Federal Bank Bailout |
Federal Government Bailout for American Express
American Express has been the high end credit card company for years, never aiming at the Fed's low cost financing or any other source of funds from aside. But the stressed economy effects and a surprisingly high delinquency rate at the company made it reconsider its financial model and seek the federal bailout.
Before it sent a request for the Federal Reserve to turn it into a bank holding company, American Express expected to hold out with the help of the $700 billion bailout package. They failed and the application to become a bank holding company seemed the only way to survive the hard economic environment and pass it with minimum changes and loss. November, 10, the Federal Reserve approved their application which means the company will now enjoy a range of privileges as well as new restrictions.
Along with the new obligations and business reconstruction, American Express gets just what the doctor ordered during the economy crisis - the urgent funds to help the giant company stay aswim and avoid serious financial problems. December, 23 Amex announced it was going to receive $3.39 billion from that $700 bailout package in exchange for the regulatory oversight on the Federal government side.
Critics see the decision to become a bank holding company as an attempt to offset great losses from its credit card business. Who could ever think that the wealthy and credit conscientious American Express customers would ever find themselves unable to pay off credit card balances? Such a thing should never have happened to a card company always a bit too much choosy about its clients. According to recent analysis, American Express has now reached a delinquency rate close to that of the national average. This bailout is expected to help the company through with minimum changes in consumer and business credit card service, although the prime focus of its policy - serving the wealthy layer of society, - may be lost. It may not mean that it would roll back its lowest interest, no fees and exclusive rewards card applications such as those for frequent flyers, but it certainly may pose risk to the company's upscale brand image.
American Express does not seem to be much concerned about its core focus, however, and as chief executive of the company said, it is more important to gain the advantage of the federal government's various programs to support US financial institutions. Now the company will have similar options as its rivals, Chase, Citigroup and Capital One and will be able to consistently borrow low cost federal money to build up a solid deposit base.
Another possible outcome of becoming a bank holding company and receiving cheap financing is turning into the business of debit cards. A decision to reshape has not been announced but it might, given consumers' increased use of debit cards in the present environment.
The capital injection was not granted for free and American Express agreed to sell its preferred stock and warrants to the US Treasury.
April Bross
April 7, 2009, 11:38 am
As far as we know, most banks are now trying to return the bailout funds, claiming that the bailout program tarnished their reputation and tangled them in unwieldy regulations. We also know that banks have to return the bailout money at a 5% interest rate, not 8%. Anyway, what you personally can do is refuse to pay the new interest rate on your credit card, and choose instead to close the account. In this case, U.S. law requires that you be allowed to pay off your balance at the initial rate of interest. Alternatively, you can continue using your credit card at the higher rate of interest.
CreditCards.com
- 0% Intro APR.
- No Annual Fee.
- Great Rewards Programs.
BadCreditOffers.com
- Low APR on Purchases.
- All Applications Welcome.
- Know your result within 60 seconds.
Credit Cards eZine
For the past few years, college campuses have been a very promising market for banks and credit companies. There has been a lot of talk about the pros and cons of student credit card applications. While some people believe that student credit deals are nothing but a dangerous financial weapon, the others consider credit cards for students as the integral part of financial freedom. Anyway, credit deals for students were readily available in the recent years, but things have changed greatly. And now in tough economic times, youth folks may find it more difficult to get access to credit. So, the question becomes: how to apply for a student credit card in difficult economic times?
Click here to read more...All through our lives, we move from one stage to another, and just like that we move from no credit to excellent scores in hopes of getting low interest rates and deals with good terms. When beginners apply for their first credit card, they want to get access to credit and build a solid payment history that will let them borrow money on favorable terms. But even if your FICO is almost perfect, it doesn't mean that you can sit back and relax. Good credit requires much work to be done and if you have good scores, you should know how to manage your credit responsibly without getting far into debt. Read more tips on how to maintain your good credit rating.
Click here to read more...When choosing between numerous credit card applications, we want to get the most of our new card. Even though there’s no card that is right for everyone, many credit offers present some tempting features designed to entice you to submit your application online. Whether it’s a large amount of complimentary bonus rewards points or zero interest rates for a certain period of time, you may be enticed to apply for the product that doesn’t fit your individual needs. The question is, how to choose the card that is right for you? Read more about the terms and conditions you should look at when selecting the best credit card.
Click here to read more...
