UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


	FORM 10-Q

(Mark One)
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
	THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011
OR
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________to ___________
_____________________________ Commission file number 0-14804 _____________________________

GENERAL ELECTRIC CAPITAL SERVICES, INC. (Exact name of registrant as specified in its charter)

Delaware		06-1109503
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3135 Easton Turnpike, Fairfield, Connecticut		06828-0001
(Address of principal executive offices)		(Zip Code)

(Registrant’s telephone number, including area code) (203) 373-2211

(Former name, former address and former fiscal year,

if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨

Accelerated filer ¨

Non-accelerated filer þ

Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

At July 29, 2011, 1,062 shares of voting common stock, which constitute all of the outstanding common equity, with a par value of $1,000 per share were outstanding.

REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE

FILING THIS FORM 10-Q WITH THE REDUCED DISCLOSURE FORMAT

(1)

General Electric Capital Services, Inc.

Part I – Financial Information		Page

Item 1.	Financial Statements
	Condensed Statement of Current and Retained Earnings	3
	Condensed Statement of Financial Position	4
	Condensed Statement of Cash Flows	5
	Summary of Operating Segments	6
	Notes to Condensed, Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	48
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	69
Item 4.	Controls and Procedures	69

Part II – Other Information

Item 6.	Exhibits	70
Signatures		71

Forward-Looking Statements

This document contains “forward-looking statements” – that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance and financial condition, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “see,” or “will.” Forward-looking statements by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties that could cause our actual results to be materially different than those expressed in our forward-looking statements include: current economic and financial conditions, including volatility in interest and exchange rates, commodity and equity prices and the value of financial assets; potential market disruptions or other impacts arising in the United States or Europe from sovereign debt issues, including developments in connection with the U.S. indebtedness cap; the impact of conditions in the financial and credit markets on the availability and cost of General Electric Capital Corporation’s (GECC) funding and on our ability to reduce GECC’s asset levels as planned; the impact of conditions in the housing market and unemployment rates on the level of commercial and consumer credit defaults; changes in Japanese consumer behavior that may affect our estimates of liability for excess interest refund claims (Grey Zone); potential financial implications from the Japanese natural disaster; our ability to maintain our current credit rating and the impact on our funding costs and competitive position if we do not do so; the level of demand and financial performance of the major industries we serve, including, without limitation, air transportation, real estate and healthcare; the impact of regulation and regulatory, investigative and legal proceedings and legal compliance risks, including the impact of financial services regulation; strategic actions, including acquisitions, joint ventures and dispositions and our success in completing announced transactions and integrating acquired businesses; and numerous other matters of national, regional and global scale, including those of a political, economic, business and competitive nature. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. We do not undertake to update our forward-looking statements.

(2)

Part I. Financial Information

Item 1. Financial Statements.

General Electric Capital Services, Inc. and consolidated affiliates

Condensed Statement of Current and Retained Earnings

(Unaudited)

	Three months ended June 30,				Six months ended June 30,
(In millions)		2011		2010		2011		2010

Revenues
Revenues from services (a)	$	12,455	$	12,520	$	25,518	$	24,951
Other-than-temporary impairment on investment securities:
Total other-than-temporary impairment on investment securities		(113)		(101)		(184)		(259)
Less: Portion of other-than-temporary impairment recognized in
accumulated other comprehensive income		59		45		66		124
Net other-than-temporary impairment on investment securities
recognized in earnings		(54)		(56)		(118)		(135)
Revenues from services (Note 9)		12,401		12,464		25,400		24,816
Sales of goods		42		168		84		449
Total revenues		12,443		12,632		25,484		25,265

Costs and expenses
Interest		3,601		3,645		7,190		7,343
Operating and administrative		3,454		3,616		6,937		7,256
Cost of goods sold		38		154		78		419
Investment contracts, insurance losses and insurance annuity benefits		790		770		1,559		1,557
Provision for losses on financing receivables		811		2,007		1,968		4,187
Depreciation and amortization		1,792		1,848		3,568		3,763
Total costs and expenses		10,486		12,040		21,300		24,525

Earnings from continuing operations before income taxes		1,957		592		4,184		740
Benefit (provision) for income taxes		(344)		120		(772)		469

Earnings from continuing operations		1,613		712		3,412		1,209
Earnings (loss) from discontinued operations, net of taxes (Note 2)		217		(100)		274		(450)
Net earnings		1,830		612		3,686		759
Less net earnings (loss) attributable to noncontrolling interests		20		(22)		51		(27)
Net earnings attributable to GECS		1,810		634		3,635		786
Dividends		–		1		–		–
Retained earnings at beginning of period		46,893		43,006		45,068		42,855
Retained earnings at end of period	$	48,703	$	43,641	$	48,703	$	43,641

Amounts attributable to GECS
Earnings from continuing operations		1,593		734	$	3,361	$	1,236
Earnings (loss) from discontinued operations, net of taxes		217		(100)		274		(450)
Net earnings attributable to GECS	$	1,810	$	634	$	3,635	$	786

(a)	Excluding net other-than-temporary impairment on investment securities.

See accompanying notes.

(3)

General Electric Capital Services, Inc. and consolidated affiliates

Condensed Statement of Financial Position

	June 30,		December 31,
(In millions)	2011		2010
	(Unaudited)
Assets
Cash and equivalents	$	77,983	$	60,257
Investment securities (Note 3)		45,331		43,921
Inventories		52		66
Financing receivables – net (Notes 4 and 12)		300,749		312,234
Other receivables		14,263		14,304
Property, plant and equipment, less accumulated amortization of $24,977
and $25,404		55,326		53,768
Goodwill (Note 5)		28,173		27,508
Other intangible assets – net (Note 5)		1,851		1,883
Other assets		74,598		79,240
Assets of businesses held for sale (Note 2)		895		3,127
Assets of discontinued operations (Note 2)		6,413		12,375
Total assets(a)	$	605,634	$	608,683

Liabilities and equity
Short-term borrowings (Note 6)	$	123,643	$	118,797
Accounts payable		7,870		7,035
Non-recourse borrowings of consolidated securitization entities (Note 6)		29,075		30,018
Bank deposits (Note 6)		41,548		37,298
Long-term borrowings (Note 6)		268,962		284,407
Investment contracts, insurance liabilities and insurance annuity benefits		29,854		29,993
Other liabilities		23,127		20,982
Deferred income taxes		2,759		6,990
Liabilities of businesses held for sale (Note 2)		527		592
Liabilities of discontinued operations (Note 2)		1,960		2,423
Total liabilities(a)		529,325		538,535

Capital stock		11		11
Accumulated other comprehensive income – net(b)
Investment securities		(436)		(639)
Currency translation adjustments		1,135		(1,411)
Cash flow hedges		(1,541)		(1,281)
Benefit plans		(381)		(380)
Additional paid-in capital		27,617		27,616
Retained earnings		48,703		45,068
Total GECS shareowner's equity		75,108		68,984
Noncontrolling interests(c)		1,201		1,164
Total equity		76,309		70,148
Total liabilities and equity	$	605,634	$	608,683

(a)

Our consolidated assets at June 30, 2011 include total assets of $44,977 million of certain variable interest entities (VIEs) that can only be used to settle the liabilities of those VIEs. These assets include net financing receivables of $36,387 million and investment securities of $5,960 million. Our consolidated liabilities at June 30, 2011 include liabilities of certain VIEs for which the VIE creditors do not have recourse to GECS. These liabilities include non-recourse borrowings of consolidated securitization entities (CSEs) of $28,556 million. See Note 13.

(b)	The sum of accumulated other comprehensive income − net was $(1,223) million and $(3,711) million at June 30, 2011 and December 31, 2010, respectively.

