Pull the U.S. Out of the (Crony Capitalist) European Bank for Reconstruction and Development

An institution, like the Import-Export Bank of the US that is nothing more than a crony vehicle for powerful and deeply connected. Kill it. Or at least end our participation in it. The US is the largest contributor.

(From Reason)

There are countless flaws with the EBRD, but three of them stand out.

First, its loan programs create capital misallocations. Consider the guaranteed loans. They transfer the risk of lending away from private lenders to the taxpayers, which drastically reduces the incentives to evaluate applicants and projects thoroughly or apply proper oversight. These programs privatize gains and socialize losses—in other words, taxpayers bear the downside risk and the companies and the banks that receive the guarantees get the upside benefit. These loans also give an incentive to lenders to shift resources toward subsidized projects and away from nonsubsidized ones, independent of the merits of the projects.

Second, the EBRD is cronyism, plain and simple. The bank picks winners and losers in the marketplace. The winners—often better-connected firms—benefit from an unfair advantage over their competition in the form of subsidies, lower borrowing costs, and other perks. Tough luck if you’re an unsubsidized firm competing in that market.

Third, it breeds corruption: A study by the Center for Freedom and Prosperity on the issue highlights all the ways “that monies ostensibly disbursed for the purpose of development assistance wind up lining the pockets of corrupt insiders. For all intents and purposes, the EBRD and other dispensers of aid enable and sustain patterns of corruption.” The study lists a few examples, such as the bank granting funding for projects in less-than-democratic countries (contrary to the stated goal of the bank) and employees accepting bribes. It also notes an analysis that founds bank officials don’t really care, as “serious allegations of corruption do not seem to have had an impact on the EBRD’s stance towards the project or the company leading the projects.”

Click here for the article.