This article first appeared at The McAlvany Intelligence Advisor on Friday, March 27, 2015:

English: Export-Import Bank of the United Stat...

In 2012 and 2013, the Export-Import Bank unanimously agreed to guarantee by Lockheed Martin to a small private Australian satellite company called NewSat, whose president was ecstatic at the news. NewSat’s CEO Adrian Ballintine celebrated:

It is fantastic to receive the support of the U.S. Ex-Im Bank. They are backing our … satellite with a direct loan, with a favorable low-fixed interest rate and long tenure.


The deal is an Australian first for Ex-Im Bank and a major milestone towards the launch of Australia’s first commercial satellite.

His was a company worth $50 million before Ex-Im guaranteed $304 million in by Lockheed Martin to provide it with a satellite designed to reach all across the South Pacific and rake in millions. Ex-Im was simply following its charter: make loans no one with any sense would consider making.

Of course, that isn’t exactly what the bank’s charter really says; the mission is to create and sustain U.S. jobs by financing sales of U.S. exports to international buyers. But behind the scenes, the Ex-Im Bank has for years been, according to the Wall Street Journal, a “fount of corporate welfare,” shifting market risk from big companies to the taxpayer.

Solyndra was a recent example, imploding and taking with it $10 million of Americans’ taxes. NewSat’s implosion could be thirty times larger.

The party ended Down Under long before the company defaulted on a $21 million payment to Lockheed Martin in January. In fact, the first sign of trouble occurred back in early 2014 when the company delayed launch of its new whiz-bang Jabiru-1 satellite into the middle of 2016.

The next sign was concerns by two board members about internal financial shenanigans. They brought in an outside investigator to see what he might find. What he found was astonishing: excessive travel expenses and hotel costs, salaries and bonuses to Ballantine in the millions, tax-dodges with bonuses, and manipulations of company stock. But what really honked them off was the discovery of unrecorded payments of more than $400,000 in “marketing expenses” to a luxury boat manufacturer, Cresta Motor Yachts. Turns out that Ballantine is on the board, and his son Tim owns the company!

The investigator concluded his report: “I have never seen nor heard of more appalling corporate behavior than at NewSat.”

NewSat’s external auditor, Ernst & Young, reviewed the report, rechecked its own numbers, and declared that there “is significant uncertainty as to whether the [company] will continue as a going concern.” This is how accountants issue last rites.

This could also spell the end of Ex-Im Bank. Its charter is up for renewal at the end of June, and a lot of ink is being spilled by people who should know better in attempts to defend the bank. One of those apologists is Todd McCracken, president and CEO of the National Small Business Association, who still thinks Ex-Im has something to do with helping small businesses do business overseas. McCracken wept over the difficulties those small firms face when trying to do business there. They “face a host of financing challenges when they try to export.” They’re small, usually poorly capitalized, and the aren’t very profitable. Besides, he weeps, banks here “won’t consider foreign receivables as collateral.”

And then there’s the unlevel playing field: Foreign countries have their own export financing banks, which makes it hard for companies to compete:

There are foreign-export credit agencies around the world that provide substantial support for their country’s exporters. Killing the [Ex-Im] bank is tantamount to unilateral disarmament and will damage our competitiveness.

In other words, they sugar their gas tanks and, therefore, so should we!

McCracken’s apologetic support for Ex-Im has little to do, of course, with reality. Most of the guarantees go to companies that don’t need them but will take them because it reduces their cost of doing business and virtually eliminates credit risk. Companies like Boeing, which, in the years 2007-2008, received 65 percent of Ex-Im’s loan guarantees. In 2012, that figure rose to more than 80 percent! With 165,000 employees and annual revenues and assets approaching $100 billion, Boeing is a long way from being your typical small business.

Ex-Im is also sold as zero cost to the US government, running itself on fees collected and avoiding any costs to the taxpayer. That turns out to be another lie as well. When economist Veronique de Rugy looked at the true costs of running the bank, using fair-value accounting methods required by private banks, taxpayers are actually already supporting this fount by $200 million a year. The bank also claims its default rate is astonishing low, but it doesn’t include a variety of “loan violations” and “modifications” and “deferrals” that are called defaults in the real world.

With the default of $21 million in January, NewSat has likely set in motion its own collapse and perhaps even the end of the Ex-Im Bank itself. When the true numbers come out, showing losses exponentially larger than Solyndra’s, members of the House are going to be hearing howls of outrage from their constituents, just in time for the final vote on the bank’s charter renewal.

Big gates sometimes swing on little hinges. One certainly hopes so, in this case.

A graduate of an Ivy League school and a former investment advisor, Bob is a regular contributor to The New magazine and blogs frequently at, primarily on economics and politics. He can be reached at



Daily Signal: How a $300 Million Bet on Australian Satellite Company Went Wrong for Export-Import Bank

Sydney Morning Herald: NewSat high flyer dangerously close to burning his boats

Export-Import Bank of the United States

The Wall Street Journal: Should Congress Reauthorize the Export-Import Bank?

Background on NewSat

Background on Boeing

The Export-Import Bank website

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