California

Predatory lending with a smiley face

Obama is banking on "loan modifications" to help struggling homeowners -- but mortgage brokers are the real winners.

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Predatory lending with a smiley face

Some 40 mortgage brokers and real-estate agents are gathered at the Long Beach Hyatt on a balmy Friday in January to attend a seminar conducted by broker Allen Brodetsky and local real-estate attorney Steve Vondran. The mortgage business might have collapsed, but those assembled in the glittering ballroom have each paid $195 so Vondran and Brodetsky can teach them a fresh way to make money off of other people’s debt.

“The Department of Real Estate has granted brokers a whole new product line you never had before,” says Vondran, as the Dockers- and Ann Taylor-clad crowd read from fat binders and ponder the unfamiliar terms in Vondran’s PowerPoint presentation — “LOAN AUDITS,” “QUALIFIED WRITTEN REQUEST.”

The new product is a loan modification. When borrowers are unable to pay their monthly mortgage bills, a frequent occurrence in this era of self-destructing subprime loans, loan modifications allow the borrowers to renegotiate the terms of their mortgages. They pay a lower monthly charge and keep their houses, and the broker earns a paycheck for arranging the new deal.

Besides doing so-called loan mods themselves, Vondran and the San Fernando Valley-based Brodetsky help others get started in the business. Vondran also has another niche within the field: Brokers hire him to eyeball borrowers’ mortgage papers to see if their original lenders committed improprieties in making the loan. Many of the lenders did, and loan mod brokers who can promise their clients a legal review have an edge on the competition. Pitching his services to the room, Vondran works up a lather against predatory lending, which he denounces, quite accurately, as “an unlawful attack on home equity.”

Brodetsky then shows the group at the Hyatt a redacted photocopy of a loan modification he recently secured. It cuts the borrower’s monthly payment to about $1,500 — half of what it would have been if he or she had to pay the full amount owed.

Unfortunately for the borrower, however, is that the remaining debt doesn’t vanish. Those unpaid tens of thousands are waiting there to be reckoned with down the road, plus years of additional interest. “Isn’t that predatory lending?” gasps one of the attendees at the Hyatt. Vondran and Brodetsky change the subject.

By the Obama administration’s account, its new housing rescue plan, which goes into effect on Wednesday, will pull up to 4 million homeowners back from the brink of foreclosure. It also offers another 5 million or so excessively indebted borrowers the chance to refinance into lower-interest loans.

But the biggest winners in the government’s $275 billion homeowner bailout just might be the mortgage brokers who were largely responsible for creating the disaster in the first place. Many are now reinventing themselves as heroes of the mortgage crisis by offering loan modification services. And between its new cash support and the refinancing program, through which they can benefit from the federal aid via brokers’ fees, the Obama homeowner bailout might as well be a full employment program for them. The Treasury Department’s FAQ for borrowers warns, “Borrowers should beware of any organization that attempts to charge a fee for housing counseling or modification of a delinquent loan, especially if they require a fee in advance.” But nothing in the homeowner bailout prevents these middlemen from stepping in and taking a cut.

In California, home to nearly one-fourth of all the foreclosures in the country, there are now applications pending from some 500 brokers and real estate agents seeking to get in on this new line of business, which hardly existed six months ago (but now has its own trade group). California’s Department of Real Estate, which licenses mortgage brokers and real estate agents, has so far authorized more than 200 companies to negotiate with mortgage lenders to modify loans, and the list grows longer every week. They may charge borrowers whatever they choose for this service, as long as they only collect a portion of the fee upfront and take the rest once the job is completed. The going rate ranges from a flat $2,985 to about 1 percent of the amount of the mortgage, or $4,000 on a $400,000 loan.

The problem is that the majority of loan mods are lousy deals for homeowners. Federal banking regulators recently determined that more than half of all mortgages that were modified by lenders in early 2008 ended up heading into foreclosure again in less than six months. Most loan modifications, in fact, dig borrowers deeper into debt.
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Like many other former mortgage brokers, Shawn Kolahi of Irvine, Calif., now runs a company licensed by the state of California to help borrowers negotiate loan modifications. His company, Loan Processing Center Inc., employs nearly 80 sales reps and case processors in a sleek office in Irvine. Up through 2007, Irvine was the subprime lending capital of America, home to infamous powerhouses like Ameriquest and New Century. For a fee of several thousand dollars, Kolahi’s company pores through loan files; assembles financial documents from borrowers; haggles with lenders — the kind of vital scrutiny that these borrowers’ mortgage brokers didn’t provide in the first place. The brokers at the Loan Processing Center are now working in reverse. In seeking mortgages on behalf of borrowers, they used to provide a bare minimum of evidence to lenders that applicants could make a monthly mortgage payment. Now the brokers spend their days trying to prove that borrowers can’t make their loan payments, and need to renegotiate their mortgages.

“We had to try to stay alive,” explains account executive Sam Carlson, who recruits brokers from across the country to join the operation. He formerly worked at a mortgage brokerage. Now his new company blitzes homeowners who have subprime and other high-risk mortgages with junk mail and telemarketing calls. Carlson reports that Loan Processing Center is currently working with some 1,700 clients. “We’re the biggest,” he boasts.

