The Export-Import Bank of the United States (Ex-Im Bank) is an independent, self-sustaining federal agency whose assistance is designed to help create and maintain U.S. jobs by financing the sale of American exports, primarily to emerging markets throughout the world. The financial activity of Ex-Im bank consists of providing loan guarantees, export-credit insurance, and direct loans—some of which are given to foreign businesses. The bank also has been known to help with the sale of equipment and technology that has aided the militaries of foreign governments with poor human rights records.
The bank was first created during the Great Depression to facilitate American exports to none other than the Soviet Union, but by the end of World War II, its mission had expanded to develop American export opportunities throughout the world. In 2010, Ex-Im Bank authorized $24.5 billion in financing to support U.S. exports worldwide. The bank claims that, throughout its history, it has supported more than $400 billion in exports, largely to developing markets around the globe, with 85% of transactions benefitting small businesses.
The Ex-Im Bank has weathered a number of controversies, including repeated calls from Republicans in recent years to defund the agency altogether.
The Export-Import Bank of Washington was created in 1934 as part of a larger economic policy promoting government spending to facilitate economic growth. Created during the Great Depression, the bank was conceived to help resolve problems of high unemployment, low income, low demand for goods and services, and slowed industrial production. While the U.S. was suffering through a dire economy, the Soviet Union was experiencing high industrial production from state-owned firms and zero unemployment. Under these economic conditions, the Soviet Union was seen as a market for U.S.-produced goods, and the export of goods to the Soviet Union was seen as a reasonable strategy for promoting U.S. economic growth and lowering unemployment.
Within a decade after its creation, the bank’s mission quickly expanded to include other foreign countries. By the end of World War II, the Export-Import Bank played a role in helping American companies participate in the expansion of U.S. industry to Europe and Asia as part of the post-war reconstruction effort. Because of the expanding post-war role of the bank and its growing importance, Congress formally designated it an independent government agency when it adopted the Export-Import Bank Act of 1945.
A 1968 amendment to the Export-Import Bank Act of 1945 renamed the bank the Export-Import Bank of the United States (Ex-Im Bank). Before 1980, the main avenue of export promotion through the bank was by way of direct loans to companies seeking to sell goods abroad. This program provided fixed interest rate loans that were most often given to businesses to fund high capital (plant and equipment) expenditures in industries such as aircraft manufacture and nuclear power. Boeing was a major recipient of assistance from the bank in an effort by the U.S. government to help the airplane manufacturer compete with Airbus, which received subsidies from the European Union.
In 1980, Congress limited the amount of direct lending by Ex-Im Bank, causing the bank to decrease its direct lending and increase its use of loan guarantees and insurance coverage as a means of facilitating the export of American goods.
During the 1980s, the Reagan administration sought to help the Saddam Hussein’s Iraq in its war against Iran through the exporting of “dual-use” technologies and equipment that could aid the Iraqi army without violating U.S. laws. Officials in the White House, State Department, and Pentagon discussed ways of financing these dual-use sales, including getting the Ex-Im Bank involved. But officials at the bank resisted being pulled into the scheme.
President George W. Bush signed the Export-Import Reauthorization Act of 2002 on July 14, 2002. This act renewed the bank’s charter through September 30, 2006, and included new rules for the provision of loans and insurance. The law now requires the bank to make a human rights assessment of any project over $10 million and to focus on projects that will promote U.S. job growth. The law also draws attention to compliance with U.S. responsibilities as a nation member of the World Trade Organization (WTO). The Export-Import Reauthorization Act of 2002 prohibits subsidization to any industry subject to a retaliatory countervailing duty through the WTO agreements.
The 2002 law was also supposed to prod the bank into providing more loans to small businesses. Congress called for the bank to give small companies from 10-20% of its total financing, but it didn’t put in place a structure to make that happen, and the bank never met the 20% goal from 2002–2006. So when lawmakers took up another reauthorization bill in 2006, they added more provisions to make sure the bank finally meets this goal.
Small Business Cheers Changes at Export-Import Bank (by Renuka Rayasam, U.S. News & World Report)
The underlying goal of the Export-Import Bank (Ex-Im Bank) of the United States is to promote the sale of U.S. goods abroad. The bank provides loans and insurance to privately owned companies to reduce the risk of selling in countries experiencing political or economic instability. In addition, the bank attempts to “level the playing field” of global markets for American companies by subsidizing U.S. industries in competition with foreign firms subsidized by their governments.
