By Jeff Gerth and Brady Dennis
ProPublica and Washington Post Staff Writer
Monday, June 29, 2009

http://www.washingtonpost.com/wp-dyn/content/article/2009/06/28/AR2009062802

General Electric, the world's largest industrial company, has quietly become the biggest beneficiary of one of the government's key rescue programs for banks. At the same time, GE has avoided many of the restrictions facing other financial giants getting help from the government. The company did not initially qualify for the program, under which the government sought to unfreeze credit markets by guaranteeing debt sold by banking firms. But regulators soon loosened the eligibility requirements, in part because of behind-the-scenes appeals from GE.

As a result, GE has joined major banks collectively saving billions of dollars by raising money for their operations at lower interest rates. Public records show that GE Capital, the company's massive financing arm, has issued nearly a quarter of the $340 billion in debt backed by the program, which is known as the Temporary Liquidity Guarantee Program, or TLGP. The government's actions have been "powerful and helpful" the company, GE chief executive Jeffrey Immelt acknowledged in December. GE's finance arm is not classified as a bank. Rather, it worked its way into the rescue program by owning two relatively small Utah banking institutions, illustrating how the loopholes in the U.S. regulatory system are manifest in the government's historic intervention in the financial crisis.

The Obama administration now wants to close such loopholes as it works to overhaul the financial system. The plan would reaffirm and strengthen the wall between banking and commerce, forcing companies like GE to essentially choose one or the other. "We'd like to regulate companies according to what they do, rather than what they call themselves or how they charter themselves," said Andrew Williams, a Treasury spokesman. GE's ability to live in the best of both worlds -- capitalizing on the federal safety net while avoiding more rigorous regulation -- existed well before last year's crisis, because of its unusual corporate structure. Banking companies are regulated by the Federal Reserve and not allowed to engage in commerce, but federal law has allowed a small number of commercial companies to engage in banking under the lighter hand of the Office of Thrift Supervision. GE falls in the latter group because of its ownership of a Utah savings and loan.

Unlike other major lenders participating in the debt guarantee program, including Bank of America, Citigroup and J.P. Morgan Chase, GE has never been subject to the Fed's stress tests or its rules for limiting risk. Also unlike firms that have received bailout money in the Troubled Assets Relief Program, or TARP, GE is not subject to restrictions such as limits on executive compensation. The debt guarantee program that GE joined is administered by the Federal Deposit Insurance Corp., which was reluctant to take on the new mission, according to current and former officials who were not authorized to speak publicly. The FDIC also initially resisted expanding the pool of eligible companies, fearing it would add more risk to the program, the officials said.

Despite those misgivings, there have been no defaults in the loan guarantee program. It has helped buoy confidence in the credit markets and enabled vital financial firms to raise cash even during the darkest days of the economic crisis. In addition, the program as raised more than $8 billion in fees. "The TGLP program has been a moneymaker for us," FDIC chairman Sheila C. Bair has said. "So I think there have been some benefits to the government and the FDIC." For its part, GE said that it properly applied for and qualified for the program. "We were ac epted on the merits of our application," company spokesman Russell Wilkerson said.

The Cash Cow

The current good fortune of General Electric, ranked by Forbes as the world's largest company, has roots in the Great Depression, when it created a consumer finance arm so that cash-starved families could buy its appliances. What grew from those beginnings is now a powerful engine of profit, accounting for nearly half of its parent's net earnings in the past five years. GE may be better known for light bulbs and home appliances, but GE Capital is one of the world's largest and most diverse financial operations, lending money for commercial real estate, aircraft leasing and credit cards for stores such as Wal-Mart. If GE Capital were classified as a banking company, it would be the nation's seventh largest. unlike the banking giants, GE Capital is part of an industrial company. That allows GE to offer attractive financing to those who buy its products. At the height of last fall's financial crisis, GE's cash cow became a potential liability. As credit markets froze, analysts feared that GE Capital was vulnerable to losing access to cheap funding -- largely commercial paper, or short-term corporate IOUs sold to large investors. on

Company officials projected confidence.

"While GE Capital is not immune from the current environment," Immelt said in October, "we continued to outperform our financial-services peers." Behind the scenes, they urgently sought a helping hand for GE Capital. One key hope was a rescue plan taking shape at the FDIC.

