GE unfairly linked with TARP association

— -- Q: What large debts does General Electric still owe the federal government and what does that mean for the stock?

A: Investors are still trying to make sense of all the acronyms and talk of bailouts from just a few years ago. And General Electric (GE) is often the target of such talk.

Investors, though, need to understand what GE really did during the crisis. There's a great bit of misinformation here, which will be set straight in this column. You suggest that GE took some sort of large loan from the government during the financial crisis. That's not true.

Neither GE nor GE Capital accepted any money from TARP, or Troubled Asset Relief Program, which was used to shore up the finances of many large banks.

GE Capital did use the FDIC's Temporary Liquidity Guarantee Program. This program, though, is widely misunderstood. GE Capital did not borrow from the U.S. government. Instead, GE Capital sold debt to the public and paid a fee to have its debt backstopped by the government. GE has since exited the program and paid the U.S. government $2.3 billion in fees for the temporary backstop. GE's participation in the program did not cost the government anything. In fact, it generated income for the U.S.' coffers.

With that said, during the financial crisis GE did borrow from Berkshire Hathaway, the investment company run by Warren Buffett, by selling $3 billion in preferred shares with a 10% annual dividend. It was a very lucrative move for Berkshire.

But that arrangement is coming to an end. On Sept. 13, GE notified Berkshire Hathaway of its intention to redeem the preferred shares for $3.3 billion. That includes the original principal plus a 10% redemption premium. The redemption was going to take place on Oct. 17, 2011.

GE has made strides to drop the financial crutches it leaned on during the financial crisis. That doesn't mean the stock is necessarily a winner for investors, as it has sunk about 10% this year. But, investors can at least erase these commonly held misconceptions from their minds when it comes to GE.

Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies and Fundamental Analysis for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com. Follow Matt on Twitter at: twitter.com/mattkrantz