Admitted Treasury auction violations could cost Salomon Brothers Inc. its advisory role at the Resolution Trust Corp., but the agency has not yet launched an invetigation.

"It's business as usual," Kate Spears, an agency spokeswoman said yesterday. Resolution Trust is the government agency charged with disposing of assets from the nation's failed thrifts.

Salomon Brothers Asset Management Inc. currently advises the agency on its junk-bond portfolio and last week underwrote $377 million of mortgage-backed securities it issued, she said.

Though no official investigation is under way, Resolution Trust has been in contact with the investment bank through telephone conversations, and Salomon has provided written information concerning its advisory status in light of the violations.

An agreement between the agency and Salomon triggered those communications, she said. Under the agreement, Salomon must disclose to Resolution Trust's Contractor Conflicts Committee "any matter which could materially impact performance under any RTC contract," Ms. Spears said, adding that disclosure must be made within 10 days after discovery.

"An investigation by the Treasury Department for impropriety is definitely considered material," the agency spokeswoman said.

The conflict committee also will review an agency-commissioned report by the New York law firm Dewey Ballantine. Ms. Spears emphasized that the report was requested early this year, well before the scandal became public.

The report concluded that Salomon Brothers properly erected Chinese walls to prevent potential conflicts when it separated its advisory function from its bond-purchasing activity.

Chinese walls are designed to prevent information sharing between traders and advisers. The report was part of a routine investigation of at least four firms. Ms. Spears was unsure of the exact number of firms reviewed in the report.

John Shippee, a high-yield bond analyst at BT Securities Corp., said if Salomon Brothers is removed from its advisory position, a number of other firms will likely bid to replace it.

"I'm sure there are lot of other interested parties," he said, adding that Donaldson, Lufkin & Jenrette Securities Corp.; Merrill Lynch & Co.; and his own firm would likely be among those interested.

"It's fee business, advisory business, and these days that's attractive to just about everyone," Mr. Shippee said.

Adding to Salomon's woes, Moody's Investors Service Inc. lowered the company's senior debt rating to A3 from A2, and dropped the firm's commercial paper rating to Prime-2 from Prime-1.

Approximately $7 billion of debt is affected, Moody's said.

The downgrades reflect Moody's concerns over possible legal, financial, and business consequences stemming from the scandal.

Moody's had placed Salomon's ratings under review for a possible downgrade August 15. The investment firm's A3 senior debt rating and the Prime-2 rating will stay under review for a possible downgrade, the agency said.

How the situation unfolds will affect the outcome of its continuing review, the agency said. Moody's biggest concern would be the nature of any criminal charges lodged against the firm, as well as any judicial or regulatory sanctions levied.

In response, Salomon issued a statement saying, "Moody's action will have no significant impact on the firt's overall liquidity, which remains strong. It may, however, marginally raise our cost of borrowing."

Salomon pointed to a passage in Moody's release saying, "Salomon's credit standing continues to be supported by the firm's professional financial management, adequate capital, and healthy liquidity."

Standard & Poor's Inc. on Aug. 16 placed Salomon's A-plus senior debt, A subordinated debt, A-1 commercial paper, and A-minus preferred stock on CreditWatch, where it still remains, a spokeswoman at the agency said.

In other news, Associates Corporation of North America, an independent finance subsidiary of Ford Motor Co., has filed a $3 billion shelf registration, company spokesman Fred Stern confirmed yesterday.

"As a finance company and a growing one we have a constant need for debt," Mr. Stern said. The company currently has $275 million remaining from a previous shelf, he said.

With some $19.3 billio in assets, Associates is the nation's second largest independent finance company. Proceeds will be used to pay down commercial paper debt.

In the corporate debt markets yesterday, high grades were up just over one point in trading with no new issues. The high-yield market was also quiet, up about an 1/8. Unysis Corp. and Petrolane Gas Service LP bonds were both higher, one trader said.

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