(c)	Included accumulated other comprehensive income − net attributable to noncontrolling interests of $(118) million and $(127) million at June 30, 2011 and December 31, 2010, respectively.

See accompanying notes.

(4)

General Electric Capital Services, Inc. and consolidated affiliates

Condensed Statement of Cash Flows

(Unaudited)

	Six months ended June 30,
(In millions)	2011		2010

Cash flows – operating activities
Net earnings	$	3,686	$	759
Less net earnings (loss) attributable to noncontrolling interests		51		(27)
Net earnings attributable to GECS		3,635		786
(Earnings) loss from discontinued operations		(274)		450
Adjustments to reconcile net earnings attributable to GECS
to cash provided from operating activities
Depreciation and amortization of property, plant and equipment		3,568		3,763
Increase (decrease) in accounts payable		887		386
Provision for losses on financing receivables		1,968		4,187
All other operating activities		(83)		308
Cash from (used for) operating activities – continuing operations		9,701		9,880
Cash from (used for) operating activities – discontinued operations		680		315
Cash from (used for) operating activities		10,381		10,195

Cash flows – investing activities
Additions to property, plant and equipment		(5,118)		(2,176)
Dispositions of property, plant and equipment		3,505		2,493
Increase in loans to customers		(153,755)		(150,337)
Principal collections from customers – loans		166,514		160,233
Investment in equipment for financing leases		(4,386)		(4,522)
Principal collections from customers – financing leases		6,813		8,372
Net change in credit card receivables		1,575		1,578
Proceeds from sale of discontinued operations		4,371		–
Proceeds from principal business dispositions		2,077		825
Payments for principal businesses purchased		(93)		–
All other investing activities		3,653		11,034
Cash from (used for) investing activities – continuing operations		25,156		27,500
Cash from (used for) investing activities – discontinued operations		(620)		(77)
Cash from (used for) investing activities		24,536		27,423

Cash flows – financing activities
Net increase (decrease) in borrowings (maturities of 90 days or less)		(2,857)		(404)
Net increase (decrease) in bank deposits		2,464		619
Newly issued debt (maturities longer than 90 days)
Short-term (91 to 365 days)		10		10,628
Long-term (longer than one year)		26,954		17,138
Non-recourse, leveraged lease		–		–
Repayments and other debt reductions (maturities longer than 90 days)
Short-term (91 to 365 days)		(44,380)		(63,476)
Long-term (longer than one year)		(273)		(1,166)
Non-recourse, leveraged lease		(520)		(454)
Dividends paid to shareowner		–		–
All other financing activities		(936)		(1,475)
Cash from (used for) financing activities – continuing operations		(19,538)		(38,590)
Cash from (used for) financing activities – discontinued operations		(42)		(305)
Cash from (used for) financing activities		(19,580)		(38,895)

Effect of currency exchange rate changes on cash and equivalents		2,407		(1,598)

Increase (decrease) in cash and equivalents		17,744		(2,875)
Cash and equivalents at beginning of year		60,398		64,540
Cash and equivalents at June 30		78,142		61,665
Less cash and equivalents of discontinued operations at June 30		159		1,903
Cash and equivalents of continuing operations at June 30	$	77,983	$	59,762

See accompanying notes.

(5)

Summary of Operating Segments

	Three months ended June 30,				Six months ended June 30,
	(Unaudited)				(Unaudited)
(In millions)	2011		2010		2011		2010

Revenues
CLL	$	4,666	$	4,506	$	9,274	$	9,100
Consumer		4,176		4,317		9,003		8,743
Real Estate		992		991		1,899		1,935
Energy Financial Services		365		595		710		1,386
GECAS		1,327		1,259		2,652		2,498
Total segment revenues		11,526		11,668		23,538		23,662
GECS corporate items and eliminations		917		964		1,946		1,603
Total revenues in GECS	$	12,443	$	12,632	$	25,484	$	25,265

Segment profit
CLL	$	701	$	312	$	1,255	$	544
Consumer		1,020		649		2,239		1,204
Real Estate		(335)		(524)		(693)		(927)
Energy Financial Services		139		126		251		279
GECAS		321		288		627		605
Total segment profit		1,846		851		3,679		1,705
GECS corporate items and eliminations		(253)		(117)		(318)		(469)
Earnings from continuing operations
attributable to GECS		1,593		734		3,361		1,236
Earnings (loss) from discontinued operations,
net of taxes, attributable to GECS		217		(100)		274		(450)
Total net earnings attributable to GECS	$	1,810	$	634	$	3,635	$	786

See accompanying notes.

(6)

Notes to Condensed, Consolidated Financial Statements (Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General Electric Capital Services, Inc. (GECS) owns all of the common stock of General Electric Capital Corporation (GECC). All of our outstanding common stock is owned by General Electric Company (GE Company or GE). Our financial statements consolidate all of our affiliates – companies that we control and in which we hold a majority voting interest. We also consolidate the economic interests we hold in certain businesses within companies in which we hold a voting equity interest and are majority owned by our parent, but which we have agreed to actively manage and control. See Note 1 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2010 (2010 consolidated financial statements), which discusses our consolidation and financial statement presentation. GECS includes Commercial Lending and Leasing (CLL), Consumer, Real Estate, Energy Financial Services and GE Capital Aviation Services (GECAS).

As a wholly-owned subsidiary, GECS enters into various operating and financing arrangements with GE. Transactions between related companies are made on an arms-length basis, are eliminated and consist primarily of capital contributions from GE to GECS; GE customer receivables sold to GECS; GECS services for trade receivables management and material procurement; buildings and equipment (including automobiles) leased between GE and GECS; information technology (IT) and other services sold to GECS by GE; aircraft engines manufactured by GE that are installed on aircraft purchased by GECS from third-party producers for lease to others; and various investments, loans and allocations of GE corporate overhead costs.

Beginning January 1, 2011, GE allocates service costs related to its principal pension plans and GE no longer allocates the retiree costs of postretirement healthcare benefits to its segments. This revised allocation methodology better aligns segment operating costs to active employee costs that are managed by the segments. This change did not significantly affect our reported segment results.

We have reclassified certain prior-period amounts to conform to the current-period presentation. Unless otherwise indicated, information in these notes to the condensed, consolidated financial statements relates to continuing operations.

Interim Period Presentation

The condensed, consolidated financial statements and notes thereto are unaudited. These statements include all adjustments (consisting of normal recurring accruals) that we considered necessary to present a fair statement of our results of operations, financial position and cash flows. The results reported in these condensed, consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for the entire year. It is suggested that these condensed, consolidated financial statements be read in conjunction with the financial statements and notes thereto included in our 2010 consolidated financial statements. We label our quarterly information using a calendar convention, that is, first quarter is labeled as ending on March 31, second quarter as ending on June 30, and third quarter as ending on September 30. It is our longstanding practice to establish interim quarterly closing dates using a fiscal calendar, which requires our businesses to close their books on either a Saturday or Sunday, depending on the business. The effects of this practice are modest and only exist within a reporting year. The fiscal closing calendar from 1993 through 2013 is available on our website, www.ge.com/secreports.

(7)

2. ASSETS AND LIABILITIES OF BUSINESSES HELD FOR SALE AND DISCONTINUED OPERATIONS

Assets and Liabilities of Businesses Held for Sale

In the second quarter of 2011, we committed to sell our Consumer business banking operations in Latvia.

In 2010, we committed to sell our Consumer businesses in Argentina, Brazil, and Canada, a CLL business in South Korea, and our Interpark business in Real Estate. The Consumer Canada disposition was completed during the first quarter of 2011. The Consumer Brazil and our Interpark business in Real Estate dispositions were completed during the second quarter of 2011 for proceeds of $22 million and $704 million, respectively.

