Monday, November 10, 2008 0 comments ++[ CLICK TO COMMENT ]++

Wow, Amex converts to a bank holding company

One could argue that this is a pre-emptive move but it looks almost like a desperate move in my eyes. MarketWatch is reporting that American Express is converting to a bank holding company:

American Express Co. got approval from the Federal Reserve Board to form a bank-holding company, the central bank said late Monday.

In becoming a holding company, the credit-card giant would get access to the Federal Reserve's emergency-lending facilities, but also will be subject to greater scrutiny by regulators.

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 waived the normal 30-day waiting period on the application.

The move is to get access to the FedRes window. In return, it is giving up some of its freedom and will regulated more.

This is actually quite surprising to me. One can argue that this is nothing more than an attempt to get cheap money from the government. But it's not clear. Being somewhat pessimistic, I wonder if American Express is facing serious issues. They have been reporting deteriorating numbers for several quarters now and I wonder if they are seeing some serious problems.

If Amex is indeed facing problems then it is not good news for the economy. I was expecting the non-real-estate debt defaults to stay moderate (higher than at any point in the last 20 years but in line with past recessions like 1990 or 1982.) But if there is serious deteriorating with consumer credit, it is not going to be pretty.


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