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OVERSIGHT OF THE EXPORT-IMPORT BANK OF

THE UNITED STATES

HEARING

BEFORE THE

COMMITTEE ON 

BANKING, HOUSING, AND URBAN AFFAIRS 

UNITED STATES SENATE

ONE HUNDRED FOURTEENTH CONGRESS

FIRST SESSION

ON

EXPLORING THE EXPORT-IMPORT BANK’S CONTINUING ROLE AND 

NEED IN THE UNITED STATES EXPORT-IMPORT INDUSTRY AND CONSIDERING IMPLICATIONS OF THE BANK’S PENDING CHARTER EXPIRING

JUNE 4, 2015

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

(

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


BANKI-41578DSA with DISTILLER
COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS 

RICHARD C. SHELBY, Alabama, Chairman

MIKE CRAPO, Idaho 

BOB CORKER, Tennessee 

DAVID VITTER, Louisiana 

PATRICK J. TOOMEY, Pennsylvania 

MARK KIRK, Illinois 

DEAN HELLER, Nevada 

TIM SCOTT, South Carolina 

BEN SASSE, Nebraska 

TOM COTTON, Arkansas 

MIKE ROUNDS, South Dakota 

JERRY MORAN, Kansas 

SHERROD BROWN, Ohio 

JACK REED, Rhode Island 

CHARLES E. SCHUMER, New York 

ROBERT MENENDEZ, New Jersey 

JON TESTER, Montana 

MARK R. WARNER, Virginia 

JEFF MERKLEY, Oregon 

ELIZABETH WARREN, Massachusetts 

HEIDI HEITKAMP, North Dakota 

JOE DONNELLY, Indiana

WILLIAM D. DUHNKE III, Staff Director and Counsel 

MARK POWDEN, Democratic Staff Director

DANA WADE, Deputy Staff Director 

JOHN V. O’HARA, Senior Counsel for Illicit Finance and National Security Policy 

JELENA MCWILLIAMS, Chief Counsel 

SHELBY BEGANY, Professional Staff Member

LAURA SWANSON, Democratic Deputy Staff Director 

GRAHAM STEELE, Democratic Chief Counsel 

MEGAN CHENEY, Democratic Legislative Assistant

DAWN RATLIFF, Chief Clerk 

TROY CORNELL, Hearing Clerk 

SHELVIN SIMMONS, IT Director 

JIM CROWELL, Editor

(II)


BANKI-41578DSA with DISTILLER
CONTENTS

THURSDAY, JUNE 4, 2015

Page

Opening statement of Chairman Shelby ................................................................ 1

Opening statements, comments, or prepared statements of: 

Senator Brown .................................................................................................. 2

WITNESS 

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

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

Prepared statement .......................................................................................... 33

Responses to written questions of: 

Chairman Shelby ....................................................................................... 57

Senator Menendez ..................................................................................... 65

Senator Cotton ........................................................................................... 66

Senator Sasse ............................................................................................ 67

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD

List of New Jersey Companies that have received Ex-Im Bank financing 

since 2007, submitted by Senator Menendez ..................................................... 93

(III)


BANKI-41578DSA with DISTILLER

BANKI-41578DSA with DISTILLER
(1)

OVERSIGHT OF THE EXPORT-IMPORT BANK 

OF THE UNITED STATES 

THURSDAY, JUNE 4, 2015

U.S. SENATE, COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, Washington, DC. 

The Committee met at 10 a.m. in room SD–538 Dirksen Senate 

Office Building, Hon. Richard Shelby, Chairman of the Committee, 

presiding. 

OPENING STATEMENT OF CHAIRMAN RICHARD C. SHELBY 

Chairman SHELBY. The hearing will come to order. 

On Tuesday, the Banking Committee heard a range of perspectives from a panel of experts and industry representatives who testified on the future of the Export-Import Bank. Today, the Committee will receive the testimony of Fred P. Hochberg, President 

and Chairman of the Bank, as we consider any next steps in light 

of Ex-Im’s expiring authorization. 

As I said earlier this week, after years of calls to reform the 

Bank right here, I am not convinced that a long-term reauthorization is merited. Many criticisms of Ex-Im Bank involve failures in 

risk management, which are particularly disturbing considering 

the 40-percent increase in Ex-Im’s exposure limit, which I opposed 

in 2012. 

At a hearing last year, the Inspector General testified on concerns related to, and I will quote him: ‘‘ . . . several challenges facing the Export-Import Bank in managing the risks inherent in its 

core business activities.’’

In recent years, both the Inspector General and the Government 

Accountability Office, GAO, have identified hundreds of recommendations related to Ex-Im’s financial and operational weaknesses. I understand that Mr. Hochberg will address several of 

these in his testimony before us today. 

I think it goes without saying that taxpayers should not be asked to backstop Ex-Im’s over $110 billion portfolio if the Bank cannot 

adequately manage its risk of loss. 

Much has been said about how Ex-Im Bank historically returns 

money to the taxpayer each year, and I am sure we will hear that 

today. This does not take into account losses that could occur based 

on a variety of factors, including economic uncertainty and Ex-Im’s 

disproportionate exposure to several industries, geographic areas, 

and large, single foreign customers. 

Any discussion of the Bank’s future I believe must include a serious examination of whether or not Ex-Im Bank can substantially 


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2

improve its accounting for these and other risks. I am concerned 

that the reforms that are necessary may simply not be achievable. 

Nevertheless, I look forward today to hearing Mr. Hochberg’s remarks as the Committee takes another hard look at the Export-Import Bank. 

Senator Brown. 

STATEMENT OF SENATOR SHERROD BROWN 

Senator BROWN. Thank you, Mr. Chairman, for holding today’s 

hearing, and thank you, Chairman Hochberg, for joining us again 

today. I especially want to thank you, Chairman Hochberg, for the 

outreach you have done to small businesses in my State, to the 

Global Access for Small Business Forums that you held in Cincinnati and Mentor, Ohio, in northeast Ohio, and Youngstown, and 

the roundtables in both Toledo and Columbus. I know you have 

done the same kinds of outreach virtually almost everywhere in the 

country. 

Congress does our country no favors when it lurches from one 

self-inflicted crisis to another. At the end of the year, we saw an 

ideological fight over an eventual expiration of the Terrorism Risk 

Insurance Program. Last Sunday, portions of the National Security 

Agency’s authority expired. When we have dealt with the Highway 

Trust Fund, it has been in the form of short-term patches one after 

another, I believe 30 extensions, something like that. Now we are 

27 days away from the Export-Import Bank’s authority expiring. 

One member of the Republican leadership has committed to a 

floor vote in June. Another said it should happen in the highway 

bill extension at the end of July, which most notably is after this 

expires. This is not a way to do business for this Committee, for 

this Senate, for this Congress. Ex-Im Bank should be bipartisan 

and always has been since first authorized at the end of World War 

II. 

According to the Wall Street Journal, prior to 2012, the Senate 

had only once required a roll call vote—only once in 70 years, a roll 

call vote to reauthorize Ex-Im. The Bank was reauthorized, for example, by unanimous consent for the Senate in 2006 under President Bush and Republican majorities in the House and Senate. The 

2006 5-year reauthorization was followed by a 5-month reauthorization in 2011, a 2-year reauthorization in 2012, and a 9-month 

reauthorization at the end of last year. This history, this recent 

history—the long-term history has been done right. This recent history of limping from one short-term authorization to another is bad 

for small business owners who want certainty to plan their investment and hiring but cannot make long-term decisions because of 

congressional inaction. It is bad for the Export-Import Bank to attract business that will expand U.S. exports and retain the necessary number of talented employees to oversee an expanding portfolio. 

It is bad for our economy because it makes the Bank riskier, not 

safer. It makes it riskier. It hurts our competitiveness. 

Of course, Ex-Im Bank is not perfect. No person or institution in 

a country this large can be. But its work is so important. In today’s 

global economy, we need to support businesses when they sell their 

products around the globe. 


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3

Many on this Committee have argued for fast-track authority 

and will support the Trans-Pacific Partnership, which, arguably, 

very arguably, may or may not mean an increase, a net increase, 

in jobs. But there is no question the Ex-Im Bank means jobs. It is 

not easy for small businesses to export, but making sure they are 

aware of and have access to tools like Ex-Im Bank can help them 

grow. 

We know that competitors around the world have their own 

version of export-import banks. There are about 60 export credit 

agencies worldwide. We should not put our manufacturers and our 

exporters at a disadvantage to China, to India, to European countries. It means more manufacturing, more exports, more jobs, particularly higher-paying manufacturing jobs. It is why the work of 

Ex-Im Bank is so important and why reauthorizing it by June 30th 

is essential. 

I look forward to working with colleagues, especially appreciated 

the comments on Tuesday from Senators Kirk and Heitkamp and 

Donnelly, and others who are committed to ensuring that this authority does not lapse for the first time in seven decades. 

Mr. Chairman, thank you. 

Chairman SHELBY. Mr. Chairman, your written testimony, we 

have reviewed it. It will be made part of the record in its entirety. 

If you would sum up your testimony, after that, if the Senate is on 

schedule, we will have a vote and a break. But we will wait and 

see. You are recognized. 

STATEMENT OF FRED P. HOCHBERG, PRESIDENT AND 

CHAIRMAN, EXPORT-IMPORT BANK OF THE UNITED STATES 

Mr. HOCHBERG. Thank you. Chairman, Ranking Member, distinguished Members of the Committee, thank you for inviting me to 

testify about how Ex-Im Bank equips U.S. businesses to compete 

in the global economy and add jobs here at home. 

Ex-Im Bank complements and works with the private sector. We 

provide backstop financing so American entrepreneurs can seize 

global opportunities to create jobs and not get left behind by their 

foreign rivals. And we have been successful, supporting 164,000 

jobs last year alone. 

Ex-Im Bank does not pick winners and losers; rather, it serves 

any eligible American business seeking competitive financing. We 

are, by definition, demand driven. Of course, our customers pay 

fees and interest for this service, and as a result, Ex-Im Bank is 

completely self-sustaining. Last year alone, Ex-Im Bank generated 

$675 million for deficit reduction. If Ex-Im Bank is not reauthorized, Ex-Im Bank will no longer be able to generate half a billion 

dollars in revenue for the taxpayers. 

As you know, in May of 2012, Ex-Im Bank was reauthorized with 

overwhelming bipartisan support—78 Members in the Senate and 

330 in the House. And I know our exporters and their workers are 

pleased to see movement in the Senate with two bills introduced 

this Congress. 

I take very seriously my duty to implement the will of Congress. 

That is why I have provided each of you with all the documentation 

outlining Ex-Im’s implementation of every single requirement from 


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the 2012 reauthorization and why I will work diligently to implement any future requirements Congress chooses to enact. 

On top of that, Mr. Chairman, we are keenly focused on risk 

management demonstrated by a low default rate of 0.167 percent 

as of March 2015. In addition, Ex-Im Bank continues to proactively 

implement risk management improvements to further ensure we 

remain faithful stewards of the taxpayer. Let me just name two. 

We increased staffing in our Asset Monitoring Division by 33 percent, and we went beyond all Federal requirements to implement 

mandatory ethics training for all employees. 

Having run a small business, I know how important it is to continually identify ways to become stronger and sleeker, and we can 

always do better. And we continually strive to be better and improve the way we operate and serve small businesses. Two particular examples: Davenport Aviation in Columbus, Ohio, and 

Xante Printing in Mobile, Alabama. 

At Ex-Im Bank, we help U.S. exporters to pursue export sales, 

create jobs, and compete more effectively in global markets. And 

global competition has ramped up dramatically since our last reauthorization, and it will continue to do so. 

American businesses and workers are not simply competing 

against their Chinese, Russian, or French counterparts. Often they 

are competing against countries. 

Congress, however, has made it clear. They have asked the 

Treasury Secretary to ratchet down export credits. And while that 

is the Secretary’s responsibility, as I said, I take the will of Congress very seriously. As a result, I recently met with many of my 

foreign counterparts to discuss exactly that topic, and here is what 

I learned. 

To the contrary, our counterparts intend to accelerate the financial backing for exporters. Their role is clear. When commercial 

banks constrict financing, export credit agencies fill the gap so that 

their domestic exporters do not lose sales or workers. 

Export-Import Bank is like a fire truck in that sense. You do not 

sell off the fire truck just because there is not a fire currently burning. 

In closing, as this Committee is aware, businesses need certainty 

to make long-term plans to grow, hire, and innovate. There are 

now about 80 other export credit agencies around the world aggressively fighting for jobs unlike Export-Import Bank. One of China’s 

export credit agencies recently noted that they doubled their financing in 2014, and they plan to double it again in the next year 

or two. 

We look forward to working with you, Mr. Chairman, and the 

Committee, to continuing empowering your constituents to export 

more and hire more American workers. 

Thank you. I look forward to answering your questions. 

Chairman SHELBY. Thank you, Mr. Chairman. 

Since they have not called the vote yet, we will move on to questions. 

In 2012, the Export-Import Bank’s Inspector General reported 

that Ex-Im’s narrow definition of default may result in an understatement of the Bank’s historical defaults. Among other things, 

the Inspector General noted that Ex-Im’s definition of default does 


BANKI-41578DSA with DISTILLER
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not include technical defaults, which reflect a failure to comply 

with specific conditions in the loan agreement. 

Do you think, Mr. Chairman, that it is a problem that Ex-Im 

Bank has not properly estimated historical defaults? And what are 

you doing about it? Are you changing it? And how can you assess 

future performance at the Bank if you do not have a good sense 

of historical defaults? 

Mr. HOCHBERG. Well, Mr. Chairman, we issue this default report 

to Congress every 90 days. It is one of the reforms in Congress. The 

defaults in here are actually cash outlaid, claims paid by the Export-Import Bank. They currently are running less than one-fifth 

of 1 percent. 

In addition, in this report we indicate delinquent payments, 

which is an indicator of what might possibly default in the future 

because they are late. 

In terms of a technical default, sometimes that is something such 

as a filing of a financial statement; it could be running a week or 

two late, or it could be some kind of compliance issue like that. So 

we are on top of that. We monitor that. But that is not in the definition that Congress has given us. 

Congress, by the way, has updated the definition of our defaults 

four times since 2012. 

Chairman SHELBY. Would a technical default also include maybe 

a violation of loan covenants? 

Mr. HOCHBERG. It would depend on—a technical default could be, 

as I said——

Chairman SHELBY. It could be substantive, could it not, in nature? 

Mr. HOCHBERG. It could be substantive, but it would not have 

any material effect on the ability to repay. If it does, we have a 

watch list that we produce every single month of credits that are 

requiring extra scrutiny or troubled credits. 

Chairman SHELBY. Mr. Chairman, according to the Export-Import Bank’s annual report, the OCP, a Moroccan Governmentowned mining company with a questionable history of human 

rights violations, received over $92 million in Ex-Im Bank loan 

guarantees. Several news sources have reported that OCP donated 

millions to the Clinton Foundation and just recently hosted a Clinton Foundation fundraiser at a five-star luxury hotel in Morocco. 

My question is this: How do you ensure the American people that 

none of the money guaranteed by the American taxpayer has not 

been used to fund the Clinton Foundation or other unrelated activities once the money is there? 

Mr. HOCHBERG. Well, for one, the money has not been disbursed 

yet, so at the moment the money—we have approved this loan. We 

have not finished documentation and disbursed it. So no money has 

been used for that purpose. 

Second, all money that is borrowed for a specific transaction relates to the purchase of U.S. goods and services and the other attendant services around that. So that is what the money—they 

have to show invoices of what the money is used for, and that is 

when the disbursement is made. So it is when the shipment is 

made. 


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Chairman SHELBY. Does it bother you at all if OCP has donated 

millions to the Clinton Foundation and just recently hosted a fundraiser and we are making them a loan? Does that raise a red flag 

with you—does that not bother you? 

Mr. HOCHBERG. Well, Senator, we look at every transaction. We 

look in terms of—look at reputational risk, integrity of the transaction. This is a large mining operation in Morocco——

Chairman SHELBY. State-owned? 

Mr. HOCHBERG. State-owned—well, let us understand one thing 

about state-owned. There is a lot of discussion. In the rest of the 

world, much of the infrastructure in country after country is stateowned. Power plants, transportation, rail, utilities, water services, 

mining is frequently state-owned. So that is the way that business—whether we like it or not—is, regrettably, done around the 

world. 

This is a good project. It is buying almost $100 million worth of 

U.S. goods, creating a lot of jobs here in America, and we obviously 

make sure that it is creditworthy, environmentally sound, and has 

no reputational risk. 

Chairman SHELBY. Mr. Chairman, in the area of subsidies and 

free markets, we have that debate, and I think it is a healthy debate. In your written testimony, you state, and I will quote:

It is incumbent upon America to strive to level the playing field in the global export arena—restoring free market factors to their rightful place at center stage of competition.

What does that mean to you? 

Mr. HOCHBERG. It means very——

Chairman SHELBY. What does it mean to us? 

