I’ve been lax about reporting the Solyndra affair as it has grown from a typical screwup of the sort that arises whenever the government tries to supplant the marketplace and pick winners, into a huge political scandal. Let me catch up by listing what we know:
After Solyndra went belly-up (after blowing through half a billion in taxpayer money), the FBI raided their offices. We know that one of Solyndra’s top backers was a major fundraiser for President Obama, that Solyndra officials were frequent visitors to the White House, and that federal officials sat in on Solyndra board meetings.
We know that the White House pressured the OMB to approve the loan, and quickly (in time for a presidential speech), despite the OMB’s concerns that they hadn’t done due diligence (that’s for sure!):
“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),” one official wrote. That Aug. 31, 2009, message, written by a senior OMB staffer and sent to Terrell P. McSweeny, Biden’s domestic policy adviser, concluded, “We would prefer to have sufficient time to do our due diligence reviews.”
And it wasn’t just the Obama-era OMB with reservations. The Bush administration shelved the loan application (despite recent attempts on the left to blame Bush for the mess). PriceWaterhouseCoopers warned that Solyndra’s troubles “raise substantial doubt about its ability to continue as a going concern.” And it wasn’t just finance people, either. According to a former Solyndra employee, everyone working there knew the company was doomed. They were making a product for $6 that they could only sell for $2-3. The Obama administration was aware of these warnings, but ignored them.
Worse, this isn’t merely a situation where political pressure resulted in a terrible decision. The process violated federal rules and the law. The General Accountability Office found that the loan process bypassed required steps. The law specifically forbade the DOE from subordinating the government’s stake (i.e., placing the government after other creditors in any bankruptcy proceeding), but the Obama administration disregarded that provision. Thus, the loan was not only unwise, not only improper, it was illegal.
Solyndra’s actions were not proper either. Once they received the government’s “investment”, they lavishly wasted money. They spent over a million on lobbying, hiring lobbyists connected to John Kerry (D-MA) and Steny Hoyer (D-MD). And, in fact, they violated the terms of their loan starting in December 2010.
Solyndra officials took the Fifth at a Congressional hearing last week. That surprised Congressional investigators who had earlier agreed to delay the hearing in exchange for a promise that the officials would testify. However, many other people did agree to testify. (Andrew Stiles summarized the proceedings here and here.)
One who did agree to testify was DOE official Jonathan Silver, who admitted that the conditions for Solyndra have been unfavorable for years (since before the latest loan!), and that the DOE has known since last July that Solyndra would go under.
One of the strangest aspects of the scandal is that somehow the California Democratic Party ended up a Solyndra creditor. No one will admit to knowing how that happened.
Alas, the Obama administration has learned nothing from the scandal. They have just announced three more solar loans totaling more than $2 billion, and have billions more to throw away this week. One of those loans, for $737 million, is to the Crescent Dunes Solar Energy Project, a project connected to Ron Pelosi, the House Democratic Leader’s brother-in-law. The political connections of the other projects have not yet been determined.
UPDATE: A nice video summarizing the scandal.