Saturday, January 22, 2011

OBAMA BRINGS CORPORATE RAPIST GENERAL ELECTRIC TO AID IN HIS TRANSFER OF ECONOMY TO WALL ST CRIMINALS

FROM DAY ONE, OBAMA HAS HAD ONLY ONE AGENDA, TO ASSAULT THE AMERICAN MIDDLE CLASS TO PAY FOR THE WELFARE COSTS OF THIS NATION’S RAPE BY OBAMA DONOR BANKSTERS, AND THE EVER EXPANDING MEXICAN WELFARE STATE IN OUR COUNTRY.




TO BE A PART OF OBAMA’S ADMINISTRATION, ONE MUST BE A LA RAZA PARTY MEMBER AND ADVOCATE FOR OPEN BORDERS, AMNESTY AND NO E-VERIFY, OR A BANKSTER CRIMINAL!



IT’S BEEN THAT WAY FROM DAY ONE WITH OBAMA, AND ONLY GETS MORE BRAZEN BY THE DAY!





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Citizen Advocate: Ralph Nader



"The only difference between the Republican and Democratic parties is the velocities with which their knees hit the floor when corporations knock on their door. That's the only difference." - Ralph Nader



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January 21, 2011

Obama Sends Pro-Business Signal With Adviser Choice

By SHERYL GAY STOLBERG and ANAHAD O’CONNOR

SCHENECTADY, N.Y. — President Obama, sending another strong signal that he intends to make the White House more business-friendly, named a high-profile corporate executive on Friday as his chief outside economic adviser, continuing his efforts to show more focus on job creation and reclaim the political center.

Here in the birthplace of General Electric, Mr. Obama introduced the new appointee, Jeffrey R. Immelt, the company’s chairman and chief executive officer, who will serve as chairman of his outside panel of economic advisers. Mr. Immelt succeeds Paul A. Volcker, the former Federal Reserve chairman, who is stepping down.

The selection of Mr. Immelt, who was at Mr. Obama’s side during his trip to India last year, and again this week during the visit of President Hu Jintao of China, is the latest in a string of pro-business steps taken by the president. He has installed William M. Daley, a former JPMorgan Chase executive, as his chief of staff; is planning a major speech to the U.S. Chamber of Commerce next month; and just this week ordered federal agencies to review regulations with an eye toward eliminating some.

Together, the moves amount to a carefully choreographed shift in strategy for the White House, both substantively and on the public relations front. Mr. Obama has started making the case that the United States has moved past economic crisis mode and is entering “a new phase of our recovery,” which demands an emphasis on job creation.

And with corporate profits healthy again, the president has begun engaging business leaders more on what it will take for them to start investing again in new plants and equipment and stepping up hiring.

As he moves into the second half of his term and lays the foundation for his 2012 re-election campaign, Mr. Obama is trying to frame the national conversation on the economy around this crisis-to-job-creation narrative. Republicans, who have spent their first weeks of the new Congress talking about repealing Mr. Obama’s health care bill and cutting federal spending, have given the president an opening to do so.

The themes the president struck here, on competitiveness and the turning point in the economy, are expected to be at the heart of the State of the Union address he will deliver Tuesday.

“The past two years were about pulling our economy back from the brink,” Mr. Obama said, standing against the backdrop of a huge generator in a well-lighted plant, with a giant American flag hanging from the ceiling.

“The next two years, our job now is putting our economy into overdrive.”

He went on, “Our job is to do everything we can to ensure that businesses can take root and folks can find good jobs and America is leading the global competition that will determine our success in the 21st century.”

It is not clear how much substantive influence Mr. Immelt’s new role will give him. Under Mr. Volcker, the panel met relatively infrequently, and Mr. Volcker at times appeared frustrated by a lack of access to the inner circles of White House decision-making.

The appointment of Mr. Immelt, who will retain his posts at G.E., is not without complications for Mr. Obama. G.E., one of the nation’s largest companies, routinely has a wide variety of regulatory, trade, contracting and other issues before the federal government, on matters as varied as television mergers, military hardware and environmental cleanup.

