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Public Statements

No More Solyndras Act

Floor Speech

By:
Date:
Location: Washington, DC

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Mr. STEARNS. Mr. Chairman and my colleagues, in a recent editorial by The Wall Street Journal, dated September 11, 2012, entitled, ``China's Solyndra Economy,'' the owner of a solar panel company in China was unable to repay $3 billion in a bank loan that was guaranteed for his solar panel company. Do you know what happened? He leaped from a sixth floor building because he couldn't repay it.

This editorial outlines an unfailing description of all of these different solar panel companies in China that could not repay their loan guarantees. In fact, this summer, the New York Stock Exchange-listed company LDK Solar, which is the world's second largest polysilicon solar wafer producer, defaulted on $95 million owed to over 20 suppliers. The company lost $600 million in just the fourth quarter of 2011 and another $200 million in the first quarter of 2012, and it has already shed 10,000 jobs.

It goes on in this article to point out that the Chinese are doing the wrong thing--they're picking winners and losers--and these people who are losing are the people who can't pay back their loan guarantees. Some people in Washington seem to feel that we should compete with China. We have this China envy. In fact, this is what the President said:

I will not cede the wind or solar or battery industry to China because we refuse to make the same commitment here.

Now, given what this editorial says and what happened in China, I would think the President of the United States would have to rethink his position. So many in Washington have developed this serious case of China envy, seeing it as an exemplar case of how to run an economy. In fact, the Chinese, the Beijing mandarins, are no better at picking winners and losers, and are just as prone to blowing money as we are here in the United States with these beltway boondoggles. So, if people are concerned about this program and don't think this legislation is necessary, just take a few moments to read this editorial, which outlines the problems with solar panels in China.

I would say to my distinguished ranking member from Colorado (Ms. DeGette) that she and I both know the mission of our Oversight and Investigations Subcommittee is to extirpate--to root out--waste, fraud, and abuse. If it happens anywhere, we should step forward, and that's what we did in the Solyndra investigation. We attempted to understand what the problem was in order to come to grips with what happened. It took us 18 months. It took us almost 8 months to get back the emails from our subpoenas back in November. We were systematic, and we tried to do it without a huge amount of political rhetoric, and I think we accomplished that. The ultimate result of this investigation is the No More Solyndras Act, H.R. 6213. What this bill does is to basically answer some fundamental questions, and it takes the lessons that we learned from this investigation and puts them into this bill.

I reach out to my Democrat colleagues on this. The gentleman from Texas (Mr. Gene Green) was on the floor just recently, and he indicated he also agreed with us about the subordination. If I understood what he said, he said it was wrong for the administration to subordinate in violation of the law. In fact, I thought I'd take a few moments and, perhaps, actually read what the law says in dealing with subordination. It's section 1702, Terms and Conditions, in the Energy Policy Act of 2005. These are the exact words that, I believe, Mr. Green, Democrat from Texas, agrees with, that the administration should not have subordinated taxpayer money.
In the paragraph dealing with subordination--these are the exact words, and I'll read this carefully--``the obligation shall be subject to the condition that the obligation is not subordinate to other financing.'' That seems crystal clear. Yet, the Department of Energy, after talking to lawyers outside of the DOE who indicated they couldn't subordinate, still parsed the legal language so that they could.

It's very disturbing--and I say this honestly--that David Frantz, the executive director of the loan guarantee program, under oath, said he wanted to continue to subordinate loan guarantees. Now, that's an absolute fact--under oath. The DOE still has a senior loan officer who wants to subordinate. So how in the world could we not pass this legislation and allow the DOE to continue to subordinate and push taxpayers behind--what?--hedge funds? What financial instruments are they going to allow them to subordinate to? He wouldn't elucidate.

So the bottom line here is that the administration still wants to subordinate. That's why I tell everybody on the Democrats' side that you have to--and should--vote for this bill because, in the end, you're going to support David Frantz, the executive director of the loan guarantee program, who wants to continue to subordinate.

Now, here are the key lessons learned--and I'm going to do a colloquy with myself, Mr. Chairman. I think they'll answer the questions the way I want, but I'll answer them the right way.

Did the administration ignore several red flags raised by the Department of Energy and OMB about Solyndra's financial condition in the market for products? Yes.

Did the Department of Energy fail to consult with Treasury prior to issuing a conditional commitment to Solyndra as required by the Energy Policy Act of 2005? Yes.

Did the administration's desire to highlight the stimulus result in DOE pushing the Solyndra loan guarantee out the door? Yes.

Did the Department of Energy fail to adequately monitor the loan guarantee as Solyndra's financial condition simply deteriorated in 2010? Absolutely, yes.

Did the DOE subordinate its interest in the loan guarantee to two Solyndra investors, which was contrary to the Energy Policy Act prohibition on subordination? Absolutely, yes.

Did Treasury play any role in reviewing the restructuring when DOE was moving forward on Solyndra? The answer to that is ``no.'' Definitely no. They did not. In fact, numerous times through email, Treasury showed that they wanted to consult with DOE.

Did DOE consult with the Department of Justice about the subordination? You would think if they were going to parse the legal language on something that was in violation of the Energy Policy Act, section 1702, Terms and Conditions, you'd think they would go to the Department of Justice and say, ``What do you think of our parsed language?'' No, they didn't. They decided not to consult with Justice.

In the end, the items that I mention, the key lessons I learned from this investigation show demonstratively that this bill is absolutely required. Each of the seven areas I outlined and gave you definitive answers, each of these answers is included in this bill. And based upon what we see in China and what we see happening in the solar industry, we should not risk taxpayers' loans for any more of these loan guarantees if it's going to endanger taxpayers' money.

