Badlands Journal

The Contra Costa Times, covering a story of Port of Oakland air pollution, supposedly of interest to its readers, missed the crucial political fact of the year on this issue: that Gov. Schwarzenegger, vetoed the bill that would have provided the most money for air clean up, by putting a surcharge on all full containers passing through the port. The additional fact that Gov. Sarah Palin, Barfly-AK, had something to do with persuading him to veto the bill, was also missed.

The Contra Costa Times was, until recently, owned by Knight-Ridder, which sold it to the McClatchy Co, which sold it to Denver-based MediaNews Group. Moody's has just again downgraded MediaNews's credit rating and pointed to significant challenges in the chain's near future.

Meanwhile, according to Project Finance Magazine, on Dec. 9, five multi-leteral export credit agencies pledged $5.25 billion for widening and improving the Panama Canal, another blow to westcoast ports. Shipping by sea remains the cheapest means of transport.

Another aspect of the problem of ports, pollution, and the money to improve air quality around the ports, is that the planned "inland ports," warehousing and truck depots in the San Joaquin Valley reached by rail from the ports, have lost one big pot of expected public funding as a result of Schwarzenegger's veto.

“In a government of law, the existence of the government will be imperiled if it fails to observe the law scrupulously. Our government is the potent, the omnipresent teacher. For good or for ill, it teaches the whole people by example. Crime is contagious. If the government becomes a lawbreaker, it breeds contempt for the law; it invites every man to become a law unto himself; it invites anarchy.” -- US Supreme Court Justice Louis Brandeis, 1856-1941

12-5-7-08
CounterPunch.com
How Washington Arrogance Helped Drive the Mumbai Attacks
Muslim Revolution
By PAUL CRAIG ROBERTS
http://www.counterpunch.com/roberts12052008.html

We were deeply struck by this ancient theme -- that the polis is the teacher of its citizens -- because it is as true now as it has always been.

But, what of that other institution so terribly important to the education of our citizens and others, our universities, specifically "the greatest public higher education research institution in the world" ... (listen to those trumpets blare) ... the University of California?

Is UC a good teacher?

10-28-08
Fresno Bee
Fish policies upheld in court ruling
Judge says feds have steelhead discretion...John Ellis
http://www.fresnobee.com/local/v-printerfriendly/story/967296.html
A federal judge in Fresno ruled Monday that the U.S. government has discretion to recognize differences in steelhead fish populations when determining whether they are eligible for listing under the Endangered Species Act.
U.S. District Judge Oliver W. Wanger issued a 168-page ruling on two challenges to how the National Marine Fisheries Service viewed California's steelhead populations.
One case challenged the government's practice of counting hatchery steelhead populations separately from wild populations.
The Pacific Legal Foundation had argued that Endangered Species Act listing decisions could be based on the numbers of hatchery steelhead produced each year. Based on that, the foundation had asked the court to remove five separate populations of steelhead from the list of endangered species.
In his decision, Wanger wrote that the "best science available" used by the NMFS "strongly indicated that naturally-spawned and hatchery-born [steelhead] are different."

The articles below from the Merced Sun-Star tell a story about felony indictments brought against five people associated with Firm Build, a program started in 1998 to train "troubled teens" in construction trades. Merced County Planning Commissioner Rudy Buendia was or is still executive director of Firm Build, which went bankrupt months ago.

Buendia, charged originally with 15 felonies (later 17), according to the newspaper fled arrest and was a "fugitive" for two days before turning himself in with Kirk McAllister, Modesto criminal defense attorney, at his side.

Two of the five charged were arrested. It is unclear from reports if two others were arrested or turned themselves in. Two have posted bail and been released.

Buendia, the only reported fugitive, was released without paying bail on September 18 by Superior Court Judge McCabe. The judge's reasons included Buendia's clean record and that he personally knew seven of the 20 prominent people who wrote letters on Buendia's behalf. The board of supervisors is reported to have no plans of removing either Planning Commissioner Buendia or Patrick Bowman, on the board of the "troubled" Merced County Housing Authority and an official of the Merced County Office of Education, from the positions the board appointed them to.

Press release: For Immediate Use !! ******* Press release: For Immediate Use !!

Raptor and POW file two suits to protect Merced River

MERCED (Aug. 11, 2008) — San Joaquin Raptor Rescue Center and Protect Our Water (POW) filed two California Environmental Quality Act (CEQA) lawsuits in Merced County Superior Court this week.

Petitioners sued Merced County, the Merced County Board of Supervisors and Christopher Robinson, alleging four arbitrary and capricious actions of abuse of discretion in approving a series of parcel splits.

Continued from: node/474

From: MCCORRYM
To: pkhiek@co.merced.ca.us, rgabriele@co.merced.ca.us
CC: rlewis@co.merced.ca.us, jfincher@co.merced.ca.us, CALFMAN1, MCCORRYM
Sent: 3/31/2008 10:55:31 A.M. Pacific Daylight Time
Subj: Request to view active files pertaining to Felix Torres

Mr. Khiek and Mr. Gabriele,

On March 28, 2008, we received an email from Mr. Gabriele. In the body of the email was a reference to our potential request to view all files associated with the Felix Torres Child Development Center. We are confirming in this email our right to view these files.

