The NewsHour with Jim Lehrer

JIM LEHRER: Good evening. I`m Jim Lehrer.

On the NewsHour tonight: the news of this Tuesday; then, President Bush`s response to the new intelligence report on Iran, with reaction from Senators Rockefeller and Bond; the prospects for a recession, as seen by two former treasury secretaries, Lawrence Summers and John Snow; and a NewsHour report from Sweden on what life is like there for Iraqi refugees.

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JIM LEHRER: President Bush warned today Iran remains a nuclear danger. At a White House news conference, he called again for tougher sanctions. Just yesterday, a National Intelligence Estimate found Iran stopped working on nuclear weapons in 2003.

But Mr. Bush said today "nothing`s changed." He said the report made clear that Iran could resume work on weapons at any time.

Iran welcomed the U.S. intelligence estimate. The foreign minister insisted again Iran has only peaceful goals. In Tehran, he appealed to other countries to rethink their positions, as well.

MANOUCHEHR MOTTAKI, Foreign Minister, Iran (through translator): Now that the questions and ambiguities have been clarified, if any countries have found answers to those questions, no matter what their intentions were, and now want to correct their views towards Iran, we will, obviously, welcome them.

The Iranian nuclear issue is a normal issue, like that of all countries, and Iran will continue its activities under the supervision of the International Atomic Energy Agency.

JIM LEHRER: We`ll have more on President Bush`s remarks on Iran and the reaction right after this news summary.

In Iraq today, a U.S. soldier died of injuries from a Monday attack. It was the second American fatality this month.

And a suicide bomber killed eight Iraqis at a police station northeast of Baghdad. At least 30 others were wounded. The attack came as a group linked to al-Qaida, the Islamic State in Iraq, ordered a new bombing campaign against Iraqi forces.

And a videotape surfaced of a British civilian kidnapped last May. He`s one of five who are missing. The kidnappers demanded British troops leave Iraq.

The U.S. Pacific Northwest struggled to recover today after back-to- back storms. Both Oregon and Washington were under states of emergency. Scores of homes were flooded in a series of coastal towns. Hurricane-force winds also blew down power lines and left thousands of people in the dark. The storms were blamed for five deaths.

The Bush administration will try to recover nearly $500 million in misspent relief funds from Hurricanes Katrina and Rita. The head of the Federal Emergency Management Agency, FEMA, gave that figure today. James McIntyre said payments went to more than 130,000 people who were not eligible. More than half had no proof they even lived along the Gulf Coast.

A top Democratic fundraiser, Norman Hsu, was indicted today for fraud and campaign finance violations. The federal indictment in New York City said he cheated investors out of $20 million. He allegedly used some of the money to make illegal campaign donations to Senator Hillary Clinton and others. Clinton has returned more than $800,000 linked to Hsu.

Top business executives offered a more upbeat forecast on the economy today. The Business Roundtable Survey found they expect sales and hiring to stay the same or even rise in the months ahead.

On Wall Street today, the Dow Jones Industrial Average lost more than 65 points to close above 13,248. The Nasdaq fell 17 points to close above 2,619.

And that`s it for the news summary tonight. Now: the Iran intelligence debate; the U.S. economy; and Iraqi refugees.

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JIM LEHRER: The Iran nuclear story. Ray Suarez begins our coverage.

RAY SUAREZ: The latest National Intelligence Estimate, or NIE, containing findings about Iran`s nuclear programs dominated the president`s news conference today.

QUESTION: Mr. President, a new intelligence report says that Iran halted its nuclear weapons program four years ago and that it remains frozen. Are you still convinced that Iran is trying to build a nuclear bomb? And do the new findings take the military option that you`ve talked about off the table?

GEORGE W. BUSH, President of the United States: I think it is very important for the international community to recognize the fact that, if Iran were to develop the knowledge that they could transfer to a clandestine program, it would create a danger for the world.

And so I view this report as a warning signal that they had the program, they halted the program. And the reason why it`s a warning signal is that they could restart it. And the thing that would make a restarted program effective and dangerous is the ability to enrich uranium, the knowledge of which could be passed on to a hidden program.

