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Green Corruption: Department of Energy “Junk Loans” and Cronyism, Part One

While the media was “tripping out” over Energy Secretary Chu giving himself “an A grade on controlling the cost of gasoline at the pump” during his testimony before a House panel last month, they missed the real scandal!

As insulting as that seems (especially since gas prices have doubled under Chu’s watch), Gene Koprowski of The Daily Caller unleashed the most outrageous part of the House Oversight’s investigation –– “Obama energy officials funded solar firms despite ‘junk bond’ ratings from S&P and Fitch.” Koprowski detailed the Department of Energy’s (DOE) lack of caution in backing hundreds of millions of dollars in loans for “tainted solar power projects.” Also documented are “other dramatic abuses at the green energy firms,” the most egregious being those firms which, received DOE funding, went bankrupt, “but not before paying their executives bonuses.”

In fact, the report released last month by the Committee on Oversight and Government Reform (led by CA Representative, Darrell Issa) “painted a startling picture of mismanagement at the Department of Energy.” The most damaging is that of the 27 loan guarantees under the 1705 program, of which the DOE doled out in excess of $16 billion, “23 of the loans were rated “Junk grade” due to their poor credit quality, while the other four were rated BBB, which is at the lowest end of the ‘investment’ grade of categories.” According to Issa’s Team, the DOE’s 1705 loan portfolio overall average was BB-.” Now, I’m no financial guru, but I wouldn’t want that grade on my report card.

So why did the DOE back so many high-risk investments, particularly at a time when we are drowning in a tsunami of debt?

In a gripping line of questioning, Ohio Representative Jim Jordan confronted this issue head on during that same hearing where he pressed Secretary Chu on nine of the firms that received loans, revealing their political connections. Chu countered that the loans were based on merit. Yet Jordan was perplexed, “so if you weren’t helping your buddies, and you were basing your decisions on the merits of the loan, how do you explain the fact that 23 of 27 recipients of the loan guarantees were rated as junk status investments?” Jordan concluded, “If it wasn’t your political buddies, it had to be incompetence.”

Finally, the probe into the DOE and how they “pick winners and losers” for “green ventures” has gone in the right direction, however, Congressman Jordan overlooked the fact that it’s not just nine –– it’s the majority of the 27 projects recorded by Issa’s Team.

Political buddies indeed –– 21 energy firms are behind the 27 projects found in the House Oversight investigation, and 18 of them are politically connected to President Obama (15 alone) and the Democratic Party, that’s over 85%! 13 were bundlers, donors, and supporters for Obama’s 2008 campaign, and two are members of the president’s Job Council, while three are allied to Senator Harry Reid –– all with ample other Democrat links in the mix.

Nevertheless, before Congress caught on, Peter Schweizer’s New York Times bestseller, Throw Them All Out –– released last November and featured on 60 Minutes, exposing the “permanent political class” and the insidious practice of “Congressional insider trading” perpetrated from both sides of the political isle –– devotes an entire chapter to alternative-energy, “Spreading the Wealth… to Billionaires!” Whereas, others players in this clean-energy scheme are uncovered by Schweizer, this chapter digs into a few of the major DOE programs operating under the stimulus, including the tens of billions of dollars that was dished out through the 1705 Loan Guarantee Program.

About Christine Lakatos

  • Frivolous D

    Christine, It’s is a shame that you undermined such a thoughtful and well researched article with an impassioned and bias conclusion. Three green dots don’t make a triangle until you decide to draw the lines. To wit:

    General Electric is the best example of how to create an impression of cronyism where none exists. Political donations by cycle:

    2004: D=901,790, R=$1,022,714
    2006: D=$711,730, R=$951,086
    2008: D=$1,815,081, R=$999,184
    2010: D=$1,385,760, R=903,210

    GE could give a rats-ass who’s in office, they just want access. It is true that Obama received 5 times as much as McCain. ($530,155 v $102,073) Given GE’s historical pattern of donations, the only thing that can be inferred is that they saw McCain as a bad investment. This donation pattern was echoed in many corporations across all industries.

