THE WEEK

By KATHLEEN ADAMS, MELISSA AUGUST, LINA LOFARO, ALICE PARK, MICHAEL QUINN, JEFFERY RUBIN, ALAIN L. SANDERS, SIDNEY URQUHART AND AMY YAMNER

NATION

CAPITAL WATER FIGHT

President Clinton added another G.O.P. proposal to his expanding list of veto targets: the House's rewrite of the federal Clean Water Act. The President claimed that the bill's looser environmental and antipollution standards would turn back years of progress and send water quality "straight down the drain." The measure's backers-it still must get past a skeptical Senate-said the President's veto threat revealed that he was a captive of "environmental extremists."

DIRTY-WATER STUDIES

Roiling the water debate, two environmental groups released studies indicating that 53 million people in the U.S. drink water that is contaminated by chemicals, pollutants and fecal matter in excess of federal protective standards. The groups attributed nearly 1,000 deaths and 400,000 cases of illness yearly to the consumption of dirty water.

CLINTON ON AFFIRMATIVE ACTION

The New York Times reported that Administration officials charged with the delicate task of reviewing the Federal Government's affirmative-action efforts have determined that most programs are O.K. According to the paper, officials have concluded that employment and education preferences based on race or sex are justified so long as the preferences don't harden into quotas. The exception: "set-aside'' programs guaranteeing work contracts to minority- and women-owned companies that the Administration thinks are discriminatory toward white males. The White House would say only that any final conclusions are weeks away.

WILSON ON AFFIRMATIVE ACTION

California Governor Pete Wilson -- an all but declared presidential candidate -- signed an executive order unilaterally curtailing or dismantling state affirmative-action policies where possible. Wilson, who was once a supporter of affirmative action and is now seeking to position himself in the G.O.P.'s conservative mainstream, decried "the tension and unfairness this system of racial spoils has produced."

IN QUAYLE'S FOOTSTEPS

Senate majority leader Bob Dole traveled to Los Angeles to knock some of its pre-eminent citizens at a fund raiser. The presidential candidate criticized entertainment moguls for producing what he called "nightmares of depravity"-films, television and music filled with sex and brutality that "push the limits of decency." Dole took particular aim at Time Warner (TIME's parent company) for its dissemination of violence-laced gangsta-rap music.

CHICAGO'S NEW LANDLORD

The Federal Government took over one of the nation's worst bureaucratic disaster areas: the Chicago Housing Authority. Henry Cisneros, Secretary of Housing, said his department would begin an immediate cleanup and renovation of the authority's crime-plagued, decrepit units and focus on developing long-range housing plans for the city's poor tenants.

AN AIR FORCE CRASH

Two people were killed and about 20 injured when an Air Force training jet, apparently experiencing mechanical problems, crashed into an apartment complex in Wichita Falls, Texas, minutes after taking off from nearby Sheppard Air Force Base. The two pilots aboard ejected safely.

THE OKLAHOMA BOMBING CASE

In Oklahoma City the last three bodies were pulled from the rubble of the demolished federal building, bringing the official death toll from the April 19 explosion to 168. Meanwhile, bombing suspect Terry Nichols was denied bail.

THE SIMPSON TRIAL

In a setback for the O.J. Simpson defense team, Judge Lance Ito ruled that the prosecution can introduce into evidence more than 40 graphic autopsy and crime-scene photos of the two slashed victims, Nicole Brown Simpson and Ronald Goldman. Judge Ito said the probative value of the "horrible" photos outweighed any prejudicial impact they might have. Most of the week's testimony involved further -- frequently tedious -- wrangling over the prosecution's blood evidence.

PROM HIGH SCHOOL ARREST]

Federal authorities arrested Christopher Johnson on arson charges, accusing him of having set fire last August to Alabama's Randolph County High School, the school beset with racial discord after its principal, Hulond Humphries, threatened to cancel a prom over interracial dating. Emmett Johnson, the suspect's father and founder of a local protest group called the Black Panther Militia, asserted that the arrest was a frame-up.

