The MacNeil/Lehrer NewsHour

MR. MacNeil: Good evening. Leading the news this Monday, allied forces ordered Kurdish rebels to stop preventing refugees from returning home. The United Nations will begin setting up posts in Northern Iraq to help the refugees, a powerful earthquake hit the Soviet republic of Georgia. We'll have details in our News Summary in a moment. Jim.

MR. LEHRER: After the News Summary, we explore the U.S. presence in Iraq with Defense Department official Paul Wolfowitz, columnist Jim Hoagland, Middle East expert Geoffrey Kemp, Kurdish representative Hoshyar Zebari, and Kurdish observer Vera Saeedpour. Then Paul Solman tells the story of what went wrong with some banks in Rhode Island.NEWS SUMMARY

MR. MacNeil: Allied military leaders in Northern Iraq told Kurdish rebels to stop blocking the return of refugees. The United Nations said Kurds are returning to Iraq at the rate of about 20,000 a day. Allied military officials said rebels had set up roadblocks to prevent refugees from reaching the allied camps at Zakho, but had now agreed to allow the refugees in. U.S. Marines began distributing food to refugees at the Zakho Camp today for the first time. Allied troops also reopened a hospital in the town. United Nations officials said they will set up a post at the camp tomorrow and eventually take it over. Allied officials have said they will stay in Iraq as long as necessary to protect the refugees and encourage their return. Vice Pres. Quayle talked about the U.S. contribution to the relief efforts this morning. He said U.S. troops were in Northern Iraq to aid and protect the refugees, not to reorder the country's politics. He spoke to a meeting of the U.S. Chamber of Commerce in Washington.

VICE PRES. QUAYLE: America's foreign policy is oriented more toward conflict between states than conflict within states. This has been a tenet of our policy over the last half century. When followed, it has served us extremely well. To change direction now, to occupy Iraq and immerse ourselves in an ancient, internal struggle, would be to enter into a quagmire.

MR. MacNeil: The White House raised the possibility of relaxing the ban on Iraqi oil exports. Spokesman Marlin Fitzwater said U.S. support for lifting the ban would depend on how Iraq used the money it earns. The issue goes before the United Nations Sanctions Committee tomorrow. Iraq has already told its past customers it is ready to resume sales, but this afternoon Pres. Bush said a lot would have to change before the U.S. would support lifting sanctions. He spoke to a group of agricultural broadcasters.

PRES. BUSH: In terms of building reliable markets and in terms of trying to have normalized trade, the United States will not have normalized trade as long as Saddam Hussein is in power. Food is an exception now, because we're not going to let people starve. We are going to go forward with helping people in Iraq, without regard to what sect they're from or anything of that nature, but I don't want to mislead any farmer in this country. We will not have normalized trade with Iraq as long as Saddam Hussein is in office and they're now trying to appeal to get some relief on the oil. There's not going to be any relief as far as the United States goes until they move forward on a lot of fronts, incidentally.

MR. MacNeil: Turkey has resumed food sales to Iraq. The Turkish treasury said the decision was taken because of Iraq's compliance with the United Nations cease-fire terms. It said it has notified the U.N. of its action. Sec. of State Baker's Mideast peace mission is making only slim progress according to White House Spokesman Fitzwater. He said the lack of progress was disappointing, but the administration wasn't giving up. Egypt today accused Israel of trying to obstruct the U.S.-led initiative. Cairo said the building of Jewish settlements in the occupied territories and Israel's position on Palestinian representation at a peace conference were major obstacles. This afternoon Israeli Prime Minister Yitzhak Shamir narrowly survived a no confidence vote in parliament over his government's policies on Mideast peace talks. Jim.

MR. LEHRER: A powerful earthquake hit the Soviet republic of Georgia today. At least 40 people were killed. It was centered in sparsely populated mountains but was felt as far away as neighboring Armenia. The quake measured 7.1 on the Richter Scale. It struck just after midnight local time and destroyed many buildings and several villages. A Georgian official in Moscow said most communications with the republic had been cut and the death toll could go much higher. The quake was about four times as powerful as the one in 1988 that killed 25,000 people in Armenia. Back in this country, Pres. Bush declared portions of Kansas a disaster area after tornadoes roared through the Midwest Friday. The declaration will make federal grants and low cost loans available to help residents recover from the damage. Twenty-two people were killed in Kansas and Oklahoma. Hundreds of families were left homeless.

MR. MacNeil: Astronauts aboard the Space Shuttle Discovery conducted several strategic defense experiments today in spite of some equipment failure. Six experiments were cancelled because of trouble with data recorders. The seven man crew was able to send back pictures of atmospheric light over Australia. The purpose of the weekday mission is to study naturally occurring phenomena in order to develop sensors that can distinguish between such phenomena and enemy missiles.

MR. LEHRER: The U.S. Supreme Court today agreed to decide whether a child abuse suspect has the right to question the accusing child. The case involves an Illinois man who was convicted of sexually abusing a four year old girl. The girl did not testify at his trial but her version of events was presented through the testimony of adults who had spoken with her. The Justices also decided today to cut down on so-called "frivolous appeals." From now on they will more strictly enforce the requirement of a $300 filing fee and printing costs. The fee is waived for people who qualify as paupers, but the Court will enforce the fee if they believe an indigent person is appealing for frivolous or malicious reasons. The Justices made the change by a six to three vote.

MR. MacNeil: There was mixed economic news today. The Commerce Department said consumer spending rose by .6 percent last month. It was the second consecutive increase in consumer spending, which accounts for about 2/3 of the nation's economic activity. Personal income also rose, but at a slower pace. It increased a relatively weak .2 percent in March. A new home apparently was something more consumers were spending their incomes on. The government said sales of new homes increased for a second consecutive month. They edged up a fullpercent in March.

