5-2-09

 
5-2-09
Merced Sun-Star
Our View: We must get Wal-Mart done, right
Merced needs distribution center, so let's not make it harder than it should be.
http://www.mercedsunstar.com/181/v-print/story/823775.html
As the city has finished the public review process for the new Wal-Mart distribution center this week, we want to restate our view that the City Council should approve the distribution center in the proposed location.
In this Valley and within the city of Merced, in particular, we have a long history of making it hard for companies to start, grow and expand their business. That needs to change.
And we must get this one right.
EDAW, the company that wrote the report, must now answer all the questions and concerns.
More importantly, it must provide mitigation for those concerns that warrant and need solutions. This is critical for many reasons.
Most reasonably, they should provide solutions because it is vital that we are good stewards of the environment and the community as a whole.
We must remember that the land proposed has been zoned for this purpose for more than 30 years. If this process is done too quickly or done wrong, the entire project will be trapped in red tape.
Although the long timeline is intensely frustrating to us, we do understand that they are taking extra precautions to ensure that it is done correctly.
We do want to make sure people understand it is not just to avoid litigation -- it is to make sure all important concerns are addressed.
One of the most serious concerns we have is that opposition is fueled by out-of-town, anti-Wal-Mart interests that don't even care about our city. They will leave town after their opposition is done and never come back.
As reported in the Sun-Star and on our Web site on Tuesday, Sacramento lawyer Keith Wagner, the hired (or free) gun for Merced Alliance for Responsible Growth, was quoted: "Fortunately, litigation pays."
By his own admission, he has created a niche for himself that probably pays him very well. Our guess is that he could care less about Merced and cares more about his own livelihood. It really doesn't bother him that we have at least six large retail locations that are empty in our town.
As a community, we must also be very careful as we digest all the comments that are made.
Philip King, a California State University, San Francisco, economics professor, argued that Wal-Mart supercenters will be popping up all across the Valley. Rest assured that Wal-Mart is a much smarter company than that. A distribution center in Merced doesn't influence store-opening decisions. A large part of their success has been because of their distribution network that's already in place.
They will propose new supercenters based on sales patterns and return on investment, not a distribution center in Merced. One of our biggest employers is a Safeway distribution center, and there isn't even a Safeway in Merced County.
As the City Council weighs its decision, they must listen to comments and be careful to separate generalizations from fact.
Our community needs jobs. There have been anecdotal comments about that issue as well.
As reported by Sun-Star reporter Scott Jason: King, who has a Ph.D. from Cornell University, claimed many of the jobs created wouldn't go to Merced residents, and some workers could come from as far away as Livingston or Fresno. Challenged by a Valley resident, King said he would need to gather evidence. Our guess is that there are people from Merced working at Foster Farms.
There will be many more debates over the next several months and a lot more work to do. There will be facts and there will be fiction. It will be up to us as a community to decide for ourselves.
As a newspaper, Web site and media company, our reporters will continue to report and publish viewpoints on all sides of the issue.
Independent of that, it is our opinion that all concerns must be addressed and important challenges must be mitigated.
But in the end, the distribution center must be approved.
It is on land designated for that purpose. Freeway infrastructure has been addressed and is in place with the Mission Avenue interchange. And job growth is vital to our long-term viability as a vibrant community.
More than ever, our community and city leaders must get this one right.
Capital Press
Line could slice farms
Ag community worried about loss of ground, trees...Tim Hearden...4-30-09
http://www.capitalpress.info/main.asp?SectionID=67&SubSectionID=616&ArticleID=50931&TM=47332.79
Many farmers and ranchers have voiced qualms about a proposed 600-mile power transmission line that would traverse the rural countryside from far Northern California to the Central Valley and the San Francisco Bay area.
The Transmission Agency of Northern California TANC, a coalition of 15 municipal utilities from Redding to Modesto, wants to build the line by 2014 to meet the needs of the state's growing population and increase access to renewable energy sources.
The agency will take comments through May 31 on the $1.5 billion project, which aims to relieve congestion on the transmission lines linking the Pacific Northwest to California.
But farmers throughout the valley are concerned that the power lines could cut through their properties, taking valuable cropland out of production.
"The biggest concern within the ag community, particularly in the Sacramento Valley, is the impact it will have on their existing orchards," said Ned Coe, an Alturas rancher and field representative for the California Farm Bureau Federation.
