Right here in River City?

Submitted: Nov 10, 2007

The Sacramento-based law firm of Somach, Simmons and Dunn filed suit on November 5 against Riverside Motorsports Park (RMP) for breach of a promissory note. Somach alleges that John Condren, CEO of Riverside, signed a promissory note on August 17 for $147,703.32, payable on November 1 for legal services the firm rendered to RMP. The two Somach attorneys representing RMP departed that firm for another Sacramento firm about that time, presumably piling up new, unpaid legal bills. Only one of the questions raised by the Somach suit is who will pay RMP attorneys to defend against it.

There were recent reports about a similar situation between RMP and Merced County, currently being sued under the California Environmental Quality Act for approving the racetrack project. RMP is indemnifying the county for the lawsuit, presumably paying all its legal bills. Lawsuits are now flying around the Altamont Speedway, another RMP project. Then, there were the post-Merced County-approval revelations about Condren's prior unsavory business affairs. An interesting portrait is beginning to emerge. We don't refer to the portrait of Condren, who is beginning to look like a practitioner of a fascinating criminal specialty better dealt with by dramatic geniuses like David Mamet than by mere country bloggers. We refer to now suspected suckers in high places, the same glorious Merced business, professional and political leadership that brought the city the highest mortgage-foreclosure rate in the nation last month.

Common sense and a decent hope suggest that the talented impresario might vanish, a sack of other peoples' money in hand and a trail of unpaid bills behind him. If that came to pass, perhaps a little trail of smooth dirt could be fashioned on one or two of those RMP parcels, where the above-mentioned "leaders" caked with the well-known substance could peddle their grandchildrens' plastic tricycles and chant in unison, "Vroom, Vroom, Vroom," for public amusement at the First Annual Suckers 500.

Badlands Journal editorial board

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For shame

Submitted: Oct 24, 2007

The Valley has always been a hard place, no doubt of that. Merced County probably hasn't been better than the fifth hungriest county in the state at the best of times in the last decade (given poverty statistics on California counties), but now, in the wake of the greatest building boom in its history, it ranks as the third hungriest county in the state and its foreclosure rate is tops in the nation. One in ten go to bed hungry and one in 68 are in some stage of home foreclosure.

For shame -- if only the decision makers in Merced County had any shame. But in the county, for a period of nearly 15 years, decision makers have paid no attention to anything but the arrival of UC Merced and the residential development it induced. The finance, insurance and real estate special interests behind local landowners, developers and the campus employed legions of propagandists to confuse the Merced public to the extent that today, it cannot connect three dots a millimeter apart: UC Merced=speculative housing boom=concealment of chronic poverty. Now,that UC development didn't pan out to universal rising of all ships, the news of chronic poverty is back along with the big hand out to the state and federal government. It's just the latest version of the Great Valley Whine. But it would have been better if all the prominent Valley plutocrats who donated to UC Merced for the magnificent Blue and Gold Future had instead devoted their excess wealth to alleviating the Present Poverty. This is particularly true in the case of some of our wealthiest citizens, who make so much of their money off government subsidies, like Gallo Farming Co., which hauled down $855,000 in federal subsidies between 2003-2005 with a reported annual income of around $50 million from the largest dairy operation in the US. How much of the $996,000 subsidy over those years to the Nickel Family LLC state Senate candidate Wiley Nickel use for that dismal excuse for a campaign against the incumbent in 2006? Whatever that ridiculous excuse for a political campaign cost, it would have been better spent on school lunch programs.

At the risk of stalling the flow of invective, the editorial board thought at this point it might be interesting to take a trip down UC Bobcatflak Memory Lane to get a better look at the real leaders who jerk the chains of elected officials in Merced and other counties in the San Joaquin Valley. Although UC Merced now chooses to keep the membership of its foundation board of trustees concealed from the public, they were appointed with great fanfare and pride. It is a rare gathering of the wise Valley leaders, many of whom personally profited from inside information on the UCM campus location in the speculative real estate boom centered in the north San Joaquin Valley. In fact, UC Merced could be described as long-term blarney and short-term land boondoggle. These wise leaders of finance, insurance and real estate are responsible for the foreclosure rate in Merced County of one in 68 households and for moving the county from fifth to third place in the poverty/hunger scale statewide. Although space does not permit discussion the ironies of any particular notable, Valley people will get some dark, retrospective chuckles out of the list. UC Merced should have adopted a Rattle Snake as its mascot. The time is Spring, 2000. Carol Tomlinson-Keasey, the Cowgirl Chancellor, is in full cry:
(see Herself in full cowgirl regalia at

March 17, 2000

CONTACT: Ron Goble, Interim Communications Director, University of California, Merced, (209) 724-4400 or (559) 734-9046,

UC Merced introduces foundation board of trustees
MERCED -- University of California, Merced Chancellor Carol Tomlinson-Keasey has unveiled the university's 82-member Foundation Board of Trustees composed of some of the most prominent individuals in the San Joaquin Valley and beyond.

The founding UCM Board of Trustees will meet in an advisory capacity and offer counsel and direction to Chancellor Tomlinson-Keasey and her Vice Chancellors.

"Our Trustees are some of the most respected and highest profile corporate and professional leaders representing such vital valley interests as agriculture, oil, technology, medicine, law, education and science," said Tomlinson-Keasey. "We are overwhelmed that so many San Joaquin Valley and statewide leaders have chosen to join the UC Merced family. Their enlightened and insightful advice will be invaluable to me and help assure the success of the new campus."

Chancellor Tomlinson-Keasey explained: "Initially, we were contemplating a much smaller board of trustees. However, when we realized the interest of Central Valley leaders and the needs of the new campus, we thought we should start with a full complement of trustees. Thus, the UC Merced founding board will be the size and status of other UC campus boards."

The blue-ribbon board consists of several Silicon Valley executives from such companies as Lucent Technologies and Sun Microsystems. Several current and former members of the UC Board of Regents included in the UC Merced Board of Trustees are current UC Regent chairman, John Davies, former chairs Leo Kolligian, Meredith Khachigian and Roy Brophy, current Regent Odessa Johnson, former Regents Carol Chandler and Ralph Ochoa. In addition, UC President Richard C. Atkinson, and Emeritus Presidents David Gardner and Jack Peltason are members of the new board.

Tomlinson-Keasey noted that several board members were valley natives, but now reside elsewhere in California, such as former Olympic decathlon champion Rafer Johnson, actor/producer Mike Connors and former U.S. Congressman Tony Coelho.

The majority of the UCM Trustees, approximately 50, are CEOs of their corporations or organizations. All are prominent, but many have national and international prominence such as Robert Gallo of E&J Gallo Winery in Modesto, developer Fritz Grupe of Stockton, John Harris of Harris Ranch in Coalinga, President Eugene Voiland of Aera Energy in Bakersfield, and William Lyons Sr., agriculture leader from the Modesto area.

The first meeting of the new board will be held March 22 at the County Bank in Merced. The board is representative in size and structure to other UC campus boards which have traditionally taken years to put in place, said Tomlinson-Keasey.

The roster of all members of the board, their titles, affiliations and locations are:

Chuck Ahlem, Partner, Hilmar Cheese Company, Hilmar;

Richard C. Atkinson, President, University of California, Oakland;

Joseph Barkett, MD, Chairman of the Board, Sunset Corp., Acampa;

Dr. Kelly F. Blanton, Founder and Chairman, Corp., San Francisco;

Robert Bliss, Senior Vice President; NEC/BCS (West), Inc., Van Nuys;

Calvin Bright, President and Chairman, Bright Development, Modesto;

Roy Brophy, Former Chairman, UC Board of Regents, Fair Oaks;

Jim Burke, chairman, Jim Burke Ford, Bakersfield;

Bob Carpenter, President, Leap, Carpenter, Kemps, Merced;

Carl Cavaiani, President, Santa Fe Nut Company, Ballico;

Carol Chandler, California Women for Agriculture, Chandler Farms, Selma

Tony Coelho, Chairman, C/O Gore 2000, Washington, D.C.;

H.A. "Gus" Collin, Chairman, Sunsweet Growers, Inc., Yuba City;

J.F. Collins, President, J.F. Collins Co., Inc., Merced;

Mike Connors, Actor/Producer, Encino;

Roger Coover, President and Publisher, The Stockton Record, Stockton;

Dean Cortopassi, President/CEO, Santomo, Inc., Stockton;

Bert Crane Sr., President, Bert Crane Ranches, Merced;

Jim Cunningham, owner, Cunningham Ranch, LeGrand;

Frank Damrell Jr., Judge, United States District Court, Sacramento;

John Davies, Attorney-at-Law, Allen Matkins, Leck, Gamble & Mallory, San Diego;

Rayburn Dezember, Bank Board of Chairman, Bakersfield;

Diana Dooley, Attorney at Law, Paden & Dooley, Visalia;

James Duarte, President, Duarte Nursery, Inc., Hughson

Ben Duran, President, Merced College, Merced;

John Evans, Chairman of the Board, Evans Communications, Turlock;

Ted Falasco, President, Central Valley Concrete, Los Banos;

Robert Foy, Chairman of the Board, California Water Service Company, Stockton;

Robert Gallo, President, E&J Gallo Winery, Modesto;

John Garamendi, Yucaipa Company, Washington, D.C.;

David Gardner, President Emeritus, University of California, San Mateo;

Lewis Geyser, President, Destination Villages, Santa Barbara;

Price Giffen, President, Giffen Company, Fresno;

Mark Grewal, Vice President and Director, Boswell Company, Corcoran;

Fritz Grupe, Chairman/CEO, Grupe Company, Stockton

Ann Gutcher, Retired 1/28/00, Kern County Board of Trade, Bakersfield;

John Harris, President, Harris Farms and Harris Inns, Coalinga;

Joe Hartley, Director, Global Technology, Sun Microsystems, Palo Alto;

Daryl Hatano, Vice President, Public Policy, Semiconductor Industry Association, San Jose;

Tom Hawker, President/CEO, County Bank, Merced;

Odessa Johnson, Modesto Junior College, Modesto;

Rafer Johnson, Chairman, Special Olympics, Culver City;

Art Kamangar, Kamangar Ranches, Merced;

Edward Kashian, Chairman, Lance Kashian & Company, Fresno;

George Kelley, founder, Stevinson Ranch, Stevinson;

Meredith Khachigian, Former Chairman, UC Board of Regents, San Clemente;

Dorothy Kolligian, Civic Leader, Fresno;

Leo Kolligian, Former Chairman, UC Board of Regents, Fresno;

Joe Levy, Chairman of the Board, Gottschalks, Inc., Fresno;

Paul Lo, Attorney at Law, Allen Polgar, Proietti & Fagalde, Merced

Robert Luster, President/CEO, Luster Group, Inc., San Francisco;

William Lyons, Sr., President, Lyons Investments and Mapes Ranch, Modesto;

George Martin, Attorney at Law and Civic Leader, Borton, Pettini & Conron, Bakersfield;

Harold Meek, President, Three Way Chevrolet, Bakersfield;

Ginger Moorhouse, Publisher and Chairman of the Board, The Bakersfield Californian, Bakersfield;

Tapan Munroe, President, Munroe Consulting, Inc., Moraga;

John Myers, Attorney at Law and Rancher, Beverly Hills;

Kate Nyegaard, Civic Leader, Board of Directors George Lucas Foundation, Modesto;

Marilyn Ohanian, Psychologist & Civic Leader, State of California, Fresno

Ralph Ochoa, President, Ochoa & Sillas, Sacramento;

Richard Otter, Senior Vice President, Salomon Smith Barney, San Francisco;

Ashit Padwal, Director, Global Public Affairs, Lucent Technologies, Fremont;

Jack Peltason, President Emeritus, University of California, The Donald L. Bren Foundation, Newport Beach;

Samuel T. Reeves, President, Pinnacle Trading Inc., Fresno;

Curtis A. Riggs, President, VIA Adventures, Merced;

Kenneth Robbins, Attorney at Law, Mason, Robbins, Gnass & Browning, Merced;

Guillermo Rodriguez Jr., Assistant to the President, PG&E, San Francisco;

Fred Ruiz, Chairman of the Board, Ruiz Foods, Dinuba

Thomas Smith, President, CALCOT, Bakersfield;

Edward Spaulding, Director of Government and Public Affairs, The Chevron Companies, Bakersfield;

Jerry Stanners, President, Stanners Consulting, Bakersfield;

Timothy Steele, Vice President, Siemens Information and Communications Networks, Inc., Santa Clara;

Cleveland Stockton, Attorney at Law, Stockton & Sadler, Modesto;

Gerald Tahajian, Attorney at Law, Gerald Lee Tahajian, Inc., Fresno;

Ann Veneman, Attorney at Law, Sacramento;

E.J. (Gene) Voiland, President/CEO, Aera Energy LLC, Bakersfield;

Daniel Whitehurst, President, Farewell, Inc. Fresno;

Carol Whiteside, President, Great Valley Center, Modesto;

Roger Wood, Vice President, J.R. Wood, Inc., Atwater;

O. James Woodward III, Attorney at Law and Civic Leader, Fresno;

Stewart Woolf, President, Los Gatos Tomato, Inc., Huron;

Michael Zagaris, President, Zagaris Companies, Modesto.

