[21800001] |Congress sent President Bush an $18.4 billion fiscal 1990 Treasury and Postal Service bill providing $5.5 billion for the Internal Revenue Service and increasing the Customs Service's air-interdiction program nearly a third.

[21800002] |Final approval came on a simple voice vote in the Senate, and the swift passage contrasted with months of negotiations over the underlying bill which is laced with special-interest provisions for both members and the executive branch.

[21800003] |An estimated $33 million was added for university and science grants, including $1.5 million for Smith College.
[21800004] |And Southwest lawmakers were a driving force behind $54.6 million for U.S.-Mexico border facilities, or more than double the administration's request.

[21800005] |More than $1.8 million is allocated for pensions and expenses for former presidents, and the budget for the official residence of Vice President Quayle is more than doubled, with $200,000 designated for improvements to the property.
[21800006] |Even the Office of Management and Budget is remembered with an extra $1 million to help offset pay costs that other government departments are being asked to absorb.

[21800007] |Within the IRS, nearly $1.95 billion is provided for processing tax returns, a 12% increase over fiscal 1989 and double what the government was spending five years ago.
[21800008] |Investigation and taxpayer service accounts would grow to $1.6 billion, and Congress specifically added $7.4 million for stepped up criminal investigations of money laundering related to drug traffic.

[21800009] |The large increase in Customs Service air-interdiction funds is also intended to counter smuggling, and the annual appropriations level has more than quadrupled in five years.
[21800010] |The $196.7 million provided for fiscal 1990 anticipates the purchase of a Lockheed P-3 surveillance aircraft and five Cessna Citation II jets.
[21800011] |Despite administration reservations, the plan has had the quiet backing of customs officials as well as influential lawmakers from Cessna's home state, Kansas.

[21800012] |Among legislative provisions attached to the bill is a ban on any Treasury Department expenditure for enforcement of a 1986 tax provision intended to counter discrimination in employee-benefit plans.
[21800013] |Small-business interests have lobbied against the so-called Section 89 tax rules.
[21800014] |Repeal is considered likely now, but the Treasury Department bill has been used as a vehicle to raise the profile of the issue and block any action in the interim.

[21800015] |Less noticed is a bit of legislative legerdemain by Houston Republicans on behalf of HEI Corp. of Texas to retroactively "move" a Missouri hospital from one county to the next to justify higher Medicare reimbursements.
[21800016] |The provision seeks to wipe out an estimated $1.4 million in claims made by the Health Care Finance Administration against HEI, which owned the hospital in Sullivan, Mo., during most of the four-year period -- 1983-1987 -- covered in the amendment.

[21800017] |In a separate development, a private meeting is scheduled this morning between House Appropriations Committee Chairman Jamie Whitten (D., Miss.) and Sen. Dale Bumpers (D., Ark.) in an effort to end a dispute which for two weeks has delayed action on an estimated $44 billion agriculture bill.
[21800018] |A House-Senate conference reached agreement Oct. 5 on virtually all major provisions of the bill, but final settlement has been stalled because of differences between the two men over the fate of a modest Arkansas-based program to provide technical information to farmers seeking to reduce their dependence on chemical fertilizers and pesticides.

[21800019] |The program's nonprofit sponsors received $900,000 in fiscal 1989 through an Extension Service grant, but Mr. Whitten has been adamant in insisting that the program be cut in 1990.
[21800020] |The 79-year-old Mississippian takes a more orthodox, entrenched view of agriculture policy than those in the movement to reduce chemical use, but as a master of pork-barrel politics, he is believed to be annoyed as well that the project moved to Arkansas from a Tennessee center near Memphis and the northern Mississippi border.

[21801001] |Michael F. Klatman, director of corporate public relations at Data General Corp., was named to the new position of vice president, corporate communications, of this maker of data storage equipment.

[21802001] |B.A.T Industries PLC may delay aspects of its defensive restructuring plan -- including the sale of its Saks Fifth Avenue and Marshall Field units -- in the wake of the current upheaval in financial markets, company officials said.

[21802002] |The British conglomerate, planning its own defensive restructuring to fight off a #13.35 billion ($21.03 billion) takeover bid by Anglo-French financier Sir James Goldsmith, intends to press ahead with an extraordinary shareholder vote today to clear the way for its value-boosting measures.
[21802003] |If anything, the gyrations in world stock markets -- and in B.A.T's share price -- since last Friday's sharp Wall Street sell-off have increased the likelihood of shareholder approval for the restructuring, analysts and several big institutional holders said.
[21802004] |"Thank God we have some deal on the table," said Stewart Gilchrist, a director at Scottish Amicable Investment Managers, which intends to vote its roughly 1% stake in favor of the restructuring.

[21802005] |Investors in B.A.T have been on a roller coaster.
[21802006] |B.A.T has been London's best-performing blue chip over the past six months, up 40% against a 4% rise in the Financial Times 100-Share Index.
[21802007] |But this week, B.A.T has been hit harder than other big U.K. stocks -- first by the market gyrations, then by Tuesday's San Francisco earthquake, which could leave B.A.T's Farmers Group Inc. insurance unit facing big claims.
[21802008] |B.A.T rose five pence (eight cents) to 756 pence ($11.91) in London yesterday as a late market rally erased a 28-pence fall earlier in the day.

[21802009] |To fight off predators, B.A.T plans to spin off about $6 billion in assets, largely by selling such U.S. retailing units as Marshall Field and Saks and by floating its big paper and U.K. retailing business via share issues to existing holders.
[21802010] |Proceeds will help pay for a planned buy-back of 10% of its shares and a 50% dividend increase.

[21802011] |"I think the restructuring will get the required support," said Michael Pacitti, an analyst at London stockbroker UBS Phillips & Drew.
[21802012] |"The shareholders effectively will support the share price by clearing the share buy-back."

[21802013] |But B.A.T's restructuring, which was never going to happen quickly, now will take longer because of the market upheaval.
[21802014] |Company officials, holders and analysts who previously expected the disposals to be substantially complete by the end of next year's first half now say the market gyrations could delay the actions well into the second half.
[21802015] |"We aren't forced sellers.
[21802016] |We don't have an absolute deadline and if market conditions are truly awful we might decide it is not the right time," to take particular steps, said Michael Prideaux, a B.A.T spokesman.

[21802017] |Even if B.A.T receives approval for the restructuring, the company will remain in play, say shareholders and analysts, though the situation may unfold over the next 12 months, rather than six.
[21802018] |The new B.A.T will be a smaller tobacco and financial-services hybrid whose price-earnings ratio may more closely reflect the lower-growth tobacco business than the higher-multiple financial-services business, these holders believe.
[21802019] |Thus B.A.T's restructuring may only make the company a more manageable target for other corporate predators -- possibly such acquisitive bidders as Hanson PLC.

[21802020] |"The last few days will surely slow down the pace of events," says Scottish Amicable's Mr. Gilchrist.
[21802021] |"But I wouldn't write off" Sir James or other potential bidders.

[21802022] |Among possible delays, the sales of Saks and Marshall Field -- which were expected to be on the block soon after the crucial Christmas season -- may slide into the second quarter or second half.
[21802023] |Analysts estimate that sales of the two businesses could raise roughly $2 billion.

[21802024] |B.A.T isn't predicting a postponement because the units "are quality businesses and we are encouraged by the breadth of inquiries," said Mr. Prideaux.
[21802025] |But the delay could happen if B.A.T doesn't get adequate bids, he said.

[21802026] |People familiar with B.A.T say possible acquirers for the units include managers from both retailing chains, and General Cinema Corp., which is interested in bidding for Saks.
[21802027] |Other potential bidders for parts of B.A.T's U.S. retail unit include Dillard Department Stores Inc., May Department Stores Co. and Limited Inc.
[21802028] |B.A.T has declined to identify the potential bidders.

[21802029] |Though Sir James has said he intends to mount a new bid for B.A.T once approval from U.S. insurance regulators is received, jitters over prospects for junk-bond financing and U.S. leverage buy-outs are making investors more skeptical about Sir James's prospects.
[21802030] |His initial offer indicated he needed to raise as much as 80% of the takeover financing through the debt markets.

[21802031] |Market uncertainty also clouds the outlook for B.A.T's attracting a premium price for its U.S. retailing properties.
[21802032] |Finally, Tuesday's California earthquake initially knocked 3.7% off B.A.T's share price in London yesterday because of fears of the potential claims to Los Angeles-based Farmers, which has a substantial portion of its property and casualty exposure in California.

[21802033] |On Farmers, Mr. Prideaux said it is too early to quantify the level of potential claims.
[21802034] |He added B.A.T "has no expectation of a material impact on Farmers.

[21803001] |Bridge and highway collapses will disrupt truck and auto transportation in the San Francisco Bay area for months to come.

[21803002] |But rail, air and ocean-shipping links to the area escaped Tuesday's earthquake with only minor damage, and many are expected to be operating normally today, government and corporate transport officials said.

[21803003] |Air traffic at San Francisco International Airport was running about 50% of normal yesterday afternoon, but airport officals said they expect a return to full operations by Saturday.
[21803004] |The major gateway to Asia and one of the nation's 10 busiest airports was closed to all but emergency traffic from the time the quake hit Tuesday afternoon, until 6 a.m. PDT yesterday when controllers returned to the tower.

[21803005] |Getting to and from the airport in coming weeks may be the problem, however.
[21803006] |"People's ability to drive throughout the bay area is greatly restricted," said a spokesman for the American Automobile Association.

[21803007] |Tom Schumacher, executive vice president and general manager of the California Trucking Association in Sacremento, said his organization urged trucking firms to halt all deliveries into the Bay area yesterday, except for emergency-medical supplies.
[21803008] |"Some foodstuff shipments will probably resume Thursday," he said.
[21803009] |"Right now most of the roads into the Bay area are closed, but the list of closings changes about every 20 minutes.
[21803010] |This {Wednesday} morning the San Mateo bridge was open and now we are informed that it is closed," Mr. Schumacher said.

[21803011] |United Parcel Service, Greenwich, Conn., said its operations in the San Francisco area have been reduced to 40% of normal.
[21803012] |A UPS spokesman said that although none of the company's terminals, trucks or airplanes were damaged in the quake, road shutdowns and power failures have impeded its pickup and delivery of packages.
[21803013] |The spokesman noted four-hour to five-hour traffic delays on the San Mateo bridge, for example.
[21803014] |In addition, power failures prevented its package-sorting facilities from operating, causing delays.

[21803015] |But freight railroads reported that damage to their facilities was relatively minor, with Santa Fe Pacific Corp.'s rail unit the least affected by the quake.
[21803016] |Santa Fe stopped freight trains Tuesday night while its officials inspected track but resumed service at 10:45 p.m. when they found no damage.

[21803017] |Union Pacific Corp.'s rail unit said that except for damage to shipping containers in its Oakland yard, its track, bridges and structures were unharmed.
[21803018] |That railroad is operating trains but with delays caused by employees unable to get to work.

[21803019] |Southern Pacific Transportation Co., the hardest hit of the three railroads in the Bay area, said service on its north-south coastline, which is used by an Amtrak train between Los Angeles and Seattle, was suspended temporarily because of kinked rails near the epicenter of the quake.
[21803020] |But service on the line is expected to resume by noon today.
[21803021] |"We had no serious damage on the railroad," said a Southern Pacific spokesman.
[21803022] |"We have no problem to our freight service at all expect for the fact businesses are shut down."

[21803023] |Amtrak said it suspended train service into its Oakland station, which sustained "heavy structural damage" during the quake.
[21803024] |The passenger railroad said it terminated some runs in Sacramento, relying on buses to ferry passengers to the Bay area.
[21803025] |Amtrak said it planned to resume some train operations to Oakland late yesterday.

[21803026] |Rail-transit operations suffered little damage, according to Albert Engelken, deputy executive director of the American Public Transit Association in Washington.
[21803027] |The Bay Area Rapid Transit "withstood the earthquake perfectly," said Mr. Engelken, adding that the rail system was running a full fleet of 45 trains during the day to provide an alternative for highway travelers.
[21803028] |"The highway system is screwed up" by the earthquake, Mr. Engelken said.
[21803029] |"The transit system is how people are going to be getting around."
[21803030] |He added that San Francisco's trolley cars and trolley buses were also running at full service levels.

[21803031] |Although air-traffic delays in San Francisco were significant yesterday, they didn't appear to spread to other airports.
[21803032] |The earthquake shattered windows at San Francisco International's air-traffic control tower and rained pieces of the ceiling down on controllers, three of whom suffered minor injuries.
[21803033] |Terminals at San Francisco International also were damaged, but the tower itself was intact.
[21803034] |Tuesday night, thousands were diverted to other airports and had to wait a day to resume travel.

[21803035] |Runways at San Francisco weren't damaged, but traffic was being limited yesterday to 27 arrivals and 27 departures an hour -- down from 33 to 45 an hour normally -- mainly because the noise level in the control tower was overwhelming without the windows, an FAA spokeswoman said.

[21803036] |While the airport was closed, flights were diverted to airports in Sacramento and Stockton, Calif.; Reno and Las Vegas, Nev.; and Los Angeles.
[21803037] |United Airlines, the largest carrier at San Francisco, was operating only 50% of its scheduled service in and out of the area because of damage to its terminal, which in turn was causing delays for travelers headed to the Bay area.
[21803038] |A United spokesman said 14 of its 21 gates were unusable, mainly because of water damage caused when a sprinkler system was triggered by the tremors.

[21803039] |The United spokesman said none of its people were injured at the airport; in fact, as the airport was being evacuated Tuesday night, two babies were born.

[21803040] |Yesterday, the United ticket counter was active, with people trying to get flights out, but the airline said demand for seats into the city also was active, with people trying to get there to help family and friends.

[21803041] |The airports in San Jose and Oakland were both fully operational by noon yesterday, the Federal Aviation Administration said.

[21803042] |In terms of diversions, Denver's Stapleton International may have experienced the most far-flung: A United flight from Japan was rerouted there.
[21803043] |"I think that's the first nonstop commercial passenger flight from Japan to land here," an airport spokesman said.

[21803044] |A Japan Air Lines spokesman said its flights into and out of San Francisco weren't affected, but getting information about its operations was difficult.
[21803045] |Its telecommunications headquarters in Burlingame, Calif., had been knocked out since the quake.
[21803046] |"We're in the dark," he said.

[21804001] |Whitbread & Co. put its spirits division up for sale, triggering a scramble among global groups for the British company's brands.

[21804002] |Whitbread already has been approached by "about half a dozen" companies interested in buying all or part of the spirits business, a spokesman said.
[21804003] |Analysts expect the spirits operations and some California vineyards that also are being sold to fetch about #500 million ($788.8 million).

[21804004] |Among the brands for sale are Beefeater gin, the No. 2 imported gin in the U.S., and Laphroaig single-malt whiskey.
[21804005] |Also for sale are Buckingham Wile Co., which distributes Cutty Sark blended whiskey in the U.S., and Whitbread's Atlas Peak Vineyards in California's Napa Valley.

[21804006] |Beefeater alone is worth as much as #300 million, analysts said.
[21804007] |Whitbread bought the Beefeater distillery two years ago for #174.5 million.

[21804008] |That purchase represented an attempt by Whitbread, a venerable British brewer, to become a major player in the global liquor business.
[21804009] |But Whitbread has been squeezed by giant rivals amid widespread consolidation in the industry.
[21804010] |Now, it wants to concentrate on beer and its newer hotel and restaurant operations.

[21804011] |For rival liquor companies, the Whitbread auction is a rare opportunity to acquire valuable brands.
[21804012] |"It's not very often something like this comes up," said Ron Littleboy, a liquor company analyst at Nomura Research Institute in London.

[21804013] |"The division will be sold off quite rapidly," predicted Neill Junor, an analyst at London brokers County NatWest WoodMac.
[21804014] |Among possible buyers, Grand Metropolitan PLC might find Beefeater a useful addition to its portfolio.
[21804015] |Grand Met owns Bombay gin, the No. 3 imported gin in the U.S.; rival Guinness PLC has the No. 1 imported brand, Tanqueray.
[21804016] |The Whitbread spirits auction "is an extremely interesting development . . . and naturally we'll be considering it carefully," a Grand Met spokesman said.

[21804017] |Guinness, which owns several leading whiskey brands plus Gordon's gin, the world's No. 1 gin, is considered less likely to bid for the Whitbread spirits.
[21804018] |A Guinness spokesman declined to comment.

[21804019] |Two other global liquor giants, Canada's Seagram Co. and Britain's Allied-Lyons PLC, also are possible buyers.
[21804020] |Seagram's gin is the world's No. 2 gin brand, but the company doesn't own any of the major gin brands imported in the U.S.
[21804021] |Allied-Lyons, while powerful in whiskey, doesn't own any major white-spirit brands.
[21804022] |"We will certainly have to take a look at" the Whitbread spirits business, an Allied-Lyons spokesman said.
[21804023] |"We would certainly like to have a major white-spirits brand in our portfolio."
[21804024] |A Seagram spokesman in New York wouldn't comment.

[21804025] |Smaller liquor companies, such as Brown-Forman Corp. and American Brands Inc. of the U.S., also are likely to be interested.
[21804026] |Such companies "are increasingly being left behind" in the global liquor business, says Nomura's Mr. Littleboy.
[21804027] |In New York, a spokesman for American Brands wouldn't comment.
[21804028] |Brown-Forman, a Louisville, Ky. distiller, also declined to comment.

[21804029] |Whitbread's wine, spirits and soft-drink operations had trading profit of #35.4 million on sales of #315.5 million in the year ended Feb. 25.
[21804030] |The company, which is retaining most of its wine and all of its soft-drink interests, didn't break out results for the businesses it plans to sell.
[21804031] |But analysts estimate their trading profit at #30 million.
[21804032] |Whitbread had total pretax profit in the year ended Feb. 25 of #223.2 million, on sales of #2.26 billion.

[21804033] |Whitbread's spirits auction occurs amid a parallel shakeup in the British beer industry.
[21804034] |Earlier this year, the government announced plans to foster increased competition in the industry.
[21804035] |British brewers currently own thousands of pubs, which in turn sell only the breweries' beer and soft drinks.
[21804036] |Under new rules, many of the country's pubs would become "free houses," selling beers of their choice.

[21804037] |Whitbread now intends to bolster its brewing interests, in an effort to grab a share of sales to free houses.
[21804038] |The company, which last month paid #50.7 million for regional British brewer Boddington Group PLC, has about 13% of the British beer market.
[21804039] |Whitbread also owns the license to brew and distribute Heineken and Stella Artois beers in Britain.

[21804040] |In addition, Whitbread intends to focus on its newer hotel, liquor store and restaurant businesses in Europe and North America.
[21804041] |In Britain, those interests include the Beefeater steakhouse chain and joint ownership with PepsiCo Inc. of the country's Pizza Hut chain.
[21804042] |In Canada and the U.S., Whitbread owns The Keg chain of steak and seafood restaurants.

[21804043] |Focusing on beer, restaurants and hotels means "we can concentrate our skills and resources more effectively," Peter Jarvis, Whitbread's managing director, said in a statement.
[21804044] |The spirits business "would require substantial additional investment to enable it to compete effectively in the first division of global players."

[21804045] |Whitbread also announced that Mr. Jarvis, who is 48, will become the company's chief executive March 1.
[21804046] |At that time Sam Whitbread, the company's chairman and a descendant of its 18th-century founder, will retire from executive duties.
[21804047] |He will retain the honorary title of non-executive chairman.

[21805001] |The Treasury plans to raise $700 million in new cash with the sale Tuesday of about $10 billion in two-year notes to redeem $9.29 billion in maturing notes.

[21805002] |The offering will be dated Oct. 31 and mature Oct. 31,

[21805003] |Tenders for the notes, available in minimum $5,000 denominations, must be received by 1 p.m. EDT Tuesday at the Treasury or at Federal Reserve banks or branches.

[21806001] |NEWHALL LAND & FARMING Co., Valencia, Calif., announced a 2-for-1 split in the real estate limited partnership's units and increased its regular quarterly cash distribution 33%, to 40 cents a unit.
[21806002] |The real estate limited partnership also said it will pay a special year-end cash distribution of 10 cents a unit.
[21806003] |Both distributions are payable Dec. 4 to limited partners of record Nov. 3.

[21807001] |Mellon Bank Corp. said directors authorized the buy-back of as many as 250,000 common shares.

[21807002] |The bank holding company said stock repurchased will be used to meet requirements for the company's benefit plans.

[21807003] |Mellon has 36.6 million shares outstanding.

[21808001] |Champion International Corp.'s third-quarter profit dropped 17%, reflecting price declines for certain paper products, operating problems at certain mills, and other factors.

[21808002] |The paper producer reported that net income fell to $102.1 million, or $1.09 a share, from $122.4 million, or $1.29 a share, in the year-earlier period.
[21808003] |Sales rose 2.6% to $1.32 billion from $1.29 billion.

[21808004] |In New York Stock Exchange composite trading, Champion's shares rose 25 cents to $32.125.

[21809001] |Digital Equipment Corp. is planning a big coming-out party on Tuesday for its first line of mainframe computers.
[21809002] |But an uninvited guest is expected to try to crash the party.

[21809003] |On the morning of the long-planned announcement, International Business Machines Corp. is to introduce its own new mainframe.
[21809004] |"Their attitude is, `You want to talk mainframes, we'll talk mainframes,'" says one computer industry executive.

[21809005] |"They're deliberately trying to steal our thunder," a Digital executive complains.
[21809006] |"Maybe we should take it as a compliment."

[21809007] |Digital's target is the $40 billion market for mainframe computers, the closet-sized number-crunchers that nearly every big company needs to run its business.
[21809008] |IBM, based in Armonk, N.Y., has dominated the market for decades.

[21809009] |That doesn't scare Digital, which has grown to be the world's second-largest computer maker by poaching customers of IBM's mid-range machines.
[21809010] |Digital, based in Maynard, Mass., hopes to stage a repeat performance in mainframes, and it has spent almost $1 billion developing the new technology.
[21809011] |A spoiler, nimble Tandem Computers Inc. in Cupertino, Calif., jumped into the fray earlier this week with an aggressively priced entry.

[21809012] |IBM appears more worried about Digital, which has a broad base of customers waiting for the new line, dubbed the VAX 9000.
[21809013] |"It's going to be nuclear war," says Thomas Willmott, a consultant with Aberdeen Group Inc.

[21809014] |The surge in competition is expected to stir new life into the huge mainframe market, where growth has slowed to single digits in recent years.
[21809015] |IBM's traditional mainframe rivals, including Unisys Corp., Control Data Corp. and NCR Corp., have struggled recently.

[21809016] |Digital is promising a new approach.
[21809017] |Robert M. Glorioso, Digital's vice president for high performance systems, says Digital's mainframe is designed not as a central computer around which everything revolves, but as part of a decentralized network weaving together hundreds of workstations, personal computers, printers and other devices.
[21809018] |And unlike IBM's water-cooled mainframes, it doesn't need any plumbing.

[21809019] |The challengers will have a big price advantage.
[21809020] |Digital is expected to tag its new line from about $1.24 million to $4.4 million and up, depending on configuration.
[21809021] |That's about half the price of comparably equipped IBM mainframes.
[21809022] |Tandem's pricing is just as aggressive.

[21809023] |The heightened competition will hit IBM at a difficult time.
[21809024] |The computer giant's current mainframe line, which has sold well and has huge profit margins, is starting to show its age.
[21809025] |The new 3090s due next week will boost performance by only about 8% to 10%.
[21809026] |And IBM isn't expected to deliver a new generation of mainframes until 1991.

[21809027] |Still, no one expects IBM's rivals to deliver a knockout.
[21809028] |IBM has a near-monopoly on mainframes, with an estimated 70% share of the market.
[21809029] |IBM is five times the size of Digital -- and 40 times the size of Tandem -- and wields enormous market power.
[21809030] |It counts among its customers a majority of the world's largest corporations, which entrust their most critical business information to IBM computers.

[21809031] |"We're not going to walk in and replace a company's corporate accounting system if it's already running on an IBM mainframe," concedes Kenneth H. Olsen, Digital's president.

[21809032] |He says Digital will target faster-growing market segments such as on-line transaction processing, which includes retail-sales tracking, airline reservations and bank-teller networks.
[21809033] |Tandem, which already specializes in on-line transaction processing, is a potent competitor in that market.

[21809034] |A key marketing target for Digital will be the large number of big customers who already own both Digital and IBM systems.
[21809035] |One such company is Bankers Trust Co.
[21809036] |Stanley Rose, a vice president, technological and strategic planning at Bankers Trust, says that despite Digital's low prices, "we aren't about to unplug our IBM mainframes for a DEC machine.
[21809037] |The software conversion costs would dwarf any savings."

[21809038] |But Mr. Rose is still looking seriously at the 9000.
[21809039] |Bankers Trust uses Digital's VAX to run its huge money-transfer and capital markets accounts, juggling hundreds of billions of dollars each day, he says.
[21809040] |As that system grows, larger computers may be needed.
[21809041] |"In the past, customers had to go to IBM when they outgrew the VAX.
[21809042] |Now they don't have to," he says.
[21809043] |"That's going to cost IBM revenue."

[21809044] |Analysts say Digital can expect this pent-up demand for the new VAX to fuel strong sales next year.
[21809045] |Barry F. Willman, an analyst at Sanford C. Bernstein & Co., estimates the 9000 could boost sales by more than $1 billion in the fiscal year beginning in July.
[21809046] |He bases the estimate on a survey of hundreds of Digital's largest customers.

[21809047] |Although Digital will announce a full family of mainframes next week, it isn't expected to begin shipping in volume until next year.
[21809048] |The first model available will be the 210, which is likely to appeal to many technical and scientific buyers interested in the optional super-charger, or vector processor, says Terry Shannon of International Data Corp., a market research concern.

[21809049] |Four more models, aimed squarely at IBM's commercial customers, are expected to begin shipping in late June.
[21809050] |Most analysts don't expect the new mainframes to begin contributing significantly to revenue before the fiscal first quarter, which begins next July 1.

[21809051] |Digital's new line has been a long time coming.
[21809052] |The company has long struggled to deliver a strong mainframe-class product, and made a costly decision in 1988 to halt development of an interim product meant to stem the revenue losses at the high end.
[21809053] |Digital's failure to deliver a true mainframe-class machine before now may have cost the company as much as $1 billion in revenue in fiscal 1989, Mr. Willman says.

[21809054] |IBM will face still more competition in coming months.
[21809055] |Amdahl Corp., backed by Japan's Fujitsu Ltd., has a growing share of the market with its low-priced, IBM-compatible machines.
[21809056] |And National Advanced Systems, a joint venture of Japan's Hitachi Ltd. and General Motors Corp.'s Electronic Data Systems, is expected to unveil a line of powerful IBM-compatible mainframes later this year.

[21809057] |NOTE:
[21809058] |NAS is National Advanced Systems, CDC -- Control Data Corp., Bull NH Information Systems Inc.

[21809059] |Source: International Data Corp.

[21809060] |Compiled by Publishers Weekly from data from large-city bookstores, bookstore chains and local bestseller lists across the U.S.
[21809061] |Copyright 1989 by Reed Publishing USA.

[21810001] |The frenetic stock and bond markets cooled off, but the dollar slumped.

[21810002] |Stocks rose slightly as trading activity slowed from the frenzied pace earlier this week.
[21810003] |Prices of long-term Treasury bonds hovered in a narrow band most of the day, finishing little changed despite the dollar's weakness and fears about a wave of government borrowing coming soon.

[21810004] |Helped by futures-related program buying, the Dow Jones Industrial Average gained 4.92 points to close at 2643.65.
[21810005] |But the Dow Jones Transportation Average fell for the seventh-consecutive session as more investors dumped UAL shares.

[21810006] |Bond prices rallied early yesterday morning as traders scrambled to buy Treasury issues on fears that the Northern California earthquake might lead to a stock-market debacle.
[21810007] |But when stocks held steady, Treasury bonds later retreated.

[21810008] |Speculation that the Federal Reserve will lower interest rates in coming weeks helped push the dollar down while boosting stocks, traders said.
[21810009] |But many investors remain wary about stocks, partly because they expect continued turbulence in the junk-bond market that would make it more difficult to finance corporate takeovers.

[21810010] |"I'm surprised we didn't see more volatility" in stocks, said Raymond F. DeVoe Jr., market strategist at Legg Mason Wood Walker.
[21810011] |"I think the problems in the junk-bond area are just beginning, and this will be very unsettling for companies that have issued junk bonds.
[21810012] |In a bull market, credit does not matter," Mr. DeVoe added.
[21810013] |"But when it does matter, then it's the only thing that matters."

[21810014] |However, many institutional investors are reacting to the stock market's plunge as "a great buying opportunity," said Charles I. Clough, chief investment strategist at Merrill Lynch Capital Markets.
[21810015] |"Things are beginning to settle down.
[21810016] |The markets are returning to normalcy."

[21810017] |Oil prices initially rose on fears that the massive earthquake in Northern California would disrupt production.
[21810018] |But prices later reversed course, finishing slightly lower, as investors concluded that any cuts wouldn't be large and that foreign oil producers would quickly pick up the slack.

[21810019] |In major market activity:

[21810020] |Stock prices rose.
[21810021] |New York Stock Exchange volume shrank to 166.9 million shares from 224.1 million Tuesday.
[21810022] |Advancers on the Big Board outpaced decliners by 822 to 668.

[21810023] |Bond prices were little changed in sluggish activity.
[21810024] |The yield on the Treasury's 30-year issue fell slightly to 8.03%.

[21810025] |The dollar dropped.
[21810026] |In New York late yesterday, the currency was at 141.45 yen and 1.8485 marks, down from 142.75 yen and 1.8667 marks late Tuesday.

[21811001] |James L. Madson, 46 years old, was named a vice president and assistant general manager of this producer of copper and other minerals.
[21811002] |He will succeed Arthur E. Himebaugh as general manager Feb. 1, when Mr. Himebaugh retires.

[21812001] |AMR Corp. posted an 8.8% drop in third-quarter net income and said the fourth quarter will be "disappointing" as well, primarily because of slimmer profit margins and increased fuel costs.

[21812002] |AMR's earnings decline comes a year after the parent company of American Airlines and the rest of the airline industry set profit records.
[21812003] |Some analysts say the latest results only seem pale by comparison with a spectacular second half of 1988.

[21812004] |Still, AMR's stumble doesn't bode well for the rest of the industry.
[21812005] |The Fort Worth, Texas, company is generally regarded as one of the best-run in the business, and its difficulties are likely to be reflected industrywide as other major carriers report third-quarter results over the next several days.

[21812006] |Meanwhile, the company's board, which had said nothing publicly about investor Donald Trump's recently withdrawn $7.5 billion offer for AMR, issued a statement condemning "ill-conceived and reckless" bids and saying it was "pleased" that Mr. Trump had backed out.

[21812007] |In the third quarter, AMR said, net fell to $137 million, or $2.16 a share, from $150.3 million, or $2.50 a share.
[21812008] |Revenue rose 17% to $2.73 billion from $2.33 billion a year earlier.

[21812009] |AMR's chairman, Robert L. Crandall, said the results were due to an 11% year-to-year increase in fuel prices and a slight decrease in yield, an industry measure analogous to profit margin on each seat sold.

[21812010] |"We think these trends will continue and will produce a very disappointing fourth quarter as well," he said.
[21812011] |Tim Pettee, an analyst with Merrill Lynch & Co., said: "The business turned faster than expected.
[21812012] |Costs are giving them a little bit of trouble, and the whole industry is having a pricing problem."

[21812013] |For the nine months, AMR's net rose 15% to $415.9 million, or $6.59 a share, from $360.1 million, or $5.99 a share.
[21812014] |Revenue jumped 22% to $7.89 billion from $6.46 billion.

[21812015] |AMR's board, in a statement after a regular meeting yesterday, said: "Ill-considered and reckless acquisition proposals adversely affect employee, financial and business relationships and are contrary to the best interests of AMR shareholders. . . .
[21812016] |AMR has not been, and is not, for sale."

[21812017] |Mr. Crandall said the company's current decline in earnings is exactly the kind of situation that an excessively leveraged company laden with debt from a takeover would find difficult to weather.

[21812018] |"Our very disappointing third-quarter results and the discouraging outlook for the fourth quarter underscore the importance of an adequate capital base," he said.

[21813001] |Christopher Whittington, 51-year-old deputy chairman of this British investment-banking group and chairman of Morgan Grenfell & Co., the group's main banking unit, has retired from his executive duties.
[21813002] |Succeeding Mr. Whittington as deputy chairman of the group is Anthony Richmond-Watson, 43, currently a main board member.
[21813003] |Succeeding Mr. Whittington at Morgan Grenfell & Co. is Richard Webb, 50, currently deputy chairman.
[21813004] |Mr. Whittington will remain on the main group board as a nonexecutive director.

[21814001] |Without federal subsidies to developers of beach houses, the economic and structural damage by Hurricane Hugo in South Carolina would have been much less, as highlighted by your Oct. 3 editorial "Subsidizing Disaster."

[21814002] |Congress should stop throwing tax dollars out to sea by subsidizing the development of beach communities on ecologically fragile coastal barrier islands, such as the hard-hit Isle of Palms near Charleston.

[21814003] |As you mentioned, subsidies for development on a number of barrier islands were curtailed in 1982 by the Coastal Barrier Resource System.
[21814004] |The National Taxpayers Union would like Congress to add 800,000 acres to the 453,000 of shoreline in the system by enacting "The Coastal Barrier Improvement Act of 1989."

[21814005] |This bill simply says that if you want to develop property on a barrier island you have to do so without taxpayer support.
[21814006] |Private-property rights would be upheld because the legislation would not ban coastal development.
[21814007] |However, home builders would have to bear the full costs of such beach-house construction.

[21814008] |A Taxpayers Union study concluded the bill would save taxpayers up to $9.3 billion in barrier-island subsidies over 20 years.
[21814009] |Already, the 1982 legislation has saved an estimated $800 million.

