If you are like a lot of small investors, you may have an account at E-Trade. If so, you may be comforted by a full page ad they have in today’s Wall Street Journal, where E-Trade maintains it is NOT going under and that all deposits are safe and are fully protected by the FDIC.

On November 9th, E-Trade’s stock declined by 59% (!), [click here for a chart] causing many to wonder if their money is safe and if they should “get their money while they can”. E-trade has put a link on their homepage to a letter from the President of E-Trade, Jarrett Lilien. In the letter, Lillen says, “The credit crunch has had a tremendous impact, but we are taking appropriate and decisive action to manage through it.” Further, on the subject of whether your money is safe, he says this:

Many of you have also asked me about asset protection, so to be clear—your money is safe at E*TRADE FINANCIAL. Here are the facts:

• FDIC insures all E*TRADE Bank accounts to at least $100,000 and Extended Insurance Sweep Deposit Accounts to $500,0001.
• SIPC protects E*TRADE Securities customers up to $500,000 (including $100,000 for claims for cash).
• Additional E*TRADE Securities protection provides up to $150 million per brokerage account, underwritten by London insurers (aggregate $600 million).
• E*TRADE is well-capitalized by regulatory standards.

Only time will tell if E-trade can pull itself out of this, but I would probably not go out of my way to open an E-trade account right now.