captioning sponsored by macneil/lehrer productions >> lehrer: good evening. i'm jim lehrer. stocks fell sharply today amid news of a weakening euro and the biggest rise in jobless claims in three months. >> brown: and i'm jeffrey brown. on the "newshour" tonight, we'll analyze what's hine the volatility and examine new rules aimed at preventing sudden dives by the market. >> lehrer: then ray suarez weighs the prospects for immigration reform, after mexican president calderon addresses a joint session of congress. >> i'm not a president who likes to see mexicans leave

our country searching for opportunities abroad. >> brown: john merrow reports on michigan's takeover of the detroit public school system. >> the issues impacting detroit public schools are top to bottom issues. it's not just the fact that we have over 300 million dollar budget deficit. but it's also the issue that we have an academic emergency. >> lehrer: and judy woodruff looks at the turmoil over the charge that north korea intentionally sunk a south korean warship. that's all ahead on tonight's "newshour". major funding for the pbs newshour has been provided by:

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and with the ongoing support of these institutions and foundations. and... this program was made possible by the corporation for public broadcasting. and by contributions to your pbs station from viewers like you. thank you. >> brown: wall street went down hard today deepening deeps europe financial stability, new concerns about the u.s. recovery in all of the major indexes. the dow jones industrial average lost 376 points to close at 10,068, its biggest one-day drop since february of last year. the nasdaq fell 94 points to close at 2204. the standard amp poors 500 is now down more than 10% from its high last month signaling a market correction. all of this came more than two weeks after the so-called flash crash that shook wall street earlier

this month. that episode was the subject of a senate hearing today. it was 2:30 in the afternoon on may 6th and the dow jones industrial average was trading above 10,800. then without warning it went into meltdown, a dizzying dive of nearly a thousand points in less than 30 minutes before snapping partway back. >> good morning, everyone. >> brown: at today's hearing the heads of major regulatory agencies said they still don't know exactly why it happened. mary schapiro is chair of the securities and exchange commission. >> been two weeks, our staffs have been working around the clock. but there is an extraordinary amount of data that we have to plow through. we had 19 billion shares traded that day and 66 million different trades. 17 million of them alone were between 2:00 and 3:00. so the enormous amount of data coming from multiple sources in different format, captured in different ways is creating an enormous

amount of work for us. >> brown: also under the mike scope today the 21,000-- trades cancelled on may 6th. they were determined to be erroneous but kentucky republican jim bunning noted that many traders had to live with their losses. >> i am very concerned that trades were cancelled on an arbitrary basis. very concerned. that is unfair, undermines market discipline, and is nothing more than a bailout of sellers who would have faced losses from their own decisions to use market orders. >> brown: as they pursue the answers to may 6th, the sec and the major exchanges have already announced a new circuit breaker plan. it would halt trading on individual stocks during periods of high volatility. the standard & poor's --00 index will be first to use the pilot program, if any stock in the index rises or

falls 10% or more within a five-minute period, trading in that stock will be stopped for five minutes. the rules will apply to price swings that occur between 9:45 a.m. and 3:35 p.m., almost all of the trading day. but going forward, the sec's schapiro said exchanges must also enact clear rules for traders caught in major sell-offs. >> we need a process that is much more transparent, provides certainty in advance about what trades will be broken and which ones won't, and creates fairness for investors. >> brown: exchange executives said they plan to meet with sec officials next week to discuss new standards. and for more on the recent volatility and attempts to better stabilize markets, we turn to nick perna, head of perna associates a consulting firm specializing in economic analysis and james angel, a professor of finance at georgetown university. nick perna start with today, 376 points down, including a

sharp drop at the end, what's going on. >> it was a real nail-biter today it is sort of like the cumulation of lots and lots of anxiety that started about three weeks ago. so we're up a total of over a thousand points for the dow since the last week of april. i will point out, however, that even with that thousand point decline, we are still some 50% ahead of where we were at the lows of april of 2009. so it is a case of high anxiety, and some revaluation, revisiting as to whether or not the market had too high hopes for the u.s. economy. i think a moderate recover is in store, not a big one. >> brown: we will get to specifics in a moment but james angel, let me bring you in. a correction of 10% drop from a high, sort of a technical term but what do you see happening in terms of the volatility of recent weeks? >> well, we've got a lot of natural volatility in the market as a result of the situation in greece, not to

