Stockton Record
The Legislature speaks...Alex Breitler's Blog
Legislative leaders today released language for a series of Delta-related bills; advocates have been screaming for these details for months.
One of the bills would establish a Delta Stewardship Council, a seven-member body that could ultimately authorize a peripheral canal. And it's important to note that of the seven members, four would be appointed by Gov. Schwarzenegger, whose administration favors a canal. Two more would come from the Legislature, and the chair of the Delta Protection Commission would be the seventh member.
There's lots to digest here, and I'm still eating.
But here's one more interesting detail: One of the bills would require water diverters in the Sacramento-San Joaquin river systems to pay a fee that would fund the activities of the council (not the canal, but the bureaucracy behind it). This would apparently include riparian water users in the Delta. Wonder how they'll feel about that?
The first in a series of hearings on the bills is scheduled for Aug. 18 at 9 a.m. in Room 4202 at the Capitol.
Until then, you can read the legislation here.
California State Assembly
Committee on Water, Parks and Wildlife
2009 Proposed Delta/Water Legislation
* Preprint Assembly Bill  No. 1 - AB 39 (Huffman) http://www.assembly.ca.gov/acs/committee/c26/Publications/
* Preprint Assembly Bill  No. 2  -  AB 49 (Feuer) http://www.assembly.ca.gov/acs/committee/c26/Publications/
* Preprint Senate Bill  No. 1  -  SB 12 (Simitian) http://www.assembly.ca.gov/acs/committee/c26/Publications/
* Preprint Senate Bill  No. 2  -  SB 229 (Pavley) http://www.assembly.ca.gov/acs/committee/c26/Publications/
* Preprint Senate Bill  No. 3  -  SB 458 (Wolk) http://www.assembly.ca.gov/acs/committee/c26/Publications/
* Summary of Delta/Water Legislation http://www.assembly.ca.gov/acs/committee/c26/
San Francisco Chronicle
Dem leaders, 'Blue Dogs' compromise...Carolyn Lochhead, Chronicle Washington Bureau...7-30-09
Washington - -- House Democratic leaders won a key breakthrough on health care Wednesday that allows Congress to adjourn until September declaring progress, even if it falls short of the House passage that Speaker Nancy Pelosi promised less than two weeks ago.
By overcoming the resistance of four fiscally conservative "Blue Dog" Democrats, party leaders hoped to clear the legislation through a final committee this week, striking a rough consensus and avoiding what threatened to be a major blow to President Obama and Pelosi, the San Francisco Democrat who is proving herself his closest ally on the issue.
The concessions won by Blue Dogs would shave about 10 percent from the health care overhaul's $1 trillion, 10-year price tag, in part by limiting subsidies to people who are not insured. The exemption for small businesses would be doubled so that only businesses with payrolls greater than $500,000 a year would be required to offer insurance or pay a tax equivalent to 8 percent of their payroll.
In addition, the government would negotiate rates with health care providers instead of using Medicare rates in the government or "public option" available to those who do not get health insurance through their employers or a government plan.
Tumult in the Capitol over health care has exposed the political volatility of what Obama has set as a key goal of his presidency.
After the hint of a deal was announced, Pelosi spent Wednesday fending off a counter-rebellion by alarmed liberals who feared too much had been compromised to get the committee votes of just four conservative Democrats.
Modesto Blue Dog Democrat Dennis Cardoza, who was leaving Pelosi's office as liberals were streaming in, has more uninsured citizens in his district than any district in the nation. Cardoza, who wasn't among the four Blue Dogs who negotiated the deal but supports it, said the legislation will be "like an accordion for a long time, where members become concerned and then they get comfortable and then they become concerned. Everybody who has ever gone to the doctor has an opinion on what should be in this bill."
The 1,000-page draft bill will sit for all to see in the public sphere for a month, until Congress returns after Labor Day. Democrats and their allies will try to explain its many intricacies, interest groups will maneuver for changes and Republicans, smelling a political comeback, will escalate their already ferocious assault.
