Merced Sun-Star
Former Gustine city councilman the focus of state probe
Fair Political Practices looking into possible conflict of interest...JONAH OWEN LAMB
A state agency charged with investigating political corruption is examining whether Mark Melville, a former Gustine city councilman, took bribes from a developer while he was in office.
If California's Fair Political Practices Commission finds that there was wrongdoing on Melville's part, he could face civil penalties and civil lawsuits.
The allegations contend that, in a conflict of interest, Melville received gifts from a company that was doing business in Gustine while he sat on the City Council. The complaint also alleges that he failed to disclose the alleged gifts.
Melville vigorously denied any wrongdoing and said he had no knowledge of the investigation. "I have never heard anything from the FPPC that they are investigating me for anything," he said. "I have never done anything inappropriate or accepted any gift from Pacific Holt Corporation."
Anyone can file complaints with FPPC, but not all complaints are investigated. An investigation in no way confers guilt or innocence. The FPPC is a state agency that investigates political corruption.
The complaint, filed by Planada resident Bryant Owens, a local activist who has a history of making such allegations, alleges that Melville was paid $9,870 in 2005 for consulting for Pacific Holt Residential Communities, of which Greg Hostetler's Ranchwood Homes was a joint owner. At the same time, Ranchwood Homes was working on a development project in Gustine called Borrelli Ranch.
"During (Melville's) time in office he had a private business relationship with one or more individuals/entities who also had business dealings with the City of Gustine," the complaint states. "These entities include Ranchwood Homes (Greg Hostetler), Borrelli Ranch, LLP (Greg Hostetler), and Pacific Holt Residential Communities (PHRC) -- Hostetler was a (one-third) partner in this joint venture."
In a nutshell, the allegations contend that Melville worked for a developer who was working on a project in Gustine while he sat on the City Council. Melville said he didn't know that the company he was working for had ties with anyone doing business in Gustine.
According to the complaint, Melville worked for Pacific Holt Residential Communities, a joint venture, which included Hostetler's Ranchwood Homes, Pacific Holt Corp. and a Geneva Investments.
On Thursday, Pacific Holt's secretary denied any knowledge of PHR Communities. But in a PHR memo in the complaint the two entities have the same phone number.
Melville said he consulted for Pacific Holt to mediate on a Planda project. As far as Melville knew, Pacifica Holt Corp. was paying him; Hostetler's Ranchwood had nothing to do with it. But even if Ranchwood was involved, he maintained that there still would have been no conflict of interest because the project wasn't in Gustine.
The issue Melville consulted on involved paying a land planning firm named Provost and Pritchard for its services, Melville said.
Will Washburn, a civil engineer who was Provost and Pritchard's project manager and who worked in Planada, said, "Our client's name was PHR Communities."
He even recalled talking to Melville about several items on the phone.
Melville said he never worked for PHR -- he worked for Tom Nevis and Pacific Holt.
But according to a PHR Communities memo about paying Pritchard and Provost, Melville was named as the project manager.
The memo further lists that the three parties would split the bill: Geneva Investments, Pacific Holt and Ranchwood Homes. The memo was addressed to Greg Hostetler, John Sessions and Steve Hair.
Provost and Pritchard's Washburn said they were led to believe that their client, PHR, was a group of investors -- not one entity.
Although there is paperwork referring to the connection among PHR, Pacific Holt and Greg Hostetler it's unclear what entities made up PHR Communities. A search of corporations and limited liability companies on California's Secretary of State's Web site found no such entity.
While Melville said he did nothing wrong by taking pay from PHR, he had no explanation for why he never put down his consulting fees in required financial disclosure papers while he was on Gustine's City Council.
His disclosure filings from 2005 and 2006 contain no mention of any consulting pay received.
"I did inadvertently forget to put it on there," he said. "If it's not on there it surprises me. I can't give any reason why. I don't know why I forgot that one; it's not that I was trying to hide it. But if it's not there, that's my bad."
Besides serving on Gustine's City Council, Melville was at one time Gustine's and Livingston's city manager and Gustine's police chief. He was also liaison to local governments for John Condren's Riverside Motorsports Park.
Modesto Bee
Patchwork of prices for homes in valley...J.N. Sbranti
Home values throughout the Northern San Joaquin Valley have been falling, but some neighborhoods are much better off than others.
January home sales figures, provided by MDA DataQuick, show a wide range of median prices.
The Ripon housing market, for instance, is relatively strong, with the median-priced home selling for $306,000 last month. That was 16 percent below January 2008.
Keyes is just 18 miles south on Highway 99, but the housing story there is different. The median home sales price in Keyes last month was just $70,000, nearly 74 percent lower than in January 2008.
Sometimes, even within the same city, home values have fared differently.
In south and west Modesto -- the 95351 ZIP code -- 101 homes sold last month for a median $65,000 each. That was nearly 64 percent less than what homes there sold for a year earlier.
On the opposite corner of town, in northeast Modesto's 95355 ZIP code, 80 homes sold for a median $190,000 last month. That was 35 percent below January 2008.
North Turlock homes, those in the 95382 ZIP code, also are doing better than those elsewhere in that city. Forty-two homes sold for a median $215,000 last month, down about 28 percent, compared with 48 homes in Turlock's 95380 ZIP code, which went for a median $125,500, down 41 percent.
None of the valley's real estate is doing well, though.
Merced County, San Joaquin County and Stanislaus County, in fact, suffered the nation's largest drop in home values during 2008.
