American express gets $4.9bn cash injection

[Iza]

American express gets $4.9bn cash injection

From correspondents in Washington
Agence France-Presse
December 24, 2008 09:15am

CREDIT card giant American Express has revealed it is to receive $3.4 billion ($4.9 billion) in capital injection from the US Treasury as part of an emergency rescue for the troubled financial sector
American Express said the Treasury had provided preliminary approval for it to participate in the Treasury's $700 billion Troubled Asset Relief Program Capital Purchase Program.
"American Express expects to issue and sell to the Treasury preferred stock of approximately $3.4 billion and warrants to purchase shares of common stock for up to 15 per cent of that amount,'' the company said.
The preferred shares will pay dividends at a rate of five percent annually for the first five years and then 9 per cent annually thereafter, a company statement said.
The United States Federal Reserve approved the company's application to become a bank holding company last month.

American express gets $4.9bn cash injection | Business Breaking News | News.com.au

 

[drron]

Must be to pay for all those bonus points.

 

[Mal]

Must be to pay for all those bonus points.

Or the Christmas bonuses for staff.

 

[anat0l]

This isn't going to spark another of those beginning-of-the-death-knells stories is it?

It'd be rather funny though if Amex did go under...and not so funny due to my Amex MR balance.....

 

[simongr]

Amex is not an investor like the major banks so I am confused as to where their exposure is other than in the availability of credit...

 

[alemdohorizonte]

Amex is not an investor like the major banks so I am confused as to where their exposure is other than in the availability of credit...

i believe that amex is having trouble raising cash because selling the paper representing the debt that users carry on their amex cards has become difficult for them. this type of ¨financial instrument¨ used to be easy to sell and allowed amex to keep its cash flow steady. but now, with credit tight, the financial institutions that amex previously relied upon to purchase this debt are either not buying or unwilling to pay reasonable rates for this paper as no one wants to assume risk atm. this means that amex, like many of its cardmembers is low on cash.

unlike a normal bank in the usa, amex does not have an asset base from customer deposits to recycle and pay merchants. this also explains why amex are drastically cutting so many of their card members´ credit lines (in the usa) to reduce their debt exposure.

bottom line, they put on lipstick, renamed themselves a bank and waddled up to the trough and grunted for uncle sam to throw them a big bucket full of usa taxpayers´ dollars.

 

[oz_mark]

unlike a normal bank in the usa, amex does not have an asset base from customer deposits to recycle and pay merchants. this also explains why amex are drastically cutting so many of their card members´ credit lines (in the usa) to reduce their debt exposure.

I suspect this was also partly behind them stopping pushing balance transfers in Australia, which they used to push quite heavily.

 

[Rick93]

See my new thread topic.... AMEX GOING BROKE ???

Did anyone get notified of the stoppage of BTs??

I won't go into here, as there is another thread started.

regards,
GORDON

 

[JohnK]

Must be to pay for all those bonus points.

Now that is no laughing matter.

Seriously has anyone considered what may happen to their MR points if something happens to Amex or is that not likely to happen anytime soon? All those MR points and no idea where to put them for safe keeping....

 

[straitman]

Now that is no laughing matter.

Seriously has anyone considered what may happen to their MR points if something happens to Amex or is that not likely to happen anytime soon? All those MR points and no idea where to put them for safe keeping....

Mmmm

Last time I did a big transfer such as this the airline (Ansett) crashed 4 days later :!:

 

[anat0l]

Now that is no laughing matter.

Seriously has anyone considered what may happen to their MR points if something happens to Amex or is that not likely to happen anytime soon? All those MR points and no idea where to put them for safe keeping....

Call it dark humour.

But understandably anyone would be concerned.

Hopefully, Amex aren't about to go under, and I'm naively going to postulate that Amex aren't about to do so. Then again - and not intending to offend anyone on this board - I'm not sure anyone could've really seen Ansett going under before they actually did.

I'm burning quite a few points at the moment and have plans for the rest......

 

[JohnK]

I know Amex crashing is not likely to happen anytime soon but surely in this current economic climate anything is possible.

I keep thinking about all the points I have in the QFF program and Amex MR rewards. I don't have the time, or the money, to use the QFF points and I was hoping to keep the Amex MR points for at least a few years before deciding what to do with them. Here's hoping nothing happens....