Don't leave home without bank status
American Express is changing its status to a bank holding company so it can qualify for federal aid. Jeremy Hobson reports AmEx's move could lead the way for other credit card and non-credit card companies.
Inside American Express headquarters in New York City (Spencer Platt/Getty Images)
More on America's Financial Crisis
TEXT OF STORY
Scott Jagow: And American companies are lining up to get a piece of bailout. American Express says it will actually become a bank so it can qualify for money from the rescue package. The government made this happen in double-time. Marketplace's Jeremy Hobson has more on that from New York.
Jeremy Hobson: American Express is being granted its request to become a bank holding company. That means AmEx will be able to accept consumer deposits. And more importantly, it means it'll be able to collect money from the $700 billion Troubled Asset Relief Program, also known as TARP.
Gary Shilling runs an economic consulting firm. He says the move isn't about shoring up long-term solvency for AmEx at all. It's just about getting government assistance now. And he says other credit card companies are likely to follow suit.
Gary Shilling: This becomes a competitive race to the bottom, and yeah, I would think you'd probably find all those that are not already banks one way or the other would want to join the parade.
If this is a parade, consumers are both the sponsors and the grand marshall. AmEx is in trouble in part because consumers are defaulting on their credit card debt at almost twice the rate they were last year.
In New York, I'm Jeremy Hobson for Marketplace.
Comments
Comment | Refresh
From Caledonia, WI, 11/12/2008
And now we're runing out of the $700 billion TARP fund?
THIS IS JUST W R O N G. Where is the accountability? If they gave out more credit than they could afford they DO deserve to take their lumps through bankruptcy. AND THEY'RE STILL OFFERING 0% CREDIT CARD ACCOUNTS!
From Dallas, TX, 11/11/2008
This is absolute insane! Why don't struggling American families start applying for bank status too so they can get some bailout money!!!
Its nice to know that my tax dollars are getting used this way.
Post a Comment: Please be civil, brief and relevant.
Email addresses are never displayed, but they are required to confirm your comments. All comments are moderated. Marketplace reserves the right to edit any comments on this site and to read them on the air if they are extra-interesting. Please read the Comment Guidelines before posting.
You must be 13 or over to submit information to American Public Media. The information entered into this form will not be used to send unsolicited email and will not be sold to a third party. For more information see Terms and Conditions and Privacy Policy.