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The Ex-Im Bank And The Art Of Picking Losers

Ex-Im graphic from Forbes

By the end of June Congress will have to resolve whether the Export – Import Bank of the United States (Ex-Im) should be re-authorized.  If Congress does nothing the authorization will expire but a vote could save the bank.  The fate of the bank is important test that will show whether Congress is on the side of taxpayers, and basic market principles, or special interests that are capable of bending markets in their direction.

In an op-ed in Forbes magazine our friends at “American Transparency” ask the question every Member of Congress should ask and answer before voting on the reauthorization of the corrupt Export-Import Bank: "How is bankrolling of dictators, subsidizing authoritarian regimes, propping up green energy and destabilizing entire industries good for growth?"

Here’s what they found when they did a deep dive into the Ex-Im Bank’s record:

Ex-Im lending has soared with a 248 percent increase in lending from 2008-2013. Now, taxpayers have total exposure of nearly $140 billion in the Ex-Im loan portfolio.

The number one share of importer benefits, $7.21 billion, flowed to Pemex – the leading oil conglomerate in Mexico (owned by the Mexican government).

The number one share of exporter benefits, $60 billion, went to Boeing.  In fact, Boeing received one-third of all export activity.

Widespread institutional corruption including loans to unqualified companies, i.e. Solyndra, lack of internal controls including heavy salary spikes and bonuses to admitted employee fraudsters; lending support to dictatorial/authoritarian governments around the world; and ‘gaming of the system’ by U.S. companies functioning as importer and exporter on same transaction.

Lack of basic transparency – $25.6 billion in activity under headings of “Undisclosed” or “To be determined.”  $1 billion of these opaque transactions were in Russia.

Even small business transactions were questionable concluded researchers from American Transparency. 

In the electronic motorcycle manufacturing space, Zero Motorcycles in California has received local, state, federal and Ex-Im grants, credits, sales rebate subsidies and financing amounting to well over $5 million. It may have helped Zero, but its competitors went out-of-business.

The analysis conducted by Adam Andrzejewski and his team shows Ex-Im exists for big business with $1 billion plus flowing to each of the top 15 domestic exporters. That’s a massive financing subsidy to companies like General Electric, Bechtel, Exxon Mobile, Westinghouse, Caterpillar, and other multi-national powerhouses.  And it bankrolled their transactions with many foreign state-owned companies in some troubling spots in the world: Bangladesh, Russia, Colombia, Indonesia, Egypt, Papa New Guinea, India, Saudi Araba, United Arab Emirates, China and others.

A number of Export-Import Bank beneficiaries, such as Halliburton Energy Services, Caterpillar Co, and Schlumberger have admitted to circumventing U.S. national security policy on dangerous regimes, such as Islamist Iran. 

Those three companies collectively received $3.5 billion in Ex-Im financing since 2007.  During this period, all three admitted doing business in Iran through subsidiary businesses circumventing sanctions against Iran.

Andrzejewski  says Ex-Im can’t even answer Congressional inquiries regarding the level of agency fraud at the bank.  In fact, there are about 40 current Inspector General fraud investigations ongoing. For example, Johnny Gutierrez, an Ex-Im Loan Specialist, pled guilty on April 22, 2015 of accepting up to $78,000 in bribes in return for recommending the approval of unqualified loan applications to the bank, among other misconduct. During this period, Ex-Im gave Gutierrez nearly a 20 percent pay hike and paid-out thousands in performance bonuses.

And then there’s foreign aid to potential competitors and adversaries: $3.4 billion funded Chinese companies owned by the Chinese government.  Is helping China direct more money to its military – and its harassment of Japan – good for the global economy?  Or is the Ex-Im’s “One Competitor” policy something weak-minded capitalists should just accept?

The case against Ex-Im boils down to a simple principle say Adam Andrzejewski and the investigators at American Transparency: when government is empowered to pick winners and losers – often times the losers flourish and the winners are punished. 

Please join the leaders of over 50 conservative organizations by signing the conservative letter to Congress demanding that your Representative and Senators let the Export - Import Bank expire on June 30, 2015.

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