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97–753 PDF 2004

OVERSIGHT OF THE EXPORT-IMPORT

BANK OF THE UNITED STATES

HEARING

BEFORE THE

SUBCOMMITTEE ON 

DOMESTIC AND INTERNATIONAL 

MONETARY POLICY, TRADE AND TECHNOLOGY

OF THE

COMMITTEE ON FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

MAY 6, 2004

Printed for the use of the Committee on Financial Services

Serial No. 108–84

(

(II)

HOUSE COMMITTEE ON FINANCIAL SERVICES 

MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa 

DOUG BEREUTER, Nebraska 

RICHARD H. BAKER, Louisiana 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

ROBERT W. NEY, Ohio 

SUE W. KELLY, New York, Vice Chair 

RON PAUL, Texas 

PAUL E. GILLMOR, Ohio 

JIM RYUN, Kansas 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

DOUG OSE, California 

JUDY BIGGERT, Illinois 

MARK GREEN, Wisconsin 

PATRICK J. TOOMEY, Pennsylvania 

CHRISTOPHER SHAYS, Connecticut 

JOHN B. SHADEGG, Arizona 

VITO FOSSELLA, New York 

GARY G. MILLER, California 

MELISSA A. HART, Pennsylvania 

SHELLEY MOORE CAPITO, West Virginia 

PATRICK J. TIBERI, Ohio 

MARK R. KENNEDY, Minnesota 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

TIM MURPHY, Pennsylvania 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

KATHERINE HARRIS, Florida 

RICK RENZI, Arizona 

BARNEY FRANK, Massachusetts 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

DARLENE HOOLEY, Oregon 

JULIA CARSON, Indiana 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

BARBARA LEE, California 

JAY INSLEE, Washington 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

HAROLD E. FORD, JR., Tennessee 

RUBE ́ N HINOJOSA, Texas 

KEN LUCAS, Kentucky 

JOSEPH CROWLEY, New York 

WM. LACY CLAY, Missouri 

STEVE ISRAEL, New York 

MIKE ROSS, Arkansas 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

JIM MATHESON, Utah 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

RAHM EMANUEL, Illinois 

DAVID SCOTT, Georgia 

ARTUR DAVIS, Alabama 

CHRIS BELL, Texas 

BERNARD SANDERS, Vermont

Robert U. Foster, III, Staff Director 

(III)

SUBCOMMITTEE ON DOMESTIC AND INTERNATIONAL MONETARY POLICY, TRADE AND

TECHNOLOGY

PETER T. KING, New York, Chairman

JUDY BIGGERT, Illinois, Vice Chairman 

JAMES A. LEACH, Iowa 

MICHAEL N. CASTLE, Delaware 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

DOUG OSE, California 

JOHN B. SHADEGG, Arizona 

MARK R. KENNEDY, Minnesota 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

TIM MURPHY, Pennsylvania 

J. GRESHAM BARRETT, South Carolina 

KATHERINE HARRIS, Florida 

CAROLYN B. MALONEY, New York 

BERNARD SANDERS, Vermont 

MELVIN L. WATT, North Carolina 

MAXINE WATERS, California 

BARBARA LEE, California 

PAUL E. KANJORSKI, Pennsylvania 

BRAD SHERMAN, California 

DARLENE HOOLEY, Oregon 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

RAHM EMANUEL, Illinois 

CHRIS BELL, Texas 

(V)

C O N T E N T S 

Page 

Hearing held on: 

May 6, 2004 ....................................................................................................... 1

Appendix: 

May 6, 2004 ....................................................................................................... 23

WITNESS 

THURSDAY, MAY 6, 2004

Merrill, Hon. Philip, President and Chairman, The Export-Import Bank of 

the United States ................................................................................................. 5

APPENDIX 

Prepared statements: 

King, Hon. Peter T. .......................................................................................... 24

Oxley, Hon. Michael G. .................................................................................... 26

Lee, Hon. Barbara ............................................................................................ 29

Maloney, Hon. Carolyn B. ................................................................................ 33

Ney, Hon. Robert W. ........................................................................................ 35

Sanders, Hon. Bernard ..................................................................................... 37

Merrill, Hon. Philip .......................................................................................... 39

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Merrill, Hon. Philip 

Ex-Im Bank 2002 Advisory Committee Recommendations to the Board 

of Directors .................................................................................................... 54

Ex-Im Bank 2003 Advisory Committee Recommendations to the Board 

of Directors .................................................................................................... 116

Letter to Mr. Norman Taylor, Avondale Mills, Inc., June 9, 2004 ............... 179

Top 23 Exporters .............................................................................................. 180

(1)

OVERSIGHT OF THE EXPORT-IMPORT 

BANK OF THE UNITED STATES 

Thursday, May 6, 2004

U.S. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON DOMESTIC AND INTERNATIONAL

MONETARY, POLICY, TRADE AND TECHNOLOGY

COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. 

The subcommittee met, pursuant to call, at 10:00 a.m., in Room 

2128, Rayburn House Office Building, Hon. Peter King [chairman 

of the subcommittee] presiding. 

Present: Representatives King, Biggert, Paul, Manzullo, Barrett, 

Maloney, Sanders, Watt and Velazquez. 

Chairman KING. [Presiding.] The subcommittee will come to 

order. The subcommittee meets today to conduct general oversight 

of the Export-Import Bank of the United States. This is the first 

oversight hearing since the 2002 Reauthorization Act and we are 

pleased to have the Honorable Philip Merrill, President and Chairman of the Export-Import Bank testifying before us today. 

Chairman Merrill brings a broad range of experience in both the 

public and private sector, having served in six previous Administrations in various capacities. We are fortunate to have such a distinguished witness before the subcommittee today, especially since 

he spent his formative years in New York City. He was, as local 

legend has it, one of the most prominent street hockey players in 

the history of New York City, but not quite as good at stick ball 

as he was at street hockey, but there is still time. And also, coming 

from Queens, I never had that much respect for the street athletes 

of upper Manhattan, but they were still pretty good. You and Colin 

Powell were. 

[Laughter.] 

As the chief U.S. government agency tasked with financing 

American exports, Ex-Im Bank provides American exporters the assistance needed to compete with their foreign competitors and often 

serves as a lender of last resort. The need for this agency stems 

from political or commercial uncertainties in foreign markets and 

competing governments subsidizing their export financing, thus 

creating an unfair playing field in the marketplace. This is 

achieved by offering credit insurance, working capital, and loan 

guarantees to U.S. exporters. 

Obviously, the overall goal of the Bank is to use its authority and 

resources to create and sustain American jobs. Over the last 5 

years, 311 New York companies received assistance from Ex-Im. In 

2

my district on Long Island, 13 small businesses have benefited 

from the programs offered by the Bank and I hope this number will 

increase in the future. 

The Bank is not without its problems, however, and was made 

aware of them during the 2002 reauthorization. It has been 2 years 

since President Bush signed into law legislation reauthorizing ExIm Bank and I am interested in the Chairman’s comments on how 

the Bank has utilized its new authority to assist small businesses, 

while creating and sustaining American jobs. 

It is my understanding the Bank reached 19.7 percent of its 20 

percent goal for financing small business exporters. I am interested 

in hearing the Chairman’s comments on whether he views this 20 

percent figure as a floor or a ceiling, and if more can be done to 

increase this level of financing for small businesses. 

Lastly, I am concerned over the lack of an inspector general for 

Export-Import Bank. As you know, the 2002 reauthorization act established a presidentially appointed inspector general for the Bank, 

yet 2 years have passed and it does not appear as if this provision 

of the law has been fulfilled. I am not sure if it is an appropriate 

issue or priority issue, but I would like to hear your comments on 

this matter as well. 

Again, thanks for taking the time out of your schedule to testify 

today. I certainly look forward to working with you as the Bank 

celebrates its 70th anniversary. 

With that, I yield to my distinguished colleague, the Ranking 

Member, Mrs. Maloney. 

