The MacNeil/Lehrer NewsHour

Intro

JIM LEHRER: Good evening and Merry Christmas. The news on this holiday was led by a message from the Pope about living right in an evil world, a birthday celebration in Bethlehen, more death in South Africa and a volcano eruption in Italy. We'll have the details in our news summary. Charlayne Hunter-Gault is in New York tonight. Charlayne?

CHARLAYNE HUNTER-GAULT: The NewsHour tonight looks at these stories. What's happening with the children of the homeless? Elizabeth Brackett reports. We'll find out what's behind the latest round of airfare wars. We'll hear a debate over the federal government's effort to police illegal stock market activity known as insider trading, and we have an essay about the true meaning of Christmas in the heartland. News Summary

LEHRER: The lead story of this Christmas Day was the celebration of this Christmas Day. In the Vatican, Pope John Paul II delivered a Christmas message to 30,000 people in St. Peter's Square. He said we should live sober, upright, godly lives to counter a world that is too often defeated by the temptation of arrogant power and oppression and by starvation and mass suffering.

In Bethlehem on the occupied West Bank of the Jordan the birth of Jesus Christ was marked on the spot where he is believed to have been born. Thousands of people from around the world crowded into the Church of the Nativity on the site. There was singing and praying in several languages. In this country, President and Mrs. Reagan spent Christmas Day at the White House. The President received a blue sport coat as his big present. They had a big turkey dinner with 22 family members and friends. Nearby, in downtown Washington as in countless other cities and towns across the country, free Christmas dinners were served to homeless and other needy people. These were treated to a dinner of ham and sweet potatoes.

HUNTER-GAULT: In South Africa today as the deaths of four more blacks were reported, Anglican Bishop Desmond Tutu appealed to his countrymen to work for justice and peace in his Christmas Day sermon. In Cape Town Winnie Mandela declared Christmas a day of mourning for blacks. Mrs. Mandela spoke after visiting her husband Nelson, who is serving a life sentence for plotting to overthrow the white South African regime by sabotage. Mrs. Mandela says this is the worst of the 21 Christmases he has spent in jail, because he is now being held in solitary confinement following prostrate surgery a month ago. Elsewhere in South Africa a clash between two black tribes near Durban has left 53 dead and nine injured, according to police. Police said they did not know what started the clash, but that the situation was now calm. Those involved in the melee were members of the Pondo and Zulu tribes.

LEHRER: A volcano erupted today in Italy. It triggered an earthquake, which led to the death of one person and the injury of 12 others. It happened at Mt. Etna, Europe's most active volcano, near Catania, Sicily. The dead and injured were staying at a tourist hotel on the mountain's slope. It was split in two by the earthquake, and then it collapsed. Four rivers of hot lava flowed and continue to flow down Mt. Etna, but so far no populated areas are in jeopardy.

HUNTER-GAULT: The investigation into Monday's fiery plane crash in Concord, California, is continuing. Today an official from the National Transportation Safety Board said the pilot of the small private plane was urged by controllers to bypass the fog-bound airport and land 20 miles away, but he never answered. The crash into a crowded shopping mall occurred moments later, killing the pilot and three others. Seventy-six were injured.

LEHRER: Seasons greetings from Uncle Sam will begin arriving tomorrow. The Postal Service will deliver the first mailing of 1985 income tax forms. This year the form will include a letter from Roscoe Egger, the head of the Internal Revenue Service, apologizing for the delays that occurred in sending out refunds last year. They were caused by problems with a new computer, and Egger says he believes it will not happen again.

HUNTER-GAULT: Still to come on the NewsHour, Elizabeth Brackett reports on the growing number of homeless children; we find out what's behind the latest round of airfare wars; we hear a debate about government policing of illegal stock market activity known as insider trading; and we have an essay about the real meaning of Christmas in the heartland. Homeless Kids

LEHRER: Christmas, among its many glories, is the time children go home to love and be loved. Our lead segment tonight is about children who do not go home because they are homeless. Elizabeth Brackett reports from Chicago.

ELIZABETH BRACKETT:[voice-over]: Nelson Gonzales is 17. He's been on the street for three years. His father is in prison, his mother is in the city somewhere; he's not sure where. Unable to cope with the teenager, she threw him out when he turned 14.

NELSON GONZALES: I stood in hallways on Diversy Street, hallways, porches, stolen cars, trucks.

BRACKETT: Did you ever get in trouble? Did you ever get hurt staying in hallways or cars?

Mr. GONZALES: I've been harassed a couple of times but never hurt anything.

BRACKETT: Were you afraid?

Mr. GONZALES: Yeah, especially in the cars because you don't know what might happen in the streets, but you just have to put up with it.

BRACKETT: Were these cars that were just parked on the street?

Mr. GONZALES: Mostly friends that I knew. I would, like, tell them leave the door open and I'll take care of the car and I would just sleep in it, get up before they go to work.

BRACKETT: Where did you do things like take a shower?

Mr. GONZALES: Parks, YMCAs, Boys Clubs.

BRACKETT: So what's your day usually like now?

Mr. GONZALES: They're long, boring, hard, especially when you're broke and stuff, you know? You can't stop in a restaurant, drink coffee, spend a couple of hours in there drinking coffee or nothing like that.

BRACKETT: What are the places you go to get out of the cold?

Mr. GONZALES: O'Hare Airport, library, corner stores, restaurants, act like if I'm going to shop for something. I'll just walk around the stores for awhile, warm up.

BRACKETT: Do you get chased out of places like that?

