Solyndra

Beyond Saving
Silver Member
Beyond Saving's picture
Posts: 4477
Joined: 2007-10-12
User is offlineOffline
Solyndra

 If you pay attention to the 24/7 news cycle you have heard about Solyndra. For those of you who don't spend your days watching the business channels, Solyndra was a solar power company that received around $500 million in loans from the federal government and now declared bankruptcy. It appears to me that they essentially stole the money and had no serious intention of ever paying it back. I really hope their executives do some serious jail time, but I doubt they will. 

 

But setting outright corruption aside, suppose the folks at Solyndra had perfectly good intentions but were simply incompetent. Should our federal government be in the business of giving out large loans to companies? It ought to be obvious to anyone but the most naive that doing so invites corruption and cronyism. Even without corruption, loaning money is risky. I have no problem with people risking their own money, that is what makes capitalism work, but the government is gambling with our money. I don't think the government should have any role in determining which companies are worth investing in and which aren't. Solyndra was owned in part by George Kaiser who is worth around $10 billion- if he wants $500 million he can come up with it himself. 

 

Loaning to startups is especially risky since they have not demonstrated an ability to make a profit. A lot of smart business people lose a lot of money on failed startups. And giving a massive amount of money to a company that has not demonstrated an ability to make a profit is downright stupid. 

 

Among other massive government loans are $529 million to Fisker Automotive that was founded in 2007 but has yet to sell a single car and has 150 employees. Now maybe it will be profitable, but if Mr. Fisker can really design great cars, he ought not have problems attracting private funding. He has spent his career in the Auto industry including high positions in Ford and Ashton Martin. So he certainly has the connections to get that kind of dough if he has a good idea. Of course, it was easier to call Al Gore and get use that political connection to get some federal government cash. The feds wouldn't know the difference between a profitable car and a money pit and probably ask fewer questions- they haven't spent their lives in the auto industry. 

 

Tesla motors was given a $465 million loan- it ran at a $154 million loss last year.  http://www.sec.gov/Archives/edgar/data/1318605/000119312511054847/d10k.htm 

 

The government is loaning $1.6 BILLION to BrightSource energy, a company founded in 2004 and has never made a profit.  http://www.energyboom.com/solar/brightsource-energy-files-250-million-ipo  Ironically, it is being sued by the federal government for violating the Endangered Species Act. Only the government could loan money to a company while pressing a lawsuit that could potentially destroy the project they are loaning money for....

 

I'm not saying these companies are necessarily going to fail, what I am saying is that the government shouldn't be risking our money, especially by making low interest loans that offer little return even if the companies do become profitable. I will gamble with my money and put it in start ups I believe will be profitable. I will either lose every penny or make a nice profit. The people who run these companies are wealthy and connected in their own right. They know people who have the cash available to invest/loan, if they can't convince people they know that the investment is a good one, why should we throw public money at them?

 

We should all say fuck you to these leeches. If you want to take a risk, use your own damn money and wealth should be made based on value provided to customers not getting large "loans" through political connections. 

I just usually go with my own taste. If I like something, and it happens to be against the law, well, then I might have a problem.- Hunter S. Thompson


Brian37
atheistSuperfan
Brian37's picture
Posts: 13591
Joined: 2006-02-14
User is offlineOffline
As badly as the private

As badly as the private sector has behaved you bitch about what government does?


You are seeking a utopia and being selective. I think you don't mind money coming from government when it supports things you like. But when Dems get money for things they like, it's wrong?

So when car companies and banks dump their loses on us, it's ok and we in turn loan them money  for things we didn't screw up? But if a company the left supports gets a loan and fails, all the sudden they are the criminals?

I think you simply support socialized losses when it benefits you. But you are a moron if you think government should never get involved with the private sector.

UTOPIAS DO NOT EXIST and you will never have a purely private society where it always behaves itself.

