publicly that the bank should be part of the deal.l. es.t would hold the bill of fort one vote that takes about 15 minutes. but in addition to that, if have everybody left the house bill so much that is what we are going to vote on. o we heard the expression felch replete we will go sultry and go to the ipo if everybody loves it so much and get it to the president's desk just as fast as we can. ..

[inaudible conversations] >> today zero provide is not an independent snapshot on the loan programs within the department of energy that were created in the 2005 in 2007 and she bills. mr. allison has had considerable expertise in the government and private sector has produced a useful review of how the programs are being administered includes and suggestions on how administration can be improved. we appreciate his highness to come here and share his findings with us. as members of the committee now, the issues surrounding the u.s. ability to compete in the

international raise to develop and deploy clean energy technology has been a concern to many of us here on the committee for many years. the loan programs in addition to rpe and other asked for is to support domestic deployment of next-generation type allergies passed in previous energy bills are part of a concerted effort to ensure the u.s. does not fall behind in addressing the critical challenges of energy, economic and climate security posed by our current reliance on fossil fuels, power generation and transportation. these programs in particular recognize and it is not enough to house the end of the innovative research that our national labs and universities can back. there also needs to be a pathway to turning those ideas and inventions into profitable companies. i believe it is important to

keep in mind -- keep this goal in mind when they look at these programs today what these programs need to be administered with high standards of professionalism and integrity, i believe mr. allison's report indicates that they are. it is also necessary to recognize that there is uncertainty about what technologies will eventually win today. if we want to be sure taxpayers lose no money, then it is easy enough to just eliminate government support for american efforts to compete in developing and deploying these new technologies. unfortunately car efforts to support domestic players in this race are the loan guarantee program have been caught up with many election-year issues. my impression is that overall the program is doing what it is designed to do. that is to take on risk that private investors are not willing to take on. not that the private sector has

not taken on risk. every investment the government has made has followed large risky investments by the year. private markers by selecting the winners. at least the companies they believe will be winners and the government is stepping in to help these entrepreneurs achieve the scale necessary to give them a chance to compete in the global stage. i'm fortunate that the u.s. remains one of the greatest sources of innovation in the world today, it is not clear that we are going to reap the benefits of that innovation or even retain the advantage we have been that innovation. and the ever changing and highly competitive environment of high-tech knowledge she and the research and development necessarily follows the manufacturing. and before long both technologies are being developed overseas as well as the manufacturing occurring

overseas. so we've seen this scenario play out in such industries such as televisions and consumer electronics in my view it would be tragic if it happened again in the technology areas that relate to our energy future. i believe that is the important context for conversation today. both of our witnesses today have important insights on how we can best achieve the goal of advancing clean energy in the united states in a way that gives the most value to the taxpayers. it will never be a risk-free enterprise for a few things and benefit our and i look forward to their thoughts on how we can best balance those risks with potential benefits of fully developing these technologies here at home. i call on senator murkowski for her comments before we hear from her first witness. >> thank you, mr. chairman.

i appreciate you associate i think is a very important hearing that is vital for committee to be in regular and intensive oversight over the programs and agencies under our jurisdiction, especially when we see problems that may be in for serious problems begin to surface. i understand secretary chu will join us later this morning. i think it will be helpful to hear from him directly about what is going on in this area and mr. allison, tu, thank you family for being this morning, but take on the audit of the departmental program. this is one of the more complicated topics that i think are committee will be tackling. these loan related authorities in the energy department's use stand different administrations, different congresses and include three separate programs, each with their own unique attributes. i want to say that i found independent audit to be quite useful. the kiss at it creates risk

profiles rather than programmatic origin and reporting shortcomings and reveals concentration risk in the current portfolio. the audit further highlights the portfolio scientist and federal mandates to force the creation of markets for certain projects and products and makes a valuable recommendation that we in the secretary need to consider. if there is one shortcoming to the audit, it is that it does not delve deeply into the history of these programs, which i think is essential to understanding how we've gotten into some of the difficulties we are now facing. again, we're talking about three different programs. the first section 1703 from the 05 energy bill. you have the 2007 energy bill to 18:00 p.m. and section 1705 from the 2009 stimulus. and while there's certain similarities between the three, there's some very important distinctions and differences between the three programs.

i will just take a quick moment, mr. chairman to review them. section 1703 was created by republican congressman relied heavily upon credit subsidy costing both paid by the applicants amid any project using new or significantly improve technologies eligible. unfortunate is not closed on a single loan guarantee. and section 1705, which was created by democratic congress company by $6 billion to pay for applicants credit subsidy costs are nearly limited eligibility to renewable and transmission projects. this program has closed on 27 loan guarantees for its approximately 16 billion. then you had to eat tbm designed to offer loans to automakers appropriated to cost the chess via phones have been issued. we've heard concerns raised around this table here about that. the last one was in march of

2011 and the other when prior was april of 2010. many remaining applicants are withdrawing. they express clear frustration over dealey's apparent inability to either make an up or down decision on this. within half both atbm's authority remains unused and is virtually diamond. but the 1705 in the atbm programs are targeted in compliance with underlying statutes and sometimes poor investment decisions and everyone here is aware of that fact. some may think we have called for this hearing this morning to pilon, to add to those criticisms. but i do not want to take my time today to add to the narrative of the scandal and the controversy that the department is already confronting. instead i would just offer this hard questions need to be asked and to be responded in full.

this program should be examined in a think they should be improved. that is an appropriate role for congress and more specifically this committee. we did not expect every single project of the department supported to be a roaring success, but we also didn't expect to see an accumulation of failure so quickly. there are clearly problems that need to be sorted out and work through. your audit, mr. allison is a good first step and i think this hearing moves us in the right direction. do we fund programs can serve a valuable purpose. i said that repeatedly, but right now we need to know if the loans and loan guarantees that have been issued through them are as effective as we had all hoped that they would be. we select have decisions to make going forward and i hope we learned enough this morning to make sure those decisions are fully informed.

i thank you, mr. allison and a thank you, mr. chairman. >> thank you. mr. herb allison is the author of the report of the independent consulting review with respect to the department of energy, loan and loan guarantee portfolio. we appreciate your good work on that report and we look forward to your describing it to us in making any other context would like before we ask questions. thank you. >> thank you in a chairman bingaman, ranking member murkowski members of the committee for asked me to today. last november is appointed by the chief of staff at the white house to study the department of energy's portfolio of loans and guarantees to clean energy projects. i was asked to perform three tasks. first evaluate the current status of the portfolio. second proposed this to strength in management and oversight of the program and third, recommend a system to provide early warning of problems that might harm the portfolio's value. the scope of my assignment does

not include investigating past decisions and actions because several independent investigations are already underway. given a tight 60 day deadline, my team and i relied on readily available information. the department of energy are dearly rapidly provided documents and arranged interviews that we requested. we conducted a review and developed the recommendations independently of the white house and the dearly. we chose to mathis for estimating future losses in the portfolio. the first method is the one that the d.o.e. and sco's to comply with a federal credit format of 1990. our second method called fair market value or fmv is used in the capital markets to estimate a discount from a loans face value that investors would demand so they could receive an acceptable return if they purchased the loan. the thick route and fmv methods

have different purposes that they are outputs are not directly comparable. the government not said estimates the credit loss on the loans. fmv, the market method estimates a broader set of cost and provides information useful in managing the portfolio. but fmv does not estimate the cost of dob that holds the portfolio until loans are paid off. using the method we estimated that the expect good credit loss on the portfolio will be $2.7 billion, about 7.7 less than the dealey's recent estimate of $2.9 billion. using the fmv method we calculate investors purchasing loans would demand a discount of $5 billion to $6.8 from face value. imported money, neither, or any other financial model can reliably predict the eventual loss of the d.o.e. portfolio for several reasons. first, these loans will not

mature for up to 30 years, well beyond the limits forecasted. second, most are still being built and some ally and unproven technologies. their performance will be known for some years. third, as projects prove themselves, their risks than expected losses will diminish. fourth, the estimates of lost assume that all products will be fully funded and that d.o.e. will be a passive bystander unable to influence the portfolio's risk over time. but so far, dob has funded only a third of its total commitments. kiwis loan agreements allow it to stop further funding and demand our credit protection of projects don't need target. for the riskier projects haven't received any funding and others have been founded only partially. if those projects don't meet conditions in their loan agreements, d.o.e. could cut off

war funding from the forecasted last to decline substantially. for obvious reasons our focus should be last on this unreliable forecasts of losses and more in assuring effective management of the portfolio going forward. dear we must be an active manager continuously monitoring the projects, spotting risk of limiting tax years exposure to loss. the report recommends ways to strengthen management and independent oversight of the program and provide early warning of potential problems. in brief, recommendations include first assuring adequate funding and staffing of the program. second, protecting taxpayers by strengthening dealey's position as a creditor whenever possible and having a clear policy and funding projects that are not meeting targets. third, determining whether to hold herself alone server time. fourth, strengthening internal

oversight by forming a risk management department in combining several committees and d.o.e. but now oversee the program. fits establishing a high-level advisory board to consult with the secretary of energy on policy matters. sixth, create an early warning system covering market conditions, performance while projects and loves an internal operation of the program. and lastly improving public reporting about the program. thank you and i'll be pleased to answer your questions. >> thank you very much. maybe i could ask you to elaborate sound. your report indicates that changes were made and the program to better control risk post before the program review for the review. and also during the time that you were doing your review. and i guess i would be interested in any comments you could give us on the effect that

either personnel or policy changes have made and whether he think this midcourse corrections have been useful or adequate. >> thank you, chairman. first of all, in terms of structuring the loans, there have been improvements through the structure of the loans, beginning in the middle of 2010. the department's agreements provided for more staging of funding and also provided that the sponsors of these projects should fund the initial stage with equity before the department of energy would be providing loan months of the department had the opportunity to view progress on these projects before the government starts putting its own money to work. we think that the terms and

conditions of these loans by and large since the middle of 2010 and in most cases conform closely to commercial practice in the industry. in terms of the internal management, there has been a gradual evolution of the management and oversight of this program within the department of energy. we see that, for instance, several committees have been formed to oversee and make recommendations through the secretary about committing additional loan funds. however, in our view, there is still room for improvement and that is why we have made these recommendations. first of all, to fully staff the loan project office with permanent professionals. there is a need for expertise, project finance, many positions are currently financed by consultants who are temporary

employees. we believe that going forward there needs to be consolidated internal oversight and very importantly the formation of a risk management department. currently the office director oversees the credit department, for example, the compliance department. we believe those should be separated out and there have to be an independent view within the department of energy about the risk that is being undertaken as loans are provided and also about the ongoing dynamic changes in risk within these loans. an independent oversight would be another check and balance. we think that position should have the ability to call for a halt any funding until the secretary proves that there is a different opinion between the

risk management department and the loan project office as to whether the loan should go forward. >> as they think you are aware, senator murkowski and i and others on the committee have proposed a bill called the clean energy deployment administration to establish an independent agency outside the department of energy that would take over responsibility for administering loans. have you had a chance to look at that? do you think the general thrust of that legislation would make sense as an alternative to continue housing of the effect dvd in the department of energy aquatic >> chairman bingaman, i have reviewed the legislation. i think all can agree there is a need for professional oversight and the use of this product this is an managing and overseeing this portfolio. i think that there are several

questions that i might pose. these are more in relation to policy. again, by brief u.s. to a fact-based analysis. but in answer to your question, i think that one issue is if there is an independent agency within the department of energy, who is responsible for policy implementation of this program? is that the newsfeed that agency or is it the secretary? my understanding is this agency would be completely independent from a decision-making input from the secretary. so when the law should provide who is accountable. secondly, should there be a subset provision in this bill? the purpose of these clean energy loans is to provide funding for projects until they reach commercial maturity and funding is available in ample

amounts in the public markets. unlike many other long programs administered by the government, which have early indefinite features like student loans or fha and so forth, this is intended i believe to be a program that would run only a certain number of years. so perhaps there needs to be some type of sunset provision. >> to anything else to add? go ahead if you do. >> as i read the bill, it would allow this agency to be able to borrow to fund its operations. this could mean that this agency would have not only equity, perhaps $10 million, but indefinite lending capability. is there a possibility that it might start to grow in size and began to crowd out private set

of financing? that is one potential risk. could it become an independent force in and of itself? so i think that these types of issues need to be carefully the debt before the decision would be made to go ahead. >> thank you very much. senator murkowski. >> thank you, mr. chairman. mr. allison, when we created the loan guarantee program, there were a number of terms and conditions that were inserted at implementation. and i want to ask you three questions i hope pretty brief. one condition in the program is that there be a reasonable prospect ascertainment. in your opinion, what is a reasonable prospect of retaining? is an 80% chance that it's going to be repaid? 70%, higher, lower?

