In a letter to his shareholders on Monday, General Electric CEO Jeffrey Immelt warned that the many incoming federal regulations and the accompanying “unprecedented” uncertainty could have an unfortunate impact on capital investment and the general American economy. You don’t say, via CNBC:
“The amount of regulation tends to grow during periods of financial strain and we are certainly seeing that in the U.S.,” Immelt said, “The number of ‘major regulations’—regulations with more than $100 million in impact—has exploded in the last few years. The result has been an additional burden on business. Until we solve for these constraints, it is hard to see that the U.S. will return to its full growth potential.”
Immelt called 2013 “another typical year in the Reset Era,” pointing to economic strength in emerging markets, including renewed growth and reform in China, while the U.S. is in “unprecedented territory” when it comes to fiscal uncertainty. He called that “a major source of volatility in corporate planning.” This uncertainty, he said, is “something I never thought I would see.”
But as CNBC host Rick Santelli wondered this morning, why didn’t we hear a little bit more emphasis about the negative effects coming from ObamaCare and Dodd-Frank when Immelt was acting as — oh, I don’t know — the chairman of President Obama’s specially-appointed Council on Jobs and Competitiveness? Paying lip service to ‘reducing regulatory barriers’ is all well and good, but those two regulatory-uncertainty-inducing behemoths managed to escape pretty well unscathed.
The other thing that gelled today is Jeff Immelt, our fearless leader of a bygone day. That’s just changed recently. On the big letter that he wrote to shareholders I would like to pull out one sentence, let’s put it on the screen: “…until we solve for these constraints, it is hard to see that the U.S. will return to its full growth potential.” Obviously they’re both talking roughly about the same thing. Here’s my problem. Where was everybody two or three or four years ago? Dodd-Frank passed in 2010. Mr. Immelt running one of the greatest companies on the planet in form of GE. Well, he was the Chair of the Jobs and Competitiveness group that the president had.
And he’s not the only big business executive who was conspicuously silent about it all, either. As for the op-ed Santelli mentions in the WSJ, it’s yet another testament to the many ways in which Dodd-Frank was the administration’s effort to look proactive on dismantling the excesses of the financial crisis, but really only compounding the problems in the process. Womp:
A dozen megabanks today control almost 70% of the assets in the U.S. banking industry. The concentration of assets has been in progress for years, but it intensified during the 2008–09 financial crisis, when several failing giants were absorbed by larger, presumably healthier ones. The result is a lopsided financial system. …
The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act was a well-intentioned response to the problem. Its stated promise—to end “too big to fail”—rings hollow. With a law that runs 849 pages and more than 9,000 pages of regulations written so far to implement it, Dodd-Frank is long on process and complexity but short on results. Regulators cannot enforce rules that aren’t easily understood.
Further, market discipline is still lacking for the largest dozen or so institutions, as it was during the last financial crisis. Why should a prospective purchaser of bank debt practice due diligence if in the end, regardless of new layers of regulation and oversight, the issuing institution won’t be allowed to fail?