10-11-08

 10-11-08Merced Sun-StarLocal work force may be forced to sidelines on rail project...JONAH OWEN LAMBhttp://www.mercedsunstar.com/167/story/493380.htmlMerced exists because of the railroad built to take products out of the Valley. But the proposed 220-mph high-speed rail system from San Francisco to Los Angeles, which will come through Merced County if Proposition 1A is passed, will do the opposite — bring things here. Namely, jobs and development.Most who talk of the train coming down the line speak of its economic benefits to the Valley. And they are hard to ignore. The nearly $10 billion bond to build the system will no doubt create jobs, and hopefully integrate the Valley with the rest of the state. While jobs will be created, all boats may not rise with the high-speed tide. There will be people left out, admit local officials and the system's planners."There is the danger of leaving a huge number of people behind," said Gregory Wellman, Atwater's city manager. "But what do we have now? A lot left behind."The "left behind" he speaks of are the 17 percent of the population under the poverty line in a county with an unemployment rate twice that of the state’s. As of 2004, just over half of the county had graduated from high school — 63 percent.Many of these locals may not be skilled enough for any jobs brought by the railroad. Still, jobs will follow. "High-speed rail will trigger job creation within the Central Valley, especially in the service, transportation, communications, utilities, and finance, insurance and real estate sectors," writes UC Merced Economics Professor Shawn Kantor in a recent report on the high-speed rail's impact on the Valley's economy. According to Kantor, the plan estimates that some 160,000 construction jobs will be created to build the rail system alone. For example, if the former Castle Air Force Base is used as a hub for the construction and maintenance of the system, 2,000 people will be needed to work there, said Anthony Daniels, the High-Speed Rail Authority’s project director. This work force would maintain rolling stock and help build the tracks and stations. While the Rail Authority plans to work with the UC and Merced College on job-training programs, said Daniels, many of the skilled labor would have to come from outside the area. “You’ll have more people coming in than could be trained,” he said.The problem is not much different from previous companies that came to Merced and had trouble hiring locals, Wellman points out. The track record for U.S. Penitentiary Atwater and the Cingular Call Center are examples of this. Both had problems finding enough qualified employees without criminal records or who could pass drug tests, explained Wellman.But other benefits would accrue from the project besides promised jobs. New businesses, home buyers and tax revenues are projected to arrive into the Valley.An estimated $46 million in new tax revenue would flow into Valley coffers as well, said Kantor’s report. One unusual benefit of the system, said Kantor, would be a shift of the financial relationship between the Valley and the rest of the state. For every dollar spent building the system in the Valley, its taxpayers will only shell out 16 to 25 cents. Another major benefit would be the intended reduction in traffic congestion on Highway 99 and hence air pollution. An estimated 2,000 passengers will ride the train from Merced each day. Merced County Supervisor John Pedrozo, the county’s point man on the project, said there could be some downsides. Environmental concerns will have to be addressed, as well as property owner compensation, he said. But he thought that, overall, the train would be a boon to the area. “My personal opinion is that the pros outweigh the cons,” he said.For a group of UC Merced students waiting for their train at the Amtrak station, the high-speed rail would simply make their trips easier. Quinn Dubin, a UC Merced freshmen from Santa Monica, said he’d love a high-speed train. A lot of students use the current Amtrak train because it’s the cheapest way to travel. “It would make our life that much easier,” said Dubin, about the plan.On Friday morning he was headed to Santa Cruz. That meant, on Amtrak, a six-hour trip: a train to Stockton, a bus to San Jose and another bus to Santa Cruz. So much for speed.High-speed rail system could drive Valley's economic engine...RUSSELL CLEMINGS, The Fresno Beehttp://www.mercedsunstar.com/167/story/493411.htmlThe San Joaquin Valley may have more at stake than the rest of California when voters decide Nov. 4 whether to build a statewide high-speed rail systemMajor Valley cities from Modesto to Bakersfield were bypassed a generation ago when the state built its main north-south highway, Interstate 5. But the rail system would have stations in most of those cities.Construction on the system also would begin in the Valley with a segment of about 160 miles from Merced to Bakersfield. It would be used for testing the 220 mph trains and getting them certified for their first use in the United States.An Oct. 1 consultant’s report for the California High Speed Rail Authority predicted that the trains could help lift the Valley from its long economic malaise and produce billions of dollars worth of new business. A July poll suggested that voters are ready to endorse high-speed rail by a margin comfortably larger than the required majority.But Proposition 1A provides only $9 billion for a system estimated to cost $33 billion for the first phase alone, which will run from San Francisco to Southern California. It also includes $950 million for local transit connections to the high-speed tracks.The rest, the authority says, is expected to come from the federal government and private investors such as pension funds. None of that money is nailed down yet.A small but vocal group of critics, led by the Howard Jarvis Taxpayers Association, is skeptical that the additional money ever will be found. The opponents also claim that the project is certain to suffer from cost overruns, is unlikely to carry as many riders as the authority projects, and may not even collect enough fares to cover its operating expenses.Only one political committee has filed campaign finance reports to date on Prop. 1A, and it supports passage. On Monday, Californians for High Speed Trains reported having raised $549,234 — a small sum for a statewide campaign. Of that, $200,000 came from the California Alliance for Jobs, a coalition of heavy construction contractors and unions. Much of the rest was from engineering and high-tech companies.Current plans call for the high-speed system — modeled after those already operating in Europe, Japan and China — to start carrying passengers a decade from now.Its first line would run from Anaheim and Los Angeles to San Francisco via Palmdale, Bakersfield, Fresno, Merced and San Jose. That puts the Valley at the heart of the system. And unlike Interstate 5, the high-speed tracks would run directly through the region’s cities, instead of dozens of miles west of them.Shawn Kantor, a UC Merced economist who was paid by the authority to assess the system’s likely effects on the Central Valley, describes a future in which goods and people can move easily and cheaply from here to the bigger cities.“Transportation costs are very high in the Central Valley,” he said. “If you start breaking that barrier down, it will help us.” But opponents focus on construction costs, which they say are likely to rise, and on the authority’s plans for future phases to the rest of the state’s major cities, including Sacramento and San Diego, which they think are unrealistic.