The Los Angeles Times from Los Angeles, California on October 17, 1989 · 60
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The Los Angeles Times from Los Angeles, California · 60

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Tuesday, October 17, 1989
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D10 IDi:SI)AY.iXTOUi:R 17. 1989 IjOS anghjstimis Panel to Probe Wall's Role in Lincoln S&L Case BRIEFLY Pauley Closing Its Newhall Refinery: Pauley Petroleum inc. said that it will cease operations at its Newhall refinery and put the land up for sale by the end of the year because of slack demand and recent losses. About 15 of the plant's 86 employees will be offered jobs at the company's Fletcher refinery in Carson; the rest will be laid off. the company said. Pauley has operated the refinery since 1959 but said upgrades required by environmental laws would be too costly given the market for the plant's asphalt. Jet fuel and fuel oiL Short-Term T-Bill Rates Drop: The Treasury Department sold $7.6 billion of new three-month bills at an average discount rate of 7.37. down from 7.63 last week. Another $7.6 billion of new six-month bills were sold at an average discount rate of 7.42. down from 7.60 last week. The rates were the lowest since three-month bills sold for 7.36 on Oct 17. 1988. and six-month bills averaged 7.35 last July 31. The new discount rates understate the actual return to investors 7.61 for three-month bills, with a $10,000 bill selling for $9.81170. and 7.82 for a six- T-BiB Auction a.s . 1 J 8.0 "J 3-month J 7.0 U-8X tii2Sa ioie SOT. OCT. pects tough questions but that good reasons exist for the actions that the bank board took. Some analysts think that Wall's predecessor, former bank board Chairman Edwin Gray, should share the blame. "Gray ought to get beaten up just as much as Danny has been," said Bert Ely, an Alexandria, Va.. industry consultant "Gray had the ball and didn't make the hard decision that he should have, and left it instead to his successor. Ed has since been amazingly successful at rewriting history." Gray was once the target of congressional criticism for his seeming inability to stem the flow of S&L disasters. But Gray defends himself. Contacted in France, where he is vacationing. Gray said the recommendation to take down Lincoln didn't reach his desk until about one week before he left office June 30. At that time, he said, it was too late to complete the procedures for seizing Lincoln before his term was up. and the three-member bank board was a member short already. The new board, however, should have been able to take action with two months. Gray said. Instead, the board under Wall listened to Heating's longstanding complaints, found that regulators had leaked information that had damaged Lincoln, suspected that the San Francisco regulators had exacerbated the fractious regulatory relationship with Keating and decided in May, 1988, to remove Lincoln from San Francisco's supervision and to initiate a new audit with a blue-ribbon panel of experienced examiners. Thrifts: Why did regulators wait so long before finally seizing the troubled Irvine firm? By JAMES S. GRAN ELLI " TIMES STAFF WIITEI A controversial decision made 2V6 years ago by federal thrift regulators in Washington will emerge as a focal point of House Banking-Committee hearings that begin today into the failure of Lincoln Savings & Loan in Irvine. The hearings before the 51-member committee are loaded with political overtones. Committee Chairman Henry B. Gonzalez (D-Tex.) is expected to come out swinging at top regulatory executives appointed by former President Ronald Reagan, who he feels are responsible for Lincoln's collapse, perhaps the costliest in the nation's history. The proceedings also are likely to raise more questions about the actions of five US. senators, including California Democrat Alan Cranston, on behalf of Lincoln officials. All five met with regulators concerning Lincoln and received campaign contributions from Phoenix businessman Charles H. Keating Jr. whose company owned Lincoln and from his family and associates. "Our intent is to make this a full record, a major case history, of what went wrong," said Joseph C (Jake) Lewis, spokesman for the banking committee. The only witness today will be L William Seidman, chairman of the Federal Deposit Insurance Corp., which has managed Lincoln since its takeover. Seidman is expected to play the role of coroner, analyzing the S&L's financial condition and explaining its demise. But the committee is clearly taking aim at another regulator M. Danny Wall director of the Office of Thrift Supervision and chairman of its predecessor agency, the Federal Home Loan Bank Board. As head of the thrift industry's regulatory body. Wall decided to ignore the recommendations of the board's regional office in California regarding Lincoln. Federal regulators in San Francisco had decided by May 1, 1987, that they needed to seize Lincoln or otherwise gain control of the thrift's activities. But since Wall and another appointee of the three-member board were scheduled to take office July 1, no action was taken. It wasn't until almost two years later that regulators took over Lincoln, a day after its parent company, American Continental Corp. in Phoenix, had filed for bankruptcy protection. By then, some 22,000 people, mostly elderly Southern Californlans, had bought about $200 million in American Continental bonds, which now may be worthless. Why