General Electric


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Update of April 25, 2003: the GE Capital savings bank proposal discussed below on this page was finally "consummated" in March 2003 -- just prior to (and in connection with) GE's proposal to acquire Conseco's Mill Creek Bank. Updates will be in ICP's new GE Watch Report.

Update of October 29, 2001: on October 23, the FDIC's board voted to adopt a new regulation "clarifying" that GE Capital's credit card issuer, Monogram Bank, qualifies as a state bank and can override state consumer protection laws. The FDIC has repeated tried to intervene in the ongoing case against GE's Monogram, and has been rebuffed. Now, the FDIC simply adopts a rule, to allow GE's Monogram to evade the Louisiana interest rate cap. That's not electrical power -- that's political power...

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     In December 1997, General Electric applied to the Office of Thrift Supervision to convert GE Capital Consumer Card Co. from a limited purpose state commercial bank to a  federal thrift charter.

    The New York Times of December 25, 1997, at D6, reported that GE Capital said “that a Federal savings and loan charter would allow the bank, the GE Capital Consumer Card Company, to offer a wider array of banking services.”  See also Investor’s Business Daily of December 26, 1997, at A1: “The financial unit of GE said that a federal thrift charter would allow its state-chartered GE Capital Consumer Card bank to offer a wider array of banking services. If OK’d, the new thrift would also benefit from the Office of Thrift Supervision’s ability to pre-empt various that laws...”.

    But GE’s application tothe Office of Thrift Supervision stated that would be no change to GE Capital Consumer Card Co.’s current CRA Statement (or presumably CRA assessment area), and beyond that confined all discussion of CRA to a confidential exhibit.

    Inner City Press/Community on the Move, and the Inner City Public Interest Law Center (together, "ICP"), seeing this, both opposed the proposal and requested the withheld CRA information under the Freedom of Information Act..  

What is apparent is the GE is simply trying to get a thrift charter, and its powers, including powers to preempt state laws, now, before Congress passes a law closing the unitary thrift holding company loophole.  See ICP's overview on the numerous thrift charter applications by insurance and other companies currently pending at the OTS, on ICP's CRA Hot Issues page.  See also the OTS' conditional approval of Travelers, FSB's charter application, where, after protest by ICP and the Delaware Community Reinvestment Action Council (DCRAC), Travelers took on a CRA duty everywhere it does business, in 44 states.

   While Travelers Group is perceived as “a big insurance” company, whereas GE Capital is perceived as “a non-traditional [prospective thrift] owner,” this application is quite similar to Travelers’. It is similar because it involves the proposed conversion of an existing state-chartered bank, that has heretofore focused on credit card lending; furthermore, just as the state-chartered Travelers Bank was affiliated with a large mortgage lender (Commercial Credit), GE Capital Consumer Card Co. is affiliated with an very large mortgage lender: GE Capital Mortgage Services (“GE Mortgage”), the lending patterns of which are analyzed below.

   Furthermore, just as the complexity / diversity of the Travelers Group gave rise to a number of consumer protection conditions in the OTS’s Travelers order, it is important to note that GE is even more complex and diversified than the Travelers Group. GE is the world’s largest company / conglomerate by market capitalization (Reuters of February 2, 1998, 7:37 a.m.). Through GE Capital, GE offers “a broad array of financial services including consumer financing, commercial and industrial financing, real estate financing, asset management and leasing, mortgage services, consumer savings and insurance services, specialty insurance and reinsurance.” GE Form 10K at 2. GE Capital also offers satelite communications.

    Even broader (and requiring even more scrutiny and conditions than Travlers), GE’s products include lighting products, appliances, industrial automation products and components, motors, electrical distribution and control equipment, locomotives, power generation and delivery products, nuclear reactors and nuclear power support services, commercial and military aircraft jet engines, materials including plastics, silicones and superabrasives, and “a wide variety of high-technology products, including products used in medical diagnostic applications.” Id. Those are (some of) GE’s products; here are some of its “services:” computer-related information services, network television services (through NBC), etc.

   GE is not only a “non-traditional” proposed owner of a federal savings bank -- it is a uniquely diversified conglomerate, the largest in the world by market capitalization. Detailed firewalls and consumer protections would be needed if this application were to be considered for approval; none are discussed or proposed in the application as provided to ICP. ICP will be commenting further on this issue, after it receives the portions of the application that have been withheld from it. ICP has also prospectively requested copies of GE’s amendments and/or supplements to the applications.

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    GE Capital Mortgage Services (Respondent ID # 3002310011; based in Cherry Hill, New Jersey) is a major nationwide mortgage lender, having originated 28,964 HMDA-reported loans in 1996. For fully 9,379 of these loans, GE Mortgage reported “race not provided” -- a presumptive violation of HMDA’s requirement that lenders request and report race, national origin and other information as to all loans and applications.

    Indicative of GE Mortgage’s lending patterns, in 1996 in the Long Island, New York MSA (MSA 5380, consisting of Nassau and Suffolk Counties), GE Mortgage made 346 mortgage loans to whites -- and only 11 such loans to African Americans, and only 6 such loans to Latinos. That is to say, in this MSA in 1996, GE Mortgage had a 2.33 times higher market share of loans to whites than of loans to African Americans, and a 2.9 times higher market share of loans to white than of loans to Latinos. Whereas GE Mortgage’s denial rate for the application of white was 18%, its denial rate for the applications of Latinos was 50% -- that is, a denial rate disparity of 2.78-to-1, compared with the industry aggregate’s denial rate disparity in this MSA of 1.54-to-1.

     By any measure (market share AND denial rate comparisons), GE Mortgage is a racially disparate lender, in this New York MSA and elsewhere. For example, in the New York City MSA in 1996, GE Mortgage had a denial rate disparity between Latinos and whites of 2.37-to-1, , compared with the industry aggregate’s denial rate disparity in this MSA of 1.57-to-1.

    Issues exist as to GE Capital Consumer Card Company itself.   See, e.g.:

--CardFAX of September 10 and 13, 1996, regarding GE Capital Consumer Card Co.’s policy of charging a $25 so-called maintenance fee to cardholders who do not pay at least $25 in annual finance charges on the GE Rewards MasterCard;

--Newsday of September 22, 1996, at F3: “GE Card Fee is No Reward;”

--CardFAX of January 29, 1997, describing proposed legislation in California that “would bar credit card issuers from charging customers who pay off their balances, a response to a GE Capital Consumer Card Co. policy announced last September;”

--Credit Card Management of February, 1997: “GE Capital Consumer Card Co. drew negative press when it decided to charge a so-called maintenance fee of $25 to convenience users of its supposedly no-annual-fee GE Rewards MasterCard (‘Those Naughty Nonrevolvers,’ December 1996).”

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    ICP's protest was submitted to the OTS in February 1998.  As of February 12, 1999, GE's application was still pending at the OTS.  The proposal was finally "consummated" in March 2003 -- just prior to (and in connection with) GE's proposal to acquire Conseco's Mill Creek Bank. Updates will be in ICP's new GE Watch Report.

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