Crony Car Capitalism Capper

 | 

Obama’s reelection hardly negates the fact that his regime is one of the most corrupt in American history. This fact is by now obvious to all but the most partisan Obamistas. Crony green energy deals, crony college deals, crony car industry deals — the list is long.

But among the most egregious was the rigged bankruptcy of GM and Chrysler, in which the legitimate secured creditors were cheated out of what they were due under settled law in favor of the UAW — which had conveniently contributed tens of millions of dollars to Obama’s coffers. The UAW was to begin with the biggest reason that American auto companies became basket cases, and it received massive amounts of stock in both companies. It was then allowed to liquidate its stock before the taxpayers were allowed to liquidate theirs. The taxpayers ate billions of bucks in losses.

All this dirty business was done to protect grossly inefficient, overpaid, greedy auto union workers, most of whose jobs would likely have been saved (albeit at lower compensation) in a regular bankruptcy.

Finally we learned what has to be the ultimate joke. In the corrupt crony bankruptcy, Chrysler — after being bailed out with billions of taxpayer dollars — was essentially given away free to an Italian car company, Fiat. Fiat used the opportunity to expand its presence in America. And the most recent news is that Fiat will likely move some of the Jeep operations to China, and the rest of the Jeep and Chrysler operations to Italy.

As the report explains, “To counter the severe slump in European sales, [Fiat] is considering building Chrysler models in Italy, including Jeeps, for export to North America. The Italian government is evaluating tax rebates on export goods to help Fiat.”

So the Italian taxpayers will pay the highly unionized Italian auto workers to make cars at a cheap subsidized price — to put American auto workers out of work, and ensure that the American taxpayers get the ultimate hosing.

The stench from this corrupt deal grows in intensity every day, with each new permutation of the putrid process.

Is it too much to hope that the House of Representatives will mount a serious investigation into the whole crony crowd responsible for this abortion? I mean (to name names) Obama, “auto czar” Steve Rattner, the management team of GM and Chrysler, including Sergio Marchionne (CEO of Fiat), and especially all the leaders of the UAW?

Alas, it probably is too much to hope. The crime of the century will likely be swept under the carpet of history.




Share This


Non-Governmental Reform

 | 

While our attention can be temporarily redirected to more pleasant matters, it does not take long to remember that the banking and financial systems are in need of serious reform.

The most recent episode of irresponsible trading in the US was by Knight Capital Group. The Group instituted a new software system with a glitch that led to a loss of over $400 million in less than an hour of trading. The glitch was the result of the software being put into practice before it could be fully tested. The thought was, if this new software could be implemented ahead of the competition, Knight Capital would gain an edge on its competitors. The rush to beat the competition led to a premature, and thus irresponsible, implementation of its new software. There is no evidence of intentional deception or corruption as was the case with Barclay's, Enron, or MF Global; but it was irresponsible.

Nevertheless, reform does not mean government-led or government-mandated action. Government oversight and intervention are not the answer; a restructuring of how companies operate and reward their employees is. Government reform is always fighting the previous battle. Reforming the way companies operate is the only real response.

The recommendations I make are necessary but not sufficient. I make them not only in consideration of my work as a political theorist and ethicist but also as a result of my experiences as a small business owner who struggles with how to balance profit, ethics, and the law while keeping his employees focused on doing the right thing as they make money.

As long as monetary gain is the motive there will always be corruption and irresponsible behavior, simply because the acquisition of money is not the simple effect of responsible or ethical behavior. We cannot eliminate money or profit. It would be equally foolhardy to think government regulations will do the trick. Whatever restrictions are passed, someone will be waiting to figure out a way around them. But there are three organizational modifications that businesses can make that will help curb abuse and irresponsible behavior. Of course nothing will prevent this sort of behavior entirely, and modifications will always need to be made to keep up with changing times, but what I outline will avoid the false assumptions of government regulation.

First, those in charge of carrying out a company's day-to-day operations should be different from those in charge of managing profit margins. For instance, if a salesperson at a car dealership earns a commission on the cars she sells, she will have no immediate incentive to be honest or fair with the customer. Her goal will be to sell cars at the highest possible price. The same holds true for financial planners. If a planner has to choose between two investments for a client, one that will earn him a higher commission even though it's not the best option for the client, he will be inclined to do so. To say or expect otherwise is naive. Similarly, if those in charge of developing investment software for Knight Capital (not those whose salaries were tied to successful trades) were also in charge of deciding when it was fit to implement, the outcome could have been different. A software engineer making a fixed sum, whose future income will depend on the quality of the software, will have more of an incentive to get it right.

Second, there needs to be transparency. When a firm makes fundamental alterations to business practices or operating procedures, the changes must be submitted to the company's board for approval and made known to all customers and investors whom the changes may affect. Not only will this provide an opportunity for internal checks to keep bad business practices from being put into action but it will make poorly conceived or unethical plans less likely to be presented in the first place. If I know that the changes I make will be open to scrutiny I will be much less likely to act badly.

The third recommendation is delay. When delay procedures are institutionalized, time is available to evaluate any changes in policy or procedure. For instance, if Knight Capital had had a mandatory 90-day evaluation period for any software changes there is a good chance that the most recent fiasco could have been avoided, which would have saved the firm and its investors a lot of money. The SEC already recognizes the benefit of delay, which is why it stops trading whenever a stock drops too drastically in too short of a time. When people are given pause, cooler heads usually prevail.

The recommendations I outline are not a cure-all, but they tap into fundamental issues that must be addressed if any worthwhile reform is to be implemented. Current reform efforts require outside regulation that is generally too slow to adapt and is too easily circumvented. If, however, we change the way companies do business by taking into account how people make decisions, we will be off to a better start.