what is reasonable? >> senator, that is an excellent question and we actually look at the history of that term in legislation and it goes back quite a long way. but nowhere could we find a definition of reasonable prospect. >> so how would you define aquatic >> i think that is precisely the issue. how does one define it? i was a reasonable prospect would probably mean more than a 50% probability. but others might define it as a 90% probability. and without amount of vagueness, there's room for a great deal of controversy and second-guessing about the program. so i respectfully recommend there be greater clarity to the policy goal around financial recovery. >> let me ask you another one where into a situation where there was vagueness. another in other requirement was the obligation is not subordinate to other financing.

i read that and it's like okay, there is no subordination there. but apparently there was vagueness fair. do you think that in that situation this particular condition of the authorizing statute was fake anyway? >> yes. not being an attorney let me see and in reading it i think that it is quite clear to me that at the point of origination and there should not be subordination. the question is later on if a project runs into trouble or loan runs into trouble, does the law allows that in order to preserve taxpayer assets that the d.o.e. has the ability to subordinate? and commercial is, it is common that were alone gets in trouble, in order to attract financing for the project can proceed, that under subordinate and have a better chance of recovery. if the object of his recovery

taxpayers, i would respectfully submit a couple techniques widely used in the private sector that are missing and are not available or at least endowed to the d.o.e. and one is to be all to subordinate because it leads to look get something back on the investment perhaps msi guinness to be able to contribute equity or to convert to equity. and in this case, it looks like that is ruled out. i think if i may speak more broadly about this, these laws can find the type of financing government can make quite a bit. and there's virtually no website for taxpayers that these projects succeed. they're strictly data. there is one case where the government did take -- it did take options. apparently the government can take equity interest as a condition for making a loud, but

it cannot make an outright equity contribution. i think for early stages of investments come in may be suitable in some cases for the government to contribute equity to prevent a control issue from arising with the government controls the project to make the nonvoting from a convertible or something like that. someone brought observation would be going forward. the legislation like this might be a wider variety of options. there may be more consideration to recovery in gains for taxpayers. a few projects were to pay off a lot might help to pay for any losses in the portfolio and other projects. >> me ask you one more and this is a requirement to quote, provide an amount sufficient to carry out the project. it's got to be pretty difficult to determine the overall cost of the project and whether or not available funds then will be there were sufficient to cover

the amount before we've issued this loan guarantee. how we finance that went? >> well, as most of the cost is going to take placed in the construction phase and that saves the loan agreements provide there must be detailed budgets, there must be independent engineering analyses as progress goes along. as i mentioned before, and various state's a certain bench racks and milestones must be met before funds revamps. >> is that happening, though click >> so it is easier to estimate the cost. there still may be overrun and most of these laws provide for some cushion in the case of overruns built-in. there is to our understanding of

frequent reviews of progress in all of these projects. what is the unknowable is once these projects are operating, especially those without an agreement, which is pretty much guaranteed source of revenue for the entire project, the capacity going forward. in the case of the manufacturing ventures they have no agreement. they have to sell how well they will succeed in a dynamic highly competitive market, for instance for electric cars. that is open to question. that is why we divided up the portfolio the way we did into utility, power purchase agreement type financing to the nonutility loans, including manufacturing of electrical components or cars, for example. and then a nissan which is a large component of the whole portfolio and great credit so we

treated them differently. those are easier to analyze. so much of the risk i would say the portfolio is on these nonutility manufacturing companies. >> senator stabenow. >> thank you, mr. chairman. and mr. allison, thank you so much for your analysis. it's very helpful to us. as someone who was deeply involved in offering the advanced technology vehicle manufacturing program for section 136 working with our chairman, at the time when we put that into the energy bill, there were a number of things happening in terms of the credit market, but also we were in the legislation, the energy bill in 2007 by raising fuel efficiency standards. in encouraging more and smaller fuel-efficient vehicles and as extremely concert at the time

they would go overseas if we did not in some ways feel our plan appears that is how it came up with this program. in fact, it has done what we wanted it to do, at least at the beginning. it is stuck at the moment here, but when we look at ford motor company retooling their assembly plant city in 1800 jobs, they are bringing jobs back from mexico navigated to that operation. as art number of other operations. so first i witnessed a statement, mr. chairman, when we look at global economy where every other kind she wants to do manufacturing, advanced manufacturing as sedate good middle-class jobs, they are all providing support in some way for fans to, tax incentives and someone at least as it relates

to the apv program, that is very much with the goal of fact is is to make sure we're providing this support to keep jobs in america. what would you recommend to make this retooling program marked the event this point click >> first of all, i would point out that these programs are intended to encourage risk-taking. that is the whole point really. so having risk and the portfolio ascenders damnable. i think it is important going forward is to make sure that this portfolio is well managed by professionals that there is independent risk oversight of this portfolio, that there's ample public reporting on each of these projects and how they

are doing so that the public and the congress is kept well informed. and while these programs are being managed, again there is some room for improvement and i think that with the recommendations that we are putting forward if those are adopted, i think this can be fares actively managed going forward. >> speaking more about this because i know some of us are concerned and there's been criticism related to the amount of risk at their apartment has taken on the loans or loan guarantees. i found it interesting that your reports suggest that some of the risk this is needed with one has actually gone down in particularly again with the retooling, the manufacturing loans and in particular you cut that is the risk associated with the ford retooling them and nissan have decreased by 95%. now i would suggest it was in part because companies like ford or making vehicles that

consumers are buying. it's doing well. it's been a real success story. i wonder if you could talk a little bit more about other reasons for changes in risk assessment that you sign your report. >> well, first of all, some of these projects have progress. and ford is the best example. during the height of the crisis all the automobile companies, even including four did need a bailout were also suffering during that time and there is a remarkable recovery and that is why they doubt that the government now holds from ford is rated investment grade. and that has had a major effect on the overall race composition of this portfolio. and so, i think that i've projects, as imaged by testimony, as they progress, as long as they are progressing according to plan, the risk in

that project decline. the major component of risk in these projects is during the construction phase, especially for the utility related projects because once they are completed, they will have a binding long-term contract with the investment-grade utility to purchase all of their production. and in several years the risk in this portfolio should be demonstrably improved if all goes according to plan. >> thank you very much. >> senator coats. >> thank you, mr. chairman. mr. allison, 20 thank you for your work. i thought it was very important to have someone take a look at the situation. i guess my question goes back to the more fundamental question of what the role government should be in something like this. we have some celebrated failures

and that sours the public and use of taxpayer money than they read about these failures and we talk about estimates of several billions of dollars of taxpayer money and i guess my question goes to you, what is your take on the question of the government limiting its investments into basic research on letting the private market take more of the risk in terms of the commercialization of various products and new innovations? have we learned some lessons from our effort to attract money to specific industries and specific companies? there's always the question of whether there's political influence in the decision-making process. i mean, these allegations. i'm not going to them, but allegations on loans or inventions from policymakers at the white house that were political directives coming down in terms of certain industries and so forth and so on. and now we are talking about better management of the process

that is the basic process broken to start, the fatal flight to start with? could you just give me your thoughts and comments. >> senator, thanks for the question. that's very important i'm a big believer in the capital markets having spent most of my years of my professional career in the capital markets. i think if we look back in history here and ensure you are well aware of this in the energy field and many of their field like medicine, et cetera transportation, the federal government has laid an important role in getting projects off the ground to the point where they could stand on their own. if you look at the space program now, we are starting to see commercial watch companies coming into effect and operation. but the government had to fund

the initial stage. in the same most forms of energy. nuclear energy is a great form of slow. so where there is a policy need and this is where of course the senate and house of representatives has to make the decisions. there may well be a legitimate role for government financed dean. i think however the financing needs to be tailored to the policy: to the risk her to risk dates of these projects and to where possible, provide mechanisms for taxpayers to benefit if the projects are successful with federal money. i do think that there is the so-called value does in various phases of finance team for safe clean energy, the government can

play a constructive role. these projects need to be carefully researched and they need to have financing structures that protect taxpayers. the right to be a finite life as i mentioned it to these programs which are intended for a specific purpose for a certain period of time until the industries mature. >> well, i think your recommendations, should we go forward on the basis of what you just said would be helpful in that regard. but it concerns me when i read that the inability to attract the necessary people with the necessary skills and appearance to work in the public sector, to make these types of evaluation, particularly when do you summon sum of else's money and you make these evaluations in the dirt, the bottom line is what ultimately counts so therefore anything this naturally would get a much keener and sharper look and due diligence before you can commit the funds. and secondly, it is outside the political process. there's responsibility are the faults on both sides for some of

these programs in terms that we continue to read about the political influence directing things the wrong way. for instance, stepping out of this field into another. i remember talking to the head of the nih. he said if congress would direct how we do -- how we allocate our money, we could be making breakthroughs in life-threatening illness is better very, very close, the congress keeps telling us know, we've got to put the money somewhere else. i'm afraid part of the beast here that exist from a political standpoint in terms of our thinking than we are responding to requests or whatever that we have a better ability to direct where the funds go democratic or

does then that is where i think we get in trouble. my time is expired now. this didn't really come to preach, but you do come out of the chair and i think your evaluation of this is important for us to hear. >> senator -- >> go right ahead. >> on your final point, senator, that is what i think it is important that these programs be reviewed periodically to see whether they are still relevant in a deal for the current climate in the object is that our being sought. i think in terms of making sure that there is professional staffing. as we pointed out, there is no provision for long-term fund and

how the loan project office. i think one of the reasons why it is difficult to attack country and attract and retain professional talent is people don't see if they come into the government in one of these roles, that this program will be funded down the road. it is funded now out of origination fees. those loans are closed, funding comes into the department of energy that underpins the loan project office. once the origination stops, defending windows. this program has loans that are going to be out there for 20 to 30 years. it is going to an active professional management for the entire time that the government holds the phones because decisions will have to be made all along the way. so to attract people, i think they need to have assurance that the funding will be there. otherwise, why should they join a band oversee this program? [inaudible] >> -- the concept to the 30, 40

or -- [inaudible] >> but i am talking about, senator, if you have an ongoing problem we are going to be making loans over time, then i think you need to think about having a sunset provision. when do we stop making new loans? when is the private market able to finance these types of projects that government assistance? once long-term loans like these are made, they are going to have to be administered. now as we point out, when consideration should be, should the d.o.e. sell off the phone once they are matured and there is a public archive for them, should they sell them off? or should they hold them? but we presume they are going to

hold them for many years. if they are going to hold them for many years thereafter be professional oversight to make sure the taxpayers are being protect good. >> senator wyden. >> thank you, mr. chairman. thank you for your good work. this seems to me that as you drill into this and look at the various kinds of loans, you come to the conclusion that not all energy loan guarantees are created equal. and then you compare that this statute, which basically lumps everything together and you say to yourself, that sure looks like it is right at the heart of what the congress ought to be trying to do. you've made a number of constructive comments today that track with my thinking. i mean, if there is private or

investment, for example, that signals a message that people can feel more confident that this is something that can work. utility linked loans, for example, which the pacific northwest as you know has been very interested in. utility linked loans ensures that your data customer line to. it's got a customer lined up the gate co., which should also get a measure of confidence. i think my question to you as a result of starting with this proposition that not all energy loan guarantees are created equal. my question would be to you, would it make sense for the congress to really step back now and look at restructuring the loan guarantee statute two and the fact, set up different categories to recognize fundamentally different risk to the taxpayers? and you would match measure, for example, something that would ensure that there is a market from the get go that could be

one category. something else, which was exciting and promising but didn't have the same levels to be a different category. my question to you, is would it be different to restructure the loan guarantee statute along the lines of recognizing different risks to taxpayers. >> senator wyden, i think that is an excellent. i think that you do have a wide variety of loans in this program. i think the fact -- i think there needs to be great clarity about the purposes of the programs as a whole and what they are designed to achieve. and again, as i said before, i don't think there's anything wrong with making some loans that are admittedly risky as long as we are acknowledging at the time the risk in the loans.

