9-7-08

 9-7-08Modesto BeeNev., Calif., officials sign landmark river deal...MARTIN GRIFFITH, Associated Press Writerhttp://www.modbee.com/state_wire/story/420908.htmlRENO, Nev. — With the scenic stream flowing behind them, officials from Nevada, California and the federal government signed a landmark agreement that settles a century-plus-old dispute over the Truckee River's water.Sen. Harry Reid, D-Nev., and Interior Secretary Dirk Kempthorne joined local and state officials at the signing ceremony Saturday for the Truckee River Operating Agreement.The complex document allocates the river's waters between the two states, and balances the interests of urban users, downstream farmers and the Pyramid Lake Paiute Tribe...Under the agreement, California will get two-thirds of Lake Tahoe's water to Nevada's one-third, while Nevada will receive 90 percent of the Truckee's water to California's 10 percent. It also calls for Nevada to get 80 percent of the Carson River's water to California's 20 percent...Lawsuits over the Truckee spanning back to the 1800s gave it a reputation for being one of the West's most litigated rivers.Under the settlement, the amount of drought water storage for the Reno area will triple, and Reno, Sparks and Washoe County will provide water rights to improve water quality in the lower Truckee. The river system is the Reno area's only water source...Officials announce takeover of mortgage giants...ALAN ZIBEL, AP Economics Writerhttp://www.modbee.com/business/story/420909.htmlWASHINGTON — The Bush administration, acting to avert the potential for major financial turmoil, announced Sunday that the federal government was taking control of mortgage giants Fannie Mae and Freddie Mac.Officials announced that the executives of both institutions had been replaced. Herb Allison, a former vice chairman of Merrill Lynch, was selected to head Fannie Mae, and David Moffett, a former vice chairman of US Bancorp, was picked to head Freddie Mac.Treasury Secretary Henry Paulson says the actions were being taken because "Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe."The huge potential liabilities facing each company, as a result of soaring mortgage defaults, could cost taxpayers tens of billions of dollars, but Paulson stressed that the financial impacts if the two companies had been allowed to fail would be far more serious."A failure would affect the ability of Americans to get home loans, auto loans and other consumer credit and business finance," Paulson said.Both companies were placed into a government conservatorship that will be run by the Federal Housing Finance Agency, the new agency created by Congress this summer to regulate Fannie and Freddie.The Federal Reserve and other federal banking regulators said in a joint statement Sunday that "a limited number of smaller institutions" have significant holdings of common or preferred stock shares in Fannie and Freddie, and that regulators were "prepared to work with these institutions to develop capital-restoration plans."The two companies had nearly $36 billion in preferred shares outstanding as of June 30, according to filings with the Securities and Exchange Commission.Fresno BeeRiver bill may roll to passageMoney for restoration added to huge spending measure on Capitol Hill...Michael Doyle, Bee Washington Bureauhttp://www.fresnobee.com/263/story/848555.htmlWASHINGTON -- The ambitious plan to restore the San Joaquin River has been folded into a huge public-lands bill with national scope, but even that might not be enough to help it win passage. Senators returning to work this week will confront a 760-page package that wraps together more than 90 separate bills. One would restore water flows and salmon runs in the San Joaquin River below Friant Dam.The river bill is big just by itself, with an estimated price tag of several hundred million dollars. The rest of the legislation is even bigger, covering everything from a new West Virginia wilderness to a proposed William Jefferson Clinton Birthplace Home National Historic Site in Hope, Ark. "A large package like this will draw more bipartisan support," said Rep. Jim Costa, D-Fresno. "You have more collective interest, and it's bipartisan." But the same size that attracts multiple sponsors also can make measures like the Omnibus Federal Land Management Acts Bill a big, fat target.One group fighting it is the American Land Rights Association...Congress often uses omnibus bills to help push legislation through. In 1992, for instance, canny authors of the controversial Central Valley Project Improvement Act included it in a package of more than 30 other bills. Even lawmakers leery of the CVPIA -- which devoted more of the region's water to protecting the Sacramento-San Joaquin Delta -- found other reasons to accept the overall bill...Some of the same environmental activists who backed the 1992 law are now supporting the San Joaquin River restoration