Boeings Big Bluff Call With Export Import Bank Reauthorization

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Boeing's recent public threat to move manufacturing if US Ex-Im Bank is not reauthorized is quite interesting. Scott Scherer, Boeing’s head of regulatory strategy, said, “Boeing is not going to let itself be hurt by the lack of an Ex-Im bank. If it means sourcing….to other countries who will support us, we may have to look at that. Other countries have more aggressive export policies. We will find an alternative.” Mmmm, tough talk.

See, there are 2 camps with strong views around reauthorizing Ex-Im and both hold steadfast to their points (does this remind you of religion?). But before we go there, lets remind everyone what Ex-Im Bank does.

What Does Ex-Im Bank Do?

Ex-Im Bank was established in 1934 by an executive order and made an independent agency in the executive branch by Congress. Congress sets the bank's lending cap and must reauthorize its charter, which expires June 30.

The mission of the bank is to create and sustain US jobs by financing sales of US exports to international buyers. It performs this mission by borrowing from the Treasury to provide working capital guarantees, export-credit insurance and financing to help foreign buyers purchase US goods and services.

The 2 Camps

Camp 1 Ex-Im as Export Champion

This camp says that Ex-Im is critical for our support of American business when competing against other nations. This group claims Ex-Im is not just for big business but help small companies compete as well. They also point to the fact that some export deals just would not happen unless supported by Ex-Im.

Camp 2 It’s Corporate Welfare

This camp says the government is not in the business of making profit, but providing services. If it chooses to subsidize business (in essence what they are doing by using the US government's balance sheet), perhaps there are more efficient ways to promote exports, like direct tax subsidies for small businesses that export versus providing the likes of GE and Boeing with huge benefits. They point to the job numbers touted by bank officials as dubious, at best, and have been roundly criticized as misleading by the Government Accountability Office, among others. Critics also point ot the fact that the major recipients have huge backorders regardless of Ex-Im support. See here

Regardless what camp you are in, it should be an interesting few weeks until the charter expires.

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