Business Desk

This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

The New York Sun

FEDERAL RESERVE


GREENSPAN WARNS OF FANNIE MAE, FREDDIE MAC RISK


Federal Reserve Chairman Alan Greenspan, in his strongest warning to date, says in a letter that Wall Street investment firms could be incapable of hedging all the financial risk posed by mortgage giants Fannie Mae and Freddie Mac, if Congress doesn’t impose meaningful limits on them in pending legislation.


“As Fannie and Freddie increase in size relative to the counterparties for their hedging transactions, the ability of these GSEs [or government-sponsored enterprises] to quickly correct the inevitable misjudgments inherent in their complex hedging strategies becomes more difficult,” Mr. Greenspan wrote in the letter, dated September 2, to Senator Bennett, a Republican of Utah. Mr. Greenspan’s letter concludes: “In the case of the GSEs, excessive caution in reducing their portfolios could prove to be destabilizing to our financial system as a whole and in the end could seriously diminish the availability of home mortgage funds.”


– Dow Jones Newswires


FINANCIAL SERVICES


LEHMAN BROTHERS NET INCOME UP 74%


Lehman Brothers Holdings expects to continue expanding its business and market share in the wake of record earnings for its third quarter, Chief Administrative Officer David Goldfarb told analysts yesterday. The New York-based investment bank reported net income for the three months ending August 31 totaled $879 million, 74% higher than in the 2004 third quarter and exceeding its previous record of $875 million in its first fiscal quarter this year. Earnings per share in the just-ended quarter rose 72% from last year to $2.94, beating the average estimate of $2.37 compiled from 16 analysts by Thomson Financial.


– Dow Jones Newswires


TECHNOLOGY


GOOGLE RAISES $4.18 BILLION IN SECONDARY OFFERING


Google raised $4.18 billion in a stock sale that will fuel acquisitions and product development to fend off advances by Yahoo and Microsoft. Google sold 14.2 million shares at $295 each, the Mountain View, Calif.-based company said yesterday in a statement distributed on Business Wire. That’s lower than Google’s closing share price yesterday of $303. The stock has surged 6.3% since Google first announced the sale, signaling continued demand from investors who expect the company to enter new markets and keep winning a bigger slice of the market for Internet advertising. Morgan Stanley and Credit Suisse First Boston managed the share sale. Google also hired 18 other securities firms including Citigroup, Lehman Brothers, William Blair & Company to help sell the stock. Shares of Google fell $8.68 at 4 p.m. in Nasdaq Stock Market composite trading. They have more than tripled since Google raised $1.67 billion selling 19.6 million shares for $85 each in an auction in August 2004. Google’s offering marked the biggest follow-on share sale in America since at least 1995, according to David Menlow, who runs IPOFinancial.com. The sale surpassed a $3.99 billion offering by Goldman Sachs in 2000.


– Bloomberg News


IN BRIEF


Robert Britz, a 33-year veteran of the New York Stock Exchange, will retire as president and chief operating officer of the exchange at the end of the year … The exchange should reverse its decision to postpone the listing of Life Sciences Research, which has been the target of animal-rights protesters, according to the top American biotechnology trade group … Merrill Lynch agreed to buy Advest Group from French insurer Axa SA for $400 million, adding more than 500 financial advisers … Ford may close more plants after a 2002 plan to cut costs failed to end losses in North America … Merck hid the safety risks of its Vioxx painkiller from consumers and doctors while reaping billions of dollars in sales, a lawyer for a heart attack victim told jurors in the second products-liability case on the drug … Sprint Nextel said Hurricane Katrina will cost it as much as $200 million in repairs and lost revenue … Gillette, maker of the three-blade Mach3 razor, will begin selling a five-blade shaver called Fusion in the first quarter of 2006, leapfrogging over Schick’s Quattro.


– Bloomberg News


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