This isn't the first time that this claim has become clear, but it is getting more attention. From the Associated Press:
The Obama administration restructured a half-billion dollar federal loan to a troubled solar energy company in such a way that private investors — including a fundraiser for President Barack Obama — moved ahead of taxpayers for repayment in case of a default, government records show.
Administration officials defended the loan restructuring, saying that without an infusion of cash earlier this year, solar panel maker Solyndra Inc. would likely have faced immediate bankruptcy, putting more than 1,000 people out of work.
Even with the federal help, Solyndra filed for Chapter 11 bankruptcy protection earlier this month and laid off its 1,100 employees. . . .
House Energy and Commerce Hearing on Solyndra, questions from Congressman Pompeo
When the congressman is asking about DOE recommending about restructuring the loan so that the firm was liquidated, I wish that I could have asked why DOE wanted this given that the company was not covering its costs and had no prospects of doing so in the foreseeable future.
More evidence that the Obama administration has been using the Stimulus to favor donors. The damage caused by this program is available here.
Gen. William Shelton, head of the Air Force Space Command, told House members in a classified briefing earlier this month that he was pressured to change prepared congressional testimony in a way that would favor a large company funded by Philip Falcone, a major Democratic donor, congressional sources told Fox News. Republicans have raised questions about whether the project pursued by the company, LightSquared, is being unduly expedited by the Obama administration, which has pushed for national wireless network upgrades. The Virginia-based satellite and broadband communications company has plans to build a nationwide, next-generation, 4G phone network that many, including Shelton, think would seriously hinder the effectiveness of high-precision GPS receiver systems, a product used most commonly by the United States military. A source familiar with the technology told Fox News that the LightSquared spectrum would be 5 billion times stronger than the military's GPS system, rendering the military's system almost useless. "Imagine trying to have a telephone conversation while your neighbors are hosting a rock concert," the source told Fox News. "That’s the situation the military is facing." Shelton, in testimony Thursday before a House Armed Services subcommittee, refused to suggest that interference problems could be mitigated, as he allegedly was being pressured to say. . . .
UPDATE: Second witness now alleges that the Obama administration tried to get him to change his testimony.
LightSquared, a wireless network backed by billionaire Democratic donor Philip Falcone, could beam broadband Internet everywhere—but some military officials fear it could interfere with critical GPS signals. Now, as The Daily Beast's Eli Lake exclusively reports, two U.S. officials allege the White House tried to influence their testimony to rush key testing, to LightSquare's benefit. A second government official has come forward saying the White House tried to influence his testimony concerning a wireless broadband project backed by a Democratic donor that military officials fear might impair sensitive satellite navigation systems. Anthony Russo, director of the National Coordination Office for Space-Based Positioning, Navigation, and Timing, told The Daily Beast he rejected “guidance” from the White House’s Office of Budget and Management suggesting he tell Congress that the government’s concerns about the project by the firm LightSquared could be resolved in 90 days, a timetable favorable to the company’s plans. “They gave that to me and presumably the other witnesses,” Russo said. “There is one sentence I disagreed with, which said that I thought the testing could be resolved in 90 days. So I took it out.” Russo said he objected to that language because “I have low confidence that we can complete all of the testing in 90 days.” He estimated that such testing would take at least six months. Russo called the White House efforts to alter his testimony “guidance rather than pressure.” Russo’s comments come just days after four-star Air Force Gen. William Shelton, who heads U.S. Space Command, told Congress in a classified briefing that he felt pressured by the White House to change his testimony about the same project to make it more favorable to the company. . . .
A White House official fretted privately that the Obama administration could suffer serious political damage if it gave additional taxpayer support to the beleaguered solar-panel company Solyndra, according to newly released e-mails.
The firm had burned through millions of dollars and in January still tottered near collapse. The official wanted the government’s top budget official to warn Obama’s energy secretary about the risk, according to the e-mails.
At the time, the Energy Department was trying to pump taxpayer money into the California company to save it from imminent failure. The firm had received a $535 million federal loan from the agency in 2009, but early this year confided to the Obama administration that without a rapid infusion of cash it was in danger of defaulting.
