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Washington, D.C. - In case you missed it, U.S. Senator Pat Toomey (R-Pa.) today went to the Senate floor to lay out his case against confirming a quorum to the board of the Export-Import Bank of the United States until meaningful, pro-taxpayer reforms are made.

Full Remarks: 

Thank you Madam President. Today, later today, I believe the Senate will be considering nominations of three board members for the Export-Import Bank. This is very important and I think an unfortunate development.

Since 2015, the Ex-Im Bank board has not had a quorum. Confirmation of these three nominees would change that, would give them a quorum, and that matters for a number of reasons. Perhaps the principal reason is that in the absence of a quorum, such as the way we've been operating for these last four and a half years, the Ex-Im board cannot approve transactions and it requires Ex-Im board approval to do deal over 10 million dollars.

So for these last almost four and a half years, the Export-Import Bank has been in existence, it's been operating, but at a much smaller level than what it had done previously and what I'm afraid it will begin to resume.

So let me explain why I oppose confirming this quorum to the board of the Ex-Im Bank.

First of all, as I will explain, I think with a quorum there's 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 the Ex-Im, I want to rebut some of the arguments of proponents of the Ex-Im bank I make, and I want to walk through a little history here to remind my colleagues about the folks who have blocked what I think are very common sense efforts to make some meaningful reforms. Then finally I do want to discuss a path forward here.

So let me walk through my concerns, my objections to the way Ex-Im Bank has operated in the past, when it is at in full-blown operation mode, and with a quorum on the board.

First of all, it's been a series of risky bets for taxpayers. The Ex-Im has sometimes claimed that it only takes risks that private lenders are unable or unwilling to take. 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's impossible to do both Madam President. The bank can't take only those transactions so risky that no one else will do it, and at the same time to be doing only safe transactions. It's pretty obvious.

Fact is, Ex-Im Bank wins business by systematically underpricing the risk. That's why borrowers go to the Ex-Im Bank, instead of any number of private lenders that won't offer deals on the same terms as the Ex-Im Bank, because they've got shareholders the 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 US Treasury, everything must be okay, not so clear. First of all, right now we have the best economy in decades, my goodness I would hope they wouldn't be drawing on Treasury when it was 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, we're underwater by two billion dollars. Remember we've heard this before, remember Fannie and Freddie, two other inventions of the federal government, they were very profitable -- until they weren't. And then they ended up costing the taxpayers 200 billion dollars.

Another objection I have Madam President, is the fact that Ex-Im Bank necessarily picks winners and losers in our economy, and I don't think any entity of the federal government ought to be doing it. It's a great deal for businesses who get the support of Ex-Im Bank, but it provides an unfair advantage to beneficiaries over companies that don't 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've heard testimony, we have seen examples.

One famous such example is a case where Air India, national airline of the country of India, used Ex-Im Bank financing to subsidize its purchase of Boeing jets. That's very nice for Air India, because they get lower-cost financing on their biggest ticket item: the jets that they fly.

They were able to lower the fares that they charge on flights from New York to Mumbai. That's great, if your Air India. It's not so great if you're Delta Airlines, an American company that employs Americans and happens to compete on that exact same route. But Delta couldn't access Ex-Im financing to buy its Boeing jets. Why would we do a thing like that, have taxpayers subsidizing a foreign Airline that's competing directly against a U.S. Airline? But that's the kind of thing Ex-Im does.

There's 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 plead guilty to accepting bribes to push unqualified loan applications. Maybe one of the most fundamental reasons that I objected 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, U.S. exports would just collapse. The reality is that US exports are higher today than they were in 2014, certainly, the last year when the Ex-Im Bank was fully functional.

As matter fact, now four and a half years since the Ex-Im Bank was fully functional, we've got the strongest economy of our lifetime, despite the fact that the Ex-Im can only do tiny transactions. But this is really no surprise, because even in its heyday, Ex-Im financed a very tiny percentage of all U.S. exports, typically it's 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're to believe that without Ex-Im financing we can't have exports?

Interestingly, even the companies that benefited the most from Ex-Im Bank haven't apparently suffered since it's 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 functioning, and nearly 40 percent of all Ex-Im deals by dollar value were used to finance Boeing aircraft. Now the Ex-Im proponents often argue that companies like Boeing would take a huge hit without a fully functioning Ex-Im. But instead Boeing is consistently having record deliveries and multi-year 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 that they've had with one category of aircraft, The Wall Street Journal reported that Boeing suppliers couldn't 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 is that? How could that be? 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 couldn't or wouldn't.

Ex-Im Bank was acting as a lenders first resort, crowding out the private sector lenders. And as soon as the Ex-Im Bank's funding was constrained, so that it wouldn't fund aircraft, well private money came flooding into the market. But yet, we still here proponents argue that the 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, who are the top recipients of the Ex-Im taxpayer subsidies. Who was it that was borrowing the money so that they could make these purchases? Well, it was all entities that have easy access to private money, but some pretty surprising entities, nevertheless.

You know the number one borrower, the number one consumer of US taxpayer subsidies through Ex-Im Bank was Petroleos Mexicanos - state-owned oil company of Mexico. It's a huge company from a really large country that can easily access private markets.