regulators waited so long before finally seizing Lincoln is what the banking committee hopes to determine in the hearings, which will involve four sessions over three weeks. "That May, 1987, date was a key one because it was the first time there was a flat finding by regulators" of cause to take action against Lincoln. Lewis said. Since that date, he said, "there's been great curiosity" about why the recommendations of the San Francisco regional regulators were never followed, why they were removed from supervising Lincoln and why their unusually long examination of the S&L's financial health was thrown out and a new one ordered. "The committee wants to know what this delay meant ultimately to the deposit insurance! fund." Lewis said. Gonzalez has blamed Wall for "gross mishandling" of the Lincoln case and for unprecedented actions in removing the San Francisco regulators. The delay, he claimed, could cost taxpayers more than $2 billion. Wall has put the cost of Lincoln's failure at $1.1 billion to $1.5 billion. A key provision of President Bush's thrift bailout law was whether Wall would be allowed to continue as the nation's top thrift regulator. The new law allowed him to remain, much to the dismay of Gonzalez. They're going to fry Wall," a regulatory official in San Francisco said about the committee hearing. "If Gonzalez doesn't get him on Lincoln, he'll get him for all the deals that were done at the end of last year." Lawmakers have repeatedly charged that in the so-called December deals, the bank board sold 75 insolvent institutions at fire-sale prices and committed the federal government to honoring $16 billion of insurance fund obligations without proper authority. Wall said recently that he ex month bill selling for $9,624.90. The discount rate reflects the price discount received when government securities are purchased at less than face value. Prosperous Decade Forecast The 1990s should be more prosperous as the result of new economic competition, according to the new First Interstate Bancorp Economic Forecast. "Competition among the Untied States, a much more unified Europe. Japan and the newly industrializing economies of Asia will promote economic growth." according to Jerry Jordan, senior vice president and chief economist He added that the VS. economy is likely to weaken in the latter part of 1989. with softness spilling over into early 1990. California's growth rate will also be reduced due to the national slowdown and a decline in defense spending, he said. Coldwell Banker Sells StOCk: Coldwell Banker Commercial Group said it has completed the sale of about $47 million worth of common stock to its employees, bringing employee ownership in the commercial brokerage to more than 40. The price of the stock was $ 10 a share. A group of employees and outside investors bought the company in April for about $300 million from Sears. Roebuck L Co. The company said money raised from the sale would be used in several ways, including for working capital and to pay back loans from Sears. EARNINGS Security Pacific Posts 10 Gain; Big Loss at J. R Morgan T . - From Times Wire Services Security Pacific Corp., the nation's sixth-largest bank holding company, said Monday that its quarterly profit rose 10. J. P. Morgan I Co.. the third-largest bank holding company, posted a third-quarter loss of $ 1.8 billion. The Los Angeles-based Security Pacific attributed its gains to strong results from California and the Northwest overcoming weakness in Arizona commercial real estate. For the quarter ending Sept 30 the parent of Security Pacific Bank, with operations throughout the West earned $185.1 million com Net Income Mixed at Big Brokerages in 3rd Quarter loans to Third World customers. The loss for the three months ended Sept 30. compared to a profit of $233.6 million during the same period a year ago. It was in line with projections made Sept 21, when Morgan announced that it was adding $2 billion to its loan-loss - reserves. Other major banks took similar action and also showed big third-quarter losses. The additional funds brought Morgan's reserves to $3 billion, or 100 of its estimated portfolio of medium-term and long -term lending in Third World countries the highest of any money -center bank. For the first nine months of this year. Merrill Lynch said it earned $1414 million from continuing operations, compared to $164.1 million in 1988. Bear Stearns Chairman Atan C Crcenbcrg said he was pleased with the first-quarter results "because several of our departments . . . were operating in a very difficult environment" He said the company saw a decline in principal transactions during the quarter due to a drop in government bond trading activities, among other things. Paine Webber said third-quarter results included a broad-based improvement in core businesses. It said the 1388 results included a pretax gain of S4&3 million and For the first nine months of 1989. Morgan's net loss was $1.4 billion, compared to last year's earnings of $744 million. Morgan said its non-interest income rose by 12 to $414 million in the third quarter, but non-interest expenses also increased in the quarter, to $496 million from $429 million. . Net interest income fell to $254 million from $347 million, while net interest expenses rose to $496 million from $429 million. Morgan is the parent of flagship Morgan Guaranty Trust Co. of New York and has assets of about $ 100.4 billion. that without that gain, the company would have shown a