Chicago Tribune from Chicago, Illinois • 79

Chicago CTribime Saturday, March 8. 1980 yssnass Section 2 The prime rate Mortgage blues (rt Business tEJ Ticker Prime is raised V2 point to 17 Intent nm banks charga to moat ctm-womt cuuonwrt ia.of In par cam 18.5 raises rate to record 15.5 180 17.S Eximbank may cut back loans 17.0 18.5 Sp. if 18 1S5 ISO U.5 14.0 13.S 13.0 Split ra'a 12.8 12.0 11.5 If it was of any consolation to Chicagoans. Washington, D.C.'s largest Perpetural Federal, announced it was charging potential homebuyers 17 per cent interest for loans. OFFICIALS AT local counted it a blessing that they still had funds to lend at all.

A special prayer of thanks went to the six-month, $10,000 money-market certificates IMMCs, whose yield is tied to that of Treasury bills. From Thursday until March 12, the current offering of MMCs will pay investors an unprecedented 14.792 per cent interest on an annual basis. At First Federal, senior vice president Don Crowder said Thursday brought in $10.9 million of investment in the MMCs, with $3.2 million of that being "new" money. Even the reinvestment of "old" money previously held in older MMCs or savings pleased First Federal, Crowder said, because "we are able to hold on to at least $7.7 million that was vulnerable" to investment elsewhere. While not having a precise breakdown of how many certificates were sold, Talman Federal said the MMCs helped the secure a net gain of $1.6 million in deposits Thursday.

Bell Federal put its net increase in funds from Thursday's business at $1.4 million By Michael Millenson HOME FEDERAL Savings and Uaa raised its basic mortgage rate to a record 15 5 per cent late Friday as the bad news continued for the trickle of Chicagoans still seeking home-mortgage loans. Home Federal's rate boost for 80 per cent loans on single-family homes came despite the fact that the firm recorded a meager three applications all week at the previous basic rate of 14.25 per cent. Asked if the rate hike meant the is leaving the lending market, an official would only say, "We're trying to limit our applications. We're approaching the market cautiously." THAT CAUTION showed up at other around the city. Talman Federal increased its basic rate Friday to 15.25 per cent from 14.5 per cent.

St. Paul Federal, which posted a mortgage rate of 15.125 per cent on Tuesday, said it was receiving a half-dozen loan applications daily at its 18 offices. Bell Federal, with a 15 per cent basic rate, is seeing three applications daily at its offices, according to chairman Roland Barstow. The state's largest First Federal, said loan applications were off more than 90 per cent from last year's level. 1979 I960 110 AMJJASONDJFM By William Gruber MANY BANKS across the aatioa Friday raised prime lending rates by another one-half point to a 174 per cent.

Harris Trust and Savings Bank in Chicago leapfrogged to 18 per cent. It marked the sixth time this year that banks have raised base loan charges for major corporate borrowers. Some analysts predicted that the key rate could reach 20 per cent in the next few weeks. "We are in the midst of a credit crisis, and we're pushing to the brink of a crunch," said David Jones, economist at Aubrey G. Lanston a New York bond and government securities firm.

IN THE last 2 weeks, banks hive increased prime rates by more than 24 per cent in a reaction to the Federal Reserve Board's attempt to curb inflation by trying to discourage bank borrowing. On Jan. 1, the rate was 15 per cent for some banks and 15' per cent for others. For many businesses that do not have top credit ratings, the new prime rate means they will be paying more than 20 per cent on loans. Loan rates to small businesses are scaled upward from the prime rate.

The new round of rate Increases came after several days of reports that President Carter and the Federal Reserve were developing a package of anti-inflation measures that could include selective controls on credit. A WHITE HOUSE spokesman said Friday that Carter did not plan to announce new actions that he might take on the inflation front until next week. Carter will confer with his economic advisers this weekend about possible options. How much higher the prime rate might go "depends on what we get out of Washington and how soon we get it," said Donald C. Miller, vice chairman of Continental Illinois National Bank Trust Company of Chicago.

