During the fiscal year 2012, the Ex-Im Bank authorized $14.7 billion in loan guarantees and direct financial aid. Of that $14.7 billion, 82.7 percent, or $12.2 billion, went directly toward financing the purchase of Boeing products (read airplanes). But why would a company like Boeing, which enjoyed nearly $70 billion in revenue in 2011, warrant additional support from U.S. taxpayers? The answer of course, is politics. Thanks to a cadre of lobbyists and an extensive network of Boeing supporters within the U.S. government, the company consistently receives billions of dollars from the Ex-Im Bank each year. As is often the case with politically driven investments, however, there is still risk involved.
Last year, the Ex-Im Bank financed the purchase of over three billion worth of Boeing 777’s to Air India – a company that has accumulated so much debt that it is now re-selling the same planes that the Ex-Im Bank helped finance. And if that isn’t bad enough, inside deals like this one have granted foreign airlines a competitive advantage in the international market; penalizing U.S. carriers who try to play by the rules. It has been estimated that the Ex-Im Bank costs the U.S. airline industry up to 7,500 jobs and $684 million per year – an amount that is transferred to consumers in the form of higher ticket prices and fewer flight options.
The recent debate over the fiscal cliff brought to light, yet again, the unsustainable spending policies of the U.S. government. With over $16 trillion worth of public debt amassed, the U.S. is already feeling the pressure of its mounting liabilities. But certain institutions don’t seem to have seen or read the memo. The Ex-Im Bank continues to spend money recklessly and without consideration of its effect on the free market.
Congress has done its part, passing legislation that directs the Secretary of the Treasury to begin winding down Ex-Im’s corporate subsidies. Unfortunately, Timothy Geithner has failed to take any action. Geinther will soon be departing and we can only hope that the incoming Secretary of Treasury abides by the law and finally puts an end to this crony capitalism.
Editor's note: The author originally stated -- incorrectly -- that the solar company Amonix went bankrupt. The error has now been corrected.