The administration’s galactic incompetence in addressing the stabilizing of the financial system has created an almost risk-free environment for those who would capitalize on this moment to take the best companies in America out behind the barn and shoot them, as a Fed President says at the bottom of this piece. Bloomberg:

General Electric Co. investors are treating the company as though it’s on the verge of failing ahead of a potential cut in its top-level AAA rating. “It’s a leper right now,” said Marilyn Cohen, president of Envision Capital Management Inc. in Los Angeles, who oversees $180 million in fixed-income assets and no longer own GE bonds. Bankruptcy “seems improbable, but we’ve seen improbable things happen,” Cohen said.

GE, which just posted its third-highest annual profit ever, has lost about $264 billion in market value in 12 months. Yesterday it fell a fourth straight day to the lowest closing price since November 1992, feeding a surge in options volume and credit-default swaps. Investors are punishing the shares on a presumption, which the company disputes, that GE Capital will need more outside funding to cover potential writedowns and losses in real estate, consumer credit cards and leasing.

The run underscores how stock investors may have lost confidence in companies with finance operations — even those like GE that own industrial businesses, still predict a profit, and operate with some degree of backing from the U.S. government. While federal commercial paper liquidity backstops and debt guarantees since October have prevented the type of creditor panics that sank Bear Stearns Cos. and Lehman Brothers Holdings Inc., a former Federal Reserve official says the programs haven’t made a convincing case for stock investors.

“Creditors are being bailed out everywhere but equity owners are not,” said William Poole, president of the St. Louis Federal Reserve Bank until March 2008. “What that does is create cascading weakness because you can’t raise any equity capital.”

Because of the pathetic performance of Geithner and the Obama administration, GE won’t be the last company to get this simple and vicious treatment. If things don’t change, it’ll be coming to a bank, insurance company or industrial corporation near you.

This entry was posted on Thursday, March 5th, 2009 at 4:19 am and is filed under Democrats, business. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.