Economy-Finance

Hedge fund Paulson to weigh buying bank stocks: report

NEW YORK (Reuters) - Paulson & Co, a prominent New York hedge fund, will weigh buying shares or convertible bonds in banks and other financial institutions that need capital, the Financial Times reported on its website on Sunday.

John Paulson, its founder, remained bearish on the economy and the financial sector, but would consider taking positions in the sector as prices fall to his target levels, the paper reported, citing two unnamed investors who were on a Paulson conference call for clients last week.

Paulson is to launch its Recovery fund on October 1, the paper said.

John Paulson cemented his superstar reputation with a historic bet against the housing market that earned him more than $3 billion last year.

The hedge fund could not be reached immediately for comment.

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FACTBOX-Global supply chain for Boeing’s 787

Sept 8 (Reuters) - A strike by machinists at Boeing Co (BA.N: Quote, Profile, Research, Stock Buzz) almostcertainly means that the troubled 787 Dreamliner will fall further behindschedule. The project, which is key to Boeing’s financial future, is alreadyaround 18 months behind the original delivery plan, due to a series of problemswith suppliers and shortages of parts.

The U.S. plane maker is pioneering a new way of making its latestcarbon-composite aircraft, outsourcing most of the structure and components tocompanies around the world and assembling the pieces at its plant in Everett,Washington.

A prolonged strike would seriously hurt 787 development and ripple througha global aerospace industry already strained by project costs, currencyvolatility and a faltering global economy.

The following is a list of some of the biggest suppliers on the 787, wherethey are based and what they are producing.

UNITED STATES

General Electric (GE.N: Quote, Profile, Research, Stock Buzz) (engines, electronics via Smiths UK)

Spirit Aerosystems (SPR.N: Quote, Profile, Research, Stock Buzz) (forward fuselage, flight deck, nose)

Honeywell International (HON.N: Quote, Profile, Research, Stock Buzz) (flight control electronics)

Rockwell Collins (COL.N: Quote, Profile, Research, Stock Buzz) (flight deck display) 

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Seoul shares seen rangebound; U.S. data to weigh

 SEOUL, Sept 8 (Reuters) - Seoul shares are set to trade in atight range on Monday after a flat finish in Wall Street onFriday, but weak U.S. job data may weigh on exporters.

 Exporters such as Hyundai Motor (005380.KS: Quote, Profile, Research, Stock Buzz) and SamsungElectronics (005930.KS: Quote, Profile, Research, Stock Buzz) may fall after U.S. government datashowed the unemployment rate soared to 6.1 percent last month, anear five-year high.

 However firms that are sensitive to energy prices such asKorean Air Line (003490.KS: Quote, Profile, Research, Stock Buzz) could gain after U.S. crude CLc1fell to around $106 per barrel on Friday, easing inflationworries and concerns about operational cost burdens.

 "We expect caution to pervade markets today ahead of thisweek's big events, most namely domestic bond redemptions onTuesday and Wednesday. Options and futures expiries on Thursdaymay also add volatility," said Hong In-young, a market analyst atHMC Investment & Securities.

 The head of South Korea's financial regulatory agency saidearly on Monday that domestic stock markets had large room forgains due to their low valuations and as local companies had abright business outlook.

 Jun Kwang-woo, chairman of the Financial Services Commission,was speaking on the state-run KBS radio channel about theturbulent local financial markets amid fears of mass capitalflight out of Asia's fourth-largest economy.

 The Korea Composite Stock Price Index  closed 1.55percent lower at 1,404.38 points on Friday, but up from thesession low of 1,393.33. The main index fell 4.7 percent on theweek. ----------------------MARKET SNAPSHOT @ 2247 GMT ------------

                  INSTRUMENT   LAST       PCT CHG   NET CHG S&P 500             .SPX       1242.31      0.44%     5.480 USD/JPY             <JPY=>       108.51      -0.42%    -0.460 10-YR US TSY YLD    <US10YT=RR>  3.708           --     0.000 SPOT GOLD           <XAU=>       808.5        0.71%     5.700 US CRUDE            CLc1       108.37       2.01%     2.140 DOW JONES           .DJI       11220.96     0.29%     32.73 ASIA ADRS           .BKAS      129.40       0.97%      1.24 -------------------------------------------------------------

MARKET SUMMARY*Dow, S&P end higher on financials, down for week [ID:nN05263512]*Oil falls $2 to 5-month low on economic gloom [ID:nL5628989]*U.S. dollar falls from 11-month high versus euro [ID:nN05470976]*Treasury yields hit 4-mth low on risk aversion [ID:nT170220]

 STOCKS TO WATCH

 CELL PHONE MAKERS - SAMSUNG ELECTRONICS, LG ELECTRONICS(066570.KS: Quote, Profile, Research, Stock Buzz)

 The world's biggest cellphone maker, Nokia (NOK1V.HE: Quote, Profile, Research, Stock Buzz), saidit expects to lose market share in the third quarter as it fightsto maintain profit margins, sending its shares as much as 14percent lower on Friday.

