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Mountain News: Bad real estate loans lead to bank closure

KETCHUM, Idaho - Federal banking officials in late April closed down a bank that had seven offices in resort areas of both Idaho and Wyoming, saying the bank was in unsound condition. Reports from Jackson, Wyo.

KETCHUM, Idaho - Federal banking officials in late April closed down a bank that had seven offices in resort areas of both Idaho and Wyoming, saying the bank was in unsound condition.

Reports from Jackson, Wyo., and in Ketchum, Idaho, differ slightly on the cause of the distress. However, they agree that loans made in Idaho's Teton Valley - the area around Driggs and Victor, across the pass and from Jackson Hole - were at least a significant part of the problem.

"There were difficult loans across the board, but the Teton Valley was definitely a major problem for this bank," Everett Covington, chief executive of the First Bank of Idaho, said. He told the Idaho Mountain Express that real estate sales in Victor and Driggs were nearly non-existent, and foreclosure proceedings had begun on many properties.

The story was much larger than simply one bank's troubles, said The Express , which is based in Ketchum.

"The bank's story is entwined with a booming national economy and people investing in vacation homes all over the West. It's the story of how a banking system became engulfed by a speculative market in which eye-popping growth ultimately could not be sustained," said the newspaper.

"The phenomenon transformed small towns into bustling boomtowns. It made savers look silly and speculative spenders look like geniuses. Lasting more than a decade, it looked like it might never end," the Express continued.

"It went far, it went fast. Then, like a car hitting the proverbial brick wall, it stopped."

That brick wall was met on Friday, April 24, when 50 federal agents arrived at the bank's headquarters in Ketchum. Formed there in 1997, the bank had three offices in the Wood River Valley plus another four offices in both Jackson Hole and in Teton Valley.

Indications of trouble had been previously reported. The bank's capital-to-loan ratio had fallen below 10 per cent at the end of 2008 due to defaulted loans or loans nearing default. On April 6, First Bank officials had been given until June 30 by the U.S. Treasury Department's Office of Thrift Supervision to raise sufficient capital to increase the capital-to-loan ratio to 12 per cent.

But the news of the agreement had the opposite effect. Worried about the security of their money, customers withdrew deposits. As well, the April 15 tax deadline resulted in a large volume of drafts, as people wrote cheques to the IRS to cover their taxes. Wilson McElhinny, chairman of the board for the First Bank of Idaho, estimated that $15 million in deposits had been removed.

Then, because of the federal restrictions imposed in the April 6 agreement, the bank was unable to seek brokered deposits to build its cash reserves. Plus, other banks continued to close their lines of credit to the Idaho-based bank. "Things just kept getting worse," Covington said.

Covington said he was close to structuring a deal to get a $10 million line of credit as well as a deal to move $15 million in assets off the bank's books. That, he told the Jackson Hole News & Guide , would have taken care of the bank's liquidity problems.

The U.S. Treasury Department's Office of Thrift Supervision said the bank was in "unsound condition and unable to continue operating due to severe liquidity strains, deteriorating asset quality, negative earnings and declining capital with no realistic prospects for raising capital quickly enough to ensure that it can repay all of its liabilities, including deposits."

After closing the bank, the Treasury Department transferred the bank to the Federal Deposit Insurance Corp., which then sold the deposits and some assets to Minnesota-based U.S. Bank. U.S. Bank, with 24 hours to make a decision, agreed to spend $1.47 million to buy $268 million in deposits. Those accounts will remain insured by the FDIC. The FDIC will handle $113 million in brokered deposits.

The FDIC temporarily froze all lines of credit. In Ketchum, the Express reported something of a panic, as merchants dependent upon financing to get them through the spring shoulder season wondered how they will survive. Randy Hall, the mayor of Ketchum, said at least a half-dozen local businesses, already reeling from a difficult winter, were in dire straits.

The Idaho Mountain Express says that Ketchum officials were exploring all options and finding lines of credit to ensure that no other businesses failed.

Summing up the situation, The Express found that the transfer of assets from one bank to another had been relatively seamless. There had been no true run on the bank, and most other normal banking functions continued, thanks to the FDIC guarantees instituted in response to the bank foreclosures of the Great Depression.

"There was no silver lining to this story, but the bank's failure could have been much, much worse," said the paper.

Basalt provides own stimulus package

BASALT, Colo. - Basalt is spending $45,000 in a homegrown stimulus project. Town officials say the program will yield $450,000 in sales for local shops, restaurants and service providers through the summer.

A "rewards card" is the basis of the program. The card gets a stamp for any purchase of more than $10 at participating venues. Once the card is up to $300 in purchases, it can be redeemed for a $30 gift certificate, explains The Aspen Times . "You don't have to be a Milton Friedman to figure this out," said Bill Kane, the town manager.

