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Explaining ENRON To Your Children

From Richard Hodges:

This is how it works:

Feudalism - You have two cows. Your lord takes some of the milk.

Fascism - You have two cows. The government takes both, hires you to take care of them, and sells you the milk.

Communism - You have two cows. Your neighbors help take care of them and you share the milk.

Totalitarianism - You have two cows. The government takes them both and denies they ever existed and drafts you into the army. Milk is banned.

Capitalism - You have two cows. You sell one and buy a bull. Your herd multiplies, and the economy grows. You sell them and retire on the income.

Enron Venture Capitalism - You have two cows. You sell three of them to your publicly listed company, using letters of credit opened by your brother-in-law at the bank, then execute a debt/equity swap with an associated general offer so that you get all four cows back, with a tax exemption for five cows. The milk rights of the six cows are transferred
via an intermediary to a Cayman Island company secretly owned by the majority shareholder who sells the rights to all seven cows back to your listed company. The annual report says the company owns eight cows, with an option on one more.

Audio News, From AL Massey: Hot Off The Presses - Bigger Than Elvis! Newly Released Hit Single Topping The Charts... By the artist formerly known as Artist Unknown Enron Ron Ron [Internet Explorer 5+ & Windows Media Player 6+ required to eXperience] (1/25/2002).