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Ex-Im Rises Again

As the Export-Import Bank appoints its new President, the agency can return to full strength after a decade of controversy and crisis. This seemingly obscure agency has been the center of political acrimony for years, but it may finally return to its mission of supporting the US economy.

 

On February 16th, 2022, American University alumnus Reta Jo Lewis was sworn in as President and Chair of the Export-Import Bank of the United States. The bank, known as Ex-Im, occupies a relatively obscure niche within the mechanisms of the federal government. While it performs a suite of financial services, its main endeavor is providing loans to foreign buyers of American goods. In other words, it helps American companies export their products. This fairly straightforward and small-scale operation has not safeguarded Ex-Im from controversy. In fact, Lewis’s confirmation was a closing chapter in a disastrous period of turmoil for the bank that dates back to the Obama Administration.


Ex-Im was founded in 1934 by executive order of President Franklin Delano Roosevelt to aid American businesses in exporting to a depression-ravaged world. Its first transaction came soon after in 1935 when it loaned almost $4 million to the Cuban government to facilitate the purchase of American silver ingots. It was made an independent government corporation in July 1945 and was subject to The Government Corporation Control Act of 1945 once the law was passed that December. Government corporations are federal agencies designed to perform market functions. Other well-known government corporations include the Postal Service and Federal Deposit Insurance Corporation. Under the Control Act, Ex-Im needed its operations to be periodically extended by Congress. The average extension length has been roughly 5 years. As this was largely a routine process, Ex-Im and Congress lived in harmony until the Tea Party arrived.

Historically, opposition to the bank was largely localized to liberals. Even then-presidential candidate Barack Obama denounced Ex-Im while on the campaign trail in 2008. Since then, however, battle lines have shifted dramatically. In 2012, significant reforms were passed by Congress that assuaged many left-wing concerns. Stricter accountability measures and more support for renewable energy and small businesses led to renewed Democratic support. The unexpectedly controversial 2012 reauthorization was due to cooperation between Congressional Democrats and House Majority Leader Eric Cantor (R-VA07) to overcome opposition from a faction of Tea Partiers. This vote saw unanimous support from Democrats and overwhelming support from Republicans for a compromise that extended the Export-Import Bank for another 3 years. However, Cantor’s surprise 2014 primary loss to a Tea Party challenger threw the GOP into turmoil.


With the Tea Party flexing new control over Republican politics, the scheduled 2015 extension of Ex-Im became a sudden target. Tea Partiers and their (now-irrelevant) intellectual cousins, the reform conservatives, wanted to dissolve the bank. An internal fight over Ex-Im cleaved the GOP’s populist and traditionalist wings. The anti-bank faction was largely driven by Tea Party Republicans led by House Financial Services Chair Jeb Hensarling. GOP leadership was also divided, with Senate Majority Leader Mitch McConnell and House Majority Leader Kevin McCarthy against Ex-Im while House Speaker John Boehner supported it. They received external support from Koch-backed right-wing and libertarian organizations. Certain American businesses also opposed the bank—the most prominent was Delta Airlines, who resented that Ex-Im aided their competitors to purchase Boeing jets.


Joining President Obama and the Democrats along with a relatively small group of pro-bank Republicans, including a South Carolina trifecta of Gov. Nikki Haley and Sens. Lindsey Graham and Tim Scott, was one of the unlikeliest political coalitions in recent years. Longtime Democratic allies like the AFL-CIO and the Sierra Club stood together with traditionally-Republican business and trade groups like the US Chamber of Commerce. Labor and business groups alike supported Ex-Im for its ability to create jobs, while environmental groups praised provisions in the extension bill that would strengthen environmental protections.


With Congress deadlocked on Ex-Im, the bank’s activities began to grind to a halt. In June 2015, Ex-Im’s charter expired. It was required to manage its existing portfolio, but it could not make new deals. It would remain in this state for four months, as Rep. Jeb Hensarling refused to allow extension legislation to be brought before the Financial Services Committee. Bank supporters bypassed Hensarling’s forced gridlock by successfully passing a discharge petition, a rare procedural move. Ex-Im’s purgatory would end in December when an extension was passed: buried in a transportation funding package. While the bank was technically allowed to resume full operations, no new members were appointed to its board of directors, which lost quorum that July. With a skeleton board, Ex-Im was unable to approve most policy changes or significant transactions.


