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American Express Bailout Abuse Details.

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When the financial crisis hit Wall Street in 2008, American Express was hit hard because its credit bonds were no longer being bought as investors were scared away from purchasing bonds in the volatility of the markets.

As is the case with most credit cards, American Express allows consumers to have credit by receiving credit themselves from both banks and from investors buying their bonds and when the credit crunch hit, it hit American Express hard.

The American Express bailout abuse was one of the most ridiculous things in the government bailout of the financial industry as the company created a bank holding company just to be able to receive a piece of the federal bailout package which was reserved for banks.

The state of American Express has hardly improved as the Standard and Poor’s Ratings Services announced that the company’s credit rating may be downgraded after the company continued to write off large amounts of money while their shares fell to well below fourteen dollars after the company had been trading at nearly seventy dollars in 2007.

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American Express Bailout Abuse: Ready Made Failure

The way that the credit card industry works is that banks lend money for credit card purchases and then they get it back when bills are repaid.

When a credit card company does not have enough money to deposit into the bank, they sell credit card loans as commodities on the open market.

These loans are in essence bonds which are backed by the company’s assets.

When the credit crisis hit and investors were to fearful of purchasing bonds, the panic spread to the credit loan bonds which greatly jeopardized the future of the credit card companies.

American Express did not have enough money to pay their debts and did not have enough investors to buy their bonds.

That is when the government stepped in and allowed American Express to have their way with the tax payer as they have been having their way with their customers.

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American Express Bailout Abuse: Bank Creation

First, the United States Federal Reserve jumped in to purchase the credit card bonds that investors were no longer purchasing to try to help the ailing company that had dug itself into a hole.

That government money was not enough for the company as in order to get a chunk of the bank bailout money, American Express created a bank holding company out of thin air.

This conversion into a bank holding company allowed AmEx to take advantage of the hundreds of billions of dollars being doled out to the other major corporations that ruined the global economy.

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After the American Express Bailout Abuse

With their assets collapsing, American Express began to take drastic moves and taking out their incompetency on their customers.

In countless cases, the company lowered people’s credit limits, sometimes to a great deal, despite many of those customers having spotless credit records.

AmEx also began to phase out their special rewards programs which they had been hoping would allow them to compete with Visa and MasterCard including their VIP rewards, their INSIDE rewards, and their free airfare program.

In November of 2008, American Express closed down all of their Business Line of Credit Accounts.

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