It was the 99th day of the Clinton presidency, and half a dozen reporters were ushered into the Old Executive Office Building to hear Al Gore talk up the new administration's record.

Gore spoke of Bosnia and Boris Yeltsin, of family leave and health care reform. But Kelly Richmond, one of the assembled scribes, had a more parochial matter on his mind.

The 28-year-old reporter was attending the briefing on behalf of the Nashville Banner. He had been churning out stories about Nashville's hotly contested bid for a plane route to London. Now he had the chance to ask the vice president of the United States whether he would support the effort of his adopted home town.

"I think that it has to be presented in a way that allows the secretary of transportation to make the proper evaluations," Gore said carefully. "But you can guess where my sympathies are."

Richmond ran to a phone and dictated his notes for the afternoon edition. His editors were thrilled. He now recalls the moment with an air of nonchalance ("It's amazing how fast you get jaded in this town") but does admit that "sitting two yards away from the vice president is a pretty cool thing."

Not much of a story, you might say -- and you'd be both right and wrong.

Richmond's mini-scoop was tailor-made for his employer, States News Service, a Washington bureau that covers the capital for 150 newspapers in 35 states. It is a business based on the old adage that all politics is local. Each day States slices and dices Beltway news into chunks too small for Beltway bigfeet to bother with but juicy enough for editors in Boise, Butte and Boston.

Think of Washington journalism as a kind of military establishment peopled by high-powered generals, captains and lieutenants, each commanding a unit of battle-scarred hacks. States is the boot camp, the basic-training hitch that turns raw recruits into writing men and women. More than 400 reporters have earned their stripes in this fashion before moving on to more prestigious postings. A year at States, says veteran sleuth Seymour Hersh -- who often sends aspiring young reporters there -- "is comparable to 37 years of journalism school."

Kelly Richmond, who took a 40 percent pay cut to join States from the Santa Fe New Mexican, has no regrets about his two-year stint. "The chance to cover Congress and the rest of Washington is unbeatable for a young reporter," he says. Richmond had applied for a job at the Denver Post, and he still recalls the gist of his rejection letter: " 'Dear Sir or Madam, we don't have any openings and, for you, we may never.'

"The next thing I knew, I was covering Washington for them. I was all over the front page of the Denver Post and got hundreds of clips."

But Richmond had no regrets about leaving States either. He quit over the summer and is now a Washington correspondent for the Bergen Record in New Jersey, with a substantial pay raise. While cleaning out his desk, he noticed that "there was almost nobody who was there when I got there."

TO THE CASUAL VISITOR, STATES NEWS Service looks like any other modern, air-conditioned newspaper bureau. The long, brightly lit room overlooking F Street, which houses 40 reporters and two editors, is equipped with fax machines, voice mail, rows of personal computers and other accouterments of office life.

But this is merely a mirage, for States is something of a white-collar sweatshop. Starting salary is $15,600 a year, or roughly 230 bucks a week after taxes. There is no overtime pay. Reporters say they must dig into their own pockets for taxi and subway fares. Paychecks bounce from time to time. The phone system occasionally goes dead because the bill has gone unpaid. The company seems perpetually on the brink of financial collapse.

States rides on the back of a professional underclass, a seemingly bottomless pool of young writers who can't yet get real jobs at real wages. Drawn to Washington by some magnetic force, they tap quickly into the twenty- something network that runs through the back rooms of every capital institution, trading gossip and low-level intelligence and gradually turning themselves into players in a city of self-important old hands.

To toil at States is to learn the art of survival. Reporters live in cheap Adams-Morgan apartments, share story ideas and hit the Press Club bar on Friday nights, when the tacos are free. No one is in real danger of going hungry, of course. These are bright, middle-class kids who can afford a brief period of scuffling on their self-assured climb up the career ladder.

The office has a bit of a sorority house atmosphere, in part because two-thirds of the reporters are women, who seem drawn to the camaraderie of the place. Louise Palmer, who has been at States for two years, suggests another reason: Female journalists still see many doors closed to them, while the door at States is always open. "Maybe there's a lower threshold for the degree of exploitation you're willing to subject yourself to," Palmer adds.

