The Fall Of Enron
The Fall of Enron
The History
Enron began as a pipeline company in Houston in 1985. It profited by promising to deliver so many cubic feet to a particular utility or business on a particular day at a market price.
That change with the deregulation of electrical power markets, a change due in part to lobbying from senior Enron officials. Under the direction of former Chairman Kenneth L. Lay, Enron expanded into an energy broker, trading electricity and other commodities.
The Business of Enron
Enron became a giant middleman that worked like a hybrid of traditional exchanges. But instead of simply bringing buyers and sellers together, Enron entered the contract with the seller and signed a contract with the buyer, making money on the difference between the selling price and the buying price. Enron kept its books closed, making it the only party that knew both prices.
Over time, Enron began to design increasingly varied and complex contracts. Customers could insure themselves against all sorts of eventualities such as a rise or fall in interest rates, a change in the weather, or a customer?s inability to pay. By the end, the volume of contracts to actually deliver commodities, and Enron was employing a small army of
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