Enron Explained: Cutting through the hype.(Company Profile)

It's now clear that this company was never as big as it seemed. It was, to a large extent, an illusion built on hype, accounting tricks, and outright fraud. Our eyes have now been opened.

Or have they? The generally accepted story of Enron's demise -- the scandal of Enron -- is almost equally overblown. Like the company itself, the scandal is largely built on hype, accounting tricks, and fraud.

No amount of hyperbole is being spared in discussions of the impact of Enron's fall. David Broder says that almost everyone is worrying about his pension now. Paul Krugman writes that it's a bigger deal than September 11 because it "told us things about ourselves that we . . . had managed not to see." Jonathan Alter calls Enron "a cancer on capitalism." Even the normally unflappable George Will sees a "systemic crisis of capitalism."

Reforms are said to be necessary "to keep this from happening again." It's almost always left unclear what "this" is that can't be allowed to recur. Presumably it's not that an energy company went bankrupt in the middle of a recession and a downdraft in energy prices.

True, it wasn't just any bankruptcy: Enron was the seventh-largest company in the country, and was found to be cooking its books. But it was the book-cooking that made it look so large in the first place. Michael Lynch of Reason, one of the few reporters on the Enron beat not to have succumbed to hysteria, notes that the company that was auditing Enron, Arthur Andersen, had more employees. Nobody lost electrical power. Kmart's bankruptcy was more consequential economically.

Or maybe the evil that must never be repeated is what happened to Enron workers' 401(k)s. It's estimated that 62 percent of their pensions were in Enron stock, which is now worthless. Ted Kennedy writes in the Boston Globe: "As Enron stock fell from a high of over $90 to less than $1 a share, the company prevented workers from selling their Enron stock at every turn." Worse, top executives were selling their own stock at the same time.

It sounds pretty bad. But let's keep a few things in mind. First, employees did not have to buy Enron stock. And contrary to Kennedy's assertion, they were free to sell it at any time if they did buy it (except for one brief period, which we'll get to in a minute). Enron contributed company stock to employees' 401(k) plans: For every two dollars an employee contributed, he got one dollar of company stock. He could not sell that stock until age 50.