Eliminate the Export-Import Bank
Liberals often say that government intervention is necessary when the private sector, for whatever reason, cannot offer a critical service. Yet this line of thinking clearly does not justify the continued existence of the Export-Import Bank of the United States, an institution whose primary purpose is to finance loans to foreign companies so that they can buy American-made products.
The Ex-Im Bank recently announced that it generated a billion-dollar profit this past year. This is clear evidence that private lenders could make money financing these loans, too. What's more, private lenders would not expose taxpayers to catastrophic risks, and they would not use taxpayer-backed loans to fund politically connected businesses.
When it comes to the serious risks of taxpayer-backed lending, the best recent examples are Fannie Mae and Freddie Mac -- which similarly made billions of dollars in profits, until they didn't. The 2008 financial collapse forced taxpayers to shoulder the costs of Fannie & Freddie's losses to the tune of more than $100 billion.
While Ex-Im does currently boast robust profit margins, its long-term financial strategy and loan-selection process deserve closer scrutiny. Most banks diversify their assets to reduce risk. Ex-Im Bank doesn't abide by this practice. In fact, in 2012, more than 80 percent of its loan guarantees and favorable terms went to help foreign companies buy from a single company: Boeing.
As peculiar as it may sound, Ex-Im could very well be creating a lending bubble in the airline industry. Last year, Ex-Im lent out more than $12 billion in support of Boeing. If a large number of borrowers were to default on these loans, taxpayers could be on the hook for that money.
Even more curious is the question of why Boeing -- whose revenue was almost $82 billion in 2012 -- is receiving the bulk of Ex-Im's largesse. Boeing's connections to the Obama Administration most likely have something to do with it. Boeing's CEO, James McNerney, is a close friend of the president and sits on the President's Export Council. And as if that weren't enough, Boeing also employs an army of lobbyists, retaining the services of not one but two of Washington's highest-paid lobbying firms.
Fred Hochberg, the CEO of the Ex-Im Bank, has been touting its recent profit announcement to silence the bank's critics, but if anything this piece of news should buttress the argument for ending the bank's charter in 2014. If the government can make a profit in this business, then private lenders can as well. Leaving it to private lenders to finance the export of U.S. goods and services would shift the risk of these loans away from taxpayers, and would put a stop to the bank's crony capitalism.
David Williams is the president of the Taxpayers Protection Alliance, a non-profit, non-partisan organization dedicated to educating the public through the research, analysis, and dissemination of information on the government's effects on the economy.
