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21–228 PDF 2005

WHAT HAS EX IM BANK DONE FOR SMALL

BUSINESS LATELY?

HEARING

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

WASHINGTON, DC, APRIL 6, 2005

Serial No. 109–8

Printed for the use of the Committee on Small Business

(

Available via the World Wide Web: http://www.access.gpo.gov/congress/house

COMMITTEE ON SMALL BUSINESS 

DONALD A. MANZULLO, Illinois, Chairman 

ROSCOE BARTLETT, Maryland, Vice 

Chairman 

SUE KELLY, New York 

STEVE CHABOT, Ohio 

SAM GRAVES, Missouri 

TODD AKIN, Missouri 

BILL SHUSTER, Pennsylvania 

MARILYN MUSGRAVE, Colorado 

JEB BRADLEY, New Hampshire 

STEVE KING, Iowa 

THADDEUS MCCOTTER, Michigan 

RIC KELLER, Florida 

TED POE, Texas 

MICHAEL SODREL, Indiana 

JEFF FORTENBERRY, Nebraska 

MICHAEL FITZPATRICK, Pennsylvania 

LYNN WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

NYDIA VELA ́ ZQUEZ, New York 

JUANITA MILLENDER-MCDONALD, 

California 

TOM UDALL, New Mexico 

DANIEL LIPINSKI, Illinois 

ENI FALEOMAVAEGA, American Samoa 

DONNA CHRISTENSEN, Virgin Islands 

DANNY DAVIS, Illinois 

ED CASE, Hawaii 

MADELEINE BORDALLO, Guam 

MICHAEL MICHAUD, Maine 

LINDA SA ́ NCHEZ, California 

JOHN BARROW, Georgia 

MELISSA BEAN, Illinois 

GWEN MOORE, Wisconsin 

J. MATTHEW SZYMANSKI, Chief of Staff 

PHIL ESKELAND, Deputy Chief of Staff/Policy Director 

MICHAEL DAY, Minority Staff Director

(II) 

C O N T E N T S 

WITNESSES

Page 

Merrill, Hon. Philip, President and CEO, Export Import Bank of the United 

States .................................................................................................................... 4

Hadfield, Ms. Victoria, President, Semiconductor Equipment and Materials 

International (SEMI) North America ................................................................. 5

Vaden, Mr. Michael, President and CEO, Rutland Plastic Technologies, Inc. ... 8

APPENDIX

Opening statements: 

Manzullo, Hon. Donald A. ................................................................................ 49

Velazquez, Hon. Nydia ..................................................................................... 54

Otter, Hon. C.L. ‘‘Butch’’ .................................................................................. 56

Simpson, Hon. Michael and Hon. C.L. ‘‘Butch’’ Otter ................................... 58

Prepared statements: 

Merrill, Hon. Philip, President and CEO, Export Import Bank of the 

United States ................................................................................................ 60

Hadfield, Ms. Victoria, President, Semiconductor Equipment and Materials International (SEMI) North America ................................................. 65

Vaden, Mr. Michael, President and CEO, Rutland Plastic Technologies, 

Inc. ................................................................................................................. 73

Attachments 

April 1, 2005 letter to Chairman Philip Merrill from Semiconductor Manufacturing International Corporation .......................................................... 77

Attachment A—Chronology of SMIC Transaction ......................................... 82

Attachment B—Appendices ............................................................................. 86

Appendix A: March 21, 2005 Letter from EX-IM Chairman Philip Merrill 

to Congressman Donald A. Manzullo (R—IL) ............................................ 87

Appendix B: Congressional letters written on SMIC and equipment suppliers behest [Items A—Q] ........................................................................... 88

(III) 

(1)

′′WHAT HAS EX IM BANK DONE FOR SMALL 

BUSINESS LATELY?′′

WEDNESDAY, APRIL 6, 2005

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, D.C. 

The Committee met, pursuant to call, at 3:25 p.m., in Room 311, 

Cannon House Office Building, Hon. Donald A. Manzullo [chair of 

the Committee] Presiding. 

Present: Representatives Manzullo, Kelly, Velazquez, 

Faleomavaega, Christensen, and Grijalva. 

Chairman MANZULLO. The hearing will come to order. There’s 

the bell. We are going to take a recess because the bells just went 

off for two votes. Probably be about 25 minutes or so, sorry about 

that. 

[recess.] 

Chairman MANZULLO. Good afternoon and thank you for appearing before the committee. As you know, the Export-Import Bank, 

or EX-IM, plays a crucial role in supporting American exports and 

American jobs. I was proud to support EX-IM during previous authorization debates. EX-IM is the primary, and in many instances, 

sole source of assistance to small businesses that must overcome 

the challenges of globalization in order to survive. Small businesses 

often find themselves trying to open new export markets in the face 

of unfair competition and foreign government subsidies. Foreign 

governments pursue aggressive programs and subsidize home 

grown companies and they play to win. 

This is why EX-IM serves such a critical need. EX-IM’s programs 

for credit insurance, working capital and loan guarantees to U.S. 

exporters play an essential role in maintaining America’s competitive edge. 

Against that background this committee has taken note of some 

disturbing trends regarding EX-IM and its core clients, American 

small businesses. In 2002, as part of EX-IM’s reauthorization, Congress imposed on EX-IM a small business set-aside of 20 percent. 

But EX-IM failed to meet this mandate, achieving 19.7 percent in 

2003 and just 16.7 percent in 2004. These numbers are frankly 

quite suspect. Moreover, the trend is clearly in the wrong direction. 

We know of some worthy efforts to improve and streamline EXIM’s processes and to make it more friendly to small businesses. 

But these efforts remain frustrated by bureaucratic inertia, corporate culture issues within the Bank and adversarial relationships 

between EX-IM and its customers and partners. 

2

For over 2 years, the Bank’s financial service partners have been 

trying to work with EX-IM on developing a more streamlined application process for small business exporters. It is called Fast Track, 

and it is used particularly for working capital between $10 million 

and $25 million. This Fast Track application has strong support 

among lenders and businesses. But EX-IM hasn’t done its job. Two 

years to come up with the program and they have failed. That is 

inexcusable, and it also hurts small businesses. 

Other small business initiatives have also fallen by the wayside. 

For example, there is a dealer/distributor financing program which 

could be a boon to small U.S. manufacturers by helping them set 

up distribution networks in foreign countries, a vital requirement 

in getting a foothold into the foreign market. To date there have 

been no implementing guidelines for the program. EX-IM small 

business customers continue to wait, and that is why we have oversight hearings. 

In the meantime, while small businesses idle, international competition races forward. During the 2002 reauthorization, EX-IM 

emphasized that the ‘‘mandate of the Export-Import Bank is to sustain jobs here in the U.S. by helping to finance U.S. exports that 

would not take place without us.’’ EX-IM also said, ‘‘our motto is 

jobs through exports, and our mantra, of course, is jobs, jobs, jobs.’’ 

We know that China poses a historic challenge to the U.S. in 

terms of trade. Recent statistics show that the U.S. is running the 

largest trade deficit on earth with China. Last year U.S. imports 

from China were $196.7 billion, an increase of 29 percent, and exceeded our exports to China by five times. Wait till next year when 

GM, working with China, is manufacturing a car in China. They 

will be exporting that to the United States. Their goal is one million cars. Solving this trade deficit is of overriding significance. 

Today we are going to hear from two witnesses who will describe 

their difficulties with EX-IM in the China trade context. The first 

witness is Mike Vaden, CEO of a small North Carolina firm, Rutland Plastic Technologies, Inc., a company from Congresswoman 

Sue Myrick’s district, and when she gets back she will be introducing you, Mike. The second witness is Victoria Hadfield of the 

trade association, SEMI, which represents many semiconductor 

equipment manufacturers. 

As with many export oriented industries, American semiconductor equipment makers are leading the world in terms of innovation, exports and additional export potential. Without EX-IM financing, many global customers turn to non-U.S. suppliers subsidized by their own governments. For example, the Japanese court 

foreign buyers openly with attractive loan subsidies and the Chinese subsidize in a wide variety of ways, directly and indirectly. 

Then add to this the many other cost advantages of producing in 

China. It is certain American equipment makers cannot begin to 

compete without the leveling provided by EX-IM. 

One particular situation of concern to this committee, an application to support hundreds of millions of dollars in sales of American 

semiconductor equipment to a company in China, has been indefinitely tabled by the EX-IM board. More than 50 members of the 

Senate and House, including the Speaker and three Governors, 

have written to EX-IM with concerns over how EX-IM has handled 

3

this application, but most particularly EX-IM’s refusal to give it a 

vote. Both law and equity entitle the applicant to a vote on its application. Why EX-IM refuses to vote is baffling. It is inexcusable, 

particularly when so many American jobs are at stake. 

EX-IM is a critical tool in maintaining American innovation and 

export readiness. We think it is imperative that changes be made 

and quickly. We urge EX-IM to consider the following key reforms: 

Timely roll out of such programs as Fast Track and dealer financing; two, an effective small business advocacy modeled after the 

one at the Overseas Private Investment Corporation; three, new 

initiatives to get more banks to offer export financing; four, create 

and manage an organization-wide small business plan; five, define 

problem solving and EX-IM processes and procedures that are 

pragmatic, timely, and squarely address challenges faced by American exporters and those who wish to purchase from American companies; and last, establish board procedures that take applications 

to a vote and which provide applicants with a transparent and 

open process. 

[Chairman Manzullo’s statement may be found in the appendix.] 

I now recognize the ranking Democratic member from New York, 

Representative Velazquez, for her opening statement. 

Ms. VELAZQUEZ. Thank you, Mr. Chairman, and I am going to 

use my time to set the record straight. I miss the time when this 

committee worked in a bipartisan way at a time when we really 

believed that our responsibility was to protect small businesses in 

this country and to enact legislation and craft legislation that really brought relief to small businesses, that provided economic tools 

for small businesses to succeed in this country. When Chairman 

Talent, today a Senator from Missouri, was the chairman of this 

committee, we passed 24 bills. Twenty of them became law. In the 

last Congress only two bills, two extensions for SBA were passed 

from this committee. 

So let me just say that, Mr. Chairman, what happened here 

today is a travesty. What was done to Mr. Barrow, Ms. Moore and 

Ms. Sanchez was unconscionable, and I will not stand idly for that 

type of disrespect to the minority’s right for an open debate. And 

yes, indeed, Chairman Talent and I had deep and big differences, 

but we were able to discuss those differences and respectfully disagree. So if you think that you can run this committee in a partisan way, unilaterally so, fine with me. Go ahead and do it. And 

then we don’t have—it doesn’t make any sense for me to stay here 

and for the members of the Democratic side to stay here and participate in this hearing. 

[Ranking Member Velazquez’s statement may be found in the appendix.] 

Chairman MANZULLO. Next time we offer to meet with your staff 

maybe they can take us up on it. Thank you for your comments. 

Mr. Merrill, we are gratified to have you here and look forward 

to your testimony. You can start. They are having a problem. Go 

ahead. 

Mr. MERRILL. I just want to stay out of that argument. 

Chairman MANZULLO. Oh, no, we have got enough issues going 

on. 

Mr. MERRILL. Okay. Just tell me when you want me to start. 

4

Chairman MANZULLO. You can start right now. That is a general 

clock, you know. 

STATEMENT OF THE HON. PHILIP MERRILL, EXPORT-IMPORT 

BANK OF THE UNITED STATES 

Mr. MERRILL. Okay. Thank you, Mr. Chairman. 

Mr. Chairman, and Members of the Committee, the Export-Import Bank of the United States is committed, very committed to assisting small business exporters. That is the role the Bank assumed years ago and one I supported throughout my tenure as 

chairman. I commend this Committee for its key role in supporting 

small businesses. I thank you, Mr. Chairman, for offering valuable 

advice and support to Ex-Im Bank and its mission of sustaining 

U.S. jobs by supporting exports that would not otherwise go forward. 

I am happy to report that the direct support of the Export-Import 

Bank for small businesses has increased in each of the last two fiscal years. Specifically, it stood at $1.78 billion in fiscal year 2002, 

$2.08 billion in fiscal year 2003 and reached $2.26 billion last year, 

fiscal year 2004. That is a 27 percent increase in the period that 

I have been in this Bank, roughly two and a half years. 

This increased funding has also been matched by an increase in 

the actual number of small business deals. We closed 2,154 small 

business transactions in fiscal year 2002, 2,258 in fiscal year 2003 

and finally, 2,572 in fiscal year 2004. That is a 19 percent increase 

over 2 years. I am proud of the steadily increasing support the 

Bank has provided to small businesses during my tenure over the 

last 2 years plus. 

Also, during that period, over 80 percent of the Bank’s transactions have directly benefited small businesses. Ex-Im Bank 

makes the most of its limited staff by using partners to reach small 

business exporters, partners such as financial institutions, brokers, 

our City-State Partners and the export assistance centers of the 

Department of Commerce. Other partners include trade associations, such as the Small Business Exporters Association, industry 

associations, some of whom are here today—I saw Peggy Hoolihan 

behind me— chambers of commerce, world trade centers and other 

business groups. 

One additional partnership recently expanded is with the Small 

Business Administration. Through a co-guarantee program established in fiscal year 2004 with SBA’s export working capital program, SBA can with the assistance of Ex-Im Bank seamlessly serve 

eligible small exporters whose needs exceed the SBA’s lending ceiling. By seamless, I mean it is one application. We lay over on top 

of them if the loan is larger. 

Even our larger transactions benefit small businesses because 

small businesses are frequently suppliers for larger exporters. This 

is what we term ‘‘indirect’’ support for small business. Our charter 

provides that we make available 20 percent of our overall authorization for the ‘‘direct’’ benefit of small business. 

As I have said, the numbers of transactions and dollars authorized for small business exporters have steadily increased during my 

tenure at Ex-Im Bank. But as a share of overall financing, the 

small business percentage has been variable. In fiscal year 2002, 

5

the rate was 17.6 percent compared to 19.8 percent in fiscal year 

2003 and 16.9 percent in fiscal year 2004. I want to assure the 

committee that we take the 20 percent very seriously. Our analysis 

shows that we were on track to exceed 20 percent for small business, but for two large transactions approved by the board very late 

in the fiscal year. We have several programs, large transactions, 

percentage drop. We have several programs in development or 

newly established to increase the number of small business exports 

and get us toward the 20 percent. 

While Ex-Im Bank is primarily demand driven and in the final 

analysis only has the ability to do those transactions that are 

brought to us, we continue striving to make ourselves more accessible to the small business community. There are 240,000 exporters 

in the United States, many of whom are small businesses. 

A program in development called ‘‘Ex-Im On Line’’ is designed to 

provide on-line application submission and electronic automatic 

processing and servicing for our short and medium term insurance 

and guarantee products. In addition, we will leverage our relationships with credit unions, City-State Partners and other agencies 

similar to what we have done with the new arrangement with the 

SBA. Again, this will allow us to reach out beyond our small employee base and work with others to increase the benefits provided 

by our small business programs. In regard to our budget, the Administration is requesting $186.5 

million in program budget, which when you add it to carry over 

funds and cancellations from previous years would give us $400.5 

million to use as a loss reserve to support a projected $13.8 billion 

in authorizations for fiscal year 2006. That is more than sufficient 

to support our projected demand for small business authorizations. For fiscal year 2006, the Administration is requesting $73.2 mil- lion for our administrative budget. Just $600,000 more than this 

year’s appropriation. It is out of this budget that we fund the technological improvements and outreach programs that I discussed 

above. Mr. Chairman, we need every dollar of that budget appropriated if we are to continue making progress towards the small 

business objectives we all share. 

Mr. Chairman, I thank you for your support of small business 

and the Ex-Im Bank. I am ready to answer any questions you or 

your colleagues may have, Mr. Chairman. Thank you. 

[The Honorable Merrill’s statement may be found in the appendix.] 

