Friday, March 20, 2015

Let the Export-Import Bank die

Over the next month or two, Americans will be subjected to a game of political football, as Congress and then the President will have a heated back and forth over the future of the Export-Import Bank, the charter of which is set to expire in June.

Most Americans are unfamiliar with the Bank. It considers itself the official export credit agency of the United States and its mission is to assist in financing the export of U.S. goods and services to international markets. The Ex-Im Bank provides working capital guarantees (pre-export financing); export credit insurance; and loan guarantees and direct loans (buyer financing).

It does all of this with the full support of public finances. If a foreign transaction falls apart or a participating American business is hoodwinked, it’s up to the Bank (and taxpayers) to foot the bill and make the affected company whole again.

That happens too often because the primary purpose of the Ex-Im Bank is to assume credit and country risks that the private sector is unable or unwilling to accept. That means if a private bank or insurance company knows better than to back a deal, our government steps in to do it, knowing full well the great amount of risk and lack of certainty.  

Enough deals have fallen through over the 80 year history of the Bank that American taxpayers have been on the hook for approximately $2 billion every decade per a report issued by the Congressional Budget Office last May.

That’s $16 billion thrown away to assume risk that those companies should have assumed on their own. True free-market capitalism is based on the entrepreneurial spirit of its participants…winners and losers know the risks, assume the risks and then reap the rewards or miseries created by the fulfillment of those risks.

But, unfortunately, that’s not the economic system we really live in. It may be for businesses on Main Street, but the markets are controlled by the businesses on Wall Street, entities that claim capitalistic paths but instead choose one that finds them begging for -- and being granted – favor from an unconstitutional federal system that meddles in markets and promotes crony capitalism. Just look at the bailouts of the Great Recession for the best example of that: Trillions of taxpayers’ dollars were used to prop up banks, lending institutions and larger corporations that were weakened by their own mass stupidity.

It’s those same businesses that are benefiting from those same taxpayers, via the Ex-Im Bank, who are taking on all the risk for potentially-bad business deals.

But, the Bank wants you to believe otherwise.

It makes an audacious claim that nearly 90 percent of its more than 3,340 transactions in 2014 directly supported American small businesses. That doesn’t tell the full story. Companies with 1,500 employees fall into the small business category for the Bank. Although 90 percent of the transactions went to small businesses (as mutated as that description may be), more than three-quarters of the dollars annually are spent on their 10 largest clients, the likes of Boeing, Caterpillar, and General Electric, all multi-billion dollar corporations that can certainly evaluate and cover their own risks.

The Ex-IM Bank approves $30 billion in new commitments ever year and has a statutory lending cap of $140 billion. But some of the Republicans who want to keep the Bank alive want that cap increased to a whopping $175 billion by 2021.

It doesn’t matter if it’s $175 billion or a dollar and seventy-five cents. It should not be the responsibility of the citizenry. Business is risky and businesses themselves should assume that risk if they want to do business.

As we saw in 2008, a world-wide recession can creep up seemingly out of the blue. Although we are experiencing a somewhat-improving economy in the U.S. the rest of the world is teetering on the edge of another recession. That, coupled with a strong U.S. dollar which can really inhibit foreign transactions, makes export-import even more of a gamble.

Let’s not repeat past bailouts this time around. Let the Export-Import Bank die in June and force entrepreneurs to be true to their title once again.  

From the 23 March 2015 Lockport Union Sun and Journal

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