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In any portfolio of investments, there will be some individual companies that will succeed and some that won't. That is especially true for a program like this that was established to support American leadership in the most cutting edge, innovative companies. No one ever expected a 100 percent success rate, but those that do succeed will generate thousands of new jobs in the short term and pave the way for entire new industries in the long term.
China, Germany, Korea and others understand the stakes and so do we: advanced auto manufacturing and clean energy are already huge global industries. The economic opportunities will grow dramatically in the years ahead for the countries that are willing to take some risks and play to win.
Congress itself recognized these risks, and wisely established and funded a loan loss reserve in each program to account for the expected losses. This ensured that the likelihood of some loan defaults was honestly reflected in the budget.
Of the almost $10 billion that Congress provided for these loan loss reserves:
- $7.5 billion was set aside to cover the risks in our portfolio of loans to auto manufacturing, which so far includes 5 projects worth $8.4 billion.
- $2.4 billion is reserved to cover any losses in our portfolio of investments in clean energy companies, which includes 28 investments worth a total of $16 billion. (Originally, $6 billion was appropriated, but Congress subsequently used some of those funds for other purposes)
As Bloomberg Government reported on Thursday, March 10, “The default rate on the U.S. clean-energy loan program that funded Solyndra LLC is a fraction of what the government budgeted for losses. The BGOV Barometer shows the default rate on the $16.1 billion Energy Department loan portfolio is less than 3.6 percent.”