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S. HRG. 113–378 

OVERSIGHT AND REAUTHORIZATION OF THE 

EXPORT–IMPORT BANK OF THE UNITED STATES 

HEARING 

BEFORE THE

COMMITTEE ON 

BANKING, HOUSING, AND URBAN AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

ON 

CONTINUING OVERSIGHT OF THE RECENT ACTIVITIES OF THE EXPORTIMPORT BANK AND THE CRITICAL NEED TO REAUTHORIZE THE 

BANK’S CHARTER 

JANUARY 28, 2014 

Printed for the use of the Committee on Banking, Housing, and Urban Affairs 

( 

Available at: http://www.fdsys.gov/ 

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS 

TIM JOHNSON, South Dakota, Chairman 

JACK REED, Rhode Island 

CHARLES E. SCHUMER, New York 

ROBERT MENENDEZ, New Jersey 

SHERROD BROWN, Ohio 

JON TESTER, Montana 

MARK R. WARNER, Virginia 

JEFF MERKLEY, Oregon 

KAY HAGAN, North Carolina 

JOE MANCHIN III, West Virginia 

ELIZABETH WARREN, Massachusetts 

HEIDI HEITKAMP, North Dakota 

MIKE CRAPO, Idaho 

RICHARD C. SHELBY, Alabama 

BOB CORKER, Tennessee 

DAVID VITTER, Louisiana 

MIKE JOHANNS, Nebraska 

PATRICK J. TOOMEY, Pennsylvania 

MARK KIRK, Illinois 

JERRY MORAN, Kansas 

TOM COBURN, Oklahoma 

DEAN HELLER, Nevada 

CHARLES YI, Staff Director 

GREGG RICHARD, Republican Staff Director 

LAURA SWANSON, Deputy Staff Director 

PATRICK GRANT, Counsel 

GREG DEAN, Republican Chief Counsel 

JOHN O’HARA, Republican Senior Investigative Counsel 

DAWN RATLIFF, Chief Clerk 

TAYLOR REED, Hearing Clerk 

SHELVIN SIMMONS, IT Director 

JIM CROWELL, Editor 

(II)

C O N T E N T S 

TUESDAY, JANUARY 28, 2014 

Page 

Opening statement of Chairman Johnson ............................................................. 1 

Opening statements, comments, or prepared statements of: 

Senator Crapo ................................................................................................... 2 

Senator Shelby 

Prepared statement ................................................................................... 23 

WITNESSES 

Fred P. Hochberg, President and Chairman, Export-Import Bank of the 

United States ........................................................................................................ 3 

Prepared statement .......................................................................................... 23 

Responses to written questions of: 

Senator Crapo ............................................................................................ 27 

Senator Tester ........................................................................................... 30 

Senator Shelby ........................................................................................... 31 

Senator Vitter ............................................................................................ 33 

Senator Toomey ......................................................................................... 44 

Senator Coburn ......................................................................................... 51 

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD

Statement submitted by Linda Dempsey, Vice President, International Economic Affairs, National Association of Manufacturers ..................................... 56 

(III)

(1) 

OVERSIGHT AND REAUTHORIZATION OF THE 

EXPORT–IMPORT BANK OF THE UNITED 

STATES 

TUESDAY, JANUARY 28, 2014 

U.S. SENATE, 

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, 

Washington, DC. 

The Committee met at 10:03 a.m., in room SD–538, Dirksen Senate Office Building, Hon. Tim Johnson, Chairman of the Committee, presiding. 

OPENING STATEMENT OF CHAIRMAN TIM JOHNSON 

Chairman JOHNSON. I call this hearing to order. 

Today the Committee again welcomes the Chairman and President of the Export-Import Bank of the U.S., Fred Hochberg. This 

hearing will continue our ongoing oversight of the Bank’s activities. 

In addition, the Bank’s current authorization expires on September 30, 2014, and it is my goal to work with Ranking Member 

Crapo and other Members of the Committee to reauthorize the 

Bank. Today we will hear from the Chairman his ideas for the reauthorization. 

The Export-Import Bank is the official export credit agency of the 

U.S., and it assists in financing the export of U.S. goods and services to international markets. Last year, the Bank supported $37.4 

billion in exports and 205,000 U.S. jobs and sent $1 billion to the 

Treasury Department. 

The Bank is one of the few Federal agencies that actually makes 

money for the U.S. Government, and since 2008 it has been selffunding. This is a testament to the Bank’s leadership under Chairman Hochberg, as well as the good work of the dedicated staff and 

Board of the Bank. 

All of the Bank’s transactions are backed by the full faith and 

credit of the U.S. Therefore, it is important for this Committee to 

make sure that the Bank is working as efficiently and as effectively 

as possible to protect the taxpayers. 

Equally important is the Bank’s objective to use exports to help 

create and maintain jobs here at home. This mission, spelled out 

in the Bank’s charter, is at the very core of what Congress intended for the Bank. I believe that while the Bank is doing a good 

job, it can—and must—do more in this area. 

Last Congress, the Bank was reauthorized with broad bipartisan 

support. As we begin work on reauthorization this year, it is important that the Committee hear from the Bank on how it has impleVerDate Nov 24 2008 09:29 Dec 19, 2014 Jkt 046629 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 L:\HEARINGS 2014\01-28 OVERSIGHT AND REAUTHORIZATION OF THE EXPORT-IMPO
2 

mented the reforms in the last reauthorization, what challenges it 

faces moving forward, and what Congress can do to help support 

the Bank’s efforts to increase U.S. exports and jobs. 

I now turn to Ranking Member Crapo. 

STATEMENT OF SENATOR MIKE CRAPO 

Senator CRAPO. Thank you, Mr. Chairman, and, again, welcome, 

Mr. Hochberg. We appreciate your work. 

Today we will review the activities of the Export-Import Bank of 

the United States as the Banking Committee prepares to consider 

this years reauthorization of the Bank’s charter. U.S. exporters are 

able to compete very effectively in international markets on the 

basis of price and quality. However, when aggressive foreign governments provide subsidies as a matter of policy or general practice 

to their exporters, U.S. exporters are placed at a competitive disadvantage purely because of such financing arrangements. 

Relative to the size of their economies, certain European governments use export credit agencies to provide three times as much 

official credit as the Bank does. China and India provide four times 

as much. Countries like China institutionalize protectionist policies 

at the direct expense of other nations, trying to keep up with China’s ability to draw on vast foreign reserves to crowd out its trade 

competitors in foreign markets. 

One of the roles of the Bank is to level the playing field for U.S. 

exporters by countering the public financing made available by foreign governments. The last reauthorization called upon the Treasury Secretary to engage in international negotiations to ultimately 

eliminate official export credit activity globally. I am interested in 

hearing what steps the Bank can take to assist the Secretary and 

what steps the Bank can initiate independently with its international counterparts to jointly reduce international subsidies. 

In the 2006 reauthorization, I worked on a number of provisions 

to make sure the small business community has an advocate to 

help address its needs and concerns. However, the Bank historically has had trouble meeting its 20-percent small business mandate in terms of authorizations as opposed to sheer number of 

transactions. Small- and medium-business transactions account for 

more than 85 percent of the Bank’s transactions, but still fall short 

in the amount of money lent. 

My question for Chairman Hochberg is: What additional changes 

are necessary to improve the Bank’s programs for small- and medium-sized businesses to achieve their needs? 

It is precisely these companies that operate at the heart of the 

U.S. economy, and export to new markets is essential for their 

growth and job creation. 

With the most recent increase in the authorization level, the 

Bank will be pressed to work harder than ever to meet its congressional mandate. Medium-sized businesses, which tap the Bank’s 

medium-term direct lending program that supports transactions in 

the 5- to 7-year and $50 to $75 million range, actually seem to be 

getting squeezed between the small business mandate and the 

Bank’s larger portfolio. This occurrence is causing the mediumterm program to dramatically shrink to the point where no direct 

loans are being made whatsoever last year. 

3 

As we look at ways to improve efficiency and reduce costs 

through all Government programs, Chairman Hochberg should be 

commended for holding the Bank’s default rate to a level under 

that of commercial banks, while each year depositing hundreds of 

millions of dollars into the U.S. Treasury’s general fund for the 

benefit of the American taxpayer. And I look forward to working 

with the Chairman and all the Members of the Committee to develop a bipartisan plan for the Bank’s upcoming reauthorization 

that will make a real commitment to small and medium businesses 

while continuing to ensure that any risk to the American taxpayer 

is minimized. 

Thank you, Mr. Chairman. 

Chairman JOHNSON. Thank you, Senator Crapo. 

Are there any other Members who would like to give brief opening statements? 

Senator SHELBY. Mr. Chairman, I would like my statement to be 

made part of the record. 

Chairman JOHNSON. Without objection. 

I would like to remind my colleagues that the record will be open 

for the next 7 days for additional statements and other materials. 

Today’s witness, Fred Hochberg, is the 23rd President of the Export-Import Bank. Mr. Hochberg, you may begin your testimony. 

STATEMENT OF FRED P. HOCHBERG, PRESIDENT AND 

CHAIRMAN, EXPORT-IMPORT BANK OF THE UNITED STATES 

Mr. HOCHBERG. Thank you. Thank you, Chairman Johnson, 

Ranking Member Crapo, and other Committee Members. You have 

my written testimony which goes into detail about the Bank’s results, processes, and reforms over the last few years, so I would 

like to take a few moments this morning to highlight just three key 

issues: our recent results; our efforts to support small business, 

which has already been mentioned; and changes we have implemented since our last reauthorization. 

As I sit before you today, the trade gap is at the lowest level it 

has been since 2009. Unemployment is down to 6.7 percent, a level 

not seen since October 2008. And the ‘‘Made in America’’ brand has 

never been stronger. 

American exports are at an all-time high—$195 billion recorded 

in November alone, the largest 1-month total in the history of the 

United States. 

At the same time, our authorizations were down last year—$27 

billion, off from $36 billion the year before. 

Let me just repeat that. Exports are up, and Eximbank authorizations are down. That actually is a very good trend. 

A significant contributor to the drop in authorizations was that 

aircraft financing was down $3.5 billion. At the same time, total 

aircraft deliveries were up. The aerospace industry is less reliant 

on Eximbank largely because other forms of financing became more 

available in the last few years. But our real report card is jobs, and 

that is private sector jobs. Through our financing we have supported 1.2 million private sector jobs over the past 5 years, including 205,000 this last fiscal year. 

We are about 400 employees, a little bit more than 400, at 

Eximbank, a number of whom are with me today, but we punt well 

4 

above our weight. For example, we have won 25 awards in the last 

5 years, including an Innovation in Government Award from Harvard’s Kennedy School of Government, as well as the Best Global 

Export Credit Agency from Trade Finance magazine, to name just 

two. And for the first time ever, Eximbank generated more than $1 

billion for the U.S. taxpayers above and beyond the cost of all operations and loan loss reserves. Where I come from, we would have 

called that a profit. 

Let me talk about small business. I was a small businessman for 

20 years, so I know that small businesses are the engines that 

drive our economy and create so many jobs back home. I am proud 

to report that of the 3,800 transactions we approved last year, 

nearly 90 percent of them were for small businesses, also an alltime record for the Bank. 

We have done more than 60 Global Access Forums, from Boise 

to Billings, from Charlotte to Shreveport. These and other forums 

in your communities spread the word of how Ex-Im can help reduce 

the risk for small businesses. 

We have also recently partnered with FedEx in a new program 

to make sure that their small- and medium-size companies who are 

clients of FedEx understand how we can help them improve and 

expand their global footprint and at the same time build sales and 

jobs. 

Third, let me now turn to the reforms and improvements we 

have made since our last reauthorization. We have improved our 

underwriting and credit monitoring. We hired a new Chief Risk Officer who reports directly to me. We are now posting all transactions, over $100 million, Federal Register prior to Board action. 

We have updated our economic impact procedures, and we have reviewed our domestic content requirements. 

We have enhanced reserves with qualitative factors. We now submit quarterly default rate reports to Congress. In our last report, 

which was filed just this past Friday, the default rate came in at 

0.00267—in other words, just over one-quarter of 1 percent. 

Comprehensive risk management and continuous improvement is 

what guides our work, and our default rate reflects that. 

In closing, let me leave you with one thing that does keep me up 

at night. We live in an extremely competitive world. On a daily 

basis, American businesses and their workers need to scrap and 

fight to win overseas sales. There are some 60 other export credit 

agencies around the globe, some regulated and some not, who are 

supporting their nation’s exporters. They would like nothing more 

than to steal sales and jobs from companies in your States. 

For example, as mentioned earlier, South Korea’s ECA finances 

roughly $100 billion in exports, three to four times the amount that 

we do in a nation that is less than one-tenth our size. That is why 

we need your help to reauthorize the Bank on time so that businesses can tap into the 95 percent of the world’s customers that 

live outside of our borders and support U.S. jobs. 

Thank you, and I look forward to your questions. 

Chairman JOHNSON. Thank you for your testimony. 

As we begin questions, I will ask the clerk to put 5 minutes on 

the clock for each Member. 

5 

Mr. Hochberg, while the number of transactions conducted by the 

Bank increased from 2012 to 2013, the value of authorizations declined. Do you see this trend continuing? 

Mr. HOCHBERG. Well, thank you, Chairman Johnson, for this 

hearing and that question. The number of transactions declined; 

partly we are tapping into more small businesses and helping more 

small companies with smaller amounts, which is an important goal 

of the Bank. It is difficult to gauge how well the capital markets 

and banks will support U.S. exports. We saw some greater support 

this year, as I cited, in aircraft. So we are really monitoring this 

on a regular basis. 

Our first quarter results are actually slightly off from last year, 

although exports are still very strong. So I think we are seeing 

some banks stepping up more than they have the last few years. 

Chairman JOHNSON. As we have discussed before, I believe more 

needs to be done to support workers and businesses in rural areas. 

Can you explain how the Bank is working to address the needs of 

U.S. exporters located in rural areas? 

Mr. HOCHBERG. Without question. I mentioned I did an export 

event with Senator Crapo in Boise this past summer. I have done 

some with Senator Tester in Billings. I was just in North Carolina 

in the Textile Belt just a week or two ago. We work with city-State 

partners in those States to make sure we can support both the export of commodities and raw materials, as well as farm equipment 

that is often made in those areas. I will be in North Dakota, in 

Fargo, later this year. 

Chairman JOHNSON. If Congress fails to reauthorize the Bank 

this year, what would be the effect for American exporters and 

workers? 

Mr. HOCHBERG. Well, if we are not reauthorized, we put in jeopardy the 205,000 jobs that our financing supported this last year. 

When we finance an export, it is because that financing is not 

available through the private sector. So it is really putting all those 

205,000 jobs and all those families that rely on those jobs at risk. 

Chairman JOHNSON. What is the Bank doing to help support exporters in Native American communities? 

Mr. HOCHBERG. Again, I think that we are working in rural communities, we are working on the commodities, we are working with 

minority- and women-owned businesses. We are looking at that entire area. I would say, Senator, one out of every five loans made 

in the small business space was to either minority communities, 

women communities, or communities that have not as fully participated in the global economy. 

Chairman JOHNSON. The Bank’s financing must support jobs 

here in America. What specific steps is the Bank taking to meet 

the mandate to contribute to the employment of U.S. workers? 

Mr. HOCHBERG. Well, our content policy very much says that the 

financing we do supports work done in America. We require 85 percent content for full financing. If there is 60 percent content, we 

will supply 60 percent financing. So we match our financing to the 

amount of work and jobs that are supported in this country. 

Chairman JOHNSON. As countries throughout the world expend 

their export credit efforts, how has the Bank responded? In parVerDate Nov 24 2008 09:29 Dec 19, 2014 Jkt 046629 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 L:\HEARINGS 2014\01-28 OVERSIGHT AND REAUTHORIZATION OF THE EXPORT-IMPO
6 

ticular, what is the Bank doing to counter export financing that is 

unregulated by the OECD? 

Mr. HOCHBERG. This is a very tricky area. It is one of the things 

I mentioned that does keep me up. And, you know, we often cite 

China, but, frankly, Russia is a very large threat right now, particularly in the nuclear space. We have two U.S. companies, Westinghouse and GE, competing. And many other countries, allies of 

ours—Japan, Korea—use what they call sort of ‘‘soft loans’’ and 

‘‘development loans.’’ Partly we are doing this through diplomatic 

channels. We are bringing the attention to the OECD when we see 

them. We are working with the State Department and Treasury to 

curtail them. But at the same time, when we see an example—we 

did in Pakistan a few years ago—we, working with the White 

House and the Treasury Department, came up with offsetting financing to make sure we could negate any impact from sort of offline or one-off financing that some of these countries have been deploying. 

Chairman JOHNSON. The Bank plays a critical role in providing 

access to emerging markets for American exporters. In what regions and industries can the Bank be most effective in supporting 

American exporters? 

Mr. HOCHBERG. I would say—and I think we will have some 

questions on this. You know, it is a little bit like a barbell. We do 

a lot in the small business space, and we do a lot with very large 

companies. Small business always has difficulty getting access to 

credit, and on some large capital projects, whether it is locomotives 

or satellites that are simply difficult to finance, are going to countries that have perceived greater credit risk is where the bulk of 

our business rests. 

Chairman JOHNSON. Last, you have noted the Bank’s commitment to ‘‘Government at the Speed of Business.’’ What steps are 

you taking to ensure that timely processing of financing requests 

does not lead to increases in bad loans or fraud? 

Mr. HOCHBERG. Well, we pride ourselves on what we call ‘‘Government at the Speed of Business.’’ We are not taking any shortcuts whatsoever on due diligence or how we underwrite a transaction. But you know and I know when a transaction comes in and 

it is reviewed by underwriters and say it takes 8 weeks, they are 

not working on this 8 weeks, 40 hours a week. There is a lot of 

time we are waiting for information. It is sitting waiting for an economic impact study or an accounting report or compliance reports. 

