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GENERAL ELECTRIC CAPITAL CORP - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.

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A. Results of Operations


In the accompanying analysis of financial information, we sometimes use
information derived from consolidated financial information but not presented in
our financial statements prepared in accordance with U.S. generally accepted
accounting principles (GAAP). Certain of these data are considered "non-GAAP
financial measures" under the U.S. Securities and Exchange Commission (SEC)
rules. For such measures, we have provided supplemental explanations and
reconciliations in Exhibit 99(a) to this Form 10-Q Report.

Unless otherwise indicated, we refer to captions such as revenues and earnings
from continuing operations attributable to GECC simply as "revenues" and
"earnings" throughout this Management's Discussion and Analysis. Similarly,
discussion of other matters in our condensed, consolidated financial statements
relates to continuing operations unless otherwise indicated.

Overview


Revenues in the third quarter of 2012 were $11.4 billion, a $0.6 billion (5%)
decrease from the third quarter of 2011. Revenues were reduced by $0.1 billion
as a result of dispositions. Revenues for the quarter also decreased as a result
of organic revenue declines, primarily due to lower GE Capital Ending Net
Investment (ENI) and the stronger U.S. dollar, partially offset by higher gains.
Earnings were $1.7 billion, up from $1.5 billion in the third quarter of 2011.

Revenues in the nine months ended September 30, 2012 were $34.3 billion, a $3.2
billion (9%) decrease from the nine months ended September 30, 2011. Revenues
for the nine months ended September 30, 2012 included $0.1 billion from
acquisitions and were decreased by $0.5 billion as a result of dispositions.
Revenues for the nine months ended September 30, 2012 also decreased as a result
of organic revenue declines, primarily due to lower ENI, the absence of the 2011
gain on sale of a substantial portion of our Garanti Bank equity investment
(2011 Garanti gain) and the stronger U.S. dollar. Organic revenue excludes the
effects of acquisitions, business dispositions (other than dispositions of
businesses acquired for investment) and currency exchange rates. Earnings were
$5.6 billion, up from $4.9 billion in the nine months ended September 30, 2011.

Overall, acquisitions contributed an insignificant amount and $0.1 billion to
total revenues in the third quarters of 2012 and 2011, respectively. Our
earnings in both the third quarters of 2012 and 2011 included an insignificant
amount from acquired businesses. We integrate acquisitions as quickly as
possible. Only revenues and earnings from the date we complete the acquisition
through the end of the fourth following quarter are attributed to such
businesses. Dispositions also affected our operations through lower revenues of
$0.1 billion and $0.1 billion in the third quarters of 2012 and 2011,
respectively. The effects of dispositions on earnings were an insignificant
amount and $0.1 billion in the third quarters of 2012 and 2011, respectively.

Overall, acquisitions contributed $0.1 billion and $0.2 billion to total
revenues in the nine months ended September 30, 2012 and 2011, respectively. Our
earnings in the nine months ended September 30, 2012 and 2011 included an
insignificant amount and $0.1 billion from acquired businesses, respectively. We
integrate acquisitions as quickly as possible. Only revenues and earnings from
the date we complete the acquisition through the end of the fourth following
quarter are attributed to such businesses. Dispositions also affected our
operations through lower revenues of $0.5 billion and $0.8 billion in the nine
months ended September 30, 2012 and 2011, respectively. The effects of
dispositions on earnings were $0.1 billion and an insignificant amount in the
nine months ended September 30, 2012 and 2011, respectively.

Segment Operations

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Operating segments comprise our five businesses focused on the broad markets
they serve: Commercial Lending and Leasing (CLL), Consumer, Real Estate, Energy
Financial Services and GE Capital Aviation Services (GECAS). The Chairman
allocates resources to, and assesses the performance of, these five businesses.
In addition to providing information on segments in their entirety, we have also
provided supplemental information for the geographic regions within the CLL
segment for greater clarity.



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Corporate items and eliminations include unallocated Treasury and Tax
operations; Trinity, a group of sponsored special purpose entities; certain
consolidated liquidating securitization entities; the effects of eliminating
transactions between operating segments; results of our run-off insurance
operations remaining in continuing operations attributable to GECC;
underabsorbed corporate overhead; certain non-allocated amounts determined by
the Chairman; and a variety of sundry items. Corporate items and eliminations is
not an operating segment. Rather, it is added to operating segment totals to
reconcile to consolidated totals on the financial statements.

Segment profit is determined based on internal performance measures used by the
Chairman to assess the performance of each business in a given period. In
connection with that assessment, the Chairman may exclude matters such as
charges for restructuring; rationalization and other similar expenses;
acquisition costs and other related charges; technology and product development
costs; certain gains and losses from acquisitions or dispositions; and
litigation settlements or other charges, responsibility for which preceded the
current management team.

Segment profit excludes results reported as discontinued operations, earnings
attributable to noncontrolling interests of consolidated subsidiaries, GECC
preferred stock dividends declared and accounting changes. Segment profit, which
we sometimes refer to as "net earnings", includes interest and income taxes. GE
allocates service costs related to its principal pension plans and GE no longer
allocates the retiree costs of its postretirement healthcare benefits to its
segments. This allocation methodology better aligns segment operating costs to
the active employee costs, which are managed by the segments.

On February 22, 2012, our former parent, General Electric Capital Services, Inc.
(GECS), merged with and into General Electric Capital Corporation (GECC). GECC's
continuing operations include the run-off insurance operations previously held
and managed in our former parent, GECS, and which are reported in corporate
items and eliminations. The operating businesses that are reported as segments,
including CLL, Consumer, Real Estate, Energy Financial Services and GECAS, are
not affected by the merger. Unless otherwise indicated, references to GECC and
the GE Capital segment in this Form 10-Q Report relate to the entity or segment
as they exist subsequent to the February 22, 2012 merger.

We have reclassified certain prior-period amounts to conform to the current-period presentation. Refer to the Summary of Operating Segments on page 7 for a reconciliation of the total reportable segments' profit to the consolidated net earnings attributable to the Company.

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CLL


                                     Three months ended
                                       September 30,              Nine months ended September 30,
(In millions)                         2012           2011                  2012                2011

Revenues                          $  4,124     $    4,512      $         12,707     $        13,786

Segment profit                    $    568     $      688      $          1,879     $         1,943


                                                 September
                                                       30,          December 31,       September 30,
(In millions)                                        2012                  2011                2011

Total assets                                   $  180,542      $        193,869     $       195,257


                                     Three months ended
                                       September 30,              Nine months ended September 30,
(In millions)                         2012           2011                  2012                2011

Revenues
  Americas                        $  2,641     $    2,624      $          7,989     $         8,082
  Europe                               795            940                 2,452               2,914
  Asia                                 500            585                 1,605               1,686
  Other                                188            363                   661               1,104

Segment profit
  Americas                        $    545     $      547      $          1,614     $         1,548
  Europe                                41            104                   155                 319
  Asia                                  28             68                   151                 140
  Other                                (46)           (31)                  (41)                (64)


                                                 September
                                                       30,          December 31,       September 30,
(In millions)                                        2012                  2011                2011

Total assets
  Americas                                     $  109,034      $        116,034     $       114,023
  Europe                                           44,860                46,590              47,738
  Asia                                             17,343                17,807              18,292
  Other                                             9,305                13,438              15,204




CLL revenues decreased 9% and net earnings decreased 17% in the third quarter of
2012. Revenues were reduced by $0.1 billion as a result of dispositions.
Revenues also decreased as a result of organic revenue declines ($0.1 billion),
primarily due to lower ENI ($0.2 billion), and the stronger U.S. dollar ($0.1
billion). Net earnings decreased reflecting core decreases ($0.1 billion).

CLL revenues decreased 8% and net earnings decreased 3% in the nine months ended
September 30, 2012. Revenues were reduced by $0.3 billion as a result of
dispositions. Revenues also decreased as a result of organic revenue declines
($0.5 billion), primarily due to lower ENI ($0.3 billion), and the stronger U.S.
dollar ($0.3 billion). Net earnings decreased reflecting dispositions ($0.1
billion) and core decreases.


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Consumer


                                     Three months ended            Nine months ended
                                       September 30,                 September 30,
(In millions)                         2012           2011            2012           2011

Revenues                          $  3,911     $    4,028      $   11,600     $   13,023

Segment profit                    $    749     $      803      $    2,485     $    3,086


                                                 September        December      September
                                                       30,             31,            30,
(In millions)                                        2012            2011           2011

Total assets                                   $  135,975      $  138,534     $  140,535




Consumer revenues decreased 3% and net earnings decreased 7% in the third
quarter of 2012. Revenues decreased as a result of the stronger U.S. dollar
($0.2 billion), partially offset by organic revenue growth ($0.1 billion). The
decrease in net earnings resulted primarily from core decreases ($0.1 billion),
which included higher provisions for losses on financial receivables ($0.1
billion) reflecting the use of a more granular portfolio segmentation approach,
by loss type, in determining the incurred loss period in our U.S. Installment
and Revolving Credit portfolio.

