Tag Archives: Bankrupt

News

A closer look at the Obama administration’s $525 million loan to Solyndra

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From the Manhattan Institute. (H/T Tom)

Here’s the first thing to note about this story:

Both Republican and Democratic administrations have practiced a “green” industrial policy by supporting ventures that promised to pursue renewable, non-carbon-based energy production or energy conservation.

The DOE’s authority to issue loan guarantees for innovative, clean energy technologies, the Energy Policy Act of 2005, was passed by a Republican House and Senate and signed into law by George W. Bush. Under the law, Congress authorized the issuance of $4 billion in loan guarantees in 2007, and $47 billion in 2009 with the objective of encouraging the development of new technologies. [2] [3]

However, no DOE loan guarantees were made during the Bush administration. The DOE wanted to make a loan to Solyndra, but career officials at the Office of Management and Budget (OMB) did not approve it, on the grounds that the project was not financially sound.

The Section 1705 Loan Program was created by the 2009 American Reinvestment and Recovery Act, which amended the Energy Policy Act of 2005.[4] The 2009 stimulus bill gave the DOE an additional $3.95 billion for loan guarantees.[5]

So that’s where the money came from. It was “stimulus” money. And now the shocking part:

By November 2008, Solyndra had raised $450 million from investors and was applying for a loan guarantee from the DOE under the Energy Policy Act of 2005. But the loan was turned down in January 2009 in the waning days of the Bush administration, on the grounds that “there is presently not an independent market study addressing long term prospects for this company” and “there is concern regarding the scale-up of production assumed in the plan for Fab 2,” a second factory.[7]

On January 13, 2009, Lachlan Seward, director of the loan program at the DOE, wrote, “After canvassing the Committee it was the unanimous decision not to engage in further discussions with Solyndra at this time.”[8] Lachlan was referring to the DOE Credit Committee, which was composed of DOE officials.

When President Obama took office days later, the DOE’s tone changed. In a March 10, 2009, e-mail to an unnamed official, a senior adviser to Energy Secretary Steven Chu wrote, “The solar co [sic] board approved the terms of the loan guarantee last night, setting us up for the first loan guarantee conditional commitment for the president’s visit to California on the 19th.”[9] As events soon revealed, March 19, 2009, was a wildly premature target date for a presidential visit. In fact, President Obama didn’t visit Solyndra until May 2010.

E-mails dated 2009 depict White House and DOE officials rushing to sign off on the project so that Vice President Joe Biden could appear at the Fremont plant in September 2009 to trumpet the administration’s support for green jobs. There was confusion about who would go and when, as well as a palpable sense of urgency. Within the OMB—historically the most fiscally conservative agency in any administration—there was anxiety about premature planning and precedent.

On March 10, 2009, an OMB official whose name was blacked out by the administration before the e-mails were released to Congress wrote, “DOE is trying to deliver the first loan guarantee within 60 days from inauguration (the prior administration could not get it done in four years). This deal is NOT [sic] ready for prime time.”[10]

[…]On August 31, 2009, an unidentified OMB official wrote to Terrell McSweeny, domestic policy adviser to Vice President Biden, saying “We have ended up in the situation of having to do rushed approvals on a couple of occasions (and we are worried about Solyndra at the end of this week). We would prefer to have sufficient time to do our due diligence reviews and have the approval set the date for the announcement rather than the other way around.”[12] Regardless of these concerns, the loan was approved on September 3, and Biden announced it via satellite at Solyndra’s plant on September 4.

[…]On May 24, 2010, Valerie Jarrett, senior adviser to the president, forwarded a Cleantech Blog post by Philip Smith to Ron Klain, chief of staff to Vice President Biden. The post outlined the doubts of Pricewaterhouse Coopers, Solyndra’s auditors, about the company. It stated, “On a pure business analysis you have to agree with the auditors—they are not a going concern.”[14] Jarrett said to Klain in an e-mail, “As you know, a Going Concern letter is not good. Thoughts?”[15]

Although Jarrett and Klain knew that Solyndra would go under, two days later, on May 26, 2010, the president visited the newly built Solyndra manufacturing plant in Fremont, California, and declared, “It is here that companies like Solyndra are leading the way toward a brighter, more prosperous future …. We can see the positive impacts right here at Solyndra.”