Mr. HOCHBERG. It means very clearly the rest of the world has 

a lot more government engagement with their industries and their 

companies, as you just mentioned, Mr. Chairman. What we want 

to make sure is that by our financing we level the playing field, so 

if we use OCP as an example, we want to make sure that the financing package that backs up U.S. exporters is the same financing package that backs up our competitors in China or Germany 

or much of Europe so that the buyer picks from a free market the 

best product, the best service, the best quality, not because someone has got their finger on the scale and is providing off-market financing to give their country an advantage. 

Chairman SHELBY. We heard testimony a couple of days ago that 

a little less than 2 percent of American exports rely on or do business with the Export-Import Bank, but 98 percent do not, but they 

are still exporting. Is that figure about right? 

Mr. HOCHBERG. That is right, and that is a good thing. 

Chairman SHELBY. OK. 

Mr. HOCHBERG. The private sector does a really good job. 

Chairman SHELBY. Senator Brown. 

Senator BROWN. Thank you, Mr. Chairman. 

Mr. Hochberg, your charter says that Ex-Im Bank financing 

should ‘‘supplement and encourage, not compete, with private capital.’’ A lot of wide-body jets, for example, are sold without Ex-Im 

Bank help. Why can’t everything be financed solely by the private 

sector? 


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Mr. HOCHBERG. I wish it were such, but it is not. I guess there 

are a couple of reasons, Senator. One, we face in the commercial 

jet area intense competition with Airbus backed by the Governments of Germany, France, and Britain. Each of them has an export credit agency that backs all Airbus purchases. So if we want 

a level playing field, if we want to make sure there is a level playing field between American-produced aircraft, made through 15,000 

suppliers of the Boeing Company, and Airbus, backed by three governments, we need to provide a comparable financing package 

when warranted. 

Additionally, from time to time—we have just come through the 

worst financial crisis since the Depression when liquidity tightened 

up and constricted and we had to really step in and fill that gap 

to keep trade growing and jobs being supported in this country. 

Since there is more liquidity, since that recession is more and more 

in our rearview mirror, our lending has dropped. We are doing 

about half of what we did 2 years ago because banks have come 

back into the fore, and there is less need for us today than there 

even was just 2 years ago. 

Senator BROWN. Some opponents of Ex-Im Bank—and we have 

heard them come out with sort of increasing volume—express concerns about management risk oversight at the Bank. The Bank’s 

portfolio has grown in the last 5 or 6 years, since 2009, but the 

number of employees has not grown by much. Your Inspector General in April noted that, ‘‘Uncertainty about Ex-Im’s long-term reauthorization is hindering recruitment.’’ There is a whole host of 

reasons that—the fits and starts and the short-term reauthorization that Congress seems to inflict on a whole lot of Government 

programs, including certainly yours, have had negative impact on 

investment, on long-term decisions, and on predictability. 

Talk to me, if you would, about how these repeated short-term 

reauthorizations and possible expirations affect your ability to recruit. 

Mr. HOCHBERG. Well, I think that it has certainly made it a challenge to recruit. There is also a bit of a brain drain as people get 

concerned. You know, our employees are no different than the 

164,000 jobs we support around the country. They are worried 

about their mortgage, they are worried about making tuition payments this fall, and the start and stop about what they do. We 

have about 450 workers at Ex-Im Bank. I care about them. They 

do a spectacular job. Why we have a default rate of 0.167 percent 

is because we have got really good underwriting and really good 

asset management. And I fear that this debate can jeopardize our 

ability to retain those people and to bring in new people as it goes 

on and on. 

Senator BROWN. So talk further, if you would—you touched on it 

in your testimony—about the repeated short-term reauthorizations, 

the continued threats that Ex-Im Bank will not exist after June 

30th. How does it affect your small business customers? You mentioned Davenport in Columbus, Ohio. You mentioned a company in 

Alabama. I met with probably a dozen businesses, mostly companies I had not heard of. As many companies as I visit around Ohio, 

there are obviously hundreds and hundreds that I do not know yet. 

The people that came in that really depend—you know, that gave 


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up their time and costing their companies money to come here and 

push, visit Senators and House Members to push for reauthorization, what effect do you see this has on small business customers? 

Mr. HOCHBERG. Well, we have seen it firsthand with—one of the 

tools that small businesses use is our Working Capital Program. 

We work with their bank, provide a 90-percent guarantee to induce 

the bank to make working capital loans to support exports. More 

than a few banks have stopped, have pulled back in light of the uncertainty. They do not want to get into a situation where they have 

made a commitment, and then if our authorization should expire, 

they are not able to execute that. We have seen some constriction 

in working capital lines, forcing—if you are a small exporter with 

a very small percentage, you might be able to fit that in your regular working capital loans. If exporting is 20 or 30 percent, it probably is too large to fit within your domestic working capital line. 

So we have seen that. 

A lot of what we do for small business is to provide credit insurance so when they sell overseas, we insure their receivable. If they 

go to a commercial broker for that, commercial brokers are loath 

to write a policy that may only have 20 days left. 

Senator BROWN. Thank you, Mr. Chairman. 

Chairman SHELBY. Senator Corker. 

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

your service. 

We had a hearing I guess a couple days ago, and it became pretty evident that, you know, we are involved in a race to the bottom 

with these export credit agencies. In essence, the National Manufacturers Association had a witness in here, and I guess it really 

highlighted more than ever that that is really what we are about, 

is we are competing with other countries. As you mentioned, many 

of the companies that are in these countries are state-owned enterprises. The export credit agencies in other countries are putting 

you, putting our Nation in a place where we are in a race to the 

bottom to try to ‘‘level the playing field.’’ And I assume you agree 

with that. is that correct? 

Mr. HOCHBERG. Yes. I mean, the OECD, the Organization for 

Economic Cooperation and Development, which has something 

called ‘‘the arrangement,’’ where most industrialized countries are 

a party to, but, frankly, China, Russia, India, and Brazil are not. 

We all have a standard. We all have a minimum fee we have to 

charge, so there is not a race to the bottom. 

The challenge is that countries that are not members can do 

whatever they want. They can be opaque about it, and they cause 

some of the most severe challenges to U.S. competitiveness. 

Senator CORKER. Well I will say, in their testimony they made 

it pretty clear that it was all about market conditions and it was 

about meeting, especially in the case of—I used the case of Boeing 

because their name came up. I have nothing against Boeing, as I 

mentioned. I like flying in their airplanes. But she did lay out the 

fact that this is really—it is that. It is a race to the bottom. We 

are competing against other countries, and I guess I would ask this 

question. How do you, when you are making these loans to a manufacturer like this, and you know that they are—you are doing this 

to make it so that a company in another country is able to buy 


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some type of equipment, just name whatever type, at a lower rate, 

and yet those companies are competing with other U.S. companies 

that do not have the benefit of that export credit agency, yours. 

How do you reconcile that? In other words, in some cases you are 

actually making American companies disadvantaged because foreign companies are able to purchase goods that are made here in 

the country at better financing arrangements than they can here 

domestically. How do you reconcile that? 

Mr. HOCHBERG. Well, we do the best we can to level the playing 

field, and I will give you a specific example. I was in South Africa 

about a year ago actually this week, and I met with Transnet, 

which is the rail authority in South Africa. They had a large tender 

for locomotives. In the end, they divided it, half to the Chinese, half 

to the United States. I asked the head of Transnet, ‘‘Well, what 

kind of financing terms are the Chinese offering you?’’ So I would 

know as a businessman what the competition is. And he said, 

‘‘Well, they said to me what would I like—10 years, 15 years, 20 

years, a grace period? What do I want to make the deal?’’ We do 

not do that. We offered—the most we can offer is 14 years. 

However, by offering 14 years, maybe we did not equal precisely 

the Chinese offer, but we got close enough that we were at least 

able to get half that order and not lose the entire order to the Chinese. 

I might just add one last thing. Not surprisingly, about a month 

or so before the tender was determined, China made a $5 billion 

loan to the rail authority for upgrading tracks, signaling, and so 

forth. Perhaps that is a coincidence, perhaps not. 

Senator CORKER. I think you can see why this would be—we understand the business you are in, and I was going to allude to you 

after 2012 needing to try to get other countries to lower this 

amount of activity. You alluded to that in your opening comments. 

But you can tell, I mean, this is an unseemly business to those of 

us sitting here where basically we have created this entity to create 

financing to compete with other countries that are basically racing 

to the bottom. 

I guess the other part of your ‘‘agenda’’ is to make sure that 

smaller enterprises have access to credit, and yet we have looked 

at your application form, and there is really nothing there that requires them to make sure—or requires you to make sure that you 

are the lender of last resort. I mean, you can check ‘‘Other’’ on the 

application form and sign it. 

I had an amendment a couple years ago to make sure that ExIm Bank was actually the lender of last resort. I know you did not 

support that. I know Stephen Fincher over in the House is leading 

an effort to reform Ex-Im Bank. Do you support those types of 

things for us to know that you, in fact, are the lender of last resort 

and just do not allow borrowers to easily check an ‘‘Other’’ box? 

Mr. HOCHBERG. Well, there are actually four questions they have 

to answer with seven sub-parts. 

Senator CORKER. I understand that. But would you allow that—

would you be supportive of that being much stronger so we know, 

in fact, you are the lender of last resort? 


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Mr. HOCHBERG. It should be stronger, but let us be clear. You are 

signing this application. You are committing perjury, fines and imprisonment if you falsify——

Senator CORKER. Not if you check ‘‘Other.’’ So will you support 

much stronger legislation to absolutely ensure that you are the 

lender of last resort in those cases? 

Mr. HOCHBERG. Well, Senator, I guess I believe that—I believe 

in the certification, and we verify those when warranted. We 

look——

Senator CORKER. I think the answer is no. Let me just—I think 

we are going to be pressing for that, and I would love to talk to 

your office about it. I will just close with this: I was in Eastern Europe recently dealing with a number of different issues, and I have 

to tell you, I was fairly offended to realize that the Ex-Im Bank basically has taken on some of the Administration’s policies without 

Congress being involved in any way. And as I understood it, ExIm Bank was no longer financing coal exports, that somehow or another, you, without a congressional mandate, had decided that if a 

company wanted to export to Eastern Europe, which is a great 

market for our coal suppliers, you had decided, the Ex-Im Bank 

has decided, because the Administration had laid out this policy, 

that you would no longer do that. I find that to be offensive—not 

that I am a lover of coal or not a lover of coal, but that you would 

be able to do that, and I wonder if you could respond to why ExIm Bank would take on Administration policies when Congress has 

not legislated that. 

Mr. HOCHBERG. Well, Congress actually put in our charter 23 

years ago that we must take the environment into account before 

making any loan agreement. And during the Bush administration, 

the Bank was sued and in a settlement, way before I got to the 

Bank, had to do a consent decree about how we actually had a 

more rigorous environmental policy. So that goes back to 2006, 

2007, and 2008, before I got to the Bank. 

So over the 23 years, we have had to adjust our environmental 

policy to meet the needs of science and industry over and over 

again. So this is not a recent—something that was just inserted recently. 

Senator CORKER. But if we were to change that, you would be 

perfectly fine with that? 

Mr. HOCHBERG. Well, let me say this, I mean—well, we have an 

environmental standard. That is up to Congress to determine it, 

and we try and comply with other—the World Bank, other export 

credit agencies around the world. But I want to be clear. We actually do support the Administration’s Climate Action Plan to restrict 

coal-fired power plants except to the poorest countries, which total 

about 80 countries now, which have no restrictions. But in the 

wealthier countries, we do support that provision. 

Senator CORKER. Mr. Chairman, thank you. I did not know we 

were carrying out environmental policy through Ex-Im Bank. 

Chairman SHELBY. I did not either. We found out something 

today, didn’t we? Thank you, Senator. 

Senator Menendez. 

Senator MENENDEZ. Thank you, Mr. Chairman. Before I move on 

to my questions, I would like to enter into the record a list of 244 


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New Jersey companies over 70 percent which are small businesses 

that have received Ex-Im Bank financing since 2007. 

Chairman SHELBY. Without objection. 

Senator MENENDEZ. OK. I fully support a timely reauthorization 

of the Bank, and I hear regularly from my constituents of the irreplaceable role that the Bank plays in making New Jersey exports 

competitive on the international market. Many of these companies 

have come to Washington to explain how Ex-Im Bank has supported their efforts around the world. Others have written to me 

in support of Ex-Im’s reauthorization, and I am speaking for them 

here today. 

Now, I would like to share with my colleagues a story about a 

situation in Ukraine, something that provides a great example of 

how the Export-Import Bank can play a critical role in furthering 

U.S. national security and economic interests. 

Ukraine gets fully half of its electricity from nuclear power. Historically, they have been dependent on Russia to manage the used 

fuel from its plants. After the Orange Revolution, Ukraine moved 

to break that tie by establishing its own spent-fuel storage facility. 

I know about this issue because a New Jersey firm, Holtec International, won the contract to construct that state-of-the-art facility. 

Because of Russia’s economic and military aggression, the new government in Ukraine did not have the resources to go forward with 

that New Jersey firm. 

That is where the Ex-Im Bank comes in. By providing loan guarantees to help manage the risks of investing in this strategically 

important country, something that the Senate has clearly espoused 

on by virtue of votes that it has had in the Ukraine Freedom Support Act that I wrote, along with Senator Corker, Ex-Im Bank can 

make this deal possible. Such a project would bring jobs and income into New Jersey where Holtec is expanding its presence with 

a new $260 million manufacturing facility. It would support 

Ukraine’s ability to develop its own expertise and infrastructure 

and remove a lever of Russian influence in Ukraine. Ukraine would 

also keep over $1.5 billion in fees that would otherwise be sent to 

Russia. Unfortunately, since the contract was awarded, the security situation in Ukraine has not permitted the project to go forward. 

Now, we heard some arguments on Tuesday that American firms 

should essentially sink or swim on their own in international markets, that we do not need additional options to pursue our diplomatic and security goals, even as other nations, including our most 

significant trading partners and rivals, continue to pour more resources into promoting their exports. 

Now, in a world of perfect markets, in a world where all countries wished us well, in a world where no other nation has provided 

support for the international operations of their industries, that 

would be an appealing idea. But that is not the world that we live 

in. 

So here is a medium-sized business, not some major corporation, 

that is on the front line of both nuclear technology and an ongoing 

national security challenge that would be an important beneficiary 

of the kind of work that Ex-Im Bank does. 


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So, President Hochberg, how do you see the role that Ex-Im 

Bank plays in bolstering U.S. national security and foreign policies 

of the services that it provides U.S. companies? 

Mr. HOCHBERG. Well, thank you, Senator Menendez, and thank 

you for your support and the many companies we work with in 

New Jersey. 

Let us be clear. Number one, our number one priority is U.S. 

jobs. That is what we are here to do. We are here to support U.S. 

jobs through the financing of exports. 

That said, obviously economic security and national security go 

hand in hand. We work with a number of defense contractors who 

are now moving into commercial fields. Oshkosh is a good example. 

Darley is another example. There are a number of them. We are 

financing theirs. But, most importantly, it is about U.S. jobs, but 

clearly if you have energy security—and you mentioned nuclear. 

Nuclear is one of the areas that we have been active in. It is one 

of the areas commercial banks are reluctant to engage in, and certainly reluctant to engage in without our assistance and guarantees. So I think there is a very close relationship between those national security interests, economic security, and jobs. 

Senator MENENDEZ. Let me ask you one other question. China 

has been particularly aggressive in export financing. As of 2013, it 

extended over $45.5 billion in export credits, 3 times the amount 

extended by Ex-Im Bank. So you touch on this in your written and 

oral testimony. Could you elaborate on the trends you are seeing 

in export financing by major U.S. economic competitors? 

Mr. HOCHBERG. Well, China is right now the largest exporter in 

the world. We were number one a dozen years ago. I actually believe we could be the number one exporter again because of the 

technology and innovation. 

That said, China has four different state-owned banks that do export credits. We have one. Just one of those, called Sinosure, in 2 

years has done about $670 billion worth of loans and guarantees. 

It took us 80 years to get to $590 billion. So they have done more 

in 2 years than we did in 80 years. And they have indicated they 

have no interest in stopping whatsoever. 

That said, the Secretary of the Treasury has been—we have been 

working on negotiating that they join an international framework 

so we have transparency, and we would try and tamp that down. 

But that is an ongoing negotiation, and it is taking time. 

Senator MENENDEZ. Well, Mr. Chairman, I just think that we 

should not engage in unilateral disarmament, and that is exactly 

what we will do if we let Ex-Im Bank expire and we are facing 

global competitors and many countries—China, Brazil, and others—that are helping their companies create the opportunity to 

penetrate markets, which means jobs here at home. 

Thank you. 

Chairman SHELBY. Senator Toomey. 

Senator TOOMEY. Thank you, Mr. Chairman. 

You know, I think we should hopefully reach an understanding 

of what is and what is not going on here. One of the arguments 

that supporters of the Ex-Im Bank make is that this is somehow 

a free policy choice, this is a free lunch. The Ex-Im Bank creates 

jobs. No jobs are destroyed, no cost to the taxpayer. In economics, 


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there is no such thing as a free lunch. There is a cost to everything 

that is provided. 

The chairman states in his testimony that over the last couple of decades, the Ex-Im Bank has sent nearly $7 billion to the U.S. 