Mr. GONZALES: A lot of the times. But I understand why because, you know, it's knocking down their business. You see people hanging out there and they're going to say, well, these people don't have no discipline for themselves.

BRACKETT: What was it like at the airport?

Mr. GONZALES: It was comfortable but, you know, everybody looked at you like you were alienized or something, like if you were some kind of creature. So you just had to put up with that.

BRACKETT: What's that make you feel like to not have a home?

Mr. GONZALES: It makes me feel like, you know, I'm not nothing, like there's nothing good in me. Like hobos -- like a hobo and stuff like that. I know better.

BRACKETT [voice-over]: Those who deal with homeless youth say it is that feeling of alienation, that lack of identity and self-esteem that is so devastating for the homeless in the long run. Youth worker Pete Hall.

PETE HALL, Transitional Living Program: It makes you real anti-social and untrusting, you know, and makes you -- they have no friends. It's real hard to get close to people like that because if you have no one to love you, no one in the world, it's very difficult. It's very bad because you don't trust anyone. And if you're out there on the streets you can't trust anyone. It could mean your life if you trust anyone.

BRACKETT [voice-over]: Paul found 18-year-old John Wisniski on the streets on the city's north side. John's mother is institutionalized. When John's father lost his home, so did John.

JOHN WISNISKI: Well, my dad was evicted one night and then I had a girlfriend staying with me and I was going to move in with her and everything just fell downhill.

BRACKETT: Could you stay with your dad?

Mr. WISNISKI: No. He's living with a friend right now.

BRACKETT: There's no room?

Mr. WISNISKI: No.

BRACKETT: What has your dad said to you? Have you asked him?

Mr. WISNISKI: I've asked him but the other guy doesn't agree with it because he's afraid of him getting kicked out, you know?

BRACKETT: So where do you keep your clothes and stuff?

Mr. WISNISKI: In the trunk of Pete's car.

BRACKETT [voice-over]: Like Nelson Gonzales, John spends much of his day walking the streets. He rarely talks to anyone. He spends most of the time trying to figure out how to get out of Chicago's bitter winter weather, trying to figure out where he will spend the night, trying to find food. Today he will join other homeless people in a soup kitchen set up by a group who call themselves the Jesus People. Pete Hall has gotten John into a government job training program and has encouraged him to finish a high school equivalency course.

Mr. WISNISKI: I haven't went to any GED classes. I haven't been able to go the last three weeks because of where I've been staying. It's either -- if I don't have the money to get from where I'm staying -- you know, I was staying on an Ironton out in West [unintelligible], and that's quite a hike, you know, to get back and forth. So I just haven't had the time for it, between that and looking for work.

BRACKETT: Are you going to try to get back to school?

Mr. WISNISKI: Yeah. Soon as I get me a place. I'm already registered and stuff. I should go over there and see about re-arranging my classes for night school.

BRACKETT [voice-over]: Nelson Gonzalez[sic] has managed to stay in school for most of the last three years, a remarkable accomplishment for a boy living in hallways. During the freezing winter months Nelson has found a place to sleep in this church-sponsored shelter on Chicago's Near West Side. But like most overnight shelters, the doors do not open until 10:30 p.m., and everyone must be out again by 6:30 a.m. There are few facilities in this shelter. That has made staying in school for Nelson unusually difficult.

Mr. GONZALES: I would get embarrassed going to school with the same clothes on for two, three weeks in a row, and I'd just say to myself, "Nelson, you know, you've got to do something about this." I'd, like, stop going for a week and the next week I would go, you know, back and forth, son, it hurts a lot.

BRACKETT: Did the teachers ever say anything?

Mr. GONZALES: Some of the teachers help me a lot, but, you know, I didn't want to depend on them too much. I felt bad, you know, living at the shelter and going to school at the same time because that made me look like, you know, like if I was irresponsible or something.

BRACKETT [voice-over]: Across the city on the south side of Chicago, another youngster knows the difficulties of staying in school while living in a shelter. But 12-year-old Maecherrie Whiteside has one big advantage over Nelson. Maecherrie has a mother determined to see that her daughter continues her education. Zanobia Whiteside and her daughter joined the ranks of the homeless when Whiteside's welfare check was cut, but her rent in public housing stayed the same. After her eviction, Whiteside found a shelter run by nuns, but it is miles from her daughter's school. This morning temperatures were well below zero, but at 6:45 a.m. Maecherrie and her mother were already on their way. Whiteside does not want her daughter to make the long, cold trip alone so the two ride the buses and stand on the rapid transit platforms together. It takes Maecherrie two hours to negotiate the three buses and one overcrowded train that take her to her West Side public school. Once in school Maecherrie does well, but her teacher says homelessness and life in a shelter have taken a toll on her work.

PHILOMENA GUERRA, Chicago teacher: She tries very hard. She probably could do much better if she were to stay in one school for a length of time. She has that potential; you could see it there. Her reading is beautiful. As I said she reads with expression beautifully. Her math needs a little more work, but then I think it's because she misses out on the basic concepts by moving around. But once she's stabilized in an area I think she will do very well, because she has the ability.

BRACKETT [voice-over]: Back at the shelter Whiteside tells her daughter she will stay in school, despite the distance and the cold. Whiteside tells her daughter she will stay in school, despite the distance and the cold.

ZANOBIA WHITESIDE: You don't want to be going from school to school because they may lose your records and things like that, and that was really your main concern, and rather for them to lose your records you're willing to catch the bus and then the El and maybe a couple more other buses going to class. You don't like to miss days.

