THE Export-Import Bank is a relatively obscure agency of the US government, one that has traditionally had a few critics but has never really been controversial until now. That all changed on June 30 (just the other day), when, after 81 years, 13 presidents and 16 routine renewals of its charter, the Ex-Im Bank was allowed to lapse by the US Congress. The legislative body took a mid-summer recess without voting on a measure to extend the bank’s life.
The Ex-Im Bank is an independent Federal agency created in 1934 by the Roosevelt Administration to serve the US government as its official export credit facility. Its primary function is to finance foreign purchases of American goods and services, which it does either through direct lending or by underwriting credit extended by American companies to their overseas customers.
As a Federal agency—the term “Bank” in its name is actually a little misleading—Ex-Im is fully funded by the Federal government, although its loan portfolio is self-sustaining. Since it is prohibited by its charter from competing with private lenders, Ex-Im in effect is a high-risk insurer, taking on financing that private sector lenders do not want to touch; for instance, funding the ‘private’ side of public-private partnership projects in unstable countries, or extending loans to low-income governments for things like road construction equipment or airplanes.
Due to the limitations on what Ex-Im can get involved in, its actual impact on the US economy is insignificant; it accounts for less than 2 percent of US exports, and has an outstanding loan portfolio of just $112 billion. The problem is, about $97 billion of that amount is concentrated in deals with Boeing (critics sometimes sarcastically refer to it as “the Boeing Bank”), General Electric and Caterpillar. That makes Ex-Im a perfect target for libertarians and other opponents of ‘big government,’ who deride it as a particularly obnoxious form of crony capitalism.
Ex-Im has always had its critics, but until now they have not had the public support to defeat the powerful business lobby that made sure the bank’s authorization was regularly renewed (In 2012, the authorization was passed in the US House of Representatives without debate by a vote of 330-93.). As it is, the expiration of Ex-Im’s authorization is only a temporary victory at this point; the Washington Post reported that the bill for renewal will be attached to a highway bill to be passed by the Senate at the end of July after the summer recess. Even though the House is expected to dump that provision once the otherwise unrelated highway bill is handed over by the Senate, the Post explained, a reauthorization of Ex-Im will ‘probably’ be passed later in the year.
In a worst-case scenario, the US Congress may surprise everyone and vote Ex-Im out of existence for good, but most see it back in business by the beginning of next year. That will be too late for the (alleged) push by the current administration of the Philippines to complete as many visible infrastructure projects as possible in the run-up to the 2016 elections. Ex-Im is already involved in several deals with the Philippine government or companies; early last year, the bank signed a $1 billion guarantee for renewable energy and gas projects with the Department of Energy, for instance, and if authorization had been renewed, would have been an easy source of more credit. As it is, the Aquino Administration can at least use it as a fresh excuse the next time they are obliged to explain government underspending.