by Veronique De Rugy | December 10, 2015 12:02 am
After allowing the Export-Import Bank of the United States’ charter to lapse June 30, Congress voted to revive it this month on the back of an expensive highway bill. The agency is the modern iteration of a New Deal-era program that mostly extends loans and loan guarantees to foreign companies to buy U.S. goods and services, backed by your hard-earned tax dollars. It’s an outrageous example of corporate welfare for companies with no need of government subsidies, and its reauthorization is yet another sign of how much power the business lobby and the U.S. Chamber of Commerce hold.
However, though Congress’ commitment to this unhealthy and unfair marriage between big government and big business is depressing, it still isn’t business as usual at the bank. According to the bank’s charter, the board of directors is made of five members, and three board members are needed to achieve quorum. Without three members, the agency can only approve transactions valued at less than $10 million.
As it turns out, the bank has been missing three members since July. The only two board members remaining are the bank’s chairman, Fred Hochberg, and its vice chairwoman, Wanda Felton, while there are vacancies for two Republican board members and one Democratic board member. So far, the only nominee President Barack Obama has put forth is Patricia Loui-Schmicker, a Democrat whose term on the bank’s board expired Jan. 20.
The stakes are high for anti-crony advocates because not approving the third board member (whether Republican or Democrat) would effectively cut big businesses out of the Ex-Im Bank. The bank dataset shows that 84 percent of the values of approved deals over the past eight years have been above $10 million. Also, though the majority of deals approved are below the $10 million threshold, they still only represent 16 percent of the total dollar amount approved.
These data provide additional evidence that the bank is not in the small-business “business,” as its supporters claim. In fact, in 2014, some 65 percent of the bank’s activities benefited 10 giant U.S. companies, with Boeing and General Electric leading the pack. The companies and their customers have access to the capital market and don’t need the support of government to prosper. Not surprisingly, these companies have also bankrolled the lobbying effort to revive the bank.
Now, this situation raises some interesting political dynamics. For instance, during the past two years of debate over the renewal of the bank’s charter, Democrats have claimed that they support the program because of its benefits to the small-business side. This development should make them happy.
On the other side of the political aisle, it will be interesting to see what Senate Majority Leader Mitch McConnell and Senate Banking Committee Chairman Richard Shelby do about the nomination of Loui-Schmicker. Senate leadership can decide whether to move forward with her nomination hearing or, as is typically done, wait to pair her with a Republican nominee because there are currently no Republicans sitting on the bank’s board.
The two men are key players here, because McConnell can decide whether or not he approves of the president’s Republican nominee and Shelby presumably has some amount of control in deciding whether or not to schedule a hearing for the nomination of that third (and possibly fourth) board member. Both men are theoretically against this crony-capitalist boondoggle.
McConnell and Shelby have many reasons not to schedule a nomination hearing, including the fact that it doesn’t make much sense for Republicans to get any of President Obama’s nominees through in the last year of his term.
That’s the theory, of course. The reality is that in Washington, politicians make deals. It rarely works to the advantage of taxpayers and consumers, but it doesn’t stop the alliances from being made and the deals from being sealed. This time may be no different.
Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.
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