According to an articlein Bloomberg.com yesterday, American Express is offering some cardholders $300 to pay off and close their accounts.
The article went on to say that charges-offs rose to 8.29% in January from 7% in December.
What this means is that American Express is anticipating losses growing and as a result they want to hedge these losses by getting ahead of the problem now rather than waiting for the problem to hit them in the future.
This is yet another example that the perception within the banking and financial industries is that we are going to see continued economic headwinds for an extended period of time; think years, not months. And it is also the reason why these same banks and financial institutions don't want to extend new credit in the same volume that they had been doing over the past several years, regardless of the TARP money they have received.
It is an interesting paradox, loose credit got us into this crisis and yet the government is trying to solve the problem by incentiveizing the banks to extend more credit. It's kind of like the government trying to spend our way to economic prosperity, it doesn't work.
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