The Export-Import Bank, a legacy of the New Deal that helps thousands of small businesses and some very large ones compete in foreign markets, teeters on the brink of extinction because it has become a symbol of big government largesse and corporate cronyism.
For the bank’s allies, it is a distressing sign of the extreme partisanship of 2012 that the 78-year-old federal credit agency, which makes taxpayer-guaranteed loans to would-be exporters, could be de-authorized by Congress in May, leaving its clients, including The Boeing Company, scrambling for financing that bank supporters say they would not be able to get on the private market.
The bank’s charter will expire May 31 unless Congress approves a proposed reauthorization, which would also increase the total amount the bank can lend at a given time from $100 billion to $140 billion. The last time Congress voted to reauthorize the Export-Import Bank in 2006, when Republicans controlled Congress, it was approved unanimously.
That the bank is facing such a threat to its existence shows how the Tea Party’s electoral success in 2010 continues to affect public policy, despite perceptions that the movement has lost momentum. Tea Party organizations and the think tanks and pundits with which they identify have made the Ex-Im Bank reauthorization a litmus test of whether the Republicans empowered by that election are true conservatives, despite the fact that bank supporters say it doesn’t cost taxpayers anything.
According to the bank’s CEO, Fred Hochberg, the bank typically writes off about 1.6 percent of its loan values, which is covered by the 2.5 percent it holds in reserves, funded by fees on borrowers.
“We do a good job collecting, and we have a lot of collateral,” Hochberg said in an interview with the Wall Street Journal. But critics contend that all of the bank’s loans are, however, guaranteed by the U.S. government at percentages that don’t factor in market risk, which makes the bank look profitable when it isn’t, and could expose taxpayers to losses.
Refusing to reauthorize the bank would be “a principled policy victory that would also play well politically with the American people,” according to the Heritage Foundation’s Dan Holler.
The Tea Party Patriots’ website quotes former Reagan Administration budget director David Stockman as saying, “Giving the heave-ho to the well-heeled lobbyists of big corporations who keep the whole scam alive would be dramatic proof that we (Republicans) meant business, not business as usual.”
Ken Blackwell, who serves on the board of Club for Growth, which advocates for lower taxes and smaller government, wrote, “While our country is $15 trillion in debt … we are mortgaging our children’s futures to give money to politically connected multinational corporations who do not need our support.”
These foes point out that, before he was president, Barack Obama made similar arguments, calling the bank “little more than a fund for corporate welfare.” Obama now supports the bank’s reauthorization, however.
The opposition to the bank is not entirely ideological. Some businesses are fighting it because they believe its loan guarantees strengthen overseas competition at the expense of U.S.-based firms. Meanwhile, the Sierra Club criticizes the bank for making loans to finance coal-fired power plants in South Africa and India.
The biggest corporate opponent of the Ex-Im Bank, Delta Air Lines Inc., wants the reauthorization to be contingent on the bank ending its practice of helping foreign air carriers like Air India and Emirates Airline purchase wide-body jets with cheaper financing. Boeing is a major beneficiary of such policies. U.S. Sen. Maria Cantwell, D-Wash., estimated that one-third of the planes Boeing has built in Washington state in the past three years are attributable to the Ex-Im Bank. But Delta argues that the bank’s loans to foreign carriers put Delta at a competitive disadvantage.
At the bank’s annual meeting April 12-13, former President Bill Clinton said, “Support for the Ex-Im Bank used to be a bipartisan deal. And I hope it will be again.” Indeed, support for the legislation to reauthorize the Ex-Im Bank and raise its credit limit remains bipartisan, and also encompasses some of the most prominent elements of the traditional pro-business wing of the Republican Party, such as the National Association of Manufacturers and the U.S. Chamber of Commerce. Because of inherent perils for companies doing business overseas, Clinton said, the bank is still needed to provide financing when conventional banks are leery of the risks.
However, the libertarian Cato Institute’s trade policy analyst Sallie James wrote a paper arguing “if the bank’s transactions were ‘sure bets,’ then the private sector would – and should – be expected to step in. If, on the other hand, the private sector wouldn’t finance a transaction, it is a signal that taxpayers should not be exposed to the risk, either.”
To the dismay of his Tea Party allies, U.S. House Majority Leader Eric Cantor, R-Va., has offered to support reauthorizing the bank for one year, instead of the four-year authorization the bank is seeking.
But Cantor’s proposal has been rejected by the bank’s CEO, Hochberg, who has called any efforts to weaken the bank problematic because its help is needed to counterbalance subsidies provided to competing businesses by foreign governments.
– John Stodder