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September 20, 2011 10:40 AM Republicans’ secret love of ‘crony capitalism’

By Steve Benen

I spent some time over the weekend reading up on the Solyndra “controversy,” hoping to get a better sense of what all the fuss is about. I’m still not sure why anyone would find this fascinating.

The company developed a solar technology that offered real promise, and was one of many outlets to receive loans, some through private investors, some through the Department of Energy. The market shifted, prices dropped, and Solyndra was forced to fold. Taxpayers lost out, but it wasn’t a lot of money, there was nothing improper about the loans, and this was the kind of risk Americans expect public-private partnerships to take. It’s the price of experimentation and innovation — sometimes these investments work out, sometimes they don’t.

Republicans are eager to present this as some kind of “scandal,” though there are no credible allegations of wrongdoing on anyone’s part. So why does the GOP keep talking about it? Aside from the fact that the right is desperate to undermine the Obama administration regardless of cause, conservatives are also looking for an excuse to oppose clean-energy programs, and Solyndra offers an excuse — it’s “proof,” the right says, that these investments are a waste.

Even at face value, it’s a bizarre argument. After all, one failed company does not a doomed industry make. But there’s another important angle to this: some of the same Republicans complaining about the Department of Energy’s loan-guarantees program for clean tech have also fought for funding from the same program for companies in their own states.

The example involving Sen. David Vitter (R-La.), best known for his prostitutes, is especially hilarious.

…Vitter has filed a bill to increase scrutiny of taxpayer-financed renewable energy projects. It wouldn’t scrutinize taxpayer-financed non-renewable energy projects, like the nuclear reactors that Vitter so ardently supports. It wouldn’t scrutinize why a certain Louisiana Senator has worked so hard to protect oil companies from liability for their spills. It would just crack down on Big Renewables.

“We can’t afford any more crony capitalism,” Vitter said in Wednesday. Vitter should know. He’s written a bunch of letters to the Energy Department’s loan program seeking loans for renewable energy firms.

For example, on July 1, 2009, Vitter and Democratic Senator Mary Landrieu of Louisiana wrote Energy Secretary Steven Chu to support a loan application by the V Vehicle Company, a clean-car start-up (backed by T. Boone Pickens and the venture capital leviathan Kleiner Perkins) that was planning a Louisiana factory. “This vehicle would serve as a catalyst for job creation,” they wrote. A year later, Vitter joined the entire Louisiana delegation in another letter pushing “expedited consideration” for VVC. Alas, the Energy Department rejected the loan, citing concerns about the company’s financial viability. Vitter must have been annoyed by all this due diligence, because in December 2010 — after VVC changed its name to Next Autoworks — he, Landrieu and Congressman Rodney Alexander tried once more. “Every day that Next Autoworks’ application is delayed is another day that workers cannot be hired,” the wrote. So far, no luck.

Vitter only seems to decry “crony capitalism” when it’s his cronies who aren’t getting the capital. All told, he sought loan guarantees from Department of Energy’s program — the very program Vitter now considers scandalous — seven times.

What’s more, it’s not just the right-wing, scandal-plagued Louisianan. The New York Times reports today that Senate Minority Leader Mitch McConnell (R-Ky.) has been busy condemning the federal loans to clean-energy projects, while simultaneously pushing for federal loans to clean-energy projects in his home state of Kentucky. In one instance, McConnell pushed for a DOE loan for a company that had hired a lobbyist that also gave McConnell generous campaign donations.

Reps. Lamar Smith (R-Texas), Fred Upton (R-Mich.), and Cliff Stearns (R-Fla.) are in a similar boat, condemning the clean-tech loans while praising clean-tech loans in their districts.

I’m starting to think when Republicans decided to raise a fuss over this, they didn’t quite think it through.

Steve Benen is a contributing writer to the Washington Monthly, joining the publication in August, 2008 as chief blogger for the Washington Monthly blog, Political Animal.

