Will the Export-Import Bank Rise Again?

No more corporate handouts.

At the end of August, the Senate Banking Committee voted Kimberly Reed out of the committee to become the new president of the U.S. Export-Import Bank. But before she can start her job, she must win a confirmation vote in the full Senate. This is the first step to restore the past glory of an agency mostly devoted to serving big corporate interests at the expense of millions of non-subsidized American firms, workers, and taxpayers.

One of the core businesses of the Ex-Im Bank is backing loans made to foreign customers of domestic companies. For the most part, both the clients getting the loans and the domestic firms being subsidized are large and successful companies with plenty of access to capital. On the domestic side, before Ex-Im lost a large portion of its lending authority in 2015 due to the lack of quorum on its board of directors (it needs three members to approve deals above $10 million), 65 percent of its activities benefited 10 very large and successful companies, like GE, Caterpillar, Applied Materials, and the Sikorsky Aircraft Corporation.

But nobody benefited more than the aerospace behemoth Boeing. Between 2007 and 2014, companies purchasing products from Boeing received 70 percent of all loan guarantees and 40 percent of all Ex-Im handouts, earning the agency the nickname "Boeing's Bank."

The top foreign beneficiaries of Ex-Im were a Who's Who list of giant and often state-owned companies. They include Emirates airline, Ryanair, and China Air. But none benefited more than PEMEX, the Mexican state-owned oil and gas firm. Between 2007 and 2014, it received a total of $7 billion on loan from Ex-Im, which would seem to conflict with the stated anti-fossil fuel position of the Obama administration during that time.

That may come as a surprise to many Democrats, since they (with the notable exception of Sen. Bernie Sanders) were fervent defenders of the agency's reauthorization a few years ago in the name of helping small businesses. Yet as the numbers demonstrate, the agency was never about small businesses. While the bank had a quorum from 2007 through 2014, small businesses still only received 20 percent of the support it provided. That combined total is half the size of Boeing's windfall. Minority-owned businesses and women-owned businesses didn't do too well compared with Boeing either, at 2 percent and 1 percent of that support, respectively.

Stopping Ex-Im from making deals above $10 million—due to the lack of quorum—has had the effect of shifting some of the bank's activities toward small businesses. From 2015 through 2017, the portion of the bank's support directed to small businesses increased to 38 percent; the portion directed to minority-owned businesses increased to 6 percent; and the women-owned businesses' share grew to 3 percent. For the first time ever, the small-business allocations of funds are now bigger than Boeing's, which currently benefits from 25 percent as opposed to 40 percent of the bank's handouts. Incidentally, Boeing has still managed to prosper during the last few years despite this cut to its government largesse.

You'd think Democrats would be delighted about the new small-business focus for the agency, but you'd be wrong. Some are expanding a great amount of energy lobbying for the restoration of GE's and Boeing's perks. Yet to do that, they need more than Reed's confirmation as bank president; they need the confirmation of other members to the board of directors.

That was the message from Sen. Heidi Heitkamp (D-N.D.) back in July during Reed's nomination hearing. Her office released a statement calling for the speedy confirmation of Reed, "as well as the nominations of three others selected to serve on the Ex-Im Bank Board." As the senator noted, "I hope the few senators blocking these nominees from moving forward will do the right thing for American workers and businesses by instead enabling these nominees to get confirmed."

I hope they don't. If Heitkamp gets her way, cronyism will get a boost. High-level lending to large foreign companies at preferential terms will resume and continue to be backed by U.S. taxpayers. It will continue to feed the swamp and the government's corporate handout system.

Comments

[Scarecrow Repair & Chippering]

Stopping Ex-Im from making deals above $10 million?due to the lack of quorum?has had the effect of shifting some of the bank's activities toward small businesses. From 2015 through 2017, the portion of the bank's support directed to small businesses increased to 38 percent; the portion directed to minority-owned businesses increased to 6 percent; and the women-owned businesses' share grew to 3 percent. For the first time ever, the small-business allocations of funds are now bigger than Boeing's, which currently benefits from 25 percent as opposed to 40 percent of the bank's handouts.

Ms. de Rugy, you are usually clear as a bell. But this makes me wonder how Boeing can get any funding at all. I assume most of their normal funding is for airliners costing hundreds of millions of dollars. With that $10M limit, all their funding now must just be for small parts orders. I believe most airliner engines cost $20M and up. So how does Boeing still use the ExIm Bank so much? What are the selling and financing this way?

Or, IOW, you'd have to sell a lot of parts to equal just one airliner. It almost makes me imagine selling airliners as IKEA flat packs. An aileron here, a door there, a hydraulic pump or two, some tires (do custom rims cost more -- can they get spinners?), pretty soon you've got an airliner, some assembly required.

[MoreFreedom]

Good post. But the reality is the statists in Congress (Dems excepting Sanders and the vast majority of the GOP) have shown they like this cronyism. In spite of promises to end corporate welfare, the lying RINOs continue to fund it when they could simply not fund it. Just like they funded Obamacare, when Cruz was pointing out they could simply choose to not fund it (via the shenanigan of passing a bill to defund Obamacare knowing it wouldn't be taken up by Reid or otherwise vetoed by Obama followed by a vote on a bill funding the government along with Obamacare).

The focus on loans to small vs. large deals is irrelevant; it's all cronyism. De Rugy brings it up because it shows the Democrats are liars as well. The government shouldn't be picking winners and losers in commerce at the expense of taxpayers. People who want loans should get them in the free market without government getting involved.

[Griffin3]

I'm pretty sure at Boeing it is business as usual, but they have to get loans and purchase orders at market rates, instead of getting handouts from the government and guaranteed low-interest loans. You know, how all the rest of us in the business world have to do it.

[Griffin3]

Oops, meant as reply to Scarecrow Repair & Chippering @ 12:34

[DiegoF]

with the notable exception of Sen. Bernie Sanders

Yes and this is the only exception--despite what the sea of faux-populist erstwhile Schumer clones now being mentioned as Presidential frontrunners are now presenting themselves as. Far more political shaming should be made over this by libertarians and the more pro-marketish Republicans--though it's doubtful that any Stupid-Partiers outside the Freedom Caucus will be willing to shame their pro-Ex-Im colleagues, limiting the promise of this strategy.

Just one of the reasons I have always regarded the former lifelong Republican Elizabeth Nighthorse Warren to be as phony as a three-dollar wampum.

[JFree]

If it weren't for ExIm Bank, deRugy wouldn't even be able to recognize corporate cronyism.

It's funny as hell. In a country that runs $500 billion in non-self-correcting currency exports/year, you gotta be a real obtuse moron to obsess about the obviously irrelevant cronyism on the other side of that ledger.