[21814010] |Marshall Y. Taylor

[21814011] |Communications Director

[21814012] |National Taxpayers Union

[21815001] |The government said 13.1% of Americans, or 31.9 million people, were living in poverty in 1988.

[21815002] |While last year's figure was down from 13.4% in 1987 and marked the fifth consecutive annual decline in the poverty rate, the Census Bureau said the 1988 drop wasn't statistically significant.

[21815003] |The bureau's report also showed that while some measures of the nation's economic well-being improved modestly in 1988, the fruits of prosperity were shared less equitably than the year before.

[21815004] |Summarizing data derived from a March 1989 survey of 58,000 households, William Butz, associate director of the Census Bureau, said that "most groups either stayed the same or improved."
[21815005] |But, he added, "Since the late 1960s, the distribution of income has been slowly getting less equal.
[21815006] |There was no reversal {of that trend} between 1987 and 1988."

[21815007] |Per capita income, a widely used measure of a nation's economic health, hit a record in 1988, rising 1.7% after inflation adjustment to $13,120.
[21815008] |But the median income of American families fell 0.2%, the first time it has failed to rise since 1982.

[21815009] |Mr. Butz said the divergence in the two measures reflects changes in family size and structure, including the rising number of female-headed families and a sharp increase in income reported by Americans who aren't living in families.

[21815010] |As a result of last year's decline, the government's estimate for the number of people living below the poverty line declined by about 500,000.
[21815011] |The poverty threshold, defined as three times food expenses as calculated by the Agricultural Department, last year was $12,092 for a family of four.
[21815012] |The Census Bureau counts all cash income in determining whether families are below the line, but it doesn't consider other government benefits, such as Medicare.

[21815013] |Thanks largely to the continued growth of the U.S. economy, the poverty rate is now substantially lower than the 1983 peak of 15.3%, but the improvements have been modest in the past couple of years.

[21815014] |Poverty remains far more widespread among blacks than other Americans.
[21815015] |In 1988, 31.6% of blacks lived in poverty, compared with 10.1% for whites and 26.8% for Hispanics.
[21815016] |But two-thirds of all poor Americans were white.
[21815017] |More than half of poor families were headed by women living without men, the bureau said.
[21815018] |More than three-fourths of poor black families were headed by women.

[21815019] |The poverty rate of children under 18 years old dropped last year to 19.7% from 20.5% in 1987, but remained far higher than a decade ago.
[21815020] |The rate among the elderly -- 12% in 1988 -- wasn't significantly lower than the year before.
[21815021] |If it weren't for Social Security payments, more than three times as many elderly would be below the poverty line, Mr. Butz said.

[21815022] |The Census Bureau also said:

[21815023] |-- Some 17.2% of all money income received by families in 1988 went to the wealthiest 5% of all families, up from 16.9% in 1987.
[21815024] |That is the greatest share reported for any year since 1950, although changing definitions over the years distort the comparison.

[21815025] |-- The top fifth of all families got 44% of the income, up from 41.5% a decade earlier.
[21815026] |The bottom fifth of all families got 4.6% of the income, down from 5.2% a decade earlier.

[21815027] |-- Confirming other government data showing that wages aren't keeping pace with inflation, earnings of year-round, full-time male workers fell 1.3% in 1988 after adjusting for higher prices, the first such drop since 1982.
[21815028] |Earnings of female workers were unchanged.

[21815029] |-- Women working full-time earned 66 cents for every dollar earned by men, a penny more than in 1987 and seven cents more than in 1978.

[21815030] |-- Median household income -- which includes both those living in families and those who aren't -- rose 0.3% last year to $27,225 after inflation.
[21815031] |It rose sharply in the Northeast and Midwest and fell slightly in the South and West.
[21815032] |Median family income was $32,191, down 0.2%.

[21815033] |-- Per capita income of blacks, though still only 60% that of whites, rose 3.9% in 1988, while per capita income of whites rose only 1.5%.

[21815034] |-- Among married couples, the gap between blacks and whites narrowed sharply, as income of black families shot up 6.8% while income of whites didn't budge.

[21815035] |Fueling a controversy that has been simmering for years, the Census Bureau also said its figures would look far rosier if it recalculated the poverty threshold using an improved consumer-price measure adopted in 1983.
[21815036] |The bureau said some 3.5 million fewer people would have fallen below the poverty line in 1988 -- and the poverty rate would have been 10.5% instead of 13.1% -- under the alternative calculation.

[21815037] |Critics on the left and right have been calling for all sorts of revisions to the measure for years.
[21815038] |A report by the staff of the Joint Economic Committee of Congress released yesterday concluded, "It is misleading to make this change without adjusting for other changes."

[21815039] |The official poverty threshold is set by the Office of Management and Budget.

[21816001] |John E. Hayes Jr. was elected chairman, president and chief executive officer, succeeding David S. Black, who retired.
[21816002] |Mr. Hayes, 52 years old, left Southwestern Bell Telephone Co. in January, where he had been chairman, president and chief executive, to join Triad Capital Partners, a St. Louis company with interests in solid waste and recycling, telecommunications and international venture capital.
[21816003] |He has resigned his posts at Triad to take the Kansas Power positions.
[21816004] |Kansas Power said Mr. Black, 61, chose early retirement.

[21817001] |The space shuttle Atlantis boosted the Galileo spacecraft on its way to Jupiter, giving a big lift as well to an ambitious U.S. program of space exploration.

[21817002] |Seven years late in the launching, $1 billion over budget and a target of anti-nuclear protestors, Galileo has long been a symbol of trouble for the National Aeronautics and Space Administration.
[21817003] |But yesterday, as Atlantis rumbled into a patch of clear sky above Florida with storm clouds closing in on it, NASA sought to turn Galileo into a symbol of triumph.

[21817004] |"NASA did it right; that's the message," said J.R. Thompson, the agency's deputy administrator.

[21817005] |The $1.4 billion robot spacecraft faces a six-year journey to explore Jupiter and its 16 known moons.
[21817006] |If all goes well, it will parachute a probe into the dense Jovian atmosphere in July 1995 to pick up detailed data about gases that may be similar to the material from which the solar system was formed 4.6 billion years ago.
[21817007] |Jupiter is so enormous -- its mass is 318 times that of Earth -- that its gravity may have trapped these primordial gases and never let them escape.

[21817008] |Investigating Jupiter in detail may provide clues to what astronomer Tobias Owen calls the "cosmic paradox" of life: Jupiter and other bodies in the outer solar system are rich in elements such as hydrogen that are essential for life on Earth, but these planets are lifeless; Earth, on the other hand, has a diminished store of such material but is rich in life.
[21817009] |Some scientists have suggested that comets and asteroids may have brought enough of this kind of material from the outer solar system to Earth to spawn life.

[21817010] |Beginning in December 1995, Galileo will begin a two-year tour of the Jovian moons.
[21817011] |In 1979, two Voyager spacecraft sent back stunning photos of Jovian moons Io and Europa that showed them to be among the most intriguing bodies in the solar system.
[21817012] |The photos showed active geysers on Io spewing sulfurous material 190 miles into its atmosphere and indicated that Europa may have an ocean hidden under a thick sheet of ice.

[21817013] |Galileo's photos of Europa will be more than 1,000 times as sharp as Voyager's, according to Torrence Johnson, Galileo's project scientist, and may show whether it actually has the only known ocean other than those on Earth.

[21817014] |Atlantis lifted Galileo from the launch pad at 12:54 p.m. EDT and released the craft from its cargo bay about six hours later.
[21817015] |"Galileo is on its way to another world in the hands of the best flight controllers in this world," Atlantis Commander Donald Williams said.
[21817016] |"Fly safely."

[21817017] |The five-member Atlantis crew will conduct several experiments, including growing plants and processing polymeric materials in space, before their scheduled landing at Edwards Air Force Base, Calif., Monday.

[21817018] |The Galileo project started in 1977, and a number of project veterans were on hand to watch the launch.
[21817019] |An ebullient Mr. Johnson, wearing a NASA baseball cap and carrying a camera and binoculars, called the launch "fantastic."
[21817020] |Benny Chin, manager of the Galileo probe, compared it to watching a child leave home.
[21817021] |"I'm happy and sad," he said.

[21817022] |Anti-nuclear activists took a less positive view.
[21817023] |Having argued that Galileo's plutonium power source could have released lethal doses of radiation if the shuttle exploded yesterday, they weren't quieted by yesterday's successful launch.
[21817024] |Galileo will skim past Earth in 1990 and 1992, collecting energy from the planet's gravitational field to gain momentum for its trip to Jupiter.
[21817025] |The protesters point out that Galileo also could crash to Earth then.

[21817026] |They said they dropped plans to infiltrate the Kennedy Space Center after NASA beefed up its security.
[21817027] |One protest did get past NASA's guard, though; a computer virus caused anti-Galileo messages to flash onto some computer screens at NASA centers.

[21817028] |The successful launch continues a remarkable recovery in the U.S. space-science program.
[21817029] |An unmanned spacecraft, Magellan, already is heading to Venus and is due to begin mapping the planet next August.
[21817030] |Voyager 2 sent back spectacular photos of Neptune and its moon, Triton, this summer.

[21817031] |Next month, NASA plans to launch a satellite to study cosmic rays dating from the birth of the universe.
[21817032] |In December, the shuttle Columbia will try to retrieve a satellite that's been in orbit for nearly five years measuring the deleterious effects of space on materials and instruments.
[21817033] |Next March, the shuttle Discovery will launch the Hubble space telescope, a $1.5 billion instrument designed to see the faintest galaxies in the universe.

[21817034] |Not all of NASA's space-science work will be so auspicious, though.
[21817035] |Around Thanksgiving, the Solar Max satellite, which NASA repaired in orbit in 1984, will tumble back into the Earth's atmosphere.
[21817036] |NASA won't attempt a rescue; instead, it will try to predict whether any of the rubble will smash to the ground and where.

[21818001] |The Associated Press's earthquake coverage drew attention to a phenomenon that deserves some thought by public officials and other policy makers.
[21818002] |Private relief agencies, such as the Salvation Army and Red Cross, mobilized almost instantly to help people, while the Washington bureaucracy "took hours getting into gear."
[21818003] |One news show we saw yesterday even displayed 25 federal officials meeting around a table.
[21818004] |We recall that the mayor of Charleston complained bitterly about the federal bureaucracy's response to Hurricane Hugo.
[21818005] |The sense grows that modern public bureaucracies simply don't perform their assigned functions well.

[21819001] |Bally Manufacturing Corp. and New York developer Donald Trump have agreed in principle to a $6.5 million settlement of shareholder litigation stemming from Bally's alleged greenmail payment to Mr. Trump.

[21819002] |According to lawyers familiar with the settlement talks, the verbal agreement to end a lawsuit filed more than two years ago was reached last week and will soon be submitted to a federal judge in Camden, N.J.

[21819003] |In February 1987, Bally thwarted a possible hostile takeover bid from Mr. Trump by agreeing to buy 2.6 million of Mr. Trump's 3.1 million Bally shares for $83.7 million -- more than $18 million above market price.
[21819004] |The term greenmail refers to a situation where a company pays a premium over market value to repurchase a stake held by a potential acquirer.

[21819005] |Lawyers for shareholders, Bally and Mr. Trump all declined to talk publicly about the proposed settlement, citing a request by a federal court magistrate not to reveal details of the agreement until it is completed.

[21819006] |But some attorneys who are familiar with the matter said the $6.5 million payment will be shared by Bally and Mr. Trump, with the casino and hotel concern probably paying the bulk of the money.

[21819007] |The amount Bally and Mr. Trump will pay to settle the class-action suit pales in comparison to the $45 million Walt Disney Co. and Saul Steinberg's Reliance Group Holdings Inc. agreed to pay to settle a similar suit in July.
[21819008] |That settlement represented the first time shareholders were granted a major payment in a greenmail case.
[21819009] |Mr. Steinberg made a $59.7 million profit on the sale to Disney of his investment in the company in 1984.

[21819010] |But lawyers said Mr. Steinberg probably faced much more potential liability because, when he sued Disney during his takeover battle, he filed on behalf of all shareholders.
[21819011] |When Disney offered to pay Mr. Steinberg a premium for his shares, the New York investor didn't demand the company also pay a premium to other shareholders.
[21819012] |When Mr. Trump sued Bally, he sued only on behalf of himself.

[21819013] |Mr. Trump and Bally also appeared to have some leverage in the case because in the state of Delaware, where Bally is incorporated, courts have held that greenmail is often protected by the business-judgment rule.
[21819014] |That rule gives boards of directors wide latitude in deciding how to deal with dissident shareholders.

[21819015] |SENATE HEARS final arguments in impeachment trial of federal judge.

[21819016] |Yesterday, U.S. Judge Alcee Hastings faced his jury -- the full U.S. Senate -- and said, "I am not guilty of having committed any crime."

[21819017] |Seventeen articles of impeachment against the Florida judge, one of the few blacks on the U.S. bench, were approved by the House in August 1988.
[21819018] |The central charge against Judge Hastings is that he conspired with a Washington lawyer to obtain a $150,000 bribe from defendants in a criminal case before the judge, in return for leniency.
[21819019] |He is also accused of lying under oath and of leaking information obtained from a wiretap he supervised.

[21819020] |The Senate's public gallery was packed with Judge Hastings' supporters, who erupted into applause after he finished his argument.
[21819021] |Judge Hastings, who was acquitted of similar charges by a federal jury in 1983, claims he is being victimized and that the impeachment proceedings against him constitute double jeopardy.

[21819022] |But Rep. John Bryant (D., Texas), the lead counsel for the House managers who conducted a lengthy inquiry into Judge Hastings' activities, said "a mountain of evidence points to his certain guilt."

[21819023] |The Senate will deliberate behind closed doors today and is scheduled to vote on the impeachment tomorrow.
[21819024] |If the judge is impeached, as is thought likely, he will be removed from office immediately.

[21819025] |However, Judge Hastings has said he will continue to fight and is contemplating an appeal of any impeachment to the U.S. Supreme Court.

[21819026] |COMPANIES SEEKING to make insurers pay for pollution cleanup win court victory.

[21819027] |In a case involving Avondale Industries Inc. and its insurer, Travelers Cos., the Second U.S. Circuit Court of Appeals in New York ruled in favor of the company on two issues that lawyers say are central to dozens of pollution cases around the country.

[21819028] |Travelers and other insurers have maintained that cleanup costs aren't damages and thus aren't covered under commercial policies.
[21819029] |They also have argued that government proceedings notifying a company of potential responsibility don't fit the legal definition of a lawsuit; thus, such governmental proceedings aren't covered by the policies, the insurers say.

[21819030] |The appeals court disagreed on both counts.
[21819031] |Avondale was notified by Louisiana officials in 1986 that it was potentially responsible for a cleanup at an oil-recycling plant.
[21819032] |Avondale asked Travelers to defend it in the state proceeding, but the insurer didn't respond.
[21819033] |The appeals court upheld a district judge's ruling that the insurer had to defend the company in such proceedings.

[21819034] |The appeals court also said, "We think an ordinary businessman reading this policy would have believed himself covered for the demands and potential damage claims" stemming from any cleanup.

[21819035] |"This decision will have a very considerable impact," said Kenneth Abraham, professor of environmental law and insurance law at the University of Virginia, because many commercial insurance policies are issued by companies based in New York.

[21819036] |William Greaney, an attorney for the Chemical Manufacturers Association, said that while other appeals courts have ruled differently on whether cleanup costs are damages, the influence of the appeals court in New York "will make insurers sit up and listen."
[21819037] |He said the decision was the first in which a federal appeals court has ruled whether administrative government proceedings qualify as litigation.

[21819038] |Barry R. Ostrager, an attorney for Travelers, said, "there are procedural bases on which this case will be appealed further."

[21819039] |NEW YORK'S poor face nearly three million legal problems a year without legal help.

[21819040] |That is the conclusion of a report released by the New York State Bar Association.
[21819041] |The report was based on a telephone survey of 1,250 low-income households across the state, a mail survey of major legal-services programs and on-site interviews with individuals in the field.

[21819042] |"The report provides detailed documentation of the extent and nature of the problem and indicates how we may want to shape solutions," said Joseph Genova, chairman of the committee that oversaw the survey and a partner at the law firm of Milbank, Tweed, Hadley & McCloy.

[21819043] |According to the study, slightly more than 34% of those surveyed reported having at least one housing problem every year for which they had no legal help.
[21819044] |Nearly 36% ranked housing problems as their most serious unmet legal need.
[21819045] |Other areas targeted by the survey's respondents included difficulty obtaining or maintaining public benefits (22%), consumer fraud (15.4%), and health-care issues (15%).

[21819046] |During the 15-month survey, 43% of all legal-services programs said that at some period they were unable to accept new clients unless they had an emergency.

[21819047] |Mr. Genova said the committee may meet to propose solutions to the problems identified in the study.

[21819048] |PROSECUTOR TO JOIN Gibson Dunn:
[21819049] |Assistant U.S. Attorney Randy Mastro, who headed the government's racketeering case against the International Brotherhood of Teamsters, will join Gibson, Dunn & Crutcher in its New York office.
[21819050] |Mr. Mastro has been with the New York U.S. attorney's office for nearly five years.
[21819051] |In 1987 he became deputy chief of the civil division.
[21819052] |Mr. Mastro will do civil litigation and white-collar defense work for Gibson Dunn, which is based in Los Angeles.

[21819053] |FORMER APPLE COMPUTER Inc. general counsel John P. Karalis has joined the Phoenix, Ariz., law firm of Brown & Bain.
[21819054] |Mr. Karalis, 51, will specialize in corporate law and international law at the 110-lawyer firm.
[21819055] |Before joining Apple in 1986, Mr. Karalis served as general counsel at Sperry Corp.

[21820001] |After failing to find a buyer for the Sears Tower in Chicago, Sears, Roebuck & Co. is negotiating with Boston pension fund adviser Aldrich, Eastman & Waltch Inc. to refinance the property for close to $850 million, according to people close to the negotiations.

[21820002] |Under the proposed agreement involving the world's tallest building, Chicago-based Sears would receive about half the money through conventional mortgage financing and the other half as a convertible mortgage.
[21820003] |At the end of the term of the convertible loan, Sears could still own half the building, and AEW could own the other half.
[21820004] |Neither side would comment.

[21820005] |The parties are currently negotiating over who would manage the building, which will be emptied of 6,000 employees from Sears' merchandise group, which is moving elsewhere.
[21820006] |The new manager will face the daunting task of leasing 1.8 million square feet in a relatively soft Chicago real estate market.
[21820007] |Also, it has not yet been decided exactly how much of the mortgage AEW will be able to convert into equity.

[21820008] |Convertible mortgages have become an increasingly popular way to finance prestigious buildings of late.
[21820009] |In a convertible mortgage, the investor lends the building owner a certain amount in return for the option to convert its interest into equity, usually less than 50%, at the end of the loan term.
[21820010] |During the term, the lender can either receive a percentage of cash flow, a percentage of the building's appreciation or a fixed return.
[21820011] |The main advantage of a convertible mortgage is that it is not a sale and therefore does not trigger costly transfer taxes and reappraisal.

[21820012] |Sears said it would put the 110-story tower on the block almost a year ago as part of its anti-takeover restructuring.
[21820013] |But Japanese institutions shied away from bidding on the high-profile tower out of fear their purchase of the property would trigger anti-Japanese sentiment.

[21820014] |Last summer, Sears appeared to have a deal with Canadian developer Olympia & York Developments Ltd.
[21820015] |But that deal fell through in September after it became clear that the sale would lead to a major real estate tax reassessment, raising property taxes, and making it difficult to lease the building at competitive prices.

[21820016] |Real estate industry executives said Sears' investment banker, Goldman, Sachs & Co., sought financing in Japan.
[21820017] |However, Japanese authorities apparently were concerned that a refinancing also would attract too much publicity.

[21820018] |Sears then went back to AEW, the Boston pension adviser that had proposed a convertible debt deal during the first round of bids last spring.
[21820019] |AEW has $3.5 billion of real estate investments nationwide, according to a spokesman.

[21821001] |Tandy Corp. said it signed a definitive agreement to acquire two units of Datatronic AB of Stockholm for cash.
[21821002] |The amount wasn't disclosed.

[21821003] |The electronics maker and retailer previously estimated the sale price at between $100 million and $200 million for Datatronic's Victor microcomputer and Micronic hand-held computer subsidiaries.
[21821004] |In addition, Tandy will acquire rights to the Victor and Micronic names for computers.
[21821005] |During 1988, the Datatronic subsidiaries had combined sales in excess of $200 million.

[21821006] |The transaction will give Tandy a well-known European computer brand that includes 2,700 dealers and distributors marketing to medium-sized business and educational institutions.

[21821007] |Closing of the transaction is subject to certain conditions and regulatory approvals, the company said.

[21822001] |Two rules in pending congressional legislation threaten to hinder leveraged buy-outs by raising the price tags of such deals by as much as 10%.

[21822002] |Wall Street is seething over the rules, which would curtail the tax deductibility of debt used in most LBOs.
[21822003] |The provisions, in deficit-reduction bills recently passed by the House and Senate, could further cool the takeover boom that has been the driving force behind the bull market in stocks for much of the 1980s, some tax experts and investment bankers argue.
[21822004] |Indeed, some investment bankers have already started restructuring deals to cope with the expected rules.

[21822005] |Wall Street has all but conceded on the issue and is now lobbying for the less onerous Senate version of one of the provisions.

[21822006] |At issue is the deductibility of certain junk bonds that are used in most LBOs.
[21822007] |Such high-yield debt is similar to a zero-coupon bond in that it is sold at a discount to face value, with interest accruing instead of being paid to the holder.
[21822008] |Under current rules, that accrued interest is deductible by the company issuing the debt.

[21822009] |The House version of the legislation would kill that deduction, and label any such debt as equity, which isn't deductible.
[21822010] |The less-rigorous Senate version would defer the deductibility for roughly five years.

[21822011] |"You see these in just about every LBO," said Robert Willens, senior vice president in charge of tax issues at Shearson Lehman Hutton Inc. in New York.
[21822012] |"It becomes a source of cash" for the company making the LBO because it gets a deduction and doesn't have to repay the debt for several years.

[21822013] |Typically, Mr. Willens estimates, this type of debt makes up 15% to 20% of the financing for LBOs.
[21822014] |These types of bonds have been used in buy-outs of companies such as RJR Nabisco Inc., Storer Communications Inc. and Kroger Co.

[21822015] |A second provision passed by the Senate and House would eliminate a rule allowing companies that post losses resulting from LBO debt to receive refunds of taxes paid over the previous three years.
[21822016] |For example, if a company posted a loss of $100 million from buy-out interest payments, the existing rule would allow the concern to be able to receive a refund from the tax it paid from 1986 through 1989, when it may have been a profitable public company.

[21822017] |But that rule is being virtually overlooked by Wall Street, which is concentrating on coping with the deduction issue.
[21822018] |"Prices for LBOs have to come down if you don't have that feature," argued Lawrence Schloss, managing director for merchant banking at Donaldson, Lufkin & Jenrette Securities Corp. in New York.

[21822019] |Several Wall Street officials say the proposed legislation already is having an impact.
[21822020] |An investment group led by Chicago's Pritzker family recently lowered a $3.35 billion bid for American Medical International, Beverly Hills, Calif., because of the threat of the legislation.

[21822021] |Moreover, one investment banker, who requested anonymity, said his firm didn't raise the ante for a target company earlier this month after a stronger bid emerged from a public company that wasn't concerned about the financing provision.
[21822022] |"We would have paid more if we thought that law wasn't going to pass," he said.

[21822023] |One possible solution for Wall Street is to increase the equity part of the transaction -- that is, give lenders a bigger stake in the surviving company rather than just interest payments.
[21822024] |That would force the buy-out firm and the target company's management to reduce their level of ownership.
[21822025] |"The pigs in the trough may have to give a little bit of the slop back and then the deal can go through," said Peter C. Canellos, tax partner at Wachtell, Lipton, Rosen & Katz.

[21822026] |Another solution, said a tax lawyer who requested anonymity, is for firms to use convertible bonds that sell at a discount.
[21822027] |Since they have a lower interest rate, they wouldn't fall under the junk-bond category that would lose its deductibility.
[21822028] |The House version of the bill would make debt non-deductible if it pays five percentage points above Treasury notes, has at least a five-year maturity and doesn't pay interest for at least one year out of the first five.
[21822029] |The bill would then declare that the debt is equity and therefore isn't deductible.
[21822030] |The Senate bill would only deny the deduction until interest is actually paid.

[21822031] |Currently, even though the issuer doesn't pay tax, the debt holder is taxed on the accrued interest.
[21822032] |But those holders are often foreign investors and tax-exempt pension funds that don't pay taxes on their holdings.

[21822033] |The Senate estimates that its version of the provision would yield $17 million the first year and a total of $409 million over five years.
[21822034] |The House version would raise slightly more.

[21822035] |Even if Wall Street finds ways around the new rules, a Senate aide contends LBOs will become somewhat more difficult.
[21822036] |"There's no question it will make LBOs more expensive," he said.
[21822037] |"The interest deduction was the engine that made these things more productive.

[21823001] |The average publicly offered commodity fund fell 4.2% in September, largely because of the volatile markets in foreign currencies, according to Norwood Securities.

[21823002] |The firm said that losers outnumbered gainers by more than three to one among the 122 funds it tracks.
[21823003] |For the first nine months of the year, Norwood said the average fund has lost 3.3%.

[21824001] |The government moved aggressively to open the spigots of federal aid for victims of the California earthquake, but its reservoir of emergency funds must be replenished soon if the aid is to continue.

[21824002] |President Bush signed a disaster declaration covering seven Northern California counties.
[21824003] |The declaration immediately made the counties eligible for temporary housing, grants and low-cost loans to cover uninsured property losses.

[21824004] |In addition, an unusually wide array of federal agencies moved to provide specialized assistance.
[21824005] |The Department of Housing and Urban Development prepared to make as many as 100 vacant houses available for those left homeless, the Agriculture Department was set to divert food from the school-lunch program to earthquake victims, and the Pentagon was providing everything from radio communications to blood transfusions to military police for directing traffic.

[21824006] |But the pool of federal emergency-relief funds already is running low because of the heavy costs of cleaning up Hurricane Hugo, and Congress will be under pressure to allocate more money quickly.
[21824007] |In Hugo's wake, Congress allocated $1.1 billion in relief funds, and White House spokesman Marlin Fitzwater said $273 million of that money remains and could be diverted for quick expenditures related to the earthquake.

[21824008] |Now, though, enormous costs for earthquake relief will pile on top of outstanding costs for hurricane relief.
[21824009] |"That obviously means that we won't have enough for all of the emergencies that are now facing us, and we will have to consider appropriate requests for follow-on funding," Mr. Fitzwater said.
[21824010] |The federal government isn't even attempting yet to estimate how much the earthquake will cost it.
[21824011] |But Mr. Fitzwater said, "There will be, I think quite obviously, a very large amount of money required from all levels of government."

[21824012] |In Congress, lawmakers already are looking for ways to add relief funds.
[21824013] |Money could be added to a pending spending bill covering the Federal Emergency Management Agency, which coordinates federal disaster relief.
[21824014] |More likely, relief funds could be added to an omnibus spending bill that Congress is to begin considering next week.

[21824015] |But it isn't just Washington's relief dollars that are spread thin; its relief manpower also is stretched.
[21824016] |FEMA still has special disaster centers open to handle the aftermath of Hugo, and spokesman Russell Clanahan acknowledged that "we're pretty thin."
[21824017] |Mr. Clanahan says FEMA now possibly may have the heaviest caseload in its history.

[21824018] |To further complicate relief efforts, the privately funded American Red Cross also finds itself strapped for funds after its big Hugo operation.
[21824019] |"It's been a bad month money-wise and every other way," said Sally Stewart, a spokeswoman for the Red Cross.
[21824020] |"It just makes it a little rough when you have to worry about the budget."
[21824021] |The Red Cross has opened 30 shelters in the Bay area, serving 5,000 people.
[21824022] |Twenty-five trucks capable of cooking food were dispatched from other states.

[21824023] |All the precise types of federal aid that will be sent to California won't be determined until state officials make specific requests to FEMA, agency officials said.
[21824024] |And in the confusion after the earthquake, "the information flow is a little slow coming in from the affected area," said Carl Suchocki, a FEMA spokesman.

[21824025] |Still, some aid is moving westward from Washington almost immediately.
[21824026] |HUD officials said they will make available as many as 100 Bay area houses that are under HUD loans but now are vacant after the houses have been inspected to ensure they are sound.
[21824027] |Additional housing vouchers and certificates will be made available, officials said, and some housing and community-development funds may be shifted from other programs or made available for emergency use.

[21824028] |Another federal agency not normally associated with disaster relief -- the Internal Revenue Service -- moved quickly as well.
[21824029] |The IRS said it will waive certain tax penalties for earthquake victims unable to meet return deadlines or make payments because of the quake's devastation.
[21824030] |The agency plans to announce specific relief procedures in the coming days.

[21824031] |And the Treasury said residents of the San Francisco area will be able to cash in savings bonds even if they haven't held them for the minimum six-month period.

[21824032] |One advantage that federal officials have in handling earthquake relief is the large number of military facilities in the San Francisco Bay area, facilities that provide a ready base of supplies and workers.
[21824033] |Even before the full extent of the devastation was known, Defense Secretary Dick Cheney ordered the military services to set up an emergency command center in the Pentagon and prepare to respond to various FEMA requests for assistance.

[21824034] |By yesterday afternoon, Air Force transport planes began moving additional rescue and medical supplies, physicians, communications equipment and FEMA personnel to California.
[21824035] |A military jet flew a congressional delegation and senior Bush administration officials to survey the damage.
[21824036] |And the Pentagon said dozens of additional crews and transport aircraft were on alert "awaiting orders to move emergency supplies."

[21824037] |Two Air Force facilities near Sacramento, and Travis Air Force Base, 50 miles northeast of San Francisco, were designated to serve as medical-airlift centers.
[21824038] |Some victims also were treated at the Letterman Army Medical Center in San Francisco and at the Naval Hospital in Oakland.
[21824039] |In addition, 20 military police from the Presidio, a military base in San Francisco, are assisting with traffic control, and a Navy ship was moved from a naval station at Treasure Island near the Bay Bridge to San Francisco to help fight fires.

[21824040] |To help residents in Northern California rebuild, FEMA intends to set up 17 disaster assistance offices in the earthquake area in the next several days and to staff them with 400 to 500 workers from various agencies, said Robert Volland, chief of the agency's individual assistance division.
[21824041] |At these offices, earthquake victims will be helped in filling out a one-page form that they will need to qualify for such federal assistance as home-improvement loans and to repair houses.

[21824042] |And federal officials are promising to move rapidly with federal highway aid to rebuild the area's severely damaged road system.
[21824043] |The Federal Highway Administration has an emergency relief program to help states and local governments repair federally funded highways and bridges seriously damaged by natural disasters.
[21824044] |The account currently has $220 million.
[21824045] |And though federal law dictates that only $100 million can be disbursed from that fund in any one state per disaster, administration officials expect Congress to move in to authorize spending more now in California.

[21824046] |To get that money, states must go through an elaborate approval process, but officials expect red tape to be cut this time.

[21824047] |Keith Mulrooney, special assistant to Federal Highway Administrator Thomas Larson, also said that after the 1971 San Fernando earthquake in Southern California, the state set tougher standards for bridges, and with federal aid, began a program to retrofit highways and bridges for earthquake hazards.
[21824048] |The first phase of the program has been completed, but two other phases are continuing.

[21824049] |The two major structures that failed Tuesday night, he said, were both built well before the 1971 earthquake -- the San Francisco Bay Bridge, completed in the 1930s, and the section of I-880, built in the 1950s.
[21824050] |The I-880 section had completed the first phase of the retrofitting.

[21824051] |Laurie McGinley contributed to this article.

[21825001] |FARMERS REAP abundant crops.
[21825002] |But how much will shoppers benefit?

[21825003] |The harvest arrives in plenty after last year's drought-ravaged effort: The government estimates corn output at 7.45 billion bushels, up 51% from last fall.
[21825004] |Soybean production swells 24%.
[21825005] |As a result, prices paid to farmers for the commodities, which are used in products as diverse as bubble gum and chicken feed, plummet 20% to 33%.
[21825006] |But don't expect too much in the way of price breaks soon at the supermarket.
[21825007] |Economists expect consumer food prices to jump 5.5% this year to the highest level since 1980 and up from last year's 4.1% rise.
[21825008] |Next year may see a drop of one percentage point.

[21825009] |Beef prices, hovering near records since the drought, could drop in earnest this winter if ranchers expand herds.
[21825010] |Lower feed prices may help animals eat more cheaply, but humans have to factor in an expensive middleman: the processor.
[21825011] |Food companies probably won't cut their prices much, blaming other costs.
[21825012] |"Labor takes the biggest single chunk out of the `food dollar,'" says Frank Pankyo of the Food Institute.

[21825013] |Stokely says stores revive specials like three cans of peas for 99 cents.
[21825014] |Two cans cost 89 cents during the drought.

[21825015] |IF IN VITRO fertilization works, it usually does so after only a few tries.

[21825016] |Costly infertility problems and procedures proliferate as aging baby boomers and others decide to have children -- now.
[21825017] |It's estimated that one in six couples experiences infertility, and in 1987, Americans spent about $1 billion to fight the problem.
[21825018] |Only about five states now offer some form of insurance coverage, but more are expected.
[21825019] |A letter in the New England Journal of Medicine notes that while technology offers "almost endless hope . . . when to stop has become a difficult question. . . ."

[21825020] |The authors, from Boston's Beth Israel Hospital, say that 84% of the 50 births they followed occurred after only two in vitro cycles.
[21825021] |It adds that births were "extremely unlikely" after the fourth cycle and concludes couples who don't achieve a pregnancy after four to six procedures should be advised that success is unlikely.
[21825022] |Some couples continue to try.
[21825023] |"Such determination may translate into extreme physical, emotional and financial costs," the letter warns.

