Editor’s Note – We were promised transparency and our government is designed to be ruled by the people. Yet, uncovering a secret Federal Bank is anything but lawful. To add insult to the Rule-of-Law, this bank with the nod from the White House, is gambling off the books and away from Wall Street by taking financial risks in venture capital start-ups. Cease and desist orders, injunctions, and warrants for arrest should be raining down on Washington DC.

Today, several billion dollars must be doled out or lost due to a deadline imposed by Congress, and of course, at this late hour, oversight is quite difficult to impose, and definitely no time to prevent another Solyndra. This is a repeating ploy, a constant card played to force the American people to swallow last minute garbage for crony capitalism, all under the guise of creating jobs, or fixing health care, or repairing our debt ceiling woes, or continuing resolutions to keep government running, or creating a more “green” workforce. This is no way to run our government, and the White House continues to push, all the while saying they are being “blocked” by those pesky Republicans who are being held “hostage” by the Tea Party.

When your ideas fail on the floor of the House, just push harder, or write an Executive Order, or force a judge to legislate from the bench, or pour out more regulations from the EPA or Energy Department. Failed policies, failed ideas, no problem, they will just force them down our throats. Best yet, Finance your friends through this bank.

The Government Bank That’s Financing More Solyndras

From Fox Business

(The following story has been corrected to reflect that the Federal Financing Bank is an on-balance sheet bank whose activities are reported in the Department of Treasury’s financial statements. The story also inaccurately stated that the FFB provides a “backdoor government bailout” of the U.S. Postal Service. In fact, Congress provides the USPS with statutory authority to borrow up to $15 billion to finance its business operations, and the FFB lends money to the USPS pursuant to this longstanding authority. The Treasury Department was unavailable for comment prior to publishing of the story, but its subsequent responses have been included below.)

Sitting at the center of the Solyndra scandal is a little-known bank at the Treasury Department that dates back to 1973.

Federal Financing Bank

This government bank, the Federal Financing Bank [FFB], had a zero balance in 2008 for green energy projects, but now, with little Congressional oversight — the FFB’s oversight committees are the Senate Banking Committee and the House Ways and Means Committee, and once a year the FFB submits its performance plan to both committees — it is giving out billions of dollars in loans to White House pet projects often at dirt-cheap interest rates below 1%. In July alone, the government bank, which had $61 billion in assets, lent nearly three quarters of a billion dollars in taxpayer funds.

The bank is also funding the insolvent U.S. Postal Service; the White House’s expensive green car projects at Ford Motor, Nissan and Tesla Motors; a $485 million loan to an expensive solar project that’s lost $160 million over the last three years that’s backed by Google, BP and Chevron; plus the FFB is funding the teetering HOPE housing bailout program, which gives delinquent mortgage borrowers breaks on their loans.

And according to KPMG’s audit report of the bank, the FFB is losing billions of dollars in taxpayer money because it is forgoing collecting interest costs on already inexpensive loans that are financing projects at agencies like the Agriculture Department.

What’s scary for taxpayers is this: The FFB can borrow unlimited amounts of taxpayer money from the Treasury for these kinds of political pet projects. Under the 1973 “FFB Act, the bank may, with the approval of the Secretary, borrow without limit from the Treasury,” says the bank’s audited statements from KPMG.

Read: KPMG’s latest audited financial statement for the Federal Financing Bank

Read: The Federal Financing Bank’s historical financial statements

The Treasury Department’s inspector general is now investigating the bank over its $528 million loan to Solyndra. FFB’s chairman of the board is Treasury Secretary Tim Geithner, and the bank’s board executives are Treasury officials.

Who is getting the FFB’s green energy money? As the White House and Democrats in Congress rail against tax breaks for oil companies, the FFB gave taxpayer loans to green companies with high cash burn that were spilling red ink.

For instance, Solyndra was still getting loans from the FFB up until it filed for bankruptcy. It got $3 million in loans at a 0.89% rate just a month and a half before it filed for bankruptcy protection. The FFB is also giving loans to risky solar companies as well as to a money-losing solar energy outfit backed by companies such as Google, Morgan Stanley, Chevron and BP that has spilled $160 million in red ink for the last three years.

