Saturday, September 17, 2011

Solyndra Gate

The Obama Administration's involvement with Solyndra Corporation has been in the news for the last several days. Even though the mainstream media hasn't characterized the issue as a scandal, the bearish social mood that will continue to unfold over the next 12 months will likely make this a drag on President Obama's re-election prospects in November 2012.

As far as the mainstream media is concerned, it's the perception of guilt that matters, rather than actual guilt. This will have significant implications down the road as bearish social mood builds in the months ahead. In bull markets, people accentuate the positive aspects of politicians and are forgiving of weaknesses, but in bear markets, people accentuate the negative aspects of politicians and overlook the positive. The socionomic model supports the possibility that the Obama Administration's involvement with Solyndra Corporation could have enough legs in the mainstream media to carry over well into 2012, not to mention the possibility that the GOP will use the issue for their own political gain.

The story broke several days ago with the revelation that the Obama Administration issued a total of $528 million in federal loans from early 2009 to late 2011 to the company. The Obama Administration frequently touted the corporation as a model for development of a clean energy program. There were a number of damaging developments that unfolded in the last 2 years:

1 -- In 2009, the Energy Department inspector general warned that the DOE lacked the necessary quality control for the loan guarantee program, which was created to support clean energy programs that could not get conventional bank loans due to elevated risk.

2 -- In July 2010, the Energy Department had bypassed required steps for funding awards for 5 of 10 applicants that received conditional loan guarantees, according to the Government Accountability Office.

3 -- In March 2011, the Energy Department kept virtually no records on 15 of 18 loan guarantees, according to the DOE Inspector General.

4 -- There had been a number of warning signs as far back as last year that Solyndra was suffering recurring losses and its financial health was deteriorating rapidly. The warning signs were all ignored, and even as recently as May 2011, the company continued its assurance about the prospect for an improving business performance in the later part of the year.

Solyndra Corporation is now on the verge of default, and the fallout from the default threatens to be a drag on President Obama's re-election chances in 2012. The FBI and the Treasury Department has already gotten involved in the investigation of the company and the loan program.

This is a development to keep an eye on. Look for the mainstream media to drag this out as long as possible, since there is a tendency by the media to look for scandals and drag them out when there is a bear market unfolding. Look for the GOP to attack Obama on this issue (perhaps starting on Tuesday). This could be characterized as a scandal by the mainstream media in the very near future.

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