The Badlands Journal editorial board, focused on social, economic and environmental justice, is frequently challenged in sneering tones by elected officials and their staffs to provide positive solutions to the questions it raises. Numerous warnings have appeared through the years on this site. None were heeded by the decision makers and certainly none by the puppetmasters behind the elected officials. In fact, decision makers are more hostile than ever. Presumably, that is their method of sublimating shame. They are human, they must see what is happening, but shame is an inconvenient emotion in the heart of American leaders at any level of government.

The litany: five of the seven Merced City Council are realtors; three of the five county supervisors are large landowners (one representing some of the nation's top recipients of farm subsidies), a fourth (failed dairyman) represents farmer/landowners (brother-in-law of the county farm bureau executive director and future president of California Women for Agriculture), and the fifth represents Atwater realtors (whose greed belies their size). We don't have the data on the Atwater and Livingston councils. The state senator is from Salinas and the assemblywoman is from Stockton (both with Livingston addresses at the moment). On behalf of UC Merced, finance, insurance and real estate special interests, landowners and members of his family and friends, the congressman led three attacks on the federal Endangered Species Act in his short, disgraceful term of office, most of it spent in former Rep. RichPAC Pombo's back pocket. These days, he seems to be leading unsuccessful attempts to subsidize fruit and nut growers, no doubt attempting to forestall the consequences of massive overproduction of almonds and the little problem with the Honey Bee.

For shame. These leaders, backed by the culture of Fat City easy virtue provided by the UC/Great Valley Center, spent 15 years focused madly on future residents of Merced, ignoring those who lived here now. They conducted a massive propaganda campaign against the Present Tense, which fed effortlessly into a speculative housing bubble that, in its aftermath, has caused a global credit crisis. It is a record of so nearly perfect social, economic and environmental injustice that it recalls a comment:

How can one defend a system that creates wealth by making the majority poor?
– Henry C. K. Liu (quoted by Mike Whitney) in Market Oracle:

It has taken a world credit crisis to slow our leaders down. They aren't stupid. They are quite cunning, calculating and subtle in the pursuit of wealth -- so much so, so nakedly in accord with what our congressman calls in reverent tones,

"the Valley Way of Life."

In fact, local government in Merced County (as is it in most places in California) is totally controlled by wealthy special interests. It is the planet on which our leaders have chosen to live, as opposed to where we live. If it weren't for the consequences of their 15 years of purely speculative thought, we might call it pathetic because it is veering so far so fast from the Earth of pain, suffering and the real, so long ignored economy of this county, agriculture, in irreversible decline because farmers have become primarily landowners in their minds.

It's hard to measure all the government aid that comes into this county. Between 1995-2005, the Environmental Working Group estimates that $186 million came to Merced farmers in subsidies. EWG admits that its records so far are only partial, but it has made strides recently on pass-throughs to individuals from agribusiness corporations. Still, with all that federal aid (not including publicly subsidized irrigation and all the other little things government does for our "family farmers," they are selling their land for subdivisions and commercial sites. This is the growth that kills. If land stays in agricultural production, the society has an opportunity to improve the farming system. Residential and commercial real estate development kills the option, not to mention what it does to the environment.

As for the public funds flowing into UC Merced, who can tell? What is the price for a well pimped, witless virgin ? All her relatives from the village in Mindanao are surrounding her to support her career in Manila to get their handouts.

Pathetic. Cruel. But Very Pacific Rim.

Badlands Journal editorial board

Modesto Bee
Jobless numbers ratchet up for Stanislaus, Merced, San Joaquin
Housing crisis cited for construction work loss in three counties...Christina Salerno
Unemployment rates in Stanislaus, San Joaquin and Merced counties swelled above last year's averages, the result of a shaky economy and deepening housing crisis. The three counties each gained at least a percentage point from the previous year, with Stanislaus County recording the biggest jump. The county went from an unemployment rate of 6.6 percent in September 2006 to 8 percent last month, according to state Employment Development figures released Friday. The construction sector, reeling from the downturn in home sales, posted the steepest decline over 12 months, 28,600 jobs statewide.
Modesto Bee
Valley home prices continue to plummet
Merced takes turn at top for lost homes
1 in 68 houses in county got foreclosure notices; SJ, Stanislaus not far behind...J.N. SBRANTI
It's a title no one wants, but counties in the Northern San Joaquin Valley keep passing around the undesirable honor of having the nation's highest home foreclosure rate.Merced County is the latest to get that title, pushing Stanislaus County into the No. 2 spot and San Joaquin County into No. 3.September filings show Merced County had the nation's highest percentage of homes in the foreclosure process. An estimated 1 in 68 homes there received some type of foreclosure notice last month, according to RealtyTrac, which monitors such statistics. That's more than eight times the national rate of 1 in 557 homes...
Merced Sun-Star
County ranks third in country for hunger
Food summit brings together several groups to try to solve the nutritional problems facing Merced's poor residents...Scott Jason
Merced County may be a thick slice of the Central Valley breadbasket, but more than a third of its poor adults scramble to eat the crumbs.
Yet 25,000 low-income adults here face that problem regularly, and an estimated 38.2 million Americans have trouble putting food on the table.
Though the statistic may drop jaws, it's not filling stomachs. That challenge has been undertaken by the Merced County Hunger Task Force. With Merced County ranked as the third-highest population in the country that has trouble feeding itself, the group of community service agencies met Friday for its second annual all-day summit about the hunger crisis.
While the idea of chronic hunger may conjure images of homeless residents, the problem afflicts seniors, children, students and, most surprisinglyMerced's working class that struggles to survive. out of 10 Merced County adults faces the prospect of going to bed hungry.
$1.1 million grant awarded to UC Merced...Victor A. Patton
Called the Ronald E. McNair Post-Baccalaureate Achievement Program, the grant will allow eligible students to receive up to $2,800 in the summer to support research related expenses. The funds will also let the students attend national and international conferences with their professors.
The program will provide about $220,000 to UC Merced each year for the next five years and is expected to benefit at least 50 students during its funding cycle
Environmentally friendly house going up -- made of straw...Dhyana Levey
Hay is for horses, straw is for houses.
That's what Jean Okuye of Livingston says.
Okuye, 67, began looking about three years ago for a way to build an energy-efficient home with sustainable products. "I wanted to work with nature as much as possible," she said. "A house with materials more cradle-to-cradle than cradle-to-grave."
That means she'd rather see her home products recycled and reused than end up at the bottom of a landfill. She has the future in mind -- five generations of family members have lived on her 78 acres of land, which was just put in a conservation easement. After researching her options online she connected with the eco-friendly Bay Area design and construction firm Skillful Means and learned all about the uses of straw bales.
Part of her inspiration may have been genetic. In her ancestors' Japan, as well as today, at least one room in many homes is made of tatami, straw mats, for flexibility and comfort. About 160 bales of rice straw now make up the walls of her new dwelling, which will be 1,370 square feet when it's done...
The straw provides effective insulation, which was a selling point on this project, said Okuye, an almond farmer and president of the Valley Land Alliance, which seeks to protect local farmland. Her goal was to conserve energy by creating a house without air conditioning or central heating.

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Kuttner: 1929 and 2007

Submitted: Oct 15, 2007

Testimony of Robert Kuttner
Before the Committee on Financial Services
Rep. Barney Frank, Chairman
U.S. House of Representatives
Washington, D.C.
October 2, 2007
Mr. Chairman and members of the Committee:

Thank you for this opportunity. My name is Robert Kuttner. I am an economics and financial journalist, author of several books about the economy, co-editor of The American Prospect, and former investigator for the Senate Banking Committee. I have a book appearing in a few weeks that addresses the systemic risks of financial innovation coupled with deregulation and the moral hazard of periodic bailouts.

In researching the book, I devoted a lot of effort to reviewing the abuses of the 1920s, the effort in the 1930s to create a financial system that would prevent repetition of those abuses, and the steady dismantling of the safeguards over the last three decades in the name of free markets and financial innovation.

Your predecessors on the Senate Banking Committee, in the celebrated Pecora Hearings of 1933 and 1934, laid the groundwork for the modern edifice of financial regulation. I suspect that they would be appalled at the parallels between the systemic risks of the 1920s and many of the modern practices that have been permitted to seep back in to our financial markets.

Although the particulars are different, my reading of financial history suggests that the abuses and risks are all too similar and enduring. When you strip them down to their essence, they are variations on a few hardy perennials -- excessive leveraging, misrepresentation, insider conflicts of interest, non-transparency, and the triumph of engineered euphoria over evidence.

The most basic and alarming parallel is the creation of asset bubbles, in which the purveyors of securities use very high leverage; the securities are sold to the public or to specialized funds with underlying collateral of uncertain value; and financial middlemen extract exorbitant returns at the expense of the real economy. This was the essence of the abuse of public utilities stock pyramids in the 1920s, where multi-layered holding companies allowed securities to be watered down, to the point where the real collateral was worth just a few cents on the dollar, and returns were diverted from operating companies and ratepayers. This only became exposed when the bubble burst. As Warren Buffett famously put it, you never know who is swimming naked until the tide goes out.

There is good evidence -- and I will add to the record a paper on this subject by the Federal Reserve staff economists Dean Maki and Michael Palumbo -- that even much of the boom of the late 1990s was built substantially on asset bubbles. ["Disentangling the Wealth Effect: a Cohort Analysis of Household Savings in the 1990s"]

A second parallel is what today we would call securitization of credit. Some people think this is a recent innovation, but in fact it was the core technique that made possible the dangerous practices of the 1920. Banks would originate and repackage highly speculative loans, market them as securities through their retail networks, using the prestigious brand name of the bank -- e.g. Morgan or Chase -- as a proxy for the soundness of the security. It was this practice, and the ensuing collapse when so much of the paper went bad, that led Congress to enact the Glass-Steagall Act, requiring bankers to decide either to be commercial banks -- part of the monetary system, closely supervised and subject to reserve requirements, given deposit insurance, and access to the Fed's discount window; or investment banks that were not government guaranteed, but that were soon subjected to an extensive disclosure regime under the SEC.

