Enron

“The only thing we have to fear is fear itself.”

Some clarification from Wu Tang Financial on the ten key principles of economics...

"...they ain't no such thang as free lunch... if you haven't figured that out yet in yo life, we is shaking our heads at ya...

PV=MV bitches. Velocity of money just not picking up boo. People been deleveraging up in here..."

Five years have passed since the onset of what is sometimes called the Great Recession. While the economy has slowly improved, there are still millions of Americans  leading lives of quiet desperation: without jobs, without resources, without hope. Who was to blame?

"The government, writ large, had a hand in creating the conditions that encouraged the approval of dubious mortgages. It was the government, in the form of Congress, that repealed Glass-Steagall, thus allowing certain banks that had previously viewed mortgages as a source of interest income to become instead deeply involved in securitizing pools of mortgages in order to obtain the much greater profits available from trading. It was the government, in the form of both the executive and the legislature, that encouraged deregulation..."

- Judge Jed Rakoff

With the numbers of 'real' enrollees in Obamacare looking dismal relative to government expectations, and the deadline for the first official details of the health law's enrollment figures due later this week, the administration has decided - in an oh so US Government-esque move - to change the rules. An enrollee is now defined as people who have purchased a plan (normal health insurance plan protocol) as well as those who have a plan sitting in their online shopping cart but have not yet paid. As The Washington Post notes, the disparity in the numbers is likely to further inflame the political fight especially in light of the fact that - for context - the average e-commerce shopping cart abandonment rate is 67%.

Earlier this afternoon, it was Steve Cohen's final fall from grace. Now, Bloomberg reports that Brazil's one time super billionaire, and now negativeworthaire, Eike Batista, whose sprawling petroleum empire was once valued in the tens of billions, is set to file for bankruptcy tomorrow.

• BRAZIL'S OGX SAID TO PLAN BANKRUPTCY PROTECTION FILING TOMORROW

We are confident that just like in Europe, there is no bank with any exposure to either OGX, Brazil, or whatever potential intercreditor avalanche will tear down many more Brazilian companies once this first insolvent domino finally tips over.

When on October 1, fallen billionaire Eike Batista's OGX Petroleo & Gas, missed a $45 million bond coupon payment, some were surprised but most  had seen the writing on the wall. After all, Brazil's second largest oil company after Petrobras, and the crowning jewel of Batista's EBX Group, had been under the microscope of investors and certainly creditors (and if it wasn't it certainly should have been) after oil deposits that Batista had valued at $1 trillion turned out to be commercial failures. And so the countdown to the inevitable bankruptcy filing began. Overnight, Bloomberg reports that the wait should not be long (in fact it may coincide with the default of that other insolvent mega-creditor: the United States), and will mostly certainly take place before the end of the month, following the retention of bankruptcy specialist law firm Quinn Emanuel.

"This is the third act in an improbable triple-fucking of ordinary people that Wall Street is seeking to pull off as a shocker epilogue to the crisis era. Five years ago this fall, an epidemic of fraud and thievery in the financial-services industry triggered the collapse of our economy. The resultant loss of tax revenue plunged states everywhere into spiraling fiscal crises, and local governments suffered huge losses in their retirement portfolios – remember, these public pension funds were some of the most frequently targeted suckers upon whom Wall Street dumped its fraud-riddled mortgage-backed securities in the pre-crash years.... It's a scam of almost unmatchable balls and cruelty, accomplished with the aid of some singularly spineless politicians. And it hasn't happened overnight. This has been in the works for decades, and the fighting has been dirty all the way."

Our bloated government needs to stop controlling and start serving. Providing its "less wealthy" citizens the very same investment freedoms that it grants its wealthier ones would be a good start.

It is somewhat ironic that none other than CNBC is reporting the news (which was suggested here months ago in "Will JPMorgan's "Enron" Be The End Of Blythe Masters?") that as part of its divestment of its physical commodities unit announced previously, JPMorgan may also seek to cover up any trace of market manipulation in the division recently embroiled in the aluminum cartel scandal (which we reported on in June 2011 and which story recently rose to prominence as a result of follow up reporting by the NYT) by getting rid of none other than Blythe Masters.

