In testimony submitted on Capitol Hill this summer, Fred Hochberg, Chairman of the Export-Import (Ex-Im) Bank, wrote that “[k]eeping small businesses – the engine of our economy – at the forefront of U.S. exports is at the core of our work at Ex-Im Bank.”
Big Trouble with Small Business at the Export-Import Bank
In the Ex-Im Bank’s 2013 Annual Report, the Bank proudly proclaimed, “We are reaching more small businesses than ever before.” In fact, in recent months the Bank and its allies practically fell over themselves to declare their undying love for the little guy. At that time, the Bank was fighting for its very survival in the face of a critical Congress which accused the New Deal-era institution of becoming yet another government conduit for crony capitalism – funneling money to major corporations and using taxpayer-funded subsidies to do it.
Despite the fact that Ex-Im’s top 2013 beneficiaries by dollar amount included such unequivocally “big” businesses as Boeing ($8.3 billion in funding), General Electric ($2.6 billion), and Caterpillar ($1.3 billion), the self-styled saviors of small business stuck to their arguments.
A major investigation by Reuters has, however, called many of the Bank’s pro-small business arguments and “facts” into question. It would appear that Ex-Im has an unorthodox definition of the word “small.”
Among the firms revealed by Reuters to fit the Bank’s rather creative standard of size were appendages of some of the world’s most massive corporate empires. The second-richest human being on Earth, Carlos Slim, owns the Grupo Carso conglomerate. One of their U.S. subsidiaries, Condumex Inc., is classified as a “small business” and given funding by the Export-Import Bank.
America’s home-grown billionaires can apparently count on Ex-Im’s support as well. Indiana-based Brock Grain Systems, another Ex-Im “small business” partner, is part of CTB, Inc., which is itself owned by Warren Buffet.
All told, Reuters identified over 200 companies which the Ex-Im has improperly categorized, along with others whose status is rendered virtually unclassifiable due to the Bank’s murky records and conflicting database entries. They estimate that over an eight-year period, some $3 billion in taxpayer-backed funding was doled out to companies questionably listed as “small.”
Regrettably, this is hardly the first instance of lackadaisical record-keeping causing a headache at Ex-Im and justifiable consternation among taxpayers. One recent study found that 14 percent of the Bank’s funding in the last seven years – amounting to more than $24 billion – went to industries classified simply as “unknown.” That is not a reassuring designation where taxpayer dollars are concerned.
The Bank was also dinged by their own inspector general last year for compiling insufficient details about a number of their transactions. The Reuters report suggests that this warning was not well heeded.
At worst, the Ex-Im Bank is engaged in a sly attempt to cook the books in order to willfully inflate their contribution to American small businesses. At best, they have been exposed yet again as another government agency that can’t be bothered to effectively and accurately keep track of the funding it hands out in the name of the American people.
The Bank’s supposed mission is to support American jobs. The deals they make to sell Boeing airliners to foreign, state-owned airlines have already killed over 7,000 jobs in the U.S. airline industry. What other consequences may have come from their shoveling money toward these bogus “small” businesses?
Only time – and more congressional investigation – will tell. Chairman Hochberg is already under subpoena from the House Oversight Committee. In any event, the pedestal of small business on which the Bank placed much of their hope for survival has undoubtedly begun to shake.
Probably the most frustrating aspect of this story is that taxpayers were on the verge of victory because the Bank’s authorization was set to expire on September 30, 2014. But, instead of being allowed to expire in September, the Bank’s charter was given a temporary renewal until next June. So close to victory. Hopefully, the new Congress will make sure that Ex-Im Bank goes away so that big business can no longer use taxpayers and the Ex-Im Bank as their personal bank.