These loans made sense when rural America lacked electricity and telephones, but now they’re basically boondoggles that subsidize ratepayers

There’s a broad sense in government that the pendulum has swung toward credit conservatism, toward fears about the deficit and the next Solyndra, toward bean counters and bankers who talk about return on investment. For example, shortly after Solyndra collapsed, gun-shy OMB analysts scuttled a “Solar Strong” deal to finance 160,000 rooftop solar installations at military housing, the largest residential solar project ever. Jonathan Silver, the former head of the Energy Department’s loan program, says the analysts made the creative argument that since Congress must approve the military budget every year, they could not assume that the Pentagon would keep paying the utility bills at its housing complexes. Solyndraphobia has become common at the bank of America, although in that case the actual Bank of America ended up financing a scaled-back version of Solar Strong.

Nuclear power plants The Energy Department is providing billions of dollars in loan guarantees for the Vogtle nuclear power plant in Georgia, America’s first new nuclear plant in three decades

The FHA has also gotten its finances in order, tightening its underwriting standards and imposing stiff fees on new borrowers to recoup some of its losses from the downturn. Its capital reserves are still 80 percent below its congressionally mandated minimum. But at least it has reserves again, and it’s unlikely to require another formal bailout anytime soon. In fact, acting FHA Commissioner Biniam Gebre says he’s starting to worry about the opposite problem: “Our risk profile might be too strong.” The FHA’s expected losses are down to 2.7 percent of its loan balances, about half its usual level, which suggests to Gebre that its current customers are excessively creditworthy.

“To us, that’s a problem,” he says. “We’re not trying to find ways to lose money. But we expect to serve certain types of people, and we’re not finding those people.”

Normal banks don’t worry about over-earning. But when credit programs are designed to help build the middle class or cut carbon emissions or achieve other nonfinancial goals, there’s inevitably a balancing act. Even the White House budget office tries to think about the benefits of programs as well as their costs to taxpayers.

“Our goal isn’t exclusively to mitigate risk,” says Deese, the deputy director. “Sometimes we want things to be riskier. It’s hard to hit the sweet spot.”

Buddy, Can You Spare a Loan?

Rural suburbia USDA provides loans to rural electric cooperatives https://yourloansllc.com/title-loans-wa/ and telecoms, even when the areas they serve-including suburbs of Atlanta and Washington, D.C.-are no longer rural.

Electric cars The Energy Department provided generous loans to Tesla Motors, which is revolutionizing electric vehicles, and Fisker Motors, which went bankrupt. It also helped Ford build new manufacturing facilities for fuel-efficient vehicles with internal-combustion engines.

It’s over budget and behind schedule, but the department’s analysis concluded that the project poses no risk to federal taxpayers.

Fine wine The Farm Credit System, originally created to extend financing to small-scale agriculture, helped a billionaire’s wife buy a winery in Charlottesville, Virginia. She defaulted. A Farm Credit branch also recently loaned Verizon $725 million to buy a European cellphone company.

Ironically, the loan program that produced the Solyndra debacle might be as close as government gets to the sweet spot. The Energy Department recently announced that the $30 billion in loans it made during Obama’s first term are on track to earn $5 billion for taxpayers. Granted, they would look less lucrative under fair-value accounting. More importantly, though, at a time when private lenders wouldn’t touch alternative energy, the program financed America’s largest wind and solar farms, a factory for Tesla Motors to build electric cars and a host of other innovative projects that reduced dependence on fossil fuels. It proved that cutting-edge low-carbon technologies made economic sense; since it backed the first five utility-scale photovoltaic solar arrays in the United States, the private sector has backed 17 more. And Solyndra notwithstanding, the program clearly isn’t breaking the bank.