Chairman Jeb Hensarling

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Posted by Staff on July 18, 2014
Full Committee Receives Semi-Annual Testimony on Monetary Policy and the State of the Economy 

On Wednesday, the full committee held a hearing to receive the semi-annual testimony from Federal Reserve Chair Janet Yellen on the conduct of monetary policy and the state of the economy. 

Members of the committee called attention to the Federal Reserve Accountability and Transparency Act introduced by Rep. Bill Huizenga (R-MI) and Rep. Scott Garrett (R-NJ), which the committee held a hearing on last week.

"The overwhelming weight of evidence is that monetary policy is at its best in maintaining stable prices and maximum employment when it follows a clear, predictable monetary policy rule. I believe the period of the Great Moderation between 1987 and 2002 attests to this proposition. Had a clear, predictable monetary policy rule like the Taylor Rule been in place throughout the last decade, it is likely the financial crisis would have been avoided in the first place, or at least downgraded to a garden variety recession," said Chairman Jeb Hensarling (R-TX).

The Federal Reserve Accountability and Transparency Act “in no way, shape or form dictates monetary policy. Anybody who maintains otherwise either hasn’t read the act, doesn’t understand the act or regrettably they are trying to mislead others," said Chairman Hensarling. "The Fed can set any rule it wishes. It can change the rule anytime it wishes. It can deviate from the rule anytime it wishes. Under the FRAT Act, it simply has to report and explain this to the rest of us. That’s what transparency and accountability are all about."

Subcommittee Examines Justice Department's "Operation Choke Point"


On Tuesday, the Oversight and Investigations Subcommittee held a hearing to review the Justice Department's actions regarding Operation Choke Point. Members of the subcommittee voiced concerns that lawfully-operating businesses are being denied access to banking services.

"Our concern is, we have a federal government that's out of control. And we have bureaucrats who think they can get a swift idea and impose the heavy hand of government on legitimate businesses that have had no adjudication of fraud. But you come in here and you say, 'fraudulent, fraudulent, fraudulent,' and you haven't proved it at all," said Rep. Sean Duffy (R-WI).


Subcommittee Chairman Patrick McHenry (R-NC) said, "equally important to the federal prosecution of alleged fraudsters are lawful methods by which the government and regulators identify and investigate those in question. For any division of government to seemingly circumvent lawful, judicious means of conducting federal investigations, it not only subjects itself to rigorous congressional oversight, but it also betrays those who it seeks to protect. And that's the American people."

Subcommittee Discusses Proposals to Reduce Excessive Red Tape

On Tuesday, the Financial Institutions and Consumer Credit Subcommittee held its second hearing to examine legislation designed to reduce the regulatory burden and streamline regulatory compliance for community financial institutions. Members of the subcommittee sought to ensure that consumers would have greater access to the financial products that they want and need.

Subcommittee Chairman Shelley Moore Capito (R-WV) discussed ways to ensure that community banks were able to maintain mortgage-servicing rights so that consumers were "able to go to the institution which they know is carrying these servicing rights" and "know exactly when and how and who is servicing their mortgage."

"A bank's board and the bank's management is in a much better position to ascertain the reputational risk of that bank than an unaccountable, unelected federal regulator in Washington, D.C.," said Rep. Andy Barr (R-KY).


Subcommittee Discusses the Bank Account Seizure of Terrorist Assets (BASTA) Act 

On Thursday, the Monetary Policy and Trade Subcommittee held a hearing to discuss matters related to the execution of court judgments against assets of the Fuerzas Armadas Revolucionarias de Colombia (FARC) for actions taken against Americans captured in Columbia by the group in 2003.

"Today we'll be discussing those difficult topics and some matters of extraordinary complexity involving ways to fairly compensate victims of these heinous acts," said Rep. Bill Huizenga (R-MI).


MEMBER SPOTLIGHT

Rep. Bill Huizenga | Video: Rep. Huizenga: The Fed Is Due for a Tune-Up

Rep. Bill Huizenga (R-MI) discusses the legislation to curb Federal Reserve powers with Peter Cook on "Street Smart."