“The optics of a Solyndra default will be bad,” the Office of Management and Budget staff member wrote Jan. 31 in an e-mail to a co-worker. “If Solyndra defaults down the road, the optics will be arguably worse later than they would be today. . . . In addition, the timing will likely coincide with the 2012 campaign season heating up.”
The e-mail suggests that, as the Energy Department pushed to release an additional $67 million in installments of the loan to Solyndra, the OMB was not participating in the decision about whether to help the company. OMB staff had been in charge of assessing the default risk of firms that received Energy Department loan guarantees. . . .
According to records filed with the Clerk of the House and a search of disclosure forms compiled by the Center for Responsive Politics, Solyndra spent nearly $1.9 million on lobbying activities over a period of 43 months from 2008 to 2011.
About $1 million of that was earned by the company's two in-house lobbyists, Joseph Pasetti and Victoria Sanville, over an 18-month period from 2010 until this year. But Solyndra has also had several big-name lobbying shops on its payroll, including established powerhouses Dutko Worldwide and Holland and Knight, which began representing the then-fledgling company in 2008.
While Holland and Knight helped the company with renewable energy tax credit issues, Dutko was brought aboard, according to its filings, to "identify decisionmakers and to assist with the client's loan application" through the Department of Energy.
It is that DOE loan that has touched off an outcry on Capitol Hill and has singed the Obama administration, just as President Obama campaigns across the country for his new jobs plan and Republicans look to scale back clean energy and environmental programs. . . .
On Jan. 12, 2009, Solyndra CEO Chris Gronet sent an Energy Department official an email marked "urgent" expressing outrage that Bush officials had decided a few days earlier that while the loan application had "merit" it needed further study before officials could move forward with a taxpayer-financed loan. "I was appalled to learn on Friday that our application is being delayed yet again," Gronet wrote to Energy official Steve Isakowitz, writing there had been "countless communications" back and forth suggesting the application would be reviewed Jan. 15. . . .
Democrats' defense is: 1) that the half a billion dollars is just a "tiny fraction" of the $19 billion handed out so far and 2) the government gives loan guarantees to other businesses (nuclear power). Given that this money is in investments that no one would make without government subsidies, everything here is a loss. It isn't clear why the government should be in the loan business at all. I suppose that the argument for nuclear power loan guarantees is that it is too offset some bad regulatory costs, but the most direct thing is to eliminate the bad regulations.
Let us ignore that this money would have gone someplace else and would have created jobs there. $19 billion to "create" 3,545 jobs comes to about $5.4 million per job. The Washington Post writes:
A $38.6 billion loan guarantee program that the Obama administration promised would create or save 65,000 jobs has created just a few thousand jobs two years after it began, government records show.
The program — designed to jump-start the nation’s clean technology industry by giving energy companies access to low-cost, government-backed loans — has directly created 3,545 new, permanent jobs after giving out almost half the allocated amount, according to Energy Department tallies.
President Obama has made “green jobs” a showcase of his recovery plan, vowing to foster new jobs, new technologies and more competitive American industries. But the loan guarantee program came under scrutiny Wednesday from Republicans and Democrats at a House oversight committee hearing about the collapse of Solyndra, a solar-panel maker whose closure could leave taxpayers on the hook for as much as $527 million. . . .
President Obama has made “green jobs” a showcase of his recovery plan, vowing to foster new jobs, new technologies and more competitive American industries. But the loan guarantee program came under scrutiny Wednesday from Republicans and Democrats at a House oversight committee hearing about the collapse of Solyndra, a solar-panel maker whose closure could leave taxpayers on the hook for as much as $527 million. . . .
If solar energy products can be produced more cheaply in other countries, why does that justify even greater government subsidies here? Despite the Solyndra scandal, "Obama administration doubling down" on these government loans. From The Hill newspaper:
The Energy Department (DOE) is not backing down in its efforts to support clean energy companies, despite a Republican push to pummel the Obama administration for approving a $535 million loan guarantee to a now-bankrupt solar firm.
The department could approve as many as 15 renewable energy loan guarantees by the end of the month when a program launched under the stimulus law ends. . . .
