American Express Co. which is being hit by slowing consumer spending and rising defaults, is seeking roughly $3.5 billion in taxpayer-funded capital from the federal government, according to people familiar with the situation.

Courtesy of the WSJ.

It did not take a giant leap in logic to see that was inevitable. If the laws are lax enough that the bailout money can be easily exploited by any financial institution that sees it as an easy pay day, that is what is going to happen. American Express has no stake in current mortgage crisis. It exist as a credit card lending business only.

I have no doubt Amex is experiencing a higher than normal rate of defaults on their credit accounts, but they have the power to help themselves more so than mortgage lenders. All credit card companies have a clause in their customer contracts that stipulates that the interest rate on your card can be adjusted by the issuer for numerous reason. Amex needs to understand that it could probably help its self by interpreting that clause not as a way to raise rates, but as a way to help their struggling customers and actually lower rates. Perhaps the person who stopped paying their 22% interest payment would appreciate a drop to 7% for a year or so. Maybe so many accounts wouldn’t be in default then.

No, no that’s crazy talk. Sorry I’ll just go back to eating my Ramen, keeping my heat set at 58 degrees, and paying my taxes so there is enough money for American Express to weather the storm.