Weekend Must Reads


Investor's Business Daily | Fed's Failed Monetary Experiment About To End

It'll be years before all the damage to our economy is fully known. But it should be clear by now if it wasn't before: The Fed's radical intervention has not been a success, and the costs are only now becoming apparent.

CNBC | Looks like the Fed wants to have even more power

"The whole financial system and economy of the United States is now a laboratory experiment as macroprudential policies are put in place by those very people who failed to understand or correct the excesses that developed in the last financial crisis," Bove said in a note to clients. "More problematic is the fact that macroprudential policy requires regulators to control the growth and direction of the U.S. economy. It denies the right of the private sector to grow in any direction it chooses without the explicit control of the government. It is anti-capitalistic."

Committee on Financial Services 
| The Six Biggest Inaccuracies in the July 10 Bloomberg Businessweek Article Regarding the CFPB’s Building Renovations

The Financial Services Committee will continue to investigate why CFPB leadership decided to commit the Bureau to a quarter billion dollars in long-term lease payments without performing any due diligence, and why it has decided to spend an additional $215.8 million to renovate a building it doesn’t own, an amount that is more than $70 million higher than the building’s appraised value.

    In the News

CNBC | Video: Santelli Exchange: Fed scrutiny

Washington Examiner
 | How could Bloomberg Businessweek reporter miss the Obama bundler in the CFPB renovation scandal?

Bloomberg | SEC's Gallagher Adds to FSOC Criticism, Supports Bill for Increased Transparency

Wall Street Journal | How to Spark Another 'Great Moderation'

The Hill | Republicans start small on Fed reforms

Wall Street Journal | Boeing Will Survive an Ex-Im Defeat

Insurance News Net | 
Hensarling: Dodd-Frank Results in Less Freedom, Less Opportunity and a Less Dynamic Economy

Wall Street Journal | House Panel Launches Corruption Probe of Export-Import Bank

In Case You Missed It

Egregious Ex-Im Bank Deal of the Day

Russia

Bill Richardson

Brazil Aquarium

Solyndra

Posted by Staff on July 18, 2014

Ex-Im and the Democratic Republic of the Congo
 
 
President Obama and the First Lady pose with Denis Sassou-Nguesso, President of the DRC, and his wife, Mrs. Antoinette Sassou-Nguesso.
 

The U.S. Statement Department reports the Democratic Republic of the Congo (DRC) is a country with “major human rights problems.”  One human rights organization labelled it the “rape capital of the world.” 
According to another report, women in this country were raped by security forces to stop “women speaking about politics, human rights and, in some cases, rape itself.”

Despite these horrific abuses and the DRC’s recent track record of default, the Ex-Im Bank is open for business there, risking more taxpayer money in the process.

Here are the deal details:

Since 2010, the Ex-Im Bank has approved more than $3 million in financing for deals in the DRC, including the financing for many mining projects.  Recently, the Obama Administration forgave $979 million in defaulted DRC government debt, which came from U.S. taxpayer-backed Ex-Im financing to the DRC. In 2010, Kerry Kennedy, founder of the Robert F. Kennedy Memorial Center for Human Rights, argued that it was the “Wrong Time for Congo Debt Forgiveness.”

American taxpayers should be asking why the Ex-Im Bank is back in business in the DRC, providing financing to mining companies in a country with a terrible human rights record and a history of defaulting on hardworking American taxpayers.

Today, the Export-Import Bank’s total exposure to the country is over $2 million.

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Posted by Staff on July 17, 2014


$10.3 Million: Ex-Im Acted “Fast” for Crony-Connected Solyndra

 


Ugh.” 

That’s exactly how taxpayers feel after losing money not just once but twice on the crony-connected and now-failed solar panel manufacturer Solyndra.

Interestingly, both projects for Solyndra were dealt with rather quickly by the Obama Administration.  Ex-Im boasts in its press release that the Solyndra project benefited from “fast due-diligence” and the Washington Post reports “the White House pushed loan reviewers to make a quick financing decision” on Solyndra’s loan guarantee.

Here are the deal details:

Not only were taxpayers on the hook for the $535 million in failed “stimulus” money Solyndra received  through a loan guarantee and then went bankrupt two years later, but taxpayers also financed a deal in 2011 when the Ex-Im Bank guaranteed a $10.3 million loan provided by KBC Bank NV – whose parent company is one of the top three financial institutions in Belgium.  The loan guarantee went to finance the sale of politically-connected Solyndra’s products to provide energy for a distribution center of Delhaize, a Belgian supermarket chain that posted $28 billion in revenues last year.

