The MacNeil/Lehrer NewsHour

MR. LEHRER: Good evening. I'm Jim Lehrer in Washington.

MR. MacNeil: And I'm Robert MacNeil in New York. After tonight's News Summary, four authorities on Russia's stormy economic path discuss whether Boris Yeltsin's new conservative government will stifle reform. We visit two Los Angeles families trying to put lives and homes together after the earthquake, and Mark Shields and company analyze the week's politics. NEWS SUMMARY

MR. MacNeil: The new and more conservative Russian government met for the first time today. The ministers immediately launched into a discussion of their economic plans. They promised to find ways to keep alive ailing Russian firms and fight runaway inflation. The government, named yesterday by Boris Yeltsin, has been purged of its most radical reformers. In Washington, President Clinton expressed some concern about the change. Reporters asked him if he thought radical reform was now over in Russia.

PRESIDENT CLINTON: I wouldn't go that far. You know, already Russia has privatized more rapidly than any of the other former Communist countries. They have a much higher rate of privatization than any of the other countries. But what we're concerned about, obviously, is whether they'll be able to manage their inflation problem. And I think the Secretary of the Treasury said it the best. We're going to support democracy, and we're going to support the fact that Russia respects its relationships with other nations, and those are fundamental to our interests. How much economic help they can get from the international Community will be directly related to what kinds of reforms they decide to undertake.

MR. MacNeil: The new Russian parliament asserted itself on foreign policy today, passing a motion opposing western air strikes against Bosnian Serbs. Extreme nationalists and Communists voted in a bloc on the motion. U.N. Secretary General Boutros Boutros- Ghali warned today he was considering ordering NATO air strikes unless Serbs stop blocking a rotation of U.N. troops. But he said the dispute over troop rotation in Eastern Bosnia was close to being resolved. Jim.

MR. LEHRER: The Japanese parliament today voted down a key political reform package. It was a major defeat for Prime Minister Hosokawa who was elected just five months ago. We have more in this report narrated by David Symonds of Worldwide Television News.

MR. SYMONDS: The vote was a stunning setback to Japan's ruling coalition. The package of reforms offered a chance to shake up the country's tarnished political establishment. Voters demanded change in last year's elections, kicking out the Liberal Democratic Party which had dominated politics since 1955. But in Japan's upper house, legislators rejected the reform package. Seventeen members of the ruling coalition voted against the measures. That ensured defeat and put the future of the government alliance into question. Among other things, the reforms would have banned corporations from giving money to individual politicians, the root of many of the country's political scandals. Prime Minister Hosokawa insisted that he'd keep fighting to push his bill through. He avoided saying what might happen if it fails again. He was elected as a political reformer. Telegenic, young, and well-spoken, he seemed a man to deliver the change the Japanese voters were after. If he can't, the question is: Can anyone?

MR. MacNeil: Treasury Sec. Lloyd Bentsen wrapped up a three-day trip to Beijing today. Chinese officials told Bentsen they would begin an experiment in allowing foreign banks to do business in China. They also agreed to allow U.S. officials to check for evidence of slave labor in Chinese prisons, but Bentsen said the Chinese must still demonstrate more progress on human rights to maintain favorable trade status with the United States. China faces renewal of its trade status in June.

MR. LEHRER: There was anger and confusion at earthquake relief centers in California today. For a second day, thousands of applicants lined up to seek aid, many more than the centers could handle. The Federal Emergency Management Agency opened a 12th center today and asked people to call an 800 number for appointments before showing up. But victims complained that the number was usually busy and the appointments were not soon enough. Rain is forecast for this weekend, and California's National Guard is planning to erect tent cities for the estimated 20,000 people made homeless by the quake. It was less cold but not exactly warm in the Eastern and Midwestern states today. There were still sub- zero readings in a number of cities and several major water main breaks. Weather forecasters said a thaw was on the way, with temperatures rising into the 30s in some areas over the weekend.

MR. MacNeil: The Food & Drug Administration took steps today to reduce the tens of thousands of seafood poisoning cases each year. The new regulations require industry to document the safety of seafood from the time it's harvested to the time it's sold to stores and restaurants. If a company failed to provide adequate documentation, the government would inspect the product. The regulations are scheduled to take effect next year. A jury in Virginia today found Lorena Bobbitt "not guilty" by reason of temporary insanity. During the much-publicized trial she said she'd been driven mad by years of marital abuse when she cut off her husband's penis last June. The judge ordered that she be held for up to 45 days of observation at a mental hospital.

MR. LEHRER: And that's it for the News Summary tonight. Now it's on to reforming reform in Russia, an update on the California earthquake, and our regular political analysis with Mark Shields, joined tonight by Paul Gigot, and Ann Lewis. FOCUS - CHANGING COURSE

MR. MacNeil: First tonight, which way Russia? After the appointment yesterday of a new government by President Boris Yeltsin, the U.S. and other governments have said they will carefully watch the changes in personnel to see if they translate into changes in policy, especially a slowdown in economic reform. The changes began just after President Clinton and his top cabinet members left Moscow, proclaiming again their support for economic reform. The first to go on Sunday was Deputy Prime Minister Yegor Gaidar. We have more on the rest of the shake-up from Ian Williams of Independent Television News in Moscow.

MR. WILLIAMS: After three days of negotiations with President Yeltsin, the prime minister emerged to announce that he has got his way, that the new government will be dominated by those advocating a cautious line on reform and that radical change in Russia is over. He said it is time to make people's lives easier and rejected demands made by his reformist Finance Minister Boris Fyodorov, telling him there is a job available, though a lesser one than before, and he should take it or leave it. Mr. Fyodorov, the most visible reformer left in the government, had asked for the post of deputy prime minister and demanded the resignation of key conservatives he accused of sabotaging reform.

