Largely out of the media spotlight, the federal government operates a network of financial subsidy programs that benefit big banks by putting taxpayer money at risk. And President Obama, that self-styled populist scourge of Wall Street, is increasing this racket of private profit and public risk that Sen. Jim DeMint (R-S.C.) aptly dubbed “venture socialism.”
In its latest act of venture socialism, the Obama administration has offered a novel taxpayer backstop to General Electric, the multinational industrial conglomerate that is famously close to this administration, and that spends more on federal lobbying than any other company. The government accessory in this instance is the Export-Import Bank of the United States, a federal agency that finances U.S. exports at taxpayer risk.
Ex-Im exists to subsidize U.S. businesses, with most of the subsidy dollars facilitating Boeing sales. Other industrial titans like GE, Bechtel, and General Dynamics devour most of the rest of the Ex-Im subsidy pie. But manufacturers aren’t the only beneficiaries of this little-known federal agency — banks profit from it, too. For instance, when Ex-Im recently approved $1 billion in financing to subsidize Pemex, Mexico’s government-owned oil company, 3M and other U.S. exporters of oil-field equipment benefited, but so did some big banks. Bank of America and JP Morgan financed these sales, and so if Pemex defaults, it’s these megabanks the U.S. taxpayer will be bailing out.
Now Obama has created a new Ex-Im subsidy for banks. The name is a mouthful: “The Supply-Chain Finance Guarantee Program.”