There are three main reasons why Enron went from glory to bankruptcy: one is illegal operation and abuse of financial derivatives for energy credit transactions, which are booming and declining rapidly. In order to raise funds, Enron created new financial derivatives, that is, energy trading contracts with futures nature, including oil derivatives, interest rate swap contracts and letters of credit. Its total is $33 billion. In addition to using these financial instruments for financial operations of energy products, Enron also uses a large number of financial swap agreements for hedging. Financial innovation is understandable, but it must serve the industry, and hedging contains great financial risks. If you win, you will make huge profits, and if you lose, you will suffer huge losses. The direct cause of Enron's bankruptcy is that this potential risk has become a real risk. The second is blind expansion, raising huge debts for great development, trying to control as many enterprises as possible with as little money as possible, thus producing the greatest financial synergy. In 1990s, Enron took advantage of the deregulation of American energy market to enter the energy trading market and expand its business abroad. It has invested $7.5 billion in the construction of India's Dabode power station project and Britain's Ethiopia-Cox water treatment project, both of which ended in fiasco. The third is that the management lacks honesty, loyalty to the enterprise, greed and selfishness. When the crisis comes, they only want to save themselves and ignore the interests of investors. After learning the inside information, they sold their shares and abandoned the ship to escape.
The impact of the Enron incident is enormous: due to Enron's bankruptcy, the American banking industry lost about $20 billion, nine multinational banks were sent to the dock, and Andersen, which did financial auditing and consulting for Enron, was sued for assisting Enron in making false accounts. Due to Enron's employee stock ownership plan, Enron employees' pensions were all invested in their own stocks, and thousands of employees' pensions were lost. Half of the members of Congress and 15 senior Bush administration officials were dragged down, including Vice President Cheney. The Enron incident also spread to Britain, and the politicians affected included British Prime Minister Tony Blair and British Crown Prince Charles. The Enron incident was not accidental. After the Enron incident, WorldCom and Xerox broke out false accounting scandals one after another, shocking the American ruling and opposition parties. More importantly, the Enron incident dealt a heavy blow to people's confidence in market integrity, indicating that there is no "perfect market" at all, even in "perfect" market economy countries. The inducement of Enron incident is uncontrollable financial derivative risk, its essence is illegal operation of listed companies, the basic means is false information disclosure, and the accomplice is cooperative deception of intermediary institutions. The Enron incident exposed the defects of American economy in securities market, related party transactions, information disclosure, financial accounting system, corporate governance structure and many other systems, and also attracted the attention of American political, financial, legal and securities regulatory agencies. On March 7th, US President Bush put forward the 10 plan to strengthen audit supervision. According to this plan, the United States will set up a federal government audit regulatory agency, which will be responsible for formulating the professional behavior standards and ethics of the audit industry. The US Congress has set up a special committee to investigate the illegal operation and securities fraud of Enron, Andersen and their executives, and the Ministry of Justice has filed a lawsuit against Enron, accusing it of violating the 1934 Securities Exchange Law and the relevant rules of the US Securities and Exchange Commission, making false reports, providing false financial statements and disclosing related transactions. It is estimated that the legal liability will reach $4 billion. Meanwhile, Andersen was formally accused of obstructing the government's investigation of Enron. On March 14, the US General Services Department announced that it would ban all new business transactions related to Enron and Andersen. In view of the fact that Andersen cooperated with Enron to cheat, the Securities and Futures Commission of the United States has made a decision: (1) to step up the liquidation of corporate accounts suspected of improper auditing behavior, so as to dispel investors' doubts as soon as possible. (2) Strictly distinguish between audit business and for-profit financial consulting business to avoid unfair audit behavior. (3) In order to improve the financial transparency of enterprises, investment banks must disclose the relationship between related enterprises and investment banks to investors in their investment reports. (4) Require the company's senior managers to make public announcements in time when buying and selling stocks for personal interests. Judging from the current situation, due to the Enron incident, the United States is launching reforms in many fields, including corporate transparency, financial auditing system, political donation system, and professional ethics responsibility of corporate executives. New rules of the game are rapidly taking shape, but it takes time to win the trust and confidence of investors. After the Enron incident, the American people and officials reacted strongly to this. This is of great guiding significance for us to establish a timely, effective, comprehensive and fair social supervision system.
