Last year, NTU Foundation warned that the Export-Import (Ex-Im) Bank was embarking on an unauthorized expansion of its mission through a new "Make More in America" initiative — without congressional approval — that could put taxpayers' funds at risk. This month, Ex-Im issued a letter of interest to provide up to $800 million in financing to NioCorp, a Colorado based mining company, which appears to be the first proposal under this new program. With the Silicon Valley Bank failure in the headlines, Americans should be especially concerned about bankrolling bad loans.
Under its charter, Ex-Im's mission is to provide loans and guarantees to companies directly involved in either importing or exporting. The new "Make More in America" program weakens the nexus to exporting and importing — in fact actively working to artificially prop up domestic suppliers over imports. The initiative was spurred by President Biden's executive order and was established through the regulatory process without approval from Congress. With the watered down rules, a manufacturer does not have to be directly involved in trade but as long as one of its customers is, it can be eligible for Ex-Im financing. As we wrote last December, "This is worse than mission creep. It subverts Congressional intent and strains Ex-Im’s statutory mandate to such an extent to make it meaningless."
According to news reports, NioCorp has raised more than $80 million since 2013 to explore Elk Creek, but interest in the area by other companies dates back to the 1970s. NioCorp hopes to extract rare earth elements, reducing U.S. reliance on foreign producers, including China. Reports suggest that the project is not intended to produce goods for export but to supply U.S. producers, although some of those goods might potentially be exported. However, as the long-timeline of the investigation of the Elk Creek area shows, it is not clear whether the project will be economically feasible.
NioCorp has raised some money from private investors, but is pursuing Ex-Im financing because the terms would be more favorable than those available through the private sector, which places a higher premium on risk than the taxpayer-backed Ex-Im Bank does.
Ex-Im will undertake an examination of the project that could last six to nine months. This should give Congress time to review whether the Bank actually has authority to extend its mission to the promotion of domestic manufacturing. Lawmakers should also re-examine the Ex-Im subsidy costs using fair-value accounting. This is the method used by private-sector lenders and more fully accounts for the costs of risks involved in loan programs than the method prescribed for the federal government.
The Ex-Im Bank had a troubled history even before its mission creep into domestic manufacturing. While it is unclear whether the expansion is permitted under its current charter, it is clear that the initiative is duplicative of other federal programs and increases risks to taxpayers. Lawmakers should rein in the Ex-Im Bank and stop risking taxpayer dollars over economically distortive activities.