Bank of Washington,” indeed.

 

President Obama tours Solyndra in May, 2010.

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Posted by Staff on July 17, 2014
House Financial Services Committee Chairman Jeb Hensarling appeared this morning on CNBC’s Squawk on the Street to discuss the Committee’s Federal Reserve Centennial Oversight Project and the fourth anniversary of the Dodd-Frank Act being signed into law.
 
CLICK HERE TO WATCH

Hensarling on yesterday’s committee hearing with Federal Reserve Chair Janet Yellen and the Federal Reserve Accountability Act:

“Earlier in her career as a central banker, in referring to one monetary policy rule in particular -- the Taylor rule -- she said ‘that's what sensible, central bankers do.’  So I suppose she has the right to reverse herself, but there's been ongoing studies for many years about where does the Fed do the best job of promoting long-term price stability and maximum employment. I think the overwhelming weight of the evidence is with a rules-based policy, and the Act that you talked about is very simple.”

“The Fed has absolute discretion, absolute discretion, on setting monetary policy. They can change it. They can deviate from it. They just need to explain to the rest of us what they're doing and holding it up to public scrutiny. So it's really about transparency and accountability.”

Hensarling on the fourth anniversary of the Dodd-Frank Act:

“…I think there's a growing consensus, including the consensus of the President of the United States of America, that Dodd-Frank did not end too big to fail and too small to matter. So before this Congress is over, our committee has done a lot of work on that, but at the end of the day Dodd-Frank has ensured that the big banks have gotten bigger, the small banks have gotten fewer, the taxpayers have gotten poorer, and our economy is less robust.”

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Posted by Staff on July 16, 2014
ICYMI - How to Spark Another 'Great Moderation'
 
 
July 15, 2014
By John B. Taylor
                                                         
Sound money and free markets go hand in hand. In 1776, Adam Smith wrote of the importance of rules for "a well-regulated paper-money" in "The Wealth of Nations." In 1962, Milton Friedman made the chapter "Control of Money," with its rationale for monetary rules, a centerpiece of "Capitalism and Freedom." In the 1980s, British Prime Minister Margaret Thatcher and President Ronald Reagan made sound money principles a key part of their market-based reform platforms.

The reason is clear: Economic crises and slow economic growth, as in the Great Depression of the 1930s and the Great Inflation of the 1970s, could be traced to deviations from sound rules-based monetary policy. That common- sense finding still holds.

When monetary policy became more rules-based during the 1980s, 1990s and until recently, the economy improved and we got what economists call the Great Moderation of strong economic growth with declining unemployment and inflation during those same years. When policy became more ad hoc, interventionist and discretionary during the past decade, the economy deteriorated and we got a financial crisis, a Great Recession, and a not-so-great recovery.

So as Americans begin to diagnose the poor economic performance of recent years and look for remedies that rely more on markets, they are again looking to monetary reform. A welcome example is the Federal Reserve Accountability and Transparency Act, just introduced in the House.

Its first main section "Requirements for Policy Rules for the Fed" would require that the Federal Reserve submit to Congress and the American people a rule or strategy for how the Fed's policy instrument, such as the federal-funds rate, would change in a systematic way in response to changes in inflation, real GDP or other inputs. The bill was the subject of a hearing on Capitol Hill last week, and Fed Chair Janet Yellen was asked about its requirements Tuesday during her testimony to the Senate Banking Committee. It ought to be the main subject when she testifies Wednesday before the House Financial Services Committee.

According to the legislation, the Fed, not Congress, would choose the rule and how to describe it. But if the Fed deviated from its rule, then the chair of the Fed would have to "testify before the appropriate congressional committees as to why the [rule] is not in compliance." The rule would have to be consistent with the setting of the actual federal-funds rate at the time of the submission. The legislation also creates a transparent process for accountability: The U.S. comptroller general would be responsible for determining whether or not the "Directive Policy Rule" was in compliance with the law and report its finding to Congress.

