A 1934 creation of President Franklin D. Roosevelt, the Export-Import Bank was meant to facilitate trade between the United States and other nations.
Its initial focus was lending to the old Soviet Union. But over the years, the Ex-Im Bank portfolio has greatly diversified.
Eighty years on, it has loaned billions to numerous foreign nations and companies. The idea, as always, is to encourage those foreign entities to purchase U.S. goods. In reality, however, the so-called bank has outlived its usefulness.
Today, the Ex-Im Bank is fast approaching its statutory cap of $100 billion in loans, and its charter is expiring. With the support of many in Congress, that bank has requested increased loan authority and reauthorization of its charter. In this situation, a do-nothing Congress is the taxpayers’ best friend. It could reduce their exposure to billions of dollars in potential loan losses simply by letting the clock run out on the Ex-Im Bank.
Congressional Quarterly reports that House Majority Leader Eric Cantor (R-Va.) and House Minority Whip Steny Hoyer (D-Md.) are working on a deal to bulldoze conservative opponents of reauthorization in the House. In the Senate, Majority Leader Harry Reid (D-Nev.) has pledged to bring a bill to the floor soon. Most likely Reid will green-light Sen. Maria Cantwell’s (D-Wash.) bill, which would extend the bank’s lease until 2015 and boost its lending authority to $140 billion.
While serving in the Senate, Barack Obama regarded this bank is an example of failed government policy. In 2008 he called the Ex-Im Bank "little more than a fund for corporate welfare.”
Sen. Jim DeMint (R-S.C.) agrees with those sentiments. Writing in the Washington Examiner, he exposed the bank as a vehicle for international crony capitalism. The Ex-Im Bank’s practice of loaning to private companies is plain “wrong,” he explained, "because all companies – foreign and domestic – should compete on a level playing field, so that success goes to those companies who offer the best products and services at the lowest prices.” .
Beyond doubt, the bank has made loan decisions based on politics, rather than the beneficiary’s ability to repay debts. Both conservatives and liberals can recognize the moral hazard of that practice.