City turns over hundreds of e-mails sent by Frago...JONAH OWEN LAMB
ATWATER -- Violent and racist e-mail jokes alluding to the assassination of President Barack Obama, the killing of Latinos and violence against black people were forwarded by Atwater City Councilman Gary Frago during the last six months, according to more than 200 new e-mails obtained by the Sun-Star from the city of Atwater.
The councilman, who forwarded the newly obtained e-mails to city staff and a county supervisor, among others, has been under public pressure to resign since it was learned in July that he had sent other racist e-mails in late 2008 and early 2009.
One of the most troubling of the new Frago e-mails, forwarded in January, joked that Nokia had designed a new cell phone for "nervous white people" who want to make calls in a series of cities known for their large black populations, such as Oakland and New Orleans. The phone was a gun.
Merced County Supervisor Mike Nelson and Atwater's Assistant City Manager Stan Feathers both received this e-mail. Neither recalled the e-mail, they said.
Another e-mail forwarded by Frago on Dec. 9, 2008, was in the form of a fictitious letter sent by Sen. John McCain to John Hinckley Jr., a man obsessed with actress Jodie Foster, who attempted to assassinate President Ronald Reagan in 1981. The letter said that Hinckley would be released soon and he should know that Obama was sleeping with Foster now.
Atwater City Manager Greg Wellman was the e-mail's only recipient. He said he doesn't recall receiving the e-mail.
A third e-mail joked about killing illegal immigrants and Obama delegates. The joke is about a man applying for a position with a police department. As a test, the chief tells the applicant: "Take this gun with 13 bullets and go out and shoot six illegal immigrants, six Obama delegates and a rabbit." The man asks: "why the rabbit?"
"Fantastic attitude," says the chief. "When can you start?"
In all, the newspaper obtained more than 200 e-mails sent or forwarded by Frago from October 2008 to July this year. The city had at first refused to release the e-mails to the newspaper. It relented after lawyers from McClatchy, the Sun-Star's parent company, sent Atwater a letter asking the city to change its mind.
Frago said that he is sorry for what he did and wants to move forward now. "I made a mistake in sending them. I want to move forward," he said Tuesday. "It's not going to be a fast process; I know that and I'm willing to work on that." He said he wants to concentrate on serving the citizens of Atwater. Frago would not comment on the new e-mails released to the Sun-Star.
Most of the e-mails contained sexist, racist or just plain off-color jokes.
Frago, who says he won't resign from the council, is already in hot water after revelations surfaced in a Sun-Star story July 17 that he e-mailed a series of racist jokes about the president, first lady and blacks in general.
Frago has begun racial sensitivity classes and this week resigned his honorary position as mayor pro tem. "I have made a mistake, I should have known better," he said at a special meeting on the e-mails in late July.
Several city officials and a county supervisor who were recipients of Frago's e-mails expressed mixed opinions about these new e-mails.
Nelson, who recommended that Frago go to racial sensitivity classes, said he doesn't endorse the e-mails that Frago forwarded to him.
"I'd be the first to say that I don't condone the e-mails or what Gary did in forwarding them," said Nelson.
Wellman, who also received many Frago e-mails, agreed. "They are obviously unacceptable. Mr. Frago has offered his apology," he said.
But Wellman added that he faces a dilemma. "I am not in a position of dictating to one of my superiors what he should do," said Wellman.
Wellman said he received legal advice to delete any e-mails that were obscene or offensive, and that's what he did, he said.
"I did not come forward after deleting these e-mails because I was concerned about repercussions from certain council members," said Wellman. "I can certainly understand some may not feel it is sufficient."
But the end result may be that everyone involved is tainted, said Wellman.
"It's quite possible that everyone associated with this could be negatively affected in terms of their ability to compete in the job market."
Feathers said only that he doesn't approve of Frago's actions. "I don't agree with or condone any of those racial jokes. I don't think anybody does and I certainly don't want to indicate that I do either."
Feathers, the assistant city manager, said he doesn't remember receiving any of the e-mails. "I get hundreds of e-mails every day," he said. "Most of my time is spent on city business. I can't control every e-mail that comes into my in-basket."
A Sun-Star story on July 17 revealed that Frago sent at least seven racist e-mails to city and county officials from October 2008 to February 2009. The e-mails denigrated President Obama, the first lady and black people in general.
While Frago has apologized, at first he said he didn't regret sending the e-mails.
"I don't see where there's a story, I'm not the only one that does it," he told the Sun-Star in a story on July 21. "I didn't originate them, they came to me, and I just passed them on."
You asked: Where's Cardoza?
He's in his district for three weeks; plenty of appearances but no town hall meeting...Our View
Turn on your television or radio, and all you see on the news are raucous town hall meetings.
On Tuesday, Missouri Sen. Claire McCaskill dealt with some boisterous protesters in Hillsboro, Mo., but pretty much held her own.
President Barack Obama had a town hall meeting in Portsmouth, N.H., Tuesday morning, which was pretty tame. There were protesters outside on both sides of the health care issue. But with the Secret Service and security inside, everyone was civil. The president answered just eight questions from the audience.
The Associated Press reported that even Republican-turned-Democratic Sen. Arlen Spector, at a community college in Pennsylvania, heard from speaker after speaker who accused him of trampling on their constitutional rights, adding to the federal deficit or allowing government bureaucrats to take over health care.
Congress people are on their summer break, mostly spent in their districts visiting with constituents.
With all the protests over the last couple weeks -- whether you consider them spontaneous or organized -- politicians are taking different approaches to dealing with it.
House Speaker Nancy Pelosi suggested Monday that lawmakers might want to lay low. Obama, on the other hand, wants lawmakers to wade right into the middle of the fray, which is what he did in New Hampshire.
A number of Sun-Star readers have asked in letters to the editor: Where's Rep. Dennis Cardoza? Is he going to have town hall meetings?
Cardoza called the Sun-Star from the side of the highway on Monday afternoon after he just flew in from Washington, D.C., to say he is back in Merced for the next three weeks. And his answer to the burning question: No.
However, he is going out to talk to various civic groups around his district, like the Rotary and Lions clubs.
You may also spot him around town -- and he's anxious to have a conversation with anyone he meets.
The congressman says town hall meetings have been replaced with telephone conference calls that can bring together thousands of constituents at a time. The calls typically last about an hour. He usually answers 15 or more questions.
There is something organic and real about town hall meetings. For a newspaper, a town hall meeting makes for a better story than a conference call. We think that Valley voters can have a civil discourse even if we are apprehensive or even opposed to health care reform.
But Cardoza says he likes the conference calls because he can communicate with more voters.
He says he wants to get health care reform done, but he wants it done right. "We have 150,000 people without any health coverage in my district," he said. "That's why this issue is so important." He is also working on getting the UC Merced medical school open because it will bring more doctors and health care to the Valley.
As for those letters in the Sun-Star, he reads them all.
He likes getting phone calls and e-mails from voters and reads most of those, as well. His staff keeps him up-to-date, even when he's in the Valley.
