If anyone is coming out looking bad in this Solyndra mess, it’s the Department of Energy.
On Tuesday, Bloomberg reported that documents that the administration provided to congressional investigators last Friday show that Treasury Department officials told their DOE counterparts that they believed that the loan officials shouldn’t have put U.S. taxpayers second-in-line to be paid back if Solyndra went bankrupt.
“Our legal counsel believes that the statute and the DoE regulations both require that the guaranteed loan should not be subordinate to any loan or other debt obligation,” Bloomberg quoted Mary J. Miller, assistant secretary for financial markets at the Treasury, as saying in an e-mail to the Office of Management and Budget Deputy Director Jeffrey Zients.
It isn’t clear how the issue was resolved because it appears to have been hashed out during a subsequent phone conversation, but Bloomberg‘s Jim Snyder notes that Treasury’s Federal Financing Bank also wrote an email to DOE’s loan program advising that that the Justice Department needed to be consulted on the Solyndra refinancing agreement.
Nevertheless, despite Treasury’s opinion on the matter, the United States is now second in line to be paid back after the private backers of Solyndra, who put more than a billion dollars into the company.
The Republican leadership in the House, led by Rep. Darrell Issa (R-CA), chairman of the House Committee on Oversight and Government Reform, is investigating why DOE agreed to subordinate its loan guarantee. The Republicans say that the 2005 energy bill that created the loan guarantee program explicitly states that the loans are not to be subordinated. DOE officials have said that it’s not so clear cut.
Solyndra, a maker of highly-advanced solar panels in Fremont, California, declared bankruptcy on Aug. 31. It received it loan guarantee in September 2009, but struggled financially to compete with the heavily-subsidized Chinese makers of solar panels.
The company is now under criminal investigation by the FBI and the DOE’s Inspector General.
Jonathan Silver, the executive director of the loan guarantee program resigned on Friday. Energy Secretary Steven Chu said in a statement last week that Silver had always planned to leave because the loan guarantee program ended on September 30.
In addition to the loan subordination issue, Solyndra was allowed to carry on despite having violated the terms of its loan agreement, notes Bloomberg. Chu has taken personal responsibility for that decision.
The New York Times also reported on Friday that Steven Spinner, a senior member of DOE’s loan guarantee oversight committee, is married to one of Solyndra’s outside lawyers and constantly pushed the White House’ Office of Management and Budget to move more quickly to approve the $535 million loan guarantee.
