E-Trade Financial Corp

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E-Trade Financial Corp., which flirted with collapse amid the growing mortgage crisis, said Thursday it is getting a $2.55 billion cash infusion from Citadel Investment Group in a bid to revive the battered discount brokerage.

Citadel, one of the nation's largest hedge funds, plans to buy E-Trade's troubled asset-backed securities portfolio and take it off the brokerage's books. Hemorrhaging in that portfolio caused massive writedowns since the summer, and triggered panic that further losses would push E-Trade into bankruptcy.

The deal also forced E-Trade's embattled chief executive, Mitch Caplan, out of the job he's held since 2003. He'll be replaced on an interim basis by President and Chief Operating Officer Jarrett Lilien. Former JPMorgan Chase & Co. vice chairman Donald Layton will become non-executive chairman.....

.....E-Trade has taken some $197 million in pretax writedowns on its securities portfolio. It will take a $2.2 billion charge as a result of the sale of the asset-based securities portfolio and will record a larger-than-expected fourth-quarter loss on its home equity loan portfolio that will result in an ending allowance of over $400 million.

The move allows E-Trade to get the troubled asset-backed securities off its books entirely, and that should begin to restore confidence of investors. The stock has plunged some 78 percent his year and has been trading near an all-time low.....
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From Calculated Risk




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