WSJ: The Peculiar Uses of a Taxpayer Bank
“American taxpayers are unwittingly propping up the bank accounts of foreign states, from China to Russia to a host of other countries. Thus it should also come as no surprise that the [Export-Import] bank has a long history of assisting international firms that raise serious red flags.”
Washington,
April 27, 2015 -
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By Mark Pfeifle
Only in Washington can a prominent example of corporate welfare be described as a “critical element” of America’s national security. That’s exactly what former Secretary of State Madeleine Albright, former Secretary of Defense William Cohen and 10 other former federal officials claimed in a recent letter to Congress, in which they pleaded with lawmakers to renew the Export-Import Bank’s charter before it expires in June. National Security Adviser Susan Rice, speaking at last week’s Ex-Im annual conference, similarly declared that the bank “is a very important part of our diplomacy.”
Most Americans would be hard-pressed to name the Ex-Im Bank, much less identify it as crucial to U.S. national security. The bank is a New Deal-era federal agency that provides taxpayer-backed financial assistance to foreign businesses that purchase American products.
In recent years, the bank has come under fire from politicians as diverse as Barack Obama and Paul Ryan, who have rightly noted that Ex-Im’s support mainly benefits a few multinational companies. Those same companies are now working to convince Congress to keep the taxpayer cash flowing.
How does this fit into America’s national security framework? According to the letter, the bank’s economic activity drives “political stability abroad.” Put aside, if you can, the fact that Ex-Im supports less than 2% of U.S. exports, rendering it a negligible portion of America’s international economic activity. A look at Ex-Im’s beneficiary list suggests that the bank sometimes works against American interests abroad.
For decades, Ex-Im has sent American taxpayer money to companies and countries that either have no place doing business with America or actively undermine U.S. national security interests.
The most egregious example: Ex-Im has given hundreds of millions of dollars in taxpayer-backed guarantees to the state-owned Russian bank Vnesheconombank (VEB). Ex-Im only recently suspended new deals after the bank was targeted by American sanctions in the past year.
VEB has a long and sordid history. Known until 2007 as the Bank for Foreign Economic Affairs of the U.S.S.R., VEB maintains an operating agreement with Russian arms exporter Rosoboronexport “to promote exports of Russian military products and boost their competitive edge in the world market.” Rosoboronexport also handles more than 80% of Russia’s weapon exports. In this capacity, it has become a chief weapons supplier to Bashar Assad’s regime in Syria and has supplied advanced missile systems to Iran, according to reporting last year in this newspaper. VEB has said that its practices fully comply with European Union and United Nations sanctions.
Americans probably assume that Washington wouldn’t use taxpayer money to help a company that supports these regimes. Yet the bank’s records indicate that VEB received a $497 million loan guarantee in 2012 and a further $703 million in 2014. American taxpayers still haven’t received thank-you cards from President Assad and the mullahs.
Ex-Im has nearly $1.5 billion of taxpayer exposure in Russia by the bank’s own report. And its indiscriminate use of taxpayer money extends far beyond Vladimir Putin’s autocracy. Between 1997 and 2014, companies in countries such as China, Venezuela, Pakistan and others received billions of dollars in Ex-Im’s taxpayer-backed assistance.
Many of the bank’s foreign beneficiaries are also state-owned. American taxpayers are unwittingly propping up the bank accounts of foreign states, from China to Russia to a host of other countries. Thus it should also come as no surprise that the bank has a long history of assisting international firms that raise serious red flags.
Consider Pemex, Mexico’s state-owned oil company, which conceded in 2013 that it deals with “serious” levels of corruption and that it has been plagued by “interference from organized crime”—including roughly $1 billion in stolen oil over a two-year span. That hasn’t stopped it from becoming the Ex-Im Bank’s single largest debtor, owing American taxpayers some $5.6 billion at the end of the fiscal year 2014.
Corruption and graft are recurring problems for the bank. According to April 15 congressional testimony by Ex-Im’s inspector general, 47 people have been convicted of defrauding the bank in the past five years. The IG also indicated that 31 corruption and fraud investigations are ongoing. That doesn’t include the four Ex-Im employees who, according to reporting in The Wall Street Journal, were being investigated last year for allegedly accepting kickbacks and steering contracts to specific companies. One Ex-Im official last week pleaded guilty to accepting bribes.
This points to a simple conclusion. Despite the fanciful claims by Secretary Albright, Secretary Cohen and the officials who signed the recent letter, the Export-Import Bank is anything but a “critical element” of America’s national security. Congress should refuse to reauthorize the bank when its charter expires. Washington shouldn’t be spending taxpayer money on corporate welfare—especially when it goes to companies and countries that are either corrupt or are actively working to undermine America.
Mr. Pfeifle is president of Off the Record Strategies. He served as deputy national security adviser for strategic communications and global outreach at the White House, 2007-09.
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