Archive for September, 2008

FBI arrests ex-Credit Suisse broker (Reuters)

Thursday, September 4th, 2008 | Finance News

NEW YORK (Reuters) -
An indicted former Credit Suisse
(CSGN.VX) broker was in U.S. custody on Thursday to face
charges over deceptive sales of subprime-related auction-rate
debt, the FBI said.

FBI officials said former broker Julian Tzolov, a native of
Bulgaria, was arrested at New York's John F. Kennedy
International Airport and taken to FBI offices in Manhattan.

"Mr Tzolov is in U.S. custody and he will be arraigned on
the charges," the FBI official said.

Tzolov and a former colleague, Eric Butler, were charged
with conspiracy, securities fraud and wire fraud in an
indictment unsealed in U.S. District Court in Brooklyn on
Wednesday.

Butler, 36, pleaded not guilty at his arraignment to all
the charges and he was released on $2.5 million bail, but
Tzolov was out of the country and did not appear in court with
his former colleague.

The office of the U.S. Attorney in the Eastern District of
New York
said Tzolov, 35, was scheduled to be arraigned in
court on Friday.

An attorney for Tzolov could not immediately be reached for
comment.

Prosecutors accused Butler and Tzolov of misleading
customers into believing that auction-rate securities in their
accounts were backed by federally guaranteed student loans and
were a safe and liquid alternative to bank deposits or money
market funds.

In a similar separate civil complaint, the Securities and
Exchange Commission
said the two men made unauthorized
purchases of more than $1 billion in auction-rate securities
for corporate customers' accounts from November 2004 to August
2007
.

According to regulators, brokerages misled investors into
believing that auction-rate debt, which has rates that reset in
periodic auctions, was safe and the equivalent of cash.

Much of the $330 billion market has been frozen since
February, when brokerages abandoned their traditional role as
buyers of last resort.

The brokers resigned from Credit Suisse in August last
year. The firm said it told regulators and cooperated with the
authorities.

(Editing by Leslie Gevirtz)

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Lehman weighs real estate spinoff: report (Reuters)

Thursday, September 4th, 2008 | Finance News

NEW YORK (Reuters) -
Lehman Brothers Holdings Inc (LEH.N)
is considering a plan to put some $32 billion of its commercial
real estate
and mortgage assets in a new company and spin it
off, Bloomberg reported on its website on Thursday.

Under the plan, similar to a good-bank-bad-bank model,
Lehman will put in about $8 billion of equity in the new
company, the news agency said, citing unnamed sources.

The remaining $24 billion will be lent to the new company
by Lehman or outside investors, it said. Shares of the company
would be owned by Lehman's current shareholders, it said.

The plan is one of several being considered, it said. Under
another plan, Lehman would set up a company funded and run by
outside investors to buy some of these assets, it said.

Lehman declined to comment.

Lehman, the smallest of the major U.S. investment banks,
has not detailed its plans, but according to sources, the bank
is looking at various options, including seeking buyers for
commercial mortgages and property on its balance sheet.

At the same time, it is weighing the sale of part or all of
its asset management business, including Neuberger Berman,
sources have said previously. It is also in talks with
state-controlled Korea Development Bank over a possible
investment in the overall business.

Earlier on Thursday, Fox-Pitt Kelton analyst David Trone
wrote in a research note that Lehman Brothers should consider
spinning off its commercial mortgage securities and loans
portfolio to shareholders instead of selling it.

A simple spinoff of the commercial mortgage securities and
loans portfolio would ensure that shareholders have the option
of owning two entities or keeping only the core Lehman stock,
Trone said.

(Editing by Gary Hill)

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Global growth, U.S. job fears hammer Wall Street (Reuters)

Thursday, September 4th, 2008 | Finance News

NEW YORK (Reuters) -Wall Street had its steepest decline in
more than two months on Thursday, as more signs of weakness in
the labor market and increasingly sluggish growth overseas
fueled fears about the ability of the U.S. economy to stage a
recovery.

The sour mood was set early in the session, after weekly
government data showed an unexpected jump in the number of
filings for jobless benefits, while a report by ADP Employer
Services showed private employers cut 33,000 jobs in August.

