hile Congress, like a pack of hunting dogs, has been looking under every rock in Texas and Washington for guilty parties in the Enron debacle, Congress has just given a gold star and a pat on the back to Ken Lay's chief accomplice.
The Export-Import Bank, a federal agency whose function is to loan money to foreign companies, won a four-year reauthorization on a voice vote in the House earlier this month, and the conference report will be passed directly after recess. All has been happening with little fuss, despite new evidence of its complicity in Enron's shady dealings.
Congress created the Export-Import Bank during the Great Depression as a way of encouraging exports. Ex-Im loans money to foreign governments or companies so that they will buy American goods. It also guarantees private bank loans to foreign buyers.
While the "bank," with hundreds of millions of dollars to hand out every year, has many well-heeled and well-connected supporters, the opposition sports some powerful lawmakers as well as powerful arguments. Majority Leader Dick Armey (Tex.), Majority Tom DeLay (Tex.), GOP Conference Chairman J. C. Watts (Okla.), and former Democratic Whip David Bonior (Mich.) have all voted to kill the bank in recent years.
Conservative lawmakers oppose Ex-Im a federal agency redistributing wealth from taxpayers to foreign and U.S. corporations on principle. A few stories about Ex-Im's recent loans and loan guarantees shows clearly the lesson we all know: Any time something really screwed up happens, the government is probably behind it.
As Americans move in and out of energy crises and price spikes, the Jiangnan shipyard in Communist China will have all the juice it needs, thanks to U.S. tax dollars. In 1996, the Clinton administration skirted its way around a law preventing loans to Marxist regimes, and signed off on a $120 million low-interest loan to the China National Nuclear Power Corporation (CNNP).
For this loan to go through, President Clinton had to sign a letter saying the loan was in our national interest. His signature on that letter was interesting in the light of his administration's finding weeks before that CNNP had transferred to Pakistan nuclear-weapons materials.
This loan from taxpayers helped Americans, Ex-Im contended, because the CNNP was building the plant using the goods and services of the Bechtel Corporation, an American-based company. Bechtel, and the family that runs it, have given over $1.5 million in campaign contributions over the last six cycles, giving slightly more to Republicans than Democrats.
Just as generous in Washington and frankly getting a better return on its investment is Boeing. In terms of dollar amounts, Boeing has benefited from at least 42 percent of the loans and long-term guarantees from Ex-Im in each of the last three fiscal years.
It may, at first glance, seem unbelievable that a federal agency could exist for the primary purpose of subsidizing one company's exports. But after a quick look at some Federal Elections Commission filings, it all makes sense. Boeing, like Bechtel, has given over $1.5 million to both parties over the last six election cycles.
The Ex-Im argument is that the loans help not only Boeing, but the subcontractors and their workers. That argument is difficult to swallow in Wichita, Kansas, where the tail sections of Boeing 737s used to made. The Red Chinese demanded that Boeing build those sections in Xian, China using Chinese labor. Ex-Im made the sales possible, and so the move to Xian necessary.
But nobody has used Ex-Im as craftily as Enron. The failed energy trader went down with hundreds of millions of dollars in taxpayer liability money it borrowed so that it could by goods and services from, well, Enron.
Enron owned 50 percent of a Turkish electric company, Trakya Elektrik, which got a $250 million loan from U.S. taxpayers via Ex-Im in 1995-96 so that it could buy from Enron. Similarly, Ex-Im extended in 2000 a $135 million in loans to a Venezuelan natural gas plant owned 49.26 percent by Enron. The U.S. exporter, again, was Enron.
In other words, U.S. taxpayers leant money to Enron so that Enron could buy things from Enron.
But Enron's overseas ventures also got Ex-Im loans to buy from other companies, such as Bechtel and GE. One such deal at the Dabhol power plant in India has made news lately because the plant had to close down after its only client, a local utility, couldn't pay its bills.
These deals where taxpayers' money was put at risk as Enron shifted money from its left hand to its right were part of Enron's hocus-pocus accounting. If every time it sold something to itself, Enron got a low-interest loan from Uncle Sam, it never had to make a real sale and could keep driving its claimed profits skyward.
Out of $650 million in Ex-Im loans and loan guarantees to Enron during the Clinton years, over $500 is still outstanding, and the taxpayers could end up footing the bill.
Everyone knows about Enron's generosity to both parties, but they had ties that ran deeper. Rebecca McDonald, chairman and CEO of Enron Global Assets, sat on Ex-Im's advisory committee. The Los Angeles Times reported Tuesday that Eduardo Aguirre, now Ex-Im's vice-chairman, wrote an e-mail to Ken Lay in November when times were getting rough, promising him, "I'm only as close as the phone if there is anything I can do for you."
The liberals who oppose Ex-Im hope to reform it. But in its essence, it is a bad agency. Taking money from would-be consumers in the U.S. cannot make jobs. The frustrating thing is that many Republican lawmakers and business interests know this fact, but either forget it or ignore it when the wealth is being transferred to their friends.
Perhaps more distorting of the market is the loan guarantees Ex-Im issues. The General Accounting Office has found that for every dollar Ex-Im underwrites, it crowds out probably just as much lending capital, if not more. That means a loan that, on an even playing field, looks better investment to a bank, gets spiked for an Ex-Im-guaranteed loan to a company in the favor of Washington's power elite. This can only hurt market efficiency.
Just before the Memorial Day recess, the House passed an extension for Ex-Im until June 14. Before then, Congress must pass the conference report on the agency's four-year extension, or Ex-Im folds.
Republicans have a chance to live up to their free-market rhetoric, but it would take standing up to their big-business patrons. Liberals have a chance to win one for the little guy, but it would involve spurning their rich friends. If anyone forces a floor vote on the final reauthorization of Ex-Im in early June, pay attention. You'll see who really believes in freedom.
Timothy P. Carney is a reporter for the Evans-Novak Political Report.