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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Stark shock widens German euro faultline (Reuters)

BERLIN (Reuters) – The surprise exit of Germany's top official at the ECB has ripped a hole in Chancellor Angela Merkel's strategy of tackling Europe's debt crisis with closer integration, raising new doubts about the euro project at home and widening divisions in her party and coalition.

Juergen Stark's premature departure from the European Central Bank because of his opposition to its controversial bond-buying program was described by German policymakers and editorial writers as a "wake-up call" for Germany.

It comes roughly seven months after Axel Weber, another monetary hawk in the post-war German tradition, abruptly resigned his post as head of the Bundesbank and withdrew his candidacy for the top post at the ECB.

That decision shocked the German policy establishment, but at the time many saw it as a one-off move by an impulsive man who had clashed loudly and publicly with President Jean-Claude Trichet over the extraordinary measures taken by the ECB to safeguard the single currency.

The resignation of Stark, a loyal, dedicated central banker who had kept his doubts about ECB policies to himself, tells a very different story, and has unleashed a wave of anxiety across Germany about the direction of 12-year-old single currency bloc.

Taken together, the departures are seen by many as indications of a southern European takeover of the ECB's policy-setting council, a worry sharpened by the looming presidency of Italian Mario Draghi, who takes Trichet's place in November.

Former Bundesbanker Edgar Meister called at the weekend for changes to the ECB's one-country, one-vote rule, saying it was "unbelievable" that a country such as Germany that was shouldering the biggest burden in the crisis could be overruled by central bankers from smaller countries that have already been rescued or are at risk of a bailout.

Norbert Barthle, a senior lawmaker from Merkel's Christian Democrats (CDU) who sits on parliament's budget committee, told Reuters that Stark's exit was "a rejection of the policies that the ECB has pursued and a clear signal that the situation in the broader euro zone has reached a really critical point."

"MORE EUROPE" STRATEGY

The implications for Merkel and Berlin's approach to the euro zone crisis are profound.

Criticized for focusing too much on domestic politics and failing to provide clear leadership in the bloc, Merkel shifted her approach this summer and began demanding "more Europe" as the solution to the bloc's deepening crisis.

She made clear last week in a speech to the Bundestag, the lower house of parliament, that changes to the EU's Lisbon Treaty to bring about closer fiscal integration between the euro zone's 17 member states should no longer be taboo.

After Stark's resignation, the domestic hurdles to that goal have risen substantially.

Julian Callow, an economist at Barclays Capital, said the political effect of Stark's resignation "could complicate Germany's involvement in additional bailout programs."

Merkel received a boost last week when the Constitutional Court rejected lawsuits seeking to retroactively block Berlin's participation in bailouts of Greece, Ireland and Portugal, albeit while giving parliament more say in future bailout moves.

But after Stark, her drive to secure a conservative majority in parliament for a bigger, bolder euro zone rescue facility on September 29 may have become more difficult again.

Merkel still seems likely to deliver that, but subsequent Bundestag votes on a second aid package for Greece and the launch of a permanent bailout fund -- the European Stability Mechanism (ESM) -- present a huge challenge to her leadership.

The Free Democrats (FDP), junior partners in her ruling coalition, are considering asking their 66,000 members whether to support the ESM. If a majority vote against, the leadership will be obliged to adopt that position as FDP policy.

Merkel's other coalition partner, the Bavarian Christian Social Union (CSU), is also agitating -- to boot Greece out of the euro zone.

A CSU policy paper obtained by Reuters over the weekend states that countries that do not respect rules on budgetary discipline should "expect to have to leave the currency union."

DEFAULT MORE LIKELY

A Greek exit from the euro zone still seems remote, and in any case, German officials say in private, such a decision would ultimately be for the government in Athens to take.

But a default no longer seems out of the question. The FDP economy minister, Philipp Roesler, said in an article published on Sunday that an orderly bankruptcy of Greece was no longer a taboo and demanded automatic sanctions for heavily indebted countries that did not meet their obligations.

Despite Greek Prime Minister George Papandreou's pledge on Saturday to do all in his power to avert bankruptcy, it is no longer a given that inspectors from the EU, IMF and ECB will sign off on the next aid payment after leaving Greece in a huff over missed deficit targets this month.

A German Finance Ministry source told Reuters at the weekend that Berlin's working hypothesis now was that Greece would ultimately default on its 340 billion euro debt mountain.

In a possible sign that markets are being prepared for this, French central banker Christian Noyer, speaking on Friday after a G7 finance ministers' meeting in Marseille, said Greek debt did not represent a threat to any bank outside of Greece.

Barthle, the budget expert in Merkel's party, told Reuters: "The problems in Greece are not getting smaller, they are getting bigger, and will create significant problems for the bloc ...

"I am eager to see what the troika report says. The way things are looking, you can't rule out a restructuring of Greece's debt any more."

Would a default force Greece out of the euro zone? A senior European banker told Reuters that one would have to follow the other, even if there is no legal mechanism for a country to leave the bloc.

But senior sources in Berlin and Brussels said all would be done to avoid such a humiliating setback for the currency union.

The focus instead appears to be on ensuring national parliaments approve new powers for the bloc's rescue mechanism -- the European Financial Stability Facility (EFSF) -- as soon as possible.

Only after that would the EFSF be really in a position to minimize the damage from a Greek default by providing credits to stricken member states and banks across Europe.

Given the time needed to win EFSF approval in all 17 euro states, the chances seem good that EU, IMF and ECB inspectors will nod through the latest Greek aid tranche within weeks.

But Merkel's real test will come in an eventual parliamentary vote on the permanent ESM.

