Eximbank as a Public Enterprise: The Role of Congress and the Executive Branch
Eximbank as a Public Enterprise
Eximbank as a Public Enterprise: The R ole of Congress and the Executive Branch
Jordan Jay Hillman 0 1 2
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Eximbank as a Public Enterprise: The
Role of Congress and the Executive
Jordan Jay Hillman*
Eximbank, a wholly-owned government corporation with the status of
an independent agency, operates under the charter of the Export-Import
Bank of 1945, as amended In this article,whichforms apartofhis broader
study of the Bank, Professor Hillman examines the influence of Congress
and the Executive Branch on Eximbank'spolicies and decisions. He
analyzes the development of the statutoryprovisions governing capitalization,
as budget status andannualprogramauthority. He then takes up the
influence ofthe executive branch,as exercisedthrough the President'spower to
appointprinc7alofficers and boardmembers to serve at his pleasure,the
OMB budgetfunction and the "coordinating"authorityofthe
NationalAdvisory Council on InternationalMonetary and FinancialPolicies.
* Professor of Law, Northwestern University School of Law, and Professor, Northwestern
University Transportation Center. This article is adapted from Chapter III, Eximbank in an Eraof
Competitive Export Financing(I). The Role of Congressandthe Executive Branch, as it appears in
the recent publication, THE EXPORT-IMPORT BANK AT WORK: PROMOTIONAL FINANCING IN THE
PUBLIC SECTOR, by Jordan Jay Hillman (Greenwood Press, Westport, CT, 1982). It is reprinted
by permission of the publisher, Greenwood Press, a division of Congressional Information
Service, Inc. The research project resulting in the entire publication and article was supported by a
grant from the Alfred P. Sloan Foundation, New York, New York, on the subject of government
The Export-Import Bank of the United States ("Eximbank" or
"Bank"), as we know it today, exists as an "independent agency" of the
United States whose operations are conducted under the statutory
charter of the Export-Import Bank Act of 1945, as amended
("ExportImport Bank Act" or "Act").' Its origins precede-World War II,
however, and trace back to the creation by Executive Orders in 1934 of two
separate Export-Import Banks of Washington.2 Their creation was
under the authority of the National Industrial Recovery Act, intended
as a centerpiece of President Roosevelt's New Deal package of
economic recovery legislation. 3
The first of these Banks was intended to provide export financing
to the emergent Soviet market, a market in which high risk and a lack
of convertible currency constituted strong impediments to private
sector financing. The second was originally intended for the single
purpose of financing Cuban silver purchases for coinage. The two Banks
were soon combined and, with encouragement from United States
exporters, the single remaining Bank was expanded into a generalized
agency for export financing to all world markets.
From 1934 to 1939, the Bank operated in support of United States
trade expansion. During World War II, however, there was a shift in
its operations in order to support the United States war effort. It
provided loans needed by United States allies for their own essential
purposes and for the development and United States import of strategic
war materials. From 1945 to 1954, the Bank, under its new statutory
charter, served largely as an instrument of foreign aid, providing vital
reconstruction loans for war devastated economies. Since 1955, with
the ultimate resurgence of those economies, the Bank's mission has
shifted increasingly back to the support of trade.
The most significant component of the Bank's financial support
programs today is the extension of loans, with the Bank generally
assuming risks that commercial institutions are unwilling to undertake.
Characteristically, the loans are at concessional interest rates and for
long maturities. Such loans are not generally available from
commercial lenders. Further, the Bank assumes certain risks in order to draw
private sector funds to export financing. Eximbank often participates
in particular loan transactions with commercial banks by funding
longer maturities and by "blending" higher commercial rates with its
lower concessional rates. The Bank also draws private sector funds to
export financing through loan guarantees and insurance.
Throughout its history, in varying degrees of relative importance,
the rationale for the Bank's role has been twofold: (1) the perceived
failure of private sector financial markets, for whatever reasons, to
meet the financing needs of export trade; and (2) non-market
competitive distortions, especially those thought to result from foreign
government-subsidized export financing programs. In recent years the second
rationale has assumed the greater importance. Nevertheless,
particularly as to the export of heavy, costly capital goods requiring large
capital aggregations (e.g., nuclear and other power plants) and lengthy
repayment periods (especially to less developed countries), the first
rationale is still widely viewed as an independent raison d'etre.
As a prototypical public enterprise, if such prototypes can really be
identified, the Bank has historically sought to balance its promotion of
the presumed or actual welfare benefits of export expansion with the
maintenance of its own financial self-sufficiency. In the wake of
escalating borrowing rates and the pressure on lending rates from
competing foreign government lending agencies, its financial solvency has
eroded in recent years. With growing attacks from opposite quarters
on its competitive effectiveness and on the actual utility of its programs,
the question of how well the Bank allocates its resources in the interest
of welfare enhancement has taken on new importance. Putting aside
for present purposes the thorny issues of the opportunity costs
associated with its non-market allocation of resources, there remains this
critical question: To what extent does Eximbank succeed in limiting its
intervention and support to minimum subsidy levels? "Minimum
subsidy levels" is here taken to mean the minimum support required for
the completion of market- or welfare-justified export transactions
which would otherwise be lost because of (i) defects in domestic export
financing markets, or (ii) nonmarket barriers, especially competitive
foreign government-subsidized financing.
Any assessment of the quality of Eximbank's performance must
begin with an understanding of how its policies and decisions are
mandated or influenced by external governmental authority. In the case of
Eximbank, that authority, for all practical purposes, consists of
Congress and the executive branch. There appear to be no reported cases
involving judicial intervention into the Bank's exercise of decisional
discretion with regard to its extension or refusal of financial support for
individual, or classes of, transactions.
This article, then, examines the working relationship between
Eximbank, Congress and the executive branch with a view toward
developing a basis for assessing Eximbank's performance.
It must be expected that the degree of economic objectivity infused
into Eximbank's policies, programs and decisions will be affected by
the types of informal influences inevitably generated through ongoing
relationships between any government agency and Congress, its
Committees and its members. The more prominent and formal mechanism
for imposing Congressional influence on the Bank, however, is found
in the operating standards of its statutory charter and the measure of
freedom or constraint imposed by the amount of resources available for
Reference has already been made to the 1945 Act as the origin of
the Bank's statutory charter. That Act, by establishing the Bank as a
statutory entity, subjected its structure and mission to a far fuller
measure of Congressional scrutiny than had previously been the case. It
also placed on-going statutory limits on the Bank's overall lending and
other program authority. Numerous modifications to the initial Act
were effected through amendatory legislation enacted between 1947
and 1968. The Bank's current operations in an era of competitive
foreign government-subsidized export financing have been most affected,
however, by four amendatory acts passed between 1971 and 1978.
These were: the Export Expansion Finance Act of 1971; 4 the
ExportImport Bank Act Amendments of 1974;1 an Act [of 1977] to Extend and
4 Pub. L. No. 92-126, 85 Stat. 345. The hearings which form part of the legislative history of
the Act areAmendthe Export-ImportBankAct of1945: Hearingson S. 4268 Beforethe Subcomm
on InternationalFinanceof the Senate Comm on Banking and Currency, 91st Cong., 2d Sess.
(1970) [hereinafter cited as S. 4268 Hearings];Amend the Export-ImportBank of1945: Hearings
on S. 19 andS. 581 Before the Subcomm. on InternationalFinanceofthe Senate Comm on
Banking,Housing,and UrbanAffairs, 91st Cong., 2d Sess. (1971); and ExportExpansionFinanceAct of
1971: Hearingson H.R 8181 Before the Subcomm. on InternationalTrade ofthe House Comm on
Banking and Currency, 92d Cong., 1st Sess. (1971). Reports related to the Act are S. REP. No.
1462, 91st Cong., 2d Sess. (1970); S. REP. No. 51, 92d Cong., 1st Sess. (1971); H.R. REP. No. 303,
92d Cong., Ist Seas., reprintedin 1971 U.S. CODE CONG. & AD. NEWS 1417; and H.R. REP. No.
435, 92d Cong., 1st Sess. (1971). Relevant floor proceedings are found at 117 CONG. REc. 28,892,
29,787-88, 29,794 (1971). The House-Senate Conference Report, CONF. REP. 435, 92d Cong., Ist
Sess. (1971), is reprinted in 1971 U.S. CODE CONG. & AD. NEWS 1432.
5 Pub. L. No. 93-646, 88 Stat. 2333 (1975). Hearings which preceeded the amendments of
1974 are Export-ImportBank ofthe U.S.: Hearingson S. 1890 Before the Subcomm. on
InternationalFinanceofthe Sen. Committee on Banking,HousingandUrbanAffairs, 93d Cong., 1st Sess.
1. Statutory Program Authority
The main recurrent issues in the periodic amendatory legislation
involve the renewal term for the Bank and the amount of the Bank's
statutory program authority. With regard to the first of these issues,
under the 1978 Act the Bank is authorized to carry out its statutory
functions through September 30, 1983, although its further existence
for the purpose of an orderly liquidation may continue as required
beyond that date.8
The Bank's current total program authority, also addressed in the
1978 Act, consists of an aggregate of not in excess of $40 billion in
loans, guarantees and insurance outstanding at any one time. There
are no absolute, categorical sublimits within this total as among loans,
guarantees and insurance. There is, however, a very practical
constraint on the issuance of guarantees and insurance in excess of a
stipulated statutory amount. Currently, the Bank's authority to charge only
25% of outstanding guarantees and insurance against the $40 billion
overall limit is limited to $25 billion. Any guarantees and insurance in
excess of $25 billion at any one time must be charged in full. Total
outstanding guarantees and insurance have remained well below these
levels. As of the close of Fiscal Year 1980, only $11.749 billion was
outstanding, reflecting an increase from $9.548 billion at the close of
Fiscal Year 1979.9
In theory, it is possible under the statutory ceiling for the Bank to
have outstanding a total of $58.75 billion in loans, guarantees and
insurance. This maximum would reflect outstanding loans of $33.75
billion and guarantees and insurance of $25 billion, which latter amount
would constitute only a $6.25 billion charge against the $40 billion
limit. As against this possibility, the Bank at the close of Fiscal Year
1980 had an unused program authority of $15.650 billion, reflecting
used authority of $21.413 billion in loans and the $11.749 billion in
guarantees and insurance charged at 25%. 10
In comparison with these current ceilings, at the beginning of
Fiscal Year 1969 the Bank's total program authority limit was $13.5
billion, with a sub-limit of $3.5 billion on the outstanding guarantees and
insurance which could be charged against the total limit at 25%.
During the same period Fiscal Years 1969-1980, the annual appropriation
for program authority increased from $2.552 billion, of which direct
loans were limited to $2.065 billion, to $5.873 billion, of which direct
loans were limited to $4.001 billion."
8 12 U.S.C. § 635f (Supp. V 1981). The Bank is also authorized to incur valid and binding
obligations which mature beyond the expiratiof date of its program authority.
9 1980 EXPOIT-IMPORT BANK ANN. REP. 18.
10 Id at 16.
11 Act of Oct. 17, 1968, Pub. L. No. 90-581, tit. 111, 82 Stat. 1137, 1143-44; Act of Aug. 29,
1980, Pub. L. No. 96-334, 94 Stat. 1061; H.R. REP. No. 1191, 96th Cong., 2d Sess. (1980) (Comm.
on Appropriations, H.RJ. Res. 589).
Statutory Operating Standards, Mandates and Constraints
Concomitant with the gradual expansion in the amount of
Eximbank's program authority (in current dollars) during this period,
Congress has expressed a growing interest in the relationships between
the Bank's central mission of export expansion and other significant
national policy goals. Throughout this process, as the legislative
hearings amply demonstrate, the Bank's broad constituency and its
respective components have not wavered in the vigor and determination of
their support of its program expansion. But even the most organized
and effective constituencies must endure the inevitability of political
accommodation to countervailing goals and interests. The ultimate
passage of the major acts of 1971, 1974, 197
7 and 1978
In general, the issues with which Congress dealt in connection with
the modification of the Bank's charter can be classified as follows:
(a) the Bank's basic operating standards, as they relate to the intended
balance to be struck in the allocation of resources between the goals of
export expansion and entrepreneurial financial responsibility and
efficiency; (b) the relevance of external countervailing goals which might
be impaired by export expansion, relating largely to foreign policy and
domestic economic considerations; (c) the identification of particular
interest groups or product sectors on whose behalf the Bank should
undertake special promotional efforts; and (d) the establishment of
procedures to expand general Congressional oversight and Presidential
To some degree, each of the acts represents a refinement of
Congressional policy with regard to each of these elements. More
specifically, the 1971 Act reflected an aggressively expansionist approach by
Congress to the Bank's central mission, while the 1974 Act was in the
nature of a pendular response.' 3 The growing Congressional concern
throughout the period was with the intensification of foreign
government-subsidized export financing in competition with Eximbank's
programs. What follows is a description of Eximbank's current statutory
charter reflecting the amendments enacted from Fiscal Years
19691980, as organized under the four classifications described above.
