Jun 30, 2015

POTUS On Ex-Im Bank: What Changed?

Post by Freedom Partners

Arlington, VA — With the Export-Import Bank set to expire for the first time in more than 80 years, the White House is shopping around an op-ed in support of reauthorization written by the same president who only a few years ago called the Ex-Im Bank “little more than a fund for corporate welfare.”

Our question for the president: what changed?

Fact-Checking President Obama’s Desperate Op-Ed

The Claim: The Ex-Im Bank “Actually Generates Money For The Taxpayer.” (Op-Ed, President Barack Obama, “Why America Needs The Export-Import Bank,” The Boston Globe, 06/30/15)

The Fact: The Congressional Budget Office Estimates That Ex-Im Direct Loans, Guarantees, And Insurance Policies Will Cost Taxpayers $2 Billion Over The Next Decade. “If Ex-Im Bank’s activity in 2015 matches the President’s budget request for that fiscal year, CBO estimates that $37.6 billion in new loans would be made or guaranteed in the bank’s six largest credit programs, with savings totaling $1.4 billion on a FCRA basis and costs totaling $0.2 billion using the fair-value approach. Thus, the 10-year effects would be savings of $14 billion using FCRA methodology and costs of $2 billion using the fair-value approach, a difference of $16 billion.” (“Fair-Value Estimates Of The Cost Of Selected Federal Credit Programs For 2015 To 2024,” CBO, 05/03/14)

The Claim: “Ex-Im Has Provided Support To Businesses And Boosted Exports In All Fifty States . . .” (Op-Ed, President Barack Obama, “Why America Needs The Export-Import Bank,” The Boston Globe, 06/30/15)

The Fact: Ex-Im Supports Less Than 2 Percent Of U.S. Exports. “First, it implies that a significant portion of US exports are dependent on Ex-Im Bank financing, but roughly 98 percent of the value of US exports receive no Ex-Im Bank assistance at all. In other words, absent the subsidies most US exports would be unaffected.” (Veronique de Rugy, “There Are Better Ways To Help US Exporters Compete Abroad Than The Ex-Im Bank,” Mercatus Center, 07/02/14)

The Fact: Washington State Received A Disproportionate 43.6 Percent Of All Ex-Im Bank Disbursements From Fiscal Years 2007 To 2014. “The first map shows that Washington state is the clear winner in terms of total Ex-Im disbursements, receiving a massive 43.6 percent of all Ex-Im Bank disbursements from 2007 to 2014. Washington is the home of Boeing, one of Ex-Im Bank’s biggest beneficiaries . . . An astounding 42 states received less than two percent of Ex-Im Bank disbursements, with 35 of these receiving less than one percent. While businesses in most states barely benefit from the Ex-Im Bank at all, their taxpayers are just as exposed to Ex-Im Bank liabilities as taxpayers in states that receive the most Ex-Im Bank backing.” (Veronique de Rugy, “Ex-Im Funds Flow To Few States, But All Bear The Risks,” Mercatus Center, 07/30/14)

The Claim: “Starting Wednesday, Businesses That Need Additional Help Shipping Their Made-In-America Products Around The Globe Will Lose That Help. And That Means Lost Sales, Lost Customers, And Lost Opportunities.” (Op-Ed, President Barack Obama, “Why America Needs The Export-Import Bank,” The Boston Globe, 06/30/15)

The Fact: Ex-Im Primarily Supports Big Businesses, With 64 Percent Of The Bank’s Total Assistance By Value Benefitting Only Ten Companies In 2013. (Veronique De Rugy, “Public Data Suggest Ex-Im Bank Is Not For Everyone,” Mercatus Center, 04/29/14)

The Fact: Analysts Agree That The Export-Import Bank’s Biggest Beneficiaries, Including General Electric And Boeing, Will Be Fine If The Bank’s Funding Expires. “The U.S. Export-Import Bank’s biggest beneficiaries, including General Electric Co. and Boeing Co., will be fine if Congress lets the institution die this month, analysts said.” (Kathleen Miller, “Killing U.S. Ex-Im Bank Seen Foolish Yet Not End Of Civilization,” Bloomberg, 06/02/15)

Need More Proof?

Congressional Research Service: Letting The Bank Expire Will Allow For An Orderly Wind-Down With No Immediate Impact On Current Financing Arrangements Or Contracts. “Other provisions of Section 635f expressly authorize the Bank to continue to perform certain functions after its termination. . . . Ex-Im Bank also may ‘[continue] as a corporate agency of the United States’ and exercise any of its functions ‘for purposes of an orderly liquidation,’ including (but apparently not limited to) administering its assets and collecting any obligations it holds.” (David H. Carpenter, Mindy R. Levit, And Julia Taylor, “Export-Import Bank Reauthorization: Frequently Asked Questions,” Congressional Research Service, 11/26/14)

The Bank’s Number-One Beneficiary

Boeing: We Can Find Alternative Financing Without The Ex-Im Bank. “Kostya Zolotusky, a managing director at Boeing’s finance arm . . . said he was confident the company could find alternative funding sources for customers that wouldn’t require it to boost its support of aircraft sales, but said Boeing remains ‘mindful’ of the debate over Ex-Im’s future.” (Doug Cameron, “Boeing Cites Jitters Over Airplane Financing From Ex-Im Bank,” Wall Street Journal, 08/07/13)

One Of Boeing’s Largest Customers: We’ll Keep Buying Boeing Aircraft If The Export-Import Bank Expires. “Emirates, Dubai’s flagship airline, would not have trouble buying planes from Boeing even if the U.S. Congress fails to renew the U.S. Export-Import Bank’s charter later this month, a senior company executive said on Friday. . . . Emirates is one of the biggest buyers of Boeing airplanes and in November placed a record order for Boeing’s next-generation 777X.” (Jeffrey Dastin, “Emirates Airline Says Ex-Im Bank Not Critical For Its Plane Financing,” Reuters, 09/05/14)

Financial Analysts And Economists

Vice President Of Teal Group, Richard Aboulafia: “In the here and now impact, would this be the end of civilization as we know it, would it be raining cats and dogs? No, that’s nonsense.” (Kathleen Miller, “Killing U.S. Ex-Im Bank Seen Foolish Yet Not End Of Civilization,” Bloomberg, 06/02/15)

Susquehanna Financial Group Analyst, Ted Grace: “I would venture a guess that it wouldn’t have any impact on Caterpillar and if it were to have impact it would be completely immaterial.” (Kathleen Miller, “Killing U.S. Ex-Im Bank Seen Foolish Yet Not End Of Civilization,” Bloomberg, 06/02/15)

Analyst At Goldman Sachs: “[Alec Phillips] cites two reasons he believes that would have a very modest effect. First, he says, the amount of U.S. exports exposed to the bank is fairly modest, at around $30 billion a year. That’s a little more than 1% of exports.” (Robert Schroeder, “If Export-Import Bank Lapses, Consequences Are ‘Very Modest,’” MarketWatch, 06/24/15)

Analysts At Standard & Poor’s: “We don’t believe that the expiration of Ex-Im’s authorization in September would hurt Boeing’s credit quality or ability to make planned deliveries.” (Editorial Board, “Boeing Will Survive An Ex-Im Defeat,” Wall Street Journal, 07/14/14)

Managing Director With Jeffries LLC, Howard Rubel: “Could there eventually be a way around this? Sure.” (Kathleen Miller, “Killing U.S. Ex-Im Bank Seen Foolish Yet Not End Of Civilization,” Bloomberg, 06/02/15)