Fisker: we scarcely knew ye

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Of all the Department of Energy's green loan debacles and there have been many, Fisker stands above even the Solyndra disaster for a combination of audacity and incompetence.

(For previous posts regarding Fisker, please go here)

To quickly recap: Fisker Automotive was to build electric hybrids cars and was approved for $529 million in loan guarantees (more than they requested) from the Department of Energy to do so. Originally, the two models of cars they were to build were going to be in the $50,000-$60,000 range. In short order, that price escalated upwards to the $110,000 range for it's high-end model thus going from hybrid to luxury hybrid.

The cars were to be assembled at a plant in Delaware as part of the justification for this massive loan was that it would create good paying green manufacturing jobs here in the U.S. The only problem was that the Delaware plant never produced a single car, rather the assembly operations had been relocated to... Finland.

If you were thinking that perhaps a stipulation of the loan would be that our tax dollars wouldn't go to pay the salaries of Paavo, Heikki and the rest of the boys over there, you and we are in the same company.


After falling drastically short of production and sales goals (last year, they sold only 900 out of the 48,000 market-wide plug-ins), the cars plagued by mechanical, electrical and software problems and the failure of A123 batteries (yet, another DOE green loan #fail) last year was a harbinger of doom for Fisker and its aptly-named luxury model "Karma".

And on Monday, there was even more bad news for the car company that has not produced a car since last August.


From the New York Times:

The all-but-closed company skipped a large loan payment that was due on Monday, leading the federal government to take the unusually aggressive step of seizing $21 million from the company's cash reserves to begin recouping the $192 million in taxpayer dollars spent on the company's flawed strategy.

Which means, of course, Fisker is still on the hook to U.S. taxpayers to the tune of $171 million.


The fall-out from this extends beyond merely financial as green technology and our wisdom of taxpayer subsidies for green technology takes a P.R. hit:

Some environmental activists worry about the potential ramifications of a Fisker bankruptcy.

"We can't get to where we need to be in electric vehicles without government help," said Dan Becker, head of the Safe Climate Campaign, an advocacy group in Washington.

Mr. Becker, good sir, if $192 million committed out of $529 million promised isn't considered "help", we scarcely know what is and Fisker still managed to bollox things up.



And if the Obama administration has committed tax-payer money to other, more established auto-manufacturers like Ford and Toyota for their EVs without such disastrous results what is the explanation for what happened with Fisker?

From CBS News:

The Obama administration was warned as early as 2010 that electric car maker Fisker Automotive Inc. was not meeting milestones set up for a half-billion dollar government loan, nearly a year before U.S. officials froze the financing after questions were raised about the company's statements, newly released documents show.

An Energy Department official said in a June 2010 email that Fisker's bid to draw on the federal loan may be jeopardized for failure to meet goals established by the Energy Department.

Fisker continued to receive money until June 2011, when the Energy Department halted further funding. The agency did so after Fisker presented new information that called into question whether key milestones - including launch of the company's signature, $100,000 Karma hybrid - had been achieved, according to a credit report prepared by the Energy Department.

The December 2011 credit report said "DOE staff asked questions about the delays" in the launch of the Karma "and received varied and incomplete explanations," leading to the suspension of the loan.

Recall that the Fisker loan was approved in mid-2009 so it only took a year for the warning flags to go up. One year.

If the warning flags were going up that early, it would suggest perhaps that exercising some due diligence at the front end would've revealed that the loan should not have been made in the first place. Just sayin'.


As it stands, and we are being polite, what this represents is a dereliction of duty by Team O in the stewardship of the taxpayers' scratch. There's really no other way to look at it and yet there will be no repercussions for this willful negligence.

Committing tax-payer money to not-yet-market-ready technology is a losing proposition and committing the same to a start-up using that same technology that can't find sufficient private backing is a guaranteed losing proposition.

Unfortunately, Team O won't learn this lesson. The pursuit of currently suspect green technology subsidized by your money is an article of faith embedded in their collectivist religion and for the smartest kids in the classroom picking winners and losers with respect to directing the economy and "creating" jobs is a divine rite not to be left to the whims of market realities. That we should be so fortunate to be blessed by their benevolence and wisdom.




* Perhaps the quintessential image of the Karma. Being towed off the track after breaking down shortly into Consumer Reports test drive of the car. On the bed of that truck, the Karma achieves the greenie dream of a zero emissions vehicle lumbering down the highway at 50 mph.

Expecting different results?

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Back in December of last year we reported out on the Navy's big biofuel push which started out with replacing a quantity of JP-5 which fuels the Navy's jets and helos. Here is what we said at the time:

The departments of Agriculture and the Navy announced plans Monday to buy 450,000 gallons of non-food biofuels -- at a cost of $16 per gallon -- in what will be the largest federal purchase of biofuels in U.S. history.

The purchase is being authorized by an executive order under the Obama administration's "we can't wait" campaign.

Administration officials gave no indication why they're not going through Congress, instead using a program that was established to promote rapid job growth by bypassing congressional debate.

Perhaps why Congress was not able to chime in on this decision was because the fuel that this biofuel is replacing, JP-5, which powers the Navy's jets and helos goes for about $4/gallon. Crazy theory, we know, but that might just explain it.

Back to real time: We went on to point out that one of the firms that was producing the biofuel was politically-connected. C'mon, you know where this is going. Back to December:

Two companies will participate in the program -- Louisiana-based Dynamic Fuels, a joint venture of Tyson foods and Syntroleum Corp, which makes biofuel from used cooking oil; and California based Solazyme, which makes fuel from algae.