MR. LEHRER: South African Pres. DeKlerk today called for talks to end fighting between rival black factions. His remarks came after a weekend of bloody clashes in several South African black townships. We have a report narrated by Tom Browne of Worldwide Television News.

MR. BROWNE: At least 41 people died in what was the worst two days of violence in the black townships this year. In Soweta, Zulus brandishing traditional weapons ran riot, killing at least 22 people. Most of the violence in the townships involved supporters in the Zulu-based Inkatha Freedom Party and the rival African National Congress. The continuing violence threatens any chance of peace talks between Inkatha and ANC. The ANC leaders say the Inkatha Party and the government are planning a wave of violence against the ANC to scuttle vital peace talks. They say that the security forces are training Inkatha agents. Such accusations are rejected by Inkatha. For those in the townships, the political in- fighting has no meaning. They can only count the cost. So far this year 600 people have died. Pres. DeKlerk is warning of civil war unless the violence stops. Nelson Mandela encountered opposition in Pretoria when he tried to address university students. Right wingers burned the ANC flag and prevented him from taking the stage after scuttles broke out between his body guards and white students. Mandela was forced to leave without uttering a word. Right wingers are opposed to the government's plans for dismantling apartheid.

MR. LEHRER: And that's it for the News Summary tonight. Now it's on to the continuing story of the Kurds and to the banks of Rhode Island. FOCUS - TANGLED WEB

MR. MacNeil: Our major segment tonight is the tangled web that may be facing the Bush administration in Iraq and Kurdistan. U.S. officials say the troops now setting up safe havens in Iraq for the Kurd will shortly turn those areas over to the United Nations, but yesterday allied forces enlarged the area they control in Northern Iraq. They're trying to convince Kurdish refugees to return to Iraq from their camps along the border with Turkey. The effort to get the refugees to return has been hampered by Kurdish rebels known as the Peshmerge, who want to establish their own military presence first. That's one of the issues on the table this week when Kurdish leaders resume negotiations with Saddam Hussein. Our focus, which includes a News Maker interview with a top Pentagon official, follows a report by Lindsay Taylor of Independent Television News. He recently visited the Peshmerge rebels in Sulaymaniyah Province near the Iranian border where there are no U.S. troops.

MR. TAYLOR: Kurdish guerrillas keeping watch over what they call liberated Kurdistan. Unlike the safe haven to the North, here there are no U.S. or British soldiers, no U.N. policemen, just these Peshmerge guerrillas dedicated to protecting Kurdish refugees from Saddam Hussein's vengeful army. In many ways, it's a model for Kurdish ambitions. Kurdish leaders negotiating autonomy with Baghdad believe that even with international supervision the armed Peshmerge must remain to protect the citizens of the regained homeland. The Peshmerge as guardians to the Kurdish people will be a central argument of Mishaban Bazani, who heads the Kurdistan Democratic Party delegation at the Baghdad talks. Here at the KDP's Iranian headquarters, Kurdish veterans will remind you the idea is not a new one. It was Bazani Sr. who negotiated a withdrawal for the Peshmerge in the 1970 autonomy deal which forms the basis for the present talks. These Kurdish exiles among the 200,000 in Iran before the refugee crisis erupted know only too well Saddam Hussein's scant regard for that agreement. But the KDP's senior representative in Iran in constant contact with the leadership says this time there can be no agreement unless three key demands are met.

DR. SHAWKT BAMARNY, Kurdistan Democratic Party: The most important point is to a state of democracy, the whole Iraq, general elections, this is very important, and guarantee international grantings either from United Nations or from other countries to share decision and third to have force from guerrilla, from Peshmerge to remain, to remain in Kurdistan.

MR. TAYLOR: Do you really think Saddam Hussein will agree to allow the Peshmerge to remain armed as the security force in Kurdistan?

DR. BAMARNY: Yes. I hope, yes.

MR. TAYLOR: Do you really believe he'll do that?

DR. BAMARNY: Yes, I believe that he'll agree.

MR. TAYLOR: And if Saddam does not agree to that, is the deal off?

DR. BAMARNY: I think -- it's my personal -- I don't believe that the delegation will be finished at this point.

MR. TAYLOR: Kurdish military commanders on the ground are skeptical. There is deep suspicion of Saddam's intentions. At the height of the Kurdish uprising, the Peshmerge claimed control of 95 percent of Iraqi Kurdistan. Now it's 50 percent. SHOKAT HAJMUSHIR, Patriotic Union of Kurdistan: [Speaking through Interpreter] The Iraqi government is in a bad state. The Kurds are against them. People from all over the world sympathize with our people's plight. They are putting pressure on Saddam, keeping him in check. But despite this, we don't trust him completely.

MR. TAYLOR: The Kurds want tangible proof that the Iraqi leader is serious about peace, so another important demand is that Saddam Hussein rebuilds what he's destroyed. In the distance are what Kurds call concentration camps where people have been forcibly resettled. One is New Halabja, where the survivors of the gas attack on old Halabja were moved. The Kurds want not just the restoration of this original city flattened but for the street lamps, but also the rebuilding with Western aid if possible what they say are the 4,000 other towns and villages razed to the ground. If this Kurdish dream is realized, it'll be the climax of nearly a century of organized political action by the Iraqi Kurds. But the course of the Baghdad negotiations is still uncertain and Saddam Hussein's unpredictability well documented. One thing is clear, there can be no peace deal in which the Peshmerge guerrillas do not play a part.