Treasury. I am sure that is true. But if you go back a little further 

behind that, then we had a period when the Ex-Im Bank was costing the taxpayer direct money in the form of bailouts—in the 

1980s, a $3 billion bailout; in the mid-1990s, about $10 billion in 

taxpayer bailouts. And that was at a time when the Ex-Im Bank 

was a fraction of the size that it is today. 

The chairman also testifies that Ex-Im Bank is restoring free 

market factors to their rightful place. I do not understand how we 

could come to such a conclusion. It is clear to me that the Ex-Im 

Bank interferes with the free market. 

Now, you may decide that the interference is worthwhile and is 

desirable, but let us not pretend that it is not an interference in 

the free market. That is my point. The chairman refers to the ExIm Bank finances as filling in the gaps. Well, if there is a gap, then 

that tells you something. 

Here is another way to look at this. If the Ex-Im Bank is creating jobs, if this is to be believed, then it seems to me it must necessarily be the case that the Ex-Im Bank is providing financing 

that would not otherwise occur, or it is providing it on terms that 

would not be obtained in the market. Right? That is the only possible way in which you can say that it is creating jobs. 

But if that is the case, if the Ex-Im Bank is financing at rates 

and terms that the market is either unable or unwilling to offer, 

then that is not the free market. In fact, that is the definition of 

a subsidy. It is the subsidy that the taxpayers are being forced to 

pay not in the form at the moment of writing a check, but in the 

form of not being adequately compensated for the risk that taxpayers are being required to take. 

And so I do not think there is even a question that taxpayers are 

being forced to take this risk. The question is: For whom? If it is 

to large politically connected corporations, then that strikes me as 

crony capitalism. If it is less than creditworthy foreign corporations, then we are putting taxpayers at risk to benefit them. None 

of these outcomes in my view make sense. 

Let me ask one specific question of the chairman. When we talk 

about the jobs that are created, do you net out the lost jobs in the 

industries where the competitive disadvantage that the Ex-Im 

Bank confers occurs? So we know, for instance, that airline companies that have to compete with foreign airlines that get the subsidy 

of cheaper aircraft, miners that have to compete with overseas mining operations that get the subsidy of mining equipment, refineries 

in the United States that have to compete with foreign refineries 

that benefit in a similar fashion. It seems to me the lost jobs ought 

to count. Do you include that in your analysis? 

Mr. HOCHBERG. Well, Senator, thank you, and thank you for 

coming today. First of all, there are a couple of things you mentioned. 

Ex-Im Bank has not received a single bailout. From 1934 to 

1992, we sent a billion dollars to the taxpayers. After the Federal 

Credit Reform Act of 1990, from 1992 to 2014 we have sent $6.9 


BANKI-41578DSA with DISTILLER
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billion. That is cash that leaves the checking account of the ExportImport Bank and goes to the Treasury. It is the saddest day for our 

CFO each year because that money leaves our bank account. So let 

me be clear about that. 

We do not pick winners and losers. Companies come to us if they 

need our financing to compete with overseas competition, and 

sometimes the markets are not fully free and open in the overseas 

international market. That is where we compete. That is where we 

step in, when there is a gap in the marketplace. 

We also do something put in Congress since 1968 called an ‘‘Economic Impact Review.’’ Economic Impact Review said if we are 

going to support the export of capital equipment, use the example 

of mining equipment, we have to make sure that the benefit to the 

U.S. economy from that will make sure there is a net benefit to our 

economy. So we do that in each and every one of—we, in fact, look 

at every single transaction to ensure that——

Senator TOOMEY. So if you are looking at the net, you are acknowledging that there are some who win and some who lose, and 

then you add it up and see on balance is it a net positive. Is that 

the way——

Mr. HOCHBERG. We look at—we make sure that there is a net 

benefit, and the Board, the Board that is Senate-confirmed, takes 

that into account. 

Senator TOOMEY. So how does that not include winners and losers? 

Mr. HOCHBERG. Well, it includes——

Senator TOOMEY. You have kind of acknowledged that there are 

winners, and we count them, and there are losers which we create, 

but as long as the net we think is positive in our analysis, then 

it is OK. 

Mr. HOCHBERG. Well, the net winners are the United States 

economy and U.S. jobs. The choice, sir, is they are going to build 

that mine, and we are going to have U.S. mining equipment or Chinese or Japanese or Korean. So we want the U.S. economy to win 

and make sure those jobs are here, not elsewhere. 

Senator TOOMEY. I see I have run out of time, Mr. Chairman. I 

appreciate the indulgence. Let me just point out the GAO has come 

to the conclusion that this does not create net new jobs. It shifts 

job creation. And in that process, in my view, it certainly is picking 

winners and losers. 

Chairman SHELBY. Thank you. 

Senator Warren. 

Senator WARREN. Thank you, Mr. Chairman. I just want to follow up on this question around jobs. 

You know, we talk a lot about the Ex-Im Bank and about jobs, 

and I believe that the Ex-Im Bank helps create American jobs and 

spur economic growth. But I also think that the Bank’s operations 

can be improved in certain areas, so I want to follow up on some 

questions I asked you the last time that you were before this Committee. 

As I noted at the hearing last year, the core of the Bank’s work 

is to promote trade by providing financing for foreign companies to 

be able to buy U.S. goods. Obviously, that helps the U.S. economy. 


BANKI-41578DSA with DISTILLER
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We want to sell those goods, as you have been testifying to this 

morning. 

But in some cases, the foreign company purchasing those goods 

also has U.S. competitors, so helping that foreign company can 

mean that the foreign buyers get a benefit not available to their 

U.S. competitors. 

So I want to start where I left off last time. Before agreeing to 

finance a deal, just to make sure I hear this right, does the Bank 

determine whether the number of U.S. jobs that could be lost by 

helping a foreign competitor is counted into the calculation? 

Mr. HOCHBERG. What we look at, Senator Warren, we look at—

one, we review every transaction. Congress has made it clear that 

if the production that would be generated by a capital equipment 

export exceeded 1 percent of U.S. production, that would trigger a 

more in-depth review. So if a de minimis amount might go on the 

market, less than 1 percent—that is a threshold established by 

Congress over 30 years ago—that actually would say that the impact would be de minimis, would not be adverse. 

Senator WARREN. I am sorry—just so I am understanding what 

you are saying here, you are saying you do not do the calculation 

on how many jobs might be destroyed because a foreign company 

got a financing benefit that was not available to its U.S. competitors unless it hits this much higher threshold. So in all the rest of 

those cases, even though cumulatively they may be a lot, you are 

not doing that calculation? 

Mr. HOCHBERG. Well, the calculation—what Congress has established for us in 1986 or 1984, 30 years ago, is that we—the threshold is 1 percent. 

Senator WARREN. I am sorry. I think what Congress established 

is you must do the calculation if you hit that high threshold. The 

question I am asking is whether you do the calculation—is it only 

in those cases and you are adding up the number of jobs lost and 

the number of jobs gained? 

Mr. HOCHBERG. Well, for example, let me be very clear. Let us 

use an airline example. We have an airline that provides low-cost 

service in South Africa. There is no impact on the U.S. economy by 

that low-cost carrier in South Africa buying U.S. equipment to fly 

around South Africa. We do not fly there. We do not fly within 

South Africa. In those cases, no, there is no potential impact on the 

U.S. economy. So we look at every transaction. 

Senator WARREN. So if the foreign buyer has no U.S. competitors, 

then you say you do not do the calculation. Another way to say it 

is you have done the calculation, and it is zero. 

Mr. HOCHBERG. Well, we review every single transaction. 

Senator WARREN. And if there is a domestic competitor, a U.S. 

competitor for the foreign company that is about to get the financing, do you always then do the calculation of how many jobs might 

be lost by the U.S. competitor? I am just asking how this works. 

Mr. HOCHBERG. At that level, we do it at the dollar level. We do 

it at the dollar—at the——

Senator WARREN. What does that mean at the dollar level? I am 

talking jobs. 

Mr. HOCHBERG. We will look at the benefit to the U.S. economy 

of selling that product, how much revenue——


BANKI-41578DSA with DISTILLER
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Senator WARREN. I am asking a jobs measure question. 

Mr. HOCHBERG. We do not do it on a per job basis. We do it on—

at that level, we do it on the economic impact. What was the economic benefit to the United States versus potential any economic 

adverse impact to the United States? 

Senator WARREN. So is there ever a case in which the Bank has 

decided not to finance a deal because of its potential impact on U.S. 

competitors and——

Mr. HOCHBERG. Yeah. 

Senator WARREN.——particularly on jobs? 

Mr. HOCHBERG. Yeah. 

Senator WARREN. And is that publicly available? 

Mr. HOCHBERG. Well, what happens is, you know, we are—you 

are at a university. We are not—you know, people do not—universities issue rejection letters. People do not like them from banks. 

So if we are——

Senator WARREN. Actually, I understood banks did issue rejection letters. 

Mr. HOCHBERG. Well, they do not like to issue rejection—so when 

we sit down with a customer and we look at that situation, we will 

have that conversation about, you know what, this is an economic 

impact here, we are going to do a more in-depth study, and this 

may not pass muster. So in those cases, sometimes they withdrew. 

I know in one particular case the entity in Latin America withdrew—let me just finish—and what happened? They still built the 

petrochemical plant. They built it all with foreign equipment. And 

you know what happened? We still are competing with that petrochemical company. 

Senator WARREN. But I am taking from what you are saying that 

none of this is publicly available. Look——

Mr. HOCHBERG. Sure it is. If we do—if it gets as far as doing the 

study and there is a vote. But frequently a client pulls out before 

that time. 

Senator WARREN. I am sorry. So you are saying there is public 

available data on how many times you have rejected a deal because 

it would cost American competitors jobs? 

Mr. HOCHBERG. Our economic impact data is on the board—is 

available after the fact to—that was one of the reforms they put 

in. So an exporter can say, ‘‘I want to see what was the economic 

impact study you did on this transaction.’’

Senator WARREN. OK. I think I have got it. But you are talking 

dollars here, and I am asking a question about jobs. 

Look, I believe that the Ex-Im Bank helps create thousands of 

jobs, in Massachusetts and across the country. And it does it while 

consistently making money for the taxpayer. I just believe that the 

Bank ought to be doing all it can to promote job growth overall, not 

helping some companies at the expense of others. And that is why 

I think that the Bank needs a rigorous process for assessing how 

its work affects U.S. competitors. And I think the Bank should 

make those data publicly available—with redactions if needed—I 

do not want to hurt anybody’s feelings—but that it ought to be 

there so that Congress and so the public can review it. And I understand that the Bank has taken important steps while it has 

been under your leadership, and you have moved it in that direcVerDate 0ct 09 2002 10:06 Jul 29, 2016 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6604 S:\DOCS\97305.TXT SHERYL

BANKI-41578DSA with DISTILLER
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tion, and I hope we can continue to work on this to continue to 

move in this direction. 

Mr. HOCHBERG. Let me add, we are the only export credit agency 

of the 85 around the world that does this. We are the only one that 

actually goes to the effort to say is there going to be a net benefit 

to the U.S. economy. 

Senator WARREN. Well, I——

Mr. HOCHBERG. We are the only single one. Everyone else says, 

in my example of that chemical plant, they are going to build it 

anyway, we can either lose once or we will lose twice. 

Senator WARREN. I appreciate that we may be more transparent 

than some other countries. The question we have to address is 

whether we are transparent enough and those calculations are obvious enough when we are trying to evaluate jobs. 

Sorry for going over, Mr. Chairman. 

Chairman SHELBY. Senator Warren, that is a good question you 

raise, and I think it is important that we find out what it does to 

our jobs here. And that has not been answered yet, but a lot of people are concerned about it. Look at some of our airlines. As you 

know, Delta has raised that question. For example, others said, 

look, they are not getting the financing that their state-owned competitors overseas are getting, which is a subsidy, which they argue, 

and probably rightfully so, it costs American jobs. 

Mr. HOCHBERG. Well, actually, I would—I have heard Delta 

make this claim. They have never substantiated it. They have 

never shown where. And, in fact, Richard Anderson just last August indicated they are adding 1,800 new flight attendants this 

year alone. They are the most profitable airline in the country, perhaps the world at this time. 

Chairman SHELBY. We have a vote on the floor. We are going to 

try to make it. We will come back because we might have some 

more Senators here. 

We will stand in recess until we get back, maybe 15 minutes or 

so. 

Mr. HOCHBERG. Thank you. 

[Recess.] 

Chairman SHELBY. The Committee will come back to order. Senator Rounds. 

Senator ROUNDS. Thank you, Mr. Chairman. 

Mr. Hochberg, I have watched the discussions, and I have listened to the testimony on Tuesday with regard to what the Bank 

does and the fact that literally there are—all of our competitive nations that we work with have an entity similar to the Bank that 

their businesses can rely on in order to compete. And so it seemed 

strange to me that we would have the challenges that we have 

heard with regard to the renewal of your ability to continue forward. 

And I have tried to search and figure out what it is that is causing the uproar, and I want to try to get to what I think might be 

part of it. And so I want to ask you some questions here, and I 

mean this to try to give you the opportunity to explain it. 

Mr. Chairman, I apologize. I was in the chair so I was not able 

to hear what the other testimony was earlier, but——

Chairman SHELBY. We are glad you are back here. 


BANKI-41578DSA with DISTILLER
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Senator ROUNDS. Thank you, sir. But what I would like to do is 

just ask a question and then work our way through this and give 

you the opportunity to respond, sir, as President of the Bank. 

I understand that the Bank is part of the Federal Government 

and that, as a result, there are rules and regulations that they 

have to abide by. But I am concerned when I see that you as the 

head of the Bank have been making some rather significant political statements that I think may have caused part of the problem. 

It only bolsters the concern that the Bank is picking winners and 

losers. 

Now, here is the example that I am speaking of. In 2013, you 

said, and I quote:

The Bank engages in an important balancing act. In supporting our exporters, we have to weigh the potential impacts on the environment associated 

with our financing. Without guidelines or limits, ever increasing numbers 

of new coal plants worldwide will just continue to emit more carbon pollution into the air we breathe. But America cannot do this alone. I strongly 

support the Administration’s efforts to build an international consensus 

such that other nations follow our lead in restricting financing of new coalfired power plants.

Mr. President, what you call ‘‘carbon pollution’’ powers a lot of 

the homes in my home State of South Dakota and a lot of the 

power on the farms in our part of the country as well. I am concerned that by using what literally is a loaded carbon pollution and 

making personal statements about which types of exports that you 

may oppose, the Ex-Im Bank becomes more about advancing policy 

goals and less about creating American jobs. 

Do you think that making this statement was a mistake and 

gives the opponents of the Ex-Im Bank the ammunition to say that 

Ex-Im Bank does pick winners and losers? 

Mr. HOCHBERG. Well, Senator, thank you for giving me a chance 

to talk about this, and I am glad we had a chance to meet in your 

office. I mentioned earlier we have had an environmental policy 

that Congress has inserted in our charter since 1992. For over two 

decades, we have been required to look at reasonable assurance repayment and the environmental impact. That is not my doing. That 

has been in our charter for over two decades. 

I mentioned earlier that under the first part of—under the Bush 

administration, the 2004–06 range, before I got to the Bank, the 

Bank got sued, and before I got to the Bank, the Bank agreed to 

a consent decree of how to impact—how the Bank could do a better 

job to adhere to the will of Congress, which is to take the environment into account. 

So the Bank has been doing this, and it has been an evolving policy over the last two decades. So this is not something that I inserted. It is not a personal agenda. 

Senator ROUNDS. Can you show me any place where the Congress of the United States has identified carbon pollution as being 

part of your role in terms of managing the environment? 

Mr. HOCHBERG. Well, the environment was put in, as I said—I 

am happy to share with you the lawsuit that the Bank lost because 

the—and the court found that the Bank, before I got there, was not 

taking into account the environment sufficiently, and part of that 

agreement was some restrictions, some regulation on the amount 

of carbon. So that precedes me at the Bank. 


BANKI-41578DSA with DISTILLER
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Senator ROUNDS. I understand that you have an obligation in 

which you can and are required or expected to promote renewable 

energy. But I cannot find where you are in a position to determine—and I am just going to ask the question. If an organization 

walks in and they say, ‘‘Look, we have got an opportunity to create 

and to build a new power plant,’’ is it your role to then say, ‘‘Well, 

is this a coal-fired plant? And if it is, it is not something that we 

can do’’? 

Mr. HOCHBERG. No, we do not look at coal-fired—that is not the 

issue. We look at the environmental impact, and we look at the 

amount of high carbon intensity. It is not about for coal or against 

coal. In fact, Senator, we export coal. We export coal mining equipment. The only thing we have had to do—and, again, it is part of 

a consent decree—is to look at to what degree the environment is 

impacted by our export. That was put in by Congress, and, again, 

the Ex-Im Bank lost a lawsuit about that. I would be happy to 

share with you the section of the law, and I am happy to share 

with you the consent decree. 

Senator ROUNDS. Mr. President, I think what happens in this 

particular case is it gives those individuals who have a concern 

about whether or not you are picking winners and losers, and you 

should not be picking winners and losers. I think it gives them the 

opportunity to point to the fact that in this particular case, when 

it comes to your statements on power plants that are coal-fired, 

that you do have a desire or an interest in promoting those that 

are not coal-fired. I bring it up because I think it has got to be 

clarified, that either you are picking winners and losers and giving 

people who do not want to see this Bank continue forward, you are 

giving them the ammo that they want to show that you are picking 

winners and losers, and that is not the way that it was set up, in 

their opinion, nor in my opinion. 