BRACKETT [voice-over]: Sister Connie Driscoll runs the shelter where Maecherrie and her mother have found a bed. Unlike the overnight shelters, women and children can stay in this shelter for 120 days. Sister Driscoll says trying to keep children in school is just one of the problems homeless families face. The impact of being without a home, says Sister Driscoll, is long-lasting.

Sister CONNIE DRISCOLL, shelter operator: The psychological effect of absolutely having nothing, being on the bottom, and anyone that doesn't have a home, that has nothing, you know, the depression that sets in and that psychological effect of, "My God, what has happened to me, no one cares," I think that's the most devastating part of homelessness.

BRACKETT [voice-over]: This Christmas party at the shelter helps to relieve the feeling that no one cares. Tracy Young and her brother Nicholas were delighted to receive small gifts from Santa. Their mother was relieved to see smiles on her children's faces. Tanya Young and her three children wound up on the street when her apartment building was sold and the new owner would not allow children. The Young family was then in Michigan and Tanya Young brought them to Chicago to look for work. But after weeks of living in motels, Young's money ran out and she found shelter where she could.

TANYA YOUNG: Well, we stayed at Union Station overnight, and it was very cold, sort of like tonight. And then all day and, like all the next day. And, well, I was calling this place to find out if they, you know, would have an opening. But they didn't have an opening for like three days and on the third day they had the opening.

BRACKETT: So you had to stay in Union Station that whole time while waiting for this?

Ms. YOUNG: It was raining out and then it was snow-rain. We couldn't go outside, so we stayed in there.

BRACKETT: Did you ever think you would wind up staying in a train station overnight with your kids?

Ms. YOUNG: Never. I never -- I worked, you know, for, like I said, 14 years as a waitress and I've always had money and always had shelter and food and clothing for the kids, and always had a car. And now I don't have any of those things, and it's just -- everything came at once, within, you know, like, five weeks, and I can't -- I just never thought I'd be in this position.

BRACKETT: Those who deal with homeless families say the problem has gotten worse in the last five years. Part of the reason is vacant lots like this one on Chicago's south side. Apartment buildings used to stand here, but they deteriorated and were torn down. Over 300 apartment units have been lost in this 10-square-block area in the last five years, yet no new low-income apartments for families have replaced them.

Sister Driscoll says that lack of low-income housing means it is women and children who are the new homeless. Five years ago it was unusual to find homeless women and children. Now in Chicago they make up close to half the homeless population.

[interviewing] Where do you find those mothers and children?

Sister DRISCOLL: Well, we don't find them. They find us. We get calls from all over, from hospitals, from police stations, from Department of Human Services saying that they have a mother and children, or even neighborhood people will call.

BRACKETT: Do mothers and children stay on the street?

Sister DRISCOLL: Many do, yes. Not only do they stay on the street. They ride the Els back and forth because it's a very safe place. They'll go into police stations and then sometimes they go into overcrowded apartment situations or they'll live in doorways. They just do any number of things to protect themselves.

BRACKETT [voice-over]: As the numbers of homeless families soar, public and private agencies have run out of resources to help them.

Sister DRISCOLL: Our average turnaway here is running at just about 650 mothers and children per month. I rather suspect that every shelter in the city is experiencing the same problem. The need is not just there now. It's growing by leaps and bounds. And I'm not sure how we're going to stem the tide of homelessness, particularly given the economics of today. They talk about the stock market is going crazy, everyone is having a wonderful time with it, but it has not helped the poor. And what we see is the rich getting richer and the poor getting poorer, and unless the city starts taking some steps right now about creating decent housing stock, I don't see an answer to the homeless problem.

BRACKETT [voice-over]: The city administrator in charge of the problem of the homeless insists that the city has enough beds to get the homeless off the streets during Chicago's bitterly cold winters, but she too admits that a long-term solution is much more difficult.

[interviewing] How many beds do you think you need to meet the need right now?

JUDITH WALKER, Commissioner, Human Resources: I resist answering that because I think the issue is low-income housing, and I don't think that the number of shelter beds -- shelters by definition are transitory. Shelters for children is not a place to live. What we need is two things. First, we need a low-income housing strategy that provides housing which is within the resources that poor women can live with. I think that is a base issue. The second is we need to provide support services -- counseling services to help women understand how to cope and get them into situations.

BRACKETT [voice-over]: Sister Driscoll has come up with her own long-term solution for one homeless child. At age 52 the nun has become a first-time mother. Final adoption papers were signed the morning of our visit for Sister Driscoll's baby daughter. The child of a drug-addicted, institutionalized mother and a mentally ill father, the child would also have been institutionalized without Sister Driscoll.

[interviewing] Is this something you'd thought about for years?

Sister DRISCOLL: I have never thought about it.

BRACKETT [voice-over]: And how does it feel?

Sister DRISCOLL: It feels wonderful! I'm totally delighted. She's a beautiful, beautiful child. She's a biracial child, but she's very pretty, very beautiful and I think she's going to be just fine.

BRACKETT: Since you've never really imagined motherhood before --

Sister DRISCOLL: That was a real shock. You know, I mean, I've been around a lot of children, I've been around my own nieces and nephews, even when they were small, but to be a full-time mother, 24 hours a day, that was quite a shock. But I'm enjoying it.

BRACKETT [voice-over]: But most homeless children will never know the love of a Sister Driscoll. Most, like Nelson Gonzales, will stay on the street, coping the best way they can, trying to deal with what, for Nelson, is the toughest part of living without a home.

