The MacNeil/Lehrer NewsHour

INTRO

ROBERT MacNEIL: Good evening. The big news today is arms control. President Reagan sent his negotiating team off to the new strategic arms talks in Geneva with more flexible instructions and a challenge to the Soviets.

Pres. RONALD REAGAN: We've gone a very long way to address Soviet concerns, but the Soviets have yet to take their first meaningful step to address ours.

MacNEIL: Tonight, with the head of the arms control agency, the new Democratic member of the U.S. team and two distinguished experts on arms control, we examine the latest Reagan position. Jim?

JIM LEHRER: Robin, the other matters we examine tonight include the new flexibility the banks have in the interest rates they pay to those who save, and the problems involved in producing 13 television programs on the roughest subject of our time, the Vietnam war. We also have news updates on the Middle East, the Philippines, the Supreme Court and the floods in Arizona, among other things.

MacNEIL: President Reagan today sent his negotiating team back to the strategic arms talks in Geneva with something new for the Russians and something for his congressional critics. The new element was the so-called build-down, an offer to destroy two old missilesfor each new one built. The gesture to Congress was adding a Democrat to give the Geneva team a more bipartisan complexion. The President said the United States has gone the extra mile; everything is on the table. This is how Mr. Reagan described his new moves at a Rose Garden ceremony this afternoon.

Pres. REAGAN: We're incorporating into START a series of build-down proposals. The United States will introduce a proposal for a mutual guaranteed build-down designed to encourage stabilizing systems. The proposal will include specific provisions for building down ballistic missile warheads and concurrently for addressing a parallel build-down on bombers. To discuss these major new initiatives we will also propose the establishment of a U.S.-Soviet build-down working group in the Geneva talks. On another front and in our effort, again, to be absolutely as flexible as possible, we will be willing to explore ways to further limit the size and capability of air-launched cruise missile forces in exchange for reciprocal Soviet flexibility on items of concern to us. We seek limits on the destructive capability of missiles and recognize that the Soviet Union would seek limits on bombers in return. There will have to be tradeoffs, and the United States is prepared to make them, so long as they result in a more stable balance of forces. The Soviet Union should not doubt the bipartisan support for our efforts. During our review process I looked for ways to broaden America's bipartisan approach to our overall arms control effort. We've consulted with many members of the congress and again with the commission headed by Brent Scowcroft. Their counsel has been invaluable, and I want to thank them for their tireless efforts and helpful advice. A solid national bipartisan consensus, sustained from year to year and from administration to administration, is crucial if we are to keep America safe and secure, and if we are to achieve successful arms reductions. Therefore, I've decided to take a number of new steps. Among these are to designate a member of the Scowcroft Commission, James Woolsey, as a member-at-large to our START negotiations.

MacNEIL: The President repeated his statement at the United Nations last week that the door to an agreement is open. Jim?

LEHRER: There are two major changes in the new U.S. position. First, on bombers: until today the U.S. did not consider them part of the START negotiations although the Soviets did. The bomber numbers of the two sides are 410 for the U.S., 345 for the Soviets. The change on missiles is more complicated. By most counts the U.S. has 1,572 land- and sea-launched missiles, the Soviets 2,348. But the missiles contain more than one warhead, and the warhead comparison comes to 7,100 for the U.S., 7,500 for the Soviets. The build-down concept offered today centers on that warhead count, with each side dismantling two or more old warheads for every new one added. The result over time would be the reduction of total warheads to some 5,000 for each side. We get more details on these changes and other aspects of the U.S. negotiating position now from Kenneth Adelman, the director of the Arms Control and Disarmament Agency, which oversees all arms control negotiations with the Soviet Union. First, Mr. Ambassador, there were reports, as I'm sure you know, that you, Ambassador Rowny and others were actually opposed to the build-down theory originally. Were those true?

KENNETH ADELMAN: No, that's just not true. Ambassador Rowny and I and members of the administration looked at the build-down and recognized it for what it is, a mechanism to have real reductions in strategic nuclear weapons and to allow each side to modernize their forces. The President looked on this as a very favorable concept, and we looked on it as a very favorable concept. We have [unintelligible] have been studying it for a good long time, since last January, and we think we have a build-down now that makes a significant new element into our START proposal.

LEHRER: In what way? How does it change things?

Amb. ADELMAN: What it does is have a real schedule to go from over 7,000 ballistic missiles -- warheads, down to 5,000, which is a one-third reduction in this important category. This is the category of warheads that peop;le usually think of when they think of strategic weapons. This is the actual bombs. And what we are doing is trying to reduce both sides by a third in this category. We are also willing to look at the possibilites of build-down on bombers themselves.

LEHRER: Either informally or otherwise, has there been any indication that the Soviet Union is interested in this build-down idea?

Amb. ADELMAN: I think the Soviet Union is interested in real reductions on strategic nuclear weapons. I think our proposal has deeper reductions than their proposal has. It also -- their proposal includes many elements that are disagreeable to us, but I think that both sides have an interest in greater stability on both sides -- on each side, and that we have an interest in real reductions.

LEHRER: But specifically have the Soviets said to Ambassador Rowny or anyone else, "Hey, look, we'd be interested in a build-down thing if you guys would come up with one"?

Amb. ADELMAN: That was the purpose of the President's proposal today -- was to authorize the delegation headed by Ambassador Rowny to go to the Soviets to talk to them about a working group within START on build-down, and to propose to them in the START negotiations themselves an actual build-down schedule.

LEHRER: I noticed out of the corner of my eye, when I was reading just now the two-for-one thing, that you kind of shook your head. Did I have that wrong? Is it not specifically dismantle two for every new one put in?

