The MacNeil/Lehrer NewsHour

MR. MacNeil: Good evening. Leading the news this Monday, Soviet Pres. Gorbachev said he would not use force in Lithuania unless lives are threatened, the White House said U.S.-Soviet relations could be damaged by further Soviet actions in the breakaway republic, and the U.S. savings & loan industry lost more than $19 billion last year. We'll have details in our News Summary in a moment. Jim.

MR. LEHRER: After the News Summary, the continuing agonies of the savings & loans [FOCUS - SAVINGS & LOSS] with chief regulator William Seidman, former government economist James Barth and Congressmen Jim Leach and Bruce Vento. Then Lee Hochberg reports from Seattle [FOCUS - CONTAMINATED CARGO?] about trucks that haul toxic material one way, food the other, and we close with some perspective on the social club fire [FOCUS - FATAL FIRE] in New York City from daily news columnist Bob Herbert and researcher Juan Flores.NEWS SUMMARY

MR. MacNeil: Soviet Pres. Gorbachev said today he would not use force against Lithuania unless lives were threatened. That report came from Sen. Ted Kennedy after he met Gorbachev in Moscow for 90 minutes. It was Gorbachev's first public comment on the situation since Thursday. Sen. Kennedy said Mr. Gorbachev did not say whether he saw an imminent threat to lives in Lithuania. In Lithuania, local officials met with Soviet military officers today to talk about the army's occupation of three Communist Party buildings in the capital Vilnius. At the same time, the Soviets tried to organize an anti-independence rally there. We have a report from Vilnius by Robert Moore of Independent Television News.

MR. MOORE: The Red Army continued to wage its war of nerves in Lithuania today. A military helicopter scattered leaflets over the capital Vilnius, calling for an anti-independence rally tomorrow and warning that nationalists were pushing the republic into an abyss of uncertainty. Soldiers continued to occupy Communist Party buildings, Moscow underlining its claim to ownership with a gun. And tanks continued to stand at the ready at military bases in and around the town. More weapons surrendered by Lithuanians were displayed. They've been told to hand in their arms by Wednesday. But as Soviet officers left a first round of meetings with Lithuanian leaders, the tension did begin to ease. Lithuania's Deputy Prime Minister Osalas caused alarm last night by warning of imminent military action. Today he announced a breakthrough. "We have passed the most dangerous period," he said. "The conflict will be de-escalating." Others agreed.

BRONIUS KUZMICKAS, Vice President, Lithuania: Today we are more calm because we are accustomed a little to such pressure. But it seems to me that the general situation has changed for better.

MR. MOORE: And as parliament continued to debate the shape of the new independent government, the only soldiers in sight were deserters, young Lithuanians who'd fled their regiment in Leningrad and traveled here for shelter. This evening Pres. Vitalis Landsbergis again shrugged off Soviet pressure. "We're hardened people," he said. "We're not going down on our knees again." To underline that determination, armed Lithuanian Interior Ministry troops loyal to the new government were sent to the state television station. An official said they defended against criminals. And Deputy Premier Osalas was on the air there tonight attempting to further underline the government's authority, he declared tomorrow's anti-independence rally would be illegal.

MR. MacNeil: This evening a Lithuanian journalist reported that Soviet paratroopers occupied another Communist Party building, located about 200 miles outside the capital. In Washington this afternoon, White House spokesman Marlin Fitzwater warned that further actions by Moscow in Lithuania could be counterproductive to U.S.-Soviet relations. When asked whether the situation could threaten the Bush-Gorbachev summit scheduled for June, Fitzwater responded, "We're prepared to have the summit at this time. We're still hopeful this can be resolved.". Jim.

MR. LEHRER: There was more bad news about savings & loans today. The government reported S&Ls lost $19.2 billion last year, the worst performance ever. Also today the House Banking Committee heard testimony about the failure of Centrust Savings & Loan in Florida. William Seidman, Chairman of the Resolution Trust Corporation, said the bailout of Centrust will cost more than $2 billion. He blamed the failure on risky investments by managers.

WILLIAM SEIDMAN, Federal Deposit Insurance Corporation: These people found a money machine in their basement and they thought money was free and they could print it and use it any way they wanted and there was nobody around to tell them that they couldn't. It was an outrage. And the American people I'm sure are very mad about it and I think they should be, because we simply let somebody have a credit card on the United States of America without any limits on it and let them spend it any way they wanted to.

MR. LEHRER: We will have Mr. Seidman and more on the savings & loan story right after this News Summary.

MR. MacNeil: In New York, a suspect was arraigned this morning for setting fire to a Bronx social club. Eighty-seven people were killed in the pre-dawn blaze on Sunday. Thirty-six year old Julio Gonzales was charged with multiple counts of arson and murder. Police said he'd been ejected from the club after a fight. He allegedly returned with gasoline and set the fire. We'll have more on that story later in the program. FBI agents today arrested the suspected head of New England's largest organized crime family. Raymond Patriarca, Jr., the reputed boss of the Patriarca crime family was taken into custody early this morning. His arrest was part of a three state round-up of alleged Mafia members. A total of 21 people in Rhode Island, Connecticut, and Massachusetts, were indicted on 113 criminal counts. They included murder, kidnapping, drug trafficking and other offenses.

MR. LEHRER: The dangers of dieting got a congressional hearing today. Congressman Ron Widen, Democrat of Oregon, said Americans spend more than $30 billion a year on diet products and the government is not doing enough to protect them. Federal Trade Commission Chairman Janet Steiger said her agency would begin looking into liquid diets and possible fraud at diet clinics.

JANET STEIGER, Federal Trade Commission: Because the liquid diet plans and other hospital-based plans are described as medically supervised, some consumers may view them as safer and more effective than other weight loss products or plans. We are aware, however, of the concerns that these liquid diet plans should be available only to persons who are severely overweight and require strict and frequent medical supervision by trained medical personnel.

MR. LEHRER: The U.S. Supreme Court today agreed to hear the so- called "fetal protection" case. The issueis whether a company can bar women of child bearing age from jobs which could damage an unborn fetus. The case was brought by the United Auto Workers against a Milwaukee company which makes automobile batteries.

