WASHINGTON—The Trump administration is pushing the Senate to revive the U.S. Export-Import Bank (Ex-Im), labeling it “a national security weapon.” But some Republicans and advocacy groups backed by the Koch brothers oppose the bank, calling it “corporate welfare.”
That quorum hasn’t existed since 2015. The four nominees sent by President Donald Trump are still pending confirmation by the Senate; no date has been scheduled for the vote.
The White House believes the bank’s role is crucial for both economic and national security purposes. It’s an important tool to compete with other countries such as China that have strong export-finance agencies.
At the Ex-Im’s annual conference last month, Peter Navarro, the White House trade adviser, lashed out at lawmakers for creating a “needless conundrum.”
“We are getting hammered—particularly by China, South Korea, and the other countries in the G-7,” he said.
U.S. exporters have missed $21 billion in overseas opportunities since the bank lost its quorum, and transactions worth $40 billion are still sitting in the bank’s pipeline, according to Navarro.
At the conference, White House chief economic adviser Larry Kudlow also stressed the importance of winning the reauthorization of the bank, calling it “a national security weapon.”
The export credit agency, dating back to 1934, assists in financing and facilitating U.S. exports of goods and services. It supports large multinational corporations such as Boeing, Caterpillar, and GE; it’s also an important source of credit for small businesses.
The last fiscal year that Ex-Im was fully operational with a board quorum was 2014. Lack of a quorum since then has severely constrained the bank’s ability to authorize large loans. In addition, the agency operates under a renewable charter and its mandate is set to expire on Sept. 30. Hence, reauthorization is an extra challenge facing the bank this year.
“It’s really the responsibility of just a few parties in the Senate that have obstructed the democratic will of the people and the Senate,” said John Schuster, the former head of Ex-Im’s structured finance division.
According to Schuster, Toomey has been a leader in the cause to eliminate the bank. He has recently placed a hold on Senate approval of Trump’s nominees, preventing the board from operating with a quorum.
“And Senator Mitch McConnell, who is the most responsible party here, has done nothing about that hold, in spite of the fact that two-thirds of the Senate has voted in favor of Ex-Im Bank in the past,” he said.
‘Unfair Advantage for Some’
In August last year, the Senate Banking Committee unanimously approved Kimberly Reed, Trump’s nominee, as the president of the bank’s board of directors. While Toomey voted in favor of Reed, he still maintains his hold on three board nominees.Toomey once admitted that he was in the minority in the Senate with his views on Ex-Im.
“It’s long been no secret I am deeply skeptical of the mission of Ex-Im Bank,” he said at a Banking Committee hearing in November 2017.
“It’s a great deal if you’re an exporter and Ex-Im subsidizes a foreign company that buys your product, that’s great. But sometimes that results in an unfair advantage for some and not others,” he explained.
He said Ex-Im subsidized aircraft for Air India, which gave them a competitive advantage over Delta Air Lines and resulted in the loss of nearly 1,000 U.S. jobs.
Proponents of the bank, however, reject the arguments, calling them unjustified. They say Ex-Im takes the commercial and political risks by guaranteeing loans for entities abroad buying American goods.
“The U.S. government can take a risk that the private sector cannot take,” said Mark Stuckart, who formerly worked for the Department of Commerce and the Overseas Private Investment Corp., Ex-Im’s sister agency.
And the U.S. government has much greater leverage in getting payments back and recovering defaulted loans, he explained.
Commercial lenders often are either unable or unwilling to accept such risks, particularly for exports to countries with a high risk of default.
According to Schuster, calling Ex-Im’s below-market rates a “government subsidy” is also unjustified.
“Until it lost its ability to make large loans, the bank operated at a profit. So it was never a subsidy,” said Schuster. “The rates that they offered were lower than commercial markets. They were rates that were offered in response to other export agency competition.”
Koch Network
Billionaires Charles and David Koch, who are among the Republican Party’s top donors, have been behind the idea of eliminating the Ex-Im. According to a Politico article published in 2015, a wide network of think tanks and advocacy groups funded by the Koch brothers put the bank on the political radar and turned it into a litmus test in Congress.“We don’t believe government should be picking ‘winners and losers’ by subsidizing or mandating certain industries or products,” the letter stated.
The industrial conglomerate labeled the bank “corporate welfare,” a tag that was also used by former President Barack Obama and Sen. Bernie Sanders (I-Vt.).
Advocacy groups such as Americans for Prosperity and Freedom Partners Chamber of Commerce, funded by the Koch brothers, continue to urge policymakers to end the corporate welfare.
“The Export-Import Bank is on a countdown to expiration and Washington should make sure it gets there,“ the advocacy groups said in a recent statement. ”Ex-Im tilts the scales in favor of the well-connected at the expense of American companies and taxpayers.”
Koch Industries launched the campaign against Ex-Im simply because the group was not a strong beneficiary of the bank, Schuster said.
“The ‘corporate welfare’ tag was originated by misguided Democrats, including President Obama,” he said. “That’s the tag that they want to pick up on. It is an incorrect reading of how Ex-Im Bank works and it’s a convenient way for them to do something that is really within their own political and corporate interests. It’s sickening.”
