9-30-08

 9-30-08CounterpunchRep. Sarbanes, Take This Shrimp SlayerTake This Shrimp Slayer!...BILL HATCHhttp://www.counterpunch.org/hatch09292008.htmlDear Congressman Sarbanes,We are writing from Merced, CA, one of three top foreclosure-rate counties in the nation. Our congressman, Dennis Cardoza, Shrimp Slayer, now resides in the 3rd Congressional District of Maryland, which you represent. Therefore, since you represent our congressman, we are petitioning you to help with our foreclosure-rate problem. The Ol' Shrimp Slayer does not seem up to the task, although he boasts to us of being a very Important Man in Washington, on the Rules Committee and chair of a subcommittee of the Agriculture Committee dealing with fruits and nuts. The Shrimp Slayer is a shy man, so shy he moved to Maryland to avoid seeing his constituents at the local grocery store, so he probably will be unable to bring himself to write you on our behalf. He is ethically disadvantaged, which frequently makes his public utterances difficult to understand if you don't know what's been going on in the backroom with the few local special interests he's protecting at the moment. However, we beg you, a member of the House Oversight and Government Reform Committee, chaired by that ferocious moralist, Henry Waxman, D-CA, who thunders about things like "moral hazard" that the Shrimp Slayer would find incomprehensible, to consider our petition to get some help for the poor, misguided and hoodwinked recent homeowners, the shrill sound of whose shattering lives fills our streets and police blotters.We understand that you are on the House Natural Resources Committee, now chaired by Nick Rahall, D-WV, so you may have heard some stories about your new constituent, the Shrimp Slayer. As your committee continues to delve into corruption in the Interior Department, certain unsavory facts may surface regarding the behavior of members of the former House Resources Committee, chaired by former Rep. Richard Pombo, Buffalo Slayer-Tracy, who represented the district immediately north of Cardoza's. During the height of the speculative housing boom in these two congressional districts, this bipartisan duo strolled about arm-in-arm counting the loot they collected from developers to pursue their single-minded aim of gutting the Endangered Species Act so that developers could completely destroy the natural habitat for a number of endangered species struggling to survive in what is left of habitat in the northern San Joaquin Valley. At the time, we called them the Pomboza, a term coined by the Azorean dairymen they menaced, and they cast a huge shadow over what is now the foreclosure-rate core of the nation -- Merced, Stanislaus and San Joaquin counties. Although we were critical of the Shrimp Slayer in his Pomboza days, we urge you to discount our outbursts at the time (we thought a bust might come) and to forgive your new constituent. Although in politics, he is so ethically warped by his love of power and money, he is by all accounts a fine family man. He exercised his "congressional voucher rights" by removing his children from the wretched school system here to put them in the finer schools of your district, which will give them a distinct advantage over their former classmates. Surely, a man of your commitments, who sits on the House Education and Labor Committee, subcommittees on Early Childhood, Elementary, and Secondary Education and Healthy Families and Communities, can understand a father's simple yearning for a better education for his children and a healthier family, by shortening the paternal commute. Nor should you overlook what the Shrimp Slayer has done for his wife's medical career by removing her from the desperately short-handed medical system (at least according to the Shrimp Slayer and other boosters of UC Merced) of the San Joaquin Valley and getting her a job teaching at the U. of Maryland, while simultaneously calling for the establishment of a medical school right here in Merced.We understand that, by your obvious progressive, even liberal standards, you might have some difficulty hearing our plea. But your new constituent, our congressman, has been wagging his little Blue Dog tail at Republicans ever since he got to Congress and he can't even get a decent community development block grant (that funky CDBG money) out of HUD to help on our foreclosure situation although Merced County is poorer than any of the surrounding counties -- Fresno, Stanislaus and San Joaquin -- that raked in $57 million in pure CDGB. So, we figure maybe a forthright progressive Democrat might do better than the rear end of the Pomboza.We're not saying our congressman is ill, by Diagnostic and Statistical Manual of Mental Disorders standards anyway. He is a good family man and the prognosis is positive for his recovery in the congenial atmosphere of Maryland's 3rd congressional district. Here, things aren't so congenial. But we figure the Shrimp Slayer will disprove the old saw that a person can't run away from his problems. We confess we have never found anything beneath the Shrimp Slayer's public pomposity but wannabe-shrewd backroom calculations that boil down to moments of political psychosis. Just moments, mind you,  just moments and geographically specific to a region about which the Shrimp Slayer as, as the psychologists would say, "conflicts." In a word, Rep. Sarbanes, your new constituent is basically a fugitive from his congressional district. He hates it. While this is no doubt not unknown in the annals of Congress, and in light of the foreclosure crisis here the least of our worries, nevertheless it ought to cause some concern among the Shrimp Slayer's colleagues -- the guy is bonkers. Possibly, you could find a place in a small parochial school in your district where he could teach political science. He might bloom in such an environment. However, with respect to the moral development of the children of your district, if you could just find the Shrimp Slayer a birth in a local Trappist monastery for a few years, perhaps under discreet lock and key, you would be doing your district and ours genuine service. It is hot here in the San Joaquin Valley, there is a drought, there are the imperious demands of demented agribusiness, there is not enough water to supply the absurd over-population of the state and so we have water wars,  and the Shrimp Slayer is just not up to water warring. We have the most polluted air quality in the nation, our state government is captured by developers as surely as it was once captured by The Railroad, and developers continue to target this dismal air-pollution region for more growth and more corruption of a rather good law we once wrote, the California Environmental Quality Act. As humane, educated people, we have some sympathy for the Shrimp Slayer. He displays the attributes of perpetual adolescence we often find in college professors and we believe his great, corrupt acts on behalf of locating a University of California campus in Merced (where it became the anchor tenant for growth, speculators including UC regents) were motivated by the desire to never grow up. Unfortunately, water wars, like those real wars you boys and girls in Congress fund, which claim so many young people from regions like ours, are hopelessly beyond the comprehension of perpetual adolescents like the Shrimp Slayer, who seek "balance," and are "troubled" by outrageous acts of governmental barbarism. Congress should realize that you are driving our congressman insane because your deeds do not accord with his reading of the texts of political science at the U. of Maryland. And so, Rep. Sarbanes, we address you as citizens of a district represented in Congress by a boy fleeing the consequences of his actions, who is trying to be a good father -- always a noble aim. We address you as an Eastern gentleman and as a self-conscious Greek American, hopefully not in the financial thrall of our local plutocrats buying classics departments throughout the nation to promote the line that Makedonia was always Greek and that Aristotle's ethics and politics support the designs of Sacramento real estate developers. Your new constituent, the Shrimp Slayer, is just a coward -- no more, no less. His district has always been too much for him. Perhaps the tender mercies of your hospitable and civilized congressional district will give him a chance to regain his manhood. Personally, we desire this for him. A man should be a man, at least once, as Hemingway said. He lacks any of the guts of a foreclosed burglar, and the current situation, which lacks any nuance at all, is highly distressing -- possibly incapacitating -- to a soul as sensitive as our Shrimp Slayer's.To conclude, regarding the HUD CDBG funds, supporters and contributors to the Shrimp Slayer in Merced County will steal every penny of them they do not funnel to their friends. So, do not listen to pleas for support from your new constituent regarding pork for his pals. He is, as we have said, ethically disadvantaged. Just find him a nice monastery where he is forbidden to speak for a few years. We are a fairly hardy lot. One way or another, we'll make it. A little help from other source than the CDBG mother of pork would be welcome. It would just be easier if we were spared the occasional obligatory inanity from Cardoza, which he must babble because he's still in office. Find him a cell in Baltimore and take care of his family. Merced Sun-StarEPA fines Atwater Dole plant for self-reported violation...CAROL REITERhttp://www.mercedsunstar.com/167/story/476331.htmlDole Packaged Foods, an Atwater frozen food business, has been fined $32,500 by the United States Environmental Protection Agency.Marty Ordman, vice president of marketing and communication for Dole, said the fine came after the business self-reported that some documentary forms hadn't been filed for 2004 and 2005."We were informed during a training session in 2007 that we were late in reporting toxic chemical forms for ammonia that is used in the facility," Ordman said.The reporting is done so that first responders such as firefighters know what type of chemicals are in use at the plant, Ordman said. "These laws help communities respond to chemical accidents," said Nathan Lau, associate director for the EPA's Communities and Ecosystems Division in the Pacific Southwest region. "Fire departments and other local agencies need all the information so they can be prepared for emergencies."Because Dole self-reported, the penalty was reduced. The company has since filed the proper forms.Ordway said that the plant tries to go above and beyond in reporting what types of chemicals are used in the plant. "It's part of our ongoing business practices to file these reports," he said.Dole bought the West Bellevue Road facility from JR Wood five years ago. It's in the frozen food business and has 650 year-round employees. More than 1,300 employees are employed during the peak season for strawberries and peaches.Congressman says federal foreclosure aid package treats Merced County unfairlyCardoza questions $3.9 billion HUD plan...SCOTT JASONhttp://www.mercedsunstar.com/167/story/476334.htmlRep. Dennis Cardoza questioned how the federal government decided to divide $3.9 billion in foreclosure aid and asked that it take another look at its math and methods before sending out the checks."