>> what about president obama and his policy with libya. the agree? >> libya. president obama. he called for the removal of muammar gaddafi. i just want to make sure that we are talking about the same thing. i do not agree with the way he handled it. that is a different one. i have got to go back.

>> we mentioned that because on thursday herman came close to the session. they were going to sit down for a conversation as he prepared to issue his endorsement. herman cain's campaign said no, and they canceled the meeting. >> there is a small part of me that feel sorry for this hurricane -- for mr. cain. we found an intimidating environment, but that demonstrates how on qualified he is to be president, but on a fundamental issue, he is not willing to prepare for a events

like this. it shows a lack of understanding in policies issues. he is still under the impression he can deliver the press. they have a nasty habits of manhandling reporters on the campaign trail. not necessarily of favorite tactic. >> how important is one newspaper endorsement?

>> it is a conservative newspaper, so it speaks to a certain kind of voter. it has an outsized importance, and the editorial writers take it very seriously. herman cain who will tell you he was trying to collect his thoughts. when you have a tehran, you do not have an opportunity to spend too much time collecting your thoughts. they become very damaging to a campaign. >> the union leader will be joining us to take your phone calls and explain why he is endorsing your campaign.

>> good morning to you guys. i would like to ask a question, because there are only 400 rich people in the country. the democrats are really talking about union members. they are not talking about the guy who owns the restaurant, because there are about 300,000 of us who own restaurants. they are closing because we are not franchising. we own 33 kinds of taxes, 22 kinds of fees and state and local fees. i would have to make $1 million gross for my business to function and pay 60 employees,

but my husband and i only make $100,000, but we are required to pay the $1 million tax, not the $100,000 tax, so explain that to all these people who talk about the rich and millionaires and billionaires, the close of those 400 people, all of us small businesses are going to get dry and into this. -- dragged into this. >> you are saying there are only 400 wealthy americans, because the number is much higher. >> when they talk about it on the news, they are talking about the 400 people who are millionaires or billionaires who should pay more taxes.

>> the 400 figure is not quite right. that comes from the wealthiest of the wealthy in this country. it is not a millionaire environment. we are talking about zillionaires. -- about billionaires the reagan democrats understand the needs of -- about billionaires. democrats understand the needs of small businesses. we have done everything we can to try to help throughout the country, but there is this ideological test going on between republicans and democrats in the house and the senate were the republicans are standing up for the wealthiest and democrats are trying to fight for the working class.

i saw looking ahead at the iowa caucuses. >> hello. >> i am going to put you on hold, because we are getting an echo. turn the volume down on your television. >> good morning. how are you. >> go ahead with your comment. >> is mitt romney ever becomes the republican nominee, i would never vote for him, and half of massachusetts and would not. he was hated appear. we did not care for him at all.

i would go with the speaker of the house newt gingrich when i vote to. >> this explains the ann romney has got some work to do and why he cannot -- this explains why mitt romney has some work to do. he has to find a way to reestablish trust. a couple of years ago i started my own small business, and it was a nightmare dealing with regulations, and if you are working on a thin margin, you have to deal with state and local and federal regulations. then you have to pay your federal taxes and everything else. it is a disaster, and keeping up with regulations, they get back

to you sometimes or do not get back to you. it is really hard out there. the odds are stacked against small-business owners. these people have to make $1 million to pay the bills, and they get called rich people. we need to do more if we want to thrive as a country. >> go ahead with your cur question. >> this is for the republican strategists. it is going to cost 11 trillion dollars, and what we need to do

is start looking overseas and rebuilding this country for the 21st century, because we are dealing with 20th-century problems. i do not know what is wrong with the democrats right now, and what is going on with the gop is they are starting to have people -- >> we will get a response. >> a couple of points. the current tax structure keeps a lot of money overseas, and if we can repatriate that money, lower the taxes so the companies have an incentive to bring one trillion dollars overseas, it will create jobs over here.

the word should have -- the war should have been paid for, but the real cost driver is because of health care costs and entitlement costs, and if we do not get a handle on what is going to happen over the next 20 or 30 years, social security trust fund is upside down. if we do not deal with that we are not going to have enough money to pay for the pentagon, so we have got some real challenges to deal with, and i am not sure of our political system is up to the challenge. >> you had the negotiations with the speaker of the house over

inability to reach any agreement on where to bring an additional revenue and cut spending. we have a debt of 15 trillion dollars. you used to work with senator reid. the deadline is tomorrow, but technically it is wednesday. >> a couple of responses. number one, regarding the super committee process, the discussion can lead to a debate about whether the political process is broken. the fact is all you need to do is looking at what has happened with the committee, and it has given the power to move on an expedited process, and they have not been able to reach a deal. i spent 21 years in the senate,

a place i love and respect very much and have the chance to work for 11 and a half years for senator kennedy. i have the greatest respect and admiration for most if not every member of the body, but the fact is that the system is broken. what is going to take to fix it, i do not know, but something has to give somewhere, and just to be fair i would point out the system is broken because of republicans have an on willingness to deal with democrats, and mr. mcconnell told the new york times last year they are going to do everything they can to cooperate with the president,

and he gave a statement to the national journal where he said his number one goal was to make sure obama is now no one-term president. if you look get fat, it is difficult to see anything -- if you look at it like that, it is difficult to see anything getting done. i do not think the super committee is going to work anything out over the next couple years. >> a freshman republican is also involved in a number of conservative groups against raising taxes. here is what he had to say is the republican response. >> our work will be completed this coming week common and and i urge our colleagues in this effort. we have a once-in-a-lifetime opportunity to pass legislation

that will generate millions of jobs, create a fairer tax system, and put our government on a path to fiscal sanity. we do not have to follow the path europe is taking. we can continue to be the land of continual and prosperity. >> it does not look as if this committee and is going to reach the deadline. >> it is not looking good. i was hopeful this would get done. i think a couple of things have conspired to make this not happened. the deadline has proved to be a false deadline. the spending cuts do not going to affect until 2013, so i think a lot of leaders think there is no down side and we can fix it later on.

second, the financial markets are not going to react negatively. there's so focused on what is going to go on in europe, that it is a bad bet. they largely believes that precipitous, south -- precipitous cuts would not be good for economic growth. >> here is a portion of the program. was the super committee and a good idea or a mistake? wasashington's answer kicking the can down a road. it is a mistake. >> it seems to be an exercise

much like the bulls simpson commission, which was an effort to continue the process of getting ideas out there and how to deal with this, and i thought it would be too tempting to not take, but obviously, there was a lack of political courage, and i would make a point early on that president obama was not anywhere near the scene. he had no interest in participating in the super committee. he is in bali now, and his administration has been nowhere on this, and you need presidential leadership. the president early on gave a speech about his jobs bill, and

then it appeared in a campaign commercial. he has decided he is going to do and do nothing strategy and blame republicans on it, so getting something done is not in his game plan. >> he is on board air force one, coming home after a 25-hour flight from indonesia. >> president obama made it very clear according to administration officials, and to the democratic republican leadership in the house and senate early on that the president would get engaged if they would like, and the administration was politely told they could handle it and they were going to take care of things.

