General Electric announced today its plans to sell off the majority of GE Capital, its financial services unit. 
General Electric announced today its plans to sell off the majority of GE Capital, its financial services unit.  - 
Listen To The Story
Marketplace

General Electric announced today that it’s getting out of the lending business, selling off most of its financial arm, GE Capital, over the next couple of years. First up is a big chunk of its real estate business, which it’s offloading to Blackstone. That leaves GE, the industrial company – a producer of jet engines and other things that go "vrroom."

Historically, GE’s lending business was a very small portion of the company, says Tom O’Boyle, author of “At Any Cost: Jack Welch, General Electric, and the Pursuit of Profit.” That changed when Jack Welch took the helm in the early ‘80s.

“Jack Welch saw bonanza in finance,” says Jeff Madrick, a senior fellow at the Century Foundation and the author of “Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present.  

Click here to continue reading below...

He says the company realized it could make lots of money in finance with far fewer employees than manufacturing, eventually becoming "a full-fledged mortgage lender and a sub-prime mortgage lender.” Now, Madrick says GE’s getting out of a business it never fully understood. Moreover, the financial industry is more competitive now with lower profits.

It’s not that finance is dying, says Jim Wilcox, a professor at U.C. Berkeley’s Haas School of Business.

“Instead, I would say the bubble’s popped,” he says. “The damage was done, but now we’re going to have a financial sector that’s going to be sturdier, and it’s going to be sturdier because it’ll be the serious devoted firms that remain.” He adds that the remaining firms are also more heavily regulated. 

“I think the best compliment I can give is not to say how much your programs have taught me (a ton), but how much Marketplace has motivated me to go out and teach myself.” – Michael in Arlington, VA

As a nonprofit news organization, what matters to us is the same thing that matters to you: being a source for trustworthy, independent news that makes people smarter about business and the economy. So if Marketplace has helped you understand the economy better, make more informed financial decisions or just encouraged you to think differently, we’re asking you to give a little something back.

Become a Marketplace Investor today – in whatever amount is right for you – and keep public service journalism strong. We’re grateful for your support.

Follow Tracey Samuelson at @tdsamuelson