Export-Import Bank's Solyndra subsidy reeks of politicized financing
Q: When would the U.S. government subsidize a U.S. export that had happened in the previous year and that was estimated to create zero jobs?
A: When the U.S. exporter was politically connected Solyndra, and the subsidizing agency is the Export-Import Bank of the United States.
Ex-Im in 2011 approved a $10.3 million loan guarantee to subsidize the construction of a solar farm in Belgium that was using panels made by Solyndra.
Solyndra had manufactured and shipped the panels to Europe months before Ex-Im even received an application for the taxpayer-backed financing. Installation was completed before the guarantee was approved. At least one internal Ex-Im document estimated that the deal created zero U.S. jobs. The press release announcing the deal didn't provide any number of "jobs supported."
But Ex-Im provided the taxpayer-backed financing for Solyndra's sale after communications with the Department of Energy, which was already exposed to Solyndra's debt. As Solyndra began to crumble and look bad for the Obama administration, Ex-Im rushed in with the subsidy for the already-installed panels.
Here's the brief timeline, as revealed by a public records request:
September 2009: Department of Energy gives final approval to loan guarantee to Solyndra. A few days later, Vice President Biden and Energy Secretary Chu attend the groundbreaking.
November 2009: Belgium solar farm orders Solyndra solar modules.
December 2009: Solyndra begins shipments of solar modules to Belgium.
January 2010: Ex-Im vice president Kevin Varney emails Ex-Im colleagues seeking agenda items for a meeting with "DOE leadership, including Sec. Chu to discuss issues and opportunities for Ex-Im and DOE."
Craig O'Connor, director of Ex-Im's Office of Renewable Energy & Environmental Exports, responds, mentioning Solyndra. The email says "Solyndra was the very first recipient of a DOE Loan Guarantee to build a $535 million factory in CA."
Ex-Im has redacted the rest of the email, which clearly discusses Solyndra, citing FOIA exemption b(5), also known as the "withhold it because you want to," exemption.
Varney (now a lobbyist at Boeing) tells me he doesn't remember such a meeting. Ex-Im officials did not return my calls asking about a meeting.
March 2010: Analyst PricewaterhouseCoopers warns of Solyndra that its finances "raise substantial doubt about its ability to continue as a going concern."
May 2010: President Obama visits Solyndra and says, "The true engine of economic growth will always be companies like Solyndra."
June & July 2010: Solyndra finishes shipping solar modules to Belgium.
June 2010: Solyndra cancels its initial public offering.
November 2010: Solyndra announces the layoffs of about 180 employees. Ex-Im receives application for financing for Belgium export made in June in July.
December 2010: Installation of the panels is completed.
February 17, 2011: On the same day House Republicans announce an investigation into the DOE loan guarantee program and Solyndra, Ex-Im gives final approval to its loan guarantee for the Solyndra-Belgium deal. This is more than a year after Solyndra won the deal, seven months after all shipments were made, and about two months after installation was completed.
June 2011: Ex-Im's loan guarantee becomes operative.
So why would Ex-Im agree to subsidize exports that had already been made, shipped, and installed? This seems odd if Ex-Im was trying to support U.S. jobs at Solyndra. It makes sense if Ex-Im was trying to change the financing of an existing export, so as to shore up Solyndra's financing. In other words, Ex-Im may not have helped Solyndra make a sale (which is what it is supposed to do), but it may have slowed down Solyndra's cash-flow trainwreck — a crucial objective for the Obama administration, which had stuck out its neck holding up Solyndra as the poster company for the new subsidized green economy.
Because Ex-Im's guarantee was to the Belgian buyer and not to Solyndra, the U.S. taxpayer didn't take a bath on this subsidy. But here's the important lesson:
Ex-Im doesn't make money out of thin air — it mostly uses government-backed loan guarantees to guide private lending to favored parts of the economy. Inevitably, this results in politically favored firms getting money, while politically disfavored (but often more economically promising) firms or projects get left out.
The paper trail, as far as the administration will reveal it, suggests that the Solyndra loan guarantee was an example of this politicized lending.
What other examples could we find if looked behind the curtain?
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