Merced Sun-Star
Amid milk price turmoil, dairy owners consider getting out...CAROL REITER
With 2009 shaping up to be among the toughest years on record for dairy producers, some dairymen who have been in the business for generations may be making the ultimate decision in the next couple of weeks -- getting out of the business entirely.
The National Milk Producers Federation's Cooperatives Working Together program has announced a herd retirement program, which will help dairy-producing members retire entire dairy herds.
Chris Galen, spokesman for the CWT program, said producers who are members can submit a bid to take their milk cows out of production, taking them to slaughter instead.
Galen said the way the program works is that dairy producers will be paid by the CWT program for the loss of future milk production that a cow would have made. The producer would also get the slaughter price for the cow.
"What the CWT is paying for is not the cow per se, but her future milk production," Galen said.
This year there's an incentive for dairy producers who choose to retire their herds to stay out of producing milk for 12 months. If a bid from a producer is accepted, only 90 percent of it will be paid up front, the other 10 percent coming after 12 months -- as long as the producer hasn't milked any cows. The facility that the producer used to milk on cannot have produced milk commercially either, Galen said.
"California is in the brunt of this dairy price mess, and we would expect that farmers would choose to do this," Galen said.
Michael Marsh, chief executive of Western United Dairymen in Modesto, said he's had quite a few dairymen ask about the program. "It's getting producers out of the business for a year, but most of them will be getting out of it forever," Marsh said.
A lot of local dairymen have been in the business since they were children, and many live on farms that have been in the family for generations, Marsh said.
"The retirement program is a piece of a legitimate answer to the price problem," Marsh said. His organization began working on the dairy price crash last October, and has been working closely with legislators in both Sacramento and Washington, D.C.
Marsh said his organization has pushed hard for the U.S. Department of Agriculture to implement the dairy export incentive program, which would make the United States more competitive overseas.
"They have yet to act on that point," Marsh said.
The USDA has used its authority to get dairy and beef products into both national and international feeding programs, Marsh said. But more needs to be done if dairy producers are going to be able to stay in business.
"We need to move as quickly as possible and remove cows and reduce the milk supply," Marsh said. "We've got to retire enough cattle that our supply comes into line with demand."
For some dairymen, that famous ad slogan may soon read:
Got cows?
Money available to fight drought conditions...Carol Reiter...4-8-09
Farmers and ranchers in counties with extreme or severe drought conditions, including Merced and Mariposa counties, may apply for assistance from the U.S. Department of Agriculture's Natural Resources Conservation Service in California until May 8.
The NRCS will take applications for $2 million that's available for practices designed to protect soil and air quality in areas of fallowed fields, keep orchard trees alive and protect natural resources on ranch and pasture land. Because of drought conditions, NRCS will pay a higher-than- normal 75 percent cost share rate.
Practices being offered through the program include establishing vegetative cover, soil surface roughening, incorporation of soil-stabilizing organic matter, silt fencing next to highways, irrigation water management and more.
More information is available at www.ca.nrcs.usda.gov/features/cadrought.html.
Modesto Bee
Concerns over North County Corridor project...last updated: April 09, 2009 12:16:37 AM
Owners of land along what could become a major expressway north of Modesto should have been notified long ago about the project, several said Wednesday at a meeting on the proposed North County Corridor.
"It was quite a shock to us to find out about this recently," said Jeff Meyer.
Vince Harris of the Stanislaus Council of Governments explained that public outreach typically increases when an idea moves into environmental review, which is happening now with the expressway. It would stretch some 25 miles, linking Oakdale and Riverbank to Highway 99 north of Salida.
"We don't feel we got a fair shot at stating our opinion before the route was chosen," said farmer Gary Darpinian, referring to a 2,000-foot-wide swath being reviewed before officials settle on an exact alignment.
"As a taxpayer and county resident, I'm not sure this is a good way to approach things when you don't involve the public," he said.
Matt Machado, the county's public works director and program manager for the North County Corridor, said more precise drawings on alternate routes east of McHenry Avenue will be posted early next week on the California Department of Transportation's Web site,
www.dot.ca.gov/ dist10/environmental/projects/northcounty.
Plan floated to spur Highway 99 widening...Garth Stapley
Trust and cooperation could trim what feels like eons from the far-out notion of Highway 99 growing a lane or two down the length of the San Joaquin Valley.
A consultant floated that idea Wednesday to transportation leaders in Stanislaus County, saying the freeway could expand from three to four lanes in each direction from Ripon to Modesto's Briggsmore Avenue, possibly in a few years instead of a few decades.
The magic formula requires pooling money from each of the valley's eight counties, from Lodi to Bakersfield. Together, they're much more likely to leverage state and federal dollars for huge projects, consultant Alan McCuen said.
"There are bold, audacious elements to this" Highway 99 business plan, McCuen said. Other ideas include charging a toll on some segments, higher vehicle license fees and charging for every mile drivers travel in a year.
Wednesday's presentation to the Stanislaus Council of Governments was McCuen's first to a policy board of elected officials in the valley, he said after the meeting. Previous pitches to transportation staff members have stirred lively debate, he said.
Apparently, some aren't wild about setting aside 10 percent of an important revenue source with a chance that another county's Highway 99 project gets done first.
"All (of these ideas) are on the table," McCuen said. "All are controversial. Maybe we'll be able to go someplace with them. Maybe not."
If the eight counties -- San Joaquin, Stanislaus, Mer- ced, Madera, Fresno, Tulare, Kern and Kings -- bank 10 percent of their road money, the partners could achieve all of their respective projects in about 24 years, according to a draft finance plan. Going it alone could take several decades, McCuen said.
The stretch through Stanislaus County is estimated to cost $73 million. The county and its nine cities would reserve $2.1 million every two years, according to McCuen's proposal.
Highway 99 would be widened from four to six lanes in San Joaquin County from Harney Road to the Sacramento County line, for $180 million.
In Merced County, the freeway would grow from four to six lanes from south Turlock to Hammett Avenue, for $80 million.
Calaveras, Amador and Alpine counties have produced nice projects by pooling their money for a dozen years, said Ken Baxter of the California Department of Transportation.
Drawing money by presenting a united front "can be done," he said.
StanCOG members Wednesday gave few clues on which way they might be leaning. They're expected to debate the ideas in future meetings.
Such discussions helped local representatives know how to vote on a valleywide growth strategy last week, said County Supervisor and StanCOG member Jeff Grover.
"The more we all understand and talk about publicly and hear from staff, the better off we all are," he said.
Dan Walters: Stimulus not likely to solve state job woes
Arnold Schwarzenegger is on one of his infrastructure kicks again, talking up the notion of federal and state public works spending as an antidote to California's severe recession.
He touted it last week in a series of California media events that crow about how quickly the state is spending federal "stimulus" money, including a joint appearance with President Barack Obama in Southern California. He then flew to Washington to ask for more, even suggesting that the feds should raise the gas tax to finance more projects.
"So as you know, for every billion dollars that we spend on and invest in infrastructure, it creates another 18,000 new jobs, so this is why we are so eager to get this money from the federal government," Schwarzenegger said during a stop in Merced.
Two days later, it was revealed that California's unemployment rate had jumped again to 10.5 percent, with just under 2 million California workers jobless, not counting those who are missed in the count, who have dropped out of the labor force, and/or who have downsized their employment.