The U.S. Federal Housing Finance Agency this week released its House Price Index for 2008, which documented home price changes in 292 of the nation's metropolitan areas.
Merced was ranked as the worst of the worst, with home values dropping 49.5 percent during 2008 and more than 33 percent over the past five years.
San Joaquin was second worst, with values dropping 40.2 percent last year and nearly 23 percent the past five years.
Stanislaus was next, with prices dropping 37.8 percent last year and almost 19 percent the past five years.
Nationwide, home values declined 4.5 percent during 2008.
The House Price Index is based on data from home sales and appraisals for refinancings.
Fresno Bee
Judge: EPA must make polluting companies pay...The Associated Press
SAN FRANCISCO A federal judge has ruled that the U.S. Environmental Protection Agency must close loopholes that allow polluting companies to get out of paying for costly cleanups by declaring bankruptcy.
U.S. District Court Judge William Alsup ruled Thursday that the EPA has allowed companies "to potentially shift the responsibility for cleaning up hazardous waste to taxpayers."
The judge says the EPA must change regulations to stop companies who file for bankruptcy from foregoing financial responsibility for cleaning up abandoned mines, coal ash dumps and other sites.
The ruling stems from lawsuit filed by the Sierra Club and other environmental groups in New Mexico, Nevada and Idaho, over the cleanup costs of so-called "Superfund" sites, or those designated by EPA as the most polluted.
An EPA spokesman said he wasn't immediately able to comment on the ruling. 
Fish and Game Department can do better...Editorial
Californians who care about the outdoors should also care what happens to the California Department of Fish and Game in coming years.
The agency has an annual budget of $475 million. It owns or manages more than 1 million acres of land. It is charged with conserving fisheries and other wildlife. It responds to oil spills and reviews permits for various projects, from logging to the pumping of water through the Sacramento-San Joaquin Delta.
More than any other agency, the Department of Fish and Game is the designated steward of California's natural bounty -- its coastlines, its mountains, its 7,000 species of plants and 100,000 varieties of animal life.
Yet it is fair to say that, despite hard work from many of its employees, the DFG hasn't been the effective and respected steward that California needs or deserves.
In the Delta, the department has been a bit player in preventing the decline of Delta smelt and other fish. Within the top policy circles of the governor's office, the DFG is consistently trumped by the Department of Water Resources, which is aligned with big water agencies that pump water from the Delta.
In Northern California, the department has too often capitulated to the timber and mining interests that have strong friends in the Legislature.
A recent example is the department's decision not to further restrict gold miners who use giant dredges in salmon streams.
Those grievances came up this week when the Senate Rules Committee took up the appointment of Donald Koch to be DFG director. The confirmation was delayed to give senators time to sort out the agency's troubles from Koch's leadership.
We don't think Koch's confirmation should be based on a handful of recent decisions that displeased certain environmental groups. But we do think lawmakers should examine those decisions in assessing several key questions:
Did Koch make a controversial dredging decision himself, or was he pressured to do so by higher-ups? If he claims it was his decision, and his alone, can he defend it? If he can, that's a point in his favor.
What is Koch's overall vision for modernizing DFG and making it more functional? Will he elevate DFG's standing in debates over the Delta and other high-profile issues? Does he have the support and ear of Gov. Arnold Schwarzenegger?
One encouraging sign is that, in reaching a budget deal, the governor dropped a disputed plan to borrow $30 million from a Fish and Game wildlife fund. If Koch had something to do with that move, that's another point in his favor.
Stockton Record
Developer violated law by selling to Wal-Mart, foes say
Group fighting Lodi Supercenter challenges project...Daniel Thigpen
LODI - The developer of a proposed 40-acre shopping center to be anchored by a Wal-Mart Supercenter in Lodi violated state land use laws and should face criminal charges, an attorney for opponents alleged this week.
It's the latest in a long list of legal challenges to Wal-Mart's six-year bid to expand in Lodi.
"It appears corporate fraud is not limited to Wall Street," said Brett Jolley, an attorney for Lodi First, one of two groups opposing the discount chain's plans to build a 216,710-square-foot Supercenter.
In a notice filed with city officials Wednesday, Jolley said he has evidence that shows Oakland developer Darryl Browman bypassed the legal process before selling one of his parcels at Lower Sacramento Road and Kettleman Lane to Wal-Mart for an undisclosed amount of money.
Contacted Thursday, Lodi City Attorney Steve Schwabauer and Wal-Mart spokesman Aaron Rios said they had not seen Lodi First's legal challenge and could not comment.
Browman, his attorney and a Wal-Mart lawyer did not return calls seeking comment.
Browman first proposed the shopping center in 2002. The City Council gave the controversial project its first approval in February 2005.
Two days later, Browman filed a final parcel map of the project with San Joaquin County record keepers, according to Jolley.
Under state law, Browman was instead required to first seek city approval of that final map, Jolley said, but that never happened.
Additionally, Browman used the contested map to sell some of the land to Wal-Mart in August 2005, Jolley said. This action was not disclosed, he said, and occurred as a lawsuit over the city's project approval was pending in San Joaquin County Superior Court.
The allegations come at a time when the Supercenter still is jumping through numerous city hoops.
A judge overturned the city's first approval in 2005, and after more studies, the project is back before city leaders.
