Edgar Filing: GENERAL ELECTRIC CAPITAL CORP

gecc10q06302010.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 June 30, 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 July 30, 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	37
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	59
Item 4.	Controls and Procedures	59

Part II – Other Information

Item 1.	Legal Proceedings	59
Item 6.	Exhibits	61
Signatures		62

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: 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 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 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 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				Six months ended
	June 30				June 30
(In millions)		2010		2009		2010		2009

Revenues
Revenues from services (Note 9)	$	12,129	$	12,531	$	24,179	$	26,033
Sales of goods		168		205		449		478
Total revenues		12,297		12,736		24,628		26,511

Costs and expenses
Interest		3,863		4,475		7,792		9,588
Operating and administrative		3,636		3,495		7,313		7,397
Cost of goods sold		154		164		419		388
Investment contracts, insurance losses and insurance annuity benefits		38		45		73		118
Provision for losses on financing receivables		2,009		2,817		4,272		5,153
Depreciation and amortization		1,856		1,946		3,780		4,126
Total costs and expenses		11,556		12,942		23,649		26,770

Earnings (loss) from continuing operations before income taxes		741		(206)		979		(259)
Benefit for income taxes		76		654		448		1,782

Earnings from continuing operations		817		448		1,427		1,523
Loss from discontinued operations, net of taxes (Note 2)		(187)		(194)		(574)		(197)
Net earnings		630		254		853		1,326
Less net earnings (loss) attributable to noncontrolling interests		(13)		17		(10)		63
Net earnings attributable to GECC		643		237		863		1,263
Dividends		1		(31)		–		(47)
Retained earnings at beginning of period		45,863		46,456		45,644		45,446
Retained earnings at end of period	$	46,507	$	46,662	$	46,507	$	46,662

Amounts attributable to GECC
Earnings from continuing operations	$	830	$	431	$	1,437	$	1,460
Loss from discontinued operations, net of taxes		(187)		(194)		(574)		(197)
Net earnings attributable to GECC	$	643	$	237	$	863	$	1,263

During the three and six months ended June 30, 2010, we recorded pre-tax, other-than-temporary impairments of $95 million and $247 million, respectively, of which $53 million and $126 million, respectively, was recorded through earnings and $42 million and $121 million, respectively, was recorded in Accumulated Other Comprehensive Income.

See accompanying notes.

(3)

General Electric Capital Corporation and consolidated affiliates

Condensed Statement of Financial Position

	June 30,		December 31,
(In millions)	2010		2009
		(Unaudited)
Assets
Cash and equivalents	$	61,188	$	63,696
Investment securities (Note 3)		15,800		27,509
Inventories		71		71
Financing receivables – net (Note 4)		333,262		336,926
Other receivables		12,560		17,876
Property, plant and equipment, less accumulated amortization of $25,612
and $26,307		53,669		56,695
Goodwill (Note 5)		27,143		28,961
Other intangible assets – net (Note 5)		2,347		3,018
Other assets		81,317		86,355
Assets of businesses held for sale		599		125
Assets of discontinued operations (Note 2)		1,203		1,470
Total assets(a)	$	589,159	$	622,702

Liabilities and equity
Short-term borrowings (Note 6)	$	116,015	$	128,329
Accounts payable		8,043		11,162
Non-recourse borrowings of consolidated securitization entities (Note 6)		33,411		3,883
Bank deposits (Note 6)		37,471		38,923
Long-term borrowings (Note 6)		289,699		326,321
Investment contracts, insurance liabilities and insurance annuity benefits		7,430		8,687
Other liabilities		19,658		22,736
Deferred income taxes		5,279		5,831
Liabilities of businesses held for sale		261		55
Liabilities of discontinued operations (Note 2)		971		853
Total liabilities(a)		518,238		546,780

Capital stock		56		56
Accumulated other comprehensive income – net(b)
Investment securities		(702)		(676)
Currency translation adjustments		(2,750)		1,228
Cash flow hedges		(1,340)		(1,816)
Benefit plans		(369)		(434)
Additional paid-in capital		28,421		28,431
Retained earnings		46,507		46,929
Total GECC shareowner's equity		69,823		73,718
Noncontrolling interests(c)		1,098		2,204
Total equity		70,921		75,922
Total liabilities and equity	$	589,159	$	622,702

(a)

Our consolidated assets at June 30, 2010 include total assets of $52,015 million of certain variable interest entities (VIEs) that can only be used to settle the liabilities of those VIEs. These assets include net financing receivables of $42,786 million and investment securities of $6,168 million. Our consolidated liabilities at June 30, 2010 include liabilities of certain VIEs for which the VIE creditors do not have recourse to GECC. These liabilities include non-recourse borrowings of consolidated securitization entities (CSEs) of $32,696 million. See Note 12.

