Business

WASHINGTON - The Bush administration, acting to avert the potential for major financial turmoil, announced Sunday that the federal government was taking control of mortgage giants Fannie Mae and Freddie Mac.
Officials announced that the executives of both institutions had been replaced. Herb Allison, a former vice chairman of Merrill Lynch, was selected to head Fannie Mae, and David Moffett, a former vice chairman of US Bancorp, was picked to head Freddie Mac. Treasury Secretary Henry Paulson says the actions were being taken because "Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe." The huge potential liabilities facing each company, as a result of soaring mortgage defaults, could cost taxpayers tens of billions of dollars, but Paulson stressed that the financial impacts if the two companies had been allowed to fail would be far more serious. "A failure would affect the ability of Americans to get home loans, auto loans and other consumer credit and business finance," Paulson said.
Both companies were placed into a government conservatorship that will be run by the Federal Housing Finance Agency, the new agency created by Congress this summer to regulate Fannie and Freddie. The Federal Reserve and other federal banking regulators said in a joint statement Sunday that "a limited number of smaller institutions" have significant holdings of common or preferred stock shares in Fannie and Freddie, and that regulators were "prepared to work with these institutions to develop capital-restoration plans." The two companies had nearly $36 billion in preferred shares outstanding as of June 30, according to filings with the Securities and Exchange Commission.

