The Export-Import Bank is a government agency which is responsible for aiding in the export of American goods and services. They accomplish this by employing a number of programs including loans, guarantees and insurance. The Ex-Im Bank is supposed to engage in these activities in a way that doesn’t harm American corporations or produce job losses, yet that is exactly what they are doing.
The Ex-Im Bank is distorting marketplaces in its use of taxpayer-backed subsidies, which oftentimes benefit foreign companies and penalize American employers. It is in essence providing the U.S. Government with the power to pick winners and losers, a direct contradiction to a free market, and in fact, a complete manipulation of it.
Unfortunately, in recent years, Congress has not held them accountable, and they have been allowed to operate freely. In fact, according to a 2007 Government Accountability Office (GAO) report there were “challenges and areas for improvement in the screening and detailed analysis of projects for economic impact.”
The Ex-Im Bank is helping certain companies increase their profits at the expense of other American companies. Ex-Im can only finance foreign customers, meaning it can assist Boeing in the sale of its airplanes to foreign airlines at subsidized rates, but not to American airlines. As a result, foreign airlines can now purchase new planes for a lower cost than their American competitors, crippling American companies in the global air transportation market.
George Will wrote recently in a March 16 column titled, “Export-Import Bank’s Damage to American Firms” that “picking American winners, the Export-Import Bank creates American Losers.”
He wrote, “The bank, whose current reauthorization expires May 31 and which two months before that might hit the $100?billion cap on its loan exposure, subsidizes myriad export transactions with guaranteed loans to make U.S. exports cheaper. Mission creep is a metabolic urge of government agencies, but there may be mission gallop at the bank as it tries to correct the collateral damage it does to some U.S. companies and as it is pushed to further politicize credit markets by mirroring the market-distorting policies of foreign governments.”
In an age of bloated government and record debt and deficits, is the practice of picking winning and losers in a free market economy what America needs? Is the practice of seeing whether the United States or Europe can artificially subsidize their exports to a greater degree ensuring fairness, competition and commerce is protected in the marketplace?
The Ex-Im Bank needs fundamental reform to prevent it from continuing to adversely affect markets for American companies. As it is currently structured, it is little more than a corporate welfare system using taxpayer-backed funds, where Americans are left footing the bill for loans or guarantees that go south.
Loan default is an all too real possibility. Ex-Im has a record of making loans that are questionable. It recently made a $1.3 billion loan guarantee to Air India, a company that is four billion in debt and is in the process of being bailed out by the Indian taxpayers.
And recently, Ex-Im’s president Fred Hochberg stated that the bank doesn’t focus on loans to energy companies, but facts do not seem to corroborate his viewpoint. Ex-Im has made loans to companies that have become notorious such as Enron, Solyndra and First Solar, which is being investigated by Chairman Darrell Issa, chairman of the House Committee on Oversight and Government Reform, for suspicious business practices and attempting to influence key government officials.
This severely undercuts Hochberg, who said “[all Ex-Im Bank] products are only provided if the Bank is convinced that there is reasonable assurance of repayment.” The dubious nature of these investments highlights the concern of government intervening in private finance markets in this manner.
The truth is, modifications are needed before the bank is reauthorized. The first step Congress should take is to level the playing field for all American companies by reforming the subsidized loan terms to foreign competitors. Then Congress should urge the Administration to engage Europe in a conversation on reducing their anti-competitive aircraft subsidies.
Reckless lending played a large role leading up to America’s economic crisis and is prolonging economic recovery. Roughly $185 billion has been dumped into Fannie Mae and Freddie Mac. And now, many in Congress appear to be blindly supporting increasing Ex-Im’s funding by $40 billion over four years with no reform whatsoever despite all the evidence that it is needed.
Washington must stop tossing taxpayer-guaranteed life rafts to a select few, hurting our companies and costing Americans jobs.
Stop taking from Peter to give to Paul, level the playing field and allow the free-market to work. What Ex-Im is doing is undermining American businesses and American workers and that is just wrong.