Ex-Im Bank Has Record Loss in Year : Plans to Cut Rates, Ease Requirements to Spur Borrowing

The Export-Import Bank, which helps to stimulate the sale of U.S. goods abroad through low-cost loans, lost a record $380 million in fiscal 1985 and expects a similar loss in the current fiscal year, bank officials said Tuesday.

But “the future should be much brighter,” bank President William Draper predicted at a news conference. Beginning next Wednesday, Draper said, the bank will cut interest rates and require smaller down payments in an effort to encourage borrowing. Currently, the Ex-Im Bank makes loans at interest rates above its costs, he said.

Bank officials said that, under the new program, a typical long-term loan of up to 10 years will carry an interest rate of 10.15%, down from the current 11.2%. In another change, the bank will offer loans covering 85% of the value of an export contract, requiring only a 15% cash payment by a foreign customer seeking to buy U.S. goods. The current limit is 65% of the contract’s value.

Avoid Rate-Cutting Wars

But at the same time, the United States and other major trading nations have agreed to avoid rate-cutting wars that could result in further losses at the bank. The new U.S. rates are as low as any other country will arbitrarily set them, Draper said, adding, “Nobody will go lower.”

The Ex-Im Bank, which has $1.1 billion available for loans this year, hopes for a substantial increase over last year’s lending total of $650 million.

Because the bank borrows its funds from the U.S. Treasury--and thus can charge less than a commercial institution--it allows American firms to offer low-cost financing to help sell their goods abroad.

Supporters of the bank contend that these low-cost loans are vital in helping U.S. companies make sales in a fiercely competitive world market. But critics, including some Reagan Administration officials, argue that the bank’s function can be handled equally well by private financial institutions.

Other nations also provide subsidized financing to help exports, and the Ex-Im Bank suffered large losses in recent years in its effort to be competitive. During the late 1970s and early 1980s, the bank was charging less for loans than its own cost of raising funds.

In 1982, the bank suffered its first loss--a $160-million deficit--and reported increasing losses each year, culminating in the record of $380 million for the fiscal year ended last Sept. 30. A similar loss is expected this year.