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Volume 68, Issue 60, Monday, November 18, 2002


Investors should be held accountable

Thomas Asma
Opinion Columnist

Politicians and pension fund managers are keen to blame corporate corruption for lost retirement savings. The heavily partisan issue deflects attention from their corruption, and it allows the avoidance of an ugly truth.

No one can face up to the greed of the investor. Nobody is pointing out that the stock market in general is risky. Enron was never a safe bet. There were warnings about the stock months before the price collapse and bankruptcy. Enron poured gobs of money into risky ventures such as shipping derivatives and broadband that were not making money. On the television and in print, analysts and realistic investors were saying that they did not know how Enron could perform as it did.

Growth for Enron was fantastic, a company with $13.3 billion in revenue in 1996 and $100.8 billion only four years later in 2000. None could decipher its financials, numbers or projections because the books were too complex. No one could understand how the company made its profits.

Considering all this, any investor with any training in finance should have stayed away, but they did not. There was no shortage of warnings from the powerful. Alan Greenspan warned of "irrational exuberance." Warren Buffet, the most influential dissenter of the "GE of the New Economy," did not invest in Enron. He didnit understand how Enron actually made a profit.

I asked a local investment banker why he invested in Enron and the New Economy when it had the classic warning signs of a bubble. He said he knew "it was all fake, but it just kept going up. You were making so much money. How could you not invest?"

There lies the crux of the issue. Everyone knew it was a fake, but the returns were so great that investors and fund managers kept the faith that the price of Enron stock would rebound.

The greatest fault lies with the investor. The corporate chieftains bear responsibility for upholding laws and avoiding morally deficient acts. They should be held accountable, but the investor bears the ultimate responsibility for the actions of fraudulent corporations. Instead of punishing Andy Fastow and Enron for opaqueness in the books, investors rewarded them with continued stock ownership.

Those who lost their pension money should hold their fund manager accountable. 

They knew Enron was a gamble and it would be irresponsible to stake the retirement funds of so many people on such a speculative stock. When the stock tanked, it was all too easy to turn and say, "Enron did it."

Asma, a senior finance major, 
can be reached via


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