Shutdown of U.S. Ex-Im Bank Puts Companies in a Financing Bind

Ethiopian Airlines had to scramble at the last minute this summer when it needed to pay for a plane it ordered from Boeing Co. MMBAMM years ago.

The East African carrier got the aircraft last month but, instead of owning it, the airline is leasing the plane from a bank, said Chief Executive Tewolde Gebremariam. It couldn’t secure a loan for the purchase because it lacked a financing guarantee from the U.S. Export-Import Bank.Amid a clash over spending priorities, congressional Republicans effectively shut down the U.S. Ex-Im Bank by failing to reauthorize the agency at the end of June. That means the bank can’t make new loans or provide loan guarantees to foreign companies so they can buy American products and services. And American companies can’t renew their export-credit insurance policies.

The shutdown was a blow to many companies in the U.S. and abroad that are fighting for revenue in a sluggish global economy. Many foreign companies like Ethiopian Airlines are looking to do business with trusted American suppliers, while U.S. companies are searching abroad for new customers.

A strong dollar and weaker growth hamper those efforts. U.S. exports of goods and services were down 3.5% from a year earlier in the first seven months of 2015. Exports fell 3.2% in August, according to the Commerce Department.Declining exports, combined with a lack of U.S. Ex-Im Bank funding, is “a double-whammy,” said David Ickert, finance chief of Air Tractor Inc., which makes small aircraft for the agriculture industry. Softer prices for crops such as soybeans have growers in places like Brazil and Argentina ordering less equipment, he said.Air Tractor, based in Olney, Texas, typically uses export-credit insurance from the U.S. Ex-Im Bank. Foreign customers typically account for over half of the company’s sales, but Mr. Ickert expects that figure to drop to 30% this year. “There are definitely some multiple headwinds we’re facing right now,” he said.

Many foreign companies say they can’t secure financing from commercial banks without some kind of government-backed financing or guarantee, which most developed countries offer through their own Ex-Im banks.Ethiopian Airlines’s Mr. Gebremariam said he hopes to buy more than two dozen planes from Boeing in coming years, but will consider going to European rival Airbus Group SE if the U.S. Ex-Im Bank stays out of business.“There’s definitely an impact on our expansion and growth,” he said. “Some economies in Africa are considered high risk, so banks wouldn’t be able to finance us directly without Ex-Im backing.”

In a letter sent to Boeing officials last week, Comair Ltd., an aviation company based in South Africa, said a continued lack of U.S. Ex-Im Bank support would force the airline to borrow in foreign currency. But doing so, given the volatility of its local currency, the rand, would “expose Comair to too great an exchange-rate risk on its balance sheet,” said CEO Erik Venter.Boeing said such sentiments reflect private conversations it has been having with customers for months. “They want to keep buying American, but the uncertainty over the future of the Export-Import Bank is forcing them to consider other options,” said a company spokesman. Boeing, a strong proponent and major beneficiary of the bank, expects it to reopen. But an extended shutdown would prompt Boeing to consider moving work offshore to compete for contracts that require Ex-Im backing, Chairman Jim McNerney said last month.General Electric Co. MMGEMM is already doing so, to make it easier for its customers to use Ex-Im funding from other countries, such as Canada, France and Hungary. In Hungary, where GE has manufacturing facilities, the export-import bank is providing a loan to Bresson AS Nigeria Ltd., a power-generation company, to buy GE turbines for new plants in Nigeria, said Barakat Balmelli, a financial adviser to Bresson on the deal.

Hungarian officials are looking to increase their level of new export-import-related lending to €1 billion, or about $1.1 billion, by the end of the year. Last month the government expanded agreements between its Ex-Im Bank and local Hungarian commercial banks.

Ms. Balmelli said Bresson chose to work with Hungary’s Ex-Im Bank partly because of the U.S. shutdown. “You have other countries changing their policies to accommodate these new business opportunities while the U.S. is just fiddling about,” she said.61ae8-exim-bank1

Last week, the U.S. Ex-Im Bank’s Republican supporters moved to bring the bill reauthorizing the bank to a vote. The procedure would force a vote on the bill, which is backed by nearly all Democrats and many Republicans, later this month.

Meanwhile, small U.S. companies, which can’t relocate or move jobs overseas, are feeling the brunt of the bank’s closure. W.S. Darley & Co., a maker of firetrucks and related gear, said the shutdown already has cost it a contract worth about $7 million.

The customer’s loan didn’t get final Ex-Im Bank approval, and since W.S. Darley’s contract was contingent on that financing, “that sale could just be gone,” said Chief Operating Officer Peter Darley.

With projects falling out of the pipeline, employees at the Itasca, Ill., company are worried about their jobs, he said. “It hurts us. We had a lot of good momentum,” he said, referring to building firetrucks for foreign cities and towns.

Featured Image -- 2741“We might be losing projects we’re not aware of,” he said. “If a buyer knows that Americans don’t have an open Ex-Im, they might not even knock on the door, or invite us to the bid table.”

Write to Kimberly S. Johnson at

U.S. Export Weakness Hampers Growth

Strong dollar and global economic strains undermine foreign trade in goods and services

Hopes for an American export boom are wilting under the weight of a strong dollar and global economic strains.