To date, the DOE has finalized 17 loan guarantees for a range of solar, wind and geothermal projects. The department has issued 15 conditional commitments that must be finalized by Sept. 30.
The department, for example, finalized an $852 million loan guarantee for a NextEra Energy solar project in California last month. . . .
But the administration has pushed back on the allegations in recent days. White House Press Secretary Jay Carney said Wednesday that the emails were a “scheduling matter” and were not intended to put additional pressure on officials to finalize the loan.
Meanwhile, the Energy Department is arguing that the Solyndra debacle shows that the United States must double down on its investments in clean energy to compete with countries like China, which has invested billions in solar energy. . . .
At least four other companies have received stimulus funding only to later file for bankruptcy, and two of those were working on alternative energy. Evergreen Solar Inc., indirectly received $5.3 million through a state grant to open a $450 million facility in 2007 that employed roughly 800 people. The company, once a rock star in the solar industry, filed for bankruptcy protection last month, saying it couldn't compete with Chinese rivals without reorganizing. The company intends to focus on building up its manufacturing facility in China. SpectraWatt, based in Hopewell Junction, N.Y., is also a solar cell company that was spun out of Intel in 2008. In June 2009, SpectraWatt received a $500,000 grant from the National Renewable Energy Laboratory as part of the stimulus package. SpectraWatt was one of 13 companies to receive the money to help develop ways to improve solar cells without changing current manufacturing processes. The company filed for bankruptcy last month, saying it could not compete with its Chinese competitors, which receive "considerable government and financial support." . . . Another winner of stimulus who ultimately lost is Mountain Plaza Inc. Despite declaring bankruptcy in 2003, the company received $424,000 from the Tennessee Department of Transportation as part of a grant aimed at installing "truck stop electrification" systems that allow idling truckers to plug-in during extended stops and turn off their exhaust-belching, environment polluting diesel engines. Mountain Plaza had filed for bankruptcy protection again in June 2010. TDOT, which received a $2 million stimulus grant from the Environmental Protection Agency for the project, said it didn't learn about the bankruptcy until October, but it is closely monitoring the project. Elsewhere, Olsen's Crop Service and Olsen's Mills Acquisition Co. also failed despite Olsen's Mills receiving $10 million to increase employment, add equipment and machinery, refinance existing debts and work capital for operations and acquire land. The payout -- part of a $64 million package to nine rural businesses in Wisconsin for economic development loan assistance -- was delivered in January 2010, after Olsen's Mills filed for bankruptcy protection for defaulting on a $60 million bank loan.
Remember this from 2009? Loans rejected by private lenders? Why is the federal government think that it can do a better job of figuring out where the best investments are? Why subsidize cars for the wealth? Why subsidize production in Finland and Britain? Giving money that no private lender would lend to a well connected Democrat? Shades of Solyndra? These just makes it seem as if this stimulus was just a way of funneling money to Democrats. From the WSJ:
A tiny car company backed by former Vice President Al Gore has just gotten a $529 million U.S. government loan to help build a hybrid sports car in Finland that will sell for about $89,000.
The award this week to California startup Fisker Automotive Inc. follows a $465 million government loan to Tesla Motors Inc., purveyors of a $109,000 British-built electric Roadster. Tesla is a California startup focusing on all-electric vehicles, with a number of celebrity endorsements that is backed by investors that have contributed to Democratic campaigns.
The awards to Fisker and Tesla have prompted concern from companies that have had their bids for loans rejected, and criticism from groups that question why vehicles aimed at the wealthiest customers are getting loans subsidized by taxpayers.
"This is not for average Americans," said Leslie Paige, a spokeswoman for Citizens Against Government Waste, an anti-tax group in Washington. "This is for people to put something in their driveway that is a conversation piece. It's status symbol thing." . . .
Cramer is bearish on Tesla Motors (TSLA), and he suggests selling if you own it. The California-based Tesla has a P/E ratio of -11.2, and a forward P/E ratio of -13.2, as of the September 12 close. Five-year annualized EPS growth forecast is 20.0%. Tesla pays no dividend yield. . . .