But I wanted to give you the opportunity to try to correct anything if we are misunderstanding the focus that you think the 

Bank has got. 

Mr. HOCHBERG. I guess all I can say is that we are doing to the 

best of our ability to follow the will of Congress in terms of taking 

the environment into account. 

Senator ROUNDS. And so what I understand is that you believe 

that it is the will of Congress that we not promote, as you call it, 

‘‘carbon pollution’’ through the creation of coal-fired plants or the 

use of the Bank to finance coal-fired plants in other parts of the 

world. 

Mr. HOCHBERG. Well, we are open for coal-fired power plants in 

the 80 or 82 poorest countries in the world. What our current law 

states is that——

Senator ROUNDS. So you would do it in 80 or 82——

Mr. HOCHBERG. 80 or—they are called ‘‘IDA’’ or ‘‘IDA blend,’’ defined by the World Bank. Those we do not have restrictions at all. 

In wealthier countries, countries that have options, that have options on renewable, gas, nuclear, the current policy—and it is in 

our appropriations bill—says that we do not do any coal-fired 

power plants in those countries where they have a lot of options. 

Poorer countries, 80 countries in the world, approximately today, 

we do. 


BANKI-41578DSA with DISTILLER
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Senator ROUNDS. Is that directed by Congress, or is that a policy 

that has been created within the Bank itself? 

Mr. HOCHBERG. No, that is in our current appropriation language. 

Senator ROUNDS. OK. Thank you, sir. I appreciate your comments. 

Thank you, Mr. Chairman. 

Chairman SHELBY. Senator Heitkamp. 

Senator HEITKAMP. Thank you, Mr. Chairman. I just want to 

kind of run through this. Basically you are subject to the requirements of NEPA. You have to do an EIS or some kind of environmental assessment on the decisions that you make. There were not 

any decisions being made regarding carbon. You are sued. As a result, you signed a consent decree that says, yes, carbon will be part 

of that consideration, right? 

Mr. HOCHBERG. My predecessor did, but, yes. 

Senator HEITKAMP. Right, but I think that the Bank is under a 

consent order——

Mr. HOCHBERG. Exactly. 

Senator HEITKAMP.——by the court to take that into consideration. It is similar to what happened to EPA when EPA said carbon is not a pollutant, the United States Supreme Court said it 

could be and you need to take a look at it, that Massachusetts case. 

And so I just want to make it clear that this is not a policy that 

came into existence when the President became the President. It 

is not something that you initiated at the Bank, although you are 

administering it. And I think it has created controversy here, and 

as a result, the Kirk-Heitkamp bill addresses this very issue and 

puts within there that you cannot discriminate against any legitimate business, and that is something that was vetted very strongly 

during our negotiations on the Kirk-Heitkamp bill with coal companies as well, or I would not sign on this bill. And so I think we 

have addressed a lot of the concerns that the Senators have

expressed regarding picking winners and losers regarding environmental impact on carbon. 

And so it does not mean—I guess when you look at the nondiscrimination language, not something that was appreciated, but 

obviously if that passes, it will be administered appropriately by 

the Ex-Im Bank. Is that correct, Mr. Hochberg? 

Mr. HOCHBERG. Yeah. Obviously, we will totally and completely 

follow the will of Congress, and I should even add that consent decree that you referred to, you know, that is a regulation put in by 

the court. We made everybody unhappy. We made the environmental community unhappy. We made the exporters unhappy. I 

would say we left—maybe that makes a good policy when everybody is unhappy. But everybody was unhappy with that outcome. 

Senator HEITKAMP. I want to get to another issue that has been 

raised here, which is the criticism that you do not do enough for 

small business, that the Bank really represents two major multinational corporations and that, you know, you are the piggy bank 

for these two large corporations. 

I would tell you that I have had a fair amount of experience with 

the Ex-Im Bank, first working with the Ex-Im Bank and the Bank 

of North Dakota, a kind of iconic institution that is actually the 


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State development bank in North Dakota, and they have had this 

very long relationship, I think, that has been very fruitful for 

North Dakota exporters. 

But I want to have you address what you have done to reach out 

to the small businesses like you have reached out in North Dakota, 

whether you think—in fact, in the Kirk-Heitkamp bill we are setting a target of 25 percent, whether you think you can achieve a 

25-percent target in the next authorization period as established by 

that bill. 

Mr. HOCHBERG. Well, let me say this—and thank you for your 

support of the Bank and thank you for proposing one of the bills 

under consideration, because I know our exporters and their workers are keenly focused on that. 

I ran a small business. I am focused on small business. In this 

fiscal year, we put in an 800 number. Operators are open 8 to 8 

Monday to Friday, standing by right now if you would like. If you 

go on our Web site and you cannot find something, we have an online chat. We do all those things to do outreach. 

Senator HEITKAMP. I only have so much time, Mr. Hochberg, so 

do you think you can achieve a 25-percent target in this period of 

time that we have given you in this reauthorization? 

Mr. HOCHBERG. I think that is a very steep target. And the reason I say that is we are demand-driven. People come to us when 

they need us. Right now banks are doing a little bit of a better job, 

so in some ways, they have more options. When there is a financial 

crisis, they come to us. So that is the challenge. I mean, I will work 

toward any target. We will strive to do better. We are now doing 

better than 20 percent, which is our current target. But it is difficult to know, because we are demand-driven, what the demand is. 

So that is the only challenge I say with any particular target in 

this regard. 

Senator HEITKAMP. Finally, obviously, there is a lot of concern—

and I think the Chairman expressed some legitimate concern—

about reforms. And we are very interested in ongoing activities 

that the Bank has to address concerns that have been expressed 

by this Committee and by GAO and by the Inspector General. 

Where do you think you are in adapting and adjusting and responding to the concerns that have been expressed about governance of the Bank? 

Mr. HOCHBERG. Well, let me say, as I mentioned earlier, you 

know, these are the reforms that were put in in 2012. We complied 

with each and every one of them. There are a number of reforms 

that have been proposed in the Kirk-Heitkamp bill, and there are 

three other bills that are circulating. 

I understand the will of Congress. We will move forward on any 

of those reforms that are enacted and do our very, very level best 

to enact them quickly and efficiently. All I am trying to worry 

about is not creating a burden for small business or more bureaucracy that makes it harder for us to be nimble. 

Senator HEITKAMP. Finally, when you look at the Bank and you 

look at the hard deadline that we have at the end of the month, 

how disruptive will it be if we allow the charter to lapse and then 

try and reinstate that? How much additional costs would the Bank 

experience even if we were able to reinstate it? 


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Mr. HOCHBERG. Well, I think the uncertainty has already caused 

a lot of concern. Uncertainty has caused some banks and insurance 

brokers to pull back. Working capital loan has been somewhat constricted to small businesses. And my fear is that we—there has 

been a lot of uncertainty. I spend a lot of time convincing foreign 

buyers we are going to be there and that they can rely on us and 

rely on the United States. 

So I think that even a temporary lapse will have a very negative 

effect because it makes us less reliable and it makes U.S. companies less reliable, and it puts our workers in jeopardy. 

Senator HEITKAMP. Thank you, Mr. Chairman. 

Chairman SHELBY. Senator Kirk. 

Senator KIRK. Thank you, Mr. Chairman. 

I want to brief you on a project near and dear to me, and that 

is the C919, the Chinese competitor to the Boeing 737, built with 

$29 billion in subsidies from the Government of China. We have already seen 400 of these booked. I think all of those orders should 

have come to the United States. I would say to my colleagues I am 

for Ex-Im Bank picking winners and losers, and those winners 

should be Americans, make sure those 400 orders come to the 

United States. 

If you know aviation as I do, an airplane is a black hole of spare 

parts. It needs an unlimited set of spare parts. All the spare parts 

for the Boeing 737 are going to be American-originated. In the case 

of the C919, they will be largely Chinese. For the billions coming 

on this airplane, I would hope that they come to the U.S.A. 

I want to thank Heidi Heitkamp for her great bipartisan work 

on this coming amendment that we will do to the National Defense 

Authorization bill to reauthorize you and make sure we win in the 

competition against the C919. 

Thank you, Mr. Chairman. 

Chairman SHELBY. Senator Merkley. 

Senator MERKLEY. Thank you, Mr. Chairman. 

You may have already addressed this, and if you have, please let 

me know. But I wanted to have you explore a little bit about the 

subsidies that China gives to their exports, including what we have 

been hearing about the new initiative to devote an additional $10 

billion in export credit to Africa, bringing their total to $30 billion 

in export credits to Africa, which is roughly equivalent, I believe, 

to Ex-Im’s global volume for the year. 

Mr. HOCHBERG. China is a particularly formidable competitor 

and particularly in Sub-Saharan Africa. Total U.S. exports to SubSaharan Africa are about $23, $24 billion, so that is all exports. 

And as you just cited, China is going to devote $30 billion of export 

finance alone. 

We see them everywhere—in power plants, infrastructure, mining, perhaps soon aircraft, as Senator Kirk mentioned. So they are 

a very, very formidable competitor, and particularly so in Sub-Saharan Africa, the fastest-growing region in the world right now. 

Senator MERKLEY. And so essentially we have a very unlevel 

playing field if they are providing finance support for their industries and we are not doing the same? 

Mr. HOCHBERG. Well, we exist to try and level that playing field 

and do the best we can, but we have a little bit one arm tied beVerDate 0ct 09 2002 10:06 Jul 29, 2016 Jkt 000000 PO 00000 Frm 00026 Fmt 6633 Sfmt 6604 S:\DOCS\97305.TXT SHERYL

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hind our back in terms of we abide by a number of global guidelines and rules, and China is untethered by that. 

Senator MERKLEY. Yes. We have been having a debate here over 

the fast track and the TransPacific Partnership and a potential 

transatlantic agreement, and there is a real debate over whether 

it will create jobs in America or eliminate jobs. But in this case, 

can’t we say that this is 100 percent clear that this financing creates jobs here in the United States of America? 

Mr. HOCHBERG. I would say without question, and do not take 

my word for it. GAO validated our jobs calculation in 2013. Where 

there were questions, they validated all of our jobs calculations. 

Senator MERKLEY. Can you remind us again how many jobs 

there are at stake here? 

Mr. HOCHBERG. We supported 164,000 jobs last year, last year 

alone; about 1.2, 1.3 billion in the 6 years I have been at the Bank. 

Senator MERKLEY. Thank you very much. 

Thank you, Mr. Chairman. 

Chairman SHELBY. Senator Scott. 

Senator SCOTT. Thank you, Mr. Chairman. Good morning. 

Mr. HOCHBERG. Good morning. 

Senator SCOTT. Thank you for being here this morning for such 

an important topic. I wanted to just share with you two stories 

from two of our more important employers in South Carolina and 

just get your response to the comments that they have made to me. 

The first one is Sage Automotive Interiors in update South Carolina. They were a part of the Milliken Group initially, and because 

of the downturn in the economy, Milliken decided to spin them off 

or basically get rid of them. 

Fortunately, the senior management decided to get the capital together, buy that company, and now they are employing more than 

600 employees in three locations throughout South Carolina. 

For the last 5 years, they have been able to succeed because of 

their exporting opportunities. Sage has used, according to the company—Dirk Pieper, the CEO, has used Ex-Im Bank backing since 

its inception to support its export business because it is necessary 

for them to do so. 

And a very similar story from another company, another major 

player in South Carolina, Grace Management Group. Grace has 

been around since 1975. They have locations, of course, in 

Spartanburg, South Carolina, but they also have locations in places 

where Chairman Shelby has a residence, I believe, in Alabama. 

And they have done very well, and they have showcases, showrooms in Atlanta, Dallas, and Las Vegas. They do business in 90 

countries. It is a wonderful success story from Spartanburg, South 

Carolina. And they tell me that because commercial banks in the 

United States are prohibited from using foreign receivables as collateral for loans, Grace has no alternative but to apply for Ex-Im 

Bank backing to support its international sales support. 

Can you comment on whether or not these companies are leading 

me in the wrong direction or not? 

Mr. HOCHBERG. Well, thank you, Senator. In fact, I had a chance 

to visit Sage on a recent trip to South Carolina. Companies come 

to us when they cannot find the financing at either comparable or 

competitive rates so they can compete overseas. Sage is an excelVerDate 0ct 09 2002 10:06 Jul 29, 2016 Jkt 000000 PO 00000 Frm 00027 Fmt 6633 Sfmt 6604 S:\DOCS\97305.TXT SHERYL

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lent example of that, and 90 percent of our customers are small 

businesses, and of the exports we financed last year of $27.5 billion, a full $10 billion came directly from small businesses. 

Senator SCOTT. I will ask you this question a little differently: 

According to Sage, commercial banks in the United States are prohibited—is that accurate?—from using these foreign receivables as 

collateral? 

Mr. HOCHBERG. That is correct. Commercial banks will not value 

a foreign receivable. They will value it at zero. When we insure 

those receivables through credit insurance, they will then lend, 

could lend 75, 80, 90 percent against that receivable, creating a 

real borrowing base so those banks can get the working capital, 

hire people, get the raw materials, and ship the goods overseas. 

Senator SCOTT. So for a business having operations and making 

sales in 90 countries, not to be able to use a part of those receivables to determine their cash-flow would be a crippling impact if 

they lost that opportunity? 

Mr. HOCHBERG. It totally disables them, and it actually impedes 

their seeking export sales and the jobs that come with them. 

Senator SCOTT. I had a conversation last night—I was invited to 

dinner with some of my House friends last night, which is a rare 

opportunity for me. They do not invite me anymore now that I am 

in the Senate. I am not sure what went wrong, but, Tom, will you 

talk to those folks for me, please? Thank you very much. And they 

suggested that there are major players in the aviation world that 

are very much in opposition to the Ex-Im Bank. 

I wonder if some of those players perhaps access something like 

export financing in other countries, if you are aware of any of those 

folks that may access——

Mr. HOCHBERG. Well, the regional jets that we all fly on, that 

Delta deploys and all American carriers, are made in two countries. 

They are made in Brazil and in Canada. And I know for a fact that 

Delta Airlines is a major user of regional jets and a major user of 

export credit financing from the Canadian Government and the 

Brazilian Government to finance those regional jets. And if any of 

us fly to New York on the Delta shuttle, you are flying on an 

Embraer Brazilian plane in all likelihood financed by the Brazilian 

Government. 

Senator SCOTT. I am hoping that I am able to get a seat on that 

plane the next time I go to New York after this question. 

[Laughter.] 

Mr. HOCHBERG. Maybe a middle seat. 

Senator SCOTT. I am too big of a boy for that conversation. 

On the reform package that has been offered by Senator Kirk as 

well as Representative Fincher, some of the questions that we are 

pondering as a part of the reform package is to reduce the borrowing authority. Your thoughts on that? 

Mr. HOCHBERG. Well, I know there are number of reforms we 

considered. It concerns me that we would constrict or reduce the 

amount of lending authority we have at Ex-Im Bank when we have 

got countries like China—Senator Kirk just showed a picture of the 

Comac plane, 400 orders. China has given no indication they are 

going to follow any rules when it comes to financing that. So I 

would certainly have a concern. Obviously, we will work with ConVerDate 0ct 09 2002 10:06 Jul 29, 2016 Jkt 000000 PO 00000 Frm 00028 Fmt 6633 Sfmt 6604 S:\DOCS\97305.TXT SHERYL

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gress on a solution, but I am concerned about restricting our efforts 

and sending that bad signal. Even if we never get there, the signal 

and the message is very important that we stand fully behind 

American workers and American exports. 

Senator SCOTT. Mr. Chairman, would you provide me with an additional 30 seconds? 

Chairman SHELBY. Go ahead. 

Senator SCOTT. Football time 30 seconds. 

Chairman SHELBY. I will give you more time. 

Senator SCOTT. Thank you, sir. 

How about on increasing the reserve requirements? 

Mr. HOCHBERG. Well, you know, there are a number of reforms 

that have been proposed. There are currently four different bills, 

two from your colleagues in the House and two here in the Senate. 

Senator SCOTT. Yes. 

Mr. HOCHBERG. What we have done is provided, in the past and 

continuing, technical assistance to any member who would like to 

review reform by reform. I think that probably is a more thoughtful 

way of doing it than just my shooting from the hip here in terms 

of some of the generalized reforms. But I think that we are looking 

for a solution, our exporters and their workers are, and we want 

to work out with this Committee and with the House to find what 

is the proper oversight so we can make sure that we move forward 

and give some certainty to those exporters. 

Senator SCOTT. Last question, since you said you were not going 

to answer it, I will ask it anyway. On the pilot program for reinsurance, thoughts? 

Mr. HOCHBERG. I think that is a good—we would be interested 

in pursuing that pilot. If it is in our reauthorization, we certainly 

would be very much open to that. 

Senator SCOTT. In the House, I have supported the Ex-Im Bank 

in the past, and I will support the Ex-Im Bank today as well or 

in the future. My concern is that we do need some reforms in the 

process. I think it is very important for us to figure out a path 

going forward. And, frankly, if we were able to negotiate something 

other than a unilateral disarming, I would be open to that as well. 