(Officials) have not treated California fairly, and they have not treated Merced County fairly," said Cardoza, D-Merced.Apparently, one reason Merced was left off the list was a lower number of houses standing vacant for more than 90 days than several nearby areas, according to U.S. postal figures.The U.S. Department of Housing and Urban Development, or HUD, announced Friday how much each state, county and city would get under the Housing and Economic Recovery Act.The program gives local governments money to buy foreclosed homes so neighborhoods don't become blighted and the surplus of empty houses is reduced.In a letter to HUD Secretary Steve Preston, Cardoza, along with other California Democrats, said the formula short-changed the state by millions and questioned how Merced, one of the nation's foreclosure capitals, was left off the list."We believe the state of California was given an unjustly low percentage of funds, which may hamper our state's recovery from the housing market crash," the letter reads.Cardoza's letter notes that the state has the most foreclosures nationwide, roughly a third of the nation's total, but will receive $12 million less than Florida, which has half as many.Merced is still eligible for aid. It will just be funneled from HUD to the state, which will decide how much of the $145 million -- reserved for smaller, rural areas -- it deserves. Based on HUD calculations, Merced would've received less than $2 million, which is why it must now get it from the state."If a local community would get less than $2 million, we just make a judgment call," HUD spokesman Brian Sullivan said. "It probably wouldn't have had that much of an effect. It doesn't go very far when you're trying to run a housing program." As a result, he noted, Merced could receive more than $2 million if the state deems its needs severe enough.Sullivan said Merced does have a high foreclosure rate, 12.2 percent. It lacks a high vacancy rate in neighborhoods where risky mortgages were used to sell homes.HUD relied on U.S. Postal Service data to show what homes had been vacant for at least 90 days. Its figures showed 0.1 percent of Merced homes in targeted neighborhoods are vacant. In comparison, Modesto, receiving $8.1 million in aid, has a 0.5 percent vacancy rate. On the high end, Moreno Valley has a 3 percent vacancy rate and will receive $11.3 million.Merced's low rate is what reduced the amount of the aid. "We're letting the data make the judgments, which is what Congress told us to do," Sullivan said.Cardoza's letter, using Census data, says that there is a 4.5 percent homeowner vacancy rate in the county, the highest in the state. Besides that, it also notes the 12.1 percent unemployment rate as a reason HUD should reevaluate the way the money is being divvied up.Atwater City Manager Greg Wellman said he was shocked that Merced and the county were left off the list. "Our numbers are so illustrative of the problem you're trying to solve," he said. "It's unimaginable that every jurisdiction within this county would be shut out. One would hope it's just a gigantic mistake."Wellman estimated his city will get between $500,000 and $1.5 million from the state. He's holding a workshop Oct. 13 so city council members can learn about the program, set priorities and be ready to go, whenever they get the money.Dorothy Kielty, president of the Merced County Association of Realtors, said she was also surprised Merced wasn't getting any money directly from HUD. "I don't see how they got the statistics that say, 'You don't need the money,'" she said. "Drive around any neighborhood. You can see the empty houses."Denham, Galgiani should start lobbying for aid...Scott Jason, Reporters' Notebookhttp://notebook.mercedsunstar.com/denham_galgiani_should_start_lobbying_for_aidCongressman Dennis Cardoza, D-Merced, is leaning on the U.S. Department of Housing and Urban Development to revise its foreclosure aid package to include Merced and increase California's share by millions.That may work. It may not.If it doesn't, the money will go from the feds to the state to Merced County and its cities.Now's the time for Merced's state representatives -- Sen. Jeff Denham, R-Merced, and Assemblywoman Cathleen Galgiani, D-Stockton -- to step up their efforts. Local officials always preach about getting "our fair share." They're the ones who can help make that happen. There's $145 million set to be divided up by the state Department of Housing and Community Development.No one can argue Merced has been hit hard by the foreclosure crisis. Everyone can easily find someone to blame. The City Council approved too many homes. Developers built subdivision after subdivision, believing there was endless demand. Homeowners didn't reading the fine print on the biggest purchase of their life. Real estate agents for always saying, "It's a great time to buy."The aftermath surrounds us.Subdivisions have been abandoned mid-construction. Homeowners are upside down, realizing it makes little sense to pay off a $300,000 loan when the house is worth $150,000. Developers are asking for extensions. The financial market is on the verge of collapse. Local businesses are folding. As I walked to lunch, I noticed one more vacant storefront.Everyone's carefully watching this cash. It's not going to fix the problem, but it will at least help with the recovery. Congressman Cardoza supports failed bailoutCongressman says the plan makes him feel like he has to 'throw up.'…MICHAEL DOYLE, Sun-Star Washington Bureauhttp://www.mercedsunstar.com/167/story/476336.htmlWASHINGTON -- Rep. George Radanovich, R-Mariposa, voted against the $700 billion bailout bill before he voted for it.Radanovich's midstream switch was not enough to change the outcome of the closely watched vote Monday, which more than one House member called "historic." Radanovich's flip, though, did hint at the roiling political crosscurrents that left the San Joaquin Valley congressional delegation sharply divided."This is a bill that no one wanted to vote for," Radanovich said afterward. "I would have loved to vote against it, but in the end we couldn't afford not to do something." By ultimately supporting the failed bailout package, Radanovich joined Democratic Reps. Dennis Cardoza of Merced and Jim Costa of Fresno. Opposing the bill from the start was Rep. Devin Nunes, R-Visalia, who said he rejected multiple entreaties from the White House.Radanovich's switch occurred during a tumultuous period on the House floor, after the standard 17-minute voting period had expired and congressional leaders from both sides were furiously seeking last-minute converts. Several GOP members who were opposed to the bill described the one-on-one lobbying as extraordinarily intense.Congressional leaders kept the vote open for a total of 38 minutes while they prowled the floor, before finally conceding defeat with the margin fixed at 228-205. Radanovich was one of only two House members to call out a vote change during the period."They're breaking arms in there," said Rep. Darrell Issa, R-Temecula, in an assessment shared nearly verbatim by Nunes.Radanovich, though, insisted that no one from the Republican leadership talked to him about switching his vote, and he said he made up his mind on his own without being leaned on. He said he had come to the House floor prepared to vote for the bill if that was needed to help it pass."I was not lobbied," Radanovich said, adding that "this bill is the best shot we were going to get." For all of the Valley's House members, the early afternoon vote capped an intense couple of days. In their own way, each of the members was playing a distinctive role in the drama. Each had been fielding numerous phone calls and e-mails from constituents, the vast majority of whom were opposed.Bush administration officials kept offering Nunes a chance to talk to Treasury Secretary Henry Paulson, or Federal Reserve Board Chairman Ben Bernanke, or anyone at all who might be persuasive. Nunes declined the opportunity, saying he had made up his mind once he read the 100-plus-page bill Sunday."We should not be propping up the stock market and interfering in the marketplace," Nunes said. "Hopefully, now we'll take up some reasonable reforms that everyone can agree with." Cardoza, a member of the leadership-appointed House Rules Committee, was carrying around in his jacket pocket a folded-up list identifying Democrats who had committed to voting for the bill. He was up past midnight Sunday with the Rules Committee considering the legislation."I feel like I have to throw up that we have to do this," Cardoza said, but then stressed that the alternative of inaction is even worse.Costa was equally dire in his assessment."The lending and credit crisis in our nation has us on the edge of this cliff," Costa said, "and if we don't pass this, there's a real possibility that this recession will turn into a depression." Costa and Cardoza both said they had talked to community bankers throughout California and found widespread support for the bailout. Together, they represent a region that by some measure has been the hardest hit of any region in the country during the ongoing home mortgage crisis; Stockton's foreclosure rate of 12.3 percent led the state, and Modesto, Merced and Fresno were not far behind.They spoke cautiously, though, for fear of further spreading public fear about the stability of specific banks."This was an historic opportunity," Cardoza said, "and we missed it." Capital Corp stock takes wild rideIn rough times, officials at County Bank's parent company struggle to explain spike...SCOTT JASONhttp://www.mercedsunstar.com/167/story/476316.htmlManagers at Merced-based County Bank are trying to figure out why its parent company's stock surged late Friday and fell Monday."It's nothing the bank did," bank spokesman Thomas Smith said. "We're trying to dig deep. We hate being in the dark."Capital Corp of the West's stock was trading between $3 and $4 Friday before it spiked about 65 percent to $10.94 in the last 90 minutes of trading. By Monday morning, it had fallen by seven points, back to where it's been hovering for the past several months.Typically, the stock mirrors the performance of larger financial institutions, Smith said. The bank is turning to some of its brokers to see who or what caused the spike."Our entire industry is fraught with rumor and innuendo," Smith said. "Rumors are pretty much rumors until it becomes action."Though County Bank, much like all other lenders, has been dealing with bad loans, he said he intends to be at his desk next year talking about how the housing market has recovered.Unlike other institutions, County Bank never carried any home mortgages, so the subprime crisis didn't affect it. The bank did offer commercial construction loans, which have caused it to post losses.Most drastic shifts in stock price are caused by company announcements. However, County Bank hasn't made any big decisions since hiring a new CEO, Richard Cupp, in July and being forced to lay off about 20 workers earlier this month.The biggest hit its stock took this year, falling from $10.66 to $3.76, was in mid-March when the company announced its annual report would be filed late.Joe Morford, a County Bank analyst with RBC Capital Markets, said the spike was probably caused by one trader trying to make money in a short sale, where the expectation is that the stock will fall. "It's nothing special fundamentally or anything like that," he said.Capital Corp of the West's stock closed at $3.39 on Monday, while the NASDAQ, where it's traded, fell 9 percent in response to the failure of the $700 billion bailout plan. "Today you've just a rough market for financials all around," Morford said. Central Valley trust guards farmland from developmentThe recently accredited organization covers Merced County, three others...CAROL REITERhttp://www.mercedsunstar.com/167/story/476317.htmlThere's no land in America with a growing ability comparable to the San Joaquin Valley.Because of that, the Central Valley Farmland Trust has worked hard to keep as much land in the Valley in farming as possible.Four years after the trust was started, it has received accreditation as a land trust by the Land Trust Accreditation Commission. The trust is one of only three accredited trusts in California."We decided to get accredited because of some unscrupulous things that were going on in trusts back East," said Bill Martin, executive director of the trust.The trust was started by a group of farmers in the Valley to provide a service to landowners to help keep farm land in agriculture. Merced County Farmlands and Open Space Trust was the precursor to the trust, and was started in 1991 by members of California Women for Agriculture, the Merced County Farm Bureau, California Alliance for Family Farms and the Sierra Club. In 2006, they merged into Central Valley Farmland Trust covering four counties.Farmers interested in keeping their land productive and not developed are paid to put the land into trust. The land then is kept in ag production in perpetuity, Martin said.Maxwell Norton, president of the trust, said some farmers do it so their children can inherit the land. Others do it to generate money to buy more land.Not all land qualifies to be put into a trust, Norton said. If a parcel is right next to a city limits, putting it into trust wouldn't be feasible. Martin said that land must be prime growing land, and it has to have an adequate quality and quantity of irrigation water. The land must be economically viable as an ag unit. The minimum amount of acres is about 40, he said."There also has to be some threat to the land from potential development," Martin said. "If someone comes to us with 100 acres of rangeland, that's not something that we would put in trust."The trust came about because prime farmland was being gobbled up by developers, Martin said."California is growing as fast as some Third World countries," Norton said. "The San Joaquin Valley is really a pretty rare commodity globally."Norton said the recent rise in commodity and food prices underscores the importance of food security as a national security issue."I don't think anyone wants to be dependent on China for even a small part of our food system," Norton said, adding that more and more farmers are looking to trusts as a way to protect their land."We have more applications than we have available funding," he said.Toyota contributes hybrid cars, money for climate research at UC Merced, Yosemite...DANIELLE GAINEShttp://www.mercedsunstar.com/167/story/476345.htmlHai! Toyota donated $603,000 and five Prius hybrids to Yosemite National Park on Monday to support a number of education programs at Yosemite and UC Merced. "The development of environmental education programs is key to preserving our majestic national parks for future generations," said Bill Duff, corporate manager of Toyota's North American environmental office. "At Toyota, we are committed to the environment and to funding educational programs that foster the next generation of environmental leadership."Part of the money will be used to fund the Yosemite Leadership program, a UC Merced internship that provides students with work experience, wilderness education, a living stipend and the possibility of future employment. "The partnership affords UC Merced faculty the opportunity to conduct important research that sheds light on the critical issue of climate change," said Chancellor Steve Kang, wearing a tan suit and matching khaki Toyota cap. "It prepares students to become wise stewards of the park and thoughtful leaders in the community."