MR. MacNeil: To explain administration policy towards the situation in Iraq, we have Paul Wolfowitz, Deputy Secretary of Defense for Policy, Mr. Secretary, thank you for joining us. Is all this working now up there in the North? It seems from the wires that there are hundreds of thousands of refugees still up in the mountains, but only about 500 or so, a tiny number, have come into the camps that the U.S. and the other allies have established.

SEC. WOLFOWITZ: I think it's working extremely well. It's obviously, we're doing something from scratch that was unanticipated. We're kind of proud in a way that we're doing -- the U.S. military in combination with some of our allies has taken over a job I think no one could have done this quickly. We have now the camp established in Zakho. We surveyed another site to the East and will begin construction there, and I think the process is moving along where the Kurdish leaders are now prepared to tell their people to go down to Zakho. We've also got an enormous relief effort going. Almost 9,000 tons of supplies have been delivered and I'm told one indication that things are beginning to improve is that some of the refugees at least are being selective about what they choose to eat now, which is a sign that in some places, at least, there's adequate supplies.

MR. MacNeil: Apparently the allied forces, Americans chiefly, were pretty rough with these Pershmerge guerrillas today, saying you've got to allow these people through or else, is that -- describe what was said to them.

SEC. WOLFOWITZ: I don't have a firsthand account. The best impression I have actually is that some of these people weren't guerrillas at all; they were effectively highway men and were trying to hold people up in order to let them go back and I think when the message was delivered to them they'd better get out of the way, there really wasn't any argument about it. And my impression also is that now that the situation has begun to stabilize and we can talk to the leaders and the Kurds, there's a great deal of responsible leadership there and a great deal of desire among the massive Kurdish refugees to sort out their humanitarian situation. So I don't want to be too optimistic to say nothing is going to go wrong, but I think it's on the right track.

MR. MacNeil: Well, can the U.S. now tell the Kurdish leaders your people are safe, Saddam's forces are not a threat to them?

SEC. WOLFOWITZ: Not in Zakho. In Zakho, we can clearly say that the situation there is safe and people can come back. The larger question that was raised in your lead segment about whether it's safe in the broader areas of Iraq and whether any can trust an agreement with Saddam Hussein, that's something else, but in the specific security zone that we've established around Zakho, the situation is safe.

MR. MacNeil: The U.N. arrives tomorrow and it's going to raise its flag there apparently. When will the U.N. have enough force in place that the U.S. troops can leave there?

SEC. WOLFOWITZ: It's a hard question to answer. The Red Cross is in there already, by the way, and that's a presence we very much welcome. We're trying right now to just move as fast as we can with the humanitarian side of this to get the shelter established, to get the supplies established, to get people down in areas where they can be fed and they can get adequate medical supplies. We'd obviously like to know that there's an end to our participation that can be turned over to international organizations, but that isn't going to hold us back. And I think frankly the national organizations will come in more quickly when they see that there is a secure established area that's functioning.

MR. MacNeil: Is it the case that the U.N. might take over the command and U.S. forces would stay there under its flag? Would that happen if there aren't enough U.N. troops to guarantee the security of --

SEC. WOLFOWITZ: I don't want to get ahead -- so far what we have from the U.N. is the U.N. High Commission on Refugees sending in relief workers under his auspices. It's a U.N. relief operation that's there. It's still too early to say what might be the long- term security arrangements for the people that are coming down. But clearly, for us to leave, there has to be a climate in which they're secure. One can imagine various ways that scenario might work out, but it will be easier to specify when the people are there, the camps are established, the U.N. presence is there, and we see what the real security situation is like.

MR. MacNeil: Well, is it -- are you counting now that the U.S. troops really won't get out of there until there is a deal between the Kurds and Saddam Hussein?

SEC. WOLFOWITZ: No. The U.S. troops will get out the day that we're convinced that the camps are secure by whatever means we're convinced of that, and not sooner. And --

MR. MacNeil: Could it be secured by the Peshmerge?

SEC. WOLFOWITZ: As I say, clearly the Kurds, themselves, have some ability to organize themselves internally and provide a degree of order and stability in the camps. It's one of those things I think you have to judge and practice. I would think that the Iraqi government has an interest in creating conditions in which the camps are secure because they have at least as much interest in getting us out of Iraq as we have in getting out ourselves.

MR. MacNeil: Does the U.S. support the Kurdish leader, Talabani, in his negotiations with Saddam?

SEC. WOLFOWITZ: No. When we talk about our reluctance to get more deeply involved in certain issues, that's one of them. I mean, if he can -- obviously we support the objective that he seems to be seeking, which is enough security for the Kurdish people to come back to their towns and villages. That's the only real long-term solution to this problem. And if he can achieve that aim, we support it. But I don't think any of us want to put ourselves in the position of second guessing his judgments about what kind of arrangement's adequate or what is inadequate. For that matter, anointing him as the Kurdish leader, as you noted in your broadcast, there are competing Kurdish leaders.

MR. MacNeil: Right. Well, you heard what one of the leaders said and we've heard it from others, that they want Western or U.N. or some kind of guarantees for any deal they make with Saddam to back them up. Is the U.S. prepared to offer guarantees to back up any deal the Kurds make with Saddam?

SEC. WOLFOWITZ: One would clearly have to see what the deal is, what kinds of guarantees are being proposed, and I think most of all what is the U.N. as a body represented by the Security Council prepared to back? And we're a long way from any of that. So it's really too abstract a question I think to answer.

MR. MacNeil: If the U.N. doesn't and if the United States doesn't back the Kurds in their negotiations, then they're on their own, right, with Saddam?