“If the governor put me in charge of that agency tomorrow, I would say start over,” said Joseph Vranich, who co-authored a critique of the authority’s plan for the Jarvis association, the libertarian Reason Foundation and Citizens Against Government Waste. Also opposing Prop. 1A is the California Chamber of Commerce. But many local chambers — including in San Francisco, Los Angeles and Fresno — support it. Environmental groups are generally in support or neutral.An investment or a waste?...The Reason Foundation report argued that the authority is projecting higher ridership for California’s high-speed rail system than for similar systems in countries, like those in Europe, that are better suited for rail travel because of denser populations and more expensive gasoline and other driving-related costs.Jarvis association President Jon Coupal says that spending billions on high-speed rail could also jeopardize the state’s ability to borrow money for other needed projects, such as new dams.“The stark reality is that these projects are going to be competing for scarce bond dollars,” he said.Although the bond measure does not raise taxes itself, the state Legislative Analyst’s Office estimates that California would spend $647 million annually for 30 years to pay off the resulting debt.Opponents also question whether fares could possibly be as low as the authority predicts — Fresno to San Francisco for $32 one-way, or Fresno to Los Angeles for $38 at 2005 prices — and still cover the system’s operating costs, which the LAO estimated at more than $1 billion per year...Still, many critical details of the system’s financing have not yet been worked out. The $9 billion from Prop. 1A may cover only a quarter of the cost. The authority predicts that the federal government will chip in at least that much more...With $33 billion needed for the first phase and only $9 billion provided by Prop. 1A, if approved, another $24 billion will be needed even with no inflation. At least another $10 billion would be needed for a second phase extending the system to Sacramento, to San Diego via Riverside and Escondido, to Oakland from San Jose, and possibly through the Altamont pass west of Tracy. The authority predicts that profits from first-phase operations would help build the later phases...Of course, neither the test track nor any other part of the system is likely to be built unless a majority of California voters say yes to Prop. 1A on Nov. 4.If they don’t? Morshed said the authority has enough state funding to remain in business through the end of the current fiscal year next June 30. After that, high-speed rail may just be consigned to a list of big ideas that went nowhere fast.Modesto BeeBankrupt Stanislaus County resort has new owner...last updated: October 10, 2008 11:50:39 AMhttp://www.modbee.com/state_wire/story/458763.htmlA bankrupt golf resort development under construction in Stanislaus County has a new owner and will get a new name.World International LLC earlier this month paid $20 million for Diablo Grande, which has been beset by bad water and $54 million in debt.The development calls for 2,100 Spanish-colonial style villas, townhouses and single-family homes along with a convention center, equestrian center and five-star resort on 28,000 acres. About 400 houses have been built so far.The developer says the new name, which has not been announced, will give the project "a fresh start."In July the California Department of Public Health cited the resort's water district for delivering water containing a suspected carcinogenNative plants hard to find in California...James McAndrews Jr.http://www.modbee.com/opinion/community/story/459406.htmlWith the arrival and settlement of Europeans in California in the latter half of the 18th century, many of the native plants of California were swept aside by newer, more aggressive plants from Europe or by overgrazing.California native plants in their pristine state could be a breathtaking sight. A field of blue lupines and the state flower, the golden poppy, is described by John Steinbeck in his novel "East of Eden":"Every petal of blue lupine is edged with white, so that a field of lupines is more blue than you can imagine. Mixed with these were splashes of California poppies. These too are of a burning color -- orange, not gold, but if pure gold were liquid and could raise a cream, that golden cream might be like the color of the poppies."The golden currant is a shrub found throughout the western United States, along riparian woodlands, and is a native of California. The currant can grow to 6 feet tall. It has green leaves in the spring that turn red in the fall. It also produces golden yellow flowers and an edible fruit in many colors.One native that survived and is still a common sight in the Central Valley is the aptly named valley oak. It's distinguished by its thick bark that is divided into deep furrows, giving an alligatorlike look. The wood is described as "hard but brittle; it is heavy but weak." Its harvested wood tends to decay quickly when it comes into contact with soil or water, making it useless even serving as a fence post.The valley oak is also well-known for producing acorns, which were an important food for California's native population. It took a lot of effort to make the acorns, voraciously consumed by the native population, palatable because of their bitter, acidic taste. The many tribes in the state used various methods, including burying, pulverizing, roasting, boiling and leeching.Before 1800, the dominant species of grass in the Central Valley was the purple needle grass (nassella). Once the new European populations from Spain and Mexico moved into the state, their livestock, especially sheep, overgrazed the valley and quickly eradicated the needle grass. To replace it, European varieties arrived that were more suited to sheep, which became the dominant animal grazing the valley. One of those plants was the sow thistle, which quickly took over valley grasslands.Today, many of these plants and trees have been reduced in number and are found only in remote locations or are preserved by universities, museums and conservation societies.These and other California native plants will be for sale Saturday from 8 a.m. to noon at the Great Valley Museum, 1100 Stoddard Ave., Modesto.Sources: Robert F. Heizer, "The California Indians: A Source Book"; Donald Culross Peattie, "A Natural History of Western Trees"; and Allan A. Schoenherr, "A Natural History of California."Project suspended to relocate desert tortoises...last updated: October 11, 2008 01:56:37 AMhttp://www.modbee.com/state_wire/story/459616.htmlAn effort to move the Mojave Desert's flagship species, the desert tortoise, off prospective combat training grounds has been suspended because the animals are being ravaged by coyotes.Army officials decided to move the desert tortoise to make room for tank training despite protests by some conservationists.Since March, however, about 90 relocated and resident tortoises have died, most killed and eaten by coyotes, according to federal biologists monitoring the project."We shut it down because of the mortality rate," said John Wagstaff, spokesman for the base. "It will remain on hold until the Army and U.S. Fish and Wildlife Service determine the reasons behind it."The controversial project, billed as the largest desert tortoise move in California history, involves transferring 770 endangered reptiles from Army land to a dozen public plots overseen by the U.S. Bureau of Land Management.Fort Irwin has sought to expand its 643,000-acre training site into tortoise territory for two decades. The Army said it needs an extra 131,000 acres to accommodate faster tanks and longer-range weapons used each month to train some 4,000 troops.The coyotes may be attacking tortoises out of desperation because a drought has depleted their usual prey: rabbits.The