(b)	The sum of accumulated other comprehensive income − net was $(5,161) million and $(1,698) million at June 30, 2010 and December 31, 2009, respectively.

(c)	Included accumulated other comprehensive income attributable to noncontrolling interests of $(161) million and $(191) million at June 30, 2010 and December 31, 2009, respectively.

See accompanying notes.

(4)

General Electric Capital Corporation and consolidated affiliates

Condensed Statement of Cash Flows

(Unaudited)

	Six months ended June 30
(In millions)		2010		2009

Cash flows – operating activities
Net earnings	$	853	$	1,326
Less net earnings attributable to noncontrolling interests		(10)		63
Net earnings attributable to GECC		863		1,263
Loss from discontinued operations		574		197
Adjustments to reconcile net earnings attributable to GECC
to cash provided from operating activities
Depreciation and amortization of property, plant and equipment		3,780		4,126
Increase (decrease) in accounts payable		2,444		(858)
Provision for losses on financing receivables		4,272		5,153
All other operating activities		(435)		(11,427)
Cash from (used for) operating activities – continuing operations		11,498		(1,546)
Cash from (used for) operating activities – discontinued operations		(67)		(26)
Cash from (used for) operating activities		11,431		(1,572)

Cash flows – investing activities
Additions to property, plant and equipment		(2,205)		(3,296)
Dispositions of property, plant and equipment		2,287		2,668
Increase in loans to customers		(152,988)		(114,271)
Principal collections from customers – loans		164,765		132,395
Investment in equipment for financing leases		(4,593)		(4,606)
Principal collections from customers – financing leases		8,555		9,886
Net change in credit card receivables		1,573		2,046
Proceeds from principal business dispositions		825		8,846
Payments for principal businesses purchased		–		(5,637)
All other investing activities		9,905		2,459
Cash from (used for) investing activities – continuing operations		28,124		30,490
Cash from (used for) investing activities – discontinued operations		1		30
Cash from (used for) investing activities		28,125		30,520

Cash flows – financing activities
Net increase (decrease) in borrowings (maturities of 90 days or less)		(2,382)		(26,638)
Net increase (decrease) in bank deposits		748		(6,450)
Newly issued debt (maturities longer than 90 days)
Short-term (91 to 365 days)		10,628		2,804
Long-term (longer than one year)		16,663		45,882
Non-recourse, leveraged lease		–		–
Repayments and other debt reductions (maturities longer than 90 days)
Short-term (91 to 365 days)		(63,476)		(35,656)
Long-term (longer than one year)		(989)		(2,731)
Non-recourse, leveraged lease		(454)		(470)
Dividends paid to shareowner		–		–
Capital contribution and share issuance		–		8,750
All other financing activities		(1,270)		(1,619)
Cash from (used for) financing activities – continuing operations		(40,532)		(16,128)
Cash from (used for) financing activities – discontinued operations		–		–
Cash from (used for) financing activities		(40,532)		(16,128)

Effect of currency exchange rate changes on cash and equivalents		(1,598)		(53)

Increase (decrease) in cash and equivalents		(2,574)		12,767
Cash and equivalents at beginning of year		63,880		36,605
Cash and equivalents at June 30		61,306		49,372
Less cash and equivalents of discontinued operations at June 30		118		184
Cash and equivalents of continuing operations at June 30	$	61,188	$	49,188

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 or 2009 consolidated financial statements), 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).

As a wholly-owned subsidiary, GECC enters into various operating and financing arrangements with GE. Transactions between related companies are made on an arms-length basis, are eliminated and consist primarily of capital contributions from GE to GECC; GE customer receivables sold to GECC; GECC services for trade receivables management and material procurement; buildings and equipment (including automobiles) leased between GE and GECC; information technology (IT) and other services sold to GECC by GE; aircraft engines manufactured by GE that are installed on aircraft purchased by GECC from third-party producers for lease to others; and various investments, loans and allocations of GE corporate overhead costs.

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, is now included in CLL and our Consumer business in Italy, previously reported in Consumer, is now included in CLL. Details of total revenues and segment profit by operating segment can be found on page 41 of this report.

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 our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2010.

Beginning 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.

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.

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).

