Many of the “small businesses” that receive financing from the Export-Import bank are actually owned by large corporations or billionaire investors.
Reuters reported on Thursday that “companies owned by billionaires such as Warren Buffet and Mexico’s Carlos Slim, as well by Japanese and European conglomerates, were listed as small businesses and Ex-Im acknowledged errors in its data in response to those findings.”
In recent months, Ex-Im has come under withering attack from a number of influential Republicans in Congress, who have labeled it crony capitalism and sought to defeat its re-authorization. (RELATED: Is the Export-Import Bank Crony Capitalism?)
A compromise was crafted shortly before the bank’s charter was set to expire at the end of September, postponing a final decision on the bank’s fate until next June, and forcing Ex-Im to remain on the defensive in the meantime.
The bank has generally responded to its critics by touting the assistance it provides to small businesses, claiming in a recent press release, for instance, that, “almost 90 percent [of FY 2014 transactions] supported American small businesses.”
However, after comparing a list of businesses listed as “small” by Ex-Im against “information supplied by corporate data collector Dun & Bradstreet, which Ex-Im also uses to vet applicants,” Reuters found “some 200 companies that appear to be mislabeled and many more whose classification is uncertain.”
Reuters claims that, “as much as $3 billion in authorizations listed as those for small business may have been misclassified over eight years,” representing about 8 percent of the $38 billion in small business financing that Ex-Im awarded over that period. (RELATED: The Export-Import Bank’s Dodgy Accounting)
House Financial Services Chairman Jeb Hensarling, who has been among the bank’s sharpest critics, said that, “Ex-Im is again playing fast and loose with the facts.” Contrary to its public assertions, Hensarling said, “The bulk of Ex-Im’s help indisputably goes to large corporations that can finance their own operations without putting it on the taxpayer balance sheet.”
Ex-Im did not deny the errors, but told Reuters that, “their impact was small,” and suggested that, “the mislabeling of small companies as large ones may have a bigger effect on the total tally of small-business support.”
“When it comes to our data,” an Ex-Im spokesman said, “we strive for 100 percent accuracy, and anything less is unacceptable.” (RELATED: Does the Export-Import Bank Cut the Deficit?)
However, the bank contradicted itself somewhat in that respect, pointing out “five examples from 2013 in which small companies were labeled as large ones by mistake,” in an effort to downplay the extent to which such errors may have overstated the number of small business transactions it made.
Moreover, “this is not the first time the Bank has been implicated by accusations of shady behavior,” Veronique de Rugy, an economist at the free-market Mercatus Center and a frequent critic of Ex-Im, wrote in National Review. In just the past year, she points out, Ex-Im has endured “corruption probes, suspicious foreign deals, and plenty of praise from their good friends (and number one customers) at Boeing.”
“For months,” she said, “I have been beating the drum about the fact that Ex-Im has been concealing handouts to large corporations under the guise of ‘small business lending’…Today, the Ex-Im Bank made our case for us.” (RELATED: Boeing, Delta Square Off on Export-Import Bank)
Chris Chocola, president of the free-market advocacy group Club for Growth, said in a press release that, “It’s appalling, but not surprising, that a corporate welfare slush fund like the Export-Import Bank would mislead the public about their data in order to stay alive,” and joked, “Does Jonathan Gruber consult for the Export-Import Bank as well?”
Chocola speculated that, “Maybe [Ex-Im Chairman] Fred Hochberg thinks, like Gruber, that a lack of transparency is a political asset,” in which case, “members of Congress should look skeptically at anything the bank says about what it does for small businesses—the data may be ‘Grubered.’”
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