"If they drag oa and on, and continue to procrastinate, we could see rates go higher. Jones said many banks were "becoming almost desperate for funds to meet extremely large credit demands from businesses" unable to raise money in the bond markets, which have been in a shambles for several weeks. "THE CD certificate of deposit market has ceased functioning at times because of the great uncertainties over future credit policies," he said. Charles Bliss, president of Harris Bank, said it decided to adopt an 18-percent prime rate because its cost for funds in the CD market was higher than that. He said a major bank was quoting 30-day CDs at 17 per cent, which translates into a cost of 18.4 per cent for banks after the 8-per-cent reserve requirement is added.

"The banks don't like these high rates any more than their customers do," Bliss said. "They're bad politically, and they're bad business. But until we get some action from the government, we have no choice." "WHEN A BANK'S cost for funds is rising very rapidly, as it has been, we have to keep up with it," added William D. McDonough, chairman of the First National Bank of Chicago's asset and liability management committee. "We're still behind our costs." Bankers and economists speculated that one part of the government's new package would include an increase in the Federal Reserve discount rate, possibly by an unprecedented 2 or 3 percentage points from the present 13 per cent level.

The discount rate is the Fed's charge for loans to member banks. Another possibility, some analysts Sower CflmwfW wwwt Niwmi aw FiwNamnal Bw Okjqd rof ii Rctenrt Board. John Moore president of the U. S. Export-Import Bank, warned Friday that the bank must cut back sharply on its financing of U.

S. exports. Because of a deadlock in Congress on Eximbank financing authorization, the export credit agency will have only about $900 million available for direct loans to finance exports of aircraft and other goods between now and next Sept. 30, Moore said. Eximbank officials, who discussed the problem Friday, commented that the spending restrictions would mean a loss of exports.

Frazers 2-part plan United Auto Workers president Douglas A. Fraser told a House Ways and Means subcommittee that there should be a law requiring 75-per-cent-North-American content in any of the foreign cars winning "substantial sales" in the United States. His two-part proposal also called for commitments by Japanese auto companies to curb exports while North American automakers convert plants to make more fuel-efficient cars over the next few years. Elsinore sees 10 gain Elsinore a spinoff of Hyatt which is controlled by the Pritz-ker family of Chicago, said Elsinore expects to report a gain of more than 10 per cent in net income for the year ended Jan. 31.

Elsinore president Joseph J. Amoroso said the 1980 results would be due in part to good profits from the Four Queens Hotel in Las Vegas. He also said that a hotel being built in partnership with Playboy Enterprises, in Atlantic City has risen in cost to (93 million from $80 million. Financing has already been arranged for the hotel, Amoroso said. OK on NYFE delayed Trihme Chart said, was that the Fed might choose to allow the discount rate to "float" with the rate for federal funds, which are uncommitted reserves that banks lend to each other overnight.

The fed funds rate is about 17 per cent. Miller, of Continental, said the package should include "sizable reductions" in federal spending, including an "unscientific across-the-board cut" in the fiscal 1980 budget, plus a discount rate increase and higher bank reserve requirements. He said the last two actions would be "very effective" in reducing credit availability. But Miller said he remains opposed to credit controls. The current level of rates, he added, already is starting to discourage some loan demand.

Seek FCC nod Owners plan to sell 49 of Channel 44 Basic money supply, loans drop something." In regard to mortgage loans, many life insurance companies and other institutional investors have stopped offering fixed-rate mortgage loans that are the principal source of long-term financing for shopping centers, office buildings and other commercial real estate. Because commercial mortgage loans typically run as long as 15 years, lenders are reluctant to commit themselves to a fixed rate when inflation, currently running at an 18 per cent annual rate, could go even higher over the life of the loan. Developers are reluctant to lock themselves into a high fixed rate because inflation could likewise subside. $745 million in the week ended Feb. 27, compared to a gain of $70 million the previous week.

