Citadel Investment Group, which coughed up $1.75 billion to fund a capital infusion for ETrade in exchange for a 20% stake, is getting mighty edgy as the company’s stock price sags. Enter new CEO Donald Layton, former vice chairman of J.P. Morgan Chase and hopefully, just the man to wheedle a fat buyout offer from brokerage rivals such as TD Ameritrade or Charles Schwab. There’s only one problem: neither potential suitor has any interest in ETrade’s roughly $12 billion of increasingly troubled home-equity loans.

In a move to rebuild investor confidence and possibly position itself for sale, ETrade Financial Corp. is hiring Donald Layton, a former vice chairman of J.P. Morgan Chase & Co., as the brokerage firm's new chief executive.

Mr. Layton, 57 years old, has been chairman of ETrade since November, when hedge fund Citadel Investment Group injected $1.75 billion into the New York company. Citadel has nearly a 20% stake, and tapping Mr. Layton is a sign Citadel is getting antsy for results.

ETrade's share price is 13% lower than when Citadel made its infusion. In Nasdaq Stock Market trading Friday, ETrade shares fell 43 cents, or 9.2%, to $4.27. Citadel backs Mr. Layton's hiring but doesn't hold an ETrade board seat.

Best known as an online brokerage, ETrade bet big -- and lost big -- buying mortgages and investing in mortgage-backed securities. Former CEO Mitch Caplan resigned in November and was succeeded on a temporary basis by Jarrett Lilien, ETrade's president and chief operating officer. Mr. Lilien is well-liked within ETrade but closely associated with its mortgage woes.

Mr. Lilien has been invited to stay on as president and chief operating officer. ETrade's directors met yesterday to vote on Mr. Layton's appointment as CEO.

Since becoming ETrade's chairman, Mr. Layton has won praise at Citadel for the way he is tackling the mortgage mess and for helping put ETrade on firmer financial ground. He also helped engineer last month's appointment of Robert Druskin, former chief operating officer at Citigroup Inc., to the brokerage firm's board.

Mr. Layton, who retired from J.P. Morgan in 2004 after 29 years, supervised investment-banking and retail operations while at the New York bank. He has privately told people that ETrade represents his return to Wall Street.

His first order of business is to improve the share price. ETrade and Citadel have been working on ways to unlock what they believe is the value in the profitable online brokerage operations, say people familiar with the matter.

TD Ameritrade Holding Corp. and Charles Schwab Corp., brokerage rivals of ETrade, have expressed interest in buying ETrade's brokerage unit but aren't interested in its bank operations, which house the troubled mortgage assets. ETrade is still saddled with nearly $12 billion of increasingly troubled home-equity loans.

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