AmEx Said to Request $3.5 Billion in U.S. Aid

http://online.wsj.com/article/SB122646207021420153.html

by gibsonf1 • 18 years ago

14 17 18 years ago

online.wsj.com

Ha! Based on my APR from them I should be getting that money paid off.

On a serious note though, this is the downfall. Once one area gets bailed out, everyone comes with outstretched hands. Will be interesting to see if Bush handles it or holds them off until Obama is in office to let him handle it.

gaius• 18 years ago

Regardless of whether Amex needs the money, if their competitors are getting it, they've basically no choice but to follow suit or find themselves at a disadvantage.

jerf• 18 years ago

Bush can't "handle" it. If he says no, nothing stops the company from just asking again in January, if they can make it that long.

startingup2• 18 years ago

By now, we should really be concerned about the immorality of it all. AmEx is one of the richest corporations in the world, serving mostly well-to-do clientele. On what moral basis do they get this aid? What is wrong with letting them do the write-off, fail if necessary?

On what moral basis can the same government deny <name-your-company> aid? So why not Circuit City? Why not Mervyns - I was there at a closing-store sale yesterday, the employee's faces told me everything. I am not advocating bailing out any of them, but if AmEx is OK to bail out, why not Mervyns? Is it because the Mervyns employees are a lower breed of human?

It is making my blood boil.

mdasen• 18 years ago

Well, first, what is aid? The big problem is that everyone is using the word "bailout". That makes one think of free money that doesn't have to be paid back. That isn't the case. Yes, if the firms still fail after receiving the government assistance, they won't pay back what amounts more to a loan than a bailout. So, yes, taxpayers can loose, but it isn't a bailout so much as an emergency loan program.

Both Circuit City and Mervyns have been dying for years. Mervyns has been shuttering stores for several years and went through a failed turn-around attempt. Circuit City simply couldn't compete with Best Buy. They didn't have sound businesses.

The big difference between a place like Circuit City and American Express is the amount that would be needed to overcome a blip. Circuit City, if it had a sound business model, might need a loan of a hundred million or so to keep paying salaries and such through a downturn. American Express needs to keep lending money - and all financial firms lend more money than their company is worth. They're intermediaries. So, Circuit City can go to a bank (or several) and get the cash they need if it would save their business. American Express can't. They need cash on a scale that Circuit City doesn't.

I understand why so many are outraged. It looks like a firesale of your tax dollars to a few firms. That isn't the case. If these firms make it (and based on their business models they will), the government will actually make money. Circuit City and Mervyns were just failing firms. Many in the financial sector have sound business models that need some cash for a year or two (in amounts that they can't raise from sources other than the government) because there was a perfect storm of credit conditions.

anamax2• 18 years ago

> If these firms make it (and based on their business models they will),

The fact that Amex can't get private investment says that the smart money thinks that they're a dumb bet. (There tons of money around. Buffet isn't the only one snapping up actual bargains.)

It may be that the Amex biz model works but Amex the company can't do it. In that case, the loan is a dumb idea. Let someone else pay to take a shot at it.

Feel free to invest your money, to get together with others if need be. If you're right, you make out. If you're wrong, I don't lose.

startingup2• 18 years ago

I was using Circuit City & Mervyns as strawmen examples. Realize that AmEx employees are some of the highest paid in America, while Mervyns' people are among the lowest paid.

A government loan (by definition on more favorable terms than what they can get in the market) to AmEx is inevitably a subsidy to those high paid employees. Mervyns having to raise funds at 15% or 25% or whatever loan-shark terms they could get - yes, entirely their own fault - means that by extension, their low paid employees have to bear that interest burden on the company.

Why should we the taxpayer subsidize AmEx? Why not let the do the write down of their bad assets? In what sense Mervyn's management mistakes more punishment worthy than AmEx management mistakes?

Here is a modest proposal: any company requesting a government loan should accept civil service pay rules for their employees. Would AmEx employees put up with it? They can get the fuck out of they don't like those terms and find real private sector employment.

curiousgeorge• 18 years ago

Will simplify credit card processing for me if they go out of business. My merchant processor only supports mastercard and visa.

"We don't take Amex... neither does anyone else."

tdavis• 18 years ago

Actually, I've found that any merchant worth doing business with generally accepts American Express. I've been using mine for years and my "Visa backup" hasn't been charged in the past year or so. AMEX is easily the best credit card company with the most perks and amazing customers service. I would be quite unhappy if they went out of business.

teehee• 18 years ago

Wow, I can't wait to redeem the skymiles on this.

biohacker42• 18 years ago

Are AmEx's clients disproportionately going bust?

Visa isn't seeking help, does that make sense?

And if AmEx does go bust what's the damage?

AIG and Lehman had all kinds of counter party risk, but who exactly would be hurt by AmEx going belly up?

bvttf• 18 years ago

Amex issues the cards themselves, exposing them to way more risk than mc/visa. Look at the branding on your credit cards. Amex will be front-and-center on an Amex, but on most other cards it's the issuing bank. Unless it's micky mouse or your kids or some shit.

If you don't pay your Amex bill, i think Amex takes a hit to pay the merchant. If Amex were to implode, those merchants could get fucked.

bdittmer• 18 years ago

Did anyone who supported the bailout actually expect nothing like this to happen? The government is pumping SEVEN-HUNDRED-BILLION DOLLARS into the economy and every major company is going to try and get a piece. Companies will (and should) always try and do what is in their best interest in order to stay competitive and make money. No one is to blame except the senators and congressman who passed this atrocious legislation. Meddle with the market and this will always happen.

tptacek• 18 years ago

The sad thing is, I see $3.5Bn, and that's good news.

AmEx Said to Request $3.5 Billion in U.S. Aid

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