12 See supra notes 4-7 and accompanying text.
13 See Comment, The Export-ImportBank Amendments of1974, 25 COLUM. J. TRANSNAT'L L.
a. Basic OperatingStandards
(i) Policy Goals
Certain long-established standards remain intact under the
currently effective Export-Import Bank Act of 1945, as amended. The
central concern of the Bank, as initially set out in its "objects and
purposes," continues to be "to aid in financing and to facilitate exports
and imports."' 4 Given the inclusion of "to facilitate" as a separate and
independent object and purpose, rather than as the ultimate aim of its
financing aid, it is certainly open to the Bank and its constituencies to
contend that the Act contemplates a supportive, promotional role; one
that is to go beyond bare bones financing alone.
The basic and original policy declaration of the Act also embraces
a welfare assumption which in itself lends support to an activist role for
the Bank. The broad, unqualified policy is "to foster expansion of
exports" because of their presumed consequential and undifferentiated
contribution "to the promotion and maintenance of high levels of
employment and real income and to the increased development of the
productive resources of the United States."' 5
Asset Management and Sources
An important feature of the Bank's operations lies in its formal
authority for the independent management of its separate assets. On
the one hand, it has received no actual appropriation of funds from
Congress beyond the government's initial subscription of $1 billion of
capital stock; on the other, it is authorized to utilize its own net
earnings, or retained income, in its operations, subject to the limits of
overall statutory program authority and annual budget authority, or
"appropriations." Specifically, the Act authorizes the Bank "to use all
of its assets . . . in the exercise of its functions." 6 The only statutory
limitation on the use of assets attributable to capital stock and net
earnings is the requirement of the payment of dividends on the capital stock
from net earnings "after reasonable provision for possible losses."'17
Although the Bank is not obligated to pay dividends on its equity
at the government's current cost of funds, the Act now requires that the
Treasury's interest charges on Bank borrowings be based on the
government's current borrowing costs for United States "marketable
obli14 12 U.S.C. § 635(a)(
15 12 U.S.C. § 635(b)(
16 12 U.S.C. § 635(a)(
gations . . . of comparable maturity."18 Similarly, Eximbank's
borrowings from the Federal Financing Bank (as in the case of all
other federal agency borrowers) are at rates determined by the
Secretary of the Treasury based on "current average yield on outstanding
marketable obligations . . . of comparable maturity," either of the
United States or of the Federal Financing Bank itself. 9
Interest Rates on Loans
In contrast to its borrowings based on the currentyields on
marketable obligations of comparable maturity, the Bank is authorized to
lend at Board-determined rates which take into consideration "the
average cost of money to the Bank as well as the Bank's mandate to
support United States exports at rates and on terms which are competitive
with exports of other countries."2 0 This present standard, incorporated
into the Act as part of the 1974 amendments, was preceded by the 1971
directive requiring that the Bank, more generally as to all "rates...
terms and conditions" of its financial support, be competitive with the
government-supported export financing programs of other countries.2 '
The 1974 amendment relating to the Bank's interest rates supplements,
but leaves intact, these 1971 provisions.2 2 The 1974 interest rate
provision was adopted in the House as an amendment to a floor amendment
which, without express reference to the continuing 1971 mandate,
would have required interest rates on loans at no less than one per cent
below the weekly determined average "prime commercial rate" of the
five largest commercial banks.2 3 In contrast, the essence of the adopted
substitute amendment is to negate any obligation of the Bank to base
its current lending rates either on prevailing commercial rates or its
own current borrowing rates and to confirm the continuing relevance of
the 1971 mandate with respect to lending rates.
18 12 U.S.C. § 635d (1976). This provision was enacted as part of the 1974 amendments in the
same legislative environment, discussed infra at text accompanying note 114, which restored the
Bank to budget status. It replaced the provision by which Treasury was to determine the Bank's
borrowing rate through "taking into consideration the currentaveragerate" of such obligations. J.
HILLMAN, THE ExPORT-IMPORT BANK AT WORK: PROMOTIONAL FINANCING IN THE PUBLIC
SECTOR ch. 1 (1982).
19 12 U.S.C. § 2285(b) (1976).
20 12 U.S.C. § 635(b)(
21 Export Expansion Finance Act of 1971, supra note 4, § (b)(6), 85 Stat. at 346.
22 12 U.S.C. § 635(b)(
23 120 CONG. REC. 29,682-84 (1974). The amendment's proponents objected to the fact that
home loans were at 9 or 10%, while Bank loans to foreign governments, "including the Soviet
Union," were at 7%. In the Senate it was proposed to require the Bank to lend "at a rate not less
than the prevailing market rate on loans of comparable maturity." Id at 31,929. For further
discussion, see infra note 124.
While directing the Bank to balance competitive need against its
average, rather than its current, cost of money, the 1974 standard
governing interest charges fails to define the "money" to which the
provision applies. Essentially, the ambiguity involves the inclusion or
exclusion of the Bank's cost of equity-derived capital (capital stock and
earned surplus). The inclusion of total equity capital, on which the
Bank has customarily paid annual dividends of less than two percent,
could substantially lower the floor on the Bank's interest charges, even
where foreign competition was not a factor.24 For whatever light the
sponsor's intent may shed on the intent of Congress itself, it appears
through his explanatory comments that "average cost of money" was
intended to cover "average cost of borrowed money."
There is a further issue involved in the interpretation of the
interest rate standard which is of particular relevance in defining the
statutory basis for concessional financing. That is the question of whether
the 1971 directive is intended to require: (i) financing programs which
are generally competitive with the prevailing levels of foreign financing
programs, or (ii) financing packages responsive to foreign
governmentsupported export financing competition as it may have an impact on
particular export transactions. At least two House members, with the
apparent concurrence of its sponsor, construed the 1974 proposal (as
enacted) as encouraging case by case assessments of the actual presence
of competition requiring concessional rates.25 Even where the Bank is
prepared to make such assessments, however, the effective statutory
ceiling on its loans in the absence of competition is "average" rather
than current costs of money (whether or not as calculated with sole
reference to "borrowed" funds). Most notably absent from the brief
House debate was any discussion of why the Bank's current cost of
money, or, indeed, prevailing analogous market rates, should not
provide the basis for the Bank's interest charges where the need for credit
arose from domestic capital market deficiencies and where foreign
subsidized competitive financing was not a factor.
The basic intent of the 1974 interest rate amendment was to
introduce some measure of cost-based discipline on the Bank in its
extension of loans at below-market concessional interest rates. By using
"average" rather than current costs and by limiting costs to those
incurred by the Bank rather than the government, the force of the
discipline was greatly diluted. Indeed, the proposal might well have been
presented by a promotionally oriented Bank director as an eminently
acceptable substitute for any real constraints on below cost interest
rates not necessitated by foreign competition. In fact, it was.26
The Bank's "Supplemental" Financing Role
The current Act continues the long-established standards
governing the Bank's extension of financial support: (i) that "in exercise of
its functions" the Bank should "supplement and encourage, and not
compete with, private capital;" and (ii) that "so far as possible
consistent with carrying out the purposes [to aid in financing and to facilitate
exports]," loans shall be for "specific purposes" and shall, in the
Board's judgment, "offer reasonable assurance of repayment."27
Although these standards have guided the Bank since its earliest
operations, two factors might be emphasized in the present context.
First, while the Bank is to supplement and not compete with private
capital, it is also directed to "encourage" the allocation of private
capital to export markets without regard to the general availability of
private capital for alternative domestic uses. There are no statutory
operating standards to limit the Bank in carrying out its assigned role
of encouraging the diversion of private capital from the uses to which it
might otherwise be allocated. However, the quantitative limits on its
total program authority may operate to impose such constraints on
guarantees or participating loans. Second, Eximbank's basic character
as a commercially modeled Bank is established in the "reasonable
assurance of repayment" requirement. As noted above, however, that
requirement is to be accommodated in some imprecise degree to the Act's
basic statutory purpose not only to aid in financing, but also to
The Bank's Role in Responding to Foreign Government
The previously noted mandate of 1971 to provide financial support
"competitive with the Government-supported rates, terms and other
conditions" available to competing exporters of other major exporting
countries constitutes a major influence on the Bank's decisional
standards. We have seen that as to interest rates the force of the mandate
was somewhat deflected by the 1974 establishment of the semblance of
a cost-related standard. Even less clear in its implications is the
in26 Id. at 29,684 (1974).
27 12 U.S.C. § 635(b)(l)(B) (1976 & Supp. V 1981). The sole exception to this repayment
standard is found in the 1968 amendments establishing the so-called Export Expansion Facility.
12 U.S.C. §§ 635j-n (1976 & Supp. V 1981). See J. HILLMAN, supra note 18, ch. II n.65 and
tended impact of a 1978 amendment which, without reference to the
continuing 1971 mandate, authorizes the Bank to provide its various
forms of financial support "at rates, terms and other conditions" which,
"in the opinion" of the Bank's Board, are "competitive with those
provided by the government-supported export credit instrumentalities of
other nations."28 One apparent distinction between the scope of the
1971 mandate and the 1978 authorization lies in the limitation of the
former to comparisons with "principal countries whose exporters
compete with United States exporters."2 9 In the practical circumstances
confronting the Bank, however, this distinction seems meaningless.3"
Further, leaving the standard to be determined "in the opinion" of the
Board could support an argument for total Bank discretion in reaching
its judgments of necessity.
This 1978 "authorization" for the Bank was linked to an
authorization and request for the President "to begin negotiations at the
ministerial level to end predatory export financing programs and other forms
of export subsidies."'" This provision once again supplemented, but
did not totally displace, the continuing 1974 directive to the Bank to
seek "to minimize competition in government-supported export
financing and. . . to reach international agreements to reduce government
subsidized export financing."3 2
Promotion-Related Allocation Standards
The Export-Import Bank Act, as amended, also imposes certain
promotion-type operating standards on the Bank. These are targeted
toward specific sectors of the economy.3 3 Related to some of these
ties are further obligations in the nature of operating standards more
directly affecting the actual allocation of resources. Thus, under the
1971 amendments the Bank is rather nebulously directed to "accord
equal opportunity to export agents and managers, independent export
firms, and small commercial banks in the formulation and
implementation of its programs. 34 With specific regard to ensuring the
availability of "adequate financing" for the export of agricultural commodities,
the Bank was further directed in 1978 to "supplement and not compete
with" the "programs of the Commodity Credit Corporation. '35 In this
respect, the Bank is required to balance any recommendations of the
Secretary of Agriculture againstthe financing of particular agricultural
exports with "the importance of agricultural commodity exports to the
United States export market and the nation's balance of trade. 36
b. CountervailingGoalsAffecting Eximbank's Support ofExport
The inclusion in the Act of external countervailing goals as
restraints on Eximbank's support of export expansion became prominent
during the Viet Nam War era.37 These goals were generally divided
into the categories of domestic economic goals and foreign policy goals,
with the latter embracing both economic and non-economic
considerations. In the case of foreign policy, however, issues involving the
allocation of political authority between the executive and legislative
branches were occasionally as prominent as those involving welfare
In setting out the current provisions of the Act which operate to
impose countervailing goals on export expansion, it is not necessary to
include a comprehensive legislative history of the subject in the
19691980 period. Such details are immaterial to the central inquiry of this
study. In the course of each of the four major legislative enactments
during this period there were unsuccessful efforts either to legitimize
added countervailing concerns, or to vary the decisional mechanisms
through which particular concerns were brought to bear on the Bank.38
34 12 U.S.C. § 635(b)(
& Supp. V 1981).
35 Export-Import Bank Act Amendments of 1978, supra note 7, § 1909, 92 Stat. at 3725.
36 12 U.S.C. § 635(b)(8) (Supp. V 1981). The apparent implication of these provisions, in
response to the wishes of agricultural exporters, is that the Bank is more likely to prove a reliable
supporter of agricultural exports than the Secretary of Agriculture.