U.S. exports are on track to decline this year for the first time since the financial crisis, undermining a national push to boost shipments abroad. Through July, exports of goods and services were down 3.5% compared with the same period last year. New data released Tuesday by the Commerce Department showed that exports of U.S. goods sank a seasonally adjusted 3.2% in August to their lowest level in years.
The weak trade performance is restraining overall economic growth, a sign of how troubles in China and other major economies are dinging the U.S. economy.

“Foreign demand remains the weakest part of the economy,” said Jim O’Sullivan, chief U.S. economist at consulting firm High Frequency Economics.
It didn’t seem that way in 2010, when President Barack Obama set a goal of doubling exports over five years. Some big cities took up the challenge, including Portland, Ore.

Facing a battered economy at home, Vanessa Keitges, president of Portland-based Columbia Green Technologies, lined up sales in Belgium and New Zealand. In Canada, she chased public-building projects and Wal-Marts. Within three years, one-quarter of the green-roofing company’s sales were outside the U.S.

But that proved to be a high-water mark for the company’s foreign ambitions. Ms. Keitges is now focusing on the strengthening domestic market for the company’s rooftop planters as weak growth abroad tempers demand and a strong dollar creates pricing problems.

Exports seemed a golden opportunity as Portland and the rest of the nation emerged from the 2007-09 recession. Foreign sales were a major contributor to U.S. economic growth in 2010 and 2011, outstripping past recoveries. Political leaders hoped selling goods and services abroad would offer a sustained boost to the job market at home.

But the dream of an export boom has faded.

As unemployment has declined, American consumers have reasserted their dominant role in driving economic growth. And a strong dollar and weakness overseas have helped turn international trade into a drain on overall economic growth in four of the past six quarters.

The Federal Reserve worries exports will be a persistent drag on the broader economy going forward. Fed Vice Chairman Stanley Fischer in August said it was “plausible to think that the rise in the dollar over the past year would restrain growth…through 2016 and perhaps into 2017.” If the Fed begins to raise short-term interest rates later this year, that could provide new fuel to push the dollar’s value even higher.

Exports of goods and services grew 80% from 2003 to 2008, but then expanded only 48% from 2009 to 2014, according to Census Bureau data.

A Commerce Department official described President Obama’s export-growth initiative as “catalytic and a success,” driving exports “despite strong global economic headwinds and macroeconomic factors outside our control.”

The administration is looking to spur trade growth through agreements such as the Trans-Pacific Partnership. Senior officials from around the world are meeting in Atlanta, trying to complete the expansive trade deal after talks stalled earlier this year.

It isn’t just the U.S. where exports have been a disappointment in recent years. Globally, growth in trade volume is set to trail the pace of economic growth for the third year in a row, and trade growth has been averaging just half its pre-financial crisis pace. In the immediate aftermath of the recession, confronted by weakness in the domestic economy, U.S. policy makers saw opportunity in global markets.

Following Mr. Obama’s lead, the Portland metro region in 2012 set its own goal to double its exports in five years. “This is how we fight for jobs in the next economy,” then-Portland Mayor Sam Adams declared. In the past year, Portland has quietly shelved that aim. The value of Portland-area exports actually declined slightly between 2012 and 2014, according to tallies from the Commerce Department and the Brookings Institution, a Washington think tank.

After Portland set its goal, economic conditions started to shift. The value of major currencies declined relative to the dollar, making American-made goods more expensive for foreign customers. Growth slowed in key markets such as China and Canada. At home, the U.S. economy regained its footing.

Over the past year, Portland first was caught up in a labor dispute that caused gridlock at ports along the West Coast, then it lost regular ocean-bound container service. Local officials also came to realize export growth depended overwhelmingly on chip maker Intel Corp., MMINTCMM which has extensive facilities in the Portland suburbs.

Exports of computer and electronic products helped drive a more than doubling of the metro area’s exports between 2003 and 2008, according to Brookings. But Intel has suffered from a slowdown in demand for personal computers.Measurable gains from smaller companies are likely to take years to materialize. Federal estimates show only about 5% of U.S. firms export, with nearly two-thirds of the annual value concentrated among 500 companies.

Hand-tool maker Astro Tool Corp. in the Portland suburb of Beaverton has seen many of the challenges up close. Over the past year, general manager Mike Barnes dedicated half his time to chasing foreign customers, while still overseeing day-to-day operations of the 30-employee company. He faced a steep learning curve. “We, A, didn’t know how to do it, and B, we didn’t have the money to do it,” he said. “You can’t just go to the Internet and say, ‘Where do we find foreign opportunities?’ ”

He eventually landed a small grant to hire a consultant and tapped connections for advice. The share of Astro’s business coming from overseas climbed over the past year to 25% from 15%. But he also watched at a trade show as a foreign competitor sold a cheap, knockoff version of a product similar to his.

The Portland region is trying to court foreign companies that already incorporate exports into their business model. But those companies aren’t immune to global pressures.

Two years ago, exports were nearing 70% of the sales of Shimadzu USA Manufacturing Inc., a subsidiary of the Japanese maker of instruments to test everything from wine fermentation to the urine of Olympic athletes. Now the plant in an industrial park at the far southern edge of metro Portland is getting closer to 50-50 as domestic growth outpaces sales gains abroad.