Just a couple of years ago, Carlson’s boss Kolahi was a broker for Dana Capital, which sold loans on behalf of Irvine subprime behemoths like Option One and New Century under its own brand name. Dana Capital specialized in the most noxious of all mortgages — “cash out” refinancing, in which homeowners with bad credit were urged, through a barrage of junk mail, faxes, telemarketing calls, late-night TV ads and Web phishing, to take out new loans based on the swelling value of their real estate. Dana’s brokers often skirted the edges of the law, working without licenses to sell mortgages in the states where they peddled them. For selling loans without a license in New Jersey, Kolahi was named in a cease-and-desist order prohibiting Dana Capital from doing business in that state. By 2007, nine states had ordered Dana Capital to get out. Facing hefty fines from regulators, the company shut down.

But by then the damage was done. It’s largely thanks to cash-out mortgages like Dana’s that recent homebuyers in California, more than anywhere else in the country, owe far more in mortgage debt than their homes are actually worth. Because Dana Capital loans typically carry adjustable rates that start at 8, 9 or even 10 percent and jump sharply after two years, and include hefty fees for late payments as well as prepayment penalties making it prohibitively expensive to refinance into cheaper new mortgages, a huge number of Dana Capital’s borrowers are doomed to lose their homes. In the company’s backyard in Orange County, of the roughly two dozen mortgages Dana Capital sold to borrowers in 2006 and 2007, at least 10 are already in foreclosure. Even for California, that’s a lot.

Now Shawn Kolahi heads a fire brigade battling the inferno he helped ignite. Following Dana Capital’s business model, Kolahi’s loan modification enterprise relies on subcontractors — some 480 brokers nationwide selling its loan modification services. Many are recruited via mortgage broker message boards, the places they went to not so long ago to find lenders willing to make ridiculously risky mortgages (as in “CAN ANYONE PLEASE HELP? I DESPERATELY NEED A LENDER THAT WILL DO 100% FINANCING PURCHASE LOAN ON A NON OWNER OCCUPIED IN NJ 668 FICO, STATED”).

These subcontractors, or “affiliates,” each operating under their own company names in Florida, New York, Texas, Michigan and other states, as well as in California, promise to help homeowners in financial trouble restructure their loans — that is, negotiate with the company handling their mortgage payments to work out some kind of deal to head off foreclosure. Carlson’s iPhone is flooded day and night with text-messaged scenarios from these brokers, each checking in to see if a beleaguered homeowner might qualify to cut a deal. If it’s mathematically possible to bring homeowners’ mortgage payments to somewhere under 40 percent of their monthly overhead, they’re probably in. The brokers send the cases to Loan Processing Center, and pay Loan Processing Center a sizable fee per file to get the job done.

Some of the “affiliates” appear to be in pretty desperate shape themselves in these hard times for the mortgage industry. One subcontractor recently went into default on his Irvine condo — the first stage of foreclosure — after missing nearly $20,000 in mortgage payments. Kolahi’s wife, an attorney who works with Loan Processing Center to identify illegalities committed back when the borrower first got the loan, is in similar straits. She’s now heading for foreclosure on a loan for nearly $1.2 million on a home in an exclusive gated community in the Irvine hills.

“Why do you think so many loan mod companies are here in Orange County?” asks Sam Carlson brightly. “We’ve got cheap office space and out-of-work loan processors!”

Carlson and his boss Kolahi are far from the only exploding-mortgage salesmen now reinventing themselves as licensed loan doctors. California has also allowed an O.C. company called Mortgage Bailout Assistance — 1-866-BAILOUT — to charge borrowers to repair their bad loans. Don’t be fooled by its eagle logo; this is no federal agency, but a spinoff from a lender called Amtec Funding. Amtec, like Dana Capital, specialized in aggressive marketing of subprime loans nationwide, a practice that won the company an FCC citation for violations of the Do Not Call registry. Amtec, which is still in business, was co-founded in 2005 by Samy Khoury, a former V.P. of sales for First Alliance Mortgage, one of the most notorious of the first wave of subprime lenders in the 1990s.

Following a training program run by Khoury’s then-wife, First Alliance salesmen adhered to a script that, as a federal appeals court concluded, “was unquestionably designed to obfuscate points, fees, interest rate, and the true principal amount of the loan. First Alliance’s loan officers were taught to present the state and federal disclosure documents in a misleading manner, and the presentation was so well performed that at least some borrowers had no idea they were being charged points and other fees and costs averaging 11 percent above the amount they thought they had agreed to.” That court ruling held Lehman Brothers liable for bankrolling “fraudulently obtained loans” sold by First Alliance — the one time ever that an investment bank marketing mortgage-backed securities has been found legally responsible for the harm they caused to subprime borrowers.

Amtec loans followed in the same tradition. In Chicago, Amtec charged one borrower a starting interest rate of nearly 10 percent, and for the privilege ladled on fees amounting to 5 percent of the entire loan amount. An Amtec loan that went into foreclosure last year wasn’t unusual for the lender: stated income, interest only, adjustable rate after two years, one of two mortgages, and borrowed by an investor who owned several other properties. Even the initial teaser payments on the one loan amounted to nearly half of the investor’s alleged income. The starting interest rate was 11 percent. His 752 credit score was sufficient to get this Amtec loan to pass muster with subprime titan New Century, and from there go into a Morgan Stanley mortgage-backed securities pool.

