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97–269PDF 2015

EVALUATING THE EXPORT–IMPORT BANK IN THE

GLOBAL ECONOMY

HEARING

BEFORE THE

SUBCOMMITTEE ON TERRORISM, 

NONPROLIFERATION, AND TRADE

OF THE

COMMITTEE ON FOREIGN AFFAIRS 

HOUSE OF REPRESENTATIVES

ONE HUNDRED FOURTEENTH CONGRESS

FIRST SESSION

OCTOBER 23, 2015

Serial No. 114–102

Printed for the use of the Committee on Foreign Affairs

(

Available via the World Wide Web: http://www.foreignaffairs.house.gov/ or

http://www.gpo.gov/fdsys/

(II)

COMMITTEE ON FOREIGN AFFAIRS 

EDWARD R. ROYCE, California, Chairman 

CHRISTOPHER H. SMITH, New Jersey 

ILEANA ROS-LEHTINEN, Florida 

DANA ROHRABACHER, California 

STEVE CHABOT, Ohio 

JOE WILSON, South Carolina 

MICHAEL T. MCCAUL, Texas 

TED POE, Texas 

MATT SALMON, Arizona 

DARRELL E. ISSA, California 

TOM MARINO, Pennsylvania 

JEFF DUNCAN, South Carolina 

MO BROOKS, Alabama 

PAUL COOK, California 

RANDY K. WEBER SR., Texas 

SCOTT PERRY, Pennsylvania 

RON DESANTIS, Florida 

MARK MEADOWS, North Carolina 

TED S. YOHO, Florida 

CURT CLAWSON, Florida 

SCOTT DESJARLAIS, Tennessee 

REID J. RIBBLE, Wisconsin 

DAVID A. TROTT, Michigan 

LEE M. ZELDIN, New York 

DANIEL DONOVAN, New York 

ELIOT L. ENGEL, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

ALBIO SIRES, New Jersey 

GERALD E. CONNOLLY, Virginia 

THEODORE E. DEUTCH, Florida 

BRIAN HIGGINS, New York 

KAREN BASS, California 

WILLIAM KEATING, Massachusetts 

DAVID CICILLINE, Rhode Island 

ALAN GRAYSON, Florida 

AMI BERA, California 

ALAN S. LOWENTHAL, California 

GRACE MENG, New York 

LOIS FRANKEL, Florida 

TULSI GABBARD, Hawaii 

JOAQUIN CASTRO, Texas 

ROBIN L. KELLY, Illinois 

BRENDAN F. BOYLE, Pennsylvania

AMY PORTER, Chief of Staff THOMAS SHEEHY, Staff Director

JASON STEINBAUM, Democratic Staff Director 

SUBCOMMITTEE ON TERRORISM, NONPROLIFERATION, AND TRADE

TED POE, Texas, Chairman 

JOE WILSON, South Carolina 

DARRELL E. ISSA, California 

PAUL COOK, California 

SCOTT PERRY, Pennsylvania 

REID J. RIBBLE, Wisconsin 

LEE M. ZELDIN, New York 

WILLIAM KEATING, Massachusetts 

BRAD SHERMAN, California 

BRIAN HIGGINS, New York 

JOAQUIN CASTRO, Texas 

ROBIN L. KELLY, Illinois 

(III)

C O N T E N T S 

Page

WITNESSES 

Ms. Diane Katz, senior research fellow in regulatory policy, The Institute 

for Economic Freedom and Opportunity, The Heritage Foundation ............... 4

Mr. T.J. Raguso, executive vice president, International Division, Amegy 

Bank National Association .................................................................................. 18

Mr. Tyler Schroeder, financial analyst, Air Tractor Inc. ...................................... 26

Loren B. Thompson, Ph.D., chief operating officer, Lexington Institute ............ 33

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Ms. Diane Katz: Prepared statement ..................................................................... 7

Mr. T.J. Raguso: Prepared statement .................................................................... 20

Mr. Tyler Schroeder: Prepared statement ............................................................. 28

Loren B. Thompson, Ph.D.: Prepared statement .................................................. 35

APPENDIX 

Hearing notice .......................................................................................................... 54

Hearing minutes ...................................................................................................... 55

The Honorable Ted Poe, a Representative in Congress from the State of 

Texas, and chairman, Subcommittee on Terrorism, Nonproliferation, and 

Trade: Statements from: 

R. Bruce Josten, Chamber of Commerce of the United States of America ..... 56

Nate LeMar, Draper Inc. ..................................................................................... 57

Don Nelson, ProGauge Technologies Inc. ........................................................... 58

Steve Wilburn, CEO, FirmGreen Inc. ................................................................ 59

Linda Menghetti Dempsey, Vice President, International Economic Affairs, 

National Association of Manufacturers .......................................................... 60

The Honorable Ted Poe: The Heritage Foundation Issue Brief, ‘‘Export-Import 

Bank Impervious to Reform,’’ by Diane Katz, dated February 24, 2015 ......... 68

(1)

EVALUATING THE EXPORT–IMPORT BANK IN 

THE GLOBAL ECONOMY 

FRIDAY, OCTOBER 23, 2015

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON TERRORISM, NONPROLIFERATION, AND TRADE,

COMMITTEE ON FOREIGN AFFAIRS,

Washington, DC. 

The subcommittee met, pursuant to notice, at 9:30 a.m., in room 

2172, Rayburn House Office Building, Hon. Ted Poe (chairman of 

the subcommittee) presiding. 

Mr. POE. The subcommittee will come to order. Without objection, all members may have 5 days to submit statements, questions, extraneous materials for the record subject to the length limitation in the rules. 

I want to welcome all of our witnesses. 

And at this time, I will give my opening statement and then 

yield to the ranking member Mr. Keating. 

If the United States’ economy wants to grow, it has to export. 

Ninety-five percent of a business’ potential customers are not in the 

United States. They are in other countries. The more foreign customers we can sell American-made goods to, the more jobs we create right here in the United States. 

Trade is the lifeblood of Houston in the State of Texas. Houston 

exports more than any other city in the United States. In Texas, 

more than one in five jobs are supported by trade. Fifty percent of 

the economy of Houston, Texas, is based on the Port of Houston. 

The Port of Houston is an export port. It exports all types of items 

throughout the world. The question for us today, does the ExportImport Bank help U.S. businesses trade and grow exports in a 

global economy? 

Congress founded the Export-Import Bank to facilitate American 

trade overseas and help guarantee financing for U.S. businesses. 

The charter has been renewed every year since 1934. That streak 

of 80 years ended this year. The bank expired on July the 1st. 

The concept of an export credit agency is not unique to the 

United States. The U.S. Ex-Im Bank is one of at least 85 export 

credit agencies throughout the world. Some countries have more 

than one. Supporters of reauthorizing Ex-Im Bank argue that 

eliminating the bank is tantamount to unilateral disarmament, 

putting U.S. companies at a competitive disadvantages with their 

competitors worldwide. There is no reason to believe, they say, that 

other counties will follow our lead to abolish their export credit 

2

agency. Instead, other countries like China and Russia will be 

happy to take our business for themselves. 

In the last few months, we have seen that start to happen. GE 

announced that 100 jobs will be moved next year from a facility 

near my district in Houston, Texas, to Hungary and China. Why? 

So GE can access foreign credit export credit for its customers of 

gas turbines. The lapse in reauthorization impacts more than the 

big companies like GE. It affects many small businesses. Cindy 

Lewis, president of AirBorn Inc., an electronic connector manufacturer in Georgetown, Texas, put it this way: ‘‘Maybe Boeing can 

weather a shutdown of the Ex-Im Bank, but small businesses in 

Texas that make up nearly 90 percent of transactions cannot.’’

Supporters of the bank also argue that Ex-Im only finances deals 

that the private sector cannot finance alone. For some large infrastructure projects in international markets, the bid will not even 

be accepted if a company does not have access to an export credit 

agency. 

And some billion-dollar opportunities for American companies 

and international markets require the availability of export credit 

before they will even entertain a bid. Without Ex-Im Bank to level 

the playing field, supporters say American companies will continue 

to lose out to foreign competitors backed by aggressive government 

support. 

However, on the other hand, opponents of the bank see it as corporate welfare subsidized by taxpayer dollars. They believe the 

companies will be able to get the private financing needed for their 

business opportunities overseas. In a free market, the United 

States Government, opponents argue, should not pick winners and 

losers. While they admit that some people may lose their jobs, they 

also say this is a global economy and the companies moving jobs 

overseas, that will happen regardless of the Ex-Im Bank. They also 

say that this is only a minor fraction of U.S. exports being only 2 

percent. 

