[20700001] |Efforts by the Hong Kong Futures Exchange to introduce a new interest-rate futures contract continue to hit snags, despite the support the proposed instrument enjoys in the colony's financial community.

[20700002] |Hong Kong financial institutions have been waiting for interest-rate futures for a long time.
[20700003] |The contract was first proposed more than two years ago, but shortly afterward, the colony's markets were hit hard by the October 1987 global stock crash.
[20700004] |The subsequent drive to reform Hong Kong's markets also has embroiled the interest-rate futures contract.

[20700005] |The Securities and Futures Commission, a government watchdog set up after the 1987 crash to try to restore confidence and order to Hong Kong's markets, had been expected to give the contract conditional approval last week.
[20700006] |But regulators this week said futures-exchange officials still have a way to go before they answer all the remaining detailed questions about the contract.

[20700007] |The exchange had forecast that the contract would begin trading by December.
[20700008] |But securities regulators now say privately that it isn't likely to start until the first quarter of next year.

[20700009] |Analysts and financial officials in the British colony consider the new contract essential to the revival of the Hong Kong Futures Exchange, which has never fully recovered from the October 1987 crash.
[20700010] |Many believe that without a healthy futures exchange, Hong Kong's aspirations to be recognized as an international financial center will suffer.
[20700011] |In addition, local banks say the new contract is important in helping them offset their Hong Kong-dollar exposure.

[20700012] |The contract will be based on the three-month Hong Kong interbank offered rate, or Hibor.
[20700013] |It is almost a carbon copy of the Chicago Mercantile Exchange's Eurodollar contract, which is based on the three-month Eurodollar rate, the rate paid on U.S.-dollar deposits in London banks.

[20700014] |If the contract is as successful as some expect, it may do much to restore confidence in futures trading in Hong Kong.
[20700015] |"The contract is definitely important to the exchange," says Robert Gilmore, executive director of the Securities and Futures Commission.

[20700016] |Two years ago, the futures exchange was the envy of other would-be futures centers.
[20700017] |After only 17 months, its main contract, based on the Hang Seng index, had grown to be the second-largest stock-index-futures contract in the world.

[20700018] |{A futures contract is an agreement to buy or sell a commodity or financial instrument at a set price on a specified date.
[20700019] |In the case of stock-index and interest-rate futures, the instruments are given an underlying cash value and are settled in cash.}

[20700020] |But in the week following the 1987 stock crash, the exchange verged on collapse, and the stock and futures markets in Hong Kong were closed for four days.
[20700021] |Only a government-sponsored bailout kept the crisis from swallowing the exchange.

[20700022] |Trading in Hang Seng index futures remains crippled by the experience.
[20700023] |Volume for the entire month of September totaled only 21,687 contracts, compared with a daily average of 27,000 in the month before the 1987 crash.

[20700024] |Despite the thin trading, and after two painful years of restructuring, the futures market has shown itself to be resilient in two recent tests.
[20700025] |While Asian markets struggled to cope with the uncertainty caused by the Oct. 13 plunge in New York stock prices, futures trading in Hong Kong was relatively heavy and went smoothly.
[20700026] |That was also the case in the days following the June 4 massacre in Beijing, which caused a sharp drop in Hong Kong stock prices.

[20700027] |"There was no problem at all," says Douglas Ford, chief executive officer of the futures exchange.

[20700028] |Most important to the contract's success is the commitment of Hong Kong's big financial institutions, especially the two leaders, Hongkong & Shanghai Banking Corp. and the local subsidiary of Britain's Standard Chartered Bank PLC.
[20700029] |The two big banks were instrumental in designing the new contract.

[20700030] |"If those two banks are there, then the balance of the banking institutions will be there," says Mr. Gilmore, the Securities and Futures Commission official.

[20700031] |Colony banks have a major stake in how interest rates move because of their enormous Hong Kong-dollar exposure.
[20700032] |Even though the currency is pegged to the U.S. dollar, with a fixed exchange rate of HK$7.8 to the American currency, the U.S. and Hong Kong economies don't always move in lock step, making it difficult to predict where interest rates in the colony will go.

[20700033] |In early 1988, when the three-month Eurodollar rate was between 7% and 8%, the three-month Hibor rate was as low as 1%.
[20700034] |Just a few months ago, the three-month Eurodollar rate was around 9.5%, while three-month Hibor hit highs above 11%.

[20700035] |The Hibor contract "solves quite a bit of the problem of interest-rate risk in the interbank market," says Eric Cheng, a director of James Capel (Far East) Ltd., the Hong Kong arm of the British brokerage firm.

[20700036] |Despite the initial support expected, trading in the contract is likely to start slowly.
[20700037] |The wounds from the 1987 crash haven't yet healed, and not all claims against the exchange clearinghouse -- by those who bet the Hang Seng index would fall -- have been settled.
[20700038] |Companies and financial institutions familiar with Hong Kong remain wary of trading in its futures market.

[20700039] |And Mr. Gilmore cautions that there may be limits on how much the contract can grow because the Hong Kong dollar isn't a widely traded currency.
[20700040] |He says the contract will be considered a success if it starts trading 500 to 1,000 lots a day.

[20700041] |Exchange officials also point out that Hibor futures were designed for institutions and corporations, not for the type of small individual investors who were very active in Hang Seng index futures and defaulted in the 1987 crash.
[20700042] |Mr. Cheng says the low margin required for trading futures attracted a lot of small investors before the 1987 crash who didn't realize that their risk was virtually unlimited.

[20700043] |"You're not going to get your taxi drivers and amahs and all that," says Rory Nicholas, a director for securities company Elders Bullion & Futures Ltd.

[20700044] |That should help to inspire confidence, Mr. Gilmore says.
[20700045] |But many bankers remain nervous, especially as the start-up of the contract continues to be delayed.

[20701001] |Two of Japan's largest paper manufacturers, Oji Paper Co. and Jujo Paper Co., posted unconsolidated pretax profit gains from a year earlier for the first half ended Sept. 30, on continuing robust domestic demand for paper products.

[20701002] |Oji Paper, the nation's largest in terms of sales, said its pretax profit rose 1.5% to 23.11 billion yen (US$163.3 million) from 22.76 billion yen.

[20701003] |Sales jumped 12.2% to 232.12 billion yen from 206.87 billion yen.
[20701004] |Net income increased 6.7% to 12.43 billion yen from 11.66 billion yen.
[20701005] |Per-share net rose to 20.48 yen from 19.51 yen.

[20701006] |Oji Paper's sales strength was evident in overall paper products sales, including newsprints, printing and wrapping papers, which rose to 221.61 billion yen in the first half from 200.70 billion yen a year earlier.
[20701007] |Pulp, processed and miscellaneous paper sales also surged.

[20701008] |For the full fiscal year ending next March, Oji predicted that total sales of 477.00 billion yen, up from 420.68 billion yen in the previous fiscal year.
[20701009] |Pretax profit is seen at 45.00 billion yen, down from 47.17 billion yen, while net income is estimated at 23.500 billion yen, up from 23.031 billion yen.

[20701010] |The company didn't provide an explanation for the softer pretax profit performance and officials couldn't be reached for comment.

[20701011] |Jujo Paper said its pretax profit rose 0.3% to 13.05 billion yen from 13.02 billion yen.
[20701012] |Sales rose 8.5% to 195.19 billion yen from 179.916 billion yen.
[20701013] |Net income surged 10% to 7.12 billion yen from 6.47 billion yen.
[20701014] |Per-share net rose to 14.95 yen from 14.44 yen.

[20701015] |General paper product sales, including newsprints and other papers, accounting for the bulk of sales, rose to 157.78 billion yen from 143.88 billion yen.

[20701016] |Jujo Paper predicted that for the full fiscal year ending next March 31, sales will total 400.0 billion yen, up from 366.89 billion yen.
[20701017] |Pretax profit was estimated at 23.0 billion yen, down from 25.51 billion yen, while net income was estimated at 12 billion yen, up from 11.95 billion yen.

[20702001] |Unocal Corp.'s decision to put its Norwegian oil and gas interests up for sale earlier this week is another step in the company's strategic review of its properties, and shows that few of them are sacred cows.

[20702002] |The company declined to estimate the value of the Norwegian holding.
[20702003] |But Eugene L. Nowak, an analyst at Dean Witter Reynolds Inc., forecast that the sale will bring in "$200 million or substantially more."

[20702004] |The proposed transaction is the latest in a redeployment of assets by the Los Angeles-based oil company that has included the $200 million sale of its headquarters property and the pending sale of half of its Chicago refinery and related marketing operations to Petroleos de Venezuela S.A.

[20702005] |Mr. Nowak said he attaches particular importance to the proposed sale because it suggests that the company is willing to sell oil and gas assets that aren't part of its major strategic strengths.

[20702006] |Unocal said it expects to complete the sale of its Unocal Norge A/S unit by next March or April.
[20702007] |In addition to an 18% stake in the Veslefrikk offshore field, the Norwegian unit has interests ranging from 10% to 25% in three other Norwegian oil and gas production licenses.

[20702008] |In 1986, Unocal sold a 7.5% stake in the Veslefrikk field to Deutsche Erdolversorgungs G.m.b.H., a West German oil company, for an undisclosed amount.
[20702009] |In 1987, it sold a 2.5% stake in the Veslefrikk field to the Swedish national oil company, resulting in a $7 million after-tax gain.

[20702010] |However, those sales were early in the field's history, before production equipment was installed.
[20702011] |The field is currently being developed and is slated to start production by the end of the year.
[20702012] |It's expected to produce about 62,000 barrels per day.

[20702013] |A company spokesman said the Veslefrikk field's gross reserves were estimated in 1987 at 229 million barrels.
[20702014] |However, he added that that estimate, made before extensive development drilling, currently is being reappraised.

[20702015] |The spokesman said Unocal has had "considerable interest" from prospective buyers.
[20702016] |The company has retained J. Henry Schroder Wagg & Co. as financial adviser and agent for the sale.

[20703001] |France's unemployment rate was steady at a seasonally adjusted 9.5% in September, the Social Affairs Ministry said.

[20703002] |In September, the number of jobless rose 0.1% from the previous month to 2.5 million on a seasonally adjusted basis.

[20704001] |The following were among yesterday's offerings and pricings in the U.S. and non-U.S. capital markets, with terms and syndicate manager, as compiled by Dow Jones Capital Markets Report:

[20704002] |Tenneco Credit Corp. -- $150 million of 9 1/4% senior notes due Nov. 1, 1996, priced at 99.625 to yield 9.324%.
[20704003] |The noncallable issue was priced at a spread of 144 basis points above the Treasury's seven-year note.
[20704004] |Rated Baa-2 by Moody's Investors Service Inc. and triple-B-plus by Standard & Poor's Corp., the issue will be sold through underwriters led by Merrill Lynch Capital Markets.
[20704005] |Tenneco Credit is a unit of Tenneco Inc.

[20704006] |Allegany Health System -- three-part issue of $156.7 million of revenue bonds, tentatively priced through a Morgan Stanley & Co. group.
[20704007] |The offering includes a new issue of $53 million of Tampa, Fla., Series 1989 revenue bonds for St. Joseph's Hospital Inc., due 1996-2000, 2005 and 2023.
[20704008] |The bonds are tentatively priced to yield from 6.90% in 1996 to 7.55% in 2023.
[20704009] |The other two portions of the deal are remarketings of outstanding debt rather than new issues.
[20704010] |The bonds are rated single-A by Moody's and single-A-plus by S&P, according to the lead underwriter.

[20704011] |City and County of Honolulu -- $75 million of general obligation bonds, 1989 Series B, due 1993-2009, through a Bear, Stearns & Co. group.
[20704012] |The bonds, rated double-A by Moody's and S&P, were priced to yield from 6.20% in 1993 to 7.10% in 2008 and 2009.

[20704013] |Federal National Mortgage Association -- $500 million of Remic mortgage securities being offered in 12 classes by Shearson Lehman Hutton Inc.
[20704014] |The offering, Series 1989-89, backed by Fannie Mae 9% securities, brings Fannie Mae's 1989 Remic issuance to $33.2 billion and its total Remic volume to $45.3 billion since the program began in April 1987.
[20704015] |Pricing terms weren't available.

[20704016] |Kyushu Electric Power Co. (Japan) -- $200 million of 8 7/8% bonds due Nov. 28, 1996, priced at 101 7/8 to yield 8 7/8% less full fees, via Yamaichi International Europe Ltd.
[20704017] |Fees 1 7/8.

[20704018] |Toshiba Corp. (Japan) -- $1.2 billion of bonds due Nov. 16, 1993, with equity-purchase warrants, indicating a 3 3/4% coupon at par, via Nomura International Ltd.
[20704019] |Each $5,000 bond carries a warrant exercisable Dec. 1, 1989, through Nov. 9, 1993, to buy company shares at an expected premium of 2 1/2% to the closing share price when terms are fixed Nov. 2.

[20704020] |Credit Lyonnais Australia Ltd. (French parent) -- 50 million Australian dollars of 16 1/4% bonds due Nov. 30, 1992, priced at 102 to yield 16.03% less full fees, via Hambros Bank Ltd.
[20704021] |Guarantee by Credit Lyonnais.
[20704022] |Fees 1 1/2.

[20704023] |World Bank (agency) -- #100 million of 10 7/8% bonds due Aug. 15, 1994, offered at 96.95 to yield 11.71%, via Baring Brothers & Co.
[20704024] |Tap on outstanding #100 million issue.
[20704025] |Also issued were 10 billion yen of bonds due Dec. 5, 1994, priced at 101 1/2, with coupon paid in Australian dollars, via LTCB International Ltd.
[20704026] |Interest during first year paid semiannually at 7.51%.
[20704027] |Thereafter, interest paid annually at 7.65%.
[20704028] |The World Bank also offered 100 million Swiss francs of 6% bonds due Nov. 16, 1999, priced at 101 1/4 to yield 5.83% via Credit Suisse.
[20704029] |Option by borrower to increase issue amount to 150 million francs.

[20704030] |Mandom Corp. (Japan) -- 80 million Swiss francs of privately placed convertible notes due March 31, 1994, with fixed 0.25% coupon at par, via Nomura Bank Switzerland.
[20704031] |Put March 31, 1992, at a fixed 107 3/4 to yield 3.43%.
[20704032] |Each 50,000 Swiss franc note convertible Dec. 4, 1989, through March 17, 1994, at a 5% premium over closing share price Nov. 1, when terms are fixed.

[20704033] |Nippon Air Brake Co. (Japan) -- 140 million Swiss francs of privately placed convertible notes due March 31, 1994, with fixed 0.25% coupon at par, via Yamaichi Bank (Switzerland).
[20704034] |Put March 31, 1992, at fixed 107 13/16 to yield 3.43%.
[20704035] |Each 50,000 Swiss franc note convertible Nov. 27, 1989, through March 17, 1994, at a 5% premium over closing share price Nov. 1, when terms are fixed.

[20704036] |Credit Suisse Finance Gibraltar Ltd. (Swiss parent) -- 100 billion lire of 12 5/8% bonds due June 30, 1993, priced at 101.45 to yield 12.75% less full fees, via Banca Nazionale del Lavaro.
[20704037] |Guarantee by Credit Suisse.
[20704038] |Fees 1 5/8.
[20704039] |Maryland National Bank -- $267 million of securities backed by home-equity lines of credit through Merrill Lynch Capital Markets.
[20704040] |The bank is a subsidiary of Baltimore-based MNC Financial Inc.
[20704041] |The securities were priced to float monthly at 20 basis points above the 30-day commercial paper rate.
[20704042] |The issue, formally titled MNB Home Equity Loan Asset Backed Certificates, Series 1989, will represent interest in a trust fund of home equity revolving credit line loans originated by the retail finance division of Maryland National Bank and secured primarily by second deeds of trust or second mortgages on single to four-family residential properties.
[20704043] |The securities are rated triple-A by Moody's and Duff & Phelps Inc.
[20704044] |They are expected to have an average life of 3.16 years.
[20704045] |Maryland National Bank's retail finance division will continue to service the loans.
[20704046] |First National Bank of Chicago will act as trustee, and the transaction will be supported by an 8% letter of credit issued by Dai-Ichi Kangyo Bank Ltd., Chicago branch.

[20704047] |Province of Nova Scotia -- $250 million of 8 1/4% debentures due Nov. 15, 2019, priced at 99.775 to yield 8.28%.
[20704048] |The noncallable issue, which can be put back to the province in 2001, was priced at a spread of 41 basis points above the Treasury's 10-year note.
[20704049] |Rated single-A-2 by Moody's and single-A-minus by S&P, the issue will be sold through underwriters led by Merrill Lynch Capital Markets.

[20705001] |Bausch & Lomb Inc. said it plans to introduce next year a new line of sunglasses containing melanin, the pigment that protects against damage from ultraviolet rays.

[20705002] |The optical products company has signed a licensing agreement with Photoprotective Technologies Inc., a closely held firm in San Antonio, Texas, which has developed a method to incorporate the synthetic melanin into plastic lenses.
[20705003] |Terms weren't disclosed.

[20706001] |Security Pacific Corp. has set its sights on buying its second bank holding company this year.

[20706002] |Security said it signed a letter of intent to purchase La Jolla Bancorp, agreeing to pay $15 of its own stock for each share of La Jolla.
[20706003] |Based on the current number of La Jolla shares, that gives the transaction a value of $104 million.

[20706004] |La Jolla is the parent company of La Jolla Bank & Trust Co., which has 12 branches in San Diego County.
[20706005] |As of Sept. 30, the bank had assets of $511 million and deposits of $469 million, Security Pacific said.

[20706006] |Earlier this month, Security Pacific, which is among the 10 largest bank holding companies in the U.S., completed the acquisition of San Diego-based Southwest Bancorp.

[20707001] |South Africa's current account surplus swelled to a seasonally adjusted annual rate of between five billion and six billion rand ($1.9 billion and $2.28 billion) in the third quarter, Reserve Bank Governor Chris Stals said.

[20707002] |The surplus was two billion rand in the second quarter and 2.7 billion rand in the first quarter.

[20707003] |He said this improvement means it is still possible to reach the targeted current account surplus of four billion rand for 1989.

[20708001] |Moscom Corp. said its board approved the repurchase of as many as 300,000 common shares when market conditions are suitable.

[20708002] |The maker of telecommunications management systems had 6,420,268 shares outstanding as of Sept. 30.

[20708003] |In over-the-counter trading yesterday, Moscom closed at $4.375, up 37.5 cents.

[20709001] |Service Corp. International said it expects to report net income of 15 cents a share for the third quarter.
[20709002] |The company said it expects to release third-quarter results in mid-November.

[20709003] |The funeral home and cemetery operator changed from a fiscal year to a calendar year in December.
[20709004] |In the comparable year-ago quarter, the second quarter ended Oct. 31, Service Corp. had a loss of about $12.5 million, or 26 cents a share, on revenue of $175.4 million.
[20709005] |Results for that quarter included a $30 million, or 40 cents a share, write-down associated with the consolidation of a facility.

[20710001] |Your Sept. 25 criticism of credit-card foreign-exchange charges is unwarranted.
[20710002] |I have just returned from France, and the net exchange rate charged on my Visa account was more favorable than I obtained for traveler's checks in any of the several banks where I converted them.

[20710003] |Vincent Jolivet Kenmore, Wash.

[20711001] |The state-controlled French metals group Pechiney S.A. said it has signed a preliminary accord to sell its Paris headquarters to Groupement Foncier Francais and Nouveaux Constructeurs for 2.76 billion francs ($443 million).

[20711002] |The sale, which Pechiney had been eager to make for several months, is still subject to certain unspecified conditions and is expected to be completed during the first quarter of 1990, the group.

[20712001] |Hong Kong's main measure of consumer prices rose 10% in September from a year earlier, the government said.

[20712002] |The Consumer Price Index "A", which measures price changes for the 50% of urban households that spend between 2,000 Hong Kong dollars (US$256.18) and HK$6,499 a month, edged up 1.5% in September from August.

[20712003] |Index "B", which monitors price changes for the 30% of urban households that spend between HK$6,500 and HK$9,999 a month, rose 9.9% last month from a year earlier and was up 1.3% from the preceding month.

[20712004] |September's Hang Seng Consumer Price Index, which measures price changes for the 10% of urban households spending HK$10,000 and HK$24,999 a month, was up 11% from a year ago and up 1.3% from August.

[20712005] |The main factors for the September increase from the previous month were higher prices for services, food and housing.
[20712006] |Prices fell marginally for fuel and electricity.

[20713001] |West German and French authorities have cleared Dresdner Bank AG's takeover of a majority stake in Banque Internationale de Placement (BIP), Dresdner Bank said.

[20713002] |The approval, which had been expected, permits West Germany's second-largest bank to acquire shares of the French investment bank.

[20713003] |In a first step, Dresdner Bank will buy 32.99% of BIP for 1,015 French francs ($162) a share, or 528 million francs ($84.7 million).
[20713004] |Dresdner Bank said it will also buy all shares tendered by shareholders on the Paris Stock Exchange at the same price from today through Nov. 17.
[20713005] |In addition, the bank has an option to buy a 30.84% stake in BIP from Societe Generale after Jan. 1, 1990 at 1,015 francs a share.

[20714001] |Furukawa Electric Co., one of Japan's leading electric wire and cable manufacturers, said unconsolidated pretax profit in the fiscal first half ended Sept. 30 fell 5.3% to 6.11 billion yen ($43.1 million) from 6.45 billion yen a year earlier.

[20714002] |Sales increased 11.9% to 279.39 billion yen from 249.68 billion yen.
[20714003] |Net fell 1% to 3.23 billion yen from 3.26 billion yen.
[20714004] |Pershare net fell to 4.97 yen from 5.40 yen.

[20714005] |The growing sales sustained by domestic demand failed to counter rising material metal costs and declining profitability in overseas construction, Furukawa said.

[20714006] |Rolled copper product sales were major contributors to overall sales growth.
[20714007] |Sales by category rose 24% to 35.23 billion yen, reflecting increased production in automobile, airconditioner and electric machine industries, which are major users of wire and cable products.

[20714008] |Sales for electric wires and cables rose 13.2% to 153.93 billion yen.

[20715001] |West Germany's cost-of-living index rose a preliminary 0.3% in October from September and was up 3.3% from a year earlier, the Federal Statistics Office in Wiesbaden said.

[20715002] |The increase follows a monthly rise of 0.2% in September from August.

[20715003] |Preliminary cost-of-living data for the current month are calculated based on inflation data from the four largest West German states -- Baden-Wuerttemberg, North Rhine-Westphalia, Bavaria and Hesse.

[20716001] |The Philippine government awarded Finland's Outokumpu Oy the contract to upgrade the facilities of Philippine Associated Smelting & Refining Corp., according to documents from National Development Corp., one of Philippine company's owners.

[20716002] |The project costs $46.8 million, and is intended to boost the company's production capacity by 25% to 34,500 metric tons of copper cathode a year.

[20716003] |Outokumpu is a mining, trading and construction concern.

[20717001] |September sales at major Japanese retail stores rose 9.4% from a year earlier to 1.388 trillion yen ($9.81 billion), marking the fifth-consecutive monthly increase, the Ministry of International Trade and Industry announced.

[20717002] |According to the ministry, retail sales at major department stores were up 12% to 745.7 billion yen, while sales at supermarkets rose 6.7% to 642 billion yen.

[20717003] |September's growth followed a 8.7% rise in July and an 8% increase in August, showing continued expansion at high year-on-year levels.
[20717004] |A ministry official said the growth leads to the conclusion the adverse effects of a consumption tax introduced in April have diminished.

[20718001] |Shell Canada Ltd. said it plans to build a lubricants blending and packaging plant at Brockville, Ontario, with start-up scheduled for 1992.

[20718002] |A spokesman said the plant, which will replace older lubricant and grease manufacturing plants in Montreal and Toronto, will cost about 50 million Canadian dollars (US$42.5 million) to build.
[20718003] |Brockville is about 100 miles east of Toronto.

[20718004] |Shell Canada, an oil and gas producer and marketer, is a unit of Royal Dutch/Shell Group, an Anglo-Dutch concern.

[20719001] |When the going gets tough, it's tough to trade stocks in continental Europe.

[20719002] |That's the troubling conclusion reached by many international investors and money managers angry at the malfunctions on Continental stock exchanges during last week's global market turbulence.
[20719003] |They say the recent market volatility has underscored the shortcomings of the way many European exchanges trade stocks.

[20719004] |The weaknesses of Continental exchanges are driving some fund managers to switch business to stocks traded on London's stock exchange, which quotes firm trading prices for about 350 blue-chip issues from 12 major countries.

[20719005] |"I'm not saying London covered itself in glory, but the events of the past week have certainly exposed Europe's weaknesses," says Stewart Gilchrist, a director of Scottish Amicable Investment Managers in Glasgow, Scotland, which manages about #6 billion ($9.63 billion) in institutional money.
[20719006] |He says the problems on European exchanges included market-system breakdowns, delayed execution of buy and sell orders and trading suspensions.
[20719007] |"The events strengthen London's hand in becoming the center for trading European stocks," Mr. Gilchrist says.

[20719008] |Unable to unload a large block of a French blue-chip company's shares in Paris for two days last week, a frustrated Scottish Amicable fund manager finally tossed down her phone in disgust and called James Capel & Co., a London brokerage firm.
[20719009] |The firm did the trade in seconds on the London stock exchange's SEAQ automated-quotation system.

[20719010] |On so-called Manic Monday, Oct. 16, stock prices plunged across Europe and trading problems erupted.
[20719011] |London had some problems, too.
[20719012] |The London exchange's electronic price-reporting system provided only indicative, or non-firm, prices for about 40 minutes on Manic Monday.
[20719013] |Some dealers say other traders weren't picking up their phones.

[20719014] |But London's problems were nothing compared with the Continent's.
[20719015] |In Brussels, which recently spent millions of dollars on a computer-assisted trading system, disgusted traders watched helplessly as a software failure before opening on Manic Monday prevented trading for two days.
[20719016] |For 48 hours, no one had any idea precisely how much his securities were worth.

[20719017] |By Wednesday, frustrated Belgian brokers reopened the market by using the time-honored method of quoting stocks with chalk on a blackboard.
[20719018] |The Belgian computer system finally was repaired and restarted on Tuesday of this week, with the aid of Toronto Stock Exchange officials who developed the system.

[20719019] |In Frankfurt, which only has a two-hour daily stock-trading session even in the best of times, stocks didn't open for the first 45 minutes because of order imbalances that brokers blame on a wave of sell orders from small investors.

[20719020] |As banks processed six-foot telexes of sell orders, the crush led to Manic Monday's worst decline: German stocks ended down 13%.
[20719021] |Exchange officials extended trading hours, 75 minutes on Monday and 65 minutes on Tuesday, to clear up order backlogs.

[20719022] |In France, more than half the top 25 blue-chip stocks -- including such giants as BSN and Elf Aquitaine -- didn't open until Wall Street rallied late in the European trading day, traders say.
[20719023] |The rally transformed some big sell orders into big buy orders, solving an order-imbalance problem.
[20719024] |But by that time, many big institutions had switched business to London.

[20719025] |"Belgium was closed for two days, France closed for a couple of hours, Germany was stuck.
[20719026] |It was a nightmare," says Susan Noble, an investment manager at Robert Fleming Holdings Ltd.'s International Investment Management unit in London.
[20719027] |"It's very worrying that these markets can't cope."

[20719028] |On Manic Monday, the volume of German shares traded in London more than tripled to 2.2 million, and the volume of French shares rose 48%.
[20719029] |(By comparison, German domestic stock volume in Frankfurt only doubled that day.)

[20719030] |The switch to the London market during such turbulent times is significant.
[20719031] |For one thing, the size of the affected market is enormous -- the European stock markets account for some 22.5% of global stock market capitalization, with an estimated value of $2.175 trillion, according to Morgan Stanley Capital International.
[20719032] |The Continental markets alone contribute about 14.3% of estimated world market capitalization of $9.671 trillion.

[20719033] |Though the widely traded shares that are quoted in London account for only a small portion of those totals, they still are the most closely watched stocks and are often viewed as a barometer for the local markets generally.

[20719034] |The switch to London underscores the fact that despite the economic restructuring associated with European Community efforts to develop a single market by 1992, European stock trading remains a highly fragmented and very localized activity.
[20719035] |Against this backdrop, one thing that doesn't seem likely to result from 1992 is a single European stock market.

[20719036] |Rather, there increasingly is a group of international brokerage and trading firms that operate in most European financial centers -- including European giants such as Barclays Bank PLC and Deutsche Bank, as well as Merrill Lynch & Co. and Shearson Lehman Hutton Inc. of the U.S. and Japan's Nomura Securities Co.

[20719037] |These firms, which often have acquired a local brokerage firm, are calling the shots when it comes to deciding in which market to transact a trade.
[20719038] |And senior officials of two U.S. securities houses say they switched trades in European stocks to the London market last week when they couldn't unwind positions on the Continent.

[20719039] |Meantime, brokers on the Continent are worried, too, mostly by the potential loss of business.
[20719040] |"I would be much happier if this volume {in German stocks} were in Frankfurt rather than London," says Dieter Bauernfeind, head of international equity sales at Dresdner Bank in Frankfurt.
[20719041] |He acknowledges that spreads "were too wide and volumes too light" in the extreme conditions on Manic Monday.

[20719042] |Already the Germans appear to be acting; at a special meeting on the day of the decline, directors of the Frankfurt Stock Exchange voted to extend their trading hours, although they haven't decided when or by how much.
[20719043] |A Frankfurt exchange official, acknowledging the brokers' anxieties, says the market still feels it "functioned OK during this crash."
[20719044] |The Dutch, who had some trading problems because of insufficient computer capacity, say new equipment to solve the problems ought to be installed within a month.

[20719045] |Says a spokeswoman for the Brussels Bourse: "Nobody around here will tell you they are happy the system didn't work.
[20719046] |But it's just one of those things that happened.
[20719047] |Investors can be assured now that this kind of problem can never occur again."

[20719048] |But for others, the pledges echo the promises made after the 1987 stock crash, when similar problems led many markets to develop the new systems that performed so badly last week.

[20719049] |"They all said they invested huge amounts of money.
[20719050] |But they either didn't buy the right machines or they wasted it," says Fleming's Ms. Noble.

[20720001] |Canadian steel production totaled 290,541 metric tons in the week ended Oct. 21, a 5.1% increase from 276,334 tons the previous week but a 7.2% decline from 313,125 tons a year earlier, Statistics Canada said.

[20720002] |The federal agency said that in the year through Oct. 21 production totaled 12,573,758 tons, up 7.1% from 11,742,368 tons.

[20721001] |Trinova Corp. said it will resume buying back as many as three million of its common shares under a program announced two years ago.

[20721002] |Trinova, which had 34.2 million common shares outstanding Sept. 30, had repurchased 29,700 shares since October 1987 before this latest announcement.

[20721003] |The company said it isn't making a commitment to purchase a specific number of shares.

[20721004] |In New York Stock Exchange composite trading yesterday, Trinova closed at $32.125, up 12.5 cents.

[20722001] |Calgene Inc. and Gustafson Inc. said they plan a joint project to develop biological products to control such plant diseases as aflatoxin, a potent cancer-causing agent.

[20722002] |Under the plan, the companies will use Calgene's patented technology to encapsulate microbes such as Bacillus subtilis, a bacterium, to enhance their biological activity against plant diseases.

[20722003] |Calgene, an agricultural biotechnology concern, said initial work will concentrate on a proprietary strain of Bacillus subtilis which has shown promise for controlling aflatoxin.
[20722004] |The strain was discovered by Morinaga & Co. and licensed to Gustafson, a unit of Uniroyal Chemical Co.

