The Department of Energy is being grilled on whether they violated a 2005 energy law over the methods it used in the 2011 bankruptcy of the green energy start-up, Solyndra.
Thursday, July 12, Republicans questioned David G. Frantz, Acting Executive Director of the Loan Program Office for the Department of Energy, over the use of the financial practice of ‚??subordination,‚?Ě or the prioritization of ownership over assets, where taxpayer interests where subordinated to private investors.
Rep. Cliff Stearns (R-Fla.), chairman of the Subcommittee on Oversight and Investigations, said in his prepared statement that Solyndra filed for chapter 11 bankruptcy ‚??just two years after the loan closed and six months after DOE restructured the loan and subordinated its interest to Solyndra‚??s private investors — all but ensuring taxpayers won‚??t see a dime.
‚??Of course, one bad loan does not make a trend,‚?Ě Rep. Fred Upton (R-Mich.), chairman of the Committee on Energy and Commerce said, ‚??but other recipients of loan guarantees and other stimulus programs have joined Solyndra in bankruptcy, and the ultimate cost to taxpayers could reach into the billions.‚?Ě
However, Ranking Member of the Committee on Energy and Commerce, Rep. Henry Waxman (D-Calif.) countered in his opening statement that ‚??I‚??m sorry Solyndra happened. We lost $500 million; that‚??s a shame, but that‚??s why loan guarantees are provided, because these are risky enterprises and not all of them are going to succeed.‚?Ě
In the hearing that focused on draft bills for two acts, the Republican sponsored ‚??No More Solyndras Act‚?Ě was given center stage by the majority Republican committee and is meant to stiffen language on the use of ‚??subordination,‚?Ě which Republican members maintain was already stripped from the DOE by a 2005 bipartisan energy law.
Acting Executive Director Frantz disagreed with the Republican members, saying that the 2005 law allowed subordination, but only as a tool of last resort. To which Rep. Phil Gingrey (R-Ga.) responded to the frequently invoked adage by Frantz that subordination was ‚??not in your toolbox.‚?Ě
Of the five Democrat members that sat in on the hearing, most took their time as an opportunity to highlight the successes of program, which Frantz agreed was ‚??an enormous success.‚?Ě
But, the Democrat members also blasted the act, which they viewed as a partisan bill, with Rep. Waxman leading the charge, saying ‚??this is a hearing for politics, that‚??s all it is. I guess this is an election year, so we can excuse it. But this nation faces an urgent energy challenge.‚?Ě Rep. Jan Schakowsky (D-Ill.) argued the bill was unnecessary as the DOE was already taking steps to correct their mistakes.
‚??The effort has included improvements to the way loan guarantees are originated and the way in which they are monitored,‚?Ě Frantz agreed, ‚??With these improvements in place, the department has concerns that the legislation would not result in increased taxpayer protections, but would instead hinder effective implementation of this important program.‚?Ě
However, when Frantz was probed further by Rep. Steve Scalise (R-La.) about aspects of the Solyndra case, including e-mails subpoenaed by the committee that warned of the political fallout over Solyndra before its bankruptcy, Frantz‚??s lack of knowledge led Scalise to believe the DOE was ‚??not serious about reform.‚?Ě
Rep. Stearns agreed, saying ‚??the Loan Guarantee Program has had a tough record.‚?Ě