bank one of the causes of controversy about this program is that there are differing expectations about what this is supposed to be doing. and i think your question his son not. and you could have some programs like the utility linked loans, where the risks are much better understood, where you have much less risk once these projects are built. i decided to try to portfolios that way. there may be good reasons to be supporting early stage, innovative manufacturing comp means in green energy, ticket as industries off the ground. i went valve higher risk. you should probably different types of financing available so

that greater risk onto the prospects for greater reward for taxpayers. the way the program is structured today is kind of one-size-fits-all. these are loans at government rates. i am not sure that enough pieces they need to be at such a low interest rate to attract funding. the rates that idea we can charge are very low. there is no provision for upside in terms of the equity linked game. so maybe there is a different type of package of financing the should be available for risky projects can see the utility projects but that's a pretty conventional approach that structure. >> i thank you tonight that senator murkowski made a lot of sense when she suffered from the the get go, no one goes into this thinking everything is going to be 100% winner and a dramatic opportunity for creating scores of new jobs and the like. but taxpayers deserve better seems to me than a programmed that lumps the lender in effect

the same category as one of these utility linked projects that have the customer up front. i think this is another area, mr. allison, i appreciate your answer where we can do better for taxpayers in this country can do better for some of the most exciting and promising to ologies. i see senator sanders who is talked about the opportunities and renewable energy. we've got a chance to make some exciting changes in this country if we restructure this program. and i thank you for holding this hearing. >> senator barrasso. >> thank you, mr. chairman. hike with my colleague. the taxpayers to deserve better. i appreciate your work on this. the report had a section called practically protecting taxpayers interests. the d.o.e. should aggressively strengthen positions a slender guarantor in places where

barbers seek relief from requirements in the loan repayments. senator murkowski addressed that with regard to the situation with the lender, the secretary is argued argued the department of energy did not violate the 2005 energy policy act when restructurings lenders loan, which they restructured. it worked in a way that i thought that the american taxpayers at a disadvantage. they were subordinated to other financing. >> said they understand the secretary understands the loans, not restructuring of loans. i do not agree with that restructuring. i think the energy policy act of 2005 does not distinguish between origination of loans at restructuring of loans. spirits up with said, she support legislation to ensure american taxpayers will always be paid before private investors, whether it's origination of the loeb were

restructuring of the loan? >> senator, thank you for your question. i think it is the paramount issue is recovery for taxpayers once these funds are made for policy purposes. based on my experience in the commercial world, i think in this case the department of energy would have some flexibility to support me once the loan has been issued under senior bases to recover money for taxpayers because by subordinating, it may make it possible to attract additional funding from other debt investors, which could help the project succeed. sometimes projects are going to run into trouble. they are after all risky, but that does not mean everything has to be last in there needs to be creative refinancing for projects as a way to protect taxpayers. and actually enhance that they would get their money back. >> it seems to me subordination as the lender does not work to accomplish that goal. thank you. >> just a pilot than what you said about taxpayers than

getting the value for their money, the loan and grant recipients have recently filed for bankruptcy and laid-off workers and experience financial difficulties. the media has reported several companies including celinda awarded large bonuses to executives and other employees but specifically the bonuses to executives as other employees have been laid off. last week it was reported that beacon power's bonuses for specifically linked to executives progress in landing the company's $43 million loan guarantee. so what if any protections are in place to make sure american taxpayers don't put a pill for bonuses awarded at failing companies. >> thank you, senator. let me again emphasize we did not look at some address and

beacon. we have not looked at the companies that receive grants. will they look at the loan program. i think that it is important in the provisions in the slot allow for this and the department can certainly have policies on this. should be looking at all the expenses. and now they may want to build in the capability to review, for instance, compensation programs. i am not sure that that provision is in these loan agreements by the way, but that is something that might be considered because they can certainly understand the public consternation if people receive for the company is wearing and tearing postbankruptcy. >> that would be one of the recommendations and terms of

assuring abuses don't take place. >> i believe that is a feasible idea, yes, sir. >> thank you, mr. chairman. >> thank you. senator sanders. >> thank you, mr. chairman. thank you for being with us. in terms of full disclosure, let me just be very clear that i happen to believe that global warming is very real. it is causing a more nice problem story planet today i think it is totally irresponsible that we are not moving as aggressively as possible to reduce greenhouse gas emissions. i would mention to my colleagues at a few weeks ago senator whitehouse and i had a press event, notching a noted as one of them are radical groups in our society and they pointed

i think that it is a very broad, deep question as to whether the government should have been sponsoring nuclear energy. i do believe as a general comment that in any decent energy, reaganite you look at nuclear fusion, which could aid the answer to energy needs and a clean of energy. >> sorry to interrupt you. i have a limited amount of time. but when people talk about winners and losers, is it fair to say that for the last 50 years the united states government has decided with one of the winners in which we should make huge investments is the very, very w-whiskey nuclear power industry? >> this is my own experience, so i can count on this. an early phases of any industry, it is very difficult to pick

winners and losers and therefore, i'll send you find finance team for a lot of different approaches to solving a particular problem and over time, one a lot. >> i agree with that. the only point i am making is when some people talk about the riskiness of certain types of sustainable energy or problems the cylinder, is it fair to say we assume that maybe 10 times plus in terms of nuclear industry, which has a certain times already last huge amounts of money from the taxpayers of the century? >> i respectfully answer. i figure next witness, secretary chu is a farmer qualified at third on that question than i am. >> thank you for a match. we do pick winners and losers and probably the great winner and federal subsidies is not over the nuclear industry, but

the fossil feel as well. with billions of billions of dollars into those industries. i for one think it is time to begin focusing on energy efficiency. thank you, mr. chairman. >> thank you. senator leahy. >> thank you, mr. chairman. and thank you, mr. allison for being here. i certainly agree that an audit of this program is warranted wholeheartedly. the real question for me is whether the government should even be playing a venture capitalists with taxpayer money in the first place, whether in a specific sector of the energy industry or elsewhere. i want to make clear that my concerns over the administration of the loan guarantee program should not be mistaken for a tacit approval of the program as a whole. when companies like so indra and bake in our way stood and it is

clear that the government in my opinion truly has no business being in the investment business. the apparent basis for the program, as i understand it is that nurtures certain types of investments that are so inherently risky, that only the government can invest in them, only the government will invest in them. today, it is time understand what you're saying correct way, to be somewhat downplayed the risk in these investments, it seems a little bit contradictory to say on the one hand government intervention is absolutely necessary because only the government could do this. ..

about what is in the national interest and the public interest over the long run, the pay off through such a from some initiative to the public. it may not be direct financial returns that they may be social consequences, what ever that make it worth the government's while to be involved. i think that there are numerous areas where private financing, and i'm talking about health initiatives for example, and that's why we have the nih doing research and we fund research in

universities and physics and lots of other areas, so there may be a legitimate role for gohmert friend where financing is not available. i do believe as i mentioned earlier that if programs should be constantly reviewed to the extent there are programs in place to see whether they are still necessary, do they still meet that policy need or are their private alternatives available today? i believe that ultimately the best allocation of resources will take place through private interactive markets. >> part of that inquiry ought to involve the risk manageable, if it is manageable, couldn't it under certain circumstances be manageable from a private capital standpoint? >> that's a very legitimate question. >> and jettisoned manageable we shouldn't be putting tax payers' dollars at risk. your report did not consider either with solyndra or be in power and that is no longer part of the program.

those are finished. >> senator, they were no longer part of the portfolio because they were in bankruptcy and the value would be determined in the courts and through recovery. >> do you have any way of guessing how that might have affected your report, what your report might have looked like, how it might have been different had those still been on the books, had those not gone through bankruptcy by the time you conducted this report? >> i don't want to be speculating that certainly we would have applied the same methodologies to examining the loans of the companies were still not in bankruptcy, and the process that we use in each case was totally independent, and we took a look at the information on each one of these loans to try to gauge the risk at this time looking at engineers' reports, rating agency reports and so forth, and so, we would have followed the same process there were coming and i don't want to be speculating as to

what we would have found because we didn't look at those companies. >> might this have been one of those instances as you acknowledge in your report certain procedures wouldn't follow certain documents were not completed and so forth? >> i believe, senator, they are investigations under way. i don't want to be speculating about that because i have no information about solyndra that's not available in the newspapers. >> thank you. i see my time is expired. thank you mr. chairman. >> thank you. senator frank. >> i think if i just heard senator lee correctly, she said that if a project, if the risk is manageable we shouldn't be putting tax dollars at risk, and if it isn't manageable we shouldn't be putting tax dollars at rest. did i hear that correctly? why did, so therefore we shouldn't ever put tax dollars at risk.

i agree with senator sanders, we have a global climate change problem. we have testimony from the director the other day who said that the duration and intensity of the forest fires are caused by global climate change and it's going to get worse. we are spending more and more money on that if there is an actual cost to the taxpayer, taxpayers' money at risk because of global climate change. the market legalese eating more and more for riss because of climate change because they don't die from severe winters certain elevations when they used to sew it is actually costing the taxpayer dollars at risk if we don't address one

this and try to get the clean energy, and so were it seems to me that our tax dollars and at risk if we don't do something. that is what it seems to me, and so it seems like we've got to just do this as smart as possible. that's what it seems like to me, but follow up on senator wydens comments and questions one. first of all ages one to say that i appreciate the investigation that you have conducted here. let me bore down on something very specific, one of the most important aspects of loan guarantee programs which have the right credit subsidy of the loans not be able to we seek the

loan and it may be the technology that has a lot of promise. if it is too low, the tax payer may not be adequately protected from the possible loan default, and as you noted in your head report in some cases the subsidy costs were underestimated while in other cases they were overestimated. the question is can you tell us what your observer respects to transparency of the credit subsidy cost calculation can the credit subsidy cost calculation for each individual product be done in a more transparent with process one that the public can access? when >> we did look up the credit subsidy process because we had to learn it in order to make our own estimates of what the credit subsidy we think should be. like any financial model, it has

strengths and weaknesses in the intensive purpose. the purpose of the of war ficra is to have a consistent approach applies to all programs across the government coming and it can certainly do that, for instance, it uses the same government discount rate pretty much for all these programs. in terms of estimating loss, these particular loans and of the portfolio, you then have to calculate a credit rating, and because the credit rating is used to determine the default rate is expected given that credit for instance most of the credits are symbol de.org vv credits, and so what is done is to look at the years of data across the different loans rated let's say double b and figured