Summarized financial information for businesses held for sale is shown below.

	June 30,		December 31,
(In millions)	2011		2010

Assets
Cash and equivalents	$	149	$	54
Financing receivables – net		576		1,917
Property, plant and equipment – net		100		103
Other intangible assets – net		31		187
Other assets		9		841
Other		30		25
Assets of businesses held for sale	$	895	$	3,127

Liabilities
Short-term borrowings	$	399	$	146
Accounts payable		56		46
Long-term borrowings		19		228
Other liabilities		53		172
Liabilities of businesses held for sale	$	527	$	592

Discontinued Operations

Discontinued operations primarily comprised BAC Credomatic GECF Inc. (BAC) (our Central American bank and card business), GE Money Japan (our Japanese personal loan business, Lake, and our Japanese mortgage and card businesses, excluding our investment in GE Nissen Credit Co., Ltd.), our U.S. mortgage business (WMC), our U.S. recreational vehicle and marine equipment financing business (Consumer RV Marine), Consumer Mexico, Consumer Singapore and our Consumer home lending operations in Australia and New Zealand (Australian Home Lending). Associated results of operations, financial position and cash flows are separately reported as discontinued operations for all periods presented.

(8)

Summarized financial information for discontinued operations is shown below.

	Three months ended June 30,				Six months ended June 30,
(In millions)	2011		2010		2011		2010

Operations
Total revenues	$	121	$	513	$	324	$	1,050

Earnings (loss) from discontinued operations before income taxes	$	(14)	$	104	$	9	$	123
Benefit (provision) for income taxes		35		(19)		30		(7)
Earnings (loss) from discontinued operations, net of taxes	$	21	$	85	$	39	$	116

Disposal
Gain (loss) on disposal before income taxes	$	(52)	$	(185)	$	(41)	$	(566)
Benefit for income taxes		248		–		276		–
Gain (loss) on disposal, net of taxes	$	196	$	(185)	$	235	$	(566)

Earnings (loss) from discontinued operations, net of taxes	$	217	$	(100)	$	274	$	(450)

	June 30,		December 31,
(In millions)	2011		2010

Assets
Cash and equivalents	$	159	$	142
Financing receivables - net		4,966		10,589
Other assets		17		168
Other		1,271		1,476
Assets of discontinued operations	$	6,413	$	12,375

	June 30,		December 31,
(In millions)	2011		2010

Liabilities
Accounts payable	$	16	$	110
Deferred income taxes		171		232
Other		1,773		2,081
Liabilities of discontinued operations	$	1,960	$	2,423

Assets at June 30, 2011 and December 31, 2010, primarily comprised cash, financing receivables and a deferred tax asset for a loss carryforward, which expires principally in 2015 and in part in 2017, related to the sale of our GE Money Japan business.

BAC Credomatic GECF Inc. (BAC)

During the fourth quarter of 2010, we classified BAC as discontinued operations and completed the sale of BAC for $1,920 million. Immediately prior to the sale, and in accordance with terms of a previous agreement, we increased our ownership interest in BAC from 75% to 100% for a purchase price of $633 million. As a result of the sale of our interest in BAC, we recognized an after-tax gain of $780 million in 2010.

BAC revenues from discontinued operations were $248 million and $508 million in the three and six months ended June 30, 2010, respectively. In total, BAC earnings from discontinued operations, net of taxes, were $20 million and $37 million in the three and six months ended June 30, 2010, respectively.

(9)

GE Money Japan

During the third quarter of 2007, we committed to a plan to sell our Japanese personal loan business, Lake, upon determining that, despite restructuring, Japanese regulatory limits for interest charges on unsecured personal loans did not permit us to earn an acceptable return. During the third quarter of 2008, we completed the sale of GE Money Japan, which included Lake, along with our Japanese mortgage and card businesses, excluding our investment in GE Nissen Credit Co., Ltd. In connection with the sale, we reduced the proceeds from the sale for estimated interest refund claims in excess of the statutory interest rate. Proceeds from the sale were to be increased or decreased based on the actual claims experienced in accordance with loss-sharing terms specified in the sale agreement, with all claims in excess of 258 billion Japanese Yen (approximately $3,000 million) remaining our responsibility. The underlying portfolio to which this obligation relates is in runoff and interest rates were capped for all designated accounts by mid-2009. In the third quarter of 2010, we began making reimbursements under this arrangement.

Our overall claims experience developed unfavorably through 2010. We believe that the level of excess interest refund claims has been impacted by the challenging global economic conditions, in addition to Japanese legislative and regulatory changes. In September 2010, a large independent personal loan company in Japan filed for bankruptcy, which precipitated a significant amount of publicity surrounding excess interest refund claims in the Japanese marketplace, along with substantial legal advertising. We observed an increase in claims during September 2010 and higher average daily claims in the fourth quarter of 2010 and the first two months of 2011. While we have experienced a decline in claims following the February 2011 claims filing deadline related to the bankruptcy filing of the personal loan company, it continues to be unclear whether excess interest refund claims activity will be also affected by the March 11, 2011 earthquake and subsequent tsunami in Japan. As of June 30, 2011, our reserve for reimbursement of claims in excess of the statutory interest rate was $1,037 million.

The amount of these reserves is based on analyses of recent and historical claims experience, pending and estimated future excess interest refund requests, the estimated percentage of customers who present valid requests, and our estimated payments related to those requests. Our estimated liability for excess interest refund claims at June 30, 2011 assumes the pace of incoming claims will decelerate, average exposure per claim remains consistent with historical experience, and we continue to see further impact of our loss mitigation efforts. Estimating the pace of decline in incoming claims can have a significant effect on the total amount of our liability. Average daily claims have been higher than expected, which we believe is primarily attributable to the bankruptcy filing of the large independent personal loan company described above and claims activity has declined substantially following that period. We believe that continued evaluation of claims activity will be important in order to fully assess the potential impact of this bankruptcy or other events on our overall claim reserve estimate. Holding all other assumptions constant, if claims declined at a rate of one percent higher or lower than assumed, our liability estimate would change by approximately $250 million.

Uncertainties around the impact of laws and regulations, challenging economic conditions, the runoff status of the underlying book of business, the effects of the March 11, 2011 earthquake and subsequent tsunami in Japan and the effects of our mitigation efforts make it difficult to develop a meaningful estimate of the aggregate possible claims exposure. Recent trends, including the effect of governmental actions, market activity regarding other personal loan companies and consumer activity, may continue to have an adverse effect on claims development.

GE Money Japan losses from discontinued operations, net of taxes, were $0 million and $188 million in the three months ended June 30, 2011 and 2010, respectively, and $0 million and $571 million in the six months ended June 30, 2011 and 2010, respectively.

WMC

During the fourth quarter of 2007, we completed the sale of WMC, our U.S. mortgage business. WMC substantially discontinued all new loan originations by the second quarter of 2007, and is not a loan servicer. In connection with the sale, WMC retained certain obligations related to loans sold prior to the disposal of the business, including WMC’s contractual obligations to repurchase previously sold loans as to which there was an early payment default or with respect to which certain contractual representations and warranties were not met. All claims received for early payment default have either been resolved or are no longer being pursued.