What we are doing is squeezing that air out of the system, making 

sure we get on the phone, call, making sure our underwriters and 

our legal teams are working closely together so we are not having 

transactions waiting around for information. But we are not taking 

any shortcuts in due diligence, any shortcuts in underwriting to 

making sure that we are underwriting and financing things that 

will have a reasonable assurance of repayment. 

Chairman JOHNSON. Senator Crapo. 

Senator CRAPO. Thank you, Mr. Chairman. 

First, Mr. Hochberg, I want to thank you for your leadership at 

the Eximbank. I want to go first in my questions back to the first 

question the Chairman had and just explore it a little further. You 

talked with him about the fact that the number of Bank transVerDate Nov 24 2008 09:29 Dec 19, 2014 Jkt 046629 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 L:\HEARINGS 2014\01-28 OVERSIGHT AND REAUTHORIZATION OF THE EXPORT-IMPO
7 

actions has increased from 2012 to 2013 while the overall value of 

authorizations has actually decreased, and I appreciate your answer to his question about that. One question I have is: What effect 

does this dynamic have on small business transactions? 

Mr. HOCHBERG. Well, small business is something that, one, I 

feel very close to, one, having run a small business and, frankly, 

served at the SBA under President Clinton. 

We are continually finding new ways to reach small businesses. 

We have modified our Web site. We opened additional offices when 

we received an appropriation a few years ago. We are innovating 

new products. I mentioned the award we received from Harvard’s 

Kennedy School about a product called ‘‘Express Insurance.’’ We 

can turn around and give an answer within 5 working days of a 

request for insurance to insure overseas receivables. So we are continually finding how do we chip away, how do we find better ways. 

The other thing, frankly, Senator, when we were out in Boise 

meeting with exporters in your State and in many of the Members 

of this Committee, we had, I think, about—we had standing room 

only, I recall that. I think we had between 100 and 120 people 

there who were looking for information how they can export and 

secure the business and increase sales and thereby increase jobs at 

home. 

Senator CRAPO. Well, thank you, and we do appreciate your outreach on that. 

I want to turn to what appears to be a contraction of the medium-term program. In 2013, the medium-term program totaled 

only about $234 million, and when you compare that to a $27 billion portfolio, it is about 1 percent. And last year, the Bank provided no medium-term loans, as I understand it. 

It further appears that the Bank has allowed its medium-term 

program to contract while overall demand for Bank support has increased. 

Why has the Bank allowed the medium-term program to shrink 

when the overall demand for authorizations is consistently growing? 

Mr. HOCHBERG. Well, let us recall that what we do at Eximbank 

is fill in gaps, gaps that the private sector is not doing. So the private sector always gives small businesses a hard time. That will 

never change. It is getting better, but it will never change. And for 

long-term loans in remote parts of the world that require 12-year 

financing or longer, the private sector also has difficulty there. 

The medium-term market is one that banks actually fill well. I 

do not want to compete with the banks at all. It is not in our charter. We supplement the banks. We are not trying to replace them 

in any way whatsoever. So where the banks step in, we are happy 

to step back. We only want to step forward when we are really 

needed. 

Senator CRAPO. Do you have the same credit standards for the 

medium-term program as you do for other loan programs? 

Mr. HOCHBERG. We do have the same standards. I have to tell 

you, though, when I arrived at Eximbank in 2009, the default rate 

in the medium-term program was as high as 44 percent. We now 

have a default rate that we have brought down to 7 percent. You 

recall that Congress has a mandate that we have to keep overall 

8 

defaults 2 percent or less. So we monitor our defaults and say, 

‘‘What do we need to do?’’ We are not in the grant business. We 

are in the loan business. We need to get paid back. And, frankly, 

a 44-percent default rate—I was in business for 20 years—was just 

unacceptable. We got it down to 7 percent, and, frankly, we need 

to still work that to a level that is acceptable by lending standards. 

Senator CRAPO. Well, thank you. And the Bank has cofinancing 

agreements in place with 11 countries. These programs enable the 

Bank to meet foreign competition by working cooperatively with 

foreign export credit agencies largely to the benefit of the Bank’s 

largest exporters. The small- and medium-sized enterprise exporting community has long sought such a program. 

Does the Bank have a comparable program in supporting similar 

transactions among small and medium enterprises? 

Mr. HOCHBERG. Without question. I will give you one example: 

Dave Ickert from Olney, Texas, that sells crop dusters and firefighting planes, mostly to farmers; most of their customers are in 

Latin America. We cofinance with Canada. The engines for those 

planes come in from Canada supported by EDC, our counterpart in 

Canada, and we support the manufacturing of the actual airplane 

itself. 

That is just one example that is a medium-term loan. Another 

aircraft company called Thrush sells a competing product in China. 

Also those engines come from the Czech Republic, and so we together jointly finance that so that those smaller and medium—it is 

a medium-size transaction that takes advantage of that. 

Senator CRAPO. Thank you. And, last, on this round, with regard 

to Eximbank’s climate change guidelines, last December the Bank 

issued new environmental guidelines to reduce greenhouse gas 

emissions, and almost immediately it became more difficult for developing countries to find public financing for coal-fired plants. Is 

the Bank’s guidance consistent with the Bank’s chartered mandate 

to provide competitive financing on behalf of U.S. exporters to find 

U.S. jobs? I guess the question really is: What is the intention of 

the Bank with this new guidance? And how does that support the 

Bank’s objectives? 

Mr. HOCHBERG. Well, I am glad you asked that question, Senator. You know, our charter, which goes back to 1945, although the 

Bank will celebrate 80 years this year—is celebrating 80 years this 

year—has laid out an environmental requirement in our charter 

back to 1992. So we have always had to balance supporting U.S. 

jobs and looking at the environmental impact of those jobs for over 

20, 22 years now. And we are constantly working with industry 

and environmental groups and finding that balance between the 

two. Sometimes I think we make everybody angry at us, both the 

exporter and the environmental community. Both of them would 

like us to tilt in one direction or another. We are trying to find that 

line in between that balances jobs and the environment and keeps 

that in some kind of balance. 

Senator CRAPO. Thank you. 

Chairman JOHNSON. Senator Reed. 

Senator REED. Well, thank you very much, Mr. Chairman, and 

thank you, Director, for your great work over many years. 

9 

You mentioned nationally the unemployment rate is 6.7 percent, 

but in many States it is much higher. In my State it is 9.1. In Nevada it is 8.8. In Kentucky and Mississippi eight-point—it is not a 

regional phenomenon. 

Are there any special efforts that your agency is taking to reach 

out to these areas that need a little more help? 

Mr. HOCHBERG. I think without question. I mean, as I mentioned, I was with Senator Crapo this summer. I was in North 

Carolina just 2 weeks ago in the textile area, which has been an 

area that has really been buffeted by a lot of foreign competition. 

One of the tools we have is we do these forums, these workshops. 

I bring in the SBA, we bring in the Commerce Department to make 

sure that small businesses understand what are the tools available, 

tools, frankly, they are paying for as taxpayers, that could help 

them increase their global footprint. 

We started that program 3 years ago. Actually at the Chamber 

of Commerce, Tom Donohue, Jay Timmons of NAM, and a few 

other Federal agencies all together launched it, and as I mentioned, we have done over 60 of those. We have revamped our Web 

site. We are continuing looking at outreach, and I would be happy 

if, for those Members that we have not been to your State, we 

would like to do that in the new few months. 

Senator REED. Well, I would encourage you to do that, but also 

it is—you know, the areas of the country that really do need an infusion of jobs, and exports generate jobs, I think we would put high 

on your priority list, and I hope you can do that. 

One other area here—and we chatted about this previously—is 

the fact that, for particularly small businesses, they might be able 

to have financing or be aware of your programs, but they are not 

aware of the markets overseas, and that is a Commerce Department activity. Can you talk about how you are going to try to pull 

together the identification of overseas markets and the potential? 

Because without that, the financing is sort of moot. 

Mr. HOCHBERG. You are absolutely right. I mean, frequently financing is not what is holding them back. Frequently they need to 

say, well, where could I sell this product overseas? And we work 

closely with Secretary Pritzker and the Commerce Department. 

They have something called ‘‘U.S. Export Assistance Centers,’’ with 

the bad acronym of USEAC for Export Assistance Centers. There 

are about 108 of them around the country. They have more Export 

Assistance Centers in this country than they have posts overseas. 

And they help exporters to find those foreign markets and identify 

where they could sell their products, and we frequently—our regional offices are collocated. So someone can go one stop and see 

all of that in one location. That is really key. 

We have done a number of outreach efforts at community colleges that also have a large footprint with small businesses. But I 

think that is why when we do an export event in-State, we make 

sure that SBA and the Commerce Department are with us, because 

people need to look at the full range of those services, not just at 

the financing option, as you mentioned. 

Senator REED. And you have made it very clear that your mission is really to fill a gap between the commercial financing operations—and, in fact, you note that exports are up and your activity 

10 

is down, and that is a good sign because it means that commercial 

enterprises are, you know, doing the bulk of the lending, as it 

should be. But there is another area where a gap can develop, and 

that is in areas where there is political risk and other issues. 

Do you consciously sort of, you know, provide support to companies that may be exporting areas where individual commercial enterprises will not engage, not because of the dollars and cents but 

because of other risks? 

Mr. HOCHBERG. I think that is a large portion of our portfolio. 

I mean, we really—for example, we are not terribly active in Europe. You know, there is not a lot of commercial risk, political risk, 

and there is a lot more commercial financing there. We are more 

active in places—for example, in sub-Saharan Africa, about 1 percent of U.S. exports go to sub-Saharan Africa, and it accounts for 

about 5 percent of our portfolio, which takes into account both commercial and political risk that is perceived in that area. And sometimes there can be—the perception can be far greater than the reality, and that is where we step in. We are only looking to really 

step in where we need it. Our feelings are not hurt when a customer goes away and goes to a commercial bank. We actually encourage it. 

Senator REED. And let me underscore what you have already 

said, that in addition to getting credit out, you are bringing your 

default rate down dramatically. So these are good credits, and you 

have done a good analysis, and you are providing good value, not 

just to the exporter but to the taxpayer. 

Mr. HOCHBERG. Correct. 

Senator REED. Thank you. 

Mr. HOCHBERG. Thank you. 

Chairman JOHNSON. Senator Shelby. 

Senator SHELBY. Thank you. Thank you, Mr. Hochberg. 

As you well know, we have a current account deficit; in other 

words, we are running a huge deficit, exports versus imports, and 

have for years and years. On the other hand, Germany and China 

are quite the opposite, for the most part. 

What role and what positive things can you tell us that the Export-Import Bank is doing besides helping in the aircraft area? We 

know the role you play there, which is big. We do not know all of 

it, but we export a lot of planes. But as we begin to make more 

here—for example, Airbus is building a huge facility to compete 

with Boeing—you know of this; they compete all over the world— 

in my home State of Alabama, Mobile, Alabama, right now. So will 

this—would the Export-Import Bank be available to Airbus to export the same as Boeing? Or what are the rules going to be? 

Mr. HOCHBERG. Well, thank you, Senator Shelby. In terms of the 

current account deficit, we want to support exports to make sure 

that when they are competing—and it is not just aircraft. It is farm 

equipment, it is services. We do a lot in power, oil and gas, in 

many of those areas. 

Senator SHELBY. Can you break it down roughly, unless you have 

the figures? What percentage of the exports that you aid on this 

with the Export-Import Bank are aircraft, aircraft-related? What 

are power plants or power-related? What are agriculture? In other 

11 

words, manufacturing and everything. Can you just give us a 

thumbnail—— 

Mr. HOCHBERG. Manufacturing was actually at an all-time high. I am doing this from my recollection. It is north of $11 billion of 

the $27 billion we financed last year. A small business—— 

Senator SHELBY. OK. Now, does that include aircraft? 

Mr. HOCHBERG. No. And then—— 

Senator SHELBY. OK. And aircraft—— 

Mr. HOCHBERG. Last year, aircraft was just over $8 billion. It 

was about 30 percent of what we did. So we actually did more in 

manufacturing than we did in aircraft. We did a total in small 

business, direct and indirect, just north of $6 billion. I think we 

should be doing more in power, frankly, because the world is 

powering up. 

One of the areas that has done a lot of growth in the last few 

years is services. We do a lot in the service sector, engineering 

services, things of that nature, architectural, even legal services, 

insurance. Those are some of the things that we have been increasing in. So those are all large areas. 

The other thing, when you mentioned Airbus—let me give you an 

example. I mentioned power. Siemens opened a turbine factory in 

Charlotte, North Carolina. We treat Siemens no different than we 

would treat General Electric. They make the goods here. They employ Americans. We are indifferent to who owns the company. We 

are most focused on supporting jobs, and if those jobs are in the 

United States, we will support that company. 

Senator SHELBY. So that would include Airbus if they export 

planes. 

Mr. HOCHBERG. Yes. To the extent, though, they have to make 

the planes here, not just assemble them but they really have to 

make them here. 

Senator SHELBY. And what does that mean? You make them here 

because say, for example, Boeing imports so many of their parts 

from all over the world and just assembles them. 

Mr. HOCHBERG. Well, for example, on the 787, approximately 60 

to 65 percent, depending on the engine, is made in the U.S. 

and—— 

Senator SHELBY. Do you have a rule on this? 

Mr. HOCHBERG. Yes, we have a content rule. We look at the content. We get a certification. We audit that. And, for example, as 

you mentioned, on the 787, NEXI, the Japanese credit agency, cofinances with us so we can finance it. So we will cofinance with a 

foreign country’s export credit agency to—they can finance their 

portion, we will finance our portion so we can put a package together. 

Senator SHELBY. What is the impediment to get up to at least 

20 percent dealing with small business? 

Mr. HOCHBERG. Well, we are at 19 and change this year. We are 

actually at 27 percent for the first quarter of this year. We had a 

very strong showing in small business. And partly we need to continue to get the word out to small business. I think as Senator 

Reed mentioned, sometimes it is not the financing. It is access to 

markets; it is understanding those markets that makes a difference. 

12 

Senator SHELBY. But that is an untapped source we have, I believe, in America. 

Mr. HOCHBERG. I think we still have a large untapped source. As 

I said, I am pleased that we hit 27 percent in the first quarter. If 

I look at it State by State, Senator, I think all but five or six 

States, we were well north of 20 percent in our support. 

Senator SHELBY. Last—my time is up—what did you get out— 

what did you take out of the GAO report which we had requested 

dealing with the Export-Import Bank, your assumptions are different and so forth? 

Mr. HOCHBERG. Well—— 

Senator SHELBY. As far as ultimate risk to the taxpayer, what 

did you take out of that? 

Mr. HOCHBERG. Well, a number of things. There have been a 

number of—GAO blesses us with many studies and investigations. 

They are not bashful about coming by. We put in a Chief Risk Officer, is one of the things we have done. We have tightened up our 

underwriting. We make sure there is a feedback loop for what is 

called ‘‘asset management underwriting,’’ so as we see how a credit 

is performing, we make sure we provide that information to underwriters so they can take it into account on future transactions. 

So a number of those things have been very helpful. Both the IG 

and the GAO have given us a number of very good recommendations, and, frankly, that is why I believe we have a good default 

rate. 

Senator SHELBY. Do you plan to carry out those recommendations? 

Mr. HOCHBERG. We have agreed with each one that the GAO has 

put forward. We did not object to them. 

Senator SHELBY. Thank you. 

Thank you, Mr. Chairman. 

Chairman JOHNSON. Senator Warren. 

Senator WARREN. Thank you, Mr. Chairman, and thank you, Mr. 

Hochberg, for your leadership in this area. 

I would like to follow up on where Senator Shelby started, and 

talking about the goal of the Eximbank is to promote U.S. exports, 

and, of course, increasing exports is ultimately supposed to create 

more jobs at home. But in some cases, those two things maybe in 

tension with each other. 

For example, a loan to a foreign company to buy a U.S. product 

may increase U.S. exports, but it may also give that foreign company a leg up over its American competitors, thus costing us jobs 

here at home for the American company. 

So how do you balance those two things in making a loan decision? 

Mr. HOCHBERG. Gingerly. Our job and our charter calls for us to 

create those balances and to do that analysis. One of the tools we 

use to do that is called ‘‘economic impact.’’ What that really means 

is we look at what is the impact of making this export and could 

there be any harm caused by making this export and balance those 

two against each other. 

In fact—I had a feeling I would get this question—we have got— 

on our Web site there is an 18-page guide to how we conduct economic impact procedures. So any exporter can know exactly how 

13 

we are going to make that assessment, what analysis we will use 

before we make it. 

Our goal is purely about increasing U.S. jobs. We have zero interest, we have no dog in this race in terms of harming the U.S. 

economy when it comes to jobs. So we have got to do that balancing 

act, and it is tricky. We have to make a number of assumptions. 

But we have put that out to the exporters. We have taken the comments. We have created the procedures, and we have put them on 

our Web site. 

Senator WARREN. All right. Good. So you are telling me, though, 

that you carefully consider the impact if you make the loan, how 

it may help a foreign company compete against domestic companies 

that do not have access to that same kind of financing. 

Mr. HOCHBERG. Right. 

Senator WARREN. OK. Good. 

We talked some about small business lending, and I was very 

pleased to see that in 2013 you committed a greater percentage of 

your money to small business lending. I think that is terrific. But 

as everyone has been talking about, the bad news is we are still 

barely at 20 percent of the assets going into small business lending. 

Obviously marginal increases in small business lending are a 

step in the right direction, but I am concerned that marketing and 

outreach are not enough to expand small business lending. 

So can you describe some ways in which the Bank could make 

some really meaningful increases in small business lending to push 

that number well beyond 20 percent? 

