General Electric Is Getting Out of the Banking Business - Assignment Example

A recent article in the Wall Street Journal revealed that after years of failed attempts, GE is getting out of the banking business. In my opinion, this is long overdue and other businesses of this nature should consider following suit. Having just gone through one of the most severe and prolonged economic downturns since the Great Depression, the problem was compounded by the reality that the federal government was forced to bail out many large financial institutions, as allowing them to fail was not seen as a viable option and one that would have proven disastrous for the country as a whole. These were purely financial institutions, and they had a difficult time staying afloat due largely to poor management, bad investments, and the lack of foresight required to weather difficult economic times.
Companies that begin in one industry should not consider branching into the financial sector, as GE has attempted, as to do so all too often results in less than stellar results and can, in the end, adversely affect the American economy as a whole.
The financial sector of any economy is critical to the well-being of the nation as a whole. It is important that such institutions are viable and that they operate with integrity to secure the confidence of an investing public. In addition, sound and prudent banking institutions are required to attract outside and foreign investment. Every time a bank fails or even struggles mightily, it reflects poorly on the nation, and it weakens investor and consumer confidence. In addition, when the banking system is in peril, as it has been for the past six to seven years, credit restrictions are tightened and the economy struggles to grow due to a lack of access to financial capital throughout all sectors of the economy. Even though GE is now exiting from the financial sector, this is another indicator that many such insinuations have simply grown too big to effectively focus solely on the banking end of the business. In the end, this is a further reflection that some business can diversify their portfolio so much that they fail to truly excel at any one aspect. When this occurs in the banking industry, however, the results can have ramifications that are felt around the world. Read More