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2The Daily Tar Heel Wednesday, March 22, 1989
World and Nation
kl y fife ir record! losses lira
From Associated Press reports
WASHINGTON The nation's
savings and loans lost a record $12.1
billion in 1988 and face continuing
problems in 1989 from rising interest
rates, government officials said
The Federal Home Loan Bank
Board said the 2,949 S&Ls lost $2.3
billion in the fourth quarter, pushing
red ink for the year well past the
previous record of $7.8 billion set in
Still, losses in the second half of
the year, $4.1 billion, were down
substantially from the first halfs $8
billion, largely because of govern
ment efforts to close, merge or prop
up 223 institutions, also a post
James Barth, chief economist of
the bank board, said the worst may
be over, but he warned that the effect
of rising interest rates in 1989 will be
"Operating income should be lower
across the board for all thrifts in the
first and second quarters," Barth said,
adding, however, "I would guess we
aren't going to see $12.1 billion (in
losses) in 1989."
Savings and loans make their
money by borrowing short-term,
from depositors, and lending long
term, for mortgages and other pur
poses. When rates follow a normal
pattern, higher long rates and lower
short rates, institutions earn more on
loans than they pay to depositors. But
currently short-term rates approach
and in some cases surpass long-term
rates, severely cutting into earnings.
Much of 1988's red ink was old
in the sense that institutions finally
got around to recognizing bad loans
that had long ago gone sour. About
$11 billion in such non-operating
losses, together with $1.9 billion in
tax payments by the industry, more
than offset a modest $900 million
profit on current operations.
Most analysts believe the non
operating losses will ease in 1989,
while rising interest rates will erode
Bert Ely, an Alexandria, Va.,
financial institutions analyst, said
government assistance paid to S&Ls
this year as a result of last year's
rescue deals will mask $5 billion to
$6 billion in 1989 losses.
"It's just like the farm economy;
if we have better results in 1989, it's
only because a substantial subsidy is
being pumped into the industry," Ely
In another result of government
spending, the industry's capital hit a
record $46.2 billion at the end of 1988,
amounting to 3.4 percent of $1.4
trillion in loans and other assets.
That's up from 2.7 percent at the
end of 1987, but the industry still has
a long way to go to come up to the
6 percent that is standard for banks
and would be required of S&Ls by
June 1991 under President Bush's
plan for dealing with the S&L crisis.
Meanwhile, the bank board's Barth
said the heaviest losses continue to
be concentrated in just a few insti
tutions, with the 20 most-troubled
institutions losing $2 billion in the
Nine of the worst 20 were in Texas,
and the state's 204 institutions collec
tively lost $1.38 billion in the fourth
For the year, the 30 percent of the
industry that was unprofitable lost
$17.7 billion, more than swamping
the $5.6 billion earned by solvent
The agency also said the number
of insolvent institutions at year-end
declined for the first time in. the
decade from 520 at the end of 1987
to 364 at the end of 1988.
So far this year, the bank board
has shut down or sold 11 of those
364. It lists about another 250
institutions as solvent but troubled
and likely to require' government
In other savings and loan devel
opments Tuesday, Budget Director
Richard Darman, appearing before
a House Banking subcommittee,
defended plans to borrow S&L rescue
money in a way that would keep $50
billion from showing up in the federal
Fighteir plane agreement may face changes
From Associated Press reports
Bush is expected to propose major
changes in the FSX fighter plane
agreement with Japan in order to
safeguard U.S. technology and make
the project more palatable to critics,
U.S. officials said Tuesday.
The proposed modifications would
seek to protect, along with other
sensitive U.S. data, computer "source
codes" that help fly and control the
plane, said Bush administration and
The changes would also give the
Commerce Department an expanded
role to monitor the project and keep
track of Japanese compliance with
the agreement, said the sources, who
insisted upon anonymity.
fiTs American Hoart
A remaining issue of contention is
whether Bush will incorporate his
changes in a complete revision of the
1988 agreement negotiated by the
Reagan administration, or serve them
up as "side agreements," the sources
The plane is to be an advanced
version of the American-made F-16
fighter, and will be built in Japan.
Congressional opponents have called
the project a giveaway of U.S.
expertise to a nation with whom the
United States is running its largest
trade deficit, more than $50 billion
The sources said that Commerce
Secretary Robert Mosbacher, who
favored tighter controls on the
project, appears to be the victor in
a Cabinet tug-of-war with the
Defense and State Departments,
which had supported the project with
A formal decision by Bush was
expected within the next few days,
White House aides said.
"Defense and State are being given
a final chance to make their case,"
said one official.
Marlin Fitzwater, Bush's press
secretary, said that as of Tuesday the
president still was not ready to
announce details, even though
"aspects of the. decision" had been,
discussed with the Japanese
"We're interested in their review of
some of the suggestions weVe made
and some of the options weVe laid
out," Fitzwater said.
