The NewsHour with Jim Lehrer

JIM LEHRER: Good evening. I'm Jim Lehrer. On the NewsHour tonight, full coverage of two major bank mergers announced today, a debate about Kenneth Starr's demand for bookstore records, a report from Chicago on health and cigar smoking, and a conversation with novelist Rafi Zabor, winner of the Penn-Faulkner Fiction Award. It all follows our summary of the news this Monday. NEWS SUMMARY

JIM LEHRER: Two large mergers were announced today in the banking industry. In the first NationsBank and BankAmerica will join in a $60 billion deal that will create the country's largest bank. It will use the BankAmerica name and serve 22 states coast to coast with 4800 branches, 15,000 automated teller machines, and assets of more than $500 billion. NationsBank chairman Hugh McColl and BankAmerica chief executive David Coulter announced the merger at a New York news conference.

DAVID COULTER, CEO, BankAmerica: We're creating a new company. And if we do it well, this is a combination where the whole is far greater than the sum of the parts. In sum, the cheer size, scope, and scale of this new company is truly formidable. But as impressive as its financials may be, they are dwarfed by the capabilities it can bring to its customers, the commitment it brings to its communities, and the combined talent of some 180,000 dedicated employees.

JIM LEHRER: The other merger is of Bank One and First Chicago. Their $30 billion deal will create the nation's fifth largest bank. We'll have more on this story right after the News Summary. Former Senator George Mitchell today again praised President Clinton for playing a critical role in last Friday's Northern Ireland peace agreement. Mitchell chaired the talks that led to the deal. He met today with the president at the White House. The agreement calls for Protestants and Catholics to share in governing the contested province. Mitchell said he was grateful for the president's involvement.

GEORGE MITCHELL: While the president was very actively involved in the concluding negotiations, including staying up all night and making phone calls to many people, including myself, they didn't begin there. They began five years ago. What happened was the culmination of a long process of involvement by the president. No American president has ever before visited Northern Ireland while in office. No American president has ever placed the problem of Northern Ireland high on the American agenda at a time when it seemed that there was no prospect for success.

JIM LEHRER: Mitchell said he hopes the president will visit Northern Ireland again next month. In Belfast, the so-called marching season began. There are hundreds of parades between Easter Monday and the end of August. Today a group of Protestants called the Apprentice Boys agreed to re-route their march to avoid a mainly Catholic area, but later many of them joined a protest against the peace accord. The International Monetary Fund issued a grim warning today about the economy of Japan. It said it was expected to stagnate and have zero growth in 1998. The Japan predictions were part of the IMF's world economic outlook report released twice a year. In Washington, the IMF's chief economist, Michael Mussa, said there was some hope for improvement next year.

MICHAEL MUSSA, International Monetary Fund: Our assessment is that while Japan is losing export competitiveness vis-a-vis the rest of Asia, it's enjoying very strong competitiveness vis-a-vis North America and Europe, which will continue to be fairly rapidly expanding economies. So we think that Japan can turn from negative growth in the first half of this year to slightly positive growth in the second half of this year and then perhaps picking up some momentum in 1999.

JIM LEHRER: The outlook also predicted the U.S. economy would continue to lead the world, but its trade deficit would increase. Thailand, Indonesia, and South Korea were expected to experience negative growth. The report said confidence in Asian financial markets should recover as economic reforms were implemented. President and Mrs. Clinton made public their income tax returns today, two days before the April 15th deadline. They paid $91,000 in federal income taxes on adjusted gross income of nearly $570,000. The president's salary is $200,000. The remainder came from investments and from earnings on Mrs. Clinton's book, "It Takes A Village." Much of those proceeds, $271,000, went to charity. Vice President and Mrs. Gore paid taxes of nearly $48,000 on income of $198,000. This was the day of the annual White House Easter Egg Roll. Thirty thousand children and adults participated. President Clinton blew a whistle to start it all. He and the First Lady--then joined by the Easter Bunny--watched children ages three to six push about seven thousand colored eggs around the grass with large spoons. This tradition dates back to 1878 and President Rutherford B. Hays. And that's it for the News Summary tonight. Now it's on to the big bank merger, the Starr books debate, smoking cigars, and a novel about a bear. FOCUS - IS BIGGER BETTER?

JIM LEHRER: Phil Ponce has the bank story.

PHIL PONCE: Is bigger better in the banking world? Some of the nation's largest banks seem to think so and are taking steps to make themselves into even larger giants. Today it was Nations Bank and Bank America, at $60 billion the largest merger between two American banks and Bank One Corporation and First Chicago, no small change either, at close to $30 billion. And those are just the latest. In the last two years First Union bought CoreStates; NationsBank bought Barnett Bank, and Wells Fargo bought First Interstate. And just last week came the biggest of all financial services deals, the proposed merger between Citicorp and Travelers Group. With us to discuss the big bank deals are Bert Ely, a banking consultant who has his own firm in the Washington, D.C. area, consumer advocate Ralph Nader, who analyzes the impact of mergers and founded Public Citizen, and Ron Chernow, an economic historian who's written several books about the banking industry. His most recent is titled "The Death of the Banker." Gentlemen, welcome.Mr. Chernow, the head of NationsBank is calling this proposed merger "the watershed event in the nation's banking history." Just how big of a deal is it?

RON CHERNOW, Economic Historian: This really is an historic event. This is the largest bank merger in American history if you measure it by deposits and branches. If you measure it by assets, the Citigroup merger last week is larger. But this is a historic event because it creates the first truly national consumer bank with branches ranging from Miami all the way to Seattle. To put this in perspective, 20 years ago we scarcely had any banks that had even branched into the adjoining state. Now we have banks that have branched from coast to coast. But this really fulfills a vision that A. P. Gianini, the founder of Bank America, articulated in 1904. It's taken the entire century to reach a truly national banking system.

PHIL PONCE: Mr. Ely, do you agree, it's a pretty big deal?