[The prepared statement of Hon. Peter T. King can be found on 

page 24 in the appendix.] 

Mrs. MALONEY. Thank you. I thank my distinguished colleague, 

Chairman King, from the great State of New York, for holding this 

oversight hearing on the Export-Import Bank. 

Good morning, Chairman Merrill. I thank you for joining the 

subcommittee. It is a pleasure to see you again. I enjoyed our meeting in my office last year following your appointment. 

I think today’s hearing is especially appropriate given the importance of the Ex-Im Bank’s mission of support of U.S. exports 

abroad. My good friend John LaFalce, the former Ranking Member 

of this committee, always reminded this committee on this topic 

that the Bank is actually improperly named, as its sole mission is 

to support U.S. exports which keep jobs here at home. The Bank 

does not play a role in encouraging additional imports to the 

United States. Your mission is so important today because our 

country is handicapped by a massive trade deficit. In the era of 

half-billion dollar trade deficits and outsourcing of informationbased jobs, I believe support for Ex-Im Bank is more important 

than ever. I am pleased to have played a role in the Bank’s latest 

reauthorization. 

In the authorization in 2002, we included some very important 

mandates that I believe will make the Bank stronger. Specifically, 

Congress dictated that 20 percent of bank support must go to small 

business. I see my good colleague, Nydia Velazquez, who was one 

of the leaders in achieving this goal. I am pleased that the Bank 

has come close to this goal, hitting 19.7 percent in 2003. 

3

I do look forward to the Chairman’s comments on why the Bank 

has not yet fully implemented its automation program for small 

business that will make it easier for them to access the Bank. Talking to my constituents, I have been informed that the Bank may 

be attempting to shift more risk for small business lending onto 

private banks within the working capital program. I would like 

very much to hear from Chairman Merrill on this issue. 

I am also pleased that the authorization included a new commitment to the Bank’s existing mandate to support exports to Africa 

and imposition of new safeguards on transactions that may fall 

under existing countervailing duty, antidumping, or section 201 

ruling. The authorization also included an amendment I offered in 

the Financial Services Committee giving the Bank explicit authority to turn down an application for Ex-Im Bank support for companies that have a history of engaging in fraudulent business practices. Unbelievably, in a prior time with a prior Chairman, they insisted on giving a loan to such a company, even though they had 

all kinds of allegations against them, because they said they were 

required by law to do so. So I am glad that this was included. I 

am interested to see if this is being used. 

Finally, I am very pleased that the Bank decided against supporting the controversial Camisea project in Peru. More generally, 

I am also interested in the role that Ex-Im is playing on OECD environmental standards. One of the main reasons that I believe the 

Bank is important to the U.S. is that it levels the playing field with 

foreign export credit agencies, so-called ECAs, such as those in 

Japan, Germany, France, Canada and other countries. In 2000, the 

ECA support from OECD nations totaled $58 billion in long-term 

export credits. 

In today’s increasingly interconnected global economy, the U.S. 

must not fall behind the international competitors. In my own district, the Bank has supported over $2 billion in exports from October 1994 to April 2004. I thank the Bank for its support of New 

York City, and I look forward to working on keeping this relationship strong. 

I thank the Chairman for being here today. I look forward to 

your comments. I yield back the balance of my time. 

[The prepared statement of Hon. Carolyn B. Maloney can be 

found on page 33 in the appendix.] 

Chairman KING. I thank the Ranking Member. 

Ms. Velazquez? 

Ms. VELAZQUEZ. I ask unanimous consent to include my opening 

statement in the record. Thank you. 

Chairman KING. Without objection. 

The gentleman from Vermont? 

Mr. SANDERS. Thank you, Mr. Chairman. Thank you for holding 

what is a very important hearing on a very important subject. 

I thank Mr. Merrill for being with us today. 

Mr. Chairman, I think nobody believes that the Export-Import 

Bank is a huge colossus agency upon whose success or failure the 

American economy will depend upon. But I think what we have got 

to look at is the fact that in the United States today we are seeing 

a collapse of manufacturing; that in the last 3 years we have lost 

2.8 million good-paying manufacturing jobs, which has resulted in 

4

the decline in the standard of living of millions of American workers. We have got to appreciate that in the United States today we 

have, the last that I have seen, is a trade deficit of some $500 billion, including I believe a trade deficit with China alone of over 

$120 billion, and if my memory is correct, the National Association 

of Manufacturers projects that that deficit will go up and up and 

up in the next number of years. 

Given the fact that the function of the Export-Import Bank as I 

understand it is to create good-paying jobs in America based on exports, while I am not here to blame the Export-Import Bank alone 

for all of these issues, I think, Mr. Chairman, what is obvious to 

anybody who looked for 3 seconds at the issue is they are irrelevant in the process; that we have to re-think our entire approach 

toward manufacturing in America, and understand why we are 

failing so abysmally, and that the Export-Import Bank is irrelevant 

in terms of the entire process. 

Mr. Chairman, what particularly upsets me about the Export-Import Bank, without blaming them for all of the problems, I do not 

mean to do that, is that year after year the Export-Import Bank 

provides billions of dollars in corporate welfare, taxpayer money for 

the largest corporations in America. You know what those corporations say, Mr. Merrill? They say, thanks America; thanks, taxpayers, for your money; we are off to China; we will send you a 

postcard from China. 

I would like Mr. Merrill when he does his response to tell me 

how he feels about corporation after corporation, which is very public, these guys do not hide it, who are saying, America, good-bye; 

we are going to China; we are hiring people for 30 cents an hour. 

I would like Mr. Merrill to tell me specifically how he feels about 

the head of General Electric, the CEO of GE, a gentleman named 

Jeff Immelt, who says a year ago in speaking to GE investors, this 

is what he says: ‘‘When I am talking to GE managers, I talk China, 

China, China, China, China. You need to be there. You need to 

change the way people talk about it and how they get there. I am 

a nut on China. Outsourcing from China is going to grow to $5 billion.’’

And yet, guess what, taxpayers of America? Export-Import Bank 

funds General Electric. They fund Motorola. They fund corporation 

after corporation that treats the American worker with contempt 

and goes abroad. This is absurd. 

So I think, Mr. Chairman, that if we are serious, and I am again 

not here to blame Export-Import for all of these problems. They are 

a small part of the problem. But we have to say, enough is enough. 

You cannot continue to give out corporate welfare to corporations 

who treat American workers with contempt. It is not good enough 

to say, oh, we have saved 12 jobs over here, when the largest corporations in America that receive your funding are laying off hundreds and hundreds of thousands of workers. 

I hope that is an issue, Mr. Chairman, that we will begin to discuss. 

[The prepared statement of Hon. Bernard Sanders can be found 

on page 37 in the appendix.] 

Chairman KING. The gentleman’s time has expired. 

5

Mr. Merrill, it is a privilege to have you here today. We have a 

copy of your full opening statement. If you could possibly keep your 

opening remarks to 5 or 10 minutes, we would appreciate it. Without objection, your full statement will be made part of the record. 

Mr. Merrill, thank you. 

STATEMENT OF HON. PHILIP MERRILL, PRESIDENT AND 

CHAIRMAN, THE EXPORT-IMPORT BANK OF THE UNITED 

STATES 

Mr. MERRILL. Thank you for all those kind words about me, and 

even the moderate words from Congressman Sanders about the 

Bank. 

Chairman KING. That is as good as you are going to ever get 

from Mr. Sanders. 

[Laughter.] 

Mr. MERRILL. Thanks. Maybe we can engage him later in a discussion about stickball, wall ball, slug, roller hockey and four corners, but otherwise let me proceed. 

Congressman Maloney, Members of the Subcommitte, I am 

pleased to be here today to report on the progress the Export-Import Bank of the United States has made in achieving our mission 

as set forth in our Charter. I want to especially acknowledge the 

role of this subcommittee, as well as the full Committee on Financial Services in our 2002 reauthorization. 

