• The Heritage Network
    • Resize:
    • A
    • A
    • A
  • Donate
  • White House Officials: DOE Concerned With 'Optics' in Solyndra Loan

    When the Energy Department set out to restructure the federal loan for now-bankrupt solar company Solyndra, White House budget staffers insisted that allowing the company to go bankrupt and liquidating its assets would provide greater returns for the taxpayer than the deal DOE had struck with the company’s private investors.

    That deal gave two venture capital firms priority in the repayment of their loans in the event of a Solyndra bankruptcy – which occurred about six months later. As a result, taxpayers will only see about $24 million of their $527 million “investment” returned – less than a third of what private investors, including the venture capital firm owned by Obama bundler George Kaiser, will recoup.

    It didn’t have to be this way, according to emails from the White House Office of Management and Budget to be released as part of a congressional report. While a taxpayer loss in the wake of a Solyndra bankruptcy was inevitable, OMB estimated that restructuring the loan in the way DOE did would cost taxpayers $385 million. Liquidation, according to OMB, would produce taxpayer losses of “only” $141 million.

    But even OMB acknowledged that DOE had a political stake in preventing a Solyndra bankruptcy, even if it meant greater returns for taxpayers. “DOE is likely to be very sensitive about optics if it should default,” one budget office staffer wrote in an email.

    Rather than accept the advice of the White House’s budget team, DOE did what it had not done for any other company financed under the Department’s 1705 loan guarantee authority: it subordinated taxpayers to private investors in the repayment of Solyndra’s refinanced loan.

    The Washington Post has details on the email exchanges between OMB and DOE staffers:

    [OMB analyst Kelly] Colyar said in e-mails that the Energy Department appeared to be giving away its “upper hand” in financing negotiations with private investors, creating additional risk. At the time, Solyndra had failed to meet the terms of its loan and was on the edge of bankruptcy because disbursements from the loan had been frozen.

    Colyar said in one e-mail that she was “vastly confused by DOE’s decision to negotiate away their senior position in this transaction.” She also questioned whether the Energy Department underestimated how much taxpayers could recoup if the company were shut immediately and its California factory sold. The proceeds of an immediate sale would be “significantly HIGHER than DOE’s estimate,” she wrote in a January 2011 e-mail, meaning that the government “is better off liquidating the assets today than restructuring under DOE’s proposal.”

    As Scribe explained in the Washington Examiner last year, the chief counsel for DOE’ Loan Program’s Office held that legal prohibitions against taxpayer subordination only applied to the initial loan guarantee, and not to subsequent restructuring agreements. Because private investors would never consider sinking more money into Solyndra, Richardson explained, a refinancing agreement demanded that taxpayers be subordinated.

    This new legal interpretation of the Energy Policy Act will likely lead to greater financial losses for taxpayers is applied to other federal loans, since taxpayers will be subordinated to private investors only for those loans that are too risky to attract standard private investment.

    Posted in Scribe [slideshow_deploy]

    2 Responses to White House Officials: DOE Concerned With 'Optics' in Solyndra Loan

    1. propertymesh says:

      PropertyMesh – The reality network

      PropertyMesh provides a platform where various property agents and customers interact with each others.
      India's fastest growing online real estate service provider,established in early 2012.
      in a such short span of time By its working techniques and marketing strategies now PropertyMesh is one of the largest online real estate service provider in India.

      PropertyMesh emerges at a time when there are lots of other big brands are already present in the market with hundreds of other small competitors in market.But by their hard work, customer's satisfaction strategy bring them with the other successful competitors served from last multiple years.Now it becomes a challenge for others to stop the rapid growth of PropertyMesh. still propertymesh is running various promotional campaigns to attract more and more investors who want to invest in real estate sector for good returns.

    2. Donald says:

      Solyndra failed becuase it was a fundementally flawed concept. The idea of minimizing the use of you solar material versus maximizing it (like concentrated solar) doesn't make a lot of sense. I am only surprised that it took this long. I knew this would happen years ago (http://gigaom.com/cleantech/solyndras-estimated-market-cap-up-to-2b-report/). This is one of the two worst ideas in solar (and I have seen a lot). The cost will be driven down by using the materials more effectively like concentrated photovoltaic (CPV). I especially like the Rainbow Concentrator by Sol Solution (www.Sol-Solution.net).

    Comments are subject to approval and moderation. We remind everyone that The Heritage Foundation promotes a civil society where ideas and debate flourish. Please be respectful of each other and the subjects of any criticism. While we may not always agree on policy, we should all agree that being appropriately informed is everyone's intention visiting this site. Profanity, lewdness, personal attacks, and other forms of incivility will not be tolerated. Please keep your thoughts brief and avoid ALL CAPS. While we respect your first amendment rights, we are obligated to our readers to maintain these standards. Thanks for joining the conversation.

    Big Government Is NOT the Answer

    Your tax dollars are being spent on programs that we really don't need.

    I Agree I Disagree ×

    Get Heritage In Your Inbox — FREE!

    Heritage Foundation e-mails keep you updated on the ongoing policy battles in Washington and around the country.

    ×