Hedge Fund Invests in E*Trade

One of the surprising big losers in the mortgage crisis is E*Trade, the discount brokerage whose savings and loan affiliate used its deposits to invest in mortgages.  Yesterday hedge fund Citidal Investment Group announced it would invest $2.55 billion in E*Trade, which, along with its current holdings, will bring its stock holdings to close to 20%.  Mitch Caplan, the E*Trade CEO who instituted the mortgage strategy, is out.  The Wall St. Journal today has a detailed account of the negotiations that led to Citidel's investment.  WSJ, Why Citadel Pounced On Wounded E*Trade.