Quote from Landis82:
Nationalize GE???
You obviously have no CLUE and should not be risking any capital in the financial markets.
Either that, or you enjoy making posts on ET that confirm your screen-name.
Read below, sounds like the rules are changing again and GE will be forced insolvent GM style. I unloaded all my GE positions and other stocks and took my profits and will stay cash.
This sounds bad.
The Obama administration's proposed regulatory overhaul could force big changes at financial firms. But one large lender, GE Capital, may find them especially painful.
Though General Electric's lending arm has $613 billion in assets and provides large amounts of credit to consumers and businesses, the vast majority of its operations don't currently fall under the purview of a bank regulator. If the administration's changes become law, GE Capital, because of its size and reach, would likely be classified as a systemically important firm. Such firms would operate under a stricter regulatory regime.
For GE Capital, such an adjustment would be tricky. Perhaps the biggest potential headache for GE is a demand that regulatory supervision be extended to any systemically important firm's parent company and other subsidiaries. Under the proposed rules, these firms would also face restrictions on "nonfinancial activity." Since GE would be unlikely to countenance limits on its industrial businesses, it might become necessary to split off GE Capital.
That would bring its own challenges. GE would have to ensure that GE Capital had sufficient capital and stable funding to satisfy regulators and investors. In a recent presentation, it said its Tier 1 "common" ratio was a respectable 6.9% at the end of 2008. However, since it isn't a bank, GE Capital doesn't provide a standard firm-wide Tier 1 capital ratio, the main regulatory measure. On this yardstick, it might fall below large banks.
When it comes to funding, the new regulations envision "rigorous liquidity requirements" for systemically important firms. One of GE Capital's weaknesses going into the credit crunch was its reliance on short-term funding, underscored by its continued use of government guarantees on shorter-term debt issues.
