By David Lawder and Richard Cowan
WASHINGTON (Reuters) - In a rapidly shifting battle, Republican leaders in the U.S. Congress on Tuesday prepared to pass a three-month highway funding extension while leaving the idled Export-Import Bank's fate hanging at least into September.
With the House of Representatives and Senate rushing toward a five-week summer recess, Republican leaders in both chambers embraced the newest version of a bill to temporarily fund road and mass transit construction projects.
Failure by Congress to act by Friday would lead to a cutoff of federal transport funds, disrupting projects nationwide. The lifeline until Oct. 29 is expected to pass the House on Wednesday followed by quick action in the Senate.
Senate Majority Leader Mitch McConnell, a Republican, vowed on Tuesday to also pass a highway trust fund extension with three years of funding in the hope the House would follow suit in coming months.
Late on Monday, the Senate demonstrated strong support for renewing the Ex-Im Bank, whose charter expired on June 30, by attaching a renewal to its longer-term transportation bill.
But House Republican leaders effectively blocked that measure by arranging to pass the three-month highway extension and leave Washington on Wednesday. The maneuver gives the Senate little choice but to rubber-stamp the House measure.
That would leave the Ex-Im Bank unable to make or guarantee new loans until September or October, when its backers in Congress will have another chance to revive it. See Factbox
Putting a positive spin on developments after days of Republican infighting, McConnell told reporters: "The good news is the House ... has decided to process in early September a multi-year highway bill of their own."
If the House succeeds, the two chambers would work out their differences this fall, including the fate of the Ex-Im Bank. Conservative Republicans have been trying to kill the agency for years, calling it a relic of "crony capitalism" that subsidizes corporations like Boeing (NYSE:BA) and General Electric (NYSE:GE).
Representative Steny Hoyer, the second-ranking House Democrat, attacked the effort to kill the Ex-Im Bank, telling reporters it would put U.S. companies at a disadvantage with foreign competitors.
The bank, he said, "ironically does not cost the taxpayer money but in fact gives money back to the Treasury."
In Ethiopia on Tuesday, President Barack Obama underscored the threat to exports by viewing a Boeing 787 Dreamliner that was sold to Ethiopia Airlines with Ex-Im support.
"These purchases are not made without the Ex-Im Bank," Obama said.