mention the jitters in korea and in iran. so there is a lot of natural uncertainty in the world and that's reflected in the volatility of the market. >> brown: so you look to greece. tell us, what do you see there? today there was-- well, it is greece an europe which we've talked about a lot on this program. and at certain points along the way it looked as though governments had stepped in enough to stem the problemment but apparently that's premature. >> well, we'll see. yesterday the german government took a unilateral step without consulting the other governments to ban so-called naked short selling in certain instruments. the fact that the european leaders are not working together is a serious sign that there are problems in europe. >> brown: nick perna, pick up on that. what about europe, how is that driving what is happening here? >> i think it's one of these things that greece is the damned if it does, damned if it doesn't. you know, if it doesn't abrogate its debts by living up to all the requirements that are going to be put on

it to bring the budget deficit down lower, then worsens its recession. so it's not an easy and clean way of resolving this just because they came up with something like a trillion dollars of aid, a package the europeans came up with a package to try to deal with this. it doesn't mean that the european economy wouldn't suffer as a consequence. so you know, you solve one problem, maybe, but another problem just pops up right away. >> brown: well, nick, the other thing that people were talking about today was the unexpected jump in claims for unemployment benefits. now -- >> yeah, you know-- . >> brown: go ahead. >> sure, i mean if that had happened and there were no problems with europe, it might have been dismissed as a quirk. but there are a few other things in addition to what is going on in europe. number one, you know, we got some evidence that, you know, maybe housing isn't at strong as some people thought. building permits fell the other day.

although housing starts rose. but permits tell you something about the future. then there was the increase in initial claims for unemployment insurance suggesting that maybe firms are laying off a little bit more than we thought they were. then we found out that foreclosures and delinquent mortgages were still at a very, very high level, and so on. so i don't think that this stuff says that the recovery is in peril. but it is as if you had a very ebullient view of the u.s. economy you have to revise that down to a more moderate outlook. >> brown: just to stay with you, you are looking at all these things. and here we are back again in the days where every day seems to be a several hundred point jump, mostly downward. and all that is, again, it goes back to what we used to talk about a year or two ago, was really about psychology, is that what it is adding up to? >> i think psychology is very important because the market, the stock market is both reflective of psychology, and formative of it. if trade ares start to get

nervous and investors get nervous, the market goes down. but then that feeds and consumers start to get nervous and businessmen start to get nervous. but i think there is a lot of other stuff going on here. and i think it has to do with, you know, all these nanosecond trades and the like that are going on in making the responses to any event outsized as opposed to smaller. >> brown: now james angel speaking of uncertainty, there's still all this uncertainty about what happened earlier this month when there was the plunge. we reported earlier about the steps that the sec is taking. explain this new circuit breaker idea for us and how is that intended to stop something like that from happening. >> well, it is not a new idea. germany has been doing this for over a decade. the idea is pretty simple. you have the computer monster-- monitor stock prices in realtime and when a stock jumps too far too fast, 10% in five minutes, the computer will call a pause and then that gives

the humans time to look and see what's happening. make sure all the circuits are working, and restart trading using the normal procedure we use every morning to reopen trading. >> brown: and then we were just-- nick perna was just talking about the high frequency trading. that's something we've heard a lot about since that happened. and the shadow markets beyond the ones we talk about, for example, the new york stock exchange. how would all that be affected by these new rules? >> well, i think the market will be a lot more stable as a result. because one of the problems we saw on tornado thursday, may 6th was that the circuits were so overwhelmed by all the volume that people's data feeds were not working properly there were a lot of technical glitches at a lot of different places and that lead to the confusion that made things worse. >> brown: now of course on that day, interestingly enough, i mean the other thing we were looking at that day was riots in greece that is what we originally all thought had happened. and still we are all still talking about greece and

europe. so explain the balance here between the technical stuff you're talking about, the machines, the computer trading, and then this sort of market psychology or looking attic things like what's going on in europe. how does one feed the other? >> they feedback very closely because even though we talk about computers trading, all those computers are attached to people. you know, it is not like these are computers from outer space that are eating the planet. they have been programmed by people mostly to do things that traders have always done, like buy on the dip and sell on the reboundment but when the market is really jittery, a lot of those computers get jittery too. and when everybody tries to run for the fire exit at once, you got problems. >> brown: and a last word from you, nick perna, you put these together too. do you expect the jittery market to continue? >> i hate to use the phrase, but i think jitteriness is the new normal. i think that until we get clearly out of the woods in