[20722005] |Aflatoxin is released by molds during grain and seed storage.
[20722006] |The recent appearance of aflatoxin in such foods as corn and peanut butter has sparked public concern and consumer scrutiny of food handling and storage procedures.

[20723001] |European Community employers fear that the EC Commission's plans for a "charter of fundamental social rights" is a danger to industrial competitiveness.

[20723002] |"We don't want Brussels deciding conditions for workers unless they are necessary and useful," said Zygmunt Tyszkiewicz, secretary general of the employers' confederation Unice.

[20723003] |Unice -- an acronym for the Union of Industrial and Employers' Confederations of Europe -- fears that the charter will force EC countries to adopt a single pattern in labor relations.
[20723004] |Workers and management, Mr. Tyszkiewicz said, would lose the "flexibility and diversity" that has so far allowed them to adapt to local conditions and traditions.

[20723005] |The British government also strongly opposes the charter in its current form.
[20723006] |It argues, as does Unice, that labor relations are best left to be regulated at the national level.

[20723007] |France will propose a slightly watered-down version of the charter to be discussed by EC social-affairs ministers on Monday, officials said.
[20723008] |But the cosmetic changes aren't expected to win over Britain.
[20723009] |"We still have serious differences with the text," a British official said, because it provides for a "regulation of the labor market."

[20723010] |Mr. Tyszkiewicz said the charter would put poorer EC countries such as Spain, Greece and Portugal at a disadvantage.
[20723011] |It would force these countries to introduce minimum standards for pay and working hours, and provide for collective bargaining and worker "participation" in major corporate decisions.

[20723012] |This, he warned, would prevent these countries from bridging the difference with their richer EC brethren.
[20723013] |Indeed, lower wages -- in Greece, they are a third of the EC average -- aren't enough to offset higher transport costs and lower productivity in the southern countries.
[20723014] |Increasing labor costs, Mr. Tyszkiewicz argued, would only put the countries at a further disadvantage in competing in the barrier-free EC market planned for after 1992.

[20723015] |But the Unice official said that producing a charter acceptable to both Britain and European industry isn't an unattainable goal.
[20723016] |The charter would just have to be restricted to a list of workers' fundamental rights, without seeking to impose any norms.

[20723017] |A key provision in the current version of the charter would give the commission a mandate to produce an "action program" detailing on what points EC member states would be required to comply with the goals set out in the charter.
[20723018] |This provision lies at the heart of the British and Unice fears of "social engineering" by the commission.

[20723019] |One possible political solution, an EC official said, would be for the commission to present the action program in late November, before the adoption of the charter at a summit of EC governments on Dec. 8 and 9.
[20723020] |This would leave Britain free to adopt the charter after having rebutted the action program.

[20723021] |The charter was approved by the EC Commission on Sept. 21.
[20723022] |France's Socialist government, which currently holds the council's rotating presidency, is committed to having the charter adopted by all 12 EC states before the end of 1989 -- the bicentennial of the French revolution and its "Universal Declaration of Human Rights.

[20724001] |Bruno DeGol, chairman of DeGol Brothers Lumber, Gallitzin, Pa., was named a director of this bank-holding company, expanding the board to 11 members.

[20725001] |Sam Ramirez and his men are late.
[20725002] |They pile out of their truck and furiously begin twisting together steel pipes linking a giant storage tank to the Sharpshooter, a freshly drilled oil well two miles deep.

[20725003] |If they finish today, the Sharpshooter can pump tomorrow.
[20725004] |One roustabout, hanging by his hands from a ladder, bounces his weight on a three-foot wrench to loosen a stuck fitting.
[20725005] |"We've been putting in long hours," Mr. Ramirez says -- six-day weeks and 13-hour days for the last two months.
[20725006] |A year ago, when almost nothing was happening amid these desolate dunes, "you'd spend two days working and two days in the yard," he recalls.

[20725007] |After a three-year nightmare of uncertain oil prices, draconian budget cuts and sweeping layoffs, fear is finally leaving the oil patch.
[20725008] |Independent drillers are gingerly sinking bits into the Earth's crust again.
[20725009] |Some in Big Oil are easing the grip on their wallets.
[20725010] |Investment capital is creeping back, and oil properties are fetching more.
[20725011] |Oil-tool prices are even edging up.

[20725012] |What happened?

[20725013] |In broadest terms, stability has quietly settled into international oil markets.
[20725014] |Mideast politics have calmed down and the squabbling within the Organization of Petroleum Exporting Countries seems under control for now.
[20725015] |"The fundamentals of supply and demand once again are setting oil prices," says Victor Burk, an Arthur Andersen & Co. oil expert.
[20725016] |After years of wild swings, oil prices over the last 12 months have settled at around $15 to $20 a barrel.

[20725017] |That isn't the $40 that delighted producers a decade ago or the $10 that pleased users a year ago.
[20725018] |But it is high enough to prod the search for future supplies, low enough to promote consumption and, most important, steady enough for both producers and users to believe in.

[20725019] |Not that oil suddenly is a sure thing again.
[20725020] |The current equilibrium is fragile and depends on steady, strong demand and continued relative harmony within OPEC, producer of more than 40% of the non-Communist world's crude.
[20725021] |A recession or new OPEC blowup could put oil markets right back in the soup.
[20725022] |Also, the new stirrings are faint, and some question their extent.
[20725023] |Drilling activity is still far below eight years ago, there's no hiring surge and some companies continue to shrink.

[20725024] |With all this, even the most wary oil men agree something has changed.
[20725025] |"It doesn't appear to be getting worse.
[20725026] |That in itself has got to cause people to feel a little more optimistic," says Glenn Cox, the president of Phillips Petroleum Co.

[20725027] |Though modest, the change reaches beyond the oil patch, too.
[20725028] |The same roller-coaster prices that halted U.S. oil exploration and drove many veteran oil men and companies out of the business also played havoc with the nation's inflation rate, the trade deficit and oil users' corporate and personal budgets.
[20725029] |Now, at least some predictability has returned, for everyone from economists to motorists.

[20725030] |Corporate planners can plan again.
[20725031] |"Management doesn't want surprises," notes Jack Zaves, who, as fuel-services director at American Airlines, buys some 2.4 billion gallons of jet fuel a year.
[20725032] |Prices had been so unstable that two years ago Mr. Zaves gave up on long-term forecasts.

[20725033] |And consumers "should be comfortable," adds W. Henson Moore, U.S. deputy secretary of energy.
[20725034] |"I don't see anything on the horizon that could lead to a precipitous rise in the price."

[20725035] |The catalyst for all this has been OPEC.
[20725036] |About a year ago, it ended an on-again, off-again internal production war that had put prices on a roller coaster and pitched oil towns from Houston to Caracas into recession.
[20725037] |Saudi Arabia, OPEC's kingpin, abandoned a policy of flooding the market to punish quota-cheaters.
[20725038] |About the same time, the Iran-Iraq war, which was roiling oil markets, ended.

[20725039] |In addition, global petroleum demand has been climbing.
[20725040] |It is projected to keep growing by a million barrels a day, or up to 2% annually, for years to come.

[20725041] |For OPEC, that's ideal.
[20725042] |The resulting firm prices and stability "will allow both producers and consumers to plan confidently," says Saudi Arabian Oil Minister Hisham Nazer.
[20725043] |OPEC Secretary-General Subroto explains: Consumers offer security of markets, while OPEC provides security of supply.
[20725044] |"This is an opportune time to find mutual ways {to prevent} price shocks from happening again," he says.

[20725045] |To promote this balance, OPEC now is finally confronting a long-simmering internal problem.
[20725046] |At its November meeting, it will try to revise its quotas to satisfy Persian Gulf members that can produce far more oil than their allotments.
[20725047] |Being held well below capacity greatly irritates them, and has led to widespread cheating.
[20725048] |OPEC has repeatedly raised its self-imposed production ceiling to legitimize some of that unauthorized output.

[20725049] |Oil ministers now hope to solve the issue for good through an Iranian proposal that gives a larger share of output to countries with surplus capacity and reduces the shares of those that can't produce more anyway.
[20725050] |But "if they walk out without any effort to resolve their problem, production could increase to 23 million or 24 million barrels a day, making for a very troublesome first quarter," warns Nordine Ait-Laoussine, a consultant and former Algerian OPEC delegate.

[20725051] |That would send prices plummeting from what some gun-shy U.S. oil executives still regard as too low a level.
[20725052] |Patrick J. Early, president of Amoco Corp.'s oil-production unit, says that despite recent stability, he plans continued tightening of costs and exploration spending.
[20725053] |The view of some others in Big Oil, he maintains, "is very much {similar to} Amoco's outlook."
[20725054] |Just this week Mobil Corp. disclosed new cutbacks in its domestic exploration and production operations.

[20725055] |Out here on the Querecho Plains of New Mexico, however, the mood is more upbeat; trucks rumble along the dusty roads and burly men in hard hats sweat and swear through the afternoon sun.
[20725056] |Santa Fe Energy Co., a unit of Santa Fe Southern Pacific Co., bought from Amoco the rights that allowed it to drill the Sharpshooter.
[20725057] |A mile and a half away looms the 150-foot-tall rig of the Sniper, due to be pumping by December.
[20725058] |"Talk is that everybody is going to drill more wells," says foreman Tommy Folsom.

[20725059] |Santa Fe aims to drill about 30 wells in this area in 1989 and double that next year.
[20725060] |It is more aggressive than most, but it isn't the only company with a new attitude, as it found when it went looking for a partner for the Sharpshooter.
[20725061] |"We went to six companies over two days pitching the prospect," says Tim Parker, a Santa Fe exploration manager.
[20725062] |"Five were interested."

[20725063] |Mitchell Energy & Development Corp. became the partner, ponying up more than half of the $600,000 in drilling and start-up costs.
[20725064] |Mitchell will get a half-interest in the oil.
[20725065] |"A kind of no-mistakes mentality" had been stifling activity, says Don Covey, Mitchell's oil exploration chief.
[20725066] |Now "everybody is a lot more optimistic."

[20725067] |One attraction for oil operators here and in other fields is the bargain-basement cost of drilling and equipment, reflecting service companies' hunger for work.
[20725068] |Kadane Oil Co., a small Texas independent, is currently drilling two wells itself and putting money into three others.
[20725069] |One of its wells, in southwestern Oklahoma, is a "rank wildcat," a risky well where oil previously hasn't been found.

[20725070] |"At this price, $18 plus or minus, and with costs being significantly less than they were several years ago, the economics are pretty good," says George Kadane, head of the company.
[20725071] |"If you know you've got stability in price, you can do things you wouldn't do with the volatility of the past few years."

[20725072] |The activity is enough to move some oil-service prices back up a little.
[20725073] |Some drill-bit prices have risen 5% in the past month.
[20725074] |In the Gulf of Mexico, a boat to deliver supplies to offshore rigs now costs around $3,000 a day, up nearly 60% since June.
[20725075] |Some service boats recently were auctioned for about $1.7 million each, up from less than $1 million two years ago.
[20725076] |At the bottom of the slump, Schlumberger Inc. was discounting 75% on an electronic evaluation of a well; now it discounts about 50%, drillers say.

[20725077] |Still, there is money to be made.
[20725078] |Most oil companies, when they set exploration and production budgets for this year, forecast revenue of $15 for each barrel of crude produced.
[20725079] |Prices have averaged more than $2 a barrel higher than that -- not a windfall, but at least a pleasant bonus for them.
[20725080] |So, according to a Dun & Bradstreet Corp. survey, companies that had been refusing to spend even their very conservative budgets may loosen up before year end.
[20725081] |It says 40% of those surveyed report that 1989 exploration spending will exceed 1988's.

[20725082] |Funds for drilling may inch up more next year if oil prices stay stable.
[20725083] |Texaco, thinking in terms of $18-to-$19 oil for 1990, may raise spending, especially for low-risk prospects, an official says.
[20725084] |Outside investors, scarce since '86, are edging back.
[20725085] |Although "it's still difficult to raise money for a pure wildcat program," says William Thomas, a Texas Commerce Bank official in Houston, "institutions are starting to see there are cycles to these things, and this one is beginning to turn."

[20725086] |Wall Street generally likes the industry again.
[20725087] |The appetite for oil-service stocks has been especially strong, although some got hit yesterday when Shearson Lehman Hutton cut its short-term investment ratings on them.
[20725088] |Contractors such as Parker Drilling Co. are raising cash again through stock offerings, and for the first time in years, two oil-service companies recently went public.
[20725089] |(They are Grace Energy Corp. of Dallas and Marine Drilling Co. of Houston.)

[20725090] |Most oil companies are still reluctant to add to the office and professional staffs they slashed so deeply.
[20725091] |But a few new spots are opening.
[20725092] |Arthur Andersen, the accounting firm, has increased its energy staff 10% in a year.

[20725093] |Out in the oil fields, if activity picks up much more, shortages could appear because so many roughnecks, roustabouts and others left after the crash.
[20725094] |Already "it's hard to get people.
[20725095] |They're so busy," says one Santa Fe drilling foreman here.

[20725096] |For most field workers, it's about time.
[20725097] |Mr. Ramirez, who arrived late at the Sharpshooter with his crew because he had started early in the morning setting up tanks at another site, just got the first raise he can remember in eight years, to $8.50 an hour from $8.
[20725098] |Norman Young, a "mud-logger" at the Sniper well, has worked all but about nine days of this year.
[20725099] |Last year, "I was off a straight month, then one time for two to three weeks and another two to three weeks," he says.

[20725100] |Butch McCarty, who sells oil-field equipment for Davis Tool Co., is also busy.
[20725101] |A native of the area, he is back now after riding the oil-field boom to the top, then surviving the bust running an Oklahoma City convenience store.
[20725102] |"First year I came back there wasn't any work," he says.
[20725103] |"I think it's on the way back now.
[20725104] |But it won't be a boom again.
[20725105] |No major booms, no major setbacks," he predicts.
[20725106] |Business has been good enough that he just took a spur-of-the-moment weekend trip to the mountain area of Cloudcroft, something "I haven't done in years."

[20725107] |The figures confirm that there certainly isn't any drilling boom.
[20725108] |Only 14,505 wells, including 4,900 dry holes, were drilled for oil and natural gas in the U.S. in the first nine months of the year, down 22.4% from the like 1988 period.

[20725109] |But that was off less than at midyear, when completions lagged by 27.1%.
[20725110] |And the number of rigs active in the U.S. is inching up.
[20725111] |According to Baker Hughes Inc., 992 rotary rigs were at work in the U.S. last week, up from the year-ago count of 933.
[20725112] |(In 1981, before the bust, the rig count was above 4,000.)
[20725113] |Global offshore-rig use shows a similar upward trend.

[20725114] |Some equipment going to work is almost new.
[20725115] |Grace Energy just two weeks ago hauled a rig here 500 miles from Caspar, Wyo., to drill the Bilbrey well, a 15,000-foot, $1-million-plus natural gas well.
[20725116] |The rig was built around 1980, but has drilled only two wells, the last in 1982.
[20725117] |Until now it had sat idle.

[20725118] |For Zel Herring, owner and a cook at the Sandhills Luncheon Cafe, a tin building in midtown, all this has made for a very good year.
[20725119] |After 11:30 a.m. or so "we have them standing and waiting," she says, as she whips out orders for hamburgers and the daily special (grilled roast beef, cheese and jalapeno pepper sandwich on whole wheat, potato salad, baked beans and pudding, plus coffee or iced tea.
[20725120] |Price: $4.50).

[20725121] |Mike Huber, a roustabout, is even making it in his new career as an entrepreneur.
[20725122] |He started Arrow Roustabouts Inc. a year ago with a loan from a friend, since repaid, and now employs 15.
[20725123] |He got three trucks and a backhoe cheap.
[20725124] |"I want to add one more truck," Mr. Huber says.
[20725125] |I sense that it's going to continue to grow.
[20725126] |That's the word.
[20725127] |The word is out.

[20726001] |Eight people, including a supervisor of Security Pacific National Bank's central vault, were arrested in an investigation of an alleged drug money-laundering operation.

[20726002] |The U.S. Attorney's office filed a criminal complaint against six bank employees charging them with conspiracy in the scheme, which apparently was capable of handling millions of dollars a week by funneling cash through fictitious bank accounts.
[20726003] |Two other men also were charged with participating in the operation.

[20726004] |The arrests capped a four-month investigation by the Internal Revenue Service, the U.S. Attorney's office and a Security Pacific internal investigation team.
[20726005] |Walter S. Fisher, executive vice president and general auditor of the bank's parent, Security Pacific Corp., said no bank funds were at risk during the investigation.

[20726006] |Arrested were Jose O. Lopez, 27 years old, of Whittier, Calif., the vault supervisor; Carlos O. Huerta, 29, of La Puente; Luis A. Arroyo, 36, of Los Angeles; Ignacio Rojas Jr., 32, of Baldwin Park; Doris Moreno, 37, of Bell Gardens; and Ana L. Azucena, 27, of Huntington Park.
[20726007] |Geno M. Apicella, 27, of Los Angeles, and Terrell N. Madison, 27, of Hawthorne, were also charged with participating in the conspiracy.

[20726008] |Each defendant faces a possible sentence of 20 years in prison and $250,000 in fines.
[20726009] |The defendants couldn't immediately be reached for comment.

[20727001] |S.A. Brewing Holdings Ltd. began laying the groundwork to launch a rival offer for Bond Corp. Holdings Ltd.'s Australian brewing operations.

[20727002] |Such an offer could torpedo a plan by Lion Nathan Ltd. of New Zealand to acquire half the brewing interests.
[20727003] |But it would probably increase the amount of cash that debt-ridden Bond Corp. would earn from the transaction.

[20727004] |Australia's National Companies and Securities Commission said it will allow S.A. Brewing to acquire an option on as much as 20% of Bell Resources Ltd., a unit of Bond Corp. that is in the process of acquiring Bond Corp.'s brewing businesses for 2.5 billion Australian dollars (US$1.93 billion).

[20727005] |S.A. Brewing, which is 20%-owned by Elders IXL Ltd., Australia's largest brewer, will make a takeover offer for all of Bell Resources if it exercises the option, the corporate regulators said in a statement.

[20727006] |Bond Corp., a brewing, property, media and resources concern controlled by financier Alan Bond, is selling many of its assets to reduce an A$6.9 billion debt.

[20728001] |Contrary to what might be expected based on the headline on John R. Dorfman's recent Money Matters article ("Pros Hit Theorists Right Where It Hurts" Oct. 3), I was able to stand proudly before my undergraduate finance students and proclaim that the findings of your yearlong experiment on stock picking is completely consistent with what they have been taught in the classroom.
[20728002] |In particular, I do not find the fact that your group of pros' monthly selections of four stocks outperforms the market in general to be inconsistent with market efficiency.

[20728003] |Mr. Dorfman states that an investor who invested $100,000 a year ago in the first four stocks selected by your pros and then sold those one month later, purchasing the four new pro picks, and repeated this process for the year would have accumulated $166,537, excluding account dividends, taxes and commissions.
[20728004] |In contrast, an investor holding the Dow Jones portfolio over the year would have accumulated only $127,446.

[20728005] |Accepted theories of asset pricing offer a perfectly legitimate explanation.
[20728006] |Accepted theories state that investors require higher returns on riskier investments.
[20728007] |Thus, rather than seeing the excess returns to the pro-selected portfolio as being abnormal, I see those returns as simply compensations for taking on added risk.
[20728008] |I believe the risk for each individual stock selected by your pros is very large.
[20728009] |If you asked me to select a stock with the highest expected return, I would select a stock with the greatest amount of undiversifiable risk, as I am sure your pros do.
[20728010] |Your hypothetical investor is simply being compensated for taking on this added risk.

[20728011] |Moreover, your hypothetical investor has forsaken the gains to be had in reducing risk by diversifying his portfolio.
[20728012] |A four-stock portfolio is still exposed to a great deal of unnecessary risk.
[20728013] |This means the returns can vary a great deal.
[20728014] |Mr. Dorfman provides confirming evidence of this phenomenon when he reports that your staff of dart throwers would have accumulated only $112,383 by randomly selecting four new stocks to be held in a portfolio each month.

[20728015] |Scott E. Hein Texas Tech University Lubbock, Texas Your Investment Dartboard article misses the target.
[20728016] |The fact that stock pickers have bested a randomly selected portfolio in eight of 12 months has no bearing on the efficient-market theory.

[20728017] |What matters is that the stocks recommended by your pros tend to be substantially riskier than a diversified portfolio.
[20728018] |For example, your pickers' recommendations for the coming month are, on average, 22.5% riskier than holding the market portfolio according to Value Line's Beta estimates.
[20728019] |James Morgan's pick for October -- Dynascan -- is a substantial 35% riskier than the market portfolio; his lauded Thermo Electron pick is 40% riskier.

[20728020] |Eric C. Meltzer

[20729001] |Peter W. Likins, president of Lehigh University, Bethlehem, Pa., was elected a director of this maker of industrial motion-control parts and systems.
[20729002] |His appointment expands the board to 13 members.

[20730001] |California Thefts Make Travel Agents Jittery

[20730002] |BEING A TRAVEL agent used to be pretty glamorous.
[20730003] |Now it's getting downright dangerous.

[20730004] |In recent months, more than 25 agencies have been robbed, compared with only a handful all last year, according to police and travel-agency groups.
[20730005] |Most of the cases have been in California, where one agent was stabbed and another was shot and killed.

[20730006] |Los Angeles police say the thieves seem to be part of a crime network that knows how to convert blank tickets into real ones.
[20730007] |Already, the stolen tickets have been used for flights all over the world.
[20730008] |So far, the thieves have stolen 3,632 blank tickets, according to Airline Reporting Corp., a ticket processing center.

[20730009] |Police say the robberies are usually pulled off by two to five men, who walk into the agencies near closing or lunch time, when few employees are there.
[20730010] |"They looked like ordinary vacationers at first," says Willy LLerena, owner of Travel Air Service in Monte Bello, Calif., describing five men who entered his agency last June.

[20730011] |But then, he says, they put two loaded pistols to his temple and demanded he open the safe.
[20730012] |When he initially refused, he says, they stabbed him in the back and made off with $2,000 and 280 blank tickets.
[20730013] |"They said they wanted to show me how serious they were," he says.

[20730014] |As word of the crime spree has spread, many agents have started changing their open-door policies.
[20730015] |At El Monte Travel Center in El Monte, Calif., customers now can get in only through a buzzer and lock system.
[20730016] |"It's hard to deal with clients this way in a service business," says Ralph "Bud" Conner, owner of the agency, which was robbed of 180 blank tickets and $850 last month.
[20730017] |"But we're just too nervous."

[20730018] |The robberies also have set off a controversy involving the airlines.
[20730019] |Agents say airlines, which track ticket numbers of all stolen tickets, should be doing more to catch the thieves by confiscating the tickets when they're used.
[20730020] |"They have the most sophisticated computers in the world," says Mr. LLerena.
[20730021] |"They ought to be able to do this."

[20730022] |But airlines say it would be too expensive and cause too many delays if they started using computerized scanners to check tickets at the gate.

[20730023] |Texans Get Reasonable Car Rental Insurance

[20730024] |CONSUMER advocates have long claimed that car rental companies charge too much for car rental insurance.
[20730025] |Now, a new law in Texas seems to be providing the proof.

[20730026] |The law -- the first of its kind -- requires car rental companies in Texas to charge only "reasonable" rates for collision-damage waiver insurance.
[20730027] |Specifically, the law says the rates must closely reflect what the company's actual expenses have been to replace damaged cars.

[20730028] |Before the law went into effect last month, car rental companies were charging as much as $12 a day for the waiver in Texas.
[20730029] |Now, they're charging as little $3 a day.
[20730030] |"If they're telling the truth now, then they've been charging 300% more than what is reasonable," says Steve Gardner, an assistant state attorney general in Texas.

[20730031] |A spokesman for Hertz Corp. acknowledges, "The waiver isn't a source of protection for consumers, but a source of revenue."
[20730032] |But Hertz points out that at least it's now charging only $3.95 a day in Texas, while some competitors are charging $6.99.
[20730033] |The state attorney general's office is investigating rental car agencies charging noticeably higher prices.

[20730034] |Flight Attendants Lag Before Jets Even Land

[20730035] |IF YOUR FLIGHT attendant seems a little weary, it may be because he or she has been working 20 straight hours.

[20730036] |A recent study for the Federal Aviation Administration found that major airlines sometimes make flight attendants work 16 hours or more straight -- despite union contracts at some airlines limiting duty time to 14 hours.
[20730037] |Some flight attendants on charter planes are putting in 20-hour work days, the study found.

[20730038] |This happens because the FAA doesn't have any rules on duty time for flight attendants; by contrast, it strictly restricts duty time for pilots and air traffic controllers, usually to a maximum of 10 consecutive hours.

[20730039] |"As far as the FAA is concerned," says Matt Finucane, air safety director at the Association of Flight Attendants, "flight attendants can work an unlimited number of hours."

[20730040] |Experts say such long hours for attendants pose a safety risk.
[20730041] |For instance, tired flight attendants might not react quickly enough during an emergency evacuation.
[20730042] |"At the end of their day, they are zombies," says John Galipault, president of the Aviation Safety Institute, a public-interest group in Worthington, Ohio.
[20730043] |"They have to work such long hours and then we expect them to be heroes if there's an evacuation."
[20730044] |In response to the study, the FAA says it is considering changing its policy -- or lack of it -- on flight attendants.
[20730045] |The agency may not have much choice: A congressional bill has been introduced that would force the agency to limit flight attendant duty time to 14 hours on U.S. flights and 16 hours on international trips.

[20730046] |Odds and Ends

[20730047] |GOLF HAS BECOME the latest diversion for travelers stuck at some airports.
[20730048] |Simulated golf games, in which players hit golf balls into nets, have been installed at airports in Denver and Pittsburgh. . . .
[20730049] |The average cost for breakfast at a "decent" hotel restaurant in New York is $17.12, according to Corporate Travel magazine.
[20730050] |The cheapest, among 100 cities surveyed, was $5.11 in El Paso, Texas.

[20731001] |Mark Q. Huggins was named executive vice president and chief financial officer.
[20731002] |Mr. Huggins, 39 years old, formerly was controller and chief accounting officer at Harte-Hanks Communications Inc.
[20731003] |Management Co. manages entertainers and produces, markets and finances entertainment.

[20732001] |Why do you continually ignore the salubrious effects of indexing the basis of capital gains for inflation?
[20732002] |Why do you maintain the House-passed capital-gains plan is a "temporary" reduction when it is not?

[20732003] |I think the reason is that you are confusing tax "rates" with tax "payments."
[20732004] |Your Sept. 29 page-one story on the House-passed capital-gains plan is a good example.
[20732005] |You lead readers to believe that the House reduced the capital-gains tax for two years only.
[20732006] |You virtually ignore the tax-reducing power of indexation, which in many cases is more substantial than a lower rate.

[20732007] |The monetary tax benefit of indexation for all gains in excess of inflation can be measured using the following equation: tax rate, times inflation rate, times basis for the gain.
[20732008] |Depending on the size of the gain and the rate of inflation, indexation can mean a lower tax payment than using the 19.6% rate without indexation.
[20732009] |But in any event -- and this is the important point -- tax "payments" on capital gains will be lower with indexation than under current law, even though the tax "rate" is the same under both systems.

[20732010] |As you can see, the capital-gains reduction plan adopted by the House would not be temporary, but permanent.
[20732011] |I hope that you begin talking about the plan's permanent and, in my view, most beneficial feature -- indexation.

[20732012] |Rep. Robert K. Dornan (R., Calif.) Washington

[20732013] |That the motivation for the two-year reduction to 19.6% is budgetary does not mean it is not in the public interest.
[20732014] |The reduction eases the burden on portfolio changes and frees capital to seek more productive or more appropriate uses.
[20732015] |But what is really significant is the indexation of capital gains after 1991.
[20732016] |To argue that this is "not likely" to affect the economy in positive ways is contrary both to recent experience with capital-gains tax cuts and to common sense.
[20732017] |A large part of the long-term appreciation of assets reflects inflation, and the taxation of inflation-created capital gains is confiscation.
[20732018] |Does the Journal really believe that people ignore the prospect of having a substantial part of their capital confiscated when they decide whether to save or how to invest?

[20732019] |Under current law, it is not financially rational to forgo consumption.
[20732020] |Real, aftertax returns from financial assets are on the order of 1% or 2% a year.
[20732021] |The capital-gains tax reform is a step toward correcting one of the gravest structural weaknesses of the U.S. economy, the closely connected phenomena of low savings rates, weak capital formation and high capital costs.

[20732022] |J. Sigurd Nielsen Richmond, Va.

[20733001] |Isaac Hersly, 41 years old, was elected president and chief operating officer of this designer and marketer of graphics, video, cable and other television-related equipment.
[20733002] |He succeeds Alfred O.P. Leubert, 66, who continues as chairman and chief executive officer.
[20733003] |Mr. Hersly formerly was group vice president of marketing and product planning for Chyron and president of the telesystems and video products division.

[20734001] |W.R. Grace & Co. said it formed a new horticultural-products company by combining its soil-nutrients and fertilizers business with Sierra Chemical Co., Milpitas, Calif.

[20734002] |Grace, a maker of specialty chemicals that already owned about 30% of closely held Sierra, said it owns a 49% stake in the new company.
[20734003] |Grace said it didn't invest any additional capital in the venture, which will be known as Grace-Sierra Horticultural Products Co.

[20734004] |The business is expected to have sales of about $100 million in 1990, Grace said.
[20734005] |The new company's product lines will be aimed at nurseries, greenhouses and the lawn and garden industry.

[20735001] |The Financial Accounting Standards Board said it will soon issue a rule requiring disclosure about the financial risk of certain financial instruments.

[20735002] |But the chief rule-making body for accountants backed off one part of its original proposal made earlier this year that would have required a breakdown of certain balance-sheet items related to off-balance sheet instruments.

[20735003] |The balance-sheet detail was opposed by many banks and thrifts that felt the cost of supplying such data wasn't worth the value of the disclosures.

[20735004] |Under the initial proposal, for example, banks would have been required to disclose that portion of allowances for loan losses that reflects specific letters of credit for which customers had defaulted.
[20735005] |The final rule won't require such a breakdown of the allowances for loan losses, which appears on the balance sheet.

[20735006] |The FASB rule will cover such financial instruments as interest rate swaps, financial guarantees, foward interest rate contracts, loan contracts, loan commitments and options written on securites held.
[20735007] |It will require companies to spell out in more detail collateral polices and concentrations of credit risk for all financial instruments.

[20735008] |The rule will require companies with financial instruments that have off-balance sheet risks to disclose data about the value and terms of the instruments, any accounting loss that would occur if the outside party involved in the instrument failed to perform, and the company's policy for requiring collateral or other security for the instrument.

[20735009] |Scott Miller, an FASB project manager, said that a final rule will be issued before year end.
[20735010] |But he noted that the initial effective date of the earlier proposal had been delayed by six months.

[20736001] |Poughkeepsie Savings Bank said a plan to sell its South Carolina branch offices to First Citizens Bank, of Columbia, S.C., fell through.

[20736002] |Poughkeepsie also expects to post a one-time charge of $8.3 million, resulting in a net loss for the third quarter.
[20736003] |The charge represents a write-down of the goodwill associated with Poughkeepsie's investment in the banks it is trying to sell and its North Carolina branches as well.

[20736004] |The thrift announced the plan Aug. 21.
[20736005] |Among other reasons, high fees regulators imposed on certain transfers of thrift deposits to commercial banks "substantially altered the economics of the transaction for both parties," Poughkeepsie said.

[20736006] |Additionally, the bank is increasing its loan-loss reserves for the third quarter by $8.5 million before taxes.

