Energy Dept. continues to rack up millions in failed loans
Solyndra…Fisker…Beacon Power. One after another, companies with federal loan guarantees go bankrupt. One after another, evidence of the foolishness of having Department of Energy bureaucrats dole out taxpayer dollars to “green” technologies that can’t survive without (or with) taxpayer assistance. Government has absolutely no business favoring (via loans, subsidies, etc.) certain businesses/technologies over others. They’re terrible at it. It’s not their job. Yet they continue to do so, because if they’re not busy spending our money with impunity – without regard to sound cost-benefit analysis, with no mind paid to returns on investment or bottom lines – what is there for them to do?
It should come as no surprise, then, to learn that another Energy Department loan was not money well spent. Last Friday, the ED announced that it will lose about $42M on a loan to VPG, maker of vans for the disabled. Time reports,
Vehicle Production Group, or VPG, suspended operations in February and laid off 100 workers. The company had paid back $5 million of a $50 million federal loan this spring, and the remainder of its debt was sold at auction this week to Humvee manufacturer AM General, which paid $3 million to buy the Energy Department loan.
VPG, of Allen Park, Mich., received a federal loan in 2011 under the same clean-energy program that provided a $529 million loan to electric car maker Fisker Automotive Inc. Fisker had received $192 million before a series of problems led U.S. officials to freeze the loan in 2011. The Obama administration has seized about $28 million from California-based Fisker, which has laid off three-fourths of its workers.
An Energy Department spokesman said sale of the VPG loan was a last resort.
“After exhausting any realistic possibility for a sale that might have protected our entire investment, the department determined that auctioning the remainder of VPG’s loan obligation offered the best possible recovery for the taxpayer,” spokesman Bill Gibbons said in an email.
The VPG loss and the potential loss of more than $160 million in the Fisker case would be the largest losses of federal loan money since the 2011 failure of solar panel maker Solyndra. That company’s collapse, which came despite a $528 million loan from the Energy Department, has triggered sharp Republican criticism of the Obama administration’s green energy program.
Rep. Jim Jordan, R-Ohio, chairman of a House Oversight subcommittee on economic growth and regulation, has called the loan program “one of the most disastrously mismanaged and corrupt programs in U.S. history,” a claim that Democrats reject.
So, well done, Energy Dept. You’re great at what you do. It’s just too bad that what you do is so bad for the rest of us.
Federal loan programs are funded by borrowed money, diverting capital from private credit markets (as the NCPA has long argued; see, e.g., http://www.ncpathinktank.org/pdfs/st103.pdf)
Before rushing to subsidize a business or industry, we should stop and ask why it “needs” to be subsidized. Markets should be able to allocate resources towards viable opportunities. Hurling taxpayer dollars at anything considered green is not the way to go.
Exactly. Profitability is the result of viability, if we subsidize industries that aren’t profitable we are creating economic loss.
Even if an industry/business “needs” a subsidy, why do we need to subsidize it? Obviously there are inefficiencies in their business that don’t allow them to “keep up” with the market.
Exactly, they should be self-sustaining.
“Yet they continue to do so, because if they’re not busy spending our money with impunity – without regard to sound cost-benefit analysis, with no mind paid to returns on investment or bottom lines – what is there for them to do?”
They think they are doing something worthwhile, but history proves different.
While the federal government was busy encouraging alternative energy projects by providing federal loan guarantees, the private market was investing in technologies such as fracking. As a result, the price of natural gas is now comparatively low and proven oil reserves are now substantially higher than only a few short years ago. If alternative energy was a good investment, private industry would have invested in it rather than legacy fuels.
Right, let industry lead the way, reaping the rewards or suffering the loss.
And best of all no loss to the federal government.
Does ‘Crony Capitalism” ring a bell?
If by “crony capitalism” you mean “government”, then yes. Don’t lay this failure at the feet of the free market.
And probably no one is being fired for any of this