Now we get to the part you've been waiting for:

Solazyme is not just any biofuels company, and its continued partnership with the Navy is not without crony connections. Its strategic advisor is T.J. Glauthier, Obama donor and part of President Obama’s transition team, as Solazyme’s website states:

TJ Glauthier is an advisor and corporate board member in the energy and “clean tech” sector. He advises companies dealing with the complex competitive and regulatory challenges in the energy sector today. He also served on President Obama’s White House Transition Team, where he focused primarily on the energy portion of the economic stimulus bill.

Here and now: Yeah, we are so cronying out our national security.





So, nearly 3 years after SecNav Ray Mabus* made the bold prediction that by the year 2020, half the Navy's fuel and power would come from green sources, how's all that working out?

On Wednesday, the Great Green Fleet is scheduled to make its first demonstration voyage in Hawaii, just as Mabus promised it would. But this is hardly the triumphant moment that the Navy Secretary depicted back in that hotel ballroom. Support for the Great Green Fleet — and for Mabus’ entire energy agenda — has collapsed on Capitol Hill, where both Republicans and Democrats have voted to all but kill the Navy’s future biofuel purchases. In the halls of the Pentagon, the Navy’s efforts to create a biofuel market are greeted with open skepticism. Even inside the environmental community, there’s deep division over the wisdom of relying on biofuels. And while the Navy has tried to deflect questions about the cost of its renewables push, a little-noticed Defense Department report shows that the Navy could spend as much as an extra $1.8 billion per year if it buys all the biofuel it’s pledged to burn.

Continue reading full article here:


The summary contains all the usual suspects but these paragraphs jumped out at us:

One reason why: Biofuel companies aren’t like high-tech firms that can start small and slowly scale up. A new biofuel refinery could cost anywhere from $65 to $300 million to build. (And that doesn’t even begin to address the costs involved with farming the land or transporting the product.) Investors are hesitant to lend out that kind of money without major customers who are committed to buy the fuel; customers are skittish about making those kinds of commitments until they know the biofuel-maker can actually deliver. Currently, there’s not a single commercial-grade biorefinery operating in this country (although several are in the works).

“You need that big anchor customer. And the Navy can afford a premium, because it knows how much petroleum really costs,” explains Brook Porter, an investment partner at the venture capital firm Kleiner Perkins Caufield & Byers, which has put more than $1.5 billion into so-called “clean tech” companies. For some of these firms, a big military contract could mean the difference between life and death.

A struggling, expensive industry that is dependent upon one big customer is ripe for the temptation of picking winners and losers and crony capitalism.



And at the end of the day, the Pentagon has simply worn out of Mabus' crusading for bio-fuels:

Even within the Pentagon, doubts about the program crept in. Top Defense Department officials, ordinarily supportive of green tech efforts, rolled their eyes when I asked about the Navy’s biofuel push. ”We’re not in the fuel production business. We’re not into scaling up new new fuels,” says Kevin Geiss, a former computational chemist now serving as the Air Force’s Deputy Assistant Secretary for Energy.

You know, it's a shame we can't figure out this energy independence thing as we keep finding more and more of that black sticky stuff underneath us here in the good ol' US of A.



* Being in the shipbuilding industry, we've been able to see some of Mabus' maneuvering. To say he is a political animal would be an understatement of the highest order.

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The Chevy Volt story just keeps getting better and better

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A study by James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy, has shown that between direct subsidies to GM and indirect ones to GM subcontractors and parts providers, there may be as much as $250,000 worth of subsidies in each $41,000 Chevy Volt.

Each Chevy Volt sold thus far may have as much as $250,000 in state and federal dollars in incentives behind it – a total of $3 billion altogether, according to an analysis by James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy.

Hohman looked at total state and federal assistance offered for the development and production of the Chevy Volt, General Motors’ plug-in hybrid electric vehicle. His analysis included 18 government deals that included loans, rebates, grants and tax credits. The amount of government assistance does not include the fact that General Motors is currently 26 percent owned by the federal government.

The Volt subsidies flow through multiple companies involved in production. The analysis includes adding up the amount of government subsidies via tax credits and direct funding for not only General Motors, but other companies supplying parts for the vehicle. For example, the Department of Energy awarded a $105.9 million grant to the GM Brownstown plant that assembles the batteries. The company was also awarded approximately $106 million for its Hamtramck assembly plant in state credits to retain jobs. The company that supplies the Volt’s batteries, Compact Power, was awarded up to $100 million in refundable battery credits (combination tax breaks and cash subsidies). These are among many of the subsidies and tax credits for the vehicle.

And how exactly are those Chevy Volt sales coming along? Eh, not so hot as Neal Cavuto chats with Mark Modica, an Associate Fellow of the National Legal and Policy Center.





6,000... 4,000 short of General Government Motors goal of 10 grand. And those numbers would appear to be padded by fleet sales to government agencies and others in the regime's crony circle like, General Electric.


It should be noted that we are not opposed to electric cars, per se. What we are opposed to is the subsidization of technology that is clearly not market-ready. Giving the evil rich a $7,500 break on the sticker price is ridiculous enough (are you listening #OWS?). However, and for the sake of argument, let's say that $250,000/unit subsidy figure is high... way high. Let's say its merely a third of that. So, now you have the Chevy Volt being subsidized to the tune of around $85,000 which is still over twice the sticker price! All that money dumped into it and still no one wants to buy it.

Ladies and Gentlemen, that is patently absurd and there is just no other way to look at it.

We forgot where we saw it, but there is apparently legislation pending in the house that would get rid of the purchase rebate. That's a good start but Congress needs to gut this entire crony charade from top to bottom.

Video smack of the day

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Ryanair CEO Michael O’Leary addresses runs some epic smack at an EU confab.


(It's long: 17 minutes so we extracted the best smack from the beginning of the video below the clip)





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“This is the first time I think that I or Ryanair have ever been invited to a conference by the European Union. Because as most of you know, the European Union spends most of its time suing me, torturing me, criticizing me or condemning me for lowering the cost of air travel…and making life so really difficult for their favorite airlines, which as we all know like high-fare airlines…who must be protected at all costs because they’re the ‘future of Europe,’"

"If you look at the mess Europe is in, if you look at the mess that the European economy is in, there’s only one way out of it.

