Leasing News

“We will never forget them, nor the last time we saw them this morning, as they prepared for their journey and waved goodbye and slipped the surly bonds of earth to touch the face of God.”

President Ronald Reagan

---the words of President Ronald Reagan in 1986 about the Challenger crew.

Headlines---

Senator John Glenn-Former Astronaut on "Meet the Press"

The Week's Economic Events

Pictures from the Past---1994-Pat Roberts

FIRSTCORPT Sold to IFC Credit

Full Story on Four indicted on charges of fraud in the PinnFund case

Cash-out' refinancing slowed in 4thQ, Not Taping Equity

US buys up Iraqi oil to stave off crisis--Count Down to War

CORRECTION---Apology to Wendy Bren, Not a "Nudist"

Latest from Bob Cragin, who just retired from CIT

Streamlined Sales Tax Meeting

Ditka to Lions: “If Mariucci passes, call me”

Special Report:

U.S. economy in holding pattern

Threat of war has corporations, consumers feeling boxed in

Carolyn Said, San Francisco Chronicle

### Denotes Press Release

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Senator John Glenn—Former Astronaut on “Meet the Press,” Sunday, Feb 2,2002

with Tim Russert, NBC News

“....to remember that we’re not up there in space just to joy ride around. We’re up there to do things that are of value to everybody right here on Earth. It’s not always just looking on out and planning to go to Mars. That’ll happen sometime. But the reason we’re up there and have the station and spend all this money is to do things that right here on Earth—and some of the things that they had on this particular flight on the Columbia flight were things like tissue generation of a certain type, human tissue generation that could be done up there in 3-D in a bioreactor that give a hope of maybe preventing the transfer of cancer cells from the prostate to the hip bone, which is a normal metastasis that they go through. Now, my dad died from that. Every male, if he lives long enough, will have some cancer cells in the prostate, they tell us. Maybe we can stop that. We have crystal growth up there of a type that’ll let us do chemicals of greater purity and better refining perhaps. We have combustion experiments that were going on. And these were all on this particular flight, where combustion now is being done with lower fuel-air mixtures than ever done before, which may apply to automobiles and better conservation right here on Earth. These are things that, you know, the reason we do these experiments—and they had 90 on this particular flight—was for the benefit of people right here on Earth. We’re not doing things that are going out into space.

“We have 16 nations involved up there on this station right now. Greatest engineering cooperative effort ever, a whole new leap forward in international relations. We’ve led the world because of that kind of leadership. We have the respect of the rest of the world because of that kind of leadership that has benefited not only us, but all mankind. Medicine, research, life expectancy is longer, standards of living is up, mainly with American leadership in these areas because we’ve been willing to push back these frontiers of the unknown.

MR. RUSSERT: How old are you now?

MR. GLENN: I’m 81.

MR. RUSSERT: And you still have that pioneer spirit?

MR. GLENN: Yeah, like to go again.

MR. RUSSERT: You do? You would go up on the next shuttle flight?

MR. GLENN: Oh, yeah. I think what we should be doing, if they send someone else up, we should be developing a database of more than just one person so it should be somebody else. But if NASA said we found something we’d like to look at on your body again in space, would I be willing to go? I’d be down there tomorrow morning.

The Week's Economic Events

February 3

MONDAY

Construction Spending: December

February 4

TUESDAY

Factory Orders: December

February 5

WEDNESDAY

None

February 6

THURSDAY

U.S. Productivity-4th Qtr.

Sales of Leading Retailers: January

Weekly Jobless Claims

February 7

FRIDAY

Unemployment: January

Consumer Borrowing: December

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Pictures from the Past---1994-Pat Roberts

“Shiver me Timbers.”

Western Association of Equipment Leasing Newsline,1994

"It's hard to believe 9 years have passed and I'm still

plugging along writing leases. What great memories of the past 25 years in

UAEL and leasing!"

Pat

M & R Leasing, Inc.