... Monday's donation is part of a larger Toyota program, called LEAF, that gave $5 million and 23 vehicles this year to the nation's five largest national parks: Yosemite, Yellowstone, Grand Canyon, Everglades and Great Smoky Mountains... Modesto BeeThree will wield tremendous powerCitigroup, JPMorgan, Bank of America survive devastation on Wall St....Dave Carpenter, The Associated Presshttp://www.modbee.com/business/story/447234.htmlNEW YORK -- The sale of Wachovia's deposits and other assets to Citigroup on Monday leaves the nation with three superbanks, reshaping the U.S. banking landscape in the midst of unprecedented financial upheaval.For customers of those institutions -- Bank of America, Citigroup and JPMorgan Chase -- the consolidation may result in higher fees on everything from checking accounts to bounced checks and overdrafts, and lower interest rate yields on deposit accounts, banking experts said.Loan availability remains in question in the near term, particularly after congressional defeat of the government's proposed financial bailout plan."The larger the bank is, theoretically the more power they have to set pricing and other policies," said Nancy Atkinson, senior analyst at Aite Group, a financial services research firm. "I expect we'll start to see free checking accounts start to disappear and rates on overdrafts could go up. Savings rates could drop."But the news isn't all bad. Atkinson and others are convinced that the approximately 8,500 remaining regional and community banks nationwide will continue to play a role, providing consumers with more options."If you are a customer of the Big Three, you're probably going to see some increased fees because these banks have increased their market shares -- dramatically in some instances," said Tim Yeager, associate professor of finance at the University of Arkansas and a former economist at the Federal Reserve Bank of St. Louis. "From the community bank point of view, I don't think you're going to see much change."More customer service glitches can be expected as Citigroup Inc. absorbs most of Wachovia Corp. and JPMorgan Chase & Co. consolidates the branch network of the nation's largest savings and loan, Washington Mutual Inc., according to Michael Pagano, finance professor at the Villanova University School of Business. That could range from delays or inattentiveness to confusion over fees as two systems are integrated.However, Pagano was not overly concerned about the risk of much higher costs from a quasi-monopoly created by the recent bank purchases."If we had five banks in the whole country, I'd be worried about market power," Pagano said. "But there are more than 8,000 banks. And even credit unions are a viable alternative, from large ones to small mom-and-pops with $10 million in assets."Wachovia, headquartered in Charlotte, N.C., on Monday became the latest casualty of the widening global financial crisis after Citigroup agreed to buy its banking operations for about $2.16 billion in a deal brokered by federal regulators.The deal greatly expands New York-based Citigroup's retail franchise, with more than 4,300 U.S. branches and $600 billion in deposits.But it comes at a cost: Citigroup Inc. said it will slash its quarterly dividend in half to 16 cents. It also will dilute the value of existing shares by selling $10 billion in common stock to shore up its capital position. Citigroup shares closed down $2.40, or 11.9 percent, to $17.75 on Monday.In addition to assuming $53 billion worth of debt, Citigroup will absorb up to $42 billion of losses from Wachovia's $312 billion loan portfolio, with the Federal Deposit Insurance Corp.agreeing to cover any remaining losses. An estimate for that figure was not available. Citigroup will issue $12 billion in preferred stock and warrants to the FDIC.Essentially, Citigroup, Bank of America, which scooped up investment bank Merrill Lynch & Co. for $50 billion in stock, and JPMorgan, which acquired the investment bank Bear Stearns Cos. in March, now own about a third of the banking market, said Anant Sundaram, professor of finance at the Tuck School of Business at Dartmouth College.Fresno BeeLAURA FULTZ STOUT: Bills would help Valley hit air quality goals...Laura Fultz StoutLaura Fultz Stout of Fresno is the campaign and outreach associate for the Coalition for Clean Air.http://www.fresnobee.com/opinion/wo/story/902281.htmlCalifornia has been immersed in a budget crisis that was as political as it was fiscal. With a budget signed and sealed, lawmakers now have a chance to come up for air-clean air. Critical environmental policy has now finally reached the governor's desk. His approval is crucial to getting California, especially the Valley, back on track. Gov. Arnold Schwarzenegger has set aggressive goals for reducing California's global warming pollution. He campaigned on a promise to cut air pollution in half during his term. As flummoxed as we all are about the budget, two key pieces of legislation would raise new money to help us meet our clean air goals: AB 2522, by Assembly Member Juan Arambula, from which millions of dollars will support air pollution reductions in the Valley, and the Ports Investment Bill (SB 974, by state Sen. Alan Lowenthal), from which Valley residents will benefit from cleaner trucks traveling our roads to and from California's largest ports. With a budget that tightens the belt on transportation and air quality spending, these bills are needed more than ever. The Valley is home to three of the five worst soot-and-smog-polluted regions in the country; the Valley can ill afford to delay its clean-up efforts. It has been widely reported in this paper and elsewhere that Valley air pollution costs our region $3.2 billion every year. It is time to put more resources toward protecting the Valley families who bear so much of the financial burden of this public health crisis. Assembly Member Juan Arambula worked closely with Sen. Dean Florez to craft AB 2522. This bill would create a new revenue stream specifically for air pollution reductions in the Valley. This money will be raised here in the Valley through car registration fees and will be used by our local air district to fight smog. That can ease the suffering for the one in three Valley families already grappling with some form of respiratory ailment. The Ports Investment Bill seeks to save some of the 3,700 lives that are lost every year in California due to pollution from ports and freight transportation. SB 974 is four years in the making and would provide more than $300 million per year to clean up statewide port pollution and fix intersections where freight trains delay traffic. Some 270 people die prematurely each year in the Valley alone due to port and freight transportation pollution. SB 974 is good for Valley businesses, especially agriculture exporters trying to ensure the timely delivery of perishables. Reducing congestion on highways and building grade separations at train crossings increases reliability and decreases delays. According to a study by Beacon Economics, the fee in SB 974 amounts roughly to one-tenth of a penny for each dollar of goods shipped by California exporters. That's a worthwhile investment given the exorbitant price tag we already pay for dirty air. Understandably, the governor is upset about the budget and the polarized politics that stalled our Legislature for months. No one was happy with the budget mess, and no one wanted the governor to make good on his threats to veto bills out of frustration. Now he must look at these bills on their merits. A modest fee on car registration will make a big difference for the Valley. A revenue stream to deal with port trucks and congestion at train crossings will benefit the Valley, as well as thousands of residents statewide who are literally dying from port pollution. Without these new revenue streams, existing money will be stretched so far that the Valley risks getting left out. As the political floodwaters recede, and we assess the damage done by the budget conflict, we can immediately start to rebuild. The governor should sign AB 2522 and SB 974. They are the Valley's most important pieces of environmental legislation this year. By putting good policy over bad politics, we can make progress toward the governor's clean air goals; and that's good for all of California. Court: Great Lakes wolf returns to endangered list...JOHN FLESHERhttp://www.fresnobee.com/640/story/902106.htmlA federal court Monday overturned the Bush administration's decision to remove gray wolves in the western Great Lakes region from the endangered species list. U.S. District Judge Paul Friedman in Washington sided with environmental groups that accused the government of misreading the law last year when it lifted protections for about 4,000 wolves in Michigan, Minnesota and Wisconsin. It was the second setback in a week for the administration's campaign to return management authority to state officials in the two regions where the wolf has rebounded after being driven to the brink of extinction in the lower 48 states. The U.S. Fish and Wildlife Service on Sept. 23 asked a judge in Montana to return gray wolves in the Northern Rockies to the endangered list, reversing a proposal to drop them earlier this year. That followed the judge's order in July barring plans for public wolf hunts in Montana, Idaho and Wyoming. "The Bush administration's repeated attempts to push the limits of the Endangered Species Act have been decidedly rejected by the courts," said Amy Atwood, an attorney with the Center for Biological Diversity. The biggest practical effect of Friedman's ruling is to nullify newly established state policies allowing people in the Great Lakes area to kill wolves attacking livestock or pets. It also bars the states from permitting hunting or trapping of wolves, although none had done so. "In our judgment, this is an animal that deserves protection," said Howard Goldman, central states regional director for The Humane Society of the United States. "It has taken so long for their numbers to recover, we've got to be very careful before removing any protections from them." Jason Holm, spokesman for the Fish and Wildlife Service, said its attorneys were studying the ruling to determine the next step. "We are disappointed," he said. "The service and our partners worked toward recovery of the gray wolf in the western Great Lakes for more than three decades" and considered the population "robust enough that it no longer needed Endangered Species Act protection." The wolf occupies only about 5 percent of its historical range, which once took in most of the continental U.S. But the animal has recovered steadily in the western Great Lakes region since the late 1970s, migrating from Minnesota into Wisconsin and Michigan's Upper Peninsula. Surveys this year turned up 2,921 wolves in Minnesota, at least 537 in Wisconsin and 520 in Michigan. In a lawsuit challenging the Fish and Wildlife Service's 2007 decision, The Humane Society and several other groups claimed the government had acted illegally by designating Great Lakes wolves as a "distinct population segment" that could be bumped from the endangered list without regard to the species' nationwide standing. Friedman said it was unclear whether the 1973 Endangered Species Act permits such a move. He ordered the agency to provide a better explanation of its interpretation and respond to concerns that its policy could undermine the goal of protecting the wolf. In the meantime, he returned the wolf to the federal endangered list. "Little confusion or inefficiency will result from reinstating a regulatory regime that was in place from 1978 to 2007, particularly given the fact that state and federal wolf management authorities have been working in tandem for years," the judge said in his opinion. But wildlife officials in the three states said the ruling would be disruptive. "A lot of things are unknown right now," said Brian Roell, wolf coordinator for the Michigan