"There are also impacts to field crops," he said. "It will increase the difficulty of using crop dusters in rice ground. You're dealing with structures out in the middle of your fields, and then on down the list from that are the aesthetic issues of having a power line going through your property."
In one case, a map of a proposed route shows a power line cutting across a farm in Glenn County and going directly over the house, Coe said.
TANC is working on the project with the Western Area Power Administration, a division of the U.S. Department of Energy that markets hydroelectric power.
The 250-kilovolt to 500-kilovolt lines would run from new substations in Ravendale, northeast of Susanville, and Round Mountain, east of Redding, down the valley to new substations in Tracy and the Elk Grove area.
The project would be funded by loans, to be repaid over 30 years through customers' utility bills, said Patrick Mealoy, a TANC operations manager in Sacramento. The lines would have the capacity to carry enough electricity to power an additional 1.12 million Central Valley homes, he said.
The many cables, towers and substations would alleviate constraints in moving power from the Pacific Northwest system, Mealoy said. It would also allow utilities to access energy from windmills and other renewable sources that would be developed in Lassen County if there were transmission lines available, he said.
"I think one of the primary drivers for getting to Lassen County, which is the northern terminus of this project, is the state's mandate for renewable energy," Mealoy said. "Twenty percent of all energy consumed ... has to come from a qualified renewable resource."
TANC officials warn that no routes have been finalized, although the agencies expect the lines to reach across a mix of public and private property. Mealoy said he and others have begun talking with local Farm Bureau offices to address farmers' concerns.
"It's something that the agency is very cognizant of," he said. "To do 600 miles of transmission through Northern California, some portion of it would have to be on ag land. We want to open up a dialogue in order to mitigate or limit whatever the impact will be on the ag community."
Karen Norene Mills, the state Farm Bureau's associate counsel and public utilities director, said the TANC project is one of several new transmission lines that are proposed throughout California.
One question that should be answered, she said, is "what part is needed, where and how much of it is needed."
"That's always the beginning question of any transmission line - what is it trying to accomplish?" she said. "The need questions are typically complex and require a lot of analysis. With this one, it's at the very beginning stage, and all the public's seen in terms of information about it is what's been printed in the Federal Register notice and some of the information on the websites."
The loss of farmland as a result of TANC has been roughly estimated at about 15,000 acres, Mills said. It's hard to mix transmission lines and timber or orchards, since you can't have trees beneath the power lines, she said.
The new lines and towers will need access roads, and people will have to come onto farmers' property to check the system, Mills said. Nowadays, many utilities hire contractors who aren't as respectful of private property rights, she said."We all want to eat, and we have to have good ag ground," she said. "When you lose it, you lose it forever."
To comment
Written comments on the proposed transmission line may be sent to David Young, NEPA Document Manager, Western Area Power Administration, Sierra Nevada Region, 114 Parkshore Drive, Folsom, CA 95630, or e-mailed to TTPEIS@wapa.gov.
Online
For more information about the Transmission Agency of Northern California's proposed transmission line, visit www.tanc.us
Stockton Record
No, thank you...Alex Breitler's Blog
http://blogs.recordnet.com/sr-abreitler
About three dozen Delta landowners will be hauled into court by state water officials for refusing to allow those officials on their land.
Their reluctance is based on the fact that the officials are surveying in part for a possible peripheral canal.
We'll have a story on this shortly. In the meantime, here are the docs. First, the Department of Water Resources and its petition to the court (the petitions for the 13 cases in San Joaquin County are nearly identical; this one pertains to the Clavius Land Co. out on McDonald Island):
http://online.recordnet.com/projects/blog/2009/0501petition.pdf
And now, the response from the attorneys representing 12 of the 13 landowners:
http://online.recordnet.com/projects/blog/2009/0501memo.pdf
Expect a showdown on June 29 when this thing is heard in San Joaquin County Superior Court. The hearing is scheduled for 9 a.m. in Dept. 41.

San Francisco Bay Guardian
Going nuclear
Legislators demand better cleanup plans for a radioactive shipyard dump...Sarah Phelan…4-29-09
http://www.sfbg.com/printable_entry.php?entry_id=8471
Radioactive waste was disposed of at Parcel E-2 
April Fool's Day is known as a day for practical jokes designed to embarrass the gullible.
