By Charles H. Green
It’s not news anymore, but regardless of where your politics lie, if you’re in commercial lending, the resignation of Speaker John Boehner is news that is going to impact our industry over the course of the next couple of years. There are several factors that will shape what that impact actually becomes, but my sense is that we have plenty to be concerned about.
Boehner threw in the towel after fighting with his conference more often than the loyal
Illustration credit: Chris Seddon, blog.chrisseddon.com
opposition party. The 2010 election that elevated him to the Speakership brought with it the freshmen class of representatives with Tea Party stripes, who after two more election cycles, total about 60 members of the Republican caucus, or roughly 25 percent of the 247 House GOP seats.
How can a minority of 25 percent of these member create such a ruckus? Their adamant opposition to governing have left the other 75 percent of their caucus forced to rely on House Democrats to deliver the roughly 30 votes needed to pass House business. Those votes weren’t free and included some drama over bills to raise the debt limit, pass most budgets, deal with expiring tax breaks, and act on other legislation normally not controversial in operating the world’s largest economy.
Big issues looming for commercial lenders
While Boehner is largely expected to pass a continuing resolution (CR) to keep the government open at the end of the fiscal year–since he’ll suffer no political consequences–that measure is expected to only last about 60 days. Recall the self-inflicted wounds to the U.S. economy when the government shutdown for 16 days in 2013 thanks to the extreme right wing, all for naught. They didn’t benefit in any visible manner from the exercise.
Once removed, Boehner’s successor will face the same fate, with more pressure from a minority of members convinced they’ve scored another trophy, after defeating Eric Cantor (R-VA) at the ballot box. If we’re in for two more years of stalemate, the U.S. economy, and therefore it’s bankers and finance industry, will pay a steep price in terms of growth and stability.
Think about the ongoing uncertainly–or possible mothballing–of the Ex-Im Bank, the consequences of blocking another increase of the debt ceiling, and the spat of more wild-eyed legislation introduced as negotiating placeholders. Here are some of the issues that concern me:
Ex-Im Bank–Inexplicably and without sound economic reasoning, the extreme GOP set their sights on the Ex-Im Bank at the calling of conservative/libertarian groups like the Heritage Foundation, CATO Institute and American Enterprise Institute. Past the misleading howls of crony capitalism (negated in my mind by CATO Institute founder’s reliance on cheap government land leases for forestry and mineral rights for mining) fail to offer credibility to a non-controversial bank that provides export financing. In fact, one only has to see exactly who’s trying to kill the bank to find the definition of crony.
It doesn’t take much effort to discover that the growth of exports since 2009 is the mother lode of all GDP growth, so killing the Ex-Im Bank is exactly like shooting the good leg while your limping. Renewing the bank’s charter was blocked by Financial Services committee chair Jeb Hensarling (R-TX), although majorities in both the House and the Senate favor its renewal. Some supporters have their fingers crossed that Boehner will get this done ahead of checking out on October 30.
Debt Ceiling–The debt ceiling is another false issue that the right wing has chosen as their holy grail. In the past, the loyal opposition in Congress (Democrat or Republican) used the debt ceiling to pontificate and bluster about the perils of runaway deficits and irresponsibility of the majority. But all the while, they made sure that it passed, and the government was authorized to borrow sufficiently to pay for all that Congress spends.
And that’s the fallacy. While tax collections and revenues are never absolutely certain, when Congress budgeted an exorbitant sum over projected revenue, an increase in the borrowing capacity should have been included de facto by the fact that they decided to spend it. Having to go through this fight twice is a waste of time and a double-faced comedy.
Wall Street is another matter, not to mention our nation’s bondholders. When you lead the global economy, your currency is the universal bedrock of value, and your bonds are the safest place to park savings in the world, it’s no time to be drawing any artificial lines in the sand because you didn’t get everything you wanted. George Washington didn’t get everything he wanted.
Small Business Administration–I’ll add SBA to my list of concerns, because the same forces that have brought the Ex-Im Bank to the brink are also just as opposed to the SBA. Given that thousands more companies benefit from SBA than Ex-Im, and their benefits are more tangibly obvious on Main Street, it would certainly be a more difficult fight, and it’s been won before. But leaving nothing to chance, it’s a risk commercial lenders might consider.
In the past year, the extreme right wing in the Senate and the House have tried to turn SBA into a sideshow. Although their indignant mud splashing largely fell on deaf ears, that doesn’t mean that bankers shouldn’t keep an eye on them.
And lest you think that Democrats are all alone in their concern about the fate of the 114th Congress, Republicans are perhaps the most unhappy of all. There are signs of more mainstream conservatives pushing back, saying the tactics demonstrated by hard-liners have accomplished nothing except the early departure of Mr. Boehner.
Ohio Governor and former Republican Congressional leader John Kasich was outspoken on CBS’s “Face the Nation” recently, saying “The people who keep saying that they want things to happen, what have they accomplished? Maybe they ought to look in the mirror. What have they accomplished? I mean, are they just speechmakers? Are they just people out there yelling and screaming?”
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What do you think? Your comments are welcome or write me @ Director@SBFI.org.