[20736007] |In the year-earlier third quarter, Poughkeepsie Savings had net income of $2.8 million, or 77 cents a share.

[20736008] |Poughkeepsie said it is continuing to try to sell itself, under a June agreement with a dissident-shareholder group.
[20736009] |The bank also said its effort would continue past the Nov. 1 deadline set in that agreement and that the litigation between the two sides might resume as a result.
[20736010] |The thrift and the holders had suspended their lawsuits as part of the agreement.

[20737001] |Joe Frank Sanderson Jr. was elected president and chief executive officer of this poultry producer.
[20737002] |Joe Frank Sanderson, who is currently chairman, chief executive and treasurer, will remain chairman.
[20737003] |The current president and chief operating officer, J. Odell Johnson, was elected to the new position of vice chairman of the board.

[20738001] |Kinder-Care Inc. was dropped from the consumer services industry group of the Dow Jones Equity Market index because the company split itself in a restructuring.
[20738002] |It was succeeded in the group by Fuqua Industries Inc.
[20738003] |Both moves are effective today.

[20739001] |A potentially safer whooping cough vaccine made by novel genetic engineering techniques was described by a team of Italian, U.S. and Japanese scientists.

[20739002] |The team reported they managed to induce bacteria to produce a non-toxic version of the poisons produced by the bacterium that causes whooping cough.
[20739003] |Laboratory tests showed that non-toxic versions of the poisons are capable of inducing an immunity to whooping cough, the researchers reported in this week's issue of the journal Science.

[20739004] |The current vaccine for whooping cough, or pertussis, is part of the "DPT" (for diphtheria, pertussis, tetanus) shot given most infants and young children.
[20739005] |The vaccine is effective in preventing a disease that still afflicts about 60 million children a year world-wide, causing an estimated one million deaths.

[20739006] |The vaccine, however, causes allergic reactions that can be fatal.
[20739007] |The reactions stem from the fact that the vaccine contains multiple copies of the whole Bordetella pertussis bacterium, which causes whooping cough.
[20739008] |This bacterium produces a toxin that, if used as a vaccine, can induce immunity to whooping cough.
[20739009] |Unfortunately, the toxin is also poisonous.

[20739010] |The Italian-led scientific team said they had succeeded in getting bacteria to produce a non-toxic version of the pertussis toxin, which could be used as a safe vaccine.
[20739011] |The researchers reported they have been able to pluck the five genes that produced the toxin out of the pertussis bacterium.
[20739012] |It turned out that although it took all five genes to produce the toxin, only one was responsible for the toxin's virulence.

[20739013] |Ordinarily in genetic engineering each of these genes, minus the one that caused the virulence, would have been transferred to another bacterium, called E. coli, which would then produce a nonvirulent version of the toxin.
[20739014] |The researchers said they did this, but the toxin didn't induce immunity to whooping cough.

[20739015] |The scientists then took the five toxin genes and triggered a mutation in the one gene that caused virulence.
[20739016] |Then, using a new technique (called homologous recombination) for introducing genes into cells, they transferred all five genes to bacteria closely related to the pertussis organism.
[20739017] |These bacterial "cousins" ordinarily don't make the toxin.
[20739018] |But the genes were accompanied by a piece of DNA, called a promoter, that turns the genes on.

[20739019] |The new bacteria recipients of the genes began producing pertussis toxin which, because of the mutant virulence gene, was no longer toxic.
[20739020] |Experiments showed that the new, non-virulent toxin is capable of inducing immunity, according to the researchers from the Selavo Research Center in Siena, Italy, the Medical College of Wisconsin in Milwaukee and the Japanese National Institutes of Health.

[20740001] |Carl E. Pissocra, president and chief executive officer of Bank One, Dover, has been named regional president, a new post at the bank-holding company.
[20740002] |Mr. Pissocra, 56 years old, will be responsible for the company's 10 banks in the Eastern region.
[20740003] |Dan J. Hartwell, 41, executive vice president of Bank One, Dover, was named president and chief executive of the Dover bank, succeeding Mr. Pissocra.
[20740004] |No one was named to succeed Mr. Hartwell.

[20741001] |At a time when foreign banks are pouring vast resources and personnel into West Germany's financial center, the opening of a three-man office on a Frankfurt side street shouldn't attract much attention.

[20741002] |Unless, of course, it happens to be run by the Rothschilds.

[20741003] |After an 88-year absence from the birthplace of the family banking empire, the return of the Rothschild group to Frankfurt was greeted by the glare of television lights, curious reporters and a mayoral reception in Town Hall.

[20741004] |Like other foreign banks establishing a presence here, the family describes its move as a calculated decision to set up a financial services outlet in Europe's largest economy ahead of the integration of European Community markets after 1992.
[20741005] |Yet the Rothschilds don't deny an emotional element to the decision.

[20741006] |In 1796, Mayer Amschel Rothschild founded Bankhaus M.A. Rothschild & Sons and later sent his four sons to London, Paris, Vienna and Naples to begin the bank's expansion during the early 19th century.
[20741007] |The original bank in Frankfurt closed in 1901 after the death of Wilhelm Carl von Rothschild, and the family's banking activities focused on London and Paris.

[20741008] |Baron Elie de Rothschild, the family's elder spokesman, explains that by the end of the 19th century, Berlin had replaced Frankfurt as Germany's financial center.
[20741009] |Yet the chief reason for the closure, he says, was rooted in a family tradition that wouldn't allow a bank to bear the Rothschild name without a Rothschild in its management.
[20741010] |"At the time we had only daughters," explains the 72-year-old patriarch, "so we had to close the bank."

[20741011] |Much of the family's mystique remained.
[20741012] |Although its palatial residence was destroyed by bombs during World War II, the Rothschilds' place in Frankfurt's history is still recalled by the city park and a street bearing the Rothschild name.

[20741013] |The family's long absence is understandable.
[20741014] |The family was in Allied countries during both World War I and the long period of economic strife of the 1920s.
[20741015] |During the Third Reich, the Rothschilds were a target of Nazi propaganda against Jewish financiers.
[20741016] |The persecution pursued the Rothschilds across Europe as the Nazis grabbed countries, confiscating the family's property in the process.

[20741017] |American journalist William L. Shirer, in his book "The Rise and Fall of the Third Reich," wrote of how in Vienna he had witnessed "squads of {Nazi} SS men carting off silver, tapestries, paintings and other loot from the Rothschild palace."

[20741018] |In the immediate postwar years, the Rothschilds concentrated on rebuilding their other European operations, delaying their return to Frankfurt.

[20741019] |"For a member of the Rothschild family, the return to Frankfurt is a very meaningful event, although it might not mean as much to German banking as it means to us," says Baron David de Rothschild, Elie's younger cousin and a partner in Rothschild & Cie. Banque in Paris.

[20741020] |Indeed, the competition isn't greatly concerned.
[20741021] |"It would be surprising if they didn't come to Frankfurt in time for 1992, and they bring an interesting tradition.
[20741022] |But the market really isn't going to be stood on its head," said a banker at one of Frankfurt's Big Three banks.

[20741023] |The return of the Rothschilds is modest.
[20741024] |The new representative office, with one manager and two assistants -- none a member of the Rothschild family -- will carry out no banking operations of its own.
[20741025] |Instead, it is to seek out corporate financing business and sell investment products on behalf of the family's mainstay banking units: N M Rothschild & Sons Ltd. in London, Rothschild & Cie. in Paris and Rothschild Bank AG in Zurich.

[20741026] |The constraints don't bother the office's 54-year-old manager, Erich Stromeyer.
[20741027] |He left his job as general manager of Shearson Lehman Hutton Holdings Inc.'s Frankfurt office because, he says, "When the Rothschilds called, I couldn't resist."

[20741028] |Each Rothschild bank is linked by family ties and cross-ownership.
[20741029] |In March, N M Rothschild in London and Rothschild Bank in Zurich showed assets of #4.1 billion ($6.51 billion) and 1.26 billion Swiss francs ($774 million), respectively.
[20741030] |The Paris bank doesn't publish that figure.

[20741031] |In Europe, the Rothschilds banks are focusing on mergers and acquisitions as European industry restructures ahead of 1992.
[20741032] |Yet the group's limited resources makes it a niche player.

[20741033] |"Obviously, there are quantitative limitations on the assistance we can provide," concedes Baron David de Rothschild, "but we feel we have some cards to play."
[20741034] |Among them, he says, is the family's traditional ties to old wealth and decision-makers in banking and industry throughout Europe and beyond.

[20741035] |The Rothschilds hope to use a long history in private banking and an aura of exclusivity to attract private and institutional investors.
[20741036] |As at the Zurich bank, the minimum investment for individuals will be high: about a million German marks ($538,000), three times what many other West German investment banks require.

[20741037] |"But we do make exceptions," says a smiling Baron Elie de Rothschild, "especially if they are very young and have very rich parents.

[20742001] |As program trading comes under renewed attack for causing stock market gyrations, a few people on Wall Street say it is time to consider extreme measures.

[20742002] |The real answer to curbing wild swings in stock prices, they say, might be to curb or even abolish stock-index futures.

[20742003] |A stock-index future is a contract to buy or sell the market value of a basket of stocks, such as the Standard & Poor's 500-stock index.
[20742004] |Since stock futures were created in 1982, trading on the Chicago Mercantile Exchange and other exchanges has boomed to the point where trading in stock-index futures rivals that in the stocks themselves.

[20742005] |The conventional view, as voiced by Goldman, Sachs & Co. partner Fischer Black, is that stocks and "derivatives" such as futures and options "form a single market, and that derivatives make it a more liquid market."

[20742006] |But increasingly, people are questioning that view, and the critics include some of the country's most successful investors.
[20742007] |Warren Buffett has been on record as opposing stock-index futures since their inception in 1982.
[20742008] |And Mario Gabelli, another star in the investing world, says, "My gut says the negatives of futures and synthetics far outweigh the benefits."

[20742009] |Like others, Mr. Gabelli says that if futures cause investors to lose confidence in stocks, they will move away from stocks -- as many have already done.
[20742010] |And those who remain, he says "will demand a higher return and over time raise the cost of capital to companies."

[20742011] |Essentially, the critics of stock-index futures fall into two camps.
[20742012] |One group says the futures contribute to stock market volatility; the other contends that futures are a sideshow of speculation that detracts from the stock market's basic function of raising capital.
[20742013] |"Before futures," says New York investor Michael Harkins, "you actually had to pay attention to whether the thing you were buying had any intrinsic value."

[20742014] |While it was once expected that futures would mimic stock prices, traders now routinely check the futures markets in Chicago before they buy or sell stocks.
[20742015] |When Chicago futures prices jump up or down, the New York Stock Exchange follows.

[20742016] |On Tuesday, for instance, the Dow Jones Industrial Average plunged 80 points in little more than an hour.
[20742017] |Then, in the space of a 20-minute coffee break, the average rallied almost all of the way back.
[20742018] |Paul Lesutis, who manages more than $3 billion of investments at Provident Capital Management Inc., blames futures markets for leading the way.
[20742019] |"The fundamentals don't change in an hour," he says.
[20742020] |"I think they should close down the futures exchange and then we could get back to investing."

[20742021] |Index arbitrage -- the rapid-fire buying and selling of stocks offset with opposite trades in futures -- is frequently blamed for adding to stock market volatility.
[20742022] |Although index arbitrage is said to add liquidity to markets, John Bachmann, managing partner of Edward D. Jones, says too much liquidity isn't a good thing

[20742023] |"The kind of instant liquidity that is implied by index futures is that you can buy a portfolio over two years and get out in one day.
[20742024] |It's too disruptive," he says.
[20742025] |"It isn't investing."

[20742026] |But stock-index futures have plenty of support.
[20742027] |Defenders say futures make markets more efficient and provide ways for investors to reduce risks.
[20742028] |They note that stocks experienced volatile swings long before futures.
[20742029] |And, defenders say, few people complain about futures when stock prices are rising.

[20742030] |Louis Margolis, managing director in charge of equity options and futures at Salomon Inc., says that trading baskets of stocks began in the 1970s, a decade before the advent of futures.
[20742031] |Futures, he says, merely cut down on trading costs.

[20742032] |He says "blaming futures is like blaming the messenger."
[20742033] |Since stock-index arbitrage merely narrows the gap between prices in the futures and stock markets, it can't add to volatility, he says.

[20742034] |Futures "don't need defending," says Andrew Yemma, a spokesman for the Chicago Mercantile Exchange, which trades the S&P 500, by far the largest stock-index futures contract.

[20742035] |Despite the current outcry over stock market volatility, few people expect stock futures to disappear.
[20742036] |For one thing, the Chicago futures exchanges have political and financial clout -- including many friends in Congress.
[20742037] |And traders say that futures have become an accepted part of the financial landscape.
[20742038] |"All life is about change -- either you adapt or die," says one Chicago futures trader.
[20742039] |"If futures aren't permitted here, we'll take it to Australia or Tokyo."

[20742040] |Average daily volume in S&P 500 futures last year was 44,877 contracts.
[20742041] |Based on yesterday's closing price of the S&P, the average value of one day's trading amounts to $7.6 billion.
[20742042] |By contrast, average dollar volume on the Big Board last year was $5.3 billion.

[20742043] |Many investment managers say futures are useful as a way to hedge portfolios.
[20742044] |If managers fear that the overall stock market will fall, but want to continue owning stocks, they can hold on to specific stocks and sell a corresponding amount of futures contracts.

[20742045] |Average daily volume in S&P 500 futures last year was 44,877 contracts.
[20742046] |Based on yesterday's closing price of the S&P, the average value of one day's trading amounts to $7.6 billion.
[20742047] |By contrast, average dollar volume on the Big Board last year was $5.3 billion.

[20742048] |Many investment managers say futures are useful as a way to hedge portfolios.
[20742049] |If managers fear that the overall stock market will fall, but want to continue owning stocks, they can hold on to specific stocks and sell a corresponding amount of futures contracts.

[20742050] |And although criticism of futures generally comes from Wall Street, one Chicago futures trader notes that brokerage firms rely on futures as hedging tools when they buy and sell big blocks of stocks from institutions.

[20742051] |One reason futures are said to add volatility is that -- unlike in stocks -- people can speculate in futures with little money down.
[20742052] |Margin requirements for speculators on the Chicago Mercantile Exchange are currently about 7%.
[20742053] |"For $10 million, you can move $100 million of stocks," a specialist on the Big Board gripes.
[20742054] |"That gives futures traders a lot more power."
[20742055] |By contrast, an investor in stocks must put up 50% in cash.

[20742056] |Some critics say futures encourage people to think of stocks as a single commodity, rather than as investments in individual businesses.
[20742057] |Thus, they say, futures inhibit the basic purpose of the stock market: to accurately price securities so that capital and investment flows where it's needed most.

[20742058] |The S&P 500 index futures "transferred the identity of 500 stocks into one unit-making them a simple commodity to trade," says George Kegler, senior vice president at A. Webster Dougherty in Philadelphia.
[20742059] |"It took away the need to know the bad third-quarter report of IBM, for example," Mr. Kegler says.

[20742060] |Of course, portfolio trading -- the increasingly common practice of buying or selling baskets of actual stocks -- also treats stocks as homogenous commodities.
[20742061] |"There is a class of investor that wants to be exposed" to the whole market, says Sandip Bhagat, assistant vice president at Travelers Investment Management Co.
[20742062] |The S&P futures are merely a "cheaper and quicker" way to get access to all 500 stocks, he says.
[20742063] |The Big Board yesterday began trading in its own basket trading vehicle representing the S&P 500 stocks.

[20742064] |But owning index futures isn't the same as owning the underlying stocks.
[20742065] |Stockholders, as a group, can win, because they own a share of corporate earnings, which can grow and boost stock prices.

[20742066] |Futures, on the other hand, are a zero sum game -- a market for making side bets about the direction of stock prices.
[20742067] |"You don't own anything," says Stephen Boesel, a money manager for T. Rowe Price in Baltimore.
[20742068] |"You're making a pure bet on the market.

[20743001] |The European Community Commission challenged an agreement on routes and fares between France's two largest airlines on antitrust grounds.

[20743002] |Meeting in Strasbourg Wednesday, the commission voted, as expected, to formally object to the accord between Air France, the state-owned airline, and state-controlled domestic carrier Air Inter.
[20743003] |An EC spokesman said the two companies will be notified so they can begin negotiations with Brussels on how to modify the pact.

[20743004] |At issue is an accord dating back to March in which Air France gained access to five domestic French routes under Air Inter's flight numbers and the domestic airline got to fly to five cities outside of France under the flag of Air France.
[20743005] |The two shared results from this route swap, and followed rules on ticket pricing.

[20743006] |The EC Commission decided that such an accord doesn't benefit consumers enough to merit an exemption from antitrust law.
[20743007] |The airlines presented it as offering consumers more choice and better flight connections.

[20743008] |An Air France spokeswoman said, "we're absolutely ready to study all solutions."
[20743009] |An Air Inter spokesman said, "Because they {the EC} have doubts, we will work again on the text and the contents of the accord.

[20744001] |A state appellate court reinstated the 1987 convictions of Pymm Thermometer Corp. and two of its executives on charges of assault for exposing workers to toxic mercury vapors.

[20744002] |The indictment charged that Pymm operated a machine to crush broken thermometers and recover the mercury in an illegal workroom.
[20744003] |The charges said that one worker suffered permanent brain damage from mercury exposure.

[20744004] |The judge handling the case in state Supreme Court, a trial court, had tossed out the jury verdicts, ruling that the matter should have been handled under federal Occupational Safety and Health Administration rules.
[20744005] |But the Appellate Division of State Supreme Court held that federal law didn't pre-empt the states from such a prosecution.

[20744006] |Elizabeth Holtzman, district attorney for Brooklyn, N.Y., said, "The appellate division has agreed with our view that despite federal worker-safety laws, state prosecutors have the power to protect working people."

[20744007] |Lawyers for the company and executives couldn't be reached for comment.

[20744008] |The executives face five to 15 years in prison and fines of $5,000 or double the profit made by failing to comply with the rules.
[20744009] |The company could be fined a maximum of $10,000, or double the profit.

[20745001] |General Motors Corp. wants to buy as much as 15% of Jaguar PLC, marking its first salvo in a possible full-scale battle against Ford Motor Co. for control of the British car maker.

[20745002] |GM sought U.S. antitrust clearance last week to purchase more than $15 million worth of Jaguar shares but doesn't own any yet, according to GM officials here and at the company's Detroit headquarters.
[20745003] |The No. 1 U.S. auto maker then wrote Jaguar that it intends "to go to that 15%" level once it wins the U.S. clearance to go beyond $15 million, a Jaguar spokesman said yesterday.

[20745004] |The GM move follows Tuesday's declaration by Ford, which holds an unwelcome 12.45% stake in Jaguar, that it is prepared to bid for the entire company.
[20745005] |GM is close to completing a friendly deal with Jaguar that is likely to involve an eventual 30% stake and joint manufacturing ventures.
[20745006] |Speculative investors, betting on an imminent clash between Ford and GM, pushed up Jaguar's share price five pence (eight U.S. cents) to a near-record 720 pence ($11.60) in late trading on London's stock exchange yesterday.
[20745007] |Since Tuesday, the shares have gained nearly 4%.

[20745008] |But an all-out bidding war between the world's top auto giants for Britain's leading luxury-car maker seems unlikely.
[20745009] |"We will not go over a certain level," said David N. McCammon, Ford's vice president for finance, at a news conference yesterday in Dearborn, Mich.
[20745010] |"There's some price at which we'd stop bidding."
[20745011] |He wouldn't specify what it was.

[20745012] |And powerful political pressures may convince the Conservative government to keep its so-called golden share, which limits any individual holding to 15%, until the restriction expires on Dec. 31, 1990.

[20745013] |"I really don't see the government doing something that Jaguar doesn't want over the next 14 months," said Kenneth Warren, a Conservative member of Parliament and chairman of the Select Committee on Trade and Industry in Britain's House of Commons.
[20745014] |"The golden share is a single share, but it is the magic share."

[20745015] |The government retained the single share after selling its stake in Jaguar in 1984 -- part of a nationalistic practice of protecting former government-owned enterprises to deflect criticism of privatization.
[20745016] |The 15% restriction covers any would-be suitor, British or foreign.

[20745017] |Ford is willing to bid for 100% of Jaguar's shares if both the government and Jaguar shareholders agree to relax the anti-takeover barrier prematurely.
[20745018] |As Jaguar's biggest holder and Britain's biggest car maker, Ford could turn up the heat by convening a special shareholders' meeting and urging holders to drop the limits early.
[20745019] |Ford might succeed because many shareholders are speculators keen for a full bid or institutional investors unhappy over Jaguar management's handling of its current financial difficulties.

[20745020] |The government probably wouldn't give in readily to a hostile foray by Ford, however.
[20745021] |It has relinquished a golden share only once before -- during British Petroleum Co.'s #2.5 billion ($4 billion) takeover of Britoil PLC in 1988.

[20745022] |In wooing British lawmakers, GM has pointed out that its willingness to settle for a minority stake would keep Jaguar British-owned and independent.
[20745023] |This week, the U.S. auto giant paid for 10 House of Commons members and two House of Lords members to fly to Detroit and tour its operations there.
[20745024] |While the visit was unrelated to Jaguar, GM Chairman Roger Smith answered the legislators' questions about it over lunch Tuesday.
[20745025] |He said Jaguar "shouldn't be smothered by anyone else," recalled one participant.

[20745026] |Politics also influences the government's thinking on the anti-takeover restriction.
[20745027] |The Conservatives don't dare jeopardize marginal Tory seats in Coventry, where Jaguar has headquarters, nor can the government easily back down on promised protection for a privatized company while it proceeds with controversial plans to privatize most of Britain's water and electricity industries.

[20745028] |Prime Minister Margaret Thatcher might, however, be receptive to any request by Jaguar Chairman Sir John Egan for the restriction's early removal to let GM amass more than 15% or mount a friendly suitor bid against Ford.
[20745029] |In the end, Sir John -- rather than the government or Jaguar shareholders -- may hold the key that unlocks the golden share.

[20746001] |Swedish rolling-steel and ball-bearing group AB SKF said its pretax profit rose 78% to 1.78 billion kronor ($278 million) in the first nine months from one billion kronor ($156 million) in the corresponding period a year earlier.

[20746002] |SKF said sales increased 17% to 18.46 billion kronor from 15.72 billion.

[20746003] |Earnings per share were 10.35 kronor compared with 5.80 kronor.

[20746004] |SKF said demand for the group's main product, rolling bearings, remained favorable in Europe, which accounts for slightly more than two-thirds of group sales.
[20746005] |Latin American markets continued their recovery after a weak start to the year, SKF said.

[20746006] |The company said the situation in the U.S. is still uncertain as reduced production in the country's automotive industry has resulted in weakened demand for rolling bearings.

[20746007] |Analysts said SKF's results for the first nine months lived up to market expectations as brokerage firms had predicted a pretax profit of 1.74 billion to 1.86 billion kronor.

[20746008] |The three business areas engaged in rolling bearing operations continued to show favorable sales development.
[20746009] |Sales of rolling bearings increased 19% to 15.7 billion kronor from 13.2 billion kronor in the corresponding period the previous year.

[20747001] |We read with interest Robert Tomsho's Sept. 28 page-one article on Robert Redford ("The Sundance Kid Gets Little Respect Around Sundance").
[20747002] |Misunderstanding conversations with us, Mr. Tomsho argued that Mr. Redford's environmental views are at odds with Utah residents.
[20747003] |This may have been true 10 years ago, but times have changed, even in Utah.
[20747004] |Mr. Redford no longer stands out as an extremist.
[20747005] |He has not changed, but those around him have.
[20747006] |Many of his views on the protection of wilderness areas, rivers and canyons are now embraced by mainstream, conservative Utahans.

[20747007] |Recently, some 60 environmental and outdoor groups representing such divergent points of view as the Sierra Club, the League of Women Voters and the National Rifle Association joined together to request a reassessment of the environmentally unsound Central Utah Project.
[20747008] |While Utah is not yet a haven for environmentalism, public views toward the environment have significantly improved.
[20747009] |In one of the most conservative, Republican states in the entire nation, the greening of Robert Redford's neighbors is the real story that Mr. Tomsho missed.

[20747010] |Sammye Meadows Sam Rushforth Gary Bryner Heber City, Utah

[20747011] |If Mr. Redford wanted to be accepted by the people of Utah, he should have taken an advisory role instead of one of forcing his personal preferences.
[20747012] |Furthermore, his actions imply that it is too damaging or costly for society to provide jobs through power-plant construction, coal mining or to build roads for public safety because of the adverse impact on the environment, but it is just fine and dandy for him to transform a mountain high in the Wasatch Range into a ski resort.

[20747013] |It astounds me he can rationalize his self-righteous and greedy actions in Utah.
[20747014] |An excellent environmental actor he is.

[20747015] |David Vranian M.B.A. Student University of Colorado Boulder, Colo.

[20747016] |Mr. Redford, like it or not, is like a braking system on a runaway truck, kind of slowing it down into control.
[20747017] |He's rich, famous and intelligent, and has the time to do something that not even the federal government will do.
[20747018] |Mr. Redford is slowing down a mindless, speeding maniac known as the progress of mankind.

[20747019] |Personally, I'm glad there are people like him around to slow down the profit takers, and those who are in such a blind hurry for something that may appear to benefit them in the immediate future, not caring about the long-range implications.

[20747020] |Ron Dyer

[20748001] |When President Bush travels to Costa Rica today, he'll go with little of the fanfare that accompanies many of his foreign travels.
[20748002] |But the two-day trip still has managed to fuel controversy over his administration's policies in Central America.

[20748003] |Some conservatives say Mr. Bush shouldn't make the trip, during which he will participate in Costa Rica's celebration of 100 years of democracy.
[20748004] |These critics object to Mr. Bush's participation in a meeting that includes Nicaraguan President Daniel Ortega among the guests.
[20748005] |In addition, they argue he won't help Washington's standing in the region by trumpeting the U.S. commitment to democracy less than a month after his administration played an ineffectual role in the failed coup attempt in Panama.

[20748006] |"I believe it will do more damage than good because it will legitimize people like Daniel Ortega," says Curtin Windsor, who served as U.S. ambassador to Costa Rica during the Reagan administration.
[20748007] |Mr. Windsor, among other analysts connected to the conservative Heritage Foundation, fears the gathering of 18 leaders, mostly from Central American nations, will force Mr. Bush "to explain and redeem himself" in the wake of charges that the U.S. failed to do enough to aid the removal of Panamanian dictator Manuel Noriega.

[20748008] |At the same time, liberal and moderate Democrats note the irony of Mr. Bush's joining a celebration of Costa Rican democracy at a time his administration has sought sharp cuts in U.S. aid to the tiny country.
[20748009] |The administration proposed only $57 million in so-called economic support funds for Costa Rica this year, down from the $90 million the U.S. provided last year.

[20748010] |The administration said improvements in Costa Rica's economic condition warrant the cut in aid, which the country uses mainly to make payments on its $4.5 billion foreign debt.
[20748011] |But Costa Rican officials argue that the recent drop in coffee prices, combined with the country's continuing struggle to reinvigorate its economy, make the support as necessary as ever.

[20748012] |"We are crossing the river and we need a little more help to get to the other side," said Rodrigo Sotela, an economic affairs specialist at the Costa Rican Embassy in Washington.

[20748013] |Democrats argue that Costa Rica deserves more assistance for the same reason that Mr. Bush is attending the celebration this weekend: to reward the country for its stability in a region wracked with turmoil and for its efforts to promote peace in Nicaragua.

[20748014] |However, peace efforts by Costa Rican President Oscar Arias haven't always helped the country's cause in Washington.
[20748015] |Mr. Arias's long-time refusal to support the U.S.'s campaign against leftist Nicaragua earned him the ire of the Reagan White House.
[20748016] |And more recently, he insisted on signing a five-nation agreement intended to disarm Nicaragua's U.S.-backed Contra rebels faster than the Bush administration would prefer.

[20748017] |"I think Bush's going there is a helpful sign," said Sen. Terry Sanford (D., N.C.) a member of the Foreign Relations Committee who pushed to provide Costa Rica about the same amount of aid as it received last year.
[20748018] |Lawmakers in both houses support the higher level.

[20748019] |Administration officials defend Mr. Bush's decision to make the trip.
[20748020] |While they acknowledge the president will attend several meals and a working session also attended by Mr. Ortega, they insist that Mr. Bush won't be extending the Nicaraguan leader any special courtesies.
[20748021] |The administration also made clear its continuing distate for the leftist Nicaraguan government in recent days, endorsing a package of electoral aid to the Nicaraguan opposition, renewing the U.S. trade embargo against the country and continuing to complain that the country supports rebel groups in the region.

[20748022] |Officials also insist Mr. Bush will use the trip to highlight his own initiatives for pushing democracy in the region, fighting illegal drugs and assisting the less developed countries.

[20748023] |"Let me say there is a symbolic component to this trip," Secretary of State James Baker told reporters Wednesday.
[20748024] |"There won't be any formal resolutions or communiques, I don't think.
[20748025] |But we still see this as an opportunity to discuss many, many very important issues.

[20749001] |In 1987, the Presidents Commission of the NCAA, which oversees most U.S. intercollegiate sports, contracted with the Washington-based American Institutes for Research to do a survey on the college experiences of what the body chooses to call student-athletes.
[20749002] |A brief "executive summary" was issued last April, and attracted some, but not much, attention.
[20749003] |More-detailed reports followed, and attracted even less notice.
[20749004] |I suspect I may be one of the few people to have read them all.

[20749005] |The sixth and last report now is out, and it puts the effort in perspective.
[20749006] |Titled "Comments From Students," it focuses on the real shame of college sports: what happens to young athletes once they enter academe.
[20749007] |It's little less than a cry for help from those who make the costly show possible.

[20749008] |The previous five reports were mainly statistical, but clear enough in outline.
[20749009] |They showed that participants in Division I football and men's basketball, the big-time "revenue sports," entered school with poorer high-school grades and test scores than "minor-sport" jocks and students who participated in other extracurricular activities, and they got lower grades once they got there, at least partly because of the athletic demands placed on them.

[20749010] |The football and basketball players spent more time on their sports in season than they did on class attendance and homework combined (30 hours a week versus 25.3).
[20749011] |Almost half (49.8%) reported suffering "mental abuse" from coaches, and almost one-quarter (24.8%) said they had been pressured to ignore injuries.

[20749012] |But even those numbers don't describe the situation as well as the athletes do in their own words.
[20749013] |The composite portrait that emerges isn't of a pampered jock marking time until he can land a seven-figure pro contract -- he's part of a tiny minority.
[20749014] |Rather, it's of a kid (we're talking about 17 to 22 year olds here) having a tough time making the best of what will probably be his one shot at college.

[20749015] |The pertinent question, coming at the end of a lengthy, confidential questionnaire, was this: "Are there things about your college life you would like to tell us that we didn't ask about?"
[20749016] |Of the almost 3,000 athletes surveyed, 1,240 took the time to respond.
[20749017] |Here are a few of their answers: -- "They say that I am a student-athlete, but really I'm an athlete-student.
[20749018] |They lied to me on the recruiting trip.
[20749019] |Football is the No. 1 thing here".
[20749020] |-- Junior football player.

[20749021] |-- "Being a student-athlete at college is a lot different from high school.
[20749022] |First, the sport you play is no longer a game -- it becomes a job.
[20749023] |Your coaches demand a lot more out of you even though some of them are not willing to take the time to watch you progress.
[20749024] |You become expendable.
[20749025] |Your interest is not taken to heart because people only care about your performance".
[20749026] |-- Freshman basketball player.