FOR A promising solar-energy start-up launched in a research laboratory at the University of Toledo, investment cash has poured in from California's Silicon Valley, Zurich, and Amsterdam.
"We are excited to have the opportunity to make this investment and look forward to supporting the company with its growth ambitions," Adam Anders, of the Netherlands' Rabo Ventures, said in announcing it was taking the lead in a large investment in Toledo's Xunlight Corp. The investment, $11 million, was the Dutch fund's first outside Europe.
It was part of $40 million that private investors have committed over the past 16 months to the solar panel developer and manufacturer on Nebraska Avenue.
And Xunlight has plenty of company.
As world attention has increasingly turned to new ways to keep lights burning, cars moving, and air clean, firms involved in alternative energy have reaped the benefits.
In the three-month period ended June 30, venture capital firms' investments in such firms in North America, Europe, China, and India zoomed 58 percent from the same period a year earlier, according to a group that tracks the sector.
Some investors are comparing the trend to the dot-com investing craze of the late 1990s.
"It's a feeding frenzy, it's so hot now," said Greg Knudson, who heads a local fund called Rocket Ventures at Toledo's private Regional Growth Partnership.
And solar companies and other alternative-energy ventures in northwest Ohio are well positioned to cash in on the bonanza because of the success of Arizona-based First Solar Inc., a Toledo-born company that had the fastest-growing stock on Wall Street last year. The firm's lone U.S. factory is in Perrysburg Township.
Its success has attracted attention to the area's budding solar-energy industry including a respected research institute at UT and several start-up companies. "It's putting us on the map and helping build momentum," said Mr. Knudson.
Rocket Ventures is working with 10 firms involved in alternative-energy and related areas that eventually could attract venture capital firms. If the local businesses can prove their worth, there will be no shortage of potential pools of cash for them to try to tap.
Seventy-four percent of investments made by venture funds in the second quarter, or $1.5 billion, went to U.S. firms, according to Cleantech Group LLC, San Francisco.
The firm said that major beneficiaries are companies developing solar thermal systems, which use steam to power turbine engines to make electricity.
Other big winners have been companies using algae, plant stalks, and other noncorn sources to make gasoline alternatives.
Investors have even coined a new term for this category of company benefiting from the trend: "clean tech" or clean technology.
It includes solar panel producers like Xunlight, firms involved in making and installing windmills, companies developing long-range batteries for automobiles, producers of biofuels, and manufacturers of advanced materials with the potential to reduce consumption of fossil fuels.
Ownership stakes The people making the investments are not tree huggers focused primarily on a greener world but hard-nosed banks, pension funds, and other institutional investors eyeing potential profit, observers said.
In exchange for their infusion of cash, they typically take an ownership stake in the company.
Rocket Ventures, of Toledo, invests up to $1 million in promising firms, assists with management, and later helps find traditional venture capital financing, said the fund's Mr. Knudson. The fund was financed by $15 million in grants from the Ohio Department of Development and $7.5 million in contributions from companies in the region.
All the start-ups that Rocket Ventures is working with are too new for traditional venture capital financing, Mr. Knudson said.
But the local fund helped nail down $2.3 million from venture investors in Madison, Wis., for a pair of UT researchers working on a drug to treat Alzheimer's disease.
Although research operations continue to be based here, the firm, now known as Mithridion Inc., has administrative offices in Wisconsin.
So-called venture capital fairs, which bring together entrepreneurs and financiers, have become commonplace, Mr. Knudson said.
First Solar, known as Solar Cells when it was founded by Toledo industrialist and inventor Harold McMaster in the 1980s, received assistance from a venture capital investor.
Potential pitfalls The firm was struggling in the 1990s when True North Partners LLC, of Scottsdale, Ariz., arrived on the scene. Led by retailing heir John Walton, now deceased, the firm pumped in $58 million to make Mr. McMaster's dream a reality.
But people who work in venture capital financing warn of potential pitfalls for the investors as well as recipients of their cash.
Many clean technology ventures are likely to fail.
"There is going to be a winnowing-out process," said Mark Heesen, president of the National Venture Capital Association. "Only the leanest and meanest firms are going to survive."
And clean-technology companies themselves are rolling the dice.
The arrival of a venture capital investor usually involves a vocal - and sometimes impatient - new "partner" monitoring sales and profitability. Funds typically like to cash out with a profit after four years or so.
But clean-technology companies, with the exception of some solar-related firms, aren't likely to begin to pay off for seven to 10 years, venture capital experts said.
Jeff Culver's Sylvania Township firm, Solargystics Ltd., is too new to even contemplate seeking financing from venture capital funds.
The enterprise, which is developing flexible solar panels that could be installed on houses in place of roofing shingles, is receiving assistance in writing grants and in other areas from the Regional Growth Partnership. So far, financing for the company has come from the principals themselves and wealthy local investors.
"We've had venture-capital conversations," Mr. Culver said. "We've never been overly interested. They put in large amounts of money … and take a large percentage of your company."
'Mathematical approach' Solargystics has no need for a huge stash of cash yet, he noted. And "with venture capital guys, it's all about how much are we going to invest, how much are we going to get back, and how fast are we going to get it," Mr. Culver said. "It's a very mathematical approach to the business."
Xunlight has no complaints about its investors.
"We have had a great relationship with the venture firms we have been working with," said Todd Armstrong, company spokesman.
Its four-member board consists of Xunming Deng, founder and chief executive, and three investors.
The Xunlight Web site said Markus Moor represents Emerald Technology Ventures, Zurich; Mark Iwanowski represents Trident Capital, of Palo Alto, Calif.; and David Buzby is a private investor from San Francisco.
Xunlight hasn't disclosed investors' ownership stakes.
Founded in 2000, Emerald, a Swiss fund, is a leader in clean technology.
Rabo Ventures, Xunlight's newest investor, is an offshoot of Amsterdam-based Rabobank, a large and diverse financial institution that began in the late 19th century as an agricultural lending cooperative.
Spokesman Bram Ledeboer said that, as Rabo Ventures' third investment, Xunlight "is a very important component of our portfolio."
Other investments are in two Dutch firms: EWT, which designs and manufactures wind turbines and installs wind farms, and Econcern, which operates businesses across the clean technology sector.
Xunlight is one of the highest-profile players in the Toledo area's budding solar-energy industry.
The industry got its start as a result of Toledo's long expertise in glass manufacturing.
Typical solar panels are made with glass, although Xunlight and a number of other local researchers have joined scientists and manufacturers using other materials.
Popular segment Solar-energy firms remain a popular area for venture-capital investing because solar "is an easy concept for everyday investors to understand," said Mr. Heesen, of the National Venture Capital Association.
"The whole clean-tech area is booming."
Of the $35 billion invested by venture capital funds annually in the United States, 12 percent - $4.2 billion - goes to clean-technology companies, he added. That is up from 3 percent, or $1.1 billion, just a few years ago.
Rocket Ventures, the quasi-public local fund, has invested $2 million since its inception four months ago, the director said.
Firms involved in alternative energy development have collected about 20 percent, and bioscience companies have received 40 percent.
A few venture capital funds started in the past few years invest exclusively in clean-technology firms, although most also put money into companies involved in communications, information technology, and medical devices.
Mr. Heesen agreed that venture capital funds often take a large role in firms in which they invest. But he sees that as a good thing.
"They work hand in hand with management," the association leader said. "We don't just invest and walk away. We sit on the board. We help with overall strategy. We're helping to find customers."
The industry's sudden interest in clean technology isn't difficult to understand, he said.
"The world population is understanding that the energy sources we have are woefully inadequate for the planet. Governments of the world are saying, 'We need change.' And consumers are saying, 'We are willing to pay a little more for long-term solutions to the energy crisis.'•"
Contact Gary Pakulski at:
gpakulski@theblade.com or 419-724-6082.

Siding goes onto a house in the Eckel Trace subdivision at Eckel Junction Road and State Rt. 199 in Perrysburg Township. It is to have 63 houses priced from $225,000 to $250,000.

