Tuesday, November 11, 2008
american express becomes a bank
``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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