(FORTUNE Magazine) – David Pottruck has long been one of the stand-up guys in American business, so it came as little surprise that when he was ousted as CEO of Charles Schwab on July 20, he made no attempt to paper over his firing with the usual vague euphemisms. "I accept the board's decision that it's time for me to step aside," he said in the company's prepared statement. To FORTUNE, he added, "When the company struggles, the CEO is held accountable."

Pottruck had been a key member of Schwab's management team for 20 years of the firm's three-decade existence, the last 62 of which he served as either co-CEO (with founder Chuck Schwab) or CEO. For much of that time it was a very good ride, as the brokerage went from being a niche firm catering to active traders to a major player with close to $1 trillion in assets. Pottruck helped guide Schwab through the 1987 crash, led its drive to start a mutual fund supermarket, and in perhaps the boldest move of all, shifted Schwab's customers en masse to the Internet in the late 1990s while dramatically cutting commission prices. For that move he was widely hailed as a business visionary (by me, among others) and handsomely compensated, with options worth tens of millions of dollars and bonuses of more than $8 million in 1999 and 2000 alone.

As the company grew up, so did Pottruck. Early in his career he managed people as if he were still the wrestler he once was. But in the late 1980s, Schwab confronted Pottruck about his style. As Pottruck once recalled to me, "I needed to examine the extent to which my ego was driving my behavior." Amazingly, he did change --and in the process became a more thoughtful, more empathetic boss who no longer led by fiat or fear. He also became known as an executive who told the truth and didn't duck hard questions.

But then the bubble burst, and in the ensuing bear market both Schwab and its CEO have floundered. As customers stopped trading, Schwab's commission revenue evaporated--and it gradually became clear that the company was in a very tough place. It was being squeezed from both ends of the brokerage market--from the full-service firms like Merrill Lynch on one end and the deep online discounters like Ameritrade on the other.

Over the past few years Pottruck has made all sorts of strategic moves to get Schwab back on track. Schwab paid $3.2 billion to buy U.S. Trust, to cater to (as they say) "high-net-worth individuals." It has branched into equity research. It has also eliminated some 10,000 jobs (and Pottruck and Schwab have both declined to take bonuses since the year 2000).

Nothing has worked. The U.S. Trust acquisition, for instance, has proved an enormous source of internal friction and a huge distraction for management. And the layoffs, painful though they've been, have generally been a day late and a dollar short. On the day Pottruck was fired, Schwab's stock stood at under $9 a share--down from $60 a share four years ago. And though its assets are at an all-time high, those new assets haven't translated into new revenues--because Schwab's customers aren't doing much trading.

Pottruck still thinks his acquisition strategy makes sense, though he concedes that it has not yet borne fruit. It's understandable that the board lost patience. His biggest mistake, he believes, was not cutting costs more quickly. "I don't think I did that as well as I might have," he says. "I was a better grower than reducer."

In the aftermath of Pottruck's firing, a number of analysts who cover Schwab predicted the firm--with its 66-year-old founder back at the helm--would sell off Pottruck's acquisitions and refocus on its "core business." Maybe so. But it's hard to see how even Chuck Schwab can get the company out of the pickle it's in. "He is a visionary," one analyst told the New York Times, "and that's what the company needs right now." Actually, what Schwab really needs is another bull market. --Joseph Nocera