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OVERSIGHT FOR THE EXPORT-IMPORT

BANK OF THE UNITED STATES

JOINT HEARING

BEFORE THE

SUBCOMMITTEE ON 

DOMESTIC AND INTERNATIONAL 

MONETARY POLICY, TRADE AND TECHNOLOGY

AND THE

SUBCOMMITTEE ON 

OVERSIGHT AND INVESTIGATIONS

OF THE

COMMITTEE ON FINANCIAL SERVICES

U.S. HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

NOVEMBER 10, 2005

Printed for the use of the Committee on Financial Services

Serial No. 109–62

(

(II)

HOUSE COMMITTEE ON FINANCIAL SERVICES 

MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa 

RICHARD H. BAKER, Louisiana 

DEBORAH PRYCE, Ohio 

SPENCER BACHUS, Alabama 

MICHAEL N. CASTLE, Delaware 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

ROBERT W. NEY, Ohio 

SUE W. KELLY, New York, Vice Chair 

RON PAUL, Texas 

PAUL E. GILLMOR, Ohio 

JIM RYUN, Kansas 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, JR., North Carolina 

JUDY BIGGERT, Illinois 

CHRISTOPHER SHAYS, Connecticut 

VITO FOSSELLA, New York 

GARY G. MILLER, California 

PATRICK J. TIBERI, Ohio 

MARK R. KENNEDY, Minnesota 

TOM FEENEY, Florida 

JEB HENSARLING, Texas 

SCOTT GARRETT, New Jersey 

GINNY BROWN-WAITE, Florida 

J. GRESHAM BARRETT, South Carolina 

KATHERINE HARRIS, Florida 

RICK RENZI, Arizona 

JIM GERLACH, Pennsylvania 

STEVAN PEARCE, New Mexico 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

MICHAEL G. FITZPATRICK, Pennsylvania 

GEOFF DAVIS, Kentucky 

PATRICK T. MCHENRY, North Carolina 

BARNEY FRANK, Massachusetts 

PAUL E. KANJORSKI, Pennsylvania 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

DARLENE HOOLEY, Oregon 

JULIA CARSON, Indiana 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

BARBARA LEE, California 

DENNIS MOORE, Kansas 

MICHAEL E. CAPUANO, Massachusetts 

HAROLD E. FORD, JR., Tennessee 

RUBE ́ N HINOJOSA, Texas 

JOSEPH CROWLEY, New York 

WM. LACY CLAY, Missouri 

STEVE ISRAEL, New York 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

JIM MATHESON, Utah 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

ARTUR DAVIS, Alabama 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

MELISSA L. BEAN, Illinois 

DEBBIE WASSERMAN SCHULTZ, Florida 

GWEN MOORE, Wisconsin, 

BERNARD SANDERS, Vermont

Robert U. Foster, III, Staff Director 

(III)

SUBCOMMITTEE ON DOMESTIC AND INTERNATIONAL MONETARY POLICY, TRADE AND

TECHNOLOGY

DEBORAH PRYCE, Ohio, Chair

JUDY BIGGERT, Illinois, Vice Chair 

JAMES A. LEACH, Iowa 

MICHAEL N. CASTLE, Delaware 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

STEVEN C. LATOURETTE, Ohio 

DONALD A. MANZULLO, Illinois 

MARK R. KENNEDY, Minnesota 

KATHERINE HARRIS, Florida 

JIM GERLACH, Pennsylvania 

RANDY NEUGEBAUER, Texas 

TOM PRICE, Georgia 

PATRICK T. MCHENRY, North Carolina 

MICHAEL G. OXLEY, Ohio 

CAROLYN B. MALONEY, New York 

BERNARD SANDERS, Vermont 

MELVIN L. WATT, North Carolina 

MAXINE WATERS, California 

BARBARA LEE, California 

PAUL E. KANJORSKI, Pennsylvania 

BRAD SHERMAN, California 

LUIS V. GUTIERREZ, Illinois 

MELISSA L. BEAN, Illinois 

DEBBIE WASSERMAN SCHULTZ, Florida 

GWEN MOORE, Wisconsin 

JOSEPH CROWLEY, New York 

BARNEY FRANK, Massachusetts 

(IV)

SUE W. KELLY, New York, Chair

RON PAUL, Texas, Vice Chairman 

EDWARD R. ROYCE, California 

STEVEN C. LATOURETTE, Ohio 

MARK R. KENNEDY, Minnesota 

SCOTT GARRETT, New Jersey 

J. GRESHAM BARRETT, South Carolina 

TOM PRICE, Georgia 

MICHAEL G. FITZPATRICK, Pennsylvania 

GEOFF DAVIS, Kentucky 

PATRICK T. MCHENRY, North Carolina 

MICHAEL G. OXLEY, Ohio 

LUIS V. GUTIERREZ, Illinois 

DENNIS MOORE, Kansas 

CAROLYN B. MALONEY, New York 

STEPHEN F. LYNCH, Massachusetts 

ARTUR DAVIS, Alabama 

EMANUEL CLEAVER, Missouri 

DAVID SCOTT, Georgia 

DEBBIE WASSERMAN SCHULTZ, Florida 

GWEN MOORE, Wisconsin 

BARNEY FRANK, Massachusetts 

(V)

C O N T E N T S 

Page 

Hearing held on: 

November 10, 2005 ........................................................................................... 1

Appendix: 

November 10, 2005 ........................................................................................... 41

WITNESSES 

THURSDAY, NOVEMBER 10, 2005

Hayman, Harry G., III, Senior Vice President, PNC Bank N.A., on behalf 

of Bankers Association for Finance and Trade .................................................. 30

Lambright, Hon. James H. Chairman and Acting President, Export-Import 

Bank of the United States ................................................................................... 7

Sabroske, John D., Director, Export Credit and Trade Finance, John Deere 

Credit .................................................................................................................... 31

Watters, Joseph, Director of International Sales, Hoffman International, on 

behalf of Small Business Exporters Association ................................................ 27

APPENDIX 

Prepared statements: 

Oxley, Hon. Michael G. .................................................................................... 42

Biggert, Hon. Judy ........................................................................................... 47

Crowley, Hon. Joseph ....................................................................................... 48

Kelly, Hon. Sue W. ........................................................................................... 49

Lee, Hon. Barbara ............................................................................................ 51

Maloney, Hon. Carolyn B. ................................................................................ 52

Manzullo, Hon. Donald A. ................................................................................ 53

Pryce, Hon. Deborah ........................................................................................ 74

Hayman, Harry G., III ..................................................................................... 76

Lambright, Hon. James H. .............................................................................. 82

Sabroske, John D. ............................................................................................. 89

Watters, Joseph ................................................................................................ 93

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Lambright, Hon. James H.: 

Written responses to questions from Hon. Barbara Lee ............................... 100

Written responses to questions from Hon. Patrick T. McHenry ................... 106

Written responses to questions from Hon. Edward R. Royce ....................... 107

Written responses to questions from Hon. Brad Sherman ........................... 110

(1)

OVERSIGHT FOR THE EXPORT-IMPORT 

BANK OF THE UNITED STATES 

Thursday, November 10, 2005

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON DOMESTIC AND

INTERNATIONAL MONETARY POLICY, TRADE AND

TECHNOLOGY, AND SUBCOMMITTEE ON OVERSIGHT

AND INVESTIGATIONS, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittees met, pursuant to notice, at 10:00 a.m., in 

Room 2128 Rayburn House Office Building, Hon. Deborah Pryce 

[chairwoman of the subcommittee on Domestic and International 

Monetary Policy, Trade and Technology] presiding. 

Present: Representatives Pryce, Oxley, Leach, Castle, Royce, 

Lucas, Kelly, Paul, LaTourette, Manzullo, Biggert, Kennedy, Garrett, Barrett, Harris, Gerlach, Neugebauer, Price, Fitzpatrick, 

Davis, McHenry, Frank, Kanjorski, Waters, Maloney, Gutierrez, 

Watt, Sherman, Lee, Moore of Kansas, Crowley, Lynch, Scott, 

Davis, Cleaver, Bean, Wasserman Schultz, and Moore of Wisconsin. 

Chairwoman PRYCE. Good morning. I am very pleased to welcome you all here today to this joint hearing on Export-Import 

Bank. And I would like to thank Chairwoman Sue Kelly for her 

abiding interest in this issue and the support in her subcommittee 

in joining with us. 

The Bank’s current charter is set to expire next year, and we anticipate this hearing will touch upon a wide range of issues that 

will need to be addressed in the new charter. 

My subcommittee has been hearing from many current and 

former clients of the Bank on issues they feel should be included 

in any reforms to the Bank next session. These issues include the 

need for greater transparency, increased oversight, and improvements in outreach. 

The Bank has a varied history of success in bolstering the U.S. 

export business as a lender of last resort coupled with the constant 

drumbeat of the need for improved management within the Bank. 

On April 6th of this year, Chairman Manzullo held a hearing on 

the need for stronger corporate governance and further advocacy 

for small business exporters. I commend Chairman Manzullo for 

his work over the last year to get Ex-Im to achieve its goal of 20 

percent activity devoted to small business and also to Congresswoman Barbara Lee, who has worked with the Bank to elevate the 

activity devoted to minority-owned small businesses. 

2

An issue of interest to me and of importance to many small businesses in my own district in Ohio is the simplification of the application for small business and the ability to use technology, like filing an application online to ease the burden of cost and work time 

a small business must devote. In the last reauthorization in 2002, 

according to language in their charter, the Bank was instructed to 

implement technology improvements that are designed to improve 

small business outreach, including allowing customers to use the 

Internet to apply for the Bank’s small business programs. 

In the testimony of then Chairman Merrell received by this subcommittee in 2003, the Bank stated, ‘‘We are focusing on three key 

priorities: putting customers first, improving cycle time, and expanding support for knowledge-based and service exports. In Fiscal 

year 2003, Ex-Im Bank revised and updated its website to provide 

all customers with improved access to information, applications, 

and forms. As a result, all of Ex-Im Bank’s applications and forms 

are available through the website. Letter of Interest applications 

can now be processed electronically and claims filing can now be 

handled online.’’ However, the business community has provided 

this subcommittee a cutting review about the Bank’s inability to 

make these products and services available through the Internet. 

We have heard from businesses wishing to file online that they are 

unable to and must manually fill out the paperwork and fax it into 

the Bank. A further concern is the reduction in operating costs 

from $2.6 billion in Fiscal Year 2000 to $530 million in Fiscal Year 

2004 that had been expended for small businesses, especially given 

that the Bank is required to provide greater Internet access for 

these small businesses. 

The Bank provides a greatly needed service to the businesses in 

our community that would like to export but cannot get a guaranteed loan from a commercial loan institution. It is my intent to 

work to improve upon the Bank’s efforts in outreach to our community businesses and to work with my colleagues to make any reforms necessary in the 2006 charter. 

We welcome our witnesses here today, and look forward to hearing their testimony. I would like now to recognize and turn over 

the gavel to Chairwoman of the Oversight and Investigations Subcommittee and my co-Chair at this hearing, Sue Kelly. 

[The prepared statement of Hon. Deborah Pryce can be found on 

page 74 in the appendix.] 

Chairwoman KELLY. [presiding] Thank you, Madam Chairman. 

The Export-Import Bank of the United States was designed to 

allow American businesses to export goods on an open playing 

field. Congress created it during the Depression to force open markets for factories that would otherwise close and to keep jobs in the 

United States that would otherwise be lost. From then until now, 

Ex-Im’s original role is important, but it has a new responsibility 

to make sure America’s small businesses, which are the center of 

the American economy, have the same access to world markets 

through the Ex-Im Bank. Last time Ex-Im testified before me was 

with Chairman Manzullo and the Small Business Committee. 

When Ex-Im testified previously before the Small Business Committee, we were extremely disappointed to learn that the percentage of small business loans made by the Bank still had not reached 

3

the required statutory limit of 20 percent. That hearing was in 

April of this year. Not only did Ex-Im Bank not meet the requirement, but the number of small business loans had fallen 2.5 percent between 2003 and 2004, and this happened at the same time 

Ex-Im’s total business soared. Ex-Im promised to do better, and we 

told Ex-Im that we expected better and that we would be watching. 

I want to thank Chairman Pryce for giving me the opportunity 

to hold this hearing with her subcommittee. This helps follow-up 

on my and Chairman Manzullo’s concerns regarding the Ex-Im 

Bank from the Small Business Committee hearing. Unfortunately, 

the results for 2005 are in and Ex-Im is still not in compliance with 

the law. I am confident that Ex-Im can do better. We have a serious problem in that Ex-Im has not complied with the law. The loan 

program at Ex-Im to help America’s small businesses is lacking. I 

am aware of suggestions for Congress to consider the larger loans 

provided to big businesses that eventually benefit small businesses. 

It is being suggested that Congress take this into consideration 

when determining whether Ex-Im has met the 20 percent threshold. I am also aware that Ex-Im knows full well that to process a 

larger loan takes just as much time and paperwork as a smaller 

loan, but the small businesses need those smaller loans. I was in 

Congress when Congress passed this law, and I am well aware of 

the intent behind the 20 percent threshold. Frankly, allowing such 

consideration for the big business loans is not within the original 

intent of this law. 

This is not my only concern. I am also interested in learning 

about Ex-Im’s current initiatives regarding web-based platforms 

and relationship managers, especially for small businesses. I represent an area in New York’s Hudson Valley where we rely so 

heavily on the continued success of our small businesses for job creation and the continued growth of the local economy. We need to 

be doing everything possible to help America’s small businesses, 

and that should be our intent in this Ex-Im oversight hearing 

today. 

I look forward to hearing the testimony today and the Ex-Im 

Bank addressing my concerns with some follow-up questions. 

I now turn to my colleague from New York, Mrs. Maloney. 

