03/28/2008 02:45 am ET Updated May 25, 2011

E*Trade: Better Disclosure, Needs More Cash

Demolished E*Trade finally gets a gold star for disclosure. After months of spin and selective data releases, the company finally opened the kimono on its troubled $12 billion home-equity portfolio and turnaround plan.

The bad news:

* The company still needs more cash. It plans to raise this through asset sales and "capital market transactions" --presumably stock sales, presumably dilutive.
* The turnaround plan will take at least through the end of 2008.
* The company cannot sell its $12 billion home-equity albatross, because there is simply no market for it. It has raised the loss expectations for the portfolio to deal with expected further drops in the housing market.
* E*Trade's loss assumptions call for a 10% decline in house prices in 2008 and an additional 5% in 2009. This is reasonable, but it's also clearly not a worst-case scenario. If this housing cycle follows the previous one, house prices will likely decline through 2011.

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