Ge Finance Jerome's - Financial Steps

GE Finance and Jerome’s Furniture: A Risky Relationship

General Electric (GE), once a symbol of American industrial might, had a significant financial arm known as GE Capital. While GE Capital provided financing for various businesses, its relationship with Jerome’s Furniture, a prominent Southern California furniture retailer, highlights the inherent risks associated with such lending practices. Jerome’s, known for its aggressive marketing and extensive credit offerings, became heavily reliant on GE Capital to finance its customer purchases.

GE Capital essentially served as Jerome’s in-house financing provider. Customers with less-than-stellar credit could still purchase furniture through GE’s financing options, often with high-interest rates and lengthy repayment periods. This strategy fueled Jerome’s sales and allowed it to cater to a broader customer base. However, it also exposed both companies to significant risk.

The inherent problem lay in the subprime nature of many of these loans. Customers with poor credit histories are inherently more likely to default. As Jerome’s sales relied increasingly on GE’s financing, the quality of the loan portfolio deteriorated. When the economy faltered, particularly during economic downturns, default rates soared. This created a double whammy: Jerome’s sales declined as consumers tightened their belts, while simultaneously GE Capital faced mounting losses due to loan defaults.

The connection between GE Capital and Jerome’s was symbiotic, but ultimately detrimental. Jerome’s benefited from increased sales driven by readily available credit, but it also became overly dependent on GE. GE Capital, in turn, expanded its loan portfolio but at the cost of increased risk. This strategy, while lucrative in the short term, proved unsustainable. The reliance on subprime lending exposed both companies to significant financial vulnerabilities.

The GE Capital model, and its relationship with companies like Jerome’s, contributed to GE’s eventual financial difficulties. The company’s over-reliance on financial services, particularly those involving subprime lending, ultimately proved to be a costly mistake. The Jerome’s example underscores the dangers of prioritizing volume over responsible lending practices and the interconnectedness of businesses relying on such financing models. While Jerome’s continues to operate, the story serves as a cautionary tale about the risks associated with aggressively pushing credit, especially during periods of economic instability.