Variable Interest Entities

6 Months Ended

Jun. 30, 2014

Variable Interest Entities [Abstract]

Variable Interest Entities

12.VARIABLE INTEREST ENTITIES

We use variable interest entities primarily to securitize financial assets and arrange other forms of asset-backed financing in the ordinary course of business. Except as noted below, investors in these entities only have recourse to the assets owned by the entity and not to our general credit.We do not have implicit support arrangements with any VIE. We did not provide non-contractual support for previously transferred financing receivables to any VIE in 2014 or 2013.

Consolidated Variable Interest Entities

We consolidate VIEs because we have the power to direct the activities that significantly affect the VIE's economic performance, typically because of our role as either servicer or manager for the VIE. Our consolidated VIEs fall into three main groups, which are further described below:

• Trinity comprises two consolidated entities that hold investment securities, the majority of which are investment-grade, and were funded by the issuance of GICs. The GICs include conditions under which certain holders could require immediate repayment of their investment should the long-term credit ratings of GECC fall below AA-/Aa3 or the short-term credit ratings fall below A-1+/P-1. The outstanding GICs are subject to their scheduled maturities and individual terms, which may include provisions permitting redemption upon a downgrade of one or more of GECC's ratings, among other things, and are reported in investment contracts, insurance liabilities and insurance annuity benefits.

• Consolidated Securitization Entities (CSEs) were created to facilitate securitization of financial assets and other forms of asset-backed financing that serve as an alternative funding source by providing access to variable funding notes and term markets. The securitization transactions executed with these entities are similar to those used by many financial institutions and substantially all are non-recourse. We provide servicing for substantially all of the assets in these entities.

         The financing receivables in these entities have similar risks and characteristics to our other financing receivables and were underwritten to the same standard. Accordingly, the performance of these assets has been similar to our other financing receivables; however, the blended performance of the pools of receivables in these entities reflects the eligibility criteria that we apply to determine which receivables are selected for transfer. Contractually the cash flows from these financing receivables must first be used to pay third-party debt holders as well as other expenses of the entity. Excess cash flows are available to GECC. The creditors of these entities have no claim on other assets of GECC.

• Other remaining assets and liabilities of consolidated VIEs relate primarily to three categories of entities: (1) joint ventures that lease equipmentwith $1,604 million of assets and $707million of liabilities; (2) other entities that are involved in power generating and leasing activitieswith $711 million of assets and noliabilities; and (3) insurance entities that, among other lines of business, provide property and casualty and workers' compensation coverage for GEwith $1,234 million of assets and $575million of liabilities.

Assets and Liabilities of Consolidated VIEs

				Consolidated Securitization Entities
				Credit						Trade
(In millions)	Trinity		(a)	cards		(b)	Equipment		(b)	receivables		Other		Total
June 30, 2014
Assets(c)
Financing receivables, net	$	-		$	25,334		$	13,084		$	2,726	$	2,732	$	43,876
Investment securities		2,685			-			-			-		1,037		3,722
Other assets		15			732	(d)		669			2		1,748		3,166
Total	$	2,700		$	26,066		$	13,753		$	2,728	$	5,517	$	50,764
Liabilities(c)
Borrowings	$	-		$	-		$	-		$	-	$	563	$	563
Non-recourse borrowings		-			15,114			10,911			2,178		448		28,651
Other liabilities		1,446			338			393			32		1,292		3,501
Total	$	1,446		$	15,452		$	11,304		$	2,210	$	2,303	$	32,715
December 31, 2013
Assets(c)
Financing receivables, net	$	-		$	24,766		$	12,928		$	2,509	$	2,044	$	42,247
Investment securities		2,786			-			-			-		1,044		3,830
Other assets		213			20			557			1		1,563		2,354
Total	$	2,999		$	24,786		$	13,485		$	2,510	$	4,651	$	48,431
Liabilities(c)
Borrowings	$	-		$	-		$	-		$	-	$	597	$	597
Non-recourse borrowings		-			15,363			10,982			2,180		49		28,574
Other liabilities		1,482			228			248			25		1,235		3,218
Total	$	1,482		$	15,591		$	11,230		$	2,205	$	1,881	$	32,389