You know who was number two? Kenya Airways. Owned by the government of, you guessed it, Kenya.

And you know who's number three? Air China of all places.Totally state-owned airline of a country that last time I checked was not terribly friendly to us. But it gets worse.

You know who ranks number four? Number four 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? VEB Bank. State-owned by the Russian government and, by the way, under sanctions now for bad behavior that they have engaged in.

So all four of these are state-owned in states that have easy access to private lending but of course they go to Ex-Im because Ex-Im will offer them a better deal, a subsidized deal.

But number five is a good one too. Number five is not a state-owned company. Number five is Roy Hill Mining. Roy Hill Holdings owns mining, not state-owned, instead it's owned by the richest woman in Australia - a multi-billionaire. And are we really to assume that she can't arrange financing for part of her enormous conglomerate? Really? The richest woman in Australia. She's probably a very lovely woman, this is not a criticism her, it's a criticism of us. We're going to allow U.S. taxpayers to take more risks, under pricing, 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 wouldn't take a U.S. taxpayers subsidy if it's offered to you?

The question is why are we okay with that? How can it be okay to force American taxpayers to take a financial risk for these entities? State-owned companies including those owned by China and Russia. It's unbelievable and my concern is if we restore a quorum later today, Madame President, we're 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 re-establishing this quorum.

You know we hear sometimes from the proponents that we just have to have Ex-Im funding because it's got to level the playing field. You know China has an export subsidy bank and they use that aggressively and so we ought to emulate the Chinese so that 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's the Chinese Export Bank. You can't make this stuff up. That's a fact. It's not just Air China; it's not just the state-owned airline. In 2014, again the last year in which Ex-Im was fully operational, which apparently they're going to return to, there were 17 transactions where the primary borrower is the Export-Import Bank of China.

So here we are, we're funding the Chinese Export Bank, which we cite as the reason we need an Ex-Im Bank. It's unbelievable! In 2014, the Ex-Im Bank also funded a deal with Huawei, which we've all come to appreciate is a very significant national security threat to the entire western world, especially the United States. And of course, what more can you say about subsidizing Russian state-owned businesses, in multiple deals back in 2014 where the Ex-Im Bank funded Russians. I already mentioned VEB Bank -- now sanctioned; two deals with Spur Bank --also sanctioned. And in any case, I think this whole argument that if some other country is engaged in this behavior, therefore we have to-- that's a really weak argument. I think of all the things the Chinese government does -- intellectual property theft, forced technology transfer, bribery, and corruption.

As a matter fact, in Malaysia, the previous corrupt government of Malaysia, stole billions of dollars 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 don't want the US to emulate all of these kinds of nefarious activities. I'm sure they don't, but the same argument could apply.

So Madam President with all of these concerns in mind, I have been advocating for reform of the Ex-Im Bank since joining the Senate. And I'll let me be clear: I would rather not have an Ex-Im Bank, but if we're going to have one, and if we're 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 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 right? The argument that we hear most frequently is we need Ex-Im Bank because other countries have exports subsidizing banks. Well okay how about having a mutual negotiation to phase these out right. Well the Obama administration did absolutely nothing about it, and we've got 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.

President Trump nominated Scott Garrett -- very well qualified, very bright and capable guy, and an avowed reformer -- a skeptic about Ex-Im Bank but one who is 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 scotched Scott Garrett's nomination. Despite that, I continued to try to find a reasonable way forward, and one of the things that I proposed was confirming Kim Reed as president.

Now let me just say about Kim -- I think she's a very capable person. Very intelligent, very knowledgeable, terrific reputation, great integrity, so my proposal was let's confirm Kim Reed because she has committed to the kind of meaningful reforms the bank needs. And we walked through -- she and I and my staff -- six very specific categories of reform.

We did that privately in my office. We did it publicly at the Banking Committee. We talked about adding transparency to how the Ex-Im Bank operates. We talked about taxpayer protections which would be implemented to reduce the risk that 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 in a competitive disadvantage against Air India.

We agree that we should encourage private financing to be first in line rather than Ex-Im Bank. We agreed that we should be cracking down on any bad actors and we also agree that there should be a mutual reduction in reliance on credit reporting agencies globally, and on that basis I was willing to confirm Kim Reed to give her a chance to implement some of these reforms -- prove that 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 Madam President, 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.

Now I'm still open to working with the new president when she's confirmed to the new board. We have a reauthorization that is presumably on the agenda for later this year but I'm going to oppose all the nominees today because we're 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 Madam President that's backwards.

Now I appreciate the conversations that I've had with Kim Reed and I trust that she actually sincerely does want to implement some of these reforms. I hope she can, and I look forward to working with her to make sure that if we do in fact go through with a reauthorization, it codifies the reforms that required codification.

But I feel very strongly that we are doing this backwards and that's the reason that I'm going to vote against all the nominees today. The Ex-Im Bank unreformed is an example of crony capitalism that puts us taxpayers at risk and subsidizes some pretty unsavory characters. I'm pretty disappointed that we're moving ahead with this today Madam President.

I hope at least we'll be able to codify the necessary reforms in the reauthorization debate, and I yield the floor.