Jack Welch wasn't responsible for the increased leveraging, and horrific choices made after September 2001. Jeff Immelt was. Under Welch, GE Capital was not highly leveraged into subprime mortgages; under Immelt, they took a massive hit on a $20 billion British subprime portfolio, along with junk subprime in Eastern Europe.
"For GE Capital, the business world from 2002 to 2006 was a nearly perfect environment. Executives Gary Wendt and Denis Nayden had aggressively globalized the business" ...
"During that period GE Capital levered up, growing its ratio of debt to equity from 6.6 to 8.1. Profits quadrupled to almost $11 billion, more than the profits of Procter & Gamble or Goldman Sachs."
"For example, the company had left the home mortgage business in 2000 but reentered it in 2004 when it was flying high, buying a subprime lender called WMC Mortgage from a private equity firm (the price was never announced). Home prices peaked in June 2006, yet it wasn't until a year later, with the subprime crisis on the front page of every newspaper, that GE Capital finally decided to bail out. WMC lost almost $1 billion in 2007 before GE dumped it in December."
Thanks for enlightening me. Welch's tenure ended in 2001, by which time 40% of GE's revenues were from GE Capital, who were actively engaged in derivatives markets and had large exposures that would have gone bad even if they hadn't levered up from 2002 to 2006.
There are many other criticisms of Welch's tenure that come to the conclusion that GE did well DESPITE Jack Welch, not because of him.
Here is a tasty link: http://en.wikipedia.org/wiki/Jack_Welch#Criticism
At any rate, I personally think that CEOs are figureheads of companies and the only things about a CEO that makes any difference is
a) how good a head of hair they have
b) how tall they are
c) which ivy league school they attended and if they shared a class with anyone now at Goldman Sachs
At least he was a Chemist, and not one of those idiot Physicists ;)
Well don't get me wrong, there's no reason to cover up what Welch was responsible for. He was obviously no saint (few are). And I don't doubt for a second that he played a role in the broad direction GE Capital took.
His reputation deserves to be hit for the things he actually did wrong. Immelt can take responsibility for his failures.
Jack Welch wasn't responsible for the increased leveraging, and horrific choices made after September 2001. Jeff Immelt was. Under Welch, GE Capital was not highly leveraged into subprime mortgages; under Immelt, they took a massive hit on a $20 billion British subprime portfolio, along with junk subprime in Eastern Europe.
"For GE Capital, the business world from 2002 to 2006 was a nearly perfect environment. Executives Gary Wendt and Denis Nayden had aggressively globalized the business" ...
"During that period GE Capital levered up, growing its ratio of debt to equity from 6.6 to 8.1. Profits quadrupled to almost $11 billion, more than the profits of Procter & Gamble or Goldman Sachs."
"For example, the company had left the home mortgage business in 2000 but reentered it in 2004 when it was flying high, buying a subprime lender called WMC Mortgage from a private equity firm (the price was never announced). Home prices peaked in June 2006, yet it wasn't until a year later, with the subprime crisis on the front page of every newspaper, that GE Capital finally decided to bail out. WMC lost almost $1 billion in 2007 before GE dumped it in December."