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.
Ex-Im’s deleterious transactions are not a recent development and have actually garnered significant attention in the past, which is why in 2012 Congress demanded reforms to the Ex-Im Bank. Members of Congress passed legislation that called on the Bank to analyze its economic impact on future transactions and avoid any loans that could negatively impact American jobs. Unfortunately, Hochberg has gone rogue, continuing to facilitate financial ventures that hurt American job growth and are anything but risk-adverse.
The new law also required that the Treasury Secretary begin to wind down American subsidies to foreign carriers, but both former Secretary Geithner and current Secretary Lew have ignored the law and this requirement.
Despite these revelations, the U.S. Senate recently approved Fred Hochberg’s nomination to serve a second term as president of the Export-Import Bank. The Senate’s approval of Hochberg is tantamount to the endorsement of his market distorting and job-killing policies. Congress’s confirmation of Hochberg means that Ex-Im will unfailingly continue to operate in a manner that is detrimental to the American people unless something changes.
In order to prevent the Ex-Im Bank from further eroding the free market and hurting American employers, it is critical that Congress pass Senator Mike Lee (R-Utah) and Congressman Justin Amash’s (R-Mich.) legislation to phase-out the Export-Import Bank. It is vital that the United States support exports, but it is more important that we do not allow the government to create an unequal playing field by intruding into the free market, leaving taxpayers on the hook much like Fannie Mae and Freddie Mac did years ago as the housing bubble popped. Congress should enact the Lee-Amash legislation, so that we can finally bring an end to an institution that inserts government into an area where the private sector could be engaged while exposing American taxpayers and hurting our employers.