In fact, the City Council on March 11 was scheduled to consider a new environmental analysis - a redo of a vote that was rescinded after opponents accused the council of violating state open meetings laws.
As for this week's allegations, it's unclear what happens next. The city has not yet responded.
Water-vs.-ecosystem fight leaves out people who live here...Michael Fitzgerald
In the ominous Delta debate, south-state interests maneuver for reliable water. Environmentalists champion the ecosystem. No one gives high priority to the region.
Us. The Delta's people. The Delta's communities, economies, infrastructure, architecture, history, its other habitats and various ways of life.
"It's not just a blank slate that can be written on by state officials," state Sen. Lois Wolk, D-Davis, says. "It's not just about the water, and it's not just about the ecosystem. It's about a place."
Wolk spoke out this week at a hearing on the Delta Vision task force. The governor appointed the task force to find a solution to the Delta's crisis.
Delta Vision straight away rubber-stamped a peripheral canal. It embraced two priorities: restoring and stewarding the Delta ecosystem and stabilizing the water supply.
Well, fine. But these pillars of policy leave a little something out: Drastic change to the Delta or water management policy may profoundly alter the lives of Delta residents.
Will the change be for the better? Well, consider government management of the Delta. The state and feds have managed the Delta into the intensive care unit.
The poor old dear is wheezing on the life support of water-export cutbacks and suspended fishing seasons. The thought that the same policymakers will impact our lifestyles is chilling. I'd rather turn the region over to Kim Jong Il.
For a half-million to 1 million people, life may never be the same. Yet this impact has been little considered. You'd think the Delta region swallowed invisible pills.
Wolk contrasts the Delta to the coast and Sierra regions.
"The (California) Coastal Commission was put in by initiative," Wolk explains. "Now, why? Because everybody knows and loves and wants to protect the coast."
Ditto the Sierra Conservancy, Wolk continues. But "we don't have the same awareness of the Delta."
Can't argue there. A 2007 survey of Stocktonians found half did not know where the Delta is. Such Cloud-9 disengagement makes it difficult to denounce the geographical ignorance of Angelenos or legislators.
But I will anyway. To treat the Delta solely as water or endangered species is to fly over this region. Decisions made in this void will be as destructive to life here as the giant export pumps are to fish.
Wolk is calling for protection of the Delta - as a place - to be elevated to a third priority equal to ecology and water supply stability.
"I am trying to convince my colleagues that we can't forget the place we're trying to save," she says. "There are communities that have been here longer than many of their communities."
Wolk has introduced legislation, SB457, to create a Delta Stewardship Council whose sole responsibility is to defend Delta interests.
The Delta needs a steward, Wolk says.
"There are over 200 agencies, state and federal, that have something to say about the Delta. When you have that many people in charge, nobody's in charge."
She also introduced SB458, which would create a Sacramento-San Joaquin Delta Conservancy "to promote projects that further Delta-based tourism, agriculture, fishing, hunting and other related economic activities."
The package also includes a $9.8 billion bond to increase water supply and fund Delta restoration and sustainability, and a bill to encourage statewide water conservation.
Will anybody listen?
"A lot of this is persuasion," Wolk says. "I take people out on the Delta. I want them to see what a levee is. I want them to see what habitat looks like. And historical communities."
Wolk is a welcome exception to the fly-over Delta policymakers who see the Delta as a resource instead of a region. A region in which the law compels respect for fish but not residents.
All her good work will be for naught, however, if the Delta counties don't unify politically and speak with one voice.
"Because I think it's going to be very, very easy to be picked off by the strength of the interests in Southern California and the Bay Area," Wolk warns. "Unless we are united, that will happen. And the Delta will surely die."
San Francisco Chronicle
Delay sought on emissions reduction bill...Wyatt Buchanan
A Republican state senator has introduced legislation to put California's landmark greenhouse gas reduction plan on hold, but the plan seems to have less of a chance than a polar bear on melting ice.
Sen. Bob Dutton, R-Rancho Cucamonga (San Bernardino County), has introduced a bill to halt the California Air Resources Board from developing regulations to implement the plan to reduce greenhouse gas emissions to 1990 levels by 2020.
He wants the delay until June at the earliest. The bill also would mandate myriad studies on the economic impact of the measure and require that the state unemployment rate be lower than 5.8 percent for three consecutive months before the delay would be lifted.
Dutton said the goal of the plan would not be changed but that it would be met in "the most effective and efficient way possible," and he was backed at a news conference by African American, Latino and Asian American small business leaders.
But getting the bill through the Democratic-controlled Legislature, which has shown strong support for the plan, will be tough. And even if that happens, Gov. Arnold Schwarzenegger will not agree to a delay, said his spokeswoman Lisa Page.
"We need to invest in renewable energy, cleaner fuels and more efficient vehicles as a way to save consumers money and pump money back into the economy," Page said.
Report: Companies should disclose water use...GARANCE BURKE, Associated Press Writer
(02-26) 18:39 PST Fresno, Calif. (AP) --
As more companies become conscious of their carbon footprint, a new movement is urging corporations to track their "water footprint" as well, or risk financial losses as freshwater supplies dry up around the globe.
Major corporations such as Coca-Cola Co. now disclose the amount of water they use in financial reports, in an attempt to show investors they can confront threats to their water supply, according to a study released Thursday by the nonprofit Pacific Institute.
But dozens of high-tech companies, farms and soda bottlers have lost millions because they didn't foresee the risks posed by droughts and floods tied to global warming, researchers found in a survey of 121 companies in water-intensive industries.
