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Posted by
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July 22, 2014
Why is Australia’s richest citizen – worth at least $18 billion – receiving loans backed by American taxpayers? The Sydney Morning Herald calls it “the latest example of a flaw in the United States political economy: what some see as crony capitalism.” Regrettably, “crony capitalism” is just what the Export-Import Bank does day-in, day-out: use hardworking taxpayers to finance crony deals for the powerful, the wealthy, and the well-connected. Here are the deal details: Australia’s richest citizen, billionaire mining heiress Gina Rinehart, secured a $694 million loan from American taxpayers thanks to Ex-Im’s support for the Roy Hill iron ore project. Why are U.S. taxpayers involved? Because – as the newspaper reports – “Commercial banks and bond investors were reluctant to shoulder all the risk.” If big banks and bond investors won’t take the risk, then why should American taxpayers be forced to? Could this egregious deal get any worse? Why, yes. Not only does Ex-Im risk taxpayers’ hard-earned dollars, Ex-Im’s financing of the deal also puts American jobs at risk. Four Democratic senators say the project will “substantially injure American iron ore and steel producers and their employees that are competing in the same global marketplace.” Explains Senator Amy Klobuchar (D-MN): “My grandfather worked 1,500 feet underground as a miner, and countless other men and women in Northern Minnesota have worked hard providing iron ore to the world. It doesn’t make sense for our government to be funding our competition, especially when this project could have such a negative impact on local economies and the livelihoods of so many miners.”
Posted by
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July 22, 2014
At his event in Seattle tonight, it won’t be surprising if President Obama praises the Export-Import Bank as a “jobs creator” that “doesn’t cost taxpayers anything.” It’s a far cry from how he used to describe the Export-Import Bank – as “little more than a fund for corporate welfare.” The President may hope that his audience is unfamiliar with those remarks. He may also hope they overlook the fact that the Ex-Im Bank has been doing business with Russian companies that his Treasury Department added to its sanctions list. But here are five important facts about Ex-Im: 1). The Ex-Im Bank doesn’t create jobs. Government export finance assistance programs like Ex-Im “largely shift production among sectors within the economy rather than raise the overall level of employment in the economy.” - Government Accountability Office, “Export-Import Bank: Key Factors in Considering Ex-Im Bank Reauthorization” “[A]t best the Ex-Im Bank creates jobs in export industries by destroying jobs in non-export industries.” – Donald Bodreaux, Ph.D, Professor of Economics at George Mason University\ “By some estimates, the Bank’s loan guarantees have resulted in up to 7,500 lost U.S. carrier jobs, and up to $684 million of lost income for U.S. airline employees annually.” – Delta Airlines 2). The Ex-Im Bank doesn’t return money to the taxpayers. The Ex-Im Bank’s profits aren’t real. They are an accounting illusion. The non-partisan Congressional Budget Office (CBO) reports that if the Bank followed more accurate accounting rules, its ledger would show a cost to taxpayers of $200 million/year, or $2 billion over 10 years. -- CBO Fair-Value Estimate 3). Less Than 1 Percent of 1 Percent of America’s Small Businesses Benefit From Ex-Im. Congress requires that 20% of Ex-Im’s authorizations go to small businesses, but Ex-Im consistently fails to meet this statutory requirement. In reality, just 0.009 percent of America’s small businesses receive any help at all from Ex-Im. Instead, Ex-Im’s subsidies go overwhelmingly to very large corporations like Boeing, GE and Caterpillar. 4). The Ex-Im Bank uses American taxpayers’ money to help foreign corporations, including businesses that are owned by the governments of China, Russia, Saudi Arabia, and the United Arab Emirates. Of the 50 largest loans or guarantees approved by the Ex-Im Bank since FY2007, 46% of the loans have gone to state-owned companies or to a joint-venture that includes a state-owned company. 5). The Ex-Im Bank financed only 1.6% of total U.S. exports in 2013. That’s less than 0.18 percent of the total U.S. economy.
Posted by
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July 21, 2014
On Wednesday at 10:00 a.m. the Full Committee will hold a hearing to assess the impact of the Dodd-Frank Act on its four-year anniversary. To view the committee staff report on “too big to fail” that was released today, click here.
On Thursday at 10:00 a.m. the Capital Markets and Government Sponsored Enterprises Subcommittee will hold a hearing to examine the SEC’s Division of Corporation Finance. Be sure to check back here on the Bottom Line Blog -- and sign up for our email updates -- for additional information throughout the week.
Posted by
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July 21, 2014
With One Hand U.S. Sanctions Russian Companies, But With the Other… 
The Export-Import Bank is financing deals with Russian companies hit
Two of the four Russian firms targeted with new sanctions announced last week by the Obama administration have received more than $1 billion in U.S. taxpayer-financed subsidies from the Export-Import Bank.
Vnesheconombank (VEB) and Gazprombank – two state-owned Russian banks – have together received more than $1 billion in Ex-Im financing since 2003. Here are the deal details: In 2003, Gazprombank received a five-year loan guarantee worth $22.6 million from Ex-Im. VEB alone has received over $1 billion in Ex-Im backed loan guarantees. This includes a $496 million loan guarantee in 2012 and a $703 million loan guarantee in 2014. The sanctions do not apply to these existing arrangements, “meaning Ex-Im is under no obligation to cancel previous deals it has with either company,” according to one report.  Ex-Im Bank Chairman Fred Hochberg (left) with Vladimir Dmitriev, Chairman, Vnesheconombank
Posted by
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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 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 In Case You Missed It
Posted by
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July 18, 2014
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. ###
Posted by
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July 17, 2014
“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. ###
Posted by
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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.
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.” ###
Posted by
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July 16, 2014
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
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July 15, 2014
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.” |
