General Electric is using a loophole to get billions in government bailout funds while avoiding federal restrictions, including pay limits.
GE Capital, GE’s huge finance division, has borrowed $74 billion from the Temporary Liquidity Guarantee Program, or TLGP, more than any other company, The Washington Post reported.
Yet it avoids government stress tests, rules for limiting risks, and limits on executive compensation.
How? GE owns two small banking institutions in Utah, allowing GE to get both light regulations and government help.
Although GE Capital makes commercial loans, it isn’t classified as a bank and initially couldn’t participate in TLGP. GE convinced the government to tweak its rules to let the company use the program.
The proposed overhaul of financial regulations would close that loophole and ban industrial companies like GE from banking. That would force it to spin off GE Capital.
"We'd like to regulate companies according to what they do, rather than what they call themselves or how they charter themselves," Andrew Williams, a Treasury spokesman, told the Washington Post.
GE says it’s just playing by the rules, although it helped make those rules through government lobbying.
"We were accepted on the merits of our application," company spokesman Russell Wilkerson told The Post.
While not against financial reform, GE officials argue that the company should be allowed to keep its structure.
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