MR. MacNeil: East Germany today dropped treason charges against its former Communist leader, Eric Honecker, and three of his colleagues. The chief prosecutor's office said there wasn't enough evidence against them. He said the 77 year old Honecker is still being investigated on charges of embezzling state funds. Honecker was forced out last fall after 17 years in power. His downfall helped lead to the end of Communist rule in East Germany. Communist rule also seems to have come to an end in Hungary. That nation held its first free elections in more than 40 years yesterday. Early returns show several parties opposed to the Communists now called socialists winning a majority of the seats in parliament.

MR. LEHRER: Police opened fire on anti-apartheid demonstrators in South Africa today. Eight people were killed, hundreds injured at two black townships near Johannesburg. Police used shotguns and tear gas to break up a crowd of several thousand protesting high rents and segregated facilities. The police said the protesters had stoned a police station and had set fire to a municipal building. And that's it for the News Summary tonight. Now it's on to the savings & loan cleanup, a report on dirty trucks, and an update on the social club fire in New York City. FOCUS - SAVINGS & LOSS

MR. LEHRER: There was more bad news today about the savings and loan industry. It lost 19.2 billion dollars last year. The third straight year of record loses. More of the same about the same and it is our lead story once again tonight. The news comes amid continuing concern about the pace and the cost of the federal government bail out plan that is supposed to eventually put the industry right and solvent again. We look at the loses and the at these concerns with William Seidman the man in charge of the cleanup, head of the Resolution Trust Corporation or RTC and Chairman of the Federal Deposit Insurance Corporation. James Barth the Government's Chief Economist on the S&L issue from 1987 to 1989. He is currently a Professor of Finance at Auburn University in Alabama and joins us from a studio in Auburn. Congressman Bruce Vento, Democrat of Minnesota, Head of the RTC Task force on the House Banking Committee and Congressman Jim Leach, Republican of Iowa and also a member of the House Banking Committee. Mr. Seidman to you first 19.2 billion dollar loss last year. Why was it so high?

MR. SEIDMAN: Well things went wrong for the industry. Property values went down, interest rates went up and the regulators cracked down and picked up a lot of loses that were really attributable to other years. They had a bad year.

MR. LEHRER: How many percentage wise, how many of the savings and loan institutions in the United States were effected by this loss? In other words how many lost money?

MR. SEIDMAN: Well about 30 percent account for the loses but 70 percent were profitable,

MR. LEHRER: Out of this 30 percent how many of these institutions did you already know about and were working on either one way or another either to close them down or to bail them out?

MR. SEIDMAN: Well we knew about almost all of them. I mean it has always been the case the loses have been by a smaller number of the institutions involved and we knew that they were in trouble.

MR. LEHRER: The 19.2 billion dollars who actually lost that? Who is out 19.2 billion dollars Mr.Seidman?

MR. SEIDMAN: Well those institutions are out. It means that their stock holders are out and if they are insolvent, they don't have enough money to pay the depositors then the tax payers are out.

MR. LEHRER: Well as we sit here now how much of that 19.2 is the tax payers going to have to pick up?

MR. SEIDMAN: I can't tell you that. It depends on how many of those institutions will fail but certainly a percentage of them will go to the tax payers.

MR. LEHRER: What is your view of how well you are doing on the clean up on the bailout? On getting this thing squared away?

MR. SEIDMAN: Well our view is that it is not as bad as most people have heard but it certainly could be better. This institution that started 7 months ago has taken over.

MR. LEHRER: You mean the Resolution Trust Corporation?

MR. SEIDMAN: Yes the RTC has taken over almost 400 institutions. It is the largest depository institution in the United States with 220 billion dollars in assets. It has liquidated 50 institutions. It has sold 30 billion in sales in the first 6 months. So it has been doing a lot but a lot more has to be done because it is such a huge problem.

MR. LEHRER: Explain to us lay men Mr. Seidman, you all have been in business for 6 months and before that there were efforts being made to kind of square this away. Why is the industry still losing 19.2 billion dollars a year? Make the connection for me.

MR. SEIDMAN: Well we haven't taken over all the institutions yet that are in trouble.

MR. LEHRER: So they are still out there losing money as we speak?

MR. SEIDMAN: That is correct.

MR. LEHRER: Losing our money?

MR. SEIDMAN: Yes and the ones that we have in the RTC are also losing money and will continue to do so until they can be liquidated and the property they have sold back to the private sector. So we are going to see a lot more of this.

MR. LEHRER: A lot more of this?

MR. SEIDMAN: Yes.

MR. LEHRER: There is no way for you tomorrow say okay let's do this, this , this to at least stop the loses on a temporary basis?

MR. SEIDMAN: There is no way to stop the loses on a temporary basis. Those loses are because these institutions made bad investments. Until those investments can be liquidated they will continue to produce loses. So those who are waiting for us or for anyone else to have a miracle that will clean all this up by the end of the year I am afraid are going to be disappointed.

MR. LEHRER: Mr.Barth would you be one of those disappointed if they can not clean up any quicker then they have been able to do so?

MR. BARTH: I sure would be. One should remember that in early 1988 people were asking the question does FSLIC have enough money and is FSLIC doing enough deals.

MR. LEHRER: Let's explain what FSLIC is.

MR. BARTH: That is the Federal Savings and Loan Insurance Corporation which was the predecessor to the RTC.

MR. LEHRER: Right.

MR. BARTH: And the Savings and Association Insurance Fund. People asked two questions in early 1988. One does FSLIC, have enough money and two is FSLIC doing enough deals. And here we are in march 1990 and the same two questions are being asked. Does RTC have enough money. Is RTC doing enough deals. We have changed the names but we have not changed the action.

MR. LEHRER: Now what is the answer?

MR. BARTH: The answer is that the RTC has to do many more deals.

MR. LEHRER: Now what do you mean a deal. You mean to go in to savings and loan A and take it over or bail it out and get on with it you mean?

MR. BARTH: What that means the RTC as Mr. Seidman correctly pointedout has to go into these institutions and close them down. It means liquidate the institutions, pay off the insured depositors or sell the institutions if there is people out there will to buy them.