Mortgage industry veterans now joining the ranks of loan modification specialists don’t apologize for the products they used to sell. Ty Youngblood, a mortgage broker with 10 years’ experience who now does loan mods with state approval in foreclosure-ravaged Riverside County, says it was impossible to stay in business in Southern California unless one was willing to deal in no-doc, option ARM, cash-out and other toxic mortgages, some of which were still advertised on his Web site earlier this year, but are no longer. “I’m just a waiter at a restaurant,” Youngblood explains by way of metaphor. “I didn’t make the food. I didn’t grow the food. I’m just presenting the menu to the borrower. A T-bone steak? I’m just saying it’s on the menu. We didn’t invent these option ARMs — the banks did.”

Their history in the trenches lets these brokers advertise themselves as experts on the mortgage business, and government-approved loan modifications as a chance to redeem themselves as heroes helping save homeowners from the recent excesses of their own industry. They’ve certainly found a growth opportunity. County clerks are recording more than 600 mortgage defaults each week in San Bernardino County; more than 550 in Orange; 1,050 in Riverside; almost 1,700 in Los Angeles — on track to 200,000 defaults this year in the L.A. region alone, each one of them a potential customer. Most will go into foreclosure. (To motivate Loan Processing Center’s sales force to close deals with their highly distressed customer base, Carlson requires each of them to Google “mortgage suicides.”)

California’s state regulator urges borrowers to use loan mod advisors from the state’s approved list, if they’re going to pay someone for help. “Log on, look ‘em up, check ‘em out,” says Tom Poole, public information officer for the Department of Real Estate. “Folks ought to be going to the [department] Web site and verifying the licensing status of the company.”

But sorting real loan modification companies from phantom ones may be almost beside the point. Loan mods, in general, don’t offer much long- or short-term relief for the borrower. Among the 3.5 million subprime and other high-risk loans for which Wells Fargo oversees mortgage-backed security pools, one-third of the loan modifications in the fall of 2008 reduced the monthly payment, but nearly half actually increased it within a matter of months, according to an analysis by Alan White of Valparaiso Law School. The average interest rate after modification was 6.9 percent, and fewer than one in 10 got a reduction in even the late fees they owed. Among the loan modifications reported by HOPE NOW, the mortgage industry effort to help homeowners in foreclosure, even fewer modifications are lowering monthly payments — just 1 in 5.

The Obama plan aims to improve that dismal track record, by promising lenders that if they and a borrower can work out a deal bringing monthly mortgage payments down to 38 percent of the homeowner’s income, the feds will kick in money for five years to bring down the bill even further, making it more likely the borrower will be able to keep paying.

For many borrowers, a lower payment will be all the difference between staying in one’s home and going into foreclosure — for now. But the Obama plan is a short-term fix. It doesn’t do the one thing that would actually help homeowners in the long haul, and that is reduce the amount of principal they owe. The loan mods that these brokers are selling, and that the Obama administration is now promoting, are new and improved variations on the exotic mortgages that seduce borrowers in the first place. They charge a manageable amount now, and then hit the borrower with higher costs down the road.

Most problematically, the total amount of money owed doesn’t shrink — in most cases, it grows, even with the new federal aid. Getting an actual debt reduction “[is] like a Bigfoot sighting,” jokes Allen Brodetsky.

“Loan modification success rates are ridiculously low,” agrees Debra Zimmerman, an attorney with Bet Tzedek Legal Services in Los Angeles who represents borrowers. “Until banks are ordered to reduce principal too, there will be no solution.” Congress is voting this week on “cramdowns,” giving bankruptcy judges the power to order lenders to reduce mortgage debts just like they already do with car or student loans that a borrower can’t pay, but resistance among the financial industry has made that prospect uncertain.

As real estate values plummet, borrowers who get loan mods are signing up to pay ever-more-insane sums for increasingly worthless real estate. Since the bill doesn’t come due until much later, they either don’t care, don’t know or harbor delusions about future price appreciation.

Loan Processing Center is there to encourage such wishful thinking, openly discouraging clients from seeking reductions in the debt they owe. Follow Sam Carlson’s math: “Let’s say you have a loan for $900,000. Now, 30 grand off that does nothing to lower your payment. A borrower needs immediate monthly relief, and the only way to significantly do this is a lower interest rate.” The only goal is to hang on to the home, right now. After all, Carlson explains with an enthusiasm that might have sounded convincing in 2005, the homeowner will gain in the long run. “America is coming back!” he cheers. “Interest rates are going down! That home is going to be worth a lot.”

His projection is far more optimistic than that of most real estate experts. Even economists for the home building industry, pathologically predisposed to positive spin, project an additional 29 percent national average home price decline this year alone — in hyper-inflated California, likely more. None dare to venture a guess about when, if ever, values will return to their bubbleicious heights. California real estate broker Ramsey Su recently offered another view of the equation in the Wall Street Journal: “Loan modification is not only ineffective, it is evil. Coercing borrowers to continue paying a mortgage on a home that is hopelessly overvalued and not informing them of alternatives is predatory lending.”

Just like mortgage brokers, loan mod companies are under no obligation to act in borrowers’ financial interests, short- or long-term. Under California’s model contract, which brokers are encouraged to emulate in their dealings with borrowers, almost any change to a mortgage is an acceptable result, whether or not it saves a borrower money. And while the client has to accept the proposed deal in order for the company to get paid in full, the sales forces at these firms are veterans of pressure pitches to people in tough financial situations. Both Carlson and a spokesman for Mortgage Bailout Assistance indicate that their clients almost invariably take the offers they are given.

