This literally makes me sick. As much as I concede that the bailout will likely preserve American capitalism and hopefully protect most Americans from an economic collapse, I can’t help but read something like this and feel absolutely sick:
American Express seeking $3.5 billion as part of government bailout program
The Associated Press
NEW YORK — American Express Co. is seeking $3.5 billion in funds under the government’s plan to directly invest in financial firms, according to a Wednesday report in The Wall Street Journal citing unnamed sources.
Earlier this week, American Express received approval from the Federal Reserve to become a bank holding company, which is a similar structure to traditional commercial banks. The credit card company now has access to financing from the Fed and the ability to grow a large deposit base.
The increased funding opportunities through government programs, including the potential $3.5 billion investment, could be a huge boost to American Express as one of its primary sources of funding has nearly disappeared amid the ongoing credit crisis.
American Express relied on packaging pools of credit card debt and selling them to investors in the securitization market. As investors have shied away from purchasing all but the safest forms of debt, the market for credit card-backed securities has dwindled.
American Express is also facing a slowdown in the broader economy, which has led to more customers missing payments and cutting back on spending, hurting the company’s profitability.
So you have a company here who preys on Americans, imposing short-term lending agreements meant to squeeze cash from consumers and pad company profits. Now facing a bleeding credit market that is likely now to spread to consumer credit cards, AMEX is crying for a bailout from the very taxpayers they are bankrupting out of house and home.
OK, that’s a bit of a stretch, but it still leaves me a bit queasy. I know credit card companies aren’t incarnations of the devil, but I do believe they craft credit agreements that are often not in the best interest for consumers they supposedly serve. While consumers have a burden in deciding which credit agreement they can live with, credit card companies also have obligations. For one, they shouldn’t lend to consumers that can’t pay their credit cards!
So if AMEX is bleeding money and can’t afford to take the limo to the office today or take that week-long spa trip this Christmas, excuse me while I play the world’s smallest violin. SUCK. IT. UP.
I only hope the federal government has the decency to impose the same credit terms on AMEX that they and many others impose on consumers. How does 25 percent interest sound to you?