So I wanted to get your thoughts and perhaps have a longer conversation with you about the necessity of reforms as we move forward. 

Mr. HOCHBERG. Well, if I can just add, you know, we have continually improved the Bank. We had 18 reforms in 2012. 

Senator SCOTT. I saw that. 

Mr. HOCHBERG. We have complied with all of them. And we are 

not also just waiting for Congress to come up with reforms. I am 

very proud of the 450 people at Ex-Im Bank because we are constantly finding better ways to improve, be sleeker, be more 

thoughtful about risk and more attentive to the needs of workers 

and taxpayers. 

Senator SCOTT. Thank you. 

Thank you for the additional time. 

Chairman SHELBY. Senator Donnelly. 

Senator DONNELLY. Thank you, Mr. Chairman. Mr. Hochberg, 

thank you for being here. 


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Yesterday, Mr. Hochberg, one of the witnesses talked about how the Ex-Im Bank was creating $140 billion in taxpayer risk to the 

people of the United States, and I think by that they were referring 

to the loan guarantees the Ex-Im Bank has made for your customers, the other product portfolios. What has your loss ratio been? 

Mr. HOCHBERG. Well, we report our defaults to Congress every 

90 days, so every 90 days Congress is updated. Our current default 

rate is running less than one-fifth of 1 percent, 0.167 percent, less 

than one-fifth of a percent, and we report that, as I said, every 90 

days. 

Senator DONNELLY. How is that considered industry-wide? 

Mr. HOCHBERG. I would say most commercial banks, apples to 

apples, are several multiples of that. 

Senator DONNELLY. And so when they talk about that, what they 

are actually talking about is just the loan portfolio that any bank 

would have, that any operation would have. And so at the end of, 

you know, just let us say the last 3 years, did you have a profit 

or a loss at the end of the last 3 years? 

Mr. HOCHBERG. We have sent money to the Treasury, last year 

$675 billion; the year before, over $1 billion; and over the last two 

decades, $6.9 billion. And that is actual cash that leaves the checking account of the Ex-Im Bank and goes to the Treasury for taxpayer—for deficit reduction. It is not an accounting adjustment. 

That is actual cash. 

Senator DONNELLY. As you know, I am from the State of Indiana. 

One of our mutual friends, Peter Baranay, has been very important 

in the operations of the Ex-Im Bank, has run a great company, has 

used the Ex-Im Bank, has helped in management of it. And I think 

that is reflective of our State, its small and mid-sized businesses, 

over 100 companies that have benefited from the Bank in recent 

years. And, you know, overall, do you think that those 100 companies would have found similar financing opportunities had Ex-Im 

Bank not been around? 

Mr. HOCHBERG. I mean, companies have to certify that we are 

the lender of last resort, that they could not find comparable, competitive financing on the outside. You mentioned Peter. ABRO is a 

good example. As they have grown with us, they now are able—

they now can find it in the private sector. They could not 3 or 4 

years ago. But, frankly, working with Ex-Im Bank, there sales have 

grown to a point it is now bankable by the private sector and he 

is able—and if that changes, we would welcome that. 

Senator DONNELLY. Which is pretty much almost a built-in formula for success for you and for the businesses, which is they work 

with you, and it is also good for our banks in that now there is no 

need for the Ex-Im Bank, and——

Mr. HOCHBERG. In that particular case. 

Senator DONNELLY.——we are sending exports overseas and jobs 

that stay right here in the United States of America. 

One other question I wanted to ask you. So if the financing—if 

the Ex-Im Bank was not there, where would companies—where 

would some of these small companies get financing if they are 

sending product overseas? What other opportunities do they have? 

Mr. HOCHBERG. Well, frequently what they have to do, which is 

very bad for business, is demand 100 percent payment in advance, 


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and the problem is that is not very competitive. So their competitors in China, Germany, Korea, and you name it, sell in open accounts. So with Ex-Im Bank, we are able to provide the financing 

that they can meet the foreign competition. 

I should quickly add in the short-term space, which a lot of the 

small businesses are operating in, we have seen as many as maybe 

20 more export credit agencies focused on short-term and small 

business in the last couple of years. So I think there is even more 

competition for small business exporters than there has been in the 

past. 

Senator DONNELLY. Well, I just want to conclude by saying that 

in Indiana, those over 100 businesses appreciate what the Ex-Im 

Bank has done. The families who their mom or dad have a really 

good job and have the chance to buy a home and take them on a 

vacation, those families really appreciate it as well. And that is the 

real world. It is not theory. It is not, you know, some economic postulation. It is the real world of someone who gets a job because 

products are being shipped overseas that were made in Muncie, Indiana, rather than in Beijing or somewhere else. So thank you very 

much. 

Mr. HOCHBERG. Thank you. 

Chairman SHELBY. Senator Cotton. 

Senator COTTON. Mr. Hochberg, thank you for being here this 

morning. On Tuesday, we had a very lively panel between ardent 

opponents of Ex-Im Bank and equally ardent proponents of the 

Bank. One point we discussed was an analogy to arms control that 

the United States should not unilaterally disarm in the export 

credit financing world. 

There is disagreement about how much of the Bank’s activities 

are done for that reason, to meet foreign competition from foreign 

ECAs. Veronique de Rugy from the George Mason Mercatus Center, who, as you know, is an opponent of the Bank, estimates it at 

about 30 percent of the Bank’s portfolio. Linda Dempsey, from the 

National Association of Manufacturers, an equally strong proponent of the Bank, disputed that, did not have the numbers at her 

fingertips. Can you tell us how much of your portfolio is made to 

meet competition from foreign ECAs? 

Mr. HOCHBERG. It is about two-thirds to meet foreign competition 

and about one-third or so is where there is not availability. So 

sometimes—frequently, that is a lot of the small businesses, there 

just simply is not the availability on any competitive terms. 

One exporter said, ‘‘Yes, I can get financing in Qatar, but they 

want 22 percent interest.’’ And he said, ‘‘I do not need to do the 

sale at 22 percent interest. That essentially takes’’—‘‘I would have 

a loss in that case. 

But we verify that in the application. The applicant has to certify—and I answered earlier—under perjury why they need the 

loan from us, why they need the support or the guarantee from us, 

why they need our financial assistance. 

Senator COTTON. Even Ms. Dempsey, who allowed that this is 

the strongest argument in favor of the Bank, had said in a world 

where we were not unilaterally disarming but multilaterally disarming, that she would not think the United States needs to have 

an export credit agency like the Ex-Im Bank. Do you agree with 


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that assessment? If no other government had an export credit 

agency, the Export-Import Bank would not need to exist here? 

Mr. HOCHBERG. Well, the challenge with that is—and I met with 

a lot of my foreign counterparts just in the last few weeks—all of 

us, including the Ex-Im Bank, really filled in a gap during the financial crisis. Our lending during the financial—in 2012 was about 

double the level today. So when banks constrict lending—and Basel 

III is one of the impacts on that in terms of particularly longerterm loans. I use this analogy: We are a little bit like the fire 

truck. You know, we respond to an emergency, and then we just 

leave it parked in the garage when there is not an emergency. So 

even if everybody does—if everybody got rid of their export credit 

agency, I think they would invent them once again when we have 

a financial crisis and banks are reluctant to lend, as they were just 

a few years ago. 

Senator COTTON. So it sounds like you think we would need to 

maintain the Ex-Im Bank even if we can negotiate a treaty with 

the other few dozen countries that have their ECAs. 

Mr. HOCHBERG. Well, first of all, there are about 85 export credit 

agencies around the world, and some are members of an international agreement called the ‘‘Organization for Economic Cooperation and Development’’ that does provide some regulation, guidelines, but many—China, Russia, Brazil, India—are not a member. 

So they have very opaque—they can offer any terms they want, as 

long as they want, as low an interest as they want, subsidize rates, 

and we really are not able—that is a real threat to U.S. competitiveness. 

Senator COTTON. OK. One common point that is made was made 

on the panel Tuesday, and you have made it this morning on a couple occasions, and that is, the lack of private financing and how 

you can be a lender of last resort. The obvious response to that is 

if there is no market in the private financing markets for a particular project, maybe that is the market sending a signal that the 

profit is not—or that the project is not going to be profitable or that 

it is too risky. What is your strongest response to that? 

Mr. HOCHBERG. Well, first of all, we are countercyclical. When 

the banks pull back—I mean, we have the best private sector in 

the world, the best private sector banking. But when the banks 

pull back, sometimes they pull back for internal reasons. We are 

countercyclical, as I mentioned. Senator, in 2012, we did over $36 

billion worth of loans, guarantees and insurance, and last year we 

did 20. So there was less of a need for us. There was not zero need. 

There was less of a need. 

Projects like nuclear power plants, certain other technologies are 

just harder to finance. Nuclear power plants, you know, need an 

18- to 20-year loan. That is very hard to secure in the private sector. So we do fill in countercyclical and also products and services 

that are particularly hard to finance. 

Senator COTTON. OK. I would like to discuss one particular example, just to get a sense of your thinking on it. This has been in 

the news lately. This is reports from Space News as well as the 

Sydney Morning Herald, the NewSat deal. The Ex-Im Bank helped 

underwrite loans to NewSat, a startup satellite company in Australia, that was going to buy a satellite from Lockheed Martin. I 


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think just 2 weeks ago, it was, the bankruptcy court in Delaware 

said that NewSat is in default, that Lockheed Martin, which has 

received $193 million for this satellite, now owns it. Most of that 

money came from the Ex-Im Bank. 

Lockheed Martin is a top-tier defense contractor. They make 

some of the best products in the world. Australia is a First World 

country. They are part of our Five Eyes intelligence partnership. 

This is not a Third World country that does not have the rule of 

law, property rights, independent courts, and so forth. 

If Australian-based NewSat could not get private market financing to buy this satellite, does that not send a signal that maybe 

this small startup satellite company that now is bankrupt, after 

widespread reports of mismanagement and overspending on travel 

and luxury yachts, should not have gotten money to buy a satellite 

in the first place? 

Mr. HOCHBERG. Well, Senator, there are two countries in the 

world that make satellites: the United States and France. And, 

frankly, we go toe to toe with them all the time. France’s export 

credit agency fully supports these satellite sales. So of late, competition has increased, and we have had to do more in satellites to 

counter that foreign competition. Similar to nuclear, satellites are 

particularly acompetitive and harder to finance. So——

Senator COTTON. And France’s agency was part of this project. 

They face losses as well. They have greater chances of recovery, 

though, than does the American taxpayer. 

Mr. HOCHBERG. Well, in this case——

Senator COTTON. One might say we should have let France finance this sale, and they could have taken the entire loss themselves as opposed to imposing it on the American taxpayer. 

Mr. HOCHBERG. Well, first of all, customers pay us a fee. The fee 

fills our loan loss reserve account. So we are so—we are far ahead 

of the game here. We are still in the negotiation. This satellite is 

not completed. It is not due to launch. There is a lot of time between now and that point. We cannot write this book from the last 

chapter forward. So we still have a ways to go. In no way is this 

a done deal. 

Second, these were jobs in the United States. We supported 250 

jobs at Lockheed and 650 indirect jobs. So there are a lot of jobs 

at stake, and we finance a number of satellites. We do a good due 

diligence. From time to time, a deal will experience difficulties. 

That is what capitalism is about. Everything does not go perfectly 

according to plan. Sometimes deals do better than expected, sometimes worse, sometimes exactly. This is a project that is in labor. 

It is difficult right now. We are working through it. I still think we 

are going to find a better solution. Yes, the news sounds rather 

grim, but I did not write that story. 

Senator COTTON. Well, I will just say in conclusion, because my 

time is well past expired, is that what capitalism is primarily about 

is putting private dollars at risk. You never know if a project is 

going to succeed beyond anyone’s wildest measure or fail unexpectedly. But when profits and losses are private, then you have the 

best incentives created. 

Thank you, Mr. Chairman. 

Chairman SHELBY. Thank you. 


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I have a couple of questions, Mr. Chairman. What percent of the $47 billion—we have been told $47 billion that you have underwritten exports. What percent of that are airplanes, roughly? In 

other words, of your portfolio, what——

Mr. HOCHBERG. I am confused. You said $47 billion? Last year, we did $27 billion. 

Chairman SHELBY. Well, I am talking about overall. We had a figure that U.S. exports for 2014 were $2.35 trillion. 

Mr. HOCHBERG. Oh, yes. 

Chairman SHELBY. And that you financed about 2 percent or $47 

billion. 

Mr. HOCHBERG. Actually, we did about $27 billion worth of exports. 

Chairman SHELBY. OK. 

Mr. HOCHBERG. Some of those exports, remember, tourism coming to America is also an export. 

Chairman SHELBY. OK. Well, what percentage of your portfolio 

dealt with financing airplane sales? 

Mr. HOCHBERG. Last year, in 2014, we financed in the range of 

about 35 percent of the——

Chairman SHELBY. Thirty-five percent of your portfolio. 

Mr. HOCHBERG. Thirty-five percent. And, actually, I should add 

the smallest number of airplanes were financed last year than the 

previous dozen years. We actually had the smallest footprint we 

ever had in that time period. 

Chairman SHELBY. This question has been asked many ways, I 

guess, but let us say that we have an airline manufacturer—we 

know it is Boeing—and they are going to sell some planes to the 

United Arab Emirates or their airline—you know, a very rich country and so forth. Could an airline here like—we will just use any 

of our airlines—Southwest, USAir, Delta, you name it, domestic. 

Could they get the same kind of financing here that you give to 

their world competitor overseas? 

Mr. HOCHBERG. We have the best capital markets in the 

world——

Chairman SHELBY. I know. 

Mr. HOCHBERG.——so anytime a U.S. carrier finances a plane, 

we actually run the numbers, and we say if they were a foreign 

carrier, what would we charge, to make sure we are charging more. 

We verify every time there is a financing of a U.S. carrier. We compare that to what a foreign carrier would pay with the same credit 

history, the same credit rating. 

Chairman SHELBY. Do you give them the same rate? 

Mr. HOCHBERG. No, the rates are determined internationally. 

What I am trying to say is we want to verify that the rates are 

proper and high enough. We have between doubled and tripled 

their fees we charge foreign carriers since 2011 to make sure we 

are not competing unfairly with the U.S. carriers, to make sure 

that the rates are higher than domestic airlines pay. 

Chairman SHELBY. With what you are just saying, what is the 

advantage of and why would you have an Export-Import Bank if 

somebody could access a country—we will just use United Arab 

Emirates, blue chip, with all the oil and money I guess they will 

ever need. They could borrow on the open market, so they cut a 


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deal with the Export-Import Bank. Obviously, it is a lower interest 

rate. It has got to be something. Are you saying it is not? 

Mr. HOCHBERG. Well, the interest rate, again, they pay us a fee, 

and as a result, they can borrow at a lower rate than they might 

otherwise be able to borrow. But I am trying to say it is still lower 

than U.S. carriers pay. Yes, it is lower than they could access otherwise, but the difficulty is that we are in head-to-head competition 

with Airbus. 

Chairman SHELBY. We understand that. 

Mr. HOCHBERG. And so we have got to level the playing field, 

when they have a choice, they are going to buy an Airbus plane or 

a Boeing plane. 

Chairman SHELBY. But our airlines here are paying more for 

their money than, say, their competition in the world if you finance 

those airplanes? 

Mr. HOCHBERG. No. Our airlines still pay less——

Chairman SHELBY. You just said they did. 

Mr. HOCHBERG. They pay less. I thought the question was would 

Emirates——

Chairman SHELBY. Who pays less? 

Mr. HOCHBERG. U.S. carriers pay less. 

Chairman SHELBY. Pay less in finance? 

Mr. HOCHBERG. Yes. 

Chairman SHELBY. Than the others do overseas? 

Mr. HOCHBERG. Yes. Based on our fees, yes. 

Chairman SHELBY. Why would an airline like United Arab Emirates or somebody like that, a very rich country, pay more when 

they could go to the market and get less? 

Mr. HOCHBERG. Well, the U.S. carriers pay less because they can 

borrow here, and we have the most fluid and the deepest capital 

markets. Foreign carriers have a much harder time accessing—the 

capital markets in their respective countries are not frequently—

are usually not as deep. 

Chairman SHELBY. Let me ask you a final question. If 98 percent 

of our exports, which was $2.35 trillion in 2014, did not access any 

credit from the Export-Import Bank, only 2 percent, does that give 

you room to think if only 2 percent of our exports are going through 

the Export-Import Bank, do we really need the Export-Import 

Bank? I just pose the question. 

Mr. HOCHBERG. I think we should be proud of the fact that 98 

percent in our country have private sector financing. The fact is we 

have the best private sector, but it does not do everything. Small 

businesses have challenges. We talked about nuclear. We talked 

about satellites. We talked about certain—Sub-Saharan Africa. 

There are gaps in that field, and we only—you know, we do not do 

very much, Senator, in Western Europe. We do not need to. But we 

do it in markets that are hard or products that are hard. 

Chairman SHELBY. Third World markets. 