Chairman MANZULLO. Thank you. Okay. I am going to go to Victoria Hadfield. Even if you came from North Carolina I would be 

going to you anyway [Laughter-reference to North Carolina’s win 

over Illinois in NCAA final]. I am waiting for Mrs. Myrick to come 

back. Ms. Hadfield is President of SEMI North America and assumed that position in June of 2002. Lots of qualifications. Great 

background. We look forward to your testimony. 

STATEMENT OF VICTORIA HADFIELD, SEMICONDUCTOR 

EQUIPMENT AND MATERIALS INTERNATIONAL (SEMI) 

NORTH AMERICA 

Ms. HADFIELD. Okay. Thank you. Thank you for the invitation to 

be here today. SEMI, Semiconductor Equipment and Materials 

6

International, is an industry association that represents nearly a 

thousand American companies specializing in the manufacture of 

capital equipment and materials for the production of semiconductors. 

While the SME [semiconductor equipment] industry is quite diverse, the majority of U.S. companies are small, privately held 

firms with annual sales of less than 25 million. Many of these are 

part of a wide network of suppliers to larger publicly held semiconductor capital equipment and materials firms who serve the global 

semiconductor industry. 

The U.S. can be proud of its world class competitive semiconductor equipment and materials infrastructure. This also serves as 

a base for providing enabling technology to new and emerging industries such as those in nanotechnology and MEMS. 

Our industry has been one of the most innovative in the U.S., 

fueling many of the manufacturing technology advances that have 

helped to improve semiconductor capability and performance. The 

average SEMI member spends upwards of 15 percent of annual 

revenues on research and development. The ability to fund these 

investments has always been dependent on export revenues, which 

now account for over 70 percent of sales for most U.S. leading semiconductor equipment companies in our industry. Thus, access to 

overseas markets and the ability to compete in these markets with 

leading edge technology is vital to the long-term health of the U.S. 

semiconductor capital equipment and materials infrastructure. 

The Asia Pacific region now comprises 70 percent of the world’s 

market for semiconductor capital equipment and materials, and it 

is the fastest growing market for our members. If you look at my 

written testimony there are charts showing the shift of semiconductor manufacturing to the Asia Pacific region. Of these Asian 

markets China is becoming one of the most important players. The 

size of the China market for new equipment for 2004 was $2.68 billion, an increase of over 130 percent from the previous year. 

U.S. SME producers face strong competition from Europe and 

Japan and markets around the world. In China last year U.S. producers sold 51 percent of the new wave for fab equipment and 34 

percent of test and assembly equipment purchased by China. Early 

access to the China market is very important. Gaining the tool of 

record designation with a customer in a new market cannot be underestimated since this means companies will be a part of future 

manufacturing facilities. 

As stated already, U.S. companies have been fairly successful so 

far in the China market, but we are still competing fiercely for 

market position. The U.S. Ex-Im Bank historically has provided 

beneficial export assistance to the U.S. SME industry. Transaction 

support in the last several years include loan guarantees and loans 

for exports to semiconductor manufacturing facilities in Malaysia, 

Russia and Singapore. Ex-Im’s assistance is needed now more than 

ever. The cost of a single semiconductor fabrication facility is on 

the order of $2 to $3 billion. Approximately 80 percent of this cost 

is for equipment. Export financing is increasingly important and 

necessary to help private banks make investments in large purchases of capital equipment. 

7

Just 5 months ago, Ex-Im approved a loan guarantee for over 

$650 million for Chartered, a semiconductor foundry located in 

Singapore. This guarantee supported exports from at least 12 U.S. 

suppliers and the Ex-Im Bank determined in this case that the 

transaction would create and sustain high quality jobs in the 

United States. 

This Chartered deal is quite similar actually to a deal currently 

pending before Ex-Im for a $770 million loan guaranteed to SMIC, 

the leading semiconductor foundry in China. For the time being, 

the SMIC deal has been put on hold due to an objection from one 

U.S. Company claiming potential competition. It is my understanding that this objection has already been addressed and the 

deal has been scaled back to insure that the equipment supported 

by the loan guarantee will not be used for products that directly 

compete with this company. 

We urge the Ex-Im Bank to put this deal back on the agenda. 

While making these decisions is not easy, we believe this case is 

clearly one where the Ex-Im loan guarantee would have a strong 

positive impact on the U.S. economy. Beneficiaries include the U.S. 

suppliers of capital equipment and materials, many of whom are 

fairly small companies, as well as the many U.S. semiconductor 

companies who are in partnership with SMIC and rely on them as 

a source of production. All of these companies represent high valueadded exports for the U.S. and manufacturing jobs. 

In reviewing this and future applications from the SME industry, 

the long-term ramifications for the industry should be taken into 

account. The Ex-Im Bank will see more of these deals in the future, 

we are sure. In this instance, without Ex-Im support SMIC could 

be forced to go to non-U.S. suppliers whose governments are able 

to provide a loan guarantee. In fact, we have been told that there 

already have been conversations with other governments and that 

they are very interested in this deal and would be willing to supply 

financing. If this deal does not go to U.S. suppliers, it could have 

a chilling impact and result in long-term changes to the semiconductor supplier base in China since other companies look to SMIC 

for leadership in making SME purchases. 

The U.S. Semiconductor equipment and material industry is a 

technology intensive, high value-added, net exporting American 

success story. Other nations recognize the importance of the SME 

manufacturing infrastructure as a valuable base for a range of enabling technologies in the semiconductor industry and other industries in the future such as MEMS and nano. They are willing to 

support their industry through a range of tools, including export financing. Continued Ex-Im Bank support for U.S. SME exports to 

leading markets is critical to the economic health and technological 

leadership of the U.S. SME industry, and we hope it can be retained. Thank you. 

[Ms. Hadfield’s statement may be found in the appendix.] 

Chairman MANZULLO. Thank you. Michael Vaden is the President and CEO at Rutland Plastics Technologies in Pineville, North 

Carolina. He joined Rutland in 1973, and we look forward to your 

testimony. 

8

STATEMENT OF MICHAEL VADEN, RUTLAND PLASTIC 

TECHNOLOGIES, INC. 

Mr. VADEN. Thank you for the opportunity, Mr. Chairman. Rutland is a company that is based in North Carolina, probably typical 

of, fairly typical I should say, of the small manufacturers in the 

United States, particularly those that we find are heavily associated with textiles activities. We have got about 113 employees. 

We have one facility that we manufacture in and we serve a 

niche marketplace with a product called plastisols, and those 

plastisols are used to supply products that go into automotive applications such as air filters and oil filters and fuel filters. It goes 

into a lot of textile and fabric coating applications. 

And then we have a very large segment of our business associated with what we call screen print ink business, and that really 

goes into garment embellishments for T-shirts, athletic apparel, ladies garments and things of that sort. What we have found is that 

our business has shifted dramatically as has the textile industry, 

as you know probably what everybody in Washington is talking 

about these days. But what we are finding is that export business 

is a way for us to survive and even thrive in a situation where 

many companies are not able to grow in that environment, particularly smaller manufacturers. 

What we have been able to do in the last 5 or 6 years is actually 

grow our export sales from a little under 3 percent of our business 

to currently over 25 percent of our business. The way we have been 

able to do this is by going overseas and exporting product. We recognized this back in the late ’90s. 

We have gotten tremendous assistance and support from the Department of Commerce and aligned organizations, such as some of 

those that have been mentioned in the previous comments. And 

when we did that, we said that we needed to find a way to insure 

that our size company would not be at risk for the products that 

we were selling overseas. 

The Department of Commerce actually suggested that we consider the Ex-Im services because they had a mission to help companies such as ours. We have been using this now for over 5 years, 

probably over closer to 6 years, and we have found it to be a very 

successful approach in what we are trying to do in the marketplace. We have insured over $27 million worth of transactions over 

that time period and we have gone to about 45 different countries 

selling product. We have worked closely with the Ex-Im folks. We 

would comply with their policies and procedures and feel that it 

has been a good partnership. And we have paid, not insignificant 

for our company, a sum of about $160,000 in premiums over those 

years also to provide ourselves this coverage. 

We have had a problem, in that when we did last year submit 

a claim for lack of payment from a company that we were selling 

product to over in China. We were—we basically encountered some 

difficulty in how you work through the organization. We—I don’t 

want to dwell too heavily on just what the particulars of that were, 

but we feel like that we need better support as a small company 

and being able to work effectively through Ex-Im to continue our 

success. We have to grow globally. That is— 

9

Chairman MANZULLO. Mr. Vaden, you can be specific if you 

want. 

Mr. VADEN. Well, the specifics were that we sold goods to a Chinese buyer. The Chinese buyer took our goods, did not pay for our 

goods, is actually selling those goods into the marketplace over 

there, proclaiming their company to be the Rutland product line 

over in China. We would think that there have actually been some 

intellectual property theft that has occurred also in this activity. 

And so what we are encountering is increased—of course we are no 

longer in business with this company so we have actually seen our 

business drop off in China, which is the largest growth market and 

opportunity that we have in the world these days. And we have to 

be there. We have to be positioned there. 

The problem that we have is we have to know that we are not 

at risk. It is very difficult for us to find trustworthy partners to do 

business with over there. And what we have encountered and 

found is that if we have good support such as the Ex-Im insurance, 

we can then continue to grow our business not only in China, 

which is the biggest market opportunity for our growth, but also 

in Asia and in the other parts of the world. 

So we are frustrated with the situation that arose when we did 

apply for a claim to be reimbursed. And basically the response that 

we got was, I felt like, a technicality in regards to what we—how 

we saw the situation versus how the folks at Ex-Im saw the situation. But more frustratingly was the circumstance that we were advised to go back and get a judgment against this company in 

China, in the courts in China, which we do not have the resources 

to do, do not have the time to do. And frankly, it is just not worth 

chasing. The amount of monies that we have lost— 

Chairman MANZULLO. Who advised you? I want to—this is an 

oversight hearing. The purpose of oversight is to hold agencies accountable for things that they may be doing wrong, also to give 

praise when they are doing things that are right. Was it Ex-Im 

that told you you had to go to China to get the judgment? 

Mr. VADEN. Well, my understanding was that since we did not 

have a judgment against this person in China, that that would toss 

out the consideration for any payment of claim. And that was my 

understanding from our financial group and our CFO’s discussions 

with some of the folks in the Ex-Im organization. 

Chairman MANZULLO. Proceed. 

Mr. VADEN. Okay. Basically, when we get beyond that point, my 

company is a privately financed and private equity held business. 

One of the things that we have to do in that business is to continue 

to grow our business, not just sustain business levels that we are 

at. For us to be able to do that, we have to grow in the export market. Our borrowing base of activity and the financing that we have 

in our business right now is predicated and tied to collateral and 

accounts receivable. And as we grow our business internationally 

Ex-Im becomes all the more vital to what we are doing. 

And I do want to say again that Ex-Im has helped us grow this 

business dramatically over those years. Our new investors and 

owners have a great deal of comfort knowing that we have worked 

with and through Ex-Im, and so they have agreed to make that 

part of our borrowing base. If we were under circumstances where 

10

there is doubt and question as to whether we will be able to rely 

on Ex-Im should we run into situations, and I suspect we are going 

to run into a few out there, where we going to find bad actors who 

will not pay for product as we sell that product overseas, then we 

are going to have a hard time running our business. If I can’t grow 

my business in the export activity, we are going to have a hard 

time running our business and our business surviving. 

So basically I guess what I would like to see, and really the reason that I had contacted your committee, knowing that there were 

going to be some discussions and hearing this week, is to implore 

and encourage and ask that not only in a very personal situation 

with our company, I wanted to be able to find a way to work better 

through Ex-Im to cut through some of the red tape and find out 

how we can get support for what we need personally. But we need 

to know that that support is out there as we try to grow our business in the future, and I think that is indicative not just of my 

company but of a lot of small manufacturing companies in the U.S. 

So what we are looking for is ways that we can know that we 

have to go to a marketplace and have some backup support 

through the Ex-Im organization. Ex-Im is the best choice I think 

to assist us, but we cannot operate and be told that we need to go 

back and litigate in foreign courts and chase things on those activities with our size organization. And I think with respect to the export markets in general that we are working in and the Chinese 

market in particular, you know, we are faced with a very drastic 

choice. If we cannot get Ex-Im to do what we think we have been 

paying for insurancewise, we may be told by our investors, you 

have to forego growing in those markets. If we forego growing in 

those markets as business continues to migrate offshore, then our 

business will not grow. It will shrink and our business will not survive. 

[Mr. Vaden’s testimony may be found in the appendix.] 

Chairman MANZULLO. I appreciate your testimony. I will start 

the round of questions here. Mrs. Myrick could not make it back 

to introduce you. She probably would have said all kinds of nice 

things about you, I am sure, but also about North Carolina. So 

these things happen. 

I am concerned, I have got a letter here to Mr. Eric Lang. Is that 

your attorney? 

Mr. VADEN. That is our attorney, yes. 

Chairman MANZULLO. And I am just—I am absolutely astonished 

at this letter that came from Export-Import Bank. It is short and 

I am going to read it. It says this letter is in response to your letter 

dated March 10 to Richard Bragg, from the Ex-Im Bank Assets 

Management Division. ‘‘You have argued that the word ′′dispute′′ in 

article V, letter F of the policy is ambiguous because it is unclear 

if it applies only to disputes with respect to the insured transaction 

or also to disputes existing out of the insured transaction. Further, 

you have argued in that case that the dispute does not involve the 

insured transaction since the debtor is not contending the price, 

quantity—or quantity of the products has already accepted these 

products and is selling them on the market.’’ That is the pirate, is 

that correct? 

Mr. VADEN. Yes. 

11

Chairman MANZULLO. ‘‘You have argued that the interpretation 

should prevail because when interpreting an insurance policy the 

ambiguity should be construed in favor of the insured. While we 

agree that ambiguities are construed in favor of the insured, we do 

not agree with your analysis. The word ′′dispute′′ in article V, letter 

F refers to any dispute with respect to the validity or legal enforceability of the debt. In this case, the buyer is disputing its obligation 

to pay the insured because it claims to have certain set-off rights 

against Rutland. The fact that such set-off rights stem from a previous transaction between the parties is irrelevant. Furthermore, 

whether the buyer is correctly or incorrectly invoking a set-off right 

to extinguish its obligation to pay the insured debt should either 

be determined by the parties pursuant to a settlement satisfactory 

to the Ex-Im Bank or by the competent authorities.’’ 

‘‘Article V, letter F clearly provides that Ex-Im Bank will only 

entertain a disputed claim when such dispute has been settled by 

the parties’’—you would have to work with the pirate with a patch 

over his eye who steals your stuff and sells it on the open market, 

does reverse technology and refuses to pay you. 

‘‘Or in a manner satisfactory to Ex-Im Bank, or when the final 

determination of the validity and legal enforceability of the debt 

has been made by the courts of the buyer’s country or another form 

acceptable to Ex-Im Bank.’’ 

I mean, I am just—I am absolutely astonished that Andrea 

Gunderman, counsel, would sign her name to this letter. 

The last paragraph is finding the exclusion from coverage of 

losses resulting from disputes between the buyer and the insured 

constitutes a standard market practice. 

Let me read that again. ‘‘The exclusion from coverage of losses 

resulting from disputes between the buyer and the insured constitutes a standard market practice.’’ 

Okay. That is not covered. Ex-Im doesn’t cover disputes. They 

only pay when there is an agreement. So why have insurance? Why 

have Ex-Im insurance? Congress is asking why have Ex-Im at this 

point. Indeed, the insurer has the right to first pay the claim to reassign the debt documents in order to collect the debt. That is 

called the right of subrogation. If the debt is not valid or is not legally enforceable, the insurer will be prevented from collecting. And 

I read this, and if I was in your position, I would go absolutely ballistic, and wonder what did you get from Ex-Im, and what did you 

hope to get from them when you signed the contract? 