The bottom line is this: Buyers overseas want American products 

and no one innovates better than the United States worker. When 

a person combines the strength of the American spirit with a level 

playing field, American companies can win and can compete. The 

purpose of this hearing is to find out whether the unilateral eliminating of the American Ex-Im Bank has put American export industry and jobs at a global disadvantage. 

And I will now yield to the ranking member from Massachusetts, 

Mr. Keating. 

Mr. KEATING. Thank you, Chairman Poe. 

And thank you for the timely and urgent hearing we are having 

today on the Ex-Im Bank. It is important to recognize, first of all, 

that the Ex-Im Bank is an independent nonpartisan agency that 

has helped finance the export of American goods and services for 

over eight decades. Not only does the agency operate at no cost to 

taxpayers, but it has been very prolific in sustaining 1.5 million 

jobs and increasing our private-sector jobs back here at home. 

It produced funds each year without any participation of taxpayer funding. Yet today, partisan politics has allowed this important tool of American business interest to lapse. Since its expiration in June, our businesses and workers have been placed at a disVerDate 0ct 09 2002 14:15 Nov 10, 2015 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 F:\WORK\_TNT\102315\97269 SHIRL
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advantage to their international competitors and American jobs are 

moving overseas. This month, two major American job supporters 

announced that they are forced to send jobs overseas due to the ExIm Bank’s expiration and the ongoing battle over its reauthorization. 

At the very least, 500 Americans will lose their jobs and this is 

only the beginning. Small businesses and businesses that do exporting need certain protections to tackle the new markets and the 

expanding markets that are there creating the most growth in jobs 

in the U.S. With nearly 60 other export credit agencies around the 

world trying to win jobs for their own countries, Ex-Im Bank helps 

level the playing field for American businesses contributing to decreasing our trade deficit and encouraging exports. This agency ensures that U.S. companies do not lose out on a sale because attractive financing exists in foreign countries. 

Now, I have been to the Port of Houston that the chairman has 

mentioned. If you just visualize the scope of that and the international commerce that is coming through that, you can see at one 

glance the impact of our not being able to be competitive with other 

countries. But you don’t have to go to the Port of Houston to see 

that. You can go to each and every State in the United States. 

One of our witnesses, Mr. Thompson, is here from my home 

State and he comes from Plymouth, Massachusetts. And we could 

have witnesses from every State in the Union here testifying today 

as to what the Ex-Im Bank does. In Massachusetts, the Ex-Im supported over $3 billion in exports and 22,000 jobs while on the 

whole, the country has had $235 billion in exports that is supported by the bank. 

However, as a result of the lapse of authority on July 1, Ex-Im 

has halted all activities on new and pending applications. Since 

then, over 400 insurance policies, many of which were predominantly small businesses, have expired totaling over $490 million in 

that period. Once more, at the time of the lapse, more than $9 billion in transactions were sitting in the pipeline. Last May, the 

chairman and I held a hearing on the important role of trade and 

promotion agencies. We were joined by business owners and supporters from both sides of the aisle in discussing the critical role 

of Ex-Im and the imperative to reauthorize its role. And we were 

warned of the job losses and disadvantages that would result in 

such a lapse. 

Regrettably, we are now starting to see those predictions come 

true. So I welcome the testimony and the insight of our witnesses 

today, and look forward to the conversation that will ensue. And 

it is my hope that today’s hearing will serve as a resource for all 

of our colleagues who are not sold on the economic import of reauthorizing this agency. It is a critical and urgent hearing. It is timely, and I hope it produces swift results in reauthorizing the bank. 

With that, I yield back, Mr. Chairman. 

Mr. POE. I thank the gentleman. 

The Chair will yield 1 minute to Mr. Heck from Washington for 

his opening statement. 

Mr. HECK. Thank you very much, Mr. Chair. Might I just begin 

by extending my sincere appreciation to both you and the ranking 

member for the privilege to sit in and participate in this committee. 

4

I am not a member of this committee. I am instead a member of 

the Committee on Financial Services, which is the general committee of jurisdiction for this issue and one with which I have incredible familiarity in the long effort. 

I want to make just one point as it relates to the impact on the 

economy and businesses. Much is often made about the fact that 

the Boeing Company is the major user of the Export-Import Bank. 

Not much is made about the fact that the Boeing Company doesn’t 

actually make airplanes. They don’t. They design and assemble 

them. The people who actually make the airplanes are the 15,000 

businesses in their supply chain, 6,000 to 8,000 of which are small 

businesses, and that is who will be hurt most by our failure to reauthorize the Bank. 

Thank you again, Mr. Chair, very much. 

Mr. POE. Mr. Castro, do you want to make an opening statement? 

Mr. CASTRO. No. Please, go ahead. 

Mr. POE. All right. Thank you. 

The Chair will now introduce the witnesses and remind the witnesses that you have 5 minutes. We have all of your statements 

made part of the record. And then, after the witnesses make their 

comments, then members of the committee will ask questions. 

Diane Katz is a senior research fellow in regulatory policy under 

the Institute of Economic Freedom and Opportunity at The Heritage Foundation. Prior to joining Heritage in 2010, she served as director of risk, environment, and energy policy at the Fraser Institute. 

T.J. Raguso is the executive vice president and international division manager for Amegy Bank. He has 22 years of experience in 

trade finance, letters of credit, commercial lending, and international correspondent banking. 

Tyler Schroeder is a financial analyst for Air Tractor in Texas. 

He works directly with Ex-Im Bank and their U.S. commercial 

banking partner to facilitate the sale of Air Tractor’s foreign receivables and assignment of Ex-Im Bank insurance coverage. 

And Dr. Loren Thompson is the chief operating officer at the 

Lexington Institute. He previously served as deputy director of the 

Security Studies Program at Georgetown University. 

Welcome to all of you. 

Ms. Katz, you may proceed. 

STATEMENT OF MS. DIANE KATZ, SENIOR RESEARCH FELLOW 

IN REGULATORY POLICY, THE INSTITUTE FOR ECONOMIC 

FREEDOM AND OPPORTUNITY, THE HERITAGE FOUNDATION 

Ms. KATZ. Thank you, Mr. Chairman, Ranking Member Keating, 

and members of the committee. I appreciate your invitation to testify this morning. My name is Diane Katz, and I am a senior research fellow in regulatory policy at The Heritage Foundation. The 

views expressed in this testimony are my own and should not be 

construed as representing any official position of The Heritage 

Foundation. 

My testimony will address whether expiration of the Export-Import Bank charter is affecting U.S. trade. The short answer is no. 

As I detail in my written testimony, there is no shortage of private 

5

export financing, and the primary beneficiaries of Ex-Im subsidies 

continue to secure billions of dollars of new orders without it. For 

small businesses in particular, there are numerous other State and 

Federal programs to facilitate exporting—not that they are necessary. 

Bank proponents have spent tens of millions of dollars trying to 

convince you that Ex-Im is a lifeline for American jobs. But export 

subsidies do not create or even support jobs; they simply redistribute them from unsubsidized firms to subsidized firms. 

It is also important to recognize that Ex-Im finances a meager 

2 percent of all U.S. exports. That means, of course, that 98 percent 

of exports rely on other forms of financing. And, as the chart before 

you illustrates, it is private financing that drives export growth. 

Some Members think that the charter should be reauthorized because Ex-Im is helpful to business in their district. But helpfulness 

does not justify government superseding a fully functioning export 

finance market, particularly when the subsidies produce more 

harm than benefit overall. Were helpfulness the proper standard, 

the size and scope of government would be boundless, as it is in, 

say, China. 

Instead, there are a great many tax and regulatory reforms that 

would help many more businesses to a far greater extent. As it is, 

the Federal Government backs an astonishing 60 percent of all financial liabilities in the U.S. The Federal Reserve Bank of Richmond, which monitors this expanding safety net, has dubbed the 

exercise ‘‘the bailout barometer.’’

In analyzing whether the charter expiration has impeded trade, 

we must identify the primary beneficiaries of Ex-Im programs. 

That turns out to be a select few multinational conglomerates. Between 2007 and 2014, more than 51 percent of Ex-Im subsidies 

benefited just 10 corporations. These companies—Boeing, General 

Electric, Bechtel, and the like—do not lack access to capital. Some 

even run export finance divisions of their own. And most of these 

industry titans also have billions of dollars of back orders that will 

keep them busy for years. The foreign firms that receive most ExIm financing are likewise corporate giants that primarily purchase 

products from other conglomerates, not mainstream businesses. 

