Much as we would love to see Wall Street's heaviest hitters squirming under the hot lights at a congressional grilling, let's hope they don't wrap themselves in the guise of innocent Enron victims.
They have been wounded, all right, but the damage is largely self-inflicted.
Yesterday we learned that investigators working for the U.S. House of Representatives' energy and commerce committee -- one of about a dozen Senate and House panels looking into the biggest corporate collapse in history -- have started questioning investment bankers about their Enron dealings. This was as inevitable as it was welcome.
An aide to committee chairman Billy Tauzin laid out a key line of questioning, saying that "some bankers were sweet-talked and others were strong-armed into participating in those questionable partnerships."
The committee wants to know if there was anything improper about Enron's apparent carrot-or-stick approach to its vast banking needs, presumably to dig up more dirt to be used against the company's Fifth-Amendment-loving top brass.
The politicians' particular interest is the company's now notorious off-balance-sheet partnerships, which would not have been possible without the banks' key financing roles. Once the investigators get their hands on the lists of holders of all the partnership units, they will find an impressive number of investment bankers on them who also happened to do financial business with Enron. That alone could keep Washington jumping for months.
But the inquiry needs a broader perspective, because the current regulations and self-imposed limitations governing the behaviour of the mega-banks clearly aren't doing the job.
The investment bankers have reason to be nervous about appearing before the politicians, who have been having a high old time embarrassing top officials of Enron and its much-maligned auditing firm, Arthur Andersen.
Their industry has been through Washington witch-hunts before. That's how investment banking and commercial banking got split up in the first place back in the 1930s. And the last thing they need is a repeat performance by a bunch of electioneering crusaders trying to paint them in black and hang them from the nearest tree.
They may well remember what Republican James Greenwood said to Andersen partner David Duncan, who was fired over his role as Enron's chief auditor: "Enron robbed the bank, Arthur Andersen provided the getaway car, and they say you were at the wheel."
By now, investigators are aware it was the big investment banks that provided the fuel and made sure the engine was tuned up.
All of Enron's top-tier lenders and underwriters could shed plenty of light on certain of the insolvent energy trading giant's complex and murky financings.
But the view that the J.P. Morgan Chases, Citigroups and Merrill Lynches of the world were somehow duped, dragooned or otherwise lured into Enron deals with promises of lucrative business or threats that they would be cut off misses a key facet of this whole debacle. There was indeed pressure on the banks, but it came as much -- and likely more -- from internal sources as external.
While risk managers were increasingly urging caution, the currency and derivatives traders and the bond and equity underwriters were pressing their bosses to ride the Enron train for all it was worth.
Commercial bankers, speaking off the record, have told how much they disliked Enron's strong-arm tactics and its persistent demands to slash fees and loan costs. They also had other concerns, some of which were voiced up the chain of command. Not least of these was Enron's increasingly cloudy financial picture, which banking sources insist was well known for at least the past two years.
And then there was the company's worrisome transformation into something akin to an unregulated financial institution.
"Many of us viewed Enron as a bank operating outside the normal regulatory framework," said one veteran banker.
Enron was trying to muscle in on oil, gas and power deals that had long been a banking preserve. A lot of bankers were delighted to see Enron disappear from the field.
Speaking of chain of command, the biggest deals were cemented right at the top, so it will be interesting to hear from the investment banks' chairmen how they could justify taking the risks.
Most will continue to insist that Enron was one of the world's most admired companies, with an investment-grade credit rating. How were they to know? bmilner@globeandmail.ca