Since repeal of Glass Steagall in 1999, after more than a decade of de facto inroads, super-banks have been able to re-enact the same kinds of structural conflicts of interest that were endemic in the 1920s -- lending to speculators, packaging and securitizing credits and then selling them off, wholesale or retail, and extracting fees at every step along the way. And, much of this paper is even more opaque to bank examiners than its counterparts were in the 1920s. Much of it isn't paper at all, and the whole process is supercharged by computers and automated formulas. An independent source of instability is that while these credit derivatives are said to increase liquidity and serve as shock absorbers, in fact their bets are often in the same direction -- assuming perpetually rising asset prices -- so in a credit crisis they can act as net de-stabilizers.

A third parallel is the excessive use of leverage. In the 1920s, not only were there pervasive stock-watering schemes, but there was no limit on margin. If you thought the market was just going up forever, you could borrow most of the cost of your investment, via loans conveniently provided by your stockbroker. It worked well on the upside. When it didn't work so well on the downside, Congress subsequently imposed margin limits. But anybody who knows anything about derivatives or hedge funds knows that margin limits are for little people. High rollers, with credit derivatives, can use leverage at ratios of ten to one, or a hundred to one, limited only by their self confidence and taste for risk. Private equity, which might be better named private debt, gets its astronomically high rate of return on equity capital, through the use of borrowed money. The equity is fairly small. As in the 1920s, the game continues only as long as asset prices continue to inflate; and all the leverage contributes to the asset inflation, conveniently creating higher priced collateral against which to borrow even more money.

The fourth parallel is the corruption of the gatekeepers. In the 1920s, the corrupted insiders were brokers running stock pools and bankers as purveyors of watered stock. 1990s, it was accountants, auditors and stock analysts, who were supposedly agents of investors, but who turned out to be confederates of corporate executives. You can give this an antiseptic academic term and call it a failure of agency, but a better phrase is conflicts of interest. In this decade, it remains to be seen whether the bond rating agencies were corrupted by conflicts of interest, or merely incompetent. The core structural conflict is that the rating agencies are paid by the firms that issue the bonds. Who gets the business -- the rating agencies with tough standards or generous ones? Are ratings for sale? And what, really, is the technical basis for their ratings? All of this is opaque, and unregulated, and only now being investigated by Congress and the SEC.

Yet another parallel is the failure of regulation to keep up with financial innovation that is either far too risky to justify the benefit to the real economy, or just plain corrupt, or both. In the 1920s, many of these securities were utterly opaque. Ferdinand Pecora, in his 1939 memoirs describing the pyramid schemes of public utility holding companies, the most notorious of which was controlled by the Insull family, opined that the pyramid structure was not even fully understood by Mr. Insull. The same could be said of many of today's derivatives on which technical traders make their fortunes.

By contrast, in the traditional banking system a bank examiner could look at a bank's loan portfolio, see that loans were backed by collateral and verify that they were performing. If they were not, the bank was made to increase its reserves. Today's examiner is not able to value a lot of the paper held by banks, and must rely on the banks' own models, which clearly failed to predict what happened in the case of sub-prime. The largest banking conglomerates are subjected to consolidated regulation, but the jurisdiction is fragmented, and at best the regulatory agencies can only make educated guesses about whether balance sheets are strong enough to withstand pressures when novel and exotic instruments create market conditions that cannot be anticipated by models.

A last parallel is ideological -- the nearly universal conviction, 80 years ago and today, that markets are so perfectly self-regulating that government's main job is to protect property rights, and otherwise just get out of the way.

We all know the history. The regulatory reforms of the New Deal saved capitalism from its own self-cannibalizing instincts, and a reliable, transparent and regulated financial economy went on to anchor an unprecedented boom in the real economy. Financial markets were restored to their appropriate role as servants of the real economy, rather than masters. Financial regulation was pro-efficiency. I want to repeat that, because it is so utterly unfashionable, but it is well documented by economic history. Financial regulation was pro-efficiency. America's squeaky clean, transparent, reliable financial markets were the envy of the world. They undergirded the entrepreneurship and dynamism in the rest of the economy.

Beginning in the late 1970s, the beneficial effect of financial regulations has either been deliberately weakened by public policy, or has been overwhelmed by innovations not anticipated by the New Deal regulatory schema. New-Deal-era has become a term of abuse. Who needs New Deal protections in an Internet age?

Of course, there are some important differences between the economy of the 1920s, and the one that began in the deregulatory era that dates to the late 1970s. The economy did not crash in 1987 with the stock market, or in 2000-01. Among the reasons are the existence of federal breakwaters such as deposit insurance, and the stabilizing influence of public spending, now nearly one dollar in three counting federal, state, and local public outlay, which limits collapses of private demand.

But I will focus on just one difference -- the most important one. In the 1920s and early 1930s, the Federal Reserve had neither the tools, nor the experience, nor the self-confidence to act decisively in a credit crisis. But today, whenever the speculative excesses lead to a crash, the Fed races to the rescue. No, it doesn't bail our every single speculator (though it did a pretty good job in the two Mexican rescues) but it bails out the speculative system, so that the next round of excess can proceed. And somehow, this is scored as trusting free markets, overlooking the plain fact that the Fed is part of the U.S. government.

When big banks lost many tens of billions on third world loans in the 1980s, the Fed and the Treasury collaborated on workouts, and desisted from requiring that the loans be marked to market, lest several money center banks be declared insolvent. When Citibank was under water in 1990, the president of the Federal Reserve Bank of New York personally undertook a secret mission to Riyadh to persuade a Saudi prince to pump in billions in capital and to agree to be a passive investor.

In 1998, the Fed convened a meeting of the big banks and all but ordered a bailout of Long Term Capital Management, an uninsured and unregulated hedge fund whose collapse was nonetheless putting the broad capital markets at risk. And even though Chairman Greenspan had expressed worry two years (and several thousand points) earlier that "irrational exuberance" was creating a stock market bubble, big losses in currency speculation in East Asia and Russia led Greenspan to keep cutting rates, despite his foreboding that cheaper money would just pump up markets and invite still more speculation.

And finally in the dot-com crash of 2000-01, the speculative abuses and insider conflicts of interest that fueled the stock bubble were very reminiscent of 1929. But a general depression was not triggered by the market collapse, because the Fed again came to the rescue with very cheap money.

So when things are booming, the financial engineers can advise government not to spoil the party. But when things go bust, they can count on the Fed to rescue them with emergency infusions of cash and cheaper interest rates.

I just read Chairman Greenspan's fascinating memoir, which confirms this rescue role. His memoir also confirms Mr. Greenspan's strong support for free markets and his deep antipathy to regulation. But I don't see how you can have it both ways. If you are a complete believer in the proposition that free markets are self-regulating and self- correcting, then you logically should let markets live with the consequences. On the other hand, if you are going to rescue markets from their excesses, on the very reasonable ground that a crash threatens the entire system, then you have an obligation to act pre-emptively, prophylactically, to head off highly risky speculative behavior. Otherwise, the Fed just invites moral hazards and more rounds of wildly irresponsible actions.

While the Fed and the European Central Bank were flooding markets with liquidity to prevent a deeper crash in August and September, the Bank of England decided on a sterner course. It would not reward speculators. The result was an old fashioned run on a large bank, and the Bank of England changed its tune.

So the point is not that the Fed should let the whole economy collapse in order to teach speculators a lesson. The point is that the Fed needs to remember its other role -- as regulator.

One of the odd things about the press commentary about what the Fed should do is that it has been entirely along one dimension: a Hobson's choice: -- either loosen money and invite more risky behavior, or refuse to enable asset bubbles and risk a more serious credit crunch -- as if these were the only options and monetary policy were the only policy lever. But the other lever, one that has fallen into disrepair and disrepute, is preventive regulation.

Mr. Chairman, you have had a series of hearings on the sub-prime collapse, which has now been revealed as a textbook case of regulatory failure. About half of these loans were originated by non-federally regulated mortgage companies. However even those sub-prime loans should have had their underwriting standards policed by the Federal Reserve or its designee under the authority of the 1994 Home Equity and Ownership Protection Act. And by the same token, the SEC should have more closely monitored the so called counterparties -- the investment and commercial banks -- that were supplying the credit. However, the Fed and the SEC essentially concluded that since the paper was being sold off to investors who presumably were cognizant of the risks, they did not need to pay attention to the deplorable underwriting standards.

In the 1994 legislation, Congress not only gave the Fed the authority, but directed the Fed to clamp down on dangerous and predatory lending practices, including on otherwise unregulated entities such as sub-prime mortgage originators. However, for 13 years the Fed stonewalled and declined to use the authority that Congress gave it to police sub-prime lending. Even as recently as last spring, when you could not pick up a newspaper's financial pages without reading about the worsening sub-prime disaster, the Fed did not act -- until this Committee made an issue of it.

Financial markets have responded to the 50 basis-point rate-cut, by bidding up stock prices, as if this crisis were over. Indeed, the financial pages have reported that as the softness in housing markets is expected to worsen, traders on Wall Street have inferred that the Fed will need to cut rates again, which has to be good for stock prices.

Mr. Chairman, we are living on borrowed time. And the vulnerability goes far beyond the spillover effects of the sub-prime debacle.

We need to step back and consider the purpose of regulation. Financial regulation is too often understood as merely protecting consumers and investors. The New Deal model is actually a relatively indirect one, since it relies more on mandated disclosures, and less on prohibited practices. The enormous loopholes in financial regulation -- the hedge fund loophole, the private equity loophole, are justified on the premise that consenting adults of substantial means do not need the help of the nanny state, thank you very much. But of course investor protection is only one purpose of regulation. The other purpose is to protect the system from moral hazard and catastrophic risk of financial collapse. It is this latter function that has been seriously compromised.

HOEPA was understood mainly as consumer protection legislation, but it was also systemic risk legislation.

Sarbanes-Oxley has been attacked in some quarters as harmful to the efficiency of financial markets. One good thing about the sub-prime calamity is that we haven't heard a lot of that argument lately. Yet there is still a general bias in the administration and the financial community against regulation.

Mr. Chairman, I commend you and this committee for looking beyond the immediate problem of the sub-prime collapse. I would urge every member of the committee to spend some time reading the Pecora hearings, and you will be startled by the sense of déjà vu.

I'd like to close with an observation and a recommendation.

My perception as a financial journalist is that regulation is so out of fashion these days that it narrows the legislative imagination, since politics necessarily is the art of the possible and your immediate task is to find remedies that actually stand a chance of enactment. There is a vicious circle -- a self-fulfilling prophecy -- in which remedies that currently are legislatively unthinkable are not given serious thought. Mr. Chairman, you are performing an immense public service by broadening the scope of inquiry beyond the immediate crisis and immediate legislation.

Three decades ago, a group of economists inspired by the work of the late Milton Friedman created a shadow Federal Open Market Committee, to develop and recommend contrarian policies in the spirit of Professor Friedman's recommendation that monetary policy essentially be put on automatic pilot. The committee had great intellectual and political influence, and its very existence helped people think through dissenting ideas. In the same way, the national security agencies often create Team B exercises to challenge the dominant thinking on a defense issue.