Department of Natural Resources. "This really takes away our ability to implement our management plan." Wisconsin will revoke permits it had issued to seven farmers allowing them to shoot wolves attacking livestock, natural resources spokeswoman Laurel Steffes said. Until the lawsuit is resolved, state officials said they probably would seek federal permits allowing non-lethal methods to deal with wolves that continually harass livestock. "We hope it can be resolved and we can get an answer from the Fish and Wildlife Service about what the next steps will be," said Dan Stark, spokesman for the Minnesota Department of Natural Resources. Time for a new water ethicGrowing demand, shortages make conservation essential…Editorialhttp://www.fresnobee.com/opinion/story/902293.htmlWater is always in short supply in California and the Valley, even when it's raining cats and dogs -- which doesn't happen often. That shortage is likely to get worse for a number of reasons. It's time for Fresno and its residents to get serious about using less water. The installation and use of water meters will help, when it's finally completed in about five years, but we need to start now to find other ways to reduce our use of water. The pressure on our water supply will come from several sources. Global climate change may reduce annual snowfall, which means less water will be available -- absent massive efforts to capture and store it -- in the summer months, when consumption skyrockets. Fresno's population is expected to grow, to around 760,000 by 2030. That's going to put even greater pressure on tight supplies. We already use more water than we need in Fresno. In Clovis, where water has been metered for years, the average household uses about 240 gallons of water each day. In Fresno, without residential water meters in use, the figure is closer to 300 gallons per day. It's difficult to find any differences between the two cities, other than the absence of water meters in Fresno homes. Meters are expected to cut water use in Fresno by about 20%, at least initially, according to Garth Gaddy, Fresno's assistant director of public utilities. That's good, but we agree with Gaddy that we must do more. The best place to start is with residential landscaping. As much as 50% of the water we use in our homes is poured onto our lawns and flower beds. Replacing water-thirsty plants with native species that are drought-tolerant saves a great deal. Lawns can go dormant in the winter or be replaced with other landscaping that requires less water. We also need to use more reclaimed waste water. With minimal filtering, it's perfectly safe and effective for non-food plants. Already the city is looking at using reclaimed water to irrigate parks. That's a great idea, and a fine example for private residences to follow. Other good ideas are repair and replacement of old plumbing lines to eliminate wasteful leaks, and the replacement of toilets and appliances with more efficient models. The greatest need is for all of us to build a new ethic of water use, a new way of looking at and employing the water we have. For decades, we had the luxury of using it as we wished, paying flat rates to flood our landscapes and run the water down the gutter. No more. We've always lived with the specter of drought, but we haven't always learned the lessons from that experience. Now we have no choice. Sacramento BeeBig area lender Wachovia sinks in mortgage mess...Jim Downing and Darrell Smithhttp://www.sacbee.com/103/v-print/story/1275900.htmlWachovia Corp.'s $26 billion gamble on California real estate went bust Monday, knocking out the Sacramento region's sixth-largest lender and adding yet more bulk to the three national financial titans emerging from the rubble of the credit crisis.Wachovia moved into California in May 2006 by buying the Oakland-based parent of World Savings Bank, which had built a huge portfolio of risky adjustable-rate mortgages – including billions of dollars in loans to homeowners in the Sacramento region.With many of those loans going bad, though, Wachovia buckled. On Monday, Citigroup Inc. swallowed the company for $2.2 billion in a deal backed in part by the Federal Deposit Insurance Corp. Citigroup will assume Wachovia's $53 billion in debt and absorb up to $42 billion in losses from the company's loan portfolio.Like the takeover of Washington Mutual by JPMorgan Chase last week, the Wachovia deal eliminates another national player in the retail banking industry.A spokeswoman for Wachovia, which has 12 commercial branches in the four-county Sacramento region, stressed Monday that the Citigroup takeover would not affect the bank's customers.But banking experts said that in the long run, the remaining mega-banks – Citigroup, Bank of America and Chase – are likely to throw their weight around nationally and in California."There will be less competition, fewer choices and probably higher prices," said Sung Won Sohn, a professor of economics at California State University, Channel Islands, in Ventura County. "But in exchange you get some more stability. I see it as a trade-off."Experts also noted that the turmoil could leave many customers looking for alternatives to the Big Three – a potential bonanza for the nation's roughly 8,500 regional and smaller banks nationwide."I think that community banks will have another bite at the apple – another opportunity to capture these customers with a different strategy," said Anat Bird, a former Wells Fargo executive in Gold River who runs peer group conferences for bank executives.Bird also said rates for certificates of deposit are likely to fall somewhat as Wachovia and other banks go under. Desperate to generate deposits, distressed banks have been offering unsustainably high rates of return on CDs, Bird said, pushing other banks to match them.Outside Wachovia's branch at 55th Street and Folsom Boulevard in East Sacramento on Monday, customer Charles Marsh, a retired probation officer, said his top concern in the Wachovia meltdown is simple: "Everyone with deposits here just wants to make sure they're safe," he said. "There were no long lines here. That's reassuring."Wachovia's troubles stemmed largely from its $122 billion portfolio of a type of loan pioneered by World Savings: payment-option adjustable-rate mortgages, also known as option ARMs.With an option ARM, borrowers pay a low initial monthly rate, which jumps sharply after about five years. What's more, during the introductory period, the loan balance grows – so if property values fall, homeowners with option ARM mortgages are stuck with loans that often far exceed the value of their homes."As long as the value of housing continues to rise, everything's good," Bird said. "But when that changes, it's a house of cards."Option ARM mortgages have proven extremely difficult to restructure, said Kevin Stein, associate director of the California Reinvestment Coalition, a collection of groups working to combat predatory lending. That's one reason the mortgages have a very high default rate.There's nothing inherently wrong with option ARMs, so long as they're made to a borrower – a law school student, for instance – whose income is very likely to grow in the near future, Stein said.But as the real-estate market boomed and then peaked, lenders desperate to keep the market rising lowered standards, dropping requirements for borrowers to prove their income, for instance. "There was a race to the bottom," he said.In the Sacramento region, World Savings, which dealt exclusively in option ARMs, became known as an easy source of financing, said Michael McGee, owner of Winchester McGee Real Estate & Loans in Rancho Cordova."You could get a little bit shakier borrower and a little bit shakier property through that conduit," he said.From June 2005 through June 2007, World Savings and Wachovia made 11,822 loans worth $2.96 billion in the Sacramento region, according to MDA DataQuick. That gave World Savings a 2.7 percent local market share.Peter Schrag: Shutting illegals out of college: Who is helped?...Peter Schraghttp://www.sacbee.com/110/v-print/story/1275715.htmlThe three-judge decision earlier this month that jeopardizes tuition breaks for thousands of California's illegal alien college students may be legally correct. But it's likely to lead to a self-defeating economic strategy the nation will regret.The ruling, by members of the 3rd District Court of Appeal in Sacramento, upholds the contention of out-of-state students and their parents that under federal law, the University of California, California State University and the California community colleges may not give illegal alien students benefits they don't grant citizens and legal residents from other states. They call it an "illegal alien tuition scheme." UC and its co-defendants maintain that California's tuition policy, enacted in 2001, doesn't discriminate. It simply sets the same in-state fees for all California residents who graduated from a California high school and attended one the prior three years, regardless of their immigration status.The judges weren't buying it. The policy, they said, was intended to benefit illegal aliens, despite federal law that prohibits such benefits."The three-year attendance requirement at a California high school," the court said, "is a surrogate residence requirement." The California law's requirement that the illegal alien student "will file an application (for legalization) as soon as he or she is eligible to do so," the judges said, is meaningless.Since in-state fees are far lower than those out-of-state students must pay, eliminating the break would make higher education nearly unattainable for many California students. More than 15,000 illegal alien community college students and several thousand more at the four-year institutions pay in-state tuition.At UC, non-residents pay $20,600 a year above the $8,100 charged residents. At the community colleges, there's an eightfold difference – $160 a unit as against $20 a unit for in-state students, bringing the annual fees to $4,800 rather than the $600 that resident full-time students pay. That's in addition to the cost of books, transportation and other expenses that usually exceed in-state fees.In effect, all three segments, but UC particularly, treat out-of-state students as profit centers, as do virtually all public universities in other states. If the appellate court's decision is upheld, the colleges would have little choice but to charge illegal alien students the higher fees charged out-of-state students.Which was Congress' objective when it passed the Illegal Immigration Reform and Immigrant Responsibility Act of 1996, which prohibits fee breaks for illegal immigrants.Texas, New York, Washington, Illinois, Kansas, Nebraska, New Mexico and Utah have had in-state tuition laws similar to California's. Some, like Oklahoma, have reversed course; South Carolina recently banned illegal immigrants from its public institutions altogether. In Kansas last year, where the tuition policy was challenged on grounds similar to those in the California case, a federal appellate court threw the challenge out.The California case, which is being appealed, has a way to go before the courts are done with it. But in a state struggling to keep students in school and to raise their achievement, any cloud on an already uncertain future is yet another invitation to give up and drop out.For some, including the congressional majority that passed the ban on fee breaks for illegal students and the immigration restriction groups backing the California suit, that's all good. Maybe it will drive some illegal aliens back to where they came from.More likely, it will drive many more out on the streets, adding yet another time bomb of dependency, hopelessness and resentment that most of us would rather not deal with.Since many illegal students were brought to this country by their parents at an early age, don't know any other country or language, were educated in this country and have no desire to go back, they are for most purposes Americans. We have a huge investment in them. Do we now convert that potentially productive investment into a liability? Should they be punished for the acts of their parents in bringing them here? Last year, a bipartisan group of senators, among them California's Dianne Feinstein, made another attempt to pass the Dream Act, which would have put many students on the track to legalization and would have repealed the federal ban on tuition breaks for illegal immigrants.The same forces – including the Federation for American Immigration Reform, NumbersUSA and conservative radio talkers – that drove Congress to reject immigration reform and pushed the ban on in-state tuition helped kill the Dream Act.If the California court's decision is upheld, there will be suits in other states and more pressure to slam the college doors on illegal immigrant students elsewhere. At a time when millions of boomers are retiring and the nation badly needs