The line for government bailout money may be getting longer. Inspired by the banking bailout, automakers General Motors Corp., Ford Motor Co. and Chrysler LLC are lobbying for government help, and now credit card company turned bank holding company American Express Co. is reportedly seeking $3.5 billion in taxpayer-funded capital, according to The Wall Street Journal.
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American Express paved the way for seeking government aid by announcing Monday that it received approval from the Federal Reserve to convert from a finance company to a bank holding company, thereby giving the 158-year-old firm access to Treasury's Troubled Asset Relief Program's $700 billion largess, which is currently only open to banks and insurers.
American Express is just the latest financial services firm to convert to a bank holding company. In September, Goldman Sachs Group Inc. and Morgan Stanley changed their corporate structure to bank holding companies, and in October they were rewarded with TARP money. The Wall Street Journal said American Express has not formally announced its application for government aid, nor did the story outline how it would use the money.
The financial picture for American Express is getting gloomier as The Deal's Donna Block reported:
Sales of credit card asset-backed bonds have plummeted, hindering American Express' ability to raise cash to fund new loans. The Fed lets banks post consumer debt, such as credit card receivables, as collateral for loans from its discount window, which carry a 1.25% interest rate.
American Express' latest earnings results in October came in lower than expected as quarterly net income declined 24% as
it set aside more money to cover bad loans. Net income came in at $815
million, or 70 cents a share, compared with $1.07 billion, or 90 cents
a share, a year earlier. - Gerald Magpily
See Dealscape: Amex to become a bank
See Dealscape: Amex to lay off 10% as it freezes salaries and hiring
