American Express to become a bank

American Express Co. won approval Monday from the Federal Reserve to become a commercial bank, opening the door for the credit card giant to accept deposits and permanently access financing from the Fed.

The Fed said it had approved the application for American Express and a related company, American Express Travel Related Services Co., to become bank holding companies.

The move represented the latest reshaping of the financial services industry, which is undergoing its worst credit crisis in decades.

The Fed cited “emergency conditions” in approving the charter in less than the usual 30-day waiting period. AmEx filed its application with the Fed on Nov. 4.

The Fed’s approval was similar to the decision it made in September to transform the country’s two biggest investment banks, Goldman Sachs Group Inc. and Morgan Stanley, into bank holding companies.

That move bolstered the two institutions after the collapse of Lehman Bros., whose bankruptcy filing was the largest in U.S. history. The investment banks’ troubles stemmed from bad bets on the housing market, including mortgage-backed securities.

In the case of AmEx, with more consumers having trouble paying their bills, it has seen the value of its primary assets decline. That’s made it harder for the company to borrow to pay for daily operations.

In a statement, AmEx said becoming a bank holding company would give it “maximum flexibility and stability in this challenging economic environment.” In exchange for Fed oversight, AmEx said it wanted “greater access” to government-sponsored financial assistance programs.

The company revealed severe financial troubles late last month when it laid off about 7,000 people, or 10% of its global workforce, and said it did not expect to meet its targets until the economic climate improved.