Congressman Jeb Hensarling

Representing the 5th District of Texas

Hensarling Statement on Expiration of Export-Import Bank’s Charter

Jun 25, 2015
Press Release
‘Ex-Im is a part of yesterday’s economy. Our focus needs to be on tomorrow’s economy and on reforms that will give every American greater opportunities to succeed.’

WASHINGTON—U.S. Congressman Jeb Hensarling (R-TX), chairman of the House Financial Services Committee, issued the following statement on the upcoming expiration of the Export-Import Bank’s charter:

“This is a small step toward renewing a competitive free-market economy and arresting the rise of the progressive welfare state and the cronyism connected to it.  Ex-Im is not only corporate welfare, it is corporate welfare for foreign companies and countries.  There’s no doubt some U.S. companies receive a benefit from Ex-Im, but there’s also no doubt Ex-Im hurts other companies and their workers.  In fact, more are hurt than helped, and nearly 99 percent of all U.S. exports are financed without Ex-Im.  Where is the fairness in giving Washington politicians and bureaucrats the power to pick who gets helped and who gets hurt? The few U.S. companies that actually benefit from Ex-Im do so at the expense of every hardworking taxpayer and all other American companies that are forced to assume the risks of Ex-Im’s loans and compete at a disadvantage. 

“As more Americans and more members of Congress learned about Ex-Im’s political lending, corruption and fundamental unfairness, the more they wanted it to expire.  Now the challenge for supporters of a competitive free-market economy is to make sure Ex-Im stays expired.  Ex-Im is a part of yesterday’s economy.  Our focus needs to be on tomorrow’s economy and on reforms that will give every American greater opportunities to succeed.  Fundamental tax reform, tort reform and regulatory reform will do more to grow our economy and help small business entrepreneurs than corporate welfare ever could.  That must be our agenda.” 

 

BACKGROUND ON THE EXPIRATION OF EX-IM’S CHARTER


NO IMPACT ON CURRENT FINANCING

The charter for the Export-Import Bank will expire on June 30, but that expiration will have no impact on Ex-Im’s current obligations. 

Ex-Im will not cease to exist on July 1.  Instead, Ex-Im will begin a gradual and orderly wind-down and – by law – financing awarded before expiration will continue through the life of the loans, loan guarantees and insurance policies.  In fact, some of this financing will extend for 12-18 years after Ex-Im’s charter expires.


“NONE OF US ACTUALLY EXPIRE JUNE 30”

As Ex-Im Chairman and President Fred Hochberg told Politico

“Well, none of us actually expire June 30.  The bank’s authority to make a new loan expires on June 30…But there’s a large function as bank that does not go away – we’ve got an over $110 billion loan portfolio that’s got to be managed and serviced…The authorization is about making new loans, but in any case we’ve got a lot of work to do here.”

The Congressional Research Service reported to Congress that when Ex-Im’s charter expires:

Ex-Im Bank also may “continu[e] 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.


EX-IM’S #1 BENEFICIARY CAN FIND ALTERNATIVE FINANCING

“Boeing itself may have undercut arguments to reauthorize the bank last week when it announced it would use its internal financing arm to support foreign buyers in the event the Export-Import Bank goes away, which opponents could point to as proof the bank is unnecessary.” (US News & World Report, June 11, 2015: Export-Import Bank Heading Toward Closure.) 

HEADLINE:  Boeing to Offer Aircraft Financing If Trade Bank Shuts (Wall Street Journal, June 5, 2015)

Kostya Zolotusky, a managing director at Boeing’s finance arm, “said he was confident the company could find alternative funding sources for customers” but that the company remains “mindful” of the debate over Ex-Im.  (Wall Street Journal, August 7, 2013)
 

CREDIT RATING AGENCIES:  ALTERNATIVES AVAILABLE

Boeing Will Survive an Ex-Im Defeat: Standard & Poor’s finds that there’s plenty of financing for aircraft sales:  “We don’t believe that the expiration of Ex-Im’s authorization…would hurt Boeing’s credit quality or ability to make planned deliveries.” (Wall Street Journal, July 14, 2014)

“S&P also examined the effect of cutting of Ex-Im financing to three of the bank’s other big clients – General Electric, Caterpillar and United Technologies.  Their conclusion? Their credit ratings wouldn’t be affected because ‘the amounts financed are generally less than 2% of revenue.’” (Wall Street Journal, July 14, 2014)

“Any U.S. congressional vote that winds down the Export-Import Bank of the United States (Ex-Im) would be management for aircraft lessors given the availability of other financing alternatives…Solid growth in financing avenues across capital markets has reduced the necessity of Ex-Im guarantees…”  (Fitch Ratings report issued July 15, 2014)

“We believe that the risk of Congress not reauthorizing Ex-Im is unlikely to affect our ratings on other U.S.-based exporters.” (S&P Analysis, July 7, 2014)
 

END OF CIVILIZATION? “THAT’S NONSENSE”

“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.” – Richard Aboulafia, Vice President, Teal Group (Quoted by Bloomberg, June 2, 2015)

“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.” – Ted Grace, Analyst, Susquehanna Financial Group (Quoted by Bloomberg, June 2, 2015)

“Today, with low interest rates around the world, and many commercial options for insuring against business risks, there probably is no intrinsic value to the Ex-Im Bank today and into the future. Thus, at this moment, I believe the charter should not be renewed…If the Ex-Im Bank were to disappear, I believe buyers and sellers would find attractive commercial options unencumbered by politics and special interests.” – Edmund Schweitzer III, Schweitzer Engineering Laboratories (Quoted in The Spokesman-Review, July 15, 2014

 

###