The Act reaffirmed the Bank’s basic roles and responsibilities in 

financing and facilitating exports of goods and services and in so 

doing contributing to the employment of U.S. workers, and establishing a reasonable assurance of repayment before approving a 

transaction, and in supporting all businesses, large and small, in 

their efforts to create jobs through exports. 

We are focusing on three key priorities: putting customers first, 

improving cycle time and transaction time, and expanding support 

for knowledge-based and services exports. President Bush has set 

forth three guiding principles for government, namely that it 

should be citizen-centered, results-oriented, and market-driven. 

Those are the right principles to follow. 

The Bank supported $12.95 billion in exports in fiscal year 2002; 

$14.3 billion in fiscal year 2003; and we estimate $15.6 billion for 

fiscal year 2004, this year; and $16.3 billion in fiscal year 2005, 

also an estimate. As you know, Ex-Im Bank provides insurance, 

guarantees and direct finance on behalf of U.S. exports and exporters. Our purpose is to create and maintain American jobs. Indeed, 

our motto is jobs through exports; and our mantra, of course, is 

jobs, jobs, jobs. 

We require a reasonable assurance of repayment. We only go to 

markets where the private sector will not go alone, and are accordingly demand-driven. We do business in 90 countries and are open 

in 150. We also seek to level the playing field for American exporters who have to compete with 28 other OECD developed countries 

that have export credit agencies supporting their exporters. 

Let me review some of the matters raised in our reauthorization 

and a number of the matters that you raised in your comments already provided. First, Mr. Chairman, small business is a major 

central concern for the Bank. In fiscal year 2003, the last full year 

6

we have numbers, the Bank authorized 2,258 transactions directly 

supporting small business, a figure representing over 80 percent of 

the Bank’s financings, actually 83 percent, and accounting for 19.7 

percent of the total dollar volume value of Ex-Im Bank’s business. 

That is very close to the 20 percent target in our Charter. 

Also, Ex-Im Bank announced at its recently concluded annual 

conference, the signing of a co-guarantee agreement with the Small 

Business Administration. This enables the financing of transactions 

of up to $2 million with one single set of documents, so customerfriendly. I might add, no double counting. They take the first 

$500,000; we take the second $1.5 million up to $2 million, or 

whatever is appropriate.

[Subsequently Mr. Merill provided the following information]

They take the first $1.5 million or up to their statutory limit, and we take 

the remaining amount minus the lender’s risk on any transaction up to $2 

million.

Second, technology improvements. The Bank is developing its 

business automation project in order to process applications more 

quickly. We are working away on it. We also participate in the 

Trade Promotion Coordinating Committee’s one-stop/one-form registration system, an Internet-based system enabling small businesses to apply electronically for all government export programs, 

including ours. 

Third, Africa. In fiscal year 2003, Ex-Im Bank authorized 152 transactions, supporting nearly $700 million in U.S. exports to 20 

sub-Saharan African countries. Just 5 years earlier in fiscal year 

1998, the Bank authorized 91 transactions that supported only $61 

million in exports; $61 million to $700 million in U.S. exports to 

sub-Saharan Africa. Over the last 6 fiscal years, Ex-Im Bank has 

authorized transactions supporting nearly $2 billion in U.S. exports 

to sub-Saharan Africa. We have also made a special effort to reach 

African buyers through our ongoing Short-Term Africa Pilot Program. This program offers Ex-Im Bank support in an additional 16 

African countries in which the Bank would otherwise not be open 

for business, raising the total number of sub-Saharan Africa countries eligible for Ex-Im Bank financing to 39. 

Fourth, Ex-Im Bank has continued its outreach to woman-owned 

and minority-owned businesses through participation in a wide 

range of trade shows, seminars, and conferences focused on this important area. 

Fifth, economic impact. Ex-Im Bank’s charter requires the Bank 

to assess whether extending its finance support is likely to yield a 

net adverse economic impact on U.S. production and employment, 

or would result in the production of substantially the same product 

that is the subject of specified trade measures. 

If a transaction is deemed by Ex-Im Bank to meet the legislatively specified standards, then economic impact can be the basis 

for denial of bank support. I want you to know that we are very 

much aware of this responsibility and we are scrupulously applying 

these procedures. 

In conclusion, Mr. Chairman, we take seriously the goals Congress set before us. We have made real progress toward meeting 

the changes to our Charter enacted in 2002 and fulfilling the purVerDate 0ct 09 2002 11:41 Feb 03, 2005 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 G:\DOCS\97753.TXT FIN1 PsN: MICAH
7

poses for which the Bank was created 70 years ago. We have done 

so through the diligent efforts of exporters and the hard work of 

the dedicated staff at Ex-Im Bank. 

I would now be happy to respond to any questions you may have. 

I wrote down four or five, some of which were covered in my remarks. I will proceed in any manner you feel comfortable with. 

[The prepared statement of Hon. Philip Merrill can be found on 

page 39 in the appendix.] 

Chairman KING. Thank you, Chairman Merrill. I appreciate your 

statement. As I said, the full text of your statement will be made 

part of the record. 

Mr. MERRILL. Thank you. 

Chairman KING. I just have several questions. One, I mentioned 

in my statement and you mentioned in yours, that is the targeted 

number of 20 percent to be allocated toward small business. Do you 

look upon that 20 percent as a floor or a ceiling? Right now, you 

are at 19.7 percent, so obviously you are on-target, but do you anticipate going beyond that target or staying at 20 percent? 

Mr. MERRILL. As a practical matter, it is about the right number. 

It is a good question, floor or ceiling. The answer is neither. It is, 

rather, the right place to be. If you incorporate the small businesses that are subcontractors for companies like GE or Bechtel or 

Caterpillar and so forth, 83 percent are small business. It is hard 

for me to see how we can go a lot further upwards without one single contract utterly distorting the 20 percent number. In other 

words, suppose we went to 99 percent, what would happen if one 

energy plant, one airline deal would substantially distort the numbers? So I think we are about right. 

Chairman KING. In the 2002 Reauthorization Act, a major provision was calling for a presidentially appointed inspector general. 

That has not happened yet. Could you explain why? Is that an appropriation matter? Have you requested it? 

Mr. MERRILL. It is in the President’s budget. It is in our submission. That is a White House issue. We do not make the appointment. 

Chairman KING. Are you pushing for it? 

Mr. MERRILL. We are neither pushing or not-pushing. We put it 

in our budget request. We are not against it. The committee directed us to do it. The President has it in his budget request. 

Chairman KING. Okay. From your dialogue with the Administration, do you expect it to happen? 

Mr. MERRILL. I do not know. I do not have a good feeling for 

that. I think this is really more a Congressional issue than a Bank 

issue. I think it is fair to say that last year, the appropriators 

sought places to cut. We got cut. We got cut in several places and 

one of those was that, or so I am told. 

Chairman KING. Okay. 

Mr. MERRILL. I do not know whether that was the Senate or the 

House that did it. It is between the two. 

Chairman KING. There is probably enough blame to go around. 

I just have one final question. The Reauthorization Act allows 

the Bank to consider the extent to which a nation has been helpful 

in combating terrorism when you take action. Can you tell me if 

you have looked into that at all? 

8

Mr. MERRILL. I am sorry. I did not hear the first part of the 

question. 

Chairman KING. The reauthorization act allows the Bank to consider the extent to which a nation has been helpful in eradicating 

terrorism. 

Mr. MERRILL. The extent to which a what, a nation? 

Chairman KING. A nation has been helpful in eradicating terrorism, when you offer your services. I am just wondering, have 

you set up any way of looking into whether or not countries you 

have been dealing with——

Mr. MERRILL. We deal with the State Department on those 

issues. In a general sense, State, Commerce, USTR, OMB, Treasury generally attend our Board meetings and a couple of them are 

ex officio members of our Board. With respect to the issue you 

raised, we have a regular representative from the State Department. We deal through him with the relevant agencies, in this case 

the Human Relations Assistant Secretary in the State Department. 

