[Congressional Record Volume 165, Number 75 (Tuesday, May 7, 2019)]
[Senate]
[Pages S2669-S2671]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]



                               Ex-Im Bank

  Mr. TOOMEY. Madam President, later today I believe the Senate will be 
considering nominations of three Board members for the Export-Import 
Bank, and this is a very important and, I think, unfortunate 
development.
  Since 2015, the Ex-Im Bank Board has not had a quorum. The 
confirmation of these three nominees will change that and give them a 
quorum, and that matters for a number of reasons. Perhaps the principle 
reason is that in the absence of a quorum, such as the way we have been 
operating for these last 4\1/2\ years, the Ex-Im Board cannot approve 
transactions without a quorum, and it requires Ex-Im Board approval to 
do a deal over $10 million. So for these last 4\1/2\ years, the Export-
Import Bank has been in existence and operating, but at a very much 
smaller level than what it had done previously, and what, I am afraid, 
it will again resume.
  Let me explain why I oppose confirming this quorum to the Board of 
the Export-Import Bank. First of all, as I will explain, I think that 
with a quorum there is a very real risk that the Ex-Im Bank returns to 
business as usual, which is a form of crony capitalism and taxpayer 
subsidy of companies far and wide.
  Historically, the fact is the Ex-Im Bank has used the American 
taxpayer to subsidize some of the largest and best connected companies 
in the world, including governments that are very unfriendly to the 
United States. So I want to describe my policy objections to the Ex-Im. 
I want to rebut some of the arguments that proponents of the Ex-Im Bank 
make. I want to walk through a little history to remind my colleagues 
about the folks who have blocked what I think are very commonsense 
efforts to make some meaningful reforms. Then, finally, I do want to 
discuss a path forward. So let me walk through my concerns, my 
objections to the way Ex-Im Bank has operated in the past when it is in 
full-blown operation mode and with a quorum on the Board.
  First of all, it has been a series of risky bets for taxpayers. The 
Ex-Im has sometimes claimed it only takes risks that private lenders 
are unable or unwilling to take. Well, we should stop right there and 
ask ourselves, if private lenders are unwilling or unable to take a 
risk, why should taxpayers be forced to take that risk? Yet, at the 
same time, the Ex-Im Bank also claims it only makes safe bets. Well, it 
is impossible to do both.
  The Bank cannot take only those transactions so risky that no one 
else will do it and at the same time be doing only safe transactions. 
It is pretty obvious. The fact is, Ex-Im Bank wins business by 
systemically underpricing the risk. That is why borrowers

[[Page S2670]]

