“Secretary Chu is a wonderful and brilliant man, but he is not perfect for the other critical DOE mission: deploying existing technologies at scale and creating jobs,” Dan Carol said in a confidential memo to then-White House Chief of Staff Peter Rous in March. “Someone else should do that and lead a new team. Someone who is comfortable meeting with bankers (Chu is not) and who gets deployment from the bottom up, in the messy last mile of political life outside of the lab and university setting,” Carol wrote.
Carol was Content and Issues Director for President Obama in the 2008 presidential campaign and remains close to the chief executive. That’s why Rous circulated Carol’s memo to 18 White House colleagues seeking comment.
That March warning seems particularly prescient as Secretary of Energy Steven Chu appears today to explain to the House Energy and Commerce Committee his decision to approve a $535 million federal loan guarantee to the now- bankrupt Solyndra solar panel manufacturing firm.
Chu’s appearance today is the first opportunity for Congress to hold him accountable for his management of the Department of Energy’s Loan Guarantee Program
First created by the Energy Policy Act of 2005, the Loan Guarantee Program got no actual funding until 2007 and no loans had been approved by the time President Obama was sworn into office in 2009.
But after Obama’s massive economic stimulus pumped $35 billion into the program (the DOE’s entire budget is normally about $27 billion) Chu issued a 2009 directive ordering the Loan Program office to accelerate its approval process and deliver the first batch of loans fast.
Solyndra was always Chu’s favorite project. At the September 4, 2009, groundbreaking for Solyndra’s now-closed factory, Chu said, “Building a smarter solar panel is exactly what Solyndra has done. Compared to traditional solar panels, Solyndra’s innovative thin-film systems produce more energy for less money and less hassle.”
This, of course, turned out to be 100 percent false. Solyndra filed for bankruptcy a year later. Chu has since laughed off his waste of taxpayer dollars, joking at an energy conference, “As we look at what happened in Solyndra, hindsight is often said to be 20/20. In this case I think some of the hindsight was 20/10 or even better, clairvoyant.”
But emails obtained by Congress show that career employees at the DOE knew Solyndra was a dud all along. The company’s own financial model showed it would run out of cash in September 2011. That is exactly what happened.
But not before Chu managed to maximize taxpayer losses on the project. By October 2010, Solyndra was burning through cash at such a rapid rate that company officials told the DOE they would run out of cash by November unless the government loan was restructured.
Solyndra needed private sector financing to keep from going bankrupt in 2010, but the terms of the government loan put taxpayers first in line to recover money if the firm went under. Private investors refused to give Solyndra more money unless their interests were placed above the taxpayers.
At first, the DOE correctly said that the original 2005 law authorizing the program forbade the government from placing private investor interests over taxpayers.
But after Solyndra threatened to announce layoffs before the 2010 elections, the DOE suddenly changed its tune. In December 2010, Chu approved subordination of taxpayer interests to private investors and Solyndra was able to obtain enough financing to keep them afloat temporarily.
At that same 2009 groundbreaking, Chu congratulated Solyndra for “what will be a shared success story.” Except Solyndra’s success would not have been shared. If there had been profits, they all would have gone to Solyndra’s private investors, one of whom happens to have been a major Obama fundraiser.
But thanks to Chu, the firms losses are now all felt by the taxpayer. Private profits on the way up, taxpayer losses on the way down.
There is a term for this: venture socialism. And Congress is right to make Chu defend it.
Conn Carroll is a senior editorial writer for The Washington Examiner. He can be reached at [email protected].