An enlightenment: American economic system is a relatively perfect market economic system, with perfect laws and regulations, strict supervision and management, and standardized corporate governance structure, but it is still impossible to avoid the Enron incident, which shows that the market mechanism is not omnipotent. The stable development of economy is not the spontaneous behavior of the market, but the self-action process under the control of social rationality. The development of the market must be supplemented by social supervision, including the supervision of government agencies. Therefore, the goal of reform is not how to build a perfect market economic system, but how to build a market economic system with social rationality and effective control, which is the key to the problem.
Revelation 2: The rules of the game are serious, and violators must be punished. In the Enron incident, we saw the timely response of the control authorities, who were firm and merciless in punishment measures. Of course, there are also the involvement of public media and the shadow of politics, but after all, it shows the toughness of the legal system. Law is like water, law is like fire, and its ruthlessness should be like fire and water. This truth is more profound to Americans than we know.
Case 2: California energy crisis-not the fault of introducing competition.
Known as the "Golden State", California is the third largest state in the United States, and its economic development contributes 17% to the American economy. According to economic strength, California can rank seventh in the world. However, it is here that the worst energy crisis broke out in history. From the second half of 1999 to 2000, the wholesale price of electricity in California increased by 500% and the retail price tripled. Because the wholesale price is much higher than the retail price, the power company loses about $400,000 per hour in power transactions. By the second half of 2000, two large power companies in California were on the verge of bankruptcy because of price inversion, and the accumulated unpaid cost was as high as $654.38+0.2 billion. The severe energy shortage has led the state government to declare a state of emergency many times. Worried about the power outage in winter, the Federal Secretary of Energy used special powers to order power plants to continue selling electricity to the California electricity market from June 5438 to February 65438 to March 2000. What caused such a serious energy crisis in California?
California's energy crisis began with California's electricity reform in September, 1996. California is a power shortage area, which needs to import 5000 MW of electricity every year, accounting for about 10% of California's power supply capacity. Due to the power shortage, the retail electricity price in California is higher than that in other American states 1/3. The original intention of power reform is to introduce competition mechanism and reduce the power cost borne by users. Before the reform, California electricity market was a vertically integrated and vertically divided market, consisting of three private power companies and two municipal franchisees. The service fields of these companies or institutions do not overlap, and they independently manage and operate power generation, transmission and distribution systems. Therefore, there is no real competition in business except for new industrial users. In view of the above factors, the California legislature passed a parliamentary decree. 18901reorganized California electric power enterprises in September 1996. The main measures are as follows: (1) Establish California Independent Power Control System (CAISO), which is responsible for running the statewide power transmission system, and any power supplier who meets the reliability standards has the right to access the power system. (2) Forcing the three private power companies to divest their power generation capacity and transfer at least 40% of their total installed capacity to independent power producers. (3) Establish a new power exchange, and require the wholesale power of independent power companies to be sold at the exchange. (4) The retail electricity price is fixed at the level of 1996, and it will be implemented for four years. This four-year transition period will be used for three private power companies to recover the precipitation cost generated by bidding sales.
It should be said that the original intention of the reform is good, and it is logically reasonable to try to reduce the wholesale price of electricity through bidding to drive the retail price down. However, the designer of the scheme neglected an important premise, that is, the price rise and fall is ultimately determined by the relationship between supply and demand. California is the fastest growing region in the United States, and the world-famous Silicon Valley is located in California. The development of the new economy has put forward a strong demand for electricity, and California has become an important load center of electricity. Due to environmental protection and other factors, California has not built new power plants for many years, and the relationship between supply and demand has been very tense. When the power supply in California is tight and there is a power shortage of 500 MW, reducing the profits of power generation companies through online bidding can only hinder the entry of new power plants, thus curbing supply, while locking in retail electricity prices makes it unnecessary for power users to reduce electricity consumption, thus further worsening the power shortage situation. A worse design is the trading mode of wholesale electricity. According to the operation flow of power exchange, bidders are allowed to submit different power supply quantities and prices in minutes during bidding. Because the power demand forecast is usually low, power generation companies find that the transaction price in the last hour is always much higher than usual, so a considerable part of power transactions are completed in the last hour, and power supply companies have to buy power at the highest price. This has resulted in a high wholesale electricity price. All these were aggravated by the rare summer heat in California 106, the drought in the Northwest Pacific for 20 years and the high price of natural gas in China, which eventually led to the collapse of California's electricity market.
When the energy crisis in California broke out, it was the time when the power system reform in China started. The analysis and understanding of California's energy crisis will inevitably affect the direction and process of China's power system reform. Now, the power system reform in China has been officially started, and the energy crisis in California and its handling are worth learning from.
