Amex's Ax, Qualified Mortgage Misery, the Fed's Fuzzy Crystal Ball

Receiving Wide Coverage ...

Amex Swings the Ax: The tectonic shifts that are reshaping finance struck American Express (AXP) late Thursday when it released its fourth quarter earnings ahead of schedule, along with the bombshell that it's planning to eliminate 5,400 jobs, or 8.5% of its staff. The Wall Street Journal describes the job cuts as Amex's biggest retrenchment in a decade. Most of the reductions will involve the New York-based company's (sorry, Mayor Bloomberg) travel business, which Chief Executive Kenneth Chenault said "is being fundamentally reinvented as a result of the digital revolution." The company will take $895 million in fourth-quarter charges to cover severance pay, the cost of revamping a membership-reward program and a slew of customer refunds linked to the regulatory settlement involving card practices that allegedly violated a range of consumer protection laws. All told, Amex took a $95 million charge that it said in a statement "deals with fees, interest and bonus rewards as well as an incremental expense related to the consent orders entered into with regulators last October." Thursday's plan is the fourth round of big job cuts at Amex since 2001, which together have eliminated more than 18,000 positions, the Journal reports. It's also the latest in a wave of financial-industry job cuts announced in recent weeks, including reductions at Citigroup (NYSE:C) and Morgan Stanley (MS). American Express's focus on affluent borrowers has enabled it to bounce back from the financial crisis more quickly than many peers, the Journal notes, but it has nevertheless seen demand suffer as consumers deleverage. Amex's customer card spending, its biggest revenue driver, climbed 8% in the fourth quarter, while card write-offs stood at 2%, the lowest rate among big card issuers, says Bloomberg News. "Against the backdrop of an uneven economic recovery, these restructuring initiatives are designed to make American Express more nimble, more efficient and more effective in using our resources to drive growth," Chenault said in the statement. Wall Street Journal, Bloomberg News, Financial Times, American Banker

Does QM = Qualified Misery?: It could have been worse. That's how the media is reporting the reaction that a lot of bankers are having the day after the Consumer Financial Protection Bureau unveiled its so-called Qualified Mortgage rule. As written, the rule, which was mandated by Congress, will offer lenders who follow it some legal protection for so-called qualified mortgages. It will also insulate issuers of qualified mortgages made at prime interest rates from future lawsuits — a so-called safe harbor. QM does, however, preserve the ability of consumers to sue under other federal statutes. The CFPB tried to find a middle ground in drafting QM, stopping short of giving banks the blanket legal protections they'd lobbied for, but also not giving borrowers broad powers to sue any time they feel their mortgages are a tad burdensome, Reuters reports. "A key first step of housing finance reform" is how QM was described by Tim Ryan, the outgoing head of the Securities Industry and Financial Markets Association, who is on his way to JPMorgan Chase (JPM). The CFPB was careful on Thursday to present a bank-friendly face at the Baltimore event it held to unveil QM. On hand was Wells Fargo's (WFC) deputy general counsel David Moskowitz to vouch for the view that the new QM standards are regarded as "Basic Underwriting 101" by his company and largely in line with current, relatively conservative industry practice. "It's entirely consistent with how we think about basic underwriting," Moskowitz added. "You've got some clear pathways to be able to do business, which I think has been lacking," Ron Peltier, head of the real-estate brokerage business at Berkshire Hathaway (BRK/A) told Bloomberg. Previously, banks "loaded with capital" didn't want to lend because rules weren't defined, he added. The New York Times described consumer advocates as seeing the CFPB's split-the-difference approach as leaving "wiggle room" for bank shenanigans. "While the bureau's new rules promote" affordable loans and better products, "they still leave the door open for abuses," Alys Cohen, a lawyer at the National Consumer Law Center told the Times. Bloomberg, New York Times, Reuters, American Banker