Export-Import Bank Update
Things have been busy on the Export-Import (Ex-Im) Bank front. For those not in the know, the Ex-Im Bank makes loans and guarantees loans for U.S. exporters, as well as their foreign customers. For example, if a foreign airline wants to buy a new plane, Ex-Im will arrange favorable financing terms if it buys that plane from U.S.-based Boeing.
Ex-Im’s critics argue that the bank is a corporate welfare program, and is vulnerable to favoritism and corruption. I compiled several reasons to oppose Ex-Im in this paper. Ex-Im’s defenders counter that Ex-Im is necessary to increase U.S. exports and support American jobs, though buying that argument requires ignoring that 98 percent of U.S. exports happen without Ex-Im’s involvement, and that there are other, possibly better uses for the capital Ex-Im sits on.
Unlike most other agencies, Ex-Im has a built-in sunset, meaning it will automatically cease to exist unless Congress periodically votes to renew its charter. This led to a bitter political fight last fall, when Ex-Im’s charter was renewed until this June 30. Typical reauthorizations last for four or five years, so this nine-month reauthorization was a significant concession to reformers. As June 30 approaches, the Ex-Im battle is heating up once again. At this point, it appears Congress will hold a vote in May on Ex-Im’s fate.
This week, the House Financial Services Committee held a hearing, where Ex-Im head Fred Hochberg (see his written testimony here) defended his agency from Chairman Jeb Hensarling (R-TX), who wants to close the bank.
Also this week, the Justice Department charged former Ex-Im employee Johnny Gutierrez with bribery. Over the period 2006-2013, Gutierrez allegedly accepted $78,900 of cash and other improper gifts. Diane Katz recently unearthed 74 cases of alleged corruption among Ex-Im employees from 2009-14, an impressive achievement for an agency with only 400 employees.
As Ex-Im’s beneficiaries turn up the political heat, rumors are swirling that Republican House Majority Leader Kevin McCarthy (R-Calif.), who came out publicly against Ex-Im last year, is changing his mind and might favor reauthorization. Rep. Stephen Fincher (R-Tenn.), who is sponsoring an Ex-Im reauthorization bill, has been working on McCarthy for some time. Boeing, which alone accounts for nearly half of Ex-Im’s business, has spent $69 million on lobbying since 2012, much of it in support of Ex-Im, and is pressing very hard to keep Ex-Im’s doors open.
Delta Airlines has been the loudest corporate voice opposing Ex-Im, but it has only spent $10 million in lobbying since 2012, barely one seventh of Boeing’s total. Delta argues that Ex-Im subsidizes its foreign competitors when they buy Boeing jets, putting Delta, which pays full price for Boeing’s planes, at an artificial disadvantage.
Finally, the bank claims to be a champion of small business, but as a new Mercatus Center paper by Veronique de Rugy and Diane Katz shows, Ex-Im heavily favors big businesses over small businesses
At this point it’s hard to say how this fight will end. The economic case against Ex-Im is airtight, and many key members of Congress want to close the bank. Inertia is the strongest force in politics and the closest thing to an immortal being is a government agency, but this is one issue where reformers have a legitimate chance of victory.