The Los Angeles Times from Los Angeles, California • 53

Coo Angeles Guuee riday. July i. 1W2 CC l'art IV Penn Square: Who Are the Wounded? Stocks Rally Drop Early Dow Index After Deep in Session; Gains 5.32 Credit unions Banks that purchased or participated in Penn Square loans to energy companies. Bank Failure Alters Money Fund Policies Managers Will Curb Their Investments in Unsecured Debt that had uninsured deposits. $7 million from 1 7 California institutions 1 00 million from credit unions nationally Savings and loans that had uninsured CDs.

$80 million in deposits nationally Continental Illinois National Bank: $1 billion Seattle First National Bank: $400 million Michigan National Bank: $200 million Northern Trust $125 million Chase Manhattan Bank: unknown Banks, many of which lacked expertise in the oil and gas Industry, purchased or participated In Penn Square loans with the energy Industry. They did so even though traditional lenders apparently shied away from such deals. Credit unions, In many cases working through money brokers, and savings and loans, generally operating on their own, put large amounts into certificates of deposit which are Insured only up to $100,000, much less than the deposits. Ripples Spread From Oklahoma From Times Wire Services NEW YORK The stock market finished mixed Thursday in a turbulent session marked by speculation that interest rates might Ik-headed lower. After tumbling in early trading, slock prices rallied as rales look a sharp drop in the credit markets.

The Dow Jones average of 30 industrials, off more than 10 points halfway through the day, closed with a 5.32 gain at 804.98. Declines outnumbered advances by about 4 to 3 on the New York Stock Exchange, after leading by as much as 4 to 1 earlier. The exchange's composite index rose 0.11 to 61.81. Big Board volume was 63.27 million, up from 46.92 million the day before. Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 73.20 million shares.

Large blocks of 10.000 or more shares on the NYSE totaled 1.142, compared to 749 on Wednesday. Indexes Rise Standard Poor's index of 400 industrials rose 0.36 to 120.32. and 500-stock composite index was up 0.31 at 107.53. At the American Stock Exchange, the market value index dropped 0.99 to 245.17. The NASDAQ composite index for the over-the-counter market closed at 166.80, down 1.28.

In London, the Financial Times index of 30 industrial stocks closed off 3.8 at 551.4. The 1982 high of 594.0 was set June 8. The low of 518.1 was set Jan. 5. The Tokyo Stock Exchange 225-share index closed off 73.20 at The 1982 high of 7,938.83 was set Jan.

20. The low of 6,889.53 was set March 17. The Wilshire index of 5,000 equities closed at 1,104.077, up 1.105. or 0.10, from the preceding trading Markets at a Glance Credit Unions' Loss May Be Held to $20 Million By KAREN TUMULTY. Times Staff Writer An estimated 150 credit unions across the nation had as much as $106.3 million in uninsured deposits in the insolvent Penn Square Bank of Oklahoma City, but none is expected to collapse as a result, federal officials said Thursday.

"Although a number of credit unions have been seriously affected, the bank's closing has not resulted in a single credit union insolvency," Edgar Callahan, head of the National Credit Union Administration, said at an industry convention in Chicago. Additionally, sources said about 20 savings and loan associations had Penn Square deposits exceeding the $100,000 maximum insured by the Federal Deposit Insurance Corp. They did not disclose an estimate of losses among savings and loans. Penn Square was closed on Monday by federal regulators, who declared it insolvent because of large loan losses. No Names Given Government and industry officials declined to name the credit unions affected by the bank's closure, but did say it had a major effect on about a dozen of the institutions.

Mai Nestlerode, executive vice president of the National Assn. of Federal Credit Unions, an industry group, said he believes that most were large institutions in major financial centers. Sidney L. Eisenberg, deputy regional director of the federal regulatory agency, said about 15 of California's 1,000 federally insured credit unions had an estimated total of $7 million in uninsured Penn Square deposits. Yoshio Fukuma of the State Department of Corporations said state -insured institutions are expected to be unaffected because they are legally barred from depositing their funds outside California.

Holders oi uninsured deposits will be issued certificates by federal regulators validating their claims against the bank. However, federal officials said credit unions will be allowed to carry those claims on their books for only 80 of their face value. Potential credit union losses on the uninsured deposits, therefore, are estimated at $20 million. By being able to continue carrying the loans on their books, however, the credit unions will avoid any potential problem with reserve requirements. Paradoxically, for many of the credit unions hurt by Please see CREDIT UNIONS, Page 4 'Money Brokers' Who Sold CDs Come Under Spotlight By BILL SING.

