I worked at GE in a middle management position when Jack Welch took over. One of the characteristics of his tenure was an unconscionable arrogance that a competent manager could manage anything, that secular knowledge was completely irrelevant. To this day, GE continues to move top and middle management through its various businesses rapidly to "broaden" them. I think recent events have shown that the opposite is true, i.e. that the lack of secular knowledge dooms businesses to failure when the business environment becomes difficult.
4
"Some smaller, regional banks continue to perform well in the new regulatory environment, as does the behemoth Wells Fargo, by focusing on businesses they understand and where they have a competitive advantage."
That is as the way it should be. When will it be that the likes of Jamie Dimon and Lawrence Summers just shut their trap, for a change?
That is as the way it should be. When will it be that the likes of Jamie Dimon and Lawrence Summers just shut their trap, for a change?
2
But when the big crisis hits GE's core industries, where will the peripheral industries/groups be to provide the profits? My grandmother, who came of age during the Depression, told me that it is better to have a little money earning a little interest than a little money earning nothing, as well as, "Pennies make dollars." Seems that GE only wants BIG profits, and isn't content to have their small profits add up to big ones overall.
1
Brought to you by the ghosts of subprime borrowers. BTW, has your homes' value rebounded following the beating it took from this failed social experiment?
1
It's about time to dismantle those misguided notion of "one stop shop" empire building in the bygone era from the likes of Citi under Sandy Weill and GE under Jack Welch.
To be sure, Welch loves GE Capital since he's able to use the financial alchemy to smooth the group's earnings which is something that Wall St loves to see. And thanks to the cheap Fed funding from Greenspan and the crazy secondary market in which no one cares about risk level, money was as cheap as it got.
Those days are no more. I'm glad that Immelt has the guts to rip this out and go back to the core competency of GE. I read from another reporting that Jack Welch sends his "approval" of Immelt's plan, which almost made me laugh, except it's not even funny at all. Immelt would not have to take this drastic step to rip things apart if Welch had put spent so much to build it up which doesn't hold water when times go bad (and funding gets expensive), all no thanks to Welch.
It's time for Jack Welch to just shut up.
To be sure, Welch loves GE Capital since he's able to use the financial alchemy to smooth the group's earnings which is something that Wall St loves to see. And thanks to the cheap Fed funding from Greenspan and the crazy secondary market in which no one cares about risk level, money was as cheap as it got.
Those days are no more. I'm glad that Immelt has the guts to rip this out and go back to the core competency of GE. I read from another reporting that Jack Welch sends his "approval" of Immelt's plan, which almost made me laugh, except it's not even funny at all. Immelt would not have to take this drastic step to rip things apart if Welch had put spent so much to build it up which doesn't hold water when times go bad (and funding gets expensive), all no thanks to Welch.
It's time for Jack Welch to just shut up.
4
This sell off of assets at General Electric is all about the jumping up the stock price and nothing more. Investors today -- particularly institutional investors -- go crazy when a stock's price stays level or, heaven forbid, drops. That's because nearly all earnings from the market are via capital gains, as dividends, which used to be an hugh source of income, are now nearly nonexistent.
If GE was paying out regular and sizable dividends, any steady unit that was profitable would be worthwhile. The appliance division, for example, was making good money and a profit, but it wan't generating the very high rate of return now deemed necessary. So, bye bye, unit, so long. Yes, you've been good for us, but we really want GE to become a more dynamic company, a true darling of Wall Street. As such, a stock price that only trades in a narrow band, month after month, doesn't cut it anymore. We need the sky-high earnings that cause eyeballs to pop and analysts to wax poetic.
This is a sorry state of affairs, and dangerous, too. Isn't there a general truism about investing that says not to place all of one's marbles in the same basket? Well, here we are today with everyone focused on the stock price, and companies, both large and small, doing nearly anything to make their shares rise ever higher. But what goes up can also come down, and any substantial reversal in the market may have severe and long lasting consequences, not only for investors themselves but the country as a whole.
If GE was paying out regular and sizable dividends, any steady unit that was profitable would be worthwhile. The appliance division, for example, was making good money and a profit, but it wan't generating the very high rate of return now deemed necessary. So, bye bye, unit, so long. Yes, you've been good for us, but we really want GE to become a more dynamic company, a true darling of Wall Street. As such, a stock price that only trades in a narrow band, month after month, doesn't cut it anymore. We need the sky-high earnings that cause eyeballs to pop and analysts to wax poetic.
This is a sorry state of affairs, and dangerous, too. Isn't there a general truism about investing that says not to place all of one's marbles in the same basket? Well, here we are today with everyone focused on the stock price, and companies, both large and small, doing nearly anything to make their shares rise ever higher. But what goes up can also come down, and any substantial reversal in the market may have severe and long lasting consequences, not only for investors themselves but the country as a whole.
4
This retrenchment to "core competencies" is nothing new - and typically follows the very frothy peak of a business cycle by a few years.
In the late '80s just before the 1990-92 recession, everyone and their uncle was trying to set up an investment banking business unit. I think even Benetton, the Italian clothing maker, set up an investment bank. Then closed it a few years later.
In 2006 everyone and their uncle want to buy a mortgage business. The bidding for Countrywide was fast and furious. There were even some obscure sub prime originators with a 6 year track record, 97 employees and 1 office building that sold for billions. Then by 2009, CEOs across the nation woke up with a giant hang over - and mumbling "I ate the whole thing...I can't believe I ate the whole thing...".
In the late '80s just before the 1990-92 recession, everyone and their uncle was trying to set up an investment banking business unit. I think even Benetton, the Italian clothing maker, set up an investment bank. Then closed it a few years later.
In 2006 everyone and their uncle want to buy a mortgage business. The bidding for Countrywide was fast and furious. There were even some obscure sub prime originators with a 6 year track record, 97 employees and 1 office building that sold for billions. Then by 2009, CEOs across the nation woke up with a giant hang over - and mumbling "I ate the whole thing...I can't believe I ate the whole thing...".
2
Sears, another once venerable American institution, made the same mistakes as GE. Sears decided to get into investments business (Dean Whitter), the insurance business (Allstate) and the credit business (Discover Card.)
In doing so they neglected their core retail business.
The rest, as they say, is history. When was the last time you shopped at Sears?
In doing so they neglected their core retail business.
The rest, as they say, is history. When was the last time you shopped at Sears?
As a former employee of a GE division and still a shareholder, I do not understand how Jeff Immelt keeps his job. Jack Welch, for all his faults, would have cut back in financial services years ago and been out of that game by now. Times change; strategies change. I don't see this as Immelt undoing Welch's strategy so much as Immelt finally taking action on something he should have done years ago.
The ROOT CAUSE of US financial troubles are the likes of Welch -- by his own admission his GREATEST LIFE MISTAKE was the focus on quarterly results ... which were manipulated during his terms with reserves and allocations to make the PE look good every quarter. Corporate management compensation should be based on very-long-term performance [CEO's at 20 years, other top management at 15 years, line workers at annual, etc], not quarterly results. Mr Welch was a disgrace to corporate management, and he even pretends to be 'smart' today simply out of disregard to his actions.
3
All of the complaints coming from the corporate world indicates how SPOILED they have been for 30 YEARS. They have received all of the benefits without having to do anything for it (other than lobbying and changing a few things on spreadsheets).
The reality is that we are slowly going back to the way things were done when America was the bedrock of the democratic world. It not only did extraordinary things at scale but it also did the RIGHT AND MORAL things. In that environment, what good you do comes right back to you and everyone in the chain also does well.
The last 30 years have been an embarrassment. If their parents's generation were still alive, they would have received (and deserved) a good spanking.
The reality is that we are slowly going back to the way things were done when America was the bedrock of the democratic world. It not only did extraordinary things at scale but it also did the RIGHT AND MORAL things. In that environment, what good you do comes right back to you and everyone in the chain also does well.
The last 30 years have been an embarrassment. If their parents's generation were still alive, they would have received (and deserved) a good spanking.
3
GE Capital originated millions of fraudulent loans that fed the securitization monster that brought down the economy. It's a company that used to solely create products that benefited lives expanded into the morass that fed the bankruptcy, loss of houses and jobs experienced by innumerable individuals who will never be made whole, and like the Jamie Dimons and their behemoth banks, got away with it, with a free pass.
2
Jennifer, you have no idea what you are talking about.....none......GE Capital worked very hard to prop up and support businesses......there were no fraudulent loans and there was never any such accusation...
For a while GE Capital was buying up every store credit card or credit line - but their customer service was abysmal. They deserve to take their licks.
How many people discovered that opening a store card gave them a one-time point of purchase discount, only to find that if they hadn't used the card again within six months GE Capital had cancelled it and dinged their credit scores?
How many people experienced the indignity of obstinate "identity checks" like mine - credit declined because I didn't know my ex-husband's dead ex-wife's birthday, which GE Capital thought I ought to know because she was entered in their profile as a "close relative" of mine (not!) - and credit score dinged again!
They deserve to have their ratings, reputation, and stock valuation suffer just like they did to their customers - unwilling customers who never realized they were under the thumb of GE Capital when they applied for a card from Gap, Banana Republic, or PC Richards et al.
How many people discovered that opening a store card gave them a one-time point of purchase discount, only to find that if they hadn't used the card again within six months GE Capital had cancelled it and dinged their credit scores?
How many people experienced the indignity of obstinate "identity checks" like mine - credit declined because I didn't know my ex-husband's dead ex-wife's birthday, which GE Capital thought I ought to know because she was entered in their profile as a "close relative" of mine (not!) - and credit score dinged again!
They deserve to have their ratings, reputation, and stock valuation suffer just like they did to their customers - unwilling customers who never realized they were under the thumb of GE Capital when they applied for a card from Gap, Banana Republic, or PC Richards et al.
2
If anything, the financial crisis was an answer to the question "how much risk is too much risk?" It would be foolish of anyone to look at the predictable decline in revenue for big banks as anything other than a welcome sign of financial responsibility and sustainable growth. There are still large profits to be had, just not as much as the greediest of people want, or with as much risk to the economy at large.
2
I wonder if they still make office furniture and carpet-or was that some other gigantic US conglomerate? I recall a time when American giants had the idea that they were wasting their money if they didn't make everything they needed for themselves, and offer to sell more of it to the world.
I think it was a "disease" of the ego that resulted from the feeling of imperial greatness and power US corporate executives developed as a byproduct of thinking they alone had won WWII, and then becoming Uncle to the entire Free World when most of it was still in ruined piles of brick and rusting, bombed out industrial districts.
I think it was a "disease" of the ego that resulted from the feeling of imperial greatness and power US corporate executives developed as a byproduct of thinking they alone had won WWII, and then becoming Uncle to the entire Free World when most of it was still in ruined piles of brick and rusting, bombed out industrial districts.