it is not the first or the last time i am going to disagree with them. i do not think this process was a mistake, but take a step back and try to figure out where this came from, and this came from the inability of house republicans to negotiate over the debt limit increase. from there came up process to try to deal with the deficit issue facing the country, but not to get too partisan, but it appears that the entire exercise was designed to try and spare the wealthy by making sure the middle class paid more than their fair share, so unless something turns around quickly,

i do not think the super committee is going to be able to act, and we are going to have to figure out what the next steps are appearing good >> could morning. welcome to the program. >> it concerns social security and medicare. since both of those are now solvent, why are you cutting them? why are you placing more deficit reduction on to seniors rather than put it on the programs but are really running the deficit up? >> that is a great question. the obama administration, members of the house and senate did agree to cut health care

program. they are largely taken from the provider side with no impact on seniors, but it appears to bee republications decided to try to focus most of the attention on cuts to medicare and medicaid and social security. democrats have resisted those cuts, and i suspect what is going to continue to be the case. >> we welcome our viewers from overseas. simon is joining us from london. >> how are you today? >> we are good. how are you? >> i have a quick question in relation to u.s. deficit. this is from a european

perspective, so please do not shoot me. any relation to the basic commodities like diesel? i was looking online before i made this call. the average price per gallon is about $3.70 in new york city, yet here in the u.k., we are paying close to $9 a gallon. surely it seems to me one of the best things you can do, which we have had to do is sustain a higher gasoline prices to get the taxes into the coffers of your treasury and look at pricings around the u.s., meaning that people have the money and consumers will have to spend more, because they do not

have the money to spend now, sir surely we need to see a more equivocal praise from your side of the atlantic, because it is not fair for the rest of us to try to pick up a global crisis and pay the bill for you, because that is the way we see it in europe. >> thank you for watching in great britain. >> we cannot raise gas prices a nickel, let alone $9 a gallon. we drive further year than in the uk. the u.k. is a much smaller country, and we drive more than the british do or the europeans, and that is our culture. mind your own business when it comes to raising gas taxes. that does not affect the world

market, and politicians say one of the first things you ought to do is raise gas taxes, that is the surest way to be a one-term congressman. that is not going to happen. >> the example which is 89 seconds he had in the debate last week. >> that is fantastic. there is less than zero chance he is going to be the next president of the united states. everytime i see that ron paul

phenomenon, i am fascinated by it. the odds aren't not stacked against him -- the odds are stacked against him. many of his views are far outside the mainstream, and he does not stand a chance. >> i think in many ways he has already won. i think he has shaped the republican primary debate in profound ways. he was the first one to have this incredible hostility to the federal reserve's. he has been an isolationist when it comes to getting out of foreign wars, and that is a growing popularity among some republican base voters. he has shaped how people look at

the drug laws and other laws the federal government puts on people. he has in many ways been a voice of freedom, and he is not going to get the nomination, but he is going to profoundly impact the debate. >> he is in the top two or three candidates for january 3, and that was a new ad taking aim at his republican challenger. >> fallout from the debt crisis triggered >> the nation's debt keep surging. >> change has come to america. >> i was willing to go along with it. >> i think there is need for economic stimulus.

the tracks where are the people but say all of this stuff is socialism. >> the government needs to be protection of liberty. >> we are bankrupting this country. >> we have to decide which way we are going to go. i am ron paul, and i approved this message. >> the latest from the ron paul campaign. all of the material is available on our web site at c- span.org/campaign2012. good morning. caller: how are you doing? i have a couple of quick comments. last night i was watching c- span, and and i have seen the democratic speech with rahm

emanuel, and shortly after that, the republican party is a big joke. i just turned the station as soon as he began talking. the big joke candidates are mitt romney and herman cain. that is a bid joke. i know john has to feel embarrassed defending them. he has to feel he is protecting a bunch of clowns, because that is what those guys are. >> are you embarrassed? >> not at all. i like all the candidates. they offer a variety of different visions of the future, and i think mitt romney would be a great president. i think newt gingrich has some

brilliant ideas. i think jon huntsman would be a serious candidate. all of these candidates offer important viewpoints. herman cain is a very important view point. we will see how the primary process and works out, and i think it is fun to watch. the republican party is not at 9%. congress is at 9%. none of the political parties are the popular, and that is because things are not going as smoothly in america as any of us would like. >> we will go to the dinner we covered with a former shifa of staff. let me go back to the issue of the super committee. "something has to give, but with

the ideologies so far apart, i am afraid there will be a lot of bloodshed. the coming election will either stayed the same or flip-flop with the same problems mirrored. god help us." that does explain the sentiments of a lot of people in this country. they are frustrated with washington. >> i am frustrated, and i know members of the house and senate are frustrated. i try to find a greater good in all of this. both sides are on as the reflecting their personal views and opinions, and they are trying to articulate their constituents, but there is a great debate going on in this country. i find it interesting that

republicans want to discuss income and the quality. that symbolizes that they are trying to figure out there is some banks out there, so it leads me to suggest when he says, and get a job and take a shower, so there is a great debate. there is conflicting opinions. a lot of interesting people are trying to work behind the scenes, but i do not see a change any time soon. >> let's go to massachusetts. >> i would like to ask the title

bias."ct of media fis what he thinks about that. ul purpose is're sol lambastes thing in a -- their purpose is lambasting. the moderator will ask a question, and within a response, rebuffing, so i guess in general, if any of these guys sees there is a bias that leans towards the liberal point of view. >> we live in an era of advocacy

journalism. i go on investment nbc -- on msnbc, because someone has to bring the republican side across. i would rather it be me, and i love doing the show. there is a difference between by us in journalism -- between bias in journalism, and they are trying to spark discussions. there has always been suspicion that "the washington post" and "the new york times" lead to the left. there are a lot of reporters that are very fair in both

organizations. the wall street journal leans right, and people understand that. there is a bias. a lot of people are not impacted by them, but i watch all of the networks, because i try to get an understanding of where they are coming from, and it is useful in that perspective, and i do not think anyone is going to get swayed by the chris matthews show. >> mitt romney is shifting in iowa. they have been cautiously playing to win in the iowa caucus. >> of fascinating development. i will agree with that. a couple of months ago he made a decision to spend as little time

in io was possible. he focused instead on new hampshire. having said that, according to that article, he has made a concerted decision to try to spend more time, energy, and .eginning to build a staff what is going to be interesting is the caucuses are dominated by evangelical christians in iowa, and i spent six years working for senator reid, who is a mormon. it is going to be interesting to see how that is going to play out in that state. no. 2, there are flip-flops in the environment and other issues.

i think he is going to have a hard time playing the state. >> this gives you a sense of what we looked at in 2008, mike huckabee winning in most of the counties in iowa, and you can see the strength of mitt romney getting 30,000 actual votes compared to more than 40,000 for mike huckabee. mitt romney's support was on either side of the state. >> i think he has decided he has to show he wants to win to come in second or third. i say that because they said, you cannot does ignore us, because if you come in fifth it is going to be really bad for you in new hampshire. i think they are saying, we probably are not going to win. coming in fifth place would not

be good for us. he decided to set out iowa and new hampshire. this is a media-generated campaign. the cables are covering this 24- 7. this is important to be where the media is. >> there is another debate on tuesday night. cnn has the debate at 8:00 eastern time. seas and radio will carry it at 10:00 eastern time. the former white house chief of staff and the mayor of chicago in iowa for the democratic party

fund-raiser and taking aim at this republican field. >> mid romney said he would be in i know what soon night. we should have known he would change his mind. he had to leave early. he had to run back to his most important people, the salespeople at tiffany's. cain randall little late. he was out a tutorial class, where is libby of? >> -- where is libby of? >> it is interesting romney is giving a speech, because he as a huge in chicago. illinois is a disaster.

