WASHINGTON (Reuters) - Leaders of the U.S. House of Representatives said on Friday they reached a bipartisan deal to reauthorize the U.S. Export-Import Bank through September 30, 2014, and gradually increase its lending cap to $140 billion from the current $100 billion.
The deal, negotiated by Republican House Majority Leader Eric Cantor and Democratic House Minority Whip Steny Hoyer came just weeks before the bank’s temporary charter was set to expire.
The nearly 80-year-old government bank provides direct loans and credit guarantees to help U.S. exporters make sales in oversea markets that private lenders consider too risky. Boeing Co is the bank’s biggest customer and many other U.S. manufacturers also rely on its services.
Bank officials have warned that without a rise in the ceiling, they could soon reach the current lending cap of $100 billion, forcing them to stop supporting U.S. exports.
Efforts to renew the Export-Import Bank’s charter, which expires May 31, had run into objections from conservative Republicans, who say it is unnecessary government interference in the market. Delta Air Lines had raised concerns, saying it had been hurt by low-interest Eximbank loans to foreign carriers.
The Senate must also approve reauthorization, but the House agreement increase chances a bill reauthorizing the bank will be on President Barack Obama’s desk before the bank’s charter expires later this month.
Last year, the Senate Banking Committee unanimously passed an alternative bill, which was supported by the Obama administration and would have reauthorized the bank for four years while raising the lending cap to $140 billion in one step.
Republicans and business groups praised the House deal.
“Action on this agreement is necessary to promote American exports and remove a threat to the creation of American jobs,” Republican Speaker of the House John Boehner said in a statement urging all House members to support the package.
The National Association of Manufacturers, which has backed reauthorization in the past, said the move would boost job growth.
“Leaders on both sides of the political aisle came together today to prevent the unilateral economic disarmament of the United States on the issue of export financing,” the group said.
The Chamber of Commerce and the Business Roundtable also issued statements praising the deal.
The plan raises the bank’s lending cap to $120 billion through the end of the current fiscal year in September and allows it to rise to $140 billion in equal increments over the next two years as long as the bank maintains a default rate of less than 2 percent, according to a fact sheet provided by Cantor’s office.
The proposed lending cap increases also depend on the bank submitting a business plan to Congress and responding to a review by the Government Accountability Office on its risk management practices.
The bill, in a nod to Delta’s demands, directs the U.S. Treasury Department to initiate and pursue multilateral negotiations for the purpose of reducing and then eliminating government export subsidies for aircraft and ultimately ending all government export subsidies. It requires the Treasury secretary to report annually on progress in those talks until export subsidies are eliminated.
The Cantor-Hoyer bill contains reporting provisions aimed at preventing defaults that would leave the U.S. taxpayer on the hook for bad loans. If the overall default rate equals or exceeds 2 percent, Eximbank must implement a corrective plan and provide monthly updates to Congress. If the situation is not corrected within six months, a third party would be brought in to audit the bank.
The bill also requires the bank to give interested parties the opportunity to comment on any transaction over $100 million in a bid to ensure U.S. companies are not put at a competitive disadvantage by a particular sale. Delta complains it has been hurt by the bank’s lending to some foreign carriers such as Air India.
Another provision requires all companies that do business with the bank to certify they do not do business with Iran, further isolating that country from the international business community due to Western concerns about its nuclear program.
Editing by Peter Cooney