The prepared statement of Hon. Sue W. Kelly can be found on 

page 49 in the appendix.] 

Mrs. MALONEY. I thank the gentlelady from the great State of 

New York for her leadership on this issue and so many others and 

also Chairwoman Pryce and Chairman Manzullo for joining us. 

And I thank them for convening this as we prepare for the reauthorization of the Ex-Im Bank in 2006. And I am especially pleased 

to welcome Mr. Lambright, who has done a very fine job in his new 

position. 

The Bank has done a really good job in helping some of my constituents and New York residents and really people across this 

country with loans and loan guaranteed disbursements, insurance 

shipments, and working capital approvals to the tune of over $3 

billion in export value in my district alone in the past year. 

And I fully support its mission, and, indeed, we do have to support American exports. We have the largest trade deficit in the history of our country. It is important that those American goods that 

4

can be exported that may not be exported without the support of 

the Ex-Im Bank are indeed shipped out. It does help American 

jobs, the American economy, and it is part of a global economy and 

very important. 

I hope that the Bank can expand its activity so as to allow U.S. 

companies to go more aggressively into new markets and increase 

its activity, particularly in the small business arena where it has 

not lived up to its congressional mandate that 20 percent of its 

loans go to small businesses. I would like to hear, as my other colleagues would, from the witnesses what Ex-Im has done to address 

the small business issue. Small businesses are the major employer 

in our country. It is a major center of new ideas and new business 

products, and it is a very important part of our economy, and they 

should really literally be supported more. It is better for the overall 

economy of America. And I am very distressed that the efforts that 

you have put in so far have not paid off from the viewpoint of the 

small businesses. 

I am also concerned that the present corporate governance structure does not incorporate some of the checks and balances that are 

common to private sector corporations and represent best practices 

in this area. For example, I would like to hear from the witnesses 

on whether they think that applying certain parts of SarbanesOxley to the Bank would be an effective tool to increase transparency and improve corporate governance. 

I look forward to hearing from the witnesses today, and thank 

you for being here. 

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

found on page 52 in the appendix.] 

Chairwoman KELLY. Thank you, Mrs. Maloney. We turn to Mrs. 

Biggert. 

Mrs. BIGGERT. Thank you, Madam Chairman, and thank you, 

Madam Pryce, for holding this joint hearing today. 

Four years ago, this subcommittee was scheduled to mark up the 

previous U.S. Export-Import Bank reauthorization at 9:30 a.m. on 

Tuesday, September 11th. And I remember sitting in my office preparing to go to mark up when we saw the terrible images on the 

television and evacuated the building. Needless to say, that meeting was abruptly postponed but we rescheduled and held a mark 

up the next week. In doing so, we proved that in the wake of the 

terrorist attacks that we would not isolate ourselves from the world 

but instead take bold steps to promote international trade, increase 

U.S. exports, and strengthen our economy. Our committee united 

and produced legislation to strengthen the functions of the bank, 

directing the bank to increase its assistance to small businesses, 

and help U.S. businesses to maintain a competitive edge in trade 

and commerce around the world. 

The Ex-Im Bank has been through a lot of changes since that 

time in leadership and through reorganization. So today I am hopeful that the dust has settled, the online system can be up and running, and that the staff can get back full time to the business that 

they know best, and that is facilitating U.S. exports. Let’s face it; 

in our increasingly competitive global environment, we as policymakers have to ensure that we provide every advantage and remove every disadvantage for our companies to compete successfully 

5

abroad. That means all of our Government policies must work together from tax to foreign assistance, trade, regulatory, and export 

financing. Make no mistake; Ex-Im is one of the best tools we have 

to ensure that our business are allowed to beat the competition 

abroad. 

In short, we are here today to make sure that we win this sale. 

We don’t want to lose the sale because another country offered better financing. We don’t want to lose the sale because another country was more aggressive in encouraging small businesses to compete abroad. And we don’t want to lose the sale because our businesses can’t even access an export financing application online. 

So I want to thank the witnesses for sharing their expertise with 

us today, and I look forward to ensuring that this next authorization puts in place everything you need from us to win the sale 

abroad. 

And I yield back. 

[The prepared statement of Hon. Judy Biggert can be found on 

page 47 in the appendix.] 

Chairwoman KELLY. Thank you very much. Mr. Manzullo. 

Mr. MANZULLO. Thank you very much for having this hearing. I 

am very upset with Ex-Im Bank. We held a hearing before the 

Small Business Committee on April 6, 2005, and tried to explain 

one of the problems, that unfortunately the Bank has taken on the 

mantra of just being the bank of Boeing and Caterpillar again. 

Now I have huge presence of those organizations in my congressional district, and Ex-Im is working very well for them, marvelously well for them, but it is to the exclusion of the little guys. 

And you just can’t take care of the big guys and ignore the little 

guys, and the little guys are continuing to get beat up; they have 

been ignored. For example, with the master of guarantee agreement and the Bureau of Financing initiative, the report coming 

from the Banker’s Association for Finance and Trade says the new 

Export-Import Working Capital Guarantee Program, the agreement 

will make it more difficult for smaller banks to support their export 

or customers, and that means that the little guy again gets 

quashed. 

But it is one incompetency after the other, and the incompetency 

of Ex-Im could lead to the demise of the entire organization. Is Mr. 

Discenza, is here today, the attorney? He is not here? He is not 

here. But let me tell you what he did in response to the inquiry 

we had in our April 6 meeting. Here is a man who took out a policy 

from Ex-Im for about $75,000, exported to China, got turned down 

on a claim for Ex-Im and Ex-Im said you have to go to China 

courts in order to resolve your lawsuits before we can help you. 

And I asked specifically for Ex-Im to get involved. They took two 

months to answer a letter. People flew out, flew from Mrs. Myrick’s 

district in South Carolina—North Carolina to Washington to get 

more help from Ex-Im, and you guys blew it again. It is one bumbling mistake after the other, Mrs. Kelly. And I want to tell you 

I am really, really upset and will go into great detail, and I would 

ask if it is possible that they could have Mr. Discenza come here 

to explore this gross thing that happened to his small company in 

South Carolina—North Carolina, if that is okay with you? 

Chairwoman KELLY. So moved. Without objection, so moved. 

6

Mr. MANZULLO. Great, so can you have him come here? 

Mr. LAMBRIGHT. Congressman, I would be happy to cooperate 

with you on that matter. Mr. Discenza is not an attorney; he is our 

CFO. And I am prepared to discuss that matter with you today. 

Chairwoman KELLY. Will that satisfy your need, Mr. Manzullo? 

Mr. MANZULLO. Well, it is your hearing; I will just have to have 

another hearing on it. It won’t because then you are going to have 

hearsay. I don’t even know if you were at that meeting with this 

constituent and Mrs. Myrick. 

Chairwoman KELLY. Mr. Manzullo, we can always have another 

hearing in the Oversight and Investigations—

Mr. MANZULLO. That would be fine. 

Chairwoman KELLY.—if you would like us to do that. 

Mr. MANZULLO. That would be fine. 

Chairwoman KELLY. Or we could do a joint hearing if you like. 

Mr. MANZULLO. You could do that but you can tell I am quite 

upset over what has happened to the little guys here, and I hope 

they take them into consideration. Thank you. 

[The prepared statement of Hon. Donald A. Manzullo can be 

found on page 53 in the appendix.] 

Chairwoman KELLY. Thank you. Mr. Crowley. 

Mr. CROWLEY. Thank you, Madam Chair. I just want to start by 

thanking you for holding this hearing today and for the committee 

doing its work and for this testimony given today. 

The Ex-Im Bank supports U.S. exports and American jobs as the 

Nation’s official export credit agency. It is charged with financing 

and promoting exports of U.S. goods and services and, in doing so, 

Ex-Im also assumes commercial and political risks. It also levels 

the playing field for U.S. businesses seeking to enter challenging 

markets by providing financing for U.S. exports that is not available in the private market. However, it does not compete against 

private lenders. 

The Ex-Im Bank was created in 1934 and established under its 

present law in 1945 to aid in financing and facilitate U.S. exports. 

Exports are seen as vital for sustaining U.S. economic growth. The 

U.S. economy is increasingly internationalized and exports a larger 

share of the Gross National Product than in the 1930’s. Globally 

trading and financial systems are more interdependent, and international competition is more intense. 

Ex-Im Bank’s financing annually sustains an estimated 200,000 

jobs directly among exporters and suppliers and another one million jobs indirectly among sub-suppliers. But Ex-Im is not only 

helping the U.S. stay competitive, it is helping New York City and 

my district as well. Overall, Ex-Im has provided loans and guarantees to three suppliers in my district, totaling over $2.8 million and 

dozens of small businesses throughout the State of New York. Companies such as Namco Machinery in Maspeth Queens and Water 

Meat Distributing Company in the Bronx have benefitted from 

working with Ex-Im Bank. With Ex-Im’s help, these and other companies in New York have exported their products around the world. 

I look forward to hearing as well as perusing the testimony of 

our witnesses today as we work towards reauthorization of this important institution. 

And with that, I yield back the balance of my time. 

7

[The prepared statement of Hon. Joseph Crowley can be found on 

page 48 in the appendix.] 

Chairwoman KELLY. Thank you, Mr. Crowley. Mr. Davis. 

Mr.DAVIS. Thank you, Madam Chairman. I don’t have an opening statement. 

Chairwoman KELLY. We turn then to Mr. Lambright. Mr. 

Lambright is the acting director of the Ex-Im Bank, and we are 

pleased to have you here this morning. And we are hoping to get 

some answers to some of the questions that have been raised here 

already. Thank you. Please proceed. 

STATEMENT OF THE HONORABLE JAMES H. LAMBRIGHT, 

CHAIRMAN AND ACTING PRESIDENT, EXPORT-IMPORT BANK 

OF THE UNITED STATES 

Mr. LAMBRIGHT. Of course, thank you. Chairwoman Kelly, may 

I submit my written testimony for the record? 

Chairwoman KELLY. Yes, without objection, your written testimony will be submitted for the record. 

[The prepared statement of Hon. James H. Lambright can be 

found on page 82 in the appendix.] 

Chairwoman KELLY. And you understand, you have testified here 

before; you have 5 minutes to testify. When the lights, which don’t 

seem to be on right now, when the green light changes to yellow, 

you have one minute. And when the red light comes on, we would 

like you to sum up. Thank you, Mr. Lambright. We are here to listen to what you have to say. 

Mr. LAMBRIGHT. Thank you, Chairwoman Kelly, Congresswoman 

Maloney, and members of the subcommittees. I am pleased to be 

here to bring you up to date on the activities of the Export-Import 

Bank. For those members who are new to Ex-Im Bank, this is a 

good introduction as we head into 2006, the year of our reauthorization. 

I am proud to report that during Fiscal Year 2005, we achieved 

significant results in meeting our goals of becoming more customer 

friendly, market driven, and results oriented, all in support of financing exports that would not otherwise go forward and, therefore, in support of the U.S. jobs base. 

Of particular note, first, our volume of business is up. Ex-Im 

Bank authorized roughly $14 billion in financing but supported 

nearly $18 billion in U.S. exports. This level of authorized financing reflects a 50 percent increase since 2001. 

Second, our multiplier effect is increasing. For every taxpayer 

dollar used in Fiscal Year 2005, Ex-Im Bank supported $57 in U.S. 

exports. That compares to $50 last year and $35 the year before. 

Management and staff have been doing more with less. 

Third, our small business exports are growing. Our direct support of small business exporters increased 18 percent over the last 

year. Since 2001, we have increased our direct support to small 

businesses by $1 billion, going from $1.7 to $2.7 billion. At least 13 

percent of those small business transactions have been with 

women- and minority-owned businesses. 

We have also boosted the number of small business transactions, 

which consistently account for over 80 percent of our transactions. 

And I think that bears repeating that when we talk about the comVerDate 0ct 09 2002 15:35 Mar 24, 2006 Jkt 000000 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 G:\DOCS\109.62 RODNEY
8

ponent of Ex-Im Bank business that goes directly to small businesses, 83 percent of the number of transactions we did this year 

went directly to small business exporters. 

But you do note that our charter provision requires us to make 

20 percent of our funding available for small business transactions. 

And as indicated by the chart on the last page of my written testimony covering 2001 to 2005, small business demand has not 

reached 20 percent. For Fiscal Year 2005, the level was 19.1 percent, up from 16.7 percent the year before. 

Fourth, the amount of exports we support to sub-Saharan Africa is up. Over the past 7 years, the Bank has supported over $3 billion in exports to sub-Saharan Africa. In Fiscal Year 2005, we support over $460 million in exports to the region, up 36 percent over 

last year. 

It is important to note that this performance was achieved without adding any employees and without competing with private 

banks while responsibly managing taxpayer resources. These results demonstrate the strong commitment of Ex-Im Bank management and staff to efficiently and effectively support U.S. exporters 

and the jobs associated with their overseas sales. 

In Fiscal Year 2005, we authorized over 3,000 transactions. Over 

2,500 of those went directly to small businesses. That means there 

are a lot of workers in American firms benefitting from the service 

we provide. But like any service provider, we know we can serve 

our customers even better. For the future, we will continue to focus 

our efforts on increasing small business exports under the leadership of our new vice president for small business and the staff of 

40 Ex-Im Bank employees dedicated exclusively to small business 

outreach. 

Furthermore, when fully in place, our business automation 

project will increase the transparency of our approval process for 

our small business customers by allowing online application and 

tracking. We are also going to continue our efforts to increase our 

activities in sub-Saharan Africa and our outreach to exporters of 

environmentally beneficial goods and services. 

Through these efforts and the reauthorization process, I am confident that Ex-Im Bank will remain in good shape to pursue its 

mandate of supporting U.S. jobs by financing exports that wouldn’t 

go forward without us. 