The legislation provides flexibility. It does not require that the Fed hold any instrument of policy fixed, but rather that it make adjustments in a systematic and predictable way. It allows the Fed to serve as lender of last resort or take appropriate actions to provide liquidity in a crisis. Moreover, the legislation even allows for the Fed to change its rule or deviate from it if the Fed policy makers decide that is necessary. As stated in the act: "Nothing in this Act shall be construed to require that the plans with respect to the systematic quantitative adjustment of the Policy Instrument Target be implemented if the Federal Open Market Committee determines that such plans cannot or should not be achieved due to changing market conditions." But "Upon determining that plans . . . cannot or should not be achieved, the Federal Open Market Committee shall submit an explanation for that determination and an updated version of the Directive Policy Rule."

In the interests of clarity, the legislation also specifies a "Reference Policy Rule," to which the Fed must compare its policy rule. The reference policy rule, to quote from the legislation, "means a calculation of the nominal Federal funds rate as equal to the sum of the following: (A) The rate of inflation over the previous four quarters. (B) One-half of the percentage deviation of the real GDP from an estimate of potential GDP. (C) One-half of the difference between the rate of inflation over the previous four quarters and two [percent]. (D) Two [percent]."

In monetary and financial circles this rule is known as the Taylor Rule, due to a proposal I made in 1992, and researchers routinely compare any policy rule they are considering to this rule. It is thus a straightforward task for the Fed. Many at the Fed already make such comparisons, including Fed Chair Janet Yellen.

Some will object to the legislation, including some at the Fed. But there is nothing partisan about rules-based monetary policy, and there is a clear precedent for congressional oversight. The Federal Reserve Act previously required that the Fed report the ranges for the future growth of the money supply, but these requirements were removed from the law in 2000. The proposed legislation fills that void.

Some will say that the legislation would destroy central-bank independence. But since the Fed chooses its own rule, its independence is maintained. The purpose of the act is to prevent the damaging departures from rules-based policy, which central-bank independence obviously has not prevented.

Based on writings, speeches and publicly released transcripts of meetings, we know that many at the Fed favor a more rules-based policy. Constructive comments from the Fed would undoubtedly improve the legislation, but if it were passed into law as is, economic performance would improve greatly.

The Federal Reserve Accountability and Transparency Act limits discretion and excessive intervention by our independent central bank, as its name implies, in a transparent and accountable way. It thereby meets Milton Friedman's goal of "legislating rules for the conduct of monetary policy that will have the effect of enabling the public to exercise control over monetary policy through its political authorities, while at the same time . . . prevent[ing] monetary policy from being subject to the day-by-day whim of political authorities."

Mr. Taylor, a professor of economics at Stanford University and a senior fellow at the Hoover Institution, served as Treasury undersecretary for international affairs from 2001 to 2005.

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Posted by Staff on July 16, 2014
Why Are American Taxpayers Financing an Aquarium in Brazil?



A rendering of the Acquario Aquarium in Fortaleza, Brazil (Ex-Im Release)

Brazilians still embarrassed by their team’s stunning loss to Germany in the World Cup will soon be able to seek refuge in this “spectacular aquarium on the beach in Fortaleza,” in the words of Export-Import Bank Chairman Fred Hochberg.  American taxpayers will be financing the project through a direct loan approved by the Export-Import Bank to the Brazilian state of Ceará. 

Two questions come to mind:

1.    Will the aquarium be the home for the next psychic octopus?

2.    Why should American taxpayers be put on the hook for this?

Here are the deal details:

In October 2012, the Ex-Im Bank approved $105 million in financing to the Brazilian state of Ceará for an aquarium there.  According to the Ex-Im Bank: “An anticipated tourist attraction, the aquarium will boast four floors housing 25 large tanks containing approximately 15 million liters of water and showcasing 500 marine species and 35,000 individual specimens. The aquarium will also feature interactive exhibits, two 4D cinemas, one 3D cinema, and an educational platform dedicated to the research and preservation of aquatic life along the Brazilian coastal regions. When completed, Acquario will rank as the largest aquarium in the Southern Hemisphere and the third largest in the world.”  – Ex-Im Release

Posted by Staff on July 15, 2014

 e·gre·gious -- outstandingly bad; shocking


It pays to have cronies in high places, especially at the Export-Import Bank it seems.