effort. This time, though, they are joined by some farm and water organizations, including the Friant Water Users Authority."Congress, sometimes when they are having difficulty passing individual bills, will package them up together, warts and all," Friant Water Users Authority General Manager Ron Jacobsma said. The San Joaquin River restoration bill is designed to implement a lawsuit settlement first filed in 1988. The bill authorizes $250 million for an array of channel improvements and other work needed to return salmon to the San Joaquin River by 2013. Some lawmakers, including Rep. Devin Nunes, R-Visalia, and some farmers, including those in the Chowchilla Water District, have raised concerns about the potential loss of irrigation water. In part because of the conflict, the Chowchilla Water District has withdrawn from the Friant Water Users Authority."We are about to start an aggressive ad campaign to educate farmers about the settlement," said Tal Cloud, a Republican political activist who has been rallying opposition to the river deal. The San Joaquin River portion spans 35 pages, or about 5% of the Omnibus Federal Land Bill's total verbiage. It is the most expensive of the California provisions, but not the only one. The Senate package also includes another provision authored by Costa, providing a $1 million grant to the California Water Institute. The institute, based at California State University, Fresno, would use the money to prepare a water-management plan covering the area from San Joaquin to Kern counties. The Senate package also includes up to $23 million for a proposed underground storage project in Madera County. Valley VoiceBig Builder Files for Bankruptcyhttp://www.valleyvoicenewspaper.com/vv/stories/2008/builderbankruptcy.htmTulare County - Utah-based Woodside Homes, with eight new home subdivisions in Tulare County, said it will file for Chapter 11 bankruptcy by Sept. 16, according to company spokesperson Jennifer Mercer.One of the top ten builders in the U.S., the company has tracts in both Tulare and Visalia and throughout Central and Northern California......On Aug. 20, five insurance companies which had more than $475 million of Woodside's notes, filed a petition in court to push the builder into bankruptcy court in order to help collect their debts. Two other lenders joined in the petition, setting the court proceedings in motion.Woodside entered the Tulare County market in 2005...The homebuilder was a part of a wave of large national and regional new homebuilders that came to Visalia that year with the peak of the building activity in 2006.Others joined the land rush into Tulare County including Reynen and Bardis, DR Horton, Pacific Union and Beazer Homes – all no longer in the area today due to the massive nationwide slowdown in housing...Sacramento BeeRoseville railyard's air pollution found highest downwind...Chris Bowmanhttp://www.sacbee.com/101/v-print/story/1216181.htmlExtensive air pollution testing has confirmed that the daily spew of locomotive exhaust from Roseville's Union Pacific Railroad yard is highest for downwind residents, particularly those near the maintenance and repair shops, newly released data show.The testing gives local officials more leverage to negotiate with Union Pacific for making further emission reductions.Union Pacific officials said the next round of air test results should show a drop in diesel emissions because of the recent introduction of cleaner locomotive models in the yard.Experts dispute whether the amount of locomotive soot wafting across Church Street through a neighborhood increased during the 2005-2007 testing.But results from the three consecutive summers of sampling show diesel exhaust levels consistently and substantially higher in the downwind neighborhood than among homes directly across the yard along the upwind or south side of the J.R. Davis Yard, a 52-track, 6-mile-long facility."Overall, there is evidence of substantial impact on the downwind sites," said Yushuo Chang, who oversees the monitoring for the Placer County Air Pollution Control District.The monitoring results don't tell the whole story.Thomas Cahill, a retired University of California, Davis, atmospheric physicist who serves on the project's technical advisory committee, said he and his toxicologist son found unexpectedly high levels of lead and toxic metal particles in more limited air sampling they conducted near the yard on their own last year for the Sacramento area chapter of Breathe California, a clean-air advocacy group.He said the metals likely came from the dust blown off the dirt railyard, where trains have been serviced for at least 100 years.The Placer air district monitoring also did not include the most toxic diesel exhaust compounds, known as benzo(a)pyrene. The Cahills reported from their sampling that the locomotive exhaust contains 5.5 times more of these compounds than those found in diesel truck