SEC. WOLFOWITZ: They obviously, what we are doing to support the refugees in the North, although it is entirely humanitarian in its purpose, I think has given them a degree of confidence. I can't image, in fact, their having these negotiations with Saddam Hussein if the world hadn't stood up in U.N. Resolution 688 and said you cannot solve your Kurdish problem by forcing all the Kurds out of Iraq into Turkey and Iran. That is not acceptable. In fact, that's a threat to international peace and security. I think that, that's not backing for the Kurds. I think it's provided the basis from which they can have a reasonable negotiation with Saddam Hussein. Remember, it's the Iraqis also who have an interest in creating conditions where the Kurds can go home, because until the Kurds go home, the Iraqis are going to have a major problem with the international community.

MR. MacNeil: Well, if the U.S. says go ahead and negotiate with Saddam and get the best deal you can, we may back it or we may not when we see what the deal is, doesn't sanctioning any deal kind of cement -- doesn't that also kind of give Saddam more credibility? Doesn't that cement him in place?

SEC. WOLFOWITZ: Well, in fact, we have a problem with the idea of Saddam Hussein remaining as the head of the Iraqi government. It's difficult for us to see ourselves or any other country having normal relations with a country that's headed by a man like that. So obviously that's going to be a consideration in anything that we're ultimately asked to do. I think the people who are going to decide on any arrangements are basically the Kurds who are going to vote with their feet, and either they vote go home or they vote to stay, and how particular security arrangements might contribute to that depends on what specifically those security arrangements are. It's very vague right now.

MR. MacNeil: I wonder when you all in the administration talk about this and think about it, are you dismayed to see that Saddam seems to appear every day rather more firmly ensconced in power again?

SEC. WOLFOWITZ: Obviously, we'd like to see him go, so I can't deny that. I'm not sure that every day he's more firmly ensconced. I don't think his long-term prospects are terribly good because I don't think Iraq is going to be able to get out of the mess that he has gotten into while he remains ahead of the government and particularly while they continue to deal with opposition the only way he seems to know. To get itself on the right course with the international community, to get sanctions lifted, to get Iraq reconstructed, Iraq is going to start having to deal decently with its own people, and I'm not sure that Saddam Hussein can do that.

MR. MacNeil: You heard the clip we ran of the President just now. I mean, is your understanding of his policy that the U.S. will continue to oppose any lifting of economic sanctions until Saddam is gone?

SEC. WOLFOWITZ: Well, there aren't going to be any sanctions lifted unless the sanctions committee agrees so we have got to agree to such things and --

MR. MacNeil: So would the U.S. -- excuse me interrupting you - - just to make it clearer, would the U.S. veto any attempt to lift sanctions until Saddam is gone?

SEC. WOLFOWITZ: We have the ability to do that. So do quite a few other countries and you know, about a week or ten days ago the Iraqis came with a proposal that they needed a billion dollars in order to buy food for their people. As far as we can tell, some large share of the trucks bringing food in from Jordan get diverted to Iraqi military camps, and as far as we know, the Iraqis still have plenty of assets of which to buy food. So these claims are greeted with considerable skepticism. And as your broadcast rightly noted, one of the issues would be are there guarantees that this is for food that's going to people who really need it.

MR. MacNeil: U.S. officials keep saying and we heard Vice President Quayle say it again the U.S. is not going to get sucked into a quagmire in Iraq's internal affairs. But as it looks this evening, how does the U.S. quickly and cleanly get out of there?

SEC. WOLFOWITZ: I think there's a difference between saying we can quickly and cleanly get out and saying we're not getting mixed up in the internal politics of Iraq. We are not getting mixed up in that game. We are there to save lives, to relieve suffering, and frankly, from everything I hear about the attitude of our troops for doing that, it's a nice, clean, clear mission which is as good as any mission they've ever been given in their lives. It is not a mission for getting in the middle of a civil war the way the British are in Northern Ireland, for example, trying to back one side against another. And as time goes on, you're not quite sure whose side your backing. It's the Iraqis who are -- this Iraqi regime that has a problem. And I don't think it's ever going to come unstuck from that problem until there's not only a change of leadership, but basically a change of policy.

MR. MacNeil: Well, Mr. Secretary, thank you for joining us..

SEC. WOLFOWITZ: Nice to be here, thank you.

MR. MacNeil: Jim.

MR. LEHRER: Now to four other perspectives on the situation in Iraq, from Hoshyar Zebari, an Iraqi Kurd who is the chief representative for the Kurdistan Democratic Party in London, Vera Saeedpour, director of the Kurdish library in Brooklyn, the Center for the Study of Kurdish Affairs, and from Geoffrey Kemp, the National Security Council staff member in the Reagan administration, now a senior associate at the Carnegie Endowment for International Peace, and Jim Hoagland, associate editor and columnist for the Washington Post. He won the 1991 Pulitzer Prize for his columns on the Persian Gulf and other foreign affairs issues. Geoffrey Kemp, is this U.S. mission clean and clear?

MR. KEMP: It's clean. I don't think it's very clear and I think the danger is that the longer the United States stays there and begins to expand its mission to take in more areas to make them secure, the more chance there is of something going wrong, a shoot out with guerrillas, mistakes, accidents, so therefore, the priority has to be first humanitarian, we've got to obviously make sure these people are fed and clothed and housed. But as soon as we can hand over to the United Nations -- now it may be that the United Nations cannot provide the security umbrella that we do. In my judgment, it would be better for us to do that under U.N. rules than just under our own.

MR. LEHRER: In other words, your fear is we may be saying all the right things, no quagmire, as the Vice President said, and Sec. Wolfowitz just told Robin that we may be getting into it at the same time, is that what you mean?

MR. KEMP: Oh, yes. I think it's far too fragile to say there won't be a quagmire, but I don't think -- I think we can avoid it if we hand over very quickly to the U.N.