Consumer revenues decreased 11% and net earnings decreased 19% in the nine months ended September 30, 2012. Revenues included $0.1 billion from acquisitions and were reduced by $0.1 billion as a result of dispositions. Revenues also decreased as a result of the absence of the 2011 Garanti gain ($0.7 billion), the stronger U.S. dollar ($0.4 billion) and organic revenue declines ($0.3 billion). The decrease in net earnings resulted primarily from the absence of the 2011 Garanti gain and operations ($0.4 billion), core decreases ($0.1 billion), which included higher provisions for losses on financing receivables, and dispositions ($0.1 billion).

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Real Estate


                                   Three months ended September          Nine months ended
                                               30,                         September 30,
(In millions)                              2012            2011            2012           2011

Revenues                          $         948      $      935      $    2,660      $   2,834

Segment profit                    $         217      $      (82)     $      494      $    (775)


                                                       September        December      September
                                                             30,             31,            30,
(In millions)                                              2012            2011           2011

Total assets                                         $   55,349      $   60,873      $  64,449




Real Estate revenues increased 1% and net earnings were favorable in the third
quarter of 2012. Revenues increased as a result of increases in net gains on
property sales ($0.1 billion), partially offset by organic revenue declines,
primarily due to lower ENI. Real Estate net earnings increased as a result of
core increases ($0.2 billion) including higher tax benefits ($0.1 billion),
lower impairments ($0.1 billion) and increases in net gains on property sales
($0.1 billion). Depreciation expense on real estate equity investments totaled
$0.2 billion in both the third quarters of 2012 and 2011.

Real Estate revenues decreased 6% and net earnings were favorable in the nine
months ended September 30, 2012. Revenues decreased as a result of organic
revenue declines ($0.2 billion), primarily due to lower ENI, partially offset by
increases in net gains on property sales ($0.1 billion). Real Estate net
earnings increased as a result of lower impairments ($0.6 billion), core
increases ($0.5 billion) including higher tax benefits of $0.4 billion,
increases in net gains on property sales ($0.1 billion) and lower provisions for
losses on financing receivables ($0.1 billion). Depreciation expense on real
estate equity investments totaled $0.6 billion and $0.7 billion in the nine
months ended September 30, 2012 and 2011, respectively.


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Energy Financial Services


                                   Three months ended September          Nine months ended
                                               30,                         September 30,
(In millions)                              2012            2011            2012           2011

Revenues                          $         401      $      221      $    1,086      $     931

Segment profit                    $         132      $       79      $      325      $     330


                                                       September        December      September
                                                             30,             31,            30,
(In millions)                                              2012            2011           2011

Total assets                                         $   19,517      $   18,357      $  18,199




Energy Financial Services revenues increased 81% and net earnings increased 67%
in the third quarter of 2012. Revenues increased primarily as a result of higher
gains ($0.1 billion) and organic revenue growth ($0.1 billion). The increase in
net earnings resulted primarily from higher gains ($0.1 billion), partially
offset by core decreases.

Energy Financial Services revenues increased 17% and net earnings decreased 2%
in the nine months ended September 30, 2012. Revenues increased primarily as a
result of organic revenue growth ($0.2 billion) including asset sales by
investees, partially offset by lower gains ($0.1 billion). The decrease in net
earnings resulted primarily from lower gains, partially offset by core
increases.

GECAS


                                     Three months ended            Nine months ended
                                       September 30,                 September 30,
(In millions)                         2012           2011            2012           2011

Revenues                          $  1,249      $   1,265      $    3,897      $   3,917

Segment profit                    $    251      $     208      $      877      $     835


                                                 September        December      September
                                                       30,             31,            30,
(In millions)                                        2012            2011           2011

Total assets                                    $  49,276      $   48,821      $  48,613




GECAS revenues decreased 1% and net earnings increased 21% in the third quarter
of 2012. Revenues decreased as a result of higher impairments ($0.1 billion),
partially offset by organic revenue growth ($0.1 billion). The increase in net
earnings resulted primarily from core increases ($0.1 billion), partially offset
by higher impairments.

GECAS revenues decreased 1% and net earnings increased 5% in the nine months
ended September 30, 2012. Revenues decreased as a result of higher impairments
($0.1 billion) and lower gains, partially offset by organic revenue growth ($0.1
billion). The increase in net earnings resulted primarily from core increases
($0.1 billion), partially offset by higher impairments ($0.1 billion) and lower
gains.


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Corporate Items and Eliminations

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Corporate items and eliminations include an insignificant amount of Treasury
operation expenses for both the third quarters of 2012 and 2011. Corporate items
and eliminations include Treasury operation expenses for the nine months ended
September 30, 2012 and 2011 of $0.1 billion and $0.2 billion, respectively.
These Treasury results were primarily related to derivative activities that
reduce or eliminate interest rate, currency or market risk between financial
assets and liabilities.

Corporate items and eliminations include the adjustment in the third quarter to
bring our nine month tax rate in line with the projected full year tax rate and
unallocated tax benefits attributable to the high tax basis in the entity being
sold in the Business Property disposition.

Certain amounts included in corporate items and eliminations are not allocated
to the five operating businesses within the GE Capital segment because they are
excluded from the measurement of their operating performance for internal
purposes. Unallocated costs included an insignificant amount in both the third
quarters and $0.1 billion in both the nine months ended September 30, 2012 and
2011, primarily related to restructuring and other charges.

Income Taxes


Our effective income tax rate is lower than the U.S. statutory rate primarily
because of benefits from lower-taxed global operations, including the use of
global funding structures. There is a benefit from global operations as non-U.S.
income is subject to local country tax rates that are significantly below the
35% U.S. statutory rate. These non-U.S. earnings have been indefinitely
reinvested outside the U.S. and are not subject to current U.S. income tax. The
rate of tax on our indefinitely reinvested non-U.S. earnings is below the 35%
U.S. statutory rate because we have significant business operations subject to
tax in countries where the tax on that income is lower than the U.S. statutory
rate and because GECC funds the majority of its non-U.S. operations through
foreign companies that are subject to low foreign taxes.

We expect our ability to benefit from non-U.S. income taxed at less than the
U.S. rate to continue subject to changes of U.S. or foreign law, including the
expiration on December 31, 2011 of the U.S. tax law provision deferring tax on
active financial services income, as discussed in Note 10 in our Annual Report
on Form 10-K for the fiscal year ended December 31, 2011 (2011 consolidated
financial statements). If this provision is not extended, our tax rate will
increase significantly after 2012. In addition, since this benefit depends on
management's intention to indefinitely reinvest amounts outside the U.S., our
tax provision will increase to the extent we no longer intend to indefinitely
reinvest foreign earnings.

The provision for income taxes was an expense of $0.1 billion for the third
quarter of 2012 (an effective tax rate of 4.4%), compared with $0.1 billion
expense for the third quarter of 2011 (an effective tax rate of 3.7%). The
slight increase in tax expense is attributable to reduced benefits from
low-taxed global operations substantially offset by the benefit related to the
high tax basis in the entity being sold in the Business Property disposition,
which adjusted the projected full year tax rate.

The provision for income taxes was an expense of $0.4 billion for the first nine
months of 2012 (an effective tax rate of 6.1%), compared with $0.8 billion
expense for the first nine months of 2011 (an effective tax rate of 14.3%). The
tax expense decreased in the first nine months of 2012 by $0.5 billion.  The
decrease is attributable to the benefit related to the high tax basis in the
entity being sold in the Business Property disposition, and increased benefits
from low-taxed global operations, which include the absence of the first quarter
2011 highly taxed disposition of Garanti Bank. These benefits were partially
offset by higher pre-tax income and the adjustments to bring our nine month tax
rate in line with the projected full year tax rate.


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Discontinued Operations


                                   Three months ended September     Nine months ended September
                                               30,                              30,
(In millions)                          2012                2011         2012                2011

Earnings (loss) from discontinued
operations,
   net of taxes                   $    (111)     $          (64)   $    (881)     $          166



Discontinued operations primarily 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.), our U.S. mortgage
business (WMC), our U.S. recreational vehicle and marine equipment financing
business (Consumer RV Marine), Consumer Mexico, Consumer Singapore, our Consumer
home lending operations in Australia and New Zealand (Australian Home Lending)
and our Consumer mortgage lending business in Ireland (Consumer Ireland).
Results of these businesses are reported as discontinued operations for all
periods presented.

Loss from discontinued operations, net of taxes, in the three months ended September 30, 2012 primarily reflect a $0.1 billion after-tax effect of incremental reserves related to retained representation and warranty obligations to repurchase previously sold loans on the 2007 sale of WMC.

