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[Senate Hearing 113-23]
[From the U.S. Government Publishing Office]

                                                         S. Hrg. 113-23

 
                     NOMINATION OF FRED P. HOCHBERG

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                                   ON

  NOMINATION OF FRED P. HOCHBERG, OF NEW YORK, TO BE PRESIDENT OF THE 
                EXPORT-IMPORT BANK OF THE UNITED STATES

                               __________

                              MAY 7, 2013

                               __________

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

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

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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                  TIM JOHNSON, South Dakota, Chairman

JACK REED, Rhode Island              MIKE CRAPO, Idaho
CHARLES E. SCHUMER, New York         RICHARD C. SHELBY, Alabama
ROBERT MENENDEZ, New Jersey          BOB CORKER, Tennessee
SHERROD BROWN, Ohio                  DAVID VITTER, Louisiana
JON TESTER, Montana                  MIKE JOHANNS, Nebraska
MARK R. WARNER, Virginia             PATRICK J. TOOMEY, Pennsylvania
JEFF MERKLEY, Oregon                 MARK KIRK, Illinois
KAY HAGAN, North Carolina            JERRY MORAN, Kansas
JOE MANCHIN III, West Virginia       TOM COBURN, Oklahoma
ELIZABETH WARREN, Massachusetts      DEAN HELLER, Nevada
HEIDI HEITKAMP, North Dakota

                       Charles Yi, Staff Director

                Gregg Richard, Republican Staff Director

                  Laura Swanson, Deputy Staff Director

                           Pat Grant, Counsel

                   Glen Sears, Deputy Policy Director

              Brian Filipowich, Professional Staff Member

                    Riker Vermilye, Staff Assistant

                  Greg Dean, Republican Chief Counsel

          John O'Hara, Republican Senior Investigative Counsel

                       Dawn Ratliff, Chief Clerk

                      Kelly Wismer, Hearing Clerk

                      Shelvin Simmons, IT Director

                          Jim Crowell, Editor

                                  (ii)

                            C O N T E N T S

                              ----------                              

                          TUESDAY, MAY 7, 2013

                                                                   Page

Opening statement of Chairman Johnson............................     1

Opening statements, comments, or prepared statements of:
    Senator Crapo................................................     2
    Senator Brown................................................     2
    Senator Warner...............................................     3
    Senator Warren...............................................     3

                               WITNESSES

Kristen E. Gillibrand, U.S. Senator from New York................     3
Charles E. Schumer, U.S. Senator from New York...................     4

                                NOMINEE

Fred P. Hochberg, of New York, to be President of the Export-
  Import Bank of the United States...............................     6
    Prepared statement...........................................    16
    Biographical sketch of nominee...............................    18
    Responses to written questions of:
        Senator Crapo............................................    19
        Senator Menendez.........................................    26
        Senator Vitter...........................................    34
        Senator Johanns..........................................    47
        Senator Toomey...........................................    48
        Senator Coburn...........................................    50

              Additional Material Supplied for the Record

Letter submitted by R. Thomas Buffenbarger, President, 
  International Association of Machinists and Aerospace Workers..    58
Letter submitted by various associations in support of Mr. 
  Hochberg's nomination..........................................    59

  NOMINATION OF FRED P. HOCHBERG, OF NEW YORK, TO BE PRESIDENT OF THE 
                EXPORT-IMPORT BANK OF THE UNITED STATES

                              ----------                              

                          TUESDAY, MAY 7, 2013

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 10:24 a.m., in room SD-538, Dirksen 
Senate Office Building, Hon. Tim Johnson, Chairman of the 
Committee, presiding.

           OPENING STATEMENT OF CHAIRMAN TIM JOHNSON

    Chairman Johnson. Good morning. I call this hearing to 
order.
    Thanks to all of you for joining us here today, and special 
thanks to our witness and the assembled Members who are with 
us.
    Today, we consider the nomination of Fred Hochberg to be 
the President and Chairman of the Export-Import Bank of the 
United States. President Obama first nominated Mr. Hochberg to 
be President and Chairman of the Export-Import Bank on April 
20, 2009. The Senate confirmed his nomination by unanimous 
consent on May 14, 2009. Mr. Hochberg was re-nominated by 
President Obama on March 21, 2013. I am hopeful that the 
Committee and the Senate will once again move as expeditiously.
    When he took over the Bank, the U.S. was still in the midst 
of the worst financial crisis since the Great Depression. Under 
his leadership, the Bank was able to expand financing for 
American exporters when private financing was difficult, if not 
impossible, to acquire. During President Hochberg's tenure, the 
Bank's authorizations have increased substantially to a record 
$35.8 billion in export financing last year. This financing is 
important for American business, both small and large. I 
believe his leadership at the Bank is crucial as we continue on 
the path to economic recovery.
    His nomination is supported by both labor and business, 
including the Business Roundtable, the Chamber of Commerce, and 
the National Association of Manufacturers, and I would like to 
submit these organizations' letters of support for the record.
    In 2012, the Export-Import Bank helped to support an 
estimated 255,000 American jobs at 3,400 companies. In 
addition, 85 percent of the Export-Import Bank's transactions 
directly benefited small business.
    Of equal importance, since 2008, the Export-Import Bank has 
been able to send nearly $1.6 billion in profits to the U.S. 
Treasury. As a self-sustaining independent Federal agency, the 
Export-Import Bank charges fees to cover all of its expenses, 
creating no cost to the U.S. taxpayers.
    Just last year, Congress, with bipartisan support, extended 
the Export-Import Bank's charter through September 30, 2014. 
Before we once again consider reauthorization, it is imperative 
that we ensure that the Bank's leadership is in place. If we do 
not once again confirm Mr. Hochberg before July 20, we run the 
risk of leaving the Bank without a quorum to act on many of the 
transactions before it, which will hurt American workers and 
exporters.
    I look forward to hearing from President Hochberg today.
    I now turn to Senator Crapo for any opening remarks he may 
have for the nominee. Senator Crapo.

                STATEMENT OF SENATOR MIKE CRAPO

    Senator Crapo. Thank you very much, Mr. Chairman. I 
appreciate you holding this hearing.
    Mr. Hochberg is no stranger to confirmation hearings. He 
has previously been confirmed as Deputy Director of the Small 
Business Administration in 1998 and then as Chairman and 
President of the Export-Import Bank again in 2009. And this 
Committee has had ample opportunity to get to know Mr. Hochberg 
in this latter role, as he has appeared before us on multiple 
occasions over the last 4 years.
    Last year's Eximbank reauthorization granted both new 
opportunities and new challenges to the Bank's mission and I 
look forward to hearing from Mr. Hochberg about how he intends 
to respond to some of these challenges, specifically, what is 
currently the most substantial obstacle to private sector 
financing that the Eximbank is working to overcome? And what 
steps will Mr. Hochberg take to mitigate the tension between 
the Bank's support for export transactions and the adverse 
impact to domestic companies? How will Mr. Hochberg work to 
address the perception that the Bank is offering so-called 
corporate welfare in the form of subsidies for big business, 
and how will he facilitate the financing of small business 
exports? And, finally, what steps will the Export-Import Bank 
take to protect taxpayers by prudently managing the risk of the 
Ex-Im's portfolio, which contains a large volume of recent 
transactions?
    I look forward to hearing Mr. Hochberg's testimony and his 
answers to these questions, and Mr. Hochberg, I thank you for 
your service at the Bank and welcome you here today.
    Thank you, Mr. Chairman.
    Chairman Johnson. Thank you, Senator Crapo.
    Does anyone else wish to make a short opening statement 
before we turn to the nominee for his testimony? Senator Brown.

               STATEMENT OF SENATOR SHERROD BROWN

    Senator Brown. Thank you, Mr. Chairman.
    I only want to add my good words to the comments of the 
Chair and Senator Crapo about Mr. Hochberg and his leadership. 
If done right, our Nation's trade policies can create jobs. The 
work that Mr. Hochberg has done at the Export-Import Bank has 
been central to achieving this goal. His trips to Ohio, to 
Perrysburg to First Solar, to Columbus, to Cleveland, to 
Cincinnati, I think, have been particularly helpful.
    I know the President's goal of doubling exports, what is 
central to that goal is the work that we do with small 
business. Large businesses know how to do it, know how to 
generally navigate some of the obstacles. Smaller businesses 
need that partnership with the Eximbank and SBA and the Export 
Assistance Centers and all of that, and Mr. Hochberg's Eximbank 
is a central part of that.
    So I thank him and look forward to this hearing.
    Chairman Johnson. Anybody else?
    Senator Warren. Mr. Chairman, I just----
    Chairman Johnson. Senator Warren.

             STATEMENT OF SENATOR ELIZABETH WARREN

    Senator Warren. Thank you. I just want to add, thank you 
very much, Mr. Hochberg, for your service, and thank you very 
much for your many trips to Massachusetts. It means a great 
deal to the businesses in Massachusetts, particularly our small 
businesses that are trying to get adequate funding so that they 
can be involved more vigorously in the export business. Thank 
you.
    Chairman Johnson. Senator Warner.

              STATEMENT OF SENATOR MARK R. WARNER

    Senator Warner. I would not want to offend President 
Hochberg, but I also want to make sure I can lay claim. I am 
glad to see my friend and colleague, Senator Gillibrand, is 
here to introduce Mr. Hochberg, but let the record also show he 
has got a deep and abiding connection with the Commonwealth of 
Virginia, as well, and I appreciate the time we spent together, 
Fred.
    Chairman Johnson. We will now proceed to witness 
introductions. Senators Schumer and Gillibrand will introduce 
Fred Hochberg. Senator Gillibrand.

STATEMENT OF KIRSTEN E. GILLIBRAND, U.S. SENATOR FROM THE STATE 
                          OF NEW YORK

    Senator Gillibrand. Thank you, Mr. Chairman. Thank you for 
your leadership and thank you for your dedication. Thank you to 
Ranking Member Crapo, Members of the Committee, to my 
colleague, who will be arriving shortly.
    It is an honor for me to join you today to introduce Fred 
Hochberg for a second term as the President and Chair of the 
U.S. Export-Import Bank.
    As a member of the President's Export Council myself, I 
know Fred is committed to achieving President Obama's goal of 
doubling America's exports, and I am eager to work closely with 
him in this effort.
    Fred is, without a doubt, the right choice to continue 
leading the Export-Import Bank. Under Fred's leadership, the 
Export-Import Bank is doing tremendous work to strengthen our 
economy and help businesses across the country reach new 
markets and grow our exports in an increasingly competitive 
global market. The Export-Import Bank is helping businesses of 
all sizes in our home State of New York to do just that.
    Take the Sensis Corporation in Syracuse, a leading provider 
of air traffic management solutions for both civil and defense 
industries. Sensis was in dire need of working capital when 
lenders were not offering it, putting jobs in Upstate New York 
at risk. The Export-Import Bank stepped in to give lenders the 
confidence they needed to invest in Sensis, keeping 700 jobs in 
Syracuse, and put the company on firm foundation for growth. 
Today, Sensis's North American presence is stronger than ever, 
expanding its portfolio with a range of new, innovative 
products.
    Other small businesses, like Love and Quiches on Long 
Island--small businesses are the most powerful private sector 
job creator we have. But like many small businesses, this Long 
Island bakery was struggling to get a line of credit it needed. 
Again, the Export-Import Bank stepped in with its Small 
Business Export Credit Insurance. That confidence and security 
helped take Love and Quiches from the small personal kitchen 
its founder launched it from and is now selling desserts to 
countries on the other side of the globe and opening a new 
state-of-the-art facility in Freeport, New York, supporting 
more local jobs.
    That is the vision for the Export-Import Bank that Fred 
holds, providing the confidence that businesses need to grow, 
reach new markets all over the world, while creating new, good 
paying jobs here at home. New York and all of America is just 
bursting with economic potential, whether it is groundbreaking 
research and innovation that we can translate to new businesses 
and new markets, or manufacturing new clean energy technologies 
to helping small businesses achieve their dreams.
    I am confident that with Fred's leadership, we can harness 
every ounce of our potential and make sure that this century is 
another American century leading the global economy and 
supporting new American jobs for a stronger middle class.
    Thank you, Mr. Chairman. Thank you, Mr. Ranking Member. 
Thank you, Members of the Committee.
    Chairman Johnson. Thank you, Senator Gillibrand.
    Senator Schumer.