Center for Biological Diversity sued the Army, the U.S. Fish and Wildlife Service and BLM in July, accusing them of violating the federal Endangered Species Act in their relocation plans."We predicted that the translocation of tortoises from Ft. Irwin's expansion would be disastrous and, unfortunately, we were proven right," said Ileene Anderson, a biologist with the center. "The loss of so many tortoises is certainly not helping this threatened population."The tortoise, whose population has fallen to an estimated 45,000 on the public lands in the western Mojave, is protected under state and federal endangered species acts.DOE formalizes intent to build nuclear rail line...Las Vegas Review-Journal, http://www.lvrj.comhttp://www.modbee.com/state_wire/story/458908.htmlLAS VEGAS — The federal Energy Department is formalizing its intent to ship nuclear waste along a railroad line it proposes to build across Nevada to Yucca Mountain.The publication Friday of a record of decision in the Federal Register was another step forward for the plan to entomb 77,000 tons of spent nuclear fuel beneath an ancient volcanic ridge in the Nevada desert.The move finalizes environmental studies underpinning the decision, and opens a door to potential legal challenges from opponents of the 330-mile rail line from Caliente to Yucca Mountain.The Energy Department also formally declared it will open the rail line to serve ranchers and farmers when it is not in being used to transport nuclear waste.Nevada sues over Yucca Mountain radiation standard...Las Vegas Review-Journal, http://www.lvrj.comhttp://www.modbee.com/state_wire/story/458852.htmlLAS VEGAS — Nevada is asking a federal court to throw out new Environmental Protection Agency radiation exposure limits for a planned nuclear waste dump northwest of Las Vegas.State Attorney General Catherine Cortez Masto filed a lawsuit Friday with the U.S. Court of Appeals for the District of Columbia alleging the EPA standard for the proposed Yucca Mountain repository won't protect the environment or the health of Nevadans.The state says the EPA shouldn't set separate "near term" and "long term" limits for radiation emissions from the site 90 miles northwest of Las Vegas.The federal agency last week set a 15 millirem radiation exposure standard for the first 10,000 years after nuclear waste is entombed, and 100 millirems thereafter.A normal chest X-ray exposes people to about 10 millirems of radiation.Sacramento BeeGroups behind Rocklin valley fight, Woodland guide saluted...M.S. Enkojihttp://www.sacbee.com/101/v-print/story/1305743.htmlA 10-year citizens' fight to stave off development in Rocklin's Clover Valley and an in-depth guide to 400 vintage structures in Woodland were honored Friday with a state preservation awards.California State Parks' Office of Historic Preservation gave its Governor's Historic Preservation Awards to 11 groups statewide. The annual awards, given since 1986, recognize community involvement and a wide scope of efforts, including building rehabilitation and archaeology.Woodland city employees drew on historical resources to compile the "Explore Historic Woodland Guidebook," which includes details about families who once resided in the town's old homes. The book is a companion piece to the annual "Stroll through History," where visitors take a historic walking tour of historic neighborhoods.In Rocklin, volunteers with the Save Clover Valley Organization made a 45-minute documentary film and created a Web site in an effort to defeat a plan to build 558 homes in the 622- acre valley.The plan threatened wildlife and Indian historical sites and would exacerbate traffic and air pollution, opponents had argued. An Indian tribe stepped in to purchase and preserve some of the property in August, increasing open space to 406 acres from 366...Stockton RecordEthanol plant greeted at portCosting $140 million, facility already at planned capacity...Reed Fujiihttp://www.recordnet.com/apps/pbcs.dll/article?AID=/20081011/A_BIZ/810110309STOCKTON - Cold, blustery winds blowing Friday through the Port of Stockton, or figuratively through the steel canyons of Wall Street, were not enough to chill the crowd of 200 to 300 who applauded the formal opening of Pacific Ethanol Inc.'s new plant.The $140 million facility began operation about a month ago, taking in truckloads of California-grown corn, and is running at its planned capacity of 60 million gallons of ethanol a year, officials said."What a great day for Stockton, for the Port of Stockton and for the people of San Joaquin County," said Rep. Jerry McNerney, D-Pleasanton, taking time out from campaigning to help inaugurate the new plant. He faces Republican challenger Dean Andal on Nov. 4.Fred Keeley, Santa Cruz County's treasurer and a former state assemblyman, spoke of the need to prevent climate change by switching away from fossil fuels."Projects just like this are exactly what we need," he said. "We can make an enormous change in both the environment and the economy."Stockton City Councilman Clem Lee said the city was proud to play host to the new plant."We're going to be the green capitol of the Central Valley," he said.And Ronald Coale, the Stockton Port Commission's chairman, said the new facility is "the largest private-sector development in the 75-year history of the Port of Stockton."While recent steep declines in petroleum prices have undercut the price of ethanol, Pacific Ethanol President Neil Koehler noted corn prices also have declined. That means producing ethanol remains cheaper than gasoline."It's still at a price point that works for us," he said.While most U.S. ethanol plants in are in the Midwest, where grain is produced, Pacific Ethanol pursued a "destination strategy," Koehler said, putting its plants near markets for the ethanol as well as a byproduct of fermentation, wet distiller's grain, used as animal feed.Feed accounts for 25 percent to 30 percent of the plant's revenues.From Stockton, the plant serves transportation fuel markets in Sacramento, the San Joaquin Valley and the Bay Area, and provides feed to the Central Valley, which houses California's dairy industry, the biggest in the nation."It is an intersection of the largest fuel and feed markets," Koehler said.During the current fall harvest, Pacific Ethanol is using California-grown corn trucked into the plant, but from winter through summer will rely on corn stores from the Midwest. Thus the city's connections to two major railroads, as well as the seaport itself, provide vital transportation.Koehler anticipates continued strong demand, with California switching next year to a gasoline mix with 10 percent ethanol from 6 percent.And the Port of Stockton's petroleum fuel terminal, next door to Pacific Ethanol, is tied into pipelines that run to Bay Area oil refineries and ship-receiving facilities, and is already a major hub for ethanol distribution.By next year, 170 million gallons of ethanol are expected to move through that hub, nearly three times Pacific Ethanol's capacity. And the company plans shortly to build a pipeline to connect its plant directly to the fuel terminal.With financial credit markets in turmoil and plans to build an ethanol plant in Brawley already in suspension, Koehler said the company plans no immediate expansion beyond its current five plants and 220 million gallons a year capacity."We'll be taking a timeout, operating these plants as efficiently as possible," he said.Bill Jones, Pacific Ethanol's chairman and a former California secretary of state, said the company may well move to a new generation of ethanol production by the time it considers its next expansion.Technology for converting cellulose, or simple plant fibers, to fuel would have to improve greatly, or perhaps