Loss from discontinued operations, net of taxes, in the three months ended September 30, 2011 primarily reflected a $0.1 billion loss from operations at our Consumer Ireland business.


Loss from discontinued operations, net of taxes, in the nine months ended
September 30, 2012 primarily reflect a $0.3 billion after-tax effect of
incremental reserves for excess interest claims related to our loss-sharing
arrangement on the 2008 sale of GE Money Japan, a $0.3 billion after-tax effect
of incremental reserves related to retained representation and warranty
obligations to repurchase previously sold loans on the 2007 sale of WMC and a
$0.2 billion loss (which includes a $0.1 billion loss on disposal) related to
Consumer Ireland.

Earnings from discontinued operations, net of taxes, in the nine months ended
September 30, 2011 primarily reflected a $0.3 billion gain related to the sale
of Consumer Singapore and earnings from operations of Australian Home Lending of
$0.1 billion, partially offset by a $0.1 billion loss on the sale of Australian
Home Lending and a $0.1 billion loss from operations at our Consumer Ireland
business.

For additional information related to discontinued operations, see Note 2 to the condensed, consolidated financial statements.

B. Statement of Financial Position

Overview of Financial Position

Major changes in our financial position for the nine months ended September 30, 2012 resulted from the following:

· Repayments exceeded new issuances of total borrowings by $28.4 billion and

collections on financing receivables exceeded originations by $9.5 billion.

· The U.S. dollar was weaker for most major currencies at September 30, 2012

than at December 31, 2011, increasing the translated levels of our non-U.S.

dollar assets and liabilities.

· We issued 22,500 shares of preferred stock for proceeds of $2.2 billion during

the second quarter of 2012 and 17,500 shares of preferred stock for proceeds

   of $1.7 billion during the third quarter of 2012. The effects of these
   issuances are reported as a $4.0 billion increase in additional paid-in
   capital.


· We paid $5.4 billion of dividends to GE.




Our assets were $561.6 billion at September 30, 2012, a $22.9 billion decrease
from December 31, 2011, and reflect a reduction of net financing receivables
($17.2 billion) and a decrease in derivative assets ($4.8 billion).



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Our liabilities decreased $27.2 billion from December 31, 2011 to $479.5 billion
at September 30, 2012, and reflect a $28.4 billion net reduction in borrowings,
primarily in long-term borrowings and commercial paper which is consistent with
our overall reduction in assets, and redemptions of guaranteed investment
contracts (GICs) at Trinity ($2.0 billion), partially offset by higher deposits
at our banks ($1.2 billion).

Cash Flows


Our cash and equivalents were $77.7 billion at September 30, 2012, compared with
$83.3 billion at September 30, 2011. Our cash from operating activities totaled
$15.0 billion for the nine months ended September 30, 2012, compared with cash
from operating activities of $16.7 billion for the same period of 2011.

Consistent with our plan to reduce our asset levels, cash from investing
activities was $16.1 billion during the nine months ended September 30, 2012,
primarily resulting from a $9.5 billion reduction in financing receivables due
to collections exceeding originations and $5.1 billion related to net loan
repayments from our equity method investments, partially offset by $3.2 billion
of net purchases of equipment leased to others (ELTO).

GECC cash used for financing activities for the nine months ended September 30,
2012 of $31.4 billion related primarily to a $28.4 billion reduction in total
borrowings, consisting primarily of reductions in long-term borrowings and
commercial paper and $2.0 billion of redemptions of guaranteed investment
contracts at Trinity, partially offset by $4.0 billion of proceeds from the
issuance of preferred stock and $1.2 billion of higher deposits at our banks.

Cash used for financing activities also included dividends to GE which represent
the distribution of a portion of GECC retained earnings. Beginning in the second
quarter of 2012, GECC restarted its dividend to GE. During the third quarter of
2012, we paid a dividend of $0.5 billion and a special dividend of $2.0 billion
to GE. During the nine months ended September 30, 2012, we paid dividends of
$0.9 billion and special dividends of $4.5 billion to GE.

Fair Value Measurements


See Note 1 in our 2011 consolidated financial statements for disclosures related
to our methodology for fair value measurements. Additional information about
fair value measurements is provided in Note 10 to the condensed, consolidated
financial statements.

At September 30, 2012, the aggregate amount of assets that are measured at fair
value through earnings totaled $6.6 billion and consisted primarily of various
assets held for sale in the ordinary course of business, as well as equity
investments.

C. Financial Services Portfolio Quality


Investment securities comprise mainly investment grade debt securities
supporting obligations to annuitants, policyholders and holders of GICs in our
run-off insurance operations and Trinity, investment securities at our treasury
operations and investments held in our CLL business collateralized by senior
secured loans of high-quality, middle-market companies in a variety of
industries. The fair value of investment securities increased to $48.7 billion
at September 30, 2012 from $47.4 billion at December 31, 2011, primarily due to
the impact of lower interest rates and additional purchases in our CLL business.
Of the amount at September 30, 2012, we held debt securities with an estimated
fair value of $47.9 billion, which included corporate debt securities,
asset-backed securities (ABS), residential mortgage-backed securities (RMBS) and
commercial mortgage-backed securities (CMBS) with estimated fair values of $26.8
billion, $5.5 billion, $2.4 billion and $3.1 billion, respectively. Net
unrealized gains on debt securities were $4.8 billion and $3.0 billion at
September 30, 2012 and December 31, 2011, respectively. This amount included
unrealized losses on corporate debt securities, ABS, RMBS and CMBS of $0.5
billion, $0.1 billion, $0.1 billion and $0.1 billion, respectively, at September
30, 2012, as compared with $0.6 billion, $0.2 billion, $0.3 billion and $0.2
billion, respectively, at December 31, 2011.



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We regularly review investment securities for impairment using both qualitative
and quantitative criteria. For debt securities, our qualitative review considers
our intent to sell the security and the financial health of and specific
prospects for the issuer, including whether the issuer is in compliance with the
terms and covenants of the security. Our quantitative review considers whether
there has been an adverse change in expected future cash flows. Unrealized
losses are not indicative of the amount of credit loss that would be recognized.
We presently do not intend to sell the vast majority of our debt securities that
are in an unrealized loss position and believe that it is not more likely than
not that we will be required to sell the vast majority of these securities
before recovery of our amortized cost. For equity securities, we consider the
length of time and magnitude of the amount that each security is in an
unrealized loss position. We believe that the unrealized loss associated with
our equity securities will be recovered within the foreseeable future.
Uncertainty in the capital markets may cause increased levels of
other-than-temporary impairments.

Our RMBS portfolio is collateralized primarily by pools of individual, direct
mortgage loans (a majority of which were originated in 2006 and 2005), not other
structured products such as collateralized debt obligations. Substantially all
of our RMBS are in a senior position in the capital structure of the deals and
more than 70% are agency bonds or insured by Monoline insurers (on which we
continue to place reliance). Of our total RMBS portfolio at September 30, 2012
and December 31, 2011, approximately $0.5 billion and $0.6 billion,
respectively, relate to residential subprime credit, primarily supporting our
guaranteed investment contracts. A majority of exposure to residential subprime
credit related to investment securities backed by mortgage loans originated in
2006 and 2005. Substantially all of the subprime RMBS were investment grade at
the time of purchase and approximately 70% have been subsequently downgraded to
below investment grade.

Our CMBS portfolio is collateralized by both diversified pools of mortgages that
were originated for securitization (conduit CMBS) and pools of large loans
backed by high quality properties (large loan CMBS), a majority of which were
originated in 2007 and 2006. The vast majority of the securities in our CMBS
portfolio have investment grade credit ratings and the vast majority of the
securities are in a senior position in the capital structure.

Our ABS portfolio is collateralized by senior secured loans of high-quality,
middle-market companies in a variety of industries, as well as a variety of
diversified pools of assets such as student loans and credit cards. The vast
majority of our ABS are in a senior position in the capital structure of the
deals. In addition, substantially all of the securities that are below
investment grade are in an unrealized gain position.

If there has been an adverse change in cash flows for RMBS, management considers
credit enhancements such as Monoline insurance (which are features of a specific
security). In evaluating the overall creditworthiness of the Monoline insurer
(Monoline), we use an analysis that is similar to the approach we use for
corporate bonds, including an evaluation of the sufficiency of the Monoline's
cash reserves and capital, ratings activity, whether the Monoline is in default
or default appears imminent, and the potential for intervention by an insurance
or other regulator.

