WASHINGTON – The Export-Import Bank is back on the congressional griddle, with some observers predicting the upcoming debate over the corporation’s fate could ultimately lead to another governmental shutdown.
House Majority Whip Kevin McCarthy (R-Calif.), who will soon replace Rep. Eric Cantor (R-Va.) in the post after the latter lost a re-election bid, revived the argument over the bank’s fate with a recent appearance on Fox News Sunday when he announced his opposition to reauthorization. Cantor supported the bank.
“It’s something that the private sector can be able to do,” McCarthy said.
House Speaker John Boehner (R-Ohio), who has supported the Ex-Im Bank in the past, has expressed less enthusiasm for the federally owned corporation this time, refusing to tell reporters which side he’s falling on.
“My job is to work with our members to get to a place where the members are comfortable,” Boehner said. “Some people believe that we shouldn’t have it at all, others believe that we should reauthorize it with significant reforms and we’re going to work our way through this.”
Senate Democratic Leader Harry Reid, of Nevada, intends to seek a vote on the bank’s future before Sept. 30 – the day the agency’s authorization is slated to expire. Senate Republican Leader Mitch McConnell, of Kentucky, who has opposed the bank in the past, told reporters he is undecided this go-round but supports Reid’s intention to debate the issue.
The Export-Import Bank, a New Deal legacy created in 1934, finances and insures foreign purchases of goods produced in the U.S. for customers either unable or unwilling to accept credit risk. The bank seeks to create and sustain domestic jobs by financing the sales of U.S. exports to international buyers.
Under the charter granted by Congress to operate as a government corporation, Ex-Im is prohibited from competing with private sector lenders but is authorized to provide financing for transactions that otherwise would likely not occur because commercial lenders are unwilling to assume the financial risk associated with the deal.
The bank’s charter expires at the end of the federal fiscal year. The Obama administration is requesting a five-year reauthorization with an exposure cap of $160 billion – a $20 billion increase above current levels.
“There is a strong drive to increase exports from many countries around the globe,” said Fred Hochberg, the bank’s president and chairman. “We need to send the same signal to competitor nations that we stand behind American workers and exporters and ensure that products stamped ‘made in the U.S.A.’ are able to compete on a level playing field. In order for U.S. businesses to be able to compete based on the price and quality of their exports, Ex-Im needs to be there to level the playing field when it comes to meeting foreign export credit agency competition.”
But a number of conservative Republicans, including Rep. Jeb Hensarling (R-Texas), chairman of the House Financial Services Committee, consider the bank a form of corporate welfare and are looking to kill it.
Hensarling maintains that records prove “overwhelmingly and indisputably” that the Export-Import Bank’s benefits are directed at “some of the largest, richest, most politically-connected corporations in the world – like Boeing, General Electric, Bechtel and Caterpillar. In fact, in 2013 over half of Ex-Im’s financing went to a handful of Fortune 500 companies.”
Large Wall Street banks like JP Morgan and Citigroup benefit from the arrangement as well, Hensarling said, citing a recent press report that quotes one banker as saying funds from Ex-Im constitute “free money.”
“So if you’re a politically connected bank or company that benefits from Ex-Im, no doubt you would like it to continue,” Hensarling said. “After all, it’s a sweetheart deal for you. Taxpayers shoulder the risk and you get the reward. But if you work at a small business or other American company competing in the global marketplace, it’s unfair. Ex-Im effectively taxes you while subsidizing your foreign competitors.”
Hensarling acknowledged that there exists a diversity of opinion within the Republican caucus over the existence of the Export-Import Bank.
“But we are united in believing we cannot reauthorize the status quo,” he said. “And we are also united in believing that the smarter and fairer way to promote American exports is by fundamental tax reform, strong trade agreements, a regulatory freeze with the exception of health and safety and greater American energy independence with projects like the Keystone pipeline.”