U.S. Ex-Im -Future Uncertain! (part II) Reauthorization Bill Defeated

Inside U.S. Trade – 03/23/2012

Ex-Im Faces Uncertain Future After Senate Defeat Of Reauthorization Bill

Posted: March 22, 2012

The Export-Import Bank faces an uncertain future following the Senate’s failure to advance bipartisan legislation this week to reauthorize the bank’s charter for four years and increase its lending limit due to Republican leadership opposition, with a Democratic aide saying the Senate has already missed its “best shot” for renewal.

The Ex-Im charter expires on May 31 and its financing limit is expected to hit its current $100 billion in late April or May, at which point it could no longer offer financing to foreign buyers of U.S. exports.

On March 20, the Senate fell five votes short of the 60 needed to invoke cloture on an Ex-Im amendment sponsored by Sen. Maria Cantwell (D-WA) to the House passed H.R. 3606, a bill that would make it easier for start-up companies to access capital markets. The cloture motion garnered 55 votes, with 44 in opposition.

The Cantwell amendment would have extended the Ex-Im’s charter through 2015 and increased its lending limit to $140 billion from $100 billion.

Senate Majority Leader Harry Reid (D-NV) and his staff are now evaluating other potential vehicles for Ex-Im renewal, the Democratic aide said. Reid is reluctant to bring the Ex-Im reauthorization to the floor as a standalone measure, as has been suggested by Senate Republican Leader Mitch McConnell (R-KY), because it would make it easier for the House to defeat it.

Long-term Ex-Im authorization faces opposition in the House from Majority Leader Eric Cantor (R-VA), who has floated a bill with a one-year extension and requirements for the administration to negotiate an end to all forms of official export credit financing (Inside U.S. Trade, March 9).

Senate Democrats tried to circumvent the House opposition to a long-term Ex-Im reauthorization by adding it as an amendment to H.R. 3606, which the House passed by a vote of 390 to 23 on March 8. According to the Democratic aide, partnering Ex-Im renewal with an overwhelmingly bipartisan piece of legislation was the “best shot” for a comprehensive reauthorization of the bank.

House Ways and Means trade subcommittee Ranking Member Jim McDermott (D-WA) said on March 22 he was “fearful” about what would become of Ex-Im between now and the end of the congressional session. He added the bank has been drawn into a “theological argument” over the role of the free market.

Business groups are actively lobbying both chambers of Congress to chart a path forward on Ex-Im reauthorization and are also urging senior-level White House officials to intervene. President Obama has been an outspoken supporter of the Ex-Im bank.

Following the Senate’s passage of H.R. 3606 yesterday (March 22), the White House issued a statement calling on Congress to reauthorize the Ex-Im bank, among other priorities.

After the Senate defeat of the Ex-Im amendment, McConnell said he would be willing to consider the Ex-Im legislation on its own, with “very few amendments.”

Reid bristled at this, citing Cantor’s outspoken opposition to the Cantwell amendment and to the Ex-Im Bank in general.”[Members of the House leadership] are not about to take the Ex-Im Bank unless it’s part of the overall package,” Reid said, referring to the House-passed H.R. 3606.

An Obama administration official emphasized this week that the Senate Democratic leadership appears willing to consider all options for bringing Ex-Im legislation to the floor, including moving it as a standalone bill. The official said the Senate Democratic leadership understands that the deadline is looming for Ex-Im Bank renewal, and is doing what it can to get a reauthorization bill passed in time.

According to the official, the administration’s preferred approach would be to have the Senate move prior to the House on Ex-Im reauthorization legislation, but in a way that would allow Republicans to offer amendments to the bill. That could take extensive Senate floor time, unless Reid and McConnell reach an agreement on the number of amendments members can offer.

Enabling Senate Republicans to offer amendments would provide an opportunity to address some of the objections that Republicans in both chambers have raised to the Ex-Im reauthorization, according to the administration official. These include the charge that Ex-Im is not complying with its congressional mandate to vet transactions for potential harm to U.S. industry, including U.S. airlines.

If those objections are addressed or at least come to a vote in the Senate, that could provide some cover for House Republicans to vote in favor of the bill, according to the administration official. The last two House votes on Ex-Im reauthorization, in 2006 and 2002, occurred through a voice vote under suspension of rules, meaning lawmakers did not have to go on the record with their votes, the official pointed out.

However, votes under a suspension of the rules normally take place for non-controversial measures, which then require a two-thirds majority for approval.

The main stated reasons by Republicans for their opposition to the Ex-Im amendment to H.R. 3606 was that they could not offer their own amendments to it and that it would further delay passage of the bipartisan H.R. 3606.

They could not offer amendments because Reid had used the procedural maneuver of “filling the amendment tree” with technical amendments to the H.R. 3606 to preclude other senators from offering any further amendments.

But the Senate Democratic aide said the fight over the amendments was secondary to the larger political motivations of Republicans in blocking the Cantwell amendment.