Now, as markets are reeling, investors can't afford to ignore the crucial role water plays for some of their favorite blue chips, and how it could affects their retirement accounts, said Anne Stausboll, who manages the nation's largest public pension fund.
"Coming out of this economic crisis, investors will be looking differently at risk," said Stausboll, CEO of the California Public Employees' Retirement System. "And water-related risks are imbedded in all of our investments, from the companies we invest in to the buildings we own."
CalPERS, for example, expects to lose money on their investments tied to California's farming industry, which suffered $260 million in crop losses alone last year due to a crippling drought, she said.
Water scarcity also has caused companies across the world to shut down plants: A few years ago, both Pepsi Co. and Coca-Cola's bottlers lost their licenses to use groundwater in Kerala, India, after authorities revoked or denied the licenses amid drought.
Shortages also could drain away profits in the high-tech industry, which relies on billions of gallons of pure water for producing silicon chips, the report found.
On Monday, scientists with the Intergovernmental Panel on Climate Change warned climate change will increase the risk of droughts, heat waves and floods if average global temperatures rise by just 1.8 degrees Fahrenheit.
"Climate change is exacerbating water scarcity problems around the world, yet few businesses are paying attention," said Mindy Lubber, the president of Ceres, a Boston-based network of investors and environmental groups that commissioned the report. "What investors need is more information to make the smart decisions they're more than capable of making."
The Pacific Institute plans to present some of their findings at the World Water Forum in Istanbul next month in partnership with the United Nations, to help companies move toward water sustainability.
Some are already well on their way.
Levi Strauss & Co., the San Francisco-based maker of 501 jeans, has reduced the amount of water used to make some styles of jeans by 30 percent in the last year, company officials said.
"We did a study and found that one pair of 501s consumed 918 gallons of water in its life cycle — everything from growing the cotton that's used to make the jeans, to the number of times it goes in the washing machine," said Michael Kobori, a vice president for supply chain social and environmental sustainability. "The water we use is one of our most significant impacts on the environment, and we saw we had to reduce our footprint."
Calif. regulators target tech industry emissions...SAMANTHA YOUNG, Associated Press Writer
California air regulators on Thursday broadened their reach into Silicon Valley, implementing rules intended to cut greenhouse gas emissions from semiconductor plants.
The state Air Resources Board voted unanimously to regulate some of the most potent gases produced by the semiconductor industry, which makes chips for cell phones, computers and cars.
By Jan. 1, 2012, more than a dozen California chip manufacturers must reduce their use of fluorinated gases. Scientists say such emissions trap heat in the Earth's atmosphere at a rate 23,000 times higher than carbon dioxide.
"The chemicals are highly potent greenhouse gases. It's important that we begin the process of phasing them out," board chairwoman Mary Nichols said.
Because California has a robust semiconductor industry, the boards' actions could set a global standard for reducing emissions, Nichols said.
Industry officials said the regulation will cost businesses some $37 million at a time when the chip industry is grappling with falling global sales. They also argued that fluorinated gases already are being addressed under voluntary global agreements, although those targets are much weaker than the new California limits.
"To the extent California makes it more costly, more cumbersome to operate here, you're not going to attract these facilities in the future," John Greenagel, a spokesman at the San Jose-based Semiconductor Industry Association, said in a phone interview before Thursday's hearing.
The reductions at semiconductor plants would account for less than 1 percent of the target California is trying to reach under the state's 2006 global warming law, which is intended to cut greenhouse gases to 1990 levels by 2020.
But the regulation is projected to cut by more than half California's output of fluorinated gases, which scientists say persist in the atmosphere for thousands of years. The air board estimates that the amount to be cut under the California regulations is roughly equivalent to the carbon dioxide emitted by 40,000 vehicles a year.
Much of the regulation's cost will be borne by 16 plants that air regulators say account for 94 percent of fluorinated gas emissions.
Those plants would spend an average of $280,000 a year over the next decade to reformulate their operations, install equipment or find alternative chemicals, according to an air board report.
Industry officials say that's a high price for businesses already struggling in a weakening economy.
One of California's largest manufacturing facilities, NEC Electronics America Inc., has been losing several million dollars a month. The regulation would further shrink its bottom line, said Gus Ballis, a manager at the Roseville-based company.
"The financial impact is going to be severe and affect our ability to be competitive in the market," Ballis told the board. "We're potentially on the chopping block — whether they are going to keep us or pull our production back to Japan."
Twelve California semiconductor plants already meet the proposed emission standards, while 57 others that generate very few emissions would simply have to report their pollution.
"I think it's very clear the cost for some is going to be nothing because they already comply, and the cost of compliance for others is going to be very high," Nichols said.
Until now, fluorinated gases have been addressed under voluntary global agreements struck by the industry. Semiconductor manufacturers have pledged to cut emissions to 10 percent below 1995 levels by next year. The target falls well short of California's 56 percent reduction over the next two years.
Regulators said companies such as NEC that plan to retool or expand their operations would be given another two years to comply.
On the Net:  California Air Resources Board: www.arb.ca.gov
Los Angeles Times
Stricter cleanup rules for mining industry?...Catherine Ho...Greenspace
The EPA must close a 29-year loophole that made it possible for polluting industries to avoid paying for hazardous-waste cleanups by declaring bankruptcy, a federal judge ruled Wednesday.
