Edgar Filing: GENERAL ELECTRIC CAPITAL CORP

gecc10q033110.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


	FORM 10-Q

(Mark One)
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
	THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010
OR
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________to ___________
_____________________________ Commission file number 001-06461 _____________________________

GENERAL ELECTRIC CAPITAL CORPORATION (Exact name of registrant as specified in its charter)

Delaware		13-1500700
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

901 Main Avenue, Norwalk, Connecticut		06851-1168
(Address of principal executive offices)		(Zip Code)

(Registrant’s telephone number, including area code) (203) 840-6300

(Former name, former address and former fiscal year,

if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨

Accelerated filer ¨

Non-accelerated filer þ

Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

At May 5, 2010, 3,985,404 shares of voting common stock, which constitute all of the outstanding common equity, with a par value of $14 per share were outstanding.

REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM 10-Q WITH THE REDUCED DISCLOSURE FORMAT.

(1)

General Electric Capital Corporation

Part I – Financial Information		Page

Item 1.	Financial Statements
	Condensed Statement of Current and Retained Earnings	3
	Condensed Statement of Financial Position	4
	Condensed Statement of Cash Flows	5
	Notes to Condensed, Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48
Item 4.	Controls and Procedures	49

Part II – Other Information

Item 1.	Legal Proceedings	49
Item 6.	Exhibits	50
Signatures		51

Forward-Looking Statements

This document contains “forward-looking statements”- that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include: the severity and duration of current economic and financial conditions, including volatility in interest and exchange rates, commodity and equity prices and the value of financial assets; the impact of U.S. and foreign government programs to restore liquidity and stimulate national and global economies; the impact of conditions in the financial and credit markets on the availability and cost of our funding and on our ability to reduce our asset levels as planned; the impact of conditions in the housing market and unemployment rates on the level of commercial and consumer credit defaults; our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so; the soundness of other financial institutions with which we do business; the level of demand and financial performance of the major industries we serve, including, without limitation, air transportation, real estate and healthcare; the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, including the impact of proposed financial services regulation; strategic actions, including acquisitions and dispositions and our success in integrating acquired businesses; and numerous other matters of national, regional and global scale, including those of a political, economic, business and competitive nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.

(2)

Part I. Financial Information

Item 1. Financial Statements.

General Electric Capital Corporation and consolidated affiliates

Condensed Statement of Current and Retained Earnings

(Unaudited)


	Three months ended
	March 31
(In millions)		2010		2009

Revenues
Revenues from services (Note 9)	$	12,050	$	13,502
Sales of goods		281		273
Total revenues		12,331		13,775

Costs and expenses
Interest		3,929		5,113
Operating and administrative		3,677		3,902
Cost of goods sold		265		224
Investment contracts, insurance losses and insurance annuity benefits		35		73
Provision for losses on financing receivables		2,263		2,336
Depreciation and amortization		1,924		2,180
Total costs and expenses		12,093		13,828

Earnings (loss) from continuing operations before income taxes		238		(53)
Benefit for income taxes		372		1,128

Earnings from continuing operations		610		1,075
Loss from discontinued operations, net of taxes (Note 2)		(387)		(3)
Net earnings		223		1,072
Less net earnings attributable to noncontrolling interests		3		46
Net earnings attributable to GECC		220		1,026
Dividends		(1)		(16)
Retained earnings at beginning of period		45,618		45,453
Retained earnings at end of period	$	45,837	$	46,463

Amounts attributable to GECC
Earnings from continuing operations	$	607	$	1,029
Loss from discontinued operations, net of taxes		(387)		(3)
Net earnings attributable to GECC	$	220	$	1,026

During the three months ended March 31, 2010, we recorded pre-tax, other-than-temporary impairments of $152 million, of which $73 million was recorded through earnings and $79 million was recorded in Accumulated Other Comprehensive Income.

See accompanying notes.

(3)

General Electric Capital Corporation and consolidated affiliates

Condensed Statement of Financial Position

	March 31,		December 31,
(In millions)	2010		2009
		(Unaudited)
Assets
Cash and equivalents	$	59,614	$	63,696
Investment securities (Note 3)		16,237		27,509
Inventories		77		71
Financing receivables – net (Note 4)		356,185		336,926
Other receivables		13,917		17,876
Property, plant and equipment, less accumulated amortization of $26,387
and $26,307		55,905		56,695
Goodwill (Note 5)		28,499		28,961
Other intangible assets – net (Note 5)		2,786		3,018
Other assets		83,043		86,355
Assets of businesses held for sale		949		125
Assets of discontinued operations (Note 2)		1,034		1,470
Total assets(a)	$	618,246	$	622,702

Liabilities and equity
Short-term borrowings (Note 6)	$	119,568	$	128,329
Accounts payable		8,019		11,162
Non-recourse borrowings of consolidated securitization entities (Note 6)		36,780		3,883
Bank deposits (Note 6)		38,310		38,923
Long-term borrowings (Note 6)		307,032		326,321
Investment contracts, insurance liabilities and insurance annuity benefits		8,389		8,687
Other liabilities		19,601		22,736
Deferred income taxes		5,908		5,831
Liabilities of businesses held for sale		30		55
Liabilities of discontinued operations (Note 2)		801		853
Total liabilities(a)		544,438		546,780

Capital stock		56		56
Accumulated other comprehensive income – net(b)
Investment securities		(743)		(676)
Currency translation adjustments		(132)		1,228
Cash flow hedges		(1,403)		(1,816)
Benefit plans		(392)		(434)
Additional paid-in capital		28,427		28,431
Retained earnings		45,837		46,929
Total GECC shareowner's equity		71,650		73,718
Noncontrolling interests(c)		2,158		2,204
Total equity		73,808		75,922
Total liabilities and equity	$	618,246	$	622,702

(a)	Assets and liabilities of consolidated variable interest entities (VIEs) were $55,115 million and $47,504 million, respectively, at March 31, 2010. Substantially all of the assets of the VIEs can only be used to settle obligations of those VIEs. See Note 12.

(b)	The sum of accumulated other comprehensive income − net was $(2,670) million and $(1,698) million at March 31, 2010 and December 31, 2009, respectively.

(c)	Included accumulated other comprehensive income attributable to noncontrolling interests of $(182) million and $(191) million at March 31, 2010 and December 31, 2009, respectively.

See accompanying notes.

(4)

General Electric Capital Corporation and consolidated affiliates

Condensed Statement of Cash Flows

(Unaudited)

	Three months ended March 31
(In millions)		2010		2009
Cash flows – operating activities
Net earnings	$	223	$	1,072
Less net earnings attributable to noncontrolling interests		3		46
Net earnings attributable to GECC		220		1,026
Loss from discontinued operations		387		3
Adjustments to reconcile net earnings attributable to GECC
to cash provided from operating activities
Depreciation and amortization of property, plant and equipment		1,924		2,180
Increase (decrease) in accounts payable		2,135		(1,537)
Provision for losses on financing receivables		2,263		2,336
All other operating activities		(1,445)		(7,771)
Cash from (used for) operating activities – continuing operations		5,484		(3,763)
Cash from (used for) operating activities – discontinued operations		(67)		(28)
Cash from (used for) operating activities		5,417		(3,791)

Cash flows – investing activities
Additions to property, plant and equipment		(857)		(1,896)
Dispositions of property, plant and equipment		1,577		1,107
Increase in loans to customers		(74,230)		(51,129)
Principal collections from customers – loans		80,534		64,629
Investment in equipment for financing leases		(2,124)		(2,503)
Principal collections from customers – financing leases		4,551		4,474
Net change in credit card receivables		2,609		2,491
Proceeds from principal business dispositions		–		8,846
Payments for principal businesses purchased		–		(6,822)
All other investing activities		6,747		(1,014)
Cash from (used for) investing activities – continuing operations		18,807		18,183
Cash from (used for) investing activities – discontinued operations		7		30
Cash from (used for) investing activities		18,814		18,213

