The NewsHour with Jim Lehrer

MR. LEHRER: Good evening. I'm Jim Lehrer. On the NewsHour tonight, the stock market reacts badly to the budget news. Charlayne Hunter-Gault talks to analyst Mary Farrell. The state of U.S./Japan relations, Elizabeth Farnsworth interviews Amb. Walter Mondale, and the new storm around the First Lady. Sen. Bennett, Clinton campaign official Ann Lewis, plus Paul Gigot, and Elizabeth Drew react and analyze. It all follows our summary of the news this Wednesday. NEWS SUMMARY

MR. LEHRER: The stock market took another big fall today, and it was blamed on the stalled budget talks. The Dow Jones Industrial Average closed down 97 points. It had dropped nearly 68 points yesterday. Some analysts said the suspension of budget talks in Washington was the cause. They cited House Speaker Gingrich's remark today that the stalemate could last until the November elections. At a cabinet meeting today, President Clinton said the impasse has nothing to do with balancing the budget anymore.

PRESIDENT CLINTON: We could balance the budget literally in 15 minutes tomorrow afternoon, and the Congressional Budget Office would say hurrah, the financial markets would say hurrah, interest rates would drop, the economy would start to grow. Everything would be fine. Then we could have an election in 1996 about whether the American people agree with their view of Medicare or mine, with their view of Medicaid or mine, with their view of our obligations in education and training of our work force, and our children, or mine, with their view of environmental protection, or mine. Now, that's what we ought to do.

MR. LEHRER: Senate Majority Leader Bob Dole said he remained positive about a possible budget deal. We'll have more on the stock market fall right after this News Summary. But Sen. Dole did have some criticism for President Clinton today. It was over the veto of the welfare reform plan passed by both Houses of Congress.

SEN. ROBERT DOLE, Majority Leader: The President may have tried to hide this stealth veto by doing it late at night. But he cannot hide this message, the message he's sending to the American people, a loud and clear message that he will stand in the way of fundamental change and instead will fight for the status quo. The President's veto means that American taxpayers will enter 1996 continuing to pour countless millions into a system that has failed according to everyone, a system that has failed and failed and failed.

MR. LEHRER: The President said in his veto message last night that he would work with Congress on a welfarereform bill that he could sign. And in the probe of President and Mrs. Clinton's financial dealings, the chairman of the Senate Whitewater Committee said today he does not plan to subpoena First Lady Hillary Rodham Clinton at this time. Republican Alfonse D'Amato of New York said he still wants more White House documents for his investigation. He said recently received billing records showed Mrs. Clinton legal work in Arkansas involved questionable transactions. D'Amato said those transactions led to the failure of Madison Guaranty, the savings & loan link to the Whitewater land deal. The President will answer questions on the budget and on this matter tomorrow afternoon at a televised news conference. We'll have more on Mrs. Clinton's problems later in this program. In the Middle East today, Secretary of State Christopher began a new round of shuttle diplomacy between Israel and Syria. He met with Prime Minister Peres in Jerusalem. He will go to Damascus tomorrow for talks with Syrian President Assad. Earlier in the day, Peres welcomed King Hussein of Jordan on his first official visit to Israel. The King said the one-day trip to Tel Aviv was a tribute to slain Prime Minister Yitzhak Rabin. Israel and Jordan signed a peace treaty last year ending 46 years of war. On the Russian hostages story today, Chechen rebels headed for their breakaway republic with at least 150 civilian hostages. They did so after freeing nearly 3,000 people they had been holding in a hospital in the town of Kizlyar. We have more in this report from Julian Manyon of Independent Television News.

JULIAN MANYON: Boris Yeltsin had promised a resolute response to this latest act of Chechen terrorism, but only this morning a convoy of buses, including both the terrorists and about 150 of their hostages, was allowed to leave for Chechnya. As they crawled towards the border, the gunmen seemed jubilant, their hostages relatively calm. All of them appeared to believe that a deal had been done and that the Russian government would stick to it, in spite of the helicopter gunships roaring above them. The convoy has now come to a virtual halt on a broken piece of road on which the vehicles can only crawl. Russian helicopters are circling overhead, occasionally swooping low to buzz the terrorists, but so far, there's no sign of an all-out Russian attack. But at a village on the Chechen border, the tension began to mount. One bus got stock and Chechen and Russian soldiers faced each other only yards apart. Then as the convoy entered an open, snow-covered field, the Russians ordered it to halt. Helicopter gunships fired warning shots, and for three hours, the convoy remained halted, with some Russian soldiers predicting that an attack was imminent. The Chechens took up defensive positions, but instead of fighting, the two sides resumed negotiations. This evening, the convoy is still halted, but there is hope that bloodshed can be avoided.

MR. LEHRER: More than 20 people were killed in fighting between rebels and police in the original siege at the hospital. And at least two of the hostages were executed. And back in this country, on the East Coast snowstorm, residents spent another day digging out from the record snow that buried the region. A light snow fell again in Boston, New York, and various other areas. Unplowed streets and icy roads kept the federal government in Washington shut down for a third consecutive day. Most major East Coast airports reopened, but travelers faced long delays as airlines tried to reschedule a backlog of flights. Another snowstorm is expected to hit the area this weekend. And that's it for the News Summary tonight. Now it's on to the stock market and the budget, the U.S. Ambassador to Japan, Walter Mondale, and the new problems of the First Lady. FOCUS - WALL ST. - GOING DOWN

MR. LEHRER: We go first tonight to the stock market's bad day and to Charlayne Hunter-Gault.

