The MacNeil/Lehrer NewsHour

Intro JIM LEHRER: Good evening. Leading the news this Friday, the Nakasone Reagan talks ended with promises to reduce Japan's trade surplus with the United States. The Senate Intelligence Committee voted to confirm William Webster as C. I. A. Director. And several leading banks raised their prime lending rates. We'll have the details in our news summary in a moment. Charlayne Hunter Gault is in New York tonight. Charlayne? CHARLAYNE HUNTER-GAULT: After the summary of today's news, here's tonight's News Hour. We start with a look at the fallout from the Nakasone visit. Then Judy Woodruff reports on the work facing Congress on the Iran contra probe. And finally, Elizabeth Brackett has a documentary on college racism. News Summary LEHRER: Japanese Prime Minister Nakasone finished up his Washington business today. He left with a promise from President Reagan to review the semiconductor sanctions the United States imposed on Japanese products. The two leaders spoke at the White House after a 40 minute private meeting. Both talked of removing the sanctions before the economic summit in early June.

YASUHIRO NAKASONE, Japanese Prime Minister: I emphasize to the President that between our two countries, problems should be solved by cooperation and joint endeavors and that the measures of the United States concerning semiconductors should be withdrawn promptly. President RONALD REAGAN: It is my hope that with the Vienna Summit coming up, our ongoing review of the semiconductor agreement will demonstrate a persuasive pattern of compliance, thereby allowing removal of the sanctions as soon as possible. LEHRER: President Reagan and the Prime Minister also issued a joint written statement on the completion of their two days of talks. They said the price of the dollar against the yen had fallen enough, and they pledged to work together to reduce Japan's huge trade surplus with the United States. It is the principal cause of U. S. irritation -- particularly in Congress. In an interesting bit of timing for Nakasone, his finance ministry back in Tokyo today, released the new trade surplus figure for the fiscal year ending March 3l. It was $101. 4 billion. That is a record for Japan. It includes the surpluses with the United States and all other countries. HUNTER-GAULT: In other economic news, major U. S. banks today raised their prime lending rate to 8% from 7 3/4%. The prime is the benchmark used by banks to set interest rates on a variety of corporate and consumer loans, including some mortgages. The White House had different reactions to the bank's increase. President Reagan said, ''I wish they hadn't. '' But White House spokesman Marlin Fitzwater calls it a step towards economic harmony and stability. LEHRER: William Webster moved another step closer today to completing his high level job switch. The Senate Intelligence Committee voted unanimously to approve the Director of the F. B. I. to be Director of Central Intelligence. Only one of the 15 senators voiced reservations about his vote. It had to do with former White House aide Oliver North's relationship with the F. B. I. during the initial phase of the Iran contra investigation.

Sen. ARLEN SPECTER, (R) Pennsylvania: While the evidence does not raise a serious question about his qualifications to be C. I. A. Director in the context of his long, distinguished record of public service, his confirmation hearings do suggest that the F. B. I. to some extent, Judge Webster himself, did not respond to clear warnings to stop Lt. Col. North's improper, if not illegal, activities. These hearings should give guidance for the future. WILLIAM WEBSTER, CIA Director Designate: Well, there were, of course, individual situations on examination and with 20/20 hindsight we might have done differently. But in following each of those efforts of Col. North to influence our investigation, as I pointed out yesterday, none of them resulted in any change in our investigative pattern. LEHRER: Intelligence Committee Chairman David Boren said he would bring the Webster nomination to the floor for a full Senate confirmation vote as soon as possible. HUNTER-GAULT: Top administration officials clashed today on mandatory AIDS testing. Surgeon General C. Everett Koop criticized such testing, arguing it would cause those vulnerable to the fatal disease to go underground. This directly contradicts earlier calls for mandatory testing by Education Secretary William Bennett. Koop reiterated his position during a congressional hearing.

