Writings and observations

READING Idaho Senator Larry Craig, who a year ago last summer said he would resign promptly but instead has stayed, at this point, nearly through his term, has lost again in court. The case, of course, concerns that arrest in the Minneapolis airport men’s room in August 2007. From the local level he has appealed to the state Court of Appeals, but today that court has rejected his arguments.

Craig (in a news release): “I am extremely disappointed by the action of the Minnesota Court of Appeals. I disagree with their conclusion and remain steadfast in my belief that nothing criminal or improper occurred at the Minneapolis airport. I maintain my innocence, and currently my attorneys and I are reviewing the decision and looking into the possibility of appealing. I would like to thank all of those who have continued to support me and my family throughout this difficult time.”

He could appeal to the Minnesota Supreme Court. But at this point, with his Senate tenure nearly done, and the main effect of appeal being to keep the case alive in the public mind, would there be any point? Guess here is that this decision today puts an end to the case.

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parking meter

Spokane’s ad

REPORT Combine one part local government badly in need of more revenue, with a consumer willingness to buy – it would seem – damn near anything, and the city of Spokane has come up with a natural:

Ever wanted to charge your teen-age son for parking on your sofa all day? How about that co-worker who parks in front of your desk when you’re on a deadline? Or, your spouse who continually parks his or her junk on the kitchen counter?

The City of Spokane has the answer: A parking meter.

Just in time for holiday shopping, the City is surplusing old mechanical crank-style parking meter heads. For the low price of $35 including tax, you can get your own parking meter to set up on your desk or next to the living room couch. It’s also a great gift for the person who has everything—or for your favorite college student.

“These gems are going to go quickly,” says Dave Shaw, who heads up the City’s parking meter operations. “We’ve already gotten some orders from the public, and we are anxious to hear how citizens plan to display these classic artifacts.”

The City has been replacing old parking meter heads throughout downtown over the last several years with digital ones. The City has a total of approximately 2,800 parking meters installed in downtown, around the County Courthouse, and around the hospitals.

To purchase a parking meter, citizens should go to the City’s Street Operations Building, 901 N. Nelson, between 8 a.m. and 4 p.m. Monday through Friday. Available are meters ranging in time periods of 30 minutes to 10 hours. They are sold as-is and in the same condition they were in when removed from the street. City employees can show buyers how to mount them to a steel or plastic pipe for display purposes. The City can accept check, money order, or cash in the exact amount of $35.

And they’re selling fast; the Spokesman-Review says that two-thirds or so are sold already . . .

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Washington

READING Last Monday, you could pick up the rumbling readership about the restructured and slightly diminished Oregonian – a local news section folded into the front world/national news section. But that was only for Monday editions; the rest of the week has remained the same. (Can we point out here that today’s Oregonian was notably strong, with lots of readable stuff?)

They should get a load of what the Seattle Times is doing: Major changes paperwide, essentially throughout the week. They seem to be good choices, seemingly aimed at preserving local journalism, which ought to be top priority. But Executive Editor David Boardman said he isn’t trying to make the argument, as a fictional editor in the cable show The Wire did, that “Less is more.”

He launched his column about the changes with an anecdote about a thanksgiving parade in which the Times participated. At one point, he said, someone in the crowd yelled out, “Please stay in business!”

Boardman responded in the column, “We’re working on it, sir. We are working on it.”

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INDICATOR An uneasy guessing game in the last couple of weeks: How long until gas prices zoom back up, by another dollar, or two, or more? No one knows exactly, of course; for now, most of us are just enjoying the lower numbers while they last.

In our runs around the Portland area in the last week, we’ve tended to see prices ranging from the low $1.70s to the mid-$1.80s. But there’s a little more variation than that, and the gas price map and charts the Oregonian has begun to post make some of that clear.

What remains curious are some of the variations within the region. The charts along with the maps list the lowest gas prices found in certain specific areas around the metro area, and what you find in these charts are substantial differences in places just a few miles apart. In Portland itself, it makes a difference whether you gas up on the east side or the west side – the range of the “best 10” goes from $1.65-$1.69 on the east side, but $1.75 to $1.99 on the west side. Elsewhere, the differences can be greater. In the Hillsboro-Forest Grove area, the range is from $1.61 to $1.71, while in Vancouver you pay $1.77 to $1.83.

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The Tacoma News Tribune decided to editorialize in its news section with a headline (in its online edition at least) out today, about the squabble over religious-related signage at the Washington statehouse: “What hath atheism wrought? A mess“.

There’s a mess, all right. But (a) the editor might want to rethink who created it, and (b) whether it’s a mess that really constitutes a problem.

