House Energy and Commerce Committee Chairman Fred Upton and Oversight and Investigations Subcommittee Chairman Cliff Stearns responded today to the Department of Treasury Inspector General's report on the Obama administration's ill-fated $535 million loan guarantee to Solyndra. The report, "Consultation on Solyndra Loan Guarantee Was Rushed," reveals that DOE cut out the Treasury Department from dealings on Solyndra, ignoring the agency's advice and limiting its opportunity to review the high-price, high-risk financing. Treasury Department officials previously testified last October before the committee regarding the agency's role in the Solyndra debacle and the fact that DOE kept Treasury out of the loop at key points in the decision-making process.
Upton and Stearns made the following statement:
"The Treasury report echoes what our investigation has shown over and over; Solyndra was a bad bet from the beginning that was rushed out the door while every red flag was ignored. Treasury's report confirms the agency had been effectively cut out of the loan guarantee process despite federal laws and regulations that require their consultation.
"At every step of the way, Treasury was clearly an afterthought in Solyndra's loan guarantee as well as its restructuring that put company investors ahead of taxpayers. What this report and our continuing investigation show is an Obama administration that was either not up to the job, was cavalier in its attitude for following federal laws, or both.
"Treasury's examination also underscores why the public is so fed up with the Washington bureaucracy -- according to a review by the independent Treasury watchdog, the Obama administration was more worried about sending out a press release than it was ensuring Solyndra was a wise investment. And now taxpayers are paying half a billion dollars for the sins of Solyndra.
"Three years later, we are still asking, "where are the jobs?' All the Obama administration can point to is an impressive archive of press releases and video footage of staged groundbreakings. Our investigation continues as we work to learn the lessons of Solyndra and ensure the public is never again left on the hook for the administration's risky bets."
Among the Treasury IG's findings that the Consultation on the Solyndra Loan Guarantee Was Rushed:
Law Requires DOE to Consult with Treasury
Under the Act, the Secretary of DOE is authorized to make loan guarantees on terms and conditions that are determined by DOE, after consultation with Treasury. (T)he regulations implementing the Act required that DOE consult with Treasury concurrent (emphasis added) with its review process.
In the case of Solyndra, Treasury was not consulted on the terms and conditions of the loan transaction prior to or concurrent with DOE's review process. Furthermore, the consultation that did occur was rushed.
Treasury Not Consulted During Credit Committee Review
For the LGP, DOE established the Credit Committee and the Credit Review Board (CRB) to review loan proposals. Officials on the Credit Committee review and approve applicants' creditworthiness and technical merits which are summarized in the credit paper, and the terms and conditions of the loan guarantee specified in the Term Sheet. Treasury was not consulted during the Credit Committee's review of Solyndra.
Treasury Initially Given 24 Hours to Conduct Review
On March 17, 2009, OMB informed Treasury's Office of Government Financial Policy (OGFP) that DOE would be issuing a press release on Solyndra. An OGFP official expressed concerns to OMB in an e-mail regarding DOE's review process as it related to the requirement that Treasury be consulted with on the terms and conditions of any guarantee before the guarantee was extended. In that email, it was also communicated that when the regulations were drafted, OGFP made it clear that Treasury wanted to be involved in the development of the terms and conditions and not be brought in at the end when the terms of the deal had already been negotiated.
On March 18, 2009, Treasury received a draft press release from DOE announcing Solyndra's conditional commitment planned for issuance later that afternoon. The draft press release stated that "Secretary Chu offered the loan guarantee by signing a 'conditional commitment' today, following approval yesterday by the Department of Energy's Credit Review Board." In response, a Treasury official contacted DOE to request additional time to review and delay the DOE Secretary's signing of the Term Sheet and the press release. DOE originally agreed to extend Treasury's review time to noon on March 20, 2009. However, Treasury then agreed with a DOE request to expedite the review to March 19, 2009, so that the press release could be issued on the morning of March 20, 2009.
Treasury Not Consulted on Solyndra's Restructuring
In February 2011, Solyndra's loan guarantee was restructured with a subordination clause to Solyndra investors. Treasury was not consulted on the restructure and it was uncertain if Treasury should have been consulted in accordance with 10 CFR §609.18 dealing with deviations from the financial terms of a loan guarantee. According to 10 CFR §609.18, "DOE will consult with OMB and the Secretary of the Treasury before DOE grants any deviations that would constitute a substantial change in the financial terms of the Loan Guarantee Agreement and related documents."