The Ex-Im Bank gave millions in taxpayer-backed loans for Spanish green energy company Abengoa International – while former Gov. Bill Richardson (D-NM) sat on the advisory boards for both.

Here are the deal details:

Richardson joined Ex-Im’s advisory board near the end of 2012, around the same time that two Ex-Im Bank loans benefitting Abengoa were issued.  Those taxpayer-backed loans totaled around $150 million.

As one newspaper noted, “critics say Richardson’s holding a seat on both Abengoa and the Export-Import Bank’s advisory boards is just another example of cronyism at the bank.”

Posted by Staff on July 15, 2014

Inaccuracy #1: “When the U.S. Consumer Financial Protection Bureau opened in 2011, the best available government office space large enough to accommodate its thousand-plus employees was a run-down concrete building on G Street near the White House that once housed the now-defunct Office of Thrift Supervision.”

Facts
The House Financial Services Committee has investigated whether 1700 G Street was in fact the “best available” office space for the CFPB at the time the Bureau opened.  Earlier this year, the Committee requested that the CFPB produce “copies of all documents prepared by the Bureau, the General Services Administration or any private contractor or consultant prior to February 17, 2012 that reference or evaluate the Bureau’s commercial real estate lease or purchase opportunities.”  The CFPB responded that, “in regard to the documents requested, the Bureau has not, to date, found documents that can be responsive to this request.”  

It therefore appears that the CFPB conducted no due diligence before selecting 1700 G Street, so it could not possibly know whether the facility was the “best available.”

Additionally, in 2010, the Securities and Exchange Commission (SEC) had leased approximately 900,000 square feet of office space in Washington, DC at 400 Seventh Street, SW, known as Constitution Center, and, as was widely reported, soon found that it had overcommitted itself by roughly 600,000 square feet (See, e.g., https://www.sec.gov/foia/docs/oig-553.pdf). The SEC and the building owner then solicited other government agencies to sublease the newly-renovated, Class A space.  Several agencies ultimately moved into the building, including the Office of the Comptroller of the Currency (OCC) and the Federal Housing Finance Agency (FHFA).  Prior to February 18, 2011, the date when Elizabeth Warren announced the selection of 1700 G Street as the CFPB’s headquarters (see http://www.consumerfinance.gov/newsroom/treasury-department-announces-permanent-headquarters-of-consumer-financial-protection-bureau/), approximately 350,000 contiguous square feet was apparently still available for rent at the Constitution Center site.  This amount exceeds the 312,000 rentable square feet the CFPB ultimately rented in 1700 G Street, and thus would appear to be “large enough” for the agency’s needs.  Two CFPB employees toured the Constitution Center facility, but for reasons unknown, CFPB leadership agreed to rent the 1700 G Street location “as-is” (which Director Cordray has described as “a white elephant” and “a dump”) rather than pursue available space in Constitution Center.  On March 21, 2014, the Committee sought documents from the OCC, SEC and CFPB that might shed light on this decision.  The SEC and OCC have produced all requested records in full, whereas the CFPB has not replied or provided records at all.  

So on what basis and with what support does Bloomberg Businessweek make the claim that the building on G Street was the “best available” real estate option for the CFPB?

Inaccuracy #2: “The U.S. General Services Administration is managing the project.”

Facts: 
The Memorandum of Understanding (MOU) between the GSA and the CFPB specifically states:

“CFPB has overall responsibility and approval authority for all aspects of the renovation project, including determining requirements associated with the renovation needs, project scope, schedule and budget.  Subject to the provisions of this MOU, all bridging design considerations decision-making authority (including aesthetic and artistic), shall be vested with the CFPB.”

Under normal circumstances, the GSA manages facility renovation and construction projects for federal real estate in its inventory, but in the case of the CFPB renovation, neither the CFPB nor the GSA own the building that the CFPB has decided to renovate.  The 1700 G Street building is owned by the OCC.  Additionally, the renovation is structured as a design-build bridging project, meaning that CFPB retains full control over the design, engineering, scope and the cost of the renovation.  The CFPB hired Skidmore, Owings & Merrill as its architecture/engineering design firm, and it is this firm that has prepared the bridging design documents for the project.  The CFPB controls the project, not the GSA.  The GSA’s role is to procure and manage a contractor to perform the demolition and construction in accordance with the CFPB’s designs. 

