E*Trade (ETFC) latest to be rocked by mortgage securities

Even the discount brokers are not safe. After write-downs from mortgage-related securities burned a brush fire through commercial and investment bank balance sheets, they hit E*Trade (NASDAQ: ETFC) yesterday. Shares in the broker dropped as much as 14% after hours, and fell through the company's 52-week low of $8.02. The stock has lost two-thirds of its value since June.

The Wall Street Journal wrote that "the discount online brokerage said its total exposure to collateralized debt obligations of asset-backed securities and second-lien securities at Sept. 30 was about $450 million, including about $50 million of "AAA" rated asset-backed collateralized debt obligations, or CDOs, that were downgraded to junk status." This will lead to write-downs in the fourth quarter. The company also suspended its guidance.

The announcement raises that question of just how many financial institutions may have mortgage-securities related problems. It has been easy to see why commercial and investment banking houses would face the issues, they invest in pools of securities as a matter of course.

It is still not clear whether other discount brokers could face write-downs of this magnitude.

But with a new piece of bad news related to the mortgage market meltdown coming out almost daily, who would be surprised?

Douglas A. McIntyre is an editor at 247wallst.com.