Frankly, I have several years in the State Department, as you 

know, but when I was there they had five assistant secretaries. 

Now, they have 26, and I cannot keep all their names straight. But 

we do deal with the State Department on such issues. 

Chairman KING. Okay. So basically, you have been dealing 

through the State Department when it comes to this. 

Mr. MERRILL. We take their lead. We do consult them. We are 

very interested in what they have to say about that, what they 

have to say about bad people what they have to say about doing 

business in countries that either have helped us or hurt us. 

Chairman KING. Okay. Thank you. 

Mrs. Maloney? 

Mrs. MALONEY. Thank you, Chairman Merrill. 

As part of our reauthorization in 2002, we put a great deal of 

emphasis on increasing Ex-Im support of small businesses. I am 

glad to see that you have almost met the binding minimum target. 

I hope that you will be giving us assurances that the Bank’s efforts 

in this area are serious and sustained. 

Part of this, a critical component of Ex-Im’s efforts to assist small 

business exporters are the private banks that play the role of ‘‘delegated authority lenders.’’ These particular lenders are granted special discretionary authority by Ex-Im to grant credit following ExIm guidelines. Under this agreement, transactions can be approved 

more quickly, with less bureaucracy. My understanding is that 

these delegated lenders currently account for 90 percent of lending 

through the working capital program, the core program for small 

business exporters. 

Unfortunately, some of these lenders have grown concerned 

about Ex-Im’s efforts to change the nature of the relationship so 

that more of the risk for these transactions will be borne by the 

delegated lenders themselves. My understanding is that these lenders are so concerned about this shift in attitude and potentially in 

practice that they are now contemplating a termination of their relationship with the Ex-Im Bank. Given the strong role that they 

played in small business finance for Ex-Im, the loss of these lenders would obviously hurt Ex-Im’s small business export programs. 

9

Could you comment on these concerns of these lenders? What are 

you doing to address them? 

Mr. MERRILL. Yes, I can. Of course, in the context here, it is an 

anonymous set of concerns so I cannot address an anonymous thing 

specifically, but let me make this point. First, the culture of this 

Bank or this institution is really totally committed to serving the 

small business person. I was once a small business person myself 

so I understand small business problems. 

More importantly, it is the totality of the culture of the Bank. 

That is, serve the customer, the small business person. So this is 

not a thing that is just directed by this Committee. This thing is 

woof and warp of how our people think. So we are singing the same 

song to one another with respect to attitude and culture. 

With respect to the concerns you are reflecting, my guess is that 

this is about the fast-track program that we have put in to increase 

the lending authority, delegated authority to nine principal banks 

where we delegate authority. I call your attention here that there 

are 240,000 exporters in the United States and slightly more than 

400 employees of this bank. If we were to call on every one of them, 

we would not get there in this century, that is, the 21st century. 

The Board approved expanded lending authority at a greater level 

to a number of banks which were qualified. 

Mrs. MALONEY. What is the level it expanded it to? 

Mr. MERRILL. It went from $10 million to $25 million, under the 

authority of the board. 

Among the Banks, that is, among them there were different interpretations of some of the criteria that incorporated going from 

$10 million to $25 million. These are within weeks not months, 1 

or 2, 3, whatever, short term, of being worked out. They are very 

minor things. They are things like, would an audit be quarterly or 

semiannually. That would be the kind of issue that remains to be 

worked out. 

Mrs. MALONEY. Could you tell us where things stand? I am interested in knowing how close the program is to being up and running. 

Mr. MERRILL. Weeks. 

Mrs. MALONEY. Weeks? So it will be in operation——

Mr. MERRILL. We have to come back to the board with it. 

Mrs. MALONEY. Okay. 

Mr. MERRILL. The differences were between the Banks, not between the Banks and us. There are different issues within the 

Banks and between the banks on getting consistency. 

Mrs. MALONEY. My colleague, for whom I have the greatest respect, Mr. Sanders, really raised some very important issues, the 

collapse of manufacturing in America; the outsourcing of jobs; a 

trade deficit that is not beneficial to our country. I would like you 

to respond to that. 

It is my understanding that the whole reason for the Export-Import Bank is to help manufacturing in America. We do not help 

manufacturing abroad. We only give loans to manufacturing to jobs 

that are here in America, and part of the agreement, if I understand it correctly, is that we save or create American jobs. 

Mr. MERRILL. That is exactly right. 

10

Mrs. MALONEY. And that none of this goes to a foreign country, 

but it stays in America, trying to help us get those jobs and keep 

those jobs. 

I also understand that part of the criteria is that you do not give 

a loan if they can get it from a private source, so this possibly 

would be a job that we may lose in America. Could you elaborate 

more on this, that possibly this will be helping us maintain American jobs? Could you comment? 

Mr. MERRILL. Yes, Congresswoman. Yes, I will. First, we are in 

the business very simply, I repeat it again, of creating American 

jobs. The issues that Congressman Sanders raises are legitimate 

issues, and indeed they are issues in the campaign being carried 

on right now, but these are issues in which our government, the 

Treasury Department and other government agencies are responsible for dealing with. 

We are not in the business of outsourcing any jobs. We are only 

in the business of supporting jobs here. I think a quick but perhaps 

aphoristic answer would be this. We just financed a deal for a large 

American corporation, the one that Congressman Sanders mentioned; $700 million worth of locomotives from the Erie plant of 

General Electric to Kazakhstan.

[Subsequently Mr. Merill corrected the figure from $700 million to 33.1 million]

There was a reasonable assurance to repay. I personally worked 

my way through every minister literally without exception of the 

Kazakhstan government, about 12 of them, all of whom were market-oriented, Western-oriented and interested in doing business 

with us. 

That represented approximately 700 locomotive kits at $1 million 

apiece, I am rounding the number, from the GE plant in Erie, 

Pennsylvania.

[Subsequently Mr. Merrill corrected that figure from 700 to 54 locomotive kits at $600,000 instead of $1 million.]

GE also operates in New York. I have been through that plant. 

In its high year, it produced 400 locomotives; here at 700 locomotives. I fail to see how the outsourcing issue which is a legitimate political issue playing in the national arena helps or hurts, 

if you will, the workers at the Erie plant. The choice is very simple. 

We can finance GE in Kazakhstan or the French or the Russians, 

who also build locomotives, will finance their exporters in the same 

place. That is a lot of jobs in Erie. It is a hell of a plant. So I think 

that what we do is appropriate for the circumstances. 

Mrs. MALONEY. Mr. Merrill, my time is up, but since you mentioned a New York company, I would like more specifics on it and 

how many jobs it created in New York. New York is very economically devastated upstate, and I would like more information on the 

jobs that it created in New York State. 

Thank you.

Chairman KING. The gentlelady from Illinois? 

Mr. MERRILL. We will get back to you. I cannot answer that right 

here, but we will get back to you. 

Mrs. MALONEY. My time is up. Thank you. 

Mr. MERRILL. I understand.

11

[Subsequently Mr. Merrill provided the following information.]

General Electric estimates that the locomotive exports financed with this 

Ex-Im Bank supported financing helped to sustain 130 jobs during 2003 

and is projected to sustain 168 jobs during 2004.

Chairman KING. Mrs. Biggert? 

Mrs. BIGGERT. Thank you, Mr. Chairman. 

Chairman Merrill, I understand that the Ex-Im Bank has an advisory committee that provided recommendations for improvements 

in 2002 and 2003. Could you tell us a little bit about this committee and what their recommendations were? 

Mr. MERRILL. There is a general advisory committee made up of 

a cross-section of businessmen, 16 people on it, that has been really 

very helpful to us. They have been chaired the last 2 years by the 

Chairman of the Houston Port, Ed Manto. It has had a series of 

suggestions for how we could be doing what we are doing, that is, 

be more customer-friendly; support more exporters. We found them 

very useful. They are actually all very able people. With their help, 

we identified three states where we ran a test program to see what 

we could do for the local banks in those states. The three states 

happen to be, we wanted states not like New York and California, 

which are so complex, but Maryland, Colorado and Arizona, in 

which we tried to look at how we could reach more exporters. 

