Washington, November 11: The Federal Reserve has approved American Express Co. (AMEX)’s application to become a bank holding company. Now, the credit card giant AMEX would get to access the federal funds, which have been released into the financial firms for emergency lending.
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Washington, November 11: The Federal Reserve has approved American Express Co. (AMEX)’s application to become a bank holding company. Now, the credit card giant AMEX would get to access the federal funds, which have been released into the financial firms for emergency lending.
The U.S. central bank said that both American Express and its affiliate American Express Travel Related Services are approved to form bank holding companies, as the Amex group converts its Salt Lake City -based American Express Centurion Bank into a full bank.
The fed quickly approved the AMEX’s application waiving the normal 30-day waiting period, considering the economic turmoil and exigent financial circumstances around the world.
With this, AMEX has joined Goldman Sachs Group Inc. and Morgan Stanley, other companies being transformed into bank holding companies. The approval is a step towards reforming the financial industry, which is undergoing a steep recession.
In addition, this move has also cooled down the irate investors worried about the financial position of AMEX, despite the fact that its two bank units already have access to the Federal Reserve's discount window.
"Given the continued volatility in the financial markets, we want to be best positioned to take advantage of the various programs the federal government has introduced or may introduce to support U.S. financial institutions," Kenneth Chenault, AmEx chairman and chief executive, said in a statement.
Mr. Chenault further said that the decision "does not fundamentally change" the company's "core focus on the payments industry".
Craig Maurer, an analyst at Calyon Securities, a unit of Credit Agricole Group, said, "Everybody wants to be a bank because everybody wants access to government funding,"
One source familiar with AmEx's strategy described the move as "common sense". "How could you possibly pass up the flexibility to be able to access these programs in a highly uncertain and volatile world?" he said.
Banks, thrifts and bank-holding companies have to apply by Nov. 14 for a capital infusion from the government. Fed officials are reviewing applications from a small number of other firms, including GMAC LLC, the auto and home lender.
Submitted by Anonymous (not verified) on Wed, 2008-12-10 00:01. *
Like many Americans we were caught with too much credit card debt when our income became reduced to 1/2 due to the economy. We contacted Bank of America and Chase and arranged a pay off agreement with lower interest rate, no penalties and payments we could afford. American Express has doubled our interest rate and offered a payment plan at nearly twice what our original payments were. They refuse to allow us to pay this debt at a rate we can afford and instead only suggest bankruptcy. Yet they came begging to the American Taxpayer to bail them out. Something is wrong with this picture.
Submitted by Rick (not verified) on Wed, 2008-11-12 02:09. *
I wanted you to know that I am OUTRAGED that the government has now recognized cash-strapped American Express as a "bank", which will enable them to have access to taxpayer bail-out monies!
American Express already had some of their operations in the banking industry with their Centurion Bank division, and I do not feel the remainder of their company should have been allowed to become a "bank" just to rescue the impending crisis in their charge-card division!
They themselves are responsible for their very-own situation when they began to lower credit-limits on virtually all American account holders, knowingly causing credit/debt ratios to fall, knowingly resulting in lower credit scores, which allowed them to raise interest rates on millions of consumers, helping to fuel the financial crisis we all now face!
American Express has shown blatant predatory practices towards us Americans and American businesses, and now they are rewarded by this recognition as a "bank" only to obtain bail-out monies from our taxes!
When are these insults to us ordinary "Joe The Plumber" types going to end?
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Like many Americans we were
Like many Americans we were caught with too much credit card debt when our income became reduced to 1/2 due to the economy. We contacted Bank of America and Chase and arranged a pay off agreement with lower interest rate, no penalties and payments we could afford. American Express has doubled our interest rate and offered a payment plan at nearly twice what our original payments were. They refuse to allow us to pay this debt at a rate we can afford and instead only suggest bankruptcy. Yet they came begging to the American Taxpayer to bail them out. Something is wrong with this picture.