Fred Hochberg, chairman and president of the Export-Import Bank, would like you to think that his organization provides assistance to a broad range of American companies for the good of our nation’s economy. In reality, the Export-Import Bank directly finances foreign companies at the expense of domestic U.S. industries. It is an organization that harms the United States’ ability to compete in foreign markets and undermines American companies’ efforts to stay profitable.
The Ex-Im Bank is quick to promote itself as a boon to the U.S. economy, but a brief look at several investments made by the organization reveals the hypocrisy of this self-created narrative and the inherent risk to taxpayers. Consider the case of Miasolé, a so-called California-based solar panel manufacturing company.
Late last year, the struggling Miasolé was purchased by a Chinese company called Hanergy – a solar panel manufacturing company that competes directly with American solar firms. While Hanergy kept Miasolé’s old manufacturing plant in California, the vast majority of the company’s business was moved to China. This did not come as any surprise to anyone familiar with the matter, as Hanergy’s operations relied on the consistently cheaper manufacturing costs available outside of the U.S. What did surprise people was that just a couple months after the buyout Miasolé (i.e. Hanergy) received nearly $10 million of U.S. taxpayer-backed funds from the Export-Import Bank.
For an organization that bills itself as a friend to American industry, the Ex-Im Bank’s decision to directly fund a competing Chinese company was questionable to say the least. What’s worse is the way that the bank tried to justify its actions after the fact. Having been caught with their hand in the taxpayers’ cookie jar, a Bank spokesman tried to explain that ownership of a company receiving taxpayer funds doesn’t actually matter, “The ownership of the company is not relevant to the decision to approve financing.” This must have come as a shock to Chairman Hochberg who last year made the claim that the Ex-Im Bank contributes to growth in American exports by “providing export finance for American companies selling into foreign markets where financing isn’t readily available.”
Miasolé is just the tip of the iceberg; however, when it comes to the Ex-Im Bank’s penchant for poor investments. The largest and thus most egregious example of this practice involves U.S. airline manufacturing and Boeing.
During fiscal year 2012, the Ex-Im Bank funneled 82.7 percent of its taxpayer-backed loan guarantees to Boeing. That is the equivalent of $12.2 billion dollars of taxpayer-guaranteed subsidies going directly to just one company. Much like it’s investment in Miasolé, the Ex-Im Bank’s choice to subsidize Boeing led to an array of negative and unforeseen complications that, in the end, effectively blocked several U.S. airlines from competing in the international market. Such was the case when the Ex-Im Bank gave a $3 billion dollar loan guarantee to Air India to purchase Boeing planes.
Air India’s favorable loan terms from the Ex-Im Bank allowed the company to purchase Boeing airplanes at a steeply discounted price – much cheaper than any non-subsidized American airline ever could. With its expanded fleet, Air India was then able to offer additional routes, flying new planes to popular destinations worldwide. For those American carriers that did not receive similar treatment, competing in the same markets as Air India immediately became unprofitable. As a result, domestic airlines were forced to cut jobs and international routes as they suffered from an unfair system. It was estimated that the Ex-Im Bank, through loans similar to the one mentioned above, cost the U.S. airline industry up to 7,500 jobs and $684 million a year.
Today, Hochberg will go before the U.S. Senate Committee on Banking, Housing and Urban Affairs as he has been re-nominated by President Obama. Here’s hoping a few Senators ask the Ex-Im Bank Chairman and President why he is financing foreign-owned companies while claiming to support American ones. Next, someone should raise with Hochberg why he is causing job losses in the airline industry by pricing out American companies. Then, someone should ask why almost all of the Bank’s taxpayer backed guarantees are issued to help a single company. If the head of Ex-Im Bank can’t adequately answer these basic questions and others, his confirmation should be put on hold.
Stephen DeMaura is the President of Americans for Job Security