And it’s not going to be a summit of European politicians. It’s certainly not going to be a conference held in Brussels, where the last innovative idea came in 1922, I think.

Innovation is going to be the way for the European economy to grow, to develop, to create new jobs and that‘s why I think it’s so important we have four young people."

Smack.



There he is, folks. An evil 1%-er who provides a service people want at a price they can afford while employing thousands of people without the help of and apparently in spite of excessive bureaucratic harassment.

This is a concept completely foreign to the economic illiterates who dominate this country's political class.

National security goes green crony

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A couple of days back we reported out on Range Fuels, a biofuel firm, that had recieved a $64 million loan from the Department of Agriculture and still managed to go belly-up. We were perplexed that there were no evident Range Fuel ties to the Obama administration as that appears to be the way things work in our new crony capitalist economic model. Well, it turns out that we were just looking at the wrong biofuel firm.




First the set up:

The departments of Agriculture and the Navy announced plans Monday to buy 450,000 gallons of non-food biofuels -- at a cost of $16 per gallon -- in what will be the largest federal purchase of biofuels in U.S. history.

The purchase is being authorized by an executive order under the Obama administration's "we can't wait" campaign.

Administration officials gave no indication why they're not going through Congress, instead using a program that was established to promote rapid job growth by bypassing congressional debate.

Perhaps why Congress was not able to chime in on this decision was because the fuel that this biofuel is replacing, JP-5, which powers the Navy's jets and helos goes for about $4/gallon. Crazy theory, we know, but that might just explain it.

Two companies will participate in the program -- Louisiana-based Dynamic Fuels, a joint venture of Tyson foods and Syntroleum Corp, which makes biofuel from used cooking oil; and California based Solazyme, which makes fuel from algae.

Now we get to the part you've been waiting for:

Solazyme is not just any biofuels company, and its continued partnership with the Navy is not without crony connections. Its strategic advisor is T.J. Glauthier, Obama donor and part of President Obama’s transition team, as Solazyme’s website states:

TJ Glauthier is an advisor and corporate board member in the energy and “clean tech” sector. He advises companies dealing with the complex competitive and regulatory challenges in the energy sector today. He also served on President Obama’s White House Transition Team, where he focused primarily on the energy portion of the economic stimulus bill.

Not an isolated incident. Though we don't have the numbers for the Dept. of Agriculture loans, a full 80% of DOE loans went to the companies of Obama donors.

Yeah, "We Can't Wait (to hook up our donors)" probably wouldn't pass Congressional muster but then who in Congress is going to have the stones to put a stop to this?

Solyndra in summary

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Our economic model summed up in 35 seconds:

"The true engine of economic growth will always be companies like Solyndra".

How appropriate that this President holds up as an example a company with connections to the administration and which received a $535 million loan from that same administration and which is now bankrupt with scant hope of getting back a nickel of that $535 million because they were selling their product at a loss because the technology they were using was not yet market-ready.

Indeed, Solyndra is the poster child for the failed crony capitalism of Obama's America.

Video clip of the day

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Starting Jan. 1 and because of a law signed by President Bush back in 2007, the trusty incandescent light bulb will be effectively banned and replaced by the expensive, mercury-filled, takes-forever-to-fully-illuminate compact fluorescent light bulb or CFL.


Reason.tv casts a mournful eye back on our 100+ year relationship with the incandescent bulb.

How can government tell me what to put in my Lite Brite?

While doing a search of what we had written previously regarding the CFLs, we noted that General Electric was very active in the lobbying effort to get incandescents banned in favor of the CFLs.

However, the dirty little secret is that G.E. lobbied for these regulatory changes contained within the 2007 Energy bill. The opportunity to mandate that consumers buy the more expensive fluorescents with the additional benefit of having them manufactured on the cheap in China was one that G.E. was not going to pass up.

So to recap: More expensive bulbs? Check. Bulbs that cost American jobs? Check. Bulbs that contain an element, Mercury, that is on every banned-list that we are aware of, including the construction program we are currently working on? Check. Bulbs that allow G.E. some back-slapping smuggery that they are doin’ it, doin’ it, doin’t, yea, for the environment? Double-check.

And don’t be at all surprised if at this very moment, G.E. is working on a patent for curbside pick-up of those mercury-containing light bulbs to be disposed of in a proper fashion. For a small fee, of course.

Corporate rent-seeking that costs U.S. jobs, decreases the purchasing power of the American consumer and is bad for the environment? Yep. Pretty much sums up the American economy, currently.

Graphic image of the day

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Used with permission from our friend Sir Charles over at Doo Doo Economics...

... and which serves as a convenient reminder of the Department of Energy's phony yet totally crony loan program that has lined the pockets of political favorites of those at:

Solyndra...

Fisker...

SunPower...

and Beacon Power

Let us know if we forgot any.

Hey, maybe it saved the Senate

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Alternate headline: Solyndra: the scandal that keeps on giving


'Suppose it just wasn't enough to give a completely ill-advised $537 billion loan that was opposed by the Treasury Department and independent auditors and with near-zero interest rates far more favorable than similar DOE loans (with a loan restructuring that put private interests ahead of that of tax-payers') and to a company with ties an Obama bundler/fundraiser.

OK, then, how about delaying announcing your closing up shop until after the 2010 midterms at the behest of the White House?:

The Obama administration, which gave the solar company Solyndra a half-billion-dollar loan to help create jobs, asked the company to delay announcing it would lay off workers until after the hotly contested November 2010 midterm elections that imperiled Democratic control of Congress, newly released e-mails show.