 

 

 

 

 

"We are a nation of Christians and Muslims, Jews and Hindus -- and nonbelievers."Obama
Check out my poetry here on Rational Responders Like my poetry thread on Facebook under BrianJames Rational Poet also on twitter under Brianrrs37


EXC
atheist
EXC's picture
Posts: 3139
Joined: 2008-01-17
User is offlineOffline
One of the reasons why the

One of the reasons why the government does this is because other countries namely China Inc. funds new industries in the hopes of keeping full employment. There they have to do it because if they start having millions of unemployed, there will be a revolution and the government will fall.

The USA lost semiconductor manufactering because the Taiwanese government funded it. The USA semiconductor industry is at a severe disadvantage. Our government doesn't fund it, but it demands tons of taxes from investors and workers when it's privately funded. In Tawain there is more of a balance between what the government puts in and what it takesout.

If you look at history, the US government has funded or gave special breaks to a number of fledgling industries(railroads, internet, electric power, etc...) that turned out to be a boon to the economy later on. I think Obama's mistake here is calling it a loan, like there was an expectation it would get paid back. It would have been better to call it a research grant, there's no expectation of getting the money back.

“Religion is regarded by the common people as true, by the wise as false, and by the rulers as useful.” Seneca


A_Nony_Mouse
A_Nony_Mouse's picture
Posts: 2880
Joined: 2008-04-23
User is offlineOffline
.

Beyond Saving wrote:
But setting outright corruption aside, suppose the folks at Solyndra had perfectly good intentions but were simply incompetent. Should our federal government be in the business of giving out large loans to companies? It ought to be obvious to anyone but the most naive that doing so invites corruption and cronyism.

Welcome to the real world. Ethanol has never been economically competative and the only demand for it as fuel has been created by law. Otherwise no one wants the stuff save for drinking. The gov has been pumping billions into that for decades. But it is green as in greenbacks as far as I can see.

Yes, I know direct subsidies were cut off this year. The artificial demand created by law still exists. The legal requirement to mix ethanol with gasoline increases both the cost of fuel at the pump and food at the grocery store. This is not a secret. It is well known. Therefore it is an intended consequence.

Jews stole the land. The owners want it back. That is all anyone needs to know about Israel. That is all there is to know about Israel.

www.ussliberty.org

www.giwersworld.org/made-in-alexandria/index.html

www.giwersworld.org/00_files/zion-hit-points.phtml


Vastet
atheistBloggerHigh Level ModeratorSuperfan
Vastet's picture
Posts: 10595
Joined: 2006-12-25
User is offlineOffline
I agree with Beyond Saving

I agree with Beyond Saving entirely. No corporate welfare should exist. Let them die.

Proud Canadian, Enlightened Atheist, Gaming God.


Beyond Saving
Silver Member
Beyond Saving's picture
Posts: 4477
Joined: 2007-10-12
User is offlineOffline
Brian37 wrote:As badly as

Brian37 wrote:

As badly as the private sector has behaved you bitch about what government does?

 

You are seeking a utopia and being selective. I think you don't mind money coming from government when it supports things you like. But when Dems get money for things they like, it's wrong?

So when car companies and banks dump their loses on us, it's ok and we in turn loan them money  for things we didn't screw up? But if a company the left supports gets a loan and fails, all the sudden they are the criminals?

I think you simply support socialized losses when it benefits you. But you are a moron if you think government should never get involved with the private sector.

UTOPIAS DO NOT EXIST and you will never have a purely private society where it always behaves itself. 

 

Why do you insist on making everything into a left/right thing? Show me where I have ever supported the government handing out free cash to anyone. Honestly, I thought you would be on my side on this one. You were bitching about how I always blame things on the middle and poor classes. So I decided to bitch about the government throwing money to extremely wealthy people. I guess from your perspective, everything is ok as long as government is giving it out... When it comes to wasting my tax money, I am an equal opportunity bitcher.

 

Why should we have any socialized losses at all? And why am I a moron for believing there shouldn't be? Why is it ok for them to gamble with our money?

