Enron Bubbles In The Business World

Bubbles in the business world are characterized by rapid expansion and then a following contraction. Enron falsified profits, took extreme risks, and rigged investments, all so that they could increase the size of their bubble. However, the bubble could only grow so large. Some were able to escape the bubble before it popped, but in the end nobody remained unscathed. The Enron bubble is a testament to the need for some regulation. Enron employed many questionable accounting practices to increase profits, including mark to market accounting and structural financing. Mark to market accounting allowed Enron to record massive profits, when they did not exist. It allowed them to not file their reports based on cash flows, like corporations are …show more content…
They also hiked returns by controlling the energy grid in California. They would export energy from California when prices were low, but then import energy to California when prices were high. They even took it further by creating artificial shortages to increase profits. These practices were all at the expense of the American consumer. Additionally, Enron used investing companies to hold onto huge amounts of debt and then buy them back at a later date, so as to make the Enron appear profitable. This was seen in the Nigerian Power Barges Scandal, in which Merrill Lynch bought three power barges from Enron only to have them buy them back in a few months, all to allow Enron to avoid reporting this debt. Activities such as these only emboldened the call for regulation and eventually for the passing of …show more content…
However, these activities were not in the best interest of their shareholders. It may have made a few rich, but it left the majority out of a lot of money. Kent Greenfield argues that shareholders should not be limited just to stock investors, “Shareholders own their shares. But bondholders own their bonds, suppliers own their inventory, and workers own their labor. Each of these ‘owners’ contributes something of essential value to the corporate enterprise, and each expects to make a profitable return” (Greenfield 1). He would argue that Enron should have taken everyone affected by the decisions into account. Enron should have taken into account its employees, bondholders, etc. The massive bubble of Enron gave a compelling reason for increased regulation. Corporations should not be able to report such fraudulent activities and make massive gains at the expense of the majority of people involved with Enron. The smartest guys in the room were not able to avoid the demise of