Base villages panned

MAMMOTH LAKES, Calif. - Ever since Pete Seibert Sr. returned from the Alps in the 1950s and then issued his vision in Vail Village, somewhat similar villages have been showing up, reaching crescendo levels in the last 15 years. One of them is at Mammoth Lakes.

The argument can be made that such villages, when done by large developers such as Intrawest, are an exercise in good planning. But others have seen them as phony. Taking the latter view is Steve Klassen, a legendary snowboarder owner of Wave Rave, a snowboard, clothing, and accessories company.

"The word village conjures up images of heritage and community," Klassen tells Mammoth's The Sheet . "Unfortunately, I don't think it stands for those things. I view it as a developers' appetite for greed.

"I do feel sorry for the tenants of the (Mammoth) Village. When Intrawest first rolled into town with all this money, it seemed like a good thing. You would walk into that sales office and it looked legit. However, I saw right through it. Do you know that their (Intrawest's parent company Fortress Investments) stock was down 96 per cent for the year not too long ago. It's really too bad. The whole thing was a case of slick marketing, and unfortunately the bottom fellow out."

Real estate project scrapped

GLENWOOD SPRINGS, Colo. - A proposal for a major real estate development at the base of Sunlight Mountain Resort, a ski area, has been formally withdrawn. There were doubts about the size of the project, making it appear that development approvals might not have been awarded by Garfield County. As well, the development was being reviewed even as the market for new mountain real estate was crumbling.

The proposal called for 830 housing units and 110,000 square feet of commercial space. A planning commission last winter recommended the project be denied, and the proponent withdrew the application in April.

"We just felt it wasn't in our best interests to move forward," said Tom Jankovsky, the ski area manager. "Definitely, money is part of it," he added in an interview with The Aspen Times .

The development proposal had been triggered by sale of the ski area. The sale of the ski area, however, was contingent upon approval of the real estate development. Jankovsky said the ski area infrastructure badly needs investment - everything but the snow cats, he said.

Mayoral candidate sets record

ASPEN, Colo.- Business may be down, but spending is up in this spring's mayoral election in Aspen. Incumbent Mick Ireland has raised $17,875, but his challenger, Marilyn Marks, raised nearly $40,000. The previous record of $30,000 was set two years ago, notes The Aspen Times .

Lovins shows off home

OLD SNOWMASS, Colo. - You would not find the house of Amory Lovins in Architectural Digest. It has no cavernous great room, no massive brick fireplaces, no half-acres of plate-glass windows.

But Lovins, a physicist by training and energy activist since the 1970s, has a house that is marvelous in a different way. The house, built on a small acreage about 20 miles from Aspen, efficiently uses energy, almost none of it obtained by burning fossil fuels.

The remodeled house, in addition to photovoltaic solar collectors, now has solar thermal panels. The hot water is delivered not only to showers, but also to pipes within the floor, for radiant heating. Lovins told The Aspen Times that he hopes the new heat source allows him to retire his two wood-burning stoves, currently the only traditional source of heat in the house.

New Solatubes allow a dark hallway to be lighted with sunshine. A new data collection system uses 170 measuring devices to gather and analyze data, allowing Lovins to adjust the home's systems when needed.

Lovins last week was named one of Time Magazine's 100 most influential people. Also named to the list this year was Daniel Nocera, a solar researcher from the Massachusetts Institute of Technology. Nocera has spoken to energy groups in both Aspen and Telluride in recent years.

Windy, dusty spring hastens melt

SILVERTON, Colo. - It has been, reports the Durango Telegraph , an unusually windy, dusty year in the San Juan Mountains. Chris Landry, director of the Center for Snow and Avalanche Studies, says 13 dust storms as of late April left dust on the snow of the San Juans, the most since he began monitoring the dust storms seven years ago.

The dust absorbs the solar radiation, causing the snow to melt more rapidly. Tom Painter, a research scientist with the University of Utah, estimates the snowpack melts several weeks earlier as a result of the dust.

Additional study of sediments in above-treeline lakes by Jason Neff, a biogeochemist with the University of Colorado-Boulder, found a five-fold increase in dust accumulations since the last half of the 19 th century as compared to the previous 5,000 years. He notes that the uptick in dust was concurrent with the arrival of railroads, and he further theorizes that large-scale livestock grazing created the additional dust.

Further work in support of that theory has been done by Jayne Belknap, a research ecologist for the U.S. Geological Survey who is based in Moab, Utah. She has demonstrated how desert soils disturbed by livestock grazing or other activities can be lifted by passing storms.

