Sacramento's "tortured middle way"

Submitted: Aug 19, 2008
Badlands Journal editorial board


Thanks to Sacramento’s man on the U.S. Supreme Court, Judge Anthony Kennedy, who created the meaningless “significant nexis” to determine the connectivity of waters to navigable streams, federal resource agencies have been up a creek as far as knowing their jurisdiction to enforce the Clean Water Act. The EPA has done nothing about more than 400 CWA enforcement cases since the Supreme Court ruling called the “Rapanos Decision.” Kennedy’s middle ground stood between four conservative justices who wanted CWA enforcement only on permanent streams and four liberals who voted for intermittent streams as well, including wetlands and vernal pools.


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Special Places for Special People

Submitted: Aug 13, 2008

Jim Marshall, city manager of the City of Merced, intoned theologically in the UK Financial Times on Tuesday that there “should be a special place in hell for” speculators, mainly from the Bay Area, who bought McMansions in Merced, took out subprime loans and tried to flip them before the first balloon payments hit.

In fact, Marshall knew well there was no local market for the subdivisions of McMansions the city was approving weekly during the speculative real estate boom, the collapse of which has made Merced nationally famous for its foreclosure rate, and now internationally famous, or infamous, along with Modesto and Stockton.

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Sunshine on Shadow

Submitted: Jul 24, 2008

And he is too humble to take the responsibility for thinking. The whole structure of his world would be endangered if he permitted himself to think. The pieces must stick within their pattern or the whole thing collapses and the design is gone. We wonder whether in the present pattern the pieces are not straining to fall out of line; whether the paradoxes of our times are not finally mounting to a conclusion of ridiculousness that will make the whole structure collapse. For the paradoxes are becoming so great that leaders of people must be less and less intelligent to stand their own leadership. John Steinbeck, The Log from the Sea of Cortez (1941), p. 46.

The following essay developed in three parts: first, some general considerations about leadership; second, a short portrait of a phony leader; and finally a letter from a true Valley leader. The third part arrived only after the first two parts had been posted, as if to make our work more complicated but more complete. It is a letter from Lloyd Carter, Fresno-based director of the California Water Impact Network, to Rep. Grace Napolitano, chair of the House Subcommittee on Water and Power, regarding last Monday's subcommittee hearing in Fresno. It came to remind us not to forget contemporary people of principle in the Valley, although sometimes it seems that all we hear is unprincipled flak. With this third update of "Sunshine on Shadow," we think our work might be done. -ed.


1. Leadership

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Raptor Center thanks contributors

Submitted: May 27, 2008

San Joaquin Raptor Rescue Center
San Joaquin Raptor/Wildlife Rescue Center
P.O. Box 778
Merced, CA 95341

The San Joaquin Raptor Rescue Center would like to take this opportunity to publicly acknowledge the tremendous support through the years provided by a small group of prominent officials and organizations.

The Raptor Center knows that this expression of gratitude for contributions to its projects and lawsuits is long overdue. The Raptor Center apologizes for its tardiness, but hopes these contributors will accept our gratitude.

First, the Raptor Center wishes to express its deepest gratitude and applause for Lowmac, who for a decade has searched local, regional and national press every day for stories indispensable for our work and has distributed these stories to us and many others involved in work that supports and is supported by the Raptor Center. Lowmac also provides a complete weekly schedule of important meetings in the county. There is no way to thank lowmac enough for the voluntary dedication and education lowmac provides daily. Lowmac’s daily clipping service has been the best news digest in the Valley since 1999.

The Raptor Center needs to express its profound gratitude to the Natural Resources Defense Council for 20 years of diligent, painstaking and protracted representation in court and in Congress in our common effort to restore the San Joaquin River and its watershed.

The Raptor Center wishes to publicly acknowledge the long-time, consistent in-kind support it has received from Cal Eggs (Rebecca Farms.)

The Raptor Center would like to publicly acknowledge the Kelsey Family, long-time Snelling ranchers, for contributions to Raptor Center lawsuits through the years. The Kelseys have never sought publicity for their contributions and have consistently dodged the limelight for their deep commitment to natural resources, environmental health and wildlife species, at this time the Raptor Center believes that the public ought to know about the Kelsey Family contributions. The Raptor Center also thanks the Kelsey Family for gifts from its bountiful harvests through the years – the Clementines.

The Raptor Center expresses its gratitude to Merced County Planning Commissioner Cynthia Lashbrook, for her contributions to help fund lawsuits the Raptor Center has undertaken. Although Commissioner Lashbrook’s commitment to the Merced environment and farmland has been manifest for years, the Raptor Center hopes that our acknowledgement will add to her fine reputation.

The Raptor Center wants to thank the Merced County Farm Bureau Board of Directors for its outstanding contributions to projects and especially to lawsuits through the years. It has been a great relationship and we sincerely hope it will continue for many years to come.

The Raptor Center expresses its gratitude to several members of the board of directors of the East Merced Resource Conservation District for contributions to projects and legal funds through the years. The EMRCD has labored long and hard for the good of the natural resources in eastern Merced County.

The Raptor Center is grateful for the financial support it has received through the years from the Peninsula Community Foundation of Palo Alto.

The Merced Fish and Game Club has generously contributed to the Raptor Center for many years and the Center wishes to express its deep gratitude to its members.

The Raptor Center realizes that these select individuals and groups are only a handful among the many who contribute to its work on behalf of the natural resources of Merced County. From time to time, we will publish more names of other contributors. We hope, by publishing these short lists, to give proper, public acknowledge for all the quiet, unheralded work these fine, public-spirited and concerned citizens have done behind the scenes to help protect our environment and wildlife species in Merced County.

San Joaquin Raptor Rescue Center
San Joaquin Raptor/Wildlife Rescue Center
P.O. Box 778
Merced, CA 95341

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The Green Job Frame, a Loose Cheeks Special Feature

Submitted: May 20, 2008

About a hundred people, many of them from Merced, got an education in UC intellectual bankruptcy this week at the old Merced Theatre during a forum on "Green Jobs." The event was organized by Kenny, the Monster UC Merced Faculty Spouse, and it featured a trio of top Bay Area speakers on everything green. After the Monster got the computers started (computer inadequacy is a hallmark of Monster Shows), we entered the world of "Framing and Reframing," a rhetorical confection created by UC Berkeley's Chomsky-Lite, Prof. George Lakoff.

The Monster framed it like this: the environmental debate is always framed as an environmental protection argument, yet we need thousands of new jobs but if the environment collapses, human health and safety also collapses; ergo, we need "green jobs." QED, it's a "no brainer" for Merced to seek these "green" industries and jobs.This "framing" of the question unleashed the speakers to bay after the elusive "green job."

Merced City Councilman John Carlisle, the only member of the panel that did not indulge in "framing" lingo, described the situation in Merced in dire terms -- gangs, bad air quality, teen pregnancy, etc. -- all the products of poverty in this weird county, which has among the nation's least affordable housing, its highest foreclosure rate and is among the five poorest counties in the state. For "a community already in need of help,"

Carlisle wants "green jobs." In his definition of "green jobs," however, the audience got its first intimation that it was going to get had that evening. "Green jobs," according to Carlisle and others on the stage have good employers, good benefits, upward mobility, and meaningful work -- for starters. Carlisle's election apparently owed quite a bit to the work of the sponsors of the Green Job event. In this context, we can understand his utopian affection. Otherwise, he seems to be a pretty level-headed retired probation

Nwamaka Agbo, from the Oakland-based Ella Baker Center, made an excellent presentation on the Center's efforts to get more "green-collar jobs" in Oakland, Berkeley, Emeryville and Richmond, pointing out that poor communities of color also care about the environment but have more immediate worries. She defined "eco-apartheid" in West Oakland near the port, presenting the dichotomy of "organic food v. no food at all." "Eco-equity" means the incorporation of everyone into the environmental movement. We thought Agbo's presentation would have been equally interesting and relevant to Merced if she had been talking about Brooklyn or Compton, but we now live in the home of UC Merced, so we must gratefully
accept its total framing of our lives as we so gratefully accepted the finance, insurance and real estate framing of our economy in recent years.

