Sunday, August 10, 2014

The Evil Doings of the Export-Import Bank

Veronique de Rugy writes:
In many ways, the Export-Import Bank is repeating the tragic mistakes of the early 21st century housing bubble on an international scale. Since 1996, the International Monetary Fund and World Bank have maintained a list of Heavily Indebted Poor Countries (HIPCs), which face debt burdens their governments cannot sustainably manage. Since fiscal year 2007, the Export-Import Bank has added to the debt levels of 20 of the 39 countries listed in some phase of the HIPC Initiative’s debt management process.

Just as Fannie Mae and Freddie Mac convinced low-income Americans to take out risky loans to purchase homes they otherwise wouldn’t dream of buying, the Export-Import Bank sways governments in developing countries to splurge on shiny new air fleets, futuristic wind farms, and unnecessary luxury tour buses-all made, of course, in the U.S.A.

Super-wealthy companies such as Boeing, with its market capitalization of $91 billion, and Lockheed Martin, with its $50 billion profit in 2013, are the Ex-Im Bank’s true masters. The program allows them to sell more of their products abroad without the headache of doing the hard financing work themselves. Obviously, these companies do not need the U.S. government to seal foreign deals. Boeing has a financing arm worth $4 billion and could easily extend loans to prospective clients.

At their worst, Ex-Im loan programs introduce political incentives into business decisions, creating the conditions for companies to seek financial rewards by pleasing political interests rather than customers. The economic costs this cronyism imposes are real and inexcusable.

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