Mr. GONZALES: The loneliness. For me it's the loneliness, because I can't hardly trust nobody, you know. I feel like there's nobody on earth that I could trust at this moment, because everything -- you know, I've been hurt spiritually, physically, mentally, sexually. I've been hurt every way there is so, so I just don't trust nobody at this time.

LEHRER: That report by correspondent Elizabeth Brackett. Still ahead on the NewsHour tonight, the whys of the latest airfare wars, a debate about government efforts to halt insider trading, and an essay about Christmas in the country. Cutting Airfares

HUNTER-GAULT: Our next focus is on the latest marketing weapon in the great airlines fare war, or what might be called the aviation industry's Christmas present to travelers. It's the special cut-rate ticket that's good only on Christmas and a few other days when most people normally don't want to fly. [voice-over] This was the scene at LaGuardia Airport in New York this Christmas morning. A day earlier it would have looked like a battle scene from War and Peace, with thousands of travelers trying to get somewhere before the real holiday began. Christmas and Thanksgiving themselves are normally a lot quieter at the airport, so last Thanksgiving the airlines tried offering deep discounts for anyone who would fly on the holiday itself or the two days afterward. It worked, and today several airlines, including American and Continental, tried it again.

FLIGHT ASSISTANT, Continental Airlines: Attention, all passengers traveling in Continental Flight 461, golden jet service to Denver --

HUNTER-GAULT [voice-over]: Continental's Flight 461 to Denver would normally be only about a third full on Christmas Day. Not today.

JOHN HARDEY, Continental Airlines: Today we did about a 50 load factor, which is quite a bit higher than what we would expect to carry on a Christmas Day.

HUNTER-GAULT [voice-over]: The ticket counters at American and Piedmont looked almost as busy as they would on a normal Wednesday. Most people we talked to thought they could have their cake and eat it too.

1st TRAVELER: -- going to Wilmington, North Carolina. I already had a ticket and the round trip would have been about $178, staying until Monday, which I didn't want to do anyway. Then I heard about the savings, and I'm coming back on Saturday, and it's costing me $98.

REPORTER: And it's worth it to you to fly on Christmas when everybody else is relaxing with their families?

1st TRAVELER: Well, no, my family is down there. I'm going to be with them. I'm arriving at 2:45, we're having dinner at four; I have the best of both worlds.

2nd TRAVELER: If I flew out of Philadelphia to go to Toronto, it would have cost me about $180, $185. American Airlines is offered it for $88 round trip. It's quite a savings, isn't it?

REPORTER: And it's worth it to you to fly on Christmas?

2nd TRAVELER: Correct.

REPORTER: You're going to spend all of Christmas at 35,000 feet.

3rd TRAVELER: That is wonderful. I'm meeting a new daughter-in-law. They're going to hold Christmas dinner for us there. We're going to Palm Springs, out of the snow. I mean, what more could you want for Christmas than that?

REPORTER: And you're saving $250.

3rd TRAVELER: That's right.

HUNTER-GAULT: Now to find out what all of this could mean for the airline business and consumers. The person who knows is Jim Brown, marketing reporter for Aviation Daily, a leading newsletter for the airline industry. He joins us from public station WFYI in Indianapolis.

Mr. Brown, why are the airlines offering all these good deals?

JAMES BROWN: Well, there are a number of reasons. Probably two are the most important. One, the airlines are continuing to add to their capacity. In other words, they're adding a number of new seats, a number of new flights and new aircraft to their offerings at approximately about a 10 annual pace each year. But at the same time, airline traffic, the number of passengers who are actually traveling, is only growing at about a 4 annual rate, so that the number --

HUNTER-GAULT: Why is that? I mean, why is it that demand is slower than capacity?

Mr. BROWN: There are a number of theories basically. One of the most well accepted is the fact that at this point and during the fall there were a number of special deals offered by automobile companies and dealerships that made a number of people, or persuaded a number of people, large numbers of people, to purchase automobiles instead of traveling. There was also the fact that this year special 30-day advance-purchase fares, called ultimate super-savers, were first introduced, and several major airline executives thought that might borrow traffic, so to speak, from the future. So there are a number of different theories about them, but just the two that I mentioned are probably the most well-accepted.

HUNTER-GAULT: What kind of customers are the airlines trying to attract with these rates?

Mr. BROWN: Mostly leisure travelers, travelers that can travel on the light days, that don't mind traveling on the lighter days of the year, some days that are a little bit more inconvenient than others, and also some travelers that maybe have never traveled before. Some American and United executives said, in analyzing these so-called "turkey fares" that were offered during the Thanksgiving period, that there were a significant percentage of those during that period that had never traveled before in their lives, and now the Air Transport Association is saying that in this year approximately 70% of all adults in the United States have now traveled by air at some point during their lives. So that's pretty significant.

HUNTER-GAULT: How successful has this whole effort been?

Mr. BROWN: The Thanksgiving fares that were offered, for the major airlines, American, United and some others, were pretty successful in terms of getting more people on their flights, getting more revenue per seat and just basically filling up their airplanes. But the majors also have an advantage in that they have computer reservation systems that are now sophisticated enough that they can analyze the types of flights and the types of service around the country that are better to offer those special fares at. There are others that would normally be more full, and so those flights don't get as many lower fares. The other flights that normally don't have as many passengers on them, on those flights more seats will be offered at the lower fares. So it's a process of having more data available, and the major airlines, which are larger and have their own CRS systems are able to do that.

HUNTER-GAULT: CRS? Computer reservation systems?

