Receive $80 Grab vouchers valid for use on all Grab services except GrabHitch and GrabShuttle when you subscribe to BT All-Digital at only $0.99*/month.
Find out more at btsub.sg/promo
PATIENTS who have been struck by long and debilitating illnesses often adopt a new perspective on things upon recovery. An athlete, for example, might have a newfound appreciation for the talents that allow him or her to play a sport. A parent might realign priorities to spend more time with the family.
The Export-Import (EXIM) Bank of the United States fell into its own bureaucratic coma for about five months in 2015, when US lawmakers failed to reauthorise the agency.
It would take a fierce outcry from the business community across America and unflinching hope from EXIM chairman Fred P Hochberg, who did not release or furlough any workers during the lapse, to eventually get the bank back up and running.
Mr Hochberg, who now spends a considerable amount of his time running around the world to reassure businesses about EXIM's future, has emerged from the ordeal more convinced than ever of the need for government to support businesses, especially the smaller ones, and of the power of grassroots to sway politicians.
"We learnt a lot in the process," Mr Hochberg says.
While EXIM has occasionally drawn criticism for some of the projects that it finances, the usefulness of the bank and its very existence has rarely been questioned in its 82 years of history, except in the past few years.
Roots in the Great Depression
EXIM has its roots in the Great Depression, when the moribund US economy was in dire need of a fiscal shot in the arm. In 1934, then-US president Franklin Roosevelt created EXIM as an agency tasked with facilitating trade between the US and other countries - initially Russia and France - and eventually expanded to include the rest of the world.
The agency operates almost like a commercial bank, albeit one that does not have to fight for client deposits. It supplies financing for US exports, so US producers or their foreign customers can apply for credit from EXIM, for example. And EXIM even offers insurance to protect US exporters against defaulting offshore customers.
Of course, commercial banks are already well represented in the trade financing space, but commercial banks are not always ready to extend financing. Longer-term projects and deals that are highly exposed to political and regulatory risks are examples of when the private sector may not be willing or able to fill a financing gap. Times of extreme economic pressure, such as during a financial crisis, can also keep private lenders from taking on more risk. Those are the gaps that EXIM tries to fill.
EXIM also exists as part of a global tit-for-tat as the scores of export-import banks around the world each tries to facilitate exports from its own home market. If EXIM's counterpart in Europe, for example, was providing cheap financing for a European exporter, a competing exporter based in the US may also need some help in order to stay competitive.
"There are about 85 export credit agencies around the world, so this is not a unique phenomenon to the US nor is it a new phenomenon," Mr Hochberg says. "It began almost 100 years ago in Great Britain, the United Kingdom, which had the first export credit agency. We followed a few years later in 1934. We exist for two purposes. One, when financial markets have a market failure and are unable to make loans or guarantees or insurance, we can supplement that market. It was true when EXIM was begun in the Depression and it was certainly very much true in the financial crisis of 2008 and it is true in certain markets where it is hard to deploy private capital. I mentioned that we're on our way to India, we're on our way to Bangladesh, that's two markets where it's hard to sometimes attract private capital to do the infrastructure investments...
"The other role we play is making sure that if a US company is competing, that it's a level playing field. So sometimes we find other governments, as I mentioned, there are 84 other export credit agencies, China, Japan, Germany and so forth, backing their exporters; we want to make sure there's a level playing field. So both parties have comparable financing, and the buyer picks the best product. So we see that frequently in aircraft, in power, in satellite technology and surface transportation." EXIM's impact on US exports is not trivial. In the year ended September 2015, EXIM authorised US$12.4 billion of loan guarantees, insurance and direct loans for about US$17 billion worth of US exports. The bank estimated that 109,000 US jobs were directly linked to those exports.
Those numbers could have been even higher were it not for the five-month lapse between July 1 and Dec 4 in 2015.
How did that lapse arise?
For all the good that EXIM supporters claim the agency does, the bank has become a target in recent years of free-market advocates and fiscal conservatives.
EXIM's opponents argue that the bank distorts the market by subsidising the financing costs of businesses. They also argue that EXIM disproportionately benefits big business, especially The Boeing Co. Commercial aircraft accounted for 30 per cent of the exports that received EXIM support in fiscal 2015.
In 2015, Texas Republican Representative Bill Flores went so far as to say about EXIM: "If you're going to start cutting the weeds out of the federal government, this is one of the first weeds you need to root out."
There was enough opposition to EXIM in the US Congress in 2014 that what should have been a routine reauthorisation of EXIM turned into a fierce debate about the role of government and the future of EXIM.
"I got a hint in 2014 when instead of getting reauthorised on Sept 30, 2014, the proposal was made to extend us to June of 2015, and I knew at that moment that it was a very dangerous sign," Mr Hochberg recalls. "Nine months did not give our exporters the confidence to make plans, and at a time of year when it's harder to get legislation passed. So I knew 10, 11 months in advance we were facing a very difficult time."
Mr Hochberg stepped up efforts to reach out to lawmakers and to the public to state his case that EXIM was an important part of the US economic ecosystem.
He argues that EXIM fills a gap that the private sector either cannot or will not bridge. And that although large companies get a larger share of EXIM's financing in dollar terms, that is consistent with the fact that those companies often carry long supply chains that benefit from EXIM's support. The large companies are also often major employers in the cities where they are located.
That EXIM could be distorting the marketplace is also refuted. EXIM generated a surplus of US$431.6 million in fiscal 2015 and had a default rate of just 0.235 per cent, suggesting that the bank was operating on sound commercial principles. For all the criticisms lobbed at EXIM by fiscal conservatives, the bank has actually contributed about US$7 billion of surpluses to government coffers over the past two decades. "Our only goal is to support jobs at home ... Our role purely is to make sure that when America competes, that it's a level playing field so that American workers have a fair shot of getting those jobs. From our point of view, we would rather those jobs be in the US than with a Chinese competitor."
