House Speaker John Boehner, Majority Leader Eric Cantor, and Majority Whip Kevin McCarthy have signed a No Climate Tax Pledge. Bad news for those pushing carbon taxes as part of a budget deal. 

Friends of affordable energy can ill-afford complacency, however. The Dumb Party has been known to snatch defeat from the jaws of victory, and carbon tax advocates are nothing if not tenacious. So when it comes to carbon taxes, I say kick ‘em while they’re down.

To that end, I excerpt below some insightful comments by several contributors to last week’s National Journal Energy Blog discussion, “Is Washington Ready for a Carbon Tax?”

David Kreutzer (Heritage Foundation) notes the chutzpah of those who, having failed to sell the public on the stealth energy tax called cap-and-trade, now expect the public to buy an open, avowed, unvarnished energy tax:

Once the electorate was made to realize that cap and trade bills (Lieberman-Warner, Waxman-Markey, etc.) were actually taxes on fossil energy, cap and trade became political poison. So it is surprising that an explicit tax on fossil energy is now being pushed in Washington.

Kreutzer then debunks the argument that conservatives should support a “revenue neutral” carbon tax that displaces EPA regulation of greenhouse gases:

The hope among carbon-tax proponents is that they can sugar coat the tax and make it palatable to conservatives, or at least to enough conservatives. This proposed confection has two ingredients. First, the carbon tax is to be a revenue-neutral swap for some even more harmful tax. Second, a carbon tax would obviate the need for regulation of carbon dioxide and for subsidies to low-carbon energy.

“Revenue neutral” is supposed to mean that each dollar raised will cut another tax by a dollar. But with neutrality there is no gravy to spread around to all the special interests—and we are talking about $100s of billions in gravy every year. So revenue neutrality will never happen. . . .

[As for a tax-for-regulation swap:] That logic may work in PowerPoint-filled rooms at think tanks, but not in the proverbial smoke-filled rooms in Congress. If this logic did carry over, then cap and trade also would have eliminated the need for carbon regulation. Instead of reducing regulations, the cap and trade bills added them. For instance, the Waxman-Markey bill went on for nearly 700 pages before it even got to cap and trade.

Just in case there might be some confusion as to whether the left is willing to trade off regulation for a carbon tax, Representative Waxman recently cleared things up: “A carbon tax or a price on carbon would be a strong incentive for the development of new technologies. But because it’s so complicated, I would not support preempting EPA. EPA can assure us that we can actually get the reductions we need.”

Susan Dudley (George Washington University Regulatory Studies Center) explains why key interest groups, regulatory agencies, and politicians would not support a carbon tax that preempts greenhouse gas regulation and cap-and-trade:

Agribusiness interests have been making billions from misguided mandates for renewable fuels, and would fight any attempt to replace them with a carbon tax. Wind and solar technologies, if they really work, would benefit from a carbon tax. But to the extent they can’t compete, they will likely have a strong preference for the direct subsidies they enjoy now.

The regulators who have been using climate concerns to seek greater authority to control the economy will see little to like in a simple carbon tax. And the market-mimicking virtues of a carbon tax will not be realized unless Congress is willing to reverse the Supreme Court’s decision to apply the Clean Air Act to GHGs, to repeal DOT’s automobile fuel economy standards and DOE’s appliance efficiency standards, and to clean out the morass of other regulations that purport to control our energy use. Opposition to a tax may be especially strong from state regulators, such as those in California, who have begun to sell GHG allowances and will oppose any policy that would convert those revenues into federal revenues.

The costs of any program aimed at reducing GHG emissions will cause prices of goods and services to rise, but for politicians, the advantage of the current regulation-subsidy patchwork or a cap-and-trade system is that these higher prices are not easily traced to climate policies, or to the politicians responsible for them. A transparent carbon tax, in addition to reducing emissions more cost-effectively than the alternatives, would allow Americans openly to weigh the tradeoffs between higher costs and environmental benefits.

The final nail in the carbon-tax coffin is that with it would come demands for exemptions, rebates, credits, and all manner of loopholes, in addition to a wish list of new spending. If the revenues are used as they should be – to offset other taxes and reduce the deficit – then legislators and the administration will not get to spend them on vocal constituencies and pet projects. What’s the fun in that? Politicians who habitually ask themselves “whose votes am I buying if I support this bill?” will not find a persuasive answer in a clean and simple carbon tax.