 It also said it expects the mobile device market in 2008 tobe hit by weak consumer confidence and tough competition indeveloping markets.[ID:nL5105391]

 (Reporting by Park Jung-youn; Additional reporting by YooChoonsik; Editing by Jonathan Hopfner)

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Veteran bankers to take reins at Fannie, Freddie

By Kevin Drawbaugh and Rachelle Younglai

WASHINGTON (Reuters) - Two veteran bankers, one from Merrill Lynch and another from U.S. Bancorp, will be the new CEOs of mortgage titans Fannie Mae and Freddie Mac under a government takeover plan announced on Sunday.

Herb Allison, 65, a former president of Merrill who most recently led the TIAA-CREF pension fund, will take the corner office at Fannie Mae, the nation’s largest housing finance group as it and Freddie Mac are placed under federal conservatorship.

David Moffett, 56, a former U.S. Bancorp executive who last year joined the politically powerful Carlyle Group private equity firm, will be CEO of Freddie, the smaller of the two deeply troubled, government-sponsored enterprises, or GSEs.

Both men are “highly capable … the circumstances are enormously challenging even for talented people,” said Eugene Ludwig, founder of consultancy Promontory Financial.

“They’ve got enormous issues to deal with. They have capital problems to address. They have funding issues that are serious. They have personnel issues,” said Ludwig, who was U.S. comptroller of the currency in the Clinton administration.

In what may be the largest federal bailout ever, the U.S. government on Sunday took control of Fannie Mae and Freddie Mac, with the housing market in its deepest swoon since the Great Depression and global financial markets in turmoil.

Fannie Mae CEO Daniel Mudd and Freddie Mac CEO Richard Syron were both ousted to make way for Allison and Moffett, who were both generally praised by financial industry groups.

“Their ethics are above reproach. When you think of Allison and Moffett, the first thing that comes to mind is ethics,” said Steve Bartlett, president of the Financial Services Roundtable, a financial industry lobbying group. 

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Lehman announces senior management changes

NEW YORK (Reuters) - Lehman Brothers Holdings Inc said on Sunday it has named Eric Felder and Hyung Soon Lee as global co-heads of fixed income, following the departure of current global head Andrew Morton.

In addition, the struggling U.S. bank said it has appointed Riccardo Banchetti and Christian Meissner co-chief executive officers of Europe and the Middle East and announced that Jeremy Isaacs will retire as chief executive officer for Europe, the Middle East and Asia-Pacific at the end of the year.

Lehman Chief Executive Officer Dick Fuld said in the statement that the appointments draw on the bank’s “deep bench strength.” The fourth-biggest U.S. investment bank is under pressure to raise capital.

Mark Lane spokesman declined comment on whether further management changes are to come.

Felder was previously head of global credit products and municipal finance, while Lee was most recently head of capital markets for Asia. Both will join the bank’s executive committee along with Meissner and Banchetti.

Morton and Benoit Savoret, chief operating officer of Europe and the Middle East, have left the firm to pursue other interests, the bank said in its statement.

Lehman Brothers shares have dropped more than 75 percent this year although its share price climbed nearly 7 percent on Friday to close at $16.20, following news that private equity firms were looking to buy some of its assets.

The investment bank has already taken $7 billion in credit-related write-downs and losses since the start of the global credit crisis and it is expected to announce further losses when it releases its quarterly results.

(Reporting by Elinor Comlay, editing by Leslie Gevirtz)

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Senate banking panel head plans hearings on GSEs

WASHINGTON, Sept 7 (Reuters) - U.S. Senate BankingCommittee Chairman Christopher Dodd said on Sunday he plannedto hold hearings to examine the government’s decision to takecontrol of Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz), sayingthere were many questions still unanswered.

“There are still many unanswered questions about theAdministration’s plan,” Dodd said in a statement, referring tothe two troubled housing finance companies.

“We need to understand the circumstances which led theadministration to change course” after saying just weeks ago itdid not think it would need to exercise emergency authoritiesCongress approved in July.

“In the coming days, I will invite the architects of thisplan to come before the banking committee to provide members ofCongress and the public with more information,” he said. (Editing by James Dalgleish)

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NEWSMAKER-Veteran bankers to take reins at Fannie, Freddie

By Kevin Drawbaugh and Rachelle Younglai

WASHINGTON, Sept 7 (Reuters) - Two veteran bankers, onefrom Merrill Lynch and another from U.S. Bancorp (USB.N: Quote, Profile, Research, Stock Buzz), willbe the new CEOs of mortgage titans Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) andFreddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) under a government takeover plan announcedon Sunday.

Herb Allison, 65, a former president of Merrill who mostrecently led the TIAA-CREF pension fund, will take the corneroffice at Fannie Mae, the nation’s largest housing financegroup as it and Freddie Mac are placed under federalconservatorship.

