It is a shame that the Obama administration didn’t pay as much attention to the details of Solyndra’s business plans and financial liabilities as it did to the details of the President’s photo op at the company’s facility on May 26, 2010. Given the rampant mismanagement and weaknesses associated with the Energy Department’s whole Loan Guarantee Program (LGP), there was plenty of incentive to do so.

Even though the company went belly up and laid off 1,100 employees in September, the Obama administration could still tout Solyndra as a job creator, because just keeping tabs on the rapidly emerging scandal will create several full-time positions.

Every day brings new and more damning revelations; September 26, 2011 headlines revolved around the spectacle of the hearings on Capitol Hill featuring company executives robotically asserting their right to remain silent after every congressional query; not going to be a bright spot for the White House.

A September 23, 2011 New York Times article outlined the basics:

“The government’s backing of Solyndra, which could cost taxpayers more than a half-billion dollars, came as the politically well-connected business began an extensive lobbying campaign that appears to have blinded government officials to the company’s financial condition and the risks of the investment, according to a review of government documents and interviews with administration officials and industry analysts…Some lawmakers on Capitol Hill question whether the firm’s executives may have engaged in a cover-up of their precarious financial condition, allegations the company denies.”

While the Solyndra scandal is turning out to be sensational and tenacious, it really should have come as no surprise. The underlying catalyst for the boondoggle is the Department of Energy’s LGP.

The Government Accountability Office (GAO) has written no fewer than four reports limning the contours of a mismanaged, capricious, unaccountable loan program, awash in stimulus money, which grew aggressively both in dollar authority and in policy scope, which is a fiscally deadly combination. The GAO was sounding alarm bells almost from the LGP’s inception. It had all the characteristics of a rogue program that would sooner or later lead inexorably to a Solyndra-like implosion.

Solar energy expert Peter Lynch told ABC News and others that the pitfalls of Solyndra’s business model were accessible to anyone reading the company’s prospectus, “It’s very difficult to perceive a company with a model that says, well, I can build something for six dollars and sell it for three dollars…Those numbers don’t generally work. You don’t want to lose three dollars for every unit you make.”

Solyndra executives recognized new funding opportunities under the incoming Obama administration (the company’s largest private investor was also an Obama campaign bundler); it redoubled its efforts, spending $1.8 million in lobbying the Department of Energy. The Daily Caller reported that Solyndra executives and investors visited the White House 20 times between March, 2009 and April 2011.

The program was first authorized in 2005 under the Bush administration as a way to fund innovative energy projects, decrease air pollutants and greenhouse gases by employing new or significantly improved technologies. But the Bush administration passed on funding Solyndra’s project, concerned over the way it was pricing its technology vis-a-vis its competitors. The LPG was cited in all four GAO reports for putting the funding cart before the oversight and due diligence horse, for making arbitrary decisions on winners and losers, for internal management weaknesses, and for having an appeals process that could either be characterized as “flying-by-the-seat-of your-pants” or nonexistent. The GAO virtually predicted the Solyndra debacle when it said in its July, 2008 report that:

“Risks inherent to the LGP will make it difficult for DOE to estimate subsidy costs, which could lead to financial losses and may introduce biases in the projects that receive guarantees....The likelihood that DOE will misestimate costs, along with the practice of charging fees to cover the estimated costs, may lead to biases in the projects that receive guarantees. Borrowers who believe DOE has underestimated costs and has consequently set fees that are less than the risks of the projects are the most likely to accept guarantees. To the extent that DOE underestimates the costs and does not collect sufficient fees from borrowers to cover the full costs, taxpayers will ultimately bear the costs of shortfalls.”

Of course, the Obama administration’s take is very different. Energy Department official Matthew C. Rogers is quoted in a September 22, 2011 New York Times article saying “We had to knock down some barriers standing in the way to get these projects funded….” Mr. Rogers also said Energy Secretary Steven Chu had been personally reviewing loan applications while urging faster action and less scrutiny.

In other corners of the President’s Cabinet, cooler heads were attempting to prevail. A September 27, 2011 Los Angeles Times story reports that “at a White House meeting in late October, Lawrence H. Summers, then director of the National Economic Council, and Timothy F. Geithner, the Treasury Secretary, expressed concerns that the selection process for federal loan guarantees wasn't rigorous enough and raised the risk that funds could be going to the wrong companies, including ones that didn't need the help.” Apparently, somebody was reading the GAO reports.