Thank you very much, and I would be happy to take any questions. 

Chairwoman KELLY. Thank you very much, Mr. Lambright. Mr. 

Lambright, you spoke about the automation. When will that webbased platform for small businesses be up and running? Do you 

have a projected time? 

Mr. LAMBRIGHT. Well, I try to be conservative in the promises I 

make, but my best estimate is the first half of 2006. 

Chairwoman KELLY. The first half, some time between January 

and June of next year? 

Mr. LAMBRIGHT. Yes, Chairwoman, we are trying to roll this out 

in phases. Since the last reauthorization, at which point we had 

nothing online, we heard this committee loud and clear that we 

needed to be moving our business services online. And since then, 

we have captured some of the low hanging fruit of being able to 

9

issue letters of interest, offer subscriptions and forms online, but 

the application processing, which is really what I understand your 

interest to be, was always known to be a multi-year process. And 

so we have developed that automated platform. It is in the testing 

stage now. In fact, I have taken it for a test myself acting as a potential applicant. So we are getting very close to being able to roll 

out the first products online. 

Chairwoman KELLY. Are small businesses going to have the 

same access as large businesses to the relationship managers that 

don’t work with direct competitors or large companies at the same 

time they are working on the small business loans? Will there be 

dedicated people there? 

Mr. LAMBRIGHT. I think I know what you are asking. 

Chairwoman KELLY. I just want a no or yes answer. 

Mr. LAMBRIGHT. We have a pool of relationship managers who 

specialize in the small businesses. 

Chairwoman KELLY. I want a no or a yes answer. Will they be 

dedicated in a way that they are not working with direct competitors or with the large companies; are they going to be working as 

a dedicated manager with the small businesses? All I need is a yes 

or a no. 

Mr. LAMBRIGHT. I think what you are asking would be impractical, and I am going to have to say no. 

Chairwoman KELLY. Well, you do it for large companies. 

Mr. LAMBRIGHT. Right, we do and we do it for customers that are 

frequent customers of the Bank. So when we have a pattern of 

business, we can work directly with a company. But of the 200,000 

or so small businesses that export, we can’t assign each of them a 

dedicated relationship manager. But we do offer a pool of people 

whose job is largely focused on small business. 

Chairwoman KELLY. But if they are also working with large businesses, then they are largely focused maybe, but they are still 

working with small businesses. Look, here is the problem. If you 

have someone who is a manager and they are working not only 

with your business but with your competitors, that is a problem in 

my book. We need somebody who is going to work directly in a way 

that doesn’t put them in that position. Also, I think that we need 

more people focused on small businesses, and I think that is important. 

I want to ask you about the dealer distributor program because 

the last time you were in front of us I asked you about—I mentioned the lack of loans in the dealer distributor program and a 

later witness here today is going to testify that they were denied 

a loan in this program. I want to know if Ex-Im has increased the 

number of dealer distributor loans? 

Mr. LAMBRIGHT. We have not, Chairwoman Kelly. 

Chairwoman KELLY. I have also found out that Ex-Im plans to 

move about 40 people, which is 10 percent of your workforce, to 

doing small business outreach and education. Is this in addition to 

small business relationship managers? 

Mr. LAMBRIGHT. Yes, it is. This staff is working with the new 

vice president of small business, and these folks are focused exclusively on outreach to small business: finding, educating, developing 

business from small businesses that export or might be interested 

10

in exporting. When you talk about the relationship managers, those 

are the folks that actually handle the applications and get the financing for the applicant, and so those are the people in our business units, many of whom spend most of their day just on small 

businesses. 

Chairwoman KELLY. Well, if that is the case, you ought to be 

able to hit 20 percent. I note that you have come up. 

Mr. LAMBRIGHT. We are very hopeful. We are working hard. 

Chairwoman KELLY. Okay, we want you to work hard on that. 

I understand also that it is the claim of the Ex-Im that the large 

loans support the small businesses, and that is really not very well 

supported by the empirical data, at least the empirical data we 

have. In fact, Ex-Im doesn’t even look for information from the 

large businesses as to whether there are small business components in the actual product being exported. Now I heard you say 

that those large loans support small businesses. We don’t have any 

data to support that, and it doesn’t look to me like Ex-Im is really 

requiring that of the large business loans. So have you done anything about that, and do you have better data than we have? 

Mr. LAMBRIGHT. Well, I don’t bring with me data today that says 

‘‘X’’ thousands of sub-suppliers have been benefitted by our larger 

deals, but we do make estimates through talking with the exporters on the small businesses that are benefitted. But you are correct 

to note that this is fairly anecdotal, and it is a lot of estimation. 

But I can tell you from talking to some of the larger exporters that 

they point to the tens of thousands of small businesses that are on 

their supplier rolls, but for any particular export, your observation 

is correct. 

Chairwoman KELLY. My background is science, sir, and anecdotal evidence is lovely, but I like to see figures and numbers. 

Mr. LAMBRIGHT. Fair enough. 

Chairwoman KELLY. And if you can start collecting those, it 

might help all the way around our understanding of the transparency of what you are doing. 

Mr. LAMBRIGHT. Right. 

Chairwoman KELLY. So thank you very much. I am out of time. 

Mrs. Maloney. 

Mrs. MALONEY. I thank you for being here and I applaud the line 

of questioning from the chairwoman on helping small businesses. 

I think it is important. One of the criticisms that doesn’t apply to 

my district but that you hear from other Members of Congress is 

that some of the businesses that get these loans are among the 

Fortune 500, some of the most successful businesses in our country. 

And they argue why in the world are we subsidizing or back-stopping these businesses? And so I am asking you a question that I 

hear as a supporter of the Ex-Im Bank. 

Mr. LAMBRIGHT. It is a fair question, Congresswoman. We think 

about these questions a lot but when we look at our mission of supporting U.S. jobs, a lot of those jobs are in the larger companies 

and a lot of jobs go into some of the larger exports of the capital 

equipment. One tractor involves a lot of people on assembly lines 

putting that together. And so we take great pride in helping some 

of the larger companies in the U.S. get those sales that they might 

11

not otherwise get, but we also focus on helping as many small businesses as we possibly can. 

Mrs. MALONEY. Well, how do you get your criteria? When you 

have a large business that is exporting tractors, shall we say,—

Mr. LAMBRIGHT. Right. 

Mrs. MALONEY.—and being very successful and then all of a sudden they get a loan to export more tractors. What is the differential 

that shows you that they need support for one set of tractors but 

not the other set of tractors? 

Mr. LAMBRIGHT. Well, we work carefully with applicants to make 

sure that the standard that we call additionality is met, which is 

exactly what you are asking. Do they really need us? We go where 

firms would go on their own if there weren’t either governmentsponsored financing from a competitor or an exaggerated perception of risk in their commercial markets. And so we step in in those 

two instances to help that export go forward. 

Mrs. MALONEY. Okay, and also we heard some concern that the 

businesses complain that the governance structure of the Bank is 

not transparent and accountable. For example, it has been proposed that Ex-Im adopt the auditing standards of Sarbanes-Oxley, 

the fact that they have an independent director and that form of 

transparent governance. And what is your response to that? 

Mr. LAMBRIGHT. Well, I don’t know what particular concerns you 

have been hearing, but with regard to Sarbanes-Oxley, while technically we are not governed by that legislation, we take it very seriously. We conducted our own audit with an outside firm to see how 

close we were to compliance with Sarbanes-Oxley. We have adopted 

a number of best practices. We did a rigorous review of our internal 

controls. And you mentioned our board of directors. We have a five 

member, bipartisan board. The non-managing directors constitute 

an audit committee that works directly with both an outside and 

inside audit function. 

Mrs. MALONEY. And there have been some concerns, particularly 

from Congressman Sanders from Vermont, that some of the biggest 

outsourcing businesses, where they out source jobs to other countries, are receiving the Ex-Im loans. And so then you see an 

outsourcing of jobs that they are purposely outsourcing and then 

they are getting loans to have jobs in the U.S. And how do you justify that challenge? 

Mr. LAMBRIGHT. They are not getting loans from us for the jobs 

that they have moved overseas. We care only about the jobs that 

remain here in the U.S. And so when we help those exports go forward that otherwise would not go forward, we are helping keep 

more of those jobs from being outsourced by keeping the production 

here in the U.S. 

Mrs. MALONEY. Where do you see job growth in the U.S.? As you 

are doing export financing, where do you see job growth and expansion in the U.S.? I know we have lost manufacturing, three million 

manufacturing jobs, but where do you see the potential job growth? 

Mr. LAMBRIGHT. Well, I see a lot of job growth in small business. 

As a sector, it really is the engine of job growth in this country. 

And we would like to support that and help fuel that growth. In 

particular sectors, I think we are seeing global demand for some 

of our more sophisticated manufacturing, environmental, and medVerDate 0ct 09 2002 15:35 Mar 24, 2006 Jkt 000000 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 G:\DOCS\109.62 RODNEY
12

ical equipment experts. Also, we are seeing a lot of large infrastructure projects as emerging markets realized that they need firstclass infrastructure to grow themselves. We are seeing demand for 

power, roads, and other infrastructure projects where American 

companies can help. 

Mrs. MALONEY. My time is almost up, but would you spend a little bit of time on your financing structure? You do not cost the taxpayers any money; you basically are a revolving door, assisting 

businesses, making profits, plowing it back in. Is there any cost to 

the taxpayer for administrative costs, or are you totally self-sufficient? 

Mr. LAMBRIGHT. Well, we do not have the authority to keep revenues in the sense of retained earnings and that revolving notion 

that you mentioned. So every year we do come before Congress to 

request both an administrative and a program budget to fund our 

operations. And what we do is like a bank; when we support a 

loan, we work with OMB and other agencies to assess the risk of 

that loan. And we take from our program budget that amount that 

reflects the potential loss and over time, if we realize, as has been 

the recent history, that our portfolio is performing better than the 

original risk calculations, we return that extra money to the U.S. 

Treasury. 

Chairwoman KELLY. Thank you very much, Ms. Maloney. Mrs. 

Biggert? 

Mrs. BIGGERT. Thank you, Madam Chairman. Mr. Lambright, on 

page 2 of your testimony you stated that the Bank often becomes 

involved in deals that are not attractive to commercial lenders because they are in higher risk markets and this is the reason for the 

Bank’s existence. But in the next paragraph you state that the 

Bank has a claims rate comparable to many commercial banks. If 

you are in the higher risk markets, how can you claim that the 

rates are comparable to the banks? 

Mr. LAMBRIGHT. I came from private banking to Ex-Im Bank, 

and that confused me for a while as well, Congresswoman. Ex-Im 

Bank by its very nature does take risks that the commercial market won’t bear. But we structure our deals to find reasonable assurance of repayment, as our charter dictates. We try to walk that balance, but I think the answer to your question is even though we 

are taking greater risks in the commercial market, we are the 

United States Government, and borrowers often find that they 

would like to pay us back and not default to us. 

Mrs. BIGGERT. Well, do you think the reasonable assurance of repayment is the correct standard? Do you find that that is too restrictive? How many loans do you turn down? 

Mr. LAMBRIGHT. Well, it is hard to give you a precise figure on 

how many we turn down because some are withdrawn throughout 

the process when applicants realize they won’t meet our standards. 

We have translated that reasonable assurance of repayment standard into credit standards that we posted on our website, and we 

work with our customers to make sure they know what countries 

we are willing to take which risks in. And we do get fairly aggressive, even though the whole portfolio, as you know, has a low 

claims rate. In certain markets or in certain sectors where we have 

been aggressive and with seasoning we have seen those deals turn 

13

bad; we have had to re-calibrate and take a closer look at the 

transactions that are coming before us. Just very recently, a few 

years ago we were spending a lot of time developing business in 

markets like Ghana and the Philippines, and with seasoning we 

noticed that there was a troubling default rate, and so we have had 

to ask harder questions. We have had to make sure that our banking partners have good ′′Know-Your-Customer′′ standards; knowing 

who we are dealing with is becoming ever more important. So I do 

think that a reasonable assurance of repayment is the right standard. But, Congresswoman, we try to walk that balance between our 

eagerness to help the exporter and our eagerness to protect the taxpayer from excessive risk. And if we feel, if we sense from our customers or from you that we have strayed too far off that balance, 

we want to listen to your guidance. And if we need to adjust 

course, we can do so. 

Mrs. BIGGERT. Okay, thank you. And then I have a question 

about transactions. Of the authorized $15 billion worth of transactions if Fiscal Year 2004, $4.5 billion went to Boeing. How many 

transactions does this $4.5 billion represent? 

Mr. LAMBRIGHT. You correctly note that Boeing deals this year 

represented about a third of our portfolio. I am not sure how many 

transactions that was, maybe two dozen or so. We have a large 

portfolio of aircraft in 50 countries around the world, and that portfolio is performing quite well. 

Mrs. BIGGERT. I guess what I am getting at is how do you define 

transactions? Is this like a line of credit that like somebody uses 

it and there are many transactions that are counted in one, or is 

it every transaction? 

Mr. LAMBRIGHT. It would be specific sales of aircraft, but oftentimes a foreign airline would buy more than one aircraft at a time, 

so we would count transactions by the number of contracts. So if 

there were a contract to buy four aircraft, that would be one transaction. 

Mrs. BIGGERT. So in the small businesses, I think you said there 

were like 2,167, something like that, transactions last year. Does 

that mean that there were just that number of contracts? 

Mr. LAMBRIGHT. Right, we are counting by the number of loan 

approvals or insurance product approvals that we signed, and 83 

percent of those went directly to small business. And the reason 

that this 20 percent of funding isn’t met by those 80 percent of 

transactions is, as you correctly note, one Boeing transaction involves a lot of money. 

