The politics around the Export-Import Bank just got much weirder.
President Donald Trump is reaching for a compromise in the debate raging around the bank, aiming to keep the agency open while putting an outspoken, ultra-conservative opponent of the institution at the helm.
In doing so, Trump has confused the politics around the export credit agency, which had been a major boost to American manufacturers such as Boeing, GE and Caterpillar before Republicans took steps to crimp the flow of financing.
The formerly anti-Ex-Im Trump abruptly changed his tune on the bank last week when he called it “a very good thing” and announced plans to nominate two board members. That was a major step toward bringing the agency back to its full working capacity.
Then, two days later, he nominated for the chairmanship former Rep. Scott Garrett (R-N.J.), a vocal foe of the bank who has also come under fire in the past for his comments about homosexuality. That set up a political tightrope that both supporters and detractors of the agency may have trouble navigating.
Democrats who champion the agency because they say it creates jobs and promotes manufacturing are uneasy about supporting a social conservative who might try to hamstring the bank from within. Sen. Chris Van Hollen (D-Md.), a member of the Banking Committee, which will vet the nominees, said appointing Garrett as chair would put thousands of American jobs at risk.
Then there are conservative Republicans who have been critical of the bank and are now cheering Garrett’s nomination.
"For too long, the bank has been a clear example of corporate welfare run amok — benefiting special interests and foreign companies at the expense of U.S. taxpayers,” said Sen. Pat Toomey (R-Pa.), who also sits on the Banking Committee. "I am confident that Congressman Garrett will chart a new course for the bank that puts U.S taxpayers first.”
The result is a 180-degree flip-flop, where lawmakers and interest groups who had expended significant resources and political capital to rein in the bank could shift to support Trump’s nominees, while its biggest champions could be left behind.
“We’re encouraged and optimistic that [Garrett] would be able to substantively reform the Export-Import Bank, make it work better in the meantime,” said Chrissy Harbin, vice president of external relations at the conservative advocacy group Americans for Prosperity. “And then when the reauthorization comes up again … we’d encourage D.C. to have the same conversation about the possibility of letting it expire once and for all.”
Democrats on the Banking Committee have reservations about Garrett, including Sens. Heidi Heitkamp (D-N.D.), Joe Donnelly (D-Ind.) and Catherine Cortez Masto (D-Nev.).
Cortez Masto said she was pleased that Trump was committing to making the bank functional. Still, she has concerns about Garrett, “given his past opposition to Ex-Im’s mission, not to mention his divisive rhetoric toward LGBT families.”
“This Garrett nom is a Catch-22,” one Senate Democratic aide said. “We need to confirm him to have a quorum, but he could be a cancer inside the agency.”
Last November, Garrett lost a seat he had held since being elected to Congress in 2002. A key moment in the race came in 2015, when POLITICO reported that he told fellow GOP members that he wouldn’t support the National Republican Congressional Committee because it backed gay candidates.
Financial companies that had been campaign backers during his years as a senior member of the House Financial Services Committee pulled back.
Garrett later denied that he objected to gay candidates and said his problem was with support for same-sex marriage.
He lost to a well-funded Democratic challenger, Josh Gottheimer, but stayed plugged in to the emerging Trump team. While in Congress, Garrett served with Vice President Mike Pence and is said to be close with the former Indiana congressman. He also counted White House counselor Kellyanne Conway as a constituent and campaign donor. A December meeting at Trump Tower was well-publicized.
Garrett could not be reached to comment on this story.
Beyond Congress, his nomination also puts big American manufacturers in an awkward spot. They need more board members at the bank to provide a quorum that’s necessary to approve deals with more than $10 million. Yet they are unsure what changes might be in store given Garrett’s past comments and promises from senior administration officials like White House Budget Director Mick Mulvaney to put “reformers” at the helm.
For now, major users of the bank are focusing on the fact that Trump has put forward any nominees rather than worrying about who they are.
“Generally speaking, between the president’s comments and naming of two nominees, it’s really encouraging,” said Kate Bernard, a Boeing spokeswoman. Boeing, she added, has experienced the loss or delay of three satellite sales since the bank first fell victim to political crossfire in 2015, so giving the bank back its quorum to “shake loose” projects that remain in the pipeline is the most crucial step at this point.
There’s no question, however, that the Garrett nomination “raises some eyebrows in the business community” and “sends some mixed messages given his previous history in the House,” said one bank proponent who asked not to be named.
Garrett established himself as a consistent and outspoken opponent of the bank while in Congress, twice voting against its reauthorization in the past five years. In 2014, he expressed skepticism that attempts at reform would ever be successful, and he pushed hard the following year to let the charter expire.
"We have the opportunity to save capitalism from cronyism and to fulfill a promise to the American people to work for them instead of a select few with special connections in Washington," Garrett said in May 2015.
"For the sake of the American taxpayer and the preservation of the free enterprise system, Congress should put the Export-Import Bank out of business."
The White House noted that history of opposition toward the bank in discussing his appointment, saying Trump chose him “to both usher in reforms and prioritize small businesses.”
“Former Rep. Scott Garrett has passionately spoken out on some of the problems that the Bank’s previous activities created,” a White House spokeswoman said in an email. “He will be a key voice for reform.”
The current nominees represent only a temporary fix: Garrett and former House Financial Services Chairman Spencer Bachus (R-Ala.), who Trump picked to sit on the board of directors, would both have to be approved to restore the bank to full working capacity. What’s more, they’ll provide a quorum that will only last until July 19, when acting Vice Chairman Scott Schloegel’s term expires. At that point, the bank would lack a quorum once again if no additional members have been confirmed before then.
But in the meantime, major users of the bank fear that the administration is trying to reshape the agency in a way that would hurt large companies that have traditionally benefited from it. Various administration officials have hinted at their own ideas for reform.
Mulvaney, who was a critic of the bank while a member of Congress, told CNBC last week that Trump’s nominees would make sure the bank “sticks to its knitting.” Commerce Secretary Wilbur Ross told the network in a separate interview that he wanted a reformed bank to “help small businesses more.”
Some reforms will be put into place as soon as Garrett and Bachus — or any two nominees — are confirmed and a board with at least three members votes to approve them. The bank’s 2015 charter included a slate of changes for the bank, and while a majority have been completed, a handful require a board quorum to be implemented — something the bank has lacked since its reauthorization was passed almost a year and a half ago.
Two of the outstanding requirements involve appointing a chief ethics officer and chief risk officer. A third involves the bank’s lending to small businesses and "increases the authority of staff to approve applications for up to $25 million in export financing for small business working capital and insurance products."
But beyond that, bank observers say there is little a chairman can do on his own to change the bank’s operations.
And while he could attempt to direct export credit assistance more often to smaller businesses, “there’s not a ton of discretion,” said Peter Cohn, an analyst with Height Securities.
“So I don’t know that we’re going to see a whole lot more than window dressing on that front,” he said.