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Tuesday, November 11, 2008


american express becomes a bank

the cure-all: get in the corporate welfare line. amex joins the fray at the treasury soup kitchen.

``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,'' Chief Executive Officer Kenneth Chenault said in a statement today. ``We will continue to build a larger deposit base to broaden our funding sources.''

it's notable particularly that the concern was as much over losses as liquidity. it's true that the credit card securitization market shut down last month, rendering amex's mode of business essentially inoperable. but that isn't a result of what might be euphemized 'modeling error', as was the case in mortgage securitization. credit card securities are known quantitites with significant history and constructed to weather some storminess. but deleveraging takes no prisoners, and consumer losses have been surprising to the upside.

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Gaius: My apologies. This post has nothing to do with American Express, but I have no other way to communicate with you about your reading of David Hume. I don't think Hume rejects induction. What he writes is that we humans have only our intuitions about the future: our reason cannot prove that A causes B any more than we can prove that the sun will rise again tomorrow. We can plan for the sun to rise, but we have to wait for the event to know that we were right. For Lord Russell this was heretical because it suggested that even the logic of mathematics was conditional - which, of course, it is. Since Hume was a man of cheerful disposition, with an irrepressible sense of fun, this uncertainty did not trouble him. For Rusell, with his Marxist self-assurance and the absense of any capacity for humor, Hume's assertions were truly anathema. I urge you to reread Hume's essay On Miracles; it suggests that there may be a way for use to be rational and sceptical about our own reasons at the same time. All the best.

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