• Excluded intercompany advances from GECC to Trinity, which were eliminated in consolidation of $1,490 million and $1,837 million at June 30, 2014 and December 31, 2013, respectively.
• We provide servicing to the CSEs and are contractually permitted to commingle cash collected from customers on financing receivablessold to CSE investors with our own cash prior to payment to a CSE, provided our short-term credit rating does not fall below A-1/P-1. These CSEs also owe us amounts for purchased financial assets and scheduled interest and principal payments.At June 30, 2014 and December 31, 2013, the amountsof commingled cash owed to the CSEs were $3,074 million and $6,314 million, respectively, and the amounts owed to us by CSEs were $3,121million and $5,540 million, respectively.
• Asset amounts exclude intercompany receivables for cash collected on behalf of the entities by GECC as servicer, which are eliminated in consolidation. Such receivables provide the cash to repay the entities' liabilities. If these intercompany receivables were included in the table above, assets would be higher. In addition, other assets, borrowings and other liabilities exclude intercompany balances that are eliminated in consolidation.
• Receivables required to be classified as held-for-sale following third-party notice to terminate a private label credit card program and purchase the program receivables.

Revenues from services from our consolidated VIEs were $1,660 million and $1,669 million in the three months ended June 30, 2014 and 2013, respectively, and $3,293 million and $3,372 million in the six months ended June 30, 2014 and 2013, respectively. Related expenses consisted primarily of provisions for losses of $267 million and $175 million in the three months ended June 30, 2014 and 2013, respectively, and $568 million and $589 million in the six months ended June 30, 2014 and 2013, respectively, and interest of $88 million and $95 million in the three months ended June 30, 2014 and 2013, respectively, and $168 million and $184 million in the six months ended June 30, 2014 and 2013, respectively. These amounts do not include intercompany revenues and costs, principally fees and interest between GECC and the VIEs, which are eliminated in consolidation.

Investments in Unconsolidated Variable Interest Entities

Our involvement with unconsolidated VIEs consists of the following activities: assisting in the formation and financing of the entity; providing recourse and/or liquidity support; servicing the assets; and receiving variable fees for services provided. We are not required to consolidate these entities because the nature of our involvement with the activities of the VIEs does not give us power over decisions that significantly affect their economic performance.

Our largest exposure to any single unconsolidated VIE at June 30, 2014is a$8,018million investment in asset-backed securities issued by the Senior Secured Loan Program (“SSLP”), a fund that invests in high-quality senior secured debt of various middle-market companies. Other significant unconsolidated VIEs include investments in real estate entities ($2,124 million),which generally consist of passive limited partnership investments in tax-advantaged, multi-family real estate and investments in various European real estate entities; and exposures to joint ventures that purchase factored receivables ($2,387 million).

The classification of our variable interests in these entities in our financial statements is based on the nature of the entity and the type of investment we hold. Variable interests in partnerships and corporate entities are classified as either equity method or cost method investments. In the ordinary course of business, we also make investments in entities in which we are not the primary beneficiary but may hold a variable interest such as limited partner interests or mezzanine debt investments. These investments are classified in two captions in our financial statements: “Other assets” for investments accounted for under the equity method, and “Financing receivables – net” for debt financing provided to these entities.

Investments in Unconsolidated VIEs

(In millions)	June 30, 2014		December 31, 2013
Other assets and investment securities	$	9,463	$	9,089
Financing receivables – net		3,054		3,344
Total investments		12,517		12,433
Contractual obligations to fund investments or guarantees		2,658		2,731
Revolving lines of credit		32		31
Total	$	15,207	$	15,195

In addition to the entities included in the table above, we also hold passive investments in RMBS, CMBS and ABSissued by VIEs. Such investments were, by design, investment grade at issuance and held by a diverse group of investors. Further information about such investments is provided in Note 3.