Under the surface of the current anti-capitalist protests, from Wall Street to the City of London, is a decade-old sore that never healed. On October 16 2001, Enron hosted the earnings call that first alerted the world to the toxicity of its off-balance-sheet arrangements. It triggered a death spiral. By December 2, Enron was bankrupt. Within a year, Arthur Andersen, its auditor, had disintegrated.
Enron was turned into books, films, a play and a byword for fiduciary failings and fraud. But the real lessons went unheeded.
Instead, many read the sermons – the importance of ethics, governance and transparency, the dangers of complexity, short-termism and one-sided incentives – in the same way they had read Michael Lewis’s Liar’s Poker, about the Salomon Brothers trading scandal of the mid-1980s: not as a warning, but, in the author’s words, “as a how-to manual”.