The whole story is too long for recapitulation here; either the TNT or AP version offer straightforward rundowns of the facts. For many years a Christmas tree (now officially a “holiday tree”) has been placed at the Statehouse by the Association of Washington business. One year a Jewish group, noting the presence of the essentially Christian display at the public building, sought to provide a presentation reflecting its seasonal holidays as well. Thereafter the door was essentially opened – presumably under the sound principle that if you allow one private interest, you shouldn’t discriminate against others – to whoever wanted to deliver a display. This year, an atheist display (provided by an organization based at Madison, Wisconsin, but petitioned for by a Mason County woman) was set up as well, saying among other things “Religion is but myth and superstition.” Which has led to counterpoints from the Christians.

This modest local tempest went much bigger once it arrived at the notice of cable gasbag Bill O’Reilly, he of the war-on-Christmas fantasy: “There is no reason whatsoever to allow an anti-religious sign to be posted alongside a Christmas display.” (How about this: Is there any reason the non-religious people of Washington state should be required to provide support and protect for a religious display but explicitly not for others?) By the way, notice in this clip how O’Reilly specifically takes after Governor Chris Gregoire, a Democrat, but not Republican Attorney General Rob McKenna, who alongside Gregoire said that the atheist display should be allowed if the religious displays are.

(Shorter O’Reilly: Your civil rights in this country are on a sliding scale, depending on how much of a minority you are in. Atheists poll as a small minority=Far fewer rights than Christians, who poll in larger numbers.)

That, of course, resulted in increased visiting to the site of the controversy (a political Lourdes?) and eventually theft of the atheist display. Which was eventually dropped off, by persons unknown, at a radio station. Throughout, the whole deal has become quite the hot story – far outpacing the massive state budget cuts or other, you know, substantive developments – in Olympia.

How much of the hoorah is the doing of the atheists? Suppose for a moment that they had delivered their sign, and no one from the opposition said anything about it. Result: No (or very little) coverage, no crowds, no Bill O’Reilly. (Remember: The Statehouse in Wisconsin has had a similar display on display for more than a decade, to little attention.) Suppose someone – presumably though we don’t know for sure one of the Christian activists – hadn’t walked off with the display? Far less media attention and coverage. The uproar isn’t what the atheists, or atheism, wrought: It evolved courtesy of the other side of the fence.

Beyond all that . . . what’s the harm in the discussion? Apart from the (temporary) theft, no damage seems to be done here. Some discussion is being engendered, and maybe some educating is going on. Nothing harmful in that.

And last we checked, Christmas is still scheduled to arrive on the 25th.

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Washington

The tough-on-crime, lock-em-up crowd has a lot to explain when it comes to what should be done with convicts after they’re released, as almost all of them eventually will be. Because of the ways the system operates, some geographic places have had to come to grips with that more directly than others. At Pierce County, it’s an issue: The Tacoma News Tribune today runs an editorial about “a state prison system that has made Pierce County a dumping ground for ex-cons for far too long.”

work release

Washington work release centers

Pierce County was, until not long ago, one of the select places around the state where prisoners were released, about a fifth of all prisoners in a county with about a seventh of the state’s population. That’s been amended, but prison activity still weighs heavy on the Tacoma rather than Everett side, since Snohomish County north of Seattle has no work release centers, while Pierce has two. (The News Tribune’s point is that Snohomish is overdue for a work release center, whether it wants one or not. Which apparently it doesn’t.)

Remarked a commenter on the TNT’s web site: “Just take a window survey of who’s leasing office space in or near downtown these days & the DOC could very easily be termed an occupying force.” Look a little closer, and check out the prisoner population alongside . . .

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The post today by David Frazier on his Boise Guardian site about Boise and the special winter Olympics is the kind of provocation likely to ruffle any number of people locally.

But a number of long-timers may find they identify with a number of attitudes Frazier isolates. And as a 38-year resident, Frazier have the standing to talk about them . . .

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Our analysis of the 2008 governor’s race in Washington would be a little different from that of former state Republican chair (and former elected official) Chris Vance, who has delivered his take on it at Crosscut. We’d throw in several additional reasons that Democratic incumbent Chris Gregoire did much better this time against Republican Dino Rossi – the power of incumbent and image reshaping (on both sides) among them. The qualitative differences in the 04 and 08 Democratic campaigns would be useful to mention too.

