As more developments arise in the Solyndra case, we find the specifics of how it was none other than Jacob Lew, the head of the Office Management Bureau, elsewhere known as the guy who puts together all those forecasts that Obama pulls out of his hat as seeing growth of 3.7% in 2012 here and budget savings of $4 trillion there, got subpoenaed, and not just over anything, but over the deal that is rapidly becoming Obama's Solargate: Solyndra. As a recap: the man who is the "expert" on how the US will get out of its multi-trillion deficit had to be subpoenaed by Congress to explain his secretive actions that ended up most likely harming US taxpayers for reasons still unknown (but not for long), and what is far worse, Congress has to subpoena the head of the OMB because it failed to exercise proper oversight of the stimulus money in the $787 billion American Recovery and Reinvestment Act... and all this under the tutelage of a White House which recently won an award for Anti-Secrecy....which was present to the president by among other Gary Bass of OMB Watch...And somehow we are expected to believe that fiscal stimulus in America has even a remote chance of being allocated productively (a fatal Keynesian flaw which Andy Lees described earlier) instead of pumping up crony capitalism schemes that enrich vested interests, and which drown in opacity and obscurity over which not even Congress has any supervision?
Lew subpoena link here.
And where it gets fun is reading through the slides that have been prepared as part of the production for current and future testimony... and believe us, there will be much more future testimony, as republicans have smelled blood shooting straight out of a punctured artery and are now circling around a president who probably doesn't even realize the danger he is in...
Combing through some of the production is the fact that the OMB knew precisely and to the dot, way back in August 2009 when Solyndra would run out of cash. From August 19, 2009: "While debt coverage is robust under stress conditions, the project cash balance goes to $62,000.00 in September 2011. Under the assumption that a small amount of cash is tied up in working capital, the project will face a funding shortfall." Also, the fact that the OMB was looking at a shell company that had absolutely no working capital should probably have set off a few alarms: from the same email - "I'm concerned that we still have a major outstanding issue. The attached model represents the Base Case that was utilized by Fitch and the project team. In this version, all working capital assumptions were eliminated, suggesting that Fab2 will hold no A/R, inventory or A/P balances... The issue of working capital assumptions has been a major issue repeatedly raised since December. Furthermore, the assumption of no working capital at the project company is inconsistent with the model we looked at just yesterday and the project team "due diligence update.... In addition to the critical issue above, we have a number of other modeling issues that need to be addressed. For example, as stated yesterday, property taxes don't seem to appear in the model..." Sigh. Only in America...
But where it gets downright surreal, is that as we reported previously Imperial Capital has been retained at a $150K/month fee, and seeks to collect a $1 million success and $1 million sale fee (all expenses paid of course, and since they are comped by the taxpayer- they are uncapped: a first in a bankruptcy advisor engagement letter), in order to.... liquidate the company. To wit from an August 27 2009 email exchange:
August 279, 2009, 3:10 pm
The credit subsidy model that OMB approved last October for the Title XVII loan guarantee program assumed a workout scenario for recoveries. However, we made it clear to DOE that decision as to whether work out or liquidation should be assumed in the model for specific cases, would be made on a case by case basis. Given the time pressure we are under to sign-off on Solyndra, we do't have time to change the model to assume liquidation.
Reply -> August 27, 2009, 4:20 pm
So we know what to say if asked, what are the arguments for assuming a workout vs. liquidation?
Reply -> August 27, 2009, 4:31 pm
We don't know. I would assume that usually one would assume liquidation. (And in fact the first credit assessment that Fitch did, coincidentally for Solyndra stated that as a startup, Fitch would assume liquidation).... We essentially kicked the can down the road, and then Fitch rode to our rescue by stating that as a startup assumes liquidation.
Something tells us that the judge overseeing the Solyndra Bankruptcy case will be happy to hear that the one possible outcome for the company is a liquidation. If after this Imperial still continues to collect $150,000 a month for over a year as it liquidates a company, a process that adds no value to the estate and can be done for pennies on the dollar by MBA grads, then surely someone else has ridden to their particular top line rescue.
There is much more in the docs entered into the record (link). And there will be much more when Lew testifies and brings the whole can of worms of OMB's corrupt business practices (ignoring their horrendous excel track record) into the open.
Just how much credibility will anything coming out of the OMB, the organization that is supposedly in charge of quantifying the cost-benefit analysis of America's near brush with austerity and forecasting the consequences of Obama's fiscal decisions, after the Congressional theater is fully done crucifying him? And by implication, the entire administration?
h/t John Poehling