Valley hydraulic brotherhood coocaloo as usual
There is an estimated $2.5 trillion in subprimes and Alt-A loans---20% of which are expected enter foreclosure in the next few years. Any up-tick in interest rates or unemployment will only aggravate the situation. -- Mike Whitney, Counterpunch.com, April 24, 2007
To effect the San Joaquin River settlement agreement between environmental groups and the Friant Water Users Authority, a congressional bill was required. The amount specified in the December bill was $250 million. McClatchy Washington Bureau reported yesterday that a "long-awaited study" put funding at $500 million to restore water flow through a 50-mile stretch of the river in the middle of Fresno County. Fresno Bee reports today, "Cost to restore river set at $1b," according to the executive director of the west San Joaquin Valley water district, San Joaquin River Exchange Contractors Authority. Yesterday a state Senate Natural Resources and Water Committee (known to McClatchy as a "Senate panel," not even a legitimate committee), voted against funding two reservoirs in Northern California, one of them the Temperance Flats dam proposal, above the Friant Dam on the San Joaquin River.
Hello, world, we are the San Joaquin Valley. We are going through one of our periodic water-madness periods in which it is revealed to the discerning eye that the San Joaquin Valley is nothing but a gigantic public works project for agribusiness and finance, insurance and real estate. We talk like we own it. We don't. The American public paid for most of it.
Consider the official voice of the San Joaquin River Exchange Contractors, for example. The exchange contractors sued the federal government about 50 years ago for building the Friant Dam where the San Joaquin River leaves the Sierra foothills, sending about 90 percent of its water down the east side of the Valley in the Friant-Kern Canal. The federal government thoughtfully built the exchange contractors the Delta-Mendota Canal, which sent San Joaquin/Sacramento Delta water south to the contractors, because cattle baron Henry Miller had good riparian rights to the San Joaquin on the west side and because the Bureau of Reclamation had stolen all the water for the City of Fresno and eastern Fresno, Tulare and Kern counties' growers. Now that federally subsidized water is worth a mint in Los Angeles and Valley cities at municipal retail rates. But, so too the Delta Mendota water, worth municipal millions in fast-growing Los Banos, Patterson, and the "new towns" planned all up and down Interstate Highway 5, the magnificent achievement of Chuck Erreca of Los Banos, chairman of the state Department of Transportation when I-5 was approved in the days of Gov. Pat Brown.
Meanwhile, the state Department of Water Resources is reporting the snow pack hasn't been so low in 30 years, reminding old farmers of the drought of 1976-77, worse than the early 1990s. It serves to remind us that modern California, built on the boundless exploitation of limited natural resources, has never been rationally managed, and this year will be no different.
Consider how $250 million becomes $500 million becomes a billion dollars in a matter of days in McClatchy. Here we haven't even gotten to the next level of congressional debate on the dirty secret of west-side irrigation, that it produces extremely toxic levels of heavy metals and salts to grow its subsidized cotton, the almond orchards of finance, insurance and real estate speculators and federally subsidized ethanol corn -- and it has no place to put the toxic waste from this destructive form of agriculture.
A very powerful political coalition is forming to stop the San Joaquin Valley settlement agreement between farmers and environmentalists. It will probably force the case back into court for a ruling, negating years bargaining work between the farmers and environmentalists. Federal judge Lawrence Karlton has said no one will like how he will rule and it would be far, far better if a good settlement was put into effect. But the lobby of what the great former generation of San Joaquin journalists dubbed "the hydraulic brotherhood" won't let that happen and their little terriers like Rep. Devin Nunes, Water Agency Mouthpiece-Visalia, are yapping. Behind the yappers are other Valley congressmen, Dennis Cardoza, Shrimp Slayer-Merced, for example, quiet in the press but working behind the scenes to derail the settlement agreement. To the hydraulic brotherhood and its minions in public office, there is something obscene about farmers and environmentalists agreeing on anything and, besides, they don't pay the big bucks developers do to fund the magnificent political campaigns among turkeys chosen in advance by the largest landowners and developers in the districts.
The price of letting water flow in the second longest river in California is a pittance compared to the hinky mortgages speculators assumed in the mad home construction boom-and-bust in the San Joaquin Valley as politicians, finance, insurance and real estate special interests seek to convert farms to subdivisions upstream from LA.
Cost to restore river set at $1b...Mark Grossi
The price tag of restoring the San Joaquin River might be $1 billion or more, according to an analysis announced Tuesday night. An official from a west San Joaquin Valley irrigation authority quoted the figure, which differs from other estimates that place the cost closer to $600 million. Environmentalists and east Valley farmers last year ended a long-running lawsuit and agreed to revive the seasonally dry river. The San Joaquin River Exchange Contractors Authority, the west-side irrigation group, represents owners of 240,000 farmland acres next to the river. Officials fear their land might be flooded if the restoration isn't done well. "I know the numbers are going to cause controversy," said Steve Chedester, executive director of the authority. "The river basically hasn't existed in one stretch since the 1960s." The restoration project probably is among the biggest in the country, said Bill Loudermilk, regional manager in this area for the state Department of Fish and Game. The restored river will either run through a rebuilt section of the river or the bypass, said Monty Schmitt, a scientist for the Natural Resources Defense Council, which filed the lawsuit over the river in 1988. He said no decision has been made yet.