STATEMENT OF CHARLES E. SCHUMER, U.S. SENATOR FROM THE STATE OF 
                            NEW YORK

    Senator Schumer. Mr. Chairman, first, let me thank you for 
being so accommodating and moving the time back a little bit so 
I could be here to introduce our great Export-Import Bank 
President and a good friend of mine for decades. We had a very 
important committee meeting, which Senator Warner attended, as 
well, the annual meeting of the Joint Committee on the Library, 
and that was scheduled by our House Chairman at ten o'clock, so 
I had to be there and I appreciate your accommodating me.
    I want to thank Senator Warner. What an instrumental role 
he played in that meeting and making the Joint Committee work 
so well.
    Senator Warner. Mr. Chairman----
    Chairman Johnson. Senator Warner.
    Senator Warner. Mr. Chairman, I just want to correct my 
distinguished Chair of the Rules Committee. I was actually only 
there for the Joint Committee on Printing----
    Senator Schumer. Printing.
    Senator Warner. ----not Library.
    [Laughter.]
    Senator Schumer. Right. Excuse me. He was so overwhelming 
on Printing that it washed over into how good he did on the 
Library Committee.
    [Laughter.]
    Senator Schumer. Anyway, I am honored to introduce my good 
friend, Fred Hochberg. Fred is an accomplished businessman. He 
is a public servant. He is just a fine and honorable person, 
and as I said, has been a good friend for decades.
    I am delighted to support his re-nomination to head the 
Export-Import Bank. He has had great service to our country in 
public service, in academia, and in the business world. And 
throughout, there is one hallmark. He has always dedicated 
himself to creating jobs here in America and making this 
country a better place. That is what the Export-Import Bank is 
all about. He knows how to do this, as I am sure my colleague, 
Senator Gillibrand, probably mentioned. Well, she is gone, but 
probably did mention.
    She may be going to the Joint Committee on the Library now.
    [Laughter.]
    Senator Schumer. He spent two decades of his career with 
the Lillian Vernon Corporation, founded by his mother. His mom 
was an immigrant. She fled Nazi Germany, founded the company 
with $2,000 in wedding gift money. And under Fred's leadership, 
the company was transformed from a small mail-order company to 
a wildly successful publicly traded corporation that employed 
more than 1,000 people, many in New York.
    From Lillian Vernon, Fred moved on to found and serve as 
President of Heyday, and that was an investment firm that 
managed real estate and made venture capital investments.
    In 1994, he came to Washington. He joined the--he was 
always dedicated to public service, even when we first met. 
That was his goal, not just to become wealthy, but to do some 
good in the Government. And he joined the Clinton 
administration as Deputy Administrator and then Acting 
Administrator of SBA. As we all know, small businesses are 
engines of our economic growth. His experience and record of 
accomplishment in both business and Government shows he knows 
what is important to the success of small business. In fact, 
under Fred's leadership, the Eximbank approved 3,313 
transactions for small business in 2012, $6 billion in 
financing and insurance for small business. That is a record 
for the Export-Import Bank.
    He has also used his expertise to improve the operational 
efficiency of the Bank. The average time to approve 
transactions dropped by more than--close to 300 percent, from 
163 days in 2009 to 60 days in 2012.
    Fred has also made an impact in his personal endeavors. He 
and his long-time partner and my friend, Tom Healy, who is 
right behind me, are active in numerous philanthropic and civil 
rights groups. I want to thank them for what they have done to 
improve the lives of so many New Yorkers.
    In conclusion, the Eximbank is a linchpin in creating good 
and sustaining jobs. Fred's record at the Export-Import Bank 
speaks for itself. Four years ago, Mr. Chairman, I said before 
this Committee, it was clear to me that Fred possesses, quote, 
``the entrepreneurial spirit, the sense of civic duty, and the 
chutzpah necessary to excel as head of the Import-Export Bank--
Export-Import Bank.'' He would have been good at the Import-
Export Bank, too. Over the last 4 years, Fred has proven that 
if I misspoke then, it was only in understating his talent and 
workmanship.
    So I want to thank you, thank the Committee, and Freddie, 
congratulations on the nomination. I know you are going to 
continue to do a good job, and I am glad you have decided to 
serve for a second term.
    Chairman Johnson. Thank you, Senator Schumer.
    We will now proceed to the oath. Will the nominee please 
rise and raise your right hand.
    Do you swear or affirm that the testimony that you are 
about to give is the truth, the whole truth, and nothing but 
the truth, so help you God?
    Mr. Hochberg. I do.
    Chairman Johnson. Do you agree to appear and testify before 
any duly constituted committee of the Senate?
    Mr. Hochberg. I do.
    Chairman Johnson. Please be seated.
    Please be assured that your written statement will be part 
of the record. Please also note that Members of this Committee 
may submit written questions to you for the record and you 
should respond to these questions promptly in order for the 
Committee to advance your nomination.
    Mr. Hochberg, I invite you to introduce your family and 
friends in attendance before beginning your statement. You may 
begin.

