The MacNeil/Lehrer NewsHour

MR. LEHRER: Good evening. I'm Jim Lehrer in Washington.

MR. MacNeil: And I'm Robert MacNeil in New York. After the News Summary this Friday, we have excerpts from President Clinton's news conference and discuss his efforts to refocus his presidency with our analysts, David Gergen and Mark Shields. Correspondent Jeffrey Kaye has a report on corporations which made money out of the savings & loan bailout, and Charlayne Hunter-Gault looks at a special program in New Jersey to help children after school. NEWS SUMMARY

MR. LEHRER: President Clinton said today he had not given up on military action as a possible way to end the fighting in Bosnia. He said lifting the U.N. arms embargo and air strikes were still on the table. At a Rose Garden news conference, he said the crisis presented an ambiguous and difficult situation. A reporter asked the President to respond to critics who say he has been indecisive.

PRESIDENT CLINTON: I have a clear policy. I have gotten more done on this than my predecessor did, and maybe one reason he didn't try to do it is because if you can't force everybody to fall in line overnight, the people that have been fighting each other for centuries, you may be accused of vacillating. We are not vacillating. We have a clear, strong policy.

MR. LEHRER: Senate Minority Leader Bob Dole challenged Mr. Clinton's assessment when he held his own news conference on Capitol Hill.

SEN. ROBERT DOLE, Minority Leader: There isn't any Bosnian policy now, notwithstanding what the President said. And I want to support him in that policy, but I must say I know a few people who were supporting the President are going to go the other way because they've had briefings and they were very disappointed in the briefings, and they don't think the administration has a clue.

MR. LEHRER: We'll have extended excerpts from the President's news conference right after this News Summary. Robin.

MR. MacNeil: At his news conference, the President welcomed the United Nations plan to station U.N. troops on the border between Bosnia and Serbia. The troops would ensure that Serbia was no longer shipping arms to the Bosnian Serbs. He said it was a good next step towards ending the fighting. In Bosnia, Serb forces launched artillery attacks on Muslims near the strategic northeastern town of Berchkow. U.N. officials condemned the fighting which broke a cease-fire signed by Serb and Muslim leaders Sunday. Meanwhile, top Serbian officials pressed the Bosnian Serbs to vote for the international peace plan in this weekend's referendum. We have a report narrated by David Symonds of Worldwide Television News.

MR. SYMONDS: As Bosnian Serbs prepared to vote on the Vance-Owen peace plan, Yugoslav and Serb leaders gathered in Belgrade. They'd been summoned by Serbian President Milosevic to show their support for the peace plan in what was billed as a Pan Serb assembly. The delegates from Serbia and Montenegro voted overwhelmingly to back the plan. But the show of support was undermined when hard-line Serb nationalists walked out of the meeting in protest. Undeterred by events in Belgrade, separations for the referendum were underway in Serb-controlled Bosnia. The Bosnian Serb citizens are expected to reject the plan as their self-proclaimed parliament did last week. If the peace plan fails at the ballot box, it's likely to increase the possibility of wider international involvement in the conflict. In another corner of Bosnia's triangular civil war, fighting between Croats and Muslims continued on the streets of Mostar. Despite a truce, gunfire echoed through the city. U.N. officials have warned that ethnic cleansing is taking place here. Hundreds of civilians have been rounded up by Croatian forces and forced out of the city. In Zagreb, German foreign minister Klaus Kinkle was urging Croatia's president to halt the violence in Bosnia. President Tudgman insists that he has no control over ethnic Croats in the neighboring republic. But the EC has threatened to extend sanctions to Croatia if the fighting doesn't stop.

MR. MacNeil: The Muslims and the Croats have been allies for most of the 13-month-old Bosnian civil war, but they began clashing over controlled territory several weeks ago.

MR. LEHRER: White House Budget Director Leon Panetta said today a new jobs bill is coming. It would provide $900 million for summer jobs and hiring police officers, among other things. Panetta said it would be paid for by across-the-board spending cuts. But as a scaled down version of the President's so-called "stimulus plan" was killed last month by a Senate Republican filibuster.

MR. MacNeil: Six French children and their teacher were held hostage for a second day today at a school outside Paris. The gunman holding them claimed he had a bomb and demanded more than $18 million ransom. Hooded special forces had the building surrounded. Media reports said a van was driven in which might contain ransom. Government officials said they were intent on negotiating a peaceful end to the standoff. That's our summary of the news. Now it's on to President Clinton, Gergen & Shields, the S&L bailout, and inner city education. FOCUS - TAKING QUESTIONS

MR. LEHRER: President Clinton spoke of his three-month-old presidency, of Bosnia, taxes, polls, and decisiveness, among other things. It happened at a news conference in the sunshine at the White House Rose Garden this afternoon. Gergen & Shields are here to talk about it all after this extended excerpt.

PRESIDENT CLINTON: I have said and I will reiterate, I think that the United States must act with our allies, especially because Bosnia is in the heart of Europe and the Europeans are there. We must work together through the United Nations. Secondly, I do not believe the United States has any business sending troops there to get involved in a conflict in behalf of one of the sides. I believe that we should continue to turn up the pressure, and, as you know, I have taken the position that the best way to do that would be to lift the arms embargo, with a standby authority of air power in the event that the present situation was interrupted by the unfair use of artillery by the Bosnian Serbs. That position is still on the table. It has not been rejected out of hand. Indeed, some of our European allies have agreed with it, and others are not prepared to go that far yet, but we have to keep the pressure up. Where we go from here is to keep pushing in the right direction. As we speak here, the United Nations is considering a resolution which would enable to place United Nations forces along the border between Serbia and Bosnia, to try to test and reinforce the resolve of the Milosevic government to cut off supplies to the Bosnian Serbs. And if that resolution passes and in its particulars it makes good sense, that is a very good next step. We're just going to keep working and pushing in this direction, and I think we'll begin to get more and more results. Helen.

