Writing at Bloomberg, Yale law professor Stephen Carter gets this exactly right about why the U.S. Energy Department makes for a lousy venture capitalist:
[T]he venture capitalist is disciplined in his lending by two forces that government does not face. First, if the venture capitalist makes too many bad bets, he will lose his investors. Government loan guarantee programs, on the other hand, can be refunded by Congress as often as politically convenient, and have been known to grow larger after making bad bets.
Second, venture capitalists face potential liability for breach of fiduciary duty if they fail in the duty of care and loyalty imposed by law on those private individuals who handle other people’s money. Government officials and departments, with minor exceptions, are shielded from lawsuits by the doctrine of sovereign immunity.
There is no way to subject a federal loan guarantee program to the discipline of the markets, and that might be reason enough for the government to stay out of the business of picking winners and losers.
One would have thought the Solyndra debacle would have made as much clear. Nope: Another $1 billion in green-energy loan guarantees were pushed out the door this week.
But have no fear: Only $737 million is going to a company with reported ties to Nancy Pelosi and…wait for it…Solyndra.
– By Kyle Wingfield