The 75-page Report of the Independent Consultants Review with Respect to the Department of Energy Loan and Loan Guarantee Portfolio, conducted and submitted by former Treasury Department official Herb Allison, "confirms that the loan portfolio as a whole is expected to perform well and holds less than the amount of risk envisioned by Congress when it created and funded the program," commented White House associate communications director, Eric Schultz.
In fact, although the U.S. government stands to lose nearly US$3 billion on the DOE loan portfolio, including the $535 million blown by the September 2011 bankruptcy of the solar company Solyndra, Inc., that sum represents far less than the $10 billion Congress originally set aside to cover the high-stakes, high-risk initiatives.
Allison was tasked with overseeing the impartial investigation by the White House on October 28 in response to a shakedown by House Energy and Commerce Committee Chairman Fred Upton (R-MI) and Oversight and Investigations Subcommittee Chairman Cliff Stearns (R-FL) for more than 70,000 pages of Solyndra-related documents and a tense face-off over two subpoenas demanding more detail.
In truth, both the Democrats and the Republicans alternately had used Solyndra to drive their own political agendas:
- Solyndra was the first renewable-energy company to receive funding under the Republican George W. Bush Administrations Energy Policy Act of 2005, which created the 1703 loan guarantee program.
- Early on, the Democrats made the company emblematic of a promising green economy. Energy Secretary Steven Chu attended a 2009 groundbreaking at Solyndras Fremont, California, headquarters, and President Barack Obama visited the company in 2010.
- However, after the companys failure in 2011, the Republicans pointed to Solyndra as a symbol of favoritism and foul play – revealing that the Obama Administration knew that the company had problems, but nonetheless continued to support it.
In conducting his review, Allison did not look at Solyndra, specifically. Instead, he reviewed a portfolio of 30 DOE loans or loan guarantees totaling $23.8 billion that were offered to utilities; non-utilities (such as cellulosic ethanol projects, solar manufacturing companies, and small, start-up automotive firms); and major automakers (Ford and Nissan).
While Allison found that due diligence had been exercised in the financing process, he and his team recommended that the DOE should use fewer contractors, fill key positions as soon as practicable, and clarify lines of authority and delegation. They said a new Chief Risk Officer position should be created to lead a separate Risk Management unit comprising all DOE functions dedicated to monitoring the programs, including the current Credit and Compliance functions.
In addition, the report suggested that program goals and expectations should be more explicit, for example, requiring a "reasonable prospect of repayment" under Title XVII is too vague. DOE should aggressively strengthen its position as lender or guarantor in cases where borrowers seek relief from requirements in the loan agreements.
And to close the loop, the review proposed that the Energy Department should provide both a comprehensive communications plan that will provide timely information to the public on program performance and an Early Warning System for management that offers three categories of information, including trends affecting the markets and the regulatory environments; the status of every loan; and internal performance of the Loan Program Office.
In response to the recommendations and the complete findings of the report, Energy Secretary Stephen Chu commented, "Mr. Allisons review rated the overall risk in the loan portfolio slightly lower than the Department itself projected and far less than the loan loss reserve Congress originally budgeted for when Congress created and funded the program. The report makes clear that the Department was operating under Congressional requirements to provide loans to projects that would have trouble obtaining private financing, which is why Congress appropriated funds for a loan loss reserve."
Chu also pointed out, "We have always known that there were inherent risks in backing innovative technologies at full commercial scale, and it is very likely that there will be other companies in the portfolio that wont succeed, but the vast majority of companies are expected to pay the loans back in full, on time, and with about $8 billion in interest while supporting a total of 60,000 American jobs and helping us compete for a rapidly growing global industry."
At the White House, Schultz echoed Chus remarks. "When Congress first developed this program under the Bush Administration, the purpose was to help fund some high-risk projects to put America at the cutting-edge of innovation," he said. "Theres no question, as the report indicates, we expect more bumps along the road in emerging industries like clean energy. But as the President said in his State of the Union message, thats not a reason to throw up our hands and cede the jobs of the future to China or Germany or anywhere else."
In response, representing the voice of the Republican loyal opposition, Chairmen Upton and Stearns jointly commented, "The first step on the road to recovery is overcoming denial, and this audit is a long-overdue acknowledgement that the Obama Administration has a problem . It would be a stunning case of bureaucratic disregard to declare victory because the government is expecting to lose ‘just’ $3 billion," they said, adding, "The very suggestion of an early warning system misses the point given that the internal warnings on Solyndra were abundant, well before the half a billion dollar loan guarantee was finalized. What use are early warnings, if they are ignored? Every warning on Solyndra fell on deaf ears. While the experts understood Solyndra was doomed for failure, they were overruled every step of the way."
The Committee chairmen ended with a prod and a jab. "If the Obama White House is, indeed, sincere about protecting taxpayers, its team of lawyers should swiftly comply with our subpoena for West Wing Solyndra documents. It has been 100 days since we were forced to subpoena the White House, and they continue withholding documents and shielding key staff from our investigators. This report reveals broad-based weaknesses, but it does not answer some of the most fundamental questions about how these risky bets were made over the objections of experts. Our investigation continues, as we work to ensure taxpayers are never again stuck paying hundreds of millions of dollars because of the Obama Administration’s risky bets."
Rep. Jim Sensenbrenner (R-WI), vice chairman of the Committee on Science and Technology, stated, "This is less a report than an umbrella to deflect the criticism thats pouring down on the Administration. The consultants didnt even evaluate the Solyndra or Beacon [Power Corporation of Massachusetts] loans. How can an evaluation be ‘independent,’ if the Administration controls its content?"
Speaking for the Democrats on the House Energy and Commerce Committee, ranking member Henry Waxman (D-CA) told Politico, "The report is a repudiation of the partisan attack on the program by congressional Republicans and the oil and coal industries. I hope Republicans will stop insisting that the U.S. cannot compete in these industries of the future and join an effort to promote U.S. manufacturing, increase our energy security, and protect our environment."
Waxmans hopes of collegiality almost certainly will be dashed during 2012, as the Republican presidential candidates continue to exploit chinks in the current Administrations armor. However, the campaign trail is long and fraught with possibilities for faux pas and distractions. Just the other day, Mitt Romney, the "intermittent" leader on the primary trail, confused his talking points during an off-the-cuff speech in Atlanta, covered by The Washington Post. "My course for America is to become energy secure and to open up that Solyndra that, that pipeline, excuse me, the Keystone pipeline, Romney told about 400 supporters at a stone-importing company in northern Atlanta. "Not Solyndra. .. the Keystone pipeline to get energy here in this country."