In the month of July alone, the FFB gave a $12.5 million loan to Abound Solar; 60% of Abound’s balance sheet will come from federal taxpayers, or $400 million in guaranteed federal loans.

FFB also gave a $117,330 loan to the struggling Kahuku Wind Power and more than $77 million to the Solar Partners companies, whose parent company is due $485 million in White House approved loans. The Solar Partners companies are units of BrightSource Energy, which is building a massive solar-powered energy plant near the Mojave Desert in San Bernardino, California.

BrightSource lost $45 million in 2008, $44 million in 2009, and $72 million in 2010, even though it has rich backers that include Google, Chevron, Morgan Stanley and BP, among others, says FOX News analyst James Farrell.

“The FFB does not decide whether to provide loans to particular institutions or recipients,” a spokesman for the Treasury Department said. “The federal agencies that administer loan guarantee programs decide which entities will receive loan guarantees under their respective programs. The guarantor federal agency–and not the FFB–selects the projects and makes the credit decisions for the federal government. The FFB is only authorized to fund a loan after a guarantor federal agency has decided to provide a 100% federal loan guarantee to a private sector entity. The FFB has no independent authority or discretion to make investment decisions.”

Besides the green energy projects, the FFB has lent the US Postal Service so far $12.6 billion. The USPS faces an estimated $10 billion shortfall this year, as the Internet, companies like FedEx and UPS, and high retiree health-benefit costs slice into its bottom line.

And the government bank gave loans to car and car parts manufacturers to retrofit their plants to make green cars. The FFB lent Ford Motor $163 million for its green car programs. The FFB is now financing projects at Fisker Automotive, Nissan North America and Tesla Motors, with $528.6 million, $1.4 billion and $465 million in federal loans, respectively.

“The FFB exercises only those authorities expressly provided by Congress,” the Treasury spokesman said. “It makes loans to private sector entities pursuant to federal loan guarantee programs that are created, overseen, and funded by Congress.”

However, the FFB’s balance sheet is backed by U.S. taxpayers, “except for loans to the U.S. Postal Service,” says KPMG’s audited statements for the bank. Because you, U.S. taxpayers, are the cushion for the bank, unlike other banks, the FFB “does not maintain a reserve for loan losses,” says the KPMG report.

Not booking loan loss reserves would get any other bank in trouble with federal bank regulators such as the Federal Deposit Insurance Corp., the Federal Reserve and the Securities and Exchange Commission.

“Federal program agencies that administer loan guarantee programs make the individual credit decisions,” the Treasury spokesman said. “And the Federal Credit Reform Act, a federal law, mandates that loan loss reserves must be held on the books of the guarantor agencies. The sponsor agency that has issued a full, faith, and credit guarantee to the FFB is the federal entity that reports the loss.”

The KPMG report says the bank told it that “no future credit-related losses are expected,” even though Solyndra clearly disputes that optimistic bureaucratic resolve. (The bank did earn $449.5 million for the fiscal year ended September 30, 2010, up slightly from $444.2 million in fiscal 2009.)

Why was this federal government bank created in the first place? Congress launched the FFB in 1973 to “reduce the costs of Federal and federally assisted borrowings,” smoothing the way for the government’s fiscal policies — fiscal policies which at the time were wading into the private credit markets like never before.

At the time, the federal government first began to see an avalanche of Congressionally approved off-budget financing for Fannie Mae, Freddie Mac and Sallie Mae. These quasi-government operations began to help grease loans for housing and for students by aiding loans securitized as bonds in the secondary markets. Banks packaged these loans as securities and sold them on to Fannie, Freddie and Sallie Mae.

These bonds though began to compete with Treasury securities, and Congress at the time feared Treasury would have to offer higher yields to attract investors away from those securities. The Vietnam war was still going, and the government was struggling to pay for the war and at the same time was battling a deep recession that had hit the U.S. economy, along with an oil shock exacerbated when OPEC plus Egypt, Syria and Tunisia hit the U.S. with an oil embargo due to its support of Israel in the Yom Kippur War with Egypt and Syria.

