The Export-Import Bank is a New Deal relic of corporate welfare that’s managed to earn the support of Congress for over 80 years.
That ended today, when organized pressure from free-market critics forced the expiration of the bank’s charter for the first time. While the government-funded bank accounts for a relatively small portion of the budget, defeating it represents a victory for those who oppose the nefarious relationship between big government and big business.
As Tim Carney, one of the bank’s most prominent critics, explained:
Ex-Im subsidizes U.S. exports through a few different financial products that all have one thing in common: they put the U.S. taxpayer on the hook if a foreign customer fails or refuses to pay back a loan. In Fiscal Year 2013, Ex-Im extended $27.3 billion in financing.
Ex-Im’s biggest product is the long-term loan guarantee. Over the past three fiscal years, such guarantees made up $52.6 billion of the agency’s $95.9 billion in financing. A fairly typical guarantee is the one that the Ex-Im’s board of directors approved on August 22, 2014: Virgin Australian International Airlines was buying a new batch of Boeing jets and Canadian TD Bank was providing the financing, in the form of a 20-year loan to the Aussie airline.
This looks like a regular market transaction until the Ex-Im Bank steps in to guarantee the loan, meaning that if Virgin Australian fails to pay back the Canadian lender, U.S. taxpayers cover the bank’s loss.
This is why Carney refers to support of Ex-Im as a “crony capitalist litmus test.” It has earned the support of Congress for so long precisely because the status quo has been so corporatist, often under the guise of support for free markets or American jobs. The tea party wave of 2010 brought to power a new class of Republicans who oppose cronyism, and ever since Ex-Im has found itself in their crosshairs.
Even Congressman Jeb Hensarling, Chairman of the House Financial Services Committee, opposes Ex-Im. According to him, “If you’re a politically connected bank or company that benefits from Ex-Im, no doubt you would like it to continue. After all, it’s a sweetheart deal for you. Taxpayers shoulder the risk and you get the reward.“
Ex-Im expiration, while a win for free market advocates, may be short-lived unless opponents of cronyism take action. The Associated Press reports that Senate Majority Leader Mitch McConnell thinks Ex-Im proponents have the votes to renew the bank’s charter and will attempt to attach its reauthorization to a highway bill. Unsurprisingly, Ex-Im apologists are yet again avoiding a clean vote on a bill specific to the bank, given its controversial nature.
The last time Ex-Im was set to expire, proponents tied its temporary reauthorization to legislation that thwarted a government shutdown. This short-term extension was tacked on in haste in September 2014 over the objections of a strong coalition of groups that were lobbying for a clean vote on Ex-Im’s renewal.
Ex-Im advocates like to push the narrative that without it, American jobs will suffer. The U.S. Chamber of Commerce claims:
Ex-Im Bank is a small federal agency that enables U.S. companies, including small and medium-sized businesses, to sell their products in global markets. As American companies compete and win in these international markets, they increase exports, create U.S. jobs and grow the American economy.
But as critics of the bank argue, the cronyism and corruption have become far too rampant. Four bank officials were recently charged with providing illegal kickbacks, and one with accepting bribes. There have been nearly 800 incidences of fraud with open cases still pending, almost 50 criminal judgments, and 74 transactions frozen by the Inspector General due to wrongdoing, all between 2007 and 2014. Furthermore, since 2010, Ex-Im beneficiaries who were found to be defrauding taxpayers are serving a total of 66 years in prison. Does this sound like a benign agency committed to middle-class American jobs?
The Ex-Im issue will heat up even further when members of Congress return from the July 4 recess. In preparation, the free-market advocacy organization Americans For Prosperity, one of the groups leading the charge against the bank, is encouraging opponents of reauthorization to pressure Congress into voting against any attempts at resurrecting the crony bank.
If Ex-Im does manage to rise from the grave, expect opponents to double down on killing it once and for all.