Profitable American Express (AXP) Gets $3.4 Billion In TARP Funds

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American Express (AXP) is still paying its $.18 dividend. The company will fire about 7,000 people and chop other costs to save $1.8 billion next year.

Last quarter AXP did relatively well, making $815 million, down 24% from the same period a year ago. At that point, the American Express CEO Kenneth I. Chenault said, "Our business model is well positioned to generate earnings and excess capital even in an economic environment that is likely to be among the weakest in many years. We believe we have the capital strength, funding resources and comprehensive liquidity plans to manage successfully through difficult market conditions."

So, why did the company take $3.39 billion of TARP money today in exchange preferred stock and warrants to purchase shares of common stock for up to 15% of that amount? The preferred shares will pay dividends at a rate of 5% annually for the first five years and then 9% annually thereafter.

American Express doesn’t need the money. Maybe it should go to taxpayers who are delinquent on their Amex payments instead.

Douglas A. McIntyre