out historic kleeb has been the fate and then you plug that rate in to the model. and then there is the recovery rate. let's say that the loan does go back and you have to recover the bankruptcy, but has been the typical rate of recovery against the amount of the loan or the value of the assets and after bankruptcy. the weakness in that model is that you are using indexing on default rates and recovery rates and a wide variety of the loans that are not particular to the idiosyncratic nature of these loans, so there is no easy way given the novelty of the loans to calculate what the default rates and the recovery rates are going to. and fair market value, another method, has some advantages, and they will apply an estimate of the market rate of discount to

determine what discount the investors would demand in order to purchase this loan at the interest rate that it has and get a market return given the risk. that also has weaknesses because you can't apply that in budgeting very easily across the government because each discount rate would be different. there would be a lot of contention about what is an appropriate discount rate. i think it would be hard to have a standard budgeting process. so it's very important with of these models to understand what the purpose is and the strengths and weaknesses, and lastly, don't give too much credence to these models in estimating what the ultimate loss will be especially bad loans like these that have 20 or 30 your lives that are dealing with mosul technology and with a government that has the ability to control the risk and has exposure in a variety of ways it doesn't have to advance all the money for example if these projects are

not meeting their contract will benchmarks. and so given all that, that's why we concluded here are the estimates using these models as best we can do, don't pay too much attention to them or think you're going to list $2.7 billion, that's not the case. it may be more, it may be less. it could be a lot less than is indicated by that member. what's important is to manage the portfolio very actively from day to day. you have it, it exists, you better manage it very carefully on behalf of the taxpayers and use the terms in the loan agreements to the advantage of taxpayers. >> so my time is up, but what you are basically saying is there isn't necessarily a find subsidy calculation here for this subset of the loan guarantees, but the management of each guaranteed is of

tremendous importance. 64, mr. allison for your work. >> cementer paul? >> thank you for coming today. do you think that the commissioning of your study had anything to do with a political outcry over the bankruptcy of solyndra? >> senator paul, i couldn't speculate. >> were due commission after it came public that solyndra was going bankrupt? >> yes. >> i find it curious than we had a huge public outcry over this lapse of oversight where a billionaire gets a 500 million-dollar loan from the u.s. government and goes bankrupt, turns out that his attorney works in the department of energy granting the loans and we are going to study oversight and we are not going to look at solyndra? i find that very curious to me and my question to you would be did anyone from the administration as you either verbally or in writing not to

mention or look into solyndra? >> a direct answer to the question is nope. >> did you have the power to look into it if you could? the mandate looks to me wide open. you are supposed to look at oversight, where the problem is. >> i was asked to look at the loans that exist now. estimate this is current status of the portfolio strengthened management and oversight of the program. if you're going to strengthen oversight certain you have to look where the problems are. this seems to be so myopic and motivated. all i am skeptical of why you don't look at solyndra when that is a whole reason your commission was over solyndra. but here's the thing. you've got solyndra and begin energy going bankrupt, bright source may be going bankrupt. did you look at the right source? >> that wasn't part of this program, sir. >> is a good part of the portfolio department of energy loans? it got $138 billion from the loan portfolio, and the thing is

who owns a great source? robert kennedy, jr., another politically connected obama contributor who gets one played $8 billion of our money. you know what their profit was, they lost 13.5 million, 138 million. is it ever going to get out of debt? and why are we getting taxpayer money to a family that has got hundreds of millions of dollars? this is about crony capitalism, this isn't about starting up solar panels, it's about giving money to people who've already got enough money. let them make their own that loans as they will solar panel, let them do it. but i don't understand, and you didn't look at any of the problems and how we come to conclusions about oversight if you didn't look at the company is where the problems are originated. >> i understand your question. first of all, there are several investigations under way, and if we were going to look at that, we would have needed the investigatory power, subpoena,

the right to demand documents. we would have taken probably many months if not in your coming and we would have been going on top of the investigations. >> then very specifically the public information that is out there the solyndras attorneys husband worked in the department of energy. does that have a red flag for you? >> again, senator, i haven't looked at those -- >> if you knew that his attorney for solyndras husband worked in the loan department granting the loans in the department of energy does that send a red flag for you, yes or no? >> cementer irca i don't know the facts of that. >> if you knew that somebody used to work for the kennedy family companies now works in the department of energy and approved the $1.8 billion loan does that send up a red flag? if you are commissioned to look at oversight as an independent person you're commissioned to look at oversight and you didn't look at where the problems and

oversight were. >> senator, we have looked at that. my point is regardless of those facts, we were going to do as thorough a process of reviewing as the policies and procedures of the department of energy regarding the management of this portfolio. i think we did that. i think that we came to our own independent conclusions about first of all held the portfolio is being managed, and you see a number of recommendations about a dozen. >> do we give loans to the company's? >> and the wall, the loans could be made to the u.s. companies. >> the got 500 million. mike understanding is their spending and building cars in finland. is that true or not true? >> these are at high income and again, we did not investigate with the law was complied with in all cases. that wasn't part of our review. >> did they give you 500 million directed towards jobs in

finland? >> the entities that borrow the money are u.s. companies. they may have ownership from abroad but the u.s. companies for instance nissan north america is a borrower, and it's owned by a japanese company but it is a u.s. corporation. >> thank you. we visited panel which is secretary chu, and i would suggest we thank mr. allison for his testimony to go to the second panel unless there is any reason not to. thank you free much. we appreciate your being here and your testimony today. why don't we see if we could ask secretary chu to come in so we can hear his perspective and ask him some questions.

[inaudible conversations] >> mr. secretary, thank you for being here. welcome back to the committee. as you know, we just received testimony from mr. allison about his report reviewing the department of loan guarantee portfolio, and we would be anxious to hear any thoughts you have on the same subject and then i'm sure senators will have

questions, so go ahead. there we go. thank you, chairman bingaman and schakowsky and members of the committee. thank you for the opportunity to discuss the department of energy efforts to strengthen the loan programs and to grow americas clean energy economy. as part of our commitment to responsible steward dollars the department has cooperated with the congress request to discuss loan portfolio and welcome the independent review of her allison. mr. allison released a thorough and thoughtful report and made important recommendations to strengthen the management and oversight of the portfolio. even before the conclusion about mr. allisons review we took steps many of which are consistent with the reports of recommendations to improve the loan programs. this includes working to ensure that our team has sufficient number of skills and experienced personnel to monitor and manage the portfolio to protect u.s.

taxpayers. we have improved and continue to improve the process these for the monitoring alone administration compliance reporting and resolution capabilities to take into account the industry best practices. in addition, we have put in place rigorous internal and external reviews to hold the loan program office accountable. the department takes its responsibility to the u.s. taxpayers seriously, and we are looking closely at mr. allisons recommendations for additional improvements. mr. allison and his team reviewed the loan in the portfolio looking at the risk factors behind regional and estimating each loans cost. mr. allisons report concluded that the department is using the appropriate risk factors in assessing each loan will. the federal credit reform act which defines the cost of loan programs as the estimated long-term cost to the government including the risk of default rate for each loan the subsidy

can be thought of as similar to the loan-loss reserves. to the similar loss reserves. congress appropriated $10 million in the credit subsidy under the federal credit reform act for title xvii a advanced vehicle loan programs while the portfolio includes loans to a range of projects the different levels of risk. the report finds the department of energy has reasonably estimated the cost of the risks. in fact, mr. allison estimates that the long-term cost of the outstanding portfolios to .7 billion. roughly 200 million lower than the department's most recent estimate. the purpose of the loan programs is to provide low-cost financing through an innovative clean energy project that has a unique value to the nation. both in terms of providing clean energy and inspiring the development of new industries. overall, the loan programs have been successful and growing americas clean energy sector. that prez supports roughly three

dozen clean energy projects and they are expected to employ more than 60,000 americans to generate enough clean electricity to power nearly 3 million homes, and displaced nearly 300 million gallons of gasoline annually. as these are just direct benefits they do not include additional supply chain jobs. the program as spurring tens of billions of dollars in investment and clean energy projects and helping to unlock private capital. thanks in part to the loan programs, last year the united states regained its title from china as the world's leader in total investment income and energy. the department of energy is using all of the tools at our disposal including the loan program to strengthen america's clean energy economy so we can compete globally. and prevention technology dramatic reductions in costs are driving the global revolution and clean energy. last year the record $260 billion was invested globally and clean energy. the question is no longer whether clean energy will arrive

but whether america will lead it as the opportunity grows so does the competition. many countries have established support of policies and making major investments in everything from renewable to electric vehicles to the next generation biofuel. in the clean energy jobs of the future the united states must do more than invent technologies. we must also manufacture them, deploy them at home and sell them from around the world. production of energy technology benefits from scale. simply put to have a competitive queen energy industry we need programs to help the deployment and markets. america faces a stark choice today. will we play to win the race or well we've watched the rest of the world pass by. can we invest in america's workers industries? we can invest in the workers industries and innovations, or we can send money and jobs overseas to the technologies of tomorrow. throughout history for mediation

come through the culture to the country's the federal government has supported the private sector in keeping the united states of the technological forefront of important industries. it's hard to to a page from our playbook. begin when the clean energy race, but we must act now. i know that the committee cares deeply about our energy future and i look forward to working with you to ensure that the united states leads in the clean energy economy. so thank you and i am pleased to answer your questions. >> thank you very much for being here. let me start with a very general question. you advocated strongly for winning the queen energy rates which i have heard you say before and i have done myself many times. in fact it is clear to all of us that we have settled for clean energy raises, one of course is in the development of these technologies working on that and

i know that the department of his various efforts to achieve that. the second clean energy rates might be the manufacturing of these technologies, so we create the jobs here that are going to be created in this area. third is the deployment of the clean energy technologies and i think that you correctly point out that there is a real possibility that we would easily see to the rest of the world the ability to develop and manufacture technology and just decide all we can do is in port them and hopefully deploy them, but it is a different challenge. i guess that senator wyden correctly pointed out that when we put the loan guarantee program into the 2005 law we

haven't separated out the different types of clean energy or energy projects that might require some level of government support through a loan guarantee or we haven't perhaps adequately segregated those out. i would be interested in any general thoughts that you have about the appropriateness of us going back and trying to be sure that we are doing in each of these various races to be sure that the united states doesn't drop out of the competition. >> i've listened to a portion of the testimony and i agree with him and the report. the report took the loan program and divided into certain sectors and if you consider the sector where you are deploying in known technology whether it is wind or

solar, something that is a proven track record, there are considerably less, especially that project and has a utility company which is a solid utility company with a good bond rating with a long-term so-called power purchase agreement that is to say you have signed and to contract with this utility company will pay this amount generated by wind or solar and as long as it is a strong and stable company, then that loan is different than the risk of a new innovative startup company. it's considerably less, but it does help very much in the deployment of the large projects. so that is one class of loans. the other class that the congress ends is to invest in our investments unclean innovative manufacturing whether it is 80 p.m. or something in

the energy generation business, and that's by its very nature a different risk. however, the mechanism that we were tasked with tried to assess what are the risks to the loans and then using destination, the allison report says that we were easily a little bit higher but essentially on par with their evaluation of the loans and that congress had appropriated that money, appropriated meaning the money could have been spent on other things to hire and could have been spent on research or could have been spent on hiring policemen and teachers, but they chose to inappropriate because they recognize that it was an opportunity to actually help these industries will help create jobs.

