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White House / Pete Souza
One factor favoring President Obama’s re-election, according to a recent article by political scientist Alan Lichtman, is the absence of scandal in his administration.
Lichtman may have spoken too soon.
The reason can be capsulized in a single word: Solyndra.
That’s the name of a company that manufactured solar panels in Fremont, Calif. (which voted 71 percent for Obama in 2008).
Solyndra was the first company to receive a loan guarantee from the Department of Energy as part of the 2009 stimulus package. This wasn’t small potatoes. The loan guarantee was for $535 million.
It was, Vice President Biden said, “exactly what the Recovery Act was all about.” Energy Secretary Steven Chu, a Nobel Prize winner, said it would help “spark a new revolution that will put Americans to work.” It was part of the Obama administration’s program to create so-called “green jobs,” which we were told were the key to future economic growth.
The beauty part is that a loan guarantee doesn’t require the federal government to shell out cash unless and until the recipient defaults on the loan. If the company’s business plan works out, the loan costs the government virtually nothing.
“Even the shrewdest venture capitalists lose money on most of their investments. But when they lose, it’s their money, not ours.” – Michael Barone
Obama paid a visit to Solyndra on a trip to California in May 2010. “It is here that companies like Solyndra are leading the way toward a brighter, more prosperous future,” he said. Hailing the green jobs loan guarantee program, he went on, “We can see the positive impacts right here at Solyndra.”
The White House even prepared a video about the company. The Solyndra personnel sound articulate and intelligent and seem to be really nice guys.
Unfortunately, there were other things going on at Solyndra for those with eyes to see. As my Washington Examiner colleague David Freddoso reported, an audit of the company performed by PriceWaterhouseCoopers two months before Obama’s visit noted that the firm had accumulated losses of $558 million in its five years of existence.
The auditor noted that Solyndra “has suffered recurring losses from operations, negative cash flows since inception and has a net stockholders’ deficit that, among other factors, raises substantial doubt about its ability to continue as a going concern.”
One of the original investors in Solyndra was Oklahoma billionaire George Kaiser, who was also a major contributor to Obama’s 2008 campaign. In early 2011 Kaiser and other investors provided an additional $75 million in financing to Solyndra. They did so on condition, approved by the Energy Department, that they receive priority over previous creditors, including the government.
On Aug. 31, while Obama was vacationing on Martha’s Vineyard, Solyndra filed for bankruptcy. On Sept. 8, the day of Obama’s “American Jobs Act” speech to a joint session of Congress, FBI agents conducted searches of Solyndra’s headquarters and the homes of the firm’s CEO and founder. Newspaper accounts speculate that the government may wind up losing the whole $535 million.
The House Energy and Commerce oversight subcommittee is scheduled to conduct a hearing on Solyndra on Wednesday. Documents have been sought not only by Republicans but also by Democratic Rep. Henry Waxman, former chairman of the committee.
It’s possible the subcommittee will find nefarious goings on at Solyndra. Was the administration’s decision to grant a loan guarantee of half a billion dollars influenced by a major campaign contributor? Did the Energy Department disregard obvious caution flags about the company? Did somebody slip somebody a bribe?
But let’s assume for the time being that there was no criminal conduct here, no violation of government procedures, no fraud. Let’s assume everyone in the administration acted with good faith.
There’s still a scandal–the scandal of the government handing out hundreds of millions of dollars to unproven and speculative businesses. Even the shrewdest venture capitalists lose money on most of their investments. But when they lose, it’s their money, not ours.
The scandal is still going on. The Energy Department has been busy handing out more loan guarantees in the past few weeks–$150 million to 1366 Technologies of Lexington, Mass. (73 percent for Obama in 2008), 80 percent of $344 million to Solar City of San Mateo, Calif. (72 percent for Obama in 2008). Will one of them be the next Solyndra?
The real scandal is the “green jobs” loan guarantee program itself. And the ones getting scammed are American taxpayers.
Michael Barone is a resident fellow at AEI.
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