[20749027] |-- "The coaches should have a more personal and sympathetic attitude toward the athletes -- not treat us like pieces of meat.
[20749028] |They always say to get a degree first, but they don't allow us time or to skip practice to study for a test.
[20749029] |They just want to get their job done at any cost to the athlete".
[20749030] |-- Freshman football player.

[20749031] |-- "The pressure put on us to win at all times has resulted in physical violence, such as punching and slapping by coaches.
[20749032] |Some days the coaches make you feel as though you are part of a large herd of animals.
[20749033] |In other words, they treat you like a piece of meat".
[20749034] |-- Sophomore football player.

[20749035] |-- "Playing intercollegiate sports doesn't give you a lot of time to spend with others.
[20749036] |We are almost left out of {campus} social activities.
[20749037] |This mostly happens because we go from football in the fall to lifting in the winter to football again in the spring".
[20749038] |-- Freshman football player.

[20749039] |-- "You talk about free time -- .what free time?
[20749040] |Time to relax and enjoy ourselves is always taken up by something to do with football (meetings, lifting weights, conditioning or films).
[20749041] |There is no recovery period -- it's go, go, go.
[20749042] |ABUSE to our bodies is overwhelming.
[20749043] |With our schedule, it's hard to sleep well knowing what is going to happen the next day".
[20749044] |-- Junior football player.

[20749045] |-- "Physical exhaustion and depression are common in my life and in some of my teammates' lives".
[20749046] |-- Football player, class unspecified.

[20749047] |-- "More often than not, college athletes go through college never really experiencing collegiate life to the fullest.
[20749048] |One has to establish one's own identity away from athletics and make athletics only a part, not a whole, of the student-athlete's life".
[20749049] |-- Sophomore basketball player.

[20749050] |-- "Somehow, and I don't know how, the game needs to be played for fun again, and not for the big bowl revenues or lucrative TV contracts".
[20749051] |-- Graduate-student football player.

[20749052] |There have been rumblings that, at long last, changes may be in the works.
[20749053] |The Knight Foundation, of Akron, Ohio, has established a national commission to look into college-sports reform, and the NCAA Presidents Commission earlier this month recommended cutting spring football practice in half, moving the start of basketball practice back by a month and reducing maximum schedules in that sport to 25 games from 28.

[20749054] |The key word in that paragraph, though, is "may."
[20749055] |NCAA Executive Director Richard Schultz, in accepting a place on the Knight Commission, urged that the panel take a "balanced" view, which looks for all the world like a plea not to rock the boat too much, and the presidents' recommendations could face considerable opposition at the NCAA's full convention in January, which will vote on them.
[20749056] |I read that one unnamed athletics director predicted that the basketball-cutback proposal could fail because of "real world" (i.e., economic) considerations.

[20749057] |But the "real world" also includes the unpleasant truth that colleges are cheating the athletes they have wooed and won.
[20749058] |If they won't change their ways voluntarily, maybe somebody bigger -- Congress -- should make them.

[20750001] |They want late-night shuttles to the biology labs.
[20750002] |They want a 24-hour library.
[20750003] |And like college radicals everywhere, they are talking about a demonstration -- where protesters would gather quietly near the science building and raise their hands, classroom style.

[20750004] |Such is the fiber of the wool that woolly intellectuals let fly at gatherings of Harvard University's new Society of Nerds and Geeks, or SONG.
[20750005] |SONGsters are mad as heck about campus anti-intellectualism and they aren't going to take it anymore, at least not without trying a few really neat ideas first.

[20750006] |"We could have called ourselves the Academic Intellectual Society, but then everyone would have said, `Oh, you mean the nerd-and-geek club,'" Leonid Fridman, SONG's graduate-student adviser, told 19 attendees at the club's inaugural meeting earlier this month.
[20750007] |Membership has since swelled to between 20 and 25.

[20750008] |Some people may think of nerds as calculator-toting, socially awkward individuals with shirt-pocket liners for their pencils and a preoccupation with computers and matters numerical.
[20750009] |Geeks, by at least one definition, are chicken-mutilating circus freaks.

[20750010] |But SONG founder Jeremy Kahn, a Harvard junior, thinks of nerds and geeks more as "nonconformists," albeit with a studious bent.
[20750011] |One of the group's first projects is a "procrastination hot line" that students could call when they have an urge to delay studying.

[20750012] |The club plans to show nerdy movies, such as "Real Genius," in which physics whizzes pop corn with lasers; and naturally, the "Revenge of the Nerds," a tale of college males with runny noses and ill-fitting pants.
[20750013] |One of its "more ambitious goals" is to get Jaime Escalante, the Los Angeles high-school mathematics teacher featured in the film "Stand and Deliver," to come to Harvard for a guest lecture.

[20750014] |Nerds and geeks sometimes find themselves a bit isolated at Harvard.
[20750015] |So Mr. Kahn says high priority is being given to creating a computerized matchmaking service "where instead of being matched for eye color, you could be matched for similar intellectual interests."
[20750016] |For instance?
[20750017] |"I'm a math major, but I want to know about psychobiology.
[20750018] |Hopefully, I'd find someone in psychobiology who wanted to know more about mathematics."

[20750019] |It could work.
[20750020] |Meanwhile, finding a volunteer to write the computer program isn't a problem.

[20751001] |Dime Savings Bank of New York was cleared by the Federal Deposit Insurance Corp. to acquire Starpointe Savings Bank of Somerset, N.J., the banks said.

[20751002] |Starpointe holders, who approved the plan last April, will receive $21 in cash a share, or a total $63 million.
[20751003] |The FDIC cleared the move yesterday, and the banks must wait at least 30 days before closing the purchase.
[20751004] |A closing date hasn't been set.

[20752001] |AEP INDUSTRIES Inc. directors authorized a 3-for-2 split of the common, payable Dec. 7 to stock of record Nov. 22.
[20752002] |The split was aimed at boosting the stock's liquidity, said Brendan Barba, chairman of the Moonachie, N.J., maker of plastic film products.
[20752003] |After the split, the company will have more than 4.7 million shares outstanding.
[20752004] |In national over-the-counter trading yesterday, AEP shares closed at $21.25, down 50 cents.

[20753001] |CRESTMONT FEDERAL SAVINGS & LOAN ASSOCIATION (Edison, N.J.) --
[20753002] |Lawrence B. Seidman, 41 years old, was named chairman of this savings and loan institution.
[20753003] |He will succeed Charles L. Harrington, chairman and chief executive officer, who retired last month.
[20753004] |Crestmont is conducting a search for a chief executive.
[20753005] |Mr. Seidman, a director of Crestmont since July, is general partner of Seidman Financial Associates, which owns 9.89% of Crestmont.

[20754001] |William J. Russo was named senior vice president, public affairs and advertising, for this financial and travel services concern's American Express Bank Ltd. subsidiary.
[20754002] |Mr. Russo, 38 years old, previously was first vice president, public affairs and advertising, at the banking unit.

[20755001] |Environmental concerns are beginning to have as much influence in oil-industry spending plans as the price of crude does.

[20755002] |In the wake of the Exxon Valdez spill in March, new governmental drilling bans are sharply curtailing exploration in promising locations offshore and in Alaska.

[20755003] |At the same time, moves toward tighter air-quality standards are spurring interest in lighter or alternative fuels that don't pollute as much as fuel refined from "heavy" crudes, generally high in sulfur.
[20755004] |Over the years, the world's stream of oil has been growing heavier.

[20755005] |So the scramble is on for lighter crudes globally, and for natural gas in the U.S.

[20755006] |Recently Saudi Arabia and Venezuela, traditional heavy-crude producers, have boasted of new finds of light, low-sulfur oil by their national oil companies.
[20755007] |Venezuela has also earmarked $200 million in new money for light-crude exploration.

[20755008] |And some oil companies are trying to lock in future supplies.
[20755009] |Typical is Ente Nazionale Idrocarburi, Italy's state-owned energy company, which not long ago acquired through its AGIP oil subsidiary a 5% share in the consortium accounting for half of Nigeria's oil output.
[20755010] |AGIP already has an oil stake in Libya.
[20755011] |Both countries produce high-quality, low-sulfur crudes especially suited to making high-octane motor fuel at minimum refining cost.

[20755012] |Franco Reviglio, ENI chairman, looks for sweeping structural change in the oil industry -- he calls it a "revolution" requiring huge investments -- as a result of environmental issues.
[20755013] |He made a special trip to examine U.S. environmental trends because they are often followed in Europe.
[20755014] |ENI needs to know what's coming as it prepares to spend some $1.3 billion on upgrading its refineries, he says.

[20755015] |Oil companies world-wide will have "to spend a lot of money for the cleaner fuels that will be required," says John H. Lichtblau, the president of the Petroleum Industry Research Foundation.
[20755016] |It will go for work ranging from refinery modification to changes in the distribution system, including the way service stations pump fuel into cars.

[20755017] |In the U.S., the search for oil had been headed toward environmentally sensitive areas believed to have vast reserves.
[20755018] |Alaska's Arctic National Wildlife Refuge alone is thought to hide more than three billion barrels of oil.
[20755019] |Until the tanker spill, Big Oil was slowly convincing authorities it could safely produce from such places.

[20755020] |Now the wildlife refuge has been closed to the industry, possibly for years.
[20755021] |Similarly, a group of companies led by Chevron Corp. has been unable to pump oil found off the California coast in the early 1980s.
[20755022] |A huge production system built in the sea off Santa Barbara and ashore is sitting idle.

[20755023] |But the push for cleaner fuels is increasing the attractiveness of natural gas.
[20755024] |More than half the domestic drilling now under way is for gas, partly on the assumption that demand will rise for a fuel that is cleaner to burn than either oil or coal.

[20755025] |Activity has revived in the largest U.S. gas-producing regions, such as the Gulf of Mexico.
[20755026] |Santa Fe International Corp., which is owned by Kuwait (and isn't related to Santa Fe Southern Pacific's unit), is stepping up development of a well off Texas' Matagorda Island where it found gas in 1987.
[20755027] |"We could have sat on it longer, but the impetus is to get the gas to the marketplace," says Richard Poole, senior scout for Santa Fe International.
[20755028] |"We're trying to get it on line as soon as possible now."

[20755029] |This month, Exxon Corp. announced plans for a 400-day project drilling for gas about five miles underground in the Anadarko Basin of western Oklahoma -- the deepest drilling project in the U.S.
[20755030] |Exxon will use a Parker Drilling Co. rig built in 1981 that can go down 9 1/2 miles.

[20756001] |As the Soviet Union grapples with its worsening economy, leading reformers have drawn up a blueprint for change designed to push the nation much closer to a free-market system.

[20756002] |The proposals go far beyond the current and rather confused policies of perestroika, Mikhail Gorbachev's restructuring of the economy.
[20756003] |They lay out a clear timetable and methodology for liberalizing the system of setting prices, breaking up huge industrial monopolies and putting unprofitable state-owned companies out of business.
[20756004] |They also address such taboo subjects as the likelihood of unemployment and high inflation, and recommend ways to soften the social consequences.

[20756005] |While many solutions to the nation's economic troubles are being discussed, the blueprint is attracting widespread attention here because of its comprehensiveness and presumed high-level authorship.

[20756006] |Although it was published unsigned in the latest edition of the weekly Ekonomicheskaya Gazeta, Soviet sources say the article was written by Leonid Abalkin and a small group of colleagues.
[20756007] |Mr. Abalkin, head of the Academy of Science's Institute of Economics, was recently appointed deputy chairman of the Soviet government and head of a state commission on economic reform.

[20756008] |"It's clearly a manifesto for the next stage of perestroika," said one analyst.

[20756009] |The economic ideas in the document are much bolder than current policies.
[20756010] |For example, the proposed overhaul of prices -- an extremely sensitive political topic -- is far more precise than the vague plans announced by Mr. Gorbachev in 1987 and later dropped.

[20756011] |But the proposals also display political savvy, couching some of the most controversial ideas in cautious language so as not to alienate powerful conservatives in the government who stand to lose out if they are implemented.
[20756012] |Seeking a middle path between opponents of change and radicals who demand overnight solutions, the article advocates what it calls a "radical-moderate approach."

[20756013] |The document is to be discussed at a conference of leading economists late this month, and will probably be presented to the Soviet Parliament for consideration this year.
[20756014] |As policy-makers draw up proposals for the next five-year plan, which starts in 1991, the blueprint represents a powerful first shot in what is likely to be a fierce battle over economic reform.

[20756015] |The authors make a gloomy assessment of the economy and concede that "quick and easy paths to success simply don't exist."
[20756016] |Instead, they map out a strategy in several phases from now until 1995.
[20756017] |Most of the measures would probably only start to have an effect on beleaguered Soviet consumers in two to three years at the earliest.
[20756018] |The key steps advocated include: -- PROPERTY.
[20756019] |Rigid ideological restrictions on property ownership should be abandoned.
[20756020] |The document proposes breaking up the monolithic system of state-owned enterprises and farms and allowing a big private sector to flourish, helped by tough anti-monopoly legislation.
[20756021] |The economy would be thrown open to numerous types of ownership between now and 1992, including factories leased by workers or owned by shareholders, cooperatives and joint ventures.
[20756022] |Some forms of private property would be sanctioned.
[20756023] |Such moves would greatly reduce the power of government ministries, who now jealously guard their turf and are seen as one of the major obstacles blocking economic reform.

[20756024] |-- FINANCES.
[20756025] |Emergency measures would be introduced to ease the country's financial crisis, notably its $200 billion budget deficit.
[20756026] |By the end of next year, all loss-making state enterprises would be put out of business or handed over to workers who would buy or lease them or turn them into cooperatives.
[20756027] |Similar steps would be taken to liquidate unprofitable state and collective farms by the end of 1991.
[20756028] |A unified system of taxation should be introduced rapidly.
[20756029] |To mop up some of the 300 billion rubles in circulation, the government should encourage home ownership, including issuing bonds that guarantee holders the right to purchase an apartment.

[20756030] |-- LABOR.
[20756031] |A genuine market for labor and wages would replace the present rigid, centralized system.
[20756032] |Departing from decades of Soviet dogma, the new system would lead to big differences in pay between workers and almost certainly to unemployment.
[20756033] |To cushion the blows, the government would introduce a minimum wage and unemployment benefits.

[20756034] |-- PRICES.
[20756035] |The entire system of centrally set prices would be overhauled, and free-market prices introduced for most wholesale trade and some retail trade.
[20756036] |Consumers would still be able to buy some food and household goods at subsidized prices, but luxury and imported items, including food, would be sold at market prices.
[20756037] |Wholesale prices would be divided into three categories: raw materials sold at fixed prices close to world levels; government-set procurement prices for a small number of key products; and free prices for everything else to be determined by contracts between suppliers and purchasers.
[20756038] |Inflation-adjusted social benefits would ensure that the poor and elderly don't suffer unduly.

[20756039] |-- FOREIGN TRADE.
[20756040] |The current liberalization and decentralization of foreign trade would be taken much further.
[20756041] |Soviet companies would face fewer obstacles for exports and could even invest their hard currency abroad.
[20756042] |Foreigners would receive greater incentives to invest in the U.S.S.R.
[20756043] |Alongside the current non-convertible ruble, a second currency would be introduced that could be freely exchanged for dollars and other Western currencies.
[20756044] |A domestic foreign exchange market would be set up as part of an overhaul of the nation's banking system.

[20756045] |The blueprint is at its vaguest when referring to the fate of the two powerful economic institutions that seem likely to oppose such sweeping plans: the State Planning Committee, known as Gosplan, and the State Committee for Material Supply, or Gossnab.
[20756046] |But it hints strongly that both organizations would increasingly lose their clout as the changes, particularly the introduction of wholesale trade and the breakup of state monopolies, take effect.

[20757001] |Ready, Willing and Unable I always lift the hood When my car doesn't start; If gadgets at home don't work I coolly take them apart.

[20757002] |I'll admit there's nothing wrong That I ever do find, But it's nice when people say I appear mechanically inclined.

[20757003] |-- Joshua Adams.

[20757004] |Flick Shock

[20757005] |At the movies today In detail you see What the prof wouldn't show In Physiology Three.

[20757006] |-- Robert Gordon.

[20757007] |Candid Comment

[20757008] |Don't worry; people will learn to read as long as there are TV program listings.

[20757009] |-- John Drybred.

[20758001] |Albert Engelken and Robert Thomson had never met, though for 38 years their lives had been intertwined in a way peculiar to the sports world.
[20758002] |Mr. Engelken, now a transit-association executive in Washington, D.C., and Mr. Thomson, a paper-products salesman in Montvale, N.J., hadn't even talked to each other.
[20758003] |But one recent day, they became much closer.

[20758004] |Mr. Engelken, a rabid baseball fan, pores over the sports pages to chart the exploits of "my favorite and not-so-favorite teams and players."
[20758005] |He often groans, he says, at the "clutter" of sports stories about drugs, alcohol, gambling and some player's lament "about the miserly millions he is offered to play the game."
[20758006] |His morning paper, the Washington Post, even carries a sports column called "Jurisprudence" that recounts the latest arrests and convictions of players and team managers.
[20758007] |Like many sports buffs, Mr. Engelken has turned cynic.

[20758008] |But his is a story about a hero in an era of sports anti-heroes, and about what Babe Ruth, Mr. Engelken reminds us, once called "the only real game in the world."
[20758009] |To Mr. Engelken, it is also a story "about love, because I'm blessed to have a wife who still thinks her slightly eccentric husband's 50th birthday deserves the ultimate present."

[20758010] |To understand what Mr. Engelken means, one must go back to a sunny October afternoon in 1951 at New York's Polo Grounds stadium, where, it can be argued, the most dramatic moment in baseball history was played out.

[20758011] |It was the ninth inning of the third game of a three-game playoff between the Brooklyn Dodgers and the New York Giants (the predecessor to the San Francisco Giants scheduled to play in tonight's world series).
[20758012] |Baseball fans throughout New York had sweated out a long summer with their teams, and now it had come to this: a battle between the two for the National League pennant -- down to the last inning of the last game, no less.

[20758013] |Some 34,320 fans jammed the stands, and shouted at the top of their lungs.
[20758014] |Mr. Engelken was doing the same across the Hudson River in New Jersey, where, with his nose pressed against the front window of the Passaic-Clifton National Bank, he watched the duel on a television set the bank set up for the event.

[20758015] |The playoff series had riveted the 12-year-old Giants fan.
[20758016] |"The Giants struck first, winning the opener, 3-1, on a two-run homer off Dodger right-hander Ralph Branca," Mr. Engelken recalls with precision today.
[20758017] |"The Giants got swamped in the second game, 100, and trailed 4-1 going into the bottom of the ninth of the third and deciding game.
[20758018] |The Giants scored once and had runners on second {Whitey Lockman} and third {Clint Hartung} as Bobby Thomson advanced to the plate."

[20758019] |The rest, as they say, is history.
[20758020] |Mr. Thomson, a tall, Scottish-born, right-hand hitter, stepped into the batter's box.
[20758021] |"Thomson took a called strike," Mr. Engelken recounts.
[20758022] |The tension mounted as Ralph Branca, again on the mound, stared down the batter.
[20758023] |He wound up and let loose a fastball.
[20758024] |The pitch sailed toward Bobby Thomson high and inside and then, with a crack of the bat, was sent rocketing back into the lower leftfield stands.
[20758025] |"Giants fans went into euphoria," says Mr. Engelken.

[20758026] |And Bobby Thomson was made a legend.
[20758027] |The same Bobby Thomson, it turns out, who sells those paper-goods today.

[20758028] |There can't be an older baseball fan alive who doesn't clearly remember that Bobby Thomson homer, who can't tell you where he was when he heard the famous Russ Hodges radio broadcast -- the one that concluded with Mr. Hodges shouting, over and over, "The Giants win the pennant, the Giants win the pennant!"

[20758029] |Mr. Engelken and Mr. Thomson drifted in different directions in the subsequent years, and the Polo Grounds, located under Coogan's Bluff in upper Manhattan, was replaced by a public-housing project.
[20758030] |Mr. Thomson played outfield and third base until 1960, posting a lifetime .270 batting average and chalking up 264 home runs before retiring and going into paper-goods sales.

[20758031] |Mr. Engelken moved south to Washington, but he took with him enduring memories of the homer of 1951.
[20758032] |When his wife, Betsy, came down the aisle on their wedding day in 1966, Mr. Engelken -- no slouch on the romantic front -- gave her the ultimate compliment: "You look prettier than Bobby Thomson's home run."
[20758033] |The couple's first dog, Homer, was named after the Great Event, though unwitting friends assumed he was the namesake of the poet.

[20758034] |And when Mr. Engelken's sister, Martha, who was born two days before the home run, reached her 25th birthday, Mr. Engelken wrote his sports hero to tell him of the coincidence of events.
[20758035] |Mr. Thomson sent off a card to Martha: "It doesn't seem like 25 years since I hit that home run to celebrate your birth," it read.
[20758036] |Martha was pleased, but nowhere near as much as Mr. Engelken.

[20758037] |The family license plate reads "ENG 23," the first three letters of the family name and -- no surprise here -- Bobby Thomson's uniform number.
[20758038] |And on Mr. Engelken's 40th birthday, his wife bought a book detailing the big homer and sent it off to Mr. Thomson to be autographed.
[20758039] |"What could have been better?" asks Mr. Engelken.

[20758040] |Betsy Engelken asked the same question earlier this year, when her husband was about to turn 50.
[20758041] |She had an idea.

[20758042] |On her husband's 50th birthday (after an auspicious 23 years of marriage, it should be noted), Betsy, Al and their college-bound son set out for New York to visit Fordham University.
[20758043] |Mrs. Engelken had scheduled a stop on the New Jersey Turnpike to, she told her husband, pick up some papers for a neighbor.
[20758044] |The papers would be handed over at a bank of telephone booths just off Exit 10.

[20758045] |"It sounded like something out of Ian Fleming," Mr. Engelken recalls.

[20758046] |At the appointed exit, the family pulled over, and Mrs. Engelken went to get her papers.
[20758047] |Mr. Engelken turned off the motor and rolled down the window.

[20758048] |In a matter of minutes, she was back, with a tall, silver-haired man in tow.
[20758049] |She crouched down by the car window and addressed her husband with her favorite nickname:
[20758050] |"Bertie," she said, "Happy 50th Birthday.
[20758051] |This is Bobby Thomson."

[20758052] |"And there he was," recalls Mr. Engelken.
[20758053] |"The hero of my youth, the one person in history I'd most like to meet.
[20758054] |Keep your Thomas Jeffersons, or St. Augustines or Michelangelos; I'd take baseball's Flying Scot without hesitation."

[20758055] |They talked of the home run.
[20758056] |"I thought it was in the upper deck," said Bobby Thomson, now 66 years old.
[20758057] |They talked of the aftermath.
[20758058] |"I never thought it would become so momentous," Bobby remarked.
[20758059] |Mr. Engelken, says his wife, "was overwhelmed by the whole thing.
[20758060] |It was worth it, just for the look on Albert's face."

[20758061] |The two men spent an hour at Exit 10, rehashing the event, "fulfilling the lifelong dream of a young boy now turned 50," Mr. Engelken says.
[20758062] |His hero signed photographs of the homer and diplomatically called Ralph Branca "a very fine pitcher."
[20758063] |And when Mr. Engelken asked him why he took time off from work for somebody he didn't even know, Bobby Thomson replied: "You know, Albert, if you have the chance in life to make somebody this happy, you have an obligation to do it."

[20758064] |In an interview, Mr. Thomson, who is married and has three grown children, says he has few ties to baseball these days, other than playing old-timers games now and again.
[20758065] |But his fans, to his constant amazement, never let him forget the famous four-bagger.
[20758066] |His mail regularly recalls "my one event," and has been growing in recent years.

[20758067] |In response to the letters, Mr. Thomson usually sends an autographed photo with a polite note, and rarely arranges a rendezvous.
[20758068] |But when Betsy Engelken wrote him, saying she could stop near his New Jersey home, it seemed different.
[20758069] |"What a good feeling it would be for me to do that," he says he thought.

[20758070] |When the Engelken family got back from its trip up north, Mr. Engelken wrote it all down, just to make sure no detail was missed.
[20758071] |"On the way home," his notes recall, "it took concentrated effort to keep that car pointed south.
[20758072] |My mind was miles north at a place called Coogan's Bluff, where a real sports hero had captured the imagination of a kid who never fully grew up and is all the richer for it.

[20758073] |"Take heart, sports fans," he wrote.
[20758074] |"Real heroes exist.
[20758075] |You might not find one in the `Jurisprudence' column.
[20758076] |But who knows?
[20758077] |You might meet up with him at that bank of telephone booths just off Exit 10 of the New Jersey Turnpike.

[20759001] |Southam Inc. said its unprofitable weekly newspaper, The Financial Times of Canada, is up for sale.

[20759002] |Analysts said the announcement, the latest in a series of divestitures and restructuring moves, is aimed at improving Southam's earnings before the expiration in June of a standstill pact with Torstar Corp.

[20759003] |When that agreement expires, Torstar will be free to increase its 22.4% stake in Southam, or to make an offer for the whole company.
[20759004] |Descendants of the Southam family hold an additional 22.6% stake in the Toronto-based company, Canada's largest newspaper publisher.

[20759005] |The newspaper could fetch between 15 million and 20 million Canadian dollars (US$12.8 million to $17.1 million), said one analyst, who asked not to be identified.
[20759006] |A spokesman for Southam declined to comment on the price the company is seeking or on estimates of the paper's annual losses, which most analysts place at between C$4 million and C$7 million.

[20759007] |Yesterday, Southam reported third-quarter earnings of C$10.8 million on revenue of C$395.4 million, down from C$14.6 million on revenue of C$389.6 million in the year-ago quarter.

[20759008] |"To be profitable, the paper requires more circulation and building circulation is an expensive undertaking," said John Macfarlane, the paper's publisher.
[20759009] |Southam said the level of future investment required by the paper would have restricted its options in other areas.

[20759010] |The acquisition of the Financial Times of Canada is "well within reach for any number of media companies, both public and private," said James Cole, an analyst with Toronto-based BBN James Capel Inc.

[20759011] |Possible bidders include Christopher Ondaatje, a Toronto financier and vice chairman of Hees International Bancorp Inc., a holding company controlled by Toronto's Bronfman family.
[20759012] |Mr. Ondaatje sold his stake in Pagurian Corp. to Hees earlier this year and is said to be seeking a media acquisition.
[20759013] |Mr. Ondaatje couldn't be reached for comment, but Roy Mac-Laren, chairman of CB Media, a closely held concern that publishes two business magazines, said his company would take a close look at the newspaper.

[20759014] |Mr. Cole said the sale of the 77-year Financial Times, which Southam has owned since 1961, is consistent with Southam's strategy of cutting costs to obtain maximum profits from its operations while disposing of "chronically under-performing" assets.

[20759015] |Southam agreed to sell its 47% stake in Selkirk Communications Ltd., a broadcasting concern, to Maclean Hunter Ltd. for about C$285 million last year.
[20759016] |This year, it has moved to cut costs in its newspaper division through layoffs and asset sales, while reaching joint venture and acquisition agreements in other areas.

[20759017] |The Financial Times of Canada has no links to the British daily newspaper, The Financial Times.

[20760001] |Norton Co. said net income for the third quarter fell 6% to $20.6 million, or 98 cents a share, from $22 million, or $1.03 a share.

[20760002] |Operating profit for the abrasives, engineering materials and petroleum services concern was $19.2 million, or 91 cents a share, up 3% from $18.7 million, or 87 cents a share.

[20760003] |The company had a tax credit of $1.4 million.
[20760004] |In the year-earlier quarter, the tax credit was $3.3 million.
[20760005] |Sales rose 8% to $368.5 million from $340.7 million.

[20760006] |Operating profit in the company's abrasives segment rose 16% while operating profit in the engineering materials segment rose 2%.
[20760007] |However, the company's petroleum services segment, while profitable, was hurt by high financing costs associated with the company's buy-out of a 50% stake in Eastman Christensen Co. from Texas Eastern Corp. last June.
[20760008] |Norton and Texas Eastern had each held a 50% stake in Eastman in a joint venture.

[20760009] |Norton announced earlier this month that it was exploring the possible sale of all or part of Eastman Christensen.

[20760010] |For the nine months, Norton had net of $81.2 million, or $3.87 a share, and a tax credit of $4.4 million.
[20760011] |In the year-earlier period, the company had net of $77.2 million, or $3.68 a share, and a tax credit of $7.7 million.

[20760012] |Norton had operating profit of $76.8 million, or $3.66 a share, up 11% from $69.5 million, or $3.31 a share.

[20760013] |Sales rose 8% to $1.15 billion from $1.06 billion.

[20761001] |Y.J. Park and her family scrimped for four years to buy a tiny apartment here, but found that the closer they got to saving the $40,000 they originally needed, the more the price rose.
[20761002] |By this month, it had more than doubled.

[20761003] |Now the 33-year-old housewife, whose husband earns a modest salary as an assistant professor of economics, is saving harder than ever.
[20761004] |"I am determined to get an apartment in three years," she says.
[20761005] |"It's all I think about or talk about."

[20761006] |For the Parks and millions of other young Koreans, the long-cherished dream of home ownership has become a cruel illusion.
[20761007] |For the government, it has become a highly volatile political issue.

[20761008] |Last May, a government panel released a report on the extent and causes of the problem.
[20761009] |During the past 15 years, the report showed, housing prices increased nearly fivefold.
[20761010] |The report laid the blame on speculators, who it said had pushed land prices up ninefold.

[20761011] |The panel found that since 1987, real-estate prices rose nearly 50% in a speculative fever fueled by economic prosperity, the 1988 Seoul Olympics and the government's pledge to rapidly develop Korea's southwest.
[20761012] |The result is that those rich enough to own any real estate at all have boosted their holdings substantially.
[20761013] |For those with no holdings, the prospects of buying a home are ever slimmer.

[20761014] |In 1987, a quarter of the population owned 91% of the nation's 71,895 square kilometers of private land, the report said, and 10% of the population owned 65% of the land devoted to housing.
[20761015] |Meanwhile, the government's Land Bureau reports that only about a third of Korean families own their own homes.

[20761016] |Rents have soared along with house prices.
[20761017] |Former National Assemblyman Hong Sa-Duk, now a radio commentator, says the problem is intolerable for many people.
[20761018] |"I'm afraid of a popular revolt if this situation isn't corrected," he adds.
[20761019] |In fact, during the past three months there have been several demonstrations at the office complex where the Land Bureau is housed, and at the National Assembly, demanding the government put a stop to real-estate speculation.

[20761020] |President Roh Tae Woo's administration has been studying the real-estate crisis for the past year with an eye to partial land redistribution.
[20761021] |Last week, the government took three bills to the National Assembly.
[20761022] |The proposed legislation is aimed at rectifying some of the inequities in the current land-ownership system.
[20761023] |Highlights of the bills, as currently framed, are: -- A restriction on the amount of real estate one family can own, to 660 square meters in the nation's six largest cities, but more in smaller cities and rural areas.
[20761024] |The government will penalize offenders, but won't confiscate property.

[20761025] |-- A tax of between 3% and 6% on property holdings that exceed the governmentset ceiling.

[20761026] |-- Taxes of between 15% and 50% a year on "excessive" profits from the resale of property, or the sale of idle land to the government.
[20761027] |The government defines excessive profits as those above the average realized for other similar-sized properties in an area.

[20761028] |-- Grace periods ranging from two to five years before the full scope of the penalties takes effect.

[20761029] |The administration says the measures would stem rampant property speculation, free more land for the government's ambitious housing-construction program, designed to build two million apartments by 1992 -- and, perhaps, boost the popular standing of President Roh.