Jim Kerr (McGuirreWoods LLP) delves into the devilish details that would have to be worked out before the usual suspects could agree on carbon tax legislation:

While economists may see a carbon tax as simple to enact, that will certainly not be the case. A carbon tax raises precisely the same difficult and complicated issues as a cap-and-trade system. Because both approaches put a price on carbon, both will have substantial real world impacts that have to be addressed. What price level would a carbon tax start at? How much would it increase and how fast? Would some revenues be used to further carbon reduction and energy efficiency efforts, how much and how? How will electric power consumers be protected from rate shocks? How will low income consumers be protected from disproportionate impacts to their disposable incomes? How will carbon-intensive industries be protected from competition and job losses? How will offsets (identified as a key cost containment issue) be recognized?

The biggest political issues to be resolved will involve geographic inequities, where regions that are more heavily dependent on higher carbon fuels will have to pay more to decarbonize their economies, and also pay higher taxes until those efforts bear fruit. Those regions may also object to a uniform redistribution of carbon tax revenues (e.g., for deficit reduction) where they have paid in far more in carbon taxes than other regions.

In the Waxman-Markey debates, many of these issues were addressed by complicated agreements on allowance allocations, and other aspects of the program. In a carbon tax system, they could similarly be addressed though tax credits or rebates, as appropriate, but only after difficult debates, none of which have begun. Thus, although the types of issues in play, and the alternatives available, are similar as between a carbon tax and a carbon cap, that does not make the decisions on these issues any easier.

Paul Cicio (Industrial Energy Consumers of America) warns of the special peril carbon taxes pose to U.S. manufacturers:

Since 2000, we have lost some 5,000,000 jobs and shutdown about 54,000 manufacturing facilities. For perspective, in 2010 and 2011 we increased about 500,000 jobs – so you can appreciate how far we need to go to re-build the manufacturing sector. Because of our failure to compete, the trade deficit in 2011 finished at $445 billion. Policy makers need to understand that a carbon tax is inconsistent with the potential for a manufacturing renaissance.

Only now, because of low natural gas costs are we beginning to see billions in capital investment announcements that could usher in a tremendous period of economic growth, jobs and exports. A carbon tax would directly increase energy costs, reduce competitiveness and raise great uncertainties toward this new investment.

A $15 per ton carbon tax would increase manufacturing costs by about $17 billion per year and a $50 per ton carbon tax by about $56 billion per year. These are significant increases in costs.

Charles Drevna (American Fuel & Petrochemical Manufacturers) argues that carbon taxes would still be regressive even if combined with feebates and cuts in other taxes:

A reduction in income tax rates won’t help 70 percent of households in the lowest income distribution or 36 percent in the second-lowest quintile. Income tax or payroll tax rebates are equally problematic since it would be of no value to those who don’t pay those specific taxes. Similarly, a payroll tax rebate would fail to reach 46 percent of households in the lowest income bracket. The CBO cautioned, “Not everyone – especially members of low-income households and retirees – pay payroll taxes or files an income tax return. But people would need to file a return to participate in a rebate program based on the income tax system.”

Households could of course file an income tax return just to receive the rebate, but we know from experience that millions won’t. For example, in 2008 as part of the Economic Stimulus Act, the Joint Committee on Taxation estimated a payout of $106.7 billion in stimulus funds, but only $94.1 billion was distributed. A lot of money was left on the table and the same will hold true should Congress pass a carbon tax. Defenders of a carbon tax expect the very same body that managed the country right into a record deficit to now manage what could be the largest federal rebate program ever enacted.

Bill O’Keefe (John Marshall Institute) views the carbon tax campaign as a triumph of hope over experience:

[Al Gore's proposal in 1993 for a BTU tax on energy] became a catalyst for a broad based coalition representing large and small businesses, transportation, manufacturing, agriculture, building trades, and even social service organizations that need gasoline and heating oil to care for the poor and homeless. The work of the coalition captured a lot of attention from the media. Its grassroots activities made clear to members of Congress that they should support the tax at their own peril. Since, as Samuel Johnson once observed, there is nothing like a hanging to concentrate the mind, Democrat support for the tax vanished. With outright defeat clear, the Administration sued for peace and the BTU became a relic of flawed policy.