His district is always on his mind. He is bringing two Beltway heavyweights to the Valley over his break -- House Majority Leader Steny Hoyer and Agriculture Secretary Tom Vilsack, the former Iowa governor -- for meetings with local leaders and an editorial board meeting with the Sun-Star and The Bees in Fresno and Modesto.
If you see the congressman on the street, walk right up and talk to him about health care.
Fresno added to a federal water suit...The Fresno Bee
The city of Fresno has joined a federal lawsuit that says new rules governing the endangered delta smelt will harm Californians who depend on Central Valley Project water.
The suit seeks to have the new rules governing management of the delta smelt rewritten. While that takes place, the suit asks for "relief from the pumping restrictions" in the Sacramento-San Joaquin Delta that were implemented as a result of the new rules.
Fresno officials say the city joined the lawsuit last week because water allocation reductions have affected the city and the region.
Similar suits were filed by other entities across the state. All those suits have now been combined.
Editorial: City can do more to use less water
If Sacramento's public officials expect the region's residents to conserve water as the state endures its third year of drought, they are going to have to set an example themselves.
An investigation by The Bee's Charles Piller, published in our Aug. 9 editions, showed how some of the region's biggest public institutions are also some of its biggest water users – and have been using more water, not less, since they began imploring their constituents to conserve.
The city of Sacramento is one of the biggest offenders. The city is using 24 percent more water than three years ago to keep Curtis Park green, and about 20 percent more water in William Land Park. The Historic City Cemetery, meanwhile, is using 75 percent more water than it did in 2006 – a fact that anyone who has been showered by its wayward sprinklers on Broadway will not be surprised to learn.
The city is not the only institutional scofflaw. The regional sewage treatment plant is using 56 percent more water these days, and Luther Burbank High School increased its consumption by 31 percent in just two years.
These trends put data behind a general impression that many people have about government: It's great at making rules for other people to follow but not so good at following those rules itself.
Until that changes, a government-run campaign to get people to use less water is going to fall flat. In Sacramento, the city has prohibited residents from watering their yards during the day or on Sundays, and has implemented an every- other-day regime for the watering that is still permitted. But the city itself ignores those rules and does as it pleases.
The numbers in Piller's story show that incentives work. At the city, which pays for its water but apparently holds no employee accountable for the amount used, consumption has increased by more than 20 percent in two years. But many private commercial users, whose water is metered and billed by the gallon, have cut back. Some have done so because they have less business in the down economy. But others are actively conserving to save money.
Incentives also explain why the average Sacramentan uses about twice as much water as the hated Los Angelenos to the south. They may covet our water, but much of the water they get is recycled through our pipes; and when they do get it, they are more careful stewards of this precious resource than are we.
Once all of Sacramento has water meters, prices will send a signal to customers to conserve. But that will take 20 years. In the meantime, if city and regional officials expect us to use less water, they can start by turning down their own tap.
Stockton council votes to oppose peripheral canal...The Record
STOCKTON - The Stockton City Council voted Tuesday to oppose a peripheral canal long after many other agencies did so.
The 7-0 vote was to oppose a proposal supported by Gov. Arnold Schwarzenegger's administration to divert water around the Delta to as far south as San Diego.
The council also voted to form a citizens advisory group on water issues.
The seven-member panel is to advise the council's water committee on water-related issues.
The Concerned Citizens Coalition of Stockton, which sued the city to undo its $600 million waterworks privatization deal - compelling Stockton to return its waterworks to municipal control last year - advocated for the advisory group's formation.
Mayor Ann Johnston and council members are each to appoint one member to the group.
West Nile may have killed young bald eagles...Dana M. Nichols
CAMPO SECO - West Nile virus may have been what killed two young bald eagles whose bodies were found in their nest near Pardee Reservoir on July 23.
As recently as last week, scientists at the California Animal Health and Food Safety Laboratory at the University of California, Davis, said the decayed condition of the birds' bodies meant it might not be possible to determine a cause of death. But the very last test conducted came back positive this week for West Nile virus in the kidney and brain tissues of one of the birds, according to Leslie Woods, a veterinary pathologist at the laboratory.
Woods said that because of the deteriorated condition of the birds' bodies, she was unable to look for the lesions in tissues that would be another indicator of a West Nile virus infection.
"I didn't expect the (virus test) to work," Woods said. "This is an RNA virus that degrades more rapidly than a DNA virus does."
The eagles appeared uninjured when they were found in their nest, about 200 yards from Sandretto Road on land owned by East Bay Municipal Utility District. There also was evidence, in the form of bones and other animal remains, below the nest that the adult eagles had been providing lots of food to the two young ones.
Bird watchers had been observing the young eagles since March and said they appeared to be almost ready to fly at the time of their deaths.
High temperatures had already begun to decay the carcasses when a California Department of Fish and Game warden retrieved and froze them.
Still, tests conducted at the laboratory were able to rule out various possible causes of death, including insecticide poisoning, lead poisoning and botulism. Woods said she provided the results of the test to the Department of Fish and Game, which will decide whether West Nile virus was the likely cause of death.
A Department of Fish and Game spokesman had not yet been able to get a response from those in the department familiar with the case late Tuesday.
West Nile virus is spread by mosquito bites and can infect a variety of birds and mammals, including humans. The virus has been documented in Calaveras County since 2004. In 2008, West Nile infections were documented in a bird in San Andreas and a person in Copperopolis.
Although West Nile has been documented to infect more than 200 bird species, it is known for being most deadly in corvids, a group of birds that includes crows, ravens, jays and magpies.
But that does not mean other species are immune. "The raptors will get it," Woods said, referring to the group of birds that includes eagles, hawks, osprey and other large carnivorous species.
Building bust takes toll
It's driving Valley job losses, not water issues, report shows...Reed Fujii
Blame San Joaquin Valley job losses mostly on the foreclosure crisis, not so much on efforts to protect fish, University of the Pacific researchers said Tuesday.
According to a recent report, water restrictions, because of the drought and the need to maintain fish populations, cost the region about 6,000 jobs and $170 million in wages and benefits. But the collapse of the Valley's construction industry eliminated 47,000 workers their $1.8 billion in income.
Toss in losses to self-employed contractors and farmers, corporate and other business income and farm losses mount to $500 million. But by the same token, the building crisis cost the region's economy $3.2 billion, or more than six times as much.
Jeffrey Michael, director of the Business Forecasting Center at Pacific, said he began his study because government employment surveys found an increase in San Joaquin Valley farm employment while widely publicized estimates said water shortages would cost the region 30,000 to 35,000 jobs.
"A lot of people are claiming it's water that's driving unemployment through the roof in the Valley, and the data just doesn't support it," he said Tuesday.
Farmers in the eight San Joaquin Valley counties (from San Joaquin in the north to Kern in the south) employed 900 more workers in June than in the same month in 2006, the year before the current drought started, the Forecasting Center reported. The seven counties most dependent on state and federal water projects, those south of San Joaquin County, employed 3,200 more farm workers in June than they did three years earlier.
