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The big story marring President Obama's jobs tour Wednesday is the $535 million loan his administration doled out to Solyndra, a solar panel company that has just gone belly-up, leaving taxpayers on the hook.
President Barack Obama visited the facility in May 2010, and said it was "leading the way toward a brighter and more prosperous future." But only a month later, the company laid off 100 employees and cancelled its plans for a public stock offering. Two weeks ago, it filed for Chapter 11 and fired 1,000 workers. FBI agents promptly raided the company's California offices.
So what exactly happened? And how big will the fallout be for Obama?
The accusation
Republicans on the House and Energy Commission are accusing the Obama administration of ignoring multiple warning signs that Solyndra was a bad bet. The Commission lays out its case against the administration's handling of the loan in a report released Wednesday, following a months-long investigation.
Under the Bush administration, the Department of Energy rejected Solyndra for a loan in early 2009, worrying that the company didn't have good long-term prospects. Yet only two months later, Obama's newly appointed Energy Secretary Steven Chu announced the government would give the company a $535 million loan, funded with money from the stimulus. Last year, government accountability investigators criticized the White House for scheduling a groundbreaking at a Solyndra plant before the Energy Department had even finished filing all its paperwork. "This deal is NOT ready for prime time," a White House budget analyst wrote only nine days before the agreement was announced.
At issue are two main things. One, emails obtained by the Center for Public Integrity show that White House officials asked the Department of Energy to make a decision on the Solyndra loan so that they would know whether they could schedule President Obama for a visit to the facility to publicize the loan. Republicans say this is evidence that the White House pressured the Energy Department, or used undue influence, to approve the loan before they knew whether it was a good bet. Republicans also mention that a big private backer of the deal, Oklahoma billionaire George Kaiser, also raised money for Obama's 2008 campaign.
The second accusation is that once the loan went through, the Obama administration ignored warning signs that the company was failing and then refinanced the loan in a way that left taxpayers twisting in the wind. A few days before the groundbreaking on the new Solyndra facility in September 2009, a Department of Energy official completed an analysis that concluded the company would run out of cash by September of 2011--a forecast that turned out to be right on the mark.
But it wasn't until last February that the government decided Solyndra was about to default, and refinanced the company's original loan with the help of $75 million from private investors. As part of the deal, the government agreed that if Solyndra ever went bankrupt, it would have to pay back the $75 million to investors first, ahead of disbursing any money back to the taxpayers.
Center for Public Integrity reporter Ronnie Greene told The Lookout that Republican members of the subcommittee suggested Wednesday that cutting such a deal was illegal, in violation of a provision of the Clean Air act.
Jeffrey Zients, deputy director of the Office of Management and Budget, defended the restructuring at the hearing Wednesday, arguing that it was less costly to taxpayers than liquidation or any other option would be.
The White House's defense
White House spokesman Jay Carney said Wednesday that the White House did not try to accelerate the approval process for the loan in any improper way. "What the emails make clear is there was urgency to make a decision on a scheduling matter. It is a big proposition to move the president or to put on an event and that sort of thing so people were simply looking for answers about whether or not people could move forward," Carney told reporters. "It had nothing to--and there is no evidence to the contrary--nothing to do with anything besides the need to get an answer to make a scheduling decision," he said.
Democrats on the panel, meanwhile, tried to deflect blame to the Solyndra executives themselves, arguing that company officials misled them about Solyndra's financial situation in July.
"I'm perplexed how they can be in my office in July telling me things are looking better and two months later filing for bankruptcy," Rep. Diana DeGette (D-Colo.), the top Democrat on the committee's oversight panel, said, according to The Hill.
The FBI won't say why it raided Solyndra's offices, and later searched executives' homes.
The top Energy Department and Office of Management and Budget officials at the panel said the Bush administration had also looked into giving the company money and that all such investments are risks. Zients, of the Office of Management and Budget, stressed that an independent credit rating agency and experts had examined the company before it was approved for the loan.
"Some of America's most sophisticated professional investors collectively invested nearly a billion dollars in the company after conducting extensive due diligence of their own," Jonathan Silver of the Energy Department testified.
Potential fallout?
The most obvious consequence of the Solyndra fiasco is that the government is going to lose some cash. According to the Washington Post, taxpayers will pick up the tab for the loan if Solyndra can't repay it. "The Energy Department could seek repayment in court, but receiving more than a nominal amount is unlikely because of the company's depleted cash and assets," the Post reports.
The legal implications of the case are less clear. Since the FBI won't disclose the reasons for raiding Solyndra's offices, the nature of the agency's investigation is unclear. Democratic lawmakers have suggested that the company misrepresented its financial situation to Congress.
Meanwhile, Republican lawmakers suggested that the February refinancing of the loan providing for private investors to be paid back before the government may be illegal. But that's far from certain, according to Greene.
In the short term, the controversy has spurred calls to roll back or regulate Obama's green jobs program. Sen. David Vitter (R-La.) floated legislation Wednesday to require all renewable energy companies that received a loan from the U.S. government in the past two years to undergo an audit, the Hill reported.
