Many Republicans believe the Export-Import Bank needs to be reformed rather than eliminated, but a new study claims similar reforms have already been tried without success.
Ex-Im came under attack last year from a number of prominent Republicans, including Reps. Paul Ryan and Jeb Hensarling, who charged the bank with “crony capitalism” for providing subsidies that benefit some companies at the expense of others. (RELATED: Exporters Worried Export-Import Bank’s Days Are Numbered)
The bank’s opponents were unable to prevent Congress from reauthorizing Ex-Im’s charter last September, but did manage to force a compromise limiting the extension to six months. Now, with Ex-Im’s charter set to expire on June 30, some Republicans are hoping to build support for a multi-year extension by attaching numerous reforms to the reauthorization bill.
Diane Katz, a research fellow at the Heritage Foundation, claims in her analysis that, “the pending House bill to reauthorize Ex-Im through 2019 is largely a regurgitation of ‘reforms’ previously mandated by Congress—without appreciable effect.”
HR 597, sponsored by Republican Rep. Stephen Fincher, would reauthorize the Ex-Im charter through 2019 and mandate changes in some bank procedures, and has attracted 57 other Republicans to sign on as co-sponsors. (RELATED: Republicans Clash Over Export-Import Bank)
According to Katz, though, “the support of these Members actually demonstrates the very cronyism that needs to be ended.”
Several of the bill’s co-sponsors, she explains, have consistently expressed their opposition to government subsidies, but are now supporting a government entity that provides financing to major companies in their districts.
Fincher and his allies argue that the reforms contained in HR 597 would curtail mismanagement at the bank, allowing it to work in cooperation with the free market, but Katz retorts that, “there is no reform that would prevent the economic distortions caused by Ex-Im’s subsidized financing.”
Moreover, she asserts that, “many provisions in the Fincher bill duplicate existing policies,” most of which have demonstrably failed to improve bank procedures. (RELATED: Lobbying Powerhouses Duke it Out Over Ex-Im Reauthorization)
For instance, “The bill calls for the appointment of a chief risk officer … to reduce risks to the bank portfolio,” but Katz notes that, “bank officials hired a chief risk officer in 2013, and established an Enterprise Risk Committee in fiscal year 2014 to oversee a ‘comprehensive and systematic risk management regime’ across all bank operations (not just the portfolio).”
In response to claims by Ex-Im supporters that the bank provides financing that would not be available from private lenders, the Fincher bill also requires that bank officials “issue annual reports to Congress on the steps taken to avoid crowding out private financing,” and that applicants for Ex-Im financing “demonstrate that they have unsuccessfully sought to obtain competitive financing.”
However, Katz counters that the bank’s Congressional charter already directs it to “supplement and encourage, and not compete with, private capital,” by providing financing only for “export transactions that are unlikely to proceed without Ex-Im support.” (RELATED: Export-Import Bank Backed Two Russian Companies Hit By Sanctions)
Fincher’s bill also seeks to address the argument that Ex-Im is needed to help American exporters compete with foreign firms that receive export subsidies from their own governments by calling on the president to negotiate with foreign governments for the elimination of subsidized export credit agencies such as Ex-Im within 10 years.
While she does not object to that goal in principle, Katz points out that Congress has already issued nearly identical instructions to the Secretary of the Treasury, to little practical effect.
In spite of the reforms that HR 597 seeks to duplicate, she argues, “Ex-Im has failed to fully comply with risk-management standards,” as evidenced by “a recent uptick in allegations of serious misconduct by Ex-Im Bank employees … [and] deficiencies in internal controls that reduce the reliability of the bank to ferret out improper payments.”
Although “it may seem understandable that lawmakers regard Ex-Im as helpful to the businesses in their district,” Katz concludes, “it is time to recognize the huge difference between support for big business and support for free enterprise.”
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