The Washington Post reports:
As the government prepares Thursday to commit billions of dollars to bring high-speed Internet to rural areas, the biggest-ever such project has collapsed.
The company Open Range, backed by a commitment of $267 million in loans from the Agriculture Department, filed for bankruptcy this month. Taxpayers are on the hook for $74 million that the upstart hasn’t repaid. And now the company, some analysts and a senior government official are blaming poor judgment and Washington bureaucracy as the reasons Open Range failed.
The two agencies that oversaw the venture defended their roles in Open Range’s demise, saying the circumstances that led to the bankruptcy were out of their control and highly unusual.
The decline of the Greenville, Colo., company comes as Republicans are criticizing the Obama administration for throwing taxpayer money at unproven ventures. The furor was sparked by the high-profile failure of solar-panel manufacturer Solyndra, which filed for bankruptcy after getting more than $535 million in federal loan guarantees.
This is but the latest example of why the government has no place in the venture capital business. Obviously, failures like these will inevitably occur and investors will lose money as a result, and presumably be held accountable for their mistakes. Except when the federal government is doing the investing, taxpayers end up footing the bill. Accountability? Not so much. The following e-mail exchange, between White House economic adviser Larry Summers and Solyndra investor Brad Jones, pretty much says it all:
“The allocation of spending to clean energy is haphazard,” [Jones] wrote. “The government is just not well equipped to decide which companies should get the money and how much. … One of our solar companies with revenues of less than $100 million (and not yet profitable) received a government loan of $580 million; while that is good for us, I can’t imagine it’s a good way for the government to use taxpayer money.”
Summers accepted the critique, saying, “I relate well to your view that [government] is a crappy vc [venture capitalist]…”