7500 West Mississippi, Suite F20

Lakewood, CO 80226

303/455-5860

303/455-5771 Fax

perts1@aol.com

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FIRSTCORPT Sold to IFC Credit Corporation

(It’s Official—Again we had the news first----

“You reported Jim Merrilees has left Firstcorp, but here is

the rest of the story, Firstcorp has been sold to IFG, in IL. John Estok

will be moving to Chicago. Len (Ludwig) of course has his new business

(venture leasing-Ven???) so this looks like the end of Firstcorp as a local

Pacific Northwest lessor.”

January 22,2003

Leasing News had several subsequent stories, but here is the official

press release: )

MORTON GROVE, Illinois- IFC Credit Corporation announced that it has signed a definitive agreement to acquire First Portland Corporation dba FIRSTCORP, based in Portland, Oregon.

FIRSTCORP is a leading small-ticket lessor of office equipment. The company serves equipment suppliers and end-users of equipment through a direct sales force, and through an advanced online lease processing system.

Rudolph D. Trebels, President and CEO of IFC Credit, commented: “The acquisition of FIRSTCORP is an excellent strategic fit for IFC Credit, and results in our becoming one of the largest independent lessors in the industry.”

Len Ludwig, Chief Executive Officer of FIRSTCORP commented, “Since the two companies have complimentary strengths and areas of expertise, the new combined entity will be in a position to offer customers a complete menu of products and services.”

Mr. Trebels concluded: “We expect a smooth integration of FIRSTCORP’s business into our operations, and will work to maximize the benefits of the expanded services and customer base. These factors, combined with greater financial resources and broadened management and service teams, should result in efficiencies and further growth.”

As a result of the acquisition, IFC Credit will have an expanded market presence through staffed offices in Chicago, Irvine, Dallas, Atlanta, New Jersey, Portland, and Morton Grove, IL.

The transaction is expected to close by February 10, 2003. Terms of the transaction were not disclosed.

IFC Credit Corporation is a national, independent equipment leasing company providing innovative services to manufacturing, wholesale, and professional service industries for both small-ticket and middle market leasing transactions. Headquartered in Morton Grove, Illinois, the company was founded in 1988 and serves a broad market from small businesses to Fortune 500 companies. The company also serves the healthcare market through Spectrum Medical Leasing, a company it acquired in 2002.

Contact:

Brian Cascarano

Vice President of Marketing

IFC Credit Corporation

(847) 663-6700

Len Ludwig

Chief Executive Officer

First Portland Corp. dba FIRSTCORP

503-598-4133

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Full Story on Four indicted on charges of fraud in the PinnFund case

By Mike Freeman

SAN DIEGO UNION-TRIBUNE STAFF WRITER

Federal prosecutors indicted four people on fraud and other charges in connection with PinnFund USA, a mortgage lender that was at the center of one of the largest financial scams ever in San Diego County.

PinnFund, which on the surface looked like a legitimate mortgage business employing 200 workers in Carlsbad, was in fact a sophisticated pyramid scheme, say federal regulators. In the end, unsuspecting investors were bilked out of $330 million.

Already, the company's chief executive and chief financial officer have pleaded guilty to various fraud charges in the case and are awaiting sentencing.

Named in the latest indictments are James Hillman, an Oakland lawyer and key money raiser for PinnFund; Piotr Kodzis, Hillman's business associate; Tommy Larsen, president of a PinnFund subsidiary called PinnLease; and Larsen's son Kim Larsen, who also was involved in PinnLease.

"We are holding accountable those who committed one of the largest frauds to have occurred in San Diego history," U.S. Attorney Carol Lam wrote in a statement.

Meanwhile, two others linked to PinnFund pleaded guilty to federal charges yesterday before the indictments were announced. Former company president and co-owner Keith Grubba admitted to fraud and tax evasion charges and agreed to cooperate with investigators. Also, Michael Trap, a former PinnLease employee, admitted he lied to a federal grand jury.

Both men are free pending sentencing, which is scheduled April 21.

PinnFund abruptly shut down and went bankrupt in March 2001 after the Securities and Exchange Commission raided the company and filed a securities fraud civil lawsuit.

