????The company aims to be more open about its accounting, but its finance division looks like a candidate for closer supervision.

????By Katie Benner

????When General Electric paid $50 million last week to settle civil fraud charges brought by the Securities and Exchange Commission, we may have witnessed a turning point for the company. While the settlement vindicated critics who have long claimed that GE pushes the accounting envelope, it also showcased moves the company has made to become more transparent and open.

????"For two decades the stock outperformed the S&P because GE showed consistent growth and almost always beat earnings by a penny," says Peter Cohan, a management consultant and GE shareholder. "Even as the stock market rewarded investors, there were always questions about how the company had such perfect results."

????Cohan says the company is trying to break from the culture of managed earnings. "In some sense, the settlement is part of Immelt's effort to put that era of accounting chicanery behind GE."

????One hallmark of the old GE: tinkering with the assets at the company's finance unit, GE Capital, to help the company hit Wall Street targets. Some of the accounting practices that got the conglomerate into hot water were used with regard to GE Capital.

????GE (GE, Fortune 500) is now in the process of shrinking GE Capital, reducing GE's exposure to the volatility of financial markets and the temptation to use it to manage earnings. The move has been applauded by investors and analysts.

????And GE has been working hard to show that it can solve its problems with strong management and more transparency. It has held shareholder meetings focused solely on the ins and outs of GE Capital. The unit's executives said in a recent investor presentation that it has enough money to offset loan losses and is in fact better capitalized than most of its U.S. banking peers that have comparable operations. GE Capital CEO Michael Neal said during the presentation that its loan portfolios were performing as well or better than expected and that it will not need more capital, even if the economy stumbles and loan losses rise.

????GE says it has made improvements in its accounting as a result of the SEC's investigation. While GE admitted to no wrongdoing in the settlement, a spokeswoman said in an email that it has taken several remedial actions with regards to its accounting methods, including implementing new procedures for its accounting and audit staff and making "appropriate personnel determinations" where errors occurred.

????While these moves have sent GE's shares higher, it's the government rather than market sentiment that may shape GE Capital's future.

????Regulators are deciding whether to make captive-finance units like GE Capital subject to the same regulations as banks. If it stood alone, GE Capital, with more than $600 billion in assets, would be among the 10 largest commercial banks in the U.S., and the size of its book reasonably qualifies it as systemically important to the financial system. GE Capital is also a major lender to small- and mid-sized businesses as well as a huge player in the commercial real estate market.

????GE has also tapped the FDIC's Temporary Liquidity Guarantee Program (TLGP) to issue about $68 billion in long- and short-term debt, mostly through the finance unit. It has issued more government-backed debt than any other company, including Citigroup (C, Fortune 500) and Bank of America (BAC, Fortune 500). This means that GE Capital's health could have a real effect on the fiscal health of the FDIC, as well as on the private sector.

????GE's position is that there is no need for regulators to lump GE Capital in with the rest of the banking system, and each new move toward a more transparent and stable company seems to reinforce the message that the company can manage itself just fine.

????However, GE Capital's size and importance to the economy make it a likely candidate for bank-style supervision.