Solyndra Loan Review: Garbage In…Garbage Out

Why is Uncle Sam broke?

As with any spendthrift the old man has continually displayed a total grasp of basic financial principles.

Simple credit analysis addresses questions of business review, borrower integrity, loan terms, collateral, and ultimately the ability to repay. Each of these points highlights the risks a lender takes in providing financing. Mitigating risks is typically a function of how robust the underwriting process is.

One would hope that those involved in managing the finances of American citizens would embrace and practice robust principles or otherwise be held to account for their failure to do so. Was the failure of the solar energy company Solyndra simply a function of unknown and immeasurable market risks as some in the Obama administration would have us believe? Could American taxpayer interests have been better protected?

Well, in the spirit of checking the work of those in Washington, let’s review the Audit Report filed this week by the Office of Inspector General of the U.S. Treasury for Solyndra Loan. What do we learn?

April 3, 2012
Mary Miller
Assistant Secretary for Financial Markets
Department of the Treasury

This report presents the results of our audit of the Department of the Treasury’s (Treasury) role in the $535 million loan guarantee made to Solyndra LLC (Solyndra) in 2009. This loan was 100 percent guaranteed by the Department of Energy (DOE) under Title XVII of the Energy Policy Act of 2005 (the Act), as amended by the American Recovery and Reinvestment Act of 2009 (Recovery Act). The loan was funded by Treasury’s Federal Financing Bank (FFB).

We initiated this audit because of the heightened media attention and congressional inquiries surrounding Solyndra’s loan and its subsequent restructuring. The objectives of our audit were to (1) determine Treasury’s responsibilities related to the DOE loan guarantee for Solyndra as established by applicable laws, regulations, policies, procedures, and agreements and (2) assess whether Treasury appropriately carried out those responsibilities. Appendix 1 contains a more detailed description of our audit objectives, scope, and methodology.

Results In Brief
Treasury ’s consultative role as it related to the Solyndra loan guarantee is derived from the Act, the Federal Financing Bank Act, and 10 CFR §609 (Final Rule implementing Title XVII of the Act).

We found that Treasury did perform a consultation on the terms and conditions of the Solyndra loan guarantee. However, whether that consultation met the intent of the applicable law and regulation is not clear because Treasury’s consultative role was not sufficiently defined, the consultation that did occur was rushed, and no documentation was retained as to how Treasury’s serious concerns with the loan were addressed.

Are you sitting down? Let’s go over this again.

1. Treasury’s consultative role not defined: sounds like those in Treasury were not clear as to whether they were playing Tweedledum or Tweedledee.

2. The consultation was rushed: sounds like those in the Department of Energy must have had better things to do while throwing OUR money away.

3. No documentation was retained: clearly “the dog ate my homework” excuse.

In summary, this audit highlights a basic principle of ‘sense on cents’: “garbage in. . . garbage out”.

Perhaps the American public might care to learn more about this garbage process and the garbage men on the campaign trail.

About Larry Doyle 522 Articles

Larry Doyle embarked on his Wall Street career in 1983 as a mortgage-backed securities trader for The First Boston Corporation. He was involved in the growth and development of the secondary mortgage market from its near infancy.

After close to 7 years at First Boston, Larry joined Bear Stearns in early 1990 as a mortgage trader. In 1993, Larry was named a Senior Managing Director at the firm. He left Bear to join Union Bank of Switzerland in late 1996 as Head of Mortgage Trading.

In 1998, after 15 years of trading and precipitated by Swiss Bank’s takeover of UBS, Larry moved from trading to sales as a senior salesperson at Bank of America. His move into sales led him to the role as National Sales Manager for Securitized Products at JP Morgan Chase in 2000. He was integrally involved in developing the department, hiring 40 salespeople, and generating $300 million in sales revenue. He left JP Morgan in 2006.

Throughout his career, Larry eagerly engaged clients and colleagues. He has mentored dozens of junior colleagues, recruited at a number of colleges and universities, and interviewed hundreds. He has also had extensive public speaking experience. Additionally, Larry served as Chair of the Mortgage Trading Committee for the Public Securities Association (PSA) in the mid-90s.

Larry graduated Cum Laude, Phi Beta Kappa in 1983 from the College of the Holy Cross.

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