STATEMENT OF FRED P. HOCHBERG, OF NEW YORK, TO BE PRESIDENT OF 
          THE EXPORT-IMPORT BANK OF THE UNITED STATES

    Mr. Hochberg. Well, thank you, Chairman Johnson, Ranking 
Member Crapo, and Senator Schumer.
    Let me introduce my partner, Tom Healy, who is here. My 
mother actually is recovering in the hospital, but she is 
watching on video. So my mother, Lillian Vernon, will be 
watching, and she will have comments for me afterwards.
    Chairman Johnson. We wish her well.
    Mr. Hochberg. And I feel very fortunate to have both 
Senators Schumer and Gillibrand, who I have known for many, 
many years, before both of them served in the Senate, for their 
introductions today.
    Additionally, I want to thank President Obama for 
nominating me for a second term as President and Chairman of 
the Export-Import Bank.
    If confirmed, I assure you that I will do my level best to 
assure that U.S. businesses large and small will be able to 
better compete on a level playing field in support of American 
jobs.
    As you mentioned, Chairman Johnson, 4 years ago, in the 
midst of a recession, I was fortunate enough to be nominated 
and later confirmed by this Committee. At that time, commercial 
banks were reluctant to lend, making Ex-Im's ability and need 
to fill the void all the more critical. Some of those 
challenging conditions have been arrested, but some are still 
with us today. And for the past 4 years, thanks to the 
dedicated staff of Eximbank, we have grown export financing 
that has translated into more U.S. jobs.
    In 2008, it was estimated, using Department of Commerce 
data, that Eximbank financing supported just over 144,000 jobs. 
By 2012, our financing supported an estimated 255,000 jobs, or 
more than 1,000 jobs for each and every working day of the 
year. And we did that in every State across this country.
    These efforts have contributed to President Obama's goal of 
doubling export the National Export Initiative--to double 
exports and add two million jobs by the end of 2014.
    As has been mentioned before and Senator Schumer commented 
on, I was in business for 20 years, for two decades, at Lillian 
Vernon, which began as a small company that my mother started 
on our kitchen table and ultimately grew to be a publicly 
traded company on the American Stock Exchange. With my business 
experience, I know that a critical component of job growth is 
small businesses.
    In fiscal year 2008, Eximbank financed $3.2 billion in 
loans, guarantees, and insurance for small businesses. In 
fiscal year 2012, $7.5 billion in small business exports, of 
which $6.1 billion was direct. And let me just add, we have 
done more for small business in the past 4 years than the 
previous 8 years combined--more in the last 4 years than the 
previous 8 years.
    To achieve such growth in small business, we have 
implemented new products. Let me just mention two. One, Express 
Insurance, which actually just recently received an award for 
Innovation in Government from Harvard's Kennedy School of 
Government. It has helped more than 500 businesses get an 
answer for their insurance application in 5 days or less.
    We have also recently launched, and Senator Sherrod Brown 
mentioned, U.S. Global Business Solutions. We launched that 
last month. This is a new program, a pilot program that brings 
together the SBA, Eximbank, and Commerce to make it more 
streamlined and easier for small businesses and their lenders 
to help them on exports.
    On top of that, as the Senator mentioned, we have improved 
customer service. Ninety percent of all transactions are 
completed in 30 days, 98 percent within 100 days or less, and 
we are working to improve that even more.
    To do that, we need to reach more small businesses. We have 
partnered with the United States Chamber, the National 
Association of Manufacturers, many banks, and have held more 
than 50 small business forums around the country, a number of 
which Senator Brown mentioned. We have done these from 
Billings, Montana, to Shreveport, to Charlotte, to San 
Bernadino, and many, many other cities around this country.
    Last, if confirmed, I will assure that the Bank continues 
its prudent oversight and due diligence standards to protect 
taxpayers. Every 90 days, we submit a default report to 
Congress. The report on March 31, 2013, showed a default of 
less than one-third of 1 percent. On top of that, over the past 
5 years, Eximbank has generated $1.6 billion for U.S. 
taxpayers, and that is above and beyond all of our 
administrative cost, operating costs, claims, and loan loss 
reserves. We operate at no cost to taxpayers and actually 
generate revenues for them while supporting U.S. jobs.
    Let me close. U.S. businesses face unprecedented 
competition from around the globe. As a businessman myself, I 
know that they need to compete on value, on price, on quality. 
But the good news is, the ``Made in America'' brand is stronger 
than ever and is desired by more and more foreign buyers, and 
that is where Eximbank comes in. If confirmed, I will continue 
to work with Congress, the Administration, U.S. companies large 
and small, and their workers to enhance competitiveness and 
support U.S. jobs.
    Thank you, and I look forward to your questions.
    Chairman Johnson. Thank you.
    As we begin questions, I will ask the Clerk to put 5 
minutes on the clock for each Member.
    Mr. Hochberg, during the most recent economic crisis, the 
Bank was able to step up and assist American exporters who were 
finding it difficult to acquire private financing. This 
assistance by the Bank had a substantial benefit for many 
American companies and workers. Can you explain the role the 
Bank played during the crisis and why ensuring the continued 
stability of the Bank is vital to protect against any unforseen 
downturns in the economy?
    Mr. Hochberg. Well, thank you, Chairman Johnson. One of the 
things that we do in the middle of a financial crisis, and we 
tend to be countercyclical, is we fill a void, particularly 
when commercial banks have their own credit limits, and this is 
particularly acute in the last three or 4 years with small 
businesses. It is another reason why we have done more small 
business volume in 4 years than the previous 8 years.
    So small business has been particularly hurt hard, and in 
addition, at times, different banks have either lending limits 
by product sector or country of export. So we help fill in 
those gaps when individual banks have those problems.
    Chairman Johnson. To continue to protect taxpayers, we must 
ensure that the Bank has responsible risk management practices 
in place. What is the Bank doing to assure Congress and the 
American people that its risk management procedures are 
appropriate?
    Mr. Hochberg. First of all, Senator, we take our loan 
losses, or every time we book a loan on our books, we make a 
reserve based on a credit evaluation of what that loan could 
possible yield in a loss, and that is done by a separate credit 
policy group. So we have substantial reserves. Our reserves now 
are over $4.6 billion to back up loans we have made.
    On top of that, we recently received a report from GAO 
looking at our credit risk policies. We have completely agreed 
with GAO and are in the midst of implementing all of their 
recommendations.
    Chairman Johnson. The Bank is required to ensure that at 
least 20 percent of its annual authorizations goes toward small 
business. Under your leadership, the Bank has substantially 
increased financing for small business, but it can do more. 
What challenges do small businesses face when seeking export 
financing, and what can you do to make the Bank more responsive 
to the needs of U.S. exporters located in rural areas?
    Mr. Hochberg. Well, Chairman Johnson, as Senator Schumer 
mentioned, I came from a small business and I worked at the 
Small Business Administration under President Clinton, so I 
have taken to heart and made central to the Bank our work in 
the small business arena.
    We have done, for example, about 50 Global Access Forums, 
seminars in different areas of the country. Senator Brown 
mentioned I have done a number in Ohio. I have done them in 
Virginia, Massachusetts, Billings, Montana, with Senator 
Tester, so in a lot of rural communities.
    In South Dakota itself, Rosenbauer, which makes fire 
trucks, we have worked with them to finance their exports out 
of South Dakota. So many companies that are not just selling ag 
products but actual hard capital goods are located in rural 
America. Rosenbauer is one, and Daktronics, which makes these 
very high-tech scoreboards, is another company in South Dakota 
that we help them export.
    Chairman Johnson. Mr. Hochberg, many other countries devote 
substantially more resources to their export credit agencies 
than the U.S. does. What is the Bank doing consistent with its 
charter and mission to ensure that it remains competitive in 
relation to other export credit agencies? How does the Bank 
help to maintain a level playing field for American companies?
    Mr. Hochberg. In a number of ways. One, the OECD, the 
Organization for Economic Cooperation and Development, sets a 
framework on how export loans are made, how long a loan can be 
made and what kind of fees or points, the way you pay points on 
a mortgage. That gives a level playing field with the 30-plus 
countries that are in the OECD.
    One of our biggest challenges today is to bring other 
countries in. Most notably, China is not a member of the OECD, 
not a part of the framework, nor Brazil, nor India. Russia is 
moving in that direction. So we have a lot of these very strong 
and emerging competitors, and China is a formidable competitor 
that is not a member.
    President Obama met with then-Vice President Xi and is 
working toward a framework by the end of 2014 that would bring 
them into the OECD so we can better be more transparent and 
find a way to limit export credit as much as possible. So that 
is still a large challenge ahead of us and it is a huge 
challenge, really, for American companies as they compete with 
countries like that.
    Chairman Johnson. Senator Crapo.
    Senator Crapo. Thank you very much, Mr. Chairman, and 
President Hochberg, again, thank you for your service at the 
Bank and for appearing here with us today.
    I would like to ask you to respond to the criticism that I 
know you are aware of that many are raising now with regard to 
the Export-Import Bank's functions in the context of the 
feeling that the Bank is basically providing corporate welfare 
to some of America's largest corporations and that it truly--
that the function of the Bank truly is not needed because these 
large corporations do not need that kind of assistance, 
particularly from a Government-backed function.
    Mr. Hochberg. Senator Crapo, most of the loans we make, the 
vast majority, are actually to customers of U.S. companies. 
They are not made to the large U.S. companies you are referring 
to. They are made to their customers. And when a customer, 
whether it is in India or Colombia or anywhere in the world, is 
making a purchase decision, they are going to choose between 
American products or products made in China or Germany, Japan, 
Korea, and so forth. Each of those countries provides export 
support and export loans to support those exports.
    We cannot unilaterally disarm by not making sure that we 
are backing American companies and American jobs, to make sure 
that if they need our financing to close the sale, it is 
available. Many times, they do not need it, but when they do, 
when they are going toe-to-toe with a competitor that has 
export financing arranged, we need to make sure they have it, 
as well.
    Senator Crapo. Well, thank you. And in that context, what 
is the Bank doing, or how do you deal with the issue that 
arises when you are supporting certain businesses or certain 
export transactions and the adverse impact that that can have 
with regard to other American companies who are competitors in 
that market?
    Mr. Hochberg. We have at the Export-Import Bank something 
called an Economic Impact Procedure that does just that. We 
want to make sure--we are about U.S. jobs. We are about 
creating, supporting, and sustaining U.S. jobs. So we want to 
do nothing that is going to hurt U.S. jobs.
    So when we evaluate each and every transaction, we review 
it to make sure that the benefits of that transaction will 
outweigh any harm. We cannot eliminate harm. We just want to 
make sure the benefits outweigh the harm, and we do that on all 
transactions. Depending on the transaction, we will do a more 
in-depth study if it is warranted.
    Senator Crapo. Thank you. And to change topics just a 
little bit, you mentioned in your remarks that the Bank 
operates at no cost to the taxpayer. What liability does the 
American taxpayer have for the loans that are not repaid, or 
any other program liability?
    Mr. Hochberg. Well, currently, as I mentioned, our defaults 
are running less than one-third of 1 percent, and our reserves 
are over 2\1/2\ percent. So our reserves are well, well in 
excess of the kind of write-offs that we have had to make on an 
annual basis.
    We do a thorough job to begin with of underwriting. The 
first step is really to make sure we are underwriting a loan 
that has a reasonable assurance of repayment. We monitor that 
loan on an ongoing basis. We true up the portfolio every year 
at year end. We are audited by Deloitte and Touche on an annual 
basis and have an unqualified financial statement each and 
every year. GAO provides oversight. We have a close working 
relationship with our Inspector General. So there are a lot of 
control mechanisms in place, but it really starts with good 
underwriting to begin with.
    Senator Crapo. Thank you. And a number of us have mentioned 
the value of small business support. What ideas do you have to 
further facilitate the financing of small business exports?
    Mr. Hochberg. Small businesses, and I ran a small business, 
as has been mentioned before, have a challenge receiving credit 
in any environment, and particularly in this environment, and 
particularly when they are looking to sell overseas.
    One of the ways we do this is by running these forums that 
I believe you and I are scheduling to do one in August in 
Idaho.
    Senator Crapo. Yes.
    Mr. Hochberg. We have done, as I said, approximately 50 of 
them, because a lot of it is about getting information out 
there. Tom Donohue of the Chamber of Commerce has been a 
partner with us, Jay Timmons at National Association of 
Manufacturers, and many States, as well as the SBA and others. 
So part of it is getting the word out.
    The other thing is better customer service. You know, we 
are trying to do our Express Insurance that received this 
award. We turn around and give a quotation for a customer to 
get insurance for an overseas sale within 5 days. We are 
looking to make those kind of innovations that will make sure 
that small businesses can compete and win globally.
    Senator Crapo. Thank you.
    Chairman Johnson. Senator Warren.
    Senator Warren. Thank you, Mr. Chairman, and thank you 
again, Chairman Hochberg, for being here and for your service. 
Your work has been extraordinary. I know you took over in very 
hard times and you have been able to accomplish a lot for our 
businesses and, I am sure, for those who work for those 
businesses. They are very grateful for your work. I 
particularly appreciate your focus on small businesses and on 
streamlining your procedures to make them more accessible.
    I want to ask you, though, about something else, and that 
is in 2011, as you know, Congress negotiated a Korea Free Trade 
Agreement, and at the time that it was negotiated, the U.S. 
Trade Representative cheered the agreement for the 
opportunities it would provide for creating more trade with 
Korea. I am sure you have noticed, though, that the facts have 
not worked out so clearly.
    Since the agreement went into effect in March 2012, trends 
in trading patterns with Korea have been alarming, and I 
checked the numbers between February 12 and March 2013, which 
is the most recently available data. U.S. imports globally grew 
by 5 percent, but they increased from Korea by 17 percent. Our 
exports to the world increased by 11 percent--very good news--
but they decreased to Korea by 5 percent. So, looking at this 
another way, while our Nation's global trade deficit shrunk 5 
percent, our deficit with Korea increased by a staggering 170 
percent. To put a specific number on it, our trade deficit with 
Korea was about $1.5 billion during this time period.
    So the question I want to ask is, your job is to increase 
exports and to reduce our trade deficit. Do you think that the 
Korea Trade Agreement has made it harder for you to do that, 
Mr. Chairman?
    Mr. Hochberg. I do not see an impact in that regard. Our 
trade that we are engaged with at Eximbank with Korea has 
primarily been in two areas. It has been in aircraft. Korean 
Airlines, I am happy to say, is a very strong Boeing customer 
and we have worked with them on some joint financing. Also in 
some of the areas of renewable energy, solar panels and solar 
energy. But we do not have a strong book of business with Korea 
outside of that.
    I actually have planned a trip to Korea later this year 
because there are a number of Korean infrastructure firms and I 
want to make sure that they start buying from the United States 
when they are doing infrastructure in third countries. So that 
is one of our goals, is to increase that footprint for American 
companies, because these Korean EPC firms, as they are referred 
to, engineering procurement and construction, are very 
formidable and I want to make sure that American companies get 
their fair share of that.
    Senator Warren. Well, I appreciate that you are trying to 
do that, because, obviously, just based on the math, something 
is not working very well for the United States on the Korea 
Free Trade Agreement and it seems to be working at cross-
purposes with what it is that you are trying to accomplish.
    As you know, the U.S. Trade Ambassador is currently 
negotiating the Trans-Pacific Partnership Agreement. Has your 
office played a role in those negotiations?
    Mr. Hochberg. We do not. Really, the role of the U.S. Trade 
Representative is really to formulate the trade agreements. 
Once they are in place, our goal is to--companies that need our 
support in those markets, is to work with them in those 
markets.
    Senator Warren. Do you think it would be helpful--I am a 
little concerned because of the data out of Korea--if we asked 
the Trade Representative to involve you more in the 
negotiations, or do you think that is not an appropriate role?
    Mr. Hochberg. It is--you know, we are really about 
implementation at the Eximbank. So in terms of trade policy, 
that really is somewhat outside of our lane. With the jobs we 
are trying to sustain and support at Eximbank, I have got my 
hands pretty full in supporting----
    Senator Warren. Fair enough.
    Mr. Hochberg. ----U.S. exporters in the work we are doing 
right now.
    Senator Warren. Fair enough. Thank you.
    I just have one more, and I want to just try to ask it 
quickly. There have been some troubling indications that the 
big banks see the Trans-Pacific Partnership Agreement and the 
Trans-Atlantic Trade and Investment Partnership as 
opportunities to weaken financial regulations, a chance for 
these banks to get something done quietly, out of sight, that 
they could not accomplish in a public place with the cameras 
rolling and the lights on. And this is a really serious concern 
for me.
    So I have a question about future negotiations. If you are 
involved in any way in future negotiations, whether it is 
formally or informally, as you monitor these negotiations, will 
you take a close look at the terms and do what you can to make 
sure that these agreements do not become a back door way to 
water down financial regulations for the large banks?
    Mr. Hochberg. Well, I can say the following, also. We have 
probably some of the strongest banks in the world right now 
because of the kind of reserves that have been put in and the 
fact that they have beefed up their balance sheets, and so that 
is what we need to work with, because most of the loans we make 
are guaranteed. We work with a bank and we guarantee those 
loans.
    For a number of years, we made a large number of loans with 
European banks. They have largely exited the market because of 
their weakened condition. So a stronger banking system is far 
better for Eximbank because we can work with a lot stronger 
banks that way.
    Senator Warren. Thank you, and I apologize for running 
over, Mr. Chairman. Thank you.
    Chairman Johnson. Senator Warner.
    Senator Warner. Thank you, Mr. Chairman, and President 
Hochberg, good to see you again.
    I want to take a slightly different approach than my 
colleagues. You know, one of the things that I think you 
pointed out was the stellar record of the Export-Import Bank, 
never cost the taxpayer a dollar, and I would think that would 
be partially because you have created this project finance 
expertise inside the Export-Import Bank that has provided value 
to American businesses, value to the American taxpayer.
    I mean, I, for one, believe that we need another tool in 
our tool box as we look at infrastructure and have been a long-
time supporter of the bipartisan efforts here in the Senate to 
put together an Infrastructure Bank, which in many ways would 
be really a project finance expertise so that those who are 
critical of efforts like around Solyndra and elsewhere, we 
could concentrate that project finance expertise in one 
location. Even good projects where we have got things like 
TIFIA right now, which has got a good record, but we are 
finding it is hard to get long-term good people to stay at 
TIFIA because they are not sure whether it is going to be the 
long-term career.
    Can you just speak for a moment about the value of having a 
separate independent institution like the Export-Import Bank 
with professional staff and how that has built the kind of good 
underwriting standards and project finance expertise in your 
institution?
    Mr. Hochberg. I can try. Well, practice does make perfect, 
and not that we are perfect, but I am very proud of the team 
that John Schuster, who heads up our Project Finance Group at 
Eximbank. We now do more project finance loans than 
transportation. It is actually the largest single area of the 
bank. And that partly is talking about the global 
infrastructure boom that we want to make sure U.S. companies 
participate in. These projects are very large. They are very 
complex. And having the expertise both on the financial side, 
on the legal side, I think, has helped us be seen as a leader 
in that regard and we have brought a lot of business to the 
United States as a result.
    I mean, more than one--a number of projects have said, 
because of our financing, they have actually moving more 
procurement and more of the services. Last year, about--we did 
over $10 billion worth of service exports in this very area you 
are talking about.
    Senator Warner. I think, Mr. Chairman, it would show that 
if we had that capability for transportation, water, energy, in 
a single location on the domestic side, it would be a great 
asset, and I, frankly, think the Export-Import Bank is a great 
model on that project finance side. I mean, I think those of us 
who have been advocates for Infrastructure Banks have sometimes 
said we are not creating a new GSE. We are really trying to 
create a domestic version of the Export-Import Bank, and I 
think, again, the record of the Export-Import Bank is a good 
one to follow.
    Let me also follow up on something Senator Brown was 
mentioning. I applaud what you are doing in terms of trying to 
help small businesses, and I, like Senator Warren, may be 
trying to get you a little bit out of your lane here again. But 
I continue to think that the--if you are a small to mid-size 
business in America trying to navigate now you are going to 
export a product or service, it is still kind of a confusing 
mess between Export-Import, OPIC, USTR, Commerce, all the other 
various agencies.
    Have you thought--I know that the Administration put 
forward some level of trade consolidation efforts that had 
maybe a half-day life here on the Hill before it got shot down 
a year past. Were you involved in any of those conversations 
about how we might want to rationalize our export activities 
for small and mid-size businesses?
    Mr. Hochberg. Well, first of all, we have--not waiting for 
legislation, we actually have something called U.S. Global 
Business Solutions that was launched in early April as a 
pilot--we are going to monitor it between now and the fall--
which pulls together the SBA, the Export-Import Bank, and the 
Commerce Department. So we are finding ways to not wait but to 
move ahead as best we can, where we can find common ground to 
make sure we help small businesses and, importantly, their 
lenders, because if we make it easy for the lenders, we 
actually make that easier for small businesses.
    Senator Warner. One of the things I hope that we can look 
at, Mr. Chairman--I do not know, it may be a little bit out of 
our purview here--but how we get that single portal so that 
small to mid-size businesses do not have to navigate their way 
through the jumble of Federal bureaucracy to get that right.
    My time is about up. I will just ask one other question for 
the record. One of the issues that when we were going through 
the reauthorization we were looking at is asking you to take a 
look at domestic content. We all want to make sure we have 
got--obviously, that this is supporting of American businesses. 
But that definition of domestic content might need a fresh look 
so that we can really make sure that we are not excluding 
American businesses. And I know, again, with the discretion of 
the Chair, if you want to make any quick comment, but if not, 
you can answer me later. Can you----
    Mr. Hochberg. Again, the focus of the Export-Import Bank is 
about U.S. jobs. We are not a national interest export credit 
agency like most of our competitors are, frankly.
    Congress has asked, and we have a content report that is 
due at the end of this month. We have spent the last 6 months 
with focus groups, public comment. We have been assembling that 
and are going to be sending a report to you and your colleagues 
at the end of May.
    Chairman Johnson. One last question. Congress has enacted 
legislation to restrict the Eximbank from making loans or 
providing guarantees in relation to certain projects or 
companies that conduct prohibited business in or with Iran. 
What has the Bank done to ensure that it is in compliance with 
this legislation?
    Mr. Hochberg. We take the requirements in the public law in 
terms of restrictions on Iran. We have fully implemented the--
it is referred to as Section 18 in our Reauthorization Act on 
Iran. We require certification by each company we do business 
with that it is not doing business with Iran, that we are in 
compliance with Iran sanctions. All transactions over $100 
million are circulated to the NAC, the National Advisory 
Council, which includes Treasury, State. So there is a rigorous 
process to ensure that we are in full compliance with the Iran 
sanctions that pertain to lending to foreign export finance.
    Chairman Johnson. Does anyone have any other questions? If 
not, thank you, Chairman Hochberg, for your testimony today.
    We will leave the record open until Thursday, May 9, at 
noon, so that Members can submit additional questions. Chairman 
Hochberg, please submit your answers to us as soon as possible.
    This hearing is adjourned.
    [Whereupon, at 11:08 a.m., the hearing was adjourned.]
    [Prepared statement, biographical sketch of nominee, 
responses to written questions, and additional material 
supplied for the record follow:]