HELEN THOMAS, UPI: There's a widespread perception that you're waffling; you can't make up your mind. One day you're saying in a few days we'll have a decision; we have a common approach. The next day you're saying, we're still looking for a consensus. Will American troops be inthis border patrol that the U.N. is voting on, and, you know, where are we?

PRESIDENT CLINTON: Well, first of all, I have made up my mind, and I have told you what my position was, and I made it as clear as I can. But I also believe it is imperative that we work with our allies on this. The United States is not in the position to move unilaterally, nor should we. So that is the answer to your question. The resolution being considered by the United Nations I think contemplates that the UNPROFOR forces would be moved and expanded and moved to the border. At this time, there has been no suggestion that we would be asked to be part of those forces.

DONALD VAN DE MARK, CNBC: Mr. President, what would you say or what do you say to Federal Reserve officials who are arguing for a slight rise in short-term interest rates, because they're concerned about resurging inflation?

PRESIDENT CLINTON: I would say that the month before last we had virtually no inflation. And you can't run the country on a month- to-month basis. You've got to look at some longer trends. There are some clear, underlying reasons for this last inflationary bulge which don't necessarily portend long-term inflation. I think it's a course of concern -- cause of concern. We ought to look at it, but we ought to wait till we have some more evidence before we raise interest rates in an economy where industrial capacity is only at 80 percent. If you look at all the underlying long-term things, long-term trends in energy prices, industrial capacity, the kinds of things that really shape an economy, there is no reason at this time to believe that there could be any cause for ever surging inflation. Yes, in the back.

DONALD VAN DE MARK: The argument is made at the Federal Reserve that higher taxes, higher burdens on business through health care fees or other things like that will, indeed, raise inflation while the economy stays weak.

PRESIDENT CLINTON: Well, just, just a few weeks ago, some people were arguing that all this would be deflationary and would repress the recovery. So I guess you can find an expert to argue any opinion, but there is no evidence of that. The prevailing opinion at the Fed, and the prevailing opinion in the economic community, has been that the most important thing we can do is to bring down long-term interest rates by bringing down the deficit. You can't have it both ways. You're either going to bring down the deficit, or we're not. And everything in life requires some rigorous effort if you're going to have fundamental change. Yes.

PETER MAER, NBC/Mutual Radio: Mr. President, in your New York speech this past week at Cooper Union, you spoke of a crisis of belief and hope. And earlier, Mrs. Clinton in a speech talked about a crisis of meaning. How do you see these crises manifesting themselves, what are the causes of them, and how severe do you see this?

PRESIDENT CLINTON: Well, I think they manifested themselves in people's honest feelings that things are not going very well in this country and that they haven't gone very well in a long time, and the alienation people feel from the political process and the alienation they often feel from one another in the same neighborhoods and communities. There are real objective reasons for a lot of these problems. After all, for most people the work week is lengthening and incomes are declining. The job growth of the country has been very weak, and the crime rate is high, and there's a sense of real alienation there. And I don't think we can speak to them just with programs. I think that in our different ways that's what both Hillary and I were trying to say. Go ahead, Mara.

MARA LIASSON, National Public Radio: Mr. President, I want to go back to a question that Helen asked earlier about your indecisiveness over Bosnia. I'm wondering how you think that's affected perceptions of you as a leader. There is a concern reflected in polls and in some comments from Democratic members in Congress that you are indecisive and perhaps not tough enough to tackle all the problems.

PRESIDENT CLINTON: Well, I'd just like to ask you what their evidence is. When Russia came up, the United States took the lead. We got a very satisfactory result. When I took office, I said we were going to try to do more in Bosnia. We agreed to go to the Vance-Owen peace process and two to three parties signed on. We got enforcement of the no-fly zone. We began to engage in multinational humanitarian aid. We got much, much tougher sanctions. We got the threat of military force on the table as a possible option. Milosevic changed his position all because this administration did more than the previous one. And every time I have consulted the Congress, they say to me in private that this is a really tough problem, I don't know what you should do, but you're the only President that ever took us into counsel beforehand; instead of telling us what you were going to do, you actually asked us our opinion. I do not believe that is a sign of weakness, and I realize it may be frustrating for all of you to deal with the ambiguity of this problem, but it is a difficult one. I have a clear policy. I have gotten more done on this than my predecessor did, and maybe one reason he didn't try to do it is because if you can't force everybody to fall in line overnight, the people that have been fighting each other for centuries, you may be accused of vacillating. We are not vacillating. We have a clear, strong policy. In terms of the other reasons, who else around this town in the last dozen years has offered this much budget cutting, this much tax increases, this much deficit reduction, and a clear economic strategy that asks the wealthy to pay their fair share, gives the middle class a break, and gives massive incentives to get new investment and new jobs in the small business community, and from large business as well. I think -- you know, I don't understand what on one day people say he's trying to do too much, he's pushing too hard, he wants too much change, and then on the other day, says, well, he's not pushing very hard. I think we're getting good results. We've been here three months, we've passed a number of important bills, and I feel good about it. I think the American people know one thing, that I'm on their side, that I'm fighting to change things, and they're finding out it's not so easy. But we are going to get a lot of change out of this Congress if we can keep our eye on the ball and stop worrying about we characterize each other in some way or another and keep thinking about what's good for the American people. Every day I try to get up and think about not what somebody characterizes my action as but whether what I do will or will not help to improve the lives of most Americans. That is the only ultimate test by which any of us should be judged. Thank you very much.

MR. LEHRER: Now how Gergen & Shields saw today's news conference and other events, matters, and issues of the week. David Gergen is editor at large of U.S. News & World Report. Mark Shields is a syndicated columnist. So to begin with that last question, Mark, what did you think of that?

MR. SHIELDS: His answer.

MR. LEHRER: That's right.

MR. SHIELDS: I thought he gave a good answer. I thought the press conference in general he showed a feistiness and sort of a combativeness that he hadn't before. I think he ought to do more of them. They're so much better than the contrived, orchestrated town meetings which don't work for him, that have a synthetic quality, because he does look presidential. He looks in command, but he -- and he was absolutely right about Russia, absolutely right. I mean, Henry Kissinger and all of the wise men don't get too close to Yeltsin. Stand back, said the long-headed pragmatist. He didn't --

MR. LEHRER: Long-headed?

