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Washington Examiner Senior Political Columnist Timothy Carney on why the U.S. Export-Import Bank may be causing a bubble in the aircraft sector.
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Had -- just tax -- you may be on the hook for that next big bubble that's about to burst and we're not talking about a housing -- -- or even a bond bubble at this point we are talking about an airline bubble.
Tim Carney joins us now he's a senior political economist for the Washington examiner.
Tim -- stories like so outrageous it drives me crazy so we're talking about the export import bank rate and the -- yeah isn't all this money.
Bad -- manufacturing.
Yes and the important thing to remember is it's not really a bank -- the right government agency.
So and what it does is it loans money to foreign buyers like say.
Air India or -- government of China that owns -- airlines or a -- -- private bank loans.
Again using US tax dollars has as a backing so that they ruled by US goods and a majority of what these foreign buyers end up buying.
Our Boeing jets and it was something like three fourths of -- in subsidies.
In that over the last three years as far as a loan guarantees we're subsidizing the sale of Boeing jets.
Right so.
Airlines like air India air China and they get a subsidy from this export import bank which is not really bank.
And then they go and they buy these Boeing planes.
The problem now is.
-- they're not flying anywhere -- mesa airlines are not making any money so what happens.
So -- this is exactly right because if you say if you criticize export import bank there -- no we don't cost taxpayers money because very good they're getting this interest payments back they're getting fees we say yes.
But what about when you have to start paying out on these loan guarantees.
Fannie Mae and Freddie Mac they weren't losing money for years they were making huge profits and -- the taxpayers are bailing them out so.
Then we look well is there trouble yes there is -- -- at which has gotten three billion dollars over the last few years and export import bank guarantees.
They haven't made a profit in seven years did the buying spree they did with the ex -- financing.
Did they government of India said that that was a recipe for disaster they can't afford these they've lost money for seven straight years.
Last year.
Every one of -- India's international flights lost money.
And then China's economy has been slowing down and air China is one of the big customers of Boeing that has the taxpayer guarantees through export import bank.
The Tim that this is the part that makes my head want to blow up.
Shouldn't they have done a little research before they made a loan to a company like air India that hasn't made a profit since 2005.
Well.
I'm sure they should and you know what if this were a private bank that we're losing its money.
I'd sell well that's too bad for -- bank and its shareholdings but it's not.
It's you and I it's the US taxpayers who are going to end up fitting the bill if there India can't pay these bills if -- China can't pay these bills so an airplane bubble wouldn't matter to us.
If there wasn't a government agency.
Making the backstop here making the taxpayers -- the -- That but the other -- though is this took a bipartisan thing it seems that they consistently renewed the money to this export import bank of sun bank.
Both sides of the I'll keep doing it though right I mean this is not one side of the other ever they keep saying fun thing.
Now late -- -- to -- -- -- on both sides there is a -- there's a vote earlier this year to reauthorize export import bank and a few conservatives led by guys like in demand in the senate.
And Ron Paul in the house tried to kill the export import bank.
They got twenty votes in the senate they got less than a hundred votes in the house.
And so majority of the Republicans and every one of the Democrats went ahead and voted for its -- Democrats say oh well we are against big business getting all the benefits.
Now they're not Boeing gets almost all this money when Republicans say they believe in free market.
Then let Boeing try to sell its own airplanes.
Right so OK so as a taxpayer sitting at home.
When -- gonna start like hitting my paycheck is inevitably everything does at some point yes.
Well I've been following guys who follow the industry much more closely than I do Holman Jenkins at the Wall Street Journal is one guy.
There's Adam -- large -- is one expert on this -- -- home if I pronounced secondarily is another expert.
And they haven't given sort of a very short term timeline that they said.
There is too much exuberance or is he added the elements of a bubble and sometime in the next couple years and air India sort of being has the canary in the coal mine -- That it could start being that these airlines are saying we ordered way too many planes we can't pay for them sorry if somebody else is gonna have to foot the bill.
Tim Carney I love they bring in a search our attention thank you --