The door seems less than open to minorities, however. Founder Leland Schwartz says he has simply been unable to attract blacks and Hispanics because they get more lucrative offers from bigger news organizations. Former and current staffers say States hasn't tried very hard and has passed up promising minority applicants.

States News's campuslike culture is no accident: Schwartz, who launched the operation 20 years ago with just $500, was 24 at the time. Both admired and reviled by the young reporters who pass through his doors, Leland -- as he is universally known -- is the stubborn presence whose obsession keeps the company alive.

Schwartz is the first to admit that conditions of employment are less than ideal. In fact, he boasts about the fact that his employees want to quit. "There's probably not one person in this room who wants to be here a year from now," he says.

"What the staff turns out under the conditions we live with is stunning. They go to hearings, they sit next to people from The Washington Post, Knight-Ridder, AP. They get paid a fraction of what these people do for the exact same kind of work. They're playing in the big leagues, but they're on the junior varsity."

Schwartz trumpets this weakness as an asset: Each reporter who leaves is held up as a shining example of the upward mobility awaiting those left behind. He constantly tells staffers that one day they will move "across the street" -- the National Press Building looms outside the window -- if they punch their ticket with him.

But before they can think big, they've got to think small.

WASHINGTON, THE MOST INTENSELY COVERED CITY IN the history of Western civilization, is teeming with journalists. Bill Clinton can't so much as go on vacation without photographers recording the scene, reporters critiquing his attire, television compressing the action and pundits chewing over the meaning of it all.

But with each agency hearing, each regulation, each court ruling, each Senate amendment, there is an impact on some local community that fails to produce a blip on the national radar. Dollars are distributed, grants awarded, priorities reshuffled in the jargon-laden world of government. Every bureaucratic hiccup, no matter how faint, produces winners and losers at the other end of the federal pipeline.

This has enabled Leland Schwartz to find a niche that even the New York Times and other papers with sizable Washington bureaus have little interest in filling. They cast a wide journalistic net, searching for a whale of a story, while States reels in the minnows.

And so the bureau's young reporters routinely find their stories stripped across Page One:

"Mount Rainier Fees May Double" -- Seattle Times;

"Cleveland Is Finalist for U.S. Jobs" -- Cleveland Plain Dealer;

"Treasure Island, Alameda Axed" -- San Francisco Examiner;

"Out: Skyway Money; In: I-95 Bridge" -- Florida Times-Union;

"Funds Erased for Nogales Sewage Plant" -- Arizona Daily Star.

Almost any Washington story can be localized. For the New York Times's Westchester County section, States provided this piece on the Vietnam Veterans Memorial: "For Family of Peekskill Pilot Lost in Vietnam, the Final Chapter."

"What we've proved is that local news is the most powerful thing you can deliver," Schwartz says. "Take the base-closing story. As a national story, it's a blur. Cut it up locally and it will force its way onto Page One."

Gesturing toward his wall map of the United States, with clusters of little pins marking States territory, Schwartz describes each chunk of geography as a journalistic opportunity. North Carolina: tobacco, coastal zone management. Texas: space, oil and gas. Arizona: drug trafficking, immigration, Indian affairs.

States reporters learn to think the same way. When President Clinton's $500 billion budget package was slogging through Congress, Ned Martel's main concern was whether it would contain an irrigation surcharge that would hurt Western farmers. Martel, 26, was writing for papers in Montana, Idaho and Utah.

States gives members of Congress plenty of ink for partisan attacks and saber rattling, and sometimes these become national stories. In June, Martel happened upon a radio transcript in which Wyoming Republican Malcolm Wallop was assailing the Clinton administration for a left-wing tilt. In fact, the senator declared, one unnamed Energy Department nominee seemed to be a Marxist.

Martel quickly deduced that Wallop was referring to Tara O'Toole, Clinton's choice for assistant secretary for environment, safety and health. O'Toole's resume listed her as a member of something called the Marxist/Feminist Group. "I knew I was plucking it from obscurity," Martel says. Never mind the echoes of McCarthyism; never mind that the group had changed its name and there was no evidence that O'Toole actually holds Marxist views; Martel's story was front-page news in the Caspar Star-Tribune and picked up by The Washington Post and New York Times. This prompted a Senate committee to delay O'Toole's nomination for months.

