There is a reason why the private market won't give companies a loan sometimes. Obama gave them $535 million, or $483,363.00 per employee. Of course,
we know what a waste of resources solar energy is. From
The Hill newspaper.
“Regulatory and policy uncertainties in recent months created significant near-term excess supply and price erosion,” Solyndra's CEO said.
A California-based solar company that received a $535 million loan guarantee from the Obama administration announced Wednesday that it will shut down.
The company, Solyndra Inc., said Wednesday it would suspend its manufacturing operations and lay off 1,100 employees effective immediately. The company said it intends to file a petition for Chapter 11 bankruptcy protection.
“Regulatory and policy uncertainties in recent months created significant near-term excess supply and price erosion,” Solyndra CEO Brian Harrison said in a statement. “Raising incremental capital in this environment was not possible. This was an unexpected outcome and is most unfortunate.” . . .
UPDATE: More stories on case. From
ABC News:
ABC News and the Center for Public Integrity's iWatch News first reported on questions about the choice of Solyndra for the loan in May after the Department of Energy disclosed it was being forced to restructure its loan package for the company, which was showing early signs of financial distress. One of Solyndra's major investors was George Kaiser, an Oklahoma billionaire who raised between $50,000 and $100,000 for Obama during the 2008 election. . . .That's when the Government Accountability Office issued an unusually blunt assessment of the Energy Department's loan program in general, concluding that the department had "treated applicants inconsistently, favoring some and disadvantaging others." The government loan guarantee was supposed to spur 1,000 full-time jobs once Solyndra's solar plant was fully operational. Instead, as the company announced Chapter 11 bankruptcy today, reports surfaced that 1,100 would lose their jobs. . . .
From
Fox News:
Solyndra LLC of Fremont, Calif., had become the poster child for government investment in green technology. The president visited the company in May 2010 and noted that Solyndra expected to hire 1,000 workers to manufacture solar panels. Other state and federal officials such as former Gov. Arnold Schwarzenegger and Energy Secretary Steven Chu also visited the company's facilities.But hard times have hit the nation's solar industry. Solyndra is the third solar company to seek bankruptcy protection this month. Officials said Wednesday that the global economy as well as unfavorable conditions in the solar industry combined to force the company to suspend its manufacturing operations.The price for solar panels has tanked in part because of heavy competition from Chinese companies, dropping by about 42 percent this year.Republicans have been looking into the Solyndra loan for months. The House Energy and Commerce Committee subpoenaed documents relating to the loan from the White House Office of Management and Budget. GOP Reps. Fred Upton of Michigan and Cliff Stearns of Florida issued a joint statement on Wednesday saying it was clear that Solyndra was a dubious investment."We smelled a rat from the onset," the two lawmakers said.Shortly after the company's announcement, it became clear that the bankruptcy would serve as further ammunition to criticize an economic stimulus bill that provided seed money for solar startups -- even though officials said interest in providing Solyndra with guaranteed government loans was first sought under the Bush administration. . . .
Clearly we must have better ways to spend this Stimulus money. From
The Week:
If massive federal spending does actually succeed in permanently creating or saving large numbers of jobs (an assertion which is often long on rhetoric and short on evidence), it must rely on targeting companies based on their ability to compete rather than merely their participation in a political effort like “green energy.” If we are going to saddle our economy with huge new debts in the hope that we can stave off another recession, we really need to be more sure that the investments we make are cost-effective instead of merely politically convenient. The Obama Administration appears to have neglected that imperative the first time around.
Note that Solyndra couldn't get the same loan guarantee from private banks
for a very good reason. Read post. This reminds me of how the government interfered with GM's business decisions.
Based on the evidence assembled so far, no Wall Street investment officer would have recommended the loan or, if he had, would have kept his job for five minutes. Pouring $535 million into an objectively lousy investment is not how Wall Street makes money.
But it all too often is how politicians get re-elected. “Green jobs” are a big plus for the “environmental movement,” which is a very important liberal special interest. That backing these particular jobs was also a favor for a very important Obama political fundraiser was another plus.
This is a textbook case of capital being allocated for political reasons (it will earn us votes) instead of economic reasons (it will make us rich). It is also further proof that politicians can’t make economic decisions even if they wanted to. And they can’t make them for the exact same reason pigs can’t fly: they aren’t designed to. . . .
UPDATE: CNBC blames competitive pressure from China. Apparently, even a giant government subsidy can’t change the realities of the global marketplace. As long as American workers are far more expensive and not far more productive than equally qualified workers elsewhere, subsidies and finger-pointing can’t produce increased employment. . . .