Comments

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  • clevergirl on September 20, 2011 10:46 AM:

    secret? what secret

  • blondie on September 20, 2011 10:46 AM:

    I�m starting to think when Republicans decided to raise a fuss over this, they didn�t quite think it through.

    Steve, they never think it through ...

  • bleh on September 20, 2011 10:51 AM:

    Well, I dunno about that. After all, YOU're posting about it.

    And the "low-information voter" never gets anywhere near the full story. Mostly, s/he gets, "oh look, smoke," and thinks "where there's smoke, there's probably fire."

    This is just standard mudslinging. And frankly, I don't think, "well, so's David Vitter," is not a very useful response. It basically concedes the issue.

    I think the correct question is something more like, "why do Republicans hate efforts to create jobs?" or "why do Republicans love the oil companies so much?"

  • DavidNOE on September 20, 2011 10:51 AM:

    They thought it through, and assumed, almost certainly correctly, that the mass media were never going to notice that they were hypocritical liars, because they almost never do. So what did they have to lose?

  • c u n d gulag on September 20, 2011 11:05 AM:

    They're great at creating fusses.

    And they're great at creating disasters for others to fuss about.

    What they are incapable of doing, though, is providing anything close to a solution to a fuss.

    Cutting taxes for the wealthy is not the answer to an and every question in this country - though you'd be hard-pressed to find another one coming from Republicans.

  • DAY on September 20, 2011 11:06 AM:

    Curious, is it not, that just as Alternative Energy is getting a foothold, we are suddenly AWASH in a sea of "newly discovered" oil and natural gas?

  • Stevo on September 20, 2011 11:10 AM:

    there are no credible allegations of wrongdoing on anyone's part.

    Really? So how did the FBI get their search warrant? They can't get one unless they present probable cause to believe a crime has been committed.

  • walt on September 20, 2011 11:11 AM:

    This is SOP for Republican attacks. In the 1990s, Rep Christopher Cox, later the asleep-at-the-switch chair of the SEC, made a mountain out of a molehill about "transfer technologies" going to China. The defense contractor in question, Loral, had a CEO who contributed to Bill Clinton. This was a twofer: crony capitalism AND consorting with the enemy. The only problem was that the program that facilitated this "transfer" was set up by the previous Bush administration. But the right went crazy for about a year, won the talking point with their megaphone differential, confused a lot of people, before switching to another dead horse.

    See also: Whitewater.

    There's not a lot to say here. Most people tune it out except for handwringers like Megan McTurdle.

  • SecularAnimist on September 20, 2011 11:21 AM:

    Media Matters has an excellent, detailed fact-check on the corporate media's "misrepresentations and omissions" (a.k.a. LIES) about the Solyndra loan. It's a must-read for anyone who is interested in this matter, and in the future of renewable energy in the USA:

    http://mediamatters.org/research/201109190020

    Just as the media's silence about anthropogenic global warming grows ever more deafening as the onslaught of AGW-driven catastrophic weather escalates, their dishonest attacks on renewable energy grow ever more strident in the face of the renewable energy industry's accelerating growth.


  • square1 on September 20, 2011 11:24 AM:

    The problem isn't low-information voters. The problem is that a certain segment of the Democratic Party -- a segment that is ostensibly comprised of high-information politically connected insiders -- immediately leaps to seriously consider every faux-scandal that the GOP whips out.

    If Democrats didn't grant credence to every whine elicited by Republicans (e.g. "Death Panels", Joe Wilson's immigrant complaints, and "business uncertainty") the low-information voters wouldn't tap into these memes.

    Even if Democrats don't completely agree with the GOP's Solyndra, I don't see them offering a competing narrative.

    For example, a major reason for Solyndra's failure was that its competitors are Chinese companies that are heavily subsidized by the Chinese government. Rather than acting so defensive, Democrats should use this as a teaching moment about the power of governments to, yes, create jobs:

    "Republicans believe that governments can't create jobs. Well the Chinese government believes otherwise. While the U.S. invested $X in solar technology, the Chinese government invested $10X. And today we see the fruits of having no industrial policy: U.S. workers in the solar industry will lose jobs and Chinese workers will gain jobs."