>> let me ask another question. i think mr. allison also said that it's extremely important that you get right professional employees working at the management and oversight of the loan portfolio over the long term, and that in order to do that you need to have a short funding for this activities of the people might actually consider leaving the private sector and coming to work for the department to pursue this management. do you have a comment on this recommendation? >> i agree with that recommendation. i think it's important that we are in the process of trying to bring in the career professionals, but as you noted in the report, because we had to stand very quickly, we hired a number of consultants to give the financial expertise, and we

very much want to bring in to the program for your people that have experience in project finance in general, so we agree with that. it's very important because of the long tenure of the loans, some of them 25, 30 years, it's very important, and because we have specific grand milestones that we pay very close attention, milestones that and allow the loan program to give money it's very important that we follow each of the loans carefully. >> senator murkowski. >> thank you and secretary, thank you for being here. it's important to hear mr. allison speech but it's equally important that you and the secretary and the department of energy be here to speak to some aspects of the loan program. in the report from mr. allison, he states that the dot should

better defined the desired balance between policy goals and financial goals. i look at that and to me it is a pretty basic managerial function, and i guess i was a bit surprised to learn that from the audit perspective mr. allison perspective that was in fact lacking, so the question is how would you grade to the department's implementation of the loan guarantee program this far? >> when we started it was new. we made a lot of improvements and will continue to make improvements, especially since we all know that sometimes the industries that a particular loan might be embedded in we could change and that is in particular something you need to watch on a weekly basis. so we think that i couldn't say

the official grade but one of the things that the report and mr. allison is talking about this for example the vagueness is also to not only the department of the policy the law itself and what do you mean by the significant chance of payback? >> that is an important thing as a committee of and that we are tasked with this oversight. the loan guarantee program is in place. i want to make sure that it is working as we had hoped that would come in and we would not see some of the spending failures we have seen from that based again on the result of the audit, what you have observed and for your interactions with your folks it looks to me like we need to do some changes. this isn't tweaking a program but some serious changes to this program so that we do have

assurances to the taxpayers so we do have a structure in place that provides and allows for a level of accountability. i know that senator stabenow is going to ask about the ev tv program and the fact we haven't seen the loans go out the door under the act we haven't seen any of the loans go forward and then from the result from the stimulus dollars that came in we had a lot of money go out the door and that is where we are seeing some pretty serious concerns, so i'm looking at this and if i had to give a great if i had to sign a letter grade to the department at this point in time it's not a passing grade, and i think that we need to be able to do much better and i would like to think you suggested you are going to be moving forward with some policy

changes, but i think that we need to be aggressive about that. let me ask a question this is kind of a follow-on to what i had asked mr. allison to read some of the conditions that are in the 05 energy bill as it relates to the guarantee programs, one of them is the reasonable prospect of repayment we certainly face that with solyndra and failure to repay the loan. there's another requirement that says no guarantee shall be made unless the secretary determines the amount of the obligation is sufficient to carry out the project, and it's now clear in hindsight that with solyndra that conditioned was not adhered to $75 million had to come in from private investors and to make that happen what we saw was the subordination the deal we put taxpayers second in line in the bankruptcy and has caused a great deal of consternation. did you make the determination

at that time as the law required and did you make the determination that the amount available when the loan guarantee was close the they were sufficient to carry out the solyndra project and if you did make that determination, then how do we get to where we are today, which again is a pretty bad mark on the books? >> when the loan closed, there was a world of difference when at the time of the restructuring loan we knew that the company was in trouble, but to your earlier point about what we intended to do, much of the things that were in busbee 70 report we are doing. we set up a risk committee and the colleagues recommended that there would be a risk management structure we agree but we set up a different independent part of

the loan program that would look at strictly the risk of the future collapse, so that is something we did before the allison report was submitted and the report acknowledged that we were doing that. we are taking his advice and we have reached this ourselves that we need people outside of the loan program to be a part of this evaluation. that's a very important that we did believe to get additional steps advice on that. so, in terms of the specific loans you mentioned, again, it was a rapidly changing dynamic during this period of time and during that restructuring, we knew the chances of repayment was low, but what we did is something that was in the best interest of the tax payer as mr. allison pointed out, when

asked specifically would you be in favor of the requirement would not subordinate any and you plan very quickly that we follow this at the time of origination camano subordination, they're has to be mechanisms to draw additional investments to give the highest chance of recovery to the taxpayer, and so what we did, and i think the allison report confirms that we were doing things that would ensure the highest return given the circumstances are rapidly changed circumstances. islamic my time has expired and i want my colleagues an opportunity to speak, but i do think it's important that we also look to some of the other aspects of that allison reports that speak to the importance of the real-time control to make sure the risks are properly managed and i think that solyndra is a perfect case in point where we missed out on

that with regards to the possible could issue and where solyndra was at that point in time as opposed to others in the solar panel manufacturing business, but i am going to defer to my colleagues so they have an opportunity to question. >> senator shaheen, you haven't had a chance to ask questions. go ahead. estimates before mr. sherman and mr. secretary for being here. yesterday i held a hearing on the uss at the norfolk naval shipyard the water so the committee, and we heard from the psychiatry of the navy, ray navis, former secretary of the navy and senator john warner, and also from some of the top-ranking officials within the navy and the marines about what they are doing to implement

energy efficiency and new sources of energy within the navy and among the marines who are on the front lines in afghanistan, and we heard a couple of things i think are important to this discussion. one is being able to look at alternative energy sources that renewables that can be used in the field are critical to reducing the dependence on foreign oil. it's vital to our national defense and that there's a direct correlation between our dependence on fossil fuels and casualties on the battlefield. one of the things i would hope you might address this morning and i would point out that i know the energy, department of energy is working closely with

the navy and the part of agriculture on biofuels which is a critical piece of trying to reduce the dependence of the military on foreign oil. can you talk about how the programs that we are talking about as a part of the loan guarantee program relate to our national defense and how critical they are as if we are going to make some of these changes on the military side of our government? >> certainly. let me begin with biofuels not only in the loan guarantee program a lot of the things we invest in across energy from the science to the energy. we think that the biofuel has considerable promise and by that i mean we think that they have considerable promise in developing technologies that can compete in the open market and that is our goal. the united states has great

agricultural resources that we can use biological waste or things that don't compete with the price of farm land we think this is a great opportunity to offload some of our dependency on oil, especially if the technology is advanced to the point where you can produce biofuels and sell a profit and make it a business for $80 a barrel, something like that. we also do a lot in terms of other dependencies to give not only the military, but the consumers and businesses to the advancement of batteries is important. batteries are important because rather than a checking into the free concert is plea routes usually diesel fuel to generate electricity you could have a lightweight solar system with a lightweight battery that could be part of the supply chain. islamic we saw a demonstration of that yesterday that was very

impressive, although solar blankets that are already in use in afghanistan and heard about how much weight it saves our soldiers and also again, not having those resupply convoys. is that that's yet another aspect of decreasing as people attack these supply lines and some of our soldiers and employees die from these attacks we think it's very important that you devotees programs. remarkable progress with batteries for example. recently in the summit conference accompanied that we support it announced that they doubled the world record energy density batteries which appears to have had no additional cost to the manufacturing, and they are optimistic you can go much better than that. so this is something that is going to be very important. we look across and then finally energy efficiency is something

not only for the 4n hamdi plight areas but in general for the military we think it is a very important part of stretching the u.s. taxpayer dollars some of the freakin' held by saving money by saving energy is very important and we have a free close working relationship with the department of defense. >> and again we saw some excellent examples of that which save money, but also make us less dependent and more efficient. my time is up, but let me make one other comment about that hearing because one of the other things we heard from all of the military officials who testified was the importance of sending signals to the private sector about the importance of these energy efficiency and renewable technologies that the government has a role to play in dillinger that it is very important to our

national security. thank you, mr. secretary. >> thank you. mr. bingaman had to go to the floor to speak on an amendment and with that i will call on senator blease. -- before mr. chu for joining us today. shortly before you became the energy secretary, would you were quoted as saying somehow we have to figure out how to boost the price of gasoline to the levels in europe. the gas in europe is about $8 a gallon which is a lot of money. last week in your testimony over in the house of representatives it is my understanding that you indicated that high gas prices are helpful in some ways in spurring research on the alternative energy. i anderson and the point and i respectfully disagree with the conclusion at least insofar as it's made to the exclusion of another i think more compelling

point which is a strong economy will always provide more capital that can be invested for research and development purposes and for the research and development money is definitely needed to help develop alternative energy, so i hope you take that perspective into account. i don't think that high gasoline prices held anyone. i don't think they do anything but a hurt the american people, but i don't know how much driving you personally do yourself, and so you may not personally be feeling the goucher the pump, but i assure you hundreds of millions of hard-working americans do feel this committee feel it every time they refuel their cars. some a lot more than others but all felix. while hard working americans continue to suffer because of the price they pay at the pump and the corresponding prices that they have to pay the grocery store and everywhere else because all of these costs and at getting passed downstream

, i hope the administration must take into account in its energy policy and pursue an energy policy that acknowledges the fact that whether we like it or not we as a people, we as human beings living in this country today continue to be dependent on liquid fuels and we have to continue to have a source and that means we have to continue a robust policy of aggressive exploration and production of petroleum and natural gas. instead i've seen it focus on this administration that has placed most of his emphasis in this area on a failed policy and putting a lot of subsidies of alternative energy projects, and on that note to the recent gao audit of all loan guarantee program that found the dod didn't always follow its own

process for reviewing applications and documents in its analysis and decisions, potentially increasing the taxpayer's exposure to the financial risk from the default and end of quote. it went on in that same report to determine that the doe, quote come has not completely documented its analysis and decisions made during the review which may undermine applicants and the public confidence in the legitimacy of its decisions. ortiz accurate in your opinion? >> let me respond to the first statement, senator so i can correct the record. since i walked in the door, the psychiatry of energy i've been doing everything in my power to do what we can to reduce these as we see the gas prices spiked to reduce the prices. and the administration, the president and i personally yes

we do acknowledge and feel the pain of leading american consumers, led by american businesses when they see the prices increase, and what we can do with all the tools available, we are using but in the department of energy tools, the most important thing that we are doing is to offload the dependency on oil and using the natural gas for transportation, electrification biofuels. with regard -- >> are you saying that you no longer share the view that we need to figure out how to boost gasoline prices in america? >> i no longer share that view. >> you did then but you don't now? >> when i began the secretary of energy i represented the u.s. government and i think that right now in this economic slow return when need to have these

prices affect the comeback of our economy, and we are very worried about that and so of course we don't want a price of gasoline to go up, we want it to go down. but let me go to the gao report. the other part of the gao report within the sentences of that showed the diligence we did in our loan program was considerably more thorough than the private sector did come and the thing you are referring to come and i admit there is the truth in that at the beginning of the program in 2007 well, 2005, and in its seriousness about 2007, a lot of the import was in paper form. a lot of the input was such that it was moving towards making those records electronic so you can have a more modern data

system. the only true of the loan program quite frankly, it is true for what the department of energy as a kind of techno guy i actually like the idea that we have an electronic record rather than paper records and by encouraging the department to make this transition, and we are doing it in the kalona program. >> and you think that will bring about more compliance with the departments process fees'? >> i believe the gao report said that because the records are. there and not in the central repository, that it would be harder for the loan program overall to see what's going on, said it's part of this risk management going forward we recognize that we need a essentially updated so you can get international access, and we recognize that. >> my time is expired.