Mr. HOCHBERG. Well, I think that—I will give you an example. 

What our competitors to the north in Canada do, they spend north 

of $3 million a year on advertising. They advertise in in-flight magazines throughout Canada to make sure that business owners— 

who, generally, if they are exporting, they are on planes—know 

about them. I think our largest single impediment is people do not 

know the support that we can offer them. 

One of the things, we did a pilot this year called ‘‘U.S. Global 

Business Solutions.’’ Frankly, it was a little disappointing. I am 

hoping that we can pick that up, which is where Commerce, the 

SBA, and Eximbank are going to be working more jointly so that 

if you show up at an SBA office or a Commerce office or an 

Eximbank office, you do not have to worry about where to do. We 

will solve the problem and give you the right tool to do that. 

I will tell you I bring this up with my counterparts and competitors around the world. They are all having a difficult time with 

this. It is difficult to reach them. But let us remember, we did 

reach more small businesses last year than any other year in our 

history. We have well exceeded 20 percent in our first quarter of 

this year. I cannot predict the second, third, and fourth quarters. 

And sometimes the good news is some small businesses are graduating and they are no longer counted as small. So that is the 

greatest success we have, is when they migrate up, or they are now 

financially secure, they can actually go to a commercial bank. 

So the 20 percent is a barometer, but it is not a perfect index. 

Senator WARREN. Well, fair enough that it is a barometer but not 

a perfect index, but it is also a modest goal. And I think a large 

part of what we would like to see in supporting this is to go beyond 

14 

the 20 percent, and so I look to support every creative approach 

you are using. I recognize some of them may not work, but that we 

are out there trying to do it. And also the notion of reaching beyond just trying to market, what else we can do, what other kinds 

of programs we can put in place that help small businesses get into 

the export business. 

I had one other area I wanted to ask about very briefly, and that 

is, the Eximbank’s charter makes it clear that the Bank is supposed to supplement private capital, and you mentioned this in 

your testimony. In other words, you should provide public funds 

only when private funds are not available. 

I am interested to know how you make sure that you are complying with that mandate. Is there a process in place to ensure that 

for every deal the Bank does, there was no private sector capital 

available? 

Mr. HOCHBERG. It is one of the questions that an applicant has 

to complete and answer when making a loan application. Second, 

our process is very rigorous. I promise you, if there was another 

source of capital, most exporters would choose that source of capital. The requirements we have on economic impact we just talked 

about; content, if it is a large product, having to be shipped on U.S. 

merchant marine ships; the Iran sanctions we have put in; our default rate—there are many hurdles. So, one, we do not make the 

process that simple. We are trying to make it more simple and 

more streamlined, but there are still a number of things, because 

we are a Government agency. But on top of that, the customer has 

to state affirmatively they could not get that loan. 

I will give you just one example—— 

Senator WARREN. And let us be brief. 

Mr. HOCHBERG. I will be very fast. We exported locomotives to 

South Africa. Of all the banks surveyed, one bank agreed to make 

the loan only with our guarantee. So it is one thing if we had ten 

banks, and you would say, well, maybe to get five of them without 

a guarantee, we only got one—one applicant would even consider 

it, and that is only with our guarantee. 

Senator WARREN. Well, I just want to say thank you very much. 

Thank you for the direction that you are pushing us in trade and 

for the successes you have had, and I hope we have many more 

that we can celebrate in 2014. 

Thank you, Mr. Chairman. 

Chairman JOHNSON. Senator Corker. 

Senator CORKER. Thank you, Mr. Chairman. And, Mr. Chairman, 

thank you for being here today as we talk about something that I 

know is very important to you. 

We have had some conversations about this in the past, I know 

in prior authorizations, but it would appear that as we look at 

ECAs around the world, especially those outside of the OECD, that 

there is, generally speaking, a race to the bottom relative to lending. And I am just wondering what your perspective is relative to 

keeping that from happening—Number one, is it happening? And 

what can we do to ensure that we do not participate, if you will, 

in this race to the bottom? 

Mr. HOCHBERG. Thank you, Senator Corker. Well, I would say 

that the primary focus we have is to get more countries in the 

15 

OECD. The Organization for Economic Cooperation and Development sets a floor that member countries can charge to do their financing, and it sets a floor in terms of the fee, and it sets a maximum amount of years that a loan can be. 

The problem we have today is the BRICs—Brazil, Russia, India, 

and China, to name just four—large powerhouse countries doing a 

lot of exports, are outside of the OECD. There are no rules that 

apply. They can do any deal they want, one-off deals, 20-year loans, 

25-year loans, grace periods—nothing that we are allowed to do. 

So our first goal is getting them in the fold. President Obama 

took a leadership role with President Xi. There is a plan to get 

China to agree to some kind of export framework and regime by 

the end of this fiscal year. But I am equally concerned about countries like India and Russia and not just China, frankly. 

Senator CORKER. Let me ask you this question: Do you agree— 

and it sounds like you may agree, but there are a lot of people 

right now that are concerned that, in essence, what China is doing 

in Africa is the same thing that happened here with subprime 

loans. I mean, in essence, you know, they are loaning monies to 

countries on a basis that down the road they are going to be saddled with huge debts that they are not going to be able to repay. 

Is that phenomenon actually occurring from your standpoint? 

Mr. HOCHBERG. It is hard to tell precisely, but China is certainly 

pouring a lot of money into sub-Saharan Africa with some good results and some not-so-good results. There have been a number of 

countries that have been looking more toward U.S. exporters and 

more toward Eximbank because they feel it is a more level playing 

field. When we export to sub-Saharan Africa, Africans go to work— 

building a power plant, building roads. Frequently when China 

does exports, they also export the workers so the African nations 

get very little benefit from that, and on top of which frequently the 

workers are left behind, so there is even less of an impact or opportunity for those African nations to succeed. 

Senator CORKER. Well, look, I appreciate you being here today. 

I felt like in the last authorization that things sort of started gelling, if you will, toward the end, and maybe not as well thought 

out as might have been. I do hope that, you know, as we move 

ahead, we will figure out a way to ensure that there is access to 

credit in an appropriate level, but at the same time we do not ourselves pursue policies just to keep up, if you will, that are very 

damaging both to our country but also to the world. I look forward 

to talking to you about that further as we move ahead, and I appreciate your service to our country. 

Mr. HOCHBERG. Thank you so much. 

Chairman JOHNSON. Senator Heitkamp. 

Senator HEITKAMP. Thank you, Mr. Chairman. 

I want to follow up on a couple points both raised by the Chairman and by the Ranking Member. First is small business, and obviously you are getting a recurring theme here that we all would 

love to see you do more outreach, more attention, and certainly not 

just small business but rural small business. I know it might be 

hard to imagine, but those places in North Dakota we do not consider rural. 

16 

We also would obviously love you to reach out to many of our Native American tribes who are looking at economic development and 

I think have industries within their boundaries that could be well 

served by expertise that your Bank brings. And so not to be too flip 

about it, but many of them do not fly on airplanes, so advertising 

in an in-flight magazine may not work. But almost every small city 

in North Dakota has an economic development agency, and there 

is an excellent opportunity to reach out to people who know what 

is happening on the ground, who know what may be the potential 

work with Commerce to make that happen. 

And so I would really encourage you to continue that kind of effort, and I thank you for your willingness to come to North Dakota. 

We are trying to set that up. I think there is a great deal of opportunity, and as we know, when we look at employment, we all give 

lip service to small business, right? Small business is where employment is going to grow maybe the next big business, but yet a 

lot of the focus is on locomotives and airplanes, and maybe you 

might find a jewel in the rough here, that gem in the rough that 

could, in fact, be the next Microsoft or Apple. And so that is just 

my pitch there. 

But I want to talk a little bit about your energy policy and about 

the decisions that you have made regarding coal-fire generation. 

You know, the lack of energy and electricity and poverty kind of 

go hand in hand, and I was reminded of that when I was in Afghanistan, and USAID was bragging because they were bringing a 

250-kilowatt—megawatt line, and right now that probably would 

not power the bakit [phonetic]—you know. 

So this is a great disparity in this world, and the access to affordable energy is a key component to building the middle class. And 

I think that the way you have structured your restrictions really 

takes out of the mix an opportunity for affordable electricity, and 

I think there is a lot of—without going too far into the weeds on 

carbon capture, there are a lot of opportunities beyond carbon capture for higher efficiency, for, you know, looking at environmental 

standards, but not clamping down so hard that we are not exporting important technologies that can, in fact, provide an opportunity 

for affordable electricity, but also improve air quality in many of 

these locations. 

And so I just want to ask you how amenable is the Bank to taking a look at reversing some of the policies that they have made 

on coal-fired electricity and taking a second look, looking at some 

of the arguments that I have made today. 

Mr. HOCHBERG. Well, thank you for your support and the support of small businesses, just to underscore that. I would say, you 

know, again, almost 90 percent of the transactions we do are small 

companies, and, you know, I would love it to be 91 or 92 percent, 

but we are pushing the limits there. 

Senator HEITKAMP. Well, your definition of ‘‘small’’ and maybe 

my definition of ‘‘small’’ are two different things. 

Mr. HOCHBERG. We actually use the SBA’s definition. 

Senator HEITKAMP. There is a long debate about what is small 

business in America today. 

17 

Mr. HOCHBERG. Yes. But my only point is we do not have our 

own separate private definition. We go with the Government’s definition of that. 

In terms of the energy issue, I would say that our charter makes 

it clear that we have to find a balance, and it is a difficult balance. 

It is a balance between jobs and the environment, and you also 

mentioned affordable power around the world. And this requirement has been in our charter since 1992, so we are looking to make 

that balance. 

Senator HEITKAMP. But the restriction coal-based fire power has 

not been an interpretation since 1992, correct? 

Mr. HOCHBERG. Well, we have had—well, actually the Bank was 

sued in the early part of this century because we were not taking 

into account the environment sufficiently in making loan decisions. 

So as part of the agreement there, we came up with a more explicit 

and transparent environmental policy, though in the omnibus bill 

that was just passed, in some ways put a stay or reversed some of 

the environmental policies we put into place in December. Net-net, 

in 82 countries we would be able to finance coal-fired power plants 

without going through some of the requirements and checks that 

that policy would have put into place. So of 180 countries around 

the world, 82 of them—these are the poorest; they are called ‘‘IDA’’ 

and ‘‘IDA-blend’’ countries—we simply have to apply our standard 

environmental procedures, which those procedures had been in 

place and modified over the last 20 years. They are the kinds of 

things that the World Bank, the IFC, and others have put into 

place. They are sort of the global international norms. So in that 

case, for those countries, between now and the end of the year 

there is no difference. 

Senator HEITKAMP. Thank you, Mr. Chairman. 

Chairman JOHNSON. Senator Vitter. 

Senator VITTER. Thank you, Mr. Chairman. 

Thank you very much, Mr. Hochberg. Like many others, I continue to be concerned about Eximbank deals that finance projects 

essentially in direct competition with U.S. businesses, and, of 

course, I am mainly talking about the airlines. 

It seems very clear that Eximbank financing in many cases has 

given foreign carriers a significant competitive advantage against 

domestic carriers, and this has been, in fact, verified in various 

court decisions and opinions as well. So moving forward, how do 

you all plan on dealing with that concern and specifically the mandate to Eximbank that it is not supposed to harm U.S. businesses 

in any of its deals? 

Mr. HOCHBERG. Thank you, Senator Vitter. You are referring to 

a number of lawsuits that have been filed by Delta Airlines against 

the Bank. 

Senator VITTER. Right. 

Mr. HOCHBERG. They so far have filed four lawsuits. We won the 

first case, and the others are in various stages. 

Senator VITTER. Just to make clear, I am not really talking about 

lawsuits. I am talking about the policy concern of providing a competitive advantage to foreign carriers versus U.S. carriers, and it 

seems to me that is beyond dispute that that is a direct result of 

these deals. 

18 

Mr. HOCHBERG. Well, let us remember two things, I think, that 

we look at at Eximbank: one, whether we finance and whether an 

airline decides to buy a Boeing airplane or an Airbus airplane, they 

are going to fly those plans, and they are going to probably fly a 

lot of them into the United States and around the world. So, frankly, we do not have a monopoly. It is not like we can—if we decide 

not to finance and not to sell them an airplane, that a foreign carrier is not going to do so. So after—— 

Senator VITTER. I am not talking about whether they fly the 

routes. I am talking about, for instance, the price they fly the 

routes, because if you substantially reduce the cost of a plane, that 

can change their whole competitive position. 

Mr. HOCHBERG. Currently, when we provide financing, only when 

it is needed and largely to rebut financing that is provided by Airbus, two things, two factors are considered: one, the price we 

charge is greater than the public markets, greater than the private 

sector, and we verify that. We look at—if American Airlines or 

United is financing a plan, we look at, for that credit risk, what 

would we charge, and over and over again we charge more than the 

private sector. That is number one. 

Number two—— 

Senator VITTER. So why does anyone come to you? 

Mr. HOCHBERG. Well, a foreign airline will come to us because 

they cannot find other financing, or partly because Airbus is offering financing, and if we want to have a level playing field to make 

sure the jobs stay in the United States and not go to Toulouse and 

Hamburg, we need to provide a level playing field financing to 

make sure that the airline chooses the best airplane, not simply 

the one that offers financing, which happens with the Airbus 

planes coming out of Europe. 

Senator VITTER. So you disagree with the basic premise that your 

financing in these deals gives foreign carriers a significant advantage that they would not otherwise have? 

Mr. HOCHBERG. I do disagree with that. And, furthermore, Senator, I would also say we do—it has been asked earlier. We do an 

economic impact study. We look at what is the economic impact, as 

we do for every export, and including airline, will we be adding 

seats to foreign carriers that would compete with U.S. carriers? 

And we do that evaluation and that review on every single transaction. 

Senator VITTER. OK. Mr. Hochberg, I also want to ask about 

some of your relatively new environmental policy. You have made 

several new policy pronouncements, I believe as a direct result of 

the President’s Climate Action Plan. 

First of all, what is the statutory basis for all of this new policy 

at Eximbank regarding carbon and environmental concerns? Because I do not see it. 

Mr. HOCHBERG. Well, the environmental requirement that the 

Board must take into account—a reasonable assurance of repayment, U.S. content for jobs, and the environment are all part of our 

charter. That is in our charter. As I mentioned earlier, it has been 

in our charter since 1992. 

Senator VITTER. And what is the exact language of that of the 

environmental—— 

19 

Mr. HOCHBERG. The language, I have not memorized the language. In making a decision to make a loan, we have to look at the 

environmental impact and balance that against jobs and competitive pressures as well as reasonable assurance of repayment. That 

is part of the deliberative process that every Board decision requires. 

Senator VITTER. And is there any specific grounding—is there 

any specific statutory basis for all of these recent new requirements 

and considerations directly related to coal, carbon capture, et 

cetera? 

Mr. HOCHBERG. Well, we have to take—it is obviously an evolving policy, as it would be with any Federal agency, or, frankly, 

when I was in the business world, any corporation. We continually 

evolve over time. Since that was put in place in 1992, we have obviously modified—— 

Senator VITTER. I translate that as a no in terms of statutory 

basis, but go ahead. Is there anything specific—— 

Mr. HOCHBERG. No, we have a statutory basis—the basis is we 

have to be clear to exporters what do we mean by environmental 

policy. So we put on our Web site what are the environmental concerns that we will look at in making a determination whether we 

can provide financing or not. 

Senator VITTER. As I understand it, you will not block coal-related projects for particularly poor countries. Is that correct? 

Mr. HOCHBERG. For the 82 poorest countries in the world, we 

will not block that at all. We will look at—make sure that it is environmental sound and financially sound. But let me also just add 

there are no restrictions on the export of coal, which we have been 

involved in. There is no restriction on the export of coal-mining 

equipment—drag lines, locomotives, shovels, and so forth. We are 

still continuing to do that kind of export. 

Senator VITTER. But so coal-related projects would be environmentally sound for those countries but not for richer countries? 

Mr. HOCHBERG. For the very poorest countries—and I think Senator Heitkamp mentioned it—which have problems finding basic 

power, things we take for granted, 7 days a week, 24-hour power— 

for the very poorest countries, we have a lower standard, or a more 

relaxed standard, I should say, than for the richer countries. If 

Canada is looking to build a power plant, there are different standards that would apply in Canada than would apply in sub-Saharan 

Africa. 

Senator VITTER. And how do you determine where to draw that 

line between who gets to benefit from cheaper power and who does 

not? 

Mr. HOCHBERG. Well, the omnibus bill said that when it comes 

to what are called, through the World Bank, the IDA and IDAblend countries, about 82 countries, we are looking at purely our 

standard environmental policies and procedures, some of which, as 

I say, go back to 1992. 

Senator VITTER. OK. Thank you. 

That is all, Mr. Chairman. 

Chairman JOHNSON. Senator Manchin. 

Senator MANCHIN. Thank you very much. Mr. Hochberg, thank 

you, and I have enjoyed meeting with you a couple times in my ofVerDate Nov 24 2008 09:29 Dec 19, 2014 Jkt 046629 PO 00000 Frm 00023 Fmt 6633 Sfmt 6633 L:\HEARINGS 2014\01-28 OVERSIGHT AND REAUTHORIZATION OF THE EXPORT-IMPO
20 

fice and learning more about what you can do and what you do do 

to really help a small State such as mine I think really opening up. 

So I look forward to the visit that we talked about. 

Mr. HOCHBERG. Good. 

Senator MANCHIN. What I would like to talk about—I know my 

good friend from North Dakota here, Senator Heitkamp, has talked 

to you about coal, and that has been a big concern of all of ours. 

