As is often the case, many of the greatest stories are truth, rather than fiction. If you made this up, no one would believe you -- yet it happened just the same. The history of Enron is traced from its beginnings though its eventual collapse, with lots of great footage of the main players in action.
I think this film's most telling observations were (1) that every quarter it appeared to the line-level employees as if they wouldn't make their numbers, yet at the end of the quarter somehow they always did, and (2) once they started fudging the numbers, Enron's financial wizards found they had to keep lying, and the lies had to keep getting bigger: if they stopped lying their change in outlook would be noticed, and all the previous lies would be exposed. This was also true of the banks and auditors involved, who once they approved the first lie had to keep going along with it or their complicity would be exposed.
As an economist and a Pacific Northwesterner, I was glued to the Western energy crisis as it unfolded. I'm going to discuss the content and context of the movie in some detail here.
Enron already had the ability to dramatically limit the supply of power, both at the generating and at the transmission level, but the winter of 2000-01 presented the perfect alignment of circumstances. First, Washington and Oregon had our worst drought in years, which cut way back on our power supply, which is mostly hydroelectric. Historically hydro power has been abundant, so electric heating is common here, and even in a normal winter we buy California's surplus to heat our homes, returning our surplus to them in the summer when they need it for A/C. Usually that's a good deal all around -- but thanks to Enron, California didn't have a surplus, exactly when we needed it most.
The second thing that happened was that an Enron-friendly administration was elected to power. Ken Lay was a good personal friend of GWB (and not just George Sr., as an earlier reviewer stated), frequently attended family picnics and was affectionately referred to as "Kenny Boy" by GWB. His company was the largest single contributor to Bush's election. At the height of the crisis, Dick Cheney (who had just met with Lay the previous day) testified against the imposition of price controls. This directly resulted in billions of additional profits to Enron and billions of additional costs to Westerners. It was only through later imposition of those very price controls that the crisis ever came to an end, because they removed Enron's incentive to limit supply.
Kudos to the movie for not sugar-coating these facts, because it's important to understand that IS how politics works. This kind of complicity happens on both sides of the aisle, but there's no escaping the fact that in this particular scandal it was Republican politicians who were complicit. This may make the movie appear biased to some, but the facts in this case are irrefutable. Here's another tidbit not covered in the movie: As chair of the federal Commodity Futures Trading Commission, Wendy Gramm (wife of Texas Senator Phill Gramm, a major Enron recipient) ruled in 1992 to exempt Enron's energy-trading scheme from federal regulation -- and shortly afterward was appointed to Enron's board of directors.
In fairness to the other side, Gray Davis completely bungled Calfornia's response to the crisis, creating unnecessary additional debt for the state -- but still, his worst crime was incompetence, not complicity, since it was on Republican Pete Wilson's watch that California's so-called "deregulation" was signed into law. Two friends of mine who are energy economists (one of whom worked for PG&E, the other of whom is a Libertarian) looked closely at California's plan at the time and warned of the disaster to come. It was predictable. It was Wilson who should have borne the consequences.
The third thing that happened -- and was not mentioned in much detail in the film -- was that 2001 was a year when a particularly large number of long-term energy contracts were to be renegotiated. These contracts are typically for 7 year terms, so the wholesale price in effect at the time of contract renewal is the price that stays in effect for 7 years. So despite the fact that wholesale prices have returned to some semblance of normalcy, Enron managed to lock in a lot of its buyers at inflated prices for the next 7 years. Which means this is not just a historical crisis. Westerners (not just Californians) will be paying billions of dollars for inflated electricity for several more years to come.
All in all, I can forgive this movie its omissions (not emphasizing that it wasn't just California who got screwed, leaving out Wendy Gramm, etc.). Those are side notes that should be of interest to anyone with a deep interest in these events, but this movie is already crammed full of facts and there's no need to lengthen it. It's hard to miss the point, and hard to miss the irony that the company whose tagline was "Ask Why?" was brought down by someone who asked that very question. 8/10.
I think this film's most telling observations were (1) that every quarter it appeared to the line-level employees as if they wouldn't make their numbers, yet at the end of the quarter somehow they always did, and (2) once they started fudging the numbers, Enron's financial wizards found they had to keep lying, and the lies had to keep getting bigger: if they stopped lying their change in outlook would be noticed, and all the previous lies would be exposed. This was also true of the banks and auditors involved, who once they approved the first lie had to keep going along with it or their complicity would be exposed.
As an economist and a Pacific Northwesterner, I was glued to the Western energy crisis as it unfolded. I'm going to discuss the content and context of the movie in some detail here.
Enron already had the ability to dramatically limit the supply of power, both at the generating and at the transmission level, but the winter of 2000-01 presented the perfect alignment of circumstances. First, Washington and Oregon had our worst drought in years, which cut way back on our power supply, which is mostly hydroelectric. Historically hydro power has been abundant, so electric heating is common here, and even in a normal winter we buy California's surplus to heat our homes, returning our surplus to them in the summer when they need it for A/C. Usually that's a good deal all around -- but thanks to Enron, California didn't have a surplus, exactly when we needed it most.
The second thing that happened was that an Enron-friendly administration was elected to power. Ken Lay was a good personal friend of GWB (and not just George Sr., as an earlier reviewer stated), frequently attended family picnics and was affectionately referred to as "Kenny Boy" by GWB. His company was the largest single contributor to Bush's election. At the height of the crisis, Dick Cheney (who had just met with Lay the previous day) testified against the imposition of price controls. This directly resulted in billions of additional profits to Enron and billions of additional costs to Westerners. It was only through later imposition of those very price controls that the crisis ever came to an end, because they removed Enron's incentive to limit supply.
Kudos to the movie for not sugar-coating these facts, because it's important to understand that IS how politics works. This kind of complicity happens on both sides of the aisle, but there's no escaping the fact that in this particular scandal it was Republican politicians who were complicit. This may make the movie appear biased to some, but the facts in this case are irrefutable. Here's another tidbit not covered in the movie: As chair of the federal Commodity Futures Trading Commission, Wendy Gramm (wife of Texas Senator Phill Gramm, a major Enron recipient) ruled in 1992 to exempt Enron's energy-trading scheme from federal regulation -- and shortly afterward was appointed to Enron's board of directors.
In fairness to the other side, Gray Davis completely bungled Calfornia's response to the crisis, creating unnecessary additional debt for the state -- but still, his worst crime was incompetence, not complicity, since it was on Republican Pete Wilson's watch that California's so-called "deregulation" was signed into law. Two friends of mine who are energy economists (one of whom worked for PG&E, the other of whom is a Libertarian) looked closely at California's plan at the time and warned of the disaster to come. It was predictable. It was Wilson who should have borne the consequences.
The third thing that happened -- and was not mentioned in much detail in the film -- was that 2001 was a year when a particularly large number of long-term energy contracts were to be renegotiated. These contracts are typically for 7 year terms, so the wholesale price in effect at the time of contract renewal is the price that stays in effect for 7 years. So despite the fact that wholesale prices have returned to some semblance of normalcy, Enron managed to lock in a lot of its buyers at inflated prices for the next 7 years. Which means this is not just a historical crisis. Westerners (not just Californians) will be paying billions of dollars for inflated electricity for several more years to come.
All in all, I can forgive this movie its omissions (not emphasizing that it wasn't just California who got screwed, leaving out Wendy Gramm, etc.). Those are side notes that should be of interest to anyone with a deep interest in these events, but this movie is already crammed full of facts and there's no need to lengthen it. It's hard to miss the point, and hard to miss the irony that the company whose tagline was "Ask Why?" was brought down by someone who asked that very question. 8/10.