I'll just conclude by again reminding my colleagues of the mismanagement and the poor executive oversight by Secretary Chu back in 2011. He said, ``We are confident we can repay the loans.'' He was wrong, and that's why this bill is needed.

With that, I yield back the balance of my time.

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Mr. STEARNS. Mr. Chairman, there are three components to her amendment. The first one is so surprising that she would make this claim that the title XVII program created 60,000 new jobs. Of course, if you go to the Department of Energy's own Web site and you add up the actual number of the permanent jobs in that program, the number is 1,174, according to DOE's own Web site.

How could she possibly come down here and say 60,000 jobs because she includes the ATVM program, which is not part of title XVII, the Advanced Technology Vehicle Program.

First of all, anybody that votes for her amendment supports voting for something that is patently false, patently wrong.

The second portion of her amendment is based upon the fact that she thinks that the decision to loan Solyndra taxpayer money was based upon personal judgment. But throughout all of the emails we received, we show, whether it was OMB or Department of Treasury or even the Department of Energy, they all showed that this program was not going to make it.

Then the last portion of her amendment, which is really the heart, I think, of what her amendment is trying to do, she is saying that the counsel for the Department of Energy determined it was satisfactory to subordinate taxpayers. This is contrary to what I read earlier, Mr. Chairman, which clearly shows it's in violation of the Energy Policy Act of 2005. You cannot subordinate taxpayers.

In fact, even while they were doing this--I want to read you an email between OMB staff regarding Solyndra and this shows the optics of the whole thing. This email is between OMB staff regarding Solyndra:

While the company may avoid default with restructuring--vis-à-vis subordination--there's also a good chance it will not. At that point additional funds will have been put at risk. Recoveries may be lower and questions will be asked.

So, the bottom line is even after they parsed the language illegally, it was clear from the OMB that they weren't going to make it. So the Department of Energy's legal analysis was a post facto to try to subordinate to make this survive for political reasons.

Why did they want to make Solyndra succeed? Because it was a poster child. It was the one that the President has touted, Vice President Biden touted. They went out there and said we have to make this continue to work, all the while the subordination was illegal.

Now, OMB's Treasury staff believed the DOE had stretched the language of the Energy Policy Act beyond the limits when it agreed to subordinate it. The email I read to you and also further emails I could elicit, which we don't have time for, will show that OMB and Treasury believed that the Department of Energy was wrong in parsing the language to do this. DOE made a questionable, tortured determination of the law in order to justify a decision they had already made.

We want to stop that. That's why this No More Solyndras bill is required. They say that the Treasury consultation was not rushed.

The Treasury Department's own inspector general found that the consultation was rushed, and the cause was a press release that DOE wanted to issue to tout the Solyndra loan guarantee. We don't want that to happen again. Treasury wasn't brought in; a collapse of the credit committee and credit review board that had approved the conditional amendment. Treasury was given 1 day to review the deal, subordination of $535 million. Treasury own's emails that were produced to the committee said that the staff felt jammed.

Mr. Chairman, I think the long and short of it is when you look at the DeGette amendment, it's clear that this has been repudiated by the 18-month investigation. It shows the information that she has in here is incorrect, is patently wrong.

I would say in conclusion to all my colleagues who are listening, subordination of taxpayers' money should stop. If we don't pass this bill, David Frantz, senior loan officer at the Department of Energy, will continue to subordinate.

If you believe in subordination, then you vote against this bill. But if you believe the taxpayers should be protected and taxpayers should not be put at risk, and if they are at risk, they should have the first opportunity to get their money back in a bankruptcy, then you should vote for our bill, No More Solyndras, and you should vote against the DeGette amendment.

Mr. Speaker, may I ask how much time I have remaining?

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Mr. STEARNS. My colleagues, this amendment would allow the title XVII loan guarantee program to go on, continue indefinitely. The committee's 18-month investigation made one thing, I think, absolutely clear: the title XVII loan guarantee program must be eliminated. The No More Solyndras Act accomplishes this goal. It's wholly supported by the Oversight and Investigation Subcommittee and by the full committee. We support an all-of-the-above national energy policy that embraces a diverse range of traditional and alternative energy resources, but we don't support the Federal Government playing venture capitalist with taxpayer money.

The gentleman from California mentions innovation. I would submit to him that the iPhone, the iPad, and the iPod all came without the government picking winners and losers. The government has a role in fostering the development of new energy technologies, but primarily through research and development. The committee's investigation made clear that the government should not be in the business of picking winners and losers. And like the editorial that I put into the Record earlier from The Wall Street Journal, China is in the same fix as we are, and a lot of their solar panel companies are going bankrupt. The government needs to get out of the loan guarantee business altogether, and that's why we need to pass this bill.

With that, I yield 2 minutes to the gentleman from Pennsylvania (Mr. Murphy).

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Mr. STEARNS. In an ideal world, the government would never really have gone down this road to create these loan guarantee programs in the first place. I think all of us realize that. While eliminating the program outright is admittedly appealing, and I think a lot of us on this side of the aisle want to do that, we must be mindful of the fact that applicants in the queue have already invested significant time and financial resources towards simply securing their loan guarantee, and they have really narrowed their financing options also in reliance of the existence of this program.

So the question would be, when we thought about this: Is it fair to change the rules in the middle of the game? We're the United States Government. We hear all the time that the government changes the rules. We should be striving to reduce risk caused by the Federal Government, not create it. That's why I said in my statement here that we have to be mindful of the fact so many applicants have already committed themselves and put their time in.

But I think we can learn from this Solyndra debacle. And based upon this amendment by Mr. Waxman, I think we realize that in the end that the No More Solyndras Act tackles all the points that he's concerned about.

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