Cronyism: The Export-Import (Ex-Im) Bank
Cronyism: The Export-Import (Ex-Im) Bank
At the end of this month, the Congressional reauthorization for the bank expires. The purpose of the Export-Import Bank is a worthy one: promoting products made in America to be sold across the globe. However, once the federal government gets in the business of banking, you have a problem because it is picking winners and losers.
- About the Bank
- Congress’ Debate
- Picking Winners and Loser
Washington Picking the Winners and Losers
About the Bank
The Export-Import Bank was created by the Export-Import Bank Act of 1945 under the purpose to provide jobs for U.S. workers by promoting U.S. goods to be sold abroad.
- It serves as the United States’ export credit agency and is required to finance and promote the export of U.S. goods in cases where other financing may not be immediately available.
- In other words, the Ex-Im Bank makes riskier loans financed with taxpayer money.
- Congress authorizes the bank and its capacity, sets the upper limits on the bank’s financial activities, and confirms the board of directors.
The Ex-Im Bank’s authority expires on May 31, by which time Congress must reauthorize or adapt the bank’s charter. 1
Though taxpayer money finances the bank, the money is paid back through fees and interest it charges borrowers.2
- According to the Congressional Research Service, in Fiscal Year (FY) 2011, the bank supported $41 billion in exports and approved 3,700 transactions.3
Picking Winners and Losers
The problem, however, is that nearly one-third of the bank’s financing is to one company: Boeing. In other words, foreign airlines’ purchases from Boeing are subsidized – a benefit U.S. airlines, such as Delta, do not enjoy.
- In other words, foreign airlines’ purchases from Boeing receive subsidized financing – a benefit U.S. airlines, such as Delta, do not enjoy.
- Delta has argued this cost their industry as many as 7,500 jobs and $684 million per year.4
House Republicans are attempting to reauthorize the Ex-Im Bank for the 25th time since its charter was established. The Securing American Jobs Through Exports Act of 2011, as amended, would reauthorize the bank though September 30, 2014 under certain conditions:
- The bill places a cap on the bank’s loans, guarantees, and insurance at $120 billion for the following fiscal years. If the bank can maintain a default rate less than 2%, it may increase this to $130 billion in FY2012 and $140 billion in FY2014. It is currently authorized at $100 billion6.
- If the default rate rises 2% or higher, the bank must report to Congress with plans to lower it. If it remains above 2% for more than six months, a third party must be hired to conduct an independent review of the bank.
- The bank must submit an annual report to Congress.
- The Government Accountability Office (GAO) must audit the bank and then the bank must report to Congress on the implementation of the GAO’s suggestions.
- The bank must report on “its effectiveness in maintaining and creating jobs in the United States and contributing to the export of goods and services.”
- Any transaction over $100 million must be printed in the Federal Register and open to comments.
- Congressional Research Service. Export-Import Bank: Background and Legislative Issues. April 3, 2012. Pg. 1. http://www.fas.org/sgp/crs/misc/R42472.pdf ↩
- Congressional Research Service. Export-Import Bank: Background and Legislative Issues. April 3, 2012. Pg. 2. http://www.fas.org/sgp/crs/misc/R42472.pdf ↩
- Congressional Research Service. Export-Import Bank: Background and Legislative Issues. April 3, 2012. Summary.
- Bloomberg. Ex-Im Bank Chief Contests Delta Complaints on Aircraft Financing. April 17, 2012.
- Unless otherwise noted, all facts in this section come from Congressional Quarterly. House Action Reports: Securing American Jobs Through Exports Act of 2011. May 7, 2012. http://www.cq.com/doc/har-4076509 ↩
- Bloomberg: Congress fights over future of export bank. May 4, 2012. http://www.businessweek.com/ap/2012-05/D9UI6B400.htm ↩