Mr. VADEN. Well, what we got from Ex-Im and what we hoped 

to get from Ex-Im was some mitigation of credit risk which would 

then enable our lenders and owners in our business to enable us 

to go and grow our business overseas and take on debt in the export market. Without that we can’t survive. We will die. I am, of 

course, from North Carolina. It is fairly simple in the concept. The 

concept that I thought we were entering into was that we had the 

best of both worlds. We had not only an insurer, so that if we did 

have risk on some of those collectibles, it would not damage the 

business that we are running, which is a small business. But also 

I felt like that we had the Federal Government behind us, and that 

carries a lot of weight. That is a marketing tool that has actually 

been positively received in the marketplace when we talk to these 

12

people we are working with and we utilize when we run against 

a tough situation. We can’t do that because Ex-Im Bank will not 

agree and let us do it. 

Chairman MANZULLO. So you were told here by somebody at ExIm Bank, do you recall who it was, Mr. Vaden? Was it this Andrea 

Gunderman? 

Mr. VADEN. Well, that conversation occurred with our attorney. 

I think John Conat might have been the person that had some conversation with our financial folks because I believe John was the 

one that notified us initially that they were going to deny the 

claim. 

Chairman MANZULLO. And so you were told that you had to go 

to China and file an IT lawsuit? 

Mr. VADEN. That was the basic message that we received at Rutland. 

Chairman MANZULLO. And how much did you lose in this transaction? 

Mr. VADEN. Well, the transaction was for $86,000, approximately, which occurred in late summer, I believe it was, of 2003. 

I think the way our policy is written, we would be out about 

$66,000 if we do not collect the claim because there was a 20 percent deductible, I guess you would call it. And of course what we 

are out is not just that situation, but we had to discontinue doing 

business with this gentleman. We have had to go find other folks 

in the marketplace. This gentleman, the pirate, is out there now 

selling our product under our tradenames. 

Chairman MANZULLO. And can’t you prove that in—I mean did 

Ex-Im ever offer to sit down and talk to you about this at length? 

Mr. VADEN. We provided documents and we provided information 

accordingly, but basically I think what we got distracted on was 

that this gentleman claimed that he had a dispute with Rutland 

as a company. 

Chairman MANZULLO. Well, there’s always a dispute. That is 

why you have insurance because there is a dispute. 

Mr. VADEN. Well, with these kind of people, there is absolutely 

a dispute because he is not a trustworthy, honest individual, number one. And number two, the other issue that we encountered was 

that we sold goods. He received goods. He had no dispute about the 

goods, and the goods are being used in the marketplace against us. 

Chairman MANZULLO. Mr. Merrill, are you aware of this particular transaction? 

Mr. MERRILL. No. This is the first I heard about it. I mean, I 

heard of it a few minutes ago. 

Chairman MANZULLO. Could you turn on your mike, please? You 

don’t know the details of it? 

Mr. MERRILL. No, you have the advantage over me by being a 

lawyer. I am very sympathetic. I thank the gentleman for his kind 

words. I am very sympathetic because I personally as a businessman looked at insurance policies like that. But the answer to your 

question is no. 

Chairman MANZULLO. Could you help us on some general principles here as to when you have a dispute, why the Ex-Im Bank 

would say go to China and get a judgment from a Chinese court? 

13

I mean, doesn’t that seem pretty difficult, especially for a small 

businessman to do that? 

Mr. MERRILL. Small business or large business, I would think 

that—let me say it is not language that I would choose to use. 

However, I don’t know what answer I can give you in principle. 

You asked for an answer, and the question is, some principles—

first, there is a difference between insurance, which is conditional. 

I don’t know the conditions of this particular insurance policy and 

just—we can find out but I don’t know. A guarantee, which in a 

general sense is unconditional, and let me call it a project finance 

which is subject to the individual—let me say the cash flow for the 

individual product. So the answer here is, I just don’t know enough 

about his insurance policy, or guarantee policy, or whatever it is 

policy to answer intelligently. I am answering your question about 

the principles. 

Chairman MANZULLO. That is fair. 

Mr. MERRILL. I think I ought to add that I was in China for 10 

days in January. You only have to pick up a paper anywhere in the 

world really to see that piracy and I am going to call it—I think 

you used the term ′′reverse engineering.′′ I don’t know whether you 

did or not. 

Chairman MANZULLO. Pirate. Black patch over one eye. 

Mr. MERRILL. Say it again. 

Chairman MANZULLO. That is a pirate. 

Mr. MERRILL. Pirating. Thank you. 

Chairman MANZULLO. They look like this [placing one hand over 

one eye]. 

Mr. MERRILL. Pirating is an extent that would understate the 

issue in China. And so I think that there are a lot of companies 

that have similar problems. And by the way, companies in Japan 

and Korea have also similar problems. 

Chairman MANZULLO. Okay. On this issue—Mrs. Kelly, why 

don’t you go ahead? Go ahead. 

Mrs. KELLY. Mr. Chairman, have you finished your line of questioning? 

Chairman MANZULLO. You go ahead. 

Mrs. KELLY. Mr. Merrill, I noticed in the chairman’s statement, 

he noted that there is a lower number of small business, that your 

role within the small business community has a lower number. I 

would like to ask why that is true. 

Mr. MERRILL. Lower number, you mean lower percentage? 

Mrs. KELLY. Yes. Lower percentage. 

Mr. MERRILL. Yes, ma’am. 

Mrs. KELLY. Why is that? 

Mr. MERRILL. It is very simple. It really is simple. I mean not 

many answers in life are simple. 

Mrs. KELLY. That is okay. I don’t have a whole lot of time so if 

you can just give me an answer quickly, I would appreciate it. 

Mr. MERRILL. Okay. A billion and a half dollars worth of deals 

for all practical matter, one billion dollar deal, airline deal, one-half 

billion dollar deal, an export of Lucent technologies, export of 

knowledge based industry, came in toward the end of the fiscal 

year. We were at 20.234, 21 percent round terms. In comes a billion and a half dollars and obviously the percentage drops at the 

14

last minute. It is literally impossible to divide two billion—I am 

just using round terms—by an average small business loan of 

$242,000 and get enough loans of that to match $2 billion in a period of weeks. So the last—these two deals came in. These were 

real jobs, which were American jobs. The transactions were approved at the very end of the fiscal year and bingo, the percentage 

went down slightly. That is what happened. 

Mrs. KELLY. Had there been more involvement with the small 

business community prior to that, that might not have been quite 

such a strong drop, don’t you think? 

Mr. MERRILL. Frankly, I think it was a very modest drop, be- cause the drop of a percent or a percent and a half against $2 billion is really not much. I mean, total authorization in [FY 2004] 

was 13 billion and total authorizations for next year that we are 

seeking is a little over $13.8 billion. To correctly anticipate when 

billion dollar deals are going to drop is an estimate. I mean we 

can’t do it on the basis of where it is in the fiscal year. You can 

estimate where the small businesses are because there are a lot of 

them. But you can’t estimate the big ones. 

Mrs. KELLY. Yeah. We need—we are interested in small businesses. The second thing I would like to ask you is why fast track 

isn’t in place yet. We have had a long time to get it done. Why isn’t 

it there yet? 

Mr. MERRILL. Yes, ma’am. I am very frustrated by it. Again I 

think the answer is I hope relatively simple. We have gone out 

three times now to the banking community with, let me call it a 

proposal inside the banking community. The asset-base lenders and 

the commercial lenders were arguing with each other about what 

the terms for fast track lending should be. So they sent back, we 

got a lot of complaints. Went back for a second round. Similar lot 

of complaints. There also were complaints not only inside the same 

banks, but among the banks to have each one tailored—there are 

14,000 banks in the United States—to have them tailored to bankby-bank credit or other similar standards. We went back for a third 

round which is now being considered, and we hope we have it 

right. However, the fast track is a program that goes between 10 

million and 25 million. Any deal that would be fast tracked can 

also go through the board as one did just a few weeks ago for $14 

million. The idea is to make it easier to do medium-term businesses, mainly 10 to 25 million. But no deal has been turned away 

because we haven’t got the fast track in place. 

Mrs. KELLY. I understand that. 

Mr. MERRILL. So we hope to get it place in early next year. 

Mrs. KELLY. It may not have even been approached because fast 

track wasn’t in place. Businesses need speed. Sometimes timeliness 

makes all the difference in the world. 

The other things I wanted to ask you about was, and I am making this quick because I am running out of time here. You have no 

guidelines yet for the dealer/distributor financing program. Why is 

that? 

Mr. MERRILL. I heard about that just a few minutes ago while 

we had the waiting period here, I called back to find out. I mean 

I just heard about that. I never heard of guidelines. We don’t have 

any guidelines. We don’t need any guidelines. The program is open. 

15

We have promoted it in all of our pieces of paper, in all of our communications with bankers. We have 1,500 people coming, or between a thousand hotel rooms reserved for our annual Bank conference, Trade Finance Export Credit, at Omni Shoreham next 

week. It has been promoted in all of the literature that goes there. 

We will promote it again there. We are open for that. I don’t know 

anything about implementing guidelines. I don’t know where that 

comes from. At least that is what I was told when I called back to 

the people in the Bank just an hour ago. We are open. 

Mrs. KELLY. How many people have taken advantage of that? 

Mr. MERRILL. I don’t know. 

Mrs. KELLY. Is there anyone, do you have staff here that could 

answer these questions? 

Mr. MERRILL. Well, answer which question, ma’am? 

Mrs. KELLY. Well, you don’t know the answer to the question I 

just asked. Is it possible that there is someone here in the audience 

that you brought with you? 

Mr. MERRILL. What is the question you asked? 

Mrs. KELLY. My question is whether or not anyone had taken advantage of the dealer/distributor financing program. 

Mr. MERRILL. I genuinely do not know the answer to that question. 

Mrs. KELLY. But do you have staff here that might know the answer to the question, since you don’t? 

Mr. MERRILL. There is staff here but I don’t know which one 

would know the answer. 

Mrs. KELLY. Is there anyone here who does? Can we ask them? 

Sir, you have your hand up. 

Chairman MANZULLO. Will you come up to the table? 

Mrs. KELLY. Will you come up and identify yourself please and 

tells us— 

Mr. MILLER. My name is Jeffrey Miller with the Ex-Im Bank. As 

the Chairman said, the program is operational. We are in the marketing rolling out stages. No one has taken advantage as of yet. 

And our annual conference will be one of the platforms where we 

will try to capture a lot of attention. 

Mrs. KELLY. Thank you very much, Mr. Miller. I am glad you 

clarified that. I am concerned that the Ex-Im Bank fulfill for the 

small businesses the function that Mr. Vaden and the other people 

who have come to this committee asking for our help with regard 

to Ex-Im Bank and small business. I am very concerned that that 

be addressed. The job we have right now is to help American businesses do business and be in the world economic market. I am concerned that Mr. Vaden’s company has lost intellectual property and 

is apparently not getting the quality support that he feels he needs. 

Issues like that need to be addressed with regard to our small businesses. 

I am also concerned because we know that other countries in the 

world are subsidizing aggressively loans that give our industries 

and our businesses a disadvantage. What your function is, Mr. 

Merrill, is to make sure that our people at least get an even, level 

playing field. 

I am very hopeful that the next time you come to talk to us there 

will be a larger percentage of small businesses involved with you. 

16

I will hope that fast track will be in place and people are using it, 

and I would hope that more than one person will have taken advantage of this dealer/distributor financing program because these 

are the programs that our industries, the people that I represent, 

the people that the chairman represents and everybody else on this 

committee, our small businesses need help. We are in a global 

economy that needs our help right now. Our businesses need our 

help to be players in that field. 

So I would hope that you would be coming back to us and giving 

us some real solid information. I thank you for what you have 

done, sir, but I know very well that it is easy to loan large amounts 

because the same amount of paperwork is required for a big 

amount as a small amount. But it is our small businesses that generate seven out of 10 jobs in this country. We need those new jobs. 

We need that, the small businesses to be able to have the financing 

and to be internationally playing in the world economy. 

So I thank you for appearing here today. I hope when you come 

back you will have strong answers to those questions. 

Mr. MERRILL. Me too. I am on your side. 

Chairman MANZULLO. Ms. Kelly, in your questioning of Mr. Miller, I believe he said he was rolling out this program in stages. 

Mrs. KELLY. The dealer/distributor program? 

Chairman MANZULLO. What does that mean? 

Mrs. KELLY. He said that the conference—correct me if I am 

wrong, the conference— 

Chairman MANZULLO. People come to Washington D.C. 

Mr. MERRILL. He meant in terms of promotion. We have promoted it in paper and letters and export credit. Big place to promote it. Excuse me, I don’t mean to interrupt the Chairman. 

Chairman MANZULLO. I mean, here is what we are hearing. The 

guys that want to export, they check with Ex-Im about the program. And you know what Ex-Im is saying? ‘‘We have no guidelines.’’ Those people aren’t testifying here. You know why? They are 

afraid of retaliation by Ex-Im. There is a problem here. There is 

a big problem, because you have had this program around for some 

time and not one person has taken advantage of it. 

Mr. MERRILL. Mr. Chairman, we have no guidelines. All you have 

to do is ask. 

Chairman MANZULLO. We do and we are told there are no guidelines. I don’t think you guys know what you are doing. 

Mr. MERRILL. I understand floor planning and that is what it is. 

Chairman MANZULLO. Why hasn’t one person in the United 

States been able to take advantage of the program? 

Mr. MERRILL. I don’t know. 

Chairman MANZULLO. Does somebody have the answer? Mr. Miller? 

Mrs. KELLY. Mr. Chairman, perhaps we could ask for you to submit to the committee a written program of the written guidelines 

that you have, whatever you have, that is the methodology for the 

small businesses that can use the bank. 

Mr. MERRILL. I would be happy to submit such a report. I agree 

with the Chairman and with you. 

Chairman MANZULLO. I want the document in 7 days. The document you will give us will be the document that goes to people who 

17

want to avail themselves of that loan. And if you get it wrong, that 

is your problem. You understand that? 

Mr. MERRILL. Mr. Chairman, in fairness, can I ask you to let us 

include the documentation that we do— 

Chairman MANZULLO. No. I want you to include—I am sorry, finish. 

Mr. MERRILL. We have a conference where this is a main line 

issue to announce. Can we—if you give us a deadline, the conference is the 14th and 15th. If you give us until the 17— 

Chairman MANZULLO. I want it in 7 days because I want to see 

what you are rolling out. Our people back home get on an airplane 

and they are all excited and they are going to Washington for a big 

Ex-Im conference. Got a great opportunity to sell things. And then 

they go there and there is this big show that costs them thousands 

of dollars. And if this program is already operational, why don’t 

you have one person involved in it? Not one person has taken advantage of it. 

Mr. Miller, do you have an answer to that? Do you know why you 

don’t have an answer to that? When these people ask, they are told 

there are no guidelines. I think there is a corporate governance 

problem here. There is a big problem, a huge problem, because you 

guys don’t even know there is a problem. 

Mr. MERRILL. Mr. Chairman, if I had known this issue was going 

to come up today, I guarantee you that we would have— 

Chairman MANZULLO. Can I document to you the number of 

times that we have talked to you about this? I don’t know how 

many times—I mean we had a hearing on it. It was last year at 

the financial services. And I sit on the Financial Services Committee, the committee of jurisdiction. 

Mr. MERRILL. You were very helpful. 

Chairman MANZULLO. And so does Mrs. Kelly. I want it done in 

7 days. I don’t care if you work 24/7. It is the only way things get 

done around here is that I have to force the issue. Will you have 

it in my office in the next final 7 days, the final document? And 

I will review it with the people, the people who are afraid to sit 

here because of retaliation by Ex-Im, and then I will get back to 

you. Do you understand that? 

Mr. MERRILL. Yes, Mr. Chairman. And— 

Chairman MANZULLO. Mr. Vaden, is your attorney here? 

Mr. VADEN. No, he is not. 

Chairman MANZULLO. Is Andrea Gundleman here from Ex-Im? 

Anybody here from your legal department? Mr. Saba, is he here, 

general counsel? Mr. Saba, I would like to meet with you and Mr. 