(6)

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 at January 1, 2010. 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, at January 1, 2010. The net reduction of total equity (including noncontrolling interests) was $1,442 million at January 1, 2010, principally related to the reversal of previously recognized securitization gains as a cumulative effect adjustment to retained earnings. See Note 12 for additional information.

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

In June 2010, we committed to sell our Consumer businesses in Indonesia and Argentina. Assets of $571 million and liabilities of $212 million were classified as held for sale at June 30, 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.

Summarized financial information for discontinued operations is shown below:

	Three months ended June 30				Six months ended June 30
(In millions)	2010		2009		2010		2009

Total revenues	$	(2)	$	(2)	$	(3)	$	(8)

Loss from discontinued operations, net of taxes
Loss from operations	$	(2)	$	(63)	$	(8)	$	(70)
Loss on disposal		(185)		(131)		(566)		(127)
Total loss from discontinued operations, net of taxes	$	(187)	$	(194)	$	(574)	$	(197)

(7)

Assets of discontinued operations were $1,203 million and $1,470 million at June 30, 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 $971 million and $853 million at June 30, 2010 and December 31, 2009, respectively. During the first six months of 2010, we recorded incremental reserves of $566 million related to interest refund claims on the 2008 sale of GE Money Japan. During the first quarter of 2010, we also reduced tax reserves by $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 all claims in excess of 258 billion Japanese Yen (approximately $2,900 million) remaining our responsibility. The underlying portfolio to which this obligation relates is in runoff and interest rates were capped for all designated accounts by mid-2009.

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 from 2009, the pace of the decline has been slower than expected and claims severity has increased. We believe the level of excess interest refund claims has been impacted by the challenging global economic conditions, in addition to Japanese legislative and regulatory changes. During the first quarter of 2010, we accrued $380 million of incremental reserves for these claims. In the second quarter of 2010, we accrued an additional $186 million of reserves for these claims. As of June 30, 2010, our liability for reimbursement of claims in excess of the statutory interest rate was $697 million.

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. We continue to monitor incoming claims activity relative to our expected claims levels. Our current expectations are that the pace of incoming claims continues to decelerate, average exposure per claim remains consistent with recent levels and we see the impact of our loss mitigation efforts. Estimating the pace of decline in incoming claims can have a significant impact on the total amount of our liability. For example, our current model assumes incoming claims continue to decline at a rate of 11% per month. June daily claims declined at a rate higher than assumed in our model. Holding all other assumptions constant, if claims were to decline at rates of 9%, 6% or 3% and we assume no impact from our loss mitigation efforts, our estimate of our liability would increase by approximately $100 million, $400 million and $1,200 million, respectively.

Uncertainties around the impact of laws and regulations, challenging economic conditions, the runoff status of the underlying book of business and the effects 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 in both the second quarter of 2010 and 2009 and both the first six months of 2010 and 2009, respectively. In total, GE Money Japan losses from discontinued operations, net of taxes, were $188 million and $136 million in the second quarters of 2010 and 2009, respectively, and $571 million and $132 million in the first six months of 2010 and 2009, respectively.

(8)

WMC

During the fourth quarter of 2007, we completed the sale of WMC, our U.S. mortgage business. WMC revenues from discontinued operations were $(2) million in both the second quarters of 2010 and 2009, and $(3) million and $(9) million in the first six months of 2010 and 2009, respectively. In total, WMC’s earnings (loss) from discontinued operations, net of taxes, were $1 million and $(5) million in the second quarters of 2010 and 2009, respectively, and $(3) million and $(11) million in the first six months of 2010 and 2009, respectively.

3. INVESTMENT SECURITIES

Substantially all of our investment securities are classified as available-for-sale. These 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. None of our securities are classified as held to maturity.

	At
	June 30, 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	$	3,831	$	70	$	(152)	$	3,749	$	5,215	$	83	$	(236)	$	5,062
State and municipal		879		7		(185)		701		887		3		(216)		674
Residential mortgage-backed(a)		2,481		20		(468)		2,033		2,999		21		(722)		2,298
Commercial mortgage-backed		1,569		13		(166)		1,416		1,599		5		(302)		1,302
Asset-backed		2,323		61		(232)		2,152		2,468		29		(298)		2,199
Corporate – non-U.S.		1,575		56		(81)		1,550		994		18		(26)		986
Government – non-U.S.		2,099		11		(42)		2,068		2,461		15		(25)		2,451
U.S. government and
federal agency		638		4		–		642		1,865		-		-		1,865
Retained interests(b)		58		9		(26)		41		8,479		392		(40)		8,831
Equity
Available-for-sale		949		115		(36)		1,028		897		227		(3)		1,121
Trading		420		–		–		420		720		-		-		720
Total	$	16,822	$	366	$	(1,388)	$	15,800	$	28,584	$	793	$	(1,868)	$	27,509

(a)

Substantially collateralized by U.S. mortgages. Of our total RMBS portfolio at June 30, 2010, $1,102 million relates to securities issued by government sponsored entities and $931 million relates to securities of private label issuers. Securities issued by private label issuers are collateralized primarily by pools of individual direct mortgage loans of individual financial institutions.