And that raises this question: Will the money that federal and state politicians are shoveling out under the rubric of "stimulus" actually have a material impact on what appears to be the worst recession to hit California since the Great Depression?
It's time to have some fun with numbers.
Even in recession, California's economy is a relative powerhouse, $1.5-plus trillion a year or the eighth largest in the world. It's unclear how much federal stimulus money California will receive, but the initial estimate is about $85 billion.
That's a figurative drop in the bucket of such a large economy, and the vast majority would not be spent on public works. So far, it appears that only about $10 billion would go directly to job-producing work.
By Schwarzenegger's arithmetic, each $1 billion would create 18,000 jobs. It's a somewhat suspicious number, but even by that calculation, $10 billion would create just 180,000 jobs, roughly 1 percent of the state's labor force.
Construction has certainly been the hardest-hit employment sector, dropping by some 18.5 percent in the last year, according to state data. But construction accounts for just 4.6 percent of the state's entire employment, so that 18.5 percent loss has been just 200,000 jobs.
Even were all the public works stimulus money spent on construction jobs, in other words, it would fall short of making up for just the last year's losses in that sector, and its impact on the state's overall economy would be infinitesimal.
At 18,000 jobs per $1 billion, it would take at least $50 billion to reverse the effects of the recession so far. And with economists' projections that California's unemployment rate is headed to as high as 15 percent next year, another half-million workers could find themselves jobless.
There are no easy answers to this economic meltdown, and it does no good to raise false hopes.
Fresno Bee
EPA Discloses New Actions Against Polluters at 'Poisoned Waters' Documentary Preview...Hedrick Smith Productions...Press Release...4-8-09  
WASHINGTON, April 8 /PRNewswire/ Lisa Jackson, Environmental Protection Agency chief for the Obama Administration, asserted today at a forum for the PBS Frontline documentary Poisoned Waters that new legislation is needed to strengthen the EPA's authority to control pollution and protect local rivers, streams and wetlands across America.
Jackson, speaking at the National Press Club, said that court decisions had left "murkiness" about the EPA's authority to enforce some mandates of the Clean Water Act. She said EPA would seek new legislation to "clarify" its authority to take action on smaller waterways.
The two-hour documentary, to be aired on PBS on April 21, shows sobering evidence of America's failure over the past 35 years to contain water contamination from agricultural waste, stormwater run-off, and now, a new wave of chemicals, known as endocrine disrupters, most of which have no safety standard set by the EPA. The danger to human health from these chemicals in the environment and in drinking water systems was underscored Dr. Robert Lawrence of the Johns Hopkins School of Public Health.
"There are five million people being exposed to endocrine disrupters just in the mid-Atlantic region," Dr. Lawrence told Frontline Correspondent Hedrick Smith, "and yet we don't know precisely how many of them are going to develop premature breast cancer, going to have problems with reproduction, going to have all kinds of congenital anomalies of the male genitalia, things that are happening, we know they're happening, but they're happening at a broad low level so that they don't raise alarm in the general public."
In nationwide survey of water sources for urban drinking water systems, the U.S. Geological Survey has reported finding dozens of endocrine disrupters. At intakes for the Washington, DC water system on the Potomac River, USGS teams found 85 chemicals on its watch list and said two-thirds of them got through filters into the city's tap water. USGS scientists said they found similar results across the country.
EPA's Jackson told Smith that, in a break from Bush Administration policies, the Obama EPA is pushing to require pollution discharge permits from industrial-scale animal feeding operations near Chesapeake Bay and other national waterways. The purpose is to regulate contamination from excess animal waste.
Poisoned Waters shows that industrial scale chicken farms generate 1.5 billion pounds of chicken waste annually - more than the human waste from four cities, New York, Washington, San Francisco and Atlanta, put together. Jackson said this waste problem has to be brought under regulation.
Smith, a Pulitzer Prize-winning former New York Times reporter and Emmy Award-winning producer, expressed concern after 18 months of reporting on water pollution. "I really wonder whether or not our grandchildren or great grandchildren are going to be able live on this earth, unless we start to change things fast."
Poisoned Waters, will air on PBS Frontline, Tuesday, April 21st from 9-11 PM. Check your local listings. It is a Frontline co-production with Hedrick Smith Productions. See the entire interview and preview at www.pbs.org/frontline/poisonedwaters
SOURCE Hedrick Smith Productions
New jobless claims fall more than expected to 654K...CHRISTOPHER S. RUGABER - AP Economics Writer
WASHINGTON New jobless claims fell more than expected last week but are stuck at elevated levels, while the number of people continuing to receive unemployment insurance approached 6 million, setting a record for the 10th straight week.
The government data released Thursday bolster recent projections from the Federal Reserve and private economists that the nation's job market will remain weak into next year as companies purge thousands more workers.
The Labor Department said the tally of initial jobless claims fell to a seasonally adjusted 654,000, down from a revised 674,000 the previous week. Analysts expected claims to drop to 660,000.
But the total number of laid-off Americans receiving unemployment rose to 5.84 million, from 5.75 million. That was the most on records dating from 1967 and higher than analysts expected.
The data show "no hint of a slowdown in job losses," John Ryding, chief economist at RDQ Economics, wrote in a note to clients.
Still, Wall Street jumped after banking giant Wells Fargo & Co. issued a surprise profit announcement far above analysts' estimates. The Dow Jones industrial average added about 155 points, or 2 percent, in midday trading, and broader indices also rose.
Separately, retail sales reports showed some signs of stabilizing, as Wal-Mart Stores Inc. said sales at stores open at least a year increased 1.4 percent, though that was less than analysts expected. Discount retailer Target Stores Inc.'s sales fell, but less than analysts forecast.
The four-week average of jobless claims, which smooths out fluctuations, fell slightly to 657,250, the first drop after 11 straight increases, according to the Labor Department.
Still, the declines are from very high levels. The 674,000 figure was the highest number of initial claims in the current recession and the most in 26 years, though the labor market has grown by half since then.
Initial claims reflect the pace of layoffs by companies and are considered a timely, if volatile, measure of the economy. A year ago, claims stood at 358,000.
The 5.84 million continuing claims lag the initial claims data by a week and doesn't include 1.54 million Americans that received benefits under an extended unemployment compensation program approved by Congress last year. That adds 20 to 33 weeks of benefits on top of the typical 26 weeks provided by states.
The high level of continuing claims is a sign that many laid-off workers are having difficulty finding new jobs.
The Fed expects the unemployment rate - now at a quarter-century high of 8.5 percent - will probably "rise more steeply into early next year before flattening out at a high level over the rest of the year," according to minutes from the central bank's March meeting released Wednesday. Many private economists expect the rate will hit 10 percent by year's end.
The U.S. has lost a net total of 5.1 million jobs since the recession began in December 2007, almost two-thirds of them in the past five months, according to Labor Department data released last week.
Among the states, Kentucky saw the largest jump in claims for the week ending March 28, an increase of more than 5,000 due to layoffs in the auto and manufacturing industries. Michigan, Illinois, Ohio and Tennessee reported the next largest increases.
