What was going on when I was born?

Princeton University today awarded bachelor's degrees to 1,074 members of the class of 1981 at the university's 234th commencement. The 90-minute exercise was the first held indoors in 21 years. It took place in Jadwin Gymnasium, because university officials feared that heavy rains would drench the graduates and their families. But by the time the graduates filed into the gym, the rain had stopped and the sun was shining through the clouds.

The Federal Reserve Board today authorized banks to set up facilities in the United States to compete for much of the international banking business that now goes to London, Singapore, Nassau and other foreign banking centers. The decision, long sought by banks in New York City, is likely to elevate the city's status as a world banking center. The board voted unanimously to allow banks in the United States to set up international banking facilities beginning Dec. 3 free from federally imposed reserve requirements and ceilings on interest rates - restraints that have led American banks to conduct much of their international banking from branches in foreign centers rather than directly from the United States. More Jobs and Business Forecast Those who supported the concept of international banking facilities, which are in effect special accounts exempt from some key domestic regulations, argued that they would create more jobs and business in the United States. But opposition has come from banks in other states on the ground that New York City banks would play too dominant a role.

International Israel defended its bombing of an Iraqi nuclear reactor, with Prime Minister Menachem Begin saying that ''Israel will use all of the possibilities at its disposal'' to halt other attempts by its enemies to make weapons of mass destruction. ''There won't be another holocaust in history,'' he said at a news conference. ''Never again, never again.'' (Page A1, Column 6.) The White House is working to decide what to do about Israel if it finds and reports to Congress within 48 hours that the Israelis violated their aid agreement by using American-made warplanes in its attack on Sunday against Iraq's nuclear reactor. An arms embargo, one of the available options, could threaten Israel's security. But to do nothing might cause the Administration to lose credibility with the Arabs, a senior official said. (A12:1-2.)

CHEVRE, that tangy, aromatic cheese formed from pure goat's milk, is suddenly in vogue. As if out of nowhere, a staggering and mysterious variety of chevres have appeared on the scene, replacing Brie as the imported cheese in demand. Why the popularity? There are a range of reasons. In the United States, at least, economics is one of them. Since the beginning of last year, quotas have been imposed on all imported cheeses, except for soft - ripened products such as Brie and Camembert, and except for 100-percent goat, sheep or buffalo milk cheese, which provide virtually no competition to American cheese makers. The French, who produce almost all of the world's goat cheese, have been quick to encourage export, while importers have been quick to capitalize on the opportunity to offer Americans something new and different. The French love their piquant goat cheese for another reason. The French cheese industry is slowly feeling the pains of industrialization, and despite such a trend, goat cheese has managed to retain a measure of handmade authenticity. While four out of five cow's milk cheeses found in France are factory-made, half of the goat cheese is still made by hand on small farms where it is prepared fresh daily, cultured, set in molds, drained, then set to age for just a matter of weeks before it goes to market.