MR. SHIELDS: Long-headed, that's kind of an Evans & Novak term, you know, he's sort of the wise man. You know, and Henry had about 8 million yards of op-ed page in every paper in the country to say don't get too close to Yeltsin. Clinton did. He rolled the dice. He did the right thing. And he deserved credit for democracy still being -- moving forward, and Russia surviving. But he's begging the question about the toughness. There is no fear of Bill Clinton in this town. The same way, I just went back and checked the record, in 1981, eighty-four House Democrats were scared stiff of Ronald Reagan, so scared stiff that they voted for his budget. Not a single House Republican voted for the Clinton budget. Not a single Senate Republican did. And that, that is an element of fear, toughness, call it what you want, that's missing.

MR. LEHRER: David.

MR. GERGEN: Well --

MR. LEHRER: Start on that -- I'm particularly interested to begin with, his answer, the way he summarized his first three months there and the kind of really strong answer there at the end.

MR. GERGEN: I thought it was a very good answer, and I give him credit. I think the White House must be very pleased tonight, because this President came out fighting. He hasn't been fighting for a long time, and it seemed to me, he was right back upon his game. He needs to be out there. He's not out of danger by any means. He put the best arguments out there. I happen to disagree with Mark about the Russian thing. Yes, he came forward with a Russian aid package. He's now proposed it, and where is it? It's nowhere in the Congress. Not a dollar out of that aid package is on its way to Russia, and nobody is ever there fighting for it, so I think that's where the problem of toughness comes, when you don't fight, and I think the perception now is on many issues that he needs to fight. So it was good to see him fight.

MR. LEHRER: Now fight. Who should he be fighting, and how should he be fighting, gentlemen?

MR. SHIELDS: David, David disagrees. He took on the establishment in this country, a good part of it, on getting close to Yeltsin. And I think he's doing the right thing there.

MR. LEHRER: Okay. Just to the final question of toughness.

MR. SHIELDS: All right. The general question of toughness, the doubts that persists about Bill Clinton. For example, I mean, we started with the grazing fees back in the Senate, where there was a cave on that, which is an initial part of the Clinton budget. They were going to impose what had not been there, our great Western ranchers and all the rest of it, God love of 'em, believe in free enterprise until it comes to socialism for governmental lands. And he backed off on that. This week in the Ways & Means Committee, where he did very well -- generally speaking, got his tax bill out -- they upped the deduction, small businesses, on new equipment $25,000 to stimulate economic activity, okay, from ten to twenty-five, big break. What happens? The National Federation of Independent Businesses, as soon as it passes, says, yeah, we'll all for it, we're against this bill. Now, that isn't, that isn't a sense of toughness. There ought to be a sense beyond that, it comes down to this week there should have been someone. In Clinton's White House, Clinton's entourage, Clinton, himself, who goes to Sam Nunn and says, Sam, we love you, we know where you stand on gays in the military, but we don't need on the President's come back week, as he's going out to the country, all right, to recast his message, to refashion his presidency, we don't need, first of all, you and John Warner, Senator from Virginia, peering into bunks in a submarine on every paper in the country. The next day we don't need Gen. Schwarzkopf testifying on the issue. We don't need further Col. Peck, the Marine, testifying, and basically ended the debate. The debate is over on gays in the military and that ban being lifted. Okay. And what you didn't need is that story being stepped on. That's when I was talking about toughness.

MR. LEHRER: But how -- what -- how does he get -- how does somebody get to be tough enough to handle those very things? I mean, you don't just suddenly wake up one morning and say, I'm going to start beating up on people, do you, when you're President of the United States, is that what toughness means?

MR. GERGEN: No. But it does mean making it clear what's vital to you and what's not, what you're going to stand firm on and what's not, and when you make concession on things, getting something in return. I think that's what you were talking about. Frequently there's a sense that the White House concedes on points and gets nothing back in return. George Bush frequently did that and was accused of not being tough enough. And the same problem holds for Bill Clinton.

MR. LEHRER: But let's take, let's take Mark's example. Let's say dealing with Sam Nunn on the specific issue this week on gays in the military. What is it that President Clinton could have said to Sen. Nunn that would have kept that from happening?

MR. GERGEN: Well, on that particular one I think --

MR. LEHRER: Close the post offices in Georgia?

MR. GERGEN: No. On that one he's getting rolled not only by Sen. Nunn, he's getting -- his own Pentagon, it was reported today in the Washington Post, is coming forward with recommendations that support the Nunn position. So it's not just the murmurs of the Hill. You know, Les Aspin, the people over in the Pentagon work for Bill Clinton; Sam Nunn doesn't. Presumably he can order the people who work for him to come up with a report which supports his own position. But now to go to Sen. Nunn, I think that's a much, much harder call. I happen to think that if the President really wants to stake his presidency on this, he has to take his case to the country and overwhelm Nunn. It's not just a question of calling in Nunn. This is not one I think he ought to stake his presidency on. I don't think it's that essential. It's not an essential part of his philosophy. Let's face it, Bill Clinton when he put forward this policy thought he wasn't going to face a lot of opposition. He faces overwhelming opposition. I don't think he wants to go down with this issue. I think he wants to go fight over economic issues and over jobs, and that's where he wants to make his big fight. And I would say even on those fronts, Jim, that he, you know, he had three big pillars to his economic program. One was the immediate stimulus program. That's what he is now puttingforward, after losing in the Senate, what he's now putting forward is a bill we just heard in your News Summary, is a trivial version of his stimulus package. It's 1/18 the size of his original stimulus package. That's been gutted. The other part of his long-term program, the second part was long-term investment. Today the President said in his news conference he's going to delay and scale back big chunks of that big public investment. That's the second part that's been whittled back. It seemed that he never made the fight on the Hill for what he wanted then in questions of training and that sort of thing. And then the third thing, of course, that is moving forward on taxes and some of the spending cuts.