California had the biggest drop in recipients of more than 7,000, which it said was due to fewer layoffs in the service and manufacturing industries. Pennsylvania, Missouri, Kansas and Minnesota had the next largest drops.
More job losses were announced this week. Pulte Homes Inc. on Wednesday said it's buying Centex Corp. for $1.3 billion in stock in a deal that will create the nation's largest homebuilder and include an unspecified number of job cuts.
Elsewhere, newspaper publisher A.H. Belo Corp., which owns the Dallas Morning News, said it would eliminate 500 positions, or 14 percent of its work force, and equipment maker Deere & Co. said 160 employees at its plant near Des Moines, Iowa, will be laid off later this month due to reduced demand.   
Sacramento Bee
Feds deny protection to California longfin smelt...Matt Weiser
The U.S. Fish and Wildlife Service on Wednesday announced that the longfin smelt, a fish native to the Delta, does not warrant Endangered Species Act protection.
The agency said there is inadequate evidence that the longfin is genetically distinct from other fish of its kind. But it is launching a status review of the species to find out.
Environmental groups petitioned the service in 2007 to protect the 5-inch longfin, which is in steep decline in the Sacramento-San Joaquin Delta along with eight other fish species.
The longfin is slightly larger than the Delta smelt, already listed as threatened under federal law. It is also known to venture into the Pacific Ocean, unlike the Delta smelt, which spends its entire life in the Sacramento-San Joaquin estuary. Both are considered important indicators of ecosystem health.
Wildlife Service spokesman Al Donner said biologists know the longfin drifts north on ocean currents as far as Alaska and may breed with other longfin populations. But no one knows if the Delta's longfin ever return or whether they are genetically unique, he said.
Only one genetic study has been done on the populations, Donner said. It dates to 1995, and examined a lake-bound longfin population in Washington state, not one that ventures into the ocean.
"There is limited information on the species, and that is part of the problem," he said.
Tina Swanson, executive director of the Bay Institute, called the decision "extremely frustrating."
The Endangered Species Act, she said, simply requires officials to heed the "best available science" in a listing decision. Since there is no proof other longfin populations are genetically identical, and since California's population is clearly at risk, she said the service should have moved to protect it.
"They've found an excuse for not protecting the species, despite the clear need to do so," Swanson said.
Her group filed the listing petition with the Center for Biological Diversity and Natural Resources Defense Council.
The California Department of Fish and Game has monitored the longfin since 1967 using annual trawl-net surveys. The longfin's numbers have always been variable, but its decline since 2000 has been longer and more severe than ever.
The species set a historic population low in 2007 and rebounded slightly last year, but remains well below its average.
In March, the California Fish and Game Commission saw enough trouble to list the species as "threatened" under the state Endangered Species Act. It also imposed limits on state and federal water diversion pumps in the Delta to protect the species – similar to those already in place for the Delta smelt.
These rules will remain in place, as the state and federal laws are distinct.
Stockton Record
Longfin smelt don't qualify for protection
Environmentalists call denial 'incomprehensible'...Alex Breitler
SACRAMENTO - A close cousin of the Delta smelt was denied federal protection under the Endangered Species Act on Wednesday, angering environmentalists who say the number of longfin smelt is critically low.
Unlike Delta smelt, the decline of which forced officials to scale back on the amount of water that can be exported from the Delta, longfin smelt are found in other estuaries as far north as Alaska.
The U.S. Fish and Wildlife Service ruled Wednesday that some longfin smelt migrate into the ocean and can travel up the coast to breed with smelt in other estuaries. Therefore, longfin smelt found in the Delta do not qualify for protection as what's known as a "distinct population."
"The numbers are low on the smelt. We recognize that. ... We're aware of it. But more information is needed," said Al Donner, a spokesman for Fish and Wildlife in Sacramento. His agency called for a broader assessment of the species that could lead to protections in the future.
Wednesday's decision may not have a dramatic impact on water supplies in California, since the longfin smelt just last month was already extended protection under the state's Endangered Species Act.
Groups that export water from the Delta to two-thirds of California said that earlier decision could put yet another dent in their supplies; they have sued the state over new longfin smelt restrictions.
Environmentalists, however, said Wednesday that federal protection is "absolutely necessary" given the fact that several other species in the Delta have earned such protection.
Jonathan Rosenfield, a biologist with The Bay Institute, called Wednesday's decision "incomprehensible."
Even if the 5-inch longfin smelt is able to migrate from the Delta to the ocean, it's unlikely that the fish could swim hundreds of miles and breed with other populations, he said.
"So what if the longfin smelt go to the ocean and can swim around?" Rosenfield said. "If they come back to the same place, and it's very likely they do, then they're just like chinook salmon and green sturgeon and steelhead," all of which are federally protected.
He said the institute will consider challenging the decision.
San Francisco Chronicle
U.S. to ban commercial salmon season...Peter Fimrite
Millbrae -- Lovers of king salmon will have to settle for fish hooked in the Pacific Northwest this year under a federal agency's recommendation Wednesday to ban the commercial catching of salmon off California and much of Oregon in an attempt to save the fabled fish.
The move, which the National Marine Fisheries Service is expected to make final by May 1, comes after the fewest chinook salmon ever recorded made their way up the Sacramento and San Joaquin rivers last fall.
"There are just no fish," said Zeke Grader, executive director of the Pacific Coast Federation of Fishermen's Associations. "If they allowed any fishing, they would be putting at risk future fishing."
Wednesday's decision by the 14-member Pacific Fishery Management Council, meeting in Millbrae, marks the second year in a row that commercial fishermen will not be allowed to reel in chinook.
Only 87,881 0f the fish returned to the once-thriving salmon factory known as the Sacramento-San Joaquin River system in 2007, and a record low of 66,286 returned last year, according to estimates extrapolated from a count of egg nests in riverbeds.
Fisheries biologists are projecting that, even without fishing this summer, the fall run of chinook will be almost twice as plentiful as last year's, but the numbers will barely reach the council's minimum goal of 122,000 fish.
A fishing ban this summer had been expected since March, when none of the three options outlined by the council included commercial fishing in the two states.
The council, established three decades ago to manage the Pacific Coast fishery, advised that some sport fishing be allowed in California and Oregon, mostly where the much-improved Klamath River salmon runs are located.
The Klamath and Trinity river runs were declared a disaster in 2006, but runs there are looking better than the Sacramento this year. Recreational fishermen would be allowed to take chinook from Aug. 29 to Sept. 7 from the mouth of the Klamath River to southern Oregon.
Some commercial and sportfishing of hatchery-raised coho salmon - identifiable because the fleshy adipose fins have been removed - will be allowed in Oregon during July and August.
The Sacramento River's spawning run was the last great salmon run along the giant Central Valley river system, which includes the San Joaquin River, where leaping, wriggling chinook were once so plentiful that old-timers recalled reaching in and plucking fish right out of the water.
Chinook, known scientifically as Oncorhynchus tshawytscha, hatch in rivers and streams. Also known as king, spring or tyee salmon, they pass through San Francisco Bay and roam the Pacific Ocean as far away as Alaska before returning three years later to spawn where they were born in the Sacramento River and its tributaries.
The fall run in September and October has for decades been the backbone of the West Coast fishing industry. At its peak, it exceeded 800,000 fish. Over the past decade, the number of spawners had consistently topped 250,000.
