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Worries about E*Trade


As this Forbes article describes, E*Trade is being hit by the subprime mess. Between gloomy announcements and analyst downgrades, there are worries that E*Trade could go out of business. This AP article from Yahoo mentioned that half of E*Trade Bank's deposit accounts representing about $15 billion are higher than the FDIC's $100K threshold. With the bad publicity, the analyst is concerned about the effects of these depositors moving their money elsewhere.

The FDIC data as of 6/30/07 on E*Trade Bank does show 54,810 deposit accounts with more than $100K. Those accounts make up more than $14.7 billion in deposits. However, $27.8 billion deposits out of a total $33.8 billion are estimated to be insured.

I think it's always a good idea to stay below the FDIC limits regardless of the bank. There are many ways to extend FDIC coverage past $100K. For more info, please refer to this post.

As we learned with the closure of Netbank (see post), there's not much to worry about if you keep under the FDIC limits. For more facts about FDIC deposit insurance, please refer to this FDIC article .

This situation with E*Trade reminds me of what Countrywide went through in August (see post). The depositors who stuck with Countrywide Bank have been rewarded with yields far above yields of other banks. It'll be interesting to see if E*Trade will be forced to raise their savings and CD rates to keep up deposits. Also similar to Countrywide, E*Trade's President has released a message today to their customers trying to soothe fears. In the message, E*Trade's President stated that "we continue to be well capitalized by regulatory standards. As a matter of fact, we could absorb an immediate write down in excess of $1 billion and still remain well capitalized."

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  |     |   Comment #1
I'm amazed with all the different options for fairly high paying liguid accounts that some people still want to exceed the per bank limits. Unless they can afford the possible loss?

I don't care how the institutions spin the finacials, I believe most are in far worse shape than they will publically let on. Be careful people!
  |     |   Comment #2
I really like e*trade. It will be sad if they go bankrupt. I still think they can pull it out. The stock went down because of some stupid citi analyst saying that there is a 15% chance of bankrupt. Tomorrow the site might be facing some heavy transactions and downtimes
  |     |   Comment #3
I had a cd at e*trade. It matured last month so I closed out all accounts there. Glad I did. They always ****ed up my interest ACH and were hard to deal with when problems arose. Can only imagine how customer service would be if there were bigger issues. Their rates were good but their CSRs never instilled confidence. Good luck folks.
  |     |   Comment #4


Personally I dislike E*Trade. I dislike their Brokerage / Bank / Web-Site.

I won't miss E*Trade, if it goes out of business ...


  |     |   Comment #5


>>The stock went down because of some stupid citi analyst saying that there is a 15% chance of bankrupt.

Really ? ... You really believe Prashant is stupid ? ... Looks like lots of folks took him seriously enough with their money. No ? *smile*

Anyways ETFC went down because the sellers were willing to sell at lower and lower price and buyers were willing to buy at lower and lower price !


  |     |   Comment #7
I am one of those who bought its stock today.
  |     |   Comment #8
I would think they would be acquired by a big bank who needs a trading platform. Wells Fargo might be one, or maybe even a foreign company needing presence in the US.
  |     |   Comment #9
Anonymous said...
I am one of those who bought its stock today.

Say adios to your $$$. Etrade is going down like a cheap ****!
  |     |   Comment #10
We've been with etrade since somewhere in the kinda late 90's-- I can't really recall. I've had a lot of problems with etrade but also enjoyed some of their successes. Our total exposure is only $9K, so big whoop-dee-doo.

What I am thinking here is that news media hype is doing a classic textbook hit on etrade. I'd suspect that the stock would rally up from these lows rather rapidly once cooler heads prevail. With our low (and insured) exposure, it doesn't matter one way or another to us. It's just an observation.

But, if you were a gambler-this one would be a good double down bet.
Just for the fun of it, we put in an order to buy 100 shares at MKT tomorrow. Heck, what can we lose? $355 + commish? Such a deal! HA.

Cheers, Monte
  |     |   Comment #11
Check out E-Loan too. They had been offering some high interest stuff. They laid off 60% of their workforce like two days ago.
  |     |   Comment #12
If you ask me, their website is pretty darned good (caveat - I only know 2 to compare). Besides the bank, they have a pretty good brokerage site. My orders are executed virtually instantly, I get good prices on the trade, they show my portfolio's profit/loss including the commission, it's very comprehensive, etc, etc ...
It seems the real question is how many sub-prime loans their banking side extended, then how many dodgy assets they invested their spare cash in. If customer service is so bad as previous posts say, hopefully that includes bad service in offering mortgages to unqualified buyers.
How many dodgy CDOs or assets do they have that risk being marked down on Nov 15 (when Level 1-2-3 rules go into effect)? Anyone have a guess? The Letter says they could withstand over $1 billion in writedowns -- but nothing about if it's more than that.
They have SIPC protection -- if they go under, what happens to shares you own in your brokerage account with them? Do they go into limbo for a period, or would you still have trading access to them?
If they had real problems and had to be bought by someone, I'm sure there are a load of buyers who would love to get their platform.
  |     |   Comment #13
I was with NetBank when it went down in flames. I decided to jump to ETrade. Now it's looking sketchy. My mortgage is with Countrywide.

Hmmm. I should get banks to pay me to stay away. I would make way better money off a protection racket.
  |     |   Comment #14
I won't be surprised if E*Trade go bankrupt, at least for E*Trade Bank. She deserves it.

I had painful experience with E*Trade Bank. When "Money Magazine" lauded her as "Best of the breed", I felt those editors are blind. A bank with inattentive discipline, customer-hostile operation process, and arrogant employees, cannot be even regarded as "good", not to say "best".

Thankfully I made a quick response pulling almost all the money out when I found her unreliable.
  |     |   Comment #15
I have been with Etrade for several years (brokerage savings CD etc) and I have been happy with their service (I know of no online bank that I have not had a problem or 2 with so imho Etrade is no better and no worst then other banks). I was a little over the FDIC max so a couple of months ago when I realized that Etrade and other banks may be in trouble, I started to move my money around. Besides I found better rates else where.
Nervous Ned
  |     |   Comment #16
Hey, Banking Guy & other readers, I'm sorry to go off-topic, but I could really use your advice. I opened a 9-month CD for $15K with Countrywide (CW) a couple of days ago, but I just now skimmed through a thread in the FatWallet Finance forum discussing CW, and the overall tone of those posting there was very pessimistic. Did I make a mistake in depositing funds with CW, even though I'm well under the FDIC limit? Should I try to cancel the CD?
  |     |   Comment #17
Ned, I also recently openned a CD and a savingslink account with Countrywide. While I don't believe for a second that they are past their problems (or even close), as long as you stay under the FDIC limits, I wouldn't worry yourself much about losing your money. I also believe because of the size of Countrywide, everyone would be working overtime to save them.

As we found out with the recent NetBank closure, the regulators take care of things pretty quickly. Would I want everything I had tied up at Countrywide? No, but a CD is probably money you should be able to live without for a week or two while things got converted.
Banking Guy
  |     |   Comment #18
Ned, I think the previous anonymous has some good advice. I don't have any more to add except that you might want to review some of my posts about the FDIC (see this post and the right sidebar for links).

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