"The environmental conversation lacks racial analysis," Agbo bravely asserted against the entire history of the environmental justice movement in an evening definitely not devoted to discussion of CEQA suits in Planada. (One of the event sponsors later tried to “reframe” what Agbo said, but Loose Cheeks, “framing-deficient," didn't get it.)

Marc Stout represented the Bigshot Entrepreneur wing of "green jobs," a flak for Cleantech, "a utility-scale power-plant project developer." He said construction and maintenance of future solar farms will require thousands of workers. He mentioned figures. He described a 40-acre facility near Mendota (unfinished) and a 640-acre solar farm his company is planning for the San Joaquin Valley.

The only interesting thing he said was that Germany, a cold, northern European country, employs a half a million of its citizens in the solar business. Siemens, the German global conglomerate, is the largest player in this market, according to other sources, but Germany is probably absorbing most of what it produces. Japanese solar technology dominates the US market at the moment, but Siemens’ India-made panels sold here reportedly have quality problems. It is interesting to note that in the cornucopia of “green jobs” Stout touted, manufacturing solar panels or any other "green" technology was absent. The entire industry seems to be gearing up for its Conquest of America on off-shored manufacturing.

Although, according to Stout, hundreds of thousands of jobs will be available soon for construction and maintenance of solar farms, about twice as many jobs will be available off-shore plants to make solar panels. Stout did not indicate if all this solar power injected onto the grid will in any way lower utility rates and not just make money for the utility companies and solar entrepreneurs like himself (and, of course,
those thousands of construction and maintenance personnel, who will all be US citizens and working for Bay Area-level wages and protected by strong unions.)

It was with the presentation by Cheryl Brown of the UC Berkeley Labor Center that we entered into the full vedanta of what it means to be "green."

"Green jobs are quality jobs," she said. And, although that was about as far as she went to defining green in mere layperson's language, she said she thought that some concept of "sustainability" should be included and that a quality job meant one that might last.

That would knock out solar farm construction work. Stout never broke down the figures on numbers of jobs between construction and maintenance. Asians will manufacture the panels.

While we have heard and largely approved of the new verb, "to greenwash," to describe what corporations are doing to claim to be environmentally friendly, it was Brown who brought back to our hick consciousness the verb, "to green," languishing in the shadows since the 1970's gerund, The Greening of America.

Brown's "framing" was dead on arrival, but it twitched along obliviously anyway. Quality jobs apparently mean that we must "unionize in the market-driven green solution." Well, we dunno. But, to use an older Berkeley term, we had a " flashback." We don't think Cesar Chavez' dying words in Yuma were, "Unionize in the market-driven green solution!"

Brown cavorted around the various bills in Congress and the state Capitol and the innumerable institutions out there doing something "to green" industry and jobs, claiming that the East Bay is to become the "Silicon Valley of green stuff."

Loose Cheeks left before all the questions from the audience were finished because they weren't questions. They were living ads for various "green" and "greenwashed" groups and public institutions.

However, in the hoopla before the event and during the event, we noted only two references to agriculture. In the Merced Sun-Star's editorial boosting the event, editors referred to "stagnant agriculture." At the "green jobs" forum, agriculture was treated solely as land available for the placement of large numbers of solar panels and as a very minor source of air pollution (less than 10 percent, versus construction, the worst polluter at 40 percent).

One of the sponsors of the event, the carpet-bagger professional opponents of the WalMart distribution center project, once again increased the threat to their cause and our environment. Having done very little but kiss the posteriors of politicians and the press since they arrived, the City of Merced has totally suckered the WalMart Action Team into making "positive contributions" instead of simply and coherently opposing the project.

They were overjoyed that the City's economic development director was in the audience. They don't like Quintero much because they feel he doesn't always listen to them. That could be because Quintero actually knows something about the employment situation in Merced. He made more sense than anyone on the panel when he said Merced contains many "line workers" who need a job tomorrow and certainly cannot afford to go through lengthy "green job" training programs, assuming government funds are made available for them. All the panelists and some of the "questioners" mentioned the sainted state Sen. Darryl
Steinberg's bill to provide $3 billion for "green job" training. Clue: Steinberg has made an entire career out of haphazard, ill-timed defenses of politically correct causes.

Thoroughly engrossed in the process of allowing UC to completely “reframe” their reality, Kenny the Monster and his sponsors never thought to include anyone on the panel who actually knew anything about the San Joaquin Valley environment or its labor history. For this act of appeasement, they were rewarded: the Sun-Star didn’t even send a reporter to cover the event.

Loose Cheeks left the performance at the old theatre in a disordered state. How is it that you come to "green" Merced without talking about its natural resources? How does that work? Presumably, UC Merced and Kenny Monster will reframe it for us us all in the finest Goodbar/Valley Hopefuls style.

Loose Cheeks learned the next day that Merced County Planning Commissioner Etc. Cindy Lashbrook said something about not wanting all the farmland filled with solar panels. This is reported to have made the posterior-kissing crowd nervous, for which we applaud the Commissioner of Many Hats.

Meanwhile, to respond to Quintero's excellent question: house the homeless in foreclosed, empty homes and hire the unemployed to mow those lawns and maintain those gardens. That would provide permanent housing for the homeless and work for those gardeners for the rest of their lives. With water, the grass and the gardens would once again be "green."

As for the Walmart "opponents," the asthma coalition and the local Sierra Clubbers who sponsored the event, Loose Cheeks wanted to remind them and their Florida-based employers, knucklehead labor goons, that you don't stop environmentally destructive development by sucking up to the land-use officials that approve the projects, and the job of opponents does not include providing "positive" solutions. That’s the business of the government and its good friends in private enterprise.

RE: [WMAT_Leadership] MSS: Forum to tout green growth‏
From: on behalf of Diana Westmoreland Pedrozo
Sent: Thu 5/15/08 4:26 PM
To: 'Kenny Mostern' (;;;;; 'Nick Robinson'

Just wanted to let you know that I will not be able to attend tonight. Thank you for bringing this issue to the forefront. If I can be of assistance in any future endeavors please let me know. I am sitting on the board of the San Joaquin Valley Clean Energy Organization formed last year through the Housing, Land Use and AG Committee of the San Joaquin Valley Partnership and green jobs is an important component of addressing energy and air quality issues here in the Valley.
Good Luck!
Diana Westmoreland Pedrozo
(Executive Director Merced County Farm Bureau, President California Women for Agriculture, Top Henchette Supervisor Deidre Kelsey reelection campaign, Etc.--ed.)

--A.J. Gangle

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Resource Conservation District Assistance Program watershed coordinator grant program

Submitted: Apr 29, 2008

Resource Conservation District Assistance Program watershed coordinator grant program
2007 Watershed Coordinator Grant Program Final Decision List

The Department of Conservation (Department) is pleased to announce its 2007 Watershed Coordinator Grant Program Final Decision.

Final Decision List (PDF) available at:

The Department’s decision is the result of an extremely competitive process and an impressive response from special districts, local governments, and non-profits throughout the state. The Department received 86 proposals requesting over $19 million in funding. The large number of proposals received reflects the great need for watershed coordination in the state. The $9 million allocated for this three-year grant program was sufficient to fund only half of the submitted proposals. The review committee recognized that there were many compelling and high-quality proposals that could not be recommended for due to funding constraints.

The Department encourages organizations which were not recommended for funding to continue watershed work through other means if possible. The management of water resources and the improvement of impaired watersheds is a high priority for the State, and watershed coordinators have shown great success in both areas.