(10)

Pending claims for unmet representations and warranties were $783 million at December 31, 2009, $347 million at December 31, 2010 and $469 million at June 30, 2011. Reserves related to these contractual representations and warranties were $101 million at both June 30, 2011 and December 31, 2010. The amount of these reserves is based upon pending and estimated future loan repurchase requests, the estimated percentage of loans validly tendered for repurchase, and our estimated losses on loans repurchased. Based on our historical experience, we estimate that a small percentage of the total loans WMC originated and sold will be tendered for repurchase, and of those tendered, only a limited amount will qualify as “validly tendered,” meaning the loans sold did not satisfy specified contractual obligations. WMC’s current reserve represents our best estimate of losses with respect to WMC’s repurchase obligations. Actual losses could exceed the reserve amount if actual claim rates, investigative or litigation activity, valid tenders or losses WMC incurs on repurchased loans are higher than we have historically observed with respect to WMC.

WMC revenues (loss) from discontinued operations were $0 million and $(3) million in the three months ended June 30, 2011 and 2010, respectively, and $0 million and $(3) million in the six months ended June 30, 2011 and 2010, respectively. In total, WMC’s earnings (loss) from discontinued operations, net of taxes, were $(2) million and $1 million in the three months ended June 30, 2011 and 2010, respectively, and $(3) million in both the six months ended June 30, 2011 and 2010.

Other

In the second quarter of 2011, we entered into an agreement to sell our Australian Home Lending operations for approximately $4,700 million. As a result, we recognized an after-tax loss of $150 million in the second quarter of 2011. Australian Home Lending revenues from discontinued operations were $101 million and $131 million in the three months ended June 30, 2011 and 2010, respectively, and $215 million and $268 million in the six months ended June 30, 2011 and 2010, respectively. Australian Home Lending earnings (loss) from discontinued operations, net of taxes, were $(118) million and $24 million in the three months ended June 30, 2011 and 2010, respectively, and $(80) million and $37 million in the six months ended June 30, 2011 and 2010, respectively.

In the first quarter of 2011, we entered into an agreement to sell our Consumer Singapore business for $692 million. The sale was completed in the second quarter of 2011 and resulted in the recognition of a gain on disposal, net of taxes, of $319 million. Consumer Singapore revenues from discontinued operations were $2 million and $26 million in the three months ended June 30, 2011 and 2010, respectively, and $31 million and $52 million in the six months ended June 30, 2011 and 2010, respectively. Consumer Singapore earnings from discontinued operations, net of taxes, were $319 million and $8 million in the three months ended June 30, 2011 and 2010, respectively, and $326 million and $16 million in the six months ended June 30, 2011 and 2010, respectively.

In the fourth quarter of 2010, we entered into agreements to sell our Consumer RV Marine portfolio and Consumer Mexico business. The Consumer RV Marine and Consumer Mexico dispositions were completed during the first quarter and the second quarter of 2011, respectively, for proceeds of $2,365 million and $1,943 million, respectively. Consumer RV Marine revenues from discontinued operations were $6 million and $54 million in the three months ended June 30, 2011 and 2010, respectively, and $11 million and $108 million in the six months ended June 30, 2011 and 2010, respectively. Consumer RV Marine earnings (loss) from discontinued operations, net of taxes, were $2 million and $17 million in the three months ended June 30, 2011 and 2010, respectively, and $2 million and $(1) million in the six months ended June 30, 2011 and 2010, respectively. Consumer Mexico revenues from discontinued operations were $12 million and $56 million in the three months ended June 30, 2011 and 2010, respectively, and $67 million and $117 million in the six months ended June 30, 2011 and 2010, respectively. Consumer Mexico earnings from discontinued operations, net of taxes, were $17 million in both the three months ended June 30, 2011 and 2010, and $33 million and $35 million in the six months ended June 30, 2011 and 2010, respectively.

(11)

3. INVESTMENT SECURITIES

Substantially all of our investment securities are classified as available-for-sale. These comprise mainly investment grade debt securities supporting obligations to annuitants, policyholders and holders of guaranteed investment contracts (GICs) in our run-off insurance operations and Trinity, and investment securities at our treasury operations. We do not have any securities classified as held to maturity.

	At
	June 30, 2011								December 31, 2010
			Gross		Gross						Gross		Gross
	Amortized		unrealized		unrealized		Estimated		Amortized		unrealized		unrealized		Estimated
(In millions)	cost		gains		losses		fair value		cost		gains		losses		fair value


Debt
U.S. corporate	$	20,818	$	1,809	$	(116)	$	22,511	$	21,233	$	1,576	$	(237)	$	22,572
State and municipal		3,182		120		(244)		3,058		2,961		45		(282)		2,724
Residential mortgage-backed(a)		2,876		131		(319)		2,688		3,092		95		(378)		2,809
Commercial mortgage-backed		2,881		172		(203)		2,850		3,009		145		(230)		2,924
Asset-backed		3,853		33		(145)		3,741		3,407		16		(193)		3,230
Corporate – non-U.S.		2,810		133		(91)		2,852		2,883		116		(132)		2,867
Government – non-U.S.		2,693		88		(85)		2,696		2,242		82		(58)		2,266
U.S. government and
federal agency		3,302		62		(28)		3,336		3,358		57		(47)		3,368
Retained interests		32		16		(3)		45		55		10		(26)		39
Equity
Available-for-sale		886		224		(31)		1,079		500		213		(8)		705
Trading		475		–		–		475		417		–		–		417
Total	$	43,808	$	2,788	$	(1,265)	$	45,331	$	43,157	$	2,355	$	(1,591)	$	43,921

(a)

Substantially collateralized by U.S. mortgages. Of our total residential mortgage-backed securities (RMBS) portfolio at June 30, 2011, $1,657 million relates to securities issued by government sponsored entities and $1,031 million relates to securities of private label issuers. Securities issued by private label issuers are collateralized primarily by pools of individual direct mortgage loans of individual financial institutions.

The fair value of investment securities increased to $45,331 million at June 30, 2011, from $43,921 million at December 31, 2010, primarily driven by improved market conditions and purchases.

(12)

The following tables present the estimated fair values and gross unrealized losses of our available-for-sale investment securities.

	In loss position for
	Less than 12 months					12 months or more
			Gross		(a)			Gross
	Estimated		unrealized			Estimated		unrealized
(In millions)	fair value		losses			fair value		losses		(a)

June 30, 2011
Debt
U.S. corporate	$	1,341	$	(29)		$	992	$	(87)
State and municipal		322		(20)			586		(224)
Residential mortgage-backed		318		(8)			943		(311)
Commercial mortgage-backed		962		(129)			705		(74)
Asset-backed		65		(4)			882		(141)
Corporate – non-U.S.		339		(7)			788		(84)
Government – non-U.S.		1,115		(3)			129		(82)
U.S. government and federal agency		–		–			224		(28)
Retained interests		–		–			6		(3)
Equity		71		(31)			–		–
Total	$	4,533	$	(231)		$	5,255	$	(1,034)

December 31, 2010
Debt
U.S. corporate	$	2,375	$	(81)		$	1,519	$	(156)
State and municipal		949		(43)			570		(239)
Residential mortgage-backed		188		(4)			1,024		(374)
Commercial mortgage-backed		831		(104)			817		(126)
Asset-backed		113		(5)			910		(188)
Corporate – non-U.S.		448		(12)			804		(120)
Government – non-U.S.		661		(6)			107		(52)
U.S. government and federal agency		1,822		(47)			–		–
Retained interests		–		–			34		(26)
Equity		49		(8)			–		–
Total	$	7,436	$	(310)		$	5,785	$	(1,281)

(a)

At June 30, 2011, other-than-temporary impairments previously recognized through other comprehensive income (OCI) on securities still held amounted to $(472) million, of which $(358) million related to RMBS. Gross unrealized losses related to those securities at June 30, 2011 amounted to $(615) million, of which $(547) million related to RMBS.

