Why all the fuss about the Export-Import Bank?

Why all the fuss about the Export-Import Bank?
Eileen St. Pierre, The Everyday Financial Planner

US Export-Import Bank SealThe U.S. Export-Import Bank was created on February 2, 1934 by President Franklin Roosevelt to be the official export credit agency of the U.S. government. It is a government corporation with twelve regional offices. It has been in the news a lot lately. Congress did not renew its charter that lapsed on June 30 so it cannot engage in new business. It can only manage its existing business. Many want Congress to re-consider after it returns from its summer recess.

What exactly does the Export-Import Bank do?

The Bank finances and insures foreign purchases of U.S. goods for customers who are unable or unwilling to accept credit risk. The Bank steps in when private commercial lenders say no to the deal. Thus, the Bank is not supposed to compete with private lenders.  Almost 60 other countries have similar export credit agencies.

The Bank offers many services, including:

  • Direct loans up to 12 years in general, 18 years for renewable energy projects
  • Loan guarantees for up to 10 years
  • Credit insurance to small businesses that enter new foreign markets

Supporters of the Bank

Supporters say the Bank creates and sustains U.S. jobs and increases U.S. exports. According to its website, the Bank supported:

  • $27.4 billion in U.S. exports in 2014, $10.7 billion for small businesses
  • 164,000 jobs in 2014
  • 1.3 million American jobs since 2009

Opponents of the Bank

A strong argument is made that the Bank does not properly adjust for risk. Opponents say that once risk is correctly accounted for, the Bank actually loses money for taxpayers.

The Bank is supposed to make at least 20% of its loans to small businesses. Critics argue that this has not happened. They argue that 76% of its financing goes to the top 10 recipients. Many (especially those in the Tea Party) view the Bank as a form of corporate welfare.

The final charge levied against the Bank is that it favors special interests, including foreign governments and nationals.

  • It has come under fire from environmental groups for financing too many fossil fuel projects.
  • It has also been scrutinized for supporting green energy projects.

It looks like the Bank is in a no-win situation here. But I’m sure it will make for a good debate during the presidential campaign season. Let’s hope so – our economy deserves the attention.