The NewsHour with Jim Lehrer

JIM LEHRER: Good evening. I'm Jim Lehrer. On the NewsHour tonight analysis of the spreading crisis in the world's financial markets, political commentary by Mark Shields & Paul Gigot, a Terence Smith look at the new burst of Dianamania, and a Richard Rodriguez essay about an important literary critic. It all follows our summary of the news this Friday.% ? NEWS SUMMARY

JIM LEHRER: There was another down day on the world's financial markets. The slide started in the Far East, circled the globe, and reached Wall Street. The Dow Jones Industrial Average dropped 114 points to end the day at 8051.68. It lost 357 points Thursday, and is now down almost 1300 points or 13.8 percent from its July 17th record of 9337. The NASDAQ index of smaller and high-tech firms was down almost 47 points today, closing at 1639.68. Russia's problems continued to be the focus of the markets. Sales of its declining ruble were still frozen. After two days out of sight President Yeltsin spoke in a televised interview. He said he would not resign or be removed from office, nor would he dissolve the parliament. He fired two aides who were prominent advocates of the economic reforms. We'll have more on all of this right after the News Summary. President Clinton reaffirmed today that he would go ahead with his summit next week in Moscow. He said the U.S. will stick by Russian leaders as long as they do the discipline things necessary to reform their economy. Mr. Clinton spoke today at a 35th anniversary commemoration of Martin Luther King's "I Have A Dream" speech. The memorial ceremony was held at a church on Martha's Vineyard, where the First Family is vacationing. The president spoke of forgiveness.

PRESIDENT CLINTON: All of you know I'm having to become quite an expert in this business of asking for forgiveness. And I-[applause]-it gets a little easier, the more you do it. And if you have a family, an administration, a Congress, and a whole country to ask, you're going to get a lot of practice. But I have to tell you that in these last days it has come home to me again something I first learned as president but it wasn't burned in my bones, and that is that in order to get it, you have to be willing to give it. And all of us-[applause]-the anger, the resentment, the bitterness, the desire for recrimination against people you believe have wronged you, they harden the heart and deaden the spirit and lead to self-inflicted wounds. And so it is important that we are able to forgive those we believe have wronged us, even as we ask for forgiveness from people we have wronged. And I heard that first-first in the Civil Rights movement-love thy neighbor as thyself. [applause]

JIM LEHRER: Back in Washington the President's close friend and Deputy White House Counsel Bruce Lindsey made a second appearance before a federal grand jury. The first time Lindsey had refused to answer some questions about the Monica Lewinsky matter on grounds of attorney-client privilege. That claim was later overruled by higher courts. Bonnie became a hurricane again before moving off land and into the Atlantic Ocean today. It pounded Norfolk and Virginia Beach with 75 mile an hour winds and heavy rain. It caused power outages for 278,000 residents, ripped roofs off buildings, and leveled 250 trees, before moving offshore in a Northeasterly direction. Tropical storm warnings are now up from North Carolina to Massachusetts. Forecasters predicted it would veer past Southern New England tonight and was not expected to hit land. Two storm-related deaths have now been reported in North and South Carolina. A search was on today in South Texas for some 176 people. The Federal Emergency Management Agency said they remain missing and unaccounted for since this week's big floods in Del Rio and elsewhere among the Mexican border. Officials said not all are presumed dead. Some may have just moved to higher ground. There have been 17 confirmed deaths in Texas and Northern Mexico from the backwash of Tropical Storm Charley. Northwest Airlines prepared for a pilot's strike at midnight tonight. The company canceled 400 flights scheduled for this weekend affecting 25,000 passengers. Negotiators continued to talk tonight in Minneapolis. The dispute involves pay, job protection, and work rules, among other things. Northwest is the nation's sixth largest airline, carrying nearly 115,000 passengers a day. A second suspect in the U.S. embassy bombing in Kenya was charged with murder in a New York federal court today. Mohammed Sadik Odei arrived in the United States this morning. Another suspect was brought to New York and charged on Thursday. Court papers unsealed today said Odei told FBI agents the embassy bombings in Kenya and Tanzania were carried out by members of a radical Islamic group headed by a millionaire Saudi exile, Osam bin Laden. His bases in Afghanistan were the targets of last week's U.S. missile strikes. The U.S. said today Libya must turn over two Pan Am 103 bombing suspects immediately. The demand followed a unanimous vote last night in the United Nations to lift sanctions against Libya once it complies. Libya said Wednesday it accepted the plan to try the two men under Scottish law by Scottish judges at a court in the Netherlands. But today the Libyan government backed away from the plan and called for further negotiations. The Libyan agents are accused of the 1988 bombing over Lockerbie, Scotland, that killed 270 people. And that's it for the News Summary tonight. Now it's on to the growing world financial crisis, Shields & Gigot, Dianamania Part II, and a Richard Rodriguez essay.% ? FOCUS - GLOBAL PLUNGE

JIM LEHRER: Spencer Michels begins our financial coverage.

SPENCER MICHELS: In Moscow, emotions ran high -- for the fifth day in a row panicky Russians tried to withdraw their savings from banks, while the country's financial system appeared to teeter on the brink of collapse. On orders from the central bank, all ruble for dollar trades were suspended for a third day. The currency market will be frozen through the weekend. Idle traders at the Moscow Interbank Currency Exchange spent their time playing computer games. The head of the exchange said he hoped regular operations would resume soon.

ALEXANDER ZAKHAROV, General Director, Moscow Interbank Currency Exchange: [speaking through interpreter] We are all waiting positive news, we are waiting for political stabilization, we are waiting for concrete economic and political decisions and I think we are all hopeful of hearing such announcements.

