The Los Angeles Times from Los Angeles, California • Page 184

D2 WMJNliSDAY. II-IMUARY 21, l'WO SI) i.os times Bank's Inroad Into Securities Sales Is Upheld BRIEFLY activities as underwriting stocks. Bankers have long criticized the law as outdated and have chipped away at the barrier the past two years as regulators have allowed such expanded powers as underwriting corporate debt A federal appeals court last September said Security Pacific could package its own loans and underwrite them as securities, calling it "the business of banking." That decision reversed a 1988 ruling by a federal judge. The Supreme Court, without comment, let stand the appeals court ruling. Reacting to the Supreme Court action, the securities association warned that one result could be an increase in risks for banks and taxpayers, who insure deposits up to $100,000.

It urged Congress to take up the Glass-Steagall controversy to "prevent the random chipping away by federal banking agencies of the safety barriers between the two industries." major blow to the act, and some other observers predicted that it will provide bankers further inroads into the securities business. But banking executives said such assessments exaggerate the effect and that the court simply upheld the right of banks to sell loans as they choose. "It is a step in the right direction, but by no means did the wall tumble," said Richard M. Gerwitz, a managing director of Security Pacific 's merchant banking unit. The case stemmed from Security Pacific's move In 1987 to bundle home loans and sell them to investors as "pass-through certificates." Investors who buy certificates, also called mortgage-backed securities, receive a stake in the bank's pool of mortgages.

Principal and interest payments made by homeowners are then "passed through" to investors who own the certificates. U.S. Comptroller of the Currency Robert L. Clarke, who regulates national banks such as Security Pacific, gave the bank his blessing, saying laws do not restrict the way banks can sell their mortgages. Security Pacific National Bank is the main unit of Security Pacific Corp.

In Los Angeles. Clarke's opinion sparked a lawsuit filed against him by the Securities Industry the main trade group for brokerages. The suit maintains that Security Pacific's activities amounted to the underwriting of securities, which is forbidden by the 1933 Glass-Steagall Act. In one court paper, the association went so far as to say that allowing Security Pacific to continue its program would be to "write Glass-Steagall right out of the statute books." Enacted during the Great Depression amid fears that securities ventures would cause bank failures, Glass-Steagall is a legal barrier preventing banks from entering such Investment-banking Chevron to Cut 800 Jobs, Sell Some Oil, Gas Assets that of its major competitors due in part to high costs, low efficiencies and top-heavy staff. "Clearly, management now sees that they need to restructure and that there's tremendous potential value to be unlocked," said Frederick P.

Leuffer, an industry analyst with C. J. Lawrence, Morgan Grenfell Inc. in New York and one of Chevron's tougher critics. Chevron's restructuring of its U.S.

exploration and production operation is part of a longstanding industry trend to streamline such operations and focus more attention overseas. Unocal Occidental Petroleum Mobil Oil Corp. and British Petroleum have already undertaken similar downsizing. Chevron's moves may signal disenchantment with domestic oil prospects in light of its frustration in trying to produce oil off the coast of Santa Please see CHEVRON, D14 By PATRICK LEE TIMES STAFF WRITER Chevron the oil industry's sluggish giant, announced a sweeping restructuring of its U.S. oil and gas division Tuesday that will cut 800 to 1,000 jobs and sell off $700 million in assets as part of a long-term strategy to bolster financial performance.

The moves will cost Chevron $25 million to $30 million in charges in the first quarter of 1990, primarily for employees' severance packages, but will eventually save the company $140 million to $160 million a year in salaries and operating costs, Chevron spokesman Michael W. Libbey said from the company's San Francisco headquarters. Analysts generally applauded the planned restructuring by the nation's third-largest energy company, whose financial performance has trailed Agreement Reached On FSX Jet: Mitsubishi Heavy Industries and General Dynamics maker of the widely used F-16 warplane, have reached final agreement on developing the FSX jet fighter for Japan's air force, the Japanese company said. The joint project was approved in principle by the two governments last year but has been plagued by wrangling between the partners. General Dynamics, the No.

2 U.S. defense contractor, is to handle 35 of the $7-billion project to build 120 aircraft. A spokesman for Japan's Defense Agency said a Joint Military Technology Commission would regulate the transfer of FSX technology and its use by General Dynamics. Federated Revamps Merchandise Services Group: Federated Stores Campeau U.S. retail unit, said it has reorganized its New York-based merchandise services group, cut about 10 of the group's staff and dropped certain private-label products.

