E*Trade Down 59 Percent on Losses and Bankruptcy Fear, ‘Bank Run’ Possible
November 13th, 2007WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
E*trade clients should consider this to be an emergency situation; especially E*trade clients with accounts over $100,000. I would strongly suggest getting your money out of there ASAP, regardless of your account size.
Via: Bloomberg:
E*Trade Financial Corp. lost more than half its market value after the online brokerage forecast a decline in fourth-quarter earnings and a Citigroup Inc. analyst said the company may go bankrupt.
E*Trade will book “significant writedowns” this quarter for asset-backed securities that sank in value last month, the New York-based brokerage said in a Nov. 9 regulatory filing. Citigroup’s Prashant Bhatia wrote in a report yesterday that there’s a 15 percent chance the company will seek protection from creditors after poor management “put the viability of the franchise at risk.”
Chief Executive Officer Mitchell Caplan’s strategy of building E*Trade’s bank by tripling loans outstanding backfired as borrowers fell behind on payments and U.S. home prices declined. The U.S. Securities and Exchange Commission also began an informal inquiry on Oct. 17 “into matters related to the company’s loan and securities portfolios,” E*Trade said.
…
‘Run On The Bank’
Since the Federal Deposit Insurance Corp. guarantees bank accounts up to $100,000, customers with larger balances may move their money elsewhere, said Bhatia, who cut his rating on the stock to “sell” from “hold.” “There is a real possibility of a run-on-the-bank scenario,” he wrote in the report.