some other methods would arise, he said."It always depends on the market and the vision we lay out in our next five-year plan," Jones said.San Francisco ChronicleFederal regulators expedite Wells-Wachovia deal...James Temple, Victoria Colliverhttp://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/10/11/BU0E13F2FR.DTL&hw=uc&sn=003&sc=347Federal antitrust regulators approved Wells Fargo & Co.'s nearly $12 billion acquisition of Wachovia Corp., adding momentum to a merger that stood in doubt through much of the week.The Federal Trade Commission granted early termination of the usual 30-day waiting period on Friday morning, allowing the banks to "consummate the deal," agency spokesman Mitch Katz said in an e-mail. Citigroup Inc. walked away from its earlier but lower-valued bid for the Charlotte, N.C., bank on Thursday, after nearly a week of public sparring and backroom negotiations with Wells and Wachovia.Rumors of a possible compromise deal, in which the company was carved up between the suitors, saturated the financial pages during the last few days. But talks broke down over differing views of the transaction structure and risks involved, Citigroup said, leaving Wells free to acquire the company in its entirety. The takeover still requires additional approval, including from the Federal Reserve and Wachovia's shareholders, but many observers believe the merger is a foregone conclusion."The basic deal has got to be close to sealed," Stanford law Professor Kenneth Scott said. He added that the government may require minor divestitures or conditions for approval, but he didn't think any of those could derail the takeover. Eva Weber, an Aite Group analyst and attorney who focuses on bank regulatory and compliance issues, concurred. She said the government will perform its due diligence on the transaction, including looking for possible antitrust concerns."But I think it's pretty safe to say when it comes to mergers, the traditional book of play has been thrown out the window," she said. "What were large antitrust issues a few years ago may not be so deal-ending now, given the condition of the economy and the fact the Fed is trying to do everything they can to save banks at this point."Moreover, the initial appeal of a deal between Wachovia and Wells is that the companies don't have much geographical overlap, the very thing that could trigger antitrust worries. Celent analyst Bart Narter described the companies' locations as "the yin and yang of U.S. branch banking."He and others have said that one of the few areas with potentially high levels of concentration is California, but there's an easy fix if regulators voice concerns: shutting down or selling a handful of branches."That would not be terribly surprising, and they might have decided for cost efficiency reasons anyway that they would want to get rid of them," said Jim Wilcox, professor of financial institutions at the Walter A. Haas School of Business at UC Berkeley. A spokeswoman for the U.S. Department of Justice said the agency is still reviewing the deal. California Attorney General Jerry Brown's office declined to comment on whether he plans to evaluate it.Wachovia hasn't set a date for a shareholder vote on the acquisition, spokeswoman Eileen Leveckis said, but Narter and other analysts said there is little chance it will fail.The remaining question is what impact, if any, Citigroup could have on the takeover. The New York financial company said it wouldn't try to block the deal, but insisted it will seek steep damages from the two companies and their leaders and advisers for breach of contract and tortious interference.Citigroup had announced plans Sept. 29 to acquire parts of Wachovia for $2.16 billion, with the backing of the federal government, and struck an exclusivity agreement with its takeover target. Wells unveiled its far more valuable counterproposal, which didn't rely on any federal aid, on Oct. 3.Citigroup responded with a flurry of legal filings, including a $60 billion lawsuit. Carl Tobias, professor at the University of Richmond School of Law, characterized the figure as an unrealistic opening bid. He said that a settlement is in everyone's best interest to avoid a drawn-out court battle. Wells Fargo spokesman Chris Hammond said the company expects to close the acquisition by the end of the fourth quarter.U.S. plans to buy direct stakes in banks...Carolyn Lochheadhttp://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/10/11/MNP413EVF4.DTL&hw=uc&sn=005&sc=311Treasury Secretary Henry Paulson, acting with finance ministers from the Group of Seven industrialized nations, Friday said the government will buy direct stakes in banks to stem a global financial collapse, as it became clear that his original $700 billion rescue, passed by Congress just last week, was not working."The current situation calls for urgent and exceptional action," said the G-7 ministers, which include Paulson's counterparts in Japan, Germany, Britain, France, Italy and Canada. They outlined a five-point plan that also would insure all deposits and use "all available tools to support systemically important financial institutions and prevent their failure."The ministers will meet this weekend and markets will be expecting flesh to be added to the still-vague plan. Still, for the United States, the action would be the first time the government has bought stakes in banks since the Great Depression. The G-7's aim is to coordinate a much more powerful global intervention to stem the banking panic and forestall a deep economic contraction.Since the Paulson Plan was enacted, U.S. stock markets have crashed, sinking more than 20 percent over eight days, including a wild plunge and partial recovery Friday that spanned 1,000 points. As the crisis has spread, interventions by the U.S. Federal Reserve have grown more stunning by the day, stretching its authority to previously unthinkable regions, such as buying unsecured debt issued by private corporations. Those actions have not succeeded in loosening credit to consumers and businesses, now starved of funds, and contracting normal economic activity. Lending remained paralyzed Friday with banks, unsure who is solvent, afraid to lend even to each other. The Dow Jones Wilshire 5000 Total Market Index is down more than 37 percent since its peak a year ago, erasing more than $8.4 trillion in wealth. "The Paulson plan is obviously not working, and the verdict of the markets is pretty clear," said Barry Eichengreen, a UC Berkeley economist who worked on the Asian crisis in the late 1990s. "The idea that by promising that some time in coming weeks that the Treasury will be taking some of these toxic securities off banks' balance sheets has accomplished nothing," Eichengreen said. "There has been a clear failure to understand the gravity of the problem until now." Paulson will use at least part of the $700 billion for the new plan, under the authority Congress granted when it passed the measure Oct. 3.Britain was the first to move, as it guaranteed bank debt and deposits Wednesday. Economists have been urgently calling for a giant coordinated intervention like Britain's to stem the panic.They said the action must be taken simultaneously by all big countries whose banks are in shambles - which means most industrialized countries - or it will not work. "There is no domestic solution to a crisis like this one," Dominique Strauss-Kahn, managing director of the International Monetary Fund, warned Thursday.Eichengreen predicted that the administration would lift the $250,000 cap on federally insured deposits, and "because banks are not lending to one another or to the private economy, which is collapsing around our ears, the government is going to guarantee all new bank loans and credits