Times Staff Writer On some days during the last year, William Goldsmith's clients bought as much as $3 million in certificates of deposit from Penn Square Bank of Oklahoma City. "It was a rapidly growing bank; it was a profitable bank," Goldsmith said in recalling why he and his Del Mar-based Professional Asset Management firm recommended the Oklahoma institution. But this last week, some of Goldsmith's clients including some large California credit unions found out that they may lose some of their deposits in the wake of the bank's collapse on Monday. And as a result, attention is being focused on Goldsmith and other "money brokers" a relatively new, fast-growing breed of part-salesmen, part-financial advisers who sell large certificates of deposits for banks and savings and loan associations. Unfortunately for these brokers, some of that attention now may be negative.

Money brokers have been around for at least a decade but have burgeoned recently in an environment of continued high interest rates, recession and corporate cashflow problems. Searching for Funds To stay afloat, corporations have had to borrow unusually high amounts in short-term loans. This demand for short-term money has in turn led banks and to search aggressively for funds often in the form of large certificates of deposit of $100,000 or more to fill the loan demand. Such jumbo certificates usually carry a higher interest rate, but amounts over $100,000 are not covered by government-backed insurance plans. Because of the demand for big certificates, the money brokers often former brokers or money managers for traditional brokerage houses such as Merrill Lynch and E.F.

Hutton have found a growing demand for their services, often from smaller banks and who have more difficulty attracting big deposits. Penn Square, a relatively small bank by national standards, apparently needed more and more cash for its growing portfolio of loans to oil and gas producers, drilling-rig operators and oil-service companies. The large, traditional brokerage houses could have sold certificates for Penn Square, but by policy they normally sell only for the largest, most reputable banks. Please see MONEY BROKERS, Page 5 DOW 30 NYSE AMEX NASDAQ WILSHIRE I 1 I I 11 5.32 0 day. A year ago the index sukkI at 1,359.28.

For ihe 12 -month period, the index high stands at 1.412.710, the low at 1.102 972. The market began the day with a wave of selling that hit bank stocks particularly hard, as traders registered their concern over ihe failure early this week of the Oklahoma City-based Penn Square Bank. Easier Credit? But prices bounced bark in the latter stages of the session, following the lead of a strong showing by the bond and short-term money markets. Interest rates on shori-ierm Treasury bills fell by one-half it two-thirds of a percentage point Prices of long-term government bonds, buoyed by falling rates, climbed as much as $20 for everv $1,000 in face value. The drop in interest rates also touched off buying in the precious -metals markets.

Gold rose $11.30 an ounce to $322.60. and silver 38 cents an ounce to $6.10. on ihe Commodity Exchange in New York. Among gold-mining stocks, ASA was up 2 at 28', Homestakc Mining l'sat 21'i. and Campbell Red Lake Mines 7 al 95s.

Banking issues finished mostly lower, meanwhile, but well above their worst levels of the day. Continental Illinois, which has said it expects to post a second -quarter loss because of its loan dealings with Penn Square, dropped 5s to 18. Chase Manhattan fell 1 to 36, Citi -corp to 23V. and J. P.

Morgan 1 to 48. Hanna Mining was the biggest loser among NYSE issues, off 67s at 181. Norcen Energy reached an agreement Wednesday to increase its position in Hanna to 20 rather than the bigger stake it had earlier proposed to acquire. Thursday, July 8, 1982 1 1.105 months, sales were down 4.7 to $2.1 billion from $2.2 billion. Inflation in the retail industry overall is estimated at 4.

"The weakness, with the exception of video games and toys, was across the board by product line and price point," Greenstein said. "The upper-end consumers, who had been the strong point, are holding back their purchases too." he said. "You're going to have some very heavy promotions in July." Sales Increase At Los Angeles-based Carter Hawley Hale Stores, for example, sales for its specialty stores, which include Neiman-Marcus, Bergdorf Goodman and Holt, Renfrew of Montreal, were down 5.4. Department store sales, including those of the Broadway in Southern California, increased by only 1.3 while specialized merchandising operations increased by 5.1. Carter Hawley Hale reported an overall increase of 3.7 in sales for the month of June with sales totaling $259.3 million compared to $250.1 million for the same period in 1981.

