Daily Archives: January 5, 2005

The Putin Puzzle

Posted on by
Reply

The Wall Street Journal’s ($) Holman Jenkins, Jr. finally weighs in on the Russian government’s heavy-handed takeover of OAO Yukos, and he correctly notes that the Yukos case signifies the end of any hope that Russian president Vladimir Putin will lead the country toward a European-style social democracy with an economy based on at least reasonably free markets:

Foreign investors puzzle over Mr. Putin and his seeming ineptitude at making Russia into Thailand writ large, a gracious and dutiful partner for trade and finance. But perhaps Mr. Putin never really had “reform” in mind. Western imaginations didn’t quite grasp that Saddam Hussein fancied himself a conqueror, an empire builder, a man of destiny (and was content to limit his country’s economic potential to the oil under his direct control). Western leaders and investors may be suffering from a similar myopia when it comes to Mr. Putin.

Mr. Jenkins goes on to point out that, despite Mr. Putin’s tactics, Western investors continue to line up to invest in various Russian business ventures. That’s true, but my sense is that it is a relative trickle in comparison to what the West would be willing to invest in Russia but for the Russian government’s takeover tactics. Until that changes, Russian economic development will continue to lag far behind the West.
Along similar lines, Boston Globe columnist Cathy Young — author of Growing Up in Moscow: Memories of a Soviet Girlhood (Ticknor & Field, 1989)– provides this Reason Online article on Mr. Putin and the implications of his grip on the Russian government for the West.

The WSJ on the case against Ken Lay

Posted on by
Reply

This John R. Emshwiller and Rebecca Smith Wall Street Journal ($) article provides an overview of the Justice Department’s criminal case against former Enron chairman and CEO, Ken Lay.
Mr. Emshwiller and Ms. Smith have been covering the Enron scandal from the beginning and have written a book on the subject — 24 Days: How Two Wall Street Journal Reporters Uncovered the Lies that Destroyed Faith in Corporate America (HarperBusiness 2003) — that certainly would prompt one to question their objectivity in writing about the issues covered in the article. As noted several times in this blog, the best book on the Enron affair to date has been the one written by Fortune reporters Bethany McLean and Peter Elkind, Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron (Portfolio 2003). So, if you want to read just one book on the Enron scandal, read the latter.
Nevertheless, Mr. Emshwiller and Ms. Smith at least acknowledge in the article that the government’s case against Mr. Lay is difficult because it largely relies on public statements that he made in support of Enron as the company was spiraling downward during the latter stages of 2001. What you will not find in the article is any meaningful analysis of the policy implications of the government prosecuting a businessman for the “crime” of making public statements about a troubled company that were clearly intended to try and save the company for the benefit of its shareholders and employees. Apparently, the government prefers that Mr. Lay not have said anything and ensured that Enron went down in flames?
This previous blog post provides a more objective analysis of the policy implications of the government’s case against Mr. Lay. The demise of Enron effectively marked the end of a speculative stock market bubble that was the result of many bad decisions by businesspersons and investors alike. There was even criminal behavior involved in some instances. However, to paint the entire management team involved in a business failure such as Enron as criminals is akin to using a sledgehammer where surgical precision is needed. The results of such an approach are hopelessly arbitrary and capricious, as we have already seen with cases such as those involving Jamie Olis , Sheila Kahanek, and Global Crossing, Ltd. Indeed, such questionable prosecutions are how someone such as Mr. Olis ends up serving a longer prison sentence than a true business criminal such as Martin Frankel.
Mr. Emshwiller and Ms. Smith do not have much interest in exploring this angle of the Enron case. That’s a shame, because it may just be the most important policy issue arising from the scandal.

USC, National Champs

Posted on by
6

USC 55 Oklahoma 19

In another bowl game that was not as close as the final score indicates, the USC Trojans absolutely laid the wood to the Oklahoma Sooners in the BCS National Championship Orange Bowl game on Tuesday night.
In this previous post on November 7, I noted that OU’s defensive secondary was probably not good enough to beat USC, and that certainly turned out to be the case as USC QB Matt Leinart (18-35 for 332 yds; 5 TD’s; 0 Int) sliced and diced the OU secondary as if he was preparing a salad.
Meanwhile, OU’s offense could never find a rhythm against the speedy USC defense. OU QB Jason White (24-36 for 224 yds; 2 TD’s; 3 Int) finished a marvelous college career by throwing three interceptions and looking generally overwhelmed the entire game.
White’s first interception — the result of a brain fart decision of throwing into triple coverage while under pressure — was arguably the turning point in the game. It came at the end of the first quarter as OU appeared poised to tie the game at 14, and USC promptly took the ball and drove for a quick TD and a 21-7 lead. After an OU receiver slipped and White threw another interception on the next possession, the Trojans quickly scored another TD and the game was effectively over.
USC is now 34-3 over the past three seasons with one and a half National Championships and two Heisman Trophy winners. They are now indisputably the best program in college football at this time.