Mr. HOCHBERG. Developing economies or where we are facing a 

lot of competition such as we mentioned with Airbus or Siemens or 

Mitsubishi or some other giant global firms. 

Chairman SHELBY. Any other questions? 

[No response.] 


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Chairman SHELBY. Thank you, Mr. Chairman. Thank you for 

your patience with us here today with the break, and the Committee is adjourned. 

[Whereupon, at 11:56 a.m., the hearing was adjourned.] 

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


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PREPARED STATEMENT OF FRED P. HOCHBERG

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

JUNE 4, 2015

Chairman Shelby, Ranking Member Brown, and distinguished Members of the 

Committee, thank you for inviting me to testify before you today. 

ABOUT EXIM BANK 

The Export-Import Bank (EXIM Bank) was created to support American job 

growth by facilitating the export of American goods and services. Each year, EXIM 

Bank empowers thousands of U.S. businesses—the vast majority of which are 

small—to contend for sales in an increasingly competitive global marketplace. With 

95 percent of the world’s consumers living beyond America’s borders, U.S. companies are increasingly looking abroad so that they can grow sales and add jobs here 

at home. Because of global trends in financing, however, U.S. companies are no 

longer simply competing for sales against foreign businesses—they’re also competing 

against countries offering generous financing terms to their domestic exporters. 

American exporters face additional competitive headwinds due to broader trends in 

global trade; for three decades prior to the financial crisis, global trade grew at 

twice the rate of the global economy, but today, that rate has been cut in half. In 

an ideal world, competitive financing terms would not be an additional challenge 

faced by our businesses; however, countries such as China, Russia, and others increasingly see expanding their respective nations’ exports as critical to growing their 

economies. It is incumbent upon America to continue to lead, and to strive to level 

the playing field in the global export arena—restoring free market factors to their 

rightful place at center stage of competition. That is where the EXIM Bank comes 

in. 

EXIM Bank is a small and effective government agency whose approximately 450 

employees are passionate about empowering businesses to create more American 

private sector jobs, while serving as responsible stewards of taxpayer dollars. EXIM 

fulfills its mission to support U.S. jobs in two ways. First, EXIM fills the gaps when 

the private sector is unable or unwilling to provide financing for U.S. exports—a 

particularly important role for American small businesses, which often find it difficult to obtain export financing from their local bank, and for exports to the developing world, which accounted for 68 percent of EXIM’s authorizations in 2014. Second, the Bank seeks to ensure a level playing field for U.S. exports by making available financing that encourages buyers to make decisions based on free market factors such as price and quality, rather than on foreign competitors’ state-sponsored 

or cut-rate financing. 

EXIM Bank does not pick winners and losers; rather, it serves any eligible American business seeking competitive financing to export goods and services. EXIM’s 

customers pay fees and interest for the financial services offered by the Bank, and 

as a result, EXIM Bank is a self-sustaining agency. Over the past two decades, 

EXIM Bank has sent nearly $7 billion to the U.S. Treasury. Consequently, if EXIM 

Bank were not reauthorized, the agency would no longer be able to serve as a budgetary offset. 

EXPORT-IMPORT BANK REAUTHORIZATION ACT OF 2012 (P.L. 112–122) 

In May 2012, the Export-Import Bank Reauthorization Act of 2012 (P.L. 112–122) 

was passed by Congress with overwhelming bipartisan support in both chambers—

330 Republicans and Democrats in the House and 78 in the Senate. The vote carried 

on a long tradition of bipartisan support that has existed for 81 years. 

To be clear, every action and study required in the Bank’s 2012 bipartisan reauthorization has been completed and implemented, or is being complied with on an 

ongoing basis (Attachment 1). Of the 16 recommendations made by the Government 

Accountability Office (GAO) since the 2012 reauthorization, EXIM has addressed 15, 

and is working to address the final recommendation (Attachment 2). Further to the 

work we do with the GAO, the Bank regularly consults with the Office of the Inspector General (OIG). Since early 2012, the Office of Inspector General has issued 

26 reports and follow-up evaluations containing a total of 145 recommendations. Of 

those 145 recommendations, EXIM Bank has fully concurred with 143 and has fully 

implemented 92 to date. We are diligently working to fully implement the remaining 

51. On the remaining two unresolved recommendations we continue to work with 

the OIG on the best path forward (Attachment 3). We have closed four additional 

recommendations since the April 15th hearing. 

I fully respect and would like to thank the Committees, Congress, the Office of 

the Inspector General, and the GAO, as well as the EXIM Bank employees, all of 

whom have played an integral role in ensuring effective oversight of the Bank. This 


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attention and oversight has helped the Bank to become a better institution, and has 

allowed us to better achieve our shared goals of growing U.S. exports while protecting American taxpayers. Over the past several years, the Bank has become more 

transparent, heightened its focus on risk, expanded its attention on small business 

and textiles, and is increasingly mindful of global competition—all of which has 

made the Bank a more effective, more resilient institution supporting U.S. job 

growth. 

ENHANCING PRIVATE SECTOR COMPETITIVENESS 

The top priority at EXIM Bank has and will continue to be to support American 

jobs by facilitating U.S. exports. In FY 2014, EXIM Bank supported 164,000 U.S. 

jobs through financing approximately $27.5 billion worth of exports. In accordance 

with its Charter, the Bank must first and foremost consider a reasonable assurance 

of repayment standard for the Bank’s approval of financing transactions. Except in 

certain cases that are clearly and carefully defined in EXIM Bank’s Charter, EXIM 

Bank support is only available to finance exports to buyers that lack sufficient private sector liquidity or capital to finance most transactions. 

Transparent & Consistent Lending Standards 

EXIM Bank’s practices adhere to competitiveness and transparency standards established by the Organisation for Economic Cooperation and Development (OECD) 

Arrangement on Guidelines for Officially Supported Export Credits. In an effort to 

promote a level global playing field for exports based on free market competition, 

the OECD Arrangement put into place responsible market based lending and transparency rules, which for several decades governed the totality (100 percent) of official export credit support worldwide. Today, only 16 years removed from that 100 

percent figure, the share of official export support that still falls under these guidelines has now dropped to 35 percent (this includes tied and untied financing), as 

countries such as China and Russia, which operate outside of the OECD Arrangement, have begun to aggressively back their domestic exporters with unregulated, 

opaque financing. Even among countries that adhere to the OECD guidelines, competition is increasing. For example, Korea’s medium- and long-term official export 

support was more than double that of the United States in 2014, despite the fact 

that the U.S. economy is 11 times larger than the Korean economy. 

Equipping American Businesses To Compete and Promoting a Free and Open Market 

More often than not, American businesses and workers aren’t simply competing 

against their Chinese, Russian, and French counterparts; more and more, they’re 

being asked to compete against ‘China, Inc.’ Though the United States remains wellstocked with innovative businesses of all sizes—many of which are perfectly capable 

of winning sales opportunities on their merits throughout the world—American companies aren’t always able to bring competitive financing packages with them to close 

a sale, which is increasingly required today. Even those that can secure financing 

from private lenders face a serious disadvantage when going up against foreign rivals offering generous state financing support of their national champions. This 

trend has the potential to threaten America’s global economic leadership. 

I just returned from a meeting with the Berne Union, a group made up of my 

counterparts from many of the 79 and counting export credit agencies around the 

globe. At that meeting, I wanted to know whether they anticipate doing more or less 

to support their domestic exporters over the next 5 years than they currently do. 

Japan, Korea, Russia, Germany, France, United Kingdom, Brazil, and others all indicated that they expect to accelerate their official export credit backing for their 

exporters. Generally, China is hesitant to share such forecasts with the world, but 

no serious observer could possibly anticipate anything other than rapid, aggressive 

acceleration of official export financing support from China in the years to come. 

Only Austria and Norway indicated they did not expect significant growth in the 

coming years. 

Our European rivals in particular are keenly focused on job growth. Following our 

lead, they are putting increased emphasis on supporting their small business exporters. As a result, there’s going to be more competition than ever for U.S. small 

businesses looking to win sales in global markets. And that’s to say nothing of larger foreign exporters who will have access to more financial backing than ever before 

as they compete for business against some of America’s largest manufacturing employers. It is also important to remember that those large manufacturers support 

extensive small business supply chains in cities and towns across America. 

Additionally, as my foreign counterparts acknowledged their export credit agencies have become increasingly critical resources in the face of financial crises—both 

global and regional. When private financiers withdraw from regions or sectors that 

are experiencing downturns, export credit agencies are equipped to step in so that 


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1This default rate is different than the default rates published in the annual Budget Appendix 

due to differing definitions. The reported rate in the Budget Appendix reflects projected defaults 

over the life of the loan while the default rate in this report reflects actual defaults at a particular point in time. 

their domestic exporters don’t experience a drop in sales—thereby maintaining domestic jobs. Export credit agencies are like fire trucks in that sense—not always 

necessary, but, when disaster strikes, absolutely essential. Like fire trucks, export 

credit agencies have a security function, safeguarding U.S. exporters’ sales from the 

fires of global and regional financial meltdowns. You don’t sell off the fire truck just 

because there doesn’t happen to be a fire at this time. No one can predict when or 

where the next crisis will hit. 

Other countries are aggressively supporting their commercial sectors as a means 

to enhance their sphere of influence. For example, in February, 12 former national 

security officials sent a letter to Congress stating:

By way of example, the government of China has announced a new initiative to devote an additional $10 billion in export credit to Africa—bringing 

China’s total to $30 billion, roughly the equivalent of the EXIM Bank’s 

global volume for the year. This will enable Chinese firms to expand their 

reach in the continent—particularly in the infrastructure sector, where 

projects can have a lifespan of 20 to 30 years. In an environment such as 

this, we should be exploring how to strengthen the EXIM Bank through 

sound reform and expand its efforts to counter the aggressive moves of our 

economic competitors (Attachment 4). 

GOVERNMENT ACCOUNTABILITY 

EXIM Bank is a demand-driven agency; EXIM does not pick winners and losers. 

Therefore, EXIM Bank does not set pre-determined exposure limits for industries, 

companies, and countries. Within those limitations, the Bank’s rigorous underwriting and due diligence processes ensure that the standard of reasonable assurance of repayment embedded in our charter is achieved for all approved transactions. The Bank has a comprehensive risk management framework as noted by 

a recent GAO Audit (GAO Report 13–303). EXIM Bank continually improves the accuracy and reliability of its monitoring and loss reserve systems based on recommendations from internal and external auditors, OMB, OIG, GAO, as well as private sector best practices. The Bank’s Country Limitation Schedule, which is derived from the Interagency Country Risk Assessment System (ICRAS, chaired by 

OMB) country rating process, provides policy limitations on the Bank’s business 

based on country credit considerations. The Bank’s low default rate is evidence that 

this system of portfolio management is effective. 

Safeguarding American Taxpayers from Excessive Exposure 

Essential to protecting taxpayer dollars is a solid risk management framework 

which starts with effective underwriting for potential transactions. After a new 

transaction is authorized, the Bank focuses on proactive monitoring of the credit, 

through both rigorous due diligence and documentation. This proactive management 

framework prevents potential defaults and allows the Bank to recover the rare actual defaults, as noted in a recent GAO audit (GA0–13–446). 

The result of our strong focus on comprehensive risk management: our low default 

rate of 0.167 percent as of March 31, 2015.1 As called for in the 2012 reauthorization, we now report our default rate to Congress every quarter, using a methodology 

that is completely transparent. As illustrated in the chart below, EXIM’s default 

rate remained low during the global financial crisis—the most realistic ‘stress test’ 

imaginable—and has declined since that time. In addition, in FY 2014, almost 80 

percent of the Bank’s exposure was backed by collateral or a sovereign guarantee. 

EXIM Bank’s risk management framework has ensured a low number of defaults, 

coupled with high recovery rates on those rare credits that have entered into default. Since the Federal Credit Reform Act went into effect in 1992, the Bank has 

succeeded in recovering approximately 50 cents for every dollar defaulted in the 

portfolio. Claims are paid from fees collected from the Bank’s customers—not from 

taxpayers.


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In addition to closely monitoring its exposure, EXIM Bank performs regular stress 

testing of its portfolio to identify how the current portfolio may perform in the future under stressed scenarios. Those stress tests results are included in our quarterly default rate reports that we send to Congress. 

Stress testing provides a forward-looking assessment of the potential impact of 

various adverse scenarios that could impact a banking institution’s financial condition and capital adequacy. EXIM Bank’s stress testing builds capacity to understand 

the Bank’s risks and the potential impact of stressful events and circumstances on 

the Bank’s financial condition. EXIM Bank’s Inspector General recommended—and 

EXIM accepted—that ‘‘Ex-Im Bank should develop a systematic approach to stress 

testing and should conduct stress testing at least annually as part of its re-estimate 

process.’’ The Bank accepted the OIG’s recommendations and took proactive measures to go one step further by including an additional stress scenario, which assumes zero recoveries for the Bank—a highly unlikely, but informative stress test. 

The Bank will continue to monitor and report the results of these future stress test 

scenarios to the U.S. Congress. 

EXIM Bank has a culture of continuous improvement, and has implemented numerous risk management improvements to further ensure that we remain effective 

stewards of the taxpayers we serve. Equally important is the Bank’s commitment 

to improving how it measures, controls, and mitigates risks. The Bank has made 

numerous advancements in recent years, including:

1. Hiring a Chief Risk Officer;

2. Creating the Enterprise Risk Committee to examine and monitor all bankwide risk;

3. Creating a Special Assets unit to enhance recoveries;

4. Expanding proactive monitoring efforts; 

5. Increasing staffing in our asset monitoring divisions by 33 percent; 

6. Going beyond Federal requirements to implement mandatory ethics training 

for ALL Bank employees;

7. Updating, streamlining, and simplifying domestic content requirements;

8. Streamlining our application process to provide better customer service and 

reduce decision time;

9. Enhancing the customer contact center, now operating from 8am to 8pm Monday through Friday with a team of trained operators; and

10. Implementing mandatory training on preventing and detecting fraud for all 

loan officers/underwriters. 

Small Business, Customer Experience, and Data Quality 

EXIM Bank is constantly seeking out new ways to serve its customers more efficiently without compromising our underwriting standards. Expanding on the 2012 

reauthorization efforts to improve our IT infrastructure, we have taken additional 

steps to meet industry standards and focus on data quality. With a new Chief Information Officer, the Bank is proactively working to improve these practices. Alongside this effort to improve technology, EXIM has streamlined its application processing, which has seen the number of days needed to reach an authorization decision cut in half since 2009. 

Additionally, as part of our ongoing efforts to enhance the customer experience 

for current and prospective exporters, EXIM Bank initiated a new and improved 


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customer contact center that includes an improved 1–800 number experience, along 

with a new email response system. The contact center also has online chat capabilities that allows small businesses to get questions answered quickly. The new contact center is the latest EXIM Bank initiative aimed at bringing our customers ‘‘government at the speed of business.’’ EXIM Bank is one of only four government agencies to have established a dedicated customer experience function. In addition, to 

improve the quality, reliability, and accuracy of the data we collect, we updated our 

application processes to require that certain data be included prior to accepting an 

application, such as number of employees, annual sales volumes, and NAICS codes. 

By requiring this information, we are working to improve our data quality as well 

as enhance the support we provide to our customers, your constituents. 

HISTORY OF ONGOING ACTIONS TO PREVENT CORRUPTION & FRAUD 

As a U.S. Government agency, EXIM Bank takes rigorous proactive measures to 

protect taxpayer dollars. Corruption and fraud mitigation efforts begin with EXIM 

Bank participants meeting our ‘‘Know Your Customer’’ requirements and ‘‘Transaction Due Diligence’’ standards. Risk-based due diligence is performed by staff to 

underwrite transactions. Subsequent due diligence is performed post-authorization 

using a risk-based sampling of authorized transactions to identify possible corruption and fraud. Any evidence of corruption and/or fraud uncovered as a result of 

these activities is referred to the Office of Inspector General (OIG), which began operating in 2007 and has a team of 23 employees. The successful record of the OIG 

in prosecuting parties involved in attempting to defraud the Bank is an important 

deterrent as well. 

EXIM Bank has zero tolerance for fraud, waste, or abuse and takes thorough and 

immediate action when any hint of misconduct or fraud is detected by the safeguards we have in place, including working closely with OIG. EXIM Bank conducts 

mandatory ethics training for all employees on an annual basis, including specific 

segments on rules relating to gifts from participants in EXIM Bank programs. Additionally, there is mandatory fraud-awareness training for all loan officers/underwriters on an annual basis. This training is designed to maintain a vigilant awareness of the risk of fraud in EXIM Bank transactions. 

EXIM’s culture of high ethical standards is evident in the Bank’s collaborative 

work with the OIG and support of OIG investigations and Department of Justice 

prosecutions of fraud matters. Of course, any organization can experience a bad 

apple. However, in the last six years, there has been only one indictment involving 

an EXIM Bank employee. In fact, the situation was uncovered thanks to a tip received by the OIG from a fellow EXIM employee. That employee recently pled guilty 

and is facing sentencing. Fortunately, this was an isolated incident. Unfortunately, 

like many other government agencies, there are also those outside the agency who 

try to take advantage. As Michael McCarthy, Acting Inspector General, stated in 

his testimony before the joint subcommittees of the House Financial Services Committee and House Oversight and Government Reform Committee on April 15, 2015: 

‘‘So what I can assure you is at this time in those other cases that we are investigating [sic] do not have evidence that we have developed of EXIM Bank employee 

internal complicity or participation . . . In those other cases, [interruption] at this 

point, [interruption] within the 31 cases, I would not at this point expect indictments of EXIM employees.’’