go to the Ex-Im Bank, instead of any number of private lenders that 
would not offer deals on the same terms as the Ex-Im Bank. No, because 
they have shareholders to answer to--Ex-Im Bank, not so much.
  Proponents of the Ex-Im Bank point out that the Bank isn't drawing 
any money from the U.S. Treasury so everything must be OK--not so 
clear. First of all, right now we have the best economy in decades. My 
goodness. I would hope they would not be drawing on Treasury with an 
economy booming the way it is.
  As recently as 2014, the last year in which the Ex-Im Bank was fully 
operational, the CBO report suggested that the Ex-Im portfolio, their 
loans and guarantees on their books, were underwater by $2 billion. 
Remember, we have heard this before. Remember, Fannie and Freddie, two 
other inventions of the Federal Government. They were very profitable 
until they weren't. Then they ended up costing the taxpayers $200 
billion.
  Another objection I have is the fact that Ex-Im Bank necessarily 
picks winners and losers in our economy. I don't think any entity of 
the Federal Government ought to be doing it. It is a great deal for 
businesses that get the support of Ex-Im Bank, but it provides an 
unfair advantage to beneficiaries over companies that do not get that 
support. In the process, it can destroy jobs. This isn't just 
hypothetical; this is real. This has happened, and we know it because 
we have heard testimony. We have seen examples. One famous such example 
is a case where Air India, the national airline of the country of 
India, used Ex-Im Bank financing to subsidize its purchase of Boeing 
jets. That is very nice for Air India because they get lower cost 
financing on their biggest ticket item, the jets they fly. They were 
able to lower the fares they charge on flights from New York to Mumbai. 
That is great if you are Air India. It is not so great if you are Delta 
Airlines, an American company that employs Americans and happens to 
compete on that exact same route, but Delta could not get access to Ex-
Im financing to buy its Boeing jets. Why would we do a thing like that, 
have taxpayers subsidizing a foreign airline that is competing directly 
against a U.S. airline? That is the kind of thing Ex-Im does. There is 
also a history of waste, fraud, and abuse.
  Ex-Im Bank has not been very well run for a long period of time. Over 
many years, there have been a number of issues raised by the Office of 
the Inspector General. Ironically enough, supporters of Ex-Im Bank have 
blocked my efforts to get a new inspector general confirmed. Makes you 
wonder, why do these proponents not want an inspector general on the 
job inspecting the practices of the Ex-Im Bank? In 2015, an employee 
pled guilty to accepting bribes to push unqualified loan applications. 
Maybe one of the most fundamental reasons I object to the Ex-Im Bank is 
our economy doesn't need the Ex-Im Bank.
  Now, some Ex-Im supporters would have you believe that without the 
Ex-Im Bank, U.S. exports would just collapse. Well, the reality is, 
U.S. exports are higher today than they were in 2014, certainly, the 
last year when the Ex-Im Bank was fully functional. As a matter of 
fact, now, you know, 4\1/2\ years since the Ex-Im Bank was fully 
functional, we have the strongest economy of our lifetime, despite the 
fact that the Ex-Im can only do tiny transactions. This is no surprise 
because, even in its heyday, Ex-Im financed a very tiny percentage of 
all U.S. exports. Typically, it is less than 2 percent. So 98-point-
something percent of all U.S. exports managed to get sold without Ex-Im 
financing, but yet we are to believe that without Ex-Im financing we 
cannot have exports?
  Interestingly, even the companies that benefited the most from Ex-Im 
Bank haven't apparently suffered since it has been virtually closed. 
Consider the case of Boeing. According to a Mercatus study, Boeing was 
the biggest seller of exports financed with Ex-Im subsidies in 2014, 
the last year in which Ex-Im was fully functional, and nearly 40 
percent of all Ex-Im deals by dollar value were used to finance Boeing 
aircraft.
  Now, the Ex-Im proponents often argued that companies like Boeing 
would take a huge hit without a fully functioning Ex-Im. Instead, 
Boeing has consistently had record deliveries and multiyear back orders 
since Ex-Im stopped doing deals that would finance Boeing aircraft. In 
fact, during the years that Ex-Im Bank has been virtually closed, 
Boeing has recorded record sales.
  In late 2018, prior to the recent problems they have had with one 
category of aircraft, the Wall Street Journal reported that Boeing 
suppliers could not keep up with the huge demand for Boeing aircraft, 
despite the fact that nobody could finance an aircraft from Boeing 
through the Ex-Im Bank. Now, why? Why is that? How could that be? It is 
because Boeing was making great products; demand was strong; and there 
is plenty of private capital available to finance great products being 
used for very productive purposes.
  I think Boeing is proof that the Ex-Im Bank wasn't acting as the 
lender of last resort, filling in where private markets could not or 
would not. Ex-Im Bank was acting as the lender of first resort, 
crowding out the private sector lenders. As soon as the Ex-Im Bank's 
funding was constrained so it would not fund aircraft, well, private 
money came flooding into the market. Yet we still have proponents argue 
that Ex-Im Bank is the lender of last resort, steps in when private 
financing is unavailable, but, again, no matter how you look at it, 
this just doesn't add up. It doesn't add up in the example of Boeing, 
when we look at an American manufacturer that sells its products, and, 
in the past, some of those purchases were funded through the Ex-Im 
Bank, but it also doesn't hold up if you look at it the other way 
around. Look at who, in 2014--again, the last year in which the Ex-Im 
Bank was fully functional--were the top recipients of the Ex-Im 
taxpayer subsidies, who was it that was borrowing the money so they 
could make these purchases? Well, it was all entities that have easy 
access to private money but some pretty surprising entities, 
nevertheless.