Tesla Motors is attempting to rapidly expand into the mainstream electric car market but we have concerns with its dependence on lithium. Lithium is believed to have the second smallest accessible metal supply in the world, which stands right above the “rare earth metals” category. Should Tesla be highly successful and sell thousands of its new Model S in conjunction with other large scale electric car competitors there is a real probability that the price of lithium batteries could sky rocket. Given that this is the most expensive part of an electric car this could destroy a profit margin that Tesla doesn’t even have yet. . . .
It’s unbelievable how competition has come out of the woodwork for the electric car space with big names like Ford (F), Toyota (TM), Nissan (NSANY.PK), and more in the line up. . . . If Toyota or other major names find the space unprofitable they can leave it and survive but this isn’t the case for Tesla Motors. Further, big auto names can afford to hang out in this space longer and may even attempt to financially bleed out Tesla Motors. The only hope Tesla Motors has in surviving currently against competition is to start running circles around them in terms of sales numbers. Otherwise it may get squashed like a fly if it stops to take a breather. . . .
Fisker is a privately held company so I can find this type of details on that investment.
UPDATE for September 8, 2011. The president demands that the bill be passed when he doesn't even yet know what is in it. Valerie Jarrett: No Jobs Bill Yet; "The President Is Going To Draft The Legislation"
Back to post. No discussion about where the money comes from and what jobs are lost because of that. A copy of Obama's speech is available here. From Michael Barone:
He called for further cuts in the payroll tax (which if continued indefinitely would undermine the case of Social Security as something people have earned rather than a form of welfare) and for a further extension of unemployment insurance (perhaps justifiable on humanitarian grounds, but sure to at least marginally raise the unemployment rate over what it would otherwise be). He called for a tax credit for hiring the long-term unemployed (unfortunately, these things can be gamed). He gave a veiled plug for his pet project of high-speed rail (a real dud) and for infrastructure spending generally (but didn’t he learn that there aren’t really any shovel-ready projects?). He called for a school modernization program (will it result in more jobs than the Seattle weatherization program that cost $22 million and produced 14 jobs?) and for funding more teacher jobs (a political payoff to the teacher unions which together with other unions gave Democrats $400 million in the 2008 campaign cycle). “We’ll set up an independent fund to attract private dollars and issue loans based on two criteria: how badly a construction project is needed and how much good it would do for the country.” Yeah, sure. Like the screening process that produced that $535,000,000 loan guarantee to now-bankrupt Solyndra. And Congress should pass the free trade agreements with Panama, Colombia and South Korea. Except that Congress can’t, because Obama hasn’t sent them up there yet in his 961 days as president. . . .
If the administration was serious about paying for the debt, they wouldn't put off the budget cuts for so many years after Obama will no longer be in office. From Politico:
. . . “Is it at the cost of our deficit? Is this another stimulus?” Gene Sperling, one of Obama’s top advisers, was asked on Fox News Friday morning.
“As we said, this is going to be paid for, every single penny,” Sperling answered. “Those of us who work on the president’s economic team have worked at the same time and are working on the details right now on how exactly we will pay for this and still have the additional deficit reduction to hit the commitment of Congress, the congressional bipartisan agreement, and, most importantly, to get our debt stabilized.”
He also added that while Obama’s plan includes asking the rich to pay more, this is “not out of class warfare,” but rather “just to make sure we have a shared sacrifice.” . . .
Dems still pushing for increased taxes. A week from this coming Monday Obama will explain how he is going to raise taxes to pay for his programs.
Temporary tax cuts may cause people to temporarily work harder, but they don’t lead to much investment and the claim is that it doesn't do much for job creation. Government spending doesn't create new wealth. But even if you believe that this creates new spending and jobs, the long lead times involved, infrastructure spending is an odd way to combat a double dip that might be starting right now. Much of the job subsidies often go to companies that would have hired the people anyway. The plurality of the people hired under the last stimulus package already had jobs and, as I have predicted since February 2009, they were just switching from one to another.
Obama administration floods reporters' inboxes after Obama's jobs speech (available here).
