The First Time News Was Fit To Print: Conan, Laptops & Credit Default Swaps
It's time for another edition of The First Time News Was Fit To Print, where we travel into the archives of The New York Times and find the first time the paper covered various subjects. If you have a suggestion for a future installment, leave a comment.
Automated Teller Machines
Methods of Future Displayed Here; Exhibit Portends More Automation for Banking
Bankers are moving with all deliberate speed into the age of automation and electronics, if the exhibition accompanying the centennial convention of the American Bankers Association can be used as an indicator of industry trends.
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James E. Lodge, director of operations, automated division of the A.B.A., said there were three forms of electronic funds-transfer systems: 1) Automated clearing house for checks. 2) Automated teller machines to make banking more convenient for customers. 3) Point-of-sale devices at store checkout counters.
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While the electronic gear of the future purred, hummed and pinged, the hucksterism of earlier ages at many booths showed bankers how to bring the customer into the tent with premiums of Bibles, tennis racquets and hand-painted portraits.
Portable Computers Show Signs of Losing Weight
Accompanied by much grunting, huffing and heaving, the first "portable" computers lumbered into the marketplace several years ago. Some of them weighed 30 pounds or more, hardly dainty enough to be carried gracefully while dashing through an airport, and they were priced as if they were worth their weight in gold.
While the pricetags of portables are still relatively fat, the computers themselves are becoming mere wisps, often weighing less than 10 pounds and small enough to slip inside a briefcase. These sleek models are called laptops, and more and more of them are showing up in classrooms, courtrooms, commuter trains and airport lounges.
There are now more than a dozen laptops on the market. Some have small display screens and no disk storage and can run all day on penlight batteries, while others have almost all the features of a desktop computer, including a voracious hunger for power. At least half a dozen others are on the drawing board, including the much rumored but vaporous "Clamshell" from International Business Machines.
NBC Has Picked an Unknown Writer to Replace Letterman
NBC has hired a 30-year-old unknown comedy writer, Conan O'Brien, to replace David Letterman as the host of its Late Night comedy and talk show. Mr. O'Brien's only previous appearances on television have been as an unbilled background player in some sketches on Saturday Night Live.
Mr. O'Brien, who previously worked for NBC as a Saturday Night Live writer and has most recently been a writer and a producer for the Fox comedy The Simpsons, will inherit one of the most visible jobs in television. "Late Night" commands up to $70 million a year in advertising revenues.
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NBC began negotiations with representatives of an established comedy star, Garry Shandling, about taking the job. Mr. Shandling removed himself from consideration yesterday, even though a multi-year contract worth about $5 million a year was at stake.
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"We think Conan can be the voice of a new generation in late-night," an NBC executive said. "You have Jay and David and Chevy Chase, all baby-boomers. Conan will speak to younger viewers."
[Conan's name had been printed once before, in a list of people associated with The Simpsons on September 24, 1992.]
Going After the Grey Dollars
The financial services industry has lately been discovering a whole "new" market: the 82 million Americans who are 50 years old and over and, in particular, the 32 million or so who are over 65.
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Obviously, the less income that is subject to regular tax, the lower the surtax. Thus, the big push to sell municipal bonds and bond funds, unit investment trusts and such relatively obscure products as certificates of annuity.
The certificates are at the heart of an innovative "surtax survival" program offered by Suze Orman, who heads an insurance brokerage in Emeryville, Calif. These hybrid vehicles, based on traditional fixed-rate annuities, come in maturities of 1 to 10 years. Taxes are deferred on earnings until the money is withdrawn. The certificates carry small commissions paid by the underwriter, unlike traditional annuities, which usually carry larger commissions paid by the buyer.
Ms. Orman is positioning the certificates as an alternative to broker-sold municipal bonds and bond funds and other insurance products like universal life, which impose commissions or sales charges of up to 10 percent.
To help with the positioning, Ms. Orman is forming a nonprofit corporation to be financed by the Metropolitan Life Insurance Company's Metlife division and the Sunlife Insurance Company of America. The company, called Consumers for Retirement Independence, will dispense information on the surtax and bolster sales of the certificates.
Credit Default Swap
See a Bubble?
The saving grace is that home loans generally are the last thing people default on. But imagine how scary it would be if, say, businesses extended floating-rate contracts to one another -- if virtually every company were dependent on making the right calculation about how these risk-avoidance vehicles would function.