During the 2008 financial crisis, the Federal Reserve provided $16.1 billion to General Electric by buying short-term corporate i.o.u.’s from the company at a time when the public market for such debt had nearly frozen. Having the chief executive of such a company advising the White House on job creation at a time when Mr. Obama is assuming a more deregulatory posture could further alienate liberals and be seen as undermining the White House’s commitment to reducing the influence of lobbyists and special interests.

Another complicating factor is union uneasiness about outsourcing by G.E. Officials at the United Electrical Workers Union say the company has closed 29 plants in the United States and one in Canada in the past two years, eliminating more than 3,000 jobs.

“We understand the logic of asking someone like that to step up and play a leading role,” said Damon Silvers, the policy director for the AFL-CIO. “But there’s a real tension there in making a G.E. executive a central figure thinking about U.S. jobs.”

But Gary Sheffer, a General Electric spokesman, said the company has also been shifting operations back to the United States, and has added 6,000 jobs in this country, for a net increase. For example, Mr. Sheffer said, G.E. is moving all of its refrigerator manufacturing business back to the United States. He said 60 percent of G.E.’s revenues come from outside the country.

At the same time, G.E.’s exports have roughly doubled in the past five years, which makes the company a good showcase for a president who is trying to promote trade and exports as a way to repair the battered economy. Exports were a major theme of the president’s India trip and the state visit by President Hu; Mr. Immelt was among the business leaders who attended a high-level meeting with Mr. Hu, as well as the state dinner at the White House on Wednesday.

General Electric is benefiting from Mr. Obama’s emphasis on exports. When the president was in Mumbai, he announced a string of deals involving American companies, including a $750 million order from Reliance Power Ltd., in Samalkot, India, for steam turbines manufactured by G.E. Those turbines will be made here in Schenectady, a point Mr. Obama drove home in his remarks.

“This plant is what that trip was all about,” Mr. Obama said. “That new business halfway around the world is going to help support more than 1,200 manufacturing jobs and more than 400 engineering jobs right here in this community, because of that sale.”

Mr. Immelt’s White House job will be as chairman of the Council on Jobs and Competitiveness, a newly named panel that Mr. Obama is creating by executive order; the president said Friday that he intends to name additional members, including business and labor leaders and economists, “in the coming days.”

The change in the council’s name is intended to signify a shift in White House focus. It will be a reconfigured version of the board that Mr. Volcker led, the President’s Economic Recovery Advisory Board, of which Mr. Immelt was a member.

That body, created by Mr. Obama when he took office in the thick of the worst economic crisis since the Great Depression, is set to expire Feb. 6.

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JANUARY 21, 2011, 3:50 PM

Obama’s Corporate Makeover

By TOBIN HARSHAW

The Thread is an in-depth look at how major news and controversies are being debated across the online spectrum.

Tags:

Economy, general electric, jeffrey immelt, jobs

True or false? “Business leaders should provide expertise in service of our country.”

For titans like Bernard Baruch, J.P. Morgan, Nelson Rockefeller, Robert McNamara and Robert E. Rubin, it’s self-evidently correct. But the phrasing above comes from Jeffrey Immelt, the chairman and chief executive of General Electric who has been tapped to head President Obama’s outside panel of economic advisers, and in his case there are plenty of bloggers taking issue with the premise.

First, though, here is Immelt’s explanation of his intentions from The Washington Post:

My hope is that the council will be a sounding board for ideas and a catalyst for action on jobs and competitiveness. It will include small and large businesses, labor, economists and government …

Government can help business invest in our shared future. A sound and competitive tax system and a partnership between business and government on education and innovation in areas where America can lead, such as clean energy, are essential to sustainable growth. It is possible to be a competitive global enterprise and still care about your home. In fact, it is not just possible but imperative. There is no easy solution to “fix” the American economy. Persistent and high unemployment – and the pessimism it breeds – should not be accepted. We must work together to construct an economy that creates more opportunity for more people.

