Wednesday, September 09, 2009

The FDIC Contemplates Granting GE Capital Six Months Of Life Support

Per Bloomberg, the FDIC is contemplating extending TLGP another six months. As long-time readers of TILB understand, this is targeted specifically at GE and its subsidiary GE Capital, which has quietly been sucking at the government teet since last fall as hard as possible.

As a reminder, GE Capital has issued approximately 30% of the entire $320 BILLION of wrapped debt under the TLGP. This almost unimaginable reliance on federal subsidies for a business that has a market cap of nearly $160 billion is happening with virtually no mention from the mainstream media. One has to wonder what portion of GE's one hundred sixty billion dollar market cap relies on taxpayer subsidies and why equity owners of one of the world's largest, most storied and theoretically most diversified businesses need - much less deserve - that taxpayer gift.

And how does GE disclose its fundamental reliance on taxpayer handouts? You'll be pleased to know that it is clearly stated in its most recent 10-Q on page 24, Section 8 under the heading GECS Borrowings in footnotes (a) and (d). Very explicit. But, hey, what's $100 billion of sovereign loan guarantees really mean these days anyway?

...and so we return to today's announcement that the FDIC is contemplating extending the TLGP program for an additional six months. One company is by far the largest issuer and we know that its reliance on government wraps has not abated. So, when one interprets the TLGP news...well, we're not sayin', we're just sayin'...

Ironically, the Bloomberg article, while mentioning GE as an issuer under the program seems to focus on the fact the program is intended for "banks" but does not connect that neither GE nor GE Capital are banks. We may not know everything about GE, but we know one thing for sure: GE may own a tiny little bank in BFE, but GE ain't no bank. It certainly is not a bank that deserves nearly $100 billion in loan guarantees from We The People. We suppose if you are the FDIC and you know your insurance fund is already broke, you can be comforted by the fact that you've already failed, nobody cares, and you are playing with the house's money. What's a few extra billion of other people's money (like one hundred billion) between friends. Hey, it's not your money. Have fun! Get some hookers and blow while you're at it!

Sept. 9 (Bloomberg) -- The Federal Deposit Insurance Corp. proposed a six-month, emergency-only extension to its debt guarantee program as regulators move to wean companies from federal aid approved at the height of last year’s credit crisis.

The five-member FDIC board unanimously approved seeking comment on the extension, which would be limited to certain cases, during a meeting in Washington today. The FDIC now guarantees eligible debt issued before the scheduled Oct. 31 expiration by banks that must get agency approval and pay a fee.
Under the limited extension, designed to help the FDIC phase out the program, banks would have to apply to the board for permission to access the aid and show that they were unable to issue unguaranteed debt due to market disruptions or other emergency circumstances.

The FDIC had about $320 billion in outstanding debt guaranteed by the program as of July 31, from firms including Citigroup Inc. and General Electric Co. Regulators are weaning banks from U.S. backing by requiring them to issue unguaranteed debt before repaying Troubled Asset Relief Program funds and escaping restrictions attached to that aid.

Issuance of FDIC-guaranteed bonds has shrunk to $10.8 billion in the third quarter of this year from $130.2 billion in the first quarter and $34.7 billion in the second, according to data compiled by Bloomberg.[emphasis added]
We look forward to a FOIA request showing how GE is "unable to issue unguaranteed debt".

Green shoots.

HT: LB and BC