for an interim period of three months, whether they're to other banks or to you and me. Now, if I told you this last week, before we saw the Fed say that it was going to start buying unsecured commercial paper, you would have called me crazy."Historians will be writing about the Panic of 2008 for decades to come, but economists are assessing Paulson, a former dealmaker and chief executive of investment bank Goldman Sachs, harshly. Georgetown University finance Professor James Angel saw shades of Hurricane Katrina: "Early warnings, levees can't handle it, unheeded," he said. "Shock and denial when a Category 5 hits. And then the first thing the government did was send in 10,000 body bags. Then the cavalry did come riding in with 1 million trailers, $2,000 debit cards. It wasn't perfect, but eventually they got back on the job of rescuing people and starting to rebuild, and that's what we're seeing right now."Paulson had said Thursday that it would take several weeks before the Treasury buys the first of the bad assets under his first plan, as markets crashed. Friday he said that plan would proceed in part, but did not say how much would be spent in that effort.The government would end up partially owning some banks that are unable to muster private investors. Others, Paulson said, would be allowed to fail. It will take weeks after the emergency intervention to sort out which banks can be saved, how the taxpayer stakes will be structured, and with what strings attached. "They have no choice," said an economist at a major government institution not permitted to speak on the record, but who has analyzed the banking problem for more than a year. "You're about to have a generalized depositor run. They have to come in and recapitalize the banks and guarantee all deposits."She said Paulson's plan was always a herculean undertaking fraught with legal and technical complexities. It could not be done overnight, she said, and should have been preceded by months of advance planning.Angel argued that Paulson fueled the panic when he put Fannie Mae and Freddie Mac under a government conservatorship, first announcing that he would not have to use such a "bazooka" and then doing just that."Once you set a match to a pile of gasoline-soaked rags, it's not as easy as blowing out the match to stop the inferno," he said. President Bush spoke Friday morning to try to calm the public. "Here's what the American people need to know," he said. "That the United States government is acting; we will continue to act to resolve this crisis and restore stability to our markets. We are a prosperous nation with immense resources and a wide range of tools at our disposal. We're using these tools aggressively."By now, many people "have confidently said Plan A will work, and then Plan B will work, and I don't know what letter of the alphabet we're down to," Eichengreen said. "But I think we know how to solve this problem." International coordination to guarantee banks should allow them to lend again to people who want to buy a car, meet a payroll or export goods. "Those are the things that are disappearing now," he said, "and that's a very grave problem."More isolated rescue efforts may be under way. Iceland's overextended banks have collapsed along with its currency, and it has found itself unable even to import food to stock its supermarkets.Economists worry about parallels in gold-plated Switzerland, another tiny country whose banks are too large for its own taxpayers to rescue. Having refused to join the European Union, Switzerland has no shelter in the storm. In what could be one of the great ironies of this crisis, Japanese officials are floating the idea of coordinating aid from Brazil, China, India and other places once considered second-tier economies, but now relatively flush with cash, should smaller "First World" countries need the help.G-7 finance ministers and central bank governors' plan of actionThe plan announced Friday, as provided by the Treasury Department:The G-7 agrees today that the current situation calls for urgent and exceptional action. We commit to continue working together to stabilize financial markets and restore the flow of credit, to support global economic growth. We agree to:1. Take decisive action and use all available tools to support systemically important financial institutions and prevent their failure.2. Take all necessary steps to unfreeze credit and money markets and ensure that banks and other financial institutions have broad access to liquidity and funding.3. Ensure that our banks and other major financial intermediaries, as needed, can raise capital from public as well as private sources, in sufficient amounts to re-establish confidence and permit them to continue lending to households and businesses.4. Ensure that our respective national deposit insurance and guarantee programs are robust and consistent so that our retail depositors will continue to have confidence in the safety of their deposits.5. Take action, where appropriate, to restart the secondary markets for mortgages and other securitized assets. Accurate valuation and transparent disclosure of assets and consistent implementation of high quality accounting standards are necessary.The actions should be taken in ways that protect taxpayers and avoid potentially damaging effects on other countries. We will use macroeconomic policy tools as necessary and appropriate. We strongly support the (International Monetary Fund's) critical role in assisting countries affected by this turmoil. We will accelerate full implementation of the Financial Stability Forum recommendations and we are committed to the pressing need for reform of the financial system. We will strengthen further our cooperation and work with others to accomplish this plan.Inside Bay AreaFish returning to Alameda Creek after killRecent deaths of 5,000 fish still being investigated...Matthew Artz, The Argushttp://www.insidebayarea.com/argus/localnews/ci_10692361FREMONT — Fish have returned to a section of Alameda Creek where earlier this week about 5,000 were found dead in what was believed to be the creek's biggest fish kill in more than two decades, water officials said.But tests aimed at determining the cause of the incident, which were expected to be completed Friday, likely won't be concluded until early next week, Alameda County Water District General Manager Paul Piraino said.Those tests, being conducted by the state Department of Fish and Game, still might not pinpoint the cause of the kill, Piraino cautioned. The water district has hired consultants to perform additional studies of the creek's stream, he added.About 5,000 fish — primarily carp, sucker and sculpin — were found belly up Monday morning in a 150-acre-foot section of the creek spanning from just east of Mission Boulevard to a rubber dam about 1,200 feet to the west.Investigators said the fish died from a sudden drop in dissolved oxygen in the water, but haven't determined what caused the drop.Measurements taken last week at the site showed oxygen levels between 11 to 14 parts per million — higher than the average of about 9 to 11 parts per million, and much higher than the 3 parts per million needed by fish.But by Monday, oxygen levels had plunged to as low as 0.1 parts per million, effectively suffocating the fish, Piraino said."The big mystery for us is what came down into that body of water ... and ate the oxygen," Piraino said. Two potential culprits are runoff from the weekend's rain, which could have included organic material such as leaves and other plant materials that consume oxygen in water; and a pipeline leak early Monday morning at a wastewater treatment plant in Pleasanton.More than 100,000 gallons of treated sewage water was released into waterways