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The Case for Closing the Export-Import Bank
By Ryan Young of the Competitive Enterprise Institute.
"Federal government programs often seem
to run on autopilot. But that may be about to change for the
Export-Import Bank, a long-entrenched Washington institution. Known as
Ex-Im for short, the bank is an 80-year-old agency that subsidizes
financing for U.S. exporters. Unlike most other agencies, Ex-Im will
cease to exist unless Congress periodically reauthorizes it. The next
deadline is on September 30, and some Republicans are pushing to shut it
down.
Critics of the Ex-Im bank argue that it is as a huge
corporate welfare program that puts tens of billions of taxpayer dollars
at risk to subsidize large companies that don't need the help. They're
right. And the case for Ex-Im gets flimsier by the day.
While Ex-Im made direct loans worth $6.9 billion in 2013, its bread-and-butter business
is guaranteeing third-party loans — $14.9 billion last year alone. For
example, a foreign airline will take out a loan from a bank so that it
can buy jets. If the airline agrees to buy from American company Boeing
instead of the French manufacturer Airbus, Ex-Im will guarantee that
loan, netting the airline a much lower interest rate.
Ex-Im loan guarantees flow to a relatively small handful of firms. Boeing alone receives nearly half of the bank's assistance in most years. Unlike other beneficiaries of Ex-Im loan guarantees, such as Enron and Solyndra,
Boeing is financially sound and can afford to pay market rates for
loans. As for those who cannot access market financing — does anyone
want more Enrons and Solyndras?
Ex-Im's defenders say it supports
205,000 American jobs by funneling business to American companies. But
as economist Veronique de Rugy of the Mercatus Center at George Mason
University calculates, each of those jobs cost an average of $131,200 in taxpayer exposure to sustain in the last year alone. Surely there are cheaper ways to keep people gainfully employed.
Another serious problem with Ex-Im and programs like it is corruption, which has gotten so bad that the House has launched an investigation.
When government has a lot of money and power, it is natural for people
to curry its favor. It is just as natural for those wielding money and
power to use it for personal gain. Ex-Im, with a portfolio of nearly
$140 billion, provides numerous real-world examples of this human
frailty. The Wall Street Journal reported
on June 23 that four Ex-Im employees have been removed or suspended in
recent months, "amid investigations into allegations of gifts and
kickbacks."
Former Ex-Im employee Johnny Gutierrez allegedly
accepted cash payments from an executive of a Florida-based construction
equipment manufacturer that has received Ex-Im financing on multiple
occasions. In a July 28 congressional hearing, Gutierrez chose to plead the Fifth Amendment
rather than deny the allegations. The other cases involve two
"allegations of improperly awarding contracts to help run the agency"
and another employee who accepted gifts from an Ex-Im suitor.
These are not isolated incidents. Bloomberg
reported that Exxon Mobil in 2009 paid for nearly $100,000 in travel
expenses for Ex-Im employees to places such as London, the South
Pacific, and Tokyo. While both parties said this was "standard industry
practice," the conflict of interest is apparent. Exxon Mobil was seeking
$3 billion in financing from Ex-Im at the time — and received it 11
months later. The Heritage Foundation's Diane Katz
found that 74 investigations into potential cases of fraud have
occurred at Ex-Im since April 2009. For an agency with only 400
employees, this is a very serious problem.
Ex-Im also imposes
significant opportunity costs on the economy. Companies have only so
many resources at their disposal. The more time and effort a business
spends lobbying agencies like Ex-Im, the less it can spend innovating
and creating value for consumers.
It is too early to tell which
side will prevail. But if Ex-Im closes, it will be a major victory for
taxpayers and clean government."
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