Why US Ex-Im needs a permanent solution
There has been much manoeuvring behind the scenes in the fortnight since my first blog on the Export-Import Bank of the United States’ (US Ex-Im) battle to be reauthorised – despite the fact that Congress has officially been in recess.
There has been much manoeuvring behind the scenes in the fortnight since my first blog on the Export-Import Bank of the United States’ (US Ex-Im) battle to be reauthorised – despite the fact that Congress has officially been in recess.
In that time, the situation has edged closer to a temporary resolution with a short-term extension of US Ex-Im’s charter looking the most likely outcome. This could take one of two forms: a standalone piece of legislation extending US Ex-Im’s mandate; or, perhaps more likely, an extension attached to a more comprehensive government funding bill.
From US Ex-Im’s point of view, neither of the temporary solutions is ideal. Kicking the can down the road will do little to alleviate the anxiety surrounding US Ex-Im’s precarious position or restore certainty to its services – something that is critical in an industry that is practically fuelled by confidence.
Ex-Im has already had to expend a lot of time and energy dealing with the fallout from its reauthorisation attempt rather than arranging new financings. This includes reassuring uneasy clients that it is ‘business as usual’ as far as the agency is concerned as well as complying with requests from the Committee on Financial Services. To date, it has provided the committee with more than 50,000 pages of documents in response to various requests.
Simply put, a huge, multi-billion dollar agency working in often-risky markets across the world cannot function optimally with a limited remit and continued investigation. As Ex-Im chairman Fred Hochberg has pointed out, “That’s not the real world of business. That’s not the world of profits and loss, sales and employment.”
Another key reason as to why a temporary resolution won’t be toasted to at US Ex-Im is because the political landscape is unlikely to get any more favourable further down the road.
With the US mid-term elections in November likely to usher in more Republicans – who are generally far more opposed to US Ex-Im’s operations than the Democrats – Congress’s collective hostility towards US Ex-Im could be set to increase. For those Republicans opposed to reauthorisation, then, there is every reason to wait and see what happens – particularly if they can regain their majority in the Senate – before returning to the negotiating table with greater leverage in several months’ time.
This blog post is one of a series that will explore US Ex-Im's reauthorisation - as well as the broader questions about export credit agencies that it raises.The first in the series - Battle lines drawn as US Ex-Im reauthorisation looms - can be read here.