As I discussed earlier, Congressional investigators have finally made public the official DOE memo defending the decision to give private investors priority over taxpayers as part of a loan restructuring agreement for the failed solar company Solyndra. Now even more evidence has come to light detailing the substantial skepticism exhibited by the Treasury Department and the Office of Management and Budget with respect to that decision.

In a Dec. 15, 2010 e-mail, as DOE was entering negotiations to restructure Solyndra’s loan agreement, senior OMB officials raised concerns about the legality of the decision to subordinate taxpayers to private investors:

There are some questions at the staff level about how DOE is going about the restructuring for Solyndra. At least one involves the legal question of what 1703(d) (3) means for their plan to make some of the debt “junior” to the new debt. … I think they have stretched this definition beyond its limits.

The e-mail is referencing a particular provision of the the Energy Policy Act of 2005, which states that loan guarantees approved by DOE “shall be subject to the condition that the obligation is not subordinate to other financing.” In other words, the taxpayer comes first. See here for more on DOE’s tortured reasoning.

Much more recently, in an e-mail dated Aug. 16, 2011, months after the restructuring was formally approved, a senior Treasury lawyer offered the following assessment:

I would bet a quarter that the DOE lawyers have some kind of theory on how whatever restructuring they have done and whatever they are considering doing does not violate these requirements. Cant wait to hear it.

Earlier today, at a hearing of the House Energy and Commerce Subcommittee on Oversight and Investigations, Gary Burner, chief financial officer of the Federal Financing Bank (and arm of Treasury), told lawmakers that he had never in his 28 years experience working at the Treasury Department witnessed a federal loan agreement that gave private investors priority over taxpayers.

Furthermore, despite rules requiring them to do so, DOE never consulted Treasury or the Department of Justice regarding the controversial terms of the restructuring agreement. “It would have been wise for them to go to the DOJ,” Burner said.