Congress is gearing up to re-authorize the Overseas Private Investment Corporation (OPIC), which has been slammed by policy analysts and House Republicans as an example of “crony capitalism” and a mirror image of the Export-Import Bank.
OPIC provides U.S. companies with loans, loan guarantees, and political risk insurance at low rates to encourage investment in developing countries and emerging markets. The agency has come under fire as a prime example of corporate welfare.
A recent report from the Competitive Enterprise Institute (CEI) showed that OPIC’s own data confirmed its position as an agency that benefits large, well-connected companies. OPIC’s top 10 beneficiaries capture 90 percent of its business. The agency’s partners include banking giants JPMorgan Chase and Wells Fargo as well as multi-billion dollar companies like Virgin.
The similarities between Ex-Im and OPIC run so deep that the Obama administration’s fiscal 2016 budget planned to combine them into a single agency. OPIC is a heavily involved in the arena of climate change with 40 percent of its business going to renewable energy projects. On Monday, OPIC’s operations in India lent $20 million to Azure Sunlight — a solar power projects developer.
The agency’s effectiveness is bitterly contested. According to the CEI report, OPIC supported $200 billion of investment with just 278,000 jobs, amounting to $719,000 per job.
“Surely there are less expensive ways to support jobs. OPIC is supposed to help the world’s poor, but in practice it mostly helps large, politically connected companies,” said the report’s author Ryan Young.
Free marketeers have had a spring in their step since Ex-Im’s charter was allowed to expire June 30. Conservative Republicans and a host of Ex-Im’s opponents outside Congress fought against the GOP establishment and major corporations such as General Electric to prevent the Bank’s renewal.
In the wake of Ex-Im’s charter expiration, Veronique de Rugy, a senior research fellow at the Mercatus Center and a leading critic of the agency, wrote:
The parallels between OPIC and Ex-Im are chilling: two government agencies that focus on artificially propping up U.S. companies in the name of economic growth and job creation by providing cheap financing to companies that could find capital on their own. In the process, both agencies transfer large risk to taxpayers.
Opponents of OPIC find themselves in good company with their hostility to cronyism. Noble prize-winning economist and free market trailblazer Milton Friedman once said he could not “see any redeeming aspect in the existence of OPIC. It is special interest legislation of the worst kind, legislation that makes the problem it is intended to deal with worse rather than better. …OPIC has no business existing.”
Republicans who back re-authorization could face a backlash from conservative supporting groups such as Heritage Action and the Club for Growth, both of which have voiced their opposition to OPIC. Last year, 116 Republicans rejected OPIC’s demand for re-authorization.
The White House recently blamed Republicans for General Electric’s decision to ship 500 jobs overseas because of the failure to renew Ex-Im which significantly benefits GE. (RELATED: In Five Days Time Congress Could Deal A Hammer Blow To Crony Capitalism)
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