Bloomberg News

Ex-Im Bank Faces Test as Republican Back Lender’s Demise

June 24, 2014

John Kerry addresses a gathering of the Export-Import Bank

Secretary of State John Kerry addresses a gathering of the Export-Import Bank at the Omni-Shoreham Hotel in Washington, Thursday, April 24, 2014. Photographer: J. Scott Applewhite/AP Photo

A U.S. agency that helps foreign companies buy American-made products is facing the biggest test in its 80-year history as House Republicans press to shut the U.S. Export-Import Bank.

Companies including Boeing Co. (BA:US), General Electric Co. (GE:US) and business groups for hundreds of manufacturers promised yesterday to ramp up their lobbying to prevent the bank’s demise, which they said would jeopardize billions of dollars in sales of goods from crop dusters to satellites and airplanes.

“Customers have been telling us for months that they are concerned about the bank’s future,” Boeing spokesman Tim Neale said by e-mail. “If Ex-Im is not reauthorized, Boeing will be placed at a competitive disadvantage to Airbus,” the European plane maker that gets its own government support, he said.

The bank debate highlights a split between factions of the Republican party: Tea Party-aligned members who back smaller government and oppose the bank and lawmakers who support some aid for businesses big and small.

President Barack Obama has proposed reauthorizing the bank’s charter for five years. The plan also would raise the cap on total loans the bank can guarantee to $160 billion from the $140 billion now. The lender last year approved 3,842 requests for assistance, according to its annual report. Small businesses accounted for 89 percent of the total number of deals, it said.

‘Tangible Contribution’

The bank makes a “tangible contribution to our economy,” White House spokesman Josh Earnest said today. Obama “does not think it would be a good policy decision to start withdrawing support from the Ex-Im bank.”

The effort against Ex-Im gained momentum this week when the new No. 2 House Republican, Majority Leader-elect Kevin McCarthy of California, said Congress should let the bank’s charter expire Sept. 30. He said the private sector can offer what the bank gives foreign companies seeking U.S. products.

Without the House’s support, even U.S. Senate action to extend funding for the the bank wouldn’t be enough.

The bank offers loan guarantees and other financing to foreign companies that borrow money to buy American products, which were valued at $37.4 billion in 2013 alone. The backing helped sell a range of U.S. goods, from Air Tractor Inc.’s planes for crop dusting to satellites by Orbital Sciences Corp. (ORB:US)

Market Meddling

Opponents including small-government advocacy groups like Heritage Action for America and Americans for Prosperity, say the lender meddles too much in markets.

“We see widespread support at the grassroots level and among conservative organizations for letting the bank expire,” Tim Phillips, president of the Arlington, Virginia-based Americans for Prosperity, said yesterday in a statement.

House Financial Services Committee Chairman Jeb Hensarling, a Texas Republican, favors abolishing the bank. His panel tomorrow holds a hearing with bank critics including Delta Air Lines Inc. (DAL:US) Chief Executive Officer Richard Anderson and supporters, including Ex-Im Chairman Fred Hochberg.

“Delta has consistently said reforms are needed to stop U.S. taxpayer subsidized financing to our foreign competitors,” the airline said today in a statement. “The bank should not be reauthorized without significant reforms.”

House Speaker John Boehner, an Ohio Republican who sets the agenda for legislation, is staying out of the Ex-Im fray for now.

Republican Split

“My job is to work with my members to get to a place where they’re comfortable,” Boehner told reporters today. “Some people believe we shouldn’t have it at all, others believe we should reauthorize it with significant reforms, we’re going to work our way through it.”

Boehner said he didn’t know what effect a bank shutdown might have on the economy.

No legislation to reauthorize the bank has been introduced in the House.

Before the House hearing, the Wall Street Journal yesterday reported the bank is investigating four officials for allegations including accepting kickbacks and attempting to help companies win federal contracts. Douglas McNabb, a lawyer for one official, Johnny Gutierrez, confirmed by phone that his client is being investigated and declined to provide details.