Mrs. BIGGERT. Okay. So do we need a small business mandate 

in the next reauthorization? And, if so, what should the percentage 

of transactions be? 

Mr. LAMBRIGHT. Well, we at Ex-Im Bank are working very hard 

to find more ways to do small business exports, and so we appreciate the encouragement from this committee to do more. In terms 

of what language or what number might be the best mark to set 

for us, I am not in a position to talk about what the Administration 

position on any charter changes would be. 

Mrs. BIGGERT. Okay, thank you. Thank you, Madam Chairman, 

and I yield back. 

14

Chairwoman KELLY. Thank you very much, Ms. Biggert. Mr. 

Crowley. 

Mr. CROWLEY. Thank you, Chairwoman Kelly. Thank you for 

being here again, as I mentioned earlier. I appreciate the work of 

Ex-Im, as I stated in my opening testimony, my opening statement 

as to the importance that it has lent to a number of my constituents. I do have though a constituent who we thought would benefit 

from Ex-Im, and if you could help maybe give us guidance as to 

how we could help proceed, whether now or generally speaking or 

specifically targeting this particular case. I won’t mention the name 

of the company but there is a metal works company in my district. 

They are in the business of wrought iron and brass and all kinds 

of metals, making doors and frames and things of that nature for 

some very high-level people. They entered into a contract with the 

prince of Abu Dhabi in the UAE to create brass doors valued at 

over $2 million. For whatever reason, the prince did not want to 

pay the price at some point, once the doors had been completed. 

And imagining all the money that was laid out to do that. In essence, their refusal to pay caused my constituent to enter into 

bankruptcy and, in effect, default on the Ex-Im loan that was also 

issued to help in that process. There was a Federal judgment earlier this year in favor of my constituent against the UAE prince. 

What can, what is, or what can Ex-Im do to help, see that judgment carried through? In other words, is there anything the Ex-Im 

could help us do in terms of making sure that my constituent is 

made whole and, in effect, being able to pay back the taxpayers 

that they are owed for the monies that were lent to help that business transaction take place? I am sure this is probably not the only 

case of its kind in the history of Ex-Im. The reason why it is sensitive is that you may very well be aware of the fact that the U.S. 

is negotiating a free trade agreement with UAE. And if this is how 

they deal in private matters, I am concerned about any free trade 

agreement that we may be entering into with a country that would 

treat our citizens in this way. Maybe if you can comment on that. 

Mr. LAMBRIGHT. Sure. Congressman, I am not familiar with the 

company that you referenced or the particular transaction and so—

Mr. CROWLEY. I will be able to get that to you. For right now, 

I think I have said enough to make my point. I hope there is someone here for the UAE. If not, some friends that maybe can get that 

back to them. 

Mr. LAMBRIGHT. We will let them know your concerns, and we 

will follow up with your office. 

Mr. CROWLEY. My second question deals with an overall, again 

a broader picture. In terms of deals that are entered into with 

American companies overseas that deal with politically sensitive 

issues and, specifically, funding of a pipeline through Azerbaijan 

that completely cuts out Armenia in the creation of that pipeline. 

I oppose funding of the Baku-Ceylan Pipeline because it does exclude Armenia. How do you go about deciding which projects to 

fund when they are politically sensitive in this particular case? 

Mr. LAMBRIGHT. Well, regardless of the politics, we are demand 

driven. And so the market needs to bring us commercially viable 

transactions. When you are talking about a large project, like what 

we refer to as the BTC Pipeline, the market, the participants would 

15

seek our financing and come to us. We would look very carefully 

at the politically sensitive issues that you raise. We would also look 

very carefully at any environmental concerns. And we would also 

look very carefully at the creditworthiness of the project, since for 

a project like that, we need the project up and running producing 

revenues for us to make sure that we are getting repaid. But in 

terms of what route a pipeline might take, that is really for the 

participants to decide. And then once the project is brought to us, 

if it meets those criteria I mentioned, we would decide whether to 

finance it or not. 

Mr. CROWLEY. How are those decisions actually made? 

Mr. LAMBRIGHT. Which decisions? 

Mr. CROWLEY. In terms of the political significance, the environmental significance. 

Mr. LAMBRIGHT. On a project of that size we would have a 

lengthy due diligence process that would go months and months of 

working with all the participants, with interested parties. Oftentimes in a project of that scope and scale, we would hear from 

NGO’s who might have environmental concerns. And so we would 

work with the project participants and most likely outside contractors to do environmental impact assessments that we would share 

with the public. We would also work with other government agencies on the political issues of whether it was appropriate for us to 

be involved in a transaction or not. 

Chairwoman KELLY. Thanks very much, Mr. Crowley. Mr. Manzullo. 

Mr. MANZULLO. Thank you. I would ask permission to insert my 

full opening statement into the record. 

Chairwoman KELLY. Without objection, so ordered. 

Mr. MANZULLO. Thank you. Does the head of the small business 

office report to you directly? 

Mr. LAMBRIGHT. He is the number two guy in our largest business unit, but I have a lot of day to day contact with him. 

Mr. MANZULLO. That doesn’t answer the question. 

Mr. LAMBRIGHT. On the org chart, he does not report directly to 

me, no. 

Mr. MANZULLO. All right, so you have no supervision over him? 

Mr. LAMBRIGHT. I have plenty of day to day contact with him, 

and I am very involved in what he is doing. 

Mr. MANZULLO. But he doesn’t report to you. 

Mr. LAMBRIGHT. He reports to the head of our business unit; that 

is correct. 

Mr. MANZULLO. He reports to what? 

Mr. LAMBRIGHT. The head of what is called our Export Finance 

Unit, which is our major business unit. 

Mr. MANZULLO. Do they report to you? 

Mr. LAMBRIGHT. Yes. 

Mr. MANZULLO. Do you have the ability to intervene in individual transactions, a transaction that takes place with the head 

of the small business? 

Mr. LAMBRIGHT. Well, I suppose I have the ability to express my 

interest in transactions moving forward. 

Mr. MANZULLO. Can you reverse them? 

Mr. LAMBRIGHT. Can I reverse? 

16

Mr. MANZULLO. Right, if the head of the small business group 

makes a decision, can you say, ‘‘I don’t like that; I want that reversed’’? 

Mr. LAMBRIGHT. Well, it depends on the nature of the transaction. The board of directors approves transactions but has delegated certain authorities to other committees or individuals in the 

Bank to approve transactions. Once a deal is signed under the 

terms of those delegated authorities, I don’t think I have any power 

any more than anyone else to turn it around. Our commitments 

carry the full faith and credit of the U.S. Government. 

Mr. MANZULLO. That is a pathetic answer. I am trying to find out 

who is in charge of the agency. Does he work for you or not? 

Mr. LAMBRIGHT. Yes, he does. 

Mr. MANZULLO. All right, if he makes a mistake, do you have the 

ability to reverse the mistake? 

Mr. LAMBRIGHT. Sure, but if he has the authority to commit the 

Bank, then I am honor bound by the contract signed. 

Mr. MANZULLO. Well, have you ever been asked to intervene in 

a situation involving a small business? 

Mr. LAMBRIGHT. I have taken a personal interest in several matters related to small business. 

Mr. MANZULLO. Will you answer the question, please? 

Mr. LAMBRIGHT. Yes, the answer is yes. 

Mr. MANZULLO. With regard to Rutland, were you personally involved in that transaction? 

Mr. LAMBRIGHT. I was personally aware of it; I was not an adjudicating official. 

Mr. MANZULLO. What does that mean? 

Mr. LAMBRIGHT. It means I took an interest in making sure that 

that customer was treated fairly and kept informed of our process, 

but I was not opening the file and reviewing the terms of their 

claim. 

Mr. MANZULLO. So you are not familiar with this file personally? 

Mr. LAMBRIGHT. I am familiar enough to know that our staff 

gave it four levels of review. 

Mr. MANZULLO. Madam Chair, would you instruct the witness to 

answer the questions. 

Chairwoman KELLY. The witness will answer. 

Mr. LAMBRIGHT. I would be happy to. Could you repeat the question, please? 

Mr. MANZULLO. The question is did you have the ability to intervene in this case and to right a wrong? 

Mr. LAMBRIGHT. I did not intervene. 

Mr. MANZULLO. Did you have the ability to do so? 

Mr. LAMBRIGHT. Sure. 

Mr. MANZULLO. Did we request that you do so? 

Mr. LAMBRIGHT. You requested of my predecessor to take a hard 

look at the case, and he directed our staff to do so. 

Mr. MANZULLO. Did you yourself personally take an interest? 

Mr. LAMBRIGHT. I took an interest in making sure that our 

staff—

Mr. MANZULLO. Did you look at the file yourself? 

Mr. LAMBRIGHT. No, sir. 

17

Mr. MANZULLO. Did you realize the file was important enough 

that I requested Mr. Merrill to personally look at it; are you aware 

of that? 

Mr. LAMBRIGHT. I did and I know that he did take a personal involvement in it. I did not subsequently review the action taken previously. 

Mr. MANZULLO. Were you in charge of the organization on August 22nd of this year? 

Mr. LAMBRIGHT. Yes, I was. 

Mr. MANZULLO. Well, the letter comes August 22nd denying any 

relief to this small business. I am just trying to find out who is in 

charge here. 

Mr. LAMBRIGHT. Congressman, that action was confirming action 

taken earlier. This has received many levels of review in the organization. 

Mr. MANZULLO. Did it receive your level of review? 

Mr. LAMBRIGHT. Enough that I directed staff to take another look 

at it and treat the customer fairly—

Mr. MANZULLO. Did you personally look at the file, yes or no? 

Mr. LAMBRIGHT. No. 

Mr. MANZULLO. You didn’t do your job. Do you know what type 

of insurance Rutland had? 

Mr. LAMBRIGHT. Yes, they had an export credit insurance policy. 

Mr. MANZULLO. What does that do? 

Mr. LAMBRIGHT. It protects against credit reasons for non-payment. 

Mr. MANZULLO. You know they didn’t get paid by this Chinese 

firm? 

Mr. LAMBRIGHT. I am aware of that. 

Mr. MANZULLO. Would you tell the committee today where you 

told them to go adjudicate their claim against you? 

Mr. LAMBRIGHT. I don’t know what we instructed them to go do. 

Mr. MANZULLO. You told them to go to China. 

Chairwoman KELLY. Mr. Manzullo. 

Mr. MANZULLO. I will calm down, thank you. 

Chairwoman KELLY. I am sorry; you are out of time. 

Mr. MANZULLO. Thank you. 

Chairwoman KELLY. We go to Mr. Neugebauer. 

Mr. NEUGEBAUER. Thank you, Madam Chairwoman. A couple of 

questions that I would like to pursue with you. One is the Bank 

and the Small Business Administration last year finalized a memorandum of understanding designed to facilitate small business access to the Bank’s various facilities. How has this program performed? How many transactions have you concluded pursuant to 

this agreement? And do you think similar arrangements would be 

desirable or possible for say the Department of Commerce or other 

foreign commercial services? 

Mr. LAMBRIGHT. Well, Congressman, let me work backwards 

from the end of your answer. In terms of creating a facility for financing with the foreign commercial service of the Commerce Department, that really isn’t possible because they are not making 

financings. But we do work closely with them. We train foreign 

commercial service officers who are going to key markets for us. 

We work very closely with the Commerce Department on outreach 

18

to customers. As for the Small Business Administration, we do 

have a facility for small business customers of the SBA who have 

reached a cap of what the SBA can finance in terms of export lending. We will cover the overflow amount of financing so that that 

customer doesn’t have to go to two different Government agencies. 

It would be a seamless application process. And in the time that 

we have had that facility up and running, we have done about a 

dozen transactions. 

Mr. NEUGEBAUER. One of the things that I was glad to hear you 

say, recognize when the discussion was going on about small versus 

large businesses, just to remind everybody that small businesses 

are the number one job creator in America. Today the Wall Street 

Journal stated that we set a new record today, and it wasn’t necessarily the kind of record that we want to set, a $66.11 billion 

trade deficit. When you talk about all of these outreach efforts that 

you are doing on small businesses, and while you have made some 

efforts and in some years you have had more success than others 

in reaching the 20 percent goal, what are some of the impediments 

that you see to getting to the 20 percentile as far as programs? 

Mr. LAMBRIGHT. Well, the one major hurdle that stands between 

us and helping more small businesses is awareness on the part of 

small business exporters. There are roughly 250,000 small businesses that export, many more who could export if they had access 

to capital. And when we travel around the country and speak to 

different groups, I always find that the number one issue that I 

talk about is explaining who we are and what we are doing there 

and what kind of services we offer. And so when we call on small 

businesses that may potentially be our customers, we are doing it 

to let them know that we exist and that we want to help them export. 

Mr. NEUGEBAUER. When you are looking at the criteria for large 

companies versus small companies in your lending criteria and 

your credit analysis, do you make a differentiation and should you? 

Mr. LAMBRIGHT. Well, we have in our charter the standard that 

is called reasonable assurance of repayment. It’s the standard that 

we need to satisfy for every financing that we participate in. And 

so whether the exporter is large or small, we still need to find that 

likelihood of getting repaid. Now we work closely with small businesses, and some of our policies offer them greater coverage and 

greater protection. But the terms that we look for in order to find 

that reasonable assurance of repayment really look at the borrower, the end user of the product to find out if we are going to 

get repaid. 

Mr. NEUGEBAUER. When you say greater coverage for small business, are you requiring them to have a greater cash flow coverage 

than you would say a large company? 

Mr. LAMBRIGHT. No. What I mean is if there is an export contract for $100, our typical policy for short-term credit insurance 

would cover $90 of that. Basically, they would have to put the 

down payment up. For a small business exporter, we would move 

up and cover 95 percent of that. And also we would offer them a 

policy that had no deductible so that they knew what their costs 

were going in. 

