As the American people grapple with the consequences of a government shutdown, there are many federal agencies that are vital to the United States economy that will be affected. However, the closure of at least one government agency should be met with relief, the United States Export-Import Bank’s (Ex-Im Bank). Thankfully operations at Ex-Im Bank have ceased and this is probably for the best, especially in light of recent revelations that the Bank loaned $33.6 million in taxpayer funds to a Abengoa – a Spain-based green energy company – whose advisory board includes former New Mexico Gov. Bill Richardson.
The loan in and of itself is not so egregious, but what is detestable is the fact that it just so happens that Mr. Richardson also sits on the Export-Import Bank’s Advisory Board. The conflict of interest is only part of a broader trend of cronyism that the agency has consistently perpetrated. In a statement, the Bank denied that Mr. Richardson played any role in the financial transaction, but Ex-Im has a sordid history of similar transactions that almost makes it too coincidental.
The Ex-Im Bank previously provided a $10.3 million loan guarantee to the now bankrupt Solyndra. Had Ex-Im conducted due diligence (normal due process performed daily by any major lending institution) concerning whether to do business with Solyndra, the likelihood of providing any financial assistance would have been minimal. It should also be noted that coincidentally one of the Solyndra’s top investors was a major Obama donor. The Bank’s kickbacks transcend partisanship, as Enron – a company that was extremely well connected politically on both sides of the aisle – received financial assistance from the Ex-Im Bank during the Clinton and Bush Administrations. The Bank is an exemplary model of corporate welfare and a shining symbol of everything the American people despise about Washington.
It also has consequential ramifications on our economy. The Bank distorts the free market by picking winners and losers. This is perhaps best evidenced by the billions of dollars in financial guarantees secured by Boeing’s army of lobbyists. Despite having an annual revenue of more than $80 billion, Boeing received about $12 billion worth of financial assistance from the Ex-Im Bank last year. These loans and guarantees allow foreign airlines to purchase Boeing planes at a discounted rate and with favorable terms.
Unfortunately, one company’s gain is another’s loss. In this specific case, it happens to be the entire U.S. airline industry that loses out. Typically, domestic carriers are prohibited from securing the same favorable financial packages that are given to foreign airlines. This gives foreign carriers a distinct competitive advantage. It reduces foreign airlines’ costs and allows them to offer cheaper tickets, effectively pricing out their competition. In turn, American carriers have to make sacrifices in order to remain competitive, so much so that some reports estimate that the Ex-Im Bank has caused the American airline industry to lose as many as 7,500 jobs.
Even a Congress that has failed to pass a budget is not totally oblivious to this issue. In 2012, a large number of Republicans rallied against the Ex-Im Bank’s lending practices and forced language into the Bank’s reauthorization legislation that called on it to perform economic impact analysis before approving or guaranteeing any loans. This language was supposed to protect American employers from any ancillary consequences.
Yet, the Bank has veered from its Congressional mandate. Most recently, it announced a massive $650 million loan to an Australian iron ore mining company that happens to be owned by one of the country’s richest people, a billionaire. This has invoked the ire of many Midwestern Democrats, who represent mining states that will be put at a competitive disadvantage thanks to the loan.
Congress took a step in the right direction when it directed the Ex-Im Bank to analyze the impact of its financial transactions, but the Bank’s most recent actions do not coincide with the intent of the legislation passed by the legislative branch. It is unfortunate that it took a federal shutdown to end the Ex-Im Bank’s harmful practices, but when Congress eventually passes a budget the Bank will continue right where it left off. Once the budget issue is resolved, Congress should direct its attention to the Ex-Im Bank and revoke its charter in an effort to preemptively protect American employers from any further damage from this out-of-control bureaucracy.