Share This


A New Wrinkle on Public Choice Theory

 | 

In my business ethics classes, I typically discuss public choice theory (PCT) right after I survey ethical egoism. I explain that by taking egoism seriously, economists have been able to understand many issues more profoundly than philosophers, who currently tend to dismiss egoism from the realm of serious ethical theory. (Other important phenomena that are generally beyond the appreciation of academic philosophers, uninterested in the profound role of self-interest in real life, include moral hazard, the principle-agent problem, regulatory capture, and especially “rent-seeking.”) In short, many philosophers buy into the Hegelian notion that the state (which they equate with the government) is the realm of disinterested charity — unlike business, which they take to be the realm of pure self-interest. Most economists are not Hegelians, which needless to say is part of their charm.

PCT asserts three propositions. First, everyone in the political process — voters, politicians, government bureaucrats, special interest groups, and the lobbyists who represent them — are motivated primarily (if not entirely) by self-interest. That is, egoism governs political reality. Second, there is an asymmetry in what participants in the process stand to gain, with special interests often standing to gain a lot while the average taxpayer only a little. And there is a concomitant asymmetry of knowledge. Third, since politicians are not spending their own money, but are using other peoples’ money (OPM), they have no incentive to use resources for the general good.

Most economists are not Hegelians, which needless to say is part of their charm.

The classic use of PCT is to explain why pork-barrel spending is so prevalent among politicians of every party (including those accurately characterized as libertarians, such as Ron Paul), and so hard to control. Suppose I am Congressman Jason (a jarring thought, I grant you), who represents a district dominated by a university. Suppose further that I am approached by a group of people who want me to build a “senior center” in my district, which, being a university-dominated area, has a lower concentration of old people than many other districts. They approach me, pleading their case, and reminding me that they made a large donation to my campaign in the last election. This group will typically include the folks who have the most to gain, such as the old people who will benefit from the project without having to spend a nickel more than taxpayers who won’t be able to use it, and the construction firm that will pocket millions of bucks from it. But the group will give itself a virtuous-sounding name, such as “Citizens for the Elderly” or “Seniors in Solidarity.”

PCT predicts that I, the politician, will reason as follows: “If I put this project in some grand bill, say, a defense spending bill, and it passes, I will get tens of thousands of campaign dollars for my next election. And, hey, money is the mother’s milk of politics. Moreover, voters in my district — especially elderly ones — will see my name on this new center and give me credit for it, even though it was OPM that financed it. Of course, the populace as a whole would be better off if this senior center were built in a district with a higher concentration of old people, but it isn’t my money, so I don’t care.”

PCT also predicts that since some of the old people in my district stand to gain a lot, not to mention the construction company, they will follow the progress of the legislation very closely, write letters on its behalf to my colleagues, call other congresspersons, and so forth. On the other hand, since the average voter only stands to lose perhaps a dollar on this boondoggle — and has other pressing matters to worry about — that voter will have no incentive to follow the legislation. He will be “rationally ignorant,” in the snappy patter of the economists.

So, when we think of politicians acting for their self-interest, as predicted under PCT, it is self-interest at arms length, so to say. We think of pols who decide to push suboptimal taxpayer-funded projects to directly help favored supporters or their constituents as a whole, so they can indirectly benefit by harvesting more votes. But a recent article in the Washington Post suggests that when they put through pork-barrel projects, many pols receive a much more directly personal payoff.

The newspaper compared public records about the property owned by all 535 members of Congress, and correlated the information with the earmarks pushed by these people over the past four years. It turns out that 33 of these solons pushed projects (costing taxpayers over $300 million) that were within two miles of their own properties. Moreover, 16 of them pushed subsidies for companies or programs in which their immediate family members (children, parents, or spouses) were employed.

The report notes that under the rules of Congress, this is all perfectly legal, and the members so benefiting were under no obligation to disclose it.

When confronted, the legislators naturally explained away their conflicts of interest by remarking on how necessary the projects were for their local economies, and claiming that the personal benefits they received were unimportant or merely coincidental.

Here are some of the juicier examples. Notice that members of both major parties are well represented.

  • Rep. Bennie Thompson (D-MS) got $900,000 in funding to resurface some roads back home. One stretch of resurfaced road just happened to be the one on which he and his daughter own two homes.
  • Rep. Roscoe Bartlett (R-MD) arranged for $4.5 million in taxpayer cash to improve a freeway interchange at a junction near his 104-acre farm and a bunch of his rental properties.
  • Rep. Ruben Hinojosa (D-TX) got an earmark to widen a major road in his district that just happened to be 600 feet away from a property that was owned and being developed by his family.
  • Rep. Jack Kingston (R-GA) used a $6.3 million earmark to restore the beaches on little Tybee Island. By sheer coincidence, he owns a home on the island, about 900 feet from the beach.
  • Rep. John Olver (D-MA) got $5.1 million to realign part of a highway. The project starts at a part of the road that is only about 200 feet from his 15-acre home, as well as some adjoining properties owned by his family.

The capper is Rep. Doc Hastings (R-WA). He was serving on the House Ethics Committee when it defined a congressperson’s financial interest as one having “a direct and foreseeable effect” on his or her assets. But the committee added that, as the Post put it, “’remote, inconsequential or speculative interests’ do not count.” Two years after writing this, however, Hastings himself got a $750,000 earmark for a new overpass — on a site only three blocks from a business he formerly owned and ran that is now operated by his brother, on land he still owns.

So when politicians spend OPM, they not only use it to buy votes, they often use it more crudely, to feather their own nests. This hardly supports the Hegelian concept of the state as the realm of disinterested charity.

Sixteen members of Congress pushed subsidies for companies or programs in which their immediate family members were employed.