BORIS FYODOROV, Former Deputy Prime Minister: [speaking through interpreter] My requests were not accepted, and in this connection, I have no intention to stay in the government. Neither, do I plan to hold the position of finance minister.

MR. WILLIAMS: The new economics minister is Alexander Shokim, Russia's debt negotiator, who has blown hot and cold on reform, while the new first deputy prime minister will be Oleg Soskoviets, a cautious industrialist. The most immediate impact is likely to be an easing of credit for Russia's massive state-owned industries. Loss-making giants like the steelworks at Magnetogorsk in the Urals have laid off thousands of workers. They don't have the money to pay them and can't sell their steel. Mr. Fyodorov tried to cut subsidies in a bid to force plants like this to restructure. Opponents, who now have the upper hand in Moscow, want to preserve them, balking at the huge social cost of cutbacks. Mr. Fyodorov's aim was also to control inflation, which he had cut significantly by the end of last year, though not nearly enough to satisfy western financial institutions.

ARDY STOUTJESDIJK, Director, World Bank, Moscow: It's true estimates for inflation for 1993 is only 900 percent as opposed to 2,000 percent in 1992, but that's not sufficient progress. Clearly much more needs to be done to reduce inflation to bring it down, and to bring about stability in the economy.

MR. WILLIAMS: The new government line-up is clearly more to the liking of Mr. Chernomyrdin than for President Yeltsin. So the man who never stood for election, indeed, stood aloof from the whole process, has clearly established himself as Russia's second most powerful politician.

MR. MacNeil: We get four views, three American and one Russian on the Kremlin changes. The Russian is Vadislav Drobkov, Washington Bureau Chief of Pravda. The Americans are Jeffrey Sachs, a professor of economics at Harvard, and, until he resigned today, an adviser to the Yeltsin government. Padma Desai is a professor of economics at Columbia University in New York, and Robert Legvold, tonight from Boston, is a professor of political science at Columbia. Jeffrey Sachs, does your resignation indicate that you're not as confident as President Clinton that reform is not over?

MR. SACHS: I think the Russian government is likely to move towards incoherence rather than fast or slow, and the coherence will be seen in much higher inflation in future months. And I'm worried that that's going to further de-stabilize the country and lead to further political risks down the road.

MR. MacNeil: Mr. Drobkov, what do you see the changes signaling in the way of less reform, slower reform, what?

MR. DROBKOV: I think that there will be actually the same amount of reforms, but surely they will move more slowly, and as it was said right now, that will be incoherent government, I believe the previous government was also rather incoherent, especially judging by the results of the two years of reform.

MR. MacNeil: How do you see it, Ms. Desai?

MS. DESAI: On the subject of incoherence, I think a cabinet and a government has to speak with one voice, and the problem with the earlier government was that there dissensions between the radical reformers like Boris Fyodorov, the finance minister, and the centrists and the conservatives, and the dissensions got so polarized towards the end of the year that we were at this end and around the world beginning to get an impression that there was no government in Moscow, so that getting back to a centrist course of action would, in my opinion, bring about a more coherent and a more stable government with one voice. Now, we may not like that voice, and our problem, therefore, is what to do with the signal which we are getting from that end.

MR. MacNeil: Are we going to like that voice, Mr. Legvold?

MR. LEGVOLD: I think almost certainly there are going to be retreats in areas that concern us. The actions on the domestic front in the economic sphere are not going to be the kind of reform that we have supported or thought we were supporting in the course of the last years. The results are likely to be very confused in the economic sphere which increased inflation and answers that won't look very good to us or to others in the West, including financial institutions. But I think in addition there are going to be problems in the foreign policy sphere, because along with the domestic evolution that we've seen on reform, there has also been an emerging consensus on foreign policy and on a more national scene, and particularly a harder line in dealing with Russia's immediate neighbors and on this question of NATO expansion, all of which I think bodes for trouble in the U.S. relationship with Russia in the incoming months.

MR. MacNeil: We saw that today in the vote in parliament opposing, adamantly opposing any NATO air strikes against the Bosnian Serbs, if that came up. Let's go on back to the question of inflation. Let me ask you a very maybe naive question, Jeffrey Sachs, so that you can explain it to us. Tell us -- Mr. Clinton also said he was concerned about inflation -- how is inflation tied to the pace of reform and what is it that causes you to fear it will rise under a new cabinet?

MR. SACHS: The inflation in Russia comes from printing too many rubles. It's the old story of too much money rising too fast, chasing too few goods, and there's a very strong relationship between the rate of money growth and the rate of price increases a few months later. To get the money printing down, you have to reduce the budget deficit, stop subsidies to industry, and get western assistance to help the Russian government pay bills using our loans and grants, rather than printed money. So you need a combination of their actions and our actions. Unfortunately, the reformers did not get promised western help. They only got about one-seventh of what was promised this year. And internally, as Padma Desai said, they had to fight tremendous battles with the Old Guard that wanted huge subsidies for industry. Now despite that, Fyodorov, the finance minister, had success in avoiding hyperinflation, and he was able to get the budget deficit down and the credits down to a point where inflation was held to about 10 percent per month at the end of this year. Unfortunately, with the Old Guard back in key positions, and we're seeing it all through the ministries in the last two weeks, in the whole range of the government, there is going to be, I believe, an extraordinarily rapid increase of credits, some for good reason, some for absolutely corrupt reasons. And I believe what we're going to see develop very quickly is a Ukrainian type situation where the Communist leadership leads to a rapid inflation not of ten or fifteen per cent per month but perhaps fifty or a hundred per cent per month, with all of the consequent political and social risks down the road.

MR. MacNeil: Do you agree with that, Padma Desai, that this group will want to continue to subsidize the kind of firms that we saw in that report by Ian Williams, and that will lead to the printing of more money?