"Certainly, when you see that the (farm employment) is up, it's hard to believe the water impact has been 30,000 to 35,000 jobs," Michael said.
The University of California, Davis, researcher who provided the higher estimates admitted Tuesday that his earlier projections of water-shortage job losses - first pegged in January at 60,000 to 80,000 and revised in May to 31,000 to 35,000 - are too high.
Still, Richard Howitt, chairman of the Agriculture and Resource Economics department at Davis, said Michael's estimates are too low.
"Even if you take the low side, you're still talking 12,000 to 15,000 jobs," Howitt maintained.
And, he said, the impact of the water supply cuts is heavily concentrated on farmers and communities lowest on the water totem pole, mostly on the west side of the Valley.
"If you happen to be living in a small town or farm on the west side, it's going to be hit," he said.
That certainly is the case in the Fresno County city of Mendota, Mayor Robert Silva said Tuesday by telephone.
"I've been living in this area all my life," he said. "The last two years, last summer and this summer, have been the worst economy I've ever seen."
Unemployment in Mendota is estimated at 38 percent, and it was well more than 40 percent earlier this year, Silva said. And he dismissed the University of the Pacific report.
"It's part of the game that people are playing because they are environmentally tied," he said. "People are just stretching the truth."
Michael does not deny the west side of the Valley is an economic ground zero, but he said the water shortage shouldn't take all the blame.
The report notes two major food processing plants in the area recently closed for reasons not related to the drought, as did a sugar refinery. And, the temporary suspension of a prison construction project and the overall building bust also add to the region's woes.
"Just saying, 'If we turn the water back on, everything is going to be fine in those communities,' isn't true at all," Michael said.
He also said he has no political ax to grind, but he did seek to undercut those who promote a peripheral canal by arguing it is needed to ease huge job losses.
"I've publicly stated there's never been a convincing case made for the people of California financing the peripheral canal," Michael said. "What I have seen is a lot of invalid rhetoric about the number of jobs lost."
Arguing over the exact number is splitting hairs, said Dave Kranz, a spokesman for the California Farm Bureau.
"Whether it's 60,000 jobs or 6,000 or 600,000 jobs, it's too many," he said. "Land is being idled; people are being thrown out of work."
"We should be adding jobs by adding to our water system."
San Francisco Chronicle
UC must retain the best leaders...Russell S. Gould, Bruce D. Varner. Russell S. Gould is chairman of the UC Board of Regents, and Regent Bruce D. Varner is chairman of the committee on compensation.
It is impossible to imagine California without the University of California. From the Gold Rush era forward, the fortunes of the two have been inextricably entwined. California early on demonstrated a remarkable understanding that only through investment in human capital could it achieve, in author Wallace Stegner's phrase, a "society to match its scenery."
In turn, the university inspired California's sense of itself as a place apart, a land of innovation and opportunity, and across generations it helped transform that inspiration into reality - an essential incubator of the California Dream.
As UC regents, we do not take lightly our responsibility to protect and nurture this precious California institution. One obligation of our stewardship is to ensure that the university - in all its many and varied endeavors - attracts and retains the best leaders possible.
In this context we turn to an unfortunate article that appeared Aug. 6 in The Chronicle, a report that attempted to cast as scandalous a couple of dozen managerial appointments and adjustments that occurred across the UC system this year.
The business of running a $19 billion, 180,000-employee enterprise - 10 campuses, five medical centers, research laboratories and a multitude of programs - does not come to a halt when the economy turns bad. People in leadership positions may leave or retire, but their institutional duties remain. Someone must run the medical center, head the academic department, oversee the research and administer the programs.
The Chronicle reported, somewhat breathlessly, that "on the same July day that the UC Board of Regents cut $813 million from UC budgets," it also "quietly approved" a couple of dozen "pay raises, stipends and other benefits." This broad-brushed summary, inviting as it may be to talk show commentators and headline writers, missed the mark on many counts.
First, these decisions came to the board as informational items only. They had been approved at the request of campuses - case by case and over several months, after careful review and in some cases revision - by Regent Bruce D. Varner, chairman of the compensation committee, in consultation with UC President Mark Yudof.
By policy, these so-called interim actions are taken when the need to fill essential positions requires quick action, or when they involve matters so routine they need not require regents' approval. Many of the items involved no new money whatsoever; others dealt with salaries paid from non-state sources, such as research hospital revenues; some created cost savings.
To classify some of them as "pay raises" is deceiving. Each item has its own backstory, but many involved individuals taking on significant new responsibilities - a head of a urology department named dean of the medical school, for example - or stepping in to perform a whole portfolio of additional duties because positions were eliminated.
And while that "quietly approved" insinuates a lack of transparency, in fact, these items are all routinely posted on the university's Web site.
As for the salary amounts involved, yes, as a result of dwindling state support, there is a furlough program in the works that will lower pay for all participating UC employees, including every executive The Chronicle cited. We are not happy about this.
At the same time, we operate in markets. The University of California competes with the world's premier institutions, both in terms of recruitment and retention. And top talent requires competitive compensation, an unavoidable fact of life. That said, the people we hire typically could command far greater salaries at private universities or medical institutions.
So we face a balancing act. The economy is dismal, and funding has been slashed by the Legislature. But we also have an obligation to California to maintain our historic level of excellence at campuses, hospitals and research enterprises, a mission that only will grow more important in the ascendant information economy.
That means installing good people in key leadership roles. It might make for better public relations to buckle to political fevers and quit pursuing and maintaining the talent needed to keep California's primary engine of opportunity thrumming. To do so, however, would be a dereliction of duty on our part and, over time, would lead to devastating consequences for California.
UC executive pay raises a tough sell...Editorial
The University of California is in an unfamiliar bind. It's a towering institution with a worldwide reputation, and its success has powered the state's growth for generations.
But the state's plunging finances have obliged UC to accept $800 million in cuts, impose unpaid furloughs on employees and raise fees for students. Selling the public and its own employees on the fairness of these trims is crucial.
More work, we're told, will be done by fewer. Cuts will force economies, and in UC's case, there will be fewer courses, larger classes and a 9 percent boost in fees for students and their families.
That's why it's especially hard to accept higher pay for more than two dozen top earners in the UC system, including lawyers, academics and administrators. The extra money was divvied up in recent months while the state cuts loomed and UC prepared a range of cuts and higher charges.
UC leaders offer a familiar argument to justify the actions: retention and recruitment. Unless the system pays more, its top people will leave and new prospects won't come.
It would be easier to accept this reasoning if UC didn't work so hard to mask the pay increases as stipends that go on top of existing salaries and to reclassify existing jobs into higher pay categories. These top earners may be handling extra duties, but so are many other workers in a shrinking economy where colleagues have departed. The timing for these higher wages couldn't be worse.
The university must rethink its stance on higher pay for higher-ups. If employees and students are asked to sacrifice, then everyone should do the same.