SPENCER MICHELS: Again today, the financial crisis in Russia was coupled with the political. President Boris Yeltsin returned to Moscow to conduct business, including firing two symbols of economic reform: Boris Nemtsov and Anatoly Chubais. Chubais was Russia's key government negotiator with international lenders. He had obtained the recent $22.6 billion emergency bailout. Yeltsin later went on television to announce he would remain in office through the year 2000.and throughout the day and night, Yeltsin aides and communist deputies in the parliament were negotiating possible new power sharing arrangements. The deputies want communist-style new economic policies, including currency controls and more nationalized industries. But few Russians believe a remedy will come soon -- no matter who's in charge.

SPOKESMAN: [speaking through interpreter] Should the president resign because of the situation? Yes, I think he should but the situation won't change as a result. It's not the president who's at fault.

SPENCER MICHELS: Around the world news from Russia helped push down markets. Soon after trading began in Japan -- the world's second largest economy -- Tokyo stocks plummeted 3.5 percent of their value, dropping to the lowest level in 12 years. Today Japan's prime minister -- Keizo Obuchi - tried to ease investors' fears.

KEIZO OBUCHI, Prime Minister, Japan: [speaking through interpreter] As for financial administration, we are determined to conduct transparent and fair administration based on accurate rules. We make financial institutions abide by market disciplines and take thorough responsibility. This has to be done to gain markets' confidence."

SPENCER MICHELS: In Hong Kong, stock market transactions were at record volume. In an effort to counter investor sell-offs, the government was buying stocks. But the value of shares fell 1.2 percent, nevertheless. In Europe, on the London Stock Exchange -- Europe's biggest market -- shares made a recovery from their lowest point in early trading but still dropped 2.2 percent to a seven-month low. British stocks lost a total of $34 billion in value. In France, the market was down 1 percent, and in Germany, the losses were between 1 and 2 percent. In New York, where the stock exchange had lost 357 points yesterday, today actually began on an up note, but as the day wore on the Dow Jones Industrial Average lost ground and finished down 114 points, for a drop of 482 points for the week, 5. 6 percent of its value.

JIM LEHRER: And now to Margaret Warner.

MARGARET WARNER: And joining me now are Daniel Yergin, president of Cambridge Energy Research Associates and Co-author of the book "Commanding Heights, the Battle Between Government and Marketplace That's Remaking the Modern World;" Adam Posen, an economist with the Institute for International Economics; Walter Russell Mead, senior fellow at the Council on Foreign Relations; and Richard Jacobs, CEO of Newstar, an international investment advisory firm that focuses on Russia. He just returned from Russia last night. Dan Yergin, is Russia a victim of the kind of global instability we've seen, market instability, all around the globe this week, or is it driving it?

DANIEL YERGIN, Cambridge Energy Associates: Well, at this point it's driving it, but what we are seeing is the kind of contagion you described. What happened in terms of Russia is that part of the factors were external. The Asian crisis affected Russia and secondly, low oil prices affected Russia. But internally, there is this political struggle over the future of Boris Yeltsin, the last act perhaps of Boris, the Czar, maybe the final scenes we're seeing now, and their inability to get a reform package in to reassure foreign investors, particularly to reform their terrible tax system.

MARGARET WARNER: Rick Jacobs, the international financial establishment responded to Russia's plight, and over the last few years has pumped billions of dollars into it. Why is none of that-that IMF bailout and other measures working?

RICHARD JACOBS, Newstar, Inc.: A few things happened. First of all, in 1992 and 1993, the West missed a huge opportunity to go into Russia and help with structural reforms at the industry level. We just sat on our hands as privatization was happening. The response that you're talking about really occurred as speculators entered the market, drove the Russian Stock Exchange to become the highest and best-performing market in the world, but there was very little fundamental analysis of the companies that were being traded back and forth. The net effect has been that we've pumped money in at the top of the economy and have paid almost no attention to the fact that it's been a sort of a cletrocracy. People have been stealing the country blind for the last eight years. I would estimate that about 15 percent of the GDP there is taken up by crime and tax evasion, not just not paying taxes.

MARGARET WARNER: Walter Mead, let's expand this out to the global economy. Is this kind of volatility that we're seeing in Russia and other emerging markets all throughout this week, is this a fact of life now for this new global interwoven economy that we've got?

WALTER RUSSELL MEAD, Council on Foreign Relations: I think it is. In the world economy today, it is in some ways back to where it was in the 19th century, where you had a very integrated global financial market, and a currency union, and in those days, it was common that panics in foreign countries would spread around the world, the panic of 1857 in the U.S. was really set off by the Indian mutiny. And there was another major depression in the U.S. in the 1890's that was triggered when Argentina defaulted on loans to some British banks. After World War II, the people trying to set up a new financial system tried to create a system where capital flows were controlled and currency rates were regulated. We've gradually dismantled that system for a mix of very good and very bad reasons, and the result is that we now have a world economy that's much freer than it used to be, but that turns out to be, you know, free to crash and burn, as well as free to soar to the heights.

MARGARET WARNER: Do you think, Adam Posen, that since we have this freer, more interconnected economy, that you're going to have these-this volatility, these highs and lows?

