Stephen Foley: GE must pull the plug on financial fiasco
Saturday 17 October 2009
US Outlook: If there is a corporate metaphor for our intoxication with finance over the credit boom years, than General Electric is it. What started out as a small financial services division offering credit to homeowners who wanted to buy its appliances swelled and swelled until it was generating more than half the company's profits in 2007.
Obviously, it plunged to huge losses last year, on sub-prime mortgage lending, but results yesterday reveal that it is further from a return to health than many had hoped.
Jeff Immelt, GE chief executive, said he was shrinking the business quickly back down to size, but there should be more urgency, if not for GE's shareholders then for the financial system as a whole. GE Capital is just the sort of "too big to fail" institution that shouldn't be allowed to exist outside of a heavily regulated bank, yet GE's efforts at the moment are concentrated on (successfully) lobbying to fend off quick implementation of the new financial sector reforms, which could have forced it to immediately recapitalise and probably divest the division.
GE Capital was again the weak spot of quarterly earnings yesterday, and the company admitted that its commercial real estate investments were tacking close to the most adverse scenario imagined under the US government's "stress test". Its insistence that the business does not need to be recapitalised – with big dilution to GE shareholders – looked even more hollow last night than it did before. It certainly will need to be when the financial reforms are enacted and newly empowered regulators sweep through, and it is endangering the financial system while it remains so shaky and so reliant on wholesale funding markets. GE should face up to its responsibilities sooner rather than later.
- 1 East 17 bandmember Brian Harvey in 'very desperate situation’
- 2 Is this bridge haunted by the ghost of nu rave?
- 3 Woman filmed launching racist tirade against men on the Tube for speaking in 'own lingo'
- 4 The West has it totally wrong on Lee Kuan Yew
- 5 Scientists have discovered a simple way to cook rice that dramatically cuts the calories
Ukip supporters are 55 or older, white and socially conservative, finds British Social Attitudes Report
JK Rowling responds to fan tweeting she 'can't see' Dumbledore being gay
Jeremy Clarkson sacked live: Alan Yentob 'wouldn't rule out' ex Top Gear host's BBC return
David Cameron calls Labour 'hopeless, sneering socialists' while announcing 7-day NHS plans
The West has it totally wrong on Lee Kuan Yew
Revealed: Putin's army of pro-Kremlin bloggers
iJobs Money & Business
Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...
Negotiable: Recruitment Genius: You will be the first point of contact for all...
£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...
£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...