Republican vice presidential candidate Sarah Palin made all kinds of political statements during her acceptance speech Wednesday night, but the fashion statement she made with her imported glasses is what dominated discussion among local eyewear professionals.
“We were just talking about that,” said Judy Sulier, a certified optician at Pinnacle Eye Group in suburban Bedford Township. “I was going to go online to pull it up and see what it would take to get it into the office, because I’m sure people will be inquiring about it.” Cathy Ashner, an optical technician with the Maumee Center for Eyes, in Arrowhead Park, agreed that John McCain’s choice for vice president “made a good fashion statement” with her glasses during her prime-time acceptance speech. “She wears them very well. They’re very unique.” Mrs. Palin, the governor of Alaska, wears customized glasses and frames from Japanese designer Kazuo Kawasaki. The high-end eyewear — the prices start at $600 — are frame­less and allow the customer to choose from a nearly limitless variety of lens shapes. And in Toledo, they are sold at just one place: The Optical Shop, in the Cricket West Shopping Center on Central Avenue. Yesterday, owner Georgeann Kohn said she had received “just a couple inquiries” from potential customers about copying Mrs. Palin’s spectacles, but she was excited that a female politician was brave enough to keep her glasses on in front of the cameras.
“This is going to be a big deal. Thank God somebody got out there with a pair of glasses on,” Ms. Kohn said. Ms. Kohn said her shop has sold Kawasaki eyewear for more than a decade. “There are many, many people out there wearing Kawasaki. It’s been a wonderful, wonderful line for us,” she said. What makes the designer unusual and popular, she explained, is the manner in which the glasses are customized. After choosing a frame style, the customer can choose from among a large variety of lens sizes and shapes. “This isn’t a frame you pick off the rack,” Ms. Kohn said. “We have clients [who] have great fun with them,” she said. The North American distributor of the glasses, Italee Optics Inc., of Los Angeles, has increased its imports of the frames in response to Mrs. Palin’s appearance and the fashion firestorm it ignited, a company manager said yesterday. Ms. Kohn said the GOP candidate’s appearance could have a long-term impact on facial fashion sense. Contact Larry P. Vellequette at:lvellequette@theblade.comor 419-724-6091.

Trying to collect a debt in early June, a Toledo collection agency left a voice-mail message with a former in-law of a borrower, phoned the Illinois woman’s mother, and even contacted her at work, the debtor claims.
This week, Larisha Weems, of South Holland, Ill., filed suit in U.S. District Court in Toledo claiming that United Collection Bureau Inc., 5620 Southwyck Blvd., violated debt-collection laws at least eight times. She is seeking unspecified damages. Her suit was one of six filed in federal court in Toledo this week by debtors across the country against United Collection and more than two dozen since 2005, records show. Many were settled by the firm, but at least 11 are pending. Alleging violation of the federal Fair Debt Collection Practices Act, many of the lawsuits were filed by attorney Jeffrey Hyslip, who has offices in the Sears Tower in Chicago.
Mr. Hyslip didn’t respond to a request for comment. Neither Harold “Sam” Rickard, owner and chairman of United Collection, nor attorney Jeffrey Turner of Dayton, could be reached for comment. The United Collection Web site said it is committed to complying with debt collection practices and places “high priority” on training debt collectors. The firm has had headquarters in Toledo since 1959 and specializes in trying to collect on unpaid bills for health-care facilities, credit-card companies, and telecommunications concerns, as well as educational and governmental organizations, the Web site states. United Collection has offices in Ohio, Michigan, and Florida. The firm’s Web site is unclear, however, about whether company headquarters is at the Southwyck Boulevard building or in Arrowhead Park in Maumee. The site lists the South­wyck address but shows a photo of the Maumee building. Contact Gary Pakulski at:gpakulski@theblade.comor 419-724-6082.

Asian stock markets soared Monday morning after Washington announced a bailout of mortgage giants Fannie Mae and Freddie Mac _ a move that could help bolster a shaky U.S. housing market and renew investor confidence in stock and credit markets worldwide....

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NEW YORK (AP) -- The government's historic bailout of Fannie Mae and Freddie Mac on Sunday will be good news to homebuyers and some homeowners hoping to refinance if it leads to lower mortgage rates, as experts expect.

But for homeowners already behind on their mortgage payments, or who owe more than their homes are now worth, the plan unveiled Sunday by Treasury Secretary Henry Paulson offers little in the way of extra relief.

"The bailout will give the mortgage industry a stability that we haven't had in a couple of years," said Rich Cosner, president of Prudential California Realty. "But frankly no, it won't help (struggling borrowers) to refinance."

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