>> thank you. >> thank you very much. secretary it's no surprise i'm going to talk to you about the vehicle technology program, and first let me say in the testimony when you talk about the fact that to win the queen mary jobs in the future the united states must do more than and technology, we must also manufacture them, deploy and sell them around the world. i couldn't agree with you more, and i appreciate the fact that when this -- when i was able to make the sprigg and part of the 2007 energy bill that passed, it was not implemented in the last administration, and that was a priority for you and the administration, and it was in fact implemented in 2009. that's the good news. we have good things to report to the jobs being saved, jobs coming back from overseas and now we are in a spot where we still have incredible delays

year after year after year. we had one company that in fact indicated that after spending $25 million as a start up in the three-year application, the application was never completed. i'm very concerned about where we are right now and something that goes to the heart of keeping advanced manufacturing in this country. we know that we are competing with countries around the world. our companies are competing with companies that are providing tax incentives that are providing financing mechanisms, giving a number of things, and the retooling program goes right to that effort of having advanced technology and manufacturing to keep jobs here greta van overseas so of course we want to protect taxpayer dollars and of course that is the absolute critical but how do we streamline this process at this point so that it actually is

using the gold it's set up to do >> it describes the importance of the loans. we believe that for example the athlone begins to ford and nissan save your generated thousands of jobs. i think it is over 30,000. a big success story because that enables ford to retool to sell to someone that is now a major leader internationally in selling very desirable competitive cars. this is exactly what the loan program was intended to do and it is a great success. the loan to nissan deutsch and a great place in the united states and another great success. now having said that, we do have to get the taxpayer money and as the conditions change, we have

to say again going back to the covenant of the law which says in these loans is there a reasonable chance of repayment? in many instances we feel that we would like to see the private equity be invested in these companies and then there are milestones to do the private investment so that we can then say all right, we can help you grow your business. and so we are very, very sensitive to those things again, trying to balance the line as you noted between stimulating the manufacturers with these loans, and again, one of the big success and making sure that we have to independently assess whether the market projections make sense in this rapidly dynamic and so that we tried our best to do that with regards to

the taxpayers money and knowing we do under stimulate investment in manufacturing. >> and i appreciate that, mr. secretary. the -- at this point the way things that have gotten back down in the slowness of it is defeating the whole purpose of what needs to be done because it is creating an unattainable situation for businesses that are on the edge to be able to move forward and create these technologies but waiting three years is just too long to be able to come up with those judgments. let me ask you one other thing. what changes would you suggest to make this program more effective to possibly add more opportunities for companies? we passed now twice on this committee the legislation that would expand to the medium and heavy-duty vehicles. we know there's tremendous energy savings and larger vehicles very exciting work that is being done.

would you support something like that? and more opportunities to save money and create jobs? >> i think this is a program i would be delighted to talk to you about to broaden the scope but also in a certain things its advanced technology in an important company, again, working with congress i didn't know if they have the appetite but to change some of that money into atem for the grants and developing more products. that would do a lot. grants that would allow the company to provide things that could then be made in america. but i would be glad we willing to work with congress of the congress seems that this is an important program to stimulate job growth in the united states and manufacturing in the united states that could be another way

of broadening the program. >> thank you. >> senator barrasso. >> thank you madam chairman. i appreciate you being here. the department has awarded a 10 million-dollar prize for the production of a light bulb that supposed to be one, energy efficient, and never to come affordable with american families and the prize went to phillips. do you know how much the winning lightbulb retails for in the united states? >> i can make a guess, 40 or $50. >> its $50. headline in "washington post" last friday affordability boast a 50 billion-dollar a light bulb -- 50 dollar light bulb. you think a 50-dollar a light bulb is affordable for american families the government figures say the average household in the united states has over 40 light bulbs so are we asking american families to spend over $2,000 to trade out of their light bulbs? >> absolutely not. we are not asking them to spend

$40 or $50 for a light bulb. it is intended to incentivize the development of new technology. some of those new technologies and commercial use in buildings and hard to get places where you have to hire people to go in a crane already are very affordable. commercially to ophicleides already take themselves, so it was the idea was to stimulate future development. >> the president claims she and his administration are promoting fairness. he talks about fairness and also lot and there was a story in "the washington post" with a headline more than half of obamas big fund-raisers got jobs in this administration and explained how bumblers, those that collect at least $500,000 from the president's campaign were given jobs in the administration. says one obama higher than and steve as a liaison in the department in the energy department and according to the internal e-mails, standard pressed for the members to

finalize the government loan first solyndra in which another campaign bumbler was a major investor. yesterday the government accountability office had its own audit in the department of energy loan program. the report concluded that the doe did not follow its own process for the meeting applications and documents in its decisions potentially increasing the taxpayer's exposure to the financial risk from an applicant default it seems like the administration is bring a pretty good job looking out for a friend but i want to know who's looking out for american taxpayers and a short doesn't sound fair to most people. for making any decision or encouragement on what you make from any athlone kalona the solyndra loan so what it's pressing for is after the commitment was made he was pressing to finalize things that he was not a part of the decision making process. >> i would like to ask about

additionally the electric vehicles the president was in north carolina getting another speech on energy, promoting electric cars. last week we learned general motors was suspending the production of the electric car because it failed to meet sales expectations. last month we were in your department cut the funds to the fiscal automotive and other car manufacturing because it failed to meet the seals expectations. so, in the get electric vehicles that range from 40,000 to over $100,000 coming and i ask if those are practical solutions from families who are struggling to pay bills especially as the president is proposing in increasing the tax credit for what is essentially the luxury vehicle and he wants to increase of from $7,500 where he didn't get adequate takers because the vehicles haven't been sold to now $10,000. is raising the tax credit for these vehicles few families can

afford the fair thing to do? .. if you get an electric vehicle that costs, let's say, low

20s. $22,000, draws the say amount, 10,000 miles. it's $300 in electricity. and so we are very focused on driving the cost of those electric vehicles down so it's exactly what you say, that it's -- the cost of a vehicle that the american public can afford. >> thank you, madam chairman. mr. chairman. >> the invisible gavel here. mr. chairman, thanks very much for being with us. let me just ask you, before i ask you a question, i wanted to agree with senator lee who talked about the high price of gasoline and what it does rural america. i come from a rural state, and many people travel long distances to work. i hope that some of my republican friends would work with us on what we think is one of the major causes of the high

price of gas, that is, speculation by the oil futures market, and over 80% of the market is now controlled not by end users, airline companies or fuel dealers, people actually use the product, but by wall street companies who are speculating on the price of oil and driving oil prices substantially up. goldman sachs themself, one of the major speculators, estimated that speculation was adding 56-cents to a gallon of gas. >> i can't anything to the estimate of goldman sachs and put on a price that adds to the speck lakers -- speculation, but i agree that futures play an important role. for example, if southwest

airlines takes deliver but they're actually going to use the fuel but it's a financial mechanism that helps them plan for the future. so futures play an important role in stabilizing companies prospects, but i agree with you, when futures are traded back and forth and no one actually intends to take delivery, it enters into a different regime. but to the extent how it modifies prices, i don't know. it's not what it was meant to do. >> let me ask you this. my understanding is that right now we have about 100,000 americans working at more than 5,000 solar companies. i think sometimes we hear discussion around here, the impression is that sustainable energy is just doing terrible. companies are not making money. we're not creating new jobs. would you agree with me that in

fact, in terms -- in recent years, not unrelited to -- unrelated too the work you and the department of energy are doing -- we have seen a significant increase in the number of jobs and installations in terms of solar panels and energy being produced from wind. are we making progress? >> we are. we're making dramatic progress, since 2008, we have almost doubled the amount of renewable energy through this sources. >> that is not insignificant. >> double is not insignificant. >> and we're creating jobs in the process as well. would you agree with me that virtually the entire scientific community, not only in this country but around the world, recognizes, a., that global warming is real, and b., it is significantly caused by home activity, and, c., if we component get a handle on greenhouse gas emissions there will be enormous problem

associated with -- in the future of this country? >> yes, i agree with that. >> let me ask you this, mr. secretary. we are talking about the role the federal government plays in terms of support of various energy technologies. is sustainable energy the only technology that has received help from the federal government? >> i would say, looking backward, that after form of energy received substantial federal help. oil, gas, coal, nuclear, you name it. when they were emerging technologies, they received substantial help. but not only when -- >> but not only when they were emerging, but they're still receiving help. >> in some cases that's correct. >> for example, i find it somewhat ironic that some of my friends on this committee

expressed their divests for loan guarantees and then tell us they want to build another 100 or 200 nuclear power plants in this country, which would not take place at all. would not build one nuclear power plant, without federal loan guarantees. is that a fair statement? >> that may not be a fair statement. let me go back to the only thing you were driving at. after we subsidize an emerging technology and it seems to be successful on its own, there's a good case that can be made that this technology, this industry, may not need federal support, and certainly we think that renewable energy will -- there will come a day -- i don't know if it's this decade or within a decade and a half, but it is not 30 years from day -- renewable energy will -- the levellized cost of renewable energy will be the same as any new form of

energy, as competitive, but until that day arrives, in this decade or the next decade and a half, yes, it could use a little bit more support, but you can -- when there are industries that are doing quite well, we can also ask ourselves, do they need to continued support? >> mr. secretary, there is a new plant being proposed for georgia, nuclear power plant. how much federal loan guarantees are involved in that plant? >> there's a vogel power plant, a consortium of companies led by southern. i believe the loan is a conditional commitment, loan guarantees $8.3 billion. it's paid for -- the credit subsidy is paid for by the applicant so it's scored by the cbo, a 1% score but the actual

credit subsidy is paid by the applicant. i know that there's -- before nrc approval, there's another set of two nuclear reactors which are not applying for a loan. so, it's -- i can't really say definitively. >> if the federal government, congress passed legislation repealing price-anderson, which is, as you know, federal insurance program, if god norbit that's a nuclear accident -- do you think wall street would be ready to invest one penny? >> i think price anderson is -- >> my point. thank you, mr. secretary. thank you for the excellent work you're doing. my only point on this is i hear sustainable energy being attacked and yet you have an entire major industry that people want to greatly expand, which is totally dependent on the support of the federal government, would not last two days from how to if the federal

government withdrew its support. i have the chair. i think it is senator paul? >> thank you for coming, secretary chu. have you met george keis center. >> i think i might have at a roundtable meeting. >> more than once? >> the only one i can recall at the time was during a roundtable. >> are you concerned about the propriety of giving money $500 million to a billionaire and then changing the rules so he gets to maybe get a better deal than the taxpayers do? >> i'm convinced, nothing i've seen in the loan program or anything in the white house had -- that any connection that george kaiser had with raising of money, had anything to do with the selection of the loan. as you well know, solyndra was at the head of the line, picked

by the previous department of energy under a previous administration, and it was the one that it's clear people advanced forward as the one that had the most work done on the loan, that satisfied the conditions of the intent of the loan. >> that's sort of troubling they were the best case scenario, and met all the criteria best and then went bankrupt. what also is troubling to most of us, giving $500 million loans to a guy who is a billionaire. why in the world would we do that? >> there were other investors in solyndra also, very wealthy people also, but associated with the republican party, and so, again, the -- >> i wouldn't give it to them, either. >> the politics of the investors was not part of the decision of whether to give a loan to solyndra. >> do you think there's a question of propriety, though, when you have someone who works for you, is married for somebody who works for solyndra, and you

say there's this fire wall at the beginning but you're not insinuating he never wrote e-mails and never corresponded to people in favor of solyndra? >> well, for example -- >> he did, correct? >> he was corresponding to -- after the loan was approved, corresponding to the timing -- >> do you think that's appropriate for him to be involved at any stage? say he wasn't involved at the beginning is a little bit of an excuse for him but the word solyndra should have never left his lips nor writing and i think it was. >> the department of energy has very rigorous standards we enforce on any potential conflict of interest, and as you mentioned, for example, his wife was actually fire-walled from having to do any business with solyndra as well. >> have you met robert kennedy, jr.? >> probably. i'm not sure. >> dollar how many times? >> well, since i'm not sure -- >> are you aware of the kennedy

family fortune, they're pretty wealthy also, probably worth hundreds of millions of dollars and we gave robert kennedy, jr.'s company 1 pointle system are you aware someone works for you who used to work for the kennedys who people say was involved in the loan process? >> i'm not aware of that. >> i think that is something we need look into as well, and the suggestion will go on in the hearings in the house as well, that this revolving door from big business into the department of energy to get large lones -- $1.8 billion is a lot of pinch, given to a contributor to the president. and it looks unseemly, and that's not your brown but you're the head of the organization that has been giving loans to wealthy people who are donors of the president and it looks really bad. do you give loans to foreign companies? >> we give loans for loans meant to manufacture in the united states. >> what about fisker? are they spending our money in