Vaden and I want to find out why—and you, Mr. Merrill, why this 

man is being asked to go to a Chinese court. Can you meet with 

us after the hearing? 

Mr. MERRILL. Of course. 

Chairman MANZULLO. Mr. Bradley, do you have any questions? 

Mr. BRADLEY. Yes. 

Mr. MERRILL. Just let me say for the record, I am extremely sympathetic to the gentleman to my right [referring to Mr. Vaden]. 

Chairman MANZULLO. Our goal is we are going to get this resolved tonight. See that door over there? That door will be locked 

until we come to a conclusion. This man got screwed. You told him 

18

and your people at Ex-Im that they had to go to China to litigate 

an IT claim and you just sat there and said there is no intellectual 

property protection in China. 

Mr. MERRILL. I didn’t say that. 

Chairman MANZULLO. Yes, you did. It is a joke in China. 

Mr. MERRILL. That may be, but I said it was a problem that has 

been reported in all the newspapers. 

Chairman MANZULLO. It is not just a problem. It is an epidemic 

over there. They are pirates and you know that. And is she still 

with you, Andrea Gundleman? Mr. Saba, is she still with you? Is 

she working today? Could you call her and have her be here in an 

hour, please. 

Mr. SABA. We don’t need her here. 

Chairman MANZULLO. It may not be necessary? 

Mr. SABA. That is correct. 

Chairman MANZULLO. You are chief counsel. I take your word for 

it. Mr. Bradley? 

Mr. BRADLEY. Thank you, Mr. Chairman, I apologize for having 

to leave the hearing. Mr. Merrill, I have a couple of questions. And 

if they have already been asked, just say so. And if not, have at 

it. Over the past year or so, the board of directors has approved 

several new financing programs which have been aimed at small 

businesses, lease financing, dealer financing, but the bank’s staff 

seemed to have dropped the ball from what we have heard in implementing what the board has approved. When will these board 

approved initiatives actually be implemented, because they would 

help in increasing small business financing? 

Mr. MERRILL. I am listening to two representatives of Congress 

saying they received complaints, which I have not received. I take 

what the Chairman and you, sir, say seriously. We will have to 

look into it. I wish I had been aware of this even a day or two ago. 

Mr. BRADLEY. Let me continue then. The bank seems to take the 

view that the annual 20 percent minimum for small businesses as 

a percent of the total financing issue is a guideline. But the legislation which passed in 2002 makes it clear that it is a requirement, 

not just a general guideline. Is that your view of what the 20 percent means or do you interpret that to mean it is a guideline? 

Mr. MERRILL. I don’t have an interpretation either way. I will 

give you an example in the instant case. The question is whether 

it is a guideline. I think that it is basically whatever you say it is, 

whatever is written—whatever is written down, I accept as being 

valid. In the instant case, there were three choices. You could reject 

the—I am going to say $2 billion in round terms of last-minute 

deals; two, three large ones, two particular. You could manage the 

numbers by kicking them over into the next fiscal year. In the 

world of Enron, Fannie Mae and AIG, I am not prepared to do that, 

and I wouldn’t be prepared to do it before any of those. 

Or you could take the business and help create American jobs 

and something had to give. We voted—we decided to create the 

American jobs. It did drive the percentage down. We intend to 

honor that percentage to do everything we can to honor the percentage to ensure that the 20 percent guideline, goal, mandate, objective, target, whatever word you wish to use, is met and we hope 

19

we can exceed it. We are on track to do it this year. We are doing 

everything we can to make that happen. 

I was once a small business man. The President wants to help. 

There is no objection to this. The President of the United States 

is wound up on helping small business. We are wound up on helping small business. And I agree with whoever made the point about 

the job creation of small business. Virtually all of the businesses 

being created in the United States is through small businesses like 

his [referring to Mr. Vaden] and mine in my nongovernment role. 

Mr. BRADLEY. Mr. Chairman, one last question and thank you for 

that answer. Congress has made it pretty clear over the years that 

small business has to be a priority for your bank. Several years 

ago, though, the bank’s small business division apparently was 

downgraded. Have you considered reinstating the small business 

division to make it more high profile and something that reports 

directly to the board of directors? 

Mr. MERRILL. In a certain sense, everything is reported to me directly. We can’t stop people from talking to the board or any member of the board. The small business thread—the focus, culture, 

ethic, objective of small business is threaded into the culture of the 

Bank. It is kind of like saying, do you still love me. We love small 

business. No matter how many times we say it, we still love them 

just as much. You can’t love somebody more than you already love 

them. The culture is small business-oriented. 

Let me say that the Bank’s principal lines of business are small, 

medium and long-term; large, medium and small in size and the 

Bank is oriented also towards guarantees, insurance and project finance. All of those have within them a culture of small business. 

All of them are involved in emphasizing the maximum number of 

small businesses that we can serve. And there isn’t anybody at the 

Bank who is outside the culture of small business. I don’t know 

who the janitorial contract is with, but I suspect it is small business. But in any professional sense, all of those operating divisions 

are conscious of trying to emphasize or focused on the maximum 

number of small businesses. 

Mr. BRADLEY. Thank you. 

Chairman MANZULLO. Let me follow up. I guess it goes to the 

question that we have been asking you that it is obvious that people who work for you have not conveyed these complaints to you, 

which is problematic, I think. I would want to know. 

Mr. MERRILL. Mr. Chairman, you can swear me 10 times over. 

The two complaints— 

Chairman MANZULLO. I believe you entirely. I guess my concern 

is why these never reached your desk. 

Mr. MERRILL. We are going to find out. 

Chairman MANZULLO. Did you know there is a directive at ExIm that no staff of Ex-Im may communicate with any board member without the consent of the general counsel’s office? Were you 

aware of that? 

Mr. MERRILL. No, I was not. However—the short answer is I was 

not. The Bank, like the rest of the country, is e-mail crazy. I got 

8,000 e-mails one weekend. Everybody copies everybody else. This 

is just not the thing which one can operate on. They are all doing 

e-mail back and forth and everybody gets copied. That is about the 

20

best I can answer to that one. And I have made it clear that my 

office is open to anybody who wants to talk to me. I take all phone 

calls and return all phone calls within human possibility unless I 

am in China, and that includes people that work for us, particularly people who work for us. 

Chairman MANZULLO. We get this information because as Members of Congress, we are close to the people. And this has come in 

from staff at Ex-Im themselves. This is pretty serious. 

Mr. MERRILL. I haven’t gotten an answer to that. 

Chairman MANZULLO. Would you be willing to put out a directive 

to your employees that anybody at any time could talk to any of 

the board members? 

Mr. MERRILL. I don’t know if it is a directive or not a directive. 

Chairman MANZULLO. That would be a simple yes or no. 

Mr. MERRILL. It is not a simple yes or no, because if anybody at 

any time can talk to any director on any subject that has not gone 

through in some way and contacted their supervisor, I would not 

be able to function. If somebody has a complaint after they have 

talked to their supervisor, I would be happy to talk to them. If they 

have something they think I need to know, I would be happy to receive it in an open line. But I don’t think— 

Chairman MANZULLO. We are not talking about HR [human resources] matters. This is some pretty serious stuff where people at 

the Ex-Im bank feel an obligation at times to talk directly, particularly, to the other board members. 

Mr. MERRILL. Board members can talk to each other. They can’t, 

three people together. Not a good idea for two. 

Chairman MANZULLO. That is regular staff talking to board 

members. Not board member to board member. Max Cleland is a 

board member, is that correct? 

Mr. MERRILL. Yes, he is. 

Chairman MANZULLO. And he came on for what purpose? 

Mr. MERRILL. The President appointed him. 

Chairman MANZULLO. And was he assigned a particular task 

to—in fact, he has been designated by you as the small business 

person on the board, is that correct? 

Mr. MERRILL. That is correct. The charter requires that a board 

member—one board member take a special interest in environmental affairs. Another one take an interest in small business affairs. Senator Cleland asked for that portfolio. Senator Sarbanes 

and two of the other Senators called and asked that he be given 

that area to represent. And the answer is yes. 

Chairman MANZULLO. Have you met and talked with him about 

what he is doing there? Does he have staff to work on that? 

Mr. MERRILL. He gets the same staff that everybody else in the 

Bank gets, except that he—because of his handicap—gets a little 

extra staff. 

Chairman MANZULLO. I understand that. Let me go back to the—

with regard to meeting the numbers where you came in at 16.7 

percent on the small business goals. Is that 16.7 percent of the 

total amount of money that is loaned that goes to small business—

that is authorized that goes to small businesses? 

Mr. MERRILL. Yes, but it is 80 percent, Mr. Chairman, of the 

transactions. 

21

Chairman MANZULLO. Explain that to me. 

Mr. MERRILL. The difference is the—small business, by definition, is a small business. So 80 percent of the transactions go to 

small business. But not 80 percent of the volume, because— 

Chairman MANZULLO. The goal— 

Mr. MERRILL. How many $240,000 loans can you do to match one 

Boeing jetliner? 

Chairman MANZULLO. Let me—Ms. Hadfield, you have mentioned in your testimony where you brought up the fact that ExIm had entered into an agreement with Chartered. Explain that 

again. 

Ms. HADFIELD. Recently, Ex-Im approved a loan of $650 million 

for the export of semiconductor equipment to Chartered Semiconductor in Singapore. 

Mr. MERRILL. To who? 

Ms. HADFIELD. Recently, there was an approval by Ex-Im of a 

loan of $650 million to Chartered in Singapore in November of 

2004. 

Chairman MANZULLO. Then you went on to—there is another 

pending deal now that has caused some concern. 

Ms. HADFIELD. There is a deal that is pending that has been set aside indefinitely by the Ex-Im bank for an export of up to $770 

million to SMIC, a semiconductor foundry in China. And we are 

very concerned that that deal should be attended to and should go 

forward. We believe it has strong economic benefits for the U.S. 

economy and very similar to the Chartered deal. 

Chairman MANZULLO. Are you familiar with the SMIC, with the 

application? 

Mr. MERRILL. Yes. 

Chairman MANZULLO. Let me tell you where I am coming from 

and the reason I have a concern in this. First of all, I don’t have 

any employees from SMIC in my congressional district. I lost 29 

percent of my manufacturing base. Rockford, Illinois used to be the 

machine tool center of the world, grease, machine oil. And today, 

we are down to the fact that if we go into what is left of our industry, with the exception of Haas from California, there aren’t that 

many machine tools made in this country. 

I get called all the time to go and look at machines. I mean, I 

get excited phone calls: ‘‘I have a new Gleason 500 shaper. Would 

you like to see it?’’ I saw my first creep feed grinder and got really 

excited about that. But these things are not made in the United 

States. And the guys struggle on a continuous basis in the district 

that I represent. We have lost 14,000 manufacturing jobs. 

The fastener industry was in the process of recovering. They are 

getting killed again. There are still tariffs on stainless steel and 

hot rolled steel. And manufacturing is a base in this country that 

has been destroyed. The Pentagon leads the charge on it. They say 

they live by the application of the Buy America Act. If you read it 

[Pentagon’s understanding], you could fulfill the Buy America Act 

in the Defense Department and not have one ounce of American 

products in it. 

We are withering on the vine. And the only thing that is left is 

the dry machine tools. Applied Materials put in millions of dollars 

worth of machine tools when IBM made the very wise decision to 

22

make the 300-millimeter wafer in East Fishkills, New York. And 

I have looked at this thing. In terms of the machine tool industry, 

this country is desperate. I know manufacturing probably better 

than 95 percent of the people in this place. I live it. My dad was 

a master machinist. 80 percent of my time in Washington is spent 

on manufacturing. This committee has held 60 hearings on manufacturing, manufacturing techniques. Anything that involves manufacturing, this committee has been involved in. 

I have to speak next week in Nashville, St. Louis and Tucson 

within a matter of 5 days in trying to maintain our manufacturing 

base in this country. And that is my interest. And what I see going 

on now when, according to what you said is—why don’t I do this. 

Why don’t you tell us the status of SMIC’s application at Ex-Im to 

sell $770 million worth of machine tools, or rather to purchase 

those? 

Mr. MERRILL. Is that the question, Mr. Chairman? 

Chairman MANZULLO. Yes. 

Mr. MERRILL. Let me say first, we are well aware of manufacturing, too. We are aware of the evolution of manufacturing taking 

place in the world and in our country. And I do not want to pretend 

special expertise in solving that, let me call it, continental revolution to you. So I am very sympathetic. And I understand. You come 

from a great district, U.S. Grant’s hometown, and a manufacturing 

base of America. And so I am entirely empathetic. 

Chairman MANZULLO. Well, Grant would drink away his problems and I am not predisposed to do that. I know he won a war. 

Mr. MERRILL. My problem is I don’t drink and smoke, but if you 

give me an ice cream cone, that is where my weakness is. The status at the moment is that this was left with the applicant. Now I 

personally, in December, met with all—met with the applicant, 

whose own request to us was to say they would come back with an 

industry-wide consensus, and we said we were available for that 

and we are available for that. They have not come back to us. So 

that is the status at the moment. By the way, I would add, I have 

met with all three companies personally, in 2 cases, the chairmen; 

in all cases, the senior executive staff. And in the case of the applicant, twice, once here and once in China. I found them to be wonderful people unanimously. I would invest in one of them personally. But if you ask me where it stands, it stands where they left 

the ball in their court. 

Chairman MANZULLO. You have gotten letters from me and the 

Speaker of the House, and a letter that was just sent April 1. 

There is no industry agreement. So what are you going to do in 

that case? 

Mr. MERRILL. Mr. Chairman, we have heard—I am kind of astonished about this. When I talked to these people, I thought in December, I thought this was normal business. Anybody who wants 

to come in and talk, comes in and talks. 

Chairman MANZULLO. I don’t think it is normal to get a letter 

from the Speaker of the House asking to bring this to a vote. 

Mr. MERRILL. Mr. Chairman, I have letters and correspondence 

and phone calls from Members in both House and Senate of both 

sides on all sides of this issue, but principally on both sides on this 

issue. It puts us between a rock and a hard place. 

23

Chairman MANZULLO. That is why you are paid. My only interest 

in this is procedural. So my question to you is, it is obvious there 

is no industry agreement. When is your board going to meet to vote 

up or down on this application? I want a date. 

Mr. MERRILL. I don’t think— 

Chairman MANZULLO. Mr. Merrill, I want a date. 

Mr. MERRILL. I don’t think I am going to give you one, Mr. 

Chairman. 

Chairman MANZULLO. Then maybe you ought to step aside so the 

board can get the job done. You have two companies that are fighting. You are paid to make a decision and so are the members of 

the board. And the applicant says ‘‘we can’t reach an agreement 

with the industry.’’ You don’t bookshelf an application based upon 

the fact that they can’t reach an agreement. 

Mr. MERRILL. That was not our suggestion, but their suggestion. 

Chairman MANZULLO. But you bookshelved it. And you have 

been advised many times since they tried to do an industry-wide 

agreement that they just can’t agree. They just absolutely cannot 

agree. What are you going to do if they can’t agree on it? 

Mr. MERRILL. Mr. Chairman, I am going to do what any person 

between a rock and hard place is going to do, which is to be extremely conservative. 

Chairman MANZULLO. And that means doing nothing. 

Mr. MERRILL. No. That means sticking as close to our— 

Chairman MANZULLO. Don’t you think you have an obligation to 

bring it to the board for a vote or are you going to sit on it? If you 

are going to sit on it, then you have helped people who are opposed 

to the application. 

Mr. MERRILL. Mr. Chairman, there are serious problems. We 

have thick briefs on both sides. 

Chairman MANZULLO. I understand that. But you are supposed 

to be reading these things in order to come to a conclusion, and so 

are the other directors. 

Mr. MERRILL. Senior members of the Bank ask of me before they 

consider a case that we deliver a proposition to the board, that is 

a case statement to the board the Friday before the case— 

Chairman MANZULLO. So when are you going to do that? 

Mr. MERRILL. Not likely to, because there are serious questions 

here of economic impact, additionality. 

