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When Business Becomes Politics

I'm not sure if I'm ready to say business and politics shouldn't mix — I can't see how to avoid it. But the skirmish over Solyndra LLC’s bankruptcy is all about politics. If it had been more about business, the whole mess could have been avoided.

For those of you not following the story, the Obama administration backed a $535 million loan guarantee for the California solar panel maker. The move was part of an overall government initiative to spur development in solar power and other clean energies. The problem, other than this week's bankruptcy filing, is that the government's due diligence indicated Solyndra was in trouble as early as 2009. Two independent audits raised red flags about its long-term viability.

Either due diligence was ignored, or the government rushed to back the loan as part of its political agenda.

Now the deal is under investigation, and the responses have broken straight down party lines. Republicans accuse the White House of pushing its agenda to the detriment of fiscal responsibility. The Obama administration insists it granted the loan on the company's merits. Some in the GOP say global warming is a scare tactic embraced by the left. Most Democrats say the environment is in grave danger.

Politics aside, let's look at the business case. If I were a potential investor in a company, would I conduct due diligence? Would I require independent assessments of its business plans? Would I expect regular reports on its progress? Would I go over every report with a fine-toothed comb? Yes to all of the above.

Here's my problem. I consider that $535 million my money. A portion of it came from my taxes. Independent research indicated Solyndra was headed for trouble. The loan was granted anyway. It's bad business.

I can't even begin to list all the ways the government (under all administrations) uses my tax money in ways I do not support. But for the most part, I recognize when my objections are political and when they are not. As complicated as business is, some things are pretty cut and dried — look at the numbers, measure your risk, and ask a lot of questions. Make a decision based on business, not politics.

Even though I am an avid supporter of alternative technologies, this is one investment I don't think I would have made.

28 comments on “When Business Becomes Politics

  1. _hm
    September 16, 2011

    Yes, Government should not get involved in this type loan. They have so much of more essential work. Why do they get involved in bad business politics. Who shall be responsible for this decision?

     

  2. Anand
    September 17, 2011

    Even though I am an avid supporter of alternative technologies, this is one investment I don't think I would have made.

    @Barbara, I share your conern but unfortunately politics is everywhere. Most of the decisions that the government  takes are all politically motivated rather than on the merits of the decision.

  3. itguyphil
    September 17, 2011

    “Why do they get involved in bad business politics?”

    _hm,

    The more important question is, why do they get involved in any type of business besides the business of providing oversight and regulation (to some extent)?

  4. Houngbo_Hospice
    September 17, 2011

    Sometimes such decisions are difficult to be made. Remember, many companies would have filed for bankrupcy if not for the goverment funding. As they say: “success has many fathers, whereas failure has just one”. But of course, this doesn't exonerate the government from its responsibility.

  5. Houngbo_Hospice
    September 17, 2011

    @pocharles:

    The more important question is, why do they get involved in any type of business besides the business of providing oversight and regulation  “.

    The answer is: to save jobs and preserve one of the american “promising” businesses. Unfortunatly it didn't work. 

  6. Nemos
    September 17, 2011

    “Make a decision based on business, not politics.” If we mix this together we have a bad result. I think first we must have the political aspect and in which direction should go and then if we can do it in business terms. He Shouldn't took a decision based only to what we would like to do.

  7. _hm
    September 18, 2011

    @pocharle: I agree with you. It is difficult to understand why government get so much enticed and harm thier own people.

     

  8. Anna Young
    September 18, 2011

    @ Pocharle, you asserted, “The more important question is, why do they get involved in any type of business besides the business of providing oversight and regulation (to some extent)”?

    I agree with this extract from Frederic Bastiat, “would a busybody who believed he/she knew best seek to have power over others? certainly!
    In my view any forms of government is a business  in itself. Why? The government is charged with appropriating the use of my tax contributions for the provisions of various services a state or nation would ideally provide ( whether I agree to it or not).

    My question is, can there be a real separation between business and politics? I don't think so.

    It is obvious from the California Solar panel maker – this is politics at play. How can you possibly ignore two independent audits report about a company's long term viability and yet Obama administration guaranteed a $535 million loan. This is laughable!

  9. itguyphil
    September 18, 2011

    The issue with that is, whenever the government goes out of its way to “save” jobs, they introduce artificial efforts that end up causing other problems.

    In another example, how did the government's artificial efforts to boost home ownership in the U.S. turn out??

  10. SunitaT
    September 19, 2011

    In another example, how did the government's artificial efforts to boost home ownership in the U.S. turn out??

    @pocharle Lets not blame the government for all the mess that has been created. Lets not forget that whole mess of 2008 started because of greey banks and corporate sector and not the government. I am not sure if any other government would have handled this mess in better fashion.

  11. SunitaT
    September 19, 2011

    The answer is: to save jobs and preserve one of the american “promising” businesses. Unfortunatly it didn't work.

    @Hospice_Houngbo I totally agree with you. I dont want government to be mute  spectator to all the events that are unfolding. If government wouldnt have taken any proactive steps in  2008 most of the banks would have had already collapsed by now.

  12. Daniel
    September 19, 2011

    Barbara, “Don’t mix business and politics” is a common phrase. If we closely watching the board of directors or chairman designated, most of them are political leaders. Because of political presence in Industry, most of the industrial policies or regulations formed by government have these fellows influences.

  13. Jay_Bond
    September 19, 2011

    “As complicated as business is, some things are pretty cut and dried — look at the numbers, measure your risk, and ask a lot of questions. Make a decision based on business, not politics.”

