Free Markets, Free People

failed

Solyndra – Administration warned it would fail in September, 2011. And, it did

In the old “what did they know and when did they know it” game concerning Solyndra, the failed solar company backed by half a billion dollars of federally guaranteed loans, it appears the administration was warned repeatedly that it would fail.

Even after Obama took office on Jan. 20, 2009, analysts in the Energy Department and in the Office of Management and Budget were repeatedly questioning the wisdom of the loan. In one exchange, an Energy official wrote of "a major outstanding issue" — namely, that Solyndra’s numbers showed it would run out of cash in September 2011.

There was also concern about the high-risk nature of the project. Internally, the Office of Management and Budget wrote that "the risk rating for the project sponsor [Solyndra] … seems high." Outside analysts had warned for months that the company might not be a sound investment.

And the reason?

Fairly simple, really:

"It’s very difficult to perceive a company with a model that says, well, I can build something for six dollars and sell it for three dollars," Lynch said. "Those numbers don’t generally work. You don’t want to lose three dollars for every unit you make."

But apparently not enough to warn off what was something that the administration badly wanted to back – “green” jobs.  The problem of course is they weren’t viable green jobs.   The company failed Econ 101 analysis, yet that didn’t stop our central planners from pushing ahead with the loan guarantees.

And all the info to determine this wasn’t a good risk was there:

In 2008, Solyndra, then just three years old, pushed ahead with its application for government backing to build a new plant to produce its unique solar panels. An outside rating agency, Fitch, gave Solyndra a B+ credit rating that August. Two months earlier, in June 2008, Dun & Bradstreet issued a credit appraisal of the company. Its assessment: "Fair."

Those are not top-of-the-line scores, Fitch Ratings spokeswoman Cindy Stoller told the Center for Public Integrity’s iWatch News, which has been investigating the deal in partnership with ABC News since March. She could not discuss the Solyndra review specifically, but said of a B+ rating: "It’s a non-investment grade rating." She provided a company ratings definition, showing that B+ falls between a "highly speculative" B and "speculative" BB.

Anyone with a 5th grade education would know enough to go “not where we should sink our money”.  But sink it they did.

What do we get back from the administration when questioned about all of this?

Asked about those ratings, and how significantly the department viewed the risk, Energy officials said Monday the department conducted "extensive due diligence" on the application, which included consideration of the Fitch rating.

"We believed the rating, which is used to inform our analysis of potential risks associated with the loan, was appropriate for the size, scale and innovative nature of the project and was consistent with the ratings of other innovative start-up companies," said Damien LaVera, an Energy Department spokesman.

"The Department conducted exhaustive reviews of Solyndra’s technology and business model prior to approving their loan guarantee application," LaVera said. "Sophisticated, professional private investors, who put more than $1 billion of their own money behind Solyndra, came to the same conclusion as the Department: that Solyndra was an extremely promising company with innovative technology and a very good investment."

Well, if that’s the case, then the analysts at the DoE are utterly incompetent.  My guess is they came up with the analysis their bosses wanted, not that which actually told the truth about the situation.

Again, instead of letting the market do its job, the administration continued to ignore the warning signs and intrude, backing a company that was bound to fail and in the end, throwing a half billion taxpayer dollars down the drain.

And there’s this:

The White House has argued that any effort to finance start-up businesses in a relatively new field like solar energy is bound to include risky ventures that could fail. They reject the notion being pushed by Republicans that Solyndra was chosen for political reasons. One of the largest private investors in the deal, Oklahoma billionaire George Kaiser, was also a prominent fundraiser for Obama’s 2008 presidential campaign.

And, Solyndra’s CEO was a large contributor as well.

However, the big concern?

"This deal is NOT ready for prime time," one White House budget analyst wrote in a March 10, 2009 email, nine days before the administration formally announced the loan.

"If you guys think this is a bad idea, I need to unwind the W[est] W[ing] QUICKLY," wrote Ronald A. Klain, who was chief of staff to Vice President Joe Biden, in another email sent March 7, 2009. The "West Wing" is the portion of the White House complex that holds the offices of the president and his top staffers.

Yup, protect the White House.  And they didn’t even have the wits to back out when they could have, instead doubling down in the face of horrific numbers.  Sound familiar?

You’re in good hands, folks — can’t you just feel it?

~McQ

Twitter: @McQandO