Obama Advisors Raised Warning Flags Before Solyndra Bankruptcy

Cartoon by Jeff Parker

Today in Washington, D.C. - Sept. 27, 2011:
The Senate is in recess for the Jewish holidays and will reconvene for legislative business on Monday, Oct. 3rd, when it will take up the motion to proceed to S. 1619, legislation dealing with China’s currency practices. The Senate will also consider a circuit court nominee and 5 district court nominees.

The Senate will hold a pro-forma session on Thursday at 1:45 PM to keep President Obama from making any recess appointments.

Last night, the Senate resolved the week long fight over FEMA funding that Democrats initiated after they were forced to back down from their demand for extra unpaid-for disaster spending, which would have added to the deficit. Democrats failed to get the 60 votes needed for cloture on an amendment to the House-passed continuing resolution (CR), H.R. 2608, offered by Majority Leader Harry Reid (D-NV), which would have removed offsets to pay for extra disaster funding. Instead, the Senate voted 79-12 for a clean CR without extra disaster funding after FEMA announced it had enough money until Fiscal Year 2012 begins on Saturday, when previously-agreed to FY2012 money will be available for FEMA.  The Senate then passed H.R. 2017, a bill funding the government into next week, by unanimous consent.

The House is on recess this week.  The House is expected to endorse that Senate with a voice vote Thursday on a one-week stopgap measure. Then there will be a recorded vote next week to keep the government running through Nov. 18. This second vote will allow conservatives to register their opposition to the spending rates in the stopgap measure.

Today Rep. Jim Jordan, Chairman, House Republican Study Committee shared: "The spending package passed by the Senate last night reveals the startling priorities of Congressional Democrats. As passed by the House last week, the bill contained $3.65 billion to provide relief to the victims of tornados, hurricanes, earthquakes, and other disasters. After going through the Senate, that figure is now $1 billion less.

Why? Because the House tried to do right by taxpayers by “offsetting” the cost of that $1 billion with cuts to subsidies for carmakers and companies like Solyndra. Senator Harry Reid and his colleagues chose to protect these subsidies instead of providing more help to families struggling in the wake of disasters.

The rest of the bill continues federal spending through November 18 at a rate that’s just $7 billion below current levels. For some perspective, imagine the annual federal budget as a family who spends $3,600 a month, $1,300 of which is borrowed. In this scenario, the spending bill cuts $7.00 next month. That’s it. While this bill is almost certain to pass the House next Tuesday even without my support, there’s clearly still a lot of work left to do – and that makes a Balanced Budget Amendment even more important."

The Los Angeles Times reported yesterday, “Long before the politically connected California solar firm Solyndra went bankrupt, President Obama was warned by his top economic advisors about the financial and political risks of the Energy Department loan guarantee program that boosted the company's rapid ascent. At a White House meeting in late October, Lawrence H. Summers, then director of the National Economic Council, and Timothy F. Geithner, the Treasury secretary, expressed concerns that the selection process for federal loan guarantees wasn't rigorous enough and raised the risk that funds could be going to the wrong companies, including ones that didn't need the help. . . . Skeptics, noting that taxpayers could now be on the hook for $527 million the federal government loaned Solyndra, said the administration would have been better off making greater use of market incentives, not individual company loan guarantees. ‘It was completely predictable that there would be a colossal failure among the bets,’ said one person familiar with the internal debate.”

Meanwhile, The Washington Post writes today, “The Obama administration’s vaunted initiative to catalyze the U.S. clean-energy industry — under attack for betting half a billion dollars on the solar-panel manufacturer Solyndra, which closed last month — has become a case study of what can go wrong when a rigid government bureaucracy tries to play venture capitalist and jump-start a nascent, fast-changing market. . . . While [Energy Secretary Steven] Chu was striving to get things moving, top White House economic officials, including Lawrence H. Summers, then director of the National Economic Council, doubted the government’s ability to shape a new industry, and some wanted to tighten up oversight by the Office of Management and Budget — even if that meant some guarantees would never be given out. Meanwhile, tumbling prices for silicon and turmoil in the financial world were changing project assumptions faster than the bureaucracy could make decisions. ‘The Department of Energy supports a process that would limit OMB and Treasury review,’ said an Oct. 25, 2010, memo to the president.”

The Post notes that after the stimulus bill pumped billions into the loan guarantee program used by Solyndra, “‘It was a manna from heaven. Too good to be true,’ said Michael Butler, chief executive of Cascadia Capital, an investment bank that has arranged financing for more than 20 clean-technology ventures. ‘Every proposal we saw planned on getting a government loan.’”

In sum, the latest reporting on Solyndra shows that the president “was warned by his top economic advisors about the financial and political risks” of the Solyndra loan program, yet the White House and the Energy Department were pushing to speed up these risky projects backed by taxpayer money.

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