E*Trade (NASDAQ: ETFC) did something odd. It made a former vice chairman of JP Morgan Chase (NYSE: JPM) its new CEO. It would be hard to imagine that he has much experience in the discount brokerage industry. Donald Layton has been non-executive chairman of the company since Citadel Investment Group put $1.75 billion into the brokerage firm last November.
According to The Wall Street Journal, "Citadel has nearly a 20% stake, and tapping Mr. Layton is a sign Citadel is getting antsy for results." The brokerage firm still have $12 billion of home loans on its books. It is hard to assign them a value while real estate prices are still dropping and default rates are rising.
Citadel may want to sell the discount brokerage firm but that would cause potential problems with other E*Trade investors. What would be left over is a company with a large pool of mortgages which are still falling in value. Getting a return on the discount brokerage operation might be a good idea on paper but separating it from the balance of the company is no "slam dunk". Shareholders don't want to be left holding that mortgage bag.
Douglas A. McIntyre is an editor at 247wallst.com.
Reader Comments (Page 1 of 1)
3-05-2008 @ 12:23AM
JD Hall said...
Layton doesn't need experience with the retail brokerage industry to do his job. His primary focus will be the management of the banking side of E-Trade, which is the section that brought E-Trade to this point.
Robert Lillien, Pres., COO, is in charge of the retail brokerage, and he's done a good job. He also just stepped down from the position of Acting CEO when Layton was appointed.
Also, Layton joined the board of directors after the Citadel deal in November, so Layton had nothing to do with the problems that got E-Trade into this mess. His resumé is impressive, and I would've been more worried if they'd picked Lillien to continue as CEO. Layton is a good choice. He isn't an insider, in the sense that he isn't part of the management team that got E-Trade into trouble, so his perspective isn't going to be beholden to the "old ways" of doing things.
Just some thoughts.