The nation’s largest chemical manufacturers are fighting to resurrect the Export-Import Bank of the U.S. (Ex-Im Bank), a small federal agency that helps U.S. companies sell their products overseas. They are part of a large coalition of businesses that say they depend on the bank for lines of credit and other critical financing that may not be available from commercial banks.
But lately, the bank has become red meat for populist conservatives in Congress who have targeted the 81-year-old institution for extinction. They argue that the Ex-Im Bank distorts the free market by providing loans to politically connected corporate giants at the expense of competitors who receive no such help.
The charter for the Ex-Im Bank expired on June 30. Although the doors of the agency won’t officially close until Sept. 30, when its fiscal-year 2015 funding runs out, it can’t make new loans or write new credit guarantees.
That’s a small victory for some Republicans in Congress who question the bank’s legitimacy.
“Where is the fairness in giving Washington politicians and bureaucrats the power to pick who gets helped and who gets hurt?” asks Rep. Jeb Hensarling (R-Texas), who chairs the Financial Services Committee in the House of Representatives. Hensarling has led the congressional effort to close the bank.
Shutting down the government-run bank is “a small step toward renewing a competitive free-market economy and arresting the rise of the progressive welfare state and the cronyism connected to it,” Hensarling says. “The challenge is to make sure Ex-Im stays expired.”
But supporters of the embattled export credit agency are scrambling to bring back the bank, asserting that it is a crucial competitive tool for U.S. businesses.
“Reauthorizing the Export-Import Bank’s charter is extremely important for the U.S. economy, most importantly in creating jobs and sustaining U.S. global competitiveness,” says Kevin M. Kolevar, Dow Chemical’s vice president of government affairs and public policy. “Without it, we risk slowing America’s manufacturing resurgence and losing good jobs to other countries.”
President Franklin D. Roosevelt created the bank in 1934 as part of the New Deal. Its mission was to increase U.S. exports and thus boost job creation and manufacturing output during the height of the Great Depression. In 1945, Congress made Ex-Im Bank an independent agency within the executive branch.
The bank’s products—direct loans, loan guarantees, working capital guarantees, and export credit insurance—close financing gaps in sales of U.S. goods to overseas buyers.
“The bank steps up when commercial banks don’t have the liquidity or capacity to fully finance a project or if they don’t have expertise in a particular emerging market,” Kolevar explains.
For most of its history, the bank was so uncontroversial that Congress routinely renewed its charter, often without a recorded vote. But in recent years, it has increasingly come under fire by conservative lawmakers and political groups who say the bank is a symbol of “crony capitalism”— close ties between big business and federal government officials.
The bank’s defenders dismiss the charge, saying Ex-Im generates value for a wide range of U.S. enterprises.
In 2012, Dow received a loan of nearly $5 billion from the bank to help finance the massive Sadara petrochemical complex the company is building in Saudi Arabia with majority partner Saudi Aramco.
“Our joint venture, Sadara, has directly financed $3.8 billion in U.S. exports and is supporting over 18,000 American jobs,” Kolevar tells C&EN. “There are over 240 U.S.-based manufacturers in over 33 states providing a range of equipment for this project, many being small and medium-sized businesses.”
Bank supporters also note that more than 60 other countries have export credit agencies. Some, especially those in China, Japan, and Canada, are far more heavily financed by national governments than Ex-Im is.
Failure to restore the bank would amount to “unilateral disarmament in the face of other governments’ far more aggressive export credit programs, which have provided their own exporters with significant financing support in recent years,” a coalition of 1,053 companies and trade associations said in a letter sent to Congress last month.
In fiscal 2014, Ex-Im provided financing or guarantees for $27.5 billion in U.S. exports, supporting more than 164,000 American jobs at 3,300 companies, according to White House data. The bank did so at no cost to the taxpayer and actually contributed $675 million to the U.S. Treasury, mostly from the fees and interest it charges on loans. The bank’s default rate that year was less than 1%.
“The bank helps level the playing field for U.S. companies seeking new sales in fiercely competitive global markets,” the organizations wrote. Signatories include Air Products & Chemicals; Dow; DuPont; the American Chemistry Council, which is a trade association of chemical manufacturers; and the National Association of Manufacturers (NAM).
“It defies reason and logic that some members of Congress believe eliminating the Ex-Im Bank will strengthen our country. Shutting down the bank would do the exact opposite,” says Jay Timmons, NAM’s chief executive officer. “Manufacturers are counting on Congress to end the political games and revisit reality.”
President Barack Obama, like much of the Democratic Party, embraces the bank and has urged lawmakers to renew it. “It’s time for Congress to do its job, and keep America’s exports growing,” the President wrote in an opinion piece that ran in newspapers across the country last month.
“The good news is, the support in Congress is there. Strong majorities of Democrats and Republicans have said they’d vote yes to reauthorize the bank. Congressional leaders just need to call a vote,” Obama wrote.
In the Senate, Majority Leader Mitch McConnell (R-Ky.) opposes reauthorization of the agency. However, McConnell has said he will give Ex-Im’s supporters a vote, likely as an amendment to a must-pass funding bill for highway and transit construction programs. The transporting funding measure is looming large over Congress because without an infusion of cash, the federal Highway Trust Fund will run out of money on July 31.
In a nonbinding test vote in early June, 65 senators, including 22 Republicans, expressed support for a five-year extension of the bank’s charter. That’s enough votes to easily stop a filibuster and pass an Ex-Im reauthorization measure.
But even if the Senate votes to revive the bank, the House will be a much bigger hurdle to Ex-Im’s long-term survival. Majority Leader Kevin McCarthy (R-Calif.) and Majority Whip Steve Scalise (R-La.) have both come out in opposition to reauthorization, while Speaker John A. Boehner (R-Ohio), who has backed Ex-Im in the past, hasn’t made a firm commitment to either side.
“The only commitment the speaker has made on the Export-Import Bank is to Chairman Hensarling, who asked that—if the Senate attached Ex-Im to a ‘must-pass’ bill and sent it over to the House—he be allowed to offer amendments,” says Boehner spokesman Kevin Smith.
Meanwhile, Ex-Im supporters such as Rep. Stephen L. Fincher (R-Tenn.) are working to keep the bank running. “I think at the end of the day, level heads will prevail and we can get this done,” says Fincher, who is sponsoring legislation (H.R. 597) that would reform the bank and reauthorize it for five years.