But Assembly Member Tom Ammiano's legislative aide Quentin Mecke says the April 1 letter that Ammiano and fellow Assembly Members Fiona Ma and state Sen. Leland Yee sent Mayor Gavin Newsom urging him not to support a proposal to bury a radiologically-contaminated dump beneath a concrete cap on the Hunters Point Shipyard was dead serious.
In their letter, Ammiano, Ma, and Lee expressed concern over that fact that federal officials don't want to pay to haul toxic and radioactive dirt off the site before it's used for parkland. They noted that an "estimated 1.5 million tons of toxics and radioactive material still remain" on the site.
A 1999 ordinance passed by San Francisco voters as Proposition P "recognized that the U.S. Navy had for decades negligently polluted the seismically-active shipyard, and that the city should not accept early transfer of the shipyard to San Francisco's jurisdiction, unless and until it is cleaned up to the highest standards," the legislators wrote. "Given the information we have, a full cleanup needs to happen," Mecke told us.
But Newsom's response so far suggests he may be willing to accept the Navy's proposal.
WAR WASTE
From the 1940s to 1974, according to the Navy's 2004 historical radiological assessment, the Navy dumped industrial, domestic, and solid waste, including sandblast waste, on a portion of the site known as Parcel E. Among the materials that may be underground: decontamination waste from ships returning from Operation Crossroads — in which atomic tests in the South Pacific went awry, showering Navy vessels with a tidal wave of radioactive material.
"We have serious questions about the city accepting what is essentially a hazardous and radioactive waste landfill adjacent to a state park along the bay, in a high liquefaction zone with rising sea levels," the letter reads. "We understand that the Navy is pushing for a comparatively low-cost engineering solution which the Navy believes will contain toxins and radioactive waste in this very unstable geology. We hope that you and your staff aggressively oppose this option."
Keith Forman, the Navy's base realignment and closure environmental coordinator for the shipyard, told the Guardian that the Navy produced a report that did a thorough analysis of the site.
The Pentagon estimates that excavating the dump would cost $332 million, last four years, and cause plenty of nasty smells. Simply leaving the toxic stew in place and putting a cap on it would cost $82 million.
Espanola Jackson, who has lived in Bayview Hunters Point for half a century, says the community has put up with bad smells for decades thanks to the nearby sewage treatment plant. "So what's four more years?" Jackson told the Guardian.
Judging from his April 21 reply to the three legislators, who represent San Francisco in Sacramento, Newsom is committed only to a technically acceptable cleanup — which is not the same thing as pushing to completely dig up and haul away the foul material in the dump.
He noted that during his administration federal funding for shipyard clean-up "increased dramatically, with almost a half-billion dollars secured in the last six years." Newsom also told Ammiamo, Ma, and Yee that the city won't accept the Parcel E landfill until both the state Department of Toxic Substances Control and the federal Environmental Protection Agency "agree that it will be safe for its intended use."
The intended use for Parcel E-2 is parks and open space, said Michael Cohen, Newsom's right-hand man in the city's Office of Economic and Workforce Development. The Navy won't issue its final recommendations until next summer. "That's when regulatory agencies decide what the clean up should be, whether that's a dig and haul, a cap, or a mix of the two, " Cohen explained.
TRUCKS OR TRAINS?
Part of the Navy's concern is the expense of trucking the toxic waste from San Francisco to a secure landfill elsewhere — someplace designed to contain this sort of material (and someplace less likely to have earthquakes that could shatter a cap and let the nasty muck escape).
David Gavrich and Eric Smith say the Navy is looking at the wrong solution. Gavrich, founder of the shipyard-based Waste Solutions Group and the San Francisco Bay Railroad, which transports waste and recyclables, and Eric Smith, founder of the biodiesel-converting company Green Depot, who shares space with Gavrich and a herd of goats that help keep the railyard surrounding their Cargo Way office weed-free, say the military solution is long-haul diesel trucks. But, he observes, the waste could be moved at far less cost (and less environmental impact) if it went by train.
Saul Bloom, executive director of Arc Ecology, a nonprofit that specializes in tracking military base reuse and cleanup operations, would also like to see the landfill removed, even though he's not sure about the trucks vs. train options.
"We don't have confidence about having a dump on San Francisco Bay," Bloom said. "I'm concerned about the relationship between budgetary dollars and remediation of the site. I'm concerned that the community's voice, which is saying they'd like to see the landfill removed, is not being heard."