I know you are saying that you will help a smaller, underdeveloped 

countries, or 82 of them, so if somebody in West Virginia and North 

Dakota has technology that can help them use their resources in 

a much cleaner fashion, we can go in that direction, but in a larger 

country we are not able to. And I would just say that if the environment is our concern—there are 8 billion tons of coal being 

burned—we should take the best technology we can anywhere in 

the world and try to help use it better. So I would hope that 

maybe—and I know this Administration is not—has been a little 

bit difficult, if you will, on those issues, and I would like to continue to explore that with you if we can. 

I do want to ask you about LNG. This has reversed our fortunes 

with the fracking and all the gas coming online in America today. 

And now we have more people applying for export LNG when we 

were thinking we had to import LNG. I have been very blessed in 

the State of West Virginia to have both Marcellus and Utica, and 

we have a tremendous influx of this. 

How are you all looking at that now, working with exporting of 

LNG? 

Mr. HOCHBERG. Well, up to now, we have been involved mostly 

in the export of technology and engineering. We have financed—we 

are in the process of financing two large LNG facilities in Australia, both being developed and built by Bechtel. 

Senator MANCHIN. Is that for them to receive it or for them—— 

Mr. HOCHBERG. For them to tap it and export it. 

Senator MANCHIN. For them to export it? 

Mr. HOCHBERG. Yes. Right now we have not had any applications 

about exporting LNG from the United States. But we are certainly 

open to that. Just as I mentioned earlier, Senator, we financed the 

export of coal from the United States. 

Senator MANCHIN. I appreciate that very much because that has 

helped us, because if it was not for the export market right now, 

our little State would be severely damaged economically, and there 

is a demand for the product. What we are wanting to say is that 

I would hope the Administration would look differently about it if 

we have the technology with the scrubbers, low NOx boilers, supercritical, and all the different technology that we have, why 

shouldn’t we be able to help use coal cleaner around the world? Because they are going to use it. 

Mr. HOCHBERG. Well, when it comes to scrubbers or improving 

the efficiency and the cleanliness of coal, we can finance that. 

Senator MANCHIN. So you are saying in existing plants you can 

finance—— 

Mr. HOCHBERG. Existing plants we can—— 

Senator MANCHIN. But building a new plant, if it is not in one 

of the 82 underdeveloped, you cannot. 

21 

Mr. HOCHBERG. Then it needs to—when it becomes commercially 

sound, it needs to use carbon capture sequestration in those richer 

countries, because those richer countries have other options. They 

have options in terms of renewable energy, hydro, nuclear, natural 

gas, a number of things that the very poorest countries do not have 

those same options. 

Senator MANCHIN. Give me one example as a small business— 

I have a machine shop in West Virginia, and I have an expertise 

of something I make that can be used anywhere in the world, but 

I do not know how to get in those markets. I am scared of the financing of those, whether I get my money or not and how to finance through these international banks. That is where you all 

step in, I understand, and you can take us through that. And if I 

came to you as a little small West Virginia company, I could come 

to you and say I need help financing, I want to sell my product, 

they want to buy it, I want to make sure I get paid, how do you 

handle it? 

Mr. HOCHBERG. Well, I will give you an example. I am sorry it 

is in the State of New Hampshire, but—— 

Senator MANCHIN. That is OK. 

Mr. HOCHBERG. That is also a small State. There is a great company there called Boyle Energy. Michael Boyle runs it. I met him. 

I was so impressed. I put him on our Advisory Committee. 

Senator MANCHIN. OK. 

Mr. HOCHBERG. So his company does the startup of power plants. 

It is about a $10 million company. So when they do that startup 

in Saudi Arabia or the rest of the world, his worry is: ‘‘How do I 

get paid?’’ 

What we do is we will insure that receivable, so he does the 

work, if for some reason his customer does not pay, we gave him 

insurance. We pay and then we collect on his behalf. 

Senator MANCHIN. You subrogate and go back on—— 

Mr. HOCHBERG. And then we go—— 

Senator MANCHIN. But I have to get—— 

Mr. HOCHBERG. You have to buy insurance. 

Senator MANCHIN. Do I have to buy—— 

Mr. HOCHBERG. Just like you buy buyer insurance, you have got 

to be—— 

Senator MANCHIN. But I have got to start with you when I start 

that process, right? And my contract for this overseas work—— 

Mr. HOCHBERG. Yes, you—— 

Senator MANCHIN. I should get involved with you for the—— 

Mr. HOCHBERG. You cannot ask—just like you cannot ask for fire 

insurance after the fire happens, you got to come to us and get insurance on the receivable before you actually—— 

Senator MANCHIN. So I have to buy that insurance, and that has 

to be part of my cost and return on my—— 

Mr. HOCHBERG. Frankly, if I was to give any small business 

owner who is watching this hearing—— 

Senator MANCHIN. Yes? 

Mr. HOCHBERG. If they are watching this hearing, the best bargain they can do is get credit insurance from the Eximbank. 

Senator MANCHIN. That is all—— 

22 

Mr. HOCHBERG. It is very cheap, and it provides them the peace 

of mind. I often tell people, ‘‘I am in the sleep business. If you have 

credit insurance, you will sleep well at night.’’ 

Senator MANCHIN. Well, I look forward very much to having you 

and your staff, capable staff, coming down and working with us, because we are going to do a lot of business with you. 

Mr. HOCHBERG. Good. I look forward to it. 

Senator MANCHIN. Thank you. 

Chairman JOHNSON. Thank you, Chairman Hochberg, for your 

testimony today. 

This hearing is adjourned. 

[Whereupon, at 11:10 a.m., the hearing was adjourned.] 

[Prepared statements, responses to written questions, and additional material supplied for the record follow:] 

23 

1This default rate is different than the default rates published in the annual Budget Appendix due to differing definitions. The reported rate in the Budget Appendix reflects projected defaults over the life of the loan while the default rate report as required in Section 8B of the 

Bank’s charter reflects actual defaults at a particular point in time. 

PREPARED STATEMENT OF SENATOR RICHARD C. SHELBY 

Thank you, Mr. Chairman. Today, we examine the activities of the Export-Import 

Bank as this Committee considers reauthorizing the Bank’s charter. 

One of the greatest problems facing our economic well-being in this country is our 

current accounts imbalance. Countries such as China and Germany have robust export surpluses; however, our current accounts situation is the opposite. I believe we 

must continue to look for ways to shore up the export deficit. 

Further, I believe that the Ex-Im Bank must do more to help small businesses 

succeed. As small businesses are the backbone of our economy, we must do all we 

can to help them thrive. Congress has mandated that the Ex-Im Bank reach a 20 

percent threshold for small business authorizations, yet the bank has failed to reach 

that level over the past 3 years. I look forward to hearing from Chairman Hochberg 

on how we can not only reach this baseline, but make small business more of a centerpiece to the Bank’s mission. 

Finally, there is growing concern over the level of transparency with the Ex-Im 

Bank’s transactions. I believe we must ensure that the Bank has not and will not 

become just a government engine for corporate welfare and that the investments 

made by the Bank are to companies that truly cannot access financing through the 

private sector. 

I look forward to hearing from Chairman Hochberg on these and other concerns, 

as we consider reauthorizing the Bank’s charter. Thank you, Mr. Chairman. 

PREPARED STATEMENT OF FRED P. HOCHBERG 

PRESIDENT AND CHAIRMAN, EXPORT-IMPORT BANK OF THE UNITED STATES

JANUARY 28, 2014 

Chairman Johnson, Ranking Member Crapo, and distinguished Members of the 

Banking Committee, thank you for inviting me to testify before you as the Committee considers the progress of the Export-Import Bank of the United States (‘‘ExIm Bank’’ or ‘‘the Bank’’) has made in supporting U.S. jobs through exports since 

our last reauthorization. 

Summary 

Today, American exports are at an all-time high. The United States exported a 

record $194.9 billion in November, 2013. Never before has the U.S. exported more 

goods and services in a single month. Our trade gap is the lowest it has been since 

2009, when U.S. exports totaled $1.9 trillion. In 2012, U.S. exports totaled a record 

$2.2 trillion. The ‘‘Made in America’’ brand has never been stronger. 

I am proud of the job our 400+ employees do each and every day. Ex-Im Bank 

has supported nearly 1.2 million private sector U.S. jobs since 2009, including 

205,000 jobs in FY2013 alone. The Bank operates at no cost to the taxpayers, and 

in FY2013, the Bank generated more than $1 billion for the U.S. taxpayers above 

and beyond the cost of all operations and loan loss reserves. This $1 billion goes 

toward deficit reduction. We do this while maintaining a default rate 1 of 0.267. 

Ex-Im Bank has at its core ensuring that small businesses—the foundation of our 

economy—are at the forefront of U.S. exports. We cannot grow our economy—or our 

exports for that matter—without fully supporting the small businesses of America. 

In 2013, the Bank financed a record 3,413 small businesses—nearly 90 percent of 

Ex-Im’s transactions. In addition, Ex-Im financed more small businesses in the last 

5 years than the prior 8 years combined. The Bank also financed more minority and 

woman-owned businesses in the last 5 years than the prior 16 years combined. 

As the global economy continues to strengthen, exports are being financed not 

only by commercial banks but also by capital markets. This is an encouraging trend. 

In 2013, the total dollar amount of transactions financed by Ex-Im was significantly 

lower than in 2012, yet exports as a whole from the U.S. were up during that timeframe. 

Purpose of Ex-Im Bank 

Ex-Im Bank is the official export credit agency of the United States. The mission 

of the Bank is to enable U.S. companies—large and small—to turn export opportunities into sales that help maintain and create U.S. jobs which contribute to a strongVerDate Nov 24 2008 09:29 Dec 19, 2014 Jkt 046629 PO 00000 Frm 00027 Fmt 6621 Sfmt 6621 L:\HEARINGS 2014\01-28 OVERSIGHT AND REAUTHORIZATION OF THE EXPORT-IMPO
24 

er national economy. The Bank achieves its mission, when needed, by providing export financing through its loan, guarantee, and insurance programs in cases where 

the private sector is unable or unwilling to do so. For example, we provide trade 

credit insurance to Miss Jenny’s Pickles in North Carolina so they don’t need to 

worry about foreign buyers not paying. We provide a working capital guarantee to 

Auburn Leather in Kentucky so they can build the inventory necessary to meet 

large foreign purchase orders. And, we provide direct loans to foreign buyers of GE 

locomotives so the sales and jobs will benefit workers in Pennsylvania rather than 

a foreign competitor. 

Ex-Im Bank also provides support if necessary to level the playing field when financing is provided by foreign governments to their companies who compete against 

U.S. exporters. We assume commercial, country, and liquidity risks that are reasonable and responsible, but currently beyond the still-recovering appetite of private 

lenders. Ex-Im Bank does not compete with private sector lenders, but rather provides financing for transactions that would otherwise not take place because commercial lenders are either unable or unwilling to accept the political or commercial 

risk inherent in the deal. 

Ex-Im Bank offers a variety of products to help U.S. businesses export around the 

world. Our working capital financing supports small business exporters to obtain 

loans which facilitate the exports of goods or services made by commercial lenders 

and backed by our guarantee. These loans provide small businesses the liquidity 

and confidence to accept new international contracts, grow export sales, and compete more effectively in the international marketplace. Export credit insurance allows U.S. businesses to increase their export sales by limiting their international 

risk, offering credit to international buyers, and enabling American businesses to access working capital funds. 

Comprehensive Risk Management and Revenue for the Taxpayers 

Ex-Im Bank continues its prudent oversight and due diligence standards to protect taxpayers through its comprehensive risk management framework. It begins 

with effective project underwriting, including detailed documentation and financial 

structuring to ensure the Bank’s rights are protected. It continues long after a 

transaction is approved and disbursed with proactive monitoring efforts to ensure 

timely payment. 

During all of FY2013, the Ex-Im Bank paid, from the fees we collect, new gross 

claims of just $48.8 million on a total portfolio greater than $110 billion. The Bank 

recovered more money—$62.6 million—than it had in new claims for the fiscal year. 

The Bank is also appropriately reserved to cover expected loan losses. The Bank’s 

reserve methodology has been reviewed, by GAO, our internal auditors, KPMG, and 

our external auditors Deloitte & Touche. As a result of provisions included in the 

Bank’s charter during last year’s reauthorization, Ex-Im Bank submits a quarterly 

default rate report to Congress. As of December 31, 2013, the Bank’s default rate 

was 0.267 percent. At the same time, over the past 5 years Ex-Im Bank has generated more than $2 billion for U.S. taxpayers, above and beyond all administrative 

operating costs, claims and loan loss reserves we set aside. We operate at no cost 

to the taxpayers. 

Moreover, we are committed to providing ‘‘Government at the Speed of Business’’, 

which means top-notch service and a relentless focus on our customers and a drive 

to innovate. In FY2013, 89 percent of all transactions were completed within 30 

days and 98 percent within 100 days. The time required to process long-term transactions dropped to an average of 88 days in FY2013, down from an average of 163 

days in FY2009. 

In 2013, the Bank named Mr. Charles J. Hall as our new Executive Vice President and Chief Risk Officer. Prudent risk-management is one of our foremost priorities. As chief risk officer, Mr. Hall reports directly to me and is responsible for ensuring that the Bank continues to be properly protected as it fulfills its mission of 

supporting jobs through exports. 

Comprehensive risk management and continuous improvement is what we strive 

towards, and our default rate reflects that. The Bank has made many improvements 

over the past few years including: 

• Modernizing credit monitoring; 

• Creating a Special Assets unit to address emerging credit issues; 

• Expanding our proactive monitoring efforts; 

• Improving our underwriting; and 

• Enhancing credit loss modeling with qualitative factors 

25 

We also have plans to implement additional risk management improvements identified over the past two years from our internal analysis of best practices, outside 

expert advice, audit recommendations, and from our Inspector General. 

Meeting Requirements of Reauthorization 

Ex-Im Bank has met all of the reporting requirements set forth in our reauthorization bill. We produced several reports to this Committee including: 

• Our Business Plan; 

• Our Small Business Report; 

• Our Content Review; 

• Our Report on Financing of Textiles; and 

• Our Quarterly Default Rate Reports 

We have added a textile industry representative to our Advisory Committee from 

Frontier Spinning in Greensboro, NC, which I visited earlier this month. We have 

fully implemented all Iran sanctions provisions, as required under the most recent 

reauthorization. In certain instances we have gone beyond the requirements of our 

reauthorization. For example, Congress required us to simply post our economic impact policies. The Bank went beyond the requirement by reevaluating our economic 

impact procedure process and making changes to that process, which included the 

review of airline services. 

As part of the reauthorization we are working in a transparent and cooperative 

way with GAO. I personally met with the Comptroller General to express my strong 

desire to work collaboratively and make the Bank more efficient and effective. I received very positive feedback from the Comptroller General about the cooperation 

between the GAO and Ex-Im. 

Four reviews were required under our last reauthorization. To date, three reviews 

have been completed: risk management; business plan; and jobs supported calculation. In each of these reviews, the Bank agreed with the GAO’s recommendations 

and we have implemented or are in the process of implementing each of them. We 

continue to work closely with the GAO as they seek to complete the final audit, due 

diligence process, which is due in May 2014. 

Congressional Mandates 

Small businesses are critical to our economy and comprise a significant number 

of net new jobs. Congress has mandated we make available 20 percent of our financing to meet their needs. In FY2013 we financed a total of $6 billion in small business exports, of which $5.2 billion was for the direct support of American small-business exporters. Total small business exports include those directly exported by small 

business to a foreign buyer, plus small business inputs into the supply chain of larger U.S. companies’ products which are ultimately exported. At Ex-Im Bank, small 

business accounted for a record-high 3,413 authorizations—nearly 90 percent of the 

total number of Ex-Im transactions. 

To put this in perspective, we have financed more small business in the past 5 

years than in the previous 8 years combined. 

Another area that we are particularly proud of is our financing to woman- and 

minority-owned businesses. In FY2013, authorizations for woman-owned and minority-owned small businesses reached a historic high of 761 transactions, totaling 

$815.5 million. One in five of total authorizations supported woman-owned and minority-owned businesses. In fact, over the past 5 years we have financed more 

woman and minority owned businesses than the Bank did in the previous 16 years 

combined. 

To address the needs of our small business customers, Ex-Im Bank has implemented a number of new financial products. Our most popular product, Express Insurance, received an innovation in government award from Harvard’s Kennedy 

School and has helped more than 800 small businesses get a prompt response to 

their application. 

The key to expanding exports is marketing and communicating to small businesses. Three years ago, Ex-Im in partnership with Tom Donohue at the U.S. 

Chamber of Commerce, Jay Timmons at the National Association of Manufacturers 

(NAM) and commercial banks, launched Global Access for Small Business. To date, 

we have held over 60 Global Access forums across America. From Billings to Boise 

and from Shreveport to Charlotte, more than 5,000 businesses have learned how to 

access foreign markets and use Ex-Im Bank to give them a competitive edge when 

exporting. For example, in November 2013, Ex-Im and FedEx announced an innovative new alliance that will help U.S. small- and medium-sized businesses (SMEs) 

reach the 95 percent of the world’s customers who live overseas. As part of this 

26 

agreement, FedEx international customer representatives will make their clients 

aware of the Bank’s abilities to protect against the risk of nonpayment and to extend credit to buyers, eliminating the need for expensive letters of credit or cashin-advance payments. Customers who are interested in this service will then be connected to Ex-Im Bank’s managers for trade finance counseling. This alliance with 

FedEx will help businesses increase sales, create jobs, and succeed in international 

markets. 

At Ex-Im Bank we have worked to ensure significant progress in supporting our 

other congressional mandates to finance more renewable energy exports and exports 

to sub-Saharan Africa. Our support for renewable energy has increased nearly than 

tenfold from $30.4 million in FY2008 to $257 million in FY2013. 

I am proud of our work in sub-Saharan Africa which is home to seven of the ten 

fastest growing economies in the world. In the past 4 years, Ex-Im Bank has authorized more than $4 billion in financing for U.S. exports to sub-Saharan Africa, including $604 million in authorizations in FY2013. 