MR. LEHRER: Is it your feeling Mr. Barth that Mr. Seidman and his people could be doing this much quicker than they are?

MR. BARTH: Unfortunately the only way to judge the performance of the RTC is by the number of institutions that it closes. That is the number of institutions that it liquidates or sells. That is the only way to judge the performance and 50 institutions thus far is insufficient to say that the RTC has done a terrific job,

MR. LEHRER: Fifty out of how many?

MR. BARTH: Fifty out of four hundred and eighty five institutions. RTC has now according to the OFfice of Thrift Supervision today three hundred and sixty five institutions in conservatorship and the OTS, the Office of Thrift Supervision has targeted another 120 institutions to turn over to the RTC. THat is a 485 institutions beyond the 50 that have been dealt with so far.

MR. LEHRER: And that is not just good enough for you?

MR. BARTH: That is just not good enough. THe whole mission for the RTC is to do deals, to close down institutions. Fifty institutions out of 500 and we know that there are even more institutions that are going to have to be dealt with beyond the 500 institutions. That is not good enough unfortunately.

MR. LEHRER: Mr. Seidman do you have a defense, Sir.

MR. SEIDMAN: Well it is lovely to sit on a college campus and tell the group that is trying to handle the thing that they are not doing well enough. We appreciate the advise. We could do better.

MR. LEHRER: It doesn't sound to me like you do.

MR. SEIDMAN: We could do better and we will. We expect to do a 140 institutions by June 30th in addition to the 50.

MR. LEHRER: You still wouldn't be even half finished, right?

MR. SEIDMAN: That is correct but let me make one point clear. When we close down these institutions we do not slow down the loses. The loses are on bad assets. The ones they do not produce any income. Until those can be sold to the private sector the loses will continue.

MR. LEHRER: Let's explain that, I mean a savings and loan is holding a piece of property as collateral. The savings and loan collapses the government takes the property, it must dispose of it or it is, what ever it is 10 cents on the dollar or fifty cents on the dollar and until then you get nothing?

MR. SEIDMAN: Essentially we continue to pay interest to hold those assets and we don't get any income. It is misunderstood and a misunderstanding to say how many institutions have you handled. The real question is how many assets have you sold to the private sector.

MR. LEHRER: And what is the answer?

MR. SEIDMAN: The answer is that we sold about 30 billion in our first six months and we intend to increase that pace but it will take years to get them all sold.

MR. LEHRER: Years, how many years?

MR. SEIDMAN: Well I would hate to predict but I would say that if we could have all of this sold by the RTC Charter of seven years it would be a minor miracle.

MR. LEHRER: You said 30 billion have been sold thus far. How much do you think is there to be sold?

MR. SEIDMAN: Well now there is 220 billion overall and there will be I guess at least another 100 billion. Now some of these assets can be sold quite easily but others are very difficult to sell.

MR. LEHRER: Mr.Barth are you convinced?

MR. BARTH: Well I convinced that the number makes some sense. We are probably talking about 300 billion dollars or more in assets. Mr. Seidman is certainly correct in pointing that out and it does take time but one has to move more rapidly. That is the point. We lost essentially the entire year of 1989. That was the shame in changing names but not moving in a more rapid and timely way against the insolvent institutions.

MR. LEHRER: Alright let's bring the two Congressman in. Congressman Vento and Congressman Leach. Congressman Vento what do of the performance of the RTC in the clean up thus far?

REP. VENTO: Well I think that Bill Seidman and others are good professionals they have good intentions but their actions don't match the need here. We have a 190 billion dollars worth of assets that are sitting there. they are not getting better with age. We have a lot of institutions that are being passively managed. They ought to be put back in the private sector and actively become economic players.

MR. LEHRER: Passively managed by the Government?

REP. VENTO: By the conservators. Obviously they can not risk tax payers money. We need to attract private investment. 50 institutions since August. The Administration didn't hit the ground running. There are a lot of reasons for it and I don't think that Boll Seidman is one of them. I think they have an awkward, cumbersome structure, they are on the learning curve. They are trying to securities and cure some of their paper but the name of the game is as Chairman Seidman said selling the assets and we are not accomplishing that right now.

MR. LEHRER: What is the problem? If you could solve it what would you do?

REP. VENTO: The problem is that they need a lot of studies so people know what the value of the assets are. We have to standardize them. You have a lot of legal problems with the assets. There is a degree of uncertainty. And of course these assets are not marked to market. The actual value of them is probably somewhat less and there is also within the Administration a reluctance to sell these at a discount and face up to the total loss of the S&L bailout.

MR. LEHRER: When you say the Administration who are you talking about?

REP. VENTO: I am talking about the totality. I am talking about the President. I think that we are out here doing a high wire act and we are losing our concentration. And this issue has been pushed on the back burner. I think that Bill Seidman needs the kind of support and the strength of the President behind him in terms of dealing with this. We haven't had appointments made, we have a confusing Administrative structure where he is being interfered with.

MR. LEHRER: Who is?

REP. VENTO: Bill Seidman is and others.

MR. LEHRER: Who is interfering with them?

REP. VENTO: Well I think Treasury is to a certain extent. That is why Dan Carney who was President of the RTC resigned. I think there are other instances. I hope that is behind us now and we can move ahead and sell these non performing assets so we can stem the loses. We've got to bring the other institutions that are still in the marketplace. We have to stop the hemorrhaging of loss. We can not afford another year of 20 billion dollars in loss. The tax payers deserve action in this case and I will tell you that it is an unpleasant issue. It is an uncomfortable one.

MR. LEHRER: Why is it? Why is it uncomfortable?

REP. VENTO: Well because I think that it requires Congress and the Administration to face up to the types of loses inherent in these institutions.

MR. LEHRER: Nobody wants to talk about this many billions of dollars?

REP. VENTO: That is right this is not a popular issue. As a work product last year very few of us are getting rose petals in our paths.

MR. LEHRER: Is that right Congressman Leach no rose petals in your path in Iowa over this?

REP. LEACH: I have received very few.

MR. LEHRER: What is you view of what has been going on thus far. You have heard what the other gentlemen have said?

