M E M O R A N D U M
Subject: TREASURY INVESTMENT IN AMERICAN EXPRESS
Date: December 23, 2008
To: All American Express Employees
From: Ken Chenault
Short version.
Long version:
When I wrote to you last month about our decision to become a bank holding company, I explained that we took this step to align our regulatory status with other companies in the financial services industry and to broaden our access to capital during a time of unprecedented strain in the credit markets. Today, we benefited from this decision as the U.S. Treasury Department notified us that we will participate in its capital purchase program.
The Treasury Department is making an equity investment in American Express similar to the ones it has been making in some of the largest and best-capitalized U.S. banks. The Treasury will purchase $3.39 billion in newly issued American Express preferred shares. The proceeds from the sale will further strengthen our capital position. In return, we will pay a five percent dividend annually for the first five years and then nine percent annually thereafter. The terms also state that we can repay the Treasury its original principal amount and retire the shares after three years.
The amount of the Treasury Department’s investment in American Express was determined by a formula based on the asset size of companies participating in the program.
The government created the capital purchase program several months ago to help restore stability and confidence in the financial system. The additional capital we gain from the Treasury’s investment will clearly enhance our position and give us added stability and capital strength.
The preferred shares that Treasury will own are a different class of shares than the common stock most investors in American Express own. These preferred shares will not come with the full voting rights that common shares provide. The Treasury Department will also receive warrants to purchase common shares with a value of up to 15 percent of its preferred share investment.
Today’s news comes at a tumultuous time for the world’s economies, but it’s important to remember that economic cycles turn. While we are clearly dealing with significant uncertainty in the near term, here are some predictions I am confident in making:
+There will be ample growth opportunities on the other side of this crisis.
+Consumers and businesses will resume their spending, and when they do, they will put more of it on cards and e-payments.
+And we will benefit when that happens.
It’s not going to be tomorrow, or next month, or perhaps not even next year. Nor will it be easy to navigate the challenges directly in front of us. We have some hard work ahead.
That’s why we have moved so aggressively to refocus our organization on three near-term priorities: staying liquid, staying profitable and investing selectively in growth.
All of us have to stay attuned to the environment and act with a sense of urgency. It’s just as important to keep a sense of perspective.
With your dedication to our customers and to the success of our business, I know we are equal to the tasks ahead in 2009. Once again, let me wish all of you and your families a joyous holiday season and a very happy new year.
…and by the way, we now have bonus money.
Happy Holidays!
- Ken
Too windy, didn’t read…
short version: we fucked up royally now were good.
I think we should start using TARP as a curse word.
example-
American Express was all TARPed up because no one wanted their commerical paper.
. . . and Paulson FINALLY gets his “Black Card”
I thought it said “In Memoriam”
#4. Good point. As in, “That company is TARPED up. It could be a good thing or a bad thing. So maybe “Tarped up” would be good and “tarped down” would be bad.
Yea, you just coined a new word.
How the F is the Treasury ever going to get this money back out of the banks? Its like asking someone to “borrow” a piece of gum.
How the F is the Treasury ever going to get this money back out of the banks? Its like asking someone to “borrow” a piece of gum.
Bess,
I truly believe you’re one of the funniest writers I’ve ever read. It’s the subtleties. Yes, the subtleties.
—Big Fan of Sad Trombone
Damn near the best use of the Sad Trombone I’ve ever seen.
Maybe congress can start a Madoff scheme to fix the TARPed up US economy.
Um…the TARP is a Madoff scheme. So…
Social security is the grandest of all Ponzi schemes.
Government cheese…don’t leave home with it.
no – SSA is not the “Grand Ponzi”;
not even “deficit financing” – [the practice of borrowing today to return principal and interest borrowed yesterday];
instead the entire Federal Reserve System has the be the Grand Ponzi – a GSE that owns and controls the country’s and world’s “medium of exchange” and “store of value{?}]
we have all been TARPed
a frustrated gold bug
Interest rates too high, didn’t read
@FGB – all stores of value are confidence games, gold no less than fiat money. There are just fewer people who question the value of gold, leading to bigger problems.
For the problems of precious metals as currency, see the inflation in the Roman Empire and the destruction of the Spanish economy engendered by Mexican silver. Economies based on fiat money are much more resilient than precious metal ones, since the regular low inflation levels hide deflation and lower economic friction.
A friend of mine (that does not work in finance) was invited by his girlfriend to the Blue Cross luxury box at Fenway Park.
That night, Ken Chenault was there because AMEX has recently renewed their contract with Blue Cross for the employee health plan. Apparently, my friend thought (the African-American) Chenault was part of the waitstaff and tried to tip him on the way out. It was a moment of total confusion for Chenault, and stunned embarassment for the Blue Cross people.
in Boston? Yeah Im sure that was an accident…
Response to comment 19:
What do you bet that your friend and his girlfriend are history? That was a major, major faux pas. Sounds like your friend belongs in the cheap seats.
hey, give ‘em a break, the guy was just short-cutting the TARP process.
besides, we’re entering obamaland soon, all that old stuff is history.
19 If you’re a guest at a corporate event, why would you even think of tipping the wait staff. Wouldnt that be the responsibility of the hosts? And dont say hes just trying to return the favor. You return the favor by being a good customer, whatever that means. How stupid is this guy.
http://www.bailoutchris.com
19 here. The kid is a fucking retard. I never said otherwise. Still, it’s kind of funny.
@19 He sounds like a great man to me.