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Posts Tagged ‘The New York Times’

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 spending investing 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.

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From Anand Giridharadas:

Let us begin by confessing that, if Sarah Palin surfaced to say something intelligent and wise and fresh about the present American condition, many of us would fail to hear it.

That is not how we’re primed to see Ms. Palin. A pugnacious Tea Partyer? Sure. A woman of the people? Yup. A Mama Grizzly? You betcha.

But something curious happened when Ms. Palin strode onto the stage last weekend at a Tea Party event in Indianola, Iowa. Along with her familiar and predictable swipes at President Barack Obama and the “far left,” she delivered a devastating indictment of the entire U.S. political establishment — left, right and center — and pointed toward a way of transcending the presently unbridgeable political divide.

So here is something I never thought I would write: a column about Sarah Palin’s ideas.

She made three interlocking points. First, that the United States is now governed by a “permanent political class,” drawn from both parties, that is increasingly cut off from the concerns of regular people. Second, that these Republicans and Democrats have allied with big business to mutual advantage to create what she called “corporate crony capitalism.” Third, that the real political divide in the United States may no longer be between friends and foes of Big Government, but between friends and foes of vast, remote, unaccountable institutions (both public and private).

In supporting her first point, about the permanent political class, she attacked both parties’ tendency to talk of spending cuts while spending more and more; to stoke public anxiety about a credit downgrade, but take a vacation anyway; to arrive in Washington of modest means and then somehow ride the gravy train to fabulous wealth. She observed that 7 of the 10 wealthiest counties in the United States happen to be suburbs of the nation’s capital.

Her second point, about money in politics, helped to explain the first. The permanent class stays in power because it positions itself between two deep troughs: the money spent by the government and the money spent by big companies to secure decisions from government that help them make more money.

“Do you want to know why nothing ever really gets done?” she said, referring to politicians. “It’s because there’s nothing in it for them. They’ve got a lot of mouths to feed — a lot of corporate lobbyists and a lot of special interests that are counting on them to keep the good times and the money rolling along.”

Because her party has agitated for the wholesale deregulation of money in politics and the unshackling of lobbyists, these will be heard in some quarters as sacrilegious words.

Ms. Palin’s third point was more striking still: in contrast to the sweeping paeans to capitalism and the free market delivered by the Republican presidential candidates whose ranks she has yet to join, she sought to make a distinction between good capitalists and bad ones. The good ones, in her telling, are those small businesses that take risks and sink and swim in the churning market; the bad ones are well-connected megacorporations that live off bailouts, dodge taxes and profit terrifically while creating no jobs.

Strangely, she was saying things that liberals might like, if not for Ms. Palin’s having said them.

“This is not the capitalism of free men and free markets, of innovation and hard work and ethics, of sacrifice and of risk,” she said of the crony variety. She added: “It’s the collusion of big government and big business and big finance to the detriment of all the rest — to the little guys. It’s a slap in the face to our small business owners — the true entrepreneurs, the job creators accounting for 70 percent of the jobs in America.”

Is there a hint of a political breakthrough hiding in there?

Giridharadas closes her article:

No one knows yet whether Ms. Palin will actually run for president. But she did just get more interesting.

Sarah Palin has always been interesting.  Her career, her life, and her philosophy.  That The New York Times and its readers, (and yes some Republicans!) are just discovering this fascinates me.

Palin is onto something here.  “Crony Capitalism” is a dangerous development in our country.  It’s a concept that has been embraced throughout Europe since World War II and now we’re watching the Euro collapse before our very eyes.

Palin experienced crony capitalism first-hand as governor in Alaska and tackled it head-on (it’s odd that Giridharadas never mentions that).  I saw it first-hand when I worked for a large European bank.

Republicans should heed this message; Giridharadas is right:  it is a political breakthrough.  Big Government and Big Business — but let’s not forget Big Labor.  We witnessed Labor malfeasance in Wisconsin’s state capitol and now we see it in the state of Washington.

Sarah Palin’s speech is worth watching in its entirety  (a written version can be found by clicking the picture above):

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