Currently the Senate is having a heated debate about a mysterious government-run bank that most Americans have never heard about even though it can call on taxpayer money in an emergency. It’s the Export-Import Bank, a government authorised institution that is officially run with the purpose of creating and safeguarding American jobs, but really amounts to a loan-guarantor for politically-connected corporations. Every few years Congress reauthorizes its operations, with hardly any debate or argument–until this year.
Currently the Export-Import Bank is run under the assumption that it costs the taxpayer nothing; the bank uses repayments of old loans to guarantee new ones.
But this is partly a fiction. The bank is “self-financing” in the same way housing giants Fannie Mae and Freddie Mac were. If it ever gets in trouble, the taxpayer is going to bail it out.
Ex-Im operates under the instruction that it shouldn’t compete with private banks, it only provides financing the market can’t or won’t provide itself. It also has a lending cap of $100 billion dollars. According to a report from Annie Lowrey of The New York Times, the Bank is getting close to bumping into that limit soon.
The bank’s charter is also coming up for renewal, and Democrat Senator Maria Cantwell wants to see it renewed through 2015, and its lending cap raised to $140 billion. She’s attached these provisions to the JOBS Act, a bipartisan effort to spur job creation in the Senate.
Conservative Republicans in the House and Senate are balking. From Lowrey’s report:
“Ex-Im is processing more than 90 per cent of its loan and guarantee applications without conducting a Congressionally required review of any serious adverse effects of the loan,” a group of six senators, including Jim DeMint of South Carolina, Rand Paul of Kentucky and Tom Coburn of Oklahoma, wrote in February in a letter.
Many conservatives are calling the Ex-Im a form of corporate welfare, and they have a point.
The bank does a great deal of business on behalf of Boeing. Here’s how it works: A foreign purchaser like the Pakistani government wants aeroplanes for its government-run airline. The government doesn’t have the kind of credit rating to finance a purchase like this. So the Export-Import Bank guarantees the financing in order to keep Boeing profitable and employing Americans. Ex-Im loaned out $10.2 billion to finance Boeing deals last year — 66.8 per cent of its portfolio, according to the Washington Examiner’s Tim Carney.
No wonder the Club for Growth, a conservative activist group, has dubbed Ex-Im, “The Bank for Boeing.”
But that’s not all. Carney also points out that last year Ex-Im gave a $10 million loan guarantee to the failed Energy giant Solyndra to sell solar-modules to Belgium.
The possibilities for corruption are ripe. Carney notes that many of Ex-Im’s clients stay very close to the White House:
Obama is indeed tight with Ex-Im’s corporate clients. Boeing CEO Jim McNerney chairs Obama’s exports council. General Electric, famously close to the Obama White House, is another leading recipient of Ex-Im subsidies. Siemens this year won a $638 million direct loan from Ex-Im. The company’s VP for federal lobbying, David McIntosh, is an Obama administration alumnus and an Obama donor. (This donation is OK by the Obama campaign because McIntosh is not registered as a lobbyist.)
The debate over the Export-Import Bank is really a debate about the nature of American capitalism. Increasingly a subset of conservatives are turning against the “pro-growth” and “pro-business” politics that dominate both parties and instead are embracing positions that might be called “pro-market” or “pro-failure” depending on your view of them.
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