The Corner

Economy & Business

Ex-Im Is Back in Business But Not for Big Companies. Let’s Keep It That Way

Last night, Congress voted to revive the Ex-Im Bank — attaching reauthorization to an awful highway bill. Shame on them. However, there is a bit of good news. Congress’s vote in favor of cronyism doesn’t help Boeing or GE, the main beneficiaries of Ex-Im. That’s because the agency lacks enough board members to authorize deals above $10 million.

Bloomberg reports:

Congress voted Thursday to revive the bank, as part of a highway-funding bill, after allowing its charter to lapse June 30. But the bank, which helps U.S. companies sell products overseas, still won’t be able to approve transactions valued at more than $10 million because three of the five spots on its board of directors are vacant.

That means companies like General Electric Co., Boeing Co. and Caterpillar Inc. that depend on the 81-year-old bank for larger loans and guarantees are out of luck until the Senate confirms a new board member.

Senator Ted Cruz issued the following statement upon the passage of the egregious highway bill that Congress used as the vehicle for Ex-Im reauthorization: 

The Export-Import Bank is an egregious example of corporate welfare and has no business being reauthorized – period, much less snuck through as part of an alleged must-pass bill. The Ex-Im Bank board of directors still lacks enough members to approve big loans that put taxpayers on the hook for millions of dollars of loan guarantees for big business, so at least for now, the Bank is still prevented from making big loans to giant corporations favored by the Washington Cartel.

This is a big deal for anyone opposed to the crony-capitalist agency. To give you an idea, I calculated that 84 percent of the value of approved deals between October 2006 and September 2014 (the whole range of the dataset that’s online) are above $10 million. Also, while a majority of deals approved are below the $10 million threshold, they still only represent 16 percent of the total dollar amount approved. In other words, not approving the third board member would effective cut the cronies out of the Ex-Im Bank. That should be something we all can celebrate.

Now, Democrats have claimed that they support Ex-Im due to the small business side of its activities. If they are consistent (I realize they aren’t), then they should be happy about this outcome! This is an indirect way to make the Bank a small-business lender rather than the crony banker it has been for all these years. I wonder how will Senator Elizabeth Warren react to the whole thing. After all in a June 2 hearing before the Senate Banking Committee, she laid into the witnesses from the Chamber of Commerce and the National Association of Manufacturers when they said that they would not support increasing the mandatory lending to small businesses. This development should make her happy. Will it?

The other question is what Senator Richard Shelby will do. It seems to me that he is a key player here since once McConnell decides whether or not he approves of the President’s Republican nominee, Shelby can decide not to schedule a hearing for the nomination of that third board member. The Senator has been a great ally in the fight against Ex-Im: voting against its reauthorization and refusing to move a reform bill through his committee after he studied the issue and concluded that Ex-Im was nothing more than a crony-capitalist boondoggle.

Shelby has many reasons not to schedule a board-member nomination hearing. Why should Senate Republicans approve any of President Obama’s nominees in the last year of his term? Why should Senator Shelby agree to schedule a hearing that would effectively lead to a policy outcome he is against?

I have many more questions but for now I am content with this outcome. Let’s just hope it lasts.

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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