A study last month by federal, state and academic scientists blamed the collapse of the fishery on poor conditions in both the ocean and river.
Destruction of river habitat, water diversions and dams in the Central Valley so weakened the fall run that it couldn't withstand two recent years of scanty food supply in the warming Pacific Ocean, according to the study commissioned by the National Oceanic and Atmospheric Administration.
Exacerbating the problem, researchers said, was the demise of three other distinct runs of salmon - winter, spring and late fall - and the reliance on less genetically diverse hatchery fish instead of naturally spawning wild populations of chinook.
Whatever the cause, more than 2,200 fishermen and fishing industry workers lost their jobs as a result of last year's ban. While they received federal disaster aid, fishing communities and fishing-related businesses lost more than $250 million.
"We just need to decide that we value wild California king salmon," said Larry Collins, a San Francisco salmon and crab fisherman. "We know what to do to make these runs healthier. Until we leave enough water in the rivers for the salmon, we're going to continue to be up against it."
Restrictions on river fishing will be decided in May or June by the California Department of Fish and Game, which allowed about 600 chinook to be caught last year, angering commercial fishermen who opposed any fishing.
"The best thing fishermen can do this year is attend all the water board hearings and let the governor know how his water policies are hurting our industry," Grader said. "In the meantime, it's going to be a struggle."
Salmon peril by the numbers


Number of chinook that spawned in Northern California each year for much of the past decade


Number of salmon that returned to the Sacramento-San Joaquin River system in 2007


Record-low number of the fish that returned last year


Number of workers who lost their jobs as a result of last year's fishing ban

$1.6 million fine for 2 Marin sewage spills...Henry K. Lee
A Marin County sewage agency has agreed to pay a $1.6 million fine for spilling more than 3 million gallons of sewage into Richardson Bay last year, officials said Wednesday.
The Sewerage Agency of Southern Marin in Mill Valley discharged 2.4 million gallons of untreated sewage Jan. 25, 2008, and a separate spill of 962,000 gallons of partially treated wastewater six days later.
In both cases, the sewage poured out during heavy rain into Richardson Bay's tidal marsh, where currents can carry pollutants into San Francisco Bay.
The agency will pay $800,000 to a state cleanup fund and another $800,000 to complete two environmental projects, said the San Francisco Regional Water Quality Control Board.
One project involves replacing older, cracked pipes in the agency's collection system, at a cost of $600,000 over five years. The goal is to reduce the amount of storm water that reaches the wastewater treatment plant.
The sewage agency will spend $200,000 to help the Richardson Bay Audubon Center and Sanctuary restore 17-acre Aramburu Island, which consists of dredged material, excavation waste and construction debris. Over two years, workers will help improve the habitat for resident and migratory birds and marine mammals such as the harbor seal.
Sewer agency officials were not available for comment Wednesday. General Manager Stephen Danehy has said the first spill happened because a worker failed to set up enough pumps to handle all the water coming into the plant.
Brooke Langston, executive director of the Audubon Center, said the sewage agency was doing its part to atone for what happened. The work on Aramburu Island is especially appropriate, she said, because it received little attention from conservationists until November 2007, when oil-slicked birds ended up there after the container ship Cosco Busan hit the Bay Bridge.
"I don't think you can ever, in any case, make up directly for a wrong done, but the sewage agency has been really anxious to do right by this somehow," Langston said. "I think the Aramburu project will do loads for habitat and water quality in the Bay Area."
UC's Yudof warns pay cuts possible for workers...Jim Doyle
The University of California's huge workforce could face salary cuts and furloughs if the state's economy continues its downward spiral, UC President Mark Yudof has told his staff.
In a memo this week, Yudof said he has instructed his top deputies to "begin planning for the possibility of employee furloughs and/or temporary and permanent salary reductions" as a response to the state's continuing budget crisis.
While the memo reflects only a general direction, Yudof said he hopes to have a detailed plan developed by the time UC's governing Board of Regents meets next month.
"Our hope is not to have to enact this policy. It's certainly an act of last resort," said Mary Croughan, chair of the university's Academic Senate.
Yudof's proposal follows a move earlier this year to freeze the salaries of nearly 300 top UC executives, an effort that did little to quell the criticism from employee unions and state legislators of what have been perceived as excessive salaries for the university's top administrators.
Union reaction to the latest idea was swift.
"Based on their history of leadership and planning, it will probably be a disaster," said William Schlitz, a spokesman for the American Federation of State, County, and Municipal Employees Local 3299, which represents about 20,000 rank-and-file UC employees. "Real leadership would be to cut salaries from the top and for the president to roll back his salary to the previous president's salary."
The 10-campus UC system employs more than 170,000 full-time and part-time faculty and staff, of which about 60,000 are covered by labor contracts that cannot be unilaterally modified by Yudof to cut union members' salaries.
"Currently there is no plan for systemwide salary reductions," UC spokesman Paul Schwartz said Wednesday. "(But) President Yudof has said that everything is on the table given the magnitude of the budget cuts (and) challenges we're facing .... Everything means everything, including the possibility of pay cuts/furloughs for senior managers in addition to the salary freeze and incentive pay restrictions they're currently subject to."
$9 billion payroll
Schwartz said any pay cuts would be "a delicate balancing act" because UC officials "wouldn't want to do anything that compromises our ability to continue to serve students, patients or the public."
He said the university's payroll alone (excluding the cost of medical and retirement benefits) is about $9 billion a year.
Based on those figures, The Chronicle calculates that a hypothetical, across-the-board salary reduction of 5 percent could save the university roughly $450 million - the amount of money that UC officials say they are in the hole.
However, Schwartz said that "some form of proportional approach, with higher-paid people getting cut more than lower-paid, might be a better way to go."
He indicated that such pay cuts could directly affect Yudof, whose total compensation package is about $828,000 a year, as well as key aides and the chancellors and other top administrators at UC's various campuses.
Stanford University President John Hennessy, Provost John Etchemendy and several other senior administrators volunteered in December to reduce their salaries by 10 percent to help stave off layoffs of staff members at the Stanford campus.
Higher operating costs
Schwartz emphasized that, before the university's nurses, staff and other workers are asked to accept reduced salaries or work fewer hours, the state should take steps to adequately fund UC, which is California's premier public university.
The state budget adopted in February includes $115 million in new permanent cuts for the UC system. UC officials say rising operating costs - including health benefits and utilities - combined with the budget cuts will push the system's total shortfall over the next two years to about $450 million.
In his memo, Yudof said his working group needs to first delineate the roles and responsibilities of the regents, the campus chancellors, the UC president and the Academic Senate in determining whether to impose furloughs and salary reductions.
Yudof also stressed that UC's contingency plan should have "flexibility for each campus to implement these actions in ways appropriate to their unique circumstances, including the need to maintain clinical health enterprise operations, ensure public safety, and honor existing union contracts and government regulations."
Many of the university's faculty members, including assistant and full professors, have individual contracts and are on a three-year cycle for raises.
Tanya Smith, local president of the University Professional and Technical Employees union, whose statewide chapters represent more than 10,000 UC workers, said the university has already imposed cost-cutting measures on her union's members who include lab assistants, illustrators and electronic technicians.
