E*Trade has been plagued by significant losses due to its exposure to low quality mortgages from E*Trade's banking unit. The losses spiraled into customer defections and a management shake-up which lead to this new turnaround plan.
Most of the loss reported this quarter came from sales of mortgage-related securities that lost a lot of value last year. Things had gotten so bad last November that concerns arose that E*Trade was in danger of insolvency. Hedge-fund giant Citadel invested $2.55 billion in E*Trade and bought its $3 billion asset-backed securities portfolio for a knockdown price of $800 million.
I recently wrote about E*Trade vis-a-vis Ameritrade. Now, it's E*Trade's turn.
Other salient issues surrounding the turnaround plans involve the new CEO, shoring up the balance sheet and Ameritrade's outages and effect on E*Trade.
Zack Miller is the Managing Editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.
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