The program emerged during a hectic weekend last October as regulators scrambled to announce a series of rescue efforts before the markets opened. They found a legal basis for the program in a 1991 law: If a faltering bank posed "systemic risk," then the FDIC, the Fed, the Treasury secretary and the president could agree to give the FDIC more authority to rescue a failing institution. The financial regulators applied the statute broadly, so it would cover the more than 8,000 banks in the FDIC system. The FDIC hurried to approve the program Oct. 13. "This was crisis management on steroids," said a person familiar with the process. "A lot was made up on the fly."

The author of the systemic-risk provision, Richard Carnell, now a law professor at Fordham University, says it was intended to apply to a single institution, and that in their rush to find legal footing for unprecedented new programs, regulators "turned the statute on its head."

How a Loophole Benefits GE in Bank Rescue

The FDIC launched the program Tuesday, Oct. 14, the same day Treasury officials announced large capital infusions into nine of the country's banking giants under TARP. That day, the FDIC also expanded its deposit guarantees to a broader range of accounts. Within days, the FDIC held conference calls with bankers to explain the program. Agency officials explained that not all companies that owned banks were eligible. "The idea is not to extend this guarantee to commercial firms," David Barr, an FDIC spokesman, said during one of the calls. A Broader Program GE was watching closely. Though GE Capital owned an FDIC-insured savings and loan and an industrial loan company, they accounted for only 3 percent of GE's assets. Company officials concluded that GE couldn't meet the program's eligibility requirements.

So the company requested that the program "be broadened," GE's Wilkerson said. GE's main argument was fairness: The FDIC was trying to encourage lending, and GE Capital was one of the country's largest business lenders. GE deployed a team of executives and outside attorneys, including Rodgin Cohen, a banking expert with the New York firm Sullivan & Cromwell. "GE was among the parties that discussed this with the FDIC," along with the Treasury and Fed, according to FDIC spokesman Andrew Gray. He said the details about eligibility "had not been specifically addressed" in the beginning.

GE has not disclosed how much the company has saved because of TLGP backing.

Like other companies in the program, GE pays the FDIC fees to use the guarantees -- a little more than $1 billion so far. But as Bair explained to bankers last fall, the fees, while "healthy," are "far below certainly what the cost of credit protection is now in the market." Not every finance company has had that peace of mind. One of GE's competitors in business lending markets, CIT Group, a smaller company, has had a harder time raising cash. It has been unable to persuade the FDIC to allow it into the debt-guarantee program, at least in part because of its lower credit ratings. A recent Standard & Poor's analysis cited CIT's "inability to access TLGP" as a factor in the company's declining financial condition.

The 'Cliff' Ahead

Two weeks ago, the Obama administration said it would seek to eliminate the Office of Thrift Supervision and force companies like GE to focus on commerce or banking, but not both. That could require the industrial giant to spin off GE Capital. Last week, Immelt said GE had no intention of doing that. "GE is and will remain committed to GE Capital, and we like our strategy," he said in a memo to staff.

In its proposal to overhaul financial regulation, the Treasury Department pointed out that some firms operating under the existing rules, including collapsed companies such as American International Group, "generally were able to evade effective consolidated supervision and the long-standing policy of separating banking from commerce."

GE's Wilkerson said the company generally supports regulatory reform but thinks that it should be permitted to retain its structure. "Bank reforms historically included grandfathering provisions upon which investors have relied," he said, "and there is no reason this settled principle should not be followed here." He said the company "didn't have any choice" but to have OTS as its regulator. The company also objects to the Treasury's proposal to force firms to separate banking and commerce because that issue "had nothing to do with the financial crisis," Wilkerson said. Wilkerson said GE has remained profitable and avoided some of the exotic financial products that contributed to losses at other stitutions. He also said that GE performed an internal stress test this year and found that its capital position was "quite strong by comparison to the banks."

The FDIC has been working to wean financial institutions off the program. The TLGP originally was slated to end in June, but at the Treasury's request the FDIC agreed to extend it until Oct. 31. Some participants have stopped using the program, but GE Capital continues to do so for the overwhelming majority of its debt. Much of the $340 billion in debt will come due in 2012, the year the FDIC guarantees expire. At that point, known in banking circles as the "cliff," the agency will have to make good if companies such as GE are unable to honor their obligations. FDIC officials say they are comfortable that the agency has collected more than enough money to cover potential losses.

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ProPublica is an independent, nonprofit newsroom that produces investigative journalism in the public interest.

About This Story: This article was reported jointly with Jeff Gerth of ProPublica, an independent, non-profit newsroom that produces investigative journalism in the public interest. ProPublica is supported entirely by philanthropy and provides the articles it produces, free of charge, both through its own Web site and to leading news organizations.

