GE Sinks Over GE Capital Worries

[DogPoundPup]

Source: Wall Street Journal / Barrons

THE FINANCIAL STORM TODAY is engulfing General Electric (ticker: GE), whose shares are off $1.71 to $25.04, as investors worry about higher funding costs at GE Capital Services and asset-quality issues at the finance unit.

A key problem for GE is that GE Capital is an enormous borrower with some $540 billion of debt outstanding at the end of the second quarter. With GE Capital credit-default swaps trading at about 3 percentage points today, double recent levels, the company's financing costs may soon rise, squeezing profit margins.

There also have been some investor fears about GE Capital's commercial and residential mortgage exposure as well as the adequacy of its loan-loss reserves.

Reflecting investor fears, GE posted a bulletin on its Web site yesterday seeking to reassure investors about GE Capital's real-estate and mortgage operations, as well as capital adequacy. GE also sought to play down the recent widening in CDS spreads saying that GE Capital's "cash bond spreads are significantly tighter than our credit-default swap spreads." GE Capital said it has no need to raise external capital and it has an "unwavering commitment to maintaining" its Triple-A bond rating. GE may still have a Triple-A rating but its CDS spreads are consistent with a much lower rating.

Read more: http://online.barrons.com/article_email/SB122150160729637305-lMyQjAxMDI4MjExNTUxMDUxWj.html

[BeatleBoot]

1. GE is in massive Re-Organization and

I am pretty certain it exited from it's appliance manufacturing division.

Maybe the Mexicans are making too much money, now to build refrigerators.

[Faygo Kid]

2. O'Lielly will take complete credit for GE's woes, of course.

Anything to go after Keith.

[trthnd4jstc]

3. Geez! Are We in a Recession Yet?

The stupidities of the economic policy of the Republicans are fully coming into play.