19

Mr. NEUGEBAUER. How many board members is the Bank supposed to have? 

Mr. LAMBRIGHT. There are five. 

Mr. NEUGEBAUER. And how many do you currently have? 

Mr. LAMBRIGHT. Three. 

Mr. NEUGEBAUER. Yes, what is the progress on that? 

Mr. LAMBRIGHT. Well, these are Senate confirmed, presidentiallyappointed positions, and so filling those spots is outside of my control. But we are eagerly awaiting nominations and confirmations to 

have a full complement of the board. 

Mr. NEUGEBAUER. Have the nominations been made and we are 

waiting on the Senate or we are still waiting on the nominations? 

Mr. LAMBRIGHT. We are still waiting on nominations. 

Mr. NEUGEBAUER. Yes, and how about for the permanent position as far as the director? 

Mr. LAMBRIGHT. That is a nomination we are waiting for as well. 

Mr. NEUGEBAUER. Okay. 

Chairwoman KELLY. Mr. Neugebauer, you are out of time. 

Mr. NEUGEBAUER. That is the story of my life. Thank you. 

Chairwoman KELLY. Sorry. We have a second panel so I am trying to keep everybody and—be fair and keep everybody on time. 

Mr. Cleaver. 

Mr.CLEAVER. Thank you, Madam Chair. The Bank received a sig- nificant increase in the administrative costs from $55 million to 

$78 million in 2000. Small business loans actually went down last 

year. Is that correct? 

Mr. LAMBRIGHT. No, Congressman, the number of small business 

transactions, both in number of transactions and dollar terms, 

went up over last year. 

Mr.CLEAVER. The difference in administrative cost, what kind—

Mr. LAMBRIGHT. To get to a $55 million administrative budget, 

you have to go all the way back to 2000 where there was a jump 

in the administrative resources given to the Bank. In the last three 

years our administrative budget has been fairly flat. We are at 

$73.2 million for Fiscal Year 2006 administrative budget. 

Mr.CLEAVER. What does that $73 million buy? 

Mr. LAMBRIGHT. Largely, it buys compensation and benefits for 

our 400 employees. It also pays rent. It pays for technology. It also 

pays for other miscellaneous things like travel. 

Mr.CLEAVER. The increase was to improve the technology. 

Mr. LAMBRIGHT. My understanding of the spike back in 2000 was 

that it was in anticipation of our growing technology needs; that 

is correct. 

Mr.CLEAVER. Do you have an idea of what the new technology—

Mr. LAMBRIGHT. Oh, certainly, we are developing a business automation platform. Back in 2000, we offered no services online. 

Today, already we offer subscriptions, claim filing, letters of interest, and forms online. But the bulk of that money was going into 

a contract for an online application service that has been developed. We are in the testing phases of it now, and we will roll it 

out in the first part of next year. 

Mr.CLEAVER. I have no further questions. 

Chairwoman KELLY. Thank you, Mr. Cleaver. Mr. Price or Mr. 

McHenry, I didn’t see which one came in first. Mr. McHenry. 

20

Mr. MCHENRY. Thank you, thank you. Actually, to follow up on 

Mr. Cleaver’s questions, it is very much in the same line and same 

vein that I was asking. It turns out your budget actually is increased by close to $20 million. I think Fiscal Year 2000 was $55 

million and this year it is what, $73 million? 

Mr. LAMBRIGHT. Right. 

Mr. MCHENRY. So that is a pretty significant increase. What has that gone to, that basically $18 million, what has that gone to? 

Mr. LAMBRIGHT. Well, it is increased over five years. The initial 

spike was really between 2000 and 2001 to make funds available 

for increasing technology where we basically have been moving 

from having no technology to some technology. And so this has 

been a multi-year process for us. But if you look at the $73.2 million administrative budget, 66 percent of that just goes straight 

into compensation and benefits; maybe a little bit over 10 percent 

goes into the technology aspect. And we really are left with a discretionary pool of funds that is less than 10 percent of the overall 

budget. 

Mr. MCHENRY. Well, it is a 30 percent jump in your budget, and 

you are just sort of saying it is going to additional needs. Can you 

be more specific? You talked about technology, but what are you 

doing? 

Mr. LAMBRIGHT. The technology project and the way we are deploying those discretionary funds is really looking towards serving 

our customers better, towards reaching out to—

Mr. MCHENRY. I know you are. It is like saying I am a Member 

of Congress; I am here to serve. Well, what do you do with your 

day? It is a very different question. 

Mr. LAMBRIGHT. Right. 

Mr. MCHENRY. That is sort of a broad answer. It is a nice thing 

to say, but what do you do, that is what I am asking, with that 

money? 

Mr. LAMBRIGHT. As I was saying, 66 percent of it goes to compensation and benefits. We pay rent; we pay for technology. 

Mr. MCHENRY. So your budget increased 30 percent. Did your 

salaries increase 30 percent? 

Mr. LAMBRIGHT. No, they have been increased—

Mr. MCHENRY. By that line of thinking, the salaries would go up 

30 percent. I am asking you what are you doing with the technology money? 

Mr. LAMBRIGHT. It has gone into a multi-year technology program that we are unveiling in phases, the largest chunk of that 

which will be early next year. It is an online application system so 

that our customers, particularly our small business customers, can 

both apply online and then once their application is submitted, 

track the status of their applications. This system has many goals. 

One is to help our small businesses apply and then know where 

their deals are in the underwriting process to increase transparency. But also it will help us with data quality and provide us 

a more flexible platform going forward. 

Mr. MCHENRY. Okay. It seems like you have this interest in giving the most generic and basic answers. I don’t know what your 

prepping was for this hearing, but it is sort of bothersome when I 

ask a specific question, you give me a general answer. We are here 

21

to provide loans. Give me a break. We are asking specifics because 

this is a reauthorization, and we want to know if your existence is 

necessary. 

Mr. LAMBRIGHT. I understand. 

Mr. MCHENRY. And when you are giving me general answers, it 

is frustrating. So I don’t know if I should even go on with any questions because you just give general answers. It is not helpful to me 

on whether or not you deserve to exist. So let me try again. Okay? 

Ninety-five billion dollars worth of loans, that is what you have 

over this authorization. You have given out what, $50 billion so 

far? 

Mr. LAMBRIGHT. Well, we have an authorized limit of how much 

exposure we can have of $95 billion. We have a current exposure 

of $62 billion. 

Mr. MCHENRY. Sixty-two. How does that break down small business to large business, large companies to small companies? 

Mr. LAMBRIGHT. Well, about 80 percent, in ball park numbers, 

about 80 percent of the transactions is for small business, but less 

than 20 percent of that money. 

Mr. MCHENRY. Eighty percent of the transactions, 20 percent of 

the money? 

Mr. LAMBRIGHT. The numbers of deals would be 80 percent go directly to small businesses. Twenty percent of the transactions go 

directly to large businesses. But it is basically the inverse of that 

when you talk about money because the larger deals involve more 

funds. 

Mr. MCHENRY. Okay, that is actually a good specific answer and 

a very nice way for me to end. Thank you. 

Mr. LAMBRIGHT. Thank you. 

Mr. MCHENRY. And I have got two other questions, Madam 

Chair, if I could submit for the record and if they would be so good 

to provide answers. 

Mr. LAMBRIGHT. We would be happy to. 

Mr. MCHENRY. Sort of in the specific range of things, that would 

be wonderful. 

Mr. LAMBRIGHT. Fair enough. 

Mr. MCHENRY. Thank you. 

Chairwoman KELLY. Thank you very much. Mr. Scott, are you 

ready with questions? 

Mr. SCOTT. Yes, I would. Thank you very much, Madam Chair 

Lady. Let me just ask you, sir, the Advisory Committee on sub-Saharan Africa makes recommendations to the Bank. How are these 

recommendations received by the Bank? Is there a formal process 

for these recommendations to be incorporated into Bank policy? 

Mr. LAMBRIGHT. Our sub-Saharan Africa Advisory Committee 

meets several times a year. It has roughly a dozen folks from outside the Bank who have experience in these markets to help us understand the risks and opportunities in sub-Saharan Africa. And it 

is a valuable source of advice to us. At the end of their term, an 

annual term, they do provide a list of recommendations to us. This 

is digested by senior management. I have a meeting next week 

with the chairman of the sub-Saharan Africa Advisory Committee 

to go over his recommendations from the current year. Depending 

22

on the nature and the length of the list, many of these recommendations do get adopted, and some do not. 

Mr. SCOTT. Another question, I am going to ask you a couple of 

questions about small businesses. I have a number of small businesses, as most of us do, but I have an inordinate amount in my 

suburban Atlanta district. There have been complaints from the 

small business community that the relationship manager program 

is not working well for them. Are you aware of that? 

Mr. LAMBRIGHT. I am aware of those complaints. 

Mr. SCOTT. Do the relationship managers specialize in small 

business transactions? And is the Bank’s decision-making process 

sufficiently transparent? 

Mr. LAMBRIGHT. Well, on the transparency question, it is something that we are working hard to improve. We have done over 

3,000 transactions last year, so we are getting a lot done. Those are 

more deals than the year before and the year before that. So with 

every year we are doing more with the resources we have. But I 

am aware that there are some frustrated customers with regard to 

transparency, and this is an area that we take very seriously. So 

we have taken steps to put our policies and standards up on our 

website so people know what is expected by us. We are also developing an online application and processing system so that our 

small business customers know where their application stands in 

the approval process. 

Mr. SCOTT. Let me ask you this? Why does the Bank not have 

an allocation in its administrative budget for small business activities? 

Mr. LAMBRIGHT. Well, because a lot of our programs—a number 

of our programs are largely used by small businesses, but they are 

also used by medium or larger companies. And so we need to staff 

those operating units to handle all the applications that come in, 

even if that particular product is used 80 percent of the time by 

small businesses. 

Mr. SCOTT. In your position, would you not advocate for some resources being added to your budget, administrative budget, to be 

of greater assistance to small businesses, especially in view of the 

light of the complaints from small businesses? 

Mr. LAMBRIGHT. Well, Congressman, I was pleased to hear that 

the conferees have adopted an appropriations package for 2006 for 

us that gives us our full administrative request, so I think we do 

have the resources going forward, at least in the next fiscal year, 

to meet our outreach goals. But I do agree with you about dedicating resources to small business. We recently have repositioned 

40 of our employees to work under a new vice president of small 

business solely on the question of outreach to small businesses to 

help them increase awareness of our products and develop applications that we can support. 

Mr. SCOTT. If I might shift for a moment to small lenders. Does 

the Bank need to expand its relationship with small lenders? I 

have a number of small lenders in my district. Do the large national and international banks have sufficient understanding of 

small business lending issues? 

Mr. LAMBRIGHT. On small lenders, we are trying to work with 

more of them. We have signed an agreement with the National 

23

Credit Union Administration to try to work with community lenders. We are trying to spend more resources training the staff of 

small banks. The problem is there are not that many banks right 

now that are active in overseas trade finance and so we are trying 

to work with those that are interested to make sure they understand that we are available. 

Mr. SCOTT. Do you find from your information that these smaller 

lenders are better at financing larger operations than small business activities? 

Mr. LAMBRIGHT. Could you repeat the question? 

Mr. SCOTT. Do you find that these lenders are better at financing 

larger operations than they are with smaller business activities? 

Mr. LAMBRIGHT. Well, I think your larger companies are going to 

have lender relationships that might make it easier for them to get 

finance for their exports. So that is why we are devoting so much 

of our energy to working with the small businesses and the lenders 

that work with those small businesses. A lot of the small business 

that we get comes in through brokers who know the Bank’s criteria 

but also have relationships with a lot of small businesses. So that 

is something we are working hard on. 

Chairwoman KELLY. Thank you very much, Mr. Scott. Since Mr. 

Scott brought up the issue of countries that are cooperating with 

us, does the Bank receive data from Treasury on which countries 

are cooperating with money laundering and terror financing? 

Mr. LAMBRIGHT. We do; we take that issue very seriously. We 

have been working with our banking partners to set guidelines for 

what we call ′′Know-Your-Customer′′ standards. We check participants in all of our transactions against lists kept by other Government agencies to make sure that we know who we are dealing with 

and that we are sensitive to the issues you have raised. 

Chairwoman KELLY. Okay, thank you. Mr. Price. 

Mr. PRICE. Thank you, Madam Chair. I want to thank you for 

this hearing, and I want to thank you, Mr. Lambright, for coming 

and being with us today. I want to follow up very quickly on Congressman Neugebauer’s question about the vacancies on the board; 

five positions on the board, three members now, two vacancies. 

How long have those two spots been vacant? 

Mr. LAMBRIGHT. Well, a technical correction to the Congressman 

is actually three vacancies because I am serving in only an acting 

capacity. So there are three nominations forthcoming that would 

require Senate confirmation, and all three of those expired on the 

same day on July 20 of this year. 

Mr. PRICE. Of this year? 

Mr. LAMBRIGHT. Yes, a few months ago. 

Mr. PRICE. Thank you. I want to switch gears to the issue of 

China, which, as Congressman Crowley brought up, some politically sensitive areas. China is increasingly becoming a controversial issue I suspect for Ex-Im, and I am interested in your thoughts 

on what the role of the Bank is and should be playing in the trading of goods with China? 

Mr. LAMBRIGHT. China is a market that gets a lot of attention. 

There is a large trade deficit with China and so when we do support exports, we are helping reduce that trade deficit. But there 

hasn’t been a lot of activity in recent years between Ex-Im Bank 

24

and China because China has developed a highly liquid banking 

system that has been providing liquidity to borrowers in China for 

the last few years, and we haven’t been needed as much. So we 

find where we have been needed in China has really been the much 

larger transactions. 