1
Dimon crabbing about regulation is like the fox complaining that the hen house is locked. To Dimon, regulation means only one thing - it will impede his ability to embezzle and steal, the one skill he has.
4
Let's get a value-added tax of 1% on all shares bought and sold and drop that cap on wages amenable to the Social Security tax. I'm sick of my passbook savings earning less than 1% while these fat cats gorge themselves on non-existent paper entity transactions of what's left of the Middle Class.
6
When an industry that sees any regulation as a gross injustice needs to be bailed out over and over - but then still claims both exclusive expertise and exclusive privilege, one has to to wonder st the stunning hubriss and self delusion of it all.
I don't know what worse: that they still don't get it, or we don't force true accountability down their collective throats. We allow them free reign, and bail them out of the results of their excesses. They in turn reward us by scorning the taxpayers that bailed them out, make credit for the everyman much less accessible, and call it prudence. Then they yet again come up with ever more risky ways of bending fiscal reality to make money, and pay themselves and their executives jaw dropping salaries and bonuses.
We justify it by calling them "too big to fail." The truth is they are "too enabled and deluded to accept responsibility."
I don't know what worse: that they still don't get it, or we don't force true accountability down their collective throats. We allow them free reign, and bail them out of the results of their excesses. They in turn reward us by scorning the taxpayers that bailed them out, make credit for the everyman much less accessible, and call it prudence. Then they yet again come up with ever more risky ways of bending fiscal reality to make money, and pay themselves and their executives jaw dropping salaries and bonuses.
We justify it by calling them "too big to fail." The truth is they are "too enabled and deluded to accept responsibility."
7
GE took money which should have been used to develop industrial processes which made for sustained economic growth, and invested in financial manipulation. Now it is going back to what it made America great, due to the ending of the Dimon era. Fox news says we must get rid of financial regulation so more money can be made manipulating money, not by making anything useful. Getting rid of Jack Walsh is a great idea, since what Walsh did was harmful to the nation.
6
Welcome to the real world of running a business. The boom years where the Smartest Guys in the Room bought companies to leverage their assets for the next acquisition had to die some time. Stick to your core competency, focus on delivering great products and services and take care of your key asset: employees, and you will do well.
5
Dimon's idea that market volatility is brought on by too much regulation and that less regulation will produce more good collateral would be comic from another person, a piece of truthiness worthy of Mr. Colbert in his alter ego. The more banks are allowed to invest as they please, the bigger bubble they can blow and the bigger the bailout they can anticipate when their investments deflate.
12
Notice that it is still profitable, just not a big enough killing to warrant continuance. That will be some relief to the about to be jettisoned employees of the firm... Well when you are in competition, real competition the poor performers get out. I like the old timey "ring of fire" picture! a truly great tool used by industrial millwrights the world over!
Enough nostalgia though, How much money did GE pay in taxes over the last 5 years anyway?
Enough nostalgia though, How much money did GE pay in taxes over the last 5 years anyway?
12
The article states that GE is getting out of the financial market because of not being able to make "big profits". Small or moderate profit is not acceptable apparently. Blame the regulations that stifle 'innovation' that gave us the recession. Why is having a reasonable cash balance bad? Liquidity means being able to use you funds to innovate but it seems that the financiers want to use liquidity to make big profits. Regulation allowed the companies to become big (Glass-Steagall). Then as big companies they complained the regulations hurt business. Get rid of regulation. Now we can use our immense weath to do things we were kept from due to regulation. See where this led us. Business to big to fail that require bailouts when they make mistakes. How is it with the low interest rates the stock market is reaching new highs? If the spread is to small they cannot give savers a decent interest rate yet they are making money. Something is not right here.
11
Great news! Now if that other bit of truthiness from that era would die as well. That outsourcing as many "non-core" functions as possible would save cost because the contractors inherently know how to deliver those services cheaply and more efficiently. The magical thinking that the reduction in costs would come from economies of scale and "expertise" and not from cutting corners and employing cheap and contract labor. And the failure to understand the negative hidden costs effects of poor communication channels and inability to establish proper oversight.
4
Unless it is government downsizing and then hiring contractors at higher rates and with less control and oversight over them. Classic GOP bait and switch.
1
G.E. may be "one of America's oldest corporations, founded by Thomas Edison in 1878", but it has lost its way, becoming one of our most loathsome corporations, not only refusing to pay its fair share of taxes on profits made in the United States, but taking a huge "tax benefit" annually from the citizens and businesses of this country who do pay their taxes. G. E. is surely at the top of the list of unpatriotic, irresponsible tax dodging corporations, proudly on massive "corporate welfare". if corporations really are people, then maybe G.E. should be in jail.
9
I am a small time investor with 400 shares. But I bought them several years ago at $32 plus per share! I keep waiting for GE to get back to its former glory. They keep reinventing themselves. I hope eventually they get it right.
5
Haven't we heard for years what utter management and financial "geniuses" that "Neutron Jack" Welch and Immelt were? (especially from them, themselves!) So now, they say they want to focus on a business they "understand"? What does THAT tell us about GE's foray into big-money finance?
Oh, and they--and fellow banksters--have the effrontery to suggest it's because of regulation that banking can't make 20% greater profits each year? This, after they almost caused Great Depression II with their reckless practices and criminal conduct? (as evidence by $billions in "settlements" with the government)
And the likes of Summers again pop up, on cue, to tell us that regulation may be too onerous for the poor banksters to operate as they need to? How can Summers or any of these bank CEOs say such things with straight faces in the wake of 2008? And why does ANYONE give them credence, not ridicule?
Oh, and they--and fellow banksters--have the effrontery to suggest it's because of regulation that banking can't make 20% greater profits each year? This, after they almost caused Great Depression II with their reckless practices and criminal conduct? (as evidence by $billions in "settlements" with the government)
And the likes of Summers again pop up, on cue, to tell us that regulation may be too onerous for the poor banksters to operate as they need to? How can Summers or any of these bank CEOs say such things with straight faces in the wake of 2008? And why does ANYONE give them credence, not ridicule?
9
Just because you can engage in any kind of business or strategy does not mean that you should. Everyone who becomes a pioneering business innovator only looks inevitable by historical hindsight. Knowing what you are both very good at love and understand is very tough.
Michael Jordan loved baseball more than basketball. But he was much better at one than the other. Warren Buffet buys businesses that he understands that have products and services that he uses.
J.P. Morgan Chase beget Standard Oil which beget ATT which beget ITT which beget GE which beget Tyco which led to 9/15/08. Too big to fail or jail or regulate is crony capitalist plutocrat welfare.
Michael Jordan loved baseball more than basketball. But he was much better at one than the other. Warren Buffet buys businesses that he understands that have products and services that he uses.
J.P. Morgan Chase beget Standard Oil which beget ATT which beget ITT which beget GE which beget Tyco which led to 9/15/08. Too big to fail or jail or regulate is crony capitalist plutocrat welfare.
4
An all too typical problem of modern American business. There is more than the need to remain fiscally sound and earn a profit, even a generous one (sorry, naysayers, profit is not evil but necessary) - instead far too many businesses, from banks to manufacturers to transportation companies and all the rest always are in a race to "grow" and be "global" or any other of the latest fluff names. We need more subsidiaries, more routes, more this and more that. Good product lines and revenues are no longer enough, they must increase in percent every year. Much of this is fueled by the egos of CEO's ever eager to prove themselves, garner accolades, get a huge personal pay out (even for failure) and then move on to the next venture. The corporations, meanwhile, are just mechanisms for their own manipulation. Like the great article in today's issue on insurance company games with spun off shell companies, these firms are led by unethical (or amoral) overly educated, lawyerly types for whom the rules that made the US an industrial powerhouse are just so yesterday and old fashioned. How very sad and dangerous for the long term health of the country.
5
Jamie Dimon, a major contributor to the '08 financial meltdown who magically retained his job, including his initially taxpayer-funded salary and bonuses says, “there may be a shortage of all forms of good collateral”. Right Jamie. It must be terrifying that JPMorgan Chase can now only launch crack-brained investment vehicles at its own risk rather than that of the US taxpayer.
3
Since when is not making enough money a failed business model?
4
Since about the same time where it was decided that spending immense amounts of money paying lobbyist, law firms, and advertising agencies to shield you from the consequences of unethical business practices was a better strategy and better use of corporate money than just behaving like a responsible corporate "citizen" in the first place.
I hope the money they make from the sale will be plowed back into the company in the form of increased R and D spending, constructing or upgrading their US manufacturing facilities, or matching more of their employees' 401(k) contributions. To enhance shareholder value, though, and to help Immelt keep his job, the money will probably used for a stock buy-back, adding no real value to the company. Sad.
3
You mean GE is going to get out of the business of weapons for war & go back to making toasters? Oh....no...that will of course never ever ever happen. Wow...look at the long list of bad guys mentioned in this article!
GE...we bring good things to life! Are you kidding me???
GE...we bring good things to life! Are you kidding me???
2
Since GE dumped deadly PCBs into the upper Hudson River ... when, I no longer remember and it was finally decided to leave them be (again when, it took so long I've forgotten). I agree, they kill good things to death.
GE expects that by 2018 it's financial services will contribute less than 10% of its income so they decide to sell it off as no longer viable? What the... When did tighter regulations and lower risks spell failure? Our capitalistic corporations need to live like the rest of us who are happy to have a job, a house and food on the table.
3
One only has to look at the "Market Cap" graph shown in the article to see the obscene effect that getting into a financial business caused GE in the early 90's, all the way to '08. The hyped "blip" you see in the curve was not generated by anything but speculation, it certainly wasn't generated by making products... Eliminate that section and draw a line from '93 ->'15 and see what steady growth happened with just plain old fashioned "buildin' good stuff". *That* is what America needs more of.
3
Paul Krugman points out that this is A Good Thing for two reasons:
1. Dodd-Frank is working as it should.
2. The Republican argument that firms want to continue as SIFIs is busted.
1. Dodd-Frank is working as it should.
2. The Republican argument that firms want to continue as SIFIs is busted.
4
Those speculators profits were not real in the sense of value added. Immelt has done a fabulous job of extricating GE from the mess Welch created.
2
Maybe that they have decided it is better to invest in ways to continue to avoid paying US taxes.
1
I believe that the notion that "GE was one of the best run corporations in America" under "neutron Jack" Welch was demolished by Thomas O'Boyle, a former Wall Street Journal and Pittsburgh Post Gazette reporter and current professor at Carnegie Mellon, in his book "At Any Cost".
Welch led the nation in de-industrialization, and, also, led the nation in the finalization of the "American economy by expanding GE Capital the the 7th largest bank. Welch did enormous damage to the United States because he was lauded for implementing "shareholder value" by "hitting the numbers" at each quarterly financial report using what Fortune Magazine called "Accounting in Wonderland".