• So no great rotation into EM? Capital Flows Back to U.S. as Markets Slump Across Asia (BBG)
• Muslim Brotherhood leader arrested in Egypt (Reuters)
• Allies Thwart America in Egypt: Israel, Saudis and U.A.E. Support Military Moves (WSJ)
• Dear Bloomberg: when you buy the loans of a distressed retailer, you are not betting on a rebound, you are betting on being the fulcrum security in a bankruptcy: Kyle Bass Said to Bet on J.C. Penney Comeback With Loan Purchase (BBG)
• Bubbles Bloom Anew in Desert as Buyers Wager on Las Vegas (BBG)
• Britain rejects Spanish request for Gibraltar talks (Reuters)
• U.K. Mortgage Lending Rises to Highest Since Lehman Collapse (BBG)
• Pension Funds Dispute Math in Detroit Bankruptcy (WSJ)
• Christie Says Gayness Inborn as He Signs Therapy Measure (BBG)

On July 30, when FERC announced that it had agreed to resolve it allegations of JPMorgan manipulation of the energy market for a $410 million fine, with the bank neither admitting nor denying guilt, we posited that the only question on Jamie Dimon's mind was whether to pay the fine from petty cash or just to charge it on his corporate Amex. Three weeks later he may have some other questions swirling in his head, such as "whose Christmas lobbying stocking did I not fill with campaign donations?" after the WSJ reported that it is no longer FERC, but the DOJ itself, led by Preet Bharara, which is investigating whether JPM manipulated energy markets. Ironically, this is a deja vu of the SAC take down by the same Bharara, when a few months after SAC settled with the SEC it was shocked to be crushed by the Department of Justice which pulled an "Arthur Anderson" on it and for all intents and purposes shut it down (although with nobody sent to prison). It remains to be seen if Bharara will have the balls to take this prosecution to the next level and whether after he made SAC into Arthur Anderson, he will make JPMorgan into the New Normal's Enron and whether Jamie Dimon or Blythe Masters will be the next Lay and/or Skilling. One can hope.

Greed; corporate arrogance; lobbying influence; excessive leverage; accounting tricks to hide debt; lack of transparency; off balance sheet obligations; mark to market accounting; short-term focus on profit to drive compensation; failure of corporate governance; as well as auditors, analysts, rating agencies and regulators who were either lax, ignorant or complicit. This laundry list of causes has often been used to describe what went wrong in the credit crunch crisis of 2008-2010. Actually these terms were equally used to describe what went wrong with Enron more than twenty years ago. Both crises resulted in what at the time was the biggest bankruptcy in U.S. history — Enron in December 2001 and Lehman Brothers in September 2008. Naturally, this leads to the question that despite all the righteous indignation in the wake of Enron's failure did we really learn or change anything?

Trough-feeding debtism faces the need to clean up its detritus.  

There was a time when Jamie Dimon liked everyone to believe that his JPMorgan had a "fortress balance sheet", that he was disgusted when the US government "forced" a bailout on it, and that no matter what the market threw its way it would be just fine, thanks. Then the London Whale came, saw, and promptly blew up the "fortress" lie. But while JPM's precarious balance sheet was no surprise to anyone (holding over $50 trillion in gross notional derivatives will make fragile fools of the best of us), what has become a bigger problem for Dimon is that slowly but surely JPM has not only become a bigger litigation magnet than Bank of America, but questions are now emerging if all of the firm's recent success wasn't merely due to crime. Crime of the kind that "nobody accept or denies guilt" of course - i.e., completely victimless. Except for all the fines and settlements. Here is a summary of JPM's recent exorbitant and seemingly endless fines.

Now that the previously reported "fine" of $400 million which the firm just got slapped with following its manipulation of various energy markets, is fact...

• JPMORGAN AGREES TO PAY $410 MLN TO SETTLE U.S. ENERGY PROBE

... One may say JPM has just admitted it is the next Enron. One would be wrong: "JPMVEC admits the facts set forth in the agreement, but neither admits nor denies the violations." In other words, JPM is a Schrodinger Enron: it admits the facts that the company best known for manipulating electricity - a charge which in 2000 was enough to crush the company, and which is now a fine equal to 0.4% of the firm's $99.5 billion in revenues - but neither admits nor denies this. But the biggest question plaguing Jamie Dimon this morning, is whether he will pay the $410 million FERC find with a personal check... or petty cash.