Mr. PRICE. Does the Bank support the export of nuclear power 

plant technology to China? 

Mr. LAMBRIGHT. We have in the past and there is—

Mr. PRICE. Tell me how that decision was—how you arrived at 

that decision. 

Mr. LAMBRIGHT. Well, the existing financings in this sector in 

China were back in the 90s. We have a preliminary commitment 

for a future transaction. And so the process that we are going 

through on that transaction is to work very closely with other Government agencies to make sure that all export controls and licenses 

and concerns about nuclear power in China have been addressed 

before we would finance the project. We would also look at credit 

issues of who we are dealing with and environmental issues before 

we would finance the loan, but we do not yet—the Chinese have 

not yet selected whether they will be choosing American exports or 

French or Russian exports on this particular project. 

Mr. PRICE. Do you believe there is a role or is it appropriate for 

Congress to have a role in that decision-making process for sensitive issues like that? 

Mr. LAMBRIGHT. Well, both chambers did take it up during our 

appropriations process and so we were watching very closely and 

listening to the statements made by Members, and we will work 

closely with interested Members if and when we take that case up. 

Mr. PRICE. But you can take action without Congress opining? 

Mr. LAMBRIGHT. Well, a transaction of that size after a board action, we would give the Congress a notification period where we 

would then see what kind of response we got back before it became 

final. 

Mr. PRICE. Thanks. I want to shift to the Patriot Act and the relevant portions of that to the Bank and how you comply and the difficulties, if any, that are present. 

Mr. LAMBRIGHT. Sure. Many provisions do not apply to the Bank 

since we are not a deposit holding bank. But some provisions do 

apply, those relating to information retention or sharing information with other Government agencies in certain circumstances. And 

my understanding right now is that none of our practices are out 

of compliance with the Patriot Act and so we are looking very closely at those provisions that do apply to us. 

Mr. PRICE. And what provisions are those that do apply to the 

Bank? 

Mr. LAMBRIGHT. The provisions requiring certain information to 

be retained, to know your participants and transactions, we take 

that very seriously. There are also requirements that would apply 

to us in certain circumstances requiring the sharing of information 

with other Government agencies. I don’t think we have been called 

upon to share that information, but we would comply if relevant. 

Mr. PRICE. Let me just ask one final question, if I may, about 

this concept of additionality that you talked about and how you determine whether or not you add something to the mix as it relates 

25

to assisting for exports, especially in the area of large corporations. 

It is unclear to me; we talk about small business and trying to help 

small business, but it is unclear to me what the Bank brings to the 

table for corporations that have significant resources and probably 

could do anything they wanted to do with or without the Bank? 

Mr. LAMBRIGHT. Well, our focus when we make financings for 

larger transactions is really to the overseas buyer of American 

goods. And so while the U.S. firms benefit from being able to make 

that marginal export, we are really looking at the availability of financing to that borrower. And we step in when—in the larger cases 

oftentimes to match government-supported foreign competition. So 

if a foreign government is offering attractive financing terms, we 

step in to make sure that that borrower is making a choice of product based on price, quality, and service, not on Government financing terms. 

Mr. PRICE. I see my time is up, Madam Chair. Thank you. 

Chairwoman KELLY. Thank you. Ms. Waters. 

Ms. WATERS. Thank you very much, Madam Chairwoman. I am 

sorry I am late for the meeting. As you know, we have so much 

going on all at the same time. But I am delighted to be here and 

this is a subject matter that I am very much interested in, and I 

would like to ask Chairman Lambright the Ex-Im Bank’s 2002 reauthorization legislation directed the Bank to expand its activity 

sub-Saharan Africa. However, in spite of this directive, both the 

number and dollar value of Ex-Im Bank transactions in sub-Saharan Africa have gone down since 2002. Now in 2003, the Commission on Capital Flows to Africa, which was chaired by former ExIm Bank Chairman James Harman, made several recommendations for increasing capital flows to Africa by the Bank and other 

export credit agencies. Some of those recommendations included allowing 20 year repayment terms for African countries, raising the 

credit ceiling for local costs for African projects from 15 to 20 percent of export value, offering guarantees and loans in local currency and creating a pilot program to initiate aid for Africa. In addition to that, I would like you to respond to—I want to know if 

you support those recommendations. If so, have you taken any 

steps to implement them or have you done anything else, perhaps 

that I didn’t mention, to increase the Bank’s activity in Africa? And 

I am worried about the HIPC Initiative, even though it has been 

argued that the terms of the Heavily Indebted Poor Countries, the 

HIPC Initiative, which provides debt relief to the world’s poorest 

countries, are constrained Ex-Im Bank activities in sub-Saharan 

Africa. I don’t think so, and I don’t see why it should be. I would 

like to know your opinion on that. I know that there is a one year 

moratorium on new lending to countries that have received debt relief but that should not interfere with the ability to expand activity 

there. So that is a lot, generally though the discussion about Africa, 

what are we doing? 

Mr. LAMBRIGHT. I would be happy to discuss Africa generally, 

though I may not hit all of the issues you raise, Congresswoman. 

But we take our efforts to increase activity in sub-Saharan Africa 

very seriously. In the past 7 years, we have supported over $3 billion in U.S. exports to the region. In 2005, we supported over $460 

million in U.S. exports, which was up over 36 percent from the 

26

year before. In 2001, when I first came to the Bank, the amount 

of exports to sub-Saharan Africa was $85 million. Although I think 

you are correct in noting in 2002 there was a big spike, and what 

I have noticed in our sub-Saharan Africa numbers is that it is not 

a smooth line on a chart. It bounces up and down depending on 

whether we participate in some large transactions. But what our 

goal really is is to increase what I would call our bread and butter 

transactions, the small and medium-size transactions that we can 

do every day to the region. And so we spend a great deal of time 

trying to work with U.S. companies exploring the region and also 

traveling there to educate borrowers. 

You mentioned the report involving our former chairman, Mr. 

Harman. That report does have a lot of ideas in it. I think some 

of them have a lot of merit. I think some of them probably go beyond what the Bank can do without working with other agencies 

or with this body in our re-chartering or at the OECD. There are 

only certain terms that we are allowed to provide based on our participation in the OECD. But we are working to do as much as we 

can in Africa. We are open in 39 different countries in sub-Saharan 

Africa. We did deals in about 20 of them, maybe 18 of them this 

year. And we are working to do as much as we can. 

You mentioned the HIPC concerns and the moratorium on new 

lending. Both of those are limits on lending activity to governments 

or qualifying countries, and a lot of those do happen to be in subSaharan Africa. But it is important to note that most of our business, interestingly, in sub-Saharan Africa is to private sector borrowers. And neither the HIPC rules nor the moratorium would prohibit us from doing lending to the private sector, just to the government. And so we are able to continue doing a lot of business even 

in the countries affected by the things you mentioned. 

Ms. WATERS. Thank you very much. And I would like to, not now 

because we certainly don’t have time, I would like to further with 

you about what you are doing to educate American businesses 

about these opportunities. So I am going to call your office and try 

to set up some time for us to get together and talk. 

Mr. LAMBRIGHT. I look forward to it. 

Ms. WATERS. Thank you very much. 

Chairwoman KELLY. Thank you very much, Ms. Waters. The 

Chair notes that some members may have additional questions for 

this panel, which they may wish to submit in writing. So without 

objection, the hearing record will remain open for 30 days for members to submit written questions to these witness and to place their 

responses in the record. With that, this panel—I want to excuse 

this panel, but first I would like to ask if Mr. Lambright, you or 

members of your staff would be willing to stay in this room to hear 

the testimony of the people on the second panel. I think that would 

be very important for all of us in this room. 

Mr. LAMBRIGHT. I agree, and I think we have arranged for a 

number of our staff, senior staff in particular, to be here and listen. 

Chairwoman KELLY. Good. Thank you very much. We appreciate 

your being with us this morning, and we thank you. This panel is 

excused. 

Mr. LAMBRIGHT. Thank you. 

27

Chairwoman KELLY. All right, I am happy now to introduce our 

second panel of witnesses. The first is Mr. Joseph Watters, representing the Small Business Exporters Association of the United 

States. Mr. Watters is currently the managing director of international sales for Hoffman International, Inc. in New Jersey. Mr. 

Watters was also the president of Hoffman International for 24 

years until 2002. He is a former chairman of the Small Business 

Exporters Association, former board member of the National Small 

Business Association, and former member of the sub-Sahara Advisory Committee for the U.S. Export Bank. 

Next, we have Mr. Hayman, who is appearing today and testifying on behalf of the Banker’s Association for Finance and Trade. 

Mr. Hayman is a senior vice president at the PNC Bank in Philadelphia where he manages international banking and global treasury management, which includes trade services, trade finance, 

international correspondent banking, and international cash management. 

And now I know that my colleague, Judy Biggert, would like to 

introduce our final witness. Mrs. Biggert. 

Mrs. BIGGERT. Thank you, Madam Chairman. I am happy to welcome Mr. John Sabroske, who is the director of Global Trade Finance for John Deere Credit. John Deere is headquartered in 

Molene, Illinois. Prior to joining John Deere Credit, Mr. Sabroske 

managed the trade banking group responsible for both export finance, as well as import finance and the associated operational 

areas. 

He currently serves on the International Committee of the 

Equipping Leasing Association. Mr. Sabroske has had more than 

20 years experience in trade finance. He received his MBA from the 

University of Chicago, as well as BA with distinction from Purdue 

University. Welcome. 

I yield back. 

Chairwoman KELLY. Thank you so much. We will begin with you 

Mr. Watters. 

STATEMENT OF JOSEPH WATTERS, DIRECTOR OF INTERNATIONAL SALES, HOFFMAN INTERNATIONAL, ON BEHALF 

OF SMALL BUSINESS EXPORTERS ASSOCIATION 

Mr. WATTERS. Thank you. Chairwoman Kelly, members of the 

committee, thank you and thanks for the opportunity to be here at 

this meeting to testify this morning. You have already done the introduction, so I will skip that but I will reiterate that I am here 

before you today representing my company, Hoffman International, 

as well as the SBEA, Small Business Exporters Association of 

America. 

As a matter of background, Hoffman International is a distribution company employing some 70 employees. And we are representing major manufacturers of construction, earth moving and 

lifting equipment for the sale, rental, lease, and service of that 

equipment throughout New Jersey, New York City, Long Island, 

and eastern Pennsylvania. 

In addition to that activity, we have for the past 35 years operated an international group within our company. That group focuses exclusively on the global market place for the same sale of 

28

parts and new and used equipment. We target emerging markets 

around the globe. Our primary markets include Central and South 

America, Russia, and NIS countries, Egypt, together with a number of parts of Africa. Our export business is a vital part of our 

total overall business. 

SBA, for whom I served as chairman for 3 years, from 1999 to 

2002, represents its own group of several hundred active exporters, 

as well as over 22,000 members of the National Small Business Association, many of whom are involved in exporting. 

Our association has had a long and constructive relationship 

with Ex-Im Bank. Many of our members are frequent users of the 

Bank’s products. And, I might add, assuring the continued vitality 

and smooth functioning of the Bank is the single strongest bond 

that connects the members of our association. 

Congress originally designed Ex-Im to be the lender of last resort 

for American exporters. Yet for us, as small and middle-size enterprises, SMEs, the Bank is frequently the lender of only resort. 

Banks over the world fear foreign risk, and that is why every major 

industrial nation has an export credit agency comparable to Ex-Im 

Bank. Relatively few banks in the U.S. get past that fear of foreign 

risk to the point of understanding international trade finance. And 

of those few commercial banks that do, even fewer of them will assist SMEs with transactions of under $1 million. Without the guarantees and insurance that Ex-Im provides, virtually no commercial 

bank would underwrite small export transactions. So let me direct: 

Small businesses that export need the Ex-Im Bank. 

Today, financing plays an increasingly important role in export 

sales. This is particularly true for small companies like mine and 

those of other SBEA members whose foreign buyers need financing 

to afford to buy what we in America sell. And it is almost mandatory for buyers in developing countries. They have enormous need 

for everything our country sells, from the bulldozers that we sell 

for building their roads to medical and hygiene products for clinics 

and schools to typical consumer goods. They need to pay for these 

purchases over time, but more often than not their own banking 

systems cannot support either short or longer term financing. 

Small USA companies can play an important role in these markets, 

but we need more than a quality product and a salesman’s smile. 

We need to provide the means for our customers to pay for these 

goods and services. In a word, we need financing. And for capital 

goods, like those we sell, we need 3 to 5-year medium term financing that meets a client’s cash flow capabilities. If small business is 

indeed the engine of the U.S. economy, then our companies that export critically need an aggressive and effective Ex-Im Bank to keep 

that engine humming. Virtually every large company in the U.S. 

exports. Less than 10 percent of the small ones do. If we are serious about addressing the $50 billion a month trade deficit, we have 

to get more of our small companies out on the international playing 

field. That means we have to back them up with a dependable export finance program and make the process user friendly. So we at 

SBA keep a close watch on Ex-Im. We often make suggestions to 

the Ex-Im leadership for improvements in the Bank’s operations. 

In that spirit, I would like to share with the subcommittee some 

recommendations that we have made to the Bank officials over the 

29

past year or two. Our recommendations fall into three categories. 

First, transparency. The Bank needs to better connect with its clients through greater openness about its guidelines and requirements and the status of processing of particular transactions. Customers should know, as they once did, which underwriters are assigned to a case. Then there should be a more open and honest dialogue between the underwriters and its customers. The Bank 

should quickly assess a potential transaction and just as quickly 

offer suggestions if they are needed. 

Chairwoman KELLY. Mr. Watters, I am sorry, but I am holding 

the committee to the 5 minute rule, and I am also hopeful that you 

can sum up from where you are. Your testimony is important to us 

and you know without objection your written testimony is a part 

of this record. 

