Here we go again. The Senate — led by the Democrats — is trying to restore the full lending power of the Export-Import Bank, a federal agency that subsidizes loans for large foreign companies to buy goods from large U.S. companies. The issue today is the refusal by Senator Richard Shelby (R., Ala.) — the chairman of the Banking Committee — to consider the nomination of a third Ex-Im board member that would allow the bank to resume its activities fully and to start extending loans above the current $10 million threshold.
Trying to go around Shelby’s objection, Senator Heidi Heitkamp (D., N.D.) asked that the Senate provide unanimous consent to confirm Mark McWatters to Ex-Im’s board. The attempt failed as Shelby objected and Utah’s Mike Lee offered his support to that objection. You can watch the whole thing here.
The great news is that, as we can hear in the video, Senator Heitkamp acknowledges that those of us who continue to fight against this crony program are still winning. The bank can only operate at roughly 16 percent capacity (between 2007 and 2014, the last year Ex-Im operated fully for a whole year, 84 percent of deals were over $10 million). In other words, the bank right now mostly serves small businesses. You would think that Democrats would be happy about that, but they are not. That’s because, as we suspected all along, the real support for Ex-Im has nothing to do with small businesses and everything to do with serving powerful interest groups like the Chamber of Commerce and the National Association of Manufacturers.
Senator Lee took the floor (27 minutes or so into the debate) to make the case that Ex-Im is “a breeding ground for cronyism and for corruption.” He also noted that if we can’t kill Ex-Im, which suffers from many corruption scandals, we should keep its role limited to serving small businesses. He also alludes to the bank’s lack of transparency and the shady justifications behind many of the loans. For example, did you know that companies seeking a loan backed by Ex-Im only have to self-report that “they can’t find credit” (whatever that means) without justifying their claim?
As for Heitkamp’s comment that 90 percent of the bank’s transactions benefit small businesses, I will say once again that the meaningful number is to look at the share of money going to small businesses: In the best year Ex-Im ever had, that’s only 25 percent. Or you can also point to the number of small businesses — as defined by Ex-Im — that get support from Ex-Im: That’s less than half of a percent!
Even liberal economist Dean Baker has pointed out the silliness of those who use the number of transactions going to small businesses as an argument for Ex-Im:
But the best part of the debate is the silly stuff that serious people have to say to promote the bank. Perhaps the best line in this category is that 80 percent of the loans supported by the bank are for small businesses. We should have great sympathy for any political figure/policy type who is forced to say this line since they know it is complete garbage.
What matters is the percent of the money, not the percent of the loans. If the bank backs $80 billion in loans for Boeing, General Electric, or Enron (a favorite in past days), and $20 billion for small businesses, it doesn’t matter that the $20 billion in small business loans accounted for the bulk of the transactions. Most of the money went to big businesses. That is what matters and everyone touting the share of small business loans knows it.
What happens next? In order for the nomination to be considered, and for the crony Ex-Im to be brought back to life fully (and Democrats get what they want), two things need to happen:
1) Shelby could decide to bring McWatters up in the Senate Banking Committee and have the committee support him at the committee level; then McWatters could be eligible for floor consideration. Shelby is currently keeping this from happening and deserves praises for it.
2. Majority Leader McConnell might not be able to do much unless Senator Shelby lets McWatters out of committee, but if that happens, McConnell could file cloture on the nominee and basically give McWatters a fast track to confirmation.
To be continued . . .