skilled workers to replace them, slamming the door on ambitious, potentially productive people is crazy. The nation needs the Dream Act more than ever.Stockton RecordS&P: Home prices post 16 percent annual drop in July (6:40 a.m.)http://www.recordnet.com/apps/pbcs.dll/article?AID=/20080930/A_NEWS/80930003NEW YORK (AP) — A closely watched index released Tuesday showed home prices tumbling by the sharpest annual rate ever in July, but the rate of monthly declines is slowing. The Standard & Poor’s/Case-Shiller 20-city housing index fell a record 16.3 percent in July from the year-ago month, the largest drop since its inception in 2000. The 10-city index plunged 17.5 percent, its biggest decline in its 21-year history. Prices in the 20-city index have plummeted nearly 20 percent since peaking in July 2006. The 10-city index has fallen more than 21 percent since its peak in June 2006. No city in the Case-Shiller 20-city index saw annual price gains in July, the fourth straight month that’s happened. However, the pace of monthly declines is slowing, a possible silver lining. Between May and July, for example, home prices fell at a cumulative rate of 2.2 percent — less than half the cumulative rate experienced between February and April. But there’s “no evidence of a bottom,” said David M. Blitzer, chairman of the index committee at S&P. Las Vegas prices plunged the most at nearly 30 percent, with Phoenix diving 29 percent and Miami, 28 percent. Prices in the seven cities in the Sunbelt all fell between 20 percent and 30 percent from a year ago. Only seven cities showed positive or flat returns from June to July, down from nine that showed month-over-month gains in June. Atlanta, Boston, Dallas, Denver and Minneapolis all posted positive returns for three months or more.Local delegation votes in favor of rescue plan...Roger Phillipshttp://www.recordnet.com/apps/pbcs.dll/article?AID=/20080930/A_NEWS/809300336/-1/A_NEWSRep. Dennis Cardoza was on the floor of the House of Representatives on Monday afternoon simultaneously watching the stock market collapse on his BlackBerry and desperately trying to persuade opponents of the $700 billion financial rescue plan to change their votes."I wanted everybody to know as much as possible what the ramifications of the vote were," Cardoza said.In the end, though, the Atwater Democrat was unsuccessful, and so was the rescue, which suffered a 228-205 defeat that led to a record-setting 778-point plunge of the Dow Jones industrial average.The local delegation, however, voted 3-0 in favor of the bill, with Pleasanton Democrat Jerry McNerney and Gold River Republican Dan Lungren also supporting the legislation. California congressional representatives voted 29-24 in favor of the package - 19-15 by Democrats and 10-9 by Republicans."We witnessed the defeat of a good-faith, bipartisan effort to protect our citizens from a potentially serious downturn in our economy," Lungren said in a statement. "Congress has an obligation to do everything within our power to try to contain the implosion in our financial markets."McNerney also issued a statement that said in part, "Indications are that the economy faces the serious risk of meltdown, which would put the jobs, savings and homes of so many Americans, and especially people who live in my congressional district, at risk. I could not, in good conscience, vote against what appears to be the only plan available to stabilize the economy."Cardoza said Congress will return to trying to craft a bill capable of getting enough votes to pass.He said he believed local representatives supported the rescue because they have seen firsthand the effects of the foreclosure crisis, which he termed an economic version of Hurricane Katrina.He also took issue with statements by some Republicans blaming what they termed a partisan speech by Speaker Nancy Pelosi criticizing President Bush's economic policies for turning them against the rescue."I think that was an absolute and total red herring," Cardoza said. "Who in their right mind would go to the floor and vote no on something this important to this country because anyone said something?"Pacific Ethanol begins operations...Reed Fujiihttp://www.recordnet.com/apps/pbcs.dll/article?AID=/20080930/A_BIZ/809300317STOCKTON - Pacific Ethanol Inc. announced Monday that its new plant at the Port of Stockton has begun operations and has the capacity to produce 60 million gallons of ethanol a year.The $100 million facility employs the equivalent of 40 full-time employees. It uses corn to produce motor fuel for the California market as well as byproducts for sale as cattle feed."The startup of our Stockton plant marks the achievement of our goal of 220 million gallons of annual production capacity and dramatically increases the availability of renewable fuels produced in the state of California," Neil Koehler, Pacific Ethanol's president and chief executive, said in a statement. "As the largest fuel market in the United States, California will benefit from locally produced ethanol and its feed co-products."Since spring 2007, Pacific Ethanol has employed up to 200 construction workers to build the plant. The new facility will help bolster the regional economy and support for local government, said Jeff Kaspar, the port's deputy director.At an estimated construction cost of $100 million, he said, "It's the largest financial commitment, investment, in the Port of Stockton that's ever been made. ... There's a whole lot of things that happen when somebody comes in and spends that kind of money."The port leased 30 acres to Pacific Ethanol for the plant, which will process 21 million bushels of corn per year, producing both ethanol and 500,000 tons of wet distiller's grains, which can be sold as cattle feed to Central Valley dairies and feedlots.Pacific Ethanol will hold a grand opening and public open house for its Stockton Production Facility at 10 a.m. Oct. 10. The facility is at 3028 Navy Drive in Stockton.San Francisco ChronicleGovernor signs bills on oil-spill cleanup...Mathew Yihttp://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/09/30/BA8B1388GS.DTLGov. Arnold Schwarzenegger signed most of a package of bills Monday that aims to speed response and improve cleanup efforts after a major oil spill such as the one that fouled much of San Francisco Bay last year.The seven bills, introduced in the aftermath of the collision of the container ship Cosco Busan with the foot of the Bay Bridge on Nov. 7, were among 32 measures the governor signed Monday as he waded through hundreds of bills that he must act on by today's deadline.Schwarzenegger has 300 more bills to consider, and any bills that he doesn't sign or veto by midnight tonight will automatically become law. The crush of legislation comes after the governor had threatened to veto all bills during the waning days of the Legislature's record budget impasse. On Monday, he signed seven of the bills in the oil-spill package while vetoing three. The bills he signed ranged from training local officials to prepare volunteers for cleanup efforts to requiring the state Department of Fish and Game to close waters to fisheries within 24 hours of an oil spill."California's coastline and waterways are a national treasure, and this package of legislation will help us better protect and preserve our natural resources for future generations," Schwarzenegger said in a written statement. He vetoed measures that would have reduced the state's oil-spill response time in San Francisco Bay from six hours to two hours; increased the fee on oil production by 3 cents per barrel to help fund spill-prevention programs and establish a grant program to evaluate new technologies for oil-spill response.Last year's accident caused 58,000 gallons of fuel to spill into the bay. Early cleanup efforts were hampered in part by a lack of a system to allow volunteers to pitch in immediately, resulting in thousands of people being turned away in the days after the spill.Assemblywoman Loni Hancock, D-Berkeley, who chairs the Assembly Natural Resources Committee, said the Cosco Busan oil spill was a wake-up call that highlighted the state's inadequacies in oil spill prevention and cleanup.Her bill, AB2031, requires the state Office of Spill Prevention and Response to train and certify local oil-spill response managers who in turn would train and certify volunteers.The bill will also offer grants to local governments for additional spill-response equipment."We know that one of the most frustrating things was that there were literally thousands of volunteers who wanted to hit the beaches ... and they were told they would be arrested if they were on the beaches," Hancock said. "It was a great waste of human energy."Other oil-spill bills signed by the governor were:-- AB2935, by Assemblyman Jared Huffman, D-San Rafael, which requires the Department of Fish and Game to close waters to fisheries within 24 hours of an oil spill of 42 gallons or more. Within 48 hours of a spill, the state Fish and Game and the Office of Environmental Health Hazard Assessment must assess whether longer closure is needed.-- SB1739, by Sen. Joe Simitian, D-Palo Alto, which requires spill responders to be adequately trained in part by regular and unannounced emergency drills.-- AB1960, by Assemblyman Pedro Nava, D-Santa Barbara, which creates an inland oil-spill prevention program by establishing new maintenance standards, enforcement authority and contingency planning requirements for oil refineries.-- AB2911, by Assemblywoman Lois Wolk, D-Davis, which expands the state Office of Spill Prevention and Response administrator's responsibility to include overseeing clean-up efforts of inland oil spills. The measure also allows the agency to impose similar penalties for inland oil spills as marine oil spills.-- SB1217, by Sen. Leland Yee, D-San Francisco, which requires the Board of Pilot Commissioners to submit an annual report to the Legislature regarding licensees. Also requires a board appointed physician to review physical fitness of a pilot.-- SB1627, by Sen. Patricia Wiggins, D-Santa Rosa, which places the Board of Pilot Commissioners under the oversight of the state Business, Transportation and Housing Agency. The bill also requires the state auditor to conduct a performance audit of the board by Oct. 1, 2009, and a financial audit by Jan. 1, 2010.Bills signed Monday-- AB2765 (Huffman, D-San Rafael). Requires the state Department of Food and Agriculture or county agricultural commissioner to hold a public hearing before the aerial spraying of a pesticide.-- AB2296 (Mullin, D-South San Francisco). In response to threats that animal activists made against UC animal researchers, the bill makes it a misdemeanor to publish names and addresses of academic researchers and their family members with the intent to commit a crime.-- AB2809 (Leno, D-San Francisco). Authorizes the Victim Compensation and Government Claims Board to reimburse up to $5,000 in out-patient mental health counseling for minors suffering emotional injury due to witnessing a violent crime.-- SB1370 (Yee, D-San Francisco). Protects high school and college journalism teachers from punishment for allowing students to write articles that are legally protected under California's rules for press freedom on campus.-- AB1879 (Feuer, D-Los Angeles). Authorizes the Department of Toxic Substances Control to develop regulations to identify toxic chemicals and create methods to analyze alternatives.-- SB509 (Simitian, D-Palo Alto). Creates an online database on household chemicals and their toxicity for consumers.-- AB1860 (Huffman, D-San Rafael). Requires retailers to remove from their store shelves any consumer products subject to a manufacture recall.-- AB2347 (Ruskin, D-Redwood City). Requires thermostat manufacturers to establish a collection and recycling program for mercury-added thermostats.Bills vetoed Monday-- AB3050 (Jones, D-Sacramento). Would have created a pilot program to provide court-appointed interpreters for low-income individuals.