WASHINGTON (Reuters) -
Mortgage-finance company Fannie Mae
(FNM.N) on Wednesday announced a management shake-up in an
effort to come to grips with mounting credit losses and a
shrinking capital base.

The company's chief financial officer, Stephen Swad, was
replaced, and the chief business officer, Peter Niculescu, will
take on an expanded role. A new chief risk officer was also
named.

Daniel Mudd, the company's chief executive, will remain in
place and has the confidence of the board of directors, said
board chairman Stephen Ashley.

"The board of directors is firmly committed to Dan Mudd,"
Ashley said in a statement. "The board will continue to work
closely with Dan and his management team to guide the company
and support the housing finance system through a very
challenging period."

Fannie Mae and Freddie Mac (FRE.N), its sibling agency,
have so far this year booked billions of dollars in losses as
the national housing market has been hit by a wave of loan
defaults and falling home prices.

The companies have also seen more than 90 percent of their
market capitalization evaporate since January and last month
the U.S. Treasury promised to re-finance Fannie Mae and Freddie
Mac if either were facing collapse.

In a statement on Wednesday, Mudd said management changes
would help the company better provide support for a U.S.
housing market in the worst downturn since the Great
Depression.

"This team will be responsible for meeting the dual
objectives of conserving capital and controlling credit losses
while Fannie Mae continues to provide crucial liquidity to the
U.S. housing and mortgage markets," Mudd said.

Trading in shares of Fannie Mae was briefly suspended for
the announcement and prices fell 2.0 percent in extended trade
after the news.

"This was probably a necessary step but not one that's
going to determine the future of Fannie Mae. Clearly, the fate
of Fannie and Freddie is in the hands of policymakers," said
Eric Kuby, chief investment officer, North Start Investment

Management Corp, Chicago.

Wall Street has been on edge for several weeks on talk that
the U.S. Treasury would put the companies through a wrenching
restructuring or even nationalize them.

The management shakeup means a greatly expanded role for
Niculescu who will run three divisions: single-family mortgage
guaranty, capital markets, and housing and community
development. He joined Fannie Mae in March 1999 after leaving
investment bank Goldman Sachs where he was the managing
director and co-head of Fixed-Income Research and Strategy.

Steve Swad, the departing CFO, joined the company only a
year ago and the chief risk officer, Enrico Dallavecchia, has
also stepped down.

(Additional reporting by Steven C. Johnson in New York;
Editing by Leslie Adler)

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NEW YORK (Reuters) -
Stocks rose on Wednesday as
surprisingly strong data on durable goods orders soothed some
concern about the sluggish economy while Fannie Mae and Freddie
Mac led a rally in financial shares.

Energy shares gained with higher oil prices, which rose for
the third straight day on fears that Tropical Storm Gustav
could interrupt oil and natural gas output in the Gulf of
Mexico.

Investors, meanwhile, were cheered by data showing new
orders for big-ticket manufactured items jumped a surprisingly
strong 1.3 percent in July. Boeing (BA.N) shares added nearly 2
percent after the data showed a 28 percent rise in orders for
civilian aircraft.

"Durable goods orders were up very nicely, and the market
is going up because that has helped people start to look beyond
the valley of all the economic and credit concerns to better
times ahead," said Al Goldman, chief market strategist at
Wachovia Securities in St. Louis. "People are a little less
pessimistic."

Fannie Mae (FNM.N) and Freddie Mac (FRE.N) rallied for a
third straight day as investors grew more confident that there
will not be a government bailout that would wipe out their
equity.

The Dow Jones industrial average was up 89.64 points, or
0.79 percent, at 11,502.51. The Standard & Poor's 500 Index was
up 10.12 points, or 0.80 percent, at 1,281.63. The Nasdaq
Composite Index was up 20.49 points, or 0.87 percent, at
2,382.46.

Trading volume, which has been light for much of August,
was especially thin ahead of the U.S. Labor Day holiday
weekend. Thin trade can exaggerate price moves.

Fannie Mae, the biggest provider of U.S. home financing,
rose 15.3 percent to $6.48, while shares of Freddie Mac gained
19.7 percent to $4.75.

Merrill Lynch & Co. in a Tuesday note became at least the
third major Wall Street bank to cast doubt on speculation that
the Treasury would add direct support to the companies, since
both have adequate capital to offset losses for "several
quarters."

That helped lift stocks of big U.S. banks and financial
companies, many of which have significant underwriting business
with the two government-sponsored mortgage finance firms.