Cash flows – financing activities
Net increase (decrease) in borrowings (maturities of 90 days or less)		(3,374)		(16,014)
Net increase (decrease) in bank deposits		(613)		(3,336)
Newly issued debt (maturities longer than 90 days)
Short-term (91 to 365 days)		4,944		1,031
Long-term (longer than one year)		10,970		29,041
Non-recourse, leveraged lease		–		–
Repayments and other debt reductions (maturities longer than 90 days)
Short-term (91 to 365 days)		(38,684)		(23,491)
Long-term (longer than one year)		(472)		(1,812)
Non-recourse, leveraged lease		(351)		(395)
Dividends paid to shareowner		–		–
Capital contribution and share issuance		–		8,750
All other financing activities		(296)		(487)
Cash from (used for) financing activities – continuing operations		(27,876)		(6,713)
Cash from (used for) financing activities – discontinued operations		–		–
Cash from (used for) financing activities		(27,876)		(6,713)

Effect of currency exchange rate changes on cash and equivalents		(497)		(147)

Increase (decrease) in cash and equivalents		(4,142)		7,562
Cash and equivalents at beginning of year		63,880		36,605
Cash and equivalents at March 31		59,738		44,167
Less cash and equivalents of discontinued operations at March 31		124		182
Cash and equivalents of continuing operations at March 31	$	59,614	$	43,985

See accompanying notes.

(5)

Notes to Condensed, Consolidated Financial Statements (Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

All of the outstanding common stock of General Electric Capital Corporation (GECC) is owned by General Electric Capital Services, Inc. (GECS), all of whose common stock is owned by General Electric Company (GE Company or GE). Our financial statements consolidate all of our affiliates – companies that we control and in which we hold a majority voting interest. We also consolidate the economic interests we hold in certain businesses within companies in which we hold a voting equity interest and are majority owned by our ultimate parent, but which we have agreed to actively manage and control. See Note 1 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2009 (2009 Form 10-K), which discusses our consolidation and financial statement presentation. GECC includes Commercial Lending and Leasing (CLL), Consumer, Real Estate, Energy Financial Services and GE Capital Aviation Services (GECAS).

Effective January 1, 2010, GE expanded the GE Capital Finance segment to include all of the continuing operations of GECC and renamed it GE Capital. In addition, the Transportation Financial Services business, previously reported in GECAS, was included in CLL and our Consumer business in Italy, previously reported in Consumer, was included in CLL. Details of total revenues and segment profit by operating segment can be found on page 34 of this report. We have reclassified certain prior-period amounts to conform to the current-period presentation. Unless otherwise indicated, information in these notes to condensed, consolidated financial statements relates to continuing operations.

In connection with this reorganization, net financing and corporate assets of $3,746 million previously managed by the GE Capital Finance segment (but owned by GECS) were transferred to GECC on January 1, 2010. In addition, in order to align substantially all of GE’s insurance operations under GECS, GECC transferred net assets related to our run-off insurance operations of $690 million to GECS. These non-cash transfers were recorded at their carrying values and the net difference was recorded as a reduction in an intercompany payable between GECS and GECC. The financial statements of prior periods have been restated as if these transfers had occurred at the beginning of the earliest period presented. Combined prior period financial statements resulting from this restatement are referred to as consolidated in these financial statements. See Exhibit 99(b).

In the first quarter of 2010, we have included a separate line on the statement of cash flows for the effect of currency exchange rate changes on cash and equivalents. We had previously included the effect of currency exchange rate changes on cash and equivalents in “All other investing activities”, as the effect was insignificant.

Accounting Changes

On January 1, 2010, we adopted Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) 2009-16 and ASU 2009-17, amendments to Accounting Standards Codification (ASC) 860, Transfers and Servicing, and ASC 810, Consolidation, respectively (ASU 2009-16 & 17). ASU 2009-16 eliminates the Qualified Special Purpose Entity (QSPE) concept, and ASU 2009-17 requires that all such entities be evaluated for consolidation as Variable Interest Entities (VIEs). Adoption of these amendments resulted in the consolidation of all of our sponsored QSPEs. In addition, we consolidated assets of VIEs related to direct investments in entities that hold loans and fixed income securities, and a small number of companies to which we have extended loans in the ordinary course of business and subsequently were subject to a troubled debt restructuring (TDR).

We consolidated the assets and liabilities of these entities at amounts at which they would have been reported in our financial statements had we always consolidated them. We also deconsolidated certain entities where we did not meet the definition of the primary beneficiary under the revised guidance; however the effect was insignificant. The incremental effect on total assets and liabilities, net of our investment in these entities, was an increase of $30,917 million and $32,359 million, respectively. The net reduction of total equity (including noncontrolling interests) was $1,442 million, principally related to the reversal of previously recognized securitization gains as a cumulative effect adjustment to retained earnings. See Note 12 for additional information.

(6)

The amended guidance on ASC 860 changed existing derecognition criteria in a manner that significantly narrows the types of transactions that will qualify as sales. The revised criteria apply to transfers of financial assets occurring after December 31, 2009.

Interim Period Presentation

The condensed, consolidated financial statements and notes thereto are unaudited. These statements include all adjustments (consisting of normal recurring accruals) that we considered necessary to present a fair statement of our results of operations, financial position and cash flows. The results reported in these condensed, consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. It is suggested that these condensed, consolidated financial statements be read in conjunction with the financial statements and notes thereto included in our 2009 Form 10-K. We label our quarterly information using a calendar convention, that is, first quarter is labeled as ending on March 31, second quarter as ending on June 30, and third quarter as ending on September 30. It is our longstanding practice to establish interim quarterly closing dates using a fiscal calendar, which requires our businesses to close their books on either a Saturday or Sunday, depending on the business. The effects of this practice are modest and only exist within a reporting year. The fiscal closing calendar from 1993 through 2013 is available on our website, www.ge.com/secreports.

2. ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE AND DISCONTINUED OPERATIONS

Assets and Liabilities of Businesses Held for Sale

On February 18, 2010, we committed to sell our Consumer businesses in Hong Kong to Standard Chartered Bank. Assets of $871 million and liabilities of $6 million were classified as held for sale at March 31, 2010.

Discontinued Operations

Discontinued operations comprised GE Money Japan (our Japanese personal loan business, Lake, and our Japanese mortgage and card businesses, excluding our investment in GE Nissen Credit Co., Ltd.) and our U.S. mortgage business (WMC). Associated results of operations, financial position and cash flows are separately reported as discontinued operations for all periods presented.

Total revenues from discontinued operations were $(1) million and $(6) million in the first quarters of 2010 and 2009, respectively. In total, loss from discontinued operations, net of taxes, were $387 million and $3 million, respectively, and reflected loss from operations, net of taxes, of $6 million and $7 million, respectively, and gain (loss) from disposal, net of taxes, of $(381) million and $4 million, respectively. During the first quarter of 2010, we recorded incremental reserves related to the 2008 disposal of GE Money Japan.

Assets of discontinued operations were $1,034 million and $1,470 million at March 31, 2010 and December 31, 2009, respectively, and primarily comprised a deferred tax asset for a loss carryforward, which expires in 2015, related to the sale of our GE Money Japan business. Liabilities of discontinued operations were $801 million and $853 million at March 31, 2010 and December 31, 2009, respectively. During the first quarter of 2010, we recorded an incremental reserve of $380 million related to interest refund claims on the 2008 sale of GE Money Japan. We also reduced tax reserves $325 million related to resolution of an uncertain tax position in Japan, but were required to record an offsetting valuation allowance on our deferred tax asset in Japan.

