Steven Chu Compares Energy Department Loan Program To An Unsedated Colonoscopy

Private banks should administer government loans for innovative energy technologies, just as they issued the government’s emergency pandemic loans, former Energy Secretary Steven Chu said Tuesday.
Many businesses are reluctant to borrow from the Energy Department because the paperwork is so onerous, Chu said at the Stanford University Global Energy Forum.
“Despite all the good things in the loan program, the loan program paperwork was horrendous,” he said. “And if you got a government loan, during the whole time you’ve got that loan it’s as if you’ve got a government colonoscopy without anesthesia up you the whole time, generating tons of reporting requirements and compliance. Just crazy.”
The paperwork has become so onerous, Chu added, because whichever political party opposes the loans will exploit any losses.
“If you slip up and there’s a little bit of a scandal, then the opposite party is all over you, so it becomes very inefficient,” Chu said.
Chu was at the center of controversy surrounding the 2011 collapse of Solyndra, a solar panel manufacturer that defaulted on a $535 million loan guaranteed by DOE. Republicans described the failure as a waste of taxpayer money, but DOE offers loan guarantees to encourage riskier loans than businesses would ordinarily approve, DOE anticipated much losses twenty times the size of the Solyndra collapse, and by 2014 DOE was turning a profit on its stimulus loans, with a failure rate of 2.28 percent.
To defend itself from partisan attacks, DOE monitors loans by burdening borrowers, Chu said, with more paperwork.
“So there’s a huge overhead, and a lot of companies didn’t want to touch a government loan because they said, ‘I don’t want to deal with all this paperwork.’”
The solution, he suggested, was demonstrated by the CARES Act Coronavirus economic stimulus: have private banks administer government loans.
“If you notice, during the covid-19 crisis, they wanted to get some money out to people, they did not create a government program. They let the banks get it out,” Chu said. “This idea of using the private sector to disperse seems to be more efficient. The best of all possible things, if we work with banks so that they do some of the legwork, because the paperwork in the loan program is horrendous.”
The Stanford professor and 1997 Nobel Prize recipient was not without criticism of the CARES Act:
“The only trouble is they gave it to the big commercial banks,” he said. “Finally they got wise and said we need to set aside a little money for the little banks, because we need to get money to the people.”
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Watch Chu at Stanford’s Global Energy Forum: