Congress might unrenew crony capitalism

April 6, 2012

By Chriss Street

Life is getting more difficult for crony capitalists. President Obama and a bipartisan group of senators was unable convince their pals in Congress to extend ludicrously large subsidies for supposed renewable energy projects under the deceptive label, “The American Energy and Job Promotion Act.”  The senators included Mark Udall, D-Colo Michael Bennet, D-Colo.; Chuck Grassley, R-Iowa; Scott Brown, R-Mass.; and Dean Heller, R-Nev.

The short delay was too much for the largest potential beneficiary of the legislation, as the Blythe Solar Power Project in the Southern California desert filed for bankruptcy.  But it seems that the American taxpayer may have dodged a big bullet since Blythe Power had been approved since April 2011 for a $2.1 billion loan guarantee from the U.S. Department of Energy.  Creditors gasped when bankruptcy papers disclosed that Blythe’s parent company, Solar Millennium, estimated they only have $10 million in assets, and already had between $50 million and $100 million in liabilities.
California is no stranger to renewable energy boondoggles.  Zond Energy was founded in 1980  as America’s first wind-energy company.  Powered by tax credits, Zond promoters raise lots of money from tax shelter-investors and placed hundreds of non-functioning windmills on pristine mountains in Northern California.  When the company filed for bankruptcy in January 1997, Ken Lay as CEO of the infamous Enron Corporation acquired Zond.

Enron then lobbied the state of Texas to enact a broad electricity restructuring bill with a “renewable portfolio standard” that mandated private electric utilities buy a minimum 2,000 megawatts of qualifying renewable energy by 2009; and 10,000 megawatts by 2025.  Enron also lobbied Congress to successfully amend Title XXII of the Energy Policy Act of 1992 to direct the federal government to authorize tax incentives for renewable energy technologies.

Lay’s wheeling and dealing eventually drove Enron’s leveraged empire into bankruptcy four years later.  His scams cost investors $10 billion. and more than 20,000 employees lost their jobs and retirement benefits in the largest bankruptcy in American history.  Lay died prior facing a possible life sentence for his crimes. But Enron’s crony tax credits, mandates and regulations did not die with him.  In May 2002, General Electric acquired Enron Wind Systems and renamed it GE Wind Energy.

Imagine cronyism

GE’s corporate motto is “Imagination.” But it was lobbying muscle that drove wind power.  GE’s $23 million lobbying in 2005 was rewarded with congressional passage of the Energy Policy Act of 2005, that provided more tax incentives and loan new guarantees for renewable energy.

As GE lobbying rose to $26 million in 2009, Congress amended Section 406, the Energy Policy Act of 2005, to authorize added loan guarantees any “innovative technology that avoids greenhouse gases.”

In 2010, GE lobbying soared to $39 million, as the American Recovery and Reinvestment Act of 2009 spiked Congressional funding to $27.2 billion for renewable energy.

Wind power and other renewables have had so much in the way of accelerated depreciation tax breaks, production tax credits, and renewable energy credits that GE has been able to recoup its capital investments within a few years.  The concept of actually selling power has been far down the list of priorities for renewables.  Under law, if renewable sources of energy are available, utilities are required to pay approximately twice the going rate for any wind power that is transmitted to their power grid.

The extension of the crony renewable energy subsidies was originally buried deep in the legislation authorizing the Keystone XL pipeline. But the Senate rejected the measure on a largely party-line vote.  With the GE lobbying machine and bipartisan support, the American Energy and Job Promotion Act appeared headed for easy passage.  But California scandals and high costs may have made green crony capitalism un-renewable.

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Thank you also for the success of Chriss Street’s latest book: “The Third Way.”

Available in hard copy or for Kindle at: www.amazon.com

22 comments

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  1. Beelzebub
    Beelzebub 6 April, 2012, 12:50

    Is there cronyism in the green industry? Sure there is. But it’s not even a blip on the radar screen compared with the cronyism, fraud and corruption that’s taken place between the politicos and the financial sector. I have no idea why you folks are so scared to talk about it. Mr. Street – you worked for 30 years as a money manager and investment banker. You know what I’m talking about. Until we fix the problems with the Wall Street financial firms we are doomed to fail as a nation. Until we fix the Capital Hill-Wall Street cronyism, secret back-room deals and immunity from the law for the WS heavyweights we simply can’t function as a constitutional republic. For the last 10 years I feel like I’ve been under the rule of an oligarchy. And it’s not getting better. It’s getting worse!

    Reply this comment
  2. queeg
    queeg 6 April, 2012, 14:46

    Yawn…..

    Reply this comment
  3. Rex The Wonder Dog!
    Rex The Wonder Dog! 6 April, 2012, 23:07

    queeg, the truth can hurt-very badly- sometimes 😉

    Reply this comment
  4. queeg
    queeg 7 April, 2012, 07:35

    If Wall Street moves off shore….small business will dry up instantly…..the best risks will get investment and poorly capitalized small businesses dry up…then home equity financed businesses caput…then franchises…..then auto dealers and farm supply….on and on…..

    You will go downtown to shop…lights out except at your branch bank and Bubba’s Bar!

    Reply this comment
  5. PJ
    PJ 7 April, 2012, 08:36

    Would financials actually leave, though? I wonder if they could even do business if they didn’t have the access and leverage they now enjoy with our government.

    Reply this comment
  6. Beelzebub
    Beelzebub 7 April, 2012, 09:23

    “If Wall Street moves off shore….”

    No other civilized nation that operates from ‘rule of law’ would put up with their BS.

    Fraud should not be a common business practice in America. Look at the trillions of taxpayer dollars that the American citizens have been defrauded out of by Wall Street.

    Bailouts, quantitative easing, ZIRP, no-interest loans – all in the name of bottomfeeders on Wall Street.

    America prospered long before the Oligarchy arrived. We don’t need these criminal scumbags to survive. That’s the same as claiming Chicago would go bankrupt without the mafia. Pull your head out.

    Reply this comment
  7. Chriss Street
    Chriss Street 7 April, 2012, 16:11

    Beelzebub:

    I pound away at Crony Capitalism all the time. I was CEO of two NYSE companies. Every big company CEO I knew gave 70% of their contribution and lobbying money to Democrats becasue you alway got something back. Big comapnieas are the only entities that can meet to huge insurance and contract compliance requirements of government. This makes tremendous sense, since today 42% of GDP is government spending.
    Wall Street knows that the most profitable busines on earth is issuing municipal bonds and investing public employee pension money.

    The bottom line is that natural gas has fallen from $5 per thousand cubic feet to $2.30. This means that alternative energy that was on average three times more expensive for producing electricity is now six times.

    High prices of oil have stimulated massive oil fracking. The cost of lifting oil in North Dakota is $16 a barrel and new technology will drive the price of lifting lower. You can buy all the crude oil you want in that area of the country for $70 a barrell, because Warren Buffet’s Burlinton Northern Railroad tanker-cars are sold out for the next 18 months. Eventually pipelines will cross the U.S. and drive energy prices lower.

    What is preventing building of those pipelines are the Wall Street / Washington K Street money and lobbyists that sucked up all the tax credits. These folks will get rolled over as the public starts to understand that gas is really going to $2.50 a gallon.

    There is no secret here, just money and crony capitalists

    Reply this comment
  8. Rex The Wonder Dog!
    Rex The Wonder Dog! 7 April, 2012, 17:03

    If Wall Street moves off shore….small business will dry up instantly…..

    Small business does not use Wall Street, not even medium sized businesses, only Big Business, so once again you have proven yourself to be a gas bag towing the water for crony capitalism. Why don’t you want the rules to apply to everyone? Why do you think you’re special?

    Reply this comment
  9. Rex The Wonder Dog!
    Rex The Wonder Dog! 7 April, 2012, 17:13

    Chriss Street says:
    Big companies are the only entities that can meet to huge insurance and contract compliance requirements of government. This makes tremendous sense, since today 42% of GDP is government spending.

    This reminds me of that god awful agency the “Resolution Trust Corporation” which was 100% gov owned in the early 1990’s gov set it up to handle all the REO/foreclosures in the commercial real estate industry which had drastically overbuilt on spec properties because of easy money lending with the S&L deregulation under Raygun. The RTC SHOULD HAVE sold off each property one by one, individually, with a proper marketing plan and calendar to achieve the highest/maximum price possible. But NOOO, that would not work because then the Wall Street slimeballs could not make billions of the taxpayers, so the RTC started selling them off in pools of $50 million, $100 million, $200 million and, well you get the picture. This eliminated 99.9999% of the buyer population-forcing the small, medium or even Big Business OUT if the buying process. When you want a $500K or $1 million commercial building and have to buy another $99 million of product to get it that pretty much wipes out all the users. It also allows the pooled properties to be sold for 10, 15, 20 cents on the dollar, and then the ones buying the pools broke them out out by one and turned a 400%, 500% or more profit.

    Reply this comment
  10. queeg
    queeg 7 April, 2012, 17:22

    You will see the end of small store front businesses in your lifetime.

    Inefficient capital return….

    Wall Street on to Africa and other emerging nightmares….

    Reply this comment
  11. Rex The Wonder Dog!
    Rex The Wonder Dog! 8 April, 2012, 07:09

    You will see the end of small store front businesses in your lifetime.
    Inefficient capital return….

