U.S. Export-Import Bank

From Apple Pie to Endangered Species

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Nations love exports — and the jobs and tax revenue that come with them. The U.S. was desperate for more of them during the Great Depression when it created a national bank to finance loans for exports. That was the Export-Import Bank of the U.S., which was so successful at expanding exports that scores of other nations have copied the model. Now — for the second time in a year — small-government advocates are trying to abolish the bank, saying it distorts the free market by using tax dollars to pick business winners and losers. While prominent Ex-Im opponents in Congress last September agreed to a nine-month extension, they’ve used the interim period to bolster their case. A bank that was seen as a success story for most of its 81 years is again fighting for its life.

The Situation

Unless Congress acts, the Export-Import Bank’s lending authority will expire June 30. Tea Party Republicans, who want to limit government intervention in the free market, say the bank provides a form of corporate welfare. Some airlines, including Delta, say the bank’s loan guarantees for Boeing jets unfairly subsidize its international competitors. Congress is now considering four bills that would reauthorize the lender with some reforms. But Republican Representative Jeb Hensarling, head of the House committee that oversees the bank, is still calling for its abolition.

Source: Export-Import Bank
Source: Export-Import Bank

The Background

The Export-Import Bank was started by President Franklin D. Roosevelt in 1934 as a New Deal program to boost exports. Despite the name, Ex-Im doesn’t offer import assistance. It provides loan guarantees, loans and insurance to help foreign companies — sometimes those with less-than-perfect credit — buy U.S. goods when private banks can’t or won’t make loans in industries including aerospace, energy and manufacturing. Over the years, Ex-Im helped bankroll projects ranging from the Pan American Highway to insurance waivers that kept airlines flying after the Sept. 11 terrorist attacks. For decades, Congress reauthorized the bank with little or no debate and didn’t even bother with a roll call in either chamber for its extension in 2006. Though Democrats widely support Ex-Im, Barack Obama criticized it while campaigning for president in 2008, calling it “little more than a fund for corporate welfare” at a time when opposition to government spending, triggered by the bailouts that year, was growing. Ex-Im authorizations soared, reaching a peak of $114 billion in total outstanding financial commitments at the end of fiscal 2013, from $58 billion in 2008. President Obama now supports Ex-Im reauthorization. 

From research by Ken Monahan, Bloomberg Government
From research by Ken Monahan, Bloomberg Government

The Argument

The Export-Import Bank says it backed $27.5 billion in exports in fiscal 2014 — somewhat less than 2 percent of the U.S. total — and supported 164,000 American jobs. And Ex-Im notes that it makes money for the government, sending more than $674 million in profits to the U.S. Treasury in fiscal 2014, though this was about 36 percent less than the previous year. In May, the U.S. Chamber of Commerce began a national ad campaign in favor of the bank, arguing that without it, jobs might be lost to competitors in China or Russia. While the bank says its default rate since 1934 is less than 1 percent, opponents say Ex-Im loans could be vulnerable in a downturn, leaving taxpayers stuck with the bill. House Majority Leader Kevin McCarthy says the current low-interest rates make it a good time to start phasing out the institution. Hensarling says he’s worried about “corruption” at Ex-Im, after a former bank employee pleaded guilty to accepting over $78,000 in bribes between 2006 and 2013. While about 90 percent of Ex-Im’s deals help U.S. small businesses, an analysis by Veronique de Rugy, a bank critic at George Mason University, found that Boeing benefited from about 30 percent of the bank’s authorizations in 2013.

The Reference Shelf

  • U.S. Export-Import Bank’s fact sheet.
  • Congressional Research Service report: “Export-Import Bank: Overview and Reauthorization Issues.”
  • Testimony from a June 25, 2014, House Financial Services Committee hearing on the Export-Import Bank.
  • Representative Jeb Hensarling speech at the Heritage Foundation: “A Time for Choosing: The Main Street Economy vs. The Washington Crony Economy.”

First Published July 1, 2014

To contact the writer of this QuickTake:

Brian Wingfield in Washington at bwingfield3@bloomberg.net

To contact the editors responsible for this QuickTake:

Anne Cronin at acronin14@bloomberg.net

Jon Morgan at jmorgan97@bloomberg.net