On February 2, 1934, president Franklin D. Roosevelt created by executive order the “Export-Import Bank of Washington.” Pursuant to FDR’s political agenda to elevate American industry and to diminish the power of Wall Street’s “money changers,” as he had so boldly promised in his 1933 inaugural address, the Export-Import Bank (Ex-Im) was conceived – and has until the present functioned – as a public service to “aid in financing and to facilitate exports and imports and the exchange of commodities between the United States and other Nations.”
Today, 80 years after the chartering of the Ex-Im Bank, a curious coalition of legislators and think tanks have set out to destroy this legacy institution, and with it a significant part of America’s waning industrial capabilities.
What does Ex-Im do?
Ex-Im is a type of bank called an export credit agency (ECA), which are operated by some 60 nations. Essentially, Ex-Im is a quasi-public agency that offers credit for the export of American manufactured goods at lower than market rates. On large contracts, this can mean low-cost financing for the foreign buyer. On smaller contracts, this can mean credit insurance – an additional guarantee that the exporter will be paid and can repay their own loans to private banks. This U.S. government support can be critically important for smaller manufacturers to sell to nations with less developed legal and financial systems.
Ex-Im releases yearly “Competitiveness Reports” to review state-sponsored export financing around the world. Last year, Ex-Im issued $14.5B in new export credit for American manufacturers, a steep drop from $31.3B in 2012. This support was exceeded by Germany at $22.6B, Korea at $14.8B and world leader China at $45.5B. Taking into account China’s other development banks, export credit for Chinese manufacturers is believed to exceed that of all G7 countries combined.
Let’s look at an example to see how Ex-Im helps American manufacturers. In 2011, GE was bidding against a Chinese company on a $477M contract to export US-made locomotives to the government of Pakistan.
The buyer preferred the GE locomotives. It surprises some to learn that the quality of American manufacturing – especially in the areas of heavy equipment and capital goods – is still second to none. China, India and other emerging powers are working hard to overcome their deficits of quality and skills in part by buying American companies along with their plant, equipment and intellectual property.
In the Pakistan contract, GE was severely undercut by the lower prices and cheap financing terms made available to the Pakistani buyer by China’s aggressive Eximbank. Thankfully, America’s Ex-Im Bank stepped up to the plate to match the Chinese financing terms and win the contract for GE and its workers in Erie, PA and Fort Worth, TX.
Who uses Ex-Im?
Much has been made of Ex-Im’s focus on large manufacturers like Boeing, GE and Caterpillar. Critics call this “crony capitalism” and demand greater support for small business. But what small business can deliver a fleet of locomotives or jet airliners? Naturally, big businesses manufacture and export the most goods, and therefore use the most credit.
But indeed, many smaller businesses take advantage of Ex-Im’s services for working capital, financing for foreign buyers, term financing and risk protection. Ex-Im’s website offers a user-friendly tool to find their customers in each State. Critics who call Ex-Im “The Boeing Bank” can simply search or scroll the wide-ranging list of industrial and agricultural businesses served by the bank (2,778 in 2013, of which 2,160 were small businesses).
What does the Ex-Im Bank cost taxpayers?
Not one dime. While the US taxpayer is “at risk” by guaranteeing Ex-Im’s loans, Ex-Im’s operating costs are low and its default rate is consistently infinitesimal, which is why Ex-Im PAID $2 billion to the US Treasury over the last five years. Like a national bank, Ex-Im lends rather than spends, and its loans are repaid, with its profits being revenue paid to the U.S. taxpayer.
When legislators like Vermont socialist Bernie Sanders call Ex-Im “Corporate welfare at its worst,” they should be asked to explain how an Ex-Im loan, repaid with interest, has anything to do with “taxpayer support”. They should also answer directly to the 1.2 million industrial and agricultural workers, like those at Northern Power Systems and Flex-a-seal in Vermont, whose jobs are kept in the U.S. in part thanks to Ex-Im Bank loans.
Who wants Ex-Im dead?
In addition to ideological leftists like Sanders and Alan Grayson, for whom no business is apparently small enough, primary opposition on Capitol Hill to reauthorizing the Bank comes from a cabal of Republican congressmen like John Boehner, Jeb Hensarling and incoming majority leader Kevin McCarthy.
Bolstering their case is a network of reactionary think tanks and academic institutes like the Cato Institute, the Heritage Foundation, and George Mason University’s Mercatus Center. All of the above are parts of the “Kochtopus” of academic fronts for the Koch brothers and related Wall Street interests. Rupert Murdoch’s foreign media empire, including Fox News and the Wall Street journal, keeps Ex-Im enemies in the headlines.
To take one example, Koch-funded Mercatus Center “scholar” Veronique de Rugy has been among the most public voices against reauthorizing the bank. She can be seen frequently on Fox News, WSJ Live and Glenn Beck’s “The Blaze” hammering Ex-Im with the thick accent of a French noblewoman. Her academic work focuses on topics like defending budget cuts and the debt ceiling, and arguing against infrastructure spending.
Arch-conservative former Senator and Heritage Foundation president Jim DeMint agrees with Bernie Sanders that Ex-Im is “primarily a marriage between big government and a few big businesses.” At Heritage, DeMint has worked hard to put Jeb Hensarling in position to be the Speaker of the House, just two heartbeats away from the presidency.
In short, the fight over Ex-Im exposes the current fraud of “corporate welfare” and “crony capitalism” as ideological cover for Wall Street’s interests.
Ex-Im foes: incompetent fools or foreign agents?
If Ex-Im is a vital service for American manufacturers, if it pays the American taxpayer, and if our global competitors are beating us with cheap export credit, we have to ask “cui bono?” in the ongoing effort to de-charter the bank.
Clearly, the question is not, “Boeing or small business?” but “Boeing or Airbus?” Is Veronique de Rugy a French fifth-columnist looking to destroy Boeing for the greater glory of French finance capitalists? Are Jim DeMint, John Boehner and Jeb Hensarling agents of China, South Korea and Germany? Is Bernie Sanders a foreign agent, or just an idiot?
One plausible theory is that the Wall Street banks that own our politicians are slowly moving Wall Street to Beijing, where they can parasitize an ascendant economy rather than one in decline. Without Ex-Im, would China’s Eximbank take a global role in managing export credit? And would that role be bolstered by the many American banks and conglomerates setting up shop and joint-partnerships in Beijing’s financial district?
Don’t end Ex-Im: strengthen it!
The American people need to stop falling for Wall Street propaganda, whether it’s issued by Jim DeMint or Bernie Sanders. Small business is not the economic engine of any industrialized nation. If we want America to be a high-wage, high-tech, industrial power, we need businesses big enough to manufacture capital equipment, heavy machinery and the industrial consumer goods (ie autos, appliances and computer hardware) that we have deferred to less-developed nations.
We can start by pushing our legislators to reauthorize the Export-Import Bank. Ultimately, the role of the bank needs to be expanded so more American manufacturers can benefit from the bank’s services. Ultimately, we need to follow a more complete program of protections and services to promote American manufacturing and family farms. This would consist of: a national bank to finance public infrastructure and production credit at low cost and long terms; A Wall Street Sales Tax to force private capital into productive investment, and; A protective tariff to allow our manufacturers to compete on equal footing for goods sold to American customers.
If you say “No” to Ex-Im, you join Wall Street in saying “Yes” to the Chinese century.