exhaust.The district's study is focused mainly on locomotive soot...Though federally regulated as "mobile sources" of pollution, locomotives in a train yard effectively become a "stationary source" like a factory, local air regulators say. Under federal and state air pollution regulations, no factory in the United States would be allowed to spew anywhere near the amount of toxic particles wafting off a railyard...The Roseville yard monitoring, now in its fourth summer, is the first of its kind in the nation, according to the state air board. Local air regulators and community activists in Los Angeles and San Bernardino counties are following Placer County's lead in quantifying urban railyard emissions and holding railroads accountable for abating them...Stockton RecordHousing disaster left S.J. in piecesKatrina comparisons drawn at Congressional hearing on foreclosures in Stockton...Joe Goldeenhttp://www.recordnet.com/apps/pbcs.dll/article?AID=/20080907/A_NEWS/809070319STOCKTON - The outer bands of a Category 5 mortgage hurricane began strafing San Joaquin County about 18 months ago, uprooting families, damaging homes, devaluing property, devastating whole neighborhoods and destroying lives. Yet the eye of this financial storm remains months away from passing over the Central Valley.The analogy to Hurricane Katrina that struck the nation's Gulf Coast three years ago was heard numerous times Saturday afternoon during a congressional field hearing on the foreclosure crisis that drew four members of Congress, nine key witnesses and about 100 interested onlookers to a meeting room at the Stockton Arena."The only difference is that Katrina was an act of nature, while our housing crisis was man-made," Visionary Home Builders of California CEO Carol Ornelas testified before the House Committee on Financial Services chaired by Rep. Barney Frank, D-Mass."Stockton, as described by '60 Minutes,' is the epicenter or ground zero for the foreclosure disaster. We have been No. 1 in foreclosures for the last year. Statistics for our city and many cities in the Central Valley show that 1 out of 26 homes are in foreclosure today," said Ornelas, whose Stockton-based nonprofit housing development agency provides affordable housing for low-income families.County Supervisor Steve Gutierrez told the committee that "since January 2007, there have been more than 12,000 foreclosures - more than 12,000 foreclosures - in San Joaquin County. ... This is a significant increase in foreclosures when compared to historical levels."He too likened the crisis to a slow-moving hurricane: "You can't really characterize this differently from Katrina." Gutierrez went on to note that despite the high numbers, "foreclosure activity in San Joaquin County is on the increase and no relief is in sight."Chairman Frank, acutely aware of the issues plaguing the national housing market, noted during a morning tour of midtown Stockton on veteran RTD driver Joe Castro's bus that foreclosures create a negative effect that goes well beyond the people losing their homes...Joining him on the bus tour were California congressional Reps. Dennis Cardoza, D-Merced, and Jerry McNerney, D-Pleasanton, who invited the committee to Stockton, and Jackie Speier, D-Hillsborough, a member of the Financial Services Committee...During the hearing, Cardoza expressed disdain for those critics who say that everyone involved in the mortgage meltdown shares in the blame."There are a whole lot of good people who have been devastated by this" through no fault of their own, either because of language or cultural barriers or because they bought into a mortgage presented by an unscrupulous broker or lender...San Francisco ChronicleUC Berkeley grove cleared of most trees...Carolyn Joneshttp://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/09/07/BAJH12PDUE.DTLArborists nearly finished clearing an embattled UC Berkeley grove Saturday, leaving a stripped, lone redwood occupied by four protesters. The drone of chain saws and chippers drowned out the howls of protesters as arborists removed 35 of 42 redwoods, laurels and other trees from the site in preparation to build a $124 million athletic training center. The university expects to remove the remaining trees today, with the exception of the occupied redwood.Twenty-eight trees around the perimeter will remain, and a mature redwood will be transplanted..."With the trees gone, the protest is completely pointless," said campus spokesman Dan Mogulof. "We believe the reality of the legal situation will sink in and they'll come down voluntarily."The university will proceed with its plans regardless of whether the tree-sitters remain, Mogulof said. "They're not holding us back," he said. "They're not stopping us from doing what we need to do."