In the coming months, I hope the committee hears from a wide circle of experts -- academics, former state and federal regulators, financial historians, people who spent time on Wall Street -- who are willing to look beyond today's intellectual premises and legislative limitations, and have ideas about what needs to be re-regulated. Here are some of the questions that require further exploration:

First, which kinds innovations of financial engineering actually enhance economic efficiency, and which ones mainly enrich middlemen, strip assets, appropriate wealth, and increase systemic risk? It no longer works to assert that all innovations, by definition, are good for markets or markets wouldn't invent them. We just tested that proposition in the sub-prime crisis, and it failed. But which forms of credit derivatives, for example, truly make markets more liquid and better able to withstand shocks, and which add to the system's vulnerability. We can't just settle that question by the all purpose assumption that market forces invariably enhance efficiency. We have to get down to cases.

The story of the economic growth in the 1990s and in this decade is mainly a story of technology, increased productivity growth, macro-economic stimulation, and occasionally of asset bubbles. There is little evidence that the growth rates of the past decade and a half -- better than the 1970s and ‘80s, worse than the 40's, 50's and ‘60s -- required or benefited from new techniques of financial engineering.

I once did some calculations on what benefits securitization of mortgage credit had actually had. By the time you net out the fee income taken out by all of the middlemen -- the mortgage broker, the mortgage banker, the investment banker, the bond-rating agency -- it's not clear that the borrower benefits at all. What does increase, however, are the fees and the systemic risks. More research on this question would be useful. What would be the result of the secondary mortgage market were far more tightly subjected to standards? It is telling that the mortgages that best survived the meltdown were those that met the underwriting criteria of the GSE's.

Second, what techniques and strategies of regulation are appropriate to damp down the systemic risks produced by the financial innovation? As I observed, when you strip it all down, at the heart of the recent financial crises are three basic abuses: lack of transparency; excessive leverage; and conflicts of interest. Those in turn suggest remedies: greater disclosure either to regulators or to the public. Requirement of increased reserves in direct proportion to how opaque and difficult to value are the assets held by banks. Some restoration of the walls against conflicts of interest once provided by Glass Steagall. Tax policies to discourage dangerously high leverage ratios, in whatever form.

Maybe we should just close the loophole in the 1940 Act and require of hedge funds and private equity firms the same kinds of disclosures required of others who sell shares to the public, which in effect is what hedge funds and private equity increasingly do. The industry will say that this kind of disclosure impinges on trade secrets. To the extent that this concern is valid, the disclosure of positions and strategies can be to the SEC. This is what is required of large hedge funds by the Financial Services Authority in the UK, not a nation noted for hostility to hedge funds. Indeed, Warren Buffet's Berkshire Hathaway, which might have chosen to operate as private equity, makes the same disclosures as any other publicly listed firm. It doesn't seem to hurt Buffett at all.

To the extent that some private equity firms and strategies strip assets, while others add capital and improve management, maybe we need a windfall profits tax on short term extraction of assets and on excess transaction fees. If private equity has a constructive role to play -- and I think it can -- we need public policies to reward good practices and discourage bad ones. Industry codes, of the sort being organized by the administration and the industry itself, are far too weak.

Why not have tighter regulation both of derivatives that are publicly traded and those that are currently regulated -- rather weakly -- by the CFTC: more disclosure, limits on leverage and on positions. And why not make OTC and special purpose derivatives that are not ordinarily traded (and that are black holes in terms of asset valuation), also subject to the CFTC?

A third big question to be addressed is the relationship of financial engineering to problems of corporate governance. Ever since the classic insight of A.A. Berle and Gardiner Means in 1933, it has been conventional to point out that corporate management is not adequately responsible to shareholders, and by extension to society, because of the separation of ownership from effective control. The problem, if anything, is more serious today than when Berle and Means wrote in 1933, because of the increased access of insiders to financial engineering. We have seen the fruits of that access in management buyouts, at the expense of both other shareholders, workers, and other stakeholders. This is pure conflict of interest.

Since the first leveraged buyout boom, advocates of hostile takeovers have proposed a radically libertarian solution to the Berle-Means problem. Let a market for corporate control hold managers accountable by buying, selling, and recombining entire companies via LBOs that tax deductible money collateralized by the target's own assets. It is astonishing that this is even legal, let alone rewarded by tax preferences, even more so when managers with a fiduciary responsibility to shareholders are on both sides of the bargain.

The first boom in hostile takeovers crashed and burned. The second boom ended with the stock market collapse of 2000-01. The latest one is rife with conflicts of interest, it depends heavily on the perception that stock prices are going to continue to rise at multiples that far outstrip the rate of economic growth, and on the borrowed money to finance these deals that puts banks increasingly at risk.

So we need a careful examination of better ways of holding managers accountable -- through more power for shareholders and other stakeholders such as employees, proxy rules not tilted to incumbent management, and rules that reward mutual funds for serving as the agents of shareholders, and not just of the profit maximization of the fund sponsor. John Bogle, a pioneer in the modern mutual fund industry, has written eloquently on this.

Interestingly, the intellectual fathers of the leveraged buyout movement as a supposed source of better corporate governance, have lately been having serious second thoughts.

Michael Jensen, one of the original theorists of efficient market theory and the so called market for corporate control and an advocate of compensation incentives for corporate CEOs has now written a book calling for greater control of CEOs and less cronyism on corporate boards. That cronyism, however, is in part a reflection of Jensen's earlier conception of the ideal corporation.

I don't have all the answers on regulatory remedies, but people smarter than I need to systematically ask these questions, even if they are beyond the pale legislatively for now. And there are scholars of financial markets, former state and federal regulators, economic historians, and even people who did time on Wall Street, who all have the same concerns that I do as well as more technical expertise, and who I am sure would be happy to find company and to serve.

One last parallel: I am chilled, as I'm sure you are, every time I hear a high public official or a Wall Street eminence utter the reassuring words, "The economic fundamentals are sound." Those same words were used by President Hoover and the captains of finance, in the deepening chill of the winter of 1929-1930. They didn't restore confidence, or revive the asset bubbles.

The fact is that the economic fundamentals are sound -- if you look at the real economy of factories and farms, and internet entrepreneurs, and retailing innovation and scientific research laboratories. It is the financial economy that is dangerously unsound. And as every student of economic history knows, depressions, ever since the South Sea bubble, originate in excesses in the financial economy, and go on to ruin the real economy.

It remains to be seen whether we have dodged the bullet for now. If markets do calm down, and lower interest bail out excesses once again, then we have bought precious time. The worst thing of all would be to conclude that markets self corrected once again, and let the bubble economy continue to fester. Congress has a window in which restore prudential regulation, and we should use that window before the next crisis turns out to be a mortal one.

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Submitted: Oct 11, 2007

The following is a report on a meeting held between top US Fish & Wildlife Service officials in Sacramento and representatives of non-government organizations concerned with California water issues and public employee responsibility for the environment. It was written by Felix Smith, retired USFWS fish biologist, representing the Save the American River Association.

Sense of the Meeting

Meeting with Mr. Steve Thompson and John Engbring of the California - Nevada Operations Office of FWS at 2800 Cottage Way, Sacramento, CA. October 1, 2007 at approximately 1:00 PM. Attending were Lloyd Carter (California Save Our Streams), Lisa Coffman (Executive Director, California Water Impact Network), Bill Jennings (Director, California Sports Fishing Protection Alliance), Karen Schambach (California Director, Public Employees for Environmental Responsibility) and Felix Smith (Save the American River Association).

This meeting was in response to my letter of August 21, 2007, to Mr. Thompson with copies to FWS Director Dale Hall and others. Mr. Engbring called me and we set up the meeting.

The purpose of the meeting was to help open communications with the interests sitting around the table and to help ensure that the brightest and most knowledgeable FWS scientists are able to speak good science, the truth to the public at large and to congressional committees, State Boards and commissions, independent bodies, etc.

Mr. Thompson is a member of the Senior Executive Service (SES) and is a career Fish and Wildlife Service employee. Mr. Thompson emphasized that the Service’s Sacramento staff is hard working. We have on staff some of the best biologists in the Service. Our field people are working along side Bureau staff with good results for fish and wildlife. He stressed that he does not like biologists working projects / investigations who are advocates for the resources or solutions. Mr. Thompson also stated that his office would continue to change documents / reports that did not measure up to established positions or didn’t “connect all the scientific dots”. He said that a report must stand on it own biological merits before the Service will support it. He advised that he was the lead person for the Klamath River water quality -fish issue. He added that the Klamath River issue was a little blown all out of proportion (Mr. Jennings commented -the fish kill?). Mr. Thompson commented there are a couple of issues here. The issues are dam impacts and removal, and water for salmon and endangered species. Regarding the Delta, Mr. Thompson stated this issue has developed over a long time and will not be solved over night. The 20 to 23 million people will get their drinking water; shutting down the pumps to protect the Delta smelt is not the solution. He did not offer a solution.

Mr. Thompson, when reminded about what FWS Regional Director Mr. Spear was told by a Congressional Subcommittee responded, he was aware, but would continue making decisions he has to make and is not worry about considering non-biological impacts. Mr. Jennings added there was an issue involving FERC and EBMUD and the Mokelumne River (See Summation).

Members of the group indicated that a Fish and Wildlife Coordination Act is a biological / ecological report on impacts to trust resources by a water development project or activity. And the same issues hold here as it does with Endangered Species Act reports. Considering non-biological information is not a part of a field biologist reporting process or in proposing recommendations to conserve and protect fish and wildlife.

· The public expects that Service biologists will speak the truth and the whole truth to the public, its representatives, independent bodies and individuals as well as helping to educate the layperson of fish and wildlife needs.
Mr. Thompson. Service managers will select the best person for the situation to represent FWS. Mr. Thompson did not want Joe Skorupa at the Senator Feinstein meeting regarding the selenium / drainage issue. Mr. Thompson made his thoughts known to FWS Washington. He believes that while Joe is a good scientist, he is too much of an advocate. The Service needs a more neutral person, not a data biased person or a person that gets in the press. He stated Joe Skorupa has been gone from California for a couple of years now and is no longer the most knowledgeable about the selenium drainage issue in California. Selenium or related issues in California are not really Mr. Skorupa’s job. Mr. Thompson will select the person that he believes will best represent the FWS interests given the situation. Mr. Thompson went on to add that the Service does not seem to have selenium or mercury drainage issues in Nevada that we have in CA.

Mr. Carter asked if the selenium issue in Nevada was studied to the degree that it was in CA? Mr. Thompson responded that the Service does not have the resources or staff to do the work. The Service must depend on USGS researchers to do so. Mr. Thompson stated that if he got 10 staff biologists in a room and asked their opinion, (I took it as being about selenium.) that he would get 10 different answers.

The group quickly stated, if the issue were selenium and avian toxicity, there would not be 10 different answers. The consensus would be quick and decisive. They would agree with Mr. Skorupa probably knows more about selenium and avian toxicity than anyone one in FWS.

· Are there any impediments that keep FWS employees from speaking or presenting ideas, science and scientific theory at meetings when representatives of the Bureau of Reclamation are in attendance and the issue is a Bureau operation, facility or management? All too frequently it looks like FWS is running flack or is a shill for the Bureau. Others have said that FWS and the Bureau, while having different duties and responsibilities, look like they are attached at the hip. There appears to be little independence exhibited by FWS biologists at meetings with the Bureau.
Mr. Thompson. Service employees can speak all the science they want they just can’t be advocates for a position. It is my job to establish the agency position and to work with the Bureau to see that the agency position is carried forth. The Service and the Bureau work very well together. Kurt Rodgers and I get along well.

· What is the FWS position on the selenium drainage issue in the SJV?
Mr. Thompson. We haven’t got there yet. There is much work to be done before a solution to the problem can be put forth. This is what Senator Feinstein and her draft proposal / legislation is all about. The FWS is waiting for the Bureau to come up with the plan. When that plan is put forth that will be the time for the Service to prepare its comments and position on the Selenium drainage issues of the SJV.