In a previously scheduled meeting, we had incorrectly anticipated the timing of a Hearing Officer hearing. Typically, they have lasted between 30 minutes to one hour — this particular hearing ran nearly 2 hours - in which we were actively participating (February 25, 2008). As a result, Mr. Khiek, seems to have interpreted our actions as disrespectful to staff as we were late for our appointment (we met him after the meeting was over). Unfortunately, despite our good faith attempts, we have been unable to accurately predict the duration of County hearings — no disrespect to staff time, it is/was beyond our control.

Badlands is declaring the coming days a Sunshine Week to post a number of documents submitted to Merced County government in the last few months. Some of these documents have been included in the official packets of information for Board of Supervisors and Planning Commission meetings. Others have been suppressed.
This material is best understood by reference to the audio or video archives of supervisors’ and planning commission meetings and we encourage readers seriously interested in understanding their local government to go to the Merced County webpage, http://www.co.merced.ca.us/CountyWeb/, to seek out these hearings, particularly the two board of supervisors meetings on July 1 and July 8.
The following correspondence and public comment letters concern the approval of a Merced County Housing Authority project.

On behalf of San Joaquin Raptor Rescue Center and Protect Our Water, two local environmental groups, attorney Marsha A. Burch filed the following letter to the Merced Local Agency Formation Commission on June 26, regarding Planada Community Services District proposals to extend its sphere of influence to annex the new Felix Torres farm worker housing project.

In addition to Ms. Burch's letter, Maureen McCorry, on behalf of San Joaquin Et Al, submitted the following documents in addition to oral testimony:

1) Planning Commission Minutes 2.27.08
2) Planning Commission Minutes 3.26.08
3) 4.12.08 Articles
4) Planning Commission Minutes 4.09.08
5) Amendment to Real Party Exchange Felix Torres
6) Badlands Felix Torres, Raptor/POW
7) Felix Torres Background:
Felix Torres 3.26.08 Farm Bureau letter
Felix Torres 4.09.08
Felix Torres 11.29.07
Felix Torres 12.29.07
Felix Torres 12.13.07
Felix Torres USDA 12.13.07
Merced County 4.04.08
Planning Commission Transcript
Owens/Corser Comments
2.06.06 Agency Letter
8) Felix Torres CUP 2.27.08
9) Access to Working Files
10) Comment on proposed subdivision
11) MSR Planada
12) Graves letter
13) Felix Torres 3.26.08
14) Mary Stillhan 3.18.08
15) Planada CSD Final Petition
16) Lawsuit filed over the Planada Community Plan
17) Planada Settlement Agreement, SJRRC, POW, and the PCSD
18) PCSD ledger of Can and Will Serve Letters 1992-2008;

and Bryant Owens submitted these documents in addition to oral testimony:

“A” 2002 Preliminary Engineering Report for Planada WWTF Expansion
“B” Can and Will Serve Ledgers and related e-mail (13 pages)
“C” E-mail from PCSD to David Capron (1pg)
“D” Letter from Ken Mackie LAFCo (2pg)
“E” 11/7/03 Modification of Escrow, 21 acre Felix Torres Parcel (1pg)
“F” Community Plan Update Map Showing Felix Torres on Gerard Ave (1pg)
“F-1” Planada Community Plan Update 2003, Included by Reference
“G” PHRC Letter to Robert Lewis dated 8/3/06 (2pgs)
“H” Tom Nevis to Terry Allen re: Planada/Tatum Inquiry, Grand Jury Notes (2pgs)
“I” Villages of Geneva EIR Guidance Package (13pgs)
“J” Merced County Municipal Service Review, 2007, Planada (6pgs)
“J-1” Local Agency Formation Municipal Service Review Guidelines August 2003
(Govt. Publication included in its entirety)
“K” Settlement Agreement between Bryant Owens and PCSD dated 5/27/08 (5pgs)
“L” CA Regional Water Quality Control Board Administrative Liability Order (6pgs)
“M” 1993 Bear Creek Village CUP and amendments
“N” LAFCo Sphere of Influence Amendment 1055B.

The LAFCo board voted unanimously for continuance until Aug. 28 to consider new information.

All in all, it was not a good day for Merced County officials, who believe that the proper public-comment letter is a hand-written note by a pencil stub on toilet paper tacked to a fence post as far away as possible from 2222 M. St., Merced.

