JEFFREY BROWN: And we turn to another looming problem for the Obama administration: Did the White House inappropriately push along financial help for a now-bankrupt solar panel manufacturer?
A congressional hearing today focused on the administration’s very public embrace of that company.
Ray Suarez has the story.
RAY SUAREZ: It began in September 2009 with Vice President Joe Biden on a video link announcing a federal stimulus loan for Solyndra. Nine months later, in May 2010, President Obama toured the solar panel company in Fremont, Calif. It was part of his push to use the stimulus for creating green technology jobs.
PRESIDENT BARACK OBAMA: Less than a year ago, we were standing on what was an empty lot. But through the Recovery Act, this company received a loan to expand its operations. This new factory is the result of those loans.
When it’s completed in a few months, Solyndra expects to hire 1,000 workers to manufacture solar panels and sell them across America and around the world.
RAY SUAREZ: All told, Solyndra received $527 million in federal aid, one of many companies to receive stimulus money in the form of loan guarantees.
But foreign competition proved too much, and Solyndra filed for bankruptcy in August, closing its doors and laying off more than 1,000 employees. Even before then, as far back as six months ago, House Republicans had charged the loan was ill-conceived, and they began investigating.
The issue went before an Energy and Commerce subcommittee.
Republican Fred Upton of Michigan chairs the full committee.
REP. FRED UPTON, R-Mich.: In this time of record debt, I question whether the government is qualified to act as a venture capitalist, picking winners and losers in speculative ventures and shelling out billions of taxpayer dollars to keep them afloat.
RAY SUAREZ: A top official at the Energy Department, Jonathan Silver, said the green tech loan program is about more than just Solyndra.
JONATHAN SILVER, Loans Programs Office, Department of Energy: This isn’t picking winners and losers; it’s helping ensure that we have winners here at all. We invented this technology and we should produce it here. The question is whether we are willing to take on this challenge or whether we will simply cede leadership in this vital sector to other nations and watch as tens of thousands of jobs are created overseas.
RAY SUAREZ: But a report in today’s Washington Post added fuel to the fire. It said internal e-mails from the Office of Management and Budget showed concerns that the loans were granted too quickly.
In one, an unidentified aide wrote: “We have ended up with a situation of having to do rushed approvals on a couple of occasions, and we are worried about Solyndra at the end of the week.”
REP. STEVE SCALISE, R-La.: This was over a year ago. They reported a serious concern….
RAY SUAREZ: Republican Steve Scalise of Louisiana said the letter highlighted a history of troubling communication involving Solyndra.
REP. STEVE SCALISE: There were warning signs at every level, and yet it seems like crony capitalism was trumping the smart decision-making process and due diligence that should have been going on. And a lot of these e-mails show that out to be the case.
RAY SUAREZ: Company officials had contributed campaign funds to President Obama and Democrats.
But White House spokesman Jay Carney denied any favoritism was involved in speeding the loan approval. He said, “It had nothing to do with anything besides the need to get an answer to make a scheduling decision.”
And Committee Democrat Diana DeGette of Colorado complained Republicans had been irresponsible in handling the e-mails.
REP. DIANA DEGETTE, D-Colo.: I am just as much concerned about this Solyndra loan as everybody else is, but the way that the information has just been parceled out, the witness don’t have the full copies of the e-mails in front of them. The minority doesn’t have the full copies of the e-mails in front of them, until we ask for them. That is not in the grand tradition of this subcommittee.
RAY SUAREZ: Two of Solyndra’s top executives didn’t testify today. Another hearing is planned next week, and they are expected to speak then.
Carol Leonnig has been reporting on this story for The Washington Post and watched the hearing today. She joins us now.
We saw those exchanges on Capitol Hill today. Did they help fill in any part of this story? Did we learn anything new about the life cycle of Solyndra?
CAROL LEONNIG, The Washington Post: Not a terrible lot was learned about the life cycle of Solyndra. But you heard a more full-throated explanation from the Department of Energy and the Office of Management and Budget inside the Obama administration why they believe the — you know, that they were making good decisions at every juncture when it came to extending support to Solyndra and when it came to extending sort of a crisis lifeline to Solyndra earlier this year.
RAY SUAREZ: What was the nature of the relationship? Was cash transferred from the federal government to this private company?