ADAM POSEN, Institute for International Economics: It's not inherent. Margaret, I mean, freedom is only as good as the information you use with it. You make stupid choices you get burned. And I think the key word that came out in your report was what Japanese Prime Minister Obuchi mentioned, the word "transparency." And what's been happening in the markets is contagion, which means countries that don't necessarily have that much to do with each other economically are having effects on other countries that don't. For example, you have a Russia, which has deep-seated problems, which we've already heard about, mostly in the tax system, but which isn't competing with Argentina, which isn't competing with Turkey, which isn't competing with Korea, and has almost no trade with those countries and yet somehow is affecting those markets. It's not the speed that matters. It's the fact that the markets continue to act like lemmings. They act in a herd and say when somebody's getting out, oh, I should get out too, and that just goes back to what Richard was saying about checking out the individual companies. And this is the part of the IMF agenda that I don't think gets enough credit. The IMF isn't just there to put out money. The IMF has been trying to put forward conditions and standards that countries have to reveal what loans they've got, what policies they're undertaking. And, in addition, there's been U.S. pressure and market pressure for companies to adhere to western accounting standards. I believe over time, assuming we survive this crisis, then we might have learned something from it, and you pay more attention to the individual investments, less to what everyone else is doing, and then if Russia falls, it's a terrible thing, but it doesn't necessarily drag down our markets.

MARGARET WARNER: Dan Yergin, your analysis of this volatility and whether it's inevitable or inescapable.

DANIEL YERGIN: I think it's one difference from the 19th century is technology. Things happen instantaneously. Somebody in Slolensk and somebody sitting in New York and Singapore sees the same information at the same time and can act upon it. And I think, you know, I was thinking as I was listening to this that the kind of just the last few years, the rise that we've seen in the Dow during that time we've really entered a new global economy. Fifteen, twenty, twenty-five years ago there were perhaps seven stock markets where your pension fund administrator could make investments outside the United States. Now there are 90 emerging markets-stock markets alone-and investors vote on those stock markets and on those nations' economies every day, every hour, and every minute. And what we're seeing is this huge negative vote on Asia, now it's a vote-a negative vote on Russia, and it's spreading to Latin America. So it is very interconnected, and it's underpinned, I might add by very cheap communication. Two decades ago it cost $8 to make a three-minute phone call to London from New York. Today I saw an ad the other day-it's 3 cents.

MARGARET WARNER: But Rick Jacobs, all this hot capital flowing around, everyone loved it, and the Asian economies loved it when it seemed to be pumping up the Asian economies. But at this point would you say that also when it flees, it punishes-the President said today it punishes essentially the good with the bad, it even punishes economies that are doing the right things?

RICHARD JACOBS: I think that's true to a degree, but, as was said earlier, the key is really transparency. The problem with instantaneous communication is there's reflection, people act immediately, and I think for example, the drop in the U.S. markets this week should not be attributed to Russia. People are finding that as an excuse. What they really want to do is find a new level for the U.S. markets. I guess it was almost two years ago that Mr. Greenspan talked about irrational exuberance. Well, now our manic depressive side has kicked in, and we're having irrational unexuberance, or whatever you want to say. Russia, arguably, was handicapped by this "hot money." When you pump in large sums of money to a place that can't handle the money, only one thing can happen, and that I think is bad. You cover up a lot of warts. And in the case of Russia, one other thing that happened, I think it also happened in Indonesia-and we're finding it more and more it may have happened in Korea-you see that money also leaves through the back door in ways that you didn't expect-where you have this sort of crony capitalism. I think if you list the countries-Russia, Indonesia, probably South Korea, probably Thailand-and there are some others where you have this kind of absolutely opaque capitalism-lots of things happen below the table, so to speak, that have a big effect. Pumping money in hurts.

MARGARET WARNER: So Walter Mead, what do you think is the likely political reaction to all of this in some of these countries? I mean, in Russia today, for instance, Yeltsin is reportedly talking to the Duma about reasserting some state control over parts of the economy. Is that-do you think that kind of thing is likely to develop?

WALTER RUSSELL MEAD: I think you're going to see a political reaction against liberal market policies, and not because necessarily that reaction is a good idea or deserved, but politicians who are faced with a collapsing economy don't want to blame their crony friends, their crooked deals, or their own incompetence, they'd much rather say, oh, it's this terrible international market capitalism that is backed by the U.S.. And I think we may find that the U.S. is going to end up as a scapegoat in a number of countries, because we've so conspicuously pushed the internationalization of the economy and the dismantling of barriers to flows of capital and sort of that was-that was the way the economy would go forward. I think basically those flows of capital are important and is the way the world economy can go forward, but clearly this process is more complicated than we've led people to believe, and you're going to hear a lot of criticism and Monday morning quarterbacking about how the U.S. did this or that wrong. I mean, he didn't get a lot of popular bitterness about it.

MARGARET WARNER: Well, Adam Posen, does the U.S. and the established economies pay a price if some of these economies, say Russia, for example, steps back, rolls back?

ADAM POSEN: Let's leave aside the special role of Russia, because of their nuclear power. I mean, the war side we have to deal with. Let's leave that aside just a moment. The point is over the long term right now the U.S. economy is very strong. We still only trade less than 20 percent of our economy, most if it with developed countries, and it's not that big of a deal. But over the long term the only way the U.S.-you and I as we get older can make good returns on our retirement money is by investing in emerging markets, because that's where the big advantages are, and this can either be the pension fund going there directly, or it can be a GE or a Boeing or whatever American economy-American company picking foreign direct investment and putting a plant there. But the point is over the long run we need to encourage these countries to play by the rules because it's in all their best interests. And that's the-and play by the rules-I mean, accept some amount of capital, accept property rights, put some limits on the government corruption, accept the fact that you get investments from cross borders and, therefore, you have a responsibility to them. There's no question in the short run there's going to be a backlash but as we see even in Asia and even in Malaysia, which initially during the crisis last summer said some terrible things about the U.S., terrible things about international speculators, actually in the end backed off-

MARGARET WARNER: Dan Yergin, address this back lash question and whether you think it's really threatening to U.S. economic interests.

