Thursday, May 24, 2012

Crony capitalism by the numbers


.

Entrance question: Just how incompetent do they have to be that they cannot even make crony capitalism work?



Marc A. Thiessen in writing for the Washington Post helpfully explains that if Mitt Romney's private equity record is fair game then so should be Obama's public equity record. Through either the stimulus bill or the Department of Energy's loan program, the administration has invested billions of taxpayer dollars in private businesses. And how's that been working out?

By the numbers...


33 million: The amount of money given to Raser Technologies to build a power plant in Utah. The company filed for bankruptcy protection in 2012 and owes $1.5 million in back taxes.


126 million: The amount of tax-payer dollars given to ECOtality for the installation of 14,000 electric car chargers. ECOtality’s own SEC filings, the company has since incurred more than $45 million in losses and has told the federal government, “We may not achieve or sustain profitability on a quarterly or annual basis in the future.”


98.5 million: The size of a loan guarantee to Nevada Geothermal Power (NGP) in 2010. The New York Times reported last October that the company is in “financial turmoil” and that “[a]fter a series of technical missteps that are draining Nevada Geothermal’s cash reserves, its own auditor concluded in a filing released last week that there was ‘significant doubt about the company’s ability to continue as a going concern.’ ”


3 billion (yes, that's billion with a "b"): the amount of tax-payer dollars given to First Solar in the form of a loan guarantee for power plants in Arizona and California. According to a Bloomberg Businessweek report last week, the company “fell to a record low in Nasdaq Stock Market trading May 4 after reporting $401 million in restructuring costs tied to firing 30 percent of its workforce.”


400 million: the amount of a loan guarantee given to Abound Solar, Inc. to build solar panel factories. Currently, the company has halted production and laid off 180 employees.



43 million: the size of the loan guarantee given to green-energy storage company Beacon Power. According to CBS News, at the time of the loan, “Standard and Poor’s had confidentially given the project a dismal outlook of ‘CCC-plus.’ ” In the fall of 2011, Beacon received a delisting notice from Nasdaq and filed for bankruptcy.



From linked article:

This is just the tip of the iceberg. A company called SunPower got a $1.2 billion loan guarantee from the Obama administration, and as of January, the company owed more than it was worth. Brightsource got a $1.6 billion loan guarantee and posted a string of net losses totaling $177 million. And, of course, let’s not forget Solyndra — the solar panel manufacturer that received $535 million in taxpayer-funded loan guarantees and went bankrupt, leaving taxpayers on the hook.



And our favorite numbers from this article:

71: the percentage of DOE grants and loans that went to “individuals who were bundlers, members of Obama’s National Finance Committee, or large donors to the Democratic Party.” This according to Peter Schweizer's book, "Throw Them All Out".

100: the number of criminal investigations that have been launched by the DOE's inspector general related to the department's green-energy program.




Here's some more on private equity firms from Democrat Lanny Davis:

Private equity firms often invest in distressed companies by putting in cash and cutting expenses in order to save a company that is already close to bankruptcy. Sometimes the investment works and the company and jobs are saved. And sometimes, to save the company, jobs need to be cut or wages and benefits reduced.

Does that sound familiar? It should. It’s called the General Motors bailout, widely touted by President Obama and Democrats as a success story, which it was.

Except that it wasn't. GM stock is currently trading at $22/share, down from the $33/share at its IPO. And that price will have to get up to $50/share in order to break even on the bailout. As it stands right now, we have lost billions to General Motors and we, most likely, will never get it back.




And one last thing regarding public equity and Obama's miserable track record regarding the same, next time you hear a Team O water carrier or someone from the administration itself pop-off about the people Romney laid off, remember this:

The Treasury Department encouraged automakers seeking TARP funds to rapidly close their dealerships, even though the plan contributed no specific savings to the companies and caused job losses at a time of mounting unemployment, according to a scathing new audit published Monday.

The report focuses on the plans by Chrysler LLC and General Motors Corp. to rapidly reduce their number of dealerships by about 25 percent each, and the role that Treasury played in encouraging the automakers to do so quickly instead of over the course of five years.

The audit was prepared by Neil Barofsky, a former federal prosecutor who now serves as special inspector general for the $700 billion Troubled Asset Relief Program.
Chrysler eliminated 789 dealerships in June 2009, and GM plans to wind down 1,454 dealerships by October of this year. The rationale behind those moves was that the old dealership network was too big, and that by closing some of the dealerships, the remaining ones would be more profitable and better positioned to re-invest in their businesses.

Wow. Kind of sounds like something Bain would've done.

Heh.


.









7 comments:

drozz said...

is it just me, or has WaPo recently published more of these kind of articles?

and this is pure opinion, but to me it seems they are hedging their bets.

SarahB said...

this is my favorite story of the week.

Road Dawg said...

will smith was in the White House last week, "duding" it up with the president. On a first name base even.
that was way more cool than your story. he's hanging with fresh prince.

Mostly Nothing said...

The biggest issue I had with the closing of dealerships, is they weren't cutting the deadwood. They closed the successful, profitable Chrysler dealership near me. Leaving open a smaller one that really wasn't performing. And Obama was quoted as saying that this was right. Part of his wealth redistribution for people that don't try.

The result? The profitable dealership bought the failing one.

Dean said...

MN, it was done in an entirely haphazard manner.

Doo Doo Econ said...

Great story!

B-Daddy said...

Devastating critique of crony capitalism vs "vulture" capitalism.