Foreign customers “can get it cheaper from Japan now than they can from the United States. We’re not as competitive as we were,” said Joe Shaddix, vice president of operations and manager of the factory, referencing the strong dollar.

At the same time, domestic demand for test instruments is developing among marijuana growers as states move to legalize the drug. The factory has expanded what it can make, becoming U.S. Food and Drug Administration registered.

Mr. Adams, the former mayor, remains a strong advocate for the goal of doubling exports—if not by 2017, then eventually. He worries the Portland economy isn’t keeping up with the quality of life that draws twenty- and thirty-somethings at an enviable rate.

“Obviously the timeline will move, but keeping that goal front and center is key,” he said.
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Write to Mark Peters at and Ben Leubsdorf at

Post-Boehner, risk of December government shutdown and Export-Import Bank closure is high

Originally posted on Fluent In Foreign Business:

On Friday, House Speaker John Boehner announced he will resign at the end of October.

Photo: Associated Press The Export-Import Bank building in Washington D.C.

With John Boehner stepping away from the negotiating table, the chances increase for a December government shutdown and a permanent shuttering of the Export-Import Bank.

Other question marks: Will Congress and the White House be able to agree on new federal borrowing authority and revise the way the U.S. pays for the upkeep of roads and bridges.

The immediate shutdown threat may have passed, since Mr. Boehner, a core group of House Republicans, House Democrats and a Senate majority appear to be in agreement on a stopgap bill to carry the government from Oct. 1 through Dec. 11.

Mr. Boehner told reporters he plans to get as much done as he can before he leaves. President Barack Obama said he…

View original 540 more words

Post-Boehner, risk of December government shutdown and Export-Import Bank closure is high

On Friday, House Speaker John Boehner announced he will resign at the end of October.

Photo: Associated Press The Export-Import Bank building in Washington D.C.

With John Boehner stepping away from the negotiating table, the chances increase for a December government shutdown and a permanent shuttering of the Export-Import Bank.

Other question marks: Will Congress and the White House be able to agree on new federal borrowing authority and revise the way the U.S. pays for the upkeep of roads and bridges.

The immediate shutdown threat may have passed, since Mr. Boehner, a core group of House Republicans, House Democrats and a Senate majority appear to be in agreement on a stopgap bill to carry the government from Oct. 1 through Dec. 11.

Mr. Boehner told reporters he plans to get as much done as he can before he leaves. President Barack Obama said he hoped Mr. Boehner would try to get as much done as possible in the next month and pledged to help him do that.

What happens to the government in December will be determined by Mr. Boehner’s successor.

If House Republicans choose a new speaker who favors more confrontations with the White House, the outcome could be either a partial government shutdown or a full-year stopgap spending bill—an option that the Defense Department, in particular, opposes unless the measure is written to allow new programs to begin.

Whoever gets the speaker’s gavel may feel obliged to promise the conservative wing of the party a willingness to go all the way to a shutdown to achieve goals such as ending funding for Planned Parenthood.

For years, there has been speculation that Mr. Boehner would strike a grand compromise with Obama and the Democrats and then resign. The first part of that—a push for a grand bargain on tax and entitlement spending, as he tried to negotiate in 2011—is probably out of reach given the proximity of the next elections.

More in realm of possibility before Boehner leaves is a smaller agreement, perhaps on the debt ceiling and reviving the Export-Import Bank. If not, all bets are off.

Here are some of the deadlines to watch during the House leadership transition:

EX-IM: The charter for the Export-Import Bank of the U.S. was allowed to lapse on June 30. Some Republicans and small- government groups oppose reauthorization, saying Ex-Im benefits only a few large corporations and that its activities should be left to the private sector. Boehner backed the Ex-Im’s renewal.

Two key decision-makers, Majority Leader Kevin McCarthy and Financial Services Chairman Jeb Hensarling, are Ex-Im opponents.

OPIC: The Overseas Private Investment Corp.’s authorization runs through Sept. 30. Republicans have been divided over whether the loan-guarantee agency should continue. Last year, 116 House Republicans voted against reauthorization.

DEBT LIMIT: The Treasury Department has been using so- called “extraordinary measures” to juggle the government’s cash flow. Secretary Jacob Lew has said that borrowing authority needs to be raised before late October or else the U.S. could default on its obligations.

In 2011, the government was pushed to the brink of default in a dispute over a debt-limit extension.

HIGHWAY BILL: Highway, transit and road safety programs are currently authorized only through Oct. 29. Lack of action could cause programs financed through the the Highway Trust Fund to shut down, partially or completely. The chief complication is that the fuel taxes that provide the bulk of Highway Trust Fund revenue haven’t been increased in more than two decades and haven’t kept up with growing infrastructure needs, better fuel efficiency and changing driving patterns.

Agreement on sustainable funding streams—such as shifting to a vehicle-miles-traveled system—has been difficult, and leading House Republicans have discussed using corporate tax changes to fund a long-term bill, though so far no plan has been unveiled.