                 PREPARED STATEMENT OF FRED P. HOCHBERG

     To Be President of the Export-Import Bank of the United States
                              May 7, 2013

    I would like to thank President Obama for nominating me for a 
second term as President and Chairman of the Export-Import Bank of the 
United States (``Ex-Im Bank'' or ``Bank''). I also want to thank 
Chairman Johnson for calling this hearing today and thank the Members 
of this Committee, including Ranking Member Crapo and others who I met 
with prior to the hearing. If confirmed, I will do everything in my 
power to assure that U.S. businesses, large and small, will be able to 
compete on a level playing field in support of American jobs.
    The Ex-Im Bank is the official export credit agency of the United 
States. The mission of Ex-Im Bank is to enable U.S. companies--large 
and small--to turn export opportunities into sales that help maintain 
and create U.S. jobs which contribute to a stronger national economy. 
The Bank achieves its mission by providing export financing through its 
loan, guarantee, and insurance programs in cases where the private 
sector is unable or unwilling to do so. Ex-Im Bank also provides 
support when necessary to level the playing field when financing is 
provided by foreign Governments to their companies who compete for 
export sales with U.S. exporters.
    I was fortunate to be nominated and confirmed 4 years ago during a 
very difficult time for our economy. We were in the midst of a 
recession and commercial banks were reluctant to lend, making Ex-Im 
Bank's ability to fill the void all the more critical. Over the past 4 
years, thanks to the dedicated staff of Ex-Im Bank, we have grown 
export financing significantly, supporting more and more U.S. jobs. In 
2008, using Department of Commerce data, it was estimated that Ex-Im 
Bank financing supported 144,800 jobs. By FY2012, our financing 
supported an estimated 255,000 jobs across the country. These efforts 
have contributed to the President's National Export Initiative goal of 
doubling exports by 2015. If confirmed, I look forward to continuing 
that job growth as our Nation continues its economic recovery.
    Before entering Federal service, I was a businessman for 20 years 
running the Lillian Vernon company. Lillian Vernon was a small mail 
order catalog company my mother started on our family's kitchen table 
and it grew into a large publicly traded company. Whether at Lillian 
Vernon or the Export-Import Bank, I have always placed a premium on 
serving our customers. In providing better service to the Bank's 
customers, we have reduced the amount of time it takes to approve 
applications and have offered new products to meet the needs of 
exporters.
    A critical component to job growth is small business, for which 
Congress has mandated we make available 20 percent of our financing. In 
FY2008 Ex-Im Bank financed $3.2 billion in direct small business 
exports. In FY2012 we financed a total of $7.5 billion in small 
business exports of which $6.1 billion was direct. Total small business 
exports include those directly exported by small business to a foreign 
buyer, plus small business inputs into the supply chain of larger U.S. 
companies' products which are ultimately exported. At Ex-Im Bank, small 
business accounted for 88 percent of all transactions last year and 
small business is essential for job growth in coming years.
    To address the needs of our small business customers, we have 
implemented new products such as Supply Chain Finance to increase 
liquidity for small businesses, Global Credit Express for smaller 
transactions of half-a-million dollars or less and our most popular 
product Express Insurance which received an innovation in Government 
award from Harvard's Kennedy School and has helped more than 500 small 
businesses get a response to their application within 5 business days.
    And we are not stopping there. In April, we launched a new pilot 
program called U.S. Global Business Solutions. The program streamlines 
U.S. Government trade-finance products for lenders and exporters. The 
programs and products will be combined into a single menu of options 
tailored to the exporter's needs. Working together, Ex-Im Bank, the 
Small Business Administration, and the U.S. Department of Commerce, 
make it easier and more cost-effective for exporters and their lenders 
to avail themselves of the programs and products of multiple agencies.
    The key to expanding exports is marketing and communicating to 
small businesses. To increase awareness, Ex-Im Bank has partnered with 
the U.S. Chamber of Commerce, the National Association of 
Manufacturers, Government agencies, and commercial banks to hold more 
than 50 small business forums that we call Global Access for Small 
Business. From Billings, Montana, to Shreveport, Louisiana, and from 
Charlotte, North Carolina, to San Bernardino, California, thousands of 
businesses have learned how to access foreign markets and use Ex-Im 
Bank to give them a competitive edge when exporting.
    During my tenure at Ex-Im Bank I have worked to ensure that we make 
significant progress in supporting our other congressional mandates to 
finance more renewable energy exports and exports to sub-Saharan 
Africa. Our support for renewable energy has increased more than 
tenfold from $30.4 million in FY2008 to $355.5 million in FY2012.
    I am proud of our work in sub-Saharan Africa which is home to 7 of 
the 10 fastest growing economies in the world. Many countries in sub-
Saharan Africa have developed to the point where they are now eligible 
for Ex-Im Bank financing. The Bank has grown sub-Saharan Africa 
financing from $576 million in FY2008 to $1.5 billion in FY2012. While 
Ex-Im Bank supports approximately 2 percent of all U.S. exports, we 
financed approximately 7 percent of all U.S. exports to sub-Saharan 
Africa.
    Lastly, if confirmed, I will ensure that the Bank continues its 
prudent oversight and due diligence standards to protect taxpayers. As 
a result of provisions inserted into the Bank's charter during last 
year's reauthorization, every 90 days Ex-Im Bank submits a default rate 
report to Congress. I am pleased to inform you that our most recent 
report dated March 31, 2013, showed a default rate of 0.307 percent. In 
addition to this low default rate, over the past 5 years Ex-Im Bank has 
generated $1.6 billion for U.S. taxpayers, above and beyond all 
administrative operating costs, claims, and loan loss reserves we have 
set aside. We operate at no cost to the taxpayers and actually generate 
revenue for them while supporting U.S. jobs.
    As a businessman myself, I know U.S. companies still need to 
compete globally on the basis of price and quality. The world wants 
services and products that are made in America. If confirmed, I will 
continue to work with Congress, the Administration, U.S. businesses and 
their workforce to enhance competitiveness and support U.S. jobs.
    Thank you.

            BIOGRAPHICAL SKETCH OF NOMINEE FRED P. HOCHBERG

    Fred P. Hochberg is the 23rd president of the Export-Import Bank of 
the United States, the U.S. Government's official export credit agency.
    President Barack Obama first nominated Hochberg to the position on 
April 20, 2009. The Senate confirmed his nomination by unanimous 
consent on May 14, 2009, for a term ending on January 20, 2013. He was 
sworn in as chairman and president on May 21, 2009. His term was 
extended for 6 months, until July 20, 2013. Mr. Hochberg was 
renominated by President Obama on March 21, 2013, for a term ending on 
January 20, 2017.
    Mr. Hochberg has more than 30 years of experience in business, 
Government, and philanthropy. From 1998 through 2001, he served as 
deputy, and then acting administrator, of the Small Business 
Administration. Before joining the Clinton administration, Hochberg was 
president and chief operating officer of the Lillian Vernon 
Corporation, which was founded by his mother. From 2004 to 2008, he was 
a dean at The New School in New York. Hochberg received a Bachelor of 
Arts from New York University and a Master's of Business Administration 
from Columbia University.

        RESPONSES TO WRITTEN QUESTIONS OF SENATOR CRAPO
                     FROM FRED P. HOCHBERG

Q.1. There is a perception that the Export-Import Bank is 
``subsidizing'' a discrete number of very large corporations 
which outwardly appear to not need any form of financial 
support. The implication is that this constitutes little more 
than Government-backed corporate welfare, in its purest form.
    Please fully respond to the perception and its implication.

A.1. Thank you for asking this question and giving me an 
opportunity to address this common misconception. Ex-Im Bank 
does not provide below-market ``subsidized'' rates. In fact, 
every financing Ex-Im Bank authorizes is fully consistent with 
the rules and principles of the World Trade Organization. Ex-Im 
Bank also does not provide aid, but provides financing in the 
form of loans, loan guarantees, and credit insurance. We 
collect a risk-based premium for this service, similar to 
points on a mortgage, which currently ranges from approximately 
0.5 percent to 15.5 percent.
    Ex-Im Bank is a self-sustaining agency. The fees and 
interest we charge customers pay for all operations, claims and 
loan loss reserves. We actually turn a profit for the 
taxpayers, last year generating $1.1 billion to the U.S. 
Treasury.
    The charge that our financing of exports amounts to 
``corporate welfare'' is false. We finance foreign purchasers 
(or guarantee foreign banks and U.S. banks) of U.S. exports, 
charging risk-based fees and interest, leveling the playing 
field so that American exporters can compete on product quality 
and value. With the exception of our U.S. small business and 
working capital guarantee programs, we do not provide financing 
directly to U.S. businesses; we principally provide financing 
support to the foreign purchasers to of U.S. goods and 
services.

Q.2. Is the availability of a Bank guarantee encouraging our 
domestic private financial institutions to stay out of direct 
lending in the export market?

A.2. No. To the contrary our guarantees don't compete with 
commercial institutions; they work with them by providing 
guarantees to their commercial loans encouraging them to make 
loans that their customary credit standards might otherwise 
limit. Therefore, Ex-Im Bank only provides guarantees if the 
commercial banks are unwilling to lend without our cover. One 
of the criteria that the Bank considers as part of its due 
diligence is whether the guarantee provided by Ex-Im Bank 
results in additional credit required by the commercial 
institutions to close a transaction.
    More than 80 percent of the Ex-Im Bank's current 
outstanding exposure (disbursed but not yet repaid) is 
comprised of guarantees of loans by commercial banks. As of 
March 31, 2013, the Bank's outstanding exposure is $74.6 
billion and of that amount $60 billion is guaranteed lending.

Q.3. In response to the Chairman's question on the ability of 
American exporters to acquire private financing in times of 
crisis, you replied in part that the Bank tends to be 
countercyclical and acts to fill a void during these times. A 
few minutes later, however, you were reported by the press to 
have said, outside the hearing, that the Bank is unlikely to 
reduce its support for U.S. exports as the economy improves.
    Can you reconcile the two positions?

A.3. There is no conflict between these two statements.
    According to the Census Bureau, exports of goods and 
services are up 39 percent since 2009, so it is not surprising 
that Ex-Im Bank is being called upon to step up. Banks are 
still ``under-lent''--that's their word--and banks increasingly 
only finance exports for preferred, well-established customers.
    Also it is worth noting that banks are now required by 
regulators to reserve more capital for their transactions, even 
those covered by Ex-Im Bank or other similar ECAs. So while 
commercial banks will re-enter the market, it may not be at 
sufficient levels to support U.S. exports. Ex-Im Bank's role is 
to fill this gap. Increased exports and a banking system that 
remains reluctant to lend to overseas buyers and small 
businesses are two reasons why our support may increase even as 
the economy improves.
    Additionally, more exports are going to the developing 
world, where banks have their own self-imposed limits as to 
lending into those markets, which means that they will continue 
to rely on Ex-Im Bank support to close those sales of U.S. 
goods and services. It is critically important to U.S. 
companies that they enter these markets early on so they can 
capitalize on follow-on sales and build brand loyalty in the 
emerging countries.
    Small businesses will continue to be challenged in 
obtaining sufficient credit, particularly in the developing 
world.