[21825024] |MARKET MOVES, these managers don't.
[21825025] |Only three of the 25 corporate pension fund managers attending a Lowry Consulting Group client conference say they plan to change the asset allocation mix in their portfolios because of the market drop.

[21825026] |WORLD ODDITIES come alive in a multimedia version of the Guinness Book of Records.
[21825027] |The $99 CD-ROM disk (it can only be played on an Apple Macintosh computer at the moment) combines animation, music and sound.
[21825028] |Among the Guinness disk's wonders: the world's loudest recorded belch.

[21825029] |ARTY FAX from David Hockney begins a tongue-in-cheek exhibit today at New York's Andre Emmerich Gallery.
[21825030] |One of the artist's earliest Fax works was "Little Stanley Sleeping," a portrait of his dog.

[21825031] |PACS GIVE and receive in a debatable duet with employees' favored charities.

[21825032] |The Federal Election Commission clears corporate plans to donate to an employee's chosen charity in exchange for the worker's gift to the company political action committee.
[21825033] |Latest approvals: Bell Atlantic's New Jersey Bell and General Dynamics.
[21825034] |Companies get more political clout plus a possible tax-deductible charitable donation -- so far no word from the IRS on deductibility.
[21825035] |Detroit Edison, the plan pioneer, generated $54,000 in matching funds this year, up from $39,000 in 1988.
[21825036] |But the utility may not continue next year.
[21825037] |"We're on a tight budget," says Detroit Edison's Carol Roskind.

[21825038] |Two election commission members opposed the matching plans.
[21825039] |Scott E. Thomas says the plans give employees "a bonus in the form of charitable donations made from an employer's treasury" in exchange for the political donation.
[21825040] |"The U.S. government could be, in effect, subsidizing political contributions to corporate PACs," he says.
[21825041] |New Jersey Bell awaits state clearance.

[21825042] |Despite federal approval, General Dynamics says it decided it won't go ahead with the matching program.

[21825043] |CHRISTMAS SHOPPERS find a helping hand from some catalog companies.

[21825044] |Blunt Ellis & Loewi estimates direct mail catalog sales rose to $12 billion last year.
[21825045] |And while it's too soon to tell how sales will fare in the important 1989 Christmas season, some companies take steps to ease the usual 11th-hour crush.
[21825046] |Spiegel promises a "Guaranteed Christmas," with a pledge to deliver goods before Christmas if ordered by Dec. 20.
[21825047] |And, for an extra $6, Land's End will deliver orders within two days; customers can designate the day.

[21825048] |Spiegel, which also owns Eddie Bauer and Honeybee, says that since 1987, sales have doubled during the week before Christmas.
[21825049] |An L.L. Bean spokeswoman notes: "People are just used to living in a last-minute society."
[21825050] |Blunt Ellis, a Milwaukee brokerage firm, says part of the reason catalog sales grow in popularity is because consumers have more money but less time to spend it.

[21825051] |L.L. Bean hires about 2,700 workers for the season rush, about 300 more than last year; Land's End hires 2,000.

[21825052] |BRIEFS:
[21825053] |Guarana Antarctica, a Brazilian soft drink, is brought to the U.S. by Amcap, Chevy Chase, Md.
[21825054] |New Product News says the beverage "looks like ginger ale, tastes a little like cherries and smells like bubble gum." . . .
[21825055] |"Amenities" planned for Chicago's new Parkshore Tower apartments include an on-site investment counselor.

[21826001] |Four years ago, Pittsburgh was designated the most-livable U.S. city by Rand McNally's Places Rated Almanac, and the honor did wonders to improve Pittsburgh's soot-stained image.

[21826002] |"People asked, is it really true?" says Maury Kelley, vice president, marketing services, for Beecham Products USA, a maker of health and personal-care products that used the ranking in its recruiting brochure.

[21826003] |Yuba City, Calif., meanwhile, ranked dead last among 329 metro areas.
[21826004] |Unamused, residents burned Rand McNally books and wore T-shirts that said: "Kiss my Atlas."

[21826005] |The almanac will be making new friends and enemies on Oct. 27, when an updated version will be released.

[21826006] |Pittsburgh figures it will be dethroned but plans to accept its ouster graciously.
[21826007] |The city's Office of Promotion plans media events to welcome its successor.

[21826008] |"We're encouraging a graceful transition," says Mary Kay Poppenberg, the organization's president.
[21826009] |"Our attitude is that (the ranking) is like Miss America.
[21826010] |Once you're Miss America, you're always Miss America."

[21826011] |Tell that to Atlanta, which Pittsburgh replaced as the most-livable city in 1985.
[21826012] |Many Atlantans thought Pittsburgh was an unworthy heir.
[21826013] |A columnist in the Atlanta Journal and Constitution wrote: "Who did the research for this report?
[21826014] |Two guys from Gary, Ind.?"

[21826015] |Not so.
[21826016] |Co-authors David Savageau and Richard Boyer, live in Gloucester, Mass., and Asheville, N.C., respectively.
[21826017] |"Atlanta," Mr. Savageau sniffs, "has unrealistic pretensions to world-class status."

[21826018] |The new edition lists the top 10 metropolitan areas as Anaheim-Santa Ana, Calif.; Boston; Louisville, Ky.; Nassau-Suffolk, N.Y.; New York; Pittsburgh; San Diego; San Francisco; Seattle; and Washington.
[21826019] |Mr. Savageau says earthquake or not, San Francisco makes the list.

[21826020] |But attention also rivets on who finishes last, and Pine Bluff, Ark. -- which finished third to last in 1981 and second to last in 1985 -- is certainly in the running.

[21826021] |"I hate to dignify the publication by commenting on the obscene rating," Mayor Carolyn Robinson says, adding that cities have no way to rebut the book.
[21826022] |"It's like fighting your way out of a fog.
[21826023] |You don't know which way to punch.

[21827001] |Northrop Corp.'s third-quarter net income fell 25% to $21.5 million, or 46 cents a share, while General Dynamics Corp. reported nearly flat earnings of $76.5 million, or $1.83 a share.

[21827002] |Los Angeles-based Northrop recorded an 8.2% decline in sales as B-2 Stealth bomber research-and-development revenue continued to ebb and high costs on some other programs cut into profit.
[21827003] |The aerospace concern earned $28.8 million, or 61 cents a share, a year earlier.
[21827004] |Sales in the latest period were $1.25 billion, down from $1.36 billion in the 1988 quarter.

[21827005] |At St. Louis-based General Dynamics, sales rose 10% to $2.52 billion from $2.29 billion.
[21827006] |It earned $76.4 million, or $1.82 a share, in the 1988 quarter.
[21827007] |General Dynamics credited significant earnings gains in its general aviation and material service segments, an earnings recovery in submarine operations, and higher military aircraft sales.

[21827008] |Northrop said sales fell because of the decline in B-2 development dollars from the government as the plane continues its initial production stage and because fewer F/A-18 fighter sections are being produced in its subcontract work with prime contractor McDonnell Douglas Corp.

[21827009] |In composite trading on the New York Stock Exchange, Northrop shares closed at $21.125, off 25 cents.
[21827010] |General Dynamics closed at $54.875, up 50 cents.

[21827011] |Northrop, which since early 1988 has declined to accept fixed-price contracts for research and development, said earnings were hurt by excessive costs on a number of such contracts won years ago.
[21827012] |Among them were the ALQ-135 electronic countermeasures system for the F-15 fighter.
[21827013] |Northrop's interest expense also soared to $35 million from $17 million a year ago.
[21827014] |It said debt remained at the $1.22 billion that has prevailed since early 1989, although that compared with $911 million at Sept. 30, 1988.

[21827015] |The backlog of undelivered orders at Northrop on Sept. 30 was $4.68 billion, down from $5.16 billion a year earlier.

[21827016] |For the nine months, Northrop reported a net loss of $46.9 million, or $1 a share, compared with profit of $190.3 million, or $4.05 a share, in 1988.
[21827017] |Sales dipped 3.6% to $3.92 billion from $4.07 billion.

[21827018] |At General Dynamics, factors reducing earnings in the military aircraft segment included higher levels of cost-sharing in development of the Advanced Tactical Fighter, and the high cost of an advanced version of the F-16 fighter.
[21827019] |F-16 deliveries also have fallen "slightly behind schedule," although a return to the previous schedule is expected in 1990, the company said.

[21827020] |Backlog at General Dynamics rose to $16.5 billion from $15.8 billion.
[21827021] |Its interest expense surged to $21.5 million from $12.4 million.
[21827022] |For the nine months, General Dynamics earned $210.3 million, or $5.03 a share, up marginally from $208.8 million, or $4.97 a share, on a 4.9% rise in sales to $7.41 billion from $7.06 billion.

[21828001] |Lotus Development Corp. reported a surprisingly strong 51% increase in third-quarter net income on a 32% sales gain, buoyed by strong demand for a new version of its 1-2-3 computer spreadsheet.

[21828002] |The results topped analysts' expectations and the earnings growth of competitors, prompting traders to all but forget the product-launch delays that bogged down the company for much of the past two years.

[21828003] |Yesterday, in heavy, national over-the-counter trading, Lotus shares rose to $32.50, up $1.25 apiece, capping a threemonth run-up of more than 40%.

[21828004] |Lotus said net rose to $23 million, or 54 cents a share, on sales of $153.9 million.
[21828005] |A year ago, net was $14.3 million, or 31 cents a share, on sales of $116.8 million.

[21828006] |For the nine months, net of $38.5 million, or 92 cents a share, trailed the year earlier's $49.9 million, or $1.08 a share.
[21828007] |Sales rose to $406 million from $356 million the year earlier.
[21828008] |In the first half, Lotus struggled to keep market share with costly promotions while customers awaited the launch of 1-2-3 Release 3, the upgraded spreadsheet software.

[21828009] |Lotus's results were about 10% higher than analysts' average expectations and compared favorably with the 36% earnings rise reported a day earlier by rival Microsoft Corp. of Redmond, Wash.
[21828010] |The company said results were bolstered by upgrades to Release 3 by previous customers and improved profit margins, the result of manufacturing-cost controls.

[21828011] |Rick Sherlund, a Goldman Sachs analyst, said Lotus had upgrade revenue of about $22 million in the quarter, twice what he had expected.
[21828012] |Also, he estimated unit shipments of 1-2-3 in all its forms were about 315,000, up 7% from 1988's quarterly average.

[21828013] |Demand for the new version was enabling Lotus to raise prices with distributors and to hold market share against Microsoft and other competitors that tried to exploit the earlier delays in Release 3's launch, Mr. Sherlund added.
[21828014] |He estimated that 1-2-3 outsold Microsoft's Excel spreadsheet by four-to-one in the quarter, and held a 70% or better share of the spreadsheet market.

[21829001] |Silicon Valley heaved a sigh of relief yesterday.

[21829002] |Though details were sketchy in the aftermath of the violent earthquake that shook the high-tech corridor along with the rest of the San Francisco Bay area, a spot check of computer makers turned up little, if any, potentially lingering damage to facilities or fabrication equipment.

[21829003] |Analysts and corporate officials said they expected practically no long-term disruption in shipments from the Valley of either hardware or software goods.
[21829004] |Intel Corp., Advanced Micro Devices Inc. and National Semiconductor Corp. were all up and running yesterday, though many workers were forced to stay home because of damaged roadways; others elected to take the day off.

[21829005] |"These systems are more rugged than many people would believe," said Thomas Kurlak, who tracks the computer industry for Merrill Lynch Research.
[21829006] |"It's not the end of the world if you shake them up a little bit."

[21829007] |Other companies, including International Business Machines Corp. and Hewlett-Packard Co., completely idled their operations because of Tuesday evening's temblor, which registered 6.9 on the Richter scale.
[21829008] |Personnel spent the morning inspecting buildings for structural weaknesses, mopping up water from broken pipes and clearing ceiling tiles and other debris from factory floors.

[21829009] |Still, many were confident that "in a day or two, everything should be back to normal," according to a spokeswoman for the Semiconductor Industry Association, based in Cupertino.
[21829010] |IBM, for instance, said it anticipates returning to a normal work schedule by the weekend at its San Jose plant, which puts out disk drives for the 3090 family of mainframes.
[21829011] |A Hewlett-Packard spokeswoman said that, while "things are a big mess," some 18,000 Valley employees have been called back to work today.

[21829012] |Apple Computer added that it was being "cautiously optimistic," despite not yet closely eyeballing all of its 50 buildings in the region.
[21829013] |Even the carefully calibrated machinery in its giant Fremont plant, to the north of the Valley, was believed to be undamaged.
[21829014] |Sun Microsystems Inc. and Tandem Computers Inc. also signaled that they should recover quickly.

[21829015] |Digital Equipment Corp., with major facilities in Santa Clara, Cupertino, Palo Alto and Mountain View, said that all of its engineering and manufacturing sites had reported to corporate headquarters in Maynard, Mass., Tuesday night.
[21829016] |None sustained "significant" damage, a spokesman said, adding that "the delicate manufacturing process machines were checked and were all found to be operating normally."

[21829017] |For many companies, of course, there is still a slew of nagging problems to grapple with, some of which have the potential to become quite serious.
[21829018] |For example, a spokesman for Advanced Micro Devices said the Sunnyvale chip maker is worried about blackouts.
[21829019] |A sudden surge or drop in electric power could ruin integrated circuits being built.

[21829020] |But, given what might have happened to the fragile parts that are at the heart of the microelectronics business, the bulk of Valley companies seemed to be just about shouting hosannas.

[21829021] |Several factors apparently spared the Valley -- a sprawling suburban stretch from San Jose to Palo Alto -- from the kind of impact felt in San Francisco, an hour's drive north.
[21829022] |For one thing, buildings there tend to be newer and, thus, in step with the latest safety codes.
[21829023] |Also, the soil in the Valley is solid, unlike the landfill of San Francisco's downtown Marina District, which was hit with fires and vast destruction.

[21829024] |In addition, some microelectronics companies said they were prepared for tremulous conditions like Tuesday's.
[21829025] |Their machine tools are even bolted to the shop floor.
[21829026] |Intel said that over the past decade, it has installed computer sensors and shutoff valves, sensitive to the shake of an earthquake, in the pipes that snake through its plants.

[21829027] |Like other large Valley companies, Intel also noted that it has factories in several parts of the nation, so that a breakdown at one location shouldn't leave customers in a total pinch.

[21829028] |That's certainly good news for such companies as Compaq Computer Corp., Houston, which has only a four-day supply of microprocessors from the Valley on hand because of a just-in-time manufacturing approach that limits the buildup of inventory.
[21829029] |Compaq said it foresees no difficulties in obtaining parts in the immediate future.

[21829030] |Computer makers were scrambling to help customers recover from the disaster.
[21829031] |Digital Equipment has set up disaster-recovery response centers in Dallas, Atlanta and Colorado Springs, Colo.
[21829032] |These units were handling calls both from people in the San Francisco area and from computers themselves, which are set to dial Digital automatically when trouble arises.
[21829033] |They then run remotely controlled self-diagnostic programs.
[21829034] |Digital also said it has dispatched teams of technicians to California.

[21829035] |Meanwhile, several other major installations around the Valley -- America's center of high-tech -- said they, too, fared as well as could be expected.
[21829036] |Lawrence Livermore National Laboratory, where the Energy Department tests and conducts research on nuclear weapons, had only "superficial damage," a spokesman said.

[21829037] |At Lockheed Corp.'s missiles and space systems group in Sunnyvale, about 40 miles south of San Francisco, workers were asked to head to work yesterday after it was realized that "there were no show-stoppers" in the 150-plus buildings on its one-square-mile campus.

[21829038] |Several engineering and research offices needed closer scrutiny to make sure they weren't in danger of crumbling, but "the bulk of the place is in pretty good shape," an official said.

[21829039] |One of Lockheed's most lucrative sectors -- accounting for more than half the aerospace company's $10.59 billion in sales in 1988 -- the missiles and space group is the prime Pentagon contractor on the Trident II ballistic missile.
[21829040] |It also generates pieces of the missile shield called the Strategic Defense Initiative.

[21829041] |Fortunately, the Hubble Space Telescope -- set to be launched on the shuttle next year in a search for distant solar systems and light emitted 14 billion years ago from the farthest reaches of the universe -- was moved from Sunnyvale to the Kennedy Space Center in Florida at the beginning of October.

[21829042] |John R. Wilke contribued to this article.

[21830001] |Michael Maynard offered the world a faster way to break eggs.
[21830002] |As thanks, the egg industry tried to break him.

[21830003] |And the egg producers have done a pretty good job.
[21830004] |They tried to put Mr. Maynard out of business by an act of Congress.
[21830005] |Egg-industry lobbying helped persuade six states to ban Mr. Maynard's automatic egg-breaking machine because of fears over salmonella.
[21830006] |His company, Misa Manufacturing Inc., was forced to seek protection from creditors under federal bankruptcy law in 1987 and has since been liquidated.
[21830007] |Monthly sales of his Egg King machine -- which he now is marketing through a new company -- have sunk to about half a dozen from a peak of 75, says the 46-year-old businessman.

[21830008] |Mr. Maynard isn't the first entrepreneur to bump up against entrenched interests.
[21830009] |But his case is notable both for the scale of the fight -- it isn't often that a congressional hearing is held to determine whether one small businessman is a threat to the republic -- and for what it tells about the pitfalls of marketing a new product.

[21830010] |Now one might ask why people who sell eggs would fight someone who is trying to make it easier to crack them.
[21830011] |Part of the answer lies in the nature of the industry.
[21830012] |Many larger egg producers are also egg processors, who crack, inspect, and sanitize billions of eggs, turning them into powdered, liquified or frozen egg products.

[21830013] |However, dozens of bakers, restaurant chefs and other food preparers who flocked to Mr. Maynard's defense say that products ranging from egg bread to eclairs lose some zip when the eggs come in 30-pound cans instead of shells.
[21830014] |But for companies that use hundreds of eggs a day, breaking them by hand can get, well, out of hand.

[21830015] |The idea behind the Egg King is pretty simple: put the eggs into a cylinder that contains perforated baskets, spin them at a high speed to break the shells and strain the edible part through the baskets.

[21830016] |One Egg King -- which at just under four feet tall and two feet wide has been likened to the robot R2-D2 -- can crack about 20,000 eggs an hour.
[21830017] |Because fresh eggs are less expensive than processed ones, a big egg user can recover the Egg King's $3,390 cost in a few months, says Mr. Maynard.

[21830018] |Such centrifugal egg breakers have been around since the 1890s.
[21830019] |But when Mr. Maynard came forward with his machine in the early 1970s nobody else was offering them in the U.S.
[21830020] |The main reason: salmonella.

[21830021] |Chickens carry this bacteria, which can cause upset stomachs and, in rare cases, death among people.
[21830022] |Hens sometimes pass salmonella to the eggs, and it can also be found on unclean shells.
[21830023] |Thus, any machine that breaks large amounts of eggs at once has the potential to spread salmonella if a bad egg gets in with the good ones.

[21830024] |Mr. Maynard claims this is a manageable problem.
[21830025] |The Egg King carries written instructions to break only high-grade eggs that have been properly sanitized and, as an added precaution, to use the eggs only in products that will be cooked enough to kill bacteria.
[21830026] |With nearly 4,000 machines in use, there have been no salmonella problems as long as instructions were followed, Mr. Maynard boasts.

[21830027] |He says the handful of salmonella cases involving products that may have used eggs broken by an Egg King stemmed from a failure to adequately cook the products.
[21830028] |But he says that's no more a reason for banning Egg Kings than bad drivers are a reason for banning cars.

[21830029] |Opponents don't buy such arguments.
[21830030] |"Human nature being what it is, people don't always follow instructions," says Jack Guzewich, chief of food protection for the New York state Health Department.

[21830031] |Leading the assault against the Egg King has been United Egg Producers.
[21830032] |The Decatur, Ga., trade group has issued a "briefing book" that claims the machine is "a health hazard" and that Mr. Maynard is trying "to make a fast buck at the expense of the nation's egg producers."
[21830033] |The UEP declines to comment, but the group's attorney, Alfred Frawley, says the group's actions are motivated solely by "health concerns."

[21830034] |An early battleground was the U.S. Department of Agriculture.
[21830035] |Mr. Maynard initially won approval for his machine to be used at egg-processing facilities regulated by the USDA's Food Safety Inspection Service.
[21830036] |Unfortunately for Mr. Maynard, another branch of the USDA, the Agricultural Marketing Service, was in charge of eggs.
[21830037] |After receiving complaints from egg producers, this branch got the other branch to rescind its approval, thus limiting the machine's potential market to bakeries and restaurants and other establishments that aren't regulated by the USDA.

[21830038] |The egg producers also lobbied the Food and Drug Administration.
[21830039] |But the FDA in a 1985 letter to the United Egg Producers said that there was "little likelihood" of a health problem as long as instructions were followed.

[21830040] |So the producers went to Capitol Hill, where a congressman from Georgia introduced a measure to ban centrifugal egg-breaking machines.
[21830041] |Mr. Maynard, whose company at the time was based in Santa Ana, Calif., enlisted his local congressman, and the battle was joined.

[21830042] |Mr. Maynard's forces finally defeated the measure, though it took a vote on the floor of the House of Representatives to do it.
[21830043] |Even then, opponents managed to get a congressional hearing to examine what one congressman called an "unscrupulous" method for breaking eggs.

[21830044] |Foiled in their effort to get a national ban, the egg producers turned their attention to the states.
[21830045] |So far, New York, New Jersey, Nebraska, Georgia, Michigan and Minnesota have outlawed Mr. Maynard's device, citing health concerns.

[21830046] |An antitrust suit that Mr. Maynard's company filed in Los Angeles federal court against the United Egg Producers and others only added to the entrepreneur's woes.
[21830047] |The judge dismissed the suit and ordered Mr. Maynard's company to pay over $100,000 in legal fees to the defendants' lawyers.
[21830048] |Mr. Maynard says the ruling pushed his company into bankruptcy court.

[21830049] |Now he has moved to Oklahoma where costs are lower, and started a new company, Adsi Inc., to market his machine.
[21830050] |But, so far, the change of scenery hasn't ended his string of bad breaks.
[21830051] |Mr. Maynard recently fell from a horse and fractured his arm.

[21831001] |Michelle Pfeiffer can't chew gum and sing at the same time.
[21831002] |But on the evidence of "The Fabulous Baker Boys," that may be the only thing she can't do, at least when she's acting in movies.

[21831003] |As the tough, slinky lounge chanteuse in "The Fabulous Baker Boys," Ms. Pfeiffer sings for herself, and more than passably well.
[21831004] |Her Susie Diamond handles a song the way the greats do, like she's hearing the way it should sound inside her head and she's concentrating on matching that internal tone.
[21831005] |Yet her intensity stops and starts with the music.
[21831006] |When she isn't performing for an audience, she prepares for a song by removing the wad of gum from her mouth, and indicates that she's finished by sticking the gum back in.

[21831007] |Like almost everything in this wonderfully romantic and edgy movie, Ms. Pfeiffer's Susie seems like someone you've seen before, in numerous show-biz stories (even her name, Susie Diamond, sounds like a character Marilyn Monroe must have played).
[21831008] |Yet nothing about "Baker Boys," and certainly nothing about Ms. Pfeiffer, really is like something from the video vault.

[21831009] |Steve Kloves, the young writer and director (he isn't yet 30), has only one produced picture to his credit; he wrote the screenplay for "Racing With the Moon," a lovely coming-of-age picture set in the '40s.
[21831010] |Both movies are infused with the nostalgic sensibility of someone much older, someone who doesn't dismiss dreams, but who also has enough experience to see his limits.
[21831011] |However, Mr. Kloves directs his own material without sentimentality and at its own eccentric pace; "Baker Boys" is both bluesy and funny.

[21831012] |He's put a fresh spin on material that could come off terribly cliched; for example, the way Susie wows an audience the first time she sings with the Baker Boys.
[21831013] |Of course, it doesn't hurt that Mr. Kloves has made up for his lack of experience behind the camera with technicians who know exactly what they're doing.

[21831014] |Much of the picture's sensuality emerges from cinematographer Michael Ballhaus's slyly seductive lens work.
[21831015] |After working for years with Werner Rainer Fassbinder, the late German director, and more recently with Martin Scorsese ("After Hours," "The Color of Money," "The Last Temptation of Christ"), Mr. Ballhaus has developed a distinctively fluid style.
[21831016] |And Dave Grusin's witty score embraces the banal requirements of banquet-hall musicianship ("Feelings" is a must) without condescension.

[21831017] |Though Ms. Pfeiffer has the flashy part -- she gets the best comic bits and to wear glamorous dresses and spiked heelsthe boys are pretty great, too.
[21831018] |What seemed like a good idea, to cast the Bridges brothers (Jeff and Beau) as the Baker brothers, actually turned out to be a good idea.
[21831019] |Anyone who's tried to appear "natural" in front of a camera knows that it's much more natural to end up looking like a stiff.
[21831020] |So it's quite possible that the terrific play between the brothers isn't natural at all, that Jeff and Beau had to work like crazy to make their brotherly love -- and resentment and frustration and rage -- seem so very real.

[21831021] |When the movie opens the Baker brothers are doing what they've done for 15 years professionally, and twice as long as that for themselves: They're playing proficient piano, face-to-face, on twin pianos.
[21831022] |They're small time in the small time-hotels (not the best ones) and restaurants in Seattle.
[21831023] |Yet they don't disparage their audiences by disparaging their act.
[21831024] |They wear tuxedos most nights, unless circumstances (a regular gig at a "tropical" lounge, for example) require them to wear special costumes, like Hawaiian shirts.

[21831025] |Plump Beau, looking eager to please with his arched eyebrows and round face, plays the older brother, Frank.
[21831026] |Frank plans the program, takes care of business, and approaches the work like any other job.
[21831027] |He's even able to think of a job that takes him out of the house 300 nights a week as an ordinary job.
[21831028] |He's got a wife and two kids and a house in the suburbs; the audience sees only the house, and only near the end of the movie.
[21831029] |Frank grovels a little for the bookers, probably no more or less than he would have to if he worked for a big corporation.
[21831030] |On his off-hours he wears cardigan sweaters.

[21831031] |Jeff Bridges is the younger brother, Jack, who fancies himself the rebellious artist; he lives in a loft with his sick dog and the occasional visit from the little girl upstairs, who climbs down the fire escape.
[21831032] |Yet Jack's the one who can remember every dive they ever played, and when, and he dutifully shows up for work night after night (he consoles himself with booze and by showing up at the last minute).
[21831033] |Looking leaner than he has in a while, the younger Mr. Bridges's Jack is sexy and cynical and a far sadder case than Frank, who's managed to chisel his dreams to fit reality without feeling too cheated.
[21831034] |He can live with little pleasures.

[21831035] |Mr. Kloves has put together some priceless moments.
[21831036] |These include Jennifer Tilly's audition to be the Baker Boys' girl singer.
[21831037] |Ms. Tilly of the tweety-bird voice showed great comic promise during her stint as the mobster's girlfriend on the television show, "Hill Street Blues."
[21831038] |Here she delivers, especially during her enthusiastically awful rendition of the "Candy Man," which she sings while prancing around in a little cotton candy pink angora sweater that couldn't be more perfect.
[21831039] |(It matches her voice.)
[21831040] |And Ms. Pfeiffer's particular version of "Making Whoopee" -- and the way Mr. Ballhaus photographs her, from the tips of her red high heels right up her clingy red velvet dress -- might make you think of Marilyn Monroe if Ms. Pfeiffer hadn't gone and become a star in her own right.

[21831041] |VIDEO TIP:
[21831042] |If you'd like to see the first time Michelle Pfeiffer sang on screen, and you have a lot of patience, take a look at "Grease 2."
[21831043] |You'll find her there.
[21831044] |Better yet, check out the emergence of her comic persona in "Married to the Mob," Jonathan Demme's delightful Mafia comedy.

[21832001] |International Proteins Corp. definitively agreed to pay $49 million and 2,850,000 of its shares for Hanson PLC's Ground Round restaurant subsidiary.

[21832002] |Shareholders of International Proteins, a food and agriproducts company, will vote on the transaction at a meeting late next month.
[21832003] |Hanson is a London producer of consumer and other goods.

[21832004] |International Proteins shares didn't trade yesterday on the American Stock Exchange.
[21832005] |They closed Tuesday in composite trading at $13.625, down 37.5 cents, giving the stock portion of the transaction an indicated value of $38.8 million.

[21833001] |Control Data Corp. agreed to sell its idle supercomputer manufacturing plant here to Minnesota Mining & Manufacturing Co. for $5.8 million.

[21833002] |The tentative agreement calls for 3M to use the 115,000-square-foot plant and 19 acres of land for research laboratories.
[21833003] |Control Data has been seeking a buyer for the facility since it folded its ETA Systems Inc. supercomputer unit this past April.

[21834001] |General Dynamics Corp. was awarded contracts totaling $589 million for one Navy Trident submarine and for Air Force research on the National Aerospace plane.

[21834002] |Grumman Corp. won a $58.9 million Navy contract for 12 F-14 aircraft.

[21834003] |Raytheon Co. was issued a $19.2 million Air Force contract for support of the Milstar communications satellite.

[21834004] |McDonnell Douglas Corp. got a $12.5 million Air Force contract for support work on the National Aerospace plane.

[21835001] |Denis C. Smith was named to the new post of vice president of world-wide advanced materials operations for this chemicals concern.
[21835002] |Mr. Smith, 50 years old, was formerly responsible for advanced materials, which include plastic composites and alloys, in North America only.
[21835003] |Himont is 81%-owned by Montedison S.p.A. of Milan, Italy.

[21836001] |Galveston-Houston Co. said it will redeem all 3,950 shares of its privately held 6.5% convertible Series C preferred stock Nov. 8.

[21836002] |Holders can either convert each share into 421 shares of the company's common stock, or surrender their shares at the per-share price of $1,000, plus accumulated dividends of $6.71 a share.

[21836003] |Galveston-Houston makes and markets products for the construction, mining and energy industries.

[21837001] |Bank Building & Equipment Corp. of America, which previously said accounting discrepancies its auditors uncovered would hurt earnings and require restatement of earlier results, increased its projections of the negative fiscal impact, and said it was exploring the company's sale.

[21837002] |Bank Building, which builds and equips banks, had announced it would restate the first-three quarters of this fiscal year, which ends Oct. 31.

[21837003] |On Oct. 5, the company estimated after-tax effects on the year's earnings would be "at least" $1.3 million.
[21837004] |Yesterday, the company said the negative after-tax effect on earnings for the year will be about $3.3 million.
[21837005] |For the nine months ended July 31, Bank Building had a net loss of $1 million, on revenue of $66.5 million.

[21837006] |Bank Building, which expects to report a fourth-quarter loss, said it engaged advisers to "explore financial alternatives for the company including the possible sale of the company or one or more of its units."

[21837007] |Company auditors are continuing their review, and final restated figures aren't yet available.
[21837008] |Bank Building earlier said the restatement is necessitated by "certain errors in recording receivables and payables" at its Loughman Cabinet division.
[21837009] |That division's manager has been fired.

[21837010] |In American Stock Exchange composite trading, Bank Building closed at $4 a share, down 62.5 cents.

[21838001] |Gen. Paul X. Kelley, retired commandant of the U.S. Marine Corps, was elected a director of this plastics, specialty materials and aerospace concern, succeeding Jewel Lafontant, who resigned to accept a government position.

[21839001] |Rep. Mary Rose Oakar (D., Ohio) at last week's hearings on irregularities in programs at the Department of Housing and Urban Development:

[21839002] |I don't want to feel guilty representing my constituents.
[21839003] |And if I think that some people {on HUD Secretary Jack Kemp's} staff are off base in terms in which they're evaluating certain things affecting my hometown, I have to tell you something -- I'm not going to take it.
[21839004] |I think that I'm elected to represent the people that sent me here.
[21839005] |And one of our charges is to be an ombudsman for our area.
[21839006] |And if we're not ombudsman for our area, we ought to be thrown out of office.
[21839007] |On the other hand, if we're asking for something unreasonable or unethical and so on, then that's a whole different story.
[21839008] |But if I feel that there are situations where I'm trying to get housing for our area -- whatever it happens to be -- and I have to feel that I can't even ask a question, I've got to tell you, I think that's outrageous. .

[21839009] |I think these regulations that would prohibit well-operated programs in areas across this country would be wrong to change. . . .
[21839010] |I don't want to see some guidelines change that's going to inhibit my city's opportunity to use its money.

[21840001] |The Chicago Mercantile Exchange said it fined Capcom Futures Inc. $500,000 and accepted its withdrawal from membership as part of a settlement of disciplinary actions against the firm.

[21840002] |Capcom Futures is a Chicago subsidiary of Capcom Financial Services Ltd., a London financial firm that was implicated last year in a scheme to launder drug money.
[21840003] |The case is pending.
[21840004] |The firm was indicted in Tampa, Fla., on money-laundering charges.

[21840005] |In June, the Chicago Board of Trade said it suspended Capcom Financial.
[21840006] |The Capcom Futures unit withdrew from Board of Trade membership voluntarily in August, a Board of Trade spokesman said.

[21840007] |Capcom Futures, while neither admitting nor denying the Merc charges, said in a statement that the Merc charges were "technical in nature" and that "no customers were hurt" as a result of the violations cited by the Merc.

[21840008] |The Merc alleged that, among other things, from April 1987 through October 1988 Capcom Futures failed to document trades between Capcom Futures and people or entities directly or indirectly controlled by Capcom Futures shareholders.

[21841001] |Frederick W. Lang, 65 years old, the founder of this software services concern, was elected to the new post of chairman.
[21841002] |Formerly president and treasurer, Mr. Lang remains chief executive officer.
[21841003] |Victor C. Benda, 58, formerly executive vice president, succeeds Mr. Lang as president and becomes chief operating officer, a new post.

[21842001] |Maurice Warren, 56-year-old group managing director, was named chief executive officer of this food and agriculture group.
[21842002] |The post of chief executive has been vacant since July when Terry Pryce, 55, left the company.