MS. DESAI: Well, the main problem right now is an enormous policy dilemma which is the rate at which inflation should be controlled, and I agree with Prof. Sachs that inflation has to be brought under control. But my point is at what rate should it be brought under control, and the other aspect of the policy dilemma is that this is an economy which in the course of the last two years has shrunk by 1/3. It is 2/3 of its former size, and Prime Minister Chernomyrdin and the rest of his colleagues are worried about further decline in industrial production. Now, no one can tell me, least of all Prof. Sachs, that this declining industrial production is required because we are producing useless things. The declining industrial production has been across the board. It has not meant that industry today produces useful things and getting away from useless things. So that this dilemma between inflation control and between production and decline from getting further, that is a main problem. Now the inflation rate, there is the sense in wanting to bring down the rate of inflation which was -- which is currently 20 to 25 percent a month to 5 percent a month. All of a sudden, how is that possible? If you sort of open a door all of a sudden, it is going to shut back and rebound, but you may be able to open a door slowly and win the battle that way. A 5 percent monthly rate of inflation is going to need enormous help from the West, because a 5 percent rate of inflation will mean that there'll be a lot -- you can spend only a lot less money; you will have to cut back subsidies to industries on a vast scale.

MR. MacNeil: And you have to put a lot of people out of work.

MS. DESAI: You will have to put a lot of people out of work. You will have to provide a safety network for them, and according to Prof. Sachs' calculations, if you want to follow that agenda, then the flow of aid from the G-7 countries, the industrialized countries, will have to be in the range of 15 to 20 billion dollars a year. Are we prepared to give that kind of aid to the Russians on a steady basis for the next two to three years at least?

MR. MacNeil: The answer to that is no, Prof. Legvold, is it not? It's a very clear "no"?

MR. LEGVOLD: It's not a clear "no" yet. But I think we can safely predict that it's going to become so. We just had a meeting of the Paris Club, i.e., governments who are responsible for the debt of the Russian government to the outside, that is to the government. And we've gotten a temporizing decision, a momentary postponement until April of payment, but they're clearly watching what the IMF is going to do, and the IMF is scheduled to face a decision on releasing the next billion and a half dollars in, in credit to the Russians. I think they're going to come away from the current decisions being taken in Moscow discouraged, and I think it's entirely possible that this will not go forward, and as a result, I believe it's going to be very hard for the West to engage itself even on the limited basis that it's been engaged up to this point. But frankly, at this stage, I think that's the secondary importance. I think the crucial issues are the decisions will be made by the Russians. And my own view is that those are going to be rather confused decisions in coming months.

MR. MacNeil: But they certainly won't be to suddenly close down these huge state industries and cause many more thousands of people to become unemployed.

MR. LEGVOLD: On the contrary. They will try to maintain employment. They've made it -- Chernomyrdin and others -- have made it plain that they'll do so. But up to this point, their problem hasn't been unemployment or the risk of large scale unemployment in the near-term. There's been very little unemployment in Russia up to this point. They're simply not willing to run the risk of further agony of any kind, whether it's unemployment or further decline in real income, as they see it. So I think what you see them do in coming weeks is spend money on salaries, not merely on subsidies to the firms.

MR. MacNeil: Mr. Drobkov, how do you explain -- it was only a week or so ago that President Clinton was in Moscow and standing up and applauding the fact that he had fresh assurances from Boris Yeltsin that radical reform would continue. And yet, Mr. Yeltsin knew at the time that these resignations of the reformers were coming. How do you explain that?

MR. DROBKOV: It seems to me that while Yeltsin and Clinton, the two presidents, were speaking about reforms, they beared in mind each different things. For Yeltsin, reforms was kind of the course which was chosen by him and which is more or less followed by his government for these two years. But the results of these reforms and actually the result of the shock therapy, as it is said quite often here, is not as good as might be expected by President Yeltsin. That's why I think that when he was speaking about reforms and new reforms, he expected that these reforms this time will bring better results. And I believe for Russia it will be easier and more productive to go slow tactics, to choose the kind of tactics, just as China has done already. Because, otherwise, they will get no reforms and there will be no economy, and there will be no market in Russia anymore, because if the -- as a result of these two years of reforms, as it was said here already, 1/3 of the Russian economy and the Russian production simply disappeared, it will not take long for us to have a bankrupt country. And I don't believe that any kind of the foreign aid or foreign assistance will help greatly here, because first of all, nobody in the West is ready to provide such amount of assistance, first. Secondly, the kind the system has provided now is a rather strange way, the only and the most visible result, not only surely but the most visible result of it is the accumulation of the Russian national debt and maybe several dozens or hundreds new millions here in the West - - Russian --

MR. MacNeil: Mr. Sachs, describe for us, if they are going to slow down reform, what does that, what does that mean, and why does it matter from your point? What are they going to do? What are they going to stop doing that will be bad, as you see it?

MR. SACHS: This term slow or fast is really beside the point, and the idea that there's been something called shock therapy is preposterous. There has been a fight between conservatives and reformers. It's led to paralysis, not to a shock therapy. If you want to look at real stabilization, you look at a country like the Czech Republic, or you look at Poland, or you look at Estonia, which ended inflation and resumed economic growth. That's what you get when you really do something. What they've had is incoherence. And, of course, the public didn't like the incoherence. That shouldn't be interpreted as a vote against reform. That's a vote against pain and incoherence. Now, we missed a wonderful opportunity in the last two years to give the kind of support not that I was asking for but that the West itself was promising. We put on the table 28 billion dollars this year. We delivered about four. It's a shame. This was the time when we really could have helped the reformers, helped them pay for the social support, which is desperately needed, helped them meet some of their bills so that inflation could come down as it has in the successful reforming countries. What are we going to get in the future is not fast or slow, and the idea that it's going to be more cautious is even more silly. What we're likely to see is what we see in Ukraine, huge budget deficits, enormous corruption, by the way. Let's talk straight. These links between the state managers, the bureaucracy, and the central bank are riddled with corruption because cheap loans get turned around into the black market, into roll-overs of these loans at higher interest rates, into dollars, into capital flight, and it's exactly these people that reformers have been fighting against, an absolutely corrupt and bankrupt system that these people ran up until a few years ago, and now they're back to run it again, because after all this is the return of the old group.