Since then, the U.S. Attorney's Office, the FBI and the Internal Revenue Service have been pursuing a criminal probe that paralleled the SEC action. Prosecutors have had the help of former chief executive Michael Fanghella, who pleaded guilty in March 2002 to several federal charges. Fanghella agreed to help investigators in hopes of reducing his possible 14-year prison sentence. Chief financial officer John Garitta also pleaded guilty to conspiracy charges. He is scheduled to be sentenced April 14.

PinnFund was a classic pyramid scheme, prosecutors allege. Investors were told that their money was being used to finance mortgage loans. But instead, it was being used to cover PinnFund's massive losses, pay for Fanghella's lavish lifestyle and to give investors a promised 17 percent monthly return.

Fanghella's lifestyle grabbed most of the headlines. Using investor money, he purchased homes in Rancho Santa Fe, bought a yacht and paid $100,000 for dinners and wine at 5-star restaurants. He also gave more than $10 million in gifts to an ex-girlfriend, who at one time had been a porn star.

Fanghella disappeared after the SEC filed its lawsuit. He turned himself over to authorities in August 2001 and has been behind bars since. He is scheduled to be sentenced Monday.

Tommy Larsen was arrested yesterday by the FBI and Escondido police. He is expected to be arraigned today. His attorney, Douglas Brown, said Larsen will plead not guilty and fight the charges.

Kim Larsen, Hillman and Kodzis are expected to be arraigned Feb. 4.

Tom Brown, a Los Angeles lawyer representing Hillman, declined to comment until he had read the indictment. The Union-Tribune was unable to contact the lawyers for Kodzis and Kim Larsen.

The SEC settled its civil case in 2002. As part of the settlement, Hillman agreed to turn over $47 million in personal assets to investors. Hillman maintained throughout the civil case that he was duped by Fanghella, who Hillman claimed was the ringleader of the scam.

Meanwhile, the roughly 160 investors who lost millions in the scam have filed lawsuits against PriceWaterhouseCoopers and other accounting agencies that audited the books of PinnFund and Hillman-run entities. The lawsuits are ongoing.

Tom Frame, an investor, lost $8 million in the scam and was forced to sell a house at a $1 million loss because his finances were in a shambles. At one time, he had mixed feeling about criminal charges being brought against Hillman. But now he has changed his mind.

"Even if he did not know exactly what Mike had done, he told us several things that were absolutely not correct," said Frame. "If he's found guilty by a jury of his peers, I don't have any problems with it."

Hillman, 63 and Kodzis, 43, were charged with one count of conspiracy to commit mail and wire fraud, 18 counts of mail fraud and 10 counts of wire fraud. Each count has a maximum penalty of five years in prison and a $250,000 fine.

Tommy Larsen, 53, faces a 23-count indictment that includes charges of conspiracy to commit mail and wire fraud, conspiracy to commit money laundering, perjury, subornation of perjury, obstruction of justice and tax evasion.

Kim Larsen, 32, faces charges of mail fraud, wire fraud and conspiracy to commit money laundering.

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Cash-out' refinancing slowed in 4th quarter

Fewer homeowners tap housing equity

BLOOMBERG NEWS

WASHINGTON – Fewer Americans raised cash by refinancing their home loans in the fourth quarter, a sign consumer spending may slow, according to a survey released last week by Freddie Mac, which buys home loans.

New loans with balances at least 5 percent or higher than the original mortgage fell to 41 percent of Freddie Mac-owned refinanced loans, from 45 percent in the third quarter and 66 percent in the second quarter, Freddie Mac's survey of so-called "cash-out" loans showed.

The drop in the number of cash-out loans signals the housing sector's influence on the U.S. economy may be waning, analysts said. Without the rise in spending made possible by homeowners tapping their property's equity to buy items such as cars and home furnishings, the economy would have grown at a slower pace last year, said Freddie Mac chief economist Frank Nothaft.

"Had this extra source of cash not been available, it would be safe to say that the national economy would have been in much worse condition," Nothaft said.

