The primary criticism about LJM was that it violated GAAP because no risk was transferred to outside investors. The accounting rules recognize that risk creates opportunity for success and the only way to make money.
On June 9 of this year, Timothy Gaithner said:
“A centerpiece of what the President will recommend in terms of financial reform will be a much more conservative set of constraints on risk-taking across the financial system.”
Based on this statement, what Obama wants is Fastow. Apparently, Fastow did an improper deal that eliminated investor risk — that’s not right.
What Obama needs is the real Enron, the company that overwhelmingly did real deals involving real risk. It is true that Enron over-leveraged itself, but the federal government is the most leveraged institution in the history of this nation. So a movement back to Enron-level leverage would be a dramatic change for our irresponsible government.
So, in other words, the government not only learned nothing from the real Enron, it is in fact copying the guy who is probably the only true Enron wrong doer.