New China accord pushed in Sen- ate by Reagan aide A2 For the Chinese, a great new place to visit - China A2 Mexican President ends visit; progress in talks is reported A3 Legislator's son is arrested in South Africa A3 Crocker confirmed in Africa post by Senate A4 Officials admit flaws in Salvador report; but defend conclusions A6 Around the World A7 Italian police seize the member- ship lists of all Masonic lodges A9 Brezhnev says U.S. is taking no real steps to renew arms talks A10 Greece gives U.S. Monday dead- line on bases accord A11 Soviet calls U.S. an accomplice in Israeli raid on Iraqi reactor A12 Habib, U.S. envoy, returns to Bei- rut, his mission clouded A13 France upset by Israeli attack on French-built reactor in Iraq A14 Government/Politics South Carolina and U.S. reach in- tegration accord A28 Schools close another chapter in desegregation efforts A28 Carey offers choice of 3 compro- mises on Medicaid takeover B3 New investigative office is set up by Transit Authority B3 State study says imprudent prac- tices imperil L.I. water supply B4 Goodman sees opportunity in Manhattan G.O.P. post B4 General Around the Nation A16 Vietnam veterans evicted, ending protest in Los Angeles A16 Board faults T.W.A. crew in jet's 5-mile dive over Michigan A18 The mail is moving by bicycle these days in Phoenix A20 Extortion by youth gangs plague Chinese communities B7 Living Section Food Goat cheese: Piquancy, with an artisan's touch C1 Mess may be "dining" but there's still K.P. C1 In pursuit of a wild dish: branch lettuce C3 60-Minute Gourmet C3 Best Buys C9 Wine Talk C17 Living At Cole Porter party, the mix is right C1 Metropolitan Diary C2 Kitchen Equipment C2 Personal Health C10 Discoveries C14 Industry/Labor New commuter aircraft to be built in Youngstown, Ohio A20 Religion Conservative re-elected president of Southern Baptists A16 Arts/Entertainment S.J. Perelman's "Last Laugh" is about to be published C20 Tanner's film "Messidor" opens C21 Chuck Close's Photo-Realist paintings at the Whitney C26 Kevin Wade's "Key Exchange" staged at the WPA C26 Producers presenting proposal in Hollywood writers' strike C28 Julia Hirsch's "Family Photo- graphs" is reviewed C29 Cynthia Gregory and Fernando Bujones in "Don Quixote" C29 Henry James's "The Ambassa- dors" on public television C31 Bantam aims at Hispanic market with Valenzuela book C31 Obituaries Allen Ludden, host of TV game show "Password" B6 Nathaniel J. Palzer, active in fighting vote fraud B6 Chester Gorman, archeologist B6 Sports Holmes out to stop Spinks but has retirement on his mind B8 Yankees top Royals, 8-5, for ninth straight victory B9 No disappointment for Nets on first round of draft B9 How Coach Brown of the Nets maneuvers his draft choices B9 Knicks get Newlin from Nets B9 Reds beat Mets, 8-4 B9 Arbour considers stepping down as coach for Islanders B9 Rose, with 2 hits, draws within one of Musial's mark B10 Expos end 5-game losing streak by routing Braves, 12-1 B10 Red Smith on a guy named Brucker B10 Buck Williams, No. 1 Net choice, calls himself a team player B11 Features/Notes About New York B3 Notes on People B4 Going Out Guide C22 News Analysis Drew Middleton looks at Iraqi op- tions for retaliation A12 Editorials/Letters/Op-Ed Editorials A30 America can't be colorblind yet Deregulation betrayed Why worsen a good co-op law? Topics: refuge & also-rans Letters A30 James Reston: Jerusalem and the bomb A31 Russell Baker: and sausage on the side A31 Alan Cranston: condemn Israel? Didn't we plan to hit Cuba? A31 Gerald J. Bender: Secretary of State Helms A31

In the summer of 1953, Elvis Presley stepped into a studio and recorded his first song, a ballad that helped propel the retail record industry into a multibillion-dollar business and that now describes it perfectly as it enters middle age. The song was called ''That's When Your Heartaches Begin.'' The year 1981 will be remembered in the record business for three dubious milestones: The list price of a top-selling album hit $9.98, the average age of a rock superstar hit 30 and one of the founding fathers of the retail record trade filed for bankruptcy. Behind these seemingly unrelated events is the story of an industry come of age. The maturing process has turned the retail record business upside down in the past 18 months, but left the survivors stronger for the experience. It has also left behind higher prices, fewer recordings by top stars and in some cases fewer records on the shelf.

At 4:01 yesterday afternoon, it was settled: the American Telephone and Telegraph Company, whose stock is the most widely held in the world, would proceed today with a offering of its common at $57 a share. ''If the deal is in shape, you can't afford to wait around,'' said Thomas A. Saunders 3d, a managing director at Morgan Stanley & Company and the man in charge of the offering. It was in the midtown offices of Morgan Stanley, the lead manager for the stock offering, that A.T.& T. officials huddled one last time with their financial advisers. Part of the reason that investment bankers are paid millions of dollars in fees is for their expertise in picking the moment, and this was the moment. They had tentatively planned to price the stock today, but decided to move faster in the face of flaring tensions in the Middle East.