terms of financial fragility, even in terms of things like are we at the point of a political upheaval in the united states-- upheaval in the sense of changing control of congress, if you will, until all these things are resolved, jitteriness is the order of the day. >> brown: jittery is the new normal. okay, nick perna and james angel, thanks, i think. >> thank you. >> lehrer: still to come on the "newshour" tonight, immigration reform, detroit's embattled school system, and the korean warship sinking. but first the other news of the day, here is hari sreenivasan in our newsroom. >> there was word late today dennis layer will resigns ahead of national intelligence. a number of reports say he could make the report tomorrow. he is the third person to serve as dni overseeing the nation's intelligence agencies. he drew criticism over the handling of the airlining bombing attempt over detroit last yis-- christmas. the senate moved to clear the way for final passage of

financial regulation reform. democrats got the 60 votes they needed to wind down debate. that sets up a final vote on the most sweeping rewrite of financial rules since the great depression. this afternoon president obama welcomed the outcome. >> over the last year, the financial industry has repeatedly tried to end this reform with hoards of lobbyists and millions of dollars in ads. an when they couldn't kill it, they tried to water it down with special interest loopholes and -- -- undermining real change. today i think it is fair to say that these efforts have failed. >> the bill would make it easier to liquidate large firms that fail and it would create a new consumer protection agency among other things. a final vote could come by tomorrow. b.p. said today it is siphoning more of the oil spill in the gulf of mexico. but it conceded there is more than 210,000 gallons of oil spilling every day. it did not say how much

more. the company had been using that estimate for nearly a month. this as more of the rust coloured ooze washed ashore into marshlands in louisiana at the mouth of the mississippi river. the region is home to a variety of wildlife. meanwhile, the obama administration demanded that b.p. release all measurements of the leak, samples of air and water quality and trajectorys of the oil plum. the head of massey energy defended his company today in the wake of a west virginia mine disaster. 29 workers died in a passy mine explosion last month but at a senate hearing today ceo don blankenship rejected sharp criticism of his firm. >> let me state for the record massey does not place profits over safety. we never have. and we never will. period. from the day i became a member of massey's leadership team 20 years ago i have made safety the number one priority. the result has been a 90% reduction in lost time accidents.

>> some senators like west virginia robert byrd took exception. byrd said the coalmine had an alarming record. the fatal explosion is under investigation. three american hikers being held in iran were reunited with their mothers today. sarah shourd, shane bauer and josh fattal were detained last july after crossing the unmarked border between iraq and iran. iranian state television showed today's emotional reunion at a hotel in tehran and the hikers spoke in public for the first time since their arrest. >> shane and josh are in the room together but i'm alone. that's the most difficult thing for me. but i see them twice a day. so we have good food and we have medical care which is appreciated. and we have reading materials and television. >> iranian officials have accused the three americans of spying. the hikers and the u.s. state department have denied that. in afghanistan search planes

spotted the wreckage of an afghan commercial airliner. the plane crashed into mountains 25 miles north of kabul on monday. all 44 people on board were feared dead. nato officials reported the plane had broken into four pieces across a steep mountain side. poor weather and rugged terrain hampered the search until now. the capitol of thailand was quieter today after wednesday's bloody crackdown on protestors. the government reported order had mostly been restored in bangkok, still troops in the city continued r509ing out small pockets of demonstrators. and some holdouts forced to bank its sporadic violence continued. meanwhile three more leaders of the anti-government protest surrendered today. a daring art heist in paris has triggered a worldwide alert. five paintings including works by picasso and matisse were stolen overnight from the paris museum of modern art valued at more than $100 million. investigators searched for clues today at the site. the mayor of paris said parts of the museum's alarm

system had been broken for the past few days. and the deputy culture secretary said an inquiry was under way. >> there is a security system. there are three people in the museum at all times. so they were there. but the security system was outsmarted as they saw nothing. so they didn't react to anything. but all will be revealed during the investigation. >> officials said surveillance videos showed a single masked intruder. those are some the day's major stories. to you back to jim. >> lehrer: immigration reform, which is back in the spotlight today in washington. ray suarez has our story. >> madame speaker, the president of mexico. (applause) >> suarez: it was the second and final day of president felipe calderon's state visit to washington. >> it's a great honor to stand before you today. >> suarez: and as he did yesterday at the white house, the mexican leader used today's address to congress to make his case on immigration.