MR. LEHRER: What is it that he's not doing, Mark, that -- what can he do or should he be doing to show he's tough, if you think he should be tough?

MR. SHIELDS: Well, the first thing you have to do is your word has to mean something. I mean, there has to be a sense that you're going to pay a price if you cross the President of the United States. It is that you're not going to be forgiven. It's not something you advertise. It's not something you do with swagger. It's not something you do with Sen. Shelby, and you stiff him by taking 40 employees out of Alabama and make him a martyr at home. It's that you let it -- the word is out now on the Hill in part that you can hold up nominations in the Senate.

MR. LEHRER: Everybody's holding up nominations.

MR. SHIELDS: Everybody's got to hold -- and it all starts, it starts with the grazing thing. It starts with the idea that it can roll a guy and at some point there's got to be an act of -- two things you do in politics; first of all, the person who stands with you, okay, at risk is rewarded, is recognized, is elevated. So the word goes through a legislative body, you know, when you stick with Lehrer, he sticks with you. You go in a foxhole with Lehrer, he doesn't forget it. All right. That's the first thing. The second thing is an act of treachery never goes unpunished and rarely goes forgotten. I mean, that's really, that's really what has to be done. And I think, I think with Nunn what it had to be was look, Sam, we don't need it. We don't need the front page of the New York Times. We don't need Schwarzkopf. We don't need the general coming up here doing that, so let's call it off; let's cut our deal right now. It is dead. I mean, it's a dead issue. Now it's going to come down that the organized gay lobby who are looking for sanctions basically, they're looking for the gay lifestyle to be sanctioned by a public thing. They're going to resist it. But we're going to come down with don't -- some variation of don't ask, don't shout, don't yell, don't scream, don't pry, don't spy, whatever, but that's what it's going to be. And why not acknowledge that and say --

MR. LEHRER: And get it over with.

MR. SHIELDS: -- get it over with?

MR. GERGEN: But there's another part of this, Jim. You know, Roosevelt was described as a lion and a fox, and you probably have got to be both; you've got to be wily at this game too. And, in part, that means working with Sam Nunn on a variety of issues so that you'd make a trade on one issue and you'd get something on another issue; you do some things for him in some other areas. It also means, very importantly and critically importantly, in the Clinton presence since he started out at only 43 percent in the election, it means going to the country and building a --

MR. SHIELDS: That's what he started doing this week.

MR. GERGEN: That's right. And I give him credit for that. I think --

MR. LEHRER: That's smart.

MR. GERGEN: Yeah. It was smart. Just like at this news conference today, having a news conference on a Friday afternoon to frame the argument for the weekend, you know, we talked a couple of weeks ago about weekend talk shows. That frames the argument for all the talk shows, a very smart way to do a press conference, a good move on his part, going to the country, good movie, build up the support for the things he cares about, and then it's a lot easier to deal with Sam Nunn and the rambunctious Senators.

MR. SHIELDS: Why in May are we talking about Bill Clinton doing press conferences well when he does press conferences well? I mean, he should have been doing press conferences -- I mean, he's so much better at press conferences than most Presidents --

MR. LEHRER: Period.

MR. SHIELDS: And then Reagan, for goodness sakes, you had to memorize the NATO countries -- sorry -- you know, and George Bush - - he's so much better. He did. He was good. But the point is he's good at it. He ought to be doing that.

MR. LEHRER: Why isn't he? What's the word on that? Why isn't he doing that?

MR. SHIELDS: Well, I mean, David probably knows better than I, and I just think there was a certain hostility to going what they thought were the conventional, orthodox role and road to --

MR. LEHRER: Just to be different?

MR. SHIELDS: Well, I mean, a sense if we can go around, we can go over, we did it, we used all these extra, extraordinary means. I think he did right this week. I think it was good for him. I think it was good for him. He, he was up this week.

MR. LEHRER: You could tell that today.

MR. SHIELDS: You could see it. That's why the -- that's why the travels. I don't know if the travels helped the messages much. Certainly in the first couple of days --

MR. GERGEN: They were unfocused, yet, he was held up with the lot.

MR. SHIELDS: That's right.

MR. GERGEN: He was very rusty when he was on.

MR. SHIELDS: But he did -- you could see him. I mean, you could see him get up and get the batteries charged, and he took -- I mean, candidates take certain things from experiences. He went back to what works for him, and that was good for him. You could see it.

MR. LEHRER: And what do you mean the message got muffled? What do you mean, David?

MR. GERGEN: You mean earlier this week?

MR. LEHRER: Yeah.

MR. GERGEN: He seemed to have no story line, Jim. He seemed to be all over the lot. When you go out for a trip for a couple of days, what you want to do is have one central message you're trying to take the country, to beam it out on television for two days or whatever it's going to be, and instead of going out with a central message of what he was trying to accomplish, it became a laundry list, and he was all over the lot, all of the different things he had up on the table, and I thought frankly he was defensive. And he was a little defensive today.

MR. LEHRER: The hostility -- you mentioned the hostility between, between him and the White House press. It seems to be there in every question that he is asked, or am I imagining that?

MR. GERGEN: That's totally on the part of the press corps.

MR. LEHRER: On the part of the press toward him. Well, you know, it takes two to be hostile.

MR. GERGEN: The relationship is clearly frayed between the President and the White House press corps, and there is a sense of distrust on both sides.

MR. LEHRER: Does it matter?

MR. GERGEN: Not terribly, except it matters when you're, when you're down, when you're looking for a break, when you're looking for the benefit of the doubt.

MR. LEHRER: And they're not giving it to him.

MR. GERGEN: That's when -- and they see, the word mattered on a hundred day interpretations. Those hundred day interpretations were more sour and harsher coming out of this city in part --

MR. SHIELDS: Because of that. I think David's absolutely right, and I think it's one of these questions where if you get your shot every day or two at the guy, the hostility starts to, starts to abate, starts to dissipate.