MR. MacNeil: You called it incoherence and pain. The, the election in December seemed to be punishing policies or the results of policies that made things extremely painful for the ordinary, ordinary Russians. And there was a lot of talk, including talk by Vice President Gore, of, of somehow softening that impact. Is that what -- is that what Chernomyrdin and his new cabinet are going to do?

MR. SACHS: Well, let me say that Minister Fyodorov as he left office yesterday issued a very unhappy statement about the comments here by Strobe Talbott and others about less shock, more therapy. He said, what sort of shock therapy is it if inflation runs at 20 percent a month? What sort of shock therapy is it if the whole nation had just five bankruptcies during the year, if the official unemployment is 1 percent of the labor force? There wasn't shock therapy. There was incoherence. A year ago, the administration confronted the question of whether to help support the social safety net. And thisadministration a year ago when there were reformers in government said, no, and they said no very explicitly, and they even explained it, that it would be bad politics in Washington to be giving help for the Russian social safety net when we have such obvious and real social problems here. They made that decision when the people are gone. I don't -- when the reformers were there -- I don't know what they're going to do with the reformers gone. But the point I'm making is that the idea that there is going to be a nice but coherent and more cautious, slow reform is, is absolutely putting it in a very peculiar way. What there's going to be is a huge amount of printing of money most likely, and all of the instability that results from that, and no faster recovery and no more production, just more incoherence. To get real recovery requires real stabilization as we've seen in a few countries in Eastern Europe and in the Baltic states.

MR. MacNeil: Excuse me. Padma Desai, do you see some good sign that the system is reacting to what were clearly very unhappy voters in the December election?

MS. DESAI: I think the main issue here is that any policy maker, any cabinet, any government has to work out a reform package, which is, which is feasible, which is politically, economically, and socially feasible.

MR. MacNeil: And which can be endorsed by this parliament.

MS. DESAI: This can be endorsed by this parliament. Now, shock therapy was tried for six to eight months. It was by the very nature of the situation not going to work, and it's not going to work now. 5 percent inflation rate per month is not going to work now. The, the point which Prof. Sachs made, that he has never recommended huge amounts of aid in also, in my view, not correct, because as far back as 1991 suggested that the West G-7 should be $30 billion worth of aid to Russia for five years.

MR. SACHS: I've always recommended, Robin --

MR. MacNeil: He was, but he said they didn't pay it. Isn't that your point, that the West didn't pay it?

MS. DESAI: But that's not what he suggested. He suggested that aid package which was a megabuck $150 billion worth of aid package. But the question now is fast rate of inflation or slow rate of inflation. That is the question. And I also believe that monetary restraint should be employed in order to tackle the current monetary situation in India -- in Russia. But the whole problem is what is the rate at which inflation can be removed from the economy, and in my view, the slow rates of monthly inflation that the prime minister has given out seem to be to be feasible, and the G-7 and IMF should look at them carefully.

MR. MacNeil: Mr. Legvold, as we come to the end of this, does whatever you call these changes, slowing reform or whatever, does it make Russia because of the parliamentary situation a more stable and a safer friend and less volatile friend of the United States, how are reform and emerging democracy connected here now do you think?

MR. LEGVOLD: My own view is that in the coming weeks there is likely to be a more stable political environment in Moscow, first because there's likely to be more consensus within the Russian government, the executive, and secondly, because that executive is likely to work more easily, especially with the upper chamber of the new parliament, but even with the lower chamber, the state duma, because they are more on the same wave length. But at the same time, I agree with Jeffrey. I think there is going to be a lot of confusion in the economic sphere. I think it is likely that we'll see a rapidincrease in inflation. Fyodorov, when he left, said something like 30 percent again by April, which means they're beginning to edge toward hyperinflation. I think there's going to be a lot of confusion in other areas as well, pressure on privatization. The Communist Party is very much focused on that issue and attempting to control it or roll it back at a critical stage, because there's much more to be done in this sphere. And the same thing is true in other parts of the economy, so I think we've got a country right now that is politically more stable for the time being but that is creating an increased economic difficulty for itself, while at the same time its foreign policy is moving in a direction that is more nationalistic and in some ways more troublesome for us, so that by the summer or the fall, I think we're going to have problems with Russia.

MR. MacNeil: Well, Mr. Legvold, Mr. Sachs, Mr. Drobkov, and Padma Desai, thank you. Jim.

MR. LEHRER: Still to come on the NewsHour tonight, in harm's way of nature and our Friday night political analysis. UPDATE - SHAKEN FAITH

MR. LEHRER: Next, an update on the California earthquake. An estimated 20,000 people have been left homeless in the Los Angeles area. Spencer Michels has the story of two homeless families who are struggling to put their lives back together.

MR. MICHELS: An early morning campfire and another helping of eggs for the Martinez family. The food and fire don't relieve the tension and fear in the wake of Monday's quake. As the weather turns colder, up to 14,000 Angelenos continue to camp out in parks. Among them is the family of 30-year-old Carlos Martinez, an immigrant from Mexico who came to Los Angeles 13 years ago looking for a better life. When the quake hit, Martinez, his wife, Ruth, and their two young children were in their apartment in Northridge. Fear of the building coming down on their heads caused them and several other family members to seek the safety of nearby Balboa Park.

