Taxpayers look to Congress to seize upon opportunities to stop federal agencies when they run amok. Congress had unique opportunity to reign in the Export-Import Bank (Ex-Im Bank), which has a litany of egregious practices, by not re-confirming Fred Hochberg as the agency’s chairman and president. Under his leadership, the Bank has a detailed history of promoting crony capitalism and mismanaging taxpayer-backed deals.
Throughout Hochberg’s tenure, the Bank has exemplified fiscal recklessness, providing loans to companies that would not pass the scrutiny of private investors. These transactions are best exemplified by the Ex-Im’s penchant for subsidizing lackluster green energy companies. In the past, the Bank foolishly approved $455.7 million in loan guarantees to First Solar, which in turn used the taxpayer backed subsidies to sell the solar panels to itself. Such investments are quite typical of the Export-Import Bank, as it has also provided loan guarantees to energy companies that eventually went bankrupt, like Enron and Solyndra.
These risky loans are not even the tip of the iceberg. The Bank has also usurped the American free market by picking winners and losers based on political patronage, rather than thoughtful analysis. The Boeing Company, which coincidentally retains a vast army of lobbyists, has been the largest benefactor of the Bank’s corporate welfare, so much so that Ex-Im is often referred to as “Boeing’s Bank.” In fact, last fiscal year Boeing received roughly $12.2 billion in financial assistance from Ex-Im, which equates to more than 80 percent of Ex-Im’s total loan guarantees.
While this might be great for Boeing shareholders, these actions have harmful consequences on the broader American economy, most notably the U.S. airline industry. Ex-Im’s loans are predominately used to finance foreign airlines’ purchases of Boeing aircrafts at below market level rates and with favorable loan terms. This results in a competitive advantage, where foreign carriers can cut costs from their budget and prices from their tickets. In order to remain competitive, American carriers are forced to scale back in other areas, resulting in job losses and lower revenue. According to some estimates, the Export-Import Bank costs the U.S. airline industry as many as 7,500 jobs and $684 million.