How to fix General Electric, and quick

The investment world is now worried about how the General Electric (GE:NYSE) “situation” will turn out.

• Will they lose their Triple A credit rating?
• Will the finance division eat the parent company alive?

Who wants to wait to find out how this movie ends?

The GE Board of Directors would be well served to butterfly the company right now.  Spin out the GE Capital business; whatever shared services there are with the industrial divisions…de-tangle them.  GE shareholders will still own the two businesses, but the rest of GE proper won’t be dragged down any further.

If GE Capital needs a bank-like, AIG-like, bailout so be it.  At least it will be a clean deal.  Things are too muddy otherwise.

If GE Capital surives, there will be lots of time to stitch things up if the GE board of directors wants to put the two businesses back together again.  Would be interesting to see what shareholders think of that “re-marry” concept a year or two or three from now.

Goldman and Morgan Stanley had to make some hard decisions to avoid the fate of Lehman and Merrill Lynch.  If the GE Board comes to realize that the days of pseudo banks being subs of industrial holding companies are over (as Corporate Japan did), this decision will be the best one they’ve made in recent memory.  Other than the one where they laid out Berkshire Hathaway (BRK:NYSE) with that US$3 billion pref deal — those warrants are struck at US$22.25.  GE closed today at an ominous figure: US$6.66. 

The Number of the Beast.

MRM