that flow into Alameda Creek. The wastewater likely would have included bacteria that could have sucked up oxygen.Whatever killed the fish won't impact the local residents, who rely on the creek for some of their drinking water, said Steve Dennis, the water district's emergency services supervisor.No other sections of the creek experienced a decrease in dissolved oxygen or fish kill, he added. Dissolved oxygen at the affected section of the creek has risen throughout the week, Dennis said. By Thursday, it was nearly up to 7 parts per million in certain sections — enough to sustain fish.The high winds and cooler weather forecast for this weekend also should help, Dennis said. High winds facilitate more turnover and splashing in the pool, which increases oxygen levels. And, water is more inclined to absorb ambient oxygen in cool weather, he said.Los Angeles TimesArmy suspends relocation of Ft. Irwin tortoisesThe $8.7-million effort has stopped because coyotes have killed so many in their new desert location...Louis Sahagunhttp://www.latimes.com/news/science/environment/la-me-tortoise11-2008oct11,0,3474852,print.storyThe Army's National Training Center at Ft. Irwin on Friday suspended its effort to move California desert tortoises off prospective combat training grounds and onto nearby public lands because the animals are being hit hard by coyotes.The first phase of the $8.7-million translocation effort began in March, when about 670 tortoises were airlifted by helicopter out of the southern portion of the desert base northeast of Barstow to new homes in drought-stricken western Mojave Desert areas.Since then, at least 90 translocated and resident tortoises in those areas have died, most killed and eaten by coyotes, according to federal biologists monitoring the project."We shut it down because of the mortality rate," said John Wagstaff, spokesman for the base."It will remain on hold until the Army and U.S. Fish and Wildlife Service determine the reasons behind it."Biologists theorize the problem may be connected to severe drought conditions, which have killed off plants and triggered a crash in rodent populations. As a result, coyotes, which normally thrive on kangaroo rats and rabbits, are turning to tortoises for sustenance.They also point out that translocated tortoises tend to wander, sometimes for miles, making them lumbering targets for hungry predators. Gashes and tooth marks in the shell of one translocated tortoise discovered in April by federal biologists indicated that it had been ripped out of the front of its carapace.Other threats include vehicle traffic and an infectious respiratory disease. The disease was prevalent in the relocation area, and now the newcomers are catching it. In July, the Center for Biological Diversity, a Tucson-based environmental group, sued the Army, the U.S. Fish and Wildlife Service and the U.S. Bureau of Land Management, accusing them of violating the federal Endangered Species Act in their management of Gopherus agassizii. In a prepared statement released on Friday, Ileene Anderson, a biologist with the center, said, "We predicted that the translocation of tortoises from Ft. Irwin's expansion would be disastrous and, unfortunately, we were proven right."This whole debacle needs to be significantly rethought," Anderson said. "The loss of so many tortoises is certainly not helping this threatened population."The tortoise, whose population has fallen to an estimated 45,000 on the public lands in the western Mojave, is protected under state and federal endangered species acts. In 2001, Congress authorized Ft. Irwin to expand into prime tortoise habitat. As mitigation, the Army agreed to move the tortoises to unoccupied public lands."The Army cares very much about these tortoises," Wagstaff said."That's why we've devoted a lot of money and research to them over the past 20 years."Commondreams.orgWall Street Bailout Won't Do Much to Help Ailing Economy...Mark Weisbrothttp://www.commondreams.org/view/2008/10/11-3It is now clear the approval by Congress of President Bush's $700 bailout package on Friday October 3rd has done nothing to ease the current financial crisis. Credit markets have worsened for several days after the bill passed the Congress. The stock market also plummeted to nearly ten-year lows.So much for dire warnings from the Bush Administration that Congress was risking a Great Depression if it did not quickly fork over the dough. The bailout's supporters said Congress had to do something to unfreeze the credit markets. It didn't work.There is a basic misunderstanding of the current financial crisis and economic recession that is widespread. Most people think that the current economic downturn - which will be officially designated a recession some time in the near future - is the result of the financial crisis. But this is not true. The current recession is mainly the result of a collapsing housing bubble. This bubble of more than $8 trillion dollars accumulated between 1996-2006, and it is only about 60 percent deflated so far. This means that even if all the problems in the financial system were miraculously solved tomorrow, the United States would still be facing a serious recession...Statement on the Need for Coordinated StimulusBy Dean Baker and Mark WeisbrotThe current economic crisis is the result of an extraordinary period of extreme economic mismanagement. The world's central banks, most importantly the Federal Reserve Board in the United States, made the decision to ignore, if not actively cultivate, the growth of asset bubbles. This was the case with stock market bubbles in the 90s and housing bubbles in the current decade.They compounded this mistake by ignoring the explosive growth of credit and new complex derivative instruments. They allowed financial institutions to become hugely over-leveraged, ensuring that the collapse of the bubble would lead to major financial disruptions.Finally, they failed to recognize the seriousness of the problem, understating the size of the problem at every step. This has slowed efforts to muster an adequate response to the situation. President Bush and other political leaders markedly worsened the situation when they raised the specter of the Great Depression and otherwise sought to raise fears in order to gain public support for the bank bailout package.The meeting this weekend of the G-7 provides an extraordinary opportunity to begin the reversal of this dismal record. First, it is necessary to have a coordinated financial and monetary policy to stem the immediate financial crisis. This will require bank bailouts that focus on the direct injection of capital into the banking system, following the example of the United Kingdom earlier this week.The financial system will also benefit from further cuts in overnight lending rates, especially by the European Central Bank (ECB). The ECB's focus on concerns over inflation at this economic junction is almost as foolish and potentially more harmful than the decision to ignore the growth of the housing bubble.The other key component of an economic recovery package should be a coordinated fiscal stimulus. In the United States, this stimulus should be on the order of $300 billion to $400 billion (2.0-2.7 percent of GDP). This stimulus is essential for counteracting the sharp falloff in consumption that is following the loss of $5 trillion in housing wealth and President Bush's scare tactics for promoting his bank bailout.The stimulus should be designed to quickly boost demand. In the United States, this can best be done by aiding state and local governments, extending unemployment benefits, tax rebates to low income individuals, accelerating infrastructure spending and support for energy conserving retrofits of homes and businesses. It