GE Capital, Jack Welch and Jeff Immelt: A Tissue of Lies & Subterfuge?
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08 April 2010, By David Caploe PhD, Chief Political Economist, EconomyWatch.com
What follows are the contents of two emails, received by me via my friend Richard Martin,
08 April 2010, By David Caploe PhD, Chief Political Economist, EconomyWatch.com
08 April 2010, By David Caploe PhD, Chief Political Economist, EconomyWatch.com
What follows are the contents of two emails, received by me via my friend Richard Martin,
08 April 2010, By David Caploe PhD, Chief Political Economist, EconomyWatch.com
What follows are the contents of two emails, received by me via my friend Richard Martin,
who subsequently received confirmation of the contents of the initial e-mail from an anonymous source within GE Capital. [br]
Ritholtz is Barry Ritholtz, whose blog, The Big Picture, was examining a book by Roger Lowenstein, “The End of Wall Street”.
Jack Welch, of course, was the revered head of GE, “one of America’s most respected companies”,
and Immelt is Jeffrey Immelt, Welch’s successor at GE as Chairman and CEO …
From our point of view, it sounds like GE was using JUST the same tricks that Lehman Bros was using with Repo 105 – and, as we pointed out, GSachs with Greece … 😉 …
which undercuts YET AGAIN the ridiculous argument about the necessity of insane compensation levels in the financial sector in order to attract “the best talent”,
SINCE, APPARENTLY, THEY’RE ALL USING THE SAME BASIC BAG OF TRICKS ANYWAY 😉
Here’s the FIRST email:
“GE’s Jack Welch pocketed over $400 million dollars in salary, bonuses, and options.
Lowenstein argued in his book that Welch essentially managed the earnings with very creative accounting, and the help of GE Capital’s impenetrable financial black box.
The credit crisis caused the collapse of GE’s earnings management, confirming Lowenstein’s thesis of earnings management.
It’s hard to avoid his conclusion that the greatest industrial CEO in recent American history was little more than a clever accounting cheat.”
And this short note from my friend RM brought THIS – highly detailed – SECOND email response from the anonymous source within GE:
Lowenstein is absolutely correct in his theories and views on Welch’s earnings management practices.
These practices did not end when [Jack] Welch left the company.
[His successor Jeffrey] Immelt was selected by Welch, and Immelt has maintained the same earnings management practices.
GE denies these allegations to the street, but it is widely known and accepted internally that
the company manages the quarterly results by buying and selling assets and moving earnings as necessary.
In addition, on the equipment side of the business,
the company pushes product forward or holds it back depending on which quarter they want to take the profit.
This worked nicely in good times, but as we saw from the disaster in 2008/2009,
GE could not hide their practices and had to scurry to manage their quarter earnings,
and hence why Immelt landed on his heels and the company missed its quarterly numbers for the first time in history.
The street also has always said that the company is propped up by the commercial paper market,
and without that market, GE would not be able to exist.
This came true when the commercial paper market came to a standstill
[the on-going lending freeze, which was especially frightening during the immediate aftermath of Black September 2008]and the company had to accept money from [St. Warren of] Buffet to stay afloat
[a move that sounds awfully similar to what St Waren pulled off with Goldman during that same period ].
The company would say this was a “precautionary” measure or a “proactive” action.
That is not the case – GE Capital was on a lifeline in Fall of 2008 and was near death.
The company could not keep its obligations and could not fund its Borrowers.
What GE displays to the street and what really happens at the company are two entirely different things.
Another side point I might add is that, in addition to the clever accounting occurring at the company,
GE also has significant Human Resource issues, with inappropriate and illegal behavior occurring and coverups as a regular course of business.
Of course I could talk about this for hours, but this is just a tidbit of the real workings of supposedly “the most respected company in the world”.