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This year's speculative bubble

Submitted: Apr 21, 2008

This article raises two questions.
1. How much of the contest between Obama and Clinton is a contest between rival financial centers, Chicago and New York?
2. Given the large increases in grain plantings in Central California, will speculation in the grain markets affect the California farm economy this year?

Badlands Journal editorial board
New Threat to Farmers: The Market Hedge...DIANA B. HENRIQUES
Fred Grieder has been farming for 30 years on 1,500 acres near Bloomington, in central Illinois. That has meant 30 years of long days plowing, planting, fertilizing, and hoping that nothing happens to damage his crop.
“It can be 12 hours or 20 hours, depending,” Mr. Grieder said.
But Mr. Grieder’s days on the farm in Carlock, Ill., are getting even longer. He now has to keep a closer eye on the derivatives markets in Chicago, trying to hedge his risks so that he knows how much he will be paid in the future for crops he is planting now. And the financial tools he uses to make such bets are getting more expensive and less reliable.
In what little free time he has, Mr. Grieder attends Illinois Farm Bureau meetings to join other frustrated farmers who are lobbying officials in Chicago and Washington to fix a system that was designed half a century ago to reduce uncertainty for food producers but is now increasing it.
Mr. Grieder, 49, is shy about complaining amid so much prosperity. Prices for his crops are soaring on the updraft of growing worldwide demand, and a weak dollar is making those crops more competitive in global markets.
But today’s crop prices are not just much higher, they also are much more volatile. For example, a widely used measure of volatility showed that traders in March expected wheat prices to swing up or down by more than 72 percent in the coming year, three times the average volatility for that month and the highest level since at least 1980. The price swing expected in March for soybeans was three times its monthly average, and the expected volatility in corn prices was twice its monthly average.
Those wild swings in expected prices are damaging the mechanisms — like futures contracts and options — that in the past have cushioned the jolts of farming, turning already-busy farmers into reluctant day-traders and part-time lobbyists.
One measure of the farming industry’s frustration is the overflow crowd expected at a public forum on Tuesday at the Commodity Futures Trading Commission in Washington. Interest is so high that the commission, for the first time ever, will provide a Webcast of the forum, which it says is being held to gather information about whether key markets for hedging the price of crops “are properly performing their risk management and price discovery roles.” The Webcast link is available on the commission’s Web site,
The additional costs that stem from volatility in grain prices — higher crop insurance premiums, for example — are not just a problem for farmers. “Eventually, those costs are going to come out of the pockets of the American consumer,” said William P. Jackson, general manager of AGRIServices, a grain-elevator complex on the Missouri River.
Prices of broad commodity indexes have climbed as much as 40 percent in the last year and grain prices have gained even more — about 65 percent for corn, 91 percent for soybeans and more than 100 percent for some types of wheat. This price boom has attracted a torrent of new investment from Wall Street, estimated to be as much as $300 billion.
Whether new investors are causing the market’s problems or keeping them from getting worse is in dispute. But there is no question that the grain markets are now experiencing levels of volatility that are running well above the average levels over the last quarter-century.
Mr. Grieder’s crop insurance premiums rise with the volatility. So does the cost of trading in options, which is the financial tool he has used to hedge against falling prices. Some grain elevators are coping with the volatility and hedging problems by refusing to buy crops in advance, foreclosing the most common way farmers lock in prices.
“The system is really beginning to break down,” Mr. Grieder said. “When you see elevators start pulling their bids for your crop, that tells me we’ve got a real problem.”
Until recently, that system had worked well for generations. Since 1959, grain producers have been able to hedge the price of their wheat, corn and soybean crops on the Chicago Board of Trade through the use of futures contracts, which are agreements to buy or sell a specific amount of a commodity for a fixed price on some future date.
More recently, the exchange has offered another tool: options on those futures contracts, which allow option holders to carry out the futures trade, but do not require that they do so. Trading in options is not as effective a hedge, farmers say, but it does not require them to put up as much cash as required to trade futures.
These tools have long provided a way to lock in the price of a crop as it is planted, eliminating the risk that prices will drop before it is harvested. With these hedging tools, grain elevators could afford to buy crops from farmers in advance, sometimes a year or more before the harvest.
But that was yesterday. It simply is not working that way today.
Futures, for example, are less reliable. They work as a hedge only if they fall due at a price that roughly matches prices in the cash market, where the grain is actually sold. Increasingly — for disputed reasons — grain futures are expiring at prices well above the cash-market price.
When that happens, farmers or elevator owners wind up owing more on their futures hedge than the crops are worth in the cash market. Such anomalies create uncertainty about which price accurately reflects supply and demand — a critical issue, since the C.B.O.T. futures price is the benchmark for grain prices around the world.
“I can’t honestly sit here and tell you who is determining the price of grain,” said Christopher Hausman, a farmer in Pesotum, Ill. “I’ve lost confidence in the Chicago Board of Trade”...

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The 2008 honey bee deal

Submitted: Apr 02, 2008

The bee deal

The European Honey Bee was imported to North America is colonial times. In the course of its pollination work, it became a symbol of American agrarian industriousness. We see an indication of that in the names of the McClatchy newspapers -- Sacramento, Modesto and Fresno Bees -- in the region built on the greatest fruit, nut and vegetable production in the nation. Poetically, we might see an analogy between the Colony Collapse Disorder (CCD) in the honey bees and Subprime Mortgage Disorder (SMD) in subdivisions that have replaced so many agricultural fields and orchards in recent years. But, we aren't as poetic as the McClatchy chain.

Established agricultural scientific research, mainly coming from the land-grant university system, has identified several factors and tentatively suggested that no one factor in bee environment is causing the CCD, but that it is a combination of stresses. Arguments of both sides of the polarized debate around genetically engineered crops is inconclusive that their pollens are involved, however some land-grant university professors are willing to grant that it might be one weakening factor among others. The anti-GE forces continue to produce compelling information that, due to biotechnology corporate influence in the Clinton and Bush administrations, approval of GE crops was granted by the federal government without adequate human health studies as to their effects, and that US and Canadian citizens are now unwitting guinea pigs in a massive, unregulated dietary experiment. This would be somewhat similar to the recent SMD experiment in the credit markets conducted with such enthusiasm here in recent years, as we were unwittingly dragged from the "old" agricultural economy into the "new economy."

The "old" economy, however, is the devil we know. It was never particularly stable and this latest mess in the almonds, the largest market for rental bees in the world it seems, is another case of the original problem of high concentration of mono-cropping of a luxury crop humanity could actually do without, particularly this year with the lowest grain storage quantities since WWII and Third World food-importing nations scrambling to avoid famine. Add to this that a great many almond acres are simply plantings to hold land in agriculture to the tax advantage of developer owners, speculating on a future real estate boom, and it presents a view of extreme agricultural irresponsibility, sort of suicidal in fact. It looks more like Ricardo's dour thoughts on (land) Rents than like agriculture at all.

Nevertheless, although Adee, the South Dakota bee magnate, says (below) that he lost 40 percent of his bees in the California almond orchards this year, he didn't say he lost money on the deal. Aside from the 28,000 Sioux Falls honey bees that did not return from California this year -- about which no one seems to care anymore than Economic Man cares about anyone beyond his own family -- it is becoming likely that the California almond industry is a death trap for bees. And that has consequences far beyond the family of the grower or the investor in the almond deal, when it is considered that honey bees pollinates about a third of a commercially grown crops in the US.

The almond deal, however, can rest assured that as the land-grant university scientists dither on with their various hypotheses and Rep. Dennis Cardoza, Shrimp Slayer-Merced ducks and runs from his House Agriculture subcommittee responsibilities including bees, one hypothesis that will never be considered, at least for funding, is what the effect of 600,000 acres of one crop -- largest magnet for bee rental in the nation -- is having on the nation's premier commercial fruit, nut and vegetable pollinator. This would challenge "scientific" laws of a much higher order of value: economic rather than merely biological.