Defeated dams still supported; Governor isn't backing away from $4 billion in bonds after negative vote by Senate panel, By Judy Lin, http://by135w.bay135.mail.live.com/mail/ReadMessageLight.aspx?Aux=4%2c0%...
Gov. Arnold Schwarzenegger said Tuesday he has no plans to scale down his $4 billion proposal for building two new dams in the state despite watching Democrats reject his bill earlier in the day.
The Senate Natural Resources and Water Committee killed the governor's plan to put bonds for two dams -- one on the west side of the Sacramento Valley and one east of Fresno -- on the 2008 ballot. Senate Bill 59 by Sen. Dave Cogdill, R-Modesto, had Republican support, but couldn't muster the necessary five votes to pass out of the Democrat-led committee...SB 59 called for voters to approve a $3.95 billion plan to build one dam at Temperance Flat just above Friant Dam near Fresno, and the other on Sites reservoir in Colusa and Glenn counties. Together the dams would yield up to 3.1 million acre-feet of water. By comparison, Folsom Dam holds about 1 million acre-feet...Opponents led by environmental groups argue that the dams aren't needed as long as Californians continue to conserve. They say the projected cost of constructing the two dams has already increased by 10 percent, from $4 billion to $4.4 billion, and noted that some of the water would be lost due to evaporation.Republicans from the Central Valley counter that there hasn't been new dam construction in the last 25 years while the state's population has grown by 15 million...
River price tag put at $500mLawmaker says the restoration cost creates a problem.By Michael Doyle / Bee Washington Bureau -- http://www.fresnobee.com/263/story/43412.html
A long-awaited study puts the federal government's cost of restoring the San Joaquin River at $500 million -- raising questions about how to pay for the painstakingly negotiated plan.
One legislator is using the new Congressional Budget Office study in his attempts to derail the proposal to send more water down the river. The additional water would allow the return of long-depleted salmon populations.
"I think the costs are a lot higher than have been advertised, and that's a considerable problem for the bill," said Rep. Devin Nunes, R-Visalia. He has been critical of the restoration plan's possible effect on farmers if less water is available for irrigation.
The plan's supporters retort that the costs aren't unexpected. As they prepare for a May 2 Senate hearing, they will try to shave the cost estimates and identify the necessary offsetting savings.
"We've known for some time that we had a [budget] issue," Dan Dooley, an attorney for the Friant Water Users Authority, said Friday. "Until this report, we didn't have the specifics, but I'm confident we'll work through it."
The bill language itself only specifies $250 million in spending. The new cost estimate adds other required environmental spending, as well as the loss of federal tax revenue from California bonds that would be sold to help pay for the project as part of the state's share of funding.
Farmers and environmentalists differ over what the final total cost will be, with estimates ranging from between $600 million and $1.2 billion.
New rules in place under Democratic leadership require congressional spending to be balanced with additional revenues or with new savings. The San Joaquin River bill is one of the first natural resources bills to confront the new pay-as-you-go budget requirements.
In coming weeks, river restoration supporters will confront the political challenge of identifying other programs to trim so that the San Joaquin River might live.
"Good luck," Nunes said. "Who are they going to cut?" ...
April 24, 2007
"Is It Too Late to Get Out?"
Housing Bubble Boondoggle
By MIKE WHITNEY
Treasury Secretary Henry Paulson delivered an upbeat assessment of the slumping real estate market on Friday saying, "All the signs I look at" show "the housing market is at or near the bottom."
Paulson added that the meltdown in subprime mortages was not a "serious problem. I think it's going to be largely contained."
Paulson knows full well that the housing market is headed for a crash and probably won't bounce back for the next 4 or 5 years. That's why Congress is slapping together a bailout package that will keep struggling homeowners out of foreclosure. If defaults keep skyrocketing at the present rate they are liable to bring the whole economy down in a heap.
Last week, the Senate convened the Joint Economic Committee, chaired by Senator Charles Schumer. The committee's job is to develop a strategy to keep delinquent subprime mortgage holders in their homes. It may look like the congress is looking out for the little guy, but that's not the case. As Schumer noted, "The subprime mortgage meltdown has economic consequences that will ripple through our communities unless we act."
Schumer's right. The repercussions of millions of homeowners defaulting on their loans could be a major hit for Wall Street and the banking sector. That's what Schumer is worried about---not the plight of over-leveraged homeowners.
