The relatively unknown Export-Import Bank is a loan guaranty entity of the federal government that assists U.S. companies to grow their export of products. Founded in 1934 as a part of the New Deal legislation, the bank's charter has been renewed on a bi-partisan basis without controversy since that time. The charter is again up for renewal June 30, and for the first time in nearly 81 years of existence, there is a distinct possibility that the charter will be allowed to expire. This extraordinarily unfortunate development is the result of intense lobbying on the part of certain narrow corporate interests coupled with their conservative political allies such as the Heritage Foundation and the Club for Growth.
The principal corporate opponent is Delta Airlines, which claims that the Ex-Im Bank, as it's known, in providing loan guarantees to foreign airlines, assists the foreign airlines to offer lower fares in competition with Delta. Delta tried to argue its case in federal court but was unsuccessful. The Heritage Foundation and others seem to believe, ideologically, that the government should not be involved in financing arrangements with the private sector. Powerful Congressional Republicans, such as Representatives Paul Ryan, chairman of the House Ways and Means Committee, and Jeb Henserling, chairman of the House Financial Services Committee, have sided with the bank's opponents and stated that the bank should be allowed to die. The logic of their position is very difficult to understand.
First of all, the Ex-Im Bank assists U.S. exporters in providing financing arrangements to foreign buyers, which would not be generally available from private sources, often because of the size and terms of the loans required. Thus without the Ex-Im Bank, foreign buyers of jet airplanes, for example, would have to turn to Airbus, which offers generous financing through the French and German governments. The bank's opponents are in effect arguing that the U.S. should "unilaterally disarm" in the global competitive marketplace, with enormous implications for jobs in the U.S., economic growth and our balance of payments. The Department of Commerce has estimated that the loss of the Ex-Im Bank would, over time, cause a loss of 250,000 to 300,000 middle class jobs in manufacturing and related sectors of our economy. Furthermore, the U.S. needs more and not less exports in order to reduce our balance of trade deficits, which have been running at unsustainable levels of $500 billion annually. A reduction of exports would cause an increase in our trade deficits and would directly reduce our current modest level of growth in GDP.
With such devastating consequences, it would seem that the right wing opposition to the Ex-Im Bank would have the burden of proving why such a step is in the nation's interests. But they have not done so. They argue that since of the bank's financing guarantees assist large corporations such as Boeing, GE and Caterpillar, this somehow represents "crony capitalism," as they call it. But Ex-Im's existence benefits hundreds of small and medium sized businesses engaged in the export sector, not to mention the thousands of suppliers of the large multinational exporters. Furthermore, do we not want our large, successful corporations to grow and become even more competitive, profitable and successful in the global marketplace? Is it not in the national interest to have U.S. made products sold and respected throughout the world economy? Is it right for U.S. companies to try to compete in an increasingly globalized economy with one arm tied behind their backs? Would we rather cede dominance in the marketplace to our foreign competitors?
The opponents of the Ex-Im Bank have not presented clear, logical arguments as to why our national interest is served by liquidating this entity, which so benefits the U.S. economy and does so with a profit of $7 billion to our taxpayers since 1992. They have not because they cannot.
It is encouraging to note that virtually all business organizations such as the U.S. Chamber of Commerce and the National Association of Manufacturers have spoken out and are working hard to change the views of the bank's right wing opposition in Congress. Let's hope that between now and June 30, sanity will prevail and the incomprehensible position of the Ex Im Bank's opponents will be defeated. Our economy is struggling enough in achieving its full potential without taking such an unnecessary and deliberate step to slow it down. It's time to demand that our representatives in Congress save the Ex-Im Bank and renew its charter before June 30.
Alexander R.M. Boyle is the retired vice-chairman of the board of the Chevy Chase Bank, a position in which he served for over 30 years. He frequently writes on economic and banking matters. His email is armboyle@aol.com.