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Export-Import Bank caught doctoring data to benefit big business cronies

11/24/2014

When the Export-Import Bank as well as its friends on Capitol Hill and elsewhere talk about how the billions it doles out in taxpayer-backed loans benefits small businesses, they really mean it helps big business. Earlier this month, Reuters reported that Ex-Im, a relic of the New Deal, had "mischaracterized" subsidiaries of 200 large corporations as small businesses:

A comparison of some 6,000 businesses characterized by Ex-Im as "small" with information supplied by corporate data collector Dun & Bradstreet, which Ex-Im also uses to vet applicants, and other sources turns up some 200 companies that appear to be mislabeled and many more whose classification is uncertain.

A division of Austria's Swarovski jewelers shows up, as does North Carolina's Global Nuclear Fuels owned by General Electric and Japan's Toshiba and Hitachi.

The extent of the errors, which also mean some genuine small business transactions are not labeled as such, is not clear. Separate Ex-Im databases don't even agree with each other.

The mislabeling of the subsidiaries of big businesses is a pretty big deal:

Reuters calculations show that as much as $3 billion in authorizations listed as those for small business may have been misclassified over eight years - roughly 8 percent of Ex-Im's $38 billion in small business support over that period. Total authorizations were worth $189 billion.

Ex-Im's biggest argument for reauthorization is its support for small businesses and the workers employed by them. In July, Chairman Fred Hochberg proclaimed in written testimony to the House Oversight and Government Reform Committee that "[k]eeping small businesses – the engine of our economy – at the forefront of U.S. exports is at the core of our work at Ex-Im Bank." He went as far to state that Ex-Im "financed a record 3,413 small businesses - nearly 90 percent of Ex-Im’s total transactions" in 2013.

But the Reuters report on Ex-Im's sketchy data completely undermines that argument. According to the report, big businesses that benefited from the Bank's mislabeling includes subsidiaries of Warren Buffett's Berkshire Hathaway and Carlos Slim's Grupo Carso. Buffett and Slim are two of the richest men in the world, worth $59.1 billion and $76 billion, respectively.

Contrary to Hochberg's characterization of Ex-Im's support for small businesses, in FY 2013, according to research by Veronique de Rugy, the main beneficiaries of Ex-Im loans were Boeing, Caterpillar, and General Electric, which, together, received more than $10.4 billion in loans. Small businesses accounted for some $200 million worth of loans. Looking at the larger picture, de Rugy has explained that Ex-Im's impact is incredibly small, supporting just 0.04 percent of all small businesses and 0.29 percent of jobs at small businesses.

In addition to it's purported support for small businesses, Ex-Im's crony friends like to say that its support doesn't come at a cost to taxpayers and that it boosts exports. These arguments for Bank's reauthorization, however, just keep going up in flames. Ex-Im will cost taxpayers $2 billion over the next decade. Its impact on U.S. exports is negligible at best, representing just 1.9 percent of total export value and 2.3 percent of export-related job creation.

If Congress wants to help American-based manufacturers, boost exports, and create jobs, lawmakers should begin by reducing regulatory barriers that stifle business as well as lowering and simplifying the corporate tax code. It's a more reasonable approach than continuing to sellout taxpayers with sweetheart deals that only serve the interests of the politically connected.