Two Republican senators broke with their party Tuesday to block President Donald Trump’s nominee to lead the Export-Import Bank, a setback for the White House that reflects deep divisions in the Republican Party over the role that the government should play in steering the U.S. economy toward prosperity.
The nominee, Scott Garrett, a former representative and a Republican from New Jersey who had wanted to see the government’s export credit agency shuttered, was rejected by the Senate Banking Committee in a 13-10 vote, the first by the committee against a Trump administration nominee.
The clash over the bank, which provides loan guarantees to foreign buyers of U.S.-made products, reflects a split in the Republican Party between purist conservatives who view any government involvement in the economy as a violation of the free market and more business-oriented Republicans who see a role for the federal government as an advocacy arm in the global economy.
The Trump administration has tried, sometimes unsuccessfully, to straddle this divide. Trump has vacillated between opposing the Export-Import Bank as an example of crony capitalism and supporting it as a tool to reduce the nation’s trade deficit.
Garrett reflected that uncertainty. Like some of the Trump administration’s more controversial Cabinet appointments, he had previously called for abolishing the institution that he would have led. Once nominated, he tried to assure senators that he had had a change of heart. But business and manufacturing groups that benefit from the Export-Import Bank feared that, as the agency’s leader, Garrett might act to undermine it from within.
They greeted his defeat Tuesday as good news. But at least for the near term, the bank’s future remains unresolved. Since 2015, the agency has been hobbled by a lack of personnel necessary to approve projects over $10 million, formerly the bulk of the agency’s work. An estimated $42.2 billion worth of deals are stuck in the pipeline waiting for approval, which could support an estimated 250,000 U.S. jobs, a spokeswoman for the Export-Import Bank said.
The Export-Import Bank has offered government-backed loan guarantees to overseas customers wishing to buy products manufactured in the United States since the Depression. Some of its biggest customers are General Electric, Boeing and Caterpillar, whose equipment can be out of reach to some foreign customers without loan guarantees that help them secure credit with private banks.
But the agency — once backed by large majorities in both parties — has become something of a litmus test for hard-line conservatives versus establishment Republicans. Hard-line conservative outside groups like Heritage Action and the Club for Growth have demanded the agency’s closing. Business groups like the National Association of Manufacturers and the U.S. Chamber of Commerce have tried to revive it.
As a candidate, Trump described the bank as a kind of corporate welfare. But in his first few months in office, the president appeared to have been persuaded that the bank’s mission dovetailed with his own goal of using the might of the government to help lift manufacturing and exports. He also appeared to have been persuaded by the bank’s supporters, who point out that the agency makes enough money to more than pay for itself and that other countries have far larger export credit agencies.
“It turns out that, first of all, lots of small companies will really be helped, the vendor companies, but also maybe more important, other countries give it,” Trump said in an interview in April with The Wall Street Journal. “And when other countries give it, we lose a tremendous amount of business.”
“So instinctively, you would say it’s a ridiculous thing, but actually, it’s a very good thing and it actually makes money,” the president said.
The White House’s national security strategy, released Monday, also suggested it views the Export-Import Bank as a tool in a strategic competition with China. “Trade, export promotion, targeted use of foreign assistance and modernized development finance tools can promote stability, prosperity and political reform,” the document read.
The vote Tuesday was the first time that the Senate Banking Committee had scuttled a Trump administration nominee. Sens. Tim Scott, R-S.C., and Michael Rounds, R-S.D., joined 11 Democrats to reject the nomination.
“I believe he’s a principled man who simply believes in the abolishment of the bank,” Rounds said of Garrett. “I think that strong desire on his part to see it abolished as an example of crony capitalism would not have worked in the operation of the bank.”
Scott, whose state hosts a huge manufacturing plant for Boeing, the bank’s biggest customer, said: “My belief is that we need to both reform the Export-Import Bank and ensure it continues to function as an important tool for American businesses large and small. Given Mr. Garrett’s long history opposing the Ex-Im Bank, I believe it would be hard for him to accomplish both of those goals.”
Garrett had been an outspoken critic of the bank, making him a curious choice to lead it.
As a House member who served seven terms, he voted twice against reauthorizing the bank. The chairman of the Senate Banking Committee, Richard Shelby of Alabama, then blocked President Barack Obama’s nominees to the bank’s board, leaving it without the quorum necessary to approve large projects of more than $10 million. That has crippled the agency and its ability to support the nation’s largest private sector exports.
In 2015, Garrett called the bank “a fund for corporate welfare” and accused it of embodying “the corruption of the free enterprise system.”
Since his nomination, Garrett had expressed a newfound respect for the agency, but his conversion was not convincing to a majority of the Banking Committee.
“Mr. Garrett was a leader of the effort to slam shut the doors of America’s export financing bank, and he can’t hide his contempt for Ex-Im,” said Sen. Sherrod Brown of Ohio, the top Democrat on the committee. “His testimony expressed no regret for his work to close the bank.”
The demise of Garrett’s nomination presents the White House with a choice on where to go.
The White House press secretary Sarah Huckabee Sanders said the administration was “certainly disappointed” but added, “We’re going to work with the committee on a path forward that hasn’t been determined.”
The Senate Banking Committee voted Tuesday to advance four other Trump administration nominees, who would serve on Ex-Im’s board. If at least two of those nominees are approved in the Senate, the agency will have enough personnel to function normally.
But some senators could move to block those nominations in the coming months. In November, Sen. Patrick J. Toomey, R-Pa., a critic of the bank, said that he would do “everything I can to prevent Ex-Im from getting a quorum” if Garrett was not approved.