A $6.6 Billion Lame-Duck Loan From Biden to Bezos and the Saudis
Rivian, a competitor to Musk’s Tesla, would benefit
The electric car and truck company Rivian (RIVN) announced this week that it had received “conditional commitment” from the U.S. Department of Energy for a $6.6 billion loan to build a factory in Georgia. You can read the Rivian press release and the Department of Energy press release. Neither one will tell you what the company’s most recent proxy statement says, which is that Rivian’s two biggest owners are Amazon (“Amazon.com NV Investment Holdings LLC,” to be precise) and “Global Oryx Company Limited,” which is the Jameel family of Saudi Arabia.
Amazon’s Jeff Bezos is one of the richest men in the world. The Jameel family is also prosperous. So if they want to build a factory in Georgia, why don’t they do it with their own money, rather than by borrowing from the U.S. taxpayers?
Suspicious minds will see plenty to be suspicious of. Bezos owns the stridently anti-Trump (“Democracy dies in darkness”) Washington Post. The executive of the rival electric car company that is the market leader, Tesla, Elon Musk, is a huge partisan of Trump. Maybe Biden is trying to prop up a Tesla competitor on his way out the door? Or maybe, by doing the Saudis a favor, Biden is trying to enlist their support for some sort of last-minute Israel-Saudi peace deal and ceasefire that could be a crowning foreign policy achievement to rescue the reputation of an otherwise dismal presidency.
Remember, the U.S. government is already subsidizing electric vehicle purchases with a $7,500 tax credit. The $6.6 billion loan is an additional subsidy on top of that subsidy.
And if you think this is an example of Biden’s reckless “Inflation Reduction Act” spending, the actual story is a little more complicated and bipartisan. The loan is to be made under the authority of the Energy Independence and Security Act of 2007, which was signed into law by President George W. Bush. Bush was determined to fight what he called “greenhouse gas admissions [sic].”
The largely free-market adoption of hybrid and electric vehicles is an amazing technological and business success story of recent years. If Rivian eventually fails, Biden will be, like Bush, out of office, and taxpayers will be stuck with worthless collateral for a defaulted-on loan. If Amazon needs an electric delivery-van partner, let it fund the project out of its profits without government help. Perhaps Bezos can sell the Post if he’s so hard-pressed for cash, freeing up the newspaper to investigate deals such as this one without conflicts of interest.
Meantime, our federal government can barely fulfill core functions such as securing the borders or fielding a fully functioning and seaworthy Navy. Who trusts the ability of Washington bureaucrats to provide venture debt financing in the competitive, high-tech transportation industry? Why not leave the car-factory factory loans to the guys at Blackstone, Ares, Apollo and other nonbank lenders who are financing everything else? It doesn’t seem fair to force people who work at other auto companies to have their taxes used to subsidize a factory for their competitor.
Defenders of such loans say they are eventually paid back with interest and that there are benefits in terms of combating climate change. If the payback with interest is so certain, way not look to a private lender rather than the government? And if combating climate change is the goal, there are almost surely better ways to spend $6.6 billion than by helping to build a factory for one electric car and truck company.
Thank you: The Editors, unlike Rivian, has no commitments, conditional or otherwise, for billions of dollars in taxpayer-backed loans. We rely on paying readers. If you can afford the $8 a month or $80 a year, please sign up today if you haven’t already.
And if you are feeling generous, please consider giving your Thanksgiving host or someone else special to you a gift subscription.
Well put.