BRIGHT AUTOMOTIVE: Another Of The Many American Companies Screwed By Obama To Protect Obama's Political Financiers

BRIGHT AUTOMOTIVE: Another Of The Many American Companies Screwed By Obama To Protect Obama's Political Financiers

Bright Automotive calls it quits after Obama plays favorites | News | heraldbulletin.com

Bright Automotive calls it quits By Stuart Hirsch ... Bright officials hoped to employ about 200 people at the Michigan facility and 1,000 more at the production site and had touted the IDEA as a

READ THIS REPORT: BRIGHT AUTO STONE WALLED.pdf

Electric car maker Bright Automotive to shut down after getting lied to by Obama

Another electric car startup, which waited years for a Department of Energy loan, plans to call it quits. According to local media in Indiana (and Green Car Reports) Bright Automotive, which was a spinoff from the not-for-profit think tank Rocky Mountain Institute, and which had been developing a plug-in hybrid car called the IDEA for commercial fleets, plans to close shop.

Despite that Bright Automotive was the first official investment from General Motor’s venture arm, the company had been developing its business around getting a DOE advanced technology vehicle manufacturing loan of $450 million. According to a letter sent to the media, Bright Automotive slams the DOE for leading it down a road where it spent three years and $15 million on pursuing a loan that never was delivered.

Bright Automotive isn’t the only electric automaker that felt confident it had a DOE loan in the bag, yet ultimately never got that loan. In December, electric car startup Aptera also announced that it would shut down after failing to bring in private investment, which was one of the final criteria to secure a DOE loan. Electric car company Coda Automotive had also long said it was waiting for a DOE loan, but has yet to receive one. Norwegian car company Think Automotive also was hoping for a loan to build electric cars in Indiana, but never received it, and went bankrupt last year.

Fisker Automotive did receive a DOE loan award, but after drawing down on part of the loan, was then unable to secure the rest after facing delays for its inaugural car. Battery suppliers to these electric car companies have also struggled as a result of the EV makers struggling — Ener1 went bankrupt after Think went bankrupt and A123 Systems’ stock has dropped dramatically after Fisker’s problems were revealed.

Bright Automotive execs said in a letter published by various outlets that: “Last week, we received the fourth ‘near final’ Conditional Commitment Letter since September 2010. Each new letter arrived with more onerous terms than the last. . . .The first three were workable for us, but the last was so outlandish that the most rational and objective persons would likely conclude that your team was negotiating in bad faith.”

Other companies and investors have pointed out the difficult terms of the DOE loans before, including Solyndra investors (after the company went bankrupt) and Beacon Power (after that company suspended operations and was sold to a private equity firm). The DOE seemingly became far stricter in its terms after the solar company Solyndra went bankrupt, taking with it an over $500 million loan.

 

Nick 

What’s really too bad is that Bright had some great people behind, mostly engineers from different fields who had worked with different car makers, at one point or another. If anybody was going to pull it off in the long run, these guys would have.

This is a bitter disappointment. I hope to see them back one way or another.

 

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They told each West Coast Senator: "If you push this agenda, we can covertly push hundreds of millions of dollars into your family's Goldman Sachs accounts..."

 

Crony capitalism. What is it? Why is it so bad? - By Jay Cost

To answer these questions, let’s think about good, old-fashioned capitalism. It is premised on the free exchange of goods or services between independent agents.

Let’s say I want to buy some cereal. Steve’s Grocery is selling my brand for $4. Ted’s Grocery has it for $5. I buy from Steve, which creates the most value for both me and him. Meanwhile, Ted now has an incentive to cut his costs so he can compete better. Replicate this kind of transaction billions of times a day, 365 days a year, and that is how our economy functions and grows. Or at least how it’s supposed to.

Now, what about crony capitalism? Let’s say it’s the government that wants to buy some cereal. More specifically, the House of Representatives’ Committee for Cereal Acquisition is put in charge of the task. Steve still sells it for $4. Ted for $5. I buy from Steve. He’s the low price man. But the Committee for Cereal Acquisition buys from Ted. Why?