The Bank approved a record 188 authorizations to sub-Saharan Africa in FY2013. 

This financing supported U.S. exports to 35 of 49 sub-Saharan African countries, including Cameroon, Ethiopia, Ghana, Kenya, Mozambique, Nigeria, South Africa, 

and Tanzania. Ex-Im Bank is a key player in the Power Africa initiative, involving 

other U.S. Government agencies including the U.S. Agency for International Development (USAID), U.S. Trade and Development Agency (USTDA), the Overseas Private Investment Corporation (OPIC) and the Departments of State and Energy. ExIm Bank pledged support of up to $5 billion over the next 5 years in support of the 

President’s goal of doubling sub-Saharan Africa’s access to electricity. 

As a destination market, sub-Saharan Africa receives about one percent of U.S. 

exports, but the region receives a higher percentage of Ex-Im’s financing. As of 

FY2013, almost 5 percent of Ex-Im’s total exposure consisted of exposure to sub-Saharan Africa. 

Conclusion 

I want to thank this Committee for their work on our reauthorization in 2012 and 

stress the importance of a timely reauthorization in 2014. There are some 60 Export 

Credit Agencies (ECAs) around the globe. Make no mistake, these foreign governments want the 205,000 American jobs Ex-Im financing helped support last year for 

themselves. As I travel the world on behalf of American companies, I know that my 

counterparts in China, Brazil, Russia, and South Korea, are right behind me. These 

nations, and many others, are serious competitors in the global marketplace. For example, the South Korean government, with an economy less than one tenth of our 

size finances more than 3 times the exports for South Korean companies than the 

United States finances for U.S. companies. There is a strong drive to increase exports from many countries around the globe. We need to send the same signal to 

competitor nations that we stand behind American workers and ensure they are operating on a level playing field. In order for U.S. businesses to be able to compete 

based on the price and quality of their exports, Ex-Im needs to be there to level the 

playing field when it comes to meeting foreign ECA competition. The thousands of 

businesses that benefit from Ex-Im Bank financing—almost 90 percent of which are 

small businesses—appreciate the fact that Congress was able to reach an agreement 

to reauthorize the Bank in 2012 and they need to know that we will be around in 

the years ahead to help them meet foreign competition and grow their exports and 

create more jobs here at home. 

I thank you for this opportunity to provide you with an update on the excellent 

work Ex-Im Bank is doing to support U.S. jobs. I want to commend the outstanding, 

professional work of our 400+ employees who are committed to supporting American 

jobs and increasing U.S. exports. I look forward to working with you to reauthorize 

the Bank and continue to grow U.S. exports. 

27 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR CRAPO 

FROM FRED P. HOCHBERG 

Thank you for your questions. Over the past 5 years Ex-Im Bank 

has supported an estimated 1.2 million U.S. jobs through exports. 

I am pleased to report that in Idaho from 2009 to 2013, Ex-Im 

Bank financed total authorizations of $66,288,220, of which 

$50,345,720 were small business authorizations. The total number 

of companies financed was 107 companies, of which 92 were small 

businesses. 

The top three categories supported in Idaho were: manufacturing 

and sales of noncapital equipment; manufacturing and sales of capital equipment; and agriculture, forestry, fishing, and hunting. 

The top four exporters in Idaho supported by Ex-Im Bank were: 

Micron; George F. Brocke & Sons, Incorporated; Hess Pumice Products, Inc.; and Buck Knives, Inc. 

The estimated number of jobs supported in Idaho over the last 

5 years by Ex-Im Bank was 500 jobs. 

Q.1. On the Apparent Contraction of the Medium Term Program— 

In FY2013, the Medium Term Program totaled only some $234 million of a $27 billion portfolio, which is about 1 percent, and the 

Bank provided no direct loans at all last year. It further appears 

that the Bank has allowed its Medium Term Program to contract 

while overall demand for Bank support increased. 

Why has the Bank allowed the Medium Term Program to shrink 

when overall demand for authorizations has consistently increased? 

A.1. The medium-term program consists of loan guarantees and insurance policies up to a value of $10 million plus exposure fee, if 

financed, that are typically between 2 and 7 year terms. Ex-Im 

Bank is fully supportive of the medium-term programs which support U.S. exports and U.S. jobs. In the past, the Bank has sustained significant losses under the medium-term program, such 

that the fees charged no longer cover our loan loss reserve requirements. When I took over as Chairman & President of Ex-Im Bank, 

medium-term defaults were above 40 percent. We have brought 

those down to roughly 71⁄2 percent, which, is still too high. 

Improved due diligence steps during the underwriting phase 

combined with robust monitoring of the medium-term portfolio 

postauthorization has resulted in a significantly lower loss ratio. 

Q.2. What does this mean for medium-sized market exporters? 

A.2. Nothing has changed for small- to mid-sized exporters. Ex-Im 

Bank continues to accept medium-term applications through our 

electronic application platform. Our staff is available to assist and 

advise exporters and lenders on complex loan structuring. The good 

news is that commercial banks have also increased their activity in 

medium-term transactions. 

Q.3. Does the Bank extend the identical credit standards for the 

Medium Term Program, as for its other programs? 

A.3. The Bank has credit standards that are specific to the medium-term loan guarantee and insurance borrower. They can be 

found on our Web site at: http://www.exim.gov/tools/upload/ebdm-39-1.pdf. 

28 

Q.4. On Cofinancing for Small and Medium Business—The Bank 

has cofinancing agreements in place with 11 countries. These programs enable the bank to meet foreign competition by working cooperatively with foreign export credit agencies largely to the benefit 

of the Bank’s largest exporters. The small- and medium-sized enterprise exporting community has long sought such a program. 

Does the Bank have a comparable program supporting similar 

transactions among Small and Medium Enterprises? 

A.4. Cofinancing for small- and medium-sized businesses has been 

available since 2001. Several small and a few large exporters actively use cofinancing. One small Texas company concludes approximately 40 export sales under our cofinancing program each 

year. Another small business located in Georgia recently concluded 

approximately 40 export sales under our cofinancing program. The 

most active export credit agencies that are used to cofinance medium-term programs include: EDC (Canada); EGAP (Czech Republic); Hermes (Germany) and Atradius (Netherlands.) 

Q.5. If not, why not? 

A.5. N/A 

Q.6. On Ex-Im’s Climate Change Guidelines—In December, the 

Bank issued new environmental guidelines to reduce greenhouse 

gas emissions. Almost immediately it became more difficult for developing countries to find public financing for coal-fired power 

plants. 

What authority did the Bank rely on to issue the guidelines? 

A.6. Since 1992, Section 11 of the Bank’s Charter requires the 

Bank to establish environmental procedures for projects like coalfired power plants that meet certain criteria, to take into account 

the potential beneficial and adverse environmental effects of U.S. 

exports for which support is requested. Such procedures shall apply 

to any transaction involving a project: 

A. for which long-term support of $10,000,000 or more is requested from the Bank; 

B. for which the Bank’s support would be critical to its implementation; and 

C. which may have significant environmental effects upon the 

global commons or any country not participating in the 

project, or may produce an emission, an effluent, or a principal product that is prohibited or strictly regulated pursuant 

to Federal environmental law. (12 U.S.C.A. §635i-5) 

Q.7. How is the Bank’s guidance consistent with the Bank’s chartered mandate to provide competitive financing on behalf of U.S. 

exporters to maximize U.S. export jobs? 

A.7. Section 11 of the Bank’s Charter states that the Bank’s environmental procedures ‘‘shall permit the Bank’s Board of Directors, 

in its judgment, to withhold or approve financing from a project for 

environmental reasons or to approve financing after considering 

the potential environmental effects of a project. Environmental effect is one of many factors, including economic impact and reasonable assurance of repayment, that the Charter directs the Bank to 

consider in its decisions concerning these kinds of projects. 

29 

Q.8. Was it the intention of the Bank’s guidance to reduce the 

number of new coal projects globally? 

A.8. The intention of the Bank’s Supplemental Guidelines was to 

set environmental requirements and standards applicable to highcarbon intensity projects, including coalfired power plants, seeking 

financing support from Ex-Im. These guidelines may result in a reduction of Ex-Im Bank exposure to high carbon-intensity methods 

of power generation. 

Q.9. How does the guidance support U.S. companies? 

A.9. The Charter requires the Bank to ‘‘aid in the financing and 

to facilitate exports . . . and in doing so, contribute to the employment of United States workers.’’ The Charter also requires the 

Bank to ‘‘establish procedures to take into account the potential 

beneficial and adverse environmental effects’’ of certain categories 

of financed projects. The Bank’s environmental guidelines ultimately support U.S. companies by establishing transparent environmental emission (and effluent) limits for plants which, when 

adopted by those companies and foreign buyers, enables Ex-Im 

Bank to provide the financial support required to achieve the U.S. 

company’s exporting endeavors. To the extent that U.S. companies 

manufacture CCS technology or manufacture new coal-fired power 

plants that are the best appropriate technology where there is no 

other economically feasible alternative to high CO2 plans (in the 

case of the poorest countries), they will benefit through export 

sales. Also, engineering service companies will benefit from contracts that meet our new guidelines. 

Q.10. On Aircraft Finance—At the 2013 Dubai Airshow, several 

state subsidized airlines announced orders totaling $162.6 billion. 

What involvement has the Bank in providing loans or any other 

loan services with regard to any of these aircraft orders from the 

2013 Dubai Airshow? 

A.10. The 2013 Dubai Airshow was a great win for American jobs 

and American workers. Orders will support thousands of U.S. jobs 

over the course of fulfilling these orders. Ex-Im Bank has not been 

formally approached to provide loans or any other loan services 

with regard to the aircraft orders that were announced at the 2013 

Dubai AirShow. 

Q.11. Does the Bank need to provide funding for aircraft that an 

airline has already committed to purchase? 

A.11. Ex-Im Bank provides financing to support the export of U.S. 

manufactured goods where there is a need for such financing, 

whether due to a shortfall in the availability of commercial financing or to level the playing field with financing support provided by 

other export credit agencies. The 2013 Dubai Airshow was a great 

win for American jobs and American workers. Orders will support 

thousands of jobs over the course of fulfilling these orders. Ex-Im 

Bank has not been formally approached to provide loans or any 

other loan services with regard to the aircraft orders that were announced at the 2013 Dubai Airshow. 

Q.12. Does the Bank act as a true ‘‘lender of last resort’’ in such 

transactions? 

30 

A.12. The Bank acts either as a lender of last resort or in the function of leveling the playing field due to competitor ECA financing 

availability. 

Q.13. Why would export credit agencies, the Bank included, need 

to finance acquisitions for State-owned enterprises in circumstances where sovereign wealth funds exist? 

A.13. In the rest of the world, State-owned enterprises are involved 

in railroads, power generation, airlines, telecommunications, and 

many other projects. U.S. companies are competing with other foreign countries to sell them goods. Ex-Im financing is used to ensure 

a level playing field for U.S. businesses—large and small—with foreign competitors. 

Q.14. On the Bank’s Domestic Content Policy—The Bank has identified as worthy for additional analysis, three areas concerning its 

domestic content policy: namely, the codification of a policy for 

Services, the expansion of cofinancing arrangements, and a simplification of the content policy. 

What is significant about these particular areas and what is the 

progress of that analysis? 

A.14. The three areas identified by the Bank for further exploration all provide opportunities for Ex-Im to streamline policies and 

establish programs that will add clarity to Ex-Im’s content policy 

and will make engaging with Ex-Im easier for U.S. exporters. Staff 

is in the process of preparing proposals and plans to bring to Bank 

management such proposals in the first half of 2014. 

The Board has not yet voted on changes to our content policy. 

However, in the first half of FY2014, the Board of Directors is expected to have an opportunity to consider proposals intended to 

provide reasonable assurance that Ex-Im Bank’s content requirements are met, address operational risks, and propose solutions to 

the challenges in collecting and verifying content data. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR TESTER 

FROM FRED P. HOCHBERG 

Thank you for your questions. Over the past 5 years Ex-Im Bank 

has supported an estimated 1.2 million U.S. jobs through exports. 

I am pleased to report that in Montana from 2009 to 2013, Ex-Im 

Bank financed total authorizations of $14,092,989, 100 percent of 

which were small business authorizations. The total number of 

companies financed was 47 small businesses and we would like to 

do more. 

The top three categories supported in Montana were: manufacturing and sales of capital equipment; manufacturing and sales of 

noncapital equipment; and agriculture, forestry, fishing, and hunting. 

The top three exporters in Montana supported by Ex-Im Bank 

were: Agmor Inc.; Rm International, Inc.; and Schoggi, Inc. 

Q.1. The recent authorization of the Export Import Bank included 

a clear directive for the Bank to engage the European Union export 

credit agencies in negotiations to cease offering loans for the purchase of wide-body aircraft. Please tell me the status of these negoVerDate Nov 24 2008 09:29 Dec 19, 2014 Jkt 046629 PO 00000 Frm 00034 Fmt 6602 Sfmt 6602 L:\HEARINGS 2014\01-28 OVERSIGHT AND REAUTHORIZATION OF THE EXPORT-IMPO
31 

tiations and provide us with any letters or proposals exchanged 

with the EU ECA. 

A.1. The 2012 Ex-Im Reauthorization did not require Ex-Im Bank 

to negotiate a reduction or end of financing of wide-body aircraft 

with Export Credit Agencies in Europe. The 2012 Ex-Im Reauthorization provides that Treasury initiate and report on the negotiations described in the question. Treasury has submitted two such 

reports on these negotiations to Congress, the most recent in December 2013. 

Q.2. At the 2013 Dubai Airshow, several State-subsidized airlines 

announced orders totaling $162.6 billion. Has the Bank been approached to provide loans or any other loan services with regard 

to any of these aircraft orders from the 2013 Dubai Airshow? If so, 

how many? 

A.2. The 2013 Dubai Airshow was a great win for American jobs 

and American workers. Orders will support thousands of U.S. jobs 

over the course of fulfilling these orders. Ex-Im Bank has not been 

formally approached to provide loans or any other loan services 

with regard to the aircraft orders that were announced at the 2013 

Dubai Airshow. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR SHELBY 

FROM FRED P. HOCHBERG 

Thank you for your questions. Over the past 5 years Ex-Im Bank 

has supported an estimated 1.2 million U.S. jobs through exports. 

I am pleased to report that in Alabama from 2009 to 2013, Ex-Im 

Bank financed total authorizations of $224,441,912, of which 

$190,623,091—or 85 percent—was small business authorizations. 

That’s more than four times the national average of small business 

authorizations by the Bank. The total number of companies financed was 163 with 136 being small businesses. 

The top three categories supported were: manufacturing and 

sales of noncapital equipment; manufacturing and sales of capital 

equipment; and transportation and warehousing. 

The top three exporters in Alabama supported by Ex-Im Bank 

were: Biohorizons Implant Systems; American Tank & Vessel Inc.; 

and Imaging Business Machines. 

The estimated number of jobs supported in Alabama by Ex-Im 

Bank over the last 5 years was 2,500 jobs. 

Q.1. Ex-Im Bank has recently finalized its Supplemental Environmental Guidelines for High Carbon Intensity Projects. Ex-Im purports these guidelines will have a positive environmental impact, 

however some have said these guidelines clearly place domestic industry at a competitive disadvantage. For many parts of the world, 

coal-generated electricity is vital, because it remains one of the best 

means to lift people out of poverty. Unquestionably, the lack of affordable energy jeopardizes the future of developing nations and 

helps to condemn billions worldwide to continued energy poverty. 

The International Energy Agency (IEA) estimates that over 1.3 billion people—nearly 20 percent of the world’s population—live with 

no access to electricity, to say nothing of the 1.7 billion who have 

very limited access. This is not just about powering a light bulb 

32 

and stoves, but about powering commerce, education, and health 

care that will improve lives. 

How will emerging nations in Africa, South Asia, and Latin 

America afford and implement alternative energy under Ex-Im’s 

guidelines? 

A.1. Since 1992, Ex-Im Bank is required by its charter to consider 

the impact to the environment of projects it finances. In approving 

the Supplemental High Carbon Intensity Guidelines, the intent of 

the Bank was to continue to adhere to our Charter and consider 

the environment in all Board decisions and set requirements and 

standards that would result in a reduction of greenhouse gasses 

(CO2) from new coal plants those otherwise produce very large 

amounts of CO2. It was also to encourage other ECAs to adopt 

similar requirements so as to promote broad multilateral standards 

while leveling the playing field for U.S. exporters. The CO2 emissions from coal-fired power plants represent a large portion of the 

world’s anthropogenic CO2 production. The Guidelines introduced 

a standard or limit for CO2 emissions produced by power plants in 

countries such as China that would require mitigation measures including deployment of carbon capture and sequestration (CCS) to 

lower the plant’s CO2 emissions to levels consistent with that of 

gas-fueled plants. However, for the world’s poorest countries, such 

as most sub-Saharan African nations, the Guidelines for new coal 

plants do not require CCS. For those poorest countries, we require 

only that the buyer meet the criteria of best appropriate technology 

where there is no other economically feasible alternative. The 

Bank’s Supplemental High Carbon Guidelines allow for the financing by Ex-Im Bank of U.S. exports for new affordable coal plants 

in the world’s poorest countries, if the buyer meets requirements 

such as the submission of an analysis demonstrating that the proposed coal plant is the best appropriate technology where there is 

no other economically feasible alternative. These Supplemental 

Carbon Guidelines have no impact on U.S. exports for gas or oil 

fired power plants worldwide. This policy impacts more developed 

economies that are able to afford cleaner or alternative technologies. 