The announcement could have been politically damaging because President Obama and others in the administration had held up Solyndra as a poster child of its clean-energy initiative, saying the company’s new factory, built with the help of stimulus money, could create 1,000 jobs. Six months before the midterm elections, Obama visited Solyndra’s California plant to praise its success, even though outside auditors had questioned whether the operation might collapse in debt.

As the contentious 2010 elections approached, Solyndra found itself foundering, and it warned the Energy Department that it would need an emergency cash infusion. A Solyndra investment adviser wrote in an Oct. 30, 2010, e-mail — without explaining the reason — that Energy Department officials were pushing “very hard” to delay making the layoffs public until the day after the elections.

The announcement ultimately was made on Nov. 3, 2010 — immediately following the Nov. 2 vote.

Aside from the blatant impropriety if not outright illegality of this, we find it almost quaint, cute, in a way.

Now, we can work ourselves into a righteous lather with respect to the aforementioned transgressions of this Solyndra mess but thinking that delaying the announcement of 1,000 layoffs was going to make one iota of difference in that "hotly contested" midterm election shellacking of 2010 has to be one of the more amusing things we've heard in a while.

An ass-kicking that anyone with a pulse could've seen coming would somehow become not so or lesser so due to delaying a layoff announcement of a company no one had really heard of at the time. Awesome.

Fisker: it doesn't really have to make any sense...

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... as long as you can feel good about yourself.



Sure, we'll get yet another aspect of the Solyndra scandal soon here but we couldn't turn out the lights this evening without commenting on this.

You all remember Fisker, right? The American-owned car company that we, as in the U.S. tax-payers, via the Department of Energy's green loan program, lent $529 million to build $97,000 and $57,000 a copy electric cars... in Finland.

At 97 large for their high-performance sedan, there really can be no doubt that the purchase of this vehicle is merele an exercise in green vanity and smugness. And to put to rest any doubt you may have towards our contention, please bare in mind that one of the package options for the Fisker is, wait for it....

... EcoChic

The most advanced sustainable trim package available featuring 100% Recyclable EcoSuede interior material, and Certified Rescued Wood trim from California fires.

Let that settle in for a moment: they're sending that burnt wood all the way over to Finland to be inlaid to the dashboard. Feeling better about that $529 million already, aren't you?

You couldn't make this stuff up if you tried.

The hits... they just keep coming

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Remember when they told us that if we voted for McCain it would mean just four more years of blatant cronyism and unchecked practices of favortism? Well, they were right.


Solyndra, Lightsquared, Fast and Furious and now... Siga Technologies Inc.?


From the L.A. Times no less (headline sub headline):

Cost, need questioned in $433-million smallpox drug deal

A company controlled by a longtime political donor gets a no-bid contract to supply an experimental remedy for a threat that may not exist.

Over the last year, the Obama administration has aggressively pushed a $433-million plan to buy an experimental smallpox drug, despite uncertainty over whether it is needed or will work.

Senior officials have taken unusual steps to secure the contract for New York-based Siga Technologies Inc., whose controlling shareholder is billionaire Ronald O. Perelman, one of the world's richest men and a longtime Democratic Party donor.

When Siga complained that contracting specialists at the Department of Health and Human Services were resisting the company's financial demands, senior officials replaced the government's lead negotiator for the deal, interviews and documents show.

When Siga was in danger of losing its grip on the contract a year ago, the officials blocked other firms from competing.

Siga was awarded the final contract in May through a "sole-source" procurement in which it was the only company asked to submit a proposal. The contract calls for Siga to deliver 1.7 million doses of the drug for the nation's biodefense stockpile. The price of approximately $255 per dose is well above what the government's specialists had earlier said was reasonable, according to internal documents and interviews.

Our existing stockpile of small pox vaccine which can cover the entire U.S. population and prevent death if given within 4 days of exposure goes for $3 a pop.

The government's pursuit of Siga's product raises the question: Should the U.S. buy an unproven drug for such a nebulous threat?

"We've got a vaccine that I hope we never have to use — how much more do we need?" said Dr. Donald A. "D.A." Henderson, the epidemiologist who led the global eradication of smallpox for the World Health Organization and later helped organize U.S. biodefense efforts under President George W. Bush. "The bottom line is, we've got a limited amount of money."

Dr. Thomas M. Mack, an epidemiologist at USC's Keck School of Medicine, battled smallpox outbreaks in Pakistan and has advised the Food and Drug Administration on the virus. He called the plan to stockpile Siga's drug "a waste of time and a waste of money."

And don't like how negotiations are going? Go to the bullpen.

Negotiations over the price of the drug and Siga's profit margin were contentious. In an internal memo in March, Dr. Richard J. Hatchett, chief medical officer for HHS' biodefense preparedness unit, said Siga's projected profit at that point was 180%, which he called "outrageous."

In an email earlier the same day, a department colleague told Hatchett that no government contracting officer "would sign a 3 digit profit percentage."

In April, after Siga's chief executive, Dr. Eric A. Rose, complained in writing about the department's "approach to profit," Lurie assured him that the "most senior procurement official" would be taking over the negotiations.

"I trust this will be satisfactory to you," Lurie wrote Rose in a letter.

And here's some more of that transparency we've been hearing so much about.

Neither the HHS spokeswoman nor the Siga representatives would disclose the agreed-upon profit margin or the per-treatment price. Siga has cited terms of the contract in its public financial statements — but without those financial details.

We're not experts in this field but we remain confident that non-disclosure of the financial details of government contracts runs afoul of Federal Aquisition Regulations and certainly that of the practice of good governance.

And just to make you Obama apologists feel a little bit better about this, the effort to stockpile super vaccines such as the one Siga has successfully peddled in the name of counter-terrorism started during the Bush administration lending more evidence to our contention that O > W.