BERT ELY, Banking Consultant: I think it's a very big deal, again, because it creates the first coast to coast bank in the country, and it is a natural consequence of the federal government filing, knocking down all the remaining restrictions on banks' ability to branch within the United States.

PHIL PONCE: Mr. Nader, is bigger better as far as consumers are concerned?

RALPH NADER, Consumer Advocate: I don't think so. The big banks have a record of charging higher for bank fees and their customer accounts. They have a record of less responsiveness to small business loans. But this just isn't just a merger of banks. This is part of a larger pattern where insurance companies, security firms, banks, and industrial corporations can own one another, with the repeal of laws that were trying to reduce the risk level during the Depression and after years of 1930 and later. So what we're seeing here is a taxpayer-guaranteed moving in through deposit insurance, bailing out the deposit insurance fund, which is now at a ridiculous $30 billion--hardly enough for one bank collapse--and bigger and bigger banking and financial conglomerates that say to Uncle Sam if we get in trouble, you're going to have to bail us out because we're too big to fail.

PHIL PONCE: How about that, a bad deal for consumers, Mr. Ely?

BERT ELY: No, I don't think so because consumers are still going to have ample choice within the banking industry. We have 9,000 banking companies in this country. Most of them are small community institutions that can meet the needs of those people who aren't happy with the big banks that are serving their market. Now that we're getting increasing competition among these banks not only as they branch across the country, but as they also sell their products, in other regards--also, I think the too big to fail argument is overplayed. I mean, it is a reality, but the way the Federal Deposit Insurance system is set up, the federal government has theright to tax without limit successful banks in this country to pay for whatever deposit insurance losses there are going to be. This is quite a change from the S&L situation in the 1980's.

RALPH NADER: Of course, in a period of record profits the FDIC has stopped assessing for a rainy day ahead of time. Listen, when Paul Volcker, the former chairman of the Federal Reserve Board, warns against breaking down the barriers between banking and commerce and securities and industry, we'd better listen. Here's a man right out of Wall Street, major figure in American financial activity, testifying a few months ago before the Congress, saying, look, you're going to have cross subsidization, you're going to have the taxpayer having to fund failures in say the securities area and insurance area, instead of just supporting the deposits in a bank. It raises the risk factor and brings in crony capitalism where banks will favor their own subsidiaries and affiliates in terms of loans, et cetera, just the way we're decrying now in Asia. We're saying crony capitalism is bad in Asia but it's okay to bring it back here, and concentrate power even more.

PHIL PONCE: Mr. Chernow, is that a fair comparison?

RON CHERNOW: Well, you know, I think that the worst example of crony capitalism in American banking has been the community bank. The community bank has been wonderful in terms of having personal relationships with individual depositors and local businesses. But we have had more bank failures in American history because of collusion and back scratching, because of local bankers in cahoots with local real estate developers and small businesses than from any other area. I mean, just look at the S&L crisis so that the small bank has been a hallowed institution in America in banking's history, but it hasn't been an unmixed blessing.

PHIL PONCE: How about the--how about the status of small banks, though, should small banks be worried in light of these mergers that seem to be taking place? Is a small bank an endangered species at this point?

RON CHERNOW: I think so. I think that these two mergers today really sound the death knell for the community bankers, and I have mixed feelings about that, but I don't think that they have the resources, the capital, and the technology to compete. I think that we'll see more community banks selling out to super regional banks, more super regional banks now indulging fantasies of becoming coast to coast banks of the sort that BankAmerica and NationsBank announced today.

PHIL PONCE: Death knell for community banks, Mr. Ely?

BERT ELY: Not at all. Community banks are doing very well. Last year 188 new community banks were chartered. Sure, the community banks are being bought, but the large banks are not going to put 'em out of business. Every time two large banks merge there's a net transfer of customers to other banks. And so I don't think they're going to be falling by the wayside. I'll come back to a point that Ralph talked about in terms of and his implication is of maintaining a separation of banking from insurance and securities. That's obsolete thinking. The fact is that electronic technology--meshing together all these different industries, that's why we saw the Citicorp/Travelers deal last and that's why we're going to get away from these nice, neat compartments that we're used to visualizing the world towards an integrated financial services industry, and that is what the future holds.

PHIL PONCE: For clarification's sake, what happened last week, and correct me if I'm not stating it correctly, what happened last week had more to do with expanding services, whereas, what happened--what's happening today has more to do with just banks being bigger as banks.

BERT ELY: That's right. Today's mergers are just those taking place within the banking industry. The Citicorp/Travelers deal last week brings together a giant organization that's involved in banking on a worldwide basis in the insurance business and the securities business. This is the wave of the future because this is what technology is making increasingly feasible.

PHIL PONCE: Mr. Nader.

RALPH NADER: If this is the wave of the future and we're going to get preferential treatment of these affiliates, these banks and loans et cetera, which I call crony capitalism, a far greater scale, by the way is in the hometown bank--if so, let's get rid of deposit insurance for the bank that is part of a conglomerate that's going to cross-subsidize and favor its insurance and security and other affiliates. Why have this kind of guarantee when you have this kind of cross-subsidization? This is why we need congressional hearings the way Wright Patman and Sen. Proxmire used to have so Bert can go up there and testify, others go up there and testify, this is an enormous jolt to the traditions and the risk controls, and the competitive scenario of our economy, and to have it go through with no more discussion on television than what this program allows in a sound bite media world is ridiculous. We need thorough, deliberate congressional hearings here.

PHIL PONCE: How about that, Mr. Ely, should Congress--should the government give this--give this--these mergers the thumbs up?

BERT ELY: I think without question, and there have been lots of congressional hearings on this over the last couple of years, in conjunction with financial services modernization legislation that Congress has been chewing on. Also, with regard to this cross- subsidization--what that is, banks with deposit insurance are able to subsidize other activities--that's an assertion that Alan Greenspan and others in the Federal Reserve have made. But they have not put a single number on the table to support that it's a totally false assertion in my opinion.

PHIL PONCE: Mr. Chernow, does the country really have any experience in dealing with the potential failure of an institution of the size that's contemplated here?