GE Money Japan

During the third quarter of 2007, we committed to a plan to sell Lake upon determining that, despite restructuring, Japanese regulatory limits for interest charges on unsecured personal loans did not permit us to earn an acceptable return. During the third quarter of 2008, we completed the sale of GE Money Japan, which included Lake, along with our Japanese mortgage and card businesses, excluding our investment in GE Nissen Credit Co., Ltd. As a result, we recognized an after-tax loss of $908 million in 2007 and an incremental loss in 2008 of $361 million. In connection with the sale, we reduced the proceeds on the sale for estimated interest refund claims in excess of the statutory interest rate. Proceeds from the sale may be increased or decreased based on the actual claims experienced in accordance with loss-sharing terms specified in the agreement, with claims in excess of approximately $3,000 million remaining our responsibility.

(7)

We update our estimate of our share of expected losses quarterly. We recorded a reserve of $132 million in the second quarter of 2009 for our estimated share of incremental losses under the loss-sharing provisions of the agreement based on our experience at that time. In the last several months, our overall claims experience has developed unfavorably. While the number of new claims continues to decline, claims severity has increased. In addition, there are Japanese legislative and regulatory changes that may be affecting excess interest refund claims. During the first quarter of 2010, we accrued an additional $380 million of reserves for these claims. The amount of these reserves is based on analyses of recent and historical claims experience, pending and estimated future excess interest refund requests, the estimated percentage of customers who present valid requests, and our estimated payments related to those requests. Uncertainties around the impact of laws and regulations, challenging economic conditions, the liquidating status of the underlying book of business and the effect of our mitigation efforts make it difficult to develop a meaningful estimate of the aggregate possible claims exposure. Recent trends, including the effect of governmental actions, may continue to have an adverse effect on claims development. We will continue to review our estimated exposure quarterly, and make adjustments if required.

GE Money Japan revenues from discontinued operations were an insignificant amount and $1 million in the first quarters of 2010 and 2009, respectively. In total, GE Money Japan earnings (losses) from discontinued operations, net of taxes, were $(383) million and $4 million in the first quarters of 2010 and 2009, respectively.

WMC

During the fourth quarter of 2007, we completed the sale of WMC, our U.S. mortgage business. WMC revenues from discontinued operations were $(1) million and $(7) million in the first quarters of 2010 and 2009, respectively. In total, WMC’s losses from discontinued operations, net of taxes, were $4 million and $6 million in the first quarters of 2010 and 2009, respectively.

3. INVESTMENT SECURITIES

The vast majority of our investment securities are classified as available-for-sale and comprise mainly investment-grade debt securities supporting obligations to holders of guaranteed investment contracts (GICs) in Trinity, which ceased issuing new investment contracts beginning in the first quarter of 2010, and investment securities held at our global banks.

(8)

	At
	March 31, 2010								December 31, 2009
			Gross		Gross						Gross		Gross
	Amortized		unrealized		unrealized		Estimated		Amortized		unrealized		unrealized		Estimated
(In millions)	cost		gains		losses		fair value		cost		gains		losses		fair value

Debt
U.S. corporate(a)	$	4,120	$	81	$	(170)	$	4,031	$	5,215	$	83	$	(236)	$	5,062
State and municipal		880		5		(189)		696		887		3		(216)		674
Residential mortgage-backed(b)		2,683		21		(543)		2,161		2,999		21		(722)		2,298
Commercial mortgage-backed		1,643		16		(231)		1,428		1,599		5		(302)		1,302
Asset-backed		2,394		53		(264)		2,183		2,468		29		(298)		2,199
Corporate – non-U.S.		1,718		35		(78)		1,675		994		18		(26)		986
Government – non-U.S.		1,888		15		(33)		1,870		2,461		15		(25)		2,451
U.S. government and
federal agency		642		1		–		643		1,865		-		-		1,865
Retained interests(c)		62		3		(22)		43		8,479		392		(40)		8,831
Equity
Available-for-sale		950		145		(14)		1,081		897		227		(3)		1,121
Trading		426		–		–		426		720		-		-		720
Total	$	17,406	$	375	$	(1,544)	$	16,237	$	28,584	$	793	$	(1,868)	$	27,509

(a)	Included $65 million of U.S corporate debt securities at March 31, 2010, related to our adoption of ASU 2009-16 & 17 on January 1, 2010.

(b)	Substantially collateralized by U.S. mortgages.

(c)	Included $1,918 million of retained interests at December 31, 2009 accounted for at fair value in accordance with ASC 815, Derivatives and Hedging. See Note 12.

The fair value of investment securities decreased to $16,237 million at March 31, 2010, from $27,509 million at December 31, 2009, primarily driven by a decrease in retained interests as a result of our adoption of ASU 2009 -16 & 17 and maturities, partially offset by improved market conditions.

(9)

The following tables present the estimated fair values and gross unrealized losses of our available-for-sale investment securities.

	In loss position for
	Less than 12 months				12 months or more
			Gross				Gross
	Estimated		unrealized		Estimated		unrealized
(In millions)	fair value		losses		fair value		losses

March 31, 2010
Debt
U.S. corporate	$	858	$	(6)	$	883	$	(164)
State and municipal		94		(9)		577		(180)
Residential mortgage-backed		67		(5)		1,357		(538)
Commercial mortgage-backed		39		(3)		1,032		(228)
Asset-backed		62		(17)		1,229		(247)
Corporate – non-U.S.		219		(32)		360		(46)
Government – non-U.S.		421		(4)		176		(29)
U.S. government and federal agency		–		–		–		–
Retained interests		–		–		15		(22)
Equity		43		(13)		4		(1)
Total	$	1,803	$	(89)	$	5,633	$	(1,455)

December 31, 2009
Debt
U.S. corporate	$	611	$	(20)	$	1,365	$	(216)
State and municipal		237		(120)		421		(96)
Residential mortgage-backed		74		(4)		1,561		(718)
Commercial mortgage-backed		–		–		1,015		(302)
Asset-backed		68		(7)		1,312		(291)
Corporate – non-U.S.		310		(14)		346		(12)
Government – non-U.S.		370		(3)		195		(22)
U.S. government and federal agency		–		–		–		–
Retained interests		208		(16)		27		(24)
Equity		23		(1)		8		(2)
Total	$	1,901	$	(185)	$	6,250	$	(1,683)

We adopted amendments to ASC 320 and recorded a cumulative effect adjustment to increase retained earnings as of April 1, 2009, of $58 million.

We regularly review investment securities for impairment using both qualitative and quantitative criteria. We presently do not intend to sell our debt securities and believe that it is not more likely than not that we will be required to sell these securities that are in an unrealized loss position before recovery of our amortized cost. We believe that the unrealized loss associated with our equity securities will be recovered within the foreseeable future. For additional information regarding our methods for determining the fair value of our investment securities, see Note 3 to the consolidated financial statements in our 2009 Form 10-K.

During the first quarter of 2010, we recorded pre-tax, other-than-temporary impairments of $152 million, of which $73 million was recorded through earnings and $79 million was recorded in accumulated other comprehensive income (AOCI). At January 1, 2010, cumulative impairments recognized in earnings associated with debt securities still held were $140 million. Subsequent to January 1, 2010, we recognized first time impairments of $55 million and incremental charges on previously impaired securities of $17 million. These amounts included $13 million related to securities that were subsequently sold.