The mining industry, which generates more than 2 billion pounds of toxic waste each year — and is among the EPA's list of top polluters — may be the most affected by the decision.
In New Mexico, conservationists tried for years to get the Molycorp/Chevron molybdenum mine near Questa to clean up toxins released into the Red River and ground water. In 2002, Molycorp set aside $152 million for a cleanup job that could cost up to $400 million. Environmentalists argued that the company would have been more careful if it had known it would be held responsible for cleanup costs.
"This victory will encourage mine operators to act more responsibly, hopefully preventing future problems in New Mexico," said Brian Shields of Amigos Bravos, one of four environmental groups that sued the EPA over its failure to issue "financial assurance regulations," which would have held companies financially accountable for cleaning up contaminated sites.
The loophole has existed since 1980, when the Superfund law was passed with the understanding that lawmakers would put financial assurance regulations in place within three years. Those regulations were never enacted.
U.S. District Judge William Alsup ruled that the EPA has until May 4 to identify the industries that will be subject to the regulations.
"By not promulgating financial assurance requirements, EPA has allowed companies that otherwise might not have been able to operate and produce hazardous waste to potentially shift the responsibility for cleaning up hazardous waste to taxpayers," Judge Alsup wrote in the ruling.
Environmental advocates hope the decision will help pave the way for federal laws requiring industries to post bonds to cover the cost of potential future cleanups.
"New standards will push companies that deal with toxic substances towards more responsible practices," said Jan Hasselman, an Earthjustice attorney who argued the case on behalf of the environmental groups.
Coen brothers' TV ad ridicules 'clean coal'
The Oscar winners, known for their sardonic style, directed the spot for an environmental coalition as a media battle warms up over the role carbon fuels should play in America's energy future...Marla Dickerson
Academy Award winners Joel and Ethan Coen, known for their grimly comic portrayals of human nature, are poking fun at a new target: the coal industry.
The filmmaking brothers have directed a TV spot for an environmental coalition that's trying to demolish the notion that there's anything clean about so-called clean coal.
Launched Thursday, the ad follows a grinning, lacquer-haired pitchman whose can of "clean coal" air freshener sends a suburban family into coughing spasms when they spray a grimy cloud of it inside their spotless home.
The ad ends with a tag line: "In reality, there's no such thing as clean coal."
The spot is the latest salvo in the media battle between the coal industry and environmentalists over the role that carbon fuels should play in the United States' energy future.
The Obama administration has signaled its intention to move the nation toward clean, homegrown energy sources in an effort to boost energy security and fight global warming.
The nation's coal industry has gone on the offensive to persuade Americans that coal is part of the solution, not part of the problem. It has formed a trade group known as the American Coalition for Clean Coal Electricity, spending $18 million so far on television spots touting coal's abundance and the efforts being made to clean up this fuel, a major emitter of the greenhouse gases that are changing the Earth's climate.
"Meeting America's growing energy demand . . . is going to require the use of all energy technologies," said Joe Lucas, spokesman for the coalition. "Technology has made coal a cleaner energy option."
Lucas said the industry had spent more than $50 billion since the 1970s installing pollution-control equipment and designing plants that are more efficient. The industry is working on the next wave of innovation, he said, including carbon sequestration to capture carbon dioxide emissions and prevent their release.
The trouble, environmentalists say, is that the coal industry's marketing campaign has left Americans with the impression that such "clean coal" technology already exists. Such a breakthrough has yet to be developed and may never be at a cost that makes economic sense, said Bruce Nilles, national coal campaign director for the Sierra Club.
His nonprofit and four others -- the Alliance for Climate Protection, the League of Conservation Voters, the Natural Resources Defense Council and the National Wildlife Federation -- formed their own group last year to counter the coal industry's message. Known as the Reality Coalition, it has launched three TV spots since December mocking the notion of "clean coal."
Coalition spokesman Brian Hardwick said the sardonic script proposed by the group's advertising agency hooked the Coen brothers, who won 2007 Oscars for producing, directing and adapting "No Country for Old Men" and a 1996 Oscar for writing "Fargo."
"They thought it was their style," he said.
In a statement, the Coens said: "We were excited to be part of this important project and tell another side of the 'clean' coal story."
The spot is running on CNN, MSNBC, Comedy Central and can be viewed at www.thisisreality.org.
The ad is humorous, but the stakes are serious.
Coal is the bedrock of U.S. electricity generation. About half of the nation's power is supplied by 600 coal-burning plants. The fuel is reliable, cheap and plentiful. The
U.S. possesses about one-quarter of the planet's coal reserves.
But some scientists say that weaning the world off coal is crucial to slowing the devastating effects of climate change.
New York Times
BofA May Be Next, Credit Analysts Say...Cyrus Sanati
With Citigroup’s third government bailout revealed, Wall Street is pondering Bank on America’s fate.
Minutes after Citi and the Treasury Department announced a big stock-conversion plan Friday, Egan-Jones, the credit research firm, said in a note to investors that it believed Bank of America was “next in line” for a government infusion of equity.
Egan-Jones said the endgame for Bank of America and Citi appeared to be following a similar pattern: “killing the common and preferred shareholders and eventually stabilizing credit.”
According to Egan-Jones’s calculations, Bank of America will need $100 billion in equity within the next 100 days. That is in addition to the $45 billion in cash and $120 billion financial backstops that the government already committed to shore up Bank of America’s capital base.