finland? >> we gaffe a -- gave a loan to a design group in los angeles, and if they satisfy the loan, which would go to manufacturing in the united states. so the money we give in loans is very targeted to jobs -- >> my understanding they were struggling here and this money was going to be used in finland. >> well, as i said before, the loans we give are for american jobs and we're very clear about that. so -- >> no money goes to finland. they're not allowed to use any of the money in finland? >> as i said, the -- we give loans for jobs in america, and we're very clear about that. >> so fisker is not using any u.s. taxpayer dollars -- >> i can get back to you on the details. i know the overall scope of the loan is for manufacturing in the united states and for design and -- went to a dish. >> picking wayners and users, people say that even though we bade for the wind mills, if you

take away the subsidies they'll never make a profit. they're not profitable. and talk about tilting at win wind mills, we're throwing money at wind mills. we shouldn't be in this business at all, and the think is you're choosing $50 light bulbs. nobody understands that in america and there's a real problem here, and i don't think you're going to win the perception war on this, and my counseling and advice to you would be, let get out of this business. let's not be involved in stuff like this, and by your involvement in it, it really looks unseemly. and i don't question your character. you're nonfor being an upright person from hack deem na, but you're overseeing something that really doesn't pass the smell test. >> thank you, senator sanders

has to involvement i just voted. and senator paul, you don't have to vote if you don't want to. >> you got to try to play all north percentages here. [laughter] >> thank you, mr. secretary. i wanted to ask a little bit about just our competition in the world on these technologies, and i think it's really important that we keep pace and don't fall behind china and india and europe. just as i was listening to other questions, and the old panel, thinking of all of the above, and -- i know the president gets

criticized sometimes when, say, for example, he may not approve offshore drilling everywhere, when they say, well, what about all the above? and my viewing is, like, all the above doesn't mean all of all of the above. but if it does mean all of all the above, certainly it means innovation, and it means -- which means r & d. which is basic -- which is patterned after darpa, which created the internet, which i believe -- tell me if i'm wrong -- has created some jobs. >> i think you're right. >> thank you. for that validation. it also includes what

mr. allison referred to as investment so that we don't have the valley of death for all these things that are discovered at universities and where we have had some investment by the federal government, but to commercialize it, and that seems to me what the loan program is about. >> that's correct. i think it's been mischaracterized inappropriately as the government being a venture capitalist. venture cappallists deal with smaller amounts of money at an early stage. a large investment of capital is needed and when these loan programs were set up in 2005 and 2007, and then a lot of them third, especially in the the end of 2008 and beyond, the credit

markets froze. this is why many countries have some sort of finance -- financial bank of their own to allow their industries to grow. china has a very large -- i think a credit line of one year, $34 billion, in renewable energy. netherlands, germany, england, all looking -- maybe of these countries have these programs. >> aren't they simply looking at the future? and not the far future. but the near future. in terms of -- the competitive world global environment in terms of these technologies because we know this where is we're going? >> yes. that's why they're doing this. they want their industries in their countries to have -- to be

advantaged welltive to other countries that -- if all the countries said we won't have any sort of government financing in any country, that would be one thing, but if a large number of countries are going forward in doing this, the question we should ask gloves the united states, -- ask ourselves in the united states, what should be we doing? >> we want to be come pet enough these technologies which are clearly going to be an enormous part of our economy and of the world economy and the world energy economy. right? >> right. >> and kind of not -- kind of ignoring that to me seems almost wilful in not understanding where the world is going. i don't mean to be harsh but would you agree with me? >> well, i would phrase it differently. if you look at a way of

financing as a way of stimulating private sector investment, which is what we ultimately want to do, a loan program such as the one we were administering, most people agree was stimulating private sector investment at a ten-to-one ratio. this is a good thing, and that the losses expected from this investment are far less, we think, and alice si reaif i weres this -- than what was authorized. so, in the aggregate. while nobody wants to say -- in the aggregate it has been very good at stimulating private sector investment. >> my timees over but i'm now the chairman so i yielded my time. solyndra, we must keep in mind, was 3.3% of the entire 1705 program, and, look, there are risks.

we had one senator on the other -- my friend and colleague on the other side, say, about the loan program, if the risk is manageable, for this company we're lending money to, we shouldn't be putting task dollars as risk. they said if the money isn't manageable, we shouldn't be putting tax dollars at risk. so, in other words, we should never put tax dollars risk according to my colleague. now, he has signed on to the all of the above. so i would suggest that anyone who is for all of the above, and who isn't for a loan program, isn't really for all of the above. so, i would caution them, when they -- when the president is not opening every square mile of

the continental shelf to adjust shore drilling, that the criticism he is being a hypocrite because he signed on for all of the above, they should be a little bit careful in that regard. how much -- okay. you said china is doing 36 billion -- >> lines of credit to, as i understand it, $34 billion line of credit to renewable or the clean energy sector. >> okay. i think it is absolutely crucial for all kinds of reasons, that we invest in clean and renewable energy for obvious reasons. for economic reasons, for

climate reasons, and when i hear about the $50 light bulb, and the award given for that technology, i think of what laptops were when the first laptop came out. i mean, essentially we're talking about main frames, what the cost of a main frame was compared to now everybody who can get a laptop, gets a laptop. that's what that's about. right? that $50 light bulb, are you expecting every american to put -- spend $2,000 a year on light bulbs or whatever that question was, strikes me as just disingenuous, or either that or not understanding what the purpose of developing that kind of technology is. so, let's assume it's the

latter. shall we? can you explain again about the $50 light bulb in places and it's already being used and already saving money, that technology. >> sure. the l.e.d.es, because they last so long, 10, 20,000 hours, if you're in a place which leaves these bulbs on a long time, an exit sign, emergency exit sign, sometimes in buildings they're left on for eight or ten hours and they're high ceilings and so you have to hire someone with a crane to change the light bulb. traffic lights are another good example. they're on all the time inch those instances, we already know that switching out incandescent light bulbs for l.e.d.es makes commercial sense today.

the idea of the light bulb contest was to provide for a goal going further down to get a light bulb that eventually americans can afford, and no one expects to pay $60 for a light bulb, and quite candidly, you know, if -- fill your house with light bulbs like that, they should be part of your will, given they last so long. >> i think we'll end on that. i just wish that when we do these hearing, that we did them with the purpose of getting the most understanding of what we're doing. both from the -- a broad level, and, is a asked mr. allison a very specific about the loan subsidies. i think that is the best use of these hearings, and i thank you,

mr. secretary, for the tremendous job you're doing. >> thank you, and as i said, our goal is to get that cost of the light bulb down, or even 10,000 hours, and -- >> and for streetlights, be on in certain neighborhoods for safety. it can reduce crime. there's all kinds of reasons for that. mr. secretary, thank you. i assume that the record will stay open for -- i'm making this up now -- a week, but the hearing is adjourned. >> thank you.

ask. >> came across the ocean in sailing ships you wouldn't cross a lake in. when they arrived there was nothing here. they built tiny little cabins, and neighbors were helping one another, not federal grants. >> as candidates campaign we look back at 14 men who ran nor the office and lost. go to our web site, to see video of the contenders who had a lasting impact on american politics. >> this is also the time to turn away from excessive preoccupation over seas to the rebuilding of our own nation. america must be restored. to her proper role in the world, but we can do that only through the recovery of confidence in ourselves. >> secretary of state hillary clinton hosted the second global chiefs of mission conference at the state department today.

the forum brings together hundreds of u.s. ambassadors to discuss foreign policy. secretary clinton talked about the u.s. role in the pacific region. she is bro -- introduced by her chief of staff, cheryl miller. this is half an hour. applause [applause] [applause]

>> well, thank you all very much, and welcome to the global chief of mission conference. we're really pleased and excited to have almost every ambassador and all of our leaders in usaid today for the conference. i just want to give a brief overview before i turn it over to the secretary, and hopefully today you will fine that all of the things -- alloff your questions will be answered and all of the things you wondered about you will no longer wonder about. just to remind everybody, we're going to start out by having the secretary open the conference, and she is going to speak about our priorities to their remainder of this year and going forward, and then we will also have our deputies bill and tom joins to actually expand on specific priorities, and i'll talk a little bit about where we are in the qdr and what the next

steps are and many of you know we have been focused on the practical aspects of advancing economic statecraft and our own deputy chief of staff, jake sullivan, is going to be leading a panel discussion, and then we will be led into lunch by wall tar isaacson, who will be talking about leadership, and drawing on the biography of steve jobs. and then at lurch we have the honor of hosting senator john kerry he will be super keen to answer your questions. so we should take advantage of the opportunity to have one of the department's biggest champions their actually ask him his thoughts and his guide. this afternoon we arranged what i hope you will find to be a very useful series of seminar style breakout sessions as well as other information on discrete areas of foreign policy and will

we close with the leaders to answer any questions and have a free-flowing discussion which we're all looking forward to i just want to take a quick moment to flag during the bleak actually is a number of departments set up different points of contact where they can actually answer questions about programming and offer other information you might find useful in the field and if you can take a moment to go through there, that would be useful. and i just want to thank a couple of people here in the department who have been uniquely supportive in putting this conference on. the encop operable pat kennedy, as always, provides tremendous leadership. [applause] >> but he has been ably helped by a team, including management policy chief bill haw and his team of deputies, mike jacobs and molly more ran and tom's staff member, kurt. we had facility manager candace,

and director of protocol and our exec sec team. [applause] >> so last but not least, i want to just remind you that the secretary's remarks are open press, so smile for the cameras. and then the rest of the conference will be closed press as we move forward, and so without further adieu, let me please introduce secretary of state, hillary rodham clinton. >> thank you, sheryl. [applause] >> thank you all. so, welcome, and welcome home. it is a great pleasure for me to start this conference, our second-ever global chiefs of mission conference. most of the time i see any of you, i am causing you more work and maybe more headaches as i'm either on the end of a phone or

actually in your country, and this time i get to host, and we've plan, as cheryl said, full day of events. we could have filled a week, but we know how busy each and every one of you happen to be. so, we couldn't take that much time away from what you're doing on behalf of our country. i want to especially thank again the team that put this together, and also cheryl mills, who has been both chief of staff and counselor and all-around troubleshooter and problem solver for the last three plus years, for which i am very grateful. and it's almost hard to imagine how much has happen in the last year since we last met. the world has changed very quickly under our feet and before our eyes. the proof is in this room. we have one more person than we did last year, our ambassador to

the newest country, south sudan. when we hole this conference in the future, i hope we can count on an ambassador tober burma among our ranks so we have no status quo in the world today. it is a dynamic challenging environment, and each of you is called on to play an increasingly complicated role several of you have had to face not only uncertainty but danger and even physical threats over this past year. so i really want to extend my thankses to all of you. you truly are the finest colleagues i've ever had the pleasure of working with. i can't imagine any secretary of state ever having a better team than all of you, and i am deeply grateful for your service and your support. well, over the last three years, we have end one war, and we've

begun two wind down another. we are affirming our place as a pacific power, in case anyone ever doubted. we are strengthening our alliance with our european and nato partners. we are elevating the role of economics and development within our diplomacy to help create jobs here at home and to advance our strategic interests around the world. and of course, we are reaching beyond governments to engage directly with people, and many of you have been so creative and smart about doing that. conferences, seminars, travel, twitter, facebook. i mean, it's really been remarkable to see the accelerated outreach that i monitor back here in washington. and we're doing this amidst great volatility but also great possibility. as we watch these transformations, first and

