The NewsHour with Jim Lehrer

GWEN IFILL: Good evening. I'm Gwen Ifill. Jim Lehrer is on vacation. On the NewsHour tonight, Ray Suarez looks at the Bush administration's decision on arms sales to Taiwan; we examine two major Supreme Court decisions handed down today; Fred De Sam Lazaro reports from Bangladesh on a new approach to banking; and Margaret Warner updates the Navy's investigation of the nuclear submarine collision with a Japanese fishing ship. It all follows our summary of the news this Tuesday.

NEWS SUMMARY

GWEN IFILL: The White House today announced plans to sell arms to Taiwan. China immediately filed a formal protest with the State Department. Taiwan can now purchase four destroyers, up to eight diesel- powered submarines, and other weapons and equipment. For now, ships fitted with the advanced Aegis combat radar system would not be included. Taiwan had requested them. At the White House, a spokesman said part of the reason president Bush approved the arms sale is that 300 Chinese missiles are now aimed at Taiwan.

ARI FLEISCHER: When the President made his decision on providing defensive weapons to Taiwan, it was based on his assessment and the assessment of his national security team about the threat that is posed to Taiwan by China. And that includes all the military operations of China including the missiles that are located across the strait. That certainly was a factor.

GWEN IFILL: Taiwanese officials welcomed the decision. We'll have more on this story right after the News Summary. The Mississippi River is expected to crest tonight in Davenport Iowa at a near record level. The city has mounted an effort to save businesses from the rising water. Tom Bearden has our report.

TOM BEARDEN: The pumps in downtown davenport are running flat out, trying to keep up with the water seeping through a sandbag levee. That levee is the only thing that stands between two blocks of Davenport's business district and the surging Mississippi River. Public works director Dee Breummer took reporters on a walking tour of the area this afternoon.

DEE BREUMMER: We're holding our own. We've done a lot of reinforcement to our levees in the downtown. There's not been a lot of rain in the last 24 hours, so we've had the ability to hold our earthen dikes that are permanent dikes all year round.

TOM BEARDEN: The situation looks a little precarious at a few places along the sandbag walls. What's going on there?

DEE BREUMMER: With a sandbag levee, the elevation of the river here, there's a lot of leakage from behind, and our storm water system, which usually takes the water to the river, is now bringing the river to us. We don't have a gating system in place in this area of town, and so we're pumping the river over the levee.

TOM BEARDEN: The city has upended culverts over the manhole covers, trying to keep the river from surging into the streets. Breummer says improving weather is helping.

DEE BREUMMER: Yesterday was very nerve- wracking, with the high winds and the waves here. It looked like I was not looking at the Mississippi River, but an ocean.

TOM BEARDEN: Across the river, in Moline, Illinois, a smaller sandbag levee failed yesterday afternoon, inundating several homes and small businesses. The State Department of Corrections has dispatched groups of minimum-security prisoners to provide manpower. This group was joined by local volunteers in filling sandbags, which are being trucked weak spots in the levees. Back in Davenport, Tom Magers is waiting it out in his hobby shop.

TOM MAGERS: Been here on the same corner since 1954.

TOM BEARDEN: So you've seen these floods before?

TOM MAGERS: Yes. In fact, I was in the national guard in '65, and I actually fought the flood in Bettendorf, so I'm very familiar with what they do.

TOM BEARDEN: Magers is open for business. There are few customers because the city has closed off many of the surrounding streets.

TOM MAGERS: I've got a parking lot back here that's never been under water, and I can't get to it. We also have customers that have been turned away because they can't get into our business.

TOM BEARDEN: Swollen by melting snow and thunderstorms upstream, the river is expected to crest sometime in the next 24 hours, just a few inches below the all-time record.

GWEN IFILL: Today, the mayor of Davenport said the director of the Federal Emergency Management Agency was "out of touch" for suggesting Davenport build a flood wall to prevent future damage. FEMA Director Joe Allbaugh yesterday questioned whether it was fair for taxpayers to pay for flooding that could be prevented. Allbaugh is to visit Davenport later this week. At the U.S. Supreme Court today, the Justices said police in Texas did not exceed their authority when they handcuffed and arrested a woman for not wearing seatbelts. The Court said in a 5-4 ruling that Fourth Amendment protections against unreasonable searches and seizures were not violated. And in another 5-4 ruling, the court said a Mexican immigrant in an Alabama case did not have the right to sue the state because she had to take her driver's test in English instead of Spanish. We'll have more on these decisions later in the program tonight. In economic news, consumer confidence was down sharply this month, the Conference Board reported today. It was the sixth decline in seven months. The New York research group blamed consumer concerns over business conditions and job security. Separately, J.D.S. Uniphase announced it's cutting 5,000 jobs, or 20% of its workforce, because of declining profits. The fiber-optic parts maker is based in San Jose, California, and Canada. That's it for the News Summary tonight. Now it's on to arming Taiwan, Supreme Court decisions, a new approach to banking, and an update on the submarine collision story.

FOCUS - ARMING TAIWAN

GWEN IFILL: The arms for Taiwan story. Ray Suarez has it.