In many emerging markets the cost of alternative or renewable 

energy is approaching and sometimes at par with fossil fuel sources 

since much of the populations without electricity live in rural areas 

where the cost to connect to the grid would be prohibitively expensive. To make renewable energy affordable, Ex-Im Bank has adopted a policy to offer financing for renewable forms of energy at the 

maximum allowable repayment terms allowed by the Organization 

for Economic Cooperation and Development (OECD) group of export credit agencies (ECAs), which is up to 18 years, compared to 

the 12 year maximum that the OECD allows for ECA support of 

conventional fossil fueled plants. In addition Ex-Im Bank, consistent with OECD policy, can also offer local cost financing of up 

to 30 percent of the U.S. export contract, and offer capitalization 

of interest during construction of the project. 

Q.2. To alleviate poverty, countries look to economical and reliable 

sources of electricity such as coal. Coal remains the backbone of 

global electricity generation and is the fuel enabling rapid advanceVerDate Nov 24 2008 09:29 Dec 19, 2014 Jkt 046629 PO 00000 Frm 00036 Fmt 6602 Sfmt 6602 L:\HEARINGS 2014\01-28 OVERSIGHT AND REAUTHORIZATION OF THE EXPORT-IMPO
33 

ment of developing countries, helping to raise living standards and 

lift hundreds of millions of people out of poverty. Ex-Im’s High Carbon Intensity Guidelines could deny developing countries these opportunities and the associated quality of life and environmental improvements correlated with higher standards of living. 

Wouldn’t a better policy be to promote coal as a low cost and reliable source of electricity that will power growth and sustainable 

development and the associated environmental improvements for 

generations to come? 

A.2. The Bank does not direct the development of other countries’ 

energy policies. The Bank takes an ‘‘all of the above’’ approach to 

energy financing. This includes supporting projects that rely on 

solar, wind, biomass, geothermal, nuclear, and natural gas. Under 

the Bank’s Supplemental Guidelines for High Carbon Intensity 

Projects, in the world’s poorest countries where there is no other 

economically feasible alternative, coal-fired power plants are expected to use the best appropriate technology. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR VITTER 

FROM FRED P. HOCHBERG 

Thank you for your questions. Over the past 5 years Ex-Im Bank 

has supported an estimated 1.2 million U.S. jobs through exports. 

I am pleased to report that in Louisiana from 2009 to 2013, ExIm Bank financed total authorizations of $587,748,942, of which 

$325,879,062 were small business authorizations. The total number 

of companies financed was 276 companies, of which 211 were small 

businesses. 

The top three categories supported in Louisiana were: manufacturing and sales of noncapital equipment; manufacturing and sales 

of capital equipment; and mining. 

The top three exporters in Louisiana supported by Ex-Im Bank 

were: Pride Offshore Inc.; Atlantis International, Inc.; and Reliable 

Industries, Inc. of New Orleans. 

The estimated number of jobs supported in Louisiana over the 

last 5 years by Ex-Im Bank was 5,100 jobs. 

Q.1. Mr. Hochberg, in 2012, Congress passed the Export-Import 

Bank Reauthorization Act of 2012. The act required the U.S. Government Accountability Office (GAO) to report on the process and 

methodology used by Export Import Bank (Ex-Im Bank) to calculate the effects of export financing on U.S. employment. In a 

2013 report, GAO found that the Ex-Im Bank’s methodology to calculate the number of U.S. jobs associated with the exports, while 

following a process, does not report serious ‘‘limitations in its process or fully detail the assumptions related to its data or methodology.’’ The GAO report concludes that, ‘‘because of a lack of reporting on the assumptions and limitations of its methodology and 

data, Congressional and public stakeholders may not fully understand what the jobs number that Ex-Im Bank reports represents 

and the extent to which Ex-Im Bank’s financing may have affected 

U.S. employment.’’ 

Does Ex-Im Bank maintain a detailed list of U.S. exporters involved or who benefit from individual transactions? 

34 

A.1. Ex-Im Bank’s mission is to support U.S. jobs through exports. 

The Bank developed a methodology that utilizes publicly available 

Commerce Department and Bureau of Labor Statistics data, and is 

also used by other agencies to calculate jobs numbers. We were 

pleased that the GAO verified the Bank’s jobs calculation methodology and recognized the advantages of the Bank’s current jobs calculation methodology. The GAO report also recognized that the 

Bank’s current jobs calculation methodology is commonly used. The 

report did not recommend any changes to the underlying methodology, but it did recommend that we include detailed information 

on the assumptions and limitations associated with jobs calculation 

methodology. These were included in the Bank’s ‘‘supporting U.S. 

jobs’’ section of our FY2013 Annual Report which was released on 

December 16, 2013. 

The Export-Import Bank does maintain information on U.S. exporters involved or that benefit from individual transactions. The 

Bank’s annual report also lists all Long Term guarantees and direct loans. The Bank’s Web site also lists all transactions which includes information on the primary exporter. This information is 

compliant with the Federal Funding and Transparency Act 

(FFATA) and can be found on the Bank’s Open Government Web 

page. 

Q.2. Mr. Hochberg, Office of Inspector General and GAO reports as 

recent as December 2013 have found that while the Ex-Im Bank 

Business Plan reported that the Ex-Im Bank’s exposure limits were 

appropriate, the forecasting process used to reach these conclusions 

have key weaknesses that do not appropriately reflect changing 

conditions. 

What steps is the Ex-Im Bank taking to routinely analyze and 

report financial performance for mandated transactions? Has ExIm Bank increased its ability to evaluate such performance at the 

sub-portfolio level and inform Congress of related risks? 

A.2. Ex-Im Bank is committed to continuous improvement and 

using the GAO recommendations has improved its forecasting process. In January 2014 in response to GAO concerns, the Bank submitted a report on the Bank’s Authorization and Forecasts to the 

Senate Committee on Banking, Housing, and Urban Affairs and 

the House Financial Services Committee. 

Ex-Im Bank is routinely analyzing and reporting financial performance for authorized transactions. The Bank has enhanced its 

ability to evaluate such performance at the sub-portfolio level. ExIm Bank began reporting this information in our quarterly default 

report. The first quarterly report that incorporated this information 

was the September 30, 2013, Quarterly Default Report. The recent 

December 31, 2013, Quarterly Default Report also included this information. This report is submitted to the Senate Committee on 

Banking, Housing, and Urban Affairs and the House Financial 

Services Committee. The Bank will continue including this information in future Quarterly Default Reports. 

Q.3. Mr. Hochberg, in response to exporter concerns, the Ex-Im 

Bank revised its medium- and long-term content policy in January 

2001. Specifically, the Bank allowed eligible content to be calculated based on the aggregate content of all items within a supply 

35 

contract instead of using an item-by-item approach. However, according to the Inspector General, voluntary reporting resulted in 

limited information for decision makers, and did not establish other 

appropriate internal controls; because of this, the Bank has not received any statistically valid data to date. Additionally, language 

included in the Export-Import Bank Reauthorization Act of 2012, 

required the Ex-Im Bank to address this issue. Since that time it 

appears that the Ex-Im Bank has failed to achieve one of the key 

desired outcomes of the 2001 changes to its content policy, and has 

been unable to comply with its Board of Directors’ requirements regarding the analysis and reporting of detailed content trend information. 

In 2013 we were told that ‘‘The Board of Directors intends to vote 

on these possible policy changes by the end of calendar year 2013,’’ 

has the Board done so? 

A.3. Section 15 of the reauthorization required the Bank to ‘‘conduct a review of its domestic content policy for medium and longterm transactions.’’ The Bank conducted that review as prescribed 

by Congress and submitted the report to the Senate Committee on 

Banking, Housing, and Urban Affairs and the House Financial 

Services Committee on time. 

The review yielded a number of policy recommendations that the 

Board is scheduled to consider in the first half of 2014. 

Q.4. Mr. Hochberg, due to the above referenced issue (long-term 

content policies) present day decision makers do not have access to 

what could have been a robust historical record of over 10 years of 

content-related data to inform current and future decisions about 

the content policy and help assess potential impacts on achieving 

Ex-Im Bank’s jobs mandate. 

What potential losses or negative decisions could the Bank have 

avoided had it had access to this historical data? 

A.4. It is not possible to speculate as to what potential losses or 

negative decisions the Bank could have avoided if the historical 

data had been submitted. 

Q.5. Ex-Im Bank has indicated that it is considering additional 

changes to its content policy. Has Ex-Im Bank enacted all content 

policy review requirements of the Export-Import Bank Reauthorization Act of 2012? If not, please delineate which have and have 

not been met. 

A.5. Ex-Im Bank has ‘‘enacted all content policy review requirements of the Export-Import Bank Reauthorization Act of 2012.’’ 

However, in the course of conducting the Congressionally mandated review, the process revealed opportunities for Ex-Im Bank to 

streamline policies and programs. Staff plans to bring several proposals for consideration to the Board in the first half of 2014. 

The three areas identified by the Bank for further exploration all 

provide opportunities for Ex-Im to streamline policies in order to 

add clarity to Ex-Im’s content policy and will make engaging with 

Ex-Im easier for U.S. exporters. Staff is in the process of preparing 

proposals and plans to bring to Bank management such proposals 

in the first half of 2014. 

36 

1 Ibid, p.58. 

Q.6. Why has it taken 13 years since 2001, and almost 2 years 

since the 2012 reauthorization for the Board to consider and implement changes needed? 

A.6. The issues predated my tenure as Chairman and President of 

Ex-Im Bank. When the issue was brought to management’s attention, it was addressed. In the absence of concrete data from exporters and at a time of record breaking authorizations, there was no 

evidence that changing the current content policy would result in 

increased exports and more U.S. jobs. The Congressionally mandated content review was concluded on time at the end of May 

2013. Since the conclusion of the review, Bank staff have been analyzing and preparing proposals for streamlining the content policy 

and plan to bring proposals to senior management and ultimately 

the Board for consideration in the first half of 2014. 

Q.7. What has the Bank done to ensure that it adheres to the 2012 

Ex-Im Reauthorization passed provisions instructing it to negotiate 

a reduction or end of subsidies for wide-body aircraft with the Export Credit Agency in Europe? 

A.7. The 2012 Ex-Im Reauthorization did not require Ex-Im Bank 

to negotiate a reduction or end of financing of wide-body aircraft 

with Export Credit Agencies in Europe. The 2012 Ex-Im Reauthorization provides that Treasury initiate and report on the negotiations described in the question. Treasury has submitted two such 

reports on these negotiations to Congress, the most recent in December 2013. 

Q.8. I am increasingly concerned that current procedures set up to 

facilitate and benefit the United States are working at ends that 

will result in the ultimate harming of U.S. businesses. One glaring 

example is the recent U.S. Customs and Border Protection, or CBP 

preclearance customs post at Abu Dhabi airport, which opened on 

Friday. This post which was funded by Appropriations Committee 

in 2012 despite widespread bipartisan opposition, solely benefits 

foreign competitors. Why are the Ex-Im Bank and the DHS pouring 

money into businesses that do not appear to need it and which directly compete against U.S. businesses? Is there a mandate from 

the Executive Branch to do so? 

A.8. Ex-Im Bank has absolutely no role in appropriating funds for 

the U.S. Customs and Border Protection preclearance post at Abu 

Dhabi Airport. 

Q.9. U.S. Competition Questions—In the U.S. District court, Delta 

Air Lines et al v. Export Import Bank of the United States; 878 F. 

Supp. 2d at 57, the memorandum opinion of the U.S. District Judge 

states, that in previous cases related to 2011 Commitments to Air 

India, (it) ‘‘decisively establishes what seems a matter of common 

sense: the loan guarantees provided by the Ex-Im Bank to foreign 

airlines, in the aggregate, have injured ATA’s (U.S. based airliners) 

members.’’ 1 . . . and ‘‘competitive injury’’ ‘‘will nevertheless face 

increased direct competition .. . ’’ Adding further that it ‘‘has also 

shown that additional direct competition on international routes is 

substantially certain.’’ The Court also ‘‘finds that ATA has made a 

37 

factual showing sufficient to establish that it faces imminent competitive injury.’’ There is more than a ‘‘vague probability’’ that the 

subsidized planes will compete on routes served by ATA’s members 

and an even more significant probability that said competition ‘‘will 

cause [those members] to lose business or drop its prices.’’ 

In short, the court appears to find that in previous cases, an entity upon whom the U.S. Government has conferred a significant 

benefit was in direct competition of a U.S. business which prior 

Bank guarantees have caused them significant, concrete injuries 

and that the 2011 Commitments are substantially certain to cause 

them further injury. What actions and steps is the Bank conducting to ensure that similar processes do not continue to occur? 

A.9. Ex-Im Bank’s policy on economic impact is to provide an analysis of whether or not Ex-Im support of a transaction will generate 

more benefits than a potential harm to the U.S. economy. The 

quotations above from the opinion of the U.S. District Court in 

Delta Air Lines et al. v. Export-Import Bank of the United States, 

878 F.Supp.2d at 57, were stated in the context of the Court’s decision that the plaintiffs in the case had standing to bring suit. In 

the context of a standing analysis, the Court must determine, 

among other things, if the plaintiffs have met the minimal Constitutional requirement of demonstrating that they have suffered 

an injury-in-fact and that the injury has occurred or is substantially certain to occur. The finding that a plaintiff has made such 

a showing says nothing about the merits of the plaintiffs claim. It 

also says nothing about the entirely different assessment that the 

Bank’s Charter requires it to make, which is whether a proposed 

transaction is likely to cause substantial injury to U.S. industry. 

The Bank’s economic impact procedures are designed to make that 

assessment. Moreover, the Court in that opinion went on to conclude that Ex-Im Bank’s economic impact procedures were not arbitrary and capricious as alleged by the plaintiffs. Additionally, in 

April 2013, the Bank put into effect new economic impact procedures and methodological guidelines, including new procedures for 

aircraft transactions. The procedures include an economic impact 

review for every transaction and detailed reviews where warranted. 

In addition, Ex-Im has supported the Treasury Department in negotiating more market oriented terms and conditions for governmental financing support for aircraft exports. The most recent 

round of these negotiations concluded in 2011. 

Q.10. Mr. Hochberg, when the Export-Import bank is completing 

an Economic Impact Analysis for financing to a foreign entity, does 

the bank, in order to avoid counting foreign jobs, take foreign content into account as part of any benefit to the United States economy? If so, how does the bank do this? 

A.10. The Bank’s Economic Impact Procedures have never included, and still do not include, the number of jobs supported by 

a transaction as a factor in the Economic Impact Procedures or in 

any detailed economic impact analysis. Ex-Im Bank’s mission is to 

support U.S. jobs through exports. The Bank developed a methodology that utilizes publicly available Commerce Department and 

Bureau of Labor Statistics data, and is also used by other agencies 

to calculate jobs numbers. We were pleased that the GAO verified 

38 

the Bank’s jobs calculation methodology and recognized the advantages of the Bank’s current jobs calculation methodology. The GAO 

report also recognized that the Bank’s current jobs calculation 

methodology is commonly used and cost effective. The report did 

not recommend any changes to the underlying methodology, but 

did recommend that we include detailed information on the assumptions and limitations associated with jobs calculation methodology. These were included in the Bank’s ‘‘supporting U.S. jobs’’ 

section of our FY2013 Annual Report which was released on December 16, 2013. 

Q.11. Mr. Hochberg, Does the Ex-Im Bank take into account the 

impact on domestic companies access export credit support against 

the Home Market Rule? 

A.11. The Home Market Rule is a longstanding informal understanding between certain European countries—supporting sales of 

Airbus aircraft—and the United States—supporting sales of Boeing 

aircraft—that neither side will finance aircraft into the United 

States or the European ‘‘Airbus countries’’ (the United Kingdom, 

France, Spain, and Germany). Under the Home Market Rule, U.S. 

airlines do not have access to European export credit support for 

the purchase of Airbus aircraft, just as they do not have access to 

support for the purchase of Boeing aircraft. Likewise, airlines in 

European ‘‘Airbus countries’’ do not have access to Ex-Im Bank export credit support for the purchase of Boeing aircraft. However, 

U.S. airlines do benefit from the United States having the largest, 

most liquid and sophisticated capital markets in the world. 

Q.12. Mr. Hochberg, you have previously stated that the bank does 

an Economic Impact Analysis on every single transaction the ExIm Bank enters into. Is this information available for Congress to 

review? If so, can you please provide to myself and other Members 

of the Banking Committee a list and copies of all of the Economic 

Impact Analysis reports that the bank performed as part of large 

aircraft transactions during your tenure as Chairman? 

A.12. In my testimony, I indicated that the Bank considers the economic impact implications of every application. However, the Bank 

performs detailed economic impact analyses only on those applications that meet the standards articulated in the Bank’s Economic 

Impact Procedures. In April 2013, new Economic Impact Procedures and Methodological Guidelines went into effect. These new 

procedures put in place a revised system for assessing whether aircraft transactions are likely to cause an adverse economic impact 

on U.S. industry. For transactions that include passenger aircraft 

for commercial use, staff submits to the Ex-Im Bank Board of Directors one of two types of analyses: (1) a no-substantial injury 

analysis, or (2) a detailed economic impact analysis. For passenger 

transactions that do not meet the threshold for substantial injury 

to U.S. industry according to the Bank’s Economic Impact Procedures, Ex-Im Bank staff prepares a no-substantial injury memorandum explaining the details of the transaction and why the 

transaction fails to pass the substantial injury threshold. For passenger aircraft transactions that do meet the threshold for substantial injury to U.S. industry, Bank staff prepares a detailed economic impact analysis, which identifies any financing advantage 

39 

that the Bank may provide to the foreign buyer compared to financing available to a similarly situated U.S. airline. If staff finds 

that Ex-Im Bank has provided a financing advantage, staff calculates an estimate of harm to the U.S. passenger airline industry 

that could result from the financing advantage, which is weighed 

against the positive effects of the export. The Ex-Im Bank Board 

of Directors considers this analysis when deciding whether to finance a transaction. A list of all analyses done since April 1, 2013, 

is below. 