RON CHERNOW: No, we really don't because our entire sense of scale changes with these mergers. I mean, just a week or two ago a bank with 200/300 billion dollars in assets considered an extremely large bank. Now, suddenly we have mergers creating institutions with 500/600/700 billion dollars in assets. So I think that Ralph Nader is correct, that is going to create a huge debate about deposit insurance because I think that if banks were too big to fail in the 1980's, they're now much, much bigger in the 1990's. And we have a situation when we have a national consumer bank that's operating coast to coast, if that bank were to fail, the ripples would spread right across the country. So I agree with Ralph; this will trigger off a big debate about deposit insurance.

PHIL PONCE: Is fear of failure something that people should take seriously, Mr. Ely?

BERT ELY: Well, I think that the political establishment should take it seriously, and I agree with both Ron and Ralph on this, that there is going to be a congressional debate on it, and I think it's going to be very healthy. But what I think is important is to look at the facts in the issue and get away from the emotions. Too big to fail is a political reality of the industrialized world. I think it's important to accept that. But what's key is how do you prevent failure and who pays for failure? That's what we debated, and I believe that these large mergers are going to put this issue on the table more directly before Congress as they should. So I don't think we have any disagreement on that. Disagreements can be over how you do it.

PHIL PONCE: Let's get to an initial impulse, Mr. Ely, and that is, why are these mergers taking place? What is the motivation, the essential motivation?

BERT ELY: The motivation is that the restrictions against them have finally been taken off after a century. What the federal and state law did for a century is prevent the evolution of the America banking system as we now see it emerging. And we're going to end up with what we should have always had, which is a relatively small number of large regional or national banks coupled with thousands of prospering community banks. And so we're moving in the direction we should that evolution is delayed for almost a century by I think a misguided federal state law.

PHIL PONCE: So you're saying the--that left to its own devices, the market would have only--the market now would have resulted in what, a dozen or fifteen large banks?

BERT ELY: Yes.

PHIL PONCE: Is that what you're saying?

BERT ELY: And we would have been there and--but coupled with five, six, seven thousand smaller banks, plus we had well over ten thousand credit unions.

PHIL PONCE: Mr. Nader.

RALPH NADER: Little boys looking for bigger toys. Let's not discount the bigness for bigness sake. The top executives are going to make out like bandits on these mergers in all kinds of ways, executive compensation, stock options. They have their own personal interest for these mergers. But what is the purpose for the consumer, for the beleaguered taxpayer, who's expected to bail them out? Who else can bail out these big banks when they start collapsing? How about the experience of American Express and Sears Roebuck with conglomerate financial empires? That didn't work out very well either. You have huge corporate bureaucracies here riddled with internal envy and in-fighting, et cetera, very unwieldy, very difficult to manage. Anyone who gets hooked into those conglomerates are going to lose the opportunity for comparison shopping, the key criteria for consumer welfare, comparison shopping. And they're going to lose a lot of personal privacy about their financial lives.

PHIL PONCE: Mr. Chernow, how about that? Historically, how often are these deals motivated, driven by the individuals at the head of their respective institutions?

RON CHERNOW: There's always corporate ego and frankly, a lot of bank mergers have not worked out. But I think that we have to acknowledge the reality that banking has been in a kind of slow motion crisis for the last 20 years. Depositors have deserted the commercial banks for the brokerage houses, for mutual funds, for the stock markets. Large companies have deserted the banks for the stock market and the bond market. And one of the reasons that legislators and regulators allowed a loosening of these restrictions was to enable commercial banks to increase both their product and geographic diversification. This is why the restrictions that were placed on interstate branching in the 1920's and then again in the 1950's have now been slowly dismantled.

RALPH NADER: But they're reporting record profits for six years in a row of these banks, record massive profits, massive stock appreciation, are hardly down and out, and they need this kind of help.

RON CHERNOW: Yes, but I think there are two reasons for that. Number one, they've had extremely low interest rates, and in banking, when you have low interest rates to spread between what the banks have to pay and what they're taking in tends to increase, and profits increase. Also, some of that profitability comes from the bank mergers where they cut costs where there have been overlapping branches. I think what we're seeing today is that the commercial banks feel that they have to offer new products and to expand revenues and not simply cut costs by closing branches.

RALPH NADER: Mr. Ely.

BERT ELY: The large increase in bank profits in large part is due to the fact that the banks have bigger and bigger capital bases all the time. That return on capital has not been rising the way it might be suggested. The other thing that we see going on is that banks have lost a tremendous amount of market share in recent decades to their less regulated and less taxed competitors. And I think part of the modernization process has to go forward, is to level the playing field from a regulatory standpoint so that we get the most efficient mix of banking and financial services and get away from the regulatory discrimination that has existed towards the nation's banks.

PHIL PONCE: And, Mr. Ely, how much pressure is there in the nation's banks--among the nation's banks to merge some more? Are we going to be seeing more of this in the next--next couple of three years?

BERT ELY: We are going to see more because we have not yet fully worked through the consolidation process that was held up with water behind the dam for almost a century. It probably takes another five or ten years to run out, but overlaying it is going to be this melding of the banking, insurance, and securities industries as we saw in the Travelers/Citicorp deal that was announced last week.

PHIL PONCE: A quick reaction to that prospect.

RALPH NADER: Yes. Hugh McCall, the head of NationsBank, says in a few years five to six giant financial conglomerates will dominate the nation. That's not healthy for Main Street; it's risky for Wall Street; and it's bad for the Federal Reserve and all the other forces in Washington who want to bail out these banks and financial conglomerates, when they're mismanaged, speculative, or overreach in terms of their risk taking. The key thing here is to have broad congressional hearings and more discussions on programs like this.

PHIL PONCE: And, gentlemen, I'm afraid that's where we'll have to leave it. Thank you all very much.

JIM LEHRER: Still to come on the NewsHour tonight, more on the Starr investigation, smoking cigars, and a novel about a bear. CONVERSATION - STARR VS. BOOKSTORES

JIM LEHRER: Margaret Warner has the Starr update.