TAX BREAKS, NUTRITION: The race to be speaker — and a possibly more contentious battle for the majority leader spot — could determine the ability of Congress to renew dozens of tax breaks that expired at the end of 2014 and to come to a compromise on reauthorizing $30 billion in nutrition programs that expire Sept. 30.

Main Street awaits fate of Ex-Im Bank, key lender

Mary Howe, president of Howe Corp. in Chicago, relies on the Export-Import Bank of the United States for credit insurance.

Lawrence Collins
Mary Howe, president of Howe Corp. in Chicago, relies on the Export-Import Bank of the United States for credit insurance.

The fate of the Export-Import Bank of the United States, a key lender for many small companies that do business overseas, again hangs in the balance.

The bank’s fund runs out Sept. 30. While the bank’s charter technically expired June 30, it continues to service loans with terms of up to 18 years. Adding to the drama, the U.S. government could potentially shutdown Oct. 1 if a budget agreement is not reached. However, the bank’s reauthorization is not directly tied to the federal budget process.

Known as “Ex-Im” for short, the bank is a financial lifeline and safety net for many small businesses that export goods in foreign markets than can be risky. The bank provides loans and insurance to support exports. President Barack Obama has been a vocal supporter of renewing Ex-Im’s funding, calling the move a “no brainer” over the summer.

For small business owners such as Mary Howe, the potential closure could reduce her access to working capital. Howe’s family business, Howe Corp. in Chicago, exports up to 40 percent of its industrial refrigeration equipment to places including Central America and Canada.

And if the Ex-Im Bank’s funding isn’t renewed? “Our backup plan is to self-fund; it’s going to get tight,” Howe said.

Read MoreBattle lines drawn over Export-Import Bank renewal

The Senate voted in July to fund Ex-Im as part of a longer-term highway bill, which has since moved to the House for consideration.

The vote in the U.S. Senate on the bill was a strong signal of bipartisan support for the Ex-Im bank and “businesses and workers that we have empowered in the past to grow their exports,” the bank’s Chairman Fred P. Hochberg said in an email statement to CNBC. Ex-Im Bank has been funded for some 80 years.

Since Ex-Im’s charter expired in June, it has not been able to make or guarantee any new loans, or extend insurance, partly due to congressional disagreement over who receives funding from the bank. The financial institution did $20.5 billion in financing last year.

Ex-Im Bank’s small-business authorizations in fiscal year 2014 were more than $5 billion, as measured by total dollar volume, which is nearly 25 percent of the total-dollar volume of overall authorizations.

The bank approved more than 3,300 small-business authorizations, nearly 90 percent of the total number of Ex-Im Bank authorizations.

The remaining $15.5 billion supports exports at other big corporations—including General Electric, which announced last week it would move about 500 U.S. jobs overseas to avoid losing business to foreign competitors, due to uncertainty about the bank’s charter. GE says 400 of the 500 positions will now be based at its facility in France, dependent on the company’s winning bids. The additional 100 jobs currently are in Texas, but will move to Hungary and China.

“Our customers rely on export credit agencies, like U.S. Ex-Im, to finance their critical power projects,” said Jeff Connelly, vice president of supply chain at GE Power & Water, in prepared remarks.

But critics, including House Financial Services Committee Chair Jeb Hensarling, Republican of Texas, see the bank as a form of corporate welfare. “Most of this goes to very successful, well-heeled companies that don’t need the help in the first place,” Hensarling told CNBC over the summer.

Export-Import bank

Andrew Harrer | Bloomberg | Getty Images

Still, the future of the bank is a “huge issue” for small companies, according to Morrison Textile Machinery Co. in Fort Lawn, South Carolina. President Jay White says Ex-Im allows the company, which designs, manufactures and installs textile machinery globally, to insure its overseas business on a rolling basis.

“If I can’t get Ex-Im insurance, I am taking on credit risk myself—the profit on my job would be eaten up if I get commercial credit insurance,” White says. “This overseas credit support is very important to my business,” he says.

And while Ex-Im Bank’s charter technically has expired, it will remain operational through the end of the month and continues to service existing loans. The bank’s funding lapse coincides with a potential government shutdown if a congressional continuing resolution is not passed to keep the government operational.

Read MoreEntrepreneuers who do biz overseas await bank’s future

(Tea Party) Republican Job Killers and the Export-Import Bank

You know things are bad, when I have to cite a left leaning newspaper such as the NY Times, as an information source bashing Republican Party.  Yet, the author of the OP-ED below, does make some valid points.  Rather than go into additional explanations on this issue, I simply would like to pose a few questions to let the readers think and decide for themselves. These questions will address both pros and cons of the issue. Answers will be published in the next post.

  • There are overwhelming votes in both the House and the Senate to pass the Ex-Im reauthorization, yet a hand-full of congressmen from the Tea Party is blocking the reauthorization bill in the committee. What does this say about our Democratic process?
  • Whose interests are these Tea partiers serving?
  • Why can’t large companies such as Boeing and GE finance exports themselves rather than lose orders?
  • What would be an estimated annual impact of the Ex-Im shutdown?
  • Since US Ex-Im financing represents less than two percent of annual US exports, why do we care if the Bank goes away?