For some of that pessimism he mentions, here is emptywheel at FireDogLake:

I noted the other day that GE had signed a big deal with China that will involve us sharing our jet technology with China, which will ultimately help China compete with both GE and — China has said explicitly — Boeing. Then there’s the fact that, even as Immelt has been calling for manufacturing in the U.S., his company has been shutting U.S. plants to move the work to China …

GE managed, alone of “manufacturing companies” in the U.S., to turn itself into a Too Big To Fail overleveraged finance company in need of a $16 billion bailout from the government (as has happened with all the TBTF finance companies, bailouts have made GE’s financing business profitable again).

In short, no matter how many times Immelt gets up on a podium or in an op-ed and feigns an interest in American jobs, his actions make him the poster child for everything wrong with the U.S. economy right now.

Alex Seitz-Wald at ThinkProgress has some praise for the man from G.E.: “Immelt has adeptly led America’s fourth-largest corporation, pushing major investment in alternative energy and green technology, and would likely provide valuable insight to any president.” And then brings up a curious incident:

But he is interesting choice for this president, considering that Immelt has expressed some very negative sentiment about Obama in the past. At a dinner with Italian executives last July, as quoted by the Financial Times … Immelt remarked that business does not like the president, and the president does not like business … The question is whether Immelt still believes that Obama is anti-business, even though, for example, the stock market has gained more under Obama than any president except for Franklin Roosevelt and Coolidge. If he has had a change of heart in the past seven months, then Immelt could be an excellent messenger for Obama. If not, then Immelt is an odd choice. Of course, “Immelt’s appointment comes as Mr. Obama has increasingly turned to people with close ties to the business sector for counsel.”

Seitz-Wald’s colleague Pat Garofalo isn’t reassured by Immelt’s G.E. credentials:

Immelt’s company already highlights a need for change: due to a corporate tax system that is loophole-ridden and full of giveaways, General Electric pays a pittance in corporate income tax. Though the statutory corporate income tax rate is 35 percent, GE last year paid a paltry 3.6 percent. In 2009, despite making $10.3 billion in pretax income, GE paid nothing in corporate income tax (and, in fact, received $1.1 billion in tax benefits).

Immelt isn’t to blame for this; it makes sense that a company would take advantage of a tax code that enables it to dramatically lower its tax rate. The problem is that it is far too easy for companies to take advantage of the corporate tax code by shifting and sheltering income.

Scott Paul of the Campaign for America’s Future has a laundry list of similar concerns:

* In a speech to the Detroit Economic Club in 2009, Immelt berated “Buy American” policies while acknowledging that GE lived under domestic preference regimes in China, France, and other nations. In Immelt’s mind, it is fine for China and France to require to GE to make what it sells in their nations, but it’s not OK for America to do the same.

* Immelt essentially rules out any enforcement of our trade laws in his Washington Post op-ed today through a spurious claim that distorts the issue. So China can cheat all it wants, and Immelt wants us to do nothing. Trade enforcement is not “erecting barriers,” as Immelt alleges. Rather, trade enforcement is about removing distortions from the free market. Immelt reveals his true stripes with this ridiculous assertion. It’s a dangerous statement, and it demands an immediate and forceful rebuke from the White House.

* Immelt supported two of the most disastrous economic policies of the post-World War II era: financial deregulation and China’s entry into the World Trade Organization with few, if any, consequences for breaking the rules.

“When (one half of) the economy is in free-fall, definitely the best thing to do is keep pandering to the half that’s doing awesome, because trickle-down economics totally works and has not been comprehensibly discredited by 30 years of demonstrable evidence of its utter failure,” adds Melissa McEwan at Shakesville. “Also: You should totally hire someone who’s in touch with the plight of the hoi polloi to run your Economic Advisory Panel, like an executive from GE.”

The White plan involves more than just the addition of Immelt and the departure of Paul Volcker, including a re-branding of the advisory team. “Mr. Immelt will chair a new Council on Jobs and Competitiveness that Mr. Obama intends to create by executive order,” reported The Times’s Sheryl Gay Stolberg and Anahad O’Conner. “The council will be a reconfigured version of the board Mr. Volcker chaired, the President’s Economic Recovery Advisory Board … The changes signal what the White House describes as ‘a new phase of our recovery,’ a shift from crisis to job creation.”

