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News Briefs II

Japan Regulators Close Ailing Bank; Government Faces Crisis

The Washington Post

Japanese regulators' decision to shut down an ailing commercial bank, the first such closure in the post-war era, may signal that the government is finally facing up squarely to the country's huge banking crisis, some financial analysts here believe.

In the past, the regulators have used mergers or restructurings to bail out troubled banks and keep them going. That practice has come under increasing criticism from the international financial community, which wants Japan to deal decisively with institutions that were left with hundreds of billions of dollars of bad debts by the collapse of the "bubble economy" of the 1980s.

Thursday regulators announced they were shutting down Hanwa Bank, a regional institution with bad debts of about $694 million. That move follows an announcement earlier this month by the government of Prime Minister Ryutaro Hashimoto of a tougher policy toward sick banks.

"Hanwa serves as a test case of the new big-stick approach," said Jesper Koll, vice president of J. P. Morgan Securities Asia. "Depositors are guaranteed to be paid off, but shareholders and providers of debt funding to the institutions will no longer be bailed out."

Analysts predicted that if the Hanwa closure went smoothly, other would follow.

So far it hasn't been entirely smooth, however. Thursday, hundreds of Hanwa customers lined up at the bank's offices in search of their money.

Science Applications Int'l to Acquire Bell Communications Research

Los Angeles Times

San Diego defense contractor Science Applications International Corp. said Thursday as expected that it will acquire the research arm of the regional Bell telephone companies, Bell Communications Research Inc., for an undisclosed amount.

The bid by SAIC for the Baby Bell research unit, popularly known as Bellcore, is likely to touch off a major industry restructuring as the seven regional Bells redirect millions of dollars of research spending to competing laboratories and telecommunications developers.

Created as part of the 1984 break-up of AT&T, Bellcore was initially charged with assuring the continued technical integrity of the local telephone network as well as providing R&D services to its parent companies.

But some of the Baby Bells have long been unhappy about a sharing their research and development entity. And the sweeping telecommunications law enacted last winter opened up the possibility of regional Bells invading one anothers' territories - making joint research more problematic than ever.

"Today's announcement is a logical extension to the sweeping changes in the telecommunications industry," said Marty Kaplan, a Bellcore director who is president of Pacific Bell's network services group. Once the Baby Bells fully embraced Bellcore, Kaplan continued, because they "shared a common purpose and deployment needs for Bellcore's products and services. This is no longer the case. Today each of us is pursuing our own competitive strategies."

Analyst speculate that SAIC offered around $700 million to buy Bellcore in hopes of utilizing the company as a vehicle to wean itself from its government contracts and expand into the burgeoning private telecommunications and computer software development fields.