Amb. ADELMAN: What we have been talking about, and the President today talked about in the Rose Garden very clearly, was a scheme for reductions from above 7,000 down to 5,000.We have been talking about a percentage reduction to keep the schedule very regular or a modernization approach, which would include various ratios that we would work out. This has all been discussed with the Congress, and I think there is good agreement on the proposals from the American side, and, like I say, we're going to now discuss that in Geneva and to have the Soviet reaction to the build-down idea.

LEHRER: But the U.S. position is not a firm two-for-one idea, is that what you're saying? It's going to be kind of worked out?

Amb. ADELMAN: It's going to be worked out, as many elements are, in the negotiations. What is firm is a schedule for real reductions of warheads on a regular basis.

LEHRER: The whole build-down idea, of course, emanated from Democratic members of the Congress. Was there a kind of a deal involved that, in exchange for support on MX and other things, the administration would agree to float the build-down idea in Geneva?

Amb. ADELMAN: The build-down idea actually didn't originate by Democratic members. I know Senator Cohen was very instrumental in first proposing the idea. He proposed it, I believe it was last January. The President, when he heard about the idea, read it in the newspaper, called Senator Cohen and said that the concepts of real reductions with modernization were concepts compatible to his own ideas on arms control. We have been looking very hard for this kind of bipartisan support --

LEHRER: But this has received -- there's no question this helped.

Amb. ADELMAN: This has been Republicans and Democrats, and the bipartisan support has increased because of our actions on the build-down.

LEHRER: Thank you. Robin?

MacNEIL: Mr. Adelman, turning to the bombers, after refusing to count them for so long, why has the administration changed its mind?

Amb. ADELMAN: What we are trying to do is to have a proposal that basically is encompassing on strategic weapons, signalling out and focusing on the most destabilizing weapons of all. As you know, the ICBM force of both sides are the weapons that are most dangerous, that pose the greatest first-strike capability on each side, and if you're talking about greater stability in the relationship between the United States and the Soviet Union, you'd want to spotlight the biggest problem. The biggest problem has always been the ICBM force.

MacNEIL: Well, what does that say about the bombers, then? I mean, up until now the U.S. has refused to include them in the count of delivery systems. Why is it now including them?

Amb. ADELMAN: It isn't quite factually true that we have been refusing to include them. We have been discussing bombers in Geneva for a good long time. I think there is a willingness to look at these kind of factors anew with the kind of flexibility the President has given Ambassador Rowny. But this is not a new introduction of a bomber consideration. This has been a reinforcement of what has taken place.

MacNEIL: I see. In counting the bombers, would it be that the U.S. would be looking for parity in bombers themselves or just in the overall count of delivery systems?

Amb. ADELMAN: What we are trying to do is to negotiate an agreement with the Soviet Union based on overall equality. What this means is that the overall strategic forces of both sides would be equal. We want greater emphasis on the destablizing weapons systems, the weapons systems that pose the first-strike capability. Bombers are retaliatory forces. They are for a crisis management kind of consideration rather than any kind of first strike.

MacNEIL: Since the U.S. has at the moment more strategic bombers than the Soviets, could this result in the U.S. destroying some bombers?

Amb. ADELMAN: We have been looking at various packages and are going to be receptive to what the Soviet Union wants to do in these kind of categories. The Soviets have discussed with us bombers in the past, and basically we'll continue those discussions.

MacNEIL: Another big issue in these talks has been throw weight, the great apparent Soviet superiority in the weight they can actually deliver of destructive power with their larger rockets. How, with this new approach, is the U.S. going to address that problem?

Amb. ADELMAN: Basically, the President has been highlighting our 5,000-warhead limit. In addition, we are concerned about deployed missile totals and destructive capability on both sides. Destructive capability or throw weight is an element of strategic power that has been discussed in arms control proposals throughout the SALT process and now in START. And this is something that is going to be discussed in the next round. Let me say --

MacNEIL: Is there a new flexible element in that too?

Amb. ADELMAN: We have been very flexible in the past. I was just going to say that in the last round, in the fourth round, we have given the Soviet Union basically three approaches to trying to cap or reduce destructive capability on both sides. The third approach is to open the door to them on ideas they might have to hold down destructive potential.

MacNEIL: Has any new thought been given in your agency to merging the START talks with the INF or intermediate-range talks?

Amb. ADELMAN: This is a question that has been around for quite a while. The focus has been on INF this year because the deployments are scheduled for the end of this year. It has been thought of those individuals in my agency and of the President that the best chances of reaching an agreement on intermediate nuclear forces in Europe this year is to keep the negotiations separate, to have the negotiations headed up by Paul Nitze in Geneva, to look at the SS-20s and the ground-launched cruise missiles and the Pershing IIs as a separate. We think that it would be very complicating at this point to merge the two.

MacNEIL: Thank you. Jim?

LEHRER: There was no immediate Soviet reaction on the administration's new START talk proposals, but tonight at the United Nations the Soviet Union issued a call for a nuclear arms freeze. The Soviet U.N.. ambassador told the General Assembly that the world should freeze the development of all nuclear weapons systems. The speech had been slated for delivery by Foreign Secretary Gromyko, who canceled his trip after the Korean Air Line incident. Mr. Reagan took special pains today to make sure his main domestic critics, the Democrats, were on board. He began that operation by meeting this morning at the White House with a bipartisan congressional group. Afterward Congressman Les Aspin, Democrat of Wisconsin, and a strong advocate of more flexibility in the U.S. arms control position, said this.

Rep. LES ASPIN, (D) Wisconsin: What we had was in 1977 Jimmy Carter took office and threw Vladivostok out and said, "I can do better," and started again. He got as far as negotiating SALT II but didn't get it ratified. Ronald Reagan got elected and took office in 1981, and threw out SALT II, and said, "I can do better than that." So what you've got is a constant going back and forth between whatever administration gets in, throwing out what was done by the previous administration and starting all over. Which means it's been a long time since we've had any arms control agreements ratified in this country. What is hopeful is that we have a bipartisan approach which both parties can get credit for for getting us as far as we are now, and both parties can build on no matter who is elected in 1984.

