June 25 (Bloomberg) -- U.S. Export-Import Bank Chairman Fred Hochberg mounted a defense of the 80-year-old agency as Republicans weigh eliminating the lender they say backs major corporations with political connections.
“Ex-Im Bank is not engaged in corporate welfare,” Hochberg said today at a House Financial Services Committee hearing in Washington.
Committee Chairman Jeb Hensarling, a Texas Republican who has urged abolishing the bank, said the lender primarily benefits companies including Boeing Co., General Electric Co. and Caterpillar Inc.
“If you’re a politically connected bank or company that benefits from Ex-Im, no doubt you would like it to continue,” Hensarling said during the more than six-hour hearing.
The panel is scrutinizing the Ex-Im Bank, which helps foreign companies buy U.S. goods, as some Republicans seek to kill the agency, saying the private sector can perform the same job. Incoming House Majority Leader Kevin McCarthy this week backed Ex-Im’s demise, adding a hurdle for Congress to renew the bank’s charter before it lapses on Sept. 30.
President Barack Obama wants to reauthorize the lender for five years, and gradually raise its lending limit to $160 billion from the current $140 billion. The bank gives foreign buyers loan guarantees, loans and credit insurance, and last year backed $37 billion in exports, about 2 percent of the total of U.S. goods exports.
Democrats are united in support. Republicans on the panel are split, with Representatives Peter King of New York and Stephen Lee Fincher of Tennessee favoring reauthorization with changes to its operations, which they didn’t specify.
“Please let’s don’t overreact,” Fincher said, adding that the bank’s lending supports about 1,000 jobs in his district.
The bank’s advocates say the agency is needed as American companies compete for business against foreign companies that get government financial aid. Nations including Russia and China are increasing support for their domestic exporters, and two-thirds of such government financing was unregulated last year, the bank said today in its annual competitiveness report.
“U.S. businesses are not competing against Chinese companies on a level playing field,” Hochberg said as he made the case to keep the bank in business. “They’re competing against China Inc.”
Business groups including the U.S. Chamber of Commerce and National Association of Manufacturers are lobbying to renew the lender. Without Ex-Im backing, they say companies stand to lose business to competitors with their government’s support.
Limited-government advocates including Heritage Action for America and the Club for Growth, both based in Washington, say the claim is overstated.
Providing support because other nations do it is “subsidy versus subsidy,” said Representative Michelle Bachmann, a Minnesota Republican who opposes reauthorization. “It’s a complete rejection of the free market. I don’t think that’s the direction we want to go.”
Hensarling cited disclosures that four bank officials were disciplined for accepting kickbacks or steering contracts to certain companies as he criticized the bank.
“Ex-Im may not just be guilty of cronyism, it may be guilty of corruption as well,” Hensarling said.
Hochberg said the disclosure, reported by the Wall Street Journal yesterday, will help the agency because it says to staff and exporters, “we are on to you.”
The agency’s inspector general is investigating the alleged misconduct, and at least two of four people involved have left the bank, he said.
While 89 percent of the bank’s deals help small businesses, according to its annual report, the single largest beneficiary is Boeing Co. of Chicago, the largest U.S. exporter.
Delta Air Lines Inc. is pushing for change, including preventing the bank from providing loan guarantees to help government-backed foreign competitors, such as Dubai’s Emirates Airline, buy wide-body Boeing jets.
“The Ex-Im Bank finances the wealthiest, most profitable airlines in the world with huge amounts of our taxpayer dollars,” Delta Chief Executive Officer Richard Anderson said at the hearing. He said changes his carrier sought in a 2012 debate over the bank’s reauthorization were “totally ignored.”
Senate Majority Leader Harry Reid yesterday said he plans to set a reauthorization vote before the charter lapses in September.
In the House, at least two renewal proposals have emerged. Representative John Campbell, a California Republican, said he is drafting a measure to keep the bank in business for three years and trim the lending cap to $95 billion. Representative Denny Heck, a Washington Democrat, said he has a bill to renew the bank through 2021 and raise the limit to $175 billion.
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