    Now put yourself in the board-room of an alternative energy start-up. Are you going to put your money on McCain, and his chanting throngs of “Drill, baby drill?” That would make zero business sense.

    Further, it makes all the sense in the world to be putting our government dollars into risky energy companies. First, energy independence is a national security issue and it is just plain stupid to ignore alternative energy options. Secondly, of course these companies are going to be a higher risk. Duh! You don’t give penicillin to a healthy patient (unless you are an oil company, of course).

    You should have stopped at “Perhaps, it is just business as usual.”

  • christine

    Hey Friv D: Nice to see that someone here at BC read the entire piece prior to the criticism. Good point, and in full disclosure, SoloPower (in this investigation) and John Doerr, with a few others, have ties to the GOP. In fact, Doerr wrote the “Energy Independence” part of Bush’s state of the of the Union (just can’t remember date). But the majority are to the left. Yet, all will come out in due time, when I reveal each energy company listed here. So much to cover in a blog!

  • christine

    Clarification: good point on GE!

  • Frivolous D

    “Clarification: good point on GE!”

    In politics, an inch can feel like a mile. I’ll take it. Thanks.

  • Dr Dreadful

    While partisan, this is an infinitely better treatment of the topic than that offered to us by a certain other BC Politics contributor.

    Couple of quick points: Christine, you remark that Issa only has one-third of the story. Given that he and the rest of his committee are all politicians, could there be some cherry-picking going on here?

    Secondly, am I the only one who finds it ironic that, despite all those folks buying Throw Them All Out and making it a bestseller, the vast majority of Congress will not get thrown out in November by that very same public?

  • Igor

    I didn’t read the entire article (yet) because I pulled up after the second sentence, which is inaccurate and biased: ” …gas prices have doubled under Chu’s watch…”, and then cites a rightist blog that cites another rightist blog that cites another rightist blog…ad infinitum, without a citation to seminal data.

    Maybe, after a lot of searching, a person could find some facts, real facts. But I went directly to the source of data at the Energy Information Administration page for gas price history gas price history and thence to the 1993-2012 graph: EIA graph.

    That’s a nice graph because you can move the cursor over a data point and read out the detail data. Thus, one finds that on 7/1/2008 gas was $4.10, 1/5/2012 $1.70 and… on and on and on. YOU see if you can make sense of it with regard to president. It doesn’t relate! Gas price is independent of who’s president, which is what the experts said all along. Go ahead, try to figure out a rationale for blaming either Bush or Obama for gas prices.

    What REALLY caused the big drop in price was the dreadful 2008 world recession.

    Oil prices are world prices. They are set in world markets. There is almost nothing the USA or it’s president can do to affect prices. Not George Bush, Not Barack Obama. Nor would phanthom president Newt Gingrich. Prices have a longterm secular upward trend because India and China have rapidly expanding driver numbers. After the Big 2008 recession Hit prices resumed the rate of increase under Bush.

    Maybe I’ll get back to this article later, but my first impression is that it is a lazy and superficial repetition of propaganda.

  • El Bicho

    welcome back, Christine. But I have to agree with Igor because I was not paying $2 for gas the day before Obama got sworn in.

  • Igor

    That’s right, EB. In fact, the EIA graph shows that the high price paid during Bush was $4.1 on 7/1/2008 and that it plummeted precipitously until 12/22/2008 when it resumed it’s longterm secular increase before Obama took office.

    As I stated (confirming what every real oil expert has said) gas prices are independent of presidential politics. Oil and gas prices are out of our hands, they are decided by large universal international markets that, these days, are dominated by China and India and the USA only consumes 20% of all oil, thus has weak influence over price.

  • Larry Stewart

    Jim Jordan is a bird brain

  • Larry Stewart

    I would tend to label myself as a conservative to moderate politically and I am a resident of Ohio but I am not super impressed by the opinions of Rep Jim Jordan. I don’t agree with a lot of Obama’s politics but I do like the fact that we are providing support for energy R&D etc.
    If I have to choose between Jim Jordan and Obahma, my choice would be none of the above.