And so it`s a -- to me, the NIE provides an opportunity for us to rally the international community, continue to rally the community to pressure the Iranian regime to suspend its program.

RAY SUAREZ: The president said he was not concerned that the new estimate, which contradicts one released in 2005, would hurt the credibility of U.S. intelligence or his administration.

GEORGE W. BUSH: You know, I want to compliment the intelligence community for their good work. Right after the failure of intelligence in Iraq, we reformed the intel community so that there was a lot of serious considerations of NIEs in a way that would give us confidence.

And here`s a, I think, a very important product that is a result of the reforms we`ve put in place.

People said, "Well, why is it that you can`t get exact knowledge quicker?" Well, the answer is, is because we`re dealing with a regime that is not very transparent. And, frankly, we haven`t had a very good presence in Iran since 1979.

And that`s why I instructed the intel community to beef up its intelligence on Iran, so we could have a better sense for what they`re thinking and what they`re doing. And this product is a result of intelligence reform and, more importantly, the good, hard work of our intelligence community.

QUESTION: You talked about Iraq, you and others in the administration talked about a mushroom cloud; then there were no WMD in Iraq. When it came to Iran, you said in October, on October 17th, you warned about the prospect of World War III.

So can`t you be accused of hyping this threat? And don`t you worry that that undermines U.S. credibility?

GEORGE W. BUSH: I was made aware of the NIE last week. In August, I think it was John McConnell -- Mike McConnell who came in and said, "We have some new information." He didn`t tell me what the information was. He did tell me it was going to take a while to analyze.

Why would you take time to analyze new information? One, you want to make sure it`s not disinformation; you want to make sure the piece of intelligence you have is real. And, secondly, they want to make sure they understand the intelligence they gathered. If they think it`s real, then what does it mean? And it wasn`t until last week that I was briefed on the NIE that is now public.

Iran was dangerous. Iran is dangerous. And Iran will be dangerous if they have the knowledge necessary to make a nuclear weapon. The NIE says that Iran had a hidden, covert nuclear weapons program. That`s what it said. What`s to say they couldn`t start another covert nuclear weapons program?

RAY SUAREZ: Reaction abroad has been mixed. Iranian officials said the new intelligence report supported Iran`s longstanding claims that its nuclear program is only for civilian use. And China, which agreed only reluctantly to pass sanctions against Iran, said it hoped the NIE would spur new diplomatic efforts.

But Britain and France, which are also permanent members of the U.N. Security Council, said they would continue to seek further sanctions against Iran.

JIM LEHRER: Gwen Ifill takes the story from there.

GWEN IFILL: Now, the view from Capitol Hill. For that, we turn to the two senior members of the Senate Select Committee on Intelligence. Jay Rockefeller, Democrat from West Virginia, is the chairman; and Kit Bond, Republican of Missouri, is the vice chairman.

Welcome to you both, gentlemen.

SEN. KIT BOND (R), Missouri: Thank you.

GWEN IFILL: Senator Rockefeller, we just heard the president lay out a case for Iran as a past, present, and future threat. Do you agree with that?

SEN. JAY ROCKEFELLER (D), West Virginia: It`s always possible, but I think the news of the day is that the intelligence community, under Mike McConnell, potentially has begun to wipe out the catastrophic mistake they made, and which our Intelligence Committee caught them up on, about weapons of mass destruction in Iraq.

I think Mike McConnell is very good. I think he`s really serious about getting rid of stovepipes. I think he`s serious about making the different intelligence agencies work together.

I assume there was a lot of debate on this, but what he`s done is he`s flown in the face of what the president was saying. It`s hard intelligence that -- obviously, any intelligence can be wrong, but you don`t get the feeling that this one probably is -- saying that they stopped all of that and that they haven`t been doing that now for several years.

I consider that very good news. And I consider it a sign that it`s time for to us stop talking about nuclear holocausts and World War III and to get down to the business of trying to work out our relationship with Iran.

GWEN IFILL: Senator Bond, Senator Rockefeller said this flies in the face of what the president`s previous claims have been, yet we saw the president today and his national security adviser yesterday embrace this as good news.