Commercial and industrial loans at large banks across the nation declined $485 million, compared with a gain of $85 million fct previous week. Dorothy Nichols, an economist at the Federal Reserve Bank of Chicago, said the latest loan figures indicate a drop from heavy loan demand earlier in February. "THE MOST recent decline is very hard to interpret," she said. "It's not necessarily indicative of a trend. Loans should strengthen in the next few weeks, and if they don't then maybe we've got THE NATION'S basic money supply and commercial and industrial loans fell in the latest reporting week.

But economists warned it was too early to deduce the long-awaited cooling off of the economy. The basic money measure, currency in the hands of the public plus demand deposits at commercial banks, fell $2.8 billion to a seasonally adjusted average $374.7 billion, in the week ended Feb. 27. A broader money measure, which includes funds in accounts similar to bank checking accounts, dropped $2.9 billion to $391.2. Commercial and Industrial loans at major New York City banks dropped Dow falls 42.58 in week, worst loss since October year, he said, but the baseball team may have to find a new outlet next year, when its contract with Channel 44 runs out.

NEITHER MORRIS nor officials of Oak Industries and Capital Cities would be specific about where the programming for the subscription service would originate. "There are no negotiations with anybody. We have not made any decisions yet," said Morris. "The option is open to us to either buy programming from a service like Home Box Office or go directly to the producers for programming." Robert Hartney, vice president of Oak Industries, said in a phone interview from the firm's headquarters in San Diego that programming on the station would consist of entertainment specials, sports, and "movies purchased from a wide variety of sources." Capital Cities Communications, which owns radio and television stations in Philadelphia, Houston, Buffalo, Los Angeles, and several other cities, the Kansas City Star, Kansas City Times, and other newspapers, and Fairchild Publications, a trade-mazazine publisher, has never before been involved with subscription television, according to Ruth Fitzgerald, a spokeswoman for the firm in New York. The company does, however, have interest in cable-based pay television.

HARTNEY said fees for the subscription service had not yet been determined, but would probably approximate those at Oak Industries' other subscription operations. That would mean viewers would pay $40 plus a $25 deposit for installation of the decoder and about $20 a month for the service. Video 44 is owned by Harriscope Broadcast a Los Angeles-based firm that owns several other broadcasting companies, and Essaness Theatre which is run by Alan Silvermen, a Chicago theater owner and film producer. By Mark Potts VIDEO 44, which plans to begin offering subscription television on its WSNS-TV Channel 44 by late summer, said Friday it would sell a 49 per cent interest in the station to Capital Cities Communications, and Oak Industries, for an undisclosed price. The planned sale, which must be approved by the Federal Communications Commission fFCC, represents the second time Video 44 has tried to find partners in the station.

Last June, it announced plans to sell a 50 per cent interest in WSNS-TV American Television Communications Corp. ATC, a subsidiary of Time, Inc. That deal, reportedly for about $5 million, fell through in October following objections from several movie studios that ATC was trying to create a monopoly in the pay-TV field. WSNS-TV won approval from the FCC last month to begin offering subscription television service later this year. A SUBSCRIPTION TV station scrambles its signal during part of the day, usually at night, and viewers must rent a decoder from the station to receive the programming uncut recent movies, sports, and specials.

There are no commercials. Oak Industries is the largest manufacturer of decoding equipment, and WSNS-TV would be its fourth subscription television outlet. Oak operates subscription channels serving a total of about 250,000 viewers in Miami-Ft. Lauderdale, Phoenix, and Los Angeles under the name "On TV." The Los Angeles operation is said to be the largest of its kind and very profitable. Ed Morris, station manager of WSNS-TV, said the station would broadcast normally during the day and then switch to subscription television offerings at night.

The station's broadcasts of White Sox baseball games would not be affected this Stock Market March'7, 1980 Composite tablet Volume 57,427,300 Issues traded 1,923 349rT.p2Sf? Dow Jones Industrials 820.56 500 106.90. The New York Stock Exchange doesn't expect to receive regulatory approval to open its proposed New York Futures Exchange before mid-May, Big Board vice chairman John J. Phelan Jr. said. The exchange had hoped to open the new marketplace April 1.

