The Ex-Im Bank’s Corruption Problem

As the September 30th expiration date for the Export-Import Bank approaches, it is facing tough scrutiny from conservative Republicans who question why it should even exist. In recent days, their criticism has expanded. The agency, whose goal is to finance American exports, is no longer just facing attacks for unnecessarily funding big corporations and artificially boosting exports. The Export-Import Bank is also corrupt.

A June 23rd article in the Wall Street Journal revealed that four bank officials were removed from the agency over the course of several months regarding allegations of gifts, kickbacks, and the attempted steering of contracts to preferred companies. Initially, the bank was silent about the allegations.

The House Committee on Oversight and Government Reform now believes that the ethics of the bank have been compromised. The charge is led by Representatives Darrell Issa and Jim Jordan, who are requesting the release of documents relating to the four removals. They subpoenaed Johnny Gutierrez, one of the four corrupt employees, to appear at a hearing on July 29th.

Escorted from the Export-Import Bank building in April, Gutierrez illegally accepted cash in exchange for helping a Florida company acquire financial support for the export of construction equipment to Latin America. When he appeared at the hearing on Tuesday, he pled the Fifth in response to every question he was asked. The three other corrupt officials have not been named by the Export-Import Bank Chairman Hochberg. Two of them have been investigated and removed for “improperly awarding contracts to help run the agency” while the other one was suspended for possibly accepting gifts from a company that wanted to be financed by the bank.

It does not end with these four employees. During the hearing, congressmen discovered that the bank is currently investigating 40 separate allegations of fraud. Most of these are likely instances when businesses defrauded the agency without any direct employee guilt. In response to this news, Congress is likely to insist on hearing more information about widespread fraud at the bank.

Democratic Representative Cartwright believed that the hearing was just a show to gin up opposition to the bank’s reauthorization. During the hearing, he brought forth a letter from an official at the bank stating that of the 71 cases of fraud since 2009, exactly zero Ex-Im employees were involved. But wait, how is this a flattering statistic? Does it matter if employees were or were not involved? There are still 71 cases of fraud that exist because businesses have mooched off of the existence of this bank.

By acting outside of the free market and providing insurance and loans through bureaucratic decisions, the Export-Import Bank invites corruption. In a strictly free market, the ability of an exported product or service to be successful and the creditworthiness of the business involved would determine whether or not a bank would provide loans. The most effective and profitable firms are successful. But when the governmental Export-Import Bank insures exports, decisions are made through the arbitrary whim of bureaucrats funded by ample loans from the Treasury Department. Government-friendly businesses can exploit the power and money of a bank employee to secure their interests, wittingly in the case of Johnny Gutierrez.

Chairman Hochberg argues that because the four accused employees were publicly dismissed, the Export-Import Bank has an “ethical culture.” He says that between 2009 and 2012, there have been no indictments at his organization. But, only four years without indictments is not exactly something to be proud of. Even Illinois hasn’t indicted a governor in four years.

It’s no wonder that only 42.1% of bank employees in 2013 said that the “organization’s leaders maintain high standards of honesty and integrity”. The same survey reveals that only 24.8% responded positively to their satisfaction with “the policies and practices of [their] senior leaders”. Those aren’t quite the marks of an agency with an “ethical culture.”

So in addition to the crony capitalist official policies of insuring the exports of big corporations like Boeing and General Electric, it is now clear that the Export-Import Bank’s existence has enabled dozens of instances of fraud. With rumors that leading Republicans may be willing to compromise and “reform” the bank, this recent news should prove that it’s time to shut this monster down for good.

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