To prevent another financial meltdown like the one that took place in September 2008, where banking institutions required bailouts from the federal government, a list of “systemically important financial institutions was developed,” or SIFIs. Like other companies on the SIFI list, such as Goldman Sachs and Bank of America, GE has been under Federal Reserve scrutiny since the list, created by the Financial Stability Board, was approved at the Seoul, Korea G20 Summit.
By selling off its lending division last year, GE relinquished half its financial business profits and feels it no longer should have to abide by the requirements of the Board.
The remnants of GE Capital, the company’s finance arm, are “smaller, simpler and less interconnected with the U.S. financial system,” the company said, and the unit “does not pose any conceivable threat to U.S. financial stability.”
If approved, GE’s financial arm would no longer be tagged as “too big to fail.”
Yesterday, MetLife won a similar court ruling, escaping the need to be under tough federal scrutiny.
“A federal judge in Washington struck down the designation on Wednesday in a decision that could shake up the financial regulatory reform implemented following the 2008 recession,” Bloomberg reported. “The ruling might give ammunition to Republican lawmakers who’ve argued that regulators have abused their authority under the Dodd-Frank Act.”
If GE also wins, we can expect an avalanche of new filings by financial and insurance institutions.