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This headline could be changed to be: Car maker builds cars in Finland, gets US loan guarantee to build cars in US and create US jobs Maybe it's a bit long for

This headline could be changed to be: Car maker builds cars in Finland, gets US loan guarantee to build cars in US and create US jobs Maybe it's a bit long for a headline This news is also 2 years old!

hugh3 15y ago
What is a loan guarantee, anyway? Oh, I looked it up. Apparently it's an assumption of the risk if the company defaults. So if I'm understanding this correctly, from the US Government's point of view it has all the risk of giving them a loan (we're on the hook if they default), with none of the upside (if they pay it back we don't get the interest). Right?
- brown9-2 15y ago
  Well the upside is that the lender develops successful technology that has a big impact on the economy and the movement away from reliance on oil. It's subsidized research.
  - hugh3 15y ago
    It's badly subsidized research. Compare to, say, the budget of the National Renewable Energy Laboratory in Golden, Colorado. For five hundred million dollars, you can get, say, five thousand man-years worth of actual research. As opposed to a business that makes a few funny-looking sports cars for rich people and then goes broke.
  - OstiaAntica 15y ago
    It is corruption, a form of "venture socialism" where politically connected donors get money with no-strings-attached. It's heads I win, tails, the taxpayer loses. This form of government-driven investment is a dramatic departure from 200 years of American tradition. Nobody really noticed because a lot of these programs were created by George W Bush, with Democratic support, and the media cheerleading anything "green".
    - Retric 15y ago
      There are plenty of examples of these types of government backed deals. Disneyland being one of the most famous that nobody talks about but the tradition predates 'corporations' with the 'East India Company' being the both the first example of a large multi-national company and probably the most blatant example. Some of this is infrastructure like oil pipelines, but homestead land grants are both classic American expansionism and free handouts at the same time.
      - OstiaAntica 15y ago
        You are mistaken. Disneyland is a classic private entrepreneurial tale. Walt Disney sold his home to finance the park. http://www.mackinac.org/7164 http://www.mackinac.org/7164 Homestead land grants cost taxpayers nothing and went to small family farmers. That's nothing like half-billion dollar taxpayer loans directed by politicians in Washington.
        Retric 15y ago
        Homestead land grants cost taxpayers LAND. After the film, it was explained that for Disney World, including EPCOT, to succeed, a special district would have to be formed: the Reedy Creek Improvement District with two cities inside it, the City of Bay Lake and the City of Reedy Creek (now the City of Lake Buena Vista). In addition to the standard powers of an incorporated city, which include the issuance of tax-free bonds, the district would have immunity from any current or future county or state land-use laws. The only areas where the district had to submit to the county and state would be property taxes and elevator inspections.[1] http://en.wikipedia.org/wiki/Walt_Disney_World_Resort http://en.wikipedia.org/wiki/Walt_Disney_World_Resort
- tomfakes 15y ago
  If this is successful, the US government gets taxpayers and people out of unemployment lines. There is an upside, but not directly from the payback of the loan.
  - OstiaAntica 15y ago
    This money is taken from private sector, profitable companies like Google and Apple, and is given to politically connected, trendy companies like Solyndra. Politically directed investment increases unemployment because the incentives are all wrong and the resources are invariably wasted. Private markets do a far better job allocating capital than governments-- that's the overwhelming economic lesson of the 20th century.
- tomjen3 15y ago
  Well yes, but not really. True the government won't get interest directly but, because it can only be spend inside the US, they do get the secondary effects. Think of it as trying to do what the stimulus should have done, leveraged quite a bit (because you only need to pay out what it cost to cover the loans that go bad).

hugh3 15y ago

What is a loan guarantee, anyway? Oh, I looked it up. Apparently it's an assumption of the risk if the company defaults. So if I'm understanding this correctly, from the US Government's point of view it has all the risk of giving them a loan (we're on the hook if they default), with none of the upside (if they pay it back we don't get the interest). Right?

brown9-2 15y ago
Well the upside is that the lender develops successful technology that has a big impact on the economy and the movement away from reliance on oil. It's subsidized research.
- hugh3 15y ago
  It's badly subsidized research. Compare to, say, the budget of the National Renewable Energy Laboratory in Golden, Colorado. For five hundred million dollars, you can get, say, five thousand man-years worth of actual research. As opposed to a business that makes a few funny-looking sports cars for rich people and then goes broke.
- OstiaAntica 15y ago
  It is corruption, a form of "venture socialism" where politically connected donors get money with no-strings-attached. It's heads I win, tails, the taxpayer loses. This form of government-driven investment is a dramatic departure from 200 years of American tradition. Nobody really noticed because a lot of these programs were created by George W Bush, with Democratic support, and the media cheerleading anything "green".
  - Retric 15y ago
    There are plenty of examples of these types of government backed deals. Disneyland being one of the most famous that nobody talks about but the tradition predates 'corporations' with the 'East India Company' being the both the first example of a large multi-national company and probably the most blatant example. Some of this is infrastructure like oil pipelines, but homestead land grants are both classic American expansionism and free handouts at the same time.
    - OstiaAntica 15y ago
      You are mistaken. Disneyland is a classic private entrepreneurial tale. Walt Disney sold his home to finance the park. http://www.mackinac.org/7164 http://www.mackinac.org/7164 Homestead land grants cost taxpayers nothing and went to small family farmers. That's nothing like half-billion dollar taxpayer loans directed by politicians in Washington.
      - Retric 15y ago
        Homestead land grants cost taxpayers LAND. After the film, it was explained that for Disney World, including EPCOT, to succeed, a special district would have to be formed: the Reedy Creek Improvement District with two cities inside it, the City of Bay Lake and the City of Reedy Creek (now the City of Lake Buena Vista). In addition to the standard powers of an incorporated city, which include the issuance of tax-free bonds, the district would have immunity from any current or future county or state land-use laws. The only areas where the district had to submit to the county and state would be property taxes and elevator inspections.[1] http://en.wikipedia.org/wiki/Walt_Disney_World_Resort http://en.wikipedia.org/wiki/Walt_Disney_World_Resort
tomfakes 15y ago
If this is successful, the US government gets taxpayers and people out of unemployment lines. There is an upside, but not directly from the payback of the loan.
- OstiaAntica 15y ago
  This money is taken from private sector, profitable companies like Google and Apple, and is given to politically connected, trendy companies like Solyndra. Politically directed investment increases unemployment because the incentives are all wrong and the resources are invariably wasted. Private markets do a far better job allocating capital than governments-- that's the overwhelming economic lesson of the 20th century.
tomjen3 15y ago
Well yes, but not really. True the government won't get interest directly but, because it can only be spend inside the US, they do get the secondary effects. Think of it as trying to do what the stimulus should have done, leveraged quite a bit (because you only need to pay out what it cost to cover the loans that go bad).