"We're already seeing long-term employees facing temporary reduction in hours of work, layoffs and expanding workloads," she said.
To learn more
-- To read UC President Mark Yudof's full statement, go to sfgate.com/ZGRR.
Contra Costa Times
Longfin smelt not endangered in California, regulators say...Mike Taugher
Longfin smelt in the Bay and the Delta do not warrant protection under the federal endangered species law, regulators said Wednesday.
The fish are already protected under state law, but the decision to reject another layer of environmental protection angered environmentalists who said the fish is disappearing in California and could be in similarly bad shape in the Pacific Northwest and Alaska.
"I don't think their conclusion is credible," said Tina Swanson, executive director of the Bay Institute, one of three environmental groups that asked for the listing in 2007. "It's a tragedy."
A similar attempt to add the fish to the list of endangered species was rejected in 1994 when federal biologists determined that the fish was doing fine in parts of a range that extends from the Bay Area to Alaska. In 2007, environmentalists asked the U.S. Fish and Wildlife Service to determine that the Bay Area population was distinct from the rest of the population and should be protected.
If it were listed, Swanson said state and federal water managers could be forced to allow more water to flow into the Bay instead of through pumps near Tracy that deliver water to parts of the Bay Area, San Joaquin Valley, the Central Coast and Southern California.
Longfin smelt, a cousin to the more severely threatened Delta smelt, is protected under California's endangered species law. New state rules that went into effect in recent months limit Delta water pumping somewhat to protect the longfin, but Swanson said the federal law could force water managers to allow more water to flow into the Bay.
Despite its decision to not protect the Bay Area population under the federal law, the Fish and Wildlife Service said it would open a broader look at the status of species from California to Alaska, a review that could end with the agency adding a layer of protection for the fish throughout its range.
"They look at the species in the state of California," Fish and Wildlife Service spokesman Al Donner said. "We don't have the luxury of looking just at the state."
Lawsuit may affect clean air...Stacey Shepard
A major air pollution rule limiting emissions from dairies will be suspended in May, just as the San Joaquin Valley enters its peak smog season.
And local air regulators on Wednesday pointed the finger at a Shafter-based environmental group that sued them.
The situation is a result of a lawsuit brought by the Association of Irritated Residents (AIR) that claimed an air district rule limiting emissions from dairies wasn’t tough enough.
A court rejected the group’s main argument but agreed the air district had failed to properly analyze the rule’s public health benefits, which is mandated by state law. As a result, the rule will be revoked while the health study is done. The rule suspension could last anywhere from one month to several.
The San Joaquin Valley Air Pollution Control District, which adopted and enforces the rule, says it tried to keep the rule in effect until then but AIR refused.
“It’s really unfortunate they insisted the rule be rescinded. I’m hoping the people living by these dairies won’t be impacted by rolling back these rules,” said Seyed Sadredin, the air district’s executive director.
AIR said repealing the rule is necessary so a stronger rule can be developed. It disputed the district’s claims that air quality could be impacted, saying the rule was so weak it didn’t achieve any real pollution reductions.
“What the rule requires dairies to do are things the dairies were already doing before the rule came into play,” said Brent Newell, an attorney for the Center on Race, Poverty and the Environment who represents AIR.
Rule in limbo for now
The rule in dispute applies to all large confined animal facilities, which include hundreds of dairies in the San Joaquin Valley and a smaller number of beef, cattle, swine and poultry facilities.
These facilities are considered one of the state’s largest source of volatile organic compounds, a key ingredient in smog. The air district says the rule’s impact on VOCs is equivalent to removing 1.3 million cars from the road each day.
The air district board is tentatively scheduled to revoke the rule May 21. It will remain suspended until the district completes a health study. After reviewing the study, the board will decide whether to reinstate the rule or start the process of drafting a new one, a process that could take months. That decision on how to proceed is expected at its June 18 meeting. 
AIR wants the board to decide in favor of a new rule. It sees it as its only chance to require dairies to do more to reduce pollution.
“Our main hope now is the health study will point out the inadequacy of the rule and the board will agree we have to make the rule stronger,” said Tom Frantz, president of AIR.
Dueling opinions
State Senate Majority Leader Dean Florez, who authored state laws requiring the district to regulate agriculture, said Wednesday he supports AIR’s actions. If the air district adhered to the law and did the health analysis in the first place, it wouldn’t have to repeal the rule, he said.
“Environmentalists sued and they were right to do so,” said Florez, D-Shafter.
Frantz and other critics have contended the rule is too weak since it was first proposed. They say most dairies didn’t have to change a thing to comply with it
and the air district was playing a numbers game to appease industry while claiming phony pollution reductions.
A trial court and appellate court disagreed, however.
In a November ruling, the 5th Circuit Court of Appeals concluded that aside from elaborating on the health benefits of the rule, it found no evidence that the rule didn’t achieve its goal.
“AIR has not provided any science to refute the (pollution reduction) estimates assigned by the district,” the ruling said, adding that state law leaves “the number crunching and the science” to the air district and the court “cannot say that the district’s assumptions are arbitrary and capricious.”
Kern County Supervisor Ray Watson, an air district board member, said criticism of air district rules often boils down to “dueling scientists” but in this case, he sides with the district.
“In the end, we have a bunch of very good scientists on the district staff. I’m going to believe them until someone proves them wrong,” he said. “That hasn’t been done yet.”
Los Angeles Times
An 'alarm bell' for oceans rings in Washington...Jim Tankersley, Greenspace
The decision to shut down California salmon fishing for a second consecutive year is bad news for commercial fishermen and cedar-plank barbecuers. It is also, in the words of Monterey Bay Aquarium Executive Director Julie Packard, “an alarm bell happening in the ocean.”
“For too long,” Packard said in an interview, “we’ve been taking oceans for granted and been viewing them as an endless source of resources for us.”
Packard is a member of the Joint Ocean Commission, a bipartisan group that descended on Washington this week to lobby the Obama administration on federal efforts to restore fish, plants and entire ocean ecosystems. Their efforts coincided with the vote in California to close the salmon fishery.
At the center of the commission’s recommendations, which it outlined in a report this week, is a $1.7-billion effort to protect, revitalize and research ocean life -- coupled with a call for federal action to combat climate change, which the group tags as oceans’ biggest threat.
The specifics include establishing a national oceans policy, expanding federal power to regulate water quality and coastal health, and pushing the Senate to ratify the international Law of the Sea convention, which includes marine-life protections.
They also include a price tag on the importance of oceans to the U.S. economy: “Ocean-dependent industries,” the report says, “generate approximately $138 billion for the United States every year, 2.5 times more than the agriculture industry.” Coastal leisure, hospitality, trade, transportation and utilities added an additional $1.3 trillion.
“We need to build up ocean science research and management,” said Paul Kelly, a member of the oceans commission and president of the nonprofit Gulf of Mexico Foundation, “because they’re going to be key drivers of all the issues related to energy, the economy and the environment.” The Obama administration sees plenty of economic potential in the sea. The Interior Department has touted ocean-based sources of renewable energy in recent days, including a report last week that estimated that offshore wind turbines could potentially -- emphasis on potentially -- supply more than enough power to meet the nation’s entire electricity demand. The administration is also stocked with several members of the ocean commission, including CIA Director Leon E. Panetta and Jane Lubchenco, the director of the National Oceanic and Atmospheric Administration, which regulates fisheries.