Why do politicians think they can get away with such obvious use of taxpayer money for their own direct benefit? Well, to begin with, in every case they think they can successfully rationalize away their behavior to the voters. So, for example, Rep. Kingston, when questioned by the reporters, said brazenly, ”It’s absurd to suggest that this benefits me. The beach doesn’t improve the real estate of a house, unless it’s on the beach. . . . The only thing that changes in value is the beachfront property. It does have an economic impact on the beach and the community.” One has to suppose that Kingston thinks the average voter is a fool — which may or may not be a plausible view, depending on the depth of your cynicism.

But one should also remember that politicians are rarely caught. Few reporters ever do the sort of research needed to discover cases of such directly beneficial pork projects. Indeed, the research that the Post reporters did seems to be the first of its kind.

Perhaps the Post will now do an expose showing that Santa Claus doesn’t really exist. Its management, which is highly favorable to expensive government, may be similarly surprised.




Share This


More Solyndra Stink

 | 

The stench of corruption that characterizes the Solyndra scandal — the affair of the so-called green energy company, run by a billionaire Obama crony, that cost taxpayers a fortune — permeates the whole green energy scene.

But a recent article — amazingly, in the Washington Post, hitherto a bastion of Obama Regime support — turns over yet another rock, exposing yet more maggots crawling around the putrid Department of Energy (DOE).

What is humorous about this piece is that it focuses on “venture capitalists” who were in on the, shall we say, less idealistic side of the green industry.(Obama, by the bye, raised more than twice as much campaign money from the venture capital industry as did his rival McCain.) The listed include many worthy luminaries.

  • Sanjay Wagle was a major fundraiser for Obama in 2008, leading a group of greenies called “Clean Tech for Obama.” He then left his company, Vantage Point Venture Partners, to join the DOE team in charge of doling out $80 billion in green energy subsidies. Is it any coincidence, comrades, that companies in which Vantage Point had invested raked in $2.4 billion from the DOE slush fund?
  • David Danielson left General Catalyst to join Obama’s DOE. Subsequently, the DOE handed out $105 million to three companies backed by General Catalyst. The DOE denies any connection here — pure coincidence.
  • David Sandalow is a longtime Democrat player (he was part of the Clinton Administration as well as a fellow at the Brookings Institute, a liberal thinktank). He was paid nearly a quarter of a million dollars by venture capital company Good Energies (don’t you just love these names?) the same year he left it to join the DOE (2008). Again, according to the DOE, it is pure coincidence that SolarReserve, one of the companies invested in by Good Energies, scarfed up $737 million in DOE loans.
  • Steven Spinner (a marvelously Dickensian moniker) raised over a half-million bucks for Obama. He was then made a loan advisor to the Green Regime’s DOE, which awarded venture capitalist firm Wilson Sonsini’s client firms $2.75 billion in various forms of financing. By another astonishing coincidence, Spinner’s wife just happened to be working for — Wilson Sonsini!
  • John Roos was a major “bundler” for Obama’s 2008 race. He was also CEO of Wilson Sonsini when its clients received all that DOE pelf.
  • Steve Westly was another big donor-bundler for the Obama campaign. He is the founder of venture capitalist firm Westly Group. He also served on the DOE advisory board, the same DOE that forked over $600 million to companies invested in by the Westly Group.
  • David Prend is head of the venture capital firm Rockport Capital. Prend has long been affiliated with the DOE, going back to the most recent Bush administration, and continued his role under Obama. Companies supported by his firm (including the infamous Solyndra) received $668 million in money from the DOE.

Some years back, I reviewed a great book by Arthur Brooks, Who Really Cares?, which showed conclusively that progressive liberals are actually far less charitable on average than people who don’t support redistributionist governmental policies. That is, progressive liberals generally were shown to be liberal only with other people’s money.

What is emerging now is a corollary to that thesis. It is now obvious that venture capital firms run by progressive liberals venture only other people’s capital.




Share This


A Living Wage?

 | 

Ever since Fidel Castro’s retirement from all official positions of power in Cuba in 2008, and his brother Raul’s accession to the presidency, the island and its concerned neighbors, trading partners, assorted NGOs, and inquiring observers have been atwitter with the possibility of “hope and change” erupting.

Throughout this period, dominated by much informed speculation about the course of future events but overshadowed by the ever-present ball-and-chain of the still-living Fidel — the "conscience" of the Revolution — I have tried to separate the wheat from the chaff for Liberty’s readers. The winnowing has included accounts of the official transfer of power, the character of Raúl (according to his sister’s memoir), quotidian life on the island, the role of corruption, evolving US policy, and even Fidel’s admission, in a Gramma editorial, that yes, mistakes had been made.

But the big news has always been the projected microeconomic reforms and the ministerial-level reforms where grandiose plans for investments through joint venture agreements between foreign corporations and the regime are being concocted.

Well, Gallus economicus is slowly slouching homeward, with an eye to roosting.

Self-employment in over 180 professions is now legal — though with some restrictions and paperwork. Last month, the buying and selling of homes and cars also became legal (as per above). The biggest splash is being made by the 3,000 executives from over 60 countries, prospective joint commercial enterprisers, at Havana’s annual trade fair last month. But that splash has overflown the verge of the little pool and is soaking an awful lot of people.

According to The Economist, several foreign managers have been arrested and three joint ventures have been closed. One British and two Canadian executives have been held for questioning without charge, the former for over one month and the other two for several months. “Perhaps,” the article speculates, “because some of these steps are controversial, he [Raúl] is also cracking down on corruption, which the cash-strapped state can no longer afford to fund.” Since the government never set up tender guidelines for its corporate partners, kickbacks for contracts are rife. But rumors of the allegations extend way beyond bribery and push the definition of "corruption" into territory it is only now exploring.

