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business newsThe Solyndra Scandal: Background, Updates, and Analysis
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ProPublica.org Sep 15, 2011 2:15 pm
What's the situation? Who's the focus of the investigations? How big a deal is this storyline? Here, sorting through what the Solyndra scandal does -- and doesn't -- mean.
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Scrutiny -- particularly from House Republicans -- quickly shifted to the Obama administration, which has been accused of rushing to approve a $535 million loan to the company in 2009 for political reasons and without carefully weighing the risks.
So what's the situation, who's the focus of the investigations, and how big a deal is this Solyndra storyline? We sort through what it does -- and doesn't -- mean.
What Was the Investment to Begin With?
The government first began considering Solyndra for a loan as part of a loan-guarantee program that began under the Bush administration. The Obama administration expanded the loan guarantee program by way of the stimulus and approved the half-billion dollar loan to the California-based solar company.
As the Washington Post's Wonkblog notes, Solyndra makes up just 1.3 percent of the $38 billion in loans extended as part of the loan-guarantee program, and it's the only loan to go bad so far.
Now that Solyndra had filed for bankruptcy protection, how much taxpayers will actually recoup depends on how things shake out in bankruptcy court and whether any money is left. Bloomberg and Time recently reported that at least some private investors are in line to get repaid before U.S. taxpayers.
So What's the Government's Investigation About?
It depends on which investigation you're wondering about. According to the Wall Street Journal, the FBI's criminal investigation focuses on "whether Solyndra executives knowingly misled the government to secure more than $500 million in loan guarantees." (A Solyndra spokesman said the company is "fully cooperating" with the investigation.)
Meanwhile, House Republicans on the Energy and Commerce Committee released findings yesterday from a seven-month investigation into the government's role in approving the loan. The memo, titled The Solyndra Story [PDF] blames the Department of Energy and the White House Office of Management and Budget for ignoring red flags "in their rush to spend stimulus dollars."
Did the Obama Administration Do Anything Wrong?
Well, government shouldn't approve the use of taxpayer money without doing its due diligence first. A 2010 report [PDF] by the Government Accountability Office found that the Department of Energy "treated applicants inconsistently, favoring some and disadvantaging others.
Solyndra wasn't the only one that got fast-tracked. The GAO also found that in at least four other cases, the government agreed to back companies before obtaining final reports assessing their risk of failure.
But so far there's no evidence that the Obama administration approved the loan in order to curry favor with supporters, as some have speculated.
Ultimately Solyndra was a failed investment decision on the part of the government -- which, unfortunately for taxpayers, isn't unusual. Consider the billions in bailout dollars that was lent to banks that, like Solyndra, ended up bankrupt.
No positions in stocks mentioned.
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