One last goodie: for all that, Siga's vaccine, ST-246, only has a shelf-life of 38 months. Just over 3 years for those of you in Placentia, California. The government had intended in non-competing the replenishment contract but dropped the exclusivity provision after one of the potential contractors lodged a formal protest. Though disappointed, Siga accepted this mere compliance with the rules not wanting to seek "any negative publicity." Probably a little too late for that.


Go to the link for more of the details regarding just how it was the existing system for competing government contracts was rigged, ignored and otherwise gamed to the exclusive benefit of one contractor whose controlling shareholder is a long-time/big-time Democratic and Obama supporter and donor.

Team O: raising crony capitalism to a true art form.



P.S. The Washington Post had finally started covering the unfolding Solyndra scandal and the L.A. Times has been on Fast and Furious and, now, this apparent Son of Solyndra in this Siga vaccine mess. There just might be some hope yet for the 4th estate.

More great moments in the history of crony capitalism... cont.

As even more and more legacy media outlets are digging into the Solyndra scandal it becomes more and more evident why the White House is blowing off Congressional subpoena request deadlines.





From the WaPo:

At a number of points in its troubled history, the solar company Solyndra faced dire financial problems that threatened its survival. Yet at each crisis, Energy Secretary Steven Chu and officials at his agency failed to take steps that critics say could have limited taxpayer losses when the company collapsed last summer.

Instead, Energy Department officials monitoring the solar panel manufacturer and its $535 million federal loan stepped in with financial assistance, or worked to dispel concerns raised by industry analysts and other Obama administration staffers, according to previously confidential documents analyzed by The Washington Post.

The officials raised no public red flags even as Solyndra executives presented a glowing picture last summer to Capitol Hill lawmakers, describing a growing company when internal sales figures suggested one that was in serious trouble.

The newly obtained documents, along with other records obtained in recent weeks, offer the clearest picture yet of Solyndra’s deteriorating finances and the Energy Department’s extraordinary efforts to prop up the company. Chu, who is scheduled to testify next week before a House investigating subcommittee, is likely to be questioned about his agency’s willingness to invest millions more taxpayer dollars in the firm, even after the White House had abandoned hopes of a rescue.

Everybody including the Treasury Department, OMB and independant auditors knew that Solyndra was a dog but Chu, the Energy Department and, of course, the White House forged ahead with their continuing support of their fair-headed green power child.

With Solyndra technically in default this past December for failing to make a $5 million reserve fund payment as a taxpayer protection, the Energy Department could have shut down the entire operation. However, instead of doing so, DOE officials wrangled $75 million dollars out of private investors with the stipulation that placed their new investment ahead of taxpayers for repayment in the event of a bankruptcy.

If this sounds familiar it should as in the Chrysler and General Motors bankruptcy cram-down proceedings, secured creditors were told to take a back seat to union concerns.



To recap: Against the better judgement of everyone outside the White House and DOE, a $535 million loan at near-zero interest rates (which were lower than similar DOE loans) was dumped into a solar company, linked to Obama fundraiser/bundler George Kaiser, that produced not-yet-ready-for-market-time solar panels and which ultimately went belly up. If that isn't crony capitalism carried out to a "t" then we don't know what is?

More great moments in the history of crony capitalism

We suppose the good news here is that potentially only $43 million will be lost as opposed to the over $500 million that was sunk into the doomed-to-failure Solyndra outfit here in California.

Beacon Power Corp filed for bankruptcy on Sunday, just a year after the energy storage company received a $43 million loan guarantee from a controversial Department of Energy program.

The bankruptcy comes about two months after Solyndra -- a solar panel maker with a $535 million loan guarantee -- also filed for Chapter 11, creating a political embarrassment for the administration of President Barack Obama, which has championed the loans as a way to create "green energy" jobs.

Beacon Power drew down $39 million of its government-guaranteed loan to fund a portion of a $69 million, 20-megawatt flywheel energy storage plant in Stephentown, New York.

There are several key differences between the two loans, an Energy Department spokesman said on Sunday, noting the Beacon plant continues to operate, unlike Solyndra, which shut down shortly before filing for bankruptcy.

The Energy Department also had agreed to restructure Solyndra's debt in a last-ditch effort to keep the company alive, a deal which put taxpayers behind $75 million in private investment. But for the Beacon project, the government loan is the first debt the company must pay, the spokesman said.

(italics, ours)

It's comforting to know that in running this green jobs picking winners and losers program, the Dept. of Energy is becoming a little more PR-savvy in recognizing that it's important that the tax-payer recoup at least some of their "investment".


Oh, and about that crony capitalism thing, just how was it that Beacon Power secured that loan?

Beacon is using the money to develop a 20 MW regulation plant at a site in Stephenton, NY. The site will use several 1 MW flywheels to store energy as well as electrical and technological equipment.

Company spokesman Gene Hunt said Beacon didn’t have financial advisors per se, just its outside law firm of Edwards, Angell, Palmer & Dodge. “We also used our in-house expertise and we have good relationships with our congressional members.”

Per se!


For those of you scoring at home: the afore-linked Solyndra, SunPower, Fisker, Lightsquared and now Beacon Power.

Stacking up like cord wood.


H/T: Hot Air

If you read nothing else today...

... make sure you check out the WaPo interview of Eric Schmidt, Executive chairman of Google in the wake of his testimony before Congress.


On the nature of his testimony:

So we get hauled in front of the Congress for developing a product that’s free, that serves a billion people. Okay? I mean, I don’t know how to say it any clearer. I mean, it’s fine. It’s their job. But it’s not like we raised prices. We could lower prices from free to…lower than free? You see what I’m saying?