If you really want to look at a well run company, look at Exxon Mobile. Even if you don't like what they do they know how to run a large company well.
Welch led the nation in de-industrialization, and, also, led the nation in the finalization of the "American economy by expanding GE Capital the the 7th largest bank. Welch did enormous damage to the United States because he was lauded for implementing "shareholder value" by "hitting the numbers" at each quarterly financial report using what Fortune Magazine called "Accounting in Wonderland".
If you really want to look at a well run company, look at Exxon Mobile. Even if you don't like what they do they know how to run a large company well.
4
"... in a joint deal with Blackstone Group, (Wells Fargo) said it agreed to buy G.E. real estate assets valued at $23 billion in a deal without any competitive bidding."
A "joint deal" of this magnitude deserves further scrutiny. How deep does the cronyism run?
Mark-to market accounting is so old school...
A "joint deal" of this magnitude deserves further scrutiny. How deep does the cronyism run?
Mark-to market accounting is so old school...
7
Many of the best pieces of once-great public companies have been disappearing into private plutocrat's empires ever since the US drank the Kool-Aid of Reaganomics.
6
So what are selling now? Cancer? Oh yeah, polychlorinated biphenyl (PCB); forgot about that. Never mind, they'll think of something.
6
57,000 employees are going....doesn't anyone care? These aren't big earners.....regular people doing their jobs
10
We stopped caring about such inconsequential things like job loss during the Reagan administration, have you not been paying attention.
2
Don't act surprised. GE has been doing this for a long time. It was back in '96 for me.
A more recent one is the large appliances business (washers, fridges, etc). Small appliances (toasters, irons, etc) went decades ago. Not like the old days, is it.
A more recent one is the large appliances business (washers, fridges, etc). Small appliances (toasters, irons, etc) went decades ago. Not like the old days, is it.
1
You care. I care. People of good will care, in general. The problem is that government doesn't care, corporations don't care, and the media doesn't care. These institutions view layoffs as normal and acceptable, part of the "creative destruction" process of modern Capitalism. Their mentality is: "You lost your job? How unfortunate. Perhaps you should have acquired new skills to help you survive. Now go out and get a new job. Have a nice day."
But layoffs are tragedies to those of us who care. Many - perhaps most - of the people who get laid off will never again find a job as good or better than the one they are losing. They'll have trouble sending their kids to college, and building financial security for retirement. Even worse, some of them might lose their homes.
As a society, how long will we tolerate this kind of corporate behavior as normal and acceptable? How long will allow the media to largely ignore it? These are important questions we have to start asking ourselves, before the corporate state turns most of the country into an economic wasteland.
But layoffs are tragedies to those of us who care. Many - perhaps most - of the people who get laid off will never again find a job as good or better than the one they are losing. They'll have trouble sending their kids to college, and building financial security for retirement. Even worse, some of them might lose their homes.
As a society, how long will we tolerate this kind of corporate behavior as normal and acceptable? How long will allow the media to largely ignore it? These are important questions we have to start asking ourselves, before the corporate state turns most of the country into an economic wasteland.
10
The article portrays this development as a bad thing. This trend is a great thing for the US economy.
After the dot com crash of 2000 and the great recession from banking excesses, this is a positive change for the greater good. If the reason that GE is leaving the banking business is because there is lower risk and there is not enough money to be made, this is outstanding news!!!! Bump up the capital requirements further. Full transparency on derivative trading.
US needs an economy that focuses on creating products and adding value to products. We need capital markets to help fund companies that are developing products and providing services.
We do NOT capital markets dedicated to making money out of trading transactions. Artificial products created solely to extract money FROM the capital markets and FROM the economy to benefit the elite wall street barons like Dimon. Anything Dimon says, we should do the opposite. He is only looking out for #1, himself.
Tax rules that benefit carryed interest for hedge funds should be eliminated. Transactions costs for short term trading should be implemented. There is so much that can be done to reduce risk and expand our capital markets for the greater good.
Good Job Mr. Immelt!
After the dot com crash of 2000 and the great recession from banking excesses, this is a positive change for the greater good. If the reason that GE is leaving the banking business is because there is lower risk and there is not enough money to be made, this is outstanding news!!!! Bump up the capital requirements further. Full transparency on derivative trading.
US needs an economy that focuses on creating products and adding value to products. We need capital markets to help fund companies that are developing products and providing services.
We do NOT capital markets dedicated to making money out of trading transactions. Artificial products created solely to extract money FROM the capital markets and FROM the economy to benefit the elite wall street barons like Dimon. Anything Dimon says, we should do the opposite. He is only looking out for #1, himself.
Tax rules that benefit carryed interest for hedge funds should be eliminated. Transactions costs for short term trading should be implemented. There is so much that can be done to reduce risk and expand our capital markets for the greater good.
Good Job Mr. Immelt!
21
I don't think the GE is the bad guy here. They were not one of the abusers of the capital markets leading up to the Great Recession. What they did was use their AAA balance sheet to borrow cheaply and lend out at spreads that created attractive returns. Additionally, tax advantages associated with this business enabled them to achieve very low tax rates for their shareholders. Their financial businesses--real estate investing, small business lending, credit card finance, European mortgage lending--was not the abusive stuff of the likes of Bear, Goldman, Lehman, etc. When the model changed, mostly as a result of increased regulation, they made the sensible business decision to exit. Good for them, and good for investors in GE.
1
They borrowed short to lend long. That expands exposure to interest rate risk.
6
Profit is profit. Profit can never be a loss. The main problem with banking since 1980 is greed and the refusal of those engaged in the business to accept rational ideas of what a profit should be while also promoting false ideas like the constant growth model as if it is proven fact.
These ideas are all based in a foreign to America Darwinian concept of the economy which implies it should be used to profit only those able to use it for their own advantage.
The basic concept in "All men are created equal…" is that the children of poor ignorant parents can grow to be as smart or smarter than the wealthy whom have leadership positions in society. The American economy is an essential tool to lift all people up. That cannot happen if the basic setup of the economy intentionally makes it as hard as possible to do so.
Other ideas of what our economy should be are in general based in bigoted or class prejudices about the poor and uneducated that have not yet lifted their families to the level of middle class. The lower end of middle is buying a home and having savings that can span more than a year of unemployment.
Most who promote the Darwinian ideas from the top know they are false.
The important thing to ask here is; Are they going to make all the People whose lives they made miserable with those extortionate loan and collection practices whole?
These ideas are all based in a foreign to America Darwinian concept of the economy which implies it should be used to profit only those able to use it for their own advantage.
The basic concept in "All men are created equal…" is that the children of poor ignorant parents can grow to be as smart or smarter than the wealthy whom have leadership positions in society. The American economy is an essential tool to lift all people up. That cannot happen if the basic setup of the economy intentionally makes it as hard as possible to do so.
Other ideas of what our economy should be are in general based in bigoted or class prejudices about the poor and uneducated that have not yet lifted their families to the level of middle class. The lower end of middle is buying a home and having savings that can span more than a year of unemployment.
Most who promote the Darwinian ideas from the top know they are false.
The important thing to ask here is; Are they going to make all the People whose lives they made miserable with those extortionate loan and collection practices whole?
3
One of the main problems with the banking industry is the lack of interest rate spread between what the banks pay and what they can earn. This narrow spread is in part a result of the Fed's continual easy money policy. Nobody wants to put money into a plain interest bearing account that earns next to nothing. The systemic lack of liquidity is a synergy among the reduced aggregate of deposit accounts, the additional capital regulatory requirements, and the reticence of banks to lend because they cannot ameliorate risk with the low interest rate returns. it's a triple-whammy. If the Fed can wean itself from its artificial monetary policy, maybe things can return to some semblance of normal. Don't count on it with a presidential election right around the corner.
I'm not absolving the financial industry of wrong-doing. They made their own beds and now must lie in them. Unfortunately, because of the greed of a few, the rest of us suffer.
I'm not absolving the financial industry of wrong-doing. They made their own beds and now must lie in them. Unfortunately, because of the greed of a few, the rest of us suffer.
4
I have always felt that Jack Welch was one of the most overrated gurus. His strategy of growth by acquisition has now proven to be a disaster and his personnel policies, sack the bottom ten percent of every unit every year, was a recipe for backbiting and lack of cooperation (suppose I am a great manager who has picked a superb team, I am still meant to sack the bottom ten percent?). Similarly he once said that GE should not be involved anywhere that it was not the number one or two in the sector; a ludicrous approach that reeked of egoism (if I have a very profitable company which is number three I should get rid of it?)
20
I can think of only one industry where the No. 3 company is "very profitable." But I don't do tobacco.
The "#1 or #2" strategy is not all bad. As a guide it works but you have to allow for the possibility of exception. And GE did and still does - it's still in the nuclear business, although in a very small way.
They wouldn't be selling it if it was really worth anything. Could this be the canary in the next financial coal mine?
8
I suppose the "GE" imprimatur gave some respectability to what in effect was another criminal operation.
Twenty five years ago I leased a new Nissan model car for two years (since I didn't know if I would like it) that was financed by GE Capital. I returned the car in mint condition to the dealer (another crook) who assured me there would be nothing owed. Of course I took a complete set of pictures of the car which were date stamped by the camera.
Two weeks later I got a letter from the banksters at GE demanding $1500 for damage. I called them. They wouldn't be swayed. Unfortunately for them, I'm smarter than gamblers like Jeffrey Immelt. I made good use out of my Yale Law degree. When everything was over, Jeffrey's boys (and girls) had to reimburse me for the full cost of the lease.
There is nothing I will ever read about American corporations and the commentaries by the ivory tower "business professors" that will ever change my mind about them: they're all criminals with fancy suits and manicured finger nails, but the dirt can never wash off.
Twenty five years ago I leased a new Nissan model car for two years (since I didn't know if I would like it) that was financed by GE Capital. I returned the car in mint condition to the dealer (another crook) who assured me there would be nothing owed. Of course I took a complete set of pictures of the car which were date stamped by the camera.
Two weeks later I got a letter from the banksters at GE demanding $1500 for damage. I called them. They wouldn't be swayed. Unfortunately for them, I'm smarter than gamblers like Jeffrey Immelt. I made good use out of my Yale Law degree. When everything was over, Jeffrey's boys (and girls) had to reimburse me for the full cost of the lease.
There is nothing I will ever read about American corporations and the commentaries by the ivory tower "business professors" that will ever change my mind about them: they're all criminals with fancy suits and manicured finger nails, but the dirt can never wash off.