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What's Good for Jeffrey Immelt Is Good for America

http://spectator.org/blog/2011/01/21/whats-good-for-jeffrey-immelt

By Joseph Lawler on Jan. 21, 2011

On April 22, 2009, GE CEO Jeffrey Immelt entered a raging controversy at the University of Notre Dame surrounding an upcoming commencement speech by Barack Obama with an op-ed in, of all places, the Notre Dame Observer.

Without addressing any of the issues in contention, namely Obama's pro-choice policies and the school's obligations as a Catholic institution, the article expressed Immelt's wholehearted support for Obama and his upcoming speech. What made the article so odd, beside the apparent cluelessness of the author, was that the CEO of GE felt it necessary to add his opinion to an argument involving Notre Dame. Immelt is not a Notre Dame alumnus (he went to Dartmouth), he doesn't have affiliations with the university other than a commencement speech he gave in 2007, and he's not Catholic. One would think that the CEO of one of the largest companies in America would have better things to do than writing an op-ed for a student newspaper picking sides in an essentially intra-denominational controversy. So why would Immelt weigh in?

Had the Observer provided the most routine of disclosures for that article, the answer would have been obvious. On February 17th of that year, Obama had signed the stimulus bill, which included $24.9 million in grants that would flow directly to GE, with roughly $20 billion more slated for health care record modernization of the kind that GE specializes in -- "with a direct request to do so from GE's CEO Jeffrey Immelt." Months before, during the Bush administration, GE had successfully lobbied "behind-the-scenes" to get its financing arm, GE Capital, included in a FDIC bailout program that would insure up to $139 billion of its debt. By the time Obama stepped on stage at Notre Dame, GE Capital had used the program to raise "$74 billion, helping to cover [GE'S] 2009 funding needs, and about $8 billion of its projected needs for 2010." In addition, Immelt knew that many billions more would accrue to his company through its green initiatives if Obama's cap and trade proposal became law.

It would be hard to think up a more direct conflict of interest.

Except, of course, for the conflict of interest raised by Obama's decision, announced today, to name Immelt the chair of the new President's Council on Jobs and Competitiveness while Immelt still serves as GE's CEO.

According to the president, the purpose of the new council will be to "focus its work on finding new ways to encourage the private sector to hire and invest in American competitiveness." It is not hard to imagine ways for Immelt to fulfill that mandate by enriching GE's shareholders, which, remember, is his contractual obligation as CEO.

Immelt isn't serving on the panel out of love of Obama or loyalty to Democrats: he "counts former President Ronald Reagan as a ‘personal hero,'" and donated $2,300 to both Hillary Clinton and John McCain in the 2008 election. Nor is Immelt concerned about fairness, competitiveness, or the free market: as he has explained, "It's never been a free market; it's never gonna be a free market. That's just the way it is." And: "The fact that I'd like GE to work in concert with where government policy is in the U.S. doesn't mean that I'm a traitor or a bad guy, I think it's just being practical that that's gotta happen."

Immelt is serving on the panel because of money. He represents one of Big Business's biggest. A post in the Obama administration presents a huge opportunity to enrich his company and himself. Obama is allowing him to do so because a company as big and diversified as GE can do a lot for him, up to and including defending him in the op-ed sections of college newspapers.

That's the measure of the extent of the corrosiveness of this kind of government-business collaboration. Its harmful effects aren't limited to the economy, but trickle down into Immelt's advocacy of environmentalism, the programming on GE-owned TV channels, and so on. It introduces corruption into matters, such as Obama's visit to Notre Dame, that might be considered morally significant within a small community but should have nothing to do with big business or money changing hands. Yet Immelt doesn't feel the need, when writing a student paper op-ed, to disclose the billions of dollars his company took from taxpayers by cozying up to the administration. Nor does he, apparently, feel compunction about promising to help people across the country find real jobs while at the same time promising his shareholders that he'll prioritize the company's bottom line.  