[20761030] |But opposition legislators and others calling for help for South Korea's renters say the proposed changes don't go far enough to make it possible for ordinary people to buy a home.
[20761031] |Some want lower limits on house sizes; others insist on progressively higher taxation for larger homes and lots.

[20761032] |The Citizens Coalition for Economic Justice, a public-interest group leading the charge for radical reform, wants restrictions on landholdings, high taxation of capital gains, and drastic revamping of the value-assessment system on which property taxes are based.

[20761033] |But others, large landowners, real-estate developers and business leaders, say the government's proposals are intolerable.
[20761034] |Led by the Federation of Korean Industries, the critics are lobbying for the government to weaken its proposed restrictions and penalties.

[20761035] |Government officials who are urging real-estate reforms balk at the arguments of business leaders and chafe at their pressure.
[20761036] |"There is no violation of the capitalistic principle of private property in what we are doing," says Lee Kyu Hwang, director of the government's Land Bureau, which drafted the bills.
[20761037] |But, he adds, the constitution empowers the government to impose some controls, to mitigate the shortage of land.

[20761038] |The land available for housing construction stands at about 46.2 square meters a person -- 18% lower than in Taiwan and only about half that of Japan.

[20761039] |Mr. Lee estimates that about 10,000 property speculators are operating in South Korea.
[20761040] |The chief culprits, he says, are big companies and business groups that buy huge amounts of land "not for their corporate use, but for resale at huge profit."

[20761041] |One research institute calculated that as much as 67% of corporate-owned land is held by 403 companies -- and that as little as 1.5% of that is used for business.
[20761042] |The government's Office of Bank Supervision and Examination told the National Assembly this month that in the first half of 1989, the nation's 30 largest business groups bought real estate valued at $1.5 billion.

[20761043] |The Ministry of Finance, as a result, has proposed a series of measures that would restrict business investment in real estate even more tightly than restrictions aimed at individuals.

[20761044] |Under those measures, financial institutions would be restricted from owning any more real estate than they need for their business operations.
[20761045] |Banks, investment and credit firms would be permitted to own land equivalent in value to 50% of their capital -- currently the proportion is 75%.
[20761046] |The maximum allowable property holdings for insurance companies would be reduced to 10% of their total asset value, down from 15% currently.

[20761047] |But Mrs. Park acknowledges that even if the policies work to slow or stop speculation, apartment prices are unlikely to go down.
[20761048] |At best, she realizes, they will rise more slowly -- more slowly, she hopes, than her family's income.

[20762001] |CAMBREX Corp., Bayonne, N.J., declared its initial quarterly of five cents a share, payable Dec. 1 to stock of record Nov. 10.
[20762002] |The maker of specialty chemicals has about 5.9 million shares outstanding.
[20762003] |The company said the move recognizes its strong financial position.
[20762004] |Although profits were "squeezed" in 1989, mainly as a result of higher raw-material costs, the company said it is confident about future earnings and cash flow for 1990 and beyond.
[20762005] |In national over-the-counter trading yesterday, Cambrex shares rose 50 cents to close at $13 a share.

[20763001] |The Justice Department said it is seeking to join a private lawsuit challenging a Pittsburgh suburb's zoning ordinance that sharply restricts the locations available to group homes for the handicapped.

[20763002] |This would be the department's first suit challenging a local zoning ordinance under 1988 amendments to the Fair Housing Act.
[20763003] |Under those amendments, which took effect in March of this year, the federal government can intervene in private housing-discrimination lawsuits.

[20763004] |The ordinance, in Moon Township, prohibits locating a group home for the handicapped within a mile of another such facility.
[20763005] |In papers filed with the federal district court in Pittsburgh, the Justice Department alleged that the ordinance, by limiting the number of group homes that can be established in the township, makes housing unavailable on account of handicap.
[20763006] |The private suit was brought by three mentally retarded people who live in a group home in Moon.

[20763007] |Greg Smith, Moon Township manager, said the ordinance is intended to prevent the concentration of group homes for the mentally retarded from changing "the character and flavor of the neighborhood."
[20763008] |He said the ordinance also will benefit the mentally retarded.
[20763009] |"Our intent is to spread them out" to insure they are well integrated into the community, he said.

[20764001] |Energetic and concrete action has been taken in Colombia during the past 60 days against the mafiosi of the drug trade, but it has not been sufficiently effective, because, unfortunately, it came too late.

[20764002] |Ten years ago, the newspaper El Espectador, of which my brother Guillermo was editor, began warning of the rise of the drug mafias and of their leaders' aspirations to control Colombian politics, especially the Congress.
[20764003] |Then, when it would have been easier to resist them, nothing was done and my brother was murdered by the drug mafias three years ago.

[20764004] |The most ruthless dictatorships have not censored their press more brutally than the drug mafias censor Colombia's.
[20764005] |The censorship is enforced through terrorism and assassination.
[20764006] |In the past 10 years about 50 journalists have been silenced forever, murdered.

[20764007] |Within the past two months a bomb exploded in the offices of the El Espectador in Bogota, destroying a major part of its installations and equipment.
[20764008] |And only last week the newspaper Vanguardia Liberal in the city of Bucaramanga was bombed, and its installations destroyed.
[20764009] |Journalists and their families are constantly threatened as are the newspaper distribution outlets.
[20764010] |Distribution centers are bombed, and advertisers are intimidated.
[20764011] |Censorship is imposed by terrorism.

[20764012] |If the Colombian media accept this new and hideous censorship there is little doubt that the drug mafia's terrorism someday will extend to all the newspapers published in the free world.
[20764013] |The solidarity of the uncensored media world-wide against drug terrorism is the only way press freedom can survive.

[20764014] |The American people and their government also woke up too late to the menace drugs posed to the moral structure of their country.
[20764015] |Even now, the American attack upon this tremendous problem is timid in relation to the magnitude of the threat.
[20764016] |I can attest that a recent Colombian visitor to the U.S. was offered drugs three times in the few blocks' walk between Grand Central Terminal and the Waldorf Astoria Hotel in midtown Manhattan.
[20764017] |Colombia alone -- its government, its people, its newspapers -- does not have the capacity to fight this battle successfully.
[20764018] |All drug-consuming countries must jointly decide to combat and punish the consumers and distributors of drugs.
[20764019] |The U.S., as the major drug consumer, should lead this joint effort.
[20764020] |Reduction, if not the total cessation, of drug consumption is the requirement for victory.

[20764021] |Much is being done in Colombia to fight the drug cartel mafia.
[20764022] |Luxurious homes and ranches have been raided by the military authorities, and sophisticated and powerful communications equipment have been seized.
[20764023] |More than 300 planes and helicopters have been impounded at airports, and a large number of vehicles and launches has been confiscated.
[20764024] |The military has also captured enormous arsenals of powerful and sophisticated weapons, explosives and other war-like materiel.
[20764025] |Much has been accomplished and public opinion decisively supports the government and the army -- but, on the other hand, none of the key drug barons have been captured.

[20764026] |There has been a lot of talk that a large portion of the Colombian economy is sustained by the laundering of drug money.
[20764027] |In my opinion, this is not true.
[20764028] |Laundered drug money has served only to increase, unrealistically, the price of real estate, creating serious problems for low-income people who aspire to own their own homes.
[20764029] |Drug money has also gone to buy expensive cars, airplanes, launches and nightclubs where drugs are consumed.
[20764030] |But most of the drug money is kept in investments and in financial institutions outside Colombia.
[20764031] |In fact, the cooperation of those financial institutions is essential to the success of the drug battle.

[20764032] |What is of much more importance to the Colombian economy than the supposed benefits of laundered drug money is higher prices for Colombia's legitimate products.
[20764033] |The price of coffee has gone down almost 45% since the beginning of the year, to the lowest level (after inflation) since the Great Depression.
[20764034] |Market conditions point to even lower prices next year.
[20764035] |The 27-year-old coffee cartel had to be formally dissolved this summer.
[20764036] |As a result, Colombia will earn $500 million less from its coffee this year than last.
[20764037] |Our coffee growers face reductions in their income, and this tempts them to contemplate substituting coca crops for coffee.

[20764038] |U.S. interests occasionally try to impose barriers to the import of another important Colombian export -- cut flowers -- into the American market.
[20764039] |A just price and an open market for what Colombian produces and exports should be the policy of the U.S.

[20764040] |I take advantage of this opportunity given to me by The Wall Street Journal to make a plea to the millions of readers of this newspaper, to become soldiers dedicated to the fight against the use of drugs.
[20764041] |Each gram of cocaine consumed is a deadly bullet against those in our country and in the rest of the world who fight this terrible scourge.
[20764042] |A crusade of NO to the consumption of drugs is imperative.

[20764043] |Mr. Cano is president of El Espectador, a newspaper founded by his grandfather.

[20765001] |It has more drug users than Boston has people.
[20765002] |Thirty-four thousand of its children live in foster homes, while 50,000 residents have no homes at all.
[20765003] |Its tax base is shrinking, a $1 billion budget deficit looms, and the city faces contract negotiations with all major municipal unions next year.

[20765004] |This is New York City.
[20765005] |When the dust and dirt settle in an extra-nasty mayoral race, the man most likely to gain custody of all this is a career politician named David Dinkins.
[20765006] |Running the nation's largest and most ornery city may be no treat, but at least Mr. Dinkins knows what to expect from it.
[20765007] |As the campaign hits the home stretch, however, voters still have very little idea what they can expect from him.
[20765008] |After 25 years in city politics, David Dinkins remains an enigma.

[20765009] |The soft-spoken, silver-haired Manhattan borough president -- the first black man to win the Democratic nomination for mayor here -- doesn't have a single prominent political enemy.
[20765010] |While he is widely described as a man with deep convictions, he has few major political programs that he can call his own.
[20765011] |Asked about his greatest achievement in public life, he first speaks about the quality of his staff.

[20765012] |Now, as election day nears, even some supporters wonder what he will do if he wins the mayoralty on Nov. 7.
[20765013] |They wonder whether he can be firm with his longtime allies, including union leaders and political cronies who may seek a place at the trough.
[20765014] |They wonder whether he has the economic know-how to steer the city through a possible fiscal crisis, and they wonder who will be advising him.
[20765015] |Will he, if he wins, be in the thrall of the most liberal of his allies, who advocate such policies as rent control for commercial buildings, or will he tilt toward the real-estate interests that have funneled money into his campaign?

[20765016] |After his decisive primary victory over Mayor Edward I. Koch in September, Mr. Dinkins coasted, until recently, on a quite-comfortable lead over his Republican opponent, Rudolph Giuliani, the former crime buster who has proved a something of a bust as a candidate.

[20765017] |But Mr. Dinkins has stumbled in the past two weeks over his campaign's payments to a black activist who is a convicted kidnapper, and over his handling of a stock sale to his son.
[20765018] |Polls also have recorded some slippage in Mr. Dinkins's support among Jewish voters, and citywide projections now put his lead at between four and 20 percentage points.

[20765019] |In an interview with reporters and editors of The Wall Street Journal, Mr. Dinkins appears quite confident of victory and of his ability to handle the mayoralty.
[20765020] |"A lot of people think I will give away the store, but I can assure you I will not," he says.
[20765021] |"I am aware we have real budgetary problems."

[20765022] |The city is full of aging bridges, water mains and roadways that are in need of billions of dollars worth of repair.
[20765023] |Renewed efforts to fight drugs and crime will be costly.
[20765024] |But city officials say tax revenues are lagging.
[20765025] |And after a decade of explosive job growth on Wall Street, a period of contraction is under way.

[20765026] |Mr. Koch already has announced he will drop 3,200 jobs from the city payroll, but that won't be enough.
[20765027] |New York State Comptroller Edward Regan predicts a $1.3 billion budget gap for the city's next fiscal year, a gap that could grow if there is a recession.
[20765028] |If elected, Mr. Dinkins will probably have no choice but to raise taxes on overburdened businesses or cut spending in already under-serviced neighborhoods.

[20765029] |"He is going to face a mess," says City Council President Andrew Stein.
[20765030] |"His supporters are not venal, but their solution to everything will be to spend more money, and he won't have any money."

[20765031] |By and large, Mr. Dinkins has finessed the touchy question of whose ox he would gore.
[20765032] |Instead of focusing on the financial future, Mr. Dinkins has sold himself as a unifier for a city recently touched by racial violence and as a soothing antidote to 12 years of commotion generated by Mayor Koch.
[20765033] |"The thing about the Dinkins candidacy is that it offers hope to a broad range of people," says Meyer Frucher, a real-estate executive and former aide to Gov. Mario Cuomo.
[20765034] |"It is a feel-good candidacy."

[20765035] |No doubt, Mr. Dinkins has been a calming influence.
[20765036] |He is an avuncular figure who remembers the birthdays of colleagues' children, opens doors for women, and almost never has a bad word to say about anybody.
[20765037] |More important, he emerged as a peacemaker last summer after the Central Park rape of a white jogger -- in which a group of Harlem teens was charged -- and the racial murder of a black teen-ager in the white Brooklyn neighborhood of Bensonhurst.
[20765038] |Rather than scaring off white voters, as many predicted he would, Mr. Dinkins attracted many whites precisely because of his reputation for having a cool head.
[20765039] |(Keeping cool is a Dinkins priority: On humid days this summer, he was known to change his double-breasted suits as many as four times a day.)

[20765040] |But even in his front-runner campaign, he has shown signs of the indecisiveness and confusion that some say has plagued his tenure as Manhattan borough president -- and might hinder him as mayor.
[20765041] |Over the last few weeks, he has frittered away roughly half of what was once a 33-point lead in the polls over Mr. Giuliani.
[20765042] |A story about how he mishandled the sale to his son of his stock in a media company controlled by his political patron Percy Sutton was allowed to fester a full week before Mr. Dinkins faced the media.
[20765043] |He has canceled numerous campaign appointments and was largely inaccessible to the media until the stock story broke.

[20765044] |His campaign was caught flat-footed amid allegations it paid almost $10,000 for what it said was a "get-out-the-vote" effort by black activist Sonny Carson, a convicted kidnapper who later said publicly that he is "anti-white."
[20765045] |Critics have said the payment looked like an attempt by the Dinkins camp to get Mr. Carson to stop leading confrontational demonstrations protesting the Bensonhurst murder -- protests the campaign may have feared could cause some white voters to turn from a black candidate.

[20765046] |Mr. Dinkins also has failed to allay Jewish voters' fears about his association with the Rev. Jesse Jackson, despite the fact that few local non-Jewish politicians have been as vocal for Jewish causes in the past 20 years as Mr. Dinkins has.

[20765047] |These campaign problems have echoed difficulties Mr. Dinkins has run into before.
[20765048] |A former U.S. Marine, Mr. Dinkins got off to a quick start in politics, joining a local Democratic political club in the 1950s, linking up with black urban leaders such as Charles Rangel, Basil Paterson and Mr. Sutton, and getting himself elected to the state assembly in 1965.
[20765049] |But his chance to become deputy mayor under Mayor Abraham Beame, a plan boosted by Mr. Sutton, was squandered because of Mr. Dinkins's failure -- still largely unexplained -- to file income tax returns for four years running.
[20765050] |"I always thought of this as a thing that could always be done tomorrow," he said at the time.

[20765051] |Later, Mr. Dinkins became more deeply indebted to Mr. Sutton and other city pols, including then-City Council President Paul O'Dwyer, when they helped him get appointed city clerk, a largely ceremonial post responsible for the city's marriage bureau, among other things.
[20765052] |(Mr. O'Dwyer is now one of the lawyers for Mr. Sutton's media company.)

[20765053] |The debt rose further in 1977 when Mr. Sutton resigned his position as Manhattan borough president to run for mayor.
[20765054] |Mr. Sutton recalls: "When I left, I sat down with Charlie {Rangel}, Basil {Paterson} and David, and David said, 'Who will run for borough president?' And I said, 'You will.'"

[20765055] |David Garth, Mayor Koch's longtime media adviser, says of Mr. Dinkins, "He really is the personification of the patronage system.
[20765056] |But the guy is so personally decent, people tend to forget that."

[20765057] |Mr. Dinkins lost twice by wide margins before finally getting elected borough president in 1985.
[20765058] |But by most accounts, he made little of the post and was best known among city politicians for his problems making up his mind on matters before the city's Board of Estimate, the body that votes on crucial budget and land-use matters.
[20765059] |Colleagues today recall with some humor how meetings would crawl into the early morning hours as Mr. Dinkins would march his staff out of board meetings and into his private office to discuss, en masse, certain controversial proposals.
[20765060] |"He taught me how to drink herbal tea instead of coffee at 3 a.m., I'll give him that," says Deputy Mayor Robert Esnard.

[20765061] |Often, Mr. Dinkins's procrastination prevented him from having a say in the way things turned out, critics claim.
[20765062] |On the campaign stump, he often points out that he was the only Board of Estimate member to vote against a controversial real-estate project at Manhattan's Columbus Circle.
[20765063] |But board members say he took so long to decide how to vote that by the time he decided, it was too late to try to draw other members to his position.
[20765064] |Says one city official: "Everybody else had brought in the wagons and made their deal.
[20765065] |He would have got a lot more done if he made up his mind faster."

[20765066] |One Board member, Bronx Borough President Ferdinand Ferrer, was said to be so impatient with Mr. Dinkins's behavior at many meetings that he withheld his support for Mr. Dinkins's mayoral effort until late in the primary campaign.
[20765067] |"I had some problem from time to time on the length of time he would take to make up his mind," Mr. Ferrer admits, but he maintains that he didn't delay his support of Mr. Dinkins and that he backs the Democratic candidate enthusiastically.

[20765068] |Mr. Dinkins's campaign manager and former chief of staff, Bill Lynch, denies that the Manhattan borough president has taken too long to decide important issues.
[20765069] |"We didn't rubber-stamp everything that came to us," Mr. Lynch says.

[20765070] |On some occasions when Mr. Dinkins has discussed the issues during the campaign, he has run into a familiar kind of trouble.
[20765071] |Some supporters were stunned this summer when Mr. Dinkins suggested weakening the law forbidding public employees to go on strike.
[20765072] |He withdrew the remark.
[20765073] |When he later sided with striking hospital workers, some allies cringed a little more, concerned that Mr. Dinkins was setting the wrong tone for coming contract negotiations with city employees.

[20765074] |Then, two days before receiving an endorsement from environmental groups, Mr. Dinkins promised he would issue a three-year moratorium on construction of garbage-incinerator plants.
[20765075] |That announcement was roundly criticized by Mayor Koch -- who has endorsed Mr. Dinkins -- because the city faces a garbage crisis and has already spent $5 million planning for an incinerator that would be scrapped under Mr. Dinkins's proposal.

[20765076] |While his public statements have at times been confusing, Mr. Dinkins's position papers have more consistently reflected anti-development sentiment.
[20765077] |He favors a form of commercial rent control, which the financial community believes would make it more difficult to attract investment in the city.
[20765078] |In the midst of a labor shortage, he proposes linking city subsidies to businesses to their record of hiring New York City residents.
[20765079] |With an untrained local labor pool, many experts believe, that policy could drive businesses from the city.

[20765080] |And he favors a more cooperative approach toward the neighboring states of New Jersey and Connecticut in the battle over companies thinking of moving employees out of New York City.
[20765081] |Many economic-development officials say the Koch administration's aggressive approach helped save 5,000 Chase Manhattan Bank jobs from moving across the Hudson.

[20765082] |But Mr. Dinkins's economic planks don't seem to bother the business community, where he draws significant support.
[20765083] |Steven Spinola, president of the Real Estate Board of New York, an industry organization, says Mr. Dinkins's "economic development program is shortsighted, but when it comes down to it, he can be reasonable."

[20765084] |Mr. Dinkins's inner circle of advisers appears to include both ideologues and pragmatists, leaving voters with little clue as to who will be more influential.
[20765085] |The key man seems to be the campaign manager, Mr. Lynch.
[20765086] |A disheveled, roly-poly son of a Long Island potato farmer, Mr. Lynch is a veteran union organizer who worked on the presidential campaigns of Sen. Edward Kennedy and Mr. Jackson.
[20765087] |But as the Dinkins campaign hit tough times this month, Andrew Cuomo, the politically seasoned son of the New York governor, is also said to have taken a more active role on strategy.

[20765088] |Another close ally is Ruth Messinger, a Manhattan city councilwoman, some of whose programs, such as commercial rent control, have made their way into Mr. Dinkins's position papers.
[20765089] |If she remains influential with Mr. Dinkins, as some suggest she will, his mayoralty may take on a more anti-development flavor.

[20765090] |But Lincoln Center President Nathan Leventhal, who would head a Dinkins transition team, is more mainstream, as is real-estate executive Anthony Gliedman, another insider.
[20765091] |Mr. Dinkins also has said he would receive economic advice from a board that would include American Express Co. chairman James D. Robinson III, investment banker Felix Rohatyn, leveraged-buy-out specialist Reginald Lewis and attorney Joseph Flom.

[20765092] |Some business leaders and others also believe that Mr. Dinkins would place significant responsibility in the hands of a deputy mayor with a strong administrative background.
[20765093] |Names of possible deputies that have surfaced include former mayoral candidate Richard Ravitch, former schools chancellor Frank Macchiarola and Messrs. Leventhal and Gliedman.

[20765094] |Then there are Mr. Dinkins's old-time Harlem colleagues, such as U.S. Rep. Rangel, former Deputy Mayor Paterson and Mr. Sutton.
[20765095] |Having attained positions of real influence or wealth, these men constitute the Old Guard of New York City black politics; they are less confrontational than the younger, more activist black political community that has been based largely in Brooklyn.
[20765096] |(Part of Mr. Dinkins's strength is his ability to win the support of both the Brooklyn and Harlem factions.)

[20765097] |"We know there are potholes for the city out there," says Mr. Paterson, Mr. Dinkins's former law partner.
[20765098] |"If any of us think we're going to sidetrack David's determination to be the best possible mayor because of his obligations to us, we are making a sad mistake."
[20765099] |Adds Ms. Messinger, who is expected to win the borough president's job Mr. Dinkins is vacating, "You have to remember David is a pragmatist."

[20765100] |But Mr. Dinkins's sense of pragmatism often comes across more as an insider's determination not to upset the political apple cart.
[20765101] |He is taken aback in an interview when asked whether, as mayor, he plans on reforming the political "fiefdoms" that perpetuate the monumental ineffectiveness of New York's school system.
[20765102] |"I will sit down and talk some of the problems out, but take on the political system? Uh-uh," he says with a shake of the head.

[20765103] |Despite many doubts about his candidacy, white New Yorkers -- who gave Mr. Dinkins 30% of their votes in the primary -- aren't expected to desert in sufficient numbers to turn the election to Mr. Giuliani.
[20765104] |The former U.S. attorney, who prosecuted targets ranging from Mafia dons to Wall Street executives, has succeeded in raising questions about Mr. Dinkins's ethical standards, but so far has failed to generate excitement about his own candidacy.
[20765105] |As a Republican in an overwhelmingly Democratic city, Mr. Giuliani has an inherent handicap.
[20765106] |As a first-time candidate, he has been slow to learn the nuances of New York City politicking.

[20765107] |Mr. Giuliani is finding that Mr. Dinkins, in his many years in public life, has built up considerable good will that so far has led many voters to overlook certain failings.
[20765108] |"The bottom line is that he is a very genuine and decent guy," says Malcolm Hoenlein, a Jewish community leader.
[20765109] |"In the end, I think David will be judged for being David.

[20766001] |Toni Johnson pulls a tape measure across the front of what was once a stately Victorian home.

[20766002] |A deep trench now runs along its north wall, exposed when the house lurched two feet off its foundation during last week's earthquake.
[20766003] |A side porch was ripped away.
[20766004] |The chimney is a pile of bricks on the front lawn.
[20766005] |The remainder of the house leans precariously against a sturdy oak tree.

[20766006] |The petite, 29-year-old Ms. Johnson, dressed in jeans and a sweatshirt as she slogs through the steady afternoon rain, is a claims adjuster with Aetna Life & Casualty.
[20766007] |She has been on the move almost incessantly since last Thursday, when an army of adjusters, employed by major insurers, invaded the San Francisco area to help policyholders sift through the rubble and restore some order to their lives.

[20766008] |Equipped with cellular telephones, laptop computers, calculators and a pack of blank checks, they parcel out money so their clients can find temporary living quarters, buy food, replace lost clothing, repair broken water heaters, and replaster walls.
[20766009] |Some of the funds will used to demolish unstable buildings and clear sites for future construction.

[20766010] |Many adjusters are authorized to write checks for amounts up to $100,000 on the spot.
[20766011] |They don't flinch at writing them.
[20766012] |"That's my job -- get {policyholders} what they're entitled to," says Bill Schaeffer, a claims supervisor who flew in from Aetna's Bridgeport, Conn., office.

[20766013] |The Victorian house that Ms. Johnson is inspecting has been deemed unsafe by town officials.
[20766014] |But she asks a workman toting the bricks from the lawn to give her a boost through an open first-floor window.
[20766015] |Once inside, she spends nearly four hours measuring and diagramming each room in the 80-year-old house, gathering enough information to estimate what it would cost to rebuild it.
[20766016] |She snaps photos of the buckled floors and the plaster that has fallen away from the walls.

[20766017] |While she works inside, a tenant returns with several friends to collect furniture and clothing.
[20766018] |One of the friends sweeps broken dishes and shattered glass from a countertop and starts to pack what can be salvaged from the kitchen.
[20766019] |Others grab books, records, photo albums, sofas and chairs, working frantically in the fear that an aftershock will jolt the house again.

[20766020] |The owners, William and Margie Hammack, are luckier than many others.
[20766021] |A few years ago, Mrs. Hammack insisted on buying earthquake insurance for this house, which had been converted into apartments.
[20766022] |Only about 20% of California home and business owners carried earthquake coverage.
[20766023] |The Hammacks' own home, also in Los Gatos, suffered comparatively minor damage.

[20766024] |Ms. Johnson, who works out of Aetna's office in Walnut Creek, an East Bay suburb, is awed by the earthquake's destructive force.
[20766025] |"It really brings you down to a human level," she says.
[20766026] |"It's hard to accept all the suffering people are going through, but you have to.
[20766027] |If you don't, you can't do your job."

[20766028] |For Aetna and other insurers, the San Francisco earthquake hit when resources in the field already were stretched.
[20766029] |Most companies still are trying to sort through the wreckage caused by Hurricane Hugo in the Carolinas last month.
[20766030] |Aetna, which has nearly 3,000 adjusters, had deployed about 750 of them in Charlotte, Columbia, and Charleston.
[20766031] |Adjusters who had been working on the East Coast say the insurer will still be processing claims from that storm through December.
[20766032] |It could take six to nine months to handle the earthquake-related claims.

[20766033] |When the earthquake rocked northern California last week, Aetna senior claims executives from the San Francisco area were at the company's Hartford, Conn., headquarters for additional training on how to handle major catastrophes, including earthquakes.

[20766034] |Since commercial airline flights were disrupted, the company chartered three planes to fly these executives back to the West Coast and bring along portable computers, cellular phones and some claims adjusters.
[20766035] |Because of the difficulty of assessing the damages caused by the earthquake, Aetna pulled together a team of its most experienced claims adjusters from around the country.
[20766036] |Even so, few had ever dealt with an earthquake.

[20766037] |Some adjusters, like Alan Singer of San Diego, had been working in Charleston for nearly four weeks.
[20766038] |He returned home last Thursday, packed a bag with fresh clothes and reported for duty Friday in Walnut Creek.
[20766039] |Offices were set up in San Francisco and San Jose.

[20766040] |In a few instances, Aetna knew it would probably be shelling out big bucks, even before a client called or faxed in a claim.
[20766041] |For example, officials at Walnut Creek office learned that the Amfac Hotel near the San Francisco airport, which is insured by Aetna, was badly damaged when they saw it on network television news.

[20766042] |"The secret to being a good adjuster is counting," says Gerardo Rodriguez, an Aetna adjuster from Santa Ana.
[20766043] |"You have to count everything."

[20766044] |Adjusters must count the number of bathrooms, balconies, fireplaces, chimneys, microwaves and dishwashers.
[20766045] |But they must also assign a price to each of these items as well as to floors, wallcoverings, roofing and siding, to come up with a total value for a house.
[20766046] |To do that, they must think in terms of sheetrock by the square foot, carpeting by the square yard, wallpaper by the roll, molding by the linear foot.
[20766047] |Using a calculator and a unit-price guide for such jobs as painting, plumbing and roofing in each major region of the country, adjusters can figure out the value of a home in today's market and what it would cost to rebuild it.

[20766048] |Sometimes repairs are out of the question.
[20766049] |When Aetna adjuster Bill Schaeffer visited a retired couple in Oakland last Thursday, he found them living in a mobile home parked in front of their yard.

[20766050] |The house itself, located about 50 yards from the collapsed section of double-decker highway Interstate 880, was pushed about four feet off its foundation and then collapsed into its basement.

[20766051] |The next day, Mr. Schaeffer presented the couple with a check for $151,000 to help them build a new home in the same neighborhood.
[20766052] |He also is working with a real-estate agent to help find them an apartment to rent while their home is being built.

[20766053] |Many of the adjusters employed by Aetna and other insurers have some experience with construction work or carpentry.
[20766054] |But such skills were alien to Toni Johnson.
[20766055] |Four years ago, she was managing a film-processing shop and was totally bored.
[20766056] |A friend mentioned that she might want to look into a position at Aetna, if she was interested in a job that would constantly challenge her.
[20766057] |She signed up, starting as an "inside" adjuster, who settles minor claims and does a lot of work by phone.
[20766058] |A year later, she moved to the commercial property claims division.

[20766059] |She spent a month at an Aetna school in Gettysburg, Pa., learning all about the construction trade, including masonry, plumbing and electrical wiring.
[20766060] |That was followed by three months at the Aetna Institute in Hartford, where she was immersed in learning how to read and interpret policies.

[20766061] |Her new line of work has some perils.
[20766062] |Recently, a contractor saved her from falling three stories as she investigated what remained of an old Victorian house torched by an arsonist.
[20766063] |"I owe that contractor.
[20766064] |I really do," she says.

[20766065] |As Ms. Johnson stands outside the Hammack house after winding up her chores there, the house begins to creak and sway.
[20766066] |The ground shakes underneath her.
[20766067] |It is an aftershock, one of about 2,000 since the earthquake, and it makes her uneasy.

[20766068] |The next day, as she prepares a $10,000 check for the Hammacks, which will cover the cost of demolishing the house and clearing away the debris, she jumps at the slightest noise.
[20766069] |On further reflection, she admits that venturing inside the Hammacks' house the previous day wasn't "such a great idea."

[20766070] |During her second meeting with the Hammacks, Ms. Johnson reviews exactly what their policy covers.
[20766071] |They would like to retrieve some appliances on the second floor, but wonder if it's safe to venture inside.
[20766072] |Ms. Johnson tells them that, if the appliances can't be salvaged, their policy covers the replacement cost.
[20766073] |Mr. Hammack is eager to know what Aetna will pay for the house, which has to come down.
[20766074] |"When will I get that check for a million dollars?" he jokes.

[20766075] |The adjuster hadn't completed all the calculations, but says: "We're talking policy limits."
[20766076] |In this case, that's about $250,000.
[20766077] |It suddenly dawns on Mr. Hammack that rebuilding the house in Los Gatos, an affluent community in Santa Clara County, may cost more than Aetna's policy will pay.
[20766078] |"We can lose money on this," he says.

[20766079] |"And you didn't want me to buy earthquake insurance," says Mrs. Hammack, reaching across the table and gently tapping his hand.