MS. HUNTER-GAULT: The stock market has been on a sustained high for a long time now until yesterday. That's when it started to drop, 68 points yesterday, 97 today. To help us analyze what's now moving the market, we're joined by Mary Farrell, investment strategist with Paine Webber. Ms. Farrell, thank you for joining us. We've heard that this move downward has been blamed on the stalled budget negotiations. Is that right?

MARY FARRELL, Paine Webber: [New York] That's part of it. And that's certainly the most visible in the catalysts today. But it's also the fact that earnings are coming in very disappointing for the fourth quarter.

MS. HUNTER-GAULT: All right. Let's start with the stalled budget talks. Take us through that. I mean, Speaker Gingrich says that we're not going to have a deal possibly till November, and the stock market starts to drop. How exactly does that happen? Are people sitting on the edge waiting, and what happens?

MS. FARRELL: Well, I think a good portion of the stock market's gain last year was based on the premise that we would have a creditable budget deficit reduction package, that that in turn would take some pressure off interest rates, would resolve the inflation issue, i.e., keep inflation low, and that did push stock prices higher.

MS. HUNTER-GAULT: And the connection with interest rates is what?

MS. FARRELL: Basically, the lower interest rates go, the more highly stocks are valued. If you can get a high return in interest rates buying bond with a high interest rate, stocks are relatively less attractive.

MS. HUNTER-GAULT: Okay. Go ahead. I interrupted you. Sorry.

MS. FARRELL: So basically, now that it appears that we are not going to necessarily get one, and I think when we say a budget deficit package, that certainly means not the smoke and mirrors that we've often seen from Washington. The market is reacting very negatively.

MS. HUNTER-GAULT: And when you say the market, I mean, who is it that goes and suddenly starts making it move?

MS. FARRELL: Interestingly, Charlayne, it's primarily institutional investors who tend to do the large volume trading on days like this. One lesson that has been learned by the individual investors in the post stock market crash of '87 environment is it really doesn't pay to trade these short-term moves; as long as the outlook long term is good, it's better to hold.

MS. HUNTER-GAULT: Now, you say there were other, other factors as well, not just Gingrich's remarks.

MS. FARRELL: Yes. A very important factor which the market is going to have to face is that earnings growth is slowing. Last year was a very strong earnings year for the market. Corporate earnings were up on an operating basis about 19 percent, but as the economy slows, so do those earnings.

MS. HUNTER-GAULT: And, I mean, are those the two main factors, or are there other things as well, because I was reading that there were other factors that in the last week or so in particular, that started to contribute to this.

MS. FARRELL: There are some other factors, and, for example, retail sales were very weak over Christmas. Automotive sales have been weak, and we are starting to see that, you know, kind of broadening in the economy. There's one little fact that's kind of interesting. Usually you get tax loss selling in the month of December before year-end. There's some belief we're seeing a lot of tax loss selling now, or actually tax planning taking gains, because of the possibility or probability we'd see some capital gains reduction.

MS. HUNTER-GAULT: But also last month, I mean, the market--didn't the market drop 101 points in December?

MS. FARRELL: One ironic thing about this market is that it went up so strongly, over 34 percent last year, with very few corrections. We did have a few of those backtracking periods, but really not very much. Most bull markets get several 5 to 10 percent corrections. This one, remarkably, did not.

MS. HUNTER-GAULT: So how seriously should we take this drop yesterday and today? I mean, is this a really big deal and something to really be worried about?

MS. FARRELL: If I were those congress persons and our President in Washington, I would take very close note here because I think the market really does reflect a lessening of confidence in what's going on in Washington, and I think they should respond to that. I think if you look ahead, you know, this period of slower growth, slower earnings is going to take its toll, but basically the outlook for the market is pretty good. This is a soft landing. You know, I think the Federal Reserve did a good job maneuvering us into a soft landing and relatively we're pretty healthy.

MS. HUNTER-GAULT: But, you know, today after Speaker Gingrich said what he said about the budget deal, Sen. Dole said that he was very optimistic about a budget deal. How is--is that going to also factor into this equation and cause some movement in the market, I mean, is it steadily going down now, or will it change, depending on things like that?

MS. FARRELL: Yes. I think two things. I think there will be very close watching on what goes on in Washington, and the market will respond. This could turn on a dime if we came back with a creditable agreement in Washington. And the other thing is I think the market is going to focus very closely on earnings. They haven't had to worry about the practicalities. Last year, earnings were strong. The economy was moving. Unemployment was high. Interest rates were declining. This year not only do we not have the budget package, but we also have interest rates more stabilizing and earnings slowing. So it's not quite as easy out there.

MS. HUNTER-GAULT: So is it possible to predict with any certainty in this very volatile environment what we might see tomorrow or the next day?

MS. FARRELL: I would hesitate to say with certainty. I'd feel probably most comfortable saying not that we'd see more of the same. I don't necessarily think we're going to see, you know, a 100-point decline sequentially here, but I think it is a nervous market which will wait for a sign that we do have progress in Washington, or else, it's going to have to come to grips with these lower earnings. So I think it's going to be very tough and go and expect more volatility.

MS. HUNTER-GAULT: All right. Well, Ms. Farrell, thank you for joining us.

MS. FARRELL: Thank you very much. NEWSMAKER

MR. LEHRER: Now, the state of U.S. relations with Japan and to an interview with the U.S. Ambassador to Japan, Walter Mondale, to be conducted by Elizabeth Farnsworth.