SEN. KIT BOND: Well, it`s good news that they stopped production -- at least we have a high level of confidence -- back in 2003. But, number one, that proves that they did have a nuclear weapons program. We just learned the information recently that they had stopped it at that point.

However, we do not have a high degree of confidence that they have not restarted the program. In addition, Iran continues to enrich uranium, they say for peaceful purposes, but enriching uranium puts them in a position to use that in a nuclear weapon, perhaps in the 2010-2015 timeframe.

GWEN IFILL: Senator Bond -- pardon me, were you surprised at this reversal, however? And do you think -- do you now trust the information contained in the reversal, if the 2005 report was not accurate?

SEN. KIT BOND: Well, we received new information. Now, we have not looked at the tradecraft and the analysis that went into that information. That`s one of the things that we do in the Intelligence Committee.

And we will continue to look at the information they had and go in depth in classified, secret hearings as to what they knew, when they knew it, and what other information they have that tends to support or discredit that information.

But the other points that are important is, there is no question that Iran has supported terrorist activities against us, from the Marine barracks bombing in Lebanon, the embassy bombing. We know that they have sent explosively formed projectiles, a deadly form of weapon, into Iraq to use against our troops in the field, and they`ve sent the Iranian Revolutionary Guard.

So there`s no question that Iran continues to be very dangerous. And we don`t know when or if they are going to continue to -- or will restart their program to enable them to achieve Ahmadinejad`s goal of wiping Israel off the face of the Earth.

GWEN IFILL: Senator Rockefeller, Senator Bond just used the old formulation "What did they know and when did they know it?" I wonder if you have that question about the president. He said today that he heard about this last week, that it had been hinted to him, essentially, by Mike McConnell, the head of intelligence, in August. Do you think the president should have known about it?

SEN. JAY ROCKEFELLER: My guess is that the president had information on it, because Vice Chairman Bond and I were given information several months ago. We were not given any final conclusions, just simply information which didn`t lead to anything.

But I was really struck when the president said that he only got the final judgments on Tuesday -- or whatever it was that he said -- because I have to believe that he knew what was going on before Vice Chairman Bond and I did.

GWEN IFILL: When you say -- I just want to clear that up -- when you say that you were given information, you mean information that led you to believe that this outcome was in the offing?

SEN. JAY ROCKEFELLER: No, not at all, because the Intelligence Committee was not in a position to do that. They did give us information. And it was -- I think they gave it just to Kit Bond and myself, the vice chairman and myself. And it was just information.

But it was a number of months ago. And I can`t believe that between - - you know, I can`t believe that the president didn`t get that same information. And then, since that time, was he asking questions? Why was he talking about a nuclear holocaust? Why was he talking about all of those things?

Now, granted, they hadn`t arrived at a final judgment, but there was clearly something changing in the air. And I think it`s really important for the world.

And, Gwen, I`ve got to say this. What was most fascinating to me about that was not the politics of any of this, but was the fact that Iran seemed to have made up their minds partly on a cost-benefit ratio. In other words, what was the cost of proceeding with a nuclear program? And, indeed, they could do that again.

But it seems that they decided that the benefit, in terms of what it would give up, feeding people in the rural areas and taking care of their many other needs, was outweighed, and that the nuclear program had to give way.

GWEN IFILL: Senator Bond, I want to pick up on the intelligence piece about this a little bit more, because the president also said today that what happened in this new report was the fruit of post-Iraq intelligence reform. What kind of intelligence reform are we talking about that would encourage the American people to believe what they are being presented now, rather than what they were presented two years ago?

SEN. KIT BOND: Well, as a result of 9/11 and the failures of information throughout the `90s, and prior to 9/11, there has been major reform within the intelligence community providing more information-sharing among agencies under the direction of the director of national intelligence.

The Intelligence Committee itself -- our committee -- put out a very critical report that the intelligence community assumed too many things because of Saddam Hussein`s previous actions. Now, this NIE states that we had information -- the information that was available to the intelligence community in 2005 when they did the NIE -- suggested that -- indicated that there was a nuclear weapons program.

Now that they have found new information, which they`ve had to examine and now believe credible, they have come back and told us honestly that they believe that there was a halt in the program in 2003.