MR. MICHELS: Why are you and your family out here camping? There are shelters are available, Red Cross.

CARLOS MARTINEZ: Well, because -- I'm here because I think here is better, you know. It's safer here, because I have brothers, they live in buildings, apartments, and I don't want to go there, because it's dangerous there, and I think it's better to be here. Everybody, you know, at nighttime we go in the cars, and everybody sleep, you know. We wake up every 20 minutes, but --

MR. MICHELS: Ruth Martinez, a native of El Salvador, was traumatized by the quake, and like millions of residents here feared most for her children.

RUTH MARTINEZ: The thing I am feeling right now is very, very scared and terrified. I'm very scared for my kids and myself. The kids are terrorized. They don't want to go near the building for anything.

MR. MICHELS: Some family members head out to their apartments to pick up remaining goods. That's enough to upset one of the children staying behind who fears for her mother's safety.

CHILD: [crying] Mommy!

MR. MICHELS: Carlos Martinez and the other residents here ignore "keep out" signs scrawled by the landlord. The Balboa Garden Apartments, with 70 units, appears to be a near total loss. As the family enters the building, one woman stops to cross herself. Although city inspectors have yet to show up, this once charming complex is obviously unsafe and uninhabitable. Martinez loved the place where he paid $650 a month rent, but now it brings back terrible memories.

CARLOS MARTINEZ: Everything come down, everything come down, and all thewindows are broken, and my wife, she got like crazy, and she wouldn't let me do anything, because she guards me and say, "My kids, my kid!" She won't let me go.

MR. MICHELS: You weren't scared?

CARLOS MARTINEZ: I'm scared, you know, but I tried to -- I can't explain to you, but I tried to relax a little bit and think what I had to do, because that's hard, really hard.

MR. MICHELS: In a near frenzy, Martinez and his relatives salvage what they can, still worried that an aftershock could hurt or even kill them.

CARLOS MARTINEZ: We came yesterday here and we was in the apartment when it started again, and my brother jumped from the second floor down, and I run for the steps, you know, but I told my brother, don't do that, come with me. And everybody is real scared.

MR. MICHELS: The earthquake has forced Martinez to reconsider whether he wants to remain here.

CARLOS MARTINEZ: Well, you know, like everybody, we hear about United States and we think, you know, it's better life here, and we try, we came here to try it, but now I think to go back to my country as soon as possible.

MR. MICHELS: Nearby, in Northridge, most of the residents of this neighborhood of residential homes sustained some damage, but much less than most of the larger buildings like the Martinez complex. Many residents who lived in tents outside their homes are starting to return indoors. While the quake happened early Monday morning, some people are only now finding out their homes have been damaged. This couple returned from South America astounded to find the stucco canopy by their pool had collapsed. At the nearby home of David and Alberta Bellasario -- he's in the entertainment business -- she's in insurance -- damage was light.

DAVID BELLASARIO: Right after the quake, I did a lot of running around. I had to run outside and turn the gas off because the water heater went -- I was afraid it ripped the line with it. I smelled something really strange which ended up being a combination of creme de menthe and teriyaki sauce, and I -- as soon as everything settled down for a second -- as soon as I had the water off, I had the gas off, we didn't have -- we were sitting still for a second - - I reached and got the camera and just started walking around and taping things, because I wanted to see what the damage was like. Oh, what a night.

CLOYD STEPHENS, Insurance Adjustor: It looks like what you've got here some plaster, some paint, some chimney.

MR. MICHELS: Four days later an adjustor for Farmer's Insurance Company arrived, fresh in from Texas. The Bellasarios have earthquake insurance, but the adjustor must determine if there's enough damage to meet the deductible.

MR. MICHELS: So what's their deductible?

CLOYD STEPHENS: Their deductible should be 10 percent --

MR. MICHELS: Of?

CLOYD STEPHENS: Of the policy.

MR. MICHELS: So they got a $113,000 policy, right?

CLOYD STEPHENS: Yes.

MR. MICHELS: So they have to have damage --

CLOYD STEPHENS: Above that for me to pay 'em.

MR. MICHELS: So above about $11,000 damage?

CLOYD STEPHENS: Right. If they've got $11,000 deductible, and my estimate comes to $12,000, I give 'em $1,000.

MR. MICHELS: And if it comes to $10,000, you don't give 'em anything?

CLOYD STEPHENS: I'm sorry.

ALBERTA BELLASARIO: What I'm concerned about is because of the type of coverage but when I buy insurance it's really for catastrophe. If the house were leveled, I'd have a new house. If it's minor, that's where you get loans and you get things, you're going to manage. You know, again, if it's not structurally unsafe, then I'm not worried about it. Over time we'll fix it. And as long as we're fine, the rest is irrelevant.

MR. MICHELS: Carlos Martinez doesn't have insurance worries but money, especially his $700 security deposit at the Balboa Garden Apartments, is vital to him.

MR. MICHELS: Are you worried about your security deposit?

CARLOS MARTINEZ: Yes, because, you know, I need money now, especially now I need money, you know. The owner says he don't have insurance for this building. He don't have insurance, or he don't want nobody here. Everybody have to go out, but I think, you know, they lie, because he have to have insurance.

MR. MICHELS: The owner of the apartments and his manager know residents are angry at them, but they say their plight in this disaster is serious as well. Owner Bob Tamkin explains that security deposits went to help pay off the mortgage because low rents and vacancies have made the building lose money.

BOB TAMKIN, Apartment House Owner: We will do whatever we can to get him his security deposit back, but it's going to take a little bit of time. It's not something that can be done overnight.

MR. MICHELS: Why is that?

BOB TAMKIN: Well, first of all, we've got to put our -- we don't even know what we're doing, as the owners. We don't know if we've even got an investment left worth keeping.