[21843001] |Money-market mutual fund assets grew at nearly three times their usual rate in the latest week, as investors opted for safety instead of the stock market.

[21843002] |Money-fund assets soared $4.5 billion in the week ended Tuesday, to a record $348.4 billion, according to IBC/Donoghue's Money Fund Report, a Holliston, Mass.-based newsletter.

[21843003] |"We were expecting it, following the fall of the Dow Friday," said Brenda Malizia Negus, editor of Money Fund Report.
[21843004] |"It's the proverbial flight to safety."

[21843005] |Despite recent declines in interest rates, money funds continue to offer better yields than other comparable investments.
[21843006] |The average seven-day compound yield on the 400 taxable funds tracked by IBC/Donoghue's was 8.55% in the latest week, down from 8.60%.
[21843007] |Compound yields assume reinvestment of dividends and that current yields continue for a year.

[21843008] |Most short-term certificates of deposit are yielding about 8% or less at major banks, and the yields on Treasury bills sold at Monday's auction fell to 7.61% for three months and 7.82% for six months.

[21843009] |Money-fund assets have been rising at an average rate of $1.6 billion a week in recent months, Ms. Negus said, reflecting the relatively high yields.
[21843010] |In the latest week, funds open to institutions alone grew by $1.8 billion.

[21843011] |Some fund managers say inflows could increase in coming days as a result of stock selling in the wake of Friday's 190.58point drop in the Dow Jones Industrial Average.
[21843012] |"If you're selling equities, you don't start getting proceeds for five to seven days," said Frank Rachwalski, who manages the Kemper Money Market Fund.

[21843013] |Neal Litvack, marketing vice president for Fidelity Investments, said inflows Friday into Fidelity's Spartan and Cash Reserves money-market funds were about twice normal levels, with about half coming from equity and junk-bond funds.
[21843014] |Monday and Tuesday "were lackluster in comparison," he said.

[21843015] |"People aren't necessarily running scared," Mr. Litvack said.
[21843016] |"They're maintaining their attitude toward investing, which has leaned toward the conservative recently."

[21843017] |Money-fund yields tend to lag interestrate trends as portfolio managers adjust the maturities of their investments -- short-term Treasury securities, commercial paper and the like -- to capture the highest yields.
[21843018] |Maturities usually are shorter when rates are rising and longer when they are falling.

[21843019] |The average maturity of the funds tracked by IBC/Donoghue's remained at 38 days for the third consecutive week.
[21843020] |It was as short as 29 days at the start of this year, when rates were marching steadily upward, and hit 42 days in August.

[21843021] |The average seven-day simple yield of the funds fell to 8.21% this week from 8.26%.
[21843022] |The average 30-day simple yield was 8.26%, compared with 8.27% the week before, and the 30-day compound yield slid to 8.60% from 8.61%.

[21843023] |Some funds are posting yields far higher than the average.
[21843024] |The highest yielding taxable fund this week was Harbor Money Market Fund, with a seven-day compound yield of 12.75%.
[21843025] |That included capital gains that were passed along to customers.

[21843026] |Among the other high-yielding funds, Fidelity's Spartan Fund had a seven-day compound yield of 9.33% in the latest week.
[21843027] |The seven-day compound yield of the Dreyfus Worldwide Dollar Fund was 9.51%.

[21844001] |whose Della Femina McNamee WCRS agency created liar Joe Isuzu, among others -- announced a massive restructuring that largely removes it from the advertising business and includes selling the majority of its advertising unit to Paris-based Eurocom.

[21844002] |The complex restructuring, which was long expected, transforms London-based WCRS from primarily a creator of advertising into one of Europe's largest buyers of advertising time and space.
[21844003] |It also creates a newly merged world-wide ad agency controlled by Eurocom and headed jointly by New York ad man Jerry Della Femina and two top WCRS executives.
[21844004] |The merged agency's admittedly ambitious goal: to become one of the world's 10 largest agencies, while attracting more multinational clients than the agencies were able to attract alone.

[21844005] |WCRS's restructuring reflects the growing importance of media buying in Europe, where the only way to get a good price on advertising time and space is to buy it in bulk.
[21844006] |For Eurocom, meanwhile, the move gives it a strong U.S. foothold in Della Femina, and more than quadruples the size of its ad agency business world-wide.
[21844007] |It also gives the outspoken Mr. Della Femina -- who often generates as much publicity for himself as for his clients -- an international platform that he most certainly won't be loath to use.

[21844008] |According to terms, WCRS will pay 2.02 billion French francs ($318.6 million) for the 50% it doesn't already own of Carat Holding S.A., one of Europe's largest media buyers.
[21844009] |Meanwhile, Eurocom, which had held 20% of WCRS's ad unit, will pay #43.5 million ($68.5 million) to raise its stake to 60%.
[21844010] |That price also covers Eurocom raising to 60% its 51% stake in Europe's Belier Group, a joint venture ad agency network it owns with WCRS.
[21844011] |Eurocom will also have the right to buy the remaining 40% of the merged ad agency group in six years.

[21844012] |The transaction places the three executives squarely at the helm of a major agency with the rather unwieldy name of Eurocom WCRS Della Femina Ball Ltd., or EWDB.
[21844013] |The merged agency will include Della Femina McNamee based in New York, Eurocom's various agencies in France, the Belier Group in Europe and WCRS's other advertising and direct marketing operations.

[21844014] |Mr. Della Femina will be joint chairman with former WCRS executive Robin Wight.
[21844015] |Both will report to Tim Breene, a former WCRS executive who will be chief executive officer at the new agency.

[21844016] |In an interview in New York, Mr. Breene, fresh from a Concorde flight from Paris where executives had worked through most of the night, outlined big plans for the new agency.
[21844017] |"Our goal is to develop quite rapidly to a top-10 position . . . by the end of three years from now.
[21844018] |It implies very dramatic growth," he said.
[21844019] |He added that Eurocom and WCRS had agreed to provide a development fund of #100 million for acquisitions.
[21844020] |The new agency group is already in discussions about a possible purchase in Spain, while Mr. Breene said it also plans to make acquisitions in Scandinavia, Germany and elsewhere.

[21844021] |Cracking the top 10 within three years will be difficult at best.
[21844022] |Della Femina had billings of just $660 million last year and ranked as the U.S.'s 24th-largest ad agency.
[21844023] |The merged company that it now becomes part of will have billings of just more than $2.6 billion -- most of that in Europe -- bringing it to about 14th world-wide.
[21844024] |To make it to top-10 status, it would have to leapfrog over such formidable forces as Grey Advertising, D'Arcy Masius Benton & Bowles and Omnicom's DDB Needham.

[21844025] |The merged agency's game plan to attract multinational packaged-goods advertisers may prove equally difficult.
[21844026] |When WCRS created Della Femina McNamee out of the merger of three smaller agency units in 1988, it said it did so in order to attract larger clients, especially packaged-goods companies.
[21844027] |Since then, Della Femina won Pan Am as an international client and also does work for a few packaged-goods clients, including Dow Chemical Co.'s Saran Wrap.

[21844028] |But major packaged-goods players of the world -- such as Procter & Gamble, Colgate-Palmolive and Unilever -- have steadfastly eluded the agency.
[21844029] |"Three of our favorite names," Mr. Della Femina calls that roster, adding hopefully, "We're a much more attractive agency to large multinationals today than we were yesterday."

[21844030] |Still, the restructuring could create one of the most powerful alliances between advertising and media-buying firms that Europe has seen.
[21844031] |As part of the restructuring, WCRS and Eurocom said they will look for ways to combine their media buying across Europe.

[21844032] |What's more, both Eurocom and brothers Francis and Gilbert Gross, who founded Carat, will acquire 14.99% stakes in WCRS Group, creating a powerful link between Eurocom and Carat.
[21844033] |Carat will receive its WCRS stake as part of payment for the 50% Carat stake that WCRS is buying, while Eurocom said it expects to pay about #32 million for its WCRS stake.

[21844034] |Mr. Della Femina says he plans to remain heavily involved in the creative product at the world-wide agency, serving as a sort of "creative conscience."
[21844035] |Louise McNamee, Della Femina's president, will continue running the U.S. agency day-to-day.
[21844036] |They and other top executives signed long-term employment contracts and Mr. Della Femina will receive an additional multimillion-dollar sum, which some industry executives pegged at about $10 million.

[21844037] |WCRS Group, for its part, will now be able to follow its longstanding plan of becoming "a holding company for a series of media-related businesses," said Peter Scott, the firm's chief executive.
[21844038] |In addition to Carat, WCRS will hold onto its public relations, TV programming and other businesses.
[21844039] |WCRS says its debt will be cut to #24 million from #66 million as a result of the transaction.

[21844040] |For Carat, meanwhile, the alliance with Eurocom and WCRS is intended to strengthen its own push outside France.
[21844041] |Carat's Gross brothers invented the idea of large-scale buying of media space.
[21844042] |By buying the space in bulk, they obtain discounts as high as 50%, which they can pass on to customers.
[21844043] |They thus have won the French space-buying business of such advertising giants as Coca-Cola Co., Fiat S.p.A., Gillette and Kodak.
[21844044] |But now, other agencies are getting into the business with their own competing media-buying groups -- and Carat wants to expand to the rest of Europe.

[21844045] |To help finance the Carat purchase, WCRS said it plans an issue of Euroconvertible preferred shares once the market settles down.
[21844046] |But WCRS added that "in the light of the current uncertainty in the equity markets," it has arranged medium-term debt financing, which would be underwritten by Samuel Montagu & Co. Ltd.

[21844047] |Earthquake's Damage

[21844048] |Tuesday's earthquake brought the San Francisco ad scene to a screeching halt yesterday, with only a few staffers showing up at their offices, mainly to survey the damage or to wring their hands about imminent new-business presentations.

[21844049] |While no agencies reported injuries to employees, the quake damaged the offices of J. Walter Thompson, Chiat/Day/Mojo and DDB Needham, among others, spokesmen for those agencies said.
[21844050] |Staffers at Thompson, whose offices are in the ultramodern Embarcadero Center, watched pictures drop from the walls and then felt the skyscraper sway seven to eight feet, according to a spokeswoman.
[21844051] |Plaster fell and windows were broken at Chiat/Day/Mojo, a spokesman for that agency said.

[21844052] |Late yesterday afternoon, DDB Needham executives were scrambling to figure out what to do about a new business presentation that had been scheduled for today, a spokesman said.
[21844053] |DDB Needham's office building may have sustained structural damage, the spokesman added.
[21844054] |"All operations have stopped," he said.
[21844055] |A number of agencies, including Thompson and Foote, Cone & Belding, said some employees who live outside of San Francisco, fearful that they wouldn't be able to get home, spent the night at the agency.

[21844056] |Ad Notes. . . .

[21844057] |NEW ACCOUNT:
[21844058] |Chesebrough-Pond's Inc., Greenwich, Conn., awarded its Faberge hair care accounts to J. Walter Thompson, New York.
[21844059] |Thompson, a unit of WPP Group, will handle Faberge Organic shampoo and conditioner and Aqua Net hairspray.
[21844060] |The accounts, which billed about $7 million last year, according to Leading National Advertisers, were previously handled at Bozell, New York.

[21844061] |WHO'S NEWS:
[21844062] |William Morrissey, 44, was named executive vice president, world-wide director of McCann Direct, the direct marketing unit of Interpublic Group's McCann-Erickson agency.
[21844063] |He had been president and chief operating officer of Ogilvy & Mather Direct.

[21844064] |BOZELL:
[21844065] |Los Angeles will be the site of a new entertainment division for the ad agency.
[21844066] |The division will be headed by Dick Porter, who returns to Bozell after being vice president of media at MGM.

[21844067] |AC&R ADVERTISING:
[21844068] |The agency's three California offices, previously called AC&R/CCL Advertising, will now be called AC&R Advertising to match the name of its New York office.
[21844069] |AC&R Advertising is a unit of Saatchi & Saatchi Co.

[21844070] |NEW BEER:
[21844071] |Sibra Products Inc., Greenwich, Conn., awarded its Cardinal Amber Light beer account to Heidelberg & Associates, New York.
[21844072] |Budget is set at $1.5 million.
[21844073] |The new beer, introduced this week at a liquor industry convention, is imported from Switzerland's Cardinal brewery.
[21844074] |Heidelberg's first ads for the brand, which Sibra says will compete with imported light beer leader Amstel Light, feature the line "The best tasting light beer you've ever seen.

[21845001] |Diamond-Star Motors Corp., a joint venture of Chrysler Corp. and Mitsubishi Motors Corp. said it will begin shipping Mitsubishi Eclipse cars to Japan next week, emulating other Japanese auto ventures shipping U.S.-built vehicles back to Japan.

[21845002] |Diamond-Star said it will export about 1,500 Eclipse cars to Japan by year's end.

[21845003] |Honda Motor Co., the first Japanese auto maker to ship cars to Japan from the U.S., is now exporting more than 5,000 Accord Coupes a year from its Marysville, Ohio, factory.

[21846001] |One of the most remarkable features of the forced marches of the ethnic Turks out of Bulgaria over the past five months has been the lack of international attention.
[21846002] |The deportation of more than 315,000 men, women and children by the Bulgarian regime adds up to one of the largest migrations seen in the postwar years.
[21846003] |Yet some people are advancing a chilling casuistry: that what we are seeing is somehow the understandable result of the historical sins committed by the Turks in the 16th century.
[21846004] |Today's Turks in Bulgaria, in other words, deserve what is coming to them four centuries later.

[21846005] |As if this weren't enough, the Senate Judiciary Committee is getting into the act.
[21846006] |On Tuesday it approved Senator Bob Dole's proposed commemorative resolution designating April 24, 1990, as the "National Day of Remembrance of the 75th Anniversary of the Armenian Genocide of 1915-1923," suffered at the hands of the warring Ottoman Empire.

[21846007] |There can be no quibbling that the Armenians endured terrible suffering, but one has to wonder what possible good such a resolution will achieve.
[21846008] |It puts great strain on a longstanding U.S. friendship with Turkey, a country that has been one of America's strongest allies in NATO.
[21846009] |The resolution also comes at a time when Turkey has been seeking help from the United States in resolving its Bulgarian emigration controversy and pursuing democratic reforms that may lead to membership in the European Community.

[21846010] |Turkey has been fighting its past for years, and thus far has been only partially successful.
[21846011] |Must it now accept that one of its strongest allies blames it for the genocide of another people?
[21846012] |Such sentiment only encourages the adverse feelings toward Turkey that surfaced when Turkey asked for assistance in dealing with its Bulgarian emigration crisis.

[21846013] |Mr. Dole's odd effort notwithstanding, most of Turkey's political problems lie with the Europeans.
[21846014] |Part of the problem some Europeans have with Turkey seems to stem from its location -- Turkey isn't really part of Europe.
[21846015] |Why, they wonder, should it belong to the EC?
[21846016] |Another anti-Turkish hook is the Islamic faith of the majority of the Turkish people: Turkey, we are told, is not a Christian nation; its people simply won't fit in with the Western European Judeo-Christian tradition.
[21846017] |It's when these rationalizations fall on deaf ears that the old standby of retribution for treatment at the hands of the Ottoman Empire comes to the fore.

[21846018] |No one has to accept the sins of the Ottoman Empire to reject that argument.
[21846019] |Turkey in any event is long past it.
[21846020] |The country has in recent years accepted more than 500,000 refugees from at least four bordering nations.
[21846021] |Kurds, suffering what many people consider to be a current extermination campaign at the hands of Syria, Iran and Iraq have inundated eastern Turkey.
[21846022] |Now it is their fellow Turks arriving as refugees from Bulgaria.

[21846023] |The Turkish refugee tragedy and the ongoing crisis cannot be ignored and shuttled off to that notorious dustbin of history that has become so convenient recently.
[21846024] |Surely, the past suffering of any people at any time cannot be simply filed away and forgotten.
[21846025] |But what the Senate Judiciary Committee has done in supporting the strongly worded Armenian resolution achieves no useful end; it merely produces more controversy and embittered memories.

[21846026] |Congress has enough difficulty dealing with the realities of the world as it currently exists.
[21846027] |Bulgaria's government has been behaving beyond the pale for months, and the U.S. does its values no credit by ignoring that while casting its votes into the past.

[21847001] |Many in Washington say President Bush will have to raise taxes to pay for his war on drugs.
[21847002] |We have a better idea: Dismantle HUD to pay for the war on drugs.

[21847003] |Housing and Urban Development's budget is $17 billion.
[21847004] |From what we and the nation have been reading, the money isn't being spent very well.
[21847005] |The single most important contribution the government could make now to help the poor is to get the specter of drugs out of their neighborhoods.
[21847006] |If that takes money, take it away from this discredited federal department.

[21847007] |But of course the Democrats pillorying HUD in hearings and in the press have no such solution in mind.
[21847008] |Instead, they're scrambling to protect the very programs at the heart of the HUD scandal.

[21847009] |This month, HUD Secretary Jack Kemp unveiled a series of proposed reforms to improve management at HUD.
[21847010] |No doubt many of his ideas are worthy, but ultimately he is proposing to make fundamentally flawed programs work slightly more fairly and efficiently.
[21847011] |Congress is unlikely to go even that far.

[21847012] |Last week, Secretary Kemp ran into a buzzsaw of criticism from House Banking Committee members.
[21847013] |They were appalled, for instance, that he wanted to target more of the $3 billion Community Development Block Grant (CDBG) program to low-income projects and zero out the notorious "discretionary" funds that have allowed HUD officials to steer contracts to political cronies.

[21847014] |These development grants mainly enrich developers who want to put up shopping centers and parking garages.
[21847015] |They also give those in Congress political credit for bringing home the pork, and so they are popular with such Members as Mary Rose Oakar.

[21847016] |Rep. Oakar, a Democrat from Cleveland, wants a $6.9 million grant so Cleveland can build an 18-story Rock and Roll Hall of Fame.
[21847017] |She says it'd create 600 jobs and bring Cleveland tourist revenue.
[21847018] |HUD says the project doesn't qualify, and Mr. Kemp says that rock 'n' roll musicians and the music industry ought to put up the money.

[21847019] |At the hearing, Rep. Oakar started wailing about "phoney baloney regulations" that would stand between her and "housing for downtown Cleveland."
[21847020] |Rep. Chalmers Wylie, an Ohio Republican, rallied to the cause: "I think the gentlelady is making an important statement.
[21847021] |The implication that if a congressman calls about a project in his district there's something wrong, I think is most unfortunate."

[21847022] |We're sure some theologian can explain the difference between what the Republican consultants have been doing with HUD and what these gentleladies and gentlemen want to do with HUD.
[21847023] |Our view is that given Congress's attitude toward HUD, the place probably is beyond reform.

[21847024] |For more than 50 years the federal government has tried various ways to provide housing for the poor and revive cities.
[21847025] |In the process HUD has wasted untold billions, created slums and invited corruption.

[21847026] |Much of HUD's spending actually is disguised welfare for developers or the middle class.
[21847027] |That includes the CDBG funds and the Federal Housing Administration, which loans out money for private home mortgages and has just been discovered to be $4 billion in the hole.
[21847028] |Selling the FHA's loan portfolio to the highest bidder would save the taxpayers untold billions in future losses.

[21847029] |Some HUD money actually does trickle down to the poor, and zeroing out housing middlemen would free up more money for public housing tenants to manage and even own their units.
[21847030] |The rest ought to be used to clean out drugs from the neighbhorhoods.

[21847031] |Rival gangs have turned cities into combat zones.
[21847032] |Even suburban Prince George's County, Md., reported last week there have been a record 96 killings there this year, most of them drug-related.
[21847033] |Innocent bystanders often are the victims.
[21847034] |A man in a wheelchair was gunned down in the crossfire of a Miami drug battle.
[21847035] |A three-year-old Brooklyn boy was used as a shield by a drug dealer.

[21847036] |Decent life in the inner cities won't be restored unless the government reclaims the streets from the drug gangs.
[21847037] |Until then, the billions HUD spends on inner-city housing simply is wasted.

[21847038] |It's still unclear whether Secretary Kemp wants to completely overhaul the engine room at HUD or just tighten a few screws here and there.
[21847039] |No doubt he believes the place can be salvaged.
[21847040] |Having seen the hypocrisy with which Congress has addressed the HUD scandals, we disagree.
[21847041] |It's time to scrap the politically infested spending machine HUD has become and channel the resources into the drug war.

[21848001] |Randy Delchamps was named chairman and chief executive officer of this grocery chain.
[21848002] |Mr. Delchamps, 46 years old, succeeds A.F. Delchamps Jr., who died in a plane crash on Sunday at the age of 58.
[21848003] |Randy Delchamps retains his position as president.

[21849001] |Natural upheavals, and most particularly earthquakes, are not only horrible realities in and of themselves, but also symbols through which the state of a society can be construed.
[21849002] |The rubble after the Armenian earthquake a year ago disclosed, quite literally, a city whose larger structures had been built with sand.
[21849003] |The extent of the disaster stemmed from years of chicanery and bureaucratic indifference.

[21849004] |The larger parallel after the earthquake centered south of San Francisco is surely with the state of the U.S. economy.
[21849005] |Did the stock-market tremors of Friday, Oct. 13, presage larger fragility, far greater upheavals?
[21849006] |Are the engineering and architecture of the economy as vulnerable as the spans of the Bay Bridge?

[21849007] |The eerie complacency of the Reagan-Bush era has produced Panglossian paeans about the present perfection of U.S. economic and social arrangements.
[21849008] |A licensed government intellectual, Francis Fukuyama, recently announced in The National Interest that history is, so to speak, at an end since the course of human progress has now culminated in the glorious full stop of American civilization.
[21849009] |His observations were taken seriously.
[21849010] |But we are, in reality, witnessing the continuing decline of the political economy of capitalism: not so much the end of history but the history of the end.

[21849011] |The financial equivalent of the sand used by those Armenian contractors is junk bonds and the leveraged buy-outs associated with them.
[21849012] |Builders get away with using sand and financiers junk when society decides it's okay, necessary even, to look the other way.
[21849013] |And by the early 1980s U.S. capitalists had ample reason to welcome junk bonds, to look the other way.

[21849014] |By that time they found extremely low profit rates from non-financial corporate investment.
[21849015] |Government statistics in fact show that the profit rate -- net pretax profits divided by capital stock -- peaked in 1965 at 17.2%.
[21849016] |That same calculation saw profit rates fall to 4.6% in the recession year 1982 and the supposed miracle that followed has seen the profit rate rise only to 8.1% in 1986 and 8% in 1987.

[21849017] |Corresponding to the fall in profit rates was -- in the early 1980s -- the drop in the number arrived at if you divide the market value of firms by the replacement costs of their assets, the famous Q ratio associated with Prof. James Tobin.
[21849018] |In theory, the value attached to a firm by the market and the cost of replacing its assets should be the same.
[21849019] |But of course the market could decide that the firm's capital stock -- its assets -- means nothing if the firm is not producing profits.
[21849020] |This is indeed what the market decided.
[21849021] |By 1982 the ratio was 43.5%, meaning that the market was valuing every dollar's worth of the average firm's assets at 43 cents.

[21849022] |From the history of capitalism we can take it as a sound bet that if it takes only 43 cents to buy a dollar's worth of a firm's capital stock, an alert entrepreneur won't look the other way.
[21849023] |His assumption is that the underlying profitability rate will go up and the capital assets he bought on the cheap will soon be producing profits, thus restoring the market's faith in them.
[21849024] |Hence the LBO craze.

[21849025] |But here is where the entrepreneur made a very risky bet, and where society was maybe foolish to look the other way.
[21849026] |The profit rate is still low and the Q ratio was only 65% in 1987 and 68.9% in 1988.
[21849027] |Result: a landscape littered with lemons, huge debt burdens crushing down upon the arch and spans of corporate America.

[21849028] |The mounting risks did not go unobserved, even in the mid-1980s.
[21849029] |But there were enough promoters announcing the end of history (in this case suspension of normal laws of economic gravity) for society to continue shielding its eyes.
[21849030] |Mainstream economists and commentators, craning their necks up at the great pyramids of junk financing, swiveling their heads to watch the avalanche of leveraged buy-outs, claimed the end result would be a leaner, meaner corporate America, with soaring productivity and profits and the weaker gone to the wall.
[21849031] |But this is not where the rewards of junk financing were found.
[21849032] |The beneficiaries were those financiers whose icon was the topic figure of '80s capitalism, Michael Milken's $517 million salary in one year.

[21849033] |Left-stream economists I associate with -- fellows in the Union of Radical Political Economists, most particularly Robert Pollin of the economics faculty at the University of California at Riverside -- were not hypnotized in the manner of their pliant colleagues.
[21849034] |All along they have been noting the tremors and pointing out the underlying realities.
[21849035] |Profit rates after the great merger wave are no higher, and now we have an extremely high-interest burden relative to cash flow.

[21849036] |The consequences of building empires with sand are showing up.
[21849037] |In contrast to previous estimates reckoning the default rate on junk bonds at 2% or 3%, a Harvard study published in April of this year (and discussed in a lead story in The Wall Street Journal for Sept. 18) found the default rate on these junk bonds is 34%.

[21849038] |What is the consequence of a high-interest burden, high default rates and continued low profitability?
[21849039] |Corporations need liquidity, in the form of borrowed funds.
[21849040] |Without liquidity from the junk-bond market or cash flow from profits, they look to the government, which obediently assists the natural motions of the capitalist economy with charity in the form of cuts in the capital-gains tax rate or bailouts.
[21849041] |The consequence can be inflation, brought on as the effect of a desperate bid to avoid the deflationary shock of a sudden crash.

[21849042] |Attacks on inflation come with another strategy of capital of a very traditional sort: an assault on wages.
[21849043] |Mr. Fukuyama, peering through binoculars at the end of history, said in his essay that "the class issue has actually been successfully resolved in the West . . .
[21849044] |the egalitarianism of modern America represents the essential achievement of the classless society envisioned by Marx."

[21849045] |Mr. Fukuyama might want to consult some American workers on the subject of class and egalitarianism.
[21849046] |From its peak in 1972 of $198.41, the average American weekly wage had fallen to $169.28 in 1987 -- both figures being expressed in 1977 dollars.
[21849047] |In other words, after the glory boom of the Reagan years, wages had sunk from the post World War II peak by 16% as capitalists, helped by the government, turned down the screws or went offshore.

[21849048] |But there are signs now -- the strikes by miners, Boeing workers, telephone workers, etc. -- that this attack on wages is being more fiercely resisted.

[21849049] |These are long-term Richter readings on American capitalism.
[21849050] |The whole structure is extremely shaky.
[21849051] |Governments have become sophisticated in handling moments of panic (a word the London Times forbade my father to use when he was reporting the Wall Street crash in 1929).
[21849052] |But sophistication has its limits.
[21849053] |The S&L bailout could cost $300 billion, computing interest on the government's loans.
[21849054] |These are real costs.
[21849055] |Under what weights will the Federal Deposit Insurance Corporation totter?
[21849056] |Capitalism may now be engineered to withstand sudden shocks, but there are fault lines -- the crisis in profits, the assault on wages, the structural inequity of the system -- that make fools of those who claim that the future is here and that history is over.

[21849057] |Mr. Cockburn is a columnist for The Nation and LA Weekly.

[21850001] |Japan Air Lines, Lufthansa German Airlines and Air France reportedly plan to form an international air-freight company this year, a move that could further consolidate the industry.

[21850002] |Japanese newspaper Nihon Keizai Shimbun reported that the three giants plan to integrate their cargo computers and ground-cargo and air-cargo systems.
[21850003] |They reportedly will invest a total of 20 billion yen ($140 million) in the venture, whose headquarters would be in France or West Germany.

[21850004] |The action follows Federal Express Corp.'s acquisition of Flying Tiger Line Inc. in August.
[21850005] |After that, "it would make sense for airlines to talk about doing things jointly," said Cotton Daly, director of cargo services for New York consulting firm Simat, Helliesen & Eichner Inc.

[21850006] |Mr. Daly said such discussions are motivated by the competitive threat posed by Federal Express, United Parcel Service of America Inc. and other fast-growing air-freight companies.
[21850007] |Many airlines are talking about cargo ventures, and there have been rumors about such a tie between JAL and European airlines.

[21850008] |In Tokyo, a JAL spokesman said he couldn't confirm or deny the latest Japanese report.
[21850009] |But he said JAL is talking to Lufthansa and Air France about some sort of cargo venture.
[21850010] |"It is just one of a number of strategies JAL has embarked upon to come to terms with the situation in Europe after 1992," the deadline for ending trade barriers in the EC, he said.

[21850011] |In Frankfurt, a Lufthansa spokesman confirmed talks are under way, but declined to comment.
[21850012] |A Lufthansa spokeswoman in Tokyo said the head of Lufthansa's cargo operations had been in Toyko last week for talks with JAL.
[21850013] |In Paris, Air France declined to comment.

[21850014] |"Nothing is defined or signed at this point," Mr. Daly said of the talks.
[21850015] |Whatever accord the three carriers reach, he said, he is skeptical it would create a separate airline.

[21850016] |If the three companies pool their air-freight businesses, their clout would be considerable.
[21850017] |According to figures from the International Air Transport Association, they carried a combined 1.8 million tons of freight last year.
[21850018] |Federal Express and Flying Tiger, as separate companies, carried a combined 2.6 million tons.

[21850019] |Air France and Lufthansa last month concluded a far-reaching cooperation accord that includes air-freight activities.
[21850020] |They plan to increase cooperation in freight ground-handling and create a world-wide computer system to process cargo.
[21850021] |Other airlines would have access to the system, they said, and negotiations with partners were already under way.

[21850022] |Both European airlines operate extensive fleets of Boeing 747 freighters and 747 Combis, aircraft that carry both freight and passengers on the main deck.
[21850023] |They currently have large orders for cargo planes.

[21850024] |Several airlines, including Lufthansa, JAL and Cathay Pacific Airways, are working on a so-called global cargo system and are trying to attract other carriers to join, Mr. Daly said.

[21850025] |JAL also has signaled it is looking for toeholds in Europe before the end of 1992.
[21850026] |Last month, the carrier said it wanted to lease crews and planes from British Airways so it could funnel its passengers from London to other European destinations.

[21850027] |British Airways said it hasn't received a proposal from JAL.
[21850028] |But last week there were air-traffic negotiations between the U.K. and Japan, a likely first step to any commercial agreement between JAL and British Airways or another U.K. carrier.

[21851001] |Federal Paper Board Co. said it completed the previously announced purchase of Imperial Cup Corp., a closely held maker of paper cups based in Kenton, Ohio.
[21851002] |Terms weren't disclosed.

[21851003] |Imperial Cup has annual sales of approximately $75 million.
[21851004] |Federal Paper Board sells paper and wood products.

[21852001] |In a move to prevent any dislocation in the financial markets from the California earthquake, the Securities and Exchange Commission said it temporarily reassigned options listed on the Pacific Stock Exchange to the American, New York and Philadelphia stock exchanges and to the Chicago Board Options Exchange.

[21852002] |The decision, which affects millions of dollars of trading positions, was made late yesterday because the Pacific exchange's options floor was shut down as a result of Tuesday's earthquake.
[21852003] |The SEC, faced with a major squeeze on options positions, said it was necessary to ensure that options listed on the exchange could be traded today and tomorrow.

[21852004] |SEC Chairman Richard Breeden said the cooperation by the exchanges would enable investors to buy and sell options listed solely on the Pacific exchange, guaranteeing the liquidity of the market.

[21852005] |Officials at the four exchanges said well over 50 traders from the Pacific exchange were taking flights from San Francisco late yesterday to the American, New York and Philadelphia exchanges and to the CBOE, where they would continue making markets in the Pacific-listed options.
[21852006] |The Big Board said carpenters quickly erected a new options floor to accomodate 40 traders from the Pacific exchange.
[21852007] |In addition, specialists on the exchanges agreed to provide backup capital for market-making in Pacific exchange options traded on the exchanges.

[21852008] |Trading was light on the Pacific Stock Exchange yesterday, with workers at the exchange's main floor in San Francisco struggling to execute orders by flashlight as a result of a continuing power outage.

[21852009] |The most pressing problem was the suspension of options trading.
[21852010] |The Pacific exchange has options for 129 underlying stock issues, including highly active Hilton Hotels Corp., which is listed on the Big Board.
[21852011] |Investors were concerned that they might be unable to exercise options that expire tomorrow.

[21852012] |But professionals said throughout the day that the shutdown wouldn't be a cause for alarm even if it were to persist for several days.
[21852013] |"I've told my staff and clients that they still have the ability to exercise their options, because they are guaranteed by the Options Clearing Corp.," said Michael Schwartz, a senior registered options strategist at Oppenheimer & Co.

[21852014] |The SEC reassigned trading in the options, however, to allow investors to do more than simply exercise the options.

[21852015] |While the exchange's equities floor in San Francisco remained open on a limited basis, orders were being routed and executed in Los Angeles.
[21852016] |Workers could dial out, but they couldn't receive telephone calls.
[21852017] |"It's a very uncertain situation right now," said Navin Vyas, administrative assistant of trading floor operations of the exchange, which has daily volume of about 10 million shares.

[21852018] |Because the exchange's computer was rerouting orders to the exchange's trading operations in Los Angeles, "business is as usual" Mr. Vyas said.
[21852019] |"If one city is down, the other can take over."

[21852020] |Meanwhile, the brokerage firms in San Francisco were trying to cope.
[21852021] |Charles Daggs, chairman and chief executive officer of Sutro & Co., said traders came to work at 5 a.m. PDT -- many on foot because of uncertain road and traffic conditions -- but learned that they would have to await a required inspection by the city in order to turn the power back on at the company's two main facilities there.
[21852022] |That should happen by today, he said.

