WASHINGTON (Reuters) - U.S. exporters facing tight credit markets for overseas sales can plan with more certainty after President Barack Obama signed legislation on Wednesday to renew the U.S. Export-Import Bank’s charter one day before it expired, the bank’s president said.
“This just takes away a big cloud of doubt for a lot of American businesses,” Ex-Im Bank President Fred Hochberg said in an interview, adding that the bank’s board of directors will be considering “north of $6.5 billion” of financing deals on Wednesday and Thursday to support U.S. exports.
With the bank’s previous charter set to expire on Thursday, Hochberg joked that Obama’s signing of the bill passed by Congress this month with broad bipartisan support was a “just-in-time reauthorization” of the nearly 80-year-old government-run bank.
The legislation, which Obama said would help the United States meet his goal of doubling exports, extends the bank’s charter through September 2014 and gradually raises the bank’s lending cap to $140 billion over the next 16 months, from $100 billion currently, assuming default rates remain low.
“As long as our global competitors are providing financing for their exports, we’ve got to do the same. So I‘m glad that Congress got this done,” Obama said before signing the bill.
The bank provided a record $32.7 billion in direct loans and other financing assistance in the 2011 budget year, as other sources of trade finance remained tight.
Republicans noted that Obama, while running for president in 2008, called the bank “little more than a fund for corporate welfare” that should be cut back rather than expanded.
“Goes to show you, it’s more rhetoric and less principle when Obama is on the stump,” Kirsten Kukowski, press secretary for the Republican National Committee, said in a note to reporters.
What is usually a routine effort to reauthorize the bank’s charter became politically charged this time around after many conservative Republicans questioned whether the government should be involved in helping financing exports.
But the bank’s defenders said it would be folly for the United States to “unilaterally disarm” when other countries aggressively use government financing to boost exports.
“It’s not just China. It’s China, it’s Brazil, it’s Germany, Japan, Korea. Many have a very robust approach toward supporting their exports and part of that includes their export credit banks,” Hochberg said.
The U.S. Ex-Im Bank’s long list of clients include big U.S. companies such as Boeing Co(BA.N), Caterpillar Inc(CAT.N) and General Electric Co(GE.N), as well as thousands of small and medium-sized firms that rely on government loans or credit guarantees to make sales in markets where private financing is scarce.
The protracted debate over renewing the bank’s charter may have cost U.S. companies some sales as potential customers turned to other suppliers in a better position to arrange financing, but it is difficult to measure, Hochberg said.
At the same time, the bank has had to manage its loan portfolio to avoid breaching its lending cap.
Assuming all the deals before the board are approved on Wednesday and Thursday, the bank’s total portfolio would be “in the $99 billion range. So within $1 billion (of the current $100 billion cap). I don’t know how much closer I could have gotten,” Hochberg said with a laugh.
Ex-Im’s approval of a deal to help Boeing sell planes to Air India AIN.UL also threw a wrench into the congressional reauthorization process after Delta (DAL.N) complained it was unable, as a U.S. company, to get the same financing deals to buy aircraft that foreign competitors could.
Although European credit agencies help Airbus make sales, they stay clear of the U.S. market just as Ex-Im does not finance Boeing sales into the European Union.
Delta’s complaint led to language in the reauthorization bill requiring the United States to initiate negotiations with other major exporters aimed at eliminating government-subsidized financing of aircraft and other goods.
Hochberg said he expected the U.S. Treasury Department to make a good-faith effort to reach a deal, but personally has not seen much foreign appetite for the talks.
“That is generally not a view that I have seen shared by our counterparts around the world. They are, as we are, looking to create jobs and will do (that by) any means they can,” Hochberg said.
In addition, the fragile international banking system puts demands on “Ex-Im and other export credit agencies to be much more active than otherwise,” he said.
Still, it may be possible negotiate some additional curbs on the use of export credits, Hochberg said. The United States has traditionally favored a more restrained approach to government financing than other countries have, he said.
Editing by Mohammad Zargham and Eric Walsh