Ex-Im Bank Makes Record-Breaking $5 Billion Loan
Reuters recently reported that the U.S. Export-Import Bank has approved a record-breaking direct loan to help build Sadara Chemical Company, a petrochemical complex in Saudi Arabia. The $4.975 billion loan — the biggest in the bank’s history — is being sold as a good way to create American jobs. The article states:
“Approximately 70 companies including Dow, KBR, ABB Inc and more than 20 small businesses are expected to export U.S. goods and services to the facility in Jubail Industrial City II in eastern Saudi Arabia under the loan, the bank said.”
In this economy, that is pretty savvy advertising. But scratch beneath the surface, and you’ll find that this is not such a great idea.
As Heritage Action has said, the Export-Import Bank “is nothing more than corporate welfare that works like a Fannie Mae for exporters.” This is fundamentally problematic because American taxpayers are on the hook for these loan guarantees . This should be unsettling to anyone who pays taxes, as these generously funded ventures may result in an even bigger heaping of failure, as was the case with “First Solar,” a politically favored, failure of a company.
Heritage’s Brian Darling explains what is wrong with the Export-Import Bank and what Congress should do about it:
“Eighty years on, it has loaned billions to numerous foreign nations and companies. The idea, as always, is to encourage those foreign entities to purchase U.S. goods. In reality, however, the so-called bank has outlived its usefulness.
Today, the Ex-Im Bank is fast approaching its statutory cap of $100 billion in loans, and its charter is expiring. With the support of many in Congress, that bank has requested increased loan authority and reauthorization of its charter. In this situation, a do-nothing Congress is the taxpayers’ best friend. It could reduce their exposure to billions of dollars in potential loan losses simply by letting the clock run out on the Ex-Im Bank.”
He also reminds us:
“The bank doesn’t restrict its dubious lending practices to foreign entities. Among its domestic “clients” are the now famously bankrupt Enron and Solyndra.
The bottom line is this: The Ex-Im Bank uses taxpayer resources to prop up government- favored companies. And, all too often, government-favored companies are bad investments.
This slush fund for foreign business and domestic cronies should be terminated. That would protect taxpayers from bad investments and protect free markets from the distortion of federal favoritism.”
For now, we have to deal with our taxpayer dollars going to overseas companies that, frankly, don’t need the cash, or to companies our spendthrift government decides are politically important enough to garner them. So Heritage Action will continue to push for the unmaking of the Export-Import bank, which we have consistently opposed.