Ex-Im's choices of winners, losers hurts overall business - WTRF 7 News Sports Weather - Wheeling Steubenville

Ex-Im's choices of winners, losers hurts overall business

Posted: Updated:
Stephen Smoot Stephen Smoot

Stephen Smoot is a public policy writer, media expert and historian. He lives in Keyser with his wife and son.

In recent years, the Export-Import Bank of the United States has drawn heavy criticism. Officials from the bank have gone on a nationwide barnstorming campaign to build support as many congressional Republicans consider shutting the public credit giant down via defunding it.

The Ex-Im Bank, as it is generally called, touts “an 80-year record of supporting U.S. jobs by financing the export of American goods and services.” It was a Depression-era program designed to roll back the destructiveness of the Smoot-Hawley Tariff passed under President Herbert Hoover. The tariff had eliminated two-thirds of U.S. exports by 1932. The Ex-Im Bank was established to provide credit to those companies trying to do business in the aftermath.

It joined a legion of many agencies offering government credit, including the Reconstruction Finance Corp., the Electrical Home and Farm Authority, the Federal National Mortgage Association and others. These sources of government credit were used as competition with, and occasionally a bludgeon against, the private sector banks.

Franklin Roosevelt's right hand man in credit, Texas Democrat Jesse Jones, threatened private sector bankers, “Be smart, for once. Take the government into partnership with you.”

It quickly became a tool of Roosevelt's foreign policy. In 1938, as the Japanese tightened control over China, the Ex-Im Bank financed the Burma Road which helped the U.S. support the war effort.

By 1943, Roosevelt officially drafted the bank into the national security role it had played for years, putting it under the Office of Economic Warfare. Later, it participated in the Marshall Plan loan packages for the rebuilding of Europe. Also, upon achieving independence, Israel received a $100 million credit from the Ex-Im Bank to help construct its country.

Its foreign policy roles did not end in the 1940s. Throughout the Cold War, it financed projects in American friendly nations in the Third World. It also extended credit to Soviet Bloc countries when Washington wanted to signal warming relations.

Critics complain, however, that Ex-Im Bank has recently grown into a corporate welfare agency that only benefits a few of America's most profitable companies. But it is also a ticking time bomb.

The Heritage Foundation's Stephen Moore, writing for the Chicago Tribune, explains that “the Export-Import Bank holds more than $100 billion in loan guarantees, making it one of the largest banks in the world.” Moore says that if the loans “go sour,” like with housing giants Fannie Mae and Freddie Mac, the economic consequences could be staggering.

Moore refers to the practice of basically loaning money to international buyers from approved American companies. The Washington Examiner's Tim Carney reported in 2012 about how First Solar received $455 million in loan guarantees that subsidized the sale of panels to a solar farm in Canada. If the buyer never pays, the federal government picks up the bill, paid for by taxpayers. In this case, both the seller and buyer were First Solar.

“The implication here,” Carney wrote, “is that First Solar was ‘competing' with foreign solar panels in order to sell solar panels — to First Solar.”

Ohio governor Ted Strickland touted the guarantee in his failed re-election campaign. The ill-fated Enron pulled off a similar deal in 2000.

Why would anyone think that the loans could turn into liabilities? Moore says if this was “a moneymaker, then private sector banks would gladly underwrite these activities. But they won't, so what does that tell you?”

Currently, Ex-Im Bank wants Congress to raise its cap on guarantees to $160 billion. Some argue that the money risked is worth the investment. Tony Fratto of Hamilton Place Strategies defended the bank in a recent debate. He said eliminating the bank makes “winners of our overseas competitors while harming U.S. firms and taxpayers.”

Bank chairman and president Fred Hochberg also claims that the bank ensures that U.S. firms are “competing on a more level playing field while expanding their exports.”

It may benefit U.S. firms, but does it serve the cause of jobs and taxpayers? Carney reported in 2005 that GE used Ex-Im Bank support to finance construction of a refrigerator plant in Mexico while closing a similar one in Indiana.

West Virginia businesses across the state last year received $1.6 million from the Ex-Im Bank, which claims that it resulted in over $3 million in purchases. The bank's practice, however, of picking winners and losers, hurts the state overall.

The Ex-Im Bank actively subsidizes coal competitors. Its own site promises “enhanced support for environmentally beneficial exports … including exports related to renewable energy resources.” Carney blasts this practice as “rewarding a few chosen winners.”

These winners are not only green energy, but also the most politically connected, or those employing the most effective lobbyists.

“The Fortune 500,” Moore says, “have become addicted to their subsidies. They now regard them as a political entitlement.”

Moore proposes that all corporate welfare, including the Ex-Im Bank, be eliminated. Support all American businesses by reducing the highest corporate tax rates in the world. This would benefit all companies, not just a few lucky ones. It would also make sure that companies such as Mylan Pharmaceuticals would want to keep their American identity, instead of being forced offshore just to compete.

The House of Representatives will likely put off the funding fate of the Ex-Im Bank until after the election, but a day of decision will likely come soon after.

Powered by Frankly