Home price appreciation slowed in the fourth quarter, with the median rising 9 percent for a property where a homeowner refinanced, down from 11 percent in the third quarter and 22 percent in the second quarter.

The average size of a refinanced loan fell to $175,000 in the fourth quarter, from $195,000 in the prior quarter, according to the Mortgage Bankers Association of America. That puts the average refinanced loan size at the lowest since the year-earlier quarter, when it was $173,000.

"I suspect that the people who refinanced in the fourth quarter were simply going for the lower rate, and had already done a cash-out in a previous refinancing," said Phil Colling, an economist with the banker's group.

Total refinancing volume in the fourth quarter reached $447.8 billion, a gain of 7.6 percent from the previous quarter, making it the second- best quarter on record after the fourth quarter of 2001 when $476 billion was refinanced, Colling said.

The average U.S. rate for a 30-year fixed mortgage was 6.54 percent in 2002, down from 6.97 percent in 2001, according to Freddie Mac. On Jan. 3 the rate hit a 37-year low of 5.85 percent.

Freddie Mac rival Fannie Mae is the largest buyer of mortgages. The two were chartered by Congress to help people buy homes by providing funds for mortgages. The two control about 41 percent of the housing market.

US buys up Iraqi oil to stave off crisis

By Faisal Islam & Nick Paton Walsh

Guardian News Service

LONDON: Facing its most chronic shortage in oil stocks for 27 years, the

United States has this month turned to an unlikely source of help - Iraq.

Weeks before a prospective invasion of Iraq , the oil-rich state has

doubled its exports of oil to America, helping US refineries cope with a

debilitating strike in Venezuela.

After the loss of 1.5 million barrels per day of Venezuelan production in

December the oil price rocketed, and the scarcity of reserves threatened to

do permanent damage to the US oil refinery and transport infrastructure. To

keep the pipelines flowing, President Bush stopped adding to the 700m

barrel strategic reserve. But ultimately oil giants such as Chevron, Exxon,

BP and Shell saved the day by doubling imports from Iraq from 0.5m barrels

in November to over 1m barrels per day to solve the problem. Essentially,

US importers diverted 0.5m barrels of Iraqi oil per day heading for Europe

and Asia to save the American oil infrastructure.

The trade, though bizarre given current Pentagon plans to launch around 300

cruise missiles a day on Iraq, is legal under the terms of UN's oil for

food programme. But for opponents of war, it shows the unspoken aim of

military action in Iraq, which has the world's second largest proven

reserves - some 112 billion barrels, and at least another 100bn of unproven

reserves, according to the US Department of Energy.

Iraqi oil is comparatively simple to extract - less than $1 per barrel,

compared with $6 a barrel in Russia. Soon, US and British forces could be

securing the source of that oil as a priority in the war strategy. The

Iraqi fields south of Basra produce prized 'sweet crudes' that are simpler

to refine.

On Friday, Pentagon sources said US military planners "have crafted

strategies that will allow us to secure and protect those fields as rapidly

as possible in order to then preserve those prior to destruction".

The US military says this is a security issue rather than a grab for oil,

after a 'variety of intelligence sources' indicated that Saddam planned to

damage or destroy his oil fields - which would inflict up to $30bn damage

on the US economy and cause irreparable environmental damage. But the

prospect of British and US commandos claiming key oil installations around

Basra by force has pushed global oil diplomacy into overdrive.

International oil companies have been jockeying position to secure

concessions before 'regime change'.

Last weekend a Russian delegation flew to Baghdad to patch up relations

after Iraq's cancellation of its five-year-old contract to develop the huge

West Qurna oil field - worth up to $600bn at today's oil price. Lukoil was

punished by Baghdad for negotiating with the US and Iraqi exiles on keeping

its concession in a post-Saddam Iraq.

The delegation of Ministers and oil executives returned to Moscow with

three signed contracts. Oil is the state budget's lifeblood, and Russia

requires an oil price of at least $18. Russians fear a US grip on a large

reserve of cheap oil could send prices tumbling. But Saddam has offered

lucrative contracts to companies from France, China, India and Indonesia as

well as Russia. It is only the oil majors based in Britain and America that

don't have current access to Iraqi contracts.