Q.4. When the Bank does act on behalf of an overseas buyer, 
what steps does the bank take to either mitigate or eliminate 
negative economic impact on other domestic manufacturers or 
suppliers of services?

A.4. The Bank's actions are always on behalf of U.S. exports 
and the related U.S. jobs. Every application submitted to the 
Bank is subject to economic impact scrutiny. Staff quickly 
determines economic impact applicability and subjects only 
those applications that meet stated criteria to detailed 
economic analysis. For example, applications valued at $10 
million or less seeking support for the export of noncapital 
goods and services (e.g., spare parts and commodities), are 
screened out early in the economic impact review process.
    On the other hand, applications for capital goods and 
services exceeding $10 million in Ex-Im Bank financing for 
projects that will establish or expand foreign production 
capacity (e.g., a petrochemical project) by 1 percent or more 
of comparable U.S. production, are subject to detailed economic 
impact analyses. For such applications, the Bank: (1) issues a 
notice in the Federal Register seeking comments from the 
public, (2) prepares an analysis of the likely impact of the 
new foreign production on U.S. producers, (3) obtains input 
from other USG agencies; and (4) provides the Board with all 
relevant information gathered in the three previous steps. In 
sum, the Bank has created a transparent and comprehensive 
process to evaluate any potential negative impact on U.S. 
producers.
    The tests used to determine whether a detailed economic 
impact analysis is necessary are usually called ``screens'' or 
``filters.'' The screens used in the foregoing example are 
applied to transactions in which the exported goods or services 
are used to manufacture goods. The screens are different for 
transactions in which the exported goods or services result in 
services rather than goods. Different screens are necessary 
because of the inherent differences between goods and services.

Q.5. What will become of the relative distribution of Bank 
support in an improving world economy, where private markets 
and rates become more attractive to the best credit risks?

A.5. Our goal and mission is to be available only when needed. 
As the economy improves, there will be those sectors of the 
export economy that will be more adequately served by 
commercial banks. Although Ex-Im Bank tends to be 
countercyclical, two other factors today are at play--increased 
exports and globally a weakened financial system with higher 
capital requirements. In a changing global economy the Bank's 
portfolio distribution may change reflecting underlying 
financial needs. Some sectors may increase their need for Bank 
financing while others may decrease. We will also be challenged 
to finance more marginal credits that remain less attractive to 
banks--that is to countries that are hard to finance and 
products that are difficult to finance. While we may face more 
marginal transactions, that will not change our extensive due 
diligence and underwriting practices. Thanks to our stringent 
underwriting and aggressive collection processes, we have a 
very low 0.307 percent default rate as of March 31st.

Q.6. The 2012 reauthorization required the Government 
Accountability Office (GAO) to review the Bank's risk 
management practices to determine what if any inherent risks 
there are to the American taxpayer. The report was issued in 
March 2013.
    Are you willing to accept and implement procedures or 
processes for each of GAO's recommendations?

A.6. Yes. The Bank provided a very inclusive and transparent 
review of our risk management practices for the GAO. Ex-Im Bank 
proactively manages risk and is committed to continuous 
improvement. The Bank agreed with each GAO recommendation on 
this audit and began this fiscal year to implement of all of 
the Recommendations for Executive Action identified in this GAO 
audit. Ex-Im Bank will report the implementation status to the 
U.S. Congress and the GAO within 120 days after officially 
receiving the Comptroller General report.

Q.7. What are the specific steps that you will take to improve 
the Bank's risk-management framework, particularly in light of 
the bank's large volume of recent transactions?

A.7. The Ex-Im Bank has been developing a comprehensive risk 
management framework, recognized by the GAO, which proactively 
manages risk and is committed to continuous improvement. Ex-Im 
Bank believes that a comprehensive risk management framework 
minimizes claims.
    First, the Bank already has in place risk-rating systems 
with stringent credit underwriting procedures for its short, 
medium, and long term transactions. These credit standards and 
risk rating methodologies are applied to transactions under 
review to determine whether they qualify under Ex-Im Bank's 
Charter requirements of reasonable assurance of repayment prior 
to presenting the transaction for final approval.
    The risk rating system is also complemented by a country 
risk evaluation from Ex-Im Bank's in-house country risk 
evaluation team. Country-risk criteria and risk rating 
standards applied are the same as the criteria shared and 
applied by all other USG agencies in their lending protocols. 
Additionally, the Bank is very proud of the risk management 
improvements made during the past few years, improvements that 
protect the U.S. taxpayer. Recently, the Bank has implemented 
the following important improvements:

    streamlining of credit monitoring functions,

    enhancing the sharing of information and risk 
        evaluation within the Bank to insure sound credit 
        decisions are made,

    evaluating existing programs,

    creating a Special Assets Unit to address emerging 
        credit issues,

    updating the Bank's Credit Manual, and

    using qualitative factors to improve the Bank 
        credit-loss models.

    These recent improvements are consistent with industry best 
practices. In fiscal year 2012, the Bank paid $37 million in 
gross claims on a portfolio of $106 billion. Ex-Im Bank 
recovers approximately 50 percent on all claims paid, far above 
commercial bank averages. On March 31, 2013, Ex-Im Bank 
reported a default rate of 0.307 percent.
    The Bank is also committed to further improvements in our 
risk management practice. To foster the development of 
enterprise risk awareness, Ex-Im Bank plans to establish an 
Enterprise Risk Committee (ERC) comprising senior management 
from the business, financial, legal, policy, resource, and risk 
management areas.
    Thanks to Congress, the Bank is also making significant 
investments to modernize its IT systems and business processes, 
including the modernization of the Asset Monitoring System. Ex-
Im Bank also is committed to analyzing workload capacity 
benchmarks on a product and functional basis. This operational 
risk analysis will allow the Bank to better evaluate its 
ability to support incremental transactions given current 
resource allocations. Additionally, the Bank will continuously 
evaluate and seek to improve our underwriting, monitoring, and 
recovery efforts using best practices. Ex-Im Bank has a 
comprehensive risk management framework that proactively 
manages risk and is committed to continuous improvement.

Q.8. I have long been concerned on this Committee with the 
situation of small business exporters. Since 2002, Congress has 
required that the Bank make available at least 20 percent of 
its annual financing to such business.
    What steps is the Bank taking to attract more small 
business participation, and how effective are those steps?

A.8. I have made small business a key priority during my tenure 
at Ex-Im Bank. Having run a small family business for 20 years 
that grew into a large publicly traded company, I know the 
vital role small businesses play in our economy both through 
direct exports and through inputs added to other goods for 
export. Having also served as Deputy Administrator of the Small 
Business Administration (SBA) and later as Acting 
Administrator, I have a deep knowledge and commitment to small 
business.
    I am proud of the progress Ex-Im Bank has made over the 
past 4 years. In 2008 the Bank supported $3.2 billion in direct 
small business exports. Thanks to a number of new options for 
small businesses, we have grown that number to $7.5 billion in 
FY2012, of which $6.1 billion was direct exports.
    In fact, Ex-Im Bank financed more small business exports in 
the last 4 years than it did in the previous 8 years.
    Ex-Im Bank has taken aggressive steps on three critical 
tracks for growing small business:

Expanded Visibility

    Ex-Im Bank has developed the Global Access Forums which 
bring together exporters, representatives of Federal exporting 
agencies and local banks. These half day forums which are 
delivered nationally provide product information and contacts 
for facilitating export transactions. Over 50 of these have 
been done, with several thousand attendees.

New Financial Products That Fit the Need

            Global Credit Express
    This fills a critical gap in the market, offering small 
export working capital loans (up to $500,000) to high quality 
credit with limited assets and capital, typically service 
businesses.
            Express Insurance
    This simplified policy requires only a one-page application 
and free credit reports, and are answered within five days. 
Since it began in April 2011, we have generated 579 policies in 
the amount of $278 million using 48 brokers. This received the 
Bright Ideas in Government Award from Harvard's Kennedy School 
of Government in 2012.
            Supply Chain Finance
    This can cut borrowing costs for small business suppliers 
by more than half while helping them manage cash and their 
relationships with their largest customers. Initiated in 2010, 
there have been five SCF transactions that have authorized 
$1.2B in available low-cost advance funding to small business 
suppliers.

Expanding Partnerships With Institutions That Serve Small Businesses

    Together with the SBA, Commerce, the USTDA, USDA, and OPIC, 
Ex-Im Bank has established:
            Global Business Solutions
    This pilot program aims to increase the number of small 
business exporters by 50,000 by December 2017--after enlisting 
250 banks to provide trade finance services to their clients by 
December 2015.
    It offers two simple menus of products and services from 
the export agencies that are targeted for specific segments of 
the small business and small-business lending sectors: the 
Global Business Solutions for high volume mainstream earlier 
stage businesses, and the Specialized Global Solutions for more 
advanced businesses and lenders.
    It involves 40 experienced export finance managers 
nationally selling the same products and services, shared 
marketing and training for small business lenders and their 
clients beginning in June, 2013, and interagency referral 
platform and data base for ensuring optimal service and 
tracking.

Establishing Infrastructure

    Ex-Im Bank has created the Exporter Evaluation risk scoring 
system, which enables the Bank to deliver its trade credit 
insurance approvals much more rapidly and systematically. Since 
2010 average turnaround has dropped from 30 days to 15 in trade 
credit insurance, partly as a result of this innovation.

Q.9. What challenges is the Bank facing in its effort to 
increase small business participation, and what more could be 
done?

A.9. In Fiscal Year 2012, 88 percent of Ex-Im Bank's 
transactions were for small businesses. Historically the 
biggest market for the small business has been right here in 
the U.S. and, as a result, many small businesses saw little 
need to export. In the last decade this has changed as domestic 
growth has slowed while accelerating abroad. Today, 95 percent 
of the world's customers live outside the United States and, to 
be more competitive, small U.S. businesses need to tap into 
that market.
    As more small businesses discover demand for their products 
and services and the need to go overseas, they find that their 
lenders and service providers are often not up to speed on the 
products and services they need to successfully export. This is 
why we created Global Access Forums, to educate small 
businesses on the financial tools they need to effectively 
compete overseas.
    For example, Jenny Fulton was a laid off stock broker in 
North Carolina. As a result, she decided to start canning Miss 
Jenny's Pickles and selling them to local grocers. Jenny came 
to one of our Global Access Forums, heard my presentation about 
how we work with small businesses so they can export their 
products utilizing modern credit tools, such as accounts 
receivable insurance. As she stated on 60 Minutes recently, 
that is what inspired her to begin exporting as she grew her 
company. Jenny became Ex-Im Bank's 500th Express Insurance 
customer and now she is exporting to China, Mongolia, Canada 
and other countries.
    Aside from getting the word out to small businesses as to 
how we can help them export, we need to educate U.S. banks 
about our services. Historically, the trade finance disciplines 
have been separate from the small business finance disciplines 
at most banks and this separation is largely consistent across 
the banking community. In order to bridge the gap, we have made 
trade finance products and services fit the specific needs of 
small businesses and the platforms that their lenders have 
developed to serve them. This is the primary goal of the Global 
Business Solutions program developed by the Export Promotion 
Cabinet.

Q.10. U.S. companies increasingly are challenged by subsidized 
export financing from China and other non-European countries.
    What are some examples of nontraditional financing terms 
used by China and these other countries to induce buyers to 
purchase its products?

A.10. From Ex-Im Bank's perspective, any export financing that 
does not conform to the terms and conditions set forth in the 
OECD's Arrangement on Officially Supported Export Credits are 
considered to be ``Nontraditional.'' Therefore, nontraditional 
officially (Government) supported export credits can come from 
both OECD and non-OECD countries. For example, the Canadian 
ECA, Export Development Canada (EDC), an OECD member, offers 
``market window'' financing that EDC states are available terms 
that mirror the private market (e.g., interest rates, repayment 
terms). Because of the ``market'' nature of the market-window 
financing, this form of financing is not covered by the OECD. 
As such practices are not subject to OECD reporting, Ex-Im Bank 
has no specific examples to share.
    Another form of financing that is utilized commonly in 
Asia, but is not covered by the OECD Arrangement is ``untied 
financing'' which by its very nature is not supposed to be tied 
to exports, and therefore falls outside the scope of the OECD. 
However, Ex-Im Bank has received numerous allegations of lost 
sales due to untied financing.
    Regarding China, China Eximbank provides export credit 
financing on what appears to be both OECD compliant and non-
OECD compliant terms. However, China is not a member of the 
OECD so it is not required to conform to the OECD guidelines. 
As a result, the terms of their financings are also not as 
transparent as OECD compliant loans.
    In one case, Ex-Im Bank offered to match a China Eximbank 
offer in 2010--Pakistan Rail valued the contract at $477 
million. U.S. exporters were competing with Chinese locomotive 
manufacturers. It was reported to us that China was offering 
financing terms more generous than generally allowed by OECD 
rules. China, however, refused to reveal the precise terms of 
their financing offer, a practice OECD members are required to 
follow. To level the playing field so that U.S. manufacturers 
could fairly compete for the order, Ex-Im Bank made available 
off setting financing terms. In this way, Pakistan Rail could 
choose the locomotive best suited to their needs and not 
influenced by nontraditional or one-off financings.
    In this transaction, Ex-Im Bank offered to match the 
Chinese financing of 91 percent of the contract (versus our 
usual 85 percent); charge a risk premia of 8.2 percent which is 
lower than the 21 percent OECD premia would have been, and 
matched extended repayment terms of 12 years (versus OECD's 10 
year financing).

