Toomey Opposes Pryor for EXIM Vice President
If Confirmed, Pryor Would Provide Quorum EXIM Requires to Vote on New Domestic Financing Program
Washington, D.C. – U.S. Senate Banking Committee Ranking Member Pat Toomey (R-Pa.) today urged his colleagues to oppose the nomination of Judith Pryor for First Vice President of the Export-Import Bank of the United States (EXIM).
On
March 10, Senator Toomey sent
a letter to EXIM raising concerns over a new program to finance
domestic manufacturing and domestic infrastructure, areas far outside EXIM’s
statutory mandate. The letter asked for more information about the proposal and
urged EXIM not to present it to its Board of Directors without first publishing
a comprehensive framework for the program and receiving public comments.
On
March 23, EXIM sent Senator Toomey a response,
which raises more concerns about the program’s nature. EXIM also refused to
acknowledge the Ranking Member’s request for public comment, and proceeded to
schedule a vote on the program for April 14, even though it currently lacks a
necessary voting quorum. If Ms. Pryor is confirmed before EXIM’s Board of
Directors’ meeting on April 14, EXIM would then have the quorum to approve the
new program.
Ranking
Member Toomey’s remarks, as prepared for delivery:
I
rise today to discuss the nomination of Judith Pryor to serve as First Vice
President of the Export-Import Bank of the United States.
EXIM
was established to help U.S. exporters by providing financing to foreign buyers
in order to purchase American products. But I continue to remain deeply
skeptical of EXIM’s mission and its role in the global economy.
EXIM
claims that it only takes risks that private lenders are unable or unwilling to
take. We should stop right there and ask ourselves: If private lenders are
unwilling or unable to take a risk, why should taxpayers be forced to take that
risk?
Yet
at the same time, EXIM also claims it only makes safe bets. It's impossible to
do both. EXIM can't only take transactions so risky that no one else will do
them, and at the same time only be doing safe transactions.
EXIM
wins business by systematically underpricing risk. That's why borrowers go to
EXIM, instead of any number of private lenders that will not offer deals on the
same terms as EXIM. That’s why our largest banks go to EXIM for loan
guarantees.
The
EXIM terms are too good to be true—at least in the private sector. That is
evident by the transactions EXIM approves.
In
2021, EXIM financed a deal guaranteeing an $82 million loan from JP Morgan to
Qantas for the purpose of buying jet engines from General Electric. JP Morgan
is the largest bank in America. Qantas is the largest airline in Australia. And
GE is one of the largest industrial companies in the world.
Why
do these companies need the American taxpayers to subsidize their deal? The
obvious answer is they don’t.
These
are some of the biggest, most sophisticated companies in the world with full
access to the capital markets. They didn’t turn to EXIM because they were
unable to secure private financing, they turned to EXIM because they got better
terms than what the private markets were offering.
As
if that isn’t galling enough, EXIM has now decided that the U.S. markets cannot
meet our domestic financing needs. I remind you, the U.S. capital markets are
the largest, deepest, most sophisticated in the world. Anyone with a bright
idea and a business plan can raise capital in the U.S.
According
to the Securities and Exchange Commission’s Office of Small Business Capital
Formation report for Fiscal Year 2021 there were $2.2 trillion in private
offerings of debt and equity, and $1.7 trillion in IPOs and other registered
offerings.
And
then of course there are the banks. According to the Fed, there are about $2.5
trillion in outstanding commercial and industrial loans as of March 16.
The
U.S. is not a market starved of capital, it is a market awash in cash.
Nevertheless, the Biden administration has instructed EXIM to develop a new
Domestic Financing Program to expand the reach of the bank.
The
proposed Domestic Financing Program would support creating or expanding
domestic manufacturing businesses and infrastructure projects as long as there
is the expectation that some arbitrary portion of goods produced will be
exported. This can include indirect exports. That is, an EXIM financed
manufacturer won’t have to export a thing, so long as its customers do.
This
is beyond mission creep. As George Will observed in the Washington Post today,
this is “mission gallop.” Such a program subverts Congressional intent by
straining the interpretation of EXIM’s charter to such an extent as to make it
meaningless.
There
is no reason that EXIM should be providing domestic financing—none. As
discussed, we live in a highly developed market economy in which promising
businesses have access to capital on competitive terms.
Just
like all of EXIM’s other programs—maybe even more so—EXIM will only win
domestic financing business if it finances bad deals that the private sector
refuses, or it underprices the risk associated with the deal.
Earlier
this month, I sent a letter to EXIM’s President and Chair Reta Jo Lewis
requesting that EXIM respond to a series of questions I have about this
unprecedented program, and withhold Board consideration of the Domestic
Financing Program at least until a comprehensive framework is published for
notice and comment.
Before
the board votes, shouldn’t we all see exactly how this program is going to
work, how expansive it will be, and how many private lenders will be shoved
aside so that EXIM can take on their business?
While
EXIM responded to my questions, there was complete silence on my request to
withhold Board consideration until a robust policy framework is provided to the
general public. Then only 3 business days after receiving EXIM’s response to my
questions . . . a Board of Directors meeting is noticed for April 14th
to consider and likely approve this Domestic Financing Program.
It’s
no wonder why the Democrats are trying to push through Ms. Pryor’s nomination.
It is my understanding that EXIM’s Board of Directors needs at least three
Senate confirmed nominees to change or amend EXIM policies, procedures, bylaws,
or guidelines, of which the new domestic program would qualify.
EXIM
currently only has two Senate confirmed board members. Without Ms. Pryor they
cannot adopt this new domestic program.
Turning
to our nominee, I am concerned that Ms. Pryor will continue to support EXIM’s
unacceptable practice of providing taxpayer-financed subsidies to some of the
world’s largest and most well-capitalized companies. And, I fear she will move
EXIM in the direction of supporting domestic financing.
Ms.
Pryor has previously served on EXIM’s Board of Directors. And during that time,
the JP Morgan, Qantas, and General Electric loan guarantee that I mentioned
earlier was supported by Ms. Pryor herself.
I
asked Ms. Pryor a simple question during her nomination hearing. And that is:
Do these incredibly large entities have access to private capital?
She
acknowledged that my question was a simple one, yet she refused to answer it.
Why would she refuse to answer such a simple question?Because she did not want
to admit that these massive multinational firms have access to private capital,
but EXIM still financed the deal.
I
am also concerned about weakening one of the few taxpayer protections built
into EXIM’s charter. The charter includes a 2 percent default rate cap, which
when breached precludes EXIM from providing additional lending.
Recently,
EXIM’s default rate has trended towards that 2 percent cap. And that’s why, for
a second year in a row, the President’s budget requests Congress to temporarily
waive this taxpayer protection.
Rather
than address EXIM’s deteriorating book of business, Ms. Pryor supports the
Biden administration’s deeply flawed request to double EXIM’s statutory default
rate cap from 2 percent to 4 percent.
Congress
has laid out a clear corrective measure in the event the default rate cap is
breached—and that is—to freeze EXIM’s book of business. Is EXIM or the Biden
Administration proposing to fix the problem? Of course not! They just want to
ignore it.
Ms.
Pryor is clearly well qualified to be the First Vice President at EXIM.
However, the nomination process has not alleviated my concerns that she would
advance a badly flawed agenda at EXIM.
The
Biden administration and its supporters need Ms. Pryor in order to advance the
Domestic Financing Program. That is one of the reasons I cannot support her
nomination.
And
I encourage my colleagues to vote against Ms. Pryor.
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