Trump now likes Ex-Im, but new bank head does not

Donald Trump

The Export-Import Bank of the United States was founded in 1934 and for its first 80 years it rarely attracted much mainstream attention. This changed when the Tea Party movement started attacking it for “crony capitalism” in 2012 and campaigned for it to be shut down.

Now, President Donald Trump has made sure that it will stay in the limelight.

In 2015, whilst campaigning to be President, Trump criticised EXIM. “I don’t like it because I don’t think it’s necessary,” he said. “It is a one-way street. It’s sort of a feather bedding for politicians and others, and a few companies. And these are companies that can do very well without it. So I don’t like it.”

But since becoming President he has changed his mind about EXIM.

In an interview with The Wall Street Journal he said: “Actually, it’s a very good thing. It actually makes money; it can make a lot of money.” He praised its support of small businesses and also said: “When other countries give it we lose a tremendous amount of business.”

With this new view, President Trump has nominated a new Chairman and a board member.

This should be great news. EXIM has been closed for deals worth more than $10 million for more than a year now because it has not had a full board.

President Obama had nominated two individuals but all members of the Board of Directors need to be confirmed by the US Senate. Before the full Senate votes, a confirmation hearing must be held by the Senate Banking Committee, followed by a favourable vote by the Committee.

Senator Richard Shelby (R-Alabama), the former Chairman of the Senate Banking Committee, did not agree with EXIM’s role so simply refused to hold a confirmation hearing on either of the two nominees. This meant that Senator Shelby was able to single-handedly prevent EXIM Bank from having a quorum of its Board of Directors or even holding board meetings. This meant it could not get board approval for deals worth more than $10 million.

If President Trump’s two appointees are confirmed by the Senate, the bank – which was reauthorised by President Obama – could soon start providing aircraft guarantees again.

But it is not that simple. The one thing that could stop EXIM from fully re-opening is the chairman that President Trump has nominated. Scott Garrett, a former Republican congressman, has been a fierce critic of EXIM for years. He once described it as: “A bank that embodies the corruption of the free enterprise system.” Spencer Bachus, a former congressman from Alabama, Trump’s pick for the other board seat, is seen as more moderate.

As chairman, Garrett could stop EXIM from guaranteeing any large aircraft deals. The Chairman of the EXIM Bank Board of Directors is a real job with real powers. Garrett will also serve as president and CEO of the bank. This means that he will influence what the bank’s priorities are and decide which types of deal the bank focuses on. Garrett will also choose which transactions are placed on the agenda at board meetings.

It is too early to say what will happen next. Garrett has not been formally appointed. Although the new Chairman of the Senate Banking Committee, Senator Mike Crapo (R-Idaho), is expected to follow regular order and hold confirmation hearings on Garrett and Bachus and allow the Senate Banking Committee to vote on nominees.

Garrett has not given any interviews on his plans and (unlike the President) has not tweeted since last October.

Despite Garrett’s past criticism of the bank there are reasons to be optimistic. There is a tradition of politicians becoming more supportive of EXIM as they learn more about it. President Obama also criticised the bank before he took office and then became a big supporter. Boeing and GE will also no doubt be stressing the importance of EXIM to US trade and jobs.

It is very plausible that EXIM could show Garrett many aircraft deals that he could support. But he may look at transactions more critically – he may not want to finance carriers that compete with US airlines, for example.

It is definitely positive for airlines and manufacturers that EXIM may soon have a fully functioning board – even if the Chairman limits some deals. It is easy to forget the critical role that export credit agencies played after the September 11 terrorist attacks. Manufacturers will at least be able to take comfort that EXIM is open again if the worst happens. Garrett may need convincing, but he is unlikely to be as blinkered as Senator Shelby was, especially with the President being supportive.

But the only thing you can be certain of now, is that for the next few months at least, EXIM is going to continue to get a lot of headlines.

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