· Can FWS correspondence, data, etc., with the Bureau of Reclamation especially about the selenium drainage issues be made freely available to the public?
Mr. Thompson. Copies of all correspondence with the Bureau can be made available to any one who wants it. Just let us know. Business cards were exchanged so addresses can be put on the mailing list. He did say he meets regularly with several groups. We stated how did you miss us. He followed up with; maybe we should do this again sometime. He added however that he will not voluntarily provide and information to any organization that is suing the agency, even if the lawsuit involves an entirely different subject that the information requested.

· What can this group do to help you do a better job and to help ensure that fish and wildlife will get fair and just treatment in any agricultural drainage or other negotiations?
Mr. Thompson. Just do not bring a lawsuit against us. We are spending way too much time and money with lawsuits. This is time and money that we should be spending on improving or making things better for fish and wildlife.

Lisa Coffman reminded Mr. Thompson and stressed that when an agency takes an action inconsistent with the research data / findings, this could bring on a lawsuit. A lawsuit becomes a tool because the public has no other way to try to correct a politically driven or pressured mistake by natural resources managers.

Mr. Thompson a couple of time mentioned that the Bush Administration is doing all it can for fish and wildlife. Almost in unison the group stated this meeting is not about the Bush Administration, it is about getting good science and good decisions based on science.

Summation with additional background material.

I was a field biologist and staff biologist, a project leader and a Field Supervisor with the US Fish and Wildlife Service. I retired with than 34 years of service.

My understanding of Mr. Thompson’s message is that FWS biologists can speak science (down load tables of data), but should not help analyze the data so the layperson can understand what the data means in practical terms. This concept is foreign to me. He claims that FWS biologists are not to discuss with the public or policy–makers possible solutions to a problem is also foreign to me. Biologists can talk science all they want but they can’t develop or propose solutions. If a biologist explains too much about his or her science and possible resource impacts, a biologist risks becoming an advocate and that according to Mr. Thompson is when the person loses his or her credibility. This in turn harms the Service because only Service managers know the breadth of the activities and what is best for the Service. To me, what Mr. Thompson is saying is “I will do what is best for my career and the Service”, not “I will do what is best for the resource, the long-term public interest and future generations”.

Mr. Thompson was aware of what Mr. Spear (FWS Regional Director Region 2) was told by a Congressional Subcommittee concerned the Mt. Graham Red Squirrel. Mr. Spear was aware of the biological concerns in reports prepared by his staff and reports of the State of Arizona. He just was not convinced. He didn’t think a small loss of critical habitat would harm the squirrel’s survival. Mr. Spear told a GAO investigator he had to make an expeditious decision: the University needed the Emerald Peak facility: in court the University would win; and in his perception the telescope would be world class.

Mr. James Duffus III of the General Accounting Office, on June 26, 1990 presented Mr. Spears testimony to members of several committees of the House of Representatives relative to the Mt. Graham red squirrel Endangered Species issue. Mr. Duffus stated “We do not believe that it is appropriate for an FWS official to consider non-biological information in reaching opinion that could jeopardize a species existence”.

Mr. Spear effectively undercut his staff in a couple of FWS field offices. This engendered Sierra Club involvement and also involved affidavits by FWS staff. The staff was quickly demoralized.

A few years’ later Mr. Spear was now the RD of FWS Region 1 and Sacramento biologists were working with EBMUD regarding flows on the Mokelumne River. While Sacramento FWS and CDFG staffs, along with the Committee to Save the Mokelumne were negotiating the flows, Mr. Spear was making a deal with EBMUD people in Portland. That deal undercut the efforts of the Sacramento Field Office and others. He did not support his field biologist’s reports or findings. Mr. Spear’s actions quickly demoralized staff and left a bad taste in everyone’s mouth.

It has been a long standing FWS policy that biological reports prepared under the Fish and Wildlife Coordination Act and ESA are stand alone products. Recommendations are not to be tampered with non-biological considerations, other to ensure that recommendations are reasonable and can be implemented.

Mr. Thompson’s thinking relative to selenium seems to be how much damage and risk can the migratory bird resource take (so we lose a few birds forever) until just before there is catastrophic resource or population collapse. To me the issue is or should be how much stress, harm and mortality to migratory birds can be prevented. To say it another way, what is needed to prevent damages to the sustainability of public trust resources such as migratory birds and wetlands and what actions are needed to protect water quality and the viability of that resource?

I believe a major part of science is understanding and interpreting data. The next big part of science (and that of FWS) is letting the people know, i.e. educating them, as to just what the data means and the potential benefits and impacts to fish and wildlife. I believe that it is up to a manager to tell the public the information they need or should know to better understand an impact on a resource or understand an agency’s position. To not tell them important information about impacts is irresponsible. To ignore one set of data or the resultant impacts in favor of another because it fits a preconceived notion or fits a certain predetermined political solution, is bad science and management and is bad for public confidence in FWS managers.

When Mr. Thompson stated that all his people can talk science all they want, but they could not to be an advocate for their research data, or a solution to protect or make conditions better for fish and wildlife; --- it was like a kick to my gut and very foreign to me. In my opinion without having advocacy for one’s project, research activity and data to protect fish and wildlife, a manager can effectively kill imagination, innovation and the esprit de corps of his agency. Fish and wildlife biologists like talking science and ecology. They like defending their study findings against all attackers. Such challenges and discussions lead to improved science and understanding of the problem and to formulating possible solutions. During the early days of the selenium / drainage issue, I was told by an SES, “I do not like your science and your reasoning”. I answered, “Then the best references on the subject and associated findings need to be changed”. He responded, “don’t use those references”.

I believe that people working for FWS do not give up the right of freedom of speech. I also believe that these same people believe that educating the public and decision-makers about fish and wildlife needs is an integral part of their professional duties and responsibilities.

There is little doubt in my mind that the entire FWS Sacramento field staff is confused about what they can do and can not do relative to their projects / investigations and data. I also believe the field biologists are receiving mixed signals regarding what they can say in public or at meetings when the dominant Interior agency, Bureau of Reclamation, is represented.

Mr. Thompson does not want FWS biologists explaining or interpreting data and what it means to the future of fish and wildlife. In my opinion when FWS data and analysis becomes confidential information, the people and public trust resources are put in jeopardy. This is what happened in the early 1980s when the Bureau had the selenium / water quality data relative to the San Luis Unit drainage. FWS biologists questioned the Bureau data. FWS – SES managers said they (field biologists) had to respect the Bureau’s data. It was revealed to FWS biologists a few months later that the Bureau data were cleansed. The high values were ignored as being rogue data. Only low values were reported. After a few months of questioning the data, USGS obtained its own data to reveal gross misrepresentation of the selenium data. The USGS also reviewed the Bureau’s protocol for testing for selenium and found it in error. The USGS then evaluated the Bureau’s lab. The lab failed to pass or meet USGS standards. I was told the lab flunked miserably. There needs to be full public understanding of the selenium / drainage data and public airing of all options. It should not be solely the province of the FWS and Bureau SES managers.

I see the day when FWS employees will be subpoenaed and requested / asked to testify or present technical information and discuss possible solutions involving selenium and drainage issues. FWS employees could be asked to prepare affidavits regarding his or her involvement with selenium, drainage, endangered species, or Delta water quality issues. The Service will probably choke on the idea. This could happen at a trial or before a government committee.

Mr. Thompson is a SES. As such he is graded on making deals. He can also receive a sizeable bonus. I believe that he is first a public trustee. The first duty of a trustee is to manage trust assets for the future benefit of those assets and for the people. However, the “lets make a deal” mentality is engrained in the SES and is going to be around for a long time. Mr. Thompson apparently believes that “lets make a deal” is the way to go. All too frequently that cuts out the public from overseeing how managers work and why they do the things they do. And all to frequently action is taken with little if any paper trail.

One thing is true. Scientific findings will continue to prove “lets make a deal” decisions wrong. However the deal cutters are seldom around to pick up the mess. They have received their bonuses and promotion and have moved on. This is why lawsuits are a necessary tool and should be filed against the deal cutters.

I believe that the Code of Ethics for Government Service (PL 96-303) is still valid and applies to all those in government service. This code is a minimum standard. Integrity, professional ethics, and scientific credibility must be the bottom line, but it must start at the top. To me effective government means that the Nation’s laws will be faithfully carried forth without prejudice. It means that career scientists responsible for conserving and protecting our nation’s environmental resources, uses and values, will be allowed to do their jobs without fear of partisan political pressure or reprisal.

If the people do not demand the highest level of scientific integrity, professional ethics and scientific truths from FWS managers or if the people do not or no longer trust the agency officials to tell the truth, our system of government of serving the people, will fall to one of special favors for special interests. When that becomes evident, then it is time for a lawsuit.


Felix E. Smith – FWS retired 1990.

ThomMeetSumOct107 Oct 7, 07 ---7:30 PM

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General diatribe on the state of the state

Submitted: Sep 29, 2007

By Paul DeMarco, Petaluma

I've been absurdly busy lately, but I did catch up a little on my favorite web journal today. "Behind the Curve" was great.

The land use issue reminds me of an editorial I read several years ago from one of the Sacto Bee columnists. It was about the effects of the tax structure upon development. Because sales tax goes back to the municipalities and property tax stays with the state (I know it's not that simple, but good enough for this purpose), cities are in deep competition for big box retail and auto dealerships. When Rohnert Park sucked the shoppers down there, Santa Rosa responded by blighting Santa Rosa Av. with a traffic-freezing series of haphazard big stores--probably annexing rural land in the process--to bring those sales tax dollars back in. As long as the taxes are structured this way, this will always happen.

On a broader note, I spent 12 hours on Tuesday at a retreat listening to four subject experts on the arts, health & human services, the environment and education. In all fields, in gory detail in each one, we heard how the sharp cut in or total absence of public funds has had very bad effects that philanthropy can't cure. This ridiculous state of public affairs is not the case in all states. It's the case in a state that is seeing the long-term effect of Prop 13. That things is still considered a sacred cow rather than an unholy monster. If ever there needs to be an effort from Don Quixote, in a last and long-term effort to save the state, the evils of Prop 13 needs to be understood. I know that its partner is the ridiculous growth in population so greedily encouraged by those who profit from it, but at this point we could have 5 million fewer people here and the
paralysis in public policy would still prevail.

I like my low property tax. The fact that a new buyer next door would pay 3 times as much in property tax as I do wouldn't bother my conscience. But I don't like being 51st (after even D.C.) in certain measures of schoolspending. I don't like that Alabama spends $3 per citizen on the arts each year while we spend 3 cents. I don't like to see the state park system stripped down where it can't maintain what it's got, nor acquire
anything new. I don't like having some of the worst roads in the nation. I don't like knowing that too many kids don't have health insurance, that there's no significant money for prevention of alcohol and drug abuse, or that the only thing the county spends money on is law enforcement. I don't like a tax structure that enriches the landed elite like some 17th century French province.

I suppose it's all going to hell--to a breakdown that will shock us, and throw us back on to whatever skills and resources we have managed to accumulate in our years. Maybe that's already written into the plot. But until that happens, maybe we can hone our lance on another windmill.

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The real Merced River Stakeholders agenda, time and place

Submitted: Sep 18, 2007

Merced River Stakeholders Meeting

September 24, 2007

6 p.m.-8:30 p.m.

