It’s been a busy and somewhat dismal season for American Express. After reporting a 24% drop in quarterly profits, AmEx announced that it would lay off 7,000 employees. That’s not exactly surprising, considering the company is trying to cut costs wherever it can to survive the drawn-out economic downturn. AmEx also stated that it would reduce costs by spending less on consultants, business development, travel, entertainment, and rewards programs. The company seems determined to make ends meet despite experts’ speculation that it’s not strong enough to stay the course.
Perhaps the most surprising move by American Express was the decision to become a bank. Chief Executive Kenneth Chenault said of the maneuver: “Given the continued volatility in the financial markets, we want to be best positioned to take advantage of the various programs the federal government has introduced or may introduce to support U.S. financial institutions.”
The Federal Reserve gave its blessing for AmEx to shift from credit card issuer to bank holding company. The move will give AmEx more stable funding in the form of deposits, as well as greater access to government relief, though representatives did not say whether or not American Express would be taking part in the $700 billion bailout package. Goldman Sachs and Morgan Stanley also made the switch following the Lehman Brothers bankruptcy.
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