House leaders must soon reconcile conflicting versions of their committee bills; a similar process must occur in the Senate, where the pivotal Finance Committee has yet to produce a bill.
The Congressional Budget Office must vet all the versions before either chamber passes legislation. If that happens, there will be more negotiations to meld House and Senate versions.
"Frankly, I'm pleased that we're going to break for August," said Monterey Democrat Sam Farr. "This whole accusation that nobody's read the bill, it's too big, it's too cumbersome - everybody in the United States will have a month to read this bill .... This accusation is, 'Well you never read the bill.' Well, ladies and gentlemen, have you read it? You can read it and form your own opinion."
Although some liberals threatened to withdraw their support for the bill, including Rep. Lynn Woolsey of Petaluma, co-chairwoman of the Progressive Caucus, Farr said he had seen nothing in the compromise that would force him to oppose it.
"The question is whether the Blue Dogs have negotiated something that nobody can accept," Farr said. "I didn't get the feeling in that room that it was that. I think they actually moved more constructively toward trying to get a bill that works."
Conservative Democrats who struck the compromise with Pelosi and other House leaders are Reps. Mike Ross of Arkansas, Baron Hill of Indiana, Zach Space of Ohio and Bart Gordon of Tennessee.
Key points in compromise
The deal struck with conservative House Democrats would:
Cut about 10 percent from the health care overhaul's $1 trillion, 10-year price tag, in part by limiting subsidies to people who are not insured.
Require only businesses with payrolls greater than $500,000 a year to provide health benefits to employees or pay a tax equal to 8 percent of their payroll. The previous limit was $250,000 a year.
Negotiate rates with health care providers rather than using Medicare rates in the government or "public option" available to people who don't get insurance through employers or a government plan.
Stealth Legislation Unveiled: A Road Map to the Peripheral Canal…Dan Bacher
The stealth package of water bills proceeding through the California Legislature comprise a virtual road map to the peripheral canal, according to Bill Jennings of the California Sportfishing Protection Alliance.
The stealth package of water bills proceeding through the California Legislature comprise a virtual road map to the peripheral canal - an obscenely expensive and environmentally destructive project that Governor Arnold Schwarzenegger, Dianne Feinstein and California Legislators have been relentlessly campaigning for over the past two years.
A broad coalition of recreational fishing groups, commercial fishing organizations, Delta farmers, American Indian Tribes and principled environmentalists is strongly opposing the canal, a bad idea that was voted down overwhelmingly by California voters in 1982.
The five bills that were gutted and passed out of Policy Committees have now been reformatted and released, according to breaking news from Bill Jennings, executive director of the California Sportfishing Protection Alliance (CSPA).
"They will be headed to a joint conference committee and then moved to the floor of the respective houses for a vote," said Jennings. CSPA has quickly reviewed the reformatted bills and issued the following initial reaction. An in-depth review will follow in the next day or so.
"As expected, the five bills comprise a road map to a peripheral canal," noted Jennings. "In a stunning abdication of legislative responsibility and due diligence, the package authorizes the creation of a Delta Stewardship Council comprised of four members appointed by the Governor, two from the legislature and the Chairperson of the Delta Protection Commission."
The Council would have authority to implement a peripheral canal and assess fees and issue bonds to pay for it. "In other words, our legislature proposes to allow the Governor, who strenuously advocates building a peripheral canal, the authority to appoint a majority of members to a Council that has authority to build and fund it," explained.
The five bills are: AB 39, the Delta Plan (Huffman), AB 49, Water Conservation (Feuer), SB 12, Delta Governance (Simitian), SB 229, Water Use Reporting (Pavley) and SB 458, Delta Conservancy (Wolk).
"Collectively, the bills are a legislative shell game that raises bureaucratic mumbo jumbo to an art form," stated Jennings. "While there are some good things to like (i.e., no new dams, conservation, and beneficiary pays principle), the total package is a bureaucratic nightmare and a Valhalla for attorneys."
