What’s going on with the Ex-Im Bank? The business community is just as confused as the rest of us, as the White House is sending some very mixed signals.
First of all, let’s remind ourselves what the bank is and what it does. The United States Export-Import Bank was created by Franklin Delano Roosevelt during the Great Depression as part of his New Deal, an effort to stimulate the economy and grow American jobs. Like most New Deal programs, it was staggeringly wrongheaded and more about cronyism between business and government than about actually helping the economy.
The bank offers loans and loan guarantees to businesses, ostensibly to stimulate exports. In reality, though, it also subsidizes foreign companies with political connections. Among its most vocal supporters, the Ex-Im Bank counts Hillary Clinton, Harry Reid, and Elizabeth Warren.
Yet here we are, 80 years later, with the bank still humming along quietly in the background. Despite a major push by conservatives in 2015 to end the bank’s charter, it survived and was reauthorized for another ten years.
Donald Trump has been a longtime supporter of the Ex-Im Bank, which is why it’s surprising that he has appointed former Rep. Scott Garrett, who lost reelection in 2016, to take charge of it. During the struggle to close the bank in 2015, Garrett was on the front lines of that effort.
As a founding member of the House Freedom Caucus, Garrett rightly pointed out that most of what the bank does is prop up big companies at the taxpayers’ expense. The party line is to claim that the bank supports small business, but in fact the majority of the Ex-Im Bank’s operations involve loan guarantees for industry giants like Boeing, General Electric, and Caterpillar. If these loans are such money-makers, as supporters including Trump claim, one is forced to wonder why we need the government to guarantee them? If these companies can’t find insurance on the private market, that indicates that the loans are too risky for ordinary investors, which is why they must be shifted onto the taxpayers without our consent.
The Ex-Im Bank also has operating costs of approximately $2 billion over the next ten years. For an administration that claims a desire to drain the swamp, as well as a certain amount of fiscal conservatism, it’s difficult to see how this expense can be justified.
This brings us back to the question of “why Garrett?” Maybe Trump is privately not as big a supporter of Ex-Im as he has claimed. Maybe he and his advisers see Garrett as a way to neutralize the bank without actually ending it, especially since its charter doesn’t run out until 2025. Then again, maybe the president just takes pleasure in having politicians do jobs that contradict their stated principles, pointing out the hypocrisy of almost everyone in elected office.
The Ex-Im Bank is an outdated, crony institution that has no legitimate function in modern America. If Scott Garrett can minimize its impact, or least refocus it away from protecting the biggest, most powerful countries, that will surely be a good thing. Let’s hope he doesn’t get seduced by the dark side as so many have before.