GE’s FDIC Insurance – Imagination at Work

November 13, 2008

GE is an international industrial conglomerate with a triple A rating. It has had very profitable years and is well able to cover some losses should they occur. While it also owns a Savings & Loans, that is only a very small part of its total business. GE has hardly any deposits but is a big debt issuer.

What then is the justification of giving GE the full backing of federal deposit insurance, i.e. risking saver and taxpayer dollars?

How can one reconcile A, B and C?

The Federal Deposit Insurance Corporation (FDIC) preserves and promotes public confidence in the U.S. financial system by insuring deposits in banks and thrift institutions for at least $250,000; by identifying, monitoring and addressing risks to the deposit insurance funds; and by limiting the effect on the economy and the financial system when a bank or thrift institution fails.
The Federal Deposit Insurance Corporation: Who is the FDIC?

GE is Imagination at Work – a diversified technology, media and financial services company focused on solving some of the world’s toughest problems. With products and services ranging from aircraft engines, power generation, water processing and security technology to medical imaging, business and consumer financing, media content and industrial products, we serve customers in more than 100 countries and employ more than 327,000 people worldwide.
…
GE’s financial results highlight our ability to deliver. In 2007, GE generated double-digit earnings and revenue growth ($173 billion in revenues and $22.5 billion of earnings). Also in 2007, GE generated $23.3 billion in cash, which has given us flexibility to invest in our businesses, return more than $25.4 billion to shareowners through a dividend increase and stock buyback. Over the past four years, GE’s average earnings growth rate has been 14 percent per year.
GE: Factsheet

BOSTON (Reuters) – General Electric Co has secured the temporary backing of the Federal Deposit Insurance Corp for up to $139 billion of the debt of its finance arm, a spokesman said on Wednesday.
GE says gets FDIC backing for $139 billion in debt

Posted by b on November 13, 2008 at 11:12 UTC | Permalink

Comments

Damn, I really didn’t want to post this, as I kept hoping someone else would. I have already ruffled enough feathers and blown peoples candles out,didn’t want to be the one to further rattle peoples hopes but…
Obama’s Bailout Bunch Brings Us More of the Same
We’re playing those mind games together,We all been playing mind games forever -JOHN LENNON

Posted by: Uncle $cam | Nov 13 2008 12:10 utc | 1

Obama’s Bailout Bunch Brings Us More of the Same

I’m sorry to say I share that author’s concerns. Among other things, he says…

The president-elect needs some new advisers — fast. We are in a crisis of confidence in American capitalism. These aren’t the right people to re-instill its sense of honor.
Many of them should be getting subpoenas as material witnesses right about now, not places in Obama’s inner circle. Did Obama learn nothing from the ill-fated choice of James Johnson, the former Fannie Mae boss, to lead his vice- presidential search committee?

