LEAD: The Long Island Lighting Company sought today to convince the Federal Nuclear Regulatory Commission that it was ready to begin full-power operations at its Shoreham nuclear-power plant.

Lilco Assures N.R.C. of Its Shoreham Nuclear Plant's Readiness

LEAD: Sometimes it seems as if the only guy in America saying the word ''liberal'' out loud is George Bush, and he says it about every two minutes in a tone that makes it sound like a synonym for ''extremely painful root canal.''

Our Towns; 'Liberal' Is Not A Dirty Word To This Coalition

LEAD: A powerful alliance of Arab oil producers inside the Organization of Petroleum Exporting Countries, led by Saudi Arabia, called today for a steep cut of as much as 3 million barrels a day in OPEC's current oil production.

Saudis Call For Cut in Oil Output

LEAD:  Fashion and the First Lady  Nancy Reagan issued regrets at not reporting that she had borrowed designer outfits. She promised in 1982 not to borrow any more. Page A26.  Trump Sells St. Moritz  Donald J. Trump is selling the elegant hotel to an Australian billionaire for $150 million more than he paid for it in 1985.

INSIDE

LEAD: Three major bank holding companies yesterday reported higher third-quarter earnings although they were unable to report profits from a large part of their Argentine loans.

Chase, Morgan and First Chicago Profits Up

LEAD: Business inventories, a closely watched indicator of a developing recession, rose by a strong eight-tenths of 1 percent in August, the Commerce Department reported yesterday. It was the 20th consecutive monthly increase.

August Rise In Inventories Is Put at 0.8%

LEAD: As part of a major drive against income-tax evasion by Wall Street brokers and investment house employees, the state tax department announced today that it would withhold taxes from bonuses and commissions at the state's highest rate starting Jan. 1.

New York Mounts Campaign Against Wall St. Tax Cheats

LEAD: The Soviet Union is expected this week to wrap up what is likely to be the largest credit line ever with the West. The deal with London banks would come just days after the Soviets signed two major credit agreements with West German and Italian banks.

New Soviet Credit Line Is Expected

LEAD: The American Telephone and Telegraph Company said yesterday that it would cut long-distance rates an average of 3.8 percent, a move that would save residential and business customers about $700 million a year.

A.T&T. to Cut Long Distance By About 3.8%

LEAD: For the New York Life Insurance Company, the office of the future is in this rural Irish market village, where high technology has usually meant a new tractor.

The Growth of the Global Office

LEAD: CONSERVATIONISTS breeding green iguanas in captivity to replenish the dwindling population of the species in Central America face a quandary: is it better to turn loose the bullies or the more submissive iguanas?

For Iguanas, Place in Sun May Be Too Bright

LEAD: A 30-inch-long series of cracks has been discovered on a 19-year-old Continental Airlines Boeing 737, a top Government safety official said yesterday in a speech about the hazards of aging airliners.

CRACKS ARE FOUND ON AGING JETLINER

LEAD: A Federal judge yesterday refused to remove himself from the Drexel Burnham Lambert securities fraud case and denied charges made by some of the defendants that by presiding in the case, he was violating conflict of interest rules.

Judge in Drexel Fraud Case Refuses to Remove Himself

LEAD: Mounting a stunning takeover bid that would create the biggest producer of consumer goods in the world, Philip Morris Companies Inc. late yesterday offered to buy Kraft Inc. for nearly $11.5 billion in cash.

COMPANY NEWS;

LEAD: Donald J. Trump said yesterday that he was selling the St. Moritz Hotel on Central Park South for $150 million more than he paid for it in 1985.

Trump to Sell The St. Moritz At Big Profit

LEAD: Two Americans and a Briton won the Nobel Prize in Physiology or Medicine yesterday for discoveries of what the Nobel committee in Stockholm said were ''important principles for drug treatment.'' The researchers developed a series of drugs that have become essential in the treatment of heart disease, peptic ulcers, gout, leukemia and other ailments.

3 Drug Pioneers Win Nobel in Medicine

LEAD: In its largest loan ever made to a debt-pressed nation, the United States said today that it would grant Mexico up to $3.5 billion to help it cope with reduced revenues resulting from the plunge in oil prices.

MEXICO TO RECEIVE UP TO $3.5 BILLION AS LOAN FROM U.S.

LEAD: Sukhreet Gabel testified yesterday that Bess Myerson told her in the midst of a grand jury investigation that ''you could be dangerous'' and that she should ''keep your mouth shut.''

Witness Tells Of Warnings By Myerson

LEAD: The Federal judge in the Yonkers housing-desegregation case yesterday designated the last of seven sites for low-income public housing and ordered the city to act to acquire the property.

Judge Picks Final Site For Yonkers

LEAD: Leaders of three of the nation's most important Jewish organizations have asserted that the American Israel Public Affairs Committee, the chief lobby for Israel on Capitol Hill, is out of step with ''the consensus of the organized Jewish community'' on some key Middle East issues.

Leaders of 3 U.S. Jewish Groups Take Issue With Pro-Israel Lobby

LEAD:  COMPANIES  Philip Morris offered $11.5 billion for Kraft in a bid that would create the world's biggest producer of consumer goods, with an empire ranging from its many cigarette brands to Miller beer and a huge line of General Foods products. The $90-a-share deal would, if completed, displace Unilever, the big British-Dutch company, as the world's largest producer of consumer goods.

BUSINESS DIGEST

LEAD: THE United States and the Soviet Union are drawing up elaborate plans for the use of nuclear power in space, reigniting fears that radioactive debris from an accident will sooner or later come raining down on the Earth.

New Plans for Space Reactors Raise Fears of Nuclear Debris

LEAD: The sex hormone testosterone is a genuine aphrodisiac, with higher levels stimulating sexual desire in men and perhaps in women as well, recent research has shown. But the level of testosterone coursing through a person's body has little direct impact on sexual performance, according to the studies, which have discovered a sharp distinction between the chemistry of desire and that of the sexual act itself.

Chemistry of Sexual Desire Yields Its Elusive Secrets

LEAD: King Hussein's decision in July to give up all ties to the Israeli-occupied West Bank of the Jordan River in favor of the Palestinians is having real consequences on the lives of the 2.8 million people of Jordan, about 40 percent of whom consider themselves Palestinians.

Jordan's West Bank Move Upsetting Daily Life

LEAD: EMPLOYER-SUBSIDIZED health benefit plans that cover millions of Americans are likely to be revised as a result of new requirements that Congress is reviewing this week. The measures, which have attracted criticism, are intended to insure that a company's lower-paid employees get the same type and value of medical benefits as managers and other higher-paid personnel.

Business and Health; The Controversy On Benefit Rules

Tessa Schram is a Dutch actress and director. She is the daughter of film producer and director Dave Schram and Maria Peters and the sister of actor Quinten Schram.

October 18, 1988

Headlines from October 18, 1988

Lilco Assures N.R.C. of Its Shoreham Nuclear Plant's Readiness

Our Towns; 'Liberal' Is Not A Dirty Word To This Coalition

Saudis Call For Cut in Oil Output

INSIDE

Chase, Morgan and First Chicago Profits Up

Billboard 200

New Jersey

Appetite For Destruction

Hysteria

Cocktail

Tracy Chapman

Notable Births

Historical Context for October 18, 1988