APNewsBreak: Report: Energy loans could cost $3B

WASHINGTON (AP) — The government could lose nearly $3 billion on Energy Department loans for green energy programs — far less than the $10 billion Congress set aside for the high-risk program, according to an independent review.

The White House ordered the review after criticism of a $528 million loan to Solyndra Inc., solar company that went bankrupt.

The review, led by former Treasury Department official Herb Allison, looked at 30 loans or loan guarantees totaling $23.8 billion that were offered to green energy companies and auto makers such as Ford and Nissan.

The review did not involve Solyndra or Beacon Power Corp., a Tyngsboro, Mass., energy storage company that also went bankrupt after receiving a federal loan. The government has lost $567 million from those two loans so far, although officials said this week they could recover as much as $28 million from the sale of Beacon to a private equity firm.

The 75-page report, released Friday, says that about one-third of the money allocated — $8.3 billion — had been spent as of Nov. 28.

The government could reduce its losses from the loan program if it withholds money from companies that fail to meet certain benchmarks, the report said. The comment echoes criticism by some Republicans in Congress who say the Obama administration should have cut off money to Solyndra far sooner than it did.

The report recommends several steps the Energy Department can take to improve the loan program, including creation of a chief risk officer to monitor all of the agency's loans. The risk management unit should be separate from the loan program office and should report directly to senior DOE managers, the report says.

Energy Secretary Steven Chu said the report makes clear that the Energy Department is operating under congressional requirements to provide loans to projects that would have trouble obtaining private financing — which is why Congress appropriated $10 billion to cover expected losses.

"We have always known there were inherent risks in backing innovative technologies at full commercial scale, and it is very likely that there will be other companies in the portfolio that won't succeed," Chu said in a statement, "but the vast majority of companies are expected to pay the loans back in full, on time and with about $8 billion in interest."

Counting loans and guarantees to U.S. car makers and the nuclear industry, the loan program is supporting as many as 60,000 jobs and generating up to $40 billion in private investment, Chu said.

A GOP critic of the loan program was not impressed.

"This is less a report than an umbrella to deflect the criticism that's pouring down on the administration," said Rep. Jim Sensenbrenner, R-Wis., adding that he was disappointed the report did not evaluate the Solyndra or Beacon loans.

"How can an evaluation be 'independent' if the administration controls its content? A study that excludes inconvenient evidence isn't independent," Sensenbrenner said.

While the report generally backs department estimates of potential losses from the loan program, it says the loan values are far below what the companies would have to pay a private bank, without a government guarantee. Under a so-called fair-market value, the loans have been discounted by anywhere from $5 billion to $6.8 billion, the report says.

A White House spokesman said the purpose of the program was to spark investment in alternative and renewable energy programs that otherwise would not qualify for a private loan.

The finding about subsidies "simply means that a private bank wouldn't be willing to buy the (Energy) Department's loans at face value unless they could charge a higher interest rate," said spokesman Eric Schultz. He called that unsurprising, "since the entire point of the program ... was to make loans available for emerging clean energy companies so they have the best chance of succeeding in early stages, when innovative technologies traditionally have a difficult time accessing private capital."

Schultz called the report thorough, substantive and objective and said it confirms that the overall loan portfolio is expected to perform well.

The White House ordered the review in October as congressional Republicans investigated the Solyndra bankruptcy amid embarrassing revelations that federal officials were warned the company had problems but nonetheless continued to support it. Chu attended a 2009 groundbreaking at the company's California headquarters, and President Barack Obama visited the company in 2010.

Solyndra, of Fremont, Calif., was the first renewable-energy company to receive a loan guarantee under a stimulus-law program to encourage green energy and was frequently touted by the Obama administration as a model.

Since then, the company's implosion and revelations that the administration hurried to finish its review of the loan in time for its September 2009 groundbreaking has become an embarrassment for Obama and a rallying cry for GOP critics of his clean-energy program.

___

Follow Matthew Daly's energy coverage at Twitter.com/MatthewDalyWDC

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China city suspends plans to ease property controls: report

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China tells banks to roll over local govt loans: report

SYDNEY (Reuters) - China has told its banks to start a huge roll-over of loans to local governments, the Financial Times reported, aiming to give itself more time to deal with a $1.7 trillion debt hangover from the global financial crisis.

