The charter of the Export-Import Bank of the United States, founded at the urging of Franklin Delano Roosevelt to help U.S. businesses during the Great Depression, expired at midnight, victim of a battle between rival Republican factions in Congress.
Representatives of the U.S. companies that rely on Ex-Im, as it is commonly known, to help secure funding for the sale of U.S. goods in foreign markets hope that the bank’s supporters will be able to revive the institution when Congress returns to Washington after its Independence Day break, perhaps as an attachment to a popular highway bill.
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But many exporters remain frustrated that their businesses are being affected and contracts endangered because of an ideological fight between hardline conservative opponents of the bank, who view it as an example of bloated government, and business-friendly Republicans who see it as a necessary tool to keep American companies competitive in a global market.
When Congress returns, “Our hope and expectation is that this will be one of the first things considered,” said Aric Newhouse, senior vice president for policy and government relations at the National Association of Manufacturers.
Newhouse, who spoke during a conference call hosted by the group Exporters for Ex-Im Coalition on Tuesday, said, “This is the definition of a problem that we could have avoided. A problem that was, unfortunately, made from political games.”
There is “overwhelming” bipartisan support for renewing the Ex-Im Bank, he said. “We’re confident that this is a short-term blip,” he added. “When there is a broad bipartisan majority for something it tends to happen.”
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But opponents of the bank were all too happy to start dancing on its grave Tuesday.
"We applaud the growing numbers of lawmakers who did the right thing and took a public stand against this hive of corporate welfare,” said Luke Hilgemann, CEO of the conservative activist group Americans for Prosperity.
Others celebrated by insisting that Ex-Im is required to start selling off its assets as soon as this morning.
Michael A. Needham, president of the Heritage Foundation’s Heritage Action PAC, said in a statement, “Change doesn’t come fast or easy in Washington, but over the past three years conservatives created the conditions that caused the Export-Import Bank to expire and enter liquidation. Now it is up to Republican leaders to accept and preserve this major policy victory.”
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A spokesman for the bank said that while it has no authority to enter into new loan agreements after its charter expired, it won’t be liquidating in any real sense of the word. The bank will not start selling off assets tomorrow, or at all.
“As of tomorrow we will continue to service all of our obligations and to manage our portfolio to maturity. We’re also funded through the end of the fiscal year,” the spokesman said.
The battle over the bank’s future has been brewing for several years. The main purpose of the Ex-Im Bank is to provide trade finance to U.S companies that do business overseas – particularly in less-developed countries where U.S. commercial lenders don’t have the expertise to underwrite loans.
Conservative Republicans, particularly in the House of Representatives, have objected to the existence of the Ex-Im Bank on the grounds that if it did not exist the free market would step in and offer the financing U.S. companies need. By their reckoning, the Ex-Im Bank is pure corporate welfare, a sign of bloated federal government that needs to be dismantled.
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Supporters of the bank challenge the assertion that the free market would step in to take the place of the bank, arguing for instance, that commercial banks have little incentive to develop the expertise necessary to underwrite loans in small third world countries for one-off construction projects and heavy equipment purchases.
Additionally, they point out, virtually every other developed country in the world has a government-backed trade finance lender, meaning that without one, U.S. exporters are left at a severe strategic disadvantage.
Backers of the bank insist that most members of Congress understand this and that a small minority, trying to make a political point, have caused serious disruption for many U.S. companies.
Dick Rogovin, Chairman and Chief Legal Counsel at Ohio-based manufacturer U.S. Bridge said that his company, with $35 million in sales and 150 employees, is already facing the loss of a major contract because of the expiration of the Ex-Im charter.
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“We have pending now a very large contract in Ghana for 92 bridges,” he said, speaking on the Exporters for Ex-Im Coalition conference call. “We have already received a very disturbing message yesterday that one of our competitors from China has informed out customer that we cannot obtain financing for our bridges and they should consider another source.”
He said, “The Ex-Im was going to guarantee a long-term loan to the government of Ghana. In the absence of the Ex-Im bank, there is no U.S. commercial bank that will perform the same service.
Rogovin, like other business representatives on the call, sounded angry and frustrated. He said that, having heard House Majority Leader Kevin McCarthy (R-CA) say that there were private lenders that would step in if the government just got out of the way, he called McCarthy’s office.
“I called and asked what banks these are,” he said, adding that he never received an answer.
“We’re not aware of any U.S. banks that can replace the Ex-Im Bank,” Rogovin said. “We are very concerned about losing this contract … if we lose it, it will affect our company and the employment we have.”
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