foremost in the arab world but not exclusively there, we're watching new powers rise, the redrawing of the strategic map. it brings new opportunities for partnership as well as growing economic competition and, yes, new threats, al qaeda is weakened but still dangerous, and we have to be literally on our toes all the time. i believe that in this fast-changing world, american leadership is even more important. only america has the reach, resources and relationships to anchor a more peaceful and prosperous world. and as leaders within our country's foreign policy here at the state department and usaid, our goal must be to bolster america's position, not just for the rest of this year but for decades to come. last year i spoke about our

institutional efforts to do so with the first ever drawed residential diplomacy and development review you will hear more about. now we have implemented many of those recommendations to transform diplomacy and development efforts, to better position us to deal with the world we face today and tomorrow. this includes adapting to new foreign policy imperatives, such as cyber security, and the full range of cyber issues, standing up, the first-ever bureau dedicated solely to energy issues and all that it entails. creating a knew new family of civilian security bureaus so we can better address the full range of interrelated issues that fuel conflict and instability, and of course, we have a lot of work still ahead of us to try to consolidate the progress we're already made and to build on it. i want to highlight some of the priority policy areas that we are working on to sustain and

deepen our leadership. i presented these same themes to congress a few weeks ago with our budget request. as you know, i've work very hard to make the case to congress and the american public, and given the difficulties of our budget environment, i am grateful for the support that the president and the administration and the congress have given us. they seem to recognize that our efforts to elevate diplomacy and development alongside defense in pursuit of smart power is exactly what we need to be doing in this period of time. first, as i mentioned to congress, we are ending a decade of armed conflict. but when all the troops come home, thousands of state department and usaid employees -- american and local staff -- will still be there on the frontlines, in iraq,

afghanistan, and pakistan. they will be working under very difficult conditions to advance our vital interests through civilian power. tom nides is leading our american efforts to help iraq become a stable sovereign democratic partner and you he could not have had a better partner than jim jeffrey. i've grateful to all on the team regarding iraq, because it has been a very big challenge for us to get our arms around. a critical element of our path forward in afghanistan will be the success of the afghans in securing and leading their country for themselves. ryan crocker has brought his tremendous lifetime experience to this really difficult job at this moment. they will need help. and i've asked many of you, as a

key element of president obama's policy, to press the governments to which you are accredited, to pledge substantial financial support the afghan security forces for the period beyond 2014. i'm also counting on your personal vigorous engagement regarding pakistan. cameron minuter, and before him, ann paterson, have had a very challenging assignment. there are multiple overlapping worlds in pakistan, and we have to deal with all of them simultaneously. but the country is vital to our counterterrorism, economic stability, and regional cooperation goals for the region. and we will continue to engage where we even have legitimate concerns and disagreements. in these frontline states and all countries facing

instability, we put a special focus on protecting universal human rights, increasing political participation, and enforcing the rule of law. it also puts an extra burden on us to live our values and to, both on the military and civilian side, demonstrate who we are as a people. because when people feel safe and empowered to pursue sure the legitimate aspirations they are more likely to reject extremism and invest in their own societies. so human rights and global security are deeply and directly linked. we cannot sacrifice one without damaging both. and we have been working to use our position on the u.n. human rights council to continue standing up for universal human rights on the international scene. now, i recognize that sustainable progress on human rights and democracy can only happen from within. but we do have an obligation to

help amplify those voices of those advocating for change in their own societies, including nongovernmental human rights and democracy activists. in recent years, a number of governments have taken actions aimed at disempowering these groups, and today in the middle east and north africa, and elsewhere, governments are challenging the propirate of american support for civil society associations. ...

a lot of the countries have legitimate questions and particularly a lot of the transition new democracies, so i don't think we can assume anything. we need to be very humble in making our case and to do so effectively and consistently. for much of the past decade we focused by necessity on places where threats and instability are greatest. in the decade ahead we must also be just us focused on the areas of our greatest opportunities. that happens to be the rest of the world. but our second priority is our relationship with of the asia-pacific region, and when we talk about asia-pacific we are talking about from the indian subcontinent to the americas we want to expand the adventure of what this means to the united states, so we are helping lead a

government-wide effort to build a network of relationships and institutions that spans the pacific that complements the success of our durable atlantic partnership. we are strengthening our alliances and asia wanting new strategic dialogue is and economic initiatives creating an adjoining important multilateral institutions to underscore that america is and will remain a pacific power. no region will be more consequential to america's future. this is not just a concern for the eap, it's also for the waj and sba, but it's also for all of us because the security and economic interest will affect everything we do everywhere so we have to engage you in our efforts and reach out to for example e.u. r to help us with the asia dialogue with the e.u.. we are working hard with our

friends in latin america to expand their reach asia but to do so in a way that helps themselves and not just create the market for natural resources. we should engage everyone as partners to work to establish a rules based border for the coming years, and that is particularly true but again, not exclusively in the pacific. our relationship with latin america and all the countries of our hemisphere are vital in their own right and i'm looking forward to participating in the summit of the americas and a few weeks and discussing how we will continue strengthening our ties close to home and talking with counterparts in the middle east and north africa we often use examples from latin america transitioning from military dictatorships, autocratic regimes to the most vibrant space region in the world right now with such a dynamic growth

happening on both sides of the pacific there are great opportunities and natural affinities from the countries to cooperate that has boosted economic growth from the canadian north to the straits of magellan. of course as we invest in these new opportunities in asia we must also engage with the most consequential development in the past year. throughout the region of our missions have responded in remarkable and unprecedented ways but then again we've had to. it couldn't be business as usual. from morocco all the way through to yemen and everyone serving has had to really work and think outside of the box. sar feared a priority area is helping those countries complete their transitions to democracy and this will not be easy and it certainly will not happen overnight. i often tell leaders in this

region and the united states has been working in our democracy more than 235 years we are still in the process trying to perfect it we have to make steady progress that's not an excuse for either standing or going backward. engaging with islamist parties is going to be a new but necessary effort on the part of the united states which we are undertaking at every level. not all countries in the region are embracing the mantle of reform. we continue to apply pressure on al asad and his regime and syria to stop the brutality and we work with the opposition and like-minded countries to try to help them at be in a position to be part of a successful political transition. as the region transforms, so must our engagement we must be ready to respond to an unanticipated flood of needs and a way that reflects our leadership's as people and

governments like meaningful commitments to reform intangible ways with their that means on how to build a vibrant society enjoying the full participation of women providing loan guarantees or promoting educational opportunities we have to be active across-the-board. we need to provide the right assistance at the right moment to the right people and this is also true in sub-saharan africa and southeast asia as well. promoting democracy and accountable government that delivers results from people should be at the heart of our agenda in every part of the world. in this effort and each of the other areas i've discussed, europe remains our partner of first result. from the front lines in afghanistan to the table with the u.n. security council, our alliances and friendships with our european friends and institutions that they have built have never wavered, and we look to europe as we take on

these global challenges in the 21st century just as much as we did in the 20th. that brings me to the fourth priority, economic statecraft. i sent a tail on this subject to every in the sea and council of last october and about to reinforce a person's how important our actions at the crossroads of economic and diplomacy are. at every turn which should be asking ourselves how can we use diplomacy and development to strengthen our country, how can we leverage our economic strength to promote our diplomatic goals how we build a global economic system that is open, free, transparent and fair. these are not new questions, but we have to bring them to the forefront of our discussion. i think for too long the treasury did economics, the commerce department and the u.s.

tiahrt come expert input, but we have the global presence. we are everywhere we have 1,000 economic officers. we have to be right there at the point of this year looking for these opportunities, working with and sometimes advising our colleagues in government about the best way to cut through all of the barriers. several weeks ago we hosted a unique and unprecedented event. we partnered with the american chamber of commerce and invited chambers from across the world along with business leaders. i told them we have made job diplomacy a priority mission here is the state department and i want to but that phrase, java diplomacy in front of you as well so we do need to do more to help american companies expand their business overseas and to promote foreign investment at home where we see corruption and red tape, favoritism, distorted

currencies or intellectual property theft that disadvantages american companies we must push back because those practices create unfair barriers to competition and slower economic recovery. from very large to quite small but agile exporting businesses said i always used to think there was no role for the government. i was out there and i was competing with a free-market system. i didn't need or in this your your state department to help me and now i look around and i see every other country from our european friends to our asian ones to have a full partner with their government and we need your help. what we are trying to do is enhance our efforts to speed up the visa process. more people are visiting and the more people that is it the more people here at home actually worked to lead to improve the quality-of-life for millions of people in order to create a

future trading partners and new markets. now oftentimes people who have a very clear view of what the policy and development or for find this kind of jobs diplomacy pitch a little bit jarring because it's not exactly what either diplomacy or development has been conceived of, but it's also gone on and also will go on. we have to be more intentional and effective in delivering to get my fifth point has to do with continuing to elevate development. it's an indispensable pillar of our national security strategy. an effective development requires indigenous political will, responsive, accountable to restaurant governance, economic framework that creates opportunities. to achieve that, we need to broaden our traditional development assistance tools and focus on mobilizing reform

through influence and engagement that controls on the strengths and resources of all relevant government agencies. diplomacy is central to that, and part of the work we did through the que dvr to help you as the chief of mission truly become the chief executive of the u.s. government presence in your country was to ask you to really support the development side of the ledger as well. i will soon be sending detailed guidance that covers modernizing our diplomacy to better support development. as we pursue our signature initiative, the global health initiative, the future, we are transforming the way we development. sometimes it is a little frustrating because we emphasize the country ownership, and a lot of people that of the development over the years, you know, the dillinger a country and say here's why you need to come and now countries are saying here is what we want.

so negotiating that is really a diplomatic effort that requires your participation to a our global health initiative will reach 6 million people with lifesaving treatments by 2013, creating the foundation for an aids free generation and the future initiative is driving agricultural growth and improving nutrition. so we are increasing our capacity within the countries so they can take on more responsibility. we have to move forward towards sustainability. we have so much rhetoric about that. now we have to translate into an active agenda. it doesn't work anymore. when we go into a country with our aid, the government in the country basically withdrawals from that area and uses the money that they were using for a sample on health to do something else, so we have to be much more engaged at all levels in the government. it's not just the ministers of

development, it's the finance ministers, the foreign ministers and everyone else. so, i think where we are looking to move is to partner with government, local groups, and the private sector cannot substitute for them and then to deliver measurable results, and the doctor has made creating a result oriented aid his highest priority. and of course i couldn't speak to this group without stressing the global focus that we have on that and see the status of women and girls. you know the arguments. i set them forth in a series of speeches, particularly the apex speech in san francisco last fall making the case that full participation of women is every economy including our own, mainly knocking down the barriers to participation, whether they be education or

access to credit for the right to inherit would raise the gdp of every country in the world. that would legalize a little bit like finland. but some could go up a very long way, and would be a tremendous step forward for prosperity. and we also are stressing of the women's unique contribution to making and keeping peace. we have worked hard with the defense department and the white house on a first-ever national action plan as to how we could involve women more effectively because most peace treaties fail. they don't have by and support from the populist, and where it is just coincidental perhaps, but there is a correlation where the women have been involved like liberia. the chances of it lasting or at least greater than not read so this week i am issuing the first-ever secretarial policy

directive on promoting gender equality. it contains specific steps to ensure that we integrate women and promote gender equality in every aspect of our gender policy development, strategic planning, budgeting and programming are monitoring and evaluation management and training practices. women are often the canary in decline. well, when it comes to transitioning to democracy or sustaining democracy, we need to pay attention to whether they are writing or not, because that is one of the earliest indicators of whether any society is going to sustain its space progress. and i am counting on your leadership as the chief of the mission to implement this guidance around the world. i should also note that there will be changes in our ambassadorial core this summer in following the november elec