Republican Job Killers and the Export-Import Bank

Joe Nocera, NY Times OP-ED COLUMNIST

“At a time when we want to compete around the world, it is hard to believe what is happening in the U.S. Congress,” said Jeff Immelt, the chief executive of General Electric.

“The ultimate irony is that we are on the verge of an American manufacturing renaissance,” bemoaned Jim McNerney, the chairman of Boeing. “Yet this action is causing companies to start looking outside the U.S. instead.”

“People complain that the bank only helps big companies,” said Doug Oberhelman, the chairman and C.E.O. of Caterpillar. “A lot of our suppliers are small. They don’t export, but we do. And if we aren’t exporting, they aren’t selling to us.” He added, “I find it staggering that we would put highly paid export-oriented jobs at risk.”

What Oberhelman finds “staggering,” Immelt finds “hard to believe” and McNerney finds ironic is the refusal of Republican extremists — led by the House Financial Services Committee’s chairman, Jeb Hensarling — to allow a vote on the reauthorization of the Export-Import Bank of the United States, a vote that would pass in a landslide. The Ex-Im Bank, which insures and sometimes finances export sales, had to stop making deals at the end of June, when its reauthorization deadline came and went.

Although the Ex-Im Bank still exists, it has been reduced these days to managing its portfolio, rather than underwriting or insuring new deals. According to Boeing, its foreign rival Airbus, which can tap not one but three export credit agencies, is spreading the word to potential aircraft customers that Boeing can no longer compete when bids require sovereign insurance. That is hardly the only such example.

The damage this is doing to our economy is starting to become clear. In recent weeks, Boeing, America’s largest exporter in dollar volume, made two sobering announcements: first, that Asia Broadcast Satellite canceled an $85 million satellite contract expressly because there was no Ex-Im support. (Boeing is hoping to renegotiate.) More recently, Kacific, a Singapore-based satellite company, told Boeing not to bother bidding on a satellite contract, again because of a lack of Ex-Im financing.

As a result, McNerney told me, “layoffs in the hundreds” have taken place in Boeing’s satellite division.

This week, it was G.E.’s turn to make Ex-Im-related news. First, it said it would move 400 jobs to France to manufacture — and export — gas turbines, and 100 final assembly jobs to Hungary and China. Then it said it would create a new turboprop center in Europe that would employ up to 1,000 people. In both cases, G.E. said the moves would allow the company to take advantage of European export credit agencies.

When I spoke to Immelt, McNerney and Oberhelman, whose company also uses the agency, they all sounded astonished that this important tool, which they need to compete with companies abroad, was being taken away for purely ideological reasons.

“If no other country had export financing, that would be one thing,” said Immelt. “But that’s not where the world is. What you are really doing is helping Siemens and China Rail” — companies that rely heavily on their countries’ export financing.  Immelt told me that G.E. currently has $11 billion in potential deals that require export credit agency financing. That’s real money, even for General Electric.

McNerney pointed out that many big deals require export financing for the bid to even be considered. He also noted, ominously, that 10 to 15 percent of Boeing’s aircraft exports are dependent on Ex-Im support. Losing that business would be devastating for the company, and its employees.

When asked about the accusation from the right that the Ex-Im Bank is a classic case of government picking winners and losers, Oberhelman said that “if this doesn’t change, we’re all going to be losers.”

The anti-Ex-Im Bank faction is having a glorious time mocking the G.E. and Boeing announcements. A spokesman for Heritage Action for America, the conservative think tank leading the charge, described G.E.’s moves as “multinational crony capitalism.” Hensarling issued a statement claiming Boeing could finance the satellite deals itself to prevent layoffs; “it just chooses not to.”

And an unidentified financial services committee staffer told Politico that the loss of 500 G.E. jobs was a drop in the bucket for a company that employs 136,000 people in the U.S.

That heartless quote reminded me of an anecdote in “Confidence Men,” Ron Suskind’s book about the Obama administration’s financial team during the president’s first term. Some of Obama’s top advisers wanted to let Chrysler fail. But in a critical meeting, Ron Bloom, a former adviser to the United Steelworkers who was a member of Obama’s Auto Task Force, said, “Mr. President, these are the reasons we can’t kill this company. The damage to these communities and people will never be undone.”

Chrysler was ultimately saved because the president’s advisers suddenly understood that it was their role to save jobs, not to sacrifice them on the altar of economic purity. What will it take for the Republicans to come to the same realization.

GE to Move Turbine Jobs to Europe, China Due to EXIM Bank Closure

Originally posted on Fluent In Foreign Business:


General Electric, GE


General Electric Co (GE) said on Tuesday that it will move 500 U.S. power turbine manufacturing jobs to Europe and China because it can no longer access U.S. Export-Import Bank financing after Congress allowed the agency’s charter to lapse in June.

GE said that France’s COFACE export agency has agreed to support some of the industrial giant’s global power project bids with a new line of credit in exchange for moving production of 50-hertz heavy duty gas turbines to Belfort, France, along with 400 jobs. GE also said in a statement that 100 additional jobs will move from the United States to Hungary and China.

The company said it is now bidding on $11 billion worth of international power projects that require export credit agency financing, including some in Indonesia.