...Among the trees felled was a 200-year-old coast live oak, dubbed by protesters as "Grandma," which was apparently the oldest oak on the main campus, according to local historians. The tree-sitters were not admitting defeat Saturday, saying their protest brought international attention to their cause."Obviously we failed to protect these beautiful trees, but it's been a tremendous experience," said Eric "Ayr" Eisenberg, one of the protest leaders. "We came here on a cold December morning almost two years ago. Now millions of people know about this place, and a lot have been inspired to do positive things in their own communities."The project delays were because of the litigation, not the tree-sitters, Mogulof said. "In terms of their goals, they failed completely," he said. "It's a shame that all this time and energy was spent on a pointless protest, when so many more important environmental issues have gone completely ignored."...Students had mixed reactions on campus Saturday, but most appeared relieved the spectacle was winding down."The tree-sit protest diverted a lot of money and time from the UC police, and I think campus safety is more important," said Eugene Krimkevich, a junior business major who competes on the Cal cycling team. "You just wonder why it took so long to end."Craig DeWitt, also a junior business major, said he was heartened that dissent is still alive on campus, and questioned the money the university invests in athletics.Los Angeles TimesWinners, losers in the U.S. takeover of Fannie/Freddie...Money & Co.http://latimesblogs.latimes.com/money_co/2008/09/who-wins-and-wh.htmlWho wins and who loses under the Treasury’s decision to take control of mortgage titans Fannie Mae and Freddie Mac?Here’s a quick rundown:--- Owners of both common and preferred shares in the companies could lose it all, depending on how much capital the government winds up putting into the firms to keep them solvent. The government won’t cancel the common or preferred shares, but all dividend payments on the stocks will be halted.The Treasury will buy a new class of senior preferred stock from the companies. The shares will pay the government a 10% annualized yield initially and will carry with them warrants representing a potential ownership stake of 79.9% in the companies.The Treasury could invest as much as $100 billion in each company via the new preferred stock over time. The more stock the government has to buy -- to bolster the companies’ capital cushions against mortgage losses -- the more likely it will be that current common and preferred shareholders will lose everything. But that may not be known for years.There had been some speculation that the government would preserve the current preferred shares (about $36 billion is outstanding between the two companies), because some banks and thrifts have been big investors in those securities. Those institutions now stand to suffer heavy losses if the preferred shares’ market value plunges further.Bank regulators said today they would work with banks that are stung by losses on Fannie and Freddie preferred stock to "develop capital-restoration plans." But in the short term, a dive in the value of the companies’ preferred shares could worsen stresses in the financial system by further weakening some banks and thrifts.--- Holders of Fannie and Freddie’s senior and subordinated debt securities will be protected. Their interest payments will continue. This should ease concerns of private and public investors worldwide who own the debt. In effect, they now own U.S.-government-guaranteed bonds.--- The Treasury also sought to give peace of mind to owners of the companies’ mortgage-backed securities. The Treasury will begin buying some of those bonds in the open market, seeking to bolster the value of the securities by providing another source of demand.The Treasury expects its initial purchases of mortgage-backed securities to total $5 billion. The purchases and management of the bonds will be handled by independent asset managers, under contract with the government. (There's a win for Wall Street.)Because the government expects to earn more on the bonds than its cost of borrowing to buy the securities, "There is no reason to expect taxpayer losses from this program, and it could produce gains," the Treasury said in a statement outlining the plan. But that will depend on the level of defaults and ultimate losses on the home loans backing the bonds that the Treasury buys.--- The government hopes that its plan will bring down mortgage rates, which have remained elevated over the last year despite the Federal Reserve's deep cuts in short-term interest rates. The average rate on 30-year conventional home loans now is 6.35%, up from 6.07% at the start of the year.By removing doubts about the solvency of Fannie and Freddie, Treasury Secretary Henry M. Paulson Jr. hopes to make investors feel more confident about buying the companies' mortgage-backed bonds. That could lower Fannie's and Freddie's cost of borrowing, which in turn could allow them to lower the rates they require on home loans purchased from banks and thrifts.The Treasury said it expected its bond purchases to generate "increased availability and lower cost of mortgage financing."  