CAROL LEONNIG: It’s a pretty complicated transaction, but here’s the basic effort of this program that Jonathan Silver was describing — $38 billion in the loan guarantee program basically is to invest in clean energy technologies and different companies that offer to do that through a government-backed loan.
In the case of Solyndra, they won the government-backed loan, but they also got it from a federal Treasury bank at a very low interest rate. So it’s basically like the government saying we will guarantee that if you can’t pay this half-billion-dollar loan, which is what Solyndra got, we will pay it off, which means taxpayers will pay it.
RAY SUAREZ: So now that the company has gone bankrupt, taxpayers are on the hook for, what, the whole amount?
CAROL LEONNIG: Well, energy officials tell me that they are concerned that it will be a large portion of the half-billion that has been disbursed to Solyndra so far.
They’re worried about what kind of assets the company really has even if it sells them in bankruptcy and what other debts it has to its investors. What taxpayers will get may be very small.
RAY SUAREZ: So the government lines up with other creditors at this point?
CAROL LEONNIG: Yes.
RAY SUAREZ: Has a government program with a subsidy to a company like this ever failed this spectacularly before?
CAROL LEONNIG: Well, there’s a long history in federal policy, going back to probably Roosevelt, of different ways in which the government has tried to stimulate a targeted industry and has made a mistake along the way.
What’s unusual is, this is the first big public misstep for what has been Obama’s showcase of recovery. Here is the way the president says he has generated jobs and tried to spur a new industry on American soil.
A lot of economists say that’s really a noble goal, but that perhaps the DOE — I’m sorry — the Department of Energy didn’t always have the competency to make the best selections about which projects would really fly.
RAY SUAREZ: Well, if you just know the end of the story, you may be scratching your head, but what attracted federal officers to a company like Solyndra in the first place to make this loan?
CAROL LEONNIG: Right.
They have said repeatedly that the innovation that Solyndra was offering was — gave it extra marks. The innovation was essentially, you know, a photovoltaic panel that goes — that stores solar energy and is usable inside a building and stores energy.
But what was unusual about this one was, it was cylindrical. It would be expensive to manufacture the panel, but it would be really cheap to install it like on big-box Wal-Mart stores. And that gave it an edge.
The problem was that Solyndra’s equipment was so expensive to produce that they never got to take advantage of sort of the installation — the low cost for installation. But here’s the issue, actually, Ray, with Solyndra and why people have so many questions about them.
This company was flagged by independent auditors in 2010 as being pretty quick to burn through cash. And even when they were applying to the Department of Energy in 2009 for this very large, whopping loan guarantee, internally, these e-mails show that even at the Department of Energy, there were staffers saying they have got cash flow problems that we can see off in the distance.
And, indeed, that’s exactly what happened. They burned through a lot of cash. And at the beginning of this year, they confided privately to the administration they were going to go bankrupt unless they got emergency cash.
RAY SUAREZ: Well, didn’t the Obama administration at that point double down and give them some of that emergency cash?
CAROL LEONNIG: In a form, yes. They pressed investors to put in a little extra cash in exchange for an agreement that they could get their cash out first, their new cash.
They also agreed that they would let them repay the loan more slowly. And they also agreed to special terms whereby Solyndra would keep getting installments on the existing loan. Remember, you don’t give the whole half-billion all at once.
So, from that time of warning until today, taxpayers have now got another $67 million extended to this company that was really on the brink of collapse.
RAY SUAREZ: Now, this is a company that approached the Bush administration for a similar kind of help and was in the process of this request. It got handed over to the new administration.
Did it not get approved during the Bush term because there were perceived problems with it then or was it on its way?
CAROL LEONNIG: There’s a lot of spin on both sides on that. It’s a great question that you ask. It’s true that they applied under the Bush administration program, which was eventually recycled essentially by the Obama administration and given new life.
But the problem with the Bush administration program is, it was never really fully funded, so applicants complained bitterly that they couldn’t — it wasn’t really attractive to them. The White House says, you know, look, the Bush administration was looking at this program. They thought Solyndra was really attractive.
On the other hand, Republicans point out that as — literally as the Bush administration was walking out the door, there were committee meetings to discuss, should we move forward with this loan? And the vote was, no, we have more questions about cash issues, actually.
So were they about to land a big loan with the Bush administration? Unlikely. Were they being reviewed as a serious contender? It looks like they were.
RAY SUAREZ: To be continued.
Carol Leonnig of The Washington Post, thanks for joining us.
CAROL LEONNIG: Thank you.