Washington School

4402 W. Oakdale Road, Winton


6:00 Introductions, Minutes Approval, Agenda Review

6:15 Updates

Merced Irrigation District Ted Selb

Merced County Planning Department Jeff Wilson

Grant Reporting

DOC II: Watershed coordinator update:

Reports from Gwen Huff, Cindy Lashbrook

Prop. 13: Merced River Alliance:

Reports from Cathy Weber, Cindy Lashbrook, Karen Whipp, Nancy McConnell

Props. 50 and 84 if applicable

6:30 Grant Discussion

Protest letters to EMRCD grant proposal (please refer to attachments)
California Public Records Act requests regarding existing grants in which MRS is "partnered"
Letter to suspend public grant-fund releases until relationship with MRS and EMRCD/Merced River Alliance/Watershed Coordinator is clarified
Support/non-support of EMRCD
Continued Facilitation of the Merced River Stakeholders
MRS grant development
EMRCD/MRS website
Merced River Alliance newsletter


Next meeting date

Refreshments will be provided by the Bettencourt family and can be accessed at any time during the meeting. There will be no break.

Past meeting minutes can be found at

Produced by Stakeholders for Stakeholders



Provide a collaborative forum for coordination, and gathering and sharing of information

about the Merced River watershed. Protect and enhance the lower Merced River Watershed such that the natural processes, ecosystems, and its unique characteristics are conserved and restored. Foster voluntary stewardship in advance of habitat degradation and regulatory action.

Strive for a balanced level of human interaction within the watershed.


Educate the public about the Merced River watershed and its importance.

Foster and improve communication among affected private individuals, interested citizens, commercial interests, educational institutes, and representatives of local, state and federal agencies.

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Proximity to a boom-doggle

Submitted: Sep 14, 2007

We thought UC Merced's First Chancellor Carol "Cowgirl" Tomlinson-Keasey's late-Nineties slogan --"Proximity is destiny" -- was about the finest piece of UC Merced Bobcatflak in an era of budget surpluses we ever heard. For those uninitiated in the Fabulous UC Bobcatflak or merely forgetful, the Cowgirl used the slogan to emphasize that -- although no one has yet figured out exactly why -- proximity to a UC campus raises the percentage of the population who goes to college. This percentage is supposed to be the best measure mankind has found for Truth and Beauty.

For those of us outside the Valley leadership circle, it was apparent that something else entirely was taking place, for which we created the slogan: "Proximity is density." Subdivision after subdivision was built and Merced vied with Sacramento, Stockton, Modesto and the State of Nevada for being the top target of real estate speculators taking out subprime mortgages. As these mortgages "reset" to much higher payments, "proximity" is beginning to mean dry lawns, dead garden foliage and swimming pools turned into stagnant mosquito nurseries.

The people of Merced were raped by the University of California, the developers on its board of trustees, it local, state and federal politicians (especially Rep. Dennis Cardoza, Shrimp Slayer-Merced), land-use planning agencies, local large landowners and special interests representing finance, insurance (like Bob "Mr. UC Merced" Carpenter), and real estate from here, there and everywhere.

Badlands Journal estimates that 40 percent of the real estate transactions in Merced were speculations and we are certain that largest part of the Merced population has only begun to realize the negative economic consequences of having won the competition for the San Joaquin Valley UC campus. For us, proximity to UC Merced means exorbitant real estate prices. We won't be elevated. We will be squeezed out and replaced, having fattened landlords, banks and realtors, utilities and local government on the way out.

The public works improvements required to support the new development is being built on our backs. We will see yet another million-dollar campaign to persuade us to raise our sales taxes to help pay for various expressways all leading to UC Merced. And this campaign, like all the others, will receive the enthusiastic endorsement of the people we elect to government, who gambled that we would pay for all the public works needed to support so much speculative development for the profit of so few and, it is becoming apparent, hardship for so many.

Honestly considered, UC Merced is an overpriced, under-enrolled, scofflaw junior college. It has been such an outrageous development project that -- a fitting tribute to its creators -- it has engendered a genuine addition to the American language, the word "boom-doggle," coined by a member of our editorial board.

Badlands Journal editorial board

Merced Sun-Star
County report card close to D's and F's in 2006...Abby Souza

Of the 40 California counties surveyed last year, Merced ranked 39th for the percentage of residents older than 24 who hold a high school diploma; only Imperial County ranked lower...the percentage of adults who hold a bachelor's degree, Merced ranked 38th out of 40. Sixty-four percent of Merced County residents over the age of 24 have a high school diploma. That compares with the statewide 80 percent and the national 84 percent. Eleven percent of Merced residents over 24 hold bachelor's degrees, compared with California's 30 percent.
While experts say lifting Merced out of its next-to-last position might prove a bewildering task, the implications of its ranking are clear. "The ripple effect that comes with an uneducated population is huge," said Simon Weffer, a professor of sociology at UC Merced...
The data come from the census bureau's 2006 American Community Survey, now conducted annually in cities and counties above a certain population.
While it's easy to blame Merced's K-12 education system...the causes lie with the types of industries in Merced, said Adrian Griffin, a senior policy analyst with the California Postsecondary Education Commission...said that Merced lacks industries that require an educated work force. For that reason, he said, highly educated Mercedians often leave the area to start their careers. ...people moving to Merced tend to be less educated.
Many say UC Merced is the key to accomplishing both, but that major change will take time. As a research university, Kevin Browne, UC Merced's vice chancellor of enrollment, said UC Merced will eventually attract high-tech companies. And even for students who don't choose UC Merced, the university's mere presence can make a difference, Browne said.

Modesto Bee
Housing tab rising in Northern San Joaquin ValleyJ.N. Sbranti

Homeowners in the valley pay far more each month for housing than most Americans, according to the 2006 American Community data also shows homeownership rates are lower in the valley than the national average, while housing costs consume a much larger share of residents' income.
Homeowners traditionally have been advised to keep housing costs below 30 percent of their income. The same goes for renters, but many of the valley's renters didn't do that last year. In Merced County, for example, 51 percent of renters spent more than one-third of their income on housing.
The Northern San Joaquin Valley expanded its housing stock much faster than the national average from 2000 to 2006...census statistics show, the number of housing units rose 9 percent nationally but more than 18 percent in Merced and San Joaquin counties, and nearly 14 percent in Stanislaus County.
Despite the rapid growth, the valley's homeownership rates still lag behind the U.S. average. That's particularly true in the city of Merced, where census statistics show fewer than 40 percent of homes are owner-occupied. Nationwide, more than 67 percent of homes are owner-occupied.

Foreclosure not an issue for nation's vast majority...Kenneth R. Harney, Washington Post

The rate of American home loans entering the foreclosure process last quarter hit the highest it's been in the history of the survey, which dates back to 1953.
But from a national perspective... The answer is: Not as bad as it may sound. Drill down into the latest delinquency and foreclosure numbers and you'll find that for the overwhelming majority of homeowners across the country, delinquency and foreclosure are not issues -- at least not yet.
To begin with, remember that mortgage delinquency problems only affect people with outstanding loans, and more than one out of three homeowners own their properties debt-free. Of the remaining two-thirds of all owners with active mortgage accounts -- the latest survey examined 44 million of them -- prime loans that are 30 days past due or more constitute just 2.6 percent of all loans nationwide. In other words, among mortgages made to borrowers with good credit at application, 97.4 percent are continuing to be paid on time.
The numbers get more sobering when you look at how borrowers with subprime mortgages are performing: 14.5 percent of them nationwide are behind on their payments by at least 30 days. That's more than five times the rate of delinquency among prime borrowers. On the other hand, 85.5 percent of subprime borrowers are still paying on time every month, according to the survey.
The numbers get even worse when you look at the performance of subprime borrowers who took out adjustable-rate loans, such as the notorious "2/28" mortgages that allow low monthly payments for the first two years but then reset upward with a big jolt at the beginning of the third.
What about the record jumps in new foreclosure filings? In 34 states, the rate of new foreclosures actually decreased. In most other states, the increases were minor, except in California, Florida, Nevada and Arizona, where they were attributable in part to investors walking away from condos, second homes and rental houses they bought during the boom years. In Nevada, for instance, non-owner-occupied (investor) loans accounted for 32 percent of all serious delinquencies and new foreclosure actions. In Florida, the investor share of serious delinquencies was 25 percent, in Arizona, 26 percent and in California, it was 21 percent.
Bottom line: The scary foreclosure and delinquency rates you're hearing about are for real. But they're highly concentrated -- among loan types, local and regional economies, and especially prevalent among investors in formerly high-flying markets who are finally throwing in the towel.

Sacramento Bee
Foreclosures gain on sales
An ugly new duel in capital area: Home keys picked up vs. those lost...Jim Wasserman

...For roughly every two homes sold in August in the capital region, one house went into foreclosure, according to the newest sales statistics released Thursday...
grim ratio may worsen as fall and winter sales traditionally slow and foreclosures keep rising, analysts say. Already, in Sacramento County in August, there were more defaults -- the first indicator of payment problems that can trigger foreclosure -- than sales, DataQuick reported.
Last month, 2,978 new owners picked up keys to homes they purchased in Amador, El Dorado, Nevada, Placer, Sacramento, Sutter, Yolo and Yuba counties, La Jolla-based DataQuick Information Systems reported Thursday. But in those same counties during August, 1,367 homeowners in foreclosure handed their keys back to the bank, according to Fair Oaks-based, a Web site for real estate investors.
"Sacramento (County) was positioned almost perfectly to take the brunt of this housing storm," said DataQuick analyst Andrew LePage.
Sacramento County now shows the region's worst ratio of sales to foreclosures. The county reported 1,527 escrow closings during August and 772 bank repossessions, according to DataQuick. The county also tallied more defaults during the month -- 1,869 -- than sales, statistics show. But analysts like McGee are quick to caution that only about one-third of people going into default will eventually lose their homes to foreclosure. DataQuick says about half of those in default in California will likely lose their homes.

Merced Sun-Star
Are we forever poor?...Our View

Distressing news came to light this week when it was revealed Merced County residents are poorer than ever... new information from the United States Census Bureau should be a rallying cry for making wholesale improvements to underlying conditions present in the county...more must be done -- and soon -- to raise the educational level of Merced County's residents. We need more high-paying jobs with the well-qualified workers to fill these positions. Both of these elements are lacking right now. we need stepped-up efforts to enhance this area's chances of landing top-notch employers looking for qualified workers. More minimum-wage jobs aren't the answer. Between 2005 and 2006, the percentage of Merced County residents living in poverty rose from 18.1 percent to 21.5 percent...about one out of every five people living here. The county's median income level also dropped nearly $1,600 between the two years, further evidence of this area's profound poverty and worsening economic conditions. It's no secret Merced County's economy is not very well-diversified at present. It's mainly farm-based, subject to vagaries from Mother Nature and cyclical agricultural conditions. Couple recent setbacks in some crops along with a severe downturn in the county's housing industry and one can see why the poverty figures have jumped.

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The Pomboza, now an Agency

Submitted: Aug 26, 2007

They're still at it! The inseparable couple of wannabe Endangered Species Act
extirpators, Rep. Dennis Cardoza, Shrimp Slayer-Merced, and former Rep. RichPAC Pombo, Buffalo Slayer-Tracy (reborn as a lobbyist) have teamed up on a scheme to defeat an evil plot by the federal government to make San Joaquin County homeowners living in flood plains pay flood insurance. The Pomboza has so far obstructed updates of FEMA flood-plain maps but time in running out. It is very hard to tell from the stingy reports on this plan what the deal really is, but it seems to be something like this: municipalities
along the river and developers will put up funding for levee work and hope the feds will generously match the money.

