Stephen DeMaura
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Boeing’s recent stumbles with its new 787 Dreamliner have again brought into question what role U.S. taxpayers should play in subsidizing the giant airplane manufacturer. As of two weeks ago, the Federal Aviation Administration (FAA) was forced to ground the entire fleet of Boeing’s new planes after they exhibited a tendency to catch fire mid-flight. The media coverage has rightly focused on the numerous flaws in design and construction that went into these planes, often noting the multiple years of setbacks that forced the company to officially delay the plane’s release date seven times.

What this coverage generally omits, however, is that regardless of the failures of Boeing and its 787, the U.S. government continues to subsidize the company to the tune of tens of billions of dollars each year. This corporate welfare is dispensed through the United States Export Import Bank (Ex-Im), an institution that draws on the backing of American taxpayers in order to offer financial support to companies of their choosing.

The Ex-Im Bank has a storied history with Boeing. Since the advent of this government institution, no company has received more financial support than the aircraft maker. Last year’s numbers are a testament to this fact: of the Ex-Im Bank’s $14.7 billion fiscal year 2012 budget, 83 percent went toward financially supporting Boeing either through direct loans or loan guarantees. And although such statistics may seem drastic, the close relationship between these two entities has existed for decades.

The Ex-Im Bank acts much like any other bank in that they loan money or offer loan guarantees to be paid back over time with interest. What separates the Ex-Im Bank is that its loans are backed by the full faith and goodwill of American taxpayers, giving the organization a far greater ability to invest in riskier ventures, while offering lower rates than privately-held banks. Consequently, some of the bank’s investments haven’t panned out so well; for example, Solyndra.

The Ex-Im Bank is known as “Boeing’s Bank” due to its role in facilitating the export of the company’s planes to countries around the world. And instead of allowing private lending institutions to make the loans or guarantee them, Ex-Im has aggressively implanted itself into the financing process, subsequently stymying competition and establishing a system of government-sponsored corporate welfare.

The Ex-Im Bank should concern itself with financing only when the absence of it exists. Yet, the Bank is engaged in areas where an existing presence of creditors and private lenders can provide support. This has been most pronounced in the airline industry, an area where the Ex-Im Bank’s role has been particularly detrimental. By granting foreign entities ongoing financial support, the Bank has effectively gifted foreign companies a comparative advantage in the international market. As a result, domestic airlines are penalized for simply trying to play by the rules. Conservative estimates show that the Ex-Im Bank costs the U.S. airline industry up to 7,500 jobs and $684 million per year. For this reason, the Ex-Im Bank recently came under fire from certain Members of Congress. During last spring’s Congressional hearing over the Bank’s re-authorization, several Congressmen raised doubts about the ongoing efficacy of the Ex-Im Bank’s current model. Noting that the institution lacked both transparency and oversight, these congressmen inserted language into the Ex-Im’s reauthorization bill that would limit the damage that could be done by the institution. Moreover, the new reauthorization legislation included explicit instructions for the Treasury Secretary to begin winding down the Ex-Im Bank and its role in manipulating marketplaces. So far, those in charge of the Bank, including the Treasury Secretary, have done little to see these new instructions through.

And so, public money continues to flow to companies like Boeing despite the company’s revenue stream of close to $70 billion in 2011. But as the company’s recent blunder with the 787 has reminded us, no business is guaranteed to perform well ad infinitum. After all, one can’t forget the story of Fannie Mae and Freddie Mac: two giant mortgage lenders backed by American taxpayers that are deeply in the red and costing Americans hundreds of billions of dollars. As it was with Fannie and Freddie, when profits started drying up, taxpayer funds kept flowing. Eventually, when bankruptcy was imminent, it finally became clear that those funds weren’t going to be paid back anytime soon. To this day, Fannie and Freddie remain a large black spot on the U.S. Treasury’s balance sheet. Our country cannot afford another failed experiment in risking American taxpayer’s money.

The Ex-Im Bank is an institution that risks billions in taxpayer-backed loans to companies chosen through a politically-driven process. Congress should take note of the recent fiasco surrounding Boeing 787 Dreamliners and finally force the Obama Administration to wind down the Ex-Im Bank while we still can. If not, the Bank will become another institution that is too big to fail and further threaten American taxpayers with costly governmental failures.

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Stephen DeMaura

Stephen DeMaura is president of Americans for Job Security.