American Express Seeks $3.5 Billion in US Aid

November 12, 2008

Washington (Chattahbox) American Express Co., the fourth largest credit card issuer is seeking financial help worth $3.5 billion from tax-payer funded capital from the US government. The company has recently become a bank holding company.

“Given the continued volatility in the financial markets, we want to be best positioned to take advantage of the various programs the federal government has introduced or may introduce to support U.S. financial institutions,” said Chief Executive Kenneth Chenault in a statement.

It remains unclear if the application under the Troubled Relief Asset Relief Program came before or after American Express got the approval from the Federal Reserve to be a bank holding company. American Express has also not disclosed if it has made the application and how it would use the money received from the government.

The Federal Government has also waived the 30 day period of waiting to approve the application filed under the $700 billion TRAP. This enables American Express to apply for capital injection from the Relief Fund before the Friday deadline. However, this move looked risky to the tax payers who felt that the AIG bail out is more necessary. Tax payers doubt the merits of lending support to a credit card company that has shown a constant deterioration in its portfolio.

American Express advanced in German trading after the close on Wall Street. It rose 40 cents to $22.80 but dropped 6.6 percent on the New York Stock Exchange. It has already lost 57 percent market value owing to fall back by its customers who have delayed or defaulted on their payments. The company has set aside more reserves as customer failed to pay its loans. Moreover, there has been a tremendous slow down in consumer spending in retail segment, automobiles and consumer durables.


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