Mark Ripperda of EPA's Region 9 told us that community acceptance is important, but a remedy must also be evaluated using nine specific criteria.
"A remedy must first meet the threshold criteria," Ripperda said. "If it passes the threshold test, then it is evaluated against the primary balancing criteria and finally the modifying criteria are applied."
Noting that he has not received any communication from either the Assembly Members or the Mayor's Office concerning the Parcel E-2 cleanup, Ripperda said that "the evaluation of alternatives considered rail, barge, and truck transport, with rail being the most favorable transportation mode for the complete excavation alternative. However, the waste would still be transported and disposed into a landfill somewhere else and the alternatives must be evaluated under all nine criteria."
Ripperda said it's feasible to remove the worst stuff — the "hot spots" — and cap the rest. "A cap will eliminate pathways for exposure and can be designed to withstand seismic events," he told us. "The landfill has been in place for decades and the groundwater data shows little leaching of contaminants."
Meanwhile Newsom has tried to redirect the problem to Ammiano, Ma, and Yee, saying he seeks their "active support in directing even more state and federal funds" toward cleaning up the shipyard. He made clear he wants to move the redevelopment project forward — now.
Sen. Mark Leno is carrying legislation that includes a state land swap vital to the city's plans to allow Lennar Corp. to build housing and commercial space on the site.
But while Cohen claims the aim of the land trade is to "build another Crissy Field," some environmentalists worry it will bifurcate the southeast sector's only major open space. They also suspect that was the reason Leno didn't sign Ammiano's April 1 letter.
Leno says that omission occurred because Sacramento-based lobbyist Bob Jiroux, who Leno claims drafted the letter, never asked Leno to sign. (Jiroux refused to comment.)
Claiming he would have signed Ammiano's letter given the chance, Leno described Jiroux as a "good Democrat" who used to work for Sen. John Burton, but now works for Lang, Hansen, O'Malley, and Miller, a Republican-leaning lobbying firm in Sacramento whose clients include Energy Solutions, a Utah-based low-level nuclear waste disposal facility that stands to profit if San Francisco excavates Parcel E-2.
Ammiano dismisses the ensuing furor over Energy Solutions as a "tempest in a teapot.
"I signed that letter to Newsom because of the truth that it contains," Ammiano said. "Sure, there's crazy stuff going on. But within the insanity, there's a progressive message: the community wants radiological contaminants removed from the shipyard."
Los Angeles Times
Officials celebrate project to cut water loss on All-American Canal
After decades of planning and more recent legal battles, a concrete lining will prevent seepage along 23 miles in the Imperial Valley...Tony Perry
http://www.latimes.com/news/local/la-me-all-american-canal2-2009may02,0,5735200,print.story
Reporting from Gordon'S Well, Calif. — Running through an obscure strip of isolated Imperial County, the All-American Canal rarely gets the attention of the other ditches that have shaped Southern California.
The Los Angeles Aqueduct, which brings water from the Owens Valley; the Colorado River Aqueduct, which supplies coastal Southern California; and the California Aqueduct, which brings water from Northern California, are near major population areas.
The All-American Canal brings copious amounts of Colorado River water to turn 500,000 acres of desert into some of the most productive farmland in the world.
As California struggles with drought, the 82-mile channel could be key. So on Thursday, water officials gathered at the canal to celebrate what they called a rare example of cooperation in the often contentious arena of water politics.
"This event is a big deal," said Karl Wirkus, deputy commissioner of the U.S. Bureau of Reclamation, whose motto is "Managing Water in the West."
At a patch of desert 35 miles east of El Centro and barely 50 yards north of the metal fence that separates the United States and Mexico, officials of several sometimes warring water agencies came together to celebrate the nearly completed project to line 23 miles with concrete to prevent seepage. The section was considered the leakiest part of the earthen canal.
The project is part of an agreement under which the Imperial Irrigation District, the canal's operator, grudgingly agreed to sell some of its mammoth share of the Colorado River to water-deprived San Diego County. The cost of the $300-million project was split between the state government and the San Diego County Water Authority.
Lester A. Snow, director of the California Department of Water Resources, praised more than 300 officials and others at the ceremony for overcoming numerous political, legal and financial problems when much of state government seems paralyzed. He joked that he was carrying a message from the governor: "Congratulations on finally getting something done in this state."