[20766080] |Earthquake insurance costs about $2 to $4 annually for every $1,000 of value, and high deductibles mean it generally pays only when there is a catastrophe.
[20766081] |So, many Californians believe they can get by without it.
[20766082] |Even Ms. Johnson herself made that assumption.
[20766083] |"I always knew that the 'Big One' was coming, but not during my lifetime," she says.
[20766084] |Now she says she's thinking of contacting her own insurance agent.

[20766085] |For Ms. Johnson, dealing with the earthquake has been more than just a work experience.
[20766086] |She lives in Oakland, a community hit hard by the earthquake.
[20766087] |She didn't have hot water for five days.
[20766088] |The apartment she shares with a 12-year-old daughter and her sister was rattled, books and crystal hit the floor, but nothing was severely damaged.
[20766089] |Her sister, Cynthia, wishes Toni had a different job.
[20766090] |"We worry about her out there," Cynthia says.

[20766091] |Last Sunday, Ms. Johnson finally got a chance to water her plants, but stopped abruptly.
[20766092] |"I realized I couldn't waste this water when there are people in Watsonville who don't have fresh water to drink."
[20766093] |She hasn't played any music since the earthquake hit, out of respect for those who died on Interstate 880 where the roadway collapsed.

[20767001] |The Federal Communications Commission allowed American Telephone & Telegraph Co. to continue offering discount phone services for large-business customers and said it would soon re-examine its regulation of the long-distance market.

[20767002] |The FCC moves were good news for AT&T, which has been striving since the breakup of the phone system for greater latitude in pricing and reduced regulation.
[20767003] |Alfred Sikes, the new FCC chairman, championed deregulation of AT&T at his last job as head of a Commerce Department telecommunications agency.
[20767004] |But it has been an open question whether Mr. Sikes, an extraordinarily cautious man, would continue pushing deregulation at the FCC in the face of what is likely to be great political pressure.

[20767005] |"It means that Sikes is serious about the deregulation of long distance," said Jack Grubman, a telecommunications analyst at PaineWebber Inc., who attended the FCC meeting.
[20767006] |"All the commissioners were in amazing agreement {to re-examine regulation} for only having been together for a few months."

[20767007] |The FCC took three specific actions regarding AT&T.
[20767008] |By a 4-0 vote, it allowed AT&T to continue offering special discount packages to big customers, called Tariff 12, rejecting appeals by AT&T competitors that the discounts were illegal.
[20767009] |Then by a separate 4-0 vote, it chose the narrowest possible grounds to strike down a different discount plan, called Tariff 15, that AT&T offered to Holiday Corp.

[20767010] |AT&T gave a 5% to 10% discount to the Memphis, Tenn., company that oversees Holiday Inns, in response to a similar discount offered to Holiday Corp. by MCI Communications Corp.
[20767011] |The agency said that because MCI's offer had expired AT&T couldn't continue to offer its discount plan.
[20767012] |But the agency specifically didn't rule whether AT&T had the right to match offers by competitors if that means giving discounts not generally available to other phone users.

[20767013] |Indeed, Joe Nacchio, AT&T's vice president for business-communications services, said AT&T offered a similar Tariff 15 discount to Resort Condominium International, of Indianapolis, to meet another MCI bid.
[20767014] |The FCC "didn't say I couldn't do it again," he said.

[20767015] |Apart from those two actions, Mr. Sikes and the three other commissioners said they expect to re-examine how AT&T is regulated since competition has increased.
[20767016] |Richard Firestone, chief of the FCC's common-carrier bureau, said he expected the agency to propose new rules next year.

[20767017] |AT&T applauded the FCC's actions.
[20767018] |"The time is long overdue to take a look at the fierce competition in the long-distance business and the rules governing it," the New York telecommunications firm said in a statement.
[20767019] |But MCI, of Washington, was displeased with the FCC decision concerning Tariff 12, arguing that "AT&T cannot be allowed to flaunt FCC rules."

[20767020] |United Telecommunications Inc.'s US Sprint unit said it was "obviously disappointed" with the FCC decision on Tariff 12.
[20767021] |US Sprint said was it will petition the FCC decision in federal court.
[20767022] |"We believe that the court will find it unlawful," said a US Sprint spokesman.

[20767023] |Separately, AT&T filed a countersuit against MCI accusing it of misleading consumers through allegedly "false and deceptive" advertising.
[20767024] |The AT&T action was the most recent blow in a nasty fight.
[20767025] |Earlier this month, MCI sued AT&T in federal district court, claiming that AT&T's ads are false.

[20767026] |AT&T assembled three of its top executives in Washington, all visibly angry, to try to refute MCI's charges.
[20767027] |"MCI has made hawks out of the upper echelon of AT&T," said PaineWebber's Mr. Grubman, who said he expected AT&T to become increasingly aggressive in dealing with its longtime nemesis.

[20767028] |Julie Amparano Lopez in Philadelphia also contributed to this article.

[20768001] |Billions of investors' dollars are pouring out of the nation's junk-bond mutual funds, undermining a pillar of support in the already reeling junk market.

[20768002] |Last week alone, an eye-popping $1.6 billion flowed out of the junk funds, or nearly 5% of their total assets, according to estimates by Dalbar Financial Services Inc., a Boston research firm.

[20768003] |In the past two months the nation's 88 junk funds have lost a total of about $6 billion -- more than 15% of assets -- through sales or transfers of junk-fund shares, Dalbar says.
[20768004] |It made the estimates based on data collected from more than a dozen big junk funds.

[20768005] |Interviews with three major fund groups -- Fidelity Investments, Vanguard Group Inc. and T. Rowe Price Associates Inc. -- confirm the trend.
[20768006] |Their junk funds combined have had net outflows totaling nearly $500 million, or about 13% of their junk fund assets, in the past two months.

[20768007] |Some fund managers say negative publicity has exacerbated investors' concern about recent declines in junk-bond prices.
[20768008] |"People have been seeing headline after headline after headline and saying: `I can't take it anymore -- I'm getting out,'" says Kurt Brouwer of Brouwer & Janachowski, a San Francisco investment adviser.

[20768009] |The withdrawals could spell trouble for the $200 billion junk market.
[20768010] |If the heavy outflows continue, fund managers will face increasing pressure to sell off some of their junk to pay departing investors in the weeks ahead.
[20768011] |Such selling could erode prices of high-yield junk bonds, already weakened by a rash of corporate credit problems.

[20768012] |Mutual fund groups haven't lost control of much of the outgoing money, says Louis Harvey, Dalbar's president.
[20768013] |Mutual fund officials say that investors have transferred most of it into their money market accounts, and to a lesser extent, government-bond funds.
[20768014] |So the impact on the $950 billion mutual fund industry as a whole probably will be slight.

[20768015] |But tremors are likely in the junk-bond market, which has helped to finance the takeover boom of recent years.
[20768016] |Mutual funds are the among the largest holders of junk, accounting for more than a quarter of the entire high-yield, high-risk market.
[20768017] |The 88 mutual funds investing solely in junk bonds hold assets of about $32 billion.
[20768018] |Other funds hold a smattering of junk bonds, too.

[20768019] |The $1.5 billion Fidelity High Income Fund has had a net outflow of about $150 million in the past two months.
[20768020] |About $60 million streamed out last week alone, double the level of the week following last month's Campeau Corp. credit squeeze.
[20768021] |About 98% of the outflow was transferred to other Fidelity funds, says Neal Litvack, a Fidelity vice president, marketing, with most going into money market funds.

[20768022] |"You get a news item, it hits, you have strong redemptions that day and for two days following -- then go back to normal," says Mr. Litvack.
[20768023] |The fund, with a cash cushion of more than 10%, has "met all the redemptions without having to sell one thing," Mr. Litvack says.
[20768024] |He adds: "Our fund has had {positive} net sales every month for the last three years -- until this month."

[20768025] |Vanguard's $1 billion High Yield Bond Portfolio has seen $161 million flow out since early September; $14 million of that seeped out Friday Oct. 13 alone.
[20768026] |Still, two-thirds of the outflow has been steered into other Vanguard portfolios, says Brian Mattes, a vice president.
[20768027] |The fund now holds a cash position of about 15%.

[20768028] |At the $932 million T. Rowe Price High Yield Fund, investors yanked out about $182 million in the past two months.
[20768029] |Those withdrawals, most of which were transferred to other T. Rowe Price funds, followed little change in the fund's sales picture this year through August.
[20768030] |"The last two months have been the whole ball game," says Steven Norwitz, a vice president.

[20768031] |Junk-fund holders have barely broken even this year, as fat interest payments barely managed to offset declining prices.
[20768032] |Through Oct. 19, high-yield funds had an average 0.85% total return (the price change plus dividends on fund shares), according to Lipper Analytical Services Inc.
[20768033] |That's even less than the 4.35% total return of the Merrill Lynch High-Yield Index.

[20768034] |Fidelity's junk fund has fallen 2.08% this year through Oct. 19, Lipper says; the Vanguard fund rose 1.84%; and the T. Rowe Price fund edged up 0.66%.

[20768035] |People who remain in junk funds now could get hit again, some analysts and fund specialists say.
[20768036] |Many funds in recent weeks and months have been selling their highest-quality junk issues, such as RJR Nabisco, to raise cash to meet expected redemptions.

[20768037] |Funds might be forced to accept lower prices if they expand their selling to the securities of less-creditworthy borrowers.
[20768038] |And then, asset values of the funds could plunge more than they have so far.

[20768039] |Says Michael Hirsch, chief investment officer of Republic National Bank and manager of the FundTrust Group in New York: "It's a time bomb just waiting to go off.

[20769001] |The surprise resignation yesterday of British Chancellor of the Exchequer Nigel Lawson sent sterling into a tailspin against the dollar by creating uncertainties about the direction of the British economy.

[20769002] |The U.S. unit also firmed against other currencies on the back of sterling's tumble, as market participants switched out of pounds.

[20769003] |The pound also dropped precipitously against the mark, falling below the key 2.90-mark level to 2.8956 marks from 2.9622 marks late Wednesday.

[20769004] |Mr. Lawson's resignation shocked many analysts, despite the recent recurring speculation of a rift between the chancellor and Prime Minister Margaret Thatcher.

[20769005] |Indeed, only hours earlier, Mrs. Thatcher had called Mr. Lawson's economic policies "sound" and said she has "always supported" him.

[20769006] |"There was a general feeling that we'd seen the worst," said Patrick Foley, deputy chief economic adviser for Lloyds Bank in London.
[20769007] |"The resignation came as a great surprise."

[20769008] |Graham Beale, manager of foreign-exchange operations at Hong Kong & Shanghai Banking Corp. in New York, added that Mrs. Thatcher's comments reinforced the market's growing confidence about sterling and compounded the unit's later decline.

[20769009] |"The market was caught totally the wrong way. . . .
[20769010] |Everyone was extremely long on sterling," Mr. Beale said.

[20769011] |In late New York trading yesterday, the dollar was quoted at 1.8400 marks, up from 1.8353 marks late Wednesday, and at 142.10 yen, up from 141.52 yen late Wednesday.
[20769012] |Sterling was quoted at $1.5765, sharply down from $1.6145 late Wednesday.

[20769013] |In Tokyo Friday, the U.S. currency opened for trading at 142.02 yen, up from Thursday's Tokyo close of 141.90 yen.

[20769014] |Few analysts had much good to say about the pound's near-term prospects, despite the fact that most don't anticipate a shift in Mrs. Thatcher's economic policies.

[20769015] |Mr. Foley of Lloyds noted that Mr. Lawson's replacement, John Major, the British foreign minister, will take time to establish his credibility and, in the meantime, sterling could trend downward in volatile trade.

[20769016] |But Mr. Foley predicted few economic policy changes ahead, commenting that Mr. Major shares "a very similar view of the world" with Mr. Lawson.

[20769017] |Bob Chandross, chief economist at Lloyds Bank in New York, also noted that the pound's sharp decline is pegged more to uncertainty in the market than a vision of altered United Kingdom economic policies.

[20769018] |Unless Mr. Lawson's resignation leads to a change in British interest-rate policy -- Mrs. Thatcher's administration firmly supports high interest rates to keep inflation in check -- or posturing toward full inclusion in the European Monetary System's exchange-rate mechanism, Mr. Lawson's withdrawal will have little long-term impact on exchange rates, Mr. Chandross concluded.

[20769019] |Also announcing his resignation Thursday was Alan Walters, Mrs. Thatcher's economic adviser and Mr. Lawson's nemesis.

[20769020] |The pound, which had been trading at about $1.6143 in New York prior to Mr. Lawson's announcement, sank more than two cents to $1.5930, prompting the Federal Reserve Bank to buy pounds for dollars.
[20769021] |The Fed's move, however, only proved a stopgap to the pound's slide and the Fed intervened for a second time at around $1.5825, according to New York traders.

[20769022] |Meanwhile, dollar trading was relatively uninspired throughout the session, according to dealers, who noted that Thursday's release of the preliminary report on the U.S. third-quarter gross national product was something of a nonevent.

[20769023] |U.S. GNP rose at an annual rate of 2.5% in the third quarter.
[20769024] |The implicit price deflator, a measure of inflation, was down to a 2.9% annual rate of increase in the quarter from a 4.6% rate of gain in the second quarter.

[20769025] |In Europe, the dollar ended lower in dull trading.
[20769026] |The market closed prior to Mr. Lawson's announcement.

[20769027] |On the Commodity Exchange in New York, gold for current delivery rose $3.40 to $372.50 an ounce in heavy trading.
[20769028] |The close was the highest since August 3.
[20769029] |Estimated volume was five million ounces.

[20769030] |In early trading in Hong Kong Friday, gold was quoted at $370.85 an ounce.

[20770001] |The following issues were recently filed with the Securities and Exchange Commission:

[20770002] |Anheuser-Busch Cos., shelf offering of $575 million of debt securities.

[20770003] |Coca-Cola Bottling Co. Consolidated, shelf offering of $200 million of debt securities, via Salomon Brothers Inc. and Goldman, Sachs & Co.

[20770004] |First Brands Corp., proposed offering of 6,475,000 common shares, of which 1,475,000 common shares will be sold by the company and five million shares by holders, via First Boston Corp. and Credit Suisse First Boston Ltd.

[20770005] |Home Nutritional Services Inc., a wholly owned subsidiary of Healthdyne Inc., proposed initial offering of four million common shares, of which 1.8 million will be sold by Home Nutritional Services and 2.2 million will be sold by Healthdyne, via Smith Barney, Harris Upham & Co.

[20770006] |Parametric Technology Corp., initial public offering of 1.7 million common shares, of which 1,365,226 will be offered by the company and 334,774 will be offered by holders, via Alex. Brown & Sons Inc., Hambrecht & Quist Inc. and Wessels, Arnold & Henderson.

[20770007] |SynOptics Communications Inc., proposed public offering of 1.5 million common shares, of which 1,003,884 shares are to be sold by the company and 496,116 shares are to be sold by holders, via Morgan Stanley & Co. and Hambrecht & Quist.

[20771001] |On an office wall of the Senate intelligence committee hangs a quote from Chairman David Boren, "Don't hold your ticket 'til the show's over."
[20771002] |He once used that line in a closed-door meeting on Panama, meaning don't shrink from taking action against Manuel Noriega.

[20771003] |So how did a good senator like this end up approving a policy that required the U.S. to warn Mr. Noriega of any coup plot against him?
[20771004] |"I agree, it's ridiculous," says Mr. Boren, and indeed by now ridiculous may be the only way to describe how the U.S. decides to take -- or rather, not to take -- covert action.

[20771005] |George Bush disclosed the policy last week by reading it to GOP senators, perhaps as a way of shifting blame for the Panama fiasco to Congress.
[20771006] |But the broader truth is more complicated -- and dismaying.
[20771007] |The policy was contained in an exchange of letters last October between the Senate intelligence committee and the CIA and National Security Council.
[20771008] |Staff lawyers for both sides were busy agreeing with one another about what the U.S. could not do to oust the Panamanian thug.
[20771009] |They simply got carried away with interpreting what the executive order banning assassinations really meant.
[20771010] |Mr. Boren himself didn't discover the warn-your-enemy nuance until Mr. Bush told him privately at the White House last week.

[20771011] |It's ironic that David Boren should be in the center of this mire.
[20771012] |A former Oklahoma governor, he's a thoughtful defender of presidential powers in foreign policy.
[20771013] |He's a rare Democratic hawk.
[20771014] |He's the senator most like Arthur Vandenberg, the GOP senator from Michigan who worked to forge a bipartisan foreign policy in the 1940s.
[20771015] |"Vandenberg and Rayburn are heroes of mine," Mr. Boren says, referring as well to Sam Rayburn, the Democratic House speaker who cooperated with President Eisenhower.
[20771016] |"They allowed this country to be credible.
[20771017] |I really want to see that happen again."
[20771018] |If this were 1949, Mr. Boren might even succeed.
[20771019] |But in 1989 most senators have other ideas.
[20771020] |Last July, his committee rejected a Reagan administration plan to support a coup in Panama.
[20771021] |Ohio Democrat Howard Metzenbaum refused to support any plan that might get people hurt, a charming notion for a great power.
[20771022] |Maine Republican William Cohen said the plan might violate the assassination ban.
[20771023] |So the administration dropped it.
[20771024] |By October, when the committee rejected a much more modest covert proposal, even the administration was agreeing little should be done.

[20771025] |Mr. Boren doesn't think all this influenced the failed coup this month, but he does concede that Congress has made mistakes.
[20771026] |"In the aftermath of Vietnam, in the aftermath of Iran-Contra, I can understand some people might think that if they plan a coup, they have to bring their lawyers," he says.

[20771027] |But even Mr. Boren defends congressional oversight.
[20771028] |Writing in the Harvard International Review, he says that his committee approves covert operations only when there's a "consensus."

[20771029] |So what does consensus mean?
[20771030] |"It doesn't mean unanimous," he insists, though he implies it means a bipartisan majority.
[20771031] |"The sustainability of U.S. foreign policy is essential," he explains.
[20771032] |"Why was containment so successful?
[20771033] |Because it had bipartisan support."

[20771034] |Mr. Boren is confusing consensus on general principles with agreement on specific actions.
[20771035] |Elliott Abrams, a veteran of intelligence committee debates, doubts that even Grenada or the Libyan raid would have taken place if "consensus" had been required.
[20771036] |Vandenberg and Rayburn were wise enough to leave specific operations to presidents; modern senators, Mr. Boren notwithstanding, are less modest.

[20771037] |The result is that the Senate committee has what amounts to veto power over every covert action.
[20771038] |"I wouldn't say it's quite a veto," Mr. Boren demurs.
[20771039] |But wouldn't a president who acted despite Senate objections be taking grave political risks?
[20771040] |"He would," agrees the chairman.
[20771041] |"But that is something the president ought to know before he goes ahead."

[20771042] |Mr. Boren even spies a silver lining.
[20771043] |He figures the episode will help "clarify any ambiguities" between the committee and administration.
[20771044] |He points to a letter on his desk, his second in a week from President Bush, saying that they "don't disagree."
[20771045] |More broadly, Mr. Boren hopes that Panama will shock Washington out of its fear of using military power.
[20771046] |"Maybe this will jolt us out of the post-Vietnam syndrome that we never are prepared to use force," he says.

[20771047] |Maybe -- if every senator shared the principles of Mr. Boren.
[20771048] |But it's just as plausible to argue that if even David Boren can get mired in this sort of mess, the problem goes beyond legal interpretation.
[20771049] |Maybe the problem is a political system that won't act without an "exchange of letters," that insists on running foreign policy by committee, that treats a president as just another guy at the table.

[20771050] |The reply of the Metzenbaums and Cohens is that we can't abolish these oversight committees because we've seen too many abuses of executive power.
[20771051] |But Panama illustrates that their substitute is a system that produces an absurd gridlock.
[20771052] |The lawyers are now in charge of our national security.
[20771053] |In Panama, the U.S. interests at stake were happily minor; the only people killed were foreigners hapless enough to trust American will.
[20771054] |Americans may not be so lucky the next time.

[20772001] |I was impressed by the perceptiveness of your Sept. 12 story "Rural Enterprise: Tough Row To Hoe."

[20772002] |We lived in rural areas many years, but now live in St. Louis County, Mo.
[20772003] |This morning as I drove the 13 miles to my law office and endured the routine heavy traffic during that twice-daily journey, I thought of how fortunate it was that we made the decision to be residents of an expanding community with so many opportunities and where so much is happening.

[20772004] |The presence of so many people, cars and competing businesses is evidence of a healthy economy in a place where people want to live.

[20772005] |I thought back to our time in small, sparsely populated communities.
[20772006] |I remembered how hard it was for an outsider to become accepted by long-established, stake-holding residents, and what pitfalls awaited an original thinker in societies that were long accustomed to unchanging, "safe" ways of thought and action.

[20772007] |I remembered being fired at age 44, with five children at home, when my views and actions were deemed unsettling by a timid, small-town employer.
[20772008] |How difficult it is for a thinking person to live among societies rooted in the past.

[20772009] |Now, I revel in the freedom, culture, activity and diversity of this great metropolitan area with its traffic jams and perpetual road-building projects.

[20772010] |Yet when my youngest child died two years ago, I buried him in the church cemetery of a small Missouri town.

[20772011] |So after all, even the bitterest critic of rural exclusivity harbors a continuing yearning for those scarce, rural virtues thought to exist amid fields, forests and country lanes.

[20772012] |Ronald Edwin Parsons Ballwin, Mo.

[20773001] |Finnish government officials are negotiating with creditors of Waertsilae Marine Oy, a major shipyard that filed for bankruptcy protection this week, amid confusion and mounting doubts that collapse of the nation's entire shipbuilding industry can be averted.

[20773002] |At stake are almost 10,000 jobs in an industry that has been the mainstay of Finland's post-war economic revival.
[20773003] |Shipbuilding became a point of pride as Finnish shipyards remained profitable long after rivals collapsed all over Europe.

[20773004] |But if, as many now fear, Waertsilae Marine joins the ranks of failed shipyards it might turn out to be remembered most as a blemish on Finland's international reputation.
[20773005] |The shipyard's 6.5 billion Finnish markka ($1.54 billion) backlog includes about 20 ships ordered by big international shippers, including three for Carnival Cruise Lines Inc.

[20773006] |Miami-based Carnival said the first of the three ships is scheduled to be delivered next month, just in time for the winter tourist season in the Caribbean.
[20773007] |The second ship is scheduled to be delivered in fall 1990 and the third in fall 1991.
[20773008] |One analyst said the first ship probably will be delivered close to schedule, but that Carnival may have to pay up to 25% more to get the second and third ships.

[20773009] |All the ships are covered by loan guarantees from a state export financing agency, even though it's not clear whether they will actually be built.
[20773010] |Bankers worry that if the government makes good a threat to withdraw its guarantee commitments, shippers will counter with a hail of lawsuits.

[20773011] |State loan guarantees are rarely a source of controversy.
[20773012] |However, some bankers cited possible parallels between the Waertsilae Marine case and the collapse of Norway's state-owned Kongsberg Vappenfabrikk AS two years ago.
[20773013] |In that case, international banks and investors incurred big losses because they incorrectly believed the company's debt carried implicit state guarantees.

[20773014] |Doubts about the quality of state credit guarantees could reduce the competitive strength of Finnish companies in world markets where financing often is the key to winning orders, analysts warn.
[20773015] |Moreover, state-owned Finnish companies lacking formal state guarantees could face greater difficulty raising funds in international financial markets, bankers say.

[20773016] |The decision by a majority of state-appointed Waertsilae Marine directors Monday to file for bankruptcy was an abrupt about-face from previous government policy.
[20773017] |In August, the government played a major part in a sweeping restructuring of the troubled shipyard.

[20773018] |At the time 71%-controlled by Oy Waertsilae, a conglomerate, the shipbuilding unit faced potential losses estimated at one billion markka and was on the brink of liquidation.
[20773019] |Under the rescue plan, Waertsilae sold 51% of its stake to a group of banks and pension funds.
[20773020] |The government, in turn, guaranteed financing to complete the order backlog and took control of the board.

[20773021] |Government officials were expected to combine Waertsilae Marine with two other struggling firms, and thus ensure Finland's survival as a shipbuilding nation.
[20773022] |The government spent most of last year attempting to carry out such a plan but was thwarted when the parent Waertsilae concern pulled out at the last minute.

[20773023] |After the restructuring of Waertsilae Marine and bolstered by state loan guarantees, two big bank creditors, Union Bank of Finland and state-controlled Postipankki, resumed lending the shipyard working capital.
[20773024] |But the bankers got cold feet recently as government officials complained they had been misled about the shipyard's actual financial condition, and hinted the credit guarantees might be withdrawn.

[20773025] |People familiar with Monday's board meeting said it was the state's refusal to explicitly reaffirm the credit guarantees that led Union Bank and Postipankki to halt lending to Waertsilae Marine.
[20773026] |Then, in a boardroom showdown, state-appointed directors voted to file for bankruptcy, apparently under instructions from Finland's Industry Minister Ilkka Suominen.

[20773027] |Analysts say Mr. Suominen had grown increasingly worried about the state's potential financial exposure as Waertsilae Marine's losses ballooned to more than double the figure estimated in August.
[20773028] |Noting that Sweden wound up wasting state subsidies of about 35 billion Swedish kronor ($5.47 billion) during the 1970s in a vain attempt to salvage its shipbuilding industry, one analyst suggested that Mr. Suominen may have decided to cut Finland's losses once and for all.

[20773029] |Senior ministry officials huddled with creditors during the week in an attempt to agree on some form of restructuring that would keep Waertsilae Marine operating.
[20773030] |The talks may drag on for weeks before any concrete result is announced, people familiar with them said.

[20773031] |One solution would be to sell the shipyard to an outsider.
[20773032] |But there appear to be few, if any, suitors.
[20773033] |Indeed, the potential losses make any rescue scheme unlikely unless the politicians once again change tack and agree to pick up the bill, analysts said.
[20773034] |Meantime, shippers with vessels on order from Waertsilae Marine will remain in limbo.

[20774001] |Turner Broadcasting System Inc. said it expects to report an extraordinary loss of about $122 million in the fourth quarter due to early retirement of debt.

[20774002] |The cable programmer said the loss will consist primarily of prepayment penalties, and unamortized issue discount and costs related to its just-completed $1.6 billion refinancing of its long-term debt and some preferred stock in one of its subsidiaries.

[20774003] |A Turner spokesman wouldn't speculate on the extent of the charge's effect on the quarter's earnings, but said the company continues to expect to report a net loss for 1989.

[20774004] |The company said the repayment or redemption of the long-term debt, and the outstanding Class A cumulative exchangeable preferred stock of Cable News Network, was made possible by an offering of about $750 million of debentures and notes and $900 million in bank borrowings.

[20774005] |The offering included $550 million of 12% senior subordinated debentures due 2001 and $200 million of zero coupon liquid yield option notes due 2004.
[20774006] |The notes were priced to yield 8% and are convertible into the company's Class B common stock at a price which represents a 15% premium over the market price on Oct. 10, 1989.

[20774007] |In addition, the company called its 12 7/8% senior subordinated notes due 1994, with an aggregate principal amount of $200 million, for redemption on Dec. 15.

[20774008] |As a result of the refinancing, the company said the interest on the debt will fall to slightly more than 11% from slightly more than 14%.

[20774009] |In American Stock Exchange composite trading, Turner's Class A stock closed at $50.50, down 37.5 cents.

[20775001] |General Motors Corp. said it will temporarily idle its Arlington, Texas, assembly plant for one week beginning Monday because of slow sales.

[20775002] |The closing will affect about 3,000 workers and eliminate production of 700 cars.
[20775003] |The assembly plant builds the Cadillac DeVille, Chevrolet Caprice and Oldsmobile Cutlass Ciera Wagon.

[20775004] |In addition, GM's Truck & Bus Group said slow sales are forcing it to close its Detroit assembly plant the week beginning Monday.
[20775005] |The plant builds chassis for recreational vehicles and about 450 workers will be affected by the closing.

[20775006] |The No. 1 auto maker scheduled overtime this week at its Janesville, Wis., assembly plant, manufacturer of the Chevrolet Cavalier.

[20775007] |The nine major U.S. auto makers plan to build 147,121 vehicles this week, down 9.6% from the 162,767 a year ago, but 2.5% higher than last week's 143,534.

[20775008] |Ford Motor Co. slated overtime again this week at its Wixom, Mich.; Wayne, Mich.; Kansas City, Mo., and Norfolk, Va., assembly plants.
[20775009] |They build the Lincoln Town Car, Continental and Mark VII, the Ford Escort and full-sized pickup trucks.

[20775010] |Chrysler Corp. scheduled overtime this week at its St. Louis Assembly Plant No. 2, Newark, Del., and Sterling Heights, Mich., assembly plants.
[20775011] |They build extended minivans and the Dodge Spirit, Acclaim, Shadow and Sundance.

[20775012] |d-Percentage change is greater than 999%.
[20775013] |e-Estimated.
[20775014] |f-Includes Chevrolet Prizm and Toyota Corolla.
[20775015] |r-Revised.
[20775016] |x-Year-to-date 1988 figure includes Volkswagen domestic-production through July.

[20776001] |The surprise resignations of two top economic government officials heaped more uncertainty on London's financial markets, which already have been laboring under worries about Britain's ailing economy.

[20776002] |"The last thing markets like is uncertainty," said Ian Harwood, chief economist at S.G. Warburg & Co., of the resignations of Chancellor of the Exchequer Nigel Lawson and chief economic adviser Sir Alan Walters.
[20776003] |"I think you'll see share prices go down, and sterling now is under something of a cloud."

[20776004] |The pound immediately began to take a buffetting after the resignations were announced.
[20776005] |In late New York trading, sterling stood at $1.5765, down from $1.6145 late Wednesday.

[20776006] |The British economy is hardly the picture of health these days.
[20776007] |At 15%, base interest rates are the highest in eight years, and the 7.6% annual inflation rate is by far the highest in the European Community.
[20776008] |Unions are pressing demands for wage increases of more than 10% despite general belief that economic growth next year will be less than 2%.

[20776009] |Increasingly, the financial markets are reflecting the gloom.
[20776010] |The Financial Times 100-share index has dropped about 12% from its 1989 high of 2423.9 on Sept. 8.
[20776011] |Yesterday, even before the resignations were announced, the index dove 32.5 points to close at 2129.4.

[20776012] |"We are expecting a recession," says Donald Franklin, chief economist at Schroders investment bank.
[20776013] |"The only question is, how deep is it going to be?
[20776014] |The outlook for corporate earnings is fairly bleak.
[20776015] |It's quite likely we're going to get repeats" of the mid-October market shocks.

[20776016] |Red ink already has begun to flow in the wake of the U.S.-U.K. market breaks of Oct. 13 and Oct. 16.
[20776017] |London-based LIT Holdings, the largest financer of traders in the Chicago options and futures markets, said yesterday it will incur a second-half loss as a result of the market plunge.
[20776018] |The company, which also will omit its second-half dividend, didn't specify the size.
[20776019] |But company insiders estimated that the loss could approach the equivalent of $10 million.

[20776020] |Christopher Castleman, LIT chief executive, said in an interview that the loss stemmed from the default of three options traders who had bet on a price rise in UAL Corp. shares before Oct. 13.
[20776021] |The price plummeted after a proposed leveraged buy-out of the airline fell through.

[20776022] |LIT Holdings shares plummeted 36 pence to close at 54 pence (85 cents), a 40% drop, on London's stock exchange.

[20776023] |Denizens of London's financial district are cushioning themselves for heavy blows.
[20776024] |"A lot more of our customers are staying until our 10 p.m. closing time," says Christopher Brown, managing director of Corney & Barrow Restaurants Ltd., which runs five tony wine bars in the district.

