Many U.S. exporters are familiar with the Export-Import Bank of the United States (“EXIM Bank”), an independent federal agency that facilitates U.S. exports through private export financing (such as export credit insurance, working capital guarantees, and guarantees of commercial loans to foreign buyers).
However, operation of the EXIM Bank continues to be a political issue. Denounced by critics as a prime example of “corporate welfare”, there was a concerted effort by some factions in Congress to block renewal when the bank’s charter expired in July 2015. Consequently, the EXIM Bank was unable to accept new business for five months until bipartisan support resulted in reauthorization being included in legislation signed into law in December 2015.
Absence of Quorum
Since then, the EXIM Bank has been processing suspended and new applications, but a new issue has limited the bank’s operations. The Board of Directors of the bank, composed of five members, must have at least three members to make a quorum. In the absence of a quorum, the Board of Directors is unable to conduct any business, including consideration for applications of transactions exceeding $10 million.
Currently there are only two members serving on the Board of Directors of the bank, the president of the bank Fred Hochberg who serves as chairman of the board, and the First Vice-President Wanda Felton, who serves as Vice Chairman of the board. The other three members of the Board of Directors are appointed by the President of the United States, by and with the advice and consent of the U.S. Senate.
Senator Richard Shelby, chairman of the Senate Banking Committee, has so far refused to act on President Obama’s nomination of Mark McWatters to be a third member of the Board of Directors of the Bank, and allow it to make a quorum. Although approximately 98 percent of the applications for help to the EXIM Bank have been for loans under $10 million, in dollar terms two-thirds of the bank’s export financing has been used for deals greater than $10 million.
And the lack of a quorum on the bank’s Board of Directors to approve assistance over $10 million has created issues, primarily for the customers of large-item manufacturers such as John Deere, Boeing, G.E., Westinghouse, and Caterpillar. Currently, some 30 transactions worth more than $20 billion are on backlog and stalled until the EXIM Bank regains its quorum.
There has been a bipartisan effort in both the U.S. House of Representatives and U.S. Senate to bypass Sen. Shelby by allowing, for the next three years, that a quorum may consist of only two members on the Board of Directors. In any case, political opposition continues to be a problem for the EXIM Bank and deals involving U.S. companies that rely on it.