MS. FARNSWORTH: In Japan, the U.S. military presence has come under attack in the months since three U.S. servicemen were indicted for raping a Japanese schoolgirl last September, all this just as Japan is getting a new prime minister with a reputation for talking tough and straight to Americans. Tomorrow, if all goes according to script, the Japanese Diet, or Parliament, will elect Ryutaro Hashimoto as prime minister. He has been Japan's chief trade negotiator and developed a reputation for blunt talk across the bargaining table during meetings with the U.S. over auto exports. At age 58, Hashimoto also represents a new generation of politicians. He replaces Tomiichi Murayama, age 71, a Socialist who abandoned the anti-U.S. and pacifist platform of his party when he came to office a year and a half ago in a coalition of opposites with the long-ruling liberal Democrats. The change in government comes at a time when many Japanese are demanding a different military security relationship with the United States. Thousands have mobilized in demonstrations, calling for removal of U.S. bases and military forces. Since World War II, the U.S. has assumed a major role in the defense of Japan as part of a strategy for maintaining a military balance in Asia. Japan's forces are limited to self-defense of the home islands by the U.S.-imposed post-war constitution. Some 47,000 American military personnel are stationed at 10 bases on the islands, with the largest concentration of troops in Okinawa. Provoking the recent uproar over this presence was the abduction and rape of a 12-year-old Okinawan girl, allegedly by three American servicemen last September. The three are now on trial in a Japanese court. American officials, from Amb. Walter Mondale to Defense Sec. William Perry, have apologized.

WILLIAM PERRY, Secretary of Defense: [November 1, 1995] On behalf of all members of the armed forces, I want to express my deep sorrow and anger for this terrible act--deep sorrow for the little girl who was the tragic victim and for her family and anger at the perpetrators whose actions not only caused a tragedy for the victims but also unfairly reflected on the many fine American military personnel in Japan.

MS. FARNSWORTH: The controversy reached a peak towards the end of November, just as President Clinton was scheduled to make a state visit to Japan as part of the Asia Pacific Economic Summit, but the President had to cancel that visit because of the budget battle in Washington.

WARREN CHRISTOPHER, Secretary of State: [November 16, 1996] It is well known that the relationship the United States has with Japan is the cornerstone of our entire Asia policy. I've already had a chance to express to the foreign minister my regret at the fact that President Clinton was required by domestic circumstances to cancel his trip to Japan.

MS. FARNSWORTH: Vice President Gore took the President's place at the APEC meeting, and Mr. Clinton is scheduled to go this Spring. Today, White House Press Secretary Mike McCurry said Washington expects continued cooperating with the new Japanese prime minister.

MIKE McCURRY, White House Press Secretary: We've heard from a variety of people, including Mr. Hashimoto, that our close working relationship would continue, and we continue to enjoy cooperation, whether it comes to economic discussions, political matters that affect our work together across the globe, or in the security area so vital to the national security of both the United States and Japan.

MS. FARNSWORTH: Now to get some perspective on all this we turn to the United States Ambassador to Japan, Walter Mondale. He joins us from St. Paul, Minnesota. Thank you for being with us, Mr. Ambassador.

WALTER MONDALE, U.S. Ambassador, Japan: [St. Paul] Pleased to be here.

MS. FARNSWORTH: The new prime minister-designate, Mr. Hashimoto, has a reputation for being a tough guy. One wire reporter called him a political bruiser. Is that an overstatement?

AMB. MONDALE: Well, I've worked with Mr. Hashimoto practically daily since I've been ambassador. He is tough. He speaks up for Japan, but he's also a strong friend of the U.S. relationship, and once you make a bargain, he keeps it. I think we'll be able to work with him very well. He--one of his strongest statements the last few days has reaffirmed his view that the U.S./Japan relationship is crucial and that the U.S.--American security relationship is crucial for Japan, so I think what we'll see is continuity under a strong prime minister, and I believe we are going to be able to work with him very well.

MS. FARNSWORTH: Does he represent a generational change in that he's quite a bit younger than recent prime ministers?

AMB. MONDALE: In one sense, yes, true, but in another sense, he's an old hand. He's been in the Diet, the parliament, now for 33 years. He was elected as a young man, so while he's part of the new generation, he's also part of a generation of political leaders who've been around for a long time; so younger and also more experienced at the same time.

MS. FARNSWORTH: Last year, the Clinton administration and Japan negotiated essentially--correct me if I'm wrong--a reaffirmation of the current military arrangement in Japan, an agreement that would have been signed by President Clinton last year but will be in the Spring. But the platform of the coalition that Mr. Hashimoto heads says something a bit different. It calls for "the realignment and reduction of American military bases in Okinawa." How will these two be reconciled?

AMB. MONDALE: Well, we have agreed to review through what we call a special action committee the--several matters surrounding our bases in Okinawa. This was triggered by the horrible rape that you've mentioned, and we are meeting now with Japanese officials to see how we can reduce irritants such as noise and the rest and how we can reduce the--what we call the footprint, the, the size of our presence there, all of it, however, consistent with our ability to do what we have to do under the treaty. Our bases in Okinawa are very important, and over this next year, we're going to see what we can do to make certain that we're as good a neighbor as we can possibly be in Okinawa, and yet be able to do what we must do. I think we're going to be able to get that done, and I hope the people of Okinawa will see the sincerity of our efforts.

MS. FARNSWORTH: Does that mean that there might be some changes in Okinawa, but the overall number--forty-five to forty-seven thousand troops in Japan--

AMB. MONDALE: Right.

MS. FARNSWORTH: --would stay the same?

AMB. MONDALE: That is correct.

MS. FARNSWORTH: They just might be moved somewhere else.

AMB. MONDALE: Well, that's not clear. Where our troops are to be located in Japan is a question for the government of Japan to decide. And so if they want to move some of them elsewhere and provide other facilities, that would be fine by us, but I, I frankly don't anticipate much of that. So what we really must do in Okinawa is to see how we can readjust the forces, reduce irritants, as I mentioned before, and try to be less intrusive than the current structure. And I think we're going to be able to take some useful steps there.

