The private sector also has its means of protecting investors private and corporate.
Most importantly, there are credit rating agencies like Moody’s or Standard & Poor’s and Fitch that are supposed to tell investors how risky buying a company’s bonds might be.
Triple AAA bonds are the safest, while “junk bonds” are more risky.
But these agencies failed to spot any problems with Enron until the company was nearly bankrupt, only downgrading its bonds on 28 November.
They claimed they could only act on public information.
Yet earlier, in March 2001, credit analysts with S&P and Fitch told a Fortune reporter they had no idea how Enron made its money.
One reason the credit agencies did not act earlier may be that downgrading a company’s bond rating could drive it into bankruptcy by sharply raising the costs of its loans.