>> i am convinced that a comprehensive immigration reform is also crucial to securing our common border. however, i strong ly disagree with your recently adopted law in arizona. >> suarez: that law makes it a state crime not to carry proper documentation. and it empowers police to check anyone they find suspicious. >> it is a law that not only ignores a reality but cannot be-- but also introduce a terrible idea using racial profiling as the basis. we must find together a better way to face and fix this common problem. >> suarez: calderon's criticism drew cheers and a standing ovation from the democratic side of the aisle. most republicans remained

seated and did not applaud. later republican senator john mccain of arizona said calderon's remarks were unfortunate and disappointing. but calderon also went beyond the arizona law and called for attacking 9 root of the problem. >> the time has come to reduce the cause of migration and turn this phenomenon into a legal order and secure flows of workers and visitors. we want to provide the mexican people with the opportunities they are looking for. that is our goal. >> suarez: the mexican president said it all comes down to building a strong mexican and north american economy. >> members of the congress , i am not a president who likes to see mexicans leave our country searching for opportunities abroad . with migration, our communities lose their best

people. the hardest working, the most dynamic, the leaders of the community. >> suarez: president calderon also appealed for u.s. support in stemming the drug violence in his country. he's using the mexican army to battle narcotics traffickers, but the violence has claimed at least 23,000 lives since he took office in 2006. today calderon urged the u.s. to restore a ban on assault weapons that are finding their way across the border and to address drug usage among americans. >> let us work together to end this lethal trade that threatens mexico and your own people. we cannot ignore the fact that the challenge to our security has roots on both sides of the border. at the end of the day, its origin is the high demand for drugs here and other places. >> suarez: the growing violence along the border was highlighted it in march

by the killings of two americans connected to a u.s. consulate in juarez but it was immigration that dominated calderon's two-day visit to washington. it even came up when first lady michelle obama an her mexican counterpart margarita zavala visited and elementary school in silver spring, maryland, outside washington. as they met with institutes the second grader spoke up to tell of her mother's fears. >> she say barack obama is taking everybody away that doesn't have papers. >> yeah, well that's something that we have to work on, right, to make sure that people can be here with the right kind of papers, right? that is exactly right. >> suarez: later the department of homeland security released a statement saying it would not pursue any action against the girl's mother. now for two different views on the immigration issue and the prospects for reform, we're joined by luis fraga, professor of political science and director of the diversity research institute

at the university of washington, and jan ting, a former assistant commissioner at the immigration and naturalization service during president george h.w. bush's administration. he now teaches at temple university's beasley school of law. professor fraga, yesterday at the white house and again today on capitol hill, president calderon bringing a message about immigration. did he bring a different message, a different tone, a different language from previous mexican leaders? >> i think for the first time this mexican president actually clearly accepted the responsibility mexico and its leadership has for reducing the incentives that mexican citizens have to think of leaving their country and coming to the united states. it is rare for a mexican president to be as open and as blunt in the need for social reform, public policy, health-care reform, all sorts of changes. educational opportunity needed if in their country to be able to stem that

flow. that was different. what was to the different was his criticism of actions taken in the united states, and in particular his criticism of the law, recent law in arizona. >> suarez: professor ting, what did you make of the speech? >> well, i agree with what was just said. i think both presidents missed the point that public opinion in the united states is sharply divided as to what the nature of the immigration problem is. one side thinks the problem is 12 million people who have to live without documents. the other side thinks the problem is that our existing laws are simply not being enforced by the federal government. and that's what drives elected officials in states like arizona to be pressed by their voters to do something about this problem. there were recent polls that show a vast majority of the american people more than 60% in polls conducted by "the new york times" and "the washington post" and the pew research center, more than 60% either support the arizona statute or think

it's not tough enough. they want something tougher. so the country is not in a mood to support so-called comprehensive immigration reform, which i think is a euphemism for open borders, which doesn't mean it's a bad thing. but i think we have to answer the fundamental question, do we want unlimited immigration to the u.s. or not. the alternative is a numerically enforced limitation. and if we are going to do that, you have to keep the people who are not selected out and if they come anyway, you have to remove them from the united states. americans have a hard time making that choice. >> suarez: did we see that division on the floor of the congress today? >> i think we did. i think we did. and the republicans not standing up as much as the democrats did. but there's a lot of bipartisan support for immigration reform. to get to professor ting's comment about polls supporting the law in arizona, it's also the case that 65% of the american public for the last two decades have said we need to change our immigration system. there's a clear need for

immigration reform. there is a clear division in the country as to what it might be best for us to do. but there's clear agreement as well. at 65% of the public that says we need to do something different. the arizona law is an indication of the frustration that state officials face, that many within the public think exists, and certainly that local officials face as they deal with the consequences of our broken immigration system. i think our arizona law is as much an indication of a desire by many different sectors of our society to have a reasonable reformed system of immigration that makes sense. >> suarez: professor ting, is that right, that at the same time as there is widespread support for arizona's sb 1070 there is also a sentiment out there in the country for immigration reform? >> i think that's wrong. i don't think the immigration system is broken. we admit every year into the united states, we give out more green cards with a

clear path to full citizenship in larger numbers than all the rest of the nations of the world combined. so our immigration system is functioning fine. the only part that is not functioning fine, i think the majority of people in america would agree, and certainly the majority of people in arizona, is we're not enforcing the laws that are on the books which say if you are not selected to come to the u.s., you can't come. and if you come anyway, you are subject to being removed from the united states. those laws are not being enforced. there is no, virtually no interior enforcement going on. we haven't built the physical barriers at the border that we know work. and, indeed, the enforcement initiatives are being held hostage in the congress to this larger, i think, delusion of comprehensive immigration reform. the proposed solution to illegal immigration is to legalize the people that have come illegally. that's like saying we're going to cure the greek debt crisis by loaning the greek government more money.