LEHRER: Mr. Reagan also told Aspin and the other Democrats about a further step he was taking, the addition of a Democrat to his START negotiating team in Geneva. That Democrat is James Woolsey, already a member of the Scowcroft Commission on the MX. Mr. Woolsey was the undersecretary of the Navy during the Carter administration, and is currently in the private practice of law here in Washington. Why did you take this assignment?

JAMES WOOLSEY: The Ambassador Rowny called 10 days to two weeks ago and asked if I'd consider it, and I spoke with my family and my law partners first of all, but then with Harold Brown, who held this position for eight years during the Nixon and Ford administrations while he was president of Cal Tech. And I value his advice on many things, including that. And as a result of those discussions, it seemed to me it was possible to make a contribution and to do so while continuing as a private citizen, and so I was glad to help.

LEHRER: Do you see it as a symbolic thing, as a way of getting the bipartisan Democratic support?

Mr. WOOLSEY: I suppose -- I guess we all have a hard time considering ourselves a symbol. I think there are any number of people who could have fulfilled this function as well as I, but I have worked on arms control before in SALT I. I was adviser on the delegation working for Paul Nitze back in '69 and '70, and worked for Kissinger briefly on it in 1970 as well in the White House. So I've been interested in this issue for some time, and I hope I can make some kind of contribution.

LEHRER: Do you feel -- well, when you talk about contribution, what kind of contribution do you think you're going to be able to make? Are you along for the ride or do you feel you can exert some influence here and there or what?

Mr. WOOLSEY: Well, it's difficult to say. I plan within a week or two to go over to Geneva and sit in on some of the negotiating sessions and then, if I come back, make myself available here in Washington to consult with those members of the Congress who are interested in the process and with those like Ken in the administration who are interested. And I hope to be able to help in some of the same ways that Brent Scowcroft has been able to help with those of us on the commission in the process in Washington.I think Brent has done a remarkable job, and I've been trying to help him and I hope to continue that.

LEHRER: Are you in full synch with the administration negotiating position, including these two changes announced today that we've just been talking about?

Mr. WOOLSEY: Well, I think the two changes announced today are quite positive. I think the most important thing about them is the way the administration went about making them. In a parliamentary system there's no paticular problem in getting the legislature and executive together. In one of those systems these six congressmen would either be ministers or would be in the shadow cabinet, probably, and under our system, you have to really kind of go the extra mile in order to try to work out a bipartisan approach. And I think the administration's done a good job on that over the course of the last several months, together with the Democrats and Republicans in the Congress who are interested.

LEHRER: Finally, let me ask you this. As you go about this job, do you see yourself now as an integral part of the team, as a team player, or if something --

Mr. WOOLSEY: Yes.

LEHRER: You do. So if something goes wrong or something happens that you disagree with, there will be no public statements or any of that sort of thing? You are part of the team.

Mr. WOOLSEY: As part of the delegation it's my function to report through Ambassador Rowny. I recall when I was an advisor on the SALT I delegation and Harold Brown was a delegate-at-large, he never had any problem getting his views known back in Washington, either by adding views onto the cable going back or by making them felt in Washington when he got back, and I plan to do the same. But privately.

LEHRER: All right, thank you. Robin?

MacNEIL: We now have two different perspectives on arms control. McGeorge Bundy was national security assistant to Presidents Kennedy and Johnson, is now a history professor at New York University. Mr. Bundy is a co-author of a widely discussed study calling for the U.S. to renounce the first use of nuclear weapons. We also talk with William Van Cleave, senior fellow at the Hoover Institution and director of the Defense and Strategic Studies program at the University of Southern California. Mr. Van Cleave was a member of the SALT I negotiating team and Mr. Reagan's senior defense adviser during the 1980 campaign. He joins us from public station KCET, Los Angeles. Starting with you, Mr. Van Cleave, how do you view the build-down proposal?

WILLIAM VAN CLEAVE: Well, I think what the administration has done is take something that is inherently a very bad idea and tried to adapt it to its arms control approach of reductions.

MacNEIL: Why is it a bad idea?

Mr. VAN CLEAVE: Well, it has no strategic logic to it. It isn't tied to any necessary improvement in survivability or stability so far as I can tell. Reductions, for that matter, might increase vulnerability rather than increasing stability, depending, of course, on what's reduced and what the ratio is, for example, between warheads and the numbers of launchers or missiles that one side has. One saw reductions for the sake of reductions in the build-down proposals that emanated from the Hill. The administration, so far as I can tell from listening to what I've just heard, is, however, trying to adapt that into something that has to do with destructive capacity and something that has to do with reducing the most destabilizing systems. We'll just have to wait and see if that is, in fact, what happens.

MacNEIL: McGeorge Bundy, how do you view the build-down proposal?

McGEORGE BUNDY: Well, I think in principle the build-down as put forward by Senator Cohen and others can be a constructive proposal. I was sorry to see that Mr. Adelman wasn't able to tell us just what kind of build-down is proposed. I assume that the kind of build-down that is proposed is one which is aimed at destabilizing systems, such as the SS-18 in the Soviet Union, the MX here. And to me what is striking is that this proposal -- which is essentially a part of the bargaining process to keep support for the MX -- his proposal, which, if accepted, would make the MX itself the very last system you would want to deploy.

MacNEIL: Why?

Mr. BUNDY: Because the MX is a vulnerable system, 100 MX with 1,000 warheads --

MacNEIL: Ten each.

Mr. BUNDY: Ten each. One hundred MX with 1,000 warheads would require you to remove 2,000 warheads from what are much more survivable systems, either the singlewarhead Minuteman or the submarines at sea. And it seems to me clear that if we ever have a real build-down, the two-to-one basis that the senators have insisted on, the one system we will not build is the MX.