On August 3, the Stockton Record editorialized that, although as chairman of the House Resources Committee, Pombo did exactly nothing for Delta levees after the Jones Island break and after Katrina, as a lobbyist, he is proposing a win-win, public-private partnership called Central Valley Resources Agency to lobby for federal flood funds and, one imagines, gut the FEMA flood plain maps, at least in San Joaquin County. Pombo has already signed lobbying contracts with Stockton and Manteca but was rebuffed recently by his hometown city council in Tracy.

It seems like a strange way to run a government in the face of a potential problem that could endanger the drinking water supplies for 23 million people, but levees, as has been noted, are strange jurisdictional creatures, mostly private, so perhaps it is the only way the Pomboza can proceed. The state has expressed itself as tired of the idea that it must pay for flood damage along the Delta as the result of legislation brought to life by the artful state Capitol management of developer lobbyists.

The area we call Pombozastan is but a province -- including all its local governments -- of a larger win-win, public-private partnership designated in 2005 by the Hun, our governor, as the Partnership for the San Joaquin Valley. Stretching through interlocking watersheds from the San Joaquin Delta to the Kern River, encompassing subdivisions on flood plains in Stockton to the immense prison/megadairy complex of Kings and Kern counties, it ain't no ecotopia. It's got the worst air quality in the nation and it is the Number One target in California for urban growth. It remains the most productive farming valley in the US, probably in the world, but agriculture's days are numbered in the San Joaquin Valley. We are calling it today the dual monarchy of GrupeSpanopolis and the Fresno Catastrophe, an internal empire of developers who control all levels of its government. the Pomboza is merely its northern-most province.

The Record reports today, Congressman Cardoza is calling for a "regional group to tackle levee problems." Cardoza was sworn into his seat in the state Assembly when a levee break had put about half his district under water in early 1997.

Now let brave souls make wild surmises: this Central Valley Resources Agency will find its way into the Partnership for the San Joaquin Valley plan because its co-chairman is Fritz Grupe, Stockton's largest developer. Due to the essentially private nature of this "agency," the public probably won't see much of the Pomboza Plan before it is sprung as part of the Valley partnership. We'd probably have to bribe a little bird to monitor the Hun's famous Cigar Porch to get an accurate report of the doings of the Central Valley Resources Agency.

The remorselessly consistent Pombo, has left the "Natural" out of his agency's title. But's he's happy he's chairman of a new Resource Agency. Now an employee of a powerful Western lobbying group, Portland-based Pac/West, flaks for our beloved Northwest timber interests, in alliance with the cutting edge of modern agribusiness thinking on private property rights, Sacramento-based Pacific Legal Foundation, and funded by developers, the Pomboza agency would appear to be omnipotent. The people who actually live here now would appear to have about the same chance for decent quality of life as a Chinook salmon smolt or a Delta smelt.

Pombo was defeated for reelection to his eighth term by the present Rep. Jerry McNerney, D-Pleasanton. McNerney, the soul of political ambition and yet as timid as a "cautious twerp" of the sort manufactured en masse by the state and national environmental groups that defeated Pombo, is absent from debate on the formation of the Central Valley Resources Agency, although he represents at least as much Valley flood plain as Cardoza does. One imagines the conversation:

"But Dennis, I need some press on water issues in my own district."
To which Cardoza replies with one name: "Andal," McNerney's probable opponent in 2008, a former state Assemblyman, state Franchise Tax Board member and developer in Cardoza's district.

McNerney sneaks off over the Altamont to his stronghold in Bay Area suburbia, far from those tacky Delta water wars. Perhaps he is being advised to do so by House Speaker Nancy Pelosi, D-SF, and Sen. Dianne Feinstein, D-CA (SF). Who knows what their developer husbands are invested in around here? Too bad, because the people need a voice, which they ain't going to get with either end of the win-win, public-private beast we call The Pomboza Agency and its owners and trainers.

We hope to be surprised by sudden lurches of political evolution not yet in evidence. Meanwhile,the public is in a theological pickle: to pray for rain for drinking and irrigation water, or to pray for continued drought so the levees don't break -- that is the question.

Badlands Journal editorial board

Dozens hash out levee accreditation...The Record
Dozens of local, state and federal officials met Thursday to hash out a levee
accreditation process that could end with thousands of residents forced to pay flood insurance as soon as 2009. San Joaquin County officials say they're being required by the federal government to make levee improvements that have not been defined and that they haven't been given enough direction from FEMA or the U.S. Army Corps of Engineers. Rep. Dennis Cardoza, D-Atwater, asked cities and counties if they'd like to form a regional group to tackle levee problems. Cardoza recently visited New Orleans and called Thursday's meeting to give all the parties a better understanding of the remapping

The voice of Pombo...Editorial
Finding a common voice among San Joaquin County officials and residents regarding flood protection is common sense. Even if they're a decade or more behind Sacramento County, Stockton officials have done the right thing by pledging $100,000 in startup funding for just such an endeavor. It's very ironic they would hire former Rep. Richard Pombo, the Republican from Tracy, to help. Pombo spent 14 years as a member of the U.S. House of Representatives, where he had an ideal platform from which to encourage and support that kind of unity. He couldn't formally lead it, but he had every opportunity to help persuade county and city leaders to establish a public-private collaboration. Pombo - who had become chairman of the House Resources Committee - had other priorities. Now he works for Pac/West Communications, an Oregon-based business that has been commissioned to set up a mechanism for lobbying state and federal officials for flood-protection funds. Now, uniting the county's leaders is a priority in Pombo's new job. This public-private partnership, to be known as the Central Valley Resources Agency, still is in the formative stages. Pombo will know who the key decision-makers are in Washington, D.C. He probably will prove to be an effective advocate.

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Where giants reign

Submitted: Aug 18, 2007

Recently accused by a local planning commissioner of being a dishonest journalist, I reviewed my notebooks for moral reassurance. I found notes from an interview I once did with a city planning-department staffer in charge of maps. This Galilean fundamentalist believed that geography was the queen of the sciences and would set us free. I honestly reported this lunacy for the local newspaper.

Our little region of the globe contains three north San Joaquin Valley CA counties in the largest parts of two congressional districts formerly known as Pombozastan in honor of representatives Pombo and Cardoza, of anti-Endangered Species Act fame. The three county seats are tops in the nation for mortgage foreclosures. Three other Central California cities, Sacramento, Fresno and Bakersfield, also score high for mortgage foreclosure rates. These land-use jurisdictions, whose elected officials approved the massive construction boom driven by speculation, are awash in debt and planning maps: county limits, city limits, specific urban development plans, spheres of influence, blueprints, greenprints and regional partnerships.

Years ago, state Assembly Speaker Willie Brown, irritated with local governments in Northern California, advanced an idea to consolidate its 50 counties into conveniently large land-use jurisdictions like the eight counties south of the Tehachapis, which contain the largest population in the state. I don't remember the speaker's exact political purpose for this suggestion, but it threatened the livelihoods and power of thousands of county staff and supervisors, presumably to some positive outcome for the
Legislature in that year's state budget. To my knowledge, Brown's proposal has not returned in his forthright terms, but it has gained momentum by other means.

As anyone knows, whose life has detoured for some reason into the intellectual sump called "land-use planning" in California, the topic is rich in absurdity and cannot be faced, let alone comprehended without deep study of the comic novel and neglected masterpieces of 18th-century Neapolitan social theory. Although the environment constantly deteriorates under the impact of "inevitable growth," although the resource-carrying capacity of the state is breaking down all around us, although new slogans along the lines of the familiar chestnut "smart growth" are endlessly confected by land-use propagandists -- we know we cannot take this sugar-coated bullshit seriously. Down that path lies idiocy, and there are examples all around us of those who have ventured there and never returned.

The area including 15 Central California counties is missing the two maps essential to understanding the true land-use jurisdictions.

Each of the 15 counties has land-use authority over the unincorporated areas within its borders. The cities within them have land-use authority over the areas within their corporate city limits and consultative jurisdiction over areas beyond their limits depending on spheres of influence, specific urban development plans, and other arrangements with their counties. (As a canny realtor/city councilman once put it: "Counties don't grow; cities do.")

As official land-use jurisdictions, these counties and their cities are subject to state and federal environmental laws and regulations, particularly the California Environmental Quality Act (CEQA), which defines the state’s unique procedures and requirements for environmental review. Federal laws and regulations define other duties and responsibilities of local land-use jurisdictions. The main federal laws are the Endangered Species Act (ESA), Clean Water Act and Clean Air Act. If the local jurisdictions corrupt these laws too blatantly, their decisions are open to legal challenge.

Local land-use officials do not don sackcloth and sit in ashes when they are defeated in court. Their response to a negative ruling is to ramp up the propaganda attack against successful petitioners, courts, judges and environmental law, approve more projects and sacrifice to golden cows, praying for the extirpation of their enemies -- from the San Joaquin Kit Fox to environmental organizations. After a few years of these rustic rites, a stranger arriving in their midst and observing their public behavior must theorize that they were born that way or that the idiocy is environmentally caused.

The executive director of the San Joaquin Valley air board, controlled by pro-growth county supervisors, continues his campaign to convince the public that one of the two worst air quality basins in the nation, facing epidemic growing rates of childhood and elder asthma, has better air quality than it was 25 years ago. The only way to comprehend this is to realize that the San Joaquin Valley Regional Air Quality Board, like city councils and boards of supervisors in its region, has been wholly digested and evacuated by its “regulated community.”

Environmental laws and regulations governing the legal actions of local land-use jurisdictions theoretically obstruct developers in collusion with local officials from doing exactly what they want to do -- create a continuous slurb from Chico to Bakersfield on the richest, most productive farm and ranch land in the nation and one of the greatest agricultural treasures in the world, also home to abundant wildlife. They seek to create residential subdivisions to profit while making the region’s air unbreathable, its water unpotable and its wildlife extinct.

There are numerous county and municipal general plans being updated at the moment. The state has mandated general plans since 1927 and has required frequent updates in recent years. The whole Valley is updating general plans that are out of compliance with unenforced state law. General plans are supposed to be made to guide development as if the existing population mattered. They are the main venue in which citizens have any say about what developers and their government enablers have planned for them. "Planning" is an activity conducted in an arcane jargon designed to impress and intimidate the populace. But, at least the jurisdictions covered by the general plans are relatively well marked on maps. Locally, Fresno and Merced cannot seem to settle its boundaries, but in the rest of the state, these disputes were settled a century ago.

Meanwhile, various forms of regional planning are going on. The seven counties around Sacramento have a regional transportation-planning agency called Sacramento Area Council of Governments (SACOG) that ceaselessly generating frosted cow pies for public consumption. Lately, the eight San Joaquin Valley counties have gotten into the business with a state-funded San Joaquin Valley Blueprint Planning Process, led by the Merced County Associations of Governments (MCAG). In addition to our blueprint, we have a special commission, the San Joaquin Valley Partnership, chaired by Stockton’s largest developer.

These parallel planning processes are necessarily uncoordinated. The transportation planning, for example, has one aim: persuading the state Department of Transportation that it should put SACOG or MCAG's special streets and roads projects at the top of the pile in the annual hogfest of requests to the Federal Highway Administration.

The regional transportation planning process pays as little attention as possible to state and federal environmental law. While the local general plans must at least pretend an interest in the environment, regional transportation planning is motivated by its higher calling -- federal highway funds. Thanks to the durable public-private/"win-win" partnership between developers and land-use authorities, housing is built without enough roads to handle the increased traffic (known in planning jargon as "inadequate transportation infrastructure"). Delegations speaking with "One Voice" are regularly dispatched to Congress demanding that the empty barrel of speculation-driven construction be filled with pork.

