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Government Solar Loans are Imploding

Written By Brian Hicks

Posted October 14, 2011

The “useful idiots” will prove to be a costly distraction.

The capitalism-hating, iPod-toting, free-bagel-devouring Occupy Wall Street crowd has targeted banksters, billionaires, and the nation’s wealthiest one percent.

Their demands — which reveal a lot about their personal motivations — include free college education, complete debt forgiveness, and the outlawing of all credit rating agencies.

History will view these protestors as nothing more than a foul wind. The protests of a few hundred people have been top news and have pushed the government’s squandering of billions of dollars on green energy projects to the back burner.

The bills for these hopey-changey tree-hugging “investments,” however, are coming due…

And they’re tipping off a major trend that’s about to play out to the profit of a small group of investors. Let me explain.

The Real Green of the Green Movement

The last few weeks have exposed green projects, investments, and jobs for what they really are.

The high-profile bankruptcy of Obama’s pet solar company Solyndra was just the first of many to come. It set taxpayers back more than a half billion dollars while some well-connected crony capitalists avoided losses and walked away with some tidy fortunes.  

Follow that with this week’s revelation that SunPower (NASDAQ: SPWRA) received a loan guarantee of $1.2 billion to build a giant solar farm in California.

The men who pulled it all together are father-and-son team Rep. George Miller III (D-Calif.) and George Miller IV. The former is a big supporter of “green jobs,” and is in turn supported by unions (according to Center for Responsive Politics, Rep. Miller’s top five contributors are all unions); the latter’s lobbying firm was the direct beneficiary of the deal. These two are likely the first of many.

Another $4.75 billion worth of loans and guarantees will likely come due, too.

The whole thing stinks. Billions of dollars have been wasted so a select few could make a few million dollars…

But hey, we’re about to see some “change.”

Heads They Win, Tails You Lose

Luckily, there’s a solution to this disastrous system. But it’s not to stop doing it.

It’s the solution that only could pass muster in Washington: When something fails miserably, do more of it.

That’s why we’re about to see what has played out in the solar and green energy sector on a much larger scale.

Bipartisan support for “Infrastructure Bank” has already been well-established. The bank, which is nothing more than public-private partnerships, will likely provide loan guarantees.

As we explained in our preview of Obama’s jobs plan, the bank will be a big winner for all of the most closely-connected parties: contractors, unions, and the government. Think Bridgie Mae and Roadie Mac.

Congress may not be able to stop it, either — even if it wanted to.

President Obama tipped his hand earlier this week at his Top Political Donors Jobs Council meeting:

The American jobs act that I’m putting forward obviously contains many ideas like infrastructure investment that should be pretty straightforward. And our hope is that we will be able to get those passed in the next couple of months. But we’re not going to wait for Congress. Scour this report, identify all those areas in which we can act administratively.

In short, the “bank” is coming.

There will be as much as $1 trillion in loan guarantees tied to it.

And it’s going to further accelerate the most significant change in the United States economy.

The False Hope

When the “infrastructure bank” gets chartered, there will be a wide call to buy infrastructure stocks.

The rationale is simple enough: The government is spending money on roads and bridges. Buy companies that build roads and bridges.

It makes sense.

But it won’t last…

The majority of the construction industry is private. According to construction industry consulting firm FMI, only 9.6% of American construction firms are publicly traded. The rest are private companies, many of which are surely owned by well-connected political contributors.

Infrastructure stocks will go just like they did during the “Obama Rally” in late 2008. They’ll jump on the infrastructure bank story only to be followed by a long, costly slide into reality.

The Smart Money Move

The real winner will be the same as it always is every time the government starts assuming large debts of questionable projects…


Infrastructure spending — regardless of how popular — will end up failing to meet economic expectations. Revenue from the project will come in below forecasts. Costs will consistently exceed forecasts.

In a few years, after all the ribbon-cutting ceremonies are over, the private companies have made their millions in profits for the work, and the construction jobs have disappeared, the bill will come due…

And the infrastructure bank (read: taxpayer) will be on the hook for it all.

The end result: The reported debt will continue its rise. It won’t be hidden in off-balance-sheet loan guarantees anymore.

The dollar will take its next leg down. And gold will continue to be one of the last few great stores of value.

The Occupy Wall Street protesters can demand and distract all they want. They will continue to miss the real problems.

In fact, it’s worse than that. They are aiding and abetting what will be the greatest government-led caper in history.

Good investing,

Andrew Mickey
Editor, Wealth Daily