Shares of Bank of America (BAC.N), the No. 2 U.S. bank,
were among the top boosts for the S&P and Dow, rising 2.2
percent to $29.65. Lehman Brothers (LEH.N) rose 5.4 percent to
$14.78.

News from the Commerce Department that July durable goods
orders jumped by 1.3 percent, beating expectations, also drove
up shares. Alcoa (AA.N), the world's biggest aluminum producer,
added 1.5 percent to $32.08. Boeing rose 1.7 percent to $64.52.

The report followed a mixed bag of housing data on Tuesday
that showed sales continued to fall in July though at a slower
rate than in June.

"What we are looking for is to be able to say 'We've found
a trough,"' said Linda Duessel, equity market strategist at
Federated Investors in Pittsburgh. "But if that's so, we can
still meander around for a while, so I wouldn't get too excited
yet."

A resurgence in oil prices, which settled up 1.6 percent at
$118.15 a barrel, boosted energy stocks. ConocoPhillips (COP.N)
rose 1.3 percent at $83.47, while Chevron (CVX.N) added 1
percent to $86.62.

On Nasdaq, shares of Amylin Pharmaceuticals Inc (AMLN.O)
fell almost 25 percent on news that its diabetes drug, Byetta,
which it sells with Eli Lilly & Co. (LLY.N), was linked to four
more deaths in pancreatitis patients, adding to two deaths
announced by federal regulators last week.

Bristol-Myers Squibb Co. (BMY.N) and Pfizer Inc. (PFE.N)
fell after they said late Tuesday their blood clot preventer
apixaban failed its primary goal in a late-stage trial and they
no longer plan to seek marketing approval for it next year.
Bristol-Myers was off 2.1 percent at $21.52 and Pfizer fell 1
percent to $19.08.

Trading volume was light on the New York Stock Exchange,
with about 819 million shares changing hands, well below last
year's estimated daily average of roughly 1.90 billion, while
on Nasdaq, about 1.55 billion shares traded, also below last
year's daily average of 2.17 billion.

Advancing stocks outnumbered declining ones on the NYSE by
about 3 to 1 while on the Nasdaq, advancers beat decliners by
about 2 to 1.

(Editing by Leslie Adler)

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NEW YORK (Reuters) -
A man accused of trying to extort
millions of dollars from his son-in-law, an executive of the
Blackstone Group LP (BX.N), on Wednesday blamed the private
equity firm for his "malicious" arrest and charges.

The case in New York State Supreme Court against Stuart
Ross, estranged father-in-law of Blackstone Senior Managing
Director David Blitzer, was adjourned until September 23 to
give Ross time to find an attorney.

But outside the courtroom, Ross, 71, said he believed that
Manhattan District Attorney Robert Morgenthau brought the
charges against him and his friend Stuart Jackson, 79, "at the
behest of Blackstone to attempt to crush two innocent
individuals."

Asked for comment, Blackstone Group spokesman Peter Rose
said, "That is utter nonsense."

Ross said he and Jackson were arrested on Friday after a
sting operation in the Union League Club in Manhattan on
Thursday. They were charged with attempting to extort as much
as $11 million from Blitzer, an executive at Blackstone's
London office, and face up to seven years imprisonment if
convicted.

Ross, of Aventura, Florida, is a non-practicing attorney
and once-successful businessman who has been estranged from his
daughter, Allison Blitzer and her husband, David Blitzer, since
2002.

Ross was released on bail of $2,500 at arraignment in the
early hours of Saturday and Jackson was released on his own
recognizance. Jackson, of Manhasset, New York, is accused of
acting as Ross' attorney in negotiations with Blitzer and his
lawyer over several months.

Judge Melissa Jackson ordered the defendants not to contact
the family in any way.

"We believe this is totally unlawful, totally malicious,"
the gray-haired Ross, who was dressed in a blue business suit,
told reporters. "This was a preconceived operation by
Blackstone to show its strength."

In a statement on Friday, the prosecutor said Ross, in
telephone calls, e-mails and voicemail messages, "made threats
to ruin Blitzer's life, personally and professionally, unless
Blitzer paid off Ross."

But Ross said on Wednesday that the case was about his
request to have visitation rights with his grandchildren and he
believed he had an agreement with Blitzer.

In a separate civil lawsuit filed on Friday, Blitzer sued
Ross for $11 million. He accused Ross of stealing hundreds of
thousands of dollars from him in a "relentless campaign of
harassment and threats" to Blitzer and his family.

It described how Ross was once successful in business with
licensing rights to the Smurfs cartoon characters, but a series
of business mishaps led him to lose much of his money before he
met Blitzer.

An attorney for Blitzer declined to comment.

(Editing by Maureen Bavdek)

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