-- Badlands editorial staff
-----------------------------------------------------

MARSHA A. BURCH
ATTORNEY AT LAW
131 South Auburn Street
GRASS VALLEY, CA 95945
June 25, 2008
Via Email
Mr. Bill Nicholson, Executive Officer
Merced County Local Agency Formation Commission
2222 M Street
Merced, CA 95340

Re: Proposed Sphere of Influence Amendment No. 1055C to the Planada Community Services District and Planada Community Services District Annexation No. 2008-1, Planada, Merced County, California LAFCo File No. 0645

Dear Mr. Nicholson:

This office, in conjunction with the Law Office of Donald B. Mooney, represents the San Joaquin Raptor Rescue Center and Protect Our Water, groups with an interest in the above-referenced proposed sphere of influence amendment and annexation (“Proposal”). We apologize for the late hour of these comments, but we were unable to obtain a copy of the Planada Municipal Services Review (“MSR”) until this afternoon. We submit the following comments on the Proposal.

By previous letters and comments to the Merced County Planning Commission our clients have raised concerns that the Merced County Housing Authority’s (“MCHA”) CEQA documentation related to the above-referenced Proposal is inadequate. The following comment provides additional detail regarding the flaws in reliance upon the Environmental Assessment/Initial Study prepared by the MCHA. This comment further describes the legal obligation of the LAFCo as a CEQA responsible agency to assume the role of lead agency and prepare subsequent environmental review before approving the Proposal.

I. Required Subsequent Environmental Review

A responsible agency may not grant a discretionary approval for a project for which a negative declaration has been prepared without first considering the environmental impacts outlined in the negative declaration. (CEQA Guidelines § 15096(f); cf. Endangered Habitats League, Inc. v. State Water Resources Control Board (1997) 63 Cal.App.4th 227.) A responsible agency must decide for itself how to respond to a project’s significant effects that will directly or indirectly result from the responsible agency’s own decision to approve an aspect of the project. (CEQA Guidelines § 15096(g)(1); and Pub. Res. Code § 21002.1(d).) The responsible agency must adopt any feasible mitigation measures that will substantially lessen such effects. (CEQA Guidelines § 15096(g)(2).)

When a responsible agency believes that a lead agency has improperly relied on a negative declaration it may elect from options set forth in CEQA Guidelines section 15096 as follows: (1) take the matter to court within the applicable limitations period; (2) prepare its own “subsequent EIR” if permissible under CEQA Guidelines section 15162; or (3) assume the role of lead agency if permissible under section 15052. (Guidelines § 15096; and see City of Redding v. Shasta County Local Agency Formation Comm. (1989) 209 Cal.App.3d 1169, 1179-1181.)

As discussed in detail below, the initial study and negative declaration for the project failed to analyze certain impacts, and new information regarding potentially significant impacts has come to light since the MCHA approved the project. Thus, if the MCHA refuses to supplement the inadequate environmental
review, the LAFCo should assume the role of lead agency and evaluate the impacts of the project prior to approval.

It bears noting that the MCHA adopted the negative declaration for the project two and a half years ago on November 15, 2005. There is substantial evidence showing that the Felix Torres Housing Center is significantly different today in its construction phase than the project that was reviewed and approved
by the MCHA. Further, there is substantial evidence showing that the Planada Community Services District’s (“CSD”) plans to expand the wastewater treatment capacity have changed considerably, and the planned expansion formed a large portion of the MSR prepared by the LAFCo in April of 2007.

There is new information showing that the project will likely have significant impacts that were not addressed by the MCHA. (See Supporting Document Packet submitted by San Joaquin Raptor Rescue Center and Protect Our Water.)

Under CEQA Guidelines section 15052, the LAFCo as a responsible agency, shall assume the role of the lead agency when any of the following conditions occur:

(1) The Lead Agency did not prepare any environmental documents for the project, and the statute of limitations has expired for a challenge to the action of the appropriate Lead Agency.

(2) The Lead Agency prepared environmental documents for the project, but the following conditions occur:

(A) A subsequent EIR is required pursuant to Section 15162;

(B) The Lead Agency has granted a final approval for the project;
and

(C) The statute of limitations for challenging the Lead Agency's action under CEQA has expired.

(3) The Lead Agency prepared inadequate environmental documents without consulting with the Responsible Agency as required by Sections 15072 or 15082, and the statute of limitations has expired for a challenge to the action of the appropriate Lead Agency.

Under Section 15052(1)(A), a subsequent environmental review is required because new information has come to light (see Supporting Document Packet) which was not known at the time the negative declaration was adopted by the MCHA, and the new information shows that significant effects to utilities and service systems will be more severe. (CEQA Guidelines § 15162(a)(3).) This requirement applies to a negative declaration, and as a responsible agency, LAFCo may not grant a discretionary approval for the project until the subsequent negative declaration or EIR is adopted. (CEQA Guidelines § 15162(b) and (c).)

Accordingly, if the MCHA is unwilling to prepare the supplemental environmental review necessary to bring the review into compliance with CEQA, the LAFCo must step into the role of the lead agency and prepare the necessary review before considering and approving the project. (CEQA Guidelines §
15052(a), subsections (1), (2) and (3).)

