According to a recent report E-Trade Financial Corp. is working with largest shareholder Citadel investment Group on ways to steady its financial position. As reported by the Wall Street Journal while there is no information about the terms of the deal negotiations between E-Trade and hedge-fund outfit Citadel have been going on for several weeks with prospects of increasing E-Trade's fortunes.

As t was announced earlier on Tuesday Kenneth Griffin, Citadel's founder and chief executive, will join the finance and risk-oversight committee of E-Trade's board. The reports about the talks and appointment of Griffin to the board make some people speculate that Citadel may be readying to drop more cash into E-Trade. In November 2007, Citadel injected $1.75 billion in exchange for close to a 20% equity stake. In addition, Citadel is also E-Trade's largest bondholder. 

As a result of implications incurred from the mortgage crisis E-Trade's banking unit suffered so much that in 2008 it set aside loan loss provisions of more than $1.5 billion in its bank mortgage portfolio. 

In April it was reported that the Office of Thrift Supervision said to E-Trade to raise more capital in a short term. One option could be to cancel some outstanding debt by exchanging bonds for stocks, but that's complicated by the fact that Citadel must keep its stock ownership below 24.9% to avoid being regulated by a bank -- it now owns more than 15% of shares outstanding.

Thereby, the problems led to tensions between E-Trade and Citadel executives, said the Journal.