A revelation: electricity is a special public commodity, and it is necessary for the government to control its production and supply because of its natural monopoly. Introducing competition into the electricity market can improve the efficiency of electricity production, but at the same time it must be supplemented by effective supervision means. Due to the real-time nature of power production and supply, the dispatching between power grids must ensure the balance between supply and demand of each transmission node, otherwise the transmission will be blocked and a crisis will occur.
Revelation 2: A strong electricity regulatory agency is necessary. The primary task of this regulatory body should be to establish fair competition rules and supervise their compliance, monitor electricity prices and effectively carry out inter-network transmission and load management. The electricity price reform involves the adjustment of the interest pattern between the central and local governments and between local and local governments, and can only be implemented after full demonstration.
Case 3: Financial Crisis in Orange County-Holding Children by Yourself
Orange County, located in Southern California, is the richest region in California, with a county GDP of11800 million US dollars and a per capita income of 70,000 US dollars. As a grass-roots government, Orange County has set up a treasurer to manage local taxes and deposits of local public institutions. The treasurer's main duty is to use these financial funds for investment, and the proceeds are used for public expenditure in Orange County. Bob Sidon, then the treasurer, was regarded as a hero for his good management and was re-elected for seven times. Before the 1994 crisis, the total financial input of Orange County once reached 20.6 billion US dollars, and more than 200 public institutions participated in it. Bob invested these funds in the risky Wall Street bond market to get high profits. Its basic practice is to arbitrage in the interest rate reduction space by using financial derivatives through the floating interest rate trading contract of reverse acquisition. Unfortunately, the initial successful investment strategy ran into trouble, because the Fed kept raising interest rates from 1994. By the second half of 1994, this speculation had caused Orange County to lose $65,438.07 billion. Due to poor cash flow and payment crisis, Orange County had to declare financial bankruptcy on February 6th 1994, thus becoming the largest market authority in American history.
Due to financial bankruptcy, Orange County entered a state of crisis. The municipal authorities first set up a crisis management team. After being refused help from the state government, they took the following measures to solve the crisis: First, they laid off 6.5438+0.7 million civil servants and 2,000 people; The second is to reduce investment in fixed assets; The third is to cut public services; The fourth is to negotiate with creditors, promise to repay debts with the tax revenue of Orange County, and ask for an extension of the repayment period. The implementation of many measures has played a role. Eight months later, Orange County ended the crisis, broke away from bankruptcy and returned to normal. Of course, treasurer Bob Sidon was forced to be investigated for criminal responsibility because of the crisis, and his sentence was short.
Generally speaking, there are four factors that lead to the bankruptcy of orange county: first, the loss is huge, exceeding the financial capacity; Second, the people lost confidence in the finance of Orange County, and there was a run. Third, the state and federal governments stood by and refused to provide financial assistance. Fourth, the party's political factors, orange county is the party's territory, the reality is that the Democratic Party is in power. Former US Secretary of State Schultz believes that the root cause of bankruptcy in Orange County is poor management. If the state government helps this kind of thing, it will set a bad precedent, and other municipalities will have no incentive to strengthen their financial management.
The financial crisis in Orange County and its solutions have given us many inspirations:
One of the revelations: the power of affairs and the power of finance should match. Theoretically, the role of the government in the allocation of social resources is mainly to provide public goods that cannot be provided by the market or effectively, but the public goods provided by grass-roots governments have regional benefits, which is the basis for grass-roots governments to have relatively independent administrative power. Therefore, it is necessary to strictly distinguish the administrative power and financial power of governments at all levels. Our problem is unclear responsibilities caused by unclear powers and responsibilities, and the central government has assumed unlimited responsibilities for financial risks at the grassroots level. Due to the different systems, the financial crisis in Orange County of the United States is only a local crisis, and once the grass-roots financial crisis occurs in China, it will turn into a national crisis, which cannot be ignored.
The second revelation: it is necessary to establish a local financial risk early warning mechanism. Nip in the bud is an urgent and realistic task in the current financial field. Generally speaking, when the financial crisis is about to break out, there is a lead time. If we can find abnormal signs in time through the early warning mechanism, it is possible to take timely measures to eliminate the crisis. This is very important for ensuring social stability and maintaining the normal operation of political institutions.
Revelation 3: We should use financial aid carefully and actively advocate self-reliance to solve our own problems. If the financial aid is abused improperly, on the one hand, it will cultivate the dependence of the rescued unit, on the other hand, it will easily produce the psychology of keeping up with the joneses and cause unbearable economic burden, and comrades in the financial department should pay special attention to this.