I was thinking a bit about Jeff Skilling (former Enron CEO) today. What must he be thinking as a series of large firms that were supposedly far more stable than Enron go down one after the other to liquidity crises much like that of Enron? Bear Stearns and Lehman, two firms that should have been rock solid, go down in the blink of an eye in a credit crunch, and all we hear from the media is how the firms fell victim to larger forces beyond their control. At least at Enron they were up-front with the market about their taking on large risks. Now, the government is running around in the background trying to match-make these failing companies and helping to save at least a squidge of shareholder equity. The only thing the government did in the Enron collapse was hound Skilling and others into jail.
Sure, Skilling may have made some overly optimistic statements about his company as he was trying to stave off the crunch, but no more so that the happy-face statements issuing from Bear or Lehman in their final days. Executives who find themselves in a credit crunch are in a nearly impossible position. The best way they can serve equity holders is to downplay or even bury bad news to head off the looming crisis of confidence. But if they do so, they face presecution for making false statements about the company, ironically under laws meant to protect equity holders.