Mr. WATTERS. One more minute I think I will be finished, 

Madam Chairman. 

Chairwoman KELLY. Go right ahead, sir. 

Mr. WATTERS. The second involves efficiency. Efficiency means 

rapid processing. The Bank seems to do quite well with short-term 

programs, but virtually all of our members find the transaction period entirely too long, much too long. Time is a critical commodity. 

If we don’t move rapidly, we lose customers. A small company simply can’t afford to nursemaid a transaction. 

We believe expanded partnering programs with commercial 

banks would also improve the Bank’s efficiency. Ex-Im currently 

has a working capital guarantee program, which is enormously 

helpful to smaller companies. My company has one of those. How 

we would ever arrange our pre- and post-export financing without 

that program, I don’t know. The program is largely handled by 

commercial banks using Ex-Im’s delegated authority. We would 

like to see this type of delegated authority expanded to include medium-term products. SBA is doing this; OPIC has done this and 

had great success with it. 

Third, and our final topic is focus. Congress has mandated that 

20 percent of Ex-Im’s business must involve small business exporter transactions. This is a significant challenge for the Bank, 

but meeting or even exceeding it only adds more fuel and fire to 

the small business engine. What do we mean? We mean the establishment of a dedicated small business division at the Bank comparable to the highly successful at OPIC, one that answers directly 

to the Ex-Im board. It means having underwriters that work on 

nothing else but SME deals, and it means developing incentive programs for the employees. 

Chairwoman KELLY. Sir, I will give you a few seconds to sum up 

but then I really must ask you to please—

Mr. WATTERS. I understand; I am sorry for going over time. I 

want to finish this one point. And it means developing incentive 

programs to better motivate Ex-Im employees to originate SME 

transactions, move them expeditiously through the Bank, and then 

reward those people who perform and do a good job. 

Chairwoman KELLY. Thank you very much. 

Mr. WATTERS. Thank you very much. 

[The prepared statement of Joseph Watters can be found on page 

93 in the appendix.] 

30

Chairwoman KELLY. Mr. Hayman. 

STATEMENT OF HARRY G. HAYMAN , SENIOR VICE PRESIDENT, PNC BANK OF N.A., ON BEHALF OF BANKERS ASSOCIATION FOR FINANCE AND TRADE 

Mr. HAYMAN. Thank you. I would like to thank the two subcommittees for holding this timely and important hearing on oversight of the U.S. Export-Import Bank. As mentioned, my name is 

Harry Hayman. I am in charge of international for PNC Bank, 

which is one of the largest supporters of small and medium-size 

business through financing with the Ex-Im Bank. 

I am speaking today as vice president of the Bankers Association 

for Finance and Trade, which is 150 banks and service providers, 

so virtually all of the banks that support medium-sized businesses 

on their exports. I have also served for the last 2 years as a member of Ex-Im Bank’s advisory board, and we appreciate the opportunity to make some comments. 

Expansion of exports is a critical element for the U.S. economy 

and the U.S. Export-Import Bank plays an important role in supporting these exports. As we are all aware, the U.S. current account deficit now exceeds 6 percent of GDP. This is clearly not sustainable from either an economic or geopolitical standpoint and requires, among other actions, significant growth in U.S. exports. 

The Ex-Im Bank has made a number of positive and successful 

new initiatives in the past 2 years. Examples include the continued 

expansion of the City-State Partners Program and the initiation of 

the Environmental Exports Program. The staff of Ex-Im Bank 

should be congratulated for their work and progress in promoting 

effective and efficient programs for end users of the Bank’s services. 

I am particularly pleased with Acting Chairman and President 

Jim Lambright’s recognition that the next major effort needed is to 

improve Ex-Im Bank’s transaction application approval process. 

This can be cumbersome for parties involved and, therefore, detrimental to U.S. exports. The focus should be on both consistent and 

transparent credit standards, improvements in the use of technology, and in my written remarks there are a number of comments I make on that subject. 

We look forward to working with Mr. Lambright and the Bank 

to streamline and improve this process. We do not believe there are 

any changes required to Ex-Im’s charter at this time. 

An additional area that continues to require improvement is the 

way governmental entities cooperate in facilitating international 

business. Ex-Im is working on that. Mr. Lambright is working on 

that, but there is much to be done in that area to make the U.S. 

successful in exports. 

I was asked to comment on Ex-Im’s Working Capital Guarantee 

Program, which the Congressman referred to earlier. This has been 

resolved. There is a new agreement in place between the banks and 

our exporting customers and Ex-Im Bank. It is satisfactory. I believe that we would stand by our statement that it will make 

things more difficult for some of the smaller banks. We have a program in place on the Bankers Association for Finance and Trade 

working with Ex-Im to work closely with the smaller banks, such 

31

as in the Congressman’s district, to allow them to work closely with 

small business. 

Thank you. 

[The prepared statement of Harry G. Hayman can be found on 

page 76 in the appendix.] 

Chairwoman KELLY. Thank you very much, Mr. Hayman. Mr. 

Sabroske? 

STATEMENT OF JOHN D. SABROSKE, DIRECTOR, EXPORT 

CREDIT AND TRADE FINANCE, JOHN DEERE CREDIT 

Mr. SABROSKE. Thank you, Madam Chairman. 

Chairwoman KELLY. Mr. Sabroske, be sure you—

Mr. SABROSKE. Yes. 

Chairwoman KELLY.—yes, please. Thank you. 

Mr. SABROSKE. Thank you, Madam Chairman and members of 

the subcommittee. I appreciate the opportunity to appear before 

you today to present our views on reauthorization of the Ex-Im 

Bank charter. John Deere has manufacturing operations in the 

U.S., as well as in 15 other countries. And our products are sold 

to consumers in more than 160 countries, virtually across the 

globe. Our financial services group, John Deere Credit, provides 

credit and other financial services to support John Deere equipment sales to customers both here in the U.S. and in global markets. I believe this gives us a unique perspective, both as an exporter and a lender, from which to comment with regard to the operations and value of the Ex-Im Bank. 

The Ex-Im Bank support for John Deere exports has grown from about $7.5 million in 2003 to $43.5 million in 2004 and to $64 million in 2005. So far for our Fiscal Year 2006, Ex-Im support for 

John Deere equipment sales as total $11.5 million. Over the past 3 years, the Ex-Im loan guarantees of $127 million have supported about $143 million in export sales of John Deere 

equipment. Virtually all of these export sales were in the commercially and politically challenging former Soviet States of Russia, 

Kazakhstan, and Ukraine. Ex-Im’s loan guarantees supported exports of John Deere combine harvesters, manufactured in east 

Molene, Illinois, tractors produced in Waterloo, Iowa, and cedars 

made in Valley City, North Dakota. Without Ex-Im’s support, it is 

fair to say that much, if not all, of this business would have gone 

to non-U.S. based competitors. 

There is today a strong and growing demand in many parts of 

the world for more efficient productive technology and machinery 

made in the West. And there is strong and growing competition for 

this business from agricultural equipment manufacturers in Belgium, Canada, Finland, France, Germany, Italy, and other countries. Each of these manufacturers is aggressively backed by its 

own export credit agency. And because the demand for Western 

equipment is so strong, it is often the terms of credit and its timely 

approval that determine which manufacturer gets the sale. 

The financial risks of doing business in emerging markets means 

that without Government support of credit enhancement, the cost 

of credit to the customer would be prohibitive. So it is vitally important for us to have an aggressive and innovated Ex-Im Bank 

that enables us to compete against non-U.S. manufacturers. We 

32

view Ex-Im as a strategic partner in helping John Deere compete 

for this business. 

Regarding the Ex-Im Bank reauthorization, not only is ours an 

extremely competitive business but in emerging markets, especially 

those businesses in the constant state of change. Our customers operate in seasonal, relatively high risk commercial environments. 

They are increasingly demanding of suppliers to provide quality 

farm inputs at low cost and in an efficient and timely manner. As 

these markets continue to evolve, so too do our overseas competitors with the active support of their own export credit agencies. 

This means that Ex-Im products, policies, and procedures must 

continue to evolve to keep U.S. exporters ahead of customer demands and foreign competitors. 

In our experience, the Bank’s procedures for documentation review and approval of applications have historically taken far longer 

than other ECAs. This creates obvious competitive pressures in our 

seasonal business. We have a saying that if we are 2 weeks late 

in delivering equipment, we are in reality 12 months early. We 

have a unique business in that Mother Nature really sort of drives 

these deadlines. You may have only a 2-week planting window and 

if you deliver a cedar a week after that or even at the end of that 

period of time, they are going to leave that equipment unused for 

another year. So we have extreme time pressures. Your reauthorization efforts should encourage more streamlined procedures for 

transaction approval. 

To stay competitive, we believe that the Bank must also be willing to assume greater risks through its lending practices. As stated 

before, emerging markets for U.S. exports are evolving and competitor ECAs have become more aggressive. We recognize that these 

markets are inherently more risky. If they weren’t, the Bank’s loan 

guarantees and other products wouldn’t be necessary. And we fully 

recognize the necessity of the Bank’s reasonable assurance of repayment obligation. However, the inflexible application of this 

standard in the face of changing market conditions for additional 

risk taking as both reasonable and prudent could work against 

U.S. exporters. We believe that Congress through the reauthorization process should work with the Bank to consider more aggressive standards for underwriting risks and extending the credit enhancements needed to develop these evolving markets for U.S. exports. 

Nor should policies that govern the Bank’s lending practices become an undue barrier to U.S. exports. In working with Ex-Im, our 

objective is to reach a level playing field on financing so that we 

compete and win on product performance and quality. More flexibility in Ex-Im rules ranging from loan tenure to MARAD requirements can have a positive impact on achieving the Bank’s overriding mission. 

In short, we encourage Congress and the Bank to continue to 

work together to develop a more agile and flexible institution that 

helps U.S. exporters compete better in the face of changing market 

conditions and customer expectations. 

John Deere appreciates the opportunity to share its views with 

the subcommittee, and we would be pleased to work with you to 

33

help build on the contributions the Ex-Im Bank makes to promote 

U.S. exports and U.S. jobs. 

Thanks very much. 

[The prepared statement of John D. Sabroske can be found on 

page 89 in the appendix.] 

Chairwoman KELLY. Thank you, Mr. Sabroske. I am going to 

start the questioning with Mr. Watters. You testified regarding the 

importance of having a new vice president of small business report 

directly to the board of directors. If it is required that one-fifth of 

the loans that Ex-Im Bank does go to small businesses, do you 

think that we should also require at least one-fifth of the Ex-Im 

Bank board of directors represent small business exporters? 

Mr. WATTERS. Well, at the moment, I believe one of the directors 

of the Ex-Im Bank has the responsibility of small business loans. 

I am not able to identify that director now, but I think there is a 

designation for one of the five directors to be responsible for small 

loan activities. 

Chairwoman KELLY. Well, since we heard earlier that there are 

only three out of the five there, is it possible that you or someone, 

perhaps you have staff who are here, who might be able to help us 

with this answer, does there exist currently a small business person whose charge it is to handle—a person on the board of directors whose charge it is to handle the small business loans? Anybody here? 

Mr. WATTERS. I believe surely the answer to that is yes, there 

is one. 

Chairwoman KELLY. Currently of the three? 

Mr. WATTERS. No, there is a chair that is filled by one of the directors who has that responsibility. I cannot answer whether or not 

it is filled at this moment. 

Chairwoman KELLY. All right, well, that is good to know. Perhaps we can get some information from the Ex-Im Bank on that. 

Mr. Sabroske, many of the Ex-Im exporters sell agriculture 

equipment and implements. You talked about the seasonal nature. 

Mr. SABROSKE. Right. 

Chairwoman KELLY. I want to know how important it is to you 

all to have a loan officer or a relationship manager or someone like 

that that understands the seasonal nature of exporting agricultural 

equipment. And if that is important, should we make sure that 

someone has that chair on the board of directors? 

Mr. SABROSKE. For us it is absolutely vital that we have what 

I would consider a relationship manager for our business. We 

spend a lot of time with Ex-Im Bank, communicating with Ex-Im 

Bank, both in person and on the phone. I travel here frequently. 

People on my staff travel here from overseas to meet with Ex-Im 

Bank senior management. We are I would say in daily phone contact, touching various parts of the organization. The seasonality 

issue is very real, and we have I think done a good job, I hope we 

have done a good job, in explaining the implications of that. Once 

you back up the time, you have to have the equipment in the field 

to where we have to make a production decision, and when we 

need to know whether we are getting the support or not from ExIm Bank for a particular transaction, we can lay that all out in a 

very clear timeline. So for us it is critical. 

34

Chairwoman KELLY. And would you feel that—my question was 

actually also what about our designating, making sure that at least 

one chair is occupied by somebody who has that seasonal sensitivity and knowledge? 

Mr. SABROSKE. I think it would be extremely helpful. That would 

go a long way towards I believe streamlining the approval process 

within the Bank for situations like this. 

Chairwoman KELLY. I want to go to a question that I asked earlier about the relationship managers working with competitors. Is 

that an important issue to you, to have someone who is working 

directly with you and not with competitors? 

Mr. SABROSKE. Oh, I would not be comfortable with having a relationship manager that was working, assigned to us and also to 

one of our domestic competitors. That would be a tremendous potential conflict there, yes. 

Chairwoman KELLY. Thank you. Mr. Hayman, do you have anything you would want to add? 

Mr. HAYMAN. No. On that subject, no. 

Chairwoman KELLY. All right. Thank you; we turn now to Mrs. 

Biggert. 

Mrs. BIGGERT. Thank you. Mr. Hayman, how would you suggest 

that Ex-Im Bank improve their inter-agency cooperation between 

the Department of Commerce and State and the Overseas Private 

Investment Corporation, the Trade and Development Agency, and 

the Small Business Administration? 

