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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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By MrBlastman on 10/4/2011 12:23:11 PM , Rating: 2
Doubt it you might but it happens all the time.

You see, Solyndra never had to make any money for their initial liberal investors (so the theory holds) to make out with profits. Instead, what happens often is a business starts up and they look for seed money.

This money often comes from people that like the cause the business is behind or are promised to make out from their investment. Oftentimes, the individuals running the company aren't exactly ethical in their handling of the books and manytimes do not value the company properly, thus, their private stock price.

So what happens is those running the show keep telling everyone things are going great. They especially tell their seed money providers this lie. They then reach out for additional loans and investors--in this case, the United States Government and in return, to keep their private shareholders happy, pay out part of this invested money to these initial holders through redemptions--yes, they let them redeem their shares (some of them are probably getting tired of not receiving a dividend check) at a higher price than they paid them for.

But wait, how is this possible? It is possible due to the shady accounting practices. See, publicly traded stock is regulated by the SEC who routinely requires filings to be made disclosing certain bits of information. The SEC can randomly audit any of these businesses at any times to see whether they are true or not. Private businesses do not have this requirement at all. They can essentially value their shares for whatever they like and those investing in the company, have to accept it as word.

Of course, a private investor can ask to see the books--but, the books are only as truthful as those who prepare them. Oftentimes these businesses will keep two sets of books. The "real" books that they show investors and then the REAL books that only those internally can see (which really show the poor health of the company). These "real" (fake) books show growth or other appealing things that would make people want to invest in the firm and also justify an appreciating share price. Sometimes they'll even show a profit, othertimes not.

So through additional equity being invested (or loaned) in the company, they then capitalize these redemptions to the initial holders to keep them happy--and thus they pass the word on to others that the company made them money, thus perpetuating the whole scheme for a time. Eventually these things fold, just ask Charles Ponzi all about it... or Worldcom's ex leaders... or Enron's...

*PS: Just because the SEC regulates public entities doesn't mean they are completely truthful either. As we've seen in the last few years, the SEC has been asleep at the wheel and let a lot of things slip by.*

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