Monolines provide credit enhancement for certain of our investment securities,
primarily RMBS and municipal securities. The credit enhancement is a feature of
each specific security that guarantees the payment of all contractual cash
flows, and is not purchased separately by GE. The Monoline industry continues to
experience financial stress from increasing delinquencies and defaults on the
individual loans underlying insured securities. We continue to rely on Monolines
with adequate capital and claims paying resources. We have reduced our reliance
on Monolines that do not have adequate capital or have experienced regulator
intervention. At September 30, 2012, our investment securities insured by
Monolines on which we continue to place reliance were $1.4 billion, including
$0.2 billion of our $0.5 billion investment in subprime RMBS. At September 30,
2012, the unrealized loss associated with securities subject to Monoline credit
enhancement, for which there is an expected credit loss, was $0.2 billion.

Total pre-tax, other-than-temporary impairment losses during the third quarter
of 2012 were an insignificant amount, which was recognized in earnings and
primarily relates to credit losses on non-U.S. corporate securities, CMBS and
RMBS.

Total pre-tax, other-than-temporary impairment losses during the third quarter
of 2011 were $0.1 billion which was recognized in earnings and primarily relates
to credit losses on non-U.S. corporate securities, non-U.S. government
securities and RMBS.

Total pre-tax, other-than-temporary impairment losses during the nine months
ended September 30, 2012 were $0.1 billion, of which $0.1 billion was recognized
in earnings and primarily relates to credit losses on non-U.S. corporate
securities and other-than-temporary losses on equity securities.




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Total pre-tax, other-than-temporary impairment losses during the nine months
ended September 30, 2011 were $0.3 billion, of which $0.2 billion was recognized
in earnings and primarily relates to credit losses on non-U.S. corporate
securities, retained interests, non-U.S. government securities and RMBS.

At September 30, 2012 and December 31, 2011, unrealized losses on investment
securities totaled $1.0 billion and $1.6 billion, respectively, including $0.9
billion and $1.2 billion, respectively, aged 12 months or longer. Of the amount
aged 12 months or longer at September 30, 2012, more than 65% are debt
securities that were considered to be investment grade by the major rating
agencies. In addition, of the amount aged 12 months or longer, $0.4 billion and
$0.4 billion related to structured securities (mortgage-backed and asset-backed)
and corporate debt securities, respectively. With respect to our investment
securities that are in an unrealized loss position at September 30, 2012, the
majority relate to debt securities held to support obligations to holders of
GICs. We presently do not intend to sell the vast majority of our debt
securities that are in an unrealized loss position and believe that it is not
more likely than not that we will be required to sell these securities before
recovery of our amortized cost. For additional information, see Note 3 to the
condensed, consolidated financial statements.

Financing receivables is our largest category of assets and represents one of
our primary sources of revenues. Our portfolio of financing receivables is
diverse and not directly comparable to major U.S. banks. A discussion of the
quality of certain elements of the financing receivables portfolio follows.

Our consumer portfolio is composed primarily of non-U.S. mortgage, sales
finance, auto and personal loans in various European and Asian countries and
U.S. consumer credit card and sales financing receivables. In 2007, we exited
the U.S. mortgage business and we have no U.S. auto or student loans.

Our commercial portfolio primarily comprises senior, secured positions with
comparatively low loss history. The secured receivables in this portfolio are
collateralized by a variety of asset classes, which for our CLL business
primarily include: industrial-related facilities and equipment, vehicles,
corporate aircraft, and equipment used in many industries, including the
construction, manufacturing, transportation, media, communications,
entertainment, and healthcare industries. The portfolios in our Real Estate,
GECAS and Energy Financial Services businesses are collateralized by commercial
real estate, commercial aircraft and operating assets in the global energy and
water industries, respectively. We are in a secured position for substantially
all of our commercial portfolio.

Losses on financing receivables are recognized when they are incurred, which
requires us to make our best estimate of probable losses inherent in the
portfolio. The method for calculating the best estimate of losses depends on the
size, type and risk characteristics of the related financing receivable. Such an
estimate requires consideration of historical loss experience, adjusted for
current conditions, and judgments about the probable effects of relevant
observable data, including present economic conditions such as delinquency
rates, financial health of specific customers and market sectors, collateral
values (including housing price indices as applicable), and the present and
expected future levels of interest rates. The underlying assumptions, estimates
and assessments we use to provide for losses are updated periodically to reflect
our view of current conditions and are subject to the regulatory examinations
process, which can result in changes to our assumptions. Changes in such
estimates can significantly affect the allowance and provision for losses. It is
possible to experience credit losses that are different from our current
estimates.

Our risk management process includes standards and policies for reviewing major risk exposures and concentrations, and evaluates relevant data either for individual loans or financing leases, or on a portfolio basis, as appropriate.


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 losses is not
carried over at acquisition. This may have the effect of causing lower reserve
coverage ratios for those portfolios.



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For purposes of the discussion that follows, "delinquent" receivables are those
that are 30 days or more past due based on their contractual terms; and
"nonearning" receivables are those that are 90 days or more past due (or for
which collection is otherwise doubtful). Nonearning receivables exclude loans
purchased at a discount (unless they have deteriorated post acquisition). Under
Financial Accounting Standards Board (FASB) Accounting Standards Codification
(ASC) 310, Receivables, these loans are initially recorded at fair value and
accrete interest income over the estimated life of the loan based on reasonably
estimable cash flows even if the underlying loans are contractually delinquent
at acquisition. In addition, nonearning receivables exclude loans that are
paying on a cash accounting basis but classified as nonaccrual and impaired.
"Nonaccrual" financing receivables include all nonearning receivables and are
those on which we have stopped accruing interest. We stop accruing interest at
the earlier of the time at which collection of an account becomes doubtful or
the account becomes 90 days past due. Recently restructured financing
receivables are not considered delinquent when payments are brought current
according to the restructured terms, but may remain classified as nonaccrual
until there has been a period of satisfactory payment performance by the
borrower and future payments are reasonably assured of collection.

Further information on the determination of the allowance for losses on financing receivables and the credit quality and categorization of our financing receivables is provided in Notes 4 and 12.

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                        Financing receivables               Nonearning receivables               Allowance for losses
                    September 30,      December 31,      September 30,     December 31,      September 30,     December 31,
(In millions)               2012              2011               2012             2011               2012             2011

Commercial
CLL
Americas          $       74,488     $      80,505     $        1,600     $      1,862     $          567     $        889
Europe                    34,916            36,899              1,533            1,167                574              400
Asia                      11,597            11,635                206              269                 72              157
Other                        659               436                 53               11                  2                4
Total CLL                121,660           129,475              3,392            3,309              1,215            1,450

Energy
 Financial
   Services                4,989             5,912                  2               22                 13               26

GECAS                     11,628            11,901                 50               55                 12               17

Other                        537             1,282                 16               65                  9               37
Total
 Commercial              138,814           148,570              3,460            3,451              1,249            1,530

Real Estate
Debt(a)                   21,225            24,501                454              541                631              949
Business
 Properties(b)             5,069             8,248                228              249                105              140
Total Real Estate         26,294            32,749                682              790                736            1,089

Consumer
Non-U.S.
 residential
  mortgages(c)            33,855            35,550              2,659            2,870                467              546
Non-U.S.
  installment
   and revolving
    credit                18,504            18,544                234              263                654              717
U.S. installment
 and revolving
  credit                  46,939            46,689                896              990              2,030            2,008
Non-U.S. auto              4,601             5,691                 27               43                 73              101
Other                      7,996             7,244                339              419                171              199
Total Consumer           111,895           113,718              4,155            4,585              3,395            3,571
Total             $      277,003     $     295,037     $        8,297     $      8,826     $        5,380     $      6,190



(a) Financing receivables included an insignificant amount and $0.1 billion of

     construction loans at September 30, 2012 and December 31, 2011,
     respectively.


(b) Our Business Properties portfolio is underwritten primarily by the credit

quality of the borrower and secured by tenant and owner-occupied commercial

     properties.



(c)  At September 30, 2012, net of credit insurance, approximately 37% of our
     Consumer non-U.S. residential mortgage portfolio comprised loans with

introductory, below market rates that are scheduled to adjust at future

dates; with high loan-to-value ratios at inception (greater than 90%); whose

terms permitted interest-only payments; or whose terms resulted in negative

amortization. At origination, we underwrite loans with an adjustable rate to

the reset value. Of these loans, 88% are in our U.K. and France portfolios,

which comprise mainly loans with interest-only payments, high loan-to-value

ratios at inception and introductory below market rates, have a delinquency

rate of 15%, have a loan-to-value ratio at origination of 82% and have

re-indexed loan-to-value ratios of 92% and 65%, respectively. At September

30, 2012, 10% (based on dollar values) of these loans in our U.K. and France

     portfolios have been restructured.