And that tells us what we know, but there`s also a tremendous amount that we don`t know, as to whether they -- well, we do know that they`re continuing to enrich uranium, which is one important forerunner to developing a nuclear weapon.

But we don`t know if a nuclear weapon program has restarted. There is a great danger that it could restart.

GWEN IFILL: Do we think, Senator bond, based on what the president, as Senator Rockefeller was saying, his references to World War III, and now given what we didn`t know, do you feel that, in the absence of what we didn`t know, that the president and Vice President Cheney were making the case for war against Iran?

SEN. KIT BOND: They never said that they were making the case for war against Iran. They have sought sanctions. They`ve sought inspections. They have sought diplomatic pressure. And we have been able to apply, through persuasion, squeezes on their financial institutions.

This is a country, again, not only that was developing a nuclear weapon at one point, up until 2003, but actively supporting efforts that were killing American troops and threatening our troops. And they are a very dangerous country in a very volatile part of the world, and the leader has promised to wipe Israel off the map and has made other threats that you cannot disregard. If he got a nuclear weapon, he could be extremely dangerous.

GWEN IFILL: Let me ask that same question to Senator Rockefeller, whether military action is now off the table as we focus on diplomacy because of what we see in this report?

SEN. JAY ROCKEFELLER: I think there was a lot of either direct talk or implied talk about regime change. And I think, in many ways, the White House was kind of preparing the country for that in a not-high-decibel manner.

To me, the most interesting part of this is that -- is really two- fold. One is that the intelligence community really did an about-face. I think -- and I hope I`m not proven wrong -- that they really do understand that giving good intelligence, whether the White House or the Congress or anybody else wants to hear it, is their job and that they have a new commitment under McConnell to doing that job.

And, secondly, I think it shows that Vice Chairman Bond and myself and the House Intelligence Committee, that we`re really committed to oversight, that we`re no longer kidding about oversight. We have done a lot of things within our committee -- Vice Chairman Bond and myself -- to increase oversight, I`d say 100 percent more than previously.

And I think those are important for balance of power, and I think it`s very important for intelligence, because intelligence has to precede any move that the United States makes.

GWEN IFILL: Now I`d like to ask you both briefly if you can tell me whether you think that the results of this report increases or decreases the likelihood -- starting with you, Senator Rockefeller -- that sanctions will -- international sanctions will now be toughened?

SEN. JAY ROCKEFELLER: I think it will make people -- I`ll answer yes, to be sure, but I think it takes some of the pressure off. But, remember, what we`re talking about is not Hezbollah and Hamas, although Vice Chairman Bond is absolutely correct about that. They`re still a very dangerous country, and what they`re doing to our men and women in Iraq, and these other vehicles in the -- can destroy Israel.

But the subject of the day is atomic nuclear capacity. And I think they have backed off from that, and they`ve done it for interesting reasons, and it may be that the cost-benefit ratio was the decision-maker. It may be that the threat of sanctions was hurting more than we thought it was.

And, therefore, I don`t think that sanctions should be taken off the table at all. I do think that talking about regime change should be taken off the table.

GWEN IFILL: Senator Bond, what do you think about that?

SEN. KIT BOND: Well, number one, I agree with Chairman Rockefeller that there`s a lot more work we need to do on this intelligence report. We`ve only had a chance to look at it briefly. We want to learn more about it, because I have some questions about some of the conclusions they reached and how they reached them, not to say that there`s anything wrong in the report.

But the chairman raised a number of interesting issues about what may have changed their attitudes. And I don`t know whether we have good information to know whether there are factors which will indicate that they`re much less likely to pursue nuclear weapons. I am not confident -- I am not highly confident that they have forever forsaken it.

There is nobody that I know of that is saying, "We need military action against Iran." But I think given the whole -- the actions they`ve taken, the military actions, the terrorist actions they`ve supported, we must continue to seek sanctions, which I would hope would bring about a change in attitude. And if that requires a change in regime, then that might well be one of the beneficial results of international pressure and sanctions that I think are still very important on Iran.

GWEN IFILL: Senators Kit Bond and Jay Rockefeller, thank you both very much.

SEN. KIT BOND: Thank you.

SEN. JAY ROCKEFELLER: Thank you, Gwen.

