How Secure Are Your Securities? by John A. Sarkett
How well protected are your stocks and options in
your brokerage account?
Two classic Zen koans and one modern
riddle you may never have considered: What
is the sound of one hand clapping? Does a
dog have Buddha nature? And how well protected
are the stocks and options in your brokerage
account — not their value, which fluctuates, but
their very existence? In peaceful financial times,
that last query rarely arises.
These are not peaceful financial times. The
subprime shakeout has caused bank runs (Countrywide,
Northern Rock), toppled CEOs (Merrill Lynch,
Citigroup), and devastated broker stock values.
The charts of Merrill Lynch (Figure 1), Bear Stearns (Figure 2), and E*Trade Financial (Figure 3) clearly
depict the picture. Worse, it may not be over. More
subprime loans will reset in the months ahead. The
risk to the global financial system may be in the
trillions of dollars.
By getting involved in credit derivatives and
mortgage loans, major financial firms such as Merrill
Lynch, Bear Stearns, Lehman Brothers, Citigroup,
and E*Trade, among others, have put their shareholders
at risk for billions. Even more chilling, they
may have also put in the same position their brokerage
customers — that is, you.