A report from e21, a nonpartisan economic think tank, reveals the true costs of the Export-Import Bank’s taxpayer subsidized loans could amount to more than $200 million in 2012 alone.
The current accounting method used by Ex-Im is based on the Federal Credit Reform Act of 1990 (FCRA) does not accurately reflect the true taxpayer burden. As the Congressional Budget Office (CBO) stated earlier this year:
“FCRA-based cost estimates do not provide a full accounting of what federal credit programs actually cost the government because they do not incorporate the full cost of the risk associated with the loans. Fair-value accounting recognizes market risk … as a cost to the government.”
Proponents of Ex-Im have long argued that the bank makes a net profit for taxpayers based on the faulty FCRA method. However, using fair-value accounting, a method supported by CBO, e21 finds that:
“[T]he Ex-Im bank’s loan guarantees are made at sufficiently generous terms that borrowers receive subsidies of about 1% of the amount borrowed. That translates into a $200 million cost for taxpayers on the $21 billion in loans that the bank will make in 2012. Because the bank’s smaller loan programs already carry positive subsides under FCRA, the total subsidy level for the entire Ex-Im bank business is even higher than $200 million using fair-value estimates.
Senator DeMint supports the use fair-value accounting to bring full transparency to the true costs to taxpayers. Senator DeMint has strongly opposed the reauthorization of Ex-Im that would increase the taxpayer subsidized loan cap to $140 billion. He outlined his opposition in a recent op-ed in the Greenville News.
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