MS. FARNSWORTH: The rape, the fact that the U.S. military did not turn over the men until they'd been indicted, which I guess is part of our agreement with the Japanese, and then the statements by the U.S. Pacific Commander, Admiral Mackey, who said, "The rape was stupid because the men could have hired a prostitute," led to some really hot and hard and angry feelings in Japan. Does that continue, or has that changed?

AMB. MONDALE: Well, let me just say one thing about the rape. It was horrible. There is no justification for it. To do this to a 12- year-old girl was just beyond belief, and I agree with what Sec. Perry said. It was not only dreadful for that young girl and for her family and the rest, but it also defames unfairly the public reputation of our many fine service men and women in that area. Secondly, when this happened, we immediately investigated, found the suspects, placed them under arrest, and began complete and vigorous cooperation with the Japanese authorities, who have told us they were thoroughly satisfied. Under our then rules, however, we could not turn these suspects over to Japanese authorities until an indictment had been issued, but it was understand--understood at all times during this proceeding that they would be turned over, and, in fact, they were. Following that, we reviewed the rules to make it possible to turn suspects over who are charged with heinous crimes more quickly than is now the case, but I think a fair assessment of how that was handled on our part would show that we did everything we could to cooperate with Japanese authorities. Now, the statement by the admiral, who happens to a friend of mine, was very unfortunate, and it, it required him to resign. I'm sorry that that happened, but I thought there was no other alternative.

MS. FARNSWORTH: And how do you assess the situation now? Has some of the sting gone out of the situation, or are the demonstrations continuing?

AMB. MONDALE: Somewhat, but this matter needs careful attention, and that's exactly what we're doing. We're meeting almost continuously with Japanese authorities from the Secretary of Defense on down. We've been working to make these changes in Okinawa that would help reduce the public concern about our presence there. I think we're going to be able to do quite a bit. This committee that I referred to must complete its work within a year. I'm sure we will do so, and I hope that that will be seen as satisfactory to many of the citizens of Okinawa.

MS. FARNSWORTH: It seems that the rape brought to a boil the simmering resentment or some--a resentment among some over the U.S. presence. What is your answer to the question, why do we need 47,000 troops, U.S. troops, in Japan in this post Cold War period?

AMB. MONDALE: Well, first of all, if you look at North Korea, they have a million military personnel on the border of South Korea as we talk tonight. We hope that they will never use those forces, but a little over a year ago, we were very concerned that they might do something foolish there. If that were to occur, we would need our forces in Japan, our forces in South Korea, and perhaps other forces to deal with what could be a very serious risk. Secondly, the American forces in Japan play a crucial stabilizing role throughout the Asian Pacific region. In my lifetime, there have been three wars, all of them started there. This time we're trying to do it differently, and the essence of our strategy involves the U.S./Japan security relationship and the presence of American forces in Japan that are permitted not only to help defend Japan but also to be deployed forward in case of need. And I think that every Asian country--I don't know of any exception, perhaps North Korea, is very glad for the U.S. presence there, and I think we should be too.

MS. FARNSWORTH: Turning to trade, how much has the U.S.--the aggressive stance on trade--led to a somewhat position in Japan about other issues? What's the tie there?

AMB. MONDALE: I don't--I think that's greatly exaggerated. You know, we have trade disputes with Europe, with Canada, and so on. It doesn't affect NATO. We have been very careful to keep trade issues separate from security issues. They are not related, and they shouldn't be related. I think we've made a good deal of progress on trade. American exports are rising. The current account deficit is coming down, partly as a result of the strong yen, but also because we've made progress in these trade talks, and I think by helping to solve this problem, as we are, this will help strengthen the relationship. Those negotiations were tough; there may be difficulties in the future, but I think it's very important that we try to keep the two separate.

MS. FARNSWORTH: Mr. Ambassador, in your experience, is Japan, does Japan see its future increasingly with the rest of Asia, and especially Southeast Asia, where it's gotten very involved with Vietnam, for example, rather than so much across the Pacific?

AMB. MONDALE: Oh, I think the Japanese leaders would consider that a false choice. Of course, they've got to be active in Asia. They are very involved there in economic trade and so on, and diplomatically, and by and large, I think we favor that. It, it helps all of us. But they also need a strong relationship with the United States and with the rest of the world, with Europe and so on. And I think they are very clear about that. The Asian Pacific Economic Conference, which is something they've helped bring about, has a Pacific-wide focus to it. They're involved in all the international organizations. Yesterday, Hashimoto, for example, said that the U.S./Japan relationship is the linchpin of Japanese foreign policy and security policy. I think they see a choice of picking Asia or the United States or Asia and Europe as a false choice.

MS. FARNSWORTH: Last year saw a long line of difficult events in Japan, beginning with the earthquake in Kobe, the gas attack on the Tokyo subway, the yen surging to a new high on the dollar, and the collapse of five financial institutions. What kind of a public mood has all that produced?

AMB. MONDALE: Well, I think it has shaken them some, and I think there's a lot of hope that this new government will be able to deal with some of these matters that are still troubling them in an effective way. They've had four years of very sluggish growth. Unemployment is rising particularly among the young and particularly among young women. They have been shaken by these other events that you've described. A lot of it--some of it's just bad luck, like the Kobe earthquake, but it was dreadful, and I think that, that it has sobered the Japanese and Japanese public opinion, and for that reason, they're looking to their government to start dealing with some of these problems in a more vigorous way.

MS. FARNSWORTH: And finally, Mr. Ambassador, how do the Japanese leaders in your--I know that there's a wide variety here, but if you can generalize--in your experience, how do they see the United States? One reads here about Japanese intellectuals saying that the United States is a declining power.