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JIM LEHRER: Still to come on the NewsHour tonight: Summers and Snow on the economy; and Iraq refugees in Sweden.

But first, this is Pledge Week on public television, and we`re taking a short break now so your public television station can ask for your support. That support helps keep programs like ours on the air.

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JIM LEHRER: Now, the prospects of a recession. Margaret Warner talks to two former treasury secretaries.

MARGARET WARNER: Last week, former Treasury Secretary Lawrence Summers created a stir in the financial world with an op-ed piece headlined "Wake Up To the Dangers of a Deepening Crisis." In it, he wrote, "the odds now favor a U.S. recession that slows growth significantly on a global scale."

His view was at odds with the assessment President Bush offered at his press conference today that, quote, "the basics in the economy are good," despite the "headwind" caused by the housing price and mortgage crunch.

Is the U.S. headed for recession, and what should be done to avert it? For that, we`re joined by Larry Summers, treasury secretary in the Clinton administration from 1999 until 2001. He`s now professor of economics at Harvard University. And John Snow, former treasury secretary under President Bush from 2003 until 2006, he`s now chairman of Cerberus Capital Management, a private equity firm.

And welcome, both of you, Misters Secretary.

And, Larry Summers, let`s begin with you and your Financial Times piece. What evidence led you to the conclusion that odds are we`re headed for a recession?

LARRY SUMMERS, Former Treasury Secretary: You look at the force of the headwinds, Margaret, what`s happening in housing, where some markets are forecasting that prices could decline 20 percent or more nationwide. You look at the strains in the financial system, where it`s pretty clear that credit is going to have to contract, as there have been losses at major financial institutions, and also requirements that they make loans they were never planning to because of various standby arrangements.

You look at the set of forces bearing down on the consumer -- falling house values, reduced availability of credit, increased oil prices, increased prices coming from the decline in the value of the dollar -- and it seems to me that, while nobody can make predictions with certainty, and you have to view the economy always, and particularly at a time like this, with great uncertainty, that the balance of risks does point in the direction of recession at this point and that, certainly, as one thinks about the priorities for policy, the risks that the economy will decline too rapidly seem to me to dwarf any kind of risk that the economy will overheat.

It seems to me that we`ve got the kind of situation where we know what our primary problem is and have to really put a focus on it.

MARGARET WARNER: All right. Former Secretary Snow, how do you see the balance of risk? Do you see it as Larry Summers does, or do you share the more -- I say more upbeat view that President Bush expressed today?

JOHN SNOW, Former Treasury Secretary: Well, I think Professor Summers` assessment is fundamentally sound. There are an awful lot of headwinds or negatives in the economy today that he`s outlined there for you.

The biggest one in my mind is the credit markets. And credit is the fuel of this economy, and the credit markets simply aren`t working today for reasons he`s outlined. But this economy of ours is pretty resilient.

At the very time that housing is down, we see exports up. We see jobs continuing to be strong. We see profits continuing to be strong. So it doesn`t have to be a self-fulfilling prophecy. Good monetary policy, good fiscal policy, addressing the credit markets with sensible and vigorous approaches here I think will avoid that recession, at least up the odds that it will be avoided.

MARGARET WARNER: But, Mr. Snow, we want to get to the remedies in a minute, but let me just press you on this point. Do you think, all things being equal, the way things stand now, the odds now favor a recession?

JOHN SNOW: Well, the odds have certainly shifted, shifted with more downward sentiment, with the sensitivities to the downside, as I think the Fed has recognized, in statements by the chairman and the vice chairman very recently.

And fortunately, the Fed is on guard, prepared to be nimble and respond, and that response by the Fed, I hope, I think, will be very helpful in avoiding that very much unwanted result of a recession.

MARGARET WARNER: Now, Professor Summers, one of the possible remedies you ticked off in your piece had to do with lowering interest rates further, but the Fed has already lowered rates a couple of times since August, and yet the confidence level seems to be declining, and the fourth- quarter projections for fourth-quarter economic growth are down. So what would a further interest rate cut at the next meeting really do?

LARRY SUMMERS: You know, Margaret, every time we have an economic problem, there`s always the question of, will monetary policy matter? Will changes in interest rates matter? Or will people just not invest anyway because they`re discouraged?

