Cor­po­rate wel­fare? Boe­ing cashes in on Ex-Im

The Washington Times Weekly - - Geopolitics - BY KEL­LAN HOW­ELL

The vast ma­jor­ity of loans and guar­an­tees from the Ex­port-Im­port Bank of the United States, cre­ated 80 years ago to help U.S. com­pa­nies com­pete over­seas, go to a hand­ful of cor­po­rate gi­ants such as Boe­ing Co. and Gen­eral Elec­tric Co., spurring a de­bate in Congress over whether the pro­gram amounts to cor­po­rate wel­fare and should end.

With law­mak­ers set to de­cide the bank’s fu­ture by Septem­ber, a coali­tion of ma­jor po­lit­i­cal or­ga­ni­za­tions is poised Mon­day to ask Congress to op­pose the reau­tho­riza­tion on grounds that the pro­gram’s benefits no longer jus­tify tax­pay­ers’ ex­pense.

A re­view by The Wash­ing­ton Times of Ex­port-Im­port long-term loans and guar­an­tees last year found that out of over $19 bil­lion loans and guar­an­tees granted by the Ex-Im, al­most $8.3 bil­lion, or 44 per­cent, went solely to Boe­ing projects.

More than $1 bil­lion in loans and/or guar­an­tees went to three other com­pa­nies: $1.8 bil­lion to Bech­tel and $1.64 bil­lion to Fluor, both en­gi­neer­ing and con­struc­tion com­pa­nies, and $1.5 bil­lion to oil gi­ant Pe­mex, a Mex­i­can firm that must use its loans and/or guar­an­tees to pur­chase U.S. goods and ser­vices.

The Times’ re­view mir­rors re­search by the Mer­ca­tus Cen­ter at Ge­orge Ma­son Univer­sity, which found the Ex-Im Bank gave roughly 90 per­cent of its $13 bil­lion in loans and guar­an­tees in 2010 to 10 ma­jor cor­po­ra­tions, with Boe­ing top­ping the list.

The other ma­jor cor­po­ra­tions that re­ceived the bulk of the Ex-Im’s fund­ing in 2010 in­cluded Gen­eral Elec­tric ($2.6 bil­lion), Bech­tel ($1.8 bil­lion), tech­nol­ogy man­u­fac­turer Ap­plied Ma­te­ri­als Inc. ($1.5 bil­lion) and heavy-ma­chin­ery maker Cater­pil­lar Inc. ($1.3 bil­lion).

“Our view is that the Ex-Im bank is lit­tle more than cor­po­rate wel­fare that dis­torts the mar­ket, costs Amer­i­can jobs and puts tax­pay­ers on the hook when things go wrong,” said Levi Rus­sell, direc­tor of pub­lic re­la­tions at Amer­i­cans for Pros­per­ity, one of the con­ser­va­tive groups lead­ing ef­forts to kill the bank.

Crit­ics also ac­cuse the Ex-Im Bank of dis­tort­ing the mar­ket in ways that hurt Amer­i­can com­pa­nies other than those it sub­si­dizes.

A let­ter to Congress au­thored by a coali­tion of 30 tax­payer ad­vo­cacy groups notes that the sub­si­dies for U.S. air­plane ex­ports aid U.S. plane man­u­fac­tur­ers at the ex­pense of U.S. air­lines that have to com­pete with for­eign air­lines that buy Boe­ing’s planes.

Ac­cord­ing to the let­ter, Air­lines for Amer­ica es­ti­mates that re­cent loans from the Ex-Im bank to for­eign air­lines have killed as many as 7,500 jobs for work­ers at U.S.-flag air­lines.

“By pay­ing for­eign com­pa­nies to buy Amer­i­can ex­ports, the Ex­port-Im­port Bank tilts the play­ing field away from mid-sized and small busi­nesses in fa­vor of large, po­lit­i­cally con­nected cor­po­ra­tions,” the coali­tion’s let­ter said.

Ex-Im of­fi­cials ar­gue that the loans and guar­an­tees sub­stan­tially in­crease for­eign mar­kets for U.S. com­pa­nies and keep good­pay­ing jobs in Amer­ica.

“Ex-Im Bank proudly stands be­hind its 80-year track record of sup­port­ing Amer­i­can jobs through ex­ports. We sup­ported nearly 1.2 mil­lion jobs here at home over the last five years, in­clud­ing 205,000 Amer­i­can jobs last year alone,” said Matthew Bevens, a spokesman for the Ex-Im Bank. “We con­tinue to level the in­ter­na­tional play­ing field and ex­pand growth op­por­tu­ni­ties for thou­sands of U.S. com­pa­nies, nearly 90 per­cent of which are Amer­i­can small busi­nesses.”

Of­fi­cials at the bank say the mis­sion is to help man­u­fac­tur­ers of all sizes fi­nance ship­ments to in­ter­na­tional mar­kets. Ac­cord­ing to the bank’s web­site, the Ex-Im bank ap­proved 3,413 small-busi­ness au­tho­riza­tions in fis­cal 2013. The ma­jor­ity, 1,923, were worth less than $500,000 each.

Mr. Bevens told The Times that the bank is fis­cally re­spon­si­ble be­cause the greater part of its work is ei­ther in grant­ing loans di­rectly or in “co-sign­ing” loans as a guar­an­tor. In ei­ther case, the cor­po­rate re­cip­i­ent must re­pay the loan and the tax­payer loses only when the com­pany de­faults, which is rare.

The bank said it has “sent more than $1 bil­lion to the U.S. Trea­sury in 2013 — an all-time record — for deficit re­duc­tion, and we did so with a his­tor­i­cally low ac­tive-de­fault rate of less than one quar­ter of one per­cent.”

Since 1992, ac­cord­ing to the Ex-Im web­site, the bank has given U.S. tax­pay­ers about $5 bil­lion in ex­cess of the cost of bank op­er­a­tions.

Mr. Bevens said he ex­pects Congress to con­tinue sup­port­ing the bank and its ex­porter fund­ing. “We are op­ti­mistic Congress will reau­tho­rize the bank as soon as pos­si­ble, so Amer­ica’s ex­porters have the cer­tainty they need to grow their busi­nesses and cre­ate jobs,” he said.

How­ever, the coali­tion let­ter cites the Con­gres­sional Bud­get Of­fice as say­ing that the bank re­lies on ob­so­lete ac­count­ing meth­ods that sig­nif­i­cantly over­state its prof­its. A Mas­sachusetts In­sti­tute of Tech­nol­ogy study found that the bank was los­ing $200 mil­lion a year, it noted.

“These risky loans and poor ac­count­ing prac­tices are harm­ful to tax­pay­ers, who are left foot­ing the bill. In fact, tax­pay­ers have al­ready bailed out this bank once be­fore at a cost of $3 bil­lion,” the coali­tion let­ter states.

Congress bailed out the Ex­port-Im­port Bank in 1987 when cap­i­tal re­serves dwin­dled to less than a year’s op­er­a­tions af­ter sev­eral years of nine-fig­ure losses at­trib­uted at the time to a se­ries of de­faults blamed on the high in­ter­est rates of the late 1970s when the deals were made.

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