Eric Lipton and John M. Broder pen a story for The New York Times about the Solyndra debacle, calling it “one of the administration’s most costly fumbles.” Some new details are uncovered by the duo:
- There was intense pressure on senior Energy Department staff to rush stimulus spending out the door and Secretary Steven Chu was personally reviewing loan applications and urging faster action.
- While Solyndra spent nearly $1.8 million on Washington lobbyists, employing six firms, none of the other three solar panel manufacturers that eventually got federal loan guarantees spent a dime on lobbyists.
- Tim Harris, the chief executive of Solopower, which got a $197 million loan guarantee last month to build solar panels in San Jose, Calif., said his company had never considered employing a Washington lobbyist to grease the application. “It was made clear to us early in the process that was clearly verboten,” Mr. Harris said. “We were told that it was not only not helpful but it was not acceptable.”
- The Bush administration, according to the authors, had started the review of the Solyndra application in May 2008 and were anxious to approve the deal, because members of Congress were complaining that the loan guarantee program, signed into law in 2005, still had not given out its first award.
The article continues, focusing largely on intense and expensive lobbyist efforts and misplaced zeal on the part of the administration.
The authors characterize the bankruptcy of Solyndra — and the likely loss to taxpayers — as merely a failure of execution. If only the administration had exercised less haste, if only the lobbyists hadn’t interfered and company officials were more honest, if only the price of silicon had remained high, if only the DOE had “followed the rules”.
If only. These two words are the foundation of the liberal mindset, especially when there is failure. The New York Times has now set the narrative for President Obama and his main-stream media water boys regarding the Solyndra “fumble”.
But in the newspaper’s rush to blame anything and anyone but the stimulus, and more specifically the loan guarantee program, it inadvertently exposes the program’s fundamental flaws and why many simply call it “crony capitalism”.
- Through the article’s narrative, it becomes obvious that well-connected companies stand a better chance at receiving government assistance than those which aren’t.
- Political goals can easily outweigh due diligence and sound judgement when
spendinginvesting taxpayer dollars in private enterprise.
- If the Energy Department hadn’t been rushed, would the loan still have been guaranteed? Of course it would. There is absolutely no evidence to suggest otherwise.
Solyndra provides a multitude of examples as to why the government should not be in the business of “investing” in private businesses. Here are a few:
- The company’s success or failure depended upon one important commodity and its price: silicon. Once this dependency is acknowledged, the loan guarantee is no longer investing, but speculation.
- The price of silicon is a major — if not the major — risk factor the company faced. But I don’t see in the company’s S-1 filing for its proposed IPO any mention of it. Goldman Sachs and Morgan Stanley (as well as the attorneys) even missed this elementary point. Why should we expect the government to recognize the risk? Moreover, there is no evidence of protective hedging. By the way, had the company been successful in its IPO and subsequently declared bankruptcy, class-action lawyers would now be licking their chops.
- Over a half billion dollars’ worth of Factory 2’s assets were highly specialized manufacturing equipment that likely had little use outside its specific purpose, making for very poor collateral, or as junior commercial loan officers would say, “there’s no second source of repayment”.
- After the loan was drawn, the agreement specified repayment of principal and interest over only four years. There was no evidence of sufficient cash flow to service this kind of debt. Banks call this “betting on the come.”
- The government allowed a restructuring of the debt, placing itself junior to private investors. A review of the statute makes it clear the action broke the law. The rationale given was ridiculous. It’s called “good money chasing bad”.
These simple examples are clear to any junior banker and illustrate how the government failed so spectacularly in its fiduciary duty to taxpayers, who will see over $500 billion in their hard-earned money evaporate. And it’s likely we’ll see more failed government “investments” in the very near future.
We’re experiencing the worst economic environment since the Great Depression. In times like these it is especially imperative that our government acts as a careful and thoughtful steward of hard-earned taxpayer money. It’s bad enough that this ill-conceived program was even launched, but what’s most insulting is the carelessness in which it has been executed.
Tar and feathers.