Solyndra founder Chris Gronet talks to Obama during his tour of the company, May 26, 2011 (Getty Images)
“Crony capitalism” is a term that’s often been used to characterize the rampant corruption of post-Soviet Russia. The term refers to a capitalist economy in which success in business depends on close relationships between business people and government officials. The cronyism is displayed via government’s favoritism in the distribution of legal permits, special tax breaks, and special grants and loans.
Crony capitalism is exactly what the Obama administration has devolved into.
Obama and VP Joe Biden both insisted on spending HALF A BILLION in taxpayer dollars as a loan to Solyndra — a politically-connected “green energy” upstart company — despite government analysts’ doubts and concerns about the company’s financial viability. And, sure enough, just as analysts had predicted almost to the day, Solyndra is now bankrupt — and we taxpayers can kiss that $535 million loan bye-bye.
Matthew Mosk, Brian Ross, and Ronnie Greene report for ABC News, September 13, 2011, that Solyndra’s solar panel factory was heralded as a centerpiece of Obama’s green energy plan — billed as a way to jump start a promising new industry.
Internal emails uncovered by investigators for the House Energy and Commerce Committee that were shared exclusively with ABC News show the Obama administration was keenly monitoring the progress of the loan, even as analysts were voicing serious concerns about the risk involved. “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.
Solyndra was the Obama administration’s first loan guarantee recipient. Federal auditors had flagged the loan, saying some applicants had benefitted from special treatment. One of the largest private investors in the deal, Oklahoma billionaire George Kaiser, was also a prominent fundraiser for Obama’s 2008 presidential campaign.
The emails were uncovered by investigators for the House Energy and Commerce Committee, which held hearings on the Solyndra loan yesterday, Sept. 14. The Republican-led House has been investigating the Obama administration’s green energy loan program for months. That probe took on new urgency two weeks ago, when Solyndra abruptly shut its doors and laid off 1,100 employees. Last week, the FBI raided the factory as part of a joint investigation with the Energy Department’s inspector general.
Obama’s DOE has said it backed Solyndra as a potential game changer in the clean tech movement, but the company’s collapse came after clear warning signs the venture was a high risk from the start.
The White House insinuated to ABC News that the Bush administration was the first to consider Solyndra’s application and that some executives at the company have a history of donating to Republicans. But the results of the Congressional probe shared Tuesday with ABC News show that less than two weeks before President Bush left office, on January 9, 2009, the Energy Department’s credit committee made a unanimous decision not to offer a loan commitment to Solyndra.
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.
Peter Lynch, a New York-based solar energy analyst, told ABC News it took only a cursory glance through Solyndra’s prospectus to see there was a problem with their numbers. “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.”
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.
Read the full ABC News article here.