MacNEIL: What do you think about that, Mr. Van Cleave?

Mr. VAN CLEAVE: Strangely enough, I tend to agree with that. I think that deploying the MX in a vulnerable mode is inconsistent with the very logic of strategic stability and survivability, and contradictory to all of the things that the Scowcroft Commission report said should be the attributes of the survivable ICBM force.So the MX in a vulnerable mode strikes me as a bad idea. But I think we should relate this to strategic modernization and not to arms control. We've looked too long and expected too much from arms control. We know that the Soviet Union will not agree to reductions and, for that matter, we know that the Soviet Union will not agree to any real meaningful arms limitation that will help us escape the problems that they've worked so hard to give us.

MacNEIL: Would this be likely to have any appeal to the Soviets, from your perspective, from where you sit?

Mr. BUNDY: It's hard to tell because it will depend on the fine print, and we don't yet have the fine print. In principle, a build-down from destabilizing to stabilizing systems ought to be interesting to both sides. I think the harder part of the President's proposals in terms of prediction is just what is meant by a willingness to discuss bombers? And just what is meant by rubbing out the distinction between first-phase talks and second-phase talks? There is such open ground between us and the Soviet Union in all of these fields that I think it is much too soon to say whether this proposal increases the chance of a serious negotiation, which we have not had so far.

MacNEIL: Mr. Van Cleave, taking the bombers into consideration as well, do you think that this opens the door to serious negotiations?

Mr. VAN CLEAVE: I think the United States has been negotiating seriously all along. I do not believe that the Soviet Union has ever negotiated seriously in terms of having the same objectives as we do. I couldn't disagree more with Mr. Adelman when he asserted that both sides are interested in strategic stability. There's not a shred of evidence for that.

MacNEIL: Do you think that the American side has been negotiating seriously?

Mr. BUNDY: I don't think the START proposals have been serious up to this point because they have demanded so much of the Soviet Union and offered so little in return that there's been no prospect the Soviets would be affirmative. I also think it's a misfortune that these proposals, coming so late, are in a time frame in which the real crisis is in the theater negotiation --

MacNEIL: The INF --

Mr. BUNDY: The negotiations about the INF. And I think myself that it would be wise for the administration to reconsider its apparently firm position that it's better to keep the two sets of negotiations apart.

MacNEIL: Mr. Woolsey, can we bring you into this? How do you feel, having heard the two criticisms of the build-down proposal? Would you like to defend it?

Mr. WOOLSEY: Well, the proposal as announced by the President today is just a framework. It's not a finished set of details, and it, I think, can't be and shouldn't be until Ambassador Rowny has an opportunity to see if the Soviets are willing to form a working group and to begin to discuss it with them. I think the principle of the build-down, as enunciated by these six senators and congressmen who have been working on its with the administration for the last several months, has an inherent soundness to it. And it has to do with trying to promote reductions in strategic forces while at the same time giving incentives for both sides to modernize by deploying more stabilizing systems rather than destabilizing systems. The analogy I use sometimes is, in a way, it's more like effluent charges than the Clean Air Act. The Clean Air Act, like SALT II and the first START proposal, in a sense, tries to make very explicit what one should do in a number of individual circumstances. A tax or effluent charges in the environmental area tend to try to put disincentives on behavior that one doesn't like, and then leave a certain amount of flexibility as to how that would be implemented. And I think these new proposals today are more along that second route. One way Senator Nunn said it today is that they try to avoid dictating the force structure of each side, and I think that's a positive general direction.

MacNEIL: Mr. Van Cleave, I didn't ask you, I asked Mr. Bundy -- do you think this is likely in any way, this total package, to be more appealing to the Soviets?

Mr. VAN CLEAVE: No, I can't see that it would be. Again, we're expecting too much from the Soviet Union in terms of what they're willing to agree to. They've achieved advantages that they're not about to relinquish in arms limitation agreements.

MacNEIL: Right. Do you want a final comment on that? No? All right, Jim?

LEHRER: Yes, back to you, Mr. Adelman, for a couple of minutes here. First of all, what do you say to Mr. Bundy's point that under the build-down theory the MX missile is the last system in the world to deploy?

Amb. ADELMAN: I think the Scowcroft Commission did a brilliant job in analyzing the benefits of strategic modernization, arms control and a new missile called Midgetman. I think that the Scowcroft Commission laid out all three as part of a package for a greater strategic stability. And I think those arguments are very solid arguments that the commission had.

LEHRER: Yeah, but what about the specific point that Mr. Bundy made, that if the build-down idea is carried through, as at least advocated by the six members of Congress, that the MX doesnt make sense?

Amb. ADELMAN: What we are looking at is a program of strategic modernization and arms control both.

LEHRER: Strategic modernization is a code word for the MX, right?

Amb. ADELMAN: That is -- no, it's larger than that. It includes the --

LEHRER: It includes that.

Amb. ADELMAN: -- B-1, it includes the Trident, it includes the MX as our land-based, and it also includes the new Midgetman that has been proposed by the Scowcroft Commission.

LEHRER: In other words, you're saying that Mr. Bundy may be right, that these other things may be better than the MX in the final analysis?

Amb. ADELMAN: No, what I'm saying is that the analysis that the Scowcroft Commission gave on the MX was, I think, a very convincing analysis. Because of the differences in the force structure and the hard-target capability and other systems, between the United States and the Soviet Union, that we needed this for strategic modernization. I think that the important point is that on arms control, if we can help, if they are successful in gaining a greater stability at lower levels.

LEHRER: Mr. Van Cleave says you're dead wrong when you said a moment ago that both sides are interested in strategic stability.

