Export-Import Bank's expiration a victory for billionaire Koch brothers

The Export-Import Bank, created by President Franklin Delano Roosevelt to help foreign customers buy U.S. goods, has been reauthorized 16 times, usually with little fuss and often with strong Republican support.

But Congress let the bank's charter expire this week, halting any new loans.

Even more surprising than the rare event of a government program being wound down was the force behind the shutdown: the billionaire Koch brothers. Their network of groups turned what was once routine reauthorization of a lesser-known financing entity into a litmus test for conservatives — and they scored a major victory.

The ability to make the bank a Capitol Hill priority and even a presidential campaign issue highlights the growing power of the Koch network within the GOP. It also spotlights some of the internal divisions complicating the Republican effort to recapture the White House in 2016.

"This is a really interesting case in how battles are won," said Veronique de Rugy, a senior research fellow at the Mercatus Center at George Mason University in Virginia and an expert on the bank.

Without the involvement of the Koch network of conservative groups they fund, "we wouldn't be where we are," she said.

The bank's demise may yet prove temporary because Republican leaders have vowed to again consider reauthorizing it when Congress returns from its Fourth of July recess.

The bank's charter currently allows $140 billion in annual activity, and much of its lending ends up helping big businesses — facilitating the sales of Boeing airplanes and General Electric power plants abroad.

Supporters, who include many business groups typically aligned with the GOP, say the bank is vital to fill the gap when private lending lags and to counter aid that rival countries provide for their exporters. They point to many smaller American firms and export suppliers that rely on the bank.

Opponents argue that it creates an uneven playing field, with taxpayers shouldering risks for big business.

For the Kochs and the groups they fund, the campaign against the bank provided a way to prove that their small-government campaign extended beyond reducing programs for poor people, such as food stamps and Medicaid.

Their network of organizations seized on the Export-Import Bank late in 2013 as a prime example of what they labeled "crony capitalism." The campaign against the bank also provided a way of proving their clout within the party by defeating a priority of long-established GOP powers in the business community.

Brent Gardner, vice president of government relations at Americans for Prosperity, a nonprofit group heavily financed by Charles and David Koch and their allies, said that for the billionaire brothers, the bank is "the perfect symbol for what they've talked about — a more free society."

"This little never-heard-of bank, it became kind of a litmus test for people who wanted to prove their potential free-market bona fides," Gardner said.

Republican presidential hopefuls, anxious to curry favor with the Kochs, have made ending the bank part of their campaign platforms. Jeb Bush, Scott Walker and other leading GOP candidates have all come out against it.

Last week, Sen. Marco Rubio of Florida gave an entire talk in the early primary state of New Hampshire not on the economy or national security, but on why the Export-Import Bank needs to shut down. Sen. Ted Cruz of Texas said he switched his vote on the trade bill in June because he feared that it included a backroom deal to save the bank.

The campaign to close the bank started after the Republicans won control of the House in 2010 as conservative groups, including Heritage Action for America and the Club for Growth, began organizing opposition to the bank on and off Capitol Hill.

They viewed the goal as attainable because it did not involve getting Congress to pass legislation; simply doing nothing would accomplish the goal.

The effort truly took off when Americans for Prosperity got heavily involved, tapping its list of 2 million members to contact their representatives. The group held town hall events across the nation and pounded the halls of Congress. Its government relations team met with more than 150 lawmakers or their staffs, including all the freshmen.

Andy Roth, vice president of government affairs at Club for Growth, said a turning point came a year ago after House Majority Leader Eric Cantor (R-Va.) suffered a stunning primary loss to a tea party challenger who had made the bank one of his issues. Cantor's successor as majority leader, Rep. Kevin McCarthy (R-Bakersfield), quickly made clear that the bank's charter should expire.

"It was no longer us shouting from the cheap seats," Roth said. "Leadership was echoing."

This year, the Koch-aligned Freedom Partners began running ads that called the bank a "bad deal" and asked, "Will Congress follow Hillary Clinton or free market champions?"

Clinton, in turn, has positioned her support of the bank as an example of moderation, in contrast to what she terms Republican extremism.

But more than the grass-roots campaigns and the ads, the involvement of Koch-aligned groups gave the campaign against the bank the imprimatur of a political force whose support can make or break candidates' futures.

That power could be seen earlier this year as Republican presidential hopefuls addressed the Club for Growth's annual membership conference in Florida. One by one, each announced support for letting the bank expire.

The GOP's conventional allies in the business community scrambled to salvage the bank, but they were late to recognize the threat they faced. "It caught a lot of people off guard," said Ron Kirk, a former U.S. trade representative in the Obama administration.

"Maybe I put too much value in the fact that you have all of those interests saying, 'Wait a minute, this is critically important to us,'" Kirk said. "I don't think anyone believed it would grow to this extreme."

Tony Fratto, a strategist hired by a coalition led by the U.S. Chamber of Commerce, lamented that the business community had been lax in defending the bank as the political climate changed.

"That created the opportunity for critics to walk in and attack and present this to staff and members who didn't have bedrock of knowledge," said Fratto, a former official in the George W. Bush administration.

The two sides dispute some basic facts about the bank. The nonpartisan Congressional Budget Office said that by one measure, the bank doesn't add to the nation's deficit but has contributed $14 billion over the decade in revenue; but using a different accounting model, the bank costs the government $2 billion.

Export-Import Bank Chairman Fred P. Hochberg warned that halting the bank's loans would cost hundreds, if not thousands, of U.S. jobs.

"All because Congress won't move to get this done — all because of a vocal minority here in Washington has put ideology ahead of American workers," he said at a trade summit last week.

Many believe that the bank's expiration will be temporary. Senate Majority Leader Mitch McConnell (R-Ky.) recently suggested a vote to reauthorize the bank could be part of a highway package that will be debated when Congress returns this month.

"It's not that there's some big groundswell," Fratto said about the opposition.

Even if Congress agrees to reauthorize the bank this summer, however, those who have been leading the fight against it believe that it's only a matter of time before they finish the job.

"If you're going to be successful in reforming entitlements, you don't have moral credibility if you don't take on corporate welfare — and you can't do better than Ex-Im," said Michael A. Needham, chief executive of Heritage Action.

lisa.mascaro@latimes.com

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