But this bit at the end really seems worth highlighting and absorbing:

Rossi’s numbers were down all across the state, but it is the results in King County that Republicans must focus on. John McCain received an incredible 28 percent of the vote in King County. Rossi received 36 percent, down from 40 percent in 2004. In 2004, Rossi lost King County by 18 percent; this time he lost by 28 percent — the biggest change of any of the large counties. Republicans will never elect a Governor or U.S. Senator, or regain legislative majorities in Olympia, if this trend in King County continues.

It wasn’t new voters that made this difference; it was a continuation of the long-term erosion of Republican support among suburbanites. This key shift is the most important factor Republicans must address going forward.

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Google “Port of Seattle fraud” and Google says they can find “about 119,000” hits . . . which, yes, isn’t a very precise measurement, but sure feels about right. Which more or less suggests why today’s release of an internal investigative report about fraud at the port, which indeed points to some fraud at the port, doesn’t seem especially jaw-dropping.

The new report does, however, get very specific in detailing some of the problem areas. Here are some examples from its summary section:

There are four findings related to the Third Runway that constitute fraud, defined as the intentional misrepresentation or concealment of material information with intent to deceive or mislead and resulting damage.
1. A Port employee provided an internal Port estimate to a potential bidder (TTI) prior to the bid submission date, without notification to the public, any other prospective bidders, senior Port leadership, or the Commission. . . .
2. A Port employee negotiated with TTI after receipt of TTI’s bid, but prior to the award of the contract. These negotiations resulted in a misleading change order that falsely represented a $9.4 million reduction in the amount of TTI’s bid, when the actual reduction was closer to $2 million, and constitutes fraud. This process also included an apparent attempt to cause the Commission to believe that TTI agreed to a contract amount that was within 10% of the Engineer’s Estimate.
3. Senior Port staff provided a misleading notification memorandum to the Commission. . . . The notification memorandum that was provided to the Commission not only failed to inform the Commission of the true facts surrounding the bid scenario, but also contained overtly misleading language intended to lull the Commission into taking no action as a result of the memorandum, and constitutes fraud.
4. A Port employee made large-dollar premature payments to TTI12 that may have cost the Port many thousands of dollars in lost interest income. . . .
Findings Related to Small Works Roster Program Contracts. There were two findings related to the Small Works Roster Program that constitute fraud.
1. PCS personnel steered contracts to preferred vendors, often to pay for work that had already been performed, by using “expedited” procedures, requesting vendors to not submit bids on identified contracts, not notifying selected vendors on the Small Works Roster of contract opportunities, and opening additional contract opportunities when the “wrong” contractor won a contract. This behavior constitutes fraud.
2. PCS routinely breaks large-dollar projects into smaller “sub-contracts” to fit within the Small Works Roster Program $200,000 contract limit, which constitutes fraud.
Findings Related to Competition for Professional Services Agreements (PSAs). There were four findings related to PSAs that constituted fraud.
1. Port staff circumvented competition requirements by procuring services from preferred consultants by awarding consultant agreements at no-competition (Category A/1) or limited-competition (Category B/2) levels, then repeatedly amending those contracts to the maximum amount and awarding follow-on agreements to avoid the competition requirements of Port policies PUR-2 and Resolution 3181.
2. Port staff executed PSAs and amendments that exceeded the maximum amount allowed by PUR-2 and Resolution 3181.
3. A senior Port executive issued a no-competition $25,000 contract for damage assessment services under an emergency work exemption to PUR-2 following the Nisqually Earthquake. This contract was amended from $25,000 to over $1 million, most of which was for ongoing project management services related to subsequent repair work, which was a different scope of work and outside the “emergency” window.
4. PCS personnel violated PUR-2 by steering work to a preferred minority consultant (3A Industries) to artificially increase the volume of work that appeared to be awarded to minority owned businesses.

And it goes on.

A from a Seattle Times article earlier this year: “The U.S. Justice Department has launched a criminal investigation of the Port of Seattle, following a recent state audit that accused the Port of wasting public money and raised the specter of possible fraud in construction contracts.”

Then, a year ago there was the state auditor’s critical report.

The point being that allegations of troubled procedures are nothing new at the Port.

The second-ranked hit on Google for “Port of Seattle fraud” is this: “Port of Seattle Fraud Hotline. If you see or suspect unethical or illegal activity around Port businesses or facilities, don’t ignore it – let us know.” Sounds like it’s still needed . . .

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Sterling Bank

Sterling Bank

Wondering where exactly that mass of financial bailout money is going? The online journalists at ProPublica have some answers, and Northwesterners may be surprised, maybe troubled, by some of them.