chicago is a complete disaster, so instead of getting these partisan speeches, he ought to fix my home town. >> here is one from iowa. >> the republicans are having a debate across town. i do not know about you, but i have watched a couple of those debates. i never thought i would say this, but i am beginning to miss the wisdom of sarah palin. their debate was called the thanksgiving family forum, which is fitting, because i have never seen a greater collection of turkeys. >> your comment. >> great line about sarah palin.

i have not spent much time watching the republican debates until a couple weeks ago, and i was dumbfounded. if i do anything this morning, i want to urge every american to watch more of these debates, because the more they watch these republican debates, the more they are going to be turned off by the extreme rhetoric. the more the merrier. as many debates as possible, and if i was the obama campaign, i would be sitting back and feeling pretty good. >> i thank you both for being on here. i have a quiz for both. this is the second quiz. what happens to the money in terms of donations contribute to

the failed candidates. newt and herman cain know they cannot win, but they are already eyeing the campaign funds of the losers. >> they use them to pay debt, and if there is enough, they use it to influence other campaigns. sometimes they hold onto it to promote their own ideas. get their website up. they may be give it to some campaigns that they care about. usually they use this to buy political influence. >> welcome to the program. go ahead with your comment.

>> i would like to compare and contrast the bill from away back when to what is going on with the super committee. i think it would be beneficial to everybody to know and to get the budget back in control. >> a couple of ways to respond to the viewers. the cynical way is that it did not prove to work out as suggested. for many the answer is just --

so just where this is going -- that suggests where this is going. that is one way to answer the question. >> it did a couple of things. it established the discretionary, and that did compel congress to act. second, it established new rules in the senate. you could not do anything unless you cut spending. there was a decade of deficit reduction. by the end of the decade we hadn't a surplus. it was partisan in 19th region we had a surplus. it was our decision in 1996, but through all of those things they

came to agreements. this could have an impact, but they will have to be built on by future congresses, and every 20 years or so congress decides it is going to spend more money. >> what about where we are spending millions each week to reduce the deficit. >> it will be a significant health. you have to sharply reduce taxes or deal with entitlement programs. >> what does happen next? >> a couple of things. if the subcommittee fails to act there are a handful of issues and the need to be addressed. president obama is going to new hampshire on tuesday.

congress also needs to address unemployment insurance. there are a host of others the need to be addressed. there are a number of issues that need to be addressed. i forgot. the extension of bush tax cuts. that also needs to be addressed by the end of the year. some of these can be done next year and made retroactive. that is far too attractive to make these retroactive, but short-term, i think congress is going to be consumed again why a debate in early december on unemployment insurance and cutting the payroll tax.

>> we want to share just one moment from last night's "saturday night light." >> two new polls show that newt gingrich is passed mitt romney, because if there is one thing he would be bad at, it is catching up to people. it is reported he received consulting fees of between one points $6,000,000.10 $0.8 --lion from freddie mac's 1.6 million dollars and $1.8 million. i do not know. i am not going to count you out yet. >> if you are newt gingrich right now and people are talking about you on saturday night live from where your campaign was, you have to be thinking this is fantastic.

>> if they are talking about you like that, you're in a heap of trouble. i'd to the fact all of the reporting going on about our business -- add to the fact all of the reporting about new business ties. i do not see it happening myself. >> both of our guests are veterans of the congressional business office on capitol hill. thank you both for being with us. i want to welcome in person the pentagon correspondent. this is the headline from this

morning. the essence and indicates the afghan government is preparing for the long haul of u.s. troops being over there. >> they have a long-term strategic partnership. they favor some sort of who stipulations that are really going to be a problem, including the night raid, which is difficult for the afghans. the u.s. government now believes this is an important tool to go after terrorists in afghanistan after a troop levels dwindle. >> what is the difference of international law in afghanistan and iraq?

>> the situation is different if we look at long-term draw down. in the case of iraq, you have a country with a strong military, with a government whose institutions are much stronger. the anticipation is in afghanistan they will need outside support for much longer, and it is hard to envisage a situation in afghanistan like in iraq where they say, we do not need you anymore. we have some shortfalls, but i think it is time for foreign troops to go home. >> this gives you a sense of how many foreign troops are on the ground in afghanistan. the u.k. has about 9500. also a substantial presence when you compare it to other countries. romania has 1300, almost 4000

from italy. >> it is much more of an authentic coalition in afghanistan and iraq was. the united states is directly conceiving overall strategy and during most of the heavy lifting in terms of logistics, surveillance, things like that. >> is president karzai for-in control? >> president karzai controls a very complicated country from a tribal political perspectives, and afghanistan has barely been a country, and he is aware of that. he does have some political support, and his relationship with the west has been important. there are fears the once the

foreign military presence and some of the country could be pushed back into civil war, and that is one reason they want to make sure there is a commitment to an enduring western military presence, but they want to do that in a way that suits their own interests. >> i want to go to the numbers. >> military casualties have climbed steadily. itt's continue to take a major toll on soldiers.

>> our lines are open. you can also join the conversation online at twitter, or send us an e-mail. ms. c ryan -- missy ryan. we're focusing on the situation in libya. this is essentially the last holdout outside of one or two individuals involved in the gaddafi regime. his capture indicates there is no chance he would try to redirect his father strategy. >> i think it is interesting he managed to avoid capture four months, and his father was captured and kiln a month ago, and apparently he was trying to exit libya.

he obviously feared the same violent and his father met. what is happening now is a libyan government says they would like to try him in libya rather than send him to the hague, where he faces charges of crimes against humanity, and it is going to be a huge test as to whether or not they can organize a trial that would be credible, sir, transparent at such a sensitive time. >> how stable is libya today? obviously a lot of change going on, but people say the day to day life is relatively normal under the circumstances. >> certainly to some extent normal life has resumed. that said, there are still pro- gaddafi die-hards who continue to fight, and the more important test will be how well do these embryonic government no institutions stand up to

these kinds of challenges such as the former leader and providing services. all of these things are very difficult for any country, especially a country like libya, which had an autograph for 40 years and a very weak government. >> when were you last in libya? >> i left libya on august 25. >> what were your impressions of the people? >> i spend all my time in gaddafi-controlled tripoli. they were trying to minimize the threat rebels were imposing to them. it is a country that it's very divided. this is where the uprising occurred. it will in some ways have some

advantages in terms of oil resources they have in trying to build an economy, and perhaps return to a world economy. that said, it is hard to get over the social divisions and violence we saw since the uprising occurred in february. that cannot happen overnight. >> we are talking to missy ryan. the president addressed the australian parliament. >> in afghanistan we have begun are responsible transition so afghans can take responsibility of their future and coalition forces can begin to draw down. with partners like australia, we struck major blows against outside and put that on the path to defeat, so make -- against al qaeda and put them on the path to defeat. >> about 1500 australian troops in afghanistan.