“Chairman Hochberg should come fully prepared to discuss all details surrounding these troubling accusations,” David Popp, a spokesman for the committee, said in an e-mail.

Business Lobbying

Matt Bevens, a bank spokesman, said federal laws prevent him from discussing personnel issues, and said the bank acts quickly “when any hint of misconduct or fraud is detected by the safeguards we have in place.”

For months, business organizations including the National Association of Manufacturers and the U.S. Chamber of Commerce have rallied for Ex-Im’s reauthorization. The groups, which succeeded in saving the bank in 2012, are mounting a massive lobbying campaign now to show that American businesses will be hurt unless Congress acts.

“American companies would be put at a unique disadvantage in global markets, resulting immediately in lost sales and lost jobs,” according to a letter yesterday to lawmakers signed by 865 groups and arranged by the manufacturers’ and chamber. Supporters include Alcoa Inc. (AA:US), Lockheed Martin Corp. (LMT:US), Manitowoc Co. (MTW:US) and Fluor Corp. (FLR:US)

The groups hired former Representative Richard Gephardt, a Missouri Democrat, and Tony Fratto, a White House spokesman for former President George W. Bush, to help make their case, Jay Timmons, president of the manufacturers’ group, said on a call yesterday with reporters.

‘Full Court’

“Our efforts are really going to be a full court press,” he said.

Time is short. After this week, Congress is in session for six full weeks before Sept. 30, with no action during the annual August recess.

In the House, 41 Republicans yesterday including members of the Financial Services Committee urged Boehner and McCarthy to support reauthorization for the bank founded in 1934.

“Failure to reauthorize Ex-Im would amount to unilateral disarmament in the face of other nations’ aggressive efforts to help their exporters,” they wrote.

U.S. businesses say about 60 export credit agencies, in nations including China, Russia and France, will step in to provide financing for their own exporters if the Export-Import Bank closes. U.S. companies unable to compete will shed jobs and lose sales, they say.

Boeing, Caterpillar

Overseas sales backed by the bank accounted for about 2 percent of total U.S. goods exports last year, Commerce Department data show. The biggest beneficiaries include Boeing, GE, Bechtel Group Inc., Applied Materials Inc. and Caterpillar Inc. (CAT:US), according to Bloomberg Industries, citing data from George Mason University. Boeing, with projects valued at $8.3 billion, led the list.

“Large exporters like us have vast supply chains that include a lot of small and medium-size businesses,” Neale said in his e-mail. He said Boeing’s U.S. supply chain includes more than 15,000 businesses. “Without Ex-Im, a lot of people will get hurt,” he said.

The Export-Import Bank survived the authorization debate in 2012, amid opposition from Tea Party groups. Atlanta-based Delta said the bank’s assistance in financing the sales of wide-body jets to carriers like Air India Ltd. and Dubai-based Emirates Airline, cut into its bottom line. The House in 2012 reauthorized the bank 330-93, with 147 Republicans in support.

The Export-Import Bank’s supporters are making the case that small businesses will get hurt the most in a closing.

Steven Wilburn, chief executive officer of FirmGreen Inc. of Newport Beach, California, said uncertainty about the bank’s future caused his company to lose a $57 million sale to a Philippines-based company in May. The buyer decided to get financing from Korea’s export-credit agency instead, forcing FirmGreen to furlough three employees and get a loan through Wells Fargo & Co. (WFC:US) to cover operating expenses, he said.

“It will probably mean the closing down of FirmGreen as we know it,” if the bank closes, Wilburn said in a phone interview. “I’d probably have to reconstitute the company.”

To contact the reporters on this story: Brian Wingfield in Washington at bwingfield3@bloomberg.net; Cheyenne Hopkins in Washington at chopkins19@bloomberg.net

To contact the editors responsible for this story: Steve Geimann at sgeimann@bloomberg.net Lawrence Roberts


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