American Express, CIT get approval for TARP funds

By Juan Lagorio

NEW YORK (Reuters) - American Express Co and CIT Group, received approval to get $5.72 billion (3.8 billion pounds) under the government's financial bailout program on Tuesday.

Both companies, struggling with mounting credit losses and higher financing costs, morphed into bank holding companies in order to qualify for funds under the $700 billion U.S. Treasury's Troubled Asset Relief Program.

The new status would also allow American Express, the fourth-largest U.S. credit card company, and CIT to borrow funds directly from the Federal Reserve's discount window.

American Express, which has been growing more than its peers in the last years by expanding aggressively in troubled markets such as California and Florida, got preliminary approval to receive $3.39 billion in fresh funds, in exchange for preferred shares and warrants.

In addition, commercial finance firm CIT will receive $2.33 billion of government funding.

Neither company would explain how they intend to use the taxpayers' money nor did they respond to repeated calls seeking further information.

The U.S. government launched the TARP plan in October in an attempt to strengthen the capital base of banks hammered by mounting losses and unfreeze the credit markets.

The program was later extended to other non-banking financial institutions, such as American Express and CIT, and the cash-starved automakers.