BTU became a verb and members of Congress wanted to avoid being BTU-ed, but in 1994 voters enacted retribution and turned Congress over to republicans.

The economy is in worse shape today than it was in 1993, and it could easily slip back into recession. . . .A small carbon tax at the outset would be easy to increase in small increments. Then in time a small tax will become a big tax. Anyone who doubts this should study the VAT experience in Europe. Rates go up; never down. Even today as they face economic catastrophe, Spain and Greece are considering raising their VAT above 20 percent. . . .We can do better than create the son of a BTU!

Yes, argues Daveed Gartenstein-Ross in The Atlantic (Sep. 17, 2012). Gartenstein-Ross is the author of Bin Laden’s Legacy: Why We’re Still Losing the War on Terror. I haven’t read the book, but judging from the favorable reviews, Gartenstein-Ross has the ear of defense hawks of both parties. Does he offer sound advice on global warming?

In his Atlantic article, Gartenstein-Ross chides Republicans for taking a “decidely unrealistic tack” on climate change. “The available evidence overwhelmingly suggests that climate change is real; that extreme weather events are increasing; and that this dynamic will have an impact on American national security, if it hasn’t already,” he avers. He goes on to blame this summer’s drought on global warming, citing NASA scientist James Hansen’s claim that the 2003 European heat wave, the 2010 Russian heat wave, and the 2011 Texas-Oklahoma drought have “virtually no explanation other than climate change.” (For an alternative assessment, see these posts.) 

Since 2010, notes Gartenstein-Ross, the Department of Defense has classified climate change as a conflict accelerant — a factor exacerbating tensions within and between nations. Well, sure, what else is Team Obama at DOD going to say in an era of tight budgets when no rival superpower endangers our survival? The concept of an ever-deepening, civilization-imperilling climate crisis is an ideal mission-creep accelerant. 

Gartenstein-Ross concludes by urging Republicans to face “reality” and take action on climate change. However, he offers no advice as to what policies they should adopt. Does he favor cap-and-trade, carbon taxes, the EPA’s greenhouse gas regulatory cascade, ’all of the above’? Gartenstein-Ross doesn’t say. He ducks the issue of what economic sacrifices he thinks Republicans should demand of the American people. 

Below is a lightly edited version of a comment I posted yesterday at The Atlantic on Gartenstein-Ross’s article: 

Dear Mr. Gartenstein-Ross,

Some Republicans have taken an “unrealistic tack” on climate change — for example, denying that global warming is real or doubting whether carbon dioxide is a greenhouse gas. This, however, is an unfortunate consequence of the climate alarm movement’s rhetorical trickery. Al Gore and his allies pretend that once you accept the reality of global warming, then everything else they claim (e.g. sea levels could rise by 20 feet this century) or advocate (cap-and-trade, carbon taxes, Soviet-style production quota for wind turbines) follows inexorably, as night the day. Consequently, some GOP politicians and activists now believe they must deny or question a tautology (“greenhouse gases have a greenhouse effect”) in order to oppose Gore’s narrative of doom and agenda of energy rationing.

As a thoughtful analyst, you should see through this rhetorical trap. Yes, other things being equal, CO2 emissions warm the planet. That, however, does not begin to settle the core scientific issue of climate sensitivity (the amount of warming projected to occur from a doubling of atmospheric CO2 concentrations). It tells us nothing about impacts, such as how much Greenland and Antarctica will contribute to sea level rise by 2100 (BTW, a realistic projection is inches rather than feet or meters). It does not tell us whether the costs of “inaction” are greater or less than the costs of “action.”

James Hansen’s attribution of the ongoing drought to global warming, which you cite, is a testable hypothesis. Patrick Michaels examines how the U.S. Palmer Drought Severity Index (PDSI) matches up over time both with the U.S. temperature record and that portion of the record attributable to global temperature trends. Turns out, there is zero correlation between global temperature trends and the PDSI, but a significant correlation between plain old natural climate variability and the PDSI.

One massive fact conveniently swept under the rug by the climate alarm movement is that since the 1920s — a fairly long period of overall warming — global deaths and death rates attributable to extreme weather have declined by 93% and 98%, respectively. The 93% decline in aggregate deaths is remarkable, given that global population has increased about four-fold since 1920. The most deadly form of extreme weather is drought, and since 1920, worldwide deaths and death rates attributable to drought have fallen by an astonishing 99.98% and 99.99%, respectively. 