Chairman MANZULLO. Let us go back to economic impact. Do you 

have a written report from your staff? Have you seen the written 

report on economic impact? 

Mr. MERRILL. I have seen volumes of reports. 

Chairman MANZULLO. And based—and you are supposed to take 

those into consideration and make a decision, isn’t that correct? 

Mr. MERRILL. Those and the reports that came as a result of the 

public notice process. 

Chairman MANZULLO. The fact that there are a lot of problems 

doesn’t mean that you can’t just schedule a vote on this thing. 

Mr. MERRILL. The fact that there are a lot of problems means in 

order for us, the senior management, to take a case to the board—

to take a case to the board that said there were economic impact 

issues here of substantial import, that there were additionality 

issues of substantial import. 

24

Chairman MANZULLO. What are you reading from? 

Mr. MERRILL. I am reading from my own notes to myself. 

Chairman MANZULLO. I understand that. You have to make an 

economic analysis under the Toomey amendment, am I correct? 

Mr. MERRILL. You have me there. 

Chairman MANZULLO. The Toomey amendment was the amendment that mandated you do an economic analysis. That is what 

was added. And I guess my issue here is when are you going to 

make up your mind on this thing? 

Mr. MERRILL. We made up our minds on this thing. 

Chairman MANZULLO. What did you make up your mind on? 

Mr. MERRILL. We made up our minds that there was economic 

impact. These are my notes to myself when you were speaking. 

Just key words. These are the remarks I made when I started the 

conference. I am not reading from testimony. Economic impact is 

an issue. 

Chairman MANZULLO. Let me finish right there. We can do this 

seriatim. The fact that it is an issue, does that mean that you are 

going to deny the application? 

Mr. MERRILL. What it means is, Mr. Chairman, is there are several issues that are involved that are complex. 

Chairman MANZULLO. I understand that. I am trying— 

Mr. MERRILL. Not only economic impact. 

Chairman MANZULLO. I want to start with that one because I 

haven’t received a satisfactory answer on it. 

Mr. MERRILL. There is a serious economic impact issue, which involves market definition, what is the market involved and whether— 

Chairman MANZULLO. If this is the case then, why didn’t you just 

call your board of directors and vote on it? Apparently you have 

made up your mind that there is going to be an adverse economic 

impact. 

Mr. MERRILL. Under the bank’s normal and permanent—long before I got there and long after I will ever be there, the cases presented to the board are presented by the management of the Bank 

and there are 50 to 100-page documents which give you the general 

drift of the loan and everything that is associated with it or the 

guarantee or the insurance if it is over $10 million. 

Chairman MANZULLO. Have you seen the economic analysis provided by your staff? Have you had a chance to read it? 

Mr. MERRILL. I have not personally looked at that economic analysis except in a glancing way. But I have also seen the economic 

analysis presented as a result of the public notice period and several other economic analyses. And to be honest with you, the several economic analyses are together in my mind and I am not quite 

capable of separating what was said in one economic analysis as 

opposed to what was said in another economic analysis. But the 

general answer to your question is, yes, I have seen these economic 

analyses. 

Chairman MANZULLO. At what point will you come to a conclusion as to whether or not there is an adverse impact upon a company? I think that is a fair question. 

Mr. MERRILL. It is a fair question. 

25

Chairman MANZULLO. If they don’t get the loan from you they 

are going to Japan. They are going to get the same stuff from 

Japan, the same machine tools. 

Mr. MERRILL. Mr. Chairman, the applicant in question, a very, 

very, very likeable person with whom I met with twice— 

Chairman MANZULLO. You are not answering my question. I 

want to know at what point—I know he is a likeable person. When 

are you going to make up your mind as to the issue of economic 

impact? 

Mr. MERRILL. There are three other issues as well and they 

interact. 

Chairman MANZULLO. Go ahead. 

Mr. MERRILL. I am trying to be responsive the very best I can. 

I want to be responsive. 

Chairman MANZULLO. Proceed. 

Mr. MERRILL. There is an issue of additionality. 

Chairman MANZULLO. What does that mean? 

Mr. MERRILL. We are not supposed to give—to make credit available on a basis that competes with any other financial institution. 

In other words, if anybody else takes the deal, we are the lender 

of last resort. 

Chairman MANZULLO. I imagine if they went to you and didn’t 

go to anybody else and were turned down, that is pretty simple. 

Isn’t that a simple determination of additionality? Isn’t that a simple determination? 

Mr. MERRILL. It could be a very simple determination. 

Chairman MANZULLO. They could just give you a letter that said 

that they can’t get financing anywhere else. What do you require 

from the applicant? 

Mr. MERRILL. When I met with him in China and here—now this 

is not somebody else, this is me, you know. It is not somebody six 

levels down in the Bank that I am not familiar with, me—this is 

not good English—me and my associates and several people from 

other government agencies and the—inside the embassy in China 

and here, were told by the applicant that they were going to get 

financing from Chinese banks. It would cost 80 basis points more; 

that they wanted to use us because we were 80 basis points less. 

After that meeting, representatives of at least two other U.S. government agencies rather surprised me, said to me, boy, you really 

have a question of additionality here. 

Chairman MANZULLO. When did that conversation take place? 

Mr. MERRILL. That conversation took place in the last week of 

January in China. And so the additionality factor got raised not 

only by me, but by other agencies who sit either ex-officio on our 

board or who attend our meetings. 

Chairman MANZULLO. Go ahead with your list. 

Mr. MERRILL. We will come back to economic impact. There is an 

oversupply issue. The industry consensus now is that there is an 

oversupply. 

Chairman MANZULLO. What does that mean? 

Mr. MERRILL. Chips— 

Chairman MANZULLO. Oversupply of someone making machine 

tools? 

Mr. MERRILL. No. It means there is a market. 

26

Chairman MANZULLO. Why would that be a consideration, because machine tools are going to be brought from Japan if not the 

United States. They still will be manufacturing. 

Mr. MERRILL. We are mandated to analyze the economic impact, 

it goes back to that, of anything that impacts. 

Chairman MANZULLO. Well, in that case, you probably can’t approve any loan. 

Mr. MERRILL. Might be. But in the instant case, this lady—give 

me your first name [referring to Ms. Victoria Hadfield]—that Vicky 

referenced earlier, the Chartered company, there were no objections by public—through the public notice process. No objections 

from other experts, so to speak. No objections put to us as a result 

of our required procedures. Here we have objections put to us. We 

have to look at those objections. I take very seriously, very seriously, all comments by any Member or Members of the House and 

Senate. We also have experts on both sides. 

There are people who are presenting papers to us on both sides. 

For the record, just so I convey this, one of those experts who gave 

us an eight-inch stack of paper was an old friend of mine and I 

think of yours, Jim Miller, who used to be director of OMB in the 

Reagan administration when I was in the Defense Department. 

There is not a better mind in the world than Jim Miller’s. In the 

interest of full disclosure, I supported him when he ran for public 

office and I supported his wife when she ran for public office. But 

I didn’t talk to him personally about this case. His view is opposite 

to those of the proponents in respect to the impact on the marketplace of the 1 percent and the impact of, let me call it, the estimated amount, lack of oversupply, if you will, that would be extant 

18 months from now. The argument on one side—Mr. Chairman, 

I think you need to know this. 

Chairman MANZULLO. There is a hearing going on, because a lot 

of people don’t know anything. We are just asking. 

Mr. MERRILL. I don’t want to overstate my welcome. I want to 

be responsive. If the impact on the market is more than 1 percent, 

there is a question of definition of what is the market as in an antitrust case. Is the market the Washington area? Is the market 

Maryland? Virginia? Is the market the east coast? It is open to 

question. 

Chairman MANZULLO. What is the fourth point? 

Mr. MERRILL. The second part is an estimate of a product that 

is now in oversupply, but the estimate of the applicant is that it 

will not be in oversupply 18 months from now. If I took all—when 

this bureau becomes operative—if I took all the philosophers in the 

world and rounded them up end to end around the world, half of 

them could make a reasonable case on one side and half of them 

could make a reasonable case on the other side. It is an ambiguous 

circumstance. You could make a reasonable case for either side. 

Chairman MANZULLO. That is why you have lawyers. They are 

paid to make reasonable cases. But there are also people like you 

and the directors that are paid to make decisions based upon the 

information they are given. 

Mr. MERRILL. And what I was asked to do and the applicant said 

to me and this is not to somebody else, again back to me, that they 

wanted this case brought to the board within the next week. This 

27

is in January, toward the end of January. I haven’t gotten the 

exact date, but when I was in China, but within the next week; 

that they had to make a decision; that they were going to get Chinese financing; that they were going to get Chinese bank financing. 

In the context of the fact that the Chinese have $600 billion cash 

on hand. And this is a Chinese company. That was not an unreasonable thing for them to say. 

So we considered all of these factors that I just mentioned, definition of market, oversupply, additionality, economic impact. And 

as soon as we decided these were just too complex and too difficult 

to overcome, we went immediately back to the borrower, the applicant, I should say, and said no, we are not going to take it to the 

board in the next week. There are too many issues here. The applicant said, thank you and then offered up this suggestion that they 

would come back to us with an industry— 

Chairman MANZULLO. You are aware of the fact that there is no 

industry agreement. You knew that before you came in this room. 

Mr. MERRILL. I am not sure I know that. 

Chairman MANZULLO. When you look at the letters from different Members of Congress that are fighting like crazy, do this, do 

that. Isn’t it obvious to you that there is not an agreement? 

Mr. MERRILL. Mr. Chairman, my bias is totally towards the exporter. You know that. 

Chairman MANZULLO. I don’t know. I am asking you to do your 

job. I know you have a lot of heavy lifting to do in this case. 

Mr. MERRILL. I am going to step out of line and say my old friend 

Senator Gramm called me this morning about this case and he 

said—I said to him the same thing I said to you I am between a 

rock and hard place, to use the same analogy. And he is no longer 

in the Senate, but he is an old friend. And he said you know when 

you are in difficulty and you are between a rock and a hard place, 

what you have to do is do what is right and live with the consequences. In my view, what is right here and the view of all of 

the senior staff of this Bank is that the obstacles here are the same 

obstacles that we gave back to the applicant the first week—either 

the last week— 

Chairman MANZULLO. The parties can’t resolve it. Do you agree 

that it is your job and the job of the other—is it five directors? 

Mr. MERRILL. It is my job to take the case to the board if we believe the case does not violate the mandate of Congress. 

Chairman MANZULLO. So you believe that it does? 

Mr. MERRILL. Yes. 

Chairman MANZULLO. Why don’t you deny them the loan? Send 

them a letter. We want those directors to vote on it, because I believe they may disagree with you, and that is a matter of corporate 

governance. They are also appointed by the President of the United 

States. They have an obligation also. I mean you are telling me 

that you can sit there and you can pigeonhole one application that 

nobody else—can anybody else on that board individually or somebody else force a vote up or down? 

Mr. MERRILL. The normal procedures of this Bank are that a 

board gets a paper, which gives the plusses, minuses, risk factors, 

and all of the liabilities. Any paper that we would give to the board 

28

now would have to say that we believe that there is a significant, 

substantial additionality issue. There is a significant— 

Chairman MANZULLO. Have you asked— 

Mr. MERRILL. That this loan be voted on. 

Chairman MANZULLO. Why don’t you do that? 

Mr. MERRILL. We have done it. 

Chairman MANZULLO. Why don’t you get everybody from the 

board. Because you know, they have minds of their own and they 

may disagree with you and they may say, just a second, Mr. Chairman. We have also examined the same materials that you have 

and we believe you are wrong. But what you are doing now is you 

won’t even let it come up for a vote. And that is wrong. That is not 

what Congress envisioned. I am not talking about the staff. I am 

talking about the presidential appointees, that they also have an 

obligation and they have a right to vote on these applications. You 

are not—let me finish. 

Mr. MERRILL. I am sorry. 

Chairman MANZULLO. What you are telling me is that you have 

sole discretion, that nobody else can bring a matter before the 

board except you. And that if you decide that just based upon the 

fact that there are problems, just the fact that there are problems, 

even though if you read the documents, you may come to a conclusion that maybe one side is right and the other side is wrong, that 

you can completely withhold the vote. That is why the Speaker is 

engaged in this thing. He has also lost 29 percent of his manufacturing base. I mean, we are getting killed around the country and 

you are sitting there and you are sitting on an application and that 

is why I got involved procedurally. Let the members of the board 

exercise their right to pass upon this application. Can’t you do 

that? 

Mr. MERRILL. Let me know when you are finished. 

Chairman MANZULLO. Can’t you do that? 

Mr. MERRILL. Is that the question, sir? 

Chairman MANZULLO. Yes. 

Mr. MERRILL. Mr. Chairman, what I believe I am doing is faithfully executing the duties. 

Chairman MANZULLO. You are doing nothing. You have deepsixed this thing just because there are problems. You won’t even 

give me a time table within which you think you can resolve these 

problems. 

Mr. MERRILL. Mr. Chairman, I have sworn an oath to faithfully 

execute the office. 

Chairman MANZULLO. No one is sitting here denying your patriotism, all right. I am trying to get you to act. If you can’t move on 

this application, then why don’t you at least recuse yourself from 

this case. You haven’t lost the manufacturing jobs. You don’t go 

back home and face people with 9 percent unemployment in Rockford, Illinois. You don’t see the closed factories. 

And you don’t see what is happening to the industry in this country. If this applicant buys the stuff from the Japanese, do you know 

what that is going to do for the reputation for buying machine tools 

that make chips in this country? Do you know what the Japanese 

are saying? ‘‘Don’t buy from the Americans. That Ex-Im Bank. 

Don’t worry about them. You have visa problems coming in. You 

29

can’t rely upon those people. They won’t make a decision. Why buy 

from the Americans.’’ And you are part of it, because I can’t get any 

answers out of you. 

Mr. MERRILL. Mr. Chairman, we let the applicant know— 

Chairman MANZULLO. He is right here. He is ready to move. 

Mr. MERRILL. I had trouble, ma’am understanding some of your 

language. I did not realize you were— 

Chairman MANZULLO. No. He is back there in the first row [referring to SMIC official]. The applicant is sitting there. He came 

here. I am trying to get you to make a decision. 

Mr. MERRILL. We made a decision. 

Chairman MANZULLO. And what is the decision? 

Mr. MERRILL. Mr. Chairman, as we informed the applicant as 

soon as we had decided in late January that there were sufficient 

problems here that we were not going forward to the board with 

it— 

Chairman MANZULLO. No. No. No. Who has the final decision, 

you or the board? You can surely answer that question. 

Mr. MERRILL. There is a question of analyzing the economic— 

Chairman MANZULLO. No. I am asking you a question. If the 

board takes a vote to approve this loan and you vote no and the 

rest of them or any proportion votes yes, is the loan approved or 

the application approved? 

Mr. MERRILL. That is a hypothetical question. 

Chairman MANZULLO. That is not a hypothetical question. This 

one is a hypothetical--when you get up in the morning, do you tie 

your shoes? 

Ms. HADFIELD. Mr. Chairman, may I ask a question? I am curious as to how, if this loan is turned down, and SMIC is forced to 

turn to a foreign source for financing, Japan or Europe or some 

combination thereof, and change their overall strategy which has 

been to mainly use U.S. equipment—how that is going to benefit 

the U.S. Industry and also the U.S. Semiconductor industry because ultimately, it will go forward. They will get the financing. 

Mr. MERRILL. Just speak a little bit slower. 

Ms. HADFIELD. I am curious as to how it ultimately benefits the 

U.S. economy for the Ex-Im bank to deny this deal, when ultimately, they will get financing and they will buy equipment that 

will not be from U.S. companies. They will still be a competitor. 

They will not compete in any area that is directly competing with 

the company that is opposing this deal, but they will remain a 

strong competitor and they will get financing and they will buy 

equipment. Right now, they are buying U.S. Equipment, but they 

need the financing to continue doing that. And they have come to 

the Ex-Im bank to get that financing. And I don’t understand that 

economic impact issue. 

