Missouri exporters could lose loan lifeline
Posted on July 22, 2014 17:30 pm CDT
by Deirdre Shesgreen
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WASHINGTON – In 2011, David Bakare found himself scrambling to finance a $1.2 million deal that his company — Springfield's Executive Coach Builders Inc. — had made with a Chinese firm seeking to purchase a fleet of its high-end custom vehicles.
After local and national banks turned down his loan requests, Bakare was about to lay off workers and tell the buyer he couldn't deliver when someone told him to check with the Export-Import Bank, an obscure federal agency that helps U.S. companies finance exports. He applied for a loan, was approved, and delivered on the contract.
"Without the Export-Import Bank . . . we probably wouldn't be in business today," said Bakare, president and owner of Executive Coach Builder, which makes luxury limousines, SUVs and buses. Bakare said he now turns to the bank to finance about 40 percent of the company's business.
It's no wonder, then, that Bakare is alarmed about the brewing debate in Congress over whether to shutter the 80-year-old institution, known the Ex-Im Bank.
The bank's congressionally approved charter expires on Sept. 30. And a faction of tea party-backed House Republicans want to close the institution, arguing that it's a form of "corporate welfare" that interferes with the free market. They note that some of the bank's clients include politically connected corporate giants like aircraft maker Boeing Corp.
Critics also pounced on recent revelations that four Ex-Im Bank employees were suspended or fired for allegedly accepting gifts and kickbacks and for steering contracts to favored companies.
Taxpayers for Commonsense, a fiscal watchdog group, says "the Export-Import bank is like your appendix — if it ever had a legitimate use it has long disappeared."
The bank was supposed to "fill a void by providing financing for worthy ventures that couldn't get private backing," the group says in a missive urging Congress to kill the institution. "In reality, it became a favor-factory for politically well-connected corporations trolling for corporate welfare."
Congressional Democrats are pushing to keep the Ex-Im Bank alive, and GOP-leaning business groups like the U.S. Chamber of Commerce and the National Association of Manufacturing are lobbying hard for reauthorization.
Republicans who support the bank also are speaking up. In a June 23 letter to House GOP leaders, 41 House Republicans — including Reps. Billy Long of Springfield and Vicky Hartzler of Harrisonville — called for a multi-year reauthorization, saying it would provide "certainty and stability for U.S. manufacturers and exporters of all sizes."
In a statement, Long said the bank "levels the playing field against heavily subsidized foreign companies which win export business away from American businesses."
Sen. Roy Blunt, R-Mo., echoed that argument, noting, for example, a major Boeing competitor, Airbus, receives huge subsidies from European governments. Blunt also noted that the bank has a good financial track record.
"People pay the loans back in almost all instances," he said. "This is not a bank that has significant financial problems."
Ex-Im provides U.S. exporters and farmers with billions of dollars in financing to sell their products to foreign buyers. It also provides credit insurance and loans to overseas buyers of U.S.-made goods and crops. Ex-Im's $140 billion lending cap and its charter must be renewed by Congress by the end of September if the institution is to survive.
Congressional supporters say the bank's assistance is critical to Missouri's economy and has helped American firms export $234 billion worth of products since 2007. They also note that Ex-Im Bank costs U.S. taxpayers very little because it supports itself through interest payments and fees.
Executive Coach Builders is one of 96 Missouri businesses and farms — including five in the Springfield area — that have sought the bank's help over the past seven years.
Bakare says his company simply cannot get loans from American banks for overseas sales — at least not on reasonable terms. Take the case of the $1.2 million contract his firm won in 2011 from the Chinese buyer.
"We went to our own local bank, we went to national banks, (and) we called bankers in New York," Bakare recounted. They all turned him down except a Wall Street institution, which said it would lend him the money but charge 20 percent interest.
"We don't even make that kind of profit," Bakare said.
The Springfield businessman said he's now working on securing Export-Import Bank financing for a $12 million contract with another Chinese buyer.
"If the Ex-Im Bank goes away today, so does that $12 million deal," he said.
There's no question the institution's fate remains in doubt, because the tea party faction has a lot of clout in the GOP-controlled House.
A case in point: Incoming House Majority Leader Kevin McCarthy, R-Calif., recently said he would oppose renewing the bank's charter, even though he voted to reauthorize the bank in the 2012.
McCarthy's comments came after the current No. 2 House Republican, Majority Leader and Virginia Republican Eric Cantor, was defeated by a little-known tea party candidate in the GOP primary. Cantor was instrumental in securing the two-year Ex-Im Bank reauthorization in 2012 and worked to broaden support for immigration reform among House Republicans.
House Speaker John Boehner, R-Ohio, who has also supported the Ex-Im Bank in the past, said last month that the institution's operations merit fresh congressional scrutiny.
"There's a big debate going on in our conference, and we're just going to have to sort our way through this," he told reporters at a June 25 news conference.
He declined to say whether he supports reauthorizing the bank. "Laying my cards on the table tilts the balance. I don't want to do that," Boehner said. "I want to get our members to a place where they're comfortable."
Bakare says he's puzzled by the debate. He can't understand how anyone thinks the loans he gets from the bank are a form of corporate welfare. If Congress does away with the bank, he said, it won't hurt big companies like Boeing or General Electric, but it could be devastating to smaller firms like his.
"Those big corporations ... they'll go to Wall Street or elsewhere" for financing, he said. "But little guys like us, where are we going to go?"
Reporter Deirdre Shesgreen writes for the News-Leader from Gannett's bureau in Washington, D.C. Gannett Washington Bureau reporters Raju Chebium and Christopher Doering contributed to this story.
Missouri businesses and farms that rely on Ex-Im Bank
Springfield area businesses and farms that rely on Ex-Im Bank
Amount of product Ex-Im Bank has help American firms export since 2007
House Republicans calling for a multi-year reauthorization