Monday, November 12, 2007

E-Trade Bank - Time to pull out

Although they deny it, there are rumors all over the financial press that they are facing bankrupcty. If you have less then $100K in an INSURED account, you are fine. Anyone with amounts over $100k should pull out ASAP. Unless you are getting paid a risk premium (and you are not), taking bankruptcy risk is foolish.

For brokerage customers, the decision to stay/go is complicated. Nevertheless, I find it likely their service will suffer while management deals with their subprime mess.
1. I would expect the company to deploy capital to defend their ratings, not to improve service.
2. I would expect their best executive talent to be deployed in other areas.

NOTE - I do not work for or have any relationship with E-Trade, Frankly, I hope they pull out of it because I firmly believe they are good for competition.

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