Rarely do some of the nation’s most powerful politicians and businesspeople laud banks that report big profits when in fact they have lost billions of dollars.
But we’re witnessing this spectacle on behalf of the Export-Import Bank of the United States, which for many decades, and for good reason, has been called by its critics “The Bank of Boeing.” Its charter expires September 30, and a battle over its possible extension is brewing between the political establishment and reformers.
The Export-Import Bank got its start in 1934. It’s a Great Depression-era relic that has always favored the largest and most politically powerful companies.
Here’s how establishment defense of the Export-Import Bank has become: In 2008, presidential candidate Barack Obama correctly declared the Bank is “little more than a fund for corporate welfare.” Now that he is President Obama, firmly seated atop the federal government, he defends the Bank.
At the opposite end of the political spectrum but also near the center of the political establishment sits the U.S. Chamber of Commerce, whose lobbyists were among those who worked a “lobbying day” event for the Bank last month.
President Obama and other Export-Import Bank defenders have been claiming the bank makes a “profit” for America’s taxpayers.
The Congressional Budget Office recently debunked this claim in a report that finds, under proper accounting standards, the Bank costs U.S. taxpayers an average of $200 million a year in losses.
The CBO explains this by noting the Export-Import Bank does not account for “market risk,” the danger that borrowers will become delinquent in repaying their loans or stop repaying them. Private banks have to account for market risk. The CBO report says the Bank’s current accounting standards “do not provide a comprehensive measure of what federal credit programs actually cost the government and, by extension, taxpayers.”
The largest beneficiaries of the Export-Import Bank have been huge companies, with Boeing standing out in this regard. Boeing’s customers include both domestic and foreign airlines. Because of the loans and guarantees the Export-Import Bank gives to overseas buyers of Boeing airplanes, those overseas airlines often end up paying less for Boeing planes than domestic airlines pay. In helping Boeing, the Export-Import Bank can end up hurting domestic airlines.
Boeing in 2012 received more than 80 percent of the Export-Import Bank’s largesse. Virtually every year, at least 40 percent of Bank backing aids Boeing.
Boeing’s revenue tops $80 billion annually. Other huge companies that show up on the list of companies receiving Export-Import Bank backing include General Electric Co., Caterpillar Inc., and even Pemex (the Mexican government-owned oil company). In most years, 10 companies receive at least 75 percent of the Bank’s backing. Some years it’s more than 90 percent.
All of these companies have smaller competitors, and those companies often receive little or no support from the Bank. It’s another example of Big Business being in league with Big Government.
The billions of dollars of Export-Import Bank backing go to less than 2 percent of total U.S. exports. And there is every reason to believe that sliver of exports would have happened without the Bank.
The United States exported $2.27 trillion of goods and services in 2013, a $61 billion or 2.7 percent increase from 2012. Yet Export-Import Bank loans actually declined by $8.5 billion in 2013. So U.S. exports grew even when Bank loans declined.
Congress should heed the words of our president when he was a candidate who stood for something: The Export-Import Bank is “little more than a fund for corporate welfare.”
End it, especially now that the Congressional Budget Office has shown us the bank’s dodgy accounting has been covering up hundreds of millions of dollars of annual losses.