In a pre-proposal conference for potential construction contractors held by the GSA on March 21, 2014, Tyrone Anderson, the GSA’s project executive, said that the CFPB renovation project is “unique for us” because “we don’t own the building, and we don’t control design.”  Additionally, several construction tasks fall outside the scope of the GSA’s contract with the CPFB, and thus will not be undertaken by the contractor procured by the GSA.  For instance, the CFPB plans to replace the building’s data and telecommunications system and furniture, fixtures & equipment (FF&E), but these projects will be handled by the CFPB through separate procurements, not the GSA.

Inaccuracy #3: “The GOP members say their calculations show the renovation will cost $215.8 million.”

Facts:
This figure comes not from Republican members but from an independent report by the Inspector General for the Federal Reserve Board released on June 30, 2014.  This report states in pertinent part:

“Based on the CFPB’s assessed requirements as of June 5, 2014, we currently estimate all-in costs to total approximately $215.8 million.”

(See http://oig.federalreserve.gov/reports/cfpb-congressional-request-headquarters-renovation-project-jun2014.pdf)

Inaccuracy #4: “The [Inspector General’s] report said the renovation covers 512,000 sq.ft.”

Facts:
The Inspector General’s report cites two square footage estimates, one (350,000 square feet) prepared by the CFPB’s Chief Financial Officer, and the other (512,000 square feet) prepared by the GSA.  But the GSA estimate is for gross square feet (GSF), which in this case covers the total square footage for the entire property.  However, not all of the property will be renovated.  Suzanne Tosini, the CFPB’s Chief Administrative Officer, confirmed in a briefing for Committee staff members on April 16, 2014 that the two underground parking garage levels will not be renovated, stating: “It’s not like we’re renovating the parking garage.” 

Her statement is supported by the bridging design documents created by Skidmore, Owings & Merrill, which show proposed floor plans for every level in the building except the two garage levels, and by the presentation slides the GSA provided to potential contractors, which also show renovation plans for every floor of the building except the two underground parking garage levels. 

Additionally, the OCC has confirmed in letters sent to its ground-level retail tenants that the building’s retail space will not be renovated by the CFPB.  Using square foot figures appearing in documents provided by the CFPB pursuant to Committee document requests, the actual total square footage being renovated by the CFPB appears to be 365,199 square feet, which is significantly less than the GSA’s gross figure, but tracks closely with the initial estimate of 350,000 square feet from the CFPB’s CFO. 

Inaccuracy #5: “The Republican figures inflate the total price by tacking on $70.7 million for costs such as hiring movers and renting temporary offices to use during the construction.”

Facts:
Because the CFPB has chosen to completely renovate 1700 G Street, it must relocate approximately 1,000 employees and rent another 306,000 rentable square feet from the GSA in a separate building for the entirety of the renovation, which is expected to last three years.  These costs, which include the costs of moving, transportation, rent, utilities and security, would never have been incurred by the CFPB but for the Bureau’s decision to renovate a building it does not own.  These costs incurred by the agency are every bit as relevant as costs associated with demolition and construction, and were included by the Federal Reserve Inspector General in determining the all-in renovation costs.

The Committee calculated the renovation cost per square foot by dividing the total renovation costs estimated by the Inspector General – $215.8 million – by the estimated square footage actually being renovated – 365,199 square feet.  This figure amounts to approximately $590/square foot.

Inaccuracy #6: “Republicans have cast the project as a misuse of public dollars in a time of tight budgets…But the Federal Reserve is self-financed, largely with income on securities such as government bonds, so the amount Congress needs to set aside for the office redo is precisely zero.”

Facts:
Federal Reserve profits are remitted to the U.S. Treasury, so every dollar the CFPB demands from the Fed to renovate its headquarters is one less dollar that could be used to pay down federal budget deficits.  And the only reason Congress is not involved in setting aside taxpayer dollars for the CFPB’s renovation is because the CFPB is, by design, unaccountable to Congress.  Unlike virtually every other agency of government, including those whose mission is consumer protection, the CFPB is exempt from the congressional appropriations process.  Four-story glass staircases, wisteria-covered pergolas, two-story waterfalls and sunken gardens are not the best use of taxpayer funds, whether or not they come directly from Congress.

