The Goldman Sachs hearings in the US Senate have properly made headlines across the country as Senators attack the investment bank for betting against investments they thought would fail. That was just one of the many ways Goldman Sachs and other investment banks have been accused of unethical, and possibly illegal, behavior – others have pointed out the common practice of using Credit Default Swaps to profit off of failed investments. As Matt Taibbi put it:

Even if he stands to make a buck at it, even your average used-car salesman won’t sell some working father a car with wobbly brakes, then buy life insurance policies on that customer and his kids. But this is done almost as a matter of routine in the financial services industry, where the attitude after the inevitable pileup would be that that family was dumb for getting into the car in the first place. Caveat emptor, dude!

A similar process is at work with California bonds – except in this case, the car is a state that constitutionally cannot default on its debts. California is not Greece, our debt-to-GDP ratio is just 4.5% (Greece’s is 112%), and despite our budget problems there’s no real chance we would miss a payment.

That hasn’t stopped investment banks from betting against California debt, however – even when they’re the ones selling it. Treasurer Bill Lockyer is demanding an end to the practice in a letter he wrote late last month:

“We have information that indicates your firm, which sells California GO [General Obligation] bonds, may participate in the municipal credit default swaps market,” the letter said. Lockyer wanted to know why, and to what extent. The treasurer posted the banks’ responses on his Web site last week….

What was Lockyer concerned about? “Data reported in the news media and other sources show that the prices, or spreads, on California CDS wrongly brand our bonds as a greater risk than those issued by such nations as Kazakhstan, Croatia, Bulgaria and Thailand,” he wrote. “The perception of risk could adversely affect the price of our bonds when we go to market.”

As I explained above, the “perception of risk” about California debt is vastly overstated. But if the big investment banks are betting against CA by buying up these CDSes, it signals to the market that maybe there is a risk and that CA should be paying more.

This isn’t a new issue – Goldman Sachs has previously been accused of encouraging investors to bet against California debt, and other banks have been implicated in a scheme to cheat municipal governments by paying below-market rates to those governments.

All of this matters not just for California’s debt, but for California’s future. As we learn more about the ways Wall Street is systematically cheating Americans and our state governments out of billions of dollars, destroying our economy in the process, we should be asking ourselves “why would we want to elect a former Goldman Sachs board member as our governor?” Wall Street Meg Whitman’s ties to GS aren’t going away:

Republican front-runner Meg Whitman tried again to put her prior relationship with the bank behind her, telling the Associated Press she regrets taking part in a now-banned stock sale practice involving the firm and that she left its board after 15 months because it “wasn’t a good fit.”…

Steve Smith of the California Labor Federation, which represents a coalition of more than 1,200 unions, said in an e-mail that Whitman’s remarks were “dumbfounding” and that while “she’d like to sweep her dealings with Goldman under the rug, the evidence points to a close, lasting relationship that continues to this day.”

These are the practices Meg Whitman is associated with, and the practices she presumably plans to bring to California’s government.

Monterey County faces a $32 million shortfall and is considering laying off 43 workers and leaving 20 positions vacant in the sheriff’s department, despite a serious gang problem in the Salinas Valley. Other counties on the Central Coast are facing similar crises.

When Abel Maldonado was finally confirmed as Lieutenant Governor yesterday, some of these counties pleaded with Governor Arnold Schwarzenegger to consolidate the election to fill his seat in SD-15 with the November general election. A Santa Cruz County elections official explained the situation to the local news last night:

“The money eventually comes out of the tax payers pockets and we’re talking about 3 million dollars plus to conduct a special vacancy election,” said Santa Cruz County Clerk, Gail Pellerin.

Gail Pellerin with the Santa Cruz county elections office is urging governor Arnold Schwarzenegger to leave Maldonado’s senate seat vacant until November.  She sent him this letter today explaining how the consolidation could help save the county and tax payers’ money.

“Resources are limited right now.  So it certainly is fiscally prudent for the governor to consolidate this election, especially since he’s got this great opportunity to do so,” said Pellerin.