Schwartz, whose political views are a mystery to his staff, has come to understand precisely what newspaper editors want from the capital. It seemed obvious, for example, that the Nashville Banner, which signed up with States this year, would be receptive to his offer to focus on Al Gore.

"He was persuasive," says Tim Ghianni, the Banner's state editor. "He was very confident in his product, and very honest about the fact that these are young folks trying to work their way up. I'm extremely pleased with the coverage."

That very day, in fact, Ghianni's paper carried three States stories. The lead story, by Polly Basore Elliott, was the president's announcement on gays in the military, but with a Tennessee twist: "State Delegation Speechless on Gay Policy." Inside was a second Elliott piece on four Tennessee lawmakers serving on the House-Senate budget conference, and a colleague's story on interim Sen. Harlan Mathews, who is filling Gore's seat.

The paper has even given Elliott a column; her picture runs next to David Broder's. "I never thought at 25 I'd have a shot at getting a White House press pass," she says. "That's the seduction of States."

But Elliott is acutely aware of the downside. "In Washington the lunch thing is a big deal," she says. "I can't afford to go to the places these people eat, so I end up just not doing it. It makes me angry that I have to feel uncomfortable about it." When a press secretary treated her to lunch in the House dining room, she ordered a $1.50 bowl of bean soup so as not to feel indebted.

The Boston Globe, which has an 11-person Washington bureau, is a longtime States subscriber. "It irritates me sometimes that our bureau is not doing the kind of local stories that they do for us," Editor Matthew Storin says. "When I first got here {last year}, any story that had to do with New England was done by States News Service."

While the writing is often choppy, Storin says, "they're into all the agencies. They pick up local angles there that I just know we wouldn't get. They're energetic and they dig."

All true, perhaps -- but there are other explanations for the Globe's enthusiasm. Patricia Willens, 26, who started work at States in June and promptly got an assignment for a regional section of the paper, sums it up this way: "The reason the Globe uses us to do this instead of its own reporters is that we're cheap. It's slave labor."

Other editors give States lower marks than Storin does. The service "was kind of hit and miss," says David Lowery, managing editor of the Austin American-Statesman, which dropped States after a year. "There just wasn't good consistency." When his first States reporter quit, "the person they brought in was young, kind of inexperienced and really didn't give us what we needed."

Ralph Williams, an editor at the Manchester Journal Inquirer in Connecticut, says States is too quick to "round up the usual suspects: 'The president cleared his throat, let's get everyone in the delegation to react.' They might be a little more imaginative. The quality of the reporting would be better if the quality of the editing were better." In fact, there is almost no professional editing; reporters give each other's copy a quick once-over when they have a few spare moments.

LOUISE PALMER IS HEADED FOR the Hill. She buys some batteries (with her own money), slips them into her battered tape recorder (she paid for that too) and sticks her Farecard (ditto) in the Metro Center turnstile.

"People view us as the boat people of journalism, and it's hard to stomach that after a while," says Palmer, 25, who joined States after freelancing for the El Paso Times.

Palmer's desk back at States is a tangled mess of documents topped by a plastic bottle of hair spray. She hopes to become a feature writer for a major newspaper or magazine. Like many of her colleagues, she lives in Adams-Morgan, is constantly broke and spends her free time job-hunting.

"We're seen as really young, really ambitious, really talented, blah blah blah, but as something lesser because we've settled for a lesser wage," Palmer says on the Red Line train. "The pay is really horrible. I've had to go into debt at times to work here, which is pretty absurd when you think about it." On the other hand, she recalls, Schwartz once paid for a new bicycle when hers was stolen.

A blunt, black-haired woman with an easy smile, Palmer was one of two dozen States people who covered last summer's Democratic convention in New York. Schwartz gave them $100 apiece for transportation and living expenses, forcing them to sleep four to a hotel room (or to stay, as Palmer did, with friends or relatives) and hit every free-food bash near Madison Square Garden. "We had to undergo this rather humiliating experience of begging our papers for money for the convention," she says.

