The industrial conglomerate set aside $1.5 billion of reserves for a potential legal settlement in connection with alleged subprime mortgage violations under GE Capital in 2006 and 2007.
"In March we had settlement discussions following the DOJ's assertion that WMC and GE Capital violated FIRREA," GE Chief Financial Officer Jamie Miller said on a conference call with investors, referring to the federal law on loans.
The Justice Department opened an investigation in late 2015 regarding WMC, which was a GE Capital subsidiary, and its alleged violation of the Financial Institutions Reform, Recovery, and Enforcement Act.
GE, which sold WMC in 2007, has said the warning about potential DOJ action includes the outcomes from investigations of other financial firms. Miller reiterated that GE's newly raised reserve is based on those discussions with the Justice Department, as well as a "review of settlements by other banks."
Before GE reported the $1.5 billion reserve, Deutsche Bank had estimated GE had $426 million set aside, while Bank of America had said its model assumes about "$1 billion of cash outflow to settle" the WMC claims.
Barclays settled a similar Justice Department allegation for $2 billion, announced in March.
"GE Capital has sufficient liquidity to manage the WMC FIRREA settlement," Miller added, noting that "the discussions are ongoing."