To see a list of the salaries and positions, go to links.sfgate.com/ZHVR.
"Drought impacts on unemployment are grossly overstated"...Dr. Peter Gleick
Thus concludes a new comprehensive assessment of the impacts of the drought on Central Valley unemployment. We've heard a lot of rhetoric on this issue in the past few months, mostly from a small group of self-interested farmers who would like to see the deliveries of water to their fields increased at the expense of remaining storage in reservoirs and water recently returned to natural ecosystems.
Water Number: 0.3%. In fact, this new independent assessment, from Professor Jeffrey Michael of the University of the Pacific Eberhardt School of Business Forecasting Center (which took no outside funding to do the report), concludes that of the 5.6% increase in unemployment in the San Joaquin Valley counties over the past year, only 0.3% of it comes from water shortages. More than 2.5% of the rise in unemployment comes from the drastic drop in construction employment and the rest from other economic woes caused by the financial policies of the previous administration.
Most media stories have reported that 30,000 to 90,000 jobs were lost due to water shortages. The University of the Pacific report finds that to be a gross overestimate, and concludes that job losses from water shortages were around 6,000 - certainly bad, but far, far lower than losses due to other factors. The report uses two different methods to check these results, using data from the agricultural industry. Both methods reach similar conclusions.
In fact, the University of the Pacific report notes that official employment data from the State of California shows that "For each of the first six months of 2009, San Joaquin Valley farm jobs have increased over the previous year." Farm employment in the seven San Joaquin Valley counties grew by 3,200 jobs from June 2008 to June 2009. Non-farm employment is where the problem lies: it dropped by 30,200 jobs in the same region in the same period.
But the authors go even farther and analyze why the higher estimates, from UC Davis, are too high. According to the Michael's report, the group at UC Davis acknowledges the flaws in their estimates - actually done by the California State Water Resources Control Board staff - and is moving to update and redo their model with new assumptions and data. I look forward to the continuing refinement and debate over these estimates, but I hope that policymakers and the media take account of the new findings so that effective actions can be taken to stimulate employment in these counties.
Finally, as the University of the Pacific report clearly states: "The rise in unemployment is creating great economic hardship in the San Joaquin Valley, particularly among lower income households in the Central Valley. A disproportionate share of the impact has been felt by Latino households who make up large shares of employees in the construction and farm sectors." But exaggerating the role that water plays in that unemployment, and using that exaggeration as an excuse to eliminate environmental protections and increase the withdrawal of remaining water from reservoirs, rivers, and the Delta, will do little to improve farm jobs and much to hurt rational water policy in the region.
Eberhardt School of Business
Business Forecasting Center
Unemployment in the San Joaquin Valley in 2009: Fish or Foreclosure?
New Report: The Lies of Congressmen Nunes, Cardoza and Corporate Ag Exposed...Dan Bacher...8-11-09
Bill Jennings, executive director of the California Sportfishing Protection Alliance (CSPA), comments on the ground breaking report by Dr. Jeffrey Michael that has "torpedoed the lie that measures to protect fish have triggered massive agricultural unemployment in the Central Valley."
The report titled "Unemployment in the San Joaquin Valley in 2009: Fish or Foreclosure" found that “reductions in water deliveries due to environmental regulations have increased the Valley unemployment rate by 0.1 percentage point and the drought 0.2 percentage points for a total water shortage impact of a 0.2 percentage point increase in the unemployment rate.” This compares to a 4.5 percentage point increase in construction unemployment caused by the foreclosure and housing crisis that continues to drive job loss in the Valley.
The report was released as Governor Arnold Schwarzenegger and his allies in the California Legislature are pushing to build a peripheral canal that would result in pushing Central Valley salmon, Delta smelt, longfin smelt, green sturgeon and other fish populations over the abyss of extinction.
New Report: The Lies of Congressmen Nunes, Cardoza and Corporate Ag Exposed
Media reports exaggerate water caused job losses up to 15 times actual impact ...Bill Jennings, executive director, California Sportfishing Protection Alliance
A comprehensive new study by University of Pacific Economics Professor Jeffry Michael, Director of the Business Forecasting Center, has torpedoed the lie that measures to protect fish have triggered massive agricultural unemployment in the Central Valley.
The report titled Unemployment in the San Joaquin Valley in 2009: Fish or Foreclosure found that “reductions in water deliveries due to environmental regulations have increased the Valley unemployment rate by 0.1 percentage point and the drought 0.2 percentage points for a total water shortage impact of a 0.2 percentage point increase in the unemployment rate.” This compares to a 4.5 percentage point increase in construction unemployment caused by the foreclosure and housing crisis that continues to drive job loss in the Valley.
And the 0.1 point increase is something of an illusion. Actual farm labor employment has beensteadily increasing since 2004 and throughout the present drought. Indeed, farm labor jobs in the seven south-of-Delta counties in the Valley increased by 15,500 between June 2006 and June 2007, 12,500 between June 2007 and June 2008 and 3,200 between June 2008 and June 2009. Contrary to the claims that water shortages have brought economic disaster to the Valley, farm labor employment increased by over 31,000 jobs during the three years drought.
However, recession caused private nonfarm employment to decrease by 33,700 jobs between June 2006 and June 2007, 40,400 between June 2007 and June 2008 and another 30,200 between June 2008 and June 2009. In other words, while nonfarm employment lost more than a 104,000 jobs during the recession, farm labor employment increased by more than 31,000 jobs.
Clearly, agriculture has been the bright spot in the Valley economy. This is also born out by the reports submitted by County Agricultural Commissioners that show significant increase in the value of crop production in 2007 and 2008. For example, Fresno County has experienced record production in both 2007 and 2008.
The study rips two reports by U.C. Davis Professor Richard Howitt that initially claimed revenue losses of $1.2-$1.6 billion and job losses of 60-80,000; later reduced to $627-$710 million loss in revenue and 31-35,000 jobs. Water exporters have shamelessly promoted Dr. Howitt's estimates as proof that protecting fish was causing people to suffer.
However, Howitt didn't do his own economic modeling and his claims were based upon assumptions of multiplier effects far larger than other published studies of California agriculture. Dr. Howitt claimed that 50 jobs were affected for every $1 million change in agricultural revenue. Dr. Michael points to published studies that consistently report far lower multiplier effects: 11.7 jobs per $1 million (Summer et. al., Berkeley Economic Consulting); 23.8 (Sunding et. al., UCD Ag. Issues Center); 16.4 (Michael et. al. (UOP) and 11-21 (Univ. of Georgia evaluating the Georgia drought).
Dr. Michael also discusses at length the fact that farm labor employment per unit of yield has been plummeting due to changes in cropping patterns and increased agricultural production efficiency. This has had the effect of reducing the labor intensity of agriculture. The report extensively discusses the widely reported fact that in recent years agricultural representatives and, even Senator Feinstein, have been blaming a shortage of farm workers for agricultural production difficulties.