WORLD

BOSNIAN SERBS UP THE ANTE

Secessionist Serbs in Bosnia raised the stakes in their tense standoff with U.N. and NATO forces, downing a U.S. F-16 on routine patrol; Bosnian Serb forces said the jet's lone pilot survived and was in their custody, an assertion the U.S. was unable to confirm. At the same time, the Bosnian Serbs -- under pressure from their erstwhile patron, Serbian President Slobodan Milosevic -- released 121 of the more than 370 U.N. peacekeepers they had been holding hostage. U.S. envoy Robert Frasure met with Milosevic to discuss possibly suspending economic sanctions against Serbia in return for the release of the other hostages and Serbian recognition of Bosnia's borders. NATO and European Union defense ministers, meanwhile, met in Paris and agreed to create a combat force, numbering 4,000 to 5,000, to respond to Serb challenges to peacekeepers.

USE OF U.S. TROOPS UNLIKELY

Calling the Bosnian Serbs "outcasts and international pariahs," the Clinton Administration offered to help redeploy existing peacekeeping forces in Bosnia-a seeming shift in a U.S. policy that heretofore said U.S. ground troops would be used only to enforce a peace treaty among the warring factions or evacuate peacekeepers. With critical voices rising in Congress, Clinton quickly characterized the use of American troops as a "remote, highly unlikely event" that would take place only if peacekeepers needed to be rescued.

JAPANESE DEBATE WAR APOLOGY

The ruling Japanese coalition government failed to meet its self-imposed deadline for agreeing on an apology for the country's role in World War II. The main coalition parties, the Liberal Democrats and the Socialists, are deadlocked over the wording of the suggested apology, which the Socialists say does not sufficiently express Japan's responsibility for its actions during World War II.

DEATH TOLL RISES IN RUSSIAN QUAKE

A devastating earthquake struck Sakhalin Island in Russia's far east, killing perhaps as many as 2,000 of 3,000 people living in the tiny oil-drilling town of Neftegorsk. The violent quake, 7.5 on the Richter scale, flattened the shoddy Soviet-built apartment blocks; in a section of town, one of the few structures still standing was a statue of Lenin. Subfreezing nighttime temperatures complicated rescue efforts, and thick offshore ice kept a hospital ship from reaching Sakhalin.

RUSSIA MOVES CLOSER TO NATO

The foreign ministers of the 16 members of the NATO alliance met with Russian Foreign Minister Andrei Kozyrev in the Netherlands to try to begin building a closer relationship between the former enemies. For the first time, Kozyrev agreed to participate fully in the Partnership for Peace program, which links NATO with its former Warsaw Pact enemies. But Kozyrev warned the ministers that Russia continues to oppose its neighbors' actually joining the alliance: "We would need to clarify whom nato is going to defend itself against," he said. "If one has Russia in mind, it is obvious that this would mean creating new dividing lines in Europe." Washington, however, remains adamant that NATO has the right to accept new members without a Russian veto.

BUSINESS

A BRAKING ECONOMY

The government issued a series of reports indicating that the economy may be slowing down more quickly than expected. Among the figures: the gross domestic product for the first quarter of this year rose at an annual rate of 2.7%, down sharply from the previous quarter's 5.1% growth; orders to U.S. factories plunged 1.9% in April, and sales of new homes dipped 2.7%; business payrolls dropped by 101,000 in May; and the index of leading economic indicators fell for the third straight month, declining 0.6% in April.

KERKORIAN'S LEMON

Billionaire Kirk Kerkorian withdrew his hostile $20 billion bid to take over Chrysler after failing to line up financing. But spokesmen said Kerkorian might be back later with another offer for the automaker.

--By Kathleen Adams, Melissa August, Lina Lofaro, Alice Park, Michael Quinn, Jeffery Rubin, Alain L. Sanders, Sidney Urquhart and Amy Yamner