On regulation:

Washington—having spent a lot of time there, I grew up there and have spent a lot of time there recently—is largely defined by detailed analytical views and policy choices that are not very good. You know, each policy choice has a winner and a loser, right? Somebody’s ox is getting gored. They’re complex arguments: They’re economic and political and social, and everyone has an opinion on those. Here, the arguments are, how do we make something that affects a million people? How do we change the economics of an industry?

And one of the consequences of regulation is regulation prohibits real innovation, because the regulation essentially defines a path to follow—which by definition has a bias to the current outcome, because it’s a path for the current outcome.

And the answer to regulation with respect to Washington not screwing things up:

You’re asking it the way an engineer asks. It’s not an answer, it’s a journey. If it were an answer, then after we had done our thing and told everyone to leave us alone, they would have left us alone. That’s not how Washington works. That’s not how government works. It’s naïve, on our part. So the modern model is that we spend a lot of time trying to make sure the government understands how large the contribution is that technology has made to the GDP of the country. One of our quotes: Fifteen percent of the GDP growth has been due to the two-and-a-half percent of the economy that’s IT. In other words, don’t screw that up.

On rent seeking:

Let me give you a counter example. Now there are startups in Washington. And these startups have the interesting property that they’re founded by people who were policymakers, let’s say in telecommunications. They’re very clever people, and they’ve figured out a way in regulation to discriminate, to find a new satellite spectrum or a new frequency or whatever. They immediately hired a whole bunch of lobbyists. They raised some money to do that. And they’re trying to innovate through the regulation. So that’s what passes for innovation in Washington. And again, God bless them. But they have a political strategy to get their particular legislation and niche approved. That’s unheard of here.

And the counter concept to that:

The conclusion that we came to [as far back as when I was at Sun Microsystems] is that there are two kinds of lobbying. And this, I think, is grossly unfair but kind of true. There’s the kind of lobbying where you pay an ex-senator to get the current senator to write a sentence into a bill, and there’s no confusion as to what this is about. You are representing your corporate interest. It’s specific to your company. In Washington, for example, you can pay an ex-person $50,000 to arrange a meeting to get that process, to get those five sentences written in this bill, and so forth and so on.

The punch line is, we concluded that we didn’t want to do that as industry, and certainly not at Sun. We wanted to lobby based on ideas. And as far as I know, every company that I’ve worked with—and I was part of the Business Software Alliance and all these other groups—we all sort of agree with this. There’s a line that we’re not willing to cross. So what we do from a leadership perspective, at least in terms of political leadership, is we talk about ideas. And inevitably what happens is everyone says ‘yes,’ yet inevitably on the Hill you have an older gentleman or lady.

On immigration with respect to the tech sector:

A classic example is H-1B visas. Now, the following arguments are so obvious, it’s hard for me to believe that anyone would believe that they’re false. These industries are full of very smart people. There are very smart people who don’t live in America. They come to America, we educate them at the best universities, they are smarter than I am, and then we kick them out. If they stayed in the country, let’s just review: They would create jobs, pay taxes, have high incomes, pay more taxes than the average American, and generally increase the GDP of the country. I hope my argument is clear, and if it isn’t I’ll start screaming about it. It’s the stupidest policy the government has with respect to high tech. So you have this conversation and people say “yes,” and you say, ”This is the single thing that you can do that will lead to innovation occurring in our country, and the future economic wealth of our country.” And then they don’t act.

Check out the rest of the interview at the link above.

Do you have to know the secret handshake to get into this club?

Here's Ray Lane, the Chairman of Fisker, the electric car manufacturer that recieved a $529 million loan guarantee from the Department of Energy to build its cars in Finland praising the Obama administration's use of tax dollars in private investment and using, wait for it... Solyndra as proof of its success in an interview back in March of 2009.

"Policy - government/private capital cooperation is actually beginning to work."


"It would be silly to think we could start these car companies and build them to full deployment with all the capital required without the help of the government in policy decisions to support U.S. jobs actually manufacturing cars in the United States."

In a sense, Lane is right. It sure would be silly to think Fisker was going to be building cars, their two main models costing $97,000 and $57,400 a piece, without being subsidized because what private investor in their right mind is going to sink his money into that?

Unfortunately, those subsidies are your tax dollars serving to prop up a technology and a business model that is not market-ready. Who is going to buy these cars except super-rich, smug limo-liberals?

And it's terrific they all seem to know each other. As Lane suggests, this crony capitalism thing is pretty damn peachy but unfortunately what winds up happening is that billions and billions of dollars are flushed down a black hole of the politically-connected and cock-a-mamie car companies building a product overseas that no one can afford.

If the technology and business model were market-ready then government subsidies would not be needed, as it stands then, when the government picks winners and losers, they invariably choose the losers.

Yet another green technology (overseas) boondoggle

*


On the bright side of things, we guess we should be thankful that they have not yet gone out of business like Solyndra or are massively in debt like SunPower.

With the approval of the Obama administration, an electric car company that received a $529 million federal government loan guarantee is assembling its first line of cars in Finland, saying it could not find a facility in the United States capable of doing the work.

Vice President Joseph Biden heralded the Energy Department's $529 million loan to the start-up electric car company called Fisker as a bright new path to thousands of American manufacturing jobs. But two years after the loan was announced, the job of assembling the flashy electric Fisker Karma sports car has been outsourced to Finland.

"There was no contract manufacturer in the U.S. that could actually produce our vehicle," the car company's founder and namesake told ABC News. "They don't exist here."

This really is old news as this loan to Fisker and the fact the cars would be built over in Finland was reported out on these very pages over two years ago..


And political connections, you ask? But, of course:

The loan to Fisker is part of a $1 billion bet the Energy Department has made in two politically connected California-based electric carmakers producing sporty -- and pricey -- cutting-edge autos. Fisker Automotive, backed by a powerhouse venture capital firm whose partners include former Vice President Al Gore, predicts it will eventually be churning out tens of thousands of electric sports sedans at the shuttered GM factory it bought in Delaware. And Tesla Motors, whose prime backers include PayPal mogul Elon Musk and Google co-founders Larry Page and Sergey Brin, says it will do the same in a massive facility tooling up in Silicon Valley.

