The Real Solyndra Scandal

Sept. 26, 2011
The scandal's effects could well greatly transcend the American solar power industry or even the entire embryonic green energy sector, as it will surely place the darkest of clouds over any federal support for specific industries or applied technologies w

What a complete -- and unnecessary -- disgrace the Obama administration's performance in the Solyndra affair has been.

Admittedly, not all the facts are out about the administration's decision to award a $535 million dollar federal loan guarantee to the recently collapsed California-based solar panel maker. And admittedly, many free-market extremist politicians and think tank hacks are only too happy to blur a critical distinction: between criminal or otherwise corrupt activities (or simple incompetence, for that matter) on the one hand, and the inherent difficulties and risks on the other hand of subsidizing new, potentially game-changing, but by definition chancy products and technologies that will struggle to attract private capital from the short-term focused American financial system.

But notwithstanding an FBI investigation, even the possibility of criminal fraud by the company's owners wouldn't represent the most powerful and most important indictment of the president and his aides on this score. Instead, their worst failing has already been exposed -- an unforgivably sloppy, tone-deaf, politics-as-usual approach to the kinds of industrial and technology policy initiatives that could be crucial to the nations recovery and longer-term economic future.

After all, any government involvement in promoting economic activity on the industry level is already controversial enough in America. And the White House's conservative adversaries clearly have been loaded for bear on this issue ever since the Wall Street and auto industry bailouts. As a result, the need to keep the process completely above reproach should have been screamingly obvious to the president, all his political appointees (including his Secretary of Energy), every bureaucrat involved, and every member of Congress claiming to take seriously the idea that government has a useful economic role to play beyond getting the macro fundamentals right and promoting basic research.

Every lobbyist and financial supporter of the president, no matter how influential or helpful, should have experienced an immediate telephone hang-up or door-slamming every time they tried to contact a responsible official regarding loan guarantees such as Solyndra's or similar programs. And every White House staffer should have been under strict, blunt orders -- from the top -- to do nothing even suggesting the appearance of exploiting these initiatives for partisan political gain, or of playing political favorites.

Instead, what happened? The Bush administration, which originated the clean energy loan program, had expressed major qualms about Solyndra's entire business and technology plan during its final weeks in office. These reservations, moreover, persisted after Inauguration Day among career bureaucrats at the Energy Department and the White House Office of Management and Budget. Yet Solyndra's loan guarantee application progressed through the Obama vetting process, anyway. In mid-2009, it wound up receiving the very first and biggest of four such loan guarantees handed out by the Energy Department.

Partly responsible for Solyndra's success was a major Obama push to speed all stimulus spending out the door at the depths of the economic and financial crisis. Nonetheless, during this period, top White House aides also met several times with billionaire Obama fund-raiser George Kaiser -- a major indirect Solyndra investor. And released emails along with recent public statements make clear that administration political appointees were hounding the doubters in the lower ranks to get with the program pronto.

In addition, at the time, Solyndra was also spending nearly $2 million on lobbying, according to The New York Times, hiring "six firms with ties to members of Congress [including then Speaker and now House Democratic Leader Nancy Pelosi] and officials of the Obama White House." One of these lobbyists' prime -- and secured -- targets was senior White House official Valerie B. Jarrett, a long-time confidante of President Obama.

For good measure, in January, 2010, Solyndra began lobbying the White House for a second loan and, soon after, for a restructuring of the first loan. These discussions evidently proceeded even though the market for Solyndra's panels had worsened so dramatically that industry trade publications by then were openly questioning even its short-run survivability.

Indeed, as early as March, 2010, the company's own accountant had expressed agreement (possibly one reason for the FBI's apparent suspicion of financial fraud). But the Obama White House preferred to trust the still rosy forecasts of Solyndra lobbyists and executives instead -- and showed little if any interest in independent analysis.

The Solyndra scandal's effects could well greatly transcend the American solar power industry or even the entire embryonic green energy sector. They will almost surely place the darkest of clouds over any federal support for specific industries or applied technologies without clear-cut national defense implications. Already, the free-market zealots are crowing, "I told you so," and bombarding the media and policymakers with accusations of crony capitalism and with long-time talking points like "Government can't pick winners and losers" and "Washington always gets it wrong."

These claims are nonsensical. Decisive and successful industry-specific federal economic programs date from the Agriculture Department's establishment in 1862. Even omitting post-World War II Defense Department programs that created high tech products and industries ranging from computers to software to semiconductors -- and, yes, the internet -- Washington's industrial and technology development record has been impressive.

Starting in 1915, for example, the National Advisory Committee on Aeronautics played a seminal role in turning the U.S. aircraft industry into a world leader in both the military and civilian sectors. In 1958, the agency was transformed into the space age NASA. The American pharmaceutical industry owes its own world-class status largely to the research conducted and funded by the National Institutes of Health.

Yet in an era where sound-bites and Twitter trump expertise and experience, the historical record is sure to be overshadowed by libertarian ignorance -- at least for many months -- and major economic recovery opportunities seem likely to be delayed, preempted, and even lost. Also endangered are small-scale, more recent successes like the Commerce Department's Manufacturing Extension Partnerships. And the blame will fall squarely on the Obama administration, which apparently thinks that it can risk charges of cronyism while running potentially vital national programs, and that time is on the U.S. economy's side.

Alan Tonelson is a Research Fellow at the U.S. Business & Industry Educational Foundation and the author of "The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards."

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