It’s time to be through with the crony capitalist institution that provides sweetheart deals and taxpayer-backed loans to America’s largest corporations. The U.S. Export-Import Bank’s (Ex-Im) charter expired at the end of June, but there’s discussion in the U.S. Senate about attempting to resurrect it from the dead when Congress returns from August recess.
Ex-Im is an outdated, FDR-era institution that was created to assist U.S. small business exports to volatile areas like the Soviet Union and Cuba, by providing them loan-backed guarantees that were deemed “too risky” for other private lenders. While relevant once, the bank has far outlived its intended purpose. It has also proven to be impervious to reforms.
Today, taxpayer-backed loan guarantees are provided to some of the largest, most lucrative multinational conglomerates. Boeing alone receives over 80 percent of Ex-Im’s loan guarantees, and no one can argue that they would struggle to find financing elsewhere. Boeing receives these government subsidies while at the same time reporting $1.47 billion in fourth quarter profits last year, in addition to having a record backlog of airplane orders spanning eight years. There are much better uses for our tax dollars, to say the least.
While the bank is not supposed to displace other American companies or disrupt the free market, in reality, it picks the winners and losers in American exporting, leaving many small companies at a comparative disadvantage. Additionally, the bank has a long record of misleading Congress and the public on its business practices. In 2014, the bank mischaracterized “potentially hundreds of large companies and units of multinational conglomerates as small businesses,” in order to pad their statistics and seem needed, and in 2013, the last year that the data is available, 60 percent of the bank’s financing went to just 10 mega corporations.
Those actions directly violate the bank’s own Congressional charter, which directs it to provide export financing only for “export transactions that are unlikely to proceed without Ex-Im support.” Ex-Im is nothing more than corporate welfare for a select few.
Some Senators are trying to reauthorize Ex-Im’s charter on the basis of enacting reforms, forcing the bank to be more transparent in their business dealings. To them, I say, it’s been attempted before but to no avail. Congress’s reauthorization in 2012 was contingent upon Ex-Im submitting a business plan, addressing risk management practices with the Government Accountability Office, and become more transparent. Instead, what we have seen in the past three years is 30 ongoing cases of fraud involving bank officials, a guilty plea from Ex-Im loan officer Johnny Gutierrez for accepting bribes on 19 different occasions, and a host of risky loans exposed.
Recently, the House Committee on Oversight and Government Reform held a hearing to examine the impact of the 2012 reforms. The bank’s Inspector General (IG) discussed the growing numbers of indictments of bank officials, warning more might be forthcoming. He also shed light on some questionable loans made in past years. In 2012, Ex-Im gave the Australian satellite company NewSat $280 million in loans to purchase a satellite from Lockheed Martin – a few months later, NewSat declared bankruptcy. We can be sure that the American taxpayers will never see most of that money again.
And who could forget the Solyndra saga? In 2010, the solar start up went bankrupt after receiving over $500 million in taxpayer subsidies and a loan of over $10 million from the Ex-Im bank. Another “green energy” company, Abound Solar, went under after receiving $9.2 million in Ex-Im loans.
This out of control mess is set to cost taxpayers $2 billion over the next 10 years, according to figures provided by the Congressional Budget Office. Reforms offered currently in Congress are regurgitations of reforms attempted in years past -- reforms that were flatly ignored. There’s no sense in duplicating existing policy and expecting different results. Keep the Ex-Im bank buried.