American Express seeks Government Assistance. What about its Customers?

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News that American Express (AmEx), is seeking roughly $3.5 billion in taxpayer-funded capital from the federal government was quite ironical to me. Millions of consumers are struggling to make ends meet, in part due to mounting credit card debt, and now we have the most prestigious credit company in the world asking for a bailout. So tax payers (also known as consumers) are going to pay for a bailout of a company, who I am sure will in turn raise fees and interest to recoup some of the losses and pay their year end executive bonuses. What about bailing out “main-street” America?


Slowing consumer spending and rising defaults have hit all industries, but the financial companies seem to be getting all the assistance. Which is kind of strange since they were the ones that facilitated this credit crisis in the first place. Amex sources said in a recent WSJ article that “Even the most affluent AmEx customers are cutting back on discretionary purchases.A spending slowdown is particularly problematic for AmEx because its business model revolves around consumers who pull out plastic for their purchases.” Stop the press: Because consumers are being careful with their money in these tough times we should bailout AmEx and promote consumers to continue spending on their credit cards. Gimme’ a break.

AmEx, was a big player in encouraging folks to get more credit cards which led, in part, to the massive amounts of debts people have now accumulated (the average American credit card debt is $12,000). With Americans finally being forced to look at their spending habits and to spend what they can afford (a strange concept, I know) we should be encouraging consumers to reduce the reliance on easy to get credit card debt. In fact the people who defaulted on their credit card debt, and are causing AmEx the biggest problems, are the ones we want to keep away from using credit cards.

I know AmEx employs thousands of people, so I am not proposing that they should be left in the wilderness to wither away. It’s just that like we are reforming the mortgage industry, we should focus on reforming the credit card industry so that we don’t end up in situations like we have now. It would be a shame to give AmEx the money (which I have no doubt they will get under the TARP) without ensuring they do not raise fees or engage in unfair practices to bolster their revenues at the cost of struggling consumers.

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