Friday, December 02, 2011

Inside Crony Capitalism

Wall Street, or at least that portion of it that writes editorials for the Wall Street Journal, is not, members of “Occupy Wall Street” may be happy to learn, on friendly terms with greedy Crony Capitalists.

The Crony Capitalist is the politically connected “entrepreneur” who finances risky ventures with taxpayer’s money so that, when the venture goes belly-up, the risks will be borne by taxpayers rather than private investors. When and if the company succeeds, of course, the profits will flow their way. It’s a win-win situation for crony capitalists because its financier is Uncle Sam.

The “bank” that supplies Crony Capitalists with their ill-gotten investment funds is the U.S. government, which also happens to be the national tax-collector-in-chief. Lord Acton, who said that “power corrupts and absolute power corrupts absolutely,” should have lived to see the day that Solyndra, the green energy company that was given a half billion dollars in tax money, went belly-up.

Following Solyndra’s inevitable crack-up, the handful of congressmen interested in bridling run-away spending had an opportunity to take a gander at e-mails flowing back and forth between officials in President Barack Obama’s administration and the spendthrifts in Solyndra, and they do not paint a pretty picture. The crack-up was inevitable because the cost to produce Solyndra’s product, solar panels, exceeded the price Solyndra was charging for their product. This way lies ruin, as any 12-year-old lemonade stand vendor would have been able to advise the “investors” in Mr. Obama’s administration.

In April 2010, a month after PriceWaterhouseCoopers raised a red flag concerning Solyndra’s solvency, a staffer in the White House Office of Management and Budget telegraphed his fears. The Department of Energy (DOE), he wrote, “has one loan to monitor and they seem completely oblivious." Another red flag waver said it was “terrifying" to consider that some of DOE's next projects would make Solyndra look "better, according to the WSJ report. Rumbles were heard among Mr. Obama’s insiders as well. Venture capitalist and Obama donor Steve Westly, communicating with White House Aide Valerie Jarret in May, said “many of us believe the company's cost structure will make it difficult for them to survive long term." She wrote to Vice President Joe Biden’s chief of staff, Ron Klain, who touched base with the DOE. An official there relayed the calming message, “We believe the company is okay in the medium term, but will need some help of one kind or another down the road."

The back and forth between Mr. Klain and Ms. Jarret is wonderfully obtuse. Far from launching a serious preview of Solyndra’s viability, Mr. Klain advised Ms. Jarrett that he supported a pending visit of the president to Solyndra even though there were “risk factors” involved. “It looks like it’s OK to me,” Mr. Klain wrote Ms. Jarrett, “but if you feel otherwise, let me know.” Ms. Jarrett did not feel otherwise, and she let Mr. Klain know, “I’m comfortable if you're comfortable," to which Mr. Klain responded, “The reality is that if POTUS (the President of the United States) visited 10 such places over the next 10 months, probably a few will be belly-up by election day 2012—but that to me is the reality of saying that we want to help promote cutting edge, new economy industries."

Obama administration officials may have wrongly supposed that even this crisis need not have gone to waste. Republicans in the coming election will make full use in their campaign advertising of the visit the president and vice president made to Solyndra, as well as clips taken from testimony before the U.S. congress in which failed Solyndra mucky-mucks are shown rather stiffly asserting their right under the constitution not to disclose to congress information that may incriminate them. A house hearing on the issue may provide other juicy tidbits.

Crony Capitalism lies at the root of the Solyndra scandal, curled around the base of the Obama administration like a serpent coiled around a tempting apple tree.

State houses, it should be noted, are also prone to the allure of Crony Capitalists. Solyndra was a green feather in Mr. Obama’s campaign cap, and the company never minded renting taxpayer resources to cover its economic failings. Governors elsewhere have yielded to similar temptations to boost their popularity. The way up is always exhilarating just before the fall.
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