The evidence is pretty overwhelming from American history, from the experience of many countries, that through a whole variety of channels, the provision of liquidity, more expansionary monetary policy does have an important effect on lending decisions, which in turn affects spending decisions, which in turn affects asset values, which in turn affects confidence, and feeds back to spending decisions, and the rest of it.

So I don`t think that monetary policy is the only issue here by any means, but I think that monetary policy has to be used prudently, given the situation of the dollar, given the risks of inflation, which never are completely gone.

But I think the vast preponderance of professional opinion would be that monetary policy does have an impact. But, look, it`s not the only issue. We`ve got to think about, on a standby, contingent basis...

MARGARET WARNER: Let me just interrupt you there and ask you, then, just to follow up on what John Snow talked about, and you talk about in your article, which is the big problem of tightening of credit in general. What do you think needs to be done to continue the free-flow of credit?

LARRY SUMMERS: Well, I think you need to see institutions focus on raising capital to assure capital adequacy. And the moves by a number of institutions to issue new capital or to reduce dividends have, I think, been very constructive in that regard.

You need to see assets priced at levels that are realistic so that exchange can take place. And so I think the process of recognition and write-downs to real levels is a very important one. I think that process probably has some room to go, and I think it would be very dangerous if there were to be efforts made to inhibit that process, in the name of somehow restoring confidence.

I think that the central bank needs to be sure that it`s in a position to provide liquidity, so as to assure that we don`t get a situation where things are cramped up because banks don`t feel they can get any access to funds. I think we need to address, in particular, the problems of homeowners.

MARGARET WARNER: Let me get John Snow`s response, though, on that, in terms of the write-downs. Larry Summers in his piece said he thinks the $50 billion that`s been announced so far by these big banks, the big financial institutions, is essentially the tip of the iceberg. It`s going to be several times that.

Do you agree with that? What can be done to hasten the rate at which these write-downs occur and there`s a sense that we really know the extent of the problem?

JOHN SNOW: I don`t think we know the full extent of it, but I certainly agree that facilitating the marking of these assets to appropriate values makes an awful lot of sense. This may take some regulatory forbearance. I`m encouraged to see some of the banks doing it.

HSBC restructured their balance sheet, recognized losses. Citicorp has sought to bring capital in. We have a process here of both marking to market the assets that are overvalued and then recapitalizing the banks through new infusions of equity.

MARGARET WARNER: But I mean...

JOHN SNOW: That process is now underway, and it`s a healthy and necessary process.

MARGARET WARNER: Let me finally end with the two of you asking you a broader question.

And, Larry Summers, to you first. There are critics out there, people who say -- I mean, you both seem to favor some sort of government intervention -- who say, you know, you can`t bail out unscrupulous lenders or foolhardy borrowers or banks that took on risky loans and that we`ve just got to wring this excess out and let the system take its medicine. What do you say to that?

JOHN SNOW: Margaret, that was Andrew Mellon`s philosophy in the late 1920s, and it made the depression great. It`s not the right philosophy. There are people who have done wrong thing. They should be punished. There are people who`ve certainly lost very prominent positions as part of this. There are a variety of issues of prevention that we`re going to have to look at when this is over.

But the right focus for public policy right now isn`t the bankers. It isn`t the balance sheets. It`s doing what we can to make sure that regular Americans who`ve never heard of a mortgage-backed security, who don`t know what an ABX tranche is, are able to life their lives and build on the great strength of the American economy. That`s where we should be focused.

MARGARET WARNER: A quick, final word from John Snow on this, in terms of about whether we should be bailing people out.

JOHN SNOW: The key issue is no longer imprudent lending; that`s been dealt with. The key issue now is getting the financial system to work again. And unless we get it working again, unless we get credit extended to credit-worthy borrowers, then Professor Summers` forecast of a possible recession is very hard to avoid.

MARGARET WARNER: All right, John Snow, Larry Summers, thank you both.

LARRY SUMMERS: Thank you.

JOHN SNOW: Thank you.