MR. LEHRER: Jim Hoagland, is there any way to avoid a political element to what we're doing as far as a clean, clear effort to save the Kurdish refugees?

MR. HOAGLAND: I don't think so, Jim. This is a country that we have been at war with formally by authorization of Congress as well as by authorization of the United Nations. I think, in fact, we have an obligation to try to help this country mend itself and bring it back into the international system. I think the great puzzle here is why the Bush administration, which has repeatedly said this is not Vietnam, now portrays this as a Vietnam-like situation by using the quagmire analogy. I think if we used the muscle that we have and if we set our minds and our will to helping resolve the problems of Iraq, we could and should do so.

MR. LEHRER: And that means the President said it, Sec. Wolfowitz again just repeated it, the United States will not support the lifting of any economic sanctions as long as Saddam Hussein remains in charge of the country.

MR. HOAGLAND: Well, neither one of them quite said that. They came close to saying that, but I'm struck by the fact that they would not in the clear, simple language you have just used say precisely that. That means to me that they may have something else in mind.

MR. LEHRER: What's it say to you, Geoff Kemp?

MR. KEMP: I agree on that. I think the problem is that to deal with the Kurdish problem, there has to be an agreement between the Kurds and who's ever in charge in Baghdad. And at the moment, the only leader there is Saddam Hussein and the Baath Party. And it may be that we find that the Kurds want to deal with Saddam Hussein because he is weak and because they think they can get a deal now. At that very moment if we then have other forces to try to remove Saddam, we may compound the problem and undermine the Kurds at the very moment that they're getting something they could never have gotten under any other circumstances.

MR. LEHRER: What about the question that Robin asked Sec. Wolfowitz? If the Kurds make a deal with Saddam Hussein, doesn't that make Saddam Hussein even more powerful?

MR. KEMP: I think it makes the regime in Baghdad more powerful and I think we'd have to deal with it. As for Saddam, I think that's a separate issue. I think what we need to do is if necessary work with the Baathists in Baghdad if they are cooperating with the Kurds, but single out Saddam as the individual we want to remove, rather than the entire party and its infrastructure.

MR. LEHRER: Does that make sense to you, Jim?

MR. HOAGLAND: Well, I think this is part of the problem though. U.S. policy really is to try to remove Saddam but not the regime, keep enough of the present bureaucracy, the leadership, in place to ensure Suni control and not to take a risk on the fragmentation of the country. I think that risk is exaggerated and may, in fact, be a less -- worse solution than the situation we've got now with the deaths going on not only among the Kurds but among the Shiites. We don't talk much about the Shiites, but there are hundreds of thousands of Shiites who have been displaced by this as well.

MR. LEHRER: How could it be a worst solution? Lay out the worse scenario.

MR. HOAGLAND: Well, I think we have the worst scenario now where we've got this repudiated regime still in control, kept in place by terror, kept in place by murder. I don't think that a fragmentation of Iraq is worse than that.

MR. KEMP: Well, I think the big news is that there are no American soldiers being killed today, and I think to implement what Jim wants to implement, either we resume the war with Baghdad, which means, you know, bombing again, or we go to the United Nations and try to get a new resolution passed calling for the removal of Saddam Hussein. I don't think either of those options quite frankly are going to pan out. I think they'll be rejected by the U.N. and they'll be rejected by the administration.

MR. LEHRER: To the Kurds' situation specifically, Ms. Saeedpour in New York, you have suggested that the Kurdish guerrilla leaders may be orchestrating this whole thing, that they do not want the refugees to go back into Iraq. Explain your thesis on that.

MS. SAEEDPOUR: Well, I believe that part of the problem has been that the Kurds in Iraqi Kurdistan who constitute only 17 1/2 percent of the total Kurdish population of the region, which is upwards of 25 million, are in a very untenable position. They're really powerless to change their situation in and of itself. They need the help of outside countries and they have solicited in this case the help of Turkey in order to assure that they might get some autonomy. And what's happened now is I believe that the establishment of the enclave by the United States was the first step in their getting that autonomy with the setting of the 36th Parallel above Kirkuk, above the oil fields. And I think that the exodus provided, the exodus provided the kind of a pretext to get international intervention notably in the form of the United States.

MR. LEHRER: You mean, they were encouraging their own people to flee their villages rather than from the threat of the Iraqi military and Saddam Hussein?

MS. SAEEDPOUR: No, I think this is not simply a matter of encouraging their people, but it's a matter of establishing a kind of an enclave that's necessary as the first, the first step in getting an autonomous region in the North.

MR. LEHRER: Does that make sense to you, Mr. Zebari? Is that what is going on, in fact?

MR. ZEBARI: Well, what happened, in fact, I mean people left the towns and the cities basically because of the fear of the bombardment and the terror they were subjected to and there was no calculated policy to evacuate these towns and cities, for the people to leave. And now their intention in fact at the moment is try to bring back these people to the towns and cities which they used to live, but under some kind of international protection or security arrangement that these people would be safe from persecution. Now one reason people are hesitant, for instance, to go to Zakho, the town, is there are a number of Iraqi police. From our information, there are secret police, and they will be reported back if the U.S. troops will leave soon.

MR. LEHRER: But the Secretary says that city is completely secure and safe.

MR. ZEBARI: Well, at the moment, in fact, as long as the international forces are there it might be safe, but who will protect them if tomorrow, for instance, they left? Iraq would send their army divisions back to where the U.S. troops are occupying at the moment.

MR. LEHRER: But from your point of view, from the Kurdistan Democratic Party's point of view, the longer and the larger the U.S. presence gets in Kurdistan, in your part of Iraq, the better, right?