Bank of America’s shares were down about 15 percent in early trading Friday.
If it believes that BofA’s tangible common equity is too low, the government might seek to convert some of its preferred BofA shares into common shares, as it agreed to do Friday with Citi.
Bank of America vigorously disputed Egan-Jones’s assertions. “We are currently working regulators on our stress test,” a bank spokesman, Scott Silvestri, said. “We do not know what the results will be, but we think the conclusion of the research report is ridiculous.”
Bank of America has taken pains to say that it does not expect another government lifeline. In an internal memo, the bank’s chief executive, Kenneth D. Lewis, said “our company does not need further assistance today and I don’t believe we’ll need any more in the future.”
CNN Money
Is Citi the next AIG?
The government now has a bigger say in Citigroup. But that may not be enough to save the bank...just look at what's happened to AIG...Paul R. La Monica
NEW YORK (CNNMoney.com) -- You and I will soon own a very big chunk of Citigroup.
The bank announced Friday morning that the Treasury Department will convert preferred shares it owned following last year's bailout into common stock. The deal will give the government -- and taxpayers -- as much as a 36% stake in the bank.
This was spun as good news. Citi (C, Fortune 500) claims it boosts its financial health in the short term. And the government went out of its way to point out that no new taxpayer money is being put at risk.
That all may be true. But to see how this could all go awry we need only look to what's happened to AIG since the government essentially took it over last fall.
Talkback: Can the government save Citigroup?
In September, the Federal Reserve agreed to take about an 80% stake in AIG (AIG, Fortune 500), with a loan then worth $85 billion. The bailout has since ballooned to $152 billion.
And with AIG expected to report appallingly bad fourth quarter results soon -- some expect a $60 billion quarterly loss -- there is chatter of another bailout to come.
How did this happen?
When the government agreed to help AIG, it threw out top management (something it did not do with Citi Friday), and indicated that the loan would bide time so AIG could sell off pieces of itself in an orderly manner instead of at fire sale prices in liquidation. AIG would then use the proceeds to pay back the government.
But AIG has turned into the house that Tom Hanks and Shelley Long bought in "The Money Pit." No matter how many coats of paint new AIG CEO Edward Liddy slaps on the company, there's no denying that AIG is still a dilapidated mess.
AIG has faced a difficult time selling off some of the parts that have not been completely gutted by the bad credit default swaps that ultimately brought down the whole firm.
MetLife (MET, Fortune 500) and French insurance giant AXA (AXA) have reportedly made bids for AIG's life insurance business while AIG is said to be in talks to sell its auto insurer to Zurich Financial Services.
However, with most insurance companies struggling during this recession, it's unlikely that any company is going to make an aggressive bid for a part of AIG. For this reason, there is talk that AIG might be forced to split into several separate divisions controlled by the government.
"The notion that you can break these assets up in this marketplace and easily sell them is a flawed one. It will take a great deal longer to do that. There are limited options for the government," said Haag Sherman, managing director with Salient Partners, an investment firm based in Houston.
What's more, any prospective buyer knows that AIG really has no power to negotiate for a higher price, especially since the government has already shown that it's willing to pump money into AIG more than once to keep it afloat.
"What's their leverage? AIG no longer has any. There are some good assets but they are all buried under toxic holdings," said Barry Ritholtz, CEO and director of equity research at research firm Fusion IQ.
"When the government took over AIG, they should have spun out the core insurance units into a separate company immediately to make it easier to sell it. Instead, you have this slow drain," he added.
And unfortunately for taxpayers, there appears to be some eerie comparisons between Citi and AIG, which means that even though the government did not commit any new money to Citi on Friday, it may have to do so again very soon.
"The bank has been effectively nationalized. There is now a bigger incentive for the government to pour more money into the black hole that is Citigroup," Ritholtz said.
Sherman agreed. He pointed out that since Citi is still going to be subject to the newly unveiled stress tests for big banks, it's hard to imagine how Citi can avoid needing more funding in the next few months. He does not believe private investors would step in and help out.
"This is taking the same path as AIG. Citigroup is going to need substantially more capital," he said.
That is obviously not good news. Consider that on the day the Fed announced its deal to save AIG, the stock closed at $3.75 a share. This morning, it was hovering at just 45 cents. If that's any indication, Citi, even at just $1.70 a share, still could have more downside.
Will the banks survive?
A wave of troubled loans threatens to send weak ones into the arms of Uncle Sam....Shawn Tully
(Fortune Magazine) -- On Friday, Feb. 20, investors watched in horror as shares of Bank of America plunged below $3 and Citigroup's stock broke $2, giving the two pillars of U.S. banking a combined market value of $26 billion - far below that of Kraft Foods.
Fear is spreading that if all that rescue money can't revive these stumbling giants, only one road remains. Everyone from former Fed chief Alan Greenspan to Senate Banking Committee chairman Chris Dodd is warning that the sole solution may be the once unthinkable one: nationalization.
How can it be that the banks are tottering after the government fortified them with hundreds of billions in bailout cash and guarantees on their troubled assets? For the past 18 months, the banks' problems with toxic securities, especially collateralized debt obligations (CDOs) and other exotic products that packaged subprime mortgages, attracted most of the attention - and alarm. Now the storm is entering an entirely new phase that's potentially even more dangerous: a historic meltdown in the bread-and-butter businesses of credit card, home-equity, and mortgage lending.
