It would be nice not to need an Export-Import Bank. Until that happens, let's keep it. Photographer: Andrew Harrer/Bloomberg
It would be nice not to need an Export-Import Bank. Until that happens, let's keep it. Photographer: Andrew Harrer/Bloomberg

When the House Financial Services Committee holds its hearing tomorrow on the Export-Import Bank, some of its members might legitimately ask: Why should the U.S. even have an export-import bank?

After all, the bank, which makes and guarantees loans to foreign companies that buy U.S. products, has clear drawbacks: It subsidizes the consumption of U.S. goods and services abroad, skewing the normal operation of supply and demand. It puts U.S. taxpayer money at risk if a borrower defaults. And it can harm American competitors of the foreign companies that receive loans.

Indeed, in a perfect world, the U.S. would be better off without an export-import bank. In the actual world, however, where international trade is carried out on an uneven playing field and the market doesn't naturally provide affordable credit to all companies that need it, the U.S. needs an export-import bank to make up for those imperfections.

Many other countries prop up their exporters by providing loans underwritten by taxpayers. And the U.S. bank's loans go toward projects that private lenders can't or won't finance on affordable terms.

The Export-Import Bank has other positive qualities: It is set up to make only those loans that are determined to have a net positive impact on the U.S. economy and jobs. It has a record of making loans with a low default rate, often generating a profit for the U.S. Treasury. And its loans fund only purchases of U.S. products -- which means the money goes to U.S. companies or subsidiaries.

Nevertheless, there are plenty of ways the bank's operations can be improved. Loan officers sometimes fail to complete checklists or collect the documents that are required to approve a loan, according to a report from the bank's inspector general last year. Bank staff need to document that every loan meets the criteria established by Congress, especially when it comes to determining economic impact.

Also, it's important to make sure the bank's financial returns reflect more than favorable accounting. In May, the Congressional Budget Office projected that, after factoring in market risk, the bank will cost taxpayers $2 billion over 10 years. The existing accounting standards (set by Congress) say the bank will save the government $14 billion. There's disagreement over whether it's appropriate to apply so-called fair-value accounting to the bank, but that's a helpful conversation to have.

Lawmakers on the Financial Services Committee should also look into reports that four bank officials have been suspended over allegations that include accepting kickbacks and trying to help companies win federal contracts.

Congress is right to seek an end to subsidized loans for exporters in the U.S. and elsewhere. But getting rid of the Export-Import Bank wouldn't achieve that goal, and would be all but certain to hurt the economy.

To contact the senior editor responsible for Bloomberg View's editorials: David Shipley at davidshipley@bloomberg.net.