AMB. MONDALE: I, I think it goes in cycles. Right now, I think that there's a lot of respect for the United States, you know. Our economy now is the most productive in the world. We are the world's only major military superpower. American leadership is seen throughout the world as being indispensable to, to a stable world. I think that our relationship, though we've had the difficulties that you described, is fundamentally sound. Both leaders, i.e., Hashimoto and Mr. Ozawa, the leader of the main opposition party, are strong friends of a good, solid U.S./Japanese relationship, and although you hear these other voices, as you've mentioned, I think most Japanese feel very strongly that the U.S. relationship is crucial, and I hope that most Americans feel the same way about it, because I think that's the truth.

MS. FARNSWORTH: Well, thank you for being with us, Mr. Ambassador.

AMB. MONDALE: Thank you. FOCUS - IMAGE PROBLEMS

MR. LEHRER: Finally tonight, the new storm over Hillary Rodham Clinton. We begin with a setup report by Charlayne Hunter-Gault.

MS. HUNTER-GAULT: First Lady Hillary Clinton had been keeping a deliberately lower profile since her very high profile days as head of the President's ill-fated health care reform effort, but she's back in the spotlight again, involuntarily and in a highly controversial way. It all dates back to May 1993, when seven long- time employees of the White House Travel Office abruptly were fired following allegations of mismanagement inside the office.

GEORGE STEPHANOPOULOS, White House Communications Director: [May 21, 1993] It is never easy to terminate people who serve at the pleasure of the President, especially people who serve long tenures in their jobs. We could not, however, fail to act in the face of these findings. In fact, it would be irresponsible not to act. That is why we called for the review. That is why we acted upon the review, and that is why the FBI is investigating today.

MS. HUNTER-GAULT: The FBI was investigating without the knowledge of Attorney General Janet Reno.

SEN. ROBERT DOLE, Minority Leader: [May 25, 1993] I think it's truly disturbing that the FBI should be used in this manner by anybody, by anybody. It reminds you of--it takes you back to Watergate, and as a Republican, I can tell you of some of the repercussions of that and of that practice.

MS. HUNTER-GAULT: The incident quickly developed into an embarrassment for the President.

PRESIDENT CLINTON: [May 25, 1993] I talked to Mr. McLarty about it this morning, and, you know, I keep reading this. I know that there's a feeling at least based on what I've read that someone in the White House may have done something that was inappropriate or that wasn't quite handled right, or something, so I asked--Mack and I talked about it today. We said he would spend some real time on it, look into it, try to ascertain exactly what happened, make a full report to me, which I think is the appropriate thing to do.

MS. HUNTER-GAULT: The affair soon became known as Travelgate, particularly after it was discovered that Harry Thomason, a friend of both Bill and Hillary Clinton, also was co-owner of a private firm prepared to take over all White House travel and the lucrative contract that goes with it. The White House later admitted the firings were mishandled, apologized, and found jobs for five of the fired employees, but it denied Mrs. Clinton had any direct involvement in the firings. But last week, the White House suddenly announced it had found a two-year-old memo written by then White House Director of Administration David Watkins, who carried out the firing. In the memo, Watkins says White House Counsel Vincent Foster, "regularly informed me that the First Lady was concerned and desired action. The action desired was the firing of the Travel Office staff." Watkins said he would have resisted the firings, but because of Mrs. Clinton's involvement, there would have been hell to pay. Yesterday, the White House said Mrs. Clinton was concerned about mismanagement at the White House Travel Office and knew in advance of the firings but did not order them.

SEN. ALFONSE D'AMATO, Chairman, Whitewater Committee: [Today] This is a pattern--delay, deception, withhold.

MS. HUNTER-GAULT: The release of the Travel Office documents adds fuel to Sen. D'Amato's criticisms of the White House on this and the Whitewater issue. The Senator chairs the committee investigating Whitewater. Only the day before, the White House had released records documenting what Mrs. Clinton billed for her legal services to the government in its case against Madison Guaranty Savings & Loan. Mrs. Clinton has long held she did very little work for the government on the Madison case.

HILLARY RODHAM CLINTON: [April 22, 1994] And the young attorney, the young bank officer did all the work, and the letter was sent, but because I was what you call the billing attorney--in other words, I had to send the bill to get the payment made--my name was put on the bottom of the letter. It was not an area that I practiced in. It was not an area that I really know anything to speak of about.

MS. HUNTER-GAULT: But the released records show Mrs. Clinton spent at least 60 hours on the Madison case. Madison is the failed Arkansas bank owned by James MacDougal, the Clintons' Whitewater Development business partner.

SEN. ALFONSE D'AMATO: And so even at this time, the so-called cooperation has been lacking. It makes no sense to say we've turned over 50,000 pages when, indeed, the critical pages, the critical files, that that goes to the heart of this matter, have been withheld systematically. We're going to pursue this. We're going to get the facts. We may have to dig them out. It may be painful at times for everyone concerned, including the committee. It has certainly been a waste of time in many cases because we could have achieved these results a long time ago had the White House truly been cooperative, as they claim. That has not been the case.

MS. HUNTER-GAULT: The document releases have put Mrs. Clinton back on the front page, with stories and editorials questioning her honesty. In Monday's "New York Times," William Safire called Mrs. Clinton "a congenital liar." Yesterday, the White House reacted angrily to the column, with the White House Press Secretary suggesting if he were not President, Mr. Clinton would have delivered a more forceful response to the bridge of Safire's nose. Later, however, President Clinton's reaction to the charge was somewhat more reserved.