The scale of potential losses in consumer and business loans swamps what's left from the securities debacle by a factor of three or four to one. And the next wave, the looming defaults on commercial real estate loans financing the likes of half-leased retail malls, will soon cause a fresh round of pain. "We've now moved from the securities phase to the lending phase of the banking crisis," says Tanya Azarchs, a managing director in S&P's financial services ratings group. "For 2009 we expect that loan losses will be much worse than for 2008 and that securities write-downs will be much less."
Those looming losses make it inevitable that the government will shower the banks with more bailout billions - and get big ownership stakes in return. But that will fall far short of what most people think of as nationalization.
Speaking before Congress, Federal Reserve chairman Ben Bernanke said that nationalization means that the government takes 100% ownership, wipes out the shareholders, and runs the bank. "I don't think we want to do that," he said. He added that talk of nationalization misses the point. And he's right: The government already exerts tremendous influence over the industry, requiring banks that take federal money to limit compensation and modify mortgages, among other restrictions.
Moreover, the government seizes banks all the time. Since the beginning of 2008, the FDIC has shut down 39 insolvent institutions (leaving shareholders with nothing), reselling the branches, loans, and bad assets as quickly as possible. In the rare cases when it can't find a buyer, the FDIC will run the bank, as it is doing with Indy-Mac, which it took over in July. (A sale of Indy-Mac is now in the works.) And the agency is likely to be busy for some time to come: During the last banking crisis, from 1989 through 1992, it seized 1,368 banks.
The big banks, however, will get all the help they need to avoid that fate. The administration plans to put the 19 banks with assets of more than $100 billion through a rigorous financial analysis called a stress test. The banks will have to calculate their losses under severe conditions, including increased unemployment and continued home-price declines. The goal is to establish which institutions are so short of capital that they can't sustain current loan books, let alone expand credit.
Washington won't let those big banks fail: It will boost their capital by purchasing preferred stock that will pay a 9% dividend. If a bank has trouble paying the hefty dividend, it can convert the preferred shares into common stock. Hence, the weakest big banks may well end up with the government as their largest shareholder.
To understand the forces that will drive some banks into the arms of Uncle Sam, let's take a deep dive into their balance sheets. We'll concentrate on the four biggest U.S. institutions - Bank of America (BAC, Fortune 500), Citigroup (C, Fortune 500), J.P. Morgan Chase (JPM, Fortune 500), and Wells Fargo (WFC, Fortune 500) - because they hold almost half of U.S. consumer and business loans and account for most of the problem securities that haunt the industry.
First, let's examine the banks' securities portfolios. According to brokerage FBR Capital Markets, the four big banks hold almost $2 trillion in investment and trading securities such as collateralized debt obligations (CDOs), collateralized loan obligations (CLOs), and commercial and residential mortgage-backed securities - including the subprime paper that started the whole debacle. Accounting rules require the banks to mark almost all such assets to market-adjust their value according to prices brought by comparable securities in recent sales. But the markets for many of these assets are frozen, making it difficult or impossible to value them accurately.
That doesn't mean, however, that they are necessarily being carried on the banks' books for much more than they are worth, as is widely believed. In fact, banks have been marking the securities down for well over a year. According to Azarchs of the S&P, three types of debt are fairly valued or undervalued on banks' books: bundles of home loans backed by Fannie Mae (FNM, Fortune 500) and Freddie Mac, the notorious subprime CDOs that started the problem, and leveraged loans that shops like Blackstone (BX) and KKR used to finance buyout deals. The loans backed by Fannie and Freddie are essentially government guaranteed. Banks are carrying them at about 90 cents on the dollar, so they are fairly valued. The banks have marked down many subprime CDOs to 25 cents, and they are carrying the leveraged loans at around 75 cents. But Azarchs contends that a fair portion of those loans are producing income and will be paid back. "In both categories the potential losses in many cases, in my opinion, are a lot lower than their prices on the banks' books," she says.
Other securities are still overvalued: for example, mortgage-backed securities based on jumbo home loans, those too big to be guaranteed by Fannie and Freddie. Azarchs says that these securities at the four big banks are now marked at around 78 cents, probably an inflated number given the soaring mortgage default rates. Another area where the marks are too high is packages of commercial real estate loans. "Even if they're still paying full interest, many of the buildings backing them are worth a lot less than the loans," says Tom Barrack, CEO of Colony Capital, a private equity firm specializing in real estate. "They're really worth around 50 cents, and they're marked at 70 cents."
The banks also face losses on the insurance contracts they bought to protect against losses on many of these securities from monoline insurers such as Ambac and MBIA. Those insurers have run into trouble and seen their credit ratings cut, which forces the banks to take reserves against potentially uninsured losses, a trend that's bound to accelerate.
If the securities held by the banks do indeed contain plenty of bargains (alongside the overpriced merchandise), why aren't buyers lining up to take them off the banks' hands? The reason is threefold: First, buyers who have jumped in so far have been badly burned because of gyrating prices. In the fourth quarter, just when it looked as if once-toxic securities were raving bargains, prices collapsed as rates on everything from junk bonds to triple-A corporate debt exploded. Second, the buyers are financing their purchases with short-term loans, so they typically can't hold the assets until they mature. Instead, they're getting killed by margin calls from lenders. Third, potential buyers are sitting on the sidelines while Washington designs a plan for dealing with toxic assets that may give them a better deal.
