What Does Cantor’s Defeat Mean For The Ex-Im Bank?

If the sun’s setting on the Export-Import Bank, they have only themselves to blame. Back in the early 1990s I did a training stint there and it’s when I first heard the ‘Bank of Boeing’ joke. Fast forward to last week, when Eric Cantor lost in his primary and Boeing’s stock dropped by 2.3 percent. Which raises the question, given his connections to the big business wing of the GOP, could Cantor’s loss be a death knell for Ex-Im?

I’ll admit, when I was a newbie Kennedy School grad, I was very impressed by the people who worked at Ex-Im. They were smart, hardworking, and, because of their close relationships with commercial bank, were early and aggressive adopters of new internet technologies. They did clever things like holding an annual auction around Christmastime for all the trinkets foreign governments and firms gave to Ex-Im at signing ceremonies in the past year (I bought one of them, and made my check out to the U.S. Treasury).

As a Republican, I naturally was impressed by staff grumblings over the incident when Bill Clinton’s apparatchiks literally drilled holes in ExIm’s stone-paneled lobby to hang his official photo. As the Brits would say, hanging the presidential photo in the Ex-Im lobby ‘was not the done thing.’ Psychologically, Clinton’s message was, ‘you’re just another agency and you work for me.’

Despite these positive impressions, I couldn’t help but notice the many little commemorative jet planes that sprouted on staffers’ desks and shelves. Older staffers had offices festooned with enough model jets to satisfy any nine-year-old boy. That’s when I heard about Ex-Im’s reputation as the ‘Bank of Boeing’.

Even back then, senior staff recognized Ex-Im had an image problem and cranked up attention to small business requests.

Twenty years later, the evidence indicates much of this attention was mere lip service. Look at this page from their 2013 annual report. You’ll see Ex-Im’s support for small businesses fell 15 percent in 2013 compared to 2012, and its 2013 authorizations (loans, loan guarantees, insurance) for small businesses amounted to 19 percent of total authorizations.

Meanwhile, if you examine Ex-Im’s 2013 list of recipients for long-term loan guarantees, Boeing comes in at number one, with 35 transactions.

Thus it’s no surprise that Boeing’s stock tumbled last week when Ex-Im’s key supporter in the House leadership lost his primary race.

Do we really need a taxpayer-supported Bank of Boeing in this 21st century age of global finance?

Arguments for maintaining ExIm generally have these themes: (1) everybody else does it and discontinuing Ex-Im would be the economic equivalent of unilateral disarmament, and (2) this agency is so small, it’s not worth the trouble to pull the plug.

The first argument has some merit. For example, one 2013 Ex-Im transaction for Boeing involved Ethiopian Airlines – probably a high risk sale, as Ethiopia has one of the world’s lowest per-capita incomes. But did Boeing absolutely need Ex-Im assistance t0 make the sale? That’s unclear.

For example, in 1994 France privatized its version of Ex-Im, Coface (it was purchased by the French investment bank Natixis). While Coface still handles the French government’s export loans and loan guarantee operations, it now has a worldwide presence in providing private risk insurance for exporters. Monday morning, Coface launched an IPO worth $1 billion, as Natixis seeks to sell off about half of its shares. To me, Coface’s IPO is an indicator that the private risk insurance business is quite robust.