For starters, financing is well outside of the DOE’s core competency, so there’s no reason to expect that it could start a successful banking operation from scratch. There’s also the fact that government has a horrid record picking energy ventures in which to invest taxpayer money. As such, the odds of the green bank failing were high when it was created by the 2005 Energy Policy Act.
During the whole of the program’s existence, evidence has mounted confirming that the green bank is a bad idea. The Government Accountability Office, the top federal watchdog, has issued three separate reports raising serious doubts about the DOE’s management of the program. These suspicions were validated when the DOE first loan guarantee, for $535 million, went to a California solar power company, Solyndra, that now teeters on the brink of insolvency.
Unfortunately for taxpayers, it gets worse, because the results of a recent investigation suggest that the green bank lacks transparency. Last week, the DOE’s Office of the Inspector General published a report finding that the green bank program “could not always readily demonstrate, through systematically organized records, including contemporaneous notes, how it resolved or mitigated relevant risks prior to initiating loan guarantees.” According to the report (available here), 15 loan guarantees (out of 18 total) lacked “pivotal” information regarding risk ratings.
Notably, House of Representatives eliminated the program in its 2011 budget, which is great news for taxpayers. It could save them up to $70 billion in bad loans to boondoggles. However, green energy enthusiasts in the Senate (Senator Dianne Feinstein is chief among them), are intent on rescuing the program from the chopping block, so its fate is uncertain.