Their research finds that as of midday today, $242.02 billion has been designated to 129 financial institutions around the country, to buy senior preferred shares of the various companies. Eight of them are based in the Northwest, six in Washington state, one each in Oregon and Idaho. They are (in order of size): Sterling Financial Corp in Spokane (WA), $303 million; Umpqua in Portland (OR), $214.2 million; Washington Federal in Seattle (WA), $200 million; Banner Corp in Walla Walla (WA), $124 million; Columbia Banking System in Tacoma (WA), $76.9 million; Cascade Financial Corp in Everett (WA), $39 million; Intermountain Community Bancorp in Sandpoint (ID), $27 million; Heritage Financial in Olympia (WA), $24 million.

Unlike the federal bank takeovers, this is a voluntary program, and banks (or banking companies) apply to participate – to sell shares of stock.

Another that should be of regional interest is Wells Fargo – one of the top banking operations in the Northwest – in San Francisco, getting $25 billion. It is in fact one of the biggest dollar recipients, tied for third place overall; first and second go to Citigroup and AIG, respectively. Wells seems on its face a puzzler, since it was praised (and rightly) for avoiding much of the bad-mortgage financial garbage that sank so many others. But Wells is buying Wachovia Corporation, which did make a mass of bad loans, so at least some of that funding is understandable.

But what of the others? Some curious questions start to arise, including the question of how many of these federal stock buys are really needed. At least one Northwest bank CEO says explicitly, in a press release, that his bank didn’t need it at all.

The money is going to purchase certain types of stock, and the intent seems to be that the infusion of money will boost the companies’ risk-based capital ratio – that is, the amount of solid assets compared to the money at risk (as in certain types of loans). The regulatory standard number for a reasonably well-positioned bank is 10%; if you’re a bank, you don’t want to fall below that. Evidently, from the records we’ve reviewed, the Northwest banks generally have been able to maintain themselves above that mark.

Here’s some of what we know about some of the Northwest financial operations – but please, don’t stop till you get to the end, and even skip to there if need be:

bullet Sterling Bank, Spokane, $303 million. A bit of a surprise, this bank that does much of its business in small and rural locations around the Northwest. (Our small town, population about 1,800, has two small banks, of which Sterling is one.) From the press release on this: “The shares are callable by Sterling at par after three years and may be replaced if Sterling were to choose to repurchase them with newly raised equity capital at any time. In addition to the preferred shares, the U.S. Treasury will receive 10-year warrants entitling the Treasury to purchase shares of Sterling common stock with an approximate aggregate value equal to $45 million or 15% of the senior preferred investment.”

The usefulness of this being? “The investment is anticipated to increase Sterling’s total risk-based capital ratio to 13.8%, on a pro forma basis, from 11.0% at September 30, 2008. The fortification of Sterling’s capital position through attractively priced capital from the U.S. Treasury enhances Sterling’s financial flexibility to make additional loans to the businesses and consumers in the communities in which we serve.” In other words, the money being paid for the stock is supposed to be entered into Sterling’s books so as to reduce the overall risk of making loans.

bullet Umpqua Bank, Portland (OR), $214.2 million. Umqua has a very good reputation around the region too, particularly as an employer (it has placed first in a number of regional surveys) and for community involvement as well. Nor had it seemed to be at particular risk. Its press release on participating in the federal capital program said that “Umpqua’s total risk-based capital ratio of 11.2% as of September 30, 2008 is already well above the regulatory requirements of 10.0% for a ‘well capitalized’ institution. With this new capital, Umpqua’s total risk-based capital ratio would increase to approximately 14.0%.”

Still. When “Umpqua plans to issue $214 million in senior preferred shares, with warrants to purchase approximately $32 million in common stock, to the Treasury,” you have to ask: Why, if it doesn’t need to? Wouldn’t the issuance of the new stock tend to weaken the existing stock? And wouldn’t the federal infusion amount to a one-time assist that might have to be repeated later? Of course, we might be missing something here . . .

bullet Washington Federal, Seattle (WA), $200 million. A savings and loan rather than a bank, Washington Federal has also had a fairly solid reputation, but they’re in this too for a couple hundred mil. From its November 14 press release: “it has successfully completed the sale to the U.S. Department of the Treasury of 200,000 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A, and a warrant to purchase 1,707,456 shares of the Company’s common stock for an aggregate purchase price of $200 million in cash. . . . The preferred securities pay a cumulative dividend of 5% per annum for the first five years and 9% per annum thereafter. Redemption is precluded in the first three years, except with the proceeds of a “qualified equity offering”. After three years, the preferred securities can be redeemed at their liquidation preference, plus all accrued and unpaid dividends. The preferred securities are generally non-voting. The warrant has a ten year term and an exercise price of $17.57 per share. If the Company receives aggregate gross cash proceeds of not less than $200 million from qualified equity offerings on or prior to December 31, 2009, the number of shares of common stock issuable pursuant to Treasury’s exercise of the warrant will be reduced by one half of the original number of shares underlying the warrant. Treasury has agreed not to exercise voting power with respect to any shares of common stock issued upon exercise of the warrant. If the warrant is exercised in full, Washington Federal will receive proceeds totaling $30 million.”