Like all new recruits, Palmer started at States as a glorified clerk, writing news briefs about Hill committee "markups" in the back of the office. If States is the bargain basement of Washington journalism, this is the dungeon. New inmates troop from one mundane markup to the next, dreaming of a promotion to regional reporter. "I was deeply depressed," Palmer says. "It was cruel and unusual punishment, unless you're a complete geek."

She was promoted after seven months and now writes for three Connecticut papers -- the Manchester Journal Inquirer, Waterbury Republican-American and New Haven Register, along with the New York Times's weekly Connecticut section. She is also the Washington correspondent for Maine's Bangor Daily News and York County Coast Star, and contributes to the Providence Journal-Bulletin. She writes as many as three stories a day and often feels stretched thin.

"The major frustration is not having one boss but seven," she says. "You can spend a hell of a lot of time trying to placate editors in three different states, not to mention your immediate supervisor here."

All States reporters must constantly ask their local members of Congress to expound on this or that national development, a ritual that Palmer detests. "The much-reviled react story," she says with a roll of the eyes. "Papers love them. It's sort of a demeaning story if you do it over and over because it takes absolutely no thought."

Palmer is juggling several pieces at the moment. She is digging into allegations of sexual harassment and mismanagement at the Coast Guard Academy in New London. She's been talking to a whistle-blower from Groton, who was fired by the Federal Aviation Administration. She is profiling a lobbyist who recently left the staff of Connecticut Sen. Joseph Lieberman. She is examining whether the Environmental Protection Agency will ban the use of lead sinkers on fishing lines, which are killing rare loons in Maine.

On this sultry summer afternoon, Palmer walks into the Cannon House Office Building to see Rep. Nancy Johnson, hoping to carve out a local angle on the health care reform story. A Connecticut Republican who serves on the Ways and Means health subcommittee, Johnson has met several times with Ira Magaziner, the director of Hillary Rodham Clinton's health care task force, and Palmer wants to write about her influence on the process.

Palmer's Capitol is a twentysomething kind of place where she feels right at home with the staff. "I'm always surprised when I see a man in a rumpled gray suit," she says. She greets Johnson's 26-year-old press secretary, Stacy Baum, like an old friend.

"Hi, Stace."

"Hi, Louise."

The two trade gossip for a while, then follow Johnson to the Capitol when she is summoned to vote. In an interview just off the House floor, the congresswoman recites her proposals on health reform but admits she's made little headway with Magaziner.

"I don't see much impact . . . I would have to say our discussions have not been fruitful . . . I am very disappointed," she says as Palmer scribbles away. So much for Local Congresswoman Shapes Health Plan. But a good reporter can turn almost anything into news, or at least pseudo-news. After conferring with Stacy Baum, Palmer decides to write that Johnson has turned sharply negative toward the Clinton health plan.

The dirty little secret here is that regional reporters, with their magnifying-glass approach, generally make the hometown lawmaker appear far more important than he or she really is. A hard-charging scribe doesn't make the front page by writing that Congressman Backbencher is just a lonely voice in a chamber of 435 noisy egos.

Instead, States mass-produces such stories as: "With Help From Brown, House Votes to Kill Super Collider." "Baucus and Burns Balk at Gas Tax Hike." "Kohl Vows Bid to Kill Fuels Tax." "New Mexico Senators Push DOE to Approve Early Retirement Plan." "Gejdenson Meets With First Lady to Talk Health Care."

"The papers are very parochial," says Holly Yeager, 28, who services Ohio's Youngstown Vindicator, Willoughby News Herald and Lorain Morning Journal (along with the Cleveland Plain Dealer and the Syracuse, N.Y., Herald-Journal). When Ohio kids come to town for a spelling bee competition, she is there.

