The Export-Import Bank of the United States may be an unexpected casualty of House Majority Leader Eric Cantor’s shocking primary loss Tuesday. The bank must be reauthorized by Sept. 30, but the Virginia vote may have cost the bank a key ally in pushing through a bill before Congress wraps up its work for the summer.
Mr. Cantor, long seen as a friend to Wall Street, was a prominent ally of the bank but fell victim to conservative primary challenger Dave Brat in the June 10 primary. Mr. Brat, an economics professor, was a sharp critic of what he called corporate welfare, including the Ex-Im bank, which provides financing to foreign consumers looking to purchase American goods and services.
The Ex-Im bank is seeking a five-year reauthorization and an extra $20 billion in permitted lending this year. Mr. Cantor and Maryland Democratic Rep. Steny Hoyer joined to win bipartisan support for the bank’s last reauthorization in 2012, which also raised the bank’s lending cap to $140 billion.
Mr. Cantor will formally step down as house majority leader on July 31, but the leadership battle to replace him is in full swing. Huge question marks hang over the House’s floor agenda in the weeks ahead.
Ex-Im spokesman Matthew Bevens said that the bank will continue business as usual, and is not focusing on the fallout from Mr. Cantor’s loss.
“We are focused on the business of the bank,” he said.
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If the Ex-Im’s charter is not reauthorized before Sept. 30, it will still be able to honor its current loans and obligations, but it will not be able to conduct any new business.
The bank finances transactions in which foreign consumers buy American goods. Often, loans to purchase American goods, whether small industrial hardware or jetliners, are given at lower rates than from commercial lenders. The bank also offers insurance for risks carried by U.S. exporters, such as shipping costs.
Importantly, the bank is funded entirely by its own fees, according to Ex-Im’s charter. The bank does not use taxpayer money, and in fiscal year 2013 sent an operating profit of over $1 billion to the U.S. Treasury. But Congress through its authorization vote sets a limit on total financing activity, including loans, guarantees and insurance.
Many American exporters would face uncertain options for financing if reauthorization were to fail. Boeing, one of the biggest U.S. exporters, has seen its stock fall nearly 3 percent in two days because of worries over the Ex-Im’s fate. After Mr. Cantor, the company was the “biggest loser” from Tuesday’s primary vote, Chris Krueger, a senior policy analyst for Guggenheim Securities LLC, said in an analysis this week.
Proponents of the bank, like the National Association of Manufacturers, say the financing the Ex-Im offers helps American businesses of all sizes.
Even with Mr. Cantor’s loss, NAM Vice President of International Economic Affairs Linda Dempsey said the organization is dedicated to continuing to support the bank.
“The necessity for reauthorization of the Ex-Im bank for small and medium manufacturers across the country hasn’t changed,” Ms. Dempsey said. “This remains a top priority for manufacturers and we will continue to tell the story of how the bank supports U.S. exports and jobs in districts across the country, to both sides of the aisle.”
Majority Whip Kevin McCarthy, California Republican is a strong front-runner to succeed Mr. Cantor in the June 19 special election as majority leader. Mr. McCarthy’s office did not respond to requests for comment, but he did vote to reauthorize the bank in 2012.
Critics like the Heritage Foundation, however, say Ex-Im loans are a form of “corporate welfare” and that the bank, established by President Roosevelt in 1934, should be abolished. Americans for Tax Reform is one of 30 groups, also including Heritage, that recently signed a letter to Congress opposing reauthorization.
“The Export-Import Bank gives politically-backed corporations billions in taxpayer-subsidized loans, distorting global markets and making us less competitive at home,” said John Kartch, spokesman for Americans for Tax Reform.
Rep. Jeb Hensarling, the Texas Republican who chairs the House Financial Services Committee, is also a vocal opponent of the bank.
Mr. Hensarling, who took himself out of the running Thursday for Mr. Cantor’s post, has expressed doubts about the bank’s self-reported operating profit. He is also opposes reauthorization.
“I have always believed that reauthorizing the Export-Import Bank is a bad idea,” Mr. Hensarling said in an April 25 statement. “In many respects, it’s the face of cronyism.”