Indeed. FWIW (admittedly not much) I’ve been screaming all this to the limited audience I have, namely New Mexico Dem/DNC and affiliated orgs which I participated in/with in this election.
There has been a tin ear, and BO’s appointments so far reflect that. Others are saying the same, but getting little attention. Deeply, deeply concerned I am.
At very least, I desperately would like to see not just individuals, but panels taken from academia… all the folks who’ve been predicting this mess for years, who understand it, have been watching WS rather then running it, and have proposed out-of-the-current-box well reasoned action that’s been entirely ignored… why are these people on the sidelines?
…
Re: topic of this thread: in my view, the GMAC deal is just another point in the time-line of incompetence, action for action’s sake, and seemingly oblivious Fed/Treasury leadership that looks like a tugboat in the fog with no map of the harbor. It’s going in circles, seems content to continue that trajectory, and somehow even seems to think this arc is progress… eg: (Paulson’s speech yesterday… I thought it was pathetic. He claimed self-congratulatory progress in kind’a-sort’a freeing up the credit markets, while everything else that plugs into those markets is stagnating and/or collapsing.
Their contexts are, and have been, from w/in the bubble (WS) while ignoring what goes on outside. We (US) have little needed economic production, nor even political discussions what that may mean . WS’s free market functioning has utterly failed in it’s promise to move capitol where it’s most needed.
What are we looking at?
Mervyn King: UK Worst Economic Downturn in 30 years
(former GS CEO) Whitehead sees slump worse than Depression
(JPMorgan CEO)Dimon Says Recession May Be Worse Than Credit Crisis (Update3)
Just more points on timeline, utterly predictable AFAIC, and notably w/out any suggestions from this crew of WS’s best and brightest on what to do. So why is Washington looking to the Devil for guidance? hello?
Starting to see visible WS types utter what’s been warned by Roubini et’al for some time: $USD default, currency collapse, etc. etc.
I just don’t understand, given magnitude and clearly systemic cascading collapse… why OB not saying anything? At this rate of meltdown, we could be in default by inauguration day.
How many fingers available to plug all the rupturing holes in GM’s dike?
How are dems going to pay for next proposed stimulus, much less proposed HC? And to what end… pump $$(xxx)b’s into consumer bank accounts hoping it will stimulate a system springing leaks everywhere, not to mention source of that $$ is wholecloth?
A KOS diarist dug up another indicator yesterday… a good post.
For those wondering what it all means… where is it going, good post by David MerkelWhat is a Depression? He provides understandable framework into which all we see can be plugged in… eg. draw your own conclusions.
Along lines of other recent posted stats from Fed on $$ supply and such, Merkel put up Total Credit Market Debt as % of GDP yesterday. It’s off the charts.
Things are not looking good, and looks to me like there’s no help on the way.

Posted by: jdmckay | Nov 13 2008 14:27 utc | 2

That’s ok, Uncle. We all need liberal doses of true reality.

Posted by: Prez | Nov 13 2008 15:00 utc | 3

Uncle $cam,
Maybe Obama is operating under the assumption that it takes a thief to catch a thief.

Posted by: Cynthia | Nov 13 2008 15:11 utc | 4

Just as someone else said on another board I visit says, “This bailout situation reminds me of when the gold deposits were removed from the basement of the World Trade Center before the towers came down. This time, the gold is the bailout money and the WTC is the whole US. I’m really thinking that the plan is to bankrupt the US govt completely and all this bailout stuff is just a mad scramble do grab what’s left.”
I suspect this whole thing was engineered to hollow out America. As the real power moves North to Canada where the water is. Which makes it quite convenient that Canada’s Banks Don’t Need Help.
As always, great work b. Still by far the best bar to drink at. And the most thought provoking patrons. Btw, for the folks whom couldn’t see the post rick posted regarding the AAA Downgrade talk, it’s now on youtube: Martin Hennecke – US May Lose Its ‘AAA’ Rating 20081110

The United States may be on course to lose its ‘AAA’ rating due to the large amount of debt it has accumulated, according to Martin Hennecke, senior manager of private clients at Tyche.

I’d suggest, cigarettes, whiskey, bulk food and ammo asap. This aint no party, this aint no disco, this aint no fooling around…

Posted by: Uncle $cam | Nov 13 2008 15:55 utc | 5

Uncle: frankly, I’m not even sure there was a plan. BushCo was so bad that it was only a matter of time before the empire came crashing down.
The coming US bankruptcy might not even have been engineered. In this case, it’s quite possible that some big players just see the writing on the wall and want to loot it all since whatever is done, it’ll soon be over.
Not to say they’re not guilty of messing around and aren’t scum, but in this specific case, I think they’re probably as opportunistic as mischievous schemers. Basically, whether they engineered the current meltdown or not doesn’t matter much to me; I fully expected the whole house of cards to come down sooner or later, willingly or not, because its fundamentals (US exceptionalism, laissez-faire capitalism, mass consumption, waste and looting of natural resources) were flawed and often downright bad when not evil.

