2007 Comments from Six Major US Banks on DOE's Title 17 Energy Loan Guarantee Program

"The six financial institutions below (Citigroup, Credit Suisse, Goldman Sachs, Lehman Brothers, Merrill Lynch and Morgan Stanley) are convinced that loan guarantees are an important tool, along with supportive state government policies, to enable the financing in the credit markets of new nuclear power plants in the United States. We are concerned that the Proposed Rule is not workable, and are providing our perspective in the hope that it will assist the Department of Energy in developing final regulations to implement this essential program. We regard the attached comments as a set of minimum conditions necessary to secure project financing from lenders and from investors in the fixed income markets."

Most of the comments made the loan guarantees much more favorable for the banks, and were, in fact, implemented by DOE.  While DOE relied on the banks for key input on risk management and establishing proper checks and balances in a credit program, events of the following year illustrated that even for their own operations, the risk management, incentive alignment, and accountability left much to be desired.  This slide shows how the banks fared in the fiscal crisis.