eTrade 2008 Annual Report Download - page 53

Corporate Cash
Corporate cash is the primary source of liquidity at the parent company and is available to invest in our
regulated subsidiaries. We define corporate cash as cash held at the parent company as well as cash held in
certain subsidiaries that can distribute cash to the parent company without any regulatory approval. The
components of corporate cash as of December 31, 2008 and 2007 are as follows (dollars in thousands):
December 31, Variance
2008 2007 2008 vs. 2007
Parent company cash $216,535 $251,663 $ (35,128)
Converging Arrows, Inc. and other cash(1) 218,318 60,701 157,617
Total corporate cash(2) $434,853 $312,364 $122,489
(1) Converging Arrows, Inc. and other consists of corporate subsidiaries that can distribute cash to the parent company without any
regulatory approval and includes E*TRADE Mauritius.
(2) Total corporate cash at December 31, 2008 includes $45.3 million that we invested in The Primary Fund and is included as a receivable
in the other assets line item, as The Reserve Fund has not indicated when the funds will be distributed back to investors.
Parent company cash decreased $35.1 million to $216.5 million as of December 31, 2008 when compared to
December 31, 2007. The cash received from the sale of the Canadian brokerage business was offset by the $500
million in capital infusions made to E*TRADE Bank during the second half of 2008. The $157.6 million increase
in cash to $218.3 million at Converging Arrows, Inc. and other as of December 31, 2008 when compared to
December 31, 2007 was due almost entirely to the sale of E*TRADE Mauritius’ equity shares in Investsmart.
Cash and Equivalents
The consolidated cash and equivalents balance increased by $2.1 billion to $3.9 billion at December 31,
2008 compared to 2007. The majority of this balance is cash held in regulated subsidiaries, primarily our Bank
and Brokerage, outlined as follows:
December 31, Variance
2008 2007 2008 vs. 2007
Corporate cash $ 434,853 $ 312,364 $ 122,489
Bank subsidiaries 3,220,232 691,826 2,528,406
Brokerage subsidiaries 339,716 768,677 (428,961)
Other corporate cash 5,356 5,377 (21)
Less:
Cash reported in Other assets(1) (146,308) — (146,308)
Total consolidated cash $3,853,849 $1,778,244 $2,075,605
(1) Cash reported in other assets at December 31, 2008 consists of cash that we invested in The Reserve Funds’ Primary Fund and is
included as a receivable in the other assets line item, as The Reserve Fund has not indicated when the funds will be distributed back to
investors.
The cash held in our regulated subsidiaries serves as a source of liquidity for those subsidiaries and is not a
primary source of capital for the parent company.
Cash and Equivalents Held in the Reserve Fund
At December 31, 2008, we held cash in The Reserve Funds’ Primary Fund (“the Fund”) of $146.3 million,
which is included as a receivable in other assets line item on the balance sheet. On September 16, 2008, the Fund
reported that its shares had fallen below the standard of $1 per share, which is commonly referred to as “breaking
the buck.” Prior to the fund “breaking the buck,” we submitted a redemption request for our entire balance in the
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