In Bank Debate, High Stakes for Texas Businesses and GOP
A once-obscure federal export credit agency has landed at the center of a national debate over business and free-market ideology, with potentially enduring ramifications for the Texas companies it supports and the Republicans it is dividing.
A once-obscure federal agency has landed at the center of a national debate over business and free-market ideology, with potentially enduring ramifications for both the Texas companies it supports and the Texas Republicans it is dividing.
The Export-Import Bank, which helps American businesses export products, has been regularly reauthorized by Congress since its founding in 1934, but conservative leaders in the House are seeking to let its charter expire Sept. 30, with Rep. Jeb Hensarling, R-Dallas, chairman of the Financial Services Committee, leading the charge.
The fight has particular resonance for Texas, the nation’s largest exporter and one of the bank’s top recipients of aid. Since 2007, the bank has disbursed about $12 billion to 1,343 Texas exporters and supported about $22 billion of exports, according to its website.
The bank, an independent agency, offers American businesses and foreign buyers different financing options to stimulate exports — among them loan guarantees, direct loans and credit insurance. Though the bank is authorized by Congress and led by bipartisan presidential appointees, it receives no federal funding, paying for itself through interest and fees it charges.
Critics of the bank argue that it cherry-picks winners and losers, distorting the free market and benefiting insider businesses with political connections. Supporters say the bank creates jobs and supports businesses at no cost to taxpayers, and that its elimination would put the United States at a competitive disadvantage, since nearly 60 other countries have such banks.
Democrats largely support the bank’s reauthorization, and President Obama has asked Congress to raise the bank’s funding cap and extend its charter for five more years, noting that the bank returned about $1 billion in profit to the U.S. Treasury last year. But the GOP’s response has laid bare a nascent intra-party divide, highlighted nowhere better than in Texas: Gov. Rick Perry has strongly supported the bank, while Sen. Ted Cruz voiced vociferous opposition in a USA Today column Wednesday.
The opposition represents a new strain of economic populism among some of the party’s most conservative leaders, who — bolstered by Tea Party groups — are tapping into a vein of discontent by decrying “crony capitalism” and the cozy relationship big business has long enjoyed with political elites.
The catch is that those business interests have historically supported Republicans more often than Democrats. Therein lies one of the party’s most significant growing rifts: Many in the GOP’s establishment wing are deeply concerned that ideology could be blinding Tea Party legislators to the financial and political benefits of maintaining those ties.
The bank’s opponents have inertia on their side: If the House does nothing, the bank will die by default.
The bank’s political landscape has shifted significantly in recent years. Its reauthorization has rarely been controversial, but the primary defeat of outgoing House Majority Leader Rep. Eric Cantor, R-Virginia, this spring sent shock waves through the party. Cantor played a leading role in the bank’s 2012 reauthorization.
Not everyone has been consistent: On the campaign trail in 2008, Obama denounced the bank as “corporate welfare” — currently a favorite Tea Party rallying cry — though he supports it now. Perry, too, criticized one of the bank’s transactions on the first day of his presidential campaign in 2011, as the Club for Growth noted in a press release last month.
And some have avoided taking one side firmly. Multiple proposals in Congress have called for reauthorization with reform — lowering the bank’s funding cap, for example, or eliminating built-in preferences for small businesses and green-energy projects. If Speaker John Boehner, R-Ohio, brings the reauthorization to a vote, it is likely to only be a short-term measure.
Like Boehner, Sen. John Cornyn has not thrown his weight behind reauthorization or abolishment. “It may be that there’s more than a binary choice between yes and no, maybe there’s some areas where we could reform it and deal with some of the problems that critics are point to without harming our domestic manufacturers and exporters,” he said in a statement Wednesday.
Texas Democrats are largely supportive of the bank. Rep. Rubén Hinojosa, D-Mercedes, “firmly believes this should be reauthorized,” spokeswoman Patricia Guillermo said in an email.
Rep. Al Green, D-Houston, said in a statement Wednesday that he supports a “clean reauthorization” of the bank to support Texas businesses. But at a Financial Services Committee meeting last month, he expressed some misgivings. Though he would support the reauthorization, he said at the time, “I would dearly like to have options other than end it or extend it.”
In the political debate, each side has relied on dueling statistics: Opponents emphasize that more than 80 percent of the bank’s funds last year went to large businesses, while proponents note that about 90 percent of transactions were with small businesses.
In Texas, one of those small businesses is Air Tractor Inc., an Olney-based manufacturer of agricultural and forestry firefighting aircraft with 260 employees. The company, located 40 miles south of Wichita Falls, has depended for about 20 years on medium-term credit insurance from the bank, said CFO David Ickert. Currently, about 25 percent of the company’s sales use that insurance, he said, and “in most of these cases, there is no other alternative.”
“That puts basically 25 percent of our jobs at risk” if the bank is shut down, Ickert added.
That is precisely the danger that worries Tony Bennett, president of the Texas Association of Manufacturers. “This is sheer ideology,” he said of the efforts to abolish the bank. “They’re wanting to throw red meat to the ultra-conservative right, and it’s very, very dangerous to base your policy on ideology that has no foundation.”
Thirty-one governors sent a letter supporting the bank to congressional leaders on July 15, and five others have sent individual letters. Among them is Perry, who wrote on June 25, “Every major economy in the world utilizes such an institution.” He added that more than one-fifth of Texas businesses assisted by the bank since 2008 were woman- or minority-owned.
Cruz’s opinion piece on Wednesday took a different tack, saying that the bank has enabled lending to repressive governments in Sudan and Congo, as well as Chinese power plants and Middle Eastern oil companies. “It sends huge amounts of assistance to foreign corporations, buyers, and companies that are hostile to our economic and security interests, but can afford armies of lobbyists to access easy financing backed by American taxpayers,” he wrote.
Members of Congress can expect to hear plenty from Texas taxpayers and businesses during the August recess, when many say they are planning to lobby their representatives.
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