Enron redux

I'm amazed that the media hasn't not yet picked up on the Enron angle with respect to the bailout superfund for bank structured investment vehicles (SIV), in particular for Citibank, since there is such a strong similarity. In both cases we have massive amounts of debt being kept off-balance-sheet. Why would banks be using these massive "conduits" if all of the transactions were sensible and well-capitalized? The answer has to be that the banks knew that the transactions were risky and were simply trying to set up a firewall to attempt to prevent any "blowback" if the transactions ever got into trouble, which they finally did. The real problem seems to be that they simply did not apply enough legal talent to engineer the legal firewall to be strong enough to keep up with the "innovation" on the part of the financial "quant" rocket scientists.

I'm also amazed that nobody is even hinting at accusing Citibank of engaging in fraud by failing to adequately inform their shareholders of the raw magnitude of the risk they were facing.

And what about the Federal Reserve and "banking supervision"? Can it really be true that by putting all of these transactions into off-balance-sheet "vehicles", they magically are no longer within the Fed's jurisdiction? Really?

Finally, I really am wondering where former Treasury Secretary Bob Rubin was while Citibank's wizards were "Enronning-up" their corporate structure. How could he not have known the magnitude of Enronesque risk that Citibank was taking on? What kind of advice was he giving his employer?

-- Jack Krupansky