Q.11. What measures does the Bank employ to ``level the playing 
field''?

A.11. In support of U.S. jobs, Ex-Im Bank makes available 
financings to off-set those export credits that foreign 
Governments provide for their exporters. Ex-Im Bank, acting as 
the official export credit agency (ECA) of the U.S., actively 
participates in the OECD discussions and negotiations. These 
negotiations establish the principles, disciplines and 
practices allowable by Governments that seek to minimize the 
use of export credit subsidies and to ensure a level playing 
field by preventing a ``race to the bottom'' by different 
countries. The OECD employs the principle of transparency as 
the central policing mechanism in which ECAs are expected to 
notify and provide an explanation when they intend to deviate 
from the standard guidelines. If Ex-Im Bank or any other ECA 
determines that the proposed terms are inappropriate, they can 
challenge the offering ECA with the expectation that the terms 
will be made compliant, and if not, other ECAs can match those 
terms to ensure a level playing field.
    A similar process is followed when a noncompliant financing 
offer is alleged to exist from a non-OECD member. The Pakistan 
case referenced previously is an example.
    Finally, Ex-Im Bank also requires applicants to provide the 
basis for their request for Bank support: to meet foreign ECA 
completion and/or private financing is not available. If the 
financing is needed to meet competition, Ex-Im Bank staff 
collects as much information on the alleged competition as 
possible in an attempt to confirm. This information is required 
to be included in the Board memo presented for the board of 
directors' approval consideration.
                                ------                                

               RESPONSES TO WRITTEN QUESTIONS OF
             SENATOR MENENDEZ FROM FRED P. HOCHBERG

Q.1. I am pleased Ex-Im Bank has had a carbon management policy 
in place for several years. As you know, expanding renewable 
energy exports and increasing support of exports that produce 
fewer greenhouse gas emissions in energy production not only 
increases U.S. competitiveness but also improves our 
environment. However, implementation of this policy has been 
inconsistent and I have concerns over some of Ex-Im Bank's 
fossil fuel projects, including projects that could have 
significant environmental and public health impacts.
    What is Ex-Im Bank doing to better monitor carbon dioxide 
emissions reporting from projects it finances?

A.1. Ex-Im Bank has made renewable energy exports and 
environmentally beneficial products and services a top priority 
of the Bank. In fact, there is a team of people solely 
dedicated to this effort. Additionally, Ex-Im Bank is the only 
export credit agency (ECA) that publicly discloses the expected 
amount of carbon dioxide relating to the applications for 
financing covering all projects that are expected to produce 
more than 50,000 tonnes per year. When the Bank adopted 
Environmental Guidelines applicable to high-carbon intensity 
power plant projects in March 2010, it did so only after 
vetting the proposed guidelines with environmental NGOs as well 
as U.S. exporters.
    To date, the Bank has reviewed three high-carbon intensity 
projects under these guidelines, all of which were power plants 
fueled by coal. Following a review of these projects against 
the guidelines for high-carbon intensity projects, the Board 
authorized financing for two of the projects (coal-fired power 
projects in South Africa and in India) and a financing decision 
for the third (a coal-fired power plant proposed for a large 
copper mine in Mongolia) remains pending.
    In all cases, Ex-Im Bank's support has helped sensitize the 
buyers to address low-carbon growth strategies. In the case of 
India, the Bank has already provided financing for numerous 
solar and renewable energy projects. During 2010, I met with 
Environmental NGOs and discussed their concerns about the 
projects in India and South Africa. Their concerns were taken 
into account in the Bank's decision to proceed with financing 
of these projects, which will help to meet the increasing 
demand for electric power in these countries. The Bank is 
carefully monitoring the construction of these projects, and 
when they become operational, the Bank's staff will conduct a 
rigorous monitoring regime of their environmental performance, 
including the level of carbon dioxide emissions. The Bank has 
taken measures to address concerns raised by NGOs last year 
relating to environmental and social compliance issues of the 
SASAN project in India.

Q.2. What measures are being taken to encourage foreign buyers 
to reduce the impact of fossil fuel projects?

A.2. Ex-Im Bank is the only ECA in the world that has special 
environmental guidelines addressing high-carbon intensity 
projects applicable to coal-fired power plants. These 
guidelines impose requirements on foreign buyers that are 
intended to sensitize them to the environmental effects of such 
projects, while encouraging them to address low-carbon 
alternative projects such as solar and wind energy. The 
guidelines include requirements for offsets for projects having 
very high-carbon intensity levels, the preparation of an 
analysis demonstrating that low-carbon alternatives to the 
project were addressed, and information showing that the 
project, as designed, is employing the best appropriate 
technology with respect to carbon emissions.
    In 2010, the Board of Directors initially voted to withhold 
financing for U.S. exports destined for the SASAN coal-fired 
power project in India, based on the project's high-carbon 
intensity and its projected levels of carbon dioxide 
production. Shortly after this action the owner of the project 
both improved the performance of the power plant and informed 
the Bank that it was prepared to commit to build solar power 
projects totaling 250 MW in capacity. With this new information 
stating the buyer's commitment to invest in renewable energy, 
the Board of Directors reviewed for a second time the 
transaction's impact on greenhouse gas production and it 
subsequently voted to finance the project. I am pleased to 
report that Ex-Im Bank has already supported U.S. exporters 
involved in several solar projects for this buyer, totaling 
approximately 150 MW. Furthermore, it has financed more than 
250 MW in solar energy projects throughout India since 2010, 
and we continue to address applications for renewable energy in 
that market.
    Ex-Im Bank also offers financing incentives specifically 
applicable to renewable energy projects, incentives that 
include financing repayment terms that can be extended to 18 
years, well above the maximum terms available to conventional 
power projects. These financing incentives have helped the Bank 
increase its portfolio of renewable energy projects by hundreds 
of millions of dollars since 2008. In the case of India and 
South Africa where Ex-Im Bank provided financing for coal-fired 
power plants, those plants would have gone forward with or 
without Ex-Im Bank financing. However, through the leverage it 
has gained by applying its high-carbon intensity guidelines to 
these projects, Ex-Im Bank believes that the projects will be 
operated in a more environmentally responsible manner, with 
measures taken to control the level of greenhouse gases that 
they will produce. Finally, there continues to be evidence that 
the owners of these projects are also directing more attention 
and resources to the development of alternative low-carbon 
producing projects.

Q.3. As you know, the Equator Principles were agreed to by over 
70 financial institutions, including Ex-Im Bank, setting 
standards to assess and manage social and environmental risks 
in financing projects. How have these standards been applied to 
Ex-Im Bank's work?

A.3. Ex-Im Bank has integrated the Equator Principles into its 
Environmental Procedures and Guidelines. Before joining the 
Equator Principles the Bank's environmental specialists and 
staff from its Office of the General Counsel interfaced 
extensively with members of the various committees of the 
Equator Principles Financial Institutions to ensure that Ex-Im 
Bank understood and was prepared to properly implement the 
various standards and procedures of the Equator Principles.
    The Bank successfully implements and manages the Equator 
Principles standards on all transactions covered by these 
Principles. For example, the Bank requires, and conducts due 
diligence to ensure that all projects structured as project 
finance comply with the Performance Standards on Environmental 
and Social Sustainability of the IFC, as required by the 
Equator Principles, and it engages independent environmental 
and social consultants to advise the Bank on elements 
pertaining to the environmental and social risk and impacts 
associated with the project.
    In addition, in keeping with procedures of the Equator 
Principles, Ex-Im Bank disclosed the environmental 
categorizations of all the project finance transactions it 
authorized during 2012, and it included the appropriate 
environmental and social covenants in the financing documents 
of these projects in compliance with the Equator Principles. 
Finally, Ex-Im Bank staff, including its Environmental 
Specialists, continue to participate in committees with other 
members of Equator Principles as they work to prepare a third 
revision to the Principles, and to that end the Bank currently 
cochairs the Equator Principles Association's Climate Change 
Working Group to promote further measures to advance the level 
of environmental stewardship among members of the Equator 
Principles.

Q.4. As you know, greenhouse gas pollution has the same impact 
on global warming regardless of the point of origin. Further, 
the EPA is currently working on greenhouse gas emission rules 
for new power plants. Should we apply those same rules to power 
plants you finance?

A.4. While we work to encourage ECAs around the world to follow 
more stringent environmental rules, many of them operate under 
their own rules and regulations, while other ECAs like Ex-Im 
Bank operate within the framework of the Organization for 
Economic Cooperation and Development (OECD).
    Ex-Im Bank works to support U.S. jobs by ensuring a level 
playing field for U.S. exporters competing for foreign 
projects. The Bank is negotiating with other Export Credit 
Agencies within the OECD to establish common guidelines to 
address climate issues that would be applicable to all high-
carbon intensity projects.
    This is a strategy similar to that adopted by Ex-Im Bank 
over 15 years ago at the OECD which resulted in the 
ratification by all ECAs of a common set of environmental 
guidelines applicable to all projects that are based on the 
environmental standards of the World Bank Group.
    When we participate in financing projects, we are in a 
position of influence and can negotiate to improve the 
environmental performance of those projects, which in 
practically all cases, would be built anyway, possibly without 
U.S. exports or environmental improvements.

Q.5. I am also pleased to see in your official testimony that 
the Export Import Bank is focused on supporting the President's 
National Export Initiative goal of doubling U.S. exports by the 
end of 2014, and that Ex-Im Bank is promoting export 
opportunities with U.S. companies, including through its 
initiative, ``Global Access for Small Business.'' Ex-Im Bank is 
responsible for supporting thousands of U.S. companies and 
billions of dollars of U.S. exports of goods and services, and 
plays a critical role in our broad effort to increase American 
exports. Nevertheless, while total goods and services exports 
have increased approximately 40 percent since 2009, supporting 
an additional million jobs, this is below the pace we need to 
see for a doubling of exports. Furthermore, less than 1 percent 
of American companies export their products, and this is well 
below the average in other developed economies. I would 
appreciate Ex-Im Bank's comments on what it is doing to address 
these shortcomings and how the Administration as a whole can do 
better on export promotion, especially with small businesses.

A.5. Ex-Im Bank plays an important role, but we are not a 
development or aid agency. Ex-Im Bank's role is to fill 
financing gaps and level the playing field so exporters can 
compete based on the price and quality of their goods and 
services. Other agencies including Commerce, TDA, and OPIC 
develop markets for U.S. exporters. We finance those who need 
us with reasonable assurance of repayment.
    Given that 95 percent of the world's consumers are outside 
the U.S., it is critical to do outreach, meet foreign 
competition, and encourage businesses that are not exporting, 
to do so. The Export Promotion Cabinet Report of July 2012, 
proposes a segmentation of the small business sector by stage 
of development and need, systematically allocating resources to 
meet those needs. The Ex-Im Bank role is to deliver finance and 
insurance products to the appropriate segments in coordination 
with the SBA, Commerce, USTDA, USDA, and OPIC under the Global 
Business Solutions program. Ex-Im Bank's internal small 
business strategic plan is completely aligned with this formal 
consolidated focus of resources and effort. Our new Global 
Business Solutions pilot program calls for adding 250 small 
business lenders to the trade finance arena by December 2015, 
and 50,000 new small business exporters to the current 296,000 
by December 2017.

Q.6. With so few American companies exporting, as a percentage 
of the total, what actions are Ex-Im Bank and the 
Administration taking to educate and orient potential 
exporters, what are the main obstacles that inhibit or prevent 
American companies from taking advantage of overseas 
opportunities, and what legislative, regulatory, or monetary 
impediments complicate Government agencies' efforts to increase 
exports and support exporters?

