1. Reauthorization of Ex-Im Bank Memo
Aaratrika Bose
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TO: Hon. Luke Messer (R-IN-6)
FROM: Aaratrika Bose
DATE: 7/25/2014
Re: Reauthorization of the Export-Import Bank
The export-Import Bank of the United States as an independent federal government
agency aims in contributing to US employment by helping to finance US exports of
manufactured goods and services when there is a lack of alternate financing to assist US
exporters to meet foreign, export credit competition. With the full faith and credit of US
government, Ex- Im bank’s main programs include direct loans, loan guarantees, working
capital finance, and export credit insurance. According to the legislation enacted in the
112th Congress to raise its exposure cap and extend the bank’s authority through the close
of business on 30th September, 2012. Currently the Congress is debating whether to
renew Ex-Im Bank’s authority and, if so, for how long and under what terms.1
Part I- Economic Analysis
The tea-party and the conservative groups as well as some democrats oppose the
reauthorization of the Export-Import bank as “Crony Capitalism”, where instead of
allowing the market forces to determine economic winners and losers; the government
uses taxpayer money to select it. There are many reasons on why the reauthorization of
Ex-Im bank should not be extended; but there are two main ones that make it an easy call
1 A U.S. government corporation is a government agency established by Congress to provide market-
oriented public servicesand to produce revenues that meet or approximateexpenditures. See CRS Report
RL30365, Federal Government Corporations:An Overview, by Kevin R. Kosar.

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for the lawmakers to not extend the reauthorization. One of them is the Ex-Im bank
subsidies keep providing a competitive advantage to a selected group of favored firms
with 60 percent of Ex-Im money going to 10 giant corporations, including the privately
held Bechtel Group Inc., the Boeing Co, Caterpillar Inc. and the General Electric Co,2
although their 2013 report which fails to list the small businesses, states that 90% of the
firms they supported were small businesses in the last year.
Large corporations like Boeing recently announced a $15 million loan guarantee to
support the overseas sale of power generating equipment by Caterpillar, Inc. 3 There is
no doubt that these big companies create more US jobs, but the actual point of helping
small US businesses reach out internationally is completely diminished. Supporters of
Ex-Im bank argue that failing to reauthorize the Ex-Im bank will result in affecting the
functioning of these big companies, thereby reducing the number of jobs, lower prices
and profits. But according to a May 6 company report, only 18 percent of Boeing’s sale
this year will be financed with export credit.
Another reason why it should not be reauthorized is the loophole in the Ex-Im Bank’s
Charter which allows the board of directors of the bank to ignore the constraints of the
Bank’s charter in transactions that would produce a “net benefit” to the US economy as
well as lack of professional training among its workers in analyzing such transactions.
2 Kreiter, Marcy. "Export-Import Bank Reauthorization Debate SplittingRepublicans."International
Business Times.N.p., n.d. Web. 04 July 2014.
3 Alman, Ashley. "White House Backs Export-Import Bank One Day After Kevin McCarthy Says He Won't."
The Huffington Post.TheHuffingtonPost.com, 23 June 2014. Web. 04 July 2014.

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The Ex-Im bank provides financing to foreign firms to purchase US equipment to provide
commercial services but the Bank’s Charter prohibits financing under three conditions: 4
 The recipient’s production is likely to create a surplus in world markets;
 The recipient competes with U.S. production of the same, similar, or competing
commodity; or
 The financing would cause “substantial injury” to American producers of the
same, similar, or competing commodity.
However, the Bank’s Charter also allows the board of directors to ignore these conditions
based on the above mentioned loophole. Therefore, in this manner without proper
consideration of the impacts on American workers as well the businesses that employ
them, the bank officials drain out billions of taxpayer money to foreign firms.
Although supporters of Ex-Im might argue that the Ex-Im helps in expanding economic
activities in the US by providing trade-finance that the public sector would not provide,
therefore necessitating the need for government involvement and correcting a market
failure; in reality the situation is very different. Ex-Im creates three market failures: First,
by offering taxpayer-backed loans to big corporations, it creates a moral hazard and
encourages risky lending. Second, Ex-Im favors big corporations with monopoly power
which creates unfair competition by strengthening already powerful companies to be
more powerful. Third, Ex-Im encourages rent-seeking through lobbying and corruption.5
4 The Charter of the Export–Import Bank of the United States, updated August 30, 2012,
www.exim.gov/about/whoweare/charterbylaws/upload/Updated_2012_EXIM_Charter_August_2012_Fin
al.pdf (accessed May 29, 2014).
5 Furth, Salim."How the Export-Import Bank Creates Problems for the Market." Washington WireRSS.
N.p., 21 July 2014.Web. 23 July 2014.

