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Another bail-out package for a financial institution in distress.

E-Trade, the online broker whose expansion into the mortgage market has backfired spectacularly, on Thursday unveiled its lifeline. It’s getting an cash infusion of $2.5bn from Citadel and Blackrock - and chief executive Mitchell Caplan is joining the Wall St job club, to be replaced, temporarily at least, by Jarrett Lilien.

The company’s shares slumped, losing more than half their value, when it warned earlier this month that it faced “continued declines” in the fair values of its ABS portfolio.  Analysts at Citi put the frighteners on by arguing that there was a significant chance the company could wind up in bankruptcy as its depositors opted to move their funds elsewhere.

Reuters was reporting on Thursday that in fact E-Trade’s retail clients have pulled out 15 per cent of their total assets during November, with assets falling from $192m to $226.7bn.  So E-Trade is taking a hit to get out of its subprime-dug hole - and to clamber out quickly and cleanly.

Here are the details:

• E-Trade gets $2.5bn in cash, of which $2.4bn is immediate
• $1.6bn comes in exchange for 12.5 per cent senior notes, and common stock, including funds from Blackrock
• Citadel gets E-Trade’s entire ABS book for $800m cash
• On closing, Citadel will invest a further $150m for senior notes and stock
• E-Trade will issue about 20 per cent of current outstanding stock
• Citadel gets one representative on E-Trade’s board

Citadel is undoubtedly canny when it comes to picking up assets on the cheap.  And Jarrett Lilien rather sniffily said on Thursday, “Citadel understand we have been faced with a challenged balance sheet, not a challenged business.”

So Deal Journal thinks investors should take the Citadel move as a sign that the worst of the mortgage turmoil is behind us.

But this sounds rather familiar, notes Fortune.  Wasn’t BofA linking up with Countrywide back in the summer meant to indicate the bottom? There was also a flurry of excitement earlier this week related to the Citi-Abu Dhabi deal being the turning point.  Meanwhile, our very own bottomless pit in the UK, the Northern Rock, has apparently borrowed another £2.7bn of Bank of England funds in the past week alone.

So Citadel clears up in the bargain bin. And E-Trade, which has already gained on the back of various rescue or takeover tales, gets a survival bounce - but only to the tune of 6 per cent and that’s disappearing fast. The emergency care packages being drawn up for lenders teetering on the brink may not turn out to be the best indicator that the worst is over.