Exporting Gimmicks and Importing Honesty
Easy access to congressional voting records does wonders for accountability, but it often leads to impressive acts of rhetorical contortion by lawmakers.
Last month, the 238 House Republicans and 7 Democrats approved the Budget and Accounting Transparency Act of 2012 (H.R.3581). The bill “revise[s] the budgetary treatment of federal direct loans and loan guarantees to account for them on a fair value basis.” In English, it requires a more honest and transparent method of accounting, one based on market risk.
The legislation stems, in part, from the stunning failures and subsequent taxpayer bailouts of Fannie Mae and Freddie Mac. Prior to their collapse, both government-backed banks were touted as moneymaking machines for the federal government. In a willful ignorance of history, the chairman and president of another government-backed bank is trotting out the exact same argument.
In a statement urging Congress to reauthorize and expand the Bank, Fred Hochberg said it “pays for itself and earns money for the U.S. Treasury.” Indeed, the Chamber of Commerce says that since 2005, the bank has returned $3.4 billion to the U.S. Treasury.
But folks at e21 say “the Ex-Im bank’s profits are almost surely an accounting illusion.” Why? Because the bean counters are not using the type of fair value accounting House Republicans supported just last month! e21 continues:
The CBO hasn’t provided a fair-value estimate for the Ex-Im bank specifically, but one can be calculated using the following back-of-the-envelope approach. …
This simple approach…suggests that the Ex-Im bank’s long-term loan guarantee program actually provides guarantees at a loss for taxpayers, not a profit. Moreover, this analysis reveals that the Ex-Im bank’s loan guarantees are made at sufficiently generous terms that borrowers receive subsidies of about 1% of the amount borrowed. …
… As the back-of-the-envelope analysis above suggests, a fair-value estimate would rob the bank’s supporters of one of their favorite talking points by showing that subsidizing businesses and foreign buyers, in this case, isn’t “self sustaining” or profitable for taxpayers.
Despite well-known concerns over the Bank’s market-distorting endeavors and new evidence the Bank is not profitable, a bipartisan group of “adults” in the House are negotiating a compromise to reauthorize the Bank for one year and lift its lending cap by $13 billion.
If lawmakers are committed to changing the way Washington works they should insist the Congressional Budget Office provide a real, fair value score for the ExIm Bank before considering any reauthorization. With a little more honesty and a few less gimmicks, maybe Congress’s approval rating could move above 17 percent.