The proverbial fox is helping the hens hold on to their coops, and not just in California. Seventeen states now have laws on the books effectively banning “foreclosure consultants,” but most make an exception for mortgage brokers. As consumer complaints about fraudulent loan mod operations proliferate across the country, other government officials, including New York’s City Council, are now following California’s lead and exploring the creation of an official registry of mod brokers.

 

Alyssa Katz is television critic for the Nation.

California’s college mess

How not to compete in the global economy: The richest state in the U.S. can't afford to educate its students

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California's college messJerry Brown (Credit: Reuters/Lucy Nicholson)

If increasing access to quality higher education is as crucial to U.S. economic growth as everybody seems to think it is, then two news item from California this week deliver a simple, straightforward message: We’re screwed.

1) Ace education reporter Nanette Asimov reported on Tuesday in the San Francisco Chronicle that the California State University system is withholding around $90 million in cash grants previously allocated to graduate students in the CSU system.

Graduate students across the 23-campus system began receiving financial aid notices this week and were astonished to see that the State University Grant that takes care of tuition for low-income students was missing. In its place was the offer of a federal loan at 6.8 percent interest.

2) Also on Tuesday, University of California officials announced a sharp increase in out-of-state student admissions to the U.C. system:

More than 23 percent of all those incoming freshmen will be out-of-state and international students who pay nearly three times more than California residents to attend UC…. The figures mark a big jump from last fall, when 18 percent of admissions were from out of state. And it’s almost double the percentage of foreign and non-California residents who were admitted in fall 2009.

The common link to these two data points: California’s increasing inability to fund its public university system. The CSU system has already weathered a 33 percent cut in its overall state funding — $1 billion — over the last four years, and faces another $200 million cut if Gov. Jerry Brown fails to convince voters to pass a state initiative authorizing a tax hike this November.

The UC system is in similar straits. Once upon a time, California gave every student who qualified for the UC system a completely free ride. Now the state pays only 11 percent of UC tuition costs. As a result, for in-state students, tuition has tripled over the last 20 years, to $13,200. But out-of-state students pay three times as much as that, a fact that has made them more and more attractive to admissions departments.

California’s troubles paying for higher education can be traced all the way back to the passage of Proposition 13 in 1978, which made it extraordinarily difficult for the state to raise taxes. But California’s s woes are by no means unique. In 2011, state funding for higher education dropped by $6 billion, or 8 percent nationwide. And with the federal government caught in the same vice grip — an intransigent refusal to raise taxes for any purpose whatsoever — there’s little help that can be expected from Washington. In fact, the same graduate students who are getting their unpleasant mail from CSU this week are due for another unhappy surprise on July 1, when interest rates on their federal student loans bump up, a result of one of the cost-cutting deals that was part of the debt ceiling agreement one year ago.

All these numbers add up to another simple, straightforward truth: Quality higher education is increasingly available only to those who can afford it. So income inequality becomes educational inequality, and the stratification of American society into haves and have-nots continues apace. If we’re looking for strategies on how to prosper in an ever more competitive global economy, this isn’t it.

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Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

California’s unregulated fracking problem

Drilling has long gone unregulated in this earthquake-prone state. And now Gov. Brown may be trying to hush it up

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California's unregulated fracking problemA gas flare burns at a fracking site in rural Bradford County, Pennsylvania January 9, 2012 (Credit: Reuters/Les Stone)
This originally appeared on

Thanks to the smoking gun of Josh Fox’s sobering documentary “Gasland,” hydraulic fracturing has finally entered our renewable news cycle. Yet despite poisoning groundwater, freeing methane and literally creating earthquakes back east, fracking has a visibility problem in California.

AlterNetThe situation became less clear after a recent investigative report from D.C.-based nonprofit Environmental Working Group explained that California has experienced 60 unregulated years of widespread fracking, whose technical methods and geographical locations in the seismically active state exist outside of the public purview. It got darker after Gov. Jerry Brown’s administration wiped the state government’s Division of Oil, Gas and Geothermal Resources (DOGGR) website of fracking fact-sheets and documents. Good luck finding anything about fracking on the governor’s official site either.

“Since our report came out, the Brown administration hasn’t been happy with it,” Bill Allayaud, EWG‘s California director of government affairs, told AlterNet by phone. “They said we quoted their meetings but left out important quotes. But I don’t know what we left out, or how we could shine a better light on the situation. We’ve been trying to work with them now for over a year.”

There has also been a great disappearing act. According to Allayaud, gone is the issue’s main page, an account of fracking in other states, as well as what he calls an “inaccurate and misleading factsheet about fracking in California.” Gone also is a copy of a letter sent by the state in response to questions from Senator Fran Pavley (D-Santa Monica), chair of the Senate Committee on Natural Resources and Water, whose rebuffed inquiries about the extent of California fracking inspired assembly bill 591 (AB 591), currently at the center of a tug-of-war between the interested citizenry and an industry that seems desperate to avoid transparency.

Punch the term “fracking” into DOGGR’s search today and you’ll receive a white screen with the perhaps accidentally ironic query “Did you mean: cracking” in response. That’s probably funny to even most Californians, whose fault-laced state is due for its next catastrophic earthquake, but it doesn’t inspire confidence that DOGGR is taking fracking seriously.

