The Ex-Im Bank is supposed to aid the export of American
goods and services by providing loans to companies who can not or are not
willing to afford the fees and political risks inherent in these transactions.
It has been a self sustaining federal government agency since 1945. It is
regulated by the Congress of the United States.
Any company that wished to secure a loan submits an
application and it goes through an approval process.
The specific issue that aviation companies have with the
Bank is that they are not supposed to favor certain companies. In order for
them to be fair, a mandate has been set for them to offer 20% of their loans to
small businesses. This may sound like a viable plan, but heres the kicker, They
have largely supported Boeing and Enron. In 2007 -2008, 65% of their loan
guarantees went to companies purchasing Boeing aircraft. In 2012, 82% of their
guarantees went to Boeing customers.
I do not particularly care who the bank gives money to, as
long as they do not have a high default rate which affects me as a taxpayer. It
unnerves me that this is a governmental agency. It needs to be a private agency
where ultimately I am not paying the salaries and it is not wasting the time of
my civil servants who could be processing more pressing matters for the United
States. They need to let it be privately owned and run, a regular business with
no bail out potential.
In the revitalization agreement that Obama signed, it has
negotiations. In its second set of negotiations , it aims to reduce and
eventually eliminate export credit financing for all aircraft covered by the
2007 sector. The link for these aircraft describes what this specifically
means. I feel they are finding their own temporary solutions to quell the anger in the aviation industry, but feel this is only a temporary fix for a permanent problem, the bank needs to be private.
Good point about a high default rate effecting the taxpayer. I wonder what the default rate is for the bank? Something to look up...
ReplyDeleteI personally don't get the issue with Boeing being largely supported. Airbus is really the only other manufacturer of wide-body aircraft in the US, and they haven't had any aircraft to compete with Boeing in the market. Last year when they introduced the A350, which didn't have its first flight until May, they finally had a real competitor for the market. Of course the numbers say Boeing is favored, they had the best wide-body planes on the market. If no one orders planes from Airbus, its pretty had to offer them financing. I would be interested to see stats in a couple of years once the A350 has time to gain some traction. Then we could truly see if its favoritism...
ReplyDeleteI do believe the Ex-Im bank has a significant role in the US and global economy, and should be a public organization. It is not private because firms are unwilling to lend money to foreign companies with less than stellar credit. By providing credit, the Ex-Im is able to get more US made good in the hands of other countries. I do agree with you that if the tax payers money is at risk we should not offer the program, however, the average default rate is only 1.5%. There is also substantial abuse when it comes to aircraft, which you alluded to in the link provided.
ReplyDeleteYou make a very good point about the Ex-im bank using taxpayer money. I think that if it were a private industry however, they would not have the incentive to offer financing to foreign air carriers to provide business to Boeing.
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