Friday, December 28, 2007

Ex-Im Bank Scandal Looks Like Tip of Corruption Iceberg

The WFAA story about the Ex-Im Bank giving loans to Sinaloa and Juarez drug cartel associates threw me for a bit of a loop, and I thought I'd take a moment to explore the implications a little further. (Read this Grits post if you don't know what I'm talking about. Go ahead ... I'll wait.)

Until today, I hadn't thought much about the Ex-Im Bank since I was an economics major in college, but insofar as corruption of major international trade institutions goes, this is a really big deal!

Some of these loans went to companies that didn't even give a valid address: One business, WFAA reported, gave a Dallas address on "Highway 10." There's no Highway 10 of any kind in Dallas, though Interstate 10 runs from Houston through San Antonio and El Paso more than 250 miles south.

What could it mean? What will it mean? Who is in charge of the Ex-Im Bank and who oversees their activities? Who approved the loans in question? Certainly David Carter, Vice President of Credit Underwriting, has some questions to answer, as well as Business Credit VP Pamela Bowers. How did President Bush come to name these particular people to serve on the board - are they donors, friends, banking careerists?

Cui bono?
Who benefits? For that matter, particularly for these phony front companies, who cashed the checks when the loan funds were released?

Let me say for starters that I'd hate for the Ex-Im Bank's overall mission to take a hit. If I had my druthers, US loans to Mexican business enterprises would be a key strategy to reduce immigration, which largely stems from a shortage of job opportunities in Mexico. But when you see stories of fabricated front companies receiving loans, it's hard to argue for more lending.

The Ex Im Bank gives loans that are supposed to create new markets for American exports. Here's a web page with overview information on the Ex-Im Bank's role in Mexico. What's needed, at a minimum, is an immediate Government Accountability Office (GAO) audit to determine the scope of the problem and whether the program is utterly corrupt or if only the medium-term loans were affected. That's where WFAA found most of the phony loans that it has documented so far, according to reports (it's also the type of loan for which Ms Bowers created a "fast track" program, according to the Ex-Im website, that probably also deserves a second look).

If steroid use in Major League Baseball deserves Congressional hearings, surely the allegations presented by WFAA deserve a similarly full and high profile investigation. Certainly it matters much more to the nation's security if, as WFAA's investigation strongly implies, US trade organs are being used to finance drug cartel operations in Mexico.

Does Congress or any federal law enforcement agency care, or is it just WFAA?

UPDATE: It's not just Mexico, apparently - here's news of a scam to secure phony loans to Fillipino companies for export goods that never existed. The company "acted as a purported exporter, falsified records given to US banks and diverted $2.1 million in loan proceeds guaranteed by the Ex-Im Bank," reported ABC News. Between this news and revelations that Ex-Im loans in Mexico went to known drug cartel figures, this agency needs a serious housecleaning.

Perhaps I'm being paranoid, but the mind reels at the possibilities of how deep this might go: If a bold thinker wanted the perfect front for massive-scale, global money laundering, you couldn't ask for a better vehicle than the Ex-Im Bank. At a minimum, I think I'll add the Ex-Im Bank to my Google News feeds for a while and see what else pops up.


Anonymous said...

As I understand it, Japanese banks get hit up for 'loans' from the yakuza. This is simply a shakedown for cash. (What's the bank going to do, say no? Yeah, right.) The bank then funnies up the paperwork to hide the payout as a bad loan, spreading the loss over many accounts to make it look like just a bad week or month.

The Ex-Im Bank may be getting the same 'investment prospect' from the cartels.

Anonymous said...

Trace the wire transfers. This isn't operating cash coming out of these banks, it's clean money after having been laundered.

Anonymous said...

So...does this mean that the Ex-Im Bank is subject to forfeiture procedures? It's engaged in RICO type activities, isn't it?