By Brody Mullins
WASHINGTON--When the Export-Import Bank sought to respond to
critics with tighter rules for aircraft sales, it reached out to a
company with a vested interest in the outcome: Boeing Co., the
biggest beneficiary of the bank's assistance.
For months in 2012, according to about 50 pages of emails
reviewed by The Wall Street Journal, the bank worked with Boeing to
write rules that would satisfy critics in Congress and the domestic
commercial airline industry--while leaving most sales of Boeing's
airplanes to foreign carriers unscathed.
Ex-Im Bank, which helps finance the purchase of U.S. exports
through loans and guarantees, is the target of Republicans who want
to kill it, in part because they say it mostly provides subsidies
to America's largest companies. The Boeing emails will add fuel to
that fight.
The previously unreported documents, obtained through an
open-records request, show how the two sides swapped ideas, drafts
and data on sales of wide-body airplanes. Ex-Im Bank officials
pushed their Boeing counterparts for information. Boeing suggested
changes to the bank's draft proposal.
They reveal an extraordinary level of coordination between
public officials and corporate executives. In a message one
Saturday morning, Bob Morin, then the bank's head of aircraft
financing, sent a plea: "If Boeing expects Ex-Im Bank to continue
supporting wide-body aircraft, we need to get this right."
When Congress renewed the bank's charter in 2012, the bank was
required to publish its methodology for determining which
transactions were significant enough to trigger an additional
"economic-impact review" and, potentially, rejection.
The requirement didn't specifically include aircraft purchases,
but Delta Air Lines Inc. and some lawmakers wanted the bank to
include them in the rules, too.
That's when Boeing and Ex-Im Bank started discussing how the
rule should be written. Many of the emails between the bank and
Boeing deal with the guidelines the bank was creating to determine
which aircraft transactions would trigger the additional
review.
The collaboration appears to have worked. In the nearly two
years since the rule went into effect, no Boeing sales have been
nixed as a result.
Republican presidential hopeful Jeb Bush recently joined the
chorus of conservatives questioning the bank's purpose. In late
February, he told a gathering of the Club for Growth, a
conservative advocacy group, that the government should consider
whether this kind of financing "should be phased out." The bank's
current authorization expires June 30 and the lobbying battle is
heating up.
Its usual supporters include lawmakers of both parties,
including House Speaker John Boehner (R., Ohio) and Minority Leader
Nancy Pelosi (D., Calif.), as well as the U.S. Chamber of Commerce,
major labor unions, manufacturers and Wall Street banks.
Officials at Boeing declined to comment on the emails. In
general, said Tim Myers, president of Boeing Capital Corp.,
Boeing's aircraft-financing unit, "it would be only natural" for
the bank to ask for input since Boeing is the only U.S. maker of
wide-body commercial aircraft.
Tim Keating, the company's top Washington lobbyist, called the
interaction an example of how government should work: "There
doesn't have to be a full hostile relationship between the
regulator and the regulated," he said.
Matt Bevens, a spokesman for Ex-Im, said other countries have
their own export-financing agencies, but Ex-Im is the only one that
assesses the economic impact of its transactions. Mr. Bevens,
speaking on behalf of the individual employees named in the emails,
said the bank developed the new guidelines voluntarily and that it
would have been "irresponsible if Ex-Im Bank had failed to consult
the only American manufacturer of commercial aircraft."
Bank supporters say foreign airlines would buy planes from
European rival Airbus Group NV without Ex-Im financing. Boeing
customers are among the biggest recipients of Ex-Im Bank loan
guarantees. In the most recent fiscal year ended Sept. 30, 2014,
the bank helped Boeing sell 61 wide-body planes to foreign airlines
by guaranteeing more than $7 billion in loans.
Overall, in that fiscal year the bank guaranteed $20.5 billion
in financing for U.S. exports. The bank charges a fee on its loans
and made $675 million in profit that it sent to the U.S.
Treasury.
Yet while the bank helps some American exporters, it irks other
domestic firms.
Delta, for one, says the bank's financing gives rivals such as
Emirates Airline, Thai Airways International PLC and Air India an
advantage in their aircraft purchases that isn't available to U.S.
carriers. For some foreign airlines, Ex-Im Bank's financing can be
less expensive than a standard commercial loan.
It's amid such criticisms that the Ex-Im Bank and Boeing
collaboration began. In August 2012, a bank official forwarded a
draft proposal on the economic-impact trigger to several senior
executives at Boeing and its aircraft-financing unit.
"Please note that this is an internal Ex-Im document still in
draft form, but we wanted to get your input on several aspects of
it prior to further developing the paper," wrote Claire Avett, an
Ex-Im policy analyst on Friday, Aug. 31.
"We look forward to working closely with you to define concrete
next steps to be able to achieve these ends," she wrote, referring
to imminent internal deadlines.
The next morning, Saturday, Sept. 1, a second bank official sent
a follow-up email. "We do not have a lot of time," wrote Mr. Morin,
the Ex-Im official in charge of aircraft financing.
The emails suggest Ex-Im Bank officials wanted Boeing's help to
write guidelines that would limit the number of additional reviews
on aircraft purchases.
"Subjecting and applying other transactions to detailed analysis
under economic impact procedures has had the effect of killing most
of those deals," wrote Mr. Morin, in the Sept. 1 email.
"Accordingly, it is very important that we establish the correct
procedures here," he said.
Mr. Bevens, the Ex-Im Bank spokesman, says those deals were
killed by delays and uncertainty created by the review process, not
the review process itself. He said those delays are why Boeing and
its suppliers opposed subjecting aircraft purchases to potentially
lengthy scrutiny.
A few hours later on Sept. 1, a senior official at Boeing
Capital responded that the company was working "to look at what
data we can pull together." The Boeing official, Kristi Kim,
director of aircraft financial services at Boeing Capital, said the
company was building model impact studies "to see how the data
would vary."
Tim Neale, a spokesman for Boeing, said the company's goal was
ensure that the reviews were "based on reasonable criteria."
On Sept. 6, James Cruse, a senior vice president at Ex-Im's
policy and planning group, wrote to Boeing to thank the company for
its input. "We recognize we are pushing and pressing you in ways
that are not in your natural strike zone (and may verge toward
ridiculous)," he wrote.
The next month, the partners delved into nitty-gritty details,
including the time frame that would be used to assess economic
impact (shortening the time period to 12 months might be best, one
Boeing official suggested). They settled on 12 months.
They also discussed who would conduct the reviews, if they were
ever triggered. Boeing itself was an option because it had access
to industry data. Other options were Ex-Im Bank or an outside
consulting firm.
In one email where the two sides discussed who should conduct
the analysis, Ms. Avett, the Ex-Im Bank policy analyst, asks for
input on "what would be most palatable to Boeing."
In the end, Ex-Im Bank took the job of performing the reviews.
In the two years since the new rules went into effect, Ex-Im has
helped finance roughly 50 aircraft deals. Just one of those--a
lease deal of Boeing planes by Aeroflot Russian Airlines--triggered
the detailed economic review. Ultimately, that transaction was
approved.
Doug Cameron contributed to this article.
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