(Slate) In 2009, as the financial crisis raged and General Motors and Chrysler plunged toward bankruptcy, Tesla Motors faced a seemingly impossible task: raising half a billion dollars to build an electric-car factory. Tesla had just staggered through a year of layoffs, canceled orders, and record losses. Then suddenly, salvation. The U.S. Department of Energy offered to lend the company $465 million at rock-bottom interest rates.
Four years later, Tesla Motors offers a remarkable example of how a well-timed government investment in the right company can pay off. Every week, 400 all-electric Model S sedans roll out of Tesla's factory in Fremont, Calif., which the government's loan financed. Motor Trend named the Model S its 2013 Car of the Year. Tesla's stock is the toast of Wall Street, giving the company a market value topping $12 billion. And in sharp contrast to Solyndra, the solar panel maker that defaulted on its $528 million loan from the Energy Departtment, Tesla last week paid the government back early, with interest.
Yet despite all the public celebration, both Solyndra and Tesla stand as warnings of the dangers in deputizing bureaucrats to play bankers and venture capitalists. In both loans, the government walked away laughably undercompensated for the risk it accepted in the startup companies. In fact, the Tesla deal was arguably far more costly for America than the Solyndra fiasco.
Advertisement - story continues below