In an era when foreign corporate investment in third world countries is subject to the scrutiny of such fuzzy concepts as “a living wage” and “social justice,” used to criticize pay scales based on local customs (pay scales that often provide income for people who might not otherwise be employed, that are perfectly legal and welcome, and that produce a product affordable to a wider audience), Cuba is adding a new and thought-provoking twist to the debate.

Some of Cuba’s new foreign venture partners, in an effort to attract dedicated employees and avoid meddling outside criticism, are sweetening employee contracts with bonuses and perks, such as extra-tasty lunches. Unfortunately, the Cuban government requires firms to hire workers through a state employment agency that pays meager salaries. Any remuneration above state mandated levels is considered corrupt. Some of the foreign managers’ arrests and joint venture closures, according to the rumored allegations, are attributed to the "overcompensation" of employees.

If you truly want to help the poorest coffee growers, stick with the “exploitation coffee.”

But the door swings both ways. Cuba’s comptroller general has had dozens of employees in the sugar, mining, telecom, and tobacco industries jailed for graft. For Castro, developed world market wages are a step too far. One European businessman, who pays bonuses to his entire local staff under the table, says, “My people help run a business which brings in millions of dollars to Cuba. I need to pay them a salary which is rather more than the price of a taxi ride home.”

Aside from the health consequences of exercise vs. smoking, which is the greater evil: Nike's legal and welcome $1.25-a-day Indonesian wage to sub-adult employees for the manufacture of athletic shoes, or another international corporation’s illegal and prosecuted near-first-world compensation to Cuban tobacco workers?

One irony is that the debate about "sweatshop" economics has mostly been settled. Even Nobel prize-winning economist Paul Krugman states in a 1997 article for Slate that “as manufacturing grows in poor countries, it creates a ripple effect that benefits ordinary people. ‘The pressure on the land becomes less intense, so rural wages rise; the pool of unemployed urban dwellers always anxious for work shrinks, so factories start to compete with each other for workers, and urban wages also begin to rise.' In time average wages creep up to a level comparable to minimum-wage jobs in the United States.” Similarly, economist Jeffrey Sachs said, "My concern is not that there are too many sweatshops, but that there are too few."

More controversially, Tyler Cowen, in Discover Your Inner Economist, tackles “fair trade” goods:

“Fair trade (coffee) sells a premium product at a premium price, under the premise that the workers are treated better and paid more. It sounds so nice. But will those purchases benefit the poor?

“It depends. How about a product called “exploitation coffee”? You pay less, and they promise to treat the workers especially poorly. That wording is a less effective marketing ploy, but that is what the concept of fair trade boils down to. Whether we upgrade one option or downgrade the other is just semantics. We can either have two classes of coffee (and workers), or one class of coffee and workers. Splitting up the market into classes is good for the workers at the higher end, but it does not always help workers at the lower end. In fact it may hurt them. The jury remains out on this idea.”

My idea is, if you truly want to help the poorest coffee growers, stick with the “exploitation coffee” (without promising to treat them "especially poorly"). The more you buy, the more they earn. The greater the demand, the higher the price will rise and the better off they’ll become.

But the biggest irony in the Cuban government’s wage depression and generosity prosecution is its complete obliviousness to basic and current economic theory. It is truly pushing the dismal science’s frontiers into terrain that no one has ever explored before.




Share This


A Cure for What Doesn’t Ail You

 | 

The Obama Regime is best known for its crony car and crony green energy capitalism, but there is scarcely any industry it hasn’t tried to corrupt for its own interests.

An unlikely source has now informed us of an especially egregious new variety — what can only be described as crony drug capitalism.

The LA Times — yes, savor that! — reports that another billionaire backer of Obama, Ronald O. Perelman, was able to get a no-bid contract from the government for some dubious vaccine produced by his New York-based company, Siga Technologies. The money involved is Solyndra scale: Perelman’s company will get $433 million in taxpayer cash.

The drug is supposedly a cure for smallpox, if you are unlucky enough — extremely unlucky — to contract it (see below).

Ponder these points:

  • Besides donating to Obama’s election campaign, Perelman gave $50,000 to finance Obama’s inaugural party.
  • Perelman’s company, Siga, put Obama’s close associate and major supporter, Andrew Stern, former head of the Service Employees International Union, on Siga’s board of directors.
  • Smallpox was eliminated as a live disease from the entire planet over 30 years ago. The only known specimens of the virus are said to exist in Russian and American government labs.
  • The use of smallpox by our enemies is amply deterred by our own possession of it, as well as by our nuclear weaponry.
  • Even supposing someone attacked us with smallpox, we already have a billion-dollar supply of effective vaccine on hand — enough for the whole country.
  • This existing vaccine costs $3 a dose.
  • Siga’s vaccine costs $255 a dose, i.e., 85 times more than the existing vaccine.
  • Siga’s vaccine lasts only 38 months, while the existing vaccine lasts for decades.
  • When the Department of Health and Human Services resisted the ludicrously overpriced vaccine, Obama appointee Dr. Nicole Laurie put a new person in charge of negotiations with the company.
  • After that change, Siga received a “sole source” contract, meaning that it was the only company asked to submit a bid.
  • Even though the contract was supposed to go to a small company, and one such outfit, called Chimerix, wanted a shot at the project, and Siga (since it is affiliated with a large company) didn’t meet the criterion, Chimerix was frozen out.
  • Siga’s vaccine has not received (and will not, for ethical reasons, involving needed tests on human subjects, ever receive) FDA approval.

So, because of Obama’s political connections, we are paying nearly half a billion dollars for nothing.

A feculent business, indeed.




Share This


More Thoughts on Green Energy

 | 

Look, I apologize — okay? — but this story just won’t stop. I know that I’ve written a fair amount on crony green capitalism, but more things keep propping up, and the mainstream media keep ignoring them. They have made green energy their shibboleth. So those of us in the alterative media just have to step up to the plate.