Amb. ADELMAN: I think that there may be severe differences bewteen the United States and the Soviet Union on force posture and on what our strategic goals may be. I think there are -- I think that's true.I think there are areas to overlapping interest between us and the Soviet Union so that it may be in both of our interests to have an arms control agreement at reduced levels with greater stability. If it is not, then I don't believe that we're going to be successful in arms control. I think what our obligation is, to make sure that the conditions are there so that there can be real progress in arms control to our national security interest if the Soviets are willing.

LEHRER: Is Mr. Bundy right when he says that up 'til now there has been no serious negotiation at Geneva?

Amb. ADELMAN: Our proposals have been serious. We have made many reforms in the past round. The President today announced reforms for greater flexibility in this round, and basically, as the President said today, the Soviets have been stonewalling it thus far.

LEHRER: So there had been -- there had been no real serious negotiations, right?

Amb. ADELMAN: Well, there is serious talks going on right now. Our proposals are very serious, and I think they open the doors, the Presidentsaid today, for there to be a genuine arms control agreement if the Soviets would only walk through.

LEHRER: Thank you. Robin?

MacNEIL: Yesterday President Reagan called off his forthcoming visit to President Marcos of the Philippines after growing signs of political unrest there. Today Marcos told ABC he wasn't offended and had received an explanation from Mr. Reagan in a letter delivered to Manila by Michael Deaver, deputy White House chief of staff. The letter cited the press of business with Congress and did not mention recent anti-Marcos demonstrations.

In Argentina the political and financial crisis is deepening. Yesterday police arrested the president of Argentina's central bank as he returned from negotiations on the country's foreign debt. The police are investigating charges that an agreement he made on repayment of some items constitutes a violation of national sovereignty. The debt has become a central issue as Argentina prepares to elect a civilian government on October 30th, after nearly eight years of military rule. Argentine labor leaders called a 24-hour general strike paralyzing public transportation and closing factories today.

And we'll be back in a moment.

[Video postcard -- Mt. Vernon, Virginia]

LEHRER: Some 2.000 people with an unpleasantness in common got together today via television to figure out what to do next.The 2,000 are the unhappy holders of bonds in the Washington Public Power Supply System, known as Whoops. Whoops, as you may recall, defaulted in July on $2.25 billion worth of municipal bonds, the largest default of its kind ever. It followed the cancellation of work on two nuclear power plants in the state of Washington. This and other problems has added up to an $8 billion debt in principal and interest payments due the Whoops bondholders. Their trustee is the Chemical Bank of New York, which has filed a lawsuit on their behalf. This morning in a teleconference the bondholders in Seattle, Chicago and New York talked to bank officials and lawyers about their mutual problem and got some advice as well. Here's a sampling from that most unusual event.

WILLIAM BERLS, Chemical Bank: Patience is what we ask. Litigation is a time-consuming process.

CALLER [by phone]: If the bondholders win their court action, how soon could we expect financial compensation?

MICHAEL MINES, trustee lawyer: Should our case be successful and a verdict and judgment is rendered in favor of Chemical Bank in the federal district court case before Judge Bilby. I can visualize that there will be appeal time to run, and that it -- you assume two years for this case to get to trial and several months for the trial. The appeal time would be another year, probably, beyond that at best.

CALLER: Why should it take two years to bring the trustees' suit in the federal court to trial?

RALPH McAFEE, trustee lawyer: If Judget Bilby is able to get this complicated litigation to trial in two years, he should be made the chief justice of the Supreme Court of the United States, because it's one of the most difficult, complicated cases to come down the road in many years. It's the largest such case we have ever had, for one thing. We are suing over 600 people, individuals as well as a number of institutions.

KENNETH DOWD, Chemical Bank: One of the most frequently asked questions in our mail response is, what are the prospects for success in Chemical's litigation? Mike, we'll go back to you for that one.

Mr. MINES: Well, it's almost impossible to predict ahead of time the degree of success in acase of this kind. We are not in a position, really, to speculate as to how it will come out. We believe that our claims are valid, that promises have been made that weren't kept and that we believe that we have every right to bring this suit on those bases.

Mr. McAFEE: I would like to see the people who welched on their obligations punished.

CALLER: Is it possible, Mr. McAfee, to send lobbyists to Washington?

Mr. McAFEE: I hear it's done.

CALLER: Is it possible for there to be a political solution similar to the federal loans to New York City when the city was close to default?

Mr. BERLS: We are not in a position to dictate exactly what that settlement or solution is to be. But we certainly will be receptive to any appropriate solution which takes into account the rights and interests of the bondholders.

LEHRER: Thus far the prospects for a federal bailout, as critics have already begun to call it, do not look good. Legislation has been introduced that would provide federal backing for Whoops' other three nuclear plants, but even it's not expected to be acted on until later this month, if then. Robin?

MacNEIL: In Arizona, which is experiencing the worst floods in a century, skies cleared over most of the state today, but more rain was forecast for Thursday. Three days of flooding have left 13 people dead and forced thousands from their homes. Yesterday, by washing out bridges and closing highways, the flood waters left the city of Tucson virtually an island.

There was also news in the energy field today. The Reagan administration unveiled its updated national energy policy entitled Plan Four, which said that this country will still be relying on imported oil for at least the next 20 years.Secretary of Energy Donald Hodel recommended -- recommitted the administration to pushing for complete decontrol of natural gas, streamlining nuclear energy regulations and funding for the Clinch River breeder reactor. But Secretary Hodel put new emphasis on conservation.

DONALD HODEL, Secretary of Energy: We were running close to 50%. Secondly, we emphasize the importance of conservation, and I have tried throughout my tenure as secretary of energy to emphasize that conservation has got to be a component of any national energy program. And the problem is that it's not very -- it's not attracting a lot of attention. I think I include it in every speech I give, but it doesn't receive a lot of coverage because it, apparently, just isn't as high on everybody's interest level screen as I think it ought to be. It has got to be a component, as does emphasis on renewable energy.

