See editorial Page
Vol. LXXXVIII, No. 13 Ann Arbor, Michigan-Thursday, September 22, 1977 Ten Cents 14 Pages
HowA2almost lost $1.4million
By GREGG KRUPA than the borrowed security participation in a "questionable trans- when actually they were not. investments seemed to be profitable, Levin was "not an acceptable one."
hction" on June 30 and July 1 of this City Accountant Marc Levin found then Levin found out Carroll had been Murray said: "The explanation given
A report issued by City Adminastrator MERRILL LYNCH agreed to return year by "accepting investments from a out information supplied by Carroll was giving him the wrong information. On to me was that they trusted Merrill
Sylvester Murray yesterday revealed all funds invested i arbitrage trans- city employe with no written authori- incorrect after he spoke with another June 30 when the loss situation had still Lynch because the money was return-
that Ann Arbor narrowly escaped an actions since June 30 of this year with ty." person in the Merrill Lynch office and not been corrected, another transaction ed the first time."
estimated $800,000 to $1.4 million loss the acceptable federal government in- Merrill Lynch announced that Mi- with some other brokers. was initiated by Carroll whereby the
from shaky investments by striking an terest rate, so the city would incur no chael Carroll, an account executive Levin later confronted Carroll, who losing arbitrages were closed and con- THE NEW investments followed the
agreement with the brokerage firm of losses whatsoever. The brokerage firm with the firm wpo handled the question- admitted the information he had given firmed with no loss to the city. same declining pattern as the original
Merrill, Lynch, Pierce, Fenner and decided to return the money and "make able transactions with the city, has the city was incorrect. arbitrages. "Attempts by the control
Smith. the city whole" after city officials out- been fired. BUT THEN ON July 1, the City Con- ler's office to correct the adverse in-
The money had been invested in arbi- lined several positions they considered THE ENTIRE affair put city hall into troller's office re-established its previ- vestment position of the city were un-
trage transactions, in which the in- improper. MURRAY'S REPORT says the loss a frenzy this week as the crisis un- ous arbitrage position by returning the successful," reads Murray's report,
vestor (in this ease the city) borrows a These positions included: dealing on the arbitrage transaction was in- folded. The loss the city might have money to Merrill Lynch. "and in the period between July 1 and
United States treasury note from a with the city in arbitrages which are curred because of incorrect investment sustained would have cut last fiscal Why the controller's office got in- September 13, the value of the arbi-
brokerage firm, and then sells the note possibly illegal under state law because figures supplied to the city by Carroll year's budgetary surplus of $2.6 million volved in the investment activity after trages declined substantially."
for cash. The money is then used to buy the city was "in effect borrowing mon- sometime in late May or early June. in half. the first disappointment is unclear. Levin's computations at that time in
another Treasury note which the in- ey from Merrill Lynch," possible mis- The spurious information showed the The arbitrage transactions began in Murray said the explanation given to dicated that the city's loss position was
vestor hopes will be more profitable representation of securities prices, and city's investments were doing well late January of this year. At first, the him by Controller Lauren Jedele and See A, Page 5
WASHINGTON (AP) - A fellow,
Georgian, James McIntyre, 36, likely
will be Bert Lance's successor as
director of the Office of Management
and Budget, at least temporarily as
McIntyre has been deputy director
under Lance, a position that gave
him supervision over the day-to-day
operations of the budget office.
SINCE LANCE never considered
himself to be a nut-and-bolts man-in
running OMB, McIntyre became the
detail man, and in the process
probably came to know more about
the agency's operations than Lance
Another possible candidate to suc-
ceed Lance is Robert Strauss, Car-
ter's special ambassador for trade
negotiations and former chairman of
the Democratic National Committee.
Strauss has said publicly he is not
interested in the OMB post, but aides
said he might change his mind if
Carter pressed him to take'the job.
ALTHOUGH both Lance and McIn-
tyre are from Georgia, the similari-
ties stop there. While Lance is
outgoing and gregarious, McIntyre is
quiet and introspective.
He is inclined to greet visitors with
a polite handshake rather than the
arm-pumping, back-slapping wel-
come Lance became known for..
As deputy director, he shunned
publicity, and once even insisted to a
reporter that he not be quoted after
,n interview about zero-based bud-
geting. "I'm not a headline seeker,"
he said at the time.
An aide said of McIntyre, "He's a
very pleasant guy, easy-going, and
calm . .. But he knows what the hell
is going on in the agency."
Quits OMB with
WASHINGTON (AP) - Bert
Lance resigned yesterday as
director of the Office of Man-
agement and Budget and insist-
ed he was returning to Georgia
with a clear conscience and
with his good name restored.
In a letterof resignation that
ended the first major crisis of
the Carter presidency, Lance
said he was "convinced" he
could have continued to be an
effective OMB director. But he
said he was stepping down "be-
cause of the amount of contro-
versy and the continuing na-
ture of it."
"AS I said at the Senate hearings,
my conscience is clear," Lance
His action" ended months of a
mounting controversy over Lance's
past handling of his personal finan-
ces and his Georgia banks' affairs.
Carter accepted Lance's resigna-
tion with "the greatest sense of
regret and sorrow" and described
him as "a good and honorable man."
