INTRODUCTION

During World War II and in its aftermath, the Export-Import Bank showed itself to be a remarkably flexible and resilient institution. The volume, scope, and complexity of its activity increased rapidly in these years. When war broke out in Europe in 1939, the Bank to that point principally financed the export of surplus agricultural products and aided manufacturers to meet overseas competition. During World War II, the Bank's focus narrowed essentially to dealing with Latin America. But its activities there broadened. It helped Latin American countries to cope with the dislocations in world markets and finance brought about by the conflict. Ex-Im financed – in cooperation at times with other U.S. government agencies – equipment, facilities, and strategic materials for the war effort. The Bank embarked on a program of developmental lending to improve the export capabilities of Latin American countries. In doing so, it reoriented its financing from relatively simple transactions to complex project-type lending that involved literally hundreds or thousands of separate transactions.

Following the war, the U.S. government refocused the Bank on Europe instead of Latin America. In coping with the destruction in Europe, the Ex-Im became the first government agency to provide loans in the emergency reconstruction effort of the immediate postwar years. It was the only agency of the U.S. government still in business in 1945 with the experience to take up the task of extending and managing large credits overseas.

INTRODUCTION

Much of the decade of the 1980s proved a difficult period for financial institutions. The Export-Import Bank was not immune to the consequences of the unusual macroeconomic developments of the period. For the Bank, the 1980s, especially after 1983, created a time of turmoil and important turning points.

At the beginning of the decade, domestic inflation reached unprecedented peacetime levels. To cope with these problems, the Reagan administration slowed the economy by raising interest rates, which resulted in the deepest recession since the depression of the 1930s. At the same time, large tax cuts and increased military spending led to record deficits. Compounding the decade's economic problems were the first signs of trouble in the domestic savings and loan industry, a consequence of banking deregulation in the late 1970s.

Internationally, a serious debt crisis occurred among less-developed countries unable to service debts incurred in the 1970s. One consequence of these difficulties was a sharp decline in the demand for imports in affected areas. An unusually strong dollar, at least until agreements between 1985 and 1987 to drive its value down, further contributed to a growing trade deficit as American exporters were priced out of many markets.

Together these domestic and international economic developments contributed to a serious reduction in the levels of the Ex-Im's lending activity and the quality of its loan portfolio. In 1983, the Ex-Im's direct lending plunged. It would never again reach the levels of 1978–82.

The Export-Import Bank of the United States is the government's official export credit agency (ECA). Throughout its history the Bank has promoted the financial needs of American exporters, but it has also served the goals of policy makers in the White House, as well as the Departments of the Treasury, State, and War (later Defense). In that sense, Ex-Im was not atypical when compared to the ECAs of other governments. What has been unusual in Ex-Im's history was the need to compete with foreign ECAs, which were the products of different political economies, serving governments that often had domestic and foreign agendas unlike those of the United States. Ex-Im has avoided competing with private sector institutions. That stricture, a part of its early congressional mandate, has shaped a government institution keenly attuned to the practices of financial market institutions. Additionally, the Bank focused on market principles because of the requirement that its lending be based on the assumption of a reasonable assurance of repayment.

Franklin D. Roosevelt created the Export-Import Bank in 1934 during the New Deal's earliest zeal for planning and building the power of the state. It now exists in an environment where leaders extol market solutions to economic growth and development in most places in the world. As this transformation suggests, Ex-Im has long conducted its business in an ever-changing realm defined by the shifting demands of both the state and the market.

In 2000, the Export-Import Bank of the United States (Ex-Im) marked its sixty-fifth anniversary. Ex-Im is the United States' export credit agency (ECA). It is a federal entity dedicated to promoting American exports by providing loans, guarantees, and insurance, without competing with the private sector. Many other countries have ECAs, including all the world's major industrial exporting countries. Throughout its history, Ex-Im has served the interests of the American exporter community, while also attending to the public policy goals of the executive branch and Congress. For almost half of its recent history, Ex-Im has played a part on the world scene by contributing to the United States' efforts to promote freer trade – leveling the playing field by standardizing practices among ECAs – through negotiations at the Organization for Economic Cooperation and Development (OECD).

At the turn of the century, the Bank was confronting a series of changes in private international capital markets and in the practices of other ECAs. In the last two decades, Ex-Im conducted its business in the midst of major international financial crises in Latin America in the 1980s and Southeast Asia in the late 1990s. Like other private and public institutions, Ex-Im also had to face up to the opportunities and challenges of the revolution in information technology and the arrival of the Internet. In addition, as an institution operating on the world scene, Ex-Im had to pay heed to the demands of nongovernmental institutions devoted to environmental causes.

INTRODUCTION

John F. Kennedy promised to get America moving again in the 1960 presidential election campaign. Despite the youthful energy that Kennedy brought to the White House, problems and issues that had surfaced during the Eisenhower years carried over into the new administration, and that of Lyndon B. Johnson and later Richard M. Nixon. America's balance of payments position continued to erode. Pressures on the federal budget persisted from one administration to the other. And the Cold War became more contentious, especially during the Kennedy years, as an activist administration in the United States faced an opportunistic leadership in the USSR.

These circumstances shaped the Bank's experience in the Kennedy–Johnson, and the first Nixon, administration. Under the leadership of Harold F. Linder (March 1961–July 1968), the Export-Import Bank assiduously followed its established policies of risk assessment and loan management. But the way in which Ex-Im employed its assets changed as the Bank increasingly made use of guarantees and insurance. Indeed, the Bank's 1965 annual report said that it had become two institutions, one focused on direct lending, the other on guarantees and insurance. During the Kennedy and Johnson administrations, the geographic focus of Bank long-term credits shifted away from development projects in Latin America. It also became an important supplier of credits for purchases of the products of the jet aircraft, nuclear power, and new earth satellite industries.

