
AmEx Said to Request $3.5 Billion in U.S. Aid - gibsonf1
http://online.wsj.com/article/SB122646207021420153.html
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startingup
By now, we should really be concerned about the immorality of it all. AmEx is
one of the richest corporations in the world, serving mostly well-to-do
clientele. On what moral basis do they get this aid? What is wrong with
letting them do the write-off, fail if necessary?

On what moral basis can the same government deny <name-your-company> aid? So
why not Circuit City? Why not Mervyns - I was there at a closing-store sale
yesterday, the employee's faces told me everything. I am _not_ advocating
bailing out any of them, but if AmEx is OK to bail out, why not Mervyns? Is it
because the Mervyns employees are a lower breed of human?

It is making my blood boil.

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mdasen
Well, first, what is aid? The big problem is that everyone is using the word
"bailout". That makes one think of free money that doesn't have to be paid
back. That isn't the case. Yes, if the firms still fail after receiving the
government assistance, they won't pay back what amounts more to a loan than a
bailout. So, yes, taxpayers can loose, but it isn't a bailout so much as an
emergency loan program.

Both Circuit City and Mervyns have been dying for years. Mervyns has been
shuttering stores for several years and went through a failed turn-around
attempt. Circuit City simply couldn't compete with Best Buy. They didn't have
sound businesses.

The big difference between a place like Circuit City and American Express is
the amount that would be needed to overcome a blip. Circuit City, if it had a
sound business model, might need a loan of a hundred million or so to keep
paying salaries and such through a downturn. American Express needs to keep
lending money - and all financial firms lend more money than their company is
worth. They're intermediaries. So, Circuit City can go to a bank (or several)
and get the cash they need if it would save their business. American Express
can't. They need cash on a scale that Circuit City doesn't.

I understand why so many are outraged. It looks like a firesale of your tax
dollars to a few firms. That isn't the case. If these firms make it (and based
on their business models they will), the government will actually make money.
Circuit City and Mervyns were just failing firms. Many in the financial sector
have sound business models that need some cash for a year or two (in amounts
that they can't raise from sources other than the government) because there
was a perfect storm of credit conditions.

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anamax
> If these firms make it (and based on their business models they will),

The fact that Amex can't get private investment says that the smart money
thinks that they're a dumb bet. (There tons of money around. Buffet isn't the
only one snapping up actual bargains.)

It may be that the Amex biz model works but Amex the company can't do it. In
that case, the loan is a dumb idea. Let someone else pay to take a shot at it.

Feel free to invest your money, to get together with others if need be. If
you're right, you make out. If you're wrong, I don't lose.

~~~
quellhorst
One of Buffet's largest holdings is Amex.

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anamax
If Buffet doesn't think that Amex is worth any more of his money, why is it
worth any of mine?

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bdittmer
Did anyone who supported the bailout actually expect nothing like this to
happen? The government is pumping SEVEN-HUNDRED-BILLION DOLLARS into the
economy and every major company is going to try and get a piece. Companies
will (and should) always try and do what is in their best interest in order to
stay competitive and make money. No one is to blame except the senators and
congressman who passed this atrocious legislation. Meddle with the market and
this will always happen.

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teehee
Wow, I can't wait to redeem the skymiles on this.

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trickjarrett
Ha! Based on my APR from them I should be getting that money paid off.

On a serious note though, this is the downfall. Once one area gets bailed out,
everyone comes with outstretched hands. Will be interesting to see if Bush
handles it or holds them off until Obama is in office to let him handle it.

~~~
gaius
Regardless of whether Amex _needs_ the money, if their competitors are getting
it, they've basically no choice but to follow suit or find themselves at a
disadvantage.

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biohacker42
Are AmEx's clients disproportionately going bust?

Visa isn't seeking help, does that make sense?

And if AmEx does go bust what's the damage?

AIG and Lehman had all kinds of counter party risk, but who exactly would be
hurt by AmEx going belly up?

~~~
bvttf
Amex issues the cards themselves, exposing them to way more risk than mc/visa.
Look at the branding on your credit cards. Amex will be front-and-center on an
Amex, but on most other cards it's the issuing bank. Unless it's micky mouse
or your kids or some shit.

If you don't pay your Amex bill, i think Amex takes a hit to pay the merchant.
If Amex were to implode, those merchants could get fucked.

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curiousgeorge
Will simplify credit card processing for me if they go out of business. My
merchant processor only supports mastercard and visa.

"We don't take Amex... neither does anyone else."

~~~
tdavis
Actually, I've found that any merchant worth doing business with generally
accepts American Express. I've been using mine for years and my "Visa backup"
hasn't been charged in the past year or so. AMEX is easily the best credit
card company with the most perks and amazing customers service. I would be
quite unhappy if they went out of business.

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tptacek
The sad thing is, I see $3.5Bn, and that's _good news_.