"BERT Lance is my friend,"
Carter told a nationally broadcast
news conference. "I know him
personally as well as if he was my
Carter's news conference was de-
layed two hours while Lance com-
pleted his resignation letter. By the
time the President entered the
auditorium. for the announcement,
copies of Lance's 50-word letter of
resignation bad been distributed.
Before responding to questions,
Carter read the letter. When he
reached the sentence, "I have decid-
ed to submit my resignation as
directorsof 0MB," the President's
voice stumbled on the word "resigna-
EVERY QUESTION from report-
ers concerned the Lance affair.
While answering them, Carter's eyes
frequently were downcast, his lips
drawn in a tight line. After 34
minutes, he terminated the news
conference without waiting for the
traditional, "Thank you, Mr. Presi-
dent," from the senior wire service
Sen. Sam Nunn (D-Ga.), Lance's
principal defender on the Senate
Governmental Affairs Committee,
See LANCE, Page 5
Amid speculation that it might be his last day, Bert Lance cut a solitary figure as he entered the Executive Office Building
yesterday morning. Hours later, Lance announced that he had resigned as Director of the Office of Management and
WANT WAGES, TUITION DISCUSSED:
GEO demands renewed talks
By SUE WARNER
Acknowledging that their request will
probably be ignored, 35 faithful mem-
bers of the Graduate Employes Organi-
zation (GEO) adopted a motion Tues-
day night demanding that tie Univer-
sity return to the bargaining table to
discuss wages and tuition changes.
"We'll send out a letter this week in-
viting them (the University) to bar-
gain, but there'sprobably only a slim
chance they'll accept," said GEO
President Mike Clark yesterday. "Still,
I think it is the courteous thing to do at
ORIGINALLY, the GEO membership
had planned to vote on two positions op-
posing the University's recent decision
to unilaterally increase Graduate
Student Assistant (GSAs) wages by 5.75
per cent and to alter tuition rates.
But on Tuesday the membership
voted 18-17 to postpone a vote on the two
recommendations until the next mem-
bership meeting in October.
The accepted motion was presented
by GEO member Susan Van Alsteyne
after almost two hours of heated debate
on the two original recommendations.
Van Alsteyne's motion passed unani-
Intlation slows in August
THE POSTPONED proposals were
put forth by the GEO executive com-
mittee and presented for discussion at
The majority position, backed by four
of the six executive committee mem-
bers, called for the union to file an un-
fair labor practice (ULP) charge
against the University for changing the
wage and tuition rates without going
through the collective bargaining pro-
The minority position, presented by
executive committee member Mike
Canjar, proposed that the union de-
mand the 5.75 per cent increase im-
mediately. In return the union would
waive its right to file ULP's or take
other legal action against the Univer-
sity arising from the issue.
THE UNIVERSITY currently plans
to place the pay increase in an escrow
fund until legal action determining
whether GSAs are students or employes
Canjar contends that by waiving its
right to file ULPs on the issue GEO is
not waiving the right to bargain collec-
tively with the University.
Both positions demand that the Uni-
versity supply information on the es-
crow account. GEO wants a complete
list of all GSAs who will receive the in-
crease, information on any interest on
the account, the establishment of a
board of trustees for the fund and a cer-
tificate of deposit proving the money
has been placed in escrow.
CLARK SAID a special membership
meeting will be called for mid-October
to vote on the positions. Alternative
proposals may also be presented at that
time, he added.
"I think new positions will develop in
WASHINGTON (AP) - Consumer
prices rose by only three-tenths of
one per cent last month, the lowest
monthly rate of inflation since last
November, the Labor Department
The August increase reflected
continued moderation in grocery
prices and d slowdown in the cost of
s e r v i c -e s, including household
charges and mortgage interest rates.
THE SLOWING of inflation this
summer has been one of the few
bright spots in an otherwise cloudy
economic picture, which has seen
unemployment rising and economic
Carter administration economists
called the price report encouraging.
"If the trend can be maintained, it
should bolster consumer confidence
--A is.,Fii tn . M rc- n An
prices have been falling since April
and economists said it was only a
matter of time before the declines
are reflected at the retail level.
DESPITE THE easing of inflation,
the purchasing power of workers'
paychecks continued to shrink last
The Labor Department said real
spendable earnings fell six-tenths of
one per cent because of the rise in
consumer prices and a drop in hours
worked, which reduced earnings.
Over the year, however, real earn-
ings increased 2.8 per cent, largely
because of a cut in federal income
taxes that became effective June 1.
IN AUGUST, the consumer price,
index stood at 183.3, meaning that a
marketbasket of goods and services
camin fr Leinn in 19A7 nnm enc
continued' to increase
products, cereals and
fruits and vegetables.
Prices for commodities other than
food rose three-tenths of one per cent,
continuing a moderate trend that has
been evident since February.
THE COST OF services, which had
been the fastest rising component of
the consumer price index this year,
rose by five-tenths of one per cent. It
was the smallest increase since
The government attributed the
slowdown to the first decline in
mortgage interest rates so far this
year and an easing of other house-
A m o n g non-food commodities,
ME 11: IE E AM 1 - f o