American Transparency Exposes Crony Boondoggle for Ex-Im Insiders
CHQ Staff | 6/17/2015
In a report that is truly shocking, even by today’s standards of insider pillaging of the American Treasury, openthebooks.com, a project of American Transparency, has documented how large private banks processed more than $127 billion in Ex-Im supported transactions since 2007, while having an ownership stake in the private bank empowered to trade on the guaranteed loan portfolio of Ex-Im.
Here's how it works according to the openthebooks.com report: Ex-Im mitigates all credit risk to private banks by guaranteeing payments from foreign importers. The big banks use this taxpayer guarantee to collect fees and profits with very limited downside.
So far, they've avoided intense scrutiny. They include Citibank, JPMorgan Chase, New York Mellon, Deutsche, Bank of America, and many others.
But, says Adam Andrzejewski, Chairman of American Transparency and founder of OpenTheBooks.com, it's even more egregious.
In 1970, the federal government’s Export - Import Bank "spun-off" a private bank empowered to trade on the guaranteed loan portfolio of Ex-Im.
The "spun-off" private bank is the Private Export Funding Corporation (PEFCO). It’s incorporated in Delaware and chartered to trade only in products bearing a full Ex-Im guarantee (or U.S. Treasury equivalent).
The owners of this Ex-Im "subsidiary" are some of the largest bank processors and corporate beneficiaries of Ex-Im transactions including JPMorgan Chase, Citibank, New York Mellon, Bank of America, and Deutsche. The Fortune 100 corporations owning a slice of PEFCO include Boeing and General Electric.
So PEFCO, is owned by some of the largest beneficiaries of Ex-Im support.
In column for Forbes, Andrzejewski documented how a corporate giant gets to double dip their Ex-Im backed transactions.
Through information disclosed online, American Transparency discovered PEFCO has traded in Ex-Im backed loans mostly within the airline industry. Even in Angola, where the people face malnourishment and starvation, PEFCO provided the long-term loan to the state-owned Ministry of Finance for the $256 million purchase of Boeing airplanes with an Ex-Im guarantee.
How convenient that Boeing owns 17 percent of PEFCO – the private bank observed Andrzejewski.
Boeing was not only able to sell their product to one of the world’s most corrupt governments through cheap Ex-Im financing plans (up to $2 million benefit per plane), but, noted Andrzejewski , the company was also able to privately monetize the entire transaction through their ownership of PEFCO.
For JPMorgan Chase and Bank of America, the deal is even better says Andrzejewski.
As the owners in PEFCO, these bankers also underwrite PEFCO’s commercial paper. New York Mellon manages all aspects of PEFCO long-term notes and collateralized obligations. Separately, all these banks partner with Ex-Im on financial transactions around the world.
This Private Export Funding Corporation (PEFCO) is chartered to operate only under express Ex-Im permissions. In fact, the relationship is so tight notes Andrzejewski that the former Ex-Im Chief Operating Officer John McAdams recently joined the PEFCO board and Rita Rodriquez, a former Ex-Im Bank director is also a PEFCO director. The top corporate officers at Boeing, Bank of America, JP Morgan, Citizens Financial, Citibank, and Mellon are also directors at PEFCO.