American Express Wants Low Cost Funding?

American Express (AXP) sought and received approval from the Fed reserve to become a bank holding company. Everyone points to the low cost funding available from the Fed. If this is American Express’s only reason, than it’s a bad one. Today the Fed is generous with its funding. Fireman and paramedics are also generous when at the site of a disaster. American Express does not want to go the disaster route.

Keep an eye on the fundamentals. There is a lot of plastic out there that is melting down. Already we know that American Express is starting to hurt. Even your best creditworthy customers are curtailing spending. They would be the responsible customers that you want to keep. The bank holding company may allow a few structural changes that will benefit American Express but it will not make a fundamental difference to those “Who do not leave home without it”