  • sbest on September 20, 2011 12:01 PM:

    I live and work down the street from Solyndra, out here in Silicon Valley. And while I can hardly speak for the whole community, a well-financed company failing spectacularly when the production costs fall for alternative technology ... just isn't that shocking.

    Yes, it sucks how Solyndra management handled their layoffs, since they had enough cash for at least a small severance. But as far as the DoE and DARPA taking a risk and failing: so did all of the venture capital and sweat equity behind this startup. That's how new things get done -- for every 1 Google there are 10 well-financed failures you'll never hear of.

    Solyndra failure is capitalism in action. The only governments that can offer 100% assurance on every business venture aren't just called "lucky", they're called "socialist".

  • Vince on September 20, 2011 12:36 PM:

    In addition to the hypocrisy that Steve highlights here, I seem to recall a certain administration, let's see, not too long ago, that dished out billions of dollars worth of no-bid contracts to well-connected friends. When any oversight was attempted, the Republican Congress rushed to put the kibosh on it.

  • ron300 on September 20, 2011 12:46 PM:

    Benen, you're a fool. You said "The market shifted, prices dropped, and Solyndra was forced to fold." The problem is that the market shifted, prices dropped before the loan was give to Solyndra. Many many people told Obama that, but the buck stopped in Obamas bank account. Do some fact check before you show your true colors.

  • mr. irony on September 20, 2011 1:37 PM:


    GOP MATH:

    Money lost in first 6-months of Iraq war: $9-billion

    Money lost in feds investment of Solyndra: $535-million

  • Frank Knight on September 20, 2011 3:47 PM:

    @Ron300 proof please of your claim that the market shifted in 2008.

  • Sean T on September 20, 2011 3:50 PM:

    America is a crony capitalist country. the entire market-based mythology is just that, a myth. it is all cronyism these days. See wall street, over and over and over. see Delta and FAA rules. see Boeing and DOD. See NRC and the moribund nuke industry. see MMS and BP. see T Boone Pickens and his state-sanctioned land grabs and natural gas boondoggle. see Enron back when the tea baggers didnt care about this stuff. Fannie and Freddie. any free trade agreement. hell, see hosts and reams of other examples where government and capitalists collude against the market and work to privatize profits and socialize risk and other rent seeking behavior. In fact, looking at Iraq and Afghanistan, it is biggest and best export.

  • Frank Knight on September 20, 2011 3:54 PM:

    avg spot price of silicon in 2008 - $300/kg.

    avg spot price of silicon in 2011 - $50/kg.

  • jjm on September 20, 2011 5:37 PM:

    RE SOLYNDRA -- it all began under Bush...

    Exclusive Timeline: Bush Administration Advanced Solyndra Loan Guarantee for Two Years, Media Blow the Story | ThinkProgress http://http://thinkprogress.org/romm/2011/09/13/317594/timeline-bush-administration-solyndra-loan-guarantee/

    Youd never know from the media coverage the following stuff:

    Timeline:

    May 2005: Just as a global silicon shortage begins driving up prices of solar photovoltaics [PV], Solyndra is founded to provide a cost-competitive alternative to silicon-based panels.

    July 2005: The Bush Administration signs the Energy Policy Act of 2005 into law, creating the 1703 loan guarantee program.

    February 2006 October 2006: In February, Solyndra raises its first round of venture financing worth $10.6 million from CMEA Capital, Redpoint Ventures, and U.S. Venture Partners. In October, Argonaut Venture Capital, an investment arm of George Kaiser, invests $17 million into Solyndra. Madrone Capital Partners, an investment arm of the Walton family, invests $7 million. Those investments are part of a $78.2 million fund.

    December 2006: Solyndra Applies for a Loan Guarantee under the 1703 program.

    Late 2007: Loan guarantee program is funded. Solyndra was one of 16 clean-tech companies deemed ready to move forward in the due diligence process. The Bush Administration DOE moves forward to develop a conditional commitment.

