Topic: The Export-Import Bank (Read 4659 times)

You are familiar with crypto currency basics, yes?

In addition to another payment method, it is also a better payment method.
Some of the more applicable merits include.
Proof of funds
Validated low friction escrows
Smart contracting

This could provide contract enforcement for order cancellations.  
Cancel an order and still pay some %.  Manufacturer still has the goods and can sell, and also receives compensation for unfair business practice.

Folks whine about not having consumer protections, but they are there for anyone that wants to use them, what is missing isn't the protection, its just missing the protection racket.

I'm no expert in ex-im bank stuff, but these things just seem to be such obviously better mechanisms for solving the problems.  Save the big guns for when they are absolutely needed.  State department has enough to worry about.

How would crypto currencies better protect US companies from a foreign government placing large orders at US companies and then not paying? It is a standard practice to not pay for goods ordered until delivery (or sometime thereafter) when dealing on a B2B basis.

All a crypto currency would do is provide another payment method when the foreign government does decide to pay (and is not engaging in a trade war)

Crypto currency is also among those better tools.  Government would be better served getting the hang of what it offers before its left behind.

In reality, the only entity that can protect the US economy from other government aggressors is the US government. This has nothing to do with domestic politics. The ex-im bank protects the US economy from trade war with other countries. You are implying that AIG and other insurance companies should be able to protect itself and fight in War with other countries.

A few companies in the pockets of a few government employees !== the US economy.
If the US economy is threatened, the ex-im bank is not a significant factor other than as a measurement tool.
It should not be a government entity.
It should not be subject to political influence and corruption.

It is as wrong when we do it as when "the other guy" does it.
Why be in a race to burn moral authority for no marginal gain and only increased moral hazards?

How would this not be a good thing? The government protecting the american economy from foreign governments can only be a good thing unless you wish to see the economy fail/decline

That people think this is a good thing is also astounding..
How far we have fallen.

It will not lose money. It can use the influence of the government to prevent it from losing money. Private sector insurers would not have this influence.

I'm baffled as to why you think the government needs the ex-im bank for an excuse to do this.
If this is the reason we need it, it is the flimsiest justification for it yet. 
Creating a intermediary bureaucracy so that it can lose money in order to give a reason for foreign policy action?

Even the more obvious justification is better, as a means to extract donations from corporations to political campaigns, and a way to channel the extracted wealth of citizens to advance those interests.  At least there is some perverse logic to that.

If the ex-im bank is going to take a loss because a country is cancelling orders from US companies in mass, then the US government would likely contact the country via diplomatic channels to try to get these order cancellations to stop.

The ex-im bank is in no way required for political action regarding this concern.

The reason the government is involved in the export-import bank is because other countries could economically attack the US if they were to engage in a trade war. If a country (say China) were to get it's companies to order a lot of American products with no intention of paying for them nor taking delivery of them then the US government can use it's political influence to get this to stop and reverse this policy of China (in this scenario). The private sector would not be able to exert this influence.

This is not a function of good government.  Government interferes in what should be private business.  This should be done by private insurance and be competitive.  There is no state interest here other than the capitalization on political power.  Get elected, and then use the power of the state to enrich those who elected you.
It is simple corruption.  It should be private or ended, not government subsidized.

My argument is not that this should not be done.  Just that it should not be done by governments, especially not the US which ought be above such nonsense.  Its bad enough that the government thinks it is the insurance company for its citizens and banks and random companies that are too-big-too-fail, but throwing its weight into the international trade to pick favorites among the exporters is unnecessarily corrupt.

You fail to recognize that the export-import bank takes a fee for every loan/order they guarantee payment for. They do not necessarily need to sell all of the goods they purchased because a foreign company defaulted on an order because of this. They are a way of spreading the risk of foreign companies' defaulting around the US economy.

Then why (over)claim that it reduces supply when you clearly state it doesn't do anything more than put it on a shelf to rot and become obsolete, just like it would on the producer's shelf, and perhaps ultimately be sold?  This is not reducing supply, only productive use does that.  This is not a public good, it is the opposite, a public taking.
It is a politically controlled market distortion at public expense for private benefit, subject to lobbyist influence and plain corruption.  Government ought not be in this business, it is wrong and a misuse of power.

I was in the "What is it?" / "I don't care" camp until all these ExIm apologists came along with these mealy-mouthed justifications.  The more they write, the more reprehensible it seems.  Should just stop and hope that folks don't see it for what it is.  The more you explain, the worse it appears.

Not much patience for all this lipstick on a pig.

