The Export-Import Bank and the Case of the “Missing” $24 Billion

May 20, 2014 by AFP

By Akash Chougule

“Where in the world are my $24 billion dollars” seems like a fairly ridiculous question for anyone to have to ask. But for the Export-Import Bank, which doles out taxpayer-backed loans to big businesses and foreign corporations, it’s a completely legitimate one – and one that the bank can’t answer. The second largest beneficiary of the Bank’s second-hand generosity is “unknown.” In addition to the Bank’s history of suspect accounting and lack of transparency, this latest revelation should give Congress yet another reason to reject its reauthorization.

The Export-Import Bank by its nature is a massive fund for corporate welfare. The large multinational corporations that benefit from “Ex-Im” simply do not need an extra boost from the government. As infuriating as it should be for taxpayers that their hard-earned dollars are benefitting multi-billion dollar companies via loans to countries like China, Russia, and Saudi Arabia, it should be even more concerning that the Ex-Im Bank – by its own admission – doesn’t even seem to know where a huge chunk of the money is going.

As the Mercatus Center’s Veronique de Rugy explains, according to the Bank’s own data, the second-most-supported industry over the past seven years is labeled “unknown.” Unknown beneficiaries make up fourteen percent – over $24 billion – of the Bank’s financing since 2007. This trend should be extremely disconcerting given the inherently suspect nature of the Bank’s function. Lending taxpayer dollars to foreign countries and corporations who in turn use that money to benefit other huge corporations lends itself to surreptitiousness, but one would at least expect the Bank to know the whereabouts of its own dollars.

Unfortunately, the Bank’s shocking ignorance about its own activity is only part of their history of questionable practices. The Office of the Inspector General has repeatedly criticized the Bank for a lack of transparency. Ex-Im refuses to share important data like default rates that put taxpayers on the hook, perhaps because it would make people far more wary of reauthorizing the bank, which has already sought one multi-billion dollar bailout.

Furthermore, the Bank claims it makes a profit for the federal government, but the government itself noted that this claim is based on faulty accounting.  Unlike private lenders, the Export-Import Bank does not factor “market risk” in calculating the value of its loans. This specially constructed method that only government entities use allows the Bank to claim it made $1 billion in profit in 2013. But fair-value estimates plug the Bank as a $200 million loss for taxpayers.

Veronique de Rugy rightly declares that “taxpayers should be left wondering whether [the Export-Import Bank] deserves our trust.” In fact, they should be outraged that Congress has allowed this crony sham operation to last until now. But, the Bank is up for reauthorization this year. So thankfully, in order to eliminate it Congress needs only to do what they have been so good at recently – which is to do nothing at all.

Allowing the Export-Import Bank to expire would be a win for taxpayers, for fairness, and for the free market economy that fosters real opportunity, innovation, and competition.  It’s time to break the bank.

UPDATE: A May 22, 2014 report from the Congressional Budget Office details that by not using fair-value accounting, the Bank essentially misstates its 10-year budgetary effect by $16 billion. Ex-Im claims $14 billion in savings under traditional accounting, but fair-value assessment pins a $2 billion cost on the Export-Import Bank over 10 years.