Dating back to its founding in 1934, the Export-Import Bank of the United States has had a pretty specific mission: subsidize the export of American-made products by extending cheap credit to foreign companies looking to buy our stuff.
Whether the bank serves any legitimate purpose is another matter entirely. These days, the Export-Import Bank mostly acts as a slush fund for politically connected American corporations like Boeing and General Electric that would have no trouble doing business abroad but are more than happy to benefit from its largesse, doled out in the form of low-interest loans to potential buyers. Sometimes it also blows American taxpayer money on propping up government-run monopolies in foreign countries.
Still, the mission has always been clear. It's right there in Executive Order 6581, which President Franklin Delano Roosevelt signed in 1934 to authorize "a banking corporation…with power to aid in financing and to facilitate exports and imports and the exchange of commodities between the United States and other Nations." The bank's current mission statement, too, clearly spells out a goal of "supporting American jobs by facilitating the export of U.S. goods and services."
Now, quietly, the Ex-Im Bank is taking on a new—and entirely domestic—project.
At a meeting last week, the Ex-Im Bank's board of directors voted unanimously to approve a so-called "Make More in America" initiative. The press release announcing the new program is a gobbledygook of crony capitalist doublespeak virtually devoid of specifics about how the program will operate or what it will cost. The new program "will create new financing opportunities that spur manufacturing in the United States, support American jobs and boost America's ability to compete with countries like China," Reta Jo Reyes, the bank's president and board chair, says in the statement.
This latest development at the Ex-Im Bank is another aspect of the sprawling federal effort that began under President Donald Trump and continues under President Joe Biden to subsidize American manufacturing. The creation of a "domestic financing program" at the Ex-Im Bank was part of a series of supply chain recommendations made by the White House in June. A few days before Christmas, the Ex-Im Bank filed a vague notice in the Federal Register outlining plans to implement the program.
But there has been little clarity about what the program will aim to do, which businesses might stand to benefit from it, or how its results will be judged. In the announcement last week, the Ex-Im Bank only said that the new program will "immediately make available the agency's existing medium- and long-term loans and loan guarantees for export-oriented domestic manufacturing projects."
What counts as "export-oriented" is open to some interpretation. The details filled in the Federal Register indicate loans could be available to companies that export as little as 25 percent of their product, though the financing must have "reasoned and articulated" nexus to exports of some kind—and the Ex-Im Bank will decide what that means on a case-by-case basis.
All that vagueness is a feature, not a bug. Many American manufacturers might be able to qualify, but most companies don't have the time and resources to appeal to the Ex-Im Bank for loans—the beneficiaries will be those that do.
"This is worse than mission creep," says Sen. Pat Toomey (R–Pa.), the top Republican on the Senate Banking Committee.
In March, Toomey filed a series of questions with the Ex-Im Bank seeking additional information about how the new initiative would work. The bank's responses, delivered to the senator in a March 23 letter from Lewis, do not leave the impression that the program is being carefully targeted toward a real need.
In response to one query asking the Ex-Im Bank to provide evidence that there is a lack of private sector financing that might make a federal domestic loan program necessary, Lewis admitted that "it is difficult" to identify such a shortfall, and that "U.S. capital markets are deep and liquid." Where there are "gaps," according to Lewis, they exist among "non-investment grade or unrated borrowers." In fact, Lewis explains, applicants for the new domestic financing program "will need to demonstrate that the required financing is not otherwise available from the private sector."
Translation: the government will throw taxpayer dollars at investments that private capital markets have deemed too risky.
But how will the government decide which projects to fund? Toomey also asked the bank to explain what steps will be taken to "ensure that domestic transactions will not be influenced by political pressures."
The Ex-Im Bank's response to that query is even more worrying. There don't appear to be any safeguards in place. "Financing is available to all qualifying applicants based on criteria established by law and agency practice," Lewis wrote in reply.
Translation: Any company with the resources to hire the attorneys, accountants, and lawyers necessary to decipher the bank's policies and sufficiently schmooze decision-makers can get paid.
"There is no reason that taxpayers should have to back domestic financing when we live in a highly developed market economy in which promising businesses have access to capital on competitive terms," says Toomey. "Even worse, this unprecedented program subverts Congressional intent by straining the interpretation of Ex-Im's charter to such an extent as to make it meaningless."
Tellingly, one of the companies to already have discussions with the Ex-Im Bank, according to Lewis' letter, is Suniva—the Georgia-based solar panel manufacturer that has helped pull the strings on Trump's and Biden's tariff policies despite not actually producing any solar panels in the U.S. in the past five years
And if the Make More in American program is as successful as the rest of the Ex-Im Bank's efforts, it's unlikely to accomplish much of anything.
"The Ex-Im Bank's record of underachievement is hard to overstate," says Veronique de Rugy, George Mason University economist, Reason contributor, and longtime critic of the Ex-Im Bank.
From 2014 through 2018, the Ex-Im Bank was effectively shut down (a lack of a quorum on the board meant it could only approve small loans) but American exports actually grew to a then-record $2.5 trillion during the 2018 fiscal year from $2.3 trillion in the 2014 fiscal year. If the Ex-Im Bank is an essential element of America's global trade strategy, you'd expect the opposite to have happened during four years when the bank was hobbled.
But that didn't stop Trump from reopening the Ex-Im Bank as part of his haphazard efforts to boost American manufacturing against China. And it hasn't stopped the Biden administration from using the bank as a tool in its equally vague attempts to bolster protectionism. All that's based on a Washington-centric bizarro world in which American manufacturing is struggling—it's actually thriving—and where private capital markets are less well-equipped to make decisions about which projects get funding, despite a long track record of misguided corporate handouts.
The best-case scenario, says De Rugy, is that the bank's new domestic program will add no value to the economy. In all likelihood, it will be a net negative as it crowds out some private investment.
Worst of all, the Ex-Im Bank's mission creep turns the institution into, de Rugy says, "an even bigger corporate welfare nightmare than it already was."