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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