After Ohio sent several freshmen lawmakers to Congress, Yeager says, the local papers "were interested in everything their new congressman did: 'Tell us where he is today.' 'Tell us what committee he's on.' " The Morning Journal even had Yeager ask Rep. Sherrod Brown to give Bill Clinton a 100-day report card, complete with letter grades. "That feels a little silly," Yeager says.

Nevertheless, she says, "I like what I'm doing. I like being in Washington. The alternative is going to Willoughby and covering county government."

But life at States has a high burnout factor. "Everyone in the room feels overloaded," says Katie Hickox, 24, who recently left for the Orange County Register in California. "There's always an aura of panic. Some people have too many papers and too many deadlines."

All beat reporters have to balance the need to write critically about their sources with the need to maintain lines of communication. This challenge is even tougher for Palmer and her colleagues, because access to members of Congress is absolutely crucial in keeping their clients happy. They can't afford to be frozen out at deadline time.

Palmer faced this dilemma when Connecticut Rep. Gary Franks repeatedly refused to return her calls. After months of frustration, she interviewed other Connecticut reporters and wrote a story accusing Franks of erecting a "wall of silence" around his office. (Franks, who gets lots of national press as a black Republican, complained that "local stories often have a negative spin.")

"I was at the end of my rope," Palmer says. "I couldn't get him on the phone." Then another occupational hazard reared its head.

It's not unusual for States reporters to get tripped up by the internal politics of their papers, where executives may have their own relationship with the local congressman. Palmer's story about Franks never ran in the Waterbury Republican-American, whose publisher, William Pape II, contributed $1,600 to Franks's last two campaigns. (Regional Editor John Crowell says he doesn't recall the story but that the publisher "never comes up to me and tells me what to do.")

The Republican-American appears less friendly toward liberal Democratic Sen. Chris Dodd. While the paper gave Page One play to a Louise Palmer story that dealt with Dodd's playboy image, it never ran her piece on how a United Nations report vindicated his criticism of El Salvador in the 1980s.

In the late '70s, Schwartz says, when a States reporter filed a piece on a House freshman named Dan Quayle, the Fort Wayne News-Sentinel excised all the negative comments. Ernie Williams, then the editor of the Indiana paper, had privately urged Quayle to run for Congress.

Several States reporters say they've had controversial stories spiked, watered down or buried, yet they can't complain because the clients pay their salaries. It is a harsh lesson in the real world of newspapering. "I feel betrayed by the profession," one says. Schwartz takes a more matter-of-fact view, saying that his clients "can print whatever they want. We're a wire service."

A corollary fact of journalistic life is that politicians who cooperate with the press tend to get the benefit of the doubt. Palmer enjoys dealing with Nancy Johnson, a friendly woman always available for a quick quote. As she winds up the interview on health care, Palmer is already planning a feature for the New York Times's Connecticut section on Johnson's unheralded role as head of the congressional Ball Bearing Caucus.

It's a safe bet that nobody in Johnny Apple's Times bureau is dying to write that piece.

LELAND SCHWARTZ IS A BORN SALESMAN, a true believer, the classic sell-ice-to-the-Eskimos kind of guy. He is also a bit strange. As he warms to a subject, his eyes assume a faraway gaze. His speech is punctuated by long, mysterious pauses. The office joke is that he's downloading data from his home planet.

Nearly everyone has a Leland anecdote: the time he accused a staffer of trying to read his typewriter ribbon. The time he yelled at a job applicant who wandered in at the wrong moment. The time he insisted that a reporter investigate whether Sen. Ben Nighthorse Campbell is really an Indian.

Amy Brooke Baker, 27, says Schwartz peppered her with "useless story ideas" before she quit. One was to find every object in the Smithsonian that comes from Connecticut.

"He would get really frustrated because he didn't think people were taking him seriously, which they weren't," she says. "He just wears his reporters down with this stuff. It was a horrible experience."

Schwartz epitomizes the phrase "married to his work," so it came as no surprise that he wed his business assistant, Ainsley Perrien, three years ago. The couple, who live in a rented Cleveland Park house, have a 2-year-old daughter and 5-month-old son. He says no business setback could compare to the pain of watching three brothers die -- one as a baby, another in a car accident and a third after a long bout with leukemia.