Secondly, I don’t understand the issue of oversupply, because 

that is constantly changing in the industry. The industry prognosis 

on that is constantly wrong. You can go to any number of experts 

on this and get a different story. So you are always going to have 

that issue with these loans. The complexity of this industry is 

going to be longstanding, and it has been a problem predicting 

when oversupply is going to kick in and when there is a problem 

with capacity. 

30

What you are saying to me right now as I hear it on behalf of 

SEMI, is that we are going to face future continued—‘‘this is too 

complex for us to deal with, so we don’t want to give you any financing because it might be a problem in the future or it might 

have a negative economic impact to one company even though you 

have letters from governors from the State of California, Texas, 

Massachusetts, about jobs that are impacted in those companies 

and in those States.’’ 

It is a very important issue for us because export financing is 

going to be a key tool in the future in these deals. If we want to 

retain a semiconductor, capital equipment and a materials base, we 

need access to this as a tool. And that helps fund the R&D necessary to be a world class industry. 

Mr. MERRILL. I am not sure if I am answering your question or 

the Chairman’s question. I would like the Chairman to hear what 

I said. The answer to that question or comment is that first of all, 

I agree with every word you said personally or close to every word. 

I didn’t hear quite every syllable. But the Congress has mandated 

an economic impact analysis of anything that affects more than 1 

percent of the relative market. We had weigh in on us somebody 

who has 15,000 jobs and who claims that there will be a severe economic impact on those jobs. So we are caught between the desire 

of ourselves to support an exporter and the requirement of Congress to protect those jobs that would be affected by let me call it 

an adverse economic impact. 

Chairman MANZULLO. And the other thing that you have is an 

analysis from SMIC? 

Mr. MERRILL. Yes. 

Chairman MANZULLO. Can both be right? Both economic analyses 

can be correct? I mean, you have to make a decision as to whose 

economic analysis is correct. 

Mr. MERRILL. And the decision we have made is that the impact— 

Chairman MANZULLO. The decision that you have made, because 

you have not allowed the board of directors to vote on this. So you 

made the decision to sit on it. 

Mr. MERRILL. If you ask does the buck stop here, the buck stops 

here. 

Chairman MANZULLO. It stops at a point of responsibility and 

personal acceptance of the fact that you are frustrating Congress’s 

intent. Why do you think we have Ex-Im governors or directors? If 

you make the decision, these people must be wasting their time, 

because you are the one who is saying, I have to bring it before the 

board. 

Mr. MERRILL. Mr. Chairman, I want to be sure you are finished. 

I don’t want to interrupt. 

Chairman MANZULLO. Show me your by-laws, Mr. Miller. Show 

me your by-laws or your rules that say only you can present this. 

Mr. MERRILL. Mr. Chairman, I am the Chairman and Chief Executive Officer of this Bank. The manager reports to me by law. The 

directors are not the management of the Bank. They are directors, 

as in a company. When we make a judgment on whether or not as 

we are required to do here whether we assess the economic impact 

on a company as mandated by Congress outweighs— 

31

Chairman MANZULLO. That is fine. Have you told that to the directors? 

Mr. MERRILL. I have told that to the applicant. 

Chairman MANZULLO. Have you told it to the directors? Do you 

think they appreciate people hounding them all the time because 

you won’t make a decision? 

Mr. MERRILL. The directors ask of me a complete package without serious liabilities that we are violating the expressed will of 

Congress as expressed through our Charter. I would not have put 

the economic statement in our Charter. 

Chairman MANZULLO. I am not talking about that. I mean, isn’t 

the vice-chair, hasn’t that typically been the CEO of Ex-Im? 

Mr. MERRILL. Sometimes yes, sometimes no. 

Chairman MANZULLO. You are not making a decision. You are 

making a decision to shelve this thing, is that correct? 

Mr. MERRILL. We are making a decision—the senior management 

of this Bank has looked at what the economic impact analysis— 

Chairman MANZULLO. That means that you believe the analysis 

of the people that are objecting to the loan, is that correct? 

Mr. MERRILL. That is essentially correct, according to law. 

Chairman MANZULLO. Now that is the most I have gotten out of 

you in an hour. 

Mr. MERRILL. I have made it clear. 

Chairman MANZULLO. No. You have not made it clear. I have 

asked you several different times. Now what you are saying is this. 

I want to make sure this is correct. You are adopting the economic 

analysis of the people objecting to this loan? 

Mr. MERRILL. I did not say that. 

Chairman MANZULLO. Then what did you say? You are agreeing 

with it? 

Mr. MERRILL. There are several economic analyses. 

Chairman MANZULLO. Whose do you believe? 

Mr. MERRILL. Our own. Our own says that the economic— 

Chairman MANZULLO. That is not what your staff has been telling us. They came to us. 

Mr. MERRILL. Mr. Chairman, I am not a lawyer. 

Chairman MANZULLO. I mean the staff is so frustrated, they end 

up calling Congress. We can’t say who these people are. 

Mr. MERRILL. Mr. Chairman, there are several hundred employees in the Bank. Many of them are conflicted and divided. 

Chairman MANZULLO. You have to make a decision. Is the application still pending? 

Mr. MERRILL. Still pending? I don’t know what that means. 

Chairman MANZULLO. You don’t know what the word ′′pending′′

means? 

Mr. MERRILL. I don’t know what pending means in the context 

right now, no, I don’t. I could give you an answer as to where we 

stand with it, but I don’t know what ′′pending′′ means. 

Chairman MANZULLO. Has the application been withdrawn? 

Mr. MERRILL. I don’t know the answer. 

Chairman MANZULLO. The answer is no. It hasn’t been withdrawn. You should have known that before you came here. 

32

Mr. MERRILL. Mr. Chairman, we informed them that we were not 

going forward with this loan as far back as the first week in February or maybe the last week— 

Chairman MANZULLO. But you said you needed further data, 

additionality. So it is still pending. 

Mr. MERRILL. They wanted an answer in a week. 

Chairman MANZULLO. My question is, is this application still 

pending? 

Mr. MERRILL. We gave them an answer. 

Chairman MANZULLO. Would you answer my question. Is it still 

pending? 

Mr. MERRILL. I don’t know the answer to that question. I can’t 

answer something I don’t know. 

Chairman MANZULLO. You don’t know. And you are the chairman 

of the Ex-Im Bank and on one of the most controversial loans, you 

don’t even know if the application is still pending. 

Mr. MERRILL. Pending is a technical term. 

Chairman MANZULLO. What about the word ‘‘is’’? 

Mr. MERRILL. Mr. Chairman, I am trying to be as responsive. 

Chairman MANZULLO. Just a second. Everybody here who is with 

the Ex-Im bank, would you please stand. Please stand. Everybody 

with the Ex-Im bank. We have about 10 people. Now start over 

here. Is the application still pending, do you know? 

VOICE. I don’t know. 

Chairman MANZULLO. Do you know, Mr. Miller? 

Mr. MILLER. Yes, it is. 

Chairman MANZULLO. Could you have a seat up here next to 

your boss and help him out. 

Mr. MERRILL. Could I offer one more sentence? 

Chairman MANZULLO. No. I would like to talk to Mr. Miller. 

Chairman MANZULLO. Could you enlighten us. 

Mr. MILLER. The application has not been withdrawn. 

Chairman MANZULLO. It means it is still there? 

Mr. MILLER. Yes. 

Chairman MANZULLO. Have you been seeking further information on it, Mr. Miller, further data? To your knowledge, has further 

data, new data been coming in on a daily basis? 

Mr. MILLER. I understand that there still has been some data 

being passed. 

Chairman MANZULLO. Stay there, please, if you could. Mr. Merrill, the application is still pending, you have heard. Do you believe 

you have an obligation to dispose of a pending application? 

Mr. MERRILL. I believe that I do and I believe I got back to the 

applicant or we got back to the applicant as soon as we had decided— 

Chairman MANZULLO. That is not the answer. The applicant has 

not withdrawn that. 

Mr. MERRILL. But we have disposed of it in terms of the practical 

sense of it by saying to the applicant that we are not going forward 

with this and we did this back in February and that is where it 

was left. We were very clear with them. That is what we said. They 

asked for a decision in a week and did not get a decision that they 

liked, but they got a decision. 

33

Chairman MANZULLO. It is obvious with all this interest by Members of Congress. You have three. 

Mr. MERRILL. Three sides? 

Chairman MANZULLO. No. No. No. You have people from Idaho 

and people from other States and people like me who are interested 

in keeping manufacturing here. I think there are probably two 

sides to this issue. 

Mr. MERRILL. Reduced to two sides. 

Chairman MANZULLO. Did you confer with any of the directors in 

this case? 

Mr. MERRILL. We have talked a little bit about it. 

Chairman MANZULLO. Just in the last couple of days. 

Mr. MERRILL. We are unable to talk about any case with three 

people together. It is illegal under the Sunshine Act. We do not 

confer in advance of cases. And as a practical matter, I find—I 

don’t know whether it is a legal question, but I find and our directors find I believe that we each take our own briefings so that we 

are not impinging on the Sunshine Act or putting Democrats 

versus Republicans if somebody is left out. So essentially, each director does their own work. 

Chairman MANZULLO. Now is it asking, would it violate the 

Charter or the intent of Congress—I had a little bit to do with the 

Charter, would you agree? You guys were in bad shape several 

years ago and I had to jump in. Remember that? 

Mr. MERRILL. You are a big supporter of the Bank. 

Chairman MANZULLO. Maybe I have some credibility and let us 

talk about congressional intent. Don’t you think I have something 

in this? 

Mr. MERRILL. You have a sense of credibility. And other Congressmen and Senators also have credibility. 

Chairman MANZULLO. My question is does your Charter say, or 

your by-laws, that only you can bring a matter before the board for 

a vote? Yes or no? 

Mr. MERRILL. I can’t answer yes or no, because I don’t know 

what the by-laws say. I just don’t know. 

Mr. MILLER. I don’t know the answer to that. 

Chairman MANZULLO. General counsel, do you want to have a 

seat up here and answer that question? This thing is coming up for 

reauthorization. 

Mr. MERRILL. I can tell you what I think is right. 

Chairman MANZULLO. What you are doing is wrong. 

Mr. MERRILL. That may be. Half the time in life, my purpose in 

life is to be right 51 percent of the time. 

Chairman MANZULLO. Mr. Saba, can you answer my question? 

Mr. SABA. The Charter provides that the President of the Bank 

is the chief executive officer. Also as Chairman, he presides over 

the board meetings. In that context, he sets the agenda just as I 

believe you probably set your agenda here for this committee or 

other committees. It does not specifically make the statement you 

say, but he has those powers historically and that is how it has 

been. Before my time and continuing further, he sets the agenda. 

Chairman MANZULLO. Don’t you think it is interesting—and how 

many directors are there? There are five? 

Mr. SABA. Including the chairman, there are five. 

34

Chairman MANZULLO. All five are presidential appointments, correct? 

Mr. SABA. That is correct. 

Chairman MANZULLO. Does one of the five simply say that is it? 

Mr. SABA. Not just one of the five. The chairman of the board 

who presides over the board. 

Chairman MANZULLO. I understand that. I don’t have— people 

that work for me aren’t elected by my constituents nor are they appointed by the President, but they are there for a purpose. And one 

of their [Ex-Im Directors] purposes is to pass upon the applications, 

and they are being denied the opportunity to do that in this case. 

Mr. SABA. I think what the chairman was saying was that at the 

time that the applicant requested action, this case was not ready 

for action. And at that time, it would have been—in his view, I believe, he was talking about fulfilling the duties of his office—it 

would have been—he would not have been fulfilling his duties to 

have brought the case with these serious issues out there. 

Chairman MANZULLO. My question to you, do you think that 

these issues should be resolved? I mean you have an issue of, what 

is that word called—additionality. Can that issue be resolved? 

Mr. SABA. I don’t think it is a simple yes-no issue. It has always 

been a gray area. 

Chairman MANZULLO. I mean how do you go about making conclusions and decisions? 

Mr. SABA. It is very hard. You have an applicant in this case who 

most recently sent a letter saying that they are looking for Ex-Im 

Bank financing, in large part, because they don’t want to be overly 

dependent on Chinese banks. That is in their most recent letter. 

Should the U.S. Ex-Im Bank— 

Chairman MANZULLO. They are buying American stuff. 

Mr. SABA. Should the U.S. Ex-Im Bank be financing a Chinese 

company when they have alternative Chinese bank financing available? 

Chairman MANZULLO. Based upon that—all I want you to do is 

to rule and make a decision so nobody has to bother you anymore. 

If you feel that based upon that, they do not fulfill the Ex-Im requirements, then the application should be turned down, isn’t that 

correct, if that is your decision? 

Mr. SABA. We effectively are acting in response to their request 

for action by a certain date. And we told them that that could not 

happen. They have now continued to move the goal post and they 

have increased their efforts. Additional data has been provided, but 

most of the stuff we have just seen frankly, has been, you know, 

efforts and lobbying. 

Chairman MANZULLO. Just because you guys haven’t made up 

your mind. That is because they were led to believe that you guys 

had deep-sixed this thing and we are trying to get you to make a 

ruling on it. 

Mr. MERRILL. They wanted a decision and we gave them a decision. 

Chairman MANZULLO. The Speaker of the House has requested 

that you meet and come to vote. Is that asking too much? 

Mr. MERRILL. I am going to execute the office. That is my best 

ability. 

35

Chairman MANZULLO. You aren’t doing it. The best of your ability is insufficient because you have hung them out. 

Mr. MERRILL. It means honoring the mandate of Congress that 

we do not support anything. 

Chairman MANZULLO. Send them a letter and say look it, your 

application is denied. Can you do that? Can you send them a letter 

and say your application is denied? 

Mr. MERRILL. Sure I can. 

Chairman MANZULLO. Can you send them a letter? 

Mr. MERRILL. I suppose we could send them a letter. Be happy 

to do it. 

Chairman MANZULLO. Go ahead and do it. And I would be interested in knowing what the other five members, four members of 

your board would be—would have to say about the fact that you 

unilaterally turned it down and you didn’t even bring it to them 

for a vote and they may have a different conclusion. Perhaps you 

have usurped their authority because they were appointed by the 

President to at least vote upon something. I don’t think that is 

being a good CEO, not in this particular case. It is not like— 

Mr. MERRILL. You have Congressmen on both sides of this issue 

and Senators on both sides of this issue. 

Chairman MANZULLO. I just want you to make a decision. 

Mr. MERRILL. We made a decision. 

Chairman MANZULLO. Then tell them. 

Mr. MERRILL. We told them in the first week in January. 

Chairman MANZULLO. I challenge you to put it in writing. Phil, 

I am going to tell you right now, if you don’t act on this thing, I 

am going to ask for your resignation. 

Mr. MERRILL. We will do it. 

Chairman MANZULLO. I want this thing disposed of. You can’t 

keep people hanging out. Let them go buy from the Japanese. 

Make sure you carbon copy the other members of the board. 

Mr. MERRILL. In the interest of civility, Mr. Chairman, we told 

them that directly and specifically the last week in January. 

Chairman MANZULLO. Mr. Saba says the application is still pending. They are here because they think they have some hope of still 

getting the Ex-Im loan. 

Mr. SABA. Mr. Chairman, in effect we told them, as Mr. Merrill 

said, that this application was not going to move forward. 

Chairman MANZULLO. That is not in the letter you sent me. 

Mr. SABA. From their own business perspective, it would be better than getting this denial letter. If they think they are better off 

with a denial letter, the Chairman has indicated he will provide 

that. 

Chairman MANZULLO. Let me read this letter [from Mr. Merrill] 

dated March 21, 2005. ‘‘Thank you for your letter of March 17. Appreciate your interest in the SMIC application and the concern that 

SMIC receive a timely response. The application relates to large 

complex transactions that implicates a number of requirements 

under our Charter, including, among other things, an economic impact test and additionality. While our interest at Ex-Im is always 

to help U.S. exporters large and small, we must adhere to these extraordinary mandates.’’ 

