During her nomination process to become the chairman of the Export-Import Bank, Kimberly Reed promised Senator Patrick Toomey that she would be an agent of reform at the bank. The bank has a long track record of serving mostly large foreign and domestic companies in higher income nations, and distorting capital markets to fund projects that would likely be funded otherwise. It’s called cronyism and it has a negative impact on the economy and our political system.
On Tuesday, she is testifying again before the Senate Banking Committee and this piece is a warning to them that what the chairman may call reforms will lead to the exact same crony outcomes as we have seen for decades at the Bank. Sadly, few people care these days as we are all preoccupied with many other restrictions of our freedom. Yet, I have to try to send the alarm one more time.
Ex-Im Bank’s “No-Reform” Reform to its Additionality Guidelines
Ex-Im Bank Chairman Reed apparently has put to rest a few of the reform commitments that she made to Senator Toomey in her confirmation hearing nearly two years ago. These commitments included improving protection for domestic companies from economic harm that might arise from Ex-Im Bank financing their foreign competitors, and ensuring that the Ex-Im Bank is not crowding out private financing options that would otherwise be available but for Ex-Im Bank’s involvement.
This piece focuses on the second of these commitments, as reflected in a recently published “Additionality Guidelines and Checklist” document that purportedly will lead U.S. exporters and their overseas buyers to use Ex-Im Bank only when they have no commercial alternatives. I testified a few months ago before the Bank’s Board of Advisors on this same issue. My oral comments can be found here and my written testimony is here.
Unfortunately, a cursory reading of the new guidance suggests the continuation of a longstanding philosophy that will result in few, if any, changes in Ex-Im Bank’s decisions about which borrowers will receive government-backed loans. In fact, if Chairman Reed wants to show how effective her new guidelines are, she should tell us which companies and deals that were approved in the past would not be approved under these new guidelines.
Following is a summary of what appear to be the core elements of the Ex-Im Bank philosophy on Additionality.
The “Foreign Export Credit Agency Under the Bed” Standard
WASHINGTON, June 17 (Reuters) – The Export-Import Bank of the United States (EXIM) on Friday said its board of directors approved an $811 million loan guarantee to help finance the sale of Boeing wide-body aircraft to French-Dutch airline Air France-KLM SA (AIRF.PA)
EXIM said in a statement that the loan guarantee would support aircraft assembled at Boeing’s Everett, Washington, and North Charleston, South Carolina, factories, which produce 787 jetliners. It did not specify the number of aircraft involved, but KLM had ordered some 15 787-10 aircraft and began to take delivery of them in 2019.
Since then, Boeing experienced severe delays in 787 Dreamliner deliveries because of production flaws and has advised airlines and suppliers that deliveries would resume in the second half of 2022, but is still awaiting regulatory approvals. read more
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