Cincinnati-based Federated said 25 of its 280 employees in the FederatedAllied Merchandising Services, or FAMS, group will be laid off as the unit consolidates its design, graphics and quality-control departments. T-Bill Rates Rise: The Treasury Department sold $7.6 billion of new three-month bills at an average discount rate of 7.80, up from 7.65 last week. Another $7.6 billion of new six-month bills were sold at an average discount rate of 7.77, also up from 7.65 last week. The new discount rates understate the actual return to investors 8.07 for three-month bills with a $10,000 bill selling for $9,802.80 and 8.20 for a six-month bill selling for $9,607.20. Great Northern Agrees to Buyout: Great Northern Nekoosa said it agreed to a $5-billion buyout by Georgia-Pacific, dropping its vehement four-month opposition to a deal that would create the largest U.S.

forest-products company. Great Northern agreed to the deal after Georgia-Pacific sweetened its offer to $65.75 a share from $63, a spokesman said. In addition to acquiring Great Northern's 57-million common shares outstanding for $3.7 billion, Georgia-Pacific will assume $1.3 billion in Great Northern debt. Inland Empire Papers to Merge: Donrey Media Group win merge its daily newspapers in Pomona and Ontario to form the new Inland Valley Daily Bulletin on April 30. The new morning and evening publication will succeed the morning Daily Report of Ontario, which is 80 years old, and the evening Progress-Bulletin of Pomona, which is 106 years old.

The two newspapers have been publishing combined editions on Saturdays and Sundays for more than a year but had maintained separate weekday editions. The two papers have a combined circulation of more than 90,000. Sale Of Zenith Unit in Dispute: Zenith Electronics said it is embroiled in a "major dispute" with Paris-based Groupe Bull over the final sale price of Zenith's computer business. The previously announced deal, completed Dec. 28, called for Zenith to receive $91.9 million plus the adjusted net book value of the assets sold.

That value is in dispute. Minorco to Buy U.S. Mining Firm for $705 Million: south Africa-backed Minorco said it had agreed to buy Freeport-McMo-Ran Gold for $705 million, sending stock in the New Orleans mining company sharply higher. Freeport-McMoRan Gold Co. is 61 owned by Freeport-McMoRan which has an interest in a string of mining and energy exploration businesses in the United States.

New Jeans Line Uses Gang Themes in Ads: a flood of flashy commercials will be aired during tonight's Grammy Awards on CBS. But none are likely to prove more provocative than one for Soviet, a new line of jeans. The ad for California viewers features gang members engaged in a verbal confrontation. Huntsman Drops AriStech Bid: Huntsman Holdings whose unsolicited $813-million bid for Aristech Chemical Corp. prompted the chemicals company to seek a Japanese "white knight," has dropped its offer.

The Pittsburgh-based polymers and chemicals firm has agreed to be acquired for $845 million by a management-led group and Mitsubishi Corp. of Japan. U.S. Will Raise Temporary Thrift Rescue Funds: Federal regulators approved a plan to raise up to $11 billion in temporary working capital for the government's massive savings and loan rescue program. The Oversight Board of the Resolution Trust or RTC, said it decided to borrow the money from the Federal Financing Bank, which was created in the 1970s to lend money to government agencies at a fraction above market rates.

From Time Staff and Wire Report Semiconductors in Texas Sony to Make By NANCY YOSHIHARA TIMES STAFF WRITER Sony whose buying spree here has included purchases of CBS Records and Columbia Pictures, is making its biggest move yet into U.S. computer markets by purchasing its first American semiconductor plant, it was disclosed Tuesday. In an unusual move, the giant Japanese company also agreed to share its chip-making know-how with Advanced Micro Devices, Banking: The Supreme Court refused to stop Security Pacific from packaging its mortgages for sale to investors. By JAMES BATES TIMES STAFF WRITER The U.S. Supreme Court on Tuesday refused to bar Security Pacific National Bank from pooling its mortgages and selling them as securities to investors, a move that further chips away at the nation's 57-year-old law separating banks from the securities business.

As expected, however, securities industry representatives and bankers disagreed sharply over how much the court's action erodes the Depression-era Glass-Steagall Act separating the businesses. Securities industry officials called the Supreme Court move a Federal Deposit Insurance Goes Under Review Savings: Congress wants to restore the confidence of depositors but doesn't want financial institutions to take unreasonable risks. By ROBERT A. ROSENBLATT TIMES STAFF WRITER WASHINGTON Federal deposit insurance had a mixed record during the 1980s: It prevented panic in the streets by nervous savers but also provided the fuel for disastrously risky new ventures by savings and loan associations. Today Congress begins the difficult task of reforming the insurance system to handle banking in the 1990s.

Once again, the legislators want to bolster the shaken confidence of depositors. But they also want U.S. savings institutions to take more reasonable risks, seeking out new lines of business as they compete with capital-rich Japanese banks. The House Banking Committee will begin considering a number of proposals as it conducts hearings today. For example, some members of Congress would require banks and to seek private insurance for high-risk ventures instead of relying on the federal insurance, which guarantees deposits up to $100,000.

