General Electric is "getting out of the banking business," said Rob Cox at Reuters. The storied American corporation announced last week that it plans to sell off much of GE Capital, its $500 billion financial arm. It's a major corporate transformation, designed to "return GE to its industrial roots" — manufacturing jet engines, oil drills, and washing machines. Though GE Capital, the brainchild of former CEO Jack Welch, was a cash cow throughout much of the 1990s and 2000s, and remains the seventh-largest financial firm in the U.S., banking has simply become riskier and less profitable since the 2008 financial crisis.

To understand this "landmark in American capitalism" — one of the most dramatic shifts in GE's 123-year history — "you have to start with Jack," said The Economist. As GE's CEO from 1981 to 2001, Welch turned the company "into a closet bank," providing tens of billions of dollars in business loans, credit cards, and mortgages each year without much regulatory oversight. For years, that made Welch, already a corporate guru, "look like a visionary." Earnings from financial services soared as the U.S. "financial bubble" grew. At its peak, GE Capital contributed nearly 60 percent of GE's overall profits. Then the financial crisis delivered a near death blow, said Peter Eavis at The New York Times. Struggling under a portfolio laden with risky loans, GE was bailed out to the tune of $139 billion in government — guaranteed debt and lost its prized AAA credit rating. Washington also got wind of the serious risks "posed by large financial firms that were not regulated banks." The Federal Reserve's response under the 2010 Dodd-Frank financial reform bill — to designate GE as systemically important to the financial system and regulate it just like a bank — led directly to the company's decision to slim down.

This just proves that Dodd-Frank "is doing some real good," said Paul Krugman at The New York Times. Before the crisis, GE Capital "created systemic risks" just like a major bank but was "effectively unregulated." But once it was subjected to greater regulatory oversight, with higher capital and liquidity requirements, it found it couldn't make outsize profits because it couldn't take as much risk. "GE only wanted to be a bank if it didn't have to play by the same rules that other banks do," said Matt O'Brien at The Washington Post. That not only shows that financial reforms are having their intended effect but also that "we know how to make the big banks safer." The federal government doesn't have to break them up. "It just has to give them incentives to do the job themselves — and they will."

Still, I don't expect Wall Street banks to get the breakup bug, said Matt Levine at Bloomberg View. After all, GE has its manufacturing and industrial divisions to fall back on; other big financial firms don't have alternative business models. But GE's move suggests that reforms are making it harder for big banks to "generate acceptable returns," said Justin Fox, also at Bloomberg​ View. And if that remains true, then GE won't be the only financial firm "under pressure to divest and shrink."