GE finally dumps Jack Welch's poisonous legacy and the stock surges

General Electric (NYSE:GE)

On a day that saw industrial giant, General Electric, dump the last remaining legacy of Jack Welch the stock soared. No surprise.

GE finally dumped its financial business; a business built up by Jack Welch and a business that almost sank the company. Jeff Immelt did something he should have done a long time ago. That's because Welch's GE Capital was nothing more than an accounting scam that almost wrecked the firm founded by Thomas Edison.

Now GE can go on doing what it does best: making real stuff. Everyone knows it for its home appliances: washing machines, dryers, refrigerators, ranges and such. In addition, the company makes sophisticated industrial products like jet engines, medical imaging machines and power generation equipment. Things the world needs. What it doesn't need is any more accounting frauds.

I never understood all the adulation of Jack Welch. He was like the God of CEO's. Still is, to many. I met him many times when I was at Fox News and while he was a likable guy, I never thought he was very smart. His economic views were totally out of paradigm. He was a hard money, fiscal austerity, ideologue; a member of the club of corporate elites who succeed in spite of themselves or who rely on tricks, gimmicks or bending the system, as most of finance did, with its accounting scams.

Disclosure: I own GE stock. Good riddance Jack Welch and your legacy.

Bill Black — Ten Lessons We Must Learn from Charles Keating

The Savings and Loan debacle was the test bed for the epidemics of accounting control fraud that drove our subsequent financial crises. The debacle was the only one that was “successfully” contained before it could cause a financial crisis. The debacle was widely described at the time as the “worst financial scandal is U.S. history,” so the phrase “successfully contained” is obviously one that could spark disbelief. The critical modifier is “before it could cause a financial crisis.” The S&L debacle did not lead to even a mild national recession. It did hyper-inflate regional real estate bubbles that pushed parts of the Southwest region into a serious economic decline. The Enron-era frauds substantially contributed (in conjunction with the related collapse of the dot com bubble) to a $7 trillion fall in market capitalization and the fraud epidemics hyper-inflated the largest bubble in history and drove a Great Recession that is projected to cost over $20 trillion in lost production. The S&L debacle, therefore, allows us to understand not only went wrong, but also how to prevent things from going wrong.

This one is a classic.

New Economic Perspectives

Ten Lessons We Must Learn from Charles Keating

William K. Black | Associate Professor of Economics and Law, UMKC