REP. LEACH: Well I think that they are both largely correct. There is just a slight difference here.

MR. LEHRER: There are three here.

REP. LEACH: I think the critic is pushing a little faster, Mr. Barth that is. But I think people have to understand Mr. Seidman has been asked to create an organization larger than Citicorp is less than a year and the pace has not been as fast as we like but you can waste a lot in speed. There is nothing easier to get rid of an asset but at a huge discount. Who is the loser the public. My sense is they have gone a little slow.

MR. LEHRER: You think that Seidman and his folks have called this right in other words the balancing of speed versus getting on with it?

REP. LEACH: I think it has been a little on the slow side but on the other hand it would have been a worse mistake to error on the fast side.

MR. LEHRER: What would have been the error there?

REP. LEACH: Well the error there is any one can sell any asset overnight but you might get a bid that is trivial and who is the loser it is the public. You can stop the loses overnight if you sell every thing over night but the dept of the loses in total will be far greater then if you take the time to make sure among other things that you get competitive bidders and that you bring the American people in to the process. But also what is at issue here is the institutional structure and quite frankly your Congress brought a Bill that was very cumbersome. I personally think that we have an embarrassing situation for Congress and a costly one for the tax payer.

MR. LEHRER: In what way? Spell that out please.

REP. LEACH: Well embarrassing for Congress. We have a court case right now that says we unconstitutionally designated a single individual to run the Thrift Supervision Agency and at the same time we recreated the same agency that failed. I mean, I think that it was nuts. I think that we should have moved over night.

MR. LEHRER: You are talking about the RTC?

REP. LEACH: No I am talking about the Office of Thrift Supervision.

MR. LEHRER: Right, right.

REP. LEACH: We should have turned that all over the Seidman, and the Comptroller of the currency.

MR. LEHRER: We are talking about you like you are not here. We will be back to you in a minute.

REP. VENTO: Let me just add that you can have the worst structure in the World but if you have good administrators they can do their job. So I don't think that it is all structure. The Administration got all it asked for in terms of structure. And clearly the confirmation issue which regards Wall is a problematic one but it hasn't been holding things up to this point.

REP. LEACH: Let me object to that. Right now the United States District Court has stopped the foreclosure of any thrifts by stopping a single thrift and we are losing 29 million dollars a day.

MR. LEHRER: That is the case in Chicago?

REP. LEACH: That is the case in Chicago. Of the 485 thrifts now insolvent or under government control and a 100 million here and a 100 million there adds up to real money but it also may add up to real scandal.

MR. LEHRER: Scandal?

REP. LEACH: Well scandal in the sense that the judgement of the United States Congress as well as some lack of effort of speed in terms of the Administration. The fact is that this is an enormous circumstance in which there are a lot of people complicities.

MR. LEHRER: Well let's go back to Mr. Seidman and Mr. Barth on Congressman Vento's point on the bureaucracy and people interfering with you. Mr. Seidman does the Congressman have that right?

MR. SEIDMAN: Well I think that he has it right. We had some start up problems there is no question about that.

MR. LEHRER: Bureaucratic problems?

MR. SEIDMAN: Bureaucratic problems. we did not have a smooth start. I am pleased to say that I think that has been worked out now and I think that the organization is in place to move faster. I don't disagree that we should have moved ahead faster and we would like to move ahead faster. I simply make the point that a lot has been done.

MR. LEHRER: He says the President, President Bush, is not really behind what you are doing enough?

MR. SEIDMAN: Well I hope he is. I don't know whether he is or not. I don't know as he said anything about it as far as I know. I do know that we are walking a very narrow lane between two big cassems. If we put this property on the market and totally depress the market by not doing it in a prudent way we will being a whole more institutions down banks as well as thrifts.

MR. LEHRER: Because you will knock the value of the property down.

MR. SEIDMAN: That is right.

MR. LEHRER: You buy that Mr. Barth?

MR. BARTH: I think that I should also point out when I talked about the delay in not doing enough deals and taking enough action against insolvent institutions there was also a lot of delay between January and August last year before RTC even came in to existence. But with respect to the sale of a large amount of assets I think that Mr. Seidman is absolutely correct that one does have to sell the assets in a prudent matter. One has to be somewhat cautious in not letting these assets over hang in the market place inducing people not to be too sure when the assets will come to the market place and exactly which assets are going to be put up for sale. There is that substantial uncertainty that one has to resolve as soon as possible.

MR. LEHRER: And that causes us many problems as going ahead and selling it?

MR. BARTH: It sure does. People out here in the market place not knowing exactly what assets are going to be put up for sale and when they are going to be put up for sale.

MR. LEHRER: Can you solve that Mr. Seidman?

MR. SEIDMAN: We will solve that. We are enroute. We have put up around 15 billion worth so far. We'll have another large amount by June 30th. We have to get control of the situation. We have to have systems that will make all these things marketable and that is what we are working on.

MR. LEHRER: So the people in Houston will know on certain days that this is the kinds of properties that will come up for sale over the next few weeks and the people in Little Rock or where ever they are?

MR. SEIDMAN: That is right and they will all be computerized so they can go right into our system and get a list of what assets they need.

MR. LEHRER: Congressman Vento why is it that nobody wants to talk about this?

REP. VENTO: Well I think that the reality is that.

MR. LEHRER: Nobody but us.

REP. VENTO: I think the reality of this is that it is going to cost at least 30 billion dollars or more than what we have appropriated and perhaps as high as a 162 billion and it is a very unpleasant topic. Making a decision in selling some of these assets. We have sold some of the liquid assets. We have not really sold the tough assets yet. And the fact is that when they start being sold we are going to demonstrate the depth and breath of this loss. I think that first stepping up to a problem now we have a Grand Canyon size hole to fill and it is a very unpleasant topic.

MR. LEHRER: Congressman Leach is there a blame problem here too that there is a kind of unwillingness or inability to look around and say look this is what caused this. These people responsible, those people responsible right down the line.

REP. LEACH: Well to some degree that is right and we have a little degree of partisanism. Democrats want to point out the problems in the Administration Republicans want to point out the reason for the problem in the first place.