[20776025] |"There's a strong sense among the martini set that there's more {bad news} to come," asserts Roger Yates, chief investment officer at Morgan Grenfell Asset Management.
[20776026] |"People in the stock market were very much Thatcher's children -- very young and wealthy optimists.
[20776027] |Now it's dawning on them that they can be non-wealthy."

[20776028] |The malaise has created a nostalgic longing for the uncomplicated days of the mid-1980s, before a rash of securities-firm mergers on the eve of the industry's deregulation in 1986.
[20776029] |"People come to us saying they'd like to be back where they were a few years ago, in a more collegial atmosphere, with less tension," says Stephen Waterhouse, managing director of Hanover Partners Ltd., a financial district head-hunting firm.

[20776030] |But after trading losses in the mid-October market jolts here, many people will be lucky to have jobs at all, executives predict.
[20776031] |The industry, which currently employs about 25,000 people in London, has shed about 2,500 jobs over the past two years.
[20776032] |"I can see cuts of at least 20% more," says the head of the London office of a major U.S. firm.

[20776033] |The mergers and acquisitions market has been a saving grace for the industry, but uncertainties are beginning to mount even there.
[20776034] |Intra-European takeovers are expected to continue at their brisk pace.
[20776035] |But investment bankers say that stock market uncertainties in the U.S. may cause many European companies to mark time before bidding for American companies, in the hope that share prices will come down.

[20776036] |"If prices in the States go down, industrial buyers in Europe have the opportunity of getting reasonable prices in the U.S.," says Francois von Hurter, chief of Continential M&A at Credit Suisse First Boston Ltd.
[20776037] |But he adds: "Everybody and his sister have opened up M&A shops.
[20776038] |It's difficult to see that there's going to be enough business to go around.
[20776039] |About eight firms will get the lion's share.
[20776040] |At the others, there are going to be a lot of disappointments, after all those promises and all that big money that's been paid to people."

[20776041] |It all adds up to a cold winter here.
[20776042] |Says Allen D. Wheat, head of trading at Bankers Trust Co.: "People are just plain scared."

[20776043] |One person who is past worrying about London's blues is Christopher Hartley.
[20776044] |Last summer, he chucked his 10-year career as a London stockbroker and headed for the mountains.
[20776045] |He didn't stop until he got to Jackson Hole, Wyo.

[20776046] |"I'm glad to be out," said the 32-year-old Mr. Hartley in a phone interview.
[20776047] |"The percentage of your day spent twiddling your thumbs got greater, and the work day kept getting longer.
[20776048] |What am I doing in Jackson Hole?
[20776049] |Not a great deal.
[20776050] |My wife and I will stay through the skiing season, or until the money runs out -- whichever comes first.
[20776051] |But unlike London, out here I've never heard anybody blow a car horn in anger.

[20777001] |SYDNEY-Qintex Australia Ltd., under pressure from bank lenders, has called in accounting firm Peat Marwick Hungerfords to help oversee asset sales and restructure the resorts and media company.

[20777002] |Analysts said the move could presage even harsher action by the banks.
[20777003] |But any move by the banks to take over Qintex Australia's management could threaten its ability to operate its national television network under Australian broadcast license rules.
[20777004] |That, in turn, could substantially reduce the value of the television assets.

[20777005] |The appointment of Peat Marwick, which has a unit that specializes in advising troubled companies, came about as a result of a round of meetings held by Qintex Australia Chairman Christopher Skase with bank creditors.

[20777006] |Yesterday, Mr. Skase said the company is "solvent and with the continued support of its bankers is able to meet its financial commitments."

[20777007] |Qintex Australia is a unit of Qintex Ltd.
[20777008] |The Qintex group's problems began in earnest in March, when Mr. Skase agreed to buy MGM/UA Communications Co.
[20777009] |But the transaction faltered in September, when Qintex Australia was forced to increase its offer to US$1.5 billion following a counterbid from Rupert Murdoch; the deal fell apart altogether earlier this month.

[20777010] |Qintex Australia owes creditors around A$1.2 billion.
[20777011] |Last Friday, Qintex Entertainment Inc., its 43%-owned U.S. TV production and distribution affiliate, filed for Chapter 11 protection.

[20778001] |The government is sharpening its newest weapon against white-collar defendants: the power to prevent them from paying their legal bills.
[20778002] |And defense lawyers are warning that they won't stick around if they don't get paid.

[20778003] |The issue has come to a boil in Newark, N.J., where federal prosecutors have warned lawyers for Eddie Antar that if the founder and former chairman of Crazy Eddie Inc. is indicted, the government may move to seize the money that Mr. Antar is using to pay legal fees.

[20778004] |The warning by the U.S. attorney's office follows two decisions by the U.S. Supreme Court last June.
[20778005] |In those cases, the high court ruled that federal law gives prosecutors broad authority to seize assets of people accused of racketeering and drug-related crimes, including fees paid to lawyers before an indictment.

[20778006] |If the government succeeds in seizing Mr. Antar's assets, he could be left without top-flight legal representation, because his attorneys are likely to quit, according to individuals familiar with the case.
[20778007] |A seizure also would make the case the largest -- and one of the first -- in which lawyers' fees have been confiscated in a prosecution unrelated to drugs.

[20778008] |"The people who suffer in the short run are defendants, but the people who suffer in the long run are all of the people, because there won't be a vigorous private bar to defend the Bill of Rights," says Gerald Lefcourt, a criminal defense attorney who says he has turned down a number of cases to avoid possible fee seizures.

[20778009] |Mr. Antar is being investigated by a federal grand jury in Newark, where prosecutors have told him that they may soon seek an indictment on racketeering and securities fraud charges.
[20778010] |Under the Racketeer Influenced and Corrupt Organizations law, or RICO, the government has the authority to seek to freeze or seize a defendant's assets before trial.

[20778011] |According to individuals familiar with Mr. Antar's case, prosecutors issued their warning this week after one of Mr. Antar's attorneys asked whether legal fees might be subject to seizure.
[20778012] |In a letter, prosecutors told Mr. Antar's lawyers that because of the recent Supreme Court rulings, they could expect that any fees collected from Mr. Antar may be seized.
[20778013] |Prosecutors have told Mr. Antar's attorneys that they believe Mr. Antar's allegedly ill-gotten gains are so great that any money he has used to pay attorneys derives from illegal activities.
[20778014] |Therefore, they said, the money can be taken from the lawyers even after they are paid.

[20778015] |Justin Feldman and Jack Arseneault, attorneys for Mr. Antar, both declined to comment on the matter.

[20778016] |In Newark, U.S. Attorney Samuel A. Alito said, "I don't think there's any legal reason to limit forfeiture of attorney's fees to drug cases."
[20778017] |Mr. Alito said his office "just responded to an attorney's question about whether we would go after attorney's fees, and that is different from actually doing it, although we reserve that right."

[20778018] |Mr. Antar was charged last month in a civil suit filed in federal court in Newark by the Securities and Exchange Commission.
[20778019] |In that suit, the SEC accused Mr. Antar of engaging in a "massive financial fraud" to overstate the earnings of Crazy Eddie, Edison, N.J., over a three-year period.
[20778020] |Through his lawyers, Mr. Antar has denied allegations in the SEC suit and in civil suits previously filed by shareholders against Mr. Antar and others.

[20778021] |The SEC has alleged that Mr. Antar aimed to pump up the company's stock price through false financial statements in order to sell his stake and reap huge profits.
[20778022] |Mr. Antar, the SEC said, made more than $60 million from the sale of his shares between 1985 and 1987.

[20778023] |The Justice Department has emphasized that the government's fee-forfeiture power is to be used sparingly.
[20778024] |According to department policy, prosecutors must make a strong showing that lawyers' fees came from assets tainted by illegal profits before any attempts at seizure are made.

[20778025] |Still, criminal defense lawyers worry that defendants are being deprived of their Sixth Amendment right to counsel and a fair trial if the government can seize lawyers' fees.
[20778026] |They also worry that if the government applies asset-forfeiture laws broadly, the best defense lawyers will be unwilling to take criminal cases unless they are assured of being paid.

[20779001] |The stock market correction of Oct. 13, 1989, was a grim reminder of the Oct. 19, 1987 market collapse.
[20779002] |Since, like earthquakes, stock market disturbances will always be with us, it is prudent to take all possible precautions against another such market collapse.

[20779003] |In general, markets function well and adjust smoothly to changing economic and financial circumstances.
[20779004] |But there are times when they seize up, and panicky sellers cannot find buyers.
[20779005] |That's just what happened in the October 1987 crash.
[20779006] |As the market tumbled, disorderly market conditions prevailed: The margins between buying bids and selling bids widened; trading in many stocks was suspended; orders took unduly long to be executed; and many specialists stopped trading altogether.

[20779007] |These failures in turn contributed to the fall in the market averages: Uncertainty extracted an extra risk premium and margin-calls triggered additional selling pressures.

[20779008] |The situation was like that of a skier who is thrown slightly off balance by an unexpected bump on the slope.
[20779009] |His skis spread farther and farther apart -- just as buy-sell spreads widen during a financial panic -- and soon he is out of control.
[20779010] |Unable to stop his accelerating descent, he crashes.

[20779011] |After the 1987 crash, and as a result of the recommendations of many studies, "circuit breakers" were devised to allow market participants to regroup and restore orderly market conditions.
[20779012] |It's doubtful, though, whether circuit breakers do any real good.
[20779013] |In the additional time they provide even more order imbalances might pile up, as would-be sellers finally get their broker on the phone.

[20779014] |Instead, an appropriate institution should be charged with the job of preventing chaos in the market: the Federal Reserve.
[20779015] |The availability of timely assistance -- of a backstop -- can help markets retain their resilience.
[20779016] |The Fed already buys and sells foreign exchange to prevent disorderly conditions in foreign-exchange markets.
[20779017] |The Fed has assumed a similar responsibility in the market for government securities.
[20779018] |The stock market is the only major market without a market-maker of unchallenged liquidity or a buyer of last resort.

[20779019] |This does not mean that the Federal Reserve does not already play an important indirect role in the stock market.
[20779020] |In 1987, it pumped billions into the markets through open market operations and the discount window.
[20779021] |It lent money to banks and encouraged them to make funds available to brokerage houses.
[20779022] |They, in turn, lent money to their customers -- who were supposed to recognize the opportunity to make a profit in the turmoil and buy shares.

[20779023] |The Fed also has the power to set margin requirements.
[20779024] |But wouldn't it be more efficient and effective to supply such support to the stock market directly?
[20779025] |Instead of flooding the entire economy with liquidity, and thereby increasing the danger of inflation, the Fed could support the stock market directly by buying market averages in the futures market, thus stabilizing the market as a whole.

[20779026] |The stock market is certainly not too big for the Fed to handle.
[20779027] |The foreign-exchange and government securities markets are vastly larger.
[20779028] |Daily trading volume in the New York foreign exchange market is $130 billion.
[20779029] |The daily volume for Treasury Securities is about $110 billion.

[20779030] |The combined value of daily equity trading on the New York Exchange, the American Stock Exchange and the NASDAQ over-the-counter market ranges between $7 billion and $10 billion.
[20779031] |The $13 billion the Fed injected into the money markets after the 1987 crash is more than enough to buy all the stocks traded on a typical day.
[20779032] |More carefully targeted intervention might actually reduce the need for government action.
[20779033] |And taking more direct action has the advantage of avoiding sharp increases in the money supply, such as happened in October 1987.

[20779034] |The Fed's stock market role ought not to be very ambitious.
[20779035] |It should seek only to maintain the functioning of markets -- not to prop up the Dow Jones or New York Stock Exchange averages at a particular level.
[20779036] |The Fed should guard against systemic risk, but not against the risks inherent in individual stocks.
[20779037] |It would be inappropriate for the government or the central bank to buy or sell IBM or General Motors shares.
[20779038] |Instead, the Fed could buy the broad market composites in the futures market.
[20779039] |The increased demand would normalize trading and stabilize prices.
[20779040] |Stabilizing the derivative markets would tend to stabilize the primary market.
[20779041] |The Fed would eliminate the cause of the potential panic rather than attempting to treat the symptom -- the liquidity of the banks.

[20779042] |Disorderly market conditions could be observed quite frequently in foreign exchange markets in the 1960s and 1970s.
[20779043] |But since the member countries of the International Monetary Fund agreed to the "Guidelines to Floating" in 1974, such difficulties have been avoided.
[20779044] |I cannot recall any disorder in currency markets since the 1974 guidelines were adopted.
[20779045] |Thus, the mere existence of a market-stabilizing agency helps to avoid panic in emergencies.

[20779046] |The old saying advises: "If it ain't broke, don't fix it."
[20779047] |But this could be a case where we all might go broke if it isn't fixed.

[20779048] |Mr. Heller, now at VISA International, was a governor of the Federal Reserve Board from 1986 until earlier this year.
[20779049] |This is adapted from a speech to the Commonwealth Club in San Francisco.

[20780001] |Bank of England Governor Robin Leigh-Pemberton urged banks to be cautious in financing leveraged buy-outs.

[20780002] |"Caution should . . . be the rule of the day," said Mr. Leigh-Pemberton in a speech to the Association of Corporate Treasurers' annual dinner.
[20780003] |"It would be damaging to industry and to the financial sector in general, to say nothing of banks, if prudence does not guide the financing of leveraged transactions."

[20780004] |His remarks were distributed to the press before Chancellor of the Exchequer Nigel Lawson announced his resignation last evening.
[20780005] |Bank of England officials said the central bank had no comment on Mr. Lawson's resignation.

[20780006] |Mr. Leigh-Pemberton reiterated that the exposure of United Kingdom banks to leveraged deals haven't yet reached "worrying levels."
[20780007] |However, in light of the risks involved in such transactions, banks should satisfy themselves that they have the skills to participate in this market and clear policy guidelines on acceptable levels of exposure to such transactions, he said.

[20780008] |In other comments, he said takeovers may not always be the most efficient way of securing a change of corporate direction or strategy.
[20780009] |"A similar result could sometimes be achieved, at less cost, by changing managements," he said.

[20781001] |Intel Corp.'s most powerful computer chip has flaws that could delay several computer makers' marketing efforts, but the "bugs" aren't expected to hurt Intel and most computer makers.

[20781002] |Computer experts familiar with the flaws, found in Intel's 80486 chip, say the defects don't affect the average user and are likely to be cleared up before most computers using the chip as their "brains" appear on the market sometime next year.

[20781003] |Intel said that last week a customer discovered two flaws in its 80486 microprocessor chip's "floating-point unit", a set of circuits that do certain calculations.
[20781004] |On Friday, Intel began notifying customers about the bugs which cause the chip to give wrong answers for some mathematical calculations.

[20781005] |But while International Business Machines Corp. and Compaq Computer Corp. say the bugs will delay products, most big computer makers said the flaws don't affect them.
[20781006] |"Bugs like this are just a normal part of product development," said Richard Archuleta, director of Hewlett-Packard Co.'s advanced systems development.
[20781007] |Hewlett announced last week that it planned to ship a computer based on the 486 chip early next year.
[20781008] |"These bugs don't affect our schedule at all," he said.

[20781009] |Likewise, AST Research Inc. and Sun Microsystems Inc. said the bugs won't delay their development of 486-based machines.
[20781010] |"We haven't modified our schedules in any way," said a Sun spokesman.
[20781011] |To switch to another vendor's chips, "would definitely not be an option," he said.

[20781012] |Nonetheless, concern about the chip may have been responsible for a decline of 87.5 cents in Intel's stock to $32 a share yesterday in over-the-counter trading, on volume of 3,609,800 shares, and partly responsible for a drop in Compaq's stock in New York Stock Exchange composite trading on Wednesday.
[20781013] |Yesterday, Compaq plunged further, closing at $100 a share, off $8.625 a share, on volume of 2,633,700 shares.

[20781014] |Most of Compaq's decline is being attributed to a third-quarter earnings report that came in at the low end of analysts' expectations.

[20781015] |Intel said it had corrected the problems and would start producing bugless chips next week.
[20781016] |"We should not be seeing any more," said Bill Rash, Intel's director for the 486 chip.

[20781017] |What's more, the bugs only emerge on esoteric applications such as computer-aided design and scientific calculations, he said, and then very seldom.
[20781018] |"These errata do not affect business programs," he said.
[20781019] |The bugs will cause problems in "specific and rare circumstances that will not occur in typical applications" such as word-processing and spreadsheets, said Michael Slater, editor of the Microprocessor Report, an industry newsletter.

[20781020] |Sun, Hewlett-Packard and others say Intel isn't wholly to blame for the snafu.
[20781021] |The real culprits, they said, are computer makers such as IBM that have jumped the gun to unveil 486-based products.
[20781022] |"The reason this is getting so much visibility is that some started shipping and announced early availability," said Hewlett-Packard's Mr. Archuleta.
[20781023] |"You can do that but you're taking a risk.
[20781024] |Those companies are paying the price for taking the risk."

[20781025] |In late September, IBM began shipping a plug-in card that converts its PS/2 model 70-A21 from a 80386 machine to an 80486 machine.
[20781026] |An IBM spokeswoman said the company told customers Monday about the bugs and temporarily stopped shipping the product.

[20781027] |IBM has no plans to recall its add-on cards, the spokeswoman said, and could probably circumvent the bugs without long product delays.
[20781028] |"We don't look at this as a major problem for us," she said.

[20781029] |Compaq, which said it discovered the bugs, still plans to announce new 486 products on Nov. 6.
[20781030] |Because of the glitch, however, the company said it doesn't know when its machine will be commercially available.
[20781031] |That's a break from Compaq tradition, because the company doesn't announce products until they're actually at the dealers.

[20781032] |The problem is being ballyhooed, experts say, because the 486 is Intel's future flagship.
[20781033] |Intel's microprocessors are the chips of choice in many of today's personal computers and the 80486 microprocessor is the spearhead of the company's bid to guard that spot in the next generation of machines.

[20781034] |"Although these sorts of bugs are not at all uncommon, the 486 is an extremely high-profile product," said Mr. Slater, the newsletter editor.

[20781035] |Intel's 80486 chip is the Corvette of Intel's microprocessors, a super-fast, super-expensive chip that only the most power-hungry computer users are likely to buy for at least several years.

[20781036] |Unveiled last April, the chip crams 1.2 million transistors on a sliver of silicon, more than four times as many as on Intel's earlier model, 80386.
[20781037] |Intel clocks the chip's speed at 15 million instructions per second, or MIPs.
[20781038] |That's four times as fast as the 386.

[20781039] |Machines using the 486 are expected to challenge higher-priced work stations and minicomputers in applications such as so-called servers, which connect groups of computers together, and in computer-aided design.

[20781040] |But while the chip's speed in processing power is dazzling, it's real strength lies in its software inheritance.
[20781041] |The 486 is the descendant of a long series of Intel chips that began dominating the market ever since IBM picked the 16-bit 8088 chip for its first personal computer.
[20781042] |(A 16-bit microprocessor processes 16 pieces of data at a time and is slower than newer, 32-bit chips.)
[20781043] |Since then, Intel has cornered a large part of the market with successive generations of 16-bit and 32-bit chips, all of which can run software written for previous models.

[20781044] |That's what will keep computer makers coming in spite of the irritation of bugs.
[20781045] |Big personal computer makers and many makers of engineering workstations are developing 486-based machines, which are expected to reach the market early next year.

[20781046] |Of the big computer makers, only Apple Computer Co. bases its machines on Motorola chips instead.
[20781047] |"The 486 is going to have a big impact on the industry," said Hewlett-Packard's Mr. Archuleta.
[20781048] |"It's going to be the leading edge technology in personal computers for the next few years.
[20781049] |This bug is not going to have any affect on that at all."

[20781050] |Andy Zipser in Dallas contributed to this article.

[20782001] |Bethlehem Steel Corp. has agreed in principle to form a joint venture with the world's second-largest steelmaker, Usinor-Sacilor of France, to modernize a portion of Bethlehem's ailing BethForge division.

[20782002] |The venture, which involves adding sophisticated equipment to make cast-iron mill rolls, is part of a two-pronged effort to shore up a division that has posted continuing operating losses for several years.
[20782003] |The other element includes consolidating BethForge's press-forge operations.
[20782004] |The entire division employs about 850 workers.

[20782005] |While the joint venture affects only a small part of Bethlehem's operations, it is significant because it marks the first time the nation's No. 2 steelmaker has joined forces with a foreign partner.
[20782006] |Wall Street analysts have criticized Bethlehem for not following its major competitors in linking with a foreign company to share costs and provide technology to modernize old facilities or build new ones.

[20782007] |"We think it's a step in the right direction for Bethlehem," said Felix Bello, WEFA Group's international steel analyst.
[20782008] |"It's important to share the risk and even more so when the market has already peaked."

[20782009] |He said the move could be the beginning of a broader relationship between the two companies, one that could open up new markets for Bethlehem.
[20782010] |Bethlehem had little choice but to go with a European steelmaker, because its competitors already have tapped the Japanese and South Korean industry leaders, analysts noted.

[20782011] |Under terms of the agreement, Usinor's Chavanne-Ketin unit and Bethlehem would establish a modernized facility to make cast-iron mill rolls at the company's cast-iron shop here.
[20782012] |Terms for the venture, which would be jointly owned by both companies, weren't disclosed.
[20782013] |The Usinor unit has agreed to provide technology and expertise to install a so-called spin caster by early next fall.
[20782014] |The caster improves the metallurgical quality of the iron mill rolls, which are basically huge rolling pins used to flatten or shape steel products.

[20782015] |Bethlehem is also working with the United Steelworkers union to consolidate BethForge's two machine shops and four heat-treatment facilities of the press-forge operations.
[20782016] |Once the consolidation is complete, Bethlehem plans to concentrate its forgings business on nuclear fabrication, hardened steel and large-diameter steel rolls for rolling mills and selected custom-die applications.

[20782017] |Bethlehem said earlier this year that it planned to restructure the BethForge division to improve its cost structure.
[20782018] |In the second quarter, Bethlehem posted a $50 million charge related to its plans to realign the division.

[20783001] |If you're still wondering about the causes of the slump in the junk-bond market, consider the case of Columbia Savings & Loan.
[20783002] |The California thrift has just announced a $226 million third-quarter loss.
[20783003] |How did this happen?

[20783004] |Well, when Congress in its recent S&L bailout mandated that the thrifts sell off all their junk-bond holdings by 1994, it not only artificially increased the supply of these bonds in the market but also eliminated one of the few profitable investments thrifts have made.
[20783005] |But there is a grimly ironic twist to the Columbia loss.

[20783006] |As followers of the debate over a capital-gains tax cut know, there is much talk in Congress and indeed all over Washington about the need to "encourage" long-term investment and discourage the financial sector's presumed obsession with the short term.
[20783007] |Now, we regard this as a largely phony issue, but the "long term" is nonetheless a big salon topic all around the Beltway.
[20783008] |It turns out that Columbia had this huge loss in large part because the new congressionally mandated rules forced it to adjust the book value of its soon-to-be-sold junk bonds to the lower of either their cost or market value.
[20783009] |They could no longer be classified as what Columbia regarded them, namely long-term investments.

[20783010] |Congress's ham-handed treatment of the existing structure of junk-bond holdings reminds us of a story in the Journal earlier this year about the Baby Bell companies' desire to have the court-ordered bans lifted on offering information services.
[20783011] |The issue of seeking relief from Congress was raised to Delbert Staley, the chairman of Nynex.
[20783012] |Mr. Staley replied: "Legislation tends to be compromised.
[20783013] |I believe we have to take a shot at getting as much done as we can through the court, through Justice and through state and federal regulatory agencies.
[20783014] |I see Congress as a last resort."
[20783015] |Healthy thrifts such as Columbia or the junk-bond market itself should have been so lucky.
[20783016] |The reality of life in modern America is that if you want to wreck something that works, let it fall into the hands of Congress.

[20784001] |Exxon Corp. said it will move its headquarters from Manhattan to Dallas.

[20784002] |Most of the 300 employees at the oil company's midtown headquarters building -- including much of senior management -- were unaware of the plan until informed at a morning meeting by Chairman Lawrence G. Rawl.
[20784003] |The shift won't affect operations.
[20784004] |As part of its restructuring several years ago, Exxon moved most of those out of the city and sold its 53-floor Rockefeller Center skyscraper to a Japanese company.

[20784005] |But the pullout is an embarrassment to New York City officials, coming at a time of high office building vacancy rates and departures by other major companies.
[20784006] |Mobil Corp. is in the process of vacating its headquarters here, and huge operations like J.C. Penney & Co. and Trans World Airlines have recently left.

[20784007] |New York authorities, informed yesterday about the move, reacted with concern and even some anger to the idea of the nation's third-largest corporation leaving without giving them an opportunity to accommodate it.
[20784008] |"We are dismayed, but there's nothing we can do about it now," said Stanley Grayson, New York City deputy mayor for finance and economic development.

[20784009] |Meanwhile, Dallas welcomed the move.
[20784010] |City officials there had been were aware that a large company was moving in, but negotiations had all been conducted through a law firm and under the code name "Everglades."

[20784011] |"When we were told it was Exxon, it was beyond all expectations; what a coup," said Tom Lewis, senior vice president of Dallas Partnership, the economic development affiliate of the city's Chamber of Commerce.
[20784012] |Dallas, its economy based on oil and real estate, has been in a slump.

[20784013] |Exxon said it will build a new headquarters on a 132-acre tract in the 10-year-old Las Colinas complex in the suburb of Irving.
[20784014] |Until the building is completed, Exxon will rent part of an existing office tower.
[20784015] |Las Colinas, once a huge Texas ranch, is a sprawling complex of office buildings, homes and recreational facilities that its developers have been struggling to populate in recent years.

[20784016] |Exxon officials said it will cost less to run its headquarters at Las Colinas than in New York.
[20784017] |The company won't say how much it will save, but during at its interim location, sources say it will likely pay rent of $10 to $15 per square foot.
[20784018] |Owners of the building in New York say they will be asking $50 per square foot for rent to fill the space that Exxon is vacating.
[20784019] |In Texas, taxes and development costs are also lower, they said.

[20784020] |Plus, one Exxon official said, by eliminating the typically long New York commutes between office and home, management will expect employees to work 40 hours a week in Dallas, rather than a 35-hour work week in New York.

[20785001] |Canadian production of market pulp rose 1% in September from a year earlier as the industry operated at 87% of capacity.

[20785002] |The Canadian Pulp and Paper Association, an industry group, said Canadian mills produced 532,000 metric tons of market pulp in September, compared with 527,000 metric tons a year earlier.

[20785003] |Market pulp is wood pulp sold on the open market to producers of paper and other products.
[20785004] |The statistics exclude pulp consumed at the producing mill or shipped to another mill that is affiliated with the producing mill.
[20785005] |Canada is the world's largest producer of market pulp.

[20785006] |The September 87% operating rate compared with a rate of 101% in August but was unchanged from a year earlier.

[20785007] |In the first nine months of this year output was 5,377,000 metric tons, down from 5,441,000 metric tons a year earlier.

[20786001] |IMA Holdings Corp. completed its $3 billion acquisition of American Medical International Inc., purchasing 63 million shares, or 86%, of the Los Angeles-based health-care services concern for $26.50 a share.
[20786002] |The price also includes assumption of about $1.4 billion in debt.

[20786003] |IMA is a group that includes First Boston Corp. and the Pritzker family of Chicago through the leveraged buy-out fund Harry Gray Melvyn Klein & Partners.
[20786004] |Harry J. Gray and Melvyn N. Klein, along with five other IMA designees, were named to join American Medical's 10-member board.

[20786005] |The completion of the merger agreement follows months of twists and turns.
[20786006] |In January, American Medical brought in a new chief executive officer, Richard A. Gilleland, 45, who will remain as chairman, president and chief executive.
[20786007] |A few days later, American Medical announced sharply lower earnings, taking charges of $24 million for insurance reserves and canceled real estate leases.

[20786008] |In March, American Medical received a $24-a-share offer to take the company private from an investor group including large holder M. Lee Pearce.
[20786009] |It also was considering a restructuring to help boost the stock price.
[20786010] |A group including several members of the the Bass family of Texas urged the company to take some steps to maximize shareholder value.

[20786011] |The following month, the company put itself up for sale.
[20786012] |It received more offers, but the auction was surprisingly won by IMA, which bid $28 a share and asked Mr. Gilleland to stay on as an equity participant.
[20786013] |He indicated that some assets might be sold off to service the debt.

[20786014] |Then, after extending its offer four times waiting for a congressional tax ruling, IMA early this month lowered its offer to $26.50 a share amid turbulence in the junk bond market.
[20786015] |American Medical accepted the offer, meanwhile indicating it had heard from two other suitors.
[20786016] |But they never materialized and IMA completed the purchase yesterday.

[20786017] |Other new board members include John S. Harrison and Mark A. Adley of First Boston, James F. Lyons, William S. Goldberg and Harold S. Handelsman.

[20787001] |Treasury Secretary Nicholas Brady said that Congress should grant the Securities and Exchange Commission the power to close the stock markets in periods of crisis.

[20787002] |In testimony to the Senate securities subcommittee, Mr. Brady disputed the view of SEC Chairman Richard Breeden, who told a House panel Wednesday that he doesn't want the ability to halt the markets.
[20787003] |Mr. Breeden contended that discretionary power could have an impact on the markets if rumors were to circulate about when the exchanges might be closed.
[20787004] |He added that the president already has the power to close the markets in an emergency.

[20787005] |But Mr. Brady argued that the SEC is closer to the markets and in a better position to understand when the exchanges are under such stress that they should be closed.

[20787006] |Separately, Mr. Brady said he asked the Working Group on Financial Markets to determine whether futures margins are too low.
[20787007] |He noted that some minimum margin requirements have been reduced to levels below those before the 1987 crash.

[20787008] |"This raises questions whether futures and equity margin requirements are consistent at these levels and whether futures margins are adequate," Mr. Brady said.
[20787009] |Margins are the amount of money an investor needs to put up to buy or sell a futures contract.
[20787010] |Margins on the futures exchanges typically are raised and lowered according to market volatility.

[20787011] |The Chicago Mercantile Exchange margins for the Standard & Poor's 500 stock-index futures stood at $10,000 a contract for speculators and $5,000 for hedgers before Oct. 16, 1987; that day the hedging margin was raised to $7,500.

[20787012] |Margins were raised or lowered about a dozen times since the crash Oct. 19, 1987.
[20787013] |Currently, they stand at $12,000 for speculators, who are typically individuals and non-member traders, and $6,000 for hedgers, which are usually institutions and have offsetting positions in the underlying stocks.

[20787014] |Mr. Brady also said he expects the leveraged buy-out phenomenon to "end under (its) own weight."
[20787015] |Asked whether there is anything Congress should do to curb the LBO boom, Mr. Brady responded, "I think the LBO phenomenon, (while) it won't stop completely, will be a thing of the past."
[20787016] |Before taking any action, he advised the panel to "see what the market has produced as a cure."

[20787017] |Mr. Brady also agreed with senators' concerns about recent stock-market volatility, and said he realizes that the gyrations are scaring investors from investing in stocks.
[20787018] |But he added that individuals still are participating in the equity market indirectly through mutual funds and pension funds.

[20787019] |The former Wall Street executive refused to offer an opinion on the controversy surrounding program trading, which has recently become a larger part of the trading in the market and has been blamed for accelerating the drop two weeks ago.
[20787020] |"I do not have a view of whether we should do anything about program trading at this time," he said.

[20787021] |But Mr. Brady endorsed the market-revision bill that both houses of Congress will try to push through this session.
[20787022] |That bill, proposed by the SEC last year, would require brokerage firms to disclose the financial positions of their holding companies, mandate large traders' reporting of program or block trades, and improve clearing and settlement of trades between the futures and stock markets.