Because Ted lobbied the committee. Because his corporate headquarters is in the chairman’s district. Because he gave more campaign contributions. Because he promised a lobbying gig to an undecided committee member who plans to retire next year. That is how crony capitalism works.

And it happens all throughout the government—from defense contracting, to farm subsidies, clean energy programs, infrastructure spending, affordable housing, food stamps, Medicare, Obamacare, tax policy. You pretty much name it. Crony capitalism is there.  

Capitalism is moral because it is premised on a voluntary exchange between independent parties – who agree to the deal only because it creates value for everybody. Crony capitalism is immoral because one of the parties—the government—has been bought off.

This creates three problems. First, it is unfair. Politicians are spending the public’s money, but not for the public interest. Instead, they reward friends, supporters, or themselves. Our Constitution grants Congress the power to provide for the general welfare. Crony capitalism violates this sacred principle.

Second, it is incredibly wasteful. In our cereal example, the government overpaid by going with Ted instead of Steve. That’s obviously a waste of taxpayer money. In fact, it is really stealing from the taxpayer. Here’s more waste. Ted had to spend money to lobby the government to get the contract. So, he didn’t get all of that dollar out of the transaction. That’s money that could have been spent making a better product or used in some other constructive way. Economists call this deadweight loss. And it can be substantial.

 

Moreover, crony capitalism distorts the broader economy. In some industries—like healthcare, student loans, home mortgages, and aerospace—the government is one of the biggest purchasers of goods or services. So its politicized decisions can have wide-ranging and detrimental effects. An entire industry can become, in effect, a client of the government. When that happens its goal is not to build a better mousetrap, but to keep politicians happy. How much does crony capitalism cost society per year? It is hard to say precisely, but the number reaches into the tens of billions of dollars, maybe beyond.

Third, it tempts politicians to break the law. Once politicians feel free to spend the public’s money for their own political purposes, they are just a hop-skip-and-a-jump away from doing so to line their own pockets or pump up their campaign funds or both.

So what can we do? Our first task is to recognize that government must have limits. Of course, there has to be a national authority to set the parameters for society; that establishes the rules of the game and enforces them. But when we expect the government to promote an industry, tinker with some sector of the economy, help some important voter group, we create the groundwork for crony capitalism and all the bad things that come with it–favoritism, waste, theft, and other forms of corruption. 

America’s seventh President, Andrew Jackson, had a very useful perspective on this issue. “There are no necessary evils in government,” he said. “Its evils exist only in its abuses. If it would confine itself to equal protection, and, as Heaven does its rains, shower its favors alike on the high and the low, the rich and the poor, it would be an unqualified blessing.”

Jackson had it right. A limited government confined to equal protection can’t play favorites. Limited government. If getting rid of crony capitalism is the goal, it all starts there.

The Rise Of Crony Capitalism In The Obama White House

 
 
Image credit: 
Barbara Kelley

Economists have long documented that government corruption is higher in poor countries than in rich countries. The ten least corrupt countries have, on average, a GDP per capita of around $40,000. They include Singapore, Denmark New Zealand, and Switzerland. Meanwhile, the GDP per capita in the ten most corrupt countries—including Sudan, Turkmenistan, and Uzbekistan—hovers at around $5,000. Among the 177 countries evaluated for corruption, the United States is currently number 19 on the list prepared by the NGO Transparency International.

The primary form of corruption in these nations is crony capitalism. In poor countries, businesses cannot be started or maintained without the existence of a close relationship between entrepreneurs and government officials. There is often favoritism in the granting of building and other sorts of permits, government grants, special tax breaks, and other activities of the regulatory state.

Take the case of Vietnam, which ranks in the bottom third on the corruption index at 119. Crony capitalism is rampant there. As the Financial Times observed recently, “Vietnam has gone straight from collectivism to crony capitalism with not much in between.” The primary beneficiaries of crony capitalism in Vietnam are the Communist party and its officials. Crony capitalism in Vietnam takes place both on a wholesale level as well as a retail level, a fact that Americans should pay attention to.