I just usually go with my own taste. If I like something, and it happens to be against the law, well, then I might have a problem.- Hunter S. Thompson


Beyond Saving
Silver Member
Beyond Saving's picture
Posts: 4477
Joined: 2007-10-12
User is offlineOffline
EXC wrote:If you look at

EXC wrote:

If you look at history, the US government has funded or gave special breaks to a number of fledgling industries(railroads, internet, electric power, etc...) that turned out to be a boon to the economy later on. I think Obama's mistake here is calling it a loan, like there was an expectation it would get paid back. It would have been better to call it a research grant, there's no expectation of getting the money back.

 

Are you saying that railroads, internet and electric power wouldn't exist without government subsidies? Seems to me that there is plenty of profit to be made in all three and sooner or later were destined to be exploited regardless of what the government did. Unlike ethanol, which as Anony points out is almost solely a creation of government laws and subsidies. If you DO need government involvement for something like say building a dam, isn't it best that those decisions be made by the local governments that control the areas directly affected by the project? In the US we have more than one layer of government, why do we always turn to one as the solution?

 

Completely private wind, solar and electric car companies do exist. Even without government funding they are not going to disappear precisely because of the possibility that it will become the next huge industry. 

I just usually go with my own taste. If I like something, and it happens to be against the law, well, then I might have a problem.- Hunter S. Thompson


Wonderist
atheist
Wonderist's picture
Posts: 2479
Joined: 2006-03-19
User is offlineOffline
Beyond Saving wrote:But

Beyond Saving wrote:

But setting outright corruption aside, suppose the folks at Solyndra had perfectly good intentions but were simply incompetent. Should our federal government be in the business of giving out large loans to companies? It ought to be obvious to anyone but the most naive that doing so invites corruption and cronyism. Even without corruption, loaning money is risky. ... 

Loaning to startups is especially risky since they have not demonstrated an ability to make a profit. A lot of smart business people lose a lot of money on failed startups. And giving a massive amount of money to a company that has not demonstrated an ability to make a profit is downright stupid.

This latter part is the only thing I think the gov't did wrong there (not knowing anything else about the story but what you wrote).

It is not wrong to offer incentives to create a new industry, especially one as important as alternative energy sources.

The thing they did wrong was give too much, too soon, and without any evidence that the investment was going to yield the desired outcome, which would be more-viable solar power.

However, if the gov't had instead:

  • given small loans to many small businesses, waited a year, and then
  • only re-loaned more money to those businesses that have shown proven technology (or at least a profit), and
  • again, kept the loans small and conditional on performance,
  • and repeated this hedged-loaning to the best competitors, year after year, forcing them to compete for it,

Then I think they could have spent that $500 million more wisely, and would now have something to show for it. Including the far greater likelihood of the loans actually being paid off.

The problem wasn't the investment. The problem was with the incompetent way they did it.

 

Wonderist on Facebook — Support the idea of wonderism by 'liking' the Wonderism page — or join the open Wonderism group to take part in the discussion!

Gnu Atheism Facebook group — All gnu-friendly RRS members welcome (including Luminon!) — Try something gnu!


A_Nony_Mouse
A_Nony_Mouse's picture
Posts: 2880
Joined: 2008-04-23
User is offlineOffline
.

Vastet wrote:
I agree with Beyond Saving entirely. No corporate welfare should exist. Let them die.

And as they are so keen on maintaining their status as legal persons I have a few I'd like to nominate for execution.

Jews stole the land. The owners want it back. That is all anyone needs to know about Israel. That is all there is to know about Israel.

www.ussliberty.org

www.giwersworld.org/made-in-alexandria/index.html

www.giwersworld.org/00_files/zion-hit-points.phtml


Beyond Saving
Silver Member
Beyond Saving's picture
Posts: 4477
Joined: 2007-10-12
User is offlineOffline
natural wrote:This latter

natural wrote:

This latter part is the only thing I think the gov't did wrong there (not knowing anything else about the story but what you wrote).

