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Wed July 30, 2014
The Currency: Federal Export Bank Debate Sparks Concerns In N.H.
The Currency is NHPR's ongoing look at economic and business news in New Hampshire.
The Biggest Bank You've Never Heard Of
With only a few days left in session before August recess, one item on Congress’s long to-do list is whether to reauthorize the Export-Import Bank. While Democrats are generally for keeping the bank in business, the GOP is more split. Conservative, tea party-aligned Republicans, and groups like Heritage Action for America, are for phasing it out. While other Republicans, and the U.S. Chamber of Commerce, want to keep it in business.
Ex-Im started as one of Franklin Roosevelt’s New Deal programs. And today, the bank serves both American exporters and foreign buyers. Among other things, it gives loans directly to foreign buyers, and covers American companies when their overseas customers don’t pay up.
For the past 80 years, Congress has reauthorized the bank without much fuss. And Ex-Im has returned the favor with dividends. Last year, the agency pumped $1 billion of profit back into the U.S. Treasury.
But this month, incoming Republican House Majority Leader Kevin McCarthy made the argument for killing the bank on "Fox News Sunday.”
“I think Ex-Im Bank is one—something that government does not have to be involved in. The private sector can do it,” he said.
That position has some people in New Hampshire concerned. That’s because for the past seven years, the Ex-Im Bank has supported nearly $360 million in Granite State exports.
One of the big beneficiaries has been Manchester-based Boyle Energy Services and Technologies. The work is pretty technical, but basically, once power plants or oil refineries are built, Boyle staffers install technology that makes them run as efficiently and eco-friendly as possible.
And right now, most of that work is happening overseas, especially in the Middle East.
Founder and CEO Michael Boyle says about 80-percent of his business is in foreign markets. His company is New Hampshire’s third largest exporter, and has a line of credit with the Ex-Im Bank.
“It’s a very interesting thing that in my negotiations with problem customers, when I go and say we have the full faith and credit of the Export Bank of the United States standing behind us, it gave us a little leverage to get into the project," Boyle says. "But when I tell them that the Export Bank, and Commerce, and the ambassador may be involved in collecting our receivables, it’s generally a strong advocate for getting paid.”
Q: And how many times have you had to exercise that particular option?
A: Twice. Both were successful on our behalf. But they were just friendly persuasions, they were nothing more than that. Just like Roosevelt said, ‘Walk softly and carry a big stick.’ The Ex-Im Bank is a big stick when it comes to that kind of thing.
Over the past few years, Boyle’s company has grown rapidly. He now employs about 50-people all over the country, including a small cadre of workers in Manchester and Concord. And he says the Ex-Im Bank made that growth possible. While his local bank branch might not have known enough about, say, Indonesia’s energy market to make a loan, a guarantee from the Ex-Im Bank was enough to make his local lender sign on the dotted line.
In fact, Boyle believes so much in the Ex-Im Bank that he sits on its advisory committee. And he speaks highly of the Obama Administration’s push to shift the bank more toward helping small business. Even though he’s a self-described “conservative Republican.”
"The Bank Of Boeing"
But when it comes to who benefits from the bank the most…in raw dollars, it’s not companies like Boyle Energy.
It’s true that the vast majority of Ex-Im’s customers—90 percent—are small businesses.
But a study done by George Mason University found that as few as ten companies got three-quarters of Ex-Im financial assistance last year. And Boeing is by far the bank’s biggest beneficiary, with nearly $8 billion in loans, mainly for helping foreign airlines buy their planes.
Some Ex-Im opponents have taken to calling it “The Bank of Boeing.”
“On a moral level, it’s Robin Hood in reverse," he says. "It’s wrong to make taxpayers bear the risk for sales that large corporations are making to large corporations, many of whom are government-owned overseas.”
And Carney says there’s also an economic argument.
“You have the American Action Forum, which is, in fact, generally a supporter of the Export-Import Bank, saying it doesn’t actually create jobs in the U.S. economy. It allocates jobs around the U.S. economy," he says. "You have the GAO and the Congressional Research Service and economists like Milton Friedman saying, again, supporting our exporting industry can help players in the export market at the expense of the rest of the economy.”
Again, Boeing is the go-to example for this argument. Say Korean Air wants to buy more planes. It can get a loan through the Ex-Im Bank with very favorable terms to beef up its fleet. But a competing American airline, like Delta, doesn’t have that privilege.
And in a letter to the House Financial Services Committee this past spring, that’s exactly what Delta argued. The Ex-Im Bank gives its foreign competitors an unfair advantage, which costs Delta money and jobs…even as Ex-Im assistance is creating or sustaining jobs at Boeing factories.
Small Businessman Defends Ex-Im
So again…let’s turn back to Michael Boyle at Boyle Energy in Manchester.
Q: Can the benefit to smaller businesses like yours really balance against the larger-scale so-called ‘Corporate Welfare?’
A: Without question. Companies like Boeing are exceptional US corporations that have succeeded very well with the Ex-Im backed products…But from our perspective, there were 3,400 Ex-Im transactions last year that were small business tie-ins. We’ve grown from $4 million to nearly $30 million in six years with Ex-Im support. And I question, going back 80 years, how many other small businesses have grown into these larger corporations now using that same credit facility.”
Q: If you had the ear of Congress, what’s your elevator speech for why it should fund the Export-Import Bank when other programs—like even food stamps—are being cut?
A: Well, there’s an obvious answer to that, is the Ex-Im Bank provides excess surplus revenue back to the Treasury. It doesn’t theoretically cost the United States people any money at this point, having been established 80 years. It does have a lot of the Treasury money tied-up in the projects, but it does, each year, send money back in surplus to the Treasury.
So I think that where many of the programs across the United States—I wouldn’t put this in line with food stamps, necessarily—but many of the programs need to be looked at, because their cost-benefit to the people are maybe in question. The Ex-Im Bank doesn’t have that problem, at this moment.
I have been very fortunate throughout my life to have gotten the temporary support I needed, at each phase of my life, through the United States government. I grew up on welfare in Massachusetts. We had food stamps, oddly enough. We had the school lunch programs. I was unable to go into college, or didn’t really know how that was going to work. So I ended up going into the United States Navy, where I learned how to work on boilers and large energy facilities. Which I then got out of the Navy on an honorable discharge, and then transitioned that into a business that we’ve grown to be one of the larger exporters in New Hampshire. But we did that with the help of the Ex-Im Bank.
Our goal is to one day not need the Ex-Im Bank, like my family one day did not any longer need welfare. There are elements of our government that allow us to proceed forward, that allow us to move. And the Ex-Im Bank has done that.”
The Currency is NHPR's ongoing look at business and economic news around the Granite State.
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