Chu'd out

WASHINGTON-"Subordination" was the buzzword at a House Energy and Commerce subcommittee hearing Thursday, where Energy Secretary Steven Chu testified for nearly five hours about the collapse of the California solar company Solyndra.

Lawmakers focused their interrogations on whether the Department of Energy (DOE) broke the law when it "subordinated" to private investors the $535 million federal loan to Solyndra last year.

When the company could not meet its repayment obligations to the government, the DOE restructured the loan, subordinating the government's interest in the company to that of private investors. As a result, the private investors in the company would be first in line to receive repayment if the company defaulted and Solyndra would have more leeway in its federal loan repayments.

Republicans on the committee, as well as one Democrat, said the DOE was wrong to restructure the loan. Chu said the DOE's general counsel reviewed the restructuring and deemed it legal. He added that the agency faced the choice to either "force them into bankruptcy or go forward. It was a difficult decision."

House Energy and Commerce Chairman Fred Upton, R-Mich., followed up by asking, "So, because of that decision, how much money will the federal government recover?"

"I'm not anticipating very much," Chu responded.

Solyndra was the first company to receive an alternative energy loan from the DOE in 2009, and it filed for bankruptcy at the end of August. Congress passed the loan program back in 2005, and then the 2009 stimulus ballooned the program, giving it $35 billion to spend.

The DOE's inspector general recently reported that the agency didn't have the infrastructure to handle the flood of money, since its entire budget is $27 billion. Chu has stood by the loan program, which continues to dole out funds, though he said he has brought in additional teams to oversee the lending. "We believe most of the loans are in good shape," Chu said.

A Democrat, Rep. Gene Green of Texas, was part of the House committee back in 2005 when it created the loan program, and he told Chu on Thursday that the Solyndra loan never should have been subordinated to private investors under that law.

Republican Joe Barton from Texas went further, saying that Chu had broken the law. Barton said many people had asked him whether Chu should resign his Cabinet position. "I've said every time I don't think you should resign," Barton told Chu. "I think you're a man of integrity who's doing the best he can. ... I do think you're culpable for the subordination decision."

The loan program's director, Jonathan Silver, resigned in October. Rep. Michael Burgess, R-Texas, said the DOE general counsel's authorization of the restructuring was a "tortured legal opinion."

Lawmakers also questioned whether Chu had been in communication with the White House about the Solyndra loan, which he denied. Chu said that when the loan was issued he didn't know that George Kaiser, a prominent Democratic fundraiser, had a significant stake in Solyndra.

"Everybody and their dog at DOE knew who he was," Barton said of Kaiser. "We have on record that he was in the White House 16 times at the time the Solyndra loan was being reviewed."

In response to a recent subpoena from the House committee, the White House provided another round of documents on the loan, documents that Republicans have released selectively.

In one set of emails, DOE officials asked Solyndra's chief executive to delay announcing layoffs until the day after the 2010 midterm elections. "I would not have been in favor of that decision," Chu said Thursday. "I don't think it's a proper way to do business."

Top Democrats on the committee continued to complain about the Republican investigation. The ranking member, Rep. Henry Waxman, D-Calif., said Republicans were "manufacturing a scandal." He said the investigation had "provoked a gratuitous conflict with the White House." In conclusion, Waxman said, "We need to move past Solyndra," a wish that will likely go unfulfilled.

Listen to a report on Steven Chu's testimony on WORLD's radio news magazine The World and Everything in It.