Back in the early 2000s, General Electric (GE) — previously known as the world’s biggest, best managed maker of cool, useful things like jet engines and wind turbines — discovered that it could make even more money by exploiting its AAA credit rating to borrow cheap currency and lend it out at higher rates. It ramped up its vendor financing, enabling customers to buy more of its stuff, and built a real estate empire that spanned the globe.
It took a while for people to figure out the the company, via its GE Capital division, had in effect become one of the world’s biggest, most highly-leveraged banks. But eventually they got it, and when the real estate/derivatives bubble burst in 2008, being a major bank was like being a dot-com in 2000 or a silver miner today: a very bad thing in the eyes of shell-shocked investors. GE’s market value reflected its new corporate persona:
Now it appears that GE’s managers (unlike most of the people running today’s governments and big banks) actually remember all the way back to the previous decade, and have decided that they don’t want to live through a replay. This morning the company announced that it is selling a big part of GE Capital’s real estate assets and using the proceeds to buy back stock. Some details from MarketWatch:
