I've been in Banking for 17 years. My degree is not in finance or business. I kind of happened into it, but my degree is in Political Science. I used to work for a TBTF Bank in Energy lending back in the early 2000's. I was there when Enron fell.
I've experienced a minor earthquake once. When Enron fell I felt the earth shake and buildings rattle. My former bank did not do business with Enron for a simple reason; our credit analysts and senior credit officers could not determine how they made money. We saw all the facilities and structures, but our credit officers kept telling loan production - NO. Loans wanted part of the action because people were making money up and down Louisiana Street. When Enron's house of cards fell, our exposure was secondary but we still felt the sting. Why?
Enron did business with most energy companies in Houston. There were hedges and derivatives tied to all kinds of facilities not to mention companies had exposure to Enron and were owed money. Four of our senior credit facilities to major companies saw the interest rates spike because all the fundamentals had changed. Three companies teetered on the verge of collapse. Oh what a tangled web was wove. Bankers were in a panic and emergency measures had to be taken to save companies from defaulting on existing credit facilities. The same people who contributed to the mess had to find ways to fix the mess.
Enron was celebrated by the likes of The Economist for recreating the business model. All Enron did was visit disaster on thousands of employees and bring down Arthur Anderson (though they had a huge hand in taking themselves out.)
Out of that mess came Sarbanes-Oxley or SOX. And companies complained about compliance with new regulations. Forgotten was the damage done to employees and investors.
Fast forward to 2007 and the financial disaster of 2008. When I teach banking 101 at the high school I always use 2008 to show an anatomy of a bank run. The root cause of the banking collapse was the repeal of the Glass-Steagall Act which was a Depression Era banking law that regulated banks after their spectacular failure in the 1930's. Risk managers thought they had been so smart in securitizing risk into securities and sell them off. As the housing market began its decline, those securities lost value and we have a problem. It was all so good as long as people were making money. Risk was spread through the whole system. As we now know, no one is sure who owned what and if the securities were even properly bundled. But the money kept pouring in so who had time to check the details!
Bear Sterns, Washington Mutual, Lehman Brothers, and Merrill Lynch all got caught in the mess they helped create. They were sold off or swallowed for part of their original value. This mess led to the passage of Dodd-Frank Act and the howls of regulation have been heard again.
People want to make money. However, greed should not get in the way of historical analysis. Enron happened a DECADE ago and business people act as though their hand were clean. The Banking crisis started FIVE years ago and the mess is still around.
Every time I see or hear a Republican talk about how horrible government intervention is I want to scream. These clowns are the ones who wanted to divert Social Security into the market. These clowns are the ones who don't want shareholder transparency.
There are valid historical reasons why the EPA came into existence. There are historical reasons why OSHA was created. Social Security was not created in a vacuum and neither was Medicare. Big Business cannot be trusted on its own as its proven recently. All too often the bottom line has be the only thing that mattered including breaking the law.
What I want to know is why the hell is it so hard for elected Democrats to stand up and say that? Those who don't know history are doomed to repeat it. The cycle of repeating is awfully short now.
BTW, I love working for a community bank. I don't feel like a vampire here and I am happy to come to work. I've played the corporate rat race and will not do so again.