WASHINGTON—As a presidential candidate in 2008, then-Sen. Barack Obama called the Export-Import Bank “little more than a fund for corporate welfare.” Many conservatives in Congress agree with him, but five years later, the bank lives on.
The Senate voted 82-17 on Wednesday to approve Fred Hochberg’s second four-year term as president of the Ex-Im Bank, ending conservative hopes of effectively shutting down the increasingly controversial agency. If Hochberg was not confirmed by Friday, the bank would have been barred from taking any new actions.
The Ex-Im Bank is a federal agency created during the Great Depression to increase American exports by offering companies, often foreign, loans and insurance for purchasing American products. While the bank boasts of giving most loans to small businesses, the vast majority of its cash—about 80 percent—goes to major corporations, including Boeing and General Electric.
That’s why Delta Air Lines this year sued the Ex-Im Bank for assisting foreign airlines—including Korean Air Co. Ltd. and Emirates Airlines—in buying Boeing planes, to the detriment of domestic carriers left with a competitive disadvantage. Two years ago, the Air Transport Association of America Inc. sued Ex-Im over $3.4 billion in loan guarantees to Air India.
The bank has long operated out of the public spotlight, but last year the Club for Growth—a group advocating for lower taxes and conservative economic policy—spearheaded a battle to deny the bank reauthorization, leading Congress to agree to a two-year reauthorization instead of the usual five years. Congress mandated increased oversight of the bank, but it also raised its total financing limit to $130 billion this year.
Senate conservatives had hoped to block the bank president’s nomination as a back-door way of stopping its operations. That didn’t work, but the fight is far from over: Sen. Mike Lee, R-Utah, and Rep. Justin Amash, R-Mich., last month filed bicameral legislation to repeal the authority of the Ex-Im Bank and create a plan for its closure.
“Export subsidies, like those provided by the Export-Import Bank, serve only to enrich well-connected special interests at the expense of the rest of the country,” Amash said.
Andrew Roth, vice president for government affairs at Club for Growth, told me his organization is under no illusion that leadership in the House or Senate is excited about bringing the bill up for a vote. “We’ve made up a lot of ground,” he said. “[But] a lot of Senate Republicans still favor big government.”
The bank’s commitments—i.e. taxpayer exposure—have exploded under Hochberg, rising from $59 billion in 2008 to $107 billion in 2012. Since its loans are typically repaid (the overall default rate was less than 1 percent as of December 2012), the Ex-Im Bank operates at no net cost to the federal budget.
However, one of the bank’s mandates is to provide loans in places the private sector considers too risky, which Roth says is an unnecessary risk for taxpayers and unfairly picks winners and losers. Ex-Im’s own inspector general routinely reports arrests and convictions of people who have defrauded the agency.
Hochberg’s confirmation as Ex-Im president is one of several nominations flying through the Senate this week after Majority Leader Harry Reid, D-Nev., threatened to invoke the so-called “nuclear option” on Republicans. The move would have changed Senate rules to require only a simple majority to approve presidential nominees, effectively stripping the minority of the ability to filibuster controversial picks. Current rules require 60 votes to end debate on a nominee.
Senators held a closed door meeting on the matter Monday night, during which a bipartisan majority voiced strong support for avoiding the nuclear option. Yet Reid managed to leverage his manufactured crisis to get significant concessions out of Republicans. In exchange for allowing controversial nominees to sail through the confirmation process, Republicans got only assurances that the president will withdraw two National Labor Relations Board nominees that three federal appeals courts have ruled unconstitutional.
“Today, re: so-called nuclear option, Senate Republicans preserved the right to surrender in the future,” Sen. Ted Cruz, R-Texas, tweeted Tuesday.
Reid pledged not to renew his effort to use the nuclear option until after the next election.