Analysts are starting to warn about the possibility of the second government shutdown in two years, due to the looming fight over the reauthorization of the Export-Import Bank.
Chris Krueger, an analyst at Guggenheim Securities, wrote in a research note that the “ultimate trump card” for defenders of the bank is the potential for another government shutdown, since the Ex-Im Bank’s charter’s expiration on Sept. 30 coincides with the need to pass a new government-funding bill.
“We do not believe the government will again shut down on October 1, but if House Republicans make a serious effort to close Ex-Im it is conceivable that Senate Majority Leader Reid and the White House could line-up an FY15 [continuing resolution] with an Ex-Im Bank reauthorization and we return to a game of chicken in late September just like last year (just replace Ex-Im with ObamaCare) — only this time it is right before the midterm elections,” Krueger wrote.
A second shutdown in two years — particularly one that would begin with about a month to spare before the crucial midterm elections — seems unthinkable. But analysts began speculating about the possibility of a number of unforeseen macroeconomic events being introduced into the 2014 and 2015 calendar after House Majority Leader Eric Cantor’s stunning primary loss earlier this month.
One Senate Democratic aide told Business Insider it could be a legitimate possibility.
“Yes, I do see it getting that far,” the aide said. “The Kochs have been on this campaign for years, and they are successfully recruiting Republican lawmakers into their ranks. The recent corruption charges at the Bank will only fuel their efforts.”
The aide was referring to a Wall Street Journal report on Tuesday, which contained details about the bank’s suspension and/or removal of four officials amid allegations of improper behaviour. One of the officials allegedly took cash in exchange for attempting to aid a Florida company in securing financing to export construction equipment to Latin America. Some of the groups opposed to the bank’s reauthorization blasted out the story to reporters.
The bank provides direct loans, guarantees, and credit insurance to aid foreign purchasers in buying American-made goods. Its charter expires at the end of September, unless Congress acts to renew it. Supporters of the bank were dealt a blow over the weekend, when incoming House Majority Leader Kevin McCarthy (R-California) signaled his opposition to reauthorizing its charter.
The dispute over the bank has made some unusual allies — the White House and the Republican establishment-friendly Chamber of Commerce both pressed the case for the bank’s renewal on Monday, the day after McCarthy’s comments brought the debate to the forefront.
“This outcome would likely delight the White House and Senate Democrats who are too eager to remind voters of the previous shutdown and seek to isolate House Republicans as overly conservative/Tea Party,” Krueger wrote of the potential of a shutdown.
Here’s where things could get tricky: Four top House Republicans are opposed to reauthorizing the bank — McCarthy, incoming House Majority Whip Steve Scalise (R-Louisiana), House Financial Services Committee Chair Jeb Hensarling (R-Texas), and House Budget Chair Paul Ryan (R-Wisconsin).
But their Republican counterparts in the Senate — as well as Republican governors — have been more supportive in public statements about the bank. Moreover, GOP senators wouldn’t want to risk a shutdown with a Senate majority on the line.
Businesses big and small also have an interest in the bank’s reauthorization — the Ex-Im Bank supports more than 3,000 small businesses and is a huge benefactor for behemoths like Boeing, Caterpillar, and General Electric. Because of the business lobby and the more conciliatory tone toward the bank from Republican senators and governors, Krueger expects the bank’s charter to be reauthorized — at least for a little while longer.
“We ultimately believe the bank will prevail, but it will be a dog fight,” Krueger wrote. “At the end of the day, we see Reid (and the powerful Washington Senators) marshalling the needed support of the business community and several Republican Senators and Governors to muscle a relatively short-term extension (likely not longer than six months) across the finish line.”
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