OK I want to prove that I am a fair guy, so first let me say that Krugman in this Bloomberg video didn’t deny that the Fed caused the housing bubble. If you start playing the video around 19:35, it’s clear that the interviewer is asking about federal government programs like Fannie Mae and the Community Reinvestment Act, and Krugman says “the feds” (plural) didn’t cause the housing bubble. I bring this up because a lot of my readers in the comments thought this was a total smoking gun proving Krugman is a big fat liar, since Krugman has been on record saying the Fed (not the feds) caused the housing bubble.
However, Krugman in this blog post says:
But an interesting parallel struck me here: I wonder whether the people who go on and on about the much smaller loss at Solyndra, the case that launched a thousand hearings, will get comparably worked about on this case [JP Morgan’s $2 billion trading loss–RPM] (actually I don’t wonder — they won’t).
The obvious objection is that the government lost money on Solyndra, but hasn’t (yet?) on JPMorgan. But that’s less true than meets the eye. Solyndra was a small part of a broad program of loan guarantees, which inevitably ran the risk of loss — otherwise those guarantees wouldn’t have been worth anything, would they? And it was the only loss.
OK so it’s that part I put in bold that is problematic. Beacon Power had received a large taxpayer-backed loan (and perhaps a loan itself, I need to review the details before I write this up formally) and went bankrupt last year. This was a huge deal in these circles; people were saying it was the next Solyndra. At the time, Beacon settled with the Department of Energy, saying it would sell its plant in order to raise the money to pay back its loan.
Well, back in February they found a buyer, and in this news report a DOE official estimates taxpayers will get back 70 cents on the dollar.
So, do Krugman fans want to explain to me the sense in which Solyndra already lost taxpayers money, but Beacon Power didn’t? Are you willing to say, “OK Krugman was just wrong on this point, nobody’s perfect,” or is there some loophole I’m missing?
(I’m asking partly because I am indeed going to write up this episode formally, and I want to cover possible objections.)