THERE ARE NOT ENOUGH JAIL CELLS-GOOD READ

"The Smartest Guys in the Room" is very well written, with great biographical backgrounds and telling anecdotes that will give you everything you should know and then some about the major players whose greed and egos led to their demise and Enron's collapse like a classic greek tragedy. McLean and Elkind were able to translate Faustow's complex special purpose entities into laymen's terms. The Enron story also shows the shocking lack of moral character of Arthur Anderson and the investment banks who enabled and profited by Enrons obscene techniques of literally making up its numbers and "earnings". This book was an eye-opener for me. I had never heard of "mark to marketing" accounting which allowed (and perhaps still allows) corporations to book "earnings" now on assumed future income, that it has not received and might never receive. It makes you completely mistrustful of corporate quarterly earnings reports, which Enron and others so easily manipulate. There should be a lot more criminal prosecutions, not just of the Enron people who profited by sham earnings statements, but also JP Morgan Chase, Merrill Lynch, and Citibank executives who enabled and profited by the Enron shenanigans. The wall street analysts who pumped up Enron stock with near complete ignorance of Enron's actual business should also be prosecuted for criminal impersonation-that is pretending to be "analysts". There was certainly enough unanswered questions in Enron's own public filings to raise 100 red flags--
There are a lot more reforms that should be made-particularly on the accounting end, to force corporate disclosure to somehow truly explain a company's actual cash, actual earnings and actual debt and obligations. I will never assume that a company's alleged "earnings" disclosure statements means the company actually has real cash from current revenue,and that its debt/obligation disclosure is remotely truthful.
Unfortunately, the Enron story is all to familiar- Appearances are more important than reality in the world of
corporate governance and finance-- After all, We have a President who brags about Values who should have been prosecuted for inside trading on His Harkness Energy stock sales years ago- and he gets a pass- I'm sure a lot of other big shots at the investment banks who helped Enron scam investors in Enron stock will also get pass
This book will and/or should get you mad--yet i'm not particulary sympathetic to Enron's former employees, many, if not most of whom, had to be aware that this company could not lose so much real money and spend so much real money if it was making real money in an honest way--- and its seems like guys like Pai and most of his associates will probably keep their ill gotten gains
There will be other Enrons as long as Wall Street trades on
"virtual" earnings and undistributed earnings-hopefully "mark
to marketing" accounting and its accounting brethren will be declared illegal, but that would probably be a naive hope
I would highly recommend this book, just to see how dumb and how amoral the smartest guys in the room were and often still are ---- (...) the question may be asked , how could such smart men (and women)be so stupid ......

Not For Lay People

There's blame galore to go around for the spectacular downfall of Enron Corp in that sober year of 2001. Accountants, rating agencies, regulators, lawyers, consultants, bankers--and these are just the bad actors outside the corporation. Look inside, where Bethany McLean and Peter Elkind treat their readers to a thorough journalistic scouring, and the smell of the rot almost wafts off the pages.

The authors rightly spend the vast majority of the book examining the personalities and circumstances that allowed the company to become what it was at the end of its life. Mix a potion that's one part hardscrabble Harvard MBAs, one part energy deregulation, and one part hysterical bull market, and you've got a financial molotov cocktail. Sadly, as we all know now, it was largely the little guy who paid the price for all the hubris of the players in this story, a fact that tends to get lost in the authors' painstaking recreation of the most complicated shell game in history.

But the story of Enron's fallout could provide the material for a whole other book. In this one we get the tale of the players, people like Ken Lay, Jeff Skilling, Rebecca Mark and Andy Fastow, all filled with an equal mix of remarkable brilliance and fatal arrogance. All are indicted by these authors as rabid players in a game they made up themselves, deeming themselves beyond the petty world of rules and regulation. But coming in for equal excoriation is the system itself, the web of enablement and intimidation that allowed Andy Fastow to quietly hammer together the company's coffin in the form of a maze of phantom accounting entities designed to prop of the appearance of the corpse inside. The most unnerving theme the book treats indirectly is the effect of mass psychology--the way exceptional personalities distort and transform reality on a systemic scale. And it offers little in the way of how something like this could ever be prevented in the future.

One word of warning for people not acquainted with basic finance: this is a complicated story, about erstwhile geniuses in the arcane use of financial products and regulatory loopholes. Though it's enjoyable even if one can't follow every detour down each accounting scheme, some knowledge of Wall Street and its workings seems necessary to understand the implications of the book overall. Given the fact that most experts didn't understand what went on here, the authors do their best to keep things as simple as possible, often using helpful metaphors and simple summations after a few pages of analysis, but they have no choice but to assume a level of sophistication among their readers.

Which leads to one gripe. In "The Smartest Guys In the Room" not a single institution or individual player involved with Enron escapes the authors' finger-pointing notice, with but one exception. Where were the journalists in all this? Why did short-sellers have to be the ones to ask all the tough questions? Bethany Mclean should take understandable pride in being the first one to pry the door open on Enron's malfeasance, but she was just a little late. One would think that with the mass of financial journalists on CNBC, the Journal, the Times, etc., that just one would have bucked the collective cheering squad and dug deeper into what this supposedly invincible company was up to. But of course, this was the bull market. A time when everyone was exuberant when they should have been scared.

A must for the non-sceptic

My blood ran cold reading of how long the officers of this firm managed to pull the wool over the investment community's eyes, aided and abetted by the deleriction of duty of those in whom we trust (and pay hansomely) to guard against such crooks. If there was ever a book to convince investors to do their own homework and to think independently, this is it. A well written and an engaging read. Well worth the money.