Yes, Overstock customers are a different set of customer, but the point stands. 
Boeing has the same way of selling their extra airplane as anyone else does.  The ExIm is a crutch that enables bad business decision making and socializes risk while privatising profit.
I'm just not a fan of government insurance for a select few elite "too big too fail" constituencies.
It gives the moniker of "white collar welfare" that gets applied to aerospace and others too much credence.

The guarantees that the ex-im bank provides are not free, it essentially acts as insurance. Many of the goods that are sold and guaranteed by the ex-im bank are not things that can be sold on overstock, and when they can be sold the quantity is much larger then what overstock is built for. For example if a foreign airline were to order 10 boeing airplanes and then file bankruptcy then boeing would be out of the cost to build the airplane but would have little to no way of selling it. The market for airplanes is not such that an airplane can be easily sold quickly. 

Then why (over)claim that it reduces supply when you clearly state it doesn't do anything more than put it on a shelf to rot and become obsolete, just like it would on the producer's shelf, and perhaps ultimately be sold?  This is not reducing supply, only productive use does that.  This is not a public good, it is the opposite, a public taking.
It is a politically controlled market distortion at public expense for private benefit, subject to lobbyist influence and plain corruption.  Government ought not be in this business, it is wrong and a misuse of power.

I was in the "What is it?" / "I don't care" camp until all these ExIm apologists came along with these mealy-mouthed justifications.  The more they write, the more reprehensible it seems.  Should just stop and hope that folks don't see it for what it is.  The more you explain, the worse it appears.

Not much patience for all this lipstick on a pig.

Which a number of our businesses depend on to compete overseas with foreign companies that have state backing like Chinese businesses. Take what little we actually help them out on away and they can't compete.

This sounds like a job for a company, not for a government entity.
Let Overstock do it.  Or let them buy insurance.
If its not a viable business, then its not a viable business.  Let the people do something productive instead.
Taxes ought not be taken by force of law from the widows and orphans to pay for the subsidy of business decision failures by protectionistas.
The markets price goods appropriately, not a government.

It regulates how quickly the oversupply comes into the market. The exim bank is able to wait longer to sell the supply of a good so they can price the good appropriately. If a company is forced to sell their product to meet cash/liquidity needs then they would sell their goods at an unwarranted discount.

How is it preventing oversupply?  It is just a re-seller of that supply, if it consumes nothing productively, it is just an intermediary middleman centralizing foreign counterparty risk at the expense of the national treasury?  It merely adds waste to the economic system in which it operates.

Then why (over)claim that it reduces supply when you clearly state it doesn't do anything more than put it on a shelf to rot and become obsolete, just like it would on the producer's shelf, and perhaps ultimately be sold?  This is not reducing supply, only productive use does that.  This is not a public good, it is the opposite, a public taking.
It is a politically controlled market distortion at public expense for private benefit, subject to lobbyist influence and plain corruption.  Government ought not be in this business, it is wrong and a misuse of power.

I was in the "What is it?" / "I don't care" camp until all these ExIm apologists came along with these mealy-mouthed justifications.  The more they write, the more reprehensible it seems.  Should just stop and hope that folks don't see it for what it is.  The more you explain, the worse it appears.

Not much patience for all this lipstick on a pig.

The ex-im bank is able to release the supply at a slower pace then the original producer would be able to. The producer would have to pay it's employers and it's suppliers; if it's buyer is not able to pay then it would need to rush it's now unsold goods to the market in order for it to pay it's bills.

How is it preventing oversupply?  It is just a re-seller of that supply, if it consumes nothing productively, it is just an intermediary middleman centralizing foreign counterparty risk at the expense of the national treasury?  It merely adds waste to the economic system in which it operates.

This hits it on the nail. All the export-import really does is guarantee sales for US companies to foreign firms. If the foreign firm were to fail and/or be unable to pay then the export-import bank would essentially buy the goods from the US company and attempt to sell them itself. This prevents potential oversupply of goods which is a major cause of recessions.

This is correct. If it was not for the ex-im bank orders for products would go to companies based overseas and employees based overseas would be used to fill these orders. Period.

What the ex-im bank does is reduce counter-party risk for American companies. If for example a foreign company wanted to buy $100 million dollars worth of light-bulbs from GE, then GE could use the ex-im bank to guarantee this payment while they are producing these light-bulbs. If GE's customer were to default then GE would still get paid and the light-bulbs would be given to the ex-im bank to sell or otherwise dispose of. In this situation, without the ex-im bank, GE would either need to take on more credit risk, produce a better light-bulb, charge less then the competition, or a combination of the three to be on a level playing field then it's competitors. If they did not then they would be at a disadvantage and would likely receive much fewer sales as a foreign company could buy the light-bulbs of a similar quality at a similar price on better terms from someone else. There is no way to use efficiency to solve this issue.

