Once an obscure government agency, the Export-Import (Ex-Im) Bank of the United States has been mired in congressional controversy for over two years now.
The bank, which provides financing and loan guarantees for foreign purchasers of American goods, was created in 1934 by Franklin Delano Roosevelt to “facilitate exports and imports and the exchange of commodities between the United States and other Nations or the agencies or nationals thereof,” according to the text of the executive order. In 1945, the bank was made an independent agency by Congress. The Government Corporation Control Act of the same year, however, required the bank to receive congressional reauthorization ever four to five years.
The bank provided critical financing for the construction of the Burma Road in World War II and the Pan-American Highway, and met funding shortfalls for the reconstruction of Europe before the launch of the Marshall Plan in 1948.
Reauthorizations passed with little controversy until recently. The bank has come under attack primarily from the right wing of the Republican party, which has asserted that the bank’s loans amount to corporate welfare — a line that Barack Obama once repeated during his candidacy in 2012, though he subsequently revised his position. The bank faced its first major challenge in 2012, when it was rescued by Representative Eric Cantor (R-Va). A temporary reauthorization in 2014 kept the bank afloat until 2015, when a full reauthorization failed. The bank was subsequently shut down for five months before being revived by Congress in December 2015. While the doors are open again, the bank remains unable to approve transactions of over $10 million due to the lack of a quorum on the bank’s board. Three of the five seats on the bank’s board are presently empty and members of the Senate, led by Richard Shelby (R-Al), have refused to advance nominations to the board.
Critics of the bank point in particular to the sizable portion of its loans that go to just a limited number of corporations — Boeing alone received approximately 30 percent of loan guarantees in 2013, according to the Mercatus Center. Critics further argue that the generosity of the bank’s financing terms amounts to a corporate subsidy, making American firms artificially less competitive by reducing the cost of inputs for foreign rivals (like cheaper jets for a foreign airline), and that the American people aren’t being properly compensated for the risk represented by these transactions.
Advocates for the bank, on the other hand, point out that the bank is just one of 60 export credit authorities around the world, and that unilaterally shuttering the bank leaves American businesses at a competitive disadvantage. During the 2015 shutdown period, a number of companies signaled their intentions to move operations abroad, including GE, which announced the construction of a $400 million turboprop engine factory in the Czech Republic, whose export credit agency, Export Guarantee and Insurance Corporation (EGAP), is in much safer waters, politically speaking.
While the bank appears to be safe for the near future — its current reauthorization lasts through September 2019 — its long-term future remains deeply uncertain.