FLOYD NORRIS

Notions on high and low finance.

My Friday column, on deception by derivative, compared the latest disclosures about Italy’s deception in getting into the euro zone to Enron‘s balance sheet deceptions before it collapsed.

Turns out that the observation was less than original.

Back in 2002, Benn Steil of the Council on Foreign Relations made similar points in an op-ed article in The Financial Times, under the headline:

Enron and Italy: Parallels between Rome’s efforts to qualify for euro entry and the financial chicanery in Texas

He concluded:

Enron’s window-dressing of its public accounts should clearly be a matter of government concern, since it is governments that impose the accounting rules. But the problem of government accounting abuse may in fact be far more serious, bringing to the fore that age-old question: who shall guard the guardians?

Italy cheated. Enron cheated. Those who knew about it — Europe and the banks — either helped or looked the other way. They deemed it unimportant, confident that both the company and the country were solid, even if they were not quite as solid as they had been made to appear. It turns out they were wrong about that.

I asked Mr. Steil today about the reaction to his article in 2002. He replied, in part:

I had a heated argument with a prominent N.Y. Italian journalist at the time. I told him that he and his fellow Italian economics writers were not taking this seriously enough (the Italian press mostly just attacked me for being part of some Anglo-Saxon conspiracy). He told me I was just scandal-mongering, and asked: “Don’t you agree that it’s a good thing that Italy qualified for the euro?”

Hmm . . .

Article source: http://economix.blogs.nytimes.com/2013/07/01/when-cheating-is-ignored/?partner=rss&emc=rss