MR. MICHELS: Tamkin carried no earthquake insurance on his building. It cost too much, he told us. So the earthquake, coupled with the declining value of Los Angeles real estate in general, has made his apartment building virtually worthless.

BOB TAMKIN: 8501 Balboa is worth right now about three, four hundred thousand dollars. I've got a loan of 2 million right now. What would you do if you had an asset of $500,000 and had a loan of $2 million?

MR. MICHELS: You're telling me the easiest thing to do is to walk away from this?

BOB TAMKIN: If I can't get the lender to cooperate, they'll force me into bankruptcy. They'll force the partnership into bankruptcy, I should say. There's nothing else that can be done.

MR. MICHELS: Back at Balboa Park, Martinez resumed the struggle to keep his family housed and fed. He waited patiently for free food being distributed by an Hispanic minister. Across the park, several thousand earthquake victims lined up hoping to get some help from FEMA, the Federal Emergency Management Agency. This was one of eleven centers, and anxious victims, some of whom waited for hours, became unruly, but an increased police presence calmed a volatile situation.

WOMAN: If you call the toll free number, they put 200 new operators on today, if you call the toll free number, they will send you all the applications. It's the same thing that's going to happen when you go in there.

MR. MICHELS: Ruth Martinez, who works in an electronics factory, was among those to queue up, first for FEMA, where she found out it will be weeks before she can even apply for government help.

RUTH MARTINEZ: [speaking through interpreter] Yes, I went there.

MR. MICHELS: And what happened?

RUTH MARTINEZ: [speaking through interpreter] They've given me an appointment for the 2nd of February.

MR. MICHELS: February? So what do you think?

RUTH MARTINEZ: [speaking through interpreter] In the meantime, I'm going to be in the street, all of these people.

MR. MICHELS: No one in the Martinez family was hurt in the quake. For Ruth Martinez, the warm daytime weather and the good health of her family have not softened the blow.

RUTH MARTINEZ: [speaking through interpreter] It isn't anything like camping. We've beensuffering, and we feel very scared, very cold at night, and it's not a comfortable situation at all.

MR. MICHELS: With rain predicted for the weekend, Red Cross workers visited the Martinez family and others trying to get them out of the park and into shelters. The earthquake and fear it has engendered have forced people like the Martinezes to reevaluate their lives and their priorities. The natural disaster has made them realize how vulnerable they are, not just to Mother Nature, but to the shaky economic climate here as well. FOCUS - POLITICAL WRAP

MR. LEHRER: Finally tonight, some end-of-the-week political analysis by Shields plus two. Syndicated Columnist Mark Shields, plus Paul Gigot, of the Wall Street Journal, and Democratic political consultant Ann Lewis. Mark, first on the Whitewater special counsel appointment, what do you think of Attorney General Reno's selection of Robert Fiske?

MR. SHIELDS: Good appointment. I think Jim Leach, the ranking Republican on the House Banking Currency Committee, the man who's probably been as responsible for anybody as making this case, the man, himself, of enormous integrity, said that it was an excellent, a quality appointment, a man of appropriate background and integrity. And I think he's probably right.

MR. LEHRER: They say he's a Republican, Paul, but some people have questioned whether or not he is a real Republican. What's, what's your skinny on that?

MR. GIGOT: Well, he's a sort of Bush Republican, I guess you could say. He's -- he's --

MR. LEHRER: I'm not touching that one.

MR. GIGOT: He's -- the Bush from Connecticut -- he's -- he got in a scrap -- back in the Bush years -- he was nominated to be the deputy attorney general and some conservatives in the Senate had objected to the way in which he had handled some judicial nominations when he was on the American Bar Association Committee. And, in fact, he had to withdraw his name. So --

MR. LEHRER: What did he, in fact, do -- do you know? What is it that he did that upset the conservatives?

MR. GIGOT: Well, he hadn't been, I think, strong enough, they said, on behalf of -- argued strongly enough on behalf of Robert Bork, who got a middling rating from the '88 Committee.

MR. SHIELDS: Committal but not --

MR. GIGOT: That's right. Now, I was interested. I read the New York Times editorial today, and they were a little bit cautious on Mr. Fiske, and I think interestingly so. They said he had represented Clark Clifford who in the BCCI case, kind of a pillar of the Democratic establishment, and I think that if the goal here is to kind of clear the table, pick somebody who you're really going to trust completely, you might want to have gone to an outsider altogether. And so the Times said, and I think rightly so, we're going to have to watch carefully to make sure that Mr. Fiske, in fact, is independent.

MR. LEHRER: Ann, is the issue from a Democratic point of view, and I would imagine from a White House point of view, is, let's say Mr. Fiske concludes that there was, in fact, either illegality or impropriety in the Whitewater case, does he have the credibility to make that stand?

MS. LEWIS: You're exactly right. I said there was three criteria I thought that the Independent Counsel had to reach. The first was he had to have stature, both personal and professional stature, so that when he made the decision, people would accept it. The second was I think it was important that he be Republican. Now, I don't know what it means to be a real Republican and then be told, footnote, it's a Bush Republican. I think that's still a Republican, at least in '92, as I understood it, that was a Republican. He had to be -- it was best if he were a Republican just for this reason. And here's a guy who got appointed not by one but by two Republican Presidents. He was appointed to U.S. Attorney by Ford. Then it was George Bush who tried to appoint him. And I wonder, talking about clearing the table, he had actually stepped down from the Bar Association Committee on Judges before Robert Bork was nominated. This anger against him on behalf of a very small number of very right wing Republican Senators, not to do with the fact that they felt the Bar Association Committee that Robert Fiske chaired had not been sufficiently a cheerleader for some judges who they rated as mixed, less than well qualified, but the third issue I think is not only if he, again, sort of has the stature, is a real Republican, but also, again, has law enforcement worked and was prepared to do it? That turns out to be a very small group of people. I think this is a superb choice.

