Steven Chu defended today his decision to approve a large loan guarantee to now-bankrupt solar company Solyndra as Republican investigators pressed the energy secretary on whether politics played any role.
Chu appeared today before the Republican-led House Subcommittee on Oversight and Investigations to explain his role in Solyndra, the failed solar company that received a $535 million loan guarantee from the Department of Energy.
Republicans Cliff Stearns and Joe Barton implied that decisions regarding Solyndra's loans were done as political favors to Obama supporters. They also stated that a loan restructuring earlier this year was illegal because it put private investors ahead of the Energy Department for repayment of the first $75 million of the loan.
In response, Chu said that no political considerations played a role in his decisions to approve the loan to Solyndra in the first place or during the restructuring. He said the main reason that Solyndra went out of business was a precipitous decline in the price of solar panels--on the order of 70 percent in two and a half years--and softening demand for solar in Europe.
"It is extremely unfortunate what has happened," Chu said in response to a question on who should apologize for the failed loan. "But if you ask, was there incompetence and influence of a political nature, I'd have to say no."
He said the "bottom fell out" of the solar market in a way that exceeded most market projections, which has led to Solyndra and other solar companies being caught in a "very bad tsunami."
Barton noted e-mails released during the investigation showed White House officials urged Solyndra to postpone a layoff announcement until after the midterm election in 2010. Chu said he was only recently made aware of that.
The company's failure has been a black eye for the Obama administration and raised questions about how the U.S. will compete in solar and other energy technologies internationally. But so far, the investigation has not uncovered political favoritism in approving the loan, according to reports. The Energy Department has released 180,000 pages of documents and the Office of Management and Budget and the White House have also released thousands of documents.
Subordination of loan
One of the most controversial aspects of the Solyndra failure is that during a loan restructuring earlier this year, Energy Department officials agreed to let private investors be paid back for the first $75 million of the loan before the Energy Department. Barton said that decision is illegal while Stearns said that it was done to benefit private investors.
Chu said there was extensive discussion on whether "subordinating" taxpayer money was legal and, ultimately, the general counsel of the Energy Department concluded it was.
As to why the restructuring was done that way, Chu said that the restructuring allowed Solyndra to complete construction of the factory which the loan was provided for. Without the restructuring, the company would have had to declare bankruptcy immediately and have a half-finished factory as collateral. By completing the factory, it had a "fighting chance" to compete, Chu said.
In prepared remarks, Chu couched his discussion about the Solyndra loan as part of the nation's interest in developing energy technologies for economic reasons. He noted the China Development Bank has offered $34 billion in credit to Chinese solar companies. "We're in a fierce global race," he said.
Chu said that he would not have approved the Solyndra loan today but said that it was a hypothetical question since Energy Department officials could not have made decisions knowing what would happen two years into the future.
Evaluation of the Solyndra loan application was started under the Bush administration in 2007 and was "first in line" when Chu came into office in 2009. It was approved in March 2009.