Retail crony capitalism refers to individualized, generally non-systemic expressions of corruption such as awarding jobs or university admission to people based on connections rather than on merit. Wholesale crony capitalism refers to group-focused systemic expressions of corruption. A textbook example of wholesale crony capitalism in Vietnam is the practice of employing only party members and their family members and associates to government jobs or to jobs in state-owned enterprises. Children of supporters of the South Vietnamese regime are still shunned in hiring decisions and in university admissions.

As Le Hong Hiep, a professor at Vietnam National University has observed, because “maintaining the Party’s unchallenged rule remains its top priority, “it is almost impossible for the Party to fight corruption” because rooting out corruption means pursuing cases against party officials, which, in turn, would weaken the party.

We may think that corruption is a problem of poor nations, but there is a great deal of crony capitalism in the United States. Affirmative action is one form of wholesale corruption that is prominent in the United States. By definition, affirmative action involves tipping the scales in hiring or admissions decisions in favor of particular favored groups at the expense of others.

It no longer is possible to argue that affirmative action is defensible because the groups making the hiring or admissions decisions are not members of the groups benefitting from those decisions. This sometimes, though not always, is the case. Minority set-asides and other manifestations of affirmative action occur with even more frequency in municipalities in which the mayor and members of the city council belong to the group that is benefitting from the practice. As one pundit observed years ago with respect to the massive affirmative action programs administered by the city of Atlanta, Georgia, “Atlanta needs an affirmative-action program like the Vatican needs a program to protect its Catholic residents from religious persecution.”

A strong, independent judiciary is thought by scholars to be an antidote to both wholesale and retail crony capitalism. Evidence of this is somewhat mixed. The U.S. boasts a legitimately strong and independent judiciary, but crony capitalism certainly exists in this country, and appears to be on the rise. Subsidies to the sugar industry are an example. According to the Committee for Economic Development, a nonpartisan group of corporate executives, the federal sugar subsidy program costs U.S. consumers almost $4 billion per year. A Heritage Foundation study found that although sugar crops comprise a small percentage of the total value of U.S. crops, the sugar industry accounted disproportionately for one-third of all U.S. crop lobbying from 2002 to 2011. The Wall Street Journal reports that PACs affiliated with sugar companies have made more campaign donations than did lobbyists for all other U.S. crop interests combined in recent years.  

The Export-Import Bank is another poster child of crony capitalism in the U.S.  As one newspaper observed, Boeing, Caterpillar, General Electric are “corporate behemoths that feed at the bank’s trough.” Reason magazine reports that most of the Export-Import Bank’s U.S. activities benefit a few giant companies and that its international financing tends to go to state-run businesses like Mexico’s Pemex or Air Emirates of the United Arab Emirates.

Even so, the judiciary serves as an independent counter-weight to crony capitalism. However bad things may be now, they undoubtedly would be worse if the judiciary were under the dominion of the politicians. An example of the judiciary’s role in resisting wholesale crony capitalism came in a January Supreme Court case. At issue in Friedrichs v. California Teachers Association was the validity of laws that require all workers to pay unions for engaging in collective bargaining even when the workers object to the positions taken by those unions in the collective bargaining process.

A 1977 Supreme Court ruling permits public employees to be required to pay a “fair share” fee to reflect the benefits ostensibly received by them, along with all other workers, from collective bargaining. Twenty-three states have laws requiring workers to pay these fair share fees. The justification for this odd law is that collective action problems will cause workers who benefit from collective bargaining to opt-out of paying for it in the hopes of “free-riding” on the backs of their dues-paying colleagues. Back in the 1970s, it was feared that not forcing all workers to pay for collective bargaining would undermine the system of collective bargaining as well as the power of unions in the economy.

Friedrichs offers an opportunity to strike a blow at a particularly pernicious form of crony capitalism, public sector employee unions. These unions create an unholy alliance between politicians who support the unions, and the unions who buy the politicians with their members’ dues. Unlike in the private sector, where investors and entrepreneurs have an incentive to bargain with unions against above-market contracts, politicians are happy to make “concessions” to unions because these concessions do not come from the politicians own pockets: They come out of the pocket of taxpayers. This is why rich public sector union contracts are bankrupting states and municipalities. 