MR. LEHRER: So the Democrats caused it?

REP. LEACH: Well I quite frankly think there is dual accountability or tri accountability. There is legislatures that wrote weak laws, you have state legislatures that probably complicated the situation and you have Republican Administrators that did a poor job.

MR. LEHRER: Well, Seidman, we ran in our News Summary before the discussion, you testified before the House, these gentlemen's committee today, that the situation in Florida, where the guy had essentially a credit card with the United States government and nobody was watching, nobody cared. How can that kind of thing have gone on?

WILLIAM SEIDMAN, Federal Deposit Insurance Corporation: Well, because people misunderstood what had happened, they thought the industry was deregulated when it clearly wasn't because of the use of the credit of the United States. There were not supervisors on board. When they asked for more supervisors, they were denied, and the Congress allowed the institutions to do about anything they wanted with the assets, so there's lots of blame to go around.

REP. VENTO: Well, I think the point is that there may have been deregulation, but no one deregulated the regulators. They were still there to do their job. Centar, in fact, was a resolution. This was a problem that was solved by then Chairman of the Federal Reserve Board Gray that approved this particular merger and this particular situation.

MR. LEHRER: The one in Florida, the one you were talking about today.

REP. VENTO: And I mean, you've got a situation, you're getting the blame game. You're getting regulators that didn't regulate, auditors that didn't audit, maybe some more, some Congressman stuck their nose in where they shouldn't in one or two institutions, but what about the other 700 that are failing?

MR. LEHRER: But Mr. Seidman, when you're finished, and eventually that day is going to come, is it --

MR. SEIDMAN: I hope so.

MR. LEHRER: Is it going to be clean? Is there going to be a healthy savings & loan industry in this country?

MR. SEIDMAN: I think it's too soon to tell how it's all going to work out because we don't know the full effect of this cleanup. I think there's a possibility that it will become a sound and separate industry, but there's also a possibility it will simply, the good parts will move into the banking system and there won't be a separate thrift system.

MR. LEHRER: What do you think, Mr. Barth?

MR. BARTH: I think that makes a great deal of sense, I can't disagree, but there are unfortunately, a lot of healthy but solvent institutions out there that we can't really see. They're being done a disservice by seeing all these unhealthy institutions remain open and competing with them.

MR. LEHRER: As you said at the beginning, Mr. Seidman, we're talking about 30 percent in this loss thing. The other 70 percent are doing, or are at least functioning and are solvent at this point.

MR. SEIDMAN: Yes.

MR. LEHRER: All right. All four gentlemen, thank you very much for being with us.

MR. MacNeil: Still ahead on the Newshour, trucks that carry chemicals and food and the social club fire in New York. FOCUS - CONTAMINATED CARGO?

MR. MacNeil: Next tonight we look at the risk of food being contaminated by the trucks that transport it. The issue is something truckers call back hauling, and some members of Congress think it endangers the public health. We have a report from Lee Hochberg of public station KCTS in Seattle.

NEIL HENDERSON, Trucker: I went to a chemical plant and they loaded 55 gallon drums into my trailer. These drums were filled with some kind of poison that I took right back to Pennsylvania, and in turn, delivered the poison, went right back and loaded with food.

MR. HOCHBERG: Rolling down Route 12 in Central Washington State, Trucker Neil Henderson is breaking the trucker's code of silence about back hauling. That's the lucrative practice of carrying food one way and then back hauling chemicals or garbage on the return trip. Then the trucker washes out his vehicle and fills it up again with food products.

NEIL HENDERSON, Trucker: You would not believe the stuff that goes on in this industry that's under the table that nobody'll talk about and nobody admits.

MR. HOCHBERG: One hundred twenty-five thousand tanker trucks drive the American road on an average day. Many carry loads of food and loads of chemicals. Most truckers routinely clean their tanks out between trips. But when tankers perform double duty with chemicals and food, critics say washing isn't adequate.

JOHN ERWIN, Matlack Trucking Company: One should not haul food products after chemical products regardless of the type wash procedure used.

SPOKESPERSON: The smell is something that you just cannot hardly believe. Maybe you can see the maggots --

MR. HOCHBERG: Last summer, an Indiana environmental group videotaped several refrigerated trucks at a landfill. Usually the trucks carry food. On this day they were full of garbage. Drivers told environmentalist Terri Moore that after dumping their trash, they went straight to other locations to fill up with meat, fish or fruit.

TERRI MOORE, Environmentalist: One driver in particular stated he hauled shrimp and strawberries after hauling garbage from the East Coast to the land fill.

MR. HOCHBERG: Once it was common practice for trucks to make deliveries and travel home empty. They rarely mixed food and chemicals. But to encourage competition, the federal government deregulated the industry in 1980, more independent truckers went into business, and cargo prices dropped. With falling prices, many truckers found they had to keep their tanks full at all times to remain solvent. Marty Sangster of the Washington State Trucking Association says many drivers began back hauling garbage or chemicals just to make ends meet.

MARTY SANGSTER, Washington Trucking Association: These people who are, who find themselves in that position generally have everything that they've worked for all their lives invested in that truck. And if they're unable to make the payments and unable to keep up the insurance, they're going to lose everything.

MR. HOCHBERG: Jim and Rikki Pomerenke used to work as tank truck drivers for the Premium Transport Company of Yakima, Washington. Last year, they went on a 12 state odyssey, delivering toxic chemicals and food products nationwide. At trip's end, they were shocked to find that the inside of theirtanker didn't shine like this one. A hazardous chemical had coated it and stuck there before they carried items like cranberry juice and chocolate to some of the biggest food producers in the country.

JIM POMERENKE, Trucker: Now if that load is contaminated, there's an example of a minimum of 140,000 people that could be sick or dead before it's caught out of one load.

MR. HOCHBERG: The trip started at Schenectady Chemical in New York, where they picked up a truckful of alco phenol novalac resin, a toxic chemical made with formaldehyde. They delivered it to California, then they took a shipment of marine lube oil up to Washington State. Then the Pomerenkes came to this Matlack Trucking Company Truck Wash near Seattle to clean their truck out. They thought that would leave the truck ready for their next cargo, Canadian whiskey. Tank washers fired 200 degree water and detergent at the inside of the tank. But they never detected the coat of plastic resin and tank cleaner Carl Johnson says even if they had, a wash like this would not have left the truck clean enough to carry food.