"It pays lip service to fish and Delta restoration, turns the water code upside down, places a financial and water burden on the most senior upstream water rights holders and will double or triple water rates for those least able to pay - in order to subsidize the guarantee of water to the most junior water rights holders that grow subsidized crops on drainage impaired lands on the Westside of the San Joaquin Valley; lands that when irrigated leach toxic wastes back to the San Joaquin River and Delta," he emphasized.
Jennings compares the poorly-conceived, fast-tracked peripheral canal legislation to the energy deregulation fiasco that was pushed by Legislators and corporate-funded "environmental" groups under the Pete Wilson administration, resulting in power black outs and dramatic power rate hikes through unscrupulous gaming of the market by energy companies including Exxon and Reliant Energy.
The Natural Resources Defense Council (NRDC), through its chief energy spokesperson Ralph Cavanagh, played a key role in drafting, passing and then defending the energy deregulation bill that passed through the Legislature in 1996, according to "Unnatural Disaster: Deregulated California Utilities are Electrocuting the Public," by Harvey Wasserman, 1/25/01 (http://www.ratical.org/ratville/dereg/#UD).
"In sum, the package reminds us of the time the Legislature panicked and rushed into energy deregulation without thoughtfully considering the consequences," Jennings concluded. "But, energy deregulation only cost us $43 billion. This package may end up costing us that much and kill the Delta, northern California fisheries and Delta farming along the way."
A water bond including a peripheral canal would cost anywhere from $10-40 billion today and much more over the thirty years trying to pay it back, according to Steve Evans, conservation director of Friends of the River. However, the cost to the commercial and recreational fishing industries and Delta farmers impacted by the building of "Arnold's Big Ditch" would be billions and billions of dollars more. And the cost of driving endangered species including Central Valley Chinook salmon, Delta smelt, longfin smelt, green sturgeon and the southern resident population of killer whales over the edge of extinction would be incalculable.
The peripheral canal would be approximately the size and length of the Panama Canal. The canal would have the capacity to transport 15,000 cubic feet of water per second (cfs) from the Sacramento River around the Delta. A conveyance to transport 15,000 cfs. would be between 500 and 700 feet wide, requiring a 1300-foot right-of-way, based on an engineering report completed in August 2006 by Washington Group International for the State Water Contractors. That’s the width of a 100-lane freeway!
The length of the conveyance would be between 47 and 48 miles. By comparison, the Panama Canal is between 500 and 1000 feet wide and is 50 miles long.
The current plan for "improved conveyance" under the Delta Vision and Bay Delta Conservation Plan (BDCP) processes is for "dual conveyance," consisting of a through Delta route teamed up with the peripheral canal. Two routes for the peripheral canal are proposed - a western route and an eastern route.
The Department of Water Resources will begin drilling in river bottoms at 16 locations for proposed canal intakes on the Sacramento, Mokelumne and San Joaquin Rivers starting this month. This drilling follows land-based surveys by DWR being done under the BDCP.
Canal opponents from throughout northern California will be holding a “million boat float” from Antioch to Sacramento on August 16 and 17 to save the California Delta and stop the construction of the peripheral canal. For more information, go to: http://www.millionboatfloat.org/index.htm.
For the latest updates on the Delta stealth legislation package, go to the California Sportfishing Protection Alliance (CSPA) website at http://www.calsport.org.
Schwarzenegger Appoints New Commissioner Day Before MLPA Vote...Dan Bacher
In an apparent attempt to "stack the deck" in a California Fish and Game Commission vote today over widely-disputed Marine Protected Areas (MPAs), Governor Arnold Scharzenegger appointed a new Commissioner, Donald Benninghoven, on Monday.
Members of a broad coalition of grassroots environmentalists, fishermen, seaweed harvesters, Native Americans and North Coast elected officials believe that the decision to appoint a Commissioner should have been delayed, since the Commissioner will be making one of the key decisions the Commission will vote on this year. They are asking for a delay in the implementation of Marine Life Protection Act (MLPA) process, due to concerns over mission creep, conflicts of interest and the corruption of the democracy in Schwarzenegger's corrupt fast-track process.