C.EVERETT KOOP, Surgeon General: Mandatory testing, with some specific exceptions, would not be good public health practice at this time. If, for example, we made testing mandatory in our own local public health sexually transmitted disease or tuberculosis clinics, it would cripple efforts to control those diseases. People who needed treatment for those diseases would stay away. LEHRER: Television preacher Jim Bakker broke his long silence today. The besieged former head of the vast PTL TV ministry spoke to reporters in the driveway of his Palm Springs, California, home. His wife Tammy was at his side as he denied recent charges of homosexuality, wife swapping and visiting prostitutes. Bakker also said he would not fight to return to his PTL post. HUNTER-GAULT: That's our news summary. Still ahead on the News Hour, fallout from the Nakasone visit, upcoming work for Congress's Iran contra probe, and racism on campus. Trade Tensions LEHRER: Japanese Prime Minister Nakasone has now come and gone. His two day visit to Washington was designed to change Japan's collision course with the U. S. over trade. Did he make it? How serious is the crisis between these two allies? Well, those are among the questions we pose tonight at the end of this week, dominated by trade talk and action. We pose them to three experts on U. S. --Japan relations. Robert Ingersoll, a former U. S. Ambassador to Japan, who has also served in top posts in the State Department dealing with that country. He is now a consultant on East Asian affairs. David McEachron, President of the Japan Society, a private group which promotes better U. S. --Japan understanding, and Ronald Morse, a Japan expert who has served in the State Department and the Defense Department as an East Asia specialist and is currently the Director of the Asia Program for the Woodrow Wilson International Center for Scholars here in Washington. Ambassador Ingersoll, to you first. Is the situation between these two countries better off because Mr. Nakasone came for two days? ROBERT INGERSOLL, former Ambassador to Japan: I think it's always well for protagonists -- if you might call us -- to talk over problems that exist. And Mr. Nakasone is usually a very good spokesman for his country. So I think it was very fine that he came and met with members of Congress and with the President. LEHRER: Do you think the situation is better, Mr. Morse? RONALD MORSE, Wilson Center: I think we've placed too much attention to the high level visits and discussions. The record shows that very little has changed under the previous administration, or even with Mr. Nakasone. We have to get down to some fundamental questions at a fundamental level, and develop an ongoing serious dialogue. And this type of high level visit -- I don't think -- I think it misleads people about what to expect for the future. LEHRER: What is the most misleading thing that came out of the visit, do you think? Mr. MORSE: I think number one is the semiconductor issue is just a small part of a much larger trade and political relationship. We shouldn't be misled by the importance of that. It's -- a relationship where Prime Minister Nakasone comes with some -- a few -- recommendations and promises and so on, and then goes back to Japan -- he may very well be out of power in a few months, there'll be a discontinuity in leadership, and whether there'll be any follow through or not will create a further distrust on our part about the future of what the relationship is. I think it's much better to be up front about these things and say, ''Look, we've got to get down, we've got to solve these problems, and let's work at the serious level where people actually solve these problems. LEHRER: Mr. McEachron, what's your viewof that as to how important these high level meetings even are? DAVID McEACHRON, Japan Society: Well, I would agree with Ron Morse that it's important to get down to the fundamental problems. I think having the leaders of the two countries meet together helps to do that. As long as we don't misunderstand what they're doing. They helped to focus the minds of the public and government officials on the problem and inch the problem toward some better resolution. But it's a long educational process we're talking about. These are the two largest economies in the world, they are heavily interdependent, there are very many complicated problems that can't be solved easily. And we have to change attitudes in both countries profoundly, and that just takes time. Human beings don't change their minds quickly. LEHRER: All right, I want to talk about some solutions here in a moment as the three of you see it. But first of all, Mr. Ambassador, how did this happen? How over a period of years now has this huge trade surplus gotten to this point and we've come to this crisis position between the United States and Japan. Ambassador INGERSOLL: When I went to Japan in 1972 as Ambassador, we thought we had a crisis then. The trade surplus with Japan was about $3 billion. It went to about 4, but then receded. Of course, inflation has taken place, so the figures aren't quite as distorted as they might seem. But I think that Japan has opened its markets considerably since then. But as I tell my Japanese friends, it's always too little too late. They don't do it soon enough, and the frustrations in our country build up until we get the kind of action that took place in the House yesterday. LEHRER: Mr. Morse, has the United States just played this wrong with Japan all these years? Mr. MORSE: When I was in the State Department in the 1970s, Bob Strauss was trying to open the Japanese markets -- LEHRER: He was in -- Mr. MORSE: He was Special Trade Representative. And today we have our Special Trade Representative going to Japan on the same issues. We have not structurally tried to understand the nature of the relationship and the economic area, and other areas as well, and we haven't put people in place, we haven't had the commitment to solving problems that would seriously make this a genuine relationship. A lot of people talk about the importance of the relationship. If we really felt that the relationship was as important as it really is, we would have solved these problems along the way. I think Ambassador Ingersoll is correct -- somehow people have not paid attention to how to accomplish the objectives we've had -- with the change of people, the change of administrations, people have lost continuity. We have no memory that we've fought one battle last week, and we fought another battle last week, and so on and so on. And everybody goes in and refights the same battle, and then they forget about it or they get distracted or some other problem comes up, and the American public, the business community, the government people all suffer because we get into these head on confrontations that really are the product of neglect. LEHRER: Do you agree with that, Mr. Ambassador? Ambassador INGERSOLL: Partially. There's been a lot of effort made by this and previous administrations to have Japan open its market. But I think as we talk about Japan's problem, we ought to talk about our own problem. I don't hear any of our Congressmen or Senators saying we ought to get our deficit down, which is one of the causes of our tradedeficit -- that is the federal budgetary deficit. And it affects our trade deficit. And they use Japan as a scapegoat because it's a lot easier to do that than to cut the budget. LEHRER: Is that what's going on, Mr. McEachron, do you agree that there's some scapegoating going on against Japan? Mr. McEACHRON: Oh, without any question. As Ambassador Ingersoll said, it's much easier to blame someone else. I think some history is valuable here. Japan has become a big, big partner of this country very quickly. And it takes time for them and for us to make the adjustment. And I think it's important to recognize that at the moment we are running a big trade deficit with virtually every country in the world, including countries with whom we have traditionally had surpluses. And that strongly suggests that it's a problem -- at least part of the problem -- is domestic. Clearly, the Japanese need to do more than open their market. But I also would just like to urge us all to keep in mind they're the second largest market that we have in the world after Canada. LEHRER: Mr. McEachron, your organization, as I said in introducing you, is devoted to creating better understanding between Japan and the United States. On Monday night on this program we had Senator Danforth, Congressman Gephardt in this studio, in the same seats where you two gentlemen are sitting here, and by satellite in Tokyo we had two officials of the Japanese government, and they talked back and forth for over 20 minutes. And I don't know if you saw that, but the stunning thing was that they were not only talking two languages, they were not communicating at all. The Japanese said, no, their markets were wide open, the senator and congressman said just the opposite. And when the discussion was over, there had been no movement. What's the problem? Why is there this talking over one another? Mr. McEACHRON: In that particular conversation they were both being defensive and both exaggerating. I think that when you get sensible men -- as all four of these are talking privately -- they will admit that there's much more of a mutual problem and I think the thing we in this country must keep in mind is that we will damage ourselves badly if we mishandle our relations with Japan -- and the Japanese likewise will