Posted by: CluelessJoe | Nov 13 2008 16:22 utc | 6

I seem to remember it was the cutting of Enron’s credit rating that led to its collapse. And under Bush, the entire American economy has been run just like Enron was.

Posted by: ralphieboy | Nov 13 2008 16:22 utc | 7

Uncle $cam,
Since Canada was smart enough not to get itself into a financial mess, does that mean the loonie has a good shot at replacing the dollar as the world’s reserve currency?

Posted by: Cynthia | Nov 13 2008 17:38 utc | 8

Clueless said, “…its fundamentals (US exceptionalism, laissez-faire capitalism, mass consumption, waste and looting of natural resources) were flawed and often downright bad when not evil.”
Which is true enough but I still see the “leaders” as responsible for trying to keep the circus train speeding toward a certain wreck. IOW, one must join with the money grubbers/consumers just to survive, whether he agrees with the plan or not.
At some level $cam is right; the collapse was and is engineered. The part most of us will never know is who exactly created the collapse scheme, who recognise it for what it is and take advantage, who go along because they are devoted career people and don’t ask questions, and finally, who are the blind suckers being used and discarded. Yeah we can easily identify the last two categories and maybe some of the second one, but the identity of these scheme creators remains a mystery, at least to me.
I know they exist; otherwise we’d never have sat and watched a perfectly good (hah!) capitalist economy go down the toilet. Incompetence? I seriously doubt it. And you won’t convince me that bushco just let a flawed ideology get in the way of common sense either.

Posted by: rapt | Nov 13 2008 18:14 utc | 9

What is the problem? It is a time of change, there are great opportunities out there for anyone with imagination. Case in point. Just today, Calculated Risk was saying Petco is considering the same.

Posted by: Alamet | Nov 13 2008 18:21 utc | 10

Recommended:
Top Trend Forecaster Predicts Revolution
Don’t miss the interview the above links to.

Posted by: Alamet | Nov 13 2008 18:28 utc | 11

re: #10
Notice how the FOX interview with Celente has a header reading “Predicting Obama’s Impact.” Go to Celente’s website, Trends Research Institute, and you’ll find him talking about the coming worst depression ever as of December 2007. Shame on FOX, over and over again.

Posted by: catlady | Nov 13 2008 19:57 utc | 12

Yeah, Catlady, I noticed that too. Fox never misses an opportunity. But it’s not much different on the other networks. MSNBC has been pro-Obama, yet instead of discussing taxpayer abuse scams like above, this morning news concentrated on more Palin innuendos by the network’s hosts as Palin spoke at the Republican Governors Convention and earlier press conference.
My thanks to b for all he does and to all of those who contribute with their thoughts. It is unfortunate that I have to look to a super intelligent man in another country to get a worthwhile analysis of the news here in the U.S. That sort of says it all about the state of U.S. journalists/corporate media. But on the bright side, I get to interact with many smart independent thinkers from all over the globe. I like that.

Posted by: Rick | Nov 13 2008 21:09 utc | 13

cat & rick,
note that Fox is labelling the coming depression, brought on by eight years of Bush mismanagement, as “Obama’s Impact”. Sorta like calling Vietnam “President Johnson’s War”.
But Celente is on the mark when he predicts that the sort of mindless bloated consumerism that has become so much a part of our culture that we fight wars over it will come crashing down in a manner that is nothing less than a revolution in our consciousness.
And just imagine the Christmas Holidays as a season of peace, love and good will among all people…

Posted by: ralphieboy | Nov 13 2008 22:15 utc | 14

ralphieboy–that was my point, the eight years of mismanagement being ascribed to the incoming dupe (oops, saviour) instead of the outgoing con men.
Christmas without consumerism, what a thought. I gave up xmas shopping several years ago, and started making contributions to the Heifer Project instead. I actually prefer the older solstice revels. Hail the Lord of Misrule! Perhaps W would play the role.
My New Year’s dream: to watch Obama, just after being sworn in, turn to Bush and Cheney and instead of shaking their hands, serve them papers. On national TV, with all the Secret Service and Marines standing behind him. Let’s see, here’s a little list that could inspire a few subpoenas.

