WASHINGTON, February 15, 2012 -An independent review commissioned by the White House of the Department of Energy’s loan guarantee program said there are steps the department can take to lessen the risk of the program, including the establishment of a chief risk office, separate from the loan program and answering only to senior department managers, to monitor agency loans. The assessment was led by Herb Allison, a former assistant Treasury secretary and president and CEO of Fannie Mae after it was placed into conservatorship.
The review, which covered loans for renewable technology development, nuclear energy projects and some U.S. auto-maker recovery efforts, said the DOE should develop explicit objectives and standards of performance for projects under the loan program’s portfolio, a complaint made often by Republican critics of the program in light of the Solyndra solar manufacturer’s bankruptcy last year.
And while the review said some $3 billion could ultimately be lost, that amount, the White House says, is only 30% of the $10 billion Congress allocated for the high-risk program established during the Bush administration.
But Allison and his team acknowledged several limitations to their work, including few investigative capabilities and its restriction to a single-point “snapshot” view in the life of the program. The review, which looked at 30 loans or loan guarantees totaling nearly $24 billion, does not include the impact of the failures of Solyndra or the Beacon energy storage facility.
As of Nov. 28, only about $8.3 billion of the nearly $24 billion in loans or loan guarantees offered by DOE had actually been borrowed and spent.
The two bankruptcies are expected to cost the government nearly $570 million, including $528 million from the Solyndra failure, though the DOE says some $28 million may be recovered by the sale of Beacon’s Massachusetts facility.
But many Congressional Republicans discounted the review as limited and biased. Citing Allison’s own acknowledgment of short-comings in the report, including the limited time frame that excluded Solyndra, Rep. Jim Sensenbrenner, R-Wis., said the review is “less a report than an umbrella to deflect the criticism that’s pouring down on the administration.”
He derided the administration description of the report as “independent,” asking, “How can an evaluation be ‘independent’ if the administration controls its content? A study that excludes inconvenient evidence isn’t independent,” he said.
DOE Secretary Steven Chu defended the program. “The report makes clear that the Department was operating under Congressional requirements to provide loans to projects that would have trouble obtaining private financing, which is why Congress appropriated funds for a loan loss reserve,” Chu said. “DOE's loan program is generating $40 billion in private investment in America’s economy that is supporting 60,000 direct jobs and many thousands more up and down the supply chain.”
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Original story printed in February 15, 2012 Agri-Pulse Newsletter.
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