22
It is triumph of Immelt and GE to respond to the challenges of an ever changing environment. A stodgy old line corporation is capable of responding to domestic and global regulatory requirements. The TARP recipients and supporters are crybabies, who loved the government money [TARP and QE], pre-approved mergers [Bear Stearns, Merill Lynch, Wachovia] and regulatory reform [Glass Steagall]. They hate being classified as “too big to fail” but love “too big to prosecute” by DOJ. They hate monetary penalties for mortgage fraud, money laundrying and supporting terrorism. The TARP prone mischaracterize the success of GE and Wells Fargo. JP Morgan, an investment bank, is fearful of liquidity, currency and volatility then it is in the wrong business or has the wrong leadership.
4
Bottom line GE is a manufacturing company not a bank. Right move, good time to invest in GE.
5
Folks, I am not a banker, but I do have a lot of confidence in, GE, having worked and retired from one of their owned companies, after 22 years. Mr. Immelt, has done a, very good job filling Jack Welch's shoes! We should all take notice of this, monumental direction GE is taking, now!
Poor GE - they will have to make money the old fashion way. Making stuff that sales. And maybe, put somebody to work.
One more thing, the managers at GE will finally have to manage.
One more thing, the managers at GE will finally have to manage.
3
And all that wasted PowerPoint expertise at GE Capital.... pity
GE's decision to throw in the towel on financial services is an admission that former GE CEO Jack Welch had no vision and was the most overrated CEO ever. Jack Welch destroyed GE and his hand picked successor Jeff Immelt while handed a mess, has no clue on how to fix it.
The media loved Jack Welch and he rode high for years on financial engineering but his game was finally exposed. GE's balance sheet was all debt. Still Jack Welch won't go away and be quiet, he still feels the needs to be seen. A sad and overrated leader who destroyed many jobs and the stock price but he gut rich himself. Welch is the patron saint of the clueless CEO of our times.
The media loved Jack Welch and he rode high for years on financial engineering but his game was finally exposed. GE's balance sheet was all debt. Still Jack Welch won't go away and be quiet, he still feels the needs to be seen. A sad and overrated leader who destroyed many jobs and the stock price but he gut rich himself. Welch is the patron saint of the clueless CEO of our times.
13
Back to slow and steady profitability - making things.
What's wrong with that?
What's wrong with that?
14
What I wonder (as a GE stockholder, which I am) is what is GE going to do with the proceeds of these divestments? I mean, we're talking 2/3rds of a TRILLION, with a "TR," dollars here.
That's one HECK of a lot of cash.
That's one HECK of a lot of cash.
5
Buy back a lot of stock.
Maybe buy shares in Apple ?? :)
Maybe buy shares in Apple ?? :)
NPR reported that they're going to use this money to buy back stock in order to raise its per-share value, NOT invest in new technology or manufacturing facilities. IN other words, they're selling off assets to inflate their stock value so they can report to the Board and shareholders that the share price went up. Presumably this will come with the usual bonuses to the Chair and senior 'management'.
The new American business paradigm... make nothing, invest in nothing, create nothing, except huge paychecks for the top 'management'!
The new American business paradigm... make nothing, invest in nothing, create nothing, except huge paychecks for the top 'management'!
1
"....focusing on businesses they understand."
What a novel idea! Having businesses run by those who understand that business!
Do you suppose we'll ever get back to the point where companies 1) produce products and 2) make money, instead of 1) make money and 2) produce something on the side.
What a novel idea! Having businesses run by those who understand that business!
Do you suppose we'll ever get back to the point where companies 1) produce products and 2) make money, instead of 1) make money and 2) produce something on the side.
7
Not as long as we have an endless supply of Ivy League MBAs who know everything about the bottom line and nothing about actually manufacturing something that people can actually use.
Some financiers who have long played just below legal radar are now whining about how little then can amass in untaxed, offshore "revenues." Why are they calling it "revenue" when what they really mean is "profit?" How much did they all profit from TARP and ARRA?
When Senator Elizabeth Warren threatened these Big Money Boys for violating the 2009 banking regulations that are intended to prevent another Bush Style meltdown, that arrogant snot nosed Jamie Dimon responded:
"So hit me with a fine. We can afford it." (NY Post Sunday April 5, 2015).
This is the man who was desperate in 2008 to collect TARP? This is the man who needed our tax dollars? When do we throw these boys in jail for fraud? When there is nothing left in banks of our deposits and savings as in the run up to the Crash of '29?
If you leave these foxes in the hen houses much longer without regulations, why wouldn't they abuse their privileges and live high on the hog on your money?
When Senator Elizabeth Warren threatened these Big Money Boys for violating the 2009 banking regulations that are intended to prevent another Bush Style meltdown, that arrogant snot nosed Jamie Dimon responded:
"So hit me with a fine. We can afford it." (NY Post Sunday April 5, 2015).
This is the man who was desperate in 2008 to collect TARP? This is the man who needed our tax dollars? When do we throw these boys in jail for fraud? When there is nothing left in banks of our deposits and savings as in the run up to the Crash of '29?
If you leave these foxes in the hen houses much longer without regulations, why wouldn't they abuse their privileges and live high on the hog on your money?
19
It goes back to the rating agencies. When I was at GECC in the late 90s, we knew it didn't make sense that we could devise speculative long-term financial/leasing deals that we could then sell the receivables as GE AAA-rated short commercial paper.
3
This doesn't happen under stable yield curve monetary policy.
Good news. I am fed up with hearing greedy people/corporations/companies/Wall Street complain about regulation. The Reagan area has wreaked havoc on the American middle class with its deregulation, stifling of wages, and lambasting of unions. Why the Public buys this malarkey is beyond me.
13
Ignorance of natural law. If there is no floor under the conduct of any business, the bad will drive out the good.
3
One thing that we all learned about the financial system from the 2008 meltdown was that there are few real experts in the financial market- especially those people who run Wall Street, e.g. Fuld, Cayne, etc. It is a system that evolves in secrecy (high frequency trading, dark pool, etc.) and is vast in complexity. Let's stop listening to insiders like Sumner and Dimon. One valuable lesson from the 2008 meltdown was that these insiders are more than willing to risk the future in our financial market in order to earn a profit for their constituents today.
4
If you can front-run what you know will happen next, you are golden.
It really is astounding how many things the US gets wrong right at the root level. And then how it pours on the denial.
The "dual mandate" Congress gave to the Federal Reserve Bank is impossible to fulfill. The Fed's role should be confined to maintaining a stable yield curve, while Congress has to learn how fiscal policy regulates money velocity and use it to damp the business cycle.
The "dual mandate" Congress gave to the Federal Reserve Bank is impossible to fulfill. The Fed's role should be confined to maintaining a stable yield curve, while Congress has to learn how fiscal policy regulates money velocity and use it to damp the business cycle.
I use my own money when I visit a casino to gamble and stay within the limits of what my budget can afford. When I lose, it is my money. When bankers gamble with other peoples money and lose to the extent that they endanger the global economy, that is a strong indication that their actions need to be monitored and regulated. Worse yet they expect the taxpayers to make them whole again. That luxury is not available to me. The financial industry has proven they do not have the self restraint not to endanger the economy so they need not complain about the regulations that prevent them from once again gambling away the financial well being of us all.
4
GE was a very innovative company. They made cool things that made life easier.
When they and other staple providing companies diversified, often with the excuse that their stable companies were to "capital intensive," they went into the world of risk and short term profit and for the most part, quit making products of value.
Banking used to be a boring but trustable business. The huge profits came when the normal banks were allowed to merge with the investment banks. That meant that grandma's savings could be leveraged with very low margins; 10% (a rate that you or I couldn't buy any investment with) to buy high risk investments such as mortgage "bundles."
I, for one, am glad that the Jack Welshes (father of outsourcing), Jamie Dimon, and Loyd C. Blankfein are either tethered or out of the business. They broke the world economy. We absorbed all the risk while they took all the profit and nobody significant is in jail for their fraud and gross negligence.
They wrecked the car and now they want the keys back.
Didn't we learn anything from the S&L crisis in the 1980s or the housing/banking bubble burst in 2008?
When they and other staple providing companies diversified, often with the excuse that their stable companies were to "capital intensive," they went into the world of risk and short term profit and for the most part, quit making products of value.
Banking used to be a boring but trustable business. The huge profits came when the normal banks were allowed to merge with the investment banks. That meant that grandma's savings could be leveraged with very low margins; 10% (a rate that you or I couldn't buy any investment with) to buy high risk investments such as mortgage "bundles."
I, for one, am glad that the Jack Welshes (father of outsourcing), Jamie Dimon, and Loyd C. Blankfein are either tethered or out of the business. They broke the world economy. We absorbed all the risk while they took all the profit and nobody significant is in jail for their fraud and gross negligence.
They wrecked the car and now they want the keys back.
Didn't we learn anything from the S&L crisis in the 1980s or the housing/banking bubble burst in 2008?
10
"We absorbed all the risk while they took all the profit and nobody significant is in jail for their fraud and gross negligence."
I agree absolutely. Their approach was "heads we win, tails you lose".
And it still is.
I agree absolutely. Their approach was "heads we win, tails you lose".
And it still is.
In a word, no.
Manufactured interest rate risk and derivative pyramids persist.
Manufactured interest rate risk and derivative pyramids persist.
Nary a word on GE's tax status? The folklore is they haven't paid taxes in years. Perhaps large companies -- and especially large federal contractors -- should be more responsible for the burdens they place on society, their employees and the communities they occupy.
5
We've become a nation that makes nothing but deals, and not such good ones. Jamie Dimon should pipe down: his "London Whale" sent ripples through the markets, showing that his firm has grown so large as to lose control of its business enterprises.
4
Before the bubble burst you needed the government regulators to reign in risk. After the bubble has burst risk is off, you need regulators to promote risk.
Our politicians reacted to a lack of risk by going after risk. A problem that was already in the rear view mirror.
Regulation is needed but our political system usually offers solutions to problems that are already far behind us.
Our politicians reacted to a lack of risk by going after risk. A problem that was already in the rear view mirror.
Regulation is needed but our political system usually offers solutions to problems that are already far behind us.
OK GE, but it will be at least 2 years to see how this actually goes.
Great analysis by James Stewart. Probably. Dodd-Frank is working. Sure, in a business that benefits from a financial bubble there are large profit margins. But as others have mentioned here, Dodd-Frank set out to control the deleterious consequences of a financial bubble.
I think the complaints here are a subtext; we're looking for the next bubble in which to "make it big" and we're dicouraged when one of those lucrative avenues is cut off. The stock market has been the same way. We need to restore infrastructural growth instead of off-shoring fundamental industries and relying on the service economy.
But if we can't make things here, then maybe we should be like the down-and-out gambler at the roulette wheel; put it all on the financial sector. GE is walking away from that table and going back to work at an honest job, it looks like.