L.A. City Council rejects water conservation law, for now...Bettina Boxall...L.A. Now
Saying they did not have enough time to fully study the matter, the Los Angeles City Council today rejected a proposed water conservation ordinance.
The measure, however, which is designed to reduce Los Angeles water use by 15%, is not dead. A council committee is expected to review the matter and send it back to the Los Angeles Water and Power Commission for another vote as early as next week.
The proposal would increase water rates for users who exceed a certain base allocation. City water department officials say that 85% of single-family homeowners and 94% of low-income residents would not see an increase in their water rate or would even pay less under the proposed ordinance.
What will global warming look like? Scientists point to Australia
Drought, fires, killer heat waves, wildlife extinction and mosquito-borne illness -- the things that climate change models are predicting have already arrived there, they say...Julie Cart
Reporting from The Murray-Darling Basin, Australia — Frank Eddy pulled off his dusty boots and slid into a chair, taking his place at the dining room table where most of the critical family issues are hashed out. Spreading hands as dry and cracked as the orchards he tends, the stout man his mates call Tank explained what damage a decade of drought has done .
"Suicide is high. Depression is huge. Families are breaking up. It's devastation," he said, shaking his head. "I've got a neighbor in terrible trouble. Found him in the paddock, sitting in his [truck], crying his eyes out. Grown men -- big, strong grown men. We're holding on by the skin of our teeth. It's desperate times."
A result of climate change?
"You'd have to have your head in the bloody sand to think otherwise," Eddy said.
They call Australia the Lucky Country, with good reason. Generations of hardy castoffs tamed the world's driest inhabited continent, created a robust economy and cultivated an image of irresistibly resilient people who can't be held down. Australia exports itself as a place of captivating landscapes, brilliant sunshine, glittering beaches and an enviable lifestyle.
Look again. Climate scientists say Australia -- beset by prolonged drought and deadly bush fires in the south, monsoon flooding and mosquito-borne fevers in the north, widespread wildlife decline, economic collapse in agriculture and killer heat waves -- epitomizes the "accelerated climate crisis" that global warming models have forecast.
With few skeptics among them, Australians appear to be coming to an awakening: Adapt to a rapidly shifting climate, and soon. Scientists here warn that the experience of this island continent is an early cautionary tale for the rest of the world.
"Australia is the harbinger of change," said paleontologist Tim Flannery, Australia's most vocal climate change prophet. "The problems for us are going to be greater. The cost to Australia from climate change is going to be greater than for any developed country. We are already starting to see it. It's tearing apart the life-support system that gives us this world."
Deadly fires
Many here believe Australia already has a death toll directly connected to climate change: the 173 people who died in February during the nation's worst-ever wildfires, and 200 more who died from heat the week before. A three-person royal commission has convened to decide, among other things, whether global warming contributed to massive bush fires that destroyed entire towns and killed a quarter of Victoria state's koalas, kangaroos, birds and other wildlife.
The commission's proceedings mark the first time anywhere that climate change could be put on trial. And it will take place in a nation that still gets 80% of its energy from burning coal, the globe's largest single source of greenhouse gases.
The commission's findings aren't due until August, but veteran firefighters, scientists and residents believe the case has already been made. Even before the flames, 200 Melbourne residents died in a heat wave that buckled the steel skeleton on a newly constructed 400-foot Ferris wheel and warped train tracks like spaghetti. Cities experienced four days of temperatures at 110 degrees or higher with little humidity, and 100-mph winds. In areas where fires hit, temperatures reached 120.
On the hottest day, more than 4,000 gray-headed flying foxes dropped dead out of trees in one Melbourne park.
"Something is happening in Australia," firefighter Dan Condon of the Melbourne Metropolitan Fire Brigade wrote in an open letter. "Global warming is no longer some future event that we don't have to worry about for decades. What we have seen in the past two weeks moves Australia's exposure to global warming to emergency status."
The possibility that a high-profile royal commission may find a nexus between climate change and the loss of human life is significant for many scientists here.
"That will be an important moment in its own right," said Chris Cocklin, a climate change researcher at James Cook University in Townsville, in Queensland state, and lead author on the latest report from the Intergovernmental Panel on Climate Change.
"It may mean that climate change will be brought to the fore in a way that has never happened before."
Dust Bowl scenes
Australia's climate change predicament is on depressing display in the Murray-Darling Basin, where the country's three largest rivers converge, and where Eddy runs a shrinking 100-acre orchard.
The rivers -- the Murray, Darling and Murrumbidgee -- flow from the western slopes of the Great Dividing Range and nourish the valleys of Australia's fruit and grain basket, as well as a diverse system of wetlands, grasslands and eucalyptus forests.
Like scenes from a modern Dust Bowl, mile after mile of desiccated fields lie fallow, rows of shriveled trees that once bore peaches and pears are now abandoned orchards, and small businesses are shuttered, fronted by for-sale signs. The dingy brown of the landscape rearranges in a cloud of dust with every hot wind that blows.
Farmers who once grew 60% of the nation's produce are walking off their land or selling their water rights to the state and federal government. With rainfall in the region at lower than 50% of average for more than a decade, Australia is witnessing the collapse of its agricultural sector and the nation's ability to feed itself.
In rural Victoria, one rancher or farmer a week takes his own life. Public health officials say hanging is the preferred method.
"Fourteen dairy farmers in the valley have committed suicide in the last five years," Eddy said matter-of-factly, staring at his hands at his long, wooden dining room table. "Hangings, they are common but they are not made public. It's really depressing, it's really tough going.
"Fruit growers are abandoning their orchards. It's their life's work, and it's gone to dust. They are at their wits' end. The small growers haven't got the money to replant. Haven't got the time to wait five years for a return. The machinery they have is not salable. They have thrown their arms up and walked away. They are broken people."
Pulling up trees
Those who remain continue bulldozing apple and peach trees too stressed to produce marketable fruit. Each fall, orchard owners burn the trees in a massive bonfire, forlornly "toasting" their failed crops with cans of beer. More than 20% of the fruit trees in the Goulburn Valley have been pulled up in recent years. Few new trees take their place.
Local dairy farmers live a similar definition of unsustainability, concluding they can make more money selling their water to cities than they can selling milk.
"That's what got us through last year," said Di Davies, Eddy's neighbor. "We parked our cows and sold our water."
Santo Varapodio, 73, is the patriarch of a family that runs one of the largest fruit operations around the nearby agricultural center of Shepparton. The area's annual rainfall used to be 19 to 21 inches a year.
"Now we're lucky if we get 6 to 7 inches," Varapodio said, displaying the stunted pears picked from under-watered trees. He said this summer's heat wave "cooked" his fruit. "When we bring the pears in, about 15% will have burn on them," Varapodio said. "The apples will have anything up to 50% sunburn on them."
Rainfall patterns have been frustratingly uncooperative. Gentle winter showers that replenished groundwater have been replaced by torrential summer onslaughts that turn the fertile topsoil into a slough.