MacNEIL: Afterwards, the chairman of the House Subcommittee on Energy and Power, New York Democrat Richard Ottinger, described the plan as nothing more than a good P.R. document. He said that over three years the administration had done everything in its power to destroy productive energy programs but now recognized the public relations value of supporting conservation and renewable energy policies. Jim?

LEHRER: The U.S. Supreme Court had another busy day, hearing arguments in two emotion-charged cases. One was the Karen Silkwood matter. She was a laboratory worker at an Oklahoma plutonium plant who died in a 1974 auto crash nine days after being exposed to plutonium. Her family sued and won $10.5 million in damages from her employer on grounds of negligence. An appeals court threw out $10 million of the award, and the Supreme Court is being asked to reinstate it. The issue before the court is now how or why Karen Silkwood died, but the legal question of whether federal jurisdiction pre-empts the Oklahoma law under which the damages were awarded.

The other case today has to do with whether the city of Pawtucket, Rhode Island violated the Constitution in putting a nativity scene in its official Christmas decorations. A lower court has ruled that it did. Today, lawyers for the city argued Christmas was a secular national folk festival, not a religious holiday, so there were no separation-of-church-and-state problems. The other side told the justices that argument was not valid. Christmas is definitely religious. Decisions in both the Silkwood and the Pawtucket cases are not expected until late spring or summer. Robin?

MacNEIL: It can be a bewildering scene these days for investors of any kind, even people who just want to keep their money in the bank. A new bank savings war is underway. In New York City, commercials like this have been appearing.

ACTOR, Chase Manhattan ad: Chase has been fighting long and hard for changes in CD regulations, and we won. So now we can pay you higher rates, and you can choose your own terms. If you're a Chase customer with a CD coming due in the next month, any CD, from any bank, come in and show it to us. We're so sure that our new CDs are something to talk about, we'll pay you $10 just to listen.

MacNEIL: As the man said, this new competition affects CDs, or certificates of deposit -- money that must stay in the bank for a certain period. They are the target of the latest phase of bank deregulation. Before October 1st, the federal government imposed ceilings on what interest rates banks could pay small depositors. Now they can pay what they like on deposits of longer than one month. Before last weekend, a saver had to deposit a minimum of $2,500 to get the higher rates. Now there is no official minimum, although most banks are setting one of $500. The penalties for early withdrawal have been reduced, and the time periods for CDs made more flexible. For more on how this will work for bank customers, we have Fred Hammer, executive vice president of Chase Manhattan Bank in New York. Mr. Hammer, first of all, what is the practical advantage of this for customers of the bank?

FRED HAMMER: Well, the major advantage, Robin, is that at this point the banks are able to offer the customers interest rates which are based on free markets and their own need for funds, as opposed to a rate that is regulated by the government. In addition, the depositor no longer has those large minimums so the small fellow now, with a minimum in our bank -- it happens to be $500, as you indicated -- can also benefit from the higher rates.

MacNEIL: So CDs are no longer just for rich people? They're for people with small savings accounts as well, if they want?

Mr. HAMMER: Yes, anyone who is willing to commit his money for a certain term.

MacNEIL: Now, what's the advantage for the banks in this?

Mr. HAMMER: Well, we are able to, in this area, now, compete broadly for funds. And all we ever wanted is the ability to compete. Now, this is just another small area, but as a matter of fact it allows us to fill up our own book of funds so we can match our asset and liabilities in such a way that we can manage with more stability.

MacNEIL: When the money market funds opened at the beginning of the year, the banks attracted a great deal of new money into those funds. Are you expecting -- attracting anything like that with this new CD policy?

Mr. HAMMER: I don't think it'll be quite as dramatic, although --

MacNEIL: It was $300 billion or something, wasn't it, in total?

Mr. HAMMER: It was a large money -- yeah, I think $300 billion was the correct number. The CD situation is going better than we had expected, but of course we did put a big promotional push on it in the beginning.Many people thought it would not be very important, but it's an event, and thus it gives us an opportunity once again to talk to the customer who had been lured away from the banks to alternative financial vendors, like brokerage houses, when we of course had our hands tied behind us by regulation.

MacNEIL: Now, how are you going to pay these higher rates of interest?

Mr. HAMMER: Well, basically we pay just like we would pay in the Treasury Department in the open market for corporate funds. Up to this point the small guy has really been, by regulation, forced to receive a lower rate of interest than large corporations could receive in the open markets. So this just allows us to pay the consumer what we've already been paying the big companies.

MacNEIL: Now, big banks, certainly in this part of the country, haven't been as interested recently in the small retail trade as they have been in other things. Isn't this going to get you very much into small amounts in retail trade? Is that what you really want to do?

Mr. HAMMER: Well, many of us, of course, have been vitally interested in the retail business, like ourselves and some of our major competitors. One of the major reasons, of course, that we've had to go more and more heavily into the corporate business is that, again by regulation, we have been restricted from expanding in various ways. We haven't been able to offer the whole array of services that other vendors have been able to offer. We haven't been able to expand geographically like other vendors could. And this one piece of regulatory change which allows us a little more flexibility, again allows us to compete a little bit more vigorously.

MacNEIL: Thank you. Jim?

LEHRER: Not everyone thinks it's all as wonderful as Mr. Hammer says it is.One who doesn't is Congressman Charles Schumer, Democrat of New York, a member of the House Banking Committee. Congressman, why isn't all of this competition for certificate of deposit a good thing for consumers?

Rep. CHARLES SCHUMER, (D) New York: Well, there are three real reasons that it is not as good. First of all, the kinds of campaigns that have been run by the nation's banks to attract money --

LEHRER: Like the TV commercial we just saw?

