Heritage Expert: Export-Import Bank ‘Beset by Mismanagement, Dysfunction, and Risk’
The Export-Import Bank should no longer exist on a fundamental level because, rather than leveling the playing field as it claims, it picks winners and losers. And that’s not the government’s job.
The Heritage Foundation’s Diane Katz, a research fellow in regulatory policy, expounds upon the Bank’s many flaws in her most recent issue brief, which is full of unsettling revelations about the Bank’s mismanagement of taxpayer money. All of this has been documented for years by Ex–Im’s own inspector general and the Government Accountability Office (GAO).
The Bank boasts of its surpluses and profits, but neglects its past history of losses and deficits in the 1980s and potential future costs to taxpayers. Katz illustrates this by reminding us of what happened with mortgage finance giants Fannie Mae and Freddie Mac:
Bank chairman and president Fred Hochberg boasts that the bank has sent billions of dollars in surplus funds to the U.S. Treasury. Congressional appropriators have undoubtedly been pleased to get their hands on the extra revenue. But supplementing government spending does not ensure that the other $140 billion worth of taxpayer subsidies doled out to corporations and foreign governments is necessarily secure. After all, stockholders of Fannie Mae and Freddie Mac collected many a dividend before racking up $164 billion in losses—prompting a taxpayer bailout approaching $200 billion.
The Bank understates the risk on many of the loans it gives to foreign companies by using accounting methods that artificially increase the appearance of its profits. According to the Congressional Budget Office, this misleading accounting could induce lawmakers to support expanding the Ex-Im Bank’s programs more than if they had know the Bank’s real cost to taxpayers.
According to the inspector general for the Bank, it does not have a “systematic approach to identify, measure, price, and reserve for its portfolio risk.” In this way, the Bank stands in stark contrast with private investors who Katz explains “are far more diligent” with their accounting and analysis of risk.
Katz concludes with a thought that every member should take into consideration:
In reality, the bank is little more than a conduit for corporate welfare beset by unreliable risk management, inefficiency, and cronyism. As a government creature interfering in business, it can hardly be otherwise.
We’ll see if they were paying attention this September 30, when the Bank is set to expire. For taxpayers’ sake, and for the sake of fighting cronyism, they should let the 80-year-old Bank meet its end without renewal.