A former Treasury Department official told a Senate panel today that he supports a controversial restructuring effort that Energy Secretary Steven Chu undertook last year a last-ditch effort to save the failing Solyndra solar energy company.

The restructuring effort -- which Treasury Department officials have acknowledged was highly unusual -- subordinated $75 million of taxpayer money behind cash from private investors. Because of the restructuring, those investors now have first dibs on any money recovered from bankruptcy proceedings on Solyndra.

Republicans maintain that the subordination was more than just a bad financial decision, and was in fact a blatant violation of the 2005 Energy Policy Act, which prohibits such efforts.

The Department of Energy maintains it had legal authority to subordinate the loan because a subsequent section of the law provides the department with broad authority to act to protect taxpayers in case of default. In other words, DOE took the position that Chu could subordinate the loan if he believed it would save taxpayers' money in the end.

When Republicans on the Senate Energy and Natural Resources Committee today questioned the former Treasury official, Herb Allison, who recently completed a White House-commissioned review of the DOE loan program, on the subordination issue, he said the law is clear that subordination is illegal at the point of a loan's origination.

But Allison also said that if a loan runs into trouble, the government should have the power to subordinate in order to preserve taxpayer assets.

"I think if the paramount issue is recovery for the taxpayers once these loans are made for policy purposes, I think the Department of Energy should have some flexibility to subordinate," Allison said.

Sen. John Barrasso (R-Wyo.) disagreed with that interpretation, charging that the Energy Policy Act of 2005 is clear and does not distinguish between origination or restructuring.

While acknowledging he's not a lawyer, Allison said DOE should have the same "creative refinancing" options that are widely available to the private sector to best protect taxpayer investment.

Subordination "may make it possible to attract additional funding from other debt investors which can help that project succeed," Allison said.

Republicans pointed out that the subordination didn't end up saving Solyndra in the end.

Allison stressed that his review focused on the 30 loans and loan commitments currently in the DOE portfolio and not the two projects, including Solyndra, that went bankrupt before his review began at the end of last year.

That comment irked Sen. Rand Paul (R-Ky.), who questioned why Allison didn't look into Solyndra when his review was commissioned over the political outcry that sprang up last fall in the wake of the company's failure.

"We're going to study oversight and not look at Solyndra? Why not look where the problem is?" Paul said. "This seems to be so myopic as to be politically motivated."

Paul asked Allison if he was specifically directed by the White House not to look into Solyndra when he was tapped to conduct his review.

Allison said he was never given that direction. Looking into Solyndra, he said, would have required subpoena powers and also would have duplicated the work already being done by a joint Justice Department-DOE inspector general probe.