The Corner

Oh Look: Ex-Im Money Isn’t Really Going to Small Businesses

For months, I have been beating the drum about the fact that Ex-Im conceals handouts to large corporations under the guise of “small-business lending.” Contrary to Ex-Im’s claims, the bulk of its activities isn’t about helping small businesses at all — the bank quite obviously prioritizes redistributing wealth to large domestic and foreign corporations

Bank defenders argue that 90 percent of its deals benefit small firms, but by dollar value, it’s less than 20 percent of the benefits that go to small businesses, actually violating the bank’s charter. And Ex-Im’s definition of “small business” is considerably more expansive the one other federal agencies, like the Small Business Administration, use. If you’re a company with 1,500 employees or earn less than $21 million in annual revenues, you’re a small business in the eyes of Ex-Im. (Over at the Daily Signal, Diane Katz has described some of the companies that Ex-Im considers “small” — some have revenues of more than $70 million.)

But it turns out there are even deeper problems with their “small-business support.” An Ex-Im Bank spokesman has officially confirmed that they were labeling some large firms as small businesses, misleading the public. Reuters broke the story:

The U.S. Export-Import Bank has mischaracterized potentially hundreds of large companies and units of multinational conglomerates as small businesses, a flaw in its record keeping that could undermine the export lender’s survival strategy.

A Reuters analysis showed companies owned by billionaires like Warren Buffet and Mexico’s Carlos Slim, as well by Japanese and European conglomerates, were listed as small businesses and Ex-Im acknowledged errors in its data in response to those findings. . . .

A comparison of some 6,000 businesses characterized by Ex-Im as “small” with information supplied by corporate data collector Dun & Bradstreet, which Ex-Im also uses to vet applicants, and other sources turns up some 200 companies that appear to be mislabeled and many more whose classification is uncertain.

A division of Austria’s Swarovski jewelers shows up, as does North Carolina’s Global Nuclear Fuels owned by General Electric (GE.N) and Japan’s Toshiba (6502.T) and Hitachi (6501.T). …

Reuters calculations show that as much as $3 billion in authorizations listed as those for small business may have been misclassified over eight years – roughly 8 percent of Ex-Im’s $38 billion in small business support over that period. Total authorizations were worth $189 billion.

For some of the more gory details go here.

I guess we shouldn’t be surprised by this confession, considering Jon Gruber’s candid admission that misleading the public is an effective way to shove bad policies down America’s throat, Still, there are three important points to keep in mind. 

First, the Ex-Im Bank just got reauthorized for nine months — its fate, which rests in no small part on whether lawmakers will buy the small-business claims made by the bank, is again revisited next June. 

Second, after years of supposedly being against cronyism, Democrats have become some the biggest advocates of the Ex-Im Bank by arguing it benefits small businesses rather than big corporations. Whether it is because they do not look at the data or because they have eager to help big businesses, this story should give them pause.

Third, this is not the first time that the Ex-Im Bank has been implicated by accusations of shady behavior. In the past year alone, the Bank has been dogged by corruption probes and suspicious foreign deals. It’s a perfect example of what might seem like boring, petulant complaints about the bank’s lack of transparency are actually of great importance.

In any case, this should be seen as yet another reason to end this toxic, corrupt, corporatist institution once and for all when its charter expires in June. Good riddance.

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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