Ex-Im and Boeing, Sitting in a Tree

In most years, nearly half of the Export-Import Bank’s business is for Boeing’s benefit. The relationship between the two is so cozy that Ex-Im’s informal nickname around Washington is the “Bank of Boeing.” Yet, in an interview with Politico, Ex-Im president and chairman Fred Hochberg said, “We don’t lend a single penny to Boeing.”

Oddly enough, both assertions are true—Boeing really is by far Ex-Im’s biggest beneficiary, despite no direct loans. That’s why Hochberg’s statement is misleading. Ex-Im does make loans, but most of its business is in guaranteeing loans made by other banks. As Hochberg puts it, Ex-Im does this “so that Egyptian Airways can choose a Boeing plane over an Airbus plane. That way they can make their choice on the basis of the product, not because somebody’s offered cut-rate financing on one side of the deal and the other one is cash only. That would make it a very un-level playing field.”

In other words, even if Ex-Im doesn’t give Boeing direct loans, Ex-Im still gives the company an artificial assist. Contrary to Hochberg’s claim about preventing an un-level playing field, this creates one.

Of course, the counterargument Ex-Im defenders make is that other countries do their own un-levelling with their export agencies, so the U.S. needs to fight back. If other countries want to distort their capital markets and redirect billions of dollars of scarce capital to politically connected companies, that’s their business. But just because other countries make mistakes doesn’t mean, therefore, the U.S. should make the same mistake.

Then again, Ex-Im may not even help U.S. businesses on net. What helps Boeing hurts other U.S. businesses. Delta Airlines complained that Ex-Im’s favorable deals with foreign airlines make it artificially difficult for Delta to compete abroad, and even pushed it out of India, the world’s second-largest country, altogether.

Hochberg’s remark is similar to Ex-Im officials’ earlier deflections when the agency was accused of giving loans to companies such as Enron and Solyndra. As I explained in footnote 10 of my earlier paper:

The Bank notes that it did not provide direct financing to either Enron or Solyndra. Instead, it provided “export financing support to the company's foreign customers who purchased services or products from Enron,” and “provided a loan guarantee to a Belgian bank that in turn financed the purchase of solar panels from Solyndra.” This still qualifies as giving Enron and Solyndra special favorable treatment, which is the larger point.

Hochberg and other Ex-Im defenders can play semantic games all they like, which they no doubt will do at both Senate and House hearings this week. The reason they must play such games is that on the merits, the agency remains one of the U.S. government’s largest corporate welfare programs. Congress should refuse to reauthorize Ex-Im on those grounds.