Energy Secretary Steven Chu defended himself Thursday before a congressional oversight panel, saying he and his staff had never attempted to extend loan guarantees to the now-bankrupt solar power company Solyndra for political reasons.
Testifying under oath for nearly four hours, Mr. Chu responded to prosecutorial-style questioning by Republicans on the panel, stating repeatedly that he had in all cases followed legal requirements for extending $535 million in federal loan guarantees to the company.
“I want to be clear: Over the course of Solyndra’s loan guarantee, I did not make any decision based on political decisions,” Chu said in what was his first appearance before Congress to answer questions on Solyndra, a solar panel manufacturer that went bankrupt in August.
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When it came to extending the initial loan guarantee – as well as an even more controversial later decision to subordinate, or put taxpayers second in line behind private investors in recovering funds in the event of a default – Chu said the reason was the same.
“The final decisions on Solyndra were mine, and I made them with the best interest of the taxpayer in mind,” he said in his prepared opening remarks. “I did not make any decision based on political considerations.”
In his testimony, Dr. Chu emphasized several points:
• Hindsight is 20/20. Solyndra was highly rated by Massachusetts Institute of Technology and Wall Street Journal analysts as well as savvy private investors who, Chu reminded the committee, invested a billion dollars in Solyndra and also lost their money.
• Market conditions flipped quickly from 2010 through 2011, with prices of solar panels dropping more than 40 percent in less than a year and wiping out a number of companies, something most forecasters did not predict.
• George Kaiser, a Solyndra investor and fundraiser for President Obama, was unknown to him until recent news reports – and Chu said he had received no pressure to extend loan guarantees as a favor to the White House.
• Subordinating – or putting in second place – US taxpayers behind private investors was a “tough call” that he made in order that there might be a chance that taxpayers could reap some payback. At the time, private investors were refusing to put in more money without the deal – and the company would have gone bankrupt immediately.
• China is granting tens of billions in loans to its solar industry and it makes sense for the US to grant loan guarantees, even if some cutting edge firms fail. Congress in its 2005 energy bill set aside $10 billion to cover the cost of failed federal renewable energy loans, he noted.
• Solyndra was at the front of the line of applicants for loan guarantees right up until the Bush administration left office, contrary to statements by Rep. Joe Barton (R) of Texas, who said the Department of Energy under President Bush had rejected Solyndra. In fact, Chu said, the same DOE officials who approved Solyndra as a leading contender during the Bush years made that argument successfully to him.
From the start, it was clear that Republican members of the committee were eager to grill Chu to see if there were inconsistencies in his statements or whether he was reckless in approving the loan guarantees.
“A central focus of the investigation is to understand why DOE did what it did and how we find ourselves with this taxpayer-funded debacle,” said Rep. Fred Upton (R) of Michigan, chairman of the Energy and Commerce Committee. “The number of red flags about Solyndra that were raised along the way – many from within DOE – and either ignored or minimized by senior officials is astonishing.”
Committee Democrats tried to defend Chu, criticizing Republican leaders for gathering 186,000 documents from the DOE, White House, and other branches of government and failing, they said, to find a scandal. Instead, they said, the documents only showed internal debates of the issue, with one major exception: an attempt by an unnamed DOE official to request that Solyndra delay its layoff announcements until after the 2010 elections. Rep. Henry Waxman (D) of California dismissed that as “small potatoes.”
“I don't condone this action if it's true,” he said. “But let's keep this in perspective. Asking Solyndra to delay its announcement did not put any taxpayer money at risk. It didn’t change Solyndra’s business decisions. It had nothing to do with any of the loan guarantee decisions.”
“We have lost the money,” he added. “It’s unfortunate. But there’s no scandal – there's nothing there.” He also invited Republicans to “stop dancing on Solyndra's grave” and get on with energy legislation that would put people back to work.
“You seem to fail to monitor the loan guarantee process, failed to head the warning sign of the Treasury Department, OMB (Office of Management and Budget) and even your own legal counsel,” he scolded Chu at the end of the meeting. “You ignored subsequent Solyndra bankruptcy predictions two years ago by your staff” and ordered the “illegal subordination of taxpayers to two hedge funds.”
Together, he said, it “shows a high degree of mismanagement and ineptitude and I would think under the circumstances that it could have been done a lot better. Don't you feel, in retrospect, that this was poorly managed?”
After a long pause, Chu spoke.
“As I look back at the events and at the time and what did we know, when we knew it, that decisions were made, competent decision were made by the people in the loan program,” he said. “This is very important that the US be supporting these innovative technologies.”
Five-and-a-half hours after the meeting began, Congressman Stearns brought it to an abrupt close.
“I'll conclude by saying, I don’t know how many loan risks of half a billion dollars we can afford to lose as taxpayers.”