that's not a solution. >> suarez: are we really talk being two different things, what to do from here on out and what to do about the people who are already here? >> no, i think the two have to be considered together. and part of what i think professor ting omits from his analysis and there is no question that people are here without papers. there's no question that individuals are here that under our current rules should nobody the here. you have to include as well why people are here. people are here because american society needs their labor. employers need their labor. and increasingly our american economy overall needs the labor of these individuals. most of the folks who come here without papers come here to work. and in coming it to work, they are contributing to our society. they are paying social security, if they are paid appropriately. they are paying state taxes. even many of the undocumented pay income taxes through the numbers that our internal

revenue service allows them to use to pay their tax. so there are magnificent contributions that these individuals make as well that have to be considered in the balance with the sort of concern that professor ting is describing which is exclusively a concern regarding illegality. illegality is real, just as real as the overall social structure, the nature of relationships between our two countries considering mexico and the united states, that are clearly important for to us think about, not just in the short term but in the long term as well. >> suarez: professor ting, did you find as professor fraga did, that the president of mexico made some acknowledgments about his own country's role in this problem that are helpful and might move the discussion forward? >> i didn't hear anything new. there's no question that employers in the united states welcomed the cheapest labor that they can find. but it's also true as recently as yesterday that

we're confronted with rising unemployment in the united states and a crisis, an economic crisis with no end in sight. if illegal immigration is as good for the america as my colleague implies, why don't we just have open borders. why don't we let every would-be immigrant who would like to come here in search of a better life come here. then we get the best of all possible worlds. i actually think a rational, coherent argument can be made for completely open borders. but i think the notion that we're going to solve the problem of illegal immigration if it is a problem by legalizing the people that are here now is-- has no merit to it at all. so we just have got to make up our minds. is illegal immigration a problem? yes or no. if it's not a problem, let's let everybody in. if it is a problem, let's deal with testimony. and you don't deal with it by legalizing everyone. we tried that in '86 it just lead to more illegal immigration. this comprehensive, so-called comprehensive immigration plan failed in 2006.

it failed in 2007. if it gets pushed forward this year it going to fail again. if it gets pushed forward next year t will not pass. nor will it pass in 2012. so beyond that, my crystal ball grows a little foggy. but for the foreseeable future there's no prospect of so-called comprehensive immigration reform including a large scale legalization moving forward in the united states. >> suarez: quick response s it as dead as he suggests. >> no responsible leaders it that i am aware of are calling for open borders. all leaders are calling for a regulated system that meets the interests of a variety of concerns here in the united states. the families that are here, the children that are here, the workers that are here, the economy that is here. there is, i think, a very appropriate middle course. >> suarez: jan ting in philadelphia, luis fraga here in washington, thanks very much. >> you're very welcome. >> thank you. >> brown: next the big battle over public schools in detroit.

the system facing serious financial and academic troubles. results released just today show that institutes in the fourthth and 8th grades scored the lowest among 18 large cities on a national reading test. and that's just part of the problem. the "newshour" special correspondent for education john merrow has our report. >> reporter: detroit, michigan, a city in decline. with a public school system so deep in debt the state took it over. >> what we have in this urban school district is a leadership disaster which is if it is not corrected quickly, that we will have damned generations of kids to an inferior education. >> reporter: in early 2009, michigan's governor hired robert bobb, a veteran city manager to clean up the school districts finances. >> everybody has some paper, you don't. >> reporter: takeovers like

this have gained in popularity but it's frequently a messy job. alleged mismanagement and corruption have contributed to a $316 million hole in detroit's $1.3 billion school budget. meanwhile, enrollment has dropped from 167,000 institutes ten years ago to about 84,000 today. did you know when you took this job how bad things were in detroit? >> no, not even a clue. when you get on the ground and you start digging even deeper, then you can see where these issues are even more substantial. >> reporter: bob's approach has stirred up ill-will. his security detail is a constant presence. do you worry? >> do i worry? of course i worry. absolutely. i mean i go into some very hostile environments. >> reporter: in his first year on the job bobb shuttered 29 of the

