Peak Crony Capitalism: First Citi Writes US Financial Laws, Now Boeing Tells Ex-Im Bank What To Do

Back in December, the US population was briefly but dramatically shaken, when it was revealed that none other than Citigroup - a Wall Street firm - had drafted the Congressional language for the Derivatives swaps push-out provision, the add on that assured that taxpayers/depositors would be on the hook for any future derivatives fiasco at the TBTF banks (whose total derivative holdings amounted to $303 trillion with a T) component of the Omnibus funding bill.

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Confirming that cronyism in Congress is alive and has never been better, was the further discovery that the main backer of the bill is notorious Wall Street lackey Jim Himes (D-Conn.), a former Goldman Sachs employee who has discovered lobbyist payoffs can be just as lucrative as a career in financial services.

Subsequently Zero Hedge first exposed just why Citi was so intent on making sure taxpayers would be saddled with the bill: while all other banks were actively deleveraging their derivative exposure, Citi was piling in, and just in Q3, had boosted its derivative holdings by a record $9 trillion in just the third quarter to a whopping $70 trillion, surpassing even JPM. Worse: all of these derivatives would be housed precisely in the FDIC-insured silo, so when (not if) this leveraged house of cards explodes, it will be US taxpayers picking up the pieces.

 

The people were outraged, Elizabeth Warren screamed on a few occasions and... nothing changed. By then the oh so shallow US attention span was focused on the next scandal, so things promptly reverted back to normal and Wall Street was again in charge of telling Congress how to set the stage for the next upcoming financial sector bailout.

This was crony capitalist capture of Congress at its best. But it wouldn't end there.

Today's most under the radar news, just as Citigroup was to Congress, and the swaps push out language, so Boeing, that primary recipients of the generosity of America's Export-Import (Ex-Im) Bank, has been caught red-handed drafting the rules of none other than the Ex-Im bank itself! According to the WSJ: "when the Export-Import Bank sought to respond to critics with tighter rules for aircraft sales, it reached out to a company with a vested interest in the outcome: Boeing Co., the biggest beneficiary of the bank’s assistance."

Or nothing more than a criminal conflict of interest, which, once again, is at the expense of America's infinite bailout piggybank: it's taxpayers.

For months in 2012, according to about 50 pages of emails reviewed by The Wall Street Journal, the bank worked with Boeing to write rules that would satisfy critics in Congress and the domestic commercial airline industry—while leaving most sales of Boeing’s airplanes to foreign carriers unscathed.

 

Ex-Im Bank, which helps finance the purchase of U.S. exports through loans and guarantees, is the target of Republicans who want to kill it, in part because they say it mostly provides subsidies to America’s largest companies. The Boeing emails will add fuel to that fight.

 

The previously unreported documents, obtained through an open-records request, show how the two sides swapped ideas, drafts and data on sales of wide-body airplanes. Ex-Im Bank officials pushed their Boeing counterparts for information. Boeing suggested changes to the bank’s draft proposal.

 

They reveal an extraordinary level of coordination between public officials and corporate executives. In a message one Saturday morning, Bob Morin, then the bank’s head of aircraft financing, sent a plea: “If Boeing expects Ex-Im Bank to continue supporting wide-body aircraft, we need to get this right.”

This is how Boeing explained, or rather didn't, yet another corporate crony capture: "Officials at Boeing declined to comment on the emails. In general, said Tim Myers, president of Boeing Capital Corp., Boeing’s aircraft-financing unit, “it would be only natural” for the bank to ask for input since Boeing is the only U.S. maker of wide-body commercial aircraft."

Yes: it is only natural that the firm that benefits the most from the Ex-Im bank's generosity, be consulted, write the rules and regulations, and generally assure it continues to benefit, unsupervised and unchecked, from the same bank.

Much more in the full WSJ piece, but those who are easily disgusted or with high blood pressure are advised to stay away.