is also essential that the dollar fall against other major currencies in order to bring the trade deficit back to a manageable level.It is possible that even larger boosts to spending may be necessary to restore normal economic activity. The federal government must be prepared to spend whatever amount is needed to keep the economy creating jobs. This was the main lesson that we learned from the Great Depression. Concerns over deficits prevented the government from taking sufficient measures to boost the economy out of its slump until World War II left the government no choice. It would be an enormous tragedy for the country and the world if the United States were to repeat the same mistakes almost 80 years later. rgemonitor.comThe world is at severe risk of a global systemic financial meltdown and a severe global depression...Nouriel Roubini...10-09-08http://www.rgemonitor.com/blog/roubini/253973/the_world_is_at_severe_risk_of_a_global_systemic_financial_meltdown_and_a_severe_global_depression...At this point severe damage is done and one cannot rule out a systemic collapse and a global depression. It will take a significant change in leadership of economic policy and very radical, coordinated policy actions among all advanced and emerging market economies to avoid this economic and financial disaster. Urgent and immediate necessary actions that need to be done globally (with some variants across countries depending on the severity of the problem and the overall resources available to the sovereigns) include:- another rapid round of policy rate cuts of the order of at least 150 basis points on average globally;- a temporary blanket guarantee of all deposits while a triage between insolvent financial institutions that need to be shut down and distressed but solvent institutions that need to be partially nationalized with injections of public capital is made;- a rapid reduction of the debt burden of insolvent households preceded by a temporary freeze on all foreclosures;- massive and unlimited provision of liquidity to solvent financial institutions;- public provision of credit to the solvent parts of the corporate sector to avoid a short-term debt refinancing crisis for solvent but illiquid corporations and small businesses;- a massive direct government fiscal stimulus packages that includes public works, infrastructure spending, unemployment benefits, tax rebates to lower income households and provision of grants to strapped and crunched state and local government;- a rapid resolution of the banking problems via triage, public recapitalization of financial institutions and reduction of the debt burden of distressed households and borrowers;- an agreement between lender and creditor countries running current account surpluses and borrowing and debtor countries running current account deficits to maintain an orderly financing of deficits and a recycling of the surpluses of creditors to avoid a disorderly adjustment of such imbalances...globalresearch.caA Possible Solution to the Economic Crisis What Is to be Done?...Paul Craig Roberts...10-10-08http://www.globalresearch.ca/index.php?context=va&aid=10519Readers have been pressing for a solution to the financial crisis. But first it is necessary to understand the problem. Here is the problem as I see it. If my diagnosis is correct, the solution below might be appropriate.Let’s begin with the fact that the financial crisis is more or less worldwide. The mechanism that spread the American-made financial crisis abroad was the massive US trade deficit. Every year the countries with which the US has trade deficits end up in the aggregate with hundreds of billions of dollars. Countries don’t put these dollars in a mattress. They invest them. They buy up US companies, real estate, and toll roads. They also purchase US financial assets. They finance the US government budget deficit by purchasing Treasury bonds and bills. They help to finance the US mortgage market by purchasing Fannie Mae and Freddie Mac bonds. They buy financial instruments, such as mortgage-backed securities and other derivatives, from US investment banks, and that is how the US financial crisis was spread abroad. If the US current account was close to balance, the contagion would have lacked a mechanism by which to spread.One reason the US trade deficit is so large is the practice of US corporations offshoring their production of goods and services for US markets. When these products are brought into the US to be sold, they count as imports.Thus, economists were wrong to see the trade deficit as a non-problem and to regard offshoring as a plus for the US economy.The fact that much of the financial world is polluted with US toxic financial instruments could affect the ability of the US Treasury to borrow the money to finance the bailout of the financial institutions. Foreign central banks might need their reserves to bail out their own financial systems. As the US savings rate is approximately zero, the only alternative to foreign borrowing is the printing of money.Financial deregulation was an important factor in the development of the crisis. The most reckless deregulation occurred in 1999, 2000, and 2004. (See Roberts, http://www.electricpolitics.com/2008/10the_end_of_american_hegemony.html)  Lax mortgage lending policies grew out of pressures placed on mortgage lenders during the 1990s by the US Department of Justice and federal regulatory agencies to race-norm their mortgage lending and to provide below-market loans to preferred minorities. Subprime mortgages became a potential systemic threat when issuers ceased to bear any risk by selling the mortgages, which were then amalgamated with other mortgages and became collateral for mortgage-backed securities. Federal Reserve chairman Alan Greenspan’s inexplicable low interest rate policy allowed the systemic threat to develop. Low interest rates push up housing prices by lowering monthly mortgage payments, thus increasing housing demand. Rising home prices created equity to justify 100 percent mortgages. Buyers leveraged themselves to the hilt and lacked the ability to make payments when they lost their jobs or when adjustable rates and interest escalator clauses pushed up monthly payments. Wall Street analysts pushed financial institutions to increase their earnings, which they did by leveraging their assets and by insuring debt instruments instead of maintaining appropriate reserves. This spread the crisis from banks to insurance companies.Finance chiefs around the world are dealing with the crisis by bailing out banks and by lowering interest rates. This suggests that the authorities see the problem as a solvency problem for the financial institutions and as a liquidity problem. US Treasury Secretary Paulson’s solution, for example, leaves unattended the continuing mortgage defaults and foreclosures. The fall in the US stock market predicts a serious recession, which means rising unemployment and more defaults and foreclosures. In place of a liquidity problem, I see an over-abundance of debt instruments relative to wealth. A fractional reserve banking system based on fiat money appears to be capable of creating debt instruments faster than an economy can create real wealth. Add in credit card debt, stocks purchased on margin, and leveraged derivatives, and debt is pyramided relative to real assets. Add in the mark-to-market rule, which forces troubled assets to be under-valued, thus threatening the solvency of institutions, and short-selling, which drives down the shares of troubled institutions, thereby depriving them of credit lines, and you have an outline of the many causes of the current crisis.If the diagnosis is correct, the solution is multifaceted.Instead of wasting $700 billion on a