Month: May 2002

What You Really Pay for Salmon

We know all too well the reasons given for not removing dams from the Columbia and Snake Rivers: the rivers wouldn’t be as navigable, there’d be less water for irrigation, it would impact energy supplies, we’d lose reservoirs that are now used for recreation, etc. The biggest argument, however, is the financial one: it would cost too much–both in removing the dams and in addressing the impact on farmers and energy ratepayers.

A new study, however, focuses on the costs of keeping those dams in place.

Last week, the Northwest Power Planning Council released preliminary data on the cost of running six salmon hatcheries in the Columbia River basin.

The report breaks the cost out by the number of hatchery fish that return each year to spawn. For the first time ever, the public can see that it costs $64.37 for the Spring Creek National Hatchery in Washington to produce a single fall chinook, while it costs a whopping $7,437.50 for the Eagle Creek Hatchery in Idaho to produce a single sockeye salmon. It’s astonishing that no one has done the math before now.

Who pays for the hatcheries? There are over 100 in the Columbia River basin. A handful are owned by Indian tribes, but most are paid for by a combination of federal funds (your taxes), the Bonneville Power Administration (more of your taxes), and utility companies (your electricity bills and, in the case of public utilities like Seattle City Light, more of your taxes). Because hatcheries are managed by different utilities, tribes, and agencies, it’s easy for one group to claim that a single hatchery is worth the money spent on it, and that it is ultimately cheaper than dam removal or habitat restoration. But when the figures are multiplied by 100, the costs become astounding.

And there are other costs not figured into the study. For example, fish biologists and environmentalists know the cost that hatchery salmon take on wild salmon runs, but this goes unacknowledged by US government agencies, forestry companies, utilities, and farmers. Hatchery-bred salmon compete with wild salmon for food and habitat. Hatchery salmon, raised in a protected environment and fed antibiotics, often interbreed with wild salmon, making a river’s salmon run less able to adapt to disease and predators.

In fact, in the 126 years that hatcheries have functioned in the Colombia basin, they’ve failed miserably in the one goal that is the very reason for their existence: to restore salmon and steelhead runs. We know that habitat restoration works. We also know from examining rivers where dams have been removed that dam removal works. And we know that hatcheries fail.

It’s past time to cut off the funds, turn off the tap, and close the hatcheries. The Oregonian newspaper estimates that over $80 million per year in federal funds and electricity ratepayer fees alone are poured into the hatchery system. That’s a lot of money that could be used to tear down dams, help farmers plant crops that require less irrigation, and buy out those farms that couldn’t exist without the dams.

It doesn’t even have to happen all in one year or in five; it took us more than 100 years to get to this point. But we need to start reversing course now, while there’s still a few fish left to save.

Lindh Outsmarts the Government

Hundreds of people, perhaps thousands, are still in indefinite detention post-9/11, without access to legal representation, without being able to see family members or friends, and without being charged with any crime.

Legal cases, funded by the detainees’ families, are beginning to pass through the courts challenging the Ashcroft Justice Department’s trampling of the detainees’ rights. And now there’s a new challenge to the US government’s treatment of Taliban and Al Qaeda prisoners at Guantanamo Bay: John Walker Lindh.

Lindh, as you’ll remember, was the American captured after a bloody prison uprising in Northern Afghanistan late last year, in which US planes and tanks bombed the hell out of a fort, slaughtering hundreds of Taliban prisoners, many of them unarmed. Lindh was flown back to the US, where he and his lawyers are getting ready for a treason trial scheduled for August. Right now, the lawyers are working on pre-trial hearings, depositions, and evidence gathering.

The Lindh lawyers have taken a logical move that makes the government prosecutors look like clowns. In early May, they filed a motion requesting permission to interview 12-15 Taliban and Al Qaeda prisoners being held at Guantanamo Bay. This would help them establish the fact that Lindh had nothing to do with planning the prison uprising in which CIA agent Mike Spann was killed.

