George S. May Business Blog

GE CEO and BofA execs predict second stimulus

Whether the end result proves to be positive or not, should this come to fruition, expect right wing radio hosts and Senators alike to have a field day. Oh, excuse me, and expect BofA execs to have a vacation.

“General Electric Co. Chief Executive Jeffrey Immelt and several Bank of America Merrill Lynch executives said Monday they expect Congress to approve a second economic-stimulus package to help what would otherwise be a slow economic recovery.

The speakers, on a BofA Merrill Lynch webcast, said global economic recovery would be led by governments and emerging markets.

“If you look at where we were a year ago, without a stimulus plan we wouldn’t be where we are today, talking about a recovery,” said Michael Hartnett, chief global equity strategist at BofA Merrill Lynch Global Research. Harold Ford Jr., a former congressman and vice chairman of BofA Merrill Lynch, predicted a second stimulus will take place sometime next year.

“It’s going to be hard to solve some of these problems – unemployment and otherwise,” said Mr. Immelt. He said a second stimulus should address the U.S.’s excess industrial capacity and loss of jobs. “There’s some challenges.”

While stock markets have been rebounding, Mr. Hartnett said jobs are still declining, home prices aren’t rising and bank lending remains sluggish. Those are the “missing pieces of the jigsaw,” he said.

“Right now, the economy is still very much in the intensive [care] ward,” said Ethan Harris, head of North America Economics at BofA Merrill Lynch Global Research. He projects a second stimulus package because both political parties will want something to show heading into the 2010 mid-term elections. “If you can get some job growth, you will have something to show for it.”

Sallie Krawcheck, President of Global Wealth & Investment at BofA Merrill Lynch, hosted the webcast, intended for clients of Merrill Lynch.

Mr. Immelt said GE is focusing on creating more new products at a variety of prices. “We will have more new products introduced in the next 12 months that, perhaps, any time in our history,” he said.

Mr. Immelt governments in Europe and China seem to be steady supporters of clean energy. In contrast, he said, U.S. “public policy is kind of a mess in this space.”

“Abu Dhabi will bring a new nuclear plant on line before the U.S. will,” said Mr. Immelt. GE is currently bidding with its nuclear energy partner Hitachi Ltd. against two other teams to build nuclear reactors for the United Arab Emirates in coming years.

For a nuclear-power plant to be built in the U.S., he said, “the president himself is going to have to say, ‘this is what’s going to happen.’” He described the nuclear power industry as a “sovereign business” driven by national leaders in countries such as Japan, China, Russia and France, who are willing to help put capital toward projects and push nuclear plants through.

On health care, Mr. Hartnett said the months-long battle in Washington has been a distraction. “More attention could have been paid to stimulus – making it work” or for the housing market or alternative energy, he said. “I think the healthcare debate has overwhelmed everything else. It’s a noble topic. But for the health of the global economy this year, it’s kind of immaterial.”

The panelists agreed that emerging markets, innovation are the best bets for a recovery in coming months. And forced to choose between optimism and pessimism, all four said they are optimists.

Events of the past year have forced executives to “to look at my world, my future my job in different way,” said Mr. Immelt. “I’d say I’m hungrier and humbler than I’ve ever been. I think that’s a good thing.” (source)

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