Josh Harkinson

Josh Harkinson

Reporter

Born in Texas and based in San Francisco, Josh covers tech, labor, drug policy, and the environment. PGP public key.

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Senate Introduces Mining Reform Bill

| Thu Apr. 2, 2009 4:30 PM EDT
Senator Jeff Bingaman of New Mexico has just introduced a mining reform bill in the Senate, bringing Congress one step closer to updating the nation's most outdated public lands law, the General Mining Law of 1872. A similar bill from House stalled in the Senate last year, where Majority leader Harry Reid, the son of a gold miner, has been a powerful ally of the hard rock minerals industry. Mining companies are still allowed to remove minerals from public lands without paying a cent in federal royalties. As I reported in a recent profile of Reid, Nevada remains an anachronism in a region that is becoming much less tolerant of the America's most polluting industry.

Bingaman's bill is less progressive than a similar House measure, but might win key support from Reid and moderate Republicans. According to Velma Smith, the manager of the Pew Campaign for Responsible Mining, the bill proposes reducing the House's proposed 8 percent royalty to something between 2 and 5 percent, to be set at the discretion of the Department of Interior. It would also impose a reclamation fee of .3 to 1 percent.

In what's been a keen interest of Bingaman's, the bill also asks the National Academy of Sciences to perform a study on uranium mining. Smith says uranium, which is the only energy mineral overseen by the mining law, may be moved to a leasing system. Environmentalists have been concerned that mining on any one of 1,200 uranium mining claims along the Colorado River could pollute the water supply for Las Vegas and Southern California.

In other important respects, the Senate and House bills are the same. Both call for stricter environmental permitting of mines, better ways for lands to be set off-limits to mining, and more financial assurances that mining companies will clean up after themselves. The cost of cleaning up abandoned mines in the U.S. is now estimated to be at least $32 billion.

Will Reid support the bill? "I really don’t know," Smith says. "My sense was that Senator Bingaman's office took a long time vetting this with a lot of people. I don’t see this as an extreme bill by any means. So I think there’s a chance for the industry and environmentalists to come together."

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How the Nation’s Only State-Owned Bank Became the Envy of Wall Street

| Fri Mar. 27, 2009 9:33 PM EDT

The Bank of North Dakota is the only state-owned bank in America—what Republicans might call an idiosyncratic bastion of socialism. It also earned a record profit last year even as its private-sector corollaries lost billions. To be sure, it owes some of its unusual success to North Dakota’s well-insulated economy, which is heavy on agricultural staples and light on housing speculation. But that hasn’t stopped out-of-state politicos from beating a path to chilly Bismarck in search of advice. Could opening state-owned banks across America get us out of the financial crisis? It certainly might help, says Ellen Brown, author of the book, Web of Debt, who writes that the Bank of North Dakota, with its $4 billion under management, has avoided the credit freeze by “creating its own credit, leading the nation in establishing state economic sovereignty.” Mother Jones spoke with the Bank of North Dakota’s president, Eric Hardmeyer.

Mother Jones: How was the bank formed?

Eric Hardmeyer:
It was created 90 years ago, in 1919, as a populist movement swept the northern plains. Basically it was a very angry movement by a large group of the agrarian sector that was upset by decisions that were being made in the eastern markets, the money markets maybe in Minneapolis, New York, deciding who got credit and how to market their goods. So it swept the northern plains. In North Dakota the movement was called the Nonpartisan League, and they actually took control of the legislature and created what was called an industrial program, which created both the Bank of North Dakota as a financing arm and a state-owned mill and elevator to market and buy the grain from the farmer. And we’re both in existence today doing exactly what we were created for 90 years ago. Only we’ve morphed a little bit and found other niches and ways to promote the state of North Dakota.

MJ:
What makes your bank unique today?

EH:
Our funding model, our deposit model is really what is unique as the engine that drives that bank. And that is we are the depository for all state tax collections and fees. And so we have a captive deposit base, we pay a competitive rate to the state treasurer. And I would bet that that would be one of the most difficult things to wrestle away from the private sector—those opportunities to bid on public funds. But that’s only one portion of it. We take those funds and then, really what separates us is that we plow those deposits back into the state of North Dakota in the form of loans. We invest back into the state in economic development type of activities. We grow our state through that mechanism.