Rep. SCHUMER: -- like the TV commercial aren't entirely fair, and they don't reveal everything. For instance, they don't show what a longer rate would be. They only portrary the highest rate, and if you keep your money there longer, the rate might inevitably go down. Second, they don't tell you what the fees are for early withdrawal. There's a minimum, and that's what the ads say, in very tiny little print. But the banks can go --

LEHRER: That particular one I saw said there is a substantial penalty for early withdrawal.

Rep. SCHUMER: Right. In very tiny little letters. You have good eyes, and I don't know how many consumers saw that. Finally, there are fees and charges that are often imposed if you open an account, if you change your certificate and all sorts of other things. When the banks start inviting people in for coffee and donuts when they're going to change or raise the fees or lower the interest rates, it might be a little fairer to the consumers -- maybe we can have an ad six months from now that says, "Chase will pay you $10 to learn how your rate's going down and your fees are going up."

LEHRER: And you think that's going to happen, that the banks just cannot do this --

Rep. SCHUMER: It happened with -- it happened with the money market funds, and let me give you an example that shows how inevitable it is to happen. Gold Dome is a major one of -- is the largest savings bank now in the country. It was a combination of three failing savings banks in New York. At the same time that they are advertising 11%, a high rate for your savings, they're advertising loans at 9 1/2%, and they're on the federal dole because they've been getting some certificates from the government to help them out. It is impossible for a bank to pay a consumer 11% and get 9 1/2% for loans and survive. So, sooner or later, that 11% is going to come down, and it's probably sooner. This initial war to get the consumer in depends on the consumer being lax. In other words, once the consumer puts his money in Chase because he's received the $10, he won't look the next six months and see what the rates and fees are.

There's one final problem which is a problem that has not been discussed, but it's a very real problem. Mr. Hammer was somewhat reluctant to answer the question, who is going to pay? Well, I'll tell you who is going to pay. The borrowers. The little guy who wants a car or a home loan is never going to get a five or six percent rate again because of deregulation. Big corporations are never going to get as low a rate as they got, and the government is paying a large amount of money. What the consumer has gained -- and truly has gained, particularly if he or she shops carefully -- from the increase in rates is being paid for by all sorts of borrowers, and most importantly, by our economy. I believe that our economic recovery is being halted by high interest rates, and the number-one cause in my opinion of high interest rates is the deregulation of money --

LEHRER: And this is just going to add to it?

Rep. SCHUMER: This just adds right to it. You know, if we regarded the greatest economic mistake as the 1960s turned into the '70s as having guns and butter because of the Vietnam war, I think if we look 10 years from now we will look back and say the greatest economic mistake this country has made as 1970s turned into the 1980s was the deregulation of money. We cared about how each institution would gain, and we forgot about how it would affect the economy.

LEHRER: Thank you. Robin?

MacNEIL: Let's take the macro question first. Is that the greatest mistake the country has made in the '70s as we turned into the '80s?

Mr. HAMMER: Well, obviously there's only limited resources and it's difficult to be able to do both guns and butter, and I think obviously the deficits that the government is incurring is fueling the economy with great inflationary expectations, and that, to me, is the major reason for high interest rates --

MacNEIL: Not --

Mr. HAMMER: -- the fact of deregulation. I mean, that's a silly idea.

MacNEIL: Well, what about the Congressman's point that it's actually the borrowers, whether institutional or individual borrowers trying to buy a car or a house, who are going to pay for these higher rates you will be able to pay your CD depositors?

Mr. HAMMER: You can look at that in two ways, I think. First of all, when one makes a loan, one competes against other vendors of loan products, like finance companies, who don't raise money in the deposit market. And the loan market is set in a competitive environment. Basically the cost of money that goes into your calculations in the cost of a loan is set on your alternative cost of funds, which for a bank, for the most part, is done in the corporate market where we raise most of our money. Not in the consumer market. Now, in addition, if rates do go up, which this has nothing to do with, because it basically allows us to reflect market conditions, so what? The fact of the matter is, should depositors be subsidizing borrowers? And that seems to me what the Congressman is saying. That doesn't make any sense to me at all.

MacNEIL: Is that what you're saying, Congressman?

Rep. SCHUMER: Oh, not at all. First of all, I think to deny that these increases in rates will not cause loans to go up is disingenuous. Every banker I have talked to has candidly admitted that it will cause lending to go up.

MacNEIL: Do you want to candidly admit that, Mr. Hammer?

Mr. HAMMER: If you --

Rep. SCHUMER: Mr. Hammer, you have to admit every bank has to raise their rates if their cost of money goes up, their cost of borrowing goes up. In the IMF crisis your bank has come before me and said exactly that. "We need to charge high interest rates because our cost of money is going up."

MacNEIL: But, Congressman, what about his point that it's the depositors who are subsidizing the borrowers under the regulated system?

Rep. SCHUMER: Well, that point is -- that point is a good point, but the question is, will the damage done to the country as a whole, and borrowers, be greater than the gain to consumers? The banks certainly like it because they can get into all kinds of businesses they had before. It is my view, if you look at the aggregate, the economy as a whole, this deregulation of money has hurt far more people than it has helped.

MacNEIL: You've answered that point earlier about the deficits being the cause of the higher interest rates. What about his points that in your early appeal, and as competition you're offering high rates and not coming clean about the fees and the small print, that later you will have to?

Mr. HAMMER: Well, there are two points there. Not coming clean, that's silly. We have disclosure regulations like anybody else. I think that that is really saying that the consumer is dumb. He doesn't realize what he's getting into.I think that's patronizing. I think it's untrue. The other point -- repeat that again, will you?

MacNEIL: Well, the other point was that you're offering very high interest rates now and they'll come down.

Mr. HAMMER: Yeah. Sure. Okay. That's certainly true. We are offering rates higher than alternative sources of funds, in the same way a razor company offers a free razor if you buy the razor blades. We believe that if customers can come into our bank we can show them the way we can service their accounts, we'll keep them in the long run. And then, when we start paying regular market rates, we'll price those in such a way that we'll be able to stay in business.

