The Export-Import (Ex-Im) Bank of the United States may have finally admitted to themselves what a broad swath of voices have been saying for months: they are an unnecessary institution. After fighting for their very existence against a skeptical Congress, the Ex-Im Bank might have just proven the point that American exporters could very well survive their dissolution.
The final showdown over the eventual fate of the Bank was recently deferred to next summer by a temporary government funding measure, after their charter was originally set to expire on September 30. This followed a significant legislative battle in which a number of voices from all over the political spectrum spoke out critically against this institution, calling it the poster-child for crony capitalism – not a difficult case to make considering ten major corporations scoop up about 60 percent of Ex-Im financing.
The leader of the Congressional assault was Rep. Jeb Hensarling (R-Texas), chairman of the House Financial Services Committee and a noted member of the Republican conference’s conservative wing. House Majority Leader Kevin McCarthy (R-Calif.) also voiced his opposition to the Bank, as did liberal Democratic Representative Alan Grayson (D-Fla.). A long-time champion of eliminating corporate welfare programs, Ralph Nader, has also surfaced to argue for Ex-Im’s demise.
Congress may have punted their decision to next June, but the Bank’s future is far from secure. For this reason, Ex-Im Chairman Fred Hochberg’s recent statements about the efficacy of his own organization is noteworthy.
Hochberg’s comments, reported by Bloomberg and Businessweek, suggest that his institution is not exactly an essential pillar of American trading power. In fact, their influence is diminishing. Chairman Hochberg estimated that Ex-Im’s total authorizations are estimated to have dropped a whopping $7 billion since last year.
All of this, according to Businessweek, stands as evidence of the Export-Import Bank’s “shrinking footprint.” The reason for their weakening is that more export lending is coming from the private sector.
Industry is taking business away from an embattled government institution. This should come as a surprise to no one with an understanding of economics, but it’s even less shocking considering this was predicted by none other than Majority Leader McCarthy during the height of the battle over Ex-Im’s reauthorization.
“One of the biggest problems with government is they go and take hard-earned money so others do things the private sector can do,” McCarthy told Fox News’ Chris Wallace back in June. “That’s what the Ex-Im Bank does.” He went on to add that the “Ex-Im Bank is…something government does not have to be involved in. The private sector can do it.” It appears that this is already happening.
Oddly enough, even the Bank’s top client has admitted that the private sector would suit their lending needs just fine. According to the Congressional Research Service, aircraft conglomerate Boeing accounted for 65 percent of Ex-Im’s long-term loan guarantees in 2013. A separate report pegged the dollar amount the company received at more than $8 billion that year. Boeing uses Ex-Im to finance their aircraft sales to foreign – often state-supported – airlines, a questionable practice for the government to be involved in, considering it places U.S. airlines at a competitive disadvantage. One study even estimates that this has already cost the domestic airline industry over 7,000 jobs.
Despite their sweetheart deals with Ex-Im – not to mention the $4 million in lobbying efforts they’ve recently poured in to bolster them – Boeing does not appear threatened by the prospect of the Bank folding. Last year, The Wall Street Journal reported on a top Boeing finance officer’s “confident” feeling that “alternative funding sources” would be available if Ex-Im were no longer able to issue loan guarantees.
The private sector is already picking up their slack, which means that their major benefactor, Boeing, won’t be suddenly plunged into insolvency without the Bank. Ex-Im Bank’s raison d'être is quickly fading and Congress should think hard on that matter as they prepare for their next session.