The Palm Beach Post from West Palm Beach, Florida • Page 22

22A THE PALM BEACH POST SUNDAY, OCTOBER 15, 1989 ill latest stock crash sober up our policymakers? Analysis ening to sober up our financial markets. After all, the Big Crash of 1987 and the more recent souring of some high-profile junk-bond financed deals turned out to be only a momentary setback for the dealmakers, options traders and programmed buyers. No doubt the Federal Reserve, the last bastion of discipline on the policy scene, will put aside its inflation concerns for the moment, it' did in October 1987, and provide liquidity to help stabilize the jittery markets. And the economy is still perking along all right, isn't it? Indeed, as our Treasury Secretary Nicholas Brady recently remarked, "It couldn't get much better than it is." So why-worry? Dumb luck is better than no luck at all. But, at least for the moment the markets have learned an important lesson.

Or irBy JODIE T. ALLEN Washington Post News Service WASHINGTON So it turns out that up companies at inflated prices and THoading them down with mountains of debt I Msn'tsuch a great idea. Who'd have guessed This brilliant insight was brought to "you courtesy of Friday's stock market, 1-where scores of financial whizzes, in ZJ search of the next hot takeover target, had been happily driving the indexes to new The source of the new enlighten-tment was the sudden squeamishness of the banks about financing yet another highly Jeveraged deal in this case the planned buyout of the UAL corporation, the parent of United Airlines, by a group including I British Airways, UAL executives and the airline's pilots union. national economic behavior just downright dumb? And haven't we known all along exactly how dumb it is? Like mindlessly buying nifty consumer goods from abroad and selling off our productive assets, our farms and factories, to get the money to pay for them. And being afraid to be seriously concerned about the future drain on our standard of living that this practice will inevitably produce for fear that someone might call us xenophobic or protectionist.

Or playing games about our federal budget deficit, letting the White House and Congress conspire to shift expenses from one year to the next and then back again, or undercount the real long-term costs of the new programs and taxbreaks they're starting up on the sly. The policymakers are secure in the knowledge that we won't take notice because we don't really care. After all, we've all been running up some pretty big personal bills, too wouldn't it be nice if we could fool our creditors the same way? Never mind the long-term costs Or letting our president make his top priority an expensive cut in the capital-gains tax, despite mounds of evidence that it will add to future deficits and do nothing to foster long-term growth (whereas a cut in interest rates from a lower budget deficit surely would be a spur to businesses especially those laden with debt from our other follies.) Never mind the long-term costs, we say to ourselves, the capital-gains cut might put a few dollars in our own pockets someday. No one should count on Friday'sawak- Up until then, of course, no one had ever guessed that debt-financed takeovers were anything but an efficient way to restructure corporate assets to maximize their long-term growth potential Wait a minute. Didn't we all really know in our hearts that leveraged buyouts were well, dumb idea? Did anyone, even the LBO artists, arbitrageurs and corporate executives who put these deals together and profit so much from them really believe that they were promoting long-, term growth rather than just short-term gains? How dumb are we? And come to think of it, isn't a lot of our have they? Or, more to the point, have we? Traders watching as markets open in London, Tokyo 1 We design, manufacture, install and service for commercial, residential and export.

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MARKETfrom 1A the financial system stays liquid," a top official of the Federal Reserve Board told The New York Times Saturday. The Federal Reserve's decision to make money freely available when the markets open Monday is aimed at preventing a repeat of the 1987 That decline led many shareholders of mutual funds to cash in their shares. As the mutual funds themselves ran out of cash, they had to sell more shares, which further depressed stock prices. I Also, as prices fell, 1 many investors who had I borrowed to buy stocks had their shares sold when they failed to respond to their brokers' demands for money. Flurry of calls to Asia, Europe The mutual fund redemptions and the margin calls from brokers played a large role in the waves of selling that led to the market's collapse.

The Federal Reserve official said the central bank's decision was taken at meetings late Friday and was being communicated to officials in Asia and Western Europe in a flurry of phone calls this weekend, not only from the Federal Reserve but also from the Treasury and the Securities and Exchange Commission as well. "To calm the markets, it's important that institutions know there are adequate funds available," the Federal Reserve official said. "Once the markets realize that there will be no credit crunch, we can resume normal business." Foreign authorities are being asked to take similar steps to try to avert cash problems that could have a spillover effect on markets. 'I don't see a Black Monday' In New York, traders and analysts said they saw few parallels between the 1987 crash and today's conditions. John Connolly of Dean Witter said he thought that on Monday people would be in the market to buy, not sell.