40 

41 

In light of the fact that Ex-Im Bank is involved in several different lawsuits regarding its aircraft transactions, and due to the 

business confidential and sensitive nature of the information about 

transactions that is contained in economic impact analyses, it is 

not appropriate to provide physical copies of these analyses outside 

of the Bank. We would, however, make arrangements for you or a 

staff person to do an in camera review of the documents if necessary. 

Prior to April 1, 2013, aircraft transactions were subjected to a 

categorical ‘‘exportable goods’’ screen. Each transaction was 

checked to make sure that it should be subjected to the ‘‘exportable 

goods’’ screen, but there is no separate transaction report for each 

such transaction. 

Q.13. Mr. Hochberg, regardless of a foreign airlines’ credit rating, 

from the mid-1980s until 2013, the bank charged foreign airlines 

a fee of, at most, 1 percent over the triple A rating. Could United 

States airlines borrow as cheaply during this period, and how does 

this financing compare to private markets? 

A.13. The Aircraft Sector Understanding (ASU) sets the minimum 

terms and conditions that export credit agencies (ECA) may provide when financing large aircraft transactions, and Ex-Im Bank is 

fully compliant with these guidelines. During the period from the 

mid-1980s through today, the United States and others have steadily raised the all-in cost (which includes risk fees, other fees and 

interest) of ECA support for large aircraft transactions in the ASU. 

More recently, U.S. airlines have been able to borrow as cheaply, 

if not more cheaply, than their foreign competitors who utilize official export credit financing, given the unique financing tools and 

mechanisms available to them in the U.S. financial markets. In the 

1980s and 1990s, as a result of specific U.S. laws and favorable 

U.S. tax-code provisions, U.S. airlines could avail themselves of 

tax-favored leases as well as capital market financing known as 

equipment trust certificates. In the early 2000s, the equipment 

trust certificate product was modified and the Enhanced Equipment Trust Certificate (EETC) was born; the EETC remains an attractive financing option today. 

These financing tools provided significant cost advantages to U.S. 

airlines and were not available to foreign airlines until 2013 when 

the first international EETCs were issued by a select few foreign 

airlines. Also during the 1990s and early 2000s, several U.S. airlines declared bankruptcy as airlines consolidated and changed 

their business models; this affected the rates they paid for aircraft 

financing. 

Q.14. Mr. Hochberg, the Export-Import bank Web site publishes 

annual reports detailing its Loans and Long-Term Guarantees. 

However, at the time of your testimony the 2013 report was not yet 

available. When will the 2013 report be posted online? Also, please 

provide Members of the Banking Committee this report as soon as 

possible. 

A.14. In accordance with a directive from the Office of Management and Budget to Federal agencies, Ex-Im Bank posted its 

FY2013 financial report (PDFs of audited documents) to the Bank’s 

Web site on December 16, 2013, shortly after the Bank’s signoff 

42 

with its auditors 4 days earlier. In addition, Ex-Im Bank posted the 

report’s year-in-review narrative texts on December 20, 2013. 

These nonaudited texts supplement the financial report and fulfill 

Congressional reporting requirements. The full annual report (in 

individual sections) has been available online since December 20, 

2013. 

Ex-Im Bank anticipates that printed copies of the FY2013 annual 

report will be available in the first week of March and will be distributed to your office. 

Q.15. Energy Questions—Mr. Hochberg, over the last 10 years what 

has been the historical return on investment for fossil fuels 

projects, and how does that compare to recent investments in renewables? Please provide that information, in detail by year, to the 

Committee. 

A.15. No investments are made by Ex-Im Bank. Ex-Im Bank does 

not invest, but rather, provides loans and guarantees. Over the 

past 10 years, Ex-Im Bank has earned $884 million in fees and interest on fossil fuel transactions, versus losses incurred during that 

time of $117 million. 

Q.16. Mr. Hochberg, as the National Association of Manufacturers 

has pointed out, the revisions to Ex-Im Bank’s Environmental Procedures & Guidelines, as approved by the Ex-Im Bank Board of Directors in December, would substantially deter Ex-Im support for 

new coal-fired power plants abroad. Can you tell me what the exact 

benefit of that decision will be? For example, over the next 10, 50, 

and 100 years what will be the exact change in global temperatures 

and other weather-related events? Has the Ex-Im Bank determined 

that by making this decision the climate will stop changing, and no 

longer do so as it has for millions of years? 

A.16. Since 1992, Ex-Im Bank is required by its charter to consider 

the impact to the environment of projects it finances. In approving 

the Supplemental High Carbon Intensity Guidelines, the intent of 

the Bank was to continue to adhere to our Charter and consider 

the environment in connection with Board decisions related to 

projects that have an impact on the environment and set requirements and standards that would result in a reduction of greenhouse gasses (CO2) from new coal plants those otherwise produce 

very large amounts of CO2. It was also to encourage other ECAs 

to adopt similar requirements so as to promote broad multilateral 

standards while leveling the playing field for U.S. exporters. The 

CO2 emissions from coal-fired power plants represent a large portion of the world’s anthropogenic CO2 production. The Guidelines 

introduced a standard or limit for CO2 emissions produced by ExIm-supported power plants in countries such as China that would 

require mitigation measures including deployment of carbon capture and sequestration (CCS) to lower the plant’s CO2 emissions to 

levels consistent with that of gas-fueled plants. However, for the 

world’s poorest countries, such as most sub-Saharan African nations, the Guidelines for new coal plants do not require CCS. For 

those poorest countries, we require only that the buyer meet the 

criteria of best appropriate technology where there is no other economically feasible alternative. 

43 

Ex-Im Bank still finances coal exports, coal mining projects, and 

improvements to existing coal-fired power plants. Since 2009 we 

have completed approximately $2 billion in coal related projects. 

Q.17. Mr. Hochberg, prior to passage of the omnibus appropriations 

bill earlier this month, the Ex-Im Bank was planning on requiring 

carbon capture and sequestration (CCS) for new coal-fired power 

plants. How was the Ex-Im Bank planning on determining whether 

the geology in a region would facilitate CCS or otherwise that the 

technology existed in a form that wouldn’t explode the price of electricity generation for those facilities? 

A.17. In the context of any particular project, the Bank’s engineers 

and technical consultants will address the technical feasibility of 

CCS in their analysis provided to the Bank’s Board of Directors for 

their consideration prior to voting on the transaction. 

Q.18. Mr. Hochberg, according to the International Energy Agency 

(IEA), global demand for electricity will nearly double in 2035 over 

2010 levels, as will electricity generated from coal. From now on, 

the Ex-Im Bank will insist that development agencies give ‘‘full 

consideration’’ to low-carbon or no-carbon options before moving 

ahead with a new coal plant. Is Ex-Im using their leverage associated with public finance to move developing countries away from 

coal-fired power plants thereby denying these countries the opportunities correlated with higher standards of living? 

A.18. The Bank does not direct the development of other countries’ 

energy policies. Through its Supplemental Carbon Guidelines, the 

Bank is using its policies to encourage the poorest countries to employ coal plants using the best appropriate technology where there 

is no other economically feasible alternative to high CO2 producing 

plants. In richer countries Ex-Im’s Supplemental Carbon Guidelines provide that coal-fired plants must be deployed with techniques such as CCS to mitigate the level of CO2 emissions produced from new coal plants. 

Q.19. Mr. Hochberg, the fiscal year 2014 consolidated appropriations bill recently signed into law by President Obama includes 

language prohibiting Ex-Im and the Overseas Private Investment 

Corporation from enforcing policies that block support for coalpower generation projects, which will increase exports of U.S. goods 

and services. How do you intend to comply with the intent of Congress? 

A.19. The appropriations bill does not include language ‘‘prohibiting Ex-Im . . . from enforcing policies that block support for coalpower generation projects.’’ The appropriations language leaves in 

place the Bank’s policy requiring CCS mitigation for wealthier 

countries, but it suspends the bank’s criteria for financing in IDAeligible countries. Ex-Im Bank will fully comply with the Appropriations language. 

Ex-Im Bank is fully complying with the language of the Appropriations Bill and with the intent of the Congress with respect to 

the application of its Supplemental High Carbon Intensity Guidelines. The Bank has suspended the application of these Supplemental Guidelines for transactions related to export financing reVerDate Nov 24 2008 09:29 Dec 19, 2014 Jkt 046629 PO 00000 Frm 00047 Fmt 6602 Sfmt 6602 L:\HEARINGS 2014\01-28 OVERSIGHT AND REAUTHORIZATION OF THE EXPORT-IMPO
44 

quests in all ‘‘IDA-eligible’’ (IDA-only and IDA-blend) countries. 

The Bank has posted this suspension on its Web site. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR TOOMEY 

FROM FRED P. HOCHBERG 

Thank you for your questions. Over the past 5 years Ex-Im Bank 

has supported an estimated 1.2 million U.S. jobs through exports. 

I am pleased to report that in Pennsylvania from 2009 to 2013, ExIm Bank financed total authorizations of $6,246,856,291, of which 

$986,366,231 were small business authorizations. The total number 

of companies financed was 575 companies, of which 431 were small 

businesses. 

The top three categories supported in Pennsylvania were: manufacturing and sales of capital equipment; mining; and utilities. 

The top three exporters in Pennsylvania supported by Ex-Im 

Bank were: General Electric International, Inc.; Aquatech International Corporation; and Xcoal Energy & Resources. 

The estimated number of jobs supported in Pennsylvania over 

the last 5 years by Ex-Im Bank was 46,000 jobs. 

Q.1. You stated that Ex-Im does an economic impact study ‘‘for 

every export and including airlines.’’ Can you please provide a list 

of the economic impact studies that Ex-Im performed as part of 

large aircraft transactions during your tenure as Chairman and 

also provide copies of those studies to the Committee? 

A.1. In my testimony, I indicated that the Bank considers the economic impact implications of every application. However, the Bank 

performs detailed economic impact analyses only on those applications that meet the standards articulated in the Bank’s Charter 

and Economic Impact Procedures. 

The following table summarizes the number of transactions for 

which the Bank has conducted detailed economic impact analyses 

since May 2009. This table further subdivides the information depending on whether the foreign buyer used the U.S. export to establish or expand production of a good or offer passenger aircraft 

services. 

45 

46 

47 

48 

49 

Q.2. When completing an Economic Impact Analysis for the financing of an aircraft to a foreign carrier, does Ex-Im take foreign content into account to avoid counting foreign jobs as part of any U.S. 

economic benefit? If so, how? 

A.2. When completing an Economic Impact Analysis, Ex-Im Bank 

looks at dollar benefits versus potential dollar harm to the U.S. 

economy. 

Q.3. In your testimony you stated that Ex-Im charges foreign airlines rates that are higher than those that foreign airlines can find 

in the private market. 

How did you come to the determination that Ex-Im charges higher interest rates than private lenders? 

A.3. Note: Chairman Hochberg would like to ensure that his testimony was not misunderstood. First, Airbus and Boeing compete for 

almost every single sale. Therefore, Ex-Im Bank must ensure that 

the financing available to a foreign airline to purchase a U.S.-manufactured airplane is as favorable as the financing provided by the 

European ‘‘Airbus’’ ECAs. Otherwise, Airbus will just get the sale. 

In addition, For every large aircraft transaction, Ex-Im Bank first 

performs an analysis to determine whether the transaction will create significant direct competition for a U.S. airline. If that analysis 

is affirmative, then Ex-Im Bank compares the cost of financing ExIm Bank provides to foreign airlines to the cost of financing available to comparably rated U.S. airlines from commercial sources. 

With rare and short-lived historical exceptions, U.S. airlines consistently have access to more favorable financing terms than the financing terms that Ex-Im Bank makes available to foreign airlines. 

Responses to the questions below address how Ex-Im performs this 

analysis. 

Please note the clarification stated above. The Aircraft Sector 

Understanding (ASU) sets the minimum terms and conditions that 

export credit agencies (ECA) may provide when financing large aircraft transactions, and Ex-Im Bank is fully compliant with these 

guidelines. Over the past several years, the United States and others have steadily raised the all-in cost (which includes risk fees, 

other fees and interest) of ECA support for large aircraft transactions found in the ASU. In addition to the strict cost component, 

it is also important to note that private aircraft lending over the 

historical period provided additional flexibilities in terms of advance rate and loan term, for example, that was significantly more 

advantageous than what Ex-Im could offer under the terms and 

conditions of the ASU. 

With the most recent revision of the ASU in 2011, ECA financing 

is now less competitive than U.S. bond market financing obtained 

through instruments such as the enhanced equipment trust certificate (EETC). An EETC is a structure whereby investors can provide financing directly through the capital markets, as opposed to 

loan financing provided by banks. The EETCs provide significant 

cost advantages to U.S. airlines. The EETC is premised on Section 

1110 of the U.S. Bankruptcy Code, which only applies to U.S. airlines. Section 1110 permits a secured creditor of an airline in bankruptcy to obtain possession of the creditor’s collateral (i.e., the aircraft) 60 days after the bankruptcy petition date, notwithstanding 

50 

the automatic stay provision that applies to creditors of other types 

of debtors. This certainty of access to collateral—and thus to payment—significantly decreases the risk to creditors of U.S. airlines 

and allows these creditors to provide more favorable financing 

terms than creditors of foreign airlines (which lack equivalent protections). 

Q.4. In making the determination that Ex-Im charges foreign carriers higher rates than those that can be found in the private markets, did you consider other benefits of Ex-Im financing, including 

favorable loan durations and loan-to-value ratios? 

A.4. In determining whether Ex-Im Bank provides a pricing advantage, Ex-Im Bank compares the price of financing it provides to foreign airlines to pricing available to comparable U.S. airlines in the 

U.S. capital markets. This comparison considers loan duration and 

loan-to-value ratios in analyzing the price of Ex-Im financing in 

comparison to the price of private markets financing. While we look 

at and adjust for these factors in case-by-case comparisons, historical data generally demonstrate that both loan duration and loanto-value ratios are more favorable in the EETC market, the proxy 

Ex-Im uses for private market financing. With regards to loan duration, the mean average weighted life (AWL) for EETCs during 

the historical period from 2001 through 2013 was 7.98 years, significantly longer than the typical AWL on a standard Ex-Im aircraft transaction of 6.25 years. Similarly, with regards to loan-tovalue (LTV) ratios, while Ex-Im can offer only a maximum financed 

amount of 85 percent of the net purchase price of the aircraft, 

EETC LTVs are based on appraised values (not actual purchase 

price), and as a result oftentimes airlines are able to achieve more 

beneficial LTVs with the EETC debt instruments than can be 

achieved through Ex-Im financing. 

Q.5. If Ex-Im financing is in fact more expensive than the financing available in the private market, why would a creditworthy foreign carrier ever choose Ex-Im financing? 

A.5. There are several reasons why an airline which has access to 

market financing would need to use Ex-Im Bank financing from 

time to time. First, as we have seen in recent years, in times of 

market distress, commercial market financing may be temporarily 

unavailable, and as a result, Ex-Im Bank may need to step in and 

fill the financing gap. In this sense, the business of the Export-Import Bank tends to be countercyclical in nature. Second, the nature 

of aircraft acquisition is for airlines to order a large number of aircraft at one time. Given the volume of aircraft finance needed to 

finance an order, it is often the case that the commercial markets 

will only be able to finance a portion of the order, and as a result, 

Ex-Im Bank financing is needed to complement commercial financing and to finance the aircraft that the market is unable or unwilling to do. 

Q.6. On its Web site, Ex-Im publishes an annual report detailing 

its Loans and Long-Term Guarantees. However, as of January 31, 

2014, the 2013 report was not available on your Web site. When 

do you expect this report to be posted on your Web site? Please also 

provide the Committee with this report as soon as possible. 

51 

A.6. In accordance with a directive from the Office of Management 

and Budget to Federal agencies, Ex-Im Bank posted its FY2013 financial report (PDFs of audited documents) to the Bank’s Web site 

on December 16, 2013, shortly after the Bank’s signoff with its 

auditors on December 12, 2013, In addition, Ex-Im Bank posted the 

report’s year-in-review narrative texts on December 20, 2013. 

These nonaudited texts supplement the financial report and fulfill 

congressional reporting requirements. The full annual report (in individual sections) has been available on line since December 20, 

2013. 

Ex-Im Bank anticipates that printed copies of the FY2013 annual 

report will be available in the first week of March and will be distributed to your office. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR COBURN 

FROM FRED P. HOCHBERG 

Thank you for your questions. Over the past 5 years Ex-Im Bank 

has supported an estimated 1.2 million U.S. jobs through exports. 

I am pleased to report that in Oklahoma from 2009 to 2013, ExIm Bank financed total authorizations of $621,702,468, of which 

$486,879,357—78 percent, or four times the national average for 

the Bank—were small business authorizations. The total number of 

companies financed was 213 companies, of which 166 were small 

businesses. 

The top three categories supported in Oklahoma were: manufacturing and sales of noncapital equipment; services; and manufacturing and sales of capital equipment. 

The top three exporters in Oklahoma supported by Ex-Im Bank 

were: Zeeco Inc.; Royal Mfg Co.; and Devco International. 

The estimated number of jobs supported in Oklahoma over the 

last 5 years by Ex-Im Bank was 5,200 jobs. 

Q.1. In FY2013, Ex-Im Bank approved commitments worth $27.3 

billion. Of this amount, only 19.1 percent supported exports by 

small businesses—below the congressionally mandated target of 20 

percent. Is the Bank’s failure to meet the 20 percent target due to 

low demand from small businesses or other reasons? What steps 

will the Bank take to ensure a larger share of its commitments 

benefit small businesses? 