Most of the country is in the grip of the worst drought in more than a century. Every capital in Australia's eight states and territories is operating under considerable water restrictions. In urban areas, "bucketing" has become a common practice -- placing pails in showers and using the gray water on lawns or gardens. In some cities, such as Brisbane, residents drink recycled water, a process nicknamed "toilet to tap."
In rural areas, the lucky tap their own wells, provided they still function. Others survive on rainwater or what they can scrounge or buy.
Meanwhile, the tropical north's rainy season, known as the Big Wet, is longer and wetter than ever. Warming tropical waters in the Coral Sea and the Gulf of Carpentaria spawn ever more powerful cyclones, while rainfall and heat records are broken every year.
The coastal city of Darwin, in the Northern Territory, swelters through 20 to 30 days of temperatures above 95 degrees, with high tropical humidity. Government scientists project that by 2070, Darwin will experience such conditions as many as 300 days a year.
Communities on the Cape York Peninsula accustomed to being flooded for days are commonly cut off for weeks. Throughout February, the Queensland government airdropped supplies to citizens, who had to wait to reemerge when the water recedes in the Southern Hemisphere's autumn, in late March or early April. In the meantime, in-ground burials are on hold.
Climate change researcher Cocklin lives in the far north, where the new regime of intensified monsoons scarcely gives Queenslanders a break.
"You might get punched and get up again," he said. "The second time it's harder to get up. The third time, you can't be bothered. How many times can you get punched?"
Australians in the south would see water as heaven-sent; in the north, it's a curse. In March, a young girl playing by a rain-swollen river was carried off by a crocodile, the second child lost to crocs in a month.
The region is beset with twin epidemics of malaria and a dangerous form of hemorrhagic dengue fever, from mosquitoes that breed in the standing water. Such diseases are expected to become more common in the tropics with climate change.
Reef is withering
Not far from where Cocklin lives, the north's two largest tourism draws, the Great Barrier Reef and the Tropical Rainforest Reserve, are withering under climate extremes. Higher ocean temperatures are bleaching expanses of coral and affecting fish and plant species. A report issued last year by the Intergovernmental Panel on Climate Change projected that the Great Barrier Reef will be "functionally extinct" by 2050.
Cocklin was just back from giving a presentation at a climate change conference in Europe, showing the degradation of the reef as well as photographs of the bush fires and floods. "The audience was a little bit in awe of what's going on in Australia," he said.
Inland, tropical forests are retreating up mountainsides as species of towering trees die off at lower altitudes and reestablish themselves in cooler climes. Rare and unique animals are on the move, competing for scant space atop Australia's modest topography. In most areas, the vertical distance from the tree line to a mountain's peak is less than a quarter-mile.
"If you are at the top of the mountain, it will only take a couple of degrees to push you off the top," said Stephen Williams, director of the Center for Tropical Biodiversity and Climate Change in Townsville. Scientists paint a bleak picture of wildlife competing for space on peaks in the country's alpine region. Williams and other biologists predict as much as 50% animal extinction in the region by the end of the century.
Chief among the candidates for extinction is the rare white lemuroid ringtail possum, a singular species that Flannery, the paleontologist, describes as "our panda." The pale creatures live high in trees in the 4,000 square miles of moist forest in northeast Queensland. They can't tolerate, even for hours, temperatures above 86 degrees. Williams' research found that the possum was gone in one of the animal's two historical ranges, and in the other it "has declined dramatically, to the point where you can barely detect it."
Williams said that when he shares his research illustrating the degree to which the continent's biodiversity is at risk, "people's jaws drop."
Scientists are frustrated that such dramatic anecdotal and empirical evidence hasn't sparked equally dramatic action from Australia's government. They suspect the inaction can be partly explained by examining the nation's relationship with coal. Australia is the world's largest exporter of coal and relies on it for 80% of its electricity. That helps make Australia and its 21 million people the world's highest per-capita producers of greenhouse gases in the industrialized world.
Climate change researcher Cocklin, who is deputy vice chancellor at James Cook University, said the power of the coal companies and the massive receipts they bring in render the industry politically untouchable.
"The nature of our energy profile is one where coal features significantly," he said. "There's no denying it's a massive problem. I don't think in the public-political arena it is being challenged with the tenacity that you would want. No Labor [Party] government is going to challenge that."
Prime Minister Kevin Rudd says climate change is high on his agenda, but many here are disappointed by his pledge to cut overall greenhouse gas emissions by only 5% by 2020.
Scientists and policymakers now agree that even drastic cuts won't halt climate changes already underway. In response, some Australians are considering whether outback settlements should be abandoned.
"We are already very flat and very dry as a continent," Flannery said. "There is just this little margin that is inhabitable. We don't have a lot of options."
Most Australians live on the coast, where they are vulnerable to flooding because of rising sea levels, projected to increase by 6 1/2 feet this century.
"Some places are pretty close to being bloody unlivable anymore," Cocklin said.
"When you start talking about places where 45 degrees [113 Fahrenheit] is commonplace, that raises the question of 'Can you really live in that?' "
CNN Money
Wells cashes in on mortgage boom
The big bank's fat first quarter is the result of a federally backed mortgage-refinancing surge. Still, some say banks aren't out of the woods yet...Colin Barr
NEW YORK (Fortune) -- Wells Fargo's numbers show how the big banks hope to muddle through the deepest economic downturn in decades - with some help from their friends in Washington.
San Francisco-based Wells (WFC, Fortune 500) surprised Wall Street Thursday by saying it expects to make $3 billion, or 55 cents a share, in the first quarter ended last month -- almost double the analyst consensus estimate.
Shares of Wells surged 30% to their highest level since January on the news, and the beaten-down shares of rivals followed.
Thursday's events don't erase the worries about the big banks, which center on the scope of loan losses as real estate prices plunge.
Still, Wells' numbers show that with competition having collapsed, plain vanilla banking - even mortgage banking - can be enormously profitable right now.
Wells said it posted a first-quarter net interest margin -- reflecting the difference between the rate it pays on its own borrowings and the rate it collects on its loans -- of 4.1%. That's down from the 4.9% Wells reported in the fourth quarter, excluding its acquisition of Wachovia, but above the 3.9% Wall Street expectation for the combined company in the first quarter.
Mortgage magic
Wells, which has portrayed itself as an unwilling recipient of aid from Washington and has criticized government intervention in the financial sector, also was helped in the first quarter by federal efforts to contain the damage from the housing bust.
Wells is the nation's biggest mortgage servicer and a big home loan originator, so it was a big beneficiary of a refinancing boom driven in part by ultra-low short-term interest rates and the government's purchases of mortgage bonds.
Wells said mortgage originations doubled from fourth-quarter levels to $100 billion, with three-quarters of those covering refinancing transactions.
While the refinancing boom won't last forever, it is clear that holding down mortgage rates has emerged as a top priority in Washington. The hope is that low rates can help the economy by reducing borrowers' monthly payments and could also lead to a rebound in home sales.
The gains won't be limited to the first quarter, either. Mortgage activity should remain strong in the second quarter, Wells said, judging by its own origination pipeline.
Though Wells took $25 billion in federal aid in October, it hasn't been a happy relationship. Chairman Dick Kovacevich recently called the government's stress tests "asinine" and blamed the changing terms of federal support for a steep dividend cut last month.
A penny saved?