The Commodity Futures Trading Commission must approve both the NYFE's designation as a marketplace and specific contracts involving financial instruments and foreign currencies. Phelan said it appears the foreign currency contracts would win approval before such things as government securities contracts. L.A. Times promotions The Los Angeles Times said that Tom Johnson, 38, president and chief executive officer, will become publisher of the newspaper, the nation's second largest in daily circulation. The appointment, effective April 14, will mark the first time that the publisher's chair isn't filled by a number of either of the newspaper's founding families, the Otis-es or the Chandlers.

Publisher Ctis Chandler will become chairman of the parent company, Times Mirror when chairman Franklin D. Murphy, 64, retires next Jan. 1. Meanwhile, Chandler will continue to serve as vice chairman and on April 14 will also assume the new position of editor-in-chief of the parent company. New air regulations The Interior Department issued new regulations to control the onshore spread of air pollution caused by offshore oil and gas drilling.

The regulations, required under 1978 federal legislator, apply to both existing and new facilities. At the same time, the department proposed procedures that it said it could lead to more stringent regulatory requirements in certain areas of the country. One proposal published Friday would create stricter requirements to be applied off the coast of California. Used home sales off Existing home sales declined 4 per cent in January from December, a victim of rising mortgage rates, the Na-. tional Association of Realtors reported.

Sales fell to an annual rate of 3.21 mil-; lion units, down from the 3.35 million rate in December and 3.71 million a year earlier. In Cook County, January sales dropped 7.6 per cent from the month before, First Federal Savings i i i i. N.Y.S.E. Index 60.96 Based on N.Y.S.E. tradee NEW YORK tAP-The stock market sold off for the third consecutive session Friday, winding up its worst week since last October.

Oil issues were the biggest losers as the market absorbed another barrage of bad news on inflation and interest rates. The Dow Jones industrial average fell 7.51 to 820.56, bringing its decline in the week to 42.58 points, the largest weekly loss since a 58.62 point loss Oct. 8 to 12. The daily tally on the New York Stock Exchange showed about seven losers for every two gainers. The NYSE composite index lost 0.98 to 60.96.

VOLUME CLIMBED back above the 50 million mark for the first time in more than two weeks, totaling 50.95 million shares against 49.61 million Thursday. Nationwide turnover totaled 57.43 million shares. The government reported Friday that producer prices of finished goods rose at a compounded 19.6 per cent annual rate in February. That marked a slight decrease from the 19.2 per cent pace set in January, but hardly regarded as cheerful news. Numerous large banks, meanwhile, raised their prime lending rates from 17'4 to 17 per cent, and one Harris Trust Savings of Chicago increased its basic charge on blue-chip loans to 18 per cent.

OIL STOCKS CONTINUED their rapid retreat from their peaks of a few days ago. Mobil fell $5.25 to Gulf Oil $3.37 to Exxon $2.12 to $61; Standard Oil of Indiana $7.12 to and Texaco 62 cents to $37. On the American Stock Exchange, Triaune cnart Houston Oil Minerals lost $1.37 to Dome Petroleum $3.37 to Gulf Canada $8.75 to $148; Ranger Oil of Canada $1.25 to and Sundance Oil $4.25 to $79. The Amex market value index, which reached a new high above 300 only a week ago, posted its fifth consecutive decline with an 8.75-point drop to 277.50. U.

S. challenges Ford-UAW contract Fields agrees to buy six 'The Union' stores in Ohio WASHINGTON APWrhe three-year contract negotiated last year between the Ford Motor Co. and the United Auto Workers violates the nation's anti-inflation guidelines, the Carter administration announced Friday. The council on Wage and Price Stability, which oversees the voluntary guidelines, said Ford's calculations of the contract's cost "deviated from council rules." In Detroit, Ford said it continues to believe that the contract complies with the government's pay standard. "We are disappointed with the council's ruling and don't agree with the decision," the company said.