37 See J. HILLMAN, supra note 18, ch. II nn.52-64 and accompanying text.
38 The interested reader may pursue these issues further in the legislative materials. For a list
of these materials, see supra notes 4-7.
In other cases, earlier constraints were repealed or modified.
One major factor involved in the debates on all of these matters,
however, whether bearing on domestic or foreign considerations and
whether established or newly proposed, was that of foreign
competition. Cutting across all proposals for economically or ideologically
based constraints on export expansion were the ever present questions
raised by opponents of the particular constraint. Could the constraint
really make any difference and was it not self-defeating in view of the
competitive opportunities available to foreign purchasers denied access
to the Bank?3 9 These claims of the pervasiveness of foreign
competition were often countered by the assertion of Eximbank's continuing
importance in providing aid, especially to developing countries.' In
such cases the traditional, conflicting perceptions were brought into
play. Was it Eximbank's central mission to provide aid to developing
(or otherwise necessitous) economies or financial support for United
The history of the period suggests that Congress itself was never
able to choose definitively between these historic ingredients. On the
one hand, in the interest of export expansion, it sought through
program authority and general operating standards to render Eximbank's
operations more effective in dealing with the growth of foreign
government-subsidized export financing programs. On the other hand,
whatever the force of foreign competition, Congress could not divest
itself of its historically shaped perspective of Eximbank as a source of
aid and favors, the withholding of which would either bring about the
desired results or serve to punish. With both perceptions available for
rhetorical and substantive support, any given member of Congress
could easily rationalize any preferred position in respect to any
particular countervailing goal-based constraint on the Bank's operations.41 If
the substantive priorities for Congress as a whole were not always clear,
39 In the course of the 1978 legislative proceedings the point was made in the following
contexts: in the House with regard to the export of non-strategic materials to the Soviet Union, 124
CONG. REc. 13,122 (1978) (extension of remarks); by the Bank with regard to the incremental
domestic impact of its financing a steel plan for Trinidad and Tobago, see id at 13,044; and
similarly, in the House with regard to the sale of textile machinery to Egypt and more generally as
to the domestic impacts of capital goods exports, see id at 23,088-89; and in the House with regard
to the withdrawal of Bank support for particular countries on grounds of their support of
international terrorism, see id at 23,093-94.
40 Thus, the continuing developmental aid function of the Bank was asserted in connection
with the issue of aircraft exports to Libya, which stood accused of aiding terrorism. See id at
41 The dilemma was typically expressed by the House Committee in a 1977 report, H. R. REP.
No. 235, supra note 6, at 4, reprintedin 1977 U.S. CODE CONG. & AD. NEws at 3129: "While the
committee believes that the Bank must be concerned with human rights in the countries receiving
a path of accommodation could be found in restrictive procedures
which fell short of absolute prohibitions on Eximbank's financial
Countervailing Domestic Goals
In 1974, the original 1968 provisions, requiring that the Bank in
making loans take into account "possible adverse effects upon the
United States economy," were modified.42 The scope of the
requirement was expanded to include guarantees as well as loans.4 3 The need
to consider "adverse effects" was narrowed to "serious adverse
effect."' The types of serious adverse effects to be taken into account
were made more specific, being limited to "the competitive position of
United States industry, the availability of materials which are in short
supply in the United States, and employment in the United States. 45
Related to this earlier provision is the 1978 requirement that the
Bank implement appropriate regulations and procedures to assure "full
consideration" of the extent to which any loan or guarantee is "likely to
have any adverse effect on industries, including agriculture, and
employment in the United States, either by reducing demand [for
domestic goods] or by increasing imports to the United States. 4 6 To this end,
the Bank is directed to request, and the International Trade
Commission to furnish, a report on the relevant impact of the Bank's
Also presumably related to "countervailing" domestic concerns
are those provisions of the 1978 amendments relating to the Bank's
obligation to provide "adequate financing" for agricultural commodity
exports supported by Eximbank's loans or financial guarantees, nevertheless the committee
recognizes that the Bank has been established to facilitate commercial sales by U.S. suppliers abroad."
The Committee added that stricter human rights language would have little impact on human
rights in other countries because "[ftoreign importers would turn to European and Japanese
suppliers." Id. at 5, reprintedin 1977 U.S. CODE CONG. & AD. NEws at 3129.
42 See J. HILLMAN, supra note 18, ch. II at text following n.64.
43 Eximbank support in the form of insurance continued to be excluded from the requirement.
Loans or guarantees were more likely to be involved with exports of capital goods potentially
giving rise to negative domestic impacts.
44 Export-Import Bank Act Amendments of 1974, supra note 5, § 3, 88 Stat. at 2334.
45 12 U.S.C. § 635(b)(
& Supp. V 1981). The Senate Bill in 1974 unsuccessfully
revived the previously unsuccessful 1968 proposal to bar all Bank support (including insurance)
for exports which might have "serious adverse effects on the competitive position of United States
industries," on the availability ofmaterials in short supply and on employment. S.REP.No. 1097,
supra note 5, at 7. The provisions finally adopted were those agreed on in Conference.
46 12 U.S.C. § 635a-2 (Supp. V 1981) (emphasis added). The assumption here equates imports
with negative welfare consequences. It is protectionist and mercantilistic.
47 As of this writing, the International Trade Commission has issued no report.
exports.48 For reasons not fully disclosed, the Bank, as previously
noted, is directed to "consider" recommendations of the Secretary of
Agriculture againstits financing the export of a "particular agricultural
commodity." 49 In weighing such recommendation it falls to the Bank
to "consider the importance of agricultural commodity exports to the
United States export market and the nation's balance of trade."5 It is
not clear why the Bank should be expected to finance such exports
against the recommendation of the Secretary of Agriculture. In the
absence of any Presidential policy to embargo or limit particular
agricultural exports, it might be assumed that the Secretary would prove
more promotionally-minded and responsive to his narrower
constituency than the Bank, whose resources will never want for claimants.
Conversely, during the period of any such Presidential policy, it might
be assumed that the Bank would comply either as a matter of legal
requirement or prudent deference to Presidential authority.
Countervailing Foreign Policy Goals
The range of countervailing foreign policy concerns is predictably
broader than the basic categories of domestic concerns of which the Act
takes cognizance. With increased scope come more gradations in the
intensity of various concerns. These are reflected in the greater variety
of mechanisms through which foreign policy related constraints on
export expansion are implemented.
The method of the outright ban on Eximbank financial support
has been examined in relation to the Viet Nam War-spawned
provisions relating to exports "of any product, technical data, or other
information" to nations "in armed conflict" with the United States, or to
other nations providing governmental military assistance to such
nations.5" This was the first absolute bar to Eximbank support; there is
currently only one other. Enacted in 1977, this covers the purchase of
"any liquid metal fast breeder nuclear reactor or any nuclear fuel
reprocessing facility. ' 5 2
Rather than an outright ban, the most common procedural
constraint involves a general prohibition, subject to being lifted through a
"national interest," or other determination by the President or
execu48 Export-Import Bank Act Amendments of 1978, supra note 7, § 1909, 92 Stat. at 3725. See
also supra note 36 and accompanying text.
49 See supra note 36 and accompanying text.
50 Export-Import Bank Act Amendments of 1978, supra note 7, § 1909, 92 Stat. at 3725.
51 See J. Hu.u.mN, supra note 18, ch.II n.54 and accompanying text. These provisions axe
now incorporated in 12 U.S.C. § 635b(5) (Supp. V 1981).
52 J.HiLumAN, supra note 18, ch. II n.54 and accompanying text.
tive branch authority. In some cases notification to Congress is
required prior to final action by the Bank.
The prototype for this procedure is found in the 1968 provisions
relating to any form of Eximbank financial support of exports directly
to, or known to be intended for, any Communist country as defined by
3 In 1974
the provision was clarified and amended (in the wake of
President Nixon's contrary interpretation) to require a separate
determination for each individual loan transaction of $50 million or more,
rather than a single determination as to each country.54 The previous
requirement of notification to Congress within thirty days of any
determination was continued.
A 1977 amendment bearing on the maintenance of internationally
agreed upon arrangements covering nuclear safeguards involves
similar national interest determinations by the President.55 The Secretary of
State is first required to identify to Congress and the Bank any
countries materially in violation of any such agreements. The Bank is
thereupon barred from extending any form of financial support for any
exports to countries so identified, except to the extent of any
Presidential determination that such exports are in the national interest. In this
case, twenty-five days notice to Congress is required before final
Exports to South Africa are covered by a similar set of constraints
enacted in 1978.56 These provisions include an open-ended bar to the
"support of any export which would contribute to ...apartheid," 57
applicable alike to the South African government or private
purchasers. The method for determining whether any particular export is of
such character is not defined. All Eximbank support for exports to the
South African government is also barred, subject to reinstatement
following a Presidential determination, with an explanatory statement to
Congress "that significant progress toward the elimination of apartheid
has been made."5 Finally, support for all exports to private purchasers
in South Africa is barred except as the Secretary of State "certifies" that
the particular purchaser "has endorsed and has proceeded toward the
implementation of" a series of human rights and social welfare goals in
various specified areas of concern, concluding with "improving the
53 See id. ch. II n.53 and accompanying text. See also 22 U.S.C. § 2370(f) (1976).
54 12 U.S.C. § 635(b)(2) (1976). See also S. REP. No. 1097, supra note 5, at 8; S.RaP. No.
1335, supra note 5, at 9. Separate determinations for each transaction are not required on loans
under $50 million.
55 12 U.S.C. § 635(b)(4) (Supp. V 1981).
56 12 U.S.C. § 635(b)(9) (Supp. V 1981).
57 Export-Import Bank Act Amendments of 1978, supra note 7, § 1915, 92 Stat. at 3727.
quality of life for employees. 59
Through a 1971 amendment, the Act also utilizes the mechanism
of Presidential "national interest" determinations as a more general
catchall for limiting the scope of the Bank's discretion in the area of
foreign policy concerns. In practice, of course, this statutory technique
operates as much to pinpoint Presidential responsibility on sensitive
issues as to constrain the Bank. The amendment thus authorizes the
President to bar any Bank support for the purchase of "any product,
taecctihonnicwalodualdta,beorcootnhterarriynftoor mthaetinoant"iobnyala idneteterermst.i6n0ation that the
In 1978, a blanket compromise was adopted in an effort to fix
Presidential responsibility for resolving conflicts between export expansion
and a number of countervailing foreign policy and welfare concerns.
That amendment forbids the Bank to "deny applications for credit for
nonfinancial or noncommercial considerations" except where the
President determines that such denial would be in the national interest in
terms of advancing United States policy "in such areas as international
terrorism, nuclear proliferation, environmental protection and human
The difficulties encountered by Congress in dealing with
Eximbank's support of exports to the U.S.S.R. are reflected in the
precision of the accommodation reached between the general desire for
export expansion and the general distaste for any Eximbank financing
in favor of that country. The subject is treated separately in a
paragraph enacted in 1974.62
First, the Bank is prohibited from approving after January 4, 1975,
an aggregate combination of loans and guarantees in excess of $300
million covering all exports to the U.S.S.R. Of this total increment of
subsequent support, not more than $40 million may be used to finance
the export of any product or service "which involves research or
exploration of fossil fuel energy resources. ' 63 This particular limit as to
"research and exploration" products stands in contrast to an absolute ban
on "loans and guarantees" in support of any product or service "for
production (including processing and distribution)" 6 of fossil fuel
The $300 million (but not the $40 million) aggregate limit of this
paragraph may potentially be exceeded by whatever higher limit the
President determines to be in the "national interest." In such a case,
however, Congress reserves the ultimate decision to itself. All
Presidential determinations must be forwarded to Congress with a statement
of reasons. The effectiveness of any determination is contingent on the
adoption of a concurrent resolution of approval.65
Following enactment of these provisions, Eximbank has not in fact
supported any exports to the Soviet Union. However, as in the case of
various other general export restrictions, the result is not dictated by
the Export-Import Bank Act itself. In this case, the use of Eximbank
credits in support of Soviet trade is subject to the currently effective ban
of the Jackson-Vanik amendment relating to Soviet restrictions on
In addition to the Bank's general "object and purpose. . . to
facilitate" exports, Congress has also included more specific promotional
functions among the Bank's statutory obligations. A 1974 amendment
65 The provisions of this paragraph seem convoluted to the point of internal contradiction.
The principal problem arises from: (i) the previously noted absolute ban on loan or guarantee
support for products involving "production" of fossil fuel energy resources; and (ii) the
requirement that the President, in seeking to exceed the $300 million overall limit, report to Congress on
how much of the proposed increase is to be used on exports for the "production" of such
resources. The same contradiction appears to exist in connection with the oversight provisions of 12
U.S.C. § 635(b)(3) (Supp. V 1981). See infra note 75 and accompanying text.
