"The welfare of humanity is always the alibi of tyrants" - Albert Camus

Tuesday, January 25, 2011

Cronyism Bordering On Scandalous

It is a well known fact that General Electric Chairman and CEO Jeffrey Immelt is a registered Republican (a RINO lest you confuse him with a conservative).  It is also a widely documented fact that, at the International Economic Forum of the Americas in Montreal in June 2009, he said "The government has moved in next door, and it ain't leaving.  You could fight it if you want, but society wants change. And government is not going away."  Moreover, he was reported by those around him at G.E. to have declared tongue-in-cheek on multiple occasions that "We are all Democrats now". 

Fast forward to January 2011.  Mr. Immelt, obviously, is the type of businessman Obama likes - the kind who furthers his agenda - which in Mr. Immelts case would be the green (environmental) agenda.  We know this because he has just been appointed to lead the new Council on Jobs and Competitiveness.  Here is the kicker:  On the same day Obama announced Mr. Immelt's new assignment, the Department of Interior announced that it would offer nearly $1 billion in loans for an Arizona power plant.
Guess who sells solar panels?… That’s right, General Electric.

Now, one could argue that Mr. Immelt merits this position based on his track record and no one should assign alterior motives to such a move.  But then again, one must also ask why does Mr. Immelt merit such an appointment.  Therein lies the problem because his company, General Electric, has not been a stellar performer since Mr. Immelt took office on September 7, 2001.  His company's stock, since then, fell from its all-time adjusted high of $60 per share to a low of $8 in April 2009.  As Wall Street Journal reported,  "the financial crisis hasn't been kind to General Electric Co.  Its stock has lost almost half its value, the government has stepped in to prop up its enormous financial arm, and sales have slumped in core industrial businesses".

GE stock has only recovered to its current level of $19 per share on the strength of its Ecomagination (as its name suggests, primarily centers on G.E. manufactured wind mills and solar panels) campaign built around making G.E. the green industry leader as well as the potential move to electronic medical records which puts G.E. in a position to rake in additional billions. 

Immelt wants GE to out do Goldman Sachs and Carlyle Group combined as the biggest pig at the trough of corporate handouts. David Rubenstein looks like an amateur compared to Immelt.
The government has taken on a giant role in the U.S. economy over the past two years, penetrating further into the private sector than anytime since the 1930s.  Some companies are treating the government's growing reach -- and ample purse -- as a giant opportunity, and are tailoring their strategies accordingly. For GE, once a symbol of boom-time capitalism, the changed landscape has left it trawling for government dollars on four continents.

GE has high hopes for the strategy. It says that over the next three years or so it could bring in as much as $192 billion from projects funded by governments around the globe, such as electric-grid modernization, renewable-energy generation and health-care technology upgrades...

As an interesting side note, when the stimulus package was rolled out, Mr. Immelt instructed executives leading the company's major business units "to put together swat teams to get stimulus money, and [identify] who to fire if they don't get the money," says a person who heard him issue the instructions.

In February, a few days after President Obama signed the stimulus plan, GE lawyers, lobbyists and executives crowded into a conference room at GE's Washington office to figure out how to parlay billions of dollars in spending provisions into GE contracts... You have to wonder what Immelt promised Obama and Rham Emmanuel in return. Buying off those boys doesn't come cheap.  Come to think of it, probably the latest move by the administration was a pay back for Mr. Immelt's steadfast support for the president during the election of 2008 (via NBC and MSNBC, both of which are owned by G.E. and literally became the mouth-piece of Democrat party)

Whether it is pushing the president’s plan for global warming fees in order to create demand for his “Ecomagination” line of windmills, solar panels, etc., boosting the president’s national health-care law as part of an effort to sell more medical equipment, or enthusing over the Obama strategy of making loans available for industrial exporters, Immelt has been an Obama stalwart all along. Immelt has also consistently argued to shareholders that there is big money to be made in advancing the Democratic agenda.

While most corporate leaders have taken a wait and see approach to Obama’s occasional overtures to the private sector, G.E., along with Google, Goldman and few others, have backed him to the hilt.

It is unclear how the administration plans to deal with the ethics challenges created by having a CEO whose income is determined by stock performance leading a panel designed to recommend government policies. G.E. (2009 revenue: $157 billion) is a huge government contractor and is always in the market for new subsidies and incentives.

One more important point needs to be made.  G.E. has improved its bottomline partially by having shed over 25,000 jobs since during the past year and a half. 
Shouldn't the job to lead the Council on Jobs and Competitiveness really go to a CEO whose company has not shed 25,000 jobs (and there are quite a few of those) and whose business does not depend on billions from government subsidies, without which their business model clearly would not be viable?

Whether it is likes of Mr. Immelt (a RINO) or Mr. Buffet (a Democrat) - with his vast holdings in life insurance companies, advocating doing away with estate tax exemptions (as it directly benefits life insurance companies) -, crony capitalists are clearly the rotten apples of the economic basket.  These two just happen to have the President's ear, up close and personal. 

Despite an attempted image make-over, do not expect any presidential actions to bolster fair competition or truly free markets.

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