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Foreign Trade Zones

Subject: FTZs Foreign Trade Zones - a Biiiiig Trojan Horse
From: Ben
Date: Tue, January 25, 2011
To: Ken Adachi

Hello Mr Adachi,

Here are links to documents about the 257 FTZs or 'industrial towns' that will be given to China and built on prime real estate in big cities all over the U.S. This is surely to ensure that China will have a reason to invade America in the future, very important, please check it out and re-post!

http://www.scribd.com/doc/47565450/THE-BROOKS-REPORT

or in case link is broken
http://www.rtr.org/documents/5323/148/ftz-s-foreign-trade-zones-invasion-imminent

Yours in comradeship,
Ben

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THE BROOKS REPORT

From: Second Amendment Committee
To: Second Amendment Committee
Sent: Sunday, January 23, 2011
Subject: READ IMMEDIATELY! URGENT

Subject: Foreign Trade Zones.

This is unbelievable at first, but you will soon realize that there are several motives for the global communists to physically weave our United States territory together with communist China. Read On!

Here's what is going on. Each and every one of our state governors has approved and allocated a certain amount of acres of their U.S. state land to be inhabited by Chinese communists. They are to set up little towns and live here, supposedly for the purpose of producing Chinese products for sale in the U.S.A.

The land the states are giving to them for their little towns will be considered "foreign territory". We are told that the laws of the state (in which these Chinese communists dwell) will apply to the communist Foreign Trade Zone (FTZ).

Comment: If so, why are they allowed in here? Isn't the whole set up unlawful? There are 257 of these little communist towns to be built all over the United States.

Go to this website and see the list of the states, and how many FTZ's are to be erected in each and every state. Our nation is being peppered all over with these communist closed towns called "zones"! This insane brainstorm by Washington, D.C. officials was just recently discovered by alert citizens in the State of Idaho, where an FTZ is being built there, just south of Boise, Idaho, possibly 30,000 acres of Idaho is going to be used for that FTZ. Check this site quickly before it is removed:

http://ia.ita.doc.gov/ftzpage/letters/ftzlist-map.html

When you get to this website, be prepared by having enough paper to print 40 pages, listing all the FTZ's to be built over the whole United States! 257 of these FTZ's. It is absolute insanity. How gullible are we?

The excuse given for creating communist towns all over our nation is that these Chinese people will produce products for sale in the United States, and the FTZ will eliminate overseas shipping costs of the products they create! A bizarre excuse!!! Can't we manufacture our own products anymore with American workers?

How foolish are we to allow this? Remember the hard-learned lesson taught to gullible people back in ancient times, when the Trojan Horse was built and they pulled it past their protective gates? Do we Americans look THAT STUPID to the Chinese and to our Washington,D.C. leaders? It will not mean jobs for Americans. All the workers will be Chinese! Besides, it is to be classed as "foreign territory", remember! You won't know what is really going on inside the enclave. Is there any danger for Americans to allow this?

It is a known fact that China has been preparing for war against theUnited States! Many guns are pointed at us. Why should these FTZ be allowed? What is the real reason? Is it that Washington, D.C.needs foreign help to disarm American citizens (who have privately-owned firearms) so that the federal administration can comply with Public Law 87-297, signed into law by J.F. Kennedy for "general andcomplete disarmament of the United States"? It is a law continually financed by Washington, D.C. That's the law that calls for us to have no more army, no more navy, and no more air force, all of which is to be transferred over on a permanent basis to the communist-dominated United Nations! That law also prohibits all firearms from being owned by American citizens! Without firearms, there will be no more liberty, freedom, or justice ingovernment. Guns are the main core of the check and balance system. Our nation's founders realized that firearms in the possessionof the people are the indispensible safeguard upon which all of theother rights in the "Bill of Rights" depend! That's why the SecondAmendment was meant to be honored, treasured, and preserved! Some people are wondering if the American land in these FTZ's isbeing given as collateral for the huge debt we owe to China? Somepeople are asking: "Does China own us and is our land collateral incase we don't pay the debt?" China is allowing American businessesto get established in China as FTZ's. Americans must build thestructures in China, and they must employ all Chinese people to dothe work in what is built there. After a short amount of years, theAmericans must vacate, leave the buildings and let the Chinese keepthe technology and the active operation as on-going. What this amounts to is transferring American technology and management tocommunist China.FTZ's are also known as SEZ's (Special Economic Zones).Please relay this information to all your friends. Someone has to answer for this on state and federal levels! What a set-up for sabotage, espionage, and a study on how to take over the whole United States in a war! Because the newspapers and other media are controlled, they will not be reporting on this unless there is a great public outcry. Remember when being a communist was a punishable crime in the U.S.A.? My, how we have changed! Complete reversal. Best to take this information to local public officials as well as all your contacts. Please do not delay spreading this information. Check with Idaho Eagle Forum also for updates

http://www.eagleforum.org

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