Those who directed these loan programs were themselves fundraisers for the Obama campaign. One might think that the Department of Energy's Loan Program Office, for example, which has doled out billions in taxpayer- guaranteed loans, is directed by a dedicated scientist or engineer. Or perhaps a civil servant with considerable financial knowledge. Instead, the department's loan and grant programs are run by partisans who were responsible for raising money during the campaign from the same people who later came to seek government loans and grants. Steve Spinner, who served on the Obama campaign's National Finance Committee, and was a bundler himself, was the campaign's 'liaison to Silicon Valley.' His responsibilities included fundraising, recruiting more bundlers, and managing Obama's relationship with a cadre of very wealthy donors. After the 2008 campaign, Spinner joined the Department of Energy as the 'chief strategic operations officer' for the loan programs. A lot of the money he helped hand out went to that same cadre of wealthy Silicon Valley campaign donors. He also sat on the White House Business Council, which is made up of Obama-supporting corporate executives.
Another Obama fundraiser who was positioned to lead the allocation of taxpayer money to Obama contributors was Sanjay Wagle, who served as the managing cochairman of Cleantech and Green Business Leaders for Obama, which raised millions for Obama's campaign. Wagle's day job was as a principal at VantagePoint Venture Partners. After the 2008 election, Wagle joined the Obama administration as a 'renewable energy grants adviser' at the Department of Energy. VantagePoint owned firms that would later see federal loan guarantees roll in.
Leading the loan programs at the DOE with Steve Spinner was Jonathan Silver, who would serve as executive director. Silver formerly served in the Clinton administration, first as counselor to the secretary of the interior and later as assistant deputy secretary of the Department of Commerce. He is a strict partisan: when it comes to his own campaign contributions, the recipients have all been Democrats. His wife has served as financial director for the Democratic Leadership Council. His business partner, Tom Wheeler, was an Obama bundler, and his wife was an outreach coordinator for the campaign. According to the DOE, as director of the loan programs 'Silver will be responsible for staffing the programs, and leading organization analysis, and negotiation.'
Silver managed the loans with advice from his 'strategic adviser,' Steve Spinner. The grants, on the other hand, originated in the office of Cathy Zoi, who served as the assistant secretary of energy for efficiency and renewable energy. (Wagle was her adviser.) Zoi had previously worked in the Clinton White House as the chief of staff on environmental policy, then as the CEO of former Vice President Al Gore's Alliance for Climate Protection. You may be thinking, 'So what? Why would we expect anything less of political appointees?' But the numbers don't lie: the recipients of loans and grants from these programs were Obama cronies. Were the funds doled out based on the merits? You decide.
The Government Accountability Office has been highly critical of the way guaranteed loans and grants were doled out by the Department of Energy, complaining that the process appears 'arbitrary' and lacks transparency. In March 2011, for example, the GAO examined the first eighteen loans that were approved and found that
Friends indeed. The Department of Energy loan and grant programs might be the greatest—and most expensive—example of crony capitalism in American history. Tens of billions of dollars were transferred to firms controlled or owned by fundraisers, bundlers, and political allies, many of whom—surprise!—are raising money for Obama again.
The stated goal of the energy giveaways was to create 'green jobs.' Yet many of these grants and loan guarantees created few or no jobs, according to the federal government's own records. Often, taxpayer money was given to politically connected companies for projects that were already under way or even completed. Often these companies were money losers that needed government funds to stay in business or turn a profit. By the White House's own admission in internal memos, these grants and guaranteed loans proved to be very lucrative for key political financiers. Several huge checks or loan guarantees were given to small companies with revenues of less than $1 million.
In a memorandum for the President, signed on October 25, 2010, and leaked to the media, senior White House officials Larry Summers, Ron Klain, and Carol Browner explained what an economic boon the grants and loans were to the companies involved. Many of the companies had 'relatively small private equity (as low as 10%),' reads the memo, while generating 'an estimated return on equity of 30%.' Those companies would have been hard-pressed to negotiate that sort of arrangement in the private sector. The memo further points out that if you win government money, it can make all the difference between success and failure. A wind farm can cost 55% less than it would for a company that didn't get government support. Government grants cut costs in half for some solar energy companies. The memo also makes clear that the grant review process was not handled solely by the Department of Energy; the White House staff itself was involved in picking winners and losers. The memo notes that the grants and loans receive a 'policy review' by the White House.6
White House involvement is particularly interesting because several loans appear to have gone to companies with direct connections to senior White House staff. Granite Reliable Wind, for example, was offered $135 million in loan guarantees. Why is that significant? Because it is largely owned and managed by CCMP Capital, which is where the White House Deputy Chief of Staff Nancy-Ann DeParle had been managing director before joining the Obama administration.
The alternative energy loan and grant programs were originally created in 2005, but they were not very active. Indeed, hardly any loans and grants were offered during the Bush years. The reason? The 2005 law required that the companies receiving loans or grants have a sizable amount of their own money in the game, a 'down payment' on projects. But the 2009 stimulus bill removed that provision. Wealthy investors in green-tech companies could now get large government 'investments' with very little of their own money at risk.
These government grants and loan guarantees are important not only because they provide access to taxpayer (or taxpayer-guaranteed) capital. Such support also serves as a 'seal of approval' from the federal government, opening up access to other private capital. The stock prices of firms rise and fall simply on the news that their applications are under consideration. In May 2011, for example, when it was revealed that First Solar, a sustainable-energy company, was merely 'in the running' for government loans and grants, the company's stock rose 5% on the news.
The attorney and lobbyist Steve Farber, a major donor to the Democratic National Committee and cochair of the host committee for the 2008 convention in Denver, which nominated Obama for President, understood exactly how the system worked. He had raised $40 million for the inauguration, and now he could raise some cash for himself.10 Shortly after the federal government started writing Recovery Act grant checks, Farber boldly placed an ad in the
Farber was blunt, but he spoke the truth in a way that only a lobbyist will sometimes do. He was right: when it came to getting access to tens of billions of dollars in taxpayer money, passed around as a stimulus for the economy, connections were the key.
Another Obama fundraiser, Steve Westly, echoed that sentiment. In addition to amassing more than