(b)	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 $15,800 million at June 30, 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

June 30, 2010
Debt
U.S. corporate	$	661	$	(7)	$	877	$	(145)
State and municipal		278		(14)		396		(171)
Residential mortgage-backed		691		(3)		1,234		(465)
Commercial mortgage-backed		351		(2)		1,065		(164)
Asset-backed		176		(20)		938		(212)
Corporate – non-U.S.		416		(27)		620		(54)
Government – non-U.S.		678		(2)		134		(40)
U.S. government and federal agency		–		–		–		–
Retained interests		–		–		14		(26)
Equity		154		(35)		3		(1)
Total	$	3,405	$	(110)	$	5,281	$	(1,278)

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. The methodologies and significant inputs used to measure the amount of credit loss for our investment securities during the first six months of 2010 have not changed from those described in our 2009 consolidated financial statements. See Note 3 to the consolidated financial statements in our 2009 Form 10-K, for additional information regarding these methodologies and inputs.

During the second quarter of 2010, we recorded pre-tax, other-than-temporary impairments of $95 million, of which $53 million was recorded through earnings and $42 million was recorded in accumulated other comprehensive income (AOCI). At April 1, 2010, cumulative impairments recognized in earnings associated with debt securities still held were $200 million. During the second quarter, we recognized first time impairments of $35 million and incremental charges on previously impaired securities of $16 million. These amounts included $2 million related to securities that were subsequently sold.

(10)

During the first six months of 2010, we recorded pre-tax, other-than-temporary impairments of $247 million, of which $126 million was recorded through earnings and $121 million was recorded in AOCI. At January 1, 2010, cumulative impairments recognized in earnings associated with debt securities still held were $140 million. During the first six months of 2010, we recognized first time impairments of $90 million and incremental charges on previously impaired securities of $33 million. These amounts included $15 million related to securities that were subsequently sold.

During the three months ended June 30, 2009, we recognized pre-tax, other-than-temporary impairments of $132 million, of which $57 million was recorded through earnings and $75 million was recorded in AOCI. At April 1, 2009 cumulative impairments recognized in earnings associated with debt securities still held were $101 million. During the second quarter, we recognized first time impairments of $21 million and incremental charges on previously impaired securities of $21 million. There were no securities that had previously been impaired.

During the six months ended June 30, 2009, we recognized impairments of $295 million. Of the $295 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. Subsequent to April 1, 2009, first time and incremental credit impairments were $21 million and $21 million, respectively. There were no securities sold that had previously been impaired.

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	$	2,851	$	2,869
2011-2014		3,490		3,494
2015-2019		1,619		1,434
2020 and later		1,062		913

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 June 30				Six months ended June 30
(In millions)	2010		2009		2010		2009

Gains	$	32	$	19	$	113	$	27
Losses, including impairments		(55)		(83)		(129)		(251)
Net	$	(23)	$	(64)	$	(16)	$	(224)

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 $3,451 million and $1,313 million in the second quarters of 2010 and 2009, respectively, and $7,203 million and $3,278 million in the first six months 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 $4 million and $204 million in the second quarters of 2010 and 2009, respectively, and $19 million and $244 million in the first six months of 2010 and 2009, respectively.

(11)

4. FINANCING RECEIVABLES AND ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES

Financing receivables - net, consisted of the following.

	At
	June 30,		January 1,		December 31,
(In millions)	2010		2010(a)		2009

Loans, net of deferred income	$	294,016	$	331,710	$	290,586
Investment in financing leases, net of deferred income		48,339		55,209		54,445
		342,355		386,919		345,031
Less allowance for losses		(9,093)		(9,805)		(8,105)
Financing receivables – net(b)	$	333,262	$	377,114	$	336,926

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

(b)	Financing receivables at June 30, 2010 and December 31, 2009 included $1,621 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.

