Over the last couple of weeks, there has been discussion as to whether the funding for the Export-Import Bank should be allowed to expire. While the Chamber of Commerce and other pro-business (and Republican leaning) groups are pushing to renew funding arguing that the bank promotes exports and American jobs, others are arguing that the bank is simply funding transactions for big companies, as well as funding jobs and transactions that would happen anyway, as well as putting taxpayers on the hook should the bank have to take losses.

The fact is that roughly 60% of the bank’s funding goes to 10 big corporations, including such familiar names as Boeing, General Electric, Caterpillar, and Bechtel. Only 20% of its loans go to what it defines as “small” businesses, namely those with 500 to 1500 employees. These numbers contradict the idea that the bank promotes business, but rather confirms the idea that it is a slush fund to promote big (i.e. politically well-connected) business. It is also worth noting the definition of “small” business that Ex-Im Bank uses is somewhat at odds with the definition that the Small Business Administration (SBA) uses, which is that a small business is defined as having less than 500 employees.  As of 2010, the SBA stated small businesses make up 99.7% of all businesses (as of 2010). To put it another way, virtually all of Ex-Im’s funding goes to a category of businesses that make up .3% of all U.S. businesses. That is to say that the bank doesn’t exist to promote exports and American jobs, it exists to promote the business model of large businesses. While a government certainly may want to promote its own businesses, and the U.S. faces competition from countries that do just that, there is a strong case to be made that such actions promote corruption. The fact that 60% of the bank’s funding goes to 10 businesses makes it highly unlikely that the political pressure (i.e. the use of political connections) was not involved.

The second problem is the assertion that taxpayers won’t be on the hook for loans for losses that the bank takes. Firstly, it should be noted that any normal bank that had 60% of its loan portfolio tied up in 10 clients would likely find federal bank regulators possibly moving to have it sold to a larger, more diversified institution. Given that a typical bank only has an equity cushion of 8% to 10%, a loan portfolio with concentrations such as this would likely be in the position that the bankruptcy of any 2 of the 10 clients would put it out of business. While the Ex-Im Bank operates on a different funding model than your local bank that is using Grandma Jones’ life savings, the assertion that taxpayers would never have to cover losses is highly questionable. While one might respond with the fact that Boeing, General Electric, and Caterpillar are big, well-run companies that are not likely to go bankrupt, nobody saw the General Motors bankruptcy coming, nor any of the airline bankruptcies that have occurred, nor any of the banks that were ultimately bailed out, etc. etc. Does anyone really believe that if Boeing, General Electric, etc were to be headed towards bankruptcy that they wouldn’t also be the beneficiary of a taxpayer bailout?

The Ex-Im Bank is clearly one example of crony capitalism that has disgusted large swaths of the American electorate with Washington on both the left and the right. For those on the right who champion free markets, this bank is an example of corporate welfare. For those on the left who denounce greedy capitalist, the bank is an example of the influence of corporate money in Washington that buys favors. In the Wall Street vs. Main Street narrative that has arisen over the last few years, this bank is one more example of how Washington benefits Wall Street at the expense of Main Street.

Certain politicians are arguing that the funding for the bank should not be renewed this year. They should get their way.