be badly damaged if they mishandle the relationship with us. LEHRER: How will we damage ourselves? Mr. McEACHRON: We need Japan for the capital they are sending to us -- which is helping to keep our interest rates down. We need Japan for the product that we Americans like to buy. We don't buy their products except that we find in them something we want to buy. Their technology is increasingly valuable to us. They are a major ally in the Pacific region -- which is one of the most important regions in the world today. They are just very crucial to us. And we depend on them -- as they depend on us very heavily. And so I think if we approached our problem with the Japanese with a conviction on both sides that we must solve these problems sensibly, we'd be in better shape than calling -- accusing each other of things. LEHRER: Mr. Morse, is that the answer? Mr. MORSE: Well, I think the real importance is that basically the American people, and basically the Japanese people, I think, have an awful lot in common -- lifestyles, ambitions, hopes, political systems, economic desires and so on. Where we've really gone wrong -- I mean, there's a tremendous weaving together of the business community and a whole variety of our relationships with Japan. Where the problem is tends to be at the government to government level. And that's because these people have not taken the time -- on either side -- to really reflect on what's happening in the other country. You said there was a lack of communication? LEHRER: Of understanding. Of understanding where the other one was coming from. Mr. MORSE: The best example of this is the meeting that took place here in Washington -- is that we attribute to the Japanese Prime Minister presidential powers. And anybody who knows the position of the Prime Minister and the political system in Japan knows that they don't accomplish anything. The system operates on totally different principles. And we know in this country what the limits to the President are. So when these two men come together to solve problems, we should know -- and these people should be sophisticated enough to understand -- that's not how you solve problems. But what we do is we attribute tremendous powers to these types of individuals. And in fact, we won't face up to in fact how you really get things done at the basic level. So unfortunately, there's a very strong relationship that's being in many ways damaged by a lack of attention, a lack of understanding on both sides. And so the people can cover themselves politically, they're performing this magic mirror relationship that doesn't reflect the realities on the two sides, and so people are no in communications. LEHRER: Mr. Ambassador, do you agree with Mr. McEachron and also Mr. Morse to some degree that what these folks are saying publicly is not -- that they do understand more than they're saying publicly and this is becoming a political back and forth? Ambassador INGERSOLL: Yes, I do. I think they understand more than they will profess in their public statements. LEHRER: Why? I mean what kind of -- Ambassador INGERSOLL: I think it's the political atmosphere in both countries. There are special interests in both countries to which the politicians are responding or reacting, and they believe that they will not be reelected unless they respond to those in a very public way. They see that as a solution to their political problems, their constituent complaints. And it's true in both countries. We want the Japanese to open up their agricultural markets -- their rice prices are three to four times the world price, and we can deliver rice at much lower prices. And yet they won't let it in there. They won't let it in without a very high duty -- or not at all. And the Japanese people are not benefiting by the world price of rice -- which we could deliver to them. And the politician is catering -- particularly in that country, and in our country -- to the agricultural interests. LEHRER: But what causes the situation, Mr. Morse, for a leader of Japan to say the Japanese markets are completely open to American business, and for a U. S. Congressman to say that's just not so, it's unfair, and he lists several things -- and that's the end of the conversation. Mr. MORSE: Well, I think in the case of the Japanese, they have come to understand that when American public officials deal with them, they're not really serious. In some ways, the present semiconductor war -- if you want to call it that, trade war -- is an attempt on our part to dampen Congress's enthusiasm for serious trade legislation. And we have to perform that type of thing to keep the free trade area open. LEHRER: So the message is going to our Congress -- (more) than it is to Japan from the Reagan administration? Mr. MORSE: Right. Well, it's -- the message here is for Congress. The message in Japan is that the relationship is fine and the Prime Minister's done an excellent job. Both have agreed that in some way that's the message. And solving the trade war -- or the trade problem -- or the trade deficit, which keeps growing and growing, isn't the real issue. It's the so called political agreement to solve -- have a political relationship in which both leaders benefit, but the two countries don't solve their problems. LEHRER: You shook your head. Ambassador INGERSOLL: I don't think it's entirely true. I think there's a serious problem between the business community in this country and the business community in Japan. I think our tariff on the semiconductors was a signal that the business community better pay attention. It wasn't just a political move. I think it was an economic and business move. LEHRER: -- you mean the Japanese community? Ambassador INGERSOLL: From us to them. And I think it's long overdue. LEHRER: Mr. McEachron, is this going to get worse? Are we going to have a trade war? Are we going to have a crisis between these two allies? Mr. McEACHRON: No. LEHRER: No? Mr. McEACHRON: No. I say no because I assume that the human beings in the end will do the reasonable thing after they try other alternatives. It would be too damaging to both nations to let it go to that extent, and both leaders are making that point now. I would like to come back just to the point that Ambassador Ingersoll was making. The agricultural side, because there Japan's markets are very closed. The fact of the matter is the people who suffer most from that are the Japanese. And the Japanese -- less than 10% of the Japanese population are farmers, and most of them earn their income from other sources -- other nonagricultural sources, so that a tiny percentage of the Japanese people are being outrageously subsidized by the large majority, and it's costing the Japanese a great deal, it's a very big drag on their economy. LEHRER: But the domestic politics makes it very difficult for Nakasone to do anything about? Mr. McEACHRON: For the moment that's true. But it's clearly changing, and clearly if we are not too impatient, the Japanese are going to change, because it's in their interest to change. LEHRER: Mr. Morse, it's going to get worse or better? Mr. MORSE: I think the situation will get worse unless we realize that we have to be serious with Japan, we have to send them a clear message about what has to be accomplished, and we pursue it with some tenacity over a longer period of time. If we do that, both sides are going to benefit in the long run. LEHRER: Is it too early to start thinking about taking those sanctions off in mid May, as the President said today? Mr. MORSE: I think that would be a terrible mistake, because the message has to be clear, and there has to be a clear demonstration that everybody in this country is serious -- takes Japan seriously, Japan's an important country -- it deserves to be taken seriously. But we're not going to allow our economy and our relationship with other nations to be damaged by a country that doesn't play by the same rules. LEHRER: Do you agree? Ambassador INGERSOLL: I agree. I think it may get a little worse before it gets better, but I agree with David McEachron that I think it will get better in the long run. But we have to go through this crisis where each country understands the seriousness of it and will act on it. LEHRER: It took a crisis for there to be the understanding -- is that what you're -- Ambassador INGERSOLL: There may be a little more crisis to come -- LEHRER: A little more to come, I see. Do you agree -- Mr. MORSE: There has to be some continuity -- LEHRER: -- continuity in the crisis and then the understanding? Mr. MORSE: A longer crisis this time. LEHRER: All right. Okay. Mr. McEachron from New York, Mr. Morse, Ambassador Ingersoll, thank you all three very much. HUNTER-GAULT: Coming up on the News Hour, what's in store for Congress's Iran contra probe -- and racism on campus. Iran-contra Scandal HUNTER-GAULT: Next week, Congress begins what is expected to be three months of hearings on the Iran contra scandal. Judy Woodruff will be keeping an eye on that story for us then as she is today. Judy? JUDY WOODRUFF: When the hearings get started next Tuesday, it will be almost six months to the day since the Iran contra story broke. Much has already come out in the interim. And much has probably been forgotten. For that reason we decided to try to refresh memories on the story, and a look at just what more there is for Congress to turn up. Former Sen. JOHN TOWER: Yes, the President made mistakes. I think that's very plain English. The President did make mistakes. A lot of his subordinates made mistakes.

