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Companies get a bailout based on how big the fallout is if they fail (lost jobs, lost value for the economy, etc.) or how much value is expected they'll bring i

Companies get a bailout based on how big the fallout is if they fail (lost jobs, lost value for the economy, etc.) or how much value is expected they'll bring if they're saved. Like investing in Tesla even when they constantly lost money because you expect it to recover and bring you a profit. I am not considering any other interests involved, lobbying, bribes, etc. While important I'm sure the first part is already sufficient to explain what's behind a bailout. This creates some really bad incentives for companies and their executives. If you are not in the position to have such an impact, either good or bad, then nobody will ever bother to bail you out.

SilasX 7y ago
>Companies get a bailout based on how big the fallout is if they fail (lost jobs, lost value for the economy, etc.) or how much value is expected they'll bring if they're saved It's more like, they get bailout based on how big they can convince lawmakers, in an environment of little public debate, that will be. I know, it sounds like a nitpick, but sometimes the distinction is big.
- close04 7y ago
  > I know, it sounds like a nitpick No, you're right. It's always about the perceived value or impact. And that perception can be formed by deceiving, bribing, showing your books, etc.
lowdose 7y ago
No all these companies in need of a bailout are suits without skin in the game. Elon took a big risk with his own money which means you as shareholder of Tesla are shielded from the classic agency problem. Suits empty the company in good times and when shit hits the fan they put their hands in the air and say "well I did my best".
- quickthrowman 7y ago
  On the other hand, Elon Musk’s personal finances are so closely tied to the success of TSLA that he has an incentive to stretch the truth and push the limits to pump the stock price up. See ‘offer to go private at $420’ and the delivery numbers reported AH yesterday followed by a huge fade today, and that’s just scratching the surface. It’s usually not good when the SEC is chastising and/or disciplining the CEO of a company. I’m not long or short TSLA, just presenting the bear case :) I stick to trading the indices
- close04 7y ago
  > No all these companies in need of a bailout are suits without skin in the game. You may be replying to the wrong comment. I explained the reasoning for bailouts in general. Your characterization is besides the point. I only gave Tesla as an example of investing based on future expectation of value, similar to the reasoning behind some bailouts. I wish people would stop getting so riled up at the mere mention of Tesla, so much so that reading comprehension flies out the window. This being said, at times Elon has also gone to great lengths to mislead the general public and the shareholders in order to pump up that value in critical moments ("funding secured", "virtually certain") or bailout family with other people's money (SolarCity). Court decisions already stand to confirm this. I guess everybody's "a suit" when it suits them.
  - lowdose 7y ago
    I hear you and also am against the bailouts. For me personally Elon gets a pass for his reality distortion field. I think when you are trying to bring real change especially in an area where we haven't seen progress for years.

SilasX 7y ago

>Companies get a bailout based on how big the fallout is if they fail (lost jobs, lost value for the economy, etc.) or how much value is expected they'll bring if they're saved It's more like, they get bailout based on how big they can convince lawmakers, in an environment of little public debate, that will be. I know, it sounds like a nitpick, but sometimes the distinction is big.

close04 7y ago
> I know, it sounds like a nitpick No, you're right. It's always about the perceived value or impact. And that perception can be formed by deceiving, bribing, showing your books, etc.

lowdose 7y ago

No all these companies in need of a bailout are suits without skin in the game. Elon took a big risk with his own money which means you as shareholder of Tesla are shielded from the classic agency problem. Suits empty the company in good times and when shit hits the fan they put their hands in the air and say "well I did my best".

quickthrowman 7y ago
On the other hand, Elon Musk’s personal finances are so closely tied to the success of TSLA that he has an incentive to stretch the truth and push the limits to pump the stock price up. See ‘offer to go private at $420’ and the delivery numbers reported AH yesterday followed by a huge fade today, and that’s just scratching the surface. It’s usually not good when the SEC is chastising and/or disciplining the CEO of a company. I’m not long or short TSLA, just presenting the bear case :) I stick to trading the indices
close04 7y ago
> No all these companies in need of a bailout are suits without skin in the game. You may be replying to the wrong comment. I explained the reasoning for bailouts in general. Your characterization is besides the point. I only gave Tesla as an example of investing based on future expectation of value, similar to the reasoning behind some bailouts. I wish people would stop getting so riled up at the mere mention of Tesla, so much so that reading comprehension flies out the window. This being said, at times Elon has also gone to great lengths to mislead the general public and the shareholders in order to pump up that value in critical moments ("funding secured", "virtually certain") or bailout family with other people's money (SolarCity). Court decisions already stand to confirm this. I guess everybody's "a suit" when it suits them.
- lowdose 7y ago
  I hear you and also am against the bailouts. For me personally Elon gets a pass for his reality distortion field. I think when you are trying to bring real change especially in an area where we haven't seen progress for years.