First, some recent material on the most notorious “green energy” scandal: the Solyndra case. Solyndra was loudly touted by the Obama Regime as a “jobs machine,” and its chief investor was a billionaire leftist Obama fundraiser. This “company” was given a half-billion bucks in taxpayer-backed loans, after which it went belly up. The Republicans in the House of Representatives have been trying to get all the information on the scandal, but they are naturally facing a White House stonewalling campaign. The Democrats in the Senate, led by Majority Leader Harry Reid, who has his own ties to the corrupt green energy program, are ignoring this issue.

The House served a subpoena on the White House for all its internal emails about the company. The White House is obviously frightened of those coming to light. An early release of emails showed that very high officials in the Regime knew Solyndra was in trouble even as the Regime was looking at plans to shovel it more taxpayer-backed loan guarantees; the subsidies were given, nonetheless. The emails caused the Regime considerable embarrassment, and it is clearly worried about more unfavorable publicity. So it is practicing what the Nixon Watergate cover-up hatchetman had called a “modified, limited hang out.” That is, it has released some highly redacted emails, but with crucial information omitted, and has refused to release all pertinent information.

More recently released emails show that the Department of Energy (DOE) put pressure on Solyndra to squelch an announcement that Solyndra planned worker layoffs and a plant closing until after the election.

That’s right. Solyndra’s CEO warned the DOE on Oct. 25, 2010 that because the wretched company was running out of cash, it planned to lay off employees on Oct. 28. He noted that reporters had apparently learned the company was in trouble. In an email of Oct. 30, advisers to Solyndra’s main investor note that the DOE has pressured the company to put off the announcement until a day after the Nov. 2 midterm elections. The email says, “DOE continues to be cooperative have indicated that they will fund the November draw on our loan (app. $40 million) but have not committed to December yet. . . . They did push very hard for us to hold our announcement of the consolidation to employees and vendors to Nov. 3rd — oddly they didn’t give a reason for the date.”

That last sentence indicates that the unnamed author of the email was either an idiot or a comedian.

These emails and others reveal a level of coordination between the company and the DOE that can only be called crony capitalist collusion.

Now let us mourn the demise of yet another “promising” green energy company — one I haven’t mentioned before — Beacon Power. I know what you’re thinking: why lament the passing of another startup company? Don’t 56% of all new companies fail in the first four years, Jason? What part of Schumpeterian economic theory don’t you understand, the “creative” part or the “destruction” part?

Now that’s a great return on your investment: pay less than a hundred grand, and pocket $400 million in return.

The reason you should mourn, dear friend, is that more of your tax dollars were spent on this boondoggle. Yes, Beacon Power got a tidy $43 million in taxpayer-backed loan guarantees from Obama’s DOE, and it has just filed for bankruptcy.

Then again, there is the chipper, choice news that another solar company, Colorado-based Abound Solar, received $400 million in (as always with this corrupt regime) taxpayer-backed DOE loan guarantees. Now, I know this will shock you, but one of the major investors in Abound Solar was a big financial backer of — Obama!

In a story that abounds in irony, though not in legitimate profits, one of the major investors in Abound Solar — a creature delightfully named Pat Stryker (as in, striking at our tax dollars) — “bundled” $87,500 for Honest Barry. Now that’s a great return on your investment: pay less than a hundred grand, and pocket $400 million in return.

And I must not omit the news about Robert Kennedy, Jr.’s, sly crony capitalist deal. This story has been unearthed by the keen eye of Peter Schweizer, who has an expose of the morass of crony capitalism our nation has become in his new book, Throw Them All Out.

Kennedy made his name as a big booster of green energy (except, of course, in his own backyard). His company, BrightSource, snagged a very tidy $1.4 billion bailout from Obama’s DOE. Apparently, though the details are still murky, this bailout — a DOE taxpayer-backed loan guarantee — was arranged by a key DOE employee who had only recently worked for Kennedy’s company.

The central player may have been Sanjay Wagle. He was one of the owners of BrightSource, and he raised money for Obama’s 2008 campaign. Upon election, Obama appointed him to the DOE as an adviser — on energy grants! Pretty convenient for the company, no?

At the time it requested the loan, BrightSource was a basket case, with $1.8 billion in debt, losses of $71.6 million, and a lousy $13.5 million in revenue.

The corruption these stories reveal is truly Nixonian. But there is a difference between Nixon’s and Obama’s corruption. The mainstream news media were interested in exposing Nixon’s (because they loathed him), but aren’t in the least interested in exposing Obama’s (because they love him).

For the record: this whole green energy loan guarantee program was approved by George Bush, and was dramatically increased by Obama with so-called stimulus money. Can we all not now agree just to kill the whole freaking stupid program?




Share This


How Green Were My Cronies

 | 

One of the signature issues of the Obama administration has been “green energy.” From its first day in office, the Green Regime has attempted to get America to convert to the so-called “renewable” sources of energy: biofuels (especially corn ethanol), geothermal power, wind power, and solar power.

Behind its ideological commitment to green energy, however, is a solid core of self-interest. It gets a huge amount of financial support from environmental organizations, and a large number of wealthy environmentalists. It is using its funding and regulatory power to reward these donors, giving them not only psychic benefits but also material ones.

In short, it is green for the green.

This crony green capitalism has two sides: a regulatory side (negative) and a subsidization side (positive). Both sides are needed, because “renewable energy” sources are seldom even remotely price competitive with fossil fuels. Not only must they be subsidized by government, because private investors are reluctant to put up their own money for them, but they can become saleable only if the government drives up the cost of fossil fuels by piling up regulations on fossil fuel production.

The regulatory side of crony green capitalism is the administration's jihad against all fossil fuel industries. It has locked away vast parts of the continent from oil and gas drilling, and has fought the new fracking technology tooth and nail. It has set loose the EPA with the goal of ending the use of coal, and has severely restricted drilling in the Gulf of Mexico. And it is opposing even the exploration of the US continental shelf.