“Does this council have any power, or is it just something to titillate the villagers like the SS commission?” asks John Cole at Balloon Juice. “Who is this Immelt (other than a GE exec)? How do they expect to put people back to work without a jobs program, which no one will pay for in our new ages of austerity? Is this just another wet kiss on the lips for our corporate overlords? Did the DNC need some GE donations?”

For similar musings from across the political divide, here’s Ed Morrissey at Hot Air:

The White House has to hope that the increased reliance on private-sector executives will improve Obama’s relationship with the business community as well as answer critics who have blasted the administration for its dearth of real-world business experience. But it also comes as a rather large coincidence. The White House just announced the start of its re-election campaign efforts, which will be run out of Chicago, and which will be tasked with beating the $700 million in contributions Obama raised in the 2008 campaign. He will want businesses to get involved in that effort; his sudden interest in what CEOs think at least has the appearance of self-interest more than a change in economic philosophy.

Hopefully, Obama actually takes their advice and puts pro-growth economic policies in place while pulling back hard on regulatory innovation. I suspect, however, that this is more intended as window dressing while Obama pursues the same economic policies that have led to stagnation and persistently high unemployment.

“Government at its worst,” is the judgment of William Teach of Pirate’s Cove. “Create a blue ribbon panel which will spend millions trying to solve a problem that people in 7th grade inherently understand: keep taxes low, reduce government interference, stop passing legislation that damages the private sector, and, heck, stop talking about passing legislation that damages the private sector.”

“Whatever happened to giving your political cronies ambassadorships?” asks Steve Gilbert at Sweetness and Light, noting that Immelt will keep his position at G.E. “Or would that mean that Mr. Immelt would have to quit his day job. Speaking of which, has Mr. Obama ever told Mr. Immelt that he makes too much money? Mr. Immelt’s compensation from GE was $9.9 million in 2009.” Gilbert was also struck by this passage in The Times article: “Mr. Immelt, who was a member of the original board, has been a frequent presence by the president’s side in recent months, as Mr. Obama has sought to spotlight his efforts on behalf of American companies overseas …” The blogger’s response: “Wait a cotton picking minute. Aren’t these the very same overseas companies that Mr. Obama and his stooges demonized throughout the midterm campaign for having given money to the US Chamber of commerce? What Olympian chutzpah.”

One wonders, is that the sort of chutzpah that Bernard Baruch would have admired?

(Update, 7 p.m.: I missed this earlier — a very interesting if somewhat technical post on G.E. Capital’s business practices by Mike Konczal at Rortybomb.)

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Rortybomb

Immelt, GE Capital, and the Financialization of Manufacturing.

Posted in Uncategorized by Mike on January 21, 2011

Joe Klein:

Gotta admit I’m not too pleased by the departure of Paul Volcker from Barack Obama’s circle of adviser. He was one of the few, along with Elizabeth Warren, in the current administration who had a proper perspective on the outrageous behavior that the financial community considers business as usual. And while the appointment of his replacement Jeffrey Immelt, of General Electric, signals a desire to snuggle up to the business community–at least Immelt comes from the manufacturing sector. He has experience actually making products, a skill notably lacking among every one of Obama’s other economic advisers.

Again, I’ll repeat: the important distinction here is between the business community, which should be encouraged to create more jobs, and the financial community, which should be shamed for its casino-gaming shenanigans and kept away from the inner circles of economic policy-making.

I agree with all that except the part about GE not being part of the casino-gaming shenanigans sector. That part, ummm, no. Before anything else, the idea that we have 15 million unemployed because of our “competitiveness” is just wrong, lacking any real substantial evidence. But the idea that GE can, as Joe Klein puts it, point a way forward from a financialized economy is also wrong. Two points.

1. As Raj Date cleverly put it, to understand the bailouts, you need to understand “the Killer G’s”: Goldman Sachs, GMAC, and GE Capital.

GE Capital, the major subsidiary of GE, is a major shadow bank. It used GE’s high-quality credit rating to become a major player in the capital markets, much in the same way AIG FP used the boring insurance high credit rating. GE Capital was the single largest issuer of commercial paper going into the financial crisis.

