Dear Friends,

What makes you feel that internet brokers are immune to failure?

Battered E*Trade banking on government funds
Fri Nov 21, 2008 5:15pm EST
By Jonathan Spicer

NEW YORK (Reuters) – The troubles at E*Trade Financial Corp (ETFC.O) have worsened and now hinge on whether it can secure U.S. government funds that would bring some relief to its book of bad mortgage loans.

Shares of the discount brokerage tumbled below $1 to its lowest price ever this week, indicating that investors think chances are slim it will secure the $800 million it applied for under the Troubled Asset Relief Program (TARP) rescue program.

Competitors, including Charles Schwab Corp (SCHW.O) and TD Ameritrade Holding Corp (AMTD.O), have said they are loath to bid for the smaller and now very cheap company, but have made no secret they covet E*Trade’s brokerage business, which has kept it afloat despite the drag of its mortgage business.

Roger Freeman, a Barclays Capital analyst attending a business update hosted by Schwab this week, said E*Trade’s existence "depends on whether it gets the TARP."

E*Trade’s survival probably hinges more on whether its customers continue to drive growth, according to analysts. But after a string of quarterly losses, the TARP funding is vital for the near term. But there are serious doubts the company will qualify alongside larger banks whose collapse could further shake a weakened U.S. economy.

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Jim Sinclair’s Commentary

This is a sad, but not that far from the truth if you simply put in some famous names for the financial pirates.

There is no better equation for a global Weimar

* SOMALI PIRATES APPLY TO BECOME BANK, AIM TO ACCESS TARP.
* PAULSON: TARP PIRATE EQUITY IS AN ‘INVESTMENT’ – WILL PAY OFF
* KASHKARI SAYS ‘SOMALI PIRATES ARE ‘FUNDAMENTALLY SOUND’ ‘
* MOODYS UPGRADES SOMALI PIRATES TO AAA
* SOMALI PIRATES IN DISCUSSION TO ACQUIRE CITIBANK
* FED OFFICIALS: AGGRESSIVE EASING WOULD CUT SOMALI PIRATE RISK
* FED AGREED NOV 2 TO TAKE ‘WHATEVER STEPS’ NEEDED FOR SOMALI PIRATES.

Jim Sinclair’s Commentary

The following is yesterday’s three bank failures. How is the FDIC going to guarantee GE debt instruments?

From: http://www.fdic.gov/bank/individual/failed/banklist.html
PFF Bank and Trust, Pomona, CA
Downey Savings and Loan, Newport Beach, CA
The Community Bank, Loganville, GA

FDIC Seizes Three Banks, Expanding Loan-Relief Effort
By Binyamin Appelbaum
Saturday, November 22, 2008; D01

Federal regulators seized three banks last night, including Downey Savings and Loan Association, a large California mortgage lender, expanding what is by far the most expensive crop of bank failures in modern American history and indicating that the pace of failures is increasing.

The Federal Deposit Insurance Corp., which took control of the banks, said holders of about $1.9 billion in Downey mortgage loans who have fallen behind on their payments would now be eligible for reduced monthly payments to help them avoid foreclosure. The unprecedented move in connection with a bank failure expands the agency’s controversial loan-modification program, which is opposed by other parts of the Bush administration.

Downey, with $12.8 billion in assets, is the third-largest bank to fail this year, after Washington Mutual and IndyMac Bancorp. All three institutions were large mortgage lenders focused on the California market and regulated by the Office of Thrift Supervision.

The failure was not a surprise. The company said in a securities filing last week that it expected to be seized by regulators, a highly unusual confession that underscored its desperate straits. Downey was a leading originator of alternative loans called option adjustable-rate mortgages, which work like credit cards, allowing borrowers to pay less than the full amount due each month. As with credit cards, many people borrowed more than they could afford, and default rates on the loans have soared.

Another bank seized last night, PFF Bank and Trust, is also a California thrift, with $3.7 billion in assets. Its bad loans were made mostly to residential developers.

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