This tactic will eventually do one of two things. It could bring those prisoners into the US justice system, where they would be allowed the same rights that other US prisoners have to legal counsel, a speedy trial by jury, and a chance to view evidence and address the charges against them (formal charges would have to be made in order to keep them in detention), and they would have the right to be held under more humane conditions (and not in open-air cages). On the other hand, if the Justice Department refuses to let Lindh’s lawyers interview the Guantanamo Bay prisoners, then the government would be violating Lindh’s right to view and challenge evidence against him in court, and the judge will likely dismiss the government’s case.

The judge in Lindh’s case, US District Court Judge T.S. Ellis III, has already warned the government’s legal team that it had better find a way for Lindh’s lawyers to do the interviews or else the government “may not be able to proceed against this defendant.”

The government is trying to find a way around face-to-face interviews. At first they suggested that Lindh’s lawyers submit written questions to which the prisoners would supply written answers through a translator. Lindh’s lawyers protested, claiming that this would hamper their ability to ask follow up questions or to clarify points that might be garbled through translators. It would also make it impossible for them to judge the credibility of the witnesses.

The government prosecutors then suggested one-way video tape, and this satisfied the judge. The decision to either bring the Guantanamo Bay prisoners into the US legal system or lose the case against Lindh on technical grounds was postponed. But the judge stressed that, come the day of Lindh’s trial, Lindh may still exercise his 6th Amendment right to call these prisoners as witnesses to testify in court, and the government will have to make its decision. Stay tuned.

Pampering the SPD

It’s becoming a habit: Seattle City Council members sitting quietly, listening (or pretending to), while activists line up to give testimony about the latest police riot.

I’m describing last week’s meeting of the city council’s Police, Fire, Courts, and Technology Committee–commonly referred to as the public safety committee–which is oh-so-conveniently composed of three conservative, pro-police, and pro-business council members: Jim Compton, Margaret Pageler, and Jan Drago. The testimony was familiar: Seattle police attacked what remained of the April 20th Reclaim the Streets crowd, as the crowd was already breaking up. Further, cops gave no warning before they tackled and maced people.

The Seattle Police Department explained that they weren’t trying to clear the intersection at Broadway and Thomas, but were trying to arrest people who had erected a 20-ft. tripod. By the time the arrests happened, however, the tripod was long gone. A total of 19 people were arrested, but there were far fewer than 19 people involved with putting up the tripod and disassembling it. And most of those folks escaped arrest.

Cops fell back on the argument that, when they attacked the crowd, people fought back, and were accordingly arrested for resisting arrest. A spurious argument, which, if anything, reveals the SPD’s motive: to provoke a riot, if possible. But videotape shown at the meeting, which aired on at least one TV news program last week, shows that it was the police who were responsible for all the pushing, shoving, tackling, macing, dragging, etc. Demonstrators refrained from physical violence. Some folks did yell at police–which is natural, I suppose, when you get pepper-sprayed without warning.

There were several green-clad legal observers on the spot that day to document the SPD’s actions. As a consequence, the Seattle Human Rights Commission has filed a complaint with the new Office of Professional Accountability, claiming that police violated their own internal department policies on April 20th.

This complaint will be a test for the new OPA, whose mandate is limited to gently scolding the police department through missives sent to the City Council. The OPA only has the power to issue recommendations for changes in SPD policies; it doesn’t have the power to sanction the SPD or individual officers in any meaningful way. It doesn’t have the power to subpoena documents, evidence, or testimony, either. With a minimal budget and Margaret Pageler’s efforts to assign it only a part-time staffperson, the OPA will not be able to adequately review the 900 complaints each year that are filed against the SPD.

