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Rep. McCarthy Doesn't Support U.S. Export-Import Bank--Update

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06/22/2014 | 02:12pm EST
By Damian Paletta and Devlin Barrett 

Incoming House Majority Leader Kevin McCarthy on Sunday said he would not support reauthorizing the charter of the Export-Import Bank of the United States once it expires in September, a shift that brings wide political and economic ramifications.

Mr. McCarthy's comments, made during an appearance on Fox News Sunday, clarified what had previously been a more ambiguous view about the U.S. trade agency, which was created 80 years ago and guarantees loans made to help U.S. companies export their goods, among other things.

Mr. McCarthy's predecessor as majority leader, Rep. Eric Cantor (R., Va.), helped rescue the Export-Import Bank in 2012 when some conservatives said they wanted the agency to stop backing loans. Mr. Cantor helped steer a reauthorization through Congress despite the objection of some conservatives. Mr. McCarthy of California supported the agency's reauthorization in 2012, but on Sunday said the agency should no longer be backing new loans.

Asked if he would allow the Export-Import Bank's charter to expire, Mr. McCarthy replied, "Yes, because it's something that the private sector can be able to do."

He added, "One of the biggest problems with government is they go and take hard-earned money so others do things the private sector can do. That's what the Ex-Im Bank does."

The comments bolster the position of House Financial Services Committee Chairman Jeb Hensarling (R., Texas), who has called the Export-Import Bank "crony capitalism" and said it should expire. The development, however, could be seen as a blow to a number of U.S. manufacturers, particularly Boeing Co., as the government backs a significant number of its sales to foreign airlines.

The U.S. Chamber of Commerce, the National Association of Manufacturers, and a number of companies were planning this week to launch a public relations effort to gin up support for reauthorizing the Export-Import Bank's charter, but they will face an uphill battle given Mr. McCarthy's new position.

"This is an all-hands-on-deck effort right now because we are really at a very critical time given the bank's charter expires at the end of September," said Christopher Wenk, senior director of international policy at the U.S. Chamber of Commerce.

The chances of the trade agency securing reauthorization without Mr. McCarthy's support are narrow, particularly given the recent shakeup among House GOP leaders. The incoming House Majority Whip, Republican Steve Scalise of Louisiana, has signaled his opposition to the agency. The only House Republican who could overrule them both--House Speaker John Boehner (R., Ohio)--has signaled he won't.

"Boehner has been clear that this is an issue that members, particularly on the Financial Services Committee, need to discuss--and that is happening," said Michael Steel, a spokesman for Mr. Boehner.

In 2012, lawmakers raised the Export-Import Bank's lending limit to $140 billion from $100 billion, and in fiscal 2013, the bank authorized $27 billion to support an estimated $37.4 billion in U.S. export sales. It also sent $1.06 billion to the U.S. Treasury, money it earned from interest and fees it charged its customers.

The bank borrows money from the Treasury Department and pays interest on the funds to the Treasury. It then lends that money out and charges a higher interest rate, plus a fee, that generate its revenue. It technically has been self-sustaining since fiscal 2008, though Congress provides funding for the bank's Office of Inspector General and sets the bank's lending limit.

If the bank's charter isn't reauthorized, it could continue servicing the loans it already has made and backed, but it wouldn't be able to authorize new loans.

After Mr. Cantor lost the Republican primary earlier this month, speculation had spread through Washington--and Wall Street--that the Export-Import Bank might fail to win reauthorization.

The Export-Import Bank has caused divisions within the GOP for several years. More than 100 voted to reauthorize it in 2012, and close to 40 are expected to send House Republican leaders a letter this week calling for the charter to be extended again.

The White House also has supported it reauthorization, saying the agency is critical to helping sustain U.S. exports. Close to 60 other countries have agencies to help finance exports, and supporters of the bank have said that ending the Export-Import Bank would put U.S. companies at a competitive disadvantage. Critics of the bank have said the bank creates too much interference in private markets.

Kristina Peterson contributed to this article.

Write to Damian Paletta at damian.paletta@wsj.com and Devlin Barrett at devlin.barrett@wsj.com

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