MILESTONES | UNITED STATES
In its 2013 report to Congress, the Export-Import Bank of the United States says that its “overriding mission is to create and sustain American jobs by supporting US exports.” But that very mission is under threat, with House Financial Services Committee chairman Jeb Hensarling, among others, seeking to abolish the bank. Hensarling argues that Ex-Im benefits large corporations that don’t need the support and that its role could be better performed by the private sector.
Matthew Ekberg, vice president, international policy, at Washington DC–based Bankers Association for Finance and Trade (BAFT), says that if Congress fails to renew the Ex-Im’s charter before September 30, when it is due to expire, the US will be charting a lonely course at a time when other countries are increasing their support for export credit agencies.
Ekberg says the uncertainty surrounding Ex-Im’s future means some commercial banks have placed a moratorium on new work with the organization. “It is challenging for banks to make decisions around supporting clients in this space as they’re not sure if or when Ex-Im’s charter is going to be renewed.”
Opponents of the bank say it costs taxpayers money, but Ekberg says in fiscal years 2012 and 2013, Ex-Im returned $1 billion to the US Treasury after covering all its expenses. And for those that believe the bank takes unnecessary risks with taxpayer’s money, Ekberg says the bank had a 0.19% default rate on transactions for the second quarter this year. BAFT says SMEs make up more than 85% of the bank’s business.
The Ex-Im Bank was set up by Congress to fill certain financing gaps by commercial lenders. In 2013 those financing gaps were “quite significant,” the bank says. “Regulatory, credit and compliance standards sometimes make it difficult for banks to do deals in emerging markets or to undertake trade finance transactions with longer tenors without the support of export credit agencies and multilateral development banks,” Ekberg explains.
Ekberg says a positive opportunity for the bank’s future reauthorization is a proposal put forward by West Virginian Democratic senator Joe Manchin to renew the bank’s charter for another five years and increase its capitalization to $160 billion.