The flip side is the lavish subsidization of so-called green energy sources, especially wind and solar. It is here that the play for pay game gets frisky. A flurry of recent reports about who has gotten these taxpayer subsidies dramatically increases the stench of corruption that emanates from the Regime.

It is hard to know just where to begin, but we can start with Solyndra, that striking piece of rentseeking dreck Obama boasted would create tons of jobs. We first learned that the billionaire who backed the company, George Kaiser, was a big donor to and “bundler” (i.e., a collector of donations ostensibly from others) for the Obama campaign. Kaiser’s company Solyndra was given a half-billion dollar loan guarantee by the Green Regime’s Department of Energy (DOE), structured in such a way that if the company hit the wall, the American taxpayer (as opposed to the billionaire bundler) would be liable for the loan. And hit the wall it did.

The regulatory side of crony green capitalism is the administration's jihad against all fossil fuel industries.

Well, now we learn that the entrepreneurial genius, Kaiser, this bien-pensant billionaire who wants so very much to help his country — paid zero income taxes for years. He did this by buying companies that had unrealized losses that he could then use to wipe away his personal income taxes. Kaiser is an interesting pal for a president who has shown deep fondness for bashing “millionaires and billionaires” for not paying “their fair share” in taxes.

It also turns out that an advisor for the loan program that shoveled the cash at Solyndra was — by an astonishing coincidence — a huge Obama fundraiser. This fellow, Steve Spinner, raised over a half-million dollars for Obama. And he is also — by an even more astonishing coincidence — the husband of a lawyer whose firm represented the company during its application for the loan. Moreover, despite the fact that Spinner agreed in writing to stay out of the loan process, emails show that he was involved up to his eyebrows.

It has also come to light that RockPort Capital, one of Solyndra’s biggest investors (and a board member) used its seat on a Pentagon panel that exists to help the Armed Forces identify useful new technologies to push Solyndra on the military. While RockPort disclosed that it had an investment in Solyndra, it never mentioned that the latter was a financial basket-case.

We now also learn that at least four other solar energy firms that received massive loan guarantees had executives and board members who were big donors to major Democratic politicians. These companies include Abengoa SA, First Solar, SolarReserve, and SunPower Corporation.

Start with Abengoa, a Spanish company. (Spain, remember, embraced wind and solar as the key to a jobs renaissance a decade ago. But green energy proved a veritable economic Black Plague for a country that has massive state-induced financial problems.) It turns out that Abengoa has worked with Sen. Dianne Feinstein (D-CA) to get nearly $3 billion in loan guarantees from the Regime to finance Arizona solar farms.

First Solar, upon which the Regime has lavished over $2 billion in taxpayer-backed loan guarantees, is likewise a supporter of the self-same Regime. Its founder and CEO Michael Ahearn donated nearly $125,000 to Democrats in the last election. He cleared nearly $69 million by selling some of his stock last month, even though the company cannot qualify for another loan from the DOE. Ahearn is clearly using the guarantees to keep a shaky company afloat, even as he sells his personal stock. His $125k investment in crony green capitalism has paid off big time — $69 million — while the taxpayer faces a $2.1 billion hosing. No, no corruption there!

SolarReserve is even more choice. The aforementioned billionaire bundler Kaiser (the Solyndra genius) also owns a majority of this rotten company, which got a tidy $737 million taxpayer-backed loan guarantee from the DOE. His company, Argonaut, has a voting share on the SolarReserve board of directors. Another member of the SolarReserve board of directors is one James McDermott, who just happens to have given over $60,000 to various Democrats since 2008, with about half going to Obama’s campaign. McDermott’s company, US Renewable Energy Group, has also donated heavily to Sen. Harry Reid (D-NV), who needs no introduction.

Moreover, another SolarReserve board member, Lee Bailey, is a lavish campaign donor to Regime members and other prominent Democrats. Not to mention the fact that yet another board member, Jasandra Nyker, is partners with the brother-in-law of Nancy Pelosi (D-CA) in an investment company (Pacific Corporate Asset Management). And SolarReserve paid $100K in fees to a lobbying firm headed by Obama’s transitional team leader John Podesta, to push its loan and other interests.

Then there is SunPower, whose stock price has recently plummeted with its projection of losses for this year and next. It received a $1.2 billion taxpayer-backed loan guarantee, even after it announced that it would be building its solar panels in a new plant — in Mexico! So much for the idea that “green jobs,” paid for by Americans, would go to Americans.

SunPower gave $14,650 to Congressional Democrats in 2010 (and $500 to one Republican), with about a fourth of the money going to Reid. Oh, and the company paid nearly $300K to a lobbying firm headed by Reid’s close associate Patrick Murphy. Another major SunPower lobbyist just happens to be the son of Rep. George Miller (D-CA), who touted for the company in Congress, and publicity-toured its plant with the Regime’s interior secretary, Ken Salazar. The right honorable Rep. Miller also received funds for his own campaign war chest from the company in question.

SunPower, by the way, now has a market capitalization of only $800 million, not much in the face of corporate debt of $820 million, and is facing a mass of investor lawsuits. No doubt it will, like Solyndra before it, eventually hit the wall and hose the taxpayers.

In general, the solar energy boom is going bust, because it was solely a function of political, not market, forces. Taxpayer money was shoveled to economic losers, to enrich the crony capitalists who shoveled money at the Regime.

Let’s turn next to the latest news on electric cars (EVs). Start with the frisky Frisker fiasco.