A line is crossed when public sector unions take workers’ money for causes that even the employees themselves oppose. As Justice Anthony Kennedy observed at the oral argument, “many teachers strongly, strongly disagree with the union position on teacher tenure, teacher pay, on merit pay, on merit promotion, on classroom size.” These are “matters of public concern.... The agency fees require that employees and teachers who disagree must nevertheless subsidize the unions on these very points.”

Wholesale crony capitalism is a particularly worrisome form of cronyism, not only because of its broad scope, but also because it ossifies existing power structures and political equilibria. Unions, particularly teachers’ unions, are steadfast supporters of leftist politicians, who, in turn, pay for that support with taxpayer dollars by protecting unionized teachers from having to worry about the quality of their performance on the job in the classroom.

Perhaps the strongest argument for striking down the so-called “fair share” statutes is found in the experience of California teacher Rebecca Friedrichs, who is the named plaintiff in the case currently before the Supreme Court. Her money, taken from her paychecks as required by the California fair share statute, is being used by her own union to fund a campaign that, according to the California Policy Center’s Union Watch, is “portraying Friedrichs and her peers as allies of evil corporations and white supremacists.” Why? Because of their efforts to take away from unions the power to take mandatory fees from non-members.

A pernicious facet of wholesale crony capitalism is its susceptibility to being marketed as morally benign. Crony capitalists justify favoring certain groups, whether the Communist party in Vietnam, historically under-represented U.S. minority groups, or labor unions on the grounds that these groups are deserving of favoritism. The problem with that argument is that crony capitalism is deeply damaging to the economies that allow ordinary individuals to thrive. It has pernicious effects on incentives to invest in education and entrepreneurial activity because, under crony capitalism, connections lead to advancement, not educational achievement or entrepreneurial creativity. This is why the stakes are so high in Friedrichs.

How Silicon Valley's Crony Capitalists Shamelessly Dupe Progressive Planners

P.T. Barnum may have said it best, but when it comes to hornswoggling suckers, few compare to the fast-talking peddlers of utopian technologies who have become the new kings of crony capitalism. Feasting on billions in federal grants, subsidies, tax breaks, loans, and mandates, there is hardly a single uneconomic, unsustainable, cure worse than the disease, violates-the-second-law-of-thermodynamics idea left out there that hasn’t been used to separate progressives from ... other people’s money.

What makes it so easy to cheat these people?

By now we’ve all gotten Solyndra fatigue from the endless parade of articles about “green” companies whose main claim to fame is sucking up greenbacks. All of them earned the love of progressive pundits, and their places at the public trough, by promising to reduce the nation’s carbon footprint while creating high paying jobs. None of them have done so, yet how many failures will it take before progressives wake up to the fact that they are being sold a bill of goods?

Meanwhile shale gas, the single most substantive energy industry breakthrough that has actually delivered on both of the above promises—at scale, financed privately, paying rather than consuming taxes, turning once-struggling farmers into millionaires—is met with fear and loathing by these same shlamazels, eager to fall prey to the next fast-talking charlatan who promises to magically suck carbon dioxide out of the air and turn it into ethanol. Yes, of course, improper fracking raises ground water contamination concerns that must be addressed. But there is no arguing that substituting gas for coal has reduced the nation’s carbon footprint while creating an explosion of high-paying jobs.

Judging a scheme by its stated intentions may be the proven path to legislation, but it is a boneheaded way to make technology “investments” if you actually expect the technology to provide the promised benefits. At least the venture capital industry has finally lost its appetite for cleantech deals, giving up on plans to unload their portfolios full of unworkable turkeys onto the unsuspecting public via the time-honored means of the Initial Public Offering (IPO). Ever since Facebook’s bankers and insiders sucked all the juice from the social networks’ vaunted IPO, leaving retail investors to gnaw on dry rinds, the hoped-for returns from alternative energy ventures has turned into a fading mirage. Now, with few corporate acquirers willing to pick up money-losing cleantech deals — other than perhaps some bottom-feeding Chinese state-backed firms trying to corner “strategic” markets (more power to them if they want to sell us stuff for less than it costs them to make it) — all we’re left with is a money-pit of zombie companies waiting to be put out of their misery.