Lastly, the report addresses the impacts to the small towns on the Westside of Fresno County. It points out that before State Water Project water was brought to the area, unemployment was in the single digits in the 1960s and 70s but, after the arrival of subsidized water, unemployment doubled, tripled and even quadrupled in the 1990s and 2000. It discusses the fact that recent Mendota unemployment figures are extrapolations from the 2000 census data and that much of the recent unemployment can be traced to construction losses and the closure of food processors due to changing cropping patterns.
The California Sportfishing Protection Alliance hopes that state and national media report the actual facts of agricultural impacts due to fish protection measures half as aggressively as they have parroted the inflated claims of the hydraulic brotherhood.
Bill Jennings, Chairman
California Sportfishing Protection Alliance
3536 Rainier Avenue
Stockton, CA 95204
e: deltakeep [at] aol.com
Californians Against the Canal Urgent Action Alert...Dan Bacher
This is today's urgent action alert from Robert Johnson of Californians Against the Canal. I urge you please read through and complete the survey at: http://survey.constantcontact.com/survey/a07e2k30jk4fy7jgawo/start. For more information, go to: http://www.stopcanal.org.
This week, starting immediately, advocates for prudent water policy and a healthy SF Bay-Delta Watershed must fully engage in the California Water War. We are at the defining moment: From Wednesday the 12th through next Monday the 18th are several critical events we need you to attend. Those of you cannot make one or more please send someone in your place.
IF WE DO NOT ORGANIZE HUNDREDS IN OPPOSITION TO THE $30-$40+ BILLION (incl interest, etc.) BOND PACKAGE BEING SECRETIVELY RAMMED DOWN THE THROATS OF OUR LEGISLATORS BY WELL FUNDED LOBBYISTS AND A RECKLESS GOVERNOR, THE PERIPHERAL CANAL WILL BE APPROVED BEFORE SEPTEMBER, PUTTING THE CALIFORNIA TAXPAYER ON THE HOOK FOR A MASSIVE WATER PRIVATIZATION BOONDOGGLE MASQUERADED AS A DELTA WATERSHED PROTECTION MEASURE.
This is NOT a NorCal versus SoCal issue, as the secretive corporate agribusinesses in the south San Joaquin Valley, who seek to control the state's water supply wish you to believe. Don't be misled by the massive Burson Marsteller "astroturf" campaign of disception; led by front groups that seek to portray a humanitarian crisis and severe economic recession in the Fresno/Bakersfield vicinity as being caused by environmentalist-driven cut backs in water exports to a region that has the most junior water rights in California.
No, this is not about a 3 inch fish before people or farming jobs. This is about wholesale GREED by what some call the Hydraulic Billionaires Cabal, who have allowed the people of the southern San Joaquin valley region to be terribly misled: This group let them believe that water deliveries to the west side of the valley (east side of I-5, from about Los Banus south to Kettleman City) were essentially guaranteed, allowing the increased planting of permanent crops throughout the decade, while knowing all along that in low water years, the west side water allocation would be cut. (and we wont talk about the massive soil toxicity issues).
Despite repeated warnings by reputable agencies and scientists in nearly a decade ago, the largest water districts in the US successfully bullied state and federal agencies to violate age old water laws and increase water exports to over 6 miollion acre-feet between 2003 and 2007 and completely collapsed our region's ecosystem...
Robert Johnson, Jr
Californians against the Canal (StopCanal.org)
Feds and State to Hold Public Meeting As Canal Battle Heats Up...Dan Bacher...8-11-09
The battle to save the Delta and defeat Governor Arnold Schwarzenegger and his Democratic collaborators in the State Legislature is really heating up this week. Here's today's news from Barbara Barrigan-Parrilla, campaign director of Restore the Delta.
Deputy Interior Secretary David Hayes and DWR Director Lester Snow will hold a public meeting on California's Water Challenges and Delta related issues this Wednesday, August 12 from 1:00 p.m. to 5:00 p.m. at the Capitol Plaza Holiday Inn in Downtown Sacramento. The address is 300 J Street.
On the day before the meeting, the PPIC released yet another horrible report on funding the peripheral canal. The previous report backing the canal was funded by the Bechtel and the Packard Foundation, two of the worst corporate greenwashers on the planet.
For more information, go to http://www.restorethedelta.org.
"Figures never lie, but liars sure can figure." ---Unknown Colloquial Saying
Meeting with Deputy Secretary of the Interior David Hayes
Deputy Interior Secretary David Hayes and DWR Director Lester Snow will hold a public meeting on California's Water Challenges and Delta related issues this Wednesday, August 12 from 1:00 p.m. to 5:00 p.m. at the Capitol Plaza Holiday Inn in Downtown Sacramento. The address is 300 J Street.
As of today, (8/11), an agenda was published. Representatives from the Westlands Water District and the Metropolitan Water District will be discussing the fate of the Delta with Doctor Jeff Mount - whose views of impending doom for Delta levees are being seriously questioned by Delta engineers. And of course, as part of Lester Snow's agenda, not one environmental, engineering, or agricultural representative was invited from the Delta to participate in the panel.
Restore the Delta believes that this is one of the two most important meetings that our supporters can attend on behalf of the Delta this year.
We need a good showing of people who can make it clear to Deputy Director Hayes that DWR's decision- making is too influenced by politics and questionable science to be reliable.
PPIC Report on Funding New Conveyance for the Delta
Restore the Delta staff has only had minutes to review the new PPIC report Fixing the Delta:How We Will Pay For It? But we immediately have one observation worth making. Like in their earlier do not resuscitate analysis of the Delta, PPIC authors do not note in their section on Delta levees the recreation benefits or economy that results from levees. They have left boating, marinas, recreational fishing, and the related commercial fishing economy out of the analysis. In their reports, they consistently assert that levees protect only farmland and a couple of roads. Such incomplete scholarship.
Delta Bill Package
Special by Jane Wagner-Tyack
The Delta Plan bill by Assemblyman Jared Huffman, D-San Rafael (formerly AB 39), is schizophrenic in both the clinical and the common senses of the word: it is both delusional and internally contradictory.
The delusion arises from the bill's acceptance of the notion of coequal goals for the Delta, adopted by both Delta Vision and the BDCP as a way to make as many people as possible happy. This notion has always been flawed because it is not possible to guarantee water supplies for people and agriculture and at the same time guarantee water for the ecosystem.
Huffman's bill has to include the BDCP; otherwise, the governor will never sign it. But the BDCP is being presented as a Habitat Conservation Plan. According to state and federal law, a HCP should focus on habitat improvement. Since the main objective is to find adaptive management strategies that will enable endangered species to recover, levels of exports cannot be determined in advance.
Having set itself the task of guaranteeing contradictory goals, this bill establishing the Sacramento-San Joaquin Delta Reform Act of 2009 cannot help being contradictory in trying to devise a plan.