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Therefore, Ex-Im is not only failing to fix the limited role of the private sector in
providing trade credit, but also creating moral hazards, rent-seeking and other issues at
the same time.
Part II: Public Choice & Policy Analysis
Ex-Im has been influencing big companies and a few small companies in Indiana for
years. While, there are some positive sides to Ex-Im in the district, the odds are more in
the coming years.
Negative: Till 2007, the export import bank had helped Indiana’s 6th district’s small
businesses to certain extent. But since 2008 onwards, there has been a downward slope in
assistance from the Ex-IM bank. The main problem now is that since this bank exists,
small businesses are often asked to request them for financing before any private agency,
but the Ex-Im bank mostly prioritizes bigger businesses like Cummins Inc., Amos-hill
Associates, Inc. and Precious Technology Group LLc,6 in the district over small new
businesses which creates unfair competition for these new businesses in the district. So, if
Congressman Messer continues to oppose reauthorization, then these big businesses in
the district and interest groups financed by them will definitely oppose him as customers
of the Ex-Im bank.
Positive: Congressman Messer opposing the reauthorization would save the 6th District
residents from the risk of potential higher tax. This is because as the bank provides loan
guarantees as well as capital and credit insurance to finance US exports which is backed
6 "Export-Import Bank of the US." Export Data-USA-Indiana-6th District.Export--Import Bank of the United
States, 2012.Web. 4 July 2014.

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by the credit of the US government. This puts taxpayers at risk for losses that bank
reserves fail to cover leading to higher taxes.
Therefore, as an executive director of Hoosiers for Economic Growth and newly
appointed member to the House Financial services committee it his Congressman
Messer’s duty to secure all small entrepreneurs and not just a few in his district as well as
throughout the country as the intervention of Ex-Im bank is creating undue advantage for
most small businesses. As a strong advocate of taxpayer reduction, this reauthorization
could definitely prove to be detrimental for his ‘Taxpayer Hero’ image assigned by
Citizens Against Government Waste and his idea of “trying to bring a little Hoosier
common sense to Washington's spending decisions.”7 Therefore, although there might be
some opposition from few interest groups supporting the Ex-Im bank in the district, it
will be in the best interest of Congressman Messer to continue opposing the
reauthorization to uphold his image as the tax payer savior and Hoosier economic growth
supporter in his district.
Part III- Recommendation
Congressman Messer should oppose the reauthorization of the Ex-Im bank. Although the
Idea behind the Ex-Im bank is very progressive for small businesses looking to expand
globally, it is failing continuously to abide by its original mission. One of the biggest
claims that supporters make is Ex-Im creates jobs. Whereas in reality, the bank simply
generalizes number of jobs based on national data instead of counting actual job related
to its projects. They simply assume that average employment trend apply to Ex-Im clients
7 "Luke Messer Congressman for the 6th Districtof Indiana."Congressman Luke Messer Named 'Taxpayer
Hero' N.p., 9 June 2014.Web. 04 July 2014.

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without distinguishing between full-time, part-time and seasonal jobs.8 In some cases, the
Ex-Im financing actually puts US workers at a disadvantage by financing overseas
companies with billions of dollars at favorable rates like the lawsuit filed by the Delta
Airlines and Airline Pilots association against the bank for providing financing to five
foreign airlines9 for the purchase of Boeing aircraft.
The bank also fails to evaluate the circumstances that would occur in the absence of the
subsidies. The bank officials have a false bureaucratic assumption that there will no
economic activity if the bank stops providing subsidies. Irrespective of circumstances,
government interference changes competitive landscape, where successes and failures are
determined by political consideration rather than their services.
The 6th Congressional district of Indiana mostly consists of small sub-urban counties with
middle income families. Ex-Im bank claims to create a leveled playing field by providing
government subsidies to foreign firms, where as in reality only 2.2 percent of all US
exports last year received Ex-Im financing. This means that about 98 percent US
exporters are competing without their help.10 Therefore, the best option would be to
reduce taxes and allow private investors to finance US export instead of investing billions
of dollars in corporate welfare, making it heavy on the taxpayers. The extension of the
reauthorization in 2012 did not help much and still Boeing, Caterpiller and other
corporate giants continue to be the Ex-Im bank’s top clients receiving majority of the
8 "Export–Import Bank: CronyismThreatens American Jobs." The Heritage Foundation.N.p., n.d. Web. 04
July 2014.
9 Korean Air,Dubai’s Emirates Airline,Abu Dhabi-based Etihad Airways,Latam Airlines Group SA, and LOT
Polish Airlines.
10 “Red Tape Rising:FiveYears of Regulatory Expansion,”Heritage Foundation Backgrounder No. 2895,
March 26, 2014,http://www.heritage.org/research/reports/2014/03/red-tape-rising-five-years-of-
regulatory-expansion.

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Bank’s financing. As a result, Congressman Messer is on the right path to opposing the
reauthorizing of this bank and should continue to oppose it as this bank is nothing but
another face of “capital cronyism” and “Corporate Welfare”.