"Have I made mistakes? Hundreds of them. Thousands of them," he says. "But there's no model to follow."

Schwartz rarely smiles. Tousled hair turning gray, sleeves perpetually rolled up, he still radiates unquenched ambition.

"He's totally an eccentric guy," says Katie Hickox, who is fond of her former boss. "Leland just has a hard time talking to the reporters."

At any given time, staffers say, Schwartz is at war with two or three reporters. "He consistently picks people to browbeat," says Nicki Weisensee, 26, who wrote for the Philadelphia Daily News while at States and is now the paper's Washington correspondent.

"Leland can do something really nice for you -- he gave me $500 once when my rent check bounced -- and then turn around and make your life a living hell. He can be very paranoid and give in to that paranoia and accuse you of doing things you didn't do. My nightmares finally stopped a year and a half after I left."

Says Schwartz: "In a place this small it's no secret when someone on the staff and I are going to rip each other's throats out." He says the harshest comments come from reporters like Weisensee and Baker, whose work he had criticized.

Schwartz was angry when the Daily News hired away Weisensee and later decided to drop States News. This has happened with half a dozen other clients who snapped up Schwartz's young reporters by offering grown-up salaries. "It's criminal," he complains. (Daily News Managing Editor Brian Toolan says, "We developed a relationship with Nicki. It was really rather innocent." He says the paper is keeping States for now because Schwartz has slashed the price.)

Despite the many complaints about his management style, no one doubts Leland Schwartz's dedication to the basic mission of States.

In 1973, when he was just another hack writing press releases on the Hill, Schwartz noticed something odd: The Connecticut papers were printing his handouts as news stories, often without changing a syllable.

The young press secretary, who grew up in Greenwich, Conn., had been a reporter for the New Haven Journal-Courier and a news assistant at the New York Times. Now he was working for Connecticut Sen. Lowell Weicker and growing appalled at the lousy local coverage of Congress.

So he quit his job and founded the Connecticut News Service with Howard Abramson, a friend from New Haven. They worked out of Schwartz's run-down town house on Second Street NE, which now included two used Senate desks, two phone lines and a telecopier that transmitted one page every six minutes. They had exactly two clients, the New Haven Register and the now-defunct Journal-Courier.

The duo soon came up with a bombshell of a story: that Connecticut Gov. Thomas Meskill planned to resign and accept an appointment to the federal bench from President Richard Nixon. The governor flatly denied it, but Schwartz's sources -- Democratic staffers on the Senate Judiciary Committee who wanted to torpedo the nomination -- swore it was true. The fledgling news service went with the story, which got huge play in Connecticut.

"If you guys are right," Schwartz recalls an editor telling him, "you're made. If you're wrong, you're dead." The denials persisted, but Meskill finally announced that he would not seek another term. Nixon nominated him for the judgeship hours before resigning over Watergate.

Schwartz, who later bought out his partner, soon picked up a couple of papers in New Jersey and Pennsylvania. The staff now numbered four. States News Service had been born.

In 1978 he merged with the rival Capitol Hill News Service, launched by Ralph Nader, and crammed still more reporters into the town house. Schwartz had a good eye for young talent. One early hire, John Helyar, later joined the Wall Street Journal and coauthored Barbarians at the Gate. Others have gone on to The Post, Knight-Ridder, the New York Daily News and other major news organizations.

Schwartz finally rented a large office on Pennsylvania Avenue. He built the desks himself with lumber from Hechinger's, hired more reporters, bought a fancy phone system and $250,000 worth of computers. And, like many small businessmen, found himself totally overextended.

There were round-the-clock negotiations with creditors, any one of whom could have pulled the plug. The debt reached $700,000, about half of which he owed to his parents. Schwartz tried to sell the business to CBS and the Washington Post Co. "The idea of 100 hungry young kids running around this city would make any editor's mouth water," says Ben Bradlee, then the paper's executive editor. But despite Bradlee's support, the company decided it was a losing proposition.

A group headed by Michael Mooney, then Washington editor of Harper's magazine, agreed to buy States, but Schwartz ripped up the check after discovering a memo in which the buyers said they planned to abandon local coverage.

