Monday, October 24, 2011
But the G.E. born out of Edison’s genius and synergistic with Reagan’s brand of postwar jingoism is far from the G.E. of our time. Its once minor financial-services subsidiary, G.E. Capital, metastasized over the past 30 years in sync with the growth of the new Wall Street. In 1990, G.E. Capital accounted for just a quarter of G.E.’s overall profits, but by 2007, on the eve of the crash, it had gobbled up 55 percent of the bottom line. Its sophisticated gambling strategies, like those of the big banks it emulated, amounted to an ingenious get-rich-quick scheme for high-rollers until the bottom fell out, taking shareholders and employees, not to mention the country, down with it. G.E. Capital’s dependence on short-term credit was so grave that it forced G.E. to cut back its dividend for the first time since the thirties and to turn to Buffett for a $3 billion emergency cash infusion in the dark days of October 2008.
The cheerleader for ratcheting up that risk at G.E. was the CEO, Jeffrey Immelt. These days he heads the president’s ineffectual Council on Jobs and Competitiveness, despite his own corporation’s record of job-shedding in America and the revelation that G.E. paid no American taxes in 2010 (on more than $14 billion in profits, including $5.1 billion in the U.S.). Immelt is a Republican, but that didn’t prevent Palin this fall from calling G.E. “the poster child of corporate welfare and crony capitalism.” (Bill O’Reilly and Newt Gingrich joined this class-warfare chorus.) On this point, once again, there is no air between the right and Occupy Wall Street. And as both camps condemn Immelt, so they are also united in the conviction that the godfather of Obama’s economic team, Robert Rubin, is likewise a poster child for corporate welfare and crony capitalism. Rubin, whose useful cronies included his former protégés Geithner and Lawrence Summers, encouraged reckless greed and risk at Citigroup during the bubble much as Immelt did at G.E. Capital, ultimately requiring the taxpayers’ rescue of TARP.
Posted by Walter Ebmeyer at 5:49 AM