This week in financial history we recount a landmark that many thought unrealistic, two important pieces of legislation, and a wee little accounting error.

Lost Count of the Zeros
On November 8, 2001, Enron announced that accounting errors going back to 1997 led to it misstating earnings by over $600 million. This announcement, along with a string of red flags, increased the scrutiny on both the energy giant and its accounting firm, Arthur Anderson. As a result of the restatement and circling SEC investigations, shareholder equity plunged by around $1 billion. It turned out that false earnings were just the tip of the iceberg, as the company's debt was also grossly under-reported. (Enron is a classic example of greed gone wrong and how investors were led astray. For further reading, see Enron's Collapse: The Fall Of A Wall Street Darling.)

IN PICTURES: Top 7 Biggest Bank Failures

Student Funding
On November 8, 1965, the Higher Education Act of 1965 was signed into law by President Johnson. The bill was focused on creating programs that could help prospective students gain accesses to low-interest loans. Both the Federal Family Education Loan Program and the later Federal Direct Student Loan Program come out of this bill. The Higher Education Act has been altered by the Higher Education Opportunity Act of 2008, and various tax incentives have been periodically added to help make post-secondary education accessible for more people.

Majors Mergers
On November 8, 1966, President Johnson signed another piece of law allowing a merger between the National Football League and the American Football League. This law exempted the new organization from anti-trust laws. Although this is far from the only government-enabled monopoly, it does suggest that we'll accept things in sports that would enrage us in any other circumstance. Of course, that's hardly news.

Continuing on the topic of mergers, November 10, 1997 saw the world's largest merger between Worldcom and MCI communications. The deal was worth $37 billion. Within five years, however, $37 billion wasn't enough to even make the top 10 mergers. (While acquisitions can be hostile, these varied mergers are always friendly. Read The Wonderful World Of Mergers.)

Boesky Day
On November 14, 1986, Ivan Boesky plead guilty for his part in the insider trading scandal that engulfed many Wall Street investment banks. Boesky received a $100 million fine - around $265 million in today's dollars - and served two years in prison. Information that Boesky provided to the SEC was used in building the case against junk bond king, Michael Milken. As part of his sentencing, Boesky was banned from ever working in the securities industry again. (Don't be fooled by the name - junk bonds can be valuable if you know how to analyze them. See Junk Bonds: Everything You Need To Know.)

IN PICTURES: Top 6 Uses For Bonds

Breaking the Glass-Steagall
On November 12, 1999, the Financial Services Modernization Act was enacted, reversing many of the restrictions from the Glass-Steagall Act of 1933. Basically, this act opened the way for financial institutions to bundle financial services like insurance, banking and brokerage service. This set off a series of mergers that many economists blame for creating the "too big to fail" crowd.

As True Now As It Was Then
On November 13, 1789, Benjamin Franklin wrote a letter to his friend containing one of his most famous quotes: "In this world nothing can be said to be certain, except death and taxes." This lament has echoed down the ages and rings just as true now. In fact, of the two, taxes often seem the worst. Death only happens to you once, whereas taxes are an annual ordeal - and they hound your estate even after death.

Dow 1000
On November 14, 1972, the DJIA exceeded 1,000 a mere 16 years after reaching 500. The average was lifted by its not-so-industrial components like IBM, Xerox, Texas Instruments, Johnson and Johnson and so on. The acceleration in the value of the Dow was also helped along by the introduction of proto-index funds for risk-averse institutional investors like insurance companies. These started appearing in 1971 and they were opened to the general public in 1976 by Vanguard.

That's all for this week. Next week we'll look at a commodities scandal, a free-trade agreement and much more.

For the latest financial news, see Water Cooler Finance: Lions And Diapers And Dows, Oh My!

Related Articles
  1. Options & Futures

    Pick 401(k) Assets Like A Pro

    Professionals choose the options available to you in your plan, making your decisions easier.
  2. Stock Analysis

    What Led to Lumber Liquidators' Decline?

    Read about how a "60 Minutes" story on laminate flooring sold by Lumber Liquidators led to a massive decline in the share price for the company.
  3. Stock Analysis

    How Rollins Inc. Transformed from Radio to Pest Control

    Discover how Rollins, Inc. grew and expanded, making numerous acquisitions, transitioning from the radio industry to the pest control industry.
  4. Entrepreneurship

    Mark Cuban Success Story: Net Worth, Education & Top Quotes

    Learn more about America's favorite billionaire: Mark Cuban, outspoken owner of the Dallas Mavericks and star of the hit show "Shark Tank."
  5. Investing News

    Acquisition of Zulily Inc

    On August 17, 2015, Zulily Inc (ZU), an e-commerce company that caters mothers and children, announced that it will be strategically acquired by QVC, a part of Liberty Media Corporation (LMCA), ...
  6. Investing Basics

    3 Companies You Never Thought Would Go Bankrupt

    Understand more about company bankruptcy and why a company would file for bankruptcy. Learn about three companies that went from industry leaders to bankruptcy.
  7. Stock Analysis

    Drugmaker Extraordinaire: How Eli Lilly Grows

    Drugs mean big profits in America. Here's how the country's oldest pharmaceutical firm keeps its toehold in the market.
  8. Investing Basics

    4 Things You Didn’t Know About Southwest Airlines

    Learn some little-known facts about Southwest Airlines' surging business.
  9. Markets

    Why Colt Went Out of Business

    Even as the gun industry has enjoyed good sales the last few years, iconic gun manufacturer Colt recently filed for bankruptcy. What went wrong?
  10. Personal Finance

    7 Bankrupt Companies That Came Back

    Bankruptcy is often the end of a company – until it isn't.
  1. What is the difference between the Volcker Rule and the Glass-Steagall Act?

    The Banking Act of 1933, commonly referred to as Glass-Steagall after one of its most important components, created federal ... Read Full Answer >>
  2. What's the difference between investment banks and commercial banks?

    Investment banking and commercial banking are two divisions of the banking industry that provide substantially different ... Read Full Answer >>
  3. How did Enron use off-balance-sheet items to hide huge debts and toxic assets?

    Prior to its infamous accounting scandals and collapse, Enron used off-balance-sheet special purpose vehicles (SPVs) to hide ... Read Full Answer >>
  4. Where did the term 'Nostro' account come from?

    The term "nostro" is Italian in origin. It means "our" or "ours." In accounting and finance, nostro accounts are often differentiated ... Read Full Answer >>
  5. When is a bond's coupon rate and yield to maturity the same?

    The collapse of Enron – and its subsequent fallout – is perhaps the most infamous event in modern American corporate history. ... Read Full Answer >>
  6. Can the Herfindahl-Hirschman Index be used to determine competitive balance in professional ...

    Although the measurement and analysis of a company's key performance indicators (KPIs) vary by company, it is important to ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  2. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  3. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  4. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  5. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
  6. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!