66 19 U.S.C. § 24
& Supp. IV 1980). The provision was included in the Trade Act of
1974, Pub. L. No. 93-618, § 402, 88 Stat. 1978, 205
). The ban in fact applies to all
"nonmarket economy" countries, but is subject to Presidential waivers, if supported by the stipulated
findings. Waivers have thus far been made effective as to Romania, Exec. Order No. 11,854, 3
C.F.R. 156-57 (1975 Compilation), reprintedin 19 U.S.C. § 2432 note, at 61
Exec. Order No. 12,051, 3 C.F.R. 173 (1979), reprintedin 19 U.S.C. § 3432 note, at 747 (Supp. IV
1980); and Mainland China, Exec. Order No. 12,167, 3 C.F.R. 453 (1980), reprintedin 19 U.S.C.
§ 2432 note, at 747 (Supp. IV 1980). As general background to the issues involving the Soviet
Union itself, see 15 WEEKLY COMp. PREs. Docs. 358-59 (Feb. 27, 1979). Proposals to amend
these restrictions were made in the 96th Congress, 1st Session, 1979. See S. 339, 96th Cong., 1st
Sess. (1979); H.R. 1908, 96th Cong., 1st Sess. (1979).
Another important example of a statutory bar to Eximbank support imposed from outside the
Export-Import Bank Act is found in The Foreign Military Sales Act, Pub. No. 90-629, § 32, 82
Stat. 1320, 1325 (1968). The Bank is prohibited from using any of its funds to participate in any
extension of credit for the purchase of defense materials or services by "any economically less
developed country." Id. This 1968 provision closely tracks in purpose the contradictory amount
limitations from the 1968 amendments to the Bank's own Act, now contained in 12 U.S.C.
§ 635(b)(7) (1976). See J. HILLMAN, supra note 18, ch. II n.56 and related text.
individual agencies which are not to be exceeded; and (2) requires each
agency to prepare and maintain a financial plan to monitor outlays, and
to control obligations so as to permit effective adherence to the outlay
ceiling imposed. In this situation also, "reserves" may be established to
control the use of available funds within the prescribed limits.92
In addition to this possibility of executive branch reductions in
program authority from previously approved levels, all appropriated
funds are subject to "apportionment" by Presidential authority
exercised through OMB. The purpose here is mainly to establish central
control over the timing of the outflow of federal funds in the course of a
budget year.93 Most commonly, and in the case of Eximbank,
quarterly apportionments are made beyond which quarterly spending or
lending obligations may not be incurred. One important aim is to
prevent excessive program activity early in the fiscal year leading later in
the year to pressures, or an actual need, for supplemental program
authority and appropriations. In periods of program expansion, the
apportionment system can act as a constraint. At the same time it places
responsibility for such constraint squarely on the executive branch,
which in fact might prefer the expansion were it not for the budget
impact and the need to request a supplemental appropriation.
In any case, the principal proponent and defender in the 1970-71
hearings of Eximbank's off-budget status was its Chairman and
President, Henry Kearns, supported by other executive branch agencies and
the exporting community. Without ever addressing the manner in
which off-budget status would contribute to an expansion of the Bank's
program, or any possible objections to off-budget status, the executive
branch agencies took their stand in the name of export expansion.9 4 It
fell to Chairman Kearns to pinpoint the impact of existing budgetary
92 OFFICE OF MANAGEMENT AND BUDGET, THE BUDGET OF THE UNITED STATES
GOVERNMENT, FISCAL YEAR 1972, at 518. Thus, for Fiscal Year 1969, Congress placed a $180 billion
expenditure and net lending limit on its previous budget estimates of $186 billion. Revenue
Expenditure and Control Act of 1968, Pub. L. No. 90-364, § 202, 82 Stat. 251, 271.
93 For a brief discussion of the process, contemporaneous with the period under discussion,
see OFFICE OF MANAGEMENT AND BUDGET, THE BUDGET OF THE UNITED STATES
GOVERNMENT, FISCAL YEAR 1972, at 517-18. The applicable statutory authority derives largely from the
1950 Appropriations Act, Ch. 896, § 1211, 64 Stat. 595, 765 (codified at 31 U.S.C. § 665 (1976)).
94 S. 4268 Hearings,suprc note 4, at 3-21. The executive branch departments were, of course,
as one in their ultimate support of the Administration's position. But their enthusiasm varied with
their perspective. (Commerce-"strongly favors;" State-"favors;" OMB--"would support;"
Council of Economic Advisors--"has no objection;" Treasury-"will not oppose;"
Eximbank"urges early enactment.") In contrast, the Federal Reserve Board, not a part of the executive
branch, recommended against enactment, which it found "would constitute a breach in the new
concept of a unified budget." Id at 3-8. The restrained views of the Secretary of the Treasury
probably reflected in part the discomfort emanating from the fact of what was at the time his
recent membership on the President's Commission on Budget Concepts.
principles on the Bank's program.95 In essence, it was his view that
under the "generally accepted accounting procedures" of treating loans
as an exchange of assets (cash for receivables), Eximbank's operations
would have shown profits of $104 million and $110 million in 1969 and
1970, respectively. Nevertheless, under the prevailing budgetary
practice of treating net loan disbursements as "outlays," the Bank's
"negative impact on the budget totals" amounted to $246 and $219 million in
He noted that an "important factor" in holding down the budget
deficit was the "substantial sale of assets." His problem with these
transactions, in which the document issued was now designated a
Certificate of Beneficial Interest (CBI), was not over any openly aired
differences the executive branch might have with the Comptroller
General in respect of their actual character as asset sales. Indeed, these
differences were not mentioned. The problem was, instead, their basic
lack of marketability.96
The CBI sales were variously described as "overly complicated"
and "most inefficient." Their unfamiliarity to investors were said to
cause required sales to be made on "sacrifice terms." The end result
was diminished sales at higher interest rates. The obvious solution to
all this, it was contended, was to substitute direct borrowing for asset
sales through the issuance of Eximbank debentures at lower interest
rates and in whatever amounts were required. Only when freed from
the psychological constraints of contributing to an overall budget
deficit could the Bank, through use of debentures rather than asset sales,
more readily and cheaply raise necessary funds for program expansion
without concern for the purely technical budgetary impact.
Chairman Kearns was then pressed to distinguish Eximbank's
need for off-budget status with that of other agencies such as
"Commodity Credit, Farmers Home Administration, REA, FHA, veterans
housing, SBA, and so on," all of which were included in the unified
budget. Conceding "an element of difference" from the Budget
Commission's recommendations, his distinction was nothing short of the
contention that Eximbank's programs served a unique governmental
function requiring differential budget status. He derived this
conclusion from the Bank's role as "the only institution within the U.S.
Gov95 Id at 12.
96 A discussion of the current role and budget impact of loan sales is contained in OFFICE OF
MANAGEMENT AND BUDGET, THE BUDGET OF THE UNITED STATES GOVERNMENT, FISCAL YEAR
1982, at 153-58 (Special Analysis F). While ordinarily treated as "borrowings," in a few cases
under special legislation the sale of loans are treated as asset sales with the budget consequences of
reducing total budget outlays.
ernment" set up to meet "the urgent need for balance-of-payments
The principal opponent of Eximbank's off-budget status was
Comptroller General Staats, supported by the Federal Reserve Board.
He noted that, if enacted, the proposal "would constitute the first
departure from the budget policy adopted by President Johnson and
continued to date by President Nixon.""8 With apparent agreement by the
executive branch, he also emphasized that selective or across-the-board
application of the Budget Commission's recommendations was
currently a matter of Presidential discretion.99 In this sense, he saw as one
important aspect of the issue the question of whether Congress or the
President should confer the proposed unique budget status on the
Bank, with such consequences as removing it "from the effect of any
overall expenditure limitation imposed by the Congress last year."'1
The Comptroller General recalled the virtual unanimity on the Budget
Commission "about the importance of having the net concept of the
loans included within the expenditure figure." 101 While accepting the
accounting distinction between a direct expenditure and a repayable
loan and the need for showing the categories separately, he argued the
importance of including net loans as budget outlays. The need was for
"judging program priorities" from the point of view of "commitment of
resources."10 2 That is to say, his conception of the budget was not as an
income statement alone, but as a tool for planning the allocation of all
resources commanded by the government. In those terms, he found
little sense in excluding a single function from the totality of budgetary
processes which can be brought to bear on the establishment of
Congressional proponents of the proposal argued with reason that
off-budget status would in no way deprive Congress of information
pertaining to the actual fiscal impact of the Bank's operations. Thus, as
required in any case by the Government Corporation Control Act, the
President would be expressly required to send Congress an annual
budget covering any deficit impact of the Bank's programs in the same
97 S. 4268 Hearings,supra note 4, at 16. No effort was made to distinguish Eximbank's loans
from other lending programs in terms of such possible factors as rate of program expansion,
maturities, relative amounts and loss experience.
98 Id. at 22.
99 Id. at 24. Chairman Kearns did not contest this view of the President's authority. He
simply insisted the step would not be taken without Congressional concurrence. See id at 16-17.
100 Id at 26. As to his "overall expenditure limitation" reference, see Revenue Expenditure
and Control Act of 1968, Pub. L. No. 90-364, § 202, 82 Stat. 251, 271.
101 . 4268 Hearings,supra note 4, at 29.
detail as if its operations were included in the budget. 10 3 As reported
by the Committees, and as enacted, the proposal required the President
to delineate specifically the "net lending. . . which would be included
in the budget" 04 but for the Bank's off-budget status. Moreover, the
proponents argued, the Bank would continue to be limited annually in
its operations by the amount of appropriated program authority, and
overall by the statutory ceilings of the Export-Import Bank Act.
Opponents of the proposal decried the establishment of a uniquely
favored status for Eximbank's lending programs among all the various
lending programs of at least arguably equal social value. With a
limited supply of credit in the economy, concern was expressed for any
consequential decrease "in the amount of credit available for our
There were three questions of central importance in the entire
controversy. First, whether there was anything truly distinctive in
Eximbank's function which warranted its unique off-budget status among
all government-owned lending agencies. Second, whether and in what
respects off-budget status would actually contribute to added program
expansion. Third, if off-budget status would demonstrably or plausibly
foster program expansion and thus presumably generate commensurate
welfare benefits, whether such status should be established by Congress
or the President.
Whatever the substantively correct answer to the first question
might be, the legislative proceedings were devoid of any evidence to
establish Eximbank's mission as one of overriding importance.
Invocations of the essentiality of improvements in the nation's balance of
payments figured prominently in the debate. But the matter of priorities
and opportunity costs were predictably ignored by the majority in the
context of Committee hearings dealing only with the Bank's programs.
The actual realization of net social benefits uniquely available through
the Bank's program expansion was widely accepted as a simple article
of faith.1 6 In substance, the entire undertaking to confer off-budget
103 S.REP.No. 51, supranote 4, at 3-5.
104 Id. at 5.
105 Id at 16.
106 A discordant note over the "additionality" issue, which was to grow in importance during
the following decade, was sounded by FRB in its "budget status" views. FRB Chairman Bums
concurred in the desirability of expanding exports "to help improve our balance of payments."
His problem was that "not all... loans result in additionalexport sales." S.4268 Hearings,.npra
note 4, at 6 (emphasis in original). He then explained:
This is especially true when the Bank finances the sale for U.S. goods for which there is little
or no competition in world markets. Frequently the Bank's loans are substitutes for other
financing.. . to the extent that the Bank's credit is used to substitute for offshore financing of
our exports, our balance of payments will suffer.
Id. at 6.
status on the Bank was conceived and implemented through the
acceptance of export expansion as a kind of summa bonum. To base
offbudget status on an assumed priority of welfare value would seem to
constitute the ultimate in political rationalization. 1 7
Accepting the assumption arguendo, however, we then address the
second question. How would such status contribute to an expansion of
Eximbank's programs? Here the central reality is one of politics and
psychology rather than fiscal substance. In the first instance, the
elimination of net lending outlays as a source of added, published budget
deficits may initially encourage a promotionally-minded
Administration to deal more generously with the Bank's request for program
authority, and in turn for Congress to honor the President's request.