David Moffett, 56, a former U.S. Bancorp executive who lastyear joined the politically powerful Carlyle Group privateequity firm, will be CEO of Freddie, the smaller of the twodeeply troubled, government-sponsored enterprises, or GSEs.

Both men are “highly capable … the circumstances areenormously challenging even for talented people,” said Eugene Ludwig, founder of consultancy Promontory Financial.

“They’ve got enormous issues to deal with. They havecapital problems to address. They have funding issues that areserious. They have personnel issues,” said Ludwig, who was U.S.comptroller of the currency in the Clinton administration.

In what may be the largest federal bailout ever, the U.S.government on Sunday took control of Fannie Mae and FreddieMac, with the housing market in its deepest swoon since theGreat Depression and global financial markets in turmoil.

Fannie Mae CEO Daniel Mudd and Freddie Mac CEO RichardSyron were both ousted to make way for Allison and Moffett, whowere both generally praised by financial industry groups.

“Their ethics are above reproach. When you think of Allisonand Moffett, the first thing that comes to mind is ethics,”said Steve Bartlett, president of the Financial ServicesRoundtable, a financial industry lobbying group. 

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Li & Fung sells $500 mln new shares to Temasek

HONG KONG, Sept 8 (Reuters) - Hong Kong-based consumer goodsexporter Li & Fung Ltd (0494.HK: Quote, Profile, Research, Stock Buzz) said it would sell HK$3.9billion ($500 million) worth of new shares to a wholly-owned unitof Temasek Holdings [TEM.UL], raising capital to fundacquisitions.

The U.S.-focused exporter said in a statement late on Sundaythat it would sell 168 million new shares, or 4.62 percent of itsenlarged share capital, at HK$23.09 per share.

Shares of Li & Fung ended at HK$22.55 on Friday. (US$1=HK$7.8) (Reporting by Donny Kwok; editing by Jonathan Hopfner)

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Fannie, Freddie takeover a pre-emptive strike

By David Lawder - Analysis

WASHINGTON (Reuters) - The U.S. Treasury has been worrying and wrangling over Fannie Mae’s and Freddie Mac’s capital levels and systemic risks for years. So why move now to seize control of the two troubled mortgage finance giants?

Mounting credit losses, waning foreign appetite for the institutions’ mortgage-backed securities and a sobering review by Morgan Stanley prompted Treasury Secretary Henry Paulson to launch what may become the most costly bailout in U.S. history.

“Rather than waiting until a triggering event — but seeing one on the horizon — they decided to strike preemptively,” said Bert Ely, a longtime banking industry consultant in Alexandria, Virginia.

“They lined up the evidence to present this to the Fannie and Freddie boards before their hand was forced like it was with Bear Stearns,” he added.

At the crux of the matter is housing and the economy. With mortgage default rates rising, markets have been losing confidence in the viability of Fannie Mae and Freddie Mac, government-sponsored enterprises that buy mortgages from lenders and hold them or securitize and sell them on to investors.

As demand for their paper diminishes, the cost of mortgages rises, putting more pressure on the already battered housing market.

“He (Paulson) has got to fix housing. Fixing the GSEs is critical to fixing housing. He has to do it before he leaves office,” said Michael Youngblood, principal of Five Bridges Capital LLC in Bethesda, Maryland.

FOREIGN APPETITE WANES 

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UPDATE 1-Pimco’s Gross-GSE takeover should help housing, economy

(Updates with background, adds byline)

By Jennifer Ablan

SAN FRANCISCO, Sept 7 (Reuters) - Pimco’s Bill Gross saidon Sunday that the U.S. Treasury’s takeover of Fannie Mae(FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) should ultimately slow thedecline of housing prices and help the U.S. economy.

The U.S. government seized control of mortgage financecompanies Fannie Mae and Freddie Mac, launching what could beits biggest bailout ever in a bid to support the U.S. housingmarket and ward off more global financial market turbulence.For details see [ID:nN07479172].

The action, prompted by worries over the companies’shrinking capital, was the latest in a series of emergencysteps taken by U.S. officials to prop up the wobbly housingsector and quell what is now a year-long crisis in creditmarkets that has helped push many economies toward recession.

“Today’s Treasury announcement is a positive move thatultimately should slow the decline of housing prices, preventaccelerating foreclosures, and reduce the negative momentum ofthe economy,” the manager of the world’s largest bond fund toldReuters.

Fannie Mae and Freddie Mac own or guarantee almost half ofthe country’s $12 trillion in outstanding home mortgage andhave $1.6 trillion in debt outstanding.

“By preserving the GSEs (government-sponsored enterprises)in current form — at least for now — and injecting sizablebillions of dollars into the mortgage market, mortgage ratesshould come down, and the housing market will be healthier forit,” Gross said.

He added that considerable uncertainty remains about thetiming of any housing market turnaround and when the bottom innational housing prices will be reached. 

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