  • Igor

    I finally read this article through and it’s a mess. It sprawls all over hurling out copious accusations but not bothering to establish a single case. It’s just more of the same superficiality that Christine exhibited in Earlier article.

    It’s just impossible to read.

  • christine

    Thanks Igor!

  • Glenn Contrarian

    Hm…let me see – the conservatives oppose hundreds of millions of taxpayer dollars spent for alternative energy, while liberals oppose several BILLION in taxpayer dollars in subsidies for (or in taxes not being collected from) Big Oil. Which one makes more sense?

  • Cannonshop

    #13 “Neither” is not an option in your world, Glenn, so it’s just pick six of one, or half dozen of the other, or some mixture of both.

    given that “Neither” is not an option, then, the question devolves to which one produces more taxpayers as opposed to dole collectors, in more states. In which case, it ends up being Oil that produces more jobs, hence more income tax collected, hence less of an impact when scaling is taken into account. For all the talk about ‘green jobs’ there sure aren’t a hell of a lot of them actually turning up relative to the money spent. I’d suggest that for every Solyndra that tried to actually MAKE something, there were ten outfits who only generated papers and promises and bills unpaid. Kind of like the RTA in Washington State, which ran through ten years’ funding in one with repeated ‘studies’ and not a foot of rail laid until half a decade AFTER going past deadline.

    Some of it is, as Christine and Warren suggest, corruption-and let’s be honest here, that corruption’s on both sides of the aisle, but a lot of it is also in-built barriers to actually producing anything beyond promises and vaporware, and a lot of THAT ends up coming from Your government and mine, and has since the late seventies when a lot of promising projects were killed by regulatory requirements that the developers just didn’t have the money to meet, time to meet, or allies in government to meet.

  • Igor

    14-Cannon: Oil only employs about 310,000 in the USA while alternate energy already employs about 2.5 million. So this statement is wrong:

    “…it ends up being Oil that produces more jobs, hence more income tax collected,”

    And the projected employment figures for XL are just fantasies. Even the for-hire consultant only projects 18,000 jobs (according to their secret formula), while the public report from Cornell says a few hundred to 4,000 at most.

    Big Oil is a capital-intensive business, as befits a sunset industry that throughout it’s history has assiduously pursued policies that replaced men with machines. It’s the glory of capitalism, after all, to replace men with machines. Unfortunately, Capitalism dictates that the money benefits of mechanisation be kept by the capitalists.

  • Jet Gardner

    I could swear that someone somewhere had already covered the FACTS concering the XL pipeline… oh wait, it was!

  • Jet Gardner

    Of course now that was just the facts covered in the mere comments section, now if you wanted to read the article, you’d have to click here.

  • Scott Deitche

    As someone who works in (though not at all in cleantech) and covers the “green” jobs sector, which BTW is wayyy more diverse and robust that just solar, this article is both a blessing and a curse.

    It’s a blessing in the sense that the type of cronysim that existed in this program should definitely be exposed for the reasons cited in the article, and the blowback that it causes.

    The curse is found in the article, where “scheme” is used to describe clean energy. I’m assuming it was meant in the capacity of the loan program and not all clean energy sectors, but as per usual, there are those that take this as a condemnation of all technological progress when it comes to anything vaguely green. For example, the ludicrous anti-sustainability bill in Arizona.

    Rest assured, that despite the best efforts of crooked politicians and anti-science fringe dwellers, cleantech will continue to move forward. The best illustration is the surge in private investment in cleantech R&D and companies from geothermal to wind.

    As for solar, the market is undergoing a major correction, based a lot on the entrance of China into the market which has resulted in significant downward pressure on prices. But also showing a maturing market where there is not a need for thousands of upstart solar companies.

    I recommend and The Green Skeptic, two great sources for up-to-date news and insight into cleantech and investments.

  • Igor

    Upon reading the article it seems to me that there is the possibilty of a very good article if the author concentrated on just a few of the ideas at the very beginning and expanded on them instead than sprawling across the whole spectrum. It comes out looking like a clumsy broadside against Obama personally rather than an expose of poor practices by the administration.