as you look at this transition and the responsibility we have, what lies ahead over the next 12 or 18 months? >> president obama is trying to draw down the troops he ordered into afghanistan after his 2009 strategy review. they will be withdrawn by the end of next summer. the white house is already asking for recommendations on troop levels for 2014, and we already expect there to be some sort of foreign u.s. military presence following 2014. we need to do that because afghan security forces will not be strong enough to operate on their own. we need a base to conduct operations in pakistan. the drone operations, the drone program against militants in

western pakistan is important. pakistan is a difficult, and reliable ally. we see it a rock-solid and -- pakistan is a difficult, unreliable ally. >> one of our viewers is saying we cannot afford to keep karzai, especially with u.s. soldiers still dying. tell him he gets only 1 billion and no u.s. soldiers died. the point about how much this is costing us, a significant cost to taxpayers in afghanistan. >> i would not expect congress to cut any of the money that is seen as the key for soldiers on the ground. i think areas that could be targeted for cuts in afghanistan would be our support

of the afghan national security forces, which could be 5 billion per month into the future. also our support for reconstruction and development in afghanistan, which has been a big part of the obama administration strategy there. the united states has spent $50 billion restructuring agreed to reconstructing afghanistan. -- has spent $50 billion reconstructing afghanistan. we have spent millions getting girls to school. >> if you look at a map, where is the country most unstable? >> one might have said a year ago the south, which is the traditional heartland of the taliban. the u.s. military in surging into those areas has had a number of important tactical successes on the ground. they have been able to push the

tablet bound -- knows the taliban -- push the taliban out of the areas. the security has deteriorated, and we see a network that is part of the taliban. they have been very aggressive, and they have been involved in a number of high-profile attacks that undermine american perceptions and afghan perceptions about which we security is heading in afghanistan. >> i want to point to the border with iran and asked about the threat or influence it was

with insurgent groups inside afghanistan. >> the pentagon does accuse iran of supporting militancy in terms of weapons and no logistical support. it is really not the primary focus when we have a conversation. we are focused on afghan insurgencies. pakistan is the most important country there, and the obama administration is trying very hard to bring about a change in pakistani behavior. it wants them to crack down on these proxy groups, some of these militant groups such as the taliban that operate within pakistani borders and are able to renew their fighting force and launch operations within afghanistan. >> tom is joining us from maryland, the democrats' line. >> good morning. can you hear me? >> yes. >> i have two questions. one is for your guests on her being a reuters correspondent. are there any black reuters correspondents?

>> i do not know if you want to respond to that. >> yes, there are. >> just a brief comment, and then my question. i am watching this documentary about one of these bases in afghanistan, and there was a most disturbing picture about how exposed our soldiers are, but my question is why should the united states these spending not 50 billion, but anything in terms of the reconstructing a tribal society with the geography as it is, knowing the history of afghanistan who going back thousands of years? guest: i am sure you know the history of the initial.

.

>> thank you, secretary. you can see the solyndra bankruptcy has generated a political controversy. the debate is not a bad thing if we use it to learn the most effective means of clean energy and amount of risk we are willing to accept and help our country la lead the energy industries of the future. i don't feel like the majority has done that. we have even misstatement of fact and use of selective documents out of context. to ask questions to see if we can get the record straight. applied for a d.o.e. loan during the bush administration, is that correct? >> that's correct.

>> when you received early briefings on the pipeline was solyndra presented as an ongoing application that had under john due diligence and was nearly ready to proceed or was it presented as an application that was rejected by the previous administration? >> it was presented as an application the various processes recommended we go forward with the loan. >> i would like to address one specific refrain from our political colleagues. the assertion that the bush administration rejected solyndra's application only to have it revived by the obama administration. there is a document tab 73 in your binder that was sent to the director of the loan programs office during the final months of the bush administration. it listed solyndra as one of the three highest priorities through january 15 it says 2008 but given the time of the e-mail it is obvious that means 2009 because the e-mail was december of 2008.

i would like this document made part of the record, mr. chairman. >> not hearing an objection, so ordered. >> in early january of 2009 the application was reviewed by the credit committee of d.o.e. they raised specific questions about the loan and remanded it for further consideration without project dis. the committee staff spwaud interviewed the director of the loan program office. the committee interviewed the person appointed by president bush to serve as c.f.o. of the department. mr. isokowitz who was appointed by the president continued to serve as c.f.o. until july of 2011 and was the supervisor as

the solyndra application was reviewed. do you have any reason to doubt the credibility of these individuals >> no. >> they made it clear that the application was not in any way rejected by the bush administration. they stated that the career d.l. too many in the loan programs office continued to gather more information and negotiated better equity split for the taxpayers after the first credit committee. both of these officials confirmed that consideration of the solyndra application went on unabated as the bush administration left office and the obama administration came into office. is that your understanding? >> that is my understanding. >> was it ever your understanding that the solyndra application had been rejected during the previous administration or that the application was somehow on the shelf only to be revived by the obama administration? >> no, quite the contrary.

the career folk in the department of energy in both administrations felt this loan was at the head of the lien of the ones we should be looking at and it was progressing according to the procedures. >> i thank you, mr. secretary, i think it is very important to clarify the record regarding the history of the loan guarantee and to put to rest some of the statements that were made that contradict that record. i'm happy that we have the e-mail and the documents that, i think, clearly show that this was something that was proceeding and was recommended to proceed when the bush administration left and handed this over with these career people that i yield become my time. thank you.

>> all right. the gentleman from texas, mr. burgess, you are recognized for five minutes. >> thank you, mr. chairman. secretary, thank you for being here and thank you for your generous time spending with the committee. i want to say at the outset i think solar energy has a place in the future of this nation but i'm not saying what has happened with solyndra underscores i think it has set become the prospect for perhaps some time. let me ask you a question. you said earlier it is and ttable what happened some of these were going to f l fail. in fact, the first two out of three projects that you approved have failed. the president has said it could be as high as a 50% failure rate. what is an acceptable failure risk for this type of project?

>> i would say that given the total credit subsidy that was appropriated and set aside, the $10 billion which $2.4 billion for the 1705 program, if we approached something on that number, that would be very bad. i personally don't think we are going to get anywhere close. if you take the loan program in its total, not only 1705 but atvm program, it with -- >> let me stop you there because they won't let me go over like others. you watch. >> thank you for recognizing that. >> here is the deal. the confluence of the loan guarantees coupled with the rapid injection of dollars from the stimulus bill has really led, in my opinion, to some touchy decisions being made and led you as the secretary of the

department of energy to behave like a venture capitalist. but you are the secretary of energy. you hold the nation as nuclear secrets. you maintain the nation's nuclear arsenal. you are not supposed to be a venture capitalist who takes risks. is that correct? >> first, the loan program is not a venture capital. it is for something krpbd the initial -- beyond the program and the loan program as set up by congress said here is the funds to cover for losses. >> the bottom line is you are -- i was in private business. i understand what it is like to take a risk. i understand what it is like to fail. but you are the secretary of energy. you earn almost $200,000 a year. if you approve a program that fails, you go home and you earn $200,000. none of your assets are attached. none of yours personally is put at risk. do you understand how people are uncomfortable with this concept

of the department of energy behaving as a venture capitalist? >> as i said before, this was set up by congress and congress appropriated in the 1705 $2.4 billion to account for the losses. >> as someone sitting in the committee in 2005 when it was approved i don't think any of us cover foreseen what was around the corner with the rapid injection of cash from the stimulus bill. most of us on this side opposed that. let me ask you some questions subordination because my colleague from texas asked some on it. you said it was a difficult choice to make about the subordination. correct? >> it was difficult because by that time we knew the company was in trouble and we again were trying to maximize taxpayer recovery. so all of our actions were focused on that. >> this almost seems like a tortured legal opinion, but do you see how some could look at this and say, this is a