MJ:
Clearly other banks also invest their deposits. Is the difference that you are investing a larger portion of that money into the state’s own economy?

EH:
Yeah, absolutely. But we have specifically designed programs to spur certain elements of the economy. Whether it’s agriculture or economic development programs that are deemed necessary in the state or energy, which now seems to be a huge play in the state. And education—we do a lot of student loan financing. So that’s our model. We have a specific mission that was given to us when we were created 90 years ago and it guides us throughout our history.

MJ:
Are there areas that you invest in that other banks avoid?

EH:
We made the first federally-insured student loan in the country back in 1967. So that’s been a big part of what we do. It’s become almost a mission-critical thing. I don’t know if you have been following the student loan industry lately, but it’s been very, very interesting as many have decided to leave. We will not though.

MJ:
So you are able to invest in certain areas because they provide a public good.

EH:
Yeah, or a direction, whether it’s energy or primary sector type of businesses. We have specific loan programs that are designed at very low interest rates to encourage activity along certain lines. Here’s another thing: We’re gearing up for a significant flood in one of the communities here in North Dakota called Fargo. We’ve experienced one of those in another community about 12 years ago which prior to Katrina was the largest single evacuation of any community in the United States. And so the Bank of North Dakota, once the flood had receded and there were business needs, we developed a disaster loan program to assist businesses. So we can move quite quickly to aid with different types of scenarios. Whether it’s encouraging different economies to grow or dealing with a disaster.

MJ:
What do private banks think of you?

EH:
The interesting thing about the bank is we understand that we walk a fine line between competing and partnering with the private sector. We were designed and set up to partner with them and not compete with them. So most of the lending that we do is participatory in nature. It’s originated by a local bank and we come in and participate in the loan and use some of our programs to share risk, buy down the interest rate. We even provide guarantees similar to SBA to encourage certain activity for entrepreneurial startups. Aside from that, we also act as a bankers’ bank or a wholesale bank. So we provide services to banks, whether it’s check clearing, liquidity, or bond accounting safekeeping. There’s probably 20 other bankers' banks across the country. So we act in that capacity as kind of a little mini-fed actually. And so we service 104 banks and provide liquidity to them and clear their checks and also we buy loans from them when they have a need to overline, whether it’s beyond their legal lending limit or they just want to share risk, we’ll do that. We’re a secondary market for residential loans, so we have a portfolio of $500 to $600 million of residential loans that we buy.
MJ: So what’s the advantage of a publicly owned “bankers’ bank” instead of a privately owned one?
EH: Our model is we use our deposit base to help [other banks] with funding their loans, even providing fed funds lines with our excess liquidity—we buy and sell fed funds and act as a clearinghouse for check clearing activity. That would be the benefit or different model. We’re a depository bank and can bring that to bear.
MJ: If other states had a bank like yours, do you think they would have been more insulated from the credit crisis?

Chinese-Made Drywall: The Next Tainted Product Crisis?

| Fri Mar. 27, 2009 1:46 PM EDT
Chinese-made drywall releases a rotten egg smell and might be corroding household wiring and causing health problems. It was installed throughout the Gulf Coast region in the wake of Hurricane Katrina as U.S.-made drywall became scare in the midst of the housing boom. One hundred and fifty homeowners have complained about drywall odors to the Florida Health Department; the large homebuilder, Lennar Corp., has been forced to rip out walls and is suing Chinese drywall companies; and the U.S. Consumer Product Safety Commission is investigating whether the drywall is posing a potential safety hazard. The Wall Street Journal, the only national paper that has covered the issue extensively, wonders if Chinese drywall is the "new mold." It's certainly the new toy or dog food, other Chinese product lines that have proven potentially dangerous and led to recalls. The drywall scare will compound the housing crisis by further burdening struggling builders and homeowners. And it points to the hollowness of the housing boom in the context of the global economy. Even our homes weren't made at home, and the housing boom has imported toxic assets to Main Street in more ways than one.

Regulator Says Banks Pressured him to Avoid Oversight of Derivatives

| Thu Mar. 26, 2009 3:53 PM EDT
For the first time, the former chief regulator of the $2.69 trillion municipal bond market has come out swinging at the banks, alleging that they prevented him from regulating the swaps and derivative deals that ultimately cost municipal governments more than a billion in losses.