PRESIDENT CLINTON: All I said was, you know, when you're President, there are a few more constraints on you than if you're an ordinary citizen. If I were an ordinary citizen, I might give that article the response it deserves. Well, I would just remind the American people we've been through this for four years now, and every time somebody's made a charge related to the Whitewater issue, it's turned up dry. And the only records as far as I know that haven't been disclosed so far, as far as I know, we still haven't seen the release of the RTC report, which says that after all, we told the truth all along about the underlying matters here. So I just would like to ask the American people to take a deep breath, relax, and to listen to the First Lady's answers, because we've been through this for over four years now. And every time a set of questions come up, we answer the questions, and we go on, the American people are satisfied, and they will be again. She is- -I've said before, I'll say again--if everybody in this country had the character that my wife has, we'd be a better place to. Thank you very much.

MS. HUNTER-GAULT: But as of today, the questions and the debate over Mrs. Clinton's answers and her character continue.

MR. LEHRER: And we get four perspectives now on the First Lady and her problems. Sen. Robert Bennett, Republican of Utah, is a member of the Senate Whitewater Committee, Ann Lewis is deputy manager of the Clinton-Gore Reelection Committee, Paul Gigot is a "Wall Street Journal" columnist and a regular analyst on this program. Elizabeth Drew is a Washington author and journalist. Sen. Bennett, do you believe Hillary Rodham Clinton is a liar?

SEN. ROBERT BENNETT, [R] Utah: I'm not ready to go that far at this point. I am troubled by the pattern that we've seen before the committee and the pattern that seems to be coming out now. I remember talking to Bernie Nussbaum.

MR. LEHRER: Who was then White House counsel.

SEN. BENNETT: He was the White House counsel, and then he appeared before the committee, and he laid out very vigorously-- Bernie is nothing if not vigorous--why he acted as he did following Vince Foster's tragic suicide. And I said to him, Mr. Nussbaum, you say you have done all the things you have done in order to protect executive prerogatives and privileges, but can't you see that if your motive was to cover up something that would be personally embarrassing to the Clintons, you would have acted in exactly the same way? And he responded to me by saying, yes, Senator, I guess that's true. If that had been my motive, I would have done exactly the same thing that I did, but Senator, nothing has come forward in the years of investigation that would be embarrassing to the White House, so that proves that's not my motive. What is happening now is we're seeing things come forward that are, indeed, embarrassing to the White House, embarrassing to the President, causing editorials of the kind you saw. "Detroit News" has one called the "Mean Spirited White House" and starts using words that we haven't heard for a long time. The real issue here, I'm quoting, the real issue here is that the White House seems to have misled congressional investigators about the First Lady's role. Worse, it was willing to use, quite willing to use the IRS, Justice Department, and FBI to get its way. Now, that's tough stuff. And that is coming out now, and when I put that against the pattern of my conversation with Mr. Nussbaum and the other witnesses before the committee, I find this very, very troubling, because they have always said there is nothing there--the President just said--that's come up dry. But clearly, we have evidence now that would indicate that at least somebody was wrong in the things they told the committee about the First Lady's role.

MR. LEHRER: Do you dispute that, Ann Lewis?

ANN LEWIS, Clinton-Gore Campaign: I not only dispute it, I wish the documents that came up last week had been available earlier, because, in fact, they--in one case confirm, in the other case are quite consistent with what the First Lady has said. Let us go directly to Travel--Travelgate, put the quotes on. Bill and Hillary Clinton come to Washington, come to the White House, and hear from other people, including members of the press, that there are questions about the financial management at the Travel Office. Hillary Clinton reacts as I would hope any First Lady would and expresses her concern. Things ought not go wrong at the White House. Now, in acting on that concern, she and others expressed that concern. Mack McLarty is then chief of staff. He hears this from the First Lady. He hears it from others, and a large accounting firm is brought in, they bring back and report and say there is financial mismanagement. Steps are taken. That is changed. The Travel Office now operates according to the highest standards and in some strange Washington reversal, the Clintons are now criticized for making the changes that should have been there.

MR. LEHRER: But the heart of the criticism, as you know, is that, that Mrs. Clinton's role was not properly disclosed at the time.

MS. LEWIS: And Mrs. Clinton has regularly said I've always said, I was concerned, I expressed that concern, as did others. Mack McLarty, who was chief of staff, had said, look, this was my decision, I was chief of staff, Mrs. Clinton did not direct that any personnel decisions be made. So what you have is Mrs. Clinton saying, Mack McLarty confirming that what she said is if there's a problem, the problem should be fixed. She did not say, and the memo that was found last week has no firsthand information that she ever said specifically how or what personnel steps should be taken.

MR. LEHRER: Well, so when the editorial writers that--who wrote the editorials that the Senator just quoted and the editorials that, that Charlayne quoted in our piece, say that Mrs. Clinton lied, then what are they basing that on?

MS. LEWIS: I've got to tell you, first, I find that language appalling. I think it goes beyond civil discourse. Those charges are reckless, and they are untrue. And as far as I can tell, they take Mrs. Clinton's statements, which have been consistent over a number of years, which are confirmed by Mack McLarty, who as chief of staff was responsible, contrast them with a draft memo that was never circulated and never sent, which lists third-hand impressions of what other people might have said, and, in fact, there might be misimpressions out there, we cannot correct for that, but contrast those two and it immediately jumps to the conclusion that Hillary Clinton must be wrong. I don't know how we got to the point at which the balance would shift that way.

MR. LEHRER: Yeah. Senator, is there a jump there that the assumption always is now that Hillary Clinton is the one who is wrong, rather than the memo writer, rather than the other person?

