I ended up moving one of the handset leads. I had ordered new cloth cords for the phone and the color codes did not match the drawings.

I do have another question: Even though the phone can dial out (I called my cell phone) it will also mis-dial sometimes. I bought one of those DTMF converters but I must not be connecting it correctly as it doesn't seem to make any difference. Can anyone tell me how it should be wired to the phone line? I tried to attach a pic but it's too large. It has a green circuit board with three screws on one end and a modular connection on the other. The red and green wires are labeled T & R and on one side the two terminals say "telephone".