Fascinating. This is what the government does with the money that it is borrowing from your children. This is what the “stimulus” efforts of the Obama administration amounted to. Not only was the Solyndra loan an opportunity to pay back a Democrat campaign fundraiser, but we now learn that it was also rushed through to provide Obama with a publicity opportunity. Is that the main job of the President of the United States? To waste money on photo opportunities?

Commentary

Entitlements programs are going bankrupt: how can we fix them?

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From the American Enterprise Institute, a post that explains in brief how to reform each of the three largest entitlement programs so that they will not go bankrupt by the time today’s younger workers need them.

Here are the programs:

  1. Social Security (a social program to redistribute wealth from current workers to current retirees)
  2. Medicaid (a social program to provide health care to low income/low wealth Americans)
  3. Medicare (a social program to provide health care and prescription drugs to older Americans)

And here’s one of the solutions (for Social Security):

Social Security is the easiest entitlement program to reform and can be done without raising taxes.

  • The age should be gradually raised to 70 by 2065.
  • Benefits should be indexed to price inflation, not wage inflation, as the program’s purpose is to keep the elderly out of poverty.
  • Benefits should gradually be reduced for earners with high incomes. The system should be a way to keep individuals out of poverty, not create a dependent upper- and middle-class.

Together these three reforms would ensure Social Security stays solvent. The entire system, however, could be easily replaced with a new program designed to keep seniors out of poverty and empower them throughout their retirement. People should be given the incentive to work longer by eliminating the Social Security payroll tax for individuals over 62, and a basic income supplement should be provided to impoverished senior citizens. Workers should then be given ownership of their retirement savings by enrolling all workers 55 and younger into a retirement savings account funded by 5 percent of the worker’s earnings (2.5 percent from the individual and 2.5 percent from the employer). These simple reforms would create a system that  actually provides a safety net for needy citizens — all for 60 percent of what the U.S. currently spends on Social Security.

Click through for the other two problems and solutions.

News

Greece and France vote against fiscal responsibility

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Greece is the most fiscally irresponsible country in Europe. Recently, their socialist government has been receiving bailouts from the  more responsible nations of the EU, especially Germany. These bailouts have come with the requirement that austerity measures be imposes. The spoiled Greeks have now voted against austerity measures, which will certainly imperil future bailouts, and will probably lead to the collapse of Greece and its withdrawal from the European Union.

Here’s a story that explains what happened on the weekend.

Excerpt:

The two mainstream parties that approved the second international £110 billion rescue loan and its stringent requirements for cuts were heavily punished as support surged for the Left and Right.

The shattering of the political status quo threw into doubt Greece’s commitment to meeting the terms of its debt and could spread instability throughout the euro zone.

Weeks of uncertainty are likely to follow as numerous parties vie to cobble a majority coalition, with a fresh election within two months a distinct possibility.

There will also be fears that ensuing political instability will see a return to the street violence that has scarred Athens since the debt crisis surfaced two years ago.

Exit polls said the conservative monolith New Democracy would finish first with a maximum of 20 per cent, while Pasok, the main socialist party, would suffer a dramatic fall to 13-14 percent, a third of what it received when winning the 2009 election. Voters held both responsible for years of mismanagement and corruption.

[…]Greeks angry at record unemployment, collapsing businesses and steep wage cuts ignored warnings that a vote against the harsh terms of the bailout would push Greece towards bankruptcy.

“The exit polls confirm what has been patently clear for some time: there’s no political consensus for the kind of reforms that Greece must implement if it wants to remain in the euro zone,” said Nicholas Spiros of Spiro Sovereign Strategy.