SEN. BENNETT: Let me take you through the experience that I most directly connected with. On the committee, the issue of Mrs. Clinton's activities on behalf of Madison Guaranty came up and they came up in the form of a recap of billing hours and dollars on the part of the Rose Law Firm. And I questioned Web Hubble about that very directly, and--

MR. LEHRER: Now, Webster Hubble was--

SEN. BENNETT: He was Hillary--

MR. LEHRER: --also a member of the Rose Law Firm.

SEN. BENNETT: Right.

MR. LEHRER: Right.

SEN. BENNETT: He was Hillary Clinton's law partner. He came to Washington with the Clintons, was associate attorney general, was forced to resign as associate attorney general, and unfortunately got himself in difficulty because of, of the way he handled his own billing practices and is currently in jail.

MR. LEHRER: Not related to his duties--

SEN. BENNETT: Not relating--no--

MR. LEHRER: --in the Justice Department.

SEN. BENNETT: His duties at the Rose Law Firm.

MR. LEHRER: This happened before he came here from Little Rock.

SEN. BENNETT: That's right. Yes, sir.

MR. LEHRER: Okay.

SEN. BENNETT: So I, I said to him, Mr. Hubble, it appears to me on the face of these billing recaps that Mrs. Clinton did, indeed, have far more to do with the Madison Guaranty legal representation than she has said. And, indeed, I quoted from her affidavit, a sworn affidavit in which she said--

MR. LEHRER: Sworn to whom, sworn to the committee?

SEN. BENNETT: Sworn to--no, to the inspector general of the RTC- -FDIC, I'm sorry.

MR. LEHRER: FDIC, right.

SEN. BENNETT: Sworn to the inspector general of the Federal Deposit Insurance Corporation, and also the press conference which we saw repeated on the--

MR. LEHRER: That excerpt from Charlayne's--

SEN. BENNETT: Right.

MR. LEHRER: --piece, where she talked--

SEN. BENNETT: I said, Mr. Hubble, I'm not a lawyer, I've never filled out a time sheet, but I've paid a lot of legal bills, and I think I can understand a legal bill, and I think I can read it. And as I read this recap, it's very clear to me that the billing to Madison says that Hillary Clinton is the No. 1 lawyer on this issue and spends more time on it than the young associate, Mr. Massey. Now, we come in the same week as this travel thing comes along, and, again, I'll quote, I'll quote from the editorial relating to this, saying that there is--there are new documents that have now come forward. I asked Mr. Hubble for the documents. He said they're not there. There are new documents that have come forward, and this comment I think is very, very interesting. The timing of the discovery is particularly suspect. On December 31st, the statute of limitations expired for civil suits that could have been brought under the Madison Guaranty case, also the Resolution Trust Corporation, which had--

MR. LEHRER: Let me--

SEN. BENNETT: --supervised the thing, shut down.

MR. LEHRER: Sure. Let's get to Ms. Lewis here on the--

SEN. BENNETT: Give me, give me one more sentence.

MR. LEHRER: All right.

SEN. BENNETT: It says, "For copies of the records to show up five days later is a strange coincidence, to put it mildly."

MR. LEHRER: To put it mildly?

MS. LEWIS: The good news is, I think, that the timing did not expire. The Rose Law Firm has entered into what lawyers call a tolling agreement, meaning they have agreed to keep open the time by which the Resolution Trust Corporation, if it chose to go back in on this issue, could do so, so that is simply specious. I know that there is a lot of misinformation out there. I'm glad, once again, for a chance to correct it. Second, on the issue of timing, the constant--the conspiracy theories in Washington would have us believe that Hillary Clinton having spent the last eight months writing a book on a subject that is closest to her heart, that of children, being about to go out on a book tour to talk about children, would simultaneously have orchestrated both the concealment and now the discovery of two documents that are guaranteed to divert attention from what she most wanted to talk about. I don't think anyone here thinks she's that erratic.

MR. LEHRER: What about the heart of the charge?

MS. LEWIS: All right. The heart of the charge on billing, good, is I believe those billing records, which I have now looked at, in fact, confirm what she said, the narrow, the limited nature of her work for Madison, 60 hours--a week--over 15 months, less than a hour a week, is not very much. Second, the limited nature of the work that the entire Rose Law Firm did, Rose was not the major law firm for Madison and at the end of the 15 months, they actually gave moneyback to Madison, which I happen to think is more newsworthy than some other issues, and third, on the issue of the comment that we see on the press conference, this is very important. This is an example of an answer that was given to one very specific question about a securities matter in which she did supervise a young attorney is now being used as though she were talking about all her work for Madison. She never was. She was talking in that case about one very specific set of questions about did she supervise him, as she did on a securities case. She has never said she did not do other kinds of work but 60 hours, one hour a week for 15 months, that's a very limited scope of work.

MR. LEHRER: All right. Let's bring Paul and Elizabeth into this now. Paul, is the President--does the President have a serious problem as a result of this controversy?

PAUL GIGOT, Wall Street Journal: I think he does have a problem because I think you're seeing the evolution of the First Lady from a political asset, which she was in the '92 campaign--she's always been well liked by liberals in the party and women--she was somebody who helped energize them, and I think over the last three years you've seen that she has become something of a political liability. And the President, unlike a cabinet official, he can't fire the First Lady. They're joined at the hip politically. So anything that sticks to her is ultimately going to affect him, particularly given the fact that she has had a very prominent role in this administration, in this White House.

MR. LEHRER: And sticking to her is the issue, is it not, Elizabeth? We've just heard two views now of this, of these recent revelations, these recent--that's probably a strong word--that's a loaded word--these recent developments. Is, is--but she's been called a liar. We've heard the defense, et cetera. What's going to stick, or is it possible to know at this point?

