American Express has now gotten themselves a hunk of the bailout by convincing the feds that they are a bank.

“The Federal Reserve on Monday evening granted a request by American Express to become a bank holding company, giving it access to low-cost financing from the Fed.

The Fed said it had approved the application for American Express and a related company, American Express Travel Related Services, to become bank holding companies. The approval represented the latest reshaping of the financial services industry, which is undergoing its worst credit crisis in decades.

In announcing the action, the Fed said “emergency conditions exist that justify expeditious action on this proposal.”

“Given the continued volatility in the financial markets,” said Kenneth I. Chenault, chief executive of American Express, “we want to be best-positioned to take advantage of the various programs the federal government has introduced or may introduce to support U.S. financial institutions.”

Too bad that American Express’s recent treatment of it’s customer base doesn’t justify such fair treatment. For instance, American Express has been moving to reduce the credit limits of customers, and in some cases canceling cards. These aren’t bad customers or those who haven’t kept up with their payments, but good customers, often times long term.

While American Express has claimed that they are only protecting their bottom line in tough times, the fact is their actions have had severe impacts on consumers in a already rough time for consumers in the credit market.

Democrats have no one to blame but themselves for the present crisis. Where we are at today was caused by nothing more than the inaction, greed and incompetence of Senator Chris Dodd, Senator Charles Schumer, Senator Barney Frank, three of the most vocal voices this week on the bailout.

How dare they? Easy, because up to now they were getting away with it. No more.

Back on September 14th, Bloomberg posted this indictment of the present crisis and where it came from:

“Back in 2005, Fannie and Freddie were, after years of dominating Washington, on the ropes. They were enmeshed in accounting scandals that led to turnover at the top. At one telling moment in late 2004, captured in an article by my American Enterprise Institute colleague Peter Wallison, the Securities and Exchange Comiission’s chief accountant told disgraced Fannie Mae chief Franklin Raines that Fannie’s position on the relevant accounting issue was not even “on the page” of allowable interpretations.

Then legislative momentum emerged for an attempt to create a “world-class regulator” that would oversee the pair more like banks, imposing strict requirements on their ability to take excessive risks. Politicians who previously had associated themselves proudly with the two accounting miscreants were less eager to be associated with them. The time was ripe.

Greenspan’s Warning

The clear gravity of the situation pushed the legislation forward. Some might say the current mess couldn’t be foreseen, yet in 2005 Alan Greenspan told Congress how urgent it was for it to act in the clearest possible terms: If Fannie and Freddie “continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios, which they need to do for interest rate risk aversion, they potentially create ever-growing potential systemic risk down the road,” he said. “We are placing the total financial system of the future at a substantial risk.”

What happened next was extraordinary. For the first time in history, a serious Fannie and Freddie reform bill was passed by the Senate Banking Committee. The bill gave a regulator power to crack down, and would have required the companies to eliminate their investments in risky assets.

Different World

If that bill had become law, then the world today would be different. In 2005, 2006 and 2007, a blizzard of terrible mortgage paper fluttered out of the Fannie and Freddie clouds, burying many of our oldest and most venerable institutions. Without their checkbooks keeping the market liquid and buying up excess supply, the market would likely have not existed.

But the bill didn’t become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn’t even get the Senate to vote on the matter.

That such a reckless political stand could have been taken by the Democrats was obscene even then. Wallison wrote at the time: “It is a classic case of socializing the risk while privatizing the profit. The Democrats and the few Republicans who oppose portfolio limitations could not possibly do so if their constituents understood what they were doing.”

Americans have every right to be angry, but their anger should be directed towards those most responsible for failing to take action when they should have.