Senator Dianne Feinstein Passionately Defends a Program She Voted Against

by William Yeatman on March 1, 2011

in Blog, Features

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I’ve been a vehement critic of the Department of Energy’s Loan Guarantee Program (see here and here). In a nutshell, I argue that the DOE has no business starting a bank from scratch. Even if it could cobble together the necessary expertise and infrastructure, the U.S. government has a long history of picking losers in the energy market (see: breeder reactors, synfuels).

My case against the DOE’s green bank has been made persuasively by the Government Accountability Office, the top federal watchdog. In 2007, 2008, and 2010, the GAO released reports concluding that the program is being not being run well.

My case was further made by the pending collapse of the first recipient of a loan guarantee. In September 2009, the DOE issued a $535 million loan guarantee to Solyndra, a company that you may recall from reports of it being a total financial disaster. It canceled an IPO after a PriceWaterhouse Cooper audit found that the company’s shaky finances “raise substantial doubt about its ability to continue as a going concern.” Evidently, Solyndra already has lost $557 million. In November, the company announced that it would shutter a plant and lay off 170 employees.

Cutting the fat from the federal budget is more politically popular than ever, and the green bank’s troubled history suggests it’s a risky bet better made when the budget isn’t far in the red. Accordingly, House Republicans axed the program in its proposed budget.

The House’s decision to eliminate the loan guarantee program prompted California Senator Dianne Feinstein to take to the pages of the LA Times to plead on the DOE’s behalf. Most of her argument is green jobs boilerplate, but one sentence in particular struck me. According to Senator Feinstein, “The loan guarantee program was created in 2005 with strong bipartisan support and has had a significant impact on the industry.”

She is referring to the 2005 Energy Policy Act. And she’s right—the legislation  was passed by a strong bipartisan majority in the Congress. However, Sen. Feinstein voted against it.

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