The Japanese government was said
to be resisting efforts to completely
redo the agreement. However, oppo
nents of the project suggested Tues
day that side agreements with Japan
were more difficult to enforce and
could torpedo the entire project in
the House and Senate.
The Reagan administration nego
tiated the arrangement after Japan
refused to buy F-16s and indicated
it would build its own jet fighters.
The new FSX plane would be built
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jointly by General Dynamics and
Japan's Mitsubishi Heavy Industries.
Backers, of the project within the
administration argued that it should
go ahead to avoid damaging U.S.
Japanese relations. But skeptics,
including Mosbacher, argued that the
technology transfer could work to the
disadvantage of U.S. industry, par
ticularly if the Japanese used the
advanced technology in building
Under the proposed restrictions on
computer "source codes," first
reported by The Washington Post,
the technology would be shared with
the Japanese for the FSX project, but
in such a way that the data could
not be used on other enterprises.
The codes supply the fighter's
computer with information on how
to control the plane and its weapons.
Restrictions on these codes were
not part of the original agreement,
and would have to be handled either
in a side agreement or in a complete
rewrite, administration officials said.
Transport secretary defends
concealing Pan Am warning
From Associated Press reports
LONDON Embattled Trans
port Secretary Paul Channon
went before a jeering Parliament
on Tuesday and denied he was lax
in warning airlines of a new type
of terrorist bomb before the Pan
Am Flight 103 disaster.
Channon, often shouting above
calls for his resignation, said that
after the jumbo jet was blown
apart over Scotland on Dec. 21,
he concealed from Parliament for
security reasons the international
alert about a radio-cassette bomb.
He also said that at the time,
he thought the disaster could have
been an accident. ;
"I told Parliament all I could,"
Channon said during a House of
Commons emergency debate,
forced by the opposition Labor
Party. "In investigations where
there are also important security
matters it is essential that all of
us exercise a certain degree of
Prime Minister Margaret
Thatcher rallied to Channon's
defense, declaring that "totally
unfair accusations have been made
against him by lesser men."
10 die in Brazilian plane crash
GUARULHOS, Brazil A
Brazilian cargo plane crashed and
exploded in a shantytown in this
southeastern city Tuesday. Offi-.
cials said the three-member crew
and at least seven people on the
ground were killed and more than
100 people were injured.
Lt. Col. Nelson Coura Mar
tinho of the Sao Paulo state police
said rescue teams found the bodies
of the three crew members and two
children and a woman who were
burned to death.
"We expect there may be more
bodies under the rubble," said
Martinho, standing on a muddy
hillside surrounded by the charred
remains of wooden shacks in the
Jardim Sentilha slum.
Also killed were a severely
burned pregnant woman and her
baby boy, who was born in a
News in Brief
hospital emergency ward minutes
after his mother's death but died
soon after, said doctors at the,
Catuape Hospital in Sao Paulo;
15 miles away.
Israelis hold news conference
JERUSALEM Prime Mm;
ister Yitzhak Shamir and Shimon
Peres, his political rival arid
partner, said Tuesday that peace
is more important than party
politics despite a battle within their'
troubled coalition over talking
with the Palestine Liberation'
Organization (PLO). ;.'
Shamir and Peres, who -Is'
finance minister and leads the
center-left Labor Party, held "a
news conference after addressing
1 ,600 international Jewish leade'rs
invited by the government - to
express solidarity with Israel.
2 officers killed in IRA attack
BELFAST, Northern Irelancf
Police and troops searched for
booby traps Tuesday before rem
oving the bodies of two senipt
police officers killed in an Irish
Republican Army (IRA) ambus.lv
Ireland pledged to help catch th
IRA guerrillas hid behind a wall
and sprayed the officers' car with
gunfire as they returned from, a
meeting Monday with their Irish
counterparts in the border town
of Dundalk, police said.
Northern Ireland Secretary
Tom King, Britain's top official in
the province, called the killings "a
deliberate attack on the security
cooperation" envisioned in the
1985 Anglo-Irish Agreement,
which gave the Republic of Ireland
a voice in Northern Ireland's
"Everything that can be done
will be done to find the perpetra
tors," King told Parliament in
Navy jro i 5 1 e mm a I f u o ct i o n ,
explodes after teSt Jatw.
From Associated Press reports
CAPE CANAVERAL, Ha. A
$23.7 million Trident 2 missile cart
wheeled out of control and exploded
Tuesday just four seconds after it
blasted off on the first submarine test
launch of the Navy's newest, most
powerful weapon, the Navy reported.
The crew of the nuclear submarine
USS Tennessee launched the long
range missile at 11:20 a.m. while
cruising submerged in the Atlantic
Ocean several miles off Cape
The 44-foot Trident 2 burst to the
ocean's surface, and its first stage
rocket motor ignited before the
malfunction "caused it to veer off
course and self-destruct after four
seconds of flight," a Navy statement
Flaming debris from the missile
showered into the ocean. The Navy
said no damage was done to the
submarine or nearby support ships.