So, we have a crop, almonds, that originated in China and Central Asia, brought on the Silk Road to Italy and Spain, and brought to California by Spanish missionaries, that must, at least at this quantity, be pollinated by a bee brought to the American Colonies by the English. Our 600,000-acre block supplies an estimated 80 percent of world production and draws in bees for its six-week pollination period from all over the nation and even other parts of the world for an annual International Honey Bee Jamboree, held simultaneously with the annual International Honey Bee Disease Festival.

There is a well-known analogy here: the San Joaquin Valley's huge blocks of mono-cropped orchards and vineyards have attracted the largest infestations of pests ever known -- a great boon to land-grant university pesticide researchers and manufacturers. Evidently, when economic and biological laws conflict, scientists and biotechnology corporations make money. This process has looped around to the point -- all scientists seem to agree on this -- that the pesticides in the Valley are one of the causes for CCD.

We have discovered nothing in this brief essay. However we may be able to salvage something because, unwittingly, we might have rediscovered the definition of "junk science." This term is widely used at least in the state Capitol and no doubt in Washington, wherever committees meet on natural resource or agricultural issues. We think it can be defined as: "data from the natural sciences that in any way conflicts with special economic interests." When legislators start babbling about "junk science," typically prodded on in their opinions by lobbyists and economically pliable scientific experts consulting for special interests, it is necessary for the public to "scientifically" research the legislators' property, business involvements, those of their campaign contributors, and make sure who's paying the "expert," before accepting the derogatory judgment and legislative consequences. The failure of this sort of science has led, in other realms, to blind acceptance of weird formulas designed to create the illusion that the latest crop of Nobel Prize-winning geniuses had erased investment risk from economic history.

Contemplating this example of "junk" math and its consequences raises the issue of what the general public, not arrayed in any special-interest bloc, fewer by the day in our region being able to afford a can of salted, oiled and smoke-flavored almonds, can do to defend the environment against continual depredations by increasingly lethal special interests in control of the government and most media outlets. While the term, "in the public interest," is still bandied about by government, it is frequently used against the public on behalf of special interests. The poor old Common Good"appears in recent years to have gone the way of the Rights of Man.

Moving from the scientific to the legal quagmire we now call the Homeland, we might faintly echo Christopher Stone's question about forests by asking: "Do Honey Bees have rights?" Other questions in this vein that occur are: Do beekeepers have public responsibilities? Do California almond growers have public responsibilities with regard to pollinators? Is CCD a genuinely public issue in which the public -- to be carefully distinguished from land-grant universities' research priorities and funders -- is the only advocate possible for the bees? So far, reports are nearly unanimous in covering the story strictly from the point of view of the economic interests of farmers and beekeepers. Yet, reporters dutifully mention the datum that they pollinate 90 US commercial crops. Sometimes, Einstein's speculation is brought in: "If the bee disappeared off the surface of the globe, then man would only have four years of life left." Of course, we aren't talking about the disappearance of all bees, just the European Honey Bee. But CCD is, at the very least, an unsettling precedent.

There is something grotesque about looking at so much massive death of a species so valuable to all of us and to nature itself, as well as being a creature valuable solely in its own right, totally in terms of the economic problems of its "owners and users;" and, to the extent that deals like almonds are export-led, to other people and industries as well. However, though it is not fundamentally an economic story, there is something equally horrible about never mentioning the scale of "ownership" and "use," as if bigger is always better in agriculture. "Science" is looking everywhere but at its alliance with the special interests it serves in the name of the public interest.

While the Fed is busy printing billions socializing Wall Street's private debt, you'd think they could print a few hundred millions without any special-interest strings attached to help save the bees, considerably and consistently better citizens than your average hedge-fund CEO. And Congress, which seems to have rediscovered its power to regulate, should do what regulation can do to help the situation, and not, under any circumstances listen to some phony "win-win/public-private" crap apt to come from the mouth of the Ol' Shrimp Slayer, now representing his rotten borough, which includes most of the California almond deal, from residence inside the Beltway.

Badlands Journal editorial board

AP/Google News
Mystery Die-Off Worries Beekeepers...WAYNE ORTMAN (AP)
SIOUX FALLS, S.D. (AP) — The California winter has been a tough one on South Dakota beekeepers like Richard Adee. Last fall he sent 155 semitrailer trucks to California loaded with hives containing bees fit and ready to pollinate the almond crop.
"We lost 40 percent of the hives we sent there. We sent 70,000 out and lost 28,000," said Adee, whose Adee Honey Farms in Bruce is considered the largest beekeeping operation in the nation."I would say overall the losses of South Dakota bees — from what I've heard — from what they started in the spring of '07 until they came out of the almonds is at least 50 percent. It's not good."
Now, in preparation for the honey-making season in South Dakota, he's working to get back to full strength from a mystery called colony collapse disorder.No one's really sure what's causing the disorder, evident when adult bees abandon the hive...The U.S. Agriculture Department has earmarked money and research to solving CCD because it says one-third of the human diet comes from insect-pollinated plants, and the honeybee is responsible for 80 percent of that pollination.
"As beekeepers we're confused and the scientific community is even more confused because they feel like they should be able to figure this out and get a handle on it, and yet there are so many variables they are just having a problem," said Adee, chairman of the legislative committee for the American Honey Producers Association.
Researchers with the Agricultural Research Service within the U.S. Department of Agriculture are chasing various theories about CCD, said Jon Lundgren, an ARS entomologist in Brookings not directly involved in the research.Among the possible causes are parasites, a virus, or pesticides.It may be a several factors resulting from stress on the bees, he said...The California almond industry covers about 600,000 acres and prefers two bee colonies per acre to do a good job during a pollinating season that lasts about six weeks.