A Republican from Santa Barbara, Benninghoven served on the Marine Life Protection Act Blue Ribbon Task Force in the north central region from 2007 to 2009. He voted for the "Integrated Preferred Alternative" (IPA) for the region under consideration today at the F&G Commission in Woodland.
Benninghoven replaces the former President of the Commission, Cindy Gustafson, who resigned from her post on Friday. Gustafson was considered a swing vote on the MLPA and other natural resource issues. Environmental justice advocates fear that Benninghoven, having served on the MLPA panel where he voted for the IPA, will be a ves vote for the IPA favored by the Governor and his staff.
This alternative will kick American Indian and other seaweed harvesters and seafood gatherers off their traditional harvesting areas in the Point Arena and other areas. It will also remove sustainable recreational and commercial fishermen, already hammered by the most restrictive fishing regulations for groundfish in the world, from their traditional fishing areas.
The Governor and his corporate-funded NGO collaborators, including the Natural Resources Defense Council (NRDC) and the Ocean Conservancy, are pushing for this vote just five days after a peer-reviewed report in Science Magazine revealed that the California current marine groundfish fishery is the healthiest of any surveyed in the world, due to severe fishing restrictions by the Pacific Fishery Management Council (PFMC) and other measures.
Schwarzenegger, the worst Governor for fish and the environment in California history, is pushing the fast-track MLPA process in order to tout his "green" credentials at a time that he presided over the collapse of Central Valley salmon, Delta smelt, longfin smelt, green sturgeon, striped bass and other California Delta fish populations. Meanwhile, the Governor, Nature Conservancy, Senator Dianne Feinstein and Schwarzenegger Democrats are campaigning for a peripheral canal and more dams that only exacerbate the imperiled state of estuary fish populations and drive them over the edge of extinction.
Real environmentalists don't support Schwarzenegger in his attempt to kick seaweed harvesters, abalone divers and fishermen off the water in order to remove the strongest opponents of corporate plans to build offshore oil rigs, wave energy projects and corporate aquaculture. Real environmentalists support the suspension or halting of the corrupt MLPA process while taking a strong, definitive stand against the Governor's relentless campaign to build a peripheral canal and more dams!
For Immediate Release: Tuesday, August 4, 2009
Contact: Aaron McLear, Rachel Cameron 916-445-4571
Governor Schwarzenegger Announces Appointment
Governor Arnold Schwarzenegger today announced the following appointment:
Donald Benninghoven, 76, of Santa Barbara, has been appointed to the Fish and Game Commission. Prior to retiring, he served as executive director and member of the board for the City-County-School Partnership from 1998 to 2000, a cooperative venture of the California State Association of Counties, the California School Boards Association and the League of California Cities. Prior to that, from 1958 to 1998, Benninghoven held several positions at the League of California Cities including executive director. He served on the Marine Life Protection Act Blue Ribbon Task Force from 2007 to 2009. Benninghoven also previously served as secretary for the City-County-School Partnership, chairman of the California Center for Civic Renewal and a member of the Institute for Local Self Government Executive Committee. In addition, he was a member on the Governor’s Commission on Transportation Financing, vice chair of the California State Constitution Revision Commission and member on the Governor’s Commission on Local Government Financing. Benninghoven is a member of the California Game Wardens Foundation and is a lifelong outdoorsman, fisherman and hunter. This position requires Senate confirmation and the compensation is $100 per diem. Benninghoven is a Republican.
New York Times
Battle Brewing Over Giant Desert Solar Farm...Todd Woody, Green Inc.
U.S. Fish & Wildlife Service Environmental groups are worried that a massive solar project in the Mojave will threaten protected wildlife, like this fringe-toed lizard.
