Greed versus Prudence, Continued
For Vince Kaminski, the in-house risk-management genius, the fall of Enron Corp. began one day in June 1999. His boss told him that Enron President Jeffrey K. Skilling had an urgent task for Kaminski's team of financial analysts. A few minutes later, Skilling surprised Kaminski by marching into his office to explain. Enron's investment in a risky Internet start-up called Rhythms NetConnections had jumped $300 million in value. Because of a securities restriction, Enron could not sell the stock immediately. But the company could and did count the paper gain as profit. Now Skilling had a way to hold on to that windfall if the tech boom collapsed and the stock dropped. Much later, Kaminski would come to see Skilling's command as a turning point, a moment in which the course of modern American business was fundamentally altered. At the time Kaminski found Skilling's idea merely incoherent, the task patently absurd.
The deal was "so stupid that only Andrew Fastow could have come up with it," Kaminski would later say.
Kaminski was the naysayer who finally was left outside the loop. Skilling didn't want him saying no anymore. Enron was one of the leading companies pushing for financial deregulation. Their point-man in Washington was Phil Gramm, whom they rewarded by putting his wife on the board of directors. Now Enron is dust, Skilling and Fastow in jail, and Gramm is, absurdly, advising John McCain.
As for Kaminski, he is an MD at Citigroup and teaches energy derivatives at the Jesse H. Jones Graduate School of Management (where I had him as a professor). He, like Michael Skelly, is a big supporter of tradeable carbon credits. If Obama becomes president, he could do a lot worse than have Skelly and Kaminski on the team that designs a national cap-and-trade plan.