[20787023] |The bill also would give the SEC the power to close the markets, a discretion that former SEC Chairman David Ruder wanted but Mr. Breeden doesn't.

[20787024] |Mr. Brady and senators agreed to have their staffs meet within the next week to start fine-tuning the bill.

[20788001] |The Senate Agriculture Committee is responding to trading abuses in the futures markets with a far-reaching bill that would become the Futures Trading Practices Act of 1989.
[20788002] |The proposed legislation has a laudable goal: to assure the integrity of the U.S. futures markets.
[20788003] |However, as is common with sweeping legislation, the proposal contains many provisions that could destroy important parts of the system it sets out to preserve.

[20788004] |The complex bill, introduced by Sens. Patrick Leahy (D., Vt.), Richard Lugar (R., Ind.), and Bob Kerrey (D., Neb.), covers a wide range of provisions that would affect the funding and authority of the Commodity Futures Trading Commission and would profoundly change the way the industry is regulated.
[20788005] |These include provisions relating to the technology and systems that must be employed by exchanges, oversight and disciplinary procedures for exchange trading practices, the relationship between commodity brokerage firms and floor traders, and exchange governance.
[20788006] |The bill also elevates even minor rule infractions to felonies and provides for recovery of punitive damages in civil lawsuits and arbitration cases without any showing of willful misconduct.

[20788007] |Many aspects of the bill are salutary, providing appropriate public safeguards that can and should be instituted throughout the industry.
[20788008] |Indeed, some of the bill's requirements, including broad representation on the exchanges' boards of directors and strong measures to prevent conflicts of interest, already have been put in place by the Coffee, Sugar & Cocoa Exchange and other futures exchanges.

[20788009] |Other aspects of the bill, however, are either structured in ways that create unnecessary burdens for the industry or actually are harmful to the exchanges, the industry and ultimately the general public.

[20788010] |One of the most prominent features is the requirement that in three years all exchanges have in place a system that records all trades by a source independent of the executing broker.
[20788011] |The New York futures exchanges have been working together to develop a trade recording system much like the one called for in the bill.
[20788012] |We would be delighted to have such a system in place today.
[20788013] |But is it realistic for Congress to mandate by a rigid deadline a system that has not yet been subjected to feasibility studies?
[20788014] |What if the system doesn't work?
[20788015] |What if the only system that does work is so expensive that, at best, only the largest exchanges can afford it?

[20788016] |Cost is a key consideration because of the global sweep of the financial markets.
[20788017] |The U.S. futures exchanges compete world-wide as never before.
[20788018] |Today, trading in almost any commodity can be diverted from U.S. markets with just a few strokes of a keyboard.
[20788019] |All foreign markets are aggressively courting U.S. business.
[20788020] |In fact, several London markets already offer lower costs for trading in the same or very similar contracts.
[20788021] |The U.S. exchanges need both market integrity and cost-efficiency; long-term growth depends on it.

[20788022] |The Senate bill contains many provisions that will increase the costs of trading.
[20788023] |The most arbitrary of these is the imposition of "service fees," which will directly widen the cost spread between U.S. and foreign markets.

[20788024] |Other provisions have a more subtle, but nonetheless real and detrimental effect on the international position of U.S. exchanges.
[20788025] |These include the extension of liability into areas beyond those established by judicial precedent and the expansion of liability to include punitive damages.

[20788026] |In addition to increasing costs as a result of greater financial exposure for members, these measures could have other, far-reaching repercussions.

[20788027] |One section of the bill would make all commodity brokerage firms and floor brokers liable for damages without willful misconduct.
[20788028] |Nowhere in the federal securities law is simple negligence or inadvertent action a source of liability under similar circumstances.

[20788029] |It is only logical to assume that the enactment of this provision will lead to increased litigation.
[20788030] |In an already low-profitmargin business, commodity brokerage firms may well decide to eliminate the risk and expense of dealing with the retail public, depriving the private individual of access to the markets.

[20788031] |Another measure makes commodity brokerage firms liable for violations committed by independent floor brokers who execute trades for them.
[20788032] |This untried concept would expose these firms to potentially astronomical punitive damages.

[20788033] |Faced with the virtually impossible task of supervising the execution of each trade, many commodity brokerage firms are likely to stop doing business with independents and instead hire their own salaried floor brokers.
[20788034] |This would force out of business many of the individuals and small firms that function as floor brokers.
[20788035] |A consequence of their departure could be a serious diminution of market liquidity.

[20788036] |Finally, under the bill, a number of legitimate, longstanding business practices would be arbitrarily banned, unless the CFTC were to take specific and timely action to permit them to continue.
[20788037] |In other words, regulation will occur through inaction and happenstance, rather than through a normal deliberative procedure.

[20788038] |The affected practices include the placing of oral orders, which is the way most public customer orders are placed, and trading between affiliated brokers, even though in some cases trading with affiliates may be the only way to obtain the best execution for a client.
[20788039] |Also precluded would be dual trading, whereby a broker trades for customers as well as his own account, a practice that provides needed liquidity to the markets.

[20788040] |All U.S. futures exchanges agree that these and other trading practices require proper regulation and supervision.
[20788041] |Nonetheless, each has too much potential value to the system to be banned by legislative fiat before the CFTC carefully considers all the consequences of a ban and what the regulatory alternatives are.

[20788042] |The markets are complex, as is the environment in which they function.
[20788043] |When problems surface, the temptation becomes strong to summarily overhaul a market system that has served for more than 100 years.
[20788044] |That temptation must be put aside to permit careful consideration of all the implications, positive and negative, of the proposed resolutions to those problems, and to avoid creating a marketplace where no one trades.

[20788045] |Mr. Nastro is chairman of the Coffee, Sugar & Cocoa Exchange in New York and director of commodity administration at Shearson Lehman Hutton.

[20789001] |Initial claims for state unemployment benefits fell to a seasonally adjusted 332,000 for the week ended Oct. 14 from 396,000 the previous week, the Labor Department said.

[20789002] |The number of people receiving state benefits in the week ended Oct. 7 fell to a seasonally adjusted 2,202,000, or 2.1% of those covered by unemployment insurance, from 2,205,000 the previous week, when the insured unemployment rate was 2.2%.

[20789003] |Counting all state and federal benefit programs, the number of people receiving unemployment benefits in the week ended Oct. 7 fell to 1,784,400 from 1,810,700 a week earlier.
[20789004] |These figures aren't seasonally adjusted.

[20790001] |On the hungry streets of Naguib Mahfouz's Cairo, life is nasty, brutish and wickedly entertaining.

[20790002] |Zaita the "cripple-maker" rearranges the limbs of aspiring beggars -- and takes a cut of every cent they cadge.
[20790003] |Hassan Kamel Ali is a card shark and dope dealer who has a simple creed: "I live in this world, assuming that there is no morality, God or police."
[20790004] |For the killer and thief, Said Mahran, fame flows from the barrel of a gun.
[20790005] |"One man said you act as a stimulant," a prostitute tells him, "a diversion to relieve people's boredom."

[20790006] |Mr. Mahfouz's Cairo also has Sufi sheiks and saintly wives who look to God, not crime, for their salvation.
[20790007] |But it is his portrait of Cairo low-life -- of charlatans and opium addicts, of streets filled with "dust, vegetable litter, and animal dung" -- that made his reputation, and won him the Nobel Prize in 1988.

[20790008] |Three novels, "The Beginning and the End" (412 pages, $19.95), "The Thief and the Dogs" (158 pages, $16.95), and "Wedding Song" (174 pages, $16.95), recently published by Doubleday offer an uneven sample of the 77-year-old Mr. Mahfouz's talent.
[20790009] |But they do show the range of a restless intellect whose 30-odd novels span five decades and include work of social realism, protest and allegory.
[20790010] |They also chart the evolution of a city that has grown tenfold in the author's lifetime, from a colonial outpost of fez-wearing pashas to a Third World slum choking on its own refuse.
[20790011] |"Soon it'll be so crowded," a narrator complains, "that people will start eating each other."

[20790012] |"The Beginning and the End," easily the best of the three, belongs to Mr. Mahfouz's "realistic" period and it is the one for which he is most renowned.
[20790013] |Published in 1949, it follows the decline of a Cairo family with the saga-like sweep and rich detail that critics often compare to Dickens, Balzac and Galsworthy.

[20790014] |A minor bureaucrat dies suddenly, dooming his family to poverty and eventual disgrace.
[20790015] |His daughter turns to dressmaking, then to peddling herself for a few piasters.
[20790016] |One son sacrifices his own career so that his avaricious brother can succeed, while another helps support the family with money siphoned from crime.

[20790017] |The real tragedy, though, lies not in the family's circumstances but in its concern for appearances.
[20790018] |Mourning for the father is overshadowed by the shame of burying him in a pauper's grave.
[20790019] |The family moves to another house at night to conceal shabby belongings from neighbors.
[20790020] |And the successful son wishes his embarrassing siblings dead.

[20790021] |As a critique of middle-class mores, the story is heavy-handed.
[20790022] |But its unsentimental sketches of Cairo life are vintage Mahfouz.
[20790023] |We see, smell and hear slums filled with "the echoes of hawkers advertising their wares interspersed with abusive language, rattling coughs and the sound of people gathering spittle in their throats and spewing into the street."
[20790024] |And we meet engaging crooks, such as Hassan "the Head," famed for his head-butting fights, his whoring and his hashish.
[20790025] |"`God has not yet ordained that I should have earnings,' he tells his worried mother."
[20790026] |Hassan comes to a bad end, but so does almost everyone else in the book.

[20790027] |If the setting is exotic, the prose is closer to Balzac's "Pere Goriot" than it is to "Arabian Nights."
[20790028] |Mr. Mahfouz began writing when there was no novelistic tradition in Arabic, and he modeled his work on Western classics.
[20790029] |In one sense, this limits him; unlike a writer such as Gabriel Garcia Marquez, who has a distinctive Latin voice, Mr. Mahfouz's style offers little that can be labeled "Egyptian."
[20790030] |But the familiarity of his style also makes his work accessible, as the streets of Cairo come alive for the Western reader as vividly as Dickens's London or Dostoevski's St. Petersburg.

[20790031] |"The Thief and the Dogs," written in 1961, is a taut, psychological drama, reminiscent of "Crime and Punishment."
[20790032] |Its antihero, Said Mahran, is an Egyptian Raskolnikov who seeks nobility in robbing and killing.
[20790033] |"I am the hope and the dream, the redemption of cowards," he says in one of many interior monologues.
[20790034] |Later, he recalls the words of his Marxist mentor: "The people! Theft! The holy fire!"

[20790035] |Said's story reflects the souring of socialism under Nasser, whose dictatorial rule replaced the monarchy overthrown in 1952.
[20790036] |By 1961, Mr. Mahfouz's idealism had vanished or become twisted, as it has in Said.
[20790037] |His giddy dream of redeeming a life of "badly aimed bullets" by punishing the "real robbers" -- the rich "dogs" who prey on the poor -- leads only to the death of innocents, and eventually to his own.

[20790038] |Cairo's spirited squalor also has gone gray.
[20790039] |Here, the city is dark and laden with symbolism: Said has left his jail cell only to enter the larger prison of Cairo society.
[20790040] |While the theme is compelling, the plot and characters are not.
[20790041] |We never care about Said or the "hypocrites" he hunts.
[20790042] |"The Thief and the Dogs" is a pioneering work, the first stream-of-consciousness novel in Arabic, but it is likely to disappoint Western readers.

[20790043] |The 1981 novel "Wedding Song" also is experimental, and another badly aimed bullet.
[20790044] |The story of a playwright's stage debut unfolds in first-person monologues, in the manner of Faulkner's "The Sound and the Fury."
[20790045] |But the device obscures more than it illuminates.
[20790046] |Buried in the work is a meditation on the morality of art, and on the struggle for integrity in an unfair world.
[20790047] |But again, the themes get tangled in Mr. Mahfouz's elliptical storytelling.
[20790048] |The indirectness of his later work reflects both an appetite for new genres and the hazards of art in the Arab world.
[20790049] |Mr. Mahfouz has been pilloried and censored for questioning Islam and advocating peace with Israel.
[20790050] |Veiling his message has helped him endure.
[20790051] |Art, says the playwright in "Wedding Song," is "the surrogate for the action that an idealist like me is unable to take."

[20790052] |"Wedding Song" gives glimpses of a Cairo that has become so much harsher since his youth, when, as he once said, "the poorest person was able to find his daily bread and without great difficulty."
[20790053] |The clutter of the 1940s remains, but its color has drained away, and the will to overcome has been defeated.
[20790054] |Cars can't move because of overflowing sewers.
[20790055] |Characters complain ceaselessly about food queues, prices and corruption.
[20790056] |And the ubiquitous opium addict is now a cynical and selfish man who gripes: "Only government ministers can afford it these days!"
[20790057] |Having lost their faith in God, in social reform and in opium, Cairenes are left with nothing but their sense of humor.

[20790058] |Mr. Horwitz is a Journal staff reporter covering the Middle East.

[20791001] |Norwood Partners Limited Partnership of Boston said it may make a tender offer for some or all of Phoenix Technologies Ltd.'s common shares.

[20791002] |Norwood, Mass.-based Phoenix, a once-high-flying maker of software for personal computers, has had substantial losses in the past two quarters.
[20791003] |Its stock, which was as high as $18.75 a share, has been trading under $4 a share recently.
[20791004] |Yesterday it closed at $4.375 a share, up $1.125, in national over-the-counter trading.

[20791005] |In a Securities and Exchange Commission filing, Norwood said it's part of a group that holds 525,546 Phoenix Technologies common shares, or a 5.3% stake.

[20791006] |Norwood has made "no detailed plans," but it has engaged in talks with other shareholders, the filing said.
[20791007] |Phoenix declined to comment.

[20791008] |Norwood is controlled by Daniel L. Barnett and Paul A. Reese, both officers of Boston-based Oasis Capital Management Inc., a small Boston money management firm.
[20791009] |Also involved in the group is Robert F. Angelo, formerly Phoenix's senior vice president, field operations, who left Phoenix at the beginning of October.
[20791010] |Mr. Angelo was described in the filing as a consultant to Oasis.

[20792001] |Weirton Steel Corp. said it reached a tentative agreement on a 48-month labor contract with the Independent Steelworkers Union covering production and maintenance employees.

[20792002] |The agreement, subject to approval of union members, would cover about 6,000 workers.
[20792003] |The tentative agreement provides for wage increases of 85 cents an hour retroactive to Sept. 25, 1989, and for increases of 19 cents, 70 cents and 35 cents an hour effective Jan. 1, 1991, 1992 and 1993, respectively.
[20792004] |It also provides for benefit adjustments, including a partial restoration of vacations and holidays, as well as work-rule changes to increase productivity.

[20793001] |Ground zero of the HUD scandal is the Secretary's "discretionary fund," a honey pot used to fund projects that weren't approved through normal HUD channels.
[20793002] |Jack Kemp wants to abolish it.
[20793003] |Instead, Congress's idea of reform is to increase this slush fund by $28.4 million.
[20793004] |And transfer control of much of it to Capitol Hill.
[20793005] |The HUD scandals will simply continue, but under new mismanagement.

[20793006] |After one of the most amazing debates we've ever seen on the cable channel C-SPAN, the House voted 250 to 170 on Wednesday to order $28.4 million in spending for a New Jersey arts center, a Michigan library and 38 other pet projects out of the same discretionary fund that was supposed to have been so abused during Sam Pierce's tenure.
[20793007] |HUD has no paper work whatsoever on 30 of the projects, none of the others has been approved and not a single congressional hearing has been held on any of them.
[20793008] |However, four are in the Michigan district of Rep. Bob Traxler, the chairman of the House subcommittee that writes the HUD spending bill.

[20793009] |Of course, this kind of blatant congressional pork-barreling is called "constituent service" by Members, while the same kind of noncompetitive favoritism at HUD is labeled "influence peddling."
[20793010] |Unlike those awful Republican consultants, Members don't profit directly from HUD projects.
[20793011] |They merely collect campaign contributions from developers that help keep them in office.

[20793012] |The 40 pet projects were discovered buried in the appropriations bill for HUD and some other agencies after it returned from a conference committee that was called to resolve differences between the House and Senate versions.
[20793013] |Conference committees are breeding grounds for mischief.
[20793014] |They are often closed to the public and no minutes are taken.
[20793015] |Members find it easy to doctor legislation by slipping in special provisions that could never survive in the cold light of day.

[20793016] |In this case, the Members outdid themselves.
[20793017] |They transferred some $28 million from the Community Development Block Grant program designated largely for low- and moderate-income projects and funneled it into such items as: -- $1.2 million for a performing-arts center in Newark, -- $1.3 million for "job retention" in Hawaiian sugar mills. -- $400,000 for a collapsing utility tunnel in Salisbury, -- $500,000 for "equipment and landscaping to deter crime and aid police surveillance" at a Michigan park. -- $450,000 for "integrated urban data based in seven cities." No other details. -- $390,000 for a library and recreation center at Mackinac Island, Mich.
[20793018] |Rep. Traxler recently purchased an unimproved building lot on the island.

[20794001] |This is slightly adapted from remarks Oct. 7 by former Secretary of State George P. Shultz to an alumni gathering at the Stanford Business School, where he has returned to the faculty:

[20794002] |I was struck a couple of years ago by the drug-interdiction effort in the Bahamas.
[20794003] |We had intercepted during the year an estimated $5 billion street value of cocaine.
[20794004] |I don't know how much got through.
[20794005] |Nobody has any credible estimate.
[20794006] |The GNP of the Bahamas is probably somewhere between one and two billion dollars.
[20794007] |So you get an idea of the leverage there and elsewhere that our market for drugs has brought about.

[20794008] |I welcome the emphasis that is now being put on the drug problem.
[20794009] |The efforts to get to the people who are addicted, try to rehabilitate them; if they cannot be rehabilitated, at least to contain them; to educate people, to strongly discourage use of drugs by people who are casual users and first users, to stop this process among the young -- all of these things I think are extremely important.

[20794010] |But, I have to tell you that it seems to me that the conceptual base of the current program is flawed and the program is not likely to work.
[20794011] |The conceptual base -- a criminal-justice approach -- is the same that I have worked through before, in the Nixon administration when I was budget director and secretary of the treasury with jurisdiction over the Customs.
[20794012] |We designed a comprehensive program, and we worked hard on it.
[20794013] |In the Reagan administration we designed a comprehensive program; we worked very hard on it.
[20794014] |Our international efforts were far greater than ever before.
[20794015] |You're looking at a guy whose motorcade was attacked in Bolivia by the drug terrorists, so I'm personally a veteran of this war.

[20794016] |What we have before us now is essentially the same program but with more resources plowed into all of the efforts to enforce and control.
[20794017] |These efforts wind up creating a market where the price vastly exceeds the cost.
[20794018] |With these incentives, demand creates its own supply and a criminal network along with it.
[20794019] |It seems to me we're not really going to get anywhere until we can take the criminality out of the drug business and the incentives for criminality out of it.
[20794020] |Frankly, the only way I can think of to accomplish this is to make it possible for addicts to buy drugs at some regulated place at a price that approximates their cost.
[20794021] |When you do that you wipe out the criminal incentives, including, I might say, the incentive that the drug pushers have to go around and get kids addicted, so that they create a market for themselves.
[20794022] |They won't have that incentive because they won't have that market.

[20794023] |So I think the conceptual base needs to be thought out in a different way.
[20794024] |If I am catching your attention, then read a bold and informative article in this September's issue of Science by Ethan Nadelmann on this subject.
[20794025] |We need at least to consider and examine forms of controlled legalization of drugs.

[20794026] |I find it very difficult to say that.
[20794027] |Sometimes at a reception or cocktail party I advance these views and people head for somebody else.
[20794028] |They don't even want to talk to you.
[20794029] |I know that I'm shouting into the breeze here as far as what we're doing now.
[20794030] |But I feel that if somebody doesn't get up and start talking about this now, the next time around, when we have the next iteration of these programs, it will still be true that everyone is scared to talk about it.
[20794031] |No politician wants to say what I just said, not for a minute.

[20795001] |The U.S. economy grew at a moderate 2.5% annual rate in the third quarter, the same pace as the second quarter, despite the worst trade performance in six years, the Commerce Department reported.

[20795002] |Personal spending, buoyed by a burst of automobile buying, was the main catalyst to the economy's expansion.
[20795003] |But trade, one of the economy's main forces in the past few years, showed a sharp deterioration.
[20795004] |Imports of goods and services soared, while exports were flat.

[20795005] |Some economists found the mixture ominous.

[20795006] |"For the past two years, the foreign trade sector has been a major contributor to economic growth.
[20795007] |You can't rely now solely on consumer spending to sustain the economy on a solid growth path," said Norman Robertson, chief economist at Mellon Bank in Pittsburgh.

[20795008] |Although the economy showed no change of pace from the second quarter, many analysts expect it to slow considerably in the fourth quarter as demand for autos falls, partly because of higher prices on models introduced last month.
[20795009] |Many economists think the rise in the value of the U.S. dollar this year will further crimp progress in trade, because it makes exports more expensive and imports cheaper.
[20795010] |And business investment -- which slowed in the third quarter, according to yesterday's report -- is expected to continue to be sluggish.

[20795011] |A sharp reduction in inflation was by far the brightest spot in the report on the real gross national product -- the inflation-adjusted market value of all the goods and services the economy produced.

[20795012] |An inflation gauge that measures the quarterly change in prices of an array of goods and services slowed its growth to a 2.9% annual rate in the third quarter from 5% in the second.

[20795013] |Much of the moderation came from declining energy prices, which have since turned up a bit, analysts said.
[20795014] |Consequently, Michael Darby, undersecretary for economic affairs at the Commerce Department, said inflation probably will edge up from the third-quarter rate in the final three months of 1989.
[20795015] |But he said he believes the second quarter's 5% rate "will prove to have been this year's peak quarterly inflation rate."

[20795016] |Generally, the Bush administration expressed satisfaction with the economy's progress as it heads into its eighth year of sustained growth next month.

[20795017] |Treasury Secretary Nicholas Brady called the 2.5% pace "good, solid growth," although he said he expects the expansion to slow in the fourth quarter.
[20795018] |He added: "Inflation is lower than I think people expected it to be, and I think that's good news."

[20795019] |But administration officials were concerned over the bleak trade report, which showed the deficit in the country's trade of goods and services swelling to a $74 billion annual rate in the third quarter from a $51 billion rate in the second quarter.
[20795020] |Mr. Darby called it a "disappointment" but predicted exports will pick up again.

[20795021] |"We were unprepared for the deterioration in net exports," said Daniel Van Dyke, vice president of U.S. forecasting at Bank of America in San Francisco.
[20795022] |"I can't believe it will continue," he added, noting that the economies of the country's major trading partners are strong and prices of U.S. products are still competitive.

[20795023] |Some analysts also were disturbed by a pickup in the growth of business inventories.
[20795024] |While a buildup of these stocks adds to GNP, it can hurt the economy because a pileup of unsold goods can lead to production cuts and layoffs.

[20795025] |According to the report, inventories outside the farm sector grew at an annual rate of $24.6 billion in the third quarter, up from a $19.5 billion pace in the second quarter.
[20795026] |Manufacturers' stocks fattened at an $18.4 billion annual rate, up from $8.3 billion.

[20795027] |"That suggests there is a little more inventory overhang than some people expected," said Edward Boss, senior financial economist at Continental Bank in Chicago.
[20795028] |"I don't think it's anything that's going to cause a downturn in economic activity.
[20795029] |But it will slow production."

[20795030] |Devastation from Hurricane Hugo, which slammed into the Southeast coast in late September, diminished personal income by about $4 billion, the department said, but it called the effect on the roughly $5 trillion economy "negligible."

[20795031] |Except for the loss from the hurricane, all the figures were adjusted for seasonal factors and inflation.

[20795032] |Here are some of the major components of the gross national product expressed in seasonally adjusted annual rates in billions of constant (1982) dollars:

[20795033] |In the third quarter, the implicit price deflator fell to 2.9% of the 1982 average, from 4.6% in the previous quarter.

[20796001] |Northrop Corp. received a $93.5 million contract by the U.S. Air Force for production tooling and test equipment for the Tacit Rainbow defense-suppression missile.
[20796002] |The contract provides additional equipment for Northrop, the prime contractor on the missile, and also supports a 1990 purchase of 90 missiles for follow-on flight tests.

[20797001] |General Motors Corp.'s Chevrolet division said it is offering $750 cash incentives on all 1990 models of its full-size Blazer and Suburban truck lines.
[20797002] |Chevrolet already has cash incentives on the 1989 models of these vehicles.

[20798001] |Hudson's Bay Co. announced terms of a previously proposed rights issue that is expected to raise about 396 million Canadian dollars (US$337 million) net of expenses.

[20798002] |Proceeds of the offering will be used to redeem C$264 million of preferred shares and to reduce short-term debt, the company said.

[20798003] |Canada's largest department store operator said the rights offering will entitle holders of its ordinary shares, except residents in the U.S. and Britain, to subscribe for two additional shares for every five shares held at a price of C$31.25 a share.
[20798004] |The record date is Nov. 9.

[20798005] |The company has about 31 million ordinary shares outstanding.
[20798006] |On the Toronto Stock Exchange, Hudson's Bay shares closed at C$35, up 12.5 cents.

[20798007] |Hudson's Bay said that Woodbridge Co., which currently holds about 77% of the ordinary shares, will subscribe for all the shares to which it is entitled and for any shares that aren't otherwise taken up.
[20798008] |Woodbridge is a holding company owned by Toronto's Thomson family.

[20798009] |Hudson's Bay said it will redeem 9.5 million Series H preferred shares on Oct. 31 at a price of C$27.75 each.
[20798010] |The move was approved at a special shareholders' meeting yesterday.

[20798011] |Gary Lukassen, chief financial officer, said redemption of the preferred shares, originally issued at C$25 each, will eliminate dividend payments of C$17.9 million annually.

[20799001] |Iverson Technology Corp. was one of the fastest-growing small companies in America -- until last year.

[20799002] |The McLean, Va., company modifies computers to keep sensitive military data out of unfriendly hands.
[20799003] |From 1984 to 1987, its earnings soared six-fold, to $3.8 million, on a seven-fold increase in revenue, to $44.1 million.

[20799004] |But in 1988, it ran into a buzz saw: a Defense Department spending freeze.
[20799005] |Iverson's earnings plunged 70% to $1.2 million.
[20799006] |The troubles continued in this year's first half, when profit plunged 81% to $302,000.

[20799007] |Iverson Technology is one of many small defense contractors besieged by the slowdown in defense spending.
[20799008] |Unlike larger contractors with a broad enough base to weather the downturn easily, these companies are suffering big drops in business as once-lucrative specialty niches in the massive military market erode or even disappear.

[20799009] |Companies that only recently were thriving find themselves scrambling to survive.
[20799010] |As their varied strategies suggest, there is more than one way to respond to a disaster -- though it's too soon to tell whether the changes will pay off.
[20799011] |For many companies, the instinctive first response is to cut costs.
[20799012] |Others are trying to find specialty defense work spared by the slowdown or new niches created by budget-cutting.
[20799013] |More venturesome businesses are applying their skills in commercial fields.

[20799014] |ERC International Inc., which provides professional and technical services to the military, is refining its defense niche, not retreating from it.
[20799015] |After quadrupling annual earnings over four years to $6.8 million in 1988, the Fairfax, Va., company, posted a 23% drop in earnings for this year's first half.

[20799016] |In the belief that development of advanced military technology will remain a top Defense Department priority, ERC last year acquired W.J. Schafer Associates, a technical and scientific analysis company with contracts under the Strategic Defense Initiative.
[20799017] |While the SDI anti-missile program recently awarded W.J. Schafer two contracts totaling $13.4 million, ERC's chairman and founder, Jack Aalseth, says he bought the company "more for its technology than its customer."

[20799018] |UNC Inc., an Annapolis, Md., contractor that earned $23.8 million on revenue of $400.4 million in 1988, has gone even further in realigning its military business.
[20799019] |As orders for its aircraft and submarine parts dwindled, three years of steady growth ended with a 69% drop in income in this year's first half.
[20799020] |The company hit on a new strategy: If the Defense Department is so intent on saving money, why not make money off that trend?

[20799021] |Among the company's current efforts: repairing old parts at 25% of the cost of replacing them.
[20799022] |UNC also is selling new parts, if needed, directly to the military instead of through a prime contractor.
[20799023] |At as little as one-third of the government's cost, the company is running a program to train Army helicopter pilots.
[20799024] |It is also taking over the maintenance of certain Navy aircraft with 40% fewer people than the military used.

[20799025] |In another approach, tiny Iverson Technology is trying to resume its growth by braving the new world of commercial products.
[20799026] |Donald Iverson, chairman, says he hopes the company can eventually get up to half of its revenue from commercial markets.
[20799027] |For now, he says, "we're looking at buying some small companies with niche markets in the personal-computer business."

[20799028] |Earlier this month, Mr. Iverson agreed to buy exclusive rights to a software system developed by Visher Systems Inc., Salt Lake City.
[20799029] |The product automates an array of functions performed at small to medium-size printing companies.
[20799030] |Mr. Iverson says there are 5,000 potential customers for the software in the Washington, D.C., area alone.

[20799031] |QuesTech Inc., Falls Church, Va., also has acquired some companies outside the military market.
[20799032] |Moreover, it's trying to transfer its skill at designing military equipment to commercial ventures.
[20799033] |A partnership with a Williamsburg, Va., unit of Shell Oil Co. recently patented a process for producing plastic food containers that won't melt in microwave ovens.

[20799034] |"We're trying to take the imagination and talent of our engineers and come up with new processes for industry," says Vincent Salvatori, QuesTech's chief executive.
[20799035] |"It is an effort to branch out from the government, which is very difficult for a defense contractor."

[20799036] |Mr. Salvatori should know.
[20799037] |Instead of helping his company in the defense spending slowdown, Dynamic Engineering Inc., a troubled subsidiary that makes wind tunnels for the space industry, contributed to much of QuesTech's $3.3 million loss on $55.6 million in revenue last year.
[20799038] |In January, Mr. Salvatori sold the unit.
[20799039] |"It was our first acquisition," he says, "and it was a mistake."

[20799040] |Some companies are cutting costs and hoping for the best.
[20799041] |Telos Corp., a Santa Monica, Calif., provider of software-development and hardware-maintenance services to the military, enjoyed steady growth until this year.
[20799042] |Following a tripling of earnings, to $3.9 million, on a doubling of revenue, to $116 million, over four years, earnings in the company's fiscal first quarter, which ended June 30, plunged 90% to $45,000.
[20799043] |A one-time write-off for booking nonexistent revenue was partly to blame, but so were lower profits from a stingier contract with the Army and delays in getting paid.

[20799044] |Telos responded by combining three of its five divisions to reduce expenses and "bring more focus to potentially fewer bidding opportunities," says Lin Conger, Telos chairman and controlling shareholder.
[20799045] |"It's evident we're entering a more competitive era," he says.

[20799046] |TransTechnology Corp., a Sherman Oaks, Calif., defense contractor that earned $9.2 million on revenue of $235.2 million in 1988, provides a more dramatic example of cost-cutting.
[20799047] |The company not only merged three military-electronics manufacturing operations, but also closed an unrelated plant that makes ordnance devices used in fighter planes and missiles.
[20799048] |The closing contributed to a $3.4 million loss in the fiscal first quarter ended July 31 -- its first quarterly loss since 1974.

[20799049] |"Our ordnance business has been hurt very badly by the slowdown," says Arch Scurlock, TransTechnology's chairman.
[20799050] |"I wouldn't say we're out of the business.
[20799051] |But we're not making as many {pyrotechnic devices} as we used to.