Lining the canal is seen as a major step toward Southern California learning to live within a "water budget" instead of looking to the Colorado River or Northern California for more water.
"The era of limits on the Colorado River imposes new expectations -- and responsibilities -- on all water users," said Brian Brady, general manager of the Imperial Irrigation District.
But less seepage from the canal will mean less water for the farmers of the Mexicali Valley, where the aquifer has been replenished for decades by the leaking water.
Lining the earthen canal is expected to save 67,700 acre-feet of water a year.
The water sales agreement between Imperial and San Diego may also mean less fresh water for the Salton Sea, which straddles Imperial and Riverside counties. Less water could mean a smaller, smellier sea, and could possibly lead to dust storms.
"In water projects, there are collateral benefits and collateral damages," said Steve Erie, water policy expert and professor of political science at UC San Diego.
Many of the Imperial Valley's farmers have never liked the water sale agreement. One group sued to block the lining, delaying construction for three years before losing. The Mexican government also sued unsuccessfully to protect Mexicali farmers.
Completed in 1942, the All-American Canal replaced a canal that traveled, in part, through Mexico. It is the longest irrigation canal in the world, according to NASA scientists who have studied satellite pictures. It captures water rushing south toward Mexico and, because much of the Imperial Valley is below sea level, the canal redirects the water north largely through the force of gravity.
The late Imperial Valley farmer-poet Richard Mealey, praising the valley's pioneers, wrote: "They built the mighty All-American, a wonder in its day / A canal that ran a river a hundred miles the other way."
By paying for the lining of the All-American Canal, the San Diego County Water Authority is being allowed to buy a share of the Imperial Irrigation District's allocation from the Colorado River; the district has rights to 70% of the state's portion of the river. Also, several bands of Indians in northern San Diego County will receive additional water to settle years of litigation over water rights.
The lining of the canal had been a dream of water officials for so long that Thursday's ceremony began with a tribute to those who died before the project was finished. Planning began in the early 1980s.
"Man, look at that: Isn't that a beautiful sight? A lined canal," Robert Johnson, former commissioner of the U.S. Bureau of Reclamation, told the gathering.
Washington Post
EPA Seeks Rules For Utilities' Polluted Runoff
Toxins That Once Went Into Air Are Being Diverted Into Water...Juliet Eilperin
http://www.washingtonpost.com/wp-dyn/content/article/2009/05/02/AR2009050200703_pf.html
Faced with new evidence that utilities across the country are dumping toxic sludge into waterways, the Environmental Protection Agency is moving to impose new restrictions on the level of contaminants power plants can discharge.
Plants in Florida, Pennsylvania and several other states have flushed wastewater with levels of selenium and other toxins that far exceed the EPA's freshwater and saltwater standards aimed at protecting aquatic life, according to data the agency has collected over the past few years. While selenium can be beneficial in tiny amounts, elevated levels damage not only fish but also birds and people who consume contaminated fish.
Ironically, the reason more selenium and metals such as arsenic are now entering U.S. waterways is because the federal government has pressed utilities to install pollution-control "scrubbing" technology that captures contaminants headed for smokestacks and stores them as coal ash or sludge. The EPA estimates that these two coal combustion residues -- which are often kept in outdoor pools or flushed into nearby rivers and streams -- amount to roughly 130,000 tons per year and will climb to an estimated 175,000 tons by 2015.
Eric Schaeffer, who used to lead the EPA's enforcement office and now heads the Environmental Integrity Project, an advocacy group, said the agency must take action to avoid solving "one environmental problem by creating another."
"Scrubbers will help clean our air, but let's make sure that the toxic metals stripped out of coal-plant smokestacks don't end up in our water," he said, adding that the EPA's toxic release inventory ranks the power industry as the nation's second-largest discharger of metals and metal compounds. "It's crazy not to have limits on toxic discharges this big."
Mary Smith, director of the engineering and analysis division of the EPA's water office, said the agency initially assessed the toxic emissions of 56 industries and found that the utility industry "was at the high end of the range." When it comes to selenium in power plant effluent, she added, "We're looking at how low it can go and what is economically achievable."
While the EPA has not comprehensively sampled the nation's utilities, some operations have reported wastewater selenium levels far above the agency's guidelines. Sampling at Edison Mission Energy's Homer City, Pa., plant, for example, found that it produces wastewater with selenium levels well within its state operating permit but more than 100 times the EPA's acceptable freshwater selenium levels.
