Federal Financing Bank?

Bruce Krasting at Zero Hedge has been on the case of the Federal Financing Bank.  I am still unclear if the agency is actually providing the cash or just the guarantee, but it was the one rolling out the Solyndra loan (under DOE auspices, I suppose).

In July, it was still sending cash of some sort to Solyndra - it may be that this was just a drawdown of money under its original loan commitment, or it may be new money.  A couple of things you can see are:

  • A heck of a lot of money was still going out the door to solar programs, likely with no oversight
  • Ford, the supposedly bailout-free company, sure seems to be gobbling up a lot of government guaranteed loans for something.
  • We were lending to Solyndra at 0.89% interest.
All told, a whopping 3/4 of a billion dollars of government guaranteed loans to private companies went out the door in July alone.
Other observations from the report:  The report is hard to read, as it is hard to correlate the new financing activity to changes in the balance sheet.  But there is just a ton of loan activity to rural electric companies.  Wasn't rural electrification an issue in the 1930's?  Isn't it time to let rural electric companies stand on their own two feet and get their own money from the capital markets?
There is also a lot of activity issuing HOPE for Homeowners money - it looks like the government is lending (to banks?) at 0.01% interest.  What is the difference between a 0.01% thirty year loan and a gift?


  1. John Cunningham:

    The rural electrical loans are a relic from the 1930s, when cooperatives were set up to wire the hinterland. naturally, the cheap loan program continues to date, basically providing some additional points of marginal profits compared to for-profit utilities which have to borrow on the open market. Usually this ends up in higher wages for union linemen and more management drones at the HQ offices.

  2. MJ:

    We were lending to Solyndra at 0.89% interest.

    But they weren't risky at all, were they?

  3. Smock Puppet, Hard Labor For Hire:

    >>> A heck of a lot of money was still going out the door to solar programs, likely with no oversight

    HEYYYYYY, it was a "shovel ready" project!

    They were just shoveling taxpayer money!

  4. Smock Puppet, Hard Labor For Hire:

    >> What is the difference between a 0.01% thirty year loan and a gift?

    $200k @ 0.01% for 30 years or 360 months === $556.39/month

    $200k @ 0.0% for 0 years or 0 months === $0 per month

    Glad I could clear that up fer ya!
    ... LOLZ!

    Assuming you actually meant an interest-free loan:
    $200k @ 0.00% for 30 years or 360 months === $555.56/month

    Essentially $301 in interest

  5. Ted Rado:

    The idea of loaning money for a project without a thorough engineering study is appalling. Wind is bad enough, with at best about 30% availability. Solar (in AZ) has 20% availability. There is no economical way to store or back up intermittent energy sources. It only works with USG subsidies and free backup. When dedicated backup becomes needed, the whole thing becomes a joke. The Spaniards have cut way back on their ruinous subsidies as it was bankrupting the country (they cut out new solar subsidies entirely, I believe).

    If someone had a complete package (power generation plus backup or storage) that made sense, then and only then should money be spent on the component parts. To plunge ahead with the hope that "we will think of something" is madness.

    Further, if such a study was made and it showed that the overall scheme was feasible, private capital would become available and the idiots in DC would not have to put up the money.

    I think we can look forward to years of energy fiascos, while the pols play amateur (aka incompetent) engineer.

    USG participation in the economy would make a good movie: "Scary Movie In Spades".

  6. steve:

    My 70+ year old mother sometimes tells a story of when she worked for the head honcho of a rural electrification company in Rochester IN as a secretary in the 1950s. Every year the government would give them a large loan. All the boss did with it was take it down to the bank and put it in a CD for the duration of the loan. When he paid it back, he just booked the interest as profits. In other words, it wasn't even necessary to keep them in business in the 50s.

  7. tomw:

    Steve, who paid for the water and sewer out to the cottages around Lake Manitou in Rochester? Was that a Federal loan grant? Or done by fees to those served?
    Those of us who use telephones are still paying to get phone service out to the rural areas even though the last party line in service was de-activated prior to 2000. The rural TelCos are a gold-mine if you can get your hands on one.