Ramaswamy’s threats to claw back Rivian’s loan sparked criticism of Elon Musk’s DOGE role

CNN
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Vivek Ramaswamy, the new co-chair of President-elect Donald Trump’s commission to cut government spending, is targeting money the Biden administration is doling out in its final days in office, including a key loan to a rival company of his commission chairman , Elon Musk.

Last week, the Energy Department announced a $6.6 billion conditional loan commitment to Rivian, the electric vehicle startup that is an emerging competitor to Tesla, Musk’s $1 trillion automobile company.

Ramaswamy says loans and similar borrowings are “high on the list of items” he plans to recover once his cost-cutting commission, known as the Department of Government Efficiency (DOGE), becomes operational next year.

“The kind of last-minute measures that are taking place in the lame duck deserve special attention,” Ramaswamy told CNN.

Since the election, Biden officials have continued to distribute billions of dollars in state-backed loans and other federal funds, much of it to finance clean energy and domestic chip-making projects.

It is unclear whether Ramaswamy will make good on his promise to reclaim the money or what legal reasons he would give for doing so. Despite its broad mandate to reduce government waste, DOGE has no legal authority and is essentially a presidential advisory commission that can make recommendations. Only Congress can reclaim previously approved funds.

Nevertheless, Ramaswamy’s comments are seen as a warning shot. Not only do they open another front in what is expected to be a tense battle over shrinking the federal government, but they also highlight the potential conflicts that could arise as spending cuts clash with Musk’s vast business empire, which has itself benefited from government support.

For now, industry groups and lobbyists around Washington are waiting, with some expressing skepticism about how seriously Ramaswamy’s threats should be taken.

“I would say we are just a few steps away from even having to deal with this,” said an auto industry source, asking incredulously: “Will he be allowed into the government?”

The DOE loan to Rivian has been in the works for two years and would help finance a new manufacturing facility in Georgia that Rivian said would create about 7,500 full-time jobs. The loan is among 32 deals totaling nearly $55 billion awarded by the Energy Department under Biden. All of the money must ultimately be paid back to the federal government, which has no responsibility unless the companies go bankrupt.

Speaking to CNN, Ramaswamy was cynical about taxpayers’ chances of getting their money back and suggested that the timing of post-election lending was political.

“There is no way this money will ever be paid back,” Ramaswamy said. “And if you see an increase in spending in response to the election, that suggests a politicization and a disparate change in standards that we think is inappropriate from a taxpayer protection standpoint.”

The irony is that Tesla received a similar $465 million DOE loan in 2010, at a time when Musk’s company needed cash before its first public stock sale. The loan proved to be a game-changer for Tesla, which eventually repaid it in full in 2013, nearly a decade ahead of schedule.

“Tesla is the shining example,” said Albert Gore, executive director of the Zero Emission Transportation Association — an electric vehicle trade group that represents both Rivian and Tesla. “I think it would be great to continue to support that kind of growth here in the U.S.”

Dan Ives of Wedbush Securities says that while it is legitimate for DOGE to explore last-minute loans, the selection of federal funds going to a competitor to Musk is not an “isolated case” and will likely “become the norm.” .

“If Musk is your friend, that will be a positive,” Ives said. “If he is an enemy, that will be a great disadvantage.”

Neither Rivian nor its lobbyists commented on their plans if the loan falls through. In a statement to CNN, the Energy Department’s director of loan programs, Jigar Shah, said it would be “irresponsible for any government to turn its back on private companies and communities that receive loans from the agency.”

Although industry sources say they are not overly concerned about DOGE’s ability to reclaim federal loan guarantees, some found Ramaswamy’s decision to highlight the Rivian loan worrisome.

“If you demand money back because you assume it will go to a competitor of your co-chair, that will end up delegitimizing your place in this whole system,” the auto industry source said.

Trump’s Energy Department could terminate the loan commitment to Rivian under certain circumstances, according to two lawyers familiar with the federal loan program. The loan will not close until both the agency and Rivian meet certain conditions. Still, it would be difficult to terminate the deal without cause, said Mary Anne Sullivan, a former Energy Department lawyer in the Clinton administration.

“There is so much discretion as to whether the conditions of the conditional commitment have been met and so much discretion to decide whether the financial assumptions underlying the loan guarantee have changed,” she said.

The Biden White House has spent much of the past year trying to extract money from a series of domestic spending bills the president signed during his time in office.

As of October, there is about $288 billion remaining from the bipartisan infrastructure bill of 2021, which will not be available until fiscal year 2025 or later, and $14.8 billion from the Inflation Reduction Act of 2022, which will provide much of the Clean energy projects funded under Biden.

The Impoundment Control Act provides legal regulations to ensure that funds continue to be spent. This prevents the White House from withholding funds that have already been approved by Congress.

But Trump made the use of sequestration power — a practice in which the executive branch unilaterally refuses to spend money already appropriated by Congress — a cornerstone of his presidential campaign promise to enforce fiscal discipline.

“All the trillions of dollars that are sitting there and not yet spent, we will redirect to important projects like roads, bridges, dams and we will not allow it to be spent on meaningless green new scam ideas,” Trump said in his speech at the Republican National Convention.

That would lead to a direct confrontation with lawmakers from both parties who closely guard their authority over federal spending. It would also almost certainly trigger a high-risk legal battle.

Trump has already taken steps to make good on that promise by naming Russell Vought to head the Office of Management and Budget. Vought, who was Trump’s OMB director in his first term, wrote the 25-page chapter that describes a comprehensive view of executive power in the conservative Playbook Project 2025.

The White House could try to lean on Republicans in Congress, where lawmakers can claw back funds that have already been approved as long as the White House has no obligation to do so. Last year, as part of the deal to resolve the debt ceiling, Democratic lawmakers agreed to withdraw $20 billion of the $80 billion they had allocated to the Internal Revenue Service.

However, they may face resistance, particularly when it comes to clean energy funds contained in the IRA. Although no Republicans voted for the bill, nearly 80% of announced clean energy investments are in Republican districts.

Industry and clean energy advocacy groups are already reaching out to Republican lawmakers to highlight the benefits — including funding and jobs — offered by the loan program as well as the energy tax credits authorized in the IRA.

“It’s a much more targeted and much more urgent effort,” said one clean energy industry insider.

At an Energy Department conference in Washington on Wednesday, White House senior adviser John Podesta spoke of the need to “continue shoveling money out the door” leading up to the inauguration.

“By the way, we plan to get more done by the end of this month. “As we read the newspapers, we know that the next four years will bring a lot more uncertainty to federal clean energy policy,” Podesta said. “No one can reverse the momentum we have created together.”