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Pratap Ravindran

MUMBAI, Feb. 5

WHEN Enron went boom, a good many people got singed in the hip pocket - but the falling debris also hit a lot of folks in the funny bone.

Thus, a popular bulletin board on the Net seeks to define the difference between traditional capitalism and Enron capitalism.

In traditional capitalism, you start off with two cows. You sell one and buy a bull. Your herd multiplies and the economy grows. You sell them and retire on the income.

With capitalism Enron style, you again start off with two cows. You sell three of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt-equity swap with an associated general offer so that you can get all four cows back, with a tax exemption for five cows. The milk rights of the six cows are transferred through an intermediary to a Cayman Island company secretly owned by the majority shareholder who sells the rights to all seven cows back to your listed company. The Enron annual report says the company owns eight cows, with an option on one more....

And then there's Dave Barry (Knight Ridder Tribune) who has sought to explain the Enron collapse, using simple financial terms (such as dirtballs), for the benefit of the average layperson whose grasp of high finance consists of knowing his or her ATM code. It's in a Q&A format and goes like this (extracts):

Q. How, exactly, did Enron make money?

A. Nobody knows. This is usually the case with corporations whose names sound like fictional planets from Star Wars. Allegedly, Enron was in the energy business, but when outside investigators finally looked into it, they discovered that the only actual energy source in the entire Enron empire was a partially used can of Sterno in the basement of corporate headquarters. Using a financial technique called "leveraging," Enron executives were able to turn this asset into a gigantic enterprise whose stock was valued at billions of dollars.

Q. What does "leveraging" mean?

A. Lying.

Q. Why didn't Wall Street realise that Enron was a fraud?

A. Because Wall Street relies on "stock analysts." These are people who do research on companies and then, no matter what they find, even if the company has burned to the ground, enthusiastically recommend that investors buy the stock. They are just a bunch of cockeyed optimists. When the Titanic was in its deathly throes, with the propellers sticking straight up in the air, there was a stock analyst clinging to the railing, asking people around him where he could buy a ticket for the return trip.

Q. So the analysts gave Enron a favourable rating?

A. Oh, yes. Enron stock was rated "Can't Miss" until it became clear that the company was in desperate trouble, at which point analysts lowered the rating to "Sure Thing."

Only when Enron went completely under did a few bold analysts demote its stock to the lowest possible Wall Street rating, "Hot Buy."

Dave Barry gets in a dig against the Enron directors too:

Q. Doesn't Enron have a board of directors whose members are responsible for overseeing the corporation?

A. Yes. They are paid $3,00,000 a year.

Q. So how could they have allowed this flagrant deception to go on?

A. They are paid $300,000 a year. And then there are the Jay Leno-isms:

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