Don’t leave home without bank status
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.
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