Double Rainbow Over Boeing
The most amusing headline we read the day after Eric Cantor (Smug R) lost his primary to the Tea Bagger, and Ayn Randian acolyte, David Brat, was this one. Poor, poor Boeing, lost one of their sugar daddies…
Boeing Co. (BA) fell the most in two months as U.S. House Majority Leader Eric Cantor’s defeat in a primary election threatens congressional reauthorization of low-cost lending that benefits the world’s largest planemaker.
Keeping alive the Export-Import Bank will be an “even more high-profile/challenging fight,” Chris Krueger, a senior policy analyst for Guggenheim Securities LLC, said today by e-mail. Boeing was the “biggest loser” besides Cantor in the Virginia Republican’s surprise loss yesterday, Krueger wrote.
Ex-Im arranges financing that helps foreign airlines buy jets, a service that Boeing said last month would support $10 billion of 2014 sales. As Congress debates reauthorization, House Financial Services Committee Chairman Jeb Hensarling of Texas is being promoted as a possible Cantor successor. He has said the U.S. should “exit the Ex-Im.”
(click here to continue reading Boeing Tumbles as Cantor Loss Clouds Ex-Im Bank’s Future – Bloomberg.)
Boeing – El Segundo
So what exactly is the Export-Import Bank? The Wikipedia entry:
The Export-Import Bank of the United States (Ex-Im Bank) is the official export credit agency of the United States federal government. It was established in 1934 by an executive order, and made an independent agency in the Executive branch by Congress in 1945, for the purposes of financing and insuring foreign purchases of United States goods for customers unable or unwilling to accept credit risk. The mission of the Bank is to create and sustain U.S. jobs by financing sales of U.S. exports to international buyers. The Bank is chartered as a government corporation by the Congress of the United States; it was last chartered for a three-year term in 2012 which will expire in September 2014. Its Charter spells out the Bank’s authorities and limitations. Among them is the principle that Ex-Im Bank does not compete with private sector lenders, but rather provides financing for transactions that would otherwise not take place because commercial lenders are either unable or unwilling to accept the political or commercial risks inherent in the deal.
(click here to continue reading Export-Import Bank of the United States – Wikipedia, the free encyclopedia.)
Golden Plowshares
Corporate welfare, in other words. Propping up the bottom line of the military-industrial complex, and other crony capital chores. Sure, after World War 2, the bank was perhaps justifiable, the Marshall Plan and all that. But in today’s economy? Why does Boeing, GE, Halliburton or ExxonMobil need special low-interest loans subsidized by US taxpayers, loans that are not available to the rest of the business world? Especially when so much of what the bank subsidizes is bad for the planet.
Like:
The bank’s environmental policy is a disappointment because it would allow an increase in spending on coal and other technologies harmful to the environment, said Steve Kretzmann, who runs Washington-based Oil Change International, which seeks to curb government aid to fossil-fuel companies.
“It makes a mockery of the Obama administration’s supposed commitment to phase out fossil-fuel subsidies,” Kretzmann said in an interview.
The project in Papua New Guinea led by Irving, Texas-based Exxon has become a particular point of contention.
The pipeline’s construction will destroy pristine tropical forests, PacificEnvironment’s Norlen said in a submission to the lender in September.
Exxon “is the most profitable corporation on the planet,” Kretzmann said. “This is the last place that taxpayer support should be going.”
(click here to continue reading Obama’s Trade Goal Fights His Clean-Energy Plan (Update4) – Bloomberg.)
and:
President Barack Obama’s goals of boosting U.S. exports and combating climate change are colliding as the U.S. Export-Import Bank expands financing for oil, gas, mining and power-plant projects.
Bank-supported ventures approved in the year ended Sept. 30 will emit an estimated 17.9 million metric tons of carbon annually, more than triple the previous year and the most since the lender started releasing data in 2001, according to its annual reports. Among companies aided were General Electric Co. and Petroleos Mexicanos, Mexico’s state-owned oil business.
“Ex-Im is on a fossil-fuel binge,” said Doug Norlen, policy director at PacificEnvironment, an environmental advocacy group in San Francisco.
You Can’t Bribe No one
We’re not alone in wondering why in our current economic climate, this corporate welfare bank continues to exist.
For instance, from those hippies at Forbes:
Nothing brings out the well-tailored lobbyists in Washington quite like a threat to corporate welfare. With the Export-Import Bank’s legal authorization set to run out this year, the Chamber of Commerce recently led a Big Business march on Capitol Hill to protect what is known as Boeing’s Bank. Over the last eight decades ExIm has provided over a half trillion dollars in credit, mostly to corporate titans. Congress should close the Bank.
ExIm was created in 1934 to underwrite trade with the Soviet Union. The agency piously claims not to provide subsidies since it charges fees and interest, but it exists only to offer business a better credit deal than is available in the marketplace. The Bank uses its ability to borrow at government rates to provide loans, loan guarantees, working capital guarantees, and loan insurance.
The result is a bad deal for the rest of us. For instance, ExIm is not free, as claimed. Recently made self-financing, the agency has returned $1.6 billion to the Treasury since 2008. However, economists Jason Delisle and Christopher Papagianis warned that the Bank’s “profits are almost surely an accounting illusion” because “the government’s official accounting rules effectively force budget analysts to understate the cost of loan programs like those managed by the Ex-Im Bank.”
In particular, the price of market risk is not included, even though doing so, explained the Congressional Budget Office, would provide “a more comprehensive measure of federal costs.” Delisle and Papagianis figured ExIm’s real price to exceed $200 million annually. Indeed, both the Government Accountability Office and ExIm Inspector General raised questions about the accuracy of the agency’s risk modeling.
Federal Reserve economist John H. Boyd took another approach, explaining: “For an economic profit—that is, a real benefit to taxpayers—Eximbank’s income must exceed its recorded expenses plus its owners’ opportunity cost, a payment to taxpayers for investing their funds in this agency rather than somewhere else.” If ExIm was private, he added, “one must suspect that its owners would have pulled out long ago in favor of a truly profitable enterprise.” He figured the Bank’s real cost averaged around $200 million a year in the late 1970s but had increased to between $521 million and $653 million by 1980. Given the recent explosion in Bank lending the corresponding expense today could be much higher.
(click here to continue reading Close the Export-Import Bank: Cut Federal Liabilities, Kill Corporate Welfare, Promote Free Trade – Forbes.)