violation of the law 1702 that was much talked about this morning where taxpayer obligations were not allowed to be subordinated. i realize there was again what i would try as a tortured legal opinion but did you understand the average person says that is not right, that shouldn't have happened? >> again, i had the opinion of general counsel i trusted. i had the opinion of many of those that went through a rigorous review process. >> i will stipulate that. do you see how regular people would say i don't think that is right? i will be the first to admit that in the energy policy act of 2005 perhaps as an oversight be regarded as a mistake there is no penalty, civil or criminal. no penalty for violation of that. but do you feel -- at the end of the day you earn your salary whether things work out. but do you feel that you owe people an apology for having

subordinated the taxpayer dollar to what turns out to be a risky venture? >> i think certainly it was regrettable what happened to solyndra but i go back and say when the market was falling, the prices were falling out, we were focused on trying to recover as much of the taxpayer dollars as possible under those conditions. >> one last thing. again, in my mind this was technically a violation of the law although there is no penalty. have you discussed with your boss whether you should continue in your position having violated the spirit of the policy act of 2005? >> have i discussed with my boss that? no. >> is he comfortable do you think with you continuing your position whether there was a violation of law even though there was no penalty? >> we believe there was no violation of the law. >> again that is a fairly tortured legal explanation provided to this committee.

i think the lines are straightforward. a democrat was very uncomfortable about the aspect.ation i remain very uncomfortable. i have ve to tell you not seen a poll but i think broadly across the country people understand this was not right. >> i will let the record show we let you go one minute over like else.body the gentleman from arkansas is recognized for five minutes. >> thank you, mr. chairman. mr. secretary, i believe it is important to members on both sides of the aisle to understand exactly why solyndra went bankrupt and make sure the department of energy is doing enough to protect the taxpayers. there's been a lot of partisan and political rhetoric associated with this investigation. to try to take it beyond that and remove the partisan and political nature of it and try to get to the facts. as i understand it, the department of energy was not the only entity that believed in

solyndra. private equity investors made significant investments. in march of 2010 the "wall ranked solyndra number five in the top 50 venture backed companies. that same year m.i.t.'s technology review named it one of the 50 most innovative companies. mr. chairman, hind sight is 20-20 and predicting the future of innovative technology is particularly difficult. in the case of solyndra, none of end result. as any banker doesn't like to make a loan that defaults. but it is clear that the department of energy wasn't the only entity convinced that the company had a good shot of success. smart investors and analysts and technology experts from wall street to m.i.t. and other outside observers got this one wrong. so, how do we learn from this

and massive forward whale -- move forward while continuing to advance turn renewable forms of energy? we're shipping $300 billion overseas to buy energy. that is a $300 billion payroll we could have here if we could make more of our own energy. so, i want to ask you some questions until i run out of time. on the topic of due diligence done on the solyndra application, given your scientific pwrpbd i would like -- background i would like your view on why the department of energy and investors decided to bet on the company's technology. in 2007 the department of energy submitted solyndra's application to the national renewable energy lab in colorado for review. the lab gave solyndra the highest technical merit score of any application d.o.e. has ever received and that was in the

previous administration when all of that happened. secretary chu, you are a nobel prize winning physicist and you ran a national laboratory that did work on renewable energy. what can you tell us about the national renewable energy lab process that really helped us to get to where we are today? >> well, the national are you knub renewable lab is one of our great labs and they have great expertise in solar and out of that grew another technology that patent has been licensed to general electric and general electric today is investing in that $400 million that grew out of that.

and this is -- i just spoke with the c.e.o. of g.e. and he said no, we think that this is going to be a very competitive technology. we think we can compete with the chinese and going back this is words that came out of the department of energy lab stores. but in addition to developing new technology they are experts in assessing technology. >> after the department of energy's review solyndra was invited to submit a full application to the department of energy and during this it underwent multiple third paerty m hill submitted a review. solyndra's business plan relied on studies by various consulting companies. d.o.e. relied on outside marketing reviews by a host of

experts, credit worthiness and engineering including dunn and brad street. r.w. beck, fitch and others. given all of this internal and external analysis back to 2007, as it relates to solyndra, did you feel confident that the d.o. did its due diligence on the solyndra loan? and if not what could we have done differently to ensure we would not be here today? >> as you recounted there is extraordinary due diligence not only in the insulin excellent loan but every line. that is why it took on a rough scale even with the processes a year or two years to actually do the due diligence on the loans. so, it was this combination of events the most striking being the rapid drop in prices that is stressing companies all around the world not only in the united states but in asia as well as in

europe. >> mr. secretary, i would encourage you to try to figure out what went wrong and keep this from ever happening again while continuing to advance alternative renewable american made energy at home. >> we in fact, if the chairman will allow me, we in fact based on the solyndra experience, have not only have now a separate team within our loan office to monitor the loans and disbursements. but as we are also bringing in others, for example, in the department of energy renewable energy there is a group that is expert in solar, our sunshine team headed by someone we recruit recruited a member of the national academy of engineering who understands the business well and they provide yet another set of independent eyes to monitor the loans and disbursements. so what aware doing as the loans go forward we will be watching lake hawks given -- like hawks

given the rapid changing market conditions. >> the gentlelady from tennessee is recognized five minutes. >> thank you for being with us today. secretary. i feel almost the need it sit here and remind all of us in this room this hearing today is not about solar power. the hearing today is about the possible abuse of executive power and of the taxpayer money. and we desperately want to get and we are being diligent in trying to get to exactly what happened with this process and where it ran so far afield. we have been through a series of red flags that existed and seem to have been transparent prior to the loan being approved. but i want to pick up there. after that loan closed in september 2009, at that point did d.o.e. require solyndra to provide d.o.e. with financial

information or other additional data, after that loan was approved? did you go back and say we need to find some additional data? >> after a loan is approved and as we go through disbursements we are in constant communication with the company because the disbursements -- we've a contractual agreement and as they build the stipend they have to build it as they said they would build it and we disburse funds after they have spent it to build it. so we are in constant communication. >> the question is really a yes or no. did you or did you not require additional information solyndra? >> yes. >> ok. were you aware that d.o. staff repeatedly raised the issue of solyndra's parent's financial health apnd lack of working capital as a cause for concern? >> now, there are two parts of this. one part was the working capital

in order to complete the project. as i said, there was a model which -- that there would be an interruption of cash flow but in actual fact upon reexamining th this, it was not an issue and in actual fact the plant was built. >> given that you were aware there was a possibility of an interruption of cash flow, why wouldn't you have gotten additional financial information on their cash flow and cash flow rate? >> i believe that during this time there was communication with the company on its cash flow issue. and again it was related to me that this was a particular model that said this in one month there would come to a point but the following month they would be fine. >> looking at lessons learned does the d.o.e. now require financial information about the

parent companies of its project deals? >> we always do. as i said before on lessons learned, when there is a rapidly changing situation, rapidly changing market we have additional sets of eyes not only within the loan program but outside the loan program. >> ok. the loan programs office has engaged in the kind of enhanced monitor i monitoring that you are saying you put on solyndra in these types of situations. are you doing these with the 28 other companies that are in the program? >> being, we are monitor iing l the loans on a minimum of a monthly basis because -- >> what about weekly cash flows? >> in some instances weekly. >> what about a board observer seat? >> we did have a board observer seat in solyndra after the restructuring. in that seat as with the equity it was a rapidly