“No word on that, sorry,” DOGGR spokesman Don Drysdale told AlterNet via email when asked for clarification on the division’s online document scrub, or whether they will be replaced or upgraded. Drysdale also explained that DOGGR doesn’t have regulations requiring that operators report when, where and how they use hydraulic fracturing to stimulate production. He also said that information from DOGGR regarding fracked wells in the San Joaquin-Sacramento River delta gas fields near shallow groundwater is “not available, and that “we do not have records” of offshore fracking operations in the Long Beach-Santa Barbara drilling area.

“However, the City of Long Beach has its own oil and gas department and may have some information,” he added. “We recently began to request that operators voluntarily report their hydraulic fracturing operations (PDF) to FracFocus, a public Web site run by the Groundwater Protection Council and Interstate Oil & Gas Compact Commission.”

This Kafkaesque labyrinth doesn’t exactly inspire confidence that DOGGR “has regulations designed to ensure well integrity and to protect underground resources,” as Drysdale claimed to AlterNet. If it did, there’s a good chance that AB 591 wouldn’t exist in the first place. That law proposes to legislatively define the fracking technique and disclose its “chemical constituents,” recognize its “long history of its application within the state,” evaluate its impact on California’s natural resources and “geologic and seismic complexity,” disclose its sources and amounts of water used and relay any data on “recovery and disposal of any radiological components.” That a bottomless well’s worth of disclosure demands for a regulatory regime professing to do its job just fine, thanks.

It is also why “DOGGR was raked over the coals” in a March 28 budget hearing “that was more about fracking than anything else,” according to Allayaud, who attended. At that meeting, California Department of Conservation (DOC) director Mark Nechodom was rebuffed in his efforts to procure more funding and positions for DOGGR. That fact that he repeatedly assured Assembly members that DOGGR was regulating fracking but was unable or unwilling to disclose the location of any fracked wells or well-casing failures to those members might have had something to do with it. By meeting’s end, Nechodom promised to prepare fracking regulations, undertake a scientific inquiry into its practice, and conduct a series of listening sessions in the state.

Better late than never, but DOC and DOGGR still need to speed the plow. According to a report from the Center for Investigative Reporting’s Tia Ghose, both the Center for Biological Diversity and Sierra Club are suing the Bureau of Land Management to prevent fracking on federal lands (PDF) — 2,500 “environmentally sensitive” acres in Monterey and Fresno counties have already been leased. The BLM has suggested that it’s mostly grazing land that has been leased before but still remains undeveloped, and consoled worriers by explaining that the agency executes environmental reviews in the drilling permit process.

“Our case is proceeding in the district court on a normal schedule, but there hasn’t been any merits briefing or rulings yet,” Sierra Club attorney Nathan Matthews told AlterNet. “Nobody from the state has contacted us about this suit. The BLM Web site lists who purchased the leases, but presumably the land could be developed by someone else. Our claim demands that BLM assess these types of risks before proceeding to allow development.”

Like DOGGR before them, the BLM’s distaste for transparency on an issue as controversial as fracking is counterproductive, and could prove costly in the final analysis if the problems that continue to plague the practice back east migrate westward. But their profit-oriented perspective nevertheless comfortably aligns with the industry itself, which seems all too content to rely on hindsight rather than foresight when it comes to tragedies large and small.

“An original version of AB 591 we had last year asked the industry to map where it was fracking in California, and indicate any active seismic fault within five miles,” said Allayaud. The industry’s non-profit trade group Western States Petroleum Association “said it wanted thatout. When I asked why, the answer I got was, ‘Look, if we were causing earthquakes through drilling, injection wells or fracked wells, you would know it. Look how many geophysicists are running around the state looking at earthquakes.’”

That flippant industry response, taken together with those of the California agencies overseeing that very industry, has only galvanized regional opposition. Many more will inevitably follow AB 591 and the joint complaint against BLM if industry and government alike condescendingly assert that everything is under control to a citizenry told too many times to keep its nose out of its own affairs. The fight over AB 591 exists precisely because the industry won’t release its fracking data, from the location of its wells to the chemical makeup of its bedrock-fracturing injection cocktails, without rigorous enforcement.

To play fair, the EWG stripped the mapping requirements near active seismic faults. “We agreed to take it out because the industry is trying to be cooperative,” Allayaud told AlterNet. “They’re not opposing the bill.”

For his part, Allayaud isn’t too concerned about California’s fault-riddled seismology or inevitable earthquake catastrophes. So far, neither is the United States Geological Service, whose Web site search results on fracking are more extensive than Governor Brown and DOGGR’s blank pages. The USGS explains that California’s faults are better studied and understood than anywhere else in the nation, and that its populaces are also better prepared for earthquakes large and small. “Hydraulic fracturing has been taking place for many decades in California,” the USGS Earthquake Science Center’s Art McGarr told AlterNet, “mostly to stimulate oil and gas production in old fields.”

“In any event, there is little likelihood that any fracking operation could perturb a nearby active fault so as to trigger a major earthquake,” he added. “The stress changes associated with fracking are much too small and localized to interact with a fault capable of producing a significant earthquake. In other parts of the country where fracking has enabled gas production from tight shales, the fracking has not caused earthquakes of any consequence.”

To McGarr’s knowledge, there are no high-volume waste-water injection wells in California located within areas of high population density, and he guesses that will continue to be the case. But we’ll never know until the federal and state government is compelled by a plugged-in citizenry to force the industry’s hand, and disclosure. Until that happens, they will side with controversial corporations like Halliburton, which is leading the opposition against AB 591 by arguing that disclosing the chemical cocktails it uses to fracture wells would be a violation of trade secrets. And the last-gasp natural gas bubble that fracking enables will continue to create flammable groundwater and destabilized grounds. Once it becomes apparent that the green defense of fracking is negated by more methane, which is 25 times more powerful a greenhouse gas than CO2, then hydraulic fracturing’s disclosure game will be up.

