American Express Becomes a Bank
American Express becomes a bank, getting unprecedented speedy approval to become a Federally chartered bank. This is likely a smart preemptive move by American Express to hedge mounting credit card troubles by gaining access to TARP bailout funds. The cautionary part of this tale–how bad might those mounting losses be for the Federal Reserve to waive even the cursory 30-day waiting period? Bad!
American Express Co. won U.S. Federal Reserve approval to become a commercial bank, gaining access to government funds as credit-card defaults climb with economies slowing around the world.
The Fed waived a 30-day waiting period on the application because of “the unusual and exigent circumstances affecting the financial markets,” according to a Fed statement released yesterday in Washington. Chairman Ben S. Bernanke and his colleagues unanimously approved the plan.
Fannie Mae Post $29 Billion Loss
The circumstances of these monsterous agencies just continue to get uglier and uglier.
Fannie Mae suggested it had not yet availed itself of the government funds by the quarter’s end on September 30.
But, it said, “If current trends in the housing and financial markets continue or worsen, and we have a significant net loss in the fourth quarter of 2008, we may have a negative net worth as of December 31, 2008.”
In that case, it said, the company would be required to obtain funding from the Treasury in order to avoid being forced into receivership.
The statements should be “when the housing and financial markets continue to worsen”–they forget they are an element and reflection of the problem.
American Bankers Association, More Regulation is Not the Answer
This is an interesting protest against additional banking regulations. I am not sure the argument is terribly well articulated by the ABA or the article, but I tend to agree. Additional regulation was unlikely to have prevented many of the core causes of the mortgage crisis. However, additional regulation is certainly likely to prevent an aggressive recovery. This could be a dangerous temptation as our bureaucracies get deeper embedded in our banking and commercial sectors.
Big Bank Loan Modification Programs
This is another trend that fascinates me, and I think illustrates the danger of the government getting too involved in solving our economic crisis.
While FDIC Chairman Sheila Bair wrestles with the Treasury, White House, and Congress for $50 billion, a pitence of the $700 billion TARP program funds that still remains idle, the markets and private enterprise march forward. Even more ironic, they march forward with a nearly universal plan of loan modifications that Bair is advocating while the rest of the US government is trying to decide if it is “politically prudent.”
- US government loan modification program: Request for $50 billion in political hell, helping 0 homeowners so far
- Citigroup loan modification program: Moving forward to modify $20 billion in loans, forecasted to help 500,000 homeowners. They have already modified $35 billion, helping 370,000 homeowners since 2007
- JP Morgan loan modification program: Moving forward on $110 billion in loan modifications. $70 billion in loan modifications are expected to help 400,000 families. They have already modified $40 billion in mortgages, helping 250,000 homeowners.
- Bank of America loan modification program: Moving forward on $120 billion, projected to help 400,000 borrowers.
Maybe the government should save the rest of our TARP funds and let the market work it out.
Economist Turning Negative
Here’s hoping economist are wrong:
The bright view of the world is dissolving fast. According to MarketWatch, 49 economist interviewed by Blue Chip Economic Indicators are getting downright frightened. “The consensus strongly suggests that the current recession will be deeper and last longer than those of 2001 and 1990-91,” said Blue Chip editor Randell Moore in his commentary.
10 Benefits of a Recession
Now to look at the brighter side of recessionary talk:
While you may not be able to control what happens with the economy, you can control your own mental focus. Usually, this determines whether you feel anxiety and fear or peace and hope.
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I am Bill Rice the Managing Editor of MortgageLoan.com. These are my morning notes. If you have comments, feedback, or pointers to something interesting email me or follow me on Twitter.
(photo credit: theakshay)
About Bill Rice