WASHINGTON, July 30, 2014 – The Association of Equipment Manufacturers expects Congress will eventually reauthorize the Export Import Bank – despite opposition by some powerful House Republicans -- although the final vote may be very close to Sept. 30, when its present charter expires.
Alexander Russ, AEM’s director of international and regulatory affairs in Washington, said the organization, which includes farm-equipment makers John Deere and AGCO, is “very positive” about the outcome. Russ said support for the bank has been growing over the past several weeks as members review how it has helped U.S. businesses large and small sell their products overseas.
While the U.S. Chamber of Commerce and Wall Street banks support the lender, reauthorization is facing stiff opposition from Rep. Jeb Hensarling, R-Texas, the chairman of the House Financial Services Committee, which has oversight responsibility for the bank. Hensarling, a tea party favorite, says the bank is a prime example of “crony capitalism.” Hensarling also has the backing of incoming House Majority Leader Kevin McCarthy who said in June that private lenders should be able to meet the needs of U.S. exporters.
In a hearing last month, Hensarling said the bank, which provides loan guarantees for foreign buyers of American products, “overwhelmingly” benefits “some of the richest, most politically connected corporations in the world,” including Boeing, General Electric, Bechtel and Caterpillar.
The hearing room that day was packed with scores of employees of Delta Air Lines, including cabin attendants, pilots and CEO Richard Anderson, who told the panel that the bank’s multi-billion dollar loan guarantees for foreign carriers to buy Boeing widebody aircraft had placed Delta at a competitive disadvantage to those carriers and cost the company thousands of jobs.
Anderson did not call for Congress to reject the bank’s reauthorization but he urged major reforms, including prohibiting the bank from financing widebody aircraft sales to creditworthy state-owned or supported airlines who can get their own financing from the private market.
There are signs that the opposition to the bank in some quarters may be softening. Earlier this week, the Republican chairman of the House Oversight and Reform Committee, Darrell Issa, predicted the bank, which celebrated its 80th anniversary in February, will be reauthorized. In an interview on Bloomberg TV, Issa said that fellow Californian McCarthy told him over the weekend that he would consider a short-term extension for the bank. Yet, a spokesman for McCarthy told Bloomberg the congressman's position hasn't changed.
“He’s open to considering a short-term reauthorization, but he too really wants a reform,” Issa said. “We’ve always found a way to reauthorize it; what we haven’t been able to do up until now is put real teeth in transparency and accountability.”
The campaign to reauthorize the bank took a hit Tuesday when a House Oversight and Government Reform subcommittee held a hearing on allegations that some bank employees took kickbacks. Bank Chairman Fred Hochberg angered GOP panel members when he refused to answer some of their questions, saying he didn’t want to jeopardize an ongoing investigation.
The panel’s chairman, Rep. Jim Jordan, R-Ohio, said after the hearing that the controversy and Hochberg’s refusal to provide answers are additional reasons to shut the bank down.
The Obama administration has asked for a five-year reauthorization of the Bank with an exposure cap of $160 billion, up from $140 billion in 2014. Hochberg, in testimony to Hensarling’s panel, said reauthorization at that level would support an estimated 1.3 million U.S. jobs between 2015 and 2019.
While there is no argument that the lion’s share of the bank’s loans goes to support large corporations, Hochberg noted that in 2013 the institution financed a record 3,413 small or medium-sized businesses, or nearly 90 percent of its total transactions, and many are agriculture related.
One “success story” featured on the bank’s website is that of Los Kitos Produce in Orange, California, which was able to obtain $375,000 in credit insurance from the bank to guarantee payment from buyers in Mexico. The woman-owned small business says export sales then jumped to a record $750,000 in the following year.
The family-owned Hudson Pecan Co. in Ocilla, Georgia, saw its sales surge from about $500,000 annually to over $20 million several years after CEO Randy Hudson took the company into the global marketplace with the help a $3.6 million working capital lender loan guarantee, according to the bank.
“It is next to impossible for small businesses with little liquidity to qualify for loans,” Hudson said. “That is why the Ex-Im Bank is so vital -- without it we would not have grown and added jobs like we have.”
Many large agribusinesses have also been helped by the bank, including AGCO, which says that over the past two years, Ex-Im Bank facilitated the financing of more than $35 million in grain storage sales in Eastern Europe.
“Ex-Im bank is a great benefit to Americans because it helps to grow jobs and allows U.S. companies to compete with their global counterparts in what is an active competitive market – all while generating revenue,” said AGCO. The company also noted that 80 percent of its business is conducted outside of the U.S., often in Africa, Asia and Eastern Europe, where agriculture is rapidly developing and where private sector lending can be difficult.
Alexander Russ at AEM says that while reauthorization of the bank is expected, it probably won’t happen until just before its charter is due to expire at the end of September. Congress is leaving at the end of this week on its August recess. When it returns, he said bipartisan legislation will be introduced in Congress and the bank will be reauthorized.
“This bank has been around for 80 years and been reauthorized 16 times – and it will be reauthorized again, with strong bipartisan support,” he said.
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