MR. LEHRER: Because then they dump you, because you say, you're beating up on a president.

MR. SHIELDS: That's right. If it's every two weeks and you can't get a call answered, you can't get a question asked, okay, that's - - I think the deficit idea this week of sealing it off to the trust fund is a good one. I really do. I know he's taken criticism. This is the same guy who cost George Bush a 10 percent write-off, check- off last year at the convention.

MR. GERGEN: And you called that a gimmick.

MR. SHIELDS: I called it a gimmick; this is not a gimmick. This is not a gimmick.

MR. GERGEN: Alice Rivlin has called --

MR. SHIELDS: Alice Rivlin has got Leon Panetta's disease, and it's something that OMB, the candor, the candor in the water bubble.

MR. GERGEN: It's nice to hear a little candor. Why are you not candid about it?

MR. SHIELDS: Well, I really think, I really think it's good, because it is, it has become, the deficit, Jim, has become a metaphor for failed government, and I'm tell you the American people do not believe that the federal government can do anything from health to roads to bridges, to teaching kids, unless and until they get control of it going down, and I think that's what the President's about, and I think he's absolutely right on it.

MR. GERGEN: If he has guts on the deficit, then he's going to have to deal with some Democratic Senators who are going to be coming forward I think with some alternatives. They're going to be much tougher to get at the deficit. They want him to cut far more spending and to bring down some of these taxes, he's got to -- he's facing a mini rebellion in the Senate. It's going to be very difficult for him to deal with. That's where the real test is going to come, not over this trust fund, which is a gimmick.

MR. LEHRER: You said we -- I'm going to wave you both off. Good- bye.

MR. MacNeil: Still ahead on the NewsHour, who made money from the S&L bailout, and after school in the inner city. FOCUS - FOLLOW THE MONEY

MR. MacNeil: Next, the multi-billion dollar S&L bailout which the administration says is entering its final chapter. Yesterday the Senate voted to spend another $34 billion on what should be the end of the S&L clean-up. A House vote is due in the next few weeks. This is billed as a final round of funding to supplement $100 billion already spent by the government in the past five years. Where exactly did all that money go? Correspondent Jeffrey Kaye of station KCET has the story of some who profited from cleaning up the S&L mess.

MR. KAYE: Last year, the Calvert Place Building in Dallas, Texas, was bought and sold twice. The transactions were the kinds of deals that have critics calling for changes in the way the S&L clean-up is being handled. The building was first sold by the agency running the clean-up, the Resolution Trust Corporation, RTC. The complex will soon be occupied by the Union Gospel Mission. Currently, the mission preaches to homeless men, feeds them, about a hundred a night, and gives them a place to stay. The mission plansto expand its operations to the new building. How much did pay for this building?

JOHNNIE WADE, Mission Board Chairman: Paid 475,000.

MR. KAYE: Johnnie Wade, board chairman of the mission, negotiated the sales price.

JOHNNIE WADE: About 40 percent of the building's occupied right now.

MR. KAYE: The mission bought the building not from the RTC but from the BRW Real Estate Group, a partnership of investors. BRW sold it to the Union Gospel Mission, after purchasing it from the RTC, for $475,000.

JOHNNIE WADE: We were told that the price we were paying was just a little bit more than what they had paid for it.

MR. KAYE: Would it surprise you to know that they bought it from the government for $224,937?

JOHNNIE WADE: It would surprise me.

MR. KAYE: That's according to the RTC, the Resolution Trust Corporation.

JOHNNIE WADE: Well, my understanding was that they purchased this piece of particular property along with some others in a group price.

MR. KAYE: BRW made $1/4 million on the deal. The building was part of an $80.5 million bulk sale to BRW of loans and buildings in Texas and Arkansas. BRW is a partnership, which includes a real estate management firm and two high-powered Wall Street banks, Goldman Sachs & Company and the Blackstone Group. Former principals in those two firms are now helping shape the Clinton administration's economic program. One is Robert Rubin, chairman of the New National Economic Council. Last year, Rubin was co- chairman of Goldman Sachs. The other is Roger Altman, former vice chairman of the Blackstone Group. Today he wears two hats; one as deputy treasury secretary, the other as head of the RTC.

TOM SCHLESINGER, Director, Southern Finance Project: In some respects it is a fitting finale to the RTC's history to have it led by a man whose firm has profited so handsomely from the conduct of the agency over the past four years.

MR. KAYE: Tom Schlesinger, director of the Southern Finance Project, is author of "Fortune Sons," a report on how who's getting what from the S&L clean-up.

TOM SCHLESINGER: A small number of Wall Street firms have done a very good business with RTC by acting as a deal adviser, by packaging securities with the agency, and in some instances in actually purchasing assets from the government. This is an agency whose story I think is going to be remembered as a series of deals and a tight knit circle of insiders.

MR. KAYE: Roger Altman being one of them.

TOM SCHLESINGER: Yes. His firm being one of them.

MR. KAYE: Altman says there was nothing unethical about his former company's dealings with the RTC.

ROGER ALTMAN, RTC: The RTC needs an active bidding process, and on a sealed bid, arms length basis a couple of times we had the highest bid. I see nothing whatsoever wrong with that.

MR. KAYE: As a former banker, Altman defends the RTC's large bulk sales, but as a policy maker, Altman is pledging to reform the system to allow greater participation by business people without the resources of huge Wall Street banks.

ROGER ALTMAN: We have committed ourselves to have a small investor setaside, in other words, a specific and more circumscribed program on asset sales to induce more small investor participation. And we're working on that now, but we've made our commitment.

MR. KAYE: So the policy that, that Roger Altman, businessman, participated in and took advantage of will change under Roger Altman, RTC head?

ROGER ALTMAN: Well, I challenge your assertion. Is a bidder who participates just like the rest of the world in an open, equal information, arms length procedure taking advantage of it? Unaccepted premise.

