Hensarling on Export-Import Bank: Corporate Necessity or Corporate Welfare?
“So if you’re a politically-connected bank or company that benefits from Ex-Im, no doubt you would like it to continue. After all, it’s a sweetheart deal for you. Taxpayers shoulder the risk and you get the reward.”
June 25, 2014 -
WASHINGTON- House Financial Services Committee Chairman Jeb Hensarling (R-TX) delivered the following opening statement at today’s full committee hearing “Examining Reauthorization of the Export-Import Bank: Corporate Necessity or Corporate Welfare?”:
Today we will examine the Obama Administration’s request to re-authorize the Export-Import Bank.
First, we should examine where the money comes from to finance Ex-Im. Whose money is it? Obviously, it’s taxpayers’ money. The cashier at the corner grocery store, the cop on the beat, your children’s teachers, the small business owner struggling to keep the doors open in a tough economy.
Where does the money go?
It goes to foreign countries and foreign companies in the way of direct loans and credit guarantees.
The taxpayer money goes overseas to China and Russia – nations that openly challenge our economic and security interests.
The taxpayer money goes to oil rich countries like Saudi Arabia and the United Arab Emirates.
The taxpayer money even goes to countries with a demonstrated history of atrocious human rights abuses like the Congo and the Sudan.
So who benefits? Overwhelmingly – and indisputably – it’s some of the largest, richest, most politically-connected corporations in the world – like Boeing, General Electric, Bechtel and Caterpillar. In fact, in 2013 over half of Ex-Im’s financing went to a handful of Fortune 500 companies.
And big Wall Street banks apparently benefit as well. As reported in the press recently, one former JP Morgan and Citigroup banker said of Ex-Im’s credit guarantees, “it’s free money.”
So if you’re a politically-connected bank or company that benefits from Ex-Im, no doubt you would like it to continue. After all, it’s a sweetheart deal for you. Taxpayers shoulder the risk and you get the reward.
But if you work at a small business or other American company competing in the global marketplace, it’s unfair. Ex-Im effectively taxes you while subsidizing your foreign competitors.
We hear a lot from powerful voices on K Street and Wall Street about the Bank, but we should also listen carefully to some voices from Main Street like Hal Richards of Terrell, Texas in my district.
“As a small business owner who exports, I think it’s outrageous that my own government puts my business and other small businesses at a competitive disadvantage through the Export-Import Bank. How is it fair?”
Ex-Im tells us sending taxpayer money to foreign interests supports jobs for Americans. But the government’s chief auditor reported that programs like Ex-Im “largely shift production among sectors within the economy rather than raise the overall level of employment in the economy.”
Delta Airlines, who’s CEO will testify shortly, points out that Ex-Im’s loans to foreign airlines have killed as many as 7,500 domestic airline jobs because the Bank will subsidize Delta’s foreign competitors.
Caterpillar was a recent beneficiary of Ex-Im’s taxpayer financing that went to an iron ore mining project controlled by Australia’s richest citizen.
And an American iron ore company called Cliff’s Natural Resources said it will no longer be able to effectively compete with its Australian competitors due to the subsidy and they are now having to now cut employee’s hours.
Another American competitor feeling the sting of Ex-Im is Valero Energy in my native Texas. Ex-Im is lending $641 million to a Turkish company to build a new petroleum refinery. Valero’s CEO stated that Ex-Im’s actions “jeopardize U.S. refining jobs and undermine the strength of the U.S. refining infrastructure.”
Professor Donald Boudreaux of George Mason University has summed it up neatly when he stated “… at best the Ex-Im Bank creates jobs in export industries by destroying jobs in non-export industries.”
The Bank tells us it is essential to U.S. exports. But over 98% of all U.S. exports occur without risking taxpayer dollars; again, over 98%. Most of the others who take advantage of Ex-Im? Certainly they could do it without taxpayer support.
Even Boeing – the Bank’s biggest beneficiary – has admitted it doesn’t really need Ex-Im and could “arrange alternative financing” without it.
The Bank has also told us it doesn’t cost taxpayers a dime. The Congressional Budget Office respectfully disagrees. It tells us that if the Bank were to use fair value accounting, the accepted accounting method for almost every bank and private company in America, Ex-Im’s ledger would actually show a net loss to taxpayers in the neighborhood of $200 million per year.
That’s the difference between Washington accounting and Main Street accounting.
Perhaps what is most disturbing about the Ex-Im Bank is its ideological and crony-based lending practices. It has a “green” energy quota. It permits no assistance for coal projects. It has a mandate to specifically support exports going to sub-Saharan Africa.
Last year more than 60 percent of Ex-Im’s financing benefitted just 10 mega corporations that clearly have a strong political and lobbying presence in this town.
Recently, a Spanish multi-national corporation received a $33 million Ex-Im loan while former Energy Secretary Bill Richardson simultaneously sat on its advisory board and on Ex-Im’s as well.
And Ex-Im guaranteed $10 million in loans to benefit the politically-favored Solyndra, which clearly did not favor taxpayers.
And just yesterday, we woke up to the report in the Wall Street Journal, “The U.S. Export-Import Bank has suspended or removed four officials in recent months amid investigations into allegations of gifts and kickbacks, as well as attempts to steer federal contracts to favored companies.”
Ex-Im may not just be guilty of cronyism; it may be guilty of corruption as well. Now I will admit that Republicans may disagree on whether Ex-Im should be reformed or allowed to expire, and I certainly hope this hearing will help illuminate that decision. But we are united in believing we cannot reauthorize the status quo. And we are also united in believing that the smarter and fairer way to promote American exports is by: fundamental tax reform; strong trade agreements; a regulatory freeze with the exception of health and safety and greater American energy independence with projects like the Keystone pipeline.