districts 200 schools, sparking community pushback. now he says he plans to close 41 more. and layoff about 1,250 teachers. nearly one quarter of the teaching force. >> i don't see how they can do what they want to do to keep parents bringing their children to our schools and do anywhere near that number of layoffs. >> reporter: mark o'keeffe is vice president of the detroit teacher's union which last year signed a new krot with bobb. >> i can say some good things about robert bobb. because this situation was dire. and we needed someone to come in and take action. and he did that. and the type of people who assert themselves and take action and can make changes quickly, sometimes that same trait is what might let to you assert more control than you have or seek more power than you have. >> together let's start a revolution on behalf of your children and children in detroit public schools.

>> reporter: critics contend that bobb has authority only over the school budget. but bobb has reached further, tackling the system's abysmal academic performance. on a recent national test, just 3% of detroit a 4th graders scored proficient in math. the worst scores in the history of the test. >> the issues impacting detroit public schools are top to bottom issues. it's not just the fact that we have over a $300 million budget deficit. but it's also the issue that we have an academic emergency. >> reporter: bobb hired barbara byrd-bennett, an experienced school superintendent to help him overhaul the curriculum. >> i was amazed at how frozen detroit had become. i mean it was as if they were locked in time somewhere, where the rest of the education world had moved forward. and they really hadn't. >> reporter: at the heart of bobb's academic reforms are mergers and redesigns of schools.

this huge high school will become a bre-x through community college campus. bobb has invited wayne state university to be a partner. >> we have to be creative over here. >> reporter: across the district, bobb's plans include extending the school day and creating specialized programs in the arts, communications, math and science. >> if we care about kids in an urban environment, let's give them the best opportunity that those children can get so that they become college-ready. >> reporter: but this past summer, bobb's big plans hit a big wall. otis mathis is chair of the detroit school board which filed a lawsuit saying bobb went too far when he got involved in curriculum. academics, mathis says, are the responsibility of the superintendent the board has hired. >> the dispute is that the governor and the emergency financial manage wear handle the deficit and the board and the superintendent will

handle academics. and somehow in a few months, it got twisted where he controlled everything. >> reporter: the teachers union signed on to the lawsuit saying teachers don't know whether to answer to bobb or to the superintendent. o'keeffe sites as an example a test bobb told teachers to give. >> and they got a memo from the superintendent saying not to take the test, because the superintendent and the board are in charge of academics. and they did not approve of this. so they weren't supposed to take the test. and they got another memo from robert bobb saying ignore the last memo, you have to listen to me. and do what i say. take the test. and they got another memo from someone on the board saying forget the last memo, don't do it. so what are the teachers supposed to do in that situation. >> reporter: in the end, the teachers obeyed bobb. the power struggle also makes life complicated for principals. who is your boss? >> currently right now, i answer to the superintendent of schools.

i answer to the emergency financial manager of schools, and the school board. >> reporter: and the school board. >> and the school board. >> reporter: they said it's confusing, do you empathize. >> absolutely. i mean someone-- you can't have an organization where you have several people in charge. but in my mind, i'm in charge. >> reporter: for parents like ida byrd-hill, the dispute is one more chapter in detroit school's long, sad history. >> it's a battle of adult egos again. the problem that up sets me most is that the adults can't come to a table and agree to disagree. >> reporter: they're fighting like children. >> or worse than the children. >> very good. >> let's face it. the board didn't do so well, which is why he's here. and he may not respect the board, but they were voted in by the community, because the community wanted them to represent their interest. so just both sides have a

little respect. >> the principal, the janitor, your engineer-- . >> reporter: in mid-april the court issued a temporary injunction against bobb's plans. bobb is appealing. but he says it doesn't really matter which way the judge decides, because every academic decision involves spending. >> i mean we win, we win. and if we lose we win. because someone is going to have to finance these services. >> reporter: you will still be in charge. >> if a penny touches it. >> reporter: even if the judge says mr. bobb, are you not in charge of academics, you will still have some veto power. >> because the programs have to be financed . >> reporter: bobb's contract runs out in march of next year. how much he will be able to accomplish before then is in question. meanwhile, the exodus of institutes from detroit public schools continues. to charter schools or to regular public schools in other cities and towns .

