Chu's Solyndra Rush Job

http://www.futureofcapitalism.com/2011/09/chu-solyndra-rush-job

From the March 20, 2009 press release from the Department of Energy headlined "Obama Administration Offers $535 Million Loan Guarantee to Solyndra, Inc.":

Secretary Chu is moving aggressively to accelerate important Department of Energy investments that can create jobs and transform the way America uses and produces energy. This allows the Department of Energy to offer its first loan guarantee within the first two months of the Obama Administration. This loan guarantee will be supported through the President's American Recovery and Reinvestment Act, which provides tens of billions of dollars in loan guarantee authority to build a new green energy economy....

Before offering a conditional commitment, DOE takes significant steps to ensure risks are properly mitigated for each project prior to approval for closing of a loan guarantee. The Department performs due diligence on all projects, including a thorough investigation and analysis of each project's financial, technical and legal strengths and weaknesses. In addition to the underwriting and due diligence process, each project is reviewed in consultation with independent consultants.

Secretary Chu initially set a target to have the first conditional commitments out by May - three months into his tenure - but today's announcement significantly outpaces that aggressive timeline. Secretary Chu credited the Department's loan team for their work accelerating the process to offer this conditional commitment in less than two months, demonstrating the power of teamwork and the speed at which the Department can operate when barriers to success are removed.

Solyndra filed for bankruptcy this week.

In retrospect, this press release is really a classic. Note the fawning references to President Obama: it's not just "the stimulus bill" or the "American Recovery and Reinvestment Act," but "the President's American Recovery and Reinvestment Act." Is it also the President's rushed $535 million loan guarantee to a now-bankrupt company? The line about "the power of teamwork and the speed at which the Department can operate when barriers to success are removed" is also a classic. I could get $535 million out the door pretty quickly, too, even without teamwork, if I had the federal government's taxing power to raise it and no constraint that the company receiving the money would remain in business two and a half years later.

This isn't an attack on Solyndra. Failure is part of capitalism, and the bankruptcy laws are there for a reason. Many of Solyndra's competitors are subsidized by governments as well. Maybe the company will yet make a success of itself. But for Secretary Chu to pat his team on the back for the speed of its due diligence and thorough investigation in approving a $535 million loan guarantee to a company that then went bankrupt is really something. Secretary Chu is a Nobel laureate in physics and even had some private sector experience at Bell Labs before going into academia. Anyway, it's easy to see some Republican presidential candidate or independent expenditure group turning this one into a television commercial for 2012. The next journalist who gets an interview with Secretary Chu might want to ask him whether, in retrospect, that "less than two months" approval demonstrates anything other than "the power of teamwork and the speed at which the Department can operate when barriers to success are removed."

Update: An astute reader-participant-watchdog-community member-content co-creator comments on a larger point: that the Solyndra loan guarantee may not be the only Obama administration action in which a Nobel laureate (remember, Mr. Obama himself won the Nobel Peace Prize), highly educated technocrats, and good intentions combine with self-confidence, self-righteousness, and self-congratulation to produce hasty actions that yield disappointing, even disastrous results. Dodd-Frank financial "reform"? ObamaCare?

by Editor  |  Sep 1, 2011 at 9:06 pm Related Topics:  Capital Markets Regulation, Energy, Health Care, Stimulus receive the latest by email: subscribe to the free futureofcapitalism.com mailing list