We took Colorado as an example. There are five major banks; 

substantial exports. All five banks were doing business for their exporters with banks in Seattle, with such banks as the Southwest 

Bank of Texas. So as a result, we identified roughly of the 14,00 

banks in the United States, the 175 that do some trade finance, applied it back to state levels, and we are working with city-state 

partners and so forth, all of this as a result of the work of the advisory committee.

[Subsequently Mr. Merrill provided the following information]

There is a general advisory committee made up of a cross-section of 

businesspeople, 16 people on it, that has been really very helpful to us. It 

has been chaired over the last 2 years by Edward Monto, Director of 

Metrobank, in 2003, and in 2004 by H. Thomas Kornegay, Executive Director of the Houston Port Authority. It has had a series of suggestions for 

how we could be doing what we are doing, that is, be more customer-friendly; support more exporters. We found them very useful. They are actually 

all very able people. 

With their help, we identified two States where we ran what might be 

called a test program to see what we could do for the local banks in those 

States to reach mor exporters. The two States happen to be Maryland and 

Colorado. 

Take Colorado as an example. There are five major banks; substantial exports. All five banks were doing business for their exporters with correspondent banks such as Southwest Bank of Texas. 

Of the approximately 14,000 banks in the United States, 175 of them do 

some trade finance. In addition to the banks, we are working with City/

State Partners.

Mrs. BIGGERT. So that was your implementation of their recommendations. 

Mr. MERRILL. Yes, exactly. 

Mrs. BIGGERT. Do you think that you could provide us with copies of the advisory committee’s report? 

Mr. MERRILL. Sure. 

12

[The following information can be found on pages 54 and 116 in 

the appendix.] 

Mrs. BIGGERT. Okay. And can you give an itemized list of the 

recommendations? 

Mr. MERRILL. I do not know whether there is an itemized list, 

but we will give you whatever we have. 

Mrs. BIGGERT. Okay. And just the steps that you used to implement? 

Mr. MERRILL. Advice is advice. Some things are doable. Some 

things are advice that they would like to have. For example, they 

would like to have a change in the MARAD requirements, PR 17. 

That is Greek to anybody here, but it is the requirement to ship 

certain exports on American bottoms. We understand the requirement. I personally served in the Merchant Marine. I shipped out 

when I was 16, so I understand the U.S. Merchant Marine. But we 

would like to get some waivers on an easier basis on these. Again, 

just to stick with GE, when they ship a turbine and it takes a special ship to ship it, it may not be available in the time sequence 

and so forth, so making waivers easier was one of the recommendations and we would like to do that. But implementing it is not 

within our control, so a lot of the recommendations we agree with, 

but do not have total control. It is things we have to push on other 

people for. I will stop there. 

Mrs. BIGGERT. Would you consider doing that? Let’s say, you 

need statutory change or regulation change. Is this something you 

look at then and then proceed to either come to the Congress or 

the regulatory body? 

Mr. MERRILL. Yes. 

Mrs. BIGGERT. Okay. Thank you, if you would do that. 

You talked about the 19.7 percent, or almost reaching the mark 

figure for assessing the amount of small business support pursuant 

to the last authorization legislation. Is this the same methodology 

that was used prior to 2002? 

Mr. MERRILL. Yes, it is exactly the same methodology, with one 

minor exception, not an exception, but the sample is larger just to 

be certain that it is accurate, but nothing was changed in the 

methodology, just a larger sample. 

Mrs. BIGGERT. Are you planning to make changes in the future 

to the methodology? 

Mr. MERRILL. No, not that I know. Nobody has consulted me on 

that, but I do not see why we would. Just as a private businessman, I do not like to change methodologies lightly because I like 

the comparisons from year to year. 

Mrs. BIGGERT. Then how will you account for transactions that 

originated under the memorandum of understanding with the 

SBA? 

Mr. MERRILL. We would account for them, assuming a $2 million 

transaction, the first $500,000 would be credited to SBA; the second $1.5 million would be credited to us. It would not be doublecounted.

[Subsequently Mr. Merrill provided the following information.]

We would account for them, assuming a $2 million transaction, the first 

$1.5 million or their statuary limitation would be credited to the SBA and 

13

the remanining amount minus the lender’s portion of the risk would be 

credited to us. It would not be double-counted.

Mrs. BIGGERT. So there is no change there. Okay. Thank you 

very much. 

I yield back. 

Chairman KING. The gentlelady from New York, Ms. Velazquez. 

Ms. VELAZQUEZ. Thank you, Mr. Chairman. 

In your exchange or answering the question to Carolyn Maloney, 

you said that you are in the business, Ex-Im Bank is in the business of supporting jobs. 

Mr. MERRILL. Yes, ma’am. 

Ms. VELAZQUEZ. We all know that small businesses produce 75 

percent of all new jobs. Small businesses account for 50 percent of 

all sales in this country. Small businesses employ nearly 53 percent 

of the American workforce. In the last recession, small business 

fast-growth companies created nearly 3.8 million jobs, compared to 

3.3 million jobs created by big companies. 

So if you are in the business of creating jobs, how could you come 

here and say that you so proud about the 19.7 percent financing 

achieved by Ex-Im Bank, and then to say that the 20 percent is 

neither the ceiling nor the floor? But if we are facing a jobless recovery in this country, don’t you think that then you should focus 

or reassess what your institution is doing in providing more financing for small companies? 

Mr. MERRILL. Madam Congresswoman, the committee’s dictate or 

mandate or instruction was to target 20 percent. 

Ms. VELAZQUEZ. At least 20 percent. 

Mr. MERRILL. Not including, not counting the subcontractors. 

Ms. VELAZQUEZ. Look, sir. 

Mr. MERRILL. Look, subcontractors are small businesses. 

Ms. VELAZQUEZ. The 20 percent is regarding prime contractors, 

not subcontractors. You know that. 

Mr. MERRILL. By definition——

Ms. VELAZQUEZ. Your definition. 

Mr. MERRILL. Well, anybody’s definition. It is not likely that a 

small business is going to be a prime contractor. You are not going 

to build a power plant——

Ms. VELAZQUEZ. What I am saying to you, sir, is that 20 percent, 

the law, the reauthorization of 2002, says 20 percent, at least 20 

percent. It is just common sense that what we need in this country 

is to create jobs. 

Mr. MERRILL. I agree. 

Ms. VELAZQUEZ. You should amend what you are doing and reassess, and make sure that we have more financing for small business. 

Mr. MERRILL. We are doing everything. I do not know how I can 

change and improve the culture of this Bank beyond its focus on 

small business because we are totally focused on increasing small 

business. We agree with you. We are almost totally focused. 

Ms. VELAZQUEZ. Are you prepared, based on the reality of the 

economy, to reassess the 20 percent, instead of being the ceiling, 

instead of being the floor? 

Mr. MERRILL. The problem is that we are the lender of last resort. They have to come to us. 

14

Ms. VELAZQUEZ. Okay, sir. In light of the fact that the face of 

small business in America is changing, that we have more, that 

women are the fastest-growing sector in terms of small businesses 

in our economy; there are more women, more Latinos, more Blacks. 

Do you have any data as to how much money from the 19.7 percent 

of finance has gone to minority contractors? 

Mr. MERRILL. Yes, ma’am, I do. I would actually like to read it 

to you. We have the measurement for the whole Bank. We do not 

have a measurement on the 19.7 percent. 

Ms. VELAZQUEZ. Okay. Would you be prepared to send us, this 

subcommittee, data? 

Mr. MERRILL. Yes, ma’am. I would also like to answer the question. 

Ms. VELAZQUEZ. But you said that you do not have the data? 