changing dynamic and the equity investors were as surprised as we were. >> let's go back to the cash burn rate issues. about the savvy investors that were there for solyndra. they had a billion dollars in cash. but we keep hearing about that cash burn rate. was d.o.e., in your opinion, and were you aware of those cash burn rate issues before or after that loan was closed in september of 2009? >> i believe that they were aware of what would be what happening with the business plant and with any new manufacturing plant, as you manufacture, as you build up -- >> were you personally aware or in general? >> in general as i said i have enough experience with looking at start-up companies to know that that is very -- >> did anyone breakfast you specifically on solyndra's cash

burn rate issues? the -- as the honor progressed, yes they did. >> but not before the loan closed? >> not before the loan closed. not that i recall. >> what did you know about the financial health of solyndra before you approved that deal? >> it was believed to be a healthy company at the time of closing. bond rating was something like a b-plus at the time of closing. dictated by the o.m.b. >> why did your allow that company to continue to pull down millions of taxpayer dollars after you discovered the financial problems in that company? >> that is an excellent question. so, as we began to know that the company had, the parent company, had cash flow companies, not the project, we faced the decision. you are building -- the loan was to build a factory.

the factory was half built roughly speaking or 2/3 built. if we pulled the plug then we were certain that solyndra would go into bankruptcy. then we did two analyses. if you completed the factory and sold it as an ongoing concern or -- and you give them a fighting chance to survive as an ongoing company, what was the probability? we faced this difficult choice and we felt in the taxpayers' interest the highest probability of recovering as much as possible of taxpayer dollars was to disburse the funds. >> was it in the taxpayer interest or in the desire for green energy jobs that you made the decision? >> when we make a loan, we have a very green eye shaded approach. it is a business transaction. so we said we have to by statute of law say that there is a reasonable prospect of this loan

being paid back. now, having said that, we are also mandated to make innovative loans. and again the honor loss reserve was designed and appropriated by congress in order to attack care of unfortunate instances such as this. >> the gentlelady's time has expired. the gentleman from california is recognized five minutes. thank you for being here today, mr. secretary. i had the pleasure of listening to your testimony on march 3 of 2010. at that time you stated quite distinctly that you believed that nuclear energy remains a safe and secure and economical source of clean energy. do you still believe that today? >> well, if you are asking, yes, i believe nuclear energy can be safe and secure. >> that is all i needed. i wanted to make sure that you are a high energy physicist and

probably knows that of anybody who has ever sat in your chair you probably understand the realities of that technology better than most if not all of your predecessors. you are also well-versed in not just nuclear technology but you have been on a steep learning curve when it comes to pho photovoltaic technology, too, correct? >> the learning curve started perhaps 10 years ago. >> my question is this. you distinctly understand the advantages and disadvantages of polymo polymonoand amorphous or thin film technology, right? >> i do know the advantages and disadvantages. do you personally own a solar array or photovoltaic ray of any type? >> no. little insure -- flash late

solar but not on the roof. >> if you were buying something today to put on your roof, and you had the choice of the three different divisions, which would you choose? >> it would really depend on the price, the guarantee, the warra warranty, how can the panels would last. it would be an economic decision. >> knowing what you know with those three categories, with the same square footage array, same pri that awouldn't you agree reasonable consumer at this time would be choosing either mono or polycrystal if we were going to use it on your own residence at this time? >> no, it is not clear. because the technology is actually a very good technology and this is why the u.s.

companies are investing in part in film technology. >> are you sake the production of thin film is equal to the other two to goes? >> well, there are companies like general electric placing big bets saying it will be superior. >> big bets for the future? >> they are investing today. >> and the existing technology today do not reflect that. >> no, sir, i would disagree with that. >> i appreciate that and i'm surprised that you disagree with that. but when we make reference to china and the chinese investment are you aware the overwhelming of the chinese investment is in oly and mono and not amorphous technology? >> i'm aware of that. >> is that they were betting on the additional prove technology was that in your understanding sold as being a reason to move

into a tpnew, pretty radical of how to produce solar panels using the amorphous technology? was there a conscious effort that you could jump over and beat the chinese at the game by using a new type of approach, that they were not willing to invest in? >> well, what the chinese do typically is they take an existing technology and they bring it a very large scale and get economy of scale. >> was that a decision that you knew that the chinese weren't really placing bets on a amorphous and there could be a market opportunity to beat them to it? >> the chinese actually were investing in amorphous but that tourpbtd to be a bad -- turned out to be a bad bet for them. >> not to interrupt you but it seems like it was a bad bet for us and i think you will reflect

that the false starts in pho photovoltaic the worse problem have been in amorphous. >> i think you mean thin film. >> then film. >> no, first of all this is not a department of energy -- this are or companies investing in thin film. since we developed the technology there is more technological head recommend in thin film. it is much cheaper to manufacture. the quantum efficiency of the thin film is coming up much more rapidly. so, this is why -- >> but historically it has had a problem with durability and production except very low light applications? >> no, i think that -- >> you think the durability of thin film has been equal? >> you are again maybe mixing

amorphous with cateluized. >> that hopefully the new breakthrough we will see? >> it was developed in a national laboratory, licensed to other companies and it is very competitive. >> was solyndra proposing to use that? >> no, solyndra was using another technology called sigs. >> which doesn't have that? >> no, it has the same capability as the overall efficiency. at the time they were the same price in terms of production efficiency and they were making improvements. >> thank you, mr. chairman. >> the gentleman from georgia is recognized for five minutes. dr. chu, i hate to start with a sports analogy but in regard to the restructuring of the solyndra loan i think i will give you a little sports analogy.

this sunday the atlanta falcons were playing the world khpb new orleans saints in atlanta and went to overtime tied and the falcon coach made a decision deep in his own territory, fourth and one to go for the first down knowing that if he punted the ball back to the new orleans saints and their great quarterback drew brees that they would be unlikely to stop them. so he goes for a first down and misses it. and two plays later the new orleans saints have a chip shot field goal and they win the game. so, he takes a chance, makes a ridiculous decision, i think, but it was not against the law. it was not against the law. now, in this situation of restructure being the solyndra loan i think what was done by the department of energy, despite what the counsel has

said, is breaking the law under the energy policy act. and i would just like to know from you, mr. secretary, when the folks at treasury, the people that actually made the loan -- because this was not a $535 million loan guarantee. it was a loan coming straight out of the federal financing bank. and they said in a letter or e-mail to your folks at the department of energy, before you do this restructuring, i think you better get an opinion from the justice department. now, the department of energy ignored that and went ahead and got their own letter from in-house counsel and came up with some, in my opinion, bad idea and the law was broken. you have explained your feeling was well, if you didn't do it the taxpayer was very likely,

almost immediately to see a bankruptcy of the company and total loss of the loan, the $535 million. and if you restructured or allowed them to come in with $75 million more private setting, that that might save the day. so, it was a tough decision and you approved and went ahead with this restructuring of the loan. clearly a break in the law. you have seen the slide earlier, the language is pretty clear. and the result of course was the same. not unlike what happened in atlanta this past sunday when coach smith made that fateful decision. my colleague from louisiana here says it was a good decision. but everybody said this decision you made was a bad decision. i just don't understand why you

didn't go ahead and submit this to the justice department and ask one of their high-powered lawye lawyers, assistant attorney general or what, to give you a legal opinion on that. why not? >> it is my understanding that one goes to justice if there is a change in the conditions of the loan if you, for example, decrease the amount that would be paid back or a decrease in the interest rates, things of that issue. again, it was not only the opinion of the counsel within the department of energy with season richardson and -- susan richardson and -- >> mr. secretary, i apologize for interrupting you but i don't think the folks within the department of energy in that loan program were the experts in this case. the bankers of the federal financing bank in the treasury department clearly they are the experts and all of a sudden they are worried about the loan.

