RUSSELL Banks's third major novel, after "Continental Drift" and "Afflictions," is a work of wonderful tenderness and strength, told with his unique skill of keeping a fundamental philosophic question just below the surface of everyday events. Given the declining quality of American novels, Banks could be at the top by remaining the same. Instead, he improves.The story is told by four people: Dolores Driscoll, a school-bus driver in a small town; Billy Ansel, father of two of the children on the bus; Mitchell Stephens, a lawyer; and Nichole Burnell, a student. In the accident on which the story is centered, Ansel loses his children and Nichole is paralyzed. Dolores survives the accident - the plunge of the bus through the guardrail and into the water-filled quarry - and then tries to survive survival. Mitchell Stephens becomes the attorney for the group of pa rents who mount a lawsuit. As in Banks's "Afflictions," the events take place in a small town - a small, unlovely stretch of road in upstate New York somewhere north of Albany. Banks has worked hard to understand this place. It is a place where life clings to highways, a place of short summers, long winters, and borderline poverty that never quite qualifies for official recognition. Good, unassuming people such as Dolores Driscoll work at what there is to do in the fragile economy. Driscoll's accident, after years of driving children safely through the worst of northern New York winters, is an event of undeservedly cruel caprice. She has, through the years, earned the affection of the town. The accident ruins her life and forces the townspeople - most of whom are unaccustomed to deep thinking - to weigh their living options against their losses. Into the middle of this conflict comes the lawyer, Stephens, who is portrayed as a fair and considerate man, but driven by an internal ang er to assign blame and liability. Practicing law, he says, is "like a discipline; it organizes and controls us; probably keeps us from being homicidal." He offers a promise of action to the townspeople who are stunned into helplessness. In his explanation there is fault and remedy; the guardrail was too weak, the road hadn't been plowed, the quarry hadn't been drained. But the rumble you hear growing behind Banks's story is the dispute between the weak majority and the strong minority over his basic promise that there is a remedy for their loss. The book hinges on the maddening nature of inexplicable tragedy and tragedy's quivering aftermath. Stephens offers the protection of an explanation, something to wrap around oneself to ward off the cold winds of the unknown. For some of the townspeople this is worth more than the money they might gain from the lawsuit. But not for all. It's left to the most unlikely of the victims to realize that blame can't be affixed to nature's caprice, not if one wants to continue to live sanely. Part of the explanation is that there is no explanation, and in most cases you're better off not equating life with money. The book closes on a note of forgiveness generated by those who must forgive Dolores Driscoll and, with an odd twist, by Driscoll herself, since she has to forgive those who have forgiven her. Banks is making the best literary use of small northern American town life of any working writer these days, and he gets far sharper focus in the cold upstate New York air than any of the endless Southern writers do in the sultry haze below the Mason-Dixon line. He uses characters from the area - people who have grown up and remained there, usually living lives without advantages - and he has affection for such people.