One thing is painfully clear from all the brouhaha over the Export-Import (“Ex-Im”) Bank of the United States, a government agency that promotes exports of U.S. products by providing financing and loan guarantees. That is that virtually no one involved in the debate has any idea whatsoever what a commercial or mercantile bank is or does.
Should the Ex-Im Bank be closed down? We cannot answer that question intelligently until and unless we know what it is, and what it does.
Admittedly, this writer is at a disadvantage over most of those engaged in the debate, having worked as a consultant for the Ex-Im Bank for several months in the early 1980s, and has seen first-hand what the Bank is and what it does. Nevertheless, the effort must be made.
First, what is the Ex-Im Bank? We can let the Bank itself answer that question: “The Export-Import Bank of the United States (Ex-Im Bank) is an independent, self-sustaining agency with an 80-year record of supporting U.S. jobs by financing the export of American goods and services.” Translating that into everyday language, the Ex-Im Bank is a federal government-owned commercial or mercantile bank.
Now, do we believe that the government should own a commercial bank? No. We do not believe that the government should in any way control money and credit. Regulate? That’s a different issue. Under Article I, Section 8 of the U.S. Constitution, the federal government has the responsibility of setting and enforcing the monetary standard, just as it does with any other weight or measure.
Article I, Section 8 does not give the federal government the power to create money. If the federal government has “the money power” at all, it comes under the Commerce Clause — and we believe we can make a very good argument that the framers intended that neither the states nor the federal government should be able to create money.
If nothing else, maintaining a standard of value precludes the sort of money manipulation in which the federal government has been engaged since the Civil War. The fact that the constitutional language permitting government money creation, “emit bills of credit,” was specifically removed from the enumerated powers during the debates over the objections of the delegates who believed government should be able to create money lends credence to the theory that the framers intended the money power to reside in the people, and only the people.
What is the difference between a government-emitted “bill of credit” and a private sector-issued “bill of exchange”? That is, besides the difference in terminology?
A bill of exchange must be backed by the present value of a future stream of income in which the issuer of the bill has a private property right. It is otherwise known as a “fictitious bill,” that is, one without an identifiable value that the issuer is contractually obligated to remit on maturity of the bill.
A bill of credit may be backed by the present value of a future stream of income in which the emitting government has a public property right. A bill of credit, therefore, has much more flexibility, so to speak, than a bill of exchange. If an emitting government can convince people to accept its bills, it doesn’t have to prove that they’re worth anything, where an issuer of a bill of exchange must be able to prove they are worth what he claims they are worth.
So, on the grounds that some of us believe that the Constitution does not permit the federal (or any state) government to create money for any reason may preclude an institution like the Ex-Im Bank.
The counter argument is, what about the Bank of North Dakota? The goals of the Ex-Im Bank and the Bank of North Dakota are, to all intents and purposes, effectively the same. There is, however, a legal technicality involved. The Ex-Im Bank is a federal government agency. The Bank of North Dakota is not a state agency, but a commercial bank owned by the state of North Dakota. The actions of the Ex-Im Bank are therefore directly actions of the federal government. The actions of the Bank of North Dakota are indirectly actions of the state government.
The real issue, then, is whether it is a proper function of government to be engaging in commercial activity. We believe that it is not.
Not everything is black and white, however, and we’ll go into this a little deeper in further postings in this series.