Have you heard of the Export-Import Bank? It’s little-known yet high on the list of special-interest priorities these days.
Created in 1934, this government agency loans money to foreign buyers of American products and gives U.S. exporters loan guarantees. It also provides financing for ventures that supposedly can’t get private backing.
Backers of the bank claim that it supports U.S. jobs. In reality, it’s a favor factory for politically well-connected corporations trolling for handouts.
Indeed, the bank is a poster child for special interest favoritism.
Nearly two-thirds of total assistance Ex-Im provided in 2013 went to just 10 international conglomerates — including General Electric, Caterpillar, and especially Boeing. The aviation company reaped more than 30 percent of the benefits on its own.
And a look at the largest buyers of subsidized exports from the last few years shows a list of highly capitalized and highly profitable foreign companies. They certainly don’t need U.S. taxpayer subsidies to buy American products.
Ex-Im’s financial commitments are backed by the Treasury’s full faith and credit. In the case of default, it’s taxpayers who are on the hook. Currently Ex-Im has more than $140 billion in liabilities.
Unfortunately, the bank has a poor track record, losing more than $5 billion in the 1980s alone — back when billions meant something. Since then, both the Government Accountability Office and the Inspector General have repeatedly criticized the agency for shoddy management, bad accounting, and faulty risk analysis.
Now, using realistic accounting measures, the Congressional Budget Office estimates that it could inflict at least $2 billion in losses to taxpayers. Even that’s assuming the next 10 years are free of major shocks to the world economy — especially in the airlines or oil and gas development sectors, where the bank has the most exposure.
There’s practically no gain for taxpayers. Using the bank’s own numbers, which have been roundly criticized, projects Ex-Im backed in 2013 accounted for a mere 2 percent of U.S. exports and even less of export-dependent jobs.
Those modest figures don’t take into account the jobs the bank kills when private capital follows government subsidies to less efficient companies, or when jobs are cut by unsubsidized competitors who lose sales or must pay more to get loans.
Recent estimates put the tab for these hidden downstream costs at nearly $3 billion a year.
Much like Fannie Mae and Freddie Mac, the Federal Crop Insurance Program, and the Department of Energy’s Title XVII loan guarantees — which gave us Solyndra and put taxpayers on the hook for a $6 billion faulty nuclear project — the “Bank of Boeing” is a Washington scheme where politically well-connected companies get a sweet deal while taxpayers foot the bill. It privatizes profits and socializes risks.
The bank’s authorization is set to expire on June 30, and big exporters are lobbying hard to get Congress to reauthorize it. Instead, lawmakers should give taxpayers some relief — and let this Depression-era dinosaur expire.