Change Ex-Im, or Let It Lapse
It can sometimes be hard to predict which issues will mushroom into major fights in Congress, but we know there will be a huge battle over the Export-Import Bank this summer. On September 30, the bank's charter will expire -- and while Congress typically renews the charter as needed, this time a chorus of conservative voices, both on and off Capitol Hill, is calling for Congress to reform the bank or let the charter lapse. Whatever happens, it's clear that the Ex-Im Bank cannot be allowed to continue business as usual.
Simply put, "business as usual" for the Ex-Im Bank means a massive loss for the American taxpayer. Long a contention of Ex-Im's foes, this fact was validated recently in a report by the nonpartisan Congressional Budget Office. The CBO ran the numbers and found that if the Ex-Im Bank were forced to follow actual fair-value accounting rules -- like those followed by private-sector lenders -- it would end up at a $2 billion loss over ten years.
Of course, that's not the story the bank itself would tell. Since Ex-Im benefits from the rather creative accounting practices prescribed under the Federal Credit Reform Act of 1990 (FCRA), it will end up reporting a profit of $14 billion. As the CBO noted, the difference is that the FCRA rules do not force Ex-Im to fully account for market risk.
We already know that the government -- in other words, the American taxpayer -- takes on a great deal of risk when it comes to the Ex-Im Bank. The bank's purpose since its creation during the Franklin Roosevelt administration has been to provide loans and other assistance to foreign companies so that they can purchase American-made goods and services. The CBO estimates that the total of the bank's outstanding loan products -- i.e., its "exposure" -- came to about $114 billion by the end of fiscal year 2013.
There are also significant questions about who benefits from the American taxpayers' largesse. While the bank likes to tout its work matching U.S. small businesses with foreign purchasers for their products, Ex-Im happens to do a great deal of business with aerospace behemoth Boeing. According to one analysis from George Mason University's Mercatus Center, Boeing was the single biggest Ex-Im beneficiary, receiving $8.3 billion worth of assistance in fiscal 2013 alone. Another study found that in the last five years, Boeing was involved in nearly 200 Ex-Im deals totaling some $48 billion.
As it operates now, the Export-Import Bank spends too much money and isn't nearly honest enough about its balance sheet. Massive corporations like Boeing don't need government handouts, and taxpayers have a right to know whether institutions they back are operating at a $14 billion ten-year profit or a $2 billion ten-year loss. Indeed, the fact that government accounting practices can lead to such widely disparate numbers is disturbing in itself.
If we can't eliminate the bank's subsidies for huge companies while requiring accurate accounting, the question becomes whether the bank's charter be renewed at all. It's time to fundamentally change the way the Ex-Im is run, and the upcoming debate over their charter renewal is just the forum to make that happen.
Stephen DeMaura is president of Americans for Job Security.