Export-Import Bank reopens but is hamstrung by lack of board members
WASHINGTON — Combustion Associates Inc. needed assistance from the Export-Import Bank to secure a multimillion-dollar contract to build a power plant in Nigeria.
But a political dispute forced the 81-year-old federal agency to close in July. And that left the small Corona energy firm’s president, Kusum Kavia, and her employees scrambling to save the project until a bipartisan push allowed the bank to open its doors again this month.
Kavia said she searched in vain for private banks to provide the necessary credit guarantees. The firm’s employees held weekly conference calls with the unnamed client and flew to Nigeria three times. And in an expensive gamble, Combustion Associates spent $250,000 on preliminary engineering work for the project
“We knew that every day that passed, the risk was rising, we may not see the fruits of our labor,” Kavia said.
Now, after Congress reauthorized the bank for nearly four years, Kavia and other business owners are breathing a sigh of relief. Instead of worrying about the bank’s fate, they’re trying to recover lost or endangered business while the agency ramps up its operations.
“The client has indicated they’d like to sign the contract by the end of this month,” Kavia said. “We’re optimistic and we’re engaged.”
The bank’s online application system was working again last week. But politics continued to pose problems for Combustion Associates and some other companies because transactions of more than $10 million can’t be approved until the Republican-controlled Senate advances a stalled nomination to the bank’s board.
Created during the Great Depression to boost the economy, the bank roused little attention for decades. It provides loans to foreign buyers and other assistance to help U.S. companies sell their products abroad. Dozens of other countries — including China, Germany and Brazil — have similar agencies to boost their exports.
Last year the bank provided $20.5 billion to finance $27.5 billion in exports. Taxpayers provide no money to the bank, which is funded by interest and fees and sent $675 million in profits to the Treasury last year.
The government is on the hook for any losses the bank can’t cover on about $112 billion in outstanding assistance. The bank assists with less than 2% of the nation’s $2.4 trillion in exports. But supporters said the aid is crucial for deals in developing nations and some foreign projects that require government-backed export assistance.
In recent years, critics have called the Export-Import Bank’s assistance corporate welfare because much of it benefits large exporters, such as Boeing Co. and General Electric Co.
Conservatives targeted the bank, and House Republican leaders prevented a vote to reauthorize its charter, which expired June 30. That meant the bank couldn’t provide any new assistance, leaving about 200 pending deals worth $9 billion twisting in the wind.
In the following weeks, Boeing announced layoffs at its Southern California-based satellite division after a customer could not get Export-Import Bank financing and canceled an order. And GE unveiled plans to shift about 850 jobs from the U.S. to other countries to take advantage of export assistance available for products produced there.
Bank supporters — including President Obama, congressional Democrats, business-friendly Republicans and trade groups — didn’t give up. They forced a House vote by using a rarely successful discharge petition. The bank’s reauthorization, with some reforms to address criticisms, was included in a highway spending bill that Obama signed into law Dec. 4.
“It’s a huge victory for the exporters and the American workers,” said Don Nelson, chief executive of ProGauge Technologies Inc. of Bakersfield, which makes oil industry equipment.
The bank’s closure, on top of the steep decline in oil prices worldwide, led the company to whittle its workforce to 28 from 70 during the last six months.
Although exports account for about 70% of ProGauge’s business, Nelson said he stopped looking for new sales abroad.
“We really didn’t want to spend a lot of money flying around the world trying to find projects if we didn’t have the financing capacity to do them,” he said. “Now we’re going to have to go back out there and try to find work again.”
Nelson and Kavia serve on the bank’s unpaid advisory committee.
Boeing, the nation’s largest exporter and a leading bank supporter, didn’t lose any airline orders, spokesman Tim Neale said. But if the bank had not reopened, it could have been a problem because airlines in developing countries often require government-backed export assistance to purchase planes, he said.
Layoffs in Boeing’s satellite division were caused in part by the cancellation of an order related to the bank’s closure, but also because of other factors, such as a drop in U.S. government defense spending, said Linda Taira, a spokeswoman for the division. The company’s total California workforce was 15,911 at the end of November, down from 16,857 in June.
But all systems are not go for the bank.
Boeing and other exporters are concerned that the bank’s five-member board has just two members. It needs at least three to approve large transactions.
In March, Obama renominated board member Patricia M. Loui-Schmicker, whose term has expired. But Senate Banking Committee Chairman Richard Shelby (R-Ala.), who opposed the bank reauthorization, said recently her nomination is a lower priority than others pending for the Federal Reserve and Securities and Exchange Commission.
Bank supporters hope the strong bipartisan reauthorization in Congress will push the Senate to act soon.
Combustion Associates’ Nigerian project would need board approval, Kavia said. She’s eager to secure the deal because it would spur 20 more hires at the 47-employee company.
“We froze our plan to hire more because there was just so much uncertainty,” she said.