[21852023] |Traders worked with the help of sunlight streaming through windows, despite large cracks in the walls and a lack of incoming phone calls.
[21852024] |Also, most of the telecommunications equipment was out.
[21852025] |The traders were executing municipal bond, mutual fund and other orders through a sister firm, Tucker Anthony Inc., which is also owned by John Hancock Freedom Securities but is based in New York.
[21852026] |"We are having a regular day.
[21852027] |Volume is down out of San Francisco, but not out of the 11 outlying offices," Mr. Daggs added.
[21852028] |Sutro's Oakland office executed orders through the Sacramento office, which wasn't affected by the quake.

[21852029] |Others, like Prudential-Bache Securities Inc., which has eight offices in the San Francisco area, set up an 800 number yesterday morning for customers to obtain market commentary and other help.

[21852030] |At Kidder, Peabody & Co.'s Sacramento branch, Manager Janet White received calls yesterday morning from workers in San Francisco who offered to work in Sacramento.
[21852031] |Then she discovered that Quotron Systems Inc.'s Sacramento lines were down, because they are normally tied in through a system that goes through San Francisco.
[21852032] |So the Kidder brokers had to call other company offices to get quotes on stocks.

[21852033] |At Quotron, the company's National Call-In Center, which swung into action for the first time last month for Hurricane Hugo, assembled a tactical team at 5 a.m. yesterday to begin rerouting lines and restore service to brokers and traders.
[21852034] |The company dispatched as many as 200 people in the San Francisco area to do the work, though most of the rerouting was done by computer.

[21852035] |Service appeared to be down throughout the financial district in downtown San Francisco, while just parts of Oakland and San Jose were knocked out.
[21852036] |But Dale Irvine, director of the emergency center, said service was being restored to outlying San Francisco areas.

[21852037] |In Chicago yesterday, Options Clearing confirmed that it guarantees the Pacific exchange options.
[21852038] |The firm also will permit its members and the public "to exercise their put and call options contracts traded on the Pacific exchange" even if the exchange is closed, said Wayne Luthringshausen, chairman of Options Clearing.
[21852039] |(Put options give holders the right, but not the obligation, to sell a financial instrument at a specified price, while call options give holders the right, but not the obligation, to buy a financial instrument at a specified price).

[21852040] |Investors and traders in Pacific exchange options "are protected to the extent that they can convert their put and call options into the underlying instrument," Mr. Luthringshausen said.
[21852041] |"We are seeing such exercises today, in fact.

[21853001] |International Business Machines Corp. said its board approved the purchase of $1 billion of its common shares, a move that should help support its battered stock.

[21853002] |Even as the stock market has generally done well this year, IBM's shares have slipped steadily from its 52-week high of $130.875.
[21853003] |Yesterday's closing price of $101.75, down 50 cents, in composite trading on the New York Stock Exchange, puts the stock at about 1 1/2 times book value, which is as low as it has sunk over the past decade.

[21853004] |The announcement came after the market's close.

[21853005] |The move by IBM wasn't exactly a surprise.
[21853006] |The company has spent some $5 billion over the past 3 1/2 years to buy back 42 million common shares, or roughly 7% of those outstanding.

[21853007] |In addition, despite IBM's well-publicized recent problems, the computer giant still generates enormous amounts of cash.
[21853008] |As of the end of the second quarter, it had $4.47 billion of cash and marketable securities on hand.

[21853009] |As a result, some securities analysts had predicted in recent days that IBM would authorize additional purchases.

[21853010] |In Armonk, N.Y., a spokesman said that although IBM didn't view its spending as necessarily a way to support the stock, it thought the purchases were a good way to improve such financial measurements as per-share earnings and return on equity.

[21853011] |"We view it as a good long-term investment," the spokesman said.

[21853012] |In the short term, the move is likely to have little effect.
[21853013] |At yesterday's closing price, $1 billion would buy back about 10 million shares, or less than 2% of the roughly 580 million outstanding.
[21853014] |In addition, as of Sept. 30, the company still had authorization to buy $368 million of stock under a prior repurchase program.

[21853015] |Over the long term, however, IBM's stock repurchases -- along with its hefty, $4.84-a-share annual dividend and generally loyal following among large institutional investors -- are providing a floor for the stock price.

[21853016] |Although IBM last year produced its first strong results in four years and was expected to continue to roll this year, it began faltering as early as January.
[21853017] |First, it had trouble manufacturing a chip for its mainframes, IBM's bread-and-butter business.
[21853018] |Then it had a series of smaller glitches, including problems manufacturing certain personal computers and the delay in the announcement of some important workstations.
[21853019] |Finally, IBM had to delay the introduction of some high-end disk drives, which account for 10% of its $60 billion of annual revenue.

[21853020] |None of the problems is necessarily fatal, and they aren't all necessarily even related.
[21853021] |There are also other factors at work that are outside IBM's control, such as currency exchange rates.
[21853022] |The strong dollar, which reduces the value of overseas earnings and revenue when they are translated into dollars, is expected to knock 80 to 85 cents off IBM's per-share earnings for the full year.
[21853023] |Without that problem, IBM might have matched last year's earnings of $5.81 billion, or $9.80 a share.

[21853024] |Still, investors will take some convincing before they get back into IBM's stock in a big way.
[21853025] |Steve Milunovich, a securities analyst at First Boston, said that while investors were looking for an excuse to buy IBM shares a year ago, even the big institutional investors are looking for a reason to avoid the stock these days.

[21854001] |On Wall Street yesterday, northern California's killer earthquake was just another chance to make a buck.

[21854002] |At the opening bell, investors quickly began singling out shares of companies expected to profit or suffer in some way from the California disaster, including insurers, construction-related companies, refiners and housing lenders.
[21854003] |Brokerage houses jumped in, touting "post-quake demand" stocks, and Kidder, Peabody & Co. set up a toll-free hot line for San Franciscans who might need emergency investment advice and help in transferring funds.

[21854004] |"Wall Street thinks of everything in terms of money," says Tom Gallagher, a senior Oppenheimer & Co. trader.
[21854005] |However, he added, such event-driven trading moves typically last only a few hours and are often made without full information.

[21854006] |The most popular plays of the day were insurance companies such as General Re Corp., which rose $2.75 to $86.50, Nac Re Corp., up $2 to $37.75, American International Group Inc., up $3.25 to $102.625, and Cigna Corp., up 87.5 cents to $62.50.
[21854007] |Yesterday, the brokerage firm Conning & Co. said insurers will use the earthquake as an excuse to raise insurance rates, ending their long price wars.

[21854008] |Before this bullish theory surfaced, some insurance stocks initially fell, indicating that investors thought the quake might cost insurers a lot of money.
[21854009] |In fact, Fireman's Fund Corp., which ended the day off 50 cents to $36.50, said earthquake damage would slightly hurt fourth-quarter profit.

[21854010] |On the prospect for rebuilding northern California, investors bid up cement-makers Calmat Co., up $2.75 to $28.75, and Lone Star Industries Inc., up $1.75 to $29.25.
[21854011] |Bridge and road builders had a field day, including Kasler Corp., up $2.125 to $9.875, Guy F. Atkinson Co., up 87.5 to $61.875, and Morrison Knudsen Corp., which reported higher third-quarter earnings yesterday, up $2.25 to $44.125.
[21854012] |Fluor Corp., a construction engineering firm, gained 75 cents to $33.375.
[21854013] |But home-building stocks were a mixed bag.

[21854014] |Timber stocks got a big boost.
[21854015] |Georgia Pacific Corp., up $1.25 to $58, and Maxxam Inc., up $3 to $43.75, both reported strong profits.
[21854016] |Merrill Lynch & Co. touted Georgia-Pacific, Louisiana Pacific Corp. and Willamette Industries Inc. as the best post-quake plywood plays.

[21854017] |Other gainers were companies with one or more undamaged California refineries.
[21854018] |Tosco Corp. jumped $1.125 to $20.125 and Chevron Corp., despite a temporary pipeline shutdown, rose $1 to $65.

[21854019] |Meanwhile, shares of some big housing lenders got hit, on the likelihood that the lenders' collateral -- people's homes -- suffered physical damage and perhaps a loss in value.
[21854020] |Wells Fargo & Co. fell 50 cents to $81.50, and BankAmerica Corp. fell 50 cents to $31.875.
[21854021] |Some California thrift stocks also fell, including Golden West Financial Corp. and H.F. Ahmanson & Co., which reported lower earnings yesterday.

[21854022] |"Property values didn't go up in California yesterday," says one money manager.

[21854023] |Pacific Gas & Electric Co. fell 37.5 cents to $19.625.
[21854024] |One of its power generators was damaged, though the company said there won't be any financial impact.

[21854025] |Pacific Telesis Group lost 62.5 cents to $44.625.
[21854026] |A computer failure delayed its earnings announcement, and some investors think it might have extra costs to repair damaged telephone lines.

[21854027] |Heavy construction, property-casualty insurance and forest products were among the best performing industry groups in the Dow Jones Equity Market Index yesterday.

[21855001] |Friday's stock market plunge claimed its second victim among the scores of futures and options trading firms here.

[21855002] |Petco Options, an options trading firm owned by the family of the deceased former Chicago Board of Trade chairman Ralph Peters, is getting out of the trade clearing, or processing and guaranteeing, business after sustaining a multimillion dollar loss Friday, options industry officials said.

[21855003] |Nearly 75 options traders on the Chicago Board Options Exchange who cleared trades through Petco, including a handful of traders who lost between $500,000 to $1 million themselves as a result of Friday's debacle, are trying to transfer their business to other clearing firms, CBOE members said.

[21855004] |Timothy Vincent, Petco chief executive officer, confirmed that Petco was withdrawing from the clearing business.
[21855005] |"The owners of the company got a look at the potential risks in this business, and after Monday they felt they didn't want to be exposed any more," he said.
[21855006] |He added that Petco remained in compliance with all industry capital requirements during the market's rapid plunge Friday and Monday's rebound.
[21855007] |A CBOE spokeswoman declined comment on Petco.

[21855008] |Over the weekend Fossett Corp., another options trading firm, transferred the clearing accounts of about 160 traders to First Options of Chicago, a unit of Continental Bank Corp., because it couldn't meet regulatory capital requirements after Friday's market slide.
[21855009] |The unprecedented transfer of accounts underscored the options industry's desire not to have its credibility tarnished by potentially widespread trading defaults on Monday.
[21855010] |The CBOE, American Stock Exchange, Options Clearing Corp. and Stephen Fossett, owner of Fossett, joined in putting up $50 million to guarantee the accounts at First Options.

[21855011] |The head of another small options clearing firm, who asked not to be identified, said that the heightened volatility in the financial markets in recent years makes it increasingly difficult for any but the largest financial trading firms to shoulder the risk inherent in the highly leveraged options and futures business.

[21855012] |Prior to the introduction of financial futures in the late 1970s, most trading firms clustered around the LaSalle Street financial district here were family operations handed down from one generation to the next.
[21855013] |Most also were relatively undercapitalized compared with the size of most Wall Street securities firms.

[21855014] |Mr. Peters, a LaSalle Street legend among the post-World War II generation of commodity traders, was rumored to have amassed a multimillion-dollar fortune from commodity trading and other activities by the time he died in May.

[21856001] |Part of a Series}

[21856002] |Betty Lombardi is a mild-mannered homemaker and grandmother in rural Hunterdon County, N.J.
[21856003] |But put her behind a shopping cart and she turns ruthless.

[21856004] |If Colgate toothpaste offers a tempting money-saving coupon, she'll cross Crest off her shopping list without a second thought.
[21856005] |Never mind that her husband prefers Crest.
[21856006] |Some weeks when her supermarket runs a double-coupon promotion, she boasts that she shaves $22 off her bill.

[21856007] |Money isn't the only thing that makes her dump once favorite brands.
[21856008] |After she heard about the artery-clogging hazards of tropical oils in many cookies, she dropped Pepperidge Farm and started buying brands free of such oils.
[21856009] |"I always thought Pepperidge Farm was tasty and high quality," Mrs. Lombardi says.
[21856010] |"But I don't want any of that oil for my grandkids."
[21856011] |(Pepperidge Farm says it can't tell exactly how many customers it has lost, but it hopes to remove the objectionable tropical oil from all its products by year end.)

[21856012] |Clearly, people like Mrs. Lombardi are giving marketers fits.
[21856013] |She represents a new breed of savvy consumer who puts bargain prices, nutritional and environmental concerns, and other priorities ahead of old-fashioned brand loyalty.

[21856014] |While brand loyalty is far from dead, marketing experts say it has eroded during the 1980s.
[21856015] |Marketers themselves are partly to blame: They've increased spending for coupons and other short-term promotions at the expense of image-building advertising.
[21856016] |What's more, a flood of new products has given consumers a dizzying choice of brands, many of which are virtually carbon copies of one other.

[21856017] |"Marketers have brought this on themselves with their heavy use" of promotions, contends Joe Plummer, an executive vice president at the D'Arcy Masius Benton & Bowles ad agency.
[21856018] |"Without some real product improvements, it's going to be difficult to win that loyalty back."

[21856019] |The Wall Street Journal's "American Way of Buying" survey this year found that most consumers switch brands for many of the products they use.
[21856020] |For the survey, Peter D. Hart Research Associates asked some 2,000 consumers, including Mrs. Lombardi, whether they usually buy one brand of a certain type of product or have no brand loyalty.
[21856021] |More than half the users of 17 of the 25 products included in the survey said they're brand switchers.

[21856022] |Overall, 12% of consumers aren't brand loyal for any of the 25 product categories.
[21856023] |About 47% are loyal for one to five of the products.
[21856024] |Only 2% are brand loyal in 16 to 20 of the categories, and no one is loyal for more than 20 types of products.

[21856025] |For such products as canned vegetables and athletic shoes, devotion to a single brand was quite low, with fewer than 30% saying they usually buy the same brand.
[21856026] |Only for cigarettes, mayonnaise and toothpaste did more than 60% of users say they typically stick with the same brand.

[21856027] |People tend to be most loyal to brands that have distinctive flavors, such as cigarettes and ketchup.
[21856028] |Kathie Huff, a respondent in the Journal survey from Spokane, Wash., says her husband is adamant about eating only Hunt's ketchup.
[21856029] |He simply can't stomach the taste of Heinz, she says.
[21856030] |The 31-year-old homemaker adds, "The only other thing I'm really loyal to is my Virginia Slims cigarettes.
[21856031] |Coke and Pepsi are all the same to me, and I usually buy whichever brand of coffee happens to be on sale."

[21856032] |Brand imagery plays a significant role in loyalty to such products as cigarettes, perfume and beer.
[21856033] |People often stay with a particular brand because they want to be associated with the image its advertising conveys, whether that's macho Marlboro cigarettes or Cher's Uninhibited perfume.

[21856034] |Loyalty lags most for utilitarian products like trash bags and batteries.
[21856035] |Only 23% of trash-bag users in the Journal survey usually buy the same brand, and just 29% of battery buyers stick to one brand.

[21856036] |Underwear scored a middling 36% in brand loyalty, but consumer researchers say that's actually quite high for such a mundane product.
[21856037] |"In the past, you just wore Fruit of the Loom and didn't care," says Peter Kim, U.S. director of consumer behavior research for the J. Walter Thompson ad agency.
[21856038] |"The high score reflects the attempts to make underwear more of a fashion image business for both men and women."

[21856039] |He believes there's opportunity for a smart gasoline marketer to create a strong brand image and more consumer loyalty.
[21856040] |What loyalty there is to gas brands, he believes, is a matter of stopping at the most conveniently located service stations.

[21856041] |Brand loyalty was stronger among older consumers in the Journal survey.
[21856042] |Nearly one-fourth of participants age 60 and older claim brand loyalty for more than 10 of the 25 products in the survey; only 9% of those age 18 to 29 have such strong allegiance.

[21856043] |Higher-income people also tend to be more brand loyal these days, the Journal survey and other research studies indicate.
[21856044] |Marketers speculate that more affluent people tend to lead more pressured lives and don't have time to research the products they buy for the highest quality and most reasonable price.
[21856045] |An established brand name is insurance that at least the product will be of acceptable quality, if not always the best value for the money.
[21856046] |It's sort of loyalty by default.

[21856047] |Meanwhile, "the bottom end of the market is becoming less loyal," says Laurel Cutler, vice chairman of the ad agency FCB/Leber Katz Partners.
[21856048] |"They're buying whatever's cheaper."

[21856049] |The biggest wild card in the brand loyalty game: How those hotly pursued but highly unpredictable baby boomers will behave as they move into middle age.
[21856050] |They grew up with more brand choices than any generation and have shown less allegiance so far.
[21856051] |But now that they're settling down and raising families, might they also show more stability in their brand choices?

[21856052] |Mr. Kim of J. Walter Thompson doesn't think so.
[21856053] |He believes baby boomers will continue to be selective in their brand loyalties.
[21856054] |"Earlier generations were brand loyal across categories," he says, "but boomers tend to be brand loyal in categories like running shoes and bottled water, but less so in others like toilet paper and appliances."

[21856055] |While not as brand loyal as in the past, consumers today don't buy products capriciously, either.
[21856056] |Rather, they tend to have a set of two or three favorites.
[21856057] |Sometimes, they'll choose Ragu spaghetti sauce; other times, it will be Prego.

[21856058] |Advertisers attribute this shared loyalty to the striking similarity among brands.
[21856059] |If a more absorbent Pampers hits the market, you can be sure a new and improved Huggies won't be far behind.
[21856060] |The BBDO Worldwide ad agency studied "brand parity" and found that consumers believe all brands are about the same in a number of categories, particularly credit cards, paper towels, dry soups and snack chips.

[21856061] |"When there's a clutter of brands, consumers simplify the complexity by telling themselves, 'All brands are the same so what difference does it make which I buy,'" says Karen Olshan, a senior vice president at BBDO.
[21856062] |"Too often, advertising imagery hasn't done a good job of forging a special emotional bond between a brand and the consumer."

[21856063] |But given such strong brand disloyalty, some marketers are putting renewed emphasis on image advertising.
[21856064] |A small but growing number of companies are also trying to instill more fervent brand loyalty through such personalized direct-marketing ploys as catalogs, magazines and membership clubs for brand users.

[21856065] |While discount promotions are essential for most brands, some companies concede they went overboard in shifting money from advertising to coupons, refunds and other sales incentives.

[21856066] |Some people argue that strong brands can afford to stop advertising for a time because of the residual impact of hundreds of millions of dollars spent on advertising through the years.
[21856067] |But most companies are too afraid to take that chance.
[21856068] |And perhaps with good reason.
[21856069] |Says Clayt Wilhite, president of the D'Arcy Masius ad agency's U.S. division, "Every time 24 hours pass without any advertising reinforcement, brand loyalty will diminish ever so slightly -- even for a powerful brand like Budweiser."

[21856070] |Consider, for example, what happened to Maxwell House coffee.
[21856071] |The Kraft General Foods brand stopped advertising for about a year in 1987 and gave up several market share points and its leadership position in the coffee business.
[21856072] |But since returning to advertising, Maxwell House has regained the lost share and is running neck and neck with archrival Folgers.

[21856073] |"Now, Philip Morris {Kraft General Foods' parent company} is committed to the coffee business and to increased advertising for Maxwell House," says Dick Mayer, president of the General Foods USA division.
[21856074] |"Even though brand loyalty is rather strong for coffee, we need advertising to maintain and strengthen it."

[21856075] |Campbell Soup Co., for one, has concluded that it makes good sense to focus more on its most loyal customers than on people who buy competitive brands.
[21856076] |"The probability of converting a non-user to your brand is about three in 1,000," says Tony Adams, the company's vice president for marketing research.
[21856077] |"The best odds are with your core franchise.
[21856078] |Our heavy users consume two to three cans of soup a week, and we'd like to increase that."

[21856079] |So Campbell is talking to its "brand enthusiasts," probing their psychological attachment to its soup.
[21856080] |In one consumer focus group, a fan declared that, "Campbell's soup is like getting a hug from a friend."
[21856081] |That helped persuade the company to introduce a new advertising slogan: "A warm hug from Campbell's."

[21857001] |Insurers face the prospect of paying out billions of dollars for damages caused by this week's California earthquake.

[21857002] |Getting a grip on the extent of the damages is proving a far more difficult task than what insurers faced after Hurricane Hugo ripped through the Caribbean and the Carolinas last month.
[21857003] |The earthquake's toll, including possible deep structural damage, goes far beyond the more easily observed damage from a hurricane, says George Reider, a vice president in Aetna Life & Casualty Insurance Co.'s claims division.

[21857004] |But investors are betting that the financial and psychological impact of the earthquake, coming so soon after the hurricane, will help stem more than two years of intense price-cutting wars among business insurers.
[21857005] |Reflecting that logic, insurance-company stocks posted strong gains.

[21857006] |Aetna and other insurers are hiring engineers and architects to help them assess structural damage.
[21857007] |Most insurers already have mobilized their "catastrophe" teams to begin processing claims from their policyholders in northern California.

[21857008] |Since commercial air travel is interrupted, Aetna, based in Hartford, Conn., chartered three planes to fly claims adjusters into Sacramento and then planned for them to drive to the Bay area.
[21857009] |About 25 adjusters were dispatched yesterday afternoon, along with laptop computers, cellular phones and blank checks.

[21857010] |Some adjusters, already in other parts of California, drove to the disaster area with recreational vehicles and mobile homes that could be used as makeshift claims-processing centers.

[21857011] |Insurers will be advertising 800 numbers -- probably on the radio -- that policyholders can call to get assistance on how to submit claims.

[21857012] |State Farm Mutual Automobile Insurance Co., the largest home and auto insurer in California, believes the losses from the earthquake could be somewhat less than the $475 million in damages it expects to pay out for claims resulting from Hurricane Hugo.
[21857013] |State Farm, based in Bloomington, Ind., is also the largest writer of personal-property earthquake insurance in California.

[21857014] |Earthquake insurance is sold as a separate policy or a specific endorsement "rider" on a homeowner's policy in California, because of the area's vulnerability to earthquakes.
[21857015] |State Farm said about 25% of its policyholders in California have also purchased earthquake insurance.
[21857016] |Allstate Insurance Co., a unit of Sears, Roebuck & Co., said about 23% of its personal property policyholders -- about 28% in the San Franciso area -- also have earthquake coverage.

[21857017] |The Association of California Insurance Companies estimated damage to residential property could total $500 million, but only $100 million to $150 million is insured, it said.

[21857018] |Officials from the American Insurance Association's property-claim service division, which coordinates the efforts of the claims adjusters in an area after a natural disaster, will be flying to San Francisco today.
[21857019] |They expect to have a preliminary estimate of the damages in a day or two.

[21857020] |Roads and bridges in the Bay area appear to have suffered some of the most costly damage.
[21857021] |Highways, such as the section of Interstate 880 that collapsed in Oakland, generally don't have insurance coverage.
[21857022] |Industry officials say the Bay Bridge -- unlike some bridges -- has no earthquake coverage, either, so the cost of repairing it probably would have to be paid out of state general operating funds.

[21857023] |However, the bridge, which charges a $1 toll each way, does have "loss of income" insurance to replace lost revenue if the operation of the bridge is interrupted for more than seven days.
[21857024] |That coverage is provided by a syndicate of insurance companies including Fireman's Fund Corp., based in Novato, Calif., and Cigna Corp., based in Philadelphia.

[21857025] |Earthquake-related claims aren't expected to cause significant financial problems for the insurance industry as a whole.
[21857026] |Instead, even with the liabilities of two natural disasters in recent weeks, analysts said the total capital of the industry is likely to be higher at year end than it was at midyear.

[21857027] |Indeed, the earthquake could contribute to a turnaround in the insurance cycle in a couple of ways.
[21857028] |For example, insurers may seek to limit their future exposure to catastrophes by increasing the amount of reinsurance they buy.
[21857029] |Such increased demand for reinsurance, along with the losses the reinsurers will bear from these two disasters, are likely to spur increases in reinsurance prices that will later be translated into an overall price rise.
[21857030] |Reinsurance is protection taken out by the insurance firms themselves.

[21857031] |"We are saying this is the breaking point, this is the event that will change the psychology of the marketplace," said William Yankus, an analyst with Conning & Co., a Hartford firm that specializes in the insurance industry.
[21857032] |His firm, along with some others, issued new buy recommendations on insurer stocks yesterday.

[21857033] |Among the insurance stocks, big gainers included American International Group, up $3.25 to $102.625; General Re Corp., up $2.75 to $86.50; Aetna, up $2.375 to $59.50; and Marsh & McLennan Inc., up $3.125 to $75.875.

[21857034] |Still, a few individual companies, most likely smaller ones, could be devastated.
[21857035] |"I think there is a damned good chance someone is going to hit the skids on this," said Oppenheimer & Co. analyst Myron Picoult.
[21857036] |He suspects some insurers who had purchased reinsurance to limit their exposure to catastrophes will discover that reinsurance was used up by Hurricane Hugo.

[21857037] |British, West German, Scandinavian and other overseas insurers are bracing for big claims from the San Francisco earthquake disaster.
[21857038] |Although it's unclear how much exposure the London market will face, U.K. underwriters traditionally have a large reinsurance exposure to U.S. catastrophe coverage.
[21857039] |Jack Byrne, chairman of Fireman's Fund, said this disaster will test the catastrophe reinsurance market, causing these rates to soar.

[21857040] |The catastrophe losses sustained by insurers this year will probably be the worst on an inflation-adjusted basis since 1906 -- when another earthquake sparked the Great San Francisco Fire.
[21857041] |Orin Kramer, an insurance consultant in New York, estimates that the 1906 San Francisco destruction, on an inflation-adjusted basis, included insured losses of $5.8 billion.
[21857042] |He is estimating this week's disaster will generate insured losses of $2 billion to $4 billion, following about $4 billion in costs to insurers from Hurricane Hugo.

[21858001] |Silicon Graphics Inc.'s first-quarter profit rose sharply to $5.2 million, or 28 cents a share, from $1 million, or six cents a share, a year ago.

[21858002] |The maker of computer workstations said a surge of government orders contributed to the increase.
[21858003] |Revenue rose 95% to $86.4 million from $44.3 million the year earlier.

[21858004] |In national over-the-counter trading, the company closed yesterday at $23.25 a share, down 25 cents.

[21859001] |Hunter Environmental Services Inc. said it reached a preliminary accord on the sale of its environmental consulting and services business for about $40 million and assumption of related debt.
[21859002] |The buyer wasn't identified.

[21859003] |The company said it also is making progress in negotiating the buy-out of its design division by management.

[21859004] |In addition, Hunter said it will use proceeds from a private placement of $8 million of preferred shares to purchase an interest in a start-up company to underwrite environmental impairment insurance.

[21859005] |Hunter wants to concentrate its resources on the insurance business and on a project to store hazardous wastes in salt domes.

[21860001] |Jaguar PLC's chairman said he hopes to reach a friendly pact with General Motors Corp. within a month that may involve the British luxury-car maker's producing a cheaper executive model.

[21860002] |Sir John Egan told reporters at London's Motorfair yesterday he "would be disappointed if we couldn't do {the deal} within a month."
[21860003] |He said the tie-up would mean Jaguar could "develop cars down range {in price} from where we are" by offering access to GM's high-volume parts production.
[21860004] |Besides creating joint manufacturing ventures, the accord is expected to give GM about a 15% stake that eventually would rise to about 30%.

[21860005] |Jaguar figures a friendly alliance with GM will fend off unwelcome advances from Ford Motor Co.
[21860006] |But Ford, Jaguar's biggest shareholder since lifting its stake to 10.4% this week, is pressing harder for talks with Sir John.
[21860007] |"We're getting to the point where we are going to have to meet" with him, one Ford official said yesterday.
[21860008] |Ford probably will renew its request for such a meeting soon, he added.

[21860009] |Sir John has spurned Ford's advances since the U.S. auto giant launched a surprise bid for as much as 15% of Jaguar last month.
[21860010] |Ford has signaled it might acquire a majority interest later.
[21860011] |"I'm not obligated to sit down and talk to anybody," the Jaguar chairman asserted yesterday.
[21860012] |He didn't rule out negotiations with Ford, however.
[21860013] |The fiercely proud but financially strapped British company prefers to remain independent and publicly held, despite Ford's promise of access to cash and technological know-how.

[21860014] |Sir John noted that GM, a longtime Jaguar supplier, agrees "we should remain an independent company."
[21860015] |He said Jaguar started negotiating with GM and several other car makers over a year ago, but the rest "dropped by the wayside ever since the share price went above #4 ($6.30) a share."
[21860016] |Jaguar shares stood at 405 pence before Ford's initial announcement, but the subsequent takeover frenzy has driven them up.
[21860017] |The stock traded late yesterday on London's stock exchange at 673 pence, up 19 pence.

[21860018] |Developing an executive-model range would mark a major departure for Britain's leading luxury-car maker.
[21860019] |A typical British executive car is mass produced and smaller than a luxury car.
[21860020] |It generally fetches no more than #25,000 ($39,400) -- roughly #16,000 less than the highest-priced Jaguars, which are all known for their hand-crafted leather work.

[21860021] |"We have designs for such {executive} cars, but have never been able to develop them," Sir John said.
[21860022] |GM's help would "make it possible {for Jaguar} to build a wider range of cars."
[21860023] |An executive model would significantly boost Jaguar's yearly output of 50,000 cars.
[21860024] |"You are talking about a couple hundred thousand a year," said Bob Barber, an auto-industry analyst at U.K. brokerage James Capel & Co.

[21860025] |A pact with GM may emerge in as little as two weeks, according to sources close to the talks.
[21860026] |The deal would require approval by a majority of Jaguar shareholders.
[21860027] |"We have to make it attractive enough that {holders} would accept it," Sir John said.

[21860028] |That may be difficult, the Jaguar chairman acknowledged, "when you have somebody else breathing down your neck.
[21860029] |" Ford probably would try to kill the proposal by enlisting support from U.S. takeover-stock speculators and holding out the carrot of a larger bid later, said Stephen Reitman, European auto analyst at London brokers UBS Phillips & Drew.

[21860030] |Ford can't make a full-fledged bid for Jaguar until U.K. government restrictions expire.
[21860031] |The anti-takeover measure prevents any outside investor from buying more than 15% of Jaguar shares without permission until Dec. 31, 1990.

[21860032] |But with its 10.4% stake, Ford can convene a special Jaguar shareholders' meeting and urge them to drop the restrictions prematurely.
[21860033] |"It's a very valuable weapon in their armory," which could enable Ford to bid sooner for Jaguar, observed Mr. Barber of James Capel.

[21860034] |Otherwise, Jaguar may have to tolerate the two U.S. auto giants each owning a 15% stake for more than a year.
[21860035] |"It would be difficult to see how a car company can be owned by a collective," Sir John said.
[21860036] |"It has never been done before, but there's always a first.

[21861001] |Although two Baby Bells showed strong growth in access lines, usage and unregulated business revenue, one reported a modest gain in third-quarter net while the other posted a small drop.

[21861002] |Ameritech Corp.'s earnings increased 2.8%, after strong revenue gains were offset somewhat by refunds and rate reductions imposed by regulators in its Midwest territory.

[21861003] |BellSouth Corp.'s third-quarter earnings dropped 3.8% as a result of debt refinancing, the recent acquisition of a cellular and paging property and rate reductions in its Southeast territory.

[21861004] |BellSouth

[21861005] |At BellSouth, based in Atlanta, customer access lines grew by 162,000, or 3.5%, during the 12-month period ended Sept.

[21861006] |For the third quarter, total operating revenue grew 2.6% to $3.55 billion from $3.46 billion.
[21861007] |Total operating expenses increased 3.5% to $2.78 billion from $2.69 billion.
[21861008] |Overall access minutes of use increased 10.3% and toll messages jumped 5.2%.

[21861009] |BellSouth Chairman and Chief Executive Officer John L. Clendenin said three factors accounted for the drop in third-quarter earnings.
[21861010] |The refinancing of $481 million in long-term debt reduced net income by $22 million, or five cents a share, but in the long run will save more than $250 million in interest costs.
[21861011] |The company previously said that the recent acquisition of Mobile Communications Corp. of America would dilute 1989 earnings by about 3%.
[21861012] |In addition, earnings were reduced by rate reductions in Florida, Kentucky, Alabama, Tennessee and Louisiana.

[21861013] |Ameritech
[21861014] |At Ameritech, based in Chicago, customer access lines increased by 402,000, or 2.6%, and cellular mobile lines increased by 80,000, or 62.3%, for the 12-month period ended Sept. 30.

[21861015] |For the third quarter, revenue increased 1.9% to $2.55 billion from $2.51 billion.
[21861016] |Operating expenses increased 2.6% to $2.04 billion, including one-time pretax charges of $40 million for labor contract signing bonuses.
[21861017] |Local service revenue increased 3.5% and directory and unregulated business revenue jumped 9.5%.
[21861018] |But network access revenue dropped 4% and toll revenue dropped 1.4%.

[21861019] |a-reflects 2-for-1 stock split effective Dec. 30, 1988.
[21861020] |b-reflects extraordinary loss of five cents a share for early debt retirement.
[21861021] |c-reflects extraordinary loss of five cents a share and extraordinary gain of 14 cents a share from cumulative effect of accounting change.

[21862001] |The Wall Street Journal "American Way of Buying" Survey consists of two separate, door-to-door nationwide polls conducted for the Journal by Peter D. Hart Research Associates and the Roper Organization.
[21862002] |The two surveys, which asked different questions, were conducted using national random probability samples.

[21862003] |The poll conducted by Peter D. Hart Research Associates interviewed 2,064 adults age 18 and older from June 15 to June 30, 1989.
[21862004] |The poll conducted by the Roper Organization interviewed 2,002 adults age 18 and older from July 7 to July 15, 1989.
[21862005] |Responses were weighted on the basis of age and gender to conform with U.S. Census data.

[21862006] |For each poll, the odds are 19 out of 20 that if pollsters had sought to survey every household in the U.S. using the same questionnaire, the findings would differ from these poll results by no more than 2 1/2 percentage points in either direction.
[21862007] |The margin of error for subgroups -- for example, married women with children at home -- would be larger.
[21862008] |In addition, in any survey, there is always the chance that other factors such as question wording could introduce errors into the findings.

[21863001] |Program traders were buying and selling at full steam Monday, the first trading session after the stock market's 190.58-point plunge Friday.

