Felix Salmon

Immelt and Paulson meet again

By Felix Salmon
February 6, 2010

This event — Hank Paulson being interviewed by Jeffrey Immelt at the 92nd Street Y on February 18 — might just have got a lot more interesting:

On Sept. 15, 2008, the day Lehman Brothers declared bankruptcy, Paulson says he was “startled” when Immelt came to his office and told him GE was finding it “very difficult” to sell short-term debt “for any term longer than overnight.” A day earlier, GE sent investors a letter saying its ability to sell commercial paper was “robust.” Immelt, in a statement issued Friday by GE, said he “does not believe” the two discussed problems with GE commercial paper on Sept. 15, or in one previous talk.

If correct, the portrayals in Paulson’s book, “On the Brink: Inside the Race to Stop the Collapse of the Global Financial System,” could spell trouble for GE in court, where shareholders are accusing Immelt and other executives in civil suits of violating securities laws by misleading investors in fall 2008 about GE’s finances and withholding key information.

Now, what are the chances that Immelt will bring up the discussion he had with Paulson on September 15? It would be really amazingly wonderful if the mogulfest turned into a substantive disagreement with millions of dollars at stake, with Paulson standing by his book and saying that Immelt had complained about illiquid CP markets, and Immelt denying the allegation.

But frankly it strains credibility that Immelt would have had a meeting with Paulson on that particular day and said anything else: this was hardly the time to be paying social calls. As a result, I suspect that Immelt won’t raise the subject — just as Paulson, in his book, never raises the subject of his scandalous meeting with the Goldman Sachs board in June 2008. If the likes of Immelt and Paulson had their way, no one would ever ask any tough questions at all, at the 92nd St Y or anywhere else.

(HT: Bishop)

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