The Export-Import Bank of the United States. The official export credit agency of the U.S. ‘helps’ businesses by providing loan guarantees, financing, and export credit insurance all at Treasury Department rates. It is a bane of free marketers and anti-cronyism watchdogs as Prime Example Number One of how the government hands out gifts to favored corporations who could afford possibly higher prices through private banks.
It was thought on life support until at least next year due to the lack of a quorum and the fact the Senate turned down President Donald Trump’s nominee last year. Yet, The Wall Street Journal reports the president is going to try again to infuse life into the dying agency by putting forth a new nominee in the form of Kimberly Reed.
By turning to Ms. Reed, a former Treasury Department staffer during the George W. Bush administration, the White House is backing a nominee for the bank who thinks the Ex-Im Bank’s role is essential for the U.S. to counter foreign governments that operate their own export-finance agencies. At her nomination hearing late last year for a less-senior post at the bank, she said not having a functional export-finance agency amounted to “unilateral disarmament.”
A person familiar with the matter said Ms. Reed discussed the bank’s top role with Mr. Trump, meeting privately with him at his Mar-a-Lago resort in late 2017.
The wailing and gnashing of teeth you hear are from the aforementioned free marketers and anti-cronyism advocates who have pushed for Congress to drive a stake into the bank’s heart. Yet, much like a vampire – or, perhaps, a venereal disease – the bank refuses to leave the halls of government regardless of which party is in power. This is mainly because of the interests it serves.
Former President Barack Obama claimed in 2015 the bank “helps small businesses go global.” These ‘small businesses’ include Boeing ($93.39B revenue in 2017), General Electric ($122.09B in 2017 revenue), and Siemens Energy (a subsidiary of Siemens itself) who have all benefited from government goodies since the Treasury Department can set its own rate of return on loans and insurance. It’s quite obvious they’re benefiting from the Golden Rule: He who has the gold – or in this case, the power of the Fed – makes the rules.
Ah…the lure of ‘free’ money, instead of putting up the risks yourself.
It should be noted Trump was against Ex-Im Bank during his candidacy yet decided to change course once he reached the White House. One would guess Trump’s change in attitude has to do with the same defense he gives whenever the word ‘tariff’ is mentioned: national security. Here’s WSJ, again, on the issue (emphasis mine).
Most export credit agencies, including the Ex-Im Bank, require production and jobs for deals they finance to be located in their respective countries. As a result, deals that would have been sourced domestically are moving overseas, where companies can still obtain export assistance.
Some $2 billion of heavy industrial equipment that Egyptian Carbon Holdings Ltd. had planned to source in Texas, Pennsylvania and 34 other states is instead being manufactured in Canada and Europe—regions where the firm was able to obtain export-credit assistance for a massive petrochemical plant it is constructing near the Suez Canal, according to its chief executive, Basil El-Baz.
El Al Israel Airlines Ltd. outfitted its recent order of Boeing 787 Dreamliner jets with British-built Rolls-Royce engines, gaining access to British export-credit assistance. That assistance helped the airline finance its entire order of the American-built passenger jets, but it meant their engines were manufactured by a British firm in England instead of by GE in Ohio…
“The reality is Ex-Im Bank opponents are picking winners and losers in the global marketplace, and right now they are actively choosing the foreign companies with access to export credit over the American workers, U.S. exports and manufacturing jobs,” said Tim Keating, Boeing’s executive vice president of government operations.
Yes, how dare opponents not want America to subsidize corporations but instead have the government reduce the corporate income tax rate – along with the person income tax rate – to single digits so they could keep more of their money. How dare free market fans believe the government needs to expunge a vast majority of regulations from its system to reduce costs on businesses. And how dare Ex-Im opponents believe larger companies have the ability to finance their own loans through private capital instead of relying on the government to provide them lowered rates.
A reminder to those who are forgetting their history by pushing this cronytastic notion of the Ex-Im Bank. America wasn’t meant to play by the world’s game. It was the exception to the mercantilist monarchies of England, France, and Spain under the notion the government should not pick winners and losers; and allow consumers – both domestic and foreign – decide whose product they’ll purchase or not. The United States was supposed to be the shining beacon of light in economic freedom which means ignoring how other governments conduct themselves since, as St. George Tucker wrote in 1803, “Many maxims taken from other government are inapplicable to ours, and therefore, in respect to us, are erroneous.”
The only way to cure the error of the Ex-Im Bank is to shut it down, and make it sure it never rears its ugly, festering government tossing out favors to businesses like some drug pusher head again. The Senate should reject Kimberly Reed’s appointment and urge Trump to reconsider any notion of prolonging or reviving Ex-Im’s life.