As Indur Goklany, author of the study just cited explains, the increasing safety of humanity with respect to extreme weather came about not in spite of mankind’s utilization of carbon-based fuels but in large measure because of it. Fertilizers, plastics for packaging, mechanized agriculture, trade between food surplus and food deficit regions, emergency response systems, and humanitarian assistance — advances that have dramatically increased global food security — all presuppose fossil fuels and the wealth of economies powered by fossil fuels.

A just-published study by Jeff Keuter of the George C. Marshall Institute finds that “environmental factors rarely incite conflict between states or within states.” For example, Israel and her Arab neighbors have gone to war several times — but never over access to water. Keuter finds that “efforts to link climate change to the deterioration of U.S. national security rely on improbable scenarios, imprecise and speculative methods, and scant empirical support.”

You mention the hunger crisis of 2008. Ironically, one of the contributing factors was a global warming policy – the Renewable Fuel Standard (RFS), which artificially raises the demand for and price of corn. As you note, soaring corn prices also pull up the price of wheat.

Which brings me to a final point. It is one-sided and, well, risky to assess the security risks of climate change without also assessing the security risks of climate change policies. For example, economic strength is the foundation of military power. A great power cannot have a second-rate economy. Affordable energy is vital to economic growth. Carbon mitigation schemes have a vast potential to chill job creation and growth because they are designed to make energy more costly. That is the main reason Congress and the public rejected cap-n-tax.

The worse the economy, the more painful the trade-offs between guns and butter. How to cut the deficit without gutting core military capabilities is a key issue White House and congressional budget negotiators are grappling with right now. The revival of North America as an energy producing province is one of the few economic bright spots today, a source of new tax revenues as well as new jobs. From a national security perspective, now is the worst possible time to ramp up the already considerable regulatory risks facing the coal, oil, and natural gas industries.

Tomorrow, the House Energy and Commerce Committee will hold its second hearing on Solyndra, the manufacturer of innovative non-silicon-based solar panels that borrowed $527 million only to file for bankruptcy, shutter its brand new Freemont, Calif. factory, and lay off 1,100 employees on September 6. Expect Committee Democrats to blame China and the allegedly unforeseen fall in the price of conventional silicon-based solar panels for the debacle.

That’s the line the Department of Energy’s (DOE) witness, Jonathan Silver, took at the Committee’s first (September 14) Solyndra hearing, noting China’s provision of more than $30 billion in subsidized financing to its solar manufacturers, which rapidly dropped silicon prices, “taking Solyndra, and many industry analysts, by surprise.” DOE’s blog, Energy.Gov, had already adopted this explanation on August 31, the day Solyndra announced it would file for bankruptcy.

Similarly, Solyndra’s August 31 announcement coyly cited the “resources of larger foreign [i.e. Chinese] manufacturers” and a “global oversupply of [mainly Chinese] solar panels” as factors foiling the company’s business plan. Solyndra’s ex-employees have applied to the Department of Labor (DOL) for aid under the Trade Adjustment Assistance (TAA) program, claiming that China put them out of work. If DOL approves the application, Solyndra’s former workers will receive allowances for job retraining, job searching, and health care for up to 130 weeks, or about $13,000 per employee. Blogger Scott Linicom decries such double dipping:

So to recap: massive government subsidies created 1,100 “green jobs” that never would’ve existed but for those massive government subsidies.  And when those fake jobs disappeared because the subsidized employer-company inevitably couldn’t compete in the market, the dislocated workers blamed China (instead of what’s easily one of the worst business plans ever drafted) in order to receive . . . wait for it . . . more government subsidies. Behold, the Circle of Government Life.

Whether it’s Solyndra execs and DOE officials trying to save face, ”progressives” defending the honor of green industrial policy, or former employees looking for more taxpayer freebies, they all would have us believe that Solyndra’s $535 million loan guarantee was a good bet at the time it was made. They need a scapegoat for Solyndra’s crash, so they blame China. Indeed, some (e.g. Grist) claim Solyndra’s collapse shows that the U.S. government isn’t doing enough to help our “clean tech” companies “compete.” Balderdash.    