The Independent (UK)
Albert Einstein speculated that "If the bee disappeared off the surface of the globe, then man would only have four years of life left."
Species under threat: Honey, who shrunk the bee population?
Across America, millions of honey bees are abandoning their hives and flying off to die, leaving beekeepers facing ruin and US agriculture under threat. And to date, no one knows why...Michael McCarthy
It has echoes of a murder mystery in polite society. There could hardly be a more sedate and unruffled world than beekeeping, but the beekeepers of the United States have suddenly encountered affliction, calamity and death on a massive scale. And they have not got a clue why it is happening.
Across the country, from the Atlantic coast to the Pacific, honey bee colonies have started to die off, abruptly and decisively. Millions of bees are abandoning their hives and flying off to die (they cannot survive as a colony without the queen, who is always left behind).
Some beekeepers, especially those with big portable apiaries, or bee farms, which are used for large-scale pollination of fruit and vegetable crops, are facing commercial ruin - and there is a growing threat that America's agriculture may be struck a mortal blow by the loss of the pollinators. Yet scientists investigating the problem have no idea what is causing it.
The phenomenon is recent, dating back to autumn, when beekeepers along the east coast of the US started to notice the die-offs. It was given the name of fall dwindle disease, but now it has been renamed to reflect better its dramatic nature, and is known as colony collapse disorder.It is swift in its effect. Over the course of a week the majority of the bees in an affected colony will flee the hive and disappear, going off to die elsewhere. The few remaining insects are then found to be enormously diseased - they have a "tremendous pathogen load", the scientists say. But why? No one yet knows.
"We are extremely alarmed," said Diana Cox-Foster, the professor of Entomology at Penn States University and one of the leading members of a specially convened colony-collapse disorder working group."It is one of the most alarming insect diseases ever to hit the US and it has the potential to devastate the US beekeeping industry. In some ways it may be to the insect world what foot-and-mouth disease was to livestock in England."
Most of the pollination for more than 90 commercial crops grown throughout the United States is provided byApis mellifera, the honey bee, and the value from the pollination to agricultural output in the country is estimated at $14.6bn (£8bn) annually. Growers rent about 1.5 million colonies each year to pollinate crops - a colony usually being the group of bees in a hive.
California's almond crop, which is the biggest in the world, stretching over more than half a million acres over the state's central valley, now draws more than half of the mobile bee colonies in America at pollinating time - which is now. Some big commercial beekeeping operations which have been hit hard by the current disease have had to import millions of bees from Australia to enable the almond trees to be pollinated.
Some of these mobile apiaries have been losing 60 or 70 per cent of their insects, or even more. "A honey producer in Pennsylvania doing local pollination, Larry Curtis, has gone from 1,000 bee colonies to fewer than eight," said Professor Cox-Foster. The disease showed a completely new set of symptoms, "which does not seem to match anything in the literature", said the entomologist...
Professor Cox-Foster went on: "And another unusual symptom that we're are seeing, which makes this very different, is that normally when a bee colony gets weak and its numbers are decreasing, other neighbouring bees will come and steal the resources - they will take away the honey and the pollen. Other insects like to take advantage too, such as the wax moth or the hive beetle. But none of this is happening. These insects are not coming in.This suggests that there is something toxic in the colony itself which is repelling them."
The scientists involved in the working group were surveying the dead colonies but did not think the cause of the deaths was anything brought in by beekeepers, such as pesticides, she said.Another of the researchers studying the collapses, Dennis van Engelsdorp, a bee specialist with the State of Pennsylvania, said it was still difficult to gauge their full extent. It was possible that the bees were fleeing the colonies because they sensed they themselves were diseased or affected in some way, he said. This behaviour has been recorded in other social insects, such as ants.
The introduction of the parasitic bee mite Varroa in 1987 and the invasion of the Africanised honey bee in 1990 have threatened honey bee colonies in the US and in other parts of the world, but although serious, they were easily comprehensible; colony collapse disorder is a deep mystery.
One theory is that the bees may be suffering from stress as beekeepers increasingly transport them around the country, the hives stacked on top of each other on the backs of trucks, to carry out pollination contracts in orchard after orchard, in different states.
Tens of billions of bees are now involved in this "migratory" pollination. An operator might go from pollinating oranges in Florida, to apples in Pennsylvania, to blueberries in Maine, then back to Massachusetts to pollinate cranberries.
The business is so big that pollination is replacing honey-making as the main money earner at the top end of the beekeeping market, not least because in recent years the US has been flooded with cheap honey imports, mainly from Argentina and China...

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Speculators whipsaw farm commodity futures markets

Submitted: Mar 31, 2008

Capital Press
Regulators probe market volatility...MATTHEW PERRONE (AP)
WASHINGTON - Costlier corn flakes, pricier pizzas and painful pump fill-ups share more than top billing among consumers' worries.They're all riding a roller coaster of commodity market prices, where peaks are unusually high. Like oil futures, agricultural futures have experienced dramatic highs and lows in recent months as Wall Street investors flock to commodities for protection from the falling dollar and slumping stocks.
But the ups and downs in futures prices are giving grain sellers and farmers financial vertigo. Instead of finding predictable prices for wheat, corn and other crops in futures markets, they're getting daily price jolts and no refuge from uncertainty.That has prompted government regulators to examine what forces, if any, have thrown the markets off balance.The Commodity Futures Trading Commission said last week it will meet with farmers, traders and grain sellers next month to assess the recent price jumps...
"There has been a huge influx of capital from index funds and pension funds to the point now where futures markets are not reflecting actual supply and demand," said Todd Kemp, spokesman for the National Grain and Feed Association.
As a result, Kemp said grain buyers have had to pay more to hedge themselves against future price shifts. Some of those expenses have been passed on to food processors and then to consumers. The futures volatility is adding to a cocktail of cost-raising factors that have pushed bread, cereal and other staples to record highs.
The price of white bread rose to $1.32 a pound last month, up 28 percent from a year ago, according to government data.
The U.S. wheat crop has been shrinking since the early 1980s as many farmers have decided to plant more profitable crops. President Bush signed energy legislation in December that is expected to encourage farmers to plant more corn, which can be processed into ethanol.
At the same time, poor wheat harvests in Australia and parts of Europe caused China and other Asian countries to buy up more American crops.The combination of real-world demand and turbulent markets has placed farmers in an unusual situation.
"These are very favorable prices for farmers, but they can't benefit from them if they can't sell their futures," said Melvin Brees, an agriculture analyst at the University of Missouri. Turbulence in the market has put financial strain on grain buyers, causing them to scale back spending on futures.
In the latest shift, agriculture futures plummeted last week as a rebounding dollar persuaded many investors to sell their holdings in commodities. Wheat futures closed below $10 a bushel on the Chicago Board of Trade for the first time in more than six weeks...Traditionally, as a futures contract is about to expire, its value converged with the approximate cash price of the commodity. But in recent months there have been increasing gaps between futures and cash prices..."Speculators have probably put some error in the futures market," said Darrell Good, professor of agriculture economics at the University of Illinois..."We do have a lot more speculative money in these markets, but even so the system should be designed so the delivery process works," Good said.
Wall Street Journal
Grain Elevators Caught Between Farm Boom, Credit Crunch...LAUREN ETTER and SCOTT PATTERSON
A fault line is emerging in the U.S. farm economy, as rising grain prices and the credit crunch combine to squeeze grain elevators, a crucial business link between farmers and markets.
Grain elevators that collect grains from farmers and sell them up the food chain have seen their costs of doing business balloon as prices of corn, wheat, soybeans and other grains have soared to record levels. At the same time, lenders chastened by the subprime mortgage crisis have grown increasingly reluctant to extend money to tide the elevators over.
Some elevators already have gone out of business. Big agriculture companies such as Cargill Inc. and Archer-Daniels-Midland Co. have altered the way they do business with farmers in some cases. State and federal regulators have begun to take note. If many more elevators fold, there could be a cascading financial impact on banks and financial institutions that manage futures accounts for elevators.
"We could have an explosive problem on our hands," says Diana Klemme, vice president at Grain Service Corp., an agriculture risk-management and brokerage house in Atlanta.
Few sectors of the economy have gone unscathed by the economic downturn, but agriculture has largely fared well as corn, wheat and other grain prices have been driven up by global demand for food and biofuels. In part due to higher prices, U.S. farm income this year is projected to reach a record $92.3 billion, while food prices have jumped by nearly 5% in the past year.
Farmers looking to lock in profits now are entering contracts with elevators to sell grains that won't be harvested for two to three years. To offset their risk that prices will fall, elevators typically then sell a futures contract on an exchange like the Chicago Board of Trade. Whenever the price of the grain goes higher than what is in that contract, the elevator has to make a margin call -- or post an additional amount of money to keep the account current.
These margin calls have become a crushing burden. Before the recent grain boom, a midsize elevator might have had to make a daily margin call of about $200,000 on a day when a grain market rallied. Now, it isn't uncommon for that same elevator to have a daily margin call of $1 million or more. Many elevators, lacking that much cash on hand, then turn to their banks for help. But even though the farm economy is strong, rural and agriculture lenders have stopped lending additional money in some cases as elevators have exhausted their credit limits.
Many grain elevators are "at their ropes' end financially," says Michael Swanson, an agriculture economist at Wells Fargo, a big lender to farm country. But as grain prices continue to rise, "a lot of lending institutions will call into question whether they can write another $50 million check for another margin call. The credit crunch is very real"...Stuart Selinger, bureau chief of the Illinois Department of Agriculture's Bureau of Warehouses, which regulates grain dealers, says he is concerned about a potential wave of defaults by grain elevators. His staff is currently liquidating the assets of a small Illinois grain elevator, The Grain Exchange, based near St. Louis.
The 15-year-old company faced a sharp run-up in margin calls that it couldn't meet -- to $5 million this year from $2 million last year -- as grain prices soared, says owner John Kniepmann. Its license to buy and store grains was suspended March 3. "My life and business have been turned upside-down," says Mr. Kniepmann, who doesn't plan to restart his business...Even big companies are feeling the effects. Cargill's grain-merchandising unit, AgHorizons, recently stopped offering grain contracts to farmers in some areas unless they could deliver grain to the elevator within 60 days, eliminating an important tool for farmers to hedge their risks against grain prices plummeting. Cargill spokesman David Feider, says, "We have made some changes given the market conditions."
Rival Archer-Daniels-Midland also has limited some of its contracts to farmers. Company spokesman David Weintraub says ADM doesn't comment on its hedging strategies.
Moves like those have crimped farmers' ability to manage risk in volatile grain markets. "I never really saw this coming," says John Phipps, a farmer in Chrisman, Ill., who learned recently that his largest customer, Cargill, would no longer take his grain under previous terms. "Forward contracting is such a basic, fundamental and routine exercise." Now, "My entire marketing plan fell apart."
One potential contributing factor is that new investors like index funds have flooded into agriculture commodities -- along with gold, oil and other commodities -- as a shelter from fizzling stock markets and other investments. Total index-fund investment in corn, soybeans, wheat, cattle and hogs has increased to about $42 billion, up from just over $10 billion in 2006, according to AgResource Co., a Chicago-based agriculture research firm.
The added trading activity by these institutions has helped drive up grain prices to levels unsupported by underlying fundamentals, some farmers say.
Government regulators are monitoring the role that these new investors are playing in commodity markets to ensure they aren't "the gorilla in the room breaking all the china," says Jeff Harris, chief economist at the Commodity Futures Trading Commission, the government agency that regulates commodity futures and option markets.
It is a delicate balance, though. If regulators were to restrict index funds' investment activity too much, grain prices could tumble...Ms. Klemme, the grain broker, takes solace in the Federal Reserve's recent action rescuing Bear Stearns Cos. That "gives me hope," she says. "If there is a liquidity crisis it's good to know there can be money made available for the banking system."
Grain Outlook: Financial Woes Fail To Corral The Bulls
Absent fresh fundamental supply and demand news, the grain and oilseed markets have been whipsawed by factors from outside of agriculture lately. The falling value of the dollar against other major currencies has boosted commodity prices. But the turmoil in the financial markets has had the greatest effect on the commodity markets in recent weeks.
Since last fall, growing global demand, tight supplies, and the weak U.S. dollar have pushed prices of most commodities up. Institutional investors, including the so called hedge funds, sensed opportunities to benefit from inflation as well as to earn sizable profits and shifted money out of real estate and stocks into commodities, sending prices to historic high levels. Firms of this type tend to be highly leveraged, meaning they multiply the returns to their own equity by also investing large amounts of borrowed money.
The subprime mortgage mess was supposed to be just a bump in the road for the financial community. It has turned out to be more severe than first thought and has sent ripples far beyond banks and other financial firms. Lenders are revaluing risk and stiffening criteria for borrowers to qualify for loans. Losses have lowered their financial reserves reducing their ability to make new loans. The resulting credit crunch is impacting a broad range of industries.
High commodity prices and increased commodity exchange margin requirements have been stretching the financial resources of all agribusiness firms including those in the grain and oilseed trades and speculators. Hedge funds and other speculators have had difficulty in coming up with cash when faced with margins calls. Rather than go to lenders, many of which are having liquidity problems of their own, the speculators have resorted to raising money by cashing out of profitable commodity positions causing temporary, but sometimes wide, price fluctuations.
Hedgers such as country elevators and even large grain trading companies, which have on-going business reasons to buy and sell futures contracts, are bumping up against their borrowing limits. The financial community credit woes are making lenders wary of extending more credit. At the same time, wide daily price fluctuations and the unwillingness to expose themselves to further price risk have caused grain buyers to make grain basis bids only.
These developments have had the effect of reducing cash forward contracting opportunities for grain and oilseed producers unless they are willing to use futures forward contracts, and put up the margin money themselves, or buy options. But it hasn’t had much effect on the bullish tendencies of the markets.
The March World Agricultural Supply and Demand Estimates report released this morning by the USDA contained some surprises in estimated production and carryover supplies. Though small, the surprises could have a major impact on markets super-sensitive to even small changes in supply or demand as the spring planting Battle for Acres is about to play out.
Traders, who had been engaged in pre-report position jockeying for several trading sessions, guessed wrong on corn and were a little too conservative on soybean and wheat carryovers.
There were absolutely no changes in the USDA numbers for corn from last month’s WASDE report. Strong U.S. corn exports had traders convinced the USDA would lower corn carryover. At 11% of usage, the corn carryover this year is even tighter than last year when it was 12%. Traders still expect the USDA to lower corn carryover after the release of the quarterly stocks and planting intentions report at the end of the month. The global coarse grain supply was increased in the report, mostly due to increased Brazilian corn production. Ample rain improved yield prospects for the summer crop and high corn price is expected to stimulate an increase in winter corn plantings in Northern Brazil.
The USDA dropped U.S. wheat carryover by 30 million bushels, 23 million bushels more than the average trade estimate. At ten percent of usage, that will leave the U.S. a little more than a one month supply at the end of the marketing year for wheat on May 31st. The last time the U.S. had a wheat carryover that low was in the 1946/47 marketing year. The global carryover supply of wheat remained at a 30 year low despite slightly better than anticipated crops in India, Brazil, and Australia...

