The Big Issues in 2012 Presidential Race – Health Care, Jobs, Deficits and Solyndra

A Failed Solar Energy Company May Mean a Failed Obama Re-Election

Get Ready for the Onslaught Mr. President, It’s Coming Big Time Next Year

The Dismal Political Economist has refrained from commenting on the Solyndra debacle thus far, waiting to see some clarification in the story.  The clarification is now coming, and what is being clarified is that the decision to grant solar energy company Solyndra a huge, $535 million loan guarantee was a complete and total managerial and financial disaster.

A showpiece of the Obama administration’s energy policy was government support for companies that were developing alternative energy products.  Solar energy was at the center of the government’s efforts.  The Obama administration was looking for a showpiece company, and settled on Solyndra.  The company had cutting edge solar technology.  It is now bankrupt and is expected to be liquidated.

Here is just some of what has happened with the government’s intervention into venture capital markets.

Energy Secretary Steven Chu acknowledged Thursday making the final decision to allow a struggling solar company to continue receiving taxpayer money after it had technically defaulted on a $535 million federal loan guaranteed by his agency.

Now a technical default does not necessarily disqualify a firm from financing, this happens all the time in the private sector.  But government is not the private sector.

Thursday, a law enforcement official confirmed that the criminal probe of Solyndra is focused on whether the company and its officers misrepresented the firm’s finances to the government in seeking the loan or engaged in accounting fraud. 

Guess what government, just because people are doing “green energy” doesn’t make them any less likely to engage in financial misdeeds.

In April 2010, the company’s auditors raised doubts about whether the company could continue as a “going concern” because of cash-flow problems. The following month, Obama visited the company to praise it as an “engine of growth.”

The “going concern” comment is a huge red flag for any business.  Instead of visiting the company Mr. Obama should have run as far from the operation as fast as he could.

The leading private investors in Solyndra were investment funds tied to Oklahoma billionaire George Kaiser, a prominent fundraiser for Barack Obama’s 2008 presidential campaign.

Gosh, government funding for a company that had investment from a billionaire campaign support of the President, what could go wrong politically there?

Rep. Gene Green (D-Tex.) said Thursday that he wants to know why Chu restructured Solyndra’s loan to put taxpayers behind a group of private investors to be repaid if the company went bankrupt. . . .“I guess I’m surprised that Secretary Chu made the decision earlier this year to give the private sector priority over the federal commitment, because your fiduciary duty is to the taxpayer, and not to an applicant. 

Well Mr. Green, (really, they had to get Mr. "Green" to comment on the story) your surprise is our surprise.  As for an explanation of how all of this occurred there is this.

Chu, a Nobel laureate and physicist who came to the administration from academia, arrived in Washington with a mandate to push billions of dollars in stimulus funds into clean-energy companies and projects. 

Putting an academic with no background, experience, knowledge or understanding of business in charge of investing in energy companies, what a great idea.  

As for the political implications, well the good news for Republicans is that they do not have to employ a bunch of high priced political consultants to script campaign ads on the Solyndra issue, the ads will write themselves.