    80% of ALL NEW JOBS are created by small business, and that will not change in our lifetime because Big Busiess is too slow to change to a rapidly changing busienss environment.

    Reply this comment
  12. queeg
    queeg 8 April, 2012, 07:34

    Hardly….without underground economy and government welfare….small business collapses faster.

    Reply this comment
  13. Rex The Wonder Dog!
    Rex The Wonder Dog! 8 April, 2012, 16:48

    LOL, don’t let the facts get in the way of your whoppers 🙂

    Reply this comment
  14. queeg
    queeg 8 April, 2012, 19:40

    LA is an underground cesspool. Legitimate businesses cannot compete…

    Reply this comment
  15. Rex The Wonder Dog!
    Rex The Wonder Dog! 8 April, 2012, 21:57

    I think your comment has merit, and it needs to be addressed, the udnerground labor market.

    Reply this comment
  16. queeg
    queeg 9 April, 2012, 06:30

    So did the rich accelerate the underground economy and outsouring….to survive????

    Reply this comment
  17. Beelzebub
    Beelzebub 9 April, 2012, 09:18

    “So did the rich accelerate the underground economy and outsouring….to survive????”

    Yeah, as a matter of fact they did. By bribing the politicians to ensure that immigration laws and labor laws were not enforced.

    That’s precisely the reason that E-Verify has hit so many roadblocks in both the state and federal legislatures.

    Break out of your denial.

    Reply this comment
  18. Rex The Wonder Dog!
    Rex The Wonder Dog! 9 April, 2012, 15:28

    “So did the rich accelerate the underground economy and outsouring….to survive????”
    Yeah, as a matter of fact they did. By bribing the politicians to ensure that immigration laws and labor laws were not enforced.
    That’s precisely the reason that E-Verify has hit so many roadblocks in both the state and federal legislatures.

    Break out of your denial.

    I would also call the H-1B VISA program a major form of underground labor, bringing in foreign engineers and the like to work for 50% of what the US Market rate is-while displacing American workers. And that is 100% BIG Business, like Microsfot, Qualcom, GE and tons more…..

    Reply this comment
  19. Beelzebub
    Beelzebub 9 April, 2012, 18:42

    It’s despicable that these High tech corps offshore their manufacturing plants thereby screwing the lower middle class then to add insult to injury bribe the pols to increase H1B’s visas bringing in cheap foreign skilled labor screwing American college grads. It’s not just Apple. It’s all of them! They shouldn’t be allowed to fly an American flag outside their HQ’s on US soil. If I were king I would slap a 50% tariff on their manufactured crap coming into the country. Maybe that would convince them to support their fellow countrymen! 🙁

    Reply this comment
  20. Beelzebub
    Beelzebub 10 April, 2012, 17:52

    You just have to laugh at the national media and how they lick the boots of the government and corporate oligarchs.

    The DOW lost about 350 pts in the last 2 days. The Pravda-like media claims that Europe is causing it all! heh. 😀 The Fed government is borrowing $0.40 for every dollar they spend and is deficit spending is 10% of GDP. Everybody knows that without the ZIRP, borrowing, bailouts and zero interest loans for the TBTF’s that we would be in the middle of a deflationary depression. The able-bodied labor participation percentage has been stagnant at about 55%-58%. Millions have simply given up the job search. When people don’t work they don’t pay income taxes. That puts more pressure on the shrinking labor force to support the rest. Student debt has topped $1T. These people think that they can hide from reality by going to school for a few years – and after they graduate there will be jobs galore. It’s called denial. Which means millions of debt slaves with no income to pay off their debts = more money printing and borrowing until the bond markets blow up.

    There’s only one way to fill up the hole – tax more or spend less – and either way GDP takes a hit. There is NO WAY AROUND IT.

    But they will continue to treat the pain with powerful analgesics until the cancer invades an organ or two and the lights go out.

    The media and the pols fully understand the mess we’re in. The majority of the American public will be the last to know.

    Reply this comment
  21. Chriss Street
    Chriss Street 11 April, 2012, 21:01

    Off shore manufacturing by American based companies is the real cause of the U.S. deficit. Small businesses do not have the option to move their operations off-shore, that’s why small business creates all the jobs here. Big corporations do not care about U.S. labor laws, environmental regulations and frivalous lawsuits because they have already taken the bulk of their middle income jobs to China and other low tax rate countries.

    Reply this comment
  22. nowsane
    nowsane 12 April, 2012, 07:24

    I’m all for ending all energy subsidies, and letting every energy technology stand on its own, failing or losing in the marketplace, as consumers, the ultimate customers deem appropriate.

    Reply this comment

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