When Will the Export-Import Bank Get Back in Business?
Congressional Republicans are redoubling their efforts to find a way for the Export-Import (EXIM) Bank of the United States to resume making large (more than $10 million) loans again.
These attempts, however, do not include the one action that would assure forward momentum: approving President Obama’s two nominees to the bank’s quorum of directors. The bank currently has just two board members, and its charter requires a quorum of three out of five to approve large loans. The GOP-controlled Senate wants the bank back, but apparently not that way.
In the meantime, Boeing, Caterpillar, General Electric, and other companies that depend on the agency’s export financing are facing lost sales and business opportunities.
According to EXIM Chairman Fred Hochberg, more than $20 billion in loans and guarantees are affected by the current stalemate, leaving U.S. aircraft, rail, power and communications equipment sitting in warehouses instead of being shipped to international destinations.
Of course, it could be worse. The bank was shut down entirely for six months not that long ago when its congressional charter was intentionally allowed to lapse. Boeing claims to have lost two signed (or potential) satellite deals as a result, while General Electric opted to move some production overseas to leverage foreign export credit.
That happened because critics of the bank, such as those in the Tea Party wing of the GOP, accuse EXIM of crony capitalism. They contend that the bank only supports huge multi-national companies with billion-dollar revenue streams. And it’s true that in 2015 more than 75% of its financing primarily benefited larger firms. Boeing alone accounted for almost one of every three dollars in loans EXIM authorized.
Supporters claim the bank also exists to aid smaller businesses, though EXIM defines a small business as one that has up to 1,500 employees or $21.5 million in revenue. Not exactly mom-and-pop stores.
But there are many businesses that are not household names that are also struggling because of the political games being played with EXIM’s future. Air Tractor Inc., a west Texas aviation manufacturer, hopes to ship crop-dusters and small firefighting planes to Argentina and relies on EXIM for foreign sales. The delays are also hurting thousands of smaller companies in the manufacturing supply chains of the multi-nationals.
Help On the Way?
The House Appropriations Committee recently passed an amendment to a funding bill that would allow EXIM to once again approve loans of more than $10 million by doing away with the quorum requirement. Similar legislation is working its way through the Senate.
It is supported by myriad lobbyists and trade associations, as well as the companies directly affected. Even President Obama, who rarely agrees with any GOP initiative, lauded EXIM as a bank that helps small businesses go global.
The outlook for the legislation is good, but the wheels of Congress turn slowly. In the meantime, Boeing has already provided or arranged for bridge financing for several airlines to compensate for the loss of EXIM funds, and other companies are taking similar steps.
If something doesn’t give—and in an election year that is always a possibility—the result may be companies continuing to lose business from other countries.