Solyndra scandal probe widens as White House orders new review (The Christian Science Monitor)

The Obama administration has ordered an independent review of loans made by the Energy Department to energy companies – a clear response to the controversial and now-bankrupt Solyndra Inc. solar energy company.

It’s the latest step in the face of growing criticism over the $528 million government loan to Solyndra, which was part of the administration’s economic stimulus package meant to advance green energy. Last month, FBI agents and investigators from the Department of Energy's Office of Inspector General searched Solyndra headquarters in California for documents and other information.

Heading the review announced Friday is former Treasury official Herbert Allison, who oversaw the Troubled Asset Relief Program, part of the 2008 Wall Street bailout.

"Today we are directing that an independent analysis be conducted of the current state of the Department of Energy loan portfolio, focusing on future loan monitoring and management," White House chief of staff Bill Daley said Friday afternoon – the traditional time for burying announcements. "While we continue to take steps to make sure the United States remains competitive in the 21st century energy economy, we must also ensure that we are strong stewards of taxpayer dollars."

Announcement of the internal review of procedures dealing with Solyndra was not enough to satisfy congressional critics.

Leaders of the Energy and Commerce Committee subcommittee on oversight and investigations say they’ll meet this coming week to consider a resolution authorizing the issuance of a subpoena for internal White House communications relating to the Solyndra loan guarantee.

“Subpoenaing the White House is a serious step that, unfortunately, appears necessary in light of the Obama administration’s stonewall on Solyndra,” Fred Upton (R) of Michigan and Cliff Stearns (R) of Florida said in a statement. “Since we launched the Solyndra investigation over eight months ago, the Obama administration has unfortunately fought us every step of the way, even forcing us to subpoena documents from [the White House Office of Management and Budget].”

Apparently, White House officials weren’t the only ones pushing special consideration for green energy.

Sen. Orrin Hatch (R) of Utah, who has criticized the Obama administration’s backing of Energy Department loan guarantees to Solyndra, pushed for more than $20 million in government funding for a clean energy firm in his home state, reports USA Today.

“Hatch aides [said] earlier this month that the Republican lawmaker had never pushed for taxpayer money to be used for Raser Technologies, which operated a geothermal power plant in southern Utah and also developed hybrid plug-in vehicles,” the newspaper reported Friday. “But on Friday, Hatch spokesman Matthew Harakal said that after an internal audit following publication of the USA Today story on Hatch's support for Raser, the Utah senator's office found that Hatch actually requested seven earmarks for more than $20 million from 2006 to 2008 to help fund research and development projects for the automotive wing of the company.”

None of the requests were funded, and Raser Technologies filed for bankruptcy in April.

Meanwhile, the Solyndra scandal – if that’s what it is – has indirectly touched at least one Republican presidential hopeful.

“Mitt Romney is facing scrutiny this week for associating himself with a lobbyist whose firm worked for failed California solar panel company Solyndra,” The Hill newspaper in Washington reported this week. “Lobbyist Alex Mistri co-hosted a Romney fundraiser Wednesday that included a number of lobbyists and members of Congress, held at the American Trucking Association near Capitol Hill.”

Also attending the Romney fundraiser co-hosted by lobbyist Mistri was Rep. Darrell Issa (R) of California, chairman of the House Committee on Oversight and Government Reform investigating Solyndra.

Material from the Associated Press was used in this report.

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Moody's puts U.S. ratings on review for downgrade (Reuters)

NEW YORK (Reuters) – The United States may lose its top-notch credit rating in the next few weeks if lawmakers fail to increase the country's legal borrowing limit and the government misses debt payments, Moody's Investors Service warned on Wednesday.

Moody's is the first of the big-three credit rating agencies to place the United States' Aaa rating on review for a possible downgrade, meaning the agency is close to cutting the country's rating.

Standard & Poor's placed the U.S. rating on negative outlook on April 18 which meant a downgrade is likely in 12-18 months.

"They are worried they are having these ideological arguments while Rome burns," said Carl Kaufman, portfolio manager at Oster weis Capital Management in San Francisco.

A lower credit rating would cause havoc in financial markets around the world and increase borrowing costs for the U.S. government and businesses, further harming public finances and weighing on the economic recovery.

In a statement, Moody's said it sees a "rising possibility that the statutory debt limit will not be raised on a timely basis, leading to a default on U.S. Treasury debt obligations."

Risks of a default on U.S. Treasuries, traditionally seen as the world's safest investment, have increased since the government reached its legal borrowing limit of $14.294 trillion on May 16.

Congress has refused to raise the statutory borrowing limit until agreement is reached on cutting the fiscal deficit which was $1.29 trillion in the last fiscal year.

The U.S. Treasury Department has said if the debt ceiling is not raised by August 2 it will have to start prioritizing payments.

DEFAULT RISK NO LONGER "DE MINIMIS"

Moody's said the probability there will be a default on interest payments is low, but it is "no longer to be de minimis."

"If the debt limit is raised again and a default avoided, the Aaa rating would likely be confirmed," Moody's said.

"However, the outlook assigned at that time to the government bond rating would very likely be changed to negative at the conclusion of the review unless substantial and credible agreement is achieved on a budget that includes long-term deficit reduction," the firm said.

There is precedent for Moody's decision. In 1996 the firm put some issues of U.S. Treasury debt on watch for a downgrade when the White House and Congress failed to extend the government's debt ceiling.

Moody's decision came after U.S. markets had closed on Wednesday but before Asian markets ramped up their activity. In the 24-hour currency markets the U.S. dollar index, which measures the greenback against a basket of trading partner currencies, had fallen earlier in the session and ended down 1.1 percent, marking the steepest one-day decline since early December.

"In the short-term, the dollar definitely has its problems. This ratings news sent the dollar tumbling. This is really not good," said Brian Dolan, chief strategist at Forex.com of Bedminster, New Jersey.

"Moody's might be doing this based on the politics as much as the threat of default, because the politics have become so problematic.... Between this and (Ben) Bernanke talking about QE3, the dollar could be entering a new downward phase," he said.

The U.S. dollar fell on Wednesday after U.S. Federal Reserve Chairman Ben Bernanke said the central bank could inject more monetary stimulus into the U.S. economy.

The currency fell to a record low against the Swiss franc. The greenback hit a trough of 0.8095 franc, on electronic trading platform EBS.

In after-hours trade, U.S. stock futures dropped 4.8 points to 1307.20 following Moody's decision.

COLLATERAL IMPACT

In addition, the credit ratings for institutions directly linked to the U.S. government were also put on review for a possible downgrade, including Fannie Mae, Freddie Mac, the Federal Home Loan banks and the Federal Farm Credit banks.

The ramifications of a U.S. downgrade could also be felt in places such as Israel and Egypt.

Moody's says the specific bonds issued by these two governments which carry a U.S. government guarantee "were also placed on review for possible downgrade." Israel and Egypt issue bonds without Washington's guarantee, and presumably they would not be subject to the current situation.

The U.S. Congress has routinely raised the nation's debt limit in the past. This time, however, negotiations seem to have stalled over the degree to which the fiscal deficit should be cut by raising taxes or cutting spending.

So far, U.S. Treasury Secretary Timothy Geithner has been able to resort to extraordinary measures to delay a debt default by at least August 2.

Unlike Fitch, which promised to cut the U.S. ratings to "restricted default" after a few missed debt payments, Moody's has said it would downgrade the United States to the "Aa" range, still considered investment grade.

(Reporting by Walter Brandimarte and Daniel Bases; Editing by Leslie Adler and Clive McKeef)

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