Second, when forced to cut back in the use of previously approved
funds to conform to overall expenditure and net lending limits, the
Administration should be less inclined to do so with funds not subject to
such limits. Finally, in administering its apportionment
responsibilities, it is entirely conceivable, under circumstances of limited resources
in relation to demand, that the OMB of a promotionally oriented
President will be less restrictive and more willing to run the risk of a
supplemental appropriation having no budget impact. With such an
inclination, OMB would be sustained by a reasonable belief that for the
same reason Congress would be more receptive to the request.
Whether or not any or all of these possibilities would ever come to pass,
they exist, apriori,as credible grounds for anticipating greater
opportunities for program expansion through off-budget status.
Finally, if off-budget status is to be granted, should it be done on
authority of the President or the Congress? In 1970-71, President
Nixon was eager to achieve the potential program expansion
consequences of the Bank's off-budget status. At the same time, he was
reluctant to accept responsibility for a departure from established
budgetary principles. This prompted the effort to persuade Congress to
assume the responsibility. Given the potential impact of the decision
on the establishment of national priorities, and the flood of requests for
similar treatment that might follow, it does seem fitting for Congress to
assume ultimate responsibility for the deed, if it is to be done at all.
107 In terms of reflecting the overall impact of the borrowing and lending activities of
government sponsored enterprises on resource allocation, the presence of a major categorical distinction
in budget treatment should be noted. The programs of those entities in which all government
capital has been retired are not now included in the budget and were not in 1971. One important
example is Fannie Mae. See generally S. 4268 Hearings,supra note 4, at 24, and references at
supra note 85.
Once it was done in 1971, the predictable consequences followed.
As the result of continuing budgetary pressures, the President had, in
his January 1971 budget submission, originally requested Fiscal Year
1972 Eximbank program authority in a total amount of $3.633
billion. 108 This represented a reduction of more than $400 million from
the $4.075 billion requested and appropriated in Fiscal Year 1971.109
On November 16, 1971, following the final enactment on August 17 of
the 1971 amendments establishing the Bank's off-budget status,
President Nixon submitted a Fiscal Year 1972 budget amendment to
increase total program authority by $3.691 billion to $7.324 billion.110 Of
this total increase, $3 billion was requested to initiate a short-term
discount loan program. This program had long been resisted by earlier
Bank administrations which had considered insurance and guarantees
sufficient to induce private commercial banks to finance export loans
for less than one year. To the extent of any perceived need, it had been
the Bank's view that limited program authority would nonetheless be
directed more usefully to other forms of support, including
mediumterm discount loans."'
In the climate following the conferral of off-budget status on the
Bank, the President's request was submitted to a highly receptive
Congress. In a statement recommending the full amount of requested
supplemental appropriations, the House Appropriations Committee
consciously set out the rationale in favor of the increased program
authority, while less consciously stating the principal arguments against it:
According to the Eximbank, there is presently a great need for a
program which can assure U.S. commercial banks that adequate back-up
liquidity for short-term financing of U.S. exports will be available in times
of money shortages. Apparently, the absence of such a facility is
hamperitniagl opuarrtNoaftitohnei'sr eexxppoorrttesraslewshpoacreklaygeo.n'1s2hort-term financing as an
The clear intent was to utilize the increased authority to
encourage, through the promise of liquidity, the initial allocation of larger
amounts of private capital to export financing. Thereafter, in times of
money shortages, that capital could be replaced by Eximbank with
other funds drawn off directly or indirectly by it from private markets.
This episode thus typifies the manner in which the theoretical priority
accorded to Eximbank through off-budget status would be converted
into a controlling allocative priority in private money markets.
The 1974 amendments, which became law in January 1975,
restored the Bank to budget status following the close of Fiscal Year
1976. The delay of a full fiscal year beyond the current year reflected
the intensity of the controversy during which: (i) the House rejected its
Committee's recommendation, adopted by a seventeen to fifteen vote,
for the Bank's restoration to budget status; (ii) the Senate rejected its
Committee's recommendation, reflecting an eight to seven vote, that
off-budget status be maintained; and (iii) a third conference report was
required, in which the House finally receded to the Senate on the basis
of a compromise delaying the effective date of the Bank's restoration to
budget status, following the Senate's refusal to support its Conferees'
initial recession to the House."13 The matter was thereupon "settled" in
the sense that Eximbank has remained "on budget" through the
Congress and the Idea of "Additionality"
Interviews with directors and many senior officers of the Bank
disclose a common view that the Export-Import Bank Act imposes no
particular obligation of "additionality" on the Bank in its financial support
of exports. In other words, the Bank itself has traditionally felt no duty
under law to ensure that its loans are actually necessary to generate
additionalexport sales. Undue concern for the principle of
additionality is widely viewed as a deterrent to the Bank's carrying out its
affirmative duty to "facilitate" exports and its mandate to provide forms and
amounts of support competitive with the export financing programs of
other governments. While the "reasonable assurance of repayment"
standard is accepted and pursued as a standard of banking
professionalism, its affirmative thrust is to justify loans primarily in terms of
repayment prospects rather than in terms of their actual necessity for the
completion of transactions (as the first measure of additionality would
As noted, the duty not to compete with private capital, read by
113 See H.R. REP. No. 15,977, supra note 5.
114 The matter of Eximbank's budget has never been put entirely to rest. More recent issues
and proposals are considered in J. HILLMAN, supra note 18, ch. VI.
115 The essence of "additionality," discussed supra in note 106, as a total standard of efficient
resource allocation requires identifying not only the need for any Bank participation, but the effort
to identify the least amount of resources required to neutralize such particular impediments to an
export transaction as fall within the Bank's proper cognizance.
itself, provides a standard of additionality. Its significance and
enforcement is beclouded, however, by the related duty to supplement and
encourage private capital. The result has been the growth of
cooperative and mutually supportive programs rather than the rigorous
insistence by private sector financial institutions on the Bank's adherence to
the non-competitive mandate.
In fairness to the Bank and its personnel in emphasizing the
statutory purpose to facilitate exports, one must agree that the mixed signals
emanating from the Act can fairly be read to give greater
encouragement to promotion than to restraint and skepticism in the formulation
and administration of its financial programs. But this is not to suggest
that the concept of additionality has not on occasion occupied the
attention of Congress.
In particular, the legislative proceedings of 1974 occurred in the
context of a growing concern over the Bank's blanket and growing use
of concessional financing without regard to its necessity in particular
export transactions. It was a period following a dramatic increase in
the level ofthe Bank's programs under dedicated promotional efforts of
Henry Kearns."16 Its uniform lending rate of six percent had been
maintained not only through the later Johnson years, beginning August
31, 1966, but throughout the Nixon Administration up to February 4,
1974, when it was raised to seven percent. In the interim, the general
level of interest rates had risen and the Bank was issuing large amounts
of its own debentures at interest costs in excess of its lending rates.1" 7
As the final substance of the 1974 amendments would suggest, it was a
time for Congress to reflect with more than customary deliberation on
the intended economic function of the Bank. Those deliberations did
not lead to amendments directly affecting the general operating
standards of the Act, other than what might flow from the restoration of
budget status and the reporting requirements on larger transactions.
The matter of operating standards was considered, however.
As reported by its Banking Committee, the Senate Bill would have
116 From Fiscal Years 1969 through 1973 the following increase in annual gross authorizations
had occurred (billions); Regular Loans-$1.11 to 2.41; Discount Loans-$0.185 to 1.64; Total
Loans--$1.295 to 4.05; Total Guarantees and Insurance-$1.22 to 4.46; and Total
Authorizations-$2.52 to 8.51. 1973 EXPORT-IMPORT BANK ANN. REP. 19.
117 During Fiscal Year 1973, as compared with its 6% lending rate, the Bank sold $400 million
of its debentures at an effective interest cost of 6.3%; $143 million at 5.81% and $300 million at
6.49%. Maturities ranged from 5 to 61/ years. 1973 EXPORT-IMPORT BANK ANN. REP. 24. During
Fiscal Year 1967, the first period in which the 6% lending rate was in effect, the Bank sold $900
million of its certificates of participation at rates ranging from 4.8% to 5.125% for varying terms.
1967 EXPORT-IMPORT BANK ANN. REP. 9. See also J. HILLMAN, supra note 18, ch. II n.84 and
added to existing standards the requirement that Bank financing be
provided "only to the extent that sufficient private financing is
unavailable."' 18 The intent was to "amplify" the existing requirement that the
Bank "should supplement and encourage, and not compete with,
private capital" to make clear "that Congress intends private capital to
play the major role in export financing and that Export-Import Bank
assistance should be provided only where, and to the extent, necessary
to permit an export sale to occur."'"19 In general, the Bank's resources
were to be allocated to those transactions where its assistance was
"essential," such as where private financing was not available or was
available only on terms which would preclude the transaction. Even in
these cases, the Bank's assistance was to be limited to "such amounts as
may be necessary to make up for the private financing deficiency."' 2 °
As to the extension of credits, the committee was critical of the
Bank's formulaic practice of "providing half the necessary loan funds
in each export financing package."' 12 1 The committee declared its
expectation that, in accord with more recently adopted practices, the
Bank would continue the policy of "varying financing arrangements to
fit the circumstances of each transaction."'' 22
The adoption of the committee's proposal, if construed in
accordance with its expressions of intent, could have clarified one major
ambiguity of the Act: whether the mandate to meet foreign competitive
financing was to apply to the Bank's general support levels or to each
transaction. At the same time the proposal was noteworthy for its
failure to address the two issues of: (i) differential pricing, and (ii) the
restriction of the Bank's role to the neutralization of non-market
Consistent with the committee's general tenets of efficient resource
allocation would be a pricing distinction between credits extended
because of: (i) domestic capital market inadequacies arising from risk
perceptions, length of required maturities, principal amount or fixed
interest needs over longer terms, or (ii) foreign competition. The
committee did not address the issue of whether concessional rates could
ever be justified except in the context of competitive pressures on a
Even if the committee had intended this distinction in the use of
concessional rates, it nevertheless managed to avoid any consideration
118 S. REP No. 1097, supra note 5, at 5.
121 Id.at 5-6.
122 Id.at 6.
of the character of the competition which Eximbank financing was
intended to overcome. Was the Bank intended to operate as a source of
financing subsidies directed to offsetting any competitive disadvantages
encountered by United States exporters, whether of production costs
and product price, product quality, producer's reliability and distance
from markets? If so, was its function to channel its support to the least
efficient producers with the aim of providing whatever subsidies were
required to maintain their presence in foreign markets? Or was the
concept of "competition" intended to cover no more than that explicitly
included in the Bank's statutory mandate relating to
"government-supported rates and terms" for export financing? It is possible, as is so
often the case, that the ambiguity represented the necessary basis for
agreement within the committee. In any case, that same ambiguity
proved insufficient to induce the House Conferees to accept the Senate
committee's modest proposal, as adopted in the Senate, or the Senate to
insist on this provision.
Without the formality of a proposed amendment to the Act's
operating standards, in the climate of 1974 the House Banking Committee
was nevertheless led to deliver a homily to the Bank on the subject of
additionality. Its essence was this:
The Bank should avoid extending direct credit when United States
suppliers have a competitive advantage so great that concessionary rates and
terms are unnecessary to obtain a sale. When the credit of the Bank is
necessary, the Bank should adjust its rates and terms so that they are as
close as possible to market rates and terms within the framework of
competitive requirements." 2
What this passage seems to suggest is that the Bank should avoid
bestowing the gift of concessional rates when the export could be
completed without them. 124 Further, where Bank credit is necessary "to
123 H. REP.No. 1261, supra note 5, at 4.
124 A far more sweeping proposal to eliminate all concessional pricing was put before the
Senate as an amendment to the committee-reported bill. 120 CONG. REc. 31,929-41 (1974). As to all
of its loans, the Bank would have been required to charge interest rates "not less than the
prevailing market rate on loans of comparable maturity, as determined by the Secretary of the Treasury
as of the last day of the month [preceding the loan]." Id at 31,929. This proposal would have
negated the existing directive that the Bank remain competitive with foreign government
subsidized export financing. On this basis it was attacked as having the effect of abolishing the Bank.
