Few Americans would be surprised to learn that a government agency that hands out generous loans and credit guarantees to a select number of corporations is corrupt and poorly managed. This impression has been repeatedly affirmed by the Export-Import Bank’s inspector general. The bank has a long history of dealing with dodgy firms and doling out suspiciously large amounts of loans to certain companies.
But now we don’t have to rely on reading between the lines of IG reports. It was revealed on Monday that four employees of the bank are being investigated by the Justice Department for allegedly accepting payments and gifts from Ex-Im beneficiaries. One of them has already been placed on leave from the bank (generally fed speak for “fired”).
Congressmen, who probably don’t read any more IG reports than the rest of us do, should remember this as they consider whether to reauthorize the bank, the funding for which expires at the end of September.
It’s heartening that Kevin McCarthy, the new House majority leader, already announced this past weekend that he opposes reauthorizing the bank. The previous majority leader, Eric Cantor, helped cut the deal that saved Ex-Im in 2012 but was defeated in a recent primary.
Cantor’s primary opponent emphasized during his campaign that he’d like to end crony capitalism. Plenty of other candidates in this year’s midterms — Republicans and Democrats — will talk a big game about the issue. There is no excuse, not even political necessity, for any of them to defend Ex-Im in this summer’s debate.
Those who vote for the bank’s continued survival are supporting a corrupt, near-rogue organization that wagers billions of taxpayer dollars per year. What does it all buy us? Ex-Im supports 2 percent of U.S. exports, most of them by large corporations such as Boeing and Caterpillar. (Boeing’s stock dropped 2 percent the day after Cantor lost.) Bank defenders argue that the U.S. needs an export-financing agency because other countries have them, but fear of unilateral disarmament has been largely discarded in other trade-policy debates.
If you’re wondering why it took so long to expose corruption at Ex-Im, it’s in part because the bank’s reporting on its own operations has been so irresponsible. This works to the advantage of its defenders in a number of ways. According to the bank’s IG, Ex-Im exaggerates the numbers of jobs its loans create by ignoring the distinction between full-time and part-time work; it doesn’t bother calculating default rates for specific sectors of its portfolio or stress-testing its entire book of business; and more. Some supporters of the bank want a bill that will reauthorize it while requiring reforms. But the inspector general has repeatedly criticized the bank for not carrying out the reforms required in the last reauthorization.
The kind of malfeasance that Ex-Im commits is, in some sense, inevitable. Public-choice economics teaches us that government programs work for special interests and bureaucrats, not the taxpayer. The corruption this engenders is certainly hard to investigate and fix, as we’ve seen at the VA and the IRS.
The good news is, basic economics teaches us that we don’t need to fix Ex-Im. We can just end it altogether.