Mr Hochberg shows little patience for free-market advocates who allege that EXIM is competing with the private sector, pointing out that almost all major deals that EXIM undertakes are done together with private players, and sometimes even at the behest of private lenders who cannot fully meet their clients' needs for various reasons.
"The private sector didn't get everything right in the financial crisis," Mr Hochberg says. "So, you know, I'm a little surprised that all of a sudden we now have the private sector's perfect 20/20 vision. There are also banking regulations like Basel 3 that make it harder to make a long-term loan. When we finance nuclear power, the private sector's not as ready to finance nuclear power. When we finance renewable solar power in India, it's hard to get a bank to do an 18-year loan."
Mr Hochberg also adroitly emphasised EXIM's impact on small and medium businesses, a strategy that gave prominence to the grassroots. Small and medium business owners began to make their case to their representatives in Washington.
"A lot of small business owners and medium-size companies, as well as large, actively were reaching out to their members of Congress to educate them on: 'Let me explain how many jobs in your district are impacted if the Export-Import Bank does not continue.' " Those arguments eventually worked - EXIM won reauthorisation in December 2015 through to 2019 - but not before the bank's opponents were able to hold up reauthorisation for a five-month period during which EXIM could not take on new business.
Never in EXIM's eight decades of existence had its authorisation ever lapsed.
Mr Hochberg blames a "vocal minority" for the opposition, noting that a majority of lawmakers actually supported EXIM in the subsequent and successful reauthorisation bill. But he acknowledged that the danger for EXIM is not over, especially with the Republican US presidential candidates Donald Trump and Ted Cruz having already voiced opposition to EXIM.
Role of government
"I think that we have had a debate in the US going back to the founding of our country about what should be the role of government," Mr Hochberg says. "And that's a healthy debate. That's a debate we have in our country all the time ... In some ways this is part of that larger debate."
Mr Hochberg touts his credentials as a businessman prior to joining EXIM as a way of showing that he understands what businesses need.
Mr Hochberg began his career at Lillian Vernon Corp, a mail-order business founded by his mother. He left that business in 1993, and eventually became a senior officer at the Small Business Administration under then-US president Bill Clinton. Mr Hochberg was also dean of The New School's Milano School of International Affairs, Management and Urban Policy between 2004 and 2008.
"Listen, I'm a businessman, I would like as little government as possible so that entrepreneurs can grow and flourish, but little is not none. And the Export-Import Bank has a very light footprint. We work with the private sector on every transaction. And let's remember, the private sector, private banks, be it JP Morgan or Citibank or HSBC, they bring us in. They say, a client comes to us, the only way we can get this transaction done is if we have support from the EXIM Bank ... As I said, we have a light footprint, but it is not 'no footprint'."
The light footprint, which gets lighter in better times as private lenders are more willing to take on risk, can be easy to dismiss especially today when the pain of the last global financial crisis is almost a decade in the past.
"My counterpart in Great Britain uses this line: If you haven't had a fire in five years, don't sell the fire truck and close the fire station," Mr Hochberg says. "We act as a way of being countercyclical when there's a problem."
The task now that EXIM has come back from its five-month coma is to make sure that the bank gets back up to full speed as soon as possible. "Being shut for five months has an impact," Mr Hochberg says. "If you have a favourite restaurant and it closes for five months, you're not going to starve, you're going to go somewhere else.
"I wish it didn't take so long. I wish we could have gotten a vote sooner. I wish that we had not damaged small businesses and medium-size companies to the extent that we did," he adds. "But I'm here to sort of give confidence to buyers of US goods and services, and sellers, that we will stand squarely behind them and support their efforts to sell overseas."
Every crisis offers opportunities and lessons to improve the current situation. Mr Hochberg says that one important takeaway from the lapsed authorisation is that of the importance of small businesses.
"The business community needs to engage with their elected officials so that they understand and can educate them on what's the real impact back at home, so that people aren't just dealing with theory but dealing with the reality on the ground," he says.
In fact, Mr Hochberg wishes that he had done more for small businesses.
"We have supported small businesses at a record level. We have done more with small businesses than we did under president (George W) Bush, and on minorities and women in business we have done more than president Bush and president Clinton combined," he says.
"And I would say what I've learnt in just under seven years is our small businesses still have a hard time getting access to capital. It took a few years to get the resources from Congress, but I probably would have wished I'd gotten those resources sooner and could have put more efforts into supporting small-business people in America."
Mr Hochberg is watching the commodity markets closely these days, concerned about how volatility in basic materials can impact the rest of the global economy. But as he has learnt from his own recent experience, the current disturbance offers opportunities to come back stronger.
"I'm an optimist," he says. "I think that this economic churning that's going on, the positive thing is we may see a number of economic reforms globally that are long overdue that have been keeping down economic growth globally and have an opportunity now to change. For example, in Indonesia they lifted the subsidy on oil and gas prices so now they pay market value. That is ultimately a good thing, and if we can see more of that in China, in Indonesia, in India, where governments can reduce subsidies and let market forces play a role. TPP (Trans-Pacific Partnership) has a role to do with that, in places like Vietnam, I think that can open up a lot of growth opportunities globally."
FRED P HOCHBERG
Chairman, Export-Import Bank of the United States
BA New York University
MBA Columbia University
1975 to 1993 President and COO,
Lillian Vernon Corp
1998 to 2001 Deputy and Acting Administrator, US Small Business Administration
2004 to 2008 Dean, The New School's Milano School of International Affairs, Management and Urban Policy
Since 2009 Chairman and President, Export-Import Bank of the United States