-- SB1230 (Maldonado, R-Santa Maria, Santa Barbara County). Would have limited the amount of phosphorus in household cleaning products. The author argued the chemical is harmful to aquatic life.Judge rules against bird waste injunction in Okla....JUSTIN JUOZAPAVICIUS, Associated Press Writerhttp://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2008/09/30/national/a001801D59.DTL&hw=pollution&sn=002&sc=554A federal judge has denied Oklahoma's request for a preliminary injunction to stop 13 Arkansas poultry companies from disposing of bird waste in the Illinois River watershed.Attorney General Drew Edmondson, who requested the injunction last year, said Monday's ruling had no impact on the state's environmental case against the companies, which figures to begin in 2009.The injunction could have halted a practice thousands of farmers have employed for decades in the 1 million-acre watershed, which occupies parts of Arkansas and Oklahoma: Taking the ammonia-reeking chicken waste — clumped bird droppings, bedding and feathers — and spreading it on their land as cheap fertilizer.It also could have led to similar environmental lawsuits nationwide against the industry, which produced more than 48 billion pounds of chicken in 2006.Edmondson sued the companies in 2005, accusing them of treating Oklahoma's rivers like open sewers. While gathering evidence for the pollution case, Edmondson said the state "discovered the excessive land application of poultry waste could be a danger to public health," and argued in court for the injunction earlier this year.But U.S. District Judge Gregory K. Frizzell ruled that Oklahoma "has not yet met its burden of proving that bacteria in the waters" are "caused by the application of poultry litter rather than by other sources, including cattle manure and human septic systems."He also said that "the record reflects levels of fecal bacteria at similar levels in rivers and streams throughout the state of Oklahoma, including waterways in whose watersheds the record does not evidence similar application of poultry waste."The judge also labeled as "not sufficiently reliable" the testimony of two of the state's expert witnesses because their work had not been peer reviewed or published.Edmondson defended the injunction request, saying, "we believed the health implications were sufficiently serious to bring to the court's attention as early as possible.""As the court acknowledged in its ruling, we faced a heightened burden of proof in this hearing," he said in a statement Monday. "Since the testimony of two of our experts was discounted, we could not meet that burden."Scott McDaniel, an attorney for one of the defendants, Peterson Farms Inc., said Monday that the attorney general did not produce any farm-specific evidence of contamination, and instead relied on untested science to make a case."We've gone through several years of just battling back and forth in the press, and this was the first opportunity for everybody to put their evidence on the table," McDaniel said. "We're pleased to have won this round."The Oklahoma-Arkansas region supplies roughly 2 percent of the nation's poultry, and is one of several areas nationally where the industry is most concentrated. More than 1,800 poultry houses are in the watershed, most of them in Arkansas.------LOUISVILLE, Ky. (AP) — A prolonged dry spell across Kentucky is cutting into corn and soybean yields and causing at least one county to put a strict ban on using water outdoors.National Weather Service hydrologist Mike Callahan is reporting a severe drought in portions of south-central and southeastern Kentucky. He said Monday that most of the rest of Kentucky is in a moderate or mild drought.A water shortage warning has been issued in Magoffin County. The eastern Kentucky county is pumping water from backup wells to help offset low levels in the Licking River. As a result, Magoffin residents are banned from any outside water use.Santa Cruz SentinelPublic can weigh in on UCSC housing project - SENTINEL STAFF REPORThttp://www.santacruzsentinel.com/localnews/ci_10597778UC Santa Cruz will host a public meeting Wednesday to seek input on preparing an Environmental Impact Report for a new student apartment project that would add 230,000 square feet of housing to the northeastern end of campus.The East Campus Infill Housing Project, part of an expansion outlined in UCSC's Long Range Development Plan, would be built on three under-utilized parking lots near the Crown-Merrill Apartments and Crown College. The project's seven buildings would provide up to 600 new student beds in about 100 apartments, as well as laundry areas and recreational spaces.The construction of the complex -- certain to be controversial with growth opponents and campus neighbors -- will require felling redwood, oak and bay trees, but the university says it will plant new trees at or near the site. Several of the buildings will be linked by pedestrian bridges, and a new access road will be built off Chinquapin Road.The university will also make topographical restorations at the site, as well as water infrastructure improvements. The EIR, which will be prepared by the university, must also address impacts on noise, air quality, mineral resources and other factors outlined in the California Environmental Quality Act.The public meeting will be from 6-7 p.m. Wednesday in Conference Room A Amah Mutsun at the Bay Tree Conference Center at the intersection of Hagar Drive and Steinhart Way, on campus.UCSC will accept public comment through Oct. 22 before the report is written. Comments may be sent to EIRscope@ucsc.edu, or John Barnes, director of Campus Planning, Physical Planning and Construction, UC Santa Cruz, 1156 High St., Santa Cruz, 95064. The Santa Cruz Local Agency Formation Commission will review the EIR once its completed. The campus hopes to begin building in fall 2009 and finish within two years.UCSC hands big check to city for traffic improvements...Genevieve Bookwalterhttp://www.santacruzsentinel.com/localnews/ci_10597744SANTA CRUZ — City drivers should see some drastic improvements to their roads in the near future, as UC Santa Cruz officials last week paid the city $2.3 million to fix streets affected by campus traffic.The payout comes after city and university leaders reached an agreement over the summer regarding ways to accommodate the university's planned growth. The money paid to the city last week will help relieve traffic headed to the university's main campus and the satellite facilities on Delaware Avenue, according to city leaders. "It's a good first step," said Mayor Ryan Coonerty. Of the $2.3 million, $350,000 will pay for legal fees, $1.4 million to mitigate traffic to main campus, $418,900 to mitigate traffic to the Delaware Avenue campus, and $107,500 for Mission Street widening.Details of the rest of the town-gown deal will be discussed at the City Council's Oct. 14 meeting."These payments reflect our commitment to do our part to improve a transportation system that serves the community as well as the campus," said UCSC spokesman Jim Burns. "We look forward to continuing this cooperative relationship with the city of Santa Cruz."The money arrives after city and university leaders last month agreed to drop lawsuits and countersuits filed over the university's long-range development plan, which details plans to grow the student population by 4,500 through 2020. That settlement capped an escalating clash between residents and UCSC officials as the campus made plans to deal with state-required growth in the number of students it teaches; some residents complained they were shouldering the burden of the expansion. The campus development plan also calls for new buildings on 120 acres of undeveloped north campus by 2020. City voters passed measures in 2006 forcing UCSC to pay for the impacts of campus growth, or face the possible loss of city water and sewer service to new development. Lawsuits and countersuits flew.Coonerty said the money will not help the city's $5 million deficit, which city leaders are searching for a way to resolve."It doesn't solve the budget problems because we have to spend it on the things we said we would spend it on," Coonerty said.The campus will host a public meeting Wednesday at the Bay Tree Conference Center at UCSC to discuss a residential housing project slated to be built on top of three parking lots on the northeast end of campus. Part of the city's deal with the UCSC over the long-range development plan requires more on-campus housing to minimize effects of student growth on traffic, roads and rental stock. Governor signs researcher protection bill...J.M. BROWNhttp://www.santacruzsentinel.com/localnews/ci_10597753Gov. Arnold Schwarzenegger has signed into law a bill designed to protect academic researchers from harassment and violence -- a measure inspired by firebombings and other incidents at the homes of UC Santa Cruz scientists who conduct experiments on animals.In a statement released Monday, Chancellor George R. Blumenthal thanked the governor and lawmakers who pushed the Researcher Protection Act through as an urgent bill, meaning it became law when Schwarzenegger signed it Sunday."UC Santa Cruz scientists are confronting many of society's most vexing medical challenges, including cancer, neurological conditions and infection disease," Blumenthal said. "This work is vitally important, and our researchers and their families must be protected from acts of intimidation and violence."The university has asked scientists targeted by animal rights activists not to make public comments, but two legislators who struggled early on to convince colleagues about the bill's urgency said the August firebombings got the attention of legislators in a way that previous incidents had not. "There is no doubt that the publicity that was attendant to the events in Santa Cruz not only helped the bill get out of the Senate but it also played a role in getting the governor's signature," author Assemblymember Gene Mullin, D-South San Francisco, said Monday.The FBI has made no arrests in the firebombings of a researcher's home and a colleague's vehicle, as well as an attempted home-invasion by masked animal right activists in February. Scientists at UC Berkeley and UCLA also have been targeted by vandalism and trespassing. The law makes it a misdemeanor to publish the personal information of scientists or their relatives online or elsewhere with the intent to harm them. The measure also creates a misdemeanor for trespassing on researchers' personal property with the intent to intimidate them or thwart their work.Officials say the bill gives investigators greater power to prosecute violators and serves as a deterrent."I think it will cause people to think twice before engaging in behavior that puts people at risk," said state Sen. Joe Simitian, a Palo Alto Democrat who shepherded the measure through the Senate. "It gives law enforcement and the district attorney's office tools they can use both in terms of serving as a basis of an investigation and a basis of prosecution."Santa Cruz police Capt. Steve Clark said activists who set firebombs may not be deterred by the new law because "they're not thinking rationally" but the law's true effectiveness may come in the peace of mind it gives researchers."If it provides that feeling of safety and security, then it's worth doing," he said.Santa Cruz organic farmer awarded $1 million for pesticide drift...Genevieve Bookwalterhttp://www.santacruzsentinel.com/ci_10597747?source=most_viewedSANTA CRUZ -- In a victory for the state's organic farmers, a Santa Cruz County jury has awarded a North Coast grower $1 million in damages after deciding a pesticide company violated the farmer's rights when its chemicals drifted with the fog onto his organic crops.Jacobs Farms, which raises culinary herbs on about 120 acres in Wilder Ranch State Park, was preparing to leave the property if the chemical drift continued. Instead, the operation will stay, knowing area farmers will need to be much more careful or risk paying big fines, and organic farmers statewide now have a stronger case to seek redress should pesticides, even those applied properly, end up on their plants."I feel great. We were thrilled, very excited," said Brendan Miele, California production manager for Jacobs Farm, which grows in Watsonville, on the North Coast and in Pescadero.Lawyers for the defendant, Western Farm Service of Fresno, said they might appeal. "We feel this is going to impose a serious burden and concern to the industry," said Western Farms attorney Dale Dorfmeier.Larry Jacobs with Jacobs Farms filed the suit more than a year ago after dill grown in 2006 on the Wilder land Jacobs rents from the state tested positive for organophosphate pesticide residue. Because the residue involved is not legally allowed on those herbs -- organic or not -- the entire $500,000 crop was lost that year. In 2007, damages were estimated at more than $2 million, Miele said. The pesticide at issue is regularly used on neighboring fields of brussels sprouts to fight cabbage maggots and other annoyances. Tests by the county Agricultural Commissioner's Office confirmed pesticide residue on the herbs, according to a report from that office issued before the ruling. But under state code, a pesticide sprayer's responsibility to stop chemicals from drifting into other fields ends after the pesticide is applied, the report said. As the pesticide was applied properly and did not blow away during the application, the ag office found no violation on the part of Western Farm Services at that time.Dorfmeier said the commissioner's office, not the jury that ruled on Friday, interpreted the law correctly."What this jury decision says is, one that sells or applies this product is going to be responsible for post-application movement of this material, regardless of whether it's under their control or not," Dorfmeier said. "This is movement by wind or