In addition to the election in November, this special election would cost Santa Cruz, Monterey, Santa Clara, San Luis Obispo, and Santa Barbara counties over 3 million dollars.  Santa Cruz County alone would have to fork out $340,000 and force the county to make more lay-offs and cut services.  County spokeswoman Dinah Phillips told me they’re working on the budget right now and it’s money they can’t afford to lose.

“We don’t have any extra money sitting around anywhere. All of the counties are going through times of unprecedented difficulty right now and there’s no way that we can absorb a hit like that and to no purpose.”

So how did Arnold respond to this eminently sensible money-saving proposal? By refusing to consolidate and instead announcing he’ll likely order a special election with a second round for late August/early September:

“The governor believes it’s his responsibility to fill this as quickly as possible and have a full complement of legislators for the budget talks and also for key pieces of legislation,” spokesman Aaron McLear said today.

However, the seat would not be filled until nearly two months after the June 30 deadline for the state to pass a budget and shortly before the end of the legislative session. Surely the governor isn’t planning to break the law and violate the state constitution by dragging the budget fight out into August and September, right? He’d never dream of doing something like that.

Further, it’s completely absurd to cite the state budget and then turn around and force these counties to spent $3 million they don’t have on a special election when it can be consolidated with the general election.

Obviously this is intended as a slight to Central Coast Democrats, who will be launching a campaign to elect John Laird to the SD-15 seat. I’m not so sure it’s going to work as Arnold expects. Democrats are fired up about the Laird campaign, which will generate intense interest from Democrats across California. By scheduling the election at a time when nothing else is happening in the state, it allows Democrats to focus all their energy on electing John Laird.

Whether the election is in August, September, October or November, Democrats are going to win SD-15. It’s a shame that Arnold insists on having this special election at the expense of the counties he’s already hurt through his taking of their funds.

There’s a conceit among self-described “moderate” and “centrist” pundits that their politics are the only legitimate politics – and that those on the left and right are not as legitimate. When the right and left become more dominant in a political system, the moderates view this as deviant, as something bad, as something to be fixed, instead of as just another possible permutation on the political spectrum.

When denunciation of the two “extremes” fails to arrest the collapse of the center, the moderates’ next move is to rig the system to produce outcomes favoring their ideological position.

That’s what is happening in California this June with Proposition 14. Prop 14 would change the way primary elections work in this state, sending the top two votegetters onto the general election regardless of party. That virtually guarantees it will be impossible for third parties to make it onto the November ballot, whereas under the current system, they can.

In many districts this will likely mean two Democrats or two Republicans will be on the ballot in November, making it harder for Democrats to pick up seats in these swing districts.

But the real purpose of Prop 14 is to move the Democratic Party to the right. The logic is this: in many California districts, Democratic primary fights will be pushed out into the general election, where Republican voters can support the moderate Democrat at the expense of the progressive.

Dan Walters laid out that thinking in his column today:

Liberal Democrats and their allies, especially in public employee unions, have the most to lose from a structural shift because they now control the tenor of the Legislature through gerrymandered districts and closed primaries.

Business groups have the most to win because they are now dependent on Republican Gov. Arnold Schwarzenegger to veto liberal legislation, and would like a more centrist, business-friendly Legislature.

Of course, this ignores the fact that Californians have embraced the so-called “partisan divide.” Democratic voters regularly pick more progressive candidates in their primaries because California Democratic voters are generally a progressive group of people. Similarly, California Republicans are generally a bunch of wacko wingnuts. I don’t like that fact, but that’s democracy for you.

“Moderate” politics are an anachronism out of touch with reality in 21st century America. Such politics are only possible during periods of sustained prosperity, such as the postwar era, when there was no need to debate basic economic questions. Centrism is in many respects a political bubble phenomenon enabled by prosperity.

As soon as prosperity is gone, basic questions reassert themselves: should we tax the rich to provide public services to the poor and the middle-class in order to provide them security and job growth, or should we cut taxes on the rich and slash government services and let the middle-class and poor fend for themselves?

There is no middle ground between those (unless you use massive amounts of debt to bridge the divide, which as we’ve seen is a failed policy). Everyone eventually has to choose between right or left. In fact, most “moderates” have already chosen the right and have been doing so for 30 years. The continued popularity of the left, as embodied by progressive Democrats, offends “moderate” sensibilities and is seen as cause for trying to rig elections by changing the system.