Mr. MERRILL. Not on the basis of the 20 percent, but on the basis 

of the whole Bank. 

Ms. VELAZQUEZ. No. I am referring to the 20 percent. 

Mr. MERRILL. In that case, I will have to get back to you. 

Ms. VELAZQUEZ. Would you please submit to this committee in 

writing?

[Subsequently Mr. Merrill provided the following information.]

In terms of number of transactions, minority and woman-owned businesses 

accounted for 219 of the 2,258 small business transactions or 9.7 percent. 

In FY 2003, Ex-Im Bank provided $2.1 billion in small business support. 

Of the $2.1 billion, minority and woman-owned businesses accounted for 

$135,808,144, or 6.54 percent of Ex-Im Bank’s small business support.

Mr. MERRILL. I will have to get back to you with that. I would 

like to say that among the larger corporations, that is the Fortune 

500 crowd, if you will, the GEs of the world, GE has 11 percent minority contracting. It is 30 percent for Case New Holland. The 

Bank’s administrative contracting awards to small business are 57 

percent, and the awards to African American businesses are 18 

percent. That is out of the total of the Bank, not out of the 20 percent. I will have to get back to you on the 20 percent. 

Ms. VELAZQUEZ. Thank you. 

If I may, Mr. Chairman, this is a very important question because of the arrangement between SBA and Ex-Im Bank. You 

know that the Administration’s fiscal year 2005 budget drastically 

cuts the 7(A) guarantee loan program, out of which the small exporters obtain funding such as export working capital. Now that 

less funding is going to be available for small exporters through the 

SBA export working capital, is the Ex-Im Bank going to start handling smaller loan requests? 

Mr. MERRILL. Yes, ma’am. We will handle them. Last year, we 

financed $67,000 worth of used clothing to Ghana. We will finance 

any small business at any level from any State. 

Ms. VELAZQUEZ. Thank you, Mr. Chairman. 

Chairman KING. The gentleman from South Carolina? 

Mr. BARRETT. Thank you, Mr. Chairman. 

Mr. Merrill, thank you for coming today. I appreciate it. 

One of my constituents asked a question the other day. I did not 

know the answer and it was very timely. Does the Ex-Im Bank 

offer standby letters of credit to foreign purchasers of U.S. goods? 

15

Mr. MERRILL. To foreign purchasers of U.S. goods? 

Mr. BARRETT. Yes. 

Mr. MERRILL. Yes, we would do that. It is a technical arm, but 

in a general sense certainly we would lend to a Russian company 

or Kazakh company or a Vietnamese company, Vietnam Airlines, 

that was going to purchase something from the United States. Certainly. We will finance 85 percent of an export, whoever buys it. 

And we will finance 100 percent of working capital for an export. 

But it has to be the export of goods or services from the United 

States that creates American jobs. Who the buyer is, the buyer is 

either sovereign governments or private businesses or banks in 90 

foreign countries. 

Mr. BARRETT. How does that work? What do you think about 

that policy? 

Mr. MERRILL. It is the basic business of the Bank. 

Mr. BARRETT. We had a gentleman, a Mr. Taylor from Avondale 

Mills, that had a proposal that was very similar to this. I think he 

had some twists in it or was asking a couple of different things. We 

faxed that proposal to your office. 

Mr. MERRILL. I see a head nodding behind me here. We did 2,707 

transactions. 

Mr. BARRETT. I understand that. But what I would like for you 

guys to do, just since it is a practice that you all are doing, if you 

would take a serious look at that proposal and get me back something in writing on it, I would greatly appreciate that. 

Mr. MERRILL. I have a note here that says we will. I will just 

read it to you. 

[The following information can be found on page 179 in the appendix.] 

Mr. BARRETT. Okay. Great. 

Mr. MERRILL. This is information, not secrecy. 

Mr. BARRETT. Absolutely. 

Mr. MERRILL. We insure LCs. We do not issue them. A letter of 

credit would be from a foreign bank. We would insure it. 

Mr. BARRETT. Okay. 

Mr. MERRILL. The staff is reviewing it. This proposal is under review. The case you referenced is obviously known to our General 

Counsel and our Chief Financial Officer. 

Mr. BARRETT. And you guys have been extremely helpful, your 

whole staff. Mr. Chairman, I want to thank you. But if you all 

could, as quickly as possible, get that to me and my staff, I would 

greatly appreciate it. 

Mr. MERRILL. Let’s see what we can do. When you raise something here, I will put a searchlight on it. 

Mr. BARRETT. Thank you, Mr. Chairman. 

Mr. MERRILL. Thank you. 

Chairman KING. Mr. Sanders? 

Mr. SANDERS. Thank you, Mr. Chairman. 

Let me just read for the record something and let the American 

people determine how successful the Export-Import Bank has been 

in creating jobs, jobs, jobs. Is that your motto? 

Mr. MERRILL. Yes. 

Mr. SANDERS. Okay, here we go. Jobs, jobs, jobs. 

Mr. MERRILL. Jobs through exports is the motto. 

16

Mr. SANDERS. Since 1975, General Electric has eliminated more 

than 260,000 American jobs, while receiving $2.5 billion in loans 

and guarantees from the Export-Import Bank. It does not sound 

too successful to me. Boeing is, I believe, the largest recipient of 

Export-Import taxpayer subsidies and grants. Since 1990, Boeing 

had laid off 135,000 American workers, increasingly outsourcing 

design work to China, Russia and Japan, while receiving $18 billion in direct loans and loan guarantees. Now, maybe the loss of 

135,000 jobs does not concern Export-Import, but some of us worry 

a little bit about that. Motorola has laid off close to 43,000 workers 

since 2001, and received $190 million in direct loans and loan guarantees from the U.S. Export-Import Bank. 

Jobs, jobs, jobs. You are right. We are losing jobs, jobs, jobs big 

time. Now, General Motors since 2001, 3 years ago, GM has laid 

off 37,500 workers, while receiving over $500 million from the U.S. 

Export-Import Bank, and in fact, as you know, they are now going 

to be manufacturing a lot of auto supplies in China, so we expect 

job loss to go way down. 

So the first question, and I am going to ask you several questions, the first question is, why do taxpayers in this country provide billions of dollars in loans and loan guarantees and subsidies 

to companies that are throwing hundreds and hundreds of thousands of American workers out on the street? 

Mr. Chairman, I used to be the Mayor of a city. We dealt with 

the business community. The fallacy of the Export-Import Bank is 

that Mr. Merrill will come and say, look what we did in Erie, Pennsylvania; we created 700 jobs. But they are not looking at what 

General Electric did in its entirety. The way sensible government 

works is you say to the business community, we are prepared to 

help you. What are you going to do for workers in America? How 

are you going to grow jobs? Don’t tell us you are growing jobs in 

Erie, New York, when you are laying off hundreds of thousands of 

people elsewhere, because we do not pay attention to that. We are 

just looking project by project. That is an absurd philosophy. 

I think Ms. Velazquez was right a moment ago in saying job creation is taking place among small businesses, medium-size businesses. What about telling the large corporations that if they are 

not interested in growing jobs in the United States of America, you 

are not going to support them; that if they want money from the 

taxpayers of this country, we will help them when they tell us and 

promise us they are going to start growing jobs in America, not one 

project while they are laying off hundreds of thousands of people 

elsewhere. 

Now, to add insult to injury, I gather with a straight face, Mr. 

Merrill, you are telling us that the Export-Import Bank, did I hear 

you correctly, is the agency of last resort for loans? 

Mr. MERRILL. Yes. 

Mr. SANDERS. Okay. You are telling the American people. 

Mr. MERRILL. We are the lender of last resort. 

Mr. SANDERS. Excuse me. I heard what you said. You are going 

to tell me with a straight face that General Electric, which itself 

is one of the largest financial institutions in America, cannot get 

loans anyplace else but from the taxpayers and the workers of 

America, many of whom have lost their jobs from General Electric? 

