To see how deeply Enron's demise is rippling across the nation, just look at what's happened to Atlanta-based Mirant.
The company, which provides electricity across the nation, had big plans. It would expand or build new power plants in places like Wyandot, Mich.; West Haverstraw, N.Y.; and Danville, Va.
But, now, the debt-rating agencies are looking at such spending with a magnifying glass. So last week, Mirant shelved the plans and arranged to send the turbines to warehouses to collect dust for a few years.
Indeed, from Wall Street to Main Street, the Enron saga has spread well beyond Houston and is costing both jobs and money. Energy providers such as Mirant are scaling back their spending. At the same time, investors are looking more deeply into the balance sheets of other companies - many of them in businesses completely unrelated to Enron.
The nation continued to be reminded of those concerns yesterday as top Enron executives testified before the House Energy and Commerce investigations subcommittee. Chairman James Greenwood of Pennsylvania said Enron's downfall "required the complicity of far more than a few bad apples."
The result: Wall Street skittishness that has removed more than $230 billion in market capitalization since Enron declared bankruptcy on Dec. 2nd. That's a 2.3 percent drop in the value of the Wilshire 5000, a very broad index of stocks. One securities analyst says the nation has suddenly developed a case of "Enronitis."
The Enron affair is hitting the economy at a particularly vulnerable moment. The economy is in the process of stabilizing. Since the events of Sept. 11, the stock market has moved higher, giving consumers and investors a greater sense of confidence. Now, economist John Puchalla of Moody's Investors Service says, "there is a risk in terms of the confidence factor."
Confidence has been pummeled in large part because of worries over accounting standards. Investors are concerned that the green-eye-shade types are allowing companies to manipulate earnings statements.
"There are questions about what effect it will have if accountants become more conservative in terms of what they are willing to say is acceptable - a lot of companies may not be able to show the earnings gains they would have," says Dick McCabe, a market analyst at Merrill Lynch & Co. in New York.
It's not unusual for the stock market to come up with issues, especially when investor confidence is vulnerable, says Lynn Yturri, an equity fund manager for Banc One Investment Management Group in Columbus, Ohio. Last year, the market swooned over worries about terrorism and profit problems.
"Issues come up and get magnified," says Mr. Yturri. "Now, the market is probably overreacting - in the case of financial reporting, the industry tweaks the rules when it finds loopholes or the public interest has changed and needs more information."
The market's concerns, however, are costing companies real money. For example, on Tuesday, Tyco, which has been on an acquisition binge for years, announced it would begin using a $5.9 billion back-up line of bank credit instead of borrowing money more cheaply via commercial paper.
Only last week, The Wall Street Journal reported that Tyco had made about 250 acquisitions worth about $4.5 billion, but had not revealed them to shareholders. The company hotly denied that it had misled anyone. "As far as I can tell, they are sticking to the letter of the law, but they are pushing the accounting standards to their limits," says Ed Ketz, an associate professor of accounting at the Smeal College of Business at Penn State University.
Aggressive accounting is causing the rating agencies to look more closely at many companies in the same business as Enron, says Paul Joskow, a professor of economics at MIT in Cambridge, Mass. This is leading many of the companies to cancel or defer expansion plans.
Take Mirant, for example. An energy company that sells electricity across state lines, it had plans to spend $5.9 billion over the next two years to meet this growing market. However, Moody's rating service recently downgraded the company's bonds to "junk" status from investment grade. Since the company also trades electric futures - the same kind Enron did - it needs a good crediting rating.
"As your credit rating declines, you have to post more and more collateral to back up your business," says Chuck Griffin, a spokesman.
Faced with the new scrutiny by the rating agencies, Mirant decided to back off from its spending plans. "There are new expectations we are trying to meet," says Mr. Griffin.
The cancellation or deferral of spending is spilling over to manufacturers of the equipment, such as General Electric and Siemens. Earl Nye, chairman of TXU, a big Dallas-based energy company, estimates new orders for equipment have been pared by about 33 percent. "It's not all due to Enron, part of it is the market cycle we've just been through a period of rapid expansion," explains Mr. Nye, who also chairs the Edison Electric Institute.
Nonetheless, in Atlanta, General Electric Corporation's Power Systems division says its order books are full for 2002, and it anticipates a good year in 2003. However, most of those orders were placed before the collapse of Enron. Now, Dennis Murphy, a spokesman for GE, says some customers are shifting orders around. And, the company is reviewing its workforce needs.