The move underscores China's determination to contain its 10.7 trillion yuan debt mess and forestall a potential loan crisis in the world's No. 2 economy, analysts say.

As early as June 2011, the Chinese government had vowed to clean up its local debt either by shifting 2-3 trillion yuan of debt off local governments, forcing state banks to take some bad debt losses and selling select projects to private investors, sources told Reuters earlier.

Investors worry that China's banks would suffer billions of bad loan losses and hobble the world's growth engine at a time of anaemic global economic growth.

China's mountain of local debt piled up after the 2008-09 financial crisis when Beijing ordered local governments to spend massively on infrastructure projects to buoy economic growth, which they did by borrowing heavily.

Analysts say Chinese banks are already rolling over or restructuring troubled loans to cash-strapped local governments unable to repay their debt. But the amount of loans being rolled over is not known as banks -- and Beijing -- are tight-lipped.

Worse, analysts say Chinese banks are hiding troubled loans by adamantly refusing to mark them as non-performing loans in financial statements before restructuring them, as per global best practice.

"This is bad regulation but I don't think we are going to get a bank crisis," said a bank analyst in Hong Kong.

In some cases, loans are being restructured by extending their maturities by as much as four years, the Financial Times said, citing bankers and analysts familiar with the matter.

Not all local government loans would be rolled over, the paper said, citing a person with knowledge of the plan.

Banks would determine if there was real demand for the investment. Continued funding for the construction of highways would be approved but less important projects, like massive city squares, might be cut off.

Banks would also consider whether investments were consistent with the government's five-year plan for industrial upgrading and cleaner growth.

China has said that about half of the 10.7 trillion yuan of loans will mature over the next three years.

(Reporting by Richard Pullin in MELBOURNE and Koh Gui Qing in SINGAPORE, Editing by Dean Yates & Kim Coghill)

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The 'unequivocally strong' January jobs report

Employers go on an unexpected hiring spree in January, pushing the unemployment rate to its lowest point in three years. But is all the news good?

Happy new year! The Labor Department announced on Friday that the economy gained an "incredible" 243,000 jobs in the first month of 2012, shocking many analysts who expected modest gains of about 150,000 jobs. The unexpected January hiring spree pushed the unemployment rate down from 8.5 percent to 8.3 percent. Not since the first days of the Obama presidency has the jobless rate been this low. (The unemployment rate was 7.8 percent in January 2009, 8.3 percent in February 2009, and then spent nearly three years bouncing between 8.5 and 10 percent.) The January job gains were broad — benefiting manufacturing, professional services, retail, health care, and restaurants, among other industries. Is this "monster" jobs report undeniable proof that the economy is, as the White House puts it, "continuing to heal"?

This is clearly great news: "The strangest thing about January's jobs report," says Ezra Klein at The Washington Post, "is that it's pretty much all good." December's numbers were strong largely thanks to seasonal hiring. But last month, the gains were across the board, and those jobs are here to stay. Plus, revised stats from November and December pushed the number of new jobs even higher, to 303,000. "Nicely done, economy."
"The January jobs report: It's all good"

Actually, we're still stuck in the mud: The figures are improving, but they're "still not good enough," FTN Financial economist Lindsey Piegza tells the Financial Post. The only reason the unemployment rate went down is that "more and more people are dropping out of the labor force." Remember, we need to add a minimum of 250,000 jobs each month just to keep up with population growth, so we're really just coming close to breaking even. We haven't even begun to "reabsorb the nine million people who lost their jobs during the Great Recession."
"U.S. jobs data: What the analysts say"

Regardless, this is a boon for Obama: "This was an unequivocally strong jobs report," says Philip Klein at the Washington Examiner. "And we've now had two consecutive months of 200,000+ jobs created." If Obama can convince voters things are improving, it will be "a lot harder for Republicans to run against him." After all, "saying that the economy isn't recovering as fast as it should be is a much weaker argument" than attacking "an incumbent when people feel there's simply no light at the end of the tunnel."
"Solid jobs report a boost to Obama"

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