WASHINGTON (Reuters) - The government is a “crappy” venture capitalist, Larry Summers, then President Barack Obama’s top economic adviser, declared in a 2009 email about a federal loan guarantee to a now-failed solar company.
The Summers email and other messages between presidential aides which the White House released to the House Energy and Commerce committee, show top officials were concerned about the financial stability of Solyndra well before the company filed for bankruptcy.
An internal memo from House Democrats summarizing more than 700 pages of new e-mails seeks to counter Republican charges that the Obama administration showed favoritism to Solyndra because its investors included Argonaut Private Equity, a private fund owned by Obama fundraiser George Kaiser.
But the material cited by Democrats also raises fresh questions about the loan guarantee the government gave to the solar panel manufacturer in 2009, under a program designed to spur the renewable energy industry. Solyndra’s plans for producing a new generation of solar power technology were highly touted by the Obama administration before the firm ran out of cash and filed for bankruptcy in August.
“The administration was fully aware of numerous red flags about Solyndra’s viability, but pressed ahead anyway in an effort to secure a policy or political victory,” said Cliff Stearns, the House Republican on the Energy and Commerce Committee who is leading an inquiry into the loan guarantee.
The FBI and internal investigators for the Energy and Treasury departments are also investigating Solyndra.
As early as December 2009, only months after the government had finalized the loan guarantee, a partner with private equity firm Redpoint Ventures warned Summers about the investment.
Brad Jones, a founding partner of Redpoint, said the government’s spending on clean energy was “haphazard,” citing Solyndra as an example. Redpoint was an investor in Solyndra.
“While that (loan) is good for us, I can’t imagine it’s a good way for the government to use taxpayer money,” Jones told Summers in an email released by the House Committee.
Summers agreed that the government is a “crappy VC” (venture capitalist). “If (you) were closer to it, you’d feel more strongly,” Summers told Jones.
President Barack Obama defended the loan guarantee in a live interview with ABC News on Monday.
“What we always understood was that not every single business is going to succeed in clean energy, but if we want to compete with China ... we’ve got to make sure that our guys here in the United States of America at least have a shot,” Obama said in his first comments on Solyndra since the company went under.
“Hindsight is always 20/20. It went through the regular review process, and people felt like this was a good bet,” he said.
But in the documents, analysts at the Office of Management and Budget were critical of the Energy Department’s review.
“DOE’s ‘system’ for monitoring loans is quite problematic (barely any review of materials submitted, no synthesis for program management, inherent conflicts in origination team members monitoring the deals they structured, etc)” one OMB official wrote.
SOME EXPECTED TO GO “BELLY-UP”
The emails also show the extent to which top White House officials were aware of Solyndra before the company became a political embarrassment.
Ron Klain, chief of staff to Vice President Joe Biden, and Valerie Jarrett, senior advisor to Obama, debated the merits of having Obama visit Solyndra’s factory in May 2010 given concerns about the company’s stability.
“The reality is that if (Obama) visited 10 such places over the next 10 months, probably a few would 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,” Klain said in an email to Jarrett, according to the Democrats’ memo.
House Democrats argue that this correspondence demonstrates vigorous high-level debate about the merits of the Solyndra loan guarantee among bureaucrats and government agencies, but say that the message traffic also shows that decisions about government aid for the company were made without regard to political connections of Solyndra’s private investors.
The message traffic does show that another venture capitalist close to the Obama administration sent up red flags about the company, the new emails showed.
In May 2010, as the White House planned a visit by Obama to Solyndra, venture capitalist Steve Westly emailed Jarrett, warning her that the company’s finances were shaky.
“A number of us are concerned that the president is visiting Solyndra,” said Westly, who was a prominent member of Obama’s campaign team in California in 2008.
“Many of us believe the company’s cost structure will make it difficult for them to survive long term,” he wrote.
“If it’s too late to change/postpone the meeting, the president should be careful about unrealistic/optimistc forecasts that could haunt him in the next 18 months if Solyndra hits the wall, files for bankruptcy, etc.”
The Energy Department defended Solyndra to the White House. And after the visit, one of the company’s lobbyists, the Glover Park Group, had also said the company was on the way to profitability.
Republicans said on Monday the fact that Westly was involved in discussions shows political influence is a concern.
Editing by Cynthia Osterman