WOODRUFF: [voice over] It was more than two months ago that the commission headed by former Senator John Tower reported on its investigation into the Iran contra affair, a report that laid out in impressive detail how the arms to Iran policy was born, carried out in secret at the highest levels of the Reagan administration. Sen TOWER: We had serious problems here in terms of the way foreign policy was made.

WOODRUFF: A month earlier, Congressional Intelligence Committees reported on their investigation into the scandal, and just this week, Independent Counsel Lawrence Walsh announced his ongoing investigation had turned up extensive and specific evidence. LAWRENCE WALSH, Independent Counsel: We're moving as rapidly as we can with proper care --

WOODRUFF [voice over]: With all these inquiries either completed or still on the way, why is Congress planning to hold public hearings for the next three months? Republic Senator William Cohen sits on the Select Committees holding the hearings. Sen. WILLIAM COHEN, (R) Maine: The Independent Counsel may take 18 months to two years before the full story is told from his perspective. He's looking to present a detailed prosecutorial case. That is not our burden, our responsibility. We're trying to find ut what the facts are as quickly as we can to resolve the issue so that hopefully this President can continue to serve as the Commander and Chief and leader of the country. WOODRUFF [voice over]: Democratic Senator David Boren, another member of the Select Committee, says he has heard from his constituents on the need for hearings. Sen. DAVID BOREN, (D) Oklahoma: They're saying, ''Get this over with so we can get on with the other business at hand. '' The people also want the question mark that's hanging over the presidency resolved. They want to know -- have a final answer -- did the President know about this? Did he direct it? They don't want the government left in limbo. Rep. MICHAEL DeWINE, (R) Ohio: I think there also is something beneficial about allowing the American people to see firsthand on nationwide TV, nationwide radio -- to hear and see exactly what these witnesses are saying. WOODRUFF [voice over]: Republican Congressman Michael DeWine, another Select Committee member says he has no doubt the hearings will produce new information. Rep. DeWINE: I'm convinced that most of the facts are already out. We're going to get the remaining facts out in great detail -- probably more detail than a lot of people would like to see. I think a lot of people are going to be bored with all the details. WOODRUFF [voice over]: But House Democratic Leader Thomas Foley, who also sits on the Select Committee, says it's details that will tell the story. Rep. THOMAS FOLEY, (D) Washington: I think the details are going to surprise people. I think they're going to create concerns. I wouldn't suggest to you that it's going to shake the American government to its foundations or anything like that. But it's going to be an explicit record of how far people in this group went to circumvent restrictions, recording requirements and other legal constraints applied by Congress and signed by the President, and so on -- part of our law that was, I think, deliberately and intentionally violated. WOODRUFF [voice over]: Much is already known about the Iran contra affair, thanks to the work of the Intelligence Committee and the Tower Commission -- one of whose three members was former President Ford's National Security Advisor, Retired General Brent Scowcroft. Gen. BRENT SCOWCROFT, Ret., Member, Tower Commission: I think we know pretty much the story of what happened in Iran. I would be surprised if there would be information come out which would change in any really significant way what happened in Iran. WOODRUFF [voice over]: What is known so far is the chronology of public and private events. One track involving Iran -- another track involving U. S. policy toward Nicaragua. Both tracks began in 1984 -- the first in late August when President Reagan asked for a reassessment of U. S. policy toward Iran, to look into ways of improving relations that had been broken off during the hostage crisis five years earlier. In a separate move that fall, Congress enacted the so called Boland Amendment, prohibiting any government agency involved in intelligence activities from assisting the contras fighting the government of Nicaragua. As a response, at about the same time, former National Security Council aide, Oliver North, started to build a private network to assist the contras. A network that would eventually pull in tens of millions of dollars for conservative groups, some foreign governments and even profits from arms sales to Iran. In 1985, in June, after seven Americans were kidnapped in Lebanon, and a number of terrorists incidents occurred, including the TWA airplane hijacking in Beirut, the Reagan administration came to believe that Iran may have been involved and might be interested in reopening a dialogue with the U. S. A little later, Israeli officials reportedly held out hope for a new Iran U. S. relationship, including the release of the hostages -- if the U. S. would sell arms to Iran. On June 30, after the TWA hostages were released, President Reagan had tough words. Pres. RONALD REAGAN: The United States gives terrorists no rewards and no guarantees. We make no concessions. We make no deals. Nations that harbor terrorists undermine their own stability and endanger their own people.

