Obama plans to use the Export-Import Bank — a federal agency that gives taxpayer-backed loans and loan guarantees to foreign buyers who buy American goods — to subsidize U.S. manufacturers even when they are selling to other American companies.
This would be a significant step in the federal government’s transformation into a venture capital firm and investment bank involved in all corners of the economy. It’s private profit and public risk. Conservative Sen. Jim DeMint calls it “venture socialism.”
Ex-Im has been financing exports for decades. Taxpayer-backed loan guarantees push down interest rates for foreign buyers, thus greasing the wheels for U.S. manufacturers and eliminating risk for U.S. banks.
But Washington plays in many other politically favored sectors. The federal government got into housing finance, for instance, through government-sponsored enterprises Fannie Mae and Freddie Mac. The Federal Housing Administration insures mortgages, protecting lenders from risk.
Congress has spent decades creating a slew of government loan programs to subsidize agriculture. Last month, Congress renewed the notorious sugar program, which gives growers generous nonrecourse loans with sugar as collateral.
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