Every day now, another major lending institution unveils its plan for bailing out the housing market. Citigroup and Bank of America have joined forces to create the Neighborhood Assistance Corporation of America which will provide $1 billion for the rescue of subprime loans. This will allow homeowners to refinance their mortgages and keep them out of foreclosure. The new "30- year loans will carry a fixed interest rate one point below the prime rate, putting it currently at 5.5 percent. There are no fees, and the banks pay all the closing costs."
But why are the banks being so generous if, as Paulson says, "the housing market is at or near the bottom." This proves that the Treasury Secretary is full of malarkey and that the problem is much bigger than he's letting on.
Last week, Washington Mutual announced a $2 billion program to slow foreclosures (Washington Mutual's subprime segment lost $164 million in the first quarter) while Freddie Mac committed a whopping $20 billion to the same goal. In fact, Freddie Mac announced that it "would stretch the loan term to a maximum of 40 years from the current 30-year limit."
40 years!?! How about a 60 or 80 year mortgage?
Can you sense the desperation? And yet, Paulson says he doesn't see the subprime meltdown as a "serious problem"!
Paulson's comments have had no effect on the Federal Reserve. The Fed has been frantically searching for a strategy that will deal with the rising foreclosures. On Wednesday, The Washington Post reported that "Federal bank regulators called on lenders to work with distressed borrowers unable to meet payments on high-risk mortgages to help them keep their homes".
When was the last time the feds ordered the privately-owned banks to rewrite loans?
That gives us some idea of how bad things really are. The details of the meltdown are being downplayed in the media to prevent panic-selling among the public. But the Fed knows what's going on. They know that "U.S. mortgage default rates hit an all-time high in the first quarter of 2007" and that "the percentage of mortgages in default rose to a record 2.87%". In fact, the Federal Reserve and the five other federal agencies that regulate banks issued this statement just last week:
"Prudent workout arrangements that are consistent with safe and sound lending practices are generally in the long-term best interest of both the financial institution and the borrowerInstitutions will not face regulatory penalties if they pursue reasonable workout arrangements with borrowers."
Translation: "Rewrite the loans! Promise them anything! Just make sure they remain shackled to their houses!"
Unfortunately, the problem won't be "fixed" with a $30 or $40 billion bailout scheme. The problem is much bigger than that. There is an estimated $2.5 trillion in subprimes and Alt-A loans---20% of which are expected enter foreclosure in the next few years. Any up-tick in interest rates or unemployment will only aggravate the situation.
Kenneth Heebner, manager of CGM Realty Fund (Capital Growth Management), provided a realistic forecast of what we can expect in the near future as defaults increase.
Heebner: "The Greatest Price Decline in Housing since the Great Depression" (Bloomberg News interview)
"The real wave of pain and foreclosures is just beginning.subprimes and Alt-A are both in trouble. A lot of these will go into default. The reason is, that the people who took these out never really intended to fully service the mortgage---they were counting on rising home prices so they could sign on the dotted line without showing what their income was and then 2 years later flip into another junk mortgage and get a big profit out of the house with putting anything down
"There's a $1.5 trillion in subprimes and $1 trillion in Alt-A the catalyst will be declining house prices which is already underway. But as we get a large amount of these $2.5 trillion mortgages go into default, we'll see foreclosed houses dumped on an already weak market where homebuilders are already struggling to sell there houses. The price declines which have started will continue and may even accelerate in some of the hotter markets. I would expect that housing prices in "2007 will decline 20% in a lot of markets".
"What you are going to see is the greatest price decline in housing since the Great Depression..The one thing that people should not do, is go near a CDO or a residential mortgage backed security rated Triple A by Moody's and S&P because these are going to get down-graded by the hundreds of millions---because they are secured by subprime and Alt-A mortgages where there'll be massive defaults".
Question: "Will the losses in the mortgage market exceed those in the S&L crisis?"
Heebner: "They're going to dwarf those losses because the losses could easily approach $1 trillion---that dwarfs anything that has ever happened. Enron was $100 billion---this will be far greater than that..The good news is that most of these loans are owned by Hedge FundsYou hedge funds buying these subprime and Alt-A loans and leveraging them at 10 to 1. They buy a pool of mortgages at 8% and they borrow against it in yen for 3% and then lever it at 10 to 1so you have a lucrative profit And the hedge fund you are running, the manager is going to get 20% of the gain---so even if it's a year before you go broke; you get rich until the fund is shut down".
Heebner added this instructive comment: "The brokerage firms created "securitization" they know the products are toxic. I don't think they are going to suffer losses; they simply passed them on to everyone else. The only impact this will have is the profits that flow from it will get less.But it is less than 3% of revenues in even the most exposed brokerage firm so THEY'RE NOT GOING TO GET CAUGHT" ...