The U.S. jobs will be moved from facilities in South Carolina, New York, Texas and Maine…

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GE to Move Turbine Jobs to Europe, China Due to EXIM Bank Closure


General Electric, GE


General Electric Co (GE) said on Tuesday that it will move 500 U.S. power turbine manufacturing jobs to Europe and China because it can no longer access U.S. Export-Import Bank financing after Congress allowed the agency’s charter to lapse in June.

GE said that France’s COFACE export agency has agreed to support some of the industrial giant’s global power project bids with a new line of credit in exchange for moving production of 50-hertz heavy duty gas turbines to Belfort, France, along with 400 jobs. GE also said in a statement that 100 additional jobs will move from the United States to Hungary and China.

The company said it is now bidding on $11 billion worth of international power projects that require export credit agency financing, including some in Indonesia.

The U.S. jobs will be moved from facilities in South Carolina, New York, Texas and Maine, but no U.S. facility will close, a GE spokeswoman said.

GE Vice Chairman John Rice said the company would soon announce agreements with other foreign export credit agencies to finance GE products.

“If the EXIM bank were open, it would be business as usual,” GE Vice Chairman John Rice told Reuters in a telephone interview.

 Given the bitter fight in Congress over EXIM’s future, Rice said that GE cannot afford to wait and must make other long-term financing arrangements for large industrial projects.

“If EXIM isn’t going to happen, or it’s going to be a regular fight to be reauthorized, we’ve got to make other plans,” he said.

Conservative Republicans in Congress who say that EXIM represents “corporate welfare” and “crony capitalism” successfully blocked renewal of the 81-year-old export credit agency’s charter at the end of June.

EXIM supporters have thus far been unsuccessful in attaching renewal to other legislation, but new efforts are expected to be made this autumn as Congress considers government “must-pass” agency funding, a transportation bill and an increase in the federal debt limit.

GE last year vowed to add 1,000 jobs in France to gain the blessing of the French government for the U.S. conglomerate’s acquisition of the power business of France’s Alstom. GE won European regulatory approval for the deal last week, and expects it to close by the end of the year.

GE is also seeking to wring out $3 billion in cost savings as it combines with Alstom, including by reducing overlap and consolidating manufacturing operations.

In its statement, GE said the job move “reinforces the need for Congress to promptly reauthorize the U.S. Export-Import Bank.”

Aerospace giant Boeing Co (BA) has also said it was considering moving work overseas due to uncertainty over the future of the EXIM bank.

(Additional reporting by Lewis Krauskopf in New York; Editing by Eric Walsh)

Another Pot Calling the Kettle Black, and Damaging US Economy In The Process

Another little-known, but very important and effective federal agency is under attack by the tea party pit bulls serving the interests of their corporate masters. After trying to bring down US EXIM Bank, spending massive federal resources and creating a half a billion dollar hole in the US annual budget, these clowns (there is no other word to use here) are targeting OPIC – Overseas Private Investment Corporation – a federal trade and development agency.  This agency uses full backing of the US Government, not only to protect and finance  US investors investing into high-risk markets abroad from perils like expropriation, nationalization and currency inconvertibility, but also is completely self-funding and contributes billions to the US Treasury.

As someone who had over a decade of experience working closely with OPIC, I can certainly attest to the fact the it is one of the most professionally run agencies in the Government. It is small, lean and provides terrific tools to both small and large businesses, which are investing overseas. It runs microfinance investment, provides help in war-torn, or earthquake effected countries (Georgia, Haiti, Afghanistan, Ukraine are just some examples) and helps promote US economic and foreign policies by helping major US franchises including Marriott, Ritz Carlton etc. to set up their brands and improve their presence in far corners of the world.

It is very ironic, that people pointing the finger at these agencies, as being tools of corporate  welfare, are themselves instruments of corporate interests and cronyism. The junior who wrote the article below, is not only poorly informed about OPIC and its role in our country’s foreign policy, but is a glaring example of a patsy, whom certain US airlines and corporations run by two very wealthy brothers use to further their own interests at the expense of not only American taxpayers, but the entire US economy.

OPIC: Corporate Welfare by Any Other Name

The winds of change might finally be blowing in Washington. For the first time in 81 years taxpayers are no longer dolling out dollars on risky loans to subsidize big businesses and foreign corporations, thanks to the expiration of the controversial Export-Import Bank. While this represents a victory for the taxpayers over well-funded special interests, there remains an alphabet soup of government bureaucracies that continues to dispense taxpayer goodies to those with political connections and clout.

OPIC (Overseas Private Investment Corporation) despite what the name implies, is not private but rather a taxpayer-backed outfit that provides subsidies for American businesses who invest overseas. The government provides loan guarantees as well as direct loans to American companies in emerging markets. By doing so OPIC shifts the risk of these ventures off the companies and straight to the taxpayers. Sound familiar?

The bad news is that, like the Export-Import Bank, this creature of Washington has been around for decades and has survived by free riding on legislation with broad bipartisan support to escape scrutiny. The good news is that bringing previously unknown organs of the federal government out into the open has proven to be an effective way to make these outdated and unpopular agencies a thing of the past – something we have seen recently in the fight over the little-known Export-Import Bank.

