Keith Sherin is the CFO of General Electric. He was just interviewed on CNBC. I have only seen highlights of the interview.
Anyway here is just one of the money quotes – courtesy the CNBC website.
"We have an incredibly strong liquidity position," Sherin told CNBC. "We've got $45 billion of cash; we have no triggers that we could see that would have any call on our cash in the short term."
Read it again. It does not say that they do not have ratings triggers. It does not say what rating the triggers cash in at and how much. In fact it says nothing really. Weasel words.
Ok – I got a single challenge. General Electric’s old insurance company wrote AAA rated guaranteed investment contracts (or GICs). GICs were standard for AAA rated insurance companies and were written at Ambac, MBIA and AIG. In all those cases they caused trouble – potentially parent company liquidity trouble in the MBIA and AIG cases.
The GIC contracts almost always contain ratings triggers that require collateral to be posted on certain rating declines.
The assets backing the GIC contracts and old annuity obligations are about 5 billion underwater (see note 9 in the GE annual report). There is almost certainly a rating trigger. That trigger (undisclosed and obscured by Sherin) might cause $5 billion in liquidity call.
Can we have a disclosure as to what the trigger is rather than a statement that the ratings triggers we have we can’t see causing us a problem?
In the interview Keith Sherin talked about how transparency would restore confidence in GE and then proceeded to hide behind weasel words.
This does not inspire confidence.
Are there more ratings triggers than the GIC one? I have no idea as there is no disclosure.
Sherin's weasel words continue a fine tradition.