Federal law states that the bank is supposed to supplement, and not to compete with, private capital available from other financing sources, and that Ex-Im loans should be for specific purposes and offer reasonable assurance of repayment. The bank is authorized to have capital stock of $1 billion and may have loans, guarantees, and insurance aggregating up to $40 billion outstanding at any one time.
The Ex-Im Bank has initiated various programs designed to broaden the credit opportunities of U.S. industry. It provides a direct-lending program to aid in large sales of U.S. products, and it also makes available insurance and financial guarantees to assist exporters dealing with smaller sales of products and services. The bank has assisted in financing sales to foreign buyers of a wide range of American equipment, including fertilizer plants, bridges, jet aircraft, and locomotives. More examples are available through the bank’s published annual report.
Although much of its financial activity goes toward helping American businesses and institutions sell U.S. goods and services overseas, some of Ex-Im Bank’s commitments are given to foreign enterprises. For instance, direct loans are sometimes provided to foreign buyers with fixed-rate financing to help with their purchases from the United States. To qualify for Ex-Im Bank support, a product or service must have at least 50% U.S. content and not affect the U.S. economy adversely. The bank has also co-financed projects with the US Agency for International Development (USAID), the World Bank, and regional development banks.
Furthermore, assisting in the sale of American exports means not only promoting purchases such as automobiles or wheat, but also equipment with military applications. In the past, Ex-Im Bank has supported the sale of “dual use” exports—those with both military and civilian applications. Examples include loans given to Indonesia, Venezuela, and Brazil, which were used to purchase equipment for their militaries, including aircraft, trucks, and radio systems. Also, some of the larger American recipients of Ex-Im Bank help have included defense contractors, such as Northrop Grumman.
Information is also provided on the countries and regions that Ex-Im assistance goes toward. These include Africa; Brazil; Broader Middle East and North Africa (pdf); Central Asia and Caucasus Regions; China (pdf); India; Mexico; Russia; Turkey; and Ukraine.
For small businesses, the bank provides a special portal to obtain information on how to apply for assistance or loans.
The Ex-Im Bank is headquartered in Washington D.C., and has regional offices in the following locations: Northeast (New York); Southeast (Miami); Southwest (Houston); Midwest (Chicago); and the West (Orange County, San Diego and San Francisco).
The bank is managed by a bipartisan board of directors appointed by the president with the advice and consent of the Senate. There are also more than 30 bank officers who carry out the day-to-day functions of the bank.
Export-Import Bank (by Janice Shields, Foreign Policy in Focus)
From the Web Site of the Export-Import Bank of the United States
Strategic Plan (pdf)
In its 2011 Annual Report, the Export-Import Bank of the United States published the estimated value of American exports assisted by the bank that benefited each state. The biggest winners were Washington ($15.95 billion), Texas ($2.46 billion), and California ($2.76 billion). The remaining states faired as indicated:
Over $1 billion
Illinois ($2 billion)
Florida ($1.21 billion)
New York ($1.03 billion)
Over $100 million
Georgia ($851 million)
New York ($772 million)
North Carolina ($612 million)
Massachusetts ($568 million)
Pennsylvania ($476 million)
Mississippi ($459 million)
New Jersey ($439 million)
Ohio ($435 million)
Connecticut ($368 million)
Indiana ($363 million)
Minnesota ($298 million)
Louisiana ($268 million)
Maryland ($252 million)
Oklahoma ($251 million)
Virginia ($250 million)
Oregon ($233 million)
Wisconsin ($221 million)
Kansas ($213 million)
South Carolina ($205 million)
Arkansas ($166 million)
Tennessee ($156 million)
Colorado ($151 million)
Arizona ($141 million)
Alabama ($113 million)
Nebraska ($102 million)
Over $10 million
South Carolina ($97 million)
New Hampshire ($65 million)
Utah ($56 million)
Kentucky ($48 million)
Iowa ($45 million)
Delaware ($39 million)
Nevada ($33 million)
Maine ($31 million)
Idaho ($28 million)
North Dakota ($13 million)
Rhode Island ($13 million)
Puerto Rico ($11 million)
Under $10 Million
New Mexico ($8 million)
Rhode Island ($7 million)
South Dakota ($3 million)
Vermont ($3 million)
District of Columbia ($2 million)
West Virginia ($554,000)
Bank Finances Azerbaijan’s Satellite Purchase
The U.S. Export-Import Bank (Ex-Im Bank) angered the Armenian American community in April 2011 when it approved financing for Azerbaijan to purchase an advanced satellite. The Armenian National Committee of America (ANCA) reported that the bank’s approval came only weeks after Azerbaijan threatened to shoot down civilian airliners flying into disputed territory controlled by Armenian separatists.