Richard Lugar, the hawkish chair of the Senate Foreign Relations Committee,

suggests reluctant Europeans risk losing out on oil contracts. "The case he

had made is that the Russians and the French, if they want to have a share

in the oil operations or concessions or whatever afterward, they need to be

involved in the effort to depose Se Saddam as well," said Lugar's

spokesman.

A delegation of senior US Republicans was in Moscow last Tuesday trying to

persuade Kremlin officials and oil companies that a war in Iraq would not

compromise their concessions. A leaked oil analyst report from Deutsche

Bank said ExxonMobil was in 'pole position in a changed-regime Iraq'.

Washington is split along hawk-dove lines about the role of oil in a

post-Saddam Iraq. Two sets of meetings sponsored by the State Department

and Vice-President Dick Cheney's staff have been attended by

representatives of Exxon Mobil, ChevronTexaco, ConocoPhilips and

Halliburton, the company that Cheney ran before his election.

The dovish line, led by Colin Powell, places the emphasis on 'protection'

of Iraq's oil for Iraq's people. His State Department has pointed to a

precedent in the US interpretation of international law set in the 1970s.

Then, when Israel occupied Egypt's Sinai desert, the US did not support

attempts to transfer oil resources.

While the State Department is mindful of cynical world opinion about US war

aims, officials do not always stick to the script. Grant Aldonas, Under

Secretary at the US Department of Commerce, said war 'would open up this

spigot on Iraqi oil which certainly would have a profound effect in terms

of the performance of the world economy for those countries that are

manufacturers and oil consumers'.

The US economy will announce zero growth this week, prolonging three years

of sluggish performance. Cheap oil would boost an economy importing half of

its daily consumption of 20m barrels.

But a cheaper oil price could have been reached more easily by lifting

sanctions and giving the US oil majors access to Iraq's untapped reserves.

Instead, war stands to give control over the oil price to 'new Iraq' and

its sponsors, with Saudi Arabia losing its capacity to control prices by

altering productive capacity.

Paul Wolfowitz, Assistant Defence Secretary, and Richard Perle, a key

Pentagon adviser, see military action as part of a grand plan to reshape

the Middle East. To this end, control of Iraqi oil needs to bypass the twin

tyrannies of UN control and regional fragmentation into Sunni, Shia and

Kurdish supplies. The neo-conservatives plan a market structure based on

bypassing the state-owned Iraqi National Oil Company and backing new

free-market Iraqi companies.

But, in the run-up to war, the US oil majors will this week report a big

leap in profits. ChevronTexaco is to report a 300 per cent rise. Chevron

used to employ the hawkish Condoleezza Rice, Bush's National Security

Adviser, as a member of its board.

Five years ago the then Chevron chief executive Kenneth Derr, a colleague

of Rice, said: 'Iraq possesses huge reserves of oil and gas - reserves I'd

love Chevron to have access to.'

If US and UK forces have victory in Iraq, the battle for its oil will have

only begun.-

Dawn/The Guardian News Service.

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CORRECTION---Apology to Wendy Bren, Not a “Nudist”

“My wife Wendy is very upset over your article which stated that I invited you and Bob Cragin to join me at a nudist camp. I may have invited Bob but I never would have invited you to display your manliness and embarrass yourself. I didn't even know Wendy during my wild and crazy years and you owe her an apology.”

Hy Bren

hy@warrencapital.com

(Actually not an article, a response to one of the letters in--

Friday—We Get Letters)

“....one of the first places I discounted leases was in 1973 or 74 to Security National Bank in Walnut Creek, California, to Bob Cragin....Even Hy Bren retired ( he used to send deals to Bob, and introduced me to Security Financial when he changed companies. He and his wife invited both Bob and I to the nudist colony that he attended on weekends.”

