Good News: Obama’s Green Loans Were Unprofitable, And That’s The Way They Should Be

And by “unprofitable”, The Week writer Ryan Cooper means to government, because the loans sure seemed profitable to the recipients of the loans, 80% of whom were Democrat donors

Yes, the Obama administration’s green loans are unprofitable. They should be.

Last week, we were treated to another instance of completely confused debate over a government financing program, this time the Department of Energy’s green loans initiative. The department released a financial report on the program, which has been quite successful. A report at BusinessWeek claimed the program was on track to make a $5 billion profit.

The problem is that the $5 billion figure doesn’t take into account the costs of financing or the rate of default. Correcting for that, the program is narrowly unprofitable. Thus, the bean counters over at the Tax Policy Center attacked, wagging their fingers at reporters for not reading the report closely, and accusing the Department of Energy of selling its program in a misleading way.

The report itself has an interesting graphic

That equates to $535,714 per job created. Anyhow

But this whole discussion is beside the point. As with the TARP bailout — when the government invested tens of millions of dollars in big banks — discussions of “profitability” are completely pointless. The federal government has the world’s reserve currency and the legal ability to make arbitrary quantities of dollars. Profitability is an important question for businesses, and state governments to a lesser extent, because they don’t have the dollar creation machine. But for the feds, it’s simply not an important benchmark. The question is whether the policy is good or not.

The problem is that so many of the loans were made for political payback, and many were not paid back. Many were made despite the DOE knowing that the loans were bad risks (Solyndra, anyone?) This is just another talking point to make it seem like government pissing away taxpayer money on “climate change” is a good thing.

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2 Responses to “Good News: Obama’s Green Loans Were Unprofitable, And That’s The Way They Should Be”

  1. John says:

    Problem is that those bean counters were not figuring on what the interest rate the US government actually pays
    Last time I looked they were paying 0.25% they borrow at virtually no cost
    If you factor in the current rate of inflation about2% they are actually borrowing at a negative interest rate
    They turn a profit on every dollar borrowed
    Problem is Teach you always accept “good” news without bothering to check with primary sources to see if it is actually either true or significant

  2. Blick says:

    Government loans are a crap shoot. If it was a profitable venture, the banks or venture capital would have financed it. Govt. gets the rejects to finance. The administrative Overhead costs are high and foreclosure is usually a loss as the govt. is usually in last position on collateral. Meaning the govt. gets nothing from the sale of assets. Govt lending at low-interest rates almost never pays for its self. I know from experience having run such a program.

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