UAW President Douglas Fraser, in Washington to testify to Congress about car imports, said council chairman Alfred Kahn "can't measure anything, let alone the Ford-UAW agreement. Their roles are so confused we really don't take seriously anything Kahn says." FRASER COMPLAINED that the government frequently changed the formulas in the guidelines. The union and auto company have seven working days to respond to the allegation. If no agreement is reached with the council by that time, the nation's second largest automaker could be put on a list of companies prohibited ivuan leporieo. uespue cne slower activity, prices continued to climb.

from obtaining government contracts. The denial of government contracts and adverse publicity are the only weapons the council has to enforce the guidelines. The Ford settlement was patterned after the agreement between General Motors Corp. and the UAW. THE GM-UAW contract was determined to violate the wage guidelines last December, but the council said it would not officially cite GM for the violation because the company promised to observe the' administration's rigid price guideline in the second year of the anti-inflation program.

This means, in essence, that the part of the contract 'in excess of the wage guideline should not be passed along in higher prices, a council official said. No such agreement has been reached on the Ford settlement, the official added. The contract for Chrysler workers, which was renegotiated as part of the administration's decision to back loans for the troubled automaker, "is in compliance with the pay standard," the council said. THE FORD contract was retroactive to Sept. 14 and covered about 197,000 workers at the time.

Employment at Ford has since dropped to about 192,000 workers, company officials said. Other analysts put the raise in wages and benefits at closer to 10 per cent a year for three years. Cash source may block 1040 A Halle's is believed to have lost money annually since acquired by Fields in 1969. "Halle's has made a dramatic improvement" in recent months, James E. Ryan, Fields vice president, finance, said Friday.

THE COLUMBUS department-store market is dominated by the Lazarus stores of Federated Department Stores, Inc. "But after Lazarus and The Union, there's nobody else" in the high-quality end of the market, Robert M. Rasmus-sen, Halle's chairman, said. The Union stores aren't full-line department stores, but smaller specialty stores, featuring clothing and fashion accessories for men, women, and children, Rasmussen said. He declined to disclose the stores' total sales.

The Union has a good reputation for quality and service, Rasmussen said, "and we think we can turn the business around." He said The Union was operated under Manhattan as a freestanding business performing its own purchasing and other functions. Halle's will consolidate those purchasing and other functions in Cleveland, thus achieving greater economies, he added. By Joseph Winski MARSHALL FIELD CO. said Fri-day it has agreed in principle to buy six department stores in Columbus, Ohio, market from Manhattan Industries, for $8 million in cash. Fields' purchase of the stores, operated under "The Union" name, has been rumored in the Industry for several weeks.

The stores would become part of Fields' Halle Brothers Co. subsidiary and carry the Halle's name, Fields said. Industry observers said The Union has lost money for Manhattan for at least the last two years, contributing to the company's recent decision to sell most of its retailing operations. MANHATTAN, BEST known for lu men's shirts and other sportswear, earlier this week sold its Texas-based Frost Bros, subsidiary for $27.2 million to Brooks Brothers, Miller Rhoads, of Washington, D.C. One security analyst called the proposed Union acquisition "uninspiring," but said Columbus was a much more stable market than Cleveland, where Halle's operates most of its stores.

Easy tax tips (B By George Watson Smith LONG VS. SHORT. If you had Income from self-employment, including farming, or a gain from the sale of your home or other investments, or capital gain distributions, or pension or annuity income, or alimony, you're going to have to take the long route and file Form 1040 instead of the short Form 1040A. HOW EXCITING! The old and somewhat familiar 25-per-cent alternative tax on net long-term capital gains of $50,000 or less went out with 1978. Now a 60-percent is allowed for your net long-term gain in 1979.

Therefore, the top rate on long-term capital gains is 28 per cent. The alternative capital gains tax for corporations is 28 per cent for 1979, down from 30 per cent. George Watson Smith is a certified public accountant with Smith-Spelman Enterprises, of Southfield, Mich. "Rogers, in my annual report I want to say, 'Emscott Inc. consists of a large number of individual profit You have two months to get your center provable.".