So to keep the government’s borrowing costs low, Congress launched the FFB and gave it broad statutory authority to purchase any “bonds issued, sold, or guaranteed by federal agencies,” says KPMG’s audit report. The bank then became a vehicle through which all sorts of federal agencies could finance their programs.

Since then, the FFB has helped finance a broad range of government operations, from agricultural to military programs, to now green energy projects.

Congress almost got the FFB in hot water beginning in 2006 when lawmakers pressured then Treasury Secretary Henry Paulson to open the window at the FFB to help finance student loans. At the time, Sallie Mae was posting losses as students in droves began defaulting on their high-priced college loans.

A slew of lenders, about a seventh of the student loan market at the time, had stopped giving federally guaranteed student loans. Sallie Mae then pressured lawmakers such as Senator Christopher Dodd (D-CT) to give student lenders a bailout via the Federal Financing Bank, but President George W. Bush frowned on that, and the effort went nowhere.

And now it’s the White House’s use of the FFB for green energy projects that will likely raise eyebrows.

The FFB lent no money to green companies backed by Department of Energy guarantees from 2007 to 2008, even though it could have done so starting in 2007 under the Energy Policy Act of 2005, signed into law under President George W. Bush.

That act authorized $42 billion in federal green energy loans, notes FOX News analyst Farrell. Under the 2005 law, the government could make federal loans for companies battling greenhouse gas emissions, energy efficiency and renewable energy, as well as nuclear power projects.

The FFB then began giving green loans backed by the Department of Energy after the Obama Administration’s stimulus bill of 2009 was enacted. After stimulus was signed into law by President Barack Obama, the FFB then began funding clean energy programs, backed by $2.4 billion appropriated by Congress. Under this program, Solyndra got $528 million.

The FFB doesn’t just fund green energy projects. It also funds the Home Ownership Preservation Entity (HOPE) Fund, enacted under the Bush Administration to help distressed borrowers avoid foreclosure by reducing their mortgage payments.

The bank is going full bore in helping to fund the White House’s foreclosure bailouts via buying HOPE bonds, a program that could hit $300 billion in federal costs.

The bonds essentially give investors a stake in government housing bailouts. But what should give taxpayers pause is this: the Treasury Secretary can issue HOPE bonds “without any limitations as to the purchaser of the issuance,” KPMG’s audited statements note.

Translation: The Treasury can issue these bonds, and the FFB then buys the HOPE bonds that investors don’t’ want.

“Due to the cost of issuing special purpose bonds to the public, the Secretary of the Treasury has decided to issue the HOPE bonds to the bank,” KPMG notes in its report.

That means those bonds now sit on FFB’s balance sheet, more than $492 million worth. “The bank (FFB) borrowed funds from Treasury,” says KPMG’s audit, “to purchase the HOPE bonds.”

The amounts involved can rise to $300 billion, because the Hope for Homeowners Act authorizes Treasury to issue up to $300 billion in HOPE bonds. “FFB does not have the money to buy the bonds, so it has to borrow money from Treasury to buy the bonds,” notes FOX News analyst Farrell.

However, KPMG notes in its report that “the purchase of HOPE bonds is consistent with the core mission of the Bank.”

The FFB also acts as essentially a slush bank for federal loans, an operation that helps clean up the balance sheets of other federal agencies. KPMG notes that the “lending policy of the bank is flexible enough to preclude the need for any accumulation of pools of funds by agencies.” But the FFB also lets federal agencies slide on interest costs they owe the bank on loans, even though their interest rates are dirt cheap.

For instance, the FFB has been hit with losses on loans to the U.S. Department of Agriculture, loans the Agriculture Dept. received to service rural utilities. The Agriculture Dept. is stiffing the FBB on interest it owes on these loans, a cumulative $1.7 billion in losses here.

The bank also lets the General Services Administration [GSA], as well as “Historically Black Colleges and Universities,” and the Veteran Administration slide on interest costs on their loans, too. The bank lets them defer interest costs “on their loans until future periods,” the KMPG report says.

“As required by federal statute, FFB is not allowed to collect interest income on certain loans under the Cushion of Credit program operated by the Rural Utilities Service, the successor agency to [the] Rural Electrification Administration,” the Treasury spokesman says. “This practice is mandated by Congress, via federal statute. The FFB has no discretion in the matter.”