Frisker Automotive is a Finnish company that makes pricey EVs — cars in the $100K range, sticker price, making them attractive to movie stars such as Leonardo DiCaprio, but few others. Fisker was given — yes, you guessed it! — a $529 million dollar taxpayer loan guarantee from the Energy Department. No doubt pushing the idea was Reverend Al Gore, the Green Giant who is also a major investor in — Fisker! (Gore, by the way, has already earned tens of millions from preaching the environmentalist religion, making him eerily similar to a corrupt televangelist.) Also on the list of investors in Fisker Automotive are several big donors to the Obama regime, and also John Doerr, one of Obama’s advisors.

So much for the idea that “green jobs,” paid for by Americans, would go to Americans.

The Regime justified the loan on the usual lying basis, i.e., that it would bring jobs to Americans. Vice President and Chief Buffoon Joe Biden bragged that the Fisker loan would create “thousands” of American manufacturing jobs. But Fisker has just announced that because it couldn’t find any facility in America suitable for building its cars, it will build them in Finland. Again, so much for the idea that American tax dollars are bringing jobs to America. Oh, and Fisker's electric motor and batteries are made in China! All of these cars will get a $7,500 tax credit, meaning that the few rich buyers of the Finnish-made cars with Chinese-made innards will have part of the tab covered by average-income American taxpayers. Comedy writers must have scripted this.

The kicker is that the Fiskers that were recently showcased in DC are not pure EVs, but hybrids, whose gas mileage is about that of an older model Ford Explorer.

By the bye, also receiving a similar-size taxpayer loan guarantee is Tesla Motors. Tesla’s main investors include Larry Paige and Sergey Brin, both Google-billionaires who lavishly supported Obama. So much for their corporate motto, “Don’t be evil.”

Then there is EnerDel, a maker of lithium-ion car batteries. Back in 2009, Obama doled out $2.4 billion in grants to battery makers to support EVs, including $118 million to EnerDel. Again, the insufferably dense Joe Biden saucily minced around two EnerDel plants in Indiana, boasting before cameras that the administration wasn’t only creating jobs “but sparking whole new industries.”

EnerDel, which has never turned a profit since its founding nearly a decade ago, closed the last fiscal year with a whopping $165 million loss, a mindboggling $100 million more in losses than it had reported previously. Its shares have plummeted 95% in the last years, down to a risible 27 cents a share. Nasdaq looks like it will delist the stock, and Ener1 — the parent company — has notified the SEC that it “is in the process of determining whether the company has sufficient liquidity to fund its operations.”

In short, it’s a goner, and when it goes, the taxpayer will again eat a big loss. This company was dicey all along, but the Regime still threw money at it — because it is only taxpayer money.

EnerDel also got huge support from the state of Indiana, promising 1,700 new jobs by next year and 3,000 in four years. Unfortunately, it only employs 380 people, and they look like goners, too.

The problem is obvious, at least to everyone but the cretins and corrupt clowns who populate the Regime: the market for EVs is and will remain tiny, given their inherent limitations.

Now, let’s look at wind power. First is the news that Obama went out this month to raise money with a “businessman,” a supporter of long standing, named Tom Carnahan. They chummed it up at a $25,000 a plate fundraising dinner for the Obama reelection campaign. (That has a sickening ring, doesn’t it?) Carnahan is another bundler, having garnered between $100,000 and $200,000 for Obama in 2008.

Al Gore has already earned tens of millions from preaching the environmentalist religion, making him eerily similar to a corrupt televangelist.

Yet by amazing coincidence, Carnahan is the head of a wind power company, Wind Capital Group, which just happened to receive $107 million in federal tax credits from the Regime. By the same kind of coincidence, Carnahan is part of the Democratic family that has long dominated the state’s political scene, and a brother of Congressman Russ Carnahan (D-MO).

Even more egregious is the case of the Shepherds Flat project in Oregon.

Shepherds Flat is an 845-megawatt wind farm that will cost $1.9 billion. Of this, astoundingly, the DOE will pay the developers $490 million in an outright cash grant, and give them another $1.06 billion in loans. The developers are putting up only about 11% of the total cost, and — according to Carol Browner (the Regime’s own “energy czar”) and Larry Summers (its economic advisor) — they will reap a staggering 30% return on their investment. This compares very favorably with the average 7.1% that most utility companies receive on their projects.

And just who might these lucky “entrepreneurs” be? The biggest player is — wait, let the suspense build! — GE!, which is being joined by Google and a couple of other partners. Google, as I mentioned earlier, was a big donor to Obama’s campaign. And GE? It is headed by Jeffrey Immelt, whom Obama appointed head of the President’s Council on Jobs and Competitiveness. And he was a big donor to Obama as well, natch.

This is the same GE that has a market cap of $170 billion, earned $5.1 billion in profit last year, and paid no taxes at all. Did it really need the money?

The project is questionable on other grounds as well. It is being built in a region that is already experiencing electricity congestion (the region of the massive Bonneville Dam). CNNMoney reports that it will create only 35 permanent jobs, which works out to around $16 million per job. Not that GE really cares much about American jobs — it is shipping its medical devices division to China.

No, no corruption here. None at all.

By the way, geothermal is looking pretty putrid, too. Two large geothermal companies, Raser Technologies and Nevada Geothermal Power, both received massive taxpayer backing, and are both sucking wind — the same wind that the solar and the (literal) wind companies are sucking.

Raser Technologies received a $33 million grant from the DOE. After pissing away all that taxpayer cash, along with a couple of hundred million bucks in private investor cash, the company has now filed for bankruptcy.

And Nevada Geothermal — a favorite pet of Harry Reid — received $66 million in grants from the Department of Energy, as well as a nearly $99 million taxpayer-backed loan guarantee. But it has just revealed that it has never operated at a profit for even one lousy day, and that it, too, is facing oblivion.

