Jeff Gerth of ProPublica and Brady Dennis of the Washington Post report that GE Capital, the banking arm of General Electric, has issued billions in loans that the Federal Deposit Insurance Coporation guarantees in its Temporary Liquidity Guarantee Program. The program started last October and it was strictly intended to guarantee lending for troubled banks but the rules were tweaked to include commerce/banking hybrid GE. Gerth’s and Dennis’s report is particularly relevant since Barack Obama’s proposed financial regulations involve forcing companies to make a choice of whether they want to be in banking or commerce.

Interestingly, though, while it may have been unfair to guarantee GE Capital’s loans and the FDIC was reluctant to do so, the loan guarantees are apparently working:

Despite those misgivings, there have been no defaults in the loan guarantee program. It has helped buoy confidence in the credit markets and enabled vital financial firms to raise capital even during the darkest days of the financial crisis. In addition, the program has raised more than $8 billion in fees.

The real injustice then might be that GE, the largest company in the world according to Forbes, used its power and influence to join the program while its smallest competitors could not:

One of GE’s competitors in business lending markets, CIT Group, a smaller company, has had a harder time raising cash. It has been unable to persuade the FDIC to allow it into the debt-guarantee program, at least in part because of its lower credit ratings. A recent Standard & Poor’s analysis cited CIT’s "inability to access TLGP" as a factor in the company’s declining financial condition.

Obama and Congress have to set new regulations that actually encourage competitive markets instead of enabling the GE’s of the world to become masters at manipulating the regulations.-MB

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