According to an editorial in the New Republic, the real Enron scandal is not influence-peddling but deregulation; the editorial lists several proposed laws that, they claim, would have "mitigated" the effects of the Enron collapse had conservative ideologues not blocked them. Now, some of these proposals make good sense to me; employee 401(k) plans, for instance, should not be allowed to invest in employer stock, because of the double risk, in the event of an Enron-like meltdown, to both job and savings. And accounting reforms are clearly necessary to keep auditors from being in the pockets of their big customers.

But a good antidote to the misconception that regulations could have saved the world from the Enron debacle is the now-famous Fortune article by Bethany McLean from last March. Ms. McLean is being feted these days for her uncanny prescience in asking back then, in the face of analysts' near-universal plaudits for the stock, "Is Enron Overpriced?". But a gander at her piece makes it plain that she was merely asking an obvious question that post-dot-com investors, desparate for a comeback from their recent tech baths, were too blindly enthusiastic to worry about: "It's in a bunch of complex businesses. Its financial statements are nearly impenetrable. So why is Enron trading at such a huge multiple?"

Sure, Enron's books might (or might not) have been more transparent under more stringent reporting rules. But plenty of analysts and investors who knew they had no idea how Enron was making its dough (other than that it somehow involved high-risk derivatives) still went ahead and bought the stock anyway, even at a P/E ratio well into the fifties. And employees who voluntarily loaded up their 401(k) plans with it, apparently either not knowing or not caring that filling your 401(k) with your employer's stock is just about the dumbest investing move you can make, would only have been forced under a proposed new regulation to fall for some other company's incomprehensible fly-by-night investment "opportunity" instead. Reasonable though these suggested rules might be, they would hardly have averted disaster.

As I explained in my post of January 13th, the Enron fiasco is just a minor, undistinguished footnote to the investment bubble of the nineties, which saw millions of investors lose their shirts on spectacularly reckless investments (and whose collapse, I surmise, is still far from over). Targeting a scapegoat (whether Enron or deregulation boosters) and pushing new regulations--however sensible--as the solution, ignores the underlying problem: a culture of rampant irresponsibility in individual investment behavior. And it thus vitually guarantees that the problem will persist, as citizen investors, reassured by harsh punishments and new regulations, continue the now-conventional practice of pouring their life savings into overvalued stock in flimsy companies with incomprehensible business models and questionable (but perhaps now fully disclosed) balance sheets.

It's a scandal, I tell you.