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JIM LEHRER: Finally tonight, Iraq`s faraway refugees. There have been reports of thousands of Iraqis returning to their homeland from neighboring Syria, but some are much further from home. Special Correspondent Fred de Sam Lazaro has that story.

FRED DE SAM LAZARO, NewsHour Correspondent: Sweden was not part of the coalition that went into Iraq, yet this Nordic nation has taken in more refugees from there than any other country outside the Middle East.

At Friday prayer services in the city of Malmo are refugees from some of the world`s most violent conflicts: Bosnia, Somalia, Afghanistan, and, most numerous nowadays, Iraq.

TEACHER (through translator): Our topic today is adapting to Swedish life.

FRED DE SAM LAZARO: They are people like Haider Kassam al Tamimi. He left his wife and two small children in Baghdad after his life was threatened.

HAIDER KASSAM AL TAMIMI, Iraqi Refugee and Auto Mechanic (through translator): I was working for a government ministry in the electricity department. A private American company came in to work with the ministry, and the Mujahideen were against the Americans. They sent me a threatening letter because I did not quit my job.

FRED DE SAM LAZARO: Sweden took in some 9,000 Iraqi refugees in 2006. The U.S. admitted 202 in the same period. Migration Minister Tobias Billstroem.

TOBIAS BILLSTROEM, Swedish Migration Minister: If the U.S. had taken in as many refugees as Sweden has done so far per year, it would have been approximately 500,000 that the U.S. would have accepted so far, if you compare the amount of the populations.

FRED DE SAM LAZARO: Proportionally?

TOBIAS BILLSTROEM: Yes.

FRED DE SAM LAZARO: Recently Swedish courts ruled that only those who face a personal, rather than a generalized threat of harm should get asylum. Still, Dan Eliason, who heads the agency that processes asylum applications, says most Iraqi ones are approved.

DAN ELIASON, Swedish Migration Board: If you are individually threatened, tortured, or something like that, then you can, of course, have right to stay. So still 90 percent of them are still entitled to stay here. I would say that probably we have the world`s most liberal and generous legislation when it comes to asylum matters.

FRED DE SAM LAZARO: That`s not new. Sweden has long had a policy of giving cradle-to-grave welfare benefits to refugees and natives alike. About one-fifth of Sweden`s nine million people today come from immigrant stock.

Immigration is closely linked to the country`s post-war economic boom. It first brought migrants from Yugoslavia, Greece and Turkey. In the 1970s, political refugees began arriving, from Iran and Saddam Hussein`s Iraq, like Mustafa Diner.

Today he co-owns a halal butchery, whose soaring sales mirror the new demographics: $20 million a year of meat slaughtered, according to Muslim custom.

MUSTAFA DINER, Businessman (through translator): We began in 1995 with four employees, including myself. Now we have 27 and could get much larger if we had more space. People want halal meat. The business has grown steadily.

FRED DE SAM LAZARO: The steady growth of Sweden`s refugee population -- most happen to be Muslim -- may be good for business. And on the street, most people we talked to like the idea of Sweden as safe haven. But there`s growing worry about the new influx.

BRITT NORDEBRINK, Swedish Citizen: I think it`s quite good, but maybe we have difficulties in taking care of all the refugees, because they have so many problems. They have head wounds, and so then they come to Sweden, and they need psychological help.

GUN EDSTROEM, Swedish Citizen: Perhaps it`s too many.

BRITT NORDEBRINK: Because we can`t take care of all of them.

FRED DE SAM LAZARO: Are there too many here already?

BRITT NORDEBRINK: Yes, I think so.

ROBIN TRAVIS: You make sure that they get jobs, they get somewhere to live, and they get a place in Swedish society. Otherwise, you create a problem.

ULF WISTROEM (through translator): Unfortunately, we have imported a lot of crime from different countries. The immigrants that commit crimes make all the other immigrants look bad. This problem has made the right- wing party get a lot of votes. We should accept less immigrants. We`re taking too many Iraqis, and it`s hard on our economy.

FRED DE SAM LAZARO: Those who support the immigrants say the problem is that refugees have trouble finding work, despite a robust economy. They want to add on-the-job training to the classroom instructions the newcomers get.

HAIDER KASSAM AL TAMIMI (through translator): It`s hard to feel integrated. We don`t have the language.

