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“One Is A No-Risk Racket”: Why The Bain-Solyndra Comparison Is Terrible Strategy

Is asking voters to compare Romney’s vulture capitalism to Solyndra a good idea? The Romney campaign and its cohorts seem to think so. Within the past few days, American Crossroads, Karl Rove’s super PAC, released an ad that counters Obama’s attacks on Bain by highlighting Solyndra, a bankrupt solar panel company that had been given a government-backed loan guarantee, as well as the auto industry bailout. George Will made the Bain-Solyndra comparison on This Week; Paul Ryan did the same on Fox News Sunday; Michael Barone piled on in National Review Online.

The underlying argument is that the White House has been making the same risky bets as a private equity firm, bets that produced their own failures. (The grim-voiced narrator of the Crossroads ad, which is captioned, “President Obama is playing Wall Street games with our money,” asks, “Obama’s attacking private equity. But what’s his record on public equity investing?”)

It’s not the smartest response in the world. First off, Romney allies typically explain away Bain’s failures as just the way capitalism works—sometimes, bad companies are swallowed by the market. Solyndra, whose solar technology was priced out of the market by cheaper Chinese solar panels, is a pretty classic example of this, and by citing its Adam Smithian demise in response to attacks on Bain, Romney allies have diminished their ability to dismiss Bain’s loser companies as just the natural cycle of capitalism.

But the larger risk of this approach is that comparing any of Bain’s failures to Solyndra asks voters to examine private equity alongside public stimulus. The former is a game in which a tiny group of stakeholders set out to create as much value as possible for themselves: buying companies, often loading them up with debt they can’t bear, and extracting exorbitant fees for themselves before they reintroduce the company to the public and it either fails or succeeds. It’s essentially a no-risk racket, one Timothy Noah describes in fuller detail here.

Then there’s government stimulus, which is aimed at benefitting the public, and which the Obama administration has distributed with considerable success. Take the Department of Energy loan guarantee program through which the administration backed Solyndra. That program has been hugely effective for shoring up projects that the private market underinvested in. A recent, independent audit (pdf) by the former national finance chairman for John McCain found that it was due to come in about $2 billion under budget, and had subsidized mainly low-risk, critical electricity projects. The American Crossroads ad goes a step further and offers, as a comparison with Bain Capital’s failures, the government’s auto bailout, which an independent group found saved 1.45 million jobs, when no private equity dollars could be found to do the same.

On balance, the White House seems to be playing Wall Street games—if that’s what you want to call massive investment in underfunded public infrastructure—pretty decently, and in a manner that produces more value for the public than private equity firms. Bain and Solyndra are really nothing alike. And by insisting that they are, Romney boosters have given Obama’s campaign an opening to brag about what American Crossroads is calling Obama’s public equity presidency—and all its successes.

 

BY: Molly Redden, The New Republic, May 30, 2012

 

June 1, 2012 Posted by | Election 2012 | , , , , , , , , | Leave a comment

Whose Baby Is She?: The Birthing Of Solyndra

Solyndra is trying to rival her big sister Katrina’s ability to make the federal government look incompetent. But whose baby is she?

Since the solar-energy company went belly-up a few weeks ago — leaving taxpayers on the hook for $535 million in loan guarantees — a business that was once the poster child for President Obama’s green-jobs initiative has instead become a tool for Republicans to discredit most everything the administration seeks to do.

Sen. Orrin Hatch of Utah used Solyndra to argue against worker-training benefits. Sen. Jim DeMint of South Carolina used it to argue that the federal government should stay out of autism research. Disaster relief, cancer treatments, you name it: Solyndra has been an argument against them.

And this week, the government faced the prospect of a shutdown because House Republicans added a provision to the spending bill to draw more attention to — what else? — Solyndra.

“Because of some of the horrible weather we have had over the past several weeks, we have all agreed to add emergency funds we didn’t originally plan in this bill, and Republicans have identified a couple of cuts,” explained Senate Minority Leader Mitch McConnell, including “a cut to a loan-guarantee program that gave us the Solyndra scandal.”

What McConnell neglected to mention is that Solyndra was cleared to participate in this loan-guarantee program by President George W. Bush’s administration. He also did not mention that the legislation creating the loan-guarantee program, approved by the Republican-controlled Congress in 2005, received yes votes from — wait for it — DeMint, Hatch and McConnell.

This doesn’t mean that Bush is to blame for Solyndra or that the Obama administration should be absolved. Obama, whose administration gave the company the loan guarantee, deserves the black eye that Republicans have given him over the half a billion dollars squandered on the company. But the Republican paternity of the program that birthed Solyndra suggests some skepticism is in order when many of those same Republicans use Solyndra as an example of all that is wrong with Obama’s governance.

“Loan guarantees aim to stimulate investment and commercialization of clean energy technologies to reduce our nation’s reliance on foreign sources of energy,” Bush’s energy secretary, Sam Bodman, announced in a press release on Oct. 4, 2007. The release said the Energy Department had received 143 pre-applications for the guarantees and narrowed the list down to 16 finalists — including Solyndra. Bodman said the action put “Americans one step closer to being able to use new and novel sources of energy on a mass scale to reduce emissions and allow for vigorous economic growth and increased energy security.”

Bush’s Energy Department apparently adjusted its regulations to make sure that Solyndra would be eligible for the guarantees. It hadn’t originally contemplated including the photovoltaic-panel manufacturing that Solyndra did but changed the regulation before it was finalized. The only project that benefited was Solyndra’s.

The loan-guarantee program for these alternative energy companies, in turn, was created as part of the Energy Policy Act of 2005 — sponsored by Rep. Joe Barton (R-Tex.), who has been a leader in the congressional probe of Solyndra’s ties to the Obama administration.

Among those in the Republican majority who supported the bill was Rep. Louie Gohmert (Tex.), who, in a trio of speeches on the House floor in recent days, has taken a rather different approach than the one in the legislation he supported.

On Sept. 13, he invoked “the Solyndra fiasco” and said we are “prioritizing green practices kind of like a bankrupt Spain has done.” On Sept. 15, he denounced Obama’s new jobs proposals because “green programs, like Solyndra, will have priority.” On Sept. 23, he complained: “Apparently, half a billion dollars squandered for crony capitalism was not enough. There’s more provisions for that in the president’s so-called jobs bill.”

Also supporting the legislation creating the loan-guarantee program was Rep. David Dreier (R-Calif.), who on Sept. 22 said on the House floor that Republicans were removing $100 million from the loan-guarantee program “to ensure that we never again have another boondoggle like Solyndra.”

The complaints were much the same in the Senate, where DeMint said the Solyndra case exposed the “unintended results when our government tries to pick winners and losers.” That’s a valid criticism, but it would be more valid if DeMint hadn’t been a supporter of the loan-guarantee legislation in 2005.

But that was before Obama’s presidency, and views back then were different. They were more like the March 2008 press release from Bush’s Energy Department, announcing that it was funding research projects on photovoltaic technology. “These projects are integral to President Bush’s Solar America Initiative, which aims to make solar energy cost-competitive with conventional forms of electricity by 2015,” the announcement said.

Among the winners listed in the press release? Solyndra.

By: Dana Milbank, Opinion Writer, The Washington Post, September 26, 2011

September 28, 2011 Posted by | Capitalism, Congress, Conservatives, Economic Recovery, Economy, Energy, GOP, Government, Right Wing, Teaparty | , , , , , , , , , | Leave a comment

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