A tremendous amount of media attention has largely focused on 

the supposed travails of small businesses without Ex-Im. In actuality, Ex-Im has assisted less than 1⁄2 of 1 percent of small businesses. And even that number is overstated, as detailed in my written testimony. 

The small businesses that have benefited from Ex-Im in the past 

can instead tap the private financing sources used by the vast majority of their brethren. Consider this: Small and medium-size businesses account for 98 percent of all exporters, and exports have 

reached record levels of late. Obviously, then, access to financing 

is not a problem. In the event a business cannot access private capital, it can still export through wholesalers or associate its operations with larger firms or global supply chains. 

Notwithstanding all the fear-mongering about the loss of Ex-Im 

subsidies, finance costs are only one among a variety of factors that 

affect a purchaser’s choice of supplier. Availability, reliability, and 

stability all play significant parts in purchase decisions. And there 

6

should be no question that American ingenuity can trump the export subsidies doled out by foreign governments. 

It is, of course, understandable that Ex-Im beneficiaries want to 

keep their subsidies, but the impact on the rest of the economy 

cannot be overlooked. Because Ex-Im lowers operating costs for foreign businesses, all the American firms without subsidies suffer a 

competitive disadvantage in the global market. 

The only way to eliminate the economic distortions and taxpayer 

risks of export subsidies and the rampant cronyism it perpetrates 

is to reject reauthorization of the Ex-Im charter. 

Thank you. 

[The prepared statement of Ms. Katz follows:]

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Mr. POE. Thank you, Ms. Katz. 

Mr. Raguso, you have 5 minutes. 

STATEMENT OF MR. T.J. RAGUSO, EXECUTIVE VICE PRESIDENT, INTERNATIONAL DIVISION, AMEGY BANK NATIONAL 

ASSOCIATION 

Mr. RAGUSO. Chairman Poe, Ranking Member Keating, and 

members of the subcommittee, thank you for the opportunity to appear before you this morning. 

Amegy Bank is a commercial bank with offices in Houston, Dallas, and San Antonio. We are primarily a commercial lender, which 

is to say we are especially focused on lending to businesses. We 

have more than 40,000 commercial customers in Texas, many of 

which are small businesses. 

As a bank with a regional focus, we make loans that reflect the 

markets we serve. We have a strong energy focus, but our lending 

supports many industries, including manufacturing and service. 

Trade is important to our bank, as Texas has been the largest 

exporting State for the last 12 years and accounts for roughly 12 

percent of U.S. exports. Amegy Bank has a significant presence in 

Houston, the largest exporting city in the U.S. Simply put, when 

you are a bank, you play with the cards you are dealt. In Texas, 

that means international business. 

Amegy Bank has used Ex-Im programs for over 20 years. Last year, Amegy Bank authorized more than $100 million in Ex-Imguaranteed loans in Texas, 60 percent of which were to small businesses. 

Exporting provides revenue diversification to our customers and 

to the economy. This is especially true when conditions are weak 

in the domestic market, as they are now. As we saw in the last 

downturn, Ex-Im utilization increases when the economy is in recession. We see an increased need now, given the impact of lower 

commodity prices and reduced global trade. 

Access to commercial bank borrowing is critical to a company’s 

competitiveness. However, lending to an exporting company presents additional risks. Some of these risks include foreign receivables, geopolitical risk, unfamiliar legal system, and longer delivery 

or payment terms. 

Amegy Bank uses the Ex-Im Working Capital Guarantee Program to mitigate these risks because bank credit policies require a 

conservative view of international risk and restrict borrowing 

against export-related collateral. This means less money to our customers to finance their businesses. There is no equivalent privatesector alternative for this program. Ex-Im complements, rather 

than competes, with Amegy Bank. 

CECA Supply and Services, an oil field equipment exporter focused on the Algerian market, is an example of an Amegy Bank 

customer whose success depends on Ex-Im Bank. CECA encouraged me to share their story with the committee today. 

CECA exports 100 percent of its product and benefits from both 

an Ex-Im working capital loan as well as Ex-Im insurance. Over 

the last 9 years, CECA’s revenues and export financing levels have 

more than tripled. Ex-Im programs have directly supported this 

growth. The words of CECA’s CEO, Maher Touma, explain it best: 

19

‘‘For us, it is not a cheaper source of financing. We are either in 

business or we are not. For us, it is the only financing option.’’

No Ex-Im programs would lead to direct job loss at CECA and 

possibly its suppliers and logistics suppliers. These indirect exporters contribute to exports by supplying and supporting larger companies that are the ultimate exporters. 

Charter expiration negatively impacts both Amegy Bank and its 

customers. Most importantly, we cannot approve new deals or modify existing ones. One customer has a $33 million contract opportunity, but no viable private-sector solution has been found. 

Charter expiration makes long-term planning difficult. Uncertain 

about the availability and the cost of financing has made some customers reluctant to bid on new projects. Our customers invest 

years in developing international markets, so the effects of the recent uncertainly and charter lapse may be felt for years to come. 

Our customers already report increased competition supported by 

foreign export credit agencies, especially the Chinese. China’s 

ECAs have financed more in the last 2 years than Ex-Im has in 

its entire 81-year history. 

The future of Amegy’s existing Ex-Im loan portfolio is uncertain. 

Current deals remain in effect until maturity, when they must be 

repaid or refinanced through other sources. Given the lack of private-sector alternatives, Amegy will look at each transaction to 

evaluate options, which will likely result in less financing available 

and increased cost. 

In conclusion, Amegy Bank uses Ex-Im programs to support 

Main Street businesses, and the loans approved by Amegy Bank 

have supported the creation of hundreds of jobs. We have never experienced a loss on an Ex-Im working capital loan, and our customers have paid over $8 million in Ex-Im guarantee fees over the 

last 18 years. 

Our customers need Ex-Im and have no confidence that global 

trade policy or unilateral disarmament will level the playing field. 

They are primarily concerned with winning the next deal, investing 

in their businesses, making payroll, and beating foreign competitors. No Ex-Im means fewer financing options, higher costs, and 

decreased competitiveness. 

The future of Ex-Im Bank matters to my bank because it matters 

to our customers. Thank you for allowing me the opportunity to 

present our views on this important subject. 

[The prepared statement of Mr. Raguso follows:]

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Mr. POE. Mr. Schroeder? 

STATEMENT OF MR. TYLER SCHROEDER, FINANCIAL 

ANALYST, AIR TRACTOR INC. 

Mr. SCHROEDER. Good morning. Chairman Poe, Ranking Member 

Keating, members of the committee, I thank you for allowing me 

the opportunity to be here today to provide testimony on behalf of 

the 270 employee owners of Air Tractor, Incorporated. Today I am 

going to tell you the wide-ranging benefits that the Export-Import 

Bank has had on our businesses and to thousands of small businesses across the country. 

My name is Tyler Schroeder. I am a financial analyst at Olneybased Air Tractor. Mr. Poe, you have been in Abilene for some 

time; you probably know where Olney is. But for the rest of you 

who don’t know, Olney is the epitome of the middle of nowhere. We 

are 100 miles west of Fort Worth, and we are 200 miles east of 

Lubbock. 

Air Tractor is a small business manufacturing firefighting and 

agricultural airplanes, more commonly known as crop dusters. We 

were founded in 1972 by a gentleman named Leland Snow. We are 

a small business. We have 270 employees, and, since 2007, we have 

been 100-percent employee-owned. 

Like most small businesses in the country, we began by selling, 

producing, and marketing our product mainly to the domestic market. Up until 1995, we only exported 10 percent of our sales each 

year. Those were only facilitated through the requirement of cash 

in advance or an acceptable letter of credit. 

It was in the mid-1990s that Air Tractor began to realize that 

our domestic market was becoming saturated and that for the future growth of Air Tractor the only option was to go overseas. We 

also realized at this time that the requirement of cash in advance 

was not an acceptable method to grow our export portfolio. We had 

to be able to compete on financing in country. 

Naturally, with little expertise in the global export finance arena, 

we turned to our U.S. banking sector, to quickly find that no one 

was willing or able to give medium-term credit to our foreign 

small-business purchasers. 

It was shortly after this that we were eventually led to the Medium-Term Credit Insurance Program at the Export-Import Bank 

of the United States. Through this Medium-Term Credit Insurance 

Program, Air Tractor is able to extend 5- to 7-year medium-term 

financing, normally in the form of a 5- to 7-year promissory note, 

whereas we purchase an insurance policy from the Export-Import 

Bank and attach it to this particular promissory note to defend us 

in the event of a default or economic risk. 