Despite the Bank’s assurance to the contrary, the ANCA warned the satellite would strengthen Azerbaijan’s military capabilities, which could prove dangerous for Armenia and the disputed Nagorno-Karabagh region. Work on the satellite was underway by early 2012, and a launch was planned for the end of the year.
Export-Import Bank Approves Controversial Baku Satellite Financing Deal (The Armenian Weekly)
Azercosmos Accelerates Work on Launch of Azerbaijan’s First National Satellite (by Supriya Srinivas, Satellite Pro)
Conservatives Bash Obama over Bank’s $2 Billion Loan to Brazil
Within months of President Barack Obama taking office in 2009, conservatives were in an uproar over news from the Wall Street Journal opinion page that discussed a $2 billion loan being made to Brazil’s national oil company for offshore drilling.
Republicans criticized Obama for endorsing petroleum exploration off the coast of another country, but not his own, and some even claimed the deal represented a gift to Democratic donor George Soros. The only problem with the criticism was Obama had nothing to do with the financing decision. It was the Export-Import Bank of the United States that approved the loan, which operates independently of the Executive Branch and Congress. Furthermore, at the time the financing was approved, the bank’s board was made up entirely of appointees by Obama’s GOP predecessor, President George W. Bush.
Despite Republican Claims, President Obama Has Not Loaned Money To Brazil For Oil Production (Political Correction)
Fox News Resurrects Petrobras Conspiracy Theory (Media Matters for America)
Why Are We Subsidizing Brazil? The Real Story (by Jay Bookman, Atlanta Journal-Constitution)
Ex-Im Bank Helps Finance Controversial Pipeline
The Ex-Im Bank has had its share of controversies. During the first term of the Bush administration, the bank was reportedly pressured by the White House to help finance the completion of a controversial gas pipeline project in Peru, which stood to benefit two U.S. energy companies. Also, Ex-Im officials came under scrutiny from members of Congress for approving large loans to foreign companies that are aiding U.S. enemies, such as Iran.
In 2007, it was revealed that the bank had paid $243 million in fraudulent loans to companies with no legitimate address and people associated with Mexican drug-trafficking cartels. The bank was sued in 2005 for having provided financial support to various fossil fuel and oil operations without having evaluated the impact to global warming. The seven-year legal battle concluded in 2009 with a settlement in which Ex-Im Bank agreed to evaluate carbon emission projections as part of its project qualification process.
U.S. Lawmakers Object to Bank’s Support of Iranian Fuel Purchases
A group of U.S. Congressmen asked the Export-Import Bank in December 2008 to suspend $900 million worth assistance to Reliance Industries, an Indian conglomerate that’s helping supply Iran with gasoline. The letter also called on the bank to do a better job of ensuring that the projects it supports are not in conflict with U.S. national interests. Ex-Im Bank approved two separate loan guarantees worth $900 million, including a $400 million package in August 2008. Reliance has been a major supplier of refined petroleum products to Iran, and has at times provided as much as 30% of Iran’s need for imported refined petroleum products.
“I very much support the Export-Import Bank’s mission of supporting U.S. exports. However, we must ensure that when we provide assistance, the corporate recipients are not doing business with our enemies,” said Congressman Brad Sherman (D-California). “We could greatly increase our leverage against Tehran in the dispute over its nuclear program by encouraging those supplying them with gasoline to halt their trade with Iran.”
