Bank Accounts are Safe
November 22, 2007
The online trading company E-Trade suffered some customer turmoil last week as many of its customers began to wonder if their accounts were safe amid the troubles currently being experienced in the sub-prime market. E-trade has an estimated 3.6 million accounts.
Customers were told by the broker, which is based in New York, that their accounts were protected by government insurance as well as other insurance safety nets. A full page ad in the Wall Street Journal followed in attempt to stave off customer concerns. Even so, its stock fell significantly. E-trade was not alone.
Several other financial companies faced customer withdrawals, much of which blamed on a lack of information concerning asset protection in these institutions. Some investors have begun to spread their accounts between banks and brokers as a means of protecting their funds.
“Until the smoke clears, we reduced our holdings tremendously,” said Steve Kaloroplos, a retired small business owner from South Carolina. “We like E-Trade, but we’re just not willing to risk our money. We don’t want assets tied up while there is a problem.”
Jarrett Lilien, E-Trade Chief Operating Officer Jarrett Lilien, reported that some of the company’s clients “have moved some of their money aside.”
Lilien hopes that the current run on accounts will be temporary. He stated that the possibility of E-trade becoming bankrupt is remote.
The government-backed Federal Deposit Insurance Corp. guarantees bank accounts to at least $100,000. The Securities Investor Protection Corp. is set up to protect customers of failed brokerages