Tessera Solar plans to plant 34,000 solar dishes — each one 40 feet high and 38 feet wide — on 8,230 acres of the Mojave Desert in Southern California.
Although the lengthy licensing process for the Calico solar farm remains in the early stages, several environmental groups are already raising red flags about the massive project’s impact on such protected wildlife as the desert tortoise, the Mojave fringe-toed lizard and Nelson’s bighorn sheep.
Calico is one of dozens of industrial-scale solar farms planned for the Southwest that have divided environmentalists over the need to promote renewable energy while protecting fragile desert ecosystems.
But the sheer size of the Calico project, as well as its location next to federal conservation areas, is drawing scrutiny from grassroots green activists and national organizations like the Defenders of Wildlife.
The solar farm would generate 850 megawatts of electricity for Southern California Edison.
Also jumping into the fray is a well-funded labor group that is pressing solar developers to employ union workers, and the Wildlands Conservancy, a Southern California non-profit that supports a proposal by Senator Dianne Feinstein, Democrat of California, to ban renewable energy development on hundreds of thousands of acres of the Mojave adjacent to Calico.
Most of the land for the solar farm would be leased from the federal government.
“Our feeling is the utility-scale project should first be sited on disturbed land, public or private, instead of pristine lands,” April Sall, the conservation director for the Wildlands Conservancy, told California Energy Commission staff at a recent hearing on the Calico project. “There are several endangered species, plant and animal, that would be affected by this project,” Ms. Sall said, adding that the “the side-blotched lizard” might also affected.
The labor group, called California Unions for Reliable Energy, sent an attorney and biologist to testify at the hearing. The group has come under fire for inundating developers who decline to sign labor agreements with demands that they conduct scores of costly environmental studies on their solar projects.
California Unions for Reliable Energy has taken a particularly aggressive stance in the Calico case, dispatching its own biologist to investigate the project site. At the hearing, the biologist, Scott Cashen, accused Tessera Solar of providing scientifically invalid data in its license application as well as underestimating the solar farm’s consequences for wildlife.
“Our concerns basically revolve around the lack of any sort of scientific rigor that was devoted to establishing base line conditions at the site,” Mr. Cashen said.
Sean Gallagher, Tessera Solar’s vice president for market strategy and regulatory affairs, said in an interview on Tuesday that the company has followed regulators’ scientific protocols in preparing its license application.
Mr. Gallagher said he has been in discussions with the Natural Resources Defense Council, the Sierra Club and other environmental groups and expects Tessera Solar will be able to address their wildlife concerns.
“I’m not surprised there’s a lot of interest from environmentalists given the size of the project, but I don’t expect this to turn into a big fight,” Mr. Gallagher said.
Tessera Solar, which is based in Houston, stresses that its SunCatcher solar dish is more environmentally friendly than other solar thermal technologies, consuming less water and requiring no grading of the desert.
And while the company acknowledged in its license application that the project would have “significant” impact on the desert tortoise and other plant and animal species, it also concluded that measures taken to minimize its environmental impact means that Calico “would not substantially affect, reduce the number of, or restrict the range of unique, rare, or endangered species of animal or plant, or the habitat of these species.”
CNN Money
Buy foreclosures now - before it's too late
In many markets, if you want to buy a repossessed property, you better come with your best offer first -- and fast...Les Christie
NEW YORK (CNNMoney.com) -- You've heard of speed dating? It's got nothin' on foreclosure buying these days. In many places, anyone who wants to buy a foreclosure better act fast, or they're going to come away with bupkus.
REOs, the industry term for homes repossessed by lenders and put back on the market, are often selling in a day -- sometimes in less.
"We're seeing REOs go very quickly. Offers come in immediately after the listing comes on the market, within 24 hours," said Brad Geisen, founder of Foreclosure.com. Some homes have been put into contract in less than 90 minutes.
In Stockton, Calif., foreclosure ground zero, the market has changed radically. Last summer, Cesar Dias became famous for founding the "foreclosure tour," in which he packed potential buyers on a bus and ferried them around to some of the thousands of distressed properties.