The buyers' strike won't last. In early February the Treasury announced that it would provide up to $1 trillion in financing for private buyers to purchase illiquid assets. That program is bound to stir the vultures. A few investors are ready to pounce: "We see lots of fabulous bargains, with good assets often selling at 60 cents," says Michael Tennenbaum of Tennenbaum Capital Partners, an investment firm specializing in distressed debt. And Colony Capital has raised a $1 billion fund to purchase beaten-down bonds.
As more transactions occur, we'll get a better idea of how overvalued or undervalued various securities really are. According to estimates by FBR, the banks will end up writing down around 4.5% of their trading and investment portfolios, mostly over the next three years. For the big four, that would mean losses of $90 billion, or around $30 billion a year. That's a large number, but it's far less than the $150 billion the four (and the banks and firms they have acquired recently) have written down since late 2007.
Now let's examine the second, far more dangerous menace lurking in the loan portfolios. The big four hold $3.6 trillion in credit card, home-equity, mortgage, commercial real estate, and other consumer and business loans. Those loans are deteriorating with shocking speed: Default rates will soon surpass the worst of any recession in decades. Since mid-2007, for example, the charge-off rate for credit card loans has jumped from 3.8% to 7%. Overall, the four big banks suffered charge-offs of around 1% of their portfolios through the middle of 2007. For the fourth quarter of 2008 the figure jumped to 2.6%. And things are getting worse - delinquencies in all categories are rising. Star analyst Meredith Whitney predicts that credit card losses will climb above 10%, far higher than in any recent recession.
How high will the losses mount? FBR predicts the banks will eventually write off about 9% of their loan portfolios, with the vast bulk of losses coming in the next three years. That would hit the big four with around $300 billion - or $100 billion a year - in credit losses, more than three times the projected damage from their toxic securities.
And that explains the talk of nationalization. The challenge for the banks now is to earn enough money from normal operations that they can avoid taking additional government aid - which is not an impossible dream. Unless the U.S. falls into a near depression, it's likely that the majority will succeed. Among the big four, J.P. Morgan and Wells Fargo have the best prospects. They boast relatively strong capital ratios and are striving to stay ahead of the government by raising capital on their own. J.P. Morgan just announced a steep dividend cut that will save $5 billion annually and greatly strengthen its balance sheet. By concentrating on consumer banking, Wells Fargo mostly avoided the securities mess. It's likely to raise additional cash by selling the East Coast branches it inherited from its merger with Wachovia to concentrate on its powerful Western U.S. franchise.
And even BofA, saddled with the disastrous purchase of Merrill Lynch (see "Divorce - Bank of America Style"), could find a clear path out of the muck, although that's far from certain. The smart money is betting that Bank of America will soon launch a big asset sale, including Merrill Lynch's prime brokerage, which caters to hedge funds; reportedly, it has already put private bank First Republic on the block. That could give BofA sufficient capital to sidestep a bailout. Then the bank could rely on its powerful nationwide low-cost consumer franchise to rebuild its balance sheet. "Investors underestimated BofA," says Whitney. "BofA should be able to start building capital by the middle of 2009."
The true basket case among the biggest banks is Citigroup. Citigroup's core businesses in areas like credit cards, branch banking, and international corporate lending are so weak that it cannot generate enough revenue to compensate for the deluge of losses. That means its puny equity capital is destined to keep shrinking or disappear entirely. Citi executives are already asking Washington for additional aid in exchange for as much as 40% of Citi's common stock. And after the stress test, it will probably need more cash, making it all but certain that the government will end up with a majority stake.
How the government proceeds from there will say a lot about the future of the banking sector. The fear is that Washington will continue to prop up Citi and other wounded banks in their current form. The best course would be to force battered banks to sell enough assets to restore their financial health - if that's possible - or to dissolve. That would demonstrate that Washington is serious about reviving the industry - the one that is absolutely essential to the nation's economic recovery.
Bank failures may cost FDIC $80 billion
FDIC predicts $65 billion in bank failures between 2009 and 2013, on top of the $18 billion cost of 2008 failures.
WASHINGTON (Reuters) -- The worsening U.S. economy prompted the Federal Deposit Insurance Corp. Friday to double its projected U.S. bank failure costs to more than $80 billion over a five-year period ending in 2013.
The 25 U.S. bank failures in 2008 cost the agency $18 billion, the FDIC said. Another $65 billion in bank failure costs is expected from 2009 to 2013, it said.
On Thursday, the FDIC announced that the number of problem U.S. banks jumped by nearly 50% to 252 in the fourth quarter of 2008.
FDIC staff recommended the agency assess U.S. banks a special one-time fee to raise as much as $15 billion to restore the fund being depleted by bank failures. The assessment of 20 basis points, which equates to $200,000 per $100 million in domestic deposits, in the third quarter would represent the first such move since 1996, when regulators took a similar action in the aftermath of the savings and loans crisis.
The FDIC staff also recommended giving the agency the ability to charge another assessment of 10 basis points each quarter in case of unexpected emergencies.
If the FDIC board approves the proposals, the agency would collect about $27 billion in assessment revenue from banks in 2009, up sharply from $3 billion in 2008.
The FDIC's insurance fund has dwindled with the quickening pace of bank failures in recent months.
In 2008, 25 banks failed, compared with three in all of 2007. Based on its current pace, the agency is on track to seize more than 100 banks in 2009.
The FDIC has set aside $22 billion for expected payouts by the FDIC insurance fund for bank failures in 2009.