U.S. export bank subsidizes Fortune 100
U.S. export bank subsidizes Fortune 100
By Harry C. Alford, NNPA Columnist
This seems like an odd question. Capital access is the lifeblood of business growth and job creation. Thus, all vehicles that provide such should be welcomed. As the President/CEO of the National Black Chamber of Commerce, it is assumed that I would support all avenues of capital access. However, I am starting to have big doubts about one vehicle.
The Export-Import Bank is a government-owned organization that was started by President Franklin D. Roosevelt as an apparatus for American firms to have more opportunity to export business to the Soviet Union. Most modern nations have their own EX-IM bank and even developing nations such as Ghana have just opened their own to help their businesses export to Europe, Asia and the United States.
Unlike most nations our EX-IM Bank has become controversial. It has just lost its charter as of June, and funding is frozen until or unless Congress reauthorizes funding through legislation. By now, you have seen television ads asking for your support in telling Congress to reauthorize the EX-IM Bank. Immediate action is required and if it does not happen within the next six months the doors of the EX-IM Bank will come permanently shut.
Most businesses are not familiar with the EX-IM Bank and that is a flaw in its marketing or outreach. It may also be an indicator that it is not inclusive. I don’t know of one Black owned firm that has received financing from this entity. Many billions of dollars have been provided and not one Black owned firm has received a penny. I am still searching for proof that I may be wrong but no one, including the EX-IM Bank has corrected me.
The bank claims to have a small business program. Supposedly, 20 percent of its financing goes to such firms. However, its definition of a small business is not inconsistent with the Small Business Administration size standards. They accept businesses with more than $21.5 million in sales and up to 1,500 workers as being small. This is hardly small. Still the same, none of them are Black owned.
Three years ago, the bank sent a representative to give a presentation on their services and announce that they were having a new directed outreach initiative to recruit Black owned firms to take part in their services. That person, who was a vice president, was soon gone from the bank and we haven’t heard a sound since. Some of our members voiced discontent at that meeting noting their negative experiences in trying to get financing from the EX-IM bank. Discontent is a conservative description.
The services of the EX-IM Bank are overwhelmingly enjoyed by the Fortune 100 corporations. Giants such as Boeing, Bechtel, General Electric, Caterpillar, etc. The big problem here is that they don’t need government assisted financing. They can do well in the normal financial sectors. In essence, this is a kind of corporate welfare. That is the claim opponents of this entity allege and I can’t argue against that.
Then there is another big issue with this entity. It seems to be filled with mismanagement, fraud and corruption. There is a vast amount of news articles about the history of such activity at the EX-IM Bank.
According to the Daily Signal newspaper: “An examination of EX-IM fraud cases reveals a disturbing pattern of carelessness in doling out taxpayer subsidies. For example, the bank approved 96 loan transactions in a two-year period for Gangland, USA, which purported to export electronics from Miami to South America. According to prosecutors, company owner Jose L. Quijano received more than $3.6 million in fraudulent loans from the bank.”
“Similarly, the bank approved 18 loans involving $13.6 million to Leopoldo Parra, who pleaded guilty in 2012 to wire fraud and conspiracy to commit money laundering. According to prosecutors, Parra and his co-conspirators fraudulently obtained the loan proceeds and used them for personal gain. These and dozens of other cases reflect the hazards inherent in government subsidies.
That is, agencies such as EX-IM do not engage in meaningful due diligence when taxpayers are on the hook for any or all losses. The Inspector General noted in a 2012 report to Congress that the bank failed to collect adequate credit information and history from borrowers and lacked sufficient compliance personnel relative to the increasing size of the bank’s finance portfolio, which is expected to exceed $140 billion by September 30, 2014. It also concluded that EX-IM risk management framework and governance structure are not commensurate with the size, scope and strategic ambitions of the institution.”
Yes, it never fails. Discrimination and corruption are “first cousins.” Where there is one you will most certainly find the other. It appears that the EX-IM Bank is no exception. The NBCC position is this: We will not fight to keep or kill the EX-IM Bank. This entity has no impact on our membership. Maybe it would change its ways if it survives. This is quite doubtful.