Word on the street has it that American Express has already told employees to prepare for layoffs in the U.S. and in India. My informant says rumors on the inside allege layoffs will represent a substantial part of the workforce, possibly as high as 20 percent.
This follows yesterday’s news that the company’s second-quarter earnings dropped to $653 million, a 38% decline, and today’s reports that shares dropped 7.5%.
Meanwhile, with credit card rates soaring and mortgage expenses out of hand, cardholders are beginning to default on charge card debt. Jonathan Stempel, writing in the Guardian, calls AMEX “a bellwether for the consumer economy” and quotes CEO Kenneth Chenault as saying that even big-spending, affluent customers are cutting back. Stempel also quotes analyst Andrew Boord in observing that AMEX customers are largely middle-class people, the same Americans who are overextended on their mortgages or driving gas-guzzling SUVs. Other card issuers, notably Citibank, Bank of America, and J. P. Morgan, are seeing double-digit rises in credit-card charge-offs.
It probably was inevitable that a wave of credit card defaults would follow close on the heels of mortgage foreclosures. So many people are deeply indebted to card lenders, it’s surprising we haven’t seen a plague of defaults before this.
The piper has tendered his bill and wants to be paid.