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Treasury: review of Solyndra loan was “rushed”

According to a new audit, Treasury’s review of the $535 million Department of Energy loan guarantee to the now-bankrupt Solyndra from was “rushed.”

The report, Consultation on Solyndra Loan Guarantee Was Rushed, was released April 3 by Treasury’s Inspector General’s Office (IGO). Highlighting key problems with the Treasury review of the loan guarantee, the auditors conducted the investigation because of “heightened media attention and congressional inquiries surrounding Solyndra’s loan.”

Although  DOE was required to consult with Treasury during its own review process, the audit found that Treasury was consulted after DOE’s review process, and “the consultation that did occur was rushed.” All in all, the specific terms of the “consultation” were unclear from the start.

Credit: Solyndra

“[T]he lack of clarity on what Treasury’s consultative role meant…resulted in Treasury having a pressured and compressed review period for Solyndra,” said the report.

On March 17, 2009, the Treasury was informed that DOE would be issuing a statement about Solyndra, and the following day, Treasury received a draft press release. The announcement said that Secretary Chu would sign a “conditional commitment” on the loan guarantee.

The Treasury asked for more review time, and was given a deadline of March 19 so that the press release could issued on March 20. “[T]he Solyndra loan consultative review by Treasury was completed in about 1 day,” said the audit.

This review consisted of a conference call on March 19, 2009. While Treasury said all concerns were addressed, an internal Treasury e-mail noted that “we pressed on certain issues…but the train really has left the station on this deal.”

“When asked, Treasury officials told us that enough time was granted to perform a sufficient review of Solyndra’s terms and conditions,” the report said. Apparently, Treasury “maintained no documentation of DOE’s responses to the questions and concerns raised” and email correspondence “leave[s] questions as to whether Treasury’s concerns were fully addressed.”

While Treasury officials did offer documentation to summarize the conference call, these were provided in March 2010. At a full year after the conference call, the audit argued that this documentation was supplied far too late.

Since the full loan was guaranteed by the DOE, it was funded by Treasury’s Federal Financing Bank (FFB). But all losses from the bankruptcy will be paid to the FFB by the DOE, “and are ultimately borne by the American taxpayers.”

The IGO recommended that the Assistant Secretary of the Treasury Department for Financial Markets should work with the DOE to delineate precisely what the Treasury’s “consultative role” should be, and in which situations the Treasury should be consulted.

Meanwhile, the Obama administration does not see the report’s findings to be problematic. The audit “makes clear that Treasury Department officials believed they had enough time to evaluate the terms,” Damien LaVera, an Energy Department spokesman, told Bloomberg.

“The simple fact is that the review was exhaustive — involving technical, legal and financial experts from three federal agencies for more than 1,000 days spanning two administrations.”

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