Other flaws of the Prop 14 model become apparent when looking at how it works in other states and countries.

In Washington State, where the top-two system was used for the first time in 2008, it also had the effect of pushing primary fights into the general election, diverting resources, money, and time away from other Democratic priorities.

Prop 14 would apply to statewide races as well, so one could conceivably face a gubernatorial election where there are two Republicans on the November ballot, especially if there are several Democrats dividing the Dem vote. One could eventually see a replay of the 2002 French presidential election, where the second round was a runoff between a corrupt center-right incumbent (Jacques Chirac) and a fascist (Jean-Marie Le Pen), primarily because the center-left split its votes between three different candidates. The result was that the center-left had to hold their nose and vote for Chirac to prevent Le Pen from winning. Ironically enough, the top-two system in France wound up giving a huge boost to the far right.

I could see something similar happening in 2014 if Jerry Brown weren’t to win this year: Mayor Antonio Villaraigosa, Lt Gov Gavin Newsom, and AG Kamala Harris split the Democratic vote, letting two Republicans – incumbent Meg Whitman and Tom McClintock – come in 1-2 and being the only candidates for governor on the November ballot. I’d rather poke my eyes out with sharp sticks than have to decide between those two.

All in all, it’s a strong case against Prop 14. Let’s hope voters hear that case and vote accordingly in June.

After nearly six months of debate and wrangling, the State Senate finally did what Calitics told them to do and voted to confirm Abel Maldonado as the state’s Lieutenant Governor, 25-7.

Maldonado is expected to be sworn in as soon as tomorrow, and would then vacate his seat as the Senator from the 15th District (where I live). After that, Governor Arnold Schwarzenegger would then schedule the special elections to fill the SD-15 vacancy. It is expected that the first round would be in August and the runoff would be folded in with the November general election.

The Republican candidate is likely to be Sam Blakeslee (AD-33, San Luis Obispo), who was up until recently the Minority Leader in the Assembly. The Democratic candidate is going to be John Laird, a progressive hero who represented AD-27 (Monterey, Santa Cruz) until he was termed out in 2008.

To say Laird is beloved by his former constituents is to understate the case. In February 2008, AD-27 was one of the few districts in the entire state to vote in favor of Proposition 93, the term limits extension bill. Signs around Monterey Bay read “Keep John Laird: Yes on 93.”

A Laird victory, along with Anna Caballero running next door in SD-12 (Salinas, Merced, Modesto), would give Democrats a 2/3rds majority in the State Senate. It would transform California politics and immeasurably boost the position of progressives and Democrats ahead of what will be another year or two of difficult budget choices.

SD-15 is a winnable district for Democrats. After all, the most recent registration numbers show that SD-15 is a blue district, with 41% Dems, 34.5% Reps, and 23% DTS. It is a district Obama won by over 20 points. Further, roughly 58% of the voters in SD-15 live north of the Monterey/SLO County line – in John Laird country.

The battle for 2/3rds is about to begin, and Monterey County will be ground zero. We’ve got an election to win, and a state to save.

UPDATE: Maldonado will indeed be sworn in tomorrow and resign his Senate seat at the same time. The Central Coast’s long nightmare is about to end, and an opportunity to rescue California is about to arrive.

You wouldn’t know it from Education Secretary Arne Duncan, who continues to tout his “Race to the Top” program that is designed to leverage states into implementing untested right-wing school reforms by holding out an apparently illusory promise of money, but there is a backlash growing to both school budget cuts and the radical reforms Duncan touts.

Here at Calitics you’ve been following Ellinorianne’s excellent series of posts on the teacher strike in the Capistrano Unified School District in Orange County and how it is related to a right-wing effort to use CUSD as a testing ground for their plans to privatize public education.

In Florida, a statewide movement put together at the last minute succeeded in getting Governor Charlie Crist to veto SB 6, a bill that would have implemented a wide range of far-right education “reforms” such as eliminating tenure and implementing forms of merit pay. It is the same kind of agenda Meg Whitman plans to bring to California, and similar to the reforms Arne Duncan has championed across America.