MR. KAYE: But you are expecting to in a sense challenge, take on those interests that you were once allied with in --

ROGER ALTMAN: No.

MR. KAYE: -- business, or at least provide them less opportunity?

ROGER ALTMAN: Well, it's not a matter of that. It's a matter of providing other people more opportunity. The motivation has been to say, gee, these big guys have been ripping off the RTC, we want to end that. The motivation is to try to bring out greater participation from others.

MR. KAYE: Which will mean less opportunity for the big guys?

ROGER ALTMAN: That's one consequence.

MR. KAYE: But that's something you're prepared to do?

ROGER ALTMAN: Sure.

MR. KAYE: Were taxpayer or community interests served by that transaction?

DONALD CROCKER, President, J.E. Robert Companies: I would say yes, because you need to put it in context.

MR. KAYE: Donald Crocker is president of J.E. Robert Companies, the R in BRW. He also defends the Calvert Place deal.

DONALD CROCKER: To put it in context, that's like hitting a home run in the first inning of a nine inning game. You still have to come up and bat and pitch for the rest of the nine innings, and there are a lot of things that can happen in the portfolio as far as ultimately what the total return will be.

MR. KAYE: In this case, you've hit your home run, $1/4 million worth, from a shelter for homeless people. Wouldn't the government, wouldn't it have been a better deal for the taxpayers if the government had simply sold it directly to the homeless shelter, instead of to you?

DONALD CROCKER: The answer is that the government has millions and millions of properties that they have to sell, troubled assets of all type of descriptions. Troubled assets deteriorate while they're held. This was a deteriorating asset. It was necessary for them to put together a large pool of assets and try to transfer that risk over to private capital. And I think it's very important to point out that the RTC has been successful in attracting capital where no capital existed from the standpoint of lending on these assets or buying these assets.

MR. KAYE: Managing risks is J.E. Robert's specialty. The Virginia-based firm and its partners in BRW are prime examples of big business opportunities created by the S&L crisis. J.E. Robert and Goldman Sachs have not only purchased millions of dollars worth of RTC assets; they're also managing them for the RTC. To date, the RTC has awarded J.E. Robert more than $56 million in contracts. Goldman Sachs, located in this New York City building, has been awarded an estimated $20 million worth of RTC contracts. The RTC has relied heavily on private enterprise. Businesses ranging from major Wall Street firms to accountants and auctioneers will receive an estimated $3 billion worth of RTC contracts. Getting rid of assets is the RTC's chief responsibility. Here investors bid on individual California properties, but this is not where the big money is. The big money is contained in multimillion dollar bulk portfolios put out for bid by the RTC. The loans and properties in the packages are often inaccessible to smaller investors, businessmen such as Pat Riley. Riley saw firsthand how the RTC worked in another BRW deal. And he says it wasn't to the taxpayers' benefit. Riley developed and operates the Woodland Heights apartment complex in Little Rock, Arkansas.

PAT RILEY, Businessman: I have no argument with BRW. They were -- they took advantage of the system. They put their money up there, and they're very professional people. But I think the RTC just definitely not only ripped myself off, but they ripped off the American taxpayer.

MR. KAYE: Riley owed $500,000 on the property, a retirement home. The savings institution holding the mortgage went under and was taken over by the RTC. Riley offered to give the RTC $475,000 for the mortgage. He figured he deserved a $25,000 discount for paying early. The RTC rejected Riley's offer.

MR. KAYE: Then what happened?

PAT RILEY: Then they took the loan and put it into a package.

MR. KAYE: That package, along with other loans and buildings, including Calvert Place, was sold to BRW. The price was 77 cents on the dollar. BRW then took Riley's loan from the portfolio and sold it back to him at a $72,000 profit. Riley wound up paying BRW less than he was willing to pay the RTC.

PAT RILEY: Strangely enough, it was better than I could have gotten with the RTC, and, in fact, they accepted from me $450,000. And the taxpayer is ripped off, because the taxpayer absorbed that loss or that difference. The RTC, as such, absorbed it, but it was a taxpayer and a taxpayer to, through Congress and the appropriation of funds to do so.

MR. KAYE: Do you think the system of bundling these assets for sale should be reformed?

PAT RILEY: They definitely should be reformed.

MR. KAYE: The new administration says it is committed to reforming the process.

SPOKESMAN: We're very familiar with observations that small investors, for example, or minorities and women do not have the opportunity to participate in the assets sales of the RTC to a fair degree, and we're going to be giving that a very serious review.

MR. KAYE: Roger Altman says individual business people will benefit from new RTC policies. In the future, he says, more properties will be auctioned off individually, and bulk sales portfolios will generally not go above $50 million.

ROGER ALTMAN: We're going to create more opportunities for small investors. We're going to create more opportunities for minorities and women, and as I mentioned before, we're going to fix up the internal side of the RTC to put an end to these horrendous abuses.

MR. KAYE: Those horrendous abuses are another part of the RTC story. Not only have millions been made in legitimate, if controversial, deals, millions more have been lost because of mismanagement and outright fraud. Such abuses have led to congressional queasiness about appropriating more funds for the RTC.

REP. JOSEPH KENNEDY, [D] Massachusetts: I wonder if you could describe what your concerns are, what you feel can be done to try to get a handle on what the public obviously feels is an agency that's from time to time seems to be a rogue elephant running wild.

MR. KAYE: Investigators told Congress of multi-million dollar scandals in the management of RTC contracts.

JOHN ADAIR, Inspector General, RTC: What we have found, as the GAO pointed out, is that RTC over time has issued policies and procedures for its contracting activities, but unfortunately, RTC management has not always followed those contracting policies. And the lapses in following those policies have been very costly to the corporation and the taxpayers.

MR. KAYE: For example, the RTC's inspector general looked into contracts in the wake of the takeover of California's Home Fed Bank. They found that when the accounting firm of Price Waterhouse billed for photocopying services, it charged the RTC 67 cents a page for labor only. Price Waterhouse agreed to reduce the bill.

