“I think Ex-Im Bank is … something government does not have to be involved in,” said conservative U.S. Rep. Kevin McCarthy (R-Calif.), the new House Majority Leader. “The private sector can do it.”
Progressive U.S. Sen. Bernie Sanders (I-Vt.) has blasted the Export-Import Bank (Ex-Im) for years. A dozen years ago, Sanders railed on Capitol Hill, asking why U.S. taxpayers would pay for “huge subsidies and loans to the largest multinational corporations in the world.”
The Export-Import Bank was set up as a chartered government corporation by an Executive Order from Franklin D. Roosevelt in 1934, when its assignment was to facilitate overseas buyers for U.S. products by making loans to influential borrowers at below-market interest rates. Ex-Im borrows billions of dollars from the U.S. Treasury to make direct loans or credit lines to foreign buyers of U.S. products; guarantee loans to banks that lend to foreign buyers and to U.S. exporters; and insure against losses made by U.S. exporters and banks on loans to foreign buyers.
Last year, Ex-Im borrowed and loaned more than $37 billion.
Congress’ role is just advisory, but it re-authorizes it every three years.
Supporters say Ex-Im’s assistance to companies would be difficult for them to secure on the private market and helps make trade deals that can boost hiring. Past support has ranged from Bill Clinton to Ronald Reagan. Throughout the bank's history, 14 of 16 re-authorizations have passed by unanimous consent or voice vote in at least one chamber of Congress, according to Business Insider.
Last year, Ex-Im reported its loan guarantees included $7.9 billion to Boeing and $1.3 billion to Caterpillar, and direct loans of $291 million to Boeing and $495 million to Komatsu America Corp.
"There's a sense of urgency," Kathryn Karel, Caterpillar's vice president of law and public policy, told the Wall Street Journal about the September 30 expiration of Ex-Im’s authority. "We need to get some information in front of [Congress] to educate them on the trickle-down effects.”
McCarthy reversed from the course planned by his predecessor, U.S. Rep. Eric Cantor (R-Va.), who lost in the primary to a Tea Party challenger, and now backs Ex-Im’s expiration. That’s echoed by Tea Party Congressman Jeb Hensarling (R-Texas), chair of the House Financial Services Committee, who called Ex-Im’s activities “corporate cronyism.”
Meanwhile, prominent Democrats including U.S. Sens. Dick Durbin (D-Ill.), Charles Schumer (D-N.Y.) and Elizabeth Warren (D-Mass.) are joining with the U.S. Chamber of Commerce to push for re-authorization.
In June, however, 41 Republican House members signed a letter endorsing reauthorization. U.S. Rep. Aaron Schock (R-Peoria), now a Senior Deputy Majority Whip in the House, removed his name, although he later voiced support for renewal.
Libertarian interests such as the Cato Institute criticize Ex-Im for essentially picking winners and losers in the global economy (a charge shared by Boeing competitors such as Delta).
Progressive economist Dean Baker said below-market loans “raise the cost of capital to other firms.”
Foes also doubt that such industrial giants cannot get financing elsewhere.
But supporters say Ex-Im’s demise would jeopardize U.S. exports, defending the loans as investments in business, large and small. They say that 80 percent of its lending activity is with small businesses.
Baker says that’s “garbage. What matters is the percent of the money, not the percent of the loans.”
Indeed, Ex-Im’s own records show that the top three beneficiaries – Boeing, General Electric and KBR (formerly Kellogg, Brown and Root, a U.S. engineering, construction and military contractor) together receive 72 percent of all loan guarantees.
Ex-Im allocates funds “in ways that serve to obvious economic purpose,” Baker adds.
But liberal economist Paul Krugman defends Ex-Im on the basis of increased government spending, which he advocates as spurring economic growth and hiring. And some Democrats add that it’s necessary to maintain Ex-Im since other countries have similar programs.
Elsewhere, Ex-Im is viewed as a “wasteful and unnecessary behemoth,” said Eric Peterman of FreedomWorks, a conservative group tied to the Tea Party, “antithetical to free-market capitalism.”
Speaking of the concept of free enterprise, Baker said, “It is just one more example of how the rich and powerful have no interest in the free market when circumventing how the market works to their benefit.
“It is still striking to see how the Establishment types are willing to throw out all their rules and principles in order to secure re-authorization,” he continued. “Given their power, they will almost certainly win, but the rest of us should at least enjoy the show.”
[PICTURED: Glenn Foden cartoon from heritage.org via camellarry.com]
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