DANIEL YERGIN: I think that we're going to see it in Russia, we're seeing it in countries like Venezuela, which is also suffering. There's a nationalist reaction in Asia, so it's there. I think that if you look at Russia specifically, you do have to think it is the nuclear weapons, it is the specific concern, and really the specific danger. Russia, itself, was a rather small economy. It's half the size before all of this collapse, only half the size of Brazil. But I think that there is something called confidence, and you really only notice it when it's not there. And a change of mood on the part of investors and sentiment and psychology, which is actually at the basis of markets, that's where the risk is. And if-you know-the stock market is still very high-I think if we saw 8000 a year ago, we would have said that was very high and our economy is strong. But if the negativism carries over to the rest of the economy, that's where the risk is. The other risk is a crisis-a short fall in our banking institution-some collapse that you don't expect. And there is a rule-and we're going to see it happen in Russia, I'm sure, that it turns out that initially what people say are the losses, who's vulnerable, the numbers always turn out to be more and there are surprises, and that's another thing that we're going to have to keep our eye one, and I think we're going to see a lot of effort this weekend to try and bolster confidence so that Monday doesn't turn into a bad Monday.

ADAM POSEN: If I could add one thing quickly, the one way in which there is a short-term risk to the U.S. economy is if Japan drops the ball because Japan is irreplaceable for the stability of economies that are beginning to recover in Asia, and it is a very big trading partner for us and Europe.

MARGARET WARNER: In the couple of minutes we have left I want to talk a little about solutions. Walter Mead, do you think there are international solutions that-I mean, some people are talking about slowing down the flows of capital a little. I mean, address that question, whether there's something that international institutions can look at.

WALTER RUSSELL MEAD: Well, I think we've got to start with the realization that what the IMF has been doing so far in this crisis has not worked, that if you go back to the beginning of this crisis in 1997, when the Thai bat fell, the IMF has considerably underestimated the dangers. It's overestimated the effect of its policy prescriptions, and it has generally failed to achieve the results that it itself said would be achieved by its programs, and so I think we've got to start with the idea that we need some new directions. I think to get into that would take a lot more time than we've got on this show.

ADAM POSEN: I think the key right now in the world today is probably the first time since the late 70's there is no leader in this world. Bill Clinton is hobbled by scandals about which we know the Russians laugh about it, they don't laugh at him; they laugh at us. They think how silly they're worrying about bread next week and we're worrying about somebody's dress. There's a new prime minister in Japan. The jury's out as to whether or not he's a leader, but he's too busy with himself to do anything. Kohl in Germany is running for re-election. France, England-the point is that we have a political crisis that is affecting economies and particularly in Russia right now-it's really a political issue. There's nobody home; there's nobody in charge, and we don't have anybody to address that.

MARGARET WARNER: Dan Yergin.

DANIEL YERGIN: Yes. I think it is a question right now of we need credibility, and if it was not so tragic and potentially so dangerous, the situation with Boris Yeltsin would seem wacko. He appoints people; he fires them; he changes his mind; and he's not a figure of authority. He's hated across the political spectrum, so-when you look around the world, where are you going to find that sort of Rock of Gibraltar? In the Russian situation all eyes-the man of the hour is Victor Chernomyrdin, and he has an enormously difficult situation ahead of him.

MARGARET WARNER: All right. Gentlemen, I'm sorry. That's all the time we have. Thanks very much.

JIM LEHRER: Still to come on the NewsHour tonight, Shields & Gigot, the new round of Dianamania, and a Richard Rodriguez essay.% ? FOCUS - POLITICAL WRAP

JIM LEHRER: And to our regular Friday political commentary from syndicated columnist Mark Shields, Wall Street Journal columnist Paul Gigot.Paul, should the President still go to Russia next week?

PAUL GIGOT: I think he should. He may be beleaguered here. But he's still the President, still has to do his duties, and one of his duties is to be head of state and to act as a foreign policy president. This was scheduled long ago. And the message it would send to Boris Yeltsin and to the Russian people if because Yeltsin is in trouble and this president is in trouble. If he didn't go, I think would be worse than not going.

JIM LEHRER: But, Mark, they were just talking about the need for leadership at the world level. Here you-what about the images next week of these two wounded presidents, these two wounded political leaders standing today in Moscow-Presidents Yeltsin and President Clinton?

MARK SHIELDS: They are two wounded leaders--I mean, the two leaders of very important countries-the most important and in important country-where recent politicians have called for their resignation, and they've refused. But still I agree totally with Paul. Anything that helps strengthen, preserve, keep alive democracy, a free economy, and Russia is important, and don't forget, as Dan Yergin told Margaret Warner, 22,000 nuclear missiles-and if that economy spins out of control at some point those are going to be marketable items.

JIM LEHRER: But, Paul, would it be a mistake for anything, other than a symbolic assistance, that President Clinton could give to President Yeltsin and the Russian people?

PAUL GIGOT: Well, one would hope he'd go over there with a little bit better advice than he's been-than his Treasury team has been giving Boris Yeltsin. I think when Vice President Gore went over there, he was-he said you need to impose a sales tax and get that sales tax to get those tax revenues up. I don't know why you think it would work in Russia any better than it usually works here. The IMF is, as the gentleman said earlier, has been remarkably ineffective in all of this, so if they can come up with a plan to stabilize the currency, maybe you can do some good. But, other than that, I don't think he's going to be able to come over with a lot of cash at this time. He's having a hard enough time just getting money for the International Monetary Fund through Congress.

JIM LEHRER: And speaking of the President's problems, the calls continue, Mark, for the President to say something else or something more about the Monica Lewinsky matter. People are still talking about his speech on August 17th. He didn't go far enough, et cetera. Today he talked about the need for forgiveness and whatever. Where do you come down on this?