    Your comment above is well placed and deserved. It seems like no matter who is in charge and no matter what level of government were talking about, decisions are primarily made without politics coming first, business sense second. I agree that I get rather flustered at the fact of seeing my tax money get thrown around frivolously for political gain rather than for our countries financial gain.

    It is unfortunate that some of these decisions can't be made by business people and not politicians with agendas. But what's $500 million lost if you've gained ground with the people.

     

  14. Taimoor Zubar
    September 19, 2011

    I agree with you on this, Barbara. The investment in the company doesn't seem worthwhile at all. The tax payers do have a right to question it and I appreciate your efforts in raising the issue. With the $535 million granted, one can only hope that the money is able to bring about a turnaround in the company and drive it towards profitability. If not, then that's $500 million truly wasted.

  15. eemom
    September 19, 2011

    I also agree that business and politics shouldn't mix.  However, that is a much bigger problem than this one particular event.  Once the government started bailing out failing entities, they opened up the door to a much bigger problem.  Everyone is saying, why not me??  I understand why the government had to step into certain situations but now they've extended themselves beyond what would consider reasonable and they are doing it with our tax dollars.  That's what government does, they take our tax dollars and they are free to spend it how they see fit.  We, unfortunately do not get a vote..

  16. SunitaT
    September 19, 2011

    Because of political presence in Industry, most of the industrial policies or regulations formed by government have these fellows influences.

    @Jacob, you are absolutely  correct. Infact many industrialists become political leaders so that they can tweak the policies related to their domain. I think strict laws should be ammended so that conflict of interest doesnt arise during policy making.

  17. Parser
    September 19, 2011

    I am glad that Detroit is paying back bailout money. As in business investment some companies will make it others will not. Brokers differ in opinions and we have many investment companies. Each political party has its own interests and individual business may go out of business. Then the blame game begins and it is easy to do. Parties objectivs are clear and easy targets. 

  18. Barbara Jorgensen
    September 19, 2011

    Great feedback, readers. It has made me think of another discusion I've been having: do businessmen make great leaders? I'm thinking of how Mitt Romney keeps holding up his VC credentials and there's no question he's a good businessman. We could use more business sense in the government…but who is the last great politician — anywhwre in the world — that started out as a businessperson?

  19. Eldredge
    September 19, 2011

    As discussed in a previous article on business investment, executives are being very conservative in their investment position. Sometimes even the best researched and vetted investments do not work out. Decisions have be made in a partial vacuum. Unfortunately, there is ample reason to question investment in Solyndra based on the information known prior to the decision, and it gives the appearance of having been made based on relationships and political expediency. The investment seems to have failed on two fronts.

  20. Eldredge
    September 19, 2011

    My understanding is that the company has gone bankrupt, so the investment is probably gone. Furthermore, an additional $75M invested after the gov't loan has been given priority in the bankruptcy proceedings, against the original terms of the loan, so there is no recovery for taxpayers unless more than $75M can be recouped.

  21. Daniel
    September 20, 2011

    Barbara, if you able to create another discussion “do businessmen make great leaders”, it’s very interesting. From news we had seen that most of the dictators from Middle Eastern counties are good business leaders. If we are analyze the annual report from some of the Switzerland based banks, majority of the high value transactions are happens from businessmen cum leaders.

  22. Mr. Roques
    September 20, 2011

    I would be very wary of any investment the government makes when they are the only ones making it. Not that private investor get it right all the time but they are more careful (when handling their own money, at least).

  23. Piplzchoice
    September 20, 2011

    Am I the first one to bring up the word corruption ? Or is it implied that whenever a government intervenes, the corruption is an inevitable part of the process?

  24. itguyphil
    September 20, 2011

    tirlapur,

    Please don't take my commentary the wrong way. I am not blaming the government for the mess we are in. What I am saying is, by their actions, the perfect storm was created.

    Think of it this way, if you have a very expensive item and you leave it unattended somewhere and someone steals it, some would blame you for losing it, others would say the thief is to blame BUT you still had some responsibility on it happening.

  25. Ms. Daisy
    September 20, 2011

    @ Eldrege, I hope we are not jumping the gun like the politicians and making all these judgement calls before the investigation is completed. It seems the Obama detractors are already screaming crucify him and not waiting for the final outcome of the investigation. The report may confirm just what is being released piece meal, or justify your statement “Sometimes even the best researched and vetted investments do not work out.”

  26. Eldredge
    September 21, 2011

    Perhaps I didn't state that as well as I could – the circumstances do give the appearance of political expediency given the realtionship and timing of the investment and subsequent announcement. That could, and should have been evident by decision makers prior to the investment, which is all the more reason to make sure that due diligence is performed thoroughly. At this point, one may even argue that we don't know if there was a lack of due diligence. But Barbara brought up an interesting point…would one of us have made this investment decision with our own money?

  27. Anna Young
    September 24, 2011

    @Pocharle I understand your point. We have to admit the government set out with all good intentions. Mostly the plans goes awry because of overzealous contingencies.

  28. CubevilleEscapee
    September 29, 2011

    Actually, I have been following the story, and the loan was pushed through under Bush, not Obama.

    Here's this, but you can go back through industry articles and verify the timeline for yourself:

    http://www.grist.org/solar-power/2011-09-13-bush-admin-pushed-solyndra-loan-guarantee-for-two-years

     

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