MacNEIL: Well, Mr. Hammer, Congressman Schumer, thank you. Jim?

LEHRER: The legislative effort to reform the nation's immigration laws was pronounced dead today. The pronouncer was House Speaker Thomas O'Neill. He said opposition from Hispanic-Americans and President Reagan to the reform bill meant it would not be brought up this year. The legislation is called the Simpson-Mazzoli Bill, and it would establish an identification system for foreign workers, punish employers who hired illegal aliens, and provide a partial amnesty to illegal aliens already living here. Later, the President disagreed with the Speaker and backed the immigration bill. In a White House statement Mr. Reagan said he hopes the Speaker will reconsider and bring the immigration bill to a vote in the House. And we'll be back in a moment.

[Video postcard -- Sussex County, New Jersey]

MacNEIL: In Lebanon an effort is underway to bring all the warring factions together for talks on national reconciliation, possibly next weekend in Saudi Arabia. Not all the parties have yet agreed to meet there. President Gemayel called an emergency cabinet meeting to discuss repeated breaches of the ceasefire, but only minor violations were reported today. In Washington, Lebanon's foreign minister, Elie Salem, told a news conference that his government hoped to have all foreign troops out within six months. He said he hoped some U.S. Marines would stay after that to ensure that Lebanon could govern itself, but not to fight. Jim?

LEHRER: Our final story is about a new series which debuts tonight on public television, a series of 13 programs which examine the Vietnam war, what happened and why, and the legacy it left behind for Americans and all others concerned. We are not in the habit of promoting our fellow public television enterprises, but we also do not want to develop the habit of ignoring something of major significance just because it's on public television. Charlayne Hunter-Gault explains why it should not be ignored by us or anyone else. Charlayne?

CHARLAYNE HUNTER-GAULT: Critics are calling the 13-part Vietnam series a landmark in television journalism. It traces the Vietnam war from its origins in the French colonial period at the end of World War II through the ramifications of the war being felt even today. Six years in the making, the $4.3 million documentary is currently one of television's most ambitious undertakings. It is the story of this country's longest and most bitterly divisive war. Here is how it begins.

[voice-over] It was called America's first television war: scenes like this that came into the living rooms of homes all over America in the mid-'60s were rediscovered. They were culled from more than 100 hours of footage gathered from 80 different sources, including more than 10,000 network news stories. Scores of retrospective interviews are done with political and miltary leaders, policymakers and ordinary people whose lives were touched by the war. And they are interspersed with the once-again live sounds of the war as it happened.

MEDIC [to casualty]: Speak to me. What's your name? Tell me what your name is.

Where you from?

INJURED SOLDIER: Seattle, Washington.

MEDIC: Seattle, Washington. It's a good town. Good town, good town; very good town.

SOLDIER: Got to let me go to sleep now.

MEDIC: Huh?

SOLDIER: Can I go to sleep?

MEDIC: No, don't go to sleep.

HUNTER-GAULT: Choosing the right footage was just one of a number of major problems that the production team had to overcome. Here to tell us about some of them is the executive producer of the series, Richard Ellison. A veteran filmmaker, Mr. Ellison joins us tonight from Boston public television station WGBH, where the series was produced. Mr. Ellison, what was the most difficult problem you faced putting this series together?

RICHARD ELLISON: Well, I think perhaps the most difficult problem was funding it.

HUNTER-GAULT: Why was that?

Mr. ELLISON: Well, any project of this magnitude is difficult to fund in public television terms, as I'm sure you know, Charlayne. And this one, I think, was a bit more difficult than most for a variety of reasons. In the first place, in 1977, when WGBH and Stanley Karnow and I first started to develop the idea and try to interest various funding sources in it --

HUNTER-GAULT: Stanley Karnow is your collaborator on the project.

Mr. ELLISON: That's correct, yes. He's the chief correspondent and author of the book that accompanies the series.

HUNTER-GAULT: Right, continue. I'm sorry.

Mr. ELLISON: When we started going around talking to funders what we heard very frequently was, "Well, nobody wants to know about Vietnam. The country wants to forget it and wants to put it behind it, and there simply won't be any public interest in this." So overcoming that kind of resistance took a long time and a lot of persuasion.

HUNTER-GAULT: How did you persuade?

Mr. ELLISON: Well, one step at a time. We first had to persuade public broadcasting itself to be interested. That, I must say, was not very hard. Then we had to persuade partners to join us. Central Independent Television in Britain and Antenne Deux, the French second channel, both became partners, and made substantial contributions to the project. Then we had to work very hard and develop a persuasive proposal to take to the National Endowment for the Humanities, which we had identified as one of the -- one of the few likely sources for a project of this magnitude and character.

HUNTER-GAULT: Well, let me just interrupt you there for a minute because you mentioned the four crews. You had a British and a French and two other crews. How did you manage to come up with a common treatment and a common theme with that many people involved in a project like this?

Mr. ELLISON: Well, the first thing that we did when we got a production team assembled was to hold a series of seminars. They lasted for five or six weeks. Every day. We called in 30 or more historians, social scientists and other people expert in one aspect or another of the story. These people came from France, Canada, as far as Bangkok, in one case --

HUNTER-GAULT: Well, we'll be seeing that series. I'm sorry to interrupt you, but we're out of time, and perhaps we'll hear the rest of this story at another time. Thank you very much.

Mr. ELLISON: Okay. You're welcome.

MacNEIL: Good night, Charlayne.

HUNTER-GAULT: Good night, Robin.

MacNEIL: Good night, Jim.

LEHRER: Yes, good night, Robin.And we'll see you tomorrow night. I'm Jim Lehrer; thank you and good night.