We’ve seen quite a few global banking scandals sweep across the news during the past few years, haven’t we? And just last week, another controversy erupted at the Export-Import Bank of the United States.
Huh? The Export-Import Bank? That’s not exactly a household name, is it?
The Ex-Im Bank is actually a government agency that was established during the Great Depression to help American manufacturers sell products to foreign customers. When such customers are unable to independently secure loans to buy American goods, the Ex-Im Bank is chartered to step in and guarantee their debt.
Sounds innocent enough, doesn’t it? But the Ex-Im Bank has gathered its share of controversy lately, and certain leading American legislators have called for its dissolution. They have asked, for instance, whether it’s hypocritical to complain about foreign governments that subsidize their national airlines when the Ex-Im Bank gives similar support to Boeing, a seller of aircraft to some of those very airlines.
Interestingly, such debates about the need for national banks extend back to the earliest days of the United States. Although many know that it was Alexander Hamilton, America’s first Treasury Secretary, who championed the creation of the First Bank of the United States, few know that that particular bank was disbanded after a mere twenty years.
And then, after a Second Bank of the United States was created to manage the federal debt that was incurred to fight the War of 1812, President Andrew Jackson led a successful fight to disband it after another twenty year period.
In fact, for much of the 1800s, the United States had no national bank at all. It was only after the great bank Panic of 1907, a crisis that may have led to an economic catastrophe if not for the herculean efforts of J.P. Morgan to save the national financial system, that the United States finally established today’s permanent Federal Reserve Bank system.
On the one hand, despite occasional calls by American politicians to “audit” the Fed, very few individuals today support the disbandment of the national bank of the United States. But on the other hand, many do call for the dissolution of various dysfunctional governmental and quasi-governmental banking institutions.
For instance, the mortgage institutions Fannie Mae and Freddie Mac required massive federal bailouts to prevent the Great Recession of 2008/09 from evolving into a second Great Depression. And just last week, the public learned that government officials at the Ex-Im Bank permitted Boeing executives to write the very regulations that bind them.
Nevertheless, such undeserved bailouts and corporate cronyism merely extend a longstanding tradition at America’s governmental banking organizations. After all, it was Andrew Jackson who once declared that “it is to be regretted that the rich and powerful too often bend the acts of government to their selfish purposes” while he was abolishing the Second Bank of the United States.
Thus, it wouldn’t be surprising if the latest Ex-Im Bank controversy explodes into another global banking scandal. And yet, if history is any guide, even the outright abolishment of the Bank will not end the federal government’s direct presence in the banking industry.