Renewing the authority of the U.S. Export-Import Bank has routinely been done by Congress without any fanfare, but the agency that helps American manufacturers sell their goods abroad could go out of business if ultra-conservative members of the House get their way. It may not even get a floor vote.
That's because top Republican leaders don't want to fund the export finance agency.
In an interview on Fox News Sunday
, Majority Leader-elect Kevin McCarthy made clear that he is against reauthorizing the bank, which makes loans and loan guarantees to overseas companies to help them buy goods from U.S. producers, and sells export credit insurance to U.S. companies in case a customer doesn't pay its bills.
The bank's charter expires at the end of September.
"One of the biggest problems with government is they go and take hard-earned money and do things the private sector can do. That’s what the Export-Import Bank does. The last authorization of the Ex-Im Bank directed the president and the Treasury secretary to wind down the Export-Import Bank, negotiate with the other countries [to do the same] so we have a level playing field," the California Republican said.
"I think Export-Import Bank is something government does not have to be involved in," he continued. "The private sector can do it."
The primary defeat of Eric Cantor, who subsequently stepped down as majority leader, has opened the door to Tea Party activists in the House to kill the bank. Cantor helped push through the bank's re-authorization two years ago. During his campaign for the job, McCarthy promised the Republican caucus that he wouldn't bring it up for a vote.
The House Financial Services Committee on Wednesday will hold a hearing to examine the bank's mandate, performance and the effectiveness of reforms in the 2012 reauthorization.
Committee Chairman Jeb Hensarling, R-Texas, is strongly opposed to the Export-Import Bank, and Speaker John Boehner, R-Ohio, has said he will not interfere to force a vote.
Last year, the Export-Import Bank approved $27 billion in aid to support exports for more than 3,400 companies valued at an estimated $37 billion. The agency says it earned more than $1 billion for the Treasury.
Supporters say the trade finance agency is crucial for helping exporters, especially small- and medium-sized businesses, and creating jobs. But critics question the agency's accounting, including for job creation, and say the aid mostly goes to big corporations that don't need it and puts government funds at risk. Among the beneficiaries are companies such as Boeing, GE and Caterpillar.
A week ago, for example, the bank's board voted to guarantee a $15 million load extended by Rabobank International in the Netherlands to a Dutch company to facilitate the export of Caterpillar power-generation equipment.
Ex-Im Bank statistics show that more than 90 percent of the transactions benefit small-business exporters, although a larger dollar value helps big firms.
Exports represent 12 percent of business for Miss Jenny's Pickles, a small North Carolina company. In an interview Monday on Al Jazeera America
, co-founder Jenny Fulton said her company depends on the Export-Import Bank to check the creditworthiness of overseas customers so she can offer them payment terms.
“If you can offer a customer terms then you increase your sales," she said. North Carolina banks aren't interested in offering the same terms and insurance, Fulton added.
"We pay a fee. This is not a handout," she insisted.
The Wall Street Journal
on Monday reported that the bank has
suspended or removed four officials in recent months related to
allegations of gifts and kickbacks. It is also looking into whether some
employees attempted to steer federal contracts to favored companies.
Delta Air Lines, in 2012, helped instigate the second-guessing about the Export-Import Bank, leading the small-government wing within the conservative movement to adopt the issue as an example of government waste. Delta complained that the agency was helping foreign competitors buy cheaper airplanes from Boeing, but without U.S. government help, "Ethiopian Airlines would be buying Airbuses instead of Boeings," N.Y. Times
columnist Joe Nocera said on Al Jazeera America
Delta notwithstanding, business groups, such as the National Association of Manufacturers and the U.S. Chamber of Commerce, are mobilizing to fight for the Export-Import Bank. On Monday, the Chamber and NAM sent a letter to lawmakers signed by 865 companies that support the Export-Import Bank
. It noted that the bank has a very low default rate. Supporters also point out that the agency doesn't compete with commercial lenders but fills gaps in commercial financing.