MR. LEHRER: But the question, of course, is the other side of the coin is let's say that he concludes that there's absolutely nothing wrong here, that the President didn't do anything, Mrs. Clinton didn't do anything. There was no justification for any kind of further action. Is that going to be believed?

MR. SHIELDS: Well, we just had an historic moment here. We've had the Wall Street Journal praise the New York Times editorially, and I don't think that should go unnoticed because the reality implicit in that criticism is that somehow we needed somebody who was pristine, who was removed.

MR. LEHRER: Who are those people?

MR. SHIELDS: This is a man, this is a man, Mr. Fiske, who prosecuted Tony Scotto. Tony Scotto, for listeners outside of the New York area, was one of the toughest, meanest, most vicious longshoreman leaders in, in probably in -- the world's known reserve of viciousness was depleted when Tony Scotto was prosecuted by Fiske. Fiske did it himself. That's where he met Louie Freeh, then an FBI agent, now the director of the FBI. I mean, this is a guy who's done real work. He's done heavy lifting. He hasn't just footnoted articles and done opsits and ibids. He's really written the thing, and he's done it, himself, and he's put himself on the line. I think if he comes back and says Bill Clinton and Hillary Clinton, there's nothing there, I think he's going to be believed.

MR. LEHRER: Do you agree with that, Paul?

MR. GIGOT: I think a lot will depend on how he conducts this investigation, how thorough it is, how quickly, and does he interview the right people? I mean, does he really do a thorough job? That'll matter, but to get to Mark's point, he has a great resume as a crime buster, but there is a great deal of cynicism out in America about Washington and the establishment and how it takes care of its own. And that's what this is in a way investigating, this whole thing is about, it's Whitewater. It's the relationship between politics and business, between political insiders, certainly in Little Rock, but now they've come to Washington. And I think that that's what a lot of people are going to be watching to make sure that Mr. Fiske has the courage to, to look at very closely.

MR. LEHRER: He's part of the very group -- the big group at least that he's investigating.

MR. GIGOT: That's right.

MR. LEHRER: Yeah. All right. Let's move to the Bobby Ray Inman withdrawal. Ann, what do you make of that? Everybody else has had something to say about it, to think about it. What do you say and thing about it?

MS. LEWIS: I can't stopping, how could we all have been so wrong at an appointment that looked so good, looked almost destined when it was made. What I thought at the time though was sort of one hour after I heard that Bobby Ray Inman had withdrawn, and I was shocked, and I thought, maybe some good will come of this because he's raising questions about the level of debate, this harsh, unremitting, partisan attack. I think he's raising some questions about the confirmation process which has turned into a kind of trench warfare. It sort of grinds people down, and those are questions that deserve to be asked, however, by the end of the day, because of his own performance, I think he had eclipsed the substantive questions he raised.

MR. LEHRER: He went too far in his attacks, you mean?

MS. LEWIS: Isn't there an irony that Bobby Ray Inman who got on complaining about what columnists and print press were doing to him, what people now saw was his own performance on television. I think it was an example of how technology has really transformed this process. Nothing that was written about him or could have been written about him I think will turn out to be as scathing as the view people got of Bobby Ray Inman for himself.

MR. LEHRER: But is that view only held in Washington? There's evidence that while he's been roundly criticized in Washington, that the people who called -- somebody said this the other night, in fact -- people were calling on the talk shows and radio -- the radio call-in shows, said, hey, you know, he was right, and it's those awful people in Washington.

MR. SHIELDS: I think the American public is a lot more willing than either Washington or the Washington press corps, in particular, to accept the criticisms that Bobby Ray Inman might have made, and I think there has been a marked decline in, in the level of our debate. When a leader of the American insurance industry says he's not going to be castrated by Hillary Clinton or one of the leaders of the Doctors Association says we couldn't get -- we wanted to get the President to speak to us but she couldn't make it, I mean, that says something about, I think, the level of debate from groups that historically have been sort of institutionally responsible and respectable. But Bobby Ray Inman took 30 years of distinguished public service, of loyalty and really selfless service to his country, and in one hour unraveled it. I mean, having made the charge of McCarthyism against his critics, then just dropped these sort of stink bombs in the room as he left with no supporting evidence, and I -- I just kind of contrast him with Lani Guinier. I mean, Lani Guinier wanted to make the fight. I mean, there was criticism of her in the press and she said, hey, wait a minute, I want to make the fight, and, and he didn't. I mean, one wanted the job and the other didn't, and that's part of the price of admission.

MR. LEHRER: Paul.

MR. GIGOT: I think he definitely had a good point about the process, how it's deteriorated, but he wasn't good evidence to prove the point. He really got relatively soft treatment, in my view. He was received by most of us as a pretty good choice, somebody a lot of people, particularly in the press corps -- he was a master at dealing with reporters, and it's ironic that somebody who dealt so well with so many reporters behind the scenes should let one or two of them get to him, particularly when they're just columnists. I mean, Mark's a lot more powerful columnist than I am, but I don't have anybody ever say they're going to resign because I've written tough about them. And I don't think that -- and it was just a puzzling performance for that reason. I think the President is very lucky, frankly, that in the end he did step down.

MS. LEWIS: I wonder now that we have discussed the messenger and I think if we could get back to the message, which is, again, what has happened to debate? It's as if there is a rule of thumb in Washington now that anything worth seeing is worth seeing meanly. If you're going to have an argument, if you have a point, yes, Mark put it right. And the second is, what is happening to the confirmation process, which drags on and drags on? We need better people, and we ought not have a process that is a disincentive for people to serve. I would hope that we can get back to that.

