You may have heard that dozens of cutting-edge Boeing jumbo jets have been grounded by the Federal Aviation Administration because they have an unsettling tendency to ignite.
What you may not have heard: many of these jets were exported from the U.S. with a guarantee from U.S. taxpayers.
The Export-Import Bank of the United States is a federal agency dedicated to promoting U.S. exports — mostly Boeing jets. Ex-Im guarantees private-bank loans to foreign buyers of Boeings and other U.S.-made goods. President Obama has dramatically ramped up Ex-Im’s subsidies of Boeing exports.
So, if Boeing sold a foreign airline a Boeing that is faulty, and U.S. taxpayers guaranteed the financing on that sale, could taxpayers end up footing the bill?
Ex-Im officials promise me this won’t happen. I called Phil Cogan at Ex-Im last week, and he said that Ex-Im has arranged these deals in such a way that taxpayers are protected. Here’s a Reuters story making this argument.
This whole ordeal is worth watching closely, because Ex-Im subsidies for Boeing have been the heart of President Obama’s “Export Initiative.”
When I describe Ex-Im loans and loan guarantees as “subsidies,” Ex-Im and Boeing officials object — they’re not “subsidies,” they say, because Ex-Im generally brings in more in interest payments and fees than it shells out. Point out Fannie and Freddie were profitable for years until taxpayers had to bail them out, and Team Ex-Im says Fannie was just in one industry. Point out Ex-Im is mostly exposed to the airplane industry, and they say default rate in airlines is very low.
I’m not very worried. I don’t think Ex-Im will end up shelling out big bucks for fiery Boeing Dreamliners. But it’s worth following closely.