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The portfolio of financing receivables, before allowance for losses, was $277.0
billion at September 30, 2012, and $295.0 billion at December 31, 2011.
Financing receivables, before allowance for losses, decreased $18.0 billion from
December 31, 2011, primarily as a result of collections exceeding originations
($9.5 billion) (which includes sales), transfers to held-for-sale ($4.3
billion), write-offs ($4.6 billion), partially offset by the weaker U.S. dollar
($2.4 billion).

Related nonearning receivables totaled $8.3 billion (3.0% of outstanding
receivables) at September 30, 2012, compared with $8.8 billion (3.0% of
outstanding receivables) at December 31, 2011. Nonearning receivables decreased
from December 31, 2011, primarily due to write-offs and payoffs in Real Estate
and improved economic conditions and collections in the U.S. for Consumer.

The allowance for losses at September 30, 2012 totaled $5.4 billion compared
with $6.2 billion at December 31, 2011, representing our best estimate of
probable losses inherent in the portfolio. Allowance for losses decreased $0.8
billion from December 31, 2011, primarily because provisions were lower than
write-offs, net of recoveries by $0.8 billion, which is attributable to a
reduction in the overall financing receivables balance and an improvement in the
overall credit environment. The allowance for losses as a percent of total
financing receivables decreased from 2.1% at December 31, 2011 to 1.9% at
September 30, 2012 primarily due to a decrease in the allowance for losses as
discussed above, partially offset by a decline in the overall financing
receivables balance as collections exceeded originations. Further information
surrounding the allowance for losses related to each of our portfolios is
detailed below.


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The following table provides information surrounding selected ratios related to nonearning financing receivables and the allowance for losses.



                   Nonearning financing
                       receivables                  Allowance for losses              Allowance for losses
                     as a percent of                  as a percent of                   as a percent of
                                                    nonearning financing
                  financing receivables                 receivables               total financing receivables
               September                        September
                     30,       December 31,           30,       December 31,     September 30,     December 31,
                   2012               2011          2012               2011              2012             2011
Commercial
CLL
Americas            2.1  %             2.3  %       35.4  %            47.7  %            0.8  %           1.1  %
Europe              4.4                3.2          37.4               34.3               1.6              1.1
Asia                1.8                2.3          35.0               58.4               0.6              1.3
Other               8.0                2.5           3.8               36.4               0.3              0.9
Total CLL           2.8                2.6          35.8               43.8               1.0              1.1

Energy                -                0.4         650.0              118.2               0.3              0.4
Financial
Services

GECAS               0.4                0.5          24.0               30.9               0.1              0.1

Other               3.0                5.1          56.3               56.9               1.7              2.9

Total               2.5                2.3          36.1               44.3               0.9              1.0
Commercial

Real Estate
Debt                2.1                2.2         139.0              175.4               3.0              3.9
Business            4.5                3.0          46.1               56.2               2.1              1.7
Properties

Total Real          2.6                2.4         107.9              137.8               2.8              3.3
Estate

Consumer
Non-U.S.
 residential        7.9                8.1          17.6               19.0               1.4              1.5
mortgages
Non-U.S.
 installment
and
  revolving         1.3                1.4         279.5              272.6               3.5              3.9
credit
U.S.
installment
and
 revolving          1.9                2.1         226.6              202.8               4.3              4.3
credit
Non-U.S. auto       0.6                0.8         270.4              234.9               1.6              1.8
Other               4.2                5.8          50.4               47.5               2.1              2.7

Total Consumer      3.7                4.0          81.7               77.9               3.0              3.1

Total               3.0                3.0          64.8               70.1               1.9              2.1



Included below is a discussion of financing receivables, allowance for losses, nonearning receivables and related metrics for each of our significant portfolios.


CLL - Americas. Nonearning receivables of $1.6 billion represented 19.3% of
total nonearning receivables at September 30, 2012. The ratio of allowance for
losses as a percent of nonearning receivables decreased from 47.7% at December
31, 2011, to 35.4% at September 30, 2012, reflecting an overall improvement in
the credit quality of the remaining portfolio and an overall decrease in
nonearning receivables. The ratio of nonearning receivables as a percent of
financing receivables decreased from 2.3% at December 31, 2011, to 2.1% at
September 30, 2012, primarily due to reduced nonearning exposures in most of our
portfolios, partially offset by declines in overall financing receivables.
Collateral supporting these nonearning financing receivables primarily includes
assets in the restaurant and hospitality, trucking and industrial equipment
industries and corporate aircraft, and for our leveraged finance business,
equity of the underlying businesses.



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CLL - Europe. Nonearning receivables of $1.5 billion represented 18.5% of total
nonearning receivables at September 30, 2012. The ratio of allowance for losses
as a percent of nonearning receivables increased from 34.3% at December 31,
2011, to 37.4% at September 30, 2012, reflecting increases in nonearning
receivables and the allowance for losses in our Interbanca S.p.A. and
acquisition finance portfolios. The majority of our CLL - Europe nonearning
receivables are attributable to the Interbanca S.p.A. portfolio, which was
acquired in 2009. The loans acquired with Interbanca S.p.A. were recorded at
fair value, which incorporates an estimate at the acquisition date of credit
losses over their remaining life. Accordingly, these loans generally have a
lower ratio of allowance for losses as a percent of nonearning receivables
compared to the remaining portfolio. Excluding the nonearning loans attributable
to the 2009 acquisition of Interbanca S.p.A., the ratio of allowance for losses
as a percent of nonearning receivables increased from 55.9% at December 31,
2011, to 56.9% at September 30, 2012, primarily due to an increase in the
allowance for losses in our acquisition finance portfolio. The ratio of
nonearning receivables as a percent of financing receivables increased from 3.2%
at December 31, 2011, to 4.4% at September 30, 2012, for the reasons described
above. Collateral supporting these secured nonearning financing receivables are
primarily equity of the underlying businesses for our Interbanca S.p.A. business
and equipment for our equipment finance portfolio.

CLL - Asia. Nonearning receivables of $0.2 billion represented 2.5% of total
nonearning receivables at September 30, 2012. The ratio of allowance for losses
as a percent of nonearning receivables decreased from 58.4% at December 31,
2011, to 35.0% at September 30, 2012, primarily due to a decline in allowance
for losses as a result of write-offs in Japan, partially offset by collections
and write-offs of nonearning receivables in our asset-based financing businesses
in Japan. The ratio of nonearning receivables as a percent of financing
receivables decreased from 2.3% at December 31, 2011, to 1.8% at September 30,
2012, primarily due to the decline in nonearning receivables related to our
asset-based financing businesses in Japan. Collateral supporting these
nonearning financing receivables is primarily commercial real estate,
manufacturing equipment and assets in the auto industry.

Real Estate - Debt. Nonearning receivables of $0.5 billion represented 5.5% of
total nonearning receivables at September 30, 2012. The decrease in nonearning
receivables from December 31, 2011, was driven primarily by the resolution of
North American multi-family and hotel nonearning loans, through payoffs and
foreclosures, partially offset by new European retail nonearning loans. The
ratio of allowance for losses as a percent of total financing receivables
decreased from 3.9% at December 31, 2011 to 3.0% at September 30, 2012, driven
primarily by write-offs related to settlements and payoffs from impaired loan
borrowers and improvement in collateral values. The ratio of allowance for
losses as a percent of nonearning receivables decreased from 175.4% to 139.0%
reflecting write-offs and resolution of nonearning loans as mentioned above.

The Real Estate financing receivables portfolio is collateralized by
income-producing or owner-occupied commercial properties across a variety of
asset classes and markets. At September 30, 2012, total Real Estate financing
receivables of $26.3 billion were primarily collateralized by office buildings
($6.0 billion), owner-occupied properties ($5.1 billion), apartment buildings
($3.7 billion) and hotel properties ($3.4 billion). In the first nine months of
2012, commercial real estate markets continued to show signs of improved
stability and liquidity in certain markets; however, the pace of improvement
varies significantly by asset class and market and the long term outlook remains
uncertain. We have and continue to maintain an intense focus on operations and
risk management. Loan loss reserves related to our Real Estate-Debt financing
receivables are particularly sensitive to declines in underlying property
values. Assuming global property values decline an incremental 1% or 5%, and
that decline occurs evenly across geographies and asset classes, we estimate
incremental loan loss reserves would be required of less than $0.1 billion and
approximately $0.2 billion, respectively. Estimating the impact of global
property values on loss performance across our portfolio depends on a number of
factors, including macroeconomic conditions, property level operating
performance, local market dynamics and individual borrower behavior. As a
result, any sensitivity analyses or attempts to forecast potential losses carry
a high degree of imprecision and are subject to change. At September 30, 2012,
we had 119 foreclosed commercial real estate properties totaling $1.0 billion.