JOHN ADAIR: As you know, they've received $4 million back from Price Waterhouse, and I believe we're still negotiating that.

MR. KAYE: Adair estimates the RTC paid Price Waterhouse more than $6 million too much.

JOHN ADAIR: There are also numerous problems with RTC's retention of outside counsel for legal service engagements. As you know, they have over 2500 of these agreements in place. They've spent in excess of $390 million for this.

MR. KAYE: Of the 390 million in legal fees, over 24 million dollars went to the New York firm of Cravath, Swaine & Moore. Inspectors found a number of questionable items. One Cravath lawyer billed for a 26 hour day at the rate of $180 an hour. The firm charged a dollar a page for fax transmissions, a charge that did not include phone costs. One lawyer billed the RTC $625 for a two- day stay at this luxury New York hotel even though the lawyer lives in New York City. And Cravath attorneys billed for limousine travel. Had they made the same trips by cab, they would have saved the RTC a thousand dollars. The law firm is renegotiating the questioned items.

WILLIAM SEIDMAN, Former Head, RTC: In order to put the RTC thing in context, you have to look at the challenge that was presented to a new agency with no people. Within a year, they had $400 billion of assets, making them the largest financial institution in the country.

MR. KAYE: William Seidman headed the RTC between 1989 and 1991.

MR. KAYE: Do you think the RTC was as adequately monitored, and if these kinds of things are now arising on contracts that have been audited, how much is there that we don't know about?

WILLIAM SEIDMAN: It's amazingly little. If you add up all of the accusations and everything else, it won't come to 2 percent of the expenses, maybe 1 percent.

MR. KAYE: By Seidman's estimate, that would amount to be 30 and 60 million dollars misspent by the RTC. In contrast to Seidman, the Clinton administration believes the RTC has been lax in its contracting. Treasury Sec. Lloyd Bentsen promises to clean up the agency.

SEC. LLOYD BENTSEN: Congressman, we're going to really tighten up on internal controls, strengthen them. That would be against waste, fraud, and abuse.

MR. KAYE: As Congress prepares to vote on the administration's funding request, there is little doubt that the private sector will continue to play a major role in the S&L clean-up. RTC critics say they are hopeful that in the future taxpayers' interests will be better served. FOCUS - SUCCESS STORIES

MR. MacNeil: Finally, Charlayne Hunter-Gault reports on an education project that is working in the inner city. She has the story of an after school program in Newark, New Jersey.

TED DAVIS, Soweto Academy: [talking to child] When are you coming back? No, that ain't good enough. I want to know. When are you coming back? Monday. Look at me and give me your word. Monday, and you stay. Well, if you don't, I'm going to come find you, wherever you are.

SPOKESMAN: Why were you talking to him?

TED DAVIS: Because he quit. He left the program.

MS. HUNTER-GAULT: If there's one thing Ted Davis can't stand is a quitter, especially if he's quitting a program Davis, himself, designed. Davis is a development consultant specializing in youth at risk programs. His current project, an after school education program at the Archbishop Walsh Homes in Newark, New Jersey. It's called Soweto Academy, named after the black South African township that symbolizes the devastation of apartheid and the black struggle for equality. The program is located in a public housing project plagued by all the problems associated with poverty in the inner city, crime, drugs, violence, but Davis, who also grew up poor, stubbornly refuses to let such obstacles stand in his way.

TED DAVIS: Afro-Americans have been achieving since slavery, and those were considerably worse circumstances than we encounter now. So it's a copout to say that the environment is totally responsible. Certainly, you know, there are problems, but if you let those kinds of things dissuade you, it's your fault, and that's what we say to the kids.

MS. HUNTER-GAULT: Soweto Academy was done under the auspices of Rutgers University Cooperative Extension. Soweto has sixty students age five to thirteen and eleven full-time teachers. They meet for three hours a day after school. The students are housed in cramped quarters, use worn out textbooks, and struggle to hear through the din of voices, but somehow they manage to learn reading, math, geography, and science.

SHAMECKA BELLE: I'm not drawing a planet. I'm drawing the stars. Stars are a part of our astronomy in our galaxy. Stars, they are millions of miles away.

MS. HUNTER-GAULT: Anybody studying the planets? Are you studying planets?

JAMIL LAWRENCE: Yeah.

MS. HUNTER-GAULT: Tell me about it.

JAMIL LAWRENCE: Studying Uranus, and Uranus is twenty-nine million, five hundred miles away from the sun.

TEACHER: Are you all ready?

MS. HUNTER-GAULT: "The sky's the limit," Davis tells the students. "Work hard and you'll be the best."

TED DAVIS: This might be a history project, maybe.

MS. HUNTER-GAULT: Davis is constantly prodding, praising, and by his own admission nagging, trying to motivate the students to excel. Davis says he's simply passing on a little homespun wisdom his mother taught him.

TED DAVIS: The one thing I got from my mother was that you will be the best, and whatever you have to do, if you've got to be twice as good as the white kid, then you're twice as good; you don't whine about it.

TEACHER: [teaching students] Sheryl lost her jacket. They were in her pocket. Does that make sense?

LITTLE BOY: No. Her money.

TEACHER: Jacket, does that make sense, yes or no? Why?

JAMES: Mittens.

TEACHER: James, could it be pocket, mittens, what do you think?

JAMES: It couldn't be mittens.

TEACHER: Why not?

JAMES: Because if she lost her mittens, she would just look in her pocket.

MS. HUNTER-GAULT: Soweto has a part-time reading consultant and two full-time professional educators. Paid and unpaid volunteers teach additional subjects like violin, percussion, and chess. But the backbone of the program is the teachers, all of whom were drawn from the Walsh Homes community. At the time they were hired, none had any teaching experience. Most hadn't even graduated high school. Hilda Santiago, a professional educator and member of Davis's consulting firm is Soweto site coordinator.

MS. HUNTER-GAULT: What made you so sure that they could do the job?

HILDA SANTIAGO, Soweto Academy: Their enthusiasm. They were enthused, they're dedicated, and they wanted to impact on the community. They wanted to do something good for the kids and for themselves.

