Will the GE Capital bailout make a GM bankruptcy easier?

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GE has just announced (pdf) that GE Capital has been approved to participate in the FDIC’s Temporary Liquidity Guarantee Program. The FDIC will now guarantee all GE Capital debt (subject to some limits) issued between this Friday and June 30, 2009. Banks already have this deal. Now GE Capital does too.

As an interesting side-note, GE Capital is the country’s biggest provider of debtor-in-possession (DIP) financing for companies in Chapter 11 bankruptcy. Executives at GM have said that one reason the company can’t be allowed to go bankrupt is because there’s no DIP financing to be gotten, meaning that if the company went bankrupt it would be forced to shut down and liquidate rather than keep operating while negotiating with its creditors. Now maybe that excuse is about to disappear.

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