Mr. BROWN: Computer reservation systems, right.

HUNTER-GAULT: Do you expect this to continue beyond the holidays, or is this just something --

Mr. BROWN: Yes, I think so. As a matter of fact, United and American have already announced special discount fares that are available through at least March 20th, and those range basically from $58 to $158 round trip, and they have some restrictions. Normally you have to purchase those at least 30 days in advance. There is a 25% fee for any change in travel, and normally you have to stay over on a Saturday night as well. But they are still -- they are approximately 75% off full coach fares.

HUNTER-GAULT: How is the poor consumer expected to figure all this out? I mean, even just listening to you -- the super-saver, the super-super-saver, the 25% here, there. I mean, how do you do it?

Mr. BROWN: It's very difficult for the consumer and, as I pointed out a couple of days ago to someone, the travel agent has become a much more integral part of the link between the big and the smaller airlines and the consumer these days, because there are so many specifics that are tied to any particular airline fare or any particular promotion that is offered. And normally travel agents will keep as much up to date as they can in terms of knowing these specifics and finding out what's the best available fare for any particular passenger.

HUNTER-GAULT: Well, who's going to fare the best in all of this, the consumer or the airline business?

Mr. BROWN: Well, I think in the short term the passenger especially is going to benefit, but the larger airlines in their ability to target certain markets that have the least amount of traffic and the least amount of demand, it will help them over the long run, too.

HUNTER-GAULT: Does that mean it's going to drive out some of the smaller ones?

Mr. BROWN: Well, there is some thought that during a period of low demand like this that there may be a continuing consolidation of the airline industry. There have been one or two smaller bankruptcies of some smaller carriers in the last few weeks. There is, I think, still some looking ahead to perhaps some larger carriers consolidating with other carriers during 1986. It happened to some degree last year, as well.

HUNTER-GAULT: All right, well, we'll keep in touch. Thank you for being with us.

Mr. BROWN: You're welcome.

HUNTER-GAULT: Jim? Insider Trading

LEHRER: The girlfriend of the president of the XYZ Corporation hears him say over lunch that XYZ is about to merge with the DEF Corporation. She excuses herself, calls her broker and buys 1,000 shares of XYZ stock. That kind of awful thing is the subject of our next major segment, to be conducted by Judy Woodruff.

JUDY WOODRUFF: Our focus is an illegal stock market activity which some experts say is running rampant. It is insider trading, the illegal use of confidential information to make profitable stock trades. June Cross has this report.

THORNTON BRADSHAW, Chairman, RCA: This merger will enable our new company to be number one in the world in business areas that are vital to America's future. The merger is a good thing for RCA, for General Electric and for our nation.

JUNE CROSS [voice-over]: It was a big deal and a major announcement December 11th, when General Electric and RCA told the world they were going to merge. But some people seemed to know beforehand the merger was coming. In the week prior to this press conference, RCA stock rose 16 points, one-third of its market value. That led to accusations of insider trading, and the RCA-GE deal is not the first time this year that such charges have been leveled. ABC stock soared more than 60% in the months before the announcement of its takeover by Capital Cities. MGM-United Artists rose 50% in the month leading up to its takeover by Ted Turner. And Macy's stock price increased 15% in the week before senior management announced a plan to buy out its public shareholders. All of these cases raised the possibility that some players in the market are profiting from non-public information, a violation of the federal law against insider trading. Bill Lefevre is a veteran broker and market strategist at the Wall Street firm of Purcell Graham and Company. He talked to MacNeil-Lehrer reporter Bill Shebar.

BILL LEFEVRE, stock market analyst: I'm sure that there are people trading on inside information. The SEC tries its hardest to, you know, police it. They bring cases. Sometimes they are successful in getting convictions. Frequently they're not.

CROSS [voice-over]: Lefevre is referring to the Securities and Exchange Commission, the agency that regulates the stock market. Last year the SEC received 200 reports involving possible insider trading, but they brought legal action on only 20. To help the Securities and Exchange Commission, the New York Stock Exchange has set up a computer surveillance unit. It's called Stock Watch, and it monitors trading patterns and investigates possible cases of insider trading. When this printer beeps, it means that there has been an unusually sharp movement in the price of a stock. Investigators then check the financial wires and call the company involved to see if there's been some sort of news development that the market is reacting to. If there's no immediate explanation, the stock is watched carefully. Any news that develops after the stock jumps may be grounds for an insider trading investigation. Agnes Gautier is the vice president in charge of surveillance for the stock exchange. She said that the exchange decided to investigate the RCA case immediately after the merger was announced.

AGNES GAUTIER, New York Stock Exchange: At that point then -- and we have already done this -- we go out to the member firms who are in the marketplace, and this is where we get the specific information about the customers who actually bought the stock, and we also go to the listed companies and ask them for chronologies. The company will respond and give us a calendar, actually, of how their negotiations proceeded, who were present at meetings, when they occurred, and you can see the significance of that because, again, that helps us refine that period of time we're looking at. If there is a very important date when negotiations started, we want to be sure that we're looking at trading subsequent to that date.

CROSS [voice-over]: A computer system called automated search and match, or ASAM, then looks through a large data base for any links between the buyers and the insiders.

Ms. GAUTIER: It could be someone who perhaps has a common educational background, common club affiliations, common surname.[It] doesn't give you all the answers absolutely, but it certainly tells you you have to look at that further.

WILLIAM SHEBAR: Would it give you information like two people who go to the same bar together after work?