This skeleton crew proved to be a massive blow to Ex-Im’s balance sheet. After a peak of $35 billion in loans in 2012, authorizations began decreasing. The lack of quorum accelerated those trends, and the bank authorized a modern low of just $3 billion in 2018—this negatively impacted America, where Ex-Im supported thousands of jobs. However, the downturn was more devastating for developing countries whose businesses were supported by the bank’s activities. In one analysis during the 2014 authorization crisis, the Brookings Institution’s Amadou Sy wrote about the bank’s impact on sub-Saharan Africa. Because Ex-Im is backed by the credit of the United States, it can take on loans that private-sector lenders would find too risky. Sy found that this fact made Ex-Im “essential for US companies doing business in emerging markets.” With restricted loan abilities, the bank was unable to assist many businesses in lower-income nations.


As the 2016 election cycle commenced, the bank was projected to be a major issue. Launching his campaign in 2015, Sen. Ted Cruz took aim at Ex-Im to prove his conservative purity. Another major candidate, former Texas Governor Rick Perry, was embroiled in controversy as opponents derided him for flip-flopping on his bank opposition. Meanwhile, Sen. Lindsey Graham carved a lane as the only pro-bank Republican candidate. Ex-Im found itself a target in congressional races, as the conservative nonprofit Club for Growth launched a million-dollar ad campaign targeting GOP congresspeople it viewed as insufficiently anti-bank. However, Ex-Im soon faded as a campaign issue as Donald Trump began grabbing headlines and primary wins.


Ex-Im found no support in newly-elected President Donald Trump, whose White House began a quiet internal fight over the bank’s future. Office of Management and Budget Director Mick Mulvaney was a staunch opponent, while other officials like trade advisor Peter Navarro stood in support. In 2017, Trump nominated a fierce bank opponent, former New Jersey Congressman Scott Garrett, to lead the bank. This once again created a controversy, and Garret was defeated by the Senate Banking Committee during the nomination process. Two Republicans voted with Democrats against the nomination, including Sen. Tim Scott.


However, the bank’s fortunes would soon begin improving. The 2018 Blue Wave delivered control of the House Financial Services Committee to Democrat Maxine Waters, a steadfast Ex-Im supporter. Jeb Hensarling retired and declined to seek re-election that year, leaving the Republican committee members more likely to support future action. The 116th Congress would oversee a number of significant changes to the bank. The most important of these was a restoration of quorum. In May 2019, Congress approved multiple nominees to Ex-Im’s board. Among the confirmations was a new chair: Kimberley Reed. The new members met for the first time that July, marking the first time the bank was at full operational status since July 2015. This enabled the agency to make one of the largest loans in its history: $5 billion for a natural gas project in Mozambique. This single project eclipsed Ex-Im’s combined 2018 expenditures by billions.


A new challenge quickly emerged, centering around Ex-Im’s 2019 reauthorization deadline. House Financial Services Chair Maxine Waters and Ranking Member Patrick McHenry worked together on a bipartisan Ex-Im extension bill, which faced fierce opposition from Democrats this time. In a rare defeat, Rep. Waters agreed to table the compromise bill. After that summer failure, Waters introduced a bill in October 2019 aimed at reauthorizing Ex-Im while incorporating more Democratic priorities: the US Export Finance Agency Act of 2019 (H.R.4863). Among the bill’s provisions were a 10-year extension, increased funding for renewable energy products, and a host of other reforms, including a name change to the US Export Finance Agency.