>> lehrer: and finally tonight, south korea accuses of north of sinking their naval ship two months ago. judy woodruff has our story. >> woodruff: it was the deadliest attack on south korea's military since the korean war. an explosion sank the naval vessel "cheonan" in march. killing 46 south korean sailors near the disputed maritime border with north korea. today in seoul an international team of investigators said north korea was the culprit. >> we have reached the clear conclusion that the republic of korea's "cheonan" was sunk as a result of an external underwater explosion caused by a torpedo made in north korea. the evidence points overwhelmingly to the conclusion that the torpedo was fired by a north korean submarine. there is no other plausible explanation. >> woodruff: the investigators including

experts from the u.s. said a serial number linked the recovered torpedo to north korea. but a spokesman for the north's military said the evidence was fabricated. >> our korean people's army was not founded for the purpose of attacking others. we have no intention to strike others first. if the enemy is trying to deal any retaliation or punishment or if they try sanctions or a strike on us, we will answer to this with all out war. >> woodruff: despite those threats, south korea's president called for an emergency security meeting for friday. a spokesman promised quick action. >> as the could panned never chief of the south korian military and government, president lee myung-bak is resolutely determined. will soon follow up with strong measures. >> woodruff: south korea's military options could be limited by the 1953 truce that ended the korean war. it bars any unilateral military strike. but the seoul government could call for the united

nations to punish the north koreans. the communist regime is already subject to stringent sanctions for its nuclear programs. ending that program has been a key u.s. priority, through multinational talks. but the south's foreign ministry said today any effort to restart the stalled talks will have to wait. >> we believe that we can look over whether the six party talks can be held or not after we take proper measures about the serious security-related situation. >> woodruff: in washington, a white house statement condemned the sinking of the south koreanship ship as an act of aggression. secretary of defense robert gates would not say if he considered the sinking an act of war. or what the response should be. >> we certainly support the findings of the korean , the south korean investigation. we obviously are in close consultation with the koreans. the attack was against one

of their ships. and we will naturally they would have the lead in determining the path forward. >> woodruff: in the meantime, u.s. force as long the borden between the two koreas made no move to go to higher alert. and on the diplomatic front, secretary of state hillary clinton left for a previously scheduled trip to japan, china and south korea. for more on all this we get two views, victor cha is a senior advisor at the centre for strategic and international studies and former director for asian affairs at the white house from 2004 to 2007. and joel wit is an adjunct senior researcher at columbia universities institute of east asian studies. he had a 15 year career at the state department where he focused on north korea. gentlemen, thank you both for being with us. victor cha to you first, how serious is this incident? >> well, i think it is a very serious incident. it's the largest loss of

south korean military life at the hands of north korea since the end of the korean war. as the white house statement said yesterday, it's a violation of the arm i cities. and i think it is a sign of an increasingly desperate north korean regime that is trying to force others to give them things to maintain a peaceful status quo. >> woodruff: joel wit n doubt that this was a deliberate act by the north koreans? >> well, i don't have any doubt about it. and i know there are some people who speculate about whether this was some sort of rogue operation. but i think we have to assume that this was a deliberate act by north korea. >> woodruff: and just to stay with you, why-- but why do you believe they did it? pure speculation but what is the educated guessing? >> well, the educated guess is there are two reasons. one is to humiliate the conservative south korean regime which basically has pulled back from the

engagement policy of its two does-- its two predecessors. and the second reasons is the north koreans were kind of looking for revenge for previous naval clashs in that area where north korean sailors were killed. >> woodruff: what would you add to that, victor cha. >> i mean, i agree with what joel said. the only thing that i would add is that the current government in south korea certainly is more conservative. and they are not pursuing the same sorts of unconditional engagement policies of the previous two governments. but they also have said that they are willing to engage with the north if the north is willing to reciprocate on denuclearization or conventional arms reductions or whatever the issue may be. so to say they are completely pulling back is, i think a bit of an overstatement. but i do agree with joel that they certainly are trying to hum il yate this government in south korea. >> woodruff: joel wit back to you, secretary gates said today that south korea is going to take the lead on this but what are the

options now for the south and for the united states? >> well there are a number of things we can do. and i think you've heard them in the news reports. one of them is we can prepare for future incidents like this because there is some evidence to suggest that this took the south koreans somewhat by surprise. there are other military programs that can be undertaken that step up our efforts to counternorth korea's military. and of course at the u.s. we can seek international action although there's a question of how far to go there, whether to seek sanctions or just condemnation of this action by north korea. and in that context, the attitude of china-- china is going to be very important so there is a wide range of things can be done but we also have to be very careful not to make a tense situation worse

