INTEREST RATES

FED RAISES FUNDS RATE TO 3.25%, KEEPS ‘MEASURED’ PLAN

Federal Reserve policy-makers raised the benchmark U.S. interest rate a quarter point to 3.25% and restated a plan to carry out further increases at a “measured” pace. “Monetary policy remains accommodative,” the Federal Open Market Committee said yesterday in a statement after a two-day meeting in Washington. “With underlying inflation expected to be contained, the committee believes that policy accommodation can be removed at a pace that is likely to be measured.”

Retaining the “measured” language suggests the FOMC is concerned that low long-term interest rates outside its direct control are still stoking the economy, prompting central bankers to keep raising their overnight bank lending rate to head off faster inflation.Yesterday’s rate increase, the ninth straight, brought the Fed’s target to the highest since June 2001.

– Bloomberg News

WALL STREET

MORGAN STANLEY BRINGS BACK MACK AS CHAIRMAN AND CHIEF EXECUTIVE

Morgan Stanley named John Mack chairman and CEO, bringing back a former president to rebuild morale and revive businesses that slipped while Philip Purcell ran the world’s largest securities firm.

Mr. Mack, 60, returns to Morgan Stanley four years after Mr. Purcell, 61, bested him in a boardroom battle.A 29-year veteran of the firm who went on to run Credit Suisse First Boston until he again was ousted in 2004, Mr. Mack was elected by the board yesterday and takes over immediately, the company said in a statement. “What a triumphant return for John Mack,” said Thomas Hull, chief investment officer at Lowry Hill in Minneapolis.

Mr. Mack takes over a firm riven by internal bickering and stripped of the senior executives who left after Mr. Purcell promoted two allies to co-president in a March 28 management shakeup. His challenges will include restoring a corporate reputation battered in the three-month campaign by dissident alumni to force out Mr. Purcell, gaining the confidence of unhappy investors, and reversing an earnings slide.

– Bloomberg News

AEROSPACE

BOEING NAMES 3M’S MCNERNEY CHAIRMAN, CEO

Boeing, the world’s secondlargest maker of commercial aircraft, unexpectedly named James McNerney of 3M chairman and chief executive, filling the positions three months after ousting Harry Stonecipher for an affair.

Shares of Boeing climbed as much as 8.4%, while 3M dropped 4%. Mr. McNerney, a member of Boeing’s board for almost four years, had said as late as April that he wasn’t interested in the job. Chairman Lewis Platt will become lead director, the Chicago-based company said in a statement yesterday.

Mr.McNerney,55,takes over as Boeing seeks to recoup the worldwide lead in commercial aircraft sales from Airbus and rebuild its reputation in Washington following an Air Force purchasing scandal that led to the ouster of Mr. Stonecipher’s predecessor, Philip Condit, in December 2003. Mr. McNerney headed General Electric’s jet engine unit before becoming chairman and chief executive officer of 3M in 2001.

– Bloomberg News

IN THE COURTS

EBBERS GIVES UP MOST OF HIS ASSETS TO SETTLE FRAUD SUIT, FINES

Convicted WorldCom CEO Bernard Ebbers agreed to pay as much as $45 million – almost all of his assets – to settle claims by the government, ex-employees, and defrauded investors, prosecutors said.

Federal prosecutors in New York agreed to waive restitution claims associated with Ebbers’s March 15 fraud conviction in exchange for his agreement to pay investors $5 million in cash. Ebbers has also agreed to forfeit his multimillion-dollar house and stakes in businesses ranging from timberland to a golf course, valued at between $25 million and $40 million, U.S. Attorney David Kelley said yesterday.

– Bloomberg News

REAL ESTATE

BROKERS REPORT STRONG SECOND-QUARTER PRICE GAINS

Apartment prices in Manhattan are climbing rapidly and shattering multiple records in their wake, according to market snapshots released by two real estate brokerages.

The average price for a Manhattan apartment rose to $1.318 million in the second quarter, up 30.4% from the second quarter last year, according to Prudential Douglas Elliman’s Manhattan market overview. The Brown Harris Stevens Manhattan Residential Market Report found the average price to be $1.277 million, up 21% from last year’s second-quarter results. Both would be new records, and Prudential Douglas Elliman CEO Dottie Herman said she expected nothing less. “I’ve been telling everyone there’s no bubble,” Ms. Herman said. “Real estate markets are not stock markets. They don’t crash overnight.”

Prudential reported the average price of a co-op apartment rose 27.4% from last year to $1.103 million, breaking the million-dollar mark for the first time. Brown Harris Stevens found the price to be $1.17 million, up 19% from 2004. Condo prices rose 28.4% from last year to $1.570 million according to Prudential, and 21% to $1.417 million, according to Brown Harris Stevens, both record prices. Those who are surprised by the continuing growth rate should get used to the feeling, the chief economist for Brown Harris Stevens, Greg Heym, said.

– Special to the Sun