During the first quarter of 2009, we recognized other-than-temporary impairments of $163 million. Of the $163 million, $33 million was reclassified to retained earnings at April 1, 2009, as a result of the amendments to ASC 320, Investments – Debt and Equity Securities.

(10)

Contractual Maturities of our Investment in Available-for-Sale Debt Securities (Excluding Mortgage-Backed and Asset-Backed Securities)

	Amortized		Estimated
(In millions)	cost		fair value

Due in
2010	$	2,997	$	3,007
2011-2014		3,266		3,308
2015-2019		1,835		1,639
2020 and later		1,150		961

We expect actual maturities to differ from contractual maturities because borrowers have the right to call or prepay certain obligations.

Supplemental information about gross realized gains and losses on available-for-sale investment securities follows.

	Three months ended March 31
(In millions)	2010		2009

Gains	$	81	$	8
Losses, including impairments		(74)		(169)
Net	$	7	$	(161)

Although we generally do not have the intent to sell any specific securities at the end of the period, in the ordinary course of managing our investment securities portfolio, we may sell securities prior to their maturities for a variety of reasons, including diversification, credit quality, yield and liquidity requirements and the funding of claims and obligations to policyholders. In some of our bank subsidiaries, we maintain a certain level of purchases and sales volume principally of non-U.S. government debt securities. In these situations, fair value approximates carrying value for these securities.

Proceeds from investment securities sales and early redemptions by the issuer totaled $3,752 million and $1,965 million in the first quarters of 2010 and 2009, respectively, principally from the sales of short-term securities in our bank subsidiaries.

We recognized net pre-tax gains on trading securities of $15 million and $40 million in the first quarters of 2010 and 2009, respectively.

4. FINANCING RECEIVABLES AND ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES

Financing receivables - net, consisted of the following.

	At
	March 31,		January 1,		December 31,
(In millions)	2010		2010(a)		2009

Loans, net of deferred income	$	313,792	$	331,710	$	290,586
Investment in financing leases, net of deferred income		51,927		55,209		54,445
		365,719		386,919		345,031
Less allowance for losses		(9,534)		(9,805)		(8,105)
Financing receivables – net(b)	$	356,185	$	377,114	$	336,926

(a)	Reflects the effects of our adoption of ASU 2009-16 & 17 on January 1, 2010.

(b)	Financing receivables at March 31, 2010 and December 31, 2009 included $1,911 million and $2,704 million, respectively, relating to loans that had been acquired in a transfer but have been subject to credit deterioration since origination per ASC 310, Receivables.

(11)

Effective January 1, 2009, loans acquired in a business acquisition are recorded at fair value, which incorporates our estimate at the acquisition date of the credit losses over the remaining life of the portfolio. As a result, the allowance for loan losses is not carried over at acquisition. This may result in lower reserve coverage ratios prospectively. Details of financing receivables – net follow.

	At
	March 31,		January 1,		December 31,
(In millions)	2010		2010(a)		2009

CLL(b)
Americas	$	96,553	$	99,666	$	87,496
Europe		39,980		43,403		41,455
Asia		12,664		13,159		13,202
Other		2,791		2,836		2,836
		151,988		159,064		144,989
Consumer(b)
Non-U.S. residential mortgages		52,722		58,345		58,345
Non-U.S. installment and revolving credit		24,256		24,976		24,976
U.S. installment and revolving credit		43,330		47,171		23,190
Non-U.S. auto		12,025		13,344		13,344
Other		10,898		11,688		11,688
		143,231		155,524		131,543

Real Estate		47,586		48,673		44,841

Energy Financial Services		7,854		7,790		7,790

GECAS(b)		12,615		13,254		13,254

Other(c)		2,445		2,614		2,614
		365,719		386,919		345,031
Less allowance for losses		(9,534)		(9,805)		(8,105)
Total	$	356,185	$	377,114	$	336,926

(a)	Reflects the effects of our adoption of ASU 2009-16 &17 on January 1, 2010.

(b)	During the first quarter of 2010, we transferred the Transportation Financial Services business from GECAS to CLL and the Consumer business in Italy from Consumer to CLL. Prior-period amounts were reclassified to conform to the current-period presentation.

(c)	Consisted of loans and financing leases related to certain consolidated, liquidating securitization entities.

(12)

Individually impaired loans are defined by U.S. generally accepted accounting principles (GAAP) as larger balance or restructured loans for which it is probable that the lender will be unable to collect all amounts due according to original contractual terms of the loan agreement. The vast majority of our consumer and a portion of our CLL nonearning receivables are excluded from this definition, as they represent smaller balance homogeneous loans that we evaluate collectively by portfolio for impairment. An analysis of impaired loans and specific reserves follows.

	At
	March 31,		January 1,		December 31,
(In millions)	2010		2010(a)		2009

Loans requiring allowance for losses	$	10,403	$	9,541	$	9,145
Loans expected to be fully recoverable		3,928		3,914		3,741
Total impaired loans	$	14,331	$	13,455	$	12,886

Allowance for losses (specific reserves)	$	2,675	$	2,376	$	2,331
Average investment during the period		13,580		(c)		8,493
Interest income earned while impaired(b)		96		(c)		227

(a)	Reflects the effects of our adoption of ASU 2009-16 &17 on January 1, 2010.

(b)	Recognized principally on cash basis.

(c)	Not applicable.

Impaired loans increased by $876 million from January 1, 2010, to March 31, 2010, primarily relating to increases at Real Estate. Impaired loans consolidated as a result of our adoption of ASU 2009-16 & 17 primarily related to our Consumer business. We regularly review our Real Estate loans for impairment using both quantitative and qualitative factors, such as debt service coverage and loan-to-value ratios. We classify Real Estate loans as impaired when the most recent valuation reflects a projected loan-to-value ratio at maturity in excess of 100%, even if the loan is currently paying in accordance with contractual terms. The increase in impaired loans and related specific reserves at Real Estate reflects our current estimate of collateral values of the underlying properties, and our estimate of loans which are not past due, but for which it is probable that we will be unable to collect the full principal balance at maturity due to a decline in the underlying value of the collateral. Of our $7,479 million impaired loans at Real Estate at March 31, 2010, $5,191 million are currently paying in accordance with the contractual terms of the loan. Impaired loans at CLL primarily represent senior secured lending positions.

Our loss mitigation strategy intends to minimize economic loss and, at times, can result in rate reductions, principal forgiveness, extensions, forbearance or other actions, which may cause the related loan to be classified as a TDR and included in impaired loans. As of March 31, 2010, TDRs included in impaired loans were $4,324 million, primarily relating to Real Estate ($1,641 million), Consumer ($1,355 million) and CLL ($1,265 million). TDRs consolidated as a result of our adoption of ASU 2009-16 & 17 primarily related to our Consumer business ($364 million).

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Allowance for Losses on Financing Receivables

	Balance		Adoption of			Balance		Provision								Balance
	December 31,		ASU 2009 -			January 1,		charged to				Gross				March 31,
(In millions)	2009		16 & 17		(a)	2010		operations		Other(b)		write-offs		Recoveries		2010

CLL(c)
Americas	$	1,179	$	66		$	1,245	$	325	$	(4)	$	(282)	$	35	$	1,319
Europe		575		–			575		72		(31)		(147)		15		484
Asia		244		(10)			234		50		(2)		(50)		4		236
Other		11		–			11		1		–		–		–		12

Consumer(c)
Non-U.S. residential
mortgages		949		–			949		108		(66)		(105)		27		913
Non-U.S. installment
and revolving credit		1,181		–			1,181		354		(7)		(543)		154		1,139
U.S. installment and
revolving credit		1,698		1,602			3,300		939		–		(1,249)		135		3,125
Non-U.S. auto		308		–			308		43		(10)		(98)		51		294
Other		300		–			300		107		(8)		(110)		19		308

Real Estate		1,494		42			1,536		211		(2)		(189)		1		1,557

Energy Financial
Services		28		–			28		19		–		–		–		47

GECAS(c)		104		–			104		21		–		(71)		–		54

Other		34		–			34		13		1		(2)		–		46
Total	$	8,105	$	1,700		$	9,805	$	2,263	$	(129)	$	(2,846)	$	441	$	9,534

(a)	Reflects the effects of our adoption of ASU 2009-16 & 17 on January 1, 2010.