ELIZABETH DREW, Author/Journalist: This is a story that never seems to end. And it will affect the President and it does affect the President, because character is his most vulnerable point. And they've worked very hard to get the focus off of that and onto the substantive achievements and the things that he cares about, but there seems to be a pattern in the Clinton presidency. He will be riding high and something comes along, whether it was the Arkansas troopers, and now these events. You cannot separate Mrs. Clinton from Mr. Clinton in these developments. I think even a lot of their friends are very sad at how these things were handled. In other words, I think that very questionable judgment was used on a number of cases, and oddly enough, people don't usually use this word, but naivety when they were rather new in Washington and whatever role she played in the Travel Office--and I thought David Watkins' memo was pretty explicit--we knew she'd played some role, but they said in the Travel Office report--now it's more explicit--that they didn't realize that to fire these people and then have the office taken over by Mr. Clinton's cousin, albeit a seventh cousin, and a Little Rock travel agency was not going to go down very well. I mean, Clinton, himself, realized this later. So the decision, whatever happened about removing the papers from Vince Foster's office, I've talked to criminal lawyers, apparently there's no obstruction of justice there. She was within her rights if she did it to have them removed.

SEN. BENNETT: I agree with that, by the way, and that's one of the questions I have raised. Why are we going to such lengths to say shehad nothing to do with the removal of those documents? I would expect that she would not only have them removed, she would clearly want to go through them. If, if my personal attorney had committed suicide and I had files in his office, I would want to know what those files were and what he was looking at. I, I compare it to the Sherlock Holmes' dog that didn't bark. Why didn't she look at the files? I've raised that question in the committee.

MR. LEHRER: And that has raised the question, though, of veracity, has it not, I mean--

MS. DREW: Well, again, also judgment in an emotional moment, having them removed, if she did, in that way, and then instead of saying, yes, they're my files, trying to--

MR. LEHRER: So what?

MS. DREW: If there is a cover-up, it is a cover-up of what they thought would be embarrassing, and in the course of that, they've gotten some other people, including her employee, in trouble.

MR. LEHRER: Well, that--I was going to ask both of you about this, because one of the things in Safire's column that has been- -not the liar thing--is the thing that's been caught--that's caught all the attention, but he said that she has also snared "her subordinates and friends in a web of deceit."

MR. GIGOT: Well, I think, in particular, he's talking about her friend, Susan Thomases, who was very clearly somebody who in the White House feared. I mean, she was thought to be, I think Elizabeth makes this clear in her book, she was somebody who had some clout in the White House through appointments and things like that, and, and also Mrs. Clinton's chief of staff, Margaret Williams, who had gone up to the Senate Whitewater Committee and have not recalled an awful lot to the point where their credibility is now being called into question, and even Sen. D'Amato is now talking about perhaps referring, looking into, having his counsel look into, or referring charges to the counsel of perjury.

MS. LEWIS: Jim, if I could--

MR. LEHRER: Sure.

MS. LEWIS: I hate to bring into these conversations about how, of course, she could have looked at the files, she might have looked at the files. Mrs. Clinton has said, I did not direct anyone to get those files. We were--we were grieving. We were mourning. We were stunned and saddened by the suicide of a friend. We were not thinking about documents at that moment. Again, I'm not sure why it is that a simple declaration of fact is resisted so hard and for so long, but she has been quite explicit on this on more than one occasion.

MR. LEHRER: Ann Lewis, what is your explanation of what's going on here? If this thing is so simple, there are simple explanations, nothing wrong has been done, why is this happening?

MS. LEWIS: Well, it's clear that nothing wrong has been done. I have rarely seen an investigation searching so hard for a problem, and it just goes on and on and on, and each month it seems that there is a new excuse for a new reason. I've said these charges have no verb because it is never clear to me exactly what it is Mrs. Clinton has said to have done.

MR. LEHRER: So if that's not--so what is going on?

MS. LEWIS: I think there are a number of elements at work here. And one of them, unfortunately, is that we are now entering into a political season and that a number of questions that have been raised and in many cases answered over the years are now being re- raised by a whole new cast of characters and by people who are eager to hold press conferences. I've watched this event over the last couple of months. I see Sen. D'Amato hold a press conference to demand that certain documents be introduced. Then he holds a press conference to complain when they are introduced, and I cannot help wondering if there isn't some partisan edge to this activity.

MR. LEHRER: Sen. Bennett, guilty as charged?

SEN. BENNETT: You cannot divorce what's going on here from partisan politics. I, I wouldn't try to pretend otherwise. But the fact is that we haven't gotten to the bottom of this. We haven't come to a point where we say, oh, there's nothing else there. We get to the point where the witnesses tell us, that's it, there's nothing else, we issue a subpoena, and then lo and behold, something else is, indeed, found, something else comes forward, and it always is something that we have asked for and been told either it's not there or you can't have it. And then when we get it, then we're told, oh, well, you didn't really want it anyway because there's nothing. I go back to the, the statement that I used at the very beginning of the hearings. The enduring mystery of this presidency is why President Clinton continues to take political damage, rather than simply tell us what's been going on.

MR. LEHRER: We have to leave it there. Thank you all four very much. RECAP

MR. LEHRER: Again, the major stories of this Wednesday, the stock market took another big fall. The Dow Jones Average dropped 97 points. Some analysts said the suspension of budget talks in Washington was the cause. And Whitewater Committee Chairman Republican Alfonse D'Amato said he does not plan to subpoena First Lady Hillary Rodham Clinton this time, but he said he would ask for more documents from the White House. We'll see you tomorrow night. I'm Jim Lehrer. Thank you and good night.