We regularly review investment securities for impairment using both qualitative and quantitative criteria. We presently do not intend to sell the vast majority of our debt securities and believe that it is not more likely than not that we will be required to sell these securities that are in an unrealized loss position before recovery of our amortized cost. We believe that the unrealized loss associated with our equity securities will be recovered within the foreseeable future. The methodologies and significant inputs used to measure the amount of credit loss for our investment securities during the three and six months ended June 30, 2011 have not changed from those described in our 2010 consolidated financial statements. See Note 3 in our 2010 consolidated financial statements for additional information regarding these methodologies and inputs.

During the second quarter of 2011, we recorded other-than-temporary impairments of $113 million, of which $54 million was recorded through earnings ($5 million relates to equity securities) and $59 million was recorded in accumulated other comprehensive income (AOCI). At April 1, 2011, cumulative impairments recognized in earnings associated with debt securities still held were $388 million. During the second quarter, we recognized first time impairments of $19 million and incremental charges on previously impaired securities of $24 million. These amounts included $18 million related to securities that were subsequently sold.

During the second quarter of 2010, we recorded other-than-temporary impairments of $101 million, of which $56 million was recorded through earnings and $45 million was recorded in AOCI. At April 1, 2010, cumulative impairments recognized in earnings associated with debt securities still held were $214 million. During the second quarter of 2010, we recognized first time impairments of $36 million and incremental charges on previously impaired securities of $17 million. These amounts included $7 million related to securities that were subsequently sold.

(13)

During the six months ended June 30, 2011, we recorded other-than-temporary impairments of $184 million, of which $118 million was recorded through earnings ($10 million relates to equity securities) and $66 million was recorded in AOCI. At January 1, 2011, cumulative impairments recognized in earnings associated with debt securities still held were $332 million. During the six months ended June 30, 2011, we recognized first time impairments of $20 million and incremental charges on previously impaired securities of $81 million. These amounts included $21 million related to securities that were subsequently sold.

During the six months ended June 30, 2010, we recorded other-than-temporary impairments of $259 million, of which $135 million was recorded through earnings ($1 million relates to equity securities) and $124 million was recorded in AOCI. At January 1, 2010, cumulative impairments recognized in earnings associated with debt securities still held were $172 million. During the six months ended June 30, 2010, we recognized first time impairments of $92 million and incremental charges on previously impaired securities of $35 million. These amounts included $39 million related to securities that were subsequently sold.

Contractual Maturities of our Investment in Available-for-Sale Debt Securities (Excluding Mortgage-Backed and Asset-Backed Securities)


(In millions)	Amortized		Estimated
	cost		fair value
Due in
2011	$	2,958	$	2,985
2012-2015		7,298		7,580
2016-2020		4,730		4,922
2021 and later		17,811		18,958

We expect actual maturities to differ from contractual maturities because borrowers have the right to call or prepay certain obligations.

Supplemental information about gross realized gains and losses on available-for-sale investment securities follows.

	Three months ended June 30,				Six months ended June 30,
(In millions)	2011		2010		2011		2010

Gains	$	45	$	37	$	161	$	126
Losses, including impairments		(56)		(62)		(127)		(144)
Net	$	(11)	$	(25)	$	34	$	(18)

Although we generally do not have the intent to sell any specific securities at the end of the period, in the ordinary course of managing our investment securities portfolio, we may sell securities prior to their maturities for a variety of reasons, including diversification, credit quality, yield and liquidity requirements and the funding of claims and obligations to policyholders. In some of our bank subsidiaries, we maintain a certain level of purchases and sales volume principally of non-U.S. government debt securities. In these situations, fair value approximates carrying value for these securities.

Proceeds from investment securities sales and early redemptions by the issuer totaled $4,833 million and $3,514 million in the three months ended June 30, 2011 and 2010, respectively, and $9,972 million and $7,302 million in the six months ended June 30, 2011 and 2010, respectively, principally from the sales of short-term securities in our bank subsidiaries and treasury operations.

We recognized net pre-tax gains on trading securities of $52 million and $4 million in the three months ended June 30, 2011 and 2010, respectively, and $55 million and $19 million in the six months ended June 30, 2011 and 2010, respectively.

(14)

4. FINANCING RECEIVABLES AND ALLOWANCE FOR LOSSES ON FINANCING RECEIVABLES

	At
	June 30,		December 31,
(In millions)	2011		2010

Loans, net of deferred income(a)	$	266,704	$	275,877
Investment in financing leases, net of deferred income		41,099		44,390
		307,803		320,267
Less allowance for losses		(7,054)		(8,033)
Financing receivables – net(b)	$	300,749	$	312,234

(a)	Deferred income was $2,274 million and $2,351 million at June 30, 2011 and December 31, 2010, respectively.

(b)	Financing receivables at June 30, 2011 and December 31, 2010 included $1,389 million and $1,503 million, respectively, relating to loans that had been acquired in a transfer but have been subject to credit deterioration since origination per Accounting Standards Codification (ASC) 310, Receivables.

The following tables provide additional information about our financing receivables and related activity in the allowance for losses for our Commercial, Real Estate and Consumer portfolios.

(15)

Financing Receivables – net

The following table displays our financing receivables balances.

	At
	June 30,		December 31,
(In millions)	2011		2010

Commercial
CLL
Americas	$	79,614	$	86,596
Europe		37,897		37,498
Asia		11,759		11,943
Other		2,489		2,626
Total CLL		131,759		138,663

Energy Financial Services		6,143		7,011

GECAS		11,952		12,615

Other		1,517		1,788
Total Commercial financing receivables		151,371		160,077

Real Estate
Debt		27,750		30,249
Business Properties		9,057		9,962
Total Real Estate financing receivables		36,807		40,211

Consumer
Non-U.S. residential mortgages		40,731		40,011
Non-U.S. installment and revolving credit		21,047		20,132
U.S. installment and revolving credit		42,178		43,974
Non-U.S. auto		7,141		7,558
Other		8,528		8,304
Total Consumer financing receivables		119,625		119,979

Total financing receivables		307,803		320,267

Less allowance for losses		(7,054)		(8,033)
Total financing receivables – net	$	300,749	$	312,234

(16)

Allowance for Losses on Financing Receivables

The following tables provide a roll-forward of our allowance for losses on financing receivables.

	Balance at		Provision											Balance at
	January 1,		charged to					Gross						June 30,
(In millions)	2011		operations		Other		(a)	write-offs		(b)	Recoveries		(b)	2011

Commercial
CLL
Americas	$	1,287	$	219	$	(72)		$	(366)		$	55		$	1,123
Europe		429		73		30			(133)			34			433
Asia		222		77		10			(147)			18			180
Other		7		–		–			–			–			7
Total CLL		1,945		369		(32)			(646)			107			1,743


Energy Financial Services		22		11		(1)			(4)			7			35

GECAS		20		(2)		–			(3)			–			15

Other		58		11		1			(17)			1			54
Total Commercial		2,045		389		(32)			(670)			115			1,847

Real Estate
Debt		1,292		122		9			(341)			10			1,092
Business Properties		196		54		1			(70)			3			184
Total Real Estate		1,488		176		10			(411)			13			1,276

Consumer
Non-U.S. residential
mortgages		803		66		40			(150)			31			790
Non-U.S. installment
and revolving credit		937		311		64			(664)			286			934
U.S. installment and
revolving credit		2,333		941		1			(1,688)			259			1,846
Non-U.S. auto		168		26		12			(126)			63			143
Other		259		59		4			(152)			48			218
Total Consumer		4,500		1,403		121			(2,780)			687			3,931
Total	$	8,033	$	1,968	$	99		$	(3,861)		$	815		$	7,054

(a)	Other primarily included transfers to held for sale and the effects of currency exchange.

