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Could Ex-Im Bank Debate Lead to Another Government Shutdown?

Even the GOP is divided on fate of what Hensarling calls a form of corporate welfare.

by
Bill Straub

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July 4, 2014 - 12:01 am
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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.”

All Comments   (7)
All Comments   (7)
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You need to think of governmental export financing as an obverse of protective tariffs. Rather than protecting domestic markets for domestic producers, the Ex-Im Bank subsidizes penetration of external markets by domestic producers.

Rather than unilaterally disarming ourselves, we need to kill such lending facilities like we diminished protective tariffs - by mutual negotiations like the Doha rounds.

I've seen this financing play a part in major capital exports in my own career. My US company lost a multi-billion dollar Finnish contract to a French government owned corporation when their government was able to beat our terms and conditions - which includes financing. There would be a lot more jobs in my field if we had won.

So lets not let our idealism blind us to practical matters. Such financing matters in the real world and we lose without it.
3 weeks ago
3 weeks ago Link To Comment
What? Where did this headline come from? The Ex-Im Bank is not going to lead to another govt shutdown! No. Not under any circumstances.
Please do not Bait-&-Switch your readers for Clicks! We get enough crap just surfing thru the MSMedia. The word "shutdown" in the first sentence is coffee-house, and then the entire topic is never mentioned again!
Keep your own standards high. You guys can do better.


...
4 weeks ago
4 weeks ago Link To Comment
"Even the GOP is divided..."
This really is too precious.
Why, do you think, is it that the Chamber of Commerce backs establishment Republicans? Is it because they are staunch free marketeers?
Even the GOP? Especially the GOP.
4 weeks ago
4 weeks ago Link To Comment
Corporate welfare = crony capitalism. What else explains Dow Jones rise to 17,000? HUH? Wall Street is just rolling in tax payers hard earned wages, salaries and bonuses(monetary easing). And this 1)greed, 2)unbridled search for ever more power, and 3) rampant corruption at every single level of national, local and municipal government is mind boggling to say the least (that's government AND private industry). America's MORAL fiber has become one of small number of "takers" and a wide swath of overburdened American "givers." IRS scandal is but the tip of this rocking, frolicking iceberg. Pockets of ALL Americans will soon have been picked clean...doesn't anybody in all of We The Elite People in culture of corruption in ALL of Washington DC see this? It cannot continue. Has anybody walked through their local retail outlets lately? Noticed anything different? YEP, fewer choices of merchandise, smaller gondolas with groceries on display, small packaging, higher prices... and sale events galore. And economic recovery is on the rebound? HOW? Fewer numbers of Americans working, a mountain of welfare recipients and this is what an economic rebound looks like? Not on your sweet patootie!
Discretionary income of the average American family is literally hitting an all time low. And Washington DC "fat cats" are planning to continue their "same ol', same ol'? Join a local Tea Party, register to vote and vote. Pray. Amen.
4 weeks ago
4 weeks ago Link To Comment
I am divided on this...but have I also have significant red flags and bells going off.

Pro:
- The 'bank' has been making a profit to us.

Con:

- It equates to less than 1% of our exports and only serves as a benefit to the companies and countries it backs. That same benefit is not profered for other companies inside the US.

- Quickie review of the benfactors appears to be largly Dem donors or corps under the thunb of Obama.

- Boeing has been one of the key beneficiaries, selling jets at much lower financial rates to competitors than what American carriers are able to get.
- General Electric ( who we have gaiven billions to over hte last 4 yrs)
- Bechtel
- CBI Americas
- ExxonMobil (oh my)
- Westinghouse
- Noble Oil Drilling

Why are these overwhelming wealthy companies needing hte taxpayers to take a risk? Why don't htey put their coin on the counter?
4 weeks ago
4 weeks ago Link To Comment
He of Boners' picking is just sending a message to those who bought Cain'tor that he is expecting the check to arrive for the service to continue...
4 weeks ago
4 weeks ago Link To Comment
Note the single quote from a "small business" in support of the Ex-Im.

One of Obama's "green" cronies.

Enough said.
4 weeks ago
4 weeks ago Link To Comment
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