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> For instance, the same year the government loaned $535 million to solar-power company Solyndra, it also loaned Tesla $465 million. “Taxpayers footed the bill

> For instance, the same year the government loaned $535 million to solar-power company Solyndra, it also loaned Tesla $465 million. “Taxpayers footed the bill for Solyndra’s losses—yet got hardly any of Tesla’s” gains, she says. Solyndra has become “a byword for the government’s sorry track record when it came to picking winners,” a story that has helped keep regulators at bay, she says. I'm no Tesla fan, but that's sort of how loans work. You get your money back plus interest. It's not a lottery ticket. And Tesla paid back their loan early. I don't think the program lost very much money overall.

AlphaSite 8y ago
Pretty much, I mean the argument is that there are jobs/tax revenue/etc to be gained from having a healthy local market. There may not be direct returns, but that’s not really the point.
maxerickson 8y ago
Loans are often structured with a penalty if they are paid back early. The provider of the capital wants the scheduled payments more than they want access to the capital. Perhaps big fat government loans should really be purchases of special restricted securities (that do things like limit the control the government has over the company and prevent dilution).
- dbt00 8y ago
  The auto bailouts in the late-08/early-09 timeframe were structured as warrant purchases (similar to options), and the government did see upside. In-Q-Tel is a program where the government invests in startups and participates in equity growth. So it's not impossible, but not particularly common.
tway2888888 8y ago
>I don't think the program lost very much money overall. It's not about whether it lost money. What were the risk adjusted expected rates of return? Was the interest rate sufficient? Was this the best way to invest that half-a-billion dollars? It certainly was not with Solyndra. The fact that, in hindsight, Tesla paid back the loan doesn't determine whether it was "worth it" or not. The government may have gotten lucky. That's no way to run a lending business.
paulgrant999 8y ago
So your argument is, the government should be asking for "convertible bonds"? ... right?
wpietri 8y ago
That is how loans work. But in a free-market economy, loans also come from professional lenders, who price loans according to risk. Government loans made to further industrial policy are necessarily subsidies, which is not how loans work. From the view of the economy as a whole, it can work out fine, in that we tax the profits of the successful companies. (Although a great deal less than we used to.) But it does rather put a hole in the myth of self-made men and the companies they built from nothing. I'll also note that Silicon Valley has a university at the heart of it. We fund a great deal of research, and we should. We also subsidize education in a variety of ways. But the first version of Google was developed by grad students as part of their student work, and Google today hoovers up quite a number of recent graduates from schools are either publicly run or receive a great deal of government assistance. It's a highly interdependent system. I think that's great, but don't think our myths acknowledge that.
- deleted 8y ago
  [deleted]

AlphaSite 8y ago

Pretty much, I mean the argument is that there are jobs/tax revenue/etc to be gained from having a healthy local market. There may not be direct returns, but that’s not really the point.

maxerickson 8y ago

Loans are often structured with a penalty if they are paid back early. The provider of the capital wants the scheduled payments more than they want access to the capital. Perhaps big fat government loans should really be purchases of special restricted securities (that do things like limit the control the government has over the company and prevent dilution).

dbt00 8y ago
The auto bailouts in the late-08/early-09 timeframe were structured as warrant purchases (similar to options), and the government did see upside. In-Q-Tel is a program where the government invests in startups and participates in equity growth. So it's not impossible, but not particularly common.

tway2888888 8y ago

>I don't think the program lost very much money overall. It's not about whether it lost money. What were the risk adjusted expected rates of return? Was the interest rate sufficient? Was this the best way to invest that half-a-billion dollars? It certainly was not with Solyndra. The fact that, in hindsight, Tesla paid back the loan doesn't determine whether it was "worth it" or not. The government may have gotten lucky. That's no way to run a lending business.

paulgrant999 8y ago

So your argument is, the government should be asking for "convertible bonds"? ... right?

wpietri 8y ago

That is how loans work. But in a free-market economy, loans also come from professional lenders, who price loans according to risk. Government loans made to further industrial policy are necessarily subsidies, which is not how loans work. From the view of the economy as a whole, it can work out fine, in that we tax the profits of the successful companies. (Although a great deal less than we used to.) But it does rather put a hole in the myth of self-made men and the companies they built from nothing. I'll also note that Silicon Valley has a university at the heart of it. We fund a great deal of research, and we should. We also subsidize education in a variety of ways. But the first version of Google was developed by grad students as part of their student work, and Google today hoovers up quite a number of recent graduates from schools are either publicly run or receive a great deal of government assistance. It's a highly interdependent system. I think that's great, but don't think our myths acknowledge that.

deleted 8y ago
[deleted]