CQ TODAY ONLINE NEWS
Jan. 25, 2012 – 10:45 p.m.
Export Agency’s Lending Back in Spotlight
By Joseph J. Schatz, CQ Staff
Manufacturing advocates and the White House want lawmakers to revive a stalled effort to expand lending authority at the Export-Import Bank, a tiny agency that represents big money for Boeing Co. and other major U.S. manufacturers.
The normally low-profile Ex-Im Bank, which provides financing to U.S. exporters and their customers overseas, has a higher visibility under the Obama administration, which is intent on boosting exports and helping companies penetrate markets in Asia, Latin America and Africa in the aftermath of the 2008 financial crisis.
Yet efforts to increase the bank’s $100 billion lending cap and provide a long-term renewal of its expired charter have run into opposition from several U.S. airlines over concern the bank lacks transparency and that foreign competitors are putting them at a disadvantage by gaining access to the bank’s low interest rates.
Plus, the bank stands at the awkward intersection where business interests sometimes collide with the tea party’s anti-government sentiment. The Ex-Im Bank costs little from an appropriations point of view, but it has long been a target of conservatives who see it as a wasteful sop to big corporations.
The importance of export financing to the administration’s economic plans earned the issue a passing mention from President Obama in his State of the Union address on Tuesday, when he alluded to increased competition from foreign governments — particularly China — that aggressively help their own companies compete for overseas business.
“This Congress should make sure that no foreign company has an advantage over American manufacturing when it comes to accessing finance,” Obama said.
The Ex-Im Bank’s commitments currently hover around $90 billion, just under the $100 billion cap. The administration has requested that the cap be increased to $140 billion, and congressional negotiators closed in on a $135 billion agreement in December. But the language did not make it into law, and instead Congress voted simply to renew the bank’s charter, which lapsed in September, through May 31.
‘Jobs’ Issue
In an interview, Ex-Im Bank Chairman Fred Hochberg said Congress needs to quickly assure businesses and foreign customers that it will have more financing authority. Hochberg called legislation to raise the bank’s lending limit a “jobs bill.”
A House Republican leadership aide said Wednesday that concerns about the bank are not being ignored. “We are aware of the issue and working through what can be done to address it in a timely manner,” the aide said.
Established in 1945, the bank is designed to help finance the purchase of U.S.-made goods overseas when private loans are unavailable or unaffordable, often due to the political or economic risks in certain overseas markets. The Ex-Im Bank provides direct loans to foreign buyers, as well as loan guarantees to other lenders and credit insurance to companies.
Many countries have increased their export-financing activities since the 2008 credit crunch. Emerging economies such as China, India and Brazil provide far more support to their exporters and are not party to restrictions on export finance that apply to the United States and other member countries of the Organisation for Economic Co-operation and Development.
Hochberg said the bank’s volume of financing has more than doubled during Obama’s time in office. “That’s because the world has changed,” he said. The bank is one of six trade-related agencies that Obama has proposed to consolidate.
Export Agency’s Lending Back in Spotlight
The House Financial Services Committee and the Senate Banking panel each produced a bill last year to renew the bank’s charter and to raise the lending cap. The House bill (
Neither measure saw floor action, however. As 2011 came to a close, committee negotiators tried to work out an agreement that would raise the cap to about $135 billion and attempted to insert it into the year-end omnibus spending package.
But their timing was bad. The reauthorization effort came just as Delta Air Lines, US Airways and other U.S. carriers were taking the bank to court over its agreement to provide $3.4 billion in loan guarantees to help Air India buy 30 Boeing aircraft.
The Air Transport Association of America, which changed its name to Airlines for America in December, said that deal was not publicly aired and might negatively affect the competitive strength of U.S. airlines. Several major carriers, however, including United Airlines, Continental Airlines and American Airlines, were not involved in the lawsuit.
A federal court rejected the airlines’ complaint earlier this month. But Airlines for America spokesman Steve Lott said the interested carriers want Congress to make “any increase in the bank’s lending ceiling contingent on increased transparency” of the bank’s financing transactions with regard to aircraft, including a 30-day public comment period.
The group weighed in with lawmakers during last year’s negotiations and found that “some of our concerns were well received,” Lott said.
As the second session of the 112th Congress gets under way, the bank and its supporters — particularly the National Association of Manufacturers and the Coalition for Employment Through Exports — are ramping up efforts to secure a quick deal.
Beyond the airline fight, some generally business-friendly conservatives have long been ambivalent about the Ex-Im Bank, contending it distorts markets and exposes taxpayers to risk — drawing comparisons with the two mortgage giants Fannie Mae and Freddie Mac.
“Republicans should be attempting to sunset corporate welfare programs such as the Ex-Im Bank,” wrote Russ Vought, political director at conservative Heritage Action for America, last July.
One of the biggest criticisms of the bank is that the majority of its financing goes to support major companies with significant resources of their own, such as Boeing.
In a paper last year that weighed options for overhauling some of the bank’s policies, the American Action Network, a conservative advocacy group, said Boeing alone received more than 60 percent of the bank’s long-term guarantees in 2010. “Concentrating operations so narrowly on one company may threaten its political viability,” the group said.
A Competitive Landscape
For the past year, the bank has been highlighting its financing for smaller companies — $6 billion in 2011, according to its annual report. And Hochberg reminds lawmakers that the bank is self-sustaining and actually returns some money to the Treasury. Congress appropriates money only for the bank’s inspector general, and it sets limits on the credit it can extend and the amount of its administrative expenses.
Export Agency’s Lending Back in Spotlight
Moreover, the American Action Network’s report noted that “in the current global economic landscape, the Export-Import Bank may be a necessity to counteract the aggressive and anti-competitive financing that foreign companies receive from their own” export lenders.
That is the argument companies are pushing. Many critics “don’t fully understand the competitive landscape for export financing globally,” says Lauren Airey, director of trade facilitation policy at the National Association of Manufacturers (NAM).
In addition to pushing House Republican leaders on the issue, Airey said NAM will reach out to freshmen “who don’t have a good opinion of government programs in general.”
Export financing, she said, “can be a bit of a technical issue.”