Some may also argue that the government should lower the $100,000 ceiling for guaranteeing deposits. Still others may press for limiting deposit insurance to $100,000 per person, not per account. Fewer than 10 of Americans had liquid financial assets cash, savings and checking accounts, certificates of deposit over $40,000 in 1980, when Congress boosted the deposit guarantee limit from $40,000 to $100,000. Brokerage houses eagerly solicited the money of wealthy investors in search of the highest safe yield, split the money into increments of $100,000 and sent it racing throughout the country. The money poured into and too many managers sent it surging out again for use in dubious ventures: raw land, horse-breeding farms, shopping centers in already jammed retail markets, condominiums with no chance of an economic payoff.

Rep. Henry B. Gonzalez the House Banking Committee chairman, has questioned whether the insured ceiling is too high and whether wealthy savers should be allowed to have numerous accounts. "Not only do we need to examine the absolute limits of the coverage," said Gonzalez, "but we need to determine whether the multiple accounts maintained by some depositors are unnecessarily increasing the risks to the deposit insurance! funds." However, it seems unlikely that Congress would agree to roll back the $100,000 guarantee for fear that the public might view this as a retreat from vital protection of savings. "To seek to lower the $100,000 limit at this time would severely impact on encouraging individual savings and may well have a negative effect on the health of financial institutions," said Rep.

Bruce Vento a member of the banking committee. But members agree that there will be a serious discussion of ways to remove deposit protection from risky activities to prevent a repetition of the investment excesses of the 1980s. Gonzalez said he wants to examine "private insurance possibilities, particularly for high-risk activities and for extended coverage beyond that provided by the federal insurance funds." A revised insurance Please see INSURANCE, D5 Red-Hot Record Sales Starting By JUBE SHIVER Jr. TIMES STAFF WRITER Polygram Records officials were sure that the debut album from the Scottish band Texas fueled by rave reviews and publicity from the group's first U.S. tour would go gold.

But the album, "South-side," has yet to reach the half-million mark since its July release, a company official confirmed. Janet Jackson who begins a nationwide tour next month is TREND WATCH Major Shareholder Wants A roundup of business developments spotted by other publications. Items were compiled and edited by Grassroots Research, a unit of the San Francisco money management firm of RCM Capital making the deal one of the first transfers of technology to the United States from Japan and an acknowledgement that Japanese chip-making skills are superior to American. Most arrangements have gone the other direction, with Japanese firms acquiring licenses to U.S. technology.

Sony will begin U.S. production of semiconductors under an agreement to acquire a San Antonio chip-making plant from Advanced Micro Devices, the nation's fifth -largest chip maker. In return, the also feeling the music industry blues. Sales of her heavily promoted "Rhythm Nation 1814" album, which has sold more than 2 million copies since its release in October, are falling short of expectations in some regions, according to several record dealers and sources at Jackson's label, Records. "It's not explosive," said David Blaine, general manager for the 33-store Waxie Maxie chain in Washington.

Blaine said a recent computer analysis showed that the fourth quarter ended Dec. 31, and said it would not pay a fourth-quarter dividend. The loss was the first annual net loss since it became a publicly traded company in 1983. Financial industry analysts on Tuesday were uncertain about Wedbush motive in the filing. "I don't know what it means," said Michael Abrahams, an industry analyst with Bateman Ei-chler Hill Richards in Los Angeles.

"Maybe he was just trying to jack the price of the stock up." Great American closed at $5, up $.125, on Tuesday. Just six months ago, the stock was trading at $12 or more. "The only thing I can think of is that he feels he doesn't have his finger on the button, that management is running the show and he's got no input," said Irving Katz, director of research for Thomas GreenSan Diego Securities. "But I don't know what he'd do different." was tied to its electronic components businesses, not a communications business that manufactures encoding and. decoding devices used by cable TV systems.

Oak on Tuesday said it hopes to sell the communications business, which has plants in San Diego and Taiwan. When the sale is complete, Oak will move its corporate headquarters to Boston. "Without communications, there's nothing west of the Mississippi," Weaver said. "That makes communications and travel from San Diego difficult and expensive." Oak reported an net loss for the nine months ended Sunnyvale, company will get $55 million. Some analysts interpreted the move as a signal that Sony's globalization strategy for the 1990s will include its first major move into the U.S.

computer business, where it now has only a minuscule presence. Sony, which claims to be Japan's first commercial semiconductor manufacturer, is the No. 2 supplier of computer workstations in Japan. Workstations, one of the fastest-growing segments of the Please see SONY, D5 to Cool Off Jackson's album, as well as recent releases by Paula Abdul and Quin-cy Jones, are being outsold by old albums reissued on compact discs. These "catalogue albums" typically rank at the bottom of the chain's top 10 sellers, he said.