MR. ZEBARI: Well, we think that their presence is important and useful, in fact, for reassuring these people that they would be safe if they go back. We know that the presence is a temporary one and we don't expect that they will stay long enough and eventually -- I mean, this whole operation will be handed over to United Nations, but also we can play a role here, in fact, to secure these areas. I mean, many people are totally discounting the Kurdish presence there, especially the political parties, the guerrilla forces who are already there, and if that agreement is to work out, still there is a long way to go, there is no agreement which has been signed so far and we are extremely skeptical about Saddam's motives and intentions, but just if that agreement was signed, again, one of the clauses would be that this area would be demilitarized, that Iraqi forces should withdraw from that area, the security situation behind the Kurdish people.

MR. LEHRER: Ms. Saeedpour, how do you read the fact that the -- how do you read these reports that the guerrillas are not allowing the Kurdish people back into their country and back into their towns and cities?

MS. SAEEDPOUR: Well, I think uppermost in the minds of the Kurdish guerrillas is the fact that whatever they could negotiate with Saddam Hussein when he's at his very weakest would never have any meaning unless they had international guarantees and I think that their primary concern now is to get an international security arrangement which would protect any Kurdish enclave whether it be called an autonomous region or a federation, and I think that they're fearful that if the people go back there may not be that kind of a guarantee in place as they would want it.

MR. LEHRER: In other words, it'll return too quickly to the status quo?

MS. SAEEDPOUR: Yes.

MR. LEHRER: So there's a political motive as well as a humanitarian motive to not rush back, is that what you're suggesting?

MS. SAEEDPOUR: Well, there's also, this is something that happened --

MR. LEHRER: -- safety I mean.

MS. SAEEDPOUR: -- actually among Kurdish guerrillas in Iran who were negotiating with the Rafsanjani government. The Kurdish guerrillas, the sticking point of that negotiation was the fact that the Kurdish guerrillas want to have a permanent place in protecting their own territory. They want it to be the military force protecting their territory. And I think that also for the Kurds they feel the same way about an Iraqi Kurdistan.

MR. LEHRER: Geoff Kemp, do you think that's a possibility here, that the Kurdish guerrilla leaders and others are using the enclave or would like to use the enclave thing to really establish step No. 1, 2, 3, 4, maybe 5, toward autonomy?

MR. KEMP: Maybe 6, 7, 8, 9, 10. I think part of the problem, Jim, is we don't know enough about what's going on there. We're not experts on Kurdistan. The fighting's been going on for a long, long time. There are fights within fights, conflicts within conflicts. There are stories now that the Iranians are sending forces across the border to try to defeat the Mujahadeen who used to fight the Iranians. It is a mess, and therefore, while I would think the Kurds would want some autonomous zones that's guaranteed, I think American policy should be to work towards that through the United Nations, under United Nations auspices with the U.N. mandate, not just something we do on our own with the British.

MR. LEHRER: Jim, what's your view of that? I mean, is it possible that we're being snuckered in a way by the Kurdish guerrillas into helping them come up with an autonomous region of their own?

MR. HOAGLAND: Well, I think the problem really is in Baghdad, not in Kurdistan, and we should try to resolve it in Baghdad. I'm not sure it's a question of snuckering. I think though that as an alternative to pressing for real change in Baghdad, that is, pressing for Saddam Hussein to leave in a real and forceful way, which we're not doing at the moment, we may be forced to give some kind of international guarantees which, as Geoff says, obviously should be blessed by the U.N. We should do more at the U.N. though. Resolution 688 gives us a lot of latitude to intervene. In fact, as the French are saying, it gives us a duty to intervene in what's happening in Iraq and in future situations where a government is massacring its own people. We should be using the U.N. to press for war crimes trial, we should be using the U.N. people who are sent to that zone to gather information about war crimes to be presented against Saddam Hussein and his regime.

MR. LEHRER: Mr. Zebari, do you Kurds see this from a political point of view? Forget the humanitarian thing here for a moment and the refugee problem, do you see this as your best chance to get autonomy? In other words, that that is your No. 1 priority and you're going to -- whatever elements you can put together now, this is it, you've got a golden opportunity and you don't want it to go, you don't want it to slip through your hands?

MR. ZEBARI: Well, you have to remember that the root cause of this mass exodus is political, as Jim mentioned in fact. The root cause of this problem is in Baghdad. It's not in the mountains of Kurdistan or with these desperate people or these possessed people. In fact, the Kurds have struggled for a long time for autonomy with a united and integrated Iraq, and now Saddam Hussein by his brutality has expelled nearly 2 1/2 to 3 million people to leave the country. This has created an unstable element in the region which led the international community to intervene. Now the Kurdish problem here, in fact, needs some kind of international assurances or guarantees in order to be able to make any peace. Now Saddam Hussein's regime has become an international problem not only for the Kurds, but even for the U.S., for the international coalition. He's still in power and there's no prospect probably he would be removed. Now for us, in fact, here is an opportunity for us to make a deal with Saddam Hussein, but as I said, we are extremely skeptical because in the past, Saddam Hussein has observed his pledges to us more in the breach than in the observance.

MR. LEHRER: So you don't mind making a deal with Saddam Hussein but you want the U.S. Marines standing behind you when you make the deal?

MR. ZEBARI: No. In fact, really I think, as has been mentioned, there is a Security Council resolution which provides the legal base for a solution. I think any agreement with the Iraqi government is important to be incorporated into that resolution, plus there is a memorandum of understanding between the United Nations and the Iraqi government about providing humanitarian assistance for all Iraqi people in the South and North. There are many ways, in fact, which the Kurdish autonomy could be supported by United Nations.

MR. LEHRER: And in a way that would not be a quagmire, Geoffrey Kemp?

