GE Capital asks U.S. to lift "too big to fail" label

Mar 31, 2016, 10:58 AM EDT
GE logo.
(Source: Tim Miller Follow/flickr)

GE Capital asked the U.S. to lift its "too big to fail" label after its recent shrinking.

Reuters reports:

General Electric Co's (GE.N) GE Capital financing arm on Thursday asked the U.S. government to stop designating it as a "systemically important financial institution," a label for companies considered "too big to fail," now that it has less influence on the U.S. economy. GE Capital Chief Executive Officer Keith Sherin said in a statement that the unit had shrunk to the point where it no longer meets the criteria for the designation, which can trigger possible requirements for stricter oversight and holding more capital. The application came the day after a federal judge struck down the designation of MetLife Inc (MET.N), but GE Capital said the two events were unrelated. The company had said in October that it hoped to apply to the Financial Stability Oversight Council for "de-designation" in the first quarter.

USA Today notes:

Companies assigned too-big-to-fail status by the Financial Stability Oversight Council are subject to greater scrutiny by the Federal Reserve. The Dodd-Frank Act of 2010established the panel to monitor U.S. institutions to prevent the type of domino-effect financial collapse that occurred during the Great Recession, when crises at non-banks such as AIG undermined the economy. GE Capital announced in April 2015 that it would sell about $200 billion of its assets. It has already reached agreements to sell $161 billion, of which $138 billion in deals have been closed. The moves include an exit from consumer lending and leveraged lending, as well as substantial reductions in real estate debt and equity holdings and commercial paper. The company now holds about $265 billion in assets, down from $549 billion.

The Wall Street Journal writes:

Chief Executive Jeff Immelt said changed market conditions and new regulations had caused GE Capital’s returns to fall below its cost of capital. And investors had long urged Mr. Immelt to get out of the lending business, which nearly sunk the entire company during the financial crisis.