American Express, brazen welfare queen

[marmar]

from Minyanville:



Quick Hits: AmEx Goes Begging in DC
Scott Reeves Nov 12, 2008 1:00 pm


The cynics may be right: American Express (AXP) appears to be jangling the tin cup in front of Uncle Sam the day after filing to become a bank holding company.

The credit card company, hit by the slowdown in consumer spending, apparently seeks about $3.5 billion in taxpayer money from the Federal government, the Wall Street Journal reports.

The begging might work. Retailers, car companies and others slammed by the economic downturn haven’t received bailout bucks, but financial firms have. The basic question: Why is a consumer credit card company vital to the US economy?

The answer may be because AmEx’s top executive can’t imagine themselves on the unemployment line. Here’s betting the sun would still rise in the east, even in a world without American Express.

Converting American Express and American Express Travel Related Services to bank holding companies allow the credit card issuers to attract deposits and to tap financing from the Federal Reserve.

In this respect, American Express follows Goldman Sachs (GS) and Morgan Stanley (MS), which also recently became bank holding companies. But Goldie and (once) Mighty Morgan are directly involved in raising and allocating capital to fund major companies and startups to keep the economy growing. American Express pitches itself as the credit card of the snooty, and is involved only in consumer spending.

American Express says more of its customers are having trouble paying their bills on time, if at all. Profit declined 24% in the third quarter - the fourth quarter in a row of lower earnings. That’s reduced the value of the company and made it harder to borrow money to cover daily operations.

To which the simple student might ask: So what? .......(more)

The complete piece is at: http://www.minyanville.com/articles/GS-AXP-bank-MA-Credit-ms/index/a/19955

[Donnachaidh]

1. American Express, the elitist's credit card company

Wasn't one of it's early sales pitches something along the lines of *NOT* giving credit cards to people who couldn't AFFORD to pay their outstanding bills in the same month?

So why should the American Public now shore up this ELITIST company? WHY?

[DoctorMyEyes]

2. Amex just sent me a letter lowering my credit line

I've been with them for years - have never missed a payment or even paid late. Up until this year I never carried much of a balance and more often than not paid the full balance every month. Earlier this year I had to put a large emergency purchase on the Amex and carried a balance for about six months (still making more than the minimum payment on time every month!) Then, about six weeks ago I was able to pay off the last of it.

AFTER I paid them off they sent me a letter stating they were lowering my credit limit because my debt ratio made them nervous - I'd used to much of the credit that they made available to me. WTF???

At no time did I go OVER the limit they gave me, and they never had to chase me down for a payment. I was so pissed I thought about calling them over it and then I just decided "screw them" - they've done me more of a favor than they did themselves. I'd close the freakin' account if it wouldn't adversely affect my FICO since they're my oldest open line of credit.

[HamdenRice]

5. Here's what's really happening. Your story and the news are linked--->

The Paulson "Uncle Fester on crystal meth" performance yesterday had to do with his getting data that the credit card-, car loan-, and student loan- backed securities markets had frozen up.

Credit card companies have no money to lend. They're flat busted broke. They were not actually lending you money; they were securitizing your debt into "credit card receivable backed securities" and Paulson was basically saying yesterday that no one is buying those securities any more.

Now that that market is dead, they can't extend credit. So they send out self serving letters saying it's your fault, in order to hide the fact that they have no money to lend.

[DoctorMyEyes]

6. Well isn't that interesting?

Thank you for explaining that. I didn't realize that that's how it worked - I thought they actually backed the credit.

[littlebit]

7. You're not the only one they did it to.

We got a double screw you from they. They lowered my limit. Then about a month later they laid off my girlfriend. She had been with them for almost five years.

[DoctorMyEyes]

8. ouch!

That really sucks. Sorry for your girlfriend's job loss.

[Romulox]

3. DUers are too busy whining about GM to even notice this.

:wtf:

[Horse with no Name]

4. Disgusting. Pigs at the trough.

Ugh.