Posted on 11/11/2008 1:42:41 AM PST by Freedom_Is_Not_Free
American Express, the nation’s last big independent credit card company, said late Monday that it would transform into a bank holding company to strengthen its position in the market turmoil.
Federal Reserve banking regulators said they approved its application because of the “unusual and exigent circumstances” roiling financial markets and the company’s interest in tapping up to $3.8 billion in government money. As a full-fledged bank, American Express would gain greater access to the Treasury Department’s bailout plan for banks, a move that might allow it to lend more freely and perhaps acquire a larger deposit-taking institution.
American Express customers are unlikely to notice the changes. But Monday’s announcement may also represent the end of financial companies operating a single line of business and depending on the capital markets for financing.
Goldman Sachs and Morgan Stanley recently transformed themselves from investment banks to bank holding companies after being battered by the markets. Big lenders like GMAC, the finance company partly owned by General Motors, and General Electric’s financial subsidiary have similarly been considering becoming banks.
American Express executives have publicly maintained they did not need to become a bank holding company, although they also never completely ruled out that option. But when their financing costs soared as the commercial paper markets froze , the company increasingly recognized it needed to diversify its sources of financing. The company applied for banking holding company status about two or three weeks ago, according to a person with direct knowledge of the situation.
(Excerpt) Read more at nytimes.com ...
Good observation. One thing is certain — the financial industry is changed today and will be much different going forward. When the stock value of the Investment Banks went down, and then the Big 9 were chosen for survival, I was salivating at the idea of picking up some Goldman Sachs cheap. Now its cheap. But they can’t finance like they did previously, so their profits will never again be so lofty. Steady, but not spectacular. Why bother.
People have no imagination. They think we are in a “normal” recession and will be going back to normal when this is done. They have no clue. Of course, something will fill the gap going forward. Human nature never changes and as long as the US is filled with hard workers, we will end up prosperous. Just not in the next few years...
The problem is the Fed might succeed at reinflating the credit bubble then kill off business through commodity price inflation. Or they might fail and kill off business through credit deleveraging and deflation. The latter would be brutal at this point but at least we would be able to start over.
Yes, the market may be deciding he’ll make things worse, but the market is also pricing in the fundamentals of the credit markets and the general economy, and they are both really, really bad.
It will be just another ex-Clinton hack, sure to be a creature of the CFR and the Wall Street pigmen. Did you see the photo of Obama’s economic advisors - what a joke. We should just have elected Hillary Clinton; we’re getting all the Clinton stalwarts.
Barf.
That sure is change we can believe in and hope for.
Well, that was my other part :-)
"And it’s been brewing since the Dems took over congress."
Indeed true. They are recycling all the old Clinton rejects. Barry hasn’t got a thought in his head, per the movie “the Candidate”. Except for his communist wife, he has to go on bended knee back to the Bent One for guidance.
We are screwed.
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