What this also does is allows us to quickly turn around and liquefy that paper by selling it to our U.S. commercial bank for cash. 

Air Tractor is a small business. We are not a bank. We do not have 

the capacity on our balance sheet to extend 5- to 7-year terms and 

then withhold that paper for the long term. 

We have been using the Medium-Term Credit Insurance Program at Export-Import Bank for over 20 years now. In the meantime, we have completed 200-plus transactions in the medium-term 

27

program, and, to this day, we have never filed a medium-term insurance claim with the Ex-Im Bank. 

What we have done, though, is we have increased our exports 

from 10 percent in the mid-1990s to 50 percent annually today. We 

have also increased our employment base, from 120 employees in 

1995 to 270 today. We have over doubled our production. 

However, since the charter lapsed in June, Air Tractor has felt 

the pain. It comes at a time when our largest exporting market of 

Brazil is facing its own economic constraints. The Brazilian real is 

depreciating, the U.S. dollar is appreciating, and it is becoming 

more and more expensive to purchase a U.S.-based Air Tractor aircraft. 

At the time that the Bank lapsed, we had 16 airplanes that were 

destined for our South American emerging markets, and they all 

required Ex-Im Bank financing. When the charter lapsed, Air Tractor scrambled to put a short-term patch together that included the 

private insurance sector. It was really to no avail. Of those 16 aircraft, thus far we have only been able to finalize the sale and export of 6 of those aircraft. Make no mistake that there is no alternative in the private sector for what Ex-Im Bank provides Air 

Tractor. 

I have sat here and I have told you who Air Tractor is, how we 

are impacted by Ex-Im Bank, how it has helped us succeed. I 

would like to tell you a few things that Air Tractor is not. Air Tractor is not a deep-pocketed investor trying to push our own political 

agenda. Air Tractor is not a lobbying firm. We don’t have a team 

of lobbyists up here for us talking to you guys. We do this on our 

own dime, on our own time. 

Air Tractor is a small business in a very small town of 3,000 people who has been able to create jobs through exports. Nobody sees 

Olney, Texas, as a place that that happens, but indeed it does. It 

does. It is in small-town America. We can do this. And Ex-Im Bank 

is the tool that allows us to do this. Please, let us continue to do 

that. 

Thank you. 

[The prepared statement of Mr. Schroeder follows:]

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Mr. POE. Thank you, Mr. Schroeder. 

Dr. Thompson? 

STATEMENT OF LOREN B. THOMPSON, PH.D., CHIEF 

OPERATING OFFICER, LEXINGTON INSTITUTE 

Mr. THOMPSON. Thank you for the opportunity to be here today. 

I have been asked to assess the consequences of failing to reauthorize the Ex-Im Bank, which, as you noted in your opening remarks, has been a significant contributor to U.S. trade competitiveness for eight decades. The Bank’s authority to extend new credit 

only lapsed 4 months ago, so it is a bit early to assess all the fallout. My statement will focus on consequences that can be confidently predicted in the years ahead if no reauthorization occurs 

and, therefore, the Bank has to wind down its programs. 

Near as I can tell, there will be no positive consequences, no 

gains to the United States from losing Ex-Im. Taxpayers won’t save 

any money because Ex-Im already pays for itself. The government 

won’t get smaller because other steps will need to be taken in order 

to level the playing field for U.S. exports. And the economy won’t 

become more competitive because it will operate at a disadvantage 

with countries that still offer export credit. 

So the consequences of shutting down the Export-Import Bank 

are negative for pretty much everybody, except perhaps our trade 

rivals. I will therefore devote the balance of my remarks to what 

America will lose if Ex-Im permanently ceases operations. 

First, we will lose American’s sole export credit agency. Every 

major trading nation has a government agency dedicated to mitigating risk and facilitating finance in international trade. America 

would be the only big industrial country without such an agency, 

leaving its exporters dependent on private lenders who have already stated that they will not fill the vacuum created by Ex-Im’s 

demise. 

Second, we will lose global market share in key industries. Many 

overseas buyers require government guarantees as a condition of 

bidding, which U.S. exporters could no longer secure. Even if such 

guarantees were not required, foreign customers would find it easier to obtain financing on favorable terms from countries with export credit agencies, so that is where they would go for their jet liners, for their earth movers, for their locomotives. 

Third, we will lose more ground in the U.S. trade balance at a 

time when America’s non-petroleum trade balance is already the 

worst on record. The tidal wave of foreign goods reaching these 

shores has reduced our growth rate by a full percentage point in 

recent quarters. In other words, instead of having 2.6, we could 

have had 3.6. But allowing Ex-Im to die would make that problem 

even worse. 

Fourth, we will lose tens of thousands of jobs if companies like 

Boeing and General Electric—and, by the way, Boeing is not a multinational conglomerate. It sources 80 percent of its content in the 

United States. We will see Boeing and GE, the big companies, have 

to move overseas in order to remain competitive. Hundreds of small 

companies will simply cease exporting. 

Initially, the job losses would come within the companies and 

among their suppliers. But there will be additional job losses beVerDate 0ct 09 2002 14:15 Nov 10, 2015 Jkt 000000 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 F:\WORK\_TNT\102315\97269 SHIRL
34

cause all the money that export workers spent on groceries, on 

teachers, on policemen, on dry cleaners in their communities, that 

will be reduced, and so there will be ripple effects. 

Fifth, we will lose even more of America’s domestic manufacturing base, which once was said to be the arsenal of democracy 

but now has shrunk to barely 12 percent of our economy. It simply 

isn’t feasible anymore for big manufacturers to achieve economies 

of scale without having sizable overseas sales because, as the chairman said in his opening remarks, 95 percent of the world lives outside the United States. So when financing for foreign trade is impaired, the whole enterprise suffers. 

Sixth, we will lose the most important ally of U.S. commercial 

banks and other private lenders in assuming the risk of financing 

foreign trade. Almost all of Ex-Im’s transactions, 98 percent, involve commercial financial institutions, and, in many cases, those 

institutions could not participate without Ex-Im loans, guarantees, 

or insurance. 

Seventh, we will lose the level playing field that Ex-Im provides 

for U.S. exporters when it steps in to counter the predatory financing of state-supported foreign competitors. China has become especially active in assisting its exporters to undercut U.S. sales in 

third markets by extending financing on concessionary terms, and 

Ex-Im works constantly to counter such unfair practices. 

Eight, we will lose the main point of leverage that America has 

in deterring other countries from pursuing unfair practices in their 

own export financing. Because foreign companies and credit agencies know that Ex-Im might step in to counter predatory practices, 

they are less likely to engage in market-distorting activity. 

I might mention that the Financial Times, Britain’s most respected newspaper, opined last year that it would be odd were the 

United States to disarm unilaterally by abandoning one of the few 

tools it possesses for disciplining the behavior of trading partners. 

Ninth, we will lose one of the very few agencies in Washington 

that is a bargain, an agency that doesn’t cost taxpayers a cent and, 

in fact, sends hundreds of millions of dollars to the Treasury every 

year while sustaining thousands of jobs in the export sector. 

And, finally, if Ex-Im goes down, there is one other thing that 

we will lose: A political discourse based on rational analysis rather 

than unbending ideology. The arguments for killing Ex-Im are illogical and they are fact-free, whereas the case for keeping it is empirically and analytically overwhelming. 

There is nothing wrong with espousing the principle of limited 

government, but in the case of the Export-Import Bank, we should 

listen to Winston Churchill, arguably the most important Western 

leader of the 20th century, who observed, ‘‘The duty of government 

is to be, first of all, practical.’’ I would not sacrifice my own generation to a principle. 

Thank you. 

[The prepared statement of Mr. Thompson follows:]

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Mr. POE. I thank all of our witnesses. 

I will recognize myself for 5 minutes of questions. 

Mr. Schroeder, may I ask you about your small business? And, 

yes, I know where Olney, Texas, is, and only because I was lost 

going to Abilene and I found it. 

You heard Ms. Katz say that Ex-Im Bank, the taxpayers are on 

the hook, it is a subsidy to businesses. Would you comment on that, 

if you can, from your point of view as a small business? 

Mr. SCHROEDER. Absolutely. 

Well, the argument that it is a subsidy has never really made 

much sense to us at Air Tractor in Olney. We pay very good money 

for this particular product. It is the only thing that we have to be 

able to compete in our emerging markets. And a lot of people don’t 

understand the——

Mr. POE. Explain it. Explain it then. Make it simple. I know you 

are a financial guy, but make it simple. 