In a repeat of the 2014 funding crisis, an unlikely alliance once again came together to support Waters’s legislation. Democrats, labor unions, the US Chamber of Commerce, nuclear energy companies, environmental groups, and individual companies like Boeing and GE began lobbying in support of the bill. The majority of Republicans opposed the new legislation as a result of the earlier compromise deal falling through. Joining them were many of the same conservative nonprofits who opposed Ex-Im in 2014: Heritage Action, Club for Growth, and Tea Party Patriots. In the end, HR4863 passed the House largely on party lines (4 Democrats opposed, 13 Republicans supported) before being sent to the Senate. Despite bipartisan companion legislation being introduced by Sens. Kyrsten Sinema (D-AZ) and Steve Daines (R-SD), the bill was laid to rest in Mitch McConnell’s legislative graveyard.


Unlike the 2014 crisis, the majority of 2019 Republicans supported extending Ex-Im. An ongoing trade war introduced a new viewpoint that the bank could compete with China in the global economy and reduce America’s trade deficit. Since his 2017 attempt to kill the bank via Scott Garrett’s nomination, even Donald Trump eventually changed his position to in favor. As a result, the majority of the GOP supported an extension, but not an expansion, of Ex-Im. In December 2019, a charter extension was passed, quietly buried in an omnibus package. This package was signed into law by President Trump on December 20th, the day that the bank's operating authority and funding from the government were set to expire.


This extension incorporated a handful of provisions from Rep. Waters’s earlier legislation, albeit with heavy compromises. Most importantly, the bank was extended by seven years, the longest charter extension in its history. However, this was a few years short of the 10 years H.R.4863 sought. The other major reform was to its board of directors, to avoid a future quorum loss. In the event of future vacancies, other federal officials would be called to serve as temporary board members.


2020 was a largely uneventful year for Ex-Im, as it focused on COVID-19 relief efforts for its partners and other activities. However, new problems began in 2021, ending this period of relative stability. Chair Kimberly Reed’s term expired in January, leaving the agency leaderless once again. It would remain without a permanent leader for months, as President Biden nominated Reta Jo Lewis to the role in September. Lewis would only be confirmed an additional five months later, in February 2022.


Reta Lewis’s confirmation was notable for both its historic nature and her unique qualifications. It gave the embattled bank an appointed chair for the first time in over a year. While Trump appointee Reed was the first woman to lead Ex-Im in its over 80-year history, Lewis was the first Black woman to be confirmed to the role. Her resume is a microcosm of the strange alliances that the bank has forged. She served in both the Clinton and Obama administrations in various capacities, becoming a history-making vice president of the US Chamber of Commerce in the interim. She ran unsuccessfully for mayor of Washington, DC in 2014, losing to current mayor Muriel Bowser. Both Lewis and Bowser received graduate degrees from American University, with Bowser graduating with a Master’s in Public Policy and Lewis with a Master’s in Administration of Justice.


The appointment has allowed Ex-Im to continue its work at a vital time. A February press release from the State Department included the bank in its plan to provide aid to Ukraine. The statement announced that the agency will “make available up to $3 billion to facilitate procurement of US goods and services for projects in Ukraine.” This level of transaction would be impossible if Ex-Im still lacked a quorum, and it will help Ukraine’s economy to stay functional during wartime. In response, Chair Lewis was included on a list of individuals now banned from entering Russia released by the Russian government on March 15th.


The Export-Import Bank of the United States should be on much more stable ground moving forward. With a renewed bipartisan consensus, long-term extension, significant reforms, and a new leader, Ex-Im’s future looks much clearer than its immediate past. The last decade for the bank has seen it at the center of one of the most complicated controversies in recent memory—one that almost destroyed the GOP. A 2019 retrospective from the Washington Post reflected on some of the Ex-Im extension debate’s ugliest moments: “GOP senators called each other liars. House conservatives threatened to oust the speaker. Rank-and-file Republicans rebelled against the rebellion to save the bank.” After years of controversy, Ex-Im has been fading back into obscurity. No longer at the center of warring political factions, it can focus on its mission.

Alex Moskovitz is a freshman C.L.E.G. major in the School of Public Affairs. He is a Staff Writer and Deputy Editor at the American Agora.


Image courtesy "Agnostic Preacher's Kid," Creative Commons.


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