What if I were to tell you that the government operated more than just one bank?  The Federal Reserve is well known on this blog and in any topic approaching policy or economics.  But there’s another bank out there fully owned and operated by the United States government.  It’s called the Export-Import Bank, sometimes just referred to as Ex-Im Bank.  Ex-Im’s entire purpose is very straightforward: provide financing to foreign companies that want to buy American made goods.

There are many stipulations and rules around this financing. For instance, Ex-Im is not supposed to compete with other banks.  They only step in if a transaction would not take place without them.  For example: A foreign airline wants to buy a plane from Boeing, but no bank will finance the deal because of political turmoil in the airline’s home country.  Ex-Im will step in and provide the funding.

The idea is that Ex-Im supports American jobs and the economy by enabling more exports.  In many cases they provide the loan directly.  In others Ex-Im guarantees a loan made by another institution.  Either way Ex-Im assumes the risk that other banks won’t.

Not everyone is a big fan of this program though.  Although traditionally supported within the aisles of Congress, many Republicans are taking a second look at whether or not this bank still needs to be around.  And the loudest critics are  other companies that don’t get to benefit, or are hurt, by the bank’s programs.  Delta Airlines is one of the largest critics of the bank.  They claim that Ex-Im offers too many loans and guarantees for Boeing, which makes airplanes.  A full 45% of their loans and guarantees go to the Air Transportation industry and Delta claims that’s pretty much just Boeing.

Delta’s complaint is that Ex-Im isn’t just financing deals no one else would offer.  They’re actually offering below-market rates which effectively means foreign airlines are able to buy Boeing for less cost than a domestic airline could.  This could conceivably support the jobs at Boeing while costing jobs at Delta.

Delta has been pretty loud about their issues with Ex-Im.  To what degree their claims are true will require more investigation into the bank’s practices.  To many in Congress Ex-Im is starting to feel like government meddling in activities that could be handled within the private sector.  The bank’s charter ends in September and must be renewed in order to keep going.  We shall find out soon enough the future of the Export-Import Bank.

Be Sociable, Share!
categories: banking, business, government