Despite those compelling reservations, the naysayers were overridden and the loan was made. More disturbingly, DOE officials restructured the Solyndra loan early in 2011 to make taxpayer’s subordinate to private sector investors in the event that the company failed, which appears to violate the law. According to the Washington Times’ Jim McElhatton, “The restructuring of the Solyndra loan, months before the company collapsed, has raised serious concerns that taxpayers weren’t as well protected as some of the company’s biggest private investors in case of a liquidation. Under a restructuring deal earlier this year, the Energy Department agreed that $75 million in new funds from investors Argonaut Private Equity and Madrone Capital Partners would be paid back in the case of a liquidation before the hundreds of millions of dollars loaned to the company by taxpayers.”

Even there, however, the original 2005 statute requires projects to have a “reasonable prospect of repayment,” weak language that leaves plenty of room for finessing by program applicants.

The LGP program is a toxic brew, even when all players are operating above board and free of political or self-interested financial agendas. Add in a torrent of unaccountable stimulus money, an administration driven by an aggressive environmental agenda, and rampant conflicts of interest; a flame out was inevitable.

Government officials do not have the expertise to make the decisions about funding emerging technologies in volatile industries, such as solar energy. A September 28, 2011 Washington Post article featured one LGP applicant who eventually turned down a massive $2.1 billion loan guarantee because the LGP program lacked the flexibility to allow for modifications to the project in response to rapidly evolving market forces. In order to speed up the process, Secretary Chu used $1 billion in stimulus money just for administrative overhead and bloated it up to 200 employees. And still, applicants complained about how slow the process was.

Federal bureaucrats are not investing their own money, but the taxpayers’ money. That is why there are private equity markets; investors routinely make financing decisions based upon a close vetting of a company’s fundamentals and a meticulous analysis of market conditions. When private money is at risk and there are rewards to be reaped, investors will delve much more deeply into the details and with a lot more healthy skepticism.

The loan program skewed Solyndra’s behavior, incenting company executives to worry more about their political status and pleasing government benefactors than in making sound business decisions. The government’s involvement also had personal financial ramifications for the company executives. A September 16, 2011 Wall Street Journal article describes company executives behaving almost giddily at the prospect of cashing in at the taxpayers’ expense, “In mid-2009, Solyndra had a choice: It could hunker down with its existing factory and try to slash costs to meet competition, drawing on additional private capital as needed, according to the people familiar with the company. Or, with a loan from Uncle Sam, it could gamble and build a brand-new, bigger factory in a bid to gain economies of scale and dominate the market...Solyndra's founder and chief executive at the time, Chris Gronet, decided to go for the gamble. ‘Chris was really a hard driver,’ said the former executive involved in the production of the solar panels. ‘The faster you solve problems, the faster you build your infrastructure, the quicker you are to market. You spend money to solve problems…

There was another motivator—Solyndra's management and investors had an eye on an initial public offering. ‘There was a perceived halo around the loan,’ said an investor with knowledge of the company. ‘If we get the loan, then we can definitely go public and cash out.’”

Needless to say, that decision turned out to be another in a long line of bad decisions, but this time taxpayers will pick up the very expensive pieces.

The Congress and the Department of Energy’s Office of Inspector General are all trying to get to the bottom of the Solyndra scandal, which is all well and good. However, the LPG program itself is illustrative of what can and often does go wrong when an invasive federal government creeps into industries and areas where it does not belong and, more to the point, where it is not needed. It is outrageous that federal loan program can be leveraged with impunity to benefit a few at the expense of the many.

These three additional tidbits add insult to injury for taxpayers. First, according to Jim McElhatton of the Washington Times, Solyndra used millions in stimulus money to retain highly-paid lawyers and consultants to restructure the original deal and, presumably, the subsequent modification to the loan to help shore up the floundering company and ensure that, in the event the company flamed out, its investors would be repaid before taxpayers.

Second, the company has, of course, lawyered up to deal with the multiple investigations, its impending bankruptcy and the media fallout associated with the scandal. Fees that will be paid for the company’s new posse are eye-popping. Former Massachusetts Governor William Weld will rake in $825 per hour for his work, another lobbyist and former Senate committee general counsel will get $775 per hour, and Solyndra intends to pay $425 per hour for a “professional adviser” and crisis manager, a former reporter from Reuters Television. The more money that these folks absorb, the less there will available to repay taxpayers when it’s all said and done. The safe bet is that there will little left over for taxpayers to recover.

Third, all 1,100 ex-Solyndra employees are applying for federal trade adjustment assistance, which is more generous than average unemployment benefits. If the company is permitted to claim that the company’s demise was the direct result of unfair trade practices by the Chinese, they would be eligible for job retraining, allowances for job searching, health benefits, and up to 130 weeks of income support. That aid is estimated to cost $13,000 per worker for the coming year; but what’s another $14.3 million after losing $535 million?

Once Congress sheds a bright light on the depths and breadth of the Solyndra scandal, it should move to turn the lights off on the Energy Department’s loan guarantee program and protect taxpayers from being burned again.