It is not wrong to offer incentives to create a new industry, especially one as important as alternative energy sources.

The thing they did wrong was give too much, too soon, and without any evidence that the investment was going to yield the desired outcome, which would be more-viable solar power.

However, if the gov't had instead:

  • given small loans to many small businesses, waited a year, and then
  • only re-loaned more money to those businesses that have shown proven technology (or at least a profit), and
  • again, kept the loans small and conditional on performance,
  • and repeated this hedged-loaning to the best competitors, year after year, forcing them to compete for it,

Then I think they could have spent that $500 million more wisely, and would now have something to show for it. Including the far greater likelihood of the loans actually being paid off.

The problem wasn't the investment. The problem was with the incompetent way they did it.

 

But they already offer a wide variety of incentives in the form of tax breaks which makes the industry more profitable for those companies that are successful. I would argue that tax breaks are generally not needed but in our current tax code they are everywhere. And when you are talking about something that is predictably going to become the next mega-industry like oil is today, your providing incentives to people who will become ridiculously wealthy without them if they succeed. 

 

While the bullet points you listed would certainly be a more logical way to proceed than what we are doing now, I have to ask, what is the point? Small private loans are easily accessible for anyone with a good idea that is capable of convincing others it is a good idea. Once you have a proven technology or turning a profit, there are plenty of venture capitalists that will be knocking on your door trying to buy you out. If you have some brilliant and revolutionary idea there isn't a problem of a lack of financing. Your largest barrier will be convincing those with money to invest that your idea is in fact brilliant and revolutionary. 

 

So the only reason you are left with to use the government for such loans is that somehow the government is going to fund someone who failed to attract private investment but might actually have a good idea. Sure, it is possible, if you throw enough money around, sooner or later someone is going to put it to a good use. Your still wasting large amounts of taxpayer money that we don't actually have right now on the small hope that it is going to find that DIY garage genius that is the next Henry Ford.

 

The bottom line is that investing in start ups is extremely risky. Even the best investors in the country have low success rates. The general rule of thumb is that a good angel investor (someone who invests in a small start up < $500k) out of 10 investments will have 3-5 investments fail and lose all or most of the investment. In 3-4 the investor will more or less break even and the investor can expect 1-2 investments to succeed and provide profits. The key is to make sure that the profits in the 1-2 successful businesses are large enough to make up for your losses. Angel investors who experience these kinds of success rates are generally the ones who become very involved with helping the operation of the company and use their expertise and contacts to help the entrepreneur. They don't just invest and forget. A good businessman knows that simply throwing money at something doesn't solve problems, a fact that our government seems incapable of comprehending. 

 

So even if you assume that the government is capable of hiring people who are capable of closely matching the success of a successful angel investor (which begs the question of why someone capable of picking successful startups like that would settle for a government salary) and you can nearly eliminate corruption, nepotism etc. You can expect the government will not be paid back on roughly 40% of its loans. The kicker is that when that 1 or 2 businesses start making big profits, the government is getting paid back at a low interest rate where the investor is going to own a large portion of the company. It certainly isn't going to make up enough to cover the losses.  And if the government does hire people who can pick businesses that well, isn't it likely that they will pass up on investing on the very same people the private sector passed up investing on?

 

Why is it preferable to risk taxpayer money than money of people who are voluntary investors willing to take those huge risks? Every company I listed in the OP had private investment and several had big name billionaire investors who have large fundraising potential. They COULD get the private money. But why take on another investor and give up partial ownership of your company when you can get a government loan at a minimal interest rate and not have to water down your ownership stake? From a purely selfish standpoint, it makes much more sense for them to take the government loan and risk the taxpayers money. 

 

 

I just usually go with my own taste. If I like something, and it happens to be against the law, well, then I might have a problem.- Hunter S. Thompson