The Export-Import Bank has been around for 80 years, but it has only recently landed at the top of Republican "to do" lists as they look for a government agency to shut down. The selection is curious, since Ex-Im Bank doesn't cost taxpayers money.
The bank provides working-capital loans and loan guarantees to exporters, and it charges a fee for the service. The fee more than covers the bank's operating costs, and a sizable profit is returned to the Treasury. As a New Deal agency, the Ex-Im Bank creates a far more subtle fiscal hazard than, say, FDR's Social Security.
Ex-Im Bank is akin to a government-sponsored enterprise — think Fannie Mae or Freddie Mac — that conducts business backed by the full faith and credit of the U.S. government. It's an explicit guarantee that means $134 billion in taxpayer funds are on the hook if deals go bad.
There's so much cash flowing through the bank that the unscrupulous can't resist the chance to skim a few bucks for themselves. The Heritage Foundation counts at least 74 examples of fraud, corruption and misconduct since 2009. Dozens of cases were referred to the Justice Department for prosecution. The Wall Street Journal reports that four Ex-Im Bank employees are under active investigation for pocketing gifts and cash in exchange for improperly steering federal deals to favored firms.
The agency failed to properly vet Leopoldo Parra, a small-business owner in El Paso, Texas, before backing 18 loans totaling $13.6 million that were supposed to go to "buyers" in Mexico. Instead, Parra redirected the cash into his wallet. Jose L. Quijano used phony paperwork to trick the bank's employees into thinking he exported electronics from Miami to South America. Instead, he took more than $3.6 million in U.S.-backed loans and imported the cash into his bank account.
A 2013 survey of the bank's employees found just 42 percent thought that management maintains "high standards of honesty and integrity." Only 45 percent said "favoritism and coercion for partisan political purposes are not tolerated." There's definitely a problem at the top.
In reports to Congress, the bank's inspector general suggests that deals are rushed through without verifying the credit history of borrowers. There's a reason for this. President Obama is an Ex-Im Bank supporter and in 2010 was the keynote speaker for the bank's 2010 annual conference. The White House wants to use the bank to pump up the lackluster economic figures, which Franklin D. Roosevelt sought to do, too.
In the last year of the Bush administration, the Ex-Im Bank authorized $14.4 billion in export financing, a sum that has grown 157 percent to $37.4 billion under Mr. Obama. Looking the other way on questionable deals boosts export numbers, but it's a risky way to do business.
Congress has until Sept. 30 to decide whether the Ex-Im Bank will stay in business. Republicans have their sights set low if they think taking a stand on the bank will restore fiscal sanity. Agencies such as the National Endowment for the Arts are more worthy of getting taught a lesson, and the departments of Education and Commerce are far more wasteful.
If the Ex-Im Bank survives to see another day, as it likely will, what it needs most of all is new management.