MARK SHIELDS: Well, I think, Jim, the division between the elite opinion makers, politicians, political class, or whatever, and the public, I think, is now narrowing. Originally, there was sort of a public acceptance that the President had said it, and I think there's a growing public restiveness, and that certainly that is among Democrats in Congress we saw this week great restlessness and dissatisfaction with the President-Charlie Stenholm, West Texas-I mean, a Blue Dog Democrat-no one's ever accused him of being a liberal bomb thrower-just so that it wasn't Bill Clinton's finest hour. He seemed more mad at Ken Starr than he was sorry for what he had done. And I think that speaks for a lot of people, but I think you get one bite at the apple. I mean, at the-I didn't think from what I saw of the President's statement this afternoon it wasn't helpful; he didn't appear any more contrite, which was one of the problems that people had with the original statement.

JIM LEHRER: How do you feel about it, Paul?

PAUL GIGOT: What's he going to say? This time, I mean it? This time Ken Starr is a good guy? It-you can't-you could have written beforehand the text of a genuine apology. You could think through it. I can't think through what he says now before there's a Ken Starr report that comes out when he has to answer all that again.

JIM LEHRER: All right. Now, the resignation-Tom DeLay, who is the-what, the number 3 in the House leadership on the Republican side, is outwardly organizing an effort to encourage the President to resign. You've talked to DeLay. What can you tell us about that?

PAUL GIGOT: Well, I can tell you Tom DeLay is sincere. He is genuinely offended. He's genuinely angry, and he's reflecting what is a sentiment-an awful lot of people that he says he sees and talks to when he goes out-he's been out this week in the recess talking to audiences for the Republican candidates. He is sincere, and he is sincere, despite what a lot of his colleagues think is pretty bad politics because they think right now the Republicans ought to be quiet. And one of the things he told me, he said, you know, this afternoon I was-I had a Republican member call me up and say, look, I don't want Al Gore to be President of the United States, we don't want him to resign, why are you doing what you're doing? I think DeLay feels somebody has to speak up, but I have to agree with some of his colleagues-I'm not so sure it is a good idea. I think you want at this stage to have a constitutional process go forward by which you can begin to educate the public. And so that if the President is-

JIM LEHRER: In other words, have the Starr report, have the House committee look at it and do decide, in other words, move it along but move it along slowly?

PAUL GIGOT: Well, if a president is going to leave office early, you have to have a public which sees it as a just outcome, and to do that, you have to educate them. And right now, as the polls show, they're not there.

JIM LEHRER: Now, on the other side, you mentioned the Democrats, who are restless on this. The House Minority Leader, Dick Gephardt, has shown some restlessness, particularly only the impeachment question and whatever, and some-it's been interpreted-you talk to him-what do you-what can you tell us about what he's saying on this?

MARK SHIELDS: Well, first of all, Dick Gephardt, like a lot of Republicans, is not particularly interested in the President and Al Gore. I mean, I think that-

JIM LEHRER: Because he may want to run-

MARK SHIELDS: He may want to run-ran for office once before, and he's got a certain hankering for it.

JIM LEHRER: Right.

MARK SHIELDS: Dick Gephardt has been working for 18 months to change history. In the sixth year of a president they really thought they had a chance of winning back the House. They thought there were a bunch of issues that were working their way-the Democrats did on HMO patients reform-and campaign finance reform-and saving Social Security with a surplus-they really-and they thought the Republicans were very much on the defensive, and this, of course, has just blown everything, all those plans asunder, and the 18 months of hard work. So I think there's a certain frustration. The thing about Gephardt is-not unlike Tom DeLay in this sense-he talks to a lot of people-he's a great listener. And he's reflecting, in my judgment, the attitude of so many Democrats in the House who are going to be on the ballot in November. When he used the word "reprehensible"-

JIM LEHRER: In terms of what the President did.

MARK SHIELDS: Of what the President did.

JIM LEHRER: The conduct of the President.

MARK SHIELDS: That was not a contrived word. And Dick Gephardt, if Al Gore is a straight arrow, Dick Gephardt's an eagle scout in personal behavior, and I think his sense of rectitude and his sense of right and wrong was really offended by what the president did.

JIM LEHRER: Now he has not talked about resignation, has he?

MARK SHIELDS: No. He has not talked about resignation, and I think to some degree the resignation is sort of an easy way out. It's sort of the Dr. Kevorkian way-the painless way politically of handling this. The constitutional process, which I happen to think is the wisest and the best in the long run for the country for everybody involved of going through the impeachment hearings, the resignation kind of allows us to get it behind us, which most people want to do. But it puts all the burden on the President to do that.

PAUL GIGOT: I doubt the President thinks it's painless.

JIM LEHRER: Yes. Right. Painless for everybody, right? Former Senator Sam Nunn weighed in with an op/ed page piece this week. He didn't call for the President's resignation. He just thought that it might somewhere down the line be an honorable way to resolve that. How do you read that in terms of its import?

PAUL GIGOT: As a former member of some stature, he has more freedom to say that sort of thing. He's not up for re-election, so I take it as a very serious signal to the President and to other Democrats of how they really feel. And the frustration level, as Mark suggests, is very, very high. You have a-you have all the old questions about the Democratic Party coming back from the 60's morality and that sort of thing. We thought they'd put that to rest. And these kinds of things come back. You have the issues that they'd hoped to bring blown right out of the water because the President is in danger of becoming "the" main national issue. And if he's the main national issue, that's something that would motivate or his behaviors motivate Republicans and not Democrats.

JIM LEHRER: Now we were talking about Vice President Gore a moment ago. There was a development involving him directly this week, of course, Attorney General Reno again restarting the investigation of those telephone-fund-raising telephone calls he made in '96 from the White House. How significant is that?