Posted by: catlady | Nov 13 2008 23:12 utc | 15

Hey, I’m all for a war on Christmas if it can bring consumerism to its knees!

Posted by: Cynthia | Nov 13 2008 23:30 utc | 16

O no! What will all of us poor retailers do then?

Posted by: rapt | Nov 13 2008 23:36 utc | 17

rapt,
I’ll personally see to it that fine retailers such as yourself are off-limits from attacks.:~)

Posted by: Cynthia | Nov 14 2008 0:12 utc | 18

Rapt: My point was merely that the Roman elites didn’t suddenly decide that 50 years from then, the barbarians would come, loot and burn the city, and it’d be fine for their own elite business. Just as the Byzantine elite didn’t really choose the Ottomans to rule over them in some nasty conspiracy. The Politburo didn’t pick Gorbachev to ruin and end the whole USSR and communism thingie; they picked him hoping he could still save the day. The Mongol horde didn’t just conquer half Eurasia because some bankers set them up.
Empires rise and fall, there’s no conspiracy there, just some more fundamental rules in history, human psychology, and to an extent, economy and ecology. Elites rise and fall, and are replaced by others. Their interests may overlap, and under not too dissimilar conditions, different elites may resort to similar tactics and behaviour, but it doesn’t mean that the French or English ruling goons are descendants of Jesus, that Rome was founded by some Near East former wealthy nobility, or that there’s a continuity of power and ruling elite from Sumer to Washington DC. Usually, the elite fade away when its powerbase goes down, or get the “off with their head” treatment. Alas, sooner or later, it’s “meet the new boss, same as the old boss”, which explains why most conspiracy theorists aren’t totally wrong on every single point.
At this time, whether there are a few American insiders who act to ruin and make the US collapse because they hope to make a profit out of it, or they’re just incompetent fools and capitalist cultists isn’t really important; the fruit was nearly ripe even without a conspiracy; if there were one, it just hasted the process by 2 or 3 years.

Posted by: CluelessJoe | Nov 14 2008 0:49 utc | 19

I’d like to third or fourth on the thanks to b, I have read this column and been to the bar since its earliest inception, and have also appreciated the wit and wisdom of those providing comments. I watch this show from Japan where I have lived for thirty years, I work in China, mostly in Guang Dong province, the center for the bulk of factory production for export. There are 45,000 factories in this area and in the past three months 12,000 have been closed. Even with that China is still looking at growth, selling to its own market I assume. Japan still seems vibrant, with the great emphasis on savings, a lesson learned from WWII and its longer history. The people know there are times of hardship and wisdom dictates preparation. America has not had this concept too deeply in its psyche, even though there are still a few who actually lived through or at the time of the depression.
I can not see what lies ahead of our country but that it is not good, and will require our communities to return to the spirit that raised barns, but with all the guns and the bully attitude we have lived through and cultivated, the picture I see is not so far from Thunderdome. Hope not but we really need to get it together, just being right that “they” are so wrong won’t create what we need. After all Billmon has been clear about pointing out the very wrongness for some time. We all need to create and foster community for the survival of our families and future.
Thanks for all your contribution and proffer of wisdom through this forum.
Duncan

Posted by: duncan | Nov 14 2008 1:01 utc | 20

duncan
i think the details you have offered are important & thank you for offerring it
when i read the details of other posters here it informs my life in the community
& the picture i see is also not far from thunderdome – so many vested interests – so little time & unless the people awake in a very active way they will be hurt in ways they have never conceived
i cannot say too much how much the reading of karl marx’s economic manuscripts help me through the horror we are living

Posted by: remembereringgiap | Nov 14 2008 1:23 utc | 21

RG, For me it is the I Ching, Wilhelm/Baynes translation!!

Posted by: duncan | Nov 14 2008 8:38 utc | 22

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