I think the complaints here are a subtext; we're looking for the next bubble in which to "make it big" and we're dicouraged when one of those lucrative avenues is cut off. The stock market has been the same way. We need to restore infrastructural growth instead of off-shoring fundamental industries and relying on the service economy.
But if we can't make things here, then maybe we should be like the down-and-out gambler at the roulette wheel; put it all on the financial sector. GE is walking away from that table and going back to work at an honest job, it looks like.
1
Who are Dimon and Summers trying to kid, by alleging that too much regulation may hamper the liquidity of markets? Regulations are there to keep the banks from destroying the world economy, which they almost succeeded in doing in 2007. In fact, there is not enough regulation of banks.
10
Yeah, my thoughts are similar. Dimon and the rest of Wall Street want to lever up again. Some time has passed since the "London Whale" episode, so Dimon complains to his shareholders. And then Larry Summers jumps in. The tune never changes.
1
When GE unloads financial assets and leaves the highly suspect realm of the Systemically Important Financial Institutions, will they still be able to ride the wave of the Shadow Banking Public Subsidy or will they have to eat losses like everyone else when the Wall St. Derivatives Frankenstein implodes again?
Clearly, Blackstone and Wells Fargo have become extra important and grossly disproportionate paper asset entities operating in a financial "scrap market," but these days being a Wall Street Junkman is far more profitable than manufacturing. When the fat lady sings, institutionalized perverse incentive will likely swing the balance of profitability in favor those Financially Significant Companies who feed, but create nothing. We have been seeing the ultimate expression of the logic of the welfare state applied, not to people, but to Corporations since 2008, and participation in the bankers Griftopia has been very rewarding for the "What Me Worry Crowd" who had up until 2008 had been viewed as financial wizards.
I wonder if Immelt appreciates the risk he is taking by choosing to actually make great industrial products, while at the same time cutting GE off from the public teat. Then again maybe this signals a change in the trend away from the privatization of profit with the socialization of risk back to good old Capitalism, which has been defunct since Bill Clinton destroyed the American Regime of Banking Regulation, and made our "Banks" into Corporate Welfare Queens.
Clearly, Blackstone and Wells Fargo have become extra important and grossly disproportionate paper asset entities operating in a financial "scrap market," but these days being a Wall Street Junkman is far more profitable than manufacturing. When the fat lady sings, institutionalized perverse incentive will likely swing the balance of profitability in favor those Financially Significant Companies who feed, but create nothing. We have been seeing the ultimate expression of the logic of the welfare state applied, not to people, but to Corporations since 2008, and participation in the bankers Griftopia has been very rewarding for the "What Me Worry Crowd" who had up until 2008 had been viewed as financial wizards.
I wonder if Immelt appreciates the risk he is taking by choosing to actually make great industrial products, while at the same time cutting GE off from the public teat. Then again maybe this signals a change in the trend away from the privatization of profit with the socialization of risk back to good old Capitalism, which has been defunct since Bill Clinton destroyed the American Regime of Banking Regulation, and made our "Banks" into Corporate Welfare Queens.
3
Neither GE nor any big corporation ever eats their loses. The taxpayer usually ends up having those loses on toast and the taxpayers have to pay for the toast too!
1
GE's stock buy back is equaled only that of AAPL. But AAPL gets a pass because it is one one of the US's most innovative, fastest growing and highest margin companies. GE, an under performer since Jeff Immelt took over as CEO, is exercising what looks today like a strategy free tactic leaving it two choices. One is that it immediately artificially inflates EPS by shrinking the denominator. The other is that it creates a piggy bank the company can tap as it operates without the low margins and high oversight of GE Capital, a bank the company can use to finance (hopefully productive) investments.
1
Mr. Summers and Mr. Dimon will never be able to see problems their banking system has caused because they cannot see the world from the perspective of all the rest of us who bailed them out. Remember, we're your customers, we deserve to be treated as fairly as you.
7
The last thing those two deserve is supplication from anyone.
GE has little choice. Because of Dodd Frank and its financial business falling under the - too big to fail - category, the entire company comes under government scrutiny.
When government gets involved in controlling any industry as it has done with the banking industry, bad things happen, like there is less of it and it is more expensive.
So there you go - our government bails out companies that should have imploded in 2008, now the government manages their risk and the taxpayers underwrite any losses.
Now wouldn't you rather have a free-market enterprise banking system with banks competing for your savings deposit and automobile loan and themselves managing their own risk with their shareholders underwriting that risk?
Government control equates directly with less competition and higher costs, or in the converse, less savings account interest.
When government gets involved in controlling any industry as it has done with the banking industry, bad things happen, like there is less of it and it is more expensive.
So there you go - our government bails out companies that should have imploded in 2008, now the government manages their risk and the taxpayers underwrite any losses.
Now wouldn't you rather have a free-market enterprise banking system with banks competing for your savings deposit and automobile loan and themselves managing their own risk with their shareholders underwriting that risk?
Government control equates directly with less competition and higher costs, or in the converse, less savings account interest.
3
You'r argument is totally superficial and unsupported. You incorrectly imply that government controls industry when in fact, it's setting rules that protect the market from unscrupulous pursuit of profit at the expense and detriment of society.
3
"Now wouldn't you rather have a free-market enterprise banking system with banks competing for your savings deposit and automobile loan"
Poor people already have such a system. How's that working out for them?
Poor people already have such a system. How's that working out for them?
3
THERE IS NO FREE MARKET IN BANKING. A free market only exists when companies take both their profits and their loses. In this country banks socialize loses and costs while privatizing profits. The government doesn't control banking the banks and big corporations control the government.
3
These comments are wonderful. Thank you, thoughtful readers!
3
So sad...
Another nail in the coffin of the horrid 1980s ethic-"We are all bankers now.' How much financial services can we do as a nation? One big Wall Street (or Montgomery if you will). Who gives a damn if GE even goes under? They made electrical stuff, that's why they are called GE. The magic marketplace of the service economy turns out to be a geisha house of mirrors with everyone overdressed. Now, about that Chinese widget I've got to pick up at Walmart...
Another nail in the coffin of the horrid 1980s ethic-"We are all bankers now.' How much financial services can we do as a nation? One big Wall Street (or Montgomery if you will). Who gives a damn if GE even goes under? They made electrical stuff, that's why they are called GE. The magic marketplace of the service economy turns out to be a geisha house of mirrors with everyone overdressed. Now, about that Chinese widget I've got to pick up at Walmart...
7
J. Pierpont Morgan (w/ Spencer Trask & Henry Villard) formed General Electric, not Thomas Edison. Due to the battle over AC/DC, Morgan ultimately fired Thomas Edison from General Electric.
3
Poor Edison was stuck on DC because he couldn't do calculus.
I have been a GE shareholder for decades and even worked for them for years.
I have a serious problem with Immelt. It isn't that he is making the wrong decision in selling. It is that he is always a day late and a dollar short. He sold NBC, the appliance business and now financial services all two years or more too late. The last two after he downsized. All at a distressed price. All late. All sold to a potential competitor at a price less than spinning them off would have generated for the shareholders earlier.
Yes, you couldn't sell the financial business in 2008 during the crises. However, you could have spun it out in 20010 or 2012. Instead, it was downsized and is now worth substantially less. Sure, it would require more equity.
NBC was at its highest value right after the Vivendi merger. Why not spin it out at the same time in 2004 or 2006? It was even rumored to happen. Instead, Immelt waited until 2011 when the bloom was off the rose.
Look at the appliance business. The same thing happened to the TV business decades earlier. Everyone could see it coming for years. Why wait until 2014?
Look at the financial business. It had to be cleaned up in 2008. What about 2010 and 2012? It has been substantially downsized. Each piece could have been capitalized and spun out. Even now, what is left could be spun out.
Sure, there are tax and other considerations. These businesses are generally well managed. They can make it on their own.
I have a serious problem with Immelt. It isn't that he is making the wrong decision in selling. It is that he is always a day late and a dollar short. He sold NBC, the appliance business and now financial services all two years or more too late. The last two after he downsized. All at a distressed price. All late. All sold to a potential competitor at a price less than spinning them off would have generated for the shareholders earlier.
Yes, you couldn't sell the financial business in 2008 during the crises. However, you could have spun it out in 20010 or 2012. Instead, it was downsized and is now worth substantially less. Sure, it would require more equity.
NBC was at its highest value right after the Vivendi merger. Why not spin it out at the same time in 2004 or 2006? It was even rumored to happen. Instead, Immelt waited until 2011 when the bloom was off the rose.
Look at the appliance business. The same thing happened to the TV business decades earlier. Everyone could see it coming for years. Why wait until 2014?
Look at the financial business. It had to be cleaned up in 2008. What about 2010 and 2012? It has been substantially downsized. Each piece could have been capitalized and spun out. Even now, what is left could be spun out.
Sure, there are tax and other considerations. These businesses are generally well managed. They can make it on their own.
15
I am one of the people that should matter most to GE--a consumer. However, GE hasn't shown any true interest in me for decades. They like other big corporations long ago forgot what I learned at my fathet's knee--the customer is right and comes first even if they are wrong. It matters a great deal how companies treat people. Those that don't treat people well will eventually fail and fall. GE and other corporations that put themselves above the consumers will fail and fall. And I along with others are waiting in the forest to hear the crash. The fall will not go unnoticed nor will their failure be mourned.
1
NBC had been on the block for years and I am talking at least 20 years, when Jack hijacked the company and made it into a hedge fund of sorts. Because after the Reagan revolution all that mattered was " STOCK PRICES so CEOs went out of their way to rig things to make EPS look good. Jack should be in jail. Just check out how Gillette got sold to P&G and how much the then CEO made on the deal ...$600 Million
GE is yet another company that is not manageable at its size, but you can bet that everyone involved in this will come out with billions in their personal bank accounts. Why else run a company unless you can milk it dry and leave with all its cash? I can't think of any reason to go into business except to steal as much cash as possible from as many people as possible and then tell everyone how much you have. The "business" doesn't really matter at all to anyone involved.
These corporate life cycles will continue. The current rash of mergers driven by the idiots that run so-called "hedge funds," which are simply organized crime groups where the people involved wear expensive clothes and look and speak respectfully using their own incomprehensible made-up jargon, will reverse itself as these funds sell the companies they acquire at huge profits after raping them of all their money, employees, and products. This cycle will continue until all the money belongs to fewer than the 80 people who have most of it now, and then the rest of us "little people" can figure out how to climb out of yet another recession. This cycle of joining together and then breaking apart seems to occur every 20 years or so and results in further contraction of the economy. I like the carl icahn’s of the world who appear up one day at companies like Apple and tell them how to run their businesses--making sure that they come out with an extra trillion--and these CEOs are scared of them.