Until 2007 Christopher "Kit" Taylor was the executive director of the Municipal Securities Rulemaking Board, a body set up by Congress in 1975 to make rules for firms that underwrite, trade, and sell municipal debt. The board is basically run by Wall Street firms, which control 10 of its 15 seats. “The big firms didn’t want us touching derivatives,” Taylor, told Bloomberg yesterday. “They said, ‘Don’t talk about it, Kit.”

Taylor went on to condemn the banks for stalling his efforts to close revolving doors and increase transparency in the bond market, and generally being less concerned about the health of the overall economy than their balance sheets.“I saw more bankers looking out for their self interest in my last years at the MSRB,” he told Bloomberg. “The attitude had changed from, ‘What can we do for the good of the market,’ to, ‘What can we do to ensure the future of my business.’ The profit wasn’t in the underwriting, it was in the swap.”

This story should be put into the fat file called "Why Self Regulation Doesn't Work." When that question is answered by the guy who was supposedly in charge, the need for real regulations seems pretty damn obvious.

H/T tpmmuckracker

Madagascar's Coup d'Etat

| Tue Mar. 17, 2009 1:04 PM EDT

During a college semester abroad in Fort Dauphin, Madagascar, I suddenly felt compelled to write long letters to anyone who I thought might read them. Partly it was to plaster entire envelopes with the country's beautiful palette of penny stamps--everything from lemur scenes to Elvis tributes. But I also really needed to tell someone about the malnourished, 24-hour banana salesmen who slept in doorways, the giant hissing cockroaches in the outhouses, and the men who stood on the rocks alongside the coral beaches and hurled out fishing line, bending over as it unspooled off the tops of their heads.

Madagascar has never been a practical country, and I suppose that's part of its charm. The bridges are all washed out. The national highway is a soup of laterite. Rural folk live in mud-brick hovels yet spend the afterlife within palatial cement replicas of airplanes and taxi brousses--the jacked-up WWII-era troop carriers that are the only way to get around. The less intractable of these problems were, according to Fort Dauphin's students, caused by the greed and ineptness of the country's then-president, Didier Ratsirika, who clung to power only because his party rode into town before each election atop huge loads of free rice.

An island off the southeast coast of Africa, Madagascar is in some ways even more tragic than the continent's cliches. When humans first drifted there from Africa and Indonesia beginning only about 1000 B.C., it was as if they followed the wake of a second Noah's Ark. They found lemurs the size of gorillas, pygmy hippos no bigger than pigs, and elephant birds, which stood 10 feet tall and weighed half a ton. Those creatures were long ago engulfed in wave of extinction that continues to this day. Among the most tenuous survivors is the Aye Aye, which seems like a fusion of monkey, bat, and woodpecker. Despite Madagascar's status as a virtual mini-continent where 80 percent of species are found nowhere else, its infrastructure has been too unreliable to support what should be a thriving tourism industry.

There was once hope that politicians could turn things around. In 2002, Malagasy president Marc Ravalomanana, a self-made dairy farmer, ousted Ratsirika at the polls in a wave of popular support and optimism. Of course, Madagascar was still a country where children stood on the side of the road in the middle of nowhere, waiting to dance for the occasional driver in hopes he'd toss coins out the window; poverty ran deep. So when Andry Rajoelina, the young, charismatic disc jockey who'd become mayor of the nation's capital, Antananarivo, organized protests against rising food prices and government graft last year, Ravalomanana had him ousted. The ensuing three-month standoff ended this week when troops sympathetic to Rajeolina stormed the presidential palace and forced Ravalomanana to cede power.

"This is no clash of policies; it is a clash of personalities," the BBC opined. That doesn't mean it's any less a disaster. The Madagascar military has ended its tradition of not taking political sides. Rajoelena has refused to submit to a referendum on the presidency, paving the way for an uncertain period of dictatorship. And tourism has ground to a halt and will likely take months or years to start up again, especially in the midst of a global downturn.

As the coup clearly shows,  tourism and poverty are uneasy bedfellows. The tragedy in Madagascar is that they need not be. Though hard to reach and difficult to navigate, Madagascar is far from dangerous. It simply needs more ways for tourist money to flow to people at the bottom of the economic ladder, and more tourists who won't let a few sand fleas, stomach bugs, and lost tires get in the way of seeing the most unique place on the planet.

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