Some sections of the bill are eloquent in describing existing Delta communities and values and the Delta economy ("existing developed uses . . . are essential to the economic and social well-being of the people of this state"). There is even a proposal for making the Delta a National Heritage Area. But elsewhere, the bill makes it clear that maintaining the Delta in its present form is not the business of the state. Several times, it refers to the Delta as "evolving." All human and natural communities evolve, but they change faster if they are made to change with strategies like refocusing "the economic and public values of Delta agriculture."
Similarly, the bill includes a detailed discussion of flood control, but mostly for the state and federal water projects; local flood protection plans may be incorporated, and the plan will "promote" emergency preparedness, appropriate land uses, and strategic levee investments. At the outset, the bill says that landowners are not entitled to state funding to maintain or repair private levees, suggesting an end to the subvention program for levee maintenance. There appears to be no commitment to protecting the Delta as a common pool, although it is "the hub of the California water system." And even more apparent is a lack of knowledge regarding levee protection in the Delta - private levees must be maintained so as to keep stress off of the state and federal levees that protect hundreds of thousands of urban residents in the Delta.
In one small section, the bill calls for regional self- reliance and says that it is the policy of the state to reduce long-term dependence on water from the Delta watershed. Then it spends pages describing a plan to enable continued dependence.
The bill claims that the Delta Plan Act would not affect area of origin rights protections under the law. Then it refers specifically to sections of the Water Code that have consistently been violated when water needed in the Sacramento Valley has been exported and when storing and releasing water for use outside the Delta has not met objectives for salinity control, an adequate Delta water supply, and maintenance of the common pool.
Early actions under the Act can proceed with just a quorum of the Delta Stewardship Council. (Neither the Council itself nor a quorum are defined in this bill.) One early action is to be the appointment of an Independent Science Board. Apparently recognizing that the science applied so far to this issue has not been good, the bill repeatedly calls for using "the best available scientific information."
One early action of the council will be coming up with a finance strategy for developing the Delta Plan. Coming up with a strategy is all this bill says about how the plan will be paid for.
The council will get DFG started on some identified near-term restoration projects in the Delta. DFG is also supposed to submit information and recommendations that it "deems reliable" regarding the Delta's instream flow needs, something DFG has not so far been able to do.
The bill uses "department" and "board" without defining them, but context makes it clear that the board is the SWRCB. The board is supposed to charge the department for the costs of instream flow needs analysis "pursuant to the board's authority to regulate the water rights of the State Water Project and the federal Central Valley Projects." It appears that the State Water Contractors, through DWR, would pay for this analysis of instream flow needs-a clear case of conflict of interest.
The bill includes reference to a "special master" (a water master) to help decide whether board's determinations of instream flow needs "were arbitrary or capricious."
The bill gives control of the BDCP process to the Delta Stewardship Council and incorporates the BDCP into the Delta Plan. It requires analysis of different conveyance alternatives but does not consider a no- conveyance alternative. The Independent Science Board is supposed to review data and hypotheses on which the BDCP's adaptive management is based. Apparently the whole process will go forward more or less as the BDCP intends, but under the Delta Plan. Alternative conveyance requires no further legislative approval. It is here that we find Assembly Member Huffman's implicit approval for construction of the peripheral canal.
But except for "the board" charging "the department" for instream flow needs analysis, this bill doesn't suggest how any activities or projects associated with the Delta Plan (apparently including both conveyance and storage-a canal and dams) will be paid for. Tomorrow, we will discuss funding as it is laid out in the other bills...
Contra Costa Times
Open Space District to purchase portion of UC Elkus Ranch
Money from sale will fund repairs, contribute to ranch programs...Julia Scott
HALF MOON BAY — An important coastal property owned by the University of California will soon be protected as permanent open space as part of a $4.5 million deal to be discussed by the Midpeninsula Regional Open Space District tonight.
The deal involves acquiring a 450-acre portion of UC Elkus Ranch, an environmental and agricultural education center for Bay Area youth located seven miles south of Half Moon Bay. The Midpeninsula Regional Open Space District is expected to approve the purchase, which would allow the university to retain about 170 acres of land most crucial to their youth programs. The UC Board of Regents already has signed off on the sale.
Acquiring the UC Elkus Ranch "uplands," as they are called, has been one of the Open Space District's priorities for years because it will help realize the dream of a "Purisima-to-the-Sea" trail, a continuous hiking trail from the Purisima Redwoods Open Space Preserve on Skyline Boulevard all the way down to the ocean. It is the last property on the list with the potential for private development that will finally be preserved by the public, taxpayer-funded district.
"It was the key, the missing piece, to being able to complete the marvelous vision of connecting the open space lands from Skyline down to the coastal lowlands. Planning will be needed for the trail aspect, but it was the key link in the chain to complete the vision," said Sandy Sommer, senior real property manager for the Midpeninsula Regional Open Space District.
The trail won't be built for years, as the district must follow a lengthy process of planning and public input. In the meantime, very little is expected to change on the property itself, which climbs a span of 800 feet up to Lobitos Ridge in the lower Santa Cruz Mountain foothills. Cattle will continue grazing the land, which will be closed to the public but open to youth groups from Elkus Ranch who can hike up to the ridge for a picnic and to watch the livestock.
The biggest changes will occur at UC Elkus Ranch itself, which will benefit greatly from the $4.5 million cash infusion, according to Ranch Director Marilyn Johns. Founded in 1975 as a gift from Mr. and Mrs. Richard J. Elkus, the ranch gives 6,000 young people the chance to experience life on a farm each year — with a particular focus on children from an inner-city background or with mental disabilities.
The ranch includes a chicken coop, two big barns that house cows, sheep and other animals, a demonstration garden, a greenhouse, a picnic area and a conference center.
Much of the core infrastructure, such as roads and roofs, is in dire need of repair, and the money from the property sale will cover that, according to Johns. UC Elkus Ranch plans to start an endowment that could ultimately pay for more programs, more staff and allow more young people to visit the ranch.
"It will improve the future security of Elkus Ranch to remain here and be an educational facility. It's really exciting that this will allow us to think about what the possibilities might be," Johns said.
Choosing the Open Space District to take over the land was logical and a natural fit for the mission of UC Elkus Ranch, added Johns. She suggested the two entities could work together on some outdoor programming someday.
"Clearly, Midpeninsula's goal is to be a good steward of the land, and our goal is to do outdoor education and also develop youth as good stewards of he land," she said.
The 450-acre Elkus Ranch "uplands" site has been ready to sell for years, according to Mike Williamson, another real property manager for the Midpeninsula Regional Open Space District. A millionaire developer could have bought the land and built several mansions on it, but that did not appeal to the University of California.
"A development up there would certainly have a significant impact on their educational and 4-H programs," Williamson said.
By 2011, the district hopes to lock down the two remaining properties it will need to complete the Purisima-to-the-Sea trail, Williamson explained. One property, Lobitos Ridge, is privately owned by the Peninsula Open Space Trust. The other is an unfarmed portion of Purisima Farms, a series of artichoke and Brussels sprouts fields that extend to the ocean. The Open Space District has budgeted $11 million to purchase the land.
