One of the things that lots of wonks--including me--have commented on is how scandal-free the Obama Administration has been so far. To be sure, I'm not sure whether that's because they're "unusually clean", as I recently heard someone say, or because scandals take a little time to brew, so they tend to break later in an administration.
We may be about to find out. As many of you no doubt know, a few days ago, clean energy firm Solyndra filed for bankruptcy. Why would this be a problem for the administration? Because in September 2009, they got a low-interest $500 million loan
from the government to develop their solar panels:
The $535 million loan to Solyndra Inc., issued by the U.S. Department of Treasury's Federal Financing Bank, included a quarterly interest rate of 1.025 percent, the government bank reported in July. Of 18 Energy Department loans cited in the bank's report, Solyndra's rate was lowest. Eight other Energy Department projects, each also backed by the Federal Financing Bank, came with rates three or four times higher, the report shows.
That treatment is in keeping with the history of the loan to the California solar panel maker, an arrangement inked in September 2009 with great fanfare -- and touted, not long after, during a factory visit from the president. Monthly government bank reports filed since then reveal Solyndra's rate as the lowest for any energy-related project in nearly every report; in every case its rate was well below that of most energy projects, which ranged from cutting-edge electric car makers to wind and solar ventures.
At best this looks amazingly incompetent--$535 million may not be a lot of money for the government, but it's a lot of money for a company. Yet it took only two years for the firm to run through all that cash.
It turns out that Solyndra has never made a profit
since its founding, and by early 2010, its auditor
was making unhappy noises about the company's viability. That was the year that Obama himself visited Solyndra and said
"You're demonstrating that the promise of clean energy isn't just an article of faith. . . . It's happening right now. The future is here." I expect that that clip is going to get rehearsed a lot as his opponents question his judgement.
At worst, it looks . . . worse. One of the firm's biggest investors was George Kaiser,
a major "bundler" for Obama who raised tons of money for the 2008 campaign.
All that was bad enough. Then today, the FBI staged a raid
on Solyndra's offices, in partnership with the Department of Energy's inspector general. This may simply be an attempt to answer the question we'd all like to know--how the hell did they manage to piss away all that money in just two short years? On the other hand, it also raises the possibility of criminal fraud.
Either way, what are the possibilities? The DOE was incompetent enough to give a sweetheart loan to a highly speculative firm that was probably already on the financial rocks when we inked the deal . . . or someone put their thumb on the scales. As bad as it looks, I find the latter hard to believe, because a lot of civil servants would have had to know about it, and would this really have stayed secret?
The innocent explanation is better, but it's not good: it calls the administration's competency into question at a time when they're already struggling with terrible job approval numbers, and it tarnishes one of Obama's marquee initiatives.
That's the problem with these sorts of loan programs: even if they aren't vulnerable to old fashioned corruption, they're vulnerable to the appearance of it (rich people like to donate to campaigns, and there are only two major parties, after all; chances are close to50-50 that the squeakiest loan is going to benefit a contributor.)
Moreover, they're also still vulnerable to political influence. Venture capitalists, at least in theory, lend money to firms like Solyndra because they think that doing so will make them more money. Government programs lend money to firms like Solyndra because they want to lend money to "green" firms. They don't lend until the returns drop below some threshold; they lend until they run out of the money that Congress has authorized them to lend.
When banks engage in this sort of behavior, we call it a bubble, and try to figure out how to fix things so they won't do it again. When government agencies do this, we call it a weekday.
Even if the loan turns out to have been made according to all proper procedures, the Obama administration will still confront the charge that these procedures are an idiotic waste of money.
I don't know that this is going to be the administration's first real scandal. But it sure looks like a good candidate.
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is a columnist at Bloomberg View
and a former senior editor at The Atlantic.
Her new book is The Up Side of Down