The White House budget office raised flags about the first energy loan guarantee awarded under the Obama administration, adding another layer of questions to the taxpayer backed financing now at the center of a House investigation.
In 2009, as the Department of Energy pushed to close the $535 million loan guarantee to California solar panel maker Solyndra Inc., the Office of Management and Budget concluded the financing was a greater risk to taxpayers than did DOE, iWatch News has learned. That higher risk rating, in turn, forced the government to set aside more money in case the company defaults on payments.
The Department of Energy pressed ahead, formally approving the deal in September 2009 while portraying the Solyndra loan guarantee as a symbol of President Obama’s quest to spread green energy projects with government backing.
Today, the Solyndra financing has evolved into something of a litmus test of how well the Energy Department has doled out billions of taxpayer dollars for clean energy initiatives. The loan guarantee is the subject of an ongoing House investigation, the center of a subpoena scuffle between House Republicans and the OMB and drawn questions from independent government auditors.
Yet even as the budget office has fought release of some of the records sought by Congress, its review at the dawn of the deal reveals questions about a guarantee that drew controversy as Solyndra hit financial hurdles after securing the prized government backing.
OMB scrutinized the loan guarantee’s financial strength shortly before DOE closed the agreement and, in the end, affixed a lower credit subsidy rating than the Energy Department had proposed.
The credit subsidy cost represents the cost to taxpayers should the borrower default on the loan. Before affixing a rating, OMB checks everything from the borrower’s cash flows to independent financial assessments and reports on the project’s legal and marketing strengths.
In Solyndra’s case, the Energy Department came up with one score, but OMB another—the latter concluding the deal carried more risk. The budget office gave the transaction a lower grade, meaning a higher cost.
“Of the pot of money that we had set aside, a little bit more money had to go for this deal,” Kenneth Baer, an OMB spokesman, told iWatch News.
According to a GAO report last year, the Energy Department said a typical credit subsidy cost for its loan guarantees would be 15 percent of the total. In Solyndra’s case, that would equate to $80 million. Baer would not say how much money OMB said should be set aside, but he said DOE ultimately agreed with its assessment.
The budget office said final decision for the loan guarantee rested with the Energy Department.
The Department of Energy, responding to questions from iWatch News, said it does not discuss credit scores for individual transactions. But it said it remains confident in the vetting conducted for the loan guarantee.
The budget office’s questions are not the only to be raised about the loan guarantee.
In May, iWatch News and ABC News disclosed that the Energy Department announced its commitment to award Solyndra the highly sought after guarantee without first receiving full legal and marketing reviews.
DOE said it had those reviews in hand by closing that September, and that the project will benefit the public by bankrolling construction of a plant for Solyndra’s unique solar panels for the commercial rooftop market.
Yet after securing the loan guarantee, the California firm in 2010 laid off workers and cancelled an initial public offering.
This year, the DOE restructured the loan’s terms to push back the company’s payoff date. Solyndra said it is financially stronger today, but some in Congress say its earlier troubles raise questions about how well the government vetted the financing.
Republican members of Congress are looking at the OMB to provide answers as part of a House Committee on Energy and Commerce investigation of the Solyndra loan guarantee. One of Solyndra’s primary backers is Oklahoma billionaire and Obama fundraiser George Kaiser. He has declined interview requests.
In July, following a 14-8 vote that fell along party lines, the House committee issued a subpoena demanding OMB turn over thousands of pages of records involving the Solyndra financing. Republican members of the committee, led by Subcommittee on Oversight and Investigations Chairman Cliff Stearns, R-Fla., accused OMB of ignoring many of its document requests, putting a crimp in the committee’s investigation. Democrats on the committee tried, but failed, to halt the subpoena.
The committee has been seeking four sets of records from OMB, ranging from correspondence with the White House to the budget office’s exchanges with DOE. But, Stearns said, OMB provided just one piece of those records, involving its correspondence with DOE—and only part of that.
“The most important information in the documents – the risk ratings assigned to the Solyndra guarantee – were redacted,” Stearns said at a July hearing.
The subpoena demanded records be turned over at noon Friday July 22. But when the clock struck noon that Friday, OMB did not provide the records.
The budget office said it has cooperated with the investigation, making thousands of pages of records available for review and meeting with committee investigators. It said it is reluctant to turn over some documents because they would shed light on internal review processes normally exempt from public scrutiny. Such disclosure, the budget office said, could chill future analyses.
Baer, the OMB spokesman, has said previously that the documents reveal civil servants “who take their integrity extremely seriously. There was no political interference to tell them what to do or how to do their job. There was no pressure to rubber stamp this transaction. It confirms that OMB and DOE did a careful, diligent review.”
New documents have been made available to congressional investigators to review “in camera” – meaning copies won’t be released to the committee, but are available for review.
The Solyndra guarantee ushered a new wave of spending under Obama for clean energy projects. Starting with Solyndra’s, the DOE announced 20 conditional commitments that infused projects with $11 billion in taxpayer backing. Several of those guarantees, loans and grants have bankrolled companies whose financial backers include major supporters of the president, iWatch News and ABC reported.
The Energy Department said each loan and grant was awarded after thorough review, and that the projects will put more people to work and support the green energy movement.
For its part, Solyndra said the government’s aid – coming at a time commercial markets were dry – helped it expand its solar panel production line.
In Washington recently, company President and CEO Brian Harrison presented a slide show to journalists with the heading: “The real story about Solyndra.” He said politics were not a factor in the company’s award. “I’m just trying to grow our business.”