"I don't see a Black Monday," he said. Charles Jensen of MKI Securities said: "Over the weekend, people may not think the situation is as serious as they thought Friday. We just don't know." Treasury Secretary Brady said the economy is well-balanced and on a path to future modest growth, pointing out that the market had risen 591 points this year. But investors asked why a deal involving one airline should devastate a market of thousands of listed stocks. The wave of selling was triggered after an announcement that a group trying to acquire UAL Corp.

had failed to complete financing for its $6.75 billion buyout of the parent of United Airlines. Some butterflies in Tokyo There was some nervousness Saturday in Tokyo, but Japanese financial executives said they did not expect a sustained downturn in the Japanese market. "This was related to problems with one takeover stock, in my view, and just will not impact the Tokyo stock market," said Hiroyuki Murai, head of the stock department at the Nikko Securities one of the four Japanese brokerage houses that dominate trading there. In the United States, procedures to temporarily halt trading were adopted after the 1987 crash. But some traders and exchange officials were concerned Saturday about the impact of such a halt.

The rule, which imposes a "circuit breaker," requires markets to close once they have fallen a particular limit. "I personally am worried about the circuit breakers, because I think when you have a flood of sell orders and put up a temporary wall, you are still going liif 81 THE ASSOCIATED PRESS Chicago traders watch action stop as 'circuit breakers' designed to prevent a computer-driven market collapse go into effect Friday. to have a bigger flood when the wall comes down," said Joel Lovett, a senior floor governor and a specialist at the American Stock Exchange. Under the proposals that were adopted by the exchanges last year, the stock markets will stop trading for an hour if the Dow Jones industrial average falls 250 points. After that time, if the average falls another 150 points, markets will close for two hours.

Nervousness about circuit breakers Since the proposals were adopted, officials with every major exchange have privately expressed concern about how they would work in a falling market, and about whether they would prove counterproductive. A 1988 report by the National Association of Securities Dealers, which oversees the over-the-counter stock market, concluded that circuit breakers "may cause investors to rush to execute their orders before the market closes." But under pressure from congressional and regulatory officials to make changes in the trading rules, the securities and futures exchanges agreed to implement the circuit breakers. "Philosophically, this is not where we would have normally been," William Brodsky, president of the Chicago Mercantile Exchange, said Saturday. "But no one has come up with a solution that seems better." Some traders pointed to Friday's experience as a sign that circuit breakers may cause troubles. A preliminary limit on trading was set off in the Chicago futures markets, which stops a contract from falling further once it drops 12 points.

After the market is reopened, the limit is imposed at 30 points down. Traders and some exchange officials said that once the futures and options markets closed, selling pressure began to build in the stock market. I auction conducted by: McBride Marketing All 477 Puwll Mdindc. Auctioneer Ai: 59 Urenl ftelby. Auctioneer Ikxa tJulon.

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So join the thousands of satisfied families who have shopped at Unviersal Blinds. Palmetto Broadcasters Associated for Communities PBAC. Today the group, under various non-profit entities, owns construction permits for seven stations across the state, including the three it hopes to get on the air in the next year. The foundation was created last spring and ultimately will operate the Southeast Florida stations. But before Channel 21 or the others can get on the air, they must have the money needed to pay for operations.

For Channel 21 to receive state money, it must be determined it would not duplicate another PBS signal. The earliest Channel 21 could receive state money would be as part of the 1991-92 budget. The 1990-91 Department of Education budget request of $9.8 million has been submitted and can't be increased. That money is split evenly between each of the state's 1 1 existing PBS stations. The idea of two more PBS mouths to feed just doesn't appeal to WXEL's Moran.

"It's sad that there are so little funds split so many ways. But this is America, and you can do whatever you want," he said. But, Moran quickly added, the TV industry is littered with startup projects that never get off WPBT-Channel 2. Neither station offers news specifically for Fort Pierce viewers. Edwin Massey, Indian River Community College president, has yet to be convinced Channel 21 is the answer.

Station executives have been talking to Massey about getting his school to provide educational programming for the proposed PBS station. But before the school passes or commits, it must see a detailed proposal, Massey said. "We need to look at the fiscal impact, the dollars and cents," he said. The idea for the stations emerged six years ago, when the Federal Communications Commission's construction permit for Channel 63 in Boca Raton became available, Rhea said. The construction permit is the first step in receiving FCC licensing to operate a station.

"As president of the college, I really looked at this thing a long time and spoke with our trustees," he said. "This was in keeping with the mission of a liberal arts college: to use state-of-the-art means of transmitting education." That first money was provided by the school's trustees, Rhea said, and a non-profit corporation, Palm Beach County Educators Broadcasting wa created. The name has since been changed to PBACfrom 1A Broadcasting, which qualifies stations for state money, requires a station to have 10 full-time employees, spokeswoman Mary Ma-guire said. The station also must broadcast an average of eight hours a day and have $300,000 in non-federal financing. Brightly said Channel 21 in Fort Pierce will be "fully qualified" by the time it begins broadcasting, and Rhea said the station was not experiencing any problems paying its bills.

But Brightly conceded the initial programming will be limited. "The first three months, I think we're going to say, 'Here's what we have, but here's what we're going to he said. Channel 21 hopes to fill the void in locally based news coverage left when Fort Pierce-based independent WTVX-Channel 34 disbanded its news operation in August. Channel 34 announced Friday it was seriously considering moving its operation to West Palm Beach. All three West Palm Beach network affiliates, however, maintain news-gathering bureaus covering Fort Pierce.

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