let me move on to another subject and i want to ask you if you are familiar with a recent "washington post" article i believe this is november 15 or just a couple of days ago and the title of this "solyndra, energy department pushed firm to keep layoffs quiet until after midterm elections." this article -- and i would like to ask unanimous consent to submit this for the record. >> so ordered. >> in this article, basically, they are saying, the solyndra performance, were trying to make sure that the bank, the federal financing bank, would continue to advance them loan proceeds, maybe even a little in advance of when they were due, and basically the department of

energy, according to this article said well, look, we though you are going to have layoffs coming up, it has been leaked to the press, and we would prefer that you not make the layoff announcements until november 3 one day after the midterm elections. and of course they got their advancement of the loan. a little bit suspicious. do you have any comments on that at all on the timing of that? >> yes. first, i was not we're of any communications with our loan office with the solyndra people until that article came out. way that i do business. i'm looking at the loan, the prospects of repayment and looking out for taxpayer interest. and those factors are not part of our consideration. something like that was not discussed with me and i would have not approved it. >> mr. secretary, i believe you. but this looks highly political.

i yield become. >> thank you. the gentleman from louisiana is for five minipulates. >> i praoeappreciate your havi this hearing. thank you for coming before our committee. i want to express similar sentiments dr. burgess. i support the energy policy. we are sadly lacking a policy that allows us to use the resources we have. we have to use the things we have including wind and solar. but clearly as we can see those technologies still have is not advanced to the level they need to and what is at heart here is the question of this solyndra loan, the $535 taxpayer money that has been lost and how did away get to this point. one of the big shas -- issues that i have struggled with as when we get to subordination

when the loan was restructured, this is the law of the united states and it seems clear to those of us that have looked at the law that you cannot subrow get the taxpayer. you can't put the taxpayer in the look of the -- in the back of the line when you decide to restructure. so this is the actual restructuring that we got from agency. this is the document that initiated the restructuring of the loan including the subordination of the taxpayer. i notice that on the last page is this your signature on this page? did you sign off on this document? this is tab 59. department of energy and this actually deals with the of the loan guarantee to solyndra including the restructuring. did you sign off on this? >> yes, i did. >> i want to verify this is your

signature? this is my signature. >> so, when you look at the law -- and did you look at the law before you signed off on this document? >> yes. >> this is not a long law. it is not 50 pages. it is not even a paragraph. >> that's correct. >> you looked at this one paragraph and even though it says the obligation shall be subject to the condition that the obligation is not subordinate to other financing. you read this and you can still determine that it is ok for you to subordinate the taxpayer even though the law says it is not? >> we did not subordinate the taxpayer under the terms of the original loan. >> does the tax pare have first dibs when the first dollar comes in from solyndra? >> at the time of -- >> that is a yes or no question. >> right now, after -- >> yes or no. does the tanks -- taxpayer have

first dibs or does some other company get first dibs on the? >> after restrfping, no. -- after restructuring, no. >> now back to your legal counsel, your legal counsel did look at this. not only did the legal counsel look at this and i will go to give of the legal opinion, tab 67, their legal opinion says this reading of the provision is reinforced by the use of the word "is." if that is how you hang your hat but let's go beyond your department's attorneys. we have an e-mail and we discussed this in a previous hearing in the committee. gary burn earn -- burner said the statute rests with the department of justice the authority to accept the compromise of a claim to the u.s. government. they have recommended that you to the department of justice. did do you this? >> we did not because we --

>> why would you not go to the department of justice this is not somebody on our side. this is t this is the obama administration saying you want to go to the department of justice because we don't think it is legal to put the taxpayer in the back of the line on a $535 million loan. why didn't you do that due diligence? >> because when you -- within the covenant of the loan if you are acting within those original agreements you need not go to the justice department. >> i guess that is your opinion. i think it is wrong and it will come out that you did violate the law in that regard. it is a shame for the taxpayer. i want to know who all the people were in the decision making process? was anyone at the white house the decision to restructure the loan, not to subordinate? did you get pressure? we have e-mails showing there was pressure from the white house. one reason we are trying to get documents from the white house we have not been able to get that. we had to subpoena and we have

not gotten it all. who in the white house was talking to you about the loan?ing >> to the best of my knowledge i have no knowledge of anyone saying you need to restructure the loan. this was -- >> if you get any information on we are going to try to get the fact the. we are trying to get it the bottom of the loss of $535 million. i have heard talk of politics and soon e-mails in the administration about politics as we have seen the "washington post" had the front page story talking about e-mails from within the department of energy saying pressing solyndra they are not concerned about the layoffs, they are not concerned that people will lose their jobs, they are concerning with the timing, mets. this is disgusting. i would hope that you would go -- this happened under you. you testified you knew nothing about t. i hope you will go back to your agency and have some heads roll. people need to be held accountable because political decisions were being made in

your department. they were being made in the white house and below you and hopefully maybe unnot making any of them but it is strange they are being made all around you and we are going to fight to hold people accountable because $535 million in taxpayer money was lost. i don't see any khaepb of e-mails looking out for taxpayer moan. i see e-mails looking about the politics. that is what stinks the most about this. i know we will have another round. >> the gentleman's time has expired. >> i yield back. >> just to follow, you still who at the white house and you have no interest in finding out in your department, you don't have -- you don't know who in your department was involved with this and you have no interest in finding out? >> no, we do have interest in finding out. >> when are you going to do it? >> certainly our general counsel's office will look at who was doing these things. >> all right.

the gentleman from virginia is recognized five minutes. >> thank you rb, mr. chairman. i'm going in a shrill defend direction. 1702-d-3 is the subordination and i will get back to it but first 1702-g-4-a. that would be the language of that if the borrower defaults on an obligation the secretary shall notify the attorney general of the default. i point out to you december 13, 2010 letter to solyndra from mr. silver, jonathan silver the head of the program and that is not in your book. that document be admitted to the record by unanimous consent? >> so ordered. >> if we could get a copy to -- >> serving the right to object. >> it is a letter from

mr. silver who testified previously the executive director of the honor program to -- len program to solyndra and in that letter he notices that they are in default. this is december 13, 2010. >> the gentleman suspend without order, without objection the of the record.part >> thank you. he notices the solyndra folks that they are in default and goes through the reasoning and says the department will in the waive any, if it didn't take action it is not waiving any rights under the contract. then i would point you to document 67, which is the memorandum from susan richardson this morning the subordination and in that she indicates in paragraph three, first sentence a default relating to financial requirement has occurred under the loan agreement with that -- when this occurred on december 1, 2010, 95 million remains to

be advanced and further in an e-mail from tab 59 in february, silver further acknowledges that there was a default in december by solyndra. that being said, mr. secretary, did your office in compliance with the code 1700-g-4-a that rears if borrower defaults the secretary shall notify the attorney skrpb of the default -- general of the default did you do that? >> first i have to look back at this code of the interrupt department. this -- justice department. >> i'm just asking when there was a default in dose did -- des did you notify the attorney general. i laid the letters out. everybody can look at them. i only have a certain amount of time. i want to know if you notified the attorney general in accordance with the law.