Ms. GAUTIER: If I knew the names of the bars, yes, indeed.

CROSS [voice-over]: Despite this elaborate surveillance system, the New York stock exchange has little enforcement power. Take the RCA-GE case, for example. The Stock Exchange will hand over its investigation to the SEC. If they decide to prosecute, and if that prosecution ends in a conviction, illegal traders could be forced to give back their profits, and they could also be fined three times that amount. But convictions are hard to come by, and many Wall Streeters say that federal regulators are waging a hopeless war against an activity that is part of the very nature of the stock market.

WOODRUFF: With us to discuss insider trading is Gary Lynch, the director of enforcement at the Securities and Exchange Commission. Well, Mr. Lynch, it looks like just about every time a major deal is imminent in the stock market we can look back and see that there was some heavy trading. What does that say? Does that mean insider trading is taking place in most of these situations?

GARY LYNCH: Well, I think it's beyond question that insider trading does take place. Last year we brought 20 cases alleging violations of the insider trading prescriptions. However, I would be quick to add that I think it's a mistake to assume that every time that there's a run-up prior to a merger or a takeover announcement --

WOODRUFF: A run-up in the price.

Mr. LYNCH: A run-up in the price, that the bulk of that trading is trading based on inside information. This fall we've had a number of situations where there have been widespread rumors. Some rumors have even been carried on the Dow Jones broad tape. So a lot of the trading, I think, is based on speculation that the rumors may in fact be true and not necessarily on inside information. I don't want to understate the extent of the problem, though. It's beyond question that insider trading does occur and we have brought a number of enforcement cases in the area.

WOODRUFF: Just briefly, how do you define insider trading? What is wrong -- what is it that makes it wrong?

Mr. LYNCH: Well, insider trading is trading is trading while in possession of material, non-public information, inside information, in violation of a duty of trust or confidence to someone. It's not enough just to say that someone has more information than other participants in the marketplace. You have to show that that person has received that information or is using that information in violation of a duty to someone else. If you have a corporate officer, for instance, who is trading on inside information, then they're violating a duty to the shareholders of that company. If you have an investment banker who is purchasing stock, knowing that there is going to be a takeover, then they're violating a duty to the investment banking firm or to the clients of that firm.

WOODRUFF: You say you brought 20 cases last year. Out of how many complaints was that?

Mr. LYNCH: Well, that's really hard to quantify. I think in any given year, or at least in recent years we've received about 200 referrals from the exchanges and the NASD. In addition to that, there were a number of cases that we initiate on our own, based on informants coming to us and detailing to us situations that should be investigated.

WOODRUFF: Why so few out of the hundreds?

Mr. LYNCH: Well, actually it impresses me as being quite a few number of referrals. Why so few in the fact that we brought 20 cases?

WOODRUFF: I mean why so few do you pursue?

Mr. LYNCH: Well, we pursue, we review all of the cases that come to our attention. It turns out that many times when there are suspicious circumstances that there are perfectly legitimate reasons that explain the trading. And, in addition to that, it's difficult to make an insider trading case, and most of our insider trading cases, particularly those cases that have gone criminal, in that there have been criminal prosecutions following our action, it has been demonstrated that there's perjury and obstruction of justice, and it's difficult to get people to admit that they in fact have received inside information. So for the most part our cases are based on circumstantial evidence.

WOODRUFF: There was a report in The Wall Street Journal recently that said the SEC regularly "passes up promising insider trading cases" because you just don't have the staff to cope with it. Is that part of the problem?

Mr. LYNCH: I really don't think that's part of the problem. The Wall Street Journal article referred to the number of referrals that we received from the exchanges and then noted the number of cases that we'd brought, and the point was that we'd brought about 10% of the cases that had been referred. Of the cases that had been refeewed -- of the referrals that came in, we reviewed every one. But while there may be suspicious circumstances, that does not mean that you can follow a case against someone, prevail in a court of law. Difficult -- insider trading cases are very difficult to make.

WOODRUFF: Mr. Lynch, stay with us. Also joining us is Michael Klein, a Washington-based securities lawyer who has been a consistent critic of the SEC's insider trading program.

Well, Mr. Klein, you heard what Mr. Lynch says. He says that it's juOwt not a widespread problem. It's there, but it's not as bad as some people would have us believe.

MICHAEL KLEIN: Well, the current chairman of the commission and Mr. Lynch's predecessor decided to announce publicly a couple of years ago that it was the leading problem. They were going to come down on it with hobnail boots. Apparently they both were twinkletoes with the subject. The situation continues to be rampant. The commission has not taken up any of the invitations issued by the Congress to seek an expansion of the law, which has become hypertechnical.

WOODRUFF: When you say rampant, what do you mean? I mean, just how widespread are you saying it is?

Mr. KLEIN: Well, I think the report that we just saw indicates just how rampant it is. I mean, there's enormous volumes in these run-ups. We're not talking simply about a couple of people in there trading. We're talking about millions of dollars of securities changing hands just in anticipation of precisely what become subsequently announced events -- both bankruptcies, takeovers and the like. We've got an agency here that, because of Reagonomics, has been shrinking rather than growing. It's terribly understaffed. Mr. Lynch is trying to do a good job, but the fact of the matter is that we are dealing here with people who don't seem to be willing to put their federal money where their mouth is, and they're not going to the Congress to try to get the law expanded, to clear up the ambiguities and loopholes in the law. They're not going to the Congress to get increase in staffing, and while they are trying to do what they can do with the limited resources -- and I have a great deal of sympathy for Mr. Lynch and his professional staff -- the people who run this agency simply have not been doing what they ought be doing.