(b)	Other primarily included the effects of currency exchange.

(c)	During the first quarter of 2010, we transferred the Transportation Financial Services business from GECAS to CLL and the Consumer business in Italy from Consumer to CLL. Prior-period amounts were reclassified to conform to the current-period presentation.

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	Balance		Provision								Balance
	January 1,		charged to				Gross				March 31,
(In millions)	2009		operations		Other(a)		write-offs		Recoveries		2009

CLL(b)
Americas	$	843	$	271	$	(9)	$	(201)	$	16	$	920
Europe		311		123		(12)		(82)		14		354
Asia		163		50		(11)		(28)		4		178
Other		4		–		3		–		–		7

Consumer(b)
Non-U.S. residential
mortgages		381		236		(36)		(80)		23		524
Non-U.S. installment
and revolving credit		1,049		427		(49)		(491)		97		1,033
U.S. installment and
revolving credit		1,700		905		(229)		(695)		37		1,718
Non-U.S. auto		203		117		8		(141)		42		229
Other		226		74		(36)		(76)		11		199

Real Estate		301		110		(6)		(9)		–		396

Energy Financial
Services		58		10		(2)		–		–		66

GECAS(b)		58		–		–		–		–		58

Other		28		13		1		(10)		–		32
Total	$	5,325	$	2,336	$	(378)	$	(1,813)	$	244	$	5,714

(a)	Other primarily included the effects of securitization activity and currency exchange.

(b)	During the first quarter of 2010, we transferred the Transportation Financial Services business from GECAS to CLL and the Consumer business in Italy from Consumer to CLL. Prior-period amounts were reclassified to conform to the current-period presentation.

5. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and other intangible assets – net, consisted of the following.

	At
	March 31,		December 31,
(In millions)	2010		2009

Goodwill	$	28,499	$	28,961

Other intangible assets
Intangible assets subject to amortization	$	2,786	$	3,018

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Changes in goodwill balances follow.

						Dispositions,
	Balance					currency		Balance
	January 1,					exchange		March 31,
(In millions)	2010		(a)	Acquisitions		and other		2010

CLL(b)	$	14,053		$	(44)	$	(227)	$	13,782
Consumer(b)		11,443			(1)		(146)		11,296
Real Estate		1,189			–		(34)		1,155
Energy Financial Services		2,119			–		–		2,119
GECAS		157			–		(10)		147
Total	$	28,961		$	(45)	$	(417)	$	28,499

(a)	Reflected the transfer of previously owned assets by GECS on January 1, 2010, resulting in a related increase in goodwill of $141 million.

(b)	Reflected the transfer of the Consumer business in Italy during the first quarter of 2010 from Consumer to CLL, resulting in a related movement of beginning goodwill balance of $18 million.

Goodwill balance decreased $462 million in the first quarter of 2010, primarily as a result of the stronger U.S. dollar ($384 million).

Intangible Assets Subject to Amortization

	At
	March 31, 2010						December 31, 2009
	Gross						Gross
	carrying		Accumulated				carrying		Accumulated
(In millions)	amount		amortization		Net		amount		amortization		Net


Customer-related	$	1,815	$	(716)	$	1,099	$	1,831	$	(690)	$	1,141
Patents, licenses and trademarks		586		(466)		120		630		(461)		169
Capitalized software		2,110		(1,543)		567		2,169		(1,558)		611
Lease valuations		1,703		(806)		897		1,754		(793)		961
All other		349		(246)		103		475		(339)		136
Total	$	6,563	$	(3,777)	$	2,786	$	6,859	$	(3,841)	$	3,018

Amortization related to intangible assets subject to amortization was $152 million and $174 million for the three months ended March 31, 2010 and 2009, respectively.

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6. Borrowings and bank deposits

Borrowings are summarized in the following table.

	At
(In millions)	March 31,		December 31,
	2010		2009
Short-term borrowings
Commercial paper
U.S.	$	31,567	$	32,637
Non-U.S.		9,396		9,525
Current portion of long-term borrowings(a)(b)(c)		64,582		69,881
GE Interest Plus notes(d)		8,326		7,541
Other(c)		5,697		8,745
Total short-term borrowings	$	119,568	$	128,329

Long-term borrowings
Senior unsecured notes(a)(b)	$	285,873	$	305,535
Subordinated notes(e)		2,243		2,388
Subordinated debentures(f)		7,335		7,647
Other(c)(g)		11,581		10,751
Total long-term borrowings	$	307,032	$	326,321

Non-recourse borrowings of consolidated securitization entities(h)	$	36,780	$	3,883

Bank deposits(i)	$	38,310	$	38,923

Total borrowings and bank deposits	$	501,690	$	497,456

(a)

GECC had issued and outstanding $59,045 million and $59,336 million of senior, unsecured debt that was guaranteed by the Federal Deposit Insurance Corporation (FDIC) under the Temporary Liquidity Guarantee Program at March 31, 2010 and December 31, 2009, respectively. Of the above amounts $14,000 million and $5,841 million is included in current portion of long-term borrowings at March 31, 2010 and December 31, 2009, respectively. GECC and GE are parties to an Eligible Entity Designation Agreement and GECC is subject to the terms of a Master Agreement, each entered into with the FDIC. The terms of these agreements include, among other things, a requirement that GE and GECC reimburse the FDIC for any amounts that the FDIC pays to holders of GECC debt that is guaranteed by the FDIC.

(b)

Included in total long-term borrowings was $3,024 million and $3,138 million of obligations to holders of guaranteed investment contracts at March 31, 2010 and December 31, 2009, respectively, of which GECC could be required to repay up to approximately $3,000 million if its long-term credit rating were to fall below AA-/Aa3 or its short-term credit rating were to fall below A-1+/P-1.

(c)	Included $12,163 million and $10,604 million of secured funding at March 31, 2010 and December 31, 2009, respectively, of which $5,163 million and $5,667 million is non-recourse to GECC at March 31, 2010 and December 31, 2009, respectively.

(d)	Entirely variable denomination floating rate demand notes.

(e)	Included $117 million of subordinated notes guaranteed by GE at both March 31, 2010 and December 31, 2009.

(f)	Subordinated debentures receive rating agency equity credit and were hedged at issuance to the U.S. dollar equivalent of $7,725 million.

(g)	Included $1,714 million and $1,649 million of covered bonds at March 31, 2010 and December 31, 2009, respectively. If the short-term credit rating of GECC were reduced below A-1/P-1, GECC would be required to partially cash collateralize these bonds in an amount up to $744 million.

(h)

Included at March 31, 2010 was $2,248 million of commercial paper, $15,774 million of current portion of long-term borrowings and $18,758 million of long-term borrowings related to former QSPEs consolidated on January 1, 2010 upon our adoption of ASU 2009-16 & 17, previously consolidated liquidating securitization entities and other on-book securitization borrowings. Included at December 31, 2009, was $2,424 million of commercial paper, $378 million of current portion of long-term borrowings and $1,081 million of long-term borrowings issued by consolidated liquidating securitization entities. See Note 12.