Mr. HAYMAN. I think that one of the things that we notice as a 

bank with many middle-sized customers is that there are a number 

of people and agencies, both private sector and Government sector, 

trying to promote U.S. exports. We would say—including banks, so 

we would say it hasn’t worked as well as it should, and we all bear 

responsibility for that. But if all of those resources could be leveraged, then it would certainly be a much more effective program. So, 

for example, an inter-agency group that we know that the Commerce Department is out calling on this sector and they have a 

goal to create this many export transactions. And over here it is 

U.S. Chamber of Commerce through their own financial resources 

have a group doing the same thing and have it more organized. 

Mrs. BIGGERT. So you are suggesting that there should be an 

inter-agency council? 

Mr. HAYMAN. Right, yes. 

Mrs. BIGGERT. That would make more cooperation. Why not include the Foreign Commercial Service? 

Mr. HAYMAN. Absolutely. They can be very helpful in a number 

of ways. 

Mrs. BIGGERT. Okay, thank you. Mr. Watters, what kind of communication goes on between your small business and the Bank 

throughout the application process? 

Mr. WATTERS. Representative Biggert, our company works generally through banks similar to Mr. Hayman’s in which our applications are completed and submitted by our banking relationship 

directly to Ex-Im. And our communication, therefore, with Ex-Im 

is generally through our bank. 

Mrs. BIGGERT. So you would know with that process whether 

sometimes you might withdraw it because it is not going to be acVerDate 0ct 09 2002 15:35 Mar 24, 2006 Jkt 000000 PO 00000 Frm 00040 Fmt 6633 Sfmt 6633 G:\DOCS\109.62 RODNEY
35

cepted or know how to make other points in the application? Is 

there communication through the bank for that? 

Mr. WATTERS. Yes, we are generally communicating with our 

bank to determine the status of a particular application that is 

moving through the Ex-Im Bank. There is some frustration in that, 

to find out, and that is why I commented in my remarks that some 

more openness in terms of being able to determine exactly where 

a particular application stands is very, very important because you 

have a customer on the other end who is vitally interested to know, 

okay, how am I doing; how is my loan coming; is it moving along 

or not? So it is important for us to know that, so we continue to 

communicate with our customers throughout the world. 

Mrs. BIGGERT. Thank you. Then, Mr. Sabroske, what would you 

say have been some of the most helpful tools in having such a large 

increase from $7.5 million to $64 million in 3 years in loans that 

you obtained? How did you do that; I guess, what are the tools? 

Mr. SABROSKE. Yes, I would say we work very closely with ExIm Bank with our relationship manager first off, but actually the 

origin of that business generation came from somebody in my 

group that is stationed over in Europe that has the responsibility 

for that market and has been working tirelessly to develop and 

structure transactions. But we have involved our relationship manager in Ex-Im Bank in every step of the way in expanding that 

business. The specific products, the credit guarantee facilities for 

our purposes are probably the most efficient way to handle this increased business from an administrative standpoint. It is much less 

burdensome in one up transactions. That is getting fairly technical 

here. But we have been working hard with Ex-Im Bank to expand 

that business. We just sort of re-dedicated ourselves to that market 

within the past 3 years and with obvious success. And we couldn’t 

have done it; we absolutely could not have done it without Ex-Im 

Bank’s support. 

Mrs. BIGGERT. Would you say that you were able to create or 

save any jobs in the United States because of the sales generated 

from the transactions supported by Ex-Im Bank? 

Mr. SABROSKE. I have some information on that in terms of exports. Waterloo Works, for example, says about one in every four 

tractors that comes off their line, that is 25 percent, is exported. 

Now not all of those are going to the CIS region and not all are 

supported by Ex-Im Bank. But of the numbers I gave you, in terms 

of business that we have booked in the past 2 to 3 years, those are 

all transactions that would not have happened without sales and 

financing. I can’t tell you how many jobs that affected directly; I 

don’t have that information, but that is a significant amount of 

business. 

Mrs. BIGGERT. Right, thank you very much. I yield back. 

Chairwoman KELLY. Thank you. Ms. Waters. 

Ms. WATERS. Thank you very much, Madam Chairwoman. I 

would like to talk about small business. Ex-Im is required to allocate 20 percent of its annual lending to small businesses, measured 

in dollar terms. The reauthorization also called on the Bank to increase its transactions with women- and minority-owned businesses and with very small businesses, those with fewer than 100 

employees. However, the legislation I am told did not establish a 

36

binding threshold for transactions in these areas. The Bank has 

failed to meet its 20 percent requirement for small businesses in 

each of the 3 years since the reauthorization. What, if anything, 

are you who are part of the advisory committee? 

Mr. HAYMAN. I was a part of the advisory committee until a couple of weeks ago, so the last 2 years I was part of the advisory 

board of the bank, yes. 

Ms. WATERS. Anybody here on the advisory committee still? 

Mr. WATTERS. No, ma’am, I was on the Advisory Committee on 

Africa, but I terminated that about a year ago. 

Ms. WATERS. What about you, sir? 

Mr. SABROSKE. No, I am not. A colleague of mine was previously 

on the advisory committee. 

Ms. WATERS. I see. Well, what do you know about—well, what 

are your recommendations having served for what can be done to 

increase small business participation? It appears that the Bank 

works well when it is working with the large banks and large businesses but that not many small banks are involved. Is that true? 

And could this increase, the participation of small businesses? Anybody? 

Mr. WATTERS. Well, I would respond, first of all, the Small Business Exporters Association, as well as my company, we are delighted to see the action that President Lambright has taken by establishing the small business unit. We would like to maybe move 

it up a level, frankly, so it is more institutionalized and have it report directly to the board of directors. I think that would bring a 

greater focus on developing that 20 percent or even higher, frankly. 

I think that would work well, and I think what he has done has 

certainly put an emphasis on further developing small business 

transactions. While we like to see it move up a level, we are delighted with what he has taken. And we are very interested to see 

what the results will be as we move forward. That is certainly I 

think a major step on the part of Ex-Im to cure this or to help 

them achieve their mandated 20 percent. 

Ms. WATERS. Anyone else? On the 20 percent, how can we get 

there? 

Mr. HAYMAN. Well, I think—I totally agree with that; I think ExIm is making its effort. We certainly would support more interagency cooperation as we were talking about and leverage all the 

resources that could be leveraged to promote exports, which would 

then flow to Ex-Im Bank and allow them to achieve their objective. 

I think clearly Chairman Lambright, John McAdams, Ken Tinsley, 

the new management group at Ex-Im Bank, will work very hard 

to make the process of underwriting credits, getting them approved 

more quickly improved because that is important to small business. 

We need those transactions to move through more quickly. So that 

combination of things certainly has the potential to pass the 20 

percent mark. 

Ms. WATERS. What about how do you get women businesses involved? 

Mr. HAYMAN. I think there has been some good progress made, 

as Chairman Lambright mentioned. I think there is a whole network, mostly Department of Commerce; SBA has a strong program. 

There is a lot being done. But as I was saying earlier, if you had 

37

a more interagency and private sector group where you could say 

these three groups are going to give huge focus on minority or 

women owned businesses and here are the targets that they are 

going to have, then it makes it all—

Ms. WATERS. Were there any women on the advisory committee 

when you served? 

Mr. HAYMAN. Quite a few. 

Ms. WATERS. Were there any minorities when you served? 

Mr. HAYMAN. Yes, Lieutenant Governor Steele. 

Ms. WATERS. Beg your pardon? 

Mr. HAYMAN. Yes, Lieutenant Governor Steele, for example. 

Ms. WATERS. How big is the advisory committee? 

Mr. HAYMAN. I am sorry? 

Ms. WATERS. How big is that committee? 

Mr. HAYMAN. I think there were nine, and I think five would 

have been minority or female. 

Mr. WATTERS. About the same representative orders, I was on 

the subcommittee for the Africa Advisory Committee on which 

there were a number of female members and from minority groups, 

absolutely. 

Ms. WATERS. Thank you very much. 

Chairwoman KELLY. Thank you. 

Ms. WATERS. I yield back. 

Chairwoman KELLY. Mr. Manzullo. 

Mr. MANZULLO. Thank you. Nothing runs like a Deere; I have got 

two of them. 

Mr. SABROSKE. Thank you. 

Mr. MANZULLO. And our congressional district has over $100 million presence of John Deere in it and really appreciate the quality 

green that comes out of mowing. As I am going through the testimony here, a little bit of institutional history, I believe until the 

2002 reorganization of Ex-Im, there was I believe a person who 

was a senior vice president that reported directly to the president 

and that person was in charge of small businesses. And I took over 

the chairmanship of the Small Business Committee 4 years ago 

and prior to that I chaired a subcommittee. And we have had I 

think half a dozen hearings on Ex-Im. And ever since that reorganization, Ex-Im has just fallen through the floor. Any comments on 

that, Mr. Watters, Mr. Hayman? 

Mr. WATTERS. Representative Manzullo, when you say ‘‘fallen 

through the floor,’’ are you suggesting that Ex-Im is failing in its 

efforts to achieve the 20 percent? 

Mr. MANZULLO. I am talking in terms of transparency, accountability, response. You know I am frustrated today. 

Mr. WATTERS. Well, I can sympathize with you, sir, and I will 

tell you that as a small business we also get frustrated on the time 

it takes to process a deal through the Ex-Im Bank. That is why we 

are so I think pleased with some of the decisions that Mr. 

Lambright and his staff have made, not only to form this special 

committee for small business, this group but also to streamline the 

processing. That is the most difficult challenge for small business 

to tolerate with respect to processing an Ex-Im transaction. We just 

can’t afford to nursemaid these transactions. 

38

Mr. MANZULLO. I understand. The problem is that is all we have 

heard is promises and it gets worse. And I tried to hold the ExIm Bank accountable at a hearing that we held last April and 

charged the president, and obviously Mr. Lambright was aware of 

the situation, to personally look at the documents. They just took 

it and shoved it right in the face of a committee chairman. Apparently no one is in charge over there. The nature of the answers 

that we got from Mr. Lambright, he didn’t personally look at the 

file. So I am going to have to hold a hearing the week of December 

5th again. That will be about my sixth or seventh hearing on ExIm Bank because they just don’t seem to get it with regard to small 

businesses. And this time I am going to put them under oath because I am just tired of this organization continuing with the promises. 

Chairwoman KELLY. If the gentleman will yield? 

Mr. MANZULLO. Of course. 

Chairwoman KELLY. Mr. Manzullo, do you want to make that a 

joint hearing? 

Mr. MANZULLO. Absolutely, absolutely. We are going to do that. 

One of the things that I had noticed, oh, by the way, I am looking 

for a used Gator, okay, a four by six. One of the things I noticed 

on the testimony, Mr. Hayman, on page—was your recommendations, on page 3, where it says the five recommendations that you 

make there. 

Mr. HAYMAN. Yes. 

Mr. MANZULLO. And the first one is enhanced training of Ex-Im 

staff. You have the same problems we do. 

Mr. HAYMAN. I think we all have the same problem with banks, 

but this is certainly, if you look at the process of Ex-Im, and I 

think that all of the gentlemen are aware of the subject, clearly 

creating a more experienced, knowledgeable group of underwriters 

would help address the issues that have been mentioned. 

Mr. MANZULLO. Do you deal with OPIC also? 

Mr. HAYMAN. Yes. 

Mr. MANZULLO. Have you had different experience with OPIC in 

terms of facilitating those loans? 

Mr. HAYMAN. I think it is pretty comparable. There are some 

easy ones that OPIC will move more quickly. The more difficult 

ones—the volume at OPIC isn’t the same as Ex-Im. Ex-Im has a 

lot of transactions going through where OPIC is more crafting a 

transaction. 

Mr. MANZULLO. I don’t know if anybody here could be able to answer this question with regard to the dealer finance initiative. Any 

of you familiar with that? 

Mr. SABROSKE. Yes, we have had some limited experience with 

that. Both applications were turned down which we thought were 

actually reasonable bets from a credit standpoint. So I think it has 

a tremendous amount of potential. 

Mr. MANZULLO. It is another failure by Ex-Im. If they can turn 

down John Deere, just think what they are doing to the small 

businesspeople. 

Mr. SABROSKE. The two instances were in Central America. 

These were not particularly large dealers, but they were well established, had a long term history, we felt. We don’t own the dealers. 

39

These are independent dealers, but they are exclusive dealers and 

we have had an extensive history with these entities, and we felt 

that they were fair bets. 

Mr. MANZULLO. Mr. Hayman, did you have a comment on that? 

Mr. HAYMAN. The dealer finance program was wildly successfully 

or very successful in the 1970s and 1980s, so this is bringing that 

program back. We have not taken our first transaction in yet, but 

we are about to. So we will see what the experience is on that. But 

it is a good program, and we really think it would promote what 

we are trying to accomplish here. 

Mr. MANZULLO. Okay, appreciate that very much. 

Chairwoman KELLY. Mr. Manzullo, thank you very much. 

Mr. MANZULLO. Thank you, Ms. Kelly. 

Chairwoman KELLY. The Chair notes that some members may 

have additional questions for the panel, which they may wish to 

submit in writing. So without objection, the hearing record will remain open for 30 days for members to submit written questions to 

these witnesses and to place their responses in the record. 

I want to thank my colleagues, Chairman Pryce, and Vice Chairman Biggert, and Chairman Manzullo and all of the others of my 

colleagues who have been here today. This has been an important 

informational hearing for all of us. And I especially want to thank 

all you gentlemen on the panel for sharing time with us this morning. With that, this hearing is adjourned. 

[Whereupon, at 12:10 p.m., the joint subcommittees were adjourned.] 

(41)

A P P E N D I X

November 10, 2005

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