Id at 31,938.
The proposal was not prompted, however, by any broad tenet of economic policy. The stated
underlying concern was that of adverse domestic impact. More particularly, the focus was the
competitively beneficial subsidies conferred on the foreign international airline purchasers of
United States made commercial aircraft as compared to the substantially higher domestic interest
rates paid by Pan-American. It was asserted that Pan-American was paying 12% while Eximbank
was extending 6% loans to its competitor airlines of "France, Japan and Saudi Arabia." Id at
31,934. The motion was eventually tabled following spirited debate.
obtain a sale," apparently whether for reasons of competition or
domestic capital market inadequacies, the amount of concessional help
should not exceed the actual requirements. Here the possibility of a
differential pricing system is implied, under which concessional rates
and terms would be allowed only as a response to compelling
competition. Even if this intent can be derived from the committee's statement,
however, the question of what character of competition was to be met
remains as much unanswered here as in the case of the Senate's
What the entire episode demonstrates is that even under maximum
provocation, Congress has avoided any suggestion that it is not the
function of the Bank to use its resources to neutralize competitive
disadvantages of United States exporters having little or nothing to do
with foreign government-subsidized export financing. Congress has
mandated that this specific form of competition be met by the Bank.
But that mandate, in itself, need not be read as an implied bar to the
Bank's helping exporters through concessional financing to overcome
other competitive impediments to exports involving such market
factors as price, quality, service or distance. In the absence of statutory
clarification, it is understandable that the promotional standards of the
Act were often construed to justify such efforts. Indeed, might not the
House Committee report be reasonably read to imply that "the Bank
should extend direct credit (within its resources) when United States
suppliers have a competitive disadvantage so great that concessionary
rates and terms are necessary to obtain a sale?"
THE ROLE OF THE EXECUTIVE BRANCH IN SHAPING THE
CHARACTER OF EXIMBANK'S PERFORMANCE
The central reality governing the relationship between the
Executive Branch and the Bank derives from the President's authority under
the Act to appoint the Bank's President (and Board Chairman), First
Vice President (and Board Vice Chairman) and the three other voting
directors to serve at his pleasure without fixed terms. 125 This is not to
suggest that the Bank operates primarily as a political arm of the White
House in its handling transactions. Within the framework of
Congressional oversight, public opinion and the potential complaints of more
clearly deserving but disappointed applicants, prudence will normally
restrain the President and the Bank from using the Bank's decisional
authority simply as a mechanism for distributing Presidential favors.126
125 See J. HILLMAN, supra note 18, ch. I n.63 and related text.
126 This is not to say that questions about the Bank's role in Presidential politics never arise.
But this is not to deny the President's pervasive and dominant influence
in the establishment of the decisional standards to be followed by the
Bank in pursuit of the Administration's broader policy goals, whether
rooted in ideology, economics or partisan politics.
The emphasis placed by Presidents Nixon and Carter on
Eximbank program expansion was fully honored in the Bank's lending
policies under the administrations of Henry Kearns and John Moore,
their respective appointees as Eximbank's Chairman and President.127
When, by the close of 1973, the Bank's finances had deteriorated to the
point of requiring moderation in the level of its financial support,
President Nixon brought in William Casey, a problem-solver who
nevertheless proved sensitive to the constituency expectations generated during
the four and one-half years of the Kearns administration. The brief
period of fiscal restraint, program contraction and reduced levels of
participation under President Ford's appointee, Stephen DuBrul, was
fully consistent with the general character of that Administration's free
market economic policies, as articulated and implemented in particular
by Secretary of the Treasury William Simon (although appointed by
President Nixon in the closing months of his administration).
Once more, at the outset of President Reagan's administration, a
period of restraint on the Bank's program authority seemed likely. In
his first formal address to the Congress outlining his administration's
proposed revisions of President Carter's Fiscal Year 1982 budget
requests, President Reagan asked for a one-third reduction in the Bank's
loan authority for that year. 21 Congress, in its wisdom, may or may
The Ansett Airlines case is a recent and noteworthy example. See J. HILLMAN, supra note 18, ch.
127 President Nixon made no empty promise when he advised the Chairman of the House
Ways and Means Committee by letter of May 11, 1970 that "the key aspect of the ... Bank's new
look is cooperation and flexibility" and that "exporters can look forward to continued expansion
of Export-Import Bank activities." Letter to the Chairman of the House Committee on Ways and
Means on United States Trade Policy, PUB. PAPERS 427, 430 (May 11, 1970). President Carter
observed in his "United States Export Policy" statement of September 26, 1978: "I have
consistently supported a more effective and aggressive Export-Import Bank." What he considered to be
"effective and aggressive" was made clear in his next sentence: "During the past 2 years, my
administration has increased Eximbank's loan authorization fivefold-from $700 million in FY
1977 to $3.6 billion for FY 1979." United States Export Policy, II PuB. PAPERS 1630, 1632 (Sept.
128 Program for Economic Recovery, 17 WEEKLY COMP. PRES. Doc. 180 (Feb. 18, 1981). As
later submitted, however, the revised budget proposed a net reduction in direct and discount loan
authority of $600 million (from $5 to 4.4 billion) and in loan guarantee authorizations of $1.2
billion (from $9.42 to 8.22 billion). OFFICE OF MANAGEMENT AND BUDGET, FISCAL YEAR 1982,
THE BUDGET REvisIONs 349 (Apr. 1981) [hereinafter cited as FISCAL YEAR 1982 BUDGET
not prove responsive. 129 In any event, Presidential control of Board
directors could operate to moderate the Bank's promotional activism to
the extent required by the Reagan Administration's ideological
perceptions and general economic goals. Those perceptions and goals, as first
articulated, were set out in the following OMB "Rationale" in support
of the proposed cuts in Eximbank's .Fiscal Year 1982 program
President Reagan proposes to reduce or eliminate federal subsidies to
business. He believes that American business should be required to
compete in the market, unfettered by unnecessary government restrictions but
unaided by special government privileges. In particular, he thinks it
unfair that taxpayers should be forced to share the interest costs of private,
profit-making-and often larger--corporations engaged in export
enterprise. The policy of using the Export-Import Bank as a vehicle for
meeting foreign export subsidy programs has not been justified by documented
offsetting gains in economic efficiency. The Export-Import Bank has
grown so rapidly in the past few years, and its lending policies have
become so generalized, that the Bank's credit facilities have become widely
regarded as virtual entitlement programs. That private businesses should
be "entitled" to special taxpayer subsidies is a concept firmly rejected by
A far better way to promote U.S. exports is to make the American
economy more productive and to reduce domestic inflation. Inefficient,
market-distorting programs such as the Eximbank make such overall
eccaonnhoammicpei mrporuorvtermadeentpsomstuorree.1d3i0fficult, and thus, in a larger perspective,
129 The non-predictability of the outcome stems in large part from the politics of the program.
Thus, at a further Fiscal Year 1982 appropriations hearing before the House Subcommittee on
April 9, 1981, its Democratic Chairman, Clarence Long, explained with remarkable candor why
he was probably going to vote to restore the Reagan Administration's proposed Eximbank
program cuts, despite his personal convictions to the contrary:
Usually and so often when business comes in, they want competition for everybody but
business. For business they want subsidies. A large part of the problem we are in of government
spending too much-and if you look at it analytically, objectively, you will find there are vast
quantities of business subsidies of all sorts.
I am not saying it is as bad as the welfare thing and so on. It is hard to measure. There
is a big element of subsidy here. It seems we have to get away from that sort of thing and tell
businessmen they have to compete instead of asking for a damned crutch.
I will probably support this damned thing because I am a politician and know the facts
of life. I know you can get this thing through with a hoot and holler. You can get
ExportImport through Congress by unanimous consent. Every Congressman practically is heavily
dependent on the PACs and they know where the money is coming from around election
time. That includes me also.
But to maintain that this makes economic sense I think is just flying in the face of any
kind of real thinking...
ForeignAssistanceandRelatedPrograms. HearingsBefore a Subcomi. ofthe Comm.
onAppropriations, Part4, 97th Cong., 1st Sess. 103 (1981). To all of which Congressman Long then added:
"I am probably going to have to offer an amendment to cut the cuts." Id.
130 FISCAL YEAR 1982 BUDGET REVISIONS, supra note 128, at 350.
The citation of these early Reagan Administration
pronouncements at this point carries no normative implications regarding the
Bank's work, nor does it imply that these initial views will prove to be
final views. It is set out rather as an example of a dramatic Presidential
policy departure, which, if actively pursued within the executive
branch, cannot fail to redirect the Bank's decisions on whether any
support and how much support is appropriate in particular transactions or
classes of transactions. If the policy is seriously intended, it will
undoubtedly be impressed on and largely shared by the President's Board
appointees; 3 ' it will be reflected in OMB's budget formulations and
apportionment practices; and it can be reinforced, if need be, through
the Treasury's predominant role in the National Advisory Council on
International Monetary and Financial Policies (NAG).
As regards Presidential-Bank relations in general, it would appear
that during periods of pronounced promotional activity and program
expansion the Bank and the President seek actively to identify with
each other.'32 In contrast, during periods of program transition,
contraction or flatness the parties are less inclined to embrace each other in
public. 33 What seems to be the most notable effort toward formal
identification occurred in 1979 under President Carter. In his
Reorganization Plan Number 3 of that year, the President designated the holder
of the newly created Office of Trade Representative and the Secretary
of Commerce as ex officio non-voting members of the Bank's Board. 3 4
The appointments were made in the context of a transmittal message
which declared as the general responsibility of the Trade
Representative "to ensure a vigorous and coordinated Government wide export
131 This point is underscored in the following colloquy between a Senate committee member
and a Board member appointed late in 1976 by President Ford, continued by President Carter and
seemingly not averse to serving under President Reagan:
Senator Kasten: I understand Mr. Stingel felt quite strongly in favor of increased Eximbank
funding last year. Does he support the reduction proposed by the Reagan
Mrs. Kahliff: I cannot answer for Mr. Stingel. Of course Don is very aggressive in promoting
exports; we all have been. That is because we were asked to be. If President Reagan
asks us not be aggressive, we have to be responsive to his policies. We will try to do the
best we can under conditions as we find them.
ForeignAssistanceandRelated ProgramsAppropriationsfor Fiscal Year 1982: Hearings Before a
Subcomn of the Comm on Appropriations,97th Cong., IstSess. 384, 410 (1981) (Statement of
Margaret W. Kahliff, Director, Export-Import Bank).
132 See 1979 EXPORT-IMPORT BANK ANN. REP. 2; 1978 EXPORT-IMPORT BANK ANN. REP. 2;
1973 EXPORT-IMPORT BANK ANN. REP. 11; 1972 EXPORT-IMPORT BANK ANN. REP. cover, 1971
EXPORT-IMPORT BANK ANN. REP. 1; 1970 EXPORT-IMPORT BANK ANN. REP. 1, 15.
133 There are no indications of such "identification" efforts in the Export-Import Bank's 1969
and 1974-77 Annual Reports.
134 Reorganization Plan No. 3 of 1979, 3 C.F.R. § 513 (1980), reprintedin 5 U.S.C. app. at 44
(Supp. V 1981
expansion effort," while the Secretary of Commerce was to assume the
principal mission of "fostering the international competitiveness of
As non-voting Board members, these new appointees or their
representatives will, of course, have formal standing to participate in
Board discussions. The surface appearance, therefore, was of a
Presidential initiative to infuse into Board deliberations the views of the
strongest advocates of export expansion within the executive branch.
In fact, however, representatives from all NAC component agencies, as
well as from OMB, are in regular attendance at Board meetings and the
Trade Representative was newly designated as a NAC member as part
of the same Reorganization Plan. Nor does it appear that there have
ever been any barriers to the free flow of views from NAC members to
the Board. The future of this new arrangement in the context of
President Reagan's views of the Bank's work seems uncertain. On the one
hand, it seems much less likely that the Reagan Administration would
have initially undertaken this symbolic gesture of Eximbank activism.
