Wednesday, January 18, 2012

Geeks Out Of Their Depth

Brian:           What I had said was I’m in the math club, uh, the Latin club, and the physics club . . . physics club.
Bender:          Hey, Cherry.  Do you belong to the physics club?
Claire:            That’s an academic club.
Bender:          So?
Claire:            So, academic clubs aren’t the same as other kinds of clubs.
Bender:         Ah, but to dorks like him, they are.  What do you guys do in your club?
Brian:             Well, in physics we . . . we talk about physics, properties of physics . . .
Bender:          So it’s sorta social.  Demented and sad, but social.  Right?
—Anthony Michael hall as Brian Johnson, Judd Nelson as John Bender, and Molly Ringwald as Claire Standish in The Breakfast Club

Continuing with a theme running over the last few posts, it should be apparent by now that government—and this administration in particular—has no business meddling in affairs of business.

You should be reasonably familiar with the story of Solyndra, the California-based solar panel maker that received over $500 million in loans from the Department of Energy in 2009, only to go bankrupt last fall.  Congress and the FBI continue to investigate whether there was any wrongdoing in that deal, and while the administration has steadfastly insisted that political connections had nothing to do with the issuance of that loan over the objections of DOE financial analysts, there remains a lot of smoke for there to be no fire.  Documents released on Friday reveal that the administration learned in the Fall of 2010 that Solyndra was in trouble and about to announce large-scale layoffs, and the White House was apparently more concerned with the optics of that development on the mid-term elections than on what that development said about the wisdom of such deals.

Last November, Energy Secretary Steven Chu took “full responsibility” for the decision to go ahead with the Solyndra loan, saying that decision was his, and his alone.  He also conceded he did not expect taxpayers to recover much, if any, of their money.  President Obama stood by Chu, and basically pooh-poohed the loss as no big deal; just one of the inevitable lumps we have to expect to take.

Better get your helmet on, Lumpy.

CBS News reported over the weekend that as many as 11 more of these “clean energy” loan recipients may be in similar trouble.  Of 12 companies (including Solyndra) CBS identified as being in trouble—totaling $6.5 billion in federal loans—5 have already filed for bankruptcy.  That's 12 out of a grand total of about 40 "green energy" firms receiving DOE loans.  One of the bankrupts, Beacon Energy, turns out to have had an S&P rating of CCC-plus—non-investment grade bad junk bond status—yet it still received $43 million in taxpayer money.  Among the not-dead-yet firms that haven’t quite found their way to the bankruptcy court are companies like Nevada Geothermal—a pet project of Senate Majority Leader Harry Reid—which received $98.5 million from DOE, some $80 million of which didn’t go to develop green energy and create jobs, but instead went immediately towards a prior loan that was already in default, according to Rep. Darrell Issa, one of those driving the Solyndra investigation.  SunPower—recipient of $1.2 billion after being taken over by a French oil company—owes more than it’s worth.  And there’s First Solar—recipient of $3 billion in federal loans—which fired its CEO after losing more than any other company in the S&P 500 in 2011.

All of these loan projects come out of the Department of Energy, and Secretary Chu continues to defend the program, despite mounting evidence that something is going drastically wrong with it.  Which begs the question, who is this guy, and what qualifies him to be the man with “full responsibility” for making go/no-go decisions that are “[his], and [his] alone” on billions of dollars in federal loans to private businesses?

Dr. Steven Chu is a physics professor and a career academic.  His degrees are in mathematics and physics.  Prior to becoming Energy Secretary, he was a professor of physics and molecular biology at Cal-Berkeley, and before that he taught physics at Stanford.  He won a Nobel Prize in physics in 1997.  One gets the impression that Dr. Chu kicks ass at physics, and if you want someone to study the effect of lasers on molecular structures through the time-space continuum (don’t get too caught up in what the hell that means, it’s just a combination of words I just made up, and it may well be gibberish—I’m not a physicist), he’s probably your man. 

I’m sure he’s also a nice guy and has the best of intentions.  But other than the fact that he has an extensive background in receiving government grants, what the hell makes this man even remotely qualified to be taking spins of the venture capital roulette wheel with billions of dollars in house money?  Dr. Chu has no background in business or finance.  None.  Zero.  And who put him in this position?  That’s right:  Barack Obama, another career academic with not only zero experience in business or finance, but also no experience in management of any kind.

So we have one blind egghead leading another blind egghead.

Not only are the people in charge of these gambles singularly unqualified to be making them, I can’t find anything in the Constitution that authorizes them to make those bets.  Let’s assume for a second that Dr. Chu were in fact eminently qualified with an extensive background in business and venture capital transactions.  Let’s assume further that it’s a really, really good idea to provide billions of dollars in seed money for green energy startups.  Even if all of that were true—and apparently none of it is—that still wouldn’t mean that the United States federal government has the power to do it.

I’ve harped on this before.  The federal government is not empowered to do whatever the Executive Branch decides is a good or even necessary idea, and that’s true even if the President is right.  Article I only gives Congress the power to do 17 very specifically identified things (plus the power to enact legislation to do those 17 things).  NONE of them involve taking money from the citizenry to give to other citizens in the form of high-risk venture capital loans.  Article II only gives the President the power to execute the laws enacted by Congress.  Nothing in the Constitution authorizes the Congress or the President to operate an investment bank with taxpayer money.

Don’t even bother coming at me with the Commerce Clause.  The Commerce Clause authorizes Congress to regulate commerce, not to engage in commerce:

“The Congress shall have Power To . . . regulate Commerce with foreign Nations, and among the several states, and with the Indian Tribes[.]”

The intent of that provision was not for the federal government to promote or even to manage commerce, but simply to ensure that competing state tariffs didn’t result in a Balkanized economy; Hamilton and Madison discussed this very notion repeatedly throughout the Federalist Papers (see Nos. 7, 11, 22, and 42).  No, I’m not going to go back and review the thousands of pages of Supreme Court opinions over the last 150-so years explaining the “penumbras”—look it up—of power implied in those 21 simple words.  It is plain from the face of those words that the modern expansion of Congressional power allegedly derived from them perverts the Framers’ intent beyond recognition.

It is exceedingly dangerous when people in power go beyond their authority.  This is particularly so when they do so in areas where they think they're smarter than everyone else, including the true experts, when in reality they have no idea what they’re doing.  This administration is out of its depth and out of control, and if we’re not careful, we’re all going to drown with it.


  1. I'm still reading. Please keep writing. But we need more choir members. Even those who sing off key.

  2. So get out there and proseletyze, er, recruit!