The Midpeninsula Regional Open Space District board of directors will meet at 6:30 p.m. tonight at Elkus Ranch, 1500 Purisima Creek Road, Half Moon Bay.
Los Angeles Times
Giving Snake River salmon a lift
Trucking the threatened fish past dams isn't working, The Obama administration should call for talks on what will...Editorial
Hauling truckloads of hitchhiking juvenile salmon around dams is one silly way to save a species. And it doesn't work either.
As four dams were built along the lower Snake River in southeastern Washington from the late 1950s to early 1970s, it took only a few yearsfor the river's healthy salmon populations to plummet. By the mid-1990s, the populations of four types of salmon had been declared endangered or threatened. The federal expenditure of $8 billion since then for fish ladders, hatcheries, habitat restoration and, yes, trucks and barges to transport the salmon around the dams has not restored the fish.
The salmon must make their way past a total of eight dams, four on the lower Snake River and four older dams on the Columbia River, closer to the ocean. But the fish appeared to thrive despite the Columbia River dams. Since the Snake River dams were built, the loss of salmon has decimated a once-thriving fishery and has been linked to declining numbers of killer whales; chinook salmon make up 80% of the orcas' diet.
The salmon's fate has been litigated for years, with a federal judge repeatedly rejecting the government's vague plans for restoring the fish, most notably after the George W. Bush administration claimed that the dams were a natural part of the environment. Under President Obama, the National Oceanic and Atmospheric Administration has begun a new review, but the judge is getting impatient and on Monday gave the administration one more month to make its intentions known.
Shipping young salmon around the dams is not a long-term solution. The fish are not returning to the river in large numbers, and some experts believe that the interruption in their migration is in good part to blame. The simple answer would be to breach the dams -- except that they provide 5% of the region's power in the form of clean hydroelectric energy. They also create a navigable waterway for the shipment of grain from Idaho.
Yet the importance of the Snake River salmon cannot be ignored. Climate change is believed to be a factor in last year's collapse of the California and Oregon salmon fisheries. The salmon farther north, where waters are colder, have not been as affected. Protecting these fish could provide the best hope of restoring salmon all along the West Coast.
The Obama administration should call for settlement talks that include all the parties involved -- power utilities, farmers, fishermen and environmentalists. At least some of the dams must be breached, but only in conjunction with helping the region develop new sources of clean energy and transportation for Idaho's grain. In the long haul, it makes more sense to truck wheat than fish.
Spinning the Economic News...PAUL CRAIG ROBERTS. Paul Craig Roberts was Assistant Secretary of the Treasury in the Reagan administration. He is coauthor of The Tyranny of Good Intentions. This fall CounterPunch/AK Press will publish Robert's War of the Worlds: How the Economy Was Lost. He can be reached at: PaulCraigRoberts@yahoo.com
Last Friday a Bloomberg.com headline read: “U.S. Stocks Gain, Treasuries Drop as Unemployment Rate Declines”.
Let’s have a look at the reported decline in the rate of unemployment. Do you believe that the US auto industry added 28,000 jobs in July amidst GM bankruptcy, sell-off and close-down of GM auto divisions, and demise of GM suppliers? No? Well, that’s what the Bureau of Labor Statistics reported.
The 28,000 new jobs were created by “seasonal adjustments.” July is a month when jobs are automatically added by the BLS to seasonally smooth the layoffs of auto workers during July’s retooling for the new model year. This year most of the retooling did not occur, yet the annual seasonal adjustments did. Adjustments are also made for supporting industries, which are partially idled while auto production halts for retooling.
More phantom jobs were created by the “Birth-Death Model.” The payroll jobs data contains guesses about the numbers of new startup company hires and jobs lost from business failures. Failed businesses don’t report the lost jobs (deaths), and new jobs from startups (births) are not captured in the reporting. The government estimates these numbers, but the estimates are based mainly on growth periods, not on recessionary times. Consequently, during economic downturns, the estimates from the Birth-Death Model overestimate the number of new startup jobs and underestimate the job loss.
The employment outlook was further improved by pushing another cadre of workers, who have been unemployed for too long, off the unemployment rolls. Remember that the long-term discouraged (people out of work for more than one year) are not counted as being in the work force. The length of the current downturn means that short-term discouraged workers, who are counted among the unemployed, are now moving into the long-term discouraged category, which simply erases their existence and lowers the measured rate of unemployment.
All sorts of distortions can find their way into the official statistics. For example, industrial production estimates are based on electricity consumption. Unusually hot weather, which causes a jump in air conditioning use, appears in the statistics as an increase in industrial output. Cool weather spells during summer reduces electricity use and results in a phantom drop in industrial output.
Nominal retail sales figures can increase from an uptick in inflation.
An increase in real GDP can be the result of underestimating inflation.
Other distortions come from the year to year comparisons. As time passes, new comparisons are no longer with previous peaks, but with more recent lows. Thus, reported declines are less severe than previously, which makes things sound better when they aren’t.
By spinning the financial news, the appearance of recovery is created, and this lures people back into the stock and real estate markets where they can lose the remainder of their wealth.
As homeowners head 'underwater,' another housing crisis looms
Almost half of homeowners with a mortgage could be underwater by 2011, says Deutsche Bank. We asked how that will play out...Scott Cendrowski
NEW YORK (Fortune) -- Karen Weaver, global head of Deutsche Bank's securitization research division -- responsible for analyzing credit default swaps, collateralized mortgage obligations, and other exotic Wall Street products -- said last week that 48% of U.S. mortgage owners will end up owing more than their home is worth by 2011.
The figure may have left many Americans wondering how this could be possible. But consider that 27% of U.S. homeowners with a mortgage are already "underwater." And according to Deutsche Bank, home prices may fall another 14% before hitting a bottom.
Fortune spoke with Weaver to understand the implications of her recent forecast, why it will affect regions that missed the housing boom, and why still-falling home prices are hurting even the best borrowers.
How many Americans are underwater?
Currently we estimate that 14 million homeowners have negative equity. However, based on our home price forecast, as prices continue to fall we think that number could reach 25 million, or 48% of all mortgagors.
Where does this leave us?
The obvious takeaway of falling home prices and being underwater is what it does for defaults. But there's a bigger implication, which is that when we look at the economy over the past decade or two, it's been very much a consumer economy.
What has been driving the consumer hasn't been gains in incomes. What has been driving them is easy credit and rising home values. And the fact that their home price was rising and they could borrow against that through home equity lines or loans or refinancing, it augurs for a very different economy going forward if people don't have that option.
What mortgages are most responsible for this problem?
The subprime loan borrower is more likely to use a second mortgage when purchasing a home, so they'll put down very little equity when they've purchased. So the same decline in price is going to leave them in a worse negative equity position than someone who put down 20%.