Solyndra’s business plan was dubious from the getgo. Committee Ranking Member Henry Waxman (D-Calif.) claims that “under both the Bush Administration and the Obama Administration, DOE officials strongly backed Solyndra.” In fact, on January 9, 2009, Bush’s DOE declined to approve Solyndra’s loan guarantee application, citing several “unresolved” issues including lack of an independent study of the company’s long-term prospects, questions about the company’s financial strength, and concern about the scale-up of production assumed in the business plan (Documents Entered into Record, p. 1).

As for the allegedly unanticipated glut in rooftop solar panels, which made Solyndra’s thin-film panels uncompetitive, it was the topic of a January 12, 2009 USA Today article. In an email dated January 13, 2009, Bush DOE staff cited the glut, reported in USA Today, as the reason for the DOE Credit Committee’s “unanimous decision not to engage in further discussions with Solyndra at this time” (Documents Entered into Record, p. 2).

Emails obtained by the Committee suggest that White House pressure for quick approval may have compromised the depth and quality of DOE and Office of Management and Budget (OMB) review of Solyndra’s loan application (Documents Entered into Record, pp. 4, 11, 12):

• “There’s a recurrent problem with the [White House] scheduling office looking for events [loan guarantee approvals] before they are ready to go.” (March 10, 2009)
• “As long as we make it crystal clear to DOE that this is only in the interest of time, and that there’s no precedent set, then I’m okay with it. But we also need to make sure they don’t jam us on later deals so there isn’t time to negotiate those, too.” (August 27, 2009)
• “We have ended up in the situation of having to do rushed approvals on a couple of occasions (and we are worried about Solyndra at the end of the week). We would prefer to have sufficient time to do our due diligence reviews and have the approval set the date for the announcement rather than the other way around.” (August 31, 2009)

DOE approved the Solyndra loan guarantee on September 4, 2009 — an event timed to coincide with the ground breaking ceremony for the company’s Freemont, California factory. Speakers included DOE Secretary Steven Chu, California Gov. Arnold Schwarzenegger, and Vice President Biden (via satellite feed). But a scant two weeks before, on August 19 and 20, emails between DOE staff note that when Fitch modeled Solyndra’s cash flow over time, the company ”runs out of cash in Sept. 2011 even in the base case without any stress. This is a liquidity issue” (Documents Entered into Record, pp. 8-9). Rarely has a government business forecast been so accurate!

In addition to the liquidity problem, it is unclear whether Solyndra had a viable plan to reconcile its production costs and sale prices. According to an ABC News analysis:

While Energy Department officials steadfastly vouched for Solyndra — even after an earlier round of layoffs raised eyebrows — other federal agencies and industry analysts for months questioned the viability of the company. Peter Lynch, a longtime solar industry analyst, told ABC News the company’s fate should have been obvious from the start.

“Here’s the bottom line,” Lynch said. “It costs them $6 to make a unit. They’re selling it for $3. In order to be competitive today, they have to sell it for between $1.5 and $2. That is not a viable business plan.”

Along the same lines, ELECTRO IQ (November 8, 2010) posed the question: “Can Solyndra reconcile cost-per-watt and sale price?” From the article:

In the last year, there have been numerous stories about CIGS [copper idium gallium selenide] thin-film manufacturer Solyndra’s troubles — a pulled IPO, a restructuring of the executive team, and, most troubling, the high cost of module production. (In an S-1 filing a year ago, the company said its average sales price was over $3.20 a watt, about 65% more than leading crystalline-silicon PV manufacturers. Its cost of manufacturing was over $6 a watt). Solyndra aims at $3.5 per watt by the end of 2011.

Tim Worstall, writing in Forbes (September 17, 2011), argues that, “Yes, it was possible to see this failure coming.” Defenders of the loan argue that the fall in silicon solar prices was unforeseen, hence “Solyndra’s non-silicon technology got bushwhacked by something no one could have anticipated.”

In reality, it was “blatantly obvious” that competitors’ prices would fall. In the mid-2000s demand exceeded supply and the price soared. But as Econ 101 tells us, soaring prices create incentives to increase supply, which then push prices down.

What’s more, says Worstall, by 2008, First Solar, a leading supplier of non-silicon modules, had already achieved lower cost-per-watt than Solyndra hoped to achieve by 2011.

Concludes Worstall: “It wasn’t an unexpected fall in silicon prices that did in Solyndra: they were never even close to being competitive on pricing against non-silicon technologies. They weren’t even in the right ballpark at all.”

