Good Money After Bad

The Washington Post reported yesterday that Secretary of Energy Steven Chu gave Solyndra more taxpayer money even after Solyndra was in default on the government’s $535 million loan guarantee:

Energy Secretary Steven Chu acknowledged Thursday making the final decision to allow a struggling solar company to continue receiving taxpayer money after it had technically defaulted on a $535 million federal loan guaranteed by his agency.

Chu spokesman Damien La­Vera said in a statement that the secretary approved the restructuring agreement for Solyndra because it gave the company “the best possible chance to succeed in a very competitive marketplace and put the company in a better position to repay the loan.” …

In late autumn of 2010, company executives confided to the Energy Department that they were running out of cash and could not make a required payment to a cash-reserve account. The company was supposed to begin making the first of $5 million payments to create a $30 million cash reserve on Dec. 1.

Solyndra officially defaulted on its loan that day. Chu approved a softening of the loan requirements so that the company could continue receiving loan installments.

“Ultimately, the choice was between imminent liquidation or giving the company and its workers a fighting chance to succeed,” LaVera said in the statement, first reported by Politico.

It is easy to understand what happened here: Chu threw good money after bad in the desperate hope that somehow Solyndra would pull a rabbit out of the hat and survive. He was like a gambler who gets behind and continues upping the ante in hopes that he will get lucky. Why did he do it? Because Chu knew that he and President Obama would both look like fools if Solyndra went down, and that Solyndra’s collapse would imperil the whole “green energy” agenda that is his sole interest as Secretary of Energy. So out of desperation, he wasted more taxpayer money. The difference between Chu and the gambler, of course, is that it wasn’t Chu’s money.

A real venture capitalist has to make a rational decision as to when to pull the plug. If a company in which he has invested isn’t making the grade, at some point he will stop investing and write off his loss. Chu didn’t have to make a rational economic decision because he was playing with your money, not his. This is just one more illustration of why crony capitalism is such an inherently wasteful and corrupt phenomenon.

The Post reports further that the focus of the criminal investigation of Solyndra officials is on whether they misrepresented the company’s finances to the government or engaged in accounting fraud. No word on whether the criminal investigation extends to anyone at the Department of Energy.