The U.S. Export-Import Bank Is a Cesspool of Crony Capitalism. Biden Wants To Expand It.

For years now, the U.S. Export-Import Bank—an under-the-radar agency that provides subsidized loans to foreign firms willing to buy American products—has tried to remain relevant. Ex-Im, despite criticisms for being the Bank of Boeing, is convinced that the Trump and Biden administrations may find it a powerful weapon in fighting Chinese influence. Ex-Im has now decided to extend its domestic influence, even though it cannot do so.

Ex-Im should not be able to distract from its ineptness. The 2019 Congress authorized Ex-Im for a seven-year renewal and reinstated a quorum at its board. Ex-Im was then able to resume its work on a $40-billion project backlog. Ex-Im had been mostly dormant for four years and U.S. foreign exporters suffered billions in losses because they couldn’t get preferential terms or loan rates from overseas clients (all of which were paid by American taxpayers). The story continued that these exports were available to go as soon as Ex-Im was reactivated.

Nonsense. Even though the Bank has been in business for three years, the Bank’s supporters still use the backlog to justify their crony activities. This means that if ever there was one, it is apparently still there.

One can only wonder about the Bank’s recent activities. Ex-Im created new loan programs while the nation was still in the initial stages of 2020’s pandemic. It also lifted restrictions from existing programs in order to make it easier to approve more loans during difficult times. It would be reasonable to assume that an international financial crisis will increase demand for financing. But you would be mistaken.

Although some large corporations that had access to capital were able to benefit, there was not much in the way of deals. Ex-Im has seen its footprint shrink steadily since then. Ex-Im data indicates that Exim’s loan and guarantee portfolio dropped to $54.7 Billion from 2019 and $46.9B in 2020. It then fell to $41.3B in 2021. It is less than a third of the $135 billion institution’s financing capability.

Banner 3

Ex-Im’s Program on China and Transformational Exports, which Congress included in the 2019 reauthorization was designed to encourage strategic investments to combat China’s economic power. Last year, the program delivered only $141 million—a tiny fraction of the $27 billion target that Ex-Im is supposed to hit by the end of 2026.

Ex-Im’s financial support to small businesses has fallen since 2019 when the Bank was completely restored. In 2019, it dropped from $2.3 billion, $2.1 billion and $1.6 billion. By 2021, however. Ex-Im only provided financing of $361 million to women- and minority-owned companies in 2021. This is less than half the amount Ex-Im’s financing for women- and minority-owned businesses was 10 years ago.

This record of underachievement could have been a warning sign for the Biden administration. It asked the agency instead to look into financing investment in the United States and not just abroad. This is a ridiculous idea.

You don’t need to make loans in America. The United States has one of the best financial markets around the globe, with plenty of liquidity for companies in need. Ex-Im would simply be replacing legitimate financing sources that aren’t subsidised by the U.S. taxpayers by engaging in domestic markets. This would increase the number of private lenders and distort capital market, as well as extend corporate favoritism from abroad that is so popular at the Bank to the United States. Companies that the government chooses not to subsidise have an unfair advantage.

Ex-Im is likely to conclude there is no reason for this. Near zero.

The Bank’s flexible criteria for assessing domestic investments almost guarantees that no company will not be disqualified. Ex-Im would allow Boeing to borrow money from it for domestic operations. It also allows the Bank to access large amounts of its foreign activities. Although Boeing may be happy to receive an extra handout like many of these subsidy programs, this will have a negative impact on the economy overall.

It would take too many words to mention all the potential dangers this proposal poses. While arguments are fine in government decisions, a track record of success should count more. Biden and his staff should rethink and consider closing Ex-Im’s doors permanently.