Schwartz tried to calm his staff at an angry meeting. "Peoria didn't hire us to cover national news," he told them.

"{Expletive} Peoria! Who wants to write for them anyway?" one reporter shouted. A third of the staff quit to join Mooney's outfit, which later folded.

In 1982 Schwartz sold the business to a partnership headed by Pulitzer Publishing, which put it into bankruptcy and, a year later, announced that States was shutting down. All but a handful of staffers left. But Schwartz hired new reporters and somehow kept the ship afloat. He had become quite accomplished at wheedling money out of newspaper editors with heartfelt appeals about the importance of localized Washington news.

"There are just certain people who have a knack for walking the tightrope and not falling off," says John Membrino, a former States managing editor who is now Washington news editor for Newhouse Newspapers. "He's stepped back from the brink so many times."

Schwartz's next savior was the New York Times Co., which bailed him out in 1986 with a loan of nearly $1 million. But the 1990 recession knocked him for another loop. As editors tightened their belts, States lost 50 papers and $750,000 worth of business.

"We're treading water," Schwartz says. "Our greatest strength -- our local focus -- is our financial weakness." Providing state-by-state coverage is a manpower-intensive proposition, and the papers' fees -- from $50 to $800 a week, depending on the level of service -- barely cover the salaries of the young worker bees.

States would still be in the red if not for Schwartz's move into the database business, which brings in a third of his cash. He has 15 employees who record transactions at the Securities and Exchange Commission or write news briefs on Hill markups for Legi-Slate, a subsidiary of the Washington Post Co. The information is peddled to newspapers, lobbyists and corporations. Meanwhile, the New York Times Co. recently forgave the balance of its loan in exchange for the use of States stories on its wire service.

"He's demonically possessed with the idea of making it work," says Mick Rood, a former States reporter who now edits newsletters for King Publishing. "Most other people would have folded up their tent and gone home. He wants to oversee a worldwide media empire. Every morning he wakes up and has a new idea."

But most of these ideas remain stalled on the launch pad. Schwartz has poured hundreds of thousands of dollars into the Latest News, an hourly compilation of wire-service reports handed out to afternoon shuttle passengers flying between Washington, New York and Boston. The venture struggles along on modest ad revenues. Last spring he thought he had struck a mega-deal to turn the publication into a transcript of CNN broadcasts. Ted Turner vetoed it at the last minute.

Like a high-tech Ralph Kramden, Schwartz is full of other get-rich-quick schemes. He wants to publish a States newspaper on the Hill, put States reporters in all federal agencies and in 50 state capitals. He envisions a States cable channel, filled with 24-hour local news, or an Agriculture Channel or Transportation Channel. He sees the Latest News spinning off into the Latest Defense News and Latest Labor News and Latest California News and Latest Japan News. He has pitched these ideas to big-name media types from former Wall Street Journal editor Norman Pearlstine to home-shopping network guru Barry Diller.

"I admire his tenacity, his tremendous energy," says one media investor. "But you say to yourself: He's been at this 20 years and is still living hand to mouth. Is this the kind of person I want to go forward with?" Venture capitalists and investment bankers, the investor says, "run in horror when they look at his financial records. He's just not a businessman."

Schwartz remains undaunted. The coming era of 500-channel television and countless computer databases, he says, "will in effect open up 10,000 new newspapers, and they'll all want local news. Anybody can play in the digital age. You don't need to be a big company with printing presses to get on the highway."

States reporters have a more pragmatic view of the road their boss is traveling. "Leland even said to me, 'You're only here for two years. You use us, we use you, and you're on your way,' " Patricia Willens says. "It's that blatant."

But Willens retains the kind of fresh-faced optimism States depends on. She is happy to keep doing the back-office grunt work until another reporter quits and Schwartz moves her to the front of the room.

"I'd like to work for a big daily paper or a wire service that in a few years could send me abroad," Willens says. "I'd like to be working on stories all the time. That would be wonderful."

Howard Kurtz, who covers the media for The Post, is a frequent contributor to the Magazine.