The only thing harder to roll back than big government is big government wrapped up with big business, and few outfits in Washington have been as impervious to reform as the Export-Import Bank. But the forces of light have been prevailing over the crony capitalists for a brief moment, if GOP reformers in Congress can extract changes.
The debate concerns nominees for the board of directors at Ex-Im, which subsidizes companies that export and sticks taxpayers with the lending risk. The bank is famous for lending to the likes of Boeing and General Electric ; some 65% of the bank’s financing flowed to 10 large companies in 2014.
Yet since 2015 the agency hasn’t been able to make loans of more than $10 million, and no one seems to have suffered as a result. Loans over $10 million require board approval, and the board hasn’t had a quorum, as Congress has not confirmed nominees. The lack of a quorum has converted the bank into a financier of small business, which proponents have always argued is the place’s purpose.
The Mercatus Center at George Mason University recently released an analysis showing that in 2018 some 66% of the bank’s financing flowed to small businesses, versus 25% in 2014. The bank’s risk exposure has dropped to $66 billion from $116 billion in 2013.
And how are the paupers at Boeing faring? Fine. Mercatus details how Boeing has found private alternatives to Ex-Im financing without incident. A 2019 outlook from the company reported that “airlines and lessors are expected to have some of their lowest historical costs of financing.”
Yet Trump advisers Peter Navarro and Robert Lighthizer have been winding up for another run to confirm board nominees. The trade advisers say export subsidies are essential to compete with countries like China, though the evidence for that claim isn’t apparent. The Export-Import bank at its peak in 2012 subsidized a mere 3.2% of $1.5 trillion in exported goods.
The bank’s skeptics in Congress like Pat Toomey of Pennsylvania have done yeoman’s work trying to reform Ex-Im, and the minimum for confirming a quorum should be reforms to how the bank operates. One good idea would be to require that companies show that private financing isn’t available. Limits could also be put on loans to individual companies or industries, which would be useful diversification to protect taxpayers from losses. The bank would also benefit from more transparency and better accounting practices.
Killing the bank may be politically impossible, but a President who ran on cleaning the swamp should at least support such modest reform. Mr. Trump is associating himself with a subsidy that big business doesn’t need.
Appeared in the May 2, 2019, print edition of Wall Street Journal.
How charming to that the Ex-Im Bank is more fiscally responsible in the absence of a full Board of Directors….just sayin’