Nations love exports — and the jobs and tax revenue that come with them. The U.S. was desperate for more of them during the Great Depression when it created a national bank to finance loans for exports. That was the Export-Import Bank of the U.S., which was so successful at expanding exports that scores of other nations have copied the model. Now small-government advocates are looking askance at the bank, saying it distorts the free market by using tax dollars to pick business winners and losers. Some members of Congress are turning against it. A bank that was seen as a success story for most of its 80 years is now fighting for its life.
The Export-Import Bank needs Congress to renew its authority this year and Tea Party Republicans are leading the opposition. Representative Jeb Hensarling, head of the House committee that oversees the bank, has called for its abolition, saying the lender provides “sweetheart” deals to companies, like Boeing and Caterpillar, that don’t need the help. Incoming House Majority Leader Kevin McCarthy says the bank’s charter should be allowed to expire Sept. 30 because private lenders can do the job. A bank ally, Representative Eric Cantor, McCarthy’s predecessor as majority leader, had helped broker a deal that saved the bank in 2012, but he lost his primary election in June. Tea Party-aligned groups like Heritage Action for America and the Club for Growth are waging campaigns for Ex-Im’s demise. In response, business organizations have stepped up lobbying to save the bank.
The Export-Import Bank was started by President Franklin D. Roosevelt in 1934 as a New Deal program to boost exports. Despite the name, Ex-Im doesn’t offer import assistance. It provides loan guarantees, loans and insurance to help foreign companies — sometimes those with less-than-perfect credit — buy U.S. goods when private banks can’t or won’t make loans. Over the years Ex-Im helped bankroll projects ranging from the Pan American Highway to insurance waivers that kept airlines flying after the terrorist attacks of 2001. For decades, Congress reauthorized the bank with little or no debate and didn’t even bother with a roll call in either chamber for its extension in 2006. Though Democrats widely support Ex-Im, Barack Obama criticized it while campaigning for president in 2008, calling it ”little more than a fund for corporate welfare” at a time when opposition to government spending, triggered by the bailouts that year, was growing. After the market for private financing withered, the bank’s total outstanding financial commitments grew to $107 billion at the end of fiscal 2012 from $59 billion in 2008. President Obama now supports Ex-Im and is seeking a five-year reauthorization, with a lending cap increase to $160 billion from the current $140 billion.
The Export-Import Bank says it backed $37.4 billion in exports in fiscal 2013 — about 2 percent of the U.S. total — and supported more than 200,000 American jobs. The U.S. Chamber of Commerce notes that almost 90 percent of Ex-Im transactions were done for small businesses. Disbanding it would amount to “unilateral disarmament,” the Chamber says, since nations including China, France and Russia have financing agencies waiting to underwrite easy sales from their own manufacturing, aerospace and nuclear-energy industries. Ex-Im reports that it sent more than $1 billion in profits to the U.S. Treasury in fiscal 2013. Although Ex-Im says its default rate since 1934 is less than 1 percent, opponents say its loans could be vulnerable in a downturn, leaving taxpayers stuck with the bill. Critics question Ex-Im’s bookkeeping and how much help it gives to small businesses and are pressing for changes in its accounting practices. Delta Air Lines says it will oppose Ex-Im reauthorization unless the bank stops helping competitors backed by foreign governments, like Dubai’s Emirates Airline, buy Boeing wide-body jets that could eat into its transcontinental business.
The Reference Shelf
- U.S. Export-Import Bank’s fact sheet.
- Export-Import Bank 2013 competitiveness report.
- Testimony from a June 25, 2014, House Financial Services Committee hearing on the Export-Import Bank.
- Representative Jeb Hensarling speech at the Heritage Foundation: “A Time for Choosing: The Main Street Economy vs. The Washington Crony Economy.”
- Export-Import Bank Termination Act of 2012, introduced by Representative Justin Amash.