CARL JOHNSON, Tank Washer: Even though the trailer's been cleaned, there's still always lingering traces that can be somewhere, either in the gaskets or in the valve assembly or something like that, of acetones, methylene chlorides, you know, things of that nature, that are still chlorinated solvents.

MR. HOCHBERG: You don't want to mix them.

MR. JOHNSON: No, no, no.

SPOKESMAN: If I had the choice, I would not drink that Canadian whiskey.

MR. HOCHBERG: Matlack Vice President John Erwin says his washers never told the Pomerenkes not to carry the whiskey because the Pomerenkes had never indicated that they planned to carry whiskey. The Pomerenkes say that like many truck drivers, they were under orders not to tell anybody what they planned to carry. Their company, Premium Transport, had even told them in this memo, "If you should be asked what the next product will be, or where you are going to load, PLEASE, tell them you do not know."

MR. POMERENKE: We were also told when we were going up and down the road on the CB not to be telling anybody what we had on.

MR. HOCHBERG: Unaware that plastic resin was coating the inside of their truck, making it unfit for carrying food, the Pomerenkes proceeded to British Columbia to pick up the whiskey. They carried it to Washington State, then took grape concentrates to Ocean Spray in Texas and cooking oil to Frit-O-Lay in California. Then in December, they delivered a shipment of chocolate to the Bortz Chocolate Company in Reading, Pennsylvania.

RIKKI POMERENKE, Trucker: We unloaded it the day after Christmas. They did not have a storage tank big enough for this load of lemon- flavored chocolate because it was a specialty order. They processed it off of our truck onto the candy line. I mean, they made it, it got pumped out of our truck into a little tiny tank and then went right on the line and got squished into little Easter bunnies.

MR. HOCHBERG: Not until their truck was washed out at another Matlack Wash in Houston, Texas, did anyone discover the hard chemical film stuck to the inside.

RIKKI POMERENKE: They came to us and they said, hey, we did something wrong, the inside of your tank's all screwed up. It's got something in there that won't come out. They spent three hours in that trailer with razor blades and big brillo pads and we went right over to Ventura Coastal and loaded a load of orange juice and brought it right up here to the Safeway processor, Grandview.

MR. POMERENKE: Grandview right here by our own terminal, and then we brought that tank home and the boys got in there again with razor blades and six inch brillo pads and scraped it out again.

RIKKI POMERENKE: And scraped it out again. They knew it was in there, they knew that it was staying in there and they still, that time they deliberately loaded a food product knowing that once that trailer got in the yard they were going to have to put them kids in there with razor blades and brillo pads.

MR. HOCHBERG: At that point, the Pomerenkes decided they'd seen enough and they refused to haul any more chemicals. They were promptly fired. Premium's owner, Jim Ketchum, refused to be interviewed, but his attorney told us, "It's a witch hunt. Why are people attacking one man, one firm, that is doing what is legally permissible?". The Pomerenkes took their story to the State of Washington's food safety officer, Clara Stoehr. She told producer Chris Sharp that state and federal inspectors have long suspected that food is being tainted, but they can't get any evidence.

CLARA STOEHR, Food Safety Officer: Over the years we get calls with complaints of juices and other liquids having a funny taste, an acid taste or something, caustic taste. There is no way you can possibly test for all those chemicals and our processors certainly cannot test when we don't have the equipment available.

MR. HOCHBERG: USDA inspectors Bob Armstrong and Dave Knadle say they can't do any better. They say it's impossible to check every truck delivering food to every processing plant. For those they do inspect, like this one waiting to fill up with cream, they rely mostly on what they smell and see.

DAVE KNADLE, USDA Inspector: It's clean in there. It looks like a nice stainless steel finish. I see no residues inside. It has a faint order of orange juice in it which reported it was the last load hauled. It looks okay. We can only go by what we can see and hear. We can't --

BOB ARMSTRONG: That's all we have to go by. That's right.

MR. HOCHBERG: The Pomerenkes note that appearances can be deceiving. They say their boss went so far as to have them hide chemical odors from food inspectors by spraying the inside of their tanker with a powerful deodorizer.

JIM POMERENKE, Trucker: Chemically it eliminates odors. You put four or five drops of that in a spray bottle and spray two or three sprays of it in there and then it will smell like a bathroom deodorizer.

MR. HOCHBERG: With inspectors hard pressed to monitor the food supply and no law to prevent back hauling, Congress is trying to help. Sen. Slade Gorton has introduced legislation to prohibit food tankers from hauling hazardous chemicals and refrigerated trucks from hauling garbage. The trucking industry's Marty Sangster says his group won't oppose the law, but he says it's unnecessary.

MARTY SANGSTER, Washington Trucking Association: Maybe you dismantle a bicycle, your kid's bicycle, and you wash the brake parts in gasoline and you have in the pan, you have gasoline and grease and various things, but you don't throw the pan out. You take the pan out and wash it and scour it thoroughly, and then it can be used for cooking. And the same thing applies to a tanker.

MR. POMERENKE: You wouldn't pour formaldehyde in your coffee thermos and then wash it out. I don't care how many times you boiled it out. If you knew that that formaldehyde could kill you and stop your heart, you'd be careful. If you washed it out a hundred times, would you want to pour your coffee in it and drink it?

RIKKI POMERENKE: [In Grocery Store] See. Bottled right here at home. Seal, Washington, you can drink that.

MR. POMERENKE: Yes. This one didn't get hauled in a tanker.

MR. HOCHBERG: The Pomerenkes say they'll probably never drive a tank truck again. They will change the way they shop. They'll look for food that's processed in the same place it's grown, food that's never been inside of a tanker.

