Jeff Immelt led GE to the brink of extinction two years ago. Without the taxpayer bailing him out, his company would have gone bankrupt. That is a fact. It’s balance sheet is still filled with toxic assets that if marked to their true value would bankrupt the firm today. He was a destroyer of jobs as CEO of the GE Hedge Fund pretending to be a an industrial giant. China benefitted greatly during his reign of error, generating thousands of jobs from Jeffie’s outsourcing of America plan. Now he gets to work his magic as Obama’s jobs guru. This is laughable if it wasn’t so sad. I wonder where he’ll be sitting during the State of the Disunion BIG LIE-FEST tomorrow? How do these frauds, liars and criminals live with themselves on a daily basis?
Jeff Immelt’s GE: The Too Biggest To Fail
| By: emptywheel Friday January 21, 2011 12:50 pm |
In my first post on how stupid it was for Obama to pick Jeff Immelt for his election season commission to appear focused on jobs, I looked mostly at how much GE has been outsourcing manufacturing and technology. Though I mentioned GE’s status as another TBTF finance company, I didn’t explain that in depth.
Mike Konczal has a post in which he corrects Joe Klein’s misperception that GE is not another big finance company, and in the process shows how GE was one of the biggest beneficiaries of the government’s bailout of shadow banking in 2008-09.
In it, he shows how GE received the second biggest FDIC debt guarantees of any of the big finance firms, after only Citi. He borrows the graphic at the left from a Raj Date paper that also explains how GE leveraged (heh!) its teeny FDIC insured deposits to get a big debt guarantee.
Only a small fraction of GE Capital’s funding (some $24 billion in the middle of 2008) came through FDIC-insured deposits. Despite that, the structure of the FDIC’s Debt Guaranty Program enabled GE Capital to issue well more than that (more than $50 billion) in unsecured debt that was, in effect, taxpayer-guaranteed. In essence, the program was structured in a way that almost uniquely favored a shadow bank like GE — one with a relatively small depository, but with immense unsecured debt that had been issued by the depository’s affiliates.
Konczal then goes on to cite another paper explaining why this happened: GE used the credit rating it won in its manufacturing business to make a lot of big finance games possible.
1 run the industrial business for earnings;
2 add industrial services to cover hollowing out of the industrial base;
3 buy and sell companies through acquisition and divestment to achieve returns and growth objectives;
4 rely on large-scale acquisition to prevent like-for-like comparisons and to increase opacity and the power of narrative;
5 grow the financial-services business up to the limit of the company’s credit rating;
6 accept the balance-sheet costs in terms of return on capital but focus on managing return on equity and cost of capital;
7 add financial engineering to smooth earnings and manage growth….[snip]
If the expansion of GE Capital rested on judgement and controls, it also reflected the structural advantage of the triple-A credit rating, which effectively made the financial business (as user of the credit rating) dependent on the industrial business (as credit-rating generator), and this in turn set limits on how much GE could expand without risking reclassification by credit-rating agencies. GE Industrial may be a low-growth business but it has high margins, is consistently profitable over the cycle and has funded almost all of the dividends that GE Consolidated has paid out, as well as providing the funds for acquisitions and repayment of debt. This solid industrial base is the basis for GE’s triple- A credit rating, which allows GE Capital to borrow cheaply the large sums of money that it lends on to consumers and commercial customers… [my emphasis]
Konczal summarizes the business model that Obama tapped, through Immelt, to build American jobs and competitiveness this way:
GE has been at the forefront of blurring a “financial services”-centric model of business onto the remains of a hollowed out manufacturing base, one kept in a minimal state just strong enough to qualify for high credit scoring.
In other words, Immelt and GE aren’t about building the jobs American needs (for graphic representation of that, see this post). Rather, they’re about transforming the fruits of American manufacturing into yet more destabilizing casino games.
And that’s what Obama picked today to lead his election-season effort to appear serious about job creation.
Sure, maybe it’ll fool the Joke Lines of the world into believing outsourcing to China is a solution to America’s job crisis. But those of us in flyover country seeing that jobs crisis up close are smarter than all that.
TeresaE says:
“…How do these frauds, liars and criminals live with themselves on a daily basis?…”
Apparently, boatloads of cash, homes outsides our borders and the like make it pretty damn easy.
See, it is true, a spoonful of sugar does make the medicine go down.
Well-loved. Like or Dislike:
12 
0
24th January 2011 at 4:45 pm
KaD says:
They are able to live with themselves because they’re psychopaths. They have no conscience. They are also well insulated from the suffering and misery they cause. The top 1% have their gates mansions, private jets, private schools for their kids, and hired help to do the menial tasks like grocery shopping. They never mingle with ‘average’ people.
Well-loved. Like or Dislike:
5 
0
24th January 2011 at 5:41 pm
Dave says:
How the fuck can the NIC look into the camera and tell people that his next two years will be focused like a laser on job creation? What the fuck were the first two years of 20% unemployment focused on? Along with Jeff Immeltt, most of the American public is as dumb as a box of rocks to keep buying this shit.
Like or Dislike:
2 
0
24th January 2011 at 6:26 pm
Kill Bill says:
Its a relatively new feat in the upper circles of to big too fail
Its called…
FAILING UPWARDS
Like or Dislike:
0 
0
24th January 2011 at 7:01 pm
Kill Bill says:
Well, at least now we know he isnt a secret muslim but a wall street terrorist.
Like or Dislike:
0 
0
24th January 2011 at 7:02 pm
MuckAbout says:
This whole thing, from the first issued MBS to the first TBTF Bank bailout to Turbo Timmy unloading toxic securities on the Treasury to Immelts’ appointment has gone too far. It is time for the shit to hit the fan.
I will spend the next 24 hours (after a night’s sleep with the assistance of some Bailey’s Cream) figuring out how I can sabotage the whole thing without going to jail.
I have an account with Wachovia (only a checking acct.) that I will close first and place with a locally owned privately held bank. Then I’ll buy another 15% of investment funds worth of money. Real money. Then I’ll run out to the local gun shop and pick up a Remington 12 Ga.. with an 18″ barrel and a case of ammo. After that, 6 months worth of MRE’s to be stored in the shed.
After that, I’ll make a list – the first item on it being a well with a hand pump, an extra gallon or two of clorox and a campers micro-filter.
Then I’ll have two or three different chest/back signs made with appropriate disparaging wording (nothing nasty, you know) that I will start picketing our local County and City buildings.
After I get arrested for not having a permit for doing that, I’ll think up something new.
Fuck ‘em all.
Like or Dislike:
3 
0
24th January 2011 at 8:32 pm
Novista says:
OT but I haven’t seen a mention of it, the
7th Annual Demographia International Housing Affordability Survey
The report is a .pdf via Google Docs, I don’t have a direct link. But yea, overview articles note the Australian housing market is the worst in the world.
There’s probably useful info on U.S. markets, good and bad. Worth a look.
Like or Dislike:
1 
1
24th January 2011 at 9:39 pm
eugend66 says:
With decisions like that, any remaining credibility the politicians may have left, will be
destroyed both inside and outside the US. If this is the final goal then, ‘Thank you, for a
job well done’ . Politicians eat shit with their both hands!
Like or Dislike:
0 
0
24th January 2011 at 3:17 am
Yojimbo says:
Admin et al
Does anyone know anything about these Foreign Trade Zones in the United States that have been set up for manufacturing and processing?
The link is here: http://ia.ita.doc.gov/ftzpage/info/ftzstart.html
Some are saying dire things about these zones.
http://wideawakenewsdata.yolasite.com/urgent.php
Like or Dislike:
0 
0
24th January 2011 at 7:57 am