During the controversy over Education Department Assistant Secretary Michael Williams' enunciation of a policy against federal support for schools that administer racially discriminatory scholarships, I was surprised to find that few of the media people I spoke with had actually read the Williams' letter to John Junker, the executive director of the Fiesta Bowl.

The same was true of some top Bush administration officials who commented publicly on the policy. Media distortions fed adverse reaction to the policy, while the administration's hysterical response to initial criticism further encouraged public misunderstanding.The furor makes it very hard to sort out what has actually transpired.

Williams' original letter laid out what many Americans would consider an unexceptional position. The law, he said, "prohibits discrimination on the ground of race, color or national origin in any program or activity receiving federal financial assistance . . . OCR (the Office for Civil Rights) interprets these provisions as generally prohibiting race-exclusive scholarships."

Put simply, the law forbids federal assistance to programs that reserve access to one group while saying that others "need not apply."

In the letter, Williams offered two alternatives to race-exclusive programs: a program in which race is considered a positive factor among similarly qualified individuals or a program which utilizes race-neutral criteria. He offered assistance to Junker in devising a scholarship program that would aid disadvantaged minority students without violating the anti-discrimination laws and regulations.

Williams is a federal law enforcement official. It is hard to see how he could have ignored the issue or said anything else while remaining consistent with the letter and spirit of the Civil Rights Restoration Act. That act was passed over Ronald Reagan's veto in 1988, after strenuous public debate. It says quite clearly that institutions accepting federal funds may not discriminate even in programs that don't use federal money.

Now some of the same people who bitterly criticized Reagan for vetoing the act are criticizing Williams for acting in accordance with it.

Apparently, whatever the law says, they think it's OK to discriminate in favor of minorities.

As part of its retreat from Williams, the Bush administration wants to make a distinction that will allow institutions receiving federal assistance to administer discriminatory scholarship programs so long as they are privately funded.

What will this do to the enforcement of the 1988 Civil Rights Restoration Act? If David Duke raises millions of dollars to fund whites-only scholarships for Louisiana students, will federal dollars continue to flow to Louisiana colleges that administer the grants? What if a private fraternity establishes a fund to provide poor black students with scholarships so that they can afford to live at the frat house, but refuses applications from poor white students?

If a college tolerates this within its fraternity system, will federal dollars continue to flow? And if the scholarships are for whites only?

The permutations of ingenious racism are endless.

The administration's position could create a loophole big enough to accommodate many re-segregated campuses.

(Alan L. Keyes is a former assistant secretary of state for international organization affairs and ambassador to the United Nations Economic and Social Council.)