WOODRUFF: Why are you suggesting that is? I mean, are you saying it's just that they don't have the money?

Mr. KLEIN: Well, part of it's philosophical. You can see it throughout the entire federal government. Your viewers are benefiting perhaps from the shrinkage in the federal government and their sense of whether it's proper or not. But it costs. It costs the vigilance of law enforcement all across the board. I mean, this is an agency that has shrunk from an enormous number of responsibilities in the view of those professionals who practice before it, and the insider trading area is one of those in which it is not as vigorous as its rhetoric.

WOODRUFF: All right. If you could rewrite the law that governs the SEC, what are some of the basic changes you would make?

Mr. KLEIN: Well, for example --

WOODRUFF: In the insider trading area.

Mr. KLEIN: In the insider trading area Gary summarized the law for you in a rather succinct way, but the fact is that underneath the general description he gave are a number of technicalities created by recent decisions, for the most part of the United States Supreme Court, reflecting an increasing conservative strain which require this special relationship and a degree of intent to defraud. Those were principles that this agency fought in the courts. It filed briefs amicus when it was not a party and their own briefs where they were a party, in a number of cases. A good deal of their insider trading theories today rest on a notion called misappropriation, which has not yet been recognized by the court, is in some serious doubt in the federal courts of New York where most of this activity takes place, and we're dealing essentially here with an effort to fight with one hand tied behind their back by virtue of legal developments, and one leg hobbled by virtue of their limited staff.

WOODRUFF: So that could be changed with a simple law being passed by Congress?

Mr. KLEIN: I believe it could. There have been an American Bar Association committee, not known particularly for being aggressive in suggesting law reform, of whch I've been a part, that has now published the first of two parts of a series of recommedations with respect to modification of the statute. But the chairman of this agency has decided he doesn't want to change the statute, and we may be in the bizarre position of the bar going to the Congress and suggesting a more general proscription against insider trading -- simply a statement that it shall be unlawful to make unfair use of non-public information -- with the agency opposing it.

WOODRUFF: All right, Mr. Lynch, I'll come back to you. Now, before we get into this question of the changing of the law, let's go to Mr. Klein's basic point, and that is that your agency doesn't have the money, the staff, to carry out what the law is asking you to do.

Mr. LYNCH: Well, insider trading is a problem, and I hope I made it clear that we consider it a serious problem, but what I tried to add was that it's -- I don't think it is of epidemic proportions, as some people have suggested, as Mike Klein has just suggested.

WOODRUFF: He called it rampant.

Mr. LYNCH: Well, I'm not certain that it is. It's a serious problem, but in the many instances that we've seen recently where there have been large run-ups, there have been rumors that have been widespread on Wall Street. Now, people who trade on rumors, particularly after a rumor is printed on the broad tape, aren't necessarily trading on inside information. Now, they may have an alternative source of information. They may have an inside source as well as trading on the rumor. But it doesn't necessarily follow that just because there is a large amount of volume that all the people who are trading are trading on inside information.

WOODRUFF: All right, Mr. Klein, what about that? He says a lot of it is just rumor and somebody's trying to make a buck.

Mr. KLEIN: Well, the biggest rumor is that the SEC can't do anything about it. The problem here is public investor confidence, whether the little guy on Main Street, America, believes he has a fair shake in this marketplace, and the fact of the rumors themselves -- and I don't mean to suggest that's all there is -- the fact of the basic rumor, which is the insiders, the market professionals and the corporate insiders and their friends, have an advantage that the fellow on Main Street does not have is one of the wrong things that the SEC was created to stop.

WOODRUFF: Is that an accurate characterization?

Mr. LYNCH: No, I really don't think so. It's no doubt true that there have been leaks in recent cases, and it's no doubt true that some leaks have amounted to violations of the securities laws. We're actively investigating those cases. We brought 20 cases last year; we'll probably bring as many this year if not more, and we've also been working with the Justice Department to have them prosecute criminal cases, and there have been a number of criminal prosecutions.

WOODRUFF: What do you think, Mr. Klein? Do you think, for example, this GE-RCA merger that there were people actually trading on insider information there? I mean, what's your guess?

Mr. KLEIN: Well, you know, my grandfather used to say, if it walks like a duck and talks like a duck the odds are it's a duck. You showed the figures. That stock went up an enormous price and enormous volume. There is no question that it wasn't just a lucky bet. It was the most actively traded security, or one of them, for several days running. Is that just accident? Is that just happenstance?

WOODRUFF: Is it just an accident?

Mr. LYNCH: Chairman Schad has acknowledged that we're investigating the RCA matter, and to the extent that people have traded on inside information in violation of the law, and we can establish that in a court of law, then we will prosecute them.

WOODRUFF: But what are the odds that you will be able to get the information that you need to actually bring that case to court?

Mr. LYNCH: Well, all I can do is point to our record. We've brought a number of insider trading cases over the years. I'm sure there are cases where there has been trading on inside information where we can't make the case, where we can't put all the facts together sufficient that we can go into a court of law and make our case. But there have been any number of cases where we have been successful, and I'm hopeful that if there has been insider trading in RCA, or in any other matter that's occurred recently, that we will be able to put together a case that will hold up in court.

WOODRUFF: Mr. Klein, he says he's got a pretty decent record.

