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GE Understands Simpler Is Better for Business

Statement of Bart Naylor, Financial Policy Advocate, Public Citizen’s Congress Watch Division

Note: Today, General Electric (GE) announGE Capitalced that it is selling its financial division, GE Capital. In a statement, CEO Jeffrey Immelt explained that GE intended to become “a simpler” company.

GE gets it: Leaner business models pose less risk to the company itself, less risk to shareholders and less risk to financial markets and the broader economy. In the wake of GE’s announcement, investors are already responding enthusiastically.

GE isn’t the only one thinking about shrinking. Other leaders in finance are calling for breaking up the major banks, including Sanford Weill, who merged Travelers Group with John Reed’s Citicorp to form Citigroup. One analyst recently observed that JPMorgan Chase would be worth more to shareholders with a breakup. And on Wednesday, vice chairman of the Federal Deposit Insurance Corporation Thomas Hoenig spoke out in favor of simpler, smaller financial institutions. On May 6, Bank of America shareholders will vote on a proposal (PDF) from Public Citizen to analyze the benefits of breaking up the bank.

We hope GE’s leadership will pave the way for other large financial institutions to take similar action.