And yet against this harsh reality, there it was in the recent Fiscal Cliff deal — more tax breaks for windmills, electric cars, biodiesel, algae (algae?!), and of course 14 different flavors of ethanol. How in the world do you get vocal, committed progressives who genuinely care about world hunger to buy into the idea that we should turn food into fuel on a global scale? The same way you get the Sierra Club to avert its eyes when windmills slaughter birds. Call in a crony capitalist promising green energy utopia!

Right on cue, President Obama’s pick for Treasury Secretary, Jack Lew — former lawyer for Van Ness Feldman, a firm that brags about sucking $3 Billion of federal financial and policy support out of Washington for cleantech clients — bounds onto the stage. If approved it will be Jack’s turn to dish out Treasury Department grants to well-connected solar energy interests that have totaled $13 billion so far. Do you think his former clients are rooting for him?

And what is it about trains that infatuates progressives to the point that they’re eager to sell their children — and yours — into indentured servitude so bankrupt governments can finance everything from streetcars to light rail to bullet trains, none of which can possibly earn enough money to cover their operating expenses, much less repay the capital? One would think progressives who studied economic history would be more skeptical. After all, some of the worst miscreants in the annals of crony capitalism — abusers of the public purse, corrupters of entire legislatures, defrauders of widows and orphans, destabilizers of stock markets — came from the train business.

 

Yet today, after investing half a trillion tax dollars over the past half-century to build an Interstate Highway System that ranks as the largest and most successful public works project ever conceived, progressives go weak at the knees when some huckster who couldn’t raise two cents from private investors whispers “train” in their ears. Meanwhile, unsubsidized inter-city bus entrepreneurs like Megabus, Bolt and Fung Wah are getting people out of their cars for a fraction of what it costs fat cats to ride the money-losing Acela.

And what do taxpayers get for all this malinvestment? Not much, other than to see a few eco-warriors line their pockets, skipping town before the bills come due.

2013-01-10-20130109_AlGoreOilMan.jpg
courtesy TobyToons

Speaking of which, Al Gore recently became richer than Mitt Romney not by inventing a new product or service that vastly reduces our carbon footprint, not by backing a slew of successful startups that did the same, but by selling the eyeballs of his fellow Americans to Arab oil interests. The derisive laughter coming from right wing fever swamps over the Al Jazeera sellout is deafening, as the chagrined mainstream media serves up nothing but crickets. Talk about crony capitalists who fake left and go right. Big Al had a net worth of perhaps $2 million when he left the White House and now stands to make $100 million in one transaction. And not a cleantech deal, mind you.

After signing up with storied venture capital firm Kleiner Perkins Caufield & Byers to be the chief rainmaker for their strategy to get rich by investing in companies that combat global warming, the former veep led them into a series of disastrous “alternative energy” investments that has made KP a laughing stock. Yet through the magic of VC management fees, our Nobel Prize-winning inventor of the Internet came out smelling like a rose, despite the fact that the pension funds and university endowments that bought into his half-baked schemes had their heads handed to them. You can’t make this stuff up.

So ask yourselves, saviors of the planet, why do you fall so easily, time and again, for crony capitalists’ too-good-to-be-true schemes designed to feast on public dollars? Wouldn’t a wee bit of skepticism be in order when setting public policy? Don’t you want this technology to actually work? For all our sakes, when doing your due diligence can you at least pretend that the money being flushed down a rathole is your own?

Cleantech Crony Capitalists Bring Shame to My Industry

By Bill Frezza

It's hard enough being a member of a demonized class without watching your colleagues go rogue. As a venture capitalist, I have never been comfortable being lumped in with leveraged buyout shops, hedge fund moguls, and, God forbid, investment bankers.

Although we take crazy risks in search of outsized rewards, we rarely use debt. And while our exuberance fueled bubbles that sometimes popped, deflating overvalued stock markets, we never crashed the economy. We were proud that we kept our distance from Washington. And when our businesses failed, which happens a lot, we never took the taxpayers down with us.