As the record business prepares to fete its musicians with Grammy awards tonight, the industry is facing a cooling off of red-hot record sales. But unlike the previ- Please see RECORDS, D6 More Control Another analyst suggested that Wedbush is tired of being ignored. "In the past, Great American has been willing to take his money but not his advice," said the analyst, who knows top executives in both organizations. "Maybe in the future, they won't get his money, but they'll have to take his advice." Wedbush Corp. hopes to strengthen Great American's business plan through the "addition of some independent board members," LoBue said.

"We would like Wedbush Corp. to be in a position to give direction to Great American's short-term, as well as its long-term, strategies." Wedbush, which "might" increase its 17 share to the 24.9 ceiling, has "no current intention" of exceeding that level, LoBue said. LoBue said that a review by the Office of Thrift Supervision would take at least "several months, given the higher priorities" facing the agency elsewhere. Sept. 30.

Oak reported a net profit during the like quarter a year earlier, which included $9.2 million in non-recurring items. Sales for the nine months fell slightly to $146.7 million, down from $147.9 million a year earlier. Hills, who joined Oak's board of directors at McNeely's bidding in 1985, initiated the bitter proxy fight last March after learning that he had not been invited to return for another term. "I could have simply resigned from the board, but that would mean abandoning the shareholders at a critical junction in Oak's history," Hills said early in 1989. Continued from Dl intention to oppose the application," a Great American spokesman, Brian Luscomb, said Tuesday.

"That's the right of any shareholder or any investor of his size. We don't plan to oppose it." Wedbush Corp. filed the request because the is "at a crucial juncture," Edward W. Wedbush, president of the Wedbush said in a statement released Tuesday. "Wedbush Corp.

needs the flexibility to suggest and implement changes in the direction of Great American to the same extent as the largest shareholder of any publicly owned company." Wedbush's regulatory filing was "related" to the net loss that Great American reported Friday for the year ended Dec. 31, said Philip J. LoBue, Wedbush senior vice president. Great American, which has been substantially hurt by Arizona's ongoing real estate slump, also reported a net loss for OAK Continued from Dl $300 million in net losses before his arrival in 1984. Under McNeely's leadership, Oak generated several quarterly profits.

But Hills' group maintained that the profits were illusory because they were driven by onetime gains rather than operating profits. In proxy materials distributed last year, the group told Oak shareholders that McNeely's management team lacked the industrial experience needed to generate operating profits. The Hills group's proxy materials also argued that Oak's future Modest RebOUndlA look at the Gulf states suggests an upswing in the oil industry. The rig count in Louisiana rose again last week by four units to 143, an increase over the 12 rigs in the same week a year ago. Industry observers see this rebound from January's slip from 179 rigs to 139 as an indication of a better year ahead.

At the same time, another source reports that the utilization rate of offshore mobile units in the Gulf rose to 69.8 from 45.8 a year ago. One company stepping up its exploration is Freeport-McMoRan Partners of New Orleans. The firm will increase its exploration and capital expenditures budget by 42 to $188 million, with $56 million slated for exploration alone. Times-Picayune, Morning Advocate New Discount Strategy: It seems that last year's retail rage everyday low prices is this year's has-been strategy. Target discount stores tested the concept at 50 of its outlets and found that it failed to stimulate enough sales.

In its place Target will try a system of "great buys," products at low prices that never go on sale, and weekly sales promotions. The company says this is a blend of what customers liked about both strategies. Detroit Free Press, Newsday Approval Nears: Industry observers say two artificial sweeteners discovered in the early 1970s, Johnson Johnson's sucralose and Pfizer's alitame, may soon win approval of the Food and Drug Administration. Both sucralose and alitame arc sweeter than Monsanto's aspartame (known commercially as NutraSweet), and both are heat stable, which aspartame is not. At the same time, Abbott Labs' cyclamate is under consideration by the FDA for reinstatement; the original data linking it to cancer apparently was flawed.

The artificial sweetener market is also being pursued by Coca-Cola and Biospherics, both of which have products in the pipeline. The Atlanta Journal Hot Competition: Two innovative antiperspirants, created by Helene Curtis and Revlon, will hit store shelves at the same time and both will be backed by big promotions. Helene Curtis' Degree, formulated to become effective when body heat rises, will receive a $50-million kick-off promotion, coupon and ad campaign. The company expects sales of the unisex product to reach $50 million in two years. At the same time, Revlon is introducing No Sweat, which works on the same principle as Degree but is triggered by moisture.

This product will receive a $10-million ad boost. Crain's Chicago Business.