The potential 10% default rate was based on a stress test using the federal baseline assumption for the economy. Should the US unemployment rate and GDP deteriorate sharply--i.e. a jobless rate of 10% and a 3% decline in GDP--the default rate for GE's commercial real estate loans could reach 8% or as much as 10%, representing a loss of $900 million to $1 billion for '09. In a PowerPoint presentation accompanying the investor conference, GE Capital calculated that the effect of more adverse assumptions for the GDP and unemployment would translate into a 15% decline in rents for US office markets and a 16% drop in NOI over two years.

One factor in the lower default rate, company executives said Thursday, was a lack of construction and development loans in GE's portfolio. C&D loans represent 32% of commercial banks' real estate portfolios, compared to 1.5% in GE's. The Norwalk, CT-based company also avoids "other higher risk asset classes and structures," including second mortgages, mezzanine lending, malls and resorts, according to Thursday's presentation.

In a release, GE vice chairman and CFO Keith Sherin says, "Even in this difficult environment of credit pressure and declining asset values, we expect GE Capital Finance to be profitable in the first quarter and full year '09. Our funding position is strong, having already completed 93% of [the] 2009 funding goal."