Foreclosures: How bad is your city?
Today, the foreclosure tour in Stockton is history. There are too few REOs.
"For every listing that comes out, we have 10 buyers," said Dias, an agent with Approved Real Estate Group. "We had a lot of inventory last summer. Now we're down to 1,500 listings -- from more than 5,000."
San Diego buyers face the same trend. "Agents have one or two REO listings now, compared with 15 or 20 a year ago," said realtor Adrianna Delgado of the Delgado Group.
And there's almost no negotiating, no back-and-forth, after the initial bid. "We don't get a counteroffer," said Delgado. "The sellers just ask for your highest and best bid. If you're not prepared to send in your best bid the first day, you may as well stop looking."In Florida there are so many buyers for foreclosure listings that real-estate investment companies, which had been snapping up properties, are now facing stiff competition, said Vanessa Grout, VP for acquisitions at New Valley, a real estate investment fund.Even in distressed Detroit, REOs are still in high demand. "For a good house that's not too beat up, in a good neighborhood, there's no lack of buyers in this market," said Andy Sakmar, founder of Century 21 Sakmar in the Motor City suburb of Rochester. "There are a lot fewer of these properties than a year ago, and the super buys get multiple offers."
Priced for speed
The biggest factor in the feeding frenzy is, of course, rock-bottom prices. Banks are pricing homes to move.
Sakmar tells of an REO that recently went on sale in a community of mostly $300,000 homes. It was in good shape and should have sold for $200,000, in Sakmar's opinion. Instead, the bank listed it for $129,000.
"It drew thirteen offers in two days," he said.
That kind of cut-rate pricing is very common, according to Foreclosure.com's Geisen. Instead of holding onto REOs for the best prices -- and paying the property taxes and maintenance and heating costs -- banks are selling the homes as quickly as possible.
"In this market, if they can liquidate them fast, it makes more sense to get them off the books," he said.
The trend is causing intense agita for buyers. "People feel like they're getting left out," said Dias, the agent in Stockton. "We show a house on the weekend and it's gone by Monday."
"There are plenty of buyers ready to move," added Mark Brandemuehl, a spokesman for Movoto, a California real estate broker that specializes in foreclosures. "They tell their agents to make bids right away, as soon as they see something suitable come on the market."
Bubble markets
The hot spots for this fast-paced foreclosure activity are former bubble markets where foreclosures soared -- places like California cities Sacramento, Riverside and San Bernardino.
In Sacramento, for example, the inventory is down to less than 30 days, making it a cut-throat market. The agents specializing in REOs "have nothing to sell," said Brandemuehl.
On average, inventories of California homes under $300,000, the most popular price point for foreclosure buyers, have shrunk drastically, from a nearly 10-month supply a year ago to less than three and a half-month supply today, according to the California Association of Realtors.
Nationally, the number of bank-owned properties diminished by 26% from June 2008 to June 2009.
The industry attributes the drop in inventories to foreclosure prevention efforts by President Obama and various state governments. In particular, they cite moratorium programs that, at the very least, postponed foreclosures.
The bad news is that as the moratoriums lapse, more REOs will likely hit the market.That's because these efforts tend to delay foreclosure rather than stop it.
"Every lender I talk to has been telling me there's every indication that a tsunami of new properties coming to the market later this fall," Sakmar said.
Geisen sees the same flood, but he attributes it to consumers failing out of Obama's foreclosure-prevention program, Making Home Affordable. He believes that many of the modified loans will fall back into foreclosure -- especially if the economy doesn't perk up soon.
In fact, last year the U.S. Comptroller of the Currency found that 53% of loans that were modified in the first half of 2008 fell back into arrears. Although, that was before Making Home Affordable standardized the terms and qualification process.
Still, Geisen said, "There'll be another wave of foreclosures. The wave that Obama stopped -- temporarily."