(i)

Included $21,076 million and $21,252 million of deposits in non-U.S. banks at March 31, 2010 and December 31, 2009, respectively, and $10,578 million and $10,476 million of certificates of deposits distributed by brokers with maturities greater than one year at March 31, 2010 and December 31, 2009, respectively.

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7. INCOME TAXES

The balance of “unrecognized tax benefits,” the amount of related interest and penalties we have provided and what we believe to be the range of reasonably possible changes in the next 12 months, were:

	At
	March 31,		December 31,
(In millions)	2010		2009

Unrecognized tax benefits	$	3,517	$	3,820
Portion that, if recognized, would reduce tax expense and effective tax rate(a)		1,534		1,792
Accrued interest on unrecognized tax benefits		751		713
Accrued penalties on unrecognized tax benefits		73		73
Reasonably possible reduction to the balance of unrecognized
tax benefits in succeeding 12 months		0-950		0-650
Portion that, if recognized, would reduce tax expense and effective tax rate(a)		0-500		0-250

(a)	Some portion of such reduction might be reported as discontinued operations.

The IRS is currently auditing the GE consolidated income tax returns for 2003-2007, a substantial portion of which include our activities. In addition, certain other U.S. tax deficiency issues and refund claims for previous years remain unresolved. It is reasonably possible that the 2003-2005 U.S. audit cycle will be completed during the next 12 months, which could result in a decrease in our balance of “unrecognized tax benefits” – that is, the aggregate tax effect of differences between tax return positions and the benefits recognized in our financial statements. We believe that there are no other jurisdictions in which the outcome of unresolved issues or claims is likely to be material to our results of operations, financial position or cash flows. We further believe that we have made adequate provision for all income tax uncertainties.

GE and GECC file a consolidated U.S. federal income tax return. The GECC provision for current tax expense includes its effect on the consolidated return. The effect of GECC on the consolidated liability is settled in cash as GE tax payments are due.

During the first quarter of 2009, following the change in our external credit ratings, funding actions taken and review of our operations, liquidity and funding, we determined that undistributed prior-year earnings of non-U.S. subsidiaries of GECC, on which we had previously provided deferred U.S. taxes, would be indefinitely reinvested outside the U.S. This change increased the amount of prior-year earnings indefinitely reinvested outside the U.S. by approximately $2 billion, resulting in an income tax benefit of $700 million in the first quarter of 2009.

8. SHAREOWNER’S EQUITY

A summary of increases (decreases) in GECC shareowner’s equity that did not result directly from transactions with the shareowner, net of income taxes, follows.

	Three months ended March 31
(In millions)	2010		2009

Net earnings attributable to GECC	$	220	$	1,026
Investment securities – net		(67)		(40)
Currency translation adjustments – net		(1,360)		(3,024)
Cash flow hedges – net		413		723
Benefit plans – net		42		8
Total	$	(752)	$	(1,307)

On January 1, 2010, we adopted ASU 2009-16 & 17. This resulted in a reduction of GECC shareowner’s equity primarily related to the reversal of a portion of previously recognized securitization gains. This adjustment is reflected as a cumulative effect adjustment of the opening balances of retained earnings ($1,307 million) and accumulated other comprehensive income ($258 million). See Notes 1 and 12 for additional information.

(18)

Changes to noncontrolling interests during the first quarter of 2010 resulted from net earnings $3 million, dividends $(3) million, AOCI $9 million and other $(23) million. Changes to the individual components of AOCI attributable to noncontrolling interests were insignificant.

Changes to noncontrolling interests during the first quarter of 2009 resulted from net earnings $46 million, dividends $(3) million, the effects of deconsolidating Penske Truck Leasing Co., L.P. (PTL) $(331) million, AOCI $(9) million and other $11 million. Changes to the individual components of AOCI attributable to noncontrolling interests were insignificant.

During the first quarter of 2009, GE made a $9,500 million capital contribution to GECS, of which GECS subsequently contributed $8,250 million to us. In addition, we issued one share of common stock (par value $14) to GECS for $500 million.

9. REVENUES FROM SERVICES

Revenues from services are summarized in the following table.

	Three months ended March 31
(In millions)	2010		2009

Interest on loans(a)	$	5,709	$	5,081
Equipment leased to others		2,761		3,485
Fees(a)		1,264		1,160
Investment income(a)(b)		159		338
Financing leases(a)		756		908
Net securitization gains(a)		–		326
Real estate investments		277		347
Associated companies(c)		597		165
Other items(d)		527		1,692
Total	$	12,050	$	13,502

(a)

On January 1, 2010, we adopted ASU 2009-16 & 17 which required us to consolidate substantially all of our former QSPEs. As a result, 2010 Revenues from services include interest and fee income from these entities, which were not presented on a consolidated basis in 2009. Also beginning in 2010, we will no longer record gains for substantially all of our securitizations as they are recorded as on-book financings. See Note 12.

(b)	Included net other-than-temporary impairments on investment securities of $73 million and $163 million in the first quarters of 2010 and 2009, respectively. See Note 3.

(c)

Aggregate summarized financial information for significant associated companies assuming a 100% ownership interest included total assets at March 31, 2010 and December 31, 2009 of $160,495 million and $137,075 million, respectively. Assets were primarily financing receivables of $85,002 million and $82,873 million at March 31, 2010 and December 31, 2009, respectively. Total liabilities were $142,805 million and $118,708 million, consisted primarily of bank deposits of $76,571 million and $69,573 million at March 31, 2010 and December 31, 2009, respectively, and debt of $45,007 million and $48,677 million at March 31, 2010 and December 31, 2009, respectively. Revenues in the first quarters of 2010 and 2009 totaled $4,966 million and $4,215 million, respectively, and net earnings in the first quarters of 2010 and 2009 totaled $879 million and $609 million, respectively.

(d)	Included a gain on the sale of a limited partnership interest in PTL and a related gain on the remeasurement of the retained investment to fair value totaling $296 million in the first quarter of 2009.

10. FAIR VALUE MEASUREMENTS

For a description on how we estimate fair value, see Note 1 to the consolidated financial statements in our 2009 Form 10-K for information.

The following tables present our assets and liabilities measured at fair value on a recurring basis. Included in the tables are investment securities of $6,440 million and $6,629 million at March 31, 2010 and December 31, 2009, respectively, supporting obligations to holders of GICs in Trinity, which ceased issuing new investment contracts beginning in the first quarter of 2010, and investment securities held at our global banks. Such securities are mainly investment grade.

