Mephisto, et.al.:
This thing just keeps getting messier and messier. Now Baxter takes the cowards way out, leaving his family to pick up the pieces, and todays Wall Street Journal article about how such as JP Morgan is playing in all this is enough to make your hair stand on end.
******
When J.P. Morgan & Co. set up an energy-trading business in the British Channel Islands a decade ago, the tiny venture barely caused a ripple at the giant bank.
The operation, called Mahonia Ltd., consisted of just a small office with lots of phone lines. But the Jersey-based business grew over the years to transact billions of dollars of natural-gas contracts with other energy companies. Mahonia's trading followed a simple pattern: Many of its transactions took place just before year-end. Often, the deliveries of natural gas and oil were sold right back to those who delivered them through complex derivative transactions. And about 60% of Mahonia's trades were with just one company: Enron Corp.
The point of the choreographed trading? People familiar with Mahonia say Enron used the transactions to manage tax liabilities by transferring losses in one financial reporting period to another. As Enron's troubles mounted, the Houston company eventually turned to Mahonia as a sort of surrogate bank, these people say, using it to raise at least $2 billion in financing over the years.
For J.P. Morgan, the arrangement was lucrative -- at least at first. The bank received as much as $100 million in revenues. It also thought it had insurance in place to cover any default by Enron.
But in the wake of Enron's collapse and bankruptcy-court filing, Mahonia could cost the nation's second-largest bank as much as $1 billion. Several insurers have alleged in a lawsuit in New York federal court that the trading transactions were shams, thereby negating the insurance contracts. The bank, now known as J.P. Morgan Chase & Co., disputes the court allegation. Credit-rating concern Standard & Poor's cited J.P. Morgan's overall exposure to Enron as one reason it is reviewing the bank's credit rating for a possible downgrade. J.P. Morgan, which acted as a lender, underwriter and merger adviser to Enron, says the energy concern owes it a total of $2.6 billion.
Etc., etc.
************
Greed and avarice always lead to this ultimate end, doesn't it? Jeeezus.....
John~ |
