This article was published by The McAlvany Intelligence Advisor on Wednesday, September 9, 2015:
The movie White Zombie, a horror film in 1932 starring Bela Lugosi, featured zombies as mindless, unthinking henchmen under the spell of an evil magician. The Export-Import Bank doesn’t quite fit the definition, but it’s close.
Crafted by socialists surrounding FDR in 1934 and given life by an executive order, Ex-Im was granted permanent status as an agency in 1945. It has been repeatedly, endlessly, mindlessly resurrected almost 20 times since then, until the end of June.
Since then pressure has been building among its crony beneficiaries – Boeing, General Electric, the US Chamber of Commerce, and the National Association of Manufacturers among others – to resurrect it once again.
The bank continues the canard that it’s mostly for the little guy, the small business owner who can’t do business overseas because his customers there are such poor credit risks that they can’t qualify for loans to pay for the goods he wants to sell them. Its website claims that 87 percent of the loans go to small businesses, that it’s to “level the playing field” as other countries have their own Ex-Im equivalents, that it keeps jobs onshore, promotes exports, etc., etc.
The reality, alas, is different. Most of the loan guarantees go to a handful of major corporations which have, and have long had, ties to the Washington establishment for years – General Electric and Boeing, among others. As economist Veronique de Rugy of George Mason University pointed out, the bank actually benefits just one-half of one percent of all small businesses in the country. She documented further that less than 11 percent of the bank’s loans were categorized as “necessary” because the risk was too great for an exporter, or a commercial bank, to assume. In other words, almost 90 percent of Ex-Im’s loan guarantees had nothing whatever to do with private financing being unavailable. It had everything to do with who they are, not what they couldn’t get on their own.
Threats are already being issued, now that Congress is back in session. Boeing wept with crocodile tears:
Due to congressional inaction on Ex-Im reauthorization, Boeing is operating at a significant disadvantage in overseas campaigns against foreign aerospace companies that are supported by their governments’ [own] export credit agencies.
But Jeb Hensarling, chairman of the House Financial Services Committee and no fan of Ex-Im, called out Boeing:
It’s surprising that Boeing is [threatening layoffs due to the bank’s closure] when it is reporting increased sales, record-breaking revenue, and a backlog of orders that will take seven years to clear.
While there’s no doubt some U.S. companies receive a benefit from Ex-Im, there’s no doubt Ex-Im hurts other companies and their workers.
Where is the fairness in giving Washington politicians the power to pick who gets helped and who gets hurt?
Examples abound of companies depending on the competitive advantage that Ex-Im gives them, without which their very existence is doubtful. Take Air Tractor, a small Texas company which makes firefighting and agricultural aircraft:
We’re scrambling now, trying to find a way to facilitate our sales throughout the rest of the year. That’s going to take a lot of risk on our part … [and] it’s going to be a big expense for us.
And just who was taking on the risk prior? Who was footing the advantage in financing beforehand? The US taxpayer, of course. Now that the risks and costs have been shifted back where they belong, the company’s complaining.
Or take Oscar Ramirez’s company which provides products to the energy industry:
We find the Ex-Im Bank very useful. The commercial banks will not lend us $1.7 million without the Ex-Im loan guarantee, and without the line of credit we would not be in business.
All [our] receivables are foreign and no commercial bank will lend against those receivables. We export tanks, dispensers, and signage for gas stations in Latin America, the Caribbean, and Africa. We employ 35 people, but [we] couldn’t do it without the Bank.
In other words, without US taxpayer help, Ramirez’ company wouldn’t exist. But who gets to choose? The bank, or the free market?
There’s another reason to keep this zombie from coming back to life: the Constitution. Nowhere among its enumerated powers is anything that allows the federal government to create such an entity. Laurence Vance, a student of the Constitution, a policy advisor of the Future of Freedom Foundation and an associate scholar with the Ludwig von Mises Institute, put it well:
The Export-Import Bank should not be reauthorized, but not because of anything to do with crony capitalism, corporate welfare, corporatism, subsidies, waste, fraud, inefficiency, corruption, defaults, mismanagement, or cost.
The Import-Export Bank should not be reauthorized because it is an unconstitutional and illegitimate function of the U.S. government to have a bank, finance exports, level the playing field for exporters, fill gaps in trade financing, help small businesses, increase exports, help to maintain and create jobs, match the financing that other governments provide, assume credit risks, or provide credit insurance, loan guarantees, or direct loans.
American businesses that wish to sell their products in overseas markets should bear all the risks in doing do, not American taxpayers … there is no constitutional authority for the U.S. government to have a bank of any kind.
As pressure to resurrect the Ex-Im bank builds, Congress may very well give it new life. What Congress should do, however, is close the place down: sell off its $107 billion portfolio of loans and fire everyone. This would preclude its ever coming back to life, saving taxpayers billions, and letting the free market determine winners and losers instead of bureaucrats in thrall with crony capitalists.
Washington Times: Manufacturers to push Congress for revival of Ex-Im charter
Wall Street Journal: Should Congress Reauthorize the Export-Import Bank?