EDITORIAL, "Obama’s solar stimulus snafu," Washington Times, Wednesday, August 31, 2011
Founded in 2005, the company manufactured a rooftop solar panel designed chiefly for commercial applications. Solyndra was a poster child of the utopian future envisioned by the Obama administration when oodles of green jobs would relieve the nation's unemployment rate, generate clean energy and help the environment. Energy Secretary Steven Chu rushed through loan guarantees, and money began to flow to Solyndra from the Federal Financing Bank. The terms of the loans, just more than 1 percent interest in most cases, were well below the rates competitors had to pay.Competition in the solar marketplace is stiff, particularly from China, and Solyndra couldn't make a profit. In the spring of 2010, the company spent around $3.5 million promoting an initial public stock offering (IPO) to raise $300 million to retire some of the government debt, but the company couldn't escape an inconvenient truth: In the first three quarters of 2009, it grossed $59 million against production costs of $108 million. Solyndra argued that economies of scale would eventually drive down the red ink, but the investment community wasn't impressed, and the IPO was withdrawn.When government loan guarantees of more than half a billion dollars were secured, Solyndra bragged that its new plant expansion would create 3,000 construction jobs and 1,000 permanent manufacturing positions. On a plant-site visit, Vice President Joseph R. Biden Jr. enthused, "These are jobs that won't be exported." Not so, Joe. After the failure of the IPO attempt, Solyndra sent half its manufacturing to China. . . . .
UPDATE:
Another alternative energy scandal.
In June, House Republicans passed the 2012 Homeland Security appropriations bill, which included an amendment adding $1 billion to the Disaster Relief Fund of the Federal Emergency Management Agency (FEMA). In a sensible move for taxpayers, the amendment offsets this new disaster funding by cutting spending on the Advanced Technology Vehicles Manufacturing Loan Program. This may ring a bell with readers as the funding conduit for one of Washington's adventures in crony capitalism.
In 2009, the Department of Energy announced that it would loan more than half a billion dollars through this program to a California-based company, Fisker Automotive, to make luxury electric cars. About a month after the loan package was conditionally approved, CEO Henrik Fisker and Joseph Biden appeared in the Vice President's hometown of Wilmington, Delaware to announce that Fisker would now be making some of its cars at the city's old General Motors factory.
At the event, Mr. Biden described many "long talks" he'd had with Mr. Fisker. The Vice President's office later said that Mr. Biden didn't make any direct appeals to Energy before the loan was approved, but Delaware's chief of economic development told the Journal that Mr. Biden was the state's "secret weapon, except there is nothing secret about Joe Biden."
All of this is background to say that the GOP has found the federal program that is arguably the most deserving of a cut to free up funds for disaster victims. But Senate Democrats refuse to pass the House bill and Mr. Cantor has earned their ire this week by continuing to press for cuts in corporate welfare. . . .
UPDATE: More on
potential corruption in giving the low interest rate loan to Solyndra.
ABC News discovered that the solar-tech firm Solyndra got unusually low interest rates on its federally-guaranteed loans before it collapsed last month, sending 1000 workers to the unemployment line in California. Other green-tech firms receiving loans paid as much as three and four times the interest rate Solyndra secured for its $535 million from Barack Obama’s 2009 stimulus bill from the Treasury’s Federal Financing Bank. ABC notes that other green-tech firms didn’t have the connections that Solyndra had to Obama:
The $535 million loan to Solyndra Inc., issued by the U.S. Department of Treasury’s Federal Financing Bank, included a quarterly interest rate of 1.025 percent, the government bank reported in July. Of 18 Energy Department loans cited in the bank’s report, Solyndra’s rate was lowest. Eight other Energy Department projects, each also backed by the Federal Financing Bank, came with rates three or four times higher, the report shows.
That treatment is in keeping with the history of the loan to the California solar panel maker, an arrangement inked in September 2009 with great fanfare — and touted, not long after, during a factory visit from the president. Monthly government bank reports filed since then reveal Solyndra’s rate as the lowest for any energy-related project in nearly every report; in every case its rate was well below that of most energy projects, which ranged from cutting-edge electric car makers to wind and solar ventures. …
Solyndra’s most prolific financial backer is George Kaiser, an Oklahoma oil billionaire who was a bundler of campaign donations for Obama’s 2008 race. Kaiser’s Argonaut Ventures and its affiliates have been the single largest shareholder of Solyndra, according to SEC filings and other records. The company holds 39 percent of Solyndra’s parent company, bankruptcy records filed Tuesday show.
And guess who gets paid out of the bankruptcy first?
Under terms of the bankruptcy filing, investors including Argonaut — which led a $75 million round of financing for Solyndra earlier this year — will stand in line before the federal government and other creditors.
When Solyndra announced that round of fundraising this February, it noted that the DOE had refinanced terms of the $535 million loan to extend the payment period. Under an “inter-creditor agreement” cited in the bankruptcy filing, the investors in the $75 million financing are considered first lien holders. That leaves Obama officials to confront the prospect of waiting behind private companies.
Don’t think that this happened by accident. Before Obama took office, Solyndra applied for the federally-subsidized green-tech loan, and only scored a B+ from appraisers, which ABC calls a “red flag.” . . .
The White House has to explain why it overruled the FFB’s auditors and ignored the warnings from appraisers while fast-tracking over half a billion dollars to a teetering company at loan rates far below what FFB charged other companies. . . .
UPDATE: Now
the FBI has raided the Solyndra offices.
But at the end of 2010 they had privately confided to Energy Department officials that Solyndra was rapidly going broke and on the verge of shutting down, according to newly released records and interviews. Solyndra’s inability to repay its debt leaves taxpayers liable for repaying the loans.