A.1. In FY2013, Ex-Im Bank supported nearly $6 billion in small 

business, of which $5.2 billion was direct exports. While the direct 

exports accounted for 19.1 percent, when you take into account the 

total small business authorizations by the Bank, we are over 20 

percent. Our charter requires us to report on direct small business 

exports, which is why you see the 19.1 percent figure in our reports. Indirect small business exports are vitally important to small 

business. 

Approximately 90 percent of the 3,800 Ex-Im transactions in 

FY2013 supported small business. This was an all-time record for 

the Bank. On the demand side, risks associated with the United 

States’ largest trading partner (the EU) decreased in FY2013. Macroeconomic instability in Europe caused U.S. businesses to purchase additional trade credit insurance for their exports to the EU. 

As European markets have stabilized, demand for export insurance 

52 

has decreased. On the supply side, Ex-Im moved ‘‘down market’’ in 

FY2013 to service more U.S. small businesses. In FY2013, the 

number of small business transactions increased from 3,313 in 

FY2012 to 3,413 in FY2013. While the average transaction size decreased from $1.85M to $1.53M over the same period. In addition, 

thanks to an improving economy, the private sector insurers are actively targeting Ex-Im’s larger small business customers via information requested under FOIA. We are continually encouraging the 

private sector to step up, thereby reducing the demand for Ex-Im 

Bank support. 

The key to expanding exports is marketing and communicating 

to small businesses. We will continue to leverage outreach programs such as our Global Access Forum events. In addition, we 

have partnered with FedEx in an innovative new alliance that will 

help reach and inform their small- and medium-size exporters 

about how Ex-Im Bank can help increase FedEx’s export sales and 

create jobs. 

Q.2. Is Ex-Im Bank a lender of last resort, or does the Bank want 

to maintain a certain level of business? 

A.2. Pursuant to the Bank’s Congressional mandate, Ex-Im Bank 

financing is reserved for transactions for which either: (1) commercial sources of financing are unavailable due to limitations in capacity and/or risk appetite; or (2) competition exists from foreign 

suppliers and their export credit agencies and, therefore, Ex-Im 

Bank support is needed to level the financing playing field. Hence, 

Ex-Im Bank focuses on those U.S. export transactions that would 

not likely go forward absent Ex-Im Bank support. Ex-Im Bank 

complements, rather than competes with, commercial sources of financing. As such, the ‘‘lender of last resort’’ label is fitting with respect to those transactions for which commercial sources of financing are unavailable due to limitations in capacity and/or risk. 

Q.3. Does Ex-Im Bank issue any staff performance bonuses based 

on the level of business the Bank does? 

A.3. No. Ex-Im Bank issues performance awards based on an employee’s achievement of individual performance goals, including a 

balanced scorecard of such measures as employee effectiveness, 

customer service, collaboration, productivity, cycle time, and quality. 

Q.4. If Ex-Im Bank’s mission is to fill gaps in market financing, 

why does the Bank continue to extend financing to companies 

which have no problem accessing credit in the private market? 

A.4. Ex-Im Bank extends financing to companies for one of two reasons. The first reason is to fill financing gaps unmet by private 

sources of financing due to capacity and risk-taking limitations. 

The second reason is to level the financing playing field when U.S. 

exporters are competing against foreign suppliers that have financing support from their national export credit agencies. Thus, the 

Bank can and does provide financing to foreign companies that 

might be able to access private sources of financing with the goal 

of supporting and increasing U.S. Jobs. The Bank provides this financing only for the purpose of neutralizing financing available 

from a foreign export credit agency for a specified purchase. 

53 

Q.5. How much of Ex-Im Bank’s current exposure is comprised of 

large aircraft financing? Why does large aircraft financing represent such a large portion of the Bank’s total exposure, despite 

being a much smaller share of total U.S. exports? What would be 

a financially prudent portfolio cap for large commercial aircraft 

that is also fair to the broader spectrum of U.S. industry? 

A.5. Ex-Im Bank’s exposure, as of December 31, 2013, is approximately $87 billion (or 77 percent) of the Bank’s $113 billion exposure supported capital goods. Of that amount, $49 billion supported 

large aircraft. Large aircraft represent a significant portion of ExIm Bank total exposure because of several factors: (i) aircraft are 

very expensive; (ii) Boeing’s order book has increasingly consisted 

of orders from airlines located in emerging markets such as Africa, 

Latin America, Asia, and the Middle East, which are more likely 

to require Ex-Im Bank financing for at least some of their aircraft 

purchases; and (iii) during the credit crisis and the great recession, 

other sources of financing for commercial aircraft were not available, or not available in sufficient quantities to meet the financing 

needs of the aircraft manufacturers customers. 

Boeing is the United States’ largest manufacturing exporter. Although exports of commercial aircraft may appear to be a small 

share of total U.S. exports, that is only because the U.S. economy 

is so large. The commercial aircraft industry is one of the industries in which the United States continues to run a trade surplus 

and is one of the largest export industries within the U.S. economy. 

Ex-Im Bank support for this important U.S. industry is due to the 

fact that we are called upon to finance large capital goods that face 

a shortage of financing options as well as where U.S. exporters face 

foreign competition that is supported by their countries’ export 

credit agencies. The purchase of commercial aircraft requires large 

amounts of long term financing, which commercial banks have 

demonstrated a reluctance to finance. Any unilateral ‘‘cap’’ on ExIm Bank support for sales of U.S. manufactured commercial aircraft would have only one result: the foreign airlines in question 

would purchase more European-manufactured aircraft, to the great 

detriment of U.S. industry. The market for large aircraft is a duopoly, and the sale of Airbus aircraft is heavily supported by ECAs 

in Airbus’s home countries. Therefore, the need for Ex-Im to level 

the playing field is most intense in this market. 

Q.6. Under Ex-Im Bank’s new Economic Impact Procedures (EIPs), 

the Bank estimates only 10 to 15 percent of aircraft transactions 

will receive a detailed economic impact analysis. Why were the 

EIPs designed in such a way that so few transactions receive a detailed analysis? How does this 10–15 percent figure compare to 

nonaircraft transactions of similar dollar value (e.g., above $200 

million)? 

A.6. Not all aircraft that Ex-Im finances are adding capacity to the 

commercial airline market. Many are replacing seats on aircraft 

that are being retired and others are used for cargo shipping. The 

new EIPs were designed in response to language in the Bank’s 

charter that directs the Bank to: (1) ‘‘take into account any serious 

adverse effect . . . on the competitive position of United States industry’’ (see Section 2(b)(1)(B) of the charter); and (2) determine if 

54 

its transactions could cause ‘‘substantial injury’’ to U.S. industry 

(see section 2(e)(1)(B) of the charter). Section 2(4) of the Charter 

defines substantial injury as: ‘‘ . . . the amount of the capacity for 

production established, or the amount of the increase in such capacity expanded, by such credit or guarantee equals or exceeds 1 

percent of United States production.’’ The terms ‘‘serious adverse 

effect’’ and ‘‘substantial injury’’ suggest that, for economic impact 

purposes, the Bank should focus on transactions where the potential for adverse effects are greatest (i.e., relatively large transactions with significant increases in foreign production capacity). 

Of the 15 proposed transactions involving large aircraft subject 

to approval between April 2013, when the new EIPs went into effect, and the end of FY2013, none triggered detailed economic impact analyses. However, one detailed economic impact analysis was 

performed on a passenger aircraft transaction that was authorized 

on January 23, 2014. Therefore, between the implementation of the 

Economic Impact Procedures for aircraft on April 1, 2013, and the 

time of this writing, one out of 18, or 5.5 percent, of analyses for 

authorized commercial passenger aircraft transactions has resulted 

in a detailed economic impact analysis. 

For nonaircraft cases, of the 11 cases valued over $200 million 

supported by Ex-Im financing in FY2013, six cases (or about 55 

percent) triggered a detailed economic impact analysis. However, 

the more appropriate comparison of aircraft and nonaircraft economic impact activity would be to include nonaircraft transactions 

valued over $10 million (the nonaircraft threshold) to air transactions valued over $200 million (the air threshold). This comparison shows that of the FY2013 authorizations, 8 (or 13 percent) of 

nonaircraft transactions were subject to a detailed economic impact 

analysis. The data shows that the percent of transactions which required a detailed economic impact analysis for aircraft and nonaircraft transactions are relatively comparable. 

Q.7. According to Ex-Im Bank’s new aircraft EIPs, the Bank will 

only perform a detail economic impact analysis if it determines 

that the total number of airline seats related to a given transaction 

exceeds I percent of the total seats in the U.S. fleet, even though 

this number includes U.S. flights that don’t compete with the foreign airline. Is this a fair threshold for performing a detailed analysis? 

A.7. The 1 percent test in the EIPs for passenger aircraft was 

drafted to align with the Bank’s Charter. Sec. 2(e)(4) of the Charter 

states: ‘‘For purposes of paragraph (1)(B), the extension of any 

credit or guarantee by the Bank will cause substantial injury if the 

amount of the capacity for production established, or the amount 

of the increase in such capacity expanded, by such credit or guarantee equals or exceeds 1 percent of United States production.’’ 

Not all aircraft that Ex-Im finances are adding capacity to the 

commercial airline market. Many are replacing seats on aircraft 

that are being retired and others are used for cargo shipping. According to the Bank’s EIPs for passenger aircraft transactions, one 

of the tests used to determine the potential for substantial injury 

to U.S. industry is the 1 percent test. Bank staff separates all widebody and narrow-body seats in a transaction, and divides each by 

55 

the number of seats in the U.S. fleet of either wide-body or narrowbody aircraft, respectively. This ensures that the number of seats 

in a transaction involving Bank-supported wide-body aircraft, 

which are typically used on long-haul international routes, is compared to the number of seats in U.S. wide-body aircraft, which are 

also largely operated on long-haul international routes. Accordingly, the 1 percent threshold is fair and consistent with the Bank’s 

Charter. 

Q.8. When performing a detailed economic impact analysis for an 

aircraft transaction, does Ex-Im Bank include the foreign-sourced 

content of the aircraft in its calculations of the export value of the 

transaction? lf so, why? 

A.8. The Bank’s Economic Impact Procedures have never included, 

and still do not, include, the number of jobs supported by a transaction as a factor in the Economic Impact Procedures or in any detailed economic impact analysis. Naturally, jobs are at the heart of 

the Ex-Im Bank mission, and Ex-Im uses a methodology consistent 

with that used by the Trade Promotion Coordinating Committee to 

calculate the number of jobs associated with its financing for reporting purposes. This methodology uses employment data from 

the Bureau of Labor Statistics (BLS), which includes an average 

foreign content adjustment by industry. Accordingly, the Bank’s 

methodology accounts for foreign content when calculating the 

number of jobs associated with its financing. With limited staff and 

resources, the Bank has developed a practical, easy to use tool that 

provides an effective approximation of Ex-Im Bank supported jobs; 

it utilizes publicly available Commerce Department and Bureau of 

Labor Statistics data, and is also used by other agencies to calculate jobs numbers. We were pleased that the GAO surveyed the 

Bank’s jobs calculation methodology and recognized the advantages 

of the Bank’s current jobs calculation methodology. The GAO report 

also recognized that the Bank’s current jobs calculation methodology is commonly used and cost effective. However, that factor is 

not then applied in the economic impact analysis. 

When Ex-Im Bank conducts a detailed economic impact analysis 

for a passenger aircraft transaction, the Bank counts the net contract price, including foreign content, as the benefit to the U.S. 

economy, and counts estimated revenue lost to the U.S. economy. 

If the first part of a detailed economic impact analysis for a passenger aircraft transaction finds there is a basis to estimate harm 

to U.S. industry, Bank staff estimates the overall revenue loss to 

U.S. carriers as the cost to the U.S. economy, regardless of the 

quantity of foreign content in the service provided by U.S. carriers. 

Ex-Im Bank employs this practice because calculating the precise 

foreign content in any business operation that could be harmed by 

an Ex-Im transaction would require business sensitive information 

from the injured business, or would otherwise rely solely on speculation. Instead, Ex-Im Bank takes the more workable approach of 

assuming that the foreign content of the Ex-Im Bank-supported export is roughly comparable to the foreign content of a U.S. business 

potentially injured by the transaction. Accordingly, the Bank takes 

foreign content into account when calculating the number of jobs 

associated with its financing. 

56 

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD

STATEMENT SUBMITTED BY LINDA DEMPSEY, VICE PRESIDENT, 

INTERNATIONAL ECONOMIC AFFAIRS, NATIONAL ASSOCIATION OF 

MANUFACTURERS 

Chairman Johnson, Ranking Member Crapo, and Members of the Committee, 

thank you for the opportunity to submit this statement for the record. I am grateful 

for the chance to highlight the importance of supporting the U.S. Export-Import 

Bank to help manufacturers compete in the global marketplace. 

The National Association of Manufacturers (NAM) is the largest manufacturing 

association in the United States, representing small and large manufacturers in 

every industrial sector and in all 50 States. Manufacturing employs nearly 12 million men and women, contributes more than $1.8 trillion to the U.S. economy annually, has the largest economic impact of any major sector and accounts for twothirds of private-sector research and development. The ability of U.S. companies to 

export has always been a critical issue for the NAM, and exports are increasingly 

important to the U.S. economy and to the success of domestic manufacturing. Manufactured goods exports increased by 47 percent between 2009 and 2012, reaching a 

record $1.35 trillion for 2012. 

The NAM strongly supports Ex-Im Bank’s mission to support U.S. jobs through 

exports and views the Bank as one of the most important tools the U.S. Government 

has to help grow U.S. exports and jobs, which is now more important than ever to 

U.S. companies. Ex-Im is the only tool American manufacturers have to counter the 

approximately $1 trillion in export financing that other governments provide their 

exporters. Without Ex-Im Bank support, customers may turn to foreign competitors 

that have support from aggressive foreign export credit agencies to the detriment 

of U.S. industry and jobs. America’s manufacturers cannot afford to be defenseless 

in today’s global marketplace. 

NAM member companies across the country, from large firms to small businesses, 

have turned to Ex-Im Bank to take advantage of new international trade opportunities and grow their workforce. Polyguard Products develops and produces materials 

in Ennis, Texas, for corrosion protection and water proofing of structures and infrastructure. Founded in 1952, Polyguard started to delve into exporting in 2005. 

Today, the company is trading with more than 30 countries a year and has experienced a 325 percent increase in total sales. Ex-Im Bank was able to mitigate one 

element of uncertainty in international trade, helping Polyguard cover the credit 

risk of exporting. Like Polyguard, many small businesses have sought the assistance 

of Ex-Im Bank and reaped the benefits of expanded market access. 

A record 295,000 U.S. small- and medium-sized enterprises exported goods in 

2011, accounting for 98 percent of all identified exporters and helping demonstrate 

the export potential of small businesses. With those new export opportunities, manufacturers in the United States create American jobs. According to the latest figure 

from the U.S. Department of Commerce, every $1 billion increase in exports creates 

or supports an estimated 4,000 manufacturing jobs. Exports have a real impact, and 

that impact is strengthened through the work of Ex-Im Bank. 

The Export-Import Bank is essential to boosting exports of U.S. products. In 

FY2013, Ex-Im was involved with 3,842 transactions that supported more than $37 

billion in exports—leveraging about $27 billion in authorizations. Nearly 90 percent 

of those transactions directly supported small-businesses, with a total of $5.2 billion 

in support for small business exporters. The Ex-Im Bank is a self-sustaining agency 

that generates money for the U.S. Government, thereby reducing our national deficit. Last year alone, Ex-Im sent more than $1 billion to the U.S. Treasury. Ex-Im 

is a net gain for the Federal Government and for the taxpayer. Furthermore, the 

Bank has maintained its incredibly low default rate of through the recession and 

through several years of record growth. At last measure, the Bank’s default rate 

was less 0.5 percent. 

Despite this tremendous record of success, manufacturers are concerned that ExIm Bank’s efforts to implement guidelines that categorically deny support to certain 

exporters contradict the Bank’s principal mandate to support U.S. jobs through exports. The revisions to Ex-Im Bank’s Environmental Procedures & Guidelines, as 

approved by the Ex-Im Bank Board of Directors in December 2013, would substantially deter Ex-Im support for most new coal-fired power plants abroad—hindering 

the supply of U.S. goods and services to countries that need reliable electricity, 

without any real economic or environmental benefits for those countries. On behalf 

of manufacturers in the United States, I would urge Chairman Hochberg to heed 

the clear signal sent recently by Congress to reevaluate those guidelines. 

57 

The Ex-Im Bank’s charter expires on September 30, 2014, and Congress must act 

quickly this year to extend its authorization. Reliable access to export financing is 

a vital part of being globally competitive, and the Ex-Im Bank has taken on even 

greater significance in today’s turbulent financial environment. Exporters often face 

difficulty in obtaining credit and working capital, and overseas customers are financially stretched. Those customers will continue to place a high priority on favorable 

financial terms. Failure to reauthorize Ex-Im Bank would threaten the many American jobs that depend directly or indirectly on its crucial export financing. 

Additionally, the Ex-Im Bank is the only tool American manufacturers have to 

counter the huge sums of export financing—many hundreds of billions of dollars— 

that other governments provide their exporters. Manufacturers in the United States 

face stiff competition from companies backed by the 59 other export credit agencies 

around the world, and Ex-Im Bank helps level the playing field so that manufacturers can compete on the merits of their products. If American manufacturers lose access to the Ex-Im Bank, our ability to compete globally will be severely curtailed. 

Companies large and small will be disadvantaged, and their customers may turn to 

foreign competitors that have support from aggressive foreign export credit agencies. 

America’s manufacturers cannot afford to be defenseless in today’s global marketplace. 

I urge you to move swiftly on legislation that will provide a stable, long-term reauthorization for Ex-Im Bank. Thank you, Chairman Johnson and Ranking Member 

Crapo, for holding this hearing and for allowing me the opportunity to submit a 

statement for the record.