General Electric To Sell Majority Of Finance Arm, Real Estate Holdings

Apr 10, 2015
Originally published on April 10, 2015 7:30 pm

The sprawling conglomerate General Electric is radically paring down its business, ditching most finance and real estate operations. GE was badly burned by the financial crisis, and the plan announced Friday would protect it from the risks associated with banking.

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In the wake of the financial crisis, new regulations are causing one of the country's biggest and oldest companies to change course. General Electric announced today it will sell off most of its lending operations, along with $26 billion worth of real estate investments. As NPR's Chris Arnold reports, the move is something inventor Thomas Edison himself might have liked to see.

CHRIS ARNOLD, BYLINE: Thomas Edison founded the Edison General Electric Company back in 1889, and GE, of course, went on to become a major force in the industrialization of America. It wasn't just light bulbs, but elevators, locomotives, airplane engines, power transmission.

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UNIDENTIFIED MAN: As our country grew, the West demanded more goods, more power from the East.

ARNOLD: That's an old GE filmstrip, but fast forward to the 1990s, the world had changed. And by 2007, GE was actually making most of its money by lending money.

NICK HEYMANN: GE rode the wave in the 1990s of the growth in consumer finance and business financing.

ARNOLD: That's Nick Heymann He's an analyst who's covered GE for 30 years, and before that he worked at GE. He says in recent years, if you got a credit card from Home Depot or the Gap, you probably didn't realize it, but GE was the company behind that. It also made big commercial loans, and it was making lots of money doing this.

HEYMANN: That was a huge driver of growth because there was minimal regulatory oversight because we hadn't had a global financial meltdown like we did in 2008.

ARNOLD: Since then, new regulations mean that companies that are considered too big to fail, like GE's finance unit, have to hold more capital if they're going to loan out money. That makes lending less profitable, and Heymann says that's a big reason that GE is now making this dramatic move.

HEYMANN: You're dismantling one of the 10 largest financial institutions in the U.S.

ARNOLD: So no more loans for big office buildings or shopping centers or for credit cards. Heymann actually doesn't think that's going to be a problem. He thinks other lenders will step in, but he says what this means for GE is that it's getting back to its roots. Basically, countries all over the world are just now at the stage that the U.S. was when General Electric was born. So...

HEYMANN: Today, the biggest opportunity in the world is the 4.5 billion people today on the planet that don't live in a modern economy.

ARNOLD: So Heymann says GE's goal going forward will be to do for them what it helped to do in this country over the past century - to supply machines and systems for...

HEYMANN: Water, power, rail, air transport, health care.

ARNOLD: And, of course, electric light bulbs. Chris Arnold, NPR News. Transcript provided by NPR, Copyright NPR.