Bill Constantelos, Edison Mission Energy's managing director of environmental services, said the company has worked with the EPA and has significantly reduced the selenium in its wastewater. "The standards we have to meet, we are meeting," he said.
And David Luksic, manager of environmental capital projects at Tampa Electric, said the selenium concentrations that the EPA has detected are diluted before the utility flushes its wastewater out to Tampa Bay. "It's like dumping a thimble-full in a swimming pool," he said.
But the EPA and some members of Congress are questioning whether the federal government should establish new standards to protect the environment and public health. At a hearing Thursday of the House Transportation and Infrastructure subcommittee on water resources and environment, the panel's top Republican, John Boozman (Ark.), said the nation has "a problem" when it comes to utility releases of toxic sludge.
"We're not going to be done with coal tomorrow. . . . So as we do a better job of scrubbing and whatever, we're going to have even increased residue," Boozman said.
EPA spokeswoman Adora Andy said the agency "is moving to establish a new water-quality criterion aimed at selenium."
"The new method specifically calls for assessing levels of selenium in fish tissues instead of in concentrations in water because selenium, like mercury, bioaccumulates in fish," Andy added. "EPA already measures mercury levels in fish tissues in order to be more protective. The agency plans to request public comment on its new criterion for selenium before the end of this year."
The federal government is focused on selenium in fish tissue because, as with mercury, the contamination accumulates rapidly in the animals' bodies and becomes more potent. Consumption of contaminated fish can trigger a range of effects in birds and humans. Birds who eat selenium-contaminated fish experience effects such as deformation of their beaks and jaws and problems producing viable eggs, while humans can suffer neurological damage as well as hair and nail loss.
"Selenium is probably one of the most ecologically toxic elements that there is," said Conrad Dan Volz, who directs the University of Pittsburgh's Center for Healthy Environments and Communities.
Volz, who testified this past week before the House Transportation and Infrastructure subcommittee, has conducted two large-scale studies of fish in the Pittsburgh area and has found a direct correlation between power plant toxic emissions and selenium contamination in the animals. He noted that this is a problem because some area residents "eat four meals of river-caught fish a week," raising their contamination risk.
Some states have had to issue fish-consumption advisories to protect residents from selenium contamination. Duke Energy used to let residents near Princeton, Ind., fish in the lake it created as a cooling reservoir for the coal ash ponds near its Gibson Generating Station, but it banned fishing two years ago after tests showed elevated selenium levels.
The utility had channeled water from the reservoir to the adjacent Cane Ridge Wildlife Management Area, which is home to endangered least terns and other migratory birds. After U.S. Fish and Wildlife Service officials found selenium-contaminated eggs from some bird species on the refuge, the company spent $600,000 to pipe in water from the Wabash River.
"We recognize that every action has a reaction," said Duke Energy spokeswoman Angeline Protogere. She said the company is exploring whether it can take the selenium-contaminated waste in its ash ponds and store it in a dry landfill instead.
CNN Money
Three more banks fail
Silverton Bank closes, costing the Deposit Insurance Fund an estimated $1.4 billion. Smaller New Jersey and Utah banks also shutter. Catherine Clifford. CNNMoney's David Ellis contributed to this report
http://money.cnn.com/2009/05/01/news/companies/bank_failure/
index.htm?postversion=2009050120
NEW YORK (CNNMoney.com) -- Three more banks shut their doors Friday, according to the federal government, bringing the total number of failures up to 32 in 2009.
The first failure was a wholesale banking operator that served 1,400 other lenders across the country and was the fifth biggest bank failure during the current recession in terms of assets.
Georgia "bankers' bank": The Federal Deposit Insurance Corp. said in a statement that it created a bridge bank to take over the operations of Silverton Bank, National Bank, headquartered in Atlanta.
Unlike the other 30 banks that have failed so far in 2009, Silverton Bank did not take deposits directly from the general public or make loans to consumers. Instead, it was a "bankers' bank," offering a wide variety of services, such as foreign wire transfers, as well as clearing and cash management, to other banks.
Silverton was cooperatively owned by community banks throughout the Southeast and was heavily invested in loans to real estate developments in Florida, Georgia, and other parts of the Southeast, according to Christopher Marinac, managing principal of financial firm FIG Partners LLC based out of Atlanta, Ga.
