One plank of the Export-Import Bank’s mission is to give financing to companies that might not be able to get it from the private sector. But another plank requires Ex-Im to keep its risk in check by only making or backing loans it is confident will be paid back. Both planks sound reasonable on their own, but in practice they contradict each other. This makes it difficult, if not impossible, for Ex-Im to be an effective contributor to the financial system.
If private sector banks are unwilling to lend to a company, it is probably because those banks don’t expect to get their money back. Prudence dictates that Ex-Im also stay away from such a risky investment, despite its mandate to provide financing where the private sector won’t.
A different company may look like a solid investment, with very little risk of default. This company certainly meet’s Ex-Im’s risk management criteria, and would qualify for Ex-Im financing. But this company will also have very little trouble securing private sector financing, leaving no market failure for Ex-Im to correct.
At the very least, the Export-Import Bank needs to refine its mission in a way that is logically consistent. Its current dual mandate simply will not do. Better, Ex-Im should close up shop and leave risk evaluation to companies that have their own money at risk, rather than ours.