MARGARET WARNER: Last month special prosecutor Kenneth Starr issued a subpoena to a Washington bookstore, seeking the book-buying records of Monica Lewinsky. The former White House intern is a key figure in Starr's probe into whether President Clinton committed perjury in his Paula Jones case deposition or encouraged others, including Lewinsky, to lie in theirs. Lewinsky's attorney, William Ginsburg, was outraged.

WILLIAM GINSBURG, Attorney for Monica Lewinsky: Now we have the government in our reading material. This is too much. This is an executive of the government out of control. Where does this stop? Government is reaching right into our minds. This is like "Brave New World." It's got to be stopped.

MARGARET WARNER: But the lawyer for Kramerbooks & Afterwords, a small, independent bookstore, initially indicated a willingness to cooperate. The lawyer told the Washington Post that she had negotiated with Starr's office to narrow the subpoena but wasn't in a position financially and otherwise to fight it outright. There was an immediate outcry from civil liberties groups and a group of librarians picketed the store to protest. Store owner Bill Kramer says the Post story was misleading. He said he openly decided to fight the subpoena after hearing from some upset customers.

BILL KRAMER, Owner, Kramerbooks & Afterwords: They were naturally and rightfully unhappy and concerned, as we are concerned for their right to privacy. And so there was an immediate and chilling impact on our business. We had people coming in to tell us that they did not want to shop with us if we would--if we were going to comply with the subpoena.

MARGARET WARNER: Starr in the meantime had subpoenaed the records of Lewinsky's purchases at a second bookstore, the Washington outlet of Barnes & Noble, the nation's largest bookseller. Barnes & Noble vowed to resist it. The American Booksellers Associations offered financial help for the legal fight. Kenneth Starr hasn't said anything publicly on the issue. But at an April 3rd hearing at the federal courthouse in Washington senior Starr deputy Robert Bittman aid the independent counsel wasn't interested in the content of what Lewinsky was reading but in corroborating whether Lewinsky had given the president certain books as gifts. Lewinsky reportedly told Linda Tripp about such gifts in phone conversations secretly taped by Tripp. The president also mentioned receiving a book from Lewinsky in his Paula Jones deposition. Bittman also cited the government's recent cases against Oklahoma City bomber Timothy McVeigh and unabomber Theodore Kaczynski as evidence that prosecutors in the past have sought and obtained records of individuals' private reading habits. Last Monday, April 6th, Judge Norma Hollaway Johnson issued a preliminary ruling saying, in part, "The court finds that the First Amendment is, indeed, implicated by the subpoenas to Kramerbooks and Barnes & Noble." "The bookstores and Ms. Lewinsky have persuasively alleged a chilling effect on their First Amendment right," she added. She gave Starr's office a few days to demonstrate to the court that it has a compelling need for the materials its seeks and that there is a sufficient connection between that information and the grand jury's investigation. According to public reports Starr's deadline was extended until today.

MARGARET WARNER: Does the First Amendment protect the privacy of our book purchases? We get two views now. Joe Whitley is a former federal prosecutor in Georgia and was deputy assistant attorney general in the Justice Department during the Bush administration. He's now in private practice. And Bruce Ennis is a First Amendment attorney in Washington. He filed a friend of the court brief in this case on behalf of the American Booksellers Foundation for Free Expression.Mr. Ennis, what was your argument in this case? How was the First Amendment violated by these subpoenas?

BRUCE ENNIS, First Amendment Lawyer: These subpoenas have an immense chilling effect on bookstores, not just Kramerbooks and Barnes & Noble, but all bookstores across America and all bookstore patrons. The First Amendment is thought of as preserving a marketplace of ideas. And bookstores are the quintessential markets where those ideas can flourish. If patrons have no privacy in what they are purchasing in a bookstore, their right to be exposed to new ideas and the bookstore's right to sell and communicate new ideas will be severely chilled.

MARGARET WARNER: So you're saying the First Amendment protects here both the seller of the books and also the purchaser of the books?

BRUCE ENNIS: Well, that's right. And that's settled law. The United States Supreme Court and courts across the country have already held that.

MARGARET WARNER: Mr. Whitley, how do you see it?

JOE WHITLEY, Former Federal Prosecutor: I think this is all connected to the investigation that Judge Starr is conducting, and the grand jury certainly has already heard all these tapes that Linda Tripp made of Monica Lewinsky and also they've heard from lots of other witnesses about what she said about the gifts she's given the president. And I think this is corroborative evidence of that. Certainly, this is not a subpoena for the content of those books but really to show that these books were purchased. And I can think of other situations where subpoenas could go out to bookstores. In a divorce situation one spouse might subpoena information about the purchases another spouse might make for someone else, or, as we heard earlier, in the Kaczynski and Timothy McVeigh situations you could have purchases made there that should be and could be obtained via subpoena lawfully, constitutionally. And there's a balancing act that Judge Johnson is going to have to engage in here, and I believe that she will decide in favor of Judge Starr and the grand jury--actually the grand jury--not Judge Starr--seeing the purchases that were made by Monica Lewinsky.

MARGARET WARNER: Are you saying, in other words, that because they're not really interested in the content, which is an argument that Bob Bittman also made, that this could be subpoenaing the records of what kind of a tie she bought, that it's the same thing?

JOE WHITLEY: Well, bookstores today are a lot different. I don't know about these two bookstores in particular but they sell lots of things. And we don't know really what items are actually being subpoenaed. I know I need reading glasses, and I bought a set of reading glasses at a bookstore recently. So information about that might be something that's sought. Any number of things could be sought. I don't think--the "Tale of Two Cities" was purchased, for example. I don't think there's going to be any issue about the content of that book, I don't believe at least, as far as I'm aware. Now there could be some reference that Monica Lewinsky made about the content of certain books to some of her colleagues, but I think that that's really not the issue here. The issue is what gifts were given by Monica Lewinsky to the president. And so far, Monica Lewinsky is not in a position to share that with anyone, not even the grand jury, because her lawyer and independent counsel have not worked out any arrangement for the sharing of that information.