In February, the Energy Department agreed to a refinancing for Solyndra that allowed investors who put in new money to get their funds repaid first — before taxpayers — if the company defaulted on the federal loan. . . .
Federal agents conducted a day-long search at the California headquarters, removing boxes and copying computer files. They also searched the home of the company’s chief executive, Brian Harrison, according to Solyndra spokesman David Miller.
Miller said he believed the FBI was focusing on the loan guarantee, which also has been the subject of a House subcommittee investigation. . . .
UPDATE: Question: Suppose a business executive tried to have the types of excuses that the government offers here for a bad investment, what would the response be? Would his investors simply say "OK, you didn't anticipate the large government subsidies"? From
Fox News:
The testimony came as Republican and Democratic lawmakers raised sharp questions about the decision that ultimately left taxpayers on the hook for millions, and as newly released emails show administration officials were raising doubts about the loan proposal to Solyndra months before it was finalized.
Rep. Fred Upton, R-Mich., said the program was "shrouded in secrecy and uncertainty," questioning whether the loan represented "one bad bet" or the "tip of the iceberg."
Jeffrey Zients, deputy director of the White House budget office, acknowledged that Solyndra's bankruptcy will "limit the government's recovery of funds." He called the outcome "very unfortunate."
But at a hearing Wednesday, he said administration officials provided a "thorough examination and analysis" of the loan proposal and said a "challenging global solar market" has made business harder for companies like Solyndra. . . .
Silver said Solyndra's projects were considered "advanced" dating back to 2008. "In 2009, Solyndra appeared to be well-positioned to compete and succeed in the global marketplace," Silver said.
But emails released by the House Energy and Commerce Committee show that the relevant credit committee decided "not to engage in further discussions with Solyndra" in the final days of the Bush administration. After the change in administration, officials restarted the loan review process for Solyndra.
"A half a billion dollars that was not supported in January under the Bush administration was ... conditionally recommended in March," Rep. Joe Barton, R-Texas, pointed out. . . .
From Mary Kissel at the WSJ's Political Diary:
To the annals of extraordinary government spin, add Deputy Secretary of Energy Daniel Poneman, who just published a short defense of the Obama administration's backing of Treasury's 2009 $535 million loan guarantee to now-failed solar company Solyndra. "Winning will require substantial investments," Mr. Poneman wrote. "Last year, for example, the China Development Bank offered more than $300 billion in financing to Chinese solar manufacturers."
Set aside that if Beijing wants to use its own taxpayer cash to back solar investments, that's an effective subsidy to U.S. consumers of solar panels, which is no bad thing. Mr. Poneman's defense of the Solyndra investment also had the misfortune to land on the same day that the Washington Post revealed more evidence that the White House exerted political pressure on the Office of Management and Budget to approve the loan. In one email, a staffer complained about "rushed approvals" and a lack of sufficient time "to do our due diligence reviews," in direct opposition to Mr. Poneman's claims that the Solyndra deal was prudently vetted.
The administration is trying to play down the Solyndra scandal, with a White House spokesman telling the Post that the loan guarantee was "merit-based." . . .
From
Politico:
ABC News reports on newly released emails from the administration from two years ago:
"This deal is NOT ready for prime time," one White House budget analyst wrote in a March 10, 2009 email, nine days before the administration formally announced the loan.
"If you guys think this is a bad idea, I need to unwind the W[est] W[ing] QUICKLY," wrote Ronald A. Klain, who was chief of staff to Vice President Joe Biden, in another email sent March 7, 2009.
And The Washington Post reports that the administration tried to “rush federal reviews” on the loan so that Biden could make the announcement in September 2009 at a groundbreaking for Solyndra’s new factory:
One e-mail from an OMB official referred to “the time pressure we are under to sign-off on Solyndra.” Another complained, “There isn’t time to negotiate.”
“We have ended up with a situation of having to do rushed approvals on a couple of occasions (and we are worried about Solyndra at the end of the week),” one official wrote. That Aug. 31, 2009, message, written by a senior OMB staffer and sent to Terrell P. McSweeny, Biden’s domestic policy adviser, concluded, “We would prefer to have sufficient time to do our due diligence reviews.”
From
USA Today:
In March 2010, the accounting firm PricewaterhouseCoopers issued a standard but stern warning about Solyndra, a California solar panel manufacturer: The company wasn't making money and never had, which raised "substantial doubt about its ability to continue as a going concern." Yet when President Obama visited Solyndra's plant in Fremont two months later, he gave a rousing pep talk and declared that "the future is here." . . .
Even if Solyndra's collapse is nothing more than good intentions gone awry — a big if — it is a cautionary tale about why government should be extremely wary about betting tax dollars on specific companies. If there's one thing the marketplace virtually always does better than government, it's picking individual successes in an uncertain and highly competitive business. In fact, government involvement can unfairly tilt the playing field toward one company and away from competitors. . . .
Solyndra employee claims:
"Everyone knew that the plant wouldn’t work. But they still did it. They still built it."
