Hard To Justify Ex-Im Bank's Cronyism, Corruption
Ex-Im cronyism is unjust and inefficient. But rampant Ex-Im Bank corruption and secrecy are absolutely unacceptable. It remains to be seen whether Republicans in the House of Representatives will use their largest majority since 1928 to stop the bank once and for all as their presidential candidates would like.
Have you noticed that everyone in the top tier of Republican presidential candidates — Ted Cruz, Marco Rubio, Rand Paul, Scott Walker and Jeb Bush — has gone on record against a small New Deal-era crony agency called the Export-Import Bank of the United States?
In fact, Sen. Rubio recently came out with all guns blazing against the bank, arguing that it picks winners and losers and shouldn't be reauthorized once its charter expires June 30.
Maybe their commitment to end Ex-Im cronyism and corruption will rub off on their colleagues. There are several reasons one might want to let the bank expire.
First, the Ex-Im Bank exemplifies the kind of government program that benefits well-connected companies by harming unseen victims. Over 60% of its activities benefit 10 large and politically connected companies — including Boeing, General Electric and Caterpillar.
Ex-Im credit subsidies have the economic effect of redistributing jobs and prosperity away from the 98% of unsubsidized firms, employers and workers and toward large corporations that do not lack for financing opportunities. This means that the bank does not actually increase the net dollar amount of exports.
Ex-Im also imposes damage on 189 American industries by directly subsidizing foreign competition.
Consider the list of Ex-Im's top 10 foreign beneficiaries. We find several rich, state-owned airlines. Emirates, the top airline recipient of Ex-Im largesse, is a state-owned company that uses Ex-Im savings to compete with unsubsidized U.S. airlines.
Examples of Ex-Im transactions such as these contributed to an estimated loss of 7,500 U.S. airline jobs.
But it gets worse. The top beneficiary of Ex-Im abroad is Pemex, a Mexican government-owned oil and gas company with a market capitalization of $490 billion. Even as the Obama administration does everything it can to penalize U.S. energy companies, Ex-Im extended $7 billion in cheap credit over seven years to the conglomerate.
In addition, Pemex has admitted to serious corruption issues, including a contracting process co-opted for the benefit of organized crime.
Questionable Ex-Im deals are quite common. For instance, a Wall Street Journal article recently highlighted two deals totaling over $1 billion for the benefit of the state-owned Russian bank Vnesheconombank.
VEB maintains a close business relationship with a major Russian arms dealer responsible for more than 80% of Russia's weapon exports, including shipments to Bashar Assad's regime in Syria. Because money is fungible, lowering VEB's financing costs to buy Boeing planes can easily facilitate sales of more weapons to hostile regimes.
Russian companies can no longer receive new Ex-Im subsidies, though taxpayers are still on the hook for $1.5 billion in pre-existing Russian loans. But in order to know whether the bank is actually complying with such country limitations, we need to be able to check its data.
Good luck with that. A third of Ex-Im foreign transactions are labeled "unknown" in the dataset. This makes it impossible to know whether Ex-Im loans are going to companies in restricted countries committing human rights abuses, such as North Korea and Iran.
It's hard to trust Ex-Im's data. The bank has a history of intentionally mislabeling data to artificially increase "small business" numbers.
Last year, the bank pulled down the public dataset that I and other watchdogs used to analyze its transactions. The new dataset, posted months later, was scrubbed of critical fields at Chairman Fred Hochberg's direction. Now we cannot even tell whether companies such as VEB are purchasing bank-financed Boeing jets.
Ex-Im cronyism is unjust and inefficient. But rampant Ex-Im Bank corruption and secrecy are absolutely unacceptable.
It remains to be seen whether Republicans in the House of Representatives will use their largest majority since 1928 to stop the bank once and for all as their presidential candidates would like.