(b)

Net write-offs (write-offs less recoveries) in certain portfolios may exceed the beginning allowance for losses as our revolving credit portfolios turn over more than once per year or, in all portfolios, can reflect losses that are incurred subsequent to the beginning of the fiscal year due to information becoming available during the current year, which may identify further deterioration on existing financing receivables.

(17)

	Balance at		Adoption of		Balance at		Provision								Balance at
	December 31,		ASU 2009		January 1,		charged to				Gross				June 30,
(In millions)	2009		16 & 17(a)		2010		operations		Other(b)		write-offs(c)		Recoveries(c)		2010

Commercial
CLL
Americas	$	1,179	$	66	$	1,245	$	630	$	(10)	$	(558)	$	55	$	1,362
Europe		575		–		575		137		(70)		(288)		28		382
Asia		244		(10)		234		108		(23)		(94)		9		234
Other		11		–		11		(1)		(2)		–		–		8
Total CLL		2,009		56		2,065		874		(105)		(940)		92		1,986


Energy Financial Services		28		–		28		24		1		–		–		53

GECAS		104		–		104		35		–		(89)		–		50

Other		34		–		34		18		–		(3)		1		50
Total Commercial		2,175		56		2,231		951		(104)		(1,032)		93		2,139

Real Estate
Debt		1,358		(3)		1,355		548		(4)		(310)		1		1,590
Business Properties		136		45		181		97		(7)		(64)		–		207
Total Real Estate		1,494		42		1,536		645		(11)		(374)		1		1,797

Consumer
Non-U.S. residential
mortgages		892		–		892		170		(103)		(180)		49		828
Non-U.S. installment
and revolving credit		1,106		–		1,106		615		(113)		(935)		281		954
U.S. installment and
revolving credit		1,551		1,602		3,153		1,570		(1)		(2,320)		233		2,635
Non-U.S. auto		292		–		292		73		(43)		(191)		92		223
Other		292		–		292		163		(35)		(217)		43		246
Total Consumer		4,133		1,602		5,735		2,591		(295)		(3,843)		698		4,886
Total	$	7,802	$	1,700	$	9,502	$	4,187	$	(410)	$	(5,249)	$	792	$	8,822

(a)	Reflects the effects of our adoption of ASU 2009-16 & 17 on January 1, 2010.

(b)	Other primarily included the effects of currency exchange.

(c)

See Note 12 for supplemental information about the credit quality of financing receivables and allowance for losses on financing receivables.

(18)

5. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and other intangible assets – net, consisted of the following.

	At
	June 30,		December 31,
(In millions)	2011		2010

Goodwill	$	28,173	$	27,508

Other intangible assets
Intangible assets subject to amortization	$	1,851	$	1,883

Changes in goodwill balances follow.

					Dispositions,
	Balance at				currency		Balance at
	January 1,				exchange		June 30,
(In millions)	2011		Acquisitions		and other		2011

CLL	$	13,893	$	–	$	308	$	14,201
Consumer		10,817		–		359		11,176
Real Estate		1,089		–		(2)		1,087
Energy Financial Services		1,562		–		–		1,562
GECAS		147		–		–		147
Total	$	27,508	$	–	$	665	$	28,173

Goodwill balances increased $665 million during the six months ended June 30, 2011, primarily as a result of the weaker U.S. dollar ($700 million). Our reporting units and related goodwill balances are CLL ($14,201 million), Consumer ($11,176 million), Real Estate ($1,087 million), Energy Financial Services ($1,562 million) and GECAS ($147 million) at June 30, 2011.

Intangible Assets Subject to Amortization

	At
	June 30, 2011						December 31, 2010
	Gross						Gross
	carrying		Accumulated				carrying		Accumulated
(In millions)	amount		amortization		Net		amount		amortization		Net


Customer-related	$	1,213	$	(661)	$	552	$	1,112	$	(588)	$	524
Patents, licenses and trademarks		385		(322)		63		599		(532)		67
Capitalized software		2,260		(1,733)		527		2,026		(1,528)		498
Lease valuations		1,655		(989)		666		1,646		(917)		729
Present value of future profits (a)		477		(477)		–		461		(461)		–
All other		322		(279)		43		333		(268)		65
Total	$	6,312	$	(4,461)	$	1,851	$	6,177	$	(4,294)	$	1,883

(a)

Balances at June 30, 2011 and December 31, 2010, reflect adjustments of $406 million and $423 million, respectively, to the present value of future profits in our run-off insurance operation to reflect the effects that would have been recognized had the related unrealized investment securities holding gains and losses actually been realized in accordance with ASC 320-10-S99-2.

Amortization related to intangible assets subject to amortization was $143 million and $185 million in the three months ended June 30, 2011 and 2010, respectively, and $289 million and $338 million in the six months ended June 30, 2011 and 2010, respectively.

(19)

6. BORROWINGS AND BANK DEPOSITS

Borrowings are summarized in the following table.

	At
(In millions)	June 30,		December 31,
	2011		2010
Short-term borrowings
Commercial paper
U.S.	$	30,838	$	32,547
Non-U.S.		9,862		9,497
Current portion of long-term borrowings(a)(b)(c)(e)		72,948		65,612
GE Interest Plus notes(d)		8,544		9,058
Other(c)		1,451		2,083
Total short-term borrowings	$	123,643	$	118,797

Long-term borrowings
Senior unsecured notes(a)(b)	$	243,364	$	262,789
Subordinated notes(e)		4,661		2,575
Subordinated debentures(f)		7,591		7,298
Other(c)(g)		13,346		11,745
Total long-term borrowings	$	268,962	$	284,407

Non-recourse borrowings of consolidated securitization entities(h)	$	29,075	$	30,018

Bank deposits(i)	$	41,548	$	37,298

Total borrowings and bank deposits	$	463,228	$	470,520

(a)

GECC had issued and outstanding $45,045 million and $53,495 million of senior, unsecured debt that was guaranteed by the Federal Deposit Insurance Corporation (FDIC) under the Temporary Liquidity Guarantee Program at June 30, 2011 and December 31, 2010, respectively. Of the above amounts, $28,095 million and $18,455 million is included in current portion of long-term borrowings at June 30, 2011 and December 31, 2010, respectively.

(b)

Included in total long-term borrowings were $2,073 million and $2,395 million of obligations to holders of guaranteed investment contracts at June 30, 2011 and December 31, 2010, respectively. If the long-term credit rating of GECC were to fall below AA-/Aa3 or its short-term credit rating were to fall below A-1+/P-1, GECC could be required to provide up to $1,961 million as of June 30, 2011, to repay holders of GICs.

(c)	Included $10,670 million and $11,135 million of funding secured by real estate, aircraft and other collateral at June 30, 2011 and December 31, 2010, respectively, of which $4,477 million and $4,671 million is non-recourse to GECS at June 30, 2011 and December 31, 2010, respectively.

(d)	Entirely variable denomination floating rate demand notes.

(e)	Included $417 million of subordinated notes guaranteed by GE at both June 30, 2011 and December 31, 2010, of which $117 million is included in current portion of long-term borrowings at June 30, 2011.

(f)	Subordinated debentures receive rating agency equity credit and were hedged at issuance to the U.S. dollar equivalent of $7,725 million.

(g)	Included $2,126 million and $1,984 million of covered bonds at June 30, 2011 and December 31, 2010, respectively. If the short-term credit rating of GECC were reduced below A-1/P-1, GECC would be required to partially cash collateralize these bonds in an amount up to $825 million at June 30, 2011.

(h)	Included at June 30, 2011 and December 31, 2010, were $11,590 million and $10,499 million of current portion of long-term borrowings, respectively, and $17,485 million and $19,519 million of long-term borrowings, respectively. See Note 13.