RAY SUAREZ: Every year, Taiwan conducts military drills like these, simulating an invasion from China. It's part of a state of alert that soldiers and civilians on the self-governing island have been living under for five decades. That's because Beijing considers Taiwan a renegade province that is and should be part of China. In recent years, China has added to its arsenal of short-range missiles aimed across the Taiwan Strait. Some of those were fired in 1996 into the waters just off Taiwan. The U.S. sent warships into the area, defusing the crisis. Taiwan has reacted to those tensions by turning to Washington to buy more weapons.

HUANG SUEY-SHENG (Translated ): To ensure security across the Taiwan Strait and stability and peace in the Pacific region, Taiwan has to purchase advanced weapons. We will try our best to acquire modern weapons to protect Taiwan.

RAY SUAREZ: Legally the U.S. is committed under the 1979 Taiwan Relations Act "to provide Taiwan with arms of a defensive character." The $4 billion weapons package that President Bush offered Taiwan today is the most expensive one since 1992, when the senior George Bush was President. The shopping list includes four Kidd-class destroyers capable of shooting guided missiles, a dozen antisubmarine planes known as P-3 Orions, as well as eight diesel submarines, which Beijing considers offensive weapons, and a number of minesweeping helicopters, amphibious assault vehicles, and submarine- and surface-launched torpedoes. Left off the list were high-tech destroyers equipped with so- called aegis radar technology, the sale of which China has forcefully opposed. Washington also did not offer Taiwan state-of-the-art Apache helicopters or satellite-guided bombs known by the acronym JDAM. The White House Spokesman, Ari Fleischer, said China's missile buildup was a factor in Washington's offer.

REPORTER: What could the Chinese do in future deployments to affect U.S. Decisions about weapons sales to Taiwan?

ARI FLEISCHER: Secure peaceful resolution of all differences between China and Taiwan, and that would include lessening the military presence that China has against Taiwan. China has reserved the right as they use it, say it, to use force, and that indicates a certain level of threat against Taiwan.

RAY SUAREZ: But in Beijing, the government blamed the U.S. for adopting what China called a "Cold War mentality.'

ZHANG QIYUE ( Translated ): If there is going to be any tense situation across the Taiwan Strait and any bad consequences to the peace and stability in Asia-Pacific region, the source is the American sale of advanced weapons to Taiwan.

RAY SUAREZ: The weapons controversy comes just nine days after the 24 Americans detained in China returned home. Further complicating matters, Beijing is irritated that Taiwanese President Chen Shuibien plans to stop in the U.S. next month on his way to central America. Taiwan now must assess which weapons systems it wants to buy.

RAY SUAREZ: We get three perspectives on the arms sales offer to Taiwan. Retired U.S. Navy Captain Bernard Cole teaches U.S. strategy and Sino-American Relations at the National War College, and he has written extensively about the Chinese navy. Wang Jian Wei is a visiting scholar at the Sigur Center for Asian Studies at George Washington University. He is a citizen of the People's Republic of China. And Michael Swaine is research director at the center for Asia Pacific policy at RAND, a research organization. Well, Bernard Cole, Taiwan had a long wish list. They got a lot of it; they didn't get some of it. What should we make of this offer of sales?

CAPT. BERNARD COLE (Ret.): I think it's a very strong signal that the administration is going to fulfill all the conditions of the Taiwan Relations Act and in response to the increasing number of missiles that China is stationing on the Fijian Coast.

RAY SUAREZ: And you would see what significance in the fact that destroyers are on the offer of sales but not the ones that Taiwan sough?

CAPT. BERNARD COLE (Ret.): Well, the Aegis destroyer has really become more of a political symbol than a meaningful weapons system. When people discuss the Aegis destroyer they talk about it having an anti-ballistic capability, which, in fact, it does not. It may several years down the road. But right now it's a fancier anti-air warfare system. The Kidd class guided missile destroyers that the administration has made available to Taiwan are in and of themselves the most capable anti-air warfare system in the world short of Aegis and more than satisfactory for Taiwan's present needs.

RAY SUAREZ: Wang Jian Wei, the administration in making its announcement said Beijing has nothing to fear from this sale offer to Taiwan. What's your reaction?

WANG JIAN WEI: Well, I think that obviously this is a bad news for China. But of course it could be worse. On the one hand the United States did not sell the Aegis system to Taiwan, which was feared most by Beijing. Also, the United States, you know, withhold a couple of more offensive items on the wish list of Taiwan. On the other hand, I think many Chinese will think that the sale of submarine to Taiwan is across the red line. Basically you can argue that the sale of submarine to Taiwan could indicate the death of the 1982 U.S.-China communiqu on arms sale to Taiwan.

RAY SUAREZ: Even with the sale of the submarines to Taiwan, if they go ahead, China will still have a vastly larger submarine fleet. Does this really change the calculus very much in that part of the world?

WANG JIAN WEI: Yeah, I think probably not -- probably not overall upset the balance, but I think that the Chinese will consider the sale of submarines to Taiwan more sort of a political signal indicating the United States is willing to further upgrade the military relations with Taiwan. So that is something I think the Chinese are worried most.

RAY SUAREZ: Michael Swaine, when you look at the list of technology on offer, what do you conclude?

