You would think by now that Washington policymakers would have learned their lesson, and the last thing they’d do is reauthorize and increase the credit limit of another quasi-governmental lending agency that obligates American taxpayers behind every loan they make and facilitates crony capitalist corruption.
But you’d be wrong.
The Export-Import Bank (Ex-Im) was started by executive order in 1934 by President Franklin Roosevelt in order to facilitate loans to the Soviet Union. Today it offers loans to foreign companies so that they can purchase the exported products of U.S. companies. And that’s a good thing, right?
Incompetence, Cronyism, Corruption
Dig a little deeper. Ex-Im has financed loans to now-defunct Enron and Solyndra, among other failures. On the flip side General Electric, which earned $150 billion in profits in 2010, benefitted from more than $1 billion in Ex-Im loans that same year.
But it gets even worse. According to Timothy Carney, the Ex-Im Bank loaned $455 million to a company named First Solar to sell solar panels to . . . itself.
It’s even possible that Ex-Im loaned $243 million to people with connections to Mexican drug cartels (which I would assume was never repaid).
Such abuses are typical of quasi-government agencies endowed with the power to award enormous sums of money to the well-connected. It’s a breeding ground for corruption, to say nothing of simple incompetence and scandal.
So how did Congress punish the Export-Import Bank for these misdeeds when it was last up for review in 2012? It not only reauthorized the Bank, but it increased its lending limits as well.
Proponents argue the Export-Import Bank promotes trade, and anyone who claims to be in favor of free trade should support the Bank.
Subsidies for America’s Competitors
But think what else Ex-Im loans do. They offer subsidized loans to companies that compete against U.S. companies. How is that in America’s best interest?
For instance, Delta Airlines, an American company, points out that the Ex-Im Bank subsidizes loans to foreign airlines to finance purchases from Boeing. So, in the name of promoting trade, Ex-Im helps Boeing but disadvantages Delta.
This is an example of moral hazard, market distortion, and the law of unintended consequences. But even worse, any quasi-governmental organization backed by the full faith and credit of the United States is another potential bailout.
Ex-Im, of course, says that’s nonsense. But for decades Fannie Mae and Freddie Mac (government-sponsored entities deeply involved in the housing market) insisted they would never need to tap the American taxpayer for a bailout. And we haven’t yet begun to solve the Fannie Mae recapitalization problem.
Begging for More
Meanwhile Ex-Im is asking for not just reauthorization but another increase in its lending cap. It’s as if they know Congress is incapable of learning anything.
If Congress wants to promote American exports, it should move trade promotion authority (TPA) and reform our corporate tax code, as we’ve often advocated.
In the meantime, there’s a reason its authorizing legislation requires the Export-Import Bank to be reauthorized on a regular basis: Legislators anticipated there might be a time when the Bank was no longer necessary or needed substantial revision.
That time is now. Congress should phase out the Ex-Im Bank over a three- or five-year period, and get out of the business of using taxpayer guarantees to distort our export markets and reward crony capitalism.
Tom Giovanetti ([email protected]) is president of the Institute of Policy Innovation. Used with permission of IPI’s TaxBytes