MARK SHIELDS: Well, I mean, you'd prefer-if you're Al Gore-that it didn't happen, but the 30-day, 90-day-that triggers the 90-day investigation-is almost automatic. It's rare that it doesn't, and I think-let's be quite blunt about it-the attorney general is under great scrutiny, if not pressure, right now with a contempt citation hanging over her head from the Republican Congress. So I think she might have been-

JIM LEHRER: Having to do with not Gore specifically-

MARK SHIELDS: That's right.

JIM LEHRER: But with campaign finance-

MARK SHIELDS: Campaign finance in the 1996 campaign, that's right. So-but the Vice President ironically is "the" voice to carry on the Democratic message in the view of-in lieu of the President's problems right now. And to have him hampered really puts the Democrats at an even more serious advantage if, in fact, he is hampered by it.

JIM LEHRER: Is he, in fact, hampered by this?

PAUL GIGOT: I don't think so by the phone calls, Jim. I think even if the special counsel is named, it's at worst a technical violation of the campaign finance laws, and the new bit of evidence about the vice president's alleged lack of honesty are notes scribbled by an aide. It's hard to make an issue of intent-

JIM LEHRER: We need to explain that.

PAUL GIGOT: Well, it's-there are some notes on a page about whether or not the phone-

MARK SHIELDS: The phone calls.

PAUL GIGOT: --the phone calls the President made were really what-

JIM LEHRER: The Vice President-

PAUL GIGOT: The Vice President said they were-which was to raise soft money, as opposed to hard money.

JIM LEHRER: Right.

PAUL GIGOT: And it's these technical distinctions that-

JIM LEHRER: Soft money can be used for general party purposes, hard money for a particular campaign.

PAUL GIGOT: And just in explaining it, you can see why it's not going to be prosecuted-

JIM LEHRER: I'm really sorry-I'm sorry I brought it up. No, No. I'm just kidding. [laughter among group]

PAUL GIGOT: The real issue here is the pressure on Janet Reno to name a special counsel-

JIM LEHRER: For the whole thing.

PAUL GIGOT: --for the whole thing. Was there a conspiracy to violate the campaign laws overall? And that does threaten the Vice President because it could run right up to 2000.

MARK SHIELDS: Every measure of public opinion the Vice President gets very, very high marks for-in public confidence-integrity and his honesty. He's almost the mirror image-opposite of the President in this regard, and that had been seen by Democrats as an asset going into the campaign of 1998, and I still-I agree with Paul-I don't think he's tarnished or diminished, but if he's inhibited, it becomes a problem.

JIM LEHRER: And who needs it?

MARK SHIELDS: No. Exactly.

JIM LEHRER: Gentlemen, thank you both very much.% ? FOCUS - DIANAMANIA

JIM LEHRER: They're calling it Dianamania Part II. Our media correspondent Terence Smith has the story.

TERENCE SMITH: A year ago Princess Diana's death and funeral brought some 33 million viewers to network news stations, among the highest ratings for the year. Then and since her face has launched a thousand books and magazine covers. Now, with the approach of the one-year anniversary of her death, the Diana deluge has begun anew. The news and cable networks have scheduled an extraordinary total of 25 hours, more than a full day of coverage of Diana's life and death.

SPOKESMAN: Diana-she was the people's princess, but she was his sister.

DIANA'S BROTHER: When she was young, she wanted to be a dancer.

SPOKESMAN: And her daughter.

DIANA'S MOTHER: We don't expect to bury our children.

SPOKESMAN: A Fox Files exclusive.

TERENCE SMITH: Fox News Channel is amortizing the $1/2 million it paid for home video and photographs of Diana by rerunning its special, "The Real Diana," twice this week. It includes exclusive interviews with Diana's brother and mother.

KATHARINE CRIER: Welcome to Fox News special coverage. I'm Katharine Crier.

BRIT HUME: And I'm Brit Hume.

TERENCE SMITH: And proving that it cannot get enough of a good thing when it comes to ratings, Fox News is even rebroadcasting the funeral, itself.

SPOKESMAN: When Princess Diana began a romance with Dodi Fayed-

RENE DELORM: They were definitely deeply in love.

SPOKESMAN: Rene Delorm, Dodi's butler and confidante of eight years-

RENE DELORM: I saw something sensual.

SPOKESMAN: --saw their love firsthand.

RENE DELORM: Something deep.

TERENCE SMITH: And at CBS News, "48 Hours" is devoting its entire hour to Diana. Correspondent Wyatt Andrews' exclusive contribution? An interview with Dodi Fayed's butler. MSNBC is weighing in with a five-day commemoration of Diana. It begins Sunday night.

JANE PAULEY: Remembering the life and death of Diana, Princess of Wales. I'm Jane Pauley and this is Time and Again.

TERENCE SMITH: CNN, which enjoyed a huge ratings boost from Diana a year ago, is running hour-long specials Sunday and Monday night. And if you missed Larry King's special on Diana last December 31st, you can see it again this Saturday night. And there's more on the History Channel-

SPOKESMAN: She was the most famous, most photographed woman in the world.

TERENCE SMITH: On A&E this Sunday night.

SPOKESMAN: Diana was an irresistible paradox.

TERENCE SMITH: And on NBC, which is offering a two-hour documentary Monday night. It's not just broadcasters who are in love with the Diana story. She's on the Internet as well. Newspapers across the country have devoted sections of their web sites to her. In the bookstores Diana takes up a lot of space.

TERENCE SMITH: So for at least the next several days it's going to seem as though it's all Diana, all the time. Joining us now to talk about this Dianamania are media analyst Alex Jones, formerly with the New York Times and National Public Radio; he is now a professor of communications at Duke University and executive editor of Media Mappers on PBS. And Jane Robelot, of CBS "This Morning." She anchored much of that program's coverage of Princess Diana's funeral a year ago and will be updating the story for her viewers next week.Welcome to you both. Jane, let me ask you, what, in your view, justifies this volume of coverage?

