The Export-Import Bank is down.
At the stroke of midnight Tuesday night, Ex-Im’s congressional authorization will expire. The federal agency, which subsidizes U.S. exporters and lenders through taxpayer-backed financing to foreign companies and governments, officially enters liquidation.
Export-Import Bank President Fred Hochberg (L) and Export-Import Bank Deputy Inspector General Michael McCarthy (R) testify before a House Financial Services Committee hearing on the Export-Import Bank’s reauthorization, on Capitol Hill in Washington June 3, 2015. Reuters
Legally, Ex-Im’s officers, employees and board members must cease their typical work of subsidizing Boeing, J.P. Morgan and Chinese state-owned enterprises. Instead, under the law that authorized it, Ex-Im is allowed to exist only “for purposes of orderly liquidation, including the administration of its assets and the collection of any obligations held by the bank.”
U.S. taxpayers are exposed to more than $100 billion in outstanding Ex-Im loans, guarantees and credit insurance, and agency employees are allowed to administer and collect the outstanding money and fees. But, if the words “orderly liquidation” hold their normal meaning, Ex-Im is also supposed to sell off its assets — that is, it should dump its loans into the private sector, and hand the cash over to the Treasury.
Ex-Im shouldn’t have a fire sale — that would be disorderly. Still, it is legally obligated to begin unwinding itself.
Ex-Im Chairman Fred Hochberg refers to a “lapse” in his agency’s authorization. That’s misleading. There’s no pending reauthorization. This isn’t a lapse in funding. In fact, Ex-Im’s operations budget, which pays for its electric bills and salaries, is funded through September 30, like the rest of the government.
Ex-Im is like a company that has entered Chapter 7 bankruptcy — also known as “liquidation.” It should wind down its affairs, with the goal of packing up and then exiting the market entirely, allowing the robust private industry of export credit to take its place.
Congress can, if it wants, rev the corporate welfare machine back up and bring Ex-Im out of liquidation. This wouldn’t be shocking, given Congress’ history of saving other bankrupt enterprises. But you would think the Tea Party phenomenon of the past seven years might have taught Republicans a lesson about bailing banks out of bankruptcy.
This week’s knockdown of Ex-Im should be seen in exactly this light: It is an early and visible victory for the GOP’s free-market forces over the forces of K Street, which for so long held a monopoly on the party.
You could call this fledging power center the Tea Party, but that’s a bit imprecise. You could say it’s an ideological pull on the party that counters big business’ more transactional pull. It’s probably best to say that a free-enterprise force has arisen in the party and is offering resistance to the entrenched pro-business force.
The forces for free enterprise in the Ex-Im fight have included the promulgators of arguments and ideas, such as Veronique de Rugy and her colleagues at the Mercatus Center, along with folks at the Cato Institute. Conservative and libertarian colleagues and commentators have done so as well.
Ideas have power, but they need to be weaponized. In politics, that means money and lobbying.
K Street’s arguments on Ex-Im are weak, sometimes laughably so, but they come loaded with the political equivalent of nuclear warheads. The king of K Street is the U.S. Chamber of Commerce, whose $124 million in lobbying is more than the combined spending of numbers two-five on the list. The Chamber is relentlessly and vociferously lobbying to resurrect Ex-Im.
Boeing, whose exports account for 40 percent of Ex-Im’s subsidy dollars, spends upwards of $15 million a year on lobbying. For the Ex-Im fight, the jet-maker has brought in the lobbying firm of former Democratic House leader Dick Gephardt.
Throw in the National Association of Manufacturers, General Electric and Caterpillar, and you’ve got hundreds of lobbyists and dozens of political action committees cutting $5,000 checks to Ex-Im supporters.
These days, for a change, the free-market side also has some money and lobbyists. Heritage Action is lobbying members to oppose Ex-Im. Freedom Partners (a Koch-affiliated free-market counterpart to the Chamber) and Americans for Prosperity are rallying grassroots pressure on congressmen. The Club for Growth and others are putting money behind the fight against corporate welfare.
The result is a playing field that is nowhere near level, but at least allows the free-market side to play in the game.
The most important factor in the anti-Ex-Im fight was the support of four important lawmakers: the majority leaders in both chambers (Kevin McCarthy and Mitch McConnell), and the committee chairmen in both chambers (Jeb Hensarling and Richard Shelby).
Learn more about the Export-Import Bank reauthorization debate
McCarthy’s opposition may have received a boost from the manner in which he got his job: the 2014 primary defeat of his predecessor Eric Cantor, whose conservative opponent attacked him on the grounds of “crony capitalism.”
The Obama administration and K Street aren’t giving up in this fight. They want to bring Ex-Im out of liquidation.
Corporate welfare and bailouts for bankrupt banks are business as usual for the political class. In the Ex-Im fight, though, business as usual is losing.
Timothy P. Carney, The Washington Examiner’s senior political columnist, can be contacted at tcarney@washingtonexaminer.com. His column appears Sunday and Wednesday on washingtonexaminer.com.
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