Cutbacks Crack E*Trade

At the time, ratings agency Egan-Jones downgraded E*Trade debt to B-plus from BB-minus, saying the value of E*Trade's $46.1 billion of mortgages and loans receivable "probably needs to be marked down."

A spokeswoman said at the time of the company that "while the volatility of the mortgage industry does impact us, the financial health of the company is sound. We believe the fear reflected in the current market capitalization is unfounded and are working diligently with investors to reassure them of the franchises' strength."

The company said Monday it is anticipating securities impairments of up to $100 million in the second half of the year.

Over the next two years, E*Trade plans to shift its balance sheet to focus on retail assets and liabilities. It will run off its home equity, consumer loans and securities portfolio balances and plans to replace these assets as they mature or are paid down with margin debt and prime first lien mortgages from retail customers.

An E*Trade spokeswoman was not immediately available for comment. The company is set to host a conference call this evening.

The news comes as mortgage lenders ranging from Countrywide (CFC) and H&R Block (HRB) to Lehman (LEH) have been firing thousands of workers as the mortgage business has gone sour.

Shares of E*Trade fell $1.41 to $12.80 after the market closed.

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