Just as Goldman Sachs
A couple of thoughts are probably whizzing through investors' minds this morning:
- Great! AmEx took pre-emptive measures to ensure it'll ride out the storm. Good for them!
- Huh? I thought AmEx was one of the stronger, more enviable, Buffett-blessed financials out there! Now it might need access to bailout funds? Man, maybe things are quite a bit worse than we thought …
Both are probably legitimate points. Even if AmEx doesn't need a penny of help from the Treasury, why sit back as competitors gorge on the honey pot and line their balance sheets with government funds? If anything, becoming a bank-holding company just gives an already strong AmEx an additional safety net. No qualms there.
Then again, the move also highlights just how frenzied the credit markets have become lately. As demand for anything short of U.S. Treasuries ground to a halt, even creditworthy companies such as AmEx needed to devise a plan B. When fear takes control of the markets, credit ratings and solid reputations don't mean anything; people just want to bury their heads under their pillows and wait out the storm. That's a daunting position to face if your company relies on lending markets, as AmEx did.
Developments like this emphasize AmEx's two-pronged dilemma in the year ahead. Consumers are almost certain to pare back spending. Since AmEx issues credit -- unlike Visa
Crazy times we're living in.
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Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. American Express is a Motley Fool Inside Value pick. The Fool owns shares of American Express and has a disclosure policy.