General Electric Co. sold about $16 billion of commercial paper through a Federal Reserve program to unlock credit markets frozen in September 2008, making up 2 percent of the central bank’s total purchases.
GE, whose GE Capital unit was the biggest U.S. issuer of commercial paper in 2008, said in October of that year that it planned to use the Commercial Paper Funding Facility to support the Fed’s efforts to make credit available at the height of the crisis. The program purchased a total of $738.3 billion, according to documents that the Fed released today.
Under the plan’s rules, GE could have issued as much as $98 billion, according to the company’s regulatory filing for 2008. The $16 billion was repaid as it came due in January and February 2009, the Fairfield, Connecticut-based company said. GE’s finance unit remained profitable throughout the crisis, helped in part by tax credits.
“Consistent with what we said at the time, we participated in the program to support investors’ need for liquidity during the financial crisis and to manage the company’s commercial paper maturity profile,” said Russell Wilkerson, a GE spokesman.
GE cut its outstanding balances of commercial paper to $41 billion at the end of this year’s third quarter from a peak of $101 billion in the fourth quarter of 2007 as Chief Executive Officer Jeffrey Immelt shrinks the finance unit’s assets and the percentage it contributes to the parent company’s total sales.
“All told, I’d say they have taken a prudent, if not modestly conservative, approach with short-term funding,” said Joel Levington, who follows GE for Brookfield Investment Management in New York.
Before today’s data release, required under the Dodd-Frank Act, GE finance-unit executives had testified to Congress that the company paid about $100 million in fees in addition to interest for using the Fed’s commercial paper program.
The plan was administered by the New York Fed, and prior to its Feb. 1 expiration, counted U.S. subsidiaries of European financial institutions among its largest users.
None of the debt purchased under the program defaulted, and the Fed earned $6.1 billion in interest income and usage fees from it, according to the central bank.
GE and GE Capital didn’t participate in the better-known Troubled Asset Relief Program, or TARP.
The company did get special permission in 2008 to issue debt under the Federal Deposit Insurance Corp.’s Temporary Liquidity Guarantee Program, which insured banks and finance company debt. GE borrowed $59.3 billion through that program, paying $2.3 billion in fees, according to its financial statements for 2009 filed with the Securities and Exchange Commission.
GE climbed 44 cents, or 2.8 percent, to $16.27 at 3:20 p.m. in New York Stock Exchange composite trading. The shares gained 4.6 percent this year before today, after dropping by more than half in 2008 and 6.6 percent in 2009.
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