Responding to the debacle over the Obama Administration's handling of a loan guarantee to solar energy company Solyndra, U.S. Senator Johnny Isakson, R-Ga., today offered an amendment to ensure that American taxpayers are repaid first if a recipient of a loan guarantee issued by the Department of Energy goes into default. Isakson offered the amendment to the House-passed Energy and Water Development and Related Agencies Appropriations Act, or H.R. 2354, which is being debated on the Senate floor this week.
In the case of the Solyndra loan scandal, the Administration rushed to approve a $535 million loan guarantee from the Department of Energy for Solyndra in time for the California company's 2009 groundbreaking. Solyndra never got off the ground financially, and the Department of Energy then restructured the loan guarantee in February 2011 as the company was on the verge of financial collapse. In August 2011, Solyndra closed its doors for good and laid off 1,100 employees.
Federal law states that when the Department of Energy issues a loan guarantee, the "obligation shall be subject to the condition that the obligation is not subordinate to other financing," meaning that the U.S. taxpayers are first in line to be repaid even if there are other private investors who are owed. In the loan guarantee with Solyndra, however, the Department of Energy restructured the loan for the struggling solar company in February 2011 in a manner that would have allowed taxpayers to be "subordinate" to two private investors when it comes to the order of who get repaid first.
Isakson's amendment clarifies the wording of the federal statute on Department of Energy loan guarantees to ensure taxpayers are always repaid first.
"Like many Americans, I am outraged that the administration would issue a very questionable loan guarantee -- to the tune of $535 million -- on the backs of taxpayers. I am even more astounded that when it appeared Solyndra was going into default, the administration took proactive steps and forced taxpayers to take a backseat to private investors in being repaid," said Isakson. "Our government should always put the taxpayers first, and that's why I have introduced this amendment to ensure that taxpayers are never subordinate in receiving repayment in the unfortunate event that a loan guarantee goes into default."
In a House Energy and Commerce Committee hearing last month, Jonathan Silver, the Executive Director of the U.S. Department of Energy's Loan Programs Office, admitted that all other recipients of loan guarantees that have defaulted in recent years, with the exception of Solyndra, were required to repay taxpayers before they repaid other investors. The exception made in the Solyndra restructuring process by the administration has led to allegations that the administration gave preferential treatment to Solyndra's private investors, one of whom is a large contributor to President Obama's presidential campaign.
Isakson also supports efforts to have the Department of Justice appoint a special independent counsel uncover the truth about whether politics played a role in influencing the Obama Administration to favor Solyndra over more financially stable loan applicants, and also to protect the American taxpayers' rights in the Solyndra's bankruptcy process.