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Wednesday, March 04, 2009

 

GE neck-deep in eastern europe


john hempton of bronte. the summary is that, even as general electric de-risked by selling some mortgage and insurance units, it deepened its exposure to eastern europe. now that the worm has turned, GE -- rather than raising reserves, is draining them to try to trick the market over GE capital's "earnings".

bronte has devoted considerable time to analyzing GE. he notes that the parent is defintiely tied to GE capital and admits that he does not know if it can survive.

in any case, the stock is tanking and the CDS have blown up, which is feeding the downdraft as karl denninger lays out. there is almost certainly a credit downgrade on the way, one which will be quite costly for GE; indeed as structured finance of all kinds is being downgraded en masse GE may be faced with a multiple-notch downgrade and fall quickly into a liquidity spiral, being unable to participate in the fed's commerical paper program which was essentially designed to save GE back in october.

alongside denninger, todd harrison is anticipating action on credit default swaps soon.

UPDATE: henry blodget on GE.

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