A.6. Ex-Im Bank and USG agencies throughout the Administration 
are working to support President Obama's National Export 
Initiative, which is renewing and revitalizing the efforts of 
the U.S. to promote exports abroad. These efforts have been 
paying off, as U.S. exports of goods and services reached an 
all-time high, totaling $2.2 trillion in 2012--which represents 
39.7 percent above the level of exports in 2009 (according to 
Department of Commerce released figures). However, despite the 
success to date of the National Export Initiative, there are 
many U.S. companies that are still not capitalizing on the 
opportunities that exist abroad, and Ex-Im Bank and the 
Administration have more to do in order to reach these U.S. 
companies to educate them about how selling overseas can grow 
their companies and increase jobs.
    To help get the word out to small businesses around the 
country, Ex-Im Bank has developed Global Access Forums, which 
bring together exporters, representatives of Federal exporting 
agencies and local banks. These half-day forums, which are held 
across the Nation, provide product information and contacts for 
facilitating export transactions. More than 50 of these have 
been done, with several thousand attendees, including forums in 
Newark and West Long Branch, New Jersey. When small business 
owners come to a Global Access Forum and they hear from other 
businesses in the local area that are exporting using our 
services, they see that they too can overcome the fear of 
exporting.
    Every month I send a letter to the Members of Congress and 
governors whose States or districts we have provided financing. 
In addition, I have spoken at National Governors' Association 
annual conferences and National Conference of Mayors to help 
educate them about Ex-Im Bank's programs and how they can help 
their constituent businesses export.
    In addition, Ex-Im Bank has undertaken a number of other 
measures to bring awareness to U.S. companies of how its 
products and services can help mitigate the risks of doing 
business aboard. The Bank's efforts include:

    dedicating a Web portal to educate small business 
        customers on the Bank's resources and linking 
        prospective exporters to BusinessUSA to inform them of 
        the resources of other USG trade agencies,

    hosting Ex-Im 101 seminars open to members of the 
        public in order to learn more about the Bank,

    leveraging partnerships with cities and States 
        entities in order to leverage the Bank's resources and 
        expand its reach into more regional markets,

    hosting outreach listening sessions with local 
        business leaders across the country to talk about 
        exporting, and

    opening four new regional offices in the last year 
        in order to expand Ex-Im Bank's direct reach to more 
        small businesses around the country.

    In addition, Ex-Im Bank is an active participant in 
interagency efforts to raise awareness of export opportunities. 
These efforts include:

    working with Commerce on the BusinessUSA and 
        export.gov Web portals,

    supporting Commerce's Doing Business in Africa 
        domestic exporter outreach campaign,

    partnering with SBA and Commerce on the Global 
        Business Solutions program to co-offer products and 
        services,

    assisting with U.S. commercial trade advocacy 
        efforts with foreign Government officials abroad, and

    participating with Commerce in trade missions and 
        the sharing of trade leads.

    Through its outreach efforts to U.S. companies, Ex-
        Im Bank has learned of certain obstacles that inhibit 
        companies from taking advantage of opportunities 
        abroad. These obstacles include access to capital, the 
        uncertainties of doing business in riskier markets 
        abroad, knowledge of opportunities that exist in 
        foreign markets, and fear of doing business in 
        countries where the American exporter does not know the 
        system. Getting the word out about how Ex-Im Bank can 
        give exporters peace of mind when exporting, and can 
        help alleviate some of these concerns. For example, 
        small businesses know how to follow up and get paid if 
        they are selling to New Jersey or New Mexico, but they 
        often don't know what to do if they are selling to New 
        Delhi or New Zealand. That is where Ex-Im Bank comes 
        in.

    Budgetary concerns are another impediment complicating Ex-
Im Bank's efforts to support U.S. exports. Ex-Im Bank is a 
self-sustaining agency that has generated nearly $1.6 billion 
in excess revenues above and beyond all operating expenses, 
loan loss reserves, and claims. If Congress would allow the 
Bank to retain more of the money it earns, we would be able to 
increase our efforts to reach small businesses and continue to 
generate significant revenues for taxpayers.
    While we are best equipped to speak only to the efforts of 
the Ex-Im Bank to reach more U.S. companies as well as the 
obstacles that Ex-Im Bank is aware of that inhibit American 
companies from taking advantage of overseas opportunities--
other agencies would certainly be able to contribute thoughts 
to this important conversation.

Q.7. Promoting exports and supporting U.S. companies involved 
in exporting requires a whole-of-Government approach, including 
such agencies as the Departments of State and Commerce, USTR, 
the Overseas Private Investment Corporation, the U.S. Trade and 
Development Agency, and many others, in addition to Ex-Im Bank. 
However, it is not always clear that the whole is greater than 
the sum of the parts and that all of these agencies are 
coordinating in a comprehensive effort to support exporters 
along the entire value chain. I would appreciate, therefore, 
your candid assessment of how well U.S. Government agencies are 
doing collectively to identify opportunities in overseas 
markets, promote these opportunities domestically, support U.S. 
exporters' efforts to take advantage of these opportunities, 
and then ensuring their overseas business deals are supported 
and protected. How does Ex-Im contribute to this process? 
Please explain the coordination procedures and mechanisms with 
other key agencies, and what initiatives are Ex-Im and the 
Administration doing to improve our success rate?

A.7. Given the collective efforts of the U.S. Government to 
help support an all-time record level of U.S. exports, the work 
of the U.S. Government to help identify opportunities, promote 
them domestically, support U.S. exporters, and advocate for 
them aboard has been a huge success. However, we are committed 
to ensuring an even larger share of our companies are 
capitalizing on the opportunities aboard as well.
    To address the needs of U.S. exports and enable them to 
compete effectively, the Bank has many innovative tools to 
provide U.S. companies with a competitive advantage, including 
capital markets financing, cofinancing, and direct loan 
products. In addition, the Bank has helped U.S. companies 
identify opportunities by focusing its business development 
efforts on key markets abroad--which allows for stronger 
foreign Government engagement, fosters an awareness of Ex-Im 
Bank by foreign buyers in key markets and demonstrates the 
strong backing of the U.S. Government in support of its 
companies.
    There are several coordinated mechanisms and procedures 
with key trade agencies to help improve our success rate.
    First, through the President's Export Council, Ex-Im Bank 
participates in high-level engagement with the business 
community, other key agencies and Members of Congress in order 
to work to further identify priorities and initiatives. At the 
conclusion of 2012, the President's Export Council published a 
report making recommendations to the USG and which tracked the 
progress of identified priorities.
    Second, through a number of coordinated interagency groups 
spearheaded by Commerce, the Bank shares information on its 
engagement abroad, including trade leads and advocacy 
priorities.
    Third, Ex-Im Bank is an active participant in trade 
missions and other USG conferences and summits, both 
domestically and abroad, in order to make available the 
coordinated resources of the U.S. Government to support the 
efforts of U.S. companies.
    Fourth, the Bank is working with key agencies to copromote 
(both domestically and abroad) its products and services, 
thereby capitalizing on the collective resources and reach of 
the USG.
    A few illustrative examples of this work include:

  1.  a joint effort by SBA, Commerce and Ex-Im Bank to 
        copromote the products and services offered by each 
        agency in offices all around the country; and

  2.  work with State to better train foreign commercial 
        service officers in Ex-Im Bank product offerings to 
        better enable them to identify trade leads and speak 
        directly the Bank's resources in the market

  3.  the opening of the U.S.-Africa Clean Energy Development 
        and Finance Center, an initiative by USTDA, OPIC, and 
        Ex-Im Bank to provide a coordinated approach to clean 
        energy project development in sub-Saharan Africa

    Coordination and communication among the various agencies 
that support exports is also critical. Each month, along with 
my counterparts from USTR, Commerce, TDA, State, and OPIC, I 
meet to discuss pressing issues and ensure that we update each 
other regarding problems or progress at the various agencies. I 
am also a part of the Trade Promotion Coordinating Committee 
(TPCC), an interagency task force that meets regularly and to 
ensure s the coordination and development of a Government-wide 
export promotion plan. It is comprised of 20 agencies with a 
core of seven agencies--Ex-Im Bank, Commerce, OPIC, TDA, State, 
USDA, and SBA.
    Ex-Im Bank also works closely with the State Department 
overseas where the Foreign Commercial Service officers promote 
Ex-Im Bank and send referrals to the Bank. Also, most of Ex-Im 
Bank's field offices are colocated with Commerce Department and 
SBA offices, which provides cost efficiencies as well as 
increased communication and one-stop services for customers.
    Under the Global Business Solutions pilot, Ex-Im Bank is 
marketing seven services provided by Commerce and the USTDA 
that specifically help small businesses develop export 
strategies, get market research, identify buyers, research 
buyers, visit target countries, and meet buyers. Together with 
the SBA, Ex-Im Bank targets the users of these services with a 
menu of products that cover the full range of financing needs 
from purchase orders to investment in plant and equipment.

Q.8. Export Credit Agencies (ECAs) are the largest source of 
official financing for developing countries. Increasingly, many 
Governments of emerging market countries are using their own 
ECA's to promote exports of goods and services. However, many 
of these ECAs operate outside of global coordinating 
mechanisms, such as the OECD arrangement on export credits. Is 
this a concern for ensuring that American exporters enjoy a 
level playing field when competing in overseas export markets, 
and what actions is the Administration pursuing to ensure that 
all ECAs play by the same rules?

A.8. Yes, emerging market country activity is growing in scope 
and scale. A number of these foreign Government-supported 
programs are outside the scope of the OECD rules. They are 
difficult to monitor since the terms and conditions of their 
financings are generally not transparent yet at the same time 
they have a direct impact on the ability of U.S. exporters to 
compete.
    Activity by these non-OECD member emerging market exporters 
ranges between a conservative estimate of $53.8 billion to a 
higher estimate of $83.8 billion. Ex-Im Bank has examined these 
programs and has tried to identify their implications in its 
2011 Competitiveness Report and will further inform Congress of 
its findings in the 2012 report due June 30.
    Following up on discussions with President Obama and now 
President Xi Jinping of China in 2012, the U.S. and China 
started bilateral discussions on a new order of export credit 
parameters that has now turned into multilateral negotiations--
the International Working Group (IWG). The goal is to have some 
framework agreed to by 2014.
                                ------                                

        RESPONSES TO WRITTEN QUESTIONS OF SENATOR VITTER
                     FROM FRED P. HOCHBERG

Q.1. Please submit any and all economic analysis documents on 
harm to any other U.S. companies that was conducted all wide 
body aircraft financing done in 2012.

A.1. The Economic Impact Procedures for aircraft went into 
effect on April 1, 2013. In 2001, the Bank considered the lack 
of any U.S. airline concern for the preceding 15 years to be a 
sufficient basis for introducing--purely as an operating 
efficiency measure--a screen that filtered all airline 
purchases of aircraft from any consideration of detailed 
economic impact analysis. Hence, in 2012 the applicable Ex-Im 
Bank economic impact procedures precluded there being any 
detailed economic impact analysis done on any wide-bodied 
aircraft authorized in that year. As such, there were no 
economic analyses done on any wide-body aircraft transactions 
in 2012 and therefore there are no documents on harm to U.S. 
companies from this period we are able to provide.

Q.2. In your past Testimony Mr. Hochberg, you stated that the 
Bank's ``prudent oversight and due diligence standards'' is 
limited to monitoring the default rate. I would have a 
different opinion, I would say that your prudent oversight and 
due diligence should also include ``insuring that full 
consideration is given to the extent to which any loan or 
financial guarantee is likely to have an adverse effect on U.S. 
industry or employment.'' Can you please explain why that is 
not a part of your interpretation?

A.2. To be absolutely clear, I never made the statement that 
oversight and due diligence standards ``are limited to 
monitoring the default rate.'' Those are your words that you 
have attached to a small snippet of my testimony. For the 
record and to provide factual context to your question, my 
testimony was:

        Lastly, if confirmed, I will ensure that the Bank 
        continues its prudent oversight and due diligence 
        standards to protect taxpayers. As a result of 
        provisions inserted into the Bank's Charter during last 
        year's re-authorization, every 90 days Ex-Im Bank 
        submits a default rate report to Congress. I am pleased 
        to inform you that our most recent report dated March 
        31, 2013, showed a default rate of 0.307 percent. In 
        addition to this low default rate, over the past 5 
        years Ex-Im Bank has generated $1.6 billion for U.S. 
        taxpayers, above and beyond all administrative 
        operating costs, claims and loan loss reserves we have 
        set aside. We operate at no cost to the taxpayers and 
        actually generate revenue for them while supporting 
        U.S. jobs.

    I have always held the position that prudent oversight and 
due diligence standards encompass a wide array of factors, not 
simply monitoring the default rate. The low default rate, 
however, is the ultimate test of the Bank's due diligence. The 
Bank's due diligence includes wide gathering of financial and 
nonfinancial information, including information related to both 
relevant environmental and economic impact considerations.
    The Ex-Im Bank has a comprehensive risk management 
framework that we believe minimizes claims. This framework 
starts with strong underwriting and documentation and continues 
with proactive monitoring and, if necessary, with aggressive 
recovery efforts. Ex-Im Bank is very proud of our efforts in 
these areas, efforts that in fiscal year 2012 resulted in the 
payment of $37 million in gross claims on a portfolio of $106 
billion while collecting $1 billion in fee income. The Bank has 
a current default rate (March 31, 2013) of 0.307 percent and 
recovery efforts of approximately 50 percent on all claims 
paid. These results are due to the Bank's prudent oversight and 
due diligence standards.
    Separately, the Bank also has comprehensive, transparent 
procedures to evaluate the potential economic impact of a 
transaction on U.S. industries and employment. This is an 
important part of the Bank's procedures, but is separate from 
its credit risk analysis.