  The No. 1 borrower, the No. 1 consumer of U.S. taxpayer subsidies 
through Ex-Im Bank was Petroleos Mexicanos, a state-owned oil company 
in Mexico. It is a huge company from a really large country that can 
easily access private markets.
  Do you know who is No. 2? Kenya Airways. Kenya Airways, owned by the 
Government of, you guessed it, Kenya.
  Do you know who is No. 3? Air China, of all places, a totally state-
owned airline of a country that last time I checked is not terribly 
friendly to us, but it gets worse.
  Do you know who ranks No. 4? No. 4 in terms of accessing Ex-Im 
financing in 2014--the last year in which they were fully operational--
according to a study by the Mercatus Institute, the VNE Bank, state 
owned by the Russian Government, by the way, under sanctions now for 
bad behavior they have engaged in. So all four of these are state owned 
in States that have easy access to plenty of private lending, but, of 
course, they go to Ex-Im because Ex-Im will offer them a better deal, a 
subsidized deal.
  No. 5 is a good one too. No. 5 is not a state-owned company. No. 5 is 
Roy Hill mining. Royal Hill Holdings owns mining. It is not state 
owned. Instead, it is owned by the richest woman in Australia, a 
multibillionaire. Are we to really presume that she cannot arrange for 
financing for part of her enormous conglomerate? Really, the richest 
woman in Australia? She is probably a really lovely woman. This is not 
a criticism of her; it is a criticism of us. We are going to allow U.S. 
taxpayers to take more risks underpricing and funding acquisitions by 
some of the richest people in the world and countries that are 
downright hostile to us.
  Of course, all of these governments and all of these companies can 
finance their acquisitions privately, but who would not take a U.S. 
taxpayer subsidy if it is offered to you? The question is, Why are we 
OK with that? How can it be OK to force American taxpayers to take a 
financial risk for these entities, state-owned companies, including 
those owned by China and Russia? It is unbelievable.
  My concern is, if we restore a quorum later today, we are going to go 
right back to this because we haven't enacted any reforms. We haven't 
insisted on any reforms as a condition of reestablishing this quorum.
  We hear sometimes from the proponents that we just have to have Ex-

[[Page S2671]]

Im funding because it has to level the playing field. China has an 
export subsidy bank. They have used that aggressively, and so we ought 
to emulate the Chinese so we will have a level playing field.
  Well, among the unbelievable ironies in this whole story, guess who 
is a big recipient of U.S. Ex-Im subsidies? It is the Chinese export 
bank. You cannot make this stuff up. That is a fact. It is not just Air 
China. It is not just the state-owned airline.
  In 2014--again, the last year in which Ex-Im was fully operational, 
which apparently they are going to return to--there were 17 
transactions where the primary borrower is the Export-Import Bank of 
China.
  So here we are, we are funding the Chinese export bank, which we cite 
as the reason we need an export bank. It is unbelievable.
  In 2014, the Ex-Im Bank also funded a deal with Huawei, which we have 
all come to appreciate is a very significant national security threat 
to the entire Western world, especially the United States. Of course, 
what more can you say about subsidizing Russian- or state-owned 
businesses? There were multiple deals back in 2014 where the Ex-Im Bank 
funded Russia. I already mentioned VNE Bank, now sanctioned, and two 
deals with Spur Bank, also sanctioned.
  In any case, I think this whole argument, that if some other country 
is engaged in this behavior, therefore, we have to--I think that is a 
really weak argument. Think of all the things the Chinese Government 
does, intellectual property theft, forced technology transfer, bribery, 
and corruption. As a matter of fact, in Malaysia, the previous corrupt 
Government of Malaysia stole billions of money from an investment fund, 
and China offered to use their Ex-Im Bank to help cover up the graft, 
which indirectly we were facilitating by doing transactions with that 
Chinese Ex-Im Bank. I trust that supporters of the Bank do not want the 
U.S. to emulate all of these kinds of nefarious activities. I am sure 
they do not, but the same argument could apply.
  So with all of these concerns in mind, I have been advocating for 
reform of the Ex-Im Bank since joining the Senate. Let me be clear. I 
would rather not have an Ex-Im Bank, but if we are going to have one, 
and if we are going to reconstitute a Board and allow them to do large-
scale business, I think, at a minimum, we ought to make some sensible 
reforms. Unfortunately, proponents of Ex-Im Bank in this body and in 
the other body have blocked almost every effort to do so. One small 
reform that many of us have been clamoring for, for years, would be to 
have the administration, whatever administration, work to pursue a 
mutual disarmament. The argument that we hear most frequently is we 
need Ex-Im Bank because other countries have export-subsidizing banks. 
Well, OK, how about having a mutual negotiation to phase these out, 
right? Well, the Obama administration did absolutely nothing about it, 
and we have a lot of trade talks going on right now under this 
administration. I have not heard one word about encouraging a wind down 
of everybody's mutually unfortunate export subsidy vehicles.