MICHAEL SWAINE: Well, my general impression is that the administration walked a fine line in granting certain weapons and denying others. I agree with Bud Cole that the Aegis system is certainly not a system that I would recommend granting at this time. But I think the technologies in the other areas, particularly the Kidd class destroyers and the Orion P-3 aircraft are something that the Taiwan military needs at this point. But my general concern about this issue is that we seem to be emphasizing increasingly the issue of deterrence in dealing with the Chinese. That is to say that the basic criteria by which we're measuring the situation is a military one, and it's focusing primarily on the idea of deterring the Chinese from doing certain things; I don't think that gains us an enormous amount over the long term. I think we have to put these arms sales in a much larger strategy that's designed to both deter and to reassure both the Chinese and the Taiwanese.

RAY SUAREZ: Michael Swaine, with these sales or without them, does either side in the Taiwan Straits think that the eventual solution to this stand-off is going to be through force of arms?

MICHAEL SWAINE: Well, I don't think there's any fatalistic conclusion along those lines that's been drawn by either side, but I would say that on the Chinese side, I think there is an increasing degree of concern that over time, absent a change in the political dynamic across the strait that China will become increasingly dependent on using military instruments to try and achieve or try and deter certain political ends, the most important, of course, being to deter the permanent separation of Taiwan from the Mainland.

RAY SUAREZ: So, if you're identifying this as a political problem, what does the added presence of these new weapons mean?

MICHAEL SWAINE: Well, as a political problem it, of course, from the Chinese perspective, it means that there are... from their view, there's a greater degree of willingness on the part of the United States to provide some very important weapon systems to Taiwan that the United States in the past has really resisted providing. And that is seen by the Chinese most likely as an indication that the United States is willing to back Taiwan to a greater and greater degree. And that ultimately becomes a very dangerous proposition because the fear that the Chinese have is that the United States will gradually be brought in to a relationship with Taiwan that is, in effect, a de facto security ally or security partner, not just militarily but also politically and in terms of military-to-military relations between combat forces, for example, one major red line is the issue of inter-operability. And that is really not mentioned very much in the discussion of the hardware sales. But in some regards it's even more important.

RAY SUAREZ: What does that mean?

MICHAEL SWAINE: Inter-operability means the U.S. and Taiwan forces start contacting one another, interacting with one another in order to prepare or to discuss the idea of possible coordination in the event of a crisis.

RAY SUAREZ: Wang Jian Wei?

WANG JIAN WEI: I just wanted to add to what Michael just said is that China is worried most is that the sale of more advanced weapons to Taiwan will give a boast to the forces for independence in Taiwan that makes the Taiwanese even more difficult to come to the negotiation table with Beijing. So there is a totally different argument here. For the United States the argument is that if we keep a military balance between two sides, then more likely both sides will have a dialogue. But the Chinese argument is just the opposite. If you sell more weapons to Taiwan, the Taiwanese will be more reluctant to come to the negotiating table and there will be more retention across the Taiwan Strait.

RAY SUAREZ: But earlier Mr. Cole pointed out that the number of short-range missiles on the Mainland has nearly tripled during the '90s. Doesn't that call for a response from the Taiwanese side?

WANG JIAN WEI: Well, you know, I think the United States wants to link these two things together, you know, the more deployment of short range missiles and the sale of arms to Taiwan. But China so far has refused to recognize the linkage. Chinese argue that the deployment of more missiles in the area not necessarily just targeted at Taiwan is a part of the overall military modernization program of China and also it is within the sovereignty right of China to decide when and where to deploy missiles. So there is a big perceptual gap between the two sides on this issue.

RAY SUAREZ: How do you respond?

CAPT. BERNARD COLE (Ret.): Well, I've heard that argument from the Chinese, but it's really rather disingenuous of them to say the way they move their missiles around is not going to affect events outside of their border. Let me just note that the U.S. interest here is not necessarily arming Taiwan to some level. The U.S. interest is U.S. national security interest in that part of the world, which are basically stability and a peaceful resolution of the dispute between China and Taiwan. China so far has been relatively unwilling to engage Taiwan with other than military pressure as far as the reunification process is concerned. It seems to me that more than 20 million people on Taiwan have to see some advantage to reunifying with the Mainland if China is to achieve that result without using military pressure. I don't think Beijing for one minute wants to use military force against Taiwan. But so far they've been unwilling to seek any other avenues of approach to Taipei.

RAY SUAREZ: You heard Mike Swaine suggest that this new set of arms sales makes a political settlement more complicated.

CAPT. BERNARD COLE (Ret.): Well, I think actually it increases the level of stability and hopefully would convince Beijing to seek some alternate route instead of simply building up missiles and claiming that it's their sovereign right to do so while ignoring the unavoidable international effect a missile build-up in Fijian has.

RAY SUAREZ: You wanted to -

MICHAEL SWAINE: Could I? Just to add a point there, I agree basically with that. I think that China certainly has to assess or reassess its position in light of this kind of situation of increasing assistance from the United States. There is no question about that. China's position doesn't give the Taiwanese a whole lot of breathing space in terms of reaching some kind of understanding. But my point is that we can't just emphasize the question... the issue of arms sales in this whole context because I don't believe that a policy that's focused on deterrence alone, arms sales, is going to convince the Chinese that they need to alter their behavior. It has to be combined with some set of political initiatives that are really designed to try and to some degree reassure the Chinese that what the United States is doing or rather not doing here is trying to support a Taiwan that will ultimately move towards independence.