In hindsight, it will look like a bunch of junkies who just didn’t know when to stop tapping fossil fuel’s disappearing veins.

“We need strong disclosure rules with narrow trade secret protections,” Matthews explained to AlterNet. “BLM will be announcing a proposed disclosure rule in the coming weeks, and the public will be able to submit comments on that.”

“The Brown administration still says there is no urgency to create regulations to deal with fracking,” said Allayaud. “Their focus is on getting permits for regular oil drilling out the door faster. We think they have the capability to do both, and I think AB 591 will push them in that direction, because they need to be pushed. I’ve never seen a state agency behave this way, and I’ve been working around them for 36 years.”

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Scott Thill is the editor of Morphizm.com. He has written on media, politics and music for Wired, the Huffington Post, LA Weekly and other publications.

Swimming with the stars

A new photography exhibition examines the cultural significance of the Southern California swimming pool SLIDE SHOW

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Swimming with the starsLawrence Schiller, "Marilyn Monroe," 1962.(Credit: Courtesy of Judith and Lawrence Schiller; Lawrence Schiller © Polaris Communications, Inc.)

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By turns playful, suggestive and bewitching, the photographs in a new show at the Palm Springs Art Museum propel us back through the decades, to a time when the glamour of choreographed capitalist displays had a singular hold over the American imagination.

These images, though diverse in many respects, all have one thing in common: the swimming pool. That, and their mid-to-late 20th-century Southern California backdrop.

The exhibition is part of  “Pacific Standard Time,” a multi-institutional project devoted telling the story “of the birth of the Los Angeles art scene and how it became a major new force in the art world,” sponsored by the Getty Research Institute. Over the phone, curator Daniell Cornell explained the place of the swimming pool in Southern California’s cultural history, and discussed the show’s principal themes — from architecture and suburban idealism to the cult of the Hollywood celebrity. Click through the following slide show for a sun-soaked trip back in time.

Had you considered doing a swimming-pool themed photography exhibition before “Pacific Standard Time”?

I’d been thinking for a long time, actually — ever since graduate school — about trying to do an exhibition that investigated a theoretical concept: the notion that a place is both a real, topographic entity and an ideological construct … It’s just an idea I’ve been wanting to explore. When the opportunity came to apply for a grant to do an exhibition as part of this larger project looking at art in Southern California, I realized that it was the perfect opportunity to begin to explore that idea.

When I started thinking about it … I realized that in many ways, in the post-war period, Southern California was the ideal of what the American dream was going to look like. At the center of that was the swimming pool, and suburban expansion, and the concept of everybody living in this place that didn’t have the danger of nature, but had all the benefits of the natural landscape. A place that was away from the city, but at the same time felt domesticated. I started thinking about the pool as the central icon of that both real and imaginary place. And it grew from there.

What do swimming pools say about Southern California in particular (that they don’t say, for instance, abut other parts of the country, such as the Midwest or New England)?

Well, in the immediate postwar period of the ’40s, ’50s and even ’60s, there weren’t that many swimming pools elsewhere. Maybe in Florida, which had a similar kind of expansion at that time. But Southern California was growing very rapidly in terms of suburbia in that period, and that expansion included houses that incorporated swimming pools. I grew up in the ’60s and ’70s in Seattle, and I envied Southern California — because in Seattle, in the summer, we would drag out our above-ground swimming pools and set them up and pretend that we lived the same kind of life that I imagined people in Southern California lived all the time. Thinking about kids my age in the ’70s growing up with swimming pools in their backyard and having this kind of experience as the norm for their life — that was a very seductive sensibility. I don’t think that that was unusual, when you look at how much Hollywood promoted itself and Southern California as an ideal for the country. You pretty much see it everywhere.

Two themes that seem immediately apparent in many of these images are architecture — that is, the houses or buildings we often see beside the pools — and sex.

The exhibition is divided into thematic groups. It does start with California architecture and design, because swimming pools were at the center of the way that mid-century architects here in Southern California were thinking about modern architecture. The pool created a very porous experience between indoor living and outdoor entertaining. These were houses literally built for entertaining, and the movement from the inside to the outside was part of how Southern California architecture was developed … The pool really allowed for fluid movement between those spaces. So architecture and design is certainly at the beginning of the way that you would want to think about pools, in the period from 1945 to 1982 in general, in Southern California.

In addition, this is a period in which … culture was creating an image for the Hollywood celebrity that was built around the pool. You see all of these images of Hollywood celebrities — supposedly just casual, unscripted moments. [But] none of those photographs are meant to do anything except promote the persona of the celebrity. They give you this impression that what you’re seeing is the “real” celebrity, when in fact you’re seeing the carefully narrated Hollywood persona that that celebrity is based on.

[Another section of the show focuses on] suburbia, and how much the private, backyard pool (as opposed to the public pool) was at the center of suburban life. There were some public pools in suburbia, but the ideal was a private, protected space; especially in the ’50s, it had very much to do with this notion that we Americans had a private experience — as opposed to the communal experience of the Soviet countries. When you look at what people circulated in terms of photographs, and even what they said about their own experience, it almost always revolved around things that they were doing in the backyard. If they were lucky enough, it revolved around a pool in the backyard. And as you say, because of the very nature of the fact that, when you’re around a pool, you’re wearing a swimsuit, it becomes an opportunity for the body to be on display.