Mr. KLEIN: I'm sure he feels he does. I'm sure I feel he doesn't. I'm in the unfortunate position of saying once again that if you read the business press in this country, The Wall Street Journal, not known for loving agencies, Forbes, Business Week, you have found story after story about the inability of this agency to live up to the reputation that it has had over the 50 years of its previous existence as an effective communicator to the public that it will do what's necessary to give it a fair shake in the investment marketplace. I look forward to seeing what this agency will do in these areas. I invite Mr. Lynch and his commissioners who run that agency to demonstrate in manners that they have not yet that they are really committed to doing more than issuing nice rhetoric about what it is that they're going to do about this very serious problem.

WOODRUFF: Is the small investor getting a fair shake in the market right now as a result of what may be available to those who are thinking about attempting insider trading?

Mr. LYNCH: I certainly think so, and we're focusing on the run-ups prior to major news announcements, and that probably accounts for 0.001% of all the trading that occurs on the exchanges. Now, it's undeniably true that if there's a small investor who thinks that they can act like an arbitrageur and a small investor from the Midwest who thinks that they're going to become a big-time arbitrageur trading from their own living room, that they're going to be at a disadvantage from a professional trader who's on the floor of an exchange. But generally I think the markets are very fair. I don't think that insider trading is of epidemic proportions. But it's a serious problem, and it's a problem that we're trying our best to address.

WOODRUFF: The small investor, Mr. Klein?

Mr. KLEIN: Not a bad answer except that it's in these dramatic circumstances in which people focus so much of their attention on run-ups and run-downs preceding takeovers and bankruptcies that the small investor doesn't have a prayer, and he knows it.

WOODRUFF: Thank you both for being with us, Michael Klein, Gary Lynch.

HUNTER-GAULT: Tonight's Lurie cartoon is next. It's about one of this season's great expectations.

[Lurie cartoon -- child dressed in stars and stripes gets "arms reduction" package under the Christmas tree; it proves to be a box within a box within a box, all of them empty.]

Once again, the main stories of the day. The Pope delivered a Christmas message decrying starvation, oppression and masssuffering. In South Africa, 53 people were killed in a clash between members of two rival tribes, and a tourist was killed when Mt. Etna erupted. Jim?

LEHRER: Finally tonight, a country Christmas story from Kansas. The teller is Jim Fisher, our man in the country and columnist for the Kansas City Times.

JIM FISHER, Kansas City Times: Christmas in Hoxie, Kansas, population 800. Faces of Santa Claus on light poles. Lights hung across Highway 23. And the land, as always, is the same -- snow-covered, fields planted to wheat hidden now. This is unforgiving land, land that one year out of two must be left fallow to collect the scant rain. Farmers in this part of western Kansas, in fact, all across the high plains, will tell you that this land allows for no mistakes nor accidents. Not now, when a lot of farmers are on the precipice.

And no fires, like the one that destroyed Al and Sharon Gates' farm home last week, leaving only a charred pile of wood and metal.

AL GATES: There's an end to my grandmother's antique trunk right there. Looks like the lid is burned off of it.

FISHER: Yet what happened here was more than just a fire. What burned was what folks out here call the home place, a solid traditional farmstead, where Al Gates went barefoot as a kid and learned to farm, where he and Sharon started their own family, two boys and a girl.

His peers call Al Gates a good farmer, high praise indeed in this hard, stark land. He's a man who's dealt with a handshake, who has always paid his bills, who has usually gotten a crop, no matter what, and had the resilience a decade ago to rebuild when a tornado flattened this place.

And now, not unlike a lot of other farmers, he's one who's foundered in the gap between his costs and what he gets for his crops. Last summer the Federal Land Bank foreclosed on the home place. When the fire happened the Gates were getting ready to move. Yet, with their tragedy the Gates have found something special in these days after the fire. They have found the story of Christmas.

NEIGHBOR: Here are some clothes that they -- maybe the boys can use some of those things.

FISHER: All week long, people, some of them absolute strangers, have been piling into the apartment where the Gates are staying, an apartment loaned to them by a friend.

NEIGHBOR: We'll see you Saturday, I guess.

FISHER: And those people had brought food, clothing, furniture, gifts, bedding, dishes, even soap. So much has arrived that the vacant next-door apartment is now a storage room for the overflow.

Ms. GATES: People in the community that we don't know, we still know that they're our friends because they offer us stuff. I mean, if we go downtown and they want to know what sizes everybody wears because they're wanting to buy some things for us, and, like I said, it's not those material things but it's just knowing that they care that means a lot to us.

FISHER: Collection boxes are at the two banks here, and people stop Gates on the street.

AL GATES: This one lady, she just up and handed me some cash, you know, and we just feel like that the economy being in the hard times that these people have really done something great to make a donation to us.

FISHER: The outpouring this past week for Al and Sharon Gates is really nothing out of the ordinary. It happens all the time, not just here in Hoxie, Kansas, but in rural communities all over the country. People out here still take care of their own. Oh, sure, the same thing happens to a degree in the big cities, but here the word neighbor still seems to mean more than acquaintance.

Mr. GATES: People have love in their heart in this community for each other, and when a tragedy like this strikes, people want to do something.

FISHER: Maybe that's the lesson here. Maybe that can give us all some understanding of why people like the Gates struggle so desperately to stay on the farm, why the faces of people at the farm auctions you see on television often seem contorted. It's a way of life. It's neighbors. It's Christmas, whatever the season.

LEHRER: Have a nice Christmas evening, Charlayne.

HUNTER-GAULT: Thank you, Jim. That's our NewsHour on this Christmas night. We'll be back tomorrow. I'm Charlayne Hunter-Gault. Good night.