Toomey defies Boeing on Ex-Im Bank

Boeing Co., whose helicopter factory in Ridley, Delaware County, is the largest industrial employer in the Philadelphia area, has a lot at stake in the fate of the Export-Import Bank of the United States, writes Philip A. Baggaley, analyst at Standard & Poor's Rating Services. (Revised and expanded:)

"If the Ex-Im's authorization lapses, Boeing Co., the largest beneficiary of credit support" from Ex-Im, won't have borrowing problems "in the near term," given all the cheap money now in the market, Baggaley notes. "However, in the long term, Boeing might have to step up its direct customer financing," especially in the next recession, when private money tends to dry up, leaving government agencies as prime aircraft lenders. At such times of falling sales and weak demand, "a significant expansion of Boeing Capital's (lending) could contribute to a downgrade of Boeing" without Ex-Im to back export credits. Boeing is one of the big recipients of Ex-Im credit guarantees, though this doesn't necessarily support the military-helicopter business in Delco.

Sen. Pat Toomey, R-Pa., is a determined foe of the Ex-Im Bank. Toomey is one of the "certain Senators and members of Congress, mostly Republicans, (who) would like to end the bank's activities," by failing to reauthorize Ex-Im by a June 30 deadline, as Baggaley puts it.  (See a recent Toomey denunciation of Ex-Im as "one of the most egregious forms of corporate welfare in our government, effectively allowing politically-favored companies to receive generous subsidies at the expense of other American businesses and workers" in The Hill).

Does he dislike the bank enough to hurt Boeing?  Privately, Toomey aides say S&P's own report makes clear that Ex-Im backs risky loans and encourages Boeing to make sales deals it wouldn't otherwise, leaving taxpayers to suffer losses if the buyers default. Also, they note that Boeing Ex-Im deals are mostly for airliners built outside Pennsylvania, not so much for helicopters built here. Plus, they note that Ex-Im has been resistant to Toomey-backed reforms that would limit its lending to focus on better credits, so the senator and his allies are convinced the bank won't be reformed under the Obama administration and that it's better to kill it.   

UPDATE: Statement from Sen. Toomey, doesn't directly address Boeing: "When running for office in 2008, President Obama once called the Export-Import bank 'little more than a fund for corporate welfare.' And while his views have changed after spending years in Washington, I still believe that American taxpayers – not the largest and most politically-connected corporations – should come first. The Ex-Im bank puts taxpayers at risk by providing subsidized financing deals for big companies that waste money and pick winners and losers. People across Pennsylvania are sick of corporate welfare in Washington and winding down the Ex-Im bank would be a significant step toward addressing this serious issue."

EARLIER: By contrast, the staff of U.S. Rep. Pat Meehan, R-Pa., who represents the district that includes the local Boeing plant, said they see Ex-Im as key to Philadelphia-area exports. "Congressman Meehan has been a vocal supporter of the Export-Import Bank and has spoken out on the need to reauthorize it before it expires at the end of the month. He's also an original cosponsor of legislation that would reauthorize the bank," spokesman John Elizandro told me.

Boeing rivals like Airbus enjoy foreign-government financial support (I've asked a couple of private groups that send me regular Ex-Im hate mail if they want to see Airbus beat Boeing, no reply so far). Ex-Im in recent years has been a significant lender to the Philadelphia area's two other, private-market-focused helo makers, Sikorsky (which faces big layoffs) in Coatesville, and Agusta-Westland in Northeast Philadelphia. 

Boeing won't comment on S&P's stand. But spokesman Tim Neale says Boeing agrees "that reauthorization of Ex-Im is important to our company and to the 14,800 other U.S. companies that support our products and services." 

Neale added: "Even in the current environment, where commercial financing is available for most airplane transactions, there are airlines around the world that need a government loan guarantee to secure a commercial loan. Our chief competitor, Airbus, has three government export credit agencies supporting their sales with customer financing, so eliminating Ex-Im would create a significant competitive challenge for us.

"Even a short-term suspension of the Bank's ability to do new business after June 30 would be problematical to Boeing and other U.S. exporters because it will add to customers' anxiety about the future of the bank.

"We will do all that we can to help our airline customers secure commercial loans, which is always the preferred option, and we also may be able to provide some short-term financing ourselves. However, there are real limits to how much of that we can do. Capital tied up in customer financing is capital that's not available for product development...

"We do still believe that Congress will reauthorize the Bank in the weeks ahead. Thousands of businesses across the country have come to Washington to urge their elected representatives to vote for Ex-Im, and we know from the feedback all of these exporters have gotten that there's strong support in both the Senate and the House for the bank." In the Senate test vote last week, "two-thirds of the Senate voted in favor of reauthorization, and just yesterday Majority Leader McConnell indicated that legislation reauthorizing the bank could move on a pending highway bill next month."

From a recent Rep. Meehan statement his office sent me: "The Export-Import Bank has supported more than a million jobs nationwide over the last five years and 35,000 jobs in Pennsylvania alone. It's a vital tool the enables American businesses to compete on a level playing field with competitors overseas. It isn't a drain on the taxpayer – it covers the cost of its own operations and runs an annual surplus. Only in Washington would a program that supports good American jobs and exports be allowed to expire."

Toomey's fellow U.S. Sen. Bob Casey (D-Pa.) is also an Ex-Im supporter.