MARGARET WARNER: All right. What about that point, because Starr's offices made the same point. This isn't really about reading matter. It's about a gift.

BRUCE ENNIS: I don't think there's anything to that point at all. It's like saying suppose a parent is concerned that maybe their child is developing a drug problem or might have a learning disability and they go to a bookstore to get a book about clues as to whether your child might be developing a drug problem. They don't want other people to know about that until they themselves have made their own decision about what's going on. To say that they may not be looking at the contents of the book doesn't answer the question. The title of the book is revealing in its own right. The critical point you have to understand here is that the office of legal counsel took the position that the First Amendment is irrelevant, that a subpoena to a bookstore should be treated no differently than a subpoena to a grocery store. And that just ignores the First Amendment interests of booksellers and book patrons. The court has put a stop to that by holding clearly and squarely that the First Amendment is implicated and Ken Starr has to make a showing. He has to make a showing that the subpoena requests information that is really relevant and needed for this grand jury investigation. Now, if you look at the subpoena, itself, it's unimaginable that that showing could be made in the circumstances of this case.

MARGARET WARNER: Why?

BRUCE ENNIS: Because the subpoena does not ask, did Monica Lewinsky buy X book; it asks all books that Monica Lewinsky bought in the last 30 months. If she bought a "Winnie the Pooh" for a young relative, what conceivable interest does the grand jury have in finding out that? You cannot possibly justify as a focus investigation close nexus to a grand jury investigation, a subpoena asking for everything that's ever been purchased.

MARGARET WARNER: As a former prosecutor, Mr. Whitley, do you agree with that, that that's going to be a hard showing to make, that they need all these records?

JOE WHITLEY: This is a very narrow subpoena for a very narrow period of time, and it sounded like one of the attorneys for one of the bookstores was trying to resolve this through working it out, and in my experience, we subpoenaed bank records; we subpoenaed telephone toll records; we subpoenaed information about what sort of mail people received when those people were under criminal investigation. In this case there are people under criminal investigation by this grand jury and it's certainly appropriate to do it. It's a very narrow situation. I certainly believe and support the First Amendment, but the First Amendment is not unlimited. And I think there are certain limitations the Supreme Court has acknowledged exist on the First Amendment. In this case I think they certainly exist, and I think Ken Starr will be able to show a compelling need and a connection between the information he's going to obtain through the subpoena to his investigation. It really is not such a high test, but I agree with those people who say the First Amendment should be highly valued, and it certainly is the most important part of the Constitution. We wouldn't be speaking here today if we didn't have those rights. But at the same time, the role that he has, he's sworn to uphold the Constitution and investigate these charges, is to go after these issues associated with the obstruction of justice, perjury, and suborning perjury. And they certainly relate to what she's going to ultimately say to the grand jury, and if she goes into the grand jury and lies about this, I think this is why Ken Starr is trying to corroborate everything she said previously.

MARGARET WARNER: All right. Mr. Ennis you and Mr. Whitley have both referred to Supreme Court precedent. Broaden this out now for our viewers, for you or me, how broad is the First Amendment protection for any of us in terms of the books we take from the library, books we buy, videos we rent, under what circumstances has the Supreme Court said the government can get those kinds of records?

BRUCE ENNIS: Well, the Supreme Court has not actually handled very many of these cases. It handled a case called Brandsburg many years ago and most of the case laws in the lower court sincethen. So the law is not completely clear. It is clear that the Supreme Court has held that the First Amendment, whenever the First Amendment is implicated, whenever government action of any kind burdens First Amendment rights, the government must bear a--make a showing that that interference with First Amendment rights is justified. Some cases the government has to show a compelling need for the information. Other cases the government needs to show only a substantial need for the information. It varies from case to case based on the circumstances. The critical point again here is that the office of independent counsel was taking the position in its arguments that they did not need to make any First Amendment showing at all in this case simply because it was a grand jury subpoena.

MARGARET WARNER: Which is why the judge gave them extra time to make this?

BRUCE ENNIS: That's right.

MARGARET WARNER: Mr. Whitley, how would you explain it to an average viewer, how well protected he or she is from having the government look at these kinds of records, about sort of private book and video consumption habits?

JOE WHITLEY: Well, as a practical matter there's not enough hours in the day frankly for the few federal prosecutors and investigators there are out there to do this sort of thing. This is a very focused investigation on a very narrow issue Starr's been looking at now for the last 60 days. The average consumer of books has absolutely no concerns. Certainly we want to be careful in any situation like this to make sure people's rights are upheld, but there are no situations in my experience would randomly send out a grand jury subpoena for the information on books purchased by the average citizen; it just would not have happen, and there are sanctions within the Department of Justice for people who overreach. And there are also sanctions among the bar associations for people who overreach. And there are also--all of these people associated with this investigation--all of these people, all of this experience, all the FBI agents who have all sworn to uphold the Constitution, so we're protected to some extent by their conduct. Hopefully, their conduct is appropriate. We really won't know any of this until after this investigation is concluded and Judge Starr presents his report to Congress or seeks an indictment.

MARGARET WARNER: All right, Mr. Ennis, earlier Mr. Whitley said that maybe even in a civil case. How about in a civil case, in a divorce case, could one spouse subpoena the book buying records of the other spouse?

BRUCE ENNIS: People can always obtain the information if it's relevant to either a civil proceeding or a criminal proceeding. In both instances, whenever the government is going to enforce that subpoena, there must be a showing that the need for the information outweighs the harm to First Amendment interests. I must really disagree that this is a narrow subpoena. It's all book purchases within the past 30 months. And I really disagree that this is not of any significant concern to American book buying public. That is precisely why the American Booksellers Foundation for Free Expression, the American Library Association, the Association of American Publishers, and many other groups joined together in an amicus brief challenging this subpoena. They did that because they know that book patrons and library patrons around the country will be severely chilled--they will be afraid to access information that may not be considered politically correct or to buy a book that their next door neighbors might disapprove of if they know that that kind of information can be turned over to the government without any showing of necessity whatsoever.

