Replies to post #110465 on ajtj99's Market Pulse

[jdaasoc]

I think their TV compercials touted the high rate of interest on MM funds.

In hind sight, you could have seen it coming to this when competitiors were not offering similar interest rates.

What were they thinking taking crazy risks in MM funds.

[stkboy1]

E-Trade expects to take "significant write-downs" in 4th quarter on mortgage-backed securities
Sat Nov 10, 12:52 AM
Adam Schreck, The Associated Press
Email Story IM Story Printable View By Adam Schreck, The Associated Press

NEW YORK - E-Trade Financial Corp. said Friday the value of its holdings of securities backed by home mortgages has fallen significantly, and as a result expects to take "significant write-downs" in the fourth quarter.

The online brokerage said its US$3 billion portfolio of asset-backed securities includes about $450 million worth of collateralized debt obligations and second-lien securities - financial instruments at the heart of the mortgage mess which has wreaked havoc on financial firms' balance sheets.

E-Trade also disclosed Friday that the Securities and Exchange Commission has opened an "informal inquiry" into issues related to the company's loan and securities portfolios, according to the filing. The company did not elaborate, other than to say it is co-operating fully with investigators.

"We understand this inquiry to be part of an industry wide review of the mortgage industry," spokeswoman Pam Erickson said. She added that, although the request was labelled as confidential, the company chose to disclose it in the interest of transparency.

The credit ratings of about $208 million of the asset-backed securities have been downgraded in recent weeks, E-Trade disclosed in a regulatory filing Friday, leading to a decline in their value. Of that amount, $50 million that had carried the highest possible credit rating have since been downgraded below investment grade, the company said.

The New York-based company said it will take "significant write-downs to these securities during the fourth quarter," but that it could not yet predict how big the losses would be. The size of the losses will depend on the securities' value at the end of the year.

CDOs are complex instruments that combine slices of different kind of risk. CDOs are often backed, in part, by subprime mortgages - loans given to customers with poor credit history. Second-lien debts, which in the case of home loans are typically known as second mortgages, are generally seen as relatively risky because they rely on the same collateral as a previous outstanding loan.

In September, E-Trade slashed its 2007 profit forecast and said it was getting out of the wholesale mortgage business amid mounting concerns over bad home loans this summer.

Then last month, E-Trade wrote down nearly $200 million worth of mortgage-backed securities during the third quarter. It also further lowered its 2007 earnings guidance because of "the possibility of further credit deterioration." At the time, it said it expected a profit between 75 cents to 90 cents per share.

"Investors should no longer expect these earnings levels to be achieved," the company said Friday.

E-Trade shares dropped $1.11, or 12.9 per cent, to $7.48 in after-hours trading, having closed earlier down a penny at $8.59.