WANG JIAN WEI: I agree with what Michael said. I think China is facing a sort of dilemma here, and on the one hand, you know, China wants to maintain a sort of a maximum or at least a minimum kind of military pressure on the transition government because every since he was elected, the President of Taiwan, China was worried that he could go further down the road of independence. On the other hand, that kind of, you know, missile deployment across the Taiwan Strait will obviously trigger the opposition in the United States to the Mainland China and also increase the pressure on the Bush administration to sell more weapons to Taiwan. So I think China... I think the purpose for China is not really to launch a military campaign against Taiwan but to try to put a military pressure on Taiwan -- basically kind of a deterrence here. You don't go further down the road of independence. But that kind of deployment has side consequences, that is, making the U.S.-China relations more difficult to handle because of this issue.

RAY SUAREZ: Very briefly before we go, the administration maintains that the current tensions with China over the surveillance plane had nothing to do with this. This is on a separate track. Do you take that at face value?

CAPT. BERNARD COLE (Ret.): I agree with that. I don't think there's any direct relationship at all.

RAY SUAREZ: Guests, thank you all.

GWEN IFILL: Still to come on the NewsHour tonight, today's Supreme Court decisions, banking in Bangladesh, and a submarine collision update.

FOCUS - SUPREME COURT WATCH

GWEN IFILL: Now, the two Supreme Court decisions. The court today ruled in a discrimination case from Alabama, and in a Texas Fourth Amendment case regarding unreasonable seizures. The justices split 5-4 in both. We get more on these rulings from Marcia Coyle, Supreme Court correspondent and Washington Bureau Chief for the "National Law Journal." NewsHour regular Jan Crawford Greenburg of the "Chicago Tribune" is off.

Welcome, Marcia Coyle.

MARCIA COYLE: Thank you.

GWEN IFILL: Let's start with the Alabama case. This English-only debate -- it seems to me that there's a small question here and a big question. What was the small point of law that the court was ruling on today?

MARCIA COYLE: Well, the Court was looking at whether Title 6 of the Civil Rights Act of 1964 contained an implied right of action. That means, could private individuals sue their states for policies that had a discriminatory impact? Title 6 bars discrimination by any recipient of federal funds. Alabama is a recipient of federal funds. Alabama, prior to 1990, issued drivers licenses after people took tests, and they could take the test in up to 14 different languages. But in 1990, Alabama amended its constitution to require English as the official language. The state Transportation Department then decided that the driver's test had to be given in English only.

GWEN IFILL: So this was an individual who is a Mexican immigrant who said I should be able to take this in Spanish and the court said today, the court said this was not something that the state had to do.

MARCIA COYLE: That's right. Martha Sandoval was the Mexican immigrant who wanted to take the licensing test in Spanish along with several others. And she sued in federal court -- a class action -- using Title 6 saying that this policy of the state had a discriminatory impact on her and was prohibited. But the Court said that it could find no language in the text of Title 6 that would give private individuals that right to sue.

GWEN IFILL: If the Court... In the Court's ruling today, did they speak to the whole notion about whether states can mandate English-only requirements?

MARCIA COYLE: No, they didn't. This really was not a decision on the legality or the constitutionality of English- only policies. This just had to do with whether you or I can bring a private suit to enforce title 6. I should point out that Title 6 also bars intentional discrimination by agencies-- government, private entities-- that receive federal funds. And you still do... Individuals still do have a right to enforce that bar in court.

GWEN IFILL: But as long as it's unintentional....

MARCIA COYLE: That's right. That's the key thing because intentional discrimination is very hard to prove today. You have to show motive by the person or the entity that's discriminating. But to show that some policy or program has a discriminatory impact is a little easier to do.

GWEN IFILL: Justice Stevens in his dissent wrote a very toughly worded dissent. He said that today's decision was hostile to decades of settled expectations. What did he mean by that?

MARCIA COYLE: He felt that this question actually had been answered already by the Court; and he also pointed out that all of the federal appellate courts that had faced the question had found that, yes, there was an implied right to bring these suits. So, yes, he felt that the Court had elevated above all those prior decisions a desire to keep these cases out of court, not to go the extra mile and look at Congress's intent when the language of the statute is silent.

GWEN IFILL: Now, what is the practical effect of this? Does this affect law standing in the other states? Does it affect what happens with this English-only case in Alabama?

MARCIA COYLE: Well, the practical impact is that the avenue for enforcing Title 6 ban against discrimination has been shut down. In Alabama itself, the state actually changed its policy back to the original testing in multiple languages. It changed its policy during the course of this particular suit. But the reason the suit went forward was Alabama had always held open the possibility that it might go back to English- only. There still is a way to enforce Title 6's ban and that's up to the federal government. The federal government supplies the money. It can try to pressure states into not doing this by the power of the purse. But for individuals it makes it much more difficult.

GWEN IFILL: Second case decided by the court today. A woman is driving her car full of her kids back from soccer practice. She gets pulled over and she gets arrested and handcuffed because she wasn't wearing her seat belt. Her children weren't in their seat belts. How does she sue?

MARCIA COYLE: Okay. She went to jail. She was in jail for about an hour. And then she went before a magistrate, paid her bond, later pled no contest to the offense and paid the maximum punishment for that offense under Texas law, $50. A little while later -- she didn't immediately say I'm going to sue -- she sued in federal court after a series of events in which the city and sheriff did not respond to her concern about this particular officer. She sued saying that the city and the police department had violated her rights under the Fourth Amendment to be free of unreasonable searches and seizures.