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
	June 30,		January 1,		December 31,
(In millions)	2010		2010(a)		2009

CLL(b)
Americas	$	93,042	$	99,666	$	87,496
Europe		36,067		43,403		41,455
Asia		11,914		13,159		13,202
Other		2,727		2,836		2,836
		143,750		159,064		144,989
Consumer(b)
Non-U.S. residential mortgages		48,013		58,345		58,345
Non-U.S. installment and revolving credit		21,783		24,976		24,976
U.S. installment and revolving credit		42,946		47,171		23,190
Non-U.S. auto		10,012		13,344		13,344
Other		9,764		11,688		11,688
		132,518		155,524		131,543

Real Estate		44,006		48,673		44,841

Energy Financial Services		7,472		7,790		7,790

GECAS(b)		12,337		13,254		13,254

Other(c)		2,272		2,614		2,614
		342,355		386,919		345,031
Less allowance for losses		(9,093)		(9,805)		(8,105)
Total	$	333,262	$	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
	June 30,		January 1,		December 31,
(In millions)	2010		2010(a)		2009

Loans requiring allowance for losses	$	11,515	$	9,541	$	9,145
Loans expected to be fully recoverable		3,924		3,914		3,741
Total impaired loans	$	15,439	$	13,455	$	12,886

Allowance for losses (specific reserves)	$	3,033	$	2,376	$	2,331
Average investment during the period		14,182		(c)		8,493
Interest income earned while impaired(b)		206		(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 $1,984 million from January 1, 2010, to June 30, 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 $8,281 million impaired loans at Real Estate at June 30, 2010, $5,892 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. Such loans are classified as impaired, and specific reserves are determined based upon the present value of expected future cash flows discounted at the loan’s original effective interest rate, or collateral value as a practical expedient in accordance with the requirements of ASC 310-10-35. As of June 30, 2010, TDRs included in impaired loans were $5,942 million, primarily relating to Real Estate ($2,127 million), Consumer ($1,918 million) and CLL ($1,835 million). TDRs consolidated as a result of our adoption of ASU 2009-16 & 17 primarily related to our Consumer business ($364 million).

(13)

Allowance for Losses on Financing Receivables

	Balance		Adoption of			Balance		Provision								Balance
	December 31,		ASU 2009 -			January 1,		charged to				Gross				June 30,
(In millions)	2009		16 & 17		(a)	2010		operations		Other(b)		write-offs		Recoveries		2010

CLL(c)
Americas	$	1,179	$	66		$	1,245	$	630	$	(10)	$	(558)	$	55	$	1,362
Europe		575		–			575		137		(70)		(288)		28		382
Asia		244		(10)			234		108		(23)		(94)		9		234
Other		11		–			11		(1)		(2)		–		–		8

Consumer(c)
Non-U.S. residential
mortgages		949		–			949		184		(105)		(187)		51		892
Non-U.S. installment
and revolving credit		1,181		–			1,181		652		(114)		(987)		288		1,020
U.S. installment and
revolving credit		1,698		1,602			3,300		1,604		(1)		(2,400)		251		2,754
Non-U.S. auto		308		–			308		71		(43)		(204)		102		234
Other		300		–			300		165		(34)		(217)		43		257

Real Estate		1,494		42			1,536		645		(11)		(374)		1		1,797

Energy Financial
Services		28		–			28		24		1		–		–		53

GECAS(c)		104		–			104		35		–		(89)		–		50

Other		34		–			34		18		–		(3)		1		50
Total	$	8,105	$	1,700		$	9,805	$	4,272	$	(412)	$	(5,401)	$	829	$	9,093

(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.

(14)

	Balance		Provision								Balance
	January 1,		charged to				Gross				June 30,
(In millions)	2009		operations		Other(a)		write-offs		Recoveries		2009

CLL(b)
Americas	$	843	$	736	$	(33)	$	(457)	$	44	$	1,133
Europe		311		323		–		(192)		36		478
Asia		163		120		(6)		(85)		7		199
Other		4		3		2		(1)		–		8

Consumer(b)
Non-U.S. residential
mortgages		381		560		59		(231)		59		828
Non-U.S. installment
and revolving credit		1,049		891		65		(1,092)		228		1,141
U.S. installment and
revolving credit		1,700		1,729		(497)		(1,438)		81		1,575
Non-U.S. auto		203		242		26		(297)		90		264
Other		226		160		(16)		(163)		27		234

Real Estate		301		344		10		(85)		–		570

Energy Financial
Services		58		32		2		–		–		92

GECAS(b)		58		1		(1)		–		–		58

Other		28		12		1		(14)		–		27
Total	$	5,325	$	5,153	$	(388)	$	(4,055)	$	572	$	6,607

(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
	June 30,		December 31,
(In millions)	2010		2009

Goodwill	$	27,143	$	28,961

Other intangible assets
Intangible assets subject to amortization	$	2,347	$	3,018

(15)

Changes in goodwill balances follow.