WOODRUFF [voice over]: On August 6, according to former National Security Advisor, Robert McFarlane, and to the President's original comment to investigators, Mr. Reagan gave his oral approval to an Israeli shipment to Iran of American made weapons. The President now says he cannot remember. A few weeks later, Israel did ship 508 TOW antitank weapons to Iran. Two days after that, hostage, the Reverend Benjamin Weir, was released. In November, l985, another shipment, with 18 Hawk antiaircraft missiles arrived in Iran. But this time on a CIA supplied plane, arranged by Col. Oliver North. And in December, just as McFarlane announced his resignation, the President decided to stop the Israeli arms shipment, because no more hostages had been released. Early January, l986, saw several Israeli officials travel to Washington to urge the arms shipments to be resume. North has said the Israelis at this time also suggested diverting profits from the arms sales to one of the Reagan administration's favorite causes, the Nicaraguan contras. On January 17, over the objections of his Secretaries of State and Defense, but at the urging of CIA Director William Casey and his new National Security Advisor John Poindexter, the President signed a secret intelligence finding, authorizing the direct sale of U. S. arms to Iran, and instructing the CIA not to inform Congress. In February, a thousand TOW missiles were flown from the U. S. to Iran through Israel. A White House memo dated April 4, l986, said that the $12 million from an upcoming sale of Hawk missile parts to Iran would be used to buy supplies for the Nicaraguan contras. By this time, Col. North had established an elaborate network of private and foreign aid for the contras. On April 14, in announcing the U. S. raid against Libya, President Reagan sounded a warning to terrorists everywhere. Pres. REAGAN: When our citizens are abused or attacked anywhere in the world on the direct orders of a hostile regime, we will respond so long as I'm in this Oval Office.

WOODRUFF [voice over]: In May, former National Security Advisor McFarlane, Col. North and others traveled secretly to Iran on a plane carrying $4 million worth of Hawk missile parts. After four days of meetings and no hostage release, the McFarlane party left. On July 29, another hostage, the Reverend Lawrence Jenco, was released. Four days later, in early August, more Hawk missile parts were delivered to Iran. But that fall, three more Americans were taken hostage in Lebanon. On October 29, Israel shipped 500 TOW missiles to Iran for a price of $4 million. The U. S. later replaced the missiles Israel sent. On November 2, just three days later, hostage David Jacobsen was released. The next day Beirut newspaper revealed the McFarlane mission to Iran, and the whole affair began to unravel. At the White House, however, President Reagan was refusing comment. Pres. REAGAN: Anything that tell about all the things that have been going on and trying to affect the presidency endangers the possibility of further rescue.