MR. MacNeil: Tomorrow the House of Representatives is scheduled to vote on a bill that would outlaw back hauling. FOCUS - FATAL FIRE

MR. MacNeil: Our next focus is on the fire that took 87 lives in an illegal, Bronx, New York social club over the weekend. As we reported, police have charged a man with arson in the blaze which began in the pre-dawn hours of Sunday morning. Coincidentally, the fire broke out on the anniversary of the historic Triangle Shirt Waist Company fire of 1911. That fire became a rallying call for workers and led to reforms in workplace safety laws around the nation. This weekend's fire has raised questions about the way New York City and other cities regulate small social clubs like the one that burned this weekend. City officials had ordered the Happy Land Social Club to close in 1988, citing it for many fire safety violations. There was no rear exit, there were bars on the front windows, and the stairways were only wide enough for one person. But the club, located in a poor Hispanic section of the Bronx, continued to do business. When the fire broke out on the first floor, the second floor was still jammed with people out for a good time. Officials said most of them never had a chance to get out. Most of the dead suffocated in the thick smoke. Rescue workers found bodies with their legs still wrapped around a bar stool or holding drinks. Some were trampled to death. Others tried to break through a wall in a desperate attempt to survive. By Sunday evening, officials had arrested Julio Gonzales, a 36 year old Cuban refugee, on suspicion of arson. Police said Gonzales had been bounced from the club after quarreling with an ex-girlfriend who worked there. Police said he left, warning, "I'll be back," and later returned with a can of gasoline, poured the contents through the club's only working door and lit the blaze. New York City officials almost immediately announced a crackdown on scores of other illegal clubs operating without liquor licenses throughout the city. More than 20 of an estimated 700 clubs were shut down today. We're joined now by two guests to discuss the fire and its aftermath. Bob Herbert is a columnist who's been covering the story for New York's Daily News. Juan Flores is the Acting Director of International Studies at City College in New York. He spent eight years at the Center for Puerto Rican Studies at Hunter College and has done much research into the Hispanic Community. Bob Herbert, the mayor, Mayor Dinkins, says, never again, but previous mayors have said the same after events like this. What happens when they close places like this down?

BOB HERBERT, The Daily News: We got a good indication this afternoon at city hall. Norma Steisa who is the first deputy mayor in the Dinkins administration was also in the Koch administration in 1988, when we had a similar fire. Several people were killed, I think it was seven people also in the Bronx, and a crackdown was immediately announced. What happened was about a dozen teams were set up to make sure that never again would this happen, and Steisa acknowledged this afternoon that those dozen teams were cut eventually to five and then eventually to one or two. And I think what tends to happen is when the public focus is off of these clubs, off of the specific tragedy, then the crackdown kind of just dwindles away.

MR. MacNeil: Let's get back to the regulatory side of it in a moment. Juan Flores, what need do these clubs serve?

JUAN FLORES, Professor, Latin American Studies: Well, the social clubs have played a role for a long time in the Latin community in New York, going way back, decades, places for people to get together and talk about their experiences in the homeland, to share the experience of coming here and trying to adjust to life in New York City, to serve as a place away from home outside of the confines of the often very cramped quarters that people live in in New York City, to associate, to have fun, to enjoy themselves, and all kinds of activities go on in these places, most of them having to do with baptisms and celebrations, birthday parties. They're block association meetings, political gatherings, sometimes cultural events of all different kinds of descriptions.

MR. MacNeil: So they're not just night clubs in the sense of drinking and dancing?

PROF. FLORES: Not at all. In fact, they originally started more as kind of places where they would have more civic kinds of clubs, where they would have meetings of the neighborhood, there were hometown clubs that were very important in the earlier decades and they still are today, that is, people come from the same town in Puerto Rico or in the Dominican Republic or other Latin American countries, would then congregate, and people would sometimes come from far outside of the neighborhood in order to be with others from the same part of the world.

MR. MacNeil: Most of the victims here were from Honduras, is that correct?

MR. HERBERT: Honduras, but there were a number of other ethnic groups also, mainly Latino, but mostly were from Honduras.

MR. MacNeil: Are they really, one of the points made about them is that new immigrant groups go to them for the kinds of reasons you say, but also because they're cheap. Now I read it cost $5 to get into this place and then $3 a drink. But you could go to an ordinary bar and pay $3 for a drink and you wouldn't have to pay $5 to get in. I mean, are they really so cheap?

PROF. FLORES: Well, they're cheaper than going to a regular night club, which I think is probably the best comparison. That kind of a cover charge is less than you'd normally have, and there's usually a minimum in a lot of these dancing places, so that you'll wind up spending a lot more money than that. But I think the reason for going there is less economic than cultural. That is, forms of kinship and cultural ethnic association are really very important to people, immigrants of all kinds.

MR. MacNeil: Not just in a Hispanic community.

PROF. FLORES: Not just in a Hispanic community. We go back in the history of even New York City, and we'll find that all the major groups that have come here have set up some kinds of clubs, including places where they would go in order to congregate, and so we shouldn't think of it strictly as a Latin kind of or a Latin American or Caribbean kind of phenomenon.

MR. MacNeil: So these clubs serve, you might say in a wider sense, a socially useful function?

MR. HERBERT: I think so, and also the alternatives are not great in some neighborhoods. So if local residents are not going to this particular club, where do they have to gather, and you know, you have to worry about things like drug dealing and other problems in the neighborhood and stuff. So to get together with friends in an atmosphere in many cases that seemssafe is very important. Of course, the clubs vary though. I mean, not all clubs are safe. Not all of them are just local cultural institutions. Some of them have problems with violence. Some have problems with --

MR. MacNeil: There have been shootings.

MR. HERBERT: You have to make a distinction between the types of clubs.

MR. MacNeil: Right. But if you just go around shutting them down, as the New York authorities are going to do today, they find ways of reopening in other places or the same places because they need them.

MR. HERBERT: You can't.

MR. MacNeil: You can't shut them down.

MR. HERBERT: New York City is not going to be able to shut down these clubs. If you shut down a club on this corner, it will open up on that corner or down the block somewhere. It's just, there's no way to stop them.

MR. MacNeil: Do you agree with them?

PROF. FLORES: Yes. It represents an irrepressible need of people when they come to a situation that's foreign to them, that might not be as hospitable as one would think, to want to associate and to want to have a place where that can happen.