Put another way, the more everyday Americans witness how their hard earned money is being spent by unaccountable bureaucrats in Washington, the louder the cries to Congress to let corporate welfare expire.

Some of the most egregious examples of OPIC funded projects include $50 million for a Ritz-Carlton luxury hotel in Istanbul, $150 million for Citibank to open up three overseas branches and even a loan that defaulted on an Enron operated power plant. Not exactly the best use of taxpayer dollars.

These sweetheart deals represent the worst of Washington, influential corporate interests finding obscure government agencies to pad their bottom line, while taxpayers assume the risks.

Fortunately, like the previously mentioned Export-Import Bank, OPIC’s authorization is set to expire in September. And like Ex-Im, lawmakers should take that opportunity to send this antiquated agency packing.

As we saw recently in the tug-of-war over the Export-Import bank, this will be an uphill battle, but it is a battle than can be won. A strong anti-cronyism movement across the country has buoyed the efforts of leaders committed to breaking up the cozy relationship between big business and big government that too often thrives in Washington. It is a chance to capitalize on the momentum of recent policy victories, and notch another win for taxpayers. Lawmakers should seize it.

As Milton Friedman wrote in 1996 “”I cannot see any redeeming aspect in the existence of OPIC. It is special interest legislation of the worst kind, legislation that makes the problem it is intended to deal with worse rather than better. …OPIC has no business existing.” It seems Washington might finally be catching up with Friedman’s wisdom, but now it’s time to follow through.

Businesses fume as Congress lets Export-Import Bank stay dead

“We’re at a loss how Congress can literally go on vacation and just say, ‘Good luck, guys.’”

Boeing President Jim McNerney is pictured. | Getty

That’s all a result of the demise of the Export-Import Bank, which is forcing companies large and small to ponder potentially wrenching changes as Congress prepares to leave town without acting on efforts to resurrect it. The August recess means that any rescue is at least a month away, if not longer, leaving export-dependent businesses to get by without the array of assistance the New Deal-era agency offers.

“We’re really frustrated,” said Tyler Schroeder, a financial analyst at the 265-employee company Air Tractor, which makes firefighting and agricultural aircraft and is based in the 3,000-person town of Olney, Texas. “We’re at a loss how Congress can literally go on vacation and just say, ‘Good luck, guys.’”

Gary Mendell, president of trade financier Meridian Finance Group, said export credit agencies in other countries are already taking advantage of Ex-Im’s expiration to lure away business from U.S. companies. “They’re gleeful about it, and I don’t blame them,” Mendell said. “Those foreign competitors are going to customers in other countries and saying, ‘Hey, you don’t know if your U.S. supplier is even going to be able to ship to you and give you the payment terms they’re promising in their quote, because look what’s happening with Ex-Im Bank.’”

Ex-Im’s federal authorization expired July 1, to the cheers of conservative lawmakers who view it as a tool for crony capitalism. Already, credit insurance policies are starting to run out for a number of the roughly 3,000 small businesses that rely on them to be able to export.

Still, some U.S. companies are continuing to compete for overseas bids that will ultimately require Ex-Im backing, in the hopes that the agency will be renewed before the deals fall through, National Association of Manufacturers Vice President Linda Dempsey said in an interview.

That revival won’t happen anytime soon, though. Ex-Im backers had been hoping that Congress would resurrect the bank as part of this Friday’s drop-dead deadline for extending the life of the Highway Trust Fund. But the House left town Wednesday for the August recess after passing a three-month highway extension that includes no rescue for the bank.

The fight is far from over, but lawmakers won’t be able to act on Ex-Im until September at the earliest, or possibly as late as December.

Some big companies may choose not to wait. Boeing Chairman Jim McNerney said during an appearance Wednesday that the giant plane manufacturer and defense contractor is considering moving parts of its operations to other countries, where they could take advantage of those nations’ equivalents to Ex-Im to continue selling products overseas.

“We’re actively considering now moving key pieces of our company to other countries, and we would’ve never considered that before this craziness on Ex-Im,” McNerney said.

McNerney added that he might have “made the wrong decision” years ago in trying to keep production in the U.S., given the newly uncertain politics surrounding export financing in Washington. “People just playing politics — they’re not connected to the real world anymore,” he said.

The Exporters for Ex-Im Coalition put out yet another plea for renewal this week, noting that deals approved only on July 27 for the past five years amounted to $30.2 million for 34 businesses — deals that could no longer happen today.

The agency’s supporters in Congress expressed frustration too. “What we’re asking for is a vote,” Rep. Denny Heck (D-Wash.) said during a Rules Committee markup Tuesday where an attempt to attach Ex-Im language to the transportation bill failed in an unusually close 6-7 vote. “Bad things will happen if we don’t get to this. It will start first with small businesses.”

Heck also argued that “two major manufacturers in this country” will move production offshore without the agency, the other being an apparent reference to General Electric.

But Rep. Jim Jordan (R-Ohio), a leading conservative critic of the bank, sees even a prolonged expiration for the bank as a victory.

“This is great news for families and taxpayers,” he told POLITICO in a statement. “Every day that goes by without the Ex-Im Bank being resurrected means it is more likely that it permanently ends. … This is the kind of example of good governance that I am excited to tell my constituents about during the August recess.”

