Export-Import Bank Update
On July 17, the Senate voted 82-17 to approve Fred Hochberg for a second four-year term as president and chairman of the U.S. Export-Import (Ex-Im) Bank. Ex-Im Bank, a self-sustaining federal agency, is the official export credit agency (ECA) of the U.S. It helps finance American exports of manufactured goods and services, with the objective of contributing to the employment of U.S. workforce, primarily in circumstances when alternative financing is not available.
By law, the Bank’s Board of Directors must have a quorum—or three of its five members—to approve transactions. Chairman Hochberg was previously confirmed by the Senate on May 14, 2009. His first term ended on Jan. 20 and he was leading the Bank under a six-month extension. The extension allowed under the Bank’s charter would have expired on July 20, had the Senate not reconfirmed Hochberg for another term, and the Bank’s business would have grinded to a halt and transactions would not have gotten approval.
Additionally, President Obama recently nominated Ex-Im Bank Vice Chair Wanda Felton for a second term as she has been a driving force behind the expansion of financing exports to Sub-Saharan Africa. She had yet to be confirmed by the Senate. Meanwhile, Director Larry Walther has left the Board after serving two years, and a replacement has yet to be named.
Hochberg was easily confirmed in 2009—by unanimous consent in the Senate—and saw the Bank through a difficult reauthorization fight last year that renewed the Bank’s charter for three years and raised the limit on the total financing the Bank can guarantee, to $140 billion from $100 billion.
In the 2012 budget year, which ended last September, the Bank provided a record $35.8 billion in direct loans, loan guarantees and other types of financing to help U.S. exporters make sales. That was the fourth consecutive record year for the Bank, which has seen increased demand for its services in the aftermath of the global financial crisis.
Hochberg’s nomination also became entangled in a broader Senate battle over several Obama nominations, with the majority Democrats accusing Republicans of abusing a procedural roadblock known as a filibuster to delay votes indefinitely. A deal to resolve that dispute was reached on July 16, allowing a vote on Hochberg’s nomination to proceed.
During a recent speech, Chairman Hochberg noted that U.S. exporters often face head-to-head competition with competitors backed by foreign governments that offer attractive financing terms, sometimes tipping the scale for their own domestic manufacturers and how U.S. companies can succeed in an increasingly competitive global environment, by identifying diverse opportunity areas ranging from nuclear power to infrastructure.
In conjunction with his speech, Hochberg released Ex-Im Bank’s 2012 Competitiveness Report. The Bank has produced these reports for Congress annually since 1972, and this year’s report the challenging trends in trade finance driven by emerging economies. The Bank’s press release is online here.
The Ex-Im Bank’s 2012 Competitiveness Report found that commercial bank capacity has declined since the global financial crisis, making export credit agencies (ECAs) an increasingly important tool. Many Asian countries have ambitious export plans to gain market share, and the report finds China, Korea, Japan and others are ramping up government export support.
The report goes on to state, U.S. exporters compete in many markets and sectors that other countries have targeted as a “national interest,” either explicitly as part of their national policy, or implicitly by making available a range of official financing tools intended to maximize the flow of national benefits. More and more financing is being offered outside of OECD guidelines. But it is not just interest rates. It is open season on other inducements as non-OECD countries continue to use financing to sway purchase decisions.
In the report, the 2013 Advisory Committee commended the Bank for its continued success in filling commercial financing gaps in support of U.S. exports. The Advisory Committee also noted that certain public policy issues –domestic content requirements, economic impact studies and MARAD shipping requirements – continue to be a concern.