Economy & Budget

Bonuses For the Bankrupt

You might be under the impression that the Administration’s gift of a $535 million taxpayer loan to the well-connected Solyndra Corporation was an unmitigated disaster, since the company went bankrupt, and taxpayers are going to eat $385 million in losses.  You couldn’t be more wrong!  The Solyndra implosion was very profitable… if you happened to be a Solyndra executive.

The Silicon Valley Mercury News gives us a glimpse of fin de siècle Solyndra, as executives merrily looted the company, and by extension the U.S. Treasury, while bankruptcy loomed:

Senior executives at Solyndra collected hefty bonuses — ranging from $37,000 to $60,000 apiece — as the Fremont company bled cash and careened toward bankruptcy this summer.

Bankruptcy documents filed in Delaware earlier this week reveal that more than a dozen senior executives at the defunct solar manufacturing company were awarded sizable quarterly bonuses April 15 and again July 8. Solyndra ceased operations in late August and filed for bankruptcy Sept. 6. About 1,100 employees were laid off without severance pay.

The bonuses, awarded to more than a dozen executives, came on top of what were already highly competitive salaries. Karen Alter, Solyndra’s vice president of marketing, had an annual base salary of $275,000; she was awarded a $55,000 bonus in April and again in July. Ben Bierman, Solyndra’s executive vice president of operations and engineering, had an annual base salary of $300,000; he was awarded $60,000 in April and again in July. Will Stover, the company’s chief financial officer, was also awarded a $60,000 bonus in April and again in July.

People associated with Solyndra portray these astonishing bonuses as “retention” efforts.  Which makes sense, because when you’re spending $15 to manufacture a solar panel you sell for $8, you need tip-top talent to keep your business model running.

Jason Kilborn, a resident scholar at the American Bankruptcy Institute, said Wednesday that the payments to Solyndra executives could have been standard practice, since quarterly bonuses are a common form of executive compensation. He also said they could be retention bonuses.

“It’s not uncommon for companies facing serious financial distress to say ‘we need you now more than ever, will you agree to stay?’ ” Kilborn said.

That’s a lot easier to swallow when the company in question isn’t sucking down gigantic subsidies from the U.S. taxpayer.  This was a company Obama designated as a “winner” by political fiat, and he tried to create the “win” by infusing them with millions of dollars extracted by force from the people who earned it (or borrowed from China at interest, depending on precisely where one decides government revenue ends, and deranged levels of deficit spending begin.) 

By the way, weren’t the bonuses paid to AIG executives also described as “retention” packages?  Surely you remember the AIG bonuses.  They caused hordes of furious Obama supporters to ride buses to the homes of the executives in question, and camp out on their lawns.  Remember when watching business executives stuff their pockets with bailout cash made Democrats quiver with rage?

At least these bonuses will help answer a question that has been bugging Megan McArdle of the Atlantic: “How did Solyndra spend all that money?”

I’m still trying to wrap my mind around just how much money Solyndra managed to spend in just two short years.  By my count, Since September 2009, they borrowed $535 million from us to get their second fab up and running, raised $219 million in a private equity offering, got $175 million from issuing convertible promissory notes after their IPO was pulled, received $75 million in the last-ditch round where the DOE allowed their seniority to be subordinated, and maybe got a loan from a different bank.  By the time they filed bankruptcy in August, my understanding is that they were basically out of cash.

The Washington Post‘s rather scathing new account, full of employees saying that post-loan, Solyndra started spending money like it was about to be discontinued, says the new facility for which we loaned them all that money cost $344 million to build.  So it seems that in the space of two years, Solyndra managed to spend $344 million building a factory and $660 million . . . doing what?

Well, now we know a few million dollars went right into the pockets of those top Obama donors in the executive suite.  Surely the other zillion dollars of missing taxpayer loot will turn up eventually.

The Solyndra crew are pikers compared to executives at Fannie Mae and Freddie Mac – those government-backed mortgage giants that worked so hard to put Americans with poor credit into nice houses they could be subsequently evicted from, crashing the financial system of the entire planet along the way.  Fannie and Freddie executives banked almost $13 million in bonuses last year… and Freddie Mac just requested a fresh taxpayer bailout of six billion dollars, as the Chicago Tribune reports:

The government-owned company reported a comprehensive loss in the third quarter of $4.4 billion, it said in a filing with the U.S. Securities and Exchange Commission. That compared with a $2.5 billion loss for the same three-month period in the previous year.

Despite income of $4.6 billion, the company registered a net worth deficit of $6.0 billion, which was partly attributed to a $1.6 billion quarterly dividend payment to the Treasury.

[…] Freddie Mac has now drawn $72.2 billion from the government since it was taken over at the height of the financial crisis in September 2008. The government seized both Freddie Mac and larger rival company Fannie Mae as mortgage losses at the two firms piled up and threatened them with insolvency.

Freddie Mac has now returned $14.9 billion of the money it has drawn from Treasury in the form of dividend payments.

“Looking ahead, we expect the tepid recovery to continue to put downward pressure on house prices into early next year,” Haldeman said.

There sure isn’t any downward pressure on Haldeman’s bank account.  He scooped up four million dollars in bonuses while his operation was gulping down $21 billion in bailouts, according to ZeroHedge.

But by all means, let’s ignore the huge bonuses paid to those who ride taxpayer-subsidized financial nukes into the ground, waving their cowboy hats and whooping with glee, and focus our wrath on the “income equality” of people who earn high incomes performing useful services… or, at worst, losing the money private investors voluntarily gave them.


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