>> i will get become with you on that. this was a deposit -- >> the bottom line is your people said it was a default and it looks like a default and on a default you are supposed to notify the attorney skwrpgenera. did you do it? >> i will get back to you. >> do you know what the value of patents and other intellectual properties of solyndra are? do you know what those values are? >> no. >> do you believe they have value? >> they should have some value, yes. >> do you believe it will be greater than or less then $75 million? >> the i.p.? i couldn't have anyway of assigning that. >> i would draw your attention to tab 68. in your book. this is we are talking about it appears from that particular tab -- do you have that in front of you? >> yes, i do. >> it appears that there is

something going on, it is during the time period they were beginning to discuss the subordination and a lot of it is redacted. do you have any idea who that was from and to? it looks like it might have been from susan richardson. >> no. >> do you know why that information was redacted? >> no, i don't. >> can you find out for me as to what the purpose? i understand maybe there is some reason but can you find out why that was redacted? >> we can get back to you. >> were you aware there were numerous discussions about solyndra's default and problems they were having and subordination came up fairly early in december of 2010? were you aware of that? >> i am now they were thinking of subordination, but again one can't manufacture forward until -- can't move forward until one understands the law. >> but do you understand that they were, solyndra, was looking

at bankruptcy at that point and without some understanding that there would be a new $75 million they would have had to file performance-enhancing pretty quickly? >> that is my understanding about that time scale they had the cash flow issue and needed funds to continue. that is why one restructures. >> epbs -- don't the records reflect that there was already an understanding within the department of energy with francis that there was going to be a subordination before the last had had an opportunity to determine whether they could? >> we do not do anything until -- i mean, is it ok to look at things in parallel? yes. but before our lawyers determined whether it was -- >> i understand you would not do anything. but do you understand based on the documents that have been provided it is pretty clear from the record that solyndra would

have had to file bankruptcy, that the investors were not willing to put the $75 million in unless d.o. subordinated and when writing the legal memorandum everybody in your department knew that unless they could figure out a way to subordinate, solyndra was going down? isn't this true? >> no. that is not correct. our general counsel office and susan richardson's responsibility as lawyers is to protect the department of energy make sure we act under the law, that always comes first. >> it is interesting, i just questioned why you didn't -- i go back to some of the other questions -- why you didn't get opinions when you had o.m.b. and treasury saying they didn't think it was legal why you didn't go to justice? were you afraid of getting answers that you didn't like? >> the gentleman's time is

expired. >> you should let him answer. >> i will let him answer. >> we are required to go to justice because if there was a revision of the loan that meant we were not going to get paid back, things of that nature, we went to justice. we did go to outside counsel and sought other opinions. and as noted earlier there was a previous general counsel of the department of energy on looking at the decision that concurred with it decision. >> the gentleman from kansas is recognized. skrorbgs mr. chairman if i might because i have only seen the draft that flags that you can't do the subordination if waobgd get this outside opinion i would appreciate it. >> can we get that? is that possible to get it today? do you have access to that? >> i don't know about today. >> we have an opinion of the previous general counsel of the department of energy. >> i'm asking for what you had at the time the decision was made. ot monday phorpmorning

quarterbacking or cover up. >> we can make them available. >> we to define what the gentleman is asking for. the gentleman from kansas is five minipulat minutes. you, secretary chu. you have been asked a couple of times it is an unfortunate and regrettable. use reckless and grossly mismanaged as a program. you talked about some of the programs you made to strengthen the oversight. i want to test that little bit. when the loan was originally applied for it was under 1703. is that correct? >> the solyndra loan? yes. >> when section 1705 obama stimulus mo money was availablet changed? did you approve to change from

1703 to 1705? >> i think this is an action of the company and loan program. >> so you were not involved in that process? the decision to move from 1703 to 1705? >> no. >> the difference in the two programs is that in 1703 the company got skepb -- skin in the game and has incentive but p in 1705 it is different. is that correct? >> that is not correct. as i said, the company had a billion dollars skin in the game. >> but 1705 this credit subsidy doesn't get paid by the company. the phrp taxpayer -- american taxpayer provides that. >> the american taxpayer provides the credit subsidy. but in addition there is a minimum of 20% additional the equity people would have to put in. >> but you would agree this legislation the federal credit

had a reason they wanted these credit subsidies paid for by the company, because it caused the company to have a greater interest in the success. there was a reason the private entities were designed to be the one that paid so it is a change in risk. you agree? >> there was a -- the 1705 bill was passed because they acknowledged many of the companies would not be able to afford the credit subsidy and they said that the tax dollars would be used to pay for that. >> these were suched about investments that the company couldn't afford that memberal amount? >> no, i was going back to the way the bill was designed. >> the credit subsidy was calculated do you know what it was under 1705? >> i believe it was something like 7.8%. >> on a $535 million loan we are talking about $40 million to $# million?

that the company couldn't afford to pay? >> credit subsidy score again is something and the credit subsidy as appropriated by congress was there for a reason. >> right. and the company couldn't afford to pay so the government stepped care of that incremental 40 million bucks. that is what happened, correct? >> that is what happened. >> great. in late of the bankruptcy has d.o.e. changed that score, the calculation? >> of course. >> what is it now? >> it is presumably quite high because when we constantly we evaluate loans as marketplace changes we are constantly updating what the risk is that is reflected in part by the score. >> it went from roughly 7% to what? >> i would say just raw guess probably in the 80's.

>> that is because when you change it, you know that the company is now in deep financial trouble and that reflects the risk to the taxpayer. >> have you changed the scores for the other loan to reflect this increased risk? well, in some instances the credit subsidy decreases as, for example, a $5.9 billion loan to ford motor company that score is greatly decreased because we feel that ford is an ongoing stable company and that loan did what it was supposed to do. >> would the gentleman yield briefly? yes. >> just to point out on this point since the secretary put this $10 billion on the table, nowhere in the law and nowhere in the definitions does is say that is to subsidize the loss of principal. the gentleman from kansas is correct that it is designed for

subsidized interest rates, loan maturity, tkaoefrpl of interest but not scene of the accident to cover the loss of principal. so, your opening statement, mr. secretary, is incorrect in asserting that it is. i yield back. >> i would agree. i want to talk about that number as well. program, or the entire not just section 1705. that $10 billion was for the entire portfolio of loans. correct? you said there was $10 billion to cover potential losses which i think we agree is not what that is designed for. it wasn't designed to cover losses. it was designed to cover interest rates and subsidies. but even that overstates what was appropriated for the section 1705 program. >> it was designed to cover losses in the honest if the company cannot -- my understanding of what is a credit subsidy and what the

appropriate funds were as we invest in innovative companies some of them might have difficulty paying back the loan. >> >> it was $2.5 million. >> that's right. the $10 billion as i said before was 1705 plus a little bit of 1703. >> you talked about all the other cross subsidies. we have tax credits, mandates. when provide the credit subsidy score what is the assumption about the continuation of those other subsidies? when you are calculating the risk do you assume that the other enormous subsidies will be renewed or they will expire as the low directs that they will expire? >> the major part that goes in the credit subsidy is the financial health of the company, the assets of the company and most of loans are on projects. whether it is a new fabrication plant or a proje t