The vote is already shaping up as a referendum on her leadership; if she fails to secure a majority from within the ruling coalition, the pressure to call an election from the opposition and parts of her own party will be huge.

"The resignation of Juergen Stark is a devastating signal for Angela Merkel," the conservative daily Die Welt said on Sunday. "Life is only going to get more difficult for her."

(Reporting by Noah Barkin; Editing by Kevin Liffey)

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Wealth gap widens between whites, minorities (AP)

WASHINGTON – The wealth gaps between whites and minorities have grown to their widest levels in a quarter-century. The recession and uneven recovery have erased decades of minority gains, leaving whites on average with 20 times the net worth of blacks and 18 times that of Hispanics, according to an analysis of new Census data.

The analysis shows the racial and ethnic impact of the economic meltdown, which ravaged housing values and sent unemployment soaring. It offers the most direct government evidence yet of the disparity between predominantly younger minorities whose main asset is their home and older whites who are more likely to have 401(k) retirement accounts or other stock holdings.

"What's pushing the wealth of whites is the rebound in the stock market and corporate savings, while younger Hispanics and African-Americans who bought homes in the last decade — because that was the American dream — are seeing big declines," said Timothy Smeeding, a University of Wisconsin-Madison professor who specializes in income inequality.

The median wealth of white U.S. households in 2009 was $113,149, compared with $6,325 for Hispanics and $5,677 for blacks, according to the analysis released Tuesday by the Pew Research Center. Those ratios, roughly 20 to 1 for blacks and 18 to 1 for Hispanics, far exceed the low mark of 7 to 1 for both groups reached in 1995, when the nation's economic expansion lifted many low-income groups to the middle class.

The white-black wealth gap is also the widest since the census began tracking such data in 1984, when the ratio was roughly 12 to 1.

"I am afraid that this pushes us back to what the Kerner Commission characterized as `two societies, separate and unequal,'" said Roderick Harrison, a former chief of racial statistics at the Census Bureau, referring to the 1960s presidential commission that examined U.S. race relations. "The great difference is that the second society has now become both black and Hispanic."

Stock holdings play an important role in the economic well-being of white households. Stock funds, IRA and Keogh accounts as well as 401(k) and savings accounts were responsible for 28 percent of whites' net worth, compared with 19 percent for blacks and 15 percent for Hispanics.

According to the Pew study, the housing boom of the early to mid-2000s boosted the wealth of Hispanics in particular, who were disproportionately employed in the thriving construction industry. Hispanics also were more likely to live and buy homes in states such as California, Florida, Nevada and Arizona, which were in the forefront of the real estate bubble, enjoying early gains in home values.

But those gains quickly shriveled in the housing bust. After reaching a median wealth of $18,359 in 2005, the wealth of Hispanics — who derived nearly two-thirds of their net worth from home equity — declined by 66 percent by 2009. Among blacks, who now have the highest unemployment rate at 16.2 percent, their household wealth fell 53 percent from $12,124 to $5,677.

In contrast, the median household wealth of whites dipped a modest 16 percent from $134,992 to $113,149, cushioned in part by a stock market recovery that began in mid-2009.

"The findings are a reminder — if one was needed — of what a large share of blacks and Hispanics live on the economic margins," said Paul Taylor, director of Pew Social & Demographic Trends. "When the economy tanked, they're the groups that took the heaviest blows."

The latest data come as President Barack Obama and congressional leaders try to reach a deal to avoid a U.S. default on its financial obligations after Aug. 2. Democrats and Republicans have been wrangling over proposals that could cut trillions of dollars from programs such as Medicare and Social Security; they are divided over whether to bring in new tax revenue, such as by closing corporate tax loopholes or increasing taxes for the wealthy.

The NAACP and other black groups urged Obama to resist deep cuts to housing assistance or safety net programs, saying it would disproportionately hurt urban areas with high poverty and unemployment. The U.S. poverty rate currently stands at 14.3 percent, with the ranks of the working-age poor at the highest level since the 1960s. Some analysts believe the poverty rate will climb higher when new figures are released in September.

"Typically in recessions, minorities suffer from being last hired and first fired. They are likely to lose jobs more rapidly at the beginning of the recession, and are far slower to gain jobs as the economy recovers," said Harrison, who is now a sociologist at Howard University. "One suspects that blacks who lost jobs in the recession, or who have tried to help family members or relatives who did, have now spent whatever savings or other cashable assets they had."

Other findings:

_About 35 percent of black households and 31 percent of Hispanic households had zero or negative net worth in 2009, compared with 15 percent of white households. In 2005, the comparable shares were 29 percent for blacks, 23 percent for Hispanics and 11 percent for whites.

_Asians lost their top ranking to whites in median household wealth, dropping from $168,103 in 2005 to $78,066 in 2009. Like Hispanics, many Asians were concentrated in states like California hit hard by the housing downturn. More recent arrivals of new Asian immigrants, who tend to be poor, also pushed down their median wealth.

_Across all race and ethnic groups, the wealth gap between rich and poor widened. The share of wealth held by the top 10 percent of U.S. households increased from 49 percent in 2005 to 56 percent in 2009. The threshold for entry into the wealthiest top 10 percent, however, dipped lower: from $646,327 in 2005 to $598,435.

The numbers are based on the Census Bureau's Survey of Income and Program Participation, which sampled more than 36,000 households on wealth from September-December 2009. Census first began publishing wealth data from this survey, broken down by race and ethnicity, in 1984.

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Online:

Pew Social & Demographic Trends: http://pewsocialtrends.org/

Census Bureau: http://www.census.gov

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