The fate of the United States Import-Export bank is coming down to the wire as House Republicans are threatening to block the bank’s re-authorization in advance of the September 30th deadline. The bank’s charter and government funding will expire if Congress does not vote to re-authorize the bank before then. Supporters of the bank say it is necessary for U.S. businesses that need to finance sales in riskier foreign markets, while financial conservative groups hold that the bank distorts the free market and functions as a government supported form of corporate welfare.
The Export-Import Bank is an independent export credit agency the purpose of which is to finance the export of U.S. goods in international markets by offering guarantees to foreign customers of American exporters. The 80-year-old institution was first founded under FDR in 1934 and was made an independent executive branch agency by an act of Congress in the mid-1940s.
Supporters of the bank point to the fact it has supported American firms in exporting approximately $234 million in products since 2007 and created 1.2 million jobs since 2009. Though federally funded, the bank is supported by interest payments and fees paid on loans it finances and does not cost taxpayers. According to The Brookings Institution, the Ex-Im Bank as of 2014 is running a $2 billion surplus.
The Ex-Im bank and its re-charters have generally been uncontroversial and have passed through Congress with bi-partisan support. However, in recent years as hyper-fiscally conservative elements have gained strong influence within the purse-controlling House of Representatives—supporting the bank has become somewhat more controversial.
Opponents of the bank argue that federally-funded excursions into the private marketplace invariably leads to the government playing favorites, generating inefficiencies and breeding corruption.
“The Export-Import Bank is crony capitalism,” said Rep. Thomas Massie of Kentucky, reports USA Today. “Some argue that the Ex-Im bank makes money, but so did Fannie Mae and Freddie Mac until the day they didn’t.” Massies, along with Kentucky Senator Rand Paul, is leading the charge to see the Im-Ex Bank’s charter fail to renew. He is also the co-sponsor of legislation that would dissolve the bank entirely.
Buttressing opponents’ complaints of corruption, earlier this summer The Wall Street Journal reported that four Em-Im officials had been officially suspended since the beginning of 2014 for receiving gifts and kickbacks.
Opponents also correctly point out that the Ex-Im bank benefits major companies: Boeing Co. BA , GE. and Caterpillar Inc. have all received funding through its services.
The bank, however, also services many small- and medium-sized businesses who might otherwise find international funding difficult to come by, reports Brookings.
“When a small company is attempting to navigate the international marketplace, it can be difficult to manage the risks related to financing growth and securing payment,” ISCO chief sales officer Tom O’Neill told USA Today in an E-mail. “The EX-IM bank has helped us to manage those risks and as a result our export business has been strong in recent years.”
The looming threat of the charter expiring has revealed some fracture lines in the Republican base. Small-government conservatives support abolishing or massively reforming the bank’s charter, while “chamber of commerce republicans” and various business groups support the smooth reauthorization as necessary for American businesses to function competitively on the international stage. The U.K., Germany, China and India all have their own national version of the Ex-Im bank to support domestic business conducting commerce outside their borders.
The U.S. House of Representative has no official plan to take up the Ex-Im bank reauthorization when it returns from recess in September. One possible compromise measure, that has been suggested by bi-partisan action groups hoping to head-off a political show-down over the issue in September, would be a temporary re-charter set to expire after the mid-term elections.