The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron

by Bethany McLean

The basic idea was this. Producers (acting as depositors) would contract to sell their gas to Enron. Gas customers (the borrowers) would contract to buy their gas from Enron.

The Gas Bank had been a kind of physical hedge; now trading took the next step. It freed Enron from having to own assets involved in the production and transportation of natural gas. In theory, instead of owning a portfolio of assets—natural-gas reserves and pipelines—Enron could simply own a portfolio of contracts that would allow it to control the resources it needed.

In Skilling’s head, the idea, the vision, not the mundane reality, was always the critical thing.

What’s also true, though, as we now know from painful experience, is that any accounting method is susceptible to abuse.

An accounting firm’s primary allegiance is supposed to be to the investing public, not the company whose books it is auditing.