As more Californians and Americans begin to reject Arne Duncan’s effort to impose untested and unpopular reforms on our schools, the state is debating whether to try again for “Race to the Top” funds, despite the fact that the last time the state did so, they were way down on the list of possible recipients:

The judges in the Race to the Top dinged California for a lack of union support for the application. It was also denied points for failing to provide a longitudinal data system to measure student achievement and teacher or principal performance. It also was deficient in its focus on science, technology and math education….

The California Teachers Association, the state’s largest teachers union, declined to sign on to the last application and didn’t appear enthusiastic about another go.

“I think California has got to ask some serious questions about what’s best for the students of California and for education reform in this state … and stop chasing federal dollars,” said CTA spokeswoman Becky Zoglman. “Education reform works best when teachers, parents and principals and community members come together and decide what’s best for that neighborhood school and the kids in that school.”

CTA is absolutely right to refuse to go along. The rejection of California’s earlier grant seems designed to leverage CTA into backing the right-wing reform agenda, so it’s good to see CTA being totally unwilling to play the chump.

Instead, CTA should take notice of what has happened in Florida and in south Orange County and begin to organize a statewide backlash designed to both reverse these right-wing “reforms” and to restore the budget cuts.

Californians do not want to see their schools weakened by cuts or their kids turned into guinea pigs for the latest right-wing ideological concoction. The public is ripe for a backlash. Time to start organizing it.

Following up on Brian’s post about the explosion and collapse of the Deepwater Horizon oil rig off the Louisiana coast, oil has now been confirmed to be escaping from the well.

About 42,000 gallons a day appear to be flowing into the ocean, which is quite a lot less than the 1989 Exxon Valdez spill, but could quickly rival the 1969 Santa Barbara oil spill, which spilled about 200,000 gallons into the Santa Barbara channel. That spill led to the moratorium on offshore drilling in California in the wake of the environmental and economic catastrophe it caused.

As a recent Calbuzz article noted, the Louisiana spill is germane to California because of the current debate over the Tranquillon Ridge offshore drilling plan. One of the most common arguments put forth by supporters of the Tranquillon Ridge plan is that new technology means that offshore drilling is safer and much less likely to produce a repeat of 1969:

“When I started this process, I was against offshore oil drilling,” Meg Whitman told reporters in Santa Barbara last year, “and then I began to understand deeply the new technology that is available to extract oil from existing wells.” (Calbuzz, 4/23/10)

Funny thing about that – the Deepwater Horizon rig that exploded and caused this newest spill is itself a very new platform. Built in 2001, it was regarded by industry insiders as a leading example of cutting-edge oil drilling technology:

The Deepwater Horizon was a marvel of modern technology. It was what they call an ultra-deepwater dynamic position semi-submersible oil rig.  It was the size of two foot ball fields and was like a ship that used a computer controlled system to automatically maintain its position and heading. It was a rig that could reach the bottom of the ocean and the Gulf of Mexico to depths many had even imagined. In September of last year Deepwater Horizon made history by drilling the deepest oil well in history. This was an achievement not unlike landing a man on the moon or a successful space shuttle.

Yet even this state-of-the-art oil rig wasn’t totally safe. Deepwater Horizon has a history of problems, many caused by human error. In 2005 a distracted crane operator accidentally caused a fire that did a much smaller amount of damage. Last week’s explosion is still under investigation, but it took place during a risky but necessary “casing” process. Significantly, it was a similar maneuver that touched off the 1969 Santa Barbara spill.

In other words, offshore oil drilling presents an inherent and ongoing risk to the environment and the economy. We don’t know whether Transocean, which built the rig, or BP, which operated the rig, were committing the kind of safety violations that we witnessed at Massey Energy’s West Virginia coal mine, but it’s not outside the realm of possibility. And if that wasn’t the case – if all safety procedures were followed and workers had excellent conditions – then that merely reinforces just how much of a threat offshore oil drilling is to the California coast.

So far, the debate over the Tranquillon Ridge project has tended to be focused on the details of the agreement – when PXP will close down operations, whether the agreement is fully enforceable, how much the state and local governments will get paid.