When real estate values sank in the current downturn, the assets backing those properties also lost their value. The Southeast has seen numerous regional banks topple as the housing bubble burst.
At the time of its closing, Silverton Bank had approximately $4.1 billion in assets and $3.3 billion in deposits, all of which are expected to be within the FDIC's insurance limits.
The FDIC estimates that the cost to the Deposit Insurance Fund will be $1.3 billion, making it the fourth costliest bank failure since the start of the recession. "It is a bigger hit to the insurance fund than they have seen in the last couple weeks," Marinac said. "This is a bigger issue than we have seen in awhile."
Silverton served banks in 44 states and operated six regional offices. The FDIC created a bridge bank to take over the assets of the institution and has contracted The Independent Bankers Bank, out of Irving, Texas, to assist. The FDIC does not expect to see any significant impact to the bank's clients, at least in the near term.
However, the bridge bank only plans to be operational for 60 days, with a possible 30-day extension. When the bridge bank services terminate, the banks that were serviced by the cooperatively owned bank will have to go out and find another institution to take care of those services.
"There is no clear cut answer on a situation like this," said Marinac. "This is a little bit more complex and therefore there are more uncertainties about how this will unfold."
Thus far, the FDIC has not been able to find another wholesale bank to agree to take over Silverton's operations. The FDIC will attempt to sell off the assets, but it could pose a challenge to find a buyer for risky commercial loans. However, the FDIC could try to find a buyer by discounting the debt. "Everything has a price," said Marinac.
New Jersey: State regulators shut down Citizens Community Bank Friday night, and named the FDIC as the receiver. The Ridgewood, N.J.- based bank had total assets of approximately $45.1 million and total deposits of $43.7 million as of Dec. 31.
North Jersey Community Bank, of Englewood Cliffs, N.J., has agreed to assume all of the deposits of the failed bank. The failed bank's single office will reopen Monday as the North Jersey Community Bank.
North Jersey Community Bank paid a premium of 0.67% to acquire all of the deposits of the failed bank and has agreed to purchase approximately $11.5 million in assets. The FDIC will hold onto the rest of the assets to dispose of later.
The FDIC will continue to fully insure individual accounts up to $250,000 through the end of 2009.
Utah: On Friday evening the FDIC also became the receiver of America West Bank, after the Utah regulators closed the institution. The Layton, Utah-based bank had total assets of approximately $299.4 million and total deposits of $284.1 million as of Dec. 31.
Cache Valley Bank, based in Logan, Utah, is assuming all deposits, paying discounted price of $352,000. It also agreed to buy nearly $11 million worth of America West's assets and took a 30-day option to purchase loans at book value. The FDIC estimates that the cost to the Deposit Insurance Fund will be $119.4 million.
America West's three branches will reopen Monday as Cache Valley Bank outposts.
Checking accounts, debit cards still work: Through the weekend, depositors of both Citizens Community Bank and America West Bank can access their money by writing checks or using ATM or debit cards. Checks drawn on either of the failed banks will continue to be processed, and the FDIC said loan customers should continue to make their payments as usual.
Stress tests awaited
Local banks have been shutting down in droves as the recession has made it harder for customers and businesses to pay their loans. Nearly every Friday so far this year, at least one bank has failed. Last week, four regional banks were shuttered.
Even as the government has committed unprecedented amounts of money to increase liquidity and jumpstart the economy, the pace of bank failures has accelerated. In all of 2008, 25 banks failed, compared with 2009's 31 banks.
It is not only smaller, regional banks that have felt the pressure of the recession. The nation's largest banks have also been hit by rising default rates and a decline in business spending.
Among the big banks that have received government aid, Citigroup (C, Fortune 500) and Bank of America (BAC, Fortune 500) have each received $45 billion in funds from the government's Troubled Asset Relief Program, or TARP.
In order to assess the health of the nation's financial industry, the Obama administration has unveiled details of its plan to conduct "stress tests" on 19 of the nation's largest banks.
The assessment of the bank's health was expected to be made public May 4, but an announcement from the Treasury Department Friday indicated that results would be delayed until May 7.
Market watchers are anxiously awaiting the results of the stress tests, which have been designed to assess the banks' preparedness to weather further downturns in the economy, including further increases in unemployment and decreases in home prices.