fog lift off that happens days or weeks after we do a safe application."Assemblyman John Laird, D-Santa Cruz, who has supported Jacobs Farms' efforts, was happy to hear of the ruling on Monday. "We worked hard with the county ag commissioner and many interested parties to try to address the issue of pesticide drift and organic farms," Laird said. "Between those efforts and this lawsuit, the hope is that drift will be taken much more seriously in the future."Press EnterpriseCadiz Valley desert water-storage plan renewed...David Danelski...9-28-08http://www.pe.com/localnews/sbcounty/stories/PE_News_Local_S_pipeline29.2142af4.htmlThe owners of remote desert land have revived a $200 million plan to store water underground to send to Southern California in dry times, although the region's major water agency rejected the idea six years ago. Cadiz Inc., owner of land and water rights in the Cadiz Valley about 40 miles east of Twentynine Palms, has secured a 99-year lease to use railroad right-of-way for a 42-mile pipeline connecting to the Colorado River Aqueduct, said Richard Stoddard, chief executive officer of a sister company, Cadiz Real Estate LLC, in a telephone interview. Water would be diverted from the aqueduct into the Cadiz pipeline and injected into the ground for storage in an aquifer beneath the company's land. When needed, the water would be returned to the aqueduct and could meet the needs of an estimated 1.2 million people in Southern California, the company contends.Cadiz Inc.'s announcement surprised officials at Metropolitan Water District of Southern California, the major buyer and distributor of water in the region.The district, which built and operates the 242-mile Colorado River Aqueduct that Cadiz wants to use, rejected a similar proposal in 2002 amid environmentalists' opposition and concerns about costs. In addition, the Colorado River didn't have surplus water to fill the Cadiz aquifer, district officials said."We don't have any plans to proceed with the (Cadiz) project, and they haven't discussed their new approach with us," said Timothy F. Brick, Metropolitan's board chairman.Metropolitan would have less involvement this time around, said Courtney Dedener, Cadiz investor relations manager. The previous deal would have made the water district a partner in the project, and the two entities would have jointly built the pipeline to the Cadiz Valley. Now, the company plans to build the pipeline without the water district and charge clients for water storage.Aqueduct RightsCadiz Inc. owns 44,000 acres of land and related groundwater rights in the Cadiz, Fenner and Piute valleys of eastern San Bernardino County. It grows grape and citrus crops.Stoddard said the company has been talking with several water providers that have rights or potential rights to water in the aqueduct and could benefit from the company's storage project.California's "water-wheeling" laws give water providers the right to move supplies through the aqueduct, Stoddard said. The laws are similar to rules that allow various telephone companies to use the same transmission lines, he said.Metropolitan spokesman Bob Muir said the district has not seen a proposal from the Cadiz company. To access the aqueduct, capacity must be available, he said.The Cadiz clients also would have to pay access and stewardship fees, he said.Fern Steiner, San Diego County Water Authority chairwoman, said the Cadiz venture possibly could be used to store Colorado River water the agency purchases from the Imperial Irrigation District. "Our board should look at the Cadiz project," she said. "We should explore all possibilities to find new water sources."Stoddard said he expects the pipeline to be operating in about three years, allowing 18 months for environmental reviews under the purview of the San Bernardino County planning agency.It would take roughly the same amount of time to build the pipeline, he said.Environmental ConcernsIn 2001 and 2002, environmentalists who opposed the project said they feared that pumping from the Cadiz Valley would deplete natural groundwater that feeds area springs. The springs and groundwater are necessary to sustain desert bighorn sheep and various plants and other wildlife, they said.Terry Wold, conservation coordinator for the Sierra Club's Inland chapter, said the group will continue to oppose the pipeline and storage project.Wold said that besides concern about the springs, she is worried about contaminating the pure native groundwater with the saltier Colorado River water.Elden Hughes, of Joshua Tree, former chairman of the environmental group's desert committee, said the environment would be damaged by construction of large-scale pumping stations."It they want to suck the aquifer dry, we will do our damndest to stop them," Hughes said.Club members will write letters, lobby elected officials and, if necessary, sue to stop the project, he said.Stoddard said native groundwater would be used but that levels would be carefully tracked to ensure the environment is protected.He added that using the Arizona & California Railroad Co. right-of-way would be less damaging to the environment than the previous plan that routed the pipeline across public land overseen by the federal Bureau of Land Management."The more this project is examined, the more environmentally benign it becomes," Stoddard said.#Washington PostEPA issues radiation exposure rules for Yucca dump...H. JOSEF HEBERT, The Associated Presshttp://www.washingtonpost.com/wp-dyn/content/article/2008/09/30/AR2008093001488_pf.htmlWASHINGTON -- No one knows what the earth will be like in a million years. But a proposed nuclear waste dump in Nevada must be designed to ensure that people living near it a million years from now are exposed to no more than 100 millirems of radiation annually.And over the next 10,000 years, radiation exposure to the waste dump's neighbors may be no more than 15 millirems a year, or about what people get from an X-ray. People receive about 350 millirems a year of radiation on average from all background sources.After three years of deliberations, the Environmental Protection Agency on Tuesday announced its radiation health standard for the proposed Yucca Mountain nuclear waste repository, a proposed system of underground caverns 90 miles northwest of Las Vegas where the government hopes to keep highly radioactive commercial and military nuclear waste.It is scheduled to open in 2020 if a license application is approved by the Nuclear Regulatory Commission.The EPA has struggled to comply with a 2004 court directive that said it must establish a radiation health standard for a million years into the future because some of the isotopes in the buried waste will remain extremely dangerous for that long. An earlier standard of only 10,000 years was ruled inadequate by the court.The agency said Tuesday it believes its latest standard is "consistent" with the recommendations of the National Academy of Sciences and is expected to satisfy the court decision.The Energy Department last June submitted its license request for the Yucca Mountain dump to the Nuclear Regulatory Commission, which has three years to consider the request. Despite strong opposition from Nevada officials, the Bush administration hopes the site can be opened by 2020.It is designed to hold 77,700 tons of used reactor fuel from commercial nuclear power plants in 31 states. The Energy Department recently estimated a cost of $96.2 billion of building and operating it for 150 years, until it is closed in 2113.The EPA said that in submitting its design for a license, the Energy Department must consider the effects of climate change, earthquakes and volcanic activities as well as the corrosion of the waste packages to assure it can meet the radiation exposure requirements over a million years.Energy Secretary Samuel Bodman has said he is confident that the license application submitted to the NRC will "stand up to any challenges anywhere" including questions about whether the design will be adequate to meet the EPA's radiation exposure standard to nearby residents.The NRC's primary job will be to determine whether the proposed design will protect public health and meet the EPA radiation standard. The NRC has proposed a less stringent radiation standard. And the EPA itself had a maximum exposure of 350 millirems per year for the 10,000-to-1-million-year time frame, more than three times the exposure level it announced Tuesday.CNN MoneyThis isn't just a Wall Street bailout!Angry voters led the House to reject the rescue plan. But Monday's sell-off and more turmoil in the credit markets show that a bailout is good for Main Street...Paul R. La Monicahttp://money.cnn.com/2008/09/30/markets/thebuzz/index.htm?postversion=2008093014NEW YORK (CNNMoney.com) -- The backlash against the bailout worked. The House rejected the controversial $700 billion rescue plan on Monday. But considering that the Dow plummeted nearly 800 points - its worst one-day point drop in history - will there now be a backlash against the backlash?"Many of the folks writing their congressmen last week to say they were against the plan may have looked at their 401(k)s this morning and are rethinking their position," said Bill Knapp, investment strategist with MainStay Investments, an asset manager based in New York. Talkback: Should Congress pass a new version of a bailout or just do nothing?Sure, stocks rebounded a bit Tuesday. But make no mistake. If Congress doesn't come up with some new plan to address this credit crisis, we could be faced with more gut-churning market drops. I stated last week why I thought the bailout was a necessary evil and I still feel that way.I understand why people are angry. I'm angry. I am not happy that the government is in this position because of reckless behavior by banking executives, investors, lax regulation by the government and, yes, even consumers.And I even can concede that there is a lot of merit to the claims by critics that we should let the market sort out the country's credit problems. In free markets, companies should be allowed to fail. And clearly, the market and government let Lehman Brothers fail.However, in the wake of the Lehman bankruptcy, things just got worse and more dominos fell ... AIG, Washington Mutual, Wachovia, etc. The crisis is now so pronounced that doing nothing is not really a viable option. And what infuriates me to no end is the refusal by some members of Congress and taxpayers to recognize that the consequences of doing nothing will mean more economic hardship for all Americans, not just bank CEOs, traders and New York City. Let Wall Street burn. Let Wall Street die. Let Wall Street go bankrupt. That's what people opposed to the bailout are saying over and over.Don't get me wrong. Wall Street deserves a lot of the blame for the mortgage mess. But it's overly simplistic and flat-out wrong to suggest that this is just a New York or Wall Street problem.There are a lot of companies that have either already collapsed or are nearing the precipice of failure as a result of the credit crunch ... and many of them are located far from lower Manhattan. That means many jobs are on the line and they aren't just the jobs of traders, blue-blood investment bankers and CEOs.Washington Mutual (WM, Fortune 500), which became the largest bank to fail in history last week, is based in Seattle and has more than 2200 branches across 15 states. Wachovia (WB, Fortune 500), which dumped its banking assets to Citigroup (C, Fortune 500) in a fire sale Monday, is headquartered in Charlotte, N.C.National City (NCC, Fortune 500), which many investors are betting could be the next bank to go under, is based in Cleveland. Shares of two other big Ohio banks - Cleveland's KeyCorp (KEY, Fortune 500) and Cincinnati-based Fifth Third (FITB, Fortune 500) - also got pummeled Monday.SunTrust (STI, Fortune 500), which lost nearly a quarter of its value Monday, is an Atlanta institution. Regions Financial (RF, Fortune 500) plummeted more than 40% on Monday. That bank is based in Birmingham, Ala. A bank bailout plan of some sort might not stop other banks from going under but it could certainly help minimize the pain in the industry."If we had a bailout, it would lessen the likelihood of further bank failures. We may have some more down the pipeline but we would have less with a bailout," said Robert Dye, senior economist for PNC Financial Services Group in Pittsburgh.If more banks get scooped up by larger rivals or just flat-out go under, that could lead to more job losses in the financial industry. That's not good news for the broader economy.Fears about more bank collapses have also led to chaos in the credit markets as banks are afraid to lend to each other, which makes them less willing to extend credit to businesses. That, eventually, will be felt by consumers. "The core of the problem is with credit markets, which is one step removed from Main Street. The average guy and gal is not seeing this yet but if you