MARGARET WARNER: Mr. Whitley, would you say that this decision could be precedent setting?

JOE WHITLEY: Well, as has been the case--

MARGARET WARNER: Briefly because we're just about out of time.

JOE WHITLEY: --as has been the case certainly in many of these other opinions rendered by Judge Johnson, it's possible that appeal may be taken up to the courts of appeal and then ultimately to the Supreme Court. Hopefully, this will happen quickly and she'll be able to render a decision and the bookstores will abide by whatever that decision is.

MARGARET WARNER: All right. Well, thank you both very much.

BRUCE ENNIS: Thank you. FOCUS - TRENDY AND DANGEROUS

JIM LEHRER: Now, smoking cigars. The business is booming, but a National Cancer Institute study released Friday said daily cigar smoking can cause several types of cancer and heart disease. Elizabeth Brackett of WTTW-Chicago reports.

ELIZABETH BRACKETT: Remember when cigars were considered dirty and smelly, when they were smoked only by male politicians making deals in smoke-filled rooms? Not anymore. Cigars are now the hottest, hippest thing going. Richard D'Onofrio has opened seven mini storefront cigar factories around the country in the last 10 months.

RICHARD D'ONOFRIO, La Havanita Cigar Factory: We're exceeding our production. It's amazing. It's a wonderful business. The timing is good. You know, people today want to look at--as the century winds down, I think the party has already started--New Year's Eve 1999.

ELIZABETH BRACKETT: It's a party with big name guests. The stars are smoking cigars in the movies and on TV. Athletes celebrate victories with cigars, and so do presidents. Celebrities grace the covers of glossy cigar magazines. Jonathan Scott publishes one of those magazines. He says cigars have come to symbolize--

JONATHAN SCOTT, Cigar Smoker Magazine: The good life. It's the fine wines, the fine liquors, the fine hotels, the fine cigars, and the fine company, and the fine conversation. It's been a terrific journey for me as publisher of Cigar Smoker Magazine.

ELIZABETH BRACKETT: Though even Scott is amazed at how the so-called quest for the good life has fueled his magazine's growth.

JONATHAN SCOTT: The change has been phenomenal. And the magazine, for instance, grows 20 percent almost every issue and we're quarterly. Four billion premium cigars were sold last year.

ELIZABETH BRACKETT: And not all of those cigars are being sold to men. Tobacco store owner and entrepreneur Diane Silvius Gits.

DIANA SILVIUS GITS, Up Down Tobacco Shop: The big change are the women smoking cigars. And it's like they tasted the men's cigars and they liked them. And they like--you got to smoke a big cigar. And women look kind of good with a big cigar. Don't you think?

ELIZABETH BRACKETT: No argument from commodities broker Wayne Grover.

WAYNE GROVER, Cigar Smoker: I think a woman smoking a cigar is one of the sexiest things that I have ever seen, hands down.

ELIZABETH BRACKETT: As delighted as Gits is with the new attitude, she is somewhat surprised. It's a far cry from 35 years ago when she was the only woman in Chicago selling cigars.

DIANA SILVIUS GITS: It was terrible. I used to be in the store when I was down the street on Burden and Wells, and a man would walk in and say, I don't want you to wait on me; I want a man to wait on me. I'd have to go find a street sweeper to wait on him or something. And that was--they were terrible. But all those guys are mostly dead now, so it's much better.

ELIZABETH BRACKETT: So much better that she's the only woman in America with her own brand of cigar. The Diana Silvius Diamond Vintage is a premium cigar made in the Dominican Republic. The Silvius is just part of her $2 million inventory.

ELIZABETH BRACKETT: Do you ever feel like you're hurting your health by smoking a cigar?

DIANA SILVIUS GITS: Never. I feel like I'm hurting my health when I go and eat a bunch of greasy french fries.

ELIZABETH BRACKETT: But in the first long-term study of cigar smokers versus non-smokers researchers at Kaiser Permanente in California found that cigar smokers nearly double their risk of dying from all forms of cancer. The new National Cancer Institute report has upped the ante on the dangers of cigar smoking even more. The American Lung Association's John Kirkwood thinks the NCI report will bolster his organization's conviction that even occasional cigar smoking is dangerous.

JOHN KIRKWOOD, American Lung Association: I think it could be a wake-up call. It could have the same impact that the Surgeon General's Report had. It could focus on the health issues regarding cigar smoking, and, in fact, raise people's awareness and consciousness and perhaps give them second thoughts about taking up a cigar.

ELIZABETH BRACKETT: Surgeon Sharon Collins is well aware of the relationship between smoking cigars and cancer. She specializes in head and neck cancer surgery at the Loyola University Medical Center outside of Chicago. Because they are rare, head and neck cancers are often not recognized in their early stages, and the survival rate is less than 50 percent. The surgery is often radical, the removal of a tongue or a jaw, though Collins has pioneered less invasive forms of head and neck surgery. She had operated on this patient, a former cigar and cigarette smoker, two days earlier.

DR. SHARON COLLINS, Cancer Surgeon: Even though you did have what we would consider an advanced tumor of your tongue, we were fortunately able to do an operation where we saved most of your normal parts, and I think you're going to have a very nice, functional result. You're going to look basically normal on the outside. You should be able to speak and swallow essentially normally.

ELIZABETH BRACKETT: Collins says 90 percent of her patients have used tobacco products. She is clear about the risk.

DR. SHARON COLLINS: Cigar smoking is associated with four to ten times higher risk of getting cancer of the mouth than in non-smokers.

ELIZABETH BRACKETT: Her patient had half of his tongue removed and would not be able to talk for months. But he did have a message for cigar smokers.

PATIENT HOLDING UP MESSAGE HE WROTE: When you see me now I hope you will think twice.