(I will be glad to make a correction, if that is what you want; however, I never mentioned Wendy by name in my response to an email letter from Bob Cragin. You told me the gal you were with was your wife, and you did invite me many times at the various lunches we had, plus you went to the Nudist colony in the Santa Cruz Mountains, not that far from my office in Santa Clara, California.

Kit ).

“Wendy and I married in 1980, we met in 1977 well after I stopped

attending Lupin Lodge in Santa Cruz. I suggest you print a retraction by

saying Hy's present wife was not the person you mentioned in the article.

You can quote me along with an apology to Wendy.”

Hy Bren

hy@warrencapital.com

This was verified by Stewart Kahn:

“Hy got together with Wendy in about 1975 or 1976, when they both joined

Westguard (f/k/a SHW Capital). We had just begun our merger with Guardsman

Lease Plan, the Italian Buick Dealers from Long Island.

“Hy headed up our medical/dental program, and Wendy work right "under"

Hy...”

Stewart (Kahn)

stewart@legendcapital.com

(Leasing News apologies to Hy Bren’s present wife Wendy Bren as he says she was not the one who went to the Lupin Lodge Nudist Colony in Santa Cruz, California, with him. It was not our intention to insult anyone who went or goes to a nudist colony. Lupin Nudist Colony has a very good reputation. Editor)

Lupin Nudist Colony/Nudist Sites

http://gocalifornia.about.com/gi/dynamic/offsite.htm?site=http%3A%2F%2Fwww.lupin.com

http://www.thenudist.com/usinfo.htm

http://www.drleisure.com/links.html

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Latest from Bob Cragin, who just retired from CIT:

“Kit,

“Thanks for the kind thoughts......just got back from Phoenix where CIT had a

retirement dinner (complete with gold watch) for me last night. It was very

nice......made it even harder to ‘let go’.

“Of all the companies I worked for, CIT has them all beat as a place to work. I am leaving behind some first class friends. Maybe I should write a book about my 30 years in leasing (we all could).

“Keep up the great work...”

Bob Cragin

bobdel@cox.net

Streamlined Sales Tax Meeting

Streamlined Sales Tax is featured in two meetings planned for Washington, D.C. in March, one being a debate between supporters and opponents. Both events sponsored by the Washington Area State Relations Group (WASRG) are open to everyone. Some in receipt of these Streamline updates have also expressed interest in attending the WASRG meeting featuring 2003 President of the National Association of Attorneys General (NAAG). Therefore, I am forwarding an attachment with information on all 3 events but containing a registration form only for the appearance by the 2003 NAAG President on Friday, February 14. A registration form for the Streamlined Sales Tax events will be sent to you in mid-February.

<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

National Conference of State Legislatures President Senator Angela Monson will speak on Wednesday, March 5. Senator Monson is also Co-Chair of the Streamlined Sales Tax Implementing States. A debate between Streamline supporters and opponents is scheduled in the Hall of the States at the foot of Capitol Hill on Wednesday, March 12. The Council On State Taxation (COST) and National Retail Federation (NRF) will speak in support of Streamline. The American Legislative Exchange Council (ALEC) will offer dissent.

If after reviewing the information you wish to receive WASRG meeting notices on a regular basis please send a request back to me at dbrown@elamail.com

Dennis Brown

dbrown@elamail.com

Equipment Leasing Association

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Ditka to Lions: “If Mariucci passes, call me.”

By Mike O'Hara / The Detroit News

ALLEN PARK -- Da Coach would like a shot at coaching the Lions. Mike Ditka, coach of the 1985 Super Bowl champion Chicago Bears, is endorsing Steve Mariucci for coach of the Lions. But Ditka would like a chance at the job if the Lions don't land Mariucci or another top candidate, such as Dennis Green.

"I would come in and talk to them, if they had a definite interest," Ditka said in a telephone interview from Cancun, where he had a speaking engagement. "Just as a token and that stuff, no. "I don't think there are a lot of places I'd like to coach anymore.

Detroit is a little different, though. I played for years against them and coached for years against them. It's part of the 'Black and Blue' division. "It has a lot of the same ethnic makeup as Chicago -- hard-working people. They want a hard-working football team."