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Submitted: Mar 30, 2008

California, particularly the San Joaquin Valley, staked its whole future on the real estate speculation. And things are now coming apart in a big way.

The Valley, of course, is not New York or Washington, where the decisions were made that created both the housing bubble and its bust. Our local finance, insurance, real estate, landowning and political leaders (FIRE Plus) are merely reacting to forces far beyond their control. Their thinking, in a literal sense, is totally "derivative." But, if rumbles in the County Administrative Building are any indication, the local chapter of FIRE Plus is in a major panic.

At the bottom, there are some local stories about the regional real estate deal. However, I included parts of Doug Noland's recent piece in Asia Times above them to provide a critical perspective on the de facto nationalization of Fannie Mae and Freddie Mac. Noland puts forth a convincing argument that this latest Bush-administration handout to cronies is the financial equivalent of the invasion of Iraq.

The Valley "leaders" remind us of a pied piper whose melodious flak has led the regional economy into a barrel now under heavy fire. Still, even in such an unpleasant situation, it is possible to think critically and perhaps decide what to protect and preserve. But, that thinking cannot occur in an atmosphere dominated by group panic and reaction, attacks on the most vulnerable citizens and blind lashing out. Real estate values are falling because they were highly inflated. As a result of the international real estate bubble, which created a great deal of paper wealth in this region (and enormous political corruption), the entire credit system -- apparently in the whole world -- is melting.

It has been clear since the bubble began that its critics had it right: it was unsustainable and would lead us into uncharted financial waters. The press has been full of stories including indications that "it has not been this bad for five years, 10 years, 20 years, since as long as I've been in real estate, since as long as such and such an agency has been keeping that kind of records ..." all tending back toward 1929 and the early Thirties. This is no dotcom collapse, the near meltdown of the Long-Term Capital Management or the 1987 stock market crash. It isn't even another S&L collapse. Something is happening that may not be described adequately by the word, "recession."

And yet, the level of denial today is even higher than the level of denial during the height of the bubble, and the acting out of greed sickness -- in fear now rather than in arrogance -- is even more demonstrable. Local government, the land-use agencies that approved all the projects, many of them half-finished and containing growing numbers of empty houses, seems to have adopted panic as the appropriate response. Perhaps this reflects the number of ruined speculators among our local officials. It certainly reflects general funding problems states, counties and cities are encountering. But, instead of the leadership the public has a right to, especially in critical times like these, we are getting a pathetic display of cringing cowardice, greater lies and suppression of public information, hostility and even a few actions that border on the psychotic from local officials. Examples are evident in a region whose entire power structure has been based on land ownership since the end of Indian times.