A. New Information and Changed Circumstances

The initial study/negative declaration is outdated with respect to its analysis of the CSD’s capacity for wastewater treatment and cumulative impacts. Since the MCHA approved the project, in March of 2008, the CSD settled a CEQA action in the Merced County Superior Court and agreed to limit treatment plant expansion to a maximum of 900,000 gallons per day (“GPD”).

The MSR adopted in April of 2007 assumed that the CSD would move forward with the expansion. The MSR also concludes that the community of Planada will likely grow to a population of 8,500 within the next seven years. (MSR, p. 74.)

None of these assumptions is correct at this point, and the erroneous information in the MSR should be identified and revised, or at least discussed.

Changes to the Felix Torres Project itself have also arisen. Project construction apparently began and deviated significantly from the configuration approved by the MHCA and so the Merced County Building Division halted construction. The MCHA applied for approval to deviate from the project as approved in the Conditional Use Permit and on April 9, 2008, the Planning Commission did not approve that application. It is our understanding that the Planning Commission’s decision has been appealed.

In summary, the LAFCo may not rely upon the negative declaration prepared for the Felix Torres Project because that project has evolved and transformed so significantly that additional environmental review is necessary.

The new information triggers the need for subsequent environmental review under Guidelines section 15162(a), and therefore triggers the responsible agency obligation to assume the role of lead agency and prepare the necessary review. (Guidelines § 15052.)

B. Impacts not Previously Addressed

The staff report concludes that the Proposal will not have a significant impact on agricultural lands. This conclusion violates CEQA, and also the Cortese-Knox-Hertzberg Act (discussed below). With respect to CEQA, the conclusion that conversion of agricultural land is not significant is simply false, as the extension of the sphere of influence and infrastructure into the proposed annexation areas will remove a boundary to development on surrounding agricultural areas.

The staff report indicates that the County has denied applications for residential developments outside of the SUDP boundaries, but the fact that the County has denied applications in the past provides no assurance that such applications will be denied in the future. Thus, approval of the Proposal may
result in conversion of agricultural lands.

The Legislature has determined that the preservation of the limited supply of agricultural land is necessary for the maintenance of California’s agricultural economy and the state’s economy. (Gov’t Code § 51220.) The Legislature found and declared that "the preservation of land in its natural, scenic, agricultural, historical, forested, or open-space condition is among the most important environmental assets of California." (Civ. Code § 815.)

The Proposal’s impacts to agriculture must be evaluated in a subsequent environmental review. Gaps in the initial study and negative declaration for the project may not be overlooked, and must be addressed before the Proposal may be considered for approval.

II. The Proposal Is Inconsistent with Cortese-Knox-Hertzberg Statutory
Requirements

As discussed above, the sphere amendment and annexation will result in the potential for conversion of additional agricultural land. The initial study for the Felix Torres Project does not adequately assess this potential and is insufficient under CEQA. It is also insufficient to approve the annexation under
Cortese-Knox-Hertzberg.

Section 56377 of Cortese-Knox-Hertzberg sets forth the following requirements for LAFCo approval of annexations that convert open space and agricultural lands:

56377. In reviewing and approving or disapproving proposals which could reasonably be expected to induce, facilitate, or lead to the conversion of existing open-space lands to uses other than open-space uses, the commission shall consider all of the following policies and priorities:

(a) Development or use of land for other than open-space uses shall be guided away from existing prime agricultural lands in open-space use toward areas containing nonprime agricultural lands, unless that action would not promote the planned, orderly, efficient development of an area.

(b) Development of existing vacant or nonprime agricultural lands for urban uses within the existing jurisdiction of a local agency or within the sphere of influence of a local agency should be encouraged before any proposal is approved which would allow for or lead to the development of existing open-space lands for non-open-space uses which are outside of the existing jurisdiction of the local agency or outside of the existing sphere of influence of the local agency.

This section requires the Commission to guide development away from prime agricultural lands. Subsection (b) requires that development of existing vacant land within a sphere be encouraged before annexation of open-space land outside of the existing sphere.

To comply with these mandatory requirements, most LAFCo’s require a vacant land inventory and absorption analysis. This information is essential to determine if there is adequate vacant land already within the urban boundaries for the proposed development or whether there is a need to convert additional open space or agricultural land.

There is no such analysis done for this project. There is absolutely no evidence in the record to indicate that there is insufficient vacant and developable land within the urban boundaries and sphere of influence of the CSD that would justify further conversion of agricultural land outside the boundaries. In the absence of such information, Merced LAFCo cannot make the findings necessary to justify such a conversion.

III. The Proposal Is Inconsistent with Cortese-Knox-Hertzberg Statutory Requirements

The staff report indicates that Cortese-Knox-Hertzberg requires review of various factors for all reorganization proposals, citing Government Code section 56668. (Staff Report, p. 4.) The report goes on to say that certain Merced LAFCo policies provide a more focused review for rural service districts, and so
provides an analysis under the policy rather than the Government Code.