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President Barack Obama visited the facility in May 2010, and said it was "leading the way toward a brighter and more prosperous future." But only a month later, the company laid off 100 employees and cancelled its plans for a public stock offering. Two weeks ago, it filed for Chapter 11 and fired 1,000 workers. FBI agents promptly raided the company's California offices.
So what exactly happened? And how big will the fallout be for Obama?
The accusation
Republicans on the House and Energy Commission are accusing the Obama administration of ignoring multiple warning signs that Solyndra was a bad bet. The Commission lays out its case against the administration's handling of the loan in a report released Wednesday, following a months-long investigation.
Under the Bush administration, the Department of Energy rejected Solyndra for a loan in early 2009, worrying that the company didn't have good long-term prospects. Yet only two months later, Obama's newly appointed Energy Secretary Steven Chu announced the government would give the company a $535 million loan, funded with money from the stimulus. Last year, government accountability investigators criticized the White House for scheduling a groundbreaking at a Solyndra plant before the Energy Department had even finished filing all its paperwork. "This deal is NOT ready for prime time," a White House budget analyst wrote only nine days before the agreement was announced.
At issue are two main things. One, emails obtained by the Center for Public Integrity show that White House officials asked the Department of Energy to make a decision on the Solyndra loan so that they would know whether they could schedule President Obama for a visit to the facility to publicize the loan. Republicans say this is evidence that the White House pressured the Energy Department, or used undue influence, to approve the loan before they knew whether it was a good bet. Republicans also mention that a big private backer of the deal, Oklahoma billionaire George Kaiser, also raised money for Obama's 2008 campaign.
The second accusation is that once the loan went through, the Obama administration ignored warning signs that the company was failing and then refinanced the loan in a way that left taxpayers twisting in the wind. A few days before the groundbreaking on the new Solyndra facility in September 2009, a Department of Energy official completed an analysis that concluded the company would run out of cash by September of 2011--a forecast that turned out to be right on the mark.
But it wasn't until last February that the government decided Solyndra was about to default, and refinanced the company's original loan with the help of $75 million from private investors. As part of the deal, the government agreed that if Solyndra ever went bankrupt, it would have to pay back the $75 million to investors first, ahead of disbursing any money back to the taxpayers.
Center for Public Integrity reporter Ronnie Greene told The Lookout that Republican members of the subcommittee suggested Wednesday that cutting such a deal was illegal, in violation of a provision of the Clean Air act.
Jeffrey Zients, deputy director of the Office of Management and Budget, defended the restructuring at the hearing Wednesday, arguing that it was less costly to taxpayers than liquidation or any other option would be.
The White House's defense
White House spokesman Jay Carney said Wednesday that the White House did not try to accelerate the approval process for the loan in any improper way. "What the emails make clear is there was urgency to make a decision on a scheduling matter. It is a big proposition to move the president or to put on an event and that sort of thing so people were simply looking for answers about whether or not people could move forward," Carney told reporters. "It had nothing to--and there is no evidence to the contrary--nothing to do with anything besides the need to get an answer to make a scheduling decision," he said.
Democrats on the panel, meanwhile, tried to deflect blame to the Solyndra executives themselves, arguing that company officials misled them about Solyndra's financial situation in July.
"I'm perplexed how they can be in my office in July telling me things are looking better and two months later filing for bankruptcy," Rep. Diana DeGette (D-Colo.), the top Democrat on the committee's oversight panel, said, according to The Hill.
The FBI won't say why it raided Solyndra's offices, and later searched executives' homes.
The top Energy Department and Office of Management and Budget officials at the panel said the Bush administration had also looked into giving the company money and that all such investments are risks. Zients, of the Office of Management and Budget, stressed that an independent credit rating agency and experts had examined the company before it was approved for the loan.
"Some of America's most sophisticated professional investors collectively invested nearly a billion dollars in the company after conducting extensive due diligence of their own," Jonathan Silver of the Energy Department testified.
Potential fallout?
The most obvious consequence of the Solyndra fiasco is that the government is going to lose some cash. According to the Washington Post, taxpayers will pick up the tab for the loan if Solyndra can't repay it. "The Energy Department could seek repayment in court, but receiving more than a nominal amount is unlikely because of the company's depleted cash and assets," the Post reports.
The legal implications of the case are less clear. Since the FBI won't disclose the reasons for raiding Solyndra's offices, the nature of the agency's investigation is unclear. Democratic lawmakers have suggested that the company misrepresented its financial situation to Congress.
Meanwhile, Republican lawmakers suggested that the February refinancing of the loan providing for private investors to be paid back before the government may be illegal. But that's far from certain, according to Greene.
In the short term, the controversy has spurred calls to roll back or regulate Obama's green jobs program. Sen. David Vitter (R-La.) floated legislation Wednesday to require all renewable energy companies that received a loan from the U.S. government in the past two years to undergo an audit, the Hill reported.
...
.
Pagination.
.
Previous
Will Fed announce new stimulus push next week?
Downturn paradox: Minorities hit harder, but more satisfied
Next
.
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