						Dispositions,
	Balance					currency		Balance
	January 1,					exchange		June 30,
(In millions)	2010		(a)	Acquisitions		and other		2010

CLL(b)	$	14,053		$	–	$	(656)	$	13,397
Consumer(b)		11,443			–		(482)		10,961
Real Estate		1,189			–		(112)		1,077
Energy Financial Services		2,119			–		(557)		1,562
GECAS		157			–		(11)		146
Total	$	28,961		$	–	$	(1,818)	$	27,143

(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 balances decreased $1,818 million during the first six months of 2010, primarily as a result of the stronger U.S. dollar ($1,145 million) and the deconsolidation of Regency Energy Partners L.P. (Regency) at Energy Financial Services ($557 million). Our reporting units and related goodwill balances are CLL ($13,397 million), Consumer ($10,961 million), Real Estate ($1,077 million), Energy Financial Services ($1,562 million) and GECAS ($146 million) at June 30, 2010.

On May 26, 2010, we sold our general partnership interest in Regency, a midstream natural gas service provider, and retained a 21% limited partnership interest. This resulted in the deconsolidation of Regency and the remeasurement of our limited partnership interest to fair value. We recorded a pre-tax gain of $119 million, which is reported in Revenues from services.

Intangible Assets Subject to Amortization

	At
	June 30, 2010						December 31, 2009
	Gross						Gross
	carrying		Accumulated				carrying		Accumulated
(In millions)	amount		amortization		Net		amount		amortization		Net


Customer-related	$	1,527	$	(708)	$	819	$	1,831	$	(690)	$	1,141
Patents, licenses and trademarks		614		(508)		106		630		(461)		169
Capitalized software		1,956		(1,442)		514		2,169		(1,558)		611
Lease valuations		1,643		(831)		812		1,754		(793)		961
All other		352		(256)		96		475		(339)		136
Total	$	6,092	$	(3,745)	$	2,347	$	6,859	$	(3,841)	$	3,018

Amortization related to intangible assets subject to amortization was $187 million and $236 million for the three months ended June 30, 2010 and 2009, respectively. Amortization related to intangible assets subject to amortization for the six months ended June 30, 2010 and 2009, was $339 million and $410 million, respectively.

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6. BORROWINGS AND BANK DEPOSITS

Borrowings are summarized in the following table.

	At
(In millions)	June 30,		December 31,
	2010		2009
Short-term borrowings
Commercial paper
U.S.	$	31,155	$	32,637
Non-U.S.		9,647		9,525
Current portion of long-term borrowings(a)(b)(c)		62,998		69,881
GE Interest Plus notes(d)		8,354		7,541
Other(c)		3,861		8,745
Total short-term borrowings	$	116,015	$	128,329

Long-term borrowings
Senior unsecured notes(a)(b)	$	269,871	$	305,535
Subordinated notes(e)		2,112		2,388
Subordinated debentures(f)		6,952		7,647
Other(c)(g)		10,764		10,751
Total long-term borrowings	$	289,699	$	326,321

Non-recourse borrowings of consolidated securitization entities(h)	$	33,411	$	3,883

Bank deposits(i)	$	37,471	$	38,923

Total borrowings and bank deposits	$	476,596	$	497,456

(a)

GECC had issued and outstanding $58,045 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 June 30, 2010 and December 31, 2009, respectively. Of the above amounts $13,000 million and $5,841 million is included in current portion of long-term borrowings at June 30, 2010 and December 31, 2009, respectively.

(b)

Included in total long-term borrowings was $2,624 million and $3,138 million of obligations to holders of guaranteed investment contracts at June 30, 2010 and December 31, 2009, respectively. GECC could be required to repay up to approximately $2,500 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 $10,400 million and $10,604 million of secured funding at June 30, 2010 and December 31, 2009, respectively, of which $3,795 million and $5,667 million is non-recourse to GECC at June 30, 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 June 30, 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 $1,533 million and $1,649 million of covered bonds at June 30, 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 $707 million.