JANE ROBELOT, CBS "This Morning:" Well, first of all, as you just mentioned, it was 33 million viewers that tuned in when Diana died. This is a story that pretty much anyone worldwide, certainly Americans, and Britains and Europeans, could tell you exactly where they were when they found out that Diana had died. For some reason her death had a tremendous impact on people and on individuals. It was a story that needed immediacy. We all went to London. We knew that an event like this-the most photographed woman in the world-a woman of Diana's prestige-had suddenly died. And it wasn't just that she had died in a car accident; there was some mystery surrounding her death. The investigation now a year later is still ongoing. So there was no doubt about the fact that this was news. The thing I think that surprised us the most was the fact that it continued to be news for more than a week, continued in Britain to grow. People stood in line for hours in terrible weather circumstances just to sign a book of condolence. The fact that there was such an outpouring of grief worldwide really astounded those of us who were there.

TERENCE SMITH: I think that certainly explains the reason for the coverage then, a year ago. The question is the coverage now and whether, in your view, there's any element of exploitation in it a year later.

JANE ROBELOT: I don't think there's exploitation, at least from the standard news media. From the tabloids I really can't answer for that. This is a person whose life touched so many people. At the time they would have told you they really didn't care that much about Diana. In fact, before she died, she wasn't even on the top ten list of most admired people in the world. And yet, for some reason, she touched us in death. Perhaps it was her vulnerability, the fact that she was a princess and yet she wasn't afraid to reach out to a baby with AIDS, a princess who wasn't afraid to go to Angola and speak out against landmines, and at the same time a beauty, a woman with bulimia, who would talk about her problems, a woman who married a prince and then was divorced from him and was a woman scorned. She was someone that people on some level could relate to. And she still is. If Shakespeare wrote a play, he would probably write it right along these lines. And as I said too, the story continues because the investigation continues.

TERENCE SMITH: All right. Alex Jones, what do you think justifies this volume, this 25 hours of coverage?

ALEX JONES, Media Analyst: I would say that the same legitimacy of this 25 hours is shared by the people in Britain who put Diana's picture on tubs of margarine. I think it is very much the same impulse, and it's just that naked. Don't get me wrong. I was very touched by Diana's death. I remember where I was when she died. And I think that this coverage is going to draw a huge audience, and that's why I find it so deeply cynical, because I think that legitimate emotional impulses are being manipulated, and I think that they're being done for very crass commercial reasons. And I think that that makes perfect sense in the media world we live in, but I don't think it ought to be, you know, passed off as genuine news. It isn't. It's something else. It's a kind of pandering that is dressed up with a kind of piety. I mean, the people who put her picture on the margarine tub also did it as a tribute, and I don't buy it personally.

TERENCE SMITH: So it's the-in your view-the merchandising of the myth or memory?

ALEX JONES: Well, I think it's more important than that. I mean, I don't think anybody is going to be damaged by the coverage that Diana is going to get, the 25, you know, hours and the huge print coverage, but I think there are two things that are genuinely important that make this an important thing to at least think about and one is, what it says about the way news judgments are made. This kind of an investment in time and resources on television is a staggering amount of money and resource represented. It is something that could have been spent in many, many different ways. It was, instead, spent this way. And I think that has a lot to do with the way news judgments are made when they come up against something that is a guaranteed ratings winner. And I think it is also very important to keep in mind that, you know, while this is getting all of this attention, a lot of other things are not getting the space, the airtime, the resources that they might have. Let me give you an example. USA Today this morning-now this morning's newspaper mostly across the country talked about the virtual meltdown of the Russian economy, the biggest stock market loss in years. USA Today devoted at least, I would say, a third of its front page to Diana. I think there was no news in it. There is no news in any of this coverage because everything that has been found out about Diana in the year since she's dead has already been reported, so-

TERENCE SMITH: Let's put that question to Jane Robelot. Jane, is there anything new, anything more to be said about the Diana story, anything that resembles news?

JANE ROBELOT: Well, obviously, there is and if there weren't news, then people wouldn't want to read about again and again. If people didn't want to read about it, it wouldn't be there. And as I said, the investigation is ongoing into the crash. Whether or not there will be lawsuits filed, how much responsibility did the sole survivor of the crash, Trevor Reece Jones actually have, did he try to prevent the crash, was there a death threat made against him because he knew things-these are all questions that continue to be answered, but also just the public's thirst for more information makes it news. And I would argue that the media didn't put Diana's picture on a tub of butter, or on a lottery ticket; you know, her charities did. And that's a totally separate issue. We also find that laughable. Granted, our top story today on CBS "This Morning" was the failing Russian economy, the failing Asian markets, and the impact that it has on your pocketbook at home. Do people want 25 hours of coverage of that? I don't think so. Is there continuing developing information on that? Not really. Not until the markets open on Monday. So, yes, that's a big story; yes, we gave it proper coverage. Actually, I don't think you heard anything about Diana today. Yesterday, though, interestingly-and I'd be interested to hear Mr. Jones' opinion on this-yesterday Tom Fenton, our chief European correspondent, reported that 80 percent of the people in Great Britain don't feel like Diana's-the anniversary of Diana's death should be commemorated at all. Well, we find that very interesting, and, in fact, I have to say that, if you look at some other notable person, say if a president were assassinated, one year after that you could, of course, have a great deal more coverage than you have a year after the anniversary of Diana's death, marking the one-year anniversary of her death too, compared to last year, there's much less coverage, TV-wise.