Tens of thousands of luxury sedans and mass-produced sedans at... $97,000 and $57,400 a copy? Let us know how that works out.


And proving just how affordable green technology is becoming, the reported prices for those cars two years ago was $89,000 and $40,000, respectively.

And here's what was said with respect to the prices of the cars at the time (link above):

The Karma will target an exclusive audience -- Gore was one of the first to sign up for one. Mr. Fisker says all new technology starts out being expensive. He pointed to flat-screen televisions that once started at $25,000 but are now affordable to the mass market.

And our response:

It’s not entirely clear to us that $40,000/unit falls under the mass audience category but who the hell cares about the masses when one of the main beneficiaries of your largesse has dutifully signed up to have that thing sit in his driveway?

Think about it: billions upon billions of dollars in subsidies and the prices are going in the wrong direction unlike other areas of the tech sector (TVs and cell/smart phones) where no subsidies were received and real skin was in the game and the market determined the winners and losers.

Federally-subsidized green technology: Rising consumer prices, shipping jobs out of country and hooking up your buds... What's not to like about that?




* The Karma, Fisker's luxury sedan at the San Diego Auto Show in December of 2009. Yep, Karma's a bitch.

Occupy Wall Street: "Hey, look over there!"

A few thoughts on the Occupy Wall Street movement...


As we wrote yesterday, we are sympathetic to some of the gripes that appear to be central to the Occupy Wall Street's message as they parallel our opposition to the bailouts and corporatism/crony capitalism that have been the business as usual of both the Bush and Obama administrations. However, there is a latent anti-capitalism that informs the movement by which we cannot abide.

And what may have been a well-intended grass roots movement by a very loose collection of liberal-leftists, anti-Fed populists and anarchists rallying against Wall St. "greed" is morphing into a somewhat organized distraction from the spectacularly failed statist domestic policies of the Obama administration. There is evidence that MoveOn.org is attempting to co-opt the movement.

After largely staying out of the protests thus far, “MoveOn.org is expected to mobilize its extensive online regional networks to drum up support for the effort,” reports Crain’s New York Business.

The Obama front organization has supported the demonstrators by way of its website coverage, but this marks the first time that MoveOn will actively engage to organize ‘Occupy Wall Street’ events which its members will attend.

As for the opinions of those in the movement itself, Adam Kokesh talks to a few occupiers in D.C. and as you'll see there isn't much of a coherent theme as to what the occupiers actually want done, although Kokesh seems just as intent in getting his point of view across as he is in allowing the occupiers to express their opinions.



We will credit Kokesh, however, at the 7 minute mark for attempting to address the role of the government in the crony capitalism equation that always seems to go missing in rallies and protests of this nature. Occupying Wall Street is fine but doesn't it stand to reason that you should be doing the same on Capitol Hill and in front of the residence of the biggest crony capitalist around at 1600 Pennsylvania Avenue, Washington D.C.? One doesn't get the feeling, however, that any of the people interviewed won't be voting for Obama in 2012.

And then there was this:

The zeal for totalitarian government amongst some of the “protesters” is shocking. One sign being carried around read, “A government is an entity which holds the monopolistic right to initiate force,” which seems a little ironic when protesters complain about being physically assaulted by police in the same breath.

One sign to be sure but the one gentleman in the overcoat in the video seemed to hedge towards this philosophy and as we saw during the debate over ObamaCare, the reigning-in of the power of government just ain't what it used to be for liberals.


So, are the people that are part of this movement taken aback by what appears to be a high-jacking of this movement by a Democratic front group or are they totally cool with being co-opted and being used as campaign tools for the re-election effort of the Corporatist-in-Chief.

It makes perfect sense for the President to not only welcome this Occupy Wall St. movement diversion but to get one of his front groups to start pulling the strings behind the scenes. After all, his jobs bill, which is a re-hash of the failed Porkulus bill of February 2009, is DOA as there are not even enough votes in the Democratic-controlled Senate and majority leader Harry Reid has come out and said that the jobs bill that absolutely has to be passed now! will be taking a back seat to more pressing legislative matters.

So, after all that, for the smartest man ever to be elected President, demagoguing the rich and demonizing Wall Street by proxy is all he's got left.

Nice car company you got there... shame if anything happened to it

About a week and a half ago we posted a Ford Motor Co. commercial that took a not-too-veiled swipe at the bailouts received by Ford's domestic competition, General Motors and Chrysler.

Ford driver "Chris":

“I wasn’t going to buy another car that was bailed out by our government. I was going to buy from a manufacturer that’s standing on their own: win, lose, or draw. That’s what America is about is taking the chance to succeed and understanding when you fail that you gotta’ pick yourself up and go back to work. Ford is that company for me.”

If you clicked on the link, you would've found that the video has been removed by the user.



Hmmmm....

As part of a campaign featuring "real people" explaining their decision to buy the Blue Oval, a guy named "Chris" says he "wasn't going to buy another car that was bailed out by our government," according the text of the ad, launched in early September.

"I was going to buy from a manufacturer that's standing on their own: win, lose, or draw. That's what America is about is taking the chance to succeed and understanding when you fail that you gotta' pick yourself up and go back to work."

That's what some of America is about, evidently. Because Ford pulled the ad after individuals inside the White House questioned whether the copy was publicly denigrating the controversial bailout policy CEO Alan Mulally repeatedly supported in the dark days of late 2008, in early '09 and again when the ad flap arose. And more.

With President Barack Obama tuning his re-election campaign amid dismal economic conditions and simmering antipathy toward his stimulus spending and associated bailouts, the Ford ad carried the makings of a political liability when Team Obama can least afford yet another one. Can't have that.