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Consumer - Non-U.S. residential mortgages. Nonearning receivables of $2.7
billion represented 32.0% of total nonearning receivables at September 30, 2012.
The ratio of allowance for losses as a percent of nonearning receivables
decreased from 19.0% at December 31, 2011 to 17.6% at September 30, 2012,
primarily as a result of improved portfolio quality in the U.K. and write-offs
in Hungary. Our non-U.S. mortgage portfolio has a loan-to-value ratio of
approximately 76% at origination and the vast majority are first lien positions.
Our U.K. and France portfolios, which comprise a majority of our total mortgage
portfolio, have reindexed loan-to-value ratios of 84% and 57%, respectively.
About 5% of these loans are without mortgage insurance and have a reindexed
loan-to-value ratio equal to or greater than 100%. Loan-to-value information is
updated on a quarterly basis for a majority of our loans and considers economic
factors such as the housing price index. At September 30, 2012, we had in
repossession stock 479 houses in the U.K., which had a value of approximately
$0.1 billion. The ratio of nonearning receivables as a percent of financing
receivables decreased from 8.1% at December 31, 2011 to 7.9% at September 30,
2012.

Consumer - Non-U.S. installment and revolving credit. Nonearning receivables of
$0.2 billion represented 2.8% of total nonearning receivables at September 30,
2012. The ratio of allowance for losses as a percent of nonearning receivables
increased from 272.6% at December 31, 2011 to 279.5% at September 30, 2012,
reflecting lower nonearning receivables due to improved delinquencies,
collections and write-offs primarily in Australia and New Zealand.

Consumer - U.S. installment and revolving credit. Nonearning receivables of $0.9
billion represented 10.8% of total nonearning receivables at September 30, 2012.
The ratio of allowance for losses as a percent of nonearning receivables
increased from 202.8% at December 31, 2011 to 226.6% at September 30, 2012
reflecting improved economic conditions, lower entry rates and improved
collections resulting in reductions in our nonearning receivables balance and an
increase in the allowance for losses primarily due to the use of a more granular
portfolio segmentation approach, by loss type, in determining the incurred loss
period. The ratio of nonearning receivables as a percentage of financing
receivables decreased from 2.1% at December 31, 2011 to 1.9% at September 30,
2012 primarily due to improved collections reflecting an improvement in the
overall credit environment.

Nonaccrual Financing Receivables


The following table provides details related to our nonaccrual and nonearning
financing receivables. Nonaccrual financing receivables include all nonearning
receivables and are those on which we have stopped accruing interest. We stop
accruing interest at the earlier of the time at which collection becomes
doubtful or the account becomes 90 days past due. Substantially all of the
differences between nonearning and nonaccrual financing receivables relate to
loans which are classified as nonaccrual financing receivables but are paying on
a cash accounting basis, and therefore excluded from nonearning receivables. Of
our $15.1 billion nonaccrual loans at September 30, 2012, $9.2 billion are
currently paying in accordance with their contractual terms.


                                        Nonaccrual     Nonearning
                                         financing      financing
(In millions)                          receivables    receivables

September 30, 2012

Commercial
CLL                                   $     4,736    $     3,392
Energy Financial Services                      51              2
GECAS                                         304             50
Other                                          33             16
Total Commercial                            5,124          3,460

Real Estate                                 5,633            682

Consumer                                    4,328          4,155
Total                                 $    15,085    $     8,297





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Impaired Loans


"Impaired" loans in the table below are defined 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 nonaccrual
receivables are excluded from this definition, as they represent smaller balance
homogeneous loans that we evaluate collectively by portfolio for impairment.

Impaired loans include nonearning receivables on larger balance or restructured
loans, loans that are currently paying interest under the cash basis (but are
excluded from the nonearning category), and loans paying currently but which
have been previously restructured.

Specific reserves are recorded for individually impaired loans to the extent we
have determined that it is probable that we will be unable to collect all
amounts due according to original contractual terms of the loan agreement.
Certain loans classified as impaired may not require a reserve because we
believe that we will ultimately collect the unpaid balance (through collection
or collateral repossession).

Further information pertaining to loans classified as impaired and specific reserves is included in the table below.

(In millions)                                            September 30,     December 31,
                                                                 2012             2011
Loans requiring allowance for
losses
  Commercial(a)                                        $        1,973    $       2,357
  Real Estate                                                   3,595            4,957
  Consumer                                                      3,037            2,824
Total loans requiring allowance                                 8,605           10,138
for losses

Loans expected to be fully
recoverable
  Commercial(a)                                                 3,941            3,305
  Real Estate                                                   3,882            3,790
  Consumer                                                        113               69
Total loans expected to be fully                                7,936            7,164
recoverable
Total impaired loans                                   $       16,541    $      17,302

Allowance for losses (specific
reserves)
  Commercial(a)                                        $          680    $         812
  Real Estate                                                     558              822
  Consumer                                                        658              680
Total allowance for losses                             $        1,896    $       2,314
(specific reserves)

Average investment during the                          $       16,841    $  

18,167

period

Interest income earned while                                      573              733
impaired(b)




          (a) Includes CLL, Energy Financial Services, GECAS and Other.



                   (b) Recognized principally on a cash basis.




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.

Of our $7.5 billion impaired loans at Real Estate at September 30, 2012, $6.8
billion are currently paying in accordance with the contractual terms of the
loan and are typically loans where the borrower has adequate debt service
coverage to meet contractual interest obligations. Impaired loans at CLL
primarily represent senior secured lending positions.

Our impaired loan balance at September 30, 2012 and December 31, 2011, classified by the method used to measure impairment was as follows.

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                                                September 30,     December 31,
(In millions)                                           2012             2011

Method used to measure impairment
Discounted cash flow                          $        8,307    $       8,858
Collateral value                                       8,234            8,444
Total                                         $       16,541    $      17,302


See Note 1 in our 2011 consolidated financial statements for further information on our valuation processes.


Our loss mitigation strategy is intended 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 also as impaired. Changes to Real Estate's loans primarily include
maturity extensions, principal payment acceleration, changes to collateral terms
and cash sweeps, which are in addition to, or sometimes in lieu of, fees and
rate increases. The determination of whether these changes to the terms and
conditions of our commercial loans meet the TDR criteria includes our
consideration of all relevant facts and circumstances. At September 30, 2012,
TDRs included in impaired loans were $13.8 billion, primarily relating to Real
Estate ($6.5 billion), CLL ($4.2 billion) and Consumer ($3.0 billion).

Real Estate TDRs decreased from $7.0 billion at December 31, 2011 to $6.5
billion at September 30, 2012, primarily driven by resolution of TDRs through
paydowns, restructuring and foreclosures, partially offset by extensions of
loans scheduled to mature during 2012, some of which were classified as TDRs
upon modification. For borrowers with demonstrated operating capabilities, we
work to restructure loans when the cash flow and projected value of the
underlying collateral support repayment over the modified term. We deem loan
modifications to be TDRs when we have granted a concession to a borrower
experiencing financial difficulty and we do not receive adequate compensation in
the form of an effective interest rate that is at current market rates of
interest given the risk characteristics of the loan or other consideration that
compensates us for the value of the concession. For the nine months ended
September 30, 2012, we modified $3.6 billion of loans classified as TDRs
substantially all in our Debt portfolio. Changes to these loans primarily
included maturity extensions, principal payment acceleration, changes to
collateral or covenant terms and cash sweeps, which are in addition to, or
sometimes in lieu of, fees and rate increases. The limited liquidity and higher
return requirements in the real estate market for loans with higher
loan-to-value (LTV) ratios has typically resulted in the conclusion that the
modified terms are not at current market rates of interest, even if the modified
loans are expected to be fully recoverable. We received the same or additional
compensation in the form of rate increases and fees for the majority of these
TDRs. Of our $4.6 billion of modifications classified as TDRs in the last twelve
months, $0.2 billion have subsequently experienced a payment default in the last
nine months.

The substantial majority of the Real Estate TDRs have reserves determined based
upon collateral value. Our specific reserves on Real Estate TDRs were $0.4
billion at September 30, 2012 and $0.6 billion at December 31, 2011, and were
6.8% and 8.4%, respectively, of Real Estate TDRs. In many situations these loans
did not require a specific reserve as collateral value adequately covered our
recorded investment in the loan. While these modified loans had adequate
collateral coverage, we were still required to complete our TDR classification
evaluation on each of the modifications without regard to collateral adequacy.

