Clarification on AMEX’s problems

As noted yesterday, American Express is seeing increased defaults from “high-end” borrowers. But that really doesn’t cover the story. From the AMEX conference call:

“We continue to see the greatest significance in geographies where housing prices have fallen the greatest. But recently we have actually started to see greater impacts in customers who were in that middle cycle band. Generally it is customers with low FICOs where you see the greatest impact, and we’re certainly seeing it there. But now we’re seeing it creep into FICO scores with people who are between 650 and 750.”

Source: GS research notes

What this says is that retail credit problems are much more widespread – both the upper-echelon and the otherwise responsible middle-market (core customers with previously substantial purchasing power) are feeling the pain.

Financial shorts be damned. The Fed will soon have to let Target step up to the discount window!

UPDATE: Still, nobody is forgetting the wealth effect.

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