These corporate life cycles will continue. The current rash of mergers driven by the idiots that run so-called "hedge funds," which are simply organized crime groups where the people involved wear expensive clothes and look and speak respectfully using their own incomprehensible made-up jargon, will reverse itself as these funds sell the companies they acquire at huge profits after raping them of all their money, employees, and products. This cycle will continue until all the money belongs to fewer than the 80 people who have most of it now, and then the rest of us "little people" can figure out how to climb out of yet another recession. This cycle of joining together and then breaking apart seems to occur every 20 years or so and results in further contraction of the economy. I like the carl icahn’s of the world who appear up one day at companies like Apple and tell them how to run their businesses--making sure that they come out with an extra trillion--and these CEOs are scared of them.
18
Hooray! I'm not sure I understand why this isn't a Times pick.
“Revenue growth in the banking industry is the worst it’s been in eight decades,”
My latest bank statement shows my savings interest rate = 0.03%. The interest rate on that bank's credit card = 11.75%. Car loan interest = 5.3%. They pay me 0.03% to use my money. I pay them 5.3 or 11.75% to use their money.
And they are whining about liquidity? What exactly are they doing with all the cash they have to be accumulating?
My latest bank statement shows my savings interest rate = 0.03%. The interest rate on that bank's credit card = 11.75%. Car loan interest = 5.3%. They pay me 0.03% to use my money. I pay them 5.3 or 11.75% to use their money.
And they are whining about liquidity? What exactly are they doing with all the cash they have to be accumulating?
57
Not much, really. Zero interest rate monetary policy kills money velocity.
4
Excuse me if that is bad for banks why are they lobbying to keep them sooo low.
What you describe is the crime of the century. And perpetrated by Obama and the Federal Reserve. And politicians and pundits are all curiously silent about it. It has robbed tens of billions of dollars from honest, ordinary families and seniors dependent on interest to supplement their SS.
My parents taught me to save by showing me "the miracle of compounded interest". In those days, by LAW, banks had to pay 5% interest! What can you teach a child today, when even six figures in savings earns a whopping 0.15%?
My parents taught me to save by showing me "the miracle of compounded interest". In those days, by LAW, banks had to pay 5% interest! What can you teach a child today, when even six figures in savings earns a whopping 0.15%?
Perhaps this also is a return to understanding that there is as much art as well as science in finance just as there is in surgery, writing excellent code, cutting and draping fashion. And with that the industry will attract bright minds interested in actually building worth than just making a fast buck,long gone before the damage they've caused is felt. This latter is otherwise known as a crook. the former a craftsman or artisan. The notion that finance is practiced as a craft or art could transform the industry from one that runs amok in it's zeal to one that has discipline and focused direction and return respect for the industry stolen by crooks. Banking wasn't "boring" before the ascendency of finance in the past few decades, but like a craft, to understand and appreciate took time, patience and a willingness to forgo quick results that are as cheap and flashy as they are fast. Anyone who stands by their work must come to terms with the triangle of good, fast and cheap, that you can have only two of the three and the answer is always in balancing the third to find the best in the other two variables. This turn is an opportunity for the finance industry to remake itself and with it the world if it's willing to do the work--and shed the crooks.
3
Stupid monetary policy made banking as we knew it an untenable business.
Oh please. Bankers ruined the economy got bailed out an no one went to prison. I would say banking has been pretty good busines for the CEOs!
GE's mistake was to offer too many kinds of financial services not related to the manufacturing business. Project finance made sense for GE but real estate lending did not. Basic lack of competitive understanding at board level.
3
GE is returning to its core business. Would that be the one also known as the largest defrauder in US Dept of Defense contracts never to have been prosecuted?
20
Lots of high paying jobs in financial arbitrage now on offer on in London and Zurich...
Consider for a moment the impact of Dodd Frank / increased regulation on GE Capital... Here we have the one and only SIFI with a AA-rated and diversified industrial parent that guarantees the debt of its financial services subsidiary for at least 5 years.
This provides an additional safety buffer for the US tax payer that no other large scale financial services institution can provide. And now that GE Capital is going away, 10's of thousands of people will lose there jobs and $350B of financial assets will be scattered into the shadow banking sector or consumed by firms already deemed too big to fail; resulting in more risk for the U.S. taxpayer.
Job losses + increased risk feels like regulation run amok.
This provides an additional safety buffer for the US tax payer that no other large scale financial services institution can provide. And now that GE Capital is going away, 10's of thousands of people will lose there jobs and $350B of financial assets will be scattered into the shadow banking sector or consumed by firms already deemed too big to fail; resulting in more risk for the U.S. taxpayer.
Job losses + increased risk feels like regulation run amok.
4
But the parent needed a $3 billion backstop from Warren Buffett in 2008, remember?
http://dealbook.nytimes.com/2008/10/01/buffett-to-invest-3-billion-in-ge
This is a good move all the way around. And as a taxpayer I'm glad to see GE bringing $36 billion ashore - and paying taxes on it - as part of the deal. Your turn, Apple.
http://dealbook.nytimes.com/2008/10/01/buffett-to-invest-3-billion-in-ge
This is a good move all the way around. And as a taxpayer I'm glad to see GE bringing $36 billion ashore - and paying taxes on it - as part of the deal. Your turn, Apple.
9
GE is smart. If they brought back the money at a time when they weren't simultaneously taking a huge non-cash paper loss hit, it would be very obvious how large the tax hit was and the stockholders would rightly be upset. This way they get to lump the extra taxes in the "smart move" to get out of being a SIFI and can use the repatriated dollars as a piggy bank for executive bonuses for improving the balance sheet beyond the quarter where they take the hit. Apple has no such cover and it would be ludicrous for Apple to hand the federal government $50 billion and then have the Obama Administration crow about deficit reductions.
The only thing more ludicrous is to blame the president for everything one finds disagreeable. What drives that?
Towards the end of 2007 or so, I and everyone else in my new condo building became so disgusted with the inferior quality and reliability of GE appliances that came with our condos that many of us decided never to buy one again. Focusing on their core business now is too little too late.
2
They sold off the appliance division last year. It is not part of their core business.
1
A big part of it just burned down to the ground. Electrolux evidently bought a firetrap.
That warehouse had been leased out to another company that was not associated with GE.
1
Intuitively, I was scratching my head with Mr. Dimon’s statement
“In the next crisis, he suggested, “there may be a shortage of all forms of good collateral” because bank assets that might otherwise be deployed are tied up by postcrisis capital and liquidity requirements.”
since that ‘good collateral’ will be reaching further down into the barrel for possible less desirable and riskier outcomes and of course less collateral at this stage to enhance liquidity. I’m glad something of the sorts was mentioned later in the article
“Regulators have drained significant profit opportunities from high finance, but many of the large banks’ complaints about overregulation may be a smoke screen. “They could be taking more risks and doing more lending than they are,” Mr. Greenwald said of the banks.”
“In the next crisis, he suggested, “there may be a shortage of all forms of good collateral” because bank assets that might otherwise be deployed are tied up by postcrisis capital and liquidity requirements.”
since that ‘good collateral’ will be reaching further down into the barrel for possible less desirable and riskier outcomes and of course less collateral at this stage to enhance liquidity. I’m glad something of the sorts was mentioned later in the article
“Regulators have drained significant profit opportunities from high finance, but many of the large banks’ complaints about overregulation may be a smoke screen. “They could be taking more risks and doing more lending than they are,” Mr. Greenwald said of the banks.”
4
The whole house of cards these bankers play with is a hedge against manipulation of interest rates by the Fed.
Over regulation? No. Still not enough. Require banks to be banks and nothing else. Banks should never be in the business of seeking large rewards by taking large risks. Their job is to protect assets, not gamble with them. They can still earn decent returns and their CEOs can still take home very generous paychecks. But the gambling industry should be peeled out of all banks where it can play its games with willing and (hopefully) knowledgeable investors. The bottom line is this: no financial institution should be allowed to gamble with other people's money without their express permission and the financial industry should be tiered with banks at the lowest end of the risk-reward curve.
43
We are all gamblers betting on the next moves of the Federal Reserve Bank in its ludicrous effort to substitute monetary policy for fiscal policy.
1
How is 10% not a decent profit margin? The average person would be happy with that return. But I guess those who get bailed out and then avoid paying taxes to their saviors, aka the US government, through financial manipulation truly have different standards than you and I.
37
The U.S. Government billed them out with our tax money. The entire thing is a joke,
10% is not enough for these guys. They NEED a new Gulf Stream every year!
1
Banks have moved a long way from their base and historical roots. To prevent their actions from resulting in failure they must be regulated. George Satanya said "those who fail to understand history are bound to repeat it" the goal should be reasonable profits not the highest profits of any indutstry.
7
Banking was an inherently local business before the Fed lost sight of the primary need to maintain a stable yield curve.
1
When Neutron Jack retired and the books were finally carefully investigated, it became clear how he did his famous "quarter after quarter rising profitability ".
He used GE Capital as a big flywheel to cook the books to get the numbers needed.
Emmett has been more honest-you couldn't be less honest-and so jettison the flywheel......but don't pay taxes....the books are still being cooked.
He used GE Capital as a big flywheel to cook the books to get the numbers needed.
Emmett has been more honest-you couldn't be less honest-and so jettison the flywheel......but don't pay taxes....the books are still being cooked.
7
The chutzpah of these so called financial services firms never ceases to amaze me. They brought the global economy to its knees in 2009 by selling junk bonds to unknowing investors as high quality debt by colluding with Standard and Poor and now expect us to feel sympathy? Guess what - the vast majority of Americans have seen their wealth shrink, income and wages stagnate. We are still trying to recover to where we were 15 years ago - all because of their criminal behavior which not one of them ever went to prison for. The crocodile tears that they shed foo no one.
22
It sounds like GE is spinning out the non-core portions of its financing business - real estate and commercial lending. The article was silent on what to my view is the most critical piece of GE's financing business - it's equipment leasing and financing businesses. To my view, the ability to leverage a strong balance sheet and cash flow statement by providing credit to customers who purchase large capital equipment - gas turbine engines, aircraft engines, etc - provides competitive advantage. I think this type of financing is entirely appropriate for an industrial conglomerate. I also think that GE's exit of non-core financing business does not mean GE is no longer a conglomerate. GE will still have quite an eclectic mix of industrial businesses - everything from plastics, to appliances, oilfield equipment, gas turbines and jet engines. The big question remains how the perceived gap in commercial lending will be filled in the market. Since GE is selling these businesses, new owners will likely have the same offerings.
1
@ David
They are getting out of diversified financial services but retaining the equipment financing operations that support their mainstream businesses as several other articles on this topic mention.
They are getting out of diversified financial services but retaining the equipment financing operations that support their mainstream businesses as several other articles on this topic mention.