GWEN IFILL: Why did the Court decide that there was no merit to that case, to that argument?

MARCIA COYLE: TheCourt looked for guidance in two ways. When you're trying to decide what the Fourth Amendment says or what it protects, the court said you look first to the history. You look at what the law and the practice was at the time of the founding of our country. And you also look to English common law. When the court looked at that history, it couldn't find a clear answer. So it fell back on what is normally the touchstone for Fourth Amendment violation: Was this arrest reasonable? And that makes it engage in a very, sometimes, very difficult balancing test. It has to look at the nature of the intrusion on your right to be free of these searches and seizures as well as what governmental interest is being served here.

GWEN IFILL: I'm sorry. I just want to move on a little bit because this is one of those 5-4 decisions -- which is interesting -- except in this case Justice Souter was with the five and Justice O'Connor wrote the dissent. What was her argument?

MARCIA COYLE: Justice O'Connor felt, unlike Justice Souter, that there was nothing reasonable about this arrest. She said an arrest even for a minor offense has seriously ramifications. Gail Atwater experienced some of those ramifications. She felt that the state's, the government's interest here was best served with the issuance of a citation. And she would have announced a rule that said you cannot arrest anyone for a minor criminal offense that has no jail time associated with it unless the police officer can articulate specific facts that raise it to the level of an arrest.

GWEN IFILL: Are there other Fourth Amendment cases like this before the Court this session?

MARCIA COYLE: Yes, there are. In fact there's a total of seven Fourth Amendment cases this term. The Justices usually have, say, two to three. So this is an unusual number.

GWEN IFILL: How unusual is a case like this that something so small can become so big?

MARCIA COYLE: It's not unusual at all. It's surprising that this particular question hadn't been answered after so many years of Fourth Amendment cases, but it's not unusual at all. I think that the court is seeing more and more Fourth Amendment cases partly because of the war on drugs. Even though that war has disappeared from our headlines, it's still very much a war for police on the streets. And as they try to stop the flow of drugs, they're drawn more and more into searching cars, homes and that raises questions under the Fourth Amendment.

GWEN IFILL: About what's reasonable and what's unreasonable.

MARCIA COYLE: Exactly.

GWEN IFILL: Marcia Coyle, thanks very much for joining us.

MARCIA COYLE: Thank you.

FOCUS - BANKING ON PEOPLE

GWEN IFILL: Next, an unlikely banking success story. Fred De Sam Lazaro of Twin Cities Public Television in Minnesota reports from Bangladesh.

FRED DE SAM LAZARO: Nurul Islam has an unusual routine for a bank loan officer. Once a week, he comes to this shack to meet with his small business clients and to collect their loan installments. Unusual doesn't start to describe the borrowers. Most are female, illiterate, and before they joined this group, very poor -- not exactly a lucrative group to most bankers, especially since their typical loan is about $100. But these are preferred customers of the Grameen Bank. 2.4 million of them have made Grameen one of the most prosperous financial institutions in the developing world.

MUHAMMED YUNUS, Grameen Bank: I didn't have a blueprint of any kind. I was not looking for a destination. All I was trying to do was to be helpful for today.

FRED DE SAM LAZARO: Muhammad Yunus was a young economics professor in 1974, when the idea of offering banking services to poor people-- an idea that came to be called micro-lending-- occurred to him. It was in the midst of one of this country's legendary natural disasters.

MUHAMMED YUNUS: We had a famine in 1974, people were dying of hunger; and I found myself in a very strange situation: Teaching elegant theories of economics, telling all my students that every economic problem has beautiful solutions. And I walk out of the classroom, those elegant theories have no use for people who were dying.

FRED DE SAM LAZARO: Yunus wanted to apply some of his economic theories to the real world he saw. So he surveyed 42 small business owners-- fruit vendors, artisans, rickshaw pullers-- and found that just $27 would free the whole group from debts to local money lenders, debt that kept them in almost lifelong bonded labor. Yunus decided to bankroll the group himself, after failing to sell local bankers on the idea.

MUHAMMED YUNUS: I soon found out that people are paying back, and they paid back every penny without any hitch. So I got very excited. So I thought I should have my own bank. So I went to the government with a proposal that I should be allowed to set up a bank.

FRED DE SAM LAZARO: Yunus began perhaps the first ever bank in which collateral was a bad word-- the poorer a borrower, the more creditworthy. And there was no shortage of customers in this nation where 130 million people inhabit a land area the size of Wisconsin, an area on the Asian subcontinent that's constantly battered by storms and floods. Despite the continuing poverty, Grameen has had enormous economic and social impact. Its loans have allowed some 2.4 million rural Bangladeshis to start small businesses. And it's given women new power in a traditional male-dominated society.

MUHAMMED YUNUS: Women are very cautious with the use of the money, but the men were impatient; they wanted to enjoy right away. They will entertain friends, they will go to the movies, they will do whatever they could to enjoy for themselves personally. But women didn't look at it personally. Women looked at it for the children, for the family and the so on, and for future.

FRED DE SAM LAZARO: Dilwara Begum became a Grameen borrower 11 years ago. She began with just one milk cow. Then, about four years ago, another loan helped build a poultry barn, a productive enterprise that takes the whole family to manage. The weekly yield of about 7,000 eggs is picked up every other day and taken to the capital, Dhaka, about three hours away. Over the years, Dilwara Begum says, life has changed in basic yet dramatic ways.

