August 25, 1983

An aging water main burst on the East Side at 6:15 A.M. yesterday, flooding streets, knocking out major subway lines and snarling traffic during the morning rush. Water and telephone service were disrupted for hundreds of customers in the flooded area around Fifth Avenue and 23d Street. Commuters were forced to wade to work. The 44-story headquarters of the Metropolitan Life Insurance Company, at 1 Madison Avenue, was closed, and 5,000 of its workers were sent home. Steam was cut off to four other office buildings, leaving them without air- conditioning or hot water. Two bank branches were shut down much of the day.

The special counsel to a House subcommittee said today that the panel had yet to decide how to resolve conflicting accounts by two senior Administration officials over how Ronald Reagan's campaign obtained President Carter's political strategy papers in 1980. James Hamilton, a Washington lawyer who is special counsel to the House Subcommittee on Human Resources, voiced doubt about the effectiveness of using polygraph tests to clear up discrepancies in the accounts of James A. Baker 3d, the White House chief of staff, and William J. Casey, Director of Central Intelligence. Although the Federal Bureau of Investigation has not ruled out the use of the lie-detector tests later in its investigation, Mr. Hamilton said his experience with the device in other Congressional investigations had raised questions in his mind about its usefulness. 'Need a Lot of Spadework' At a breakfast meeting with reporters, Mr. Hamilton said the subcommittee had not interviewed either Mr. Baker or Mr. Casey. ''We need to do a lot of spadework before doing that,'' he said.

New-car sales continued to show year-to-year gains in the mid-August period, with the Big Three auto makers today reporting a 19.8 percent improvement from the same period in 1982. But the rate of recovery from depressed levels a year ago has slowed because of low dealer inventories and the elimination of incentives for buyers. The seasonally adjusted annual selling rate for all the major domestic auto companies, which is the broadest measure of the overall health of the industry, was 6.2 million units in the Aug. 11-20 period, compared with 7.9 million in early August and 5.1 million in mid-August of last year. The companies had been selling cars at rates of more than 7 million units since late May.

Mitsubishi Bank's $282 million bid for the Bancal Tristate Corporation underscores the growing presence of the Japanese in California banking. Total Japanese-held banking assets in the state at the end of last year amounted to $7.5 billion, matching those of California's sixth-largest bank, the Union Bank. The acquisition of Bancal, parent of the Bank of California, will add $3.9 billion. California offers distinct attractions to the Japanese banking industry. A rich lode of consumer deposits, it is also the key location for trade with Asia.

An article in Business Day Saturday misidentified the manufacturer of Bubblicious gum. It is made by the Warner-Lambert Company.