And then there’s the make-up of the OPA board. At last week’s public safety committee meeting, Compton, Drago, and Pageler recommended three candidates to sit on the board. Only one of them, Lynn Iglitzin, can be termed a “civilian.” She’s a former member of the Seattle Human Rights Commission and the ACLU. The other two candidates–Peter Holmes, a former judge and block watch captain, and John Ross, a security consultant and former agent for the Bureau of Alcohol, Tobacco, and Firearms–are likely to give police the benefit of the doubt, which will negate the OPA’s oversight function.

In addition, Compton, Drago, and Pageler announced that the city would abandon a racial profiling study within the police department. Instead, the money set aside for the study would be used to buy around 20 video cameras to put in police cars.

This is a bad trade-off. The racial profiling study would have required all police to log traffic stops, tickets, and arrests by the race of the officer involved and the race of the suspect. It would have been a basic, simple performance measure no different from the sort of self-tracking measures that most white collar workers are required to do in most private sector jobs. But the police union balked, particularly over whether officers would have to give their names when logging stops. Without names, the study would be useless.

Instead of taking a tough stand with the police union, Compton et al. chose to do away with the study and divert the funds. Cameras in police cars are a good idea, but 20 cameras cannot cover 223 police cars.

It’s become clear why Compton fought so hard to keep his seat as chairman of the public safety committee and why Pageler and Drago were so eager to join him there. The conservative, pro-business elements of the city and their representatives on the City Council see the issue of police reform as a key power struggle. Instead of addressing the problems that have led to 900 complaints every year and long lines of people complaining at City Council meetings, they’re busy resisting reform with all their might. In their minds, no one should be allowed to police the police.

But citizens are speaking out, pushing for some kind of police accountability. If Greg Nickels can find the money to appoint a board to oversee City Light, he can scrape together the money for a civilian review board–one that has some power to sanction the SPD and individual cops.

And the city council–particularly the members of the Police, Fire, Courts, and Technology Committee–can start doing the jobs they were elected to do: address the concerns of citizens, instead of caving into the police union.

City Council meetings and committee meetings are open to the public. Check out the council’s web page at www.ci.seattle.wa.us/council/ and click on “Meeting Calendar” to find out the dates and times. You can also use the web page to send e-mail to council members or call the council message center at 684-8888 to leave a message for one or all of the council members.

Bond Collapse

Last week, telecommunications giant WorldCom, the parent company of MCI, announced a rate increase that will affect 20 million customers worldwide. MCI just finished a campaign offering cut-rate long distance service to new customers, so why raise rates so quickly?

The answer is because WorldCom is in financial trouble; moreover, that trouble could be on the same scale as the Enron collapse.

On April 29th, the CEO of WorldCom, Bernard Ebbers, resigned. His company, which made 75 acquisitions in 19 years (including MCI and CompuServe), has run up a staggering $29 billion in debt. Its stock price, which reached a high of $64.50 in June of 1999, is now at about $2.35 per share. In February, WorldCom cut its revenue projections and announced a $15 to $20 billion write-down related to “goodwill”–the amount WorldCom paid for acquisitions over and above what the acquired companies were really worth. Then in mid-April, WorldCom stunned Wall Street by announcing a further cut of its revenue projections by $1 billion.

That’s not all. WorldCom is currently under investigation by the Securities and Exchange Commission, which is looking at how WorldCom booked its income. It seems the company went down the Enron path, declaring income it never collected, booking inflated sales commissions, and counting as income customer bills that were uncollectable. There are also questions about how it classified assets of companies it purchased.

Believe it or not, that’s the good news. The bad news is that WorldCom’s debt was recently downgraded, sending the price of its bonds into a tailspin. What makes this a crisis on the level of Enron is that WorldCom is the seventh largest corporate bond issuer in the US.

What, exactly, does that mean? Well, when the stock market tanked in early 2000, many investors moved their money from stocks into bonds, seeking a safe haven from market volatility. Bonds have long been seen as stable, safe investments, particularly for elderly investors who can’t risk seeing the value of their investments fall while they’re close to or in retirement.