No it really doesn't put our companies at a disadvantage. As stated above US companies would need to offer payment terms that are somehow better then what would otherwise be available if it were not for the export0import bank.

Doing it also puts "our" companies at an international disadvantage.
It marries them to the state, making them dependent on subsidy so fatter and lazier than needed.  That it does so by killing off other companies that would have survived but for the marginal tax to support the favored few (minus the losses by running it through the bureaucracy) is a bit of economic self destruction.

Doing this sort of thing does accomplish something, it creates the new industry of government begging for the folks that lobby for these handouts.  GDP measures that as a plus, but it oughtn't.  It produces nothing.

Doing it also puts "our" companies at an international disadvantage.
It marries them to the state, making them dependent on subsidy so fatter and lazier than needed.  That it does so by killing off other companies that would have survived but for the marginal tax to support the favored few (minus the losses by running it through the bureaucracy) is a bit of economic self destruction.

Doing this sort of thing does accomplish something, it creates the new industry of government begging for the folks that lobby for these handouts.  GDP measures that as a plus, but it oughtn't.  It produces nothing.

If we don't do this then our companies will be at an international disadvantage. if they are at a disadvantage like this then they would need to employ less people, which would shrink the tax base. if the tax base is less then in order to collect the same tax revenue overall tax rates will need to rise.

Just because other countries tax their people in order to sell things to us at under-market prices, we should that favor in return?
Is the goal is to move manufacturing into this country in those industries so that we can get the secrets of foreign production techniques?
Is there a special interest for subsidizing a particular industry at the expense of all the others for strategic reasons?

If it were to go wouldn't it put American companies (and the US economy) at a competitive disadvantage? Hint: the answer is yes because most other industrialized countries have similar subsidies. The result of shutting the ex-im bank would be that the US economy would grow less then it otherwise would and jobs would be relocated overseas that would otherwise be competitive in the US.

If it were to go wouldn't it put American companies (and the US economy) at a competitive disadvantage? Hint: the answer is yes because most other industrialized countries have similar subsidies. The result of shutting the ex-im bank would be that the US economy would grow less then it otherwise would and jobs would be relocated overseas that would otherwise be competitive in the US.

It should go. Its just another market distorting corporate subsidy at taxpayer expense.

Should it stay or should it go? It is little more than thinly disguised corporate welfare.

The issue is really not so much about corporate welfare, but more supporting the american economy. Other major countries have similar programs so their local companies gain the same types of advantages that the export-import bank gives american companies. The ex-im bank does give support to american companies but taing this support away would put america at an economic disadvantage.

It does do much more outside of Boeing. A vast majority of its actual loans don't go to Boeing at all. Boeing primarily benefits from the guarantees, and Boeing is a major industry for the US overseas, as is GE and Caterpillar (which face heavy foreign competition in foreign markets). But i've worked with plenty of smaller businesses that benefit from Ex-Im when trying to compete in Africa. The dollar amounts are just smaller since they are, well, much smaller businesses and if you want to look at specific dollar amounts instead of the actual number of businesses serviced then yeah, of course it is going to appear a bit lopsided.

I am not sure it is "much more" outside of Boeing, given that a supermajority (65%) of its financing guarantees support the sale of Boeing widebody aircraft (a market where there is only one real competitor--Airbus), and almost 90% of the total goes to Boeing, GE and Caterpillar.

Ex-Im finances much more outside of aviation sales, but we absolutely do have competitors in aviation sales as well, they just tend to be more European and Russian.

I guess I was not aware of all of the widebody, long-range aircraft being made by Chinese, Japanese and South Korean concerns...

The foreign airlines are getting planes much cheaper than U.S. airlines. And there are significant credit risks in the U.S. market, albeit somewhat different risks, or else the financing rates for established airlines would not be so much higher.

Slightly reduced sunk costs are hardly a barrier to free market competition between airlines. And you are also ignoring the fact that the primary point here is not subsidies. These airlines aren't necessarily getting planes cheaper than US airlines. What the loan gauntness do is reduce risk for US companies, and it is that risk, not the actual cost of the plane, that usually prices them out of the market. And those risk costs aren't present in US markets and aren't something US airlines have to deal with when buying their capital inputs. Your argument rests on some sort of market symmetry, but that symmetry doesn't exist.

A rose by any other name...

Boeing is not a foreign competitor, but the foreign airlines it sells jets to are foreign competitors of U.S. airlines. The foreign competitor gets a subsidy to buy jets that amounts to a buy eight, get one free card. The U.S. airlines get no such subsidy and have to pay higher interest rates on jet leases and purchases. Are you truly arguing that that this does not create a competitive advantage for the foreign companies?

