2Gs

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November 17, 2008 3:22 p.m.

We’re all talking about whether GM will get a lifeline from the Feds. But I hadn’t heard that GE has already gotten one, albeit not of the same sort GM is looking for. Last week the federal government, or more specifically the FDIC’s Temporary Liquidity Guarantee Program agreed to guarantee “as much as $139 billion in long- and short-term debt through next June.”

How’d they manage that? Because the company “owns a federal savings bank and a Utah industrial bank whose deposits are insured by the FDIC.”

Late Update: Let me say a bit more about this. I don’t know GE’s finances or their precise interconnections with the rest of the real economy. But given their role in all sorts of manufacturing, at least in the abstract, I can see the logic of backing their ability to sell debt. It may make a lot of sense. But we should do it because it makes a lot of sense. Not because they happen to own some bank in Utah. The financial press is filled with stories of all sorts of companies that are buying banks for no other purpose than to get a back door into the bailout funds. For a bunch of hardcore market types, I’d like to see a little more of an eye for perverse incentives. Rather than saving the banks, it looks like we’re sucking a big chunk of the economy into the banking sector. Again, drift …

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