Tag: financial institutions

Two Factor Authentication

Since last summer when a well-known, sophisticated web meister Mat Honan was hacked and his whole web identity trashed I have been taking steps to improve my own online security.

What Is Two Factor Authentication?

2 factor authenitcationWhen you walk up to an ATM machine you conduct a two factor authentication before you make a transaction. You must physically have the card (factor one) and insert it in the machine and then you have to know the pass code (factor two). This combination makes it very unlikely that the person performing the transaction is not you.

Enron, Trust and Malfeasance

January 23, 2002 (revised 1/29/02)

The collapse of energy giant Enron over the last six months has produced a surprising level of outrage especially for a cynic like me.

As this drama continues to unfold, I have been trying to understand how Enron structured their business and made money. Until just last night I was operating on the belief that the cleverness and sophistication of Enron’s managers simply outstripped my analytical skills. But, as I have been following the writing in the NY Times and Wall St. Journal, slowly it has come to me that they don’t understand the maze of structures and deals employed by Enron for years either.

Then, last night, on the Jim Lehrer News Hour on PBS, Paul Solman, one of the regular financial reporters, gave his analysis of what has been going on. After listening to Solman’s report, it is clear that Enron has been engaging in massive deceit, deception, and downright criminal activity for years.

Now, I must admit to some familiarity with the habits and attitudes of managers. I am used to the aggressive behavior of managers trying to stretch the accounting systems to make the most recent quarter look good. In fact, I have participated in such activities. But, Enron has engaged in a long-term shell game aided and abetted by its accounting firm, Arthur Andersen, LLC. The failure of the government (the SEC) and more importantly, the audit companies, to provide oversight, transparency, basic facts, and above all the application simple commonsense ethics to a huge company’s activities is outrageous. It undermines the credibility of the economy. If Arthur Andersen, one of the oldest and most prestigious audit firms can be so blind over so many years, what are we to make of their, and other audit firms’ reliability for oversight of all the other firms so many of us hold in our 401K funds?

It will be interesting to see how the government and the financial institutions of capitalism react to this. It is a basic tenant of the capital and equity markets that timely, transparent information is essential not only to the best and highest use of our capital resources, but also to the maintenance of trust in a reasonably fair play space.

You can see the Solman report on the PBS web site (opens in a separate window)

And, from Friday January 25, 2002, here is more Solman on Enron (opens in a separate window)