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Export-Import Bank loaned $650 million to Enron

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Flashback: House Saves Enron’s Federal Partner

Export-Import Bank loaned $650 million to Enron

On May 1, the House, by voice vote, granted a four-year reauthorization to the Export-Import Bank (Ex-Im), the federal agency that loaned over $650 million to Enron before it went bankrupt. (One day earlier, the House, by a 318-to-92 vote, had given a one-month extension to Ex-Im, pending the longer reauthorization. See rollcall, page 19.)

The Ex-Im is a federal agency that receives an annual appropriation from Congress. Originally founded in 1934, it was re-chartered in 1945, with the purpose of facilitating U.S. exports by loaning tax dollars to foreign buyers, or guaranteeing, with the full faith and credit of the United States government, private banks’ loans to foreign companies or governments.

It was last reauthorized in 1996, and since that law expired last October 1, Ex-Im has been kept in existence on a series of one– month extensions. With the House now having passed a four-year reauthorization for the agency, legislators in a House-Senate conference hope to forge a compromise with the five-year bill voted by the Senate before the one-month extension expires May 31.

In the weeks leading up to that most recent extension, lawmakers got to see clearly some problems with this agency.

On January 31, the heads of the Senate Finance Committee wanted to know about any loans Ex-In had made or guaranteed to Enron. The senators also asked the same questions of the Overseas Private Investment Corporation (OPIC) and the U.S. Trade and Development Agency (USTDA), two other government agencies that spend taxpayer dollars overseas.

Sen. Charles Grassley (R.-Iowa), the top Republican on Finance, reported February 20 on the dealings between the Clinton OPIC and Enron. “From Fiscal Year 1993 to Fiscal Year 2000, the agency gave $544 million in loans to projects with an Enron financial interest,” Grassley said in a statement. “The current outstanding balance on those loans is $453.7 million.”

But OPIC was miserly compared to Ex-Im. With Rebecca McDonald, chairman and CEO of Enron Global Assets on Ex-Im’s advisory committee (before her other Enron brass had sat in the same place), the agency gave $650 million to Enron-related agencies overseas.

Enron, in many of these deals, was not the U.S. exporter being subsidized, but rather the “foreign” buyer taking the direct loan from taxpayers. One example is Dabhol Power, a firm that was 80% owned by Enron in September 1994 when Ex-Im authorized a direct loan of $302 million. The exporters to Dabhol were General

Electric and the Bechtel Corp., two of the top beneficiaries of Ex-Im. Dabhol also got Indian government funding as well as OPIC cash. The project turned out to be a bust. The plant attracted only one client-a local utility that couldn’t pay its bills.

Dabhol went bankrupt in May 2001, even before the rest of Enron, and $175 million of the Ex-Im loan is still outstanding. Finance Committee members and staffers are unsure whether the taxpayers will have to eat that loss.

But Enron worked out some even sweeter deals with Ex-Im. The Trakya Elektrik power plant in Turkey, owned 50% by Enron, borrowed $250 million from Ex-Im in 1995 through 1996 so that it could buy American products. The U.S. exporter: Enron.

In other words, Ex-Im was lending tax– payer dollars to Enron, so that Enron could buy goods from Enron.

Enron secured a similar deal for the Accroven natural gas plant in Venezuela, of which it held 49.25%. Accroven borrowed $135 million from Ex-Im to buy goods from Enron. Accroven also got OPIC financing, and still owes Ex-Im $131 million.

Grassley and Finance Committee Chairman Sen. Max Baucus (D.-Mont.) were curious how these loans got approved. They asked Ex-Im heads whether they thought Enron provided false or misleading information to the agency in order to secure the loans. The senators wanted to know if Enron could suffer any legal or civil penalties for that.

Grassley says he found it odd when an Ex-Im spokes– woman told the New York Times April 2, “We do not feel at this point in time any information we have received was inaccurate.” Grassley wrote Ex-Im’s Vice Chairman Eduardo Aguirre (Chairman John Robson had passed away two weeks earlier): “For example, the application for the Accroven SRL project in Venezuela included the… Enron Annual Report as part of the financial information provided to Ex-Im. Enron has already admitted that its financial reports did not accurately portray its financial condition.”

Grassley continued: “I’m troubled by the Ex-Im’s seeming lack of interest in this matter, given that Ex-Im is backed by the full faith and credit of the U.S. government and ultimately the taxpayers.”

Soon, Aguirre wrote back assuring Grassley that Enron was cooperating fully with the Justice Department in any inquiry or investigation into Enron’s wrongdoings.

It was against this backdrop that a strange coalition formed in the House in the final days of April. Socialist Rep. Bernie Sanders (I.-Vt.) teamed up with firebrand conservative Rep. Dana Rohrabacher (R.-Calif.) and staunch libertarian Rep. Ron Paul (R.-Tex.) to try to block the one-month extension.

Sanders’ goal was to shut down Ex-Im for one day, “to send a message” to the agency that it should not be a provider of corporate welfare. A motley crew of leftists, conservatives and middle-of-the-road protectionists took to the floor of the House April 30 to decry Ex-Im for various projects.

One loan guarantee came under particular attack. Ex-Im underwrote an $18-million loan to help modernize a hot strip steel mill at Benxi Iron and Steel Co. in Benxi, China. This would increase the plant’s capacity at a time when it had already been found to be “dumping” steel in the U.S.-that is, selling it here at below market rates to undercut U.S. domestic producers.

Lawmakers also attacked Ex-Im for loaning $120 million to the China National Nuclear Corp., which had been caught selling nuclear weapons components to Pakistan. Similarly questionable was a loan to a GE company based in Mexico to build a new plant in Celaya, so that it could shut down the one in Bloomington, Ind.

The extension was brought up under suspension of the rules, which meant it needed a two-thirds majority to pass. Sanders was able to muster only 92 votes, falling short of the 146 he needed to kill Ex-Im.

Among the 42 Republicans who voted against the agency were three of the top five party leaders: Majority Leader Dick Armey (Tex.), Majority Whip Tom DeLay (Tex.), and Policy Committee Chairman Chris Cox (Calif.). Former Democratic Whip Rep. David Bonior (Mich.) also voted no, but none of those members used their leadership clout against Ex-Im.

The next day, Democrats failed to amend the bill to prevent the agency from exporting jobs, such as with the GE plant in Celaya. Then, by voice vote, the House passed the bill.

Finance Committee staff say they expect to have the final bill drafted before the current extension expires at the end of this month.

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Written By

Mr. Carney served as a reporter for Bob Novak from 2001 to 2004, and from 2007 to 2008 as the senior reporter and, upon Novakā??s retirement, editor of the Evans-Novak Political Report.

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