The mandatory requirements of CKH may not be so lightly disregarded.

Section 56668(d), for example, requires that the anticipated effects of the Proposal must be reviewed for consistency with adopted LAFCo policies on providing orderly, efficient patterns of urban development, and the policies and priorities set forth in Section 65377. These are the very priorities that were ignored by the MCHA in approving the Felix Torres Housing project at its present location, and they may not be ignored by the LAFCo.

IV. Conclusion

We appreciate the opportunity to provide the above comments. We respectfully request that the Commissioners carefully evaluate the shortcomings of the underlying CEQA document, and its inadequacy to support a discretionary determination by the LAFCo at this time. We respectfully request
that the LAFCo deny the Proposal.

Very truly yours,

Marsha A. Burch
Attorney
cc: San Joaquin Raptor Rescue Center
Protect Our Water
Donald B. Mooney, Esq.

MERCED, CA (June 20, 2008) --Superior Court Judge Elizabeth Humphreys signed this week the judgment for the lawsuit between San Joaquin Raptor Rescue Center, Protect Our Water, Citizens for the Protection of Merced County Resources (petitioners), against the County of Merced and real party of interest Riverside Motorsports Park (respondents).

Judge Humphreys ordered in favor of petitioners that the following approvals of the Merced County Board of Supervisors on the RMP project be voided and vacated:

Resolution No. 2006-219;
Ordinance No. 1800;
Zone Change No. 03-007;
General Plan Amendment No. 03-005
Removal of project site from the Williamson Act Agricultural Preserve;
Amendment to the Merced County General Plan to redesignate the project site from "Agricultural" to "Castle Specific Urban Development Plan Industrial";
Rezone of the project from "A-1" and "A-2" to "Planned Development";
Approval of the project master plan;
Text Amendment to Merced County General Plan to modify policies in the Circulation Chapter that would exempt the project from traffic Level of Service standards for feature and major events.

The Court also ordered the County of Merced to refrain from further approvals on this project until the County and RMP undertakes further environmental review "to correct the deficiencies in the EIR and as otherwise required under the California Environmental Quality Act."

"We have nothing but the highest praise for our legal team," said San Joaquin Raptor Rescue Center President Lydia Miller. "Gregory Maxim, Julie Garcia, Marsha Burch and their law firms, Sproul Trost LLP of Roseville and the Law Offices of Don B. Mooney in Davis."

"This judgment is a tremendous victory for the citizens of Merced County," said Gregory Maxim. "This lawsuit was brought for the purpose of ensuring that the citizens were provided with a full and fair opportunity to review and comment on all project impacts. This judgment, and the voiding of nine of the project's prior approvals, will provide the citizens with this opportunity."

"We are overjoyed at this positive outcome for the Raptor Center and Protect Our Water," Miller continued. "But we were particularly pleased with the strong support we received throughout the process of this lawsuit from the Citizens for the Protection of Merced County Resources, led by Suzy Hultgren, Paul van Warmerdam and Stacey Machado."

For further information contact:

Lydia Miller GREGORY L. MAXIM
San Joaquin Raptor Rescue Center Attorney at Law
Protect Our Water Sproul Trost LLP
(209) 723-9283, ph. (916) 783-6262 tel

Citizens for the Protection of Merced County Resources

Suzy Hultgren-(209) 358-2339 ph, (cell) 209-769-8583
Paul van Wamerdam- (209) 678-2251 ph,(cell) 209-678-2251
Stacey Machado-(209) 564-8361 ph,

In his history of the Great Crash, economist John Kenneth Galbraith noted, “Congress was concerned that commercial banks in general and member banks of the Federal Reserve System in particular had both aggravated and been damaged by stock market decline partly because of their direct and indirect involvement in the trading and ownership of speculative securities.

“The legislative history of the Glass-Steagall Act,” Galbraith continued, “shows that Congress also had in mind and repeatedly focused on the more subtle hazards that arise when a commercial bank goes beyond the business of acting as fiduciary or managing agent and enters the investment banking business either directly or by establishing an affiliate to hold and sell particular investments.” Galbraith noted that “During 1929 one investment house, Goldman, Sachs & Company, organized and sold nearly a billion dollars' worth of securities in three interconnected investment trusts--Goldman Sachs Trading Corporation; Shenandoah Corporation; and Blue Ridge Corporation. All eventually depreciated virtually to nothing” ...

Scholes’ and Mertons’ fundamental axioms of risk, the assumptions on which all their models were built, were wrong. They had been built on sand, fundamentally and catastrophically wrong. Their mathematical options pricing model assumed that there were Perfect Markets, markets so extremely deep that traders' actions could not affect prices. They assumed that markets and players were rational. Reality suggested the opposite—markets were fundamentally irrational in the long-term. But the risk pricing models of Black, Scholes and others over the past two or more decades had allowed banks and financial institutions to argue that traditional lending prudence was old fashioned. With suitable options insurance, risk was no longer a worry. Eat, drink and be merry...

