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." (Read more E Trade stories.)