Richard H. Daniel is leaving a prestigious post at the Federal Home Loan Mortgage Corp. for a job that is among the most challenging in banking.
As chief financial officer of Bankers Trust New York Corp., Mr. Daniel will next week assume a critical role in a bank that is undergoing a major transition in the wake of last year's derivatives trading scandal.
Mr. Daniel's move should be no surprise to anyone who has followed his career. For a third time, he'll be joining his mentor, Frank N. Newman, the former Treasury under secretary and BankAmerica official who recently became president and chief executive officer of the beleaguered company. Mr. Daniel will report directly to Mr. Newman,
The move "is evidence that loyalty to Frank is paramount," said George M. Salem, banking analyst at Gerard Klauer Mattison & Co.
"He had a very prestigious job with a high-quality, nationally known organization," Mr. Salem said. "He's taking quite a risk in how this whole thing turns around. He's betting heavily on Frank, no doubt about that. Frank called, and he went."
One recent reminder of the kind of problems Mr. Daniel will face was last week's disclosure that Bankers Trust had agreed to pay $67 million to Air Products and Chemicals in a derivatives settlement.
Fourth-quarter earnings of $1.36 per share lagged behind analysts' consensus estimate of $1.61. And the Standard & Poor's Ratings Group recently placed the bank on credit watch with negative implications, which could lead to a debt downgrading within a month.
Making things more difficult, analysts are wondering whether the entrance of an outsider suggests turnover at the senior level as the old and new regimes clash.
"This begs the question whether there will be more turnover at the senior level," Mr. Salem said.
All of this "certainly makes the CFO job at Bankers Trust very complex and especially challenging," Mr. Daniel acknowledged. "It is one of the most intellectually demanding CFO positions."
Indeed, Mr. Daniel said the challenge of the job was as appealing as working again with Mr. Newman. The challenge alone would have been enough to get him to consider joining the bank, he said.
Besides, he said, "the basic franchise is good."
Whatever Bankers Trust's prospects might be, most observers said Mr. Newman's faith in his longtime right-hand man is well placed.
Mr. Daniel's experience is divided between various roles at government- sponsored mortgage enterprises and at California banks.
For the past year and a half he had been chief financial officer at Freddie Mac. Before that he had served a seven-year stint at BankAmerica Corp., where he directed financial analysis and planning, and 10 years at Wells Fargo Bank, where his responsibilities included heading mortgage lending.
In the interim between those bank jobs, Mr. Daniel was senior vice president for mortgage backed securities at the Federal National Mortgage Association, or Fannie Mae.
Former colleagues said his grasp of financial details and his knowledge of various business lines made him a valuable and approachable financial manager.
Some industry watchers said the experience Mr. Newman and Mr. Daniel got at BankAmerica would prepare them well for their current task. (Mr. Newman initially got to know Mr. Daniel's abilities when he hired him from Harvard Business School to work at Wells.)
"I can't describe the chaos of the Security Pacific merger," said one analyst, recalling BankAmerica's difficult acquisition of its Southern California rival. "Bankers Trust is clearly in good hands."
Although one observer dismissed Mr. Daniel as "a numbers guy" who could be slow to make decisions, the 49-year-old executive generally wins high marks from former colleagues and analysts.
Thomas O'Donnell, who covers Freddie Mac for Smith Barney Inc., said Mr. Daniel has "done a stellar job" in his short time at the agency. "He leaves the company in a stronger position than when he arrived."
Mr. O'Donnell said that Mr. Daniel had helped Freddie Mac improve its credit quality, something Bankers Trust must do to reduce its cost of business and return confidence to its bond investors.
Analysts said that Mr. Daniel has a good track record of communicating with analysts, which contrasts with Bankers Trust's reputation on Wall Street.
"I think highly of him," said Mr. Salem. "He is extremely bright and a good communicator."
As his first day on the job approaches, the mood at the bank is upbeat. Insiders say Mr. Daniel has won the confidence of other members of the Bankers Trust financial team.
Mr. Daniel said his first priority would be to get involved in the planning process. A good chief financial officer, he said, makes sure that the plan the chief executive and the line business managers adopt is executed.
"A CFO sets up the measures in the planning process," he said.
Second, and perhaps presenting the greatest challenge at Bankers Trust, Mr. Daniel said he must set up effective risk management and controls.
Mr. Daniel said he could not yet comment specifically on various pieces of Bankers Trust's business. But he said he is convinced that some high- profile problems in the derivatives arena are "not an illustration of the character of the firm. Those problems were concentrated on one desk, and I think that Bankers Trust has done a heck of a lot to restore a client focus, to repair customer relationships."
Finally, Mr. Daniel said, he will represent the company to the investment community and the reverse.
"It's very much a two-way street," Mr. Daniel said. "The CFO has to hold up the mirror to let management see the company as shareholders and the rating agencies do."
Along the way, Mr. Daniel can be expected to work especially closely with his chief executive. "Really, Frank's been my model," he said. "I've always thought of him as a mentor."