Jeffrey Feiner. an analyst with Merrill Lynch. Pierce. Fenner Smith said the poor June sales have left merchandisers with heavy inventories of spring and summer merchandise, meaning briskcr-than-usual sales this month. Greenstein said inventories of designer apparel arc especially big.

In other reports: F. W. Woolworth New York-based fourth -largest retailer, said sales for June rose 2.6 to $679.6 million from $662,738 million. For the five months, sales were up 2.4 to $2.86 billion from $2.79 billion. No.

5 Federated Department Stores Cincinnati, said June sales rose 6.3 to $622.8 million from $585.6 million. For the five months, sales were up 8.3 to billion from $2.58 billion. No. 7 Dayton Hudson Minneapolis, said sales rose 11.4 to $477.5 million from $428.8 million. For the five months, sales were up 13.9 to billion from $17 billion.

By MARTIN BARON. Times Staff Writer NEW YORK-Dismayed by the failure of Penn Square Bank, several large money-market funds said Thursday that they will curtail investments in unsecured debt and uninsured deposits of major banks that face big losses from the collapse of the Oklahoma City institution. A number of money-market officials said the failure had rocked confidence in the financial diligence of certain major banks some of which already were being shunned by money managers as overly aggressive in their lending and worri-somely weak in making full disclosure of problem loans. "The credibility of the banking industry is a little bit on the weak side with certain banks particularly," said a credit analyst at one major money-market fund, who asked for anonymity. Money funds have emerged unscathed so far from the Penn Square affair.

There have been no reports that any money fund had invested in securities or certificates of deposit issued by the Oklahoma bank. While a spokesman for the Federal Deposit Insurance Corp. said the agency doesn't know whether any money funds will be hurt, a key Securities and Exchange Commission official said he doubted that any money funds were significantly involved. Didn't Meet Criteria With less than $400 million in assets, Penn Square did not meet the normal criteria for investment used by almost all money funds. Most funds invest only in institutions with more than $1 billion in assets.

Penn Square's problems had become widely known, and funds usually restrict their investments to lop-rated financial institutions only. "Most money market funds are very restrictive in their credit policies," said Susan Silbert, portfolio manager of Los Angeles-based Transamerica Cash Reserves, a money market fund. But the incident is bound to rattle investors and money fund managers. "This should shake people up, no doubt about it," said Alan Schreiber, vice president of T. Rowe Price Associates, a Baltimore-based mutual fund group.

"People are going to take a loss in a bank; holy cow, nobody's lost money in a bank in a long time." Penn Square, the fourth -largest bank in Oklahoma, was closed last Monday by federal regulators, who declared it insolvent because of large loan losses. The regulators are Please see FUNDS, Page 2 Installment Debt Increases $1.4 Billion WASHINGTON iP-Americans took on $1.4 billion more in installment debt than they paid off in May, the government reported Thursday. It was the largest increase in eight months, but still a modest gain in comparison to pre -recession totals. Robert Ortner. the Commerce Department's chief economist, called the report encouraging.

And he said that "to the extent that it's a reflection of consumer confidence in the future, it could be very important." But he stopped far short of saying Thursday's Federal Reserve Board report indicated imminent, robust recovery from the 1981-82 recession. Ornter noted that unemployment remained high in June and that auto sales fell sharply after helping to push the consumer credit figures higher in May. Slump in Autos Private analyst Thomas Thomson, chief economist for Crocker National Bank in San Francisco, also pointed to recent reports of slumping June auto sales as an indication that credit figures didn't rise nearly as much in June as in May. And the May increase in overall outstanding installment debt, though large in comparison with recent months, was hardly a big number of pre -recession standards, he said. "I wouldn't read into the May report anything very positive about the consumer," Thomson said.

American consumers worried that pay raises will be small or that Please see DEBT, Page 2 3 Big Retailers Report Decline in June Sales Despite FCC Rulings. Investors Remain Wary of ON- TV Firm Oak Industries Poises for a Boom NEW YORK (iR-Summer got off to a lazy start at the nation's major retailers, with three of the largest reporting Thursday that they had sales declines in June. That could mean big summer bargains for shoppers, particularly those looking for designer clothing. Analysts blamed the disappointing June sales on the recession and high interest rates, which are still keeping consumers away from stores. Even analysts who optimistically predicted a slight recovery in the retail industry after a pickup in sales in May said the May results were an aberration, benefiting from business that otherwise would have taken place in snowy April.

