After its $10-Billion Loss in Q4, GE “Restates” Earnings for 2017 and 2016, by Wolf Richter

The news goes from bad to worse for General Electric. From Wolf Richter at wolfstreet.com:

A classic Friday night bad-news SEC-filing dump.

It’s not like General Electric doesn’t already have enough existential problems, ranging from its $29-billion pension-fund “nightmare” to the $9.8 billion loss in Q4 that it reported in January. It’s in a massive restructuring, trying to shed $20 billion in assets. Some of its core businesses are deteriorating. And it’s being hounded for its famously opaque and purposefully confusing earnings reports.

So to keep the damage to a minimum, GE disclosed on Friday after hours in an SEC filing that it will:

  • Have to restate the loss for 2017, making it even larger.
  • Have to restate its 2016 earnings per share
  • Have to take an additional charge for 2016 against “retained earnings.”
  • Face a Justice Department investigation into its now defunct subprime mortgage business.

This Justice Department investigation of its subprime mortgages originated between 2005 and 2007 by its now defunct unit, WMC Mortgage Corp, was listed under items that “could cause our actual results to be materially different than those expressed in our forward-looking statements.” And they may “affect our estimates of liability, including possible loss estimates.”

Of note concerning those subprime mortgages: GE got bailed out by the Fed and the Federal government during the Financial Crisis. GE received bailout loans from TARP, a Federal program, and the FDIC guaranteed $139 billion of GE Capital debt. In addition, the New York Fed, which handled the Fed bailouts, handed GE large amounts of cheap loans (which GE has paid back). GE’s then CEO Jeff Inmelt was a director at the New York Fed during that period and was involved in the decisions of the Fed bailouts. At the same time, he was on CNBC hyping his company’s stock.

To continue reading: After its $10-Billion Loss in Q4, GE “Restates” Earnings for 2017 and 2016

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