He poached the Ex-Im Bank’s head of monitoring and hired a GE Capital executive to run his credit division

Still, the department’s portfolio is thriving, with just a 2 percent failure rate so far. Silver built the world’s largest clean-energy project finance team on the department’s fourth floor, hiring senior talent (suddenly available after the Wall Street meltdown) from Goldman Sachs, JPMorgan and other megabanks. His team created a standardized, automated, exhaustive application process with multiple independent and internal reviews of every deal by financial experts as well as technical experts from the national laboratories. That’s in addition to oversight by OMB, whose risk-averse analysts seemed to see every deal as Solyndra-in-waiting, as well as Treasury, which often thought deals weren’t risky enough. White House aides killed one loan to a fuel-cell firm because they had seen it profiled on 60 Minutes and assumed it didn’t need help.

In other words, this was no government candy store. Every borrower had to put skin in the game, and every loan was negotiated for months. Silver’s team rejected applications from Range Fuels, which later failed after receiving a big USDA biorefinery loan; A123 Systems, a battery firm that would collapse despite a major grant as part of the 2009 economic stimulus package; and KiOR, another doomed biofuels venture financed by Republican Governor Haley Barbour’s administration in Mississippi. “We worked like dogs to make sure our deals didn’t blow up,” Silver says.

Some might blow up anyway. But credit programs tend to be judged less by their social goals than by their success recouping the government’s money, in an arena where public tolerance of failures is practically zero. Venture capitalists expect multiple strikeouts along with their occasional home runs, but one more Solyndra could poison the entire concept of government risk-taking.

Over the past few years, the Obama administration has improved the government’s play. But it hasn’t pushed any larger credit reforms. One idea that floated around Treasury was creating a single government entity to manage credit-something Canada, France, Israel and other countries have implemented in varying degrees-or at least consolidating back-office credit functions that seem so bizarrely misplaced at agencies like MarAd. But no one relished the epic turf battles with congressional committees.

Today, the administration knows much more than it did about the confusing, sprawling, often confounding bank of America. But politics built the bank, and politics are still protecting it. Some officials I interviewed were candid about their reluctance to make a public fuss about problems with federal credit programs, because they don’t want to give new ammunition to anti-government Republicans who have already taken aim at the energy loans and the Ex-Im Bank. As one senior official puts it, would-be reformers of risky student loans and low-income mortgages need to be careful what they wish for.

“We’re not sticking our heads in the sand, but if you go out and talk about the problems, it just gets used against you,” the official says. “It would become fodder to roll back programs that help people. So not much happens.”

These unregulated and virtually unsupervised federal credit programs are now the fastest-growing chunk of the United States government, ballooning over the past decade from about $1.3 trillion in outstanding loans to nearly $3.2 trillion today. But even after the crisis, as a Washington austerity push has restrained direct spending, many credit programs have kept expanding, in part because they help politicians dole out money without looking like they’re spending. In 2012, Congress boosted funding for a transportation loan program called TIFIA eightfold, while launching a similar initiative for water projects called WIFIA. There’s now talk of a new credit program for public buildings-naturally, BIFIA.

The Agriculture Department, in addition to those absurdly risky loans for biorefineries and broadband, makes absurdly safe loans to rural electric cooperatives and telecoms, so safe they’re sometimes described internally as “profit centers.” Those New Deal-era credit programs made sense before rural America had electricity and phone lines, but now they’re essentially boondoggles that subsidize rural ratepayers-not to mention suburbanites around Waco, Atlanta and Washington, D.C., thanks to a “once rural, always rural” loophole. Meanwhile, a branch of the federally chartered and heavily subsidized Farm Credit System, created a century ago to extend affordable financing to small-scale agriculture, recently lent Verizon $725 million to buy a European cellphone company. Private lenders complain that Farm Credit takes https://yourloansllc.com/personal-loans-ga/ advantage of its privileged status to cherry-pick the most creditworthy borrowers with remotely plausible links to rural America, although its loans to help a billionaire’s ex-wife launch a winery in Virginia and an American Idol producer build an equestrian center in South Dakota have gone bust, too.

But federal credit skeptics still see two big problems. The first is that government expectations of future loan costs can be-and sometimes have been-wildly wrong.

Government loans don’t guarantee success

The problem, Howes says, is that the administration has forecast ludicrously tepid demand for its pay-as-you-earn relief and eventual forgiveness. It’s true there hasn’t been a swarm of early adopters, partly because the Department of Education-which, unlike a private bank, does not even collect income data from its borrowers-has had problems getting the word out to potential beneficiaries. But it has vowed to fix those problems. And borrowers tend to enjoy relief and forgiveness. “There’s way too much wishful thinking,” Howes says. “Even if the default rate was zero, the government could lose barrels of money forgiving these loans.”

That’s largely because the financial crisis sparked explosive growth of student loans and Federal Housing Administration mortgage guarantees, which together compose two-thirds of the bank of America

Obama aides defend the current approach, arguing that both parties have used it since the 1990 reforms, that the Treasury’s borrowing costs really are ultralow, that government doesn’t need to account for market risks it doesn’t face. They dismiss recent Republican efforts to mandate fair-value accounting-enshrined in a “transparency bill” the House passed in 2013-as thinly disguised efforts to shrink programs for families in need by making them look expensive. Still, it’s worth noting that the head of Obama’s Council of Economic Advisers, Jason Furman, once wrote an influential paper for the liberal Center on Budget and Policy Priorities that used fair-value accounting to attack Social Security privatization; the center has disavowed the politically inconvenient section of the paper, and Furman now says his budget analysis was wrong. Then again, Republicans never showed much interest in transparent accounting when they ran Washington during the Bush years.

The Solyndra loan, derided by Republican campaign ads in 2012 as a crazy handout that reflected Obama-era “crony capitalism,” was nothing of the sort. The Bush administration originally selected Solyndra for the first federal clean-energy loan over 142 other applicants. It was an exciting solar startup that had raised $1 billion from savvy private investors like Richard Branson and the Walton family, and a slew of probes have failed to turn up any evidence of wrongdoing on its Energy Department loan. The firm’s downfall was a free fall in solar prices, which sparked a solar buying frenzy but destroyed Solyndra’s sell-high business model. Such is life in a free-enterprise economy.