DILWARA BEGUM (translated): In the past, we used to eat nothing more than rice and some vegetables. Today in each meal there is egg, meat, or fish-- at least one of them. Also, in the past we used to grow enough rice for about six months of the year; the rest we had to buy. Sometimes we had to borrow money to buy the rice. Today we grow enough rice for the whole year.

FRED DE SAM LAZARO: Dilwara and husband Nazim Uddin also raise their own fish and poultry to meet much of their food needs. After all the expenses, they save about $100 each month-- an impressive sum in Bangladesh. Even though 98% pay back their loans, only about a half of Grameen borrowers succeed in staying out of poverty. Still, Grameen and other micro-lending programs have brought significant overall improvement, notably in food production, according to Hussain Zillur Rahman, a scholar who has tracked poverty here.

HUSSAIN ZILLUR RAHMAN: I can bet my little savings that a famine in Bangladesh is not likely to occur, will not occur, actually. The threat of famine has been defeated. That's a fantastic achievement actually.

FRED DE SAM LAZARO: >> Reporter: For his part, Mumammad Yunus is now looking well beyond agriculture based enterprises. Already, Grameen is the largest cell phone company in Bangladesh, vaulting a country barely wired for telephones into the age of the wireless. ( Phone ring )

MAN: hello?

FRED DE SAM LAZARO: The phone rings often at the home of Dharani and Shamoli Sarkar. Theirs is the only phone in their village, financed by Grameen and rented out as a pay phone to a poultry farmer trying to reach a veterinarian in the city, for example, or expatriates, like this one, calling from the Persian Gulf oil fields to relatives back home. "Call back in ten minutes," Sarkar instructed the caller as he set off to alert the family. He said the job of walking phone booth is mostly his, even though his wife, Shamoli, actually holds title to the Grameen loan and to the phone. Indeed, the traditional domestic routine for most Grameen borrowers hasn't changed much. Still, Grameen officials say, as the family's meal ticket, the women increase their leverage in family decision-making, and this improves their sense of confidence.

SHAMOLI SARKAR (Translated ): I am given respect. We are offering a very good service to the village and people are very thankful for our phone business.

FRED DE SAM LAZARO: The bank also wants to change the future face of Bangladesh. It asks borrowers to have fewer children and to educate them. Poultry entrepreneurs Dilwara Begum and Nazim Uddin between them had just four years of formal education. But their son, Nasir, who is 20, will finish college in two years and plans to start his own poultry business. At 16, his sister, Nasrin, would traditionally be married. Instead she will go to college and hopes to become a journalist. Education has become a top priority in the Grameen group.

MUHAMMED YUNUS: I would say it's about 100% enrollment from Grameen families today and many of them are in colleges, universities coming all the way. So that is different. So having those children going to school, the second generation that is coming from out of these 2.4 million families of Grameen, at least they are not becoming the kind that you would expect to grow up in an illiterate family where illiteracy ran for generations.

FRED DE SAM LAZARO: Impressive as these successes are, illiteracy and poverty remain in daunting proportion in this nation, where per capita income is about $300 a year. Yunus blames the slow progress on the sluggish Bangladesh economy, whose major financial institutions, ironically, hold billions of dollars in bad debts to large businesses.

UPDATE - FIXING RESPONSIBILITY

GWEN IFILL: The Navy hands out its punishment for the submarine collision. Margaret Warner has the story.

MARGARET WARNER: The skipper of the U.S. submarine that sank a Japanese fishing vessel in February was forced into retirement yesterday after the Pacific Fleet's top admiral found him guilty of dereliction and negligence. Nine Japanese died in the collision. Admiral Thomas Fargo said the collision happened because crewmembers on the "U.S.S. Greeneville" didn't conduct an adequate sonar and periscope search of the area before surfacing, and didn't communicate among each other about what they were detecting. Fargo held Commander Scott Waddle responsible for both failures, but he declined to refer the case for a court martial. Waddle will retire later this year with a full pension. At a news conference, Fargo was asked if the punishment amounted to a slap on the wrist.

ADMIRAL THOMAS FARGO: I think, first off, you have to look at our traditions and our service. Commander Waddle has been stripped of his command, and his career effectively terminated. For a Naval officer that served for 20 years to his country, I would tell you that this is absolutely devastating. He has paid dearly. As I expressed earlier, our profound regrets to the Japanese families. I've lived in Japan. I understand what they're going through, but no process, none whatsoever, will fully compensate for the loss of life.

REPORTER: From the manual for courts martial, all that's necessary to charge for negligent homicide is that someone died as a result of simple negligent behavior, not exhibiting a degree of care, of safety, that an otherwise careful person would have exercised, and no intent is necessary. Why does this case not live up to charging for negligent homicide?

ADMIRAL THOMAS FARGO: Well, obviously I charged Commander Waddle under two very serious counts of the Uniform Code of Military Justice. It was in my judgment that further charges were not necessary, and that we could achieve proper accountability without that.

REPORTER: Admiral, some critics have charged that the court of inquiry sort of swept under the rug the issue of the distinguished visitors program by not calling any of the 16 civilians, and by not looking more in depth at the whole program, and how it's entered into this. Do you think that's true?