36

Chairman MANZULLO. ‘‘The borrower, SMIC, indicated that a decision from Ex-Im in early February will proceed with securing alternative financing. We concluded that the deal as structured was 

unlikely to satisfy our charter requirements and obtain board approval. Consequently, we timely notified both SMIC and one of the 

primary exporters the application would not be put on the board 

agenda. SMIC and the exporter both stated an intention to pursue 

an industrywide solution to address any outstanding concerns related to our charter requirements. We remain open to considering 

such a new proposal if it is presented to Ex-Im.’’ 

Mr. MERRILL. It has not been presented and I sent— 

Chairman MANZULLO. That is why I asked the question whether 

or not it is still pending. I mean they want to know what is expected of them. 

Mr. MERRILL. You know, Mr. Chairman, I am not a lawyer and 

the definition of— 

Chairman MANZULLO. Don’t hide behind that. You are a CEO, all 

right? And I have seen your background. It is impressive. 

Mr. MERRILL. Thank you, Mr. Chairman. 

Chairman MERRILL. Well, don’t tell me you don’t know what this 

letter means. 

Mr. MERRILL. I know exactly what it means. Mr. Chairman, that 

letter came, when I was en route, on a Friday on a 22-hour trip, 

and had to change planes in Chicago to Japan. I got there over the 

weekend. The letter was faxed to me. I cleared it and it got back 

to you on Monday. I have served in several administrations, and 

I have watched Congressmen, in fact I have watched White Houses 

and Presidents send letters to several departments in which I have 

served and get answers 3 months later. We turned this around over 

a weekend. I thought we were being very responsive and I stand 

by every word of that letter. 

Chairman MANZULLO. I understand. It says we remain open to 

considering such a new proposal if it is presented to Ex-Im. I guess 

that answers the question of whether or not it is pending. 

Mr. MERRILL. That is right. That is what they said about their 

intention. 

Chairman MANZULLO. Yeah. 

Mr. MERRILL. That is what they said when we told them we 

weren’t going to go forward with it. 

Chairman MANZULLO. Let me ask you a question. What if I 

hosted a meeting to come up with a solution to this? Would you be 

open to that? 

Mr. MERRILL. If you can get the industrywide consensus that 

they— 

Chairman MANZULLO. No. What if I hosted a meeting. I would 

have you there. 

Mr. MERRILL. Mr. Chairman, I don’t make any sense there without reliability of staff. I trust my staff. 

Chairman MANZULLO. Well, you know, I think your staff isn’t 

telling you some stuff. There is some stuff that came out of this 

hearing. No, I understand that. So you don’t want to be—you don’t 

think this is important enough to sit down with me, a Member of 

Congress, and try to come up with a solution? 

37

Mr. MERRILL. Well, I don’t know what a solution means. If a solution means— 

Chairman MANZULLO. You don’t know what a solution means? 

Mr. MERRILL. If a solution means, Mr. Chairman, I am going to 

be—whether I am actually under oath or not, I feel that I am 

under oath and so I have to tell you what is the truth. It is the 

functional equivalent of being under oath. I wasn’t sworn but you 

can swear me in. The truth is that we said to the applicant that 

the problems of economic impact— 

Chairman MANZULLO. No, I understand. Can this thing—I mean, 

you know— 

Mr. MERRILL. You have got a law. You have got the Congress 

mandating in our charter that we cannot impact an exporter, somebody who has 15,000 jobs at stake and they have a whole set of 

papers which— 

Chairman MANZULLO. I am going to change the Ex-Im charter 

when it comes up for reauthorization to remove the power that you 

think you have to be the sole determinant as to whether or not this 

thing comes before the board. You will be out by then. You retire 

what, in June or July? 

Mr. MERRILL. Mr. Chairman, that hasn’t been determined. 

Chairman MANZULLO. Well, maybe I can be part of that. 

Mr. MERRILL. Perhaps. But if you are not part of it on this side 

there will be somebody else on the other side. 

Chairman MANZULLO. No, it isn’t. I am just asking you to make 

a decision. 

Mr. MERRILL. I made a decision. The decision was not one the 

applicant liked. 

Chairman MANZULLO. Then what do you need from SMIC here 

where it says we remain open to considering such a new proposal? 

What do you want from them? 

Mr. MERRILL. I want something from SMIC that says that there 

is not an economic impact on somebody with 15,000 employees who 

is invoking the law against us. 

Chairman MANZULLO. All right. So anybody who comes in there 

and says this has an economic impact on us, then you are going 

to accept their theory of it? 

Mr. MERRILL. Not automatically, but we would certainly consider 

it. 

Chairman MANZULLO. Well, I think you have. 

Mr. MERRILL. We have in this case, yes. 

Chairman MANZULLO. I think you have, and I think you have 

also done a disservice to the United States Congress by not allowing the other members of the Board of Directors duly appointed by 

the President to get involved in the decision making process. You 

are not a king of this organization. 

Mr. MERRILL. Mr. Chairman, I think that I, and my general 

counsel— 

Chairman MANZULLO. I am just telling you right now. 

Mr. MERRILL. I am doing the best job I can. 

Chairman MANZULLO. Well, I don’t think it is enough, Phil. I 

really don’t. You have been evasive. You have been dodging questions here. You didn’t know what the word ′′pending′′ was. Maybe 

you have a problem with your staff. Maybe you have somebody else 

38

running the organization that is not telling you what is going on. 

But this man sitting here in the crossfire of this period of time, I 

think you can see what happened to you, right, Michael? Do you 

see what happened to you when they said to go file a lawsuit in 

China? 

Go ahead. 

Mr. MERRILL. Mr. Chairman, I am old enough to have served in 

enough administrations, I have run enough businesses to know 

that when I don’t know something I am infinitely better off to say 

I don’t know it. And the technical context of the world ′′pending′′ is not something that I understood any more than this gentleman 

over here understood. I do not know that. What I know is that I 

conveyed—we conveyed clearly and substantially to the applicant 

that we were not going to go forward with this deal because of the 

economic impact and additionality issues. We are not supposed to 

make loans to somebody because they are 80 basis points less than 

another institution. 

Chairman MANZULLO. Well, that is fine. It says that we remain 

open to considering such a new proposal if it is presented to ExIm. That is your letter. Did you see this letter? 

Mr. MERRILL. Yes, I saw it. I cleared it and it is my signature. 

Chairman MANZULLO. It says we remain open to considering 

such a new proposal. 

Mr. MERRILL. Such a new proposal refers to an industrywide consensus. 

Chairman MANZULLO. That is correct. So what that means is 

this. If one person out there objects and there is no consensus, just 

like that you turn it down. 

Mr. MERRILL. What it means is there is a public hearing process, 

Mr. Chairman. 

Chairman MANZULLO. I understand that. 

Mr. MERRILL. There is a public hearing process. People have the 

right to respond to their public hearing process. 

Chairman MANZULLO. I am going to be preparing amendments 

that I am going to give to Mrs. Kelly to make it as effective as possible that if two of the five people on the Board of Directors, and 

Phil, if you could work on that legislation, call for a vote on a pending application that they can do that and the application—would 

you be in favor of that? That would get you off the hook. 

Mr. MERRILL. No, I would not. 

Chairman MANZULLO. Why is that? 

Mr. MERRILL. Because I think that I am a private businessman, 

Mr. Chairman. 

Chairman MANZULLO. Not when you work for the government. 

Different rules apply here. 

Mr. MERRILL. Yes, sir. Representation of the rules but also practical rules. This Bank is—again, in a spirit of comity and friendliness, this Bank is rather a government agency operated as a bank 

or a bank operated as a government agency or a combination of 

both. I believe that with the sums of money at stake here that 

somebody, whether it is me or somebody else, has to be the chairman and chief executive officer. If you want to make a co-chairman 

or a co-chief executive officer or multiple chief executive officers, I 

cannot stop the Congress from doing that. You asked me whether 

39

you thought it was wise. I do not think it is wise. I would not be 

in favor of it. 

Chairman MANZULLO. That means you want to make all the decisions yourself. This is a matter of public record. 

Mr. MERRILL. I am required by the mandate of Congress— 

Chairman MANZULLO. Well, this would be a new mandate. Could 

you live with that? 

Mr. MERRILL. Congress can make another mandate. 

Chairman MANZULLO. Could you live with that? By the way, 

there is no mandate that says at the suggestion of one or two members that you can’t go ahead and call a vote. 

Mr. MERRILL. There is a mandate that says we must take account of economic impact. 

Chairman MANZULLO. No. I understand that. Do you think that 

they are ignoring it? 

Mr. MERRILL. Who is they? 

Chairman MANZULLO. The directors. 

Mr. MERRILL. I think the directors, in the two and a half years 

I have been there, the directors have made it clear to me with unmistakable force that they want from me or from the staff and me, 

when a case is presented to the board, they want all the liabilities 

presented. They do not want open questions in it. They expect us 

to make a recommendation that says this is in accordance with all 

legal charter congressional mandates. And in the instant case I 

cannot make that certification. 

Chairman MANZULLO. That is called a rubber stamp. 

Mr. MERRILL. In the instant case I cannot make that certification. 

Chairman MANZULLO. Well, then fine. Then why don’t you tell 

them that? 

Mr. MERRILL. I did. 

Chairman MANZULLO. Tell your board that and then let them 

vote on it. Has it ever occurred to you that they may disagree with 

you? 

Mr. MERRILL. As I said— 

Chairman MANZULLO. These are presidential appointees who are 

appointed to approve loans and disapprove transactions. 

Mr. MERRILL. As I said to you before, Mr. Chairman, I will have 

to repeat it again, that the board has made it unmistakably clear 

to me that they want you to present complete cases. 

Chairman MANZULLO. Is that in writing? 

Mr. MERRILL. It is a good faith understanding. I commit—we 

don’t always make it. I commit in good faith to give them a complete case by the Friday before the Thursday of board meeting, 

which is what the applicant understood, and they commit in good 

faith to vote on it. If I don’t give them the case by then they say 

they have not had enough time to consider it. They do not—some 

of them do not like to consider cases that are not complete. Some 

of them do not—some of them want to ask questions in advance. 

Each director plays his own role. 

Chairman MANZULLO. You have had occasions, have you not— 

Mr. MERRILL. Pardon? 

Chairman MANZULLO. You have had occasions, have you not, 

when you brought a matter before the board and the board looks 

40

at it and they say, you know, we need some further study on this 

and send it back for further study? You have done that? 

Mr. MERRILL. I don’t think so. 

Chairman MANZULLO. Yes, you have. I have called you. 

Mr. MERRILL. Not on actual cases where an applicant has requested a decision. There have been some policy issues where that 

has— 

Chairman MANZULLO. No. Where you bring a matter up and then 

perhaps in the meeting with the directors something comes up and 

you say, you know, let’s ice this thing for 30 or 60 days. That has 

happened? 

Mr. MERRILL. That has happened with regard to certain kinds of 

policies, like whether you are open in a country or not or whether 

you change the rating of a country or risk rating or so forth. 

Chairman MANZULLO. It has also happened with regard to certain applicants where it is come up before the board. 

Mr. MERRILL. I can only tell you what I think is the truth. I will 

stand corrected if I am wrong. But in the nearly two and a half 

years that I have been there I believe that there has been no case, 

meaning a money case, that is a $10 million or more case that I 

can recall where the board has said send this back for further 

study. There are several cases where the board, or several instances where the board objected when they saw the case before 

the board meeting, before the board meeting, and said that there 

were issues in this case which were unresolved and they didn’t 

want to vote on it until the issues were resolved by the management. 

Chairman MANZULLO. Has the board ever disagreed with your 

recommendation? 

Mr. MERRILL. Yes. 

Chairman MANZULLO. Have you ever gone before the board and 

you took the advice of the board? 

Mr. MERRILL. We had a vote. That is why they are there, to vote. 

Chairman MANZULLO. Has it ever fallen upon you to present this 

before the board and let them vote on it? 

Mr. MERRILL. The answer I come back to you again is the 

board— 

Chairman MANZULLO. Yes or no. I mean, get this monkey off 

your back. Present it to them. Let them vote on it. 

Mr. MERRILL. Mr. Chairman, I don’t know how many times I can 

go back to the same point. 

Chairman MANZULLO. Well, you don’t have to because you are 

not making the point. The point is this. You go before them with 

the recommendation that it pass and then you will follow their will. 

Is that correct? 

Mr. MERRILL. No. Sometimes I have gone before them and they 

have voted the other way. 

Chairman MANZULLO. No. Have you ever gone before them with 

a recommendation that the application not be granted? 

Mr. MERRILL. That the application not be granted? 

Chairman MANZULLO. Right. 

Mr. MERRILL. For reasons of illegality or violation of the charter, 

no. 

41

Chairman MANZULLO. That still doesn’t answer my question. 

Have you ever gone before your board with an application and say 

look, this thing is here, we need to dispose of it, I personally think 

it has a lot of problems but I will leave it up to you because I know 

you have an opinion on it? 

Mr. MERRILL. Well, we do that every week. 

Chairman MANZULLO. Well, then why didn’t you do it with this 

one? 

Mr. MERRILL. Because what the board asks of me and which I 

am obligated to provide is a complete case statement. 

Chairman MANZULLO. Yeah. You are saying that the violation is 

illegal--the application is a violation of the charter or it is illegal. 

Mr. MERRILL. We have a mandate from Congress that— 

Chairman MANZULLO. But you are the one that makes the decision. Do you understand what I am trying to get at? Do you understand that I don’t have—I don’t think that one person should sit 

in that organization and make the decisions. 

Mr. MERRILL. In every company, Mr. Chairman— 

Chairman MANZULLO. No. This is not a bank. You can go work 

for a bank if you want. You have done that before. 

Mr. MERRILL. It is a bank. 

Chairman MANZULLO. You are accountable to Congress and you 

are accountable to the people. So other people have to weigh in on 

these decisions. 

Mr. MERRILL. Congress has mandated that we consider— 

Chairman MANZULLO. I understand that. I have not disagreed 

with you on that. I have never disagreed with you on that. 

Mr. MERRILL. Mr. Chairman. 

Chairman MANZULLO. But you are not acting— 

Mr. MERRILL. You are extremely articulate. 

Chairman MANZULLO. I am not extremely articulate. Phil, I am 

going to recommend the President not reappoint you, okay? And 

maybe he ought to clean house too with the staff. 

Mr. MERRILL. Mr. Chairman, I am doing the best job that I can 

do. 

Chairman MANZULLO. Well, you know, you have got this Member 

here who has been a big—I have carried your flag for years, Phil. 

You know that. 

Mr. MERRILL. I know that. 

Chairman MANZULLO. When people were stomping on Ex-Im 

Bank, who was out there trying to save the Ex-Im Bank? 

Mr. MERRILL. Mr. Chairman, I am very aware of your support of 

the Ex-Im Bank and I am very grateful for it, as I said in my statement, as I say again. 

Chairman MANZULLO. Well, you are not willing to sit down with 

the principals and me to try to come up to try to resolve this thing. 

Mr. MERRILL. It is not up to me to resolve a private— 

Chairman MANZULLO. Yes, it is. 

Mr. MERRILL. No, it is not. 

Chairman MANZULLO. It is up to you to resolve it. 

Mr. MERRILL. It is up to the applicant to resolve it. 

Chairman MANZULLO. Oh, the applicant. You can’t sit there with the parties and say look, you guys, we only have $770 million at 

stake, let’s try to figure out and get this thing done? Bring the 

42

principals together? Is that legal to do that, Mr. Saba? Is that 

legal? Could he do that, as long as you don’t have or have the other 

board members there, whatever your rules are. Could he do that? 

Mr. SABA. You know, we are not doing anything to violate the 

antitrust law. From a board and a bank perspective, that would not 

be the case. 

Chairman MANZULLO. Of course it is not. There is no problem 

there. You are trying to resolve this thing. 