WOODRUFF [voice over]: In a speech a week later, the President insisted arms went to Iran only to establish contact with moderate elements there. On November 25th, Mr. Reagan fired Col. North and announced Poindexter's resignation because of Attorney General Edwin Meese's discovery that profits from the arms sales had flowed to the Nicaraguan contras. The reaction to the Iran initiative was summed up by former Secretary of State Edmund Muskie, a member of the Tower Commission. EDMUND MUSKIE, Member Tower Commission: I think basically, the public as a whole reacted against this initiative, this policy, because it was dealing with a country and with people in that country who Americans had come to distrust and even dislike because of the Iranian hostage incident of 1980 -- the Carter years. And I think people just found it incredible in the aftermath of that that we should be taking the sides in the Iran Iraq war on the side of Iran -- that we should be possibly paying ransom in the form of arms for the release of hostages, contrary to the President's policy. WOODRUFF: Even so, next week's hearings, which will take place here in the historic Senate Caucus Room, won't concentrate anywhere near as much on Iran as they will on questions still unanswered -- like the scope of the elaborate, private contra aid network, and where all the money went from the profits from the Iran arms sales. Sen BOREN: We know that there was circumstantial evidence that money somehow generated by the arms sale -- that there was government property, arms belonging to the taxpayers of the United States -- taken and sold at an inflated price, and that not all the money received from the taxpayers' property ended back up in the taxpayers' bank account. In other words, there was a conversion, fraudulent conversion of funds, that should belong to the taxpayers of the United States that somehow got siphoned off for another purpose. WOODRUFF: In all, Iran was charged at least $32 million for $12 million worth of arms. The bulk of the $12 million cost was apparently reimbursed to the U. S. government. But some $20 million remains unaccounted for. Sen COHEN: There was virtually no information, concerning what happened after the sale -- and the difference in this particular investigation. We are going to focus initially upon what happened to the money, how much was involved, who got it and where did it go. Former SECRETARY MUSKIE: You know, you can let your imagination roll in search of possible answers to that. Whether or not some of it went to the contras, and as to the money that went to the Iranians -- what was it used for? There are people who think it was used for bribes -- to grease the way -- people who think that some of the individuals involved profited from it. WOODRUFF: One source on the committee says that most of the profit money did in fact end up with middlemen who helped arrange the Iran arms transactions. He says the hearings will show that only very little of that money was funneled to the Nicaraguan contras and that most of that was in the form of military supplies, like guns and airplanes. However much money was diverted from the Iran arms sales, it's likely to be only a small portion of the total funds Col. North and others, like conservative fundraiser Carl Channell, collected in the name of helping the contras. Besides an unknown number of millions donated by private individuals in the United States, there was $32 million given by the government of Saudi Arabia, and $10 million put in a Swiss bank account for the benefit of the contras by the Sultan of Brunei, a tiny island nation off the coast of Malaysia. Senator Cohen says the committees will want to know why these donations were made -- -- what was expected in return. Sen. COHEN: None of these individuals or countries are what you would call humanitarians. They're not blessed with charitable instincts. They're there to contribute money to further either a private purpose in the sense of the private individuals trying to make money -- or their own country's self interest, with countries giving money to carry on a program, knowing that there will be something coming in return -- some kind of a quid pro quo. WOODRUFF: The committees will try to determine the role the White House and the National Security Council staff played in funneling money to the contras, and whether that was a violation of the Boland Amendment which was in effect at that time. Former Secretary MUSKIE: There was a prohibition against the CIA, the Department of Defense and other intelligence agencies from getting involved in the contra aid. But the issue then was does this include the NSC staff? WOODRUFF: Muskie and others say the law is ambiguous on this point, and Congress may or may not be able to prove the law was violated. Sam Dash, who was Chief Counsel for the Senate Watergate Committee, says while the laws involved are different, the Iran contra affair has some similarities to Watergate. SAM DASH, Watergate Chief Counsel: What is happening here is the act of a President's administration acting not to its normal courses of procedure through normal agencies who deal with these issues -- such as the State Department, or other agencies of that kind -- but acting to in house White House staff doing it secretly, not informing Congress. And when the facts come out, engaging in some sort of a cover up. WOODRUFF: Bob Woodward, the Washington Post reporter who broke much of the Watergate story, sees another similarity. BOB WOODWARD, Washington Post: What's fascinating about Watergate, it really was about war -- the Vietnam War and protecting that war. And in the Iran contra story, the spine of that story, the thing that really drove what went on in the White House with all of this, I think, was the contra obsession that the President clearly has, feels very, very strongly about -- and when that -- the story -- is wrapped up, I think this is going to be called the contra story, not the Iran story. WOODRUFF: There are Republicans on the Select Committees and in the administration who think those views may be exaggerated. They are uncomfortable with spending several weeks on the issue of private funding of contras. Despite their concerns, it's the contras the committees will largely focus on for the first four weeks of hearings. Campus Racism LEHRER: Next, a story about the troubled spring on some of the nation's most prestigious college campuses. Many have reported racial incidents involving black and white students. One of those was the University of Michigan at Ann Arbor. Correspondent Elizabeth Brackett has this report from Ann Arbor.

ELIZABETH BRACKETT [voice over]: Along pleasant campus pathways, an ugly word has been heard this spring -- racism. And it has been heard at campuses across the country. In one survey of 26 campuses, four out of five black students said they had been the victims of racial slurs or racial attacks. STUDENT: We've got all kinds of attacks going on on our campuses and outside of campuses --

BRACKETT [voice over]: The attacks have gotten particular attention at the University of Michigan, long considered a bastion of liberal activism. Last March Fred Pitts was attacked by four white students as he walked just off campus. FRED PITTS, Student: They were yelling little fun, racial obscenities directed at me. I hadn't even provoked anything -- hadn't even noticed they were there. I just looked over. I didn't respond. I never do. When they got past me, two of them decided to run over and jump me, so they just tackled me into the snow in front of an apartment building, shoved my head in the ground.

BRACKETT [voice over]: Two other black students were attacked atMichigan. And the campus radio station aired a half hour of racist jokes. Students began to organize. A coalition of black and white students drew up a list of demands calling for greater sensitivity to minority concerns. Dissatisfied with the University's response, students spent the night in the administration building. The next day, university president Dr. Harold Shapiro agreed to meet with them. STUDENT: It is a state of emergency because we're being victimized at the University of Michigan, and something immediately has to be done to prevent the problem. Is this a state of emergency? DR. HAROLD SHAPIRO, University of Michigan President: I think that the -- it is a very important set of issues that we're discussing here today. And to the extent that anyone's security on campus is in any way threatened, that is a state of emergency. STUDENT: You should be able to see the problem. I mean, it's obvious. You shouldn't have to go to the extent of people receiving threats, flyers, things like that -- you should realize that there's a problem, and that we should have to take over a building to make you do something, to make you talk to us! Dr. SHAPIRO: If I didn't think this was important and urgent, I wouldn't be here now. STUDENT: I'm going home, I'm going to study, and I'm going to come up with another logistical plan to shut this place down. What are you going to do, sir? What are you going to do? Dr. SHAPIRO: I'm not sure what the question is. STUDENT: The question is are you going to come in this room and meet with us and set a time to meet with the regents earlier than your scheduled meeting? Are you going to meet with [unintelligible] no later than next week? Or are you going to sit here and do nothing. Dr. SHAPIRO: I'll be glad to come into the room, but not in response to the specific set of demands that you just gave me.

