President Franklin Delano Roosevelt established the Export-Import Bank in 1934 in an effort to encourage American exports. Now, the House of Representatives is trying to keep this 85-year old relic alive for another 10 years, expand its lending capacity, and weaken its already inadequate oversight.
The Ex-Im Bank is an independent agency that provides taxpayer-backed direct loans, guarantees, and export credit insurance to private firms and foreign governments in the hope that they’ll purchase American goods. Ex-Im has a statutory lending authority of $135 billion, and the money often subsidizes large and profitable companies that would have no problem obtaining financing from the commercial banking system.
Companies that receive low-cost loans from Ex-Im include Boeing, Caterpillar, Chevron, and Halliburton. Critics have called the agency the “Reverse Robin Hood” because it takes money from taxpayers and gives it to large, profitable corporations. Others have called it “Boeing’s Bank” due to the disproportionate amount of benefits it has provided the company.
Ex-Im is not a conventional bank. It offers loan guarantees to private banks, which then agree to lend money to foreign companies who wish to buy American manufactured exports. Once the U.S. government guarantees the loan, there is almost no risk to the private bank. Ex-Im is a prime example of the government’s willingness to expose taxpayers to risk while allowing private companies to reap the benefits. In other words, it is corporate welfare.
Now the Democratic-controlled House of Representatives wants to reauthorize the bank for an unprecedented 10 years while weakening oversight.
House Financial Services Chairwoman Maxine Waters introduced a bill, the United States Export Finance Agency Act of 2019, and pushed it through her committee on a partisan vote. While there have been objections from fiscal conservatives to Ex-Im Bank funding in the past, there has generally been enough bipartisan support to keep it alive. However, this bill appears to only have Democratic support, likely making it dead on arrival in the Senate.
The legislation would allow Ex-Im to provide, for the first time, U.S. taxpayer money to companies owned and controlled by China — including those that work for the Chinese military and others that have been accused of a litany of human rights abuses. They could also include some companies that have been prohibited from doing business in the United States or are being considered for such a ban.
Rep. Waters’ bill also includes an alarming change to Ex-Im’s quorum rules, the number of members it requires to conduct business.
Currently, if the bank lacks a quorum of its Senate-confirmed board of directors, the board cannot approve deals valued at more than $10 million. Historically, that rule has benefited smaller businesses. However, Waters’ bill changes the standards for a quorum by automatically making the secretaries of Commerce and Treasury, along with the U.S. Trade Representative, board members of the bank when a quorum is otherwise not present.
On its website, Ex-Im claims to be “dedicated to dramatically increasing the number of small businesses exporting goods and services to maintain and create U.S. jobs.” But only 0.04% of small businesses receive assistance from Ex-Im, for a total of about 19% of its total disbursements. More than 80% goes to big corporations.
And Waters’ bill would all but eliminate small businesses from benefiting from Ex-Im.
The bill also dictates that at least 5% of Ex-Im’s annual lending should help to promote renewable energy. Since the onset of renewable energy subsidies in the 1970s, the federal government has allotted tens of billions of dollars to this cause, including tax credits and loan guarantees. The result?
Well, there’s been a long list of failed “investments” in renewable energy companies, such as solar energy company Solyndra. For the few companies that are still viable, there has not been any comprehensive evaluation of the benefits to taxpayers.
Even countries in the European Union, which have consistently touted the benefits of renewable energy, have recognized that government subsidies are too costly and adversely affect their economies. German Chancellor Angela Merkel’s staff referred to the subsidies as a “massive money pit” before announcing plans to phase them out.
Yet Rep. Waters wants to create a new set of renewable subsidies extended into perpetuity. This is exactly the wrong approach.
As federal spending and budget deficits continue to grow, ending cronyism and corporate welfare is more crucial than ever. When the government declares winners and losers in any industry, taxpayers end up carrying the losers.
Renewing Ex-Im at all would be a mistake. But renewing Ex-Im under Rep. Waters’ plan would be a disaster.
Tom Schatz is president of Citizens United Against Government Waste.
