Corporate Welfare and Crony Capitalism are the two phrases that come to mine when a free market conservative hears talk of reauthorizing the Export-Import Bank. According to The Hill, it looks like the House will take up a Export-Import bank reauthorization, including a massive $40 billion increase in loan authority, as early as next week.
A draft deal negotiated by House Majority Leader Eric Cantor (R-Va.) and Minority Whip Steny Hoyer (D-Md.) on the reauthorization of the Export-Import Bank extends the life of the bank by three years and raises its overall lending capacity to $140 billion from $100 billion, sources said. These major components are closer to the goals of the White House, the Senate Banking Committee and the U.S. Chamber of Commerce than to those of opponents of the Bank such as Heritage Action and the Club for Growth.
There is nothing free market about the idea of the United States government providing loans to private companies for the purposes of competing against other private companies. Especially when these large corporations are gaming the system with teams of lobbyists pushing Members of Congress to reauthorize this taxpayer funded slush fund for big business. If the loans don’t pay off, taxpayers have to pick up the tab.
The Export Import Bank was an FDR creation and reauthorizing the so called “bank” is unwise.
Below are the top ten reasons why the Crony Capitalism/Corporate Welfare bank is bad for America:
- Export Import Bank is Corporate Welfare – Barack Obama stated publicly that the Export Import bank is “little more than a fund for corporate welfare.” Senator Obama was giving a speech about ceasing government programs that “don’t work” and he specifically referenced the Export Import Bank in September of 2008. Senator Obama was correct.
- The Export-Import Bank Provides Politically Appointed Bureucrats the power to Subsidize Politically Popular, and Sometimes not Credit Worthy, Causes – According to Senator Jim DeMint (R-SC) in a Washington Examiner Op Ed dated March 20, 2012, “Ex-Im, as it is known, is a federal program that gives politically appointed executives power to lend mainly to foreign companies that buy American products and services. Started decades ago with a lending cap of $5 million, like all federal programs its grown over time and now has a taxpayer subsidized $100 billion cap. Senate Democrats want to further expand it by 40% to $140 billion. Ex-Im also has specific mandates to subsidize politically-popular causes like green energy. What’s wrong with this? In principle, it’s wrong because all companies – foreign and domestic – should compete on a level playing field, so that success goes to those companies who offer the best products and services at the lowest prices. In free market finance, we all benefit as businesses compete for investment that follows those with the best innovations, highest quality, at a price buyers are willing to pay.”
- Conservatives Oppose Reauthorization of the Export-Import Bank – According to the Conservative Action Project, “with the Federal government saddled with trillion dollars in deficits and debt the Export-Import Bank should be neither expanded nor reauthorized. We urge all organizations and individuals concerned about the size of the federal government to issue op-eds, alerts, blog posts, releases, and other communications warning about the implications of reauthorizing of the Export-Import Bank. Time is short, therefore please do not delay.”
- The Export-Import Bank has Engaged in Politicized Credit – The Wall Street Journal argued on March 3, 2012 that “if you thought Fannie Mae, Freddie Mac and Solyndra would teach Congress a lesson about politicized credit, think again. The federal Export-Import Bank is up for reauthorization, and the only question seems to be how much more taxpayer money Washington wants to put at risk. If the GOP wants to have a principled battle about fiscal waste and market distortions, this is a good one. The ExIm Bank—founded in 1934 to support trade with the Soviet Union, but never mind—provides taxpayer-backed loan guarantees and other services to U.S. business, especially big exporters.”
- The Export-Import Bank Helps Foreign Companies to Compete Against US Companies – Former Congressman Chris Chocola of the Club for Growth writes in the Richmond Times-Dispatch that “the most egregious example of how dysfunctional and misguided the Ex-Im Bank’s actions really are is present in the airline industry. The bank provides financing to foreign airlines that in turn purchase American aircraft, allowing them to compete against U.S.-based carriers. These foreign companies use our subsidy to offer lower prices since American companies cannot qualify for this corporate welfare, and they, in turn, lose business.”
- Ex-Im Funded A Bankrupt Company – The Ex-Im bank tossed $10.3 million to the now bankrupt solar panel firm Solyndra in 2011. According to PV Tech “for the first time, Solyndra used the Export-Import Bank of the United States (Ex-Im Bank) to facilitate the sale of its modules. Ex-Im Bank is guaranteeing an 18-year €7.7 million loan (U.S. $10.3 million) under its Renewable Express process that was provided by KBC Bank NV in Belgium, which meant the project financing approval was arranged in only 41 days from the receipt of the completed application to approval.”
- Export-Import Bank Sought $3 billion bailout in 1987 – According to an LA Times story from 1987, “the Export-Import Bank will seek a $3-billion bailout from Congress next month to counter the loss of hundreds of millions of dollars in capital, the federal agency’s president said in a report published today. John A. Bohn Jr. told the New York Times that he will report to Congress next month that the bank’s capital has fallen below $1.4 billion, half its 1983 level, and will be wiped out within nine months.”
- Export-Import Bank Staffers Engaged in Conflicts of Interest – Bloomberg reported on March 25, 2010 that “in the past two years, the (Ex-Im) bank accepted $366,865 for employee trips, according to information provided under a Freedom of Information Act request. Workers visited projects sponsored by companies including Newmont Mining Corp., ConocoPhillips, Saudi Aramco and Barrick Gold Corp. Such travel should be banned because the money may influence the bank’s decisions on billions of dollars in financing, said Craig Holman, a legislative representative at Public Citizen, an advocacy group based in Washington.”
- The Export-Import Bank Loaned Money to Hollywood Secured by Foreign Contracts – The Club for Growth in a press release dated March 29, 2012 wrote” the Club for Growth today issued the following statement criticizing the Export-Import Bank for guaranteeing loans for the film industry. According to a 2002 press release from the Export-Import Bank, the bank agreed to back “up to 90%” of the loans secured by foreign contracts for four independent films including:
· “The United States of Leland,” a drama about a troubled youth learning about good and evil
· “Lost Treasure,” an action film about a reality-based TV game show
· “Global Effect,” an action film about a lethal virus
· “High Voltage,” an action film about a military solar energy project gone awry.
- Export Import Bank May Have Loaned Money to Mexican Drug Cartels – According to WFAA in Dallas/Fort Worth, Texas reported that an investigation “uncovered hundreds of millions of dollars of fraudulent loans that American taxpayers will have to pay for. The Export Import Bank of the United States backed the transactions, leading some to question whether the bank should exist.” WFAA further found that “the man who lives in this posh mansion in Juarez took U.S. taxpayers for $8 million years ago and he’s still living high inside. And despite $213 million of bad loans to Mexican borrowers on the Texas border, the Export Import Bank of the United States is opening a branch in McKinney.” The investigation found “found dozens of loans made to companies with nonexistent identities and addresses and to some people with connections to Mexican drug cartels which leads Congressman Jeb Hensarling to ask: why expand?”
It will be interesting to see how this plays out on the House floor next week. Conservatives should keep a close eye on the progress of the reauthorization and expanded loan authority for the crony capitalist Export-Import Bank.