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That's right Mr. President, keep loaning the money, everything is going GREAT!  (Source: Getty Images)
President says high-risk loan was "felt like... a good bet"

(This article contains editorial commentary, which is the opinion of the author.)

President Barack Obama has endured scathing criticism in recent weeks for loaning $535M USD to failed solar startup Solyndra.  The loan came as part of a $40B USD "green" technology stimulus effort.  But on September 1, 2011 Solyndra filed Chapter 11 bankruptcy, leaving its 1,000+ employees looking for work and leaving the government staring at an un-recoupable loss.

I. Interview: Obama says "No" regrets on wasting $500M USD

In recent weeks Republicans have lashed out at President Obama for the lost money.  They argue it's indicative of the President's overall budget incompetence.  They've launched a probe into the loan and the Department of Energy's overall loan infrastructure.  States Rep. Michael Burgess (R-Texas), a member of the House Energy panel’s investigative subcommittee, "We need to hear from Secretary Chu and [White House Office of Management and Budget Director Jack] Lew to fill in some of the blanks.  The buck has to stop someplace, and presumably it stops with the heads of those agencies."

But the POTUS is holding his ground.  In an interview on ABC News' "Good Morning America", also broadcast online on Yahoo! News Monday, anchor George Stephanopoulos asked President Obama if he regretted the 2009 loan guarantees .  He replies, "No I don't.  Because if you look at the overall portfolio of loan guarantees that had been provided, overall it’s doing well. And what we always understood is that not every single business is going to succeed in clean energy."

President Obama's administration is accused of rushing the loan guarantee in order to allow it to be announced at the September 2009 groundbreaking of the company's new factory.  By February the loan was already under investigation.  Still, the President stood firmly behind Solyndra, visiting their California headquarters in early 2010 and touting them as a green energy "leader".

Some emails that have been released indicate some administration members had expressed concerns about the company's financial health -- concerns that were ultimately overruled.

Obama implied America has to get more China-like when it comes to loans, in order to compete with the Asian rival.  He states. "If we want to compete with China, which is pouring hundreds of billions of dollars in this space, if we want to compete with other countries that are heavily subsidizing industries of the future, we have got to make sure that our guys, here in the United States of America, at least have a shot."

II. Editorial: Business as Usual in Washington, D.C.

To be fair, as bad as the Solyndra loss looks, the previous Bush administration spent many times that essentially paying off the losses of the American International Group (AIG), which it built up from taking on risky investments pre-recession.  AIG received over $127B USD [source] and sent over $100B USD overseas to banks it owed money to.

Thus perhaps the Solyndra debacle is more of a testament to how things are run in Washington no matter which party is in charge, rather than a sign that President Obama is somehow exceptional or different, for better or worse.  Both parties talk about balancing the budget, but it's a matter of public record that in recent years both parties have overspent, committing to risky investments and troubled assets.

That's not to say what the Obama administration did here was right by conservative fiscal standards.  As the old saying goes, two wrongs don't make a right.  But if there's someone who offers an alternative to this kind of spending they're likely not in Washington, D.C. -- or at least likely not very popular there among either party.

These kinds of wastes are particularly sad, as they come at a time when proud American science projects are being shuttered due of lack of funds.  America recently closed the world's second largest particle accelerator, because the government claimed it couldn't find $100M USD out of the $3.4T USD budget to pay for the accelerator's annual operating costs.  The AIG funding could have paid for over 1,000 years of operation.  The Solyndra funds could have extended the life of the accelerator 5 years.

One thing's for sure when it comes to Solyndra, though -- President Obama isn't going to say sorry for what happened.

Source: ABC News



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RE: At least he's honest for once...
By phantom505 on 10/4/2011 8:49:34 AM , Rating: 2
That's what happens when you have public-private investment. You're going to lose sometimes. It's not really a big deal. My guess is that they have finance guys that calculated the risk and most of the risk is probably going to get soaked into the interest of the successful companies.

We do this with student loans all the time. No story here.


