Friday, February 27, 2009

GE and Citi --- watershed events

News today about GE and Citicorp either represents a capitulation or a collapse.

That's not a comment about these two companies, it's a comment about the entire economic scenario. GE is approximately 50% owned by individual investors, a huge percentage relative to most companies of its size and stature. GE has said, and it's been heard one-on-one here from the top a decade or so ago, "we love our retail shareholders". Few companies focus their investor relations program on retail as much as GE. Cutting the dividend is a break from a tradition that is not trivial. Citicorp's agreement with the Treasury is too new to be analyzed here, but if the whole damn thing is worth anything and it's not going to be confiscated by the government, then it's a bargain today.

Problem is, every effort to promote "accountability" can have the unfortunate effect of undermining the financial system. I put "accountability" in quotes because the word should probably be "punishment", as in by regulators and politicians who disregarded their responsibilities and now want to pass the blame. They pass it on, destroy the deserving scapegoats, and the same lame crowd gets reelected. Today's American way.

Soapboxing here --- that does no good. This new Democratic administration has just begun. If they can be non-partisan, #*#* the leading Republicans in Congress, relate to the smart ones, and just take it step by step we can get through this and eventually thrive. Patience is hard to relate to when it's measured in years, not days or months.


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