bailout of the guilty that does not address the problem, the money should be used to refinance the troubled mortgages, as was done during the Great Depression. If the mortgages were not defaulting, the income flows from the mortgage interest through to the holders of the mortgage-backed securities would be restored. Thus, the solvency problem faced by the holders of these securities would be at an end.The financial markets must be carefully re-regulated, not over-regulated or wrongly regulated. To shore up the credibility of the US Treasury’s own credit rating and the US dollar as world reserve currency, the US budget and trade deficits must be addressed. The US budget deficit can be eliminated by halting the Bush Regime’s gratuitous wars and by cutting the extravagant US military budget. The US spends more on military than the rest of the world combined. This is insane and unaffordable. A balanced budget is a signal to the world that the US government is serious and is taking measures to reduce its demand on the supply of world savings.The trade deficit is more difficult to reduce as the US has stupidly permitted itself to become dependent not merely on imports of foreign energy, but also on imports of foreign manufactured goods including advanced technology products. Steps can be taken to bring home the offshored production of US goods for US markets. This would substantially reduce the trade deficit and, thus, restore credibility to the US dollar as world reserve currency. Follow-up measures would be required to insure that US imports do not greatly exceed exports.The US will have to set aside the racial privileges that federal bureaucrats pulled out of the Civil Rights Act and restore sound lending practices. It the US government itself wishes to subsidize at taxpayer expense home purchases by non-qualified buyers, that is a political decision subject to electoral ratification. But the US government must cease to force private lenders to breech the standards of prudence.The issuance of credit cards must be brought back to prudent standards, with checks on credit history, employment, and income. Balances that grow over time must be seen asa problem against which reserves must be provided, instead of a source of rising interest income to the credit card companies.Fractional reserve banking must be reined in by higher reserve requirements, rising over time perhaps to 100 percent. If banks were true financial intermediaries, they would not have money creating power, and the proliferation of debt relative to wealth would be reduced. Does the US have the leadership to realize the problem and to deal with it? Not if Bush, Cheney, Paulson, Bernanke, McCain and Obama are the best leadership that America can produce.The Great Depression lasted a decade because the authorities were unable to comprehend that the Federal Reserve had allowed the supply of money to shrink. The shrunken money supply could not employ the same number of workers at the same wages, and it could not purchase the same amount of goods and service at the same prices. Thus, prices and employment fell. The explanation of the Great Depression was not known until the 1960s when Milton Friedman and Anna Schwartz published their Monetary History of the United States. Given the stupidity of our leadership and the stupidity of so many of our economists, we may learnLudwig von Mises InstituteRoubini Sounding Austrian...Robert Blumen...7-29-08http://blog.mises.org/archives/008352.asp...Sixth, the existence of GSEs (government-sponsored enterprises such as Fannie Mae, Freddie Mac and the Federal Home Loan Banks)....is a major part of the overall U.S. subsidization of housing capital that will eventually lead to the bankruptcy of the U.S. economy. For the last 70 years investment in housing - the most unproductive form of accumulation of capital - has been heavily subsidized in 100 different ways in the U.S.: tax benefits, tax-deductibility of interest on mortgages, use of the FHA, massive role of Fannie and Freddie, role of the Federal Home Loan Bank system, and a host of other legislative and regulatory measures.The reality is that the U.S. has invested too much - especially in the last eight years - in building its stock of wasteful housing capital (whose effect on the productivity of labor is zero) and has not invested enough in the accumulation of productive physical capital (equipment, machinery, etc.) that leads to an increase in the productivity of labor and increases long run economic growth. This financial crisis is a crisis of accumulation of too much debt - by the household sector, the government and the country - to finance the accumulation of the most useless and unproductive form of capital, housing, that provides only housing services to consumers and has zippo effect on the productivity of labor. So enough of subsidizing the accumulation of even bigger MacMansions through the tax system and the GSEs.Yahoo FinanceRoubini: More Than $1 Trillion Needed to Solve Housing Crisis...Aaron Task...7-22-08http://finance.yahoo.com/tech-ticker/article/41423/Roubini-More-Than-1-Trillion-Needed-to-Solve-Housing-Crisis?tickers=FNM,FRE,XLF,WM,WB,WFC,BACTreasury Secretary Hank Paulson has been putting on a full-court press in the last 24 hours, making the case for his plan to shore-up Fannie Mae and Freddie Mac."I would rather not be in the position of asking for extraordinary authorities to support the GSEs," Paulson said in a speech Tuesday in NYC.  "But I am playing the hand that I have been dealt. There is a need to support efforts that strengthen Fannie and Freddie's ability to continue to play their important role in financing mortgages and in our capital markets more broadly."The timing of Paulson's speech -- and various and sundry media appearances -- is not coincidental. This week, Congress is expected to vote on housing legislation that includes Paulson's plan, which a GAO report said is likely to cost the government $25 billion.But $25 billion -- or even the GAO's worst-case $100 billion estimate -- pales in comparison to the cost of doing nothing, says Nouriel Roubini, NYU professor and chairman of RGE Monitor."We have to find a solution where government intervention prevents a disorderly outcome" in the housing market that leads to a "systemic banking crisis," Roubini says.The housing bill, which earmarks $300 billion to backstop mortgages after lenders agree to lower mortgage payments, is "a step in the right direction" but "doesn't do enough," he says, predicting the government will ultimately need to spend more than $1 trillion.Roubini's main concern stems from a view that the "housing recession is not bottoming by any standards," in contrast to hopeful comments from Paulson on Fox News and Barron's last weekend.The economist believes U.S. home prices will ultimately fall 30% from their peak -- vs. 18% to date according to the S&P Case-Shiller Index -- "before bottoming out some point in 2010."In the interim, the negative wealth effect of declining home values and increase in "underwater" mortgages will lead to more Americans walking away from their homes. Such "jingle mail" threatens to ultimately cost $1 trillion in credit losses, wiping out 75% of the capital of U.S. financial institutions, Roubini warns.It is that "disorderly" outcome Roubini says the government cannot afford to let happen. With "the charade" that Fannie and Freddie weren't already government agencies over, he believes a nationalization of the 50% of mortgages not owned or guaranteed by Fannie and Freddie will be necessary, and the Frank-Dodd Bill is a small step down that road.From Roubini's view, nationalizing housing avoids the government having to nationalization the entire banking system, making it the lesser of two evils.