Thursday's news alone won't quell investors' fears about the pain that lies ahead for banks with big mortgage portfolios. Wells and rivals such as Bank of America (BAC, Fortune 500), Citigroup (C, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) remain perilously exposed to declining asset prices, particularly for commercial and residential real estate.
Indeed, some analysts questioned the quality of Wells' first-quarter profit numbers, saying the bank should be saving more for the rainy days ahead.
"We believe that credit quality materially deteriorated in the first quarter and that Wells Fargo is under-reserving for expected future losses," FBR Capital Markets analyst Paul Miller wrote in a note to clients Thursday. "We remain cautious based on what we don't know."
Wells said it added $1.3 billion to its loan loss reserve in the first quarter, bringing its total cushion against credit losses to $23 billion. Wells Fargo chief financial officer Howard Atkins called that "a very big number" in an interview on Bloomberg television Thursday, and called Wells' provision against loan losses "adequate."
Still, Wells' loan loss allowance as a percentage of total loans at the end of the first quarter was just 2.7%, going by FBR estimates -- compared with 3.62% at the end of the fourth quarter at JPMorgan Chase, the best-reserved big bank.
Even analysts who like the stock say the road ahead may not be smooth. Andrew Marquardt, an analyst at Fox Pitt Kelton who rates Wells an "outperform", wrote in a note to clients Thursday that he remains "cautious" on the state of the bank's commercial real estate, credit card and home equity loan portfolios, among others.
But given all the losses Wells has already recognized, Marquardt said he is "confident that [Wells Fargo] will continue to manage through this credit cycle better than most."
Happy days are here again? Really?
The market rally is starting to turn ridiculous and sublime. Investors now think the worst is over for banks and that consumers are spending freely again. Huh?...Paul R. La Monica
NEW YORK (CNNMoney.com) -- I don't want to necessarily say that investors were displaying a bit of good old-fashioned irrational exuberance Thursday following Wells Fargo's projected results.
But what the heck. I just did. This rally is a bit overdone.
Don't get me wrong. Loyal readers of this column (whether you love me or hate me) know that I've been saying for some time that stocks are probably oversold and that we may be closer to the bottom of the downturn than the beginning. But the worst is not necessarily over for the banking sector. So the huge rally for the entire group, and the broader market for that matter, is a little silly.
Talkback: Are you now more optimistic about the markets and economy?
Wells Fargo (WFC, Fortune 500) is one of the best run banks in the country - if not the best. The fact it was able to do well in the first quarter should not be a surprise. Nobody was predicting that it would post a loss in the first place, and the bank has reported better-than-expected results throughout the past year.
Those who were ganging up on the stock because they figured Wells would be the next Citigroup (C, Fortune 500) or Bank of America (BAC, Fortune 500) were in for a rude awakening this morning.
But there are scores of other banks that will still face a challenging year, as cash-strapped and debt-ridden consumers -- especially those who lose their jobs -- face problems paying their bills.
"The more you see unemployment rise, the more you have to think that could hurt financials. Many unemployed people have credit card debt, student debt and presumably a mortgage. Concerns about commercial loans are also still hovering around banks," said Quincy Krosby, chief investment strategist with The Hartford.
Investors appear to be making the classic mistake of assuming that, just because a leader in a sector is doing well, it's good news for the whole group.
That's not how markets work. Some companies do well at the expense of others. Wells may be a banking winner but there are still many losers out there.
To that end, SVB Financial Group (SIVB), a bank based in Santa Clara, Calif., said Tuesday it was going to post a surprise first-quarter loss due largely to a higher provision for loans that may go bad.
And analysts expect regional banks such as Comerica (CMA), SunTrust (STI, Fortune 500), Zions Bancorp (ZION) and KeyCorp (KEY, Fortune 500), to name a few, to report losses in the first quarter, second quarter and for all of 2009. Yet, shares of all four banks were up more than 10% Thursday morning.
"Other banks will likely have to create larger reserves. You have to think there are more time bombs out there and that this is far from over," said Phil Dow, director of equity strategy with RBC Capital Markets in Minneapolis.
Comeback for consumer spending?
What's going on with retail stocks is another aspect of the recent rally that is curious at best.
Wal-Mart Stores (WMT, Fortune 500) reported Thursday that same-store sales rose 1.4% in March. While that was lower than what analysts had hoped for, the company also said that it still expected profit for the first quarter would be toward the high-end of its range of 72 cents to 77 cents a share.
So what did the stock do? It fell 5%.
Meanwhile, shares of retailers that continued to report declining sales, such as Target (TGT, Fortune 500), JC Penney (JCP, Fortune 500) and Gap (GPS, Fortune 500), all rose modestly Thursday simply because their same-store sales didn't fall as much as expected. JC Penney is still expected to report a quarterly loss, but its stock was up 8%.
Then there's Bed Bath & Beyond (BBBY, Fortune 500). The company reported sales and earnings that were lower than a year ago late Tuesday. But the stock surged 25% Wednesday because both revenue and profit beat forecasts.
Some have been quick to dub the fact that sales aren't falling as much as expected as signs that the consumer is once again confident to start spending more freely.
But that may be overly simplistic. Haag Sherman, managing director with Salient Partners, an investment firm based in Houston, said it is a mistake for investors to use one company's results as a proxy for the whole group.
For example, he said a big reason why Bed Bath & Beyond had a better quarter probably had more to do with the liquidation of one of its top rivals and not a sudden boost in consumer spending.
"Is the consumer coming back, or is it that Linens 'N Things is going out of business? People aren't discerning right now," Sherman said. "Investors are picking and choosing pieces of the news to support buying."
Of course, it's encouraging that investor sentiment has finally started to shift from despair and doom to optimism and renewal.
"This reprieve in selling is an indication that the market is poised to receive any glimmer of hope in a positive light," said Krosby.
But the pendulum has swung too far from excessively negative to unreasonably positive. Just as investors were probably too bearish in the post-Lehman Brothers panic last fall and earlier this year, they are now probably too bullish in the Wells Fargo-induced euphoria.
That's why investors need to focus on identifying individual companies that can be winners, and not assume that everyone is poised for better times ahead.
"The market is looking for reasons to go up," Sherman said. "But earnings, for the most part, are going to be horrific. There's no way around that. You have to look more critically at each company."
4-14-09 Merced County Board of Supervisors meeting...10:00 a.m.
Agenda posted 72 Hours Prior To Meeting
4-16-09 Governing Board meeting...3:00 p.m.
4-22-09 Planning Process for Highways 165/99 Improvements...6:00 p.m. – 7:30 p.m.
You are invited to learn about a proposed project to reduce traffic congestion and increase safety along Highway 165.
Merced County, Merced County Association of Governments (MCAG), Stanislaus County, Stanislaus Council of Governments (STANCOG), and the City of Turlock
are working with Caltrans to develop a report (Project Study Report) that will look at traffic deficiencies, potential improvements, the possible realignment of Highway 165 and/or the building of a new interchange with Highway 99. We would greatly appreciate your comments and suggestion
Please attend the open house meeting to learn about the project and share your ideas for potential improvements.
Wednesday, April 22, 2009
6:00 p.m. – 7:30 p.m.
Elim Elementary School cafeteria
7677 North Lander Avenue
Hilmar, CA