But of course, that will be up to the marketplace.Washington PostCalif. Aims to Concentrate Growth to Cut Use of CarsHigh-Density Development May Get Dibs on Funds...Ashley Surdinhttp://www.washingtonpost.com/wp-dyn/content/article/2008/09/06/AR2008090602744_pf.htmlLOS ANGELES -- California is poised to pass the first law in the nation linking greenhouse gas emissions to urban planning, a departure from the growth approach that spawned the state's car culture and urban sprawl.The measure, known as SB375, aims to give existing and new high-density centers where people live, work and shop top priority in receiving local, state and federal transportation funds. The idea is that such developments check sprawl and ease commutes, in turn cutting the car pollution wafting through the Golden State.Authored by Sen. Darrell Steinberg (D-Sacramento), the bill reflects California's push to slash its greenhouse gas emissions by 25 percent by 2020. Sponsors say the measure is part of a much-needed growth policy for a state whose population is expected to swell to 50 million from the current 38 million in two decades."Many places across the country have realized that if you just build spread-out developments, with the expectation that everyone will have to drive for everything, it should be no surprise when the result is excessive burning of gasoline," said David Goldberg, spokesman for Smart Growth America, a Washington D.C.-based nonprofit group that helps cities and towns plan more workable, environmentally friendly growth."SB375 breaks new ground, because it specifically links that pattern of development to excess driving and what we need to do to address climate change," he said.Two years of intense negotiations have satisfied several critics of the bill and galvanized support from an unusual alliance of environmentalists, home builders, local governments and affordable-housing advocates.But other home builders and several business groups are among the bill's opponents. They say it adds a new layer to an already complicated approval process, opens projects up to delays and frivolous litigation, and could threaten the state's economy."It will hamper or completely stop infrastructure throughout the state. It will jeopardize buildings, the transfer of goods and services," said Tom Holsman, chief executive of the Associated General Contractors of California, which is joined by the California Chamber of Commerce, the California Grocers Association and the California Retailers Association in opposing the bill...California is the 12th-largest emitter of carbon in the world, with cars and trucks emitting about one-third of the state's greenhouse gases. In 2006, it became the first state to impose a cap on all greenhouse gas emissions...Treasury to Rescue Fannie and FreddieRegulators Seek to Keep Firms' Troubles From Setting Off Wave of Bank Failures...Zachary A. Goldfarb, David Cho and Binyamin Appelbaumhttp://www.washingtonpost.com/wp-dyn/content/article/2008/09/06/AR2008090602540_pf.htmlThe Bush administration yesterday prepared to take over the troubled housing finance companies Fannie Mae and Freddie Mac, after concluding the companies don't have enough capital to continue to play their crucial role funding home mortgages.Under the plan, engineered by Treasury Secretary Henry M. Paulson Jr., the government would place the two companies under "conservatorship," a legal status akin to Chapter 11 bankruptcy. Their boards and chief executives would be fired and a government agency, the Federal Housing Finance Agency, would appoint new chief executives.The action, which would be one of the most sweeping government interventions in private financial markets in decades, is planned for today, according to several sources.Authorities see Fannie Mae and Freddie Mac as crucial to the recovery of the housing market. They have funded 70 percent of home loans in recent months. A reduction in their activities could send mortgage rates that ordinary home buyers pay soaring and result in a new, deeper crisis for the already reeling housing market.Moreover, regulators are trying to prevent Fannie Mae and Freddie Mac's problems from triggering a new wave of failures among banks, which hold vast reserves of bonds and preferred shares issued by the two firms.The plan would not resolve the larger question about the future of the two companies -- whether they should be nationalized, privatized or maintain their current structure...Paulson and other government officials decided to act before those more complex issue were decided because of fears that Fannie and Freddie's ability to make cash available for home loans would face serious challenges in coming weeks...With foreclosures rising and the government bailout expected, Fannie