"The Ex-Im Bank is critical to leveling the playing field in a fiercely competitive global economy where many foreign export credit agencies offer generous terms to our competitors,” NAM President and Chief Executive Officer Jay Timmons said in a statement. “Reliable access to export financing is vital to our global competitiveness, particularly in today’s unsettled financial environment. Manufacturers in the United States can’t afford to be defenseless in the global marketplace. Allowing the Ex-Im Bank to shut its doors would be a gift to foreign producers overseas and would result in the loss of exports, manufacturing and jobs here in the United States.”
The two business associations said they have organized more than 350 meetings on the Hill and created a website with small business success stories, myths and facts about the Export-Import Bank
The same day 41 House Republicans pleaded in a letter to Boehner and McCarthy to allow consideration of a multi-year re-authorization for the Export-Import Bank
. But the pro-business Wall Street Journal
called on Congress in a June 9 editorial to kill the agency because it perpetuated crony capitalism for Beltway special interests.
"Private loans may be more expensive, but that's because competitive markets attempt to price accurately the trade-off between risk and reward. The Ex-Im subsidy also distorts economic decision-making in developing countries. Politicians love a national airline that's flying new Boeings, but maybe their citizens would be better served with better roads," it said.
"There is also little evidence showing that Ex-Im is a main export driver, and in practice, its guarantees favor some U.S. companies over others," the editorial said.
The Times' Nocera countered in his Tuesday column that the Export-Import Bank makes important deals possible
in a world where private lenders may be too risk averse or foreign governments aid national champions. He pointed out that McCarthy supported the bank's re-authorization two years ago.
Governors are also coming out in favor of the Ex-Im Bank because it supports thousands of small companies and benefits others that supply the big companies, former Mississippi governor Haley Barbour said on CNBC
’s "Squawk Box" Wednesday morning.
“Yeah, in a perfect world, in a level playing field, you could make a case there shouldn’t be one of these. But every country in the world has got an export credit agency, and most of them are much more aggressive than the Ex-Im Bank. We've got the highest corporate tax rate in the world, 35 percent; we don’t have a territorial tax system, so our companies pay taxes twice on what they make; we’ve got an administration policy on energy that’s making electricity more expensive. I just don’t think America ought to compete in exports with one hand tied behind our back. ... The fact of the matter is we can end up exporting our goods or exporting our jobs," said Haley, a one-time chairman of the Republican National Committee.
Tim Pawlenty, the CEO of the Financial Services Roundtable and a former Republican governor of Minnesota, made a similar appeal Monday on CNBC
President Obama on Monday said his administration plans to redouble efforts to increase U.S. trade and investment with Africa.
John Hardy, president of the Coalition for Employment through Exports, said in a statement that the Export-Import Bank is critical to penetrating the African market.
"It is the only tool in the U.S. commercial arsenal that has the ability at this time to counter the Chinese, Indian and other interests that have committed hundreds of billions of dollars in infrastructure and industrial projects throughout the region. Senior Chinese officials last year stated the Chinese government was committed to spending $1 trillion in sub-Saharan Africa by 2025, with 70 to 80 percent coming from China's Ex-Im Bank," he said.
The 2012 re-authorization increased the agency's lending cap to $140 billion from $100 billion. It also required the bank to submit a business plan and respond to a Government Accountability Office audit. The Treasury Secretary was directed to launch multilateral negotiations to rein in the practice of countries providing export subsidies, which critics say distorts trade. The re-authorization further required the bank to categorize each loan and loan guarantee as either necessary because the private sector would not undertake the risk, would not overcome limits in private finance, or would not meet competition from foreign export credit agencies.
The Ex-Im Bank is seeking a five-year authorization and an increase
in the lending cap to $160 billion. On Tuesday, Rep. Denny Heck,
D-Wash., filed a bill would re-authorize the Bank for seven years and
increase its lending cap to $175 billion.
"The Export-Import Bank is a reliable way for American business —
including many small businesses — to sell their goods and services into
the world marketplace,” Heck said in a statement. “If we abandon this
resource, we are allowing China, Russia, and European countries to gain
ground in export deals previously made with us, the economic equivalent
of forfeiting in the World Cup when we know we have the best team.”