Citing ''an important first step in normalizing grain trade with the Soviet Union,'' the United States paved the way today for additional large grain sales to the Russians over the next few months. Following two days of talks here between the two sides, Seeley G. Lodwick, Under Secretary of Agriculture for International Trade, said the Soviet Union would be allowed to purchase up to six million more metric tons of corn and wheat before Sept. 30. Sources close to the talks said that including this provision meant that at least some Soviet purchases were expected. This is considered a surprise because the view in the agricultural world has been that the Russians had already arranged to fill their grain needs for the present crop year.

New York City and the metropolitan area are once again in line to reap more than $15 million in Federal grants for projects that had been frozen by the Reagan Administration and were in danger of being killed. Congressional action last week was a first step toward the rescue of these programs and others around the country when it left about $160 million in this year's budget to encourage the economic revitalization of cities. Those projects now free to go through the normal approval process by the Economic Development Administration include the expansion of the Astoria Film Studios in Queens, the rehabilitation of City Center on 55th Street in Manhattan, the construction of an industrial park in Newark and the revitalization of the Fordham Road area of the Bronx. Officials of the development agency will make their final decisions on the applications by the end of September, a spokesman said yesterday.

The Administration's three-year tax-relief bill was formally introduced in the House today amid conflicting reports about whether Dan Rostenkowski, chairman of the Ways and Means Committee, wanted compromise or conflict. Aides to the Illinois Democrat said that he was eager to have the committee's 12 Republicans work with the 23 Democrats in the spirit of bipartisan cooperation that has sometimes marked the drafting of tax bills. But the senior Republican, Representative Barber B. Conable Jr. of upstate New York, reported that Mr. Rostenkowski appeared to be ''moving away'' from any possible agreement with the Republicans. Specifically, Mr. Conable said, Mr. Rostenkowski told him this morning that the Democrats would not accept uniform, across-the-board rate cuts, such as the White House has proposed. The Democrats have been divided on this question. Late last week, the chairman reported that the committee Democrats had decided in caucus on a combination of two years of across-the-board tax reductions of 5 percent the first year and 10 percent the second, combined with other tax-relief provisions that would chiefly benefit middle-income taxpayers.

Stanislaw Kania, the Communist Party leader, declared today that Poland's allies were ''fully justified'' in their alarm over developments and said his leadership would seek to tighten control in important areas of national life. Addressing a plenary meeting of the policy-making Central Committee, which was called to discuss a stern letter of warning from the Soviet party, Mr. Kania confirmed that such a letter had been received by the Polish leaders. According to Mr. Kania, the letter warned that Poland's independence was in jeopardy if the party did not move against counterrevolution. Threat to Independence Seen Quoting directly, he said: ''The serious danger that hangs over socialism in Poland constitutes a threat to the very existence of the independent Polish state.''

Prime Minister Menachem Begin, in a passionate defense of Israel's attack Sunday on an Iraqi nuclear reactor, pledged today that ''Israel will use all the possibilities at its disposal'' to thwart other attempts by its enemies to develop weapons of mass destruction. ''There won't be another Holocaust in history,'' he said at a crowded news conference. ''Never again, never again.'' Mr. Begin called the decision to bomb the plant the result of ''a terrible dilemma,'' but he dismissed the international criticism that has arisen since the raid was disclosed yesterday. 'We Survived; We Shall Survive' ''I know that in the days to come, all men and women of good will, wherever they live, will understand our problems,'' the Prime Minister declared, saying that many individuals in the United States and Europe had sent him telegrams of congratulations. ''I believe that the nations are with us, and if, for various reasons which I do not want to go into, several governments condemn and may repeat it in the Security Council, well, my friends, what can we do? We are an ancient people. We are used to it. We survived. We shall survive.''