Mr. SCHROEDER. So the argument against the subsidy, basically, 

is Air Tractor has paid over 1 million U.S. dollars each year for the 

past several years. As a matter of fact, in the past 4, we have paid 

4.8 million U.S. dollars to the U.S. Government for this MediumTerm Credit Insurance Program, and we have never lost a dime on 

it. 

Mr. POE. Do you pay a fee to use Ex-Im Bank? 

Mr. SCHROEDER. We pay a fee on every single—every single aircraft that we sell with Ex-Im support is attached to an insurance 

policy, and we pay a premium on every single insurance policy. 

Mr. POE. Do you partner with a private bank? 

Mr. SCHROEDER. Absolutely, on the back end. 

Mr. POE. Like Amegy sitting next to you. So you not only pay a 

fee to Ex-Im to use that service, you also partner with a U.S. bank, 

a local bank, community bank normally, to—for what purpose? 

Why do you partner with a bank like Amegy? 

Mr. SCHROEDER. Well, because we are not a bank. We don’t have 

the ability—we extend the financing, but we can’t hold it on our 

balance sheet. We don’t have the capacity to do that. So we turn 

around and sell that bank to a U.S. commercial bank, who then collects from our customer with interest. So, yes, we are getting business through Ex-Im Bank; we are giving business to the U.S. banks 

as well. 

Mr. POE. And who is paying the interest? 

Mr. SCHROEDER. The customer is. 

Mr. POE. In Brazil, primarily. 

Mr. SCHROEDER. Yes, in our South American emerging markets, 

the customers. 

Mr. POE. Okay. 

You use Ex-Im Bank to sell those crop dusters. And I assume you 

didn’t fly one of those up here to Washington. 

Mr. SCHROEDER. No. 

Mr. POE. Have you had any job loss because you don’t have ExIm? 

Mr. SCHROEDER. That is tough to say. So, naturally, businesses 

are going to be kind of resolute in laying people off. You know, that 

is a last-ditch effort for us. We are going to try to maintain our employment base as is for as long as possible. 

39

Mr. POE. Have you lost sales? 

Mr. SCHROEDER. Yes, absolutely, we have lost sales. 

Mr. POE. You were selling 16 of those planes to Brazil, and you 

were able to sell 6 now. Is that what you said? 

Mr. SCHROEDER. Yes, sir. And last year we sold 28 aircraft, I believe, into the Brazilian market. This year we will probably do 

eight or nine. 

Mr. POE. And, as far as jobs, if the current trend occurs in your 

business, you think maybe there might be a possibility of people 

losing their job at Air Tractor? 

Mr. SCHROEDER. Absolutely. We have been able to sustain them 

this year because we have put a short-term patch together and 

taken a lot of risk on the company. But if next year’s export season 

comes around, we have no idea. There will be——

Mr. POE. What do people do? Do they build these airplanes? Is 

that what they do? 

Mr. SCHROEDER. Yes, we build everything by hand. So it is 100 

percent made in Olney, Texas. 

Mr. POE. And what do these planes do? What are they are? Are 

they for crop dusting? 

Mr. SCHROEDER. They are for crop dusting. Agricultural airplanes is our bread and butter, obviously. So big yellow and blue 

airplanes that you see flying around spraying crops. 

Mr. POE. All right. 

Ms. Katz, let me ask you a couple of questions. You did use the 

terms ‘‘a subsidy,’’ the taxpayer is on the hook, so to speak, and 

‘‘government-based.’’

I assume that you have a bank account somewhere? 

Ms. KATZ. Yes. 

Mr. POE. I am not going to ask you where. We are not going to 

advertise for them. 

Now, whatever you have put in that bank as an individual, the 

Federal Government guarantees that deposit up to $250,000. That 

is right? 

Ms. KATZ. Yes. 

Mr. POE. So isn’t that a government-backed program of financing 

but for an individual at an American bank? Isn’t that a government-backed program, the FDIC? 

Ms. KATZ. It is, and it is one that I would argue could be better 

managed through the private sector. 

Mr. POE. And you don’t have a problem——

Ms. KATZ. If I could explain what the subsidy is——

Mr. POE. Excuse me. I am reclaiming my time because we only 

have a few minutes. 

It is an insurance program that if the bank goes insolvent, that 

the customer, the depositor, the Federal Government will back that 

deposit up to $250,000. It is a government-backed program for an 

individual. I don’t know that Americans have any problem accepting that insurance program. 

And, Mr. Raguso, last question. Isn’t that what Ex-Im Bank does 

too? It insures a loan on a project but goes through a private bank 

as well? 

40

Mr. RAGUSO. It does. It does.You know, premiums are paid, or 

guarantee fees are paid. And this is, kind of, the risk-sharing that 

happens between a private bank and the Ex-Im Bank. 

Mr. POE. All right. My time has expired. 

I yield to the gentleman from Massachusetts, Mr. Keating. 

Mr. KEATING. Thank you, Mr. Chairman. 

I think, Mr. Schroeder, if we were flying one of your planes over 

our district, one of the things you would see is these huge crops of 

red that are cranberries. And when you are talking about big conglomerates, I just wanted to share briefly the experience of the 

cranberry industry, whether it is Massachusetts or Wisconsin. 

They have been successful in terms of supply, and, because of 

that, they have either had to shrink, lose profits, or diminish their 

own markets. But they have had the opportunity to find markets 

where they never existed before, in Asia and in Europe, places 

where there is no word for ‘‘cranberry’’ and where getting conventional financing is nearly impossible for something there is no word 

for. Yet we have continued to grow in our country on this because 

of the Ex-Im Bank, because we gave that opportunity initially. 

So I just wanted to clarify, these are small businesses, and 

whether it is what Mr. Heck, you know, said in terms of Boeing, 

Mr. Thompson said in terms of Boeing, those are small, medium 

American businesses that are affected. 

Now, there is one thing that Mr. Thompson mentioned that I 

think is very important to maybe elaborate on, and that is the fact 

that the role of the Ex-Im Bank is—one of the things that just 

doesn’t jump out at you is, in the marketplace, they are there to 

provide an alternative, a credible alternative, one that doesn’t engage in practices that are engaged in in other countries, sort of a 

referee or an alternative or at least an option that brings the rest 

of the market competitively to where it should be. 

And you mentioned some of the predatory practices that are 

there. In the absence of Ex-Im, what kind of actions do you think—

and ‘‘unfair advantage’’ is a better word, maybe—that some of 

these foreign export credit agencies, what will they have over 

American businesses? And what are the kind of things you see or 

you would see more of in terms of these predatory practices if there 

wasn’t an Ex-Im alternative? 

Mr. THOMPSON. Congressman, because we are now a relatively 

small part of the global economy, barely 20 percent of economic 

output around the world, we have to sell overseas in order to 

achieve the economies of scale necessary to be on pricing parity 

with foreign competitors. 

But what will happen is, if there is not access to Ex-Im loan facilities, guarantees, and so on in countries that are considered 

high-risk, like Pakistan, like Ethiopia, like nearly 100 other countries you could mention, then they will just naturally turn to the 

Europeans, they will turn to China. And so locomotive sales from 

Erie, Pennsylvania, will dry up to a point where they will no longer 

be competitive. 

China has recently, with its own export-import bank, proposed to 

lead the construction of high-speed rail in California—in California—because they are willing to front the money to do that. 

Small companies, even medium- and large-size companies, can’t 

41

compete with a foreign government. They have to have the assistance of the U.S. Government, particularly in those markets where 

it is not feasible for the local economic system, the financial structures, to support a large-size loan or it is just outside the risk profile of the private sector. 

In that regard, I would just like to mention, this is not a subsidy. 

The World Trade Organization requires that export credit agencies 

be self-sustaining so they will not be subsidies. 

Mr. KEATING. Well, thank you. 

And Ms. Katz mentioned that 98 percent of the reason that business transactions occur aren’t dealing with the Export-Import 

Bank. And I will take our country and place it competitively 

against these countries any day on the 98 percent, but because of 

this one leverage point, we are not getting on the playing field to 

compete. 

Mr. THOMPSON. Right. 

Mr. KEATING. We are not allowed to compete on the 98 percent——

Mr. THOMPSON. Right. 

Mr. KEATING [continuing]. Of the reasons people choose from another country to buy American products. And that is the critical 

point. 

And I think Mr. Raguso mentioned this a little bit too, or Mr. 

Thompson. This program also helps support traditional private 

American financing, because there is available financing, but a lot 

of that wouldn’t exist if the Ex-Im Bank wasn’t there for that 

one——

Mr. THOMPSON. That is exactly right. 