They now say true recovery is not expected until the back-to-school shopping season. "The consumer still was basically unwilling to buy general merchandise in June," said Monroe Green -stein, an analyst who follows the retail industry for Bear, Stearns Inc. Sears Sales Tumble Sears. Roebuck the largest general merchandise retailer, said sales tumbled 1 in June from the same month a year before to $1.86 billion from $1.88 billion. For the first five months of its fiscal year, sales at Chicago-based Sears were up 2 to $7.8 billion from $7.67 billion.

Scars Chairman Edward R. Telling attributed the June sales decrease to cooler weather that cut into seasonal purchases of such items as clothing and air conditioners. No. 2 mart based in Troy. said June sales slid 1.2 to $1.59 billion from $1.6 billion.

For the five months, sales were up 5.5 to $6.5 billion from $6.2 billion. At New York-based J.C. Penney the third largest retailer, sales rose a modest 0.2 to $1,033 billion from $1,031 billion. For the five months, sales declined 0.8 to $4,308 billion from $4,344 billion. And Montgomery Ward Co.

of Chicago, the sixth -largest retailer, said sales fell 1.4 to $510.35 million from $517.8 million. For the five County Business Editor dropped, Carter replied: "We would give a lot to know that answer because, as far as management is concerned, we do not have any negatives to announce." Some analysts acknowledge that Oak is well positioned to benefit from the boom in pay -TV technologies and that negative investor reaction may be uncalled for. Oak is a major supplier of advanced "addressable" cable-TV converters and decoders. These allow the operator to supply premium pay -per -screening events and to cut off service to non-paying customers with a flick of a switch, saving a costly service call. The company now has about 42 of the cable-TV decoder and converter market.

BOB CRIBSKB I xx Angrlm Time Everitt A. Carter By ANTHONY RAMIREZ, San Diego SAN DIEGO-After the Federal Communications Commission made two decisions last month favorable to the pay-TV businesses served by Oak Industries the company should have been feeling pretty good. Instead, Oak, which supplies decoders for cable and pay TV and operates over-the-air subscription services including ON -TV in Los Angeles, is battling a bevy of troublesome factors. They include a slowdown in earnings growth and a disturbingly high first-quarter "disconnect rate," which measures the dropoff in customers for Oak's pay -TV service. Meanwhile, the price of the company's stock on the New York Stock Exchange has plunged from a 52-week high of $36.13 a share to a low for the decade of $15.13, reached on June 22.

The stock closed Thursday at $18.25, up $1. The decline has been so steep, company officials say, that acquisition talks, such as with Burbank-based Compact Video have had to be postponed. Wall Street Rumors Wreaking havoc with San Diego-based Oak's efforts to capture new investors are widespread rumors on Wall Street that several large financial institutions have been selling Oak shares. Indeed, Oak's management acknowledges rumors that as many as $1 million Oak shares may be up for sale. "Any time that overhangs the marketplace, it becomes chaotic," Oak Chairman Everitt A.

Carter said. Management of the 50-year-old company is dismayed. Asked recently why Oak's stock price has Late this decade, Oak hopes to become a major factor in direct satellite-to-home broadcasting. In this technology, a TV signal will be broadcast from a powerful satellite to small receivers, or dishes, on the rooftops of subscribers' homes. Without a cable, which subtly distorts a signal, the television picture is expected to be clearer.

The service also will have the advantage of being able to transmit stereophonic sound. With over-the-air pay TV. a scrambled signal is broadcast over existing UHF and VHF stations to subscribers with the special decoder boxes. Because operators do not have to install cable, they enjoy higher profit margins and lower start-up costs. Oak's ON -TV service, formerly a joint venture with A.

Jerrold Per-enchio, a movie and television producer, has about 600,000 customers in five markets, making Oak the largest operator of over-the-air pay TV in the United States. Reporting its 1981 earnings in February, Oak confidently asserted: "There are no signs of recession in these businesses." Nevertheless, these strengths are not enough to offset investors' current reticence. Wall Street is wary, regarding the favorable FCC rulings as only "mild positives" because of doubts about Oak's fundamental businesses and because some of the required technologies are still several years down the line. Three weeks ago, in the first of the decisions, the FCC relaxed restrictions on introduction of pay TV, saying the service can enter any area and broadcast 24 hours a day. Please see OAK, 5.