ELIZABETH BRACKETT: Many new cigar smokers are young and health conscious, and they often don't associate cigar smoking with a high degree of risk.

WAYNE GROVER: I grew up as a runner, and so I was always very healthy, and, you know, just through the work that I'm in and the friends I associate with, I kind of took up the cigar smoking, and I just really enjoy the taste, and with a little heavier beer, it's just great; it's very relaxing.

ELIZABETH BRACKETT: Many smokers say they feel safe smoking cigars because they usually don't inhale.

RICHARD D'ONOFRIO: Here's why you shouldn't inhale a cigar, because the flavor is in your mouth and it's different than a cigarette. I smoked cigarettes. I quit cigarettes 25 years ago, you know. I exercise and watch what I eat, but, you know, you have to enjoy life. We're only here for one shot, so--

ELIZABETH BRACKETT: But that one cigar contains 40 times as much nicotine as a cigarette. That means that smoking that one cigar is about the same as smoking a pack of cigarettes. Industry figures show that close to 5 billion cigars were sold last year, a drop in the bucket compared to the sale of 470 billion cigarettes, but enough to attract the attention of the Federal Trade Commission. Robert Pitofsky chairs the commission.

ROBERT PITOFSKY, Chairman, Federal Trade Commission: There are a fair number of reports that cigar smoking has spiked up in the last four or five years, and, perhaps more important to us, there are indications that cigar smoking by young people seventeen and under have spiked up, and, therefore, the same concerns that we and Congress and the country has about tobacco use by young people concerns us now about cigars.

ELIZABETH BRACKETT: Pitofsky told the NewsHour's Murray Jacobson that the commission is monitoring the amount of advertising dollars spent on cigars and is considering recommending to Congress that warning labels be placed on cigars. Though some cigars do contain labels now, Pitofsky says they're nearly impossible to read.

ROBERT PITOFSKY: Warning people clearly of the health risks, telling them in no uncertain terms that cigar smoke produces serious health risks, I think that's an obligation of government. And it doesn't mean that we're denying them the opportunity to go ahead and take the risk, but they ought to know what the risks are when they start down that road.

ELIZABETH BRACKETT: If Congress agrees to warning levels, would that have an impact on those who are profiting from the newfound popularity of cigars?

JONATHAN SCOTT: They're going to try and wreck our good time. They certainly are going to try and do that. Are they going to do it? No. They're not going to succeed. I think we've had it up to our eyeballs already with people telling us what we can and what we can't do.

ELIZABETH BRACKETT: Those in favor of warning labels are looking to the National Cancer Institute Report to bolster their effort. CONVERSATION

JIM LEHRER: Finally tonight, an award-winning novel about a talking bear and to Elizabeth Farnsworth in San Francisco.

ELIZABETH FARNSWORTH: "The Bear Comes Home," a first novel by Brooklyn author Rafi Zabor, won the 1988 Penn-Faulkner Award last week. That prize was founded in 1980 as an award for fiction that would be judged by fiction writers themselves. Rafi Zabor has also been a music journalist and occasional jazz drummer, and his novel is set in the world of jazz. It's the story of an alto sax playing bear who's seeking nothing less than perfection and truth. Congratulations, Mr. Zabor, and thanks for being with us.

RAFI ZABOR, Author, "The Bear Comes Home:" Thank you very much, Elizabeth. Nice to be here.

ELIZABETH FARNSWORTH: Fill out the story of "The Bear" for us a bit.

RAFI ZABOR: Well, when the novel opens, he's just a dancing bear on the street, and that's all anybody knows of him, but then the novel follows him home with his friend and keeper Jones to an apartment on the lower East side, and they walk inside. He unsnaps the chain from the ring in his nose. They open a couple of beers, complain about the day's work, and pretty soon he takes an alto saxophone case and opens it up on his knees and plays the Charlie Parker blues. And from there on in he winds up getting engaged with the jazz scene. And it's a perfectly realistic novel, with the exception of the wildcard in the deck at the center of the book.

ELIZABETH FARNSWORTH: A friend tells the bear, "You're too big for this world." Is that why you made the main character a bear, so that he could strive realistically against the limitations of our human world?

RAFI ZABOR: (laughing) I suppose so, yes. I just have the feeling one of the reasons the metaphor may work is that when you--when you see jazz played live, especially by people like Sonny Rawlins or John Coltrain, the late John Coltrain, or Coleman, you're seeing something that really does always fill the boundaries of the world as normally recognized, and having the bear in the lead role in this jazz story seems to suit that. It's also true that jazz musicians' humor always has been a slightly surreal goof take on reality. Improving musicians tend to be a bit less literal about the way they treat reality than most other folks. So it suits the subject.

ELIZABETH FARNSWORTH: How did you develop his character? He seems so real I feel like I'm talking about a real person right now.

RAFI ZABOR: Well, bear just appeared. What happened was I had gone to Turkey. I was in Istanbul, escaping from being a jazz critic, and wondering how I was ever going to write fiction again, and I saw a gypsy leading a talking bear away from the courtyard of a mosque, and I suddenly thought, Lower East side apartment, et cetera, and it--it seemed like a sort of goof on Kafka and much too silly a premise to work with, but a few weeks later I was in Central Turkey and I owed my magazine an article on Sonny Rawlins, I had my hotel room, my table, and my papers, my pens, and just didn't feel like doing it, so I started noodling around with the short story idea, and I wrote what's now chapter one. And what seemed a silly idea at first and probably still seems one now was changed by the sudden appearance of this character, who seemed to appear three dimensional and pretty well full blown right away, and that changed the comic premise and enlarged its capacities for human and let's say metaphysical digestion as well. The character just appeared.

ELIZABETH FARNSWORTH: I was struck by the many difficult things you tackled in the book. Seeing the world from the point of view of the bear has to have been hard, and you write about jazz improvisation. I mean, the book is full of descriptions of jazz improvisation, which is so non-verbal. Was it very difficult to write this book?