MR. KEMP: Yes, but it's got to have teeth. You can't just have a U.N. resolution that has no enforcement mechanism. That's why it would be much preferable if this had been added on to U.N. Resolution 687, the one that calls for disarmament, but there'd also been a clause that said Saddam has to look after the human rights of the Iraqi people, otherwise no lifting of sanctions.

MR. LEHRER: All right. We have to leave it there. Ms. Saeedpour, gentlemen, thank you. FOCUS - ACCOUNT CLOSED

MR. MacNeil: We turn now to the story of what happens when a banks insurance system fails. Last week government regulators warned that the Federal Bank Insurance Fund could run out of money by the end of the year unless something is done to build it up. These days any one looking for an extreme example of what happens when a deposit insurance system falls apart need to look no further than the State of Rhode Island. Business Correspondent Paul Solman did that and has this report.

GOV. BRUCE SUNDLUN, Rhode Island: On behalf of all the depositors especially the small depositors I am declaring a bank emergency in Rhode Island.

MR. SOLMAN: On New Years Day Rhode Island woke up to this announcement. The State's Bank Insurance Fund was broke. The deposits of 300,000 Rhode Islanders were frozen in a State of only 1 million people. It is a nightmare from which many Rhode Islanders are still trying to awake.

DR. ANDREW MANICKAS: The loss is unimaginable. I don't even want to discuss that. It is not worth discussing.

MR. SOLMAN: Retired dentist Andrew Manickas's life savings were in this Rhode Island Credit Union. It was supposedly insured up to $500,000 by RISDIC a private deposit insurance company. He switched his account to Davisville because it offered a higher interest rate than this Federally insured bank.

DR. MANICKAS: As I recall it is was about 2 percent. For my total savings about $6000 a year and that represented almost a 25 percent increase over what I was receiving. It seemed to make a lot of economic sense to me.

MR. SOLMAN: Economic sense. It isamazing. People still believe you can get higher interest rates without taking higher risks. But that is just wishful thinking. You get more interest precisely because you take more risk. And in this case the risk started with RISDIC a private deposit insurance company that simply was not government guaranteed. So it could fail. And it did triggering runs at the banks and credit unions like this one insured by RISDIC. Most of these banks and credit unions made the usual bad real estate loans in the 1980s the runs crippled them. The State of Rhode Island who could not afford to bail them out had to shut them down right after New Years Day. Now to us this story is a parable of the 80s. Where it came to mean looking out for number one. In addition this is one heck of a saga. The saga begins with one Joseph Malicone Jr., President of the Heritage Loan and INvestment Bank. Malicone seems to have been very well connected with a Rhode Island mob.

JAMES O'NEIL, State Attorney General: It is like a One Eyed Jack what you see on one side is not what you have on the other. Apparently he is a prominent real estate entrepreneur in the city of Providence and through out the state and yet on the other hand he simply used this institution as his own blind checking account.

MR. SOLMAN: There has been a lot written in the newspapers about organized with Malicone, Malicone's banks and so forth. What seems to be the case.

MR. O'NEIL: Well simply that organized crime has a very firm relationship with Heritage Loan and Investment and with Malicone.

MR. SOLMAN: Malicone was last spotted here at Boston's Logan Airport back on November 8th. He is not likely to show up again any time soon since he seems to have taken 13 million dollars with him. MOney he withdrew from his bank, Heritage, by simply filling out other depositors names. Of course the deposits were insured by the Rhode Island Share and Deposit Indemnity Corporation, RISDIC and therefore they seemed protected. RISDIC was security, trust, credibility and after it paid off the Heritage Depositors a trifle low on cash. With less than five million dollars to cover almost 2 billion in deposits. You see this insurance company and its member banks were so chummy that RISDIC hadn't charged them a premium since 1985. If RISDIC had been responsible this might just had been the tale of a petty mobsters rise and fall starting and ending here at Heritage. In fact some thing was rotten in the State of Rhode Island namely RISDIC and the banks and credit unions that it insured. By early December word was leaking out. The new Governor elect assigned a man to watch the situation, Sheldon Whitehouse.

SHELDON WHITEHOUSE, Governor's Counsel: It was a very sensitive environment. People from the Federal Reserve were in touch with us daily. They were very concerned. So we wanted to make sure that there would not be runs and this was a prospect of contagion and there was no way we could risk that.

MR. SOLMAN: Insiders had began to pull large amounts of cash from RISDIC institutions. UNable to stem the flow or cover the loses on December 31st the RISDIC Board met and voted to dissolve prompting the Governors statement. Like many Rhode Islanders Jean Roy had assumed that her money was safe. In November she had retired from the Army and placed all of her savings $50,000 in a local credit union.

JEANNE ROY: TO be honest with you I assumed that it was insured. I mean it is on all of my banks accounts, there is a big sign on the door insured, you know, and I never really thought about, I never realized there was a difference between federally insured or RISDIC. You know it says to me insured. Insured to me is insured. I just never expected anything like that.

MR. SOLMAN: When we first visited Rhode Island in the winter the State seemed obsessed. From kids on the street to the local talk show the impromptu public meetings the topic was always the same.

SPOKESMAN: I have $40,000 to $50,000 in bounced checks that the vendors all over this country are now saying to me we gave you a week you asked for a week. We gave it to you. We gave you two weeks. We gave it to you where is our money. Now you have come down here. I have yet to see the Governor come down here. Does he know the way to Wickford. Does he know where Wickford is on the map? I don't think that he does.

MR. SOLMAN: Actually Wickford is pretty easy to find but a harder job is coming up with any body from RISDIC who was willing to appear on camera but we finally found the perfect person or so we thought and we started off with asking him about the historic December 31st Board of Directors meeting at which the Directors literally voted themselves out of a job. Right away however we ran in to something of a snag. How long have you been on the Board?