US lawmakers ask Export-Import Bank to stop aid to RIL for Iran ties (Financial Express)
Ex-Im Bank Caught in Middle of Peru Gas Project
A controversial $2 billion natural gas project sparked heated battles in Peru and the United States in 2003 that threatened to pull in the Export-Import Bank of the United States. The Camisea pipelines were being constructed between the Apurimac Reserve and Manu National Park, two of Peru’s most biologically diverse regions, raising the passions of environmentalists, indigenous rights leaders, and Peruvian officials. In the United States, critics were irate at the Bush administration for pushing for loans to finish the pipelines, a project they say will destroy jungles and indigenous cultures while enriching two Texas energy companies. The White House tried pressuring Ex-Im Bank officials to lend millions to complete the Camisea project by 2004 to help Hunt Oil, which had a major stake in Camisea, and Kellogg Brown & Root (KBR), then a subsidiary of Vice President Dick Cheney’s former company, Halliburton. KBR was a top candidate to build a $1 billion liquefied natural gas plant on the Peruvian coast. Ray Hunt, Hunt Oil’s chief executive officer, reportedly raised more than $100,000 for Bush’s 2000 presidential race. Hunt Oil broke ground on the natural gas plant in January 2006.
The pipeline became operational in 2004 and almost immediately experienced serious problems. Four months later, the main pipeline that fed Hunt Oil’s future processing plant ruptured, spilling contaminants into rivers and streams. Eight months later, it happened again; then again 18 days later. By March 2006, the rain-forest pipeline had produced five ruptures—spilling gas and sending three burn victims to the hospital.
The Peruvian government approved an expansion to the Camisea pipeline in July 2011 over a route it said would not endanger protected zones—it would run through some small towns and native communities. The expansion should be completed by December 2013.
U.S. Questions Development Bank After Troubled Gas Project In Peru (by Kelly Hearn, Washington Times)
Camisea Natural Gas Pipeline Expansion Project, Peru (Global Gas Transport)
Peru natural gas pipelines, plant ignite controversy (by Lucien Chauvin, San Francisco Chronicle)
Camisea Natural Gas Project (Inter-American Development Bank)
Camisea Natural Gas Project (Amazon Watch)
Congressman Labels Ex-Im Bank “Corporate Welfare”
Congressman Bernie Sanders (I-Vermont) lashed out at the Export-Import Bank of the United States in 2002, calling it “one of the most egregious forms of corporate welfare” in the country. He accused the bank of distributing more than 80% of its subsidies to Fortune 500 corporations, including Enron, Boeing, Halliburton, Mobil Oil, IBM, General Electric, AT&T, Motorola, Lucent Technologies, FedEx, General Motors, Raytheon, and United Technologies.
The Export-Import Bank: Corporate Welfare At Its Worst (by Rep. Bernie Sanders, Common Dreams)
Think Tank Proposes Bank Reforms
In the wake of the Obama administration broaching the subject of reforming international financing agencies, the Peterson Institute for International Economics offered up its own suggestions for changes to the Export-Import Bank of the United States.
For starters, the bank needs more funding authority, according to Gary Clyde Hufbauer, Meera Fickling, and Woan Foong Wong. They insisted expanding the bank’s lending capabilities could be done without impacting the federal budget or deficit. At the very least, the bank should be capable of financing 5% of American exports, which would amount to $75 billion every year.
But really the goal should be able to support $150 billion in exports annually, if the bank is to help President Barack Obama reach his goal of doubling exports in five years.
The Peterson Institute also identified five major obstacles that are impeding the bank’s financing. These ranged from changing the “stiff domestic content requirements” that the bank imposes on itself to altering the requirement that transactions above $20 million be transported on a U.S.-registered vessel, which often is prohibitive to completing the transaction.
Revitalizing the Export-Import Bank (by Gary Clyde Hufbauer, Meera Fickling, and Woan Foong Wong, Peterson Institute for International Economics)
President’s Proposed Reorganization of Trade Agencies (by Daniel Runde and Meredith Broadbent, Center for Strategic and International Studies)
In the wake of Bill Richardson backing out as Secretary of Commerce, gay activists lobbied Barack Obama to select Fred P. Hochberg as a replacement for the post—in the hope of finally having an openly gay member of a presidential cabinet. Instead, they had to settle for head of the Export-Import Bank of the United States for Hochberg, a multi-millionaire who has helped fill Democratic Party coffers with hundreds of thousands of dollars. He was sworn in on May 21, 2009, for a term that will expire January 20, 2013.
A native of St. Louis, MO, Jim Lambright served as chairman and president of the Export-Import Bank of the United States beginning in July 2005, after serving as the bank’s executive vice president and chief operating officer. His term as chairman and president ended January 20, 2009.