Banks still getting sicker
The economy may have turned, but banks will be cleaning up after their lending mistakes for years. Several big banks may already be doomed to fail...Colin Barr
NEW YORK (Fortune) -- The economy may have pulled out of its plunge, but you'd never know by a look at many big banks.
Even after a rousing market rally that spurred new capital into giant institutions such as Wells Fargo (WFC, Fortune 500) and Bank of America (BAC, Fortune 500), numerous large banks around the country are still struggling with deteriorating finances.
Two dozen banks with at least $5 billion in assets get the lowest one-star rating on Bankrate.com's safety and soundness test, which is based on an assessment of regulatory filings for the quarter ended March 31.
More than half of those banks are ranked "troubled" or worse by research firm Bauer Financial, using the same data. Three of these banks, with a total of $45 billion in assets, have made public statements indicating they could soon collapse.
"There are some big ones in fairly dire straits," said Karen Dorway, director of research at Coral Gables, Fla.-based Bauer. "If you see some of these fail, it could add to the stress on local economies."
Many banks have had their capital eroded by losses, while their balance sheets remain bloated with billions of dollars in depreciating real estate investments and construction loans.
These banks have been setting aside more money for future losses, but in many cases the increases in loan loss reserves haven't kept up with the surge in nonperforming assets. That means profits could be pressured even at stronger institutions.
"We don't know when the losses are going to peak, and we don't know how long they're going to stay there," said Chris Whalen of Institutional Risk Analytics, which advises investors. "It's a pretty gruesome picture."
Meanwhile, efforts to remove troubled assets from bank balance sheets have stalled, as banks remain reluctant to sell at the low prices being offered by investors. That leaves banks trying to sell assets and lure in new funds from investors. On those counts, their records are decidedly mixed.
Over the past year, at least eight of the low-rated institutions have agreed with regulators to improve their banking practices. Banks including Pacific Capital Bank (PCBC), Westernbank Puerto Rico (WHI) and the former Lehman Brothers Bank -- now known as Aurora -- have set plans to strengthen their capital bases.
Others have been told to get more capital, but have failed to do so. Among them are condominium construction lender Corus Bankshares (CORS), based in Chicago; Colonial Bancgroup (CNB) of Montgomery, Ala., a troubled mortgage lender whose offices were recently raided by federal agents; and Guaranty Financial Group (GFG) of Austin, Texas.
Guaranty, with $13 billion in assets, said last month it expects to be taken over by regulators. A recent filing from Colonial, with $25 billion in assets, indicated "there is substantial doubt about Colonial's ability to continue as a going concern."
Corus, which has $7 billion in assets and has been told repeatedly to raise new funds, said Friday that "it is highly unlikely that it will be able to obtain additional outside capital that does not include the provision of substantial assistance by the FDIC or other Federal governmental authorities."
While problems at those banks are well known to investors -- a share of all three costs less than a dollar combined -- their failures could strain the federal deposit insurance fund and add to problems in deeply stressed real estate markets.
Corus, for instance, is the lender to 15 Florida condo projects worth at least $100 million each.
"Construction loans are going to be a big part of the challenge, because they're so complex," said Dorway.
The problems at troubled banks could slow the recovery for their healthier counterparts. So far this year, 69 banks have failed -- the most since 1992. The Federal Deposit Insurance Corp. has already imposed a one-time fee on member banks to shore up its deposit insurance fund and has said it may impose another later this year.
The FDIC's so-called problem bank list had 305 institutions -- with $220 billion in assets -- on it at the end of the first quarter. The agency has set aside $22 billion to cover failure-related costs this year. A law enacted this spring gives the FDIC access to up to $500 billion in Treasury credit though 2010.
Even so, the scale of the banking problem will surely test the agency's mettle. Veribanc, another bank rating agency, suggested as much this spring when it reported a raft of first-quarter rating downgrades and forecast 97 bank failures for the year.
"If the past quarter's trend continues, more than half of all banks could be downgraded during the remainder of 2009," Veribanc said.