The hearing was over 2hrs. I learned quite a lot. The items below are just a few of the things I learned.
Loan guarantees were created in 2005 in the major energy bill created that year (before Obama and the current Secretary of Energy took office). However, the people in the loan section (starting in 2007-2008) started having shady deals, giving money to wealthy people who didn't need the loans, giving money to major political players, and putting unsound investments like Solyndra at the top of the pile.
It was pointed out that some wealthy Republicans got money from these loans in shady deals, to which Rand Paul (Republican) said "I don't approve of that either".
Senator Rand Paul pointed out several public facts of companies not using money for designated purposes. This includes using the money for personal items such as cars, and channeling the money to manufacturing in other countries (instead of the United States).
Senator Paul also said to Secretary Chu, essentially "I think you are good man, of good character, but it is your Department, and loan managers are giving money away to people and companies based on political connections, not on sound investment. It is up to you to fix it."
Other senators pointed out that every energy sector has gotten loan guarantees, and all have worked out fine. Nuclear gets loans, and those get paid back as expected.
Much of the discussion was on policy: should the government give loans to energy technology companies? Why not the private sector providing all investment money? If we should give money, then to what areas? Why? For how long?
The best arguments in favor of giving government loans to some energy companies came from Senator Al Franken. His statements were pretty much on Ben Franklin’s theme of “a stitch in time, saves nine.” Senator Franken's statements essentially said we should invest an amount now, because if we don’t the financial cost to the American public will be greater in the future.
The free market supporters say that private companies should do all the investing in energy technologies. Government should stay out of it entirely.
Some people modify this view, saying that this sounds nice in theory, however most other nations give substantial government financing to energy technologies. This is the reality of life today. Therefore we must do the same, in order to make our energy technology industries more competitive.
Those who strongly support government financing say that some research and development is in the best interest of the nation as a whole, not just the companies. Lower energy prices, greater reliability, and less reliance on foreign companies are good for all Americans. Therefore the government should invest.
Just as important, clean energy, green energy, are major industries in the world today. There are major markets. There are opportunities for economic growth.
(I know this to be true. I have long said that the "Energy Industry" will be one of America's core industries, and will provide some of the bedrock of American economy, much like the auto industry decades ago).
And therefore, perhaps we should use government funds to help grow some sectors of the energy industry which have the greatest potential. (In this point, I agree).
The government finance supporters also say that we provide research funds for cancer and highway safety, so why not research funds for clean energy?
Then there are those who can see a bit of each side, but wonder which areas are best funded. Secretary of Energy Chu pointed out the main areas where loans can be given:
1) research and development
2) building manufacturing facilities
3) installation and service companies
However, even those who agreed with the idea of loans years ago now question the whole idea. If major loans are being given to companies like Solyndra, and almost all funds for clean energy have been misused, then maybe we should scrap the whole loan program until we fix the process.
Secretary Chu also pointed out that giving money to energy companies that already exist, being profitable for over a decade, is quite different from giving money to start-up companies with no track record. Start-ups may have great innovations, yet we just funded many start-ups and they folded. Do you then give money to only established companies?
Secretary Chu also pointed out the dilemma of the multi-national corporation. Do you want to give money to a Japanese or German company to build manufacturing facilities in the United States? At the same time, this approach makes it more difficult to track the flow of money, to ensure that it goes to the US and not abroad.
And so the discussions went back and forth with different questions and different ideas.
Personally, I have not arrived at a conclusion yet. And when I do arrive at a conclusion, it will probably be stated in specifics: “We should provide loans for ____, because _____. These loans should stop when _____ has occurred.” Something like that.
1) research and development
2) building manufacturing facilities
3) installation and service companies
However, even those who agreed with the idea of loans years ago now question the whole idea. If major loans are being given to companies like Solyndra, and almost all funds for clean energy have been misused, then maybe we should scrap the whole loan program until we fix the process.
Secretary Chu also pointed out that giving money to energy companies that already exist, being profitable for over a decade, is quite different from giving money to start-up companies with no track record. Start-ups may have great innovations, yet we just funded many start-ups and they folded. Do you then give money to only established companies?
Secretary Chu also pointed out the dilemma of the multi-national corporation. Do you want to give money to a Japanese or German company to build manufacturing facilities in the United States? At the same time, this approach makes it more difficult to track the flow of money, to ensure that it goes to the US and not abroad.
And so the discussions went back and forth with different questions and different ideas.
Personally, I have not arrived at a conclusion yet. And when I do arrive at a conclusion, it will probably be stated in specifics: “We should provide loans for ____, because _____. These loans should stop when _____ has occurred.” Something like that.
My initial thoughts are that the government should stop giving loans altogether until the loan approval process and oversight process has been totally fixed. Then start giving loans to areas one by one. However, the selection process and oversight should be tight.
On the other hand, I would like to see more investment from the private sector. (Hello Wall Street! This is what you should be investing in, not speculation, futures, or hedge funds).
There was an additional topic I found interesting. There was a discussion of $50 light bulbs. Republican senators pointed out that Americans can’t afford it. Democratic senators invited the Secretary to explain and elaborate.
The truth is that those $50 light bulbs are actually used in special places like street lights, stadium lights, and exit signs. These places are often difficult to reach or require special equipment to access, in addition to the lights being used so much of the time. These $50 light bulbs last many thousands of hours, and therefore will pay for themselves many times over when used in these areas.
Overall I learned quite a bit from this Senate Committee hearing.
The truth is that those $50 light bulbs are actually used in special places like street lights, stadium lights, and exit signs. These places are often difficult to reach or require special equipment to access, in addition to the lights being used so much of the time. These $50 light bulbs last many thousands of hours, and therefore will pay for themselves many times over when used in these areas.
Overall I learned quite a bit from this Senate Committee hearing.