Boeing isn't a foreign competitor. Nor are these businesses operating in the same markets (generally speaking). This also isn't a direct subsidy, it is an indirect one through risk management guarantees.

The term "corporate welfare" is a politicized term and doesn't really have anything to do with this subject. The fact that you feel the need to phrase this subject in some sort of politicized context before discussing its merits is a bit telling.

I don't think it is reductionist to point out that subsidizing upstream equipment purchases for the foreign competitors of U.S. companies is much different from tariffs on intermediate goods. Both have the same downstream effect of favoring one American business over another.

Nope. I'm also a little curious as to why you feel the need to attach it to some sort of over-reductionist soundbyte in order to discuss it. Why can't we just talk about what it actually does and why it is there?

So it's corporate welfare?

So you oppose free trade? Why not just increase tariffs then?

So is the Export-Import Bank corporate welfare or a jobs program?

We lent Boeing only $291 million out of about $8 billion total in 2013. I think you are thinking more of guarantees that we use to help with risk management of which Boeing is a big benefactor.

In theory it should help create American jobs by expanding foreign markets for US goods.
In practice it is little more than corporate welfare. One company -Boeing has received over 50% of funds in recent years.

So is the Export-Import Bank corporate welfare or a jobs program?

That's because it doesn't in any meaningful way. Especially when a basic cost-benefit analysis is done and the fact that it only represents 2% of our overseas exports is taken into account. It is a pretty small (relatively) operation; like I said: a niche market, but vital to breaking into emerging higher risk markets and in competing with foreign companies that receive MUCH greater financial assistance from their home countries. It also netted over $1billion in government revenue last year. US businesses are already disadvantaged in overseas emerging market financing, take this away, and we'll be even less competitive which I highly doubt would be good for US jobs.

You didn't really address the point about it costing U.S. jobs or putting U.S. businesses at a disadvantage versus their foreign competitors.

On my personal note: I have work experience with the US Ex-Im bank in helping US businesses establish footholds in Africa (like Caterpillar, and GE). We dish out about $15 billion in subsidized loans for our companies overseas and to companies that have purchase guarantees for US products. China meanwhile dishes out $111 billion. We can't even compete in subsidized financing with South Korea. Our Ex-Im operations are VERY modest when it comes to international markets.

As a personal aside, I used to do legal work for one of the largest infrastructure construction companies in the world. It is based in a Western European country and has a market cap in the billions, but it still received Ex-Im financing for equipment purchasing in many markets in which it operates. This made it a more competitive bidder in developing world infrastructure projects than U.S.-based companies.

Ex-Im financing is a pretty niche market. It's subsidized loans aren't for competition against other US businesses (we leave that financing to the private market), they are for competition against foreign businesses which also enjoy much larger subsidies from their host countries.

In trying to justify its aircraft financing program, the Bank has made numerous inaccurate and misleading arguments. Consider its argument that its financing supports jobs here at home. Delta knows firsthand that the Bank’s statements on this front are unreliable.

The Bank has repeatedly touted two deals it financed involving Delta TechOps and the Brazilian airline GOL, asserting that these guarantees “support[] an estimated 400 jobs at Delta TechOps, according to Ex-Im Bank’s jobs-calculation methodology” – which GAO has criticized. Contrary to the Bank’s public pronouncements, however, that financing did not support, much less create, a single job at Delta TechOps. The guarantees helped GOL to issue cheap debt in 2012, ostensibly to pay the costs of a Delta TechOps contract to provide maintenance service for GOL’s narrowbody aircraft engines. The truth is that the contract was signed in 2010 and the Bank’s support arrived only after the contract had been finalized, the work was underway, and payments were being made. If the Bank is willing to publicize a deal where it is so wrong on the facts, it raises the question of what the Bank is doing in the vast majority of transactions as to which it discloses little if any information. Worse, the Bank reported to Congress that the reason it approved these two guarantees was to “overcome maturity or other limitations in private-sector financing.” That statement is misleading (if not outright false) because it implies that GOL needed help to pay its bills or that Delta would have lost the deal without the Bank’s support. In fact, the contract was signed in 2010 for a five-year term, and was being fully performed, without GOL’s needing, seeking, or receiving Ex-Im support. Although the Ex-Im guarantees were nominally related to the 2010 TechOps contract, their actual effect was to provide GOL with low-cost working capital in 2012 and beyond. The Bank’s statutory justification and motive to provide financing for a contract that was already in place, was proceeding in a normal commercial manner, and did not involve competition from a subsidized foreign competitor is not apparent to us.

Exim banks of different countries would need to close down at the same time....
Otherwise, the country which closes it down will be at a disadvantage.

Should it stay or should it go? It is little more than thinly disguised corporate welfare.