Bloomberg News

U.S. Export-Import Bank Authority Extended in House Bill

May 05, 2012

The U.S. House of Representatives plans to vote next week on bipartisan legislation to extend the Export-Import Bank’s authority to help finance export sales for three years and raise its lending limit to $140 billion by 2014.

House leaders announced an agreement on the measure last night after negotiations between Republican Majority Leader Eric Cantor of Virginia and Democratic Minority Whip Steny Hoyer of Maryland.

It is “more important than ever that U.S. manufacturers can secure the financing they need to make certain their products can compete in foreign markets,” Hoyer said in a statement. The deal will “promote American exports and remove a threat to the creation of American jobs,” Republican House Speaker John Boehner of Ohio said in a statement.

The showdown over the bank pitted manufacturers and business groups, who say the bank is vital for job creation and a key part of President Barack Obama’s efforts to double exports by the end of 2014, against such groups as the Club for Growth, which says it supports small businesses. Republican Senator Jim DeMint of South Carolina is among those who oppose the bank, arguing it meddles in markets and doesn’t adequately consider the impact on domestic industries.

Officials project the bank will reach its $100 billion lending cap by month’s end, requiring action by Congress before then. The bill would raise the limit to $120 billion for the rest of the current fiscal year ending Sept. 30, to $130 billion in 2013 and $140 billion in 2014 if the bank meets some conditions.

Pursuing Negotiations

Laena Fallon, spokeswoman for Cantor, said the House will vote on the legislation next week when Congress returns from a one-week recess.

To address concerns raised by Delta Air Lines Inc. (DAL:US) and other U.S. carriers, the measure would order the Treasury secretary to pursue negotiations with foreign countries to reduce and eliminate government export subsidies for aircraft and eventually end them for all products, according to a summary of the measure.

It would require the bank to report quarterly on its loan- default rate and, if it exceeds 2 percent, the institution must implement a plan to lower it.

The Ex-Im Bank in 2011 provided a record $33 billion in export finance, with almost 90 percent of the transactions benefiting U.S. small businesses, Chairman Fred Hochberg said last month at the bank’s annual conference in Washington.

Generating Revenue

The agency’s financing has generated $1.9 billion in revenue for the U.S. Treasury within the last five years, Hochberg said. The bank says it finances about 2 percent of all U.S. exports, with the remainder paid for by the private sector.

The Obama administration supported raising the limit to $140 billion by the end of the 2014 fiscal year. In a letter to Congress, the administration estimated the bank may need a lending cap of as much as $159 billion by the end of fiscal 2015.

Critics of the bank, such as the Club for Growth, say its lending subsidizes foreign-owned companies to compete unfairly against U.S. businesses.

“The bank provides financing to foreign airlines that in turn purchase American aircraft,” the group’s president, Chris Chocola, wrote in an April 8 opinion column in the Richmond Times-Dispatch. The Club for Growth supports smaller government, lower taxes and policies that favor small-business investment.

Domestic Carriers

Delta, based in Atlanta, is leading a group of domestic carriers challenging Export-Import’s lending practices in a lawsuit. They say foreign carriers are unfairly subsidized by U.S. loan guarantees to purchase aircraft from Boeing Co. (BA:US) of Chicago.

Foreign carriers have expanded their capacity by 12 percent on U.S. routes, leading some domestic carriers to reduce their routes, the group says.

The bill “addresses Ex-Im’s current, flawed policy of favoring foreign airlines over domestic airlines and their employers,” said Trebor Banstetter, a Delta spokesman, in an e- mail. “While the language in the bill required compromises from all stakeholders, it is a good first step toward a level playing field for U.S. airlines and American jobs.”

The U.S. Chamber of Commerce, the nation’s largest business group, urged Congress to pass the bill to reauthorize the bank. Other countries are providing as much as $1 trillion in export finance, often on generous terms, dwarfing the Ex-Im Bank, the chamber said in a statement last night.

“Failure to reauthorize Ex-Im would amount to unilateral disarmament and cost tens of thousands of American jobs,” Tom Donohue, the chamber’s president, said in the statement.

Raising the Cap

Manufacturers, including Boeing, had supported extending the bank’s authority and raising its lending cap.

“The Ex-Im Bank is critical to the ability of U.S. companies, large and small, to compete on a level playing field against overseas competitors,” said Doug Oberhelman, chairman and chief executive officer of Caterpillar Inc., the construction equipment manufacturer based in Peoria, Illinois. It’s “a smart investment for U.S. taxpayers.”

Jay Timmons, president of the National Association of Manufacturers, also praised the agreement. “We urge all members of the House to support this jobs legislation, and we hope the Senate will also move forward quickly,” he said in a statement.

Tim Neale, a Boeing spokesman in Washington, said he hadn’t seen the agreement and had no immediate comment.

Backers of the bank got a boost last week when 30 House Republicans, led by Blaine Luetkemeyer of Missouri and John Campbell of California, urged the chamber’s leaders in an April 26 letter to work to reauthorize the bank “as soon as possible.”

Certainty and Stability

A multiyear reauthorization would provide “certainty and stability for U.S. manufacturers and exporters,” the letter said. “In a perfect world there would be no need for this type of export financing,” though “it seems counterproductive to unilaterally disengage,” the lawmakers said.

The letter said, “Ex-Im consistently returns money to the U.S. Treasury, contributing $3.7 billion in the last seven years alone.”

Such profits would be illusory if the market risks of the loans are taken into account, according to an article posted on the website Economic Policies for the 21st Century. The group promotes a free-market philosophy and is led by former economic officials in Republican administrations.

The legislation is HR 2072.

To contact the reporters on this story: James Rowley in Washington at jarowley@bloomberg.net William McQuillen in Washington at bmcquillen@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net


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