H.R. 597, Reform Exports and Expand the American Economy Act

H.R. 597

Reform Exports and Expand the American Economy Act

Date
October 27, 2015 (114th Congress, 1st Session)

Staff Contact
John Huston

Floor Situation

On Tuesday, October 27, 2015, the House will consider H.R. 597, the Reform Exports and Expand the American Economy Act, under a rule. The rule adopts an amendment in the nature of a substitute consisting of the text of H.R. 3611, the Export-Import Bank Reform and Reauthorization Act of 2015, as introduced.  H.R. 597 was introduced by Rep. Stephen Lee Fincher (R-TN) on January 28, 2015 and was referred to the Committee on Financial Services.   On October 26, 2015, the House voted to discharge the Committee on Rules from consideration of H. Res. 450, which provides a rule for consideration of H.R. 597, by a vote of 246 to 177.

Bill Summary

H.R. 597, as amended by the rule, reauthorizes the Export-Import Bank (Bank) of the United States through fiscal year (FY) 2019. Additionally, the bill makes various changes to the Bank’s charter, including:

Reduction in Authorized Outstanding Loans—The bill reduces the amount of outstanding loans, guarantees, and insurance the Export-Import Bank is permitted to hold by $5 billion, from $140 billion to $135 billion, for fiscal years 2015 to 2019. The bill also provides provisions to reduce the Bank’s lending if certain default rates exceed 2 percent.

Reserve Requirement—The bill requires the Bank to maintain a reserve, to protect against future losses, that is at least 5 percent of the aggregate amount of disbursed and outstanding loans, guarantees, and insurance held by the Bank. This provision will be effective one-year after enactment.

Independent Audit of the Bank’s Portfolio—The bill requires the Inspector General of the Bank to conduct an audit or evaluation of the Bank’s portfolio risk management procedures within one-year of enactment, and at least every three years thereafter.

Increased Lending to Small Business—The bill requires the Bank to increase amounts available for small business loans, guarantees, and insurance from 20 percent of its total loan authority to 25 percent.

Establishment of an Office of Ethics—The bill establishes an Office of Ethics within the Bank, which shall oversee all ethics issues within the Bank.

Risk Management Committee and Chief Risk Officer—The bill establishes a Chief Risk Officer and a Risk Management Committee to oversee all issues relating to risk within the Bank. The bill requires this entity to conduct periodic stress testing on the entire Bank’s portfolio.

Reinsurance Pilot Program—The bill allows the Bank to conduct a pilot program through FY 2019 to evaluate the usefulness of mitigating risk through reinsurance practices. The bill places limits on the pilot program and requires the Bank to submit an annual report to Congress on the program.

Government Accountability Office (GAO) Study—The bill requires the Comptroller General to submit a report to Congress reviewing the controls used by the Bank to prevent, detect, and investigate fraudulent applications for loans and guarantees within four years of enactment and every four years thereafter.

Background

The Export-Import Bank of the United States (Bank) is a Corporation owned by the United States Government that is designed to assist in the financing of U.S. exports of goods and services to support U.S. employment. The Bank is intended to provide financing to certain entities when the private sector is unwilling or unable to undertake such financing; or to meet foreign competition by countering government-backed financing offered by other countries to their companies.[1] The Bank’s charter expired on July 1, 2015. Since that time the Bank has issued no new loan, guarantee, or insurance commitments, but has continued administering and servicing existing obligations.[2]

The Bank’s charter stipulates that its financing must have a “reasonable assurance of repayment” and should supplement, and not compete with, private capital, among other requirements. In fiscal year 2014, the Bank reported authorizing approximately $20.5 billion for 3,746 transactions of finance and insurance, to support an estimated $27.5 billion in U.S. exports and approximately 164,000 U.S. jobs. Its overall outstanding portfolio was $112 billion—below the $140 billion statutory cap for that year.[3]

H.R. 597 is similar to an amendment adopted in the Senate to H.R. 22, the Senate’s long term surface transportation reauthorization bill. The amendment passed the Senate by a vote of 64 to 29 on July 27, 2015. The Senate passed the bill, as amended, by a vote of 65 to 34 on July 30, 2015. The House has not acted on the Senate-passed bill.

According to the bill sponsor, “Each day that Congress fails to take action to reform and reauthorize the Ex-Im Bank, more and more companies of all sizes will be forced to make these same tough decisions. Nearly 90 percent of Ex-Im Bank transactions are made to American small businesses. By failing to act, Congress has tied the hands of thousands of our nation’s best job creators, making it even harder for them to compete on a level playing field against our global competitors who are backed by their own export credit agencies.”[4]

According to Financial Services Chairman Jeb Hensarling, “Ex-Im is not only corporate welfare, it is corporate welfare for foreign companies and countries.  There’s no doubt some U.S. companies receive a benefit from Ex-Im, but there’s also no doubt Ex-Im hurts other companies and their workers.  In fact, more are hurt than helped, and nearly 99 percent of all U.S. exports are financed without Ex-Im. [. . . ] As more Americans and more members of Congress learned about Ex-Im’s political lending, corruption and fundamental unfairness, the more they wanted it to expire.  Now the challenge for supporters of a competitive free-market economy is to make sure Ex-Im stays expired.  Ex-Im is a part of yesterday’s economy.”[5]

For more information, click here for a CRS fact sheet on the Bank.

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[1] See CRS Report, “Export-Import Bank: Overview and Reauthorization Issues,” March 25, 2015.
[2] See CRS Report, “Export-Import Bank Reauthorization: Frequently Asked Questions,” July  15, 2015.
[3] See CRS Report, “Export-Import Bank: Overview and Reauthorization Issues,” March 25, 2015.
[4] See Rep. Stephen Fincher Press Release, “Fincher Calls for Ex-Im Vote After GE Announces to Move 500 American Jobs Overseas,” September 15, 2015.
[5] See Financial Services Committee Press Release, “Hensarling Statement on Expiration of Export-Import Bank’s Charter,” June 25, 2015.

Cost

A Congressional Budget Office (CBO) cost estimate is currently unavailable.

Additional Information

For questions or further information please contact John Huston with the House Republican Policy Committee by email or at 6-5539.