The Ex-Im Bank has been reauthorized 16 times since it was created in 1934 as a filigree on the New Deal’s overarching project of politicizing the allocation of financial resources. The reauthorization requirement is a way of pretending to refute Ronald Reagan’s axiom that there is nothing as immortal as a temporary government program, because programs acquire “reliance interests” the way a ship acquires barnacles.
Between 2015 and the Senate’s recent confirmation of three board members, Ex-Im has been without a quorum and hence unable to approve guarantees of large loans (those over $10 million). So, we have had a sustained test of the theory that Ex-Im is vital to U.S. exporting in general, and to the few giant corporations that get the lion’s share of benefits from Ex-Im’s subsidies of foreign entities. The theory has been slain by many facts.
Ex-Im has always been peripheral to U.S. exporting. In the four years since Ex-Im became largely dormant, the portion of American exports it subsidized fell from less than 2 percent to 0.3 percent — and exports have risen.
Ex-Im has prudently distributed subsidies to enough small businesses to blur its (accurate) reputation as primarily an ally of corporate behemoths such as General Electric, John Deere, Caterpillar and especially Boeing. Sen. Mike Lee (R-Utah), who opposes Ex-Im, notes, “When Ex-Im financing was at its peak, Boeing received 70 percent of all . . . loan guarantees and 40 percent of all Ex-Im dollars.” In 2018, deprived of subsidized Ex-Im loans, Boeing, America’s 23rd-largest corporation by market capitalization ($193.24 billion as of Tuesday evening), and 27th largest by revenue ($101 billion), had its best year ever.
Of course, Ex-Im makes enough loans to small businesses (in 2014, about 25 percent of Ex-Im dollars went to 0.5 percent of small businesses) to purchase congressional support in the usual way: Want to build a bomber that the military does not want? Scatter subcontractors around enough congressional districts, and it will be built.
Lee says: “The No. 1 buyer of exports subsidized by Ex-Im between 2007 and 2013 was Pemex . . . the notoriously corrupt petroleum company owned by the Mexican government. Pemex, which has a market cap of $416 billion, received more than $7 billion in loans backed by U.S. taxpayers. . . . During the same period, Ex-Im backed $3.4 billion in financing to Emirates Airlines — a company wholly owned by the government of Dubai — for Emirates’ purchase of Boeing planes.” Sen. Patrick J. Toomey (R-Pa.) identifies the second- through-fifth-biggest beneficiaries of Ex-Im subsidies: (2) state-owned Kenya Airways, (3) state-owned Air China, (4) Russia’s state-owned bank VEB (currently under U.S. sanctions for bad behavior; two hands of the U.S. government, one caressing, one smiting), (5) Roy Hill mining, owned by Australia’s richest woman, a multibillionaire.
The Trump administration trots out its usual rationale for economic irrationality: Ex-Im is a “national security weapon.” As the bank subsidizes China and Russia? In 2014, in 17 Ex-Im transactions the primary borrower was the Export-Import Bank of China. Says Toomey, “You cannot make this stuff up”: Ex-Im is subsidizing the Chinese bank that is cited as the reason we need Ex-Im.
Toomey notes that Ex-Im’s defenders argue the bank takes risks that private lenders will not undertake — and that the bank does not risk taxpayers’ money by making unsafe loans. By picking some U.S. winners, Ex-Im makes some U.S. losers: For example, it subsidizes state-owned Air India’s purchase of Boeing jets, thereby enabling it to lower its fares on the New York-Mumbai route, where it competes against Delta Air Lines.
Ex-Im, which exists to allocate credit by political criteria rather than the market’s efficiency criterion, is opposed by only 16 Republican senators — call them The Remnant — who, unlike their 37 Republican colleagues, mean what they say when praising free markets and limited government: Barrasso, Blackburn, Braun, Cruz, Daines, Grassley, Hawley, Inhofe, Kennedy, Lankford, Lee, Rubio, Sasse, Shelby, Toomey, Young.
Republicans must repeat this dismally revealing exercise by Sept. 30, when the bank must be reauthorized, which it will be. So, the 37 have three months in which to resume their denunciations of socialism, with which they are familiar.