Treasury: AIG and GE Capital Potential Threats to U.S. Economy
The Treasury's Financial Stability Oversight Council announced today that AIG and General Electric's GE Capital have been designated as the first two nonbank financial companies to pose a potential threat to U.S. financial stability.
"These designations will help protect the financial system and broader economy from the types of risks that contributed to the financial crisis," said Treasury Secretary and FSOC Chairperson Jacob Lew in a statement today. "The Council will continue to review additional companies in the designations process, to address remaining threats to financial stability."
In making its decision, the council didn't examine the actual financial stability of either company, but rather the potential widespread economic ramifications from any "material financial distress."
For AIG (link opens a PDF), the FSOC pointed to its size, interconnectedness, and relative liquidity as warning signs for a potential larger economic effect.
For GE Capital (link opens a PDF), its connection with financial intermediaries via its role as a significant global economic player pointed to potential trouble.
Although this latest designation has no direct effect on either corporation's financial standing or investment rating, both will now be subject to supervision by the Board of Governors, as well as "enhanced prudential standards."
The article Treasury: AIG and GE Capital Potential Threats to U.S. Economy originally appeared on Fool.com.Fool contributor Justin Loiseau owns shares of General Electric Company. You can follow him on Twitter, @TMFJLo, and on Motley Fool CAPS, @TMFJLo.The Motley Fool recommends AIG, owns shares of AIG and General Electric, and has options on AIG. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.