Abolish Ex-Im Bank, Don’t Reform It - The American Spectator | USA News and Politics
Abolish Ex-Im Bank, Don’t Reform It

In a recent column on this website, University of Chicago lecturer Frank Schell proposed reforming the Export-Import Bank instead of abolishing it. This piece takes the opposite view. The bank, Ex-Im for short, cannot be effectively reformed for two reasons. First, Congress has no appetite for substantive changes. Second, corruption and favoritism are inevitable consequences of Ex-Im’s very mission. As such, Congress should let the agency’s charter expire.

The Export-Import Bank makes loans and offers loan guarantees to U.S.-based exporters and their foreign customers. The agency requires periodic reauthorization from Congress, or else it will close. The next deadline is on June 30. All Congress needs to do is sit on its hands. Yet, even that seems too much for this timid bunch.

Ex-Im’s charter requires 20 percent of the dollar value of its financial activities to benefit small businesses. Yet, Ex-Im’s in-house definition of “small business” includes firms with up to 1,500 employees, or $21.5 million of annual sales. In fact, about three quarters of Ex-Im financing benefits large companies such as Boeing, General Electric, and Caterpillar.

At a recent hearing, Sen. Elizabeth Warren (D-Mass.) said the Bank has failed to reach its 20 percent threshold in three of the last four years, leading her to question “who Ex-Im bank is supposed to support.” The leading reform proposal in the Senate, from Sens. Mark Kirk (R-Ill.) and Heidi Heitkamp (D-N.D.), would raise Ex-Im’s small business funding requirement to… 25 percent. Warren has also announced she will vote to reauthorize Ex-Im, despite her misgivings.

Corruption is a serious problem at Ex-Im, with 74 allegations having been made public between 2009 and 2014, 30 corruption investigations open right now, and at least one guilty plea involving more than $78,000 in bribes. Over in the House, Rep. Stephen Fincher (R-Tenn.), who voted against Ex-Im reauthorization in 2012, is now offering an Ex-Im reauthorization and reform bill. The Fincher bill’s anti-corruption reforms include slightly stricter financial disclosure requirements for Ex-Im employees, and more audits. Not exactly inspirational stuff.

Of course, even if Congress did have the will to pass real reforms, they would still find it impossible to eliminate Ex-Im’s built-in favoritism and corruption, some of which can be found in the Bank’s very charter.

Ex-Im is required to fund a certain ratio of green energy projects, which led to a spectacularly shady deal to benefit Solyndra, the failed solar panel company. The Washington Examiner’s Tim Carney put together a timeline of the deal. In December 2009, Solyndra began shipping solar panels to a customer in Belgium. Ex-Im decided to offer financing for the project two months after it had ended, and the money didn’t actually start flowing until several more months after that. Solyndra’s financial troubles had become apparent in the meantime, so it needed all the help Washington could give it.

Ex-Im is casually known as the “Bank of Boeing,” because that one company accounts for almost half of Ex-Im’s business in most years. Their cozy relationship has become so open that even President Obama quipped (video clip here, again courtesy of Carney), “Other than—maybe—the CEO of Boeing, I don’t know anyone who’s done more to sell Boeing planes around the world than me.”

Ex-Im does around $20 billion of business per year. Its biggest beneficiaries, such as Boeing, spend millions of dollars lobbying to keep Ex-Im’s special perks. Smaller businesses, or businesses in politically favored sectors like renewable energy, can use Ex-Im to gain an unfair advantage over their competitors. Ex-Im is involved in less than 2 percent of U.S. exports, but it is still in a position to pick a lot of winners and losers when it does become involved.

The dozens of corruption cases we have seen at Ex-Im are the natural and predictable result of such power and influence. No congressional reform can fix human nature. The only realistic reform is to let Ex-Im’s charter expire, and the agency close. America’s entrepreneurs are talented and resourceful enough to compete in global markets without having to spend time influence-peddling in Washington. They deserve the opportunity.

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