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Fed Meeting Preview and Deposit Rate Forecast - March 15, 2023Worries about E*Trade
POSTED
ON BY Ken Tumin
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."
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."
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!
Readers,
Personally I dislike E*Trade. I dislike their Brokerage / Bank / Web-Site.
I won't miss E*Trade, if it goes out of business ...
- SVG
Shrazzy,
>>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 !
- SVG
I am one of those who bought its stock today.
Say adios to your $$$. Etrade is going down like a cheap ****!
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
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.
Hmmm. I should get banks to pay me to stay away. I would make way better money off a protection racket.
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.
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.