A second company that was a recipient of Department Of Energy loan guarantees for “green technology” has filed for bankruptcy protection:
The White House is facing fresh political headaches over energy loans as a second Energy Department-backed company goes bankrupt and Republicans prepare to subpoena White House internal communications on the failed solar company Solyndra.
Beacon Power Corp., the energy storage company that received a $43 million Energy Department (DOE) loan guarantee last year, filed for bankruptcy over the weekend, prompting a fresh wave of GOP criticism of the embattled DOE loan program.
The filing comes two months after California solar-panel maker Solyndra — which received a $535 million guarantee in 2009 — went belly-up.
The Republican National Committee highlighted Beacon’s bankruptcy in a stream of tweets Monday, while the GOP’s point man on the Solyndra probe, Rep. Cliff Stearns (Fla.), called out President Obama directly.
Stearns said Beacon’s woes are a “sharp reminder” that the stimulus has fallen short, adding: “Unfortunately for the American taxpayers, I am deeply concerned that other DOE programs could follow, which goes to the heart of the president’s flawed economic program.”
Stearns and others have for weeks focused their investigation on the Energy Department’s February decision to restructure the Solyndra loan guarantee in early 2011, arguing the provision “subordinating” the taxpayer interest to those of private investors violates the 2005 energy law that established the DOE loan program.
There don’t appear to be the same political ties, but that doesn’t remove the problems with the whole idea of government venture capital that I noted almost two months ago:
A venture capitalist is risking money that’s been entrusted to him, and he owns fiduciary duties to his investors that, if violated, could subject him to personal liability for losses. Of course, he also stands to benefit greatly if he bets right, both from the profit his investment earns and from the additional investors he’s likely to attract additional investors. These rewards of success and punishments of failure serve, hopefully, to give him the incentive to choose his investments carefully, targeting companies that are likely to most likely to make a profit rather than those that are politically popular or politically connected.
None of that exists when the investment decisions are being made by government.
Additionally, who suffers if a government investment decision goes wrong? Not the politicians who supported it, not the bureaucrats who made the decision, and not even the owners of the company who received the loan. the only people who are going to suffer are the taxpayers who are out half a billion dollars. And that’s the problem with this entire program. The government is playing with other people’s money, and has no incentive to ensure that they’re making wise investment decisions. That’s why this is a job for the market, not the Department of Energy.
That’s the real lesson of Beacon Power and Solyndra, and the companies that are likely to follow in his footsteps.