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Enron writ large?

Permanent Linkby wisconsin_cur on Tue Dec 01, 2009 5:45 am

Enron was the financial scandal that kicked off the decade: a giant energy trading company that appeared to be doing brilliantly—until we finally noticed that it wasn’t. It’s largely been forgotten given the wreckage that followed, and that’s too bad: we may be repeating those mistakes, on a far larger scale.

Nomi Prins dissects the opaque origins of the record profits that have been recorded by the big banks recently, delving in to the accounting of Citibank, Bank of America and Wells Fargo. My favorite quote comes in relation to Wells Fargo and sent me into a giggling fit:

Separately, Wells states in its filing that its management accounting process is “dynamic” and, not “necessarily comparable with similar information for other financial services companies.” This statement should give lawmakers pause: if banks are so complex as to constantly fluctuate their own reporting, deciphering figures just before a crisis won’t exactly be a walk in the park.

The use of the words dynamic and accounting in the same sentence should be enough for Warren Buffet to sell his shares. It is definitly to make me a bit more pessimistic about the scale, location and mode of the next leg down.

The article will probably not surprise any regular readers on this site but it provides some specific details to the manipulations at work.
Last edited by wisconsin_cur on Tue Dec 01, 2009 5:57 am, edited 1 time in total.

“It does not do to leave a live dragon out of your calculations, if you live near him.” J.R.R. Tolkien

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Re: Enron writ large?

Permanent Linkby strider3700 on Fri Dec 04, 2009 2:15 am

Hell even Cramer in his set of rules has one that states something like - If there is an issue in the accounting or something doesn't make sense in it SELL. The world really isn't that complicated and economics is pretty much the same, you either made money or you didn't.
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