Variable Interest Entities

9 Months Ended

Sep. 30, 2012

Variable Interest Entities [Abstract]

Variable Interest Entities

13.VARIABLE INTEREST ENTITIES

We securitize financial assets and arrange other forms of asset-backed financing in the ordinary course of business. The securitization transactions we engage in are similar to those used by many financial institutions. These securitization transactions serve as alternative funding sources for a variety of diversified lending and securities transactions. Historically, we have used both GECC-supported and third-party VIEs to execute off-balance sheet securitization transactions funded in the commercial paper and term markets. The largest group of VIEs that we are involved with are former Qualified Special Purpose Entities (QSPEs), which under guidance in effect through December 31, 2009 were excluded from the scope of consolidation standards based on their characteristics. 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 2012 or 2011.

In evaluating whether we have the power to direct the activities of a VIE that most significantly impact its economic performance, we consider the purpose for which the VIE was created, the importance of each of the activities in which it is engaged and our decision-making role, if any, in those activities that significantly determine the entity's economic performance as compared to other economic interest holders. This evaluation requires consideration of all facts and circumstances relevant to decision-making that affects the entity's future performance and the exercise of professional judgment in deciding which decision-making rights are most important.

In determining whether we have the right to receive benefits or the obligation to absorb losses that could potentially be significant to the VIE, we evaluate all of our economic interests in the entity, regardless of form (debt, equity, management and servicing fees, and other contractual arrangements). This evaluation considers all relevant factors of the entity's design, including: the entity's capital structure, contractual rights to earnings (losses), subordination of our interests relative to those of other investors, contingent payments, as well as other contractual arrangements that have potential to be economically significant. The evaluation of each of these factors in reaching a conclusion about the potential significance of our economic interests is a matter that requires the exercise of professional judgment.

Consolidated Variable Interest Entities

We consolidate VIEs because we have the power to direct the activities that significantly affect the VIEs 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 twoconsolidated entities that hold investment securities, the majority of which are investment grade, and were funded by the issuance of GICs. These entities were consolidated in 2003 and ceased issuing new investment contracts beginning in the first quarter of 2010. Since 2004, GECC has fully guaranteed repayment of these entities' GIC obligations. These obligations included conditions under which certain GIC 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. To the extent that amounts due were to exceed the ultimate value of proceeds realized from Trinity assets, GECC would be required to provide such excess amount. Following the April 3, 2012 Moody's downgrade of GECC's long-term credit ratings to A1, substantially all of these GICs became redeemable by the holders. In the secondquarter of 2012, holders of $1,981million of GICs redeemed their holdings.The redemption was funded primarily through advances from GECC. The remaining outstanding GICs will continue to be subject to the existing terms and maturities of their respective contracts. Following the redemption period, if the long-term credit ratings of GECC were to fall below AA-/A2 or the short-term credit ratings were to fall below A-1+/P-1, GECC could be required to provide up to $1,470 million as of September 30, 2012 to repay holders of Trinity GICs.

• Consolidated Securitization Entities (CSEs) comprise primarily our previously unconsolidated QSPEs that were consolidated on January 1, 2010 in connection with our adoption of ASU 2009-16 & 17. These entities were created to facilitate securitization of financial assets and other forms of asset-backed financing which serve as an alternative funding source by providing access to the commercial paper 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 light industrial equipment of $1,398 million of assets and $877million of liabilities; (2) other entities that are involved in power generating and leasing activities of $2,426 million of assets and $610million of liabilities; and (3) insurance entities that, among other lines of business, provide property and casualty and workers' compensation coverage for GE of $1,211 million of assets and $621million of liabilities.

The table below summarizes the assets and liabilities of consolidated VIEs described above.

