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Money Market Mess Ends In GE Board Seat For SEC's Schapiro

Stocks in this article: GE MCD SCHW

Schapiro's close ties to the money market industry may prove to be one of the most relevant issues for GE.

The company borrowed an average of roughly $50 billion in commercial paper in the fourth quarter of 2012, according to the company's annual 10-K filing. At a 2007 peak, GE's commercial paper borrowings stood at roughly double current levels.

"Mary Schapiro will bring valuable expertise to GE, particularly with her experience overseeing U.S. financial markets," Jeff Immelt, chairman and CEO of GE said Monday in statement. "Her understanding of corporate governance and financial regulation will be of great benefit to GE and its shareowners."

GE has spent post-crisis years selling assets and building up long-term funding for the company's industrial and financial operations. Those moves allowed the company to exit the FDIC's Temporary Liquidity Guarantee Program, repay the funds it received from the Fed and redeem Buffett's costly $3 billion in preferred shares.

With improved liquidity, GE has even seen its financing arm again become a crucial piece of the company's overall dividend policy. GE Capital dividends still hinge on Federal Reserve approval, given the unit's status as a bank holding company.

The prospect of money market reform, meanwhile, remains alive. The U.S. Financial Stability Oversight Council is examining whether it will recommend that the SEC revisit Schapiro's proposals. SEC commissioner Luis Aguilar, a key blocking vote against an attempt at money market reform, has indicated he's willing to revisit issues such as floating net asset values for funds.

Were any reforms to be enacted, Shapiro could be helpful to GE in preparing for regulation she spearheaded.

Still, in spite of the work GE's done to extricate itself from flighty short-term funding markets, Schapiro's appointment to GE's board might shed light on her lack of success at reform and the still fragile position of the overall money market.

John Nester, a SEC spokesperson declined to comment for this story.

-- Written by Antoine Gara in New York

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