On September 30, 2011, the Export-Import (ExIm) Bank’s renewable charter expired, but bureaucratic resiliency has been reaffirmed once again. This state-run financial institution is the rent-seeker’s dream, funneling taxpayer dollars to politically-connected interests. Kept alive via continuing resolutions, the ExIm Bank now seeks a full resurrection with the help of a bipartisan cadre of congressman.
Founded in 1934, the ExIm Bank operates under a contradictory dual mandate of providing loans that the private sector deemed too risky to make while guaranteeing taxpayers a reasonable rate of return. America’s experience with subprime mortgage giants Fannie Mae and Freddie Mac exposed the perils of such activity, making it completely unsurprising to find Congressman Barney Frank’s (D-MA) name listed as a co-sponsor of proposed legislation to renew that bank’s charter through 2015 and increase its lending cap from $100 billion to $160 billion. To paraphrase Karl Marx’s bon mot, history is repeating itself.
Equally concerning is the detrimental effects of the ExIm Bank on those businesses who lack friends in high places. Much of the ExIm Bank’s activity in recent months has involved financing Boeing’s efforts to obtain contracts from major Asian airlines. While great news for Boeing, the result of these loan guarantees is that domestic airlines are forced to pay more for new aircraft than their foreign competitors. This type of activity has cost domestic airlines as much as 7,500 jobs and $684 million per year.
President Obama, whose administration has an extensive record of assisting favored industries at the expense of others, naturally supports expanding the size and scope of the ExIm Bank. However, in his 2012 State of the Union Address, President Obama declared that “government should do for people only what they cannot do better by themselves, and no more.” Surely, a government owned and operated bank is superfluous in a world where there is a plethora of well-functioning financial institutions. The best scenario for American taxpayers is for Congress to deny the ExIm Bank’s attempts at a Lazarene comeback. Barring that, Congress should insist on more transparency from the ExIm Bank, especially when it comes to internal studies examining the harm the bank’s activities inflict on domestic industry. Requiring the ExIm Bank to live up to its congressional mandate should not be too much to ask.