Ditka, 63, has been out of coaching since 1999, when he was fired after three unsuccessful seasons as coach of the New Orleans Saints. Ditka returned to his radio job in Chicago, where he played tight end for the Bears and was coach from 1982-92, and a network position as a studio analyst for NFL games. Ditka considers himself a fall-back candidate, and he is campaigning for Mariucci to accept the Lions' offer.

"I still consider it a done deal," Ditka said. "I think they'll do the deal." If nothing else, Ditka and Lions President Matt Millen would make for a lively radio team.

It was on Ditka's radio show last year that Millen made his infamous "devout coward" comment about an unnamed Lion. "We'd kill 'em," Ditka said, laughing. "We'd have everybody fired."

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U.S. economy in holding pattern

Threat of war has corporations, consumers feeling boxed in

Carolyn Said, San Francisco Chronicle Staff Writer

How long can you hold your breath?

That's what businesses are wondering as they wait to see whether there will be a war with Iraq.

The prolonged holding pattern is dampening corporate and consumer spending. If war does break out, the effect on businesses is expected to be even more chilling, hurting such sectors as travel and tourism and also rippling through durable goods, high-tech equipment, shipping and a range of other industries.

"The war isn't going to help anybody -- except the defense industry," said Bruce Chizen, chief executive of softwaremaker Adobe Systems in San Jose. "I worry about what will a war do to the overall economy."

War is likely to create a climate in which confidence erodes.

"A war creates a great deal of uncertainty," said Steven Wood, an economist at FinancialOxygen in Walnut Creek. "The pervasive uncertainty is causing many businesses to hold their capital spending budgets in tightly."

The same is true of consumers.

"I think if there is an invasion, there would be an immediate slowdown in consumer spending," said Steve Cochrane, senior economist with Economy.com in Pennsylvania. "There would be a downturn in consumer confidence. A lot of people would be staying home, like during the Gulf War in 1991, and watching the news every night instead of shopping."

The business sector that would be hardest hit is travel and tourism -- San Francisco's top industry.

"There is no doubt in my mind that a war with Iraq would absolutely be disastrous for international tourism and air travel and would have a chilling effect on domestic travel," said John Marks, president of the San Francisco Convention and Visitors Bureau and chairman of the Travel Industry Association of America.

The Gulf War also reduced the flow of international visitors to the United States. But this time, the effect would be exacerbated because terrorism on U. S. soil is now a real possibility, he said. A war in the post- Sept. 11 climate creates an unfathomable scenario.

"There's no playbook, no template, no model, because of the terrorism element," he said.

The airline industry, still reeling from its staggering losses from Sept. 11 and its aftermath, has already put the government on notice that it wants federal help if there is a war.

"We need a national transportation plan if we go to war," Continental Airlines' chief executive, Gordon Bethune, said Thursday at a gathering of tourism and transportation leaders in New York, according to the Associated Press. "The government can't wait until we're all dead and then revive us."

He and other airline executives want Uncle Sam to relax antitrust restrictions so they can cooperate to cut capacity, temporarily suspend flight security taxes, lower fuel taxes and release oil from the Strategic Petroleum Reserve.

"We want to support the administration in what they decide to do, but obviously, there's a huge price to pay in our industry," said David Swierenga, chief economist for the Air Transport Association, the airlines' trade group in Washington.

If war starts, the ATA predicts a 10 percent decline in air traffic, which Swierenga said translates into a $2 billion decrease in airline revenue. Increased fuel prices would add another $1.5 billion to $2 billion in costs, the ATA said. War jitters have already driven up oil prices. Jet fuel is up to 90 cents a gallon on the spot market, a 50 percent hike from the long-term average of 60 to 65 cents a gallon, he said.

Another consideration for the industry is that about 9,000 pilots -- more than 10 percent of U.S. airlines' 80,000 pilots -- serve in the military reserves. If they are called up, airlines will have to scramble to train replacements, taking Boeing 777 pilots and teaching them how to fly 747s for example, he said.