(i)	Included $20,864 million and $18,781 million of deposits in non-U.S. banks at June 30, 2011 and December 31, 2010, respectively, and $13,869 million and $11,606 million of certificates of deposits with maturities greater than one year at June 30, 2011 and December 31, 2010, respectively.

(20)

7. INCOME TAXES

The balance of “unrecognized tax benefits,” the amount of related interest and penalties we have provided and what we believe to be the range of reasonably possible changes in the next 12 months were:

	At
	June 30,		December 31,
(In millions)	2011		2010

Unrecognized tax benefits	$	3,985	$	3,904
Portion that, if recognized, would reduce tax expense and effective tax rate(a)		2,397		2,276
Accrued interest on unrecognized tax benefits		812		833
Accrued penalties on unrecognized tax benefits		79		73
Reasonably possible reduction to the balance of unrecognized
tax benefits in succeeding 12 months		0-1,300		0-1,200
Portion that, if recognized, would reduce tax expense and effective tax rate(a)		0-250		0-250

(a)	Some portion of such reduction may be reported as discontinued operations.

The IRS is currently auditing the GE consolidated income tax returns for 2006-2007, a substantial portion of which include our activities. In addition, certain other U.S. tax deficiency issues and refund claims for previous years were unresolved. The IRS has disallowed the tax loss on our 2003 disposition of ERC Life Reinsurance Corporation. We are contesting the disallowance of this loss. It is reasonably possible that the 2006–2007 U.S. audit cycle will be completed during the next 12 months, which could result in a decrease in our balance of “unrecognized tax benefits” – that is, the aggregate tax effect of differences between tax return positions and the benefits recognized in our financial statements. We believe that there are no other jurisdictions in which the outcome of unresolved issues or claims is likely to be material to our results of operations, financial position or cash flows. We further believe that we have made adequate provision for all income tax uncertainties.

GE and GECS file a consolidated U.S. federal income tax return. This enables GE to use GECS tax deductions and credits to reduce the tax that otherwise would have been payable by GE. The GECS effective tax rate for each period reflects the benefit of these tax reductions in the consolidated return. GE makes cash payments to GECS for these tax reductions at the time GE’s tax payments are due. The effect of GECS on the amount of the consolidated tax liability from the formation of the GE NBC Universal joint venture will be settled in cash when it otherwise would have reduced the liability of the group absent the tax on formation.

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8. SHAREOWNER’S EQUITY

A summary of increases (decreases) in GECS shareowner’s equity that did not result directly from transactions with the shareowner, net of income taxes, follows.

	Three months ended June 30,				Six months ended June 30,
(In millions)		2011		2010		2011		2010

Net earnings attributable to GECS	$	1,810	$	634	$	3,635	$	786
Investment securities – net (a)		391		632		203		725
Currency translation adjustments – net		993		(2,649)		2,546		(4,008)
Cash flow hedges – net		(190)		88		(260)		501
Benefit plans – net		–		23		(1)		65
Total	$	3,004	$	(1,272)	$	6,123	$	(1,931)

(a)

Includes adjustments as of June 30, 2011 to deferred acquisition costs, present value of future profits, and investment contracts, insurance liabilities and insurance annuity benefits in our run-off insurance operation to reflect the effects that would have been recognized had the related unrealized investment securities holding gains and losses actually been realized in accordance with ASC 320-10-S99-2.

Changes to noncontrolling interests are as follows.

	Three months ended June 30,				Six months ended June 30,
(In millions)		2011		2010		2011		2010

Beginning balance	$	1,178	$	2,158	$	1,164	$	2,048
Net earnings		20		(22)		51		(27)
Dividends		–		(5)		(3)		(8)
Dispositions		–		(979)		–		(979)
AOCI and other (a)		3		(54)		(11)		64
Ending balance	$	1,201	$	1,098	$	1,201	$	1,098

(a)	The amount of change related to AOCI and other for the six months ended June 30, 2010 includes the impact of our adoption of ASC 810, Consolidations, of $124 million. Changes to other individual components of AOCI attributable to noncontrolling interests were insignificant.

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9. REVENUES FROM SERVICES

Revenues from services are summarized in the following table.

	Three months ended June 30,				Six months ended June 30,
(In millions)	2011		2010		2011		2010

Interest on loans	$	5,019	$	5,208	$	10,165	$	10,521
Equipment leased to others		2,852		2,769		5,674		5,530
Fees		1,159		1,170		2,304		2,375
Associated companies(a)(b)		526		460		1,608		1,057
Investment income		728		511		1,421		1,073
Financing leases		618		686		1,283		1,427
Premiums earned by insurance activities		491		490		972		979
Real estate investments		430		354		832		631
Other items		578		816		1,141		1,223
Total	$	12,401	$	12,464	$	25,400	$	24,816

(a)	During the first quarter of 2011, we sold an 18.6% equity interest in Garanti Bank and recorded a pre-tax gain of $690 million. Following the sale, we hold a 2.25% equity ownership interest which is classified as an available-for-sale security.

(b)

Aggregate summarized financial information for significant associated companies assuming a 100% ownership interest included total assets at June 30, 2011 and December 31, 2010 of $98,628 million and $180,015 million, respectively. Assets were primarily financing receivables of $53,492 million and $97,447 million at June 30, 2011 and December 31, 2010, respectively. Total liabilities were $72,874 million and $143,957 million, consisted primarily of bank deposits of $22,349 million and $75,661 million at June 30, 2011 and December 31, 2010, respectively, and debt of $43,106 million and $53,696 million at June 30, 2011 and December 31, 2010, respectively. Revenues in the second quarters of 2011 and 2010 totaled $3,951 million and $4,750 million, respectively, and net earnings in the second quarters of 2011 and 2010 totaled $628 million and $1,153 million, respectively. Revenues in the first six months of 2011 and 2010 totaled $7,668 million and $9,716 million, respectively, and net earnings in the first six months of 2011 and 2010 totaled $1,088 million and $2,032 million, respectively.

10. FAIR VALUE MEASUREMENTS

For a description on how we estimate fair value, see Note 1 in our 2010 consolidated financial statements.

The following tables present our assets and liabilities measured at fair value on a recurring basis. Included in the tables are investment securities of $27,958 million and $27,141 million at June 30, 2011 and December 31, 2010, respectively, primarily supporting obligations to annuitants and policyholders in our run-off insurance operations, and $4,927 million and $5,706 million at June 30, 2011 and December 31, 2010, respectively, supporting obligations to holders of GICs in Trinity (which ceased issuing new investment contracts beginning in the first quarter of 2010), and investment securities held at our treasury operations. Such securities are mainly investment grade.