We utilize certain short-term (three months or less) loan modification programs
for borrowers experiencing temporary financial difficulties in our Consumer loan
portfolio. These loan modification programs are primarily concentrated in our
non-U.S. residential mortgage and non-U.S. installment and revolving portfolios.
We sold our U.S. residential mortgage business in 2007 and as such, do not
participate in the U.S. government-sponsored mortgage modification programs. For
the nine months ended September 30, 2012, we provided short-term modifications
of approximately $0.6 billion of consumer loans for borrowers experiencing
financial difficulties, substantially all in our non-U.S. residential mortgage,
credit card and personal loan portfolios, which are not classified as TDRs. For
these modified loans, we provided insignificant interest rate reductions and
payment deferrals, which were not part of the terms of the original contract. We
expect borrowers whose loans have been modified under these short-term programs
to continue to be able to meet their contractual obligations upon the conclusion
of the short-term modification. In addition, we have modified $1.3 billion of
consumer loans for the nine months ended September 30, 2012, which are
classified as TDRs. Further information on Consumer impaired loans is provided
in Note 12 to the condensed, consolidated financial statements.



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Delinquencies

For additional information on delinquency rates at each of our major portfolios, see Note 12 to the condensed, consolidated financial statements.

GECC Selected European Exposures


At September 30, 2012, we had $89 billion in financing receivables to consumer
and commercial customers in Europe. The GECC financing receivables portfolio in
Europe is well diversified across European geographies and customers.
Approximately 87% of the portfolio is secured by collateral and represents
approximately 500,000 commercial customers. Several European countries,
including Spain, Portugal, Ireland, Italy, Greece and Hungary ("focus
countries"), have been subject to credit deterioration due to weaknesses in
their economic and fiscal situations. The carrying value of GECC funded
exposures in these focus countries and in the rest of Europe comprised the
following at September 30, 2012.

                                                                                       Rest of      Total
September 30,
2012 (In           Spain      Portugal    Ireland     Italy      Greece    Hungary     Europe       Europe
millions)

Financing
receivables,
  before
allowance
  for losses on

financing $ 2,029$ 497$ 353$ 7,270$ 57$ 3,061$ 77,237$ 90,504 receivables


Allowance for
losses on

financing (105) (27) (12) (348) -

    (94)     (1,399)      (1,985)
receivables

Financing
receivables,
  net of
allowance
  for losses on     1,924          470        341      6,922         57    
 2,967      75,838       88,519
  financing
receivables(a)(b)

Investments(c)(d)     115            -          -        494          -        221       1,838        2,668

Cost and equity
method
  investments(e)      386           22        350         63         32          2         680        1,535

Derivatives,
  net of                3            -          -         84          -          -         159          246
collateral(c)(f)

ELTO(g)               535           63        311        873        256        349       9,871       12,258

Real estate held
for
  investment(g)       795            -          -        406          -          -       6,248        7,449

Total funded      $ 3,758    $     555    $ 1,002    $ 8,842     $  345    $ 3,539    $ 94,634    $ 112,675
exposures(h)

Unfunded          $    19    $       9    $    28    $   370     $    5    $   632    $  8,460    $   9,523
commitments




(a) Financing receivable amounts are classified based on the location or nature

     of the related obligor.


(b) Substantially all relates to non-sovereign obligors. Includes residential

mortgage loans of approximately $33.6 billion before consideration of

purchased credit protection. We have third-party mortgage insurance for

approximately 14% of these residential mortgage loans, substantially all of

which were originated in the U.K., Poland and France.

(c) Investments and derivatives are classified based on the location of the

parent of the obligor or issuer.

(d) Includes $1.0 billion related to financial institutions, $0.3 billion related

to non-financial institutions and $1.4 billion related to sovereign issuers.

Sovereign issuances totaled $0.1 billion and $0.2 billion related to Italy

     and Hungary, respectively. We held no investments issued by sovereign
     entities in the other focus countries.



(e)  Substantially all is non-sovereign.



(f)  Net of cash collateral; entire amount is non-sovereign.


(g) These assets are held under long-term investment and operating strategies,

and our ELTO strategies contemplate an ability to redeploy assets under lease

     should default by the lessee occur. The values of these assets could be
     subject to decline or impairment in the current environment.


(h) Excludes $42.6 billion of cash and equivalents, which is composed of $23.5

billion of cash on short-term placement with highly rated global financial

institutions based in Europe, sovereign central banks and agencies or supra

national entities, of which $1.2 billion is in focus countries, and $19.1

billion of cash and equivalents placed with highly rated European financial

institutions on a short-term basis, secured by U.S. Treasury securities

($11.1 billion) and sovereign bonds of non-focus countries ($8.0 billion),

where the value of our collateral exceeds the amount of our cash exposure.





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We manage counterparty exposure, including credit risk, on an individual
counterparty basis. We place defined risk limits around each obligor and review
our risk exposure on the basis of both the primary and parent obligor, as well
as the issuer of securities held as collateral. These limits are adjusted on an
ongoing basis based on our continuing assessment of the credit risk of the
obligor or issuer. In setting our counterparty risk limits, we focus on high
quality credits and diversification through spread of risk in an effort to
actively manage our overall exposure. We actively monitor each exposure against
these limits and take appropriate action when we believe that risk limits have
been exceeded or there are excess risk concentrations. Our collateral position
and ability to work out problem accounts has historically mitigated our actual
loss experience. Delinquency experience has been relatively stable in our
European commercial and consumer platforms in the aggregate, and we actively
monitor and take action to reduce exposures where appropriate. Uncertainties
surrounding European markets could have an impact on the judgments and estimates
used in determining the carrying value of these assets.

Other assets comprise mainly real estate equity properties and investments,
equity and cost method investments, derivative instruments and assets held for
sale, and totaled $64.9 billion at September 30, 2012, a decrease of $10.7
billion, primarily related to decreases in the fair value of derivative
instruments ($4.8 billion), decreases in our Penske investment ($4.0 billion)
and the sale of certain held-for-sale real estate and aircraft ($3.1 billion),
partially offset by the consolidation of an entity involved in power generating
activities ($1.5 billion). During the nine months ended September 30, 2012, we
recognized $0.1 billion of other-than-temporary impairments of cost and equity
method investments, excluding those related to real estate.

Included in other assets are Real Estate equity investments of $22.6 billion and
$23.9 billion at September 30, 2012 and December 31, 2011, respectively. Our
portfolio is diversified, both geographically and by asset type. We review the
estimated values of our commercial real estate investments at least annually, or
more frequently as conditions warrant. Based on the most recent valuation
estimates available, the carrying value of our Real Estate investments exceeded
their estimated value by about $2.6 billion. Commercial real estate valuations
in 2011 and the first nine months of 2012 showed signs of improved stability and
liquidity in certain markets, primarily in the U.S.; however, the pace of
improvement varies significantly by asset class and market. Accordingly, there
continues to be risk and uncertainty surrounding commercial real estate values.
Declines in estimated value of real estate below carrying amount result in
impairment losses when the aggregate undiscounted cash flow estimates used in
the estimated value measurement are below the carrying amount. As such,
estimated losses in the portfolio will not necessarily result in recognized
impairment losses. During both the three and nine months ended September 30,
2012, Real Estate recognized pre-tax impairments of $0.1 billion in its real
estate held for investment, which were primarily driven by declining cash flow
projections for properties in Japan and Europe. Real Estate investments with
undiscounted cash flows in excess of carrying value of 0% to 5% at September 30,
2012 had a carrying value of $1.0 billion and an associated estimated unrealized
loss of an insignificant amount. Continued deterioration in economic conditions
or prolonged market illiquidity may result in further impairments being
recognized.

D. Liquidity and Borrowings

We maintain a strong focus on liquidity. We manage our liquidity to help provide access to sufficient funding to meet our business needs and financial obligations throughout business cycles.


Our liquidity and borrowing plans for GE and GECC are established within the
context of our annual financial and strategic planning processes. At GE, our
liquidity and funding plans take into account the liquidity necessary to fund
our operating commitments, which include primarily purchase obligations for
inventory and equipment, payroll and general expenses (including pension
funding). We also take into account our capital allocation and growth
objectives, including paying dividends, repurchasing shares, investing in
research and development and acquiring industrial businesses. At GE, we rely
primarily on cash generated through our operating activities, any dividend
payments from GECC, and also have historically maintained a commercial paper
program that we regularly use to fund operations in the U.S., principally within
fiscal quarters. During the third quarter of 2012, we paid a dividend of $0.5
billion and a special dividend of $2.0 billion to GE. During the nine months
ended September 30, 2012, we paid dividends of $0.9 billion and special
dividends of $4.5 billion to GE.

GECC's liquidity position is targeted to meet our obligations under both normal
and stressed conditions. GECC establishes a funding plan annually that is based
on the projected asset size and cash needs of GE, which over the past few years,
has included GE's strategy to reduce its ending net investment in GE Capital.
GECC relies on a diversified source of funding, including the unsecured term
debt markets, the global commercial paper markets, deposits, secured funding,
retail funding products, bank borrowings and securitizations to fund its balance
sheet, in addition to cash generated through collection of principal, interest
and other payments on our existing portfolio of loans and leases to fund its
operating and interest expense costs.



