The Voice of Young Conservatives Blog

“I literally picked up the phone and called Jon Corzine and said, Jon, what do you think we should do. The reason we called Jon is that we knew that he knew about the economy, about world markets, how we had to respond, unlike almost anyone we knew. It was because he had been in the pit – because he had been in the furnace. And we trusted his judgment,” – Vice President Joe Biden speaking in 2009.

Now, Jon Corzine finds himself disgraced. After losing to Republican Chris Christie in the New Jersey governors race, Corzine took over MF Global – one of the world’s preeminent derivatives brokers. MF Global is now kaput, losing two-thirds of its market value under Corzine’s leadership. The firm ultimately filed for bankruptcy and is currently under a federal investigation into more than $600 million of missing customer money.

If this is where the Obama team was getting their economic advice, it is little wonder they find themselves in trouble.

Corzine was destroyed by betting his clients money on European bonds, which if you’ve been following world news, you’ll understand is a risky, some would say asinine strategy. Greece has been on the verge of collapse for years now and it has threatened to drag the entire eurozone down with it. Italy, Spain, Portugal, and even France, have seen their bond rates soar, threatening to make their debt service unsustainable.

The Obama Administration made a completely different, but no less risky, bet. They used taxpayer money to gamble on green energy technologies.

The question has become whether or not Obama Administration’s decisions were made based on sound economics or pure politics. Sadly, it appears to be the latter.

In testimony before Congress yesterday, Energy Secretary Steven Chu said, “My decision to guarantee a loan to Solyndra was based on the analysis of professional – experience professionals and on the strength of the information they had available to them at the time.”

That’s the correct answer, but is it accurate?

A 2009 email correspondence from the Energy Department and Obama officials would suggest it is not. “The issue of working capital remains unresolved. The issue is cash balances, not costs. Solyndra seemed to agree that the model runs out of cash September 2011, even in the best case without any stress,” said one email, which prophetically nailed the date of Solyndra’s bankruptcy.

Moreover, Solyndra’s troubles weren’t exactly an industry secret. A November 2010 article from Renewable World revealed fundamental flaws in the solar manufacturer’s balance sheet and business model. They wrote,

“In the last year, there have been numerous stories about CIGS thin-film manufacturer Solyndra’s troubles – a pulled IPA, 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.”

In other words, Solyndra was 65% more expensive than their competitors and lost $2.80 on each watt of electricity they produced. To be fair, Solyndra said they hoped to be able to lower costs to $3.50 a watt by the end of 2011, but even under this “best-case” scenario they would have been losing money hand over fist.

In fact, if Secretary Chu’s testimony is to be believed the only thing he did know is that the taxpayers are unlikely to be paid back. When asked how much money the government will be able to cover, Secretary Chu responded “not very much.”

It’s hard to believe that President Obama’s hand-picked chief of the Energy Department didn’t know the risk behind his green energy bets. Then again, it becomes a whole lot easier to believe when you remember that one of their main economic advisors, Jon Corzine, brought a respected company to its knees based on bad bets on European bonds.

This is an Administration who just doesn’t know their economics. It’s time to replace them with people who do.