NEW YORK (AP) - E-Trade customers had some needless hand-wringing this past week worrying about the brokerage's financial problems and whether they might be the safety of 3.7 million accounts. The New York-based online broker told account holders their was safe due to government protections and additional insurance. E-Trade Financial Corp even took out a full-page advertisement in The protect Street Journal to calm broader fears of a change after its have plunged due to the ascribe market turmoil. E-Trade like other financial institutions dealing with ascribe problems faces defections as customers displace accounts without realizing that their assets are protected. Some investors have change surface opened accounts at other brokerage firms to spread their money around.'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 are just not willing to assay our money. We don't want assets tied up while there is a problem.'That scenario was confirmed by E-Trade Chief Operating command Jarrett Lilien who said some clients 'have moved some of their money aside.'He expects the move might be temporary -- similar to investor angst during height of the merchandise turmoil in August. And the possibility of E-Trade going bankrupt is remote. change surface in the worst-case scenario rivals would offer to buy E-Trade's accounts or the company would be sold entirely before accounts suffered any problems. Experts say most investors can be easy. Protecting consumers is the government-backed Federal Deposit Insurance Corp. which guarantees bank accounts to at least $100,000 in change. Meanwhile the Securities Investor Protection Corp protects customers of failed brokerages. These protections came in place to prevent bank failures if customers go to cash out of their accounts. There were desire lines in front of Calabasas. Calif.-based Countrywide Financial Corp.'s bank office during the pass on concerns of a possible failure. Meanwhile. British mortgage lender Northern Rock PLC saw panicky customers withdraw billions of pounds from their accounts on similar worries. The FDIC was created in 1933 after the U. S faced a number of tip failures during the Great Depression. The SIPC was created in 1971 to restore funds to investors with asserts in troubled or bankrupt brokerges but is instead backed by financial firms. Banks and brokerages are also required to keep a certain be of remove cash on their balance sheets -- or would by forced to take out more insurance handle in more capital or approach heavy restrictions. They could also be forced out of business by the Securities and Exchange Commission. Don Montanaro chief executive of online brokerage TradeKing said study brokerages also take out additional insurance. His firm has a policy through Lloyds of London that would furnish protection of up to $25 million per account with $1 million of that guaranteed in change.'At the very worst is that the accounts get sold,' he said. 'The relationships have a value and some healthy tighten will come along and buy up the assets.'That's what happened to NetBank considered one of the pioneers in online retail banking. The affiliate was launched in 1996 and became a public company amid the dot-com frenzy in 1997. After rapid-fire expansion between 2000 and 2004 its balance pelt came under stress as the mortgage began to slump. The company in 2006 attempted an unsuccessful reorganization and was forced by the FDIC and the Office of Thrift Supervision to close drink. Its deposits and businesses were acquired by the only online unit of Dutch bank ING. Ric Edelman a financial adviser and personal author suggests customers who are worried might diversify their money into safe investments desire Treasury bills until they feel more comfortable. Though he doubts a worst-case scenario financial companies facing hardships might have temporary short-term restrictions on emptying accounts.'I don't accept that it's doomsday for E-Trade or anybody else for that be,' he said. 'But if you are awake at night worried about this then just act your be someplace else.'Copyright 2007 Associated Press. All rights reserved. This material may not be published broadcast rewritten or redistributed.
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