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Why Non-Borrowed Reserves Don't Matter   Extra Credit, Weekend Edition
Feb 8 2008 4:52PM EST

Credit Card Datapoint of the Day

Jonathan Stempel reports:

Discover Financial Services said on Thursday it agreed to sell its Goldfish credit card unit in Britain to Barclays Plc for $70 million, abandoning a money-losing business it bought two years ago for $1.68 billion, as consumer credit worsens.

Yep, that's $1.6 billion, or 96% of the original purchase price, up in smoke. In fact, Discover has lost significantly more than its original purchase price, since Goldfish has been losing money hand over fist ever since Discover bought it. And this dreadful announcement actually helped to boost Discover's shares yesterday, although they're back down today. Score one for Morgan Stanley, which spun off Discover at $28.50 a share in June: the stock is down more than 45% since then.

Update: Murray says in the comments that Discover's loss on the sale was actually only £140 million, and that its total loss including operating losses over the course of the two years was about $500 million. Which is a lot of money, but nowhere near $1.6 billion.

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