and Freddie have had problems raising more capital...Instead of making a one-time cash infusion to keep the companies afloat, the government will make quarterly investments, to the degree that market conditions require. That way, in Treasury officials' view, investors can have confidence of a ready source of cash if the firms need it, but taxpayers need not be put on the hook anymore than necessary...New York TimesMexican Court Rules Against Wal-Mart...REUTERS...9-5-08http://www.nytimes.com/2008/09/06/world/americas/06mexico.html?scp=1&sq=wal%20mart&st=cseMEXICO CITY (Reuters) — Mexico’s Supreme Court ruled Friday that Wal-Mart de México, the country’s top retailer, violated the Constitution by paying a worker in part with store cards usable only in Wal-Mart stores. Wal-Mart de México, which is also known as Walmex and is a unit of Wal-Mart Stores Inc., gives employees electronic store cards as part of their salaries. The court said the practice harked back to exploitative wage schemes of a century ago.For now, the ruling applies only to the worker who brought the lawsuit and will not require Walmex to stop giving store cards to other employees.But if enough other workers decide to bring a similar case to court, the ruling could guarantee similar decisions in the future, a court spokesman said.During the long dictatorship of President Porfirio Díaz, which ended in 1911, wealthy landowners and businessmen paid employees with special currency valid only in company stores.Walmex said that its store card program was voluntary but that it would study the court ruling. CNN MoneyU.S. seizes Fannie and FreddieTreasury chief Paulson unveils historic government takeover of twin mortgage buyers. Top executives are out...David Ellishttp://money.cnn.com/2008/09/07/news/companies/fannie_freddie/index.htm?postversion=2008090714NEW YORK (CNNMoney.com) -- Federal officials on Sunday unveiled an extraordinary takeover of Fannie Mae and Freddie Mac, putting the government in charge of the twin mortgage giants and the $5 trillion in home loans they back.The move marks Washington's most dramatic attempt yet to shore up the nation's housing market, which is suffering from record foreclosures and falling prices.The sweeping plan, announced by Treasury Secretary Henry Paulson and James Lockhart, director of the Federal Housing Finance Agency, places the two companies into a "conservatorship" to be overseen by the Federal Housing Finance Agency. Under conservatorship, the government would temporarily run Fannie and Freddie until they are on stronger footing."A failure [of Fannie and Freddie] would affect the ability of Americans to get home loans, auto loans and other consumer credit and business finance," Paulson said at a press conference in Washington. "And a failure would be harmful to economic growth and job creation." Freddie (FRE, Fortune 500) and Fannie (FNM, Fortune 500), which were created by the U.S. government, have been badly hurt in the last year by the sharp decline in home prices and the rise in mortgage delinquencies and foreclosures, racking up about $12 billion in losses...How we got hereSunday's decision culminates weeks of meetings and analysis by top federal regulators and management teams assessing the health of the companies...The two firms buy loans, attach a guarantee, then sell securities backed by the loans' income stream. All told, they own or back $5.4 trillion worth of home debt - half the mortgage debt in the country. At the same time, Fannie and Freddie have become virtually the only source of funding for banks and other home lenders looking to make home loans. Their ability to do so is crucial to the recovery of the battered home market and the broader U.S. economy.In mid-July, the Treasury Department and Federal Reserve announced steps in to make funds available to the firms if necessary and Congress approved the sweeping proposals later that month...Unanswered questionsThe cost of the government intervention remains unclear. Experts argue that it will depend in large part on the structure of the rescue, the direction of home prices and mortgage default rates. Still it seems almost certain it will run into the billions and will most likely eclipse such other high-profile government bailouts including than the Federal Reserve's $29 billion backing of Bear Stearns assets when it was taken over by J.P. Morgan Chase.In his remarks, Paulson said that the cost to taxpayers would largely depend on how Freddie and Fannie perform.Another unintended yet unavoidable consequence may be the impact to the nation's banks.Some of the nation's largest financial institutions including JPMorgan Chase (JPM, Fortune 500) and Sovereign Bancorp (SOV, Fortune 500) own a big chunk of the estimated $36 billion in preferred shares of Fannie and Freddie, which are at risk of being wiped out should Fannie and Freddie do end up getting a cash infusion from the Treasury Department.