That, of course, ignored actual market conditions in every major market panic since Black-Scholes model was introduced on the Chicago Board Options Exchange. It ignored the fundamental role of options and ‘portfolio insurance’ in the Crash of 1987; it ignored the causes of the panic that in 1998 brought down Long Term Capital Management – of which Scholes and Merton were both partners. Wall Street blissfully ignored the obvious along with the economists and governors in the Greenspan Fed.

Financial markets, contrary to the religious dogma taught at every business school since decades, were not smooth, well-behaved models following the Gaussian Bell-shaped Curve as if it were a law of the universe. The fact that the main architects of modern theories of financial engineering—now given the serious-sounding name ‘financial economics’—all got Nobel prizes, gave the flawed models the aura of Papal infallibility. Only three years after the 1987 crash the Nobel Committee in Sweden gave Harry Markowitz and Merton Miller the prize. In 1997 amid the Asia crisis, it gave the award to Robert Merton and Myron Scholes...

The nature of the fatally flawed risk models used by Wall Street, by Moody’s, by the securities Monoline insurers and by the economists of the US Government and Federal Reserve was such that they all assumed recessions were no longer possible, as risk could be indefinitely diffused and spread across the globe... F. William Engdahl, The Financial Tsunami, http://www.globalresearch.ca

The community was shaken Thursday by the news that County Bank (corporate headquarters in Merced) was experiencing difficulties. It's stock had lost 90 percent of its value in two years, down to $3.76 a share on Wednesday, having lost half its value from the previous day. The CEO retired.

With the exception of a rather dramatic graph on the first page -- a jagged descending line showing the drop in stock price -- the McClatchy Chain covered the story as a momentary "blip." It called upon Valley economic gurus Tappan Munroe and Lon Hatamiya (former state commerce secretary under Gov. Gray Davis) for perspective. Munroe's insoucant metaphor, a "souffle with the air slowly leaking out," aptly caught the perspective of our witless Valley economic gurus.

But, that wasn't, and no doubt isn't, the end of the County Bank story. On Saturday, McClatchy reported that the bank stock had rebounded an astounding "72 percent," to $6.48. Problems over? A local builder, both a stockholder and client of County Bank, expressed his "personal opinion" that the bank is "very strong and very well-managed but the (real estate) values declining as rapidly as they did -- it just caught them by surprise."

McClatchy's Modesto outlet published a reassuring story Monday to the effect that local commercial banks didn't invest in subprime home loans and, while developers aren't always paying their loans at the moment and auto loans are a problem, their portfolios are adequately diversified to withstand the fallout from the general collapse of real estate values and foreclosures.

We'd like to go on record as saying that, beyond the stock price and information from public bank documents about its losses, we don't believe a word McClatchy has written about the problem. And the unasked questions are too numerous to list, but one could begin with the compensation for the retiring CEO, compensation for the economic gurus, was it involved at any stage in bundling subprime loans, and how will its losses affect it local agricultural lending this season?

What has happened is a massive loss of confidence, the end of every speculative bubble since the Dutch Tulip. We recall the early boosting of the bubble in Merced, when the same local builder was managing the reelection campaign of former state Sen. Dick Monteith, then claiming to the "real Mr. UC Merced." The builder and his candidate was "confidently" claiming UC Merced was a "done deal" when, in fact, as they knew well, it was not. So, forgive us for our skepticism that the local finance, insurance and real estate industry, bought politicians and McClatchy "were caught by surprise." The only real local question is: Who got to the souffle before it went flat?

The predatory lending practices that have caused a world credit crisis as well as our local crisis, were done here face-to-face by local lenders together with local realtors to local and speculative buyers. Judging by the rate of foreclosures in the north San Joaquin valley, one of the highest rates in the nation, there was an enormous amount of fraud committed here. In fact, it might be said that today the area is floating on a sea of "Liar Loans."

From the incredible amount of lying behind UC Merced, in which the local newspaper was thoroughly involved, to the rise and fall of the real estate value souffle, to this unhappy news about County Bank, there has been fraud, political manipulation, wholesale denial of environmental law and regulation and public process laws on the local, state and federal level, and a pattern of harassment of members of the public who asked any questions. This deceit has been broadly spread among what passes for "leadership" in Merced -- from the builder-politician to the Great Valley Center, UC regents and administrators of UC Merced and their boosters, municipal and county government, state and federal legislators, landowners, developers and lenders.

Saddest of all, few if any of the perpetrators regarded this as fraud or deceit. It was just good business. Alchemical formulas emanating from the nation's financial centers "proved" that risk was not risk and the more bad loans made the better. There were a few dissenting voices, but they were ignored as being, at the least, unpatriotic.

Local legacies of local greed include: a campus born with "complications," tremendous destruction of regional natural resources and wildlife habitat, the worst air quality in the nation, decreasing water quality and supply, local governments with swollen salaries for elected officials and department heads and shrinking budgets, unfinished subdivisions with empty houses and nervous residents, shaky banks, political corruption, bad news for the newspapers to cover over as best they can, and the same old compulsion to boost and to deny.

