April 19, 1994

The lights, strung on makeshift wires between steel girders, dimly illuminate a long shaft that seems to stretch far into the distance. As Mike Hardiman, a Transit Authority supervisor, strolls with a flashlight on the subway tunnel's floor, there is a deep rumble. The impulse is to flee before a train comes roaring out of the darkness. But it is only an illusion. In the two decades since the section of tunnel was dug beneath Second Avenue in East Harlem, no train has disturbed the stillness. The rumble comes from a truck on the street three stories above. Ambition and Failure The fate of the Second Avenue subway has long been part of the lore of New York City, becoming a metaphor for expansive governmental ambition followed by equally large-scale failure. The line has already died not once, but twice.

How gradual is gradual? Is Alan Greenspan, chairman of the Federal Reserve Board and famed gradualist, preparing the markets for speedier increases in interest rates, greasing the stock and bond markets' already slippery decline? That is what stock and bond traders are asking themselves in the wake of the Fed's third quarter-point increase in its short-term interest rate target this year, to 3.75 percent yesterday.

Just when the General Electric Company thought that it had put its investment banking subsidiary, Kidder, Peabody & Company, on solid footing, a seemingly rogue bond trader caused it to take a $350 million pretax charge to its first-quarter earnings. Kidder had rebounded since a 1986 insider-trading scandal embroiled the firm, posting strong profits in 1992 and 1993. The report of the phantom trades, however, comes as a challenge to John F. Welch Jr., General Electric's strong-willed chairman and a believer in tight, nearly obsessive internal controls.

Dissident directors of R. H. Macy & Company threatened yesterday to step in with a bid of their own for the bankrupt retailer. In a meeting that ran more than four hours without a vote that would resolve any of the thorny issues facing Macy's board, the directors told their colleagues they were prepared to counter any reorganization plan that valued the company below what they believed it was worth.

PERHAPS the most powerful psychiatrist in America at the moment is Dr. Allen J. Frances, the man who has been directing the fourth major revision of his profession's diagnostic bible, the Diagnostic and Statistical Manual of Mental Disorders, to be published next month. The decisions made under his direction will dictate for the next decade or so the alignment of that thin membrane separating diagnosable psychiatric disorder from the ordinary travails of life.