RAFI ZABOR: It was difficult to write the book at times, sometimes of purely material considerations, but the passages about music, which everybody says, well, you know, it's so difficult to write about music, I found very natural. I do play drums, have labored to improvise as a musician and as a jazz musician. And it just seems--and also as a jazz critic, I had worked up a vocabulary from dealing with these things, and so it seems to be a gift I have, which is to say I can't claim credit for it. It's just there. And I've been--you know, I find it easy and natural to do, and a pleasure as well.

ELIZABETH FARNSWORTH: It did take a long time, though.

RAFI ZABOR: Not an abnormally long time if you consider that, you know, I had a writer's block of about 14 years duration in the middle. Part one of the book--the first seventy-five pages- -was written back in 1979 and '80. The rest of the book, which is to say the bulk, the considerable bulk of the book, was written over a two-year period, '94 to '96, at a sort of normal writer's pace. It was just the rather inconvenient gap in the middle that may cause some to think it was hard. It was hard then. It was easy when I wrote it.

ELIZABETH FARNSWORTH: I see. Would youread from the novel for us, please?

RAFI ZABOR: I could, yes.

ELIZABETH FARNSWORTH: And set the context for what you're reading.

RAFI ZABOR: Well, in the middle of the book the bear is in a recording studio, the Power Station here in New York, and he's playing with a quartet, a piano player named Rahim Bobbie Hatwell, who's entirely fictional, and bass player Charlie Hayden, and drummer, Billy Hart, and I'll read a short section in which he is--it's the middle--a long performance of the tunes, a brief excerpt that you and I between us have contrived to select. "His mind had a chance to slip the noose and wander a while. 'Just listen to these guys,' he thought, hearing Charlie Hayden and Billy Hart's accompaniments and its insinuations. The flexive beat suggested harmonic divagation, the threat or promise of distant thunder, eventual rain. Where else could you find a music like this? Where else encounter such simultaneous discipline and abandon? It was a whole rich multifarious world, and if you went out side its visible parameters, you could draw from anything out there and bring it back in without bowing--to any foreign gods. All you had to do was be able to play. All you had to do was know how to put it together. All you had to do was see how it already was together and potential, articulate, and complete and at the same time throw yourself wholly into the maelstrom of unknown process. All you had to do was know the little secret that made it swing. It was no big deal. It was life is all, no more, no less."

ELIZABETH FARNSWORTH: It was life is all. Jazz is more than just the scene for all this. It's really part of his--it's his vehicle to find the truth he's seeking, isn't it?

RAFI ZABOR: Yes. There's a sort of--there's a spiritual process, I suppose, for want of a worse term, that the bear's involved with for the duration of the book. He has a rather aggravated case of not fitting in, let's say, and that could be a metaphor for any number of kinds of displacement, whether it's psychological, racial, metaphysical, and so forth, so this is his differentness and his inability to be a part of the passing scene without sticking out like a sore bear is something he grapples with.

ELIZABETH FARNSWORTH: And he goes through quite a journey. He goes on a journey. He falls in love. He is jailed. He-- he even tries hibernation, a kind of a death for himself, a temporary death, and then he has a very important vision. Tell us about that--at a place called the bridge.

RAFI ZABOR: Well, the book climaxes--it doesn't end at a nightclub I've invented tucked inside the Manhattan landing of the Brooklyn Bridge. There were those bricked in archways--the Brooklyn Bridge. And I don't want to give away too much what happens at that, but in that solo pretty much everything that he's been struggling with during the course of the book comes together and gets pitched into the next dimension pretty much. The book doesn't quite end there because there are some loose ends that need cleaning up. Don't know what to say beyond that. I mean, the book is a comedy or, you know, a comedia. It has to do with a coming together, a moving toward reconciliation and union, and that climax of the book happens on a fairly grand scale, I'd say.

ELIZABETH FARNSWORTH: It is--I can see why you're calling it a comedia. And yet it's also--I found it a book that was as much about philosophy even religion would be the word I'd use as it is about jazz. Did you intend it that way, or is it just what I saw in it?

RAFI ZABOR: I'm glad you saw that. Not everybody has necessarily. There's--rather than philosophy and religion I would say mysticism or perhaps metaphysics and--hmm--well, actually more that because philosophy is something that tends to happen at a rational remove from experience, whereas, a mystic--at the risk of slightly greater looniness than even philosophers are capable of--tend to experience these metaphysical categories directly. Likewise with religion, religion is a bit more exterior to what the bear is involved with. I use- -I do use a certain amount of metaphysical terminology, but I think it works. It's imbedded as deeply as it can be into this story, as I could make it be imbedded into this story and the character, so it's not--it's not as though people sit around discussing philosophy very much in the course of the book. I try to make it alive and direct.

ELIZABETH FARNSWORTH: Yes. What do you--what does the award give you? I know that you get a $15,000 check, but what else did it give you?

RAFI ZABOR: A tremendous sense of relief actually because $15,000 is not an insignificant sum to somebody who's been holing up for a couple of years with a bear in an apartment in Brooklyn. This book got a scattering of good reviews when it came out, some of them very, very nice indeed, but it did not get serious literary attention and it didn't sell very well. It sold less than 5,000 copies at this point anyway, and I'm immensely grateful to the people at Penn-Faulkner for pulling this book back from the void and putting it seriously on the table as a literary work of fiction that ought to be read. It's a tremendous change. And I'm really grateful. I think the prize--the prize is--I think it performs a valuable function in that way. I'm a bit chastened by the fact, by the way, that this is a year in which Don DeLilla, for example, seems unable to buy a prize for an exceptionally great novel. But I'll take it.

ELIZABETH FARNSWORTH: Oh, well, thank you very much, and congratulations again.

RAFI ZABOR: Thank you very much, Elizabeth. RECAP

JIM LEHRER: Again, the major story Monday, NationsBank and BankAmerica said they would merge to create the country's largest bank, and two other banks, Bank One and First Chicago, also announced they would join to make the fifth largest bank in the country. We'll see you on-line and again here tomorrow evening. I'm Jim Lehrer. Thank you and good night.