Mr. KEATING [continuing]. That one space that is necessary in 

the transaction. 

Mr. THOMPSON. A typical Ex-Im transaction is brought to the 

Bank by a private lender. They just need the support of the ExIm Bank in order to achieve an acceptable risk profile. 

Like, for example, if there is a danger somebody in Pakistan will 

default, Ex-Im will guarantee, for a fee, that that default would be 

covered. It is not a high risk; they make a big profit every year. 

But because they are willing to make that guarantee, the private 

lender can extend the credit, knowing that it is not outside of what 

they are allowed to——

Mr. KEATING. This helps the private financing stay in the 

U.S.——

Mr. THOMPSON. Exactly. 

Mr. KEATING [continuing]. Banks, not in foreign banks. 

I yield back. 

Mr. POE. I thank the gentleman. 

Without objection, the Chair will introduce into the record statements by 80 business owners throughout the United States on how 

Ex-Im Bank affects them and/or the failure to reauthorize has hurt 

their businesses. 

The Chair will now recognize the gentleman from Pennsylvania, 

Mr. Perry. 

Mr. PERRY. Thank you, Mr. Chairman. 

Mr. Raguso, what risk does the bank accept in partnering with 

Ex-Im and a business like Mr. Schroeder’s? 

42

Mr. RAGUSO. Right, so I will speak primarily from the perspective of our bank and the programs that we use. 

In a working capital loan, we access this working capital guarantee program that Ex-Im has. It provides a 90-percent guarantee 

on the loan that we make to our customer. And so, in that circumstance, you know, we are——

Mr. PERRY. You are accepting a 10-percent share of the risk? Is 

that what you are saying? 

Mr. RAGUSO. Right. Right. 

Mr. PERRY. All right. 

Mr. RAGUSO. But the bigger picture is that Ex-Im, as a solution, 

is not something that we offer in isolation. It is part of a relationship, a lot of credit that we offer our customers. So, typically, on 

our portfolio of Ex-Im business, the loans that we make that are 

Ex-Im-backed represent about half of what we lend to a customer. 

So we have a broader relationship. 

So it is not as if we make an Ex-Im loan and something happens 

to that loan and we move on down the road. If a loan goes past 

due, it affects all of the lending that we do to a customer. 

Mr. PERRY. I understand that, but the risk is what the risk is. 

It is what it is, right? It is 10 percent in that scenario that you just 

gave. 

Mr. RAGUSO. On that particular thing, yes. 

Mr. PERRY. Okay. 

All right. Ms. Katz, what percentage of Ex-Im financing did you 

say goes to the top 10? What was that statistic? Fifty-one percent 

or something like that? 

Ms. KATZ. That was 51 percent between the years 2007 and 

2014. 

Mr. PERRY. Okay. To who? 

Ms. KATZ. I could read you the list of the top——

Mr. PERRY. No, no. Just what was—so the top 10 Fortune—what 

was——

Ms. KATZ. Fifty-one percent went to just 10 companies. 

Mr. PERRY. Just 10 companies. 

Ms. KATZ. Right. 

Mr. PERRY. Okay. 

What appropriate reforms have been requested of the Ex-Im 

Bank regarding small-business loans but have not been implemented, if you know? 

In other words, one of the problems or one of the—I will maybe 

call it a problem, a challenge, or a criticism of Ex-Im is that it 

claims all this small-business activity, but when you have 51 percent going to only 10 companies—and I imagine they are probably 

large companies. I don’t want to take that for granted, but I am 

just supposing they are. 

What reforms have been requested either in past legislation that 

has been signed but not enacted or in current legislation that you 

know of? 

Ms. KATZ. Most of the reforms that I am referring to in my testimony have to do with the operations of Ex-Im in terms of managing risk, in terms of transparency, in terms of how their operations are monitored. 

43

I have an entire study about this. I would be glad to forward that 

to——

Mr. PERRY. Sure. But——

Ms. KATZ [continuing]. You. But the GAO and the inspector general have issued a number of reports over the years pointing out 

systemic flaws within Ex-Im in terms of its operations as well as 

in its, you know, risk management. 

Mr. PERRY. Right. And I agree with you, and I accept that. But 

I guess my point is, of all the serious reforms that have been proffered, none are really dealing with making sure that Ex-Im supports small businesses like Mr. Schroeder’s here more than what 

they currently do. It is all process, which is fine, but nothing really 

to require them to do more in the small-business market that you 

know of. 

Ms. KATZ. That I know of. But the problem is that what Ex-Im 

calls a small business and what the rest of the world calls a——

Mr. PERRY. Right. 

Ms. KATZ [continuing]. Small business is very different. 

Mr. PERRY. And I was thinking that, as well. I just want to keep 

moving here. 

Let me ask you this. There has been a number of indictments at 

the Ex-Im Bank. Do private banks have the same level of indictments and board-member involvement, board-member-on-the-Bank 

involvement with the same companies that the Bank is lending to? 

Do regular commercial banks or private banks or financial institutions have the same level of criminal or alleged criminal activity 

or nepotism between the financial institution and the receiving institutions? 

Ms. KATZ. I don’t know, but what I can say is that, if you are 

managing public funds, funds that aren’t your own, that I would 

hope you would have the highest level of security and risk management rather than just what is average. 

Mr. PERRY. Well, I mean, do you know what the percentage is 

of board members on the Bank that also have involvement with the 

people that they are lending to, the companies or the concerns? 

Ms. KATZ. No, I don’t. 

Mr. PERRY. I think there was testimony in a recent hearing in 

this committee that it is upward of 50 percent, just to remind everybody what we heard here. 

And I think, what, 13 current pending indictments or something 

like that? Are you familiar with that? 

Ms. KATZ. The last I checked, I think that there were 47 active 

investigations. 

Mr. PERRY. Okay. 

All right. My time has expired. I yield. 

Mr. POE. The gentleman’s time has expired. Thank you. 

Ms. Katz, you referred to a document, a report, analysis that you 

wrote. Would you make that available to the committee? 

Ms. KATZ. Absolutely. 

Mr. POE. I am not talking about the GAO report. We will get 

that. 

Ms. KATZ. No, no. 

Mr. POE. Based on what Mr. Perry said, and make that a part 

of the record, without objection. 

44

Ms. KATZ. Absolutely. 

Mr. POE. All right. The Chair recognizes the gentleman from 

California, Mr. Sherman. 

Mr. SHERMAN. I would point out there are more allegations about 

government agencies than the private sector because the press covers government agencies, we have political disputes about government agencies, we have theological and ideological disputes about 

the existence of government agencies. So I would expect that there 

would be a lot more articles, scrutiny, and allegations. 

We should point out that when a big company, a big American 

company exports, it usually has supported hundreds of small businesses buying the parts. And even if you care not at all about Airbus or Boeing and only care about small companies, there are a lot 

more small companies, American small companies, selling to Boeing than selling to Airbus. 

This isn’t a practical dispute. This is a theological dispute. The 

holy scriptures of libertarianism have no place in their sacred novels for an entity like Export-Import Bank because they create a 

perfect world, an ideologically pure world. I would like to live in 

such a world—maybe not their world, but a world just as pure. 

Ms. Katz, what is your organization doing to cause Europe and 

Asia and China to drop their finance authorities? Or do you really 

imagine a world in which every one of our competitors has subsidized financing and we don’t? 

Ms. KATZ. Well, first, I will say that I don’t base my policy recommendations on what I imagine but on what the empirical evidence shows me. 

That said, it has been the United States policy with respect to 

Ex-Im to negotiate with OECD countries to eliminate the use of export credit agencies——

Mr. SHERMAN. If I can interrupt, where would I get any leverage 

to do that? 

Look, I gave over 100 speeches for George McGovern. If anybody 

here can be accused of advocating unilateral military disarmament, 

it might be me. I was a teenager, and I didn’t go that far. And I 

hung out with some people who really believed that if we didn’t 

have a military other countries wouldn’t. 

How would we possibly persuade other countries to cut back if 

we had nothing to trade in return? 

Ms. KATZ. We have a lot to trade in return. And the idea that 

there is unilateral disarmament here is just wrong. I am——

Mr. SHERMAN. So what would you offer the Japanese to get rid 

of their subsidized financing for their exports if we already didn’t 

have an Export-Import Bank? Should we——

Ms. KATZ. I am not going to try to make——

Mr. SHERMAN. Should we write them a check every year from the 

taxpayers? 