INTRODUCTION

In 1948, President William McChesney Martin looked forward to the end of the Bank's role in European reconstruction. One might say that he hoped for normalcy. The Ex-Im's activity in that year focused on agricultural credits and developmental lending, two well-established areas of its business. By the early 1950s, much of the Ex-Im's activities were devoted to developmental lending in Latin America, an area familiar to the institution.

But the year 1948 proved anything but normal for the United States. Already troubled relations with the Soviet Union deteriorated even further with a series of events between 1947 and June 1950 – the start of the Korean War – which froze U.S.–USSR relations in the bitter standoff that came to be known as the Cold War. As a result, the Bank increased lending to promote the production of strategic materials, which in turn opened the Ex-Im to business in the Middle East, Africa, and Asia, places where its role had earlier been either minimal or nonexistent. The increasing scope and volume of the Bank's business required larger budgets for staff and greater attention to the intricacies of managing expanding operations.

The decade following 1947 also witnessed significant changes in the United States' place in the international economy. As Europe's and Japan's industrial base recovered from the damage of World War II, the United States lost its unusual postwar preeminence in world markets.

INTRODUCTION

Following the unprecedented international and domestic economic problems the United States faced in the 1980s and early 1990s, circumstances during the rest of the last decade of the twentieth century improved markedly. These changes influenced the Bank and its work. By 1992, recession gave way to the beginnings of a lengthy domestic economic boom, highlighted by an expanding export sector. Internationally, conditions also brightened. The Latin American debt crisis had abated following the substantial rescheduling of debt championed by U.S. Secretary of the Treasury Nicholas F. Brady in 1989.

In 1993, the Clinton administration embarked on an effort to stem the growth of the country's very large budget deficits. Spurred on by a Republican victory in the 1994 congressional elections, the White House and Congress both sought deficit reduction. By 1999, the federal government accumulated its first surplus since 1969. These conditions accelerated foreign capital flows to the United States, which fueled not only the stock market but also private business investment. The latter helped drive new network computer and telecommunications technologies that together fostered a revolution in “information technology” (IT). The latter made possible the commercialization of the Internet, perhaps the most important technological breakthrough of the 1990s. The United States became the leader in the new technologies, which were attractive candidates for export, despite the strong dollar. Additionally, in its first years in office, the Clinton administration embarked on an expansive export drive.

INTRODUCTION

There were momentous changes in the international economy in the 1970s, an altered environment that heavily impacted the Bank. The institutional arrangements and the “rules of the game” that had structured international economic activity since the end of World War II were undone in the 1970s. U.S. trade and payments surpluses turned into deficits, which among other things accelerated pressures to devalue the dollar. Consequently, in August 1971, President Richard M. Nixon abandoned the gold-backed, dollar-based fixed exchange rate system established at Bretton Woods in 1944. Its demise was followed by a depreciation of the dollar against major currencies, and ultimately a system of floating exchange rates. In 1973–4, the Organization of Petroleum Exporting Countries (OPEC) delivered the first of its oil shocks by quadrupling per barrel petroleum prices. One immediate consequence was increasing inflation and higher interest rates in the industrialized world and hardship in the developing countries. Most countries importing oil believed they needed to stimulate exports to counter the negative impact of OPEC prices on their balance of payments. Over the longer term, the recycling of “petrodollars” distorted international capital flows, which set the stage for the debt crisis of the 1980s.

These changes helped end the favorable economic conditions in the United States in the 1960s. The American economy gave way to slower growth, lower profits, and higher levels of inflation and unemployment in the 1970s.

INTRODUCTION

Franklin D. Roosevelt established the first Export-Import Bank of Washington in February 1934 to serve his foreign policy and promote economic recovery in the United States. He wanted the Bank to help normalize relations with the Soviet Union. The effort bogged down and failed following protracted discussions over previously unpaid Soviet debts. Another diplomatic objective – improving relations with a turbulent Cuba – prompted the Roosevelt administration to establish the second Export-Import Bank of Washington a few weeks later in March 1934. In June 1935, after officials determined that no business would be done with the Soviet Union, the two banks merged to form one Export-Import Bank of Washington (Ex-Im).

From the first, organized groups of American exporters and bankers supported the new government banking institutions. Exporters needed the Bank's services during the 1930s because of depressed conditions and the rapid deterioration of international trade and finance. Officials of the Roosevelt administration were sensitive to their needs and saw the Banks as contributing to economic recovery.

In its first decade, the Bank struggled to define its own mission. Ex-Im officials created an official dialogue with organized export and banker groups as the Bank developed its operating policies and procedures. Increasingly in the 1930s, Bank officials and staff defined the Ex-Im's role as promoting American export of agricultural and manufactured goods. But there were constraints on what the Bank could do.

To mark sixty-five years of work, the Washington-based Institute for International Economics (IIE), with the full support of the Bank, sponsored a conference in May 2000 to assess Ex-Im's effectiveness and to explore its role in the twenty-first century. While the theme of the conference was looking toward a new century, conference participants nevertheless also focused heavily on the Bank's situation at the end of the 1990s. In fact, the tenor of the conference – and the book made up of selected papers published in 2001 – was in large measure one of taking stock. To plan for the future, one needed to put the recent past into perspective. Thus, the conference presentations generally addressed the challenges the Bank faced at the end of the century. Together these challenges represented, as was so often the case in the past, the need for the Bank to determine how to adjust its internal operations and policies to yet another set of shifts in the public and private, domestic and international, environments in which it operated. In many respects, of course, the process of adjustment was already underway at the time of the meetings in Washington.

But, as the century ended, it was not entirely clear how the Bank would ultimately respond to some of the other challenges that it faced. This, of course, was one of the reasons for the conference.