Each of the three-stage Trident 2s
can deliver three to 12 warheads to
individual targets up to 6,000 miles
away. The Navy said the test missile
carried only an instrumented dummy
The failure could delay Navy plans
to have the intercontinental-range
Trident 2 operational in time to send
the Tennessee on operational patrol
late this year with 24 of the deadly
- The statement said the exact cause
of the malfunction cannot be deter
mined until the flight data is studied.
The test was the first of about 10
undersea firings planned here in the
next few months. That program
could be put on hold while the failure
is being investigated.
The Navy says the new weapon is
much more accurate than its undersea
predecessors, Polaris, Poseidon and
Trident 1, and can match the target
ing ability of land-based missiles even
though it is launched from a sub
merged, moving submarine.
Published reports have said Tri
dent 2 warheads can strike within 400
feet of their targets, compared with
about 1,500 feet for the Trident 1.
That striking distance matches the
predicted accuracy of the new land
based MX missile.
Tuesday's launch from the Tennes
see was preceded by what the Navy
called a highly successful series of test
firings from a land launch pad at
Cape Canaveral, dating back to
Fifteen of those tests were rated
successes and one a "no test" which
occurred when an Air Force safety
officer destroyed the missile by
triggering onboard explosives with a
radio signal after his radar indicated
it was off course.
The destroyed missile was deliber
ately programmed to go off course
to test the guidance system's ability
to correct its path but, through a
mixup, the safety officer was not
notified of this plan. .. .
The Tennessee is the first of nine
submarines equipped to carry the
Trident 2. Its crew of 17 officers .and
142 enlisted personnel was com
manded Tuesday by Navy Capt.
Three high-ranking naval officers
were aboard the Tennessee for the test
firing: Vice Adm. Daniel Cooper,
assistant chief of naval operations, for
undersea warfare; Vice Adm. Roger
Bacon, commander Submarine
Atlantic Fleet; and Rear Adm.
Kenneth Malley, director of strategic
systems programs. - - v
Bennett planning drug czar agenda
From Associated Press reports
WASHINGTON Drug czar
William Bennett is considering every
thing from imprisoning drug dealers
on barges on the Potomac River to
evicting convicted dealers from public
housing as possible options in the war
on drugs in Washington, the nation's
murder capital, an aide said Tuesday.
Bennett has said he may make the
District of Columbia a test case in
the war on drugs by designating it
the nation's first "high-intensity drug
Such a designation, which was
included in the drug bill passed by
Congress last year that created
Bennett's Office of National Drug
Control Policy, would allow him to
allocate federal personnel and cash
to combat the problem.
The District of Columbia became
the nation's murder capital with 372
slayings last year, the highest per
capita rate in the country. So far this
year, there have been 119 murders,
compared with 73 at this time in 1988,
police said Tuesday.
A dozen people in Bennett's office
are investigating the options, said an
aide, who spoke on grounds of
Anything attempted for Washing
ton would be viewed by the office as
"how it would fit in as a demonstra
tion program, a model program.
We're trying to keep our eye on the
ball, and the ball is the overall
The national plan is due Sept. 9.
"The number one thing we're
thinking about is expanded prison
space, to put more people away for
longer periods of time," the aide said.
"We're looking at a vast range of
"One is to use military bases as
prisons. We're also thinking about
boats, putting prisoners on barges in
the river," he said, noting that New
York is already doing that.
Another option being used by New
York and under consideration for
Washington is a 24-hour drug court,
the aide said, adding that the pos
sibilities of expanded court time,
special courts, additional judges and
prosecutors are all being considered.
For the Record
Although there has been much talk
publicly about increased use of the
military, the aide said the primary use
of any part of the military, including
the National Guard if it were called
in, would be for help with surveillance
equipment or possibly with medical
care and law enforcement training.
"Probably the last and least likely
thing would be actual troops on the
street," the aide said. "The military's
just not meant to be part and parcel
of civilian arrest troops. They " tan
help out and train or work with
specialty equipment, but not on the
Bennett, speaking Tuesday at a
drug conference in Paradise Valley,
Ariz., said he has no plan to use
National Guard troops.
"Ii's not something that is in the
works," Bennett said. "It's certainly
nothing that weVe considered, 4$ a
The aide said another option being
considered is to improve coordinated
efforts of federal law enforcement
officials with the local police, but hot
necessarily to reassign Drug Enforce
ment Administration or FBI agents
from elsewhere to the Washington
The 1989 NCAA Men's Basketball Midwest champion will . face the It is not "realistic" to "bring in a
Championship brackets that ran in Southeast champion, and the East whole cadre of FBI or DEA agents
the Monday, March 20 DTH rev- champion will face the West cham- and leave other places bare," the aide
ersed the Final Four pairings. The pion. The DTH regrets the error. v said.