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 copied the model. But small-government advocates shut down the bank in 2015, saying it distorted the free market by using tax dollars to pick business winners and losers. Its supporters didn’t give up. The bank, seen as a success story for most of its 83 years, has (sort of) come back to life.
Wilbur Ross, President Donald Trump’s secretary of commerce, said in his confirmation hearing that there could be justifications for keeping the Export-Import Bank going. He appears to have convinced the president, who in mid-April said he supported keeping the bank, after having denounced it on the campaign trail. He’ll have to convince some congressional Republicans, including Speaker of the House of Representatives Paul Ryan, who’s called the bank’s practices “crony capitalism” because two-thirds of its money went to just 10 companies. Congress let the bank’s lending authority expire after June 30, 2015, but enough Republicans in the House joined Democrats to force a vote that October to bring back the lender. In December 2015, negotiators from both chambers of Congress reached an agreement that revived the bank’s lending authority through September 2019. Senator Richard Shelby, a Republican who opposes the bank, then took matters into his own hands. He’s held up votes for nominees to the Ex-Im board, preventing the bank from having the quorum needed to approve loans of more than $10 million. Ex-Im’s lending has been tepid since then.
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 in the U.S. 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 in industries including aerospace, energy and manufacturing. Over the years, Ex-Im helped bankroll projects ranging from the Pan American Highway to insurance waivers that kept airlines flying after the Sept. 11 terrorist attacks. 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. But some airlines, including Delta Air Lines Inc., said the bank’s loan guarantees for Boeing Co. jets unfairly subsidized rival international carriers. Though Democrats widely support Ex-Im, Barack Obama had 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 he won the presidency, Obama had a change of heart and supported Ex-Im.
The Export-Import Bank says that in fiscal 2014, its last fully operation year, it backed $27.5 billion in exports — somewhat less than 2 percent of the U.S. total. This financing supported 164,000 American jobs that year, according to the bank, and about 90 percent of the bank’s deals helped small businesses. And, Ex-Im notes, it’s made money for the government, sending more than $674 million in profits to the U.S. Treasury in 2014. (In fiscal 2016, the hobbled bank backed just $8 billion in exports and sent $284 million to Treasury.) The U.S. Chamber of Commerce supports the bank, saying that without it jobs might be lost to competitors in China or Russia. This argument has been echoed by Dennis Muilenburg, chief executive officer of Boeing, which had been the bank’s biggest beneficiary. While the bank says its default rate since 1934 was less than 1 percent, opponents say Ex-Im loans could be vulnerable in a downturn, leaving taxpayers stuck with the bill. And they note the current low interest rates mean there’s less need for the institution. Republican Representative Jeb Hensarling, head of the House committee that oversees the bank, has also pointed to corruption at Ex-Im after a former bank employee pleaded guilty to accepting over $78,000 in bribes from 2006 through 2013.
The Reference Shelf
- U.S. Export-Import Bank’s fact sheet and its fiscal 2016 report.
- Congressional Research Service report: “Export-Import Bank: Overview and Reauthorization Issues.”
- 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.”
Brian Wingfield contributed to the original version of this article.
First published July 1, 2014
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