loss for the quarter. For the first nine months of 1989, Paine Webber's earnings totaled $41.09 million on revenue of $1.27 billion. That compared to earnings of $41.84 million and revenue of $1 JO billion during the same period last year. Schwab said it earned $4.6 million in the third quarter on $1411 million in revenue. That was up from earnings of $2.7 million and revenue of $38 million. For the first three quarters. Schwab earnings rose to $12.8 million from $6.8 million. Revenue touted $185.6 million, up from $158.4 million. LotS Of Christmas Trees: Despite the preference of many Americans for artificial Christmas trees, the US. Department of Agriculture is expecting a bumper year for Christmas tree farmers. A record 34.3 million Christmas trees were sold in 1988; this year, the USDA expects the market to exceed 35 million. t Kaufman & Broad Forms Unit to Buy Land: Kaufman l Broad Home Cory . the Los Angeles-based home-builder, has formed a S53.4-mitlion joint venture unit to buy California land suitable for residential development The unit Kaufman It Broad Land Development Venture Ltd. Partnership, is a 50-50 joint venture with a trust created by institutional clients of Heitman Advisory Corp., a unit of Heitman Financial Corp. Heitman is a real estate advisory, management and development company with offices in Chicago and Beverly Hills. The announcement did not identify the investors. Lockheed tO Keep CalComp: Lockheed said it decided to keep its CalComp unit an Anaheim-based maker of plotters and other computer-related graphics products. CalComp is the biggest of four companies in Lockheed's Information Systems Group, all of which were put up for sale in April But Lockheed said CalComp's profits surpass iU expected return on the sale. The unit with 2.500 employees, accounted for $425 million of the aerospace giant's $ 10.6 billion in overall 1988 revenue. Lockheed said talks on the sale of the three other operations Cadam. Metier and Lockheed Data-Plan are continuing. Compaq Introduces New Laptop: Compaq Computer Corp. unveiled its latest laptop computer, a "dazzling little machine" it claimed would become the new standard for small, lightweight but full-function personal computers. The Compaq LTE is 8 Vi by 11 inches in size and is just under 2 inches thick. With battery and standard 3Vi-inch diskette drive, the computer weighs 6 pounds. The fixed disk drive has 40 megabytes of mcmorys an optional internal modem is about the size of a credit card and permits connection to any standard telephone line. Prices range from $2,999 to $4,999. Shipments to dealers are under way. from Associated Press Merrill Lynch & Co. and Paine Webber Group Inc. reported Monday that their earnings declined in the third quarter, while another large securities firm. Bear Stearns Cos.. said its fiscal first-quarter profit rose over a year ago. Meanwhile. Charles Schwab Corp., a San Francisco-based discount brokerage, said it had a sharp earnings increase in the three months ended Sept 3a Merrill Lynch, based in New York, said net income from continuing operations fell to $412 million from $56.1 million in 1988. Revenue rose 10 to $18 billion from $2.6 billion. Bear Stearns, of New York, said first-quarter earnings totaled $22.1 pared to $167.9 million for third-quarter 1988. "Strong growth in our California consumer and residential real estate businesses, continuing strength in our Pacific Northwest business units, as well as a good showing by our financial services units, have more than offset continuing weaknesses in the Arizona commercial real estate market" said Richard J. Flamson II, chairman and chief executive. The New York-based Morgan said the SU-billion. third-quarter loss reflected its decision to add $2 billion to its reserves against shaky million, compared to $20.5 million . in the same period last year. Revenue rose 21 to $580.4 million from $478.9 million in 1988. Paine Webber, also of New York, said third-quarter earnings totaled $16.83 million on revenue of $444.87 million. That compared to earnings of $20.92 million on revenue of $450.73 million in 1983. Merrill Lynch said the third-. quarter results "reflected an industrywide softness in some of our core business activities." "The lower volume of underwriting activity and principal transactions were partially offset by revenue increases from commissions and asset management fees." the company said in a statement "Demand for IBM products and services continues to be good worldwide." Akers said In a prepared statement However, several Wall Street analysts remained cautious and advised investors not to view IBM as a bargain stock. IBM shares, which closed at $ 102 after Friday's stock market free-fall, recovered slightly Monday to close at $103. It was the third most actively traded stock on the New York Slock Exchange. "I'm not recommending that people "bottom fish' even at these levels." Cohen said. "The stock is at best dead money. I see no good news in the future, and there's a potential for bad news." Several analysts have com plained in recent weeks that IBM's work force although smaller than two years ago remains too bloated for the tough competition it faces in virtually every segment of its computer business. Further, they say. the industry wide slowdown in mainframe and mid-range computer sales has had particularly harsh results at IBM because it has historically depended on these products for the bulk of its profit Finally, they note that IBM