Not Very Much

Statement

"Not very much." According to Secretary of Energy Steven Chu, that's what taxpayers can expect to recover from the Solyndra bankruptcy. Last week, Secretary Chu testified before the House Energy and Commerce Subcommittee on Oversight and Investigations, of which I'm a member. The Department of Energy (DoE) was the government agency responsible for approving the $535 million Solyndra loan guarantee as well as the later $75 million subordination. Subordination is the process by which private financiers or investors were put in line in front of the taxpayers should Solyndra go bankrupt, as it did in August. While I appreciate Secretary Chu's willingness to testify without a subpoena, his testimony left me even more concerned about the subordination.

In my opinion, by subordinating the loan guarantee, DoE acted illegally. There were red flags everywhere. DoE received concerns about the legality of subordination from the Department of Treasury and the Office of Management and Budget. Treasury even went so far as to recommend that DoE consult with the Department of Justice before taking action related to the subordination.

Secretary Chu had two choices to protect taxpayer dollars as Solyndra was running out of money. Stop the loan guarantee and let Solyndra go bankrupt or subordinate so that Solyndra could get private capital and have more time in hopes of turning around their failing business. Despite a plethora of legal landmines, he chose subordination. But something else also concerned me about the decision. One would think the value of a company's assets would be a primary concern during this subordination decision. If you go to the back of the line, you want to be sure there's enough to go around for you to get repaid. That's just common sense. Nonetheless, when questioning Secretary Chu in a hearing, he could not give me an idea of the value of Solyndra's manufacturing facility or the value of the patents/intellectual property the company owned. If Secretary Chu doesn't know the value of the assets that could be recovered today, how could it have been in the taxpayers' best interest to subordinate last February?

Looking back, when DoE considered subordination in December 2010, $95 million of the loan guarantee had yet to be dispersed. If DoE had not approved subordination, Solyndra would have gone bankrupt. The taxpayers would not be on the hook for that $95 million or put in second place for the $75 million that was subordinated. In essence, a $170 million mistake (made in violation of the law) with taxpayer money was made in a failed attempt to save Solyndra. This is a case of throwing good money after bad. It doesn't look like the taxpayers will see much, if any, of that money again. So much for Secretary Chu's stated purpose of looking out for taxpayer dollars.

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