Badlands Journal editorial board
------------------

3-20-08
Merced Sun-Star
County Bank parent company anticipates first loss
CEO Thomas Hawker announces that he will step down when a replacement can be found....LESLIE ALBRECHT
http://www.mercedsunstar.com/167/story/190331.html
Shares of Capital Corp of the West, the Merced-based parent company of County Bank, were hammered Wednesday following news that the company expects to post its first-ever yearly loss.
Capital Corp said it anticipates it will lose $4 million for 2007.
Shares were trading at $3.76 -- a seven-year low -- when the Nasdaq market closed, a 64 percent decline from the day's opening price. The one-day percentage drop was the largest recorded on any of the major U.S. stock exchanges Wednesday. A year ago, Capital Corp's stock traded at $26.55.
The company blamed its anticipated loss on "the rapid decline in real estate values in California's Central Valley in the fourth quarter of 2007." It was then that Merced led the nation in home-value depreciation, with prices plunging 19 percent between 2007 and 2006, according to the Office of Federal Housing Enterprise Oversight.
The drop in real estate values means the collateral backing County Bank loans is worth less than it was when the loans were made one or two years ago. Capital Corp must now reclassify those loans as riskier. That, in turn, means the bank must back the reclassified loans with more money than what's required to back more secure loans -- money that comes directly out of Capital Corp's revenue stream, Smith explained...
The loss isn't tied directly to the subprime mortgage meltdown, he added, because County Bank doesn't make many home mortgages or invest in subprime loans. However, the company does lend money to developers buying land, and that land is less valuable than it was a few years ago. "Even though the guy is still paying his loan, by federal law, we have to downgrade the loan because the quality of collateral has gone down," said Smith.
Capital Corp's current problems were foreshadowed in the summer of 2007 when the company reported that a foreclosed loan to a housing developer had put a $5 million dent in its quarterly income compared with the previous year...

3-21-08
Merced Sun-Star
Bank's shares bounce back 72%
Analyst says volatility a reflection of economic conditions and lower Valley real estate values...LESLIE ALBRECHT
http://www.mercedsunstar.com/167/story/191875.html
Capital Corp of the West, the Merced-based parent company of County Bank, saw its stock rebound strongly Thursday, shooting up 72 percent from the seven-year low it hit earlier this week.
That drop had come after the company announced its first-ever yearly loss. Capital Corp expects to post a $4 million loss for 2007, the result of plunging real estate values.
At the Nasdaq's market close on Thursday, Capital Corp's stock price had risen to $6.48 a share, compared with $3.76 on Wednesday...
On Thursday Capital Corp put the focus on the present, announcing that unaudited internal financial reports from January and February show the bank has adequate capital on hand. The company had previously told federal regulators that it had fallen below what regulators consider "well-capitalized" status.
Joe Morford, a San Francisco-based analyst with RBC Capital Markets, said while the company's projected loss may be unsettling, it's typical of the problems California banks will probably face over the next year, especially in areas hard hit by the real estate slowdown.
"Six to 12 months from now, this is not going to look that unusual," said Morford. "We think there's going to be problems for several other banks both in the Central Valley and throughout the state."
He added, "A big part of the success of a community bank is the strength of its local market. Right now Merced and the Central Valley are having a real tough time. You're seeing the banks share that pain."...
On Wednesday, the company announced that it's forming a committee of board members to oversee bank operations; CEO Thomas Hawker will now report to the committee. Capital Corp also said it's hired financial advisers.
Those moves could be a sign that federal regulators are closely watching the bank, Morford suggested. "It looks like (regulators) are telling the bank that you need to raise capital, and there needs to be some changes in management," said Morford. "The regulators don't want to see County Bank fail, so they're doing what they can to ensure that doesn't happen."
Meanwhile, bank clients sounded a cautiously positive note Thursday. Local builder Bob Rucker, who's both a stockholder and client of County Bank, said he's watching intently. "The whole banking system is going through a major crisis right now with liquidity," said Rucker. "My personal opinion of the bank is that they're very strong and very well-managed, but the (real estate) values declining as rapidly as they did -- it just caught them by surprise."...

3-24-08
Modesto Bee
Valley's smaller banks eluding upheaval in financial industry
Area firms steer clear of most home loans, limiting fallout from crisis...BEN van der MEER
http://www.modbee.com/local/story/248088.html
While giant banks such as Bear Stearns implode as an indirect result of the housing crisis, many of the community banks based in the Northern San Joaquin Valley report being largely insulated from such upheavals.
That's true even after last week, when Merced-based County Bank announced a $4 million loss in 2007, and then saw its stock lose more than half its value in one day before rallying late in the week.
Jeff Burda, president of Modesto Commerce Bank, said most community banks don't make many home loans, including the subprime loans that prompted the recent housing meltdown...
Other banks, like County Bank, may have avoided subprime securities, but made substantial loans to commercial builders. With new housing at a virtual standstill, those builders aren't building, Burda said, and loans aren't being paid...
Credit agencies that monitor banks over time on the basis of criteria such as earnings and liquidity take a more measured stance.
Bankrate.com, a consumer finance Web site, gave five valley community banks, including County, Bank of Stockton and Farmers & Merchants, ratings of three or four stars -- the same ratings most banks receive, with five stars being the best, according to the site...