ADMIRAL THOMAS FARGO: The report is very clear that the civilians onboard did not cause... is not directly the cause of this collision. You know, we've had a distinguished visitors program, we've been embarking civilians in the Navy for 50 years now, and I think it's important. It's important to our nation. We can do this safely, and will do it safely. And it would be a mistake to build a wall between the American citizens, the mothers and fathers of our sailors, and its Navy.

MARGARET WARNER: In Japan, a spokesman for the Prime Minister said the U.S. Government has now acknowledged its responsibility for the collision, and that Tokyo would not press for harsher action. But relatives of the victims and local politicians told reporters the punishment was too light.

MARGARET WARNER: For more on the Navy's decision, we turn to John Hutson, a retired rear admiral who served as a judge advocate general in the U.S. Navy-- he is now dean of the Franklin Pierce Law Center in New Hampshire-- and military law expert Eugene Fidell, a former Coast Guard lawyer, and now President of the National Institute of Military justice. Welcome, gentlemen.

Admiral Hutson, flesh out a little bit more for us, admiral, what led to Admiral Fargo's decision. What did he find that Commander Waddle did or didn't do that led to this collision?

REAR ADM. JOHN HUTSON (Ret.): Well, I think first of all, first and foremost, commander Waddle failed to see the Japanese vessel when he looked through the periscope. I think that is sort of an example of the kinds of mistakes that Commander Waddle made. He tried to go too fast. He went through all the proper steps but tried to expedite them too much. Admiral Fargo said-- and I agree with him-- that commander Waddle seemed to have created a false sense of urgency on board the ship. I think that we saw to results of that. He made a classic error in assuming that everything was okay and he was just confirming that when, in fact, he should have assumed exactly the opposite.

MARGARET WARNER: The sense of urgency that he created he was trying to get back to get the visitors off to meet the tug to get the visitors off, is that right?

REAR ADM. JOHN HUTSON (Ret.): That's my understanding.

MARGARET WARNER: Eugene Fidell, was this the right decision -- in other words, a career-ending reprimand but not a court martial?

EUGENE FIDELL: Well, American policy for military justice has to be followed over the years and it's trended towards using non-judicial punishment rather than courts martial for resolving what I'll call crimes of command. So it's consistent with actions that the Navy has taken in other cases. That may or may not be satisfactory either to the Japanese or to observers of the event.

MARGARET WARNER: All right, but what about to you? Do you think this was the right decision?

EUGENE FIDELL: I have some qualms about it because I think that a public trial at which the crucible of the adversary system could have been brought to bear would have served important interests, interests in the... in fostering confidence in the fair administration of justice. And if you substitute for the trial model with which we're all familiar instead a proceeding behind closed doors, which is what the admiral's mast is, you have paid a penalty there. I think that's unfortunate.

MARGARET WARNER: Admiral, what do you think of that?

REAR ADM. JOHN HUTSON (Ret.): Well, I don't completely agree. There were 12 days of testimony at the court of inquiry, which was open to the public. There was 119-page report that is supported by 2,000 pages of documents. The entire document is on the PAC Fleet website. There was a thorough airing. Everybody knows precisely what happened here. The only question then becomes, what do you do about that? Was that shortcoming the kind of thing that rises to the level of criminal misconduct or not? This is a terrible tragedy. There's no question about that. I don't want to sound cavalier but from a legal point of view, they're relatively minor offenses.

EUGENE FIDELL: I think I'm going to disagree with that. Non-judicial punishment, with respect for John's an old friend, non-judicial punishment is by act of congress supposed to be reserved for minor offenses. The question is, are these minor offenses? Obviously that's a judgment call for Admiral Fargo to make. That's the way the statute is constructed. But if you look at the potential punishments, for example, they're quite severe and in the case of negligently handling a vessel they clearly tripped the line prescribed by the manual for courts martial that distinguishes at least in principle between a minor offense and a serious offense. Indeed Admiral Fargo himself in the clip that you showed before indicated he found Commander Waddle guilty of serious offenses. In addition, there were several other charges that I think could have been pursued at a court martial and that I think it probably would have gone to the jury, they would have reached the jury that were also quite serious charges, having to do with involuntary manslaughter, negligent homicide and even reckless operation of a vessel.

MARGARET WARNER: Well, he found -- Admiral Fargo said to him that the test was-- I'm looking for the words here-- he didn't feel it rose to the level of going to a court martial because he didn't find criminal intent or deliberate misconduct.

EUGENE FIDELL: Those... I'm sorry, Margaret.

MARGARET WARNER: My question is, is that the tradition? Is the only way... what happened to the conduct, the concept of criminal negligence as the reporter asked the admiral?

EUGENE FIDELL: The answer is that for all of the offenses that people have even thought about in connection with these tragic events, not one of them requires intent. So to cast the decision-making process in terms of whether there was criminal intent or intentional misconduct is, I think, to begin the analysis by pointing in the wrong direction. All of the offenses that occurred to me and to others that I've discussed this with under the manual for courts martial are offenses that require, in some instances, only simple negligence or in other instances reckless or wanton negligence, but reckless or wanton conduct. But in no case do they require criminal intent.

