On Nov. 11, 2008, American Express Co. won approval from Federal Reserve banking regulators to become a commercial bank. The fourth largest U.S. credit card issuer said it is taking steps to cut borrowing costs and give it access to government funds. Regulators said they approved its application because of the "unusual and exigent circumstances" currently shaking up financial markets. The Fed's approval for AmEx was similar to the decision it made in September to transform the country's two biggest investment banks, Goldman Sachs Group Inc. and Morgan Stanley, into bank holding companies. AmEx can now issue bonds that are government guaranteed through the end of June 2012.
Industry analysts said the primary concern about AmEx is not funding, but consumer credit losses. The funding pressures are adding to the credit pressures the company is facing. Default rates among its credit card clients in the United States almost doubled in the third quarter of 2008.
Todd
Southern Lending Solutions
Sunday, November 30, 2008
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