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(In millions)										Netting
	Level 1		(a)	Level 2		(a)	Level 3		(b)	adjustment		(c)	Net balance
March 31, 2010
Assets
Investment securities
Debt
U.S. corporate	$	1,249		$	1,342		$	1,440		$	–		$	4,031
State and municipal		–			453			243			–			696
Residential mortgage-backed		–			2,114			47			–			2,161
Commercial mortgage-backed		–			1,313			115			–			1,428
Asset-backed		–			736			1,447			–			2,183
Corporate - non-U.S.		148			557			970			–			1,675
Government - non-U.S.		1,026			696			148			–			1,870
U.S. government and federal agency		60			583			–			–			643
Retained interests(d)		–			–			43			–			43
Equity
Available-for-sale		453			612			16			–			1,081
Trading		426			–			–			–			426
Derivatives(e)		–			9,837			639			(3,985)			6,491
Other(f)		–			–			497			–			497
Total	$	3,362		$	18,243		$	5,605		$	(3,985)		$	23,225

Liabilities
Derivatives	$	–		$	6,842		$	501		$	(3,994)		$	3,349
Other		–			30			–			–			30
Total	$	–		$	6,872		$	501		$	(3,994)		$	3,379

December 31, 2009
Assets
Investment securities
Debt
U.S. corporate	$	1,535		$	1,871		$	1,656		$	–		$	5,062
State and municipal		–			501			173			–			674
Residential mortgage-backed		–			2,254			44			–			2,298
Commercial mortgage-backed		–			1,251			51			–			1,302
Asset-backed		–			719			1,480			–			2,199
Corporate - non-U.S.		159			51			776			–			986
Government - non-U.S.		1,277			1,023			151			–			2,451
U.S. government and federal agency		85			1,780			–			–			1,865
Retained interests		–			–			8,831			–			8,831
Equity
Available-for-sale		437			667			17			–			1,121
Trading		720			–			–			–			720
Derivatives(e)		–			10,411			451			(3,611)			7,251
Other(f)		–			–			595			–			595
Total	$	4,213		$	20,528		$	14,225		$	(3,611)		$	35,355

Liabilities
Derivatives	$	–		$	6,838		$	219		$	(3,623)		$	3,434
Other		–			32			–			–			32
Total	$	–		$	6,870		$	219		$	(3,623)		$	3,466

(a)	Transfers between Level 1 to 2 were insignificant.

(b)	Level 3 investment securities valued using non-binding broker quotes totaled $612 million and $620 million at March 31, 2010 and December 31, 2009, respectively, and were classified as available-for-sale securities.

(c)	The netting of derivative receivables and payables is permitted when a legally enforceable master netting agreement exists. Included fair value adjustments related to our own and counterparty credit risk.

(d)	Substantially all of our retained interests were consolidated in connection with our adoption of ASU 2009-16 & 17 on January 1, 2010.

(e)	The fair value of derivatives included an adjustment for non-performance risk. At March 31, 2010 and December 31, 2009, the cumulative adjustment was a gain of $9 million and $12 million, respectively. See Note 11 for additional information on the composition of our derivative portfolio.

(f)	Included private equity investments and loans designated under the fair value option.

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The following tables present the changes in Level 3 instruments measured on a recurring basis for the three months ended March 31, 2010 and 2009. The majority of our Level 3 balances consist of investment securities classified as available-for-sale with changes in fair value recorded in shareowner’s equity.

Changes in Level 3 Instruments for the Three Months Ended March 31, 2010

(In millions)							Net realized/									Net change
							unrealized									in unrealized
							gains (losses)									gains (losses)
				Net realized/			included in									relating to
				unrealized			accumulated		Purchases,		Transfers					instruments
				gains(losses)			other		issuances		in and/or					still held at
	January 1,			included in			comprehensive		and		out of			March 31,		March 31,
	2010		(a)	earnings		(b)	income		settlements		Level 3		(c)	2010		2010		(d)

Investment securities
Debt
U.S. corporate	$	1,654		$	7		$	35	$	(258)	$	2		$	1,440	$	–
State and municipal		173			–			74		(4)		–			243		–
Residential
mortgage-backed		44			–			10		–		(7)			47		–
Commercial
mortgage-backed		1,034			30			3		(952)		–			115		–
Asset-backed		1,475			2			11		(15)		(26)			1,447		–
Corporate - non-U.S.		993			(5)			(26)		166		(158)			970		–
Government
- non-U.S.		151			–			(2)		(1)		–			148		–
U.S. government and
federal agency		–			–			–		–		–			–		–
Retained interests		45			–			1		(3)		–			43		–
Equity
Available-for-sale		17			–			(1)		–		–			16		–
Trading		–			–			–		–		–			–		–
Derivatives(e)		205			77			(7)		(55)		(49)			171		54
Other		549			(1)			(23)		–		(28)			497		–
Total	$	6,340		$	110		$	75	$	(1,122)	$	(266)		$	5,137	$	54

(a)	Included $1,015 million in debt securities, a reduction in retained interest of $8,782 million and a reduction in derivatives of $37 million related to adoption of ASU 2009-16 & 17.

(b)	Earnings effects are primarily included in the “Revenues from services” and “Interest” captions in the Condensed Statement of Current and Retained Earnings.

(c)	Transfers in and out of Level 3 are considered to occur at the beginning of the period. Transfers out of Level 3 were a result of increased use of quotes from independent pricing vendors based on recent trading activity.

(d)	Represented the amount of unrealized gains or losses for the period included in earnings.

(e)	Represented derivative assets net of derivative liabilities and included cash accruals of $33 million not reflected in the fair value hierarchy table.

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Changes in Level 3 Instruments for the Three Months Ended March 31, 2009

(In millions)						Net realized/									Net change
						unrealized									in unrealized
						gains (losses)									gains (losses)
			Net realized/			included in									relating to
			unrealized			accumulated		Purchases,		Transfers					instruments
			gains(losses)			other		issuances		in and/or					still held at
	January 1,		included in			comprehensive		and		out of			March 31,		March 31,
	2009		earnings		(a)	income		settlements		Level 3		(b)	2009		2009		(c)

Investment securities	$	10,611	$	294		$	(207)	$	(264)	$	(586)		$	9,848	$	110
Derivatives(d)(e)		401		25			(44)		(7)		23			398		(15)
Other		551		(10)			(18)		(11)		–			512		(19)
Total	$	11,563	$	309		$	(269)	$	(282)	$	(563)		$	10,758	$	76

(a)	Earnings effects are primarily included in the “Revenues from services” and “Interest” captions in the Condensed Statement of Current and Retained Earnings.

(b)	Transfers in and out of Level 3 are considered to occur at the beginning of the period. Transfers out of Level 3 were a result of increased use of quotes from independent pricing vendors based on recent trading activity.

(c)	Represented the amount of unrealized gains or losses for the period included in earnings.

(d)	Earnings from derivatives were more than offset by $30 million in losses from related derivatives included in Level 2 and $10 million in losses from qualifying fair value hedges.

(e)	Represented derivative assets net of derivative liabilities and included cash accruals of $48 million not reflected in the fair value hierarchy table.

Non-Recurring Fair Value Measurements

Non-recurring fair value amounts (as measured at the time of the adjustment) for those assets remeasured to fair value on a non-recurring basis during the fiscal year and still held at March 31, 2010 and at December 31, 2009, totaled $150 million and $513 million, identified as Level 2, and $7,463 million and $17,373 million, identified as Level 3, respectively. Level 3 amounts at March 31, 2010 primarily included financing receivables and loans held for sale ($5,043 million), long-lived assets ($2,082 million), primarily real estate held for investment, equipment leased to others and equipment held for sale, and cost and equity method investments ($338 million).

The following table represents the fair value adjustments to assets measured at fair value on a non-recurring basis and still held at March 31, 2010 and March 31, 2009.

	Three months ended March 31
(In millions)	2010		2009

Financing receivables and loans held for sale	$	(583)	$	(324)
Cost and equity method investments(a)		(66)		(224)
Long-lived assets, including real estate		(719)		(128)
Retained investments in formerly consolidated subsidiaries		–		226
Total	$	(1,368)	$	(450)

(a)	Includes fair value adjustments associated with private equity and real estate funds of $(13) million and $(97) million for the three months ended March 31, 2010 and 2009, respectively.

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11. FINANCIAL INSTRUMENTS

The following table provides information about the assets and liabilities not carried at fair value in our Statement of Financial Position. Consistent with ASC 825, Financial Instruments, the table excludes financing leases and non-financial assets and liabilities. Apart from certain of our borrowings and certain marketable securities, few of the instruments identified below are actively traded and their fair values must often be determined using financial models. Realization of the fair value of these instruments depends upon market forces beyond our control, including marketplace liquidity. For a description on how we estimate fair value, see Note 15 to the consolidated financial statements in our 2009 Form 10-K.

