The Federal Reserve Monday approved American Express Co.’s bid to become a bank holding company, a status that GMAC LLC is actively pursuing in an effort to tap emergency government funding.
The Fed fast-tracked AmEx’s request, waiving the normal 30-day waiting period for the application.
“In light of the unusual and exigent circumstances affecting the financial markets, and all other facts and circumstances, the [Federal Reserve] Board has determined that emergency conditions exist that justify expeditious action on this proposal,” the U.S. central bank said in a statement.
It seems to me that GMAC is in more dire need of government funds than is AmEx. The auto and mortgage lending giant lost $2.5 billion last quarter. AmEx, by comparison, earned $815 million. GMAC has curtailed leasing and restricted certain lending operations. Its ResCap mortgage unit is having difficulty maintaining capital and liquidity; it “has become dependent on GMAC for support,” said CFO Robert Hull during the company’s third-quarter conference call last week.
Though a bank holding company charter would require “significant changes to GMAC’s corporate structure and product array,” Hull said, and would bring “an increased level of regulation,” it seems like a critical move for the lender.
Let’s see if the Fed agrees.