MR. HERBERT: And I don't think you, I don't think it's good policy to just blanketly shut them down. I mean, I don't think the city wants to do them. It makes sense to make some effort to try and make them safer, but to just say we're going to shut them down is never going to work and I don't think it's good policy.

MR. MacNeil: Now there are 700 of these estimated illegal, estimated 700 I read today of clubs said to be illegal because they don't meet the fire regulations or other things. Can these same groups with the kind of money they take in, can they afford to rent premises the fire department would approve and to buy a liquor license and be legal?

PROF. FLORES: As far as I know, there are legal social clubs, quite a few, probably more than illegal, so they evidently did. It can happen. I don't think that the people who run these places are primarily in it for the money, although I'm sure some of them are. I don't see any reason, economic obstacles to making, facing the legal restrictions and meeting up to them. I don't see any reason why they can't.

MR. MacNeil: Do you agree with that?

MR. HERBERT: I think I disagree. I think many of these clubs, especially in the poor neighborhoods just don't have the money to rent a place that's safe or if they have a place to make the improvements that are necessary, to install sprinkler systems, to make sure that proper number of exits are created and that sort of thing. I just think many of them don't have the money.

MR. MacNeil: And it costs, I gather, $5,000 to get a liquor license in New York State for a night club.

MR. HERBERT: They're not going to get liquor licenses. That's not going to happen.

MR. MacNeil: Because then it also takes a long time.

MR. HERBERT: The interesting thing is that no one is even really talking about cracking down on the liquor license violations. I mean, they're only talking, they're talking primarily about safety violations. They're going to allow these clubs to continue to operate illegally in terms of serving alcohol without a license.

MR. MacNeil: I see. So what do you think the answer is? If there are 700 out there that are premises which are unsafe, what do you think the answer is? And is it just New York City? I mean, these clubs are just all over the country.

PROF. FLORES: All over the country.

MR. MacNeil: In big cities.

PROF. FLORES: In all big cities. I know that wherever you have concentrations of Puerto Rican people, there are social clubs, and there are social clubs in Puerto Rico, so in a way, it's bring the culture from the homeland here and transplanting it and having something that represents and is analogous to what one experiences.

MR. MacNeil: So from the point of view of good safe administration in a city, what is good policy in this kind of thing?

PROF. FLORES: It is hard to answer that question in any direct sense, but I believe in working with the people who congregate and who organize these kinds of clubs, and trying to bring home the need for safety regulations. It seems to me that there's such a huge variety, as Bob was saying, of these clubs that you, that it would be hard to generalize. Some are just like glorified hangouts in a basement somewhere, in a storefront.

MR. HERBERT: It's like a rent party that's been taken next door.

PROF. FLORES: Yeah. I mean, it's almost like a house --

MR. MacNeil: It starts as a party and turns into a club.

MR. HERBERT: Yeah. I mean, I think New York is now going to crack down on these clubs with police officers. Up to 200 cops are going to join with building inspectors and fire inspectors and shut down the ones that are violating the safety codes. But I just don't think that's going to last. New York is having budget problems, there's a shortage of police officers, and I don't think the cops are going to stick with it. I think what you say is important about getting the message out both to club operators and to patrons, that they need to pay attention to safety. But then I think that you have to depend on building and fire inspectors, basically your bureaucrats, spot checks, that sort of thing, and I really think that financially that's the best New York City is going to be able to do in the long run.

MR. MacNeil: But can you, suppose you were inspected by the fire department, you had a sprinkler system, you had the right number of exits, with the right kind of stairways, you had the right kind of materials, how do you guard against some mad man if the allegations against this man are true throwing a firebomb or throwing gasoline all over the entryway and setting fire to it?

MR. HERBERT: You cannot. I mean, I think one of the focuses, at least in the first stage coverage of this fire, has been so much on the social club, it's almost as if the social club was the villain and the social club was not the villain. The villain was the person who poured gasoline in the entrance way and set it on fire. And I don't think there's a way to guard against that totally, obviously not.

MR. MacNeil: I mean, if you had that happen in a new fireproof building, in one of the new buildings in the center of Manhattan, with a club that's approved and frequented by middle class people and so on, paying a lot more money, it would still cause --

MR. HERBERT: If you did that in a movie theater, it would be a devastating tragedy.

PROF. FLORES: Right. Right. And people don't blame the phenomenon of movies or movie theaters for these kinds of tragedies.

MR. MacNeil: Because there was another incident in New York just a couple of years ago where there was a social club again on the second floor where somebody threw a firebomb upstairs.

MR. HERBERT: It was the El Joya Club and that was in the Bronx also, about half a mile from Yankee Stadium, and I believe seven people died in that fire. Several people were seriously burned.

MR. MacNeil: I thought it was 22 in that one and 7 in the one that Mayor Koch -- am I right?

PROF. FLORES: I don't know.

MR. MacNeil: Anyway, but making the point that simply closing the clubs won't be a way of -- in other words, insisting that they be fireproof, meet the safety regulations, everything else, isn't necessarily going to guard against this kind of incident.

MR. HERBERT: I think it's important to get the word out through the media, through government, through the patrons, that you have to be very careful that they should be very safety conscious. I mean, I think that's one of the most important things that you can do.

PROF. FLORES: Right. I agree. I think that's the way to work, work with the people who do it, and don't attribute these tragedies to that form of association and that way of getting together. That I think is the fallacy, as you were pointing out. Somebody throws a firebomb, it could be anywhere, it could be a Club 57, or some ritzy club, you know, and then would people blame the club itself for it?

MR. MacNeil: I'm sorry, I have to end it there. Bob Herbert and Juan Flores, thanks both for joining us.

MR. HERBERT: Thank you.

PROF. FLORES: Thank you. RECAP

MR. LEHRER: Again the major stories of this Monday, Soviet Pres. Gorbachev said force would only be used in Lithuania if lives were in jeopardy, and the troubled U.S. savings & loan industry lost $19 billion last year. Good night, Robin.

MR. MacNeil: Good night, Jim. That's the Newshour tonight and we'll be back tomorrow night. I'm Robert MacNeil. Good night.