		At
		March 31, 2010						December 31, 2009
				Assets (liabilities)						Assets (liabilities)
		Notional		Carrying		Estimated		Notional		Carrying		Estimated
(In millions)		amount		amount(net)		fair value		amount		amount(net)		fair value

Assets
Loans(b)	$	(a)	$	304,808	$	297,555	$	(a)	$	283,135	$	269,283
Other commercial mortgages		(a)		111		111		(a)		120		120
Loans held for sale		(a)		366		368		(a)		1,303		1,343
Other financial instruments(c)		(a)		2,142		2,461		(a)		2,077		2,366
Liabilities
Borrowings and bank
deposits(b)(d)		(a)		(501,690)		(507,280)		(a)		(497,456)		(502,297)
Guaranteed investment contracts		(a)		(8,051)		(8,028)		(a)		(8,310)		(8,394)
Insurance - credit life(e)		1,597		(79)		(54)		1,574		(79)		(52)

(a)	These financial instruments do not have notional amounts.

(b)	Amounts at March 31, 2010 reflect our adoption of ASU 2009-16 & 17 on January 1, 2010. See Notes 4, 6 and 12.

(c)	Principally cost method investments.

(d)	Fair values exclude interest rate and currency derivatives designated as hedges of borrowings. Had they been included, the fair value of borrowings at March 31, 2010 and December 31, 2009 would have been reduced by $2,947 million and $2,856 million, respectively.

(e)	Net of reinsurance of $2,650 million and $2,800 million at March 31, 2010 and December 31, 2009, respectively.

Loan Commitments

		Notional amount at
		March 31,		December 31,
(In millions)		2010		2009

Ordinary course of business lending commitments(a)(b)	$	6,324	$	6,676
Unused revolving credit lines(c)
Commercial		30,349		31,803
Consumer - principally credit cards		245,802		231,880

(a)	Excluded investment commitments of $2,514 million and $2,659 million as of March 31, 2010 and December 31, 2009, respectively.

(b)

Included a $937 million and $972 million commitment as of March 31, 2010 and December 31, 2009, respectively, associated with a secured financing arrangement that can increase to a maximum of $5,000 million and $4,998 million based on the asset volume under the arrangement as of March 31, 2010 and December 31, 2009, respectively.

(c)	Excluded inventory financing arrangements, which may be withdrawn at our option, of $13,232 million and $13,889 million as of March 31, 2010 and December 31, 2009, respectively.

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Derivatives and Hedging

As a matter of policy, we use derivatives for risk management purposes, and we do not use derivatives for speculative purposes. A key risk management objective for our financial services businesses is to mitigate interest rate and currency risk by seeking to ensure that the characteristics of the debt match the assets they are funding. If the form (fixed versus floating) and currency denomination of the debt we issue do not match the related assets, we typically execute derivatives to adjust the nature and tenor of funding to meet this objective. The determination of whether we enter into a derivative transaction or issue debt directly to achieve this objective depends on a number of factors, including customer needs for specific types of financing, and market related factors that affect the type of debt we can issue.

Of the outstanding notional amount of $306,000 million, approximately 94% or $286,000 million, is associated with reducing or eliminating the interest rate, currency or market risk between financial assets and liabilities in our financial services businesses. The remaining derivative activities primarily relate to hedging against adverse changes in currency exchange rates and commodity prices related to anticipated sales and purchases, providing certain derivatives and/or support arrangements to our customers, and contracts containing certain clauses which meet the accounting definition of a derivative. The instruments used in these activities are designated as hedges when practicable. In certain cases, the hedged item is already recorded in earnings currently, such as when we hedge a recognized foreign currency transaction (e.g., a receivable or payable) with a derivative. In such instances, hedge accounting is not necessary and the derivatives are classified as freestanding.

The following table provides information about the fair value of our derivatives, by contract type, separating those accounted for as hedges and those that are not.

	At March 31, 2010				At December 31, 2009
	Fair value				Fair value
(In millions)	Assets		Liabilities		Assets		Liabilities

Derivatives accounted for as hedges
Interest rate contracts	$	5,064	$	3,254	$	4,421	$	3,468
Currency exchange contracts		3,805		2,716		4,199		2,316
Other contracts		10		7		10		4
		8,879		5,977		8,630		5,788
Derivatives not accounted for as hedges
Interest rate contracts		387		788		584		702
Currency exchange contracts		917		472		1,319		462
Other contracts		293		106		329		105
		1,597		1,366		2,232		1,269
Netting adjustment(a)		(3,985)		(3,994)		(3,611)		(3,623)

Total	$	6,491	$	3,349	$	7,251	$	3,434

Derivatives are classified in the captions “Other assets” and “Other liabilities” in our financial statements.

(a)

The netting of derivative receivables and payables is permitted when a legally enforceable master netting agreement exists. Amounts included fair value adjustments related to our own and counterparty non-performance risk. At March 31, 2010 and December 31, 2009, the cumulative adjustment for non-performance risk was a gain of $9 million and $12 million, respectively.

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Fair value hedges

We use interest rate and currency exchange derivatives to hedge the fair value effects of interest rate and currency exchange rate changes on local and non-functional currency denominated fixed-rate debt. For relationships designated as fair value hedges, changes in fair value of the derivatives are recorded in earnings along with offsetting adjustments to the carrying amount of the hedged debt. The following table provides information about the earnings effects of our fair value hedging relationships for the three months ended March 31, 2010 and 2009.

Three months ended

March 31, 2010

March 31, 2009

(In millions)

Financial statement caption

Gain (loss)

on hedging

on hedged

on hedging

on hedged

derivatives

items

derivatives

items

Interest rate contracts

Interest

1,260

(1,409)

(937)

986

Currency exchange contracts

Interest

(20)

(967)

949

Fair value hedges resulted in $(153) million and $31 million of ineffectiveness of which $1 million and $(27) million reflects amounts excluded from the assessment of effectiveness for the three months ended March 31, 2010 and 2009, respectively.

Cash flow hedges and net investment hedges in foreign operations

We use interest rate, currency exchange and commodity derivatives to reduce the variability of expected future cash flows associated with variable rate borrowings and commercial purchase and sale transactions, including commodities. For derivatives that are designated in a cash flow hedging relationship, the effective portion of the change in fair value of the derivative is reported as a component of AOCI and reclassified into earnings contemporaneously and in the same caption with the earnings effects of the hedged transaction. Hedge ineffectiveness and components of changes in fair value of the derivative that are excluded from the assessment of effectiveness are recognized in earnings each reporting period.

We use currency exchange derivatives to protect our net investments in global operations conducted in non-U.S. dollar currencies. For derivatives that are designated as hedges of net investment in a foreign operation, we assess effectiveness based on changes in spot currency exchange rates. Changes in spot rates on the derivative are recorded as a component of AOCI until such time as the foreign entity is substantially liquidated or sold. The change in fair value of the forward points, which reflects the interest rate differential between the two countries on the derivative, are excluded from the effectiveness assessment and are recorded currently in earnings.

The following table provides information about the amounts recorded in AOCI for the three months ended March 31, 2010 and 2009, as well as the amounts recorded in each caption in the Condensed Statement of Current and Retained Earnings when derivative amounts are reclassified out of AOCI related to our cash flow hedges and net investment hedges.

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Gains(loss) reclassified

Gains(loss) recognized in AOCI

from AOCI into earnings

for the three months ended

March 31,

(In millions)

2010

2009

Financial statement caption

2010

2009

Cash flow hedges