Badlands Journal editorial board

Asia Times
Nationalization and dislocation
Commentary and weekly watch by Doug Noland
As long-time readers are all too familiar, I have been a persistent critic of government-sponsored enterprises, or GSEs - notably mortgage finance agencies Fannie Mae and Freddie Mac. These behemoths of historic credit excess - instigators of the mortgage finance and housing bubbles - liquidity backstops for the ballooning leveraged speculating community - and instrumental agents for an unparalleled misallocation of financial and economic resources - are proving themselves the Freddie Krueger of systemic distortions and policy failures.
Two recent comments, the first from Friday's Washington Post,paint part of the picture:

To understand Wednesday's decision by federal regulators to let Fannie Mae and Freddie Mac set aside less cash to protect against losses, imagine a family that keeps its precious antique silver in a strongbox on a high shelf, beyond easy reach. The regulators have essentially authorized Fannie and Freddie to pawn some of their family silver.
Currently, the two firms, known as government-sponsored enterprises, or GSEs, have combined reserves of US$82 billion. This includes an extra amount that the regulator, the Office of Federal Housing Enterprise Oversight (OFHEO), required them to hold while they got their books in order after accounting scandals. Now it is reducing that extra cushion by $5.8 billion. The newly freed-up money will leverage the purchase and securitization of up to $200 billion in home loans.
The point, however, is not to save Fannie and Freddie themselves but to use the two firms, which buy mortgages and resell bunches of them to investors in the form of bonds, to ease the difficulties of borrowers more generally. It’s as if our hypothetical family pawned its silver to help the neighbors out of a financial jam … This is risky. If all goes well, freeing up the GSEs will buoy mortgage lending, thus slowing or reversing the slide in housing prices … But if housing continues to tank, and the GSEs rack up new multibillion-dollar losses on top of those they have already incurred in recent months, they will have that much less in reserve to fall back on. The GSEs enjoy an implicit federal guarantee, but reducing their capital for a purpose such as this, at a time such as this, goes a fair way toward making that bailout promise an explicit one. (Washington Post, March 21)

I found OFHEO director James Lockhart's interview late Wednesday afternoon on CNBC also worthy of documentation:...

Lockhart: Well, it may take awhile. The mortgage market is one issue, but there are some other markets out there as well. I think this is going to be a major step forward. As you said, they can do $200 billion in purchases immediately. And to the extent they’re guaranteeing mortgage-backed securities - that could almost get into the trillions. We’re looking at that they would have the capacity - between what we did today and the significant capital raising that they committed to - they could do over $2 trillion in business this year if the market needs that money.

It would be an outright crime if thinly capitalized Fannie and Freddie were allowed to increase their Books of Business (mortgages retained on their balance sheets and MBS guaranteed in the marketplace) by $2 trillion this year - "if the market needs that money".
I was shocked when Mr Lockhart imparted that they were now in a position to accomplish such a feat. It is certainly a terrible idea to put Fannie and Freddie guarantees on millions of new mortgages created from restructuring loans of troubled borrowers. This would amount to nothing less than a despicable transfer of massive prospective credit losses directly to the American taxpayer (current owners of this paper should not be bailed out).
Wishful thinking
I have fully expected the GSEs, at some point, to be taken over by the federal government. It may have been orchestrated subtly, but I can only presume that such a historic endeavor was accepted last week as the only means of averting financial dislocation. And for their regulator to suggest that the GSEs today have any handle whatsoever over their unfolding "risk management" challenge is wishful thinking - at best.
As far as I’m concerned, much of the US mortgage market was this week essentially nationalized. I’ll take the dramatic narrowing in agency debt and MBS (mortgage-backed securities) spreads as support for this view. Additional support arrived from comments from Mr Lockhart, US Treasury Secretary Henry Paulson, and actions by the Federal Reserve. Having lived contently for years with the markets’ interpretation of the (grey-area) "implied" government backing of the GSEs, our policymakers are surely today satisfied with the inferred market acceptance of mortgage industry nationalization. To be sure, the Fed’s splashy "Sunday Night Special" bailout of Bear Stearns is rather trivial in both its implications and consequences when compared to Thursday’s quiet coup.
I have my own hunches about the rise and inevitable fall of the GSEs. I’ve always assumed that the Greenspan Fed was pleased (relieved?) to watch Fannie and Freddie morph in the early '90s from conservative mortgage insurance providers to aggressive bank-like lending institutions and market operators. GSE credit creation (and timely market interventions) worked greatly to alleviate the forceful economic headwinds created by an impaired banking system...
I also have a hunch with regard to Alan Greenspan's now infamous prodding, when he was Fed chairman, of households into adjustable-rate mortgages. I think he recognized clearly the degree to which the impaired GSEs (and their scantily capitalized counterparties) had become acutely vulnerable to a rise in market yields. As the Maestro, his interest-rate policies (market manipulations) orchestrated a massive shift of interest-rate risk from the financial sector to the household sector. In the process, however, recklessly low interest rates spurred unprecedented mortgage lending and speculative excesses that today imperil borrower, lender, leveraged speculator and system stability alike...
After first reaching $2 trillion in 1999, Fannie and Freddie’s combined books of business surpassed $5.0 trillion in January. This "book" increased $638 billion, or 16%, last year, in what will surely be the greatest transfer yet of risky mortgage credit to the GSEs (only to be greatly outdone in 2008). Interestingly, OFHEO, Washington politicians, and Wall Street analysts are keen to play a dangerous game pretending that there is limited risk in guaranteeing MBS (as opposed to the obvious risk associated with mortgages retained on their balance sheet). The absurdity of Mr Lockhart stating that the GSEs will be in a position to take on an additional $2 trillion of mortgage risk this year is simply incomprehensible. Keep in mind that the GSEs are on the hook for the "timely payment of principle and interest" on more than $5 trillion of American mortgages - and counting … Such obligations will, in the post-bubble era, prove untenable...Well, where are our "populist" statesmen today? The average American is getting slammed by rapid inflation in the prices for fuel, food, healthcare, education and other basis necessities. He was duped into various dangerous mortgage products to purchase homes with, in many cases, grossly inflated market values. Millions are in the process of losing virtually everything.
The average American was also duped into various risky investment products, while the bursting of bubble markets will leave him dreadfully unprepared for retirement. Now, he is seeing the returns from his savings crushed by the melee to bailout Wall Street "money changers" and speculators. Over the coming months, millions will lose their jobs with the inevitable adjustment and realignment to cope with post-bubble realities. And now, apparently, the American taxpayer is to sit back and watch his contingent liabilities balloon (even further) with the nationalization of the US mortgage market.
I understand perfectly the motivation Wall Street, the administration and the Fed have in blindly throwing the kitchen sink at this unfolding crisis. These are indeed scary times bereft of solutions. I am certainly familiar with the view that bailing out Wall Street and the speculators is medicine necessary to stabilize the system. But not only is this approach both inequitable and unethical on moral grounds, it is my view that such endeavors will prove only further destabilizing for the system overall...
Surely, policymakers were keen to mete out some punishment on the increasingly destabilizing "systemic risk trade" (shorting stocks, bonds, credit derivative indices, buying bearish derivative products, etc.), but the upshot was only further destabilization.
News that the GSEs were back in the game in a big way added to an already highly unsettled situation for myriad sophisticated trading strategies. But before getting too excited about the spectacular short-squeeze, keep in mind that shorting has become an instrumental facet of leveraged speculator trading strategies - and, really, contemporary finance more broadly speaking. And the disintegration of an ever increasing number of hedge fund and Wall Street strategies, as I’ve written previously, remains at the heart of deepening monetary disorder.
Not surprisingly, the Fed could not risk a Bear Stearns failure - not with all of its derivative, repo and counterparty exposures. It really was not a difficult fix. Yet the rapidly lengthening line of vulnerable non-bank lenders (Thornburg, CIT Group, and Rescap come immediately to mind) and hedge funds will pose a greater challenge. There are some very substantial balance sheets at risk and significantly more "de-leveraging" in the offing - and the big banks will have no appetite.
The S&P500 is down a modest 7% from the much-changed financial and economic world of one year ago. While having little impact on the unfolding credit crisis (or home prices), policymakers have thus far largely succeeded in sustaining inflated US stock prices. But, in reality, the profound deterioration in the US and global credit backdrop has greatly altered prospects for the vast majority of companies, industries, and the US and global economies more generally.
Unsustainable credit
Despite any number of policy actions and all the good intentions imaginable, there is absolutely no way that the US financial system will now be capable of sustaining either the (pre-bust) quantity of credit or the uniform flow of finance that levitated bubble economy asset prices, household incomes, corporate cash-flows, "investment" spending or consumption.
Huge sections of the credit infrastructures (notably throughout Wall Street-backed finance) are inoperable and discredited. Prominent monetary processes have been broken and the resulting flow of finance radically revamped.