TERENCE SMITH: Alex.

ALEX JONES: I think it's just that cynicism about the genuine emotional appeal of Diana that I find most offensive about this whole situation, because, you know, it's true. People want to read about Diana. They are curious about her. They did love her. They were affected by her death. But, to me, it's the-it's very much like the greeting card industry creating Grandparents Day. It's a legitimate, emotional thing that's being manipulated. And it's not being manipulated because of news. It's being manipulated because it will draw that audience. And there's something, as far as I'm concerned, that is not a tribute there. There's something that's very deeply cynical.

JANE ROBELOT: Could I just jump in really quick. If people didn't care about Grandparents Day, then Hallmark wouldn't be able to sell any cars.

ALEX JONES: Well, I think the thing is not that people don't care about their grandparents. The question is trying to opportunistically exploit that emotional feeling in a way that is really not legitimate.

JANE ROBELOT: Is it exploitation, or is it an opportunity to be able to say, Grandma, I love you?

ALEX JONES: Well, I mean, that's, I guess, for the individual to decide. I think that there are going to be a huge number of people who are going to tune in to the 25 hours of Diana coverage. I don't think that makes it right as a media decision, as a news decision. We're talking about in many cases not People Magazine but news organizations, news organizations that do have limited resources. So what do they spend it on? They spend it on something that is not news but does have the potential to grab a lot of people by their hearts, and I think it's rather tawdry.

TERENCE SMITH: Okay. I have to end it there. But thank you both because there's 25 hours ahead of us. We'll stay tuned. Thank you.% ? ESSAY - CULTURAL LEGACY

JIM LEHRER: Finally tonight literary critic Alfred Kazin, as observed by essayist Richard Rodriguez of the Pacific News Service.

RICHARD RODRIGUEZ: Alfred Kazin, the great literary critic and cultural historian, died in June on his 83rd birthday. The passing of an intellectual like Mr. Kazin is probably of less moment now than in any time in our history, such as the roar or the din of pop culture, more notice is taken of the drug overdose of a rock star. Alfred Kazin belonged to another American, to a wonderful generation of writers and critics, known now as the New York intellectuals. Their influence extended from the 1930's to the late 1960's. Many of them were Jewish, the sons of working-class immigrant parents. Many began their journey to the great world by going to City University. For many reasons my favorite Kazin is "New York Jew," his memoir of coming of age, working for magazines, and writing essays. Today one meets kids at Stanford or Yale whose intellectual ambition is to design video games in Silicon Valley, or to write apocalyptic screen plays in Hollywood. Alfred Kazin's dream was to write for the "New Republic" magazine. Imagine New York in those decades when the city trafficked in ideas, a circle formed, intellectuals who were friends and rivals. Alfred Kazin knew Irving Howe, who knew Dwight McDonald, who knew Lionel Trilling, who knew Edmund Wilson, who knew Clement Greenberg, who knew Delmore Schwartz. There are lots of reasons why the New York intellectuals faded in importance by the late 60's. American culture had grown national. Los Angeles and Washington became serious rivals. The jet airplane and the expansion of higher education dispersed the intellectual life to every corner. And the old debates about Stalin and Trotsky didn't matter to the new left of the Vietnam era. Finally, one must say too that high intellectual culture had given way by the 1960's to mass entertainment. Today the preferred accent at many of America's journals and magazines is British, not Brooklyn. The obsession is with pop, not high culture. It's not the literary scene Alfred Kazin knew as a young man. I think of Alfred Kazin's most acclaimed book, "On Native Grounds," published in 1942. His conversation with Hawthorne and Whitman and Dickinson, this immigrant son, the outsider, had the chutzpah to take on high American culture, to make it his own. At Kazin's death a friend of his with affection called him "a dinosaur but a giant." This dinosaur continued writing until the end, brooding over the legacy that America gives each new generation, our American culture. His most tender book was his childhood memoir, "A Walker in the City," published in mid-life. It is a book about Brooklyn when he first knew it-Brownsville, his neighborhood, the Jewish stores, the public library, the downtown movie palaces where his parents saw magic on the screen. As a teenager, Kazin used to spy from the Brooklyn side of the river the towers of Manhattan, which were symbols of the public life-"Beyond, beyond, beyond was the city," he wrote. I remember reading "A Walker in the City" one summer night when I was a boy in the Central Valley of California. I was a fool of generation and several thousand miles away from Kazin's New York. There was Spanish in my house, not Yiddish. But in that wonderful way that books allow, one life sharing with another, I walked with Alfred Kazin through Brooklyn. That is what I remembered when I saw the small notice in the local newspaper that the old man had died of cancer on his 83rd birthday. I remembered Alfred Kazin, a boy in Brooklyn, myself a boy as reader, the two of us intent on assuming an American voice, on joining our voices to the chorus that has sounded through generations before us. I'm Richard Rodriguez.% ? RECAP

JIM LEHRER: Again, the major stories of this Friday, the world's financial markets took another slide. The Dow Jones Industrial followed, with a 114-point drop, after losing 357 points on Thursday. Russian President Yeltsin said he would not resign or be removed from office, despite his country's economic crisis. President Clinton said he was going ahead with his summit in Moscow next week. And Hurricane Bonnie moved off land and into the Atlantic Ocean. An editor's note before we go tonight: It has to do with Scott Ritter, the U.N. Arms Inspector who resigned in protest of the way the United Nations and U.S. were handling Iraq. We were set to do a Newsmaker interview with him last night. It didn't come off, because Mr. Ritter got caught in a traffic jam on the way to the studio in New York City. We have rescheduled it for Monday night. We'll see you then and on-line. Have a nice weekend. I'm Jim Lehrer. Thank you and good night.