Today, Congressman Jeb Hensarling, chairman of the House Financial Services Committee, made a speech entitled: “A Time for Choosing: The Main Street Economy vs. the Washington Crony Economy”, in which he asserted, again, that the Export-Import Bank of the United States (Ex-Im Bank) should not be reauthorized because it fails to support the Main Street economy.
But the reality is the opposite: Ex-Im Bank is ALL ABOUT supporting the Main Street economy!
The Main Street economy is built upon small and medium size businesses not only seeking to sell their products locally but also to export their goods overseas. 95 percent of the world’s customers are outside of the United States; for a company to grow, sooner or later, it will want to export.
Since a company does not get paid until its export are delivered to the overseas buyer, the availability of working capital is critical to enable a small company to manufacture its products in order to export them.
Without Ex-Im Bank involvement, local and regional banks will not provide pre-export financing to these small companies because they do not know the foreign market or the buyer. These banks did not provide this type of financing before the financial crisis and certainly will not now under their new regulatory structures.
Years ago, Ex-Im Bank was directed by Congress to support these transactions so long as there is “a reasonable assurance of repayment;” Ex-Im Bank has successfully enabled thousands of these transactions to take place.
An example: a family electronics firm started by two brothers in their parent’s garage is now exporting its products to over 100 companies. It has a revolving line of credit with its local bank backed by an Ex-Im guarantee that enables the company’s local bank to finance the working capital necessary for the manufacture of its products for export. The company made clear that if the line of credit were terminated because of a failure to reauthorize Ex-Im Bank, not only would they lose their export market but the entire company, with all of their jobs lost.
What is more Main Street than that? Especially when each Ex-Im Bank guarantee transaction enables another small exporter to grow his business.
And what of Ex-Im Bank’s medium term loan program (MTP), which overwhelmingly supports small and mid-market companies with 5-7 year loan transactions averaging around $2 million? In the past five years, Ex-Im Bank has supported over 1,800 MTP export transactions, enabling companies to export when they had no other financing alternative.
An example: a New Hampshire company makes printing presses. It has over 650 workers in the U.S.; international sales to countries such as Brazil, Mexico, and Turkey have become increasingly important to them in recent years. It has two German competitors that have aggressive support from the German export credit agency. If Ex-Im Bank is not reauthorized, this company will lose business to Germany which may result in significantly lower sales and lost manufacturing jobs in the U.S.
With 94 percent of its transactions focused on supporting small and mid-market company exports and the thousands of jobs those exports support, Ex-Im Bank makes a fundamental and ongoing contribution to the continued rebound of the American economy. For those who care about continued U.S. job and export growth, the reauthorization of the Export-Import Bank is a no-brainer.
Hardy is president of the Coalition for Employment through Exports.