Prospective credit and financial flows will prove insufficient for scores of companies, as well as for state and local governments and various entities all along the economic food chain. Enormous numbers of business downsizings and failures - many by companies that thrived during the bubble era - will lead to huge losses of jobs and incomes (many at the "upper end" where the greatest excesses transpired)...Nationalization will prove a further blow to already fragile confidence...

Sacramento Bee
Home Front: Sacramento-area home builders play it cautious...Jim Wasserman
Sacramento-area home builders are being extraordinarily cautious this year about starting new homes. That's evident in the newest count of building permits taken out at area city halls.Home builders in El Dorado, Placer, Sacramento and Yolo counties are pulling back at more than double the statewide average rate, seeking only 589 building permits to start new houses, condominiums and apartments in January and February. That compares with 1,833 permits the same time last year, the Burbank-based Construction Industry Research Board reports.In Yuba and Sutter counties, builders got 92 permits during the first two months of 2008. The same time last year they took out 234 permits. March figures aren't available yet...jobless numbers in the capital region are up nearly one percentage point over February 2007...Half or more of the region's homebuyers are choosing homes repossessed by banks. And the number of foreclosures that will lead to more bank-owned inventory for sale has not slowed.
This year's slowdown has builders worried statewide that government approvals for their newest subdivisions will expire before they get a chance to start building in them. They're pressing the Legislature to pass Senate Bill 1185, which would extend the life of California's existing subdivisions for two years. A similar bill passed in 1996, at the height of the state's last housing downturn..."What we're seeing, frankly, is that builders aren't willing to take any forward-looking risk at this time," says Gregory Group owner Greg Paquin. He says builders are making sure their buyers are serious and aren't starting construction until they're sure the deal won't be canceled.
Auctions rage on
Less than a year ago when the first big foreclosed-home auction came to Sacramento's Cal Expo, hundreds of bidders registered to buy 107 houses.Now, whenever Irvine auction giant Real Estate Disposition Corp. comes to town, there are almost four times that many. The firm's newest auction of Sacramento-area bank repossessions at Cal Expo is scheduled for April 19-20.
Bidders will have a crack at 397 homes. And that's just the Sacramento region. In total, more than 1,500 houses in Sacramento, Stockton, Merced, Fresno, San Jose and Oakland will go up for auction in April and early May...
REDC, which did big business in home auctions during the 1990s downturn, is really going to town in the current housing slump. A look at its auction calendar shows nearly 300 homes being auctioned this weekend in New York, New Jersey and Massachusetts. Starting next week the firm's auctioneers will unload 1,500 more in Southern California and 1,000 in Florida. More "huge" auctions are planned in May in Atlanta, Denver and Minnesota, the firm says.
What's it all mean for the market? Experts talk about a forest fire clearing out the underbrush so the green grass of a healthier market can reappear. This is the forest fire...
Rates edge down again
Finally, interest rates continued their downward drift for the second week in a row, falling to a national average of 5.85 percent for a 30-year fixed-rate loan. That's down from 5.87 percent last week, reported federal mortgage giant Freddie Mac.
Rates averaged 5.80 percent in the West, according to the firm's weekly survey.
The new rates mean lower borrowing costs at the same time Sacramento-area real estate agents and mortgage brokers are reporting multiple bids for homes priced in the $200,000 range.
Thirty-year rates reached their lowest point of the year, 5.48 percent, the week of Jan. 24. This time last year, they averaged 6.16 percent.
Bakersfield Californian
Party vigilance falls to neighbors...JOHN COX\
Leticia Avila’s blood pressure plummeted when she saw what partyers had done to her south Bakersfield home. Blood and spray paint stained her upstairs bedroom. Beer bottles littered the kitchen. Her fence had been partially torn down and many of her windows shattered. The scene was all the more shocking to Avila because she had put the home up for sale only about a month before, and was living just a few blocks away when police and neighbors say a large, unruly party broke out at the house.
By the time police arrived to break it up, a young man had been beaten unconscious and two others were badly hurt.
“It can’t continue like this,” she said.
But continue it has. In March, young people staged at least four large illegal parties in empty homes around Bakersfield, including the one March 2 at Avila’s home in the 5100 block of Yellow Rose Court, near Monitor Street and Pacheco Road.Youths partying in vacant houses is nothing new. What’s new, local authorities and real estate people say, is that the troubled housing market has widened the selection of empty homes, and so the parties are taking place in nicer, larger homes in more affluent neighborhoods...
Stockton Record
Realtors membership plummets
Decline attributed to market, internal disillusionment...Bruce Spence
The Central Valley Association of Realtors, a trade group covering Stanislaus County and much of San Joaquin County, was expecting a huge membership loss this year as more and more agents dropped out of the sales market. But instead of an expected drop from 2,900 to 1,700 year to year, the association, which mainly provides educational services and lobbying efforts, has seen membership shrivel to about 1,200...
North County Times
FALLBROOK: Homeowners upset by 'downsizing' plans...TOM PFINGSTEN
Homeowners in the new Shady Grove subdivision said Friday they were concerned that their upscale houses will plummet in value if the developer of the neighborhood is allowed to shrink the size of most of the homes that are still in the planning stages.Meanwhile, real estate industry analysts said the decision by KB Home to downsize the Shady Grove houses is just the latest example of a regional trend.
Those who already paid top dollar for custom-quality homes in the neighborhood say they're unhappy with the idea of smaller, cheaper homes filling up the rest of the subdivision.
Shady Grove resident Mickie St. Pierre said Friday that the 3,285-square-foot home she and her husband bought there cost more than $700,000 last year. After extensive upgrades, she estimated it would now be worth about $1 million, if the market recovered to where it was before the downturn.While it is uncertain what effect the smaller houses would have on the value of existing homes in the development, St. Pierre said she cringes when she thinks about it.
"You're talking about homes right around the corner that would go for $300,000 or $400,000, so (ours) would probably go down into the $700,000s or $800,000s," she said. "It's a huge loss."
Nicole Dennison, president of the Shady Grove Homeowners Association, said she and her husband bought their "dream home" at the hillside development last year, and that they were dismayed by the builder's plans for plainer, cheaper homes.
"I'd love to see KB Home stick it out and keep offering the original models they advertised," Dennison said. "I understand that it's business, but they'll cut the legs out from under the homeowners. (The owners) will never recoup what they've put into these houses"...Alan Nevin, an analyst for real estate tracking firm MarketPointe, said Friday that the Shady Grove case "is not isolated at all."
He said builders who replace original floor plans in their developments with smaller homes are usually trying to sell all the lots quickly.
"The reality is that firms like KB Home will probably wind up building those new (smaller) homes and making little, if any, profit, just to use up the lots," said Nevin. "In the world of publicly held builders, land is a liability, not an asset, so they try to remove themselves from heavy lot positions, and one of the ways they can do that is by downsizing their homes."

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