Heritage Action Chief Executive Officer Michael Needham similarly hailed Ex-Im’s expiration as “the culmination of a three-year effort waged by conservatives against a vast, well-funded network of consultants, lobbyists and big-government interest groups.” In a statement, he also praised House Majority Leader Kevin McCarthy (R-Calif.) in particular for his efforts.

“If the Republican Party hopes to attract voters who gravitate to a message built around opportunity for all and favoritism to none, GOP leaders must follow his lead and preserve this historic policy victory,” Needham said.

The Export-Import Bank guarantees loans for foreign companies interested in buying U.S. exports, and also runs programs such as providing insurance and credit to help small businesses secure new customers and working capital.

Critics like Jordan argue that Ex-Im doesn’t create jobs, it merely shifts jobs to export-related sectors. They also emphasize that the private sector could step in to fill the void the bank’s death creates, pointing to statements by Boeing executives admitting as much.

But Rami Touma, president of Houston-based oil equipment exporter CECA Supply & Services, said Ex-Im’s services are critical to his business’s ability to sell products to Algeria, its major source of income.

The national Algerian oil company requires exporters to post a 10 percent performance bond, which is held until the job is done. And in the past year, Touma’s 30-employee company had its best year ever, with $60 million in sales.

“We do not have the ability to just not have $6 million accessible to us,” Touma said. “So Ex-Im, they put the money in for us, and we pay a fee.” He said Ex-Im can facilitate this because it has the expertise and access to State Department information to allow it to judge the reliability of a foreign buyer, something a traditional bank might not be able to do.

For smaller companies, “in any given year, our projects in North Africa represent 30 to 50 percent of their yearly sales,” he said. His policy with Ex-Im is locked in for roughly the next year, but if the agency stays dead, CECA would lose 30 to 40 percent of its sales “right off the bat.”

Similarly, Schroeder’s Texas crop-dusting manufacturer could lose up to one-fourth of its sales after losing the bank’s credit insurance, he said Wednesday.

“We’re scrambling now, trying to find a way to facilitate our sales throughout the rest of this year,” he said. “That’s going to take a lot of risk on our part of the company, and it’s going to take — it’s going to be a big expense for us.”

Schroeder added: “We can only do this for so long. … When it comes to next year’s export season, we don’t know. We don’t have an answer for how we’re going to fill the gap that’s been left by Congress’ blatant disrespect for business, in my opinion.”

BCH Trading, a lumber shipper from Arkansas whose working capital guarantee with Ex-Im expires in April, would have to find an investor to help it access money needed as collateral for business deals, President Randy Barsalou told POLITICO. Private banks won’t lend against the promise of money by a foreign buyer, which leaves small businesses with few options, such as putting up their own assets as collateral.

“It’s almost like going out on the street and finding someone [to invest in us],” he said. “I’ve been an Ex-Im user since 2002, and when we first started it was ’98. … We met with people to look at the possibilities of what would be available, and that issue was always there. ‘Oh, you’re an exporter.’”

Mendell said small companies looking to export don’t have other options for replacing many of Ex-Im’s services. That’s because the volume of their exports is too small or the market risk is too great for so meager a transaction.

“We don’t have any alternative in the private sector to bring them to,” said Mendell, whose company provides export credit insurance for around 1,000 companies, of which 550 have insurance policies through Ex-Im. “It doesn’t exist.”

For almost all of Mendell’s clients, he was able to ensure the renewal of Ex-Im-backed insurance policies that were expiring in July and August, but those whose policies are up in September are already facing problems. The insurance allows the U.S. exporter to give the foreign buyer payment terms, so it can take 30, 60 or 90 days to pay for the shipment. But if the exporter is selling something like medical equipment that will take 90 days to manufacture, Mendell said, then the insurance wouldn’t be available when it’s ready to ship.

“If you’ve got a customers for Christmas season, you’re shipping in September/October,” he said, so many of his clients are having to cut back sales.

Still, Heritage Action emphasizes in its publications that just 0.52 percent of small-business exporters, not even getting to small businesses overall, used the agency’s services in 2012.

Also in the balance are the jobs of roughly 430 Ex-Im employees, none of whom have yet been furloughed because the bank still has funding and work to do.

Ex-Im Chairman Fred Hochberg told POLITICO last week that his agency is keeping busy — including processing $25 billion in loans. “That’s almost a year’s worth of work,” he said, in response to a question about whether the agency would try to put off furloughs as long as possible.

“We’re trying to accelerate our work on [Freedom of Information Act] requests, which have doubled this year,” as well as reports for the inspector general, he said. “I actually have more people to work on that right now than I would otherwise, so I want to try to get that done.”

But if Congress ultimately doesn’t renew the bank, it’s clear that Ex-Im intends to stick around until the end of the longest loan guarantee, which could be as long as 18 years.

So, expired or not, the bank will likely be around for a while. But Rep. Stephen Fincher (R-Tenn.) warned that if the agency’s expiration continues into December or January, the bank could be hard to ever revive.

“That’s why this has got to happen now,” he said. “It should’ve already happened.”

Kathryn A. Wolfe contributed to this report.

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