The further to the left or the right you move, the more your lens on life distorts.

Thursday, September 15, 2011


Let me begin by saying that I’m a firm proponent of energy independence and back a strategy that develops both domestic fossil fuels and alternative energy sources (e.g., solar, wind, nuclear, tidal) to help us get there before the year 2020. I’m even in favor of government support for fledgling alternative energy companies with a really good idea and a solid business plan. But that support has to be based on solid due diligence and should never be driven by political considerations that trump solid business thinking.

But then there’s Solyndra—a California-based solar energy company that went bankrupt last month, putting over 1,000 employees on the street and frittering away a half-billion dollars in stimulus money.

The story of Solyndra appears to be an epic tale of government (in this case, the Obama administration) making very bad decisions that wasted vast sums of taxpayer money for purely political reasons.

In a nutshell, Solyndra made solar cells, but its pricing structure was uncompetitive and had been for a few years. A major private investor in the company, billionaire George Kaiser, was a major contributor to the Obama campaign in 2008. The company applied for government loan guarantees during the Bush administration, but no action was taken on their request. Once President Obama was in office, that changed. Leaked emails seem to indicate that the administration desperately needed a “green,” shovel-ready project after the $835-billion stimulus was passed. The administration decided to fast-track the Solyndra loan application so that they could use the company as a poster-child for the effectiveness of the stimulus. Barack Obama himself visited the company to tout them as a green jobs creator.

No one yet knows whether the fast track was also a case of crony capitalism or why in the final loan agreement, the government subordinated its $500+ million to George Kaiser’s private investment of $75 million. Or why the loan was allowed to be used to build new buildings when thousands of California industrial properties lay vacant. Or why George Kaiser made 16 visits to the White House in the year before the loan guarantee was granted. Or why the Obama administration didn’t listen to warnings by its internal watchdogs and outside accounting firms.

The OMB and Price Waterhouse raised flags about the company before the loan guarantee was granted. PW stated that the company “has suffered recurring losses from operations, negative cash flows since inception and has a net stockholders’ deficit that . . . raise substantial doubt about its ability to continue as a going concern.” Even members of the Obama's own administration warned, “This deal is NOT ready for prime time.”

But now the company is gone, and the taxpayer’s money is too. Half a billion dollars. Gone. For what?

The Obama Administration sacrificed due diligence and common sense to make a few political points. They’re certainly not the first administration to do that, but what they now have are the makings of a full-blow scandal.

Update (9/17/11):

As additional internal government emails are released, we learn more about this brewing scandal. The New York Post reports on an internal email from an OMB staffer:
“If Solyndra defaults down the road,” read one e-mail, “the optics will arguably be worse than they would be today,” because “additional funds [will] have been put at risk, recovery may be lower and questions will be asked as to why the administration made a bad investment, not just once ... but twice.”

The staffer, whose name was redacted from the published e-mail, tried to derail the extra Solyndra cash by making a political argument, suggesting that allowing Solyndra to shut its doors last January would let the White House “get some credit for fiscal discipline.”

But that suggestion was ignored -- little surprise, given how the Solyndra deal, now threatening to become Obama’s Enron, was steeped in politics from the start.

The Post characterizes information released to date as "the tip of the iceberg." It looks like this President and his administration exhibited remarkably bad judgment that was driven by political rather than business criteria. That's really not surprising given that few if any of Barack Obama's senior advisors have any private sector business experience whatsoever.