Bottom Line From the Inspector General’s Report: “A Sound Business Case Is Not Available to Support” the CFPB’s Renovation

The Financial Services Committee will continue to investigate why CFPB leadership decided to commit the Bureau to a quarter billion dollars in long-term lease payments without performing any due diligence, and why it has decided to spend an additional $215.8 million to renovate a building it doesn’t own, an amount that is more than $70 million higher than the building’s appraised value.

The Inspector General points out all this money is being spent by the CFPB even though it “was unable to locate any documentation of the decision to fully renovate the building” and even though it failed to comply with its procedures for obtaining internal approval for the renovation.  Therefore, “a sound business case is not available to support the funding of the renovation,” the Inspector General reports.

The CFPB’s building renovation is not a wise use of public funds, and this lavish spending does nothing to support the CFPB’s core mission of protecting consumers.

[*Click here for July 10 Article Regarding the CFPB’s Building Renovations]

Posted by Staff on July 14, 2014

Americans are increasingly alarmed about Russia’s nationalism and military aggression (just look at this week’s Pew Research poll), but the Export-Import Bank doesn’t seem to care.

In fact, Ex-Im’s financing of Russian projects jumped 177% during Fiscal Year 2013 to a record $580 million.  
(Ex-Im Bank 2013 Annual Report)  

Hardworking Americans taxpayers should be asking why they’re on the hook for Russian oil projects funneled to Vladimir Putin’s cronies while they’re struggling to pay for higher gas prices here at home and NATO issues warnings of further Russian aggression.

Here are the deal details:

  • In June 2012, Ex-Im Bank Chairman Fred Hochberg signed a $1 billion Memorandum of Understanding with state-owned Sberbank, Russia’s largest bank.  Hochberg described it as beginning “the process of joint cooperation between Ex-Im and Sberbank.”  In FY2013, Ex-Im worked with Sberbank on a $32.3 million loan involving a Russian petroleum project. – SberbankEx-Im ReleaseEx-Im Annual Report

Making it official:  Ex-Im Chairman Fred Hochberg signs Ex-Im’s $1 billion deal with Herman Gref, CEO of Russia’s state-owned Sberbank


Close ties to the Kremlin:  Russian President Vladimir Putin meets with
Sberbank CEO Herman Gref

Posted by Staff on July 14, 2014

 

July 13, 2014
Editorial
                                                         
Supporters say that killing the government Export-Import Bank would result in "unilateral disarmament" and a painful fall in U.S. exports. But consider the recent conclusions of the financial analysts at Standard & Poor's.

S&P examined what would happen to Ex-Im's biggest client, Boeing, if the bank could no longer provide taxpayer-subsidized financing. S&P estimates Boeing accounted for more than one-third of Ex-Im's financial commitments from 2007 to 2013. "We don't believe that the expiration of Ex-Im's authorization in September would hurt Boeing's credit quality or ability to make planned deliveries in 2014 and 2015," the analysts wrote, citing "the development of more and deeper sources of aircraft financing."

In other words, the private economy is ready, willing and able to provide trade financing to foreign customers to buy Boeing's jets. S&P also examined the effect of cutting off Ex-Im financing to three of the bank's other big clients— General Electric, Caterpillar and United Technologies. The conclusion? Their credit ratings wouldn't be affected because "the amounts financed are generally less than 2% of revenue."

S&P notes that Boeing might face longer-term credit risks if it has to do more of its own financing for sales, but that's still not a persuasive argument for continuing Ex-Im subsidies. Merely because Europe wants to subsidize exports for U.S. purchasers doesn't mean American taxpayers should have to return the favor for European buyers. Putting taxpayers behind a race to the bottom for subsidized export business isn't a recipe for taking prudent risks.

The battle over reauthorizing Ex-Im is turning into a political brawl in which the Fortune 500, with some exceptions, are trying to divide Republicans by fanning fears of economic harm if the bank fades away. As S&P shows, Republicans should have enough confidence in free markets to do the financing job.

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