Speaking in Irwin, Penn., on Tuesday, former Massachusetts Gov. Mitt Romney accused President Barack Obama of engaging in “crony capitalism” and used the financially unhealthy and notoriously unstable Fisker Automotive as an example.
“I am ashamed to say that we’re seeing our president hand out money to the businesses of campaign contributors, when he gave money, $500 million in loans to a company called Fisker that makes high-end electric cars, and they make the cars now in Finland,” Romney said.
“That is wrong and it’s got to stop. That kind of crony capitalism does not create jobs and it does not create jobs here,” he added.
Before we go any further, let’s review what we know about Fisker Automotive:
1. Fisker was awarded a $529 million federal loan guarantee in April 2010
2. $193 million was distributed to the auto manufacturer to produce two lines of plug-in hybrid cars
3. The company was unable to find a contract manufacturer in the United States, so it outsourced assembly jobs to Finland (the company denies the charge that it used any part of the federal loan to fund manufacturing operations in Finland)
4. The automaker fell behind its production schedule and experienced “delays” in sales (i.e. poor sales), depleting its capital
5. But to qualify for the rest of the $529 million loan guarantee, the company must maintain a certain amount of capital
Does the Fisker investment seem like a terrible investment? Absolutely. Is this a clear cut case of “crony capitalism” as Romney says it is? Let’s investigate.
A large part of Romney’s accusation deals with John Doerr, a venture capitalist at Kleiner Perkins Caufield & Byers.
“You know you have John Doerr who raised a lot of money for President Obama, you know, got appointed to an economic recovery advisory board,” Romney senior adviser Ed Gillespie said.
“And, then, his firm had a big investment in Fisker Automotive which got over half a billion dollars in loan guarantees from the Department of Energy, which did not result in jobs being created in America, but actually jobs being created overseas in Finland, but Kleiner Perkins did quite well,” he added.
Because Doerr helped raise money for President Obama, the administration shoveled cash into his firm’s investment, right?
There may be some problems with this claim.
“The contributions database at OpenSecrets.org shows that Lane contributes to some Democrats but mostly Republicans — and he gave money to Rudolph Guiliani and John McCain in 2008, not Barack Obama,” Kessler adds.
Lane also gave money to former President George W. Bush and failed presidential candidate Bob “Viagra” Dole.
Still, as Kessler notes, Lane’s a bit sweet on the president because of his “willingness to back alternative energy ventures,” saying it would be “silly” to think that a car company could get started without government assistance.
Furthermore, the Fact Checker had to update its original analysis to include the following:
1. Doerr is listed on Kleiner’s “Greentech” team
2. He argued before Congress in January, 2009, that “green” technology was the ticket to economic recovery
3. President Obama relied on Doerr, among others, for “green” energy advice
But although Doerr’s chumminess with the White House does raise an eyebrow or two, it doesn’t definitively prove “crony capitalism” was the reason the Obama administration awarded Fisker its loan in 2010.
Problems With the Time Line:
Two more arguments against the Romney accusation, via the Post:
1. “Kleiner raised venture capital for Fisker before Obama became president”
2. Fisker applied for a loan while George W. Bush was president
True, Fisker raised venture capital in 2008, just months before President Obama’s inauguration, and applied for the loan while Bush was still in office, but the automaker was still awarded over $500 million in loans guarantees by the Obama administration.
In fact, at the time of the awarding, it seemed like the Obama administration was more than willing to take full credit for the Fisker investment.
Nevertheless, there still isn’t a “smoking gun” (i.e. emails, phone records, etc.) to prove Fisker got its loan through “crony capitalism.”
Making Cars in Finland:
“Fisker spokesman Roger Ormisher said that the Energy Department knew from the beginning that the Karma cars would be produced in Finland, by a contract manufacturer, with about 50 percent of the value of the car sourced from American suppliers,” the Fact Checker explains.
“He said the entire loan has been used for design and engineering work in the United States, and the actual production in Finland was paid for by private investors,” it adds.
Assuming Ormisher is telling the truth, this means the DOE and Fisker knew well before April, 2010, that assembly jobs would go to Finland. This seems odd considering the fact that it wasn’t until October 2011, that they decided to tell the American taxpayers about this.
“With the approval of the Obama administration, an electric car company that received a $529 million federal government loan guarantee is assembling its first line of cars in Finland, saying it could not find a facility in the United States capable of doing the work,” ABC News reported 18 months after Fisker was awarded the loan.
“There was no contract manufacturer in the U.S. that could actually produce our vehicle,” the car company’s founder and namesake told ABC News. “They don’t exist here.”
Again, this isn’t necessarily “crony capitalism.” But it’s most certainly a rotten business investment.
Obama Gave $500 Million:
Romney is technically incorrect when he says President Obama gave $500 million in loans to Fisker. True, about that much was approved, but as we mentioned in the above, only part of the loan has been distributed. The rest was frozen when Fisker was unable to meet certain DOE benchmarks.
So how does the Fact Checker score Romney’s “crony capitalism” claim?
Doerr is an important partner at Kleiner and he has been an advocate for green energy, but it is a stretch to say it is his “business.” In fact, Ray Lane, who contributes mostly to Republicans, is an important Kleiner partner on this deal. Moreover, the money was raised before Obama became president.
Romney said Obama gave “$500 million in loans to a company called Fisker” — but it was a loan originally submitted under the Bush administration for a Bush administration program. He also said “they make cars now in Finland” –technically true, but in a way that suggests the taxpayer money went for that purpose, rather than for jobs and work in the United States.
Romney’s phrasing has too many weasel words. An ordinary listener would believe that Obama paid off a contributor to build cars in Finland with U.S. taxpayer money, with no hope of U.S. jobs being created. That does not appear to be the case, at least as Romney has framed it.
They award the Romney accusation a full four Pinocchios.
Final thought: Considering that Romney can’t actually prove “crony capitalism” was behind the final awarding of the Fisker loan, we can’t exactly fault the Fact Checker for its thumbs down. However, considering that last week they let the “Romney Could Totally a Felon” claim slip by with only three Pinocchios, we feel their final rating is a wee bit strong.