Ms. KATZ. I am not going to try to make the Chinese do anything. What I am going to say is that the United States is better 

off than Japan is if we don’t offer subsidies. Because, you know, 

subsidies, on the whole, detract from the overall economic benefit 

of countries. So if——

Mr. SHERMAN. Okay. So you are trying to sell a U.S. product, and 

you have a strong European or Asian competitor. The products 

45

might be equal, the price might be equal. One side has concessionary financing; the other doesn’t. Why in the world would 

somebody fail to buy the foreign product if it was just as good and 

it came with better financing? 

Ms. KATZ. Well, if it is just as good is open to great question, but 

as I said before——

Mr. SHERMAN. Okay, look, I love American companies. Yes, all of 

our products are better. But the fact is that there are circumstances where we face tough competition and our product is 

just as good as the competitor, not better. 

Ms. KATZ. This is sort of illogical, because if you are going to say 

that, then we should be financing every single product that we sell 

overseas. 

Mr. SHERMAN. Only when we face concessionary financing and 

competition. 

Ms. KATZ. We should do it with everything. In China, we cannot 

keep up with China’s subsidies, and so——

Mr. SHERMAN. We are talking here about export financing——

Ms. KATZ. I know. 

Mr. SHERMAN [continuing]. Where we face not only from one 

country like China, we face from every major competitor. 

And the idea that products don’t sell because of the financing 

package, just watch a sports game. How many commercials are you 

going to see advertising this car or that car, U.S. and foreign, 

where the focus of the commercial is not on torque, it is not even 

on cup holders, it is on the leasing terms, it is on the financing 

terms. And I would say that it may very well be that a Ford and 

a Chevy are equal, but one comes with better financing. 

Ms. KATZ. You are presuming that the decision on a product is 

made based on its financing. And as I indicated earlier——

Mr. SHERMAN. Everybody who is watching a sports game comes 

to that conclusion when it comes to buying what they buy with financing, and that is an automobile. 

Ms. KATZ. I am not sure that is exactly true. 

Mr. POE. The gentleman’s time has expired. 

The Chair recognizes another gentleman from California, Mr. 

Rohrabacher. 

Mr. ROHRABACHER. Unilateral disarmament. My gosh, Brad, that 

is a fantastic admission. 

Mr. SHERMAN. It is an admission that I knew some people. 

Mr. ROHRABACHER. All right. 

I would like to ask, I guess—is it ‘‘Raguso’’? Is that how you pronounce this? 

Mr. RAGUSO. Yes. 

Mr. ROHRABACHER. Thank you. Mr. Raguso, we just came to the 

fact that the bankers, of which you are representing the financial 

interests, take only 10 percent of the risk of these loans that are 

going to selected people who get this subsidy. What percentage of 

the profit of that loan does the private bank get? 

Mr. RAGUSO. Right. So I guess to clarify, I am speaking about 

one Ex-Im program—there are many—but the program that is 

used by my bank, which is designed to help small U.S. exporters 

export their product competitively and unlock collateral that would 

otherwise be unavailable. 

46

Mr. ROHRABACHER. Okay. So that doesn’t include the big guys, 

then. 

Mr. RAGUSO. What is that? 

Mr. ROHRABACHER. You are saying it is just the small guys. 

Mr. RAGUSO. Well, the way——

Mr. ROHRABACHER. Because the big guys are—51 percent of the 

loans, at least, we know, go to the 10 major corporations, so I assume they are the big guys. But you are only talking about little 

guys, then. 

Mr. RAGUSO. I am talking about, again, the programs that we access, where, again, our customer is the U.S. exporter. 

Mr. ROHRABACHER. Okay. And what percentage of the profit do 

you get of those loans? 

Mr. RAGUSO. Right. So, after we charge an Ex-Im Bank fee, 

which ranges in today’s world anywhere from 1.25 percent to 1.75 

percent——

Mr. ROHRABACHER. Right. 

Mr. RAGUSO. You know, our bank makes the loan. And so those 

fees go to Ex-Im, we make the loan, and so the interest income on 

the loan——

Mr. ROHRABACHER. But 90 percent of the loan, of course, is being 

guaranteed, you have no risk whatsoever, but you assume 10 percent of the risk. How much of the profit from that loan goes to your 

bank? 

Mr. RAGUSO. A hundred percent of the profit. 

Mr. ROHRABACHER. Oh, all right. So we get 100 percent of the 

profit but 10 percent of the risk. Ah, I think there are a lot of businesses that would love to have that kind of relationship with the 

government. 

Why is it that certain businesses have that right but other businesses don’t? 

Mr. RAGUSO. Right. So——

Mr. ROHRABACHER. Is it just size? Are we talking about every big 

business in America has that right to have that type of guarantee, 

a subsidy, as Ms. Katz is saying? Oh, no, somebody has to select 

them. I wonder if they select people that are close to them. Oh, 

wait a minute, there is an investigation going on to that. 

You say 47 people are being investigated now, Ms. Katz, for some 

sort of conflict of interest there on choosing who gets those loans? 

Is that right? 

Ms. KATZ. The nature of each of those investigations varies. 

Mr. ROHRABACHER. Right. All right. 

Well, let me note, what we have here is—I am sorry, you can call 

it ‘‘principle’’ if you want, but I think it is also practical that when 

we decide to set up a system in which certain people like this gentleman will get all the profit but only assume 10 percent of the 

risk, I think that is an insult to the rest of the American people 

who are trying to be enterprisers and have to assume all the risk 

for the things they do in order to make a profit. 

And Ms. Katz’s arguments, I don’t consider that to be philosophical. I consider that to be also something that is very practical 

in terms of the people who don’t get the money——

Mr. THOMPSON. Well, Congressman, you understand that anybody——

47

Mr. ROHRABACHER [continuing]. Who don’t get the subsidy. 

Please go right ahead. 

Mr. THOMPSON [continuing]. Can apply for these financial benefits if they comply with the standards established by Congress in 

the charter. Anybody can. It is not——

Mr. ROHRABACHER. No, anybody can’t. You are——

Mr. THOMPSON [continuing]. Hoarding of benefits. 

Mr. ROHRABACHER. First of all, anybody can’t get it. They have 

to be selected and go through the process. And, as we have heard, 

it is possible that the people involved in the process might take 

their self-interest into consideration, which happens, by the way, 

every time you get a big government program. 

One last note here, Mr. Chairman, and that is: How is this different than the actual guarantee that we put on people’s bank accounts? All right. You know, Ms. Katz has a certain amount of 

money in her savings, and that is guaranteed. The difference is 

every American is eligible for that—every single American. 

What we have here is crony capitalism. And I am happy that you 

have a company that is all employee-owned. I am a big supporter 

of employee ownership. I want to encourage that. But there are 

other companies down the road that might want to get that subsidy 

as well. And the fact is that we are picking and choosing who is 

going to be the winner and who—and especially the banks are the 

big winners in all of this. 

Thank you very much, Mr. Chairman. 

Mr. POE. Thank you, Mr. Rohrabacher. 

The Chair now recognizes Mr. Heck from Washington. 

Mr. HECK. Thank you, Mr. Chairman. Thank you very much for 

the privilege to be here today. 

First, fact check time. In fact, the Kirk-Heitkamp bill and that 

which we will vote on Monday night does change the small-business formula and increases the minimum requirement from 20 percent to 25 percent. 

Fact check two: The previous legislation does not require negotiating the elimination of ECAs. It requires the negotiation of eliminating subsidies. And there are no subsidies. Well, that is not true. 

That is not true. The Ex-Im subsidizes the Federal Government for 

a generation in billions of dollars transferred. 

Fact three: Not a single member of the board of directors of the 

Ex-Im works for or is on the board of directors of a company that 

receives financing—not a single member. 

Look, I have heard a lot of arguments over a long period of time, 

and here is the harsh and blunt conclusion I have come to: To accept the arguments of the opponent is the equivalent, the moral 

equivalent, of looking Mr. Raguso and Mr. Schroeder in the eye 

and saying to them, ‘‘You are either stupid or lying.’’ And I absolutely know that that is not the truth today. 

In fact, Mr. Schroeder, there is no person on the face of the earth 

in the last 3 years who has listened to more witnesses on this 

issue. You have done the finest job of reflecting and representing 

your company of anybody I have ever heard. I commend you for 

your eloquence and for your heartfelt testimony. 

