Tesla Motors Inc (NASDAQ:TSLA)’s loan deal is even worse than that of Solyndra, according to Slate contributor Scott Woolley. At first blush, this seems like a crazy argument. After all, Tesla just paid its Department of Energy loan off nine years early, while Solyndra went bankrupt and defaulted on its loan.

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However, Woolley’s problem isn’t entirely with Tesla Motors Inc (NASDAQ:TSLA), but rather with government officials who decided to play the role of venture capitalists. He said it just doesn’t work.

What Happened With Solyndra

Of course the biggest concern in terms of venture capital investments is whether those investments will pay off. Woolley notes that Solyndra is an example of one of the two big problems that can occur when the government plays the role of venture capitalist.

The company defaulted on its $528 million loan, and U.S. taxpayers probably won’t see a dime of that money back. Most loans are made by putting up to collateral, but he said Solyndra’s collateral had more “ephemeral value,” which means taxpayers lose.

What Could Have Been Gained From The Tesla Investment

When it comes to the government’s investment into Tesla Motors Inc (NASDAQ:TSLA), Woolley said the big problem is that officials didn’t ask for enough. Essentially, he argues that they offered a venture capitalist loan without demanding the size and type of compensation venture capitalists normally would.

He said that officials should have insisted on receiving stock options when making that loan to Tesla Motors Inc (NASDAQ:TSLA). If they had, he says that the DOE could have made up for its losses from the failed Solyndra investment “several times over.”

Tesla Motors Inc (NASDAQ:TSLA) said in regulatory filings that, based on venture capital rates of return for similar companies, it would have had to pay out 30 to 40 percent annually, compared to the government’s 3 to 4 percent interest rate. DOE officials however, defended their discount, emphasizing that the loan wasn’t made to “generate profit,” but to “build a strong, thriving and growing clean energy industry.”

Disappearing Tesla Motors Stock Options

Woolley also points out that the DOE did secure some stock options that would now be worth around $300 million. However, those options disappeared when Tesla Motors Inc (NASDAQ:TSLA) paid off its loan early.

In Woolley’s estimations, taxpayers could have earned an extra $1 billion if officials had pushed for stock options from Tesla Motors Inc (NASDAQ:TSLA) in return for its loan.