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GE to sell its sub-prime business GE to sell its sub-prime business
(about 6 hours later)
General Electric has decided to sell the WMC Mortgage sub-prime lending business that it bought in 2004.General Electric has decided to sell the WMC Mortgage sub-prime lending business that it bought in 2004.
"The mortgage industry has greatly changed since the purchase of WMC," WMC's chief executive Laurent Bossard said in a memo to employees. "The mortgage industry has greatly changed since the purchase of WMC," said WMC's chief Laurent Bossard.
Full details are expected with the release of GE's second-quarter results later on Friday. The sale was confirmed in GE's second-quarter results, which showed net earnings of $5.42bn (£2.67bn), up 9.6% from 2006.
Sub-prime lenders focus on less creditworthy borrowers, and the sector has seen a jump in defaults this year. Sub-prime lenders target borrowers who are less creditworthy, but the sector has seen defaults jump this year.
About 50 sub-prime lenders have been forced to close by the problems, which have also weighed on US share prices.About 50 sub-prime lenders have been forced to close by the problems, which have also weighed on US share prices.
GE has already been cutting back on its exposure to the sub-prime market.GE has already been cutting back on its exposure to the sub-prime market.
California-based WMC recently sold about two thirds of its sub-prime loans, worth about $3bn (£1.5bn), and laid off more than 1,200 staff, leaving it with a headcount of about 700. California-based WMC recently sold about two thirds of its sub-prime loans, worth about $3bn, and laid off more than 1,200 staff, leaving it with a headcount of about 700.