In general, bonds are safe. But bonds come in many different flavors. There are municipal bonds, which are issued by state and local governments, school districts, ports, public utilities, and other local governmental authorities. “Munis,” as they’re called, are backed by the finances of the local governments that issue them (and ultimately backed by taxpayers). There are federal government bonds, too, which are called “Treasury Bonds,” “Treasury Notes,” or “Treasury Bills” (or, more simply, “T-Bills” or “Treasuries”). Treasuries are backed by the federal government (and ultimately taxpayers).

There are bonds issued by semi-private agencies like the mortgage bonds issued by Fannie Mae and Freddie Mac, which operate with some taxpayer funding, but are run like private companies.

And, finally, there are bonds issued by private companies, called “corporate bonds.” Corporate bonds come in different flavors, too. Some are “investment grade,” meaning the issuing corporation is considered financially sound and fully able to pay the interest on the bonds and, at maturity, pay back the principal, with little risk of default. Other corporate bonds are “junk bonds,” issued by companies that are struggling to make ends meet and need some cash to get the company back on track. With junk bonds, the risk is high that the company will miss interest payments or eventually default on paying back the principal at maturity.

Why, you might ask, would anyone buy corporate bonds–particularly junk bonds–when they can buy Munis or Treasuries? The answer is simply this: the higher the risk of default, the higher the rate of return on the bonds. Munis generally pay the lowest rate of interest to the investor, usually between 2-6%. Treasuries pay a little more, but corporate bonds pay much, much higher rates–above 10% annual interest on many junk bonds.

Bonds are also traded on a market, just like stocks. Once a bond is purchased, it can be sold to another investor. Its price can vary, depending on how solid and safe the investment is. For corporate bonds, the price depends on how strong the issuing company’s financials are. Ratings agencies, like Moody’s Investors Service and Standard & Poors, have the task of keeping track of bonds issued by various companies. They issue ratings for corporate bonds based on the issuing company’s financial stability.

Now, “investment grade” is the highest rating for corporate bonds. WorldCom’s bonds used to be rated investment grade, and so investors all over the world, particularly large institutional investors like mutual funds, company retirement funds, state-owned retirement plans, banks, and insurance companies all owned pieces of WorldCom’s debt. Those institutional investors represent thousands of individuals who invested in mutual bond funds, including retired folks living on company pensions, school teachers, fire fighters, government employees, Mom ‘n’ Pops with their IRA accounts, and many, many people who just set aside $20 or $30 out of each paycheck to go into the company 401(k). Two of the largest owners of WorldCom bonds are the California Public Employees’ Retirement System and the Vanguard Group.

When WorldCom’s debt was downgraded on April 25th, the price of its bonds fell rapidly. At the end of the week, on April 30, WorldCom bonds were trading at 46 cents on the dollar, which put them firmly in the junk bond category.

This is perhaps the largest bond collapse in history. Investors have lost almost $6 billion in less than a year. And the effect has rippled out through the corporate bond market, dragging down the price of all investment grade corporate bonds, as institutional investors have been forced to sell bonds of other companies in an attempt to make up for their WorldCom losses.

How could WorldCom, a company that was in financial trouble, issue bonds that were rated investment grade quality? Because WorldCom, like Enron, Xerox, QWest, Global Crossing, and other companies, didn’t play by the rules (those few that still exist). It hid its problems by issuing “proforma” financial statements and not adhering to government-mandated accounting standards, so ratings agencies were fooled. The ratings agencies themselves are private companies, not governmental entities, so there are no rigorous standards that they have to adhere to while evaluating the balance sheets of companies like WorldCom. And because there are so many companies that issue bonds, it’s a big job to evaluate them all aggressively on a continuing basis. Certainly the lack of government-mandated regulations, standards, rules, and enforcement of the few rules that exist all contributed to the problem.

In short, in a largely deregulated market, the WorldCom bond collapse has proved that there are no safe havens for investors.

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