Chancellor Kang's humility, skills seen as good fit for UC Merced...MICHELLE HATFIELD
http://www.modbee.com/local/story/248077.html
MERCED -- Steve Kang has become a road warrior.
A different kind of leader
Carol Tomlinson-Keasey, who stepped down as founding chancellor to return to teaching, is remembered for her stiff demeanor and commanding presence. (After going back to the classroom in 2006, Tomlinson-Keasey quietly retired in June, moving to Georgia. She couldn't be reached for comment.)...
Kang said he believes the best leaders are those who earn trust by example.
"You have to be part of a team...
"(Tomlinson-Keasey) never really went to small events. Chancellor Kang goes to everything. I think that's why he's so popular among students," said Brenda Ramirez, a psychology junior.
Goals and plans... Focus on students urged...

Accomplishments
Getting UC Merced closer to permit approval from the Army Corps of Engineers for campus expansion and an adjacent university residence community
Starting a strategic planning process to guide the university's academic future
Drumming up community support for a medical school

Goals
Beef up student recruitment
Solve budget issues facing the campus, including lack of physical space for professors, students and research
Continue paving the road to a UC Merced medical school
Continue research initiatives among professors, focusing on issues specific to the Central Valley such as agriculture and water and air quality
Academic planning -- "Where are you going to be putting your resources? What do you want to be the best in the world at? You can't be the best at everything," UC President Robert Dynes said.

UC Merced Facts
Year opened: 2005
Number of students: 1,800
Number of employees: 884
Annual budget: $100 million
Size of campus: 18 buildings, 105 acres
Academics: 17 majors, 17 minors
Number of alumni: 76
Estimated amount of money generated by university: $1.2 billion since 2000 ...

Expansion compromise for UC Merced campus...Editorial
http://www.modbee.com/opinion/story/248069.html
It took six years for the University of California Board of Regents to choose where in the San Joaquin Valley to build its 10th campus. It's already taken more than seven years for UC to figure out how to position the campus and the adjoining community on its selected site east of Merced.
What was the hang-up? Limiting the damage to wetlands and to native plants and animals, such as the bald eagle, fairy shrimp and Colusa grass...
Finally, last year, some meaningful conversations started taking place among UC, the corps and two other federal agencies, the Fish and Wildlife Service and the Environmental Protection Agency. By October, the university announced it had a revised map that reduced the size of the campus and the placement of the community. Last month, the university submitted its formal permit application, which triggers an environmental review process that typically takes 12 to 14 months...
UC needs the Corps' permit to continue with its long-term campus plans, but it is just as essential that there will be shops, restaurants and other amenities close by for students and staff. Some current students and a number of prospective students complain about the isolation of the campus and how far it is into town.
Downsizing the campus by 100 acres does not reduce the academic choices or activities that UC Merced will offer. In fact, it is appropriate that the campus -- which already has won awards for environmental design and energy conservation -- should have a footprint that does the least possible damage to the environment.
It took too long, but we commend university officials and regulators for reaching what appears to be a good compromise.

If anyone can fix (or help) UC, it's this guy...Short Takes
http://www.modbee.com/opinion/story/248145.html
The University of California system -- 10 campuses, five medical centers and three national laboratories -- is at a crossroads. With its leadership stepping down after five years; with UC's share of the state budget declining; with the economy changing rapidly; and with a need for innovation greater than ever, a new UC president will step into an extremely challenging environment. On top of these long-term issues is the need to recover from the 2005 controversy over administrative bloat and bonuses, stipends, relocation packages and other forms of unreported compensation to top administrators. Then there's California's short-term budget crisis, which will likely require increases in student fees and rethinking of financial aid. Fortunately, in Mark Yudof, a search committee has tapped the right person to serve as the next University of California president. This first-rate constitutional scholar and teacher has served as chancellor of the University of Minnesota system (1997 to 2002) and the University of Texas system (2002 to now). The UC system really needs someone from outside the system to bring in fresh ideas, fresh personnel and shake up old ways of doing business. Yudof is ideally suited to do that. An extremely effective manager, imaginative thinker and savvy political leader, amazingly he still finds time to teach. He knows how to deal with politicians and the state budget process, create endowed professorships, increase financial aid for students and encourage research partnerships. The UC system needs this kind of president. In a reduced and changing presidency, Yudof is perfect. The regents vote Thursday. They should approve him with unanimous enthusiasm.