RE: At least he's honest for once...
By VahnTitrio on 10/4/2011 10:18:29 AM , Rating: 2
Correct. Private banks don't hit homeruns with every loan they issue. Although whether the risk is absorbed in interest remains to be seen. Wasn't that part of the housing market collapse, interest too low on high risk mortgages?


RE: At least he's honest for once...
By Iaiken on 10/4/2011 11:18:22 AM , Rating: 2
No, the problem with the mortgage crisis was the sheer volume of mortgages that had little equity and no insurance was greater than the reserves held in the banks.

The government absorbed the risk and propped up the banks long enough to allow them to undertake in the single largest transfer of real world assets into the hands of financial institutions ever. The money is mostly all still there, it's just tied up in physical assets for the time being.

That's the thing about banking, if the government is on your side, you can't lose. The government could have just as easily stopped the first domino from falling (Lehman Brothers), but deliberately chose not to as it was a powerful signal to the remaining banks that they had no choice but to co-operate.


By Master Kenobi (blog) on 10/4/2011 11:18:38 AM , Rating: 2
Interest was artificially low, when the rates started to rise nobody could pay them. But that is purely a case for poor loan criteria. It generally isn't a good idea to loan someone the money for a 400k dollar house when they only make a measley 35k. The general premise was a "get rich quick" scheme. If you bought the house and made just 1-2 payments and then proceeded to flip it (sell it to someone else for 10-15% more than you paid) then overall you could make a tidy profit. The problem is the people who did this for 2-3 years and go out while it was still good made out like bandits. All the idiots who jumped on that band wagon later on and kept at it like crack addicts still held homes they couldn't pay for when everything imploded. General rule of thumb, if "everyone is starting to do it" then the jig is up and it is time to run like hell in the opposite direction. I remember my co-workers getting their realtor licenses in droves just to speed the process up and cut out middlemen so they could flip more homes quicker. To my amusement they all got burned when shit hit the fan.


RE: At least he's honest for once...
By Reclaimer77 on 10/4/11, Rating: -1
RE: At least he's honest for once...
By phantom505 on 10/4/2011 2:25:12 PM , Rating: 2
If there is a failing of the US in modern times it is the fact we don't take risk and we don't let risky ventures fail. Why? Because "We the People" back the lion's share of every loan created through a bank via FDIC. If a bank fails who gets the tab? We do.

We set up systems to privatize profit, and publicize debt. That is one of the many dangers of getting rid of something like social security and turning it over to Wall St. Then Wall St won't be able to fail because everyone's retirements are tied to it.

What is asinine is that fact you look everything on a micro scale and fail to see the bigger picture then whine about it. Then you talk about how great something else would be that would lead to even bigger necessary bailouts. Let's just tell everyone that invests in anything that they'll certainly make money... like a real Ponzi scheme.


RE: At least he's honest for once...
By mkrech on 10/4/2011 4:43:15 PM , Rating: 4
$15,000,000,000,000
quote:
privatize profit, and publicize debt

The government is publicizing the debt. In this case, a little over $500,000,000 of debt. Then the government privatizes the profits, but only to those that are chosen by the political tyrants.

It is indeed a terrible system that MUST be stopped for our country to survive this tyranny.

Laissez Faire capitalism supported by a return to federalism will cure this system. But the longer we wait to take action the more difficult it will be to kick the bad habits.


By Ringold on 10/4/2011 1:44:27 PM , Rating: 2
quote:
My guess is that they have finance guys that calculated the risk and most of the risk is probably going to get soaked into the interest of the successful companies. We do this with student loans all the time. No story here.


Sorry, what?

You're right, they did have finance guys that calculated the risk, and they wanted more time for review, smelling a bad investment. They were ignored.

Student loans are also pretty much risk-free, as they're damn near impossible to ever get away from. They're the only loans I'm aware of, off hand, that one can't shake in bankruptcy. That puts them in a radically different category.

Pure denial to ignore all the failures, extending all the way to the top of the government, that occurred here. My only sympathies are for those 'finance guys' who were doing their job apparently and got rode hard and put up wet.


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