You say:

Lloyd Blankfein is absolutely correct. It is "amazing" that after Enron's spectacular fall from grace, business continue, without interruption, as usual.

Yet several days back, you say to give Geithner / Obama a break / benefit of the doubt when they're bringing back Enron's Death Star in the form of the PPIP. Rortybomb lays it out clearly:

http://rortybomb.wordpress.com/2009/04/05/banks-as-bidders-and-sellers-financial-nostalgia/

Its amazing that you're giving Geithner the benefit of the doubt after writing about Enron's spectacular fall from grace.

How is this amazing? There was no justice in the case of Enron. Lay's offspring got to keep the stolen money.

If you don't punish criminals and let them keep their ill-gotten gains, OF COURSE more people are going to go into the crime business.

What Enron taught us was that if you can pin everything on a couple guys, everyone else gets rich and doesn't have to spend any time in Club Fed.

Welfare mothers have to fill out massive questionnaires, and get audited all the time. Poor working people apply for state health insurance and have to have almost no assets to get coverage. Workers rush to the time clocks. Incompetents get fired. Broke men try to pay child support. Marijuana smokers go to jail by the hundreds of thousands. Drug convictions haunt peoople for years. An unregistered gun gets you called a 'terrorist' and a big fine. An ounce of weed in your car gets it impounded, to the benefit of the police. Cars are towed during snowstorms by the thousands. Parking tickets flower in certain pricy neighborhoods. Being on the street when the cops don't want you there gets you maced. Steal a loaf of bread and get arrested, and sent to jail. Lose your job and apply for jobs your are not going to get. Don't be found out working too much, or you will be kicked off unemployment.

But the bankers, for the most part, walk away with big bonuses, while one of their number 'might' get indicted. A sacraficial lamb, so that the rest may live.

Punishment for the masses, perks for the corporate banking class.

...but the Death Star scenario requires fraud to work. Recipients of funds can't have more than a minimal (8%?, working from memory) interest in an entity buying the toxic assets.

A Bank A - Bank B circle jerk wouldn't work work, since Bank B would have to be a healthy, non-bailout bank (do they even exist?) to purchase assets under the plan. Even if all the banks are in bed together, to the extent a healthy bank would have skin in the game, they'll have an incentive not to overpay. Otherwise they'd take a loss on the purchase. Regardless of whether the loss is dwarfed by the Fed. government's loss, participants have an incentive to avoid losing money. (Mostly, purchasing these assets might make sense if they're like lottery tickets, where the payout would be huge, but the odds of getting wiped out are high.)

As to the oft-cited examples requiring a rigamorale to overcome the ban on self-dealing such as creating off balance sheet investment vehicles, that would likely constitute fraud, though it depends on the precise language of the PPIP plan.

Banks might be desperate enough to commit fraud. Regulators might have trouble preventing fraud. (Noting that the FDIC seems to have pretty significant oversight in the process.) But unless Geithner's coziness with the banking industry is worse than i suspect--so bad that he'd put scratching his friends' backs ahead of his own self-interest--I think that the political backlash from flouting the PPIP's prohibition on self-dealing would be too great to risk it.

if anybody is even close to believing some bs from the CEO of GS, they really need to watch the Moyers interview with Bill Black(or read the transcript).

http://www.pbs.org/moyers/journal/04032009/watch.html

no doubts left after this, it's fraud, planned and executed.

The first bit of proof that just about nobody has a clue on Enron is found in all the references to Ken Lay. How many people even know the name of the true culprit in the Enron mess, Andy Fastow (the CFO of Enron). It was Fastow who invented Enron's version of the securitization game. It was Fastow who built bizarre, complex financial schemes involving partnerships with shadowy 'entities' that Fastow himself created, which were funded by enormous bank loans and which amounted to enormous bets that Enron's own stock price would continue to rise. It was Fastow who embezzled money for himself and the team of loyalists he used to bully the accountants at Andersen into going along with his crazy ideas. And by the way, Fastow is currently behind bars.

And I'm guessing that most finance people didn't bother looking too closely into the Enron failure either--they believed their own line about Enron being an isolated incident. With details on the collapse so sketchy (thanks, mainstream media), one would have had to do some serious digging to find out what in God's name transformed a successful multi-billion-dollar company into a scandal.

In fact, Fastow went to great lengths to hide what he was doing, so it was damn near impossible for anyone to figure it out. Only when the Wall Street Journal realized something wasn't quite right at Enron did the company find itself in trouble, and only because the stories the WSJ published (along with the 2001 recession) did damage to Enron's stock price. This began setting off the land mines hidden in Fastow's labyrinthine schemes. (These 'mines' were things like agreements to double the number of shares outstanding to pay debts if Enron's credit rating dropped--which led to further concessions due to the now-lower price of Enron stock, and so on.)

Ultimately, the real problem at Enron came down to one thing: valuing short-term profits over long-term stability. One guy at Enron who bought insurance was passed over for raises and bonuses more than once, because it was deemed that buying insurance was something "a monkey could do". As it turns out, that guy was damn good at buying insurance--the insurance he bought was the only thing that softened the blow when Enron came crashing down. Wall Street had the same attitude, and apparently even less respect for the insurance buyers of the world. Now we're all paying the price for it.

I recommend that everyone who is interested read "Conspiracy of Fools" by Kurt Eichenwald, which details what happened at Enron and reads like a novel. And trust me, if you haven't read a book about the Enron collapse, you don't understand it at all.