Morning Bell: Solyndra Revelations Show It’s Time to Close the “Bank of Washington”

Amy Payne /

“The Bank of Washington continues to help us!” bragged Solyndra CEO Chris Gronet in emails released last week.

An investigation by the House Energy and Commerce Committee revealed that Solyndra—the solar company that went under, taking more than $600 million in taxpayer funds with it—wasn’t ever supposed to be an independent business. It was built to rely on the taxpayers.

“Getting business from Uncle Sam is a principal element of Solyndra’s channel strategy,” wrote Tom Baruch, founder of Solyndra investor CEMA Capital, in an August 10, 2010 email.

Getting federal money was integral to Solyndra’s business model. But even with government backing, Solyndra failed—just one of a growing list of companies in the Green Graveyard that took taxpayer money and went bankrupt.

The emails released between Solyndra stakeholders and Obama Administration officials show that Solyndra’s investors knew the company was a bad bet for taxpayers, but the Administration wanted the energy loan guarantee program to be perceived as successful. Meanwhile, the Government Accountability Office was finding that the Department of Energy played favorites with the program, and high-level advisers including Treasury Secretary Tim Geithner were raising red flags.

When it became clear that the company wasn’t going to make it, White House communications director Dan Pfeiffer wrote to White House insiders Stephanie Cutter and David Plouffe: “This is going to be a real pain, Solyndra is about to go under apparently.”

Despite 12 such failures—companies taking taxpayer money yet going bankrupt—the Administration hasn’t given up its push for solar. In July, Interior Secretary Ken Salazar characterized the bankruptcies and delays that have plagued the solar manufacturing sector as “just minor (and expected) blips for the industry.”

“Across the Administration, we’re looking at ways to create jobs and strengthen the economy—and a big part of that is building a sustainable, clean energy future,” Salazar said. But as Heritage’s Michael Sandoval reports:

Salazar’s touting of job creation is at odds with the Department of Energy’s David Frantz, who oversees the DOE loan guarantee program.…Frantz told House members that these large, utility-scale renewable projects really could not be counted upon for creating jobs. “The predominance of our portfolio—and the objective, really, of the act—is to be creating large infrastructure, utility-scale projects; and, by definition, they are not a multiplier for job creation,” Frantz said.

Still, lawmakers in both parties have embraced the job creation fallacy. Heritage’s Nicolas Loris has noted that both Democrats and Republicans:

…like loan guarantees (or tax credits or direct grants) if they support projects for their politically preferred sources of energy, such as clean coal and nuclear, or if they bring jobs to their districts that they can take credit for creating. But these programs do not create jobs. They misallocate labor and capital by shifting taxpayer dollars away from economical projects and toward political ones.

Energy subsidies, whether in the form of taxpayer-backed loans or outright grants, are a bipartisan boondoggle that simply does not work. Looking back, President George W. Bush’s solar initiative sounds very similar when compared to President Obama’s.

The aptly named “No More Solyndras” Act, now in the House Energy and Commerce Committee, would stop the government from giving out new taxpayer-backed loan guarantees. For applications that are already under consideration or have received conditional commitment, the bill would require the Secretary of the Treasury to make a recommendation based on the merits of the program. Although not perfect, the legislation moves us in the right direction toward finally ending this program.

As subcommittee chairman Ed Whitfield (R-KY) said last week, “Instead of handing out billions in loan guarantees to selected companies, we can do much more good by removing billions in unnecessary regulatory compliance costs.”

There are plenty of job-killing regulations holding back American companies. A lack of taxpayer dollars is not the problem. It’s time to close the “Bank of Washington” and allow truly successful, viable technologies to rise to the top.

See the 10 Most Revealing Solyndra Emails

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