Peter Schweizer - Throw Them All Out

Billionaire Vinod Khosla was also a big winner in the taxpayer-funded giveaway. Khosla had been the head of Obama's India Policy Team during the 2008 election and contributed to Democratic candidates. He was a major investor in Coskata, a relatively new company whose goal is to make fuel out of waste. Coskata received a $250 million loan guarantee from the federal government. 44Company executives have been quite clear that one important measure of corporate success is the amount of "government money we attract." 45Khosla's Nordic Windpower was approved for another $16 million for a wind power manufacturing facility in Idaho. And his company AltaRock secured $25 million in stimulus money.

In April 2010, $25 million went to ZeaChem, which hired Steve Farber (mentioned above) to lobby on its behalf. One of ZeaChem's major investors are Globespan Capital, where managing director Jonathan Seelig is a Democratic donor (he too has never given to another party). The other major investor is PrairieGold Venture Partners, which is headed by Paul Batcheller, a former aide to then-Senator Tom Daschle. The grant was awarded to modify a "demonstration sale" biorefinery. According to the federal government, the project created two jobs as of December 2010.

$21.7 million went to Solazyme, based in South San Francisco. The company was founded and is chaired by Jerry Fiddler, a large Democratic donor (who has also never given to another party). He was a contributor to the Obama Victory Fund, gave $24,000 to the campaign, and made contributions to the DNC. Principal owners of Solazyme include Kennedy's VantagePoint, Lightspeed Ventures, which is headed by John Luongo, another major Obama donor, and the Roda Group, where Roger Strauch is a DNC and Obama campaign supporter. Solazyme had receipts of $38 million in 2010 and lost $13.7 million. Taxpayer money created a total of thirteen jobs. After it received the money, Solazyme announced plans for an IPO.

The list goes on and on. It would take a large team of investigative reporters to untangle every example of cronyism, and it will take more time to assess how many actual jobs these billions of dollars might have helped stimulate. But there is no question that the money failed to produce any significant short-term job gains. The true short-term effect has been to enrich cronies of the party in power. The only thing that many of these grants and loans appear to have in common is how they stimulated the wallets of well-connected investors.

Cathy Zoi, who oversaw the awarding of grants, left the Department of Energy in 2011. Where did she go? She landed as the head of a new green-tech investment fund being established by George Soros, the investor whose firms received taxpayer money through Zoi. As Steve Coll of The New Yorker recently wrote, subsidies and support for individual companies amount to "Obama-era crony capitalism," which entails "politically connected investment groups using their inside-information networks to attach themselves to those sections of the federal bureaucracy that will be primed by their party's imperatives of federal spending." 46

Crony capitalism is good for those on the inside. And it is lousy for everyone else. But it does provide a hybrid-powered vehicle to sustain a large base of rich campaign contributors with taxpayer money.

Imagine for a minute that you are a corporate executive and you start using your company's assets to "invest" in projects that in turn benefit you directly. What would happen? You would be risking possible criminal charges for the misuse of those assets. But if it's taxpayer money? Suddenly it becomes legal. Even acceptable. And for the billionaire who is looking to get a big return on his investment, there are few returns that can be higher than those resulting from campaign contributions. After all, how else can you turn half a million dollars from yourself and your friends into hundreds of millions of dollars after a single election?

Not surprisingly, many of those named here are raising money again, for President Obama's 2012 campaign. As a jobs program—the stated purpose—these billions in grants and loans were a failure. But as a method for transferring billions in taxpayer funds to friends, cronies, and supporters, they worked perfectly.

IN NINETEENTH-CENTURY AMERICA, as part of the "blue law" movement that tried to protect the sanctity and sobriety of the Sabbath, there was a concerted effort to ban alcohol sales on Sunday. It was pushed by what can only be described as an odd alliance: Baptists and bootleggers. Baptists pushed publicly for the ban on moral and religious grounds. And the bootleggers? They pushed for the ban privately, lobbying politicians so they could make bigger profits. Stifling legal alcohol purchases for even one day each week meant added profits for their illegal sales. Bans were enacted state by state, and many blue laws still exist (for example, in Arkansas, Indiana, Minnesota, and Mississippi, among others), although restrictions have been lifted steadily in recent years.

In modern-day Washington, there is a new equivalent to that coalition of Baptists and bootleggers. True believers push a cause that calls for a substantial change in government policy. And opportunists support it because they see a chance for healthy profits. In these situations, politicians can enrich their friends and allies, and sometimes themselves, while coming off as earnest "Baptists" for a worthy cause. Lobbyists, on the other hand, are widely considered bootleggers, no matter how nobly they cloak their arguments. But what if a capitalist could somehow manage to sound like a Baptist?

Consider Warren Buffett. Often seen as a sort of grandfatherly figure who is above the rough and tumble of politics, Buffett seems to be above the folly and excess of finance too. He lives in Omaha, Nebraska, in a house he first purchased in 1958 for $31,000. He uses folksy words and illustrations to make his point. ("You don't know who's swimming naked," he said during the height of the financial crisis, "until the tide goes out.") He has uttered populist ideas, such as declaring that billionaires don't pay enough in taxes. The title of an article he wrote for the New York Times captures the tone: "Stop Coddling Billionaires." And his value-based investing has made himself and his investors at Berkshire Hathaway very rich.

But the image does not always reflect the reality. Warren Buffett is very much a political entrepreneur, whose best investments are often in powerful political relationships, and who in recent years has used taxpayer money as an important vehicle to even greater wealth and profit. Indeed, the success of some of his biggest bets, and the profitability of some of his largest investments, rely on government largesse and "coddling" with taxpayer money.

During the financial crisis in the fall of 2008, Buffett became an important symbol on television. He filled the role of fiscal adult, a responsible father figure in the midst of irresponsible Wall Street speculators. While pushing for calm and advocating specific policies in both public and private, however, he was also investing (sometimes quietly) so he could profit once his policy advice was implemented. This put Buffett in the position of being both the Baptist and the bootlegger, praised for his moral character and at the same time enjoying a trip to the bank.

The crisis started in the summer of 2008, when credit became scarce and Fannie Mae and Freddie Mac and several investment houses teetered on the brink of financial collapse. In the words of the Guardian, a London paper, Buffett was "uncharacteristically quiet through much of the financial crisis." 1It was only on September 23 that he became a highly visible player in the drama, when he invested $5 billion in the investment house of Goldman Sachs, which was overleveraged and short of cash. Buffett gave them a much-needed cash infusion, and made a heck of a deal for himself. Berkshire Hathaway received preferred stock with a 10% dividend yield and an attractive option to buy another $5 billion at $115 a share. 2