Gambling is a risky proposition - but not when playing with loaded dice. That's what Solyndra's private investors were handed when the Energy Department guaranteed they'd have first dibs on compensation if the firm went belly up. This unfairly shifted the peril of investing in an uneconomical solar-panel scheme onto the backs of taxpayers. We're the ones stuck with the $535 million bill.
Congress is examining how this sweetheart deal went through. When Solyndra's bottom line started looking dodgy earlier this year, Energy restructured the loan so private investors, including Oklahoma billionaire and Obama fundraiser George Kaiser, would be first in line to get their money when it defaulted, which occurred when the company declared bankruptcy on Aug. 31.
On Friday, the House Energy and Commerce Committee's oversight and investigations panel released documents in which Treasury Department officials expressed the belief that by giving priority to private investors, the department had run afoul of a 2005 law, the Energy Policy Act. According to Energy Department regulations, government loans "shall be subject to the condition that the obligation is not subordinate to other financing." However, Susan Richardson, chief counsel for the department's loan program, drew a distinction in a Feb. 15 memo between issuing the Solyndra loan and restructuring it. Since the company's loan was "restructured," she argued, the ban on subordination didn't apply, allowing private investors to jump to the head of the line.
Officials at the Office of Management and Budget cast doubt on this overly convenient interpretation of the difference between a new loan and a restructured loan. "There are some questions at the staff level about how DOE is going about the restructuring for Solyndra. ... I think they have stretched this definition beyond its limits," said one redacted email from Dec. 15, 2010, in which the writer's name had been blacked out. The subcommittee's chairman, Rep. Cliff Stearns, Florida Republican, opined in September that he believed the favoritism amounted to an "illegal act."
The clear intent of the law is to place the interests of the public taxpayer first. Yet, the department used word games to turn the rule on its head so that it could prop up a manufacturer of the favorite fashion accessory for the industrial left: solar panels. Instead of taking the rapidly unfolding scandal seriously, Energy officials rammed through an additional $4.7 billion in last-minute loans to four additional solar projects on Sept. 30, the last day of the loan program. "If we want to be a player in the global clean-energy race, we must continue to invest in innovative technologies that enable commercial-scale deployment of clean, renewable power like solar," wrote Energy Secretary Steven Chu in a statement accompanying the announcement. In other words, after losing our shirt on one scam, we're doubling down on four more.
That's the sort of Washington behavior that has left 87 percent of Americans dissatisfied with the country's direction, according to a recent Gallup poll. The energy secretary's stiff-necked refusal to acknowledge fault prompted Mr. Stearns to seek Mr. Chu's appearance before the subcommittee to tell what he knows about the Solyndra deal. If President Obama and his cronies want to gamble, they ought to do it with their own money.
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