Until now.

A new breed of venture capitalist has blossomed during the Obama administration, like mushrooms after a rainstorm. I call them venture porkulists.

 

 

 

The scale at which these people have feasted on your money as they hosed it down rat holes like Solyndra, Beacon Power, Ener1, and others is unprecedented. The leverage they've obtained through political connections - risking pennies against your tax dollars - to ramp up manufacturing of immature and economically unsustainable technologies boggles the mind.

The wreckage that awaits as this cycle of malinvestment runs its course will distort the economy for years, not only because of the money vaporized but because public policy aggressively tilted the playing field, harming real, value-creating businesses. Reversing these policies will take time, during which even more damage will be done. And it's all in the name of saving the world from the dire predictions of climate models increasingly shown to be suspect.

I used to admire a guy named John Doerr, a rock star in our business. Compaq, Netscape, Symantec, Sun Microsystems - all of these and more were financed by John and his colleagues at Kleiner Perkins Caufield & Byers. I remember when John started to change, writing about it back in 1997 after he founded a liberal Silicon Valley lobbying outfit called TechNet.

TechNet's mission was to attract federal government involvement in technology businesses that had previously thrived without Washington's "help." Along with it came a cycle of campaign donations, policy initiatives, and regulatory arbitrage that continues to this day.

John's evolution from venture capitalist to venture porkulist wasn't complete until he drank Al Gore's apocalypse Kool-Aid. You must spend eighteen minutes watching a speech John gave at the TED conference in 2007. He starts with a warning - "I'm really scared, I don't think we're going to make it" - and wraps up in tears crying for the future of his children lest they drown when the Greenland ice cover melts into the sea.

It was a masterful performance. In between he lays out his case for a massive government takeover of the energy business, without which he claims we will face "irreversible and catastrophic consequences."

The cleantech/renewable energy/green investment boom was on. Al Gore became a partner at Kleiner Perkins on his way to becoming the first carbon billionaire, as The New York Times put it, "profiteering from government policies he supports that would direct billions of dollars to the business ventures he has invested in."

The companies spawned during this frenzy managed to pry some money out of George W. Bush's administration. But the spigots didn't really start gushing until after Obama was inaugurated, his presidential campaign generously financed by the cleantech crowd, his administration peppered with their people.

Kleiner Perkins is not alone. Vantage Point Venture Partners is the venture porkulist poster boy of the week. The Washington Post reports that the Obama administration funneled $2.4 billion in public funding to clean-energy companies financed by Vantage Point after one of the firm's partners joined the Obama Energy Department.

Many other venture firms are feeding at this trough, but I won't name names as some of them are still my friends. I'm sure you'll read about them in the press when the government-backed turkeys in which they invested go down-along with your money.

John Doerr would undoubtedly justify all this because, as he says in his TED speech, "We have a real climate crisis. There is a time when panic is the appropriate response. That time has come."

I have two answers to that. First, if we're going to make a mad rush into new technologies, can we at least choose some that are sustainable? Electric cars, batteries, windmills, biofuels, solar - none of these come close to making economic sense on the scale at which they are being pursued. Many, like ethanol, don't even make sense for reducing carbon emissions. I guess that's what happens when your investment strategy is driven by pork and panic.

Second, what if the computer models are wrong? What if instead of catastrophic, hockey stick-shaped, irreversible, 20-foot-ocean-rise global warming we get the same mild temperature increases we've experienced over the last century? At least until a decade ago, when satellite data show that the warming stopped, a fact that computer models predicting catastrophe still cannot explain.

As class warriors paint a bull's-eye on venture capitalists looking to redistribute our returns, the shady dealings of venture porkulists is not helping. It would be nice, guys, if you could stay out of the headlines for a while. As Obama "doubles down" on the Niagara of money he is piping our way, perhaps a few of you can even stand up and say, "No thanks, I think I've had enough."

 

 

Bill Frezza is a fellow at the Competitive Enterprise Institute, and a Boston-based venture capitalist

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