On option ARMs (adjustable rate mortgages), the way those loans work is that the payments are very small. And the difference between a normal payment that would cover someone's full interest and principal, and these lower teaser payments, is added to the balance. So even if prices did nothing, an option ARM could end up with negative equity.
Isn't it the case that many of those were issued at the peak?
Exactly. These products -- option ARMs, subprime, etc. -- were regarded in the industry as "affordability products." What they were designed to do is to provide options to customers in areas where home prices were unaffordable. In other words, given an individual's income, it was prohibitively expensive to purchase the average home.
So by creating products that lowered the payment, or lowered the amount of down-payment, it enabled more people to buy a home. It also perpetuated the bubble.
To give an example, if you look at Los Angeles: At the peak of home prices in LA, only about 9% of people living in Los Angeles made sufficient income to purchase the average house. Now, a number of those people had purchased their homes beforehand, so it was moot to them. But for a first-time home buyer, it meant that it was highly unlikely that you were able to purchase a home unless you used one of these very aggressive products that stretched your [income].
This is occurring in states where speculation was rampant -- for example, Florida, California, and Nevada -- but where else?
People are surprised at the extent to which subprime mortgages were used in the Midwest. In a lot of cases the Midwest has had a manufacturing recession for a while now. It's going through a paradigm shift. So in the industrial Midwest, subprime lending was more popular than some people might think.
I think the surprise is prime quality mortgages. That's where the biggest deterioration could take place in the next leg. Right now about 16% of those borrowers are underwater. If our home price forecast is correct, down another 14%, we could have 41% of borrowers underwater in the prime mortgage space. That's what happens when another 14% decline occurs.
Does this lead to a new wave of foreclosures?
Well, we don't think that the wave has stopped in any sense. But the wave is clearly building. That is evident by looking at serious delinquencies. If you look at a chart of how many borrowers have missed more than two payments, a large portion of those people are going to end up being foreclosures.
Well, that rate of serious delinquency has been rising rapidly and continues to rise, pretty much in tandem with unemployment. As long as you have serious delinquencies going up, you know for the next year and a half, a large portion of those are going to turn into foreclosures.
Of subprime and Alt-A (Alternative A-paper) borrowers, about 33% of those borrowers are seriously delinquent. If you look at prime jumbo, the highest quality mortgages, 6.2% are seriously delinquent. That sounds like a low number. But two years ago that number was 1%. It's a very straight trajectory from September 2007, pretty closely mimicking unemployment.
At what point of being underwater do homeowners start falling into foreclosure rapidly?
Once you get to the point where negative equity is significant -- for example, 25% or more -- there have been studies that suggest you get more strategic defaults.
People say, "I bought my house for $500,000, it's worth $250,000, there are 10 available for sale in my neighborhood. It makes no economic sense to spend the rest of my life trying to pay off a $500,000 debt when there's no reasonable likelihood to expect this house to go back up to $500,000."
This might sound extreme, but we have borrowers who bought a $500,000 home in California at the peak of the market on $50,000 of income. So for them to devote their gross income for the next 10 years solely to paying off [their] mortgage doesn't make any sense.
The Federal Reserve of Boston recently studied a similar housing crash in Massachusetts during the 1980s. What did they find?
In Massachusetts, there was a downturn in their housing market in the late '80s. The Federal Reserve [Bank] of Boston put out a report last year, and in their report they looked at how many people defaulted once they had negative equity. If a borrower has equity, and they can't maintain their home, that borrower is going to sell rather than default. So the question is, once someone does have negative equity, what's the propensity to default?
In Massachusetts, less than 7% of borrowers who had negative equity defaulted. This speaks to the inherent credit worthiness of mortgages -- why they're always considered to be a low-risk investment.
Is it fair to say that that will play out the same now?
Now, for example, if we believe the Deutsche Bank forecast and 25 million borrowers fall underwater, unfortunately we think 7% will be too low. The reason is when you look at Massachusetts in the late '80s, you had much better quality borrowers. In addition to that, unemployment in Massachusetts peaked at 9.1%. We're already at 9.5% [nationally]. In California, unemployment is at 11.5%. We do know that most people try to maintain their home. They try to keep their mortgage current. But to expect it to be as low as 7% is very wishful thinking.
Home prices fall a record 15.6%
Year-over-year prices may have fallen at a record pace, but there are signs of improvement...Les Christie
NEW YORK (CNNMoney.com) -- Median home prices fell a record 15.6% during the three months ended June 30, compared to the same period in 2008, according to an industry report.
There is good news though: The survey from the National Association of Realtors reported the median home price rose 4% compared to the first quarter of 2009 -- to $174,100 from $167,300.
The increase in median price was not a surprise, representing, as it did, the traditionally strong spring selling season. But the jump did offer the prospect that the worst of the price declines may be behind us.
"With low interest rates, lower home prices and a first-time buyer tax credit, we've been seeing healthy increases in home sales, which are a hopeful sign for the economy," said Lawrence Yun, NAR's chief economist..
In the vast majority of metro areas -- 129 out of 155 -- median prices dropped year-over-year. Some of the decline can be traced to an increase in the percentage of foreclosures and short sales. They accounted for 36% of all transactions during the quarter.
These "distressed properties" are usually sold at discounts of at least 15% compared with traditional sales.
Patrick Newport, a real estate analyst for IHS Global Insight, while admitting the year-over-year results are still awful, said recent evidence indicates that prices are stabilizing.
"The state sales data show sales picking up across the country," he said.
Newport expects prices and sales to trend down again, especially when the impact of the first-time homebuyers tax credit starts to fade. The credit ends December 1. "Afterward, sales will take a hit," he said.
His forecast is for prices to drop another 5% this year, driven down by added inventory as the foreclosure plague continues to worsen.
Cheapest and priciest areas
The Cape Coral metro area in Florida recorded the largest decline: 52.8% to $84,000. Davenport, Iowa, had the biggest gain: 30.6% to $113,200.
The lowest priced market in the nation is now Saginaw, Mich., where the median home sold for $55,700 during the quarter, a 30.6% drop over last year. The most expensive market was Honolulu, with a median price of $569,500 -- although that's still a 10.5% discount from a year ago. San Jose, Calif. led all mainland cities at $500,000 but that was still down a whopping 33.8% from a year ago.
Condo prices have taken an even more severe beating. They fell 19.8% year-over-year, but rose 3.6% quarter-over-quarter.
If you're in the market for a condo in Las Vegas, you may never find a better time. Prices dropped 54.1% compared with the second quarter of 2008 and fell 11.7% between the first and second quarters of 2009. The median price now stands at a bargain basement $66,400.
Condo prices rose year-over-year in only four of 61 metro areas surveyed by NAR. The biggest gain was in Virginia Beach, where prices went up 2.8%. Wichita, Kan. (2%), Dallas (0.7%) and Colorado Springs (0.2%) were the only other gainers.
The most expensive condo market was San Francisco, where the median price was $405,700, down 22.5% from a year ago. Las Vegas was the cheapest condo market by far, with Reno a distant second at $103,100