17

Are you going to tell me that with a straight face that GE is a 

struggling small business, a minority business in the barrio of New 

York, and they just cannot find financing, look as hard as they can. 

Poor GE. You are going to tell me that and the American people 

with a straight face? 

Last question that I would have for you, okay. This is such an 

absurd argument that only in Washington, D.C. would anyone regard this as a vaguely rational argument. I would hope and appreciate your giving me a list of the top 10 recipients of Export-Import 

funding and tell me how many hundreds of thousands of jobs those 

companies have lost, laid off; how many hundreds of thousands of 

American workers they have laid off. 

[The following information can be found on page 180 in the appendix.] 

Mr. Chairman, I want you to respond. Mr. Chairman, I think it 

is time to end this joke of the Export-Import Bank. What we need 

is serious help for small-and medium-size businesses in this country who want to grow decent-paying jobs in America, who are 

proud of American workers, not companies like GE who are announcing to the world that they are going to China; they are going 

all over the world; and they are going to lay off American workers. 

Mr. Merrill, tell me why the American taxpayer should be supporting a company like GE who has laid off hundreds of thousands 

of workers and whose CEO announces to the world he is going to 

China. Tell me why. 

Chairman KING. The gentleman’s time has expired. Mr. Merrill 

will have the opportunity to answer the question. 

Mr. MERRILL. There is limited time. I can only say that I agree 

absolutely with Congresswoman Velazquez that the job creation in 

the United States for a very long time, quite a few years before I 

got here, has been mainly or almost completely small business. 

That is why we are so focused on small business. I could not agree 

more. Our object is to create as many small-and medium-size business jobs as we possibly can and support as many of the 240,000 

exporters as we can. I want to put that on the record. 

Second, I think the quickest answer is with a number. I will just 

leave the one number here. Thirty-five years ago, the U.S. exported 

$42 billion worth of things. For the last 3 or 4 or 5 years, we have 

exported $1.1 trillion worth of things, out of an $11 trillion economy. Roughly speaking, $1.1 trillion is about the same size as the 

entire economy of China. It is three times the total economy of Russia. It is a lot of exports. So the movement toward exports, any way 

you want to measure it, has substantially created American jobs 

with or without Ex-Im Bank support. I will just stop there. 

Mr. SANDERS. You did not answer my question. 

Mr. MERRILL. Say again? 

Mr. SANDERS. You did not answer my question. 

Chairman KING. The time of the gentleman has expired. 

Mr. Manzullo? 

Mr. MANZULLO. Thank you. 

Before I ask my question, perhaps I can answer it. In the district that I represent, we have a $256 million Boeing presence; $110 million Caterpillar presence; $95 million John Deere presence. Those 

companies support hundreds and hundreds of small machine shops 

18

and mom-and-pop shops throughout the entire district. Whenever 

one of those machines goes over, whenever an aircraft goes over, 

that represents thousands of jobs in my district that are all small 

businesses. 

Mr. MERRILL. Thank you. 

Mr. MANZULLO. I know that perhaps this will not help Mr. Sanders in his answer, but I do know this, that every time a Boeing aircraft is sold to China or any other place in the world, and China 

is buying more Boeings this year than America, that represents 

thousands and thousands of jobs. In the district that I represent, 

we are at 11 percent unemployment. It just dropped to 10.6 percent, and hopefully next month we will be in the single-digit unemployment. Were it not for the sale of aircraft and this giant machinery which is supported by Ex-Im, I can tell you our unemployment 

would be 20 or 30 percent. 

So thank you for your leadership of the Ex-Im Bank. I especially 

want to thank you for the job that you are doing with regard to 

small businesses. I do not know of one small business that has 

been turned down by Ex-Im Bank because they are too little. Perhaps they did not fit into the parameters, but they are always 

given a fair shake. They get good service on it, and I think you are 

doing a great job just to be off .03 percent on your goal for the total 

dollar amount. I think that is exemplary what you are doing there. 

Did you like that? 

Mr. MERRILL. I thank you for the support. 

Mr. MANZULLO. You bet. 

Mr. MERRILL. I am honored and flattered. Thank you, thank you, 

thank you. 

Mr. MANZULLO. You bet. Now, I have just a couple of very short 

questions of Phil. Last year, the Ex-Im Bank, normally they designate one person on the board that is the small business person. 

We heard that former Senator Cleland was going to be that person. 

Mr. MERRILL. Yes. 

Mr. MANZULLO. Is that correct? 

Mr. MERRILL. That is correct. He wants to do it. 

Mr. MANZULLO. Okay. 

Mr. MERRILL. He served on the Small Business Committee. 

Mr. MANZULLO. That is correct. So he is still the designated person on that? 

Mr. MERRILL. Yes. 

Mr. MANZULLO. Great. 

The second question is, Ex-Im has been working with the business community to develop a new and approved dealer-distributor 

financing program over the past year that will benefit the smalland medium-size equipment manufacturers, sort of floor financing 

overseas. Given the strong support for the program, can you tell us 

when we can expect the dealer financing program to be available 

to our manufacturers? 

Mr. MERRILL. Very shortly is the answer. The floor planning 

issue is one I understand. The issue at stake is being resolved. I 

cannot say definitively, but we think it will be resolved. The issue 

is whether the creditor, the floor planner, that is, the distributor 

in let’s just say Ecuador that takes the Caterpillar tractor, or the 

19

ultimate customer to which they are sold are the buyers. And that 

is being worked out. That is the remaining issue. 

Mr. MANZULLO. Okay. So it is working out the legals of it, but 

the desire to do it is all set there? 

Mr. MERRILL. The desire to do it is there. We are going to get 

it. 

Mr. MANZULLO. Thank you. 

I yield back my time. 

Mr. MERRILL. We are going to get it, with as much executive 

force as I can put behind it, which is not inconsiderable. We are 

going to try to get it done. 

Mr. MANZULLO. Okay. I appreciate it. 

Thank you. I yield back. 

Chairman KING. Thank you, Mr. Manzullo. 

Mr. Watt? 

Mr. WATT. Thank you, Mr. Chairman. 

Thank you, Mr. Merrill, for being here. I have generally been a 

supporter of the Ex-Im Bank, but have a couple of questions that 

hopefully will help me understand a couple of things. 

First of all, the name of the Bank is Export-Import Bank. I notice that you gave us all the figures on exports and no figures on 

imports. Is the name of the Bank inappropriate or do you all keep 

some records having to do with the extent of imports that the Bank 

supports? Or do you all support any imports? 

Mr. MERRILL. It is a wonderful question. Obviously, you think 

clearly and logically. The answer is that to change the brand name 

of Ex-Im would be like taking the ‘‘Cola’’ off Coca-Cola. 

Mr. WATT. I understand that. That is the public relations statement. 

Mr. MERRILL. Yes, I understand. 

Mr. WATT. Are you saying that the name of the Bank is misleading? You do not do any support of imports? Is that the bottom 

line? 

Mr. MERRILL. No, we do not. 

Mr. WATT. Okay. That is fine. 

Mr. MERRILL. I will tell you separately later why. 

Mr. WATT. Okay. It was not a trick question. 

Mr. MERRILL. No imports; all exports. 

Mr. WATT. All exports. 

The second question was, you indicated, and I tried to find it in 

your prepared testimony, but could not find the exact wording of 

what you said in your oral testimony, that Ex-Im Bank operates 

only where businesses will not or cannot go without assistance or 

something to that effect. 

Mr. MERRILL. Can I straighten it out? 

Mr. WATT. Yes, tell me what you said, first, and then I want to 

ask a question. 

Mr. MERRILL. I am very careful not to interrupt a Congressman 

when he is talking. 

What I said was that we only go, we only finance where private 

capital will not go alone. 