The ad, pulled in response to White House questions (and, presumably, carping from rival GM), threatened to rekindle the negative (if accurate) association just when the president wants credit for their positive results (GM and Chrysler are moving forward, making money and selling vehicles) and to distance himself from any public downside of his decision.

In other words, where presidential politics and automotive marketing collide — clean, green, politically correct vehicles not included — the president wins and the automaker loses because the benefit of the battle isn't worth the cost of waging it.

Whether or not Ford supported and/or still supports the bailouts with respect to this situation is completely irrelevant. This represents yet another danger of corporatism/crony capitalism: the inherent thuggish nature of cronyism when the competition starts making you and your "winner", in the "picking winners and losers" schemes, look like a loser.

If you want just one more reason why the government should stay the hell out of private sector matters, count altering the business practices of the "competition" with innuendo and/or outright threats as that reason.


And we did warn driver Chris of his imminent proctology exam by the IRS. We would not want to be this guy, right now.

Is "Government investment" a paradox?

"Felony dumb"

That from Brian Bilbray (R-CA) on the Department of Energy's decision to give Solyndra over a half billion in tax dollar money to...

- invest in the production of the risky and not-yet-ready-for-primetime thin film technology solar panels instead of the less efficient but far-cheaper polycrystalline panels that the Chinese produce exclusively.

- manufacture solar panels in the onerous regulatory regime of California where electricity rates are twice that of Midwestern states like Ohio.

- manufacture solar panels on one of the most expensive pieces of land in the country.

- manufacture solar panels in a completely unnecessary new building when there were plenty of existing Bay Area facilities that could've been retro-fitted or rented.

Add all this up and it doesn't seem like a business plan that would attract a whole lot of private investment dollars and this also helps explain how it is that the government funded it.

There are essentially 4 ways how money is spent and they are as follows (in descending order of efficiency: 1) you spend your own money on yourself 2) you spend your own money on someone else 3) you spend someone else's money on yourself and 4) you spend someone else's money on someone else.


Take a wild guess as to which number best describes how government spends money? If you chose #4, move yourself to the head of the class.


There was simply no incentive for the government to get a quality product at the lowest possible price (#1) and this helps explain the inherent inefficiencies with government subsidies. And when the government has no real skin in the game, they invariably leave themselves open to other incentives such as graft and political favortism which very well may be the case with Solyndra...

... not that Solyndra's big wigs are going to let on to any of that.


Please remember this the next time you hear a pol prattle on about "government investments"... it simply does not work by the same rules, criteria and desired outcomes that our own personal investments do.

Justice Kennedy, are you ready for your close-up?

The 11th Circuit shoots down the ObamaCare mandate.

The provision in President Obama’s health care law requiring Americans to buy health insurance or face tax penalties was ruled unconstitutional on Friday by the United States Court of Appeals for the 11th Circuit, in Atlanta.

It was the first appellate review to find the provision unconstitutional — a previous federal appeals court upheld the law — and some lawyers said that the decision made it more likely that the fate of the health care law would ultimately be decided by the Supreme Court.

The court found that Congress exceeded its powers to regulate commerce when it decided to require people to buy health insurance, a provision of the health care law known as the “individual mandate.” But the court held that while that provision was unconstitutional, the rest of the wide-ranging law could stand.

A 2-to-1 majority ruled that the mandate was beyond Congress’s power under the Commerce Clause of the Constitution, writing that “what Congress cannot do under the Commerce Clause is mandate that individuals enter into contracts with private insurance companies for the purchase of an expensive product from the time they are born until the time they die.”

If the federal government can force you to purchase a good or a service, in this case, health care insurance, what cannot they force you to do? Don't know about you all but that doesn't sound like freedom to us.

The 11th circuit case was closely watched because among the plaintiffs were the Attorneys General of 26 states but it was just the second of three appelate reviews as the 6th Circuit found the mandate to be constitutional. The 4th Circuit is expected to render their ruling shortly.

There's also this from one of the lawyers arguing against the ObamaCare mandate.

Michael Carvin says that a Democratic judge's ruling against Obamacare proves this isn't a partisan battle.Michael Carvin, one of the lawyers who argued against President Obama’s national health care law before the 11th Circuit Court of Appeals, said the court’s decision to strike down the law’s individual mandate shows that the constitutional questions being raised transcend politics.

“It refutes the notion that this is a partisan policy fight where only the Republican appointed judges agree with our constitutional analysis,” Carvin said in a telephone interview. “This shows that it is a serious Commerce Clause issue where Congress has exceeded its power in an unprecedented way.”

President Clinton appointed one of the judges who co-authored the majority opinion in today’s two to one court decision. The suit was brought by 26 states led by Florida, as well as the National Federation of Independent Business. Carvin represented the NFIB.

“There’s simply no reason, if (Congress) can compel you to purchase this product (health insurance), that they can’t compel you to purchase any product,” he said.

The mandate is important as it's the mandate that holds the entire law together. Those 32 million previously uninsured are mostly younger people who are not using healthcare as much as other segments of society but who are needed to prop up all the other rules and regulations Congress saw fit to saddle the health insurance companies.

So, it wasn't necessarily Congress acting in benevolence in insuring those 32 million people but the health insurance companies insisting that the mandate be included in order to finance the law. Recall the interview of Pennsylvania Governor Ed Rendell by Bill O'Reilly last year right after ObamaCare was signed into law.

Right at the end of the clip, Rendell lets the cat out of the bag.

"It's the insurance companies that drove the mandate"

Well, if the insurance companies were going to become wards of the state, the mandate was the least Congress could grant them.


So, it looks like we're off to the Supreme Court and an appointment with the "Swing Man", Anthony Kennedy.