3
" it shed its remaining stake in NBC Universal two years ago and its plastics business in 2007..."
1
A nail in the coffin? Hyperbole at its best. GE hasn't paid taxes in years as it gyrates its money around the globe. An the hilarity continues as we are treated to a discussion of how banks profits have fallen and how strict the regulations on banks have become. None of which is true. The regulations such as they are and their are precious few that mean a thing are supposed to be protecting the tax payers from having to bail out these no risk averse bankers who crashed the economy and still continued to amass fortunes while sucking up billions in free money while their victims lost homes and jobs. Banks are neck deep in risky ventures including commodity manipulation. More regulation is needed not less. Investment arms of banks must be separated from their regular banking business and depositors must be protected from the predators but that is unlikely to happen as depositors are mostly humans.
As to GE I say pay your taxes and stop whining.
As to GE I say pay your taxes and stop whining.
70
“Revenue growth in the banking industry is the worst it’s been in eight decades,” .......
Welcome to the real world where middle class incomes are stagnant, benefits are decreasing, and small family businesses try to compete with corporate giants. What else could they possible expect?
Welcome to the real world where middle class incomes are stagnant, benefits are decreasing, and small family businesses try to compete with corporate giants. What else could they possible expect?
7
Will GE pay taxes now?
5
So the guys who blew up the system are complaining that if we continue to keep them from blowing up the system again it might blow up the system.
64
I'll bet there's truth in Mr. Dimon's complaint that overly restrictive regulations have the potential to strangle a response to a future liquidity crisis. After all, the same folks or type of folks who ignorantly deregulated banking are the ones who created the new restrictions. The pendelum may have swung from one extreme to the other.
What I'd love to see is a full detachment and isolation of the big banks' liabilities in own-account massive derivatives' volumes and exposures from basic banking and other financial operations. No intracorporate backstops, no implied Fed or other US government guarantees.
What I'd love to see is a full detachment and isolation of the big banks' liabilities in own-account massive derivatives' volumes and exposures from basic banking and other financial operations. No intracorporate backstops, no implied Fed or other US government guarantees.
1
“The business model for large, wholesale-funded financial companies has changed, making it increasingly difficult to generate acceptable returns going forward,”
It wasn't difficult before the 2008 crash. Americans were swimming in a sea of consumer debt and GE Capital was doing very well charging them 15+% interest on it. The Consumer Financial Protection Bureau managed to make some modest changes so that consumers actually knew what they were getting into before they got involved with these legal loansharks (thank you Elizabeth Warren). The big change was a new reluctance on the part of Americans to take on high interest consumer debt. I hope that's a permanent change, otherwise the likes of GE and GM will be jumping back into the usury business in the future. After all, they're just giving the people what they want.
It wasn't difficult before the 2008 crash. Americans were swimming in a sea of consumer debt and GE Capital was doing very well charging them 15+% interest on it. The Consumer Financial Protection Bureau managed to make some modest changes so that consumers actually knew what they were getting into before they got involved with these legal loansharks (thank you Elizabeth Warren). The big change was a new reluctance on the part of Americans to take on high interest consumer debt. I hope that's a permanent change, otherwise the likes of GE and GM will be jumping back into the usury business in the future. After all, they're just giving the people what they want.
9
New reluctance or new inability?
I would like to think that we have entered a new age of frugality, but that would mean renouncing jonesmanship, and I haven't seen much evidence of that. Not yet, anyway.
I would like to think that we have entered a new age of frugality, but that would mean renouncing jonesmanship, and I haven't seen much evidence of that. Not yet, anyway.
Banking should be LOW risk --the very meaning of the word "to bank" comes from "to amass, to pile up," e.g. "A supply or stock for future or emergency use: a grain bank." Mankind's first banking was storing food, long before there was any currency, for most of mankind's history it was the stored wealth of deferred consumption.
Modern "finance" is not banking -- modern finance uses the oxymoron "investment banking" ... and we could make a lot of progress if we could just excise that nonsensical idea from the lingo. You can "invest," or you can bank, but pretending you can do both safely is a lie. The old separation of Glass-Steagall was right, borne out by bitter experience ... which has just been renewed.
You cite "...reminder of an economic truism — reward correlates with risk." What you mean is true is that the payoff increases with risk, in any fair gambling game.
Modern "finance" has been about
1. leverage ... to drive very high potential payouts from small parleyed investments
2. Finding suckers to take proposition bets.
3. Bookies know that if they can't pay off a big bet, they are probably going to be shot. Wall Street knows that if it cannot pay off a bet, nothing happens.
People who want to make big bets are free to do so, but they must be able to cover their losses. Now that even a modicum of discipline is being imposed, a lot of busted high-stakes gamblers are taking the "free bus ride home"
Modern "finance" is not banking -- modern finance uses the oxymoron "investment banking" ... and we could make a lot of progress if we could just excise that nonsensical idea from the lingo. You can "invest," or you can bank, but pretending you can do both safely is a lie. The old separation of Glass-Steagall was right, borne out by bitter experience ... which has just been renewed.
You cite "...reminder of an economic truism — reward correlates with risk." What you mean is true is that the payoff increases with risk, in any fair gambling game.
Modern "finance" has been about
1. leverage ... to drive very high potential payouts from small parleyed investments
2. Finding suckers to take proposition bets.
3. Bookies know that if they can't pay off a big bet, they are probably going to be shot. Wall Street knows that if it cannot pay off a bet, nothing happens.
People who want to make big bets are free to do so, but they must be able to cover their losses. Now that even a modicum of discipline is being imposed, a lot of busted high-stakes gamblers are taking the "free bus ride home"
33
Dear Lee:-
The word bank comes from the Italian "banco," or bench, used by Italian bankers and money changers during the Middle Ages and after. Many of your points are well-taken and it would be nice if the bankers whose bets imploded during 2008 had been made to pay the piper. They got to keep their fancy apartments and other assets, when they should have lost their jobs instead.
The word bank comes from the Italian "banco," or bench, used by Italian bankers and money changers during the Middle Ages and after. Many of your points are well-taken and it would be nice if the bankers whose bets imploded during 2008 had been made to pay the piper. They got to keep their fancy apartments and other assets, when they should have lost their jobs instead.
5
The Federal Reserve Bank is now the world's largest creator of interest rate risk.
The basic problem with back goes back to its origins of storing food. Storing food attracks rats.
At least the Egyptians (ancient) used some grain guardians with teeth: cobras.
At least the Egyptians (ancient) used some grain guardians with teeth: cobras.
1
Of course Mr Dimon takes the position that regulation has gone too far... it will push finance back to where it should be: the boring but stable business of supporting business, home mortgages, and payment systems. When finance dominates the economy over the production of real tangable value added goods and middle class jobs, an economy declines. We are far advanced down that road and only beginning to recover. We have a long way to go.
95
Explain to me again why Jamie Dimon is not in jail for life? I guess money really does more than equate with criminal justice. That term truly does mean justice for criminals.
2
What a feel-good story on a Saturday morning! Reserve requirements will hopefully deter future "liquidity crises" (what a splendid euphemism for what these jerks put us all through) and if they don't the requirements can be temporarily suspended to restore liquidity with the banks' own money rather than the taxpayers'. We can only hope that it's "the end of an era."
You can ALWAYS count on Larry Summers to use his academic cred (what's left of it) to shill for Wall Street.
You can ALWAYS count on Larry Summers to use his academic cred (what's left of it) to shill for Wall Street.
8
So what will they do, they will buy back their OWN stock and fire workers.
3
When and how did lobbing other people's money back and forth to each other, and charging them dearly for the privilege, become 30% of GDP?
Is it any wonder that people who make or grow things that other people can use, eat, wear or live in are having such a tough time of it?
"There are two kinds of work. The first consists of altering the condition of matter, at or near the surface of the Earth. The second consists of causing others to do so. The first is unpleasant and ill-paid: the second is pleasant and highly paid."
Pace Bertrand Russell, my work is pleasant. The thing is that THEY don't think it's worthy their time or notice.
Is it any wonder that people who make or grow things that other people can use, eat, wear or live in are having such a tough time of it?
"There are two kinds of work. The first consists of altering the condition of matter, at or near the surface of the Earth. The second consists of causing others to do so. The first is unpleasant and ill-paid: the second is pleasant and highly paid."
Pace Bertrand Russell, my work is pleasant. The thing is that THEY don't think it's worthy their time or notice.
8
Blah, blah to Mr. Dimon. Kill fractional reserve banking and eliminate the ability to sell off risk. Bank lending under the fractional reserve system is loaning something they do not have, the taxpayers are the ones at risk. Eliminate that risk to the taxpayer.
7
Right, there should be no lending to anyone, the main result being bankruptcies would be totally eliminated! Brilliant.
GE's failure to find a product that doesn't require quality, labor, or rules does not mean that the quest has ended.
2
Jamie Dimond: the "next crisis" !!!!!!!!!!!!!!!
How about behaving and not stealing people's money so there WON"T BE A "NEXT CRISIS!!!"
How about behaving and not stealing people's money so there WON"T BE A "NEXT CRISIS!!!"
24
Too big to fail has gotten it's comeuppance.
Finally we are beginning to see the financial industry see that more profits
might be found by being smaller instead of bigger.
might be found by being smaller instead of bigger.
1
GE has been trying offload GE Credit for year and thus finally it can proceed. keep in mind why their financial division was nurtured in the first place: it was to smooth out the weak earnings results of their industrial divisions. Since they remade their industrials (medical imaging and oil fracking) they may find greater success than in the past. Immelt the CEO has done nothing but shuffle assets during his tenure and frankly has been a slow footed visionary who can improve the performance of GE by stepping down entirely.
2
The problem is, does GE still remember how to make things?
1
If you fly in an airliner, take a train, or use electricity, you already know the answer is yes.
Thanks for asking. Have a blessed day!
Thanks for asking. Have a blessed day!
2
Sure glad I sold all my mostly inherited 1000 shares of GE many years ago.
Far better investments offshore.
retired expatriate
Far better investments offshore.
retired expatriate
2
$287 billion in market cap and GE threw in the towel rather than develop innovative household appliances.
I am still waiting for a reasonably priced appliance that will prepare bacon, eggs, toast and grilled cheese sandwiches at the touch of a button.
Remember when "progress" was GE's "most important product"?
I am still waiting for a reasonably priced appliance that will prepare bacon, eggs, toast and grilled cheese sandwiches at the touch of a button.
Remember when "progress" was GE's "most important product"?
9
GE should go back to making good old fashioned genuine 14 cent light bulbs! Then I will buy their stock again.