Let’s take a closer look at DOE loan program director Silver’s ’don’t-blame-DOE-or-Solyndra’ explanation of why the company went bust:

In 2009, Solyndra appeared to be well-positioned to compete and succeed in the global marketplace. Solyndra manufactured cylindrical, thin-film, solar cells, which avoided both the high cost of polysilicon — a crucial component used in conventional solar panels — and certain costs associated with installing flat panels. But polysilicon prices subsequently dropped significantly, taking Solyndra, and many industry analysts, by surprise. Among the principal beneficiaries of this pricing environment were four of Solyndra’s Chinese competitors, which sell polysilicon panels and received $20 billion in credit from the China Development Bank in 2010.

* * *

Unfortunately, changes in the solar market have only accelerated in 2011, since the restructuring [of Solyndra's loan guarantee in February 2011] — making it more difficult for the company to compete. Chinese companies have flooded the market with inexpensive panels, and Europe — currently the largest customer base for solar panels — have suffered from an economic crisis that has significantly reduced demand and forced cuts in subsidies for solar deployment that were important to Solyndra’s business model. The result has been a further and unprecedented 42% drop in solar cell prices in the first eight months of 2011.

All of that may be correct, but the pertinent issue is whether anyone could have foreseen these changes in the marketplace in 2009 and 2010 when the U.S. government decided to bet taxpayers’ money on Solyndra. Far from being unforeseeable that China would subsidize its ”clean tech” companies to beat out U.S. firms and capture market share, this was a major premise of DOE’s loan guarantee program. We had to fight fire with fire or else lose the “clean energy race,” Obama officials warned. As DOE Secretary Chu said in testimony on October 27, 2009:

China has already made its choice. China is spending about $9 billion a month on clean energy. . . .The United States, meanwhile, has fallen behind. . . .We manufactured more than 40 percent of the world’s solar cells as recently as the mid 1990s; today, we produce just 7 percent. When the starting gun sounded on the clean energy race, the United States stumbled. But I remain confident that we can make up the ground. . . .The Recovery Act includes $80 billion to put tens of thousands of Americans to work developing new battery technologies for hybrid vehicles, making our homes and businesses more energy efficient, doubling our capacity to generate renewable electricity, and modernizing the electric grid.

Moreover, one did not need to be a rocket scientist to predict that if the U.S. government leverages billions of dollars in private investment to compete with Chinese firms, China would up the ante. After all, Beijing is flush with cash, whereas Washington is deep in debt.

Nor was any great acumen required to anticipate that the economic crisis would cut subsidies and thereby reduce demand for solar panels in Europe. In October 2009, the Rheinisch-Westfälisches Institut (RWI) reported that Germany’s feeder tariff system was on course to subsidize solar voltaic modules to the tune of $73 billion from 2000 through 2010, yet solar power was providing less than 1% of the nation’s electricity. Such lavish subsidies are unsustainable, especially during a financial crisis.

One also wonders why Solyndra had to hire 3,000 people to build a brand new factory (“Fab 2″). Wouldn’t it have been cheaper to rent space in an existing building? Ah, but then there would have been no groundbreaking and no photo-op for Secy. Chu, Gov. Schwarzenegger, and Vice President Biden. Mixing politics with business politicized Solyndra’s business plan.

Even if one makes the dubious assumption that Solyndra’s business plan was sound at the time DOE approved the loan guarantee, why did S0lyndra stick to the plan when it became clear the company was going broke?  ”The Fed money was explicitly tied to being *solely* used to build Fab 2. Solyndra could not use the loan proceeds for *anything* else,” according to an anonymous member of Solyndra’s management team. The DOE loan guarantee, it seems, reduced Solyndra’s ability to adapt to changing market conditions.

Sadly, the one lesson Team Obama will never draw from Solyndra’s failure is the most important one: the folly of government trying to play venture capitalist. Heritage Foundation economist David Kreutzer offers some choice words in two recent blog posts:

“We have such a great product that nobody will lend us the money,” was the nonsensical argument from Solyndra and its backers. Those who did not see the logical flaw in 2009 cannot help but see the flawed result in 2011. Unfortunately, some still do not see the logical problem that led to the mess.

Indeed, two of the criteria for the loan program show how silly it is to have government run a bank. One is that the loan must be for a commercially viable project. Another is that the applicants have to demonstrate that they could not get private financing. By definition, the second criterion rules out the first.