How to Save the Export-Import Bank

Export-Import Bank LogoThe United States Export-Import Bank (EXIM) faces closure after September 30, 2014 unless Congress chooses to reauthorize the Bank’s charter. EXIM provides loans and loan guarantees to support U.S. companies who export goods abroad. The reason for the Bank’s existence is to promote U.S. exports, place U.S. exporters on an equal footing with foreign competitors, and create U.S. jobs.

The Bank’s reauthorization is in jeopardy due to a unique alignment of circumstances. The 2008 financial crisis in the U.S., along with subsequent bank/corporate bailouts, opened the floodgates for criticism of “corporate welfare” programs. EXIM is always a prime target for anti-government activists, and when mixed with the current anti-corporate zeitgeist, events are aligned to pose a serious threat to the Bank’s survival.

However, take it from one who has been there before, there is a hope for survival.

Your humble author spent a long career with the Overseas Private Investment Corporation (OPIC), a U.S. Government agency with some similarities to EXIM. OPIC provides investment guarantees, political risk insurance and investment funds to U.S. companies for expansion in emerging markets. OPIC’s rules require that companies create U.S. jobs, and adhere to labor and environmental standards. OPIC projects must be commercially viable and OPIC’s activity cannot compete with private sector funding.

In the early 2000s, OPIC went through a crisis similar to what EXIM faces today. Specifically, OPIC’s Investment Funds program became a target for closure due to the perception of the program as a secretive, insider-favoring, “corporate welfare” program. While the odds of OPIC’s Funds program surviving media and Congressional criticism were small, the program survived and continues to this day.

The OPIC Funds program was audited by the General Accounting Office (GAO) in 2000 and reviewed by the Office of Management and Budget (OMB) two years later. The program is one of the few Federal Government programs targeted for closure that actually made its case and survived. Three main principles were key to the OPIC Funds program’s survival:

  1. Openness and transparency,
  2. The program has to justify itself to stakeholders, and
  3. The program needs to enact reforms to address stakeholder concerns.

While EXIM and its’ supporters are making a vigorous case to the Congress for reauthorization, I believe that more needs to be done and it needs to come from within the Bank itself. EXIM needs to do four things to ensure its survival:

  1. Establish a cross-department team to focus solely on reauthorization issues. Naturally, senior staff and management don’t want to lose time and productivity on a non-core function. However, reauthorization is a do or die proposition and the loss of productivity over the next few months far outweighs the risks of closing EXIM. The team should be made up of both senior and junior line officers who are conversant in all aspects of the Bank’s operations and who can make presentations to stakeholders.
  2. Write a document with a coherent argument in support of reauthorization. The brochure should be professionally produced and include a brief about the Bank, how the Bank conducts business, positive effects of the Bank, problems the Bank will fix (and how to fix them!) once reauthorized. It is nice that EXIM’s supporters have notecards on job creation to hand to their Congressional representatives, but index cards and other tchotchkes will not change minds.
  3. Make openness and transparency a priority. The more stakeholders know about EXIM, the less opposition they will have. Even though EXIM guards a number of commercial secrets and privileged information, as much transparency as possible should be practiced. If clients or staff don’t like openness, they will like closure even less.
  4. Admit that the Bank has problems. The main criticism of OPIC’s Investment Funds program wasn’t financial performance or risk, it was the procedure by which fund managers were selected. Instead of trying to defend the status quo, OPIC reformed its fund manager selection process in a way that satisfied key stakeholders. EXIM needs to admit that it has issues, and that it is perceived as “corporate welfare.” How does the Bank propose to change this? New and open selection processes, increased focus on small business and U.S. job creation, something else. This one point could make or break EXIM’s chances.

One other tip for EXIM’s staff, don’t rely on your clients to defend you. There is a lot of press about how major Bank clients are lobbying Capitol Hill for reauthorization. First, this makes it harder to argue that the Bank isn’t “corporate welfare”. Second, these companies access to political power is via specific members of Congress, not via EXIM. Should the worst happen, companies will want to preserve their relationships with Congress, their relationship with the Bank is secondary.

EXIM Bank is an important part of America’s economic and foreign policy portfolio. While there are clearly valid criticisms of the institution, closing the Bank would leave America at a competitive disadvantage in international trade going forward. However, the impetus for change and reform needs to come from EXIM itself, not its customers. Perhaps management at the Bank will consider that, for the good of all of us, it needs to pursue reauthorization on its own.

The contents of this post do not reflect the views or position of the U.S. Government.

{ 2 comments… add one }
  • Curt Graham July 25, 2014, 3:34 pm

    My company has a limited but important relationship with Exim Bank through their Export Insurance program. The Bank insures our receivables so that we can offer Open Account terms to small sized foreign companies to buy our products

    If reauthorization fails and Exim Bank operations are ended – can you recommend any similar means by which we can insure our receivables at the low cost offered by Exim?

    • kennethgray July 26, 2014, 12:38 pm

      I believe that the Multilateral Investment Guaranty Agency (MIGA) and the International Finance Corporation (IFC), both part of the World Bank Group, offer something similar. You would have to be working with countries they deal with and would probably face different pricing and reporting standards from what Exim requires. There is also the private insurance market, though again price and service geography vary greatly between private insurers. There are no perfect alternatives to Exim, but you might want to start searching for a substitute, as no replacement will be identical on price or geography.


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