How Obama Should Handle Bailouts for GM, Evergreen Solar and Sallie Mae
Corporate Survival Depends on Public Sympathy
I'll examine 3 companies I think might not make it through this economic downturn, regardless of how much money they are ladled from our taxes.
General Motors -- No
The hot topic of discussion for everyone in the last month has been how poorly GM is doing compared to the "Big 3." Assuming everything is left alone, GM probably won't make it much longer due to its falling revenues and sky high costs. $25 billion won't do much to pad the fall of this automotive giant, and I feel we shouldn't waste our time or energy on figuring that out. The $25 billion should go to the unemployment and retirement benefits all of the eventual layoffs are going to need sooner or later. No matter how much money GM gets, it'll be at the bottom of the ocean with the Titanic by 2012.
Evergreen Solar -- Yes
One of the United States' best hopes for becoming a world leader in solar photovoltaics is floundering in bad deals that were dealt to it by Lehman Brothers. To raise capital for their new manufacturing plan in Devens, Mass., Evergreen Solar lent Lehman Brothers millions of dollars in stock. When Lehman failed almost a month after getting a great deal from Evergreen Solar on the stock, they left Evergreen Solar with a massive shortcoming of money which would have helped them get their new plant running faster.
A judge ruled the company that bought Lehman was not responsible for Lehman's bad bargaining with Evergreen and will not currently be forced to repay. Although this is all under an appeals process, it is massively unfair that Lehman, as a bank, got bailed out and its creditor, Evergreen, is being forced to continue operating without any assistance or sympathy from the same folks that awarded a bailout.
Sallie Mae -- Maybe
Private student loans have been proven to be an extremely profitable and oppressive loan for people looking to finance their educations after maxing out their federal aid. Sallie Mae has been known to jack up their borrower's private student loan interest rates to 14 percent or higher without a chance to re-consolidate at a lower fixed rate.
With all financials having trouble, banks that are making private student loans are starting to wobble as well. If the government gives a bailout to these institutions, then restrictions need to be made on lending practices of the private loan programs. Maybe even the loans that are being bought could become federal loans in a sense that they could be repaid at a low fixed rate or forgiven under certain circumstances. But if the banks refuse to put more regulation on their private student loan lending, they shouldn't get a dime and can fall like the rest of the financial institutions.
I am putting corporate responsibility and punishment over job losses and economic hardship. The market downturn and corporate failures will hurt a lot of people, but new jobs and industries will flourish. In the mean time, selfish and irresponsible corporations should either be reigned in completely or left to die on their own.
Published by JR Moreau
JR Moreau is a freelance writer of several disciplines, including but not limited to: print/digital journalism, blogging, marketing, branding & pr. Working full time at a marketing analysis software company,... View profile
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16 Comments
Post a CommentI've definitely talked to some demonic call center workers when I had my student loans with Sallie Mae. They're an absolutely terrible company. Never heard anything good about them.
Sallie Mae is the spawn of the devil, if not the devil himself! They have waaay to much power and can choke the life out of young people who don't make huge bucks after graduation. My son is but one of millions of young people caught in their tentacles.
As much as I wish Sallie Mae would crash and burn, I agree a bailout for them might be in order, only because they also handle government loans, and I'd hate to see the mess students would have to go through to get loans.
You will become famous with google finance link he he he.
Anyway at least you answered the comments area and made your explanation more clear. If you are a long term investor on ESLR i think you're making a good choice, and short term movement shouldn't worry you.
And also you have been able to have some more elements to confirm the good position you built on ESLR ( and i hope for you on other solar stock too (FSLR, LDK, SPWRA, SOLF and ENER are top rank with ESLR according to me).
I will read your next paper on finance as i liked (beside the ESLR confusion) the rest.
Sorry for my overall english as it isn't my native langage at all.
Thank you for alerting me that this appeared on Google Finance. I'm actually more upset about Associated Content altering the title than I would have been otherwise. This is a problem.
I don't have the option to remove or edit this article anymore, otherwise I probably would. At the very least, I can say I own considerable amounts of ESLR stock and plan to purchase more in the near future. I apologize for any bad impressions I may have given.
The effect of the Lehman mess has already been price (the sare number has been diluted). They are in good discussion to licence their technology knowing that they developped another new technology that is better then the actual. They also have forward contract already for Polysilicon which means they pay far less then the actual spot price (that most chinese Solar companies pays). The only trouble could be raising capital in june 2009 to finish the second factory they will build. But they need 400M$ for it but they have in front already the backlog contract to prove that entire will be fully use and profitable and the Obama stimulus and renewable energy strategy will probably make the capital raise far more easy then what people could be worry about. If The government help ESLR on the lehman mess, we will have a huge positive effect (reversal of dilution) but if nothing happens, no NEGATIVE effect will occur as... everything is PRICED in.
Thanks for answering the comment that is pretty cool from you. I hope the effect of this article will be low on the stock because as you might have seen the entire Solar sector is in green except ESLR that in fact fall right at the open after your article appeared on Google Finance. I don t know if there is a link but whatever. Long term investor knows the great value of this company. For those who still don t realise here are a few elements to help them : ESLR has a great patent in the way they build their solar panel, which allow them to use far less pollysilicon then others competitor, that is a great effect on the margin as the cost of their panel is far less then competitor. They have 2,7billions$ of backlog if the Euro/USD is at 1,25 (if it is at 1,30 the backlog is bigger), they have enough cash to finish their biggest factory etc.
Well, the only way to assuage one's fears is to read closer. Unfortunately, someone who invests with anxiety from a headline probably isn't going to make prudent decisions.
That being said, I can understand some confusion with the title. I actually titled it something else and whoever edited the article at AC changed it to what they thought was suitable. I am very sorry for the anxiety felt because of the title, but the fault of it rests upon Associated Content, not I. I will take responsibility for the content of the article though.
The title of your article is grossly mis-leading. I think you should have made a point to clearly provide the reader with some very important facts: 1.) ESLR has not asked for any "bailout" and to my knowledge, there is no discussion of ESLR being even considered for assistance. 2) When considering a title for your future articles, you should choose them very carefully. You have an audience containing millions of people, some of which invest in the companies that you write about, and a lot of them aren't patient enough to read the entire article; all they see is "ESLR", "bailout" and "Obama" all in the title. Those are the idiots that typically run from what they percieve as trouble (when there really isn't any), requiring those of us that are long to increase the frequency of trips to the drug store for the bottle of Malox that we now chug as if it were a cold beer. You should use your position to add to our knowledge rather than stirring our emotions.
I understand your worry as the stock has been hit very hard lately. But this article is driving some fears that ESLR doesn't need. You see all those sudden drop on the price are Short attack (look at the heavy shorts stocks on ESLR it is huge).
People doesn't catch what happened with the Lehman Mess. The biggest risk ESLR had was : Dilution of the shares they gave to Lehman. In order to price it right away, they directly diluted them to the total number of Shares. Since then, they shouldn't be any second effect on the Lehman Story. Concerning their developpement, the cash flow of their backlog + obama policy, should help them develop very well (specially with their proprietary tech that provide high margin.)