Still another geothermal company, US Geothermal, received a $97 million loan from the Department in February of this year, even though its financial filing with the SEC shows it hasn’t made a profit — in four years. And the stocks of two other geothermal companies that also got DOE loans are down 60% to 80%. These are just some of the tidbits of recent news from the taxpayer-supported green energy front.

Now, every time I report on the green "capitalism" that has been shoved down the throat of the American taxpayer by this corrupt Regime, I get wails of tearful anger from its supporters. The wails are of two types.

1. I am told that Republicans (especially the Evil Bush) have also supported various green energy projects. So, for example, the aforementioned Raser Technologies was backed by Sen. Orrin Hatch (R-UT). I am aware of that, and I criticized Bush in these very pages for doing the same thing.

But please spare me the simple-minded faux equation of the past administration with this one. There are massive differences in scale and focus. Bush did fund some green energy projects, but never on this massive scale. And his administration allowed oil, coal, and natural gas to flourish, and took the heat for it. He was pilloried for being too fond of fossil fuels. He was portrayed in the mainstream press as a creature of the oil industry; and Cheney and Halliburton — God, we never heard the end of that. Bush at least tried to push everything. . . . I certainly would have much preferred that he had pushed, or freed up, only what works (fossil fuels and nuclear power), but his approach was certainly better than the present crusade against fossil fuels, inaction on nuclear energy, and a massive splurge in technologies that are proven losers, yet owned by supporters.

The problem is obvious, at least to everyone but the cretins and corrupt clowns who populate the Regime: the market for electric vehicles is and will remain tiny.

You have to be blind to all recent history not to comprehend that since Carter at least, the Democrats have been by far more focused than Republicans on pushing inefficient green energies. Granted, Public Choice Theory posits that all politicians (Democrat, Republican, Communist, or Libertarian) are self-interested, so will be prone to spend public resources to advance their careers. But the point here is that precisely because green energies are absolutely commercially unviable without subsidies, while fossil fuels are extremely viable, a fossil fuels based energy program won’t need much subsidization, so will leave less scope for paying off supporters.

Really, if Obama dropped hydrogen bombs on every major red state in America, these same apologists would squeal, “But Bush bombed Iraq!”

2. I am told that I am being “hyperbolic.” In no way, these Regime apologists yelp, can the Green Regime be compared to, say, that of Putin.

My response is to ask the reader, with all we now know of the crony car capitalism, the crony green energy capitalism, and the numerous other crony dealings between the Regime and its supporters over the last three years, whether the comparison isn’t just. You decide: am I really being hyperbolic, or are the supporters of the Regime being merely obtuse?

While entertaining that question, you might consider this point. What has come to light so far has come out basically from the investigations of the alternative media. The mainstream media have done very little to look into any of the Regime’s scandals (contrast the unremitting, endless investigations of Bush). The Republican-controlled House of Representatives held some feckless hearings on the Solyndra farce, and only saw Solyndra’s executives smirk and plead the Fifth. If there were — as there ought to be — Watergate-style hearings into the whole green energy boondoggle, as well as the whole Government Motors scam, just imagine (if your stomach can bear it) what would come to light.

it announced that it would be building its solar panels in a new plant rdquo; of American manufacturing jobs. But Fisker has just announced that because it couldn$2.4 billion in grants




Share This


Enron, Solyndra, and Double Standards

 | 

In the wake of the Solyndra debacle, no less than the head of the Solar Energy Industries Association — one Rhone Resch — opined, “It’s going to be very similar to Enron’s legacy in the oil and gas industry” (though he quickly added, “Just in the sense of a history that flared out fairly quickly and fairly publicly”). Enron, we all recall, was the energy company that hit the wall after misleading investors with fraudulent financial reports.

Pace Resch, I think that the comparison between Solyndra and Enron is a false analogy. It overlooks their salient differences. First and foremost, when Enron went bust, it didn’t burn the American taxpayer, which Solyndra most assuredly did. It had nearly a half billion bucks in guaranteed loans, which the taxpayer must now cover.

Second, while Solyndra’s CEO was a major supporter of Obama, as Enron’s was of Bush, when Enron’s CEO called the White House for help, he got none; but when Solyndra’s head called his buddy in the White House, he got plenty.

Third, the mainstream media trumpeted the Enron fiasco for months, using it as a handy cudgel with which to bash Bush; but the media have been virtually silent about the Solyndra mess, even in the face of the Solyndra execs pleading the Fifth before a congressional committee trying to investigate the mess.

Fourth, it is doubtful that Hollywood will make a movie about Solyndra, as it did with Enron (The Smartest Guys in the Room), indicting both the industry and the president. The Green neo-socialists — aka Watermelons — are much too worshipful of both the solar industry and Obama.




Share This


We See Through You, Mr. President

 | 

Reverend Obama, when he was running for the office he now decorates, preached the need for transparency and honesty in government. In particular, he derided “the cynics, the lobbyists, the special interests" who held sway in the District of Columbia. He promised to stop the practice of rewarding donors with political favors.

Well, scratch another promise. As iWatch News has reported, about 200 of Obama’s biggest contributors (each raising anywhere from 50 to 500 grand) have gotten top jobs in his holy administration, big contracts for their businesses, or various other payoffs.

Interestingly, iWatch News is a news outfit supported by the Center for Public Integrity, a nonprofit organization whose avowed goal is to produce nonpartisan investigative journalism that will help achieve transparency in government.

And here’s the stinger. The Center for Public Integrity is funded by a number of primarily left-liberal donors, most notoriously one George Soros, the leftist billionaire and Obama booster.

That’s worth a chuckle, no?




Share This
Syndicate content

© Copyright 2017 Liberty Foundation. All rights reserved.



Opinions expressed in Liberty are those of the authors and not necessarily those of the Liberty Foundation.

All letters to the editor are assumed to be for publication unless otherwise indicated.