By Institute for Energy Research ——Bio and Archives--October 15, 2012
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Congress budgeted $2.47 billion, or more than 15% of the total value of approved loan guarantees, to cover for defaults, like those of Solyndra and Beacon Power, which were both higher risk loan guarantees. [A study] found that even if all of the higher risk (non-generation) projects defaulted on the full amount of their loan guarantees and "no assets were to be recovered, the DOE would still have $446 million remaining to cover additional project losses." The press has largely failed to explain that there was money set aside to cover defaults like Solyndra's, and that most of the other projects are low-risk, even as they were emphasizing the potential loss of taxpayer money from loan guarantees. [Bold added.]It is difficult to comprehend the mindset that would generate this defense of the DOE program. The MediaMatters blogger is arguing that the press has been unfairly leading the public to worry about taxpayer risk from defaulting loans, when Congress has already set aside billions of dollars to cover such losses. Where did Congress get this money, if not from the taxpayers (or by running up the deficit, putting future taxpayers on the hook)? The whole point of the DOE's program is to ensure private lenders grant loans to renewables projects that would not be funded in a free market for energy. By definition, the taxpayers are co-signing on loans that do not pass the market test. Mitt Romney misspoke when he said half of the loans had defaulted thus far, but he was correct in arguing that the program was an unnecessary waste of taxpayer money. The federal government will only divert capital into politically-favored channels if it continues to pick winners and losers in the energy sector.
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