Amex Becomes Bank Holding Company

The Treasury Department announced late yesterday that it has accepted American Express's application to become a bank holding company -- the same move that Goldman Sachs and Morgan Stanley pulled in September.

This means:

a) Amex can now accept consumer deposit for savings, just like a bank.

b) Amex can and will get permanent access to federal money to keep it in business.

c) Your Amex card still works the same way, presumably. (More below.)

The company has been in trouble because more and more people are having trouble paying their bills, thanks to layoffs and other recessionary conditions.

The conversation into a bank holding company allows Amex to build up a base of cash deposits from investors to help secure its financial base.

Here's how Forbes characterized the pickle Amex found itself in:

"Much of American Express' funding comes from packaging credit card receivables and selling them as securities to investors. The market for those securities has all but dried up in recent months amid the ongoing credit crisis as investors have shied away from purchasing all but the safest forms of debt."

The company laid off 7,000 workers, or 10 percent of its workforce, last month.

In a release yesterday, the company failed to explicitly tell cardholders what the changes means to them. A FAQ would have been helpful. Here's the closest thing to a cardholder reassurance, from the Amex chief executive:

"This decision to become a bank holding company does not fundamentally change American Express' core focus on the payments industry, nor will it require any significant divestitures,” said Kenneth I. Chenault, chairman and chief executive officer of Amex.

-- Frank Ahrens