GE mulled bank charter as credit markets chilled

WASHINGTON/BOSTON (Reuters) - As General Electric (GE.N) faced a recent credit crunch, the U.S. conglomerate considered seeking a bank charter that would give it access to government lending channels, sources familiar with the company's thinking said on Friday.

Earlier this month, GE raised roughly $15 billion in a capital boost that the company said was meant to preserve its financial flexibility.

As the company contemplated the global credit crunch, it mulled becoming a bank holding company in order to access borrowing from the Federal Reserve, said the sources familiar with the company's thinking.

"If Goldman and Morgan Stanley became bank holding companies, certainly you'd expect us to at least evaluate what would that mean for us as a backup alternative to whatever we're doing," Keith Sherin, GE's chief financial officer, told Reuters on Friday in a phone interview.

Late last month, investment banks Goldman Sachs (GS.N) and Morgan Stanley (MS.N) became bank holding companies in order to access lending from the Federal Reserve.

The global credit crunch has tightened to the point where even blue-chip companies like GE and Goldman are relying on investors side-deals and government credits to fund themselves and avoid walking bare into hostile capital markets.

GE PUSHED BAILOUT

Last week, Congress authorized the Treasury Department to purchase up to $700 billion in soured investments from financial services companies to help them scrub their balance sheets and return to normal lending.

Lobbyists for GE beseeched lawmakers to pass that rescue in order to restore some order to the markets.

The image of General Electric as principally a manufacturing titan no longer fits the reality of a firm that has disparate investments and a large financial services arm, GE Capital, which saw its profits drop 33 percent in the third quarter.

As lawmakers debated the rescue legislation, Senate Banking Chairman Christopher Dodd of Connecticut told his colleagues that GE's woes illustrated the need for quick action, said sources familiar with Congressional meetings.

The Connecticut-based company, which is a big player in the commercial paper market, was mindful of the need to keep that market moving.

While GE has said that it continues to have easy access to private capital, the company went so far as to consider the radical idea of becoming a bank holding company so that it might offload assets at the Fed lending window.

In such a move, General Electric would have been regulated by the central bank and the access to new loans would have come at the cost of greater oversight.

In the end, General Electric found another option.

Just as Goldman Sachs had done a week earlier, General Electric convinced Warren Buffet to buy a stake in the company to sooth investor anxiety before calling a general stock sale.

(Reporting by Patrick Rucker in Washington and Scott Malone in Boston; Editing by Diane Craft)