According to the aide, McConnell was “running interference” for the House leadership, because a vote on the Ex-Im measure would have threatened to splinter the Republican caucus by including a measure opposed by conservatives in H.R. 3606, an otherwise overwhelmingly bipartisan piece of legislation.

Cantor’s office issued a statement a day before the vote blasting Democrats for attempting to add the Ex-Im amendment, dubbing it a “partisan measure.” He also opposed Democratic efforts to add further investor protections to H.R. 3606.

Reid expressed the urgency of passing the Cantwell amendment ahead of the cloture vote, saying that if the Senate failed to adopt it, it would “drop to the bottom of the [Senate] calendar.” This, he said, is because the Senate is faced with other high-priority legislation related to cyber security, violence against women, and funding for the U.S. Postal Service.

Any hope of resubmitting Cantwell’s Ex-Im language as an amendment to H.R. 3606 was dashed March 21 when the Senate invoked cloture on the underlying bill itself. Cantwell’s amendment was then formally dropped, as Senate rules stipulate that all amendments offered post-cloture must be germane to the bill they amend.

Only three Republicans — Sens. Dean Heller (R-NV), Scott Brown (R-MA) and Susan Collins (R-ME) — voted in favor of the Cantwell amendment. The amendment failed to attract support even from two of the Republicans who co-sponsored it, Sens. Lindsey Graham (R-SC) and Richard Shelby (R-AL). Sen. Mark Kirk (R-IL) also co-sponsored the amendment, but he was not present at that Senate session. Sen. Bernie Sanders (I-VT), who caucuses with the Democrats but has historically opposed Ex-Im lending, voted against cloture.

Conservative Republicans, fueled by small-government groups like the Club for Growth, object to Ex-Im reauthorization because they consider the bank to provide “corporate welfare” that distorts the free market. That fight has been compounded by opposition from Delta Airlines and other U.S. carriers, who argue Ex-Im support for purchases of Boeing aircraft by foreign airlines has harmed their business.

At the same time, House Republicans are under pressure from Boeing and business groups, including the U.S. Chamber of Commerce, to approve a long-term reauthorization of the bank.

Prior to the vote, McConnell said that “substantial support” exists among Senate Republicans to pass the Ex-Im bill on its own. The administration official said a standalone bill would like garner between 70 and 80 affirmative votes, while private-sector sources have speculated it would garner as many as 80 to 85 votes.

Once the bank’s lending limit is reached, no new lending could take place until existing loans came off thebooks, which the administration official said occurs at a rate of about $1 billion a month. By contrast, Ex-Im usually processes transactions worth between $2.5 billion and $3.5 billion a month.

Even if the limit is reached, an Ex-Im bank spokesman stressed that the bank still has “a fiduciary responsibility to the taxpayer” to continue to monitor its portfolio and pay claims on the loans it has issued. The process by which the bank would keep that ability in place is uncertain, but the spokesman likened it to contingency plans the U.S. government has in the event of a government shutdown.

The administration official stressed that the Senate’s failure this week to pass Ex-Im reauthorization legislation has “rattled” foreign companies who have come to rely on the bank as a stable and reliable lender. These companies are already beginning to look to suppliers in other countries as opposed to buying from U.S. firms, the official said.

For instance, foreign airlines may be more willing to buy planes from Airbus than Boeing, since the export credit agencies that help finance Airbus sales are seen as more stable than Ex-Im.

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About Alexander Gordin
An international merchant banking professional with over twenty years of business operating and advisory experience in the areas of export finance, international project finance, risk mitigation and cross-border business development. Clients include foreign governments, municipalities and state enterprises as well as Fortune 500 and small/medium enterprises. Strong entrepreneurial instincts, combined with leadership and strategic skills. Transactional and negotiations experience in over thirty five countries. Author of the highly acclaimed "Fluent in Foreign Business" book and creator of the "Fluent in OPIC", "Fluent in EXIM","Fluent In Foreign Franchising", "Fluent in FCPA",and "Fluent in USTDA" seminar/webinar series. Currently developing "Fluent In ......" seminars and publications. Co-author of the Fi3 Country Business Appeal Indices. Extensive international business development and project finance transaction experience in healthcare, aerospace, ICT, conventional and alternative energy infrastructure, distribution and hospitality industries. Experience managing international public and private corporations. Co-Founded three companies abroad. Strong Emerging and Frontier Market expertise. Published and featured in numerous publications including: The Wall Street Journal, Knowledge@Wharton, NBC.com, The Chicago Tribune, Industry Week, Industry Today, Business Finance, Wharton Magazine Blog, NY Enterprise Report, Success magazine, Kyiv Post and on a number of radio and television programs including: Voice of America, CNBC, CNNfn, and Bloomberg. Frequent speaker on strategy, cross-border finance and international business development. Executive MBA from the Wharton School at the University of Pennsylvania. B.S. in Management of Information Systems from the Polytechnic Institute of NYU. Specialties Strategic Management Advisory, Export Finance, International Project Finance & Risk Management, Cross-border Negotiations, Structured Finance transactions, Senior Government and Corporate officials liason

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