[The final section of the exhibition is a conceptual one.] I wanted this show to be not just about these social topics, but also about what was happening in photography during the period. 1945 is a high modernist moment in photography, and the earliest photograph in the show is by Ruth Bernhard, who emigrated from Germany to escape the Nazis. She went first to New York and then to Southern California, and her images represent all of the things that you would expect in a high modernist photograph: … even though it’s representative, there’s a very abstract organization of the forms and the shapes in the image, because it’s done through high contrasts of light and dark.

As you move through the period, you get photography really blurring the boundary between popular culture and high culture, because photographs circulate in commercial advertising; they circulate in journalistic reporting; they exist in lifestyle magazines as well as in professional trade journals … all of those things in addition to showing up as fine art in museums.

Then, in the 1980s — that’s when photography goes big; that’s when Cindy Sherman’s photographs go up on the wall large, and Barbara Kruger’s imagery goes up big, and David Hockney first takes his smaller Polaroid images and montages them together into something large enough that it can go up on the wall and challenge painting as the dominant mode in contemporary art practice. You see this shift from a very high modernist fine art practice to color photography that we recognize as a part of postmodern contemporary art. That really literally happens from 1945 to 1982, so it spans the dates of this show. The conceptual section really shows you how photography used the pool, not as a subject, but as an opportunity to explore all kinds of developments in photography as an aesthetic mode itself.

The exhibition features several works by David Hockney — and several that were inspired by him (or even actually incorporate him [slide 10]). Can you talk a little about his art and influence?

[The Hockney photo in your slide show,] “John St. Clair Swimming,” [slide 9] is actually very small. It’s typical of a series of images he took; he used photography in the way that other artists might use a sketch or a prefatory painting: as a way to think about his compositions. That image of John St. Clair swimming became source material for a later famous painting by Hockney that is actually set in Italy. But that particular image [was taken in California].

When I decided to do this exhibition, I knew it had to have Hockney, because if you say “the swimming pool in Southern California,” the first thing that comes to almost everybody’s mind is Hockney. It’s ironic, though — I don’t think most people know that he only painted 15 paintings of swimming pools. They loom so large, because they circulated so widely through reproductions and in the popular imagination that people think he must have painted dozens of them. But he only did 15.

“Backyard Oasis: The Swimming Pool in Southern California Photography, 1945-1982″ is on display at the Palm Springs Art Museum in Palm Springs, Calif., through May 27, 2012.

View the slide show

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Emma Mustich is a Salon contributor. Follow her on Twitter: @emustich.

Occupy Southern California

At least a half-dozen separate protest movements have sprung up between L.A. and San Diego

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Occupy Southern CaliforniaSan Diego Police clash with demonstrators at the Civic Center Plaza Friday, Oct. 14, 2011 in San Diego. (Credit: AP/Lenny Ignelzi)

California has long been a hotbed of political activism, so it’s no real surprise that residents across the state are expressing their solidarity with the Occupy Wall Street movement. In fact, in the relatively small tract of land between Los Angeles and San Diego, a number of groups have staged protests of their own. Here’s a roundup:

Occupy Los Angeles: A group of 10,000 to 15,000 protesters — not just Angelenos, but Californians from near and far — marched in dowtown L.A. on Saturday. According to the Los Angeles Times:

Despite the frustration and anger that many protesters expressed, the march took on a decidedly festive atmosphere. Families walked together, with mothers carrying babes in Snuggies and tattooed fathers toting toddlers on their shoulders. One woman twirled a Hula-Hoop around her middle as she walked. A man strummed a guitar. Several people pounded drums.

Occupy Long Beach: Though only a few dozen protesters reportedly came out for a Sunday protest, a few ran into trouble when they set up camp in the city’s Lincoln Park. From the Los Angeles Times:

Police said that the 35 to 40 demonstrators in Long Beach’s downtown Lincoln Park were peaceful Sunday and that most of them followed an order to move to the sidewalk when the park closed.

But as police searched tents in the park, they found a few had stayed behind. Those arrested and cited were among those who refused to leave, police said.

Occupy Orange County: A bastion of conservatism in a solidly blue state, Orange County hasn’t swung for a Democratic presidential candidate in decades. That doesn’t, however, mean that there isn’t some genuine frustration with the establishment. A group calling itself Occupy Orange County assembled in Irvine, Calif., on Saturday in solidarity with OWS, drawing a crowed of 1,000-plus demonstrators. Similar protests have popped up in Anaheim and Orange, with another planned for Santa Ana this upcoming Saturday, according to the Orange County Register:

Occupy Riverside: A group of some 200-to-300 protesters assembled at Riverside’s downtown mall area over the weekend. City officials have granted permits to camp out nearby, but also set a number of restrictions for conduct at the mall, which the city has reportedly spent “millions of dollars” renovating recently.

Per the Press-Enterprise:

Demonstrators waved signs with slogans such as “Banks got bailed out; We got sold out” and the now-familiar “We are the 99 percent,” and cheered when passing cars honked in support.

Occupy San Diego: The refusal of protesters to remove their tents near City Hall resulted in arrests and pepper-spraying on Friday. Since then, the atmosphere among the dozens of remaining at Occupy San Diego has been substantially more low-key.

