FDIC plans to close down Temporary Liquidity Guarantee Program

CIT Group got into trouble because it wasn't included in a government plan to guarantee new debt from financial institutions. However, all lenders will soon lose the ability to obtain those guarantees, as on Oct. 31 the Federal Deposit Insurance Corp. intends to close down the Temporary Liquidity Guarantee Program. 

According to SNL Finance, General Electric's finance subsidiary GE Capital has continued to sell TLGP debt -- a total of $46 billion worth, with the latest issues coming last week. 's last TLGP issue took place in the last week of June.

Both GE Capital and CIT funded themselves in wholesale markets. Granted, GE Capital has prefunded many of its upcoming debt maturities, and it also is shrinking its balance sheet, reducing the need for new debt. According to its annual report, GE Capital's maturity schedule looks challenging, with $62.9 billion of long-term debt coming due next year, and $52.8 billion in 2011.

If GE Capital had been issuing a lot of nonguaranteed debt there would be less concern; the $9 billion it has done this year is stunted by its TLGP total. TLGP rules demanded that once borrowers tapped the program they had to use it for all debt issues with maturities of as much as three years. But that condition expired June 30. Investors should now track how much nonguaranteed debt GE Capital issues.

In addition, GE Capital's TLGP issuance also affects GE's relationship with the government. The taxpayer has no exposure to CIT through the TLGP debt, perhaps that`s why the lender has been left to struggle so long. But the government is financing more than $45 billion of debt at GE Capital. That surely gives Washington an extra incentive to aid GE's finance business in the future, if it ever needs it.