The Northwestern Bank of Traverse City, MI, with $810 million in assets, is not the General Electric Company, which is the largest industrial firm in the world. But Northwestern is among the thousands of America’s banks that are not lapping at the public trough, as is GE.
General Electric, by a quirk in the intricate government financing complex, has joined many major banks that have been saving billions of dollars raising money for their businesses. The money gimmick GE and others have used is called Temporary Liquidity Guarantee Program (TLGP).
According to a Washington Post article on June 29, GE “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.”
Only the most suspicious would believe GE’s good fortune flowed from the fact that GE’s CEO Jeffrey Immelt is an Obama pal and economic adviser and that the GE-owned network NBC is criticized often and by many, including Fox News’ Bill O’Reilly as clearly being “in the tank” for Obama. But perhaps the happy outcome for Immelt resulted from the company’s slogan: “Imagination at Work.”
GE’s huge financing division is not classified as a bank. But it sneaked into the government’s rescue program by its ownership of a Utah Savings & Loan. The company’s financing arm, GE Capital, “has issued nearly a quarter of the $340 billion in debt backed by” the Temporary Liquidity Guarantee Program, the Washington Post story said.
GE certainly has been in the financing business. As the company says on its website: “GE provides loans, operating leases, financing programs, commercial insurance...in over 35 countries around the world.”
But GE’s financing unit is not a bank. Its ability to slip into the rescue program points to the holes in the government’s intricate system of intervention in practically every aspect of the economy. “The government’s actions have been “powerful and helpful” Immelt acknowledged on the Charlie Rose PBS television show June 25.
The agility of GE to be able to live in two worlds—banking and commerce—and capitalize on the government safety net while avoiding rigorous regulation existed well before the current national financial crisis “because of its unusual corporate structure,” as the Washington Post story noted, Federal law has allowed a limited number of commercial enterprises to be in banking “under the lighter hand of the Office of Thrift Supervision.”
But, unlike other major lenders in the debt guarantee program, such as Bank of America and Citibank, “GE has never been subject to the Fed’s stress test or its rules for limiting risk,” the Post story added.
Many of GE’s business lines will benefit from federal economic recovery proposals, from power-grid gear to wind power. And certainly one of Obama’s favorites—health information technology.
GE seems to thrive on helping the Obama Administration while making a tidy profit. For instance, Obama enthusiastically pressed for $17 billion in the stimulus package for healthcare providers to adopt electronic records as part of the Health Information Technology for Economic and Clinical Health Act (HITECH) The act commands all medical practices to fork over patient information to the federal government by 2015 or get hit with a penalty.
It’s a way for GE to make millions. The company plans to extend $100 million in interest free debt to hospitals and doctors to spur demand for its medical records systems before customers are reimbursed with the federal stimulus money for such technology, according to FT.com June 15 of the Financial Times. And GE has “pledged to invest $6 billion by 2015 in initiatives that lower healthcare costs and boost sales of its imaging gear and other medical products,” the story said.
GE’s “Healthmagination” branch has a lengthy motto that has the ring of words from an Obama speech: “It’s time for a better, simpler system where innovation helps lower the cost of care and improve the quality of outcomes for more people.” Healthmagination also will use GE-owned NBC and MSNBC to promote socialized healthcare, according to examiner.com (http://www.examiner.com/x-9100-Boston-Conservative-Independent-Examiner~y2009m6...). GE stands to make millions and even billions” off the HITECH Act, the story said. The company will need it. Its stock shares have plunged to penny-stock levels, mainly because of Immelt-style management.
GE also has lobbied heavily for a cap-and trade system for dealing with greenhouse gases rather than a straight tax system, which wouldn’t require a market, according to The Business Insider. In the fourth quarter of 2008, GE spent $4.26 million on lobbying. If you review their lobby filings, you’d think you were gazing at Al Gore’s agenda. They included, The Business Insider said, “Climate Stewardship Act,” Electric Utility Cap and Trade Act” and “Global Warming Reduction Act.” Of course, this market won’t be around until 2012, the publication added. By then GE will still be alive and well, if Barack Obama has anything to say about it.
Vice President of GE Ecomagination Steve Fludder in a Brussels interview in June described the company’s “green” technology, including wind turbines and GE’s global health care business headquartered appropriately in Great Britain, where socialized medicine struggles to keep afloat.
Meanwhile, Harry “Scrub” Calcutt, President & CEO of Northwestern Bank, a free-enterpriser—unlike Immelt-- recently wrote the customers of his bank, “It’s no secret that financial institutions have been at the heart of...the worst American economy in decades.” He noted the “staggering losses at many banks” that have received billions in taxpayer money from the government’s Troubled Asset Relief Program (TARP). “Among the troubling practices we continue to see—especially at larger banks—are hidden fees, undisclosed penalties and deceptive pricing...This is simply dishonest (and) has contributed to the undermining of the American banking system, the erosion of public confidence in banks, and the decimation of our economy.
“In contrast, at Northwestern Bank we remain strong. Our capital reserves are well above what is required by... the Federal Deposit Insurance Corporation. Our prudent lending and sound business practices have enabled us to continue to have positive earnings—which further strengthens our capital position. Our financial strength has allowed us to continue to make loans...while others are reducing or closing credit lines.”
So, Northwestern is among thousands of banks still providing support to its customers and following free-market principles.