White House orders review of Energy Department loans amid Solyndra fallout
By Scott Wilson,
The White House has authorized an independent review of all loan guarantees made by the Energy Department to foster green technology amid fallout from the bankruptcy this year of Solyndra, the California company that received a $535 million loan through the program.
White House officials said Friday that Chief of Staff William M. Daley ordered the review, which will evaluate the entire $35.9 billion loan portfolio made to support the private-sector development of new technologies that could help improve the economy and create jobs.
The review is a tacit acknowledgment that the loan program, defended by President Obama and his senior advisers for weeks, has raised enough internal concern that an outside assessment is necessary to clear the air and determine its future. The announcement came as congressional Republicans threatened to subpoena White House records relating to the Solyndra case if the administration does not produce requested documents.
Daley named Herbert M. Allison Jr., a former assistant Treasury secretary, to head what will be a 60-day review. Allison is charged with assessing the health of the existing portfolio and making recommendations for how to better ensure the security of future loans, including ways to identify potential problems with recipient companies earlier than the government did in the case of Solyndra.
“The president is committed to investing in clean energy because he understands that the jobs developing and manufacturing these technologies will either be created here or in other countries,” Daley said in a statement. “And while we continue to take steps to make sure the United States remains competitive in the 21st century energy economy, we must also ensure that we are strong stewards of taxpayer dollars.”
The issue has become a political problem for Obama, who has been forced to defend the Solyndra investment as he pitches new plans to promote economic recovery. But the outside review holds as much promise as peril for the administration, given that a clean bill of health for the loan portfolio, issued by Allison and his team, could help buttress Obama’s argument that the overall initiative has been a success.
That is unlikely to appease Republicans, however, who remain focused on the loan process. On Friday, the House Energy and Commerce Committee announced that it would meet next week to consider authorizing the issuance of a subpoena for White House documents related to the Solyndra case.
The solar-panel manufacturer, based in Fremont, Calif., was the first company to win an energy loan guarantee from the Obama administration. It closed Aug. 31, putting 1,100 employees out of work.
Internal White House e-mails have shown that senior administration officials discussed Solyndra’s weak finances and shared fears that the loan could become a political liability for Obama, who has called green energy a key element of the country’s economic future. One White House e-mail suggested that the Energy Department was “ill-equipped” to select the appropriate companies for the loan guarantees.
Congressional Republicans have asserted that the administration hastily arranged the Solyndra loan because the company’s investors had ties to a major Obama fundraiser, George Kaiser. White House officials said the loan decision was based on the proposal’s promise, and Kaiser has denied any involvement in arranging the guarantee.
In recent weeks, some requests for White House documents related to Solyndra made by Rep. Fred Upton (R-Mich.), the energy committee chairman, and Rep. Cliff Stearns (R-Fla.), who is heading the subcommittee investigating Solyndra, have been denied.
In their Friday statement, the congressmen said that “subpoenaing the White House is a serious step that, unfortunately, appears necessary in light of the Obama administration’s stonewall on Solyndra.”
“What is the White House trying to hide from the American public?” the statement said. “It is alarming for the Obama White House to cast aside its vows of transparency and block Congress from learning more about the roles that those in the White House and other members of the administration played in the Solyndra mess.”
White House officials said Daley’s decision to order the independent review, which will look primarily at the strength of the loan portfolio rather than the decision making surrounding the Solyndra loan or any other specific one, was not prompted by the energy committee’s subpoena threat.
A White House official, who spoke on the condition of anonymity to describe internal White House thinking, said the “administration has been cooperating with various agency investigations” on the Solyndra matter. The official said more than 70,000 pages of documents from several agencies, including 900 pages from the White House, have been made available to congressional investigators.
“The fact is that everything we produced so far has shown that this was a merit-based decision by career staffers at the Department of Energy,” the official said.
Allison, who has worked for Republican and Democratic administrations, will examine more than 30 loan agreements made under the Energy Department program. In a Friday statement, Energy Secretary Steven Chu said he has directed his agency to provide “all necessary assistance and information” to Allison as he conducts the review.
During the George W. Bush administration, Treasury Secretary Henry M. Paulson Jr. appointed Allison president of the troubled federal home mortgage company Fannie Mae after it was put into conservatorship in September 2008. Obama then chose him as assistant Treasury secretary for financial stability, where he oversaw the Troubled Asset Relief Program, or TARP.
In a statement Friday, Allison said, “This administration clearly recognizes the challenges and opportunities that coexist with these programs,” referring to the loan guarantees designed to help innovative industry.
“My goal is to assess the current financial state of the portfolio and to ensure effective monitoring and management of the loan portfolio going forward,” he said.
Solyndra has been the focus of congressional investigators, but Republicans and the news media have also raised questions about other loans in the portfolio, leading to what has been a steady flow of concern over the program.
Fisker, an electric-car maker that received a $529 million loan guarantee through the program, has missed its early manufacturing goals and pushed back plans for U.S. manufacturing. Rep. Darrell Issa (R-Calif.), who chairs the House Oversight and Government Reform Committee, this week asked the Energy Department to explain a $730 million loan guarantee made to the Michigan subsidiary of a steel and mining company owned by a Russian billionaire.
Other loan recipients, too, are confronting recent financial difficulties.
Beacon Power Corp., an energy storage company that received $43 million in federal support from the program, may be delisted from the Nasdaq because its shares have dropped below $1 and it has warned it may not be a “going concern.”
The firm, which makes flywheels that control the flow of energy through the electrical grid, was next in line to receive a loan after Solyndra and counts the Navy among its customers.
Beacon received good news last week when the Federal Energy Regulatory Commission approved a regulation that will allow electricity storage companies such as Beacon to receive incentive payments. But two flywheels at the company’s Stephentown, N.Y., plant have failed in the past two months, prompting some analysts to downgrade its stock.
Staff writer Juliet Eilperin contributed to this report.