D.C. Deal Has Wide-Ranging Implications for U.S. Industry

Senators have reached an agreement that will raise the financing authority of the U.S. Export-Import Bank to $140 billion by 2014, in an attempt to tackle the issue of what role the federal government should take in helping American exporters. The Export-Import Bank is a federal agency that helps U.S. companies sell manufactured goods to foreign firms by providing loan guarantees and some forms of insurance.

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On Tuesday, the Senate is expected to approve legislation passed last week by House lawmakers. Shortly after, the legislation will be passed to President Barack Obama to sign into law. Obama has advocated for the bank as part of an election-year agenda aimed at job creation as part of his drive to ramp up U.S. exports. The President has called on Congress to raise the bank’s financing cap and extend its authority.

However, opponents assert that the legislation constitutes inappropriate government interference in the marketplace. Conservative Republicans in both the House and the Senate have hesitated, citing that the bank exposes taxpayers to undue risk. They have gone so far as to call for the bank to be put out of business or be strictly limited in its activities.

The issue has been significant for big exporters such as Boeing (NYSE:BA), General Electric (NYSE:GE), and Caterpillar (NYSE:CAT), lobbying Congress to expand the bank’s lending powers. These big exporters assert that the bank supports U.S. jobs. However, companies including Delta Air Lines (NYSE:DAL) have fought the reauthorization efforts because they believe that the bank effectively subsidizes foreign companies that compete with U.S. companies and cost American jobs.

However, opponents of the bank have been largely unsuccessful. The bill that is expected to be approved by the Senate includes instructions to the administration to begin negotiations with foreign trading partners aimed at winding the bank down. But those directions do not specify a time limit or force the administration to act. The Senate is planning to hold votes Tuesday on five Republican amendments to the bill. Each amendment will increase scrutiny of the bank’s activities, with one terminating the back after one year. The votes are expected to fail.

Soon after, the Senate will hold a vote on the underlying bill, which is expected to pass. The legislation increases the financing cap the bank operates under to $140 billion, from the current $100 billion level, on the condition that the bank maintains a loan-default rate of less than 2 percent. Currently, the default rate is approximately 1.5 percent.

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