JOSEPH CUGINI, RISDIC Board Member: About 20 years.

MR. SOLMAN: So what do your old friends on the Board say happened at the meeting?

MR. CUGINI: It was just a regular board meeting and they decided to go in to the conservatorship.

MR. SOLMAN: Didn't they tell you what they did?

MR. CUGINI: I was not at the board meeting. If I were there at the board meeting may be I could have participated in that decision. I was not there so I would only be Monday morning quarterbacking. I can't help you. I wish I could. If I were there I would be able to tell you what their line of thinking was. However I was not there and I can't answer your questions.

MR. SOLMAN: Another guy who missed the meeting was RISDIC's Vice Chairman who happened to be, get this, the widely traveled Joe Malicone Jr. In another words the insurance fund was run by the insured themselves. Vartan Gregorian is President of Rhode Island's Brown University. He was asked to investigate the scandal and find out who RISDIC's Directors really are.

VARTAN GREGORIAN, President, Brown University: These are honest citizens who became heads of their credit unions and then they became members of the Board of RISDIC and they were supposed to regulate themselves and there was no custodian or guardian keeping an eye on guardians themselves.

MR. SOLMAN: RISDIC just didn't over look the shenanigans at Malicone's bank it was equally forgiving with all of its member institutions. At Jeanne Roy's Marquette Credit Union, for example, only 3 percent of the loan portfolio met federal standards and the RSDIC Board secretly must have suspected it. What did these guys tell their father confessors when they confessed in Church?

MR. GREGORIAN: They said, father, pray the nation's economy and real estate in New England won't go sour because we have our entire operation riding on it.

MR. SOLMAN: Unlike Joe Malicone, most of the people running the RSDIC banks and credit unions weren't rogues. They just felt entitled, like so many in the '80s, to whatever they could get. It almost seemed at times like a welfare state for the well-to-do, the Mike Milkens, the S&Ls, the people at RISDIC. And so long as this entitlement economy, if you will, kept spiraling upward and everyone kept faith, no one would get hurt. So when the young state legislator tried to blow the whistle here five years ago, he didn't get much of a hearing.

FRANK GASCHEN, State Representative: [1986] Whenever the fox is left to go the hen house, you must admit that most -- not most - - I think all of the members or many of the members of the RISDIC Board are also serving in capacity with the credit unions.

MR. SOLMAN: Way back in 1986 before home video like this was refined, Frank Gaschen warned of RISDIC's weakness and sponsored a bill to force all state banks and credit unions to get federal insurance. The hearing on the bill was chaired by Robert Bianchini, a part-time state rep. who also worked for the credit union.

ROBERT BIANCHINI, State Representative: I would also submit that there are thirteen or fourteen extremely well run private insurers in this country and that RISDIC, in fact, leads the nation with the kind of deposit insurance and the kind of protection and the kind of leadership that they have provided over the years.

MR. SOLMAN: Five years later, Frank Gaschen is a little grayer and a little wiser.

FRANK GASCHEN: It surprised me that he would actually take an active role in legislation that sought to regulate the industry by which he was hired.

MR. SOLMAN: With Bianchini in charge, the Gaschen bill never had a chance. In the entitlement '80s, the sky was the limit. The greatest fear, admitting the jig was up.

SHELDON WHITEHOUSE: In cartoons you often see a character walking off the edge of a cliff, over space, and it's not until the character looks down that he falls, and that's what happened here. RISDIC was off the cliff for years before everybody looked down and then whhhh --

MR. SOLMAN: The point is any financial system is based on its credence, its credibility. After all, that's what creditworthy means.

MR. WHITEHOUSE: Go find a bank and it calls itself something or other Deposit & Trust. That's exactly what credit is. You deposit and then you trust. And if the trust is gone, so's the deposit. And with that, goes the bank.

MR. SOLMAN: If you get your money back, where will you put it?

MS. ROY: Probably spend it.

MR. SOLMAN: Why?

MS. ROY: Well, that way this won't happen again.

DR. ANDREW MANICKAS: All young people should learn a lesson as to -- not to trust politicians, not to trust banks, not to trust anybody, and I hate to say that people should put their money under a mattress, but that's not a bad consideration.

MR. SOLMAN: Since the banks closed January 1st, some small ones have reopened with federal insurance but most of the big ones remain closed, including Dr. Manickas's bank and Jeanne Roy's. The state is trying to come up with a plan to liquidate assets and return as much money as possible to depositors, but the loans are lousy, the state's broke, and Jeanne Roy is on food stamps. While the free wheeling entitlement '80s may no longer be with us, the chickens are still coming home to roost. There's the S&L crisis, of course, and now RISDIC, but is that the end of it? Not necessarily, as you may have noticed. On Friday, the head of the General Accounting Office, Charles Bowsher, served notice that even the Federal Bank Insurance Fund, FDIC, is at risk.

CHARLES BOWSHER, General Accounting Office: [April 26] But next year unless the Fund is rebuilt, it will almost certainly be insolvent as more troubled banks fail.

MR. SOLMAN: In short, the credit boom of the '80s is behind us, but the credibility crisis of the '90s is far from over. RECAP

MR. MacNeil: Again the main stories of this Monday, allied forces ordered Kurdish rebels to stop blocking the return of Kurdish refugees to Iraq. The United Nations will begin setting up post in Northern Iraq tomorrow as a first step towards the takeover of the allied refugee camps. A powerful earthquake hit a sparsely populated region in Soviet Georgia, killing at least 40 people. Good night, Jim.

MR. LEHRER: Good night, Robin. We'll see you tomorrow night with a major look at developments in South Africa. I'm Jim Lehrer. Thank you and good night.