FirmGreen Inc., a Newport Beach renewable energy company, is preparing to start construction on a solar project in the Philippines. The job could have yielded about $180 million in contracts to U.S. manufacturers to supply most of the equipment — but the work most likely will be done in China instead.
When FirmGreen was unable to get the necessary loan guarantees from the U.S. Export-Import Bank, it had to seek them from China’s version of the federal export-credit agency, Chief Executive Steve Wilburn said. And that financial assistance is available only if FirmGreen promises to manufacture the project’s equipment in China.
“I’m a patriot. I’m a former Marine, a 100% disabled Vietnam vet, and for me to have to go to China and other overseas sources for manufacturing goes against my grain,” Wilburn said. “But I have to survive as a businessman.”
Now exporters such as Wilburn, along with the U.S. Chamber of Commerce and other business groups, are urging President Trump to help fix the Ex-Im Bank — a move they said would boost the White House’s efforts to increase U.S. manufacturing jobs and reduce the nation’s trade deficit.
Two administration Cabinet secretaries have indicated they support the bank. But it’s unclear whether Trump will take action, adding to the uncertainty that has plagued the controversial agency in recent years.
Many conservatives would like to kill it altogether.
The bank, opened during the Great Depression, helps U.S. companies sell their products overseas by providing loan guarantees to foreign buyers and other assistance for sales of goods manufactured domestically. It has strong support from Democrats and business-friendly Republicans.
About 85 other countries have similar export-credit agencies. Such aid is crucial for projects in developing nations, which often require government-backed financing and scare private banks because of fears of default.
But the Export-Import Bank has been hobbled for more than a year by board vacancies that prevent it from approving financial assistance of more than $10 million. That means FirmGreen hasn’t been able to get financing for its Philippines project — and Wilburn said he can’t wait any longer.
In the 2016 fiscal year, the bank authorized just $5 billion in financing — a quarter of what it did in its last fully operational year in 2014 and the smallest amount in four decades.
The Trump administration has sent mixed messages on the bank, which many conservatives strongly dislike even though it costs the government no money and has generated a total profit of $3.8 billion for taxpayers since 2009.
Those opponents, including groups such as Heritage Action for America and the Club for Growth, say the bank’s assistance is corporate welfare that largely helps mega-companies such as Boeing. Co. and General Electric Co. that don’t need the aid.
The bank’s default rate is well below 1%. But conservatives worry because taxpayers are on the hook for any losses the bank can’t cover on about $87.2 billion in outstanding assistance.
House Republican leaders blocked the bank’s reauthorization in 2015, leading to its closure for five months. After supporters pushed through legislation authorizing the bank to operate until Sept. 30, 2019, a key Senate Republican committee chairman blocked confirmation of President Obama’s nominees to fill vacancies on the board.
The five-person board has only two members, one short of the quorum needed to approve assistance for larger projects. As a result, the bank said, 40 such projects with a total value of $30 billion are waiting for approval.
During the presidential campaign, Trump said he didn’t think the bank was needed.
“It’s sort of a featherbedding for politicians and others, and a few companies,” he told the conservative National Review in 2015. “And when you think about free enterprise, it’s really not free enterprise. I’d be against it.”
And the bank reportedly is on a hit list of programs that the White House budget office wants to eliminate in the upcoming federal budget. White House budget director Mick Mulvaney voted against the bank’s 2015 authorization when he served as a Republican House member from South Carolina.
The bank is funded by interest and fees on its aid, and it sent $284 million in profit to the Treasury last year. Although the bank receives no appropriations, lawmakers each year set the amount it can spend to pay salaries and other overhead.
But recently, Trump has appeared to do an about-face, signaling support for the bank.
Sen. Heidi Heitkamp (D-N.D.), a bank proponent, said Trump promised her after a Feb. 9 White House meeting that he would nominate a third board member.
“I specifically talked with the president about the need to get the Export-Import Bank up and running,” she said in a Senate speech a week later. “The great news is that President Trump agrees, and he informed me that we can in fact say he supports the Ex-Im Bank and that he would be nominating someone soon to serve on the Export-Import Bank.”
White House spokeswoman Natalie Strom said last week that she could provide no update on Trump’s plans for the bank.
The only action Trump has taken came last month, when he withdrew Obama’s January nomination of Democrat Claudia Slacik to fill one of the board’s vacancies. That could have indicated he doesn’t plan to fill the vacancies or simply that he wants to make his own nominations.
Two key Cabinet members, Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross, have publicly indicated support for the bank recently, although with changes to focus its aid on small businesses.
“Finance is clearly one of the mechanisms for international competition, so maybe there are some things at Ex-Im that could be fixed,” Ross told CNBC on March 3. “Maybe a different mechanism is needed, but we need something and want to help small businesses.”
Boeing argues that the assistance it receives is crucial as it competes to sell planes with Airbus Group, which gets export assistance from three European countries. Boeing receives more assistance from the Export-Import Bank than any other company — 44%, or $5.5 billion, of the bank’s 2015 authorizations — largely because its aircraft cost so much.
The bank’s limitations have “already resulted in the loss or significant delay of three satellite sales and is undermining our competitiveness in the commercial aircraft market,” Boeing spokeswoman Shannon David said.
Conservatives have derided the agency as “Boeing’s Bank.” But company executives say the export assistance flows down to 13,600 U.S. companies that supply parts for Boeing aircraft. In California alone, the company funneled about $6.8 billion to more than 2,800 suppliers and vendors in 2015.
Boeing hosted Trump last month at its North Charleston, S.C., factory for the unveiling of the latest version of its 787 Dreamliner.
“Our goal as a nation must be to rely less on imports and more on products made right here in the U.S.A.,” Trump told a crowd as he stood in front of the plane, which he called “an amazing piece of work.”
Boeing would not say whether Chief Executive Dennis Muilenburg lobbied Trump about the bank during the visit. But Muilenburg sounded optimistic during a question-and-answer session at an aviation summit hosted by the U.S. Chamber of Commerce in Washington on March 2.
“A couple of nominees and we’ll be back up and running, so I’m encouraged,” Muilenburg said. “I think the incoming administration’s very supportive and I think support on … [Capitol Hill] is very clear.”
The House easily approved the bank’s reauthorization, 313 to 118, in 2015 after Republican leaders allowed the vote. The Senate earlier that year voted 64-29 to reauthorize the bank. Obama nominations to the bank’s board were blocked from consideration by Sen. Richard Shelby (R-Ala.), a bank opponent who chaired the Senate Banking Committee.
Sen. Mike Crapo (R-Idaho) now chairs the committee, which must approve any bank nominations. Crapo voted against the bank’s 2015 authorization and has given no indication of how he might handle Trump nominees. But bank supporters are hopeful he would not block consideration.
Lauren Wilk, director of trade facilitation for the National Assn. of Manufacturers, said that she is optimistic the bank will be funded in Trump’s budget and that he will nominate new board members soon.
“I think it really aligns well with the priorities he’s outlined,” she said of Trump.
Richard Rogovin, chairman and general counsel for U.S. Bridge, of Cambridge, Ohio, voted for Trump in November and said the bank’s mission is “tailor-made” for the president’s push for more manufacturing jobs.
His company, which engineers and manufactures steel bridges, has a pending $20-million contract for 25 bridges in a West African country he declined to name. Because of Ex-Im Bank’s limitations, he said he can get export assistance for only half of the project.
The deal could be in jeopardy if the bank isn’t fully functional soon, Rogovin said.
“We put a lot of time and money into this, and we’re doing exactly what the government says they want to do, which is increase exports,” Rogovin said. “But we’re doing it with one hand tied behind our backs.”
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