After the Gulf War, it took five or six months for passenger traffic to return to normal, Swierenga said. But again, post-Sept. 11, all bets are off about how quickly things will rebound.

"Here we are, more than a year after Sept. 11, and our traffic has not yet recovered -- it's running about 8 to 9 percent below the level it was at in 2000," he said. "Back to normal is off in the far-distant future."

A war is certain to driveup oil prices, which in turn could broadly impact manufacturing and other industries, as well as airlines.

"Costs for any energy-intensive industry would go up," Cochrane said. "Durable goods manufacturers rely on power that has a high energy input."

Even though a spike in oil prices would benefit oil companies -- assuming that supply is not constrained -- that advantage wouldn't help regions where oil accounts for a big part of the economy, such as Houston, he said.

"It would be a double-edged sword, because usually in the same areas as oil production are a large contingent of chemical-producing industries, which would be hurt because oil is a major input of chemicals."

Increased fuel prices obviously would raise costs for trucking, too.

Nancy Colvert, a spokeswoman for Palo Alto's CNF Inc., one of the nation's biggest movers of heavy freight, said those costs would be passed along to customers through fuel surcharges.

CNF, which owns both trucking firm Con-Way and logistics/air freight firm Menlo Worldline, ships industrial items such as generators, auto parts, electronic components and finished goods, so any slowdown in factory production would hit the firm hard.

"We're really the first line in terms of the manufacturing economy. Our business goes up and down based on what manufacturing does," Colvert said.

Already the economic slowdown has manufacturers switching to cheaper methods of moving freight -- ground transport instead of air, for example, she said.

Another impact of war and increased security concerns would be to delay the movement of goods, affecting the entire supply chain, she said. "Look at what the West Coast port disruption did; 10 days in the fall created a huge slowdown. That's the kind of thing that could happen again."

Some sectors may be relatively immune from war's effects.

Robert Kleinhenz, senior economist with the California Association of Realtors in Los Angeles, said the state's torrid housing market would probably show just a hiccup if war breaks out.

"California has overwhelming demand because of tremendous growth in household numbers and lack of (housing) supply," he said. "I don't see those things changing dramatically, so I don't see a war with Iraq bringing the housing market here to a halt."

Still, he worries that rising oil prices might lead to inflation, which would in turn translate into higher interest rates, dampening demand, particularly in regions that don't have high demand and low supply.

Paul Taylor, chief economist for the National Automobile Dealers Association in Virginia, said, "We think (a war) would have limited impact; probably 200,000 units." However, he added: "A whole year of uncertainty would be more harmful to the economy than the settlement of the issue, peacefully or otherwise. A year of uncertainty is one of the worst scenarios, prolonged war is another terrible scenario."

How a war might unfold would obviously make a huge difference in how it affects businesses.

"It depends how long it is, how messy it is, what it does to oil supply and prices," Wood said. "If it doesn't affect oil supply, we might see prices spike up and then come down quickly. If it's long and messy, the pervasive uncertainty will remain. If it's short and successful, the uncertainty will go away, and we could see a much stronger economy in the second half of the year. We might see companies start to replace equipment that's been sitting in offices three or four years and getting a little old."

The Gulf War was short-lived, and yet it didn't unleash pent-up spending. In fact, the economy imploded after the 1991 Iraq conflict; the reality of "It's the economy, stupid" essentially sent the first President Bush out of office.

So why would this time be different?

"We had much higher interest rates at that time," Wood said. "The Federal Reserve had been bringing rates down, but they weren't at the rock-bottom levels we're seeing now, so there wasn't quite the stimulus for (purchasing) houses and cars. Consumers were heavily indebted and leveraged. The Gulf War and the spike in oil prices really collapsed consumer confidence, which did not rebound quickly. We're much better supported on consumer spending this time around."

Cochrane agreed. "If this conflict is settled quickly, either through diplomacy or war, we should see a spark to the economy." he said.

Chronicle staff writer Carrie Kirby and the Associated Press contributed to this report. / E-mail Carolyn Said at csaid@sfchronicle.com.