Mr. SABA. It depends what the resolution is. Clearly, if they are 

carving up the market, no, then we couldn’t do that. 

Chairman MANZULLO. Well— 

Mr. SABA. It was the applicant and the main exporter that said 

that they were going to go back and provide this industry solution. 

They have not come back to us on that front since they have said 

that. 

Chairman MANZULLO. I think the fact that—have the applicants 

given you more data since you had that conversation with them? 

Mr. SABA. At this hearing was the first that I have heard that 

there have been—I know there have probably been ongoing discussions with the loan officers. I have not seen submissions of additional data. This is the first that I have heard of, you know, any 

additional data potentially being provided. The first we have heard 

from the applicant was basically the letter that was presented after 

this hearing was set up. 

Ms. HADFIELD. Mr. Chairman, may I just interject that initially 

when an economic impact analysis was done by the Bank we heard, 

through the grapevine, through the economic staff at the Bank, 

that it was positive and that until the objections were raised by one 

single company this loan was going to go through, this loan guarantee. I want to understand—and then once those objections were 

raised the loan was scaled back to address these objections and 

there is no competitive impact now, with respect to the equipment 

that will be shipped to China, which will be used for two fabs that 

are not involved in any D-RAM-related products, and I don’t understand how the economic impact analysis could be negative. 

Chairman MANZULLO. Well, SMIC, they made concessions, isn’t 

that correct? 

Ms. HADFIELD. That is correct. So it has been scaled back significantly— 

Chairman MANZULLO. Since the first of the year. 

Ms. HADFIELD. Already to address any potential— 

Chairman MANZULLO. We all seem to know about it here but 

this— 

Ms. HADFIELD. So it is not like the applicant hasn’t done anything to address this issue, and I am kind of surprised that now 

I am hearing that the economic impact is definitely going to be negative. I don’t quite understand that. 

Mr. SABA. If I could address—we are going to set the record 

straight. The process to scale this back in order to save this transaction by just doing the two fabs where there wasn’t going to be 

D-RAM production was one that I made, and it was discussed with 

the senior management in an attempt to see if we could move this 

forward. We have tried to put out solutions to this and there have 

been, and there are still significant issues, questions raised about 

43

economic impact. They deal with issues, as the chairman has said 

before, relating to oversupply even in logic, competition in logic, the 

enforceability of covenants, the ability to convert these fabs from 

logic to D-RAM production. They all remained open at the time 

that we were asked to provide a decision. I don’t know why there 

is some sense here, that getting a ‘‘no’’ makes this company better 

off. Usually you ask about our experience with coming with denials 

to the board. Applicants don’t want us to do that. They may say 

they want a quick response, but they then—if that response is 

going to be negative, they work with the Bank to seek resolution. 

And that is what we did here, until they determined that they said 

they had no more time. 

Chairman MANZULLO. Well, SMIC is still offering to make concessions. I mean, I need to get this kicked up to the highest level. 

I mean— 

Mr. MERRILL. It got kicked up to the highest level. You are not 

the only one who wanted it to get kicked up to the highest level. 

Chairman MANZULLO. No, I mean to your level. 

Mr. MERRILL. It did get kicked up to my level. 

Chairman MANZULLO. No, they are still making concessions. Are 

you aware of the concessions they have been making over the past 

couple of months? 

Mr. MERRILL. I am not aware of anything from them. 

Chairman MANZULLO. I guess that is the point. 

Mr. MERRILL. Until the letter was received a couple of days ago, 

when this hearing—I mean in the last 2 days before this hearing. 

Chairman MANZULLO. Mr. Saba, you came up with a proffered 

solution, is that correct? 

Mr. SABA. I don’t know if it is a unique solution, but I was the 

one that pushed that through with staff and discussions and then 

staff discussions with SMIC as a potential way to transact— 

Chairman MANZULLO. When did that discussion come up? 

Mr. SABA. I believe that was in probably early January. 

Chairman MANZULLO. Okay. First of all, I commend you for trying to come up with a solution on this because that shows a lot of 

good faith. 

Mr. SABA. And we discussed that solution with the Chairman before it was put forward. It was done with his blessing. 

Mr. MERRILL. We thought that would be helpful. We have tried. 

We have tried again and again. 

Chairman MANZULLO. Well, where is—what is the status now? I 

mean is the objector just saying that is it, he is not interested? 

Mr. SABA. I don’t know the status because it was both the applicant and the main exporter that asked to go back and they felt fairly confident that they could achieve this industrywide solution. Obviously, as you have indicated, they have not been able to do that, 

and that is why we have seen this stepped up effort to pressure the 

Bank into doing this transaction. 

Chairman MANZULLO. I am pressuring you to make a decision. 

Mr. MERRILL. We made a decision. 

Chairman MANZULLO. I don’t have a dog to hunt in this thing. 

The other people do. 

Mr. MERRILL. Mr. Chairman, you keep wanting a direct answer 

and I keep trying to give it to you. We have made a decision. We 

44

are not taking this case forward to the board. Now, that decision 

was not the decision they wanted to hear. 

Chairman MANZULLO. Don’t use the word ′′we,′′ use the word ′′I.′′ Mr. MERRILL. I said ′′we.′′ Chairman MANZULLO. No, ‘‘you’’ made the decision. 

Mr. MERRILL. Mr. Chairman, I believe the decision was made by 

senior management collectively. Was it cleared by me? And do I approve of it? Am I the place where the buck stops? Yes. 

Chairman MANZULLO. It has got to start there first. 

Mr. MERRILL. The buck comes up. It does not go down. The applicant didn’t like the decision that they got. 

Chairman MANZULLO. They didn’t get a decision. 

Mr. MERRILL. They got a decision. They have one right now. If 

you have two co-chief executive officers or three co-chief executive 

officers I can’t—maybe the decision would be different. 

Chairman MANZULLO. No. You made the decision yourself. 

Mr. MERRILL. Yes. 

Chairman MANZULLO. And? 

Mr. MERRILL. I approved the decision, and I take responsibility 

for it. 

Chairman MANZULLO. And you let your staff come to you with 

suggestions and you followed those. But you never presented this 

before the entire board, to give any of these marvelous public servants also appointed by the President, to get their view. 

Mr. MERRILL. It has been my experience, as I have said before, 

that the board wants me to present those cases— 

Chairman MANZULLO. You have said that over and over again. 

You have said that over and over again. And I just don’t think this 

is going to get anywhere, except I do know this. There is going to 

be some very substantial changes if I have anything to do with it 

with the governance of Ex-Im. You must be more accountable to 

the applicants than you are now. And you aren’t. 

I have no further questions. You know, in 7 days, you know what 

I want, Mr. Miller? 

Mr. MILLER. Yes. 

Chairman MANZULLO. I want you to prepare—it doesn’t have to 

be in final form, but close to final form and get it to Mr. Eskeland. 

This is on the dealer finance. It would be an application form, if 

there is a separate application form, plus the guidelines of how 

people fit into it and how to implement it. This is something perhaps you were going to prepare for your—when is your expo coming up? 

Mr. MILLER. Next Thursday Mr. Chairman. 

Chairman MANZULLO. Next Thursday. 

Mr. MILLER. Yeah. 

Chairman MANZULLO. So you need it before then. Thursday is—

yeah, you are going to roll it out. 

Mr. MERRILL. We have already rolled it out. 

Chairman MANZULLO. No, you haven’t. You can’t roll it out unless somebody takes advantage of it, and not one person has signed 

up for it. But I want you to meet with Mr. Eskeland and bring that 

in. I presume that is what you would be giving to the people at 

your show, is that correct? 

Mr. MILLER. Yes, Mr. Chairman. 

45

Chairman MANZULLO. Mr. Miller, do you expect this to be a 

lengthy set of guidelines? Is it a couple of pages or can you give 

us a thumbnail sketch? It is not regulations. I mean we are not in 

the area there. 

Mr. MILLER. Mr. Chairman, as in all our products when we try 

to roll them out we try to make it as simplified a process as possible. We will try to do it in as minimum amount of effort to make 

it clear and understandable especially for small businesses. 

Chairman MANZULLO. Okay. And then they would be using 

standardized forms that are already in existence? 

Mr. MILLER. Yes. 

Chairman MANZULLO. Okay. These would be the guidelines and 

how they fit into that. 

Mr. MILLER. Mr. Chairman, there is a new insurance policy that 

was geared to incorporate the changes that we made for this particular program. 

Chairman MANZULLO. Okay. And then I want a date on fast 

track. I am not going to wait 2 years. I have had all kinds of promises. It is up to you to come up with a product. When is that going 

to be done? 

Mr. MERRILL. It is a question of what the reactions of the banks 

are to this third round. The third round, we have—they are our 

customers. There are 14,000 banks in the United States. About 175 

of them do trade finance. We try—some expertise in trade finance. 

Chairman MANZULLO. Go ahead. 

Mr. MERRILL. Mr. Miller and other members of our staff have 

made three rounds with these banks and they all had problems. 

We have had to come back through the—just to meet our customer’s requests. But no deal has been stopped. 

Chairman MANZULLO. I just don’t— 

Mr. MERRILL. So we will get it done as soon as I can get the 

banks, as soon as we can get the banks to agree to a statement 

that is common to all of them, which was the purpose of having the 

fast track. 

Chairman MANZULLO. We had— 

Mr. MERRILL. It is not fast track if you have 175 banks each with 

a different set of criteria. 

Chairman MANZULLO. I have got some interesting— 

Mr. MERRILL. It is a little bit like herding cats. We think we 

have got it done. I thought we had it done 6 months ago. I am 

equally frustrated. 

Chairman MANZULLO. What can I do to get this thing done? 

What can I do to help you? 

Mr. MERRILL. Say it again, sir. 

Chairman MANZULLO. What can I do to help you to get this fast 

track done? What if I convene a meeting of the principals? 

Mr. MERRILL. I am just as frustrated as you are, Mr. Chairman. 

Chairman MANZULLO. No, you aren’t. The people that get turned 

down by you come to me and the CEO doesn’t wait 2 years to get 

a project done. 

Mr. MERRILL. Mr. Chairman, when our senior executives went 

around to talk to these banks they complained to us about the differences between asset-based lending and commercial lending, different standards. They didn’t like the form. It didn’t fit each indiVerDate 0ct 09 2002 11:55 May 23, 2005 Jkt 000000 PO 00000 Frm 00049 Fmt 6633 Sfmt 6633 G:\HEARINGS\21228.TXT MIKEA
46

vidual bank’s standards. We have done this three times. It is 

herding cats. I think we have got it done right this time, but I don’t 

know. I have to rely on both counsel and our staff who is in contact 

with these banks. We want a form that makes it easier for them. 

If each bank has a separate standard, then it is not fast track anymore. You can call it fast track but it wouldn’t be fast track. 

Chairman MANZULLO. I understand that. You know, this is a 

mandate of Congress. This is something that we want done and we 

can’t accept the fact that 2 years have come and passed. I mean, 

you know, this is the testimony, your testimony, May 6 of 2004, before the Subcommittee on Domestic International Monetary Policy, 

on which I sit. This is a transcript, May 6 of 2004, your testimony 

before the Subcommittee on Domestic and International Monetary 

Policy on the Financial Services Committee, and I sit on that Subcommittee. ‘‘And the commitments, we are focusing on three key 

priorities, putting customers first, improving cycle time, and expanding support for knowledge-based and services exports. And 

putting customers first, we are implementing the three guiding 

principles President Bush has set for the government; namely, that 

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

‘‘For Ex-Im Bank putting customers first means ensuring that 

every customer receives quick answers and clear responses. We 

have assigned relationship managers to assist customers who do a 

high volume of business through Ex-Im Bank in order to ensure 

consistent processing.’’ 

‘‘And as I discussed below we have made our website easier to 

use, with improved access to information, application and contracts. By improving cycle time, Ex-Im bank is particularly focused 

on reducing our transaction process cycle time in order to keep—

in order to help our customers offer timely financing to their buyers. As any exporter knows, timeliness can mean everything when 

you are competing for international sales. To improve cycle time 

Ex-Im Bank has simplified applications for financing products that 

most benefit small business exporters. We are also modernizing 

other systems and procedures.’’ And so—that is a year ago. 

And so I have offered, as I have offered here with Mr. Vaden, in 

fact I just settled a monstrous case in my office, not using my legal 

hat, involving probably over a million dollars where the agencies 

were going at it with a small business person. And we just sat 

down and got the thing resolved. And so I am offering to sit down 

with you and a representative from the objecting group and the applicant to try to resolve this thing amicably. And you are not—are 

you willing to participate in something like that? 

Mr. MERRILL. Not without counsel, Mr. Chairman. 

Chairman MANZULLO. What is that? 

Mr. MERRILL. I want counsel with me. 

Chairman MANZULLO. That is okay. Would you be willing to participate in a meeting like that? 

Mr. MERRILL. I want to be clear— 

Chairman MANZULLO. I mean, can you give me a yes or no? 

Mr. MERRILL. I just don’t know what the answer is. Peter, what 

is the answer? 

47

Mr. SABA. I am sorry. Are we talking about this meeting on the 

SMIC transaction? 

Chairman MANZULLO. Yeah, very informal. We would have one 

representative from SMIC and one from the objectors and then 

Peter and then Phil, you. 

Mr. MERRILL. Mr. Chairman, why can you not meet with the two 

alone? You have a lot more power. 

Chairman MANZULLO. Because you made the decision. No, you 

have a lot more power than I do. You make the decision. I mean 

are you willing to do that? 

Mr. MERRILL. Mr. Chairman, something doesn’t add up to me. 

There is something there—I am punchy at the moment but something there does not add up. I have representations from the—a 

stack of documents inch inches thick that says we feel there is an 

economic impact on this deal and a set of documents, a set of— 

Chairman MANZULLO. No, you don’t understand. Maybe that is 

the problem, Mr. Merrill. I don’t think you understand. I have offered to sit down with you and Peter and one person from the objecting group and one from SMIC to see if there can be a resolution, that these questions can be answered to the satisfaction of ExIm Bank. 

Mr. MERRILL. Mr. Chairman, in that— 

Chairman MANZULLO. Because I think that is picking up where 

Peter left off when he made that suggestion. 

Mr. MERRILL. In that context the answer is 100 percent yes. We 

would never refuse to meet with a Member of Congress. 

Chairman MANZULLO. All right. Do you have the calendar? Do 

you have my calendar there? Do you know your availability next 

week, Phil? Are you going to be in town, do you have any idea? Are 

you going to be out of the country? Peter, do you know? 

Mr. MERRILL. Well, we have the conference Thursday and Friday. 

Chairman MANZULLO. Okay. 

Mr. MERRILL. That would be the 7th and 8th. 

Chairman MANZULLO. Well, listen. 

Mr. MERRILL. It would be infinitely better for me the following 

week when I know I am clear. We can probably make time. I am 

not sure. I have to check my schedule. 

Chairman MANZULLO. Okay. I take your word. 

Mr. MERRILL. But I am quite willing to do this. 

Chairman MANZULLO. Okay, that is fine. I have no further—

Peter, are you point on this, on setting up the meeting? 

Mr. SABA. I have exchanged cards with your staff. 

Chairman MANZULLO. Okay. 

Mr. MERRILL. We will try and set up a schedule. 

Chairman MANZULLO. Okay. Well, listen. This meeting has been 

very long. Then, Peter, we are going to meet with Mr. Vaden as 

soon as we conclude the hearing. And the hearing is—first of all, 

thank you for your patience. Phil, I am glad to see that you are 

up and at it after that open heart surgery. 

Mr. MERRILL. Thank you. 

Chairman MANZULLO. You gave us a scare. 

Mr. MERRILL. You don’t have to—I thank you for the comment, 

but I am perfectly capable of responding to a strong and committed 

48

Congressman who is fighting for something he believes in. I have 

no problem with this. 

Chairman MANZULLO. Appreciate this. This meeting is adjourned. 

[Whereupon, at 6:45 p.m., the committee was adjourned.]

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