On the other, safely within the framework of Administration policies,
this essentially empty symbol can be drained entirely of any possible
substance and retained for whatever political advantage the acceptance
of afaitaccompli might provide. In either case, executive branch
monitoring and supervision will continue to emanate primarily from NAC
Following minor membership changes over the years, NAC today
consists of the Trade Representative, the Secretaries of the Treasury
(Chairman), State, Commerce, the Federal Reserve Board Chairman,
Eximbank's President and the Director of the International
Development Cooperation Agency (IDCA), whose advisory role is limited to
the work of the International Development Banks and other
development agencies.' 36
The sole statutory source of NAC's authority to deal with
Eximbank's operations remains its directive to "coordinate, by
consultation or otherwise, so far as is practicable, the policies and operations"
of United States representatives on the International Monetary Fund
and the World Bank, Eximbank and all other Government agencies to
the extent of their foreign lending, financial, exchange or monetary
135 President's message to Congress Transmitting Reorganization Plan No. 3 of 1979, 15
WEEKLY COMP. PRES. Doc. 1729, 1730, 1732 (Sept. 25, 1979).
136 22 U.S.C. § 286b (Supp. IV 1980). Other Executive Orders relevant to NAC's current
composition are Exec. Order No. 11,269, 3 C.F.R. 534 (1966-70), reprintedin 22 U.S.C. § 286b note, at
305 (1976); and Exec. Order No. 12,164, 3 C.F.R. 444-45 (1980), reprinted in 22 U.S.C. § 286b
note, at 1289 (Supp. IV 1980).
transactions. In fulfilling this wide range of coordinating
responsibilities, NAC principals act primarily through their NAC alternates at the
Assistant Secretary level. These alternates are empowered to act on
their behalf. In turn, the organization is served by a Staff Committee of
professionals drawn from the member agencies. The Staff Committee
handles its ordinary work at weekly meetings, together with
represenitatives of other executive departments and agencies whose concerns may
be relevant to particular matters before the Staff Committee. These
include, in particular, OMB and other non-member Cabinet
departments such as Defense and Agriculture. 137
The particular role served by NAC in relation to Eximbank's work
is the result of informal arrangements worked out over the years. The
concept of "coordination" would seem to imply that the purpose of
NAC intervention in the Bank's operations is limited to whatever
impacts such operations might have on other facets of United States
international economic, trade, financial and monetary policies. That is to
say, NAC, as such, has no standing to interest itself in whatever
Eximbank decisional areas might be denominated as purely internal. In
practice, of course, there are no certain standards by which the Bank's
purely internal policies and decisions can be readily distinguished from
those requiring "coordination" due to external impacts. The
continuing need ultimately perceived by Congress for some measure of
coordi,nation was reflected in the 1954 decision to restore the Bank's President
to the NAC.13 His membership was established initially following the
immediate post-war period during which an even more obvious need
existed for coordinating the overlapping reconstruction and
development aid missions of Eximbank and the World Bank.
Congress chose to deal with the fuzziness inherent in defining the
scope of "coordination" by requiring Eximbank (as well as all other
agencies subject to NAC coordination) to keep NAC "fully informed of
their activities" and to provide it "with such further information or
data in their possession as the council may deem necessary to the
appropriate discharge of its responsibilities."' 139 Thus, whatever the
technical scope of its ultimate authority over the Bank's policies and
decisions, NAC is in a position to request information. As a practical
matter, the Bank may refuse in marginal cases only at the risk of
generating "no win" disputes requiring Presidential resolution, in which the
137 An overview of NAC's operations, of which its Eximbank role is but a small part, is titled
Organization, FunctionsandOperations,in 1979 NAT'L ADVISORY COUNCIL ON INVL MONETARY
& FIN. POLICIES ANN.REP. app. A at 81.
138 See J. HILLMAN, supra note 18, ch. I n.59 and accompanying text.
139 22 U.S.C. § 28
Bank is pitted against Cabinet members on an issue of disclosure
within the executive branch.
In theory, of course, the broad power to obtain relevant
information is the power to obtain more information in explanation or
justification of the initial information. It is a process which, in the end, could
operate to confer substantial influence on NAC over the formulation of
Eximbank policies and major decisions. Nevertheless, the Bank has its
own distinct responsibilities, operating standards and policy goals, as
set out by the President and OMB, as well as by Congress. In short, the
working relationships between NAC and the Bank call for cooperation
and efforts at consensus rather than confrontation.
As indicated in NAC's 1979 Annual Report, its then current
practice called for "review of specific proposed Eximbank transactions,
prior to final decision by the Bank's Board of Directors." Such
1. proposals involving Bank liability of $30 million or more;
2. all transactions involving support for nuclear electric-generating
3. transactions in which "reasonable assurance of repayment" is
contingent on an external escrow account or other preferred creditor
4. transactions in which the Bank proposes to support exports
facing foreign official credit competition mixed with official development
assistance resulting in repayment terms or interest rates below the
5. proposals which a majority of NAC members believe to have
policy implications important enough to warrant NAC review.14°
Thus, the formal mode of intervention is by prior review. The
generality of category five lends itself to NAC prior review of general
operating standards bearing on all transactional decisions. This could
include interest rates, maturities and participation levels in particular
programs, as well as overall programs and forms of support. 14 1
While NAC operates collegially and seeks consensus, most
concerns originate within the perspectives and overall responsibilities of
140 1979 NAT'L ADVISORY COUNCIL ON INT'L MONETARY & FIN. POLICIES ANN. REP. 58.
141 During 1979, "a number of significant developments affecting Eximbank's policies occurred
and many of the consequent Eximbank policy changes were reviewed by the National Advisory
Council to assure adequate coordination of U.S. international and monetary and financial
policies." Included among the policy matters bearing on pricing and resource allocation that were
reviewed by NAC were: (i) the selective matching of the terms and conditions of "mixed credits"
established by governments in industrialized countries; (ii) offers of coverage of general purpose
lines of credit to meet competition; and (iii) increased interest coverage on export credit insurance
from 6 to 8%. (The Bank's basic lending rate was not changed during the fiscal year.) 1979 NAT'L
ADVISORY COUNCIL ON INT'L MONETARY & FIN. POLICIES ANN. REP. 58.
particular members. Treasury and the Federal Reserve Board will
focus more on the impact of the Bank's lending and borrowing practices
on money markets and rates. Any NAC interest in issues of
additionality will ordinarily stem from the concerns of these two agencies,
although the relevance of additionality principles to the role of NAC has
been questioned by the Bank on statutory grounds. 142 What would
seem especially pertinent to the role of NAC are the negative balance
of payment and capital allocation impacts of unnecessary Bank loans
extended at concessional rates, especially in substitution for available
The role of the Department of State is to maintain consistency
between Bank practices and foreign policy objectives. To that end, the
Department of State may actively solicit or discourage the Bank's
support of exports to particular countries, or of particular categories of
exports. This customary role was given added substance by President
Carter's delegation to the Secretary of State of his authority under the
Act to determine when Eximbank loan denials would be in the national
interest.143 Except as concessional terms may affect a foreign policy
objective, the Department of State has no particular institutional
concern in the Bank's general resource allocation standards.
In terms of the Bank's general operating standards, the least
influential executive branch member of NAC would seem to be Commerce.
In periods of promotional activism and program expansion, it has little
more than encouragement or possible supportive data to add to the
Bank's natural proclivities. In other periods, its own constituency
concerns have already been countered by other controlling executive
branch policies. However, one significant role largely reserved to
Commerce is that relating to the issue of adverse domestic impact. In the
Department of Commerce will be found the most direct institutional
concern for the potential domestic impacts of any future imports
generated by large capital exports (such as entire steel plants) supported by
the Bank. It is this role which the Secretary of Commerce may find
most congenial, both on NAC and as an ex officio Bank Board
mem142 The following events were related to the author by a participant in NAC's operations
during 1974. The Bank submitted a proposed loan to NAC for prior review. It involved a credit to
British Air for the purchase of United States-produced commercial aircraft. Treasury's
representative on NAC recommended rejection of the loan on the grounds that its terms were more
generous than what was required for the completion of the particular sale. The Bank's President
(William Casey) refused to accede on the grounds that Treasury had no authority to impose a
standard of "additionality," contrary to the standards of the Act. In that case, the Bank prevailed.
143 Exec. Order No. 12166, 3 C.F.R. 452-53 (1980), reprintedin 12 U.S.C. § 635 note, at 13
(Supp. V 1981
ber, under the announced policies of President Reagan."
In their discussions of Eximbank's activities, the Annual Reports
of NAC are totally noncritical. If residual, unresolved policy
differences exist, they are not evident. The Bank's work is presented in a
manner which carries the clear imprint of NAC approval. Prepared by
Treasury, the Annual Report in its substance reflects a consensus
among NAC members. If any insight is to be derived from these
documents it is that of the Bank and NAC as coordinated partners in the
implementation of executive branch policies.
The actual significance of NAC, as such, in shaping major Bank
decisions is not always apparent from its reports. In its Fiscal Year
1972 report, NAC noted the expansion of the Bank's Discount Loan
Facility to include short term paper "following extensive consultations"
within NAC.145 In context, a reasonable inference is that NAC was
instrumental at the time in passing on the basic policy as well as in
implementing details. In fact, Eximbank's intent to establish the new
program constituted the single most important assertion of need in the
earlier 1970 and 1971 legislative hearings for off-budget status.'46
In any case, NAC's Annual Reports during the Nixon
Administration most effectively demonstrate how the vigorous pursuit of
Presidential policies can create a working partnership between NAC and the
Bank. Thus, in support of Eximbank program expansion, NAC in its
Fiscal Year 1971 report repeated with obvious approval the
Administration's and the Bank's arguments on the need for off-budget status.
With similar approbation, it described "Administration" policy in these
terms: "This Administration has aggressively pushed the use of export
credit as a tool for expanding our sales abroad and has been inclined to
give the benefit of doubt in weighing the question whether financing is
reasonably necessary."' 47
The NAC report for Fiscal Year 1973 was a source of still greater
candor in setting out with approval the Bank's program objectives
under President Nixon. Thus, it explained:
The competitiveness of a product is determined by a number of factors,
including speed of delivery, the quality of the good, the availability of
144 Commerce also serves as a natural prod to the fullest feasible use of the small business
promotion provisions of the Act. See supra notes 67-68 and accompanying text.
145 1972 NAT'L ADVISORY COUNCIL ON INT'L MONETARY & FIN. POLICIES ANN. REP. 26.
146 The budget status issue also revealed the basic independence of the Federal Reserve Board
from executive branch policy determinations, as reflected in the contrary unanimous views of
cabinet department members of NAC. See supra note 94 and accompanying text.
147 Again, these "majority" views of the NAC may be compared with Federal Reserve Board's
contrary assessment of the Bank's expansionary practice. See supra note 94 and accompanying
servicing after delivery, and the price. The effective price of a good is a
combination of its selling price, the financing arrangements,
transportation costs, variation in exchange rates, and any discount that might be
Thus, favorable financing arrangements may outweigh an
unfavorable selling price. 148
This particular NAC statement surely falls short of a total policy
commitment to the subsidization of inefficient producers. But it could
easily have been construed as a green light for Eximbank to maintain a
policy of equalizing at least some disadvantages of "selling price" and
"transportation costs" through concessional financing. For better or
worse in terms of net welfare consequences, acceptance of the idea of a
calculated subsidy to overcome market-based export impediments
could hardly have been made more explicit.
Total candor in its discussions of Bank practices is not the
unvarying practice of NAC. This is especially true when it undertakes to serve
as the Bank's defender. NAC's annual report for Fiscal Year 1979
provides a case on point. By the close of that period the Bank's program
expansion in furtherance of President Carter's announced policies had
taken hold. 49 Following a reduction on January 5, 1977, of the Bank's
basic interest rates from an 8.25-9.5% range to an 8-9% range, a further
reduction to a 7.75-8.75% range was made on October 13, 1977. This
remained in effect through Fiscal Years 1978 and 1979 to April 1, 1980,
when the level was raised to 8.75-9.25% in the wake of sharp and
continuing increases in general interest rate levels and growing criticism of
the Bank's interest subsidies.' 50
Throughout 1979, while its basic lending rates remained at
7.758.75%, the Bank met its medium and long term borrowing needs from
FRB, as follows: 10-year maturities-$330 million at 9.02%; $403
million at 9.35% and $517 million at 9.42%; 3.25 year maturity-$1.283
billion at 9.49%.151
148 1973 NAT'L ADVISORY COUNCIL ON INT'L MONETARY & FIN. POLICIES ANN. REP. 35.
