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By David Lawder
WASHINGTON, June 4 (Reuters) - In a fight in the U.S. Congress over the future of the Export-Import Bank, no state looms larger than Texas, on both sides.
The state has the most companies backed by the government's export credit agency, and - paradoxically - is home to the bank's fiercest congressional critics who want to let the institution die when its charter expires at the end of June.
Representative Jeb Hensarling leads a contingent of fellow Texas Republicans pressing hard for the shutdown of the bank, despite its support for many large and small Texas businesses.
Arguing that "Ex-Im" embodies "crony capitalism" doled out by Washington bureaucrats and that it puts taxpayer funds at risk to guarantee foreign loans, many Republicans want to end the tradition of renewing the 80-year-old bank's charter.
If Hensarling, the influential House Financial Services Committee chairman, stands by his stated intention not to advance a bill to reauthorize the bank, it will soon have to stop lending and writing new trade insurance. The bank's only hope then would be legislation in the Senate.
The bank's closure would be cheered by Republican fiscal hawks, but be seen by many as a fresh blow to U.S. international economic clout months after Washington failed to stop China from launching its own Asian development bank.
If the bank dies, China and 58 other industrial countries with export credit agencies would gain a bigger share of major international sales and projects, Ex-Im backers say.
Texas exporters, with a high concentration in oil and gas equipment and engineering, say thousands of jobs are at risk. The bank lists 1,233 companies in Texas it has helped to export $22 billion worth of U.S. goods and services, a dollar amount higher than anywhere except Washington state, home of Boeing Co .
"We're all conservatives in our company, and our elected representatives are working against us," said Jim Adams, managing director of privately held Control Flow Inc, a Houston-based maker and exporter of oil wellhead equipment.
Control Flow has exported $75 million worth of equipment, including valves and blow-out preventers, backed by low-interest Ex-Im loans and insurance in the past five years.
Without that support, Control Flow would have to slash prices and accept lower profits to keep export business or cut its 160-strong workforce, Adams said.
Texas lawmakers' opposition to the bank partly reflects the rising power of the Tea Party and conservative groups in the state such as the Club for Growth, which promotes a fiscal conservative agenda and funnels money to such candidates.
Hensarling acknowledges there will be collateral damage as some firms lose support, but says they would be better served by a reformed tax code and reduced regulations.
"I hope to help these small businesses, maybe just not in the way they wish to be helped," he told Reuters during a break in an Ex-Im hearing on Wednesday.
"There are better ways to do that without transferring credit risk to the taxpayer balance sheet, which when last I looked, was an unsustainable balance sheet."
In the nine months since Ex-Im's charter was last extended, Texas House Republicans opposed to renewing it have drowned out the handful who support keeping the bank open with reforms, such as House Rules Committee chairman Pete Sessions, who is allied with House Republican leadership.
By contrast, House Republicans from Missouri, where Boeing has a major presence, have voiced strong support for the bank.
Like other Ex-Im opponents, many of the Texas Republicans say the bank provides "corporate welfare" to Boeing and other huge corporations, interferes in private finance and puts U.S. taxpayers on the hook for foreign loans.
"Ex-Im Bank has exceeded its period of usefulness. Period," said Republican Michael Burgess, a Dallas-Fort Worth area congressman.
For Texas Republicans, supporting the Ex-Im Bank could invite a primary challenge ahead of the November 2016 congressional elections, said Mark Jones, a political science professor at Rice University in Houston.
Ex-Im "has successfully been framed as being associated with crony capitalism, and that's a dangerous place to be with Republican primary voters in Texas," Jones added.
Support for economic "liberty" and small government runs deep in the vast, largely Republican state. Republican primary election voters are typically the most committed conservatives, exerting an outsize influence on the state's politics.
"This is a red meat issue for the Tea Party," said Tony Bennett, president of the Texas Association of Manufacturers.
Trying to explain to Texas conservative voters the role that Ex-Im plays in promoting exports is an "impossibility," he said. "It's ironic that we're the largest user of Ex-Im and the most vocal opponents are from Texas."
Club for Growth ran ads in April in the Waco, Texas district of Representative Bill Flores, urging him to abandon his prior support for the bank. When he came out against Ex-Im last month, the group ran ads praising him.
Air Tractor Inc, a maker of crop-dusting and fire-fighting aircraft, would not be able to find replacement financing for the small Ex-Im bank loans of $750,000 to $1 million that foreign customers use to purchase its planes, said Tyler Schroeder, a financial analyst with the firm.
These customers, largely in Brazil, would turn to a model made by Brazil's Embraer SA that has less spraying capacity, he said. Air Tractor would likely have to cut 65 to 70 of its 270 workers.
"At what point does the betterment of your constituents outweigh the ideology of this?" Schroeder said. (Editing by Kevin Drawbaugh and Stuart Grudgings)