MS. HUNTER-GAULT: You felt you could teach them to be teachers?

HILDA SANTIAGO: Yes. We have taught them to be teachers, and it has been a very difficult road, and it's still a difficult road.

TEACHER: [in teacher training session] Your job is to look through these books and to pick out the grabbers and set aside the "eck," you know, things you don't think are going to spark the children immediately, all right?

MS. HUNTER-GAULT: Teacher training began before the program started and is still continuing. The teachers, all of whom are collecting unemployment or are on welfare, say the program has given them a new lease on life. Magelene Corprew is a mother of six and a high school dropout who's now going back to school to get a high school equivalency diploma. Davis requires that all the teachers have at least an equivalency diploma.

MS. HUNTER-GAULT: What has this job meant to you?

MAGELENE CORPREW, Teacher: It means a lot to me because, well, No, 1, you know, I don't have to sit back every month and collect a check from welfare. I'm independent. I like working with kids. I always have, and by being, you know, going into training, it taught me a lot.

RAYMOND THOMAS, Teacher: It taught me a lot with the difficulties I've had in life. I had a substance abuse problem at one time.

MS. HUNTER-GAULT: Raymond Thomas has four grown children. He's had two years of college, been a mailman, a factory worker, and a computer operator.

RAYMOND THOMAS: To me the program did a lot. It gave me something maybe that I was looking for when I was abusing, and right now I want to be a role model for my grandchildren and children that I'm working with.

MS. HUNTER-GAULT: For many of the children, positive role models are in short supply.

HILDA SANTIAGO: A lot of our parents have difficulties, some of them alcoholics, some of them are substance abusers, and I think that really affects the children a lot so -- not all of them but many of them are like that.

MS. HUNTER-GAULT: In some cases, the teachers act as surrogate parents, filling in for absent mothers or fathers at parent-teacher meetings. They also make regular trips to the public schools to check on the student's progress.

MAN: [talking to public school teacher] Is there anything else that we can do, you know, to help him do better?

TEACHER: Yes, you can have him write every day, a paragraph every day. This would be great for him.

MS. HUNTER-GAULT: While the teachers look after the students, Davis looks after the finances. Soweto's main benefactor is the U.S. Department of Agriculture. Its 4-H program provides seed money, which this year totals $85,000. Soweto has to find matching funds. The Newark Housing Authority is this year's source. Those grants cover the basics for the after school and summer programs, but Davis has to scrounge money for extras, like hot meals, musical instruments, and --

TED DAVIS: This is the computer for the kids, laser printer, three CD roms for the children, and a scanner where they can take pictures, put it on it, and it'll come up on the screen. Nothing better for the best kids.

MS. HUNTER-GAULT: Davis is relentless, constantly searching for money or materials.

TED DAVIS: [on phone] Joan Lazarre is killing me. She needs $300 for more books. I have no money to take the kids to camp. He called him in reference to a grant. I figured at least thirty. If I don't get it in time, I'll be tarred and feathered.

MS. HUNTER-GAULT: Soweto's teachers say all the hard work has paid off.

MAGELENE CORPREW: A lot of these kids before they even came into this program, they were so disrespectful, they would curse you out in a minute. They were bad. They'd throw things, you know, disrespect older people, but since they have been in this program, they have calmed down a whole lot.

MATTIE HOUSER, Teacher: Kids out here, they usually just call you by your first name, but now since they're in the program they call you Ms. Houser or Mr. Thomas, Ms. Dobbins. Even when they outside, they call you the same thing and you just be like shocked to see them sayin' that, because before they used to do that.

MS. HUNTER-GAULT: And why is that important?

MATTIE HOUSER: Because some kids out here, they don't have respect for no one, for no one, and to me they're showing me that they respect me. I'm a role model for them.

MS. HUNTER-GAULT: And how does that make you feel?

MATTIE HOUSER: Good.

MS. HUNTER-GAULT: Rutgers Cooperative Extension, which oversees the program, calls it an unqualified success. Its survey found that self-esteem, behavior, and grades improved in virtually every participant. Average reading achievement scores jumped one point three years; average math scores one point seven years. Elementary school teacher Patricia Barry says the program has really helped a Soweto student in her class.

PATRICIA BARRY, Public School Teacher: The difference in when he first came to my class and the counselors came in to check to see what we were doing and to keep abreast and his improvement in homework and his participation in class has been tremendous. It really is helpful.

MS. HUNTER-GAULT: The program's only real failure is in the area of parent participation. But Davis says the fact that the teachers live in the community and are always available more than makes up for that. The students seem to agree.

DANA HINES: When we got homework and we don't finish it all, they could tell us to come up, and we come up to their house and finish the homework with them, so then we get more help.

KAREEM THOMAS: It won't be a stranger that asks your teacher. It'll be somebody that you know very well that's helping you.

MS. HUNTER-GAULT: Now that Soweto is successfully launched, Ted Davis has one last goal, his most ambitious of all, to empower Soweto's teachers to take over and run the program themselves.

TED DAVIS: If this program is run on my personality, it's a failure. It runs on the process, and that process is that if communities take responsibility for their own children and demand excellence, then they'll get it.

MS. HUNTER-GAULT: Davis has already laid the groundwork for his departure by instructing the teachers how to use outside resources when necessary, grant writers, for example. Skeptics laughed when Davis first proposed this program. Now he says he proved them wrong then and he'll do it again. RECAP

MR. LEHRER: Again, the major story of this Friday. With President Clinton's afternoon news conference at the White House, he defended his economic proposals and his policy on Bosnia. He said limited air strikes and lifting the arms embargo in Bosnia were still on the table with European allies as ways to end the fighting, sending ground troops to fight on one side against the other was not an option, he said. Good night, Robin.

MR. MacNeil: Good night, Jim. That's the Newshour for tonight, and we'll see you again Monday night. Have a nice weekend. I'm Robert MacNeil. Good night.