E*Trade Stock in $2B Free Fall

59% of value wiped out after analyst warns of subprime woes
By Peter Fearon,  Newser Staff
Posted Nov 13, 2007 2:47 AM CST
Graphic explains the mortgage crisis; 3c x 4 1/8 inches; 146 mm x 104.8 mm   (Associated Press)
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(Newser) – Online brokerage pioneer E*Trade has been caught in the subprime mortgage crisis. Its shares fell 59% yesterday, wiping out $2.2 billion of its market value, reports the Wall Street Journal. Although its core business is discount brokerage, it is also a bank and has $12.4 billion in home equity lines of credit, some of which now look questionable.

Traders became jittery when a Citigroup analyst declared that E*Trade faces possible bankruptcy and "customers may withdraw assets, and ask questions later." E*Trade reacted angrily to the implication of a run on the bank. "The call was irresponsible," said COO Jarrett Lilien. "We are impacted by the recent credit crunch but there is no fire."