The data fueled investor nervousness ahead of the
government's key August non-farm payrolls report, and losses
cascaded in afternoon trading. The Dow fell more than 340
points and only one of its 30 components escaped the sell-off.

Construction and mining equipment maker Terex Corp (TEX.N)
compounded the gloom when it cut its 2008 sales and profit
forecast, citing weak demand in Western Europe and North
America
. Top drags included economic bellwethers Caterpillar
Inc
(CAT.N) and General Electric (GE.N).

Financial stocks were also hammered, after Bill Gross, the
manager of the world's biggest bond fund, Pimco, said that to
halt what he called "a financial tsunami" the U.S. government
should give the Treasury the right to buy debt and other
assets. Gross said he was staying on the sidelines of the
markets.

"It's definitely fear of an economic downturn that's
hurting us today," said Jack Ablin, chief investment officer at
Harris Private Bank in Chicago. "The economic data and the
downbeat forecasts from management don't lend a lot of
confidence to the economic revival outlook."

The Dow Jones industrial average (.DJI) fell 344.65 points,
or 2.99 percent, to 11,188.23, while the Standard & Poor's 500
Index (.SPX) dropped 38.15 points, or 2.99 percent, to
1,236.83. The Nasdaq Composite Index (.IXIC) tumbled 74.69
points, or 3.20 percent, to 2,259.04.

It was the biggest one-day percentage drop for the three
major indexes since June 26.

It was also the fourth day of losses for both the Nasdaq
and the S&P 500, and the S&P 500's longest losing streak since
January.

Losses accelerated in the last hours of trading after the
S&P 500 broke below the 1,260 level, a technical support level
that had survived several tests in August.

Also in late afternoon trading, Pimco's Gross told CNBC
television
that his firm's clients and contacts around the
world were "sitting on their hands as well," waiting for a
major buyer to come into the asset markets.

Generally lackluster August retail sales were another
headwind for the market, as were concerns that sluggish growth
was emerging abroad. The president of the European Central
Bank
, Jean-Claude Trichet, said euro zone data points to
weakening growth at midyear.

"The job market has been just a slow drip of bad news,"
said John Augustine, chief investment strategist at Fifth Third
Asset Management in Cincinnati. "That's better than an open
faucet, but it's still bad news for the economy. The stock
market is struggling because it's waiting for better labor
market news."

Economists expect the government's labor report on Friday
to show a decline of 75,000 jobs in August, which would be the
eighth consecutive month of job losses in the United States.

Shares of Caterpillar, the maker of bulldozers and
excavators and a major exporter, fell 5.6 percent to $63.94.
Terex shares fell 19.7 percent to $38.02.

Boeing's (BA.N) stock slid 4.6 percent to $63.03 after the
plane maker's largest labor union said its members had rejected
the company's contract offer and voted to strike.

Shares of investment bank Lehman Brothers (LEH.N) fell 10.5
percent to $15.17. Lehman's LibertyView hedge funds lost money
in July, when tumbling financial markets left many hedge fund
managers nursing their biggest declines of the year, according
to a note to investors obtained by Reuters.

Shares of technology companies, considered vulnerable
because of their overseas exposure, tumbled. Networking
equipment maker Cisco Systems (CSCO.O) was a top drag on the
S&P 500, with a drop of 4.4 percent at $22.28 on Nasdaq.

BlackBerry devices maker Research In Motion (RIM.TO)
(RIMM.O) was the top Nasdaq drag, falling 6.4 percent to
$107.49. Shares of iPhone maker Apple (AAPL.O) dropped 3.4
percent to $161.22.

U.S. communications equipment maker Ciena Corp (CIEN.O)
slashed its revenue outlook due to phone companies delaying
purchases amid a weak economy. Its shares fell 24.9 percent to
$13.09.

Trading was moderate on the New York Stock Exchange, with
about 1.3 billion shares changing hands, below last year's
estimated daily average of roughly 1.9 billion, while on
Nasdaq, about 2.3 billion shares traded, above last year's
daily average of 2.17 billion.

Declining stocks outnumbered advancing ones by 5 to 1 on
the NYSE and by 4 to 1 on the Nasdaq.

(Additional reporting by Ellis Mnyandu and Steven C.
Johnson; Editing by Leslie Adler)

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