EXIM Bank is committed to operating under the highest ethical standards. The 

agency’s ethics program is not only fully compliant with all laws, but goes beyond 

government regulations, and policies that govern this aspect of our work. We conduct comprehensive ethics training for all employees and foster an environment 

where employees are encouraged to ask questions and report suspected unethical 

behavior. Among other duties, our ethics staff:

• Reviews 227 Confidential Financial Disclosure forms and 55 Public Financial 

Disclosure forms and conducts conflicts reviews;

• Reviews outside activity requests from Bank employees;

• Provides advice to employees on ethics questions;

• Provides advice on post-employment restrictions for current and former employees;

• Provides travel guideline advice; and

• Monitors the Bank’s ‘‘Ethics Advice’’ email account, which was created to provide employees quick and discreet ethics advice on basic ethics questions.

Furthermore, all new employees receive introductory ethics training upon arrival 

and mandatory training annually thereafter. The Bank brings in the Office of Special Counsel (OSC) to conduct Hatch Act training as well. Our ethics staff ensures 


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100 percent participation of all employees (above and beyond the minimum requirements of GS–11) by tracking who attends the training and following up with employee supervisors to ensure attendance. Employees who are unable to attend live 

sessions take an electronic course through the AGLearn online learning program. 

Also, the Bank introduced the ‘‘Ethics Guide for Federal Government Employees’’ 

a pocket-sized guide to provide a quick reference for employees to refer to ethics 

rules. We incorporated the use of the guides into the 2013 training module, and we 

distribute the guides to all new employees. The guides have been well-received by 

the staff and resulted in increased employee engagement in ethics rules. 

CONCLUSION 

We appreciate the widespread bipartisan support of EXIM, and are eager to continue to support American jobs, as the Bank has done effectively and efficiently for 

more than eight decades. Providing long-term certainty to U.S. businesses seeking 

to compete in overseas markets is imperative as they make long-term plans to grow 

their global sales, to hire more workers, and to invest in innovation. Deciding to export is not a last-minute decision, but one that requires extensive planning. For 

companies like Bassett Ice Cream in Philadelphia, L&H Industrial in Gillette, Wyoming, or Murray Equipment in Fort Wayne, Indiana, EXIM Bank plays a critical 

role—and one that by definition would not be filled by the private sector. 

Selling goods across borders is not the same as selling goods domestically. Access 

to credit is frequently what is needed to make global projects happen. When U.S. 

companies compete for international, large-scale infrastructure projects, the financial options are more limited. The larger the project, the greater the impact on a 

company’s day-to-day cash flow. Zeeco, a combustion technology company in Broken 

Arrow, Oklahoma, knows this fact very well. Zeeco started as a small business, but 

due to export sales has been able to triple its size and grow into a medium-sized 

business. This was primarily due to the superior products they provide, but also a 

result of the guarantee they were able to obtain from EXIM Bank. That guarantee 

allowed them to effectively compete with foreign rivals who were offering financing 

packages as a part of their sales pitch. When I visited Zeeco in March, they told 

me that commercial banks get nervous about making loans on international transactions, and that unless you are investment-grade, the commercial sector would not 

extend credit without a guarantee. Zeeco is a great example of where EXIM Bank 

has been able to simultaneously fill the gap and level the playing field. 

Companies face a variety of challenges in competing for sales. The U.S. Government should be there to break down barriers wherever we can, not to put up more 

road blocks. We know that export-backed jobs pay up to 18 percent more on average 

than other jobs and we also know that exports have accounted for nearly one-third 

of our total economic growth over the past 5 years. Right now, U.S. exports are at 

record levels, representing over 13 percent of our GDP. But I think we can do better, 

which is why the President is trying to open more markets for American goods with 

bipartisan free trade agreements, and why EXIM continues to work with the private 

sector to fill in commercial financing gaps in order to encourage more U.S. exports. 

Rising competition and an ever-globalizing world have made EXIM Bank more 

vital than ever for reducing the risks faced by American exporters so that they can 

unleash opportunity in the form of new jobs. I look forward to continuing to work 

with you on empowering your constituents to export, grow, and hire more American 

workers.


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1 Examining the Export-Import Bank’s Reauthorization Request and the Government’s Role 

in Export Financing: Hearing before the Committee on Financial Services, U.S. House of Representatives (June 3, 2015) (Testimony of Mike McCarthy). 

RESPONSE TO WRITTEN QUESTIONS OF CHAIRMAN SHELBY 

FROM FRED P. HOCHBERG 

Technical Defaults 

Q.1. In 2012, EXIM’s Inspector General reported that EXIM’s limited definition of default may result in an understatement of the 

Bank’s historical default experience. Specifically, the IG noted that 

EXIM uses a definition of default that does not include technical 

defaults-that is, defaults that reflect a client’s failure to comply 

with specific conditions in the loan agreement other than requirements for repayment.

• Does EXIM determine the prevalence of technical defaults in 

its portfolio?

• To what extent do technical defaults provide an early warning 

of future credit defaults?

• Do you think it is a problem that EXIM may not properly estimate historical defaults?

• How can you assess future performance if you do not have a 

good sense of historical defaults?

• What would EXIM’s default rate be if it included technical defaults?

A.1. The Bank’s default rate was established by Congress in Public 

Law 112–122, the Export-Import Bank Reauthorization Act of 

2012. Section 6 of the Reauthorization Act mandates the Bank to 

calculate the ‘‘default on a payment obligation. by dividing the total 

amount of the required payments that are overdue by the total 

amount of the financing involved.’’ The Bank is fully compliant 

with reporting defaults as defined and required by Congress. During his recent testimony to the U.S. Congress, the Acting Inspector 

General for the Export-Import Bank noted on the default rate that 

‘‘Congress provided the formula to how the Bank calculates that. 

They have reported that. They have been transparent about that 

formula.’’1

This default rate is very similar to that of the private sector. The 

Federal Reserve reports the charge-off rates from banks, using data 

from the Federal Financial Institutions Examination Council. The 

definition of charge-offs is similar to mandated default rate. 

Charge-offs, which are the value of loans removed from the books 

and charged against loss reserves, are measured net of recoveries 

as a percentage of average loans and annualized. 

Technical defaults are not predictors of future credit defaults. 

Simple reporting requirements such as a 1-day delay in providing 

financial statements would be considered a technical default but 


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2GAO–13–303, http://www.gao.gov/assets/660/653373.pdf. 3GAO–15–557, http://www.gao.gov/assets/670/669646.pdf.

has no bearing on future payment defaults. EXIM Bank risk rates 

all transactions above $2 million on an annual basis. This risk rating is the appropriate predictor of future defaults. 

The Bank properly estimates historical defaults. Every year, the 

Office of Inspector General (OIG) audits the Bank’s financial statements through an external auditor, Deloitte and Touche. As part 

of their audit, the external auditors analyze and review the Bank’s 

historical defaults which are used as the basis for future loss estimation or future performance. The Bank has received unqualified 

or ‘‘clean’’ opinions going back 25 years. The Bank was also recently audited by the Government Accountability Office (GAO). In 

their audit, GAO noted that the Bank includes ‘‘default and loss 

history’’ to develop the loss estimation model.2

Lack of Historical Data, Vintage Analysis 

Q.2. In 2013, the Government Accountability Office recommended 

that EXIM retain point-in-time, historical data on credit performance to conduct vintage analysis comparing the performance of 

newer and older business. This technique can help evaluate the 

credit quality of recent business by comparing the early performance of these cohorts of financing with the early performance of 

older financing cohorts. It can provide early warning of potential 

performance problems in newer business.

• For what product types has EXIM conducted vintage analysis?

• What has EXIM’s analysis shown about the early performance 

of its recent business compared to older business at comparable points in time?

• Has EXIM incorporated this data into its risk management 

practices?

A.2. The Export-Import Bank of the United States has retained, beginning in 2013, point-in-time historical data for all major product 

types. In fact, GAO recently issued a report examining the status 

of this recommendation which stated, ‘‘EXIM began retaining such 

data in 2013. We therefore consider this recommendation implemented and closed.’’3

This technique has helped EXIM Bank evaluate the credit quality of recent business by comparing the early performance of these 

cohorts of financing with the early performance of older financing 

cohorts. Generally, recent business has performed better than older 

financing at comparable points in time. Finally, the Bank has incorporated this data into its risk management practices. 

Stress-Testing 

Q.3. In 2013, GAO recommended that EXIM report its stress test 

scenarios and results to Congress. Although EXIM subsequently 

began providing stress test information in its quarterly default rate 

reports, the reports do not analyze the adequacy of EXIM’s loss reserves under the stress scenarios or how the concentration of 

EXIM’s portfolio in certain industries and regions could affect 

losses.


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4GAO–15–557, http://www.gao.gov/assets/670/669646.pdf.

• Without this data, how can EXIM be sure that it has sufficient 

loss reserves?

• Under what stress scenarios are EXIM’s loss reserves adequate 

to cover the corresponding losses?

• What progress has EXIM made, since 2013, to improve its 

stress testing analyses by examining the impact of correlated 

risks within the industries and regions where EXIM’s portfolio 

is concentrated?

A.3. As you mention, EXIM Bank has reported stress testing scenarios and results to Congress. In fact, GAO issued a report examining the status of this recommendation which stated ‘‘EXIM began 

reporting its scenarios and results in quarterly reports to Congress 

on default rates, beginning with the report for the fourth quarter 

of 2013. In that report, EXIM described the stress test scenarios 

and provided some information about results. Hence, we consider 

this recommendation implemented and closed.’’4

EXIM Bank compares the adequacy of loss reserves under the 

stress scenarios and has reviewed how the concentration of the 

Bank’s aircraft portfolio could affect losses. The Bank has appropriate reserves to cover all expected losses. Every year, the OIG audits the Bank’s financial statements through the external auditor 

Deloitte and Touche. As part of their audit, the external auditors 

analyze and review the Bank’s historical defaults which are used 

as the basis for reserves for expected losses. The Bank has received 

unqualified or ‘‘clean’’ opinions going back 25 years. 

Risk and Soft Portfolio Targets 

Q.4. The Inspector General has recommended that EXIM set ‘‘soft 

portfolio concentration limits’’ for EXIM-informal thresholds for 

total exposure in industry, region, or risk ratings to use as internal 

guidance.

• What evaluation has EXIM completed with respect to this approach?

• What decisions has EXIM made about using such limits to 

help the bank manage its risk?

• If such limits are not being implemented, why not?

A.4. EXIM Bank has begun building a portfolio risk dashboard that 

has soft portfolio limits within it by industry, region, and risk ratings. This dashboard has been presented in its test phase to the 

Bank’s Enterprise Risk Committee (ERC). The ERC approved the 

implementation of soft portfolio concentration limits by the 4th 

quarter of fiscal year 2015. However, due to a lapse in EXIM’s authority, as of July 1, 2015, the Bank is unable to process applications or engage in new business or other prohibited activities. Work 

on the impact of new authorizations on soft portfolio concentration 

limits has ceased. Currently, the Bank is building functionality into 

the dashboard to ascertain the impact of macroeconomic conditions 

on the Bank’s existing portfolio. 


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Transparency 

Q.5. The National Review reports that around July of last year, the 

Bank decided to take down Bank data, listing company and lender 

names from ‘‘Data-dot-gov for more than 7 months. When information reappeared, it was abridged and missing fields like ‘‘primary 

buyer’’ and peppered with references to ‘‘unknown,’’ ‘‘various,’’ and 

the like. The National Review reports that the only information on 

the site was business names, and not proprietary information.

• Why did the EXIM first restrict and then ‘‘scrub’’ its publicly 

available data?

• Wouldn’t the information be useful to inform the public, and 

Congress, for that matter, where EXIM’s taxpayer-backed billions are being spent, particularly what foreign countries?

• The National Review suggests that the Chairman made the decision to remove and scrub the data, is that true?

A.5. In response to exporter feedback, in early 2015, EXIM undertook a review of the published datasets. The Bank’s Office of General Counsel received customer feedback on the Bank’s data as presented to the public. Based on the feedback provided, the Bank’s 

Office of General Counsel, the Office of the Chief Financial Officer, 

and the Office of the Chief Information Officer recommended to the 

Bank’s Chief Risk Officer that the datasets be temporarily taken 

down and revised to protect exporters’ business confidential information. After the action was taken, the Chairman was made aware 

of the feedback and remedy to temporarily remove the datasets 

from the public site in order to clarify and revise the data. The 

Chairman directed Bank management and staff to quickly address 

any issues and return the data to the public electronic forum. The 

datasets were removed from the Bank’s Web site for 15 days. 

The Bank is committed to transparency and the datasets continue to provide information useful to inform the public and Congress on the Bank’s transactions. In fact, on May 27, 2015, at the 

request of the House Oversight and Government Reform Committee (HOGR) majority staff, the Bank’s Senior Vice President of 

Congressional Affairs, Chief Information Officer, Chief Financial 

Officer, and Deputy Chief Financial Officer briefed the majority 

staff on the datasets as revised and explained the data provided 

and clarifications made. 

To eliminate duplicative fields, the Bank consolidated two 

datasets into one dataset that includes all authorization supported 

by the Bank. The single consolidated dataset provides easier and 

more user friendly access to Bank information. The Bank removed 

certain business confidential fields in the dataset based on feedback from customers. The following fields were removed from the 

dataset: primary supplier, primary buyer, first claim payment date, 

claims paid amount, Dun and Bradstreet (D&B) number, and applicant contact information (which included various fields such as 

name, street, city, etc.). The removal of these fields related only to 

the Bank’s voluntary and proactive release of information in the 

electronic open formats. 

The public dataset continues to include the exporter and primary 

source of repayment for all transactions. For example, for medium 

and long term transactions, the same information was presented in 


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both the supplier and buyer fields (i.e., the ‘‘exporter ‘‘ is also the 

‘‘primary supplier’’, and the ‘‘primary buyer’’ is also the ‘‘primary 

source of repayment’’). The dataset includes multiple participants 

for each authorization (i.e., applicant, lender, exporter, borrower, 

and primary source of repayment). These participants can be and 

usually are different entities within the same authorization. As 

such, claim information fields and D&B number were removed 

from our proactive disclosure format as this information, when associated incorrectly to participants in a specific authorization, 

would be misleading. 

The Bank added new fields in the dataset to provide more information to the public. The following data fields were added to the 

dataset: ‘‘Primary Export Product NAICS/SOC Code’’ (Column 14), 

‘‘Primary Exporter City’’ (Column 20), ‘‘Primary Exporter State Abbreviation’’ (column 21), and ‘‘Primary Exporter State Name’’ (Column 22). 

In addition, the datasets, as they originally appeared, contained 

designations of ‘‘N/A’’ and ‘‘Various’’, however, the revision of the 

datasets is eliminating or clarifying such designations. 

In most cases, the ‘‘N/A’’ denotes ‘‘not applicable’’ as certain categories do not apply to all transaction types. In some instances, the 

‘‘lender’’ field includes authorizations where the lender is identified 

as ‘‘N/A.’’ The primary reason for this designation is that these authorizations are insurance transactions where there is no lender involved. In other cases, the ‘‘exporter’’ field includes various records 

where the exporter is identified as ‘‘N/A’’. The primary reason for 

this designation relates to commercial bank-held insurance policies 

which involve multiple buyers and exporters that are not specifically identified at the time the policy is authorized. At the time of 

shipment, the precise names of the exporter and buyers are then 

reported to the Bank. To improve clarity of data, the Bank revised 

the ‘‘N/A’’ value to the ‘‘exporter’’ field to ‘‘Multiple-Exporters’’ for 

these transactions. Last, a smaller sunset of authorizations where 

the exporter name is identified as ‘‘N/A’’ related to older insurance 

transactions that migrated from a legacy system and the information is no longer available. The information is over 9-years old and 

dates from a 2006 data conversion and is a small subset of insurance transactions. 

The ‘‘country’’ and ‘‘borrower’’ fields include authorizations listed 

as ‘‘Various-Insurance’’. These authorizations are for the multibuyer insurance program where each transaction can and generally 

does include more than one buyer. As such, the ‘‘country’’ and ‘‘borrower’’ field include the descriptor ‘‘Various-Insurance’’. To better 

communicate this information, the Bank revised the field name to 

‘‘Multiple-Countries’’ and ‘‘Multiple-Borrowers’’ to better reflect 

these fields. 

Attached for your reference is the list and description of all fields 

reported in the electronic open formats.


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1 EXIM, 2014 Competitiveness Report, http://www.exim.gov/sites/default/files/reports/

EXIM%202014CompetReportl0611.pdf. 2 EXIM, 2014 Competitiveness Report, http://www.exim.gov/sites/default/files/reports/

EXIM%202014CompetReportl0611.pdf.