(h)

Included at June 30, 2010 was $2,100 million of commercial paper, $11,674 million of current portion of long-term borrowings and $19,637 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 $19,816 million and $21,252 million of deposits in non-U.S. banks at June 30, 2010 and December 31, 2009, respectively, and $10,882 million and $10,476 million of certificates of deposits distributed by brokers with maturities greater than one year at June 30, 2010 and December 31, 2009, respectively.

(17)

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
	June 30,		December 31,
(In millions)	2010		2009

Unrecognized tax benefits	$	3,420	$	3,820
Portion that, if recognized, would reduce tax expense and effective tax rate(a)		1,580		1,792
Accrued interest on unrecognized tax benefits		768		713
Accrued penalties on unrecognized tax benefits		67		73
Reasonably possible reduction to the balance of unrecognized
tax benefits in succeeding 12 months		0-1000		0-650
Portion that, if recognized, would reduce tax expense and effective tax rate(a)		0-550		0-250

(a)	Some portion of such reduction may 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 generally settled in cash as GE tax payments are due. The effect of GECC on the amount of the GE consolidated tax liability from the formation of the GE NBC Universal joint venture will be settled in cash when it otherwise would have reduced the liability of the GE group absent the tax on formation.

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.

(18)

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 June 30				Six months ended June 30
(In millions)	2010		2009		2010		2009

Net earnings attributable to GECC	$	643	$	237	$	863	$	1,263
Investment securities – net		41		556		(26)		516
Currency translation adjustments – net		(2,618)		4,731		(3,978)		1,707
Cash flow hedges – net		63		593		476		1,316
Benefit plans – net		23		(17)		65		(9)
Total	$	(1,848)	$	6,100	$	(2,600)	$	4,793

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.

Changes to noncontrolling interests during the second quarter of 2010 resulted from net earnings $(13) million, dividends $(5) million, the effects of deconsolidating Regency $(979) million, AOCI $(29) million and other $(34) million. Changes to the individual components of AOCI attributable to noncontrolling interests were insignificant.

Changes to noncontrolling interests during the first six months of 2010 resulted from net earnings $(10) million, dividends $(8) million, the effects of deconsolidating Regency $(979) million, AOCI $(20) million and other $(89) million. Changes to the individual components of AOCI attributable to noncontrolling interests were insignificant.

Changes to noncontrolling interests during the second quarter of 2009 resulted from net earnings $29 million, dividends $(3) million, AOCI $1 million and other $(6) million. Changes to the individual components of AOCI attributable to noncontrolling interests were insignificant.

Changes to noncontrolling interests during the first six months of 2009 resulted from net earnings $79 million, dividends $(6) million, the effects of deconsolidating Penske Truck Leasing Co., L.P. (PTL) $(331) million, AOCI $(8) million and other $1 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.

(19)

9. REVENUES FROM SERVICES

Revenues from services are summarized in the following table.

	Three months ended June 30				Six months ended June 30
(In millions)	2010		2009		2010		2009

Interest on loans(a)	$	5,588	$	5,064	$	11,297	$	10,145
Equipment leased to others		2,769		2,927		5,530		6,412
Fees(a)		1,224		1,098		2,488		2,258
Investment income(a)(b)		110		616		269		954
Financing leases(a)		703		830		1,459		1,738
Net securitization gains(a)		–		394		–		720
Real estate investments		354		371		631		718
Associated companies(c)		460		309		1,057		474
Other items(d)(e)		921		922		1,448		2,614
Total	$	12,129	$	12,531	$	24,179	$	26,033

(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 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 $53 million and $80 million in the second quarters of 2010 and 2009, respectively, and $126 million and $243 million in the first six months 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 June 30, 2010 and December 31, 2009 of $207,605 million and $137,075 million, respectively. Assets were primarily financing receivables of $110,269 million and $82,873 million at June 30, 2010 and December 31, 2009, respectively. Total liabilities were $173,188 million and $118,708 million, consisted primarily of bank deposits of $96,430 million and $69,573 million at June 30, 2010 and December 31, 2009, respectively, and debt of $59,216 million and $48,677 million at June 30, 2010 and December 31, 2009, respectively. Revenues in the second quarters of 2010 and 2009 totaled $4,750 million and $5,125 million, respectively, and net earnings in the second quarters of 2010 and 2009 totaled $1,153 million and $554 million, respectively. Revenues in the first six months of 2010 and 2009 totaled $9,716 million and $9,340 million, respectively, and net earnings in the first six months of 2010 and 2009 totaled $2,032 million and $1,163 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.