According to  Sign On San Diego:

Demonstrators…adjusted to the mandate by police late last week prohibiting all but one tent in the Civic Center Plaza, a stark contrast to the movement’s tent city that formed during the first week of the protest.

Protest signs continued to dot the downtown plaza with messages such as “Separation of Corporation and State” and “End the Fed.”

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Obama’s crackdown on medical marijuana

The Justice Department shifts course and goes after California's lucrative pot industry

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Obama's crackdown on medical marijuanaRight: DEA agents remove marijuana plants from a dispensary in San Francisco (Credit: AP/Salon)

Back in July, I interviewed a drug policy expert about an apparent change in Justice Department policy that suggested a crackdown on medical marijuana — which is legal in many states but illegal under federal law — might be coming.

Now, with the announcement last week by California’s four U.S. attorneys that pot dispensaries will be targeted with harsh criminal sanctions, the shift feared by drug policy reform advocates appears to have come to pass. The rhetoric from candidate Barack Obama about not prioritizing medical marijuana cases now seems a distant memory.

To learn more about what’s happening in California, I spoke to Bob Egelko, a veteran reporter who covers courts for the San Francisco Chronicle and has been following the story.

Starting with the basics, what is the medical marijuana law in California and what does it allow for?

In 1996 the voters approved Proposition 215. It allows people to receive marijuana for medical purposes with their doctor’s approval — not prescription, but recommendation. It also allows them to grow it themselves or get it from a caregiver without being prosecuted under state law. It was the first law like that in the country, and there are now laws somewhat similar to it in 15 other states plus the District of Columbia.

Before this week, what has the federal response been to medical marijuana use in California?

There was opposition even before Proposition 215 passed. The Clinton administration made it clear that it opposed Prop. 215 and moved almost immediately to try, first of all, to punish doctors who recommended marijuana to their patients by removing their federal prescription licenses. That was rejected in court. The administration also moved to shut down some dispensaries for violating federal law. That reached the Supreme Court, which agreed with the administration and allowed closure of an Oakland marijuana collective. So the federal government has been pretty much hostile to the California law from the beginning, with the possible exception of the initial year or so of the Obama administration.

How big is the industry in the state?

It’s a very good-sized industry. A conservative estimate of its size is $1.5 billion per year. There are more than 1,000 dispensaries. There was a recent account suggesting that 400,000 Californians may be using medical marijuana. Of course there’s not always rigorous screening as to which use is medical and which is not. That depends on how rigorous doctors are.

So bring us up to the present — where has the Justice Department been on this?

In October 2009 the Obama DOJ announced it would not devote prosecutorial resources to people who were complying with their state’s medical marijuana laws, in California and elsewhere. This was very much in keeping with what Senator Obama said during the presidential campaign: that basically states could go their own way and he was not interested in interfering with them carrying out their own policies. This past June, the Justice Department issued a memorandum saying in effect, “We don’t want to be misunderstood here. What we really meant was, we’re not going to target individual patients and their caregivers. But we certainly are not going to let commercial dispensaries off the hook.” That was in keeping with what they have been doing: a lot of raids, continuing prosecutions of people who had been charged under the Bush policies, pressing for long sentences, and so on.

This past week, all four U.S. attorneys in California held a press conference in Sacramento to announce they would be going after dispensaries, which they regard as commercial entities. They said these entities were hiding profit-making machines under the cover of providing medical marijuana. The prosecutors said these dispensaries would be subject to civil and criminal forfeiture actions. Each of them announced that they had already notified landlords of various dispensaries that if they didn’t close them down the landlords themselves could be subject to prosecution.

Have there been other concrete steps taken yet?

Several of the prosecutors named charges they had brought against large-scale operators, with hundreds of pounds of marijuana confiscated. There have been warning letters sent out. Fewer of those have gone out in the San Francisco Bay Area, where the U.S. attorney says she is focusing on dispensaries that are near parks and schools and the like.

This is not the only action the federal government has taken. A couple of dispensaries have been hit with very large tax-enforcement actions recently. The IRS has said they will not be allowed to deduct business expenses or payroll, which essentially would bankrupt the dispensaries. There is a combination of anxiety and anger in the medical marijuana community.

The prosecutors made a lot of the distinction between for-profit and nonprofit dispensaries. Why does that matter?

When Jerry Brown, now the governor, was attorney general, he issued guidelines in 2008 that said only not-for-profit dispensaries could operate legally. Of course there is always a question of what is and is not for-profit. It doesn’t seem to be in dispute that most of these dispensaries have been operating with either the tacit approval or the formal blessing of the state and local government. A lot of them have permits, or the local police or district attorney haven’t gone after them.

I know the Justice Department has said this is not a change in policy. But is there a clear sense of why the DOJ is cracking down at this particular moment?

There’s a lot of speculation about election-year politics. But there’s always been a certain amount of tension between the U.S. attorneys and Main Justice. Even when policies are announced in Washington, they have to be implemented by these semi-autonomous U.S. attorneys, whose policies vary. Many of them don’t take too kindly to the notion that they’re to ignore violations of federal drug law just because the state sanctions it. There may be internal Justice Department politics at work. It could be that strategies change over time. No matter what the Justice Department says, this is certainly a change in philosophy. Previously they were talking about cutting the states a lot of slack. They’re not talking about that now.

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Justin Elliott

Justin Elliott is a reporter for ProPublica. You can follow him on Twitter @ElliottJustin

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