    October 2008: Then Solyndra CEO Chris Gronet touted reasons for building in Silicon Valley and noted that the companys second factory also will be built in Fremont, since a Department of Energy loan guarantee mandates a U.S. location.

    November 2008: Silicon prices remain very high on the spot market, making non-silicon based thin film technologies like Solyndras very attractive to investors. Solyndra also benefits from having very low installation costs. The company raises $144 million from ten different venture investors, including the Walton-family run Madrone Capital Partners. This brings total private investment to more than $450 million to date.

    January 2009: In an effort to show it has done something to support renewable energy, the Bush Administration tries to take Solyndra before a DOE credit review committee before President Obama is inaugurated. The committee, consisting of career civil servants with financial expertise, remands the loan back to DOE without prejudice because it wasnt ready for conditional commitment.

    March 2009: The same credit committee approves the strengthened loan application. The deal passes on to DOEs credit review board. Career staff (not political appointees) within the DOE issue a conditional commitment setting out terms for a guarantee.

    June 2009: As more silicon production facilities come online while demand for PV wavers due to the economic slowdown, silicon prices start to drop. Meanwhile, the Chinese begin rapidly scaling domestic manufacturing and set a path toward dramatic, unforeseen cost reductions in PV.

    Between June of 2009 and August of 2011, PV prices drop more than 50%.

    September 2009: Solyndra raises an additional $219 million. Shortly after, the DOE closes a $535 million loan guarantee after six months of due diligence. This is the first loan guarantee issued under the 1703 program. From application to closing, the process took three years not the 41 days that is sometimes reported. OMB did raise some concerns in August not about the loan itself but how the loan should be scored. OMB testified Wednesday that they were comfortable with the final scoring.January

    June 2010: As the price of conventional silicon-based PV continues to fall due to low silicon prices and a glut of solar modules, investors and analysts start questioning Solyndras ability to compete in the marketplace. Despite pulling its IPO (as dozens of companies did in 2010), Solyndra raises an additional $175 million from investors.

    November 2010: Solyndra closes an older manufacturing facility and concentrates operations at Fab 2, the plant funded by the $535 million loan guarantee. The Fab 2 plant is completed that same month on time and on budget employing around 3,000 construction workers during the build-out, just as the DOE projected.

    February 2011: Due to a liquidity crisis, investors provide $75 million to help restructure the loan guarantee. The DOE rightly assumed it was better to give Solyndra a fighting chance rather than liquidate the company which was a going concern for market value, which would have guaranteed significant losses.

    March 2011: Republican Representatives complain that DOE funds are not being spent quickly enough.House Energy and Commerce Committee Chairman Fred Upton (R-MI): despite the Administrations urgency and haste to pass the bill [the American Recovery and Reinvestment Act] billions of dollars have yet to be spent.And House Oversight and Investigations Subcommittee Chairman Cliff Stearns (R-FL): The whole point of the Democrats stimulus bill was to spend billions of dollars most of the money still hasnt been spent.

    June 2011: Average selling prices for solar modules drop to $1.50 a watt and continue on a pathway to $1 a watt. Solyndra says it has cut costs by 50%, but analysts worry how the company will compete with the dramatic changes in conventional PV.

    August 2011: DOE refuses to restructure the loan a second time.

    September 2011: Solyndra closes its manufacturing facility, lays off 1,100 workers and files for bankruptcy. The news is touted as a failure of the Obama Administration and the loan guarantee office. However, as of September 12, the DOE loan programs office closed or issued conditional commitments of $37.8 billion to projects around the country. The $535 million loan is only 1.3% of DOEs loan portfolio.

    To date, Solyndra is the only loan thats known to be troubled.Meanwhile, after complaining about stimulus funds moving too slowly, Congressmen Fred Upton and Cliff Stearns are now claiming that the Administration was pushing funds out the door too quickly: In the rush to get stimulus cash out the door, despite repeated claims by the Administration to the contrary, some bets were bad from the beginning.

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