Tea Party Republicans want to shutter the Export-Import Bank. Would American companies suffer if the government didn't lend an occasional helping hand?
- By Jamila TrindleJamila Trindle is a senior reporter who covers finance, economics and business where they intersect with national security and foreign policy. Her beat spans everything from the economic underpinnings of conflict to sanctions, corruption and terror finance. Before coming to Foreign Policy magazine, Jamila reported for the Wall Street Journal’s Washington bureau, covering financial regulation and economics. She has also worked as a foreign correspondent in China, Indonesia and Turkey as a freelancer for NPR, Marketplace, The Guardian and others. She moved back to the U.S. to cover the post-crisis economy for PBS in 2009.
When FirmGreen Inc., a small California energy firm, wasn’t able to secure private financing it needed for a major expansion three years ago, company executives reached out to the federal government’s Export-Import Bank for help. The bank came through, giving a Brazilian company $48 million in loans so it could buy FirmGreen technology to convert gas from one of the country’s largest landfills into natural gas.
The company has been vying for a similar contract in the Philippines, but it wasn’t so lucky this time around. The culprit? Growing uncertainty about whether the bank will survive a concerted effort by Republicans to kill an entity that they believe improperly picks winners and losers and funnels taxpayer money to companies in China and Russia.
The future of the Export-Import Bank has become the latest issue to divide the Republican Party, with Tea Party-backed lawmakers proposing to allow its authorization to expire at the end of September and traditional GOP supporters in the business community lobbying for it to stay open. Letting the bank’s charter lapse, supporters say, would make it harder for American companies to sell their products overseas, give other nations a competitive advantage over the United States, and jeopardize hundreds of thousands of American jobs.
No matter, say powerful Republican critics like incoming House Majority Leader Kevin McCarthy (R-Calif.), who shocked Republicans from the party’s pro-business wing Sunday when he told Fox News that he would support letting the bank expire. "I think Ex-Im Bank is one that government does not have to be involved in," he said. "The private sector can do it."
House Financial Services Committee Chairman Jeb Hensarling (R-Texas), another leading bank critic, says he’s also concerned that the bank could inadvertently harm American national security. "The taxpayer money goes overseas to China and Russia — nations that openly challenge our economic and security interests," he said at a hearing over the bank’s future Wednesday.
If Hensarling and his allies get their way, the United States would become the only major economy that doesn’t bolster trade with government-backed loans. Created during the Great Depression by Franklin D. Roosevelt, the Export-Import Bank helps finance the export of American goods, either by lending directly to foreign companies to buy goods or services from U.S. businesses or by insuring the deal for the U.S. company. The bank authorized $27.3 billion worth of loans that made $37.4 billion worth of exports possible and supported 250,000 U.S. jobs in 2013, according to the bank and the U.S. Chamber of Commerce.
Bank President Fred Hochberg said the institution has made money since it was reauthorized in 2012 and returned nearly $2 billion to the U.S. Treasury. He also argued that the agency helps U.S. companies remain globally competitive.
"Every industrialized country has its own version of Ex-Im, and each is tasked with supporting the domestic exports of their respective nations," Hochberg testified before the House Financial Services Committee Wednesday.
Boeing, the United States’ largest exporter and the bank’s biggest beneficiary, said letting the bank’s charter lapse would make it harder to sell its airplanes abroad. John Kvasnosky, a spokesman for the firm, said in a statement that the bank’s demise would mean "Boeing will be placed at a competitive disadvantage to Airbus and other airplane manufacturers, all of whom have government export credit agencies to support customer financing."
Delta Air Lines CEO Richard Anderson, by contrast, backed critics’ charges that the bank was indeed subverting the free market by picking winners and losers. Anderson told the House panel Wednesday that when the bank helps Boeing sell planes to foreign airlines, some of which are state-owned, Delta loses out. "We have to compete against deeply subsidized government airlines that are in turn deeply subsidized by our government," Anderson said.
The bank’s survival seems increasingly unlikely given the power of its GOP critics, but it does have some Republican support on Capitol Hill. On Monday, for instance, 41 House Republicans sent their leaders a letter urging them to reauthorize the bank. On Tuesday, Senate Majority Leader Harry Reid of Nevada and Minority Leader Mitch McConnell of Kentucky said they wanted the Senate to debate a reauthorization bill. Although McConnell has pointedly declined to predict its fate or say whether he supports reauthorization, Sen. Chuck Schumer (D-N.Y.) said at a breakfast hosted by the Wall Street Journal Wednesday that he believes the Senate can pass the bill and then use a conference committee to try to save it.
Bank supporters were dealt another blow Monday when the Wall Street Journal reported that four officials are being investigated over allegations of misconduct, including accepting gifts and cash in exchange for government financing.
Still, business groups haven’t given up the fight to save the bank. Christopher Wenk, the Chamber of Commerce’s senior director for international policy, said the pro-business advocacy group was calling on state and local chapters to contact their member of Congress when the lawmakers are home during the July Fourth and August recesses, especially in key districts.
"In a perfect world, we wouldn’t need an export-import bank, but if you look at what the rest of the world is doing to support their exporters it would be asinine for the U.S. to unilaterally disarm," Wenk said. "September 30 is 27 legislative days from right now, so there’s a real urgency about this."