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.
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