The Green Eyeshade Report

“Got questions about Solyndra? Don’t look here.”

The Wall Street Journal editorializes:

The Obama Administration is claiming vindication after Friday’s release of its “independent review” of the Department of Energy’s loan program. May we also sell you some Solyndra shares?

Looking to outflank a Congressional investigation, the White House last October retained banker and former Treasury official Herb Allison to review the loan program that had dispensed $535 million to Solyndra, a failed solar panel maker under investigation by the FBI.

It seems the White House’s idea of an review is a highly technical and uninformative snapshot of the financial status of the Energy Department’s existing loan portfolio. Mr. Allison examined 30 loans and loan guarantees that the Obama Administration has awarded to green-energy companies, worth $24 billion. The bulk of the report explains the complex methodologies Mr. Allison used to assign credit ratings to broad groups of these government “investments.” It’s not a page-turner.

This narrow approach suits the White House, especially Mr. Allison’s finding that at current market conditions taxpayers could lose only $2.7 billion on the loans. Since this is $200 million less than Energy’s own estimate, and some $7 billion less than what Congress was required by financial rules to set aside for blow-ups, the White House has declared victory.

Only in Washington is $2.7 billion in losses considered performing “well.” But the bigger problem is that the Allison report addresses none of the main issues. Because Mr. Allison’s brief was to examine only current loans, the report failed to investigate the bankruptcies of Solyndra or Beacon Power, an energy-storage company. So apart from its biggest failures, the program is a success.

Mr. Allison also didn’t investigate whether political influence was brought to bear on behalf of certain loans, a major question in the Solyndra case. His report doesn’t examine if government dollars have distorted the energy marketplace, and it doesn’t judge whether government assistance is even needed given private venture capital and corporate dollars. Mr. Allison’s remit was to don the green eyeshades.

But even by that standard he may be wrong. Because the green-energy industry depends so heavily on subsidies and unproven technology, a company that is surviving today may be in trouble next year. Ask Solyndra.

Because of privacy concerns, Mr. Allison didn’t release his credit ratings for individual loan recipients. Instead, he gave ratings for categories of loans, such as those that went to companies producing power for utilities. The report provides zero information about which borrowers are in trouble.

Mr. Allison concludes with a call for more transparency and a new “chief risk officer” to monitor the program. But what were the Administration’s current bureaucrats doing if not assessing risk? Congress’s Solyndra investigation has found that these risk assessors were pushed by the White House to quickly sign off on the loan, so that Vice President Joe Biden could announce a sexy green project.

Politics will trump economics in government handouts because they are made for political reasons. Taxpayers still deserve a genuine probe, and Congress should keep digging into green corporate welfare.

Read the entire editorial.

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