6 thoughts on “Crony Socialism”

  2. It looks like they followed the same procedures with Fisker that they did with Tesla and other loan recipients. They monitored all recipient companies, and when they saw problems with Fisker they issued warnings, held back on loan disbursals, and ultimately cut them off — just what you would expect.

    The DOE loan portfolio is costing less than expected, with most recipients paying back loans on time or (as with Tesla) ahead of time. That suggests they should have taken more risk, not less.

    1. On a side note, this illustrates well the risks of getting money from the government. Once the government decides to pull funding, as it did in May 2011, it makes it very hard for the firm to attract additional investors.

      http://www.latimes.com/business/autos/la-fi-hy-fisker-karma-cash-crunch-20121207,0,753069.story

      [[[Work on the Atlantic came to a standstill this year when the federal government suspended a $529 million loan after delays in the introduction of the Karma. Fisker had drawn down about $192 million of the loan and continues to pay interest on it. It is scheduled to start repaying principal early next year.]]]

      But then that was the same story with Kistler Rocketplane.

      SO you may well argue that the Obama Administration actually killed off this promising firm by giving it the loan.

      1. There was some speculation that Fisker had rushed its car to market to be complaint with the loan conditions. Selling $100k+ cars which don’t work establishes the wrong sort of reputation.

        Interesting idea, though–have the government kill off any companies stupid enough to take a loan from the government. Vlad Tepys was supposed to have done something similar, although I imagine his method was a bit cheaper.

    2. No, Jim. It implies that no company should have been given money by the government, loan or otherwise. It shouldn’t be costing the taxpayers anything, not “less than expected.” All that is saying is that the government expected to lose more of the money that was not theirs to begin with.

    3. The DOE loan portfolio is costing less than expected

      This sentiment is the most profoundly dumb defenses of this program. First thing to observe is that bankruptcy just a few years in is the worst sort of failure, but it isn’t the only sort of failure. One merely needs to look at the loan amounts versus the power generated to see that failure was built in to the program.

      And of course, the amount of “expectation” is absurd. I’ve heard as high as 30% default, which would in the private world clean out the leadership of whatever company authorized those loans. But of course, government is ready to step forward to take the risks that the far smarter, private world won’t touch.

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