No Chaos or Calamity with Ex-Im Expiration

David Williams

July 20, 2015

This article originally appeared in The Hill on July 9, 2015

Well, the big day has come to pass: the Export-Import (Ex-Im) Bank of the United States has officially expired, and miraculously the world has not ended.

Despite months of speculation and threats of chaos, the day went by with little fanfare. As Congress returns from their Fourth of July recess, seven influential Republican senators are calling for plans for an “orderly liquidation” of the bank when they get back.

Boeing’s reaction to the bank’s expiration was, interestingly enough, to raise prices for their jetliners. Why would a mammoth corporation apparently “concerned” about their ability to export their wide-bodied aircraft overseas respond to the bank’s closure by making their planes even more expensive? Possibly because they know that their exporting ability is, and always has been, overwhelmingly secure — with or without the bank.

Despite threats and hysteria building up to June 30, the stocks of some of the bank’s biggest loan recipients – Boeing, Caterpillar and General Electric – barely registered the change.

Co-head of Equity Research at Wells Fargo and leading expert Sam Pearlstein explained why Boeing’s stocks barely moved, stating, “In all, we do not expect any meaningful impact on [Boeing] deliveries given that: (1) Congress appears to be prepared to reauthorize ExIm in July; (2) there is abundant liquidity (bank debt and capital markets) for aircraft today; and (3) if necessary, Boeing can finance its own deliveries. As a result, we believe any ExIm-related pressure on the stock is unwarranted.”

This is quite an admission. Despite months of fear-mongering, leading financial experts admit that “there is abundant liquidity for aircraft today.” They are proving the point many opposed to the Ex-Im bank have been saying for years: these large, multi-national corporations who receive 78 percent of total Ex-Im loan support do not need the bank to finance their foreign exports abroad. They can easily obtain private loans elsewhere. Boeing doesn’t need Ex-Im.

Instead, these corporations rely on the bank for sweetheart deals provided to them based on their political-connectedness and their relationships with bank officials. Four top-level bank officials were suspended or removed last year due to accepting improper gifts and kickbacks, and one, loan officer Johnny Gutierrez, was charged with accepting bribes on 19 different instances between 2006 and 2013. There are still 31 ongoing fraud cases against bank employees. Despite years of attempts from Congress to reform the bank, Ex-Im has proven time and again that it’s a mismanaged institution of corporate cronyism. It was high time its doors were shuttered.

The bank’s authority didn’t just dissipate at 12:01 a.m. Wednesday morning. While Ex-Im is unable to accept new business or process new applications, the bank will continue to fulfill all outstanding obligations. There will likely be a multi-year winding down process. No one will be left in the lurch.

Ex-Im, however, might not be shuttered for good. Bank supporters in the Senate are poised to try attaching a renewal of Ex-Im’s charter to the highway funding bill at the end of July.   Senators who believe in free-market principles must stand firm against its reauthorization. The bank has been plagued with mismanagement and corruption, benefits a few multinational corporations, and only plays a role in less than two percent of America’s total exports abroad.

We’ve been warned: if Ex-Im is reauthorized, the Congressional Budget Office estimates that Ex-Im bank’s activates will cost taxpayers $2 billion over the next ten years.

Taxpayers simply cannot afford to continue doing the bidding for a few select corporations. Let it lie; the Export-Import Bank of the United States is closed for business.