But what the Louisiana spill reminds us is that there are much more fundamental issues to consider here. Approving the Tranquillon Ridge project means we are again running a significant risk of a major and devastating oil spill striking what is one of the most unspoiled parts of the California coastline (the remote west-facing beaches of Santa Barbara County).

If a paragon of new offshore drilling technology can fail this catastrophically, it should cause Californians to seriously reconsider whether allowing new drilling off our coast is worth the considerable risk. As our oceans are already facing the stress of pollution, overfishing, and global warming, offshore drilling seems like the last thing we would want to do to our oceans, our beaches, our wildlife, and our economy.

Arizona has gone off the deep end. California’s neighbor, and a home for many ex-Californians, has passed and Governor Jan Brewer has signed a radical and extremist bill, SB 1070, that legalizes racial profiling and implements a host of unconstitutional rules that abrogate civil liberties and subject anyone not carrying proper identification to immediate arrest.

The backlash to SB 1070 is already underway. Presente.org is organizing a a boycott of Arizona, which I’ve joined. I have a lot of family who live in Arizona, but I’m not going to subject myself to a police state to visit them; they can come to California.

The picture at right, of Governor Brewer’s signing announcement, tells you all you need to know about what is happening here. Despite the fact that people with brown skin lived in Arizona long before anyone with white skin, and despite the fact that Arizona has had a long heritage of Latinos predating US conquest, and despite the fact that Latinos and Native Americans and other non-whites have lived there up to the present, a vocal minority of Arizona’s white population has decided that being brown in Arizona is a crime.

Using “illegal immigration” as justification, Republicans led by Russell Pearce are waging a war against a people who are as Arizonan as they are, against a “culture” that is indigenous, not foreign. Here’s what Pearce had to say to NPR in 2008:

Invaders, that’s what they [undocumented immigrants] are. Invaders on the American sovereignty and it can’t be tolerated….

Pearce claims illegal immigrants are responsible for much of Arizona’s crime and he admits to feeling uncomfortable with the way society is changing in Arizona. He attributes it partly to Mexicans’ and Central Americans’ “way of doing business.”

“Drive around parts of Phoenix. I get calls all the time and it’s not that they’re Hispanic, it’s because the culture is different. The gangs are bigger. There’s more violence, kidnappings are way up,” he says.

This conflation of “illegal” with “Hispanic” is by no means new, even though there are lots of Irish undocumented immigrants in the US. What Pearce represents is the very same phenomenon we’re all too familiar with here in California: white anxiety at the fact that their country was never as white as they believed, and is becoming steadily more diverse. Blaming “illegals” is merely an easier way of couching one’s racism.

This is especially true in private conversations. Just as one can very easily find anti-Latino racism expressed in white Orange County households, you can find it even more commonly expressed in white communities in Arizona. This is exacerbated by the fact that a lot of Arizona whites moved there from California in search of a less diverse, more white place to live.

As anyone with any knowledge of California history ought to be aware, Arizona is merely following a trail the Golden State blazed long ago. In the 1850s during the Gold Rush, Anglo Californians harassed, attacked, killed, deported, and took the land of Latinos, whether they were native-born Californios or people who came here to seek wealth in the gold fields.

Over the next 150 years racism persisted, only to be dramatically reinforced when Proposition 187 was passed by 2/3rds of voters at the November 1994 election. Prop 187 was ultimately ruled unconstitutional by the courts, and it led to a shift of Latinos away from the Republican Party and towards Democrats in California that has never been reversed.

Today’s Republican Party remains every bit as anti-immigrant and anti-Latino as it was in 1994. The two candidates for the GOP gubernatorial nomination, Meg Whitman and Steve Poizner, have spent weeks airing TV ads trying to outdo each other in immigrant-bashing. Steve Poizner wrote in his new book that “From an intellectual standpoint, I absolutely know not to expect Silicon Valley-type caliber ambition and smarts from East San Jose schoolkids,” most of whom are Latinos.

We can expect California Republicans to use Arizona’s SB 1070 as a model for similar bills they will almost certainly push this year in the Legislature. California Democrats still hold enough seats to block this, but we have to continuously reinforce to them the fact that Californians opposed these kind of anti-immigrant laws.