BRACKETT [voice over]: Tensions seemed to ease when Jesse Jackson agreed to intervene between students and the administration. JESSE JACKSON: There's darkness on campuses around this country, but from Ann Arbor a light is shining today, because somebody had the sense to turn on each other, and love each other and respect each other.

BRACKETT [voice over]: But the incidents continued. John Simms came back from listening to Jesse Jackson feeling good. Then he found racist poems shoved under his door. JOHN SIMMS, Student: The poems are threatening, telling me that I should beware of every tree and every dark corner, because someone could be standing there waiting to hang me from that tree. And I've walked home a couple of times and looked at trees, and I've been scared. And I've had people walk up behind me and I may not hear them until they get really close, and I'll turn around, and I'll be ready to defend myself. Which seems unfair to me that I should have to live like that.

BRACKETT [voice over]: Racial incidents and anti racist demonstrations are not confined to Michigan. They are happening on other campuses once known for their liberalism. Racial brawls have been reported here at Columbia and at the University of Massachusetts. White Supremacist flyers are posted at the University of Chicago, and at the University of California. The question is, ''Why now?'' Tougher admissions standards may be part of the problem, says the provost of the University of Michigan, James Duderstadt. JAMES DUDERSTADT, Provost: We've become much more highly selective in recent years. We tend to be drawing many of our majority students from rather upper class suburban environments, ones in which they frequently have not had to deal with other minorities. While at the same time, we're increasingly drawing our minority students from predominantly minority black schools in the inner city, where they have really had very little experience with being a minority in the first place.

BRACKETT [voice over]: Duderstadt also points out that today's students were not even born when Michigan and other campuses were erupting with the Civil Rights struggle of the '60s. So many of the white students don't feel any particular commitment to the goals and promises of that movement. In fact, much of the progress made in the '70s seems to have been wiped out. Universities across the country have reported a startling 20% decline in black enrollment. At Michigan, black students have dropped from close to 8% to 5 l/2%. As a result, today's black students feel increasingly isolated.

JAMES LATHAM, Student: In classes, for instance, you'll be the only student of color, and you feel somewhat alienated and set off from the other group -- from the other students. And that's what kind of exists. You feel alienated, set apart. Whenever questions of minorities arise in classroom, people look to you to be the authority. I think the general atmosphere is somewhat racist, and I think it's from the top down. BRACKETT: Did you expect it to be any different? Mr. LATHAM: I was very idealistic when I came here. I thought this was a bastion of liberalism. I went to school in Detroit and I heard a lot of nice things about the university, so I was quite surprised when I came here and felt this type of alienation. BRACKETT [voice over]: Professor Walter Allen teaches a course in racism at the university. He hopes his class will help ease that sense of alienation. But Allen himself feels isolated. Blacks make up only 3. 2% of the university faculty. There are no black department heads, no assistant black department heads, although two university vice presidents are black. WALTER ALLEN, professor: Every day I feel myself assaulted racially, in very subtle and sophisticated ways -- because we are a community of learned people. So there tends to be a smoothness about the process. But on a daily basis I feel those kinds of challenges. And I guess the most frustrating thing is very often people don't perceive it as challenges. They're just unconscious. And it's very difficult to pursue them, because when you raise the issue, people say, ''Oh, that's not what I meant. You're being overly sensitive. '' BRACKETT: Has it affected your career path? Prof. ALLEN: Most definitely. BRACKETT: How? Where should you be? Prof. ALLEN: I think I should be further along. BRACKETT: But the question of how to increase the number of blacks on the faculty and in the student body has caused sharp divisions on the already tense campus. Blacks complain that except for athletes, blacks are ignored by recruiters. LANNIS HALL, student: There's 30 high schools in Detroit, and they recruit from two of them. And not just Detroit, but other schools in Michigan, and they don't recruit outside of Michigan too vigorously.

BRACKETT [voice over]: Deanne Baker is a university regent, elected by Michigan voters. He says the reason the university does not recruit heavily in Detroit and other urban areas is because the secondary schools are not turning out students who are able to succeed at Michigan. Though the university denies it, regent Baker also says admission standards are already lower for blacks than for whites. DEANNE BAKER, regent: We will select and offer places in the 1987 class to any 500 young people who meet those criteria. And generally, they would be -- the average of the entering class, and this is an astounding figure -- is going to be 3. 85 on the grade point. Now, that's on a 4. 0 system. And the SAT score will be 1200. We will accept a minority student with a 2. 8 and an 800.