(e)	Included a gain of $343 million on the remeasurement to fair value of our equity method investment in BAC Credomatic GECF Inc. (BAC), following our acquisition of a controlling interest in the second 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 $6,168 million and $6,629 million at June 30, 2010 and December 31, 2009, respectively, primarily 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
June 30, 2010
Assets
Investment securities
Debt
U.S. corporate	$	726		$	1,385		$	1,638		$	–		$	3,749
State and municipal		–			463			238			–			701
Residential mortgage-backed		–			1,987			46			–			2,033
Commercial mortgage-backed		–			1,368			48			–			1,416
Asset-backed		–			690			1,462			–			2,152
Corporate - non-U.S.		136			544			870			–			1,550
Government - non-U.S.		933			992			143			–			2,068
U.S. government and federal agency		47			595			–			–			642
Retained interests(d)		–			–			41			–			41
Equity
Available-for-sale		385			628			15			–			1,028
Trading		420			–			–			–			420
Derivatives(e)		–			11,504			677			(4,530)			7,651
Other(f)		–			–			486			–			486
Total	$	2,647		$	20,156		$	5,664		$	(4,530)		$	23,937

Liabilities
Derivatives	$	–		$	6,464		$	488		$	(4,538)		$	2,414
Other		–			29			–			–			29
Total	$	–		$	6,493		$	488		$	(4,538)		$	2,443

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 $374 million and $620 million at June 30, 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 June 30, 2010 and December 31, 2009, the cumulative adjustment was a gain of $8 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 June 30, 2010 and 2009 and the six months ended June 30, 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 June 30, 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
	April 1,		included in			comprehensive		and		out of			June 30,		June 30,
	2010		earnings		(a)	income		settlements		Level 3		(b)	2010		2010		(c)

Investment securities
Debt
U.S. corporate	$	1,440	$	10		$	11	$	180	$	(3)		$	1,638	$	–
State and municipal		243		–			(5)		–		–			238		–
Residential
mortgage-backed		47		–			(7)		–		6			46		–
Commercial
mortgage-backed		115		–			(6)		(61)		–			48		–
Asset-backed		1,447		4			4		78		(71)			1,462		–
Corporate - non-U.S.		970		–			(48)		(10)		(42)			870		–
Government
- non-U.S.		148		–			(21)		16		–			143		(7)
U.S. government and
federal agency		–		–			–		–		–			–		–
Retained interests		43		(1)			1		(2)		–			41		–
Equity
Available-for-sale		16		–			(1)		–		–			15		–
Trading		–		–			–		–		–			–		–
Derivatives(d)		171		40			5		8		–			224		42
Other		497		1			(45)		5		28			486		(1)
Total	$	5,137	$	54		$	(112)	$	214	$	(82)		$	5,211	$	34

(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)	Represented derivative assets net of derivative liabilities and included cash accruals of $35 million not reflected in the fair value hierarchy table.

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Changes in Level 3 Instruments for the Three Months Ended June 30, 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
	April 1,		included in			comprehensive		and		out of			June 30,		June 30,
	2009		earnings		(a)	income		settlements		Level 3		(b)	2009		2009		(c)

Investment securities
Debt
U.S. corporate	$	1,376	$	5		$	106	$	57	$	6		$	1,550	$	–
State and municipal		89		–			44		(1)		25			157		–
Residential
mortgage-backed		58		–			–		–		(7)			51		–
Commercial
mortgage-backed		50		–			–		–		–			50		–
Asset-backed		1,250		(4)			109		90		(14)			1,431		–
Corporate - non-U.S.		444		(6)			48		(34)		–			452		–
Government
- non-U.S.		124		–			15		3		–			142		–
U.S. government and
federal agency		–		–			–		–		–			–		–
Retained interests		6,444		350			127		604		–			7,525		124
Equity
Available-for-sale		15		1			3		–		–			19		–
Trading		–		–			–		–		–			–		–
Derivatives(d)(e)		398		52			(22)		(60)		12			380		54
Other		512		(9)			28		40		–			571		–
Total	$	10,760	$	389		$	458	$	699	$	22		$	12,328	$	178

(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)	Gains from derivatives were partially offset by $15 million in losses from related derivatives included in Level 2.

(e)	Represented derivative assets net of derivative liabilities and included cash accruals of $49 million not reflected in the fair value hierarchy table.

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Changes in Level 3 Instruments for the Six Months Ended June 30, 2010

(In millions)

Net realized/

Net change

unrealized

in unrealized

gains (losses)

Net realized/

included in

relating to

unrealized

accumulated

Purchases,

Transfers

instruments

gains(losses)