One investor researcher had this to say: “Washington Federal’s diluted operating earnings for 4Q08 (ended September 30), came in at $0.19 per share, substantially short of estimates. The miss stemmed from a huge increase in provision for loan losses in response to a deteriorating housing market, though the expansion in the interest margin was impressive, owing to WFSL’s liability sensitivity.”

bullet Banner Corp, Walla Walla (WA), $124 million. Banner has been expanding a lot in the last few years, but it appears to have been caught up in the mortgage troubles: “The company reported a loss of $1 million in the third quarter of 2008, which Banner’s CEO blamed largely on losses on investments in Fannie Mae and Freddie Mac.”

From the Banner release on the federal infusion: “As a participant, Banner plans to issue $124 million in senior preferred stock, with related warrants to purchase up to $18.6 million in common stock, to the U.S. Treasury. . . . At September 30, 2008, Banner Corporation, Banner Bank and Islanders Bank were each ‘well-capitalized’ under all regulatory guidelines. At that date, Banner Corporation’s Tier 1 Leverage Capital Ratio was 8.86% and its Total Risk Based Capital Ratio was 11.00%. The addition of new capital through the Treasury program will increase Banner Corporation’s Tier 1 Leverage Capital Ratio to approximately 11.25% and Total Risk Based Capital Ratio to approximately 13.90%.” Again, then, wherein the necessity for issuing the new stock?

bullet Columbia Banking System, Tacoma (WA), $76.9 million. The federal purchase involves 76,898 shares of Series A preferred stock and “a warrant to purchase 796,046 shares of Columbia common stock at an initial exercise price of $14.49 per share; the warrant will expire in 10 years. Columbia’s total risk-based capital ratio of 11.24% at September 30, 2008 is well above regulatory requirements for a well-capitalized financial institution. The addition of the new capital will raise Columbia’s capital ratio to over 14%.”

bullet Cascade Financial Corp, Everett (WA), $39 million. The parent firm of Cascade Bank, it tells a similar story: “Cascade’s total risk-based capital ratio of 10.40% as of September 30, 2008, which is above the regulatory requirements of 10.0% for well-capitalized banks, would increase to approximately 13.40% with the inclusion of this new capital.”

bullet Intermountain Community Bancorp, Sandpoint (ID), $27 million. This is the holding company for Panhandle State Bank, which though smallish is the largest state-chartered in the Idaho. In September, it reported that “it does not hold any common or preferred equity securities of the Federal National Mortgage Association (FNMA or “Fannie Mae”) or the Federal Home Loan Mortgage Corporation (FHMLC or “Freddie Mac”). As a result, it has no exposure to these securities. Many financial institutions have announced anticipated charges to earnings to reflect the other-than-temporary impairment of
investments in these securities.” Nonetheless, it’s opting in for $27 million.

bullet Heritage Financial, Olympia (WA), $24 million. It has sold “24,000 shares of the Company’s Fixed Rate Cumulative Perpetual Preferred Stock, Series A, with a related Warrant to purchase 276,074 shares of the Company’s common stock.”

Of considerable interest, there’s this, from CEO Brian Vance: “We are fortunate in that we had the opportunity to consider this capital injection from a position of strength. We did not need nor require this capital [emphasis added]. The primary reasons we felt this was a good strategic decision were to: Increase our capacity to lend, Improve our ability to proactively work with our borrowers in difficult times, Enhance our ability to support economic activity in the local communities we serve, and Provide our depositors with the security of more capital and liquidity even though both Heritage Bank and Central Valley Bank are already designated by our regulators as being ‘well-capitalized.’ ”

Hmm. Think on that a moment. “We did not need nor require this capital.” Here’s the CEO of the bank saying the money isn’t needed – but since it’s being proferred and it could make financial life a little smoother, well, okay. Fine. But what are the taxpayers getting out of it? And assuming he’s telling the truth (we have no reason to believe otherwise), there’s this: How many other banks are similarly situated? How many of the Northwest 8?

These banks generally maintain that they’re in solid shape. If they are, then why are taxpayers spending hundreds of billions of dollars to beef up their books?

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