BRACKETT [voice over]: But university provost James Duderstadt says Baker is simply incorrect. Are there different admission standards for black students and white students? Mr. DUDERSTADT; There are not. Because in fact those minority students have to come into our academic environment and compete in that environment in order to survive academically. If we were to lower the standards for admission for minority students, they simply couldn't survive here. BRACKETT [voice over]: Despite the denial, many students agree with Regent Baker and believe that minorities do get a break. And they have little sympathy for the demands now being made by the activists. JAMES ELLIOTT, student: Just the whole idea of making a list of demands, walking in the president's office, or whoever office they did it (sic) and plopping them down and saying, ''Okay, this is what we want, and [unintelligible]. And then it won't [unintelligible]. It just makes it worse.

BRACKETT: The rallies and protests against racism on campus continued at Michigan, and some white students began to charge that the issue was being blown out of proportion by the protesters and the press. MIKE DAVIS, Student: I think there's a rise in racism in the whole country. BRACKETT [voice over]: Like most white students, these students insist that there's no more racism in Michigan than anywhere else. Mr. DAVIS: It's a very big problem, but to single out the University of Michigan or just other colleges is -- it's wrong to just point the finger at them instead of looking at the whole country. BRACKETT: The fact that college campuses are merely reflecting the general attitude of the country is no comfort to Fred Pitts. FRED PITTS, student: It's very easy for someone who has not been the victim of an attack or any kind of slander or any kind of discrimination to say this has been blown all out of proportion. It's very simple. You know, people have to realize that it's here. That racism is here in this country, it's coming back into vogue, unfortunately. And that that attitude is being blown out of proportion is a cop out. BRACKETT: Classes will end soon at most universities, and administrators say they expect tensions will cool down over the summer. Whether those tensions will resume again in the fall may depend both on the racial sensitivity in the admissions office and the racial climate in the country. The Beat Generation CHARLAYNE HUNTER-GAULT: Finally tonight, essayist Penny Stallings has some thoughts on counterculture and capitalism.

PENNY STALLINGS: Alan Ginsberg -- beat daddy, king hippy, poet, visionary, Ginsberg making mischief with his hipster cronies in the beebop meccas of the '50s. Perennial flowerchild, pushing people love. It's been 30 years since the California courts first tried to suppress Ginsberg's profane epic poem, ''How. '' Instead they made Ginsberg a media sensation, helping to launch the beat movement and planting the seeds of the counterculture upheaval of the 60s. ALAN GINSBERG: I saw the best minds of my generation destroyed by a madness, starving, hysterical, naked, dragging themselves through the [unintelligible] streets at dawn, looking for an angry fix. Angel headed hipsters burning for the ancient heavenly connection to the starry dynamo of the machinery of night, who poverty and tatters and hollow eyed and high, sat up smoking in the supernatural darkness of coldwater flats, floating across the tops of cities, contemplating jazz --

STALLINGS: In the years immediately following the How obscenity trial, thousands of young romantics flocked to New York and San Francisco, to the Bohemian enclaves frequented by Ginsberg and his pals. Seedy, colorful neighborhoods that offered refuge from the middle class. In new shadowy haunts, self styled rebels indulged their passion for breaking new grounds and breaking the rules. Art was the be all and end all. Poverty noble and inevitable. In the New York of today, the last vestiges of that world have been pushed steadily southward to an as yet ungentrified area. No longer sinister and shadowy, this day glow Bohemia is littered with art galleries, discos, and overpriced restaurants. Downtown, as it has come to be known, is a hotbed of trends and consumerism, a place where the iconoclast and tourists meet and greet. Once it took at least a generation for the changes in taste and behavior pioneered in such places to catch on. But today, everyone is desperately seeking the downtown style -- and not just in New York. Pocket Bohemias are popping up in almost every major American city. And trendy magazines dispense the hip sensibility, along with television, like David Letterman and MTV. Middle class America is becoming more and more open to the new and outrageous. At the same time, young artists are beginning to embrace the conservative values of their affluent patrons. No longer content to toil in relative obscurity, they nurture bourgeois dreams of fame and fortune. The talk downtown these days is not of alternative lifestyle, but of tax shelters and Mercedes. Once successful, scene superstars don't wait for their works to be plagiarized by dimestore copycats. They do it themselves. But then what can you expect from a generation weaned on Disney and Warhol? The spirit of the times would seem to have come full circle since the '50s. Only this time around, there little in the way of sanctuary for those who don't share in the capitalistic fervor. In fact, if Alan Ginsberg were just getting his start in New York today, he probably couldn't make the rent. One of the last of the dying breed, Ginsberg remains stubbornly noncommercial, clinging to his tenement digs on the Lower East Side. Where will he go now that even this bombed out eden has been co oped and condoed. No doubt the passing years have endowed the [unintelligible] of his era with an idealized lustre. Put back in the cool, fluorescent glare of today and you see the beats were very much a boys' club, and the scene often corny and self consciously arty. And the same could be said for the hippies. And even the punks who followed. But whatever its plause, it seems a shame to see it all fade, to see the encroachment of civilization on the habitats of the terminally weird. And the last of glorious goof offs, like Alan Ginsberg. LEHRER: Again, the major stories of this Friday. Japanese Prime Minister Nakasone ended his two day visit to Washington. President Reagan promised to review the semiconductor trade sanctions issue, and the two leaders agreed to work together to reduce Japan's huge trade surplus with the United States. The Senate Intelligence Committee voted unanimously to confirm F. B. I. Director William Webster to be head of the C. I. A. The nomination now goes to the full Senate. And leading U. S. banks raised their prime lending rate from 7 3/4 to 8%. Good night, Charlayne. HUNTER-GAULT: Good night, Jim. That's our News Hour for tonight. We'll be back on Monday. I'm Charlayne Hunter Gault. Good night.