are a business, you are facing highly elevated costs to borrow money," Dye said."And Main Street will definitely feel this eventually. We'll also see higher rates for credit cards and other consumer loans. The cost of credit will rise dramatically," Dye added. Dye also said that if more businesses start to feel a major cash pinch, they are very likely to cut back on hiring and may even start to layoff workers. That would add to the this year's 600,000 job losses. In turn, that could intensify the economic slowdown by causing sharp pullbacks in consumer spending. On top of all that, the current stock market chaos does nobody any good. I'm not trying to cheerlead the market higher. Many stocks, particularly in the banking sector, should be trading much lower. But the credit crisis has spilled over into the broader market, hitting shares of many quality companies that are still financially healthy. As a result, $1.2 trillion in stock market value was wiped out in the wake of Monday's sell-off.That's bad news for more than just hedge fund managers - it hurts the millions of Americans that actively manage their investment portfolios as well as the millions more who have 401(k)s or IRAs for retirement as well as 529 plans to save for their kids' college tuition."It's easy to point the finger at the credit crunch being just a Wall Street problem. But it's much more pervasive than that so that's why it's imperative that this be addressed," said Knapp, the investment expert. "If a rescue plan doesn't pass we will see markets sell off further." Dye agreed. He said the biggest problem with the bailout is that it would in some fashion, allow some companies off the hook for egregiously bad decisions. Nobody is happy about that. But doing nothing just so that Wall Street can suffer is not the answer either."People don't want reward bad behavior. But we don't want to cut off our nose to spite our face here," Dye said. "This will hurt Main Street very quickly.The $55 trillion questionThe financial crisis has put a spotlight on the obscure world of credit default swaps - which trade in a vast, unregulated market that most people haven't heard of and even fewer understand. Will this be the next disaster?...Nicholas Varchaver, senior editor and Katie Benner, writer-reporterhttp://money.cnn.com/2008/09/30/magazines/fortune/varchaver_derivatives_short.fortune/index.htm?postversion=2008093012(Fortune Magazine) -- As Congress wrestles with another bailout bill to try to contain the financial contagion, there's a potential killer bug out there whose next movement can't be predicted: the Credit Default Swap. In just over a decade these privately traded derivatives contracts have ballooned from nothing into a $54.6 trillion market. CDS are the fastest-growing major type of financial derivatives. More important, they've played a critical role in the unfolding financial crisis. First, by ostensibly providing "insurance" on risky mortgage bonds, they encouraged and enabled reckless behavior during the housing bubble. "If CDS had been taken out of play, companies would've said, 'I can't get this [risk] off my books,'" says Michael Greenberger, a University of Maryland law professor and former director of trading and markets at the Commodity Futures Trading Commission. "If they couldn't keep passing the risk down the line, those guys would've been stopped in their tracks. The ultimate assurance for issuing all this stuff was, 'It's insured.'"Second, terror at the potential for a financial Ebola virus radiating out from a failing institution and infecting dozens or hundreds of other companies - all linked to one another by CDS and other instruments - was a major reason that regulators stepped in to bail out Bear Stearns and buy out AIG (AIG, Fortune 500), whose calamitous descent itself was triggered by losses on its CDS contracts (see "Hank's Last Stand"). And the fear of a CDS catastrophe still haunts the markets. For starters, nobody knows how federal intervention might ripple through this chain of contracts. And meanwhile, as we'll see, two fundamental aspects of the CDS market - that it is unregulated, and that almost nothing is disclosed publicly - may be about to change. That adds even more uncertainty to the equation. "The big problem is that here are all these public companies - banks and corporations - and no one really knows what exposure they've got from the CDS contracts," says Frank Partnoy, a law professor at the University of San Diego and former Morgan Stanley derivatives salesman who has been writing about the dangers of CDS and their ilk for a decade. "The really scary part is that we don't have a clue." Chris Wolf, a co-manager of Cogo Wolf, a hedge fund of funds, compares them to one of the great mysteries of astrophysics: "This has become essentially the dark matter of the financial universe." ***AT FIRST GLANCE, credit default swaps don't look all that scary. A CDS is just a contract: The "buyer" plunks down something that resembles a premium, and the "seller" agrees to make a specific payment if a particular event, such as a bond default, occurs. Used soberly, CDS offer concrete benefits: If you're holding bonds and you're worried that the issuer won't be able to pay, buying CDS should cover your loss. "CDS serve a very useful function of allowing financial markets to efficiently transfer credit risk," argues Sunil Hirani, the CEO of Creditex, one of a handful of marketplaces that trade the contracts. Because they're contracts rather than securities or insurance, CDS are easy to create: Often deals are done in a one-minute phone conversation or an instant message. Many technical aspects of CDS, such as the typical five-year term, have been standardized by the International Swaps and Derivatives Association (ISDA). That only accelerates the process. You strike your deal, fill out some forms, and you've got yourself a $5 million - or a $100 million - contract. And as long as someone is willing to take the other side of the proposition, a CDS can cover just about anything, making it the Wall Street equivalent of those notorious Lloyds of London policies covering Liberace's hands and other esoterica. It has even become possible to purchase a CDS that would pay out if the U.S. government defaults. (Trust us when we say that if the government goes under, trying to collect will be the least of your worries.) You can guess how Wall Street cowboys responded to the opportunity to make deals that (1) can be struck in a minute, (2) require little or no cash upfront, and (3) can cover anything. Yee-haw! You can almost picture Slim Pickens in Dr. Strangelove climbing onto the H-bomb before it's released from the B-52. And indeed, the volume of CDS has exploded with nuclear force, nearly doubling every year since 2001 to reach a recent peak of $62 trillion at the end of 2007, before receding to $54.6 trillion as of June 30, according to ISDA. Take that gargantuan number with a grain of salt. It refers to the face value of all outstanding contracts. But many players in the market hold offsetting positions. So if, in theory, every entity that owns CDS had to settle its contracts tomorrow and "netted" all its positions against each other, a much smaller amount of money would change hands. But even a tiny fraction of that $54.6 trillion would still be a daunting sum. The credit freeze and then the Bear disaster explain the drop in outstanding CDS contracts during the first half of the year - and the market has only worsened since. CDS contracts on widely held debt, such as General Motors' (GM, Fortune 500), continue to be actively bought and sold. But traders say almost no new contracts are being written on any but the most liquid debt issues right now, in part because nobody wants to put money at risk and because nobody knows what Washington will do and how that will affect the market. ("There's nothing to do but watch Bernanke on TV," one trader told Fortune during the week when the Fed chairman was going before Congress to push the mortgage bailout.) So, after nearly a decade of exponential growth, the CDS market is poised for its first sustained contraction. ***ONE REASON THE MARKET TOOK OFF is that you don't have to own a bond to buy a CDS on it - anyone can place a bet on whether a bond will fail. Indeed the majority of CDS now consists of bets on other people's debt. That's why it's possible for the market to be so big: The $54.6 trillion in CDS contracts completely dwarfs total corporate debt, which the Securities Industry and Financial Markets Association puts at $6.2 trillion, and the $10 trillion it counts in all forms of asset-backed debt. "It's sort of like I think you're a bad driver and you're going to crash your car," says Greenberger, formerly of the CFTC. "So I go to an insurance company and get collision insurance on your car because I think it'll crash and I'll collect on it." That's precisely what the biggest winners in the subprime debacle did. Hedge fund star John Paulson of Paulson & Co., for example, made $15 billion in 2007, largely by using CDS to bet that other investors' subprime mortgage bonds would default. So what started out as a vehicle for hedging ended up giving investors a cheap, easy way to wager on almost any event in the credit markets. In effect, credit default swaps became the world's largest casino. As Christopher Whalen, a managing director of Institutional Risk Analytics, observes, "To be generous, you could call it an unregulated, uncapitalized insurance market. But really, you would call it a gaming contract." There is at least one key difference between casino gambling and CDS trading: Gambling has strict government regulation. The federal government has long shied away from any oversight of CDS. The CFTC floated the idea of taking an oversight role in the late '90s, only to find itself opposed by Federal Reserve chairman Alan Greenspan and others. Then, in 2000, Congress, with the support of Greenspan and Treasury Secretary Lawrence Summers, passed a bill prohibiting all federal and most state regulation of CDS and other derivatives. In a press release at the time, co-sponsor Senator Phil Gramm - most recently in the news when he stepped down as John McCain's campaign co-chair this summer after calling people who talk about a recession "whiners" - crowed that the new law "protects financial institutions from over-regulation ... and it guarantees that the United States will maintain its global dominance of financial markets." (The authors of the legislation were so bent on warding off regulation that they had the bill specify that it would "supersede and preempt the application of any state or local law that prohibits gaming ...") Not everyone was as sanguine as Gramm. In 2003 Warren Buffett famously called derivatives "financial weapons of mass destruction." ***THERE'S ANOTHER BIG difference between trading CDS and casino gambling. When you put $10 on black 22, you're pretty sure the casino will pay off if you win. The CDS market offers no such assurance. One reason the market grew so quickly was that hedge funds poured in, sensing easy money. And not just big, well-established hedge funds but a lot of upstarts. So in some cases, giant financial institutions were counting on collecting money from institutions only slightly more solvent than your average minimart. The danger, of course, is that if a hedge fund suddenly has to pay off on a lot of CDS, it will simply go out of business. "People have been insuring risks that they can't insure," says Peter Schiff, the president of Euro Pacific Capital and author of Crash Proof, which predicted doom for Fannie and Freddie, among other things. "Let's say you're writing fire insurance policies, and every time you get the [premium], you spend it. You just assume that no houses are going to burn down. And all of a sudden there's a huge fire and they all burn down. What do you do? You just close up shop."  -------------------------------------------------------------CENTRAL VALLEY SAFE ENVIRONMENT NETWORKMISSION STATEMENTCentral Valley Safe Environment Network is a coalition of organizations and individuals throughout the San Joaquin Valley that is committed to the concept of "Eco-Justice" -- the ecological defense of the natural resources and the people. To that end it is committed to the stewardship, and protection of the resources of the greater San Joaquin Valley, including air and water quality, the preservation of agricultural land, and the protection of wildlife and its habitat. In serving as a community resource and being action-oriented, CVSEN desires to continue to assure there will be a safe food chain, efficient use of natural resources and a healthy environment. CVSEN is also committed to public education regarding these various issues and it is committed to ensuring governmental compliance with federal and state law. CVSEN is composed of farmers, ranchers, city dwellers, environmentalists, ethnic, political,and religious groups, and other stakeholders.