We securitize financial assets in the ordinary course of business to improve shareowner returns. The securitization transactions we engage in are similar to those used by many financial institutions. Beyond improving returns, these securitization transactions serve as funding sources for a variety of diversified lending and securities transactions. Historically, we have used both GE-supported and third-party entities to execute securitization transactions funded in the commercial paper and term bond markets.

Securitized assets that are on-balance sheet include assets consolidated upon adoption of FIN 46, Consolidation of Variable Interest Entities (the predecessor to FIN 46R). Although we do not control these entities, consolidation was required because we provided a majority of the credit and liquidity support for their activities. A majority of these entities were established to issue asset-backed securities, using assets that were sold by us and by third parties. These entities differ from others included in our consolidated financial statements because the assets they hold are legally isolated and are unavailable to us under any circumstances. Repayment of their liabilities depends primarily on cash flows generated by their assets. Because we have ceased transferring assets to these entities, balances will decrease as the assets repay. We refer to these entities as “consolidated, liquidating securitization entities.”

The following table represents assets in securitization entities, both consolidated and off-balance sheet.

December 31 (In millions)		2006			2005
Receivables secured by
Equipment		$ 9,590			$ 12,949
Commercial real estate		11,324			13,010
Residential real estate		7,329			8,882
Other assets		14,743			12,869
Credit card receivables		12,947			10,039
Trade receivables, principally GE		3,918			3,960
Total securitized assets		$ 59,851			$ 61,709
December 31 (In millions)		2006			2005
Off-balance sheet(a)(b)		$ 48,204			$ 43,805
On-balance sheet(c)		11,647			17,904
Total securitized assets		$ 59,851			$ 61,709

(a)	At December 31, 2006 and 2005, liquidity support amounted to $753 million and $1,931 million, respectively. These amounts are net of $3,034 million and $3,786 million, respectively, participated or deferred beyond one year. Credit support amounted to $3,815 million and $5,988 million at December 31, 2006 and 2005, respectively.
(b)	Liabilities for recourse obligations related to off-balance sheet assets were $27 million and $93 million at December 31, 2006 and 2005, respectively.
(c)	At December 31, 2006 and 2005, liquidity support amounted to $6,585 million and $10,044 million, respectively. For December 31, 2005, this amount is net of $138 million participated or deferred beyond one year. No amounts have been participated or deferred beyond one year at December 31, 2006. Credit support amounted to $2,926 million and $4,780 million at December 31, 2006 and 2005, respectively.

The portfolio of financing receivables consisted of loans and financing lease receivables secured by equipment, commercial and residential real estate and other assets; credit card receivables; and trade receivables. Examples of these assets include loans and leases on manufacturing and transportation equipment, loans on commercial property, commercial loans, and balances of high credit quality accounts from sales of a broad range of products and services to a diversified customer base.

Assets in consolidated, liquidating securitization entities are shown in the following captions in the Statement of Financial Position.

December 31 (In millions)		2006			2005
Financing receivables — net (note 13)		$ 11,509			$ 16,615
Other assets		138			1,289
Total		$ 11,647			$ 17,904

Off-balance sheet arrangements
We engage in off-balance sheet securitization transactions with third-party entities and use public market term securitizations. As discussed above, assets in off-balance sheet securitization entities amounted to $48.2 billion and $43.8 billion at December 31, 2006 and 2005, respectively. Gross securitization gains amounted to $1,199 million in 2006 compared with $939 million in 2005 and $1,195 million in 2004.

Amounts recognized in our financial statements related to sales to off-balance sheet securitization entities are as follows:

December 31 (In millions)		2006			2005
Retained interests		$ 4,760			$ 4,515
Servicing assets		9			29
Recourse liability		(27	)		(93	)
Total		$ 4,742			$ 4,451

• RETAINED INTERESTS. When we securitize receivables, we determine fair value of retained interests based on discounted cash flow models that incorporate, among other things, assumptions about loan pool credit losses, prepayment speeds and discount rates. These assumptions are based on our experience, market trends and anticipated performance related to the particular assets securitized. We classify retained interests in securitized receivables as investment securities and mark them to fair value each reporting period, updating our models for current assumptions. These assets decrease as cash is received in payment. When the carrying amounts exceed fair value, we evaluate whether the unrealized loss is other than temporary and, if so, record any indicated loss in earnings currently.
• SERVICING ASSETS. Following a securitization transaction, we also may provide servicing for a market-based fee based on remaining outstanding principal balances. Servicing assets are primarily associated with residential mortgage loans. Their value is subject to credit, prepayment and interest rate risk.
• RECOURSE LIABILITY. Certain transactions involve credit support agreements. As a result, we provide for expected credit losses at amounts that approximate fair value.

The following table summarizes data related to securitization sales that we completed during 2006 and 2005.

(Dollars in millions)	Equipment			Commercial real estate			Credit card receivables			Other assets
2006
Cash proceeds from securitization		$ 2,784			$ 4,427			$ 5,251			$ 7,782
Proceeds from collections reinvested in new receivables		—			—			16,360			30,584
Cash received on retained interests		236			80			2,307			341
Cash received from servicing and other sources		45			26			219			126
Weighted average lives (in months)		23			75			7			39
Assumptions as of sale date(a)
Discount rate		8.3	%		12.8	%		12.0	%		12.6	%
Prepayment rate		10.4			7.6			12.5			20.2
Estimate of credit losses		1.4			0.5			6.8			0.8
2005
Cash proceeds from securitization		$ 3,702			$ 5,571			$   6,985			$   4,705
Proceeds from collections reinvested in new receivables		—			—			10,067			27,697
Cash received on retained interests		190			69			1,644			10
Cash received from servicing and other sources		75			36			155			91
Weighted average lives (in months)		37			80			8			35
Assumptions as of sale date(a)
Discount rate		8.8	%		13.4	%		11.7	%		12.6	%
Prepayment rate		8.8			6.5			12.6			21.2
Estimate of credit losses		2.3			0.8			7.5			0.6

(a) Based on weighted averages.

Key assumptions used in measuring the fair value of retained interests in securitizations and the sensitivity of the current fair value of residual cash flows to changes in those assumptions related to all outstanding retained interests as of December 31, 2006, are noted in the following table.

(Dollars in millions)	Equipment			Commercial real estate			Credit card receivables			Other assets
Discount Rate(a)		8.9	%		13.2	%		11.2	%		6.6	%
Effect of
10% Adverse change		$ (10	)		$ (19	)		$ (15	)		$ (6	)
20% Adverse change		(21	)		(35	)		(30	)		(13	)
Prepayment Rate(a)		11.7	%		3.0	%		12.0	%		13.2	%
Effect of
10% Adverse change		$ (5	)		$ (7	)		$ (59	)		$ (13	)
20% Adverse change		(9	)		(13	)		(110	)		(22	)
Estimate of credit losses(a)		2.3	%		0.8	%		6.6	%		0.3	%
Effect of
10% Adverse change		$ (7	)		$ (6	)		$ (48	)		$ (9	)
20% Adverse change		(14	)		(8	)		(95	)		(17	)
Remaining weighted average lives (in months)		31			47			8			18
Net credit losses		$ 58			$ —			$ 576			$ 8
Delinquencies		121			13			437			315

(a) Based on weighted averages.

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