[21863002] |They accounted for a hefty 16% of New York Stock Exchange volume Monday, the fourth busiest session ever.
[21863003] |On Friday, 13% of volume was in computer-guided program trades.
[21863004] |In August, by contrast, program trading averaged 10.3% of daily Big Board turnover.

[21863005] |Program traders were publicly castigated following the 508-point crash Oct. 19, 1987, and a number of brokerage firms pulled back from using this strategy for a while.
[21863006] |But as the outcry faded by the spring of 1988, they resumed.
[21863007] |Some observers thought that after Friday's sharp drop, the firms would rein in their program traders to avoid stoking more controversy.

[21863008] |But the statistics released yesterday show the firms did nothing of the sort.
[21863009] |One reason, they said, was that the official reports on the 1987 crash exonerated program trading as a cause.

[21863010] |Stock-index arbitrage is the most controversial form of program trading because it accelerates market moves, if not actually causing them.
[21863011] |In it, traders buy or sell stocks and offset those positions in stock-index futures contracts to profit from fleeting price discrepancies.
[21863012] |Under the exchange's definitions, program trading also describes a number of other strategies that, in the opinion of some traders, don't cause big swings in the market.

[21863013] |The Big Board's disclosure of program trading activity on these two days was unusual.
[21863014] |Though it collects such data daily, its monthly reports on program trading usually come out about three weeks after each month ends.
[21863015] |The September figures are due to be released this week.

[21863016] |The Big Board declined to name the Wall Street firms involved in the activity Friday and Monday, or the type of strategies used.
[21863017] |But traders on the exchange floor, who can observe the computer-guided trading activity on monitor screens, said most of the top program-trading firms were active both days.

[21863018] |Through August, the top five program trading firms in volume were Morgan Stanley & Co., Kidder, Peabody & Co., Merrill Lynch & Co., PaineWebber Group Inc. and Salomon Brothers Inc.

[21863019] |Though brokerage officials defended their use of program trading, one sign of what an issue it remains was that few executives would comment on the record.
[21863020] |Besides reciting the pardon for program trading contained in the Brady Commission report, they said stock-index arbitrage was actually needed Monday to restore the markets' equilibrium.

[21863021] |On Friday, the stock-index futures market was unhinged from the stock market when the Chicago Mercantile Exchange halted trading in Standard & Poor's 500 futures contract -- a "circuit breaker" procedure instituted after the 1987 crash and implemented for the first time.
[21863022] |Futures trading resumed a half-hour later, but the session ended shortly thereafter, leaving the stock market set up for more sell programs, traders said.
[21863023] |By Monday morning, they said, stock-index arbitrage sell programs helped re-establish the link between stocks and futures.

[21863024] |But stunning volatility was produced in the process.
[21863025] |The Dow Jones Industrial Average plunged a breathtaking 63.52 points in the first 40 minutes of trading Monday as stock-index arbitrage sell programs kicked in.
[21863026] |At about 10:10 a.m. EDT, the market abruptly turned upward on stock-index arbitrage buy programs.
[21863027] |By day's end, the Dow industrials had rebounded 88.12 points, or nearly half of Friday's drop.

[21864001] |FREDERICK'S OF HOLLYWOOD Inc., Los Angeles, said its board voted a 50% increase in the specialty boutique-store operator's semiannual dividend, to five cents a common share.
[21864002] |The dividend is payable Dec. 15 to stock of record Nov. 15.

[21865001] |Valley National Corp. reported a third-quarter net loss of $72.2 million, or $3.65 a share, and suspended its quarterly dividend because of potential losses on its Arizona real estate holdings.

[21865002] |The Phoenix-based holding company for Arizona's largest bank said it added $121 million to its allowance for losses on loans and for real estate owned.
[21865003] |The company earned $18.7 million, or 95 cents a share, a year earlier.

[21865004] |For the nine months, Valley National posted a net loss of $136.4 million, or $6.90 a share.
[21865005] |It had profit of $48.6 million, or $2.46 a share, in the 1988 period.
[21865006] |Valley National had been paying a quarterly dividend of 36 cents a share.

[21865007] |"The Arizona real estate market continues to be depressed, and there is still uncertainty as to when values will recover," James P. Simmons, chairman, said.
[21865008] |The decision to increase the loan-loss reserve and suspend the dividend is "both prudent and in the best long-term interest of the shareholders," he said.

[21865009] |Valley National said it made the decision on the basis of an "overall assessment of the marketplace" and the condition of its loan portfolio and after reviewing it with federal regulators.
[21865010] |The addition to reserves comes on top of a provision of $199.7 million that was announced in June.

[21865011] |In July, Moody's downgraded $400 million of the company's debt, saying the bank holding company hadn't taken adequate write-offs against potential losses on real estate loans despite its second-quarter write-down.
[21865012] |Richard M. Greenwood, Valley National's executive vice president, said then that the company believed the write-downs were "adequate" and didn't plan to increase its reserves again.

[21865013] |Bruce Hoyt, a banking analyst with Boettcher & Co., a Denver brokerage firm, said Valley National "isn't out of the woods yet."
[21865014] |The key will be whether Arizona real estate turns around or at least stabilizes, he said.

[21865015] |"They've stepped up to the plate to take the write-downs, but when markets head down, a company is always exposed to further negative surprises," Mr. Hoyt said.

[21865016] |Valley National closed yesterday at $24.25 a share, down $1, in national over-the-counter trading.

[21866001] |Two years of coddling, down the drain.

[21866002] |That's the way a lot of brokers feel today on the second anniversary of the 1987 stock-market crash.

[21866003] |Ever since that fearful Black Monday, they've been tirelessly wooing wary individual investors -- trying to convince them that Oct. 19, 1987, was a fluke and that the stock market really is a safe place for average Americans to put their hard-earned dollars.

[21866004] |And until last Friday, it seemed those efforts were starting to pay off.
[21866005] |"Some of those folks were coming back," says Leslie Quick Jr., chairman, of discount brokers Quick & Reilly Group Inc.
[21866006] |"We had heard from people who hadn't been active" for a long time.

[21866007] |Then came the frightening 190-point plunge in the Dow Jones Industrial Average and a new wave of stock-market volatility.
[21866008] |All of a sudden, it was back to square one.

[21866009] |"It's going to set things back for a period, because it reinforces the concern of volatility," says Jeffrey B. Lane, president of Shearson Lehman Hutton Inc.
[21866010] |"I think it will shake confidence one more time, and a lot of this business is based on client confidence."

[21866011] |Brokers around the country say the reaction from individual investors this week has been almost eerie.
[21866012] |Customers and potential customers are suddenly complaining about the stock market in the exact way they did in post-crash 1987.

[21866013] |"The kinds of questions you had before have resurfaced," says Raymond A. "Chip" Mason, chairman of regional brokerage firm Legg Mason Inc., Baltimore.
[21866014] |"I can just tell the questions are right back where they were: `What's going on?,' `Can't anything be done about program trading?,' `Doesn't the exchange understand?,' `Where is the SEC on this?'"

[21866015] |Mr. Mason says he's convinced the public still wants to invest in common stocks, even though they believe the deck is stacked against them.
[21866016] |But "these wide swings scare them to death."
[21866017] |All of this is bad news for the big brokerage firms such as Shearson and Merrill Lynch & Co. that have big "retail," or individual-investor, businesses.
[21866018] |After expanding rapidly during the bull-market years up to the 1987 crash, retail brokerage operations these days are getting barely enough business to pay the overhead.

[21866019] |True, the amount of money investors are willing to entrust to their brokers has been growing lately.
[21866020] |But those dollars have been going into such "safe" products as money market funds, which don't generate much in the way of commissions for the brokerage firms.
[21866021] |At discount brokerage Charles Schwab & Co., such "cash-equivalent" investments recently accounted for a record $8 billion of the firm's $25 billion of client's assets.

[21866022] |The brokers' hope has been that they could soon coax investors into shifting some of their hoard into the stock market.
[21866023] |And before last Friday, they were actually making modest progress.

[21866024] |A slightly higher percentage of New York Stock Exchange volume has been attributed to retail investors in recent months compared with post-crash 1988, according to Securities Industry Association data.
[21866025] |In 1987, an average 19.7% of Big Board volume was retail business, with the monthly level never more than 21.4%.
[21866026] |The retail participation dropped to an average 18.2% in 1988, and shriveled to barely 14% some months during the year.

[21866027] |Yet in 1989, retail participation has been more than 20% in every month, and was 23.5% in August, the latest month for which figures are available.

[21866028] |Jeffrey Schaefer, the SIA's research director, says that all of his group's retail-volume statistics could be overstated by as much as five percentage points because corporate buy-backs are sometimes inadvertently included in Big Board data.
[21866029] |But there did seem to be a retail activity pickup.

[21866030] |But "Friday didn't help things," says Mr. Schaefer.

[21866031] |With the gyrations of recent days, says Hugo Quackenbush, senior vice president at Charles Schwab, many small investors are absolutely convinced that "they shouldn't play in the stock market."

[21866032] |Joseph Grano, president of retail sales and marketing at PaineWebber Group Inc., still thinks that individual investors will eventually go back into the stock market.
[21866033] |Investors will develop "thicker skins," and their confidence will return, he says.
[21866034] |Friday's plunge, he is telling PaineWebber brokers, was nothing more than a "tremendous reaction to leveraged buy-out stocks."

[21866035] |Meanwhile, PaineWebber remains among the leaders in efforts to simply persuade investors to keep giving Wall Street their money.
[21866036] |"It's more of an important issue to keep control of those assets, rather than push the investor to move into (specific) products such as equities," Mr. Grano says.
[21866037] |"The equity decision will come when the client is ready and when there's a semblance of confidence."

[21866038] |It could be a long wait, say some industry observers.
[21866039] |"Some investors will tiptoe back in," says Richard Ross, a market research director for Elrick & Lavidge in Chicago.
[21866040] |"Then there'll be another swing.
[21866041] |Given enough of these, this will drive everyone out except the most hardy," he adds.

[21866042] |Mr. Ross, who has been studying retail investors' perception of risks in the brokerage industry, said a market plunge like Friday's "shatters investors' confidence in their ability to make any judgments on the market."
[21866043] |The long-term outlook for the retail brokerage business is "miserable," Mr. Ross declares.

[21867001] |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:

[21867002] |Washington, D.C. --
[21867003] |$200 million of general obligation tax revenue anticipation notes, Series 1990, due Sept. 28, 1990.
[21867004] |About $190 million were offered through Shearson Lehman Hutton Inc.
[21867005] |Shearson is offering the notes as 6 3/4% securities priced to yield 6.15%.
[21867006] |J.P. Morgan Securities Inc. is offering the remaining $10 million of notes.
[21867007] |The notes are rated MIG-1 by Moody's Investors Service Inc.
[21867008] |Standard & Poor's Corp. has them under review.

[21867009] |Federal National Mortgage Association --
[21867010] |$400 million of Remic mortgage securities being offered in 16 classes by Bear, Stearns & Co.
[21867011] |The offering, Series 1989-83, is backed by Fannie Mae 9% securities.
[21867012] |The offering used at-market pricing.
[21867013] |Separately, Fannie Mae issued $400 million of Remic mortgage securities in 12 classes through First Boston Corp.
[21867014] |The offering, Series 1989-84, is backed by Fannie Mae 9% securities.
[21867015] |Pricing details weren't available.
[21867016] |The two offerings bring Fannie Mae's 1989 Remic issuance to $31 billion and its total volume to $43.3 billion since the program began in April 1987.

[21867017] |Societa per Azioni Finanziaria Industria Manaifatturiera (Italy) --
[21867018] |$150 million of 9% depository receipts due Nov. 27, 1994, priced at 101.60 to yield 9.07% less fees, via Bankers Trust International Ltd.
[21867019] |Fees 1 7/8.
[21867020] |Mitsubishi Corp. Finance (Japanese parent) --
[21867021] |$100 million of 8 5/8% bonds due Nov. 1, 1993 priced at 101 1/4 to yield 8.74% annually less full fees, via Yamaichi International (Europe) Ltd.
[21867022] |Fees 1 5/8.

[21867023] |Indian Oil Corp. (India) --
[21867024] |$200 million of floating-rate notes due November 1994, paying six-month London interbank offered rate plus 3/16 point and priced at par via Credit Suisse First Boston Ltd.
[21867025] |Guaranteed by India.
[21867026] |Fees 0.36.
[21867027] |Notes offered at a fixed level of 99.75.

[21867028] |National Westminster Bank PLC (U.K.) --
[21867029] |#200 million of undated variable-rate notes priced at par via Merill Lynch International Ltd.
[21867030] |Initial interest rate set at 0.375 point over three-month Libor.
[21867031] |Subsequent margins set by agreement between NatWest and Merrill.
[21867032] |If no margin agreed, there is a fallback rate of Libor plus 0.75 point in years one to 15, and Libor plus 1.25 point thereafter.

[21867033] |Keihin Electric Express Railway Co. (Japan) --
[21867034] |$150 million of bonds due Nov. 9, 1993, with equity-purchase warrants, indicating a 4% coupon at par via Yamaichi International (Europe) Ltd.
[21867035] |Each $5,000 bond carries one warrant, exercisable from Dec. 1, 1989, through Nov. 2, 1993, to buy company shares at an expected premium of 2 1/2% to the closing share price when terms are fixed Oct. 24.

[21867036] |Seiren Co. (Japan) --
[21867037] |110 million Swiss francs of privately placed convertible notes due March 31, 1994, with an indicated 0.25% coupon at par, via Bank Leu Ltd.
[21867038] |Put option on March 31, 1992, at an indicated 109 to yield 3.865%.
[21867039] |Callable on March 31, 1992, at 109, also beginning Sept. 30, 1992, from 101 1/2 and declining half a point semiannually to par.
[21867040] |Each 50,000 Swiss franc note is convertible from Nov. 20, 1989, to March 17, 1994, at an indicated 5% premium over the closing share price Oct. 25, when terms are scheduled to be fixed.

[21867041] |N. Nomura & Co. (Japan) --
[21867042] |50 million Swiss francs of privately placed convertible notes due March 31, 1994, with an indicated 0.5% coupon at par, via Bank Julius Baer.
[21867043] |Put option on March 31, 1992, at an indicated 108 1/4 to yield 3.846%.
[21867044] |Each 50,000 Swiss franc note is convertible from Nov. 20, 1989, to March 17, 1994, at a 5% premium over the closing share price Oct. 21, when terms are scheduled to be fixed.

[21867045] |Aegon N.V. (Netherlands) --
[21867046] |250 million Dutch guilders of 7 3/4% bonds due Nov. 15, 1999, priced at 101 1/4 to yield 7.57% at issue price and 7.86% less full fees, via AMRO Bank.
[21867047] |Fees 2.

[21867048] |Continental Airlines --
[21867049] |a four-part, $71 million issue of secured equipment certificates priced through Drexel Burnham Lambert Inc.
[21867050] |The size of the issue was decreased from an originally planned $95.2 million.
[21867051] |In addition, a planned two-part offering of $58 million in unsecured notes wasn't offered.
[21867052] |The first part, consisting of $2.5 million of 11 1/4% secured equipment certificates due June 15, 1990, was priced at 98.481 with a yield to maturity of 13.75%.
[21867053] |The second part, consisting of $28 million of 11 3/4% secured equipment certificates due June 15, 1995, was priced at 87.026 with a yield to maturity of 15.25%.
[21867054] |The third part, consisting of $18.5 million of 12 1/8% secured equipment certificates due April 15, 1996, was priced at 85.60 with a yield to maturity of 15.75%.
[21867055] |The fourth part, consisting of $22 million of 12 1/2% secured equipment certificates due April 15, 1999, was priced at 85.339 with a yield to maturity of 15.50%.
[21867056] |The issue was rated single-B-2 by Moody's and single-B by S&P.
[21867057] |All parts of the issue are callable at any time at par.
[21867058] |Continental Airlines is a unit of Texas Air Corp.

[21868001] |John V. Holmes, an investment-newsletter publisher, and three venture-capital firms he organized were enjoined from violating the registration provisions of the securities laws governing investment companies.

[21868002] |As part of an agreement that settled charges brought by the Securities and Exchange Commission, a receiver was also appointed for the three venture-capital firms.

[21868003] |Mr. Holmes was the subject of a page one profile in The Wall Street Journal in 1984, after the SEC questioned him about ties between him and companies he touted in a newsletter.
[21868004] |In 1986, in another consent agreement with the SEC, Mr. Holmes was enjoined from violating the stock-registration and anti-fraud provisions of the securities laws.
[21868005] |Without any admission or denial of guilt by Mr. Holmes, that agreement settled SEC charges that Mr. Holmes sold unregistered securities and misled investors.

[21868006] |In charges filed last week in federal district court in Charlotte, N.C., the SEC alleged that Venture Capitalists Inc., Venture Finance Corp. and New Ventures Fund Inc., all of Charlotte, failed repeatedly to file proper documents.
[21868007] |The SEC also charged that Mr. Holmes acted as an officer or director of New Ventures, in violation of his previous consent agreement.

[21868008] |"Some companies were delinquent in filings and other actions, all of which cost money," Mr. Holmes said.

[21868009] |Two of Mr. Holmes's business associates who worked for Venture Capitalists, Kimberly Ann Smith and Frederick Byrum, also consented to being enjoined from violations of registration provisions of the securities laws.
[21868010] |Ms. Smith also agreed to a permanent injunction barring her from acting as an officer, director or investment adviser of any mutual fund, unit investment trust or face-amount certificate company.

[21868011] |Mr. Byrum and Ms. Smith couldn't be reached for comment.
[21868012] |In consenting to the injunctions, none of the individuals or companies admitted or denied the allegations.

[21869001] |Senate Republicans have settled on a proposal that would cut the capital-gains tax for individuals and corporations.

[21869002] |At the same time, a small group of Senate Democrats are working on a similar plan and may introduce it soon.

[21869003] |Sen. Bob Packwood (R., Ore.), the lead sponsor of the GOP proposal, said he intends to unveil the plan today and to offer it as an amendment to whatever legislation comes along, particularly this month's bill to raise the federal borrowing limit.

[21869004] |He gave 10-to-1 odds that a capital-gains tax cut of some sort would be approved this year, though it probably won't be included in the pending deficit-reduction bill.
[21869005] |He added that he expects to talk to the Democrats who also wanted to cut the gains tax about drafting a joint proposal.

[21869006] |For individuals, the Packwood plan would exclude from income 5% of the gain from the sale of a capital asset held for more than one year.
[21869007] |The exclusion would rise five percentage points for each year the asset was held until it reached a maximum of 35%.
[21869008] |The exclusion would apply to assets sold after Oct. 1, 1989.
[21869009] |As an alternative, he said, taxpayers could chose to reduce their gains by an inflation index.

[21869010] |For corporations, the top tax rate on the sale of assets held for more than three years would be cut to 33% from the current top rate of 34%.
[21869011] |That rate would gradually decline to as little as 29% for corporate assets held for 15 years.

[21869012] |The Packwood plan would also include a proposal, designed by Sen. William Roth (R., Del.), that would expand and alter the deduction for individual retirement accounts.
[21869013] |The Roth plan would create a new, non-deductible IRA from which money could be withdrawn tax-free not only for retirement, but also for the purchase of a first home and to pay education and medical expenses.
[21869014] |Current IRAs could be rolled over into the new IRAs but would be subject to tax.

[21869015] |For their part, the group of Democrats are working on a plan that, like the Packwood proposal, would grant larger exclusions to assets the longer they were held by individuals and companies.
[21869016] |Newly acquired assets would get a bigger break than those currently held.
[21869017] |An extra exclusion would be given to long-held stock in small and medium-size corporations just starting up.

[21869018] |No one in the Senate is considering the capital-gains plan passed by the House.
[21869019] |That plan would provide a 30% exclusion to assets sold over a 2 1/2-year period ending Dec. 31, 1991.
[21869020] |After then, the House measure would boost the tax rate to 28% and exclude from tax the gain attributable to inflation.
[21869021] |Senators are focusing on making a capital-gains differential permanent.

[21869022] |Separately, Chairman Dan Rostenkowski (D., Ill.) of the House Ways and Means Committee said he didn't want the capital-gains tax cut or any other amendments attached to the pending bill raising the federal borrowing limit.
[21869023] |The current debt limit expires Oct. 31.

[21869024] |He also urged House and Senate negotiators to rid the deficit-reduction bill of all provisions that increase the budget deficit, including the House-passed capital-gains provision.

[21870001] |From a helicopter a thousand feet above Oakland after the second-deadliest earthquake in U.S. history, a scene of devastation emerges: a freeway crumbled into a concrete sandwich, hoses pumping water into once-fashionable apartments, abandoned autos.

[21870002] |But this quake wasn't the big one, the replay of 1906 that has been feared for so many years.
[21870003] |Despite the tragic loss of more than 270 lives, and damage estimated in the billions, most businesses and their plants and offices in the Bay area weren't greatly affected.

[21870004] |The economic life of the region is expected to revive in a day or two, although some transportation problems may last weeks or months.
[21870005] |A main factor mitigating more widespread damage was the location of the quake's epicenter -- 20 miles from the heart of the Silicon Valley and more than 50 miles from downtown San Francisco and Oakland.
[21870006] |Also, the region's insistence on strict building codes helped prevent wider damage.

[21870007] |The tremendous energy of the quake was dissipated by the distance, so that most parts of the valley and the major cities suffered largely cosmetic damage -- broken windows, falling brick and cornices, buckled asphalt or sidewalks.

[21870008] |Of course, the quake was the worst since the emergence of the computer era turned Silicon Valley into the nation's capital of high technology.
[21870009] |Like other major American cities, the San Francisco -- Oakland area owes its current prosperity more to its infrastructure of fiber-optic cables linking thousands of computer terminals and telephones than to its location astride one of the world's great natural harbors.

[21870010] |When the tremors struck, the region's largely unseen high-tech fabric held up surprisingly well despite the devastation visible from the air.
[21870011] |Michael L. Bandler, vice president for network technology at Pacific Bell Telephone Co., says nearly all the network's computer switches, which move thousands of calls a minute from one location to another, changed to battery power when the city lost power.
[21870012] |The battery packs have enough power for only three hours, but that gave emergency crews time to turn on an emergency system that runs primarily on diesel fuel.
[21870013] |Of some 160 switches in Pacific Bell's network, only four went down.
[21870014] |One of those was in Hollister, Calif., near the earthquake's epicenter.

[21870015] |Few telephone lines snapped.
[21870016] |That's because the widely used fiber-optic cable has been installed underground with 25 extra feet of cable between junction points.
[21870017] |The slack absorbs the pulling strain generated by an earthquake.

[21870018] |Nevertheless, phone service was sporadic; many computer terminals remained dark, and by late yesterday a third of San Francisco remained without power.
[21870019] |Business in the nation's fourth-largest metropolitan region was nearly paralyzed; an estimated one million members of the work force stayed at home.

[21870020] |The economic dislocation was as abrupt as the earthquake itself, as virtually all businesses shut down.
[21870021] |The $125-billion-a-year Bay area economy represents one-fourth of the economy of the nation's most populous state and accounts for 2% to 3% of the nation's total output of goods and services, according to the Center for Continuing Study of the California Economy in Palo Alto.
[21870022] |In high-tech, the Bay area accounts for 15% to 20% of the U.S. computer-related industry.

[21870023] |"This has been a major disruption for the Bay area economy," says Pauline Sweezey, the chief economist at the California Department of Finance.
[21870024] |"Obviously, things are going to have to go on hold for many companies."

[21870025] |The damage to the Bay area's roadways could cause significant economic hardship.
[21870026] |A quarter of a million people cross the Bay Bridge every day, far more than the 100,000 that use the Bay Area Rapid Transit system (BART) -- which was working but wasn't stopping in the city's Financial District yesterday afternoon because electricity was shut off and the area was being checked for gas leaks.

[21870027] |California state transportation officials interviewed by telephone say they nevertheless don't expect serious problems for commerce in and out of the Bay area.
[21870028] |All major roadways except Interstate 880, known as the Nimitz Freeway, and the Bay Bridge were open by 1 p.m. yesterday.

[21870029] |Officials expect difficulty routing traffic through downtown San Francisco.
[21870030] |The earthquake caused many streets to buckle and crack, making them impassible.
[21870031] |Other roads were obstructed by collapsed buildings and damaged water and power lines, an emergency relief spokesman says.
[21870032] |San Francisco Mayor Art Agnos estimated the damage to his city alone at $2 billion.

[21870033] |But many predicted that the commercial disruption would be short-lived.
[21870034] |Of the scores of companies contacted by this newspaper, few reported any damage that they didn't expect to have remedied within a day or two.
[21870035] |It is possible, of course, that some of the most seriously damaged companies couldn't be reached, particularly in areas nearest the epicenter.

[21870036] |Typical, perhaps, was the situation at New United Motor Manufacturing Inc., the General Motors Corp.-Toyota joint-venture auto plant in Fremont, about 35 miles south of Oakland.
[21870037] |Ten of the plant's workers were injured when the quake hit about a half-hour into the afternoon shift; seven were hospitalized.
[21870038] |Metal racks on the plant floor fell over, and water mains ruptured, a spokeswoman says.
[21870039] |The plant was evacuated and workers sent home.

[21870040] |But the plant was able to resume limited production of its Toyota Corollas and Geo Prizms by 6 a.m. yesterday, and absenteeism was only 7% of the work force, about twice normal.

[21870041] |Computer maker Hewlett-Packard Co., based in Palo Alto, says one of its buildings sustained severe damage when it was knocked off its foundation.
[21870042] |Other buildings had broken glass, dangling light fixtures and broken pipes, a spokesperson says, estimating the cost of reconstruction "in the millions."

[21870043] |Most banks were closed but were expected to reopen today with few problems anticipated.
[21870044] |At the Federal Reserve Bank of San Francisco, Vice President Robert Fienberg says operations were "steaming along as usual" yesterday afternoon.

[21870045] |`When the quake hit, we turned on our emergency generator and brought our computers up," he says.
[21870046] |The Fed serves as a middleman for banks, taking checks from one bank and sending them to another, an operation that it handled smoothly Tuesday night after the quake.
[21870047] |"The volume we received from the banks was a lot lower than usual," he says.
[21870048] |A disaster-contingency plan in which the Los Angeles Fed would come to San Francisco's aid wasn't needed, he adds.

[21870049] |Most of the telephone problems in the immediate aftermath stemmed from congestion.
[21870050] |The telephone network simply couldn't handle the large number of people seeking to make a call at the same time.
[21870051] |The volume resulted in dial-tone delays that were as short as 15 seconds and as long as five minutes.
[21870052] |Mr. Bandler puts traffic volume at 10 to 50 times normal.

[21870053] |American Telephone & Telegraph Co., MCI Communications Inc. and United Telecommunications' U S Sprint unit were blocking phone calls into the Bay area to alleviate congestion.
[21870054] |The companies block traffic much as highway on-ramps are blocked when traffic backs up.
[21870055] |William E. Downing, Pacific Bell's vice president of customer services for the Bay area, says most long-distance companies were blocking about 50% of all calls.
[21870056] |Pacific Telesis says its Pacific Bell unit also was blocking about 50% of its calls locally.

[21870057] |Ironically, the long-term effect of the earthquake may be to bolster the Bay area's economic fortunes and, indeed, the nation's gross national product.
[21870058] |It may also lead to new safeguards in major construction projects such as double-deck highways.

[21870059] |"It would in the near-term give a boost to the San Francisco economy because there will be an influx of people to help," says Beth Burnham Mace, a regional economist at DRI/McGraw Hill, a Lexington, Mass., forecasting firm.

[21870060] |The construction industry is sure to feel increased demand.
[21870061] |"There will be a big influx of federal dollars and gains in state, federal and local employment," Ms. Mace says.
[21870062] |Adds Stacy Kotman, an economist at Georgia State University, "There's nothing positive about an earthquake, but it will probably generate more construction activity."

[21870063] |Wall Street reacted swiftly yesterday to the disaster by bidding up stocks of construction and related companies.
[21870064] |Shares of Lone Star Industries Inc., a cement maker, rose sharply in anticipation of stepped-up demand.
[21870065] |In Greenwich, Conn., Lone Star spokesman Michael London says, "Obviously with an earthquake of this size, there are likely to be construction projects that wouldn't otherwise have been anticipated.
[21870066] |But any increase isn't likely to be any kind of a surge.
[21870067] |It's something likely to be spread out over a long period of time.
[21870068] |There will be a lot of repair work that won't require the quantities of cement or concrete that new constructon would."
[21870069] |Lone Star's San Francisco facilities weren't damaged in the quake.

[21870070] |The earthquake is likely to reduce GNP negligibly in the near term and then could raise it a bit as rebuilding begins.
[21870071] |The first effects are, of course, negative as work is disrupted and people lose income and cut spending.
[21870072] |Corporate profits may also dip initially.
[21870073] |Many of the lost tourism dollars won't be recovered; many trips delayed never take place.

[21870074] |Subsequently, however, the ill effects are likely to be offset, at least in economic terms, as construction activity begins.
[21870075] |Because of the way the government keeps its books, the damage to the Bay Bridge, however costly, won't be counted as a minus.
[21870076] |The money spent on repairs will be counted as a plus.

[21870077] |"It's very difficult to model the long-term impact of this," says Andrew Goldberg, who studies the public-policy and crisis-management aspects of earthquakes at the Center for Strategic International Studies in Washington, D.C.
[21870078] |"You certainly can say it's going to be extremely severe.
[21870079] |We really are talking about shutting down a major American city for a number of days, maybe for a few weeks."

[21870080] |Mr. Goldberg says the cost of the earthquake will definitely top $1 billion and could reach $4 billion.
[21870081] |He cautions that early damage estimates are often low; the damage totals in Hurricane Hugo increased tenfold as more information was received.
[21870082] |The earthquake damage, of course, would have been far greater if the epicenter had been in downtown San Francisco.
[21870083] |A direct hit on a major city, Mr. Goldberg figures, would cause $20 billion to $40 billion of damage.

[21870084] |Experts caution that it is far too soon for reliable estimates of the quake's total damage, but it's clear that insurers are likely to pay out enormous sums.

[21870085] |Jack Byrne, the chairman of Fireman's Fund Corp., which is based in Novato, Calif., estimates insured losses resulting the earthquake could total $2 billion.
[21870086] |The impact on the insurance industry "will be big and harsh, but less than {Hurricane} Hugo," says Mr. Byrne, who toured the Bay area by car yesterday afternoon to get a sense of the company's exposure to the earthquake.

[21870087] |Mr. Byrne says Fireman's Fund will probably pay hundreds of millions in primary claims, but, after taxes and use of its reinsurance lines, the company's fourthquarter charge against earnings shouldn't top $50 million.
[21870088] |The company was able to assess its damage liability quickly because it has computerized maps of Northern California showing the exact locations of all the property it insures.

[21870089] |Fireman's Fund had claims adjusters on the streets of San Francisco right after sunrise yesterday and was paying as many claims as it could right on the spot.
[21870090] |Fireman's Fund insures 37,300 homes and autos and 35,000 businesses in the Bay area.
[21870091] |In addition to paying for earthquake and fire damage, the insurer must cover worker-compensation claims and also losses due to businesses being shut down by lack of power or phone service.

[21870092] |But many Californians may not have adequate insurance coverage to pay for damages to their property.
[21870093] |The Independent Insurance Agents of America says fewer than one of every five California homeowners has earthquake insurance.
[21870094] |A somewhat higher percentage of people living in the Bay area have bought the additional insurance protection, but the great majority aren't covered.

[21870095] |Earthquake insurance typically runs $200 or more a year for a small house.

[21870096] |Whatever the long-term economic effect, the scene from the helicopter above Oakland is one of tragedy.
[21870097] |Gargantuan sections of a double-decker freeway have been heaved about like plastic building blocks.
[21870098] |Atop them sit cars and trucks abandoned in a terrifying scramble to safety the day before.
[21870099] |In areas where the freeway made giant concrete sandwiches of itself lie cars that police say have been flattened into foot-thick slabs.

[21870100] |On the periphery, rescue workers seem, from the air, to move in slow motion.
[21870101] |They peck away at the 1 1/2-mile section of rubble, searching for more of the 250 people thought to have died here.
[21870102] |About 20 other deaths were also attributed to the earthquake.

[21870103] |The heart of the earthquake, 6.9 on the Richter scale, was 50 miles to the south, near Santa Cruz, but its terrible fist struck here on the Nimitz Freeway, a major artery serving the Bay Bridge between Oakland and San Francisco.
[21870104] |Along the way, the quake toppled a mall in Santa Cruz, knocked down buildings in San Francisco's fashionable Marina District and sent a wall of bricks crashing on motorists in the city's Financial District.

[21870105] |Just a short span across the bay to the west, the quake also showed its mettle: A four-square-block area of the Marina District lies smoldering under a steady stream of seawater being pumped onto rubble to prevent it from blazing anew.
[21870106] |Many of the buildings, mostly condominiums and apartments, were flattened almost instantly as the underlying soil -- much of it landfill -- was literally turned to ooze by the quake's intensive shaking, rupturing gas lines.

[21870107] |Onlookers say three persons died when one of the buildings exploded into a fireball shortly after the quake struck.
[21870108] |Efforts to fight the blaze were hampered because water mains were severed as well.
[21870109] |From the air, ribbons of yellow fire hose carry water from the bay to high-pressure nozzles trained on the site.
[21870110] |As onlookers stand behind barricades, helmeted firemen and building inspectors survey rows of nearby buildings that were twisted from their foundations and seem on the verge of collapse.

[21870111] |In the Marina District, residents spent yesterday assessing damage, cleaning up and trying to find friends and neighbors.
[21870112] |Evelyn Boccone, 85 years old, has lived in the district most of her life.
[21870113] |Her parents lost everything in the 1906 earthquake.
[21870114] |"Now, we realize what our mothers must have gone through," she says.
[21870115] |"We always heard about the earthquake, but as children we didn't always listen.