  That brings me to the history of the nomination. A while back, 
President Trump nominated Scott Garrett, a very well qualified, bright, 
and capable guy, and an avowed reformist. He was a skeptic about Ex-Im 
Bank but was committed to executing his responsibilities as President 
under the charter and under the law but was going to insist on reforms.
  By the way, had Scott Garrett been confirmed, Ex-Im would probably be 
up and running now. But the proponents of the Bank didn't want the 
reforms, apparently, so they scratched Scott Garrett's nomination.
  Despite that, I continued to try to find a reasonable way forward. 
One of the things I proposed was confirming Kim Reed as President. Let 
me say a word about Kim. I think she is a very capable person. She is 
very intelligent, very knowledgeable, and has a terrific reputation and 
great integrity. My proposal was to confirm Kim Reed because she has 
committed to the kinds of meaningful reforms the Bank needs.
  She and I and my staff walked through six very specific categories of 
reform. We did that privately in my office. We did that publicly at the 
Banking hearing. We talked about adding transparency to how the Ex-Im 
Bank operates. We talked about taxpayer protections that would be 
implemented to reduce the risks taxpayers currently take. We agreed 
that we should move in the direction of protecting domestic companies, 
such as the example I gave where Delta was put at a competitive 
disadvantage against Air India. We agreed we should encourage private 
financing to be first in line rather than the Ex-Im Bank. We agreed 
that we should be cracking down on any bad actors. We also agreed that 
there should be a mutual reduction in reliance on credit export 
agencies globally.
  On that basis, I was willing to confirm Kim Reed and give her a 
chance to implement some of these reforms and prove they are actually 
being implemented, at which point I would support restoring a quorum so 
that a reformed Ex-Im would be back in business. But that deal was 
blocked by proponents of the Ex-Im Bank here in this body. It is very 
hard to conclude anything other than that those folks never want these 
reforms to take place.
  I am still open to working with the new President when she is 
confirmed, and the new Board. We have a reauthorization that is 
presumably on the agenda for later this year. But I am going to oppose 
all the nominees today because we are going ahead and putting the cart 
before the horse. We are reopening Ex-Im Bank on a full scale without 
first implementing the reforms, and that is backward.
  I appreciate the conversations I have had with Kim Reed, and I trust 
that she actually sincerely does want to implement some of these 
reforms. I hope she can. I look forward to working with her to make 
sure that if we do, in fact, go through a reauthorization process, it 
codifies the reforms that require codification. But I feel very 
strongly that we are doing this backward. That is the reason I am going 
to vote against all the nominees today.
  The Ex-Im Bank, unreformed, is an example of crony capitalism that 
puts U.S. taxpayers at risk and subsidizes some pretty unsavory 
characters. I am pretty disappointed that we are moving ahead with this 
today. I hope that at least we will be able to codify the necessary 
reforms in the reauthorization.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Romney). The Senator from New Mexico.