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The Obama administration defended a loan of over $500 million to a Silicon Valley-based solar panel company that recently went bankrupt despite warnings

The Obama administration defended a loan of over $500 million to a Silicon Valley-based solar panel company that recently went bankrupt despite warnings, saying that the economy was to blame and that alternative energy investments must carry on regardless. 

According to MSNBC, the government loaned solar panel company Solyndra $535 million in 2009. The move was set to stimulate economic growth through environmentally friendly jobs. But Solyndra recently declared bankruptcy, laying off 1,100 workers. 

Last week, the Federal Bureau of Investigation (FBI) raided Solyndra's headquarters to investigate whether the government was given the wrong idea when it handed over the hefty loan. Emails from government employees were found, and are raising questions about the Obama administration's actions back when Solyndra was given the loan. 

According to The Washington Post, the emails contained warnings from government employees about the viability of Solyndra. Only days before the final approval, an email predicted that the project would run out of money in September 2011 -- which is exactly what happened. 

Another email from government staffers questioned the model the government was using, but said "given the time pressure we are under to sign off on Solyndra, we don't have time to change the model."

Reports state that the White House pushed the loan ahead despite warnings in order to meet political deadlines. That way, Vice President Joe Biden could announce the final approval at the groundbreaking for the new plant two years ago. 

The U.S. Department of Energy's loan office and the White House budget office is defending their decisions, saying that the Solyndra loan was well in place during the final years of President George W. Bush's administration. 

“In fact, by the time the Obama administration took office in late January 2009, the loan programs staff had already established a goal of, and timeline for, issuing the company a conditional loan guarantee commitment in March 2009,” said Jonathan Silver, executive director of energy loan programs.

Much of the Wednesday hearing consisted of "assigning political blame," where Representative Cliff Stearns (R-FL) who is the chairman of the Energy and Commerce subcommittee on oversight and investigations, criticized the Democratic minority for voting against the subpoena documents in regards to the deal. 

“It should not take a financial restructuring, bankruptcy and an F.B.I. raid for my colleagues on the other side of the aisle to put politics aside and join us in our efforts,” said Stearns.

Representative Diana DeGette (D-CO) responded by saying that solar energy is not an issue of Democratic or Republican, but rather the security of American energy innovation in the future. 

Democrats didn't defend Solyndra, but did defend the government's ability to push the solar industry in order to compete with China, which is encouraging solar energy on a large scale. 

Representative Joe Barton (R-TX) added that the U.S. Department of Energy is expected to award billions of dollars more in loan guarantees by the end of this month alone, and questioned its ability to choose those who will receive the loans. 

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RE: Investment?
By autoboy on 9/14/2011 5:50:48 PM , Rating: 6
The government was acting like a Venture Capitalist in this case. This company took 1.5 Billion in investment total, and scammed a lot of private venture capitalists as well. You won't hear about those VCs because that's how the economy is supposed to work. VCs are designed to make risky investments as they expect at least a 10X return on their investment. VC's mostly risk the money of wealthy individuals who can afford to lose money on risky investments. Tax rich people more of their money, and they have less to invest in risky deals like solar companies, or Google, or YouTube. Tax them more, ruin the economy, and then the government has to pick up the slack because nobody wants to risk what they have left.

All actions have an equal and opposite reaction. Class warfare causes the wealthy to hold onto their cash for fear of losing it. This causes a downturn in the economy because companies can't get the capital they need to operate, and then the government decides it needs a stimulus to make up for the lack of investment capital so they tax and spend and cause more people to save their money. We've entered a nasty downward spiral. The only thing that will fix it is to loosen their hold on their capital. You can do that by confiscating it or you can loosen their wallets by creating a favorable investment economy. Confiscating it is a one time thing. Eventually you run out of other people's money.

All VC deals are risky so I am not surprised that a lot of people warned them it could be a bad deal. That's the nature of a risky investment. Their credit rating was a B+ which is pretty bad (not even investment grade) but it's pretty normal for a startup to have a bad credit rating. But, in this case it was the government who was doing the investing with your tax $s. I don't think all the hype the right makes about people warning it was a bad investment is warranted. As a VC deal, it was probably normal, as a lot of other VCs were also giving them money.

People on this board have mentioned GM. Those companies at least were less risky than this deal, and a lot more jobs were at stake than 1000. But, people have completely ignored the times the government actually makes $ on their VC deals. You've all heard about Tesla Motors. They also got $500 million and have been successful enough to go public on the stock exchange. I don't know how much the government made on that deal, but not all deals are like this solar deal. Some do succeed. But, IMO the government should never be in the VC business in the first place. It's a complete mess.

RE: Investment?
By Paj on 9/15/2011 7:54:19 AM , Rating: 2
Very well written analysis, and I agree with you.

RE: Investment?
By torpor on 9/15/2011 10:13:13 AM , Rating: 2
+6 needed here. Good concise explanation of where policy is going wrong right now.

"We don't know how to make a $500 computer that's not a piece of junk." -- Apple CEO Steve Jobs

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