Mr. WATT. Okay. I thought that is what you were saying. In this 

context, I think Mr. Sanders’s question about loans to GE and 

other major, particularly companies that provide financing themVerDate 0ct 09 2002 11:41 Feb 03, 2005 Jkt 000000 PO 00000 Frm 00025 Fmt 6633 Sfmt 6633 G:\DOCS\97753.TXT FIN1 PsN: MICAH
20

selves, either puts you in a situation where the statement that you 

just made is not true, or the Export-Import Bank is an influence 

in markets that if you think theoretically would not be an appropriate influence in a free trade context. You are shoring up things 

that if the market would take care of itself, which most free traders 

think it should, would resolve itself. Am I missing something here? 

Mr. MERRILL. No, you are not. You got it right. I would probably 

be in that camp. 

Mr. WATT. Okay, well then——

Mr. MERRILL. Wait a minute. I have to get one phrase out here. 

If there were not 28 other countries providing——

Mr. WATT. Okay. That is actually the question I am driving to. 

Is this really the assistance that the Export-Import Bank is providing a subsidy? And if other countries are doing the same thing, 

why wouldn’t it be a subsidy if they are doing it, and why wouldn’t 

the WTO consider that inappropriate in this free trade international trade world that we are living in? 

Mr. MERRILL. The WTO has carved out an exception for the 

OECD. We have a common arrangement. It is called the Arrangement with the other OECD countries under which we have agreed 

to common terms, that is long-term loans, 12 years roughly, medium-term and so forth, and common financing arrangements, 

within certain parameters. 

Mr. WATT. But those are on strictly business terms, I would 

think, not subsidized market terms where ordinary business would 

not go. Isn’t this a market subsidy? 

Mr. MERRILL. We are not subsidizing anybody. The Bank, does 

not subsidize anybody. They pay a fee for us, for political insurance 

or for risk insurance. If you know somebody who wants to take 

Bechtel’s position or the $160 million we put into the BTC pipeline 

in Azerbaijan——

Mr. WATT. But isn’t the whole philosophy of free trade to allow 

the market to take care of its own risk? Why should the government be playing that role? 

Mr. MERRILL. Theoretically, Congressman, I agree with you. 

Practically, Boeing has to compete with Airbus; Caterpillar has to 

compete with——

Mr. WATT. But if all countries withdrew from this, wouldn’t that 

leave us where you say the market should be in a free market context? 

Mr. MERRILL. Yes, it would. 

Chairman KING. The time of the gentleman has expired. 

Mr. MERRILL. Yes, it would. Can I get one crack at your final 

question? 

Mr. WATT. He wants to give it one final context. I think I am laying a platform for where Mr. Paul is probably going to go anyway. 

I am sounding very libertarian at this point. 

Mr. MERRILL. Just let me say, this is a stretch analogy, but you 

would not need any policemen if there were no criminals either. I 

mean, the fact that you have all these countries——

Mr. WATT. It sounds like the Export-Import Bank is the criminal 

here, not the policemen. 

Mr. MERRILL. That is why it is a stretch analogy. 

Mr. WATT. Okay. All right. 

21

Chairman KING. Now that Mr. Watt has laid the foundation and 

the platform, Mr. Paul? 

Mr. PAUL. Thank you, Mr. Chairman. 

Welcome, Mr. Merrill. 

Mr. MERRILL. Thank you. 

Mr. PAUL. You said the gentleman from North Carolina speaks 

clearly and logically. 

Mr. MERRILL. Thanks. 

Mr. PAUL. That is good and I will not contest that. But I want 

to see if I can get the same compliment, so I am going to try and 

follow-up. I notice in our memorandum from our staff here in the 

committee, it states tensions exist between the Bank’s mission and 

the United States’s commitment to free markets. I would say yes, 

there certainly are tensions. There is a contradiction. There is a 

real conflict. I think you indicated maybe that we should not use 

the word ‘‘subsidies’’ too generously, and yet the Bank would not 

come to the Congress for appropriations and authority if somebody 

did not get some specific benefits. So I think there is always a special benefit which is a subsidy, whether or not it is in cash. Maybe 

it is a competitive edge, and there is always a cost. There is involved here an allocation of credit, and the victim is never found, 

never seen. Especially in an area where there is tighter credit, 

there are victims that suffer. Although there may be a small businessman who gets the benefit, there is some other small businessman who is getting a disadvantage from the subsidy. 

My question is, how can you rationalize support for this organization? Because we on our side, we are supposed to be the champions. They are not supposed to be the champions of the marketplace. We are. We are supposed to be the champions of the marketplace. We are not champions of subsidies. We declare freedom and 

free markets and less government, and yet we are pushing all this 

and we give all these programs. 

So don’t you think for your support of this organization, don’t you 

have to do a lot of rationalization and reject some of the very principles that we stand for? 

Mr. MERRILL. There are two answers to that question, congressman. Yes, that is a perfectly logical and clear set of principles with 

which it is hard to argue. I would not argue. I think that answer 

number one is practical. When a small businessman, I am sorry 

that Congressman Manzullo left, but when a small businessman in 

Moline, in a specific case, exported $20 million worth of trucks to 

Uzbekistan, no bank is going to finance that without a government 

guarantee. Do we want to make the sale or do we want to have a 

French or a German or an Italian company make the sale? 

Theoretically, you are absolutely right. I agree with you. Practically, I want the guy in Moline to make the sale. 

Mr. PAUL. So your argument is that freedom is impractical, 

which I disagree with. 

Mr. MERRILL. I did not say that. 

Mr. PAUL. Well, indirectly. But let me follow up with another 

one, and maybe I will get a little bit further on this next question. 

I am interested in the Trade Bank of Iraq. That has been set up. 

We waste no time in trying to get some benefits in there, maybe 

to our corporations. It has been set up at $500 million. Has that 

22

been used yet? And if it has been, has any corporation been participating in Iraq? 

Mr. MERRILL. There has only been one use so far, but the Trade 

Bank of Iraq, which basically we initiated. Peter Saba, Chief Operating Officer, did the basic legwork, I would say. We put $500 million into it, or against it. We raised another $2 billion, $500 million 

from Japan, $250 million from Italy, and 15 other countries. So far, 

there has only been one, a consortium of 13 banks administered by 

J.P. Morgan which won the contract, not with us, but with the Coalition Provisional Authority. There has only been one contract so far to the U.S.; that was $15 

million. I hope you have a sense of humor for this, for a fogging 

machine out of the United States; a set of fogging machines; 200 

of them. The problem is very simple in Iraq. First, either the taxpayers are going to put up the money or there is going to be foreign 

investment which is going to pump oil or invest there. 

The three issues are sovereignty, security, which is obvious, and 

precedence over existing debt. Under the current circumstances, 

Iraq has $125 billion in existing debt and $30 billion in unpaid 

compensation awards plus additinal outstanding claims. So companies are understandably unwilling at the moment, or reluctant, to 

invest over the long term there. Nevertheless, we want to be prepared for when the government, the hand-off takes place and the 

debt is supposed to be written off by the Paris Club at the end of 

the year. Whenever a government comes into Iraq, we want to be 

prepared to make available lending. 

One other thing I have to explain, and that is the Trade Bank 

applies not only for U.S. exporters, but for exporters from other 

countries as well, any country. It is multilateral. It is not U.S.-only. 

Chairman KING. The time of the gentleman has expired. In the 

interest of fairness, if you want to keep up with your partner, Mr. 

Watt, you can take one more question. 

Mr. PAUL. No, I am not going to. 

Chairman KING. Okay. Thank you. 

Mr. MERRILL. I thank you both. 

Chairman KING. This is new access, Mr. Paul, a broad access 

here in the committee. 

Mr. Merrill, I want to thank you for your testimony this morning. It has really been helpful to us. I would note that some members may have additional questions for you. They can submit them 

in writing and the record will remain open for 30 days. 

With that, I thank you for your testimony and the subcommittee 

stands adjourned. 

[Whereupon, at 11:09 a.m., the subcommittee was adjourned.] 

(23)

A P P E N D I X

May 6, 2004

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