Wednesday, April 19, 2017


Every once in a while it might be useful if you have a bank laying around that works just for you in the furtherance of your strategy or if you happen to be a sovereign nation, your foreign policy..

Immediately after the conclusion of WWII the United States effectively demobilized leaving Europe, now for the most part shattered and destitute to fend for itself. Worse yet, it had to face a fully militarized Soviet Union eager to swallow all of Europe in the triumph of Communism.  It was a near thing but the single most important effort to stymie Stalin's ambition was the creation of the then Secretary of State, George C. Marshall, the Marshall Plan, which rebuilt and stabilized Europe against the threat of Communist aggression.  It was a bold an extraordinary achievement and the facilitator was the EXIM Bank which was the funding source for the immense transfer of American Industry and technology to Europe.  No direct funding, no Congressional interference.  Simple commercial transactions through the banking systems of two continents.

Of course, it was not simple at all but without EXIM it would have been much harder.  The Marshall Plan not only rebuilt Europe but it was an enormous boon to American Industry during a period when the nation was retooling from a wartime economy and undergoing the expected and rather severe economic slowdown.  A proud moment.

Sometimes, however, EXIM played roles in the fulfillment of American foreign policy that wasn't quite so obvious. In the case of Mexico in the 1980ies, EXIM was highly supportive in providing much need export financing for essential goods including food to support the Mexican economy at a points in time when there was no financing whatsoever available to Mexico.  And that financing was, in some cases, quite imaginative one example of which involved the securitizing of debt instruments supported by the guarantee of the EXIM Bank to support the export from the United States of corn for the staple of the Mexican diet, tortillas. Of course in the middle to late eighties Mexico also had what bankers would call cash flow issues affecting its liquidity position; what normal people would refer to as being broke.

Now the importation of food is usually financed on a short term basis (it gets eaten) but not then.  It would have been politically unacceptable for the U.S. to provide direct, desperately needed financing to Mexico,  but through the guarantee facility hundreds of millions in medium term financing WAS provided thereby assisting an important foreign policy goal; the stability of Mexico.  It was the first time an EXIM guarantee had even been securitized in what proved to be a highly successful and much appreciated exercise. With no political fall-out.  This is not the only example of its kind.  We made a hell of a lot of money doing it as well.

EXIM...not a bad thing to have around.  Never know when you might need it

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