American Express To Become Commercial Bank
The Federal Reserve approved an application Monday by American Express to become a bank holding company. The change will allow the credit card giant to become a commercial bank. The decision opens the way for American Express to accept deposits and permanently access low-cost financing from the Fed.
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ARI SHAPIRO, host:
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SHAPIRO: American Express used to be a credit card company. Soon it'll be a bank. Amex customers may not notice the change. But yesterday regulators at the Federal Reserve approved the company's application to convert itself into a bank holding company. This switch should allow Amex to get access to some of the $700 billion in government rescue funds. The company's profits have been hit by the economic downturn. More customers are defaulting on credit card payments. Others are simply cutting back on buying with plastic. Amex has also run into trouble raising money the traditional way, meaning on financial markets. By turning itself into a bank, Amex can now access cheaper federal funds, though the company will be subject to more regulation.
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