MARGARET WARNER: Admiral Hutson, I think Americans might ask particularly when nine people die again in the civilian model, if negligence were found and responsibility was found, that would constitute criminal negligence, would it not? Why does that not apply in the military model?

REAR ADM. JOHN HUTSON (Ret.): No, you don't look necessarily at the results of what happened, as tragic as the results were in this case. The question comes down to, what did Commander Waddle do or not do on the 9th of February? And does that conduct or misconduct rise to the level of something that you're going to send to a general court martial and make him potentially a felon or a criminal? I don't think that it does... that conduct did.

MARGARET WARNER: Just staying with you for a minute, admiral. For instance we've all heard of cases in which even enlisted men are court-martialed for smoking marijuana or officers have been court-martialed for having a personal relationship, sexual relationship with somebody else in their command. Just help us understand the distinction there. Why would that be court martial offense but this wouldn't?

REAR ADM. JOHN HUTSON (Ret.): Well, I sort of cringed when gene used the expression earlier about crimes of command, but to some extent that's what you're talking about. Somebody who is smoking marijuana or engaged in an inappropriate relationship with a subordinate is in a completely different situation than somebody who is underway, doing the nation's work but doesn't do it as well as he should have done it. There's no question that Commander Waddle is responsible. He said it. Admiral Fargo has said it in the action that he took. You know, there's an old Navy tradition that goes back older than the nation itself that says that the commanding officer has absolute responsibility, and with that goes authority and with that goes accountability. Waddle is accountable. Waddle is responsible for what happened. The question becomes, is he a criminal?

EUGENE FIDELL: The answer I think to that question reflects the changing nature of command in this highly technological environment. Once upon a time a wooden ship with sails propelled by sails would sail off into the sunset and be heard from nine or ten months later. Today ships are never out of instantaneous communication with shore, with the highest levels of management, commanders at sea are subject to regulations and instructions of every description. It's a pervasively regulated environment. And in important respects the responsibility of command is now shared. But still, of course, the commanding officer is the person in charge, but also in important respects decisions are being made on shore that are inextricably linked with what's going on on the ship. And that has certain institutional and cultural implications for how the punishment system works. That's what we're dealing with now.

MARGARET WARNER: Are you saying that you think the accountability should then also be spread?

EUGENE FIDELL: I think accountability at levels above the level of the immediate commander has been a problem for the national defense program for some years. We've had a number of mishaps in which our military and civilian leaders have grappled with how to impose sanctions, whether and how to impose sanctions on those who are not the immediate commander on scene but rather at levels above the immediate commander. It's a continuing problem. It's going to continue to be a continuing problem.

MARGARET WARNER: But, in other words, that might have made decisions that nonetheless affected the environment in which this commander on ship was operating.

EUGENE FIDELL: Absolutely right.

MARGARET WARNER: Admiral Hutson, do you want to comment on that? Go ahead.

REAR ADM. JOHN HUTSON (Ret.): Let me say very quickly I agree completely with Gene, that is an issue. But it's a somewhat different issue than the immediate issue at hand. Would you get a conviction at a court martial in this case and I think not. I think I've got a bunch of third year law students at Franklin Pierce who would get an acquittal in this case.

MARGARET WARNER: Finally and staying with you, Admiral, this distinguished visitors or civilian guest program that was the focus of so much commentary -- we all learned so much about through this incident -- Admiral Fargo found that though they were a distraction, he said they didn't directly contribute to the collision. What was your view on that? Did that surprise you?

REAR ADM. JOHN HUTSON (Ret.): No. I think he's right. I mean, the fact of the matter is that they were at sea because of those visitors.

MARGARET WARNER: Remind us, in other words, originally there was a mission that they were supposed to do. The mission went away somehow and they still took this trip just to take care of these guests.

REAR ADM. JOHN HUTSON (Ret.): Right. And every time you go to sea there's training involved. I mean, you have to light up the reactor. I mean all those things happen so that the ship goes through training during those evolutions. But the fact of the matter is that Commander Waddle went faster than he should have -- shortstopped some of the procedures that he should have gone through because he was in a hurry and he was in a hurry because those people were aboard the ship. But I think it's a mistake to confuse the question of whether he should go to a court martial and whether he could be convicted with the distinguished visitors program, which obviously needs to be overhauled.

MARGARET WARNER: What was your thought on that?

EUGENE FIDELL: This time I'm going to agree with John Hutson.

REAR ADM. JOHN HUTSON (Ret.): Thank you.

EUGENE FIDELL: I think they are separable issues although they interact because there was some sense that the presence of these 16 so-called distinguished visitors on the submarine did have an impact on the environment within the control room. There remain questions that have to be answered concerning what they were doing there, how they got there in the first place and I think that until those are resolved this is going to be an open issue.

MARGARET WARNER: But in the end as... what Fargo said was in the end it's up to the commander to manage those guests.

EUGENE FIDELL: Yes, that's true, but he certainly had help from on shore in bringing this situation about.

MARGARET WARNER: All right. Gene Fidell, Admiral Hutson, thank you both very much.

RECAP

GWEN IFILL: Again, the major stories of this Tuesday: The White House announced plans to sell arms to Taiwan. China immediately filed a formal protest with the State Department. And the Mississippi River is expected to crest later in Davenport, Iowa, at a near- record level. We'll see you online and again here tomorrow evening. I'm Gwen Ifill. Thank you and good night.