We like to think that when we deposit a dollar at the bank, it goes into a big vault and we can pull out that same dollar at any time. But that¿s not how the U.S. banking system works. Banks take that money and invest it to make money themselves, so cash gets spread around. This, naturally, leads to a big risk: What happens if those investments go sour? Well, you¿d be out of luck. You can¿t get your dollar back.

The Federal Reserve doesn¿t like that scenario, so it prohibits banks from putting all the cash it has on deposit on the line. In fact, the Fed forces banks to keep a portion of their assets at the Federal Reserve itself, to make sure that some of your assets won¿t get squandered if the bank¿s bets go south. These are called ¿reserves,¿ (hence, Federal Reserve. Got it? Good), and usually amount to 10% of the total cash kept in checking accounts.

These reserves are never exactly 10%, and banks like to keep a little extra in reserve ¿ not, as you might think, to make you more comfortable that they¿re in good financial shape, but rather so they can take that excess and lend it to other banks and make money off it. (They¿re banks, they can¿t help themselves.) The rate at which they make these loans is called the Federal Funds rate, which is set by the Federal Reserve¿s Federal Open Market Committee.

When you hear people chattering about how the Fed cut or hiked interest rates, this is what they¿re talking about: the interest rate banks can charge for lending money from their reserves. This begs the question: If these are essentially loans between banks, why is the Fed Funds rate so important for the rest of the economy?

Well, simply put, because loans make the financial world go round. Bank A lends Bank B $10,000 at a Fed Funds rate of 5%. Bank B then lends out $10,000 to a small business at 7%. The small business then takes that money and expands the business and hires new workers. Now someone is employed, Bank B has made interest off the loan, and Bank A is the richer for making it all happen. It¿s perhaps overly simplistic, but you get the idea. When you want the economy to thrive, you make lending cheaper.

Of course, sometimes you don¿t want the economy to thrive. In fact, you might want it to cool down, mostly to avoid money flooding the system and causing inflation. In that case, the Fed raises interest rates, making it difficult to lend or borrow.

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Wednesday, June 18, 2008

E*TRADE FINANCIAL Corporation Reports Monthly Activity for May 2008

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NEW YORK, Jun 18, 2008 (BUSINESS WIRE) ----E*TRADE FINANCIAL Corporation (NASDAQ: ETFC) today released its Monthly Activity Report for May. The Company's total retail customer assets increased 3.9 percent sequentially to $180.9 billion. Total Daily Average Revenue Trades increased 4.1 percent month over month. Net new retail accounts grew by more than 21,000.

"The growth in customer accounts, assets and activity in May further supports the restored confidence of our retail customer base," said Donald H. Layton, Chairman and Chief Executive Officer, E*TRADE FINANCIAL Corporation. "Additionally, the quality of the underlying accounts has continued to improve with May marking the third consecutive month of growth in our highest value customer segments."

 MONTHLY ACTIVITY DATA
   May-08 Apr-08 May-07 % Chg. M/M % Chg. Y/Y ---------- ---------- ---------- ---------- ---------- Trading days 21.0 22.0 22.0
   N.M. N.M. Daily Average Revenue Trades 188,333 180,970 171,387 4.1% 9.9% Gross new retail accounts 80,315 84,115 101,175 N.M.
   N.M. End of period retail accounts 4,793,219 4,771,844 4,613,232 0.4% 3.9% Retail Customer Assets ($MM) -------------- Customer
   securities holdings $ 145,832 $ 139,635 $ 176,218 4.4% (17.2)% Customer cash and deposits 35,105 34,497 38,184 1.8% (8.1)%
   ---------- ---------- ---------- Total retail customer assets $ 180,937 $ 174,132 $ 214,402 3.9% (15.6)%

Historical monthly metrics data from January 2003 to May 2008 can be found on the E*TRADE FINANCIAL investor relations site at https://investor.etrade.com.

About E*TRADE FINANCIAL

The E*TRADE FINANCIAL family of companies provides financial services including trading, investing and banking for retail and institutional customers. Securities products and services are offered by E*TRADE Securities LLC (Member FINRA/SIPC). Bank products and services are offered by E*TRADE Bank, a Federal savings bank, Member FDIC, or its subsidiaries.

Important Notice

E*TRADE FINANCIAL, E*TRADE and the E*TRADE logo are trademarks or registered trademarks of E*TRADE FINANCIAL Corporation. The statements contained in this news release that are forward-looking are based on current expectations that are subject to a number of uncertainties and risks, and actual results may differ materially. The uncertainties and risks include, but are not limited to, changes in market activity, anticipated increases in the rate of new customer acquisition, the conversion of new visitors to the site to customers, the activity of customers and assets held at the institution, seasonality, macro trends of the economy in general and the residential real estate market, instability in the consumer credit markets and credit trends, rising mortgage interest rates, tighter mortgage lending guidelines across the industry, increased mortgage loan delinquency and default rates, portfolio growth, portfolio seasoning and resolution through collections, sales or charge-offs, the development and enhancement of products and services, competitive pressures (including price competition), system failures, economic and political conditions, changes in consumer behavior and the introduction of competing products having technological and/or other advantages. Further information about these risks and uncertainties can be found in the information included in the annual reports previously filed by E*TRADE FINANCIAL Corporation with the SEC on Form 10-K (including information under the caption "Risk Factors") and quarterly reports on Form 10-Q.

SOURCE: E*TRADE FINANCIAL Corporation

E*TRADE FINANCIAL
   Corporation E*TRADE FINANCIAL Media Relations Contact Pam Erickson, 617-296-6080 pam.erickson@etrade.com or E*TRADE FINANCIAL
   Investor Relations Contact Adam Townsend, 646-521-4406 adam.townsend@etrade.com