It’s also a powerful argument for the federal government to get off its ass and finally act on comprehensive immigration reform. Californians Nancy Pelosi, Dianne Feinstein and Barbara Boxer would do well to act quickly, to ensure that no other states follow Arizona’s unconscionable and horrific lead.

Oh, and we might want to put up some signs on Interstate 10 in Blythe warning eastbound travelers that they’re about to enter a police state.

UPDATE: Sign the act.ly petition to have CalPERS divest itself of investments in Arizona companies and Arizona real estate. Let’s make AZ regret this.

The Assembly is to take up the Abel Maldonado confirmation vote for his nomination to the vacant Lieutenant Governor’s office by 10AM, and I’m watching the Cal Channel coverage. Maldonado is nervously checking his watch and fidgeting, it’s clearly his big day. Are the votes there?

Maldonado did pretty well in yesterday’s Assembly Rules Committee hearing. He reiterated his opposition to the Tranquillon Ridge offshore oil drilling project and said he “has a problem with” CSU Stanislaus not revealing Sarah Palin’s speaking fee.

Speaker John A. Pérez is apparently a “yes” vote on Maldonado. Will it be enough to get him confirmed, and enable Democrats to win a 2/3rds majority?

We’ll find out in a few minutes. Republicans are still in caucus – are they getting cold feet?

…Speaker Pérez presiding now, things starting to get underway. He runs an efficient session.

…Charles Calderon moving motion to approve the nomination. Calderon was a no vote in February.

…Chuck DeVore rises to oppose. Remember people, if DeVore is against something, it’s generally a good idea to be for it.

…Anthony Adams rises to support Maldonado, and reminds Californians that Reagan supported big tax increases too.

…To some degree we’re seeing Assemblymembers screwing with each other – Diane Harkey, an Orange County Republican, says she was going to vote no until she heard Pedro Nava speak against Maldonado, so now she’s going to vote yes. However. Lori Saldaña is making a very principled case against the confirmation. UPDATE: Saldaña wound up voting yes. UPDATE 2: Saldaña’s staff now says she switched to no.

Here we go with the vote….and Maldo’s got it. 51-17.

The Assembly has indeed confirmed Abel Maldonado, 51-17, with very little suspense – totally unlike the February vote. The Senate, which voted 26-7 in favor of the confirmation in February, is likely to quickly follow suit.

This means SD-15 is going to be an open seat, and we’re going to work our asses off between now and November to put John Laird into what is a Democratic seat, now that Maldonado’s 6-year long occupation of the Central Coast district is coming to an end.

…SacBee has the final vote tally, which was 53-21.

SurveyUSA is out with a new poll on marijuana legalization, and find that 56% of adults support it, with 42% opposed and 3% undecided. Some of the interesting crosstabs include:

Age 18-34: 74% yes, 25% no

35-49: 46% yes, 50% no

50-64: 49% yes, 49% no

65+: 39% yes, 54% no

Men: 65% yes, 32% no

Women: 46% yes, 51% no

Republicans: 46% yes, 53% no

Democrats: 59% yes, 37% no

Independents: 62% yes, 36% no

Of the four racial categories given, (white, black, Hispanic, Asian) only Hispanics oppose it, 45% to 53%.

The poll results aren’t all that surprising. Last year Nate Silver also noticed that Generation X, currently between their early 30s and their late 40s, is less supportive of marijuana legalization and much less likely to have used it themselves. But the Boomer generation is evenly split, and Millennials are overwhelmingly supportive of legalization.

For supporters, this gives a rough road map to victory in November. Turning out Millennial voters is absolutely essential. Boomers seem gettable too. A concerted push targeting female and Latino voters also strikes me as wise. Particularly necessary is making the case that this actually helps parents protect their children, not harm them. Initative supporters should start planning a pre-emptive strike before opponents pull a Prop 8 and make this a “what about the children?” campaign.

The poll appears to be of all adults, and not of likely voters, so this should not be taken as a sure sign of victory in November. There’s a lot of work to be done between now and then to ensure this initiative passes.