Who said the sell-side is dead?

FOR those who believe that the sell-side is a lame duck, here’s a cautionary tale best told by the chart below of E*Trade Financial Corp.’s (NASDAQ: ETFC) stock trading over the past five days.After Citigroup analyst Prashant Bhatia speculated that the company has a 15% probability of going bankrupt, the stock fell almost 60% and was the most heavily traded stock on U.S. markets.

The analyst worried that E*Trade’s announcement that it was canceling future earnings guidance due to uncertainty over the fair value of its $3 billion asset-backed securities portfolio would spook customers into a Northern Rock-style “run on the bank.”

The company, however, slammed the analyst’s “irresponsible comments,” according to BusinessWeek.

The irony, of course, is that if anything is going to spark panic, it’s seeing the stock of your bank or brokerage cut in half in a day. In that sense, Bhatia’s comments may be something of a self-fulfilling prophesy.

Meanwhile, Portfolio.com finance blogger Felix Salmon comes to Bhatia’s defense. “I think it’s rash to simply blame Bhatia and call him ‘irresponsible’ for publishing what was actually a pretty sober piece of analysis,” he writes.

People commenting on his post don’t agree.

If nothing else, the incident shows just how nervous investors are right now.

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