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(In millions)										Netting
	Level 1		(a)	Level 2		(a)	Level 3		(b)	adjustment		(c)	Net balance
June 30, 2011
Assets
Investment securities
Debt
U.S. corporate	$	–		$	19,415		$	3,096		$	–		$	22,511
State and municipal		–			2,849			209			–			3,058
Residential mortgage-backed		–			2,643			45			–			2,688
Commercial mortgage-backed		–			2,843			7			–			2,850
Asset-backed		–			609			3,132			–			3,741
Corporate - non-U.S.		76			1,239			1,537			–			2,852
Government - non-U.S.		804			1,618			274			–			2,696
U.S. government and federal agency		–			3,112			224			–			3,336
Retained interests		–			–			45			–			45
Equity
Available-for-sale		1,039			18			22			–			1,079
Trading		475			–			–			–			475
Derivatives(d)		–			9,954			146			(3,311)			6,789
Other(e)		–			–			595			–			595
Total	$	2,394		$	44,300		$	9,332		$	(3,311)		$	52,715

Liabilities
Derivatives	$	–		$	5,544		$	36		$	(3,304)		$	2,276
Other		–			28			–			–			28
Total	$	–		$	5,572		$	36		$	(3,304)		$	2,304

December 31, 2010
Assets
Investment securities
Debt
U.S. corporate	$	–		$	19,374		$	3,198		$	–		$	22,572
State and municipal		–			2,499			225			–			2,724
Residential mortgage-backed		47			2,696			66			–			2,809
Commercial mortgage-backed		–			2,875			49			–			2,924
Asset-backed		–			690			2,540			–			3,230
Corporate - non-U.S.		89			1,292			1,486			–			2,867
Government - non-U.S.		776			1,334			156			–			2,266
U.S. government and federal agency		–			3,158			210			–			3,368
Retained interests		–			–			39			–			39
Equity
Available-for-sale		661			20			24			–			705
Trading		417			–			–			–			417
Derivatives(d)		–			10,393			330			(3,646)			7,077
Other(e)		–			–			450			–			450
Total	$	1,990		$	44,331		$	8,773		$	(3,646)		$	51,448

Liabilities
Derivatives	$	–		$	6,250		$	102		$	(3,637)		$	2,715
Other		–			31			–			–			31
Total	$	–		$	6,281		$	102		$	(3,637)		$	2,746

(a)	The fair value of securities transferred between Level 1 and Level 2 was $67 million during the six months ended June 30, 2011.

(b)	Level 3 investment securities valued using non-binding broker quotes totaled $1,038 million and $1,054 million at June 30, 2011 and December 31, 2010, respectively, and were classified as available-for-sale securities.

(c)	The netting of derivative receivables and payables is permitted when a legally enforceable master netting agreement exists. Included fair value adjustments related to our own and counterparty credit risk.

(d)	The fair value of derivatives included an adjustment for non-performance risk. At June 30, 2011 and December 31, 2010, the cumulative adjustment was a loss of $7 million and $9 million, respectively. See Note 11 for additional information on the composition of our derivative portfolio.

(e)	Included private equity investments and loans designated under the fair value option.

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The following tables present the changes in Level 3 instruments measured on a recurring basis for the three and six months ended June 30, 2011 and 2010. The majority of our Level 3 balances consist of investment securities classified as available-for-sale with changes in fair value recorded in shareowner’s equity.

Changes in Level 3 Instruments for the Three Months Ended June 30, 2011

																						Net
(In millions)																						change in
						Net realized/																unrealized
			Net			unrealized																gains
			realized/			gains (losses)																(losses)
			unrealized			included in																relating to
			gains			accumulated																instruments
			(losses)			other								Transfers			Transfers					still held at
	April 1,		included in			comprehensive								into			out of			June 30,		June 30,
	2011		earnings		(a)	income		Purchases		Sales		Settlements		Level 3		(b)	Level 3		(b)	2011		2011		(c)

Investment securities
Debt
U.S. corporate	$	3,119	$	14		$	3	$	30	$	(41)	$	(29)	$	–		$	–		$	3,096	$	–
State and municipal		210		–			–		–		–		(1)		–			–			209		–
Residential
mortgage-backed		118		–			(2)		1		–		–		–			(72)			45		–
Commercial
mortgage-backed		11		–			1		(1)		–		–		–			(4)			7		–
Asset-backed		2,826		(3)			(19)		409		(43)		(1)		–			(37)			3,132		–
Corporate – non-U.S.		1,479		(1)			28		–		–		(31)		62			–			1,537		–
Government
– non-U.S.		162		(16)			8		13		–		–		107			–			274		–
U.S. government and
federal agency		201		–			23		–		–		–		–			–			224		–
Retained interests		52		1			(4)		–		(2)		(2)		–			–			45		–
Equity
Available-for-sale		21		–			1		–		–		–		–			–			22		–
Trading		–		–			–		–		–		–		–			–			–		–
Derivatives(d)(e)		75		37			–		1		–		(2)		–			–			111		12
Other		472		3			11		114		–		(5)		–			–			595		1
Total	$	8,746	$	35		$	50	$	567	$	(86)	$	(71)	$	169		$	(113)		$	9,297	$	13

(a)	Earnings effects are primarily included in the “Revenues from services” and “Interest” captions in the Condensed Statement of Current and Retained Earnings.

(b)	Transfers in and out of Level 3 are considered to occur at the beginning of the period. Transfers out of Level 3 were a result of increased use of quotes from independent pricing vendors based on recent trading activity.

(c)	Represented the amount of unrealized gains or losses for the period included in earnings.

(d)	Represented derivative assets net of derivative liabilities and included cash accruals of $1 million not reflected in the fair value hierarchy table.

(e)	Gains (losses) included in net realized/unrealized gains (losses) included in earnings were offset by the earnings effects from the underlying items that were economically hedged. See Note 11.

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Changes in Level 3 Instruments for the Three Months Ended June 30, 2010

(In millions)						Net realized/									Net change
						unrealized									in unrealized
						gains (losses)									gains (losses)
			Net realized/			included in									relating to
			unrealized			accumulated		Purchases,		Transfers					instruments
			gains(losses)			other		sales		in and/or					still held at
	April 1,		included in			comprehensive		and		out of			June 30,		June 30,
	2010		earnings		(a)	income		settlements		Level 3		(b)	2010			2010	(c)

Investment securities
Debt
U.S. corporate	$	2,806	$	16		$	35	$	272	$	(7)		$	3,122	$	–
State and municipal		275		–			(5)		–		–			270		–
Residential
mortgage-backed		133		–			(7)		(1)		6			131		–
Commercial
mortgage-backed		119		–			(5)		(62)		3			55		–
Asset-backed		1,862		12			3		78		(71)			1,884		(7)
Corporate - non-U.S.		1,357		2			(58)		(22)		(53)			1,226		–
Government -
non-U.S.		136		–			(21)		–		–			115		–
U.S. government and
federal agency		244		–			(15)		(2)		–			227		–
Retained interests		43		(1)			1		(2)		–			41		–
Equity
Available-for-sale		19		–			(1)		–		(1)			17		1
Trading		–		–			–		–		–			–		–
Derivatives(d)		171		40			5		8		–			224		42
Other		428		1			(43)		5		28			419		(1)
Total	$	7,593	$	70		$	(111)	$	274	$	(95)		$	7,731	$	35

(a)	Earnings effects are primarily included in the “Revenues from services” and “Interest” captions in the Condensed Statement of Current and Retained Earnings.

(b)	Transfers in and out of Level 3 are considered to occur at the beginning of the period. Transfers out of Level 3 were a result of increased use of quotes from independent pricing vendors based on recent trading activity.

(c)	Represented the amount of unrealized gains or losses for the period included in earnings.

(d)	Represented derivative assets net of derivative liabilities and included cash accruals of $35 million not reflected in the fair value hierarchy table.

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Changes in Level 3 Instruments for the Six Months Ended June 30, 2011

Net

(In millions)

change in

Net realized/

unrealized

Net

unrealized

gains

realized/

gains (losses)

(losses)

unrealized

included in

relating to

gains

accumulated

instruments

(losses)

other

Transfers

still held at

January 1,

included in

comprehensive

into

out of

June 30,

2011

earnings

(a)

income

Purchases

Sales

Settlements

Level 3

(b)

Level 3

(b)

2011

(c)

Investment securities

Debt

U.S. corporate

3,198

101

(20)

(155)

(103)

–

3,096

–

State and municipal

225

–

(5)

–

(4)

–

(11)

209

–

Residential

mortgage-backed

–

(4)

(1)

(90)

–

Commercial

mortgage-backed

–

GENERAL ELECTRIC CAPITAL SERVICES INC/CT 10-Q