Delta Is Right on the Ex-Im Bank -- Too Bad the Tea Party Is Its Biggest Ally

ATLANTA (TheStreet) -- Not to speak for Delta (DAL) , but if I were espousing a political position and I found that most of my support was coming from Tea Party Republicans, I would take another look.

But even then, it's hard to find fault with Delta's opposition to some of the policies of the Export-Import Bank. The bank offers loan guarantees to Delta's foreign competitors, who can then buy Boeing (BA) aircraft at lower cost than Delta can buy the same aircraft.

The foreign competitors then use the aircraft to compete with Delta. Delta, consequently, employs fewer people than it might otherwise employ. Is that really an intended consequence of government policy? 

Boeing takes a different tack, saying that if the bank did not back loans to its customers, Airbus, its only real rival, would still have the support of three government export credit agencies, so airlines that need a government loan guarantee to secure commercial financing would simply buy their planes from Airbus.

In other words, they do it so we have to do it too.

At first glance, this seems like a fairly simple dispute, matching two companies with different points of view. But the controversy over Export-Import Bank policies has turned into a Washington battle with political implications far beyond what a normal person would consider relevant.

The bank's charter expires Sept. 30. To continue to operate, the bank requires congressional approval. Like most Americans, I pity any entity that is placed in this position.

The Tea Party appears to think that the bank is a giant scam, in place to reward favored businesses with taxpayer money. The party accuses it of "crony capitalism," suggesting that it hands out money willy-nilly to big companies.

In fact, the bank uses loan guarantees to make it easier for foreign companies to buy American made-products, supporting American jobs. At little or no cost to American taxpayers, the bank vastly benefits the U.S. economy.

The debate over extending the bank's charter demonstrates how uniformed fringe pseudo-logic has somehow been embraced by large portions of a mainstream political party in what will surely be someday judged as a peculiarity of history. 

But to say that the bank does important work is not to say that it should support one industry at the expense of another.

The biggest beneficiary of Ex-Im Bank financing is Boeing. Boeing is the largest U.S. exporter, a great company that makes great products and employs 169,000 people (including 83,400 in commercial aviation) who -- thanks partially to the influence of the International Association of Machinists -- are fairly compensated for their work.

The difference? Emirates could finance through the Ex-Im Bank and Delta could not.

Has anything changed? Boeing assures that it has. In an email, Boeing spokesman Tim Neale wrote: "The rates that government export credit agencies now charge airlines for loan guarantees make the all-in cost of financing with such guarantees comparable to commercial loans without a government loan guarantee."

In particular, Neale said, "US airlines have increasingly come to rely on enhanced equipment trust certificates for funding new aircraft. EETCs are bonds backed by the aircraft. Rates are low because the market for nearly new aircraft is healthy, even if the aircraft have been repossessed."

But since United (UAL) first utilized the EETC market in 2013, more and more airlines, including Air Canada and Emirates (using an affiliated company) have been able to access it. Then investors, not taxpayers, bear the risk, however limited it might be, if airplanes need to be repossessed.

In an Aug. 21 letter to Rep. Jeb Hensarling, chairman of the Committee on Financial Services, which is considering the Ex-Im Bank's charter renewal, Delta lobbyist Andrea Fischer Newman wrote that "when our government backs our competitors, it tells our employees that their jobs don't matter."

It is just unfortunate that in Washington, to win traction for a logical position, Delta must ally itself with an illogical movement.

 Written by Ted Reed in Charlotte, N.C.

To contact this writer, click here.

Follow @tedreednc


At the time of publication, the author held no positions in any of the stocks mentioned. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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