GE Capital received major bailouts during the crisis, including having the FDIC guarantee more than $50 billion dollars of unsecured debt that was issued. To put that in perspective, only about $24 billion of GE Capital’s funding comes through deposits, allowing a shadow bank with massive unsecured debt obligations and only a small depository base to be carried through the financial panic. Both graphs from Date:





2. Next I want to go to the book Financialization and Strategy: Narrative and Numbers (authors: Froud, Sukhdev, Leaver, Williams, 2006), which does an extensive case study of General Electric and the financialization of the manufacturing business model from 1980 onwards:



Our analysis of the undisclosed business model is relatively straightforward and focuses on seven principles of GE’s cost recovery under Welch:

1 run the industrial business for earnings;

2 add industrial services to cover hollowing out of the industrial base;

3 buy and sell companies through acquisition and divestment to achieve returns and

growth objectives;

4 rely on large-scale acquisition to prevent like-for-like comparisons and to increase

opacity and the power of narrative;

5 grow the financial-services business up to the limit of the company’s credit rating;

6 accept the balance-sheet costs in terms of return on capital but focus on managing

return on equity and cost of capital;

7 add financial engineering to smooth earnings and manage growth….

The story of GE Capital is a story of upward mobility, as GE has found growth of sales revenue by moving beyond captive finance into many other lines of financial business. GE has sold financial services since the 1930s, starting with domestic credit for refrigerators, a classic form of captive finance. Up to the late 1970s, GE was arguably not so different from other US corporates, such as GM or Westinghouse, with a financial-services division whose central activity was captive finance. However, through the 1980s and 1990s, GE Capital greatly expanded and increased its offering in everything from LBO finance to store cards. GE has stayed away from retail banking and, after its problems with Kidder Peabody, moved out of securities dealing. But, in general, its expansion has been as a general supplier of consumer and commercial financial services, while also developing niche areas, such as mortgage insurance. The company’s expansion into financial services is neatly summarized by Fortune: ‘GE Capital pours wealth into the corporate coffers by doing just about everything you can do with money except print it’ (21 February 1994). Hence, GECS overtook General Motors Acceptance Corp. (GMAC) in terms of total assets in 1993 and was twice as large by 1997 (Forbes, 21 April 1997)….

In all this, the GE Capital board was engaged in high-stakes risk management where misjudgements about a class of business would have undermined GE’s financial record. By way of contrast, Westinghouse, GE’s conglomerate rival, had its finance arm liqui- dated by the parent company after losing almost $1 billion in bad property loans in 1990 (The Economist, 30 April 1994). GE Capital’s expertise in making acquisitions is acknowledged by S&P as one of the factors that supports its triple-A rating: ‘GECC (GE Capital Corp.) tends to be a very savvy buyer, understanding the various business risks and pricing the acquisition appropriately’ (S&P 2002: 2).

If the expansion of GE Capital rested on judgement and controls, it also reflected the structural advantage of the triple-A credit rating, which effectively made the financial business (as user of the credit rating) dependent on the industrial business (as credit-rating generator), and this in turn set limits on how much GE could expand without risking reclassification by credit-rating agencies. GE Industrial may be a low-growth business but it has high margins, is consistently profitable over the cycle and has funded almost all of the dividends that GE Consolidated has paid out, as well as providing the funds for acquisitions and repayment of debt. This solid industrial base is the basis for GE’s triple- A credit rating, which allows GE Capital to borrow cheaply the large sums of money that it lends on to consumers and commercial customers…

If there’s demand, we can dig into the huge debate in the analyst community about what was going on with GE and earnings management, a worry that hit an explosive moment post-Enron and Worldcom, during the Sarbannes-Oxley debates.

GE has been at the forefront of blurring a “financial services”-centric model of business onto the remains of a hollowed out manufacturing base, one kept in a minimal state just strong enough to qualify for high credit scoring. Marcy Wheeler has written about how that manufacturing part of the company is driven by outsourcing. In his recent, excellent book Cornered, Barry Lynn talks about how GE’s manufacturing business model becomes focus on business lines with government buyers (defense) and with government regulators and industry standard setters that can be worked (health care). They use the ratings agencies to only look at those business lines when determining the ratings they get, and lever up in the shadow banking network off that. Success!

This is not a big win for the notion of Jobs and Competitiveness.

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