RESPONSE TO WRITTEN QUESTIONS OF SENATOR MENENDEZ 

FROM FRED P. HOCHBERG 

EXIM and Free Trade Agreements 

Q.1. As we all know, TPP negotiations are nearly complete and a 

final agreement for T–TIP is expected in the next year or so. Given 

that the U.S. is apparently about to enter into the two largest free 

trade agreements it has ever joined, and that other countries continue to expand their use of export credits, whatever you make of 

those agreements themselves, now is certainly not the time to unilaterally give up this important economic tool. 

President Hochberg, how do you view the relationship of EXIM 

to our trade agenda?

A.1. EXIM Bank is, and always has been, a support player or tool 

in America’s larger trade policy agenda. For example, when that 

agenda tilts against an issue or country, such as trade sanctions, 

EXIM follows that direction in terms of the availability of official 

export credit. When the trade agenda tilts in support of some issue 

or country, such as trade agreements, EXIM supports export sales 

under those agreements. In effect, EXIM is used as an implementing tool of a broader U.S. Government trade policy. Trade 

agreements open doors for exporters and EXIM Bank helps them 

close deals. Without the tools EXIM provides, many American businesses would be unable to compete on a level playing field with foreign firms, access the working capital needed to take on and fulfill 

sales, and mitigate the risks of the international marketplace. 

EXIM support improves the competitiveness, risk management, 

and liquidity of American businesses. The absence of such support 

would mean missed opportunities, lost sales, and, ultimately, fewer 

jobs. 

International Negotiations to Reduce Export Credits 

Q.2. Some of the witnesses at the June 2nd hearing argued that 

the fact that 60 other countries maintain export credit agencies 

should not keep us from shuttering (shutting down) the EXIM 

Bank. And I agree that in a perfect world, maybe it would be best 

if no country provided government-backed export financing. 

But if Congress were to close the EXIM Bank today, what options would the U.S. have to convince countries like China, Brazil, 

and Russia to refrain from using export credits to undercut U.S. 

manufacturers?

A.2. In today’s world of long-term export financing, the arguments 

available to convince major official export credit providers are very 

limited. In recent years, commercial banks have indicated that the 

booking and holding of long-term foreign assets is no longer a core 

part of their business model.1 In fact, almost all major project 

financings outside of the Organisation for Economic Co-operation 

and Development (OECD) have an important Export Credit Agency 

(ECA) component.2 Therefore, foreign governments do not have a 


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3http://www.reuters.com/article/2015/06/24/usa-congress-exim-idUSL1N0Z80W420150624.

4http://www.business-standard.com/article/finance/q-a-with-exim-bank-cmd-with-us-eximbank-closing-we-would-have-more-market-115071400885l1.html. 5Financial Times, Demise of the US Eximbank would leave the field to China, June 22, 2015, 

http://blogs.ft.com/beyond-brics/2015/06/22/demise-of-the-us-ex-im-bank-would-leave-the-fieldto-china/. 6 EXIM, 2014 Competitiveness Report, http://www.exim.gov/sites/default/files/reports/

EXIM%202014CompetReportl0611.pdf.

strong incentive to stop providing export financing through ECAs. 

Moreover, foreign governments often view export financing as a 

vital component in supporting domestic jobs and exports, whereas 

EXIM Bank is largely used to fill in the gap and level the playing 

field. 

Unilaterally disarming means that other countries around the 

globe have a financing tool available to them that exporters in the 

United States would no longer have available to them. As a senior 

official from China’s Export-Import Bank told reporters recently, 

EXIM going away would be ‘‘a good thing’’ for China.3 The ExportImport Bank of India’s chairman also recently commented that ‘‘we 

think that the role of ECAs (export credit agencies) in countries 

like India, ones in Asia is immense. In fact, seeing our pattern, 

many other countries are opening up Exim Banks. With US Exim 

Bank closing down, we would now have more market, because, Indian products were competed by U.S. products. Now that competition will go away’’.4

EXIM has worked with a range of manufacturers including 

small, medium, and large, but the majority of our customers are 

small businesses. Of the 3,700 authorizations EXIM completed in 

2014, more than 3,300—or nearly 90 percent—directly served U.S. 

small business. Last year, EXIM supported 164,000 U.S. jobs and 

over the past 6 years, more than 1.3 million American jobs. At the 

same time, through the fees and interest we charge our customers, 

the Bank also generated a surplus of $675 million profit for American taxpayers in 2014, above and beyond all costs. 

Current headlines have argued that the lapse of EXIM will 

‘‘leave the field to China’’ as China has ‘‘lent extensively to Africa 

and has set up a family of joint funds on that continent, in the 

Middle East, and in Europe.’’5 China’s medium- and long-term export credit financing grew by 40 percent last year, from $40.6 billion in 2013 to $58.0 billion in 2014.6 In addition, Japan, Korea, 

Russia, Germany, France, United Kingdom, Brazil, and others all 

indicated that they expect to accelerate their financial backing for 

their exporters. 

We are very concerned about the impact that the lapse in authorization is having on U.S. exporters and the ability of those exporters to receive the financing they need to export goods. 

RESPONSE TO WRITTEN QUESTIONS OF SENATOR COTTON 

FROM FRED P. HOCHBERG 

Q.1. In response to my question about the percentage of EXIM 

Bank’s business that is in direct response to foreign government 

export subsidies, you stated that it was approximately ‘‘two-thirds’’ 

of the Bank’s portfolio, which is substantially different than the 

32.7 percent calculated from your 2013 Annual Report and offered 


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1 Export-Import Bank of the United States Annual Report 2014. http://www.exim.gov/sites/

default/files/reports/annual/EXIM-2014-AR.pdf. 2 Export-Import Bank of the United States Report to the U.S. Congress on Global Export Credit Competition, June 2015. http://www.exim.gov/sites/default/files/reports/EXIM%202014

CompetReportl0611.pdf. 3 Export-Import Bank of the United States Annual Report 2014, p. 45–49. http://

www.exim.gov/sites/default/files/reports/annual/EXIM-2014-AR.pdf. 4 Export-Import Bank of the United States Report to the U.S. Congress on Global Export 

Credit Competition, June 2015, p.91. http://www.exim.gov/sites/default/files/reports/

EXIM%202014CompetReportl0611.pdf. 5 Report to the U.S. Congress on the Export-Import Bank of the United States and Global Export Credit Competition, June 2014, p.113. http://www.exim.gov/sites/default/files/

newsreleases/Eximbank-Bank-2013-Competitiveness-Report-to-Congress-Complete.pdf. 6 Report to the U.S. Congress on Export Credit Competition and the Export-Import Bank of 

the United States, June 2013, p. 149. http://www.exim.gov/sites/default/files/newsreleases/

US-Eximbank-Bank-2012-Competitiveness-Report-to-Congress-Complete.pdf.

by an expert witness in the Senate Banking Committee’s hearing 

on June 2. 

What is the basis for your ‘‘two-thirds’’ figure? For additional reference, your institution’s 2013 Competiveness Report also presented data in line with the estimate of one-third (see Figure 73, 

page 113). 

Are both of these data sources inaccurate or did you misstate the 

extent to which EXIM Bank countervails foreign subsidies?

A.1. Thank you for the opportunity to clarify the potential foreign 

competition data found in the EXIM Bank’s Annual Report 1 and 

its Report to the U.S. Congress on Global Export Credit Competition 2 (‘‘Competitiveness Report’’). 

Congress requires EXIM to include in the annual Competitiveness Report a breakdown of the purposes for EXIM support for 

transactions. The purposes of EXIM support for transactions are to 

fill the financing gap when private sector financing is limited or 

unwilling to take risks, or to counter potential foreign ECA competition. 

The two-thirds figure cited at the June 4 Senate Banking Committee hearing referred to the percentage of FY2014 EXIM longterm guarantee authorizations ‘‘to meet competition from a foreign, 

officially sponsored, export credit agency.’’3 For the overall EXIM 

portfolio, 46 percent of EXIM’s authorizations were to meet foreign 

competition 4 in 2014, 38 percent in 2013,5 and 34 percent in 2012.6

RESPONSE TO WRITTEN QUESTIONS OF SENATOR SASSE 

FROM FRED P. HOCHBERG 

Q.1. The Export-Import Bank offers a number of different products, 

including loan guarantees, working capital guarantees, and direct 

loans. Do you have evidence about whether these products are 

equally valuable to companies, or are certain products more useful 

than others? For example, can you quantify how frequently companies use products? Have you conducted a survey of companies to 

see which products they believe are the most useful?

A.1. EXIM Bank creates programs that respond to a wide array of 

specific congressional mandates including providing competitive export credit financing vis-a-vis officially supported export credits 

provided by foreign governments and complementing, not competing with, private sources of financing; Each of the Bank’s programs plays an important role in fulfilling the objectives set forth 

in the Bank’s charter. Given the broad scope of these mandates, 


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1GAO–13–303, http://www.gao.gov/assets/660/653373.pdf.

the Bank has established programs that cover a cross section of 

economic sectors, markets, and exporter size/profiles that address 

gaps in the availability of export credits arising from either foreign 

competition or lack of commercial financing. 

As a counter-cyclical institution, the utilization of EXIM Bank 

and its financial products is entirely dependent on the activity level 

in the commercial market. The Bank’s programs and activity levels 

by program are summarized in the attached chart which indicates 

EXIM Bank authorizes more Insurance and Working Capital transactions than Loan Guarantees or Direct Loans. The Insurance and 

Working Capital programs are used by American companies, predominantly small businesses, to finance their exports of goods, 

while the Guarantee and Direct Loan programs are used by foreign 

buyers to finance their purchases of U.S. goods and services. 

EXIM Bank routinely seeks the feedback of its customers to improve. Since 2012, EXIM has employed a Vice President of Customer Experience whose work is dedicated to soliciting and assessing feedback on EXIM’s products in the context of our customers’ 

business, exports, and employment base. This division conducts an 

annual, customer experience survey, which provides customers 

with the ability to share their thoughts via surveys, interviews and 

roundtables. EXIM then takes the information to bring attention to 

issues, identify solutions, and prioritize action steps. This information is posted on EXIM.gov.

Q.2. The Export-Import Bank purports to create a ‘‘surplus’’ for 

taxpayers, including in 2014.

a. Setting aside the debate over the Bank’s accounting and profits, do all of the Bank’s main products have approximately the 

same fiscal record? Or does one program that generates a 

greater ‘‘surplus’’ make up for a program with a weaker track 

record?

b. Does each program generate a surplus, under the Bank’s accounting assumptions?

A.2. EXIM Bank has sent a net $6.9 billion to the U.S. Treasury 

since 1992. This net amount sent to the U.S. Treasury is after paying for all expenses, including prudent loan loss reserves. In fact, 

the Government Accountability Office (GAO) issued a report which 

determined that ‘‘EXIM’s figures for appropriations received and 

amounts sent to Treasury were reasonable based on our analysis 

of EXIM appropriations acts, budget appendixes, and financial 

statements.’’1

The Bank charges fees for its’ financing support which are used 

to set aside prudent loan loss reserves. Fees in excess of these loan 

loss reserves are classified as offsetting collections which are used 

to pay for the Bank’ administrative expenses. After paying administrative expenses, the remaining balances are sent to the U.S. 

Treasury at the end of each fiscal year. Typically, large and longterm transactions create the largest surpluses while small-term 

transactions are on a break-even basis. The majority of offsetting 

collections earned by the Bank are from long-term transactions. 

Generally, the Bank’s medium-term, short-term, and working capVerDate 0ct 09 2002 10:06 Jul 29, 2016 Jkt 000000 PO 00000 Frm 00072 Fmt 6601 Sfmt 6601 S:\DOCS\97305.TXT SHERYL

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ital programs—which primarily benefit small businesses—cover all 

loan loss reserve requirements but do not generate offsetting collections.

Q.3. The Bank has a number of lending ‘‘mandates,’’ including that 

it must make 10 percent of its authority available to renewable energy, 20 percent available to small business lending, and that it 

must also promote activity in Sub-Saharan Africa.

a. Can you provide the default rates for the transactions that 

purport to meet the ‘‘mandates’’ and compare that to the default rate for the nonmandated transactions?

b. Is there a higher default rate amongst these products, compared to the average product?

A.3. EXIM Bank has three congressional mandates for small business, sub-Saharan Africa; and environmentally beneficial transactions. The Bank takes very seriously these Congressional mandates while ensuring a reasonable assurance of repayment to protect the U.S. taxpayer. The Bank also reports defaults every 90 

days to the House Financial Services Committee and Senate Banking Committee. These default rate reports include a section on Defaults Rate: by Mandate. This section is located on page 8 of the 

Bank’s June 2015 Default Rate report which is attached. 

These mandates account for over 11 percent of the total amount 

of EXIM financing and all mandates have experienced a default 

rate below the 2 percent threshold established by Congress for the 

overall portfolio. As of June 2015, the Bank’s overall default rate 

was 0.243 percent, small business default rate was 0.484 percent, 

sub-Saharan Africa default rate was 0.119 percent, and environmentally beneficial was 1.021 percent.

Q.4. We’ve heard how the Export-Import Bank ‘‘supports’’ jobs and 

exports. For example, according to the Bank’s analysis, in 2014 the 

Bank ‘‘supported’’ 164,000 jobs and $27.4 billion in exports. Notably, there’s a difference between ‘‘supporting’’ jobs and ‘‘creating’’ 

jobs.

a. What percentage of these jobs and exports would disappear 

without the Bank, and why?

b. What percentage of this economic activity would exist, but in 

a different sector?

c. Has the Export-Import Bank conducted an in-depth study of 

these issues? If not, can the Bank commit to studying this 

question in depth?

A.4. EXIM Bank’s jobs estimate methodology follows the standard 

governmentwide jobs calculation methodology designated by the 

Trade Promotion Coordinating Committee, which uses employment 

data computed by the Bureau of Labor Statistics (BLS) to calculate 

the number of jobs associated with EXIM supported exports of 

goods and services. 

The Bank uses the latest available domestic employment requirements table (ERT) as computed by the BLS to calculate the number of jobs associated with EXIM supported goods and services. The 

ERT quantifies the number of direct and indirect production related jobs associated with a million dollars of final demand for 196 


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detailed industries. The ERT is derived from a set of data showing 

the relationship between industries, known as input-output tables. 

These tables are based on historical relationships between industry 

inputs (e.g., labor) and outputs (e.g., goods for consumption). 

For jobs estimates based on FY2014 authorizations, EXIM Bank supports a baseline average of 6,190 jobs per $1 billion of U.S. exports. This average is weighted, however, based the specific exports 

the Bank finances and on each industry’s relative jobs per $1 billion average at time of calculation. 

In 2014, EXIM approved over 3,700 authorizations with a total estimated export value of nearly $27.5 billion. This support 

equipped U.S. businesses to create or sustain approximately 

164,000 export-related U.S. jobs based on the above criteria. 

The basic judgments EXIM makes on every case are that the 

transaction is creditworthy to our standards, that the activity fits 

our mandates, and that there is a reasonable risk the transaction 

will not go forward without EXIM support. EXIM has been researching this issue for decades because the answers are central to 

the long-running question as to the net value added by the Bank, 

particularly when EXIM activity carried a budget cost. However, 

because the determinants are so transaction/sector/company-specific, the best examples are of sales EXIM denied in late stages of 

=transactions. In cases where transactions have been denied late in 

the process, evidence shows that most of the foreign sales can and 

do go to companies from other countries. More importantly, the 

‘‘chilling’’ effect of the lack of availability for future EXIM support 

of American exporters dramatically contributes to probable job 

losses. 

Without EXIM support, U.S. labor and capital resources may not 

simply shift to other sectors. As with all individual sales, the 

amount of efficient shifting of U.S. resources to other production 

depends greatly on the level of aggregate demand in the overall 

economy. Furthermore, any shift of resources may be to a less efficient use. Given that EXIM financing ensures that a transaction 

stimulated by market factors such as price and quality is not lost 

due to nonmarket influences such as foreign ECA competition, 

there is a real chance that the associated resources would go to a 

second or third-best productivity use, particularly at a time of less 

than perfect aggregate demand.


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BANKI-41578DSA with DISTILLER97305027.eps
81


BANKI-41578DSA with DISTILLER97305028.eps
82


BANKI-41578DSA with DISTILLER97305029.eps
83


BANKI-41578DSA with DISTILLER97305030.eps
84


BANKI-41578DSA with DISTILLER97305031.eps
85


BANKI-41578DSA with DISTILLER97305032.eps
86


BANKI-41578DSA with DISTILLER97305033.eps
87


BANKI-41578DSA with DISTILLER97305034.eps
88


BANKI-41578DSA with DISTILLER97305035.eps
89


BANKI-41578DSA with DISTILLER97305036.eps
90


BANKI-41578DSA with DISTILLER97305037.eps
91


BANKI-41578DSA with DISTILLER97305038.eps
92


BANKI-41578DSA with DISTILLER97305039.eps
93

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD


BANKI-41578DSA with DISTILLER97305040.eps
94


BANKI-41578DSA with DISTILLER97305041.eps
95


BANKI-41578DSA with DISTILLER97305042.eps
96


BANKI-41578DSA with DISTILLER97305043.eps
97


BANKI-41578DSA with DISTILLER97305044.eps
98


BANKI-41578DSA with DISTILLER97305045.eps