. >> woodruff: so of those options, victor cha, is there a priority list? which one is the wisest? >> i think-- i mean the broad template is you want to do something tough enough so north koreans don't do this again. but you don't want to be too tough so that you start a war. clearly the main near term task is to fashion a response that shows the north koreans there are real costs to doing what they did. and i think that means the south will do some things on their own, largely diplomatic. cutting off trade ties which hurts the north korean economy and the leadership quite a bit, as well as reinforcing the alliance with the united states, whether that is in terms of submarine detection capabilities, anti-submarine warfare capabilities , 1/2al exercises. i think these are important things to do. the larger diplomatic path is to go to the u.n.. >> woodruff: an accomplish what? >> well, to get a security council resolution that ideally would tighten some of the sanctions that were a part of the previous revolution on north korean

for their second nuclear test. but as joel said, the real problem is china. china behavior thus far in terms of this incident has been subpar to be kind. they have been very clumsy. backward, and really out of step with the international community in terms of addressing this issue. >> woodruff: so given that joel wit s there some belief that the chinese may have a different posture on this incident. >> i think i disagree with vickar a little bit here. because i don't think the chinese reaction has been surprising subpar or clumsy. i think china has very different interests here than the united states and south korea. china's interests here are rapidly shifting towards emphasizing stability in the region and that means doing nothing to force north korea into a corner where it might lash out at other countries. or to trigger the collapse of north korea.

and the second objection-- objective here for china, quite frankly, is to increase its influence in north korea. and to serve that objective we've seen china increase its assistance to north korea over the six months after north korea conducted a nuclear test and missile test. so i think we're in a very tight spot here and i'm not quite clear sure how to get out of it. but i know that china is not going to solve this problem for us. >> the only thing that i would say is i think the chinese since 1992 have tried to maintain two policies on the korean peninsula. one with the north and one with the south and tried to keep those separate. but when you have an event like this where 46 sailors easily a hundred could have died if the entire ship, all the crew had died, make it very hard for the chinese to separate out these two relationships. china does 200 billion worth of business a year with

south korea. they do $2 billion a year with north korea. so it's very clear where china's future is on the peninsula and it is with the south. and i think the government in south korea was the united states, are really going to try to push china to make a choice. >> woodruff: isn't there a sense, joel, that what the north koreans have gotten away with a lot over the years and what is to stop them from getting away with this? >> well, you know, that's kind of a broad statement they've gotten away with a lot. certainly they've conducted a lot of action that all of us find rep ri henceable. but the fact is what we need to be thinking about is a strategy for the future. it's one thing to react to this incident. i totally agree that a reaction has to be strong. but how will we deal with north korea in the coming months and years. and quite frankly, enacting tough measures like we're going to enact is not

enough. we need to think beyond them to how do we deal with the real challenges that north korea poses to our interests. >> and engage them as you suggested. >> well, of course-- of course that's my answer. but i know vickar would probably have a different answer. but what i would like to say is that the approach we're taking now which is essentially trying to contain north korea is not going to work. >> woodruff: you get the last word. >> i think there is a time for diplomacy and the 20 years of u.s. engagement with north korea shows there is a time for diplomacy. but the first step is you really have to establish deterrents on the peninsula, and once dow that there is a path open for negotiation, the obama administration has made clear they're interested in negotiations and a broader relationship with the north koreans. president obama said it from the beginning of the term. so i think there is a game plan there but the first step is we have to reestablish deterrents on

the peninsula. >> woodruff: we're going to leave it there, victor cha, joel wit, thank you. >> thank you. >> lehrer: and again the other major developments of this day, a new wave of selling swept over wall street amid deepening doubts about the debt crisis in europe. the dow jones industrial average lost nearly 380 points. director of national intelligence dennis blair issued a statement this evening confirming he will resign as of tomorrow. and mexican president calderon sharply criticized the new immigration law in arizona in a speech to congress. the "newshour" is always on-line, hari sreenivasan in our newsroom previews what is there. >> we have new video 69 oil leaking into the gulf of mexico and you can get realtime estimates of how much oil has already leaked in with our oil ticker. that's on the rundown, k kwame holman talks to one about his seriess of report of people coming of age in

pakistan and india and on art beat the story of a soccer film festival touring it small south african tours it. on our web site. >> an that's the "newshour" for tonight. i'm jeffrey brown. >> and i'm jim lehrer, we'll see you on-line and again here tomorrow evening with mark sheils and david brooks, among others. thank you and good night. major funding for the pbs newshour has been provided by: >> what the world needs now is energy. the energy to get the economy humming again. the energy to tackle challenges like climate change. what if that energy came from an energy company? everyday, chevron invests $62 million in people, in ideas-- seeking, teaching, building. fueling growth around the world to move us all ahead. this is the power of human energy. chevron.

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