Well, actually, they do. They are called derivatives. Derivatives are contracts that call for one party to pay another according to the movement of an underlying yardstick, like a foreign currency, a bond, a stock or even the weather. Since the 1980's, Wall Street has marketed derivatives as a tool for making risk more palatable, and Alan Greenspan has consistently praised them for enabling firms to spread, or "manage," their risk. For instance, a bank can hedge against the risk that one of its loans will sour. It simply -- well, not so simply -- purchases a "credit default swap," which entitles it to a payoff if a specified company, G.M. for instance, goes into default or suffers a material downgrade in its credit rating. The party on the other side might be a hedge fund that is more sanguine on G.M.'s bonds or has a way (it thinks) to hedge that risk. Every financial firm uses some varieties of derivatives, which, again, are contracts that call for a payment (one way or other) depending on some underlying asset. Their growth has been explosive. Credit-default swaps, for instance, didn't exist a decade ago; today there are $8 trillion of them. No one has any idea of the losses that could ensue from a panic; credit-default swaps "have never been stress-tested," notes the analyst James Bianco.
Neither the Fed nor the S.E.C. has ever really clamped down on derivatives or insisted on a form of disclosure that would tell folks what is going on. So forget hedge funds; if you're searching for the next financial storm, try derivatives. (Nothing much you can do about them, either.)
[This prescient piece was written by Roger Lowenstein. Credit default swaps had been mentioned once previously, in an article on financial troubles at Parmalat on December 20, 2003.]
From Past Installments of 'The First Time News Was Fit To Print'...
Irish U2, a Young Quartet, Plays at Ritz
The Irish rock quartet U2, which has received extravagant critical praise in the British press, made a strong showing at the Ritz on Saturday. For such an accomplished band, U2 is unusually young.
Ranging in age from 18 to 20, its members met three years ago at a Dublin secondary school. Yet their sound, and eclectic hard rock with a mystically romantic strain, makes them one of the most harmonically sophisticated rock bands to emerge in recent years.
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Bono Hewson, U2's lead singer, has a moderately strong voice that was partially drowned out at the Ritz. This was a shame, since the band's material is of considerable interest. Most of the songs on its debut album, Boy are visionary reflections of adolescence....Where poetically ambitious rock bands tend to get mired in their visions, U2 brings to its purpose a healthy balance between energy and lyricism.
Draft Starts at Short, Then Stops on Mound
The [#1 overall draft] choice was Alex Rodriguez, a 17-year-old shortstop out of Westminster Christian High School in Miami ... Roger Jongewaard, the Seattle Mariners' vice president of scouting and player development, bucked the trend this year just as he did in 1987 when he made Ken Griffey Jr. the No. 1 selection instead of a highly touted pitcher, Mike Harkey. This time, Jongewaard bypassed highly touted Darren Dreifort, a right-handed pitcher scooped up by the Los Angeles Dodgers with the next pick.
Jongewaard acknowledged that Dreifort, a pitcher with Wichita State University, might advance to the majors at a faster clip.
Rodriguez, a two-sport standout who received more college scholarship offers for his quarterbacking skills than his baseball skills, now has decisions to make. He has already signed a letter of intent with the University of Miami and says he still might pursue both football and baseball in college rather than turning pro.
"It's a great honor to be No. 1 in any job, whether it's baseball, basketball or football," Rodriguez said during a conference call. "I'm excited about the whole situation. I just hope it works out."
Freight Forwarder Takes to Air
The fledgling Federal Express Corporation...isn't advertising in New York, but is using TV and newspaper advertising in 27 other markets, the biggest of which is Chicago.
"The smaller our market, the bigger our share, and we think we can own places like Rochester," said J. Vincent Fagan, one-time New York agency man who is now Federal's senior vice president-marketing at its Memphis headquarters.
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The two-phase campaign (tailor-made to each market) is aimed first at making consumers aware of Federal ("Kansas City, you've got a new airline.") Then it attempts to convert users to Federal. The ad budget is about $1.2 million.
Federal, which was financed by $80-million in venture capital, is not yet making money, but, said Mr. Fagan, "we expect to make a lot of it."
So much for dreams of glory.
White Collar Crime
Dr. Sutherland Says The Cost Of Duplicity In High Places Exceeds Burglary Losses
"White-collar criminality" was sharply attacked by the retiring president of the American Sociological Society, Dr. Edwin H. Sutherland of Indiana University, in an address tonight which discarded accepted conceptions and explanations of crime.
Speaking at a joint session of that society...Dr. Sutherland described present-day white collar criminals as "more suave and deceptive" than last century's "robber barons" and asserted that "in many periods more important crime news may be found on the financial pages of newspapers than on the front pages."
Young Men's Hebrew Association Presents 2nd Jazz Concert
On the bill were two well-established jazz groups...and a relatively unknown comedian, Woody Allen. It was the comedian who walked off with the honors for the evening.
Mr. Allen, who describes himself as "short and unloved," looks like a somewhat unkempt Wally Cox. A monologuist in the Mort Sahl style who ranges over almost every area except politics...he wandered off into what he apparently found to be more diverting topics...[for example] the problem of getting a divorce in New York ("The Ten Commandments say 'Thou shalt not commit adultery,' but New York State says you have to").
Mr. Allen's quiet, underplayed style enabled him to get laughs with what might otherwise have been little more than casual remarks.
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