Hi again! Thanks for posting another interesting question.
One of the most important consequences on the US economy during the
Enron crisis was the apparent distrust brought on the psyche of
Americans as regards to accounting practices among US firms.
“In the wake of Enron’s collapse, investors have questioned the
accounting practices of many other firms. The increased scrutiny has
been quite broad, affecting companies with both low and high credit
ratings alike, including some of the biggest and most stalwart names
in Corporate America.”
The article though has one bright aspect, and that is according to
experts, such consequence will eventually have minimal impact to the
overall future of the US economy.
“However, there are reasons to believe that the financial market
impact will be limited. First, any accounting changes will be a
one-time adjustment, after which the firms’ quarterly earnings will
once again reflect changes in economic circumstances. Second, while
there is little doubt that the quality of corporate accounting
deteriorated in the second half of the 1990s and the increased use of
pro-forma accounting provided misleading signals at times, the number
of firms whose financial well-being will be called into question by
adopting more transparent and conservative accounting practices will
be extremely small.”
Another aspect of the economy that felt the waves of the Enron fallout
was the banking industry.
“The toll taken by Enron on the banking industry continues to mount
with financial services giant J.P. Morgan Chase & Co. attributing much
of the blame for its first quarterly loss in five years on the
bankrupt Texas-based energy trader.”
“J.P. Morgan Chase wrote off $456 million because of Enron and still
has an exposure of $2.06 billion. Standard & Poor's lowered its
outlook on the company's debt rating to "negative" because of the
write-offs. “
“Enron's collapse takes toll on banking industry” by Tania Padgett
http://www.chicagotribune.com/business/showcase/sns-enron-industry-nyn,0,1848199.story
On a local level, Houston was a city that felt the effects of the
crisis at Enron.
“One measure of Houston's economic woes is reflected in the recent
growth in available office space, which has soared in the city's
central business district.”
“After it declared bankruptcy in December, Enron, the energy trader
embroiled in an accounting scandal, vacated about 800,000 square feet
of prime space in landmark office towers.”
“Houston feels pangs of Enron's collapse”
http://news.bbc.co.uk/1/hi/business/2007255.stm
However, the saddest part of Enron was that it would provide further
economic challenges to thousands of displaced employees.
“The company's failure, which cost the jobs of more than 21,000
workers and raised still-unanswered questions about accounting
practices and corporate ethics, is a big topic in the corridors but
not the focus of much formal debate.”
“Enron's collapse haunts World Economic Forum”
http://www.chron.com/cs/CDA/story.hts/special/enron/1238720
In the end, some financial analyst and historians agree that judgement
on the economic impact of the Enron issue is still too early to tell.
The picture painted by the media maybe different from the economic
historian’s perspective in the future. What is important is that Enron
is another important economic lesson thought to investors about
proceeding with caution in the composition of their investment
portfolio.
“Over time, our view of this event may be quite different from what it
is now. History is the result of complex forces and requires context
to be fully understood, a context that the passage of time admirably
fills. Nonetheless, there are a couple of early conclusions that the
mainstream media tends to neglect in favor of the more glitzy public
witch-hunt.”
“As Lynn Carpenter notes, Contrary to what the media hint, it was not
that hard to discover something was wrong at Enron.’ Investors who had
done their homework might have also seen some of these signs--the
obscure references to off-balance-sheet partnerships and the lack of
disclosure--if they were not entirely scared off by the valuation. In
fact, the market’s policemen, the short-sellers, were all over Enron
for quite a while. “
Search terms used:
economic consequences fallout Enron
I hope these links would again help you in your research. Before
rating this answer, please ask for a clarification if you have a
question or if you would need further information.
Thanks for coming back!
Regards,
Easterangel-ga |
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