The Export-Import Bank (Ex-Im) has long been an easy target for critics of cronyism, and rightly so. It’s hard to deny that the government is providing direct benefits to large corporations when a government agency’s entire purpose is artificially stimulating foreign demand for domestic companies. The federal lender looks worse when its main beneficiary is a massive corporation like Boeing, and still worse when four Ex-Im employees were found playing favorites for certain companies in exchange for cash. Such blatant abuse of taxpayer money might initially appear to be a temporary lapse in the bank’s integrity—until one looks at the fact that it is commonplace.
An article by the Heritage Foundation’s Diane Katz indicates more than 74 cases of inquiry into fraud at Ex-Im by the Office of the Inspector General, as well as others that are being processed by the Department of Justice. With new questions being raised about old problems, Congress has an opportunity to allow Ex-Im’s authorization to expire, at which point it would cease all new operations and wind down its outstanding credits and loans over a period of time.
Just a day after news of the Ex-Im employee scandal hit the airwaves, the House Financial Services Committee held a hearing to discuss the bank’s value ahead of the reauthorization deadline. Representative Jeb Hensarling (R-TX), who chairs the Committee, began the hearing with a very clear summation of what Ex-Im does: “Ex-Im effectively taxes you while subsidizing your foreign competitors.” The bank is often said to encourage American exports, but this claim is highly misleading. Less than 2 percent of US exports are affected by the bank’s work, and according to economist and hearing witness Dr. Veronique de Rugy, unsubsidized businesses fail to receive as much investment capital because their Ex-Im subsidized counterparts attract more private investment.
Proponents of Ex-Im, repeatedly claim the bank is profitable and a net gain for the federal government, however even these numbers are suspect according to an MIT study that criticizes the bank’s accounting techniques. According to the study, if Ex-Im used fair value accounting standards, it would be operating at a loss of about $200 million per year. A strong supporter of Ex-Im, Representative Brad Sherman (D-CA) responded in the hearing, derisively referring to the standards as “fairytale value accounting standards.” Representative Sherman’s comments appear to be dismissive of highly credible organizations like MIT and the Congressional Budget Office.
The Committee proceeded to hear from other witnesses as well, including Delta Air Lines CEO Richard Anderson, Captain Lee Moak, President of the Air Line Pilots Association, and Mr. Steve Wilburn, the CEO of FirmGreen, Inc and an Ex-Im customer.
In addition to a rigorous back and forth regarding the future of Ex-Im, witnesses and members of the Committee alike posed the question of reform. However, taxpayers should be wary of new attempts to reform the bank as a sleight-of-hand aimed less at protecting taxpayers than perpetuating corporate welfare. The 2012 Ex-Im reauthorization contained several significant reforms, which were largely ignored.
The news last week of kick-backs and bribes at Ex-Im on top of its numerous other problems that have been well documented by NTU, make it all the more imperative that lawmakers not reauthorize this archaic institution. One after another, the so-called benefits of Ex-Im have been debunked. Given that past attempts at reform went unimplemented, taxpayers should have little confidence the bank is about to change its ways and its days should be numbered. Ex-Im’s brand of cronyism burdens taxpayers and props up many businesses that either can’t succeed on their own or do not need the help at all. The time for de-authorization of this counter-intuitive agency is now and taxpayers will benefit greatly from following this path.