Close Call for E*TRADE

E*TRADE’s woes teach us to stay below FDIC limits


About three weeks ago, E*TRADE was in danger of becoming insolvent. Customers began to flee after news broke, though there wasn’t a full run on the bank. But those 60,000 people who had E*TRADE accounts with more than $100,000 in them narrowly escaped losing their shirts. Things didn’t look too promising for a while. Some 30 companies were offered the chance to provide a bailout and passed up on the opportunity. Finally the Office of Thrift Supervision — an obscure government department that becomes very important when banks fold — intervened and got Citadel to invest $2.55 billion to keep things afloat.

Even if it E*TRADE had failed, those who were within FDIC limits would have been safe. The feds are very good at knowing how to handle these kinds of things. They got a lot of experience during the banking collapses of the late ’80s! The good news is that your money is usually available the next day after a collapse if you had less than $100,000. But rest assured of this: More financial institutions will fail. Citibank nearly folded and Countrywide is in need of cash bailouts. So the important thing to know is that you must keep your investments within the safety range provided by FDIC coverage. Don’t play with fire! Remember that the limit is $100,000, unless you’re talking about an IRA. Then you’re protected up to $250,000.


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