On Thursday, Fred Hochberg, chairman and president of the Export-Import Bank, will be grilled by members of the House Financial Services Committee over charges of corruption and mismanagement at the 80-year old agency. His task to defend the agency appears formidable, especially with its charter coming up for renewal at the end of September.
On Tuesday the Wall Street Journal reported that four Ex-Im employees have either been suspended or fired over the last few months as a result of “investigations into allegations of gifts and kickbacks.” But that’s just the tip of the iceberg. The Heritage Foundation reported on the same day that there have been at least 74 cases of “integrity” investigations by the Office of Inspector General (OIG) at the agency, plus dozens of other cases of outright fraud that have been referred to the Justice Department for prosecution. Not bad for an agency that employs just 402 people.
Hochberg’s problems are compounded by the committee’s chair, Rep. Jeb Hensarling (R-Texas), who says that the agency deserves to have its charter withdrawn because of its reputation as a funnel for taxpayer dollars to large companies as a form of corporate welfare. In addition, the newly-minted Majority Whip Kevin McCarthy, who replaced Eric Cantor in a surprise upset last week, has also weighed in against the agency, saying that the bank ought to be shut down its operations are “something that the private sector [is] able to do.”
Created by an executive order issued by then-President Franklin Roosevelt in 1945, the Ex-Im Bank was established as an agency of the executive branch. Its task, allegedly, was to offer financing to assist in the export of American products and services where private financing wasn’t available due to excessive credit risk. The agency’s stated goal at inception was “to aid in financing and to facilitate exports and imports and the exchange of commodities between the United States and other Nations or the agencies or nationals thereof.”
In other words, the U.S. taxpayer was to be required to back up any loans that defaulted in these arrangements, making them essentially the lender in transactions that otherwise wouldn’t take place because they were too risky.
Some small business owners have benefited from the Ex-Im Bank’s generosity with taxpayer monies, including Oscar Ramirez, the owner of Bolivar Trading, Inc. in Miramar, Florida. His story was told in a puff piece issued by the U.S. Chamber of Commerce, a strong supporter of the bank:
We find the Ex-Im Bank very useful. The commercial banks will not lend us $1.7 M without the Ex-Im loan guarantee, and without the line of credit we would not be in business. All [our] receivables are foreign. No commercial bank will lend against those receivables. We export tanks, dispensers, and signage for gas stations to Latin America, the Caribbean and Africa. We employ 35 people — but couldn’t do it without the Bank.
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