Othon Anastasakis, director of southeast European studies at Oxford University told Reuters: “Greeks are sending a very strong message abroad, which is enough with austerity.”

As they voted, many Greeks expressed their rage at the parties who accepted the harsh conditions of two bailouts that have kept the country from bankruptcy.

“My vote was a protest vote because they cut my pension,” said 75-year-old pensioner Kalliopi, her fists clenched in anger. “I live in a basement but pay the same (property) tax as someone who lives in a penthouse,” said Kalliopi after voting.

“I voted for Left Coalition, even if this means elections again in a month. I feel vindicated, things are changing little by little because people decided to speak up,” said 22-year-old student Klelia Avgerinopoulou.

[…]International lenders and investors fear success for the small anti-bailout parties could lead to Greece reneging on the harsh terms of the program, risking a hard sovereign default and dragging the euro zone back into the worst crisis since its creation.

Euro zone paymaster Germany has warned there would be “consequences” to an anti-bailout vote and the EU and IMF insist whoever wins the election must stick to austerity if they want to receive the aid that keeps Greece afloat.

What is most disturbing to me are the quotations from Greek citizens. Their knowledge of economic policy seems to be limited to that of spoiled children.

“The politicians who got us into this mess continue to mock us. Neither of them will do anything, all they are interested in is pulling the wool over our eyes so they can get into power again,” said Yiorgos Vrassidis, 55, after casting his vote at a “Voting for them would be like committing national suicide.”

He opted for the anti-austerity Syriza, an acronym for Coalition of the Radical Left, which shocked political observers by heading for second place. Three years ago it received just a few percent.

[…]Yianna Kiritsi, who was made redundant 18 months ago, said: “I want Greek people to decide for themselves, not the troika to decide for us. They make decisions for everybody. We are not allowed to take decisions.” Greeks routinely and derisively refer to the EU, International Monetary Fund and the European Central Bank which imposed the debt terms as “the troika”.

Dimitris Davos, a Communist voter, said: “We have to restore our dignity and national sovereignty. This election in Greece will send a strong message from the south of Europe to the rest that we can’t take any more pain. We need to be rid of these loan sharks and bankers.”

France also had elections, and they are taking the same anti-austerity (anti-reality) stance.

Excerpt:

 On Sunday night Mr Hollande had won 51.56 per cent of the vote compared to Mr Sarkozy’s 48.41 per cent with 90 per cent of the ballots counted.

Over 100,000 jubilant supporters gathered at Paris’s revolutionary Place de la Bastille, a pilgrimage site for the Left, chanting “François President”.

Many were too young to remember that it was here that a gigantic crowd gathered for the 1981 victory of the last Socialist president, François Mitterrand.

But even as the festivities got under way, officials close to both Mr Hollande and Mr Sarkozy were fearful of a market backlash against the Socialist’s plans to tax the wealthy and expand jobs in the state sector.

There are concerns that Mr Hollande will be unable to respect fiscal discipline targets while enacting a tax — and-spend programme that would see him create 60,000 more state education posts, partly revoke a pension reform and slap a 75 per cent tax on millionaire owners.

A senior Conservative source told The Daily Telegraph that fears France was about to reverse course would cause turmoil and uncertainty.

He said: “Clearly it’s going to focus a lot of market attention on the French public finances, which are nothing to write home about. I don’t think it is going to make life in the bond markets any easier next week.

“We haven’t chosen austerity because it’s fun. We have to do austerity, and so does France.

“He will have to be very careful about his public spending commitments and the lack of welfare reform.”

So the grown-ups have been voted out and the children are now in power. European voters want their ice cream, and they want it now, and they don’t want to have to behave to get it. How money is earned, how goods and services are produced, and how prices are set, etc. are all irrelevant to them. They have no idea why their goodies are being taken away, and they are having a tantrum.