More importantly, you go home to Olney, Texas, and, as a proud 

son of Texas, I want you to tell the 270 employees that an overVerDate 0ct 09 2002 14:15 Nov 10, 2015 Jkt 000000 PO 00000 Frm 00051 Fmt 6633 Sfmt 6633 F:\WORK\_TNT\102315\97269 SHIRL
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whelming majority of the Members of the House of Representatives 

are not going to stop until we reauthorize the Export-Import Bank, 

including the chair of this subcommittee and the ranking member. 

Help is on the way, Mr. Schroeder. 

Dr. Thompson, first of all, it is 85-percent minimum domestic 

content, sir, if I may correct you. 

Mr. THOMPSON. Correct. 

Mr. HECK. Secondly, the purpose of today’s hearing is to discuss 

the impact on the economy of the disappearance of the Ex-Im. But 

insofar as this is the Foreign Affairs Committee, I would like to actually take the conversation in a slightly different direction, and 

that is the issue of our Nation’s security and its defense. 

Let me lay out just a couple or three beliefs on my part—some 

are facts, some are beliefs—and have you respond to the question. 

Boeing and GE constitute the heart of this Nation’s manufacturing base. And, by the way, I don’t know how often I have to say: 

Supply chain, supply chain, supply chain. An appalling lack of understanding of the private economy, that there are 8,000 small 

businesses behind the Boeing Company. 

Number two, China is now the second-largest economy in the 

world and a fierce competitor of ours. 

Number three, China is aggressively involved in expansion of its 

interest to the building of islands and in the market. Code named 

C919, they are building a wide-body aircraft to compete with Airbus and the Boeing Company. 

All that said, Dr. Thompson, impact on economy aside, is there 

an impact on our Nation’s security and defense if we indeed unilaterally disarm in the export credit authority world? And if so, how 

would you describe it? 

Mr. THOMPSON. Well, it is a complicated question, but to just 

offer a simple answer, Ex-Im’s benefits accrue primarily to companies that are in the business of exporting capital equipment, like 

jetliners, like locomotives—the big, expensive things that are hard 

for foreign buyers and countries to afford. It is in precisely those 

sorts of technologies where we put much of our defense acquisition 

dollars. 

Mr. HECK. From some of these same companies. 

Mr. THOMPSON. Right. Exactly. In fact, there is definitely a multiplier effect and an economy of scale at places like Boeing. Because 

a lot of future aircraft for the Pentagon will be leveraged off of commercial transports. So if Boeing becomes less efficient, if it loses 

economies of scale, then it will cost the Pentagon more. 

At some point, though, you get forced out of markets entirely. I 

saw this happen in my hometown of Plymouth, where, one after 

another, the factories closed because of foreign competition. Not unnecessarily unfair competition, but, you know, we live in a country 

where people don’t make penicillin or flatware or rebar anymore. 

Eventually, you get forced out of markets entirely, and then your 

defense establishment becomes dependent on potential enemies for 

things it must have to win a war. 

Mr. HECK. Exactly. Thank you, sir. 

Mr. ROHRABACHER. Would the gentleman yield for a question before your time is up? 

Mr. HECK. With the chair’s indulgence, as I am out of time. 

49

Mr. POE. A short question, Mr. Rohrabacher. 

Mr. ROHRABACHER. You would concede that those of us asking 

tough questions do not assume that those people who disagree with 

us or have answers that we consider to be wrong—you would concede that we can respect people who we disagree with and don’t 

consider them stupid or lying. 

Mr. HECK. I certainly respect you, sir, even though we disagree 

on a lot. 

Mr. ROHRABACHER. Right, but you would agree——

Mr. POE. The gentleman’s time has expired. 

Mr. ROHRABACHER [continuing]. But you would agree that is 

not——

Mr. POE. The gentleman’s time has expired. 

Mr. ROHRABACHER. Thank you very much. 

Mr. POE. The Chair recognizes the gentlelady from Wisconsin for 

5 minutes. 

Ms. MOORE. Thank you so much, Chairman Poe, for this extraordinary opportunity to sit on this panel. 

I want to thank the witnesses for appearing today for this very 

important discussion of our economy. 

My name is Gwen Moore, and I hail from Milwaukee, Wisconsin. 

And I am old enough to remember the glory days of Milwaukee 

being sort of the manufacturing center of the universe, where our 

economy was based on producing the most tanned leather, steel, 

iron ore—the glory days of the great, huge factories like A.O. Smith 

and Allis-Chalmers. And so now Milwaukee still relies on manufacturing, but it is struggling. 

So I can understand, to some extent, the argument that has often 

been made about the Ex-Im Bank only supporting, sort of, large 

corporations like GE or Boeing. And, of course, we are losing 350 

jobs out of GE because of the lack of financing from Ex-Im Bank. 

But what I want to make sure that the panel understands is that 

Milwaukee and many other places in the United States are no 

longer in those glory days. 

And so I would ask, first of all, Ms. Katz—and excuse me if I 

have missed some of your testimony. I have a company in my district called Maxon, and, you know, they make mining equipment. 

They are part of the supply chain you have heard about, and they 

say they absolutely cannot function without Ex-Im Bank. They 

have 30 employees. Part of their supply chain is a group right 

down the street that has four employees. 

And we heard testimony here—I think my colleague Mr. Heck 

just mentioned that Boeing alone has 8,000 companies in their supply chain. 

And so I guess I am wondering—I am confused—are you advocating that if the Maxons of the world can’t make it that we ought 

to just let them wither on the vine? Is that your testimony today? 

Ms. KATZ. What I am saying and pointing out is that without ExIm it is wrong to presume that there won’t be other avenues of financing that would keep these supply chains going. And, in fact, 

for the biggest beneficiaries of Ex-Im, they have years and years 

of back orders to keep these suppliers, you know, working. 

Now, in terms of anecdotes, like you are bringing up in your district, you know, anecdotes are heart-tugging, there is no question 

50

about it, but the small business that you refer to is only half the 

equation. The other half of the equation is the company that is not 

getting the subsidy. 

And, Congressman Heck, I will explain to you what the subsidy 

is, because there is an——

Ms. MOORE. Okay, well, this is my time. It is not Mr. Heck’s 

time. Thank you so much for that. 

So you are saying there is some other way, and you don’t necessarily know what that other way is. 

Ms. KATZ. No, I do. I know exactly what the other way is. It is 

the way that 98 percent of other exporters do it, which is through 

private financing. 

Ms. MOORE. With their own money or something. 

Ms. KATZ. Well, they borrow. Some use their own money. There 

are various bonding——

Ms. MOORE. Okay. 

So who on the panel is for the TPP? I guess I want to know how 

the TPP might be impacted by the lack of an export credit agency. 

Who supports the TPP? 

No one? 

Ms. KATZ. I don’t speak on that. 

Ms. MOORE. Okay. 

Mr. Raguso? 

Mr. RAGUSO. I am not an expert on TPP. All I would say is, you 

know, for our customers, more trade means more business for their 

businesses. And so you could say I am not trying to, I guess, join 

the two together, but, yet again, freer trade means more opportunities for our customers. 

Ms. MOORE. Okay. 

And just in my last 20 seconds, who can answer the question—

I was talking to Ms. Katz. The 2 percent of the businesses that 

need this financing, what kinds of businesses are they? 

Ms. KATZ. The data is in my testimony, but about 80 percent of 

the Ex-Im financing is benefiting larger companies. 

Ms. MOORE. This is a dollar amount. It is not because they are 

big. 

Ms. KATZ. Well, but what we care about is the money. 

Ms. MOORE. No, we care about the—well, I care about the two 

employees in my district that get decent wages every day. 

Mr. THOMPSON. Could I clarify something? 

Ms. KATZ. Can we fix every problem that every person in America has? I don’t think so. 

Mr. THOMPSON. Ninety percent of the transactions that Ex-Im 

did last year were small-business transactions. 

Ms. MOORE. Right. 

Mr. THOMPSON. Nearly 40 percent, by volume, of the exports 

were small-business exports. Roughly 25 percent of the actual 

money that was disbursed or the benefits that were disbursed went 

to small business. And that is not counting all the small businesses 

that support companies like Boeing or General Electric. 

Ms. MOORE. Thank you so much. 

My time has expired. I want to thank the chairman for his indulgence. 

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Mr. POE. I thank the members of the committee and the guests 

of the committee that came to inquire about this issue. I think the 

testimony of all four witnesses was excellent. Appreciate your expertise in this area. 

And this subcommittee is adjourned. Thank you again. 

[Whereupon, at 10:52 a.m., the subcommittee was adjourned.] 

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A P P E N D I X 

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MATERIAL SUBMITTED FOR THE RECORD BY THE HONORABLE TED POE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS, AND CHAIRMAN, SUBCOMMITTEE ON

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