MR. SHIELDS: Well, the President, the President's really -- I mean, this has been a tough one, because the President -- this was seen -- Paul is absolutely right -- as a deft choice to a --

MR. LEHRER: Great selection.

MR. SHIELDS: -- to bail him out of what it is perceived to be a difficult problem. Now in that --

MR. LEHRER: Meaning the national security --

MR. SHIELDS: The national security question and the doubts about that, and the problems of the Pentagon downsizing morale and all the rest. Now, Bill Clinton is beginning the second year of his presidency the way he began the first year, cabinet appointments, public problems over cabinet appointments, and, and tonight they ought to just decide that Les Aspin stays, Les Aspin stays until --

MR. LEHRER: Is that likely?

MR. SHIELDS: Well, I mean, I'll tell you what -- I'll tell you why it makes sense. You say Les Aspin stays until the 8th of November, election day, he's agreed to stay on, he's been confirmed, he looks pretty good right now, and you stop all this hemorrhaging of each person you even talk to on the phone then leaking it to the press that he -- he has turned it down. Sam Nunn, Warren Rudman, former Senator from New Hampshire, I mean, that's a big help to Bill Clinton, isn't it? That would make --

MR. GIGOT: I think it points out one problem that Bill Clinton has, and remember, he didn't know Bobby Inman very well.

MR. SHIELDS: That's true.

MR. GIGOT: And he's had a hard time getting a choice, because I think that this demonstrates that the Democrats really don't have a terrific bench when it comes to national security and foreign policy. They've been out of the executive branch for 12 years, and this President, in particular, needs somebody with gravidas, needs somebody to give him some protective cover on the right, and there just aren't a lot of those out there. So he goes to Bob Inman who he doesn't know. He's been calling on Warren Rudman.

MR. LEHRER: Who admits he voted for the other guy in the election.

MR. GIGOT: Right, and says he needs to have a comfort level, and somehow he should have been fired then, if you ask me, so I think this is a big problem here. There aren't a lot of people out there.

MR. SHIELDS: You're certainly right.

MR. LEHRER: And this happens, Mark, as the President marks this first year in office, as you just said, and he marks, I mean, with the polls looking better than, than one would have expected at this stage of the game after all the problems he's had. What do you think of his first year?

MR. SHIELDS: I think that he is, obviously, if you divide it into quarters like they do corporate years, his last quarter's been an awfully good one. This is somebody who hit a snag, and probably was off to the worst start of any elected President in my lifetime. I mean, certainly the numbers reflected it. They stumbled badly in the spring. He grabbed -- he got his footing -- he got traction by the summer. He got his package through. He took tough stands, and by the last quarter I really think that NAFTA in a strange way was the key in, in forming the opinion. I say that as someone who is a critic of NAFTA and opposed it. The party and the nation was basically -- the nation was split on NAFTA the day before the vote, the eve of the vote. One week later, Americans were two to one in favor of NAFTA, which is a great tribute to the Americans because they believe in the Democratic process, and it's a testimony to that, but it also took Bill Clinton from a guy who was getting A for effort into somebody who could be effective and take on a couple of tough constituencies, his own Democratic Party and organized labor.

MR. LEHRER: First year, Ann?

MS. LEWIS: I think he had a good year, and he learned a lot. And maybe we all watched him learn, which was interesting, but he's a smart guy, and he's an able student. Bill Clinton came into office loving every aspect of the presidency. He liked having economic summits. He likes giving speeches and talking about large policy direction, and he liked working on the details of legislation. What he has now learned is that what he can do best for the direction, you know, giving the large speeches. I would say the President is better at steering the nation rather than rowing. And the result has been, again, the public likes what they see. They believe that they are now getting what they thought they voted for, which is this smart guy who works hard, who may stumble once or twice along the way. He's not necessarily polished, but he has their interests at heart. And as the economic news gets better, Bill Clinton's ratings rise, that's not a contest.

MR. LEHRER: Paul.

MR. GIGOT: I agree with Mark, and like Joe Montana, he does some of his best work in the fourth quarter. He -- there's no question about it.

MR. LEHRER: When they're coming after him.

MR. GIGOT: When they're coming after him. When NAFTA -- NAFTA, I think, was decisive because it showed he could lead, it showed he could take on a constituency within his own party, he could break a gridlock not only on the Republican side but on the Democratic side, and then there's this economic move, I mean, is helping him a lot. I don't think a lot of economists give him credit. I think Woody Allen said 90 percent of life is just showing up. When you show up in politics, the economy roars, you get the credit no matter what happens, and that's carrying him right now.

MR. LEHRER: Yeah. And, of course, he's got State of the Union coming next week, and Ann's point is that, that if he has, if that is right, that he has learned that it's, it's -- what was your term that --

MS. LEWIS: I said the job of the President is best -- he ought to steer the boat, not row it.

MR. LEHRER: Steer the boat, yeah. This is a great opportunity, is it not?

MR. GIGOT: It is, and I think it's actually very important for him, because if you look in the poll numbers, his personal popularity is high, but the popularity for his health care plan isn't that high. And it's been falling, in fact, and this is the decisive battle of this year. And I think you'll see him try to create a crisis atmosphere again to help pass health care.

MR. LEHRER: Okay, Paul, Ann, Mark, thank you all three very much. RECAP

MR. MacNeil: Again, the main stories of this Friday, President Clinton said he had some concerns about Boris Yeltsin's new and more conservative cabinet but he renewed his offer to help ease the shock of economic reforms in Russia. Thousands of California earthquake victims besieged federal aid centers for a second day. Officials struggled to keep up with the demand for shelter and other emergency aid. Good night, Jim.

MR. LEHRER: Good night, Robin. We'll see you on Monday night. Have a nice, warm weekend. I'm Jim Lehrer. Thank you, and good night.