[21871001] |PRINCE HENRI is the crown prince and hereditary grand duke of Luxembourg.
[21871002] |An article in the World Business Report of Sept. 22 editions incorrectly referred to his father, Grand Duke Jean, as the crown prince.

[21872001] |Resolution Funding Corp. plans to sell $4.5 billion of 30-year bonds Wednesday in the agency's first sale of securities.

[21872002] |The new bonds will be dated Oct. 30 and mature Oct. 15, 2019.
[21872003] |Tenders for the bonds, available in minimum denominations of $1,000, must be received by 1 p.m. EDT Wednesday at Federal Reserve banks.

[21872004] |Refcorp, created by the thrift-overhaul law enacted in August, will use the proceeds to merge or sell off ailing savings-and-loan institutions.
[21872005] |Congress authorized $50 billion to be borrowed to pay for the thrift bailout.
[21872006] |Of that amount, $20 billion has already been borrowed by the Treasury Department.

[21872007] |Unless otherwise specified in a particular offer, the bonds won't be subject to redemption prior to maturity.
[21872008] |Interest payments on the bonds will be payable semiannually.

[21872009] |The bonds are subject to federal taxation in the U.S., including income taxes.
[21872010] |At the state and local level, the bonds are subject to surtaxes and estate, inheritance and gift taxes, but exempt from taxation as to principal and interest.

[21873001] |G.D. Searle & Co., a Monsanto Co. unit, is launching a program to give consumers more information about its drugs when doctors prescribe them.

[21873002] |Called Patients in the Know, the program features fact sheets designed to be easy to understand.
[21873003] |The sheets tell how the medicine works, describe how to use it and list its possible side effects.
[21873004] |They are designed to be given to patients by their doctors when the medicines are prescribed and include space for the doctor to write special instructions.
[21873005] |In addition, Searle will give pharmacists brochures on the use of prescription drugs for distribution in their stores.

[21873006] |Consumer groups have long advocated that drug companies and doctors make more information available to patients.
[21873007] |"We believe that every drug that's marketed to a consumer should have a consumer label," said Douglas Teich of the Public Citizen Health Research Group, a Ralph Nader affiliate.
[21873008] |Dr. Teich said Searle is "the only company I know that voluntarily" will make consumer information available.

[21873009] |According to federal officials and drug-industry studies, nearly half of the 1.6 billion prescriptions filled each year aren't used properly, meaning that money is wasted on some prescriptions and patients are deprived of the benefits of medication.
[21873010] |"We think it's very important to provide as much information as possible on the drugs consumers take," said Searle Chairman Sheldon Gilgore.

[21874001] |Bond prices rambled yesterday as investors kept close watch on the stock market and worried about a wave of new supply.

[21874002] |Early yesterday, bonds rose as investors rushed to buy Treasury securities on the prospect that stocks would plummet in the aftermath of the massive California earthquake.
[21874003] |For example, some securities analysts warned that stocks of certain insurance companies, which face massive damage claims, would get hit hard.
[21874004] |But when the Dow Jones Industrial Average rose instead, bonds drifted lower.

[21874005] |With stocks not a major focus, "we're waiting for the next guiding light," said Brian J. Fabbri, chief economist at Midland Montagu Securities Inc.
[21874006] |"If the stock market tremors are behind us, then the bond market will go back to looking at the next batch of economic numbers to determine" where interest rates are heading.

[21874007] |The Treasury's benchmark 30-year bond, which jumped 3/8 point, or about $3.75 for each $1,000 face amount, during the first hour of trading, ended little changed.
[21874008] |Interest rates barely budged from Tuesday's levels.

[21874009] |Most junk bonds, which have been battered in recent weeks, continued a slow recuperation and ended unchanged to slightly higher.
[21874010] |But some so-called high-quality junk issues fell as some mutual funds sold their most liquid issues to raise cash.
[21874011] |RJR Holdings Capital Corp.'s 14.7% bonds due 2009 fell one point.
[21874012] |Other RJR issues fell between 1/2 point and 1 1/2 point.

[21874013] |In the latest sign of how difficult it is to place certain junk bonds, Continental Airlines said it was forced to scale back the size of its latest offering.

[21874014] |Continental, a unit of Texas Air Corp., slashed the size of its note offering from $150 million to $71 million.
[21874015] |The move had been widely expected.
[21874016] |In the multipart offering, the company sold a portion of secured notes but shelved all the unsecured notes.

[21874017] |A Continental spokeswoman said the notes may be offered at a later date.
[21874018] |"This was not a do-or-die deal," she said.
[21874019] |"I think this is a market that required some level of security.
[21874020] |It did not make sense to offer unsecured paper in an unsettling market."

[21874021] |Investors have been speculating for weeks about the market's ability to place the $7 billion to $10 billion of new junk bonds scheduled to be sold by year end.

[21874022] |Supply troubles were also on the minds of Treasury investors yesterday, who worried about the flood of new government securities coming next week.

[21874023] |"We're being bombarded by new Treasury and agency debt offerings," said William Sullivan Jr., director of money-market research at Dean Witter Reynolds Inc.
[21874024] |"The market is concerned about its ability to underwrite all this debt at current levels."

[21874025] |In addition to the $15.6 billion of Treasury bills to be sold at next week's regular Monday auction, the government will sell $10 billion of new two-year Treasury notes.
[21874026] |And Resolution Funding Corp. said late yesterday that it will sell $4.5 billion of 30-year bonds Wednesday.
[21874027] |Refcorp is the financing unit of Resolution Trust Corp., a new government agency created to rescue the nation's troubled thrifts.
[21874028] |Its securities have been dubbed "bailout bonds" by traders.
[21874029] |In when-issued trading, the two-year Treasurys had a yield of about 7.88%.

[21874030] |In the municipal market, all eyes were on California debt as investors tried to gauge the financial ramifications of Tuesday's earthquake.

[21874031] |But traders said the quake had only a minor impact on the trading of California state and local municipal debt.

[21874032] |"There are certain bonds traders refer to as `earthquake' bonds because the (issuers) are on top of the San Andreas fault," said Zane Mann, editor of the California Municipal Bond Advisor, a newsletter for investors.
[21874033] |Since those bonds already pay a slightly higher yield, an extra premium for the earthquake risk, they weren't materially affected.

[21874034] |But some bond market analysts said that could quickly change if property casualty insurance companies scramble to sell portions of their municipal portfolios to raise cash to pay damage claims.

[21874035] |"Insurance companies will foot a substantial amount of the bill to reconstruct San Francisco," said Charles Lieberman, chief economist at Manufacturers Hanover Securities Corp.
[21874036] |He also expects the performance of municipals to lag Treasurys as California is forced to issue new debt over time to repair public facilities.

[21874037] |A report issued late yesterday by Standard & Poor's Corp. concluded the quake won't cause "wide-scale credit deterioration" for issuers and debt issues in the 12-county area of Northern California affected by the quake.

[21874038] |Treasury Securities

[21874039] |Treasury bonds ended narrowly mixed in quiet trading.

[21874040] |The benchmark 30-year bond ended at a price of 100 29/32 to yield 8.03%, compared with 100 28/32 to yield 8.04% Tuesday.
[21874041] |The latest 10-year notes were quoted late at a price of 99 26/32 to yield 8%, compared with 99 25/32 to yield 8.01%.

[21874042] |Short-term rates were little changed.

[21874043] |Corporate Issues

[21874044] |Investment-grade corporate bonds ended 1/4 point lower.

[21874045] |The Continental junk bond offering, underwritten by Drexel Burnham Lambert Inc., was the only new issue priced yesterday.
[21874046] |In the four-part offering, the $71 million of secured equipment certificates was priced to yield 13.75% to 15.75%.

[21874047] |Municipals

[21874048] |Municipal bonds ended about 1/8 to 3/8 point lower, hurt by the circulation of two "bid-wanted" lists totaling $655 million.

[21874049] |Chemical Securities Inc. is acting as agent for the seller.

[21874050] |Meanwhile, some California issues were down a touch more than the broad market, but traders said there hadn't been much investor selling because of the quake.

[21874051] |But New York City general obligation bonds came under selling pressure.
[21874052] |Traders said a steady stream of bonds was put up for sale yesterday, pushing yields for longer maturities up 0.05 percentage point.
[21874053] |Traders said investors were reacting to recent negative news on the city's finances and are nervous ahead of the Nov. 7 election.

[21874054] |Washington, D.C., topped the competitive slate yesterday with a sale of $200 million of general obligation tax revenue anticipation notes.

[21874055] |In late trading, New Jersey Turnpike Authority's 7.20% issue of 2018 was off 1/4 point at 98 bid.
[21874056] |The yield was 7.35%, up 0.01 percentage point.

[21874057] |Mortgage-Backed Securities

[21874058] |Mortgage securities ended little changed after light dealings.

[21874059] |There was no appreciable market impact from the California earthquake.

[21874060] |Dealers said there was some concern that insurance companies might be forced to sell mortgage securities to help pay earthquake-related claims, but no selling materialized.

[21874061] |The Federal Home Loan Mortgage Corp. and Federal National Mortgage Association, two dominant issuers of mortgage securities, have a sizable amount of California home loans in their mortgagebacked pools.

[21874062] |But their potential quake exposure is seen as small given that they require a financial cushion on all the loans they purchase.
[21874063] |And because Northern California home prices are so high, loans from the region often are too large to be included in Freddie Mac and Fannie Mae pools.

[21874064] |Meanwhile, Government National Mortgage Association 9% securities for November delivery ended at 97 29/32, unchanged.
[21874065] |Freddie Mac 9% securities were at 97 4/32, down 1/32.

[21874066] |In derivative markets, Fannie Mae issued two $400 million real estate mortgage investment conduits backed by its 9% securities.

[21874067] |Foreign Bonds

[21874068] |British government bonds, or gilts, ended moderately lower as equities there recovered from Tuesday's drop.

[21874069] |The Treasury's 11 3/4% bond due 2003/2007 fell 11/32 to 111 31/32 to yield 10.08%, while the 12% notes due 1995 were down 7/32 to 103 22/32 to yield 11.04%.

[21874070] |Traders said today may be an anxious day for the market.
[21874071] |Several key economic figures are due out and Chancellor of the Exchequer Nigel Lawson is scheduled to give the annual "Mansion House" address to the financial community.

[21874072] |The chancellor sometimes has used the occasion to announce major economic policy changes.
[21874073] |Economists don't expect any such changes in this year's address, given Mr. Lawson's apparent reluctance to adjust policy currently.

[21874074] |Meanwhile, Japanese government bonds retreated in quiet trading, stymied by the dollar's resiliency.
[21874075] |Japan's bellwether 4.6% bond due 1998 ended on brokers' screens at 95.75 to yield 5.315%.

[21874076] |In West Germany, investors stayed on the sidelines as the bond market searched for direction.
[21874077] |The government's 7% issue due October 1999 fell 0.05 point to 99.90 to yield 7.01%.

[21875001] |The Berlin Wall still stands.
[21875002] |But the man who built it has fallen.

[21875003] |East Germany yesterday removed Erich Honecker, one of the staunchest holdouts against the reform rumbling through the Communist world, in an effort to win back the confidence of its increasingly rebellious citizens.
[21875004] |But while it was a move that stunned the East bloc, it hardly ushers in an era of reform -- at least anytime soon.

[21875005] |For the Politburo replaced Mr. Honecker, who had led East Germany for 18 years and before that headed its security apparatus, with a man cut of the same cloth: Egon Krenz, the most recent internal-security chief and a longtime Honecker protege.
[21875006] |East Germany, it is clear, is no Poland, where the Communist Party now shares power with the democratically elected Solidarity union.
[21875007] |Nor is it a Hungary, where yesterday the parliament approved constitutional changes meant to help turn the Communist nation into a multiparty democracy.

[21875008] |Still, any change in East Germany has enormous implications, for both East and West.
[21875009] |It raises the long-cherished hopes of many Germans for reunification -- a prospect that almost equally alarms political leaders in Moscow, Washington and Western Europe.

[21875010] |Mr. Krenz, 52, was named the new party chief just minutes after the Party's 163-member Central Committee convened in East Berlin.
[21875011] |Although the East German news agency ADN claimed Mr. Honecker had asked to be relieved of his duties for "health reasons," West German government sources said the 26-man Politburo had asked for his resignation at a separate meeting late Tuesday.
[21875012] |(Mr. Honecker was twice hospitalized this summer for a gall bladder ailment and his physical condition has been the subject of intense speculation in the Western media.)

[21875013] |ADN said Mr. Honecker, a hard-line Stalinist who in 1961 supervised the construction of the Berlin Wall, also was relieved of his title as head of state and his position as chief of the military.
[21875014] |Mr. Krenz is expected to be formally named to all three positions once the nation's parliament convenes later this week.

[21875015] |Mr. Honecker's ignoble fall culminates nearly two decades of iron-handed leadership during which Mr. Honecker, now 77 years old, built East Germany into the most economically advanced nation in the Soviet bloc.
[21875016] |His grip on power unraveled this summer as thousands of his countrymen, dissatisfied by the harshness of his rule, fled to the West.
[21875017] |Thousands more have taken to the streets in the last month in East Germany's largest wave of domestic unrest since a workers' uprising in 1953.

[21875018] |In Washington, the Bush administration took a characteristically cautious and skeptical view of the leadership change.
[21875019] |The official line was to offer warmer ties to Mr. Krenz, provided he is willing to institute reforms.
[21875020] |But U.S. officials have strong doubts that he is a reformer.

[21875021] |President Bush told reporters: "Whether that {the leadership change} reflects a change in East-West relations, I don't think so.
[21875022] |Because Mr. Krenz has been very much in accord with the policies of Honecker."
[21875023] |One top U.S. expert on East Germany added: "There is no clear-cut champion of reform, that we know of, in the East German leadership."

[21875024] |Indeed, Mr. Krenz said on East German television last night that there will be no sharing of power with pro-democracy groups.
[21875025] |He said, while dialogue is important, enough forums already exist "in which different interests" can express themselves.

[21875026] |The removal of Mr. Honecker was apparently the result of bitter infighting within the top ranks of the Communist party.
[21875027] |According to West German government sources, Mr. Honecker and several senior Politburo members fought over the last week to delay any decisions about a leadership change.
[21875028] |But, with public demonstrations in the country growing in size and intensity, Mr. Honecker and several key allies lost out in this battle, officials say.
[21875029] |Those allies included Politburo members Guenter Mittag, who has long headed economic affairs, and Joachim Hermann, chief of information policy.
[21875030] |Both men were also relieved of their duties yesterday.

[21875031] |Although other resignations may follow, it's still not clear to what extent the change in party personnel will alter the government's resistance to fundamental change.
[21875032] |Clearly, the central figure in this process is Egon Krenz.
[21875033] |Born in 1937 in a Baltic Sea town now part of Poland, he was eight years old when World War II ended.
[21875034] |Like West German Chancellor Helmut Kohl, he represents the postwar generation that has grown up during Germany's division.

[21875035] |Since joining the Politburo in 1983 as its youngest member, Mr. Krenz had acquired the nickname "crown prince," a reference to the widely held view that he was the hand-picked successor to Mr. Honecker.
[21875036] |In fact, the two men have had strikingly similar career paths, both having served as chief of internal security before their rise to the top party position.

[21875037] |Moreover, both men have hewn to a similar hard-line philosophy.
[21875038] |Notably, one of Mr. Krenz's few official visits overseas came a few months ago, when he visited China after the massacre in Beijing.
[21875039] |He later defended the Chinese government's response during a separate visit to West Germany.
[21875040] |East German Protestantism in particular fears Mr. Krenz, in part because of an incident in January 1988 when he was believed to have ordered the arrest of hundreds of dissidents who had sought refuge in the Church.

[21875041] |However, Mr. Krenz also has a reputation for being politically savvy.
[21875042] |His shrewd ability to read the shifting popular mood in East Germany is best illustrated by his apparent break with his old mentor, Mr. Honecker.
[21875043] |Indeed, according to West German government sources, he was one of the leaders in the power struggle that toppled Mr. Honecker.
[21875044] |In recent days, Mr. Krenz has sought to project a kinder image.
[21875045] |According to a report widely circulating in East Berlin, it was Mr. Krenz who ordered police to stop using excessive force against demonstrators in Leipzig.

[21875046] |"He doesn't want to have the image of the gun man," says Fred Oldenburg, an expert at the Bonn-sponsored Institute of East European and International Studies in Cologne.
[21875047] |"He's not a reformer -- he wants to have the image of a reformer."

[21875048] |As part of his image polishing, Mr. Krenz is expected to take modest steps toward reform to rebuild confidence among the people and reassert the party's authority.
[21875049] |Besides sacking other senior Politburo officials who allied themselves with Mr. Honecker, Mr. Krenz could loosen controls on the news media, free up travel restrictions, and establish a dialogue with various dissident groups.

[21875050] |But will it be enough?
[21875051] |West German government officials and Western analysts are doubtful.
[21875052] |"He doesn't signify what people want, so the unrest will go on," Mr. Oldenburg predicts.

[21875053] |At the same time, the expectations of the East German people are great and will continue to grow.
[21875054] |Says one West German official: "What's necessary now is the process of democratization.
[21875055] |Not just that people are being heard but that their interests are being taken seriously."

[21875056] |Chancellor Kohl, meanwhile, has invited Mr. Krenz to open discussions with Bonn on a wide range of subjects.
[21875057] |Reports in the West German press, citing sources in East Germany, suggest Mr. Krenz may serve only as a bridge between Mr. Honecker and a genuine reform leader.
[21875058] |Adding to that speculation is Mr. Krenz's reputation as a heavy drinker, who is said to also suffer from diabetes.
[21875059] |"This is a dynamic process and we're experiencing the first step," the Bonn official adds.
[21875060] |The selection of Mr. Krenz may also disappoint Moscow.
[21875061] |Soviet leader Mikhail Gorbachev has pressed hard for a change in East Germany's rigid stance.
[21875062] |Two reform-minded party leaders favored by Moscow as possible successors to Mr. Honecker, Dresden party secretary Hans Modrow and Politburo member Guenter Schabowski, were passed over.
[21875063] |If Mr. Krenz sticks to rigid policies the pressure from the Soviet Union could intensify.

[21875064] |In Moscow, Mr. Gorbachev sent Mr. Krenz a congratulatory telegram that appeared to urge the new leadership to heed growing calls for change.
[21875065] |According to the Soviet news agency Tass, "Gorbachev expressed the conviction that the leadership of the Socialist Unity Party of {East} Germany, being sensitive to the demands of the time, . . . will find solutions to complicated problems the GDR {German Democratic Republic} encountered."

[21875066] |A force of younger pro-Gorbachev members in the East German bureaucracy has for some time been pushing for relaxation within their country.
[21875067] |The older generation has been torn between a fear of tampering with the status quo and a fear of what might happen if they didn't.

[21875068] |From the perspective of East Germany's old guard, reforms that smack of capitalism and Western-style democracy could eliminate their country's reason for being.
[21875069] |Unlike the other nations of the bloc, East Germany is a creature of the Cold War.
[21875070] |Erasing the differences still dividing Europe, and the vast international reordering that implies, won't endanger the statehood of a Poland or a Hungary.
[21875071] |But it could ultimately lead to German reunification and the disappearance of East Germany from the map.
[21875072] |Which is what the Old Guard fears.
[21875073] |"I'm sure they'll formulate a reform that will be a recipe for the GDR's future as a separately identifiable state," says Michael Simmons, a British journalist whose book on East Germany, entitled "The Unloved Country," was published this month.

[21875074] |Up to now, that recipe has consisted of a dogged effort by former leader Walter Ulbricht to establish the country's international legitimacy, followed by Mr. Honecker's campaign to build the East bloc's only successful Stalinist economy into a consumer paradise.
[21875075] |Neither man achieved perfection.

[21875076] |Early in 1987, Mr. Honecker and his team stopped paying thin compliments to Mr. Gorbachev and joined with Romania in rejecting any necessity for adjustments in their systems.
[21875077] |The less-self-confident Czechoslovaks and Bulgarians, in contrast, declared their intentions to reform, while doing nothing concrete about it.

[21875078] |The East German media soon began presenting Mr. Gorbachev's speeches only as sketchy summaries, and giving space to his opponents.
[21875079] |By late 1988, they were banning Soviet publications.

[21875080] |The country abandoned its former devotion to socialist unity and took to insisting instead that each country in the bloc ought to travel its own road.
[21875081] |Mr. Honecker spoke of "generally valid objective laws of socialism" and left no room for debate.

[21875082] |With this year's dislocations in China and the Soviet Union, and the drive to democracy in Poland and Hungary, the East German leadership grew still more defensive.
[21875083] |Politburo member Joachim Herrman confessed to a "grave concern" over Hungarian democracy.
[21875084] |"Under the banner that proclaims the `renewal of socialism,'" he said, "forces are at work that are striving to eliminate socialism."

[21875085] |Some loyal voices, in and out of the East German Communist party, saw the nation's unrest coming.
[21875086] |The first signs were economic.
[21875087] |Despite heavily subsidized consumer industries, East Germans have for years watched the West pull farther out ahead.
[21875088] |In 1988, for the first time, economic growth came to a dead stop.

[21875089] |Gingerly, some economists began to blame central planning.
[21875090] |Some writers in theoretical journals even raised the notion of introducing democracy, at least in the workplace.
[21875091] |By summer, an independent reform movement was saying out loud what it had only whispered before.

[21875092] |But they are stalwart socialists.
[21875093] |Their proclaimed purpose is to cleanse East Germany of its Stalinist muck, not to merge with the West.
[21875094] |One of their pastors has envisioned a "new utopia" of "creative socialism."

[21875095] |Meanwhile, the man Mr. Krenz replaces has left an indelible mark on East German society.
[21875096] |Imprisoned by the Nazis during World War II for his political beliefs, Mr. Honecker typified the postwar generation of committed Communist leaders in Eastern Europe who took their cues from Moscow.

[21875097] |He was a "socialist warrior" who felt rankled by West Germany's enormous postwar prosperity and the Bonn government's steadfast refusal to recognize the legitimacy of his state.
[21875098] |Finally, during his first and only state visit to Bonn two years ago, he won some measure of the recognition he had long sought.
[21875099] |But ultimately he was undone by forces unleashed by his own comrade, Mr. Gorbachev.

[21875100] |Mr. Honecker's removal "was bound to happen," says one aide to Chancellor Kohl.
[21875101] |"It was only a matter of time."

[21875102] |The European Community Commission increased its forecast for economic growth in the EC in 1989 to 3.5%, slightly higher than its June projection of 3.25%.

[21875103] |In its annual economic report for 1989-1990, the commission also projected 1990 gross domestic product growth for the 12 EC members at 3%.
[21875104] |EC inflation was seen at 4.8% in 1989, higher than 1988's 3.6% price rise.
[21875105] |However, inflation for 1990 was seen slowing to 4.5%.

[21875106] |Leading EC growth forecasts in 1989 was Ireland, seen growing 5% at constant prices.
[21875107] |Slower growth countries included Greece, at 2.5%, the U.K., at 2.25%, and Denmark, at 1.75%.

[21875108] |Inflation is expected to be highest in Greece, where it is projected at 14.25%, and Portugal, at 13%.
[21875109] |At the other end of the spectrum, West German inflation was forecast at 3% in 1989 and 2.75% in 1990.

[21875110] |Nestle Korea Ltd. opened a coffee and non-dairy-creamer plant in Chongju, South Korea.
[21875111] |An official at Nestle Korea, a 50-50 joint venture between Nestle S.A. and the Doosan Group, said the new facility will manufacture all types of soluble, roasted and ground coffee, coffee mix and nondairy coffee creamer.
[21875112] |The South Korean coffee market, consisting mostly of instant coffee, was estimated at about 100 billion won ($150.7 million) last year.
[21875113] |Brands made by the Kraft General Foods unit of Philip Morris Cos. had about 95% of the market share.
[21875114] |Nestle currently has only about a 2% share with its Taster's Choice coffee.

[21875115] |Poland plans to start negotiations soon on purchasing natural gas from Iran, the official Islamic Republic News Agency reported.
[21875116] |The agency said Polish Prime Minister Tadeusz Mazowiecki told Iranian Deputy Foreign Minister Mahmoud Vaezi of Poland's willingess to purchase the gas during Mr. Vaezi's current visit to Warsaw.
[21875117] |The agency didn't mention possible quantities and didn't say how the gas would be delivered.

[21875118] |A Chinese official harshly criticized plans to close a British naval base in downtown Hong Kong.
[21875119] |Hong Kong officials announced last week that the base will be relocated to a small island to allow downtown redevelopment.
[21875120] |But Beijing wants to use the base for the People's Liberation Army after 1997, when the territory returns to Chinese sovereignty.
[21875121] |Ke Zaishuo, head of China's delegation to a Chinese-British Liaison Committee on Hong Kong, accused Britain of trying to impose a fait accompli and said, "This is something we cannot accept."

[21875122] |The Israeli and Soviet national airlines have reached preliminary agreement for launching the first direct flights between Tel Aviv and Moscow, a spokesman for the Israeli airline, El Al, said.
[21875123] |El Al director Rafi Har-Lev and top officials of the Soviet Union's Aeroflot negotiated a preliminary pact in Moscow this week, the spokesman said.
[21875124] |He added that concluding the deal requires approval by the governments of both countries, which have never had direct air links.

[21875125] |The chairman and a director of one of the Republic of Singapore's leading property companies, City Development Ltd., or CDL, were charged yesterday with criminal breach of trust of some 800,000 Singapore dollars (about US$409,000).

[21875126] |Kwek Hong Png, chairman of CDL, and director Quek Leng Chye were arrested by the republic's Corrupt Practices Investigation Bureau Tuesday night.
[21875127] |In addition to abetting in the alleged criminal breach of trust, Kwek Hong Png was also charged with dishonestly receiving S$500,000 that had been stolen.
[21875128] |Both men were charged in a subordinate court and released on bail of S$1 million.

[21875129] |The charges are the culmination of weeks of rumors concerning CDL that have depressed the company's share price and to a lesser extent the shares of all companies owned by CDL's controlling Quek family, brokers in Singapore say.
[21875130] |The Queks control the Hong Leong Group, which has widespread interests in manufacturing, property and finance in both Malaysia and Singapore.

[21875131] |News of the arrest and charging of the two men helped to push prices on the Singapore Stock market sharply lower in early trading yesterday, but brokers said that the market and CDL shares recovered once it became apparent the charges were limited to the two men personally.

[21875132] |One of the two British companies still making hard toilet paper stopped production of it.
[21875133] |British Tissues decided to do away with its hard paper after a major customer, British Rail, switched to softer tissues for train bathrooms. . . .
[21875134] |Peasants in Inner Mongolia have partly dismantled a 20-mile section of China's famed Great Wall, the official People's Daily said.
[21875135] |The paper said the bricks were used to build homes and furnaces and, as a result, the wall "is in terrible shape.

[21876001] |Wednesday, October 18, 1989

[21876002] |The key U.S. and foreign annual interest rates below are a guide to general levels but don't always represent actual transactions.

[21876003] |PRIME RATE: 10 1/2%.
[21876004] |The base rate on corporate loans at large U.S. money center commercial banks.

[21876005] |FEDERAL FUNDS: 8 15/16% high, 8 5/8% low, 8 3/4% near closing bid, 8 7/8% offered.
[21876006] |Reserves traded among commercial banks for overnight use in amounts of $1 million or more.
[21876007] |Source: Fulton Prebon (U.S.A.) Inc.

[21876008] |DISCOUNT RATE: 7%.
[21876009] |The charge on loans to depository institutions by the New York Federal Reserve Bank.

[21876010] |CALL MONEY: 9 3/4% to 10%.
[21876011] |The charge on loans to brokers on stock exchange collateral.

[21876012] |COMMERCIAL PAPER placed directly by General Motors Acceptance Corp.: 8.45% 30 to 44 days; 8.25% 45 to 74 days; 8.30% 75 to 99 days; 7.75% 100 to 179 days; 7.50% 180 to 270 days.

[21876013] |COMMERCIAL PAPER: High-grade unsecured notes sold through dealers by major corporations in multiples of $1,000: 8.55% 30 days; 8.45% 60 days; 8.375% 90 days.

[21876014] |CERTIFICATES OF DEPOSIT: 8.05% one month; 8.02% two months; 8% three months; 7.98% six months; 7.95% one year.
[21876015] |Average of top rates paid by major New York banks on primary new issues of negotiable C.D.s, usually on amounts of $1 million and more.
[21876016] |The minimum unit is $100,000.
[21876017] |Typical rates in the secondary market: 8.53% one month; 8.48% three months; 8.40% six months.

[21876018] |BANKERS ACCEPTANCES: 8.42% 30 days; 8.30% 60 days; 8.28% 90 days; 8.15% 120 days; 8.05% 150 days; 7.95% 180 days.
[21876019] |Negotiable, bank-backed business credit instruments typically financing an import order.

[21876020] |LONDON LATE EURODOLLARS: 8 11/16% to 8 9/16% one month; 8 5/8% to 8 1/2% two months; 8 5/8% to 8 1/2% three months; 8 9/16% to 8 7/16% four months; 8 1/2% to 8 3/8% five months; 8 1/2% to 8 3/8% six months.

[21876021] |LONDON INTERBANK OFFERED RATES (LIBOR): 8 11/16% one month; 8 11/16% three months; 8 1/2% six months; 8 1/2% one year.
[21876022] |The average of interbank offered rates for dollar deposits in the London market based on quotations at five major banks.

[21876023] |FOREIGN PRIME RATES: Canada 13.50%; Germany 8.50%; Japan 4.875%; Switzerland 8.50%; Britain 15%.
[21876024] |These rate indications aren't directly comparable; lending practices vary widely by location.

[21876025] |TREASURY BILLS: Results of the Monday, October 16, 1989, auction of short-term U.S. government bills, sold at a discount from face value in units of $10,000 to $1 million: 7.37% 13 weeks; 7.42% 26 weeks.

[21876026] |FEDERAL HOME LOAN MORTGAGE CORP. (Freddie Mac):
[21876027] |Posted yields on 30-year mortgage commitments for delivery within 30 days.
[21876028] |9.88%, standard conventional fixed-rate mortgages; 7.875%, 2% rate capped one-year adjustable rate mortgages.
[21876029] |Source: Telerate Systems Inc.

[21876030] |FEDERAL NATIONAL MORTGAGE ASSOCIATION (Fannie Mae):
[21876031] |Posted yields on 30 year mortgage commitments for delivery within 30 days (priced at par) 9.83%, standard conventional fixed-rate mortgages; 8.70%, 6/2 rate capped one-year adjustable rate mortgages.
[21876032] |Source: Telerate Systems Inc.

[21876033] |MERRILL LYNCH READY ASSETS TRUST: 8.50%.
[21876034] |Annualized average rate of return after expenses for the past 30 days; not a forecast of future returns.

[21877001] |A grand jury here indicted Norton Co.'s former director of advanced-ceramics research, charging him with interstate transportation of stolen property.

[21877002] |Norton and General Electric Co. last month filed a lawsuit against the former research manager, Chien-Min Sung, charging him with stealing trade secrets.

[21877003] |Mr. Sung formerly worked at General Electric in research on synthetic diamonds.
[21877004] |The criminal charges brought against him involved GE technology, according the court documents.
[21877005] |If convicted, he could be imprisoned for up to 10 years and fined $250,000.

[21877006] |Mr. Sung couldn't be reached for comment.
[21877007] |He earlier denied the allegations against him in the lawsuit by Norton and GE.

[21877008] |Norton makes sandpaper and other abrasives, diamond tools, specialty plastics and ceramics.

[21878001] |As the citizens of San Francisco and surrounding communities began assessing the damage from Tuesday's devastating earthquake, NBC News began assessing the damage from what some said was a failure to provide comprehensive coverage in the earthquake's initial moments.

[21878002] |"In terms of coverage, it was a disaster equal to the earthquakes," said Eric Premner, president for broadcasting of King Broadcasting Co., which owns the NBC affiliate in Seattle, Wash.

[21878003] |While rival ABC News outstripped the competition in live coverage of the event by sheer luck -- the network was broadcasting the World Series from Candlestick Park when the quake struck -- NBC News was unable to get its signal out of San Francisco for the first hour after the quake.

[21878004] |"I have to attribute the lackluster performance to a natural disaster," said Mr. Premner.
[21878005] |"So before I start to be really critical of NBC, I would like to know more about what happened."

[21878006] |There were no complaints from affiliates of CBS Inc. and Cable News Network, a unit of Turner Broadcasting System Inc.

[21878007] |But that was not the case at NBC News, which has been dogged with the image of not being aggressive on major breaking stories.
[21878008] |Last summer, the affiliates bitterly complained to network executives about the poor coverage of the student uprising in China.

[21878009] |"I was not pleased with the slow start, and neither was NBC News," said Guy Hempel, general manager of NBC affiliate WAVE in Louisville, Ky.

[21878010] |A spokesman for National Broadcasting Co., a unit of General Electric Co., said the network was "looking into what happened."
[21878011] |The stations said they were pleased with the extended coverage yesterday, including a special five-hour edition of "Today."

[21878012] |Don Browne, director of news at NBC News, said in an interview that "we couldn't get a signal out of San Francisco.
[21878013] |We were out of the box.
[21878014] |It was horrible.
[21878015] |The comment we're hearing is that we were slow out of the box, but beat everyone else in the stretch."

[21878016] |NBC broadcast throughout the entire night and did not go off the air until noon yesterday.

[21878017] |The quake postponed the third and fourth games of the World Series.
[21878018] |In place of the games, ABC said it planned to broadcast next week's episodes of its prime-time Wednesday and Thursday lineups, except for a one-hour special on the earthquake at 10 p.m. last night.
[21878019] |The series is scheduled to resume Tuesday evening in San Francisco.

[21878020] |"There are no commercials to make up for since we're going to eventually broadcast the World Series," said a network spokesman.

[21879001] |Pinnacle West Capital Corp. said it suspended indefinitely its common stock dividend and reported a 91% plunge in third-quarter net income.