4
A good move. A few years ago the tail was wagging the dog. They're retaining the bits that are necessary to finance their own marketing activities and getting rid of the rest which is not GE's core competency. As for Dimon's whining about a shortage of liquidity in a crisis, that was exactly the problem in 2008/9. Where was the bank's (including Dimon's own) liquidity then? It had to be provided by the Fed to get the banks out of a hole.
15
One only hopes that Jack Welch's leveraged financial fortune will decrease accordingly with the failure of his investment strategy. Ha, ha, ha, ha, ha! Well, at least the shareholders who hitched their wagons to his charisma will pay the price. Oh, wait, those are the pension fund investors who have taken a huge hit in their 401k's since hizzzoner retired. I suppose the undeserving heirs to his undeserving financial fortune will be complaining about their trust funds.
11
This is a decision that should have been made at GE a decade ago.
I don't think that this company will really turn the corner until Immelt resigns.
Can anyone explain to me, in this day and age, how a CEO/chief executive of a major American corporation has been allowed to stay after years of not delivering, of blatant incompetence. What's the story there-does he have something on the board?
I don't think that this company will really turn the corner until Immelt resigns.
Can anyone explain to me, in this day and age, how a CEO/chief executive of a major American corporation has been allowed to stay after years of not delivering, of blatant incompetence. What's the story there-does he have something on the board?
15
Actually, you have to go back to Jack Welch to find the root cause of what went wrong at GE. Most of the bad decisions took place on his watch and are of such a magnitude that it's just not that easy to uncouple, divest, and simply find a buyer.
10
Hopefully we don't have to listen to how Mr. Welch "saved" GE. In fact it is amazing GE even has survived the stupidity of entering the financial industry.
2
I suspect he's spent the past decade un-winding the house of Jack and Gary.
4
Break up the eight biggest banks and pass regulation getting them back to the same basics as credit unions pursue, and watch negative public opinion drop. Better yet, abolish the FED entirely and end their cozy bedfellow swinging door relationship with Wall Street and go nationwide to state banking. Therein lies a better way of getting untainted capital into the hands of citizens where it belongs. Or go to direct federal loans to consumers with NO middleman private bankers.
20
Nice thought, RR. And Obama had the chance to do so in 2009 when he met with the 13 honchos of the biggest banks, who were shivering in their bespoke wingtips until BO told them, incredibly: "Nice job!" (see PBS "Wall Street, Money and Power, part 3).
Unfortunately, negative public opinion doesn't count for much when it comes to corporations/banks having their way -- and being in a very strong position to pay for it -- unlike the rest of us poor plebeians.
Unfortunately, negative public opinion doesn't count for much when it comes to corporations/banks having their way -- and being in a very strong position to pay for it -- unlike the rest of us poor plebeians.
1
This is wonderful news. GE is America's premiere electrical equipment manufacturer. They make the stuff that generates power and keeps the lights on, all crucial infrastructure.
They got into the investment casino business when they saw other large companies making a killing creating profits out of thin air. Those profits were the direct result of massive speculation, leverage ratios greater than 40 to one and investment schemes so complicated no one had a clue how they really worked. Then it all blew up.
It is appalling to hear circular arguments from the likes of Jamie Dimon that claim regulations are prohibiting big banks from being able to generate the liquidity that might be needed if there is another blowout. But the regulations should prohibit the next blowout by keeping firms from speculating to such an extreme that the blowout never occurs. What Dimon is complaining about is that he can't make money by risking the stability of the economy like he could before. So he makes less money and doesn't like it. He has forgotten that the taxpayer bailed him and his brethren out.
Commercial banks serve a vital function. They make money, but not astronomical amounts like Wall Street firms. GE claims that doing that kind of banking generates low profits. Of course it does. It's supposed to. That's why well run commercial banks are rock stable. Good move GE. Now build more stuff and make money the old fashioned way.
They got into the investment casino business when they saw other large companies making a killing creating profits out of thin air. Those profits were the direct result of massive speculation, leverage ratios greater than 40 to one and investment schemes so complicated no one had a clue how they really worked. Then it all blew up.
It is appalling to hear circular arguments from the likes of Jamie Dimon that claim regulations are prohibiting big banks from being able to generate the liquidity that might be needed if there is another blowout. But the regulations should prohibit the next blowout by keeping firms from speculating to such an extreme that the blowout never occurs. What Dimon is complaining about is that he can't make money by risking the stability of the economy like he could before. So he makes less money and doesn't like it. He has forgotten that the taxpayer bailed him and his brethren out.
Commercial banks serve a vital function. They make money, but not astronomical amounts like Wall Street firms. GE claims that doing that kind of banking generates low profits. Of course it does. It's supposed to. That's why well run commercial banks are rock stable. Good move GE. Now build more stuff and make money the old fashioned way.
165
The acrimonious press debate and Greece-bashing (some deserved) has triggered this thought in me (a diaspora Greek, but by no means its apologist):
During TARP, Citibank's bailout portion alone exceed the total amount of the Greek bailout. The whole EU, and the currency's whole raison d'être, is "in crisis" over the Greek bailout's size.
In the TARP bailout, close to a trillion was handed to the banks - who then paid themselves bonuses for their "talent".
In the EU-Greece saga, Greeks are lazy, commies, crooks and cheats and liars. I only ask, academically, are Citibank's leaders, all bailed-out and bonus checks cleared in 2008, not a little deserving of the same histrionic epithets and invective?
During TARP, Citibank's bailout portion alone exceed the total amount of the Greek bailout. The whole EU, and the currency's whole raison d'être, is "in crisis" over the Greek bailout's size.
In the TARP bailout, close to a trillion was handed to the banks - who then paid themselves bonuses for their "talent".
In the EU-Greece saga, Greeks are lazy, commies, crooks and cheats and liars. I only ask, academically, are Citibank's leaders, all bailed-out and bonus checks cleared in 2008, not a little deserving of the same histrionic epithets and invective?
4
The profits from financial speculation are always short-term and do not last. If there is nothing that is solid and long-term holds up the entire enterprise, all of these accounting gimmicks do nothing but setup companies as well as the entire economy for a big crash. It happened in 1929 and it happened again in 2008. In between, all of the people that lived through 1929 died. Their children and grand-children forgot the critical lessons. So, they repeated history's mistakes.
What! Too big to fail is not making enough money? Regulators draining significant profit opportunities from high finance likely means a couple million less of the billions in profit made each year. "Wells Fargo has a profit margin of nearly 28 percent. G.E.’s was barely over 10 percent last year." You got to be kidding me. While the middle class feels lucky to have a job, a home and food, these guys are worried that a bare 10% profit margin is not enough to play with. Heaven forbid if the CEOs had to take a cut in pay, instead of 10 million a year, maybe 9 million. No wonder the rest of the world hates us.
119
Remember, GE pays no federal taxes on $23 billion profit per year and receives back $3.2 billion from the feds as credits for the following year. When was the last time you or your friends had a deal like that on your salary and taxes?
5
I feel your pain. I agree with your sentiment.
But the CEOs are only managing to Wall Street's expectations. Investors react accordingly, moving their money from the 10% return to the 28% return.
It's a dilemma and I don't know the remedy.
But the CEOs are only managing to Wall Street's expectations. Investors react accordingly, moving their money from the 10% return to the 28% return.
It's a dilemma and I don't know the remedy.
umm…GE's cost of capital is probably around 9 to 11%. At a 10% profit margin, they barely earn back their cost of capital. Not an attractive business...
Wow, maybe the era of the formulaic MBA-concocted conglomerate is finally playing out. Tricky financial maneuvering instead of actually making useful products has been in vogue for far too long. GE had a long, proud history of the latter. One hopes they can return to their roots.
54
Wow, reading this you would think that banks and the banksters are hurting! Rather, it just means that they can't keep growing their obscene profits at the same rate, and with the same profligacy. All those billions and billions they made, stole, appropriated (just ask the folks in Greece and Spain) are still in their greedy hands, or being squirreled away in their $20M condos...
72
You don't have to go to Greece and Spain to find the damage. Ask American home mortgagers who lost their living space because your government allowed and encouraged through tax policies and lack of regulation these financial firms to rob you and your pension funds. And then look at who the American public continues to elect to office ... more of the same.
4
Good to know that some person (oops, corporation) sees a need for something more useful than Collateralized Debt Obligations or games to play on an iPhone.
59
GE's finance unit was one of the worst run financial operations anywhere. It was a boondoggle from the beginning. I am glad that they finally decided to cut their losses and give up this ridiculous attempt to cash in on Wall Street.
27
If Wall Street is complaining about regulation, it makes me feel that the government must be doing something right (for a change).
163
This has been a long time coming. I'm a long time, now retired GE engineer and was ashamed of the direction my company took.
Maybe now GE can make money by getting back to the application of science and engineering as it had done since the days of Edison and Steinmetz rather than by playing with "other peoples money" like just another "Wall Street Shark".
Maybe now GE can make money by getting back to the application of science and engineering as it had done since the days of Edison and Steinmetz rather than by playing with "other peoples money" like just another "Wall Street Shark".
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Now GE allows the government to design their products for them .. so we are stuck with lampshade-destroying and oil-paint-fading mercury-tainted "lightbulbs" that are so complex and expensive that they must be made in China.
2
Great. "My cold dead hands" now applies to incandescent light bulbs. You poor dear.
1
Somebody will make money from GE's application of science and engineering, but who that will be is controlled by the way the economy works with respect to money. Since finance is not attached to reality the way production is, it can soar on wings of confidence in confidence games rather than plodding along making jet engines and turbines in competition with Europe, Japan, and China.
As a long-term second generation shareholder of GE, I welcome this change. Since GE's concentration on the financial industry -- and that was long before the '08 crisis -- the company's value tanked for ordinary shareholders such as me. Until the mid-90s, every few years the stock doubled in value every, would split 2:1, and would increase the dividend. Then everything TPTB did ended up wrong for the company, as evidenced by its share price and low dividend. Don't forget that GE took its capital off-shore to avoid paying taxes. Can the business professors and their graduates, the Midget Brained Asses, give us a satisfactory explanation?
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Therefore we should eliminate corporate taxes (which are really taxes on poor consumers) so these companies will bring their manufacturing and their jobs back to these shores. No other civilized country taxes corporations.
It is wrong to call Berkshire Hathaway a 'conglomerate'. It is just a bunch of separate businesses that Buffett owns under one umbrella. He takes advantage of the corporate structure by being able to move capital freely from one company to another, but operationally they're separate companies.
8
It's not a '60s-style conglomerate built on smoke, mirrors, leverage and watered stock. But the movement of capital between operations is the defining characteristic of a conglomerate, yes?
The large banks complain about ANY regulation.
Calling it overregulation is laughable when talking about the very ones that had to be bailed out to survive, yet who still call most of the shots.
Calling it overregulation is laughable when talking about the very ones that had to be bailed out to survive, yet who still call most of the shots.
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