FRED DE SAM LAZARO: Haider Al Tamimi, an auto mechanic, is frustrated no one will hire him until he can speak Swedish. He`s forced to crowd in with three others in a small apartment amid an acute shortage of public housing.

But for every story like his, some Swedes say they hear about others who don`t want to integrate. Peter Frankel is a business consultant in the southern city of Lund.

PETER FRANKEL, Swedish Business Consultant: There are those who miss their homeland so much that they stay in their misery. In their mind, they stay there. And you can see that clearly in the way they dress, in the way they insist on keeping their name, and in reinforcing that and go into conclaves.

FRED DE SAM LAZARO: The conclaves he refers to are immigrant clusters where Hamid Feyli and his wife, Selma Rahim, live. They`ve spent 15 years here. He has a good job as a carpenter, and three of their four children were born here. Still, they say, they will never be Swedish.

SELMA RAHMAN, Iraqi Immigrant (through translator): Look, we are Muslim. One of the most important orders in Islam is to respect the people, place and culture where you live. When we translate this to practical behavior, it means respect for the law, and this is enough.

HAMID FEYLI, Iraqi Immigrant (through translator): We don`t want to stay here. We are going to our Iraq. Our Iraq is rich. Our Iraq is powerful. We have petrol, agriculture. We have everything. We hope only that the leaders will do the right thing. We hope Iraq will be like Sweden. Actually, it can be better than Sweden.

FRED DE SAM LAZARO: But he concedes that repatriation is likely to be years away. That makes retaining one`s original identity difficult, especially for the next generation, says the man who founded the Islamic Center of Malmo, which has a mosque, community center, and this government- funded primary school.

BEJZAT BECIROV, Director, Islamic Center of Malmo (through translator): In the second generation, it will change. Parents still hold onto these dreams, but the children don`t.

FRED DE SAM LAZARO: Bejzat Becirov`s goal is to forge a new Swedish Islamic identity here, leaving behind issues that divided members in their countries of origin.

BEJZAT BECIROV (through translator): This mosque is not imported. It`s on Swedish soil, a Swedish model so all Muslims should be able to be here. You cannot bring politics from your own countries here. We`re very clear: No politics from other countries, just Swedish politics.

FRED DE SAM LAZARO: Still, this mosque has been firebombed three times in recent years. No one is sure if it`s the work of right-wing or Islamic extremists who have called the center "Islam-lite."

Such incidents have raised fear that a segregated, marginalized immigrant community could invite terrorist groups or turmoil, like that witnessed in the Paris suburbs last year. Offsetting those concerns are Sweden`s relatively positive history with immigration and that this aging society needs the newcomers, says business consultant Frankel.

PETER FRANKEL: So there`s a historic understanding or sense that, given some time and cooling it, this will be something positive for Sweden. And we need those people in a lot of jobs. I mean, we really do. I think it`s a question of time, and I think there is a strong consciousness of that, even though, of course, for the moment, perhaps for a couple of years, it will be -- it`s tough, and it is irritating.

FRED DE SAM LAZARO: One source of irritation, even resentment from all sides, is the fact that the United States isn`t taking on more of the refugee burden. Ilmar Reepalu is the mayor of Malmo.

MAYOR ILMAR REEPALU, City of Malmo: Sweden didn`t take part in the Iraq invasion. If you look upon the second quarter this year, 4,500 of the Iraqis came to Sweden and were accepted here; 2,500 went to Greece; 400 get to Spain; and 180 to United States, 180. That`s half the number that we accepted in Malmo in the same time. How come?

FRED DE SAM LAZARO: The U.S. has promised to sharply increase the number of Iraqis it will admit, but that number will still be a fraction of those who will go to Sweden.

(BREAK)

JIM LEHRER: And, again, the major developments of this day.

President Bush warned Iran remains a nuclear danger; that`s despite new intelligence the Iranians have stopped trying to build nuclear weapons.

And the Pacific Northwest struggled to recover from back-to-back storms. Both Oregon and Washington were under states of emergency.

We`ll see you online and again here tomorrow evening. I`m Jim Lehrer. Thank you, and good night.