Why is California bankrupt? Well, that’s at least the question that is in the minds of many. There is a constant tirade from the right that says California is bankrupt because of the liberal government. Although it is true that CA has a liberal government, albeit Republicans have had the governorship for the better part of the last ten years, and it is in serious need of cutting back red tape, minimizing government, and creating more efficient legislative processes, this ‘crises’ is yet another result of greed, not socialism.
In April 2001, a financial analyst during a conference call asked Enron’s Jeffery Skilling how it is so that Enron was the only financial service company that did not have to produce a balance sheet. Skilling called the analyst an ‘asshole’ and hung up on him. Enron had been notoriously had problems making their financial quotas, however they would make them every time in the nick of time, this is where it begins.
California has 26,000 miles of power lines, however, in December of 2003, when California was using half of their normal power they use in the summer, their ‘power supply’ was restricted and the California Utilities Commission had to brown out areas in major metropolitan system. Funny, how did power get restricted when California was using one-third of its capacity?
Lets back up for a second. So it wasn’t bizarre enough that California had to brownout their state when they had plenty of electricity? Well, get a load of this. Its called “deregulated electricity.”
Governor Pete Wilson in 1996 and his legislature deregulated Californian electricity. Enron fervently searched for loopholes in this odd and difficult piece of legislation and they found several of them. Their goal was to exploit the Californian market in any way they could. They succeeded.
They were arbitraging the Californian market $1 to $2 MM a day. Operation ‘Ricochet’ exported energy out of the state when prices were low and when prices went up, they sold it back to the state. Simple. Take energy away from California and sell it back to California at a higher price. When California said no to the escalated price, brownouts occurred until they said yes. When prices weren’t up enough, strong-arm tactics were used to convince power plants to shut down for a few days to push price up. They bet on the increase of energy and made even more money. Every opportunity that Enron could make money Enron took, no matter the cost. They laughed in the face of the sheer lack of social value in their dealings in the name of greed.
Greed that weakens this great nation every day...
Enron could have treated the deregulated Californian energy market ethically and used it as an example for the rest of the nation to deregulate. No, they exploited each loophole every step of the way.
Enron took $9bn from California and cost $30bn over time (citation needed). Jefferey Skilling jokes, “What’s the difference between California and the Titanic? At least when the Titanic went down the lights were on.”
Well, now California is $24bn in debt. If energy had stayed with the people, this wouldn’t have happened. California’s liberal policies had nothing to do with the current bankruptcy. This has to do with Beazer, AIG, Goldman, Lehman, Morgan Chase, etc. All those guys...
Most of the information in this article comes from the documentary Enron: The Smartest Guys in the Room. I recommend watching it. It’s a great crime story. I also recommend sellshortsandiego.com andliveinsandiegonow.com for all your real estate needs.