GE gets green light to leave U.S.'s guarantee program

NEW YORK -- General Electric said Wednesday that it has begun to exit a program that allows companies to issue debt backed by the federal government, a tool the industrial and financial conglomerate used to raise money during the credit crunch.

The program has been a boon to the company since it was approved to take part in November. GE Capital has issued $51 billion in long-term debt with government backing, which has helped the company fund its 2009 target of $45 billion in debt issuance and about a third of its 2010 goal.

As a result of the agreement with the FDIC, GE Capital will stop issuing government-guaranteed short-term debt, also known as commercial paper. It will now be able to issue non-guaranteed long-term debt with maturities of 18 months to three years.

GE said the move was a sign that the credit markets are regaining some vigor. GE has issued $12 billion in debt outside of the program, including a $3 billion euro issue this week.

"This move is a positive step in returning the broader capital markets to normal functioning," said GE Treasurer Kathryn Cassidy.

GE Capital issues a broad range of loans for consumers and companies. Until recently, it accounted for about half of the conglomerate's overall profits.

But it has struggled during the financial crisis due to mounting defaults and losses on loans in areas such as credit cards, commercial real estate, heavy equipment and home-mortgages overseas. GE reported on Friday that GE Capital's second-quarter income fell 80%.

Due largely to GE Capital's problems, the company lost its top 'AAA' credit rating earlier this year, and analysts said GE Capital's rating would be much lower than the parent company's if the finance unit was a separate company.