is corisptcuously absent from two of the fastest growing segments of the computer industry: high-powered desktop workstations and portable laptop models. Profit Off Almost 30 at IBM; Product Delays Cited Giaal Graaa Lti. In Beverly Hills terminated negotiations for the purchase of Asa Airways la. Giant Group was not immediately available for comment . . . Houston-based Baker Hagbas lac reported that the number of US rigs drilling for oil and gas rose by 21 U981 in the week ended Oct 13. compared to 925 a year ago. . . The Federal Rtttrvt said the average yield for one-year T-bills, the mart popular index for making changes in adjustable rate mortgages, fell to 8.00 last week, down from 835 the week before. Kmart to Pay $322 Million for Pace Warehouse Inc. Goldetl Witt Financial Corp.: The Oakland parent of World Savings A Loan Assn. said third-quarter earnings were up more than 16 to $41.8 million. Interest income was up almost 43 to $438 million. The company attributed the increases to a significant rise in loans over the past 12 months. Humana tnCJ The Louisville. Ky.-based health -care provider reported that net income for the year ended Aug. 31 rose 117 to $256 million. Sales totaled $4.09 billion, up almost 19 from fiscal 1988. The company said the earnings figures included an extraordinary loss of $ 16. 1 million from the early retirement of debt and a gain of $ 161 million from a change in accounting procedures. NCR Corp.! The Dayton. Ohio, maker of business information processing systems said third-quarter earnings were $33.1 million, down almost 10 from a year ago. Revenue was $1.4 billion, about the same as its record level last year. The company blamed the reduced earnings in part on its repurchase of 17 million shares of common stock. Reynolds Metals Coj The Richmond. Va company said third-quarter profit fell almost 10 due to lower prices for its aluminum products and increased material and labor costs. Earnings for the period were $123.7 million on revenue of $1.52 billion. In the same quarter a year ago. the company reported earnings of $ 137.2 million on revenue of $ 1.48 billion. TRW tUCJt The Cleveland -based producer of aerospace, automotive products and information services said third-quarter net income fell 11 to $00 million, while revenue rose 8 to SIJ billion from a year ago. The company said that excluding di vcsUlure gains in the ycar-ago period and the effects of the recall of certain truck gears, net earnings would have increased 16. Upjohn COJ The Kalamatoo. Mich., drug company said third-quarter earnings rose 7 to $96 million. Revenue was up 10 to $717 million. The company noted that operating costs and expenses were down as a result of cost-containment measures and that pharmaceutical sales in the United Slates benefited significantly from previously announced price increases on several major products. Taktaa,Pacal2 By CARLA LAZZARESail TIMES STAFF lltl International Business Machines Corp., which three weeks ago tunned Wall Street when it projected lower third-quarter profit disclosed the actual results Mondayearnings for the three months were $877 million, down nearly 30 from a year earlier. It was the second quarter this year that the profit of the world's largest computer company was down from the same period in 19S8. Several analysts said they are bracing themselves for even more down quarters. "There could be further disappointments down the road." said Steven Cohen, an analyst with SoundView Financial in Stamford. Conn. Revenue for the quarter ended Sept 30 was S1U billion, up 13 from a year earlier. For the first nine months of the year, profit was 112 billion, down 8. on revenue that rose 65 to $412 billion. As it did three weeks ago. the company blamed the quarter's performance on delays in new product introduction, a switch by custom ers to leasing from buying computer and the strength of the US dollar, which reduces the effects of foreign sales. IBM Oiainnan John F. Akers said the latest results represented the effects of short-term economic farces and do not foreshadow further problems. I'ram Associated Prevt TROY. Mich.-Major retailer K mart Corp. will purchase Pace Membership Warehouse Inc. for about $322 million under an agreement announced Monday. The board of Pace has approved the agreement and recommended that stockholders lender their shares. K mart and Pace said in a frurit statement K mart is to pay $23 a share. The acquisition of Pace would expand discounter Knurl's business in warchou-c-slylc retailing. K mart already has a warehouse club chain. hUkro Inc, with six outlets m the Cincinnati. Washington. Philadelphia. Baltimore and Cleveland areas. Pace and Makro will continue to be operated under Iheir present managements. The membership-warehouse concept has great potential, and the long-term prospects for Pace Membership Warehouse and lis employees will be enhanced by the affiliation with K mart" said Joseph H Anlonini, K mart's chair man and chief executive, and Wayne IL Patterson. Pace's chairman. Pace, based in Aurora. Cola, has 41 outlets in California, Colorado, Florida. Ccorjria. Iowa. Kentucky. Maryland. Michigan. Nebraska. North Carolina and Pennsylvania. The company reported revenue of $ U billion for im K mart has 4.150 stores in the United Slates. Puerto Rico and Canada, including 2JS3 Kmart discount stores. 12(1 WakJenbooks shops. 279 Pay l-css Drug stores and 141 Builders Square outlets.

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