(FORTUNE Magazine) – Okay, New York Stock Exchange interim chairman John Reed has the first-class CEO he wanted: Goldman Sachs's John Thain (above), 48, a man with knowledge of the markets, technical expertise, a squeaky-clean reputation, and an ego that appears to be in check. And now for Reed's remaining jobs. First, he needs a permanent chairman. This man (or, less likely, woman) almost certainly won't be from Wall Street but will rather be a CEO type--perhaps retired--accustomed to running boards. He'll have to deal with the new board of directors and the board of executives, made up of investment industry people. Could Reed be the new permanent chairman? Maybe, but he says he doesn't want the job, which will probably be full-time, at least for a while. Reed's continuing role instead is apt to be that of a deeply informed board member.

The other, much more squirrelly matter that Reed has to deal with is the no-holds-barred report that Dan Webb, of the Chicago law firm Winston & Strawn, gave Reed in mid-December on the huge controversy over former chairman Richard Grasso's compensation. Webb's findings, surely filled with harsh detail about how Grasso's pay packages were slung together, appear to set the stage for litigation. Reed and the exchange's directors could decide to sue Grasso to recover some of the $139.5 million already paid him. Or they could sue the old directors for what Reed has baldly called "a malfunction at the board level." But that would create weirdities, pitting, for example, holdover director Madeline Albright against old director Madeline Albright; the SEC may litigate instead. Then there is the counter-possibility that Grasso will sue the exchange to get $58 million he thinks is owed him.

One thing is certain: This affair is an ugly blot sure to handicap Thain as he struggles to keep the exchange preeminent. --Carol J. Loomis