Ex-Im Bank: Crony Capitalism and Insider Favoritism
The Export-Import Bank of the United States (Ex-Im Bank) is a taxpayer-backed federal agency charged with financing U.S. exports to countries around the world. Largely through the use of loan guarantees, the Ex-Im Bank facilitates the sale of U.S. made products to entities and nations that would otherwise be unable to afford them. For small businesses looking to increase sales abroad, the Ex-Im Bank would seem to offer the ultimate advantage. The reality, though, is that one U.S. airplane manufacturer, Boeing, receives the vast majority of the Ex-Im Bank’s funding even though it already has a robust profit-margin.
Boeing receives more money from the Ex-Im Bank than every other company combined. During fiscal year 2012, the Ex-Im Bank authorized $14.7 billion in loan guarantees and direct financial aid. Of that $14.7 billion, 82.7 percent, or $12.2 billion, went directly toward financing the purchase of Boeing products starting with its airplanes.
Such favoritism is the modus operandi of the Ex-Im Bank – an institution that is defined by many as crony capitalism and corporate welfare. The Ex-Im Bank does not support industries or companies that most require aid. Rather, the bulk of the Ex-Im Bank’s budget is siphoned right into the hands of the most politically connected players. To understand how Boeing came to be in this position, one need only look at the many connections that Boeing has within the U.S. government in general (read: Obama administration), and within the Ex-Im Bank specifically.
A press release announcing the Fiscal Year 2013 Advisory Board of the Ex-Im Bank reveals part of the reason why Boeing receives such preferential treatment. According to the press release, this year’s Ex-Im board includes Christine Gregoire, Governor of Washington (where the headquarters of Boeing is located), and Owen Herrnstadt, the director of trade and globalization for the International Association of Machinists and Aerospace Workers (IAMAW), the main union that engages in bargaining with Boeing and represents millions of its workers. President Obama’s export czar, Jim McNerney, is a Boeing chief executive officer and is also on the board. The vested interest of these government officials helps explain why Boeing – a company that enjoyed nearly $70 billion in revenue in 2011 – received so much additional money with the full faith and trust of America’s taxpayers. But government connections are not the only advantage that Boeing possesses. Another reason Boeing continues to be “chosen” by the Ex-Im Bank undoubtedly has to do with the company’s army of lobbyists.
Boeing’s powerful lobbyists, who routinely infiltrate the highest ranks of the U.S. government, are responsible for suggesting specific ventures that the Ex-Im Bank might undertake. Consider the following “investments” the Ex-Im Bank has recently supported on behalf of Boeing:
- $3 billion to finance the purchase of Boeing 777’s to Air India – a company that is so mired in debt that it is now re-selling many of the same planes that the Ex-Im Bank helped finance;
- $1.2 billion to help finance the purchase of twelve 737 MAX aircraft for Icelandair; and
- $1 billion worth of bonds for Ethiopian Airlines for the purchase of 10 Boeing 787 Dreamliners.
These inside deals have granted foreign airlines a comparative advantage in the international market, subsequently penalizing U.S. carriers who try to play by the rules. Domestic airlines have also been forced to cut jobs and international routes as they suffer from an unfair system. It has been estimated that the Ex-Im Bank costs the U.S. airline industry up to 7,500 jobs and $684 million per year – an outlay that is transferred to consumers in the form of higher ticket prices and fewer flight options.
Perhaps now our elected officials will finally put a stop to this bogus exercise that funnels billions of U.S. backed tax dollars into a corporate welfare system benefitting a single corporation under the guise that is benefitting America’s small businesses.