				Consolidated Securitization Entities
				Credit									Trade
(In millions)	Trinity		(a)	Cards		(b)	Equipment		(b)	Real Estate		(c)	Receivables		Other		(d)	Total
September 30, 2012
Assets(e)
Financing receivables, net	$	0		$	22,133		$	12,066		$	2,921		$	1,830	$	1,832		$	40,782
Investment securities		3,733			0			0			0			0		1,065			4,798
Other assets		80			28			332			134			0		3,479			4,053
Total	$	3,813		$	22,161		$	12,398		$	3,055		$	1,830	$	6,376		$	49,633
Liabilities(e)
Borrowings	$	0		$	0		$	4		$	25		$	0	$	1,263		$	1,292
Non-recourse borrowings		0			16,050			9,705			2,936			1,579		0			30,270
Other liabilities		1,705			116			1			3			17		1,460			3,302
Total	$	1,705		$	16,166		$	9,710		$	2,964		$	1,596	$	2,723		$	34,864
December 31, 2011
Assets(e)
Financing receivables, net	$	0		$	19,229		$	10,523		$	3,521		$	1,614	$	2,973		$	37,860
Investment securities		4,289			0			0			0			0		1,031			5,320
Other assets		389			17			283			210			0		2,250			3,149
Total	$	4,678		$	19,246		$	10,806		$	3,731		$	1,614	$	6,254		$	46,329
Liabilities(e)
Borrowings	$	0		$	0		$	2		$	25		$	0	$	821		$	848
Non-recourse borrowings		0			14,184			8,166			3,659			1,769		980			28,758
Other liabilities		4,456			37			0			19			23		1,312			5,847
Total	$	4,456		$	14,221		$	8,168		$	3,703		$	1,792	$	3,113		$	35,453

• Excludes intercompany advances from GECC to Trinity, which are eliminated in consolidation of $2,616 million and $1,006 million at September 30, 2012 and December 31, 2011, 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 September 30, 2012, the amount of commingled cash owed to the CSEs and the amount owed to us by CSEs were $5,885 million and $5,751million, respectively.
• On October 1, 2012, we completed the sale of our Business Property business, which includes servicing rights for most of these CSEs. We will deconsolidate substantially all of these securitization entities in the fourth quarter of 2012 as we will no longer have the power to direct the activities of these entities.
• Includes $1,519million in other assets and $537million of borrowings at September 30, 2012 due to the consolidation of an entity involved in power generating activities.This entity was previously subject to a leveraged lease and we consolidated this entity in March 2012 following the execution of an agreement that gave us the power to direct activities of this entity.
• Asset amounts exclude intercompany receivables for cash collected on behalf of the entities by GE 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.

Revenues from services from our consolidated VIEs were $1,675 million and $1,475 million in the threemonths ended September 30, 2012 and 2011, respectively, and $4,914 million and $4,457 million in the nine months ended September 30, 2012 and 2011, respectively. Related expenses consisted primarily of provisions for losses of $414 million and $332 million in the three monthsended September 30, 2012 and 2011, respectively, and $784 million and $882million in the nine months ended September 30, 2012 and 2011, respectively, and interest of $97 million and $143million in the threemonthsended September 30, 2012 and 2011, respectively, and $344 million and $450 million in the nine months ended September 30, 2012 and 2011, 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.

The largest unconsolidated VIE with which we are involved is Penske Truck Leasing Co., L.P. (PTL), a joint venture and limited partnership formed in 1988 between Penske Truck Leasing Corporation (PTLC) and GE. PTLC is the sole general partner of PTL and an indirect wholly-owned subsidiary of Penske Corporation. PTL is engaged in truck leasing and support services, including full-service leasing, dedicated logistics support and contract maintenance programs, as well as rental operations serving commercial and consumer customers. Our direct and indirect interest in PTL is accounted for using the equity method. During the second quarter of 2012, PTL effected a recapitalization and subsequently acquired third-party financing which, through the third quarter of 2012, was used to repay $4,750 million of its outstanding debt owed to GECC. At September 30, 2012, our direct and indirect investment in PTL of $2,732 million primarily comprised partnership interests of $816 million and loans and advances of $1,880 million.

Our largest exposure to any single unconsolidated VIE at September 30, 2012is an investment in high quality senior secured debt of various middle-market companies ($4,792 million). Other significant unconsolidated VIEs include investments in real estate entities ($3,151 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 ($1,876 million). The vast majority of our other unconsolidated entities consist of passive investments in various asset-backed financing entities.

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. Our investments in unconsolidated VIEs at September 30, 2012 and December 31, 2011 follow.

	September 30, 2012						December 31, 2011
(In millions)	PTL		All other		Total		PTL		All other		Total
Other assets and investment
securities	$	2,732	$	8,273	$	11,005	$	7,038	$	6,954	$	13,992
Financing receivables – net		0		3,171		3,171		0		2,507		2,507
Total investments		2,732		11,444		14,176		7,038		9,461		16,499
Contractual obligations to fund
investments or guarantees		159		2,314		2,473		600		2,253		2,853
Revolving lines of credit		0		68		68		1,356		92		1,448
Total	$	2,891	$	13,826	$	16,717	$	8,994	$	11,806	$	20,800

In addition to the entities included in the table above, we also hold passive investments in RMBS, commercial mortgage-backed securities (CMBS) and asset-backed securities (ABS) issued 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.