Flu closes Park City schools

PARK CITY, Utah - One person in the Park City area has been confirmed to have H1N1, the strain of flu now making the global rounds. However, there are probably 10 people with the virus, the Park Record reported on Monday.

None of the flu victims have needed hospitalization. However, there was enough concern that all schools were ordered closed for several days, reports The Park Record . Restaurateurs reported major losses as people stayed home. There was a run on hand-sanitizers at local stores. City officials set up a hotline.

A confirmed case of swine flu was also reported in Colorado's Eagle County. The individual, a male in his teens, was recovering in his house. Becky Larson, the epidemiologist, says the severity of the influenza is more important than the number of confirmed cases. "That's how we base our planning," she told the Vail Daily .

"If you follow basic steps to prevent the spread of illness, there is no reason not to go about your daily business," said Larson.

Jack Kemp loved Vail

VAIL, Colo. - Jack Kemp had a strong connection with Vail. Kemp, who died recently at the age of 73, had been a quarterback for the Buffalo Bills before later getting elected to Congress for nine terms. During that time, he served with Gerald Ford, who famously vacationed in Vail. In time, Kemp also had a house in Vail.

Kemp made a run for the presidency in 1988, but lost to George H.W. Bush. he did become the vice presidential candidate with Bob Dole in 1996, which lost to Bill Clinton and Al Gore.

But Kemp was secretary of the Department of Housing and Urban Development under the elder Bush. He had a genuine interest in educational advancement, according to reports in the New York Times and other publications. Harry Frampton, chairman of the board of the Vail Valley Foundation (and managing principal of East West Partners), told the Vail Daily that Kemp pushed the board to get more involved in educational programs.

Forest work to continue

BRECKENRIDGE, Colo.-The chain saws will be busy around Breckenridge this summer as efforts continue to thin forests and remove trees killed by bark beetle in 70 areas of open space. Local officials tell the Summit Daily News that they hope to create buffers around homes and businesses in the event of wildfire.

Efforts to merge dropped

KETCHUM, Idaho - An effort to merge the towns of Ketchum and Sun Valley has been abandoned. Two councilmen, one from each community, had issued a call several months ago for a November referendum on the consolidation, which they said is needed to save taxpayer money. The two communities exist side-by-side, although Ketchum is by far the larger of the two.

Charles Conn, the councilman from Ketchum, admitted to mistakes. The proposal for a November election came too soon, he said, and didn't allow people to get comfortable with the idea.

As well, significant opposition arose in Sun Valley. A group called Save Sun Valley called a meeting that drew 200 people to rally against the merger. Speakers claimed a difference in culture between the two towns and also argued that Sun Valley would lose out financially.

As well, Sun Valley - the town, but not the ski area - would have lost its name. Under Idaho law, the smaller municipality is subsumed in a merger. Ketchum is the older and larger town.

"We're better off with a small, flexible, responsive government," said Wayne Willich, mayor of Sun Valley.

But there was some support even in Sun Valley, as suggested by a 3-2 vote. Conn said the idea will inevitably return, because of the operating efficiencies that would result.

Idaho towns hear advice

KETCHUM, Idaho - Ketchum, Sun Valley and other communities in the Wood River Valley may have something to learn from Denver. The Idaho Mountain Express reports that Denver Mayor John Hickenlooper recently spoke at a conference in Idaho, and his message resonated. "There's no profit in having enemies," he said.

What Hickenlooper meant was that he sees Denver as part of a greater whole, both of a metropolitan area and of Colorado. As such, he sees no advantage to competing for businesses. Some consolidation has occurred, and Hickenlooper helped rally support for a metropolitan light-rail system.

"With transportation and consolidation prominent issues in the Wood River Valley," says The Express , Hickenlooper's advice could likely find an audience."

Challengers want to change co-op

STEAMBOAT SPRINGS, Colo. - Two incumbents on the board of Yampa Valley Electric Association have challengers. The challengers are running in tandem, arguing that the co-operative is not as aggressive in promoting renewables and energy efficiency as it can and should be.

"I can see a day when... we could power our town ourselves," said Susan Holland, one of the challengers. She tells the Steamboat Pilot & Today that electricity can be generated locally by installing small hydroelectric plants on local streams, harvesting the methane gas at the county landfill, and burning beetle-killed trees to produce electricity.

Scott McGill, an incumbent, tells the newspaper that the challengers are naïve to think that the co-operative can substantially reduce its reliance upon coal-burning power plants.

Larry Covillo, the co-op's general manager, says that 90 per cent of Yampa Valley Electric customers do not support paying higher rates to support a rebate program for either energy efficiency or renewable energy programs.

The co-op does provide free energy audits and compact fluorescent light bulbs. But McGill said that it's not fair for some customers to subsidize other customers.