149 Between Fiscal Years 1977 and 1979 the Bank's program authorizations had increased as
follows: direct loans-$700 million to 3.72 billion; total loans-$1.22 to 4.47 billion; total program
authority (loans, guarantees and insurance)-$5.60 to 9.49 billion. 1979 EXPORT-IMPORT BANK
ANN. REP. 14.
150 Between October, 1977 and April, 1980, the following representative interest rates or yields
had risen as follows: bank prime-from 7.5 to 19.77%; government 10 year notes and
bondsfrom 7.52 to 11.47%; corporate bonds (composite Aaa)-from 8.04 to 12.04%. FED. RES. BOARD
BULL., Jan. 1978, at A. 26-A. 27; FED. RES. BOARD BULL., July 1980, at A. 26-A. 27. For further
data and a discussion regarding interest rates during Fiscal Years 1969-80, see J. HILLMAN, supra
note 18, ch. IV.
151 1979 EXPORT-IMPORT BANK ANN. REP. 26. The Bank's current borrowing rates are
actuNorthwestern Journal of
International Law & Business
The fact that the Bank's current loans were being made at rates
fully 1%below its own current borrowing costs was explained by NAC
Throughout fiscal year 1979 Eximbank standard interest rates to
foreign borrowers were fixed within a range of 7.75 and 8.75 percent per
annum depending on maturity, with the higher rates charged for the
longer term loans. However, because there was no international
agreement at the OECD Export Credits Group discussion to raise interest rate
levels, Eximbank on occasion charged less than scale (usual) rates to meet
foreign official export credit competition. This was done in more than
one-fifth of the loans authorized by the Bank during the period covered
by this Annual Report of the National Advisory Council, accounting for
about 40 percent of the total dollar amount of loans authorized. In some
instances,the interestrate chargedwas lower than the averagecost offunds
to the Bank.
Eximbank's weighted average interest rate to borrowers duringfiscal
year 1979 was 8.30percent. As of September 30, 1979, Eximbank's
average interest cost on all outstanding b15o2rrowings-largelyfrom the Federal
Financing Bank-was 7.99percent.
Thus, the relationship between lending rates and borrowing costs
was not simply ignored. Instead, the report dissembled. The effort was
to create a more positive impression of comparative rates by relating
current lending rates to the "average cost of funds" or the "average cost
on all outstanding borrowings."
In this effort NAC could take refuge in the statutory interest rate
formula combining "average cost of money to the Bank" and
competitive needs."5 3 To do so, however, was to dedicate its services to the
cause of Eximbank program expansion with no particular concern for
factors entering into the financial consequences of its operations based
on marginal costs.
The point is made simply to emphasize that NAC and the Bank
stand together as instruments of executive branch policy objectives.
Whatever may be the nuances and refinements which NAC introduces
into the Bank's programs and decisional standards, they are likely to
have only a minimal, incremental impact on the balance achieved
between promotional activism and efficient resource allocation.
Nevertheless, it is said by authoritative observers that some
members of Congress concerned with "activist" tendencies in the Bank are
insistent that NAC maintain a critical stance. It is said that the Bank's
ally found in the notes to the Comptroller General's financial statements. See also J. HILLMAN,
supra note 18, ch. IV.
152 1979 NAT'L ADVISORY COUNCIL ON INT'L MONETARY & FIN. POLICIES ANN. REP. 57
153 See supra notes 17-20 and accompanying text.
Chairman John Moore was eager to obtain NAC unanimity on policy
matters because of its value in the Bank's Congressional relations. If
this is the purpose of Congress, then on basic issues of pricing and
resource allocation the most significant support on NAC will come from
the concurrence of the Federal Reserve Board, which, alone, is not
bound to the implementation of Presidential policies regarding the
Bank's program.' 54
In the end, of course, the greatest impact on the Bank's use of its
resources will arise from the central function and resulting intrusions of
OMB. Its role as executive branch allocator of limited resources
among competing programs through budget and apportionment
con.trols will inevitably cast it as the official skeptic of the Bank's program
needs. 5 The unavoidable, critical and complex character of OMB's
role requires a large measure of delegated discretion from the President
to compromise among competing goals. In the case of Eximbank, as
with any program, should that process yield results which depart too
far from Presidential policy objectives, OMB itself may stand to be
corrected. In such cases, the competition will be for the President's ear.
Whoever prevails in any particular dispute, OMB, and the function it
performs, remains the major continuing source of executive branch
intrusion into the availability of resources for Eximbank program
154 See supra note 94. But compare the Federal Reserve Board's concurring role in the Ansett
case. See J. HILLMAN, supra note 18, ch. VII.
155 See supra notes 92-93 and accompanying text.
156 A "strong" Bank President, confident of his relations with his President, will on occasion air
his differences with OMB to any sympathetic subcommittee of Congress who will listen. Such was
the case with William Casey. Thus, he openly disputed the "Special Analysis" of his
Administration's budget (prepared by OMB) which defined a subsidy from government lending programs as
"the difference between the cost of borrowing under the Federal program and that cost in private
markets." 1976 AppropriationsHearings,supra note 78, at 329-30. In the same year he appeared
before the Banking and Currency Subcommittee whose chairman professed a concern that, in
deciding on budget requests, OMB operates as a "shield between an agency and the Congress," so
that "what Mr. Casey might ask for is not necessarily what finally comes out in the President's
budget." To which Mr. Casey replied, in something less than a defense of what is ostensibly the
President's budget, that "[tihe Appropriations Committee is free to increase the authorization."
Brifng on the Export-ImportBank. HearingsBefore the Subcomm. on InternationalTrade of the
House Comnm on Banking, Currency andHousing, 94th Cong., IstSess. 11 (1975).
1 12 U.S.C. § 635 ( 1976 & Supp . V 1981 ). The 1945 Act is at 59 Stat . 526 ( 1945 ).
2 Exec. Order No. 6581 ( 1934 ) ; Exec . Order No. 6638 ( 1934 ).
3 National Industrial Recovery Act , Pub. L. No. 73 - 67 ,48 Stat. 195 ( 1933 ). This act was held unconstitutional in Schechter Poultry Corp . v. United States , 295 U.S. 495 ( 1935 ). However, section 8 of Act of Jan. 31 , 1935 , Pub. L. No. 74-1 , 49 Stat . 1 , 4 , continued both banks until June 16, 1937 . ( 1973 ); The Role ofthe Export-ImportBank andExport Controlsin U.S. InternationalEconomic Policy: Hearings on S, 1890 and S, 3282 Before the Subcomm . on InternationalFinance of the Senate Comm. on Banking, Housing and UrbanAffairs, 93d Cong., 2d Sess . ( 1974 ); International EconomicPolicy: Hearingson H.R. Res . 774and1059 , andH.. 13 , 838 - 40 Before the Subcomm. on InternationalTrade ofthe House Comm. on Banking andCurrency, 93d Cong., 2d Sess . ( 1974 ). The reports on the 1974 amendments are S. REP . No. 1097 , 93d Cong., 2d Sess . ( 1974 ) ; H.R. REP . No. 1261 , 93d Cong., 2d Sess., reprintedin 1974 U.S. CODE CONG. & AD. NEWS 8116. Conference reports are H.R. REP . No. 15 , 977 , 93d Cong., 2d Sess . ( 1974 ) ; H.R. REP . No. 1439 , 93d Cong., 2d Sess . ( 1974 ) ; H.R. REP . No. 1582 , 93d Cong., 2d Sess . ( 1974 ) ; H.R. REP . No. 1633 , 93d Cong., 2d Sess . ( 1974 ) ; S. REP . No. 1335 , 93d Cong., 2d Sess . ( 1974 ) ; and CONF . REP. No. 1633 , 93d Cong., 2d Sess., reprintedin 1974 U.S. CODE CONG. & AD. NEWS 8127. Floor Proceedings are found at 120 CONG . REC. S. 3917, H.R. 15 , 977 ( 1974 ).
6 Pub. L. No. 95 - 143 , 91 Stat. 1210. Hearings on the 1977 amendments are To Extend and Amend the Export-Import Bank Act of 1945: Hearings on H. 5501 Before the Subcomm . on InternationalTrade, Investment, andMonetary Policyofthe House Comm on Banking,Financeand UrbanAffairs, 95th Cong., 1st Sess . ( 1977 ). Related hearings include American Role in East-West Trade: OversightHearingsBefore the Sen . Comm. on Commerce, Science andTransportation,94th Cong., 1st & 2d Sess . (1975-76); and Oversight Hearings on the Export-Import Bank: Oversight HearingsBefore the Subcomm . on InternationalTrade, Investment and Monetary Policy of the House Comm . on Banking, Financeand UrbanAffairs, 94th Cong., 2d Sess . ( 1976 ). Reports on the 1977 amendments are S. REP . No. 279 , 95th Cong., 1st Sess . ( 1977 ) ; and H.R. REP . No. 235 , 95th Cong., 1st Sess., reprintedin 1977 U.S. CODE CONG. & AD. NEWS 3126. The conference report is H. CONF. REP . No. 627 , 95th Cong., 1st Sess., reprintedin 1977 U.S. CODE CONO. & AD. NEWS 3142. Floor proceedings on the 1977 amendments appear at 123 CONG . REc. H.R. 6415 ( 1977 ).
7 Pub. L. No. 95 - 630 , tit. XIX, 92 Stat. 3641 , 3724 . Hearings on the 1978 amendments are Export Policy,Part4: Export-Import Bank AuthorizationandRelatedIssues: Hearingson S2520 Before the Subcommr on InternationalFinanceof the Senate Comm . on Banking, Housingand UrbanAffairs, 95th Cong., 2d Sess . ( 1978 ); Export-ImportAct Amendments of 1978 Hearingson S. 3077Before the Senate Comm on the Environment and Public Works, 95th Cong ., 2d Sess . ( 1978 ) ; To Amend andExtend the Export-ImportBank Act of 1945: Hearingson HRA 11384 Before the Subcomm . on InternationalTrade, Investment andMonetary Policy ofthe House Comm. on Banking,Financeand UrbanAffairs, 95th Cong., 2d Sess . ( 1978 ); Export-ImportBank andTrade With China: Hearingson HR. 8196 Before the Subcommt on InternationalTrade, Investment andMonetary Policy of the House Comm on Banking , Financeand Urban Affairs, 95th Cong., 2d Sess . ( 1978 ); Export-ImportBank andTrade with South Africa: Hearingson H . RA 9746 Before the Subcomm . on InternationalTrade, Investment andMonetaryPolicy of the House Comm on Banking, Financeand UrbanAffairs, 95th Cong., 2d Sess . ( 1978 ). Reports on the 1978 Amendments are S. REP . No. 844 , 95th Cong., 2d Sess . ( 1978 ) ; S. REP . No. 1039 , 95th Cong., 2d Sess . ( 1978 ) ; H.R. REP . No. 1115 ,95th Cong., 2d Sess., reprintedin 1978 U.S. CODE CONG. & AD. NEWS 9380 . Floor proceedings related to the 1978 Amendments are found at 124 CONG . REC. H.R. 13 ,157, S. 3077 ( 1978 ). 2.
28 12 U .S.C. § 635a-l(b) (Supp . V 1981 ).
29 Export Expansion Finance Act of 1971, supra note 4, § (b)(6), 85 Stat . at 346.
30 The Senate Committee's report would suggest that the proponents of this "authorization" were unmindful of the existing directive . S. REP. No. 844, supranote 7 , at 11. In the earlier 1974 floor proceedings Senator Stevenson had implied in the context of the debate that a merely permissive provision, by ridding the Bank of the mandate, would permit greater flexibility in dealing with "adverse impact" problems. 120 CONG . REC. 31 , 938 ( 1974 ) (statement of Senator Stevenson) . He explained that in the pending bill the word "direct" would be deleted and made permissive. Instead, under the 1978 amendments, both the directive and the authorization exist formally as equally controlling operating standards .
31 12 U .S.C. § 635a-l(a) (Supp . V 1981 ).
32 12 U.S.C. § 635 ( b)(1)(A) (1976 & Supp. V 1981) . In response to the distress at Eastern Airlines' large purchase of the European Airbus on concessional terms through foreign government subsidized financing, the 1978 amendments incorporated the present provisions of 12 U.S.C. § 635a-3 (Supp. V 1981) . The amendment seeks to discourage such further "raids" on the United States markets of domestic producers by procedures under which Eximbank may offer concessional rates to United States buyers to offset the blandishments of foreign "non-competitive financing" in aid of foreign exports to the United States .
33 See infra notes 67-70 and accompanying text.