The CAGs and COGs generate an abundance of beautiful, colored maps. However, the two most important maps are controlled by jurisdictions that do not share.

The official boundaries of the region Formerly-Known-As- Pombozastan are clearly marked. Gerrymandered as they are according to vanities of the two-party system, the 11th and 18th congressional districts will remain the same until after the next US Census in 2010. But Pombozastan was never the most important political jurisdiction in its region.

Extremely conservatively, I date the period of radical growth of the new, unmapped political jurisdiction to the spring of 2005, when Stockton’s largest developer held a fundraiser for representatives RichPAC Pombo and Dennis "Fairy Shrimp Slayer" Cardoza, after which the two congressmen split a reported $50,000. In attendance at the event were no doubt representatives of a Sacramento-based, unmapped political jurisdiction recently stung by defeat at the hands of the Army Corps of Engineers in the US Supreme Court, when the justice from Sacramento recused himself. In the fall of 2005, about the time Pombo and Cardoza introduced their latest bill to gut the ESA, the same Stockton developer was appointed by the Hun, our governor, to co-chair the San Joaquin Valley Partnership. The term "co-chair" is overly modest.

The first great, undrawn map is now being layered over the San Joaquin Valley, for years known as the Territory of the Warring Irrigation Districts. This map is composed of two parts (befitting a partnership), representing a dual monarchy along Austro-Hungarian lines that must appeal to the Hun. In the north, we have a highly organized administrative unit built for growth called GrupeSpanopolis. The southern part of the Partnership, while not quite as well organized (though better monitored by the FBI) is called the Fresno
Catastrophe, which contains a vast prison/mega-dairy complex in its southern provinces.

In the Sacramento area, even the 7-county SACOG transportation planning region does not contain Tsakopolis, a perpetually developing dynastic octopus reaching at certain points into the neighboring Partnership. Tsakopolis is also managed along Balkan lines, although it probably owes more to the Ottoman than to the Austro-Hungarian model. The state Capitol is simply one among many gated communities in Tsakopolis.

This is the first layer of undrawn maps. One might say, (following Vico's New Science) that these are kingdoms of giants, representing no more than many other signals we are receiving our entrance into a new age of barbarism.

This map is unlikely to be drawn by local land-use jurisdictions because they must deny that the giants have any influence over land-use decisions governed by environmental law and regulation, some of the most popular laws in the state and nation. If even the existence of the kingdoms of the giants were admitted publicly and mapped, it could lead to investigations that might result in criminal prosecutions for mis, mal and non-feasance. This sort of reform could be like something out of the "Progressive Era," conjured up by the Hun from the dustheap of Republican Party history during the recall election. The Hun conquered a state capitol inside which no trooper can direct a tourist to the portrait of Gov. Hiram Johnson.

A giant, perpetual propaganda campaign sells the idea that our developers are enlightened, benevolent and humble citizens fulfilling the deepest community needs. This campaign is as true as the inevitability of growth, the absolute necessity for the peripheral canal, Sykes and Temperance Flats reservoirs, that Westlands Water District must own San Luis Reservoir, that the quality of Valley air and water is better than it was 25 years ago, that several species of Delta fish are not going extinct, that thousands of acres of habitat for endangered species can be destroyed with impunity and that developers can build mile-long sewer lines through farmland without any legal permits at all. This campaign, fomented by the global information-management firm, Fee, Fai, Foe and Fumm LLP, runs larger campaigns denying global warming, peak oil, the loss of habeas corpus, extinction of the Polar Bear, defeat in Iraq and the global credit crunch.

Like the prehistoric giants they resemble (said to have learned piety from fear of thunder and lightning), someday our giants might come to Jesus via flood, drought or both. But do not tempt your Lord about it. They would earn fabulous profits from reconstruction projects. Every child knows that giants prize gold above all.

But, there is another undrawn map, the only map at the moment of any use to hundreds of thousands of our Valley residents now inhabiting the housing products the giants built. The Great Speculative Housing Boom has Busted and people don't know who holds their mortgages anymore than the mortgage holders know the people who aren’t paying subprime resets. It would be dishonest journalism to say that I know of a map showing how mortgages in Tsakopolis, GrupeSpanopolis and the Fresno Catastrophe have been bundled and distributed among the hedge funds, investment banks and federal bailout agencies.

Bill Hatch

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Work in progress

Submitted: Aug 12, 2007

I was recently asked to produce a bibliography of "essential books" on the San Joaquin Valley.


A dozen favorites leapt to mind; a few days later a dozen more; and the pleasant task began to turn into a real project destined for certain failure and remorse. It turns out not to be so easy to remember the books of a lifetime and each dive into the Internet provides more that look very useful but I haven't had time to read yet.

When one gets to a certain age it becomes difficult to remember the heroes because they are all gone and it is harder to recall that I met some of them a time or two, here and there -- for example, Fred Ross, a slim, serious man, perpetually moving purposefully around the Delano headquarters of the UFWOC; the wise, friendly Larry Itliong; or Wilma Elizabeth McDaniel on the phone correcting the spelling of her name in an article I'd written; or the voice of Art Coelho, poet and publisher of our Valley voices, from Montana, talking about burning up cowboy boots on big cats disking the west side and years wandering the West as an itinerant poet composing the best list of country poets in the West.

I remembered a call about a great farm labor leader in farmworkers rest home in Delano leading a seminar on Lenin to fellow octogenarians from the fields. We dreamed of that moment when those workers would confront St. Peter and demand to know: "What is to be done?"

I remember the face of the great, betrayed C. Al Green, director of the multi-racial AFL-CIO Agricultural Workers Organizing Committee, a victim, like Chavez, of liberal perfidity that has resulted in indebted servitude in the fields today. All the political thieves of San Francisco have ever wanted from the Valley was agribusiness campaign cash, any way they could get it. "Migrants don't vote," they said. These days, it's "Illegal immigrants don't vote."

The longer I worked on it, the more holes I saw in the vista of written material on the San Joaquin Valley that stretched out before me like a vast battlefield of a war that has been going on since before the great Yojuts leader Estanislao defeated the young Lt. Mariano Vallejo. Looking at water rights issues today, sometimes it seems as if the ghosts of heroes and villains rising off the battlefield are pulling the strings of the living in a never-ending feud we call our "Valley way of life." Another way to look at it is that bioregions matter.

Every reader will find something missing in this bibliography. For example, I am frantically digging in book boxes for a good one on the Chinese in California I know I have somewhere but cannot remember the title of. Can't find it, have nothing on their enormous contribution except in various general histories like Bean's superb California: An Interpretive History.

Everyone I have talked to has added a book I've forgotten or never knew about.

So, this is a work in progress and I invite anyone to write us at, gleefully to announce what a knucklehead I was to forget their favorite, indispensible books about the Valley.

Meanwhile, apologies to the people who originally requested the bibliography -- we'll let you know when it's done.

Bill Hatch, for the Badlands Journal editorial board


Garden of the Sun, Wallace Smith (the only history to date strictly about the SJV)
Handbook of the Yokuts Indians, Frank Latta
The Stanislaus Indian Wars, Thorne P. Gray
The Destruction of the California Indians, Robert F. Heizer
Saints or Oppressors: The Franciscan Missionaries of California; In The Missions of California: A Legacy of Genocide, Rupert and Jeannette Costa
Flooding the Courtrooms: Law and Water in the Far West, by Mary Catherine Miller (a legal biography of the Miller&Lux cattle company)
Empires in the Sun, Peter Wiley, Robert Gottlieb (development of power utilities in the West)
Silent Spring, Rachel Carson (DDT)
Cadillac Desert, Marc Reisner
Death in the Marsh, Tom Harris (the Kesterson Wildlife Refuge ecological disaster caused by agricultural drainage containing heavy metals)
Fruits of Natural Advantage, Steven Stoll (the self-destructive economics of agribusiness)
The New California, Dan Walters
Works of Paul Taylor and Dorothea Lange: Taylor was one of the first academics (UC Berkeley economist) to study farm labor, both Mexican and Dust Bowl immigrants; Lange's photographs of migrants stand alongside Walker Evans' work with James Agee as testimony to the destruction and poverty of the Depression
Factories in the Fields, Carey McWilliams
Farm workers and agri-business in California, 1947-1960, Ernesto Galarza
Cesar Chavez: Autobiography of La Causa, Jacques E. Levy
United Farm Workers website, history section
Philip Vera Cruz: A Personal History of Filipino Immigrants and the Farmworkers Movement, Craig Scharlin
Articles on 160-acre limitation by E. Phillip Leveen (have to do Google search for them, Leveen was the top spokesman for the 160-acre limitation for federal water during the last great war over it in the late 70s; an agricultural economist at the time, he was trained as an historian and gives the history of the whole federal water/land fraud in the Valley)
Articles by Don Villarejo, founder of the California Institute for Rural Studies, list available at (nearly 50 years of thought and research on the Valley balancing social, economic and environmental justice claims)
California Institute of Rural Studies publication catalogue
Isao Fujimoto, UC Davis emeritus, has published a number of studies on different aspects of the Central Valley -- from farm labor to environmental issues
The King Of California: JG Boswell and the Making of a Secret American Empire, by Mark Arax,Rick Wartzman
Epitaph for a Peach: Four Seasons on My Family Farm, by David Mas Masumoto
BORDER CORRESPONDENT, Selected Writings, 1955-1970, Ruben Salazar
Mean Justice, by Ed Hume
California: An Interpretive History, Walton Bean
Coalition of Immokalee Workers (CIW), (the Florida front line of current farm-labor organizing)

Legal and administrative decisions and discussion: The San Joaquin Valley has produced major legal contests on an array of natural resource issues; these sources will lead the reader into essential topics in Valley history; others are dealt with in the non-fiction section

Public Trust Doctrine
Migratory Bird Treaty Act
Mono Lake Decision
San Joaquin Raptor Wildlife Rescue Center
Monterery Accord decision: PCL v. DWR
Kesterson Wildlife Refuge
San Joaquin River Settlement
Rapanos Decision
CEQA decisions (law firm blogs like Abbott and Kinderman Land Use Law blog offer reviews of recent decisions: San Joaquin Raptor v. County of Merced, Woodward Park Homeowners Association, Inc. v. City of Fresno, Vineyard Area Citizens for Responsible Growth Inc. v City of Rancho Cordova, Hayward Area Planning Association v. City of Hayward, City of Marina v. Board of Trustees of California State University, etc. provides current news on lawsuits, administrative decisions, essays and articles on resource law

Fiction, Poetry, Drama

Poetry of Wilma Elizabeth McDaniel (the greatest Dust Bowl poet, still writing about her people until shortly before she died this April)
Grapes of Wrath, In Dubious Battle, by John Steinbeck
The Octopus, Frank Norris
The Ford, Mary Austin
Art Coehlo (Cuelho) and Seven Buffaloes Press
Gerald Haslam's works, short stories and Workin' Man's Blues (memoirs of youth in Oildale and the development of "Nashville West," Bakersfield.
Plays of Luis Valdez ("Zoot Suit," "La Bamba").
Luis is the farmworkers' Bertold Brecht.
Highway 99: A Literary Journey through California's Great Central Valley, edited by Stan Yogi, Gayle Mak, and Patricia Wakida
Fat City, Leonard Gardner

Additions since posting:

New Roots for Agriculture, Wes Jackson
Topsoil and Civilization, Vernon Gill Carter and Tom Dale
The Origin of the Species, Charles Darwin

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