[21879002] |The announcement, made after the close of trading, caught analysts by surprise.
[21879003] |The company closed at $12 a share, down 62.5 cents, in composite trading on the New York Stock Exchange.

[21879004] |Pinnacle West slashed its quarterly dividend to 40 cents per share from 70 cents in December, saying at the time that it believed the new, lower dividend was "sustainable."

[21879005] |A company spokesman said the decision to eliminate the dividend resulted from a quarterly appraisal and that circumstances had changed since the December announcement.
[21879006] |He declined to elaborate.

[21879007] |Edward J. Tirello Jr., an analyst at Shearson Lehman Hutton Inc., speculated that the sudden dividend elimination presages an expensive agreement with thrift regulators over the company's insolvent MeraBank savings and loan unit.

[21879008] |Analysts have estimated that Pinnacle West may have to inject between $300 million and $400 million into the MeraBank unit before turning the thrift over to federal regulators.

[21879009] |The latest financial results at the troubled utility and thrift holding company, based in Phoenix, Ariz., reflect continuing problems at MeraBank and losses in real-estate, venture-capital and uranium-mining operations.

[21879010] |Third-quarter net income slid to $5.1 million, or six cents a share, from $56 million, or 65 cents, a year earlier.

[21879011] |Utility operations, the only company unit operating in the black in the latest period, had a 26% drop in profit, to $86.3 million, largely as a result of outages at the company's huge Palo Verde nuclear facility and the cost of purchased replacement power.

[21879012] |In other operations, losses at MeraBank totaled $85.7 million in the latest quarter, compared with a $2.5 million profit a year earlier.
[21879013] |The latest quarter includes a $42.7 million addition to loan-loss reserves.
[21879014] |As recently as August, the company said it didn't foresee a need for substantial additions to reserves.

[21879015] |Pinnacle's SunCor Development Co. real-estate unit's loss narrowed to $13.8 million from $78.4 million.
[21879016] |The latest period included a $9 million write-down on undeveloped land, while the year-earlier period included a $46 million reserve for real-estate losses.

[21879017] |Losses at its Malapai Resources Co. uranium-mining unit narrowed to $3.4 million from $18 million a year ago, which included a $9 million write-down of utility inventories.

[21879018] |Losses at El Dorado Investment Co., the venture-capital operation, widened to $6.8 million from $425,000 a year earlier.
[21879019] |The latest quarter included a $6.6 million write-down of investments.

[21880001] |Equitec Financial Group said it will ask as many as 100,000 investors in 12 of its public real-estate limited partnerships to give approval to rolling them up into a new master limited partnership.

[21880002] |Under the proposal by Equitec, a financially troubled real-estate syndicator, New York-based Hallwood Group Inc. would replace Equitec as the newly formed master limited partnership's general partner and manager.
[21880003] |Shares of the new partnership would trade on an exchange like a stock.

[21880004] |Hallwood is a merchant bank whose activities include the ownership, management and financial restructuring of shopping centers, office buildings, apartments and other real estate.

[21880005] |In a statement, Equitec Chairman Richard L. Saalfeld said the transfer will benefit both the company and investors in the 12 limited partnerships included in the proposed rollup.
[21880006] |While he didn't describe the partnerships' financial condition, he said their operations "continue to drain the resources of Equitec."

[21880007] |Equitec posted a $3.3 million net loss in the second quarter on $11.8 million of revenue, compared with a net loss of $12.9 million in the year-earlier period on revenue of $9.1 million.

[21880008] |In New York Stock Exchange composite trading, Equitec closed at $2.625 a share, unchanged.

[21880009] |Because of Tuesday's earthquake in Northern California, company officials couldn't immediately be reached for additional comment.

[21880010] |A spokesman for Hallwood said the 12 limited partnerships, which were marketed by brokerage firms and financial planners between 1979 and 1984, raised several hundred million dollars from investors.

[21881001] |With airline deals in a tailspin, legendary Wall Street trader Michael Steinhardt could have trouble parachuting out of USAir Group, traders say.

[21881002] |Only a week ago, when airline buy-out fever was already winding down, Mr. Steinhardt was engaged in a duel with USAir.
[21881003] |He was threatening to take over the carrier, after spending an estimated $167 million to build an 8.4% USAir stake for his investment clients.
[21881004] |The would-be raider even hired an investment banker to give teeth to his takeover threat, which was widely interpreted as an effort to flush out an acquirer for USAir, or for his own stake.

[21881005] |In fighting USAir, Mr. Steinhardt was pitted against another investor, billionnaire Warren Buffett, who bought into USAir to help fend off Mr. Steinhardt.
[21881006] |Mr. Buffett's firm, Berkshire Hathaway, holds a much bigger stake in the carrier than Mr. Steinhardt's firm, Steinhardt Partners.

[21881007] |Now, in the wake of UAL's troubles in financing its buy-out, the airline raiding game has been grounded.
[21881008] |Instead of hoping to sell his USAir stake at analysts' estimated buy-out price of $80 a share, Mr. Steinhardt is stuck with roughly 3.7 million USAir shares that cost him $45, on average, but yesterday closed at 40 1/2, up 1/4, in New York Stock Exchange composite trading.

[21881009] |"It doesn't make sense to parachute out at this price," Mr. Steinhardt says, though he has stopped his takeover talk and now commends USAir managers' "operating skills."

[21881010] |At the current price, the USAir holding represents 9% of all the assets that Mr. Steinhardt manages.
[21881011] |A week ago, USAir stock briefly soared above 52 after a report in USA Today that Mr. Steinhardt might launch a hostile bid for the carrier, though takeover speculators say they were skeptical.

[21881012] |"If USAir is worth 80 as a takeover and the stock went to 52, the market was saying Steinhardt's presence wasn't worth anything, in terms of getting a deal done," says a veteran takeover speculator.

[21881013] |Traders say this all goes to show that even the smartest money manager can get infected with crowd passions.
[21881014] |In trying to raid USAir, Mr. Steinhardt abandoned his usual role as a passive investor, and ran into snags.
[21881015] |Moreover, unlike Mr. Buffett, who often holds big stakes in companies for years, Mr. Steinhardt hasn't in the past done much long-term investing.

[21881016] |Mr. Steinhardt, who runs about $1.7 billion for Steinhardt Partners, made his name as a gunslinging trader, moving in and out of stocks with agility -- enriching himself and his investment clients.
[21881017] |Meanwhile, his big losses, for instance in 1987's crash, generally have been trading losses.

[21881018] |So, some see a special irony in the fact that Mr. Steinhardt, the trader, now is encumbered with a massive, illiquid airline holding.
[21881019] |Analysts say USAir stock might lose four or five points if the Steinhardt stake was dumped all at once.
[21881020] |As a result, Mr. Steinhardt must reconcile himself to selling USAir at a loss, or to holding the shares as an old-fashioned investment.

[21881021] |"Long-term investing -- that's not Steinhardt's style," chuckles an investor who once worked at Steinhardt Partners.
[21881022] |"He doesn't usually risk that much unless he thinks he has an ace in the hole," adds another Steinhardt Partners alumnus.

[21881023] |In recent days, traders say USAir has been buying its own shares, as part of a program to retire about eight million USAir shares, though the carrier won't discuss its buy-back program.

[21881024] |If USAir stepped up its share purchases, that might be a way for Mr. Steinhardt to get out, says Timothy Pettee, a Merrill Lynch analyst.
[21881025] |But USAir might not want to help Mr. Steinhardt, he adds.

[21881026] |In 1987, USAir Chairman Edwin Colodny stonewalled when Trans World Airlines Chairman Carl Icahn threatened to take over the carrier.
[21881027] |Mr. Icahn, a much more practiced raider than Mr. Steinhardt, eventually sold a big USAir stake at a tiny profit through Bear, Stearns.
[21881028] |Mr. Steinhardt also could take that route.
[21881029] |He confers big trading commissions on Wall Street firms.
[21881030] |However, with airline stocks cratering, he might not get a very good price for his shares, traders say.

[21881031] |Especially galling for Mr. Steinhardt, say people close to him, is that USAir's Mr. Colodny won't even take his telephone calls.
[21881032] |While USAir isn't considered absolutely takeover-proof, its defenses, including the sale in August of a 12% stake in the company to Mr. Buffett's Berkshire Hathaway, are pretty strong.

[21881033] |USAir's deal with Mr. Buffett "wasn't exactly a shining example of shareholder democracy," Mr. Steinhardt says.
[21881034] |Since last April, the investor has made seven so-called 13D filings in USAir, as he bought and sold the company's stock.
[21881035] |Such disclosures of big holdings often are used by raiders to try to scare a company's managers, and to stir interest in the stock.
[21881036] |But of course it would be highly unusual for an investment fund such as Steinhardt Partners to take over a company.

[21881037] |USAir and Mr. Buffett won't talk about Mr. Steinhardt at all.

[21881038] |Analysts say USAir has great promise.
[21881039] |By the second half of 1990, USAir stock could hit 60, says Helane Becker of Shearson Lehman Hutton.
[21881040] |She thinks traders should buy the stock if it tumbles to 35.

[21881041] |But meanwhile, USAir is expected to show losses or lackluster profit for several quarters as it tries to digest Piedmont Airlines, which it acquired.
[21881042] |Moreover, some investors think a recession or renewed airfare wars will pummel airline stocks in coming months.

[21881043] |However, Mr. Steinhardt says he's "comfortable holding USAir as an investment."
[21881044] |While he has bought and sold some USAir shares in recent days, he says that contrary to rumors, he hasn't tried to unload his holding.
[21881045] |Mr. Steinhardt adds that he bought USAir stock earlier this year as "part of a fundamental investment in the airline group."

[21881046] |In 1989, Mr. Steinhardt says he made money trading in Texas Air, AMR and UAL.
[21881047] |Overall, his investments so far this year are showing gains of about 20%, he adds.

[21881048] |Does Mr. Steinhardt regret his incursion into the takeover-threat game?
[21881049] |People close to the investor say that was an experiment he is unlikely to repeat.
[21881050] |"I don't think you'll find I'm making a radical change in my traditional investment style," Mr. Steinhardt says.

[21882001] |Addington Resources Inc. said it called for redemption on Nov. 21 its $25.8 million outstanding of 8% convertible subordinated debentures due 2013.

[21882002] |The debentures were issued in the face amount of $46 million on July 11, 1988, the Ashland, Ky., coal mining, water transportation and construction company said.
[21882003] |The company said the redemption is permitted because the price of Addington's stock has equaled or exceeded $19.60 for 20 consecutive trading days, a condition set in the terms of the debentures.

[21882004] |Debenture holders are expected to convert most of the debentures into common because the value of the stock received in a conversion would exceed the $1,103.11 redemption price.

[21883001] |Commodore International Ltd. said it will report a loss for the first quarter ended Sept. 30 because sales of personal computers for the home market remained weak in some major countries.

[21883002] |That will mark the second consecutive quarterly loss for Commodore and will raise additional questions about whether it can sustain the turnaround it had seemed to be engineering.
[21883003] |Commodore, West Chester, Pa., had said in August that it was consolidating manufacturing to cut costs and expected to be profitable in the fiscal first quarter.

[21883004] |Commodore said that its announcement is based on preliminary information and that the situation could look different by the time final results are announced early next month.
[21883005] |In fact, Commodore's fiscal fourth-quarter loss was $2 million narrower than Commodore had expected a few weeks after the quarter closed.
[21883006] |Still, even results approaching break-even would mark a sharp weakening compared with fiscal 1989 first-quarter earnings of $9.6 million, or 30 cents a share, on sales of $200.2 million.

[21883007] |Reflecting concerns about Commodore's outlook, its stock has plunged more than 50% since May, closing yesterday unchanged at $8.875 a share in composite trading on the New York Stock Exchange.
[21883008] |The price can be expected to erode further, because the loss estimate came after the market closed.

[21883009] |Commodore has seemed to be setting the stage recently for progress in the U.S., where its personal-computer sales have been so dismal for years that Commodore is close to dropping off research firms' market-share charts.

[21883010] |Commodore has assembled an experienced management team, it has persuaded many more dealers to carry its products and it has unleashed a slick advertising campaign.
[21883011] |But those represent long-term strategies that probably won't succeed quickly, even if they turn out to be the right ones.
[21883012] |In the meantime, the strategies will increase expenses.

[21883013] |Commodore had been counting on its consumer business to stay sufficiently healthy to support its efforts in other areas -- mainly in getting schools and businesses to use its Amiga, which has slick graphics yet has been slow to catch on because it isn't compatible with Apple Computer Inc. or International Business Machines Corp. hardware.
[21883014] |But sales to consumers have become difficult during the past several months, even in West Germany, which has been by far Commodore's strongest market.

[21883015] |The Commodore 64 and 128, mainly used for children's educational software and games, had surprised market researchers by continuing to produce strong sales even though other low-profit personal computers now operate several times as fast and have much more memory.
[21883016] |Commodore has said it expects sales to rebound, but market researchers have said that sales of the low-end products may finally be trailing off.

[21884001] |Stock prices closed slightly higher in the first routine trading day since Friday's big plunge.
[21884002] |Some issues were affected by Tuesday's devastating earthquake in the San Francisco area.

[21884003] |Activity continued to slow from the hectic pace set during the market's plunge late Friday and its rebound Monday, as players began to set their sights on events coming later this week.

[21884004] |The Dow Jones Industrial Average drifted through the session within a trading range of about 30 points before closing with a gain of 4.92 at 2643.65.

[21884005] |Broader averages also posted modest gains.
[21884006] |Standard & Poor's 500-Stock Index rose 0.60 to 341.76, the Dow Jones Equity Market Index rose 0.71 to 320.54 and the New York Stock Exchange Composite Index gained 0.43 to 189.32.
[21884007] |Some 822 New York Stock Exchange issues advanced in price, while 668 declined.

[21884008] |But the Dow Jones Transportation Average went down for the seventh consecutive session, due largely to further selling in UAL.
[21884009] |The average dropped 6.40 to 1247.87 and has now lost 21.7% of its value since the losing streak began Oct. 10.

[21884010] |Big Board volume dropped to 166,900,000 shares, in line with the level of trading over the past few weeks, from 224.1 million Tuesday.
[21884011] |Traders cited anticipation of the consumer price report for September, due today, and tomorrow's expiration of October stock-index futures and options as major factors in the slowdown.

[21884012] |In addition, activity at a number of San Francisco-based brokerage houses was curtailed as a result of the earthquake, which knocked out power lines and telephone service throughout the Bay area.

[21884013] |Stocks retreated to session lows just after the opening amid worries about the market impact of the quake, but quickly snapped back to higher levels with the help of futures-related program buying.
[21884014] |The early move essentially established the day's trading range, and traders said they saw little of the program activity that has battered the market recently.

[21884015] |"I didn't expect it to be this quiet.
[21884016] |I expected to see more volatility as some of the institutions who were spooked last Friday did some selling," said Raymond F. DeVoe, a market strategist at Legg Mason Wood Walker, Baltimore.

[21884017] |Mr. DeVoe said he expects prices to show some renewed instability over the next few sessions as institutions re-evaluate their stance toward the market in light of its decline.
[21884018] |"I would suspect that a lot of investment committees are looking into whether (they) want to be in stocks at all," he said.

[21884019] |Insurance stocks were sold at the opening amid concerns about the level of damage claims the companies would receive as a result of the earthquake.
[21884020] |But those issues recovered quickly and turned higher because of expectations that the quake and the recent Hurricane Hugo would set the stage for an increase in premium rates.

[21884021] |Issues of insurance brokers were especially strong.
[21884022] |Marsh & McLennan advanced 3 1/8 to 75 7/8, Alexander & Alexander Services climbed 2 to 32 and Corroon & Black firmed 1 7/8 to 37 1/2.

[21884023] |Elsewhere in the group, General Re rose 2 3/4 to 86 1/2, American International Group gained 3 1/4 to 102 5/8, Aetna Life & Casualty added 2 3/8 to 59 1/2 and Cigna advanced 7/8 to 62 1/2.
[21884024] |Loews, the parent of CNA Financial, rose 1 3/8 to 123 1/8.

[21884025] |Companies in the construction, engineering and building-products sectors were among other beneficiaries of earthquake-related buying.
[21884026] |The heavy-construction sector was the session's best performer among Dow Jones industry groups; Fluor rose 3/4 to 33 3/8, Morrison Knudsen gained 2 1/4 to 44 1/8, Foster Wheeler added 3/8 to 18 1/4 and Ameron climbed 2 3/8 to 39 3/4.

[21884027] |Among engineering firms, CRS Sirrine rose 5/8 to 34 1/4 on the Big Board and four others rallied on the American Stock Exchange: Jacobs Engineering Group, which gained 1 1/8 to 25 3/8, Greiner Engineering, which rose 3 1/2 to 22 1/2; Michael Baker, which added 1 1/4 to 15 1/4, and American Science & Engineering, up 1/2 to 8 1/2.

[21884028] |Within the building-materials group, Georgia-Pacific climbed 1 1/4 to 58 and Louisiana-Pacific added 1 to 40 3/4 after Merrill Lynch recommended the forest-products issues.
[21884029] |CalMat advanced 2 3/4 to 28 3/4, Lone Star Industries gained 1 3/4 to 29 1/4, Lafarge rose 1 to 19 1/2, Southdown added 5/8 to 24 5/8 and Eljer Industries rose 1 1/4 to 24 7/8.

[21884030] |Pacific Gas & Electric fell 3/8 to 19 5/8 in Big Board composite trading of 1.7 million shares and Pacific Telesis Group slipped 5/8 to 44 5/8 as the companies worked to restore service to areas affected by the quake.

[21884031] |Chevron added 1 to 65.
[21884032] |The company, based in San Francisco, said it had to shut down a crude-oil pipeline in the Bay area to check for leaks but added that its refinery in nearby Richmond, Calif., was undamaged.

[21884033] |Other companies based in the area include Hewlett-Packard, which rose 1/4 to 49; National Semiconductor, which went up 1/4 to 7 5/8, and Genentech, which eased 1/4 to 19 5/8.
[21884034] |None of the firms reported any major damage to facilities as a result of the quake.

[21884035] |BankAmerica eased 1/2 to 31 7/8 and Wells Fargo lost 1/2 to 81 1/2; the two bank holding companies, based in San Francisco, were forced to curtail some operations due to the temblor.
[21884036] |Among California savings-and-loan stocks, H.F. Ahmanson eased 3/8 to 22 1/4, CalFed slid 3/4 to 24 1/8, Great Western Financial dropped 1/2 to 21 1/4 and Golden West Financial fell 5/8 to 29 1/4.

[21884037] |UAL, the parent company of United Airlines, swung within a 14-point range during the course of the session before closing at 191 3/4, down 6 1/4, on 2.3 million shares.

[21884038] |British Airways, a member of the group that had offered $300 a share for UAL in a leveraged buy-out, said it had yet to receive a revised proposal and it was "in no way committed" to the completion of a bid.
[21884039] |Separately, investor Marvin Davis withdrew his backup $300-a-share takeover offer.

[21884040] |While UAL faltered, AMR, the parent of American Airlines, pulled out of its recent nosedive by rising 3/4 to 74.
[21884041] |The stock had been on the decline since the financing for the UAL buy-out fell through on Friday and developer Donald Trump subsequently withdrew a takeover offer of $120 a share for AMR.
[21884042] |Also, AMR was the most active Big Board issue; 2.8 million shares changed hands.

[21884043] |GTE added 1 1/4 to 65 3/8.
[21884044] |PaineWebber repeated a buy recommendation on the stock and raised its 1990 earnings estimate by 35 cents a share, to $5.10.

[21884045] |Colgate-Palmolive advanced 1 5/8 to 63 after saying it was comfortable with analysts' projections that third-quarter net income from continuing operations would be between 95 cents and $1.05 a share, up from 69 cents a year ago.

[21884046] |Springs Industries dropped 1 3/8 to 36.
[21884047] |Analysts at several brokerage firms lowered their 1989 and 1990 earnings estimates on the company after its third-quarter results proved disappointing.

[21884048] |Trinova third-quarter loss after a charge for a planned restructuring, which will include the closing or downsizing of about 25% of its plants and a work force cut of about 1,500 over three years.

[21884049] |The Amex Market Value Index snapped a five-session losing streak by rising 2.91 to 378.07.
[21884050] |Volume totaled 12,500,000 shares.

[21884051] |Carnival Cruise Lines Class A rose 1 1/4 to 22 3/8.
[21884052] |The company, citing market conditions, postponed a $200 million debt offer.

[21885001] |Philip Morris Cos. posted a 20% jump in third-quarter profit on a 45% revenue increase, reflecting strength in the company's cigarette, food and brewing businesses.

[21885002] |Net income rose to $748 million, or 81 cents a share, from the year-earlier $621 million, or 67 cents a share.
[21885003] |Per-share figures have been adjusted for a 4-for-1 stock split paid earlier this month.
[21885004] |The New York-based tobacco, food and beer concern said revenue increased to $11.25 billion from $7.74 billion.

[21885005] |In composite trading on the New York Stock Exchange, Philip Morris closed at $43.375, up 12.5 cents.

[21885006] |Philip Morris disclosed little detailed information about performance by major business lines except to say that most, including Philip Morris U.S.A., Kraft General Foods and Miller Brewing Co., posted increased revenues.

[21885007] |For the nine months, net increased 4.4% to $2.08 billion, or $2.25 a share, from $2 billion, which included $273 million reflecting the effect of an accounting change.

[21886001] |Granges Inc., citing depressed gold prices, said it plans to suspend operations for an indefinite period at its Tartan gold mine in Manitoba.

[21886002] |Granges said in Vancouver, British Columbia, that the production halt will be phased in over a 10-week period.
[21886003] |Tartan currently produces gold at a cash operating cost of $393 an ounce, which is high by industry standards and $25 or so above the current spot price.

[21886004] |Granges said it also plans in the third quarter to write down the carrying value of the Tartan mine by 2.5 million Canadian dollars (US$ 2.12 million), and to write off most of the C$6.3 million carrying value of its Windflower gold property in British Columbia.

[21886005] |Granges didn't say what impact the moves would have on total gold output or earnings, and company officials weren't available.

[21887001] |Computer Associates International Inc., Garden City, N.Y., and Digital Equipment Corp. said they agreed to jointly develop software to help manage Digital's Vax computers.

[21887002] |Computer Associates has carved out a huge business selling such software for use in managing networks of International Business Machines Corp. computers but needs to find new markets if it is to maintain its growth rate of 30% and more each year.
[21887003] |The market for system-management software for Digital's hardware is fragmented enough that a giant such as Computer Associates should do well there.

[21887004] |At the same time, the market is smaller than the market for IBM-compatible software.
[21887005] |For one thing, Digital, Maynard, Mass., has sold fewer machines.
[21887006] |In addition, its machines are typically easier to operate, so customers require less assistance from software.

[21888001] |Wang Laboratories Inc., Lowell, Mass., beset by declining demand for its computers, reported a $62.1 million, 38-cents-a-share loss in its first quarter ended Sept. 30.
[21888002] |Revenue fell 12.7% to $596.8 million from $684 million, although some of the decline was caused by discontinued operations.

[21888003] |Wang had previously forecast a loss.
[21888004] |The company reiterated that it expects another loss in the second quarter and for the full year, although it expects a profitable fourth quarter.

[21888005] |A year ago, Wang had earnings of $13.1 million, or eight cents a share, in its first quarter, including a $3.1 million loss from discontinued operations.
[21888006] |The latest period loss included a $12.9 pretax charge for severance payments.

[21889001] |Dayton Hudson Corp. said it accepted for purchase seven million common shares at $62.875 each, under the terms of a Dutch auction self-tender offer.
[21889002] |The offer expired at 12:01 a.m. yesterday.

[21889003] |In a Dutch auction, the buyer sets a price range and holders give a price in that range at which they're willing to sell their shares.
[21889004] |The buyer then picks a price and buys shares at that price from holders who offered to sell at that price or lower.
[21889005] |Dayton Hudson's repurchase offer, representing about 9% of its common shares outstanding, had established a range of between $60 and $65 for the buy-back.

[21889006] |Dayton Hudson said it accepted all odd-lot shares tendered at or below the final $62.875 price; the preliminary proration factor for other shares tendered at or below the final price is 98%.

[21889007] |The Minneapolis-based retailer said it expects to pay for the seven million shares next Thursday.
[21889008] |Tendered shares not purchased will be returned to holders.

[21889009] |In New York Stock Exchange composite trading, Dayton rose $1 to $61.125.

[21890001] |Continental Bank Corp.'s third-quarter net income slipped 11% despite a big gain from the sale of the company's London headquarters building.

[21890002] |The $55 million gain on the sale was offset by lower interest income, poorer results from foreign-exchange trading and a $9 million loss on the sale of a unit, Securities Settlement Corp.

[21890003] |Chicago-based Continental earned $65.2 million, or $1.04 a share, compared with $73.6 million, or $1.19 a share, a year earlier.
[21890004] |The 1988 quarter also included one-time gains totaling about $35 million.

[21890005] |The bank, which has loss reserves equal to about half its long-term and medium-term loans to less-developed nations, said it doesn't think additional reserves are required.

[21891001] |Enron Corp. said a subsidiary and two United Kingdom firms are studying the feasibility of constructing a 1,500 megawatt gas-fired power plant in northern England as an outgrowth of the government's privatization program.

[21891002] |Enron Power Corp., a unit of the Houston natural gas pipeline company, would design, construct and run the plant.
[21891003] |Gas to fuel it would be piped from the North Sea.

[21891004] |A subsidiary of Britain's Imperial Chemical Industries would buy electricity and steam from the proposed station.
[21891005] |Surplus power would be sold on the open market, Enron said.
[21891006] |Also participating in the study, Enron said, is the National Power division of Britain's Central Electricity Generating Board.

[21891007] |Upon privatization, National Power will be responsible for 70% of the country's power generating business.

[21892001] |Viacom Inc., New York, reported that its third-quarter loss widened to $21.7 million, or 41 cents a share, primarily because of interest expense of $70.1 million.

[21892002] |A year ago, Viacom had a net loss of $56.9 million, or $1.07 a share.
[21892003] |Interest expense in the 1988 third quarter was $75.3 million.
[21892004] |In the year-ago quarter, Viacom also paid preferred stock dividends of $17 million; Viacom exchanged its preferred stock for debt in March.

[21892005] |The communications and entertainment company said revenue rose to $345.5 million, from $311.6 million.

[21892006] |Viacom attributed the improvement to higher earnings from operations in its networks segment, which includes the MTV and Showtime networks.

[21892007] |Viacom said it also restructured bank debt under a $1.5 billion unsecured bank agreement that offers significant interest rate savings.
[21892008] |Sumner M. Redstone, Viacom's chairman, said Viacom "emerged from our leveraged buy-out structure and gained substantial operating and financial flexibility through" the bank pact.

[21893001] |Trinova Corp., Maumee, Ohio, said it is launching an extensive restructuring of its core business, and took a charge that resulted in a loss of $29.7 million, or 87 cents a share, for the third quarter.

[21893002] |Trinova said it will close, move or overhaul 40 of its 170 manufacturing facilities and over the next three years cut 1,500 jobs from its current world-wide payroll of 22,300 employees.
[21893003] |Most of the factory closings and job cutbacks will affect Trinova's Aeroquip operations, which manufacture automotive plastics, hoses and other industrial and automotive parts.
[21893004] |Hoses and plastics together account for about 42% of Trinova's total annual sales.

[21893005] |In a separate announcement, Trinova said the Aeroquip group has agreed to sell its spring-brake, piston-brake and related businesses to Midland Brake Inc. of Branford, Conn.
[21893006] |Terms weren't disclosed.

[21893007] |To provide for the restructuring's costs, Trinova said it took an after-tax charge of $38.5 million, or $1.13 a share, in the third quarter.
[21893008] |The $29.7 million net loss compares with net income of $19.6 million, or 57 cents a share, a year earlier.
[21893009] |Sales rose 8% to $456.2 million from $422 million.

[21893010] |Trinova closed at $25, down $1, in New York Stock Exchange composite trading.

[21894001] |A group of investors, including Giancarlo Parretti's Pathe Communications Corp. and Sasea Holding S.A., have agreed to buy 76.66% of Odeon Finanziaria, a financially troubled Italian TV station.

[21894002] |Florio Fiorini, managing director of Geneva-based Sasea, said the investors would pay only a symbolic one lira for the station, "but we have agreed to raise the capital that will enable the company to continue operating.
[21894003] |It's sort of a Chapter 11 situation," he added, referring to the U.S. bankruptcy law that protects companies from creditors while they restructure.

[21894004] |Milan-based Odeon, which draws about 3% of Italian TV viewers, has debt of 250 billion lire ($181.9 million), Mr. Fiorini said.
[21894005] |He added that details of the recapitalization still have to be worked out, but that Pathe will take 50% of Odeon, Rome film producer Bruno Lucisano will take 10% and the remaining 16.66%, currently owned by Sasea, will eventually be sold to other investors.
[21894006] |Calisto Tanzi, Odeon's owner, will retain his 23.34% stake.

[21894007] |Italy's Supreme Court this year ordered Parliament to write a law that will regulate media ownership.
[21894008] |"We think that it's going to be far more favorable to own a station before the law is passed than to try to buy one afterward," Mr. Fiorini said.

[21895001] |San Francisco area officials gave the media high marks for helping people find shelter and obtain emergency information after Tuesday's catastrophic earthquake.

[21895002] |"The press has been doing an excellent job.
[21895003] |They are telling people what roads are closed and just keeping the public informed has helped to keep the panic down," said James Ball, a station supervisor at Daly City Police Department.

[21895004] |Mr. Ball noted that television stations featured people holding up phone books, explaining where to call for help.
[21895005] |Radio stations provided an emergency number for people who smelled gas but didn't know how to turn off their gas supply.

[21895006] |Kim Schwartz, a spokesperson for the American Red Cross in Los Angeles, said television and radio stations in San Francisco played a "very positive role" by providing the address of 28 shelters of the Red Cross and by giving out the Red Cross number for contributions to help earthquake victims (1-800-453-9000).

[21895007] |The San Francisco Examiner issued a special edition around noon yesterday that was filled entirely with earthquake news and information.
[21895008] |The Examiner and the San Francisco Chronicle were able to publish despite Tuesday's quake, which occurred close to deadline for many newspapers.

[21896001] |Sterling Software Inc. said it lost its bid to supply software services to the National Aeronautics and Space Administration's Ames Research Center at Moffett Field, Calif.
[21896002] |Sterling, which estimated the value of the contract at $150 million, said NASA selected another bidder for final negotiations.

[21896003] |In 1988, Dallas-based Sterling protested a similar decision by NASA involving the same contract, claiming it had submitted the lowest bid.
[21896004] |As a result, last March the General Services Administration board of contract appeals directed NASA to reopen negotiations on the contract.

[21896005] |Sterling said it had requested a briefing by NASA but had not decided whether to protest the agency's latest decision.

[21897001] |Consolidated Rail Corp., New York, reported that third-quarter net income climbed 4.8% to $87 million, or $1.27 a share, exceeding analysts' expectations.

[21897002] |In the year-earlier quarter, the freight railroad earned $83 million, or $1.21 a share.
[21897003] |James A. Hagen, chairman and chief executive officer, noted that earnings advanced "in the face of a drop in business, brought on by the general economic slowdown."
[21897004] |Revenue slipped 4.6% to $835 million from $876 million.

[21897005] |For the rest of 1989, Mr. Hagen said, Conrail's traffic and revenue "will reflect the sluggish economy, but Conrail will continue to take steps to control and reduce costs."

[21897006] |For the nine months, Conrail earnings grew 0.4% to $229 million, or $3.34 a share, from $228 million, or $3.31 a share.
[21897007] |Revenue was flat at $2.59 billion.

[21898001] |Georgia Gulf Corp., hurt by declining sales and falling chemical prices, said third-quarter earnings fell 13% to $46.1 million from $53.1 million in the year-earlier period.

[21898002] |Sales declined 10% to $251.2 million from $278.7 million.

[21898003] |The Atlanta-based chemical manufacturer said lower prices hurt margins for most products.
[21898004] |"We did see some relief in raw material costs, but it wasn't sufficient to offset the drop in sales prices," James R. Kuse, the company's chairman and chief executive officer said in a statement.

[21898005] |On a per-share basis, quarterly earnings remained at $1.85, the same as last year, because of the company's share buy-back program.
[21898006] |Georgia Gulf had 24.9 million shares outstanding on average in the quarter, compared with 28.6 million in the third quarter of 1988, adjusted for a stock split paid in January 1989.

[21898007] |In composite New York Stock Exchange trading, stock in Georgia Gulf, which has been mentioned as a takeover candidate, rose $2.125 a share to close at $46.125.

[21899001] |This temblor-prone city dispatched inspectors, firefighters and other earthquake-trained personnel to aid San Francisco.
[21899002] |But a secondary agenda among officials in the City of Angels was to learn about the disaster-contingency plans that work and those that don't.

[21899003] |Los Angeles Mayor Tom Bradley used the opportunity to push the City Council harder to pass a measure establishing a loss-recovery reserve of $100 million.
[21899004] |The amount would help Los Angeles cope in the first few weeks after its own anticipated quake, while waiting for federal assistance to arrive.

[21899005] |After San Francisco Mayor Art Agnos spoke on television of the need for building inspectors to check the soundness of buildings, Los Angeles dispatched 32 inspectors to help.
[21899006] |And the county of Los Angeles placed its firefighters and sheriffs on alert, ready to send in reinforcements, and alerted San Francisco that the city has 1,000 hospital beds at its disposal.

[21899007] |Two Los Angeles radio stations initiated Red Cross donation campaigns, and one Los Angeles bank manager forked over $150,000 of his own money for relief purposes, the Red Cross said.

[21899008] |The Los Angeles Red Cross sent 2,480 cots, 500 blankets, and 300 pints of Type-O blood.
[21899009] |It is also pulling 20 people out of Puerto Rico, who were helping Huricane Hugo victims, and sending them to San Francisco instead.