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Our 2012 funding plan anticipates repayment of principal on outstanding
short-term borrowings, including the current portion of our long-term debt
($82.7 billion at December 31, 2011), through issuance of long-term debt and
reissuance of commercial paper, cash on hand, collections of financing
receivables exceeding originations, dispositions, asset sales, and deposits and
other alternative sources of funding. Long-term maturities were $13 billion in
the third quarter of 2012. Interest on borrowings is primarily repaid through
interest earned on existing financing receivables. During the third quarter of
2012, we earned interest income on financing receivables of $5.1 billion, which
more than offset interest expense of $2.8 billion.

We maintain a detailed liquidity policy for GECC which includes a requirement to
maintain a contingency funding plan. The liquidity policy defines our liquidity
risk tolerance under different stress scenarios based on our liquidity sources
and also establishes procedures to escalate potential issues. We actively
monitor our access to funding markets and our liquidity profile through tracking
external indicators and testing various stress scenarios. The contingency
funding plan provides a framework for handling market disruptions and
establishes escalation procedures in the event that such events or circumstances
arise.

We are a savings and loan holding company under U.S. law and became subject to
Federal Reserve Board (FRB) supervision on July 21, 2011, the one-year
anniversary of the Dodd-Frank Wall Street Reform and Consumer Protection Act
(DFA).  The FRB has recently finalized a regulation that requires certain
organizations it supervises to submit annual capital plans for review, including
institutions' plans to make capital distributions, such as dividend payments.
The applicability and timing of this proposed regulation to GECC is not yet
determined; however, the FRB has indicated that it expects to extend these
requirements to large savings and loan holding companies through separate
rulemaking or by order. While GECC is not yet subject to this regulation, GECC's
capital allocation planning is still subject to FRB review. The FRB recently
proposed regulations to revise and replace its current rules on capital
adequacy. The proposed regulations would apply to savings and loan holding
companies like GECC. The transition period for achieving compliance with the
proposed regulations following final adoption is unclear. As expected, the U.S.
Financial Stability Oversight Council (FSOC) recently notified GECC that it is
under consideration for a proposed determination as a nonbank systemically
important financial institution (nonbank SIFI) under the DFA. While not final,
such a determination would subject GECC to proposed enhanced supervisory
standards.

Actions taken to strengthen and maintain our liquidity are described in the following section.

Liquidity Sources

We maintain liquidity sources that consist of cash and equivalents and a portfolio of high-quality, liquid investments (Liquidity Portfolio) and committed unused credit lines.


GE has consolidated cash and equivalents of $85.5 billion at September 30, 2012,
which is available to meet its needs. Of this, approximately $8 billion is held
at GE and approximately $78 billion is held at GECC.

In addition to GE's $85.5 billion of consolidated cash and equivalents, we have
a centrally-managed portfolio of high-quality, liquid investments with a fair
value of $3.0 billion at September 30, 2012. The Liquidity Portfolio is used to
manage liquidity and meet our operating needs under both normal and stress
scenarios. The investments consist of unencumbered U.S. government securities,
U.S. agency securities, securities guaranteed by the government, supranational
securities, and a select group of non-U.S. government securities. We believe
that we can readily obtain cash for these securities, even in stressed market
conditions.

We have committed, unused credit lines totaling $48.5 billion that have been
extended to us by 51 financial institutions at September 30, 2012. These lines
include $32.1 billion of revolving credit agreements under which we can borrow
funds for periods exceeding one year. Additionally, $16.4 billion are 364-day
lines that contain a term-out feature that allows us to extend borrowings for
one or two years from the date of expiration of the lending agreement.

GE consolidated cash and equivalents of $54.8 billion at September 30, 2012 are
held outside of the U.S. Of this amount at quarter-end, $13.0 billion is
indefinitely reinvested. Indefinitely reinvested cash held outside of the U.S.
is available to fund operations and other growth of non-U.S. subsidiaries; it is
also used to fund our needs in the U.S. on a short-term basis through short-term
loans, without being subject to U.S. tax. Under the Internal Revenue Code, these
loans are permitted to be outstanding for 30 days or less and the total of all
such loans are required to be outstanding for less than 60 days during the year.



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$1.5 billion of GE cash and equivalents is held in countries with currency
controls that may restrict the transfer of funds to the U.S. or limit our
ability to transfer funds to the U.S. without incurring substantial costs. These
funds are available to fund operations and growth in these countries and we do
not currently anticipate a need to transfer these funds to the U.S.

At GECC, about $9 billion of cash and equivalents are in regulated banks and insurance entities and are subject to regulatory restrictions.

If we were to repatriate indefinitely reinvested cash held outside the U.S., we would be subject to additional U.S. income taxes and foreign withholding taxes.

Funding Plan

GE reduced its GE Capital ending net investment, excluding cash and equivalents, from $513 billion at January 1, 2009 to $425 billion at September 30, 2012.


Through September 30, 2012, we completed issuances of $28.9 billion of senior
unsecured debt with maturities up to 25 years (and subsequent to September 30,
2012, an additional $1.1 billion). Average commercial paper borrowings during
the third quarter were $41.5 billion, and the maximum amount of commercial paper
borrowings outstanding during the third quarter was $43.1 billion. Our
commercial paper maturities are funded principally through new commercial paper
issuances.

Under the Federal Deposit Insurance Corporation's (FDIC) Temporary Liquidity
Guarantee Program (TLGP), the FDIC guaranteed certain senior, unsecured debt
issued by GECC on or before October 31, 2009 for which we paid $2.3 billion of
fees to the FDIC for our participation. Our TLGP-guaranteed debt has remaining
maturities of $13 billion in 2012. We anticipate funding these and our other
long-term debt maturities through a combination of existing cash, new debt
issuances, collections exceeding originations, dispositions, asset sales,
deposits and other alternative sources of funding. 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.

We securitize financial assets as an alternative source of funding. During 2012,
we completed $12.8 billion of non-recourse issuances and had maturities of $10.9
billion. At September 30, 2012, non-recourse borrowings were $31.2 billion.

We have deposit-taking capability at 12 banks outside of the U.S. and two banks
in the U.S. - GE Capital Retail Bank (formerly GE Money Bank), a Federal Savings
Bank (FSB), and GE Capital Financial Inc., an industrial bank (IB). The FSB and
IB currently issue certificates of deposit (CDs) in maturity terms from three
months to ten years.

Total alternative funding at September 30, 2012 was $68 billion, composed mainly of $45 billion bank deposits, $8 billion of funding secured by real estate, aircraft and other collateral and $8 billion GE Interest Plus notes. The comparable amount at December 31, 2011 was $66 billion.

Credit Ratings


On April 3, 2012, Moody's Investors Service (Moody's) announced that it had
downgraded the senior unsecured debt rating of GE by one notch from Aa2 to Aa3
and the senior unsecured debt rating of GECC by two notches from Aa2 to A1. The
ratings downgrade does not affect GE's and GECC's short-term funding ratings of
P-1, which were affirmed by Moody's. Moody's ratings outlook for GE and GECC is
stable. We did not experience any material operational, funding or liquidity
impacts from this ratings downgrade.


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As further disclosed in our 2011 consolidated financial statements, GECC had
fully guaranteed repayment of $4.1 billion of guaranteed investment contract
(GIC) obligations of Trinity. As a result of Moody's downgrade, substantially
all of these GICs became redeemable by the holders. In addition, another
consolidated entity also had issued GICs where proceeds are loaned to GECC and
$1.1 billion of these GICs became redeemable by the holders. During the second
and third quarters of 2012, holders of $2.4 billion in principal amount of GICs
redeemed their holdings and GECC made related cash payments. These redemptions
were fully considered in our previously discussed liquidity plan. The remaining
outstanding GICs will continue to be subject to the existing terms and
maturities of their respective contracts. Following the redemption period, if
the long-term credit ratings of GECC were to fall below AA-/A2 or the short-term
credit ratings were to fall below A-1+/P-1, GECC could be required to provide up
to $1.5 billion as of September 30, 2012, to repay holders of Trinity GICs. If
the long-term credit ratings of GECC were to fall below AA-/A2, GECC could be
required to provide up to $0.7 billion as of September 30, 2012 to repay holders
of certain GICs.

Additionally, there were other contracts affected by the downgrade with
provisions requiring us to provide additional funding, post collateral and make
other payments. The total cash and collateral impact of these contracts was less
than $0.5 billion.

Income Maintenance Agreement

As set forth in Exhibit 12 hereto, GECC's ratio of earnings to fixed charges was
1.61:1 during the nine months ended September 30, 2012 due to higher pre-tax
earnings at GECC, which were primarily driven by lower losses and delinquencies.
For additional information, see the Income Maintenance Agreement section in the
Management's Discussion and Analysis of Financial Condition and Results of
Operations in our 2011 consolidated financial statements.
Wordcount: 12358



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