Q.3. Under what circumstances, other than bad credit, should 
the Bank deny an application for financing? Can you give me an 
example of a situation where the Bank would deny an 
application?

A.3. Our Charter instructs us to review applications for 
financing for a list of reasons, including creditworthiness, 
adverse economic impact on the U.S. economy, consistency with 
U.S. law (most notably our prohibition against financing 
defense articles and prohibition against financing sanctioned 
countries) and environmental concerns. Under language added to 
its Charter in 1993, the Bank was directed to establish 
environmental procedures that permitted the Board of Directors 
to withhold financing from a project for environmental reasons 
or to approve financing after considering the potential 
environmental effects of a project.
    In 2010, the Board of Directors initially voted to withhold 
financing for U.S. exports destined for the SASAN coal-fired 
power project in India, based on the project's high carbon 
intensity and its projected levels of carbon dioxide 
production. Shortly after this action, the owner of the project 
informed the Bank that is was prepared to commit to building 
solar power projects totaling 250 MW in capacity. With this new 
information stating the buyer's commitment to invest in 
renewable energy, the Board of Directors reviewed for a second 
time the transaction's impact on greenhouse gas production and 
it subsequently voted to finance the project. I am pleased to 
report that Ex-Im Bank has already supported U.S. exporters 
involved in several solar projects for this buyer, totaling 
approximately 150 MW. Furthermore, it has financed more than 
250 MW in solar energy projects throughout India since 2010, 
and we continue to address applications for renewable energy in 
that market.
    Over the years there have been few explicit denials on 
economic impact grounds, but several major cases never made it 
through the application process. Perhaps the most noteworthy 
are a D-RAM project in Singapore (SMIC) where the proposed 
facility would have competed with U.S. production in Idaho and 
other locations. Members of the Senate Banking Committee and 
others raised concern about the facility. After the Bank's 
consideration of these concerns the application was withdrawn 
and D-RAM was added to Ex-Im Bank's Sensitive Sectors List.

Q.4. Do you read the economic-impact provisions in the Bank's 
statutory charter as requiring the Bank to conduct economic 
impact analyses? Or are you free to ignore those provisions?

A.4. We adhere to all statutory requirements in our Charter. 
Indeed I read the economic impact provisions in the Bank's 
statutory Charter as requiring the Export-Import Bank to 
consider in all transactions the extent to which a transaction 
is likely to have an adverse effect on industries; but to 
conduct a detailed economic impact analysis on only those 
transactions where there is a likelihood of substantial adverse 
economic impact. In FY2012, 88 percent of all transactions were 
for small business. Detailed economic analyses take a long time 
to conduct and require significant staff resources. If a 
detailed economic analysis were required on every transaction, 
the potential for lost export sales would be enormous; foreign 
buyers would simply purchase their goods and services from a 
foreign source where their ECA financing does not require such 
analysis. The result would be a significant loss of U.S. jobs 
in States like Louisiana, where since 2007 Ex-Im Bank has 
authorized $10 billion in transactions to 143 exporters, 85 of 
which are small businesses.
    Accordingly, all applications are subject to filters 
designed to: (i) identify those cases associated with specific 
legislative prohibitions (e.g., cases in which trade measures 
are applicable), and (ii) determine what applications have the 
potential to cause substantial injury to the U.S. industry 
(when the new foreign production equals or exceeds 1 percent of 
comparable U.S. production).

Q.5. There are some who say you shouldn't be reconfirmed 
because you are ignoring the letter and definitely the spirit 
of the Ex-Im reauthorization bill specifically around 
conducting economic analysis on transactions where there may be 
economic harm to another U.S. Company, what would you say to 
that charge?

A.5. I would respectfully disagree with them. I would tell them 
that no other ECA in the world is as transparent as Ex-Im Bank 
is. We have policies to protect U.S. businesses from 
significant economic harm and we follow them judiciously.
    The Export-Import Bank has always followed both the 
historical letter of its Charter language on the nature and 
scope of its economic impact responsibilities, as well as 
embraced the spirit of those Charter provisions. The Bank has 
had economic impact procedures in place for approximately 40 
years and widely published for approximately 15 years. The Bank 
from time to time updates and modifies those procedures to 
accommodate changing circumstances. For example, the Bank has 
worked over the past year to update and implement our revised 
economic impact procedures. The Economic Impact Procedures and 
Methodological Guidelines approved on November 19, 2012, were 
developed by Bank staff and widely vetted with stakeholders and 
relevant USG agencies. They are available for the entire world, 
including our competitors, to see.
    The current procedure updates the economic impact mandate 
by: (1) explicitly defining the purpose of the economic impact 
mandate; (2) codifying the principles that guide the 
implementation of all economic impact reviews; (3) publishing 
the analytical methodology that introduces flexibilities to 
address the limitations of a ``one-size fits all'' approach; 
and (4) reintroducing services (specifically passenger airline 
services) in the scope of the detailed economic impact 
analysis.

Q.6. Does Ex-Im plan to protect the U.S. airline industry from 
both predatory competitive practices of foreign airlines (State 
ownership, subsidies, etc.) and the benefits of Ex-Im support 
when it finances aircraft?

A.6. Our mission is to support U.S. jobs created or sustained 
by export sales that require our financing and meet our 
eligibility standards. Unfortunately, those requirements cannot 
possibly address all of the inequities or imbalances that might 
exist in any industry including the airline industry. We do, 
however, review the economic impact of all transactions to 
determine if the benefits of any specific transaction outweigh 
any potential injury to the U.S. economy. I should add no other 
export credit agency in the world has the requirement to review 
economic impact. We are the only ECA that has the requirement 
to protect U.S. industries from the potential harm that other 
exports might cause.
    Foreign carriers have a choice when purchasing large 
aircraft. Currently, they can choose between Boeing and Airbus 
and soon other Nations will be competing for these sales as 
well. Globally aircraft sales rely in part on export credit 
support to complete those sales. If Ex-Im Bank does not provide 
financing to the foreign buyers of U.S. aircraft, then Airbus, 
Embraer, and Bombardier will have a competitive advantage over 
Boeing since their sales campaigns are generally supported by 
Government backed financing. The result will be the loss of 
thousands of U.S. jobs.
    Pursuant to the new 2013 Economic Impact Procedures, the 
Bank, among other things, reintroduced subjecting each aircraft 
application to a likelihood of substantial injury analysis. If 
a likelihood of substantial injury is found, the transaction is 
then subjected to a detailed economic impact analysis. The 
structure of any detailed economic impact analysis for an 
aircraft sale carefully balances the benefits accruing to all 
U.S. manufacturers with any possible cost that may fall on U.S. 
airlines.
    As I mentioned export credit support is critical for 
airlines globally. When eligible, U.S. airlines avail 
themselves of financing from foreign ECAs, particularly from 
Canada and Brazil. Some airlines also provide services to 
foreign carriers that directly benefit from Ex-Im Bank 
financing. One example is a Delta airlines transaction where 
Ex-Im Bank is supporting an estimated 400 jobs in Atlanta, GA, 
by providing financing for the export of almost $200 million of 
engine overhauls services for their customer and investment 
partner Gol airlines of Brazil. U.S. carriers are well 
experienced and regular users of foreign export credit to 
support their businesses and expansion.

Q.7. Do you believe that an exporter, representing less than 2 
percent of U.S. exports, should benefit from 46 percent of Ex-
Im's total portfolio? How is this fair to the other export 
sectors of the U.S. economy, and particularly to small and 
medium enterprises?

A.7. The 46 percent number you cite is for all aircraft that 
the Bank finances, not just one exporter. That number includes 
commercial aircraft, corporate aircraft, helicopters, crop 
dusters, etc. Ex-Im Bank's mandate is to support U.S. jobs 
through exports. We are demand-driven and support those 
applications that meet the Bank's reasonable assurance of 
repayment threshold as well as our environmental and economic 
impact policies, in order to level the playing field. Ex-Im 
Bank only finances roughly 2 percent of the Nation's exports, 
largely by financing the foreign buyers of our exports, not the 
exporters themselves. Certain export sectors rely more on 
export credit support than others to close the sale. They 
include, the small business sector in general, satellites, 
locomotives, power plant (particularly nuclear energy), 
aircraft, and large infrastructure projects.
    Ex-Im Bank is called upon to support the foreign purchases 
of U.S. goods and services that are difficult to finance such 
as aircraft, infrastructure, satellites, power plants, nuclear 
power, and small business. Those are the exports that the 
private sector has been reluctant to finance.
    The exporter you appear to reference is the single largest 
exporter in the United States, exporting tens of billions of 
dollars' worth of goods each year. They also source from 
thousands of small U.S. businesses providing them with billions 
of dollars that support thousands of sustainable U.S. jobs.

Q.8. Does the bank, which cited foreign export credit 
competition as the reason for 88 percent of its FY2012 
commercial aviation transaction financings and which assumes 
foreign export credit agency support will always be available 
in its revised Economic Impact Procedures, even consider or 
investigate the possibility of competitive, market-based 
financing availability before approving transactions? If so, 
how does this occur?

A.8. Yes, the Bank does investigate the possibility of 
competitive, market-based financing availability before 
approving transactions. As part of the analysis of a 
transaction and, depending on the likelihood of nonexport 
credit supported private sector financing being available based 
upon staff's evaluation of the airline's underlying 
creditworthiness, the type of aircraft to be exported, and the 
political and economic country conditions in the airline's 
country, airlines may be asked to provide information related 
to other, non- Ex-Im Bank supported financing offers that it 
received in connection with financing the aircraft. In 
addition, airlines are always encouraged to seek alternative 
private sector financing for the remainder of the aircraft. For 
example, just last week the Board approved financing for Gol 
Airline's (Brazil) purchase of one Boeing 737 aircraft. Gol is 
taking delivery of nine Boeing 737 aircraft in 2013; however, 
the Bank strongly encouraged the airline to make other 
arrangements for the financing or operating lease of the 
remaining eight aircraft. It is worth noting that Gol is the 
only major all Boeing narrow body aircraft operator remaining 
in South America. All of the other major South American 
airlines operate mixed fleets.
    Globally, competition between U.S. manufactured Boeing 
aircraft and European manufactured Airbus aircraft is intense. 
During the 6 year period of 2007 through 2012, Airbus won more 
new orders and delivered more new aircraft than Boeing did in 5 
of the 6 years.

Q.9. When Ex-Im finances aircraft for leasing companies, it 
makes sure that the specific aircraft will not be leased into 
the Home Markets to protect Boeing sales to Home Market 
airlines from subsidized financing. Does the Bank take similar 
steps to ensure that it does not subsidize specific aircraft 
that will be flown in these Home Markets to disadvantage U.S. 
airlines?

A.9. Ex-Im Bank undertakes an economic impact process that 
analyzes every transaction for foreign air carriers. Ex-Im Bank 
programs do not subsidize any aircraft or airline. Ex-Im Bank 
always charges a risk premium that is commensurate with the 
risk that Ex-Im Bank takes. In addition, the 2011 Aircraft 
Sector Understanding adjusts ECA financing rates and fees every 
90 days, so that the financing closely approximates private 
market rates.
    We provide financing on terms within the OECD arrangement 
and our loans are paid back. Every financing Ex-Im Bank 
authorizes is fully consistent with the rules and provisions of 
the WTO.
    Ex-Im Bank's mandate is to support U.S. jobs through the 
export of U.S. manufactured goods and services. Accordingly, 
Ex-Im Bank's Charter does not permit Ex-Im Bank to support 
aircraft sales to U.S.-based airlines. As a result, Ex-Im Bank 
has taken the position that if Ex-Im Bank could not directly 
finance the sale of aircraft to an airline based in the United 
States, the Bank should not indirectly finance the aircraft for 
use by a U.S.-based airline (i.e., through an operating leasing 
company).

Q.10. How does Ex-Im reach judgment on whether or not foreign 
ECA competition exists? Does Ex-Im attempt to negotiate a 
stand-down from European ECAs so that market-based competition 
can be used by both sides for individual transactions?

A.10. Ex-Im Bank explores the existence of foreign official 
financing competition and relies on lenders and exporters to 
inform the Bank as to whether foreign ECA competition exists in 
any given transaction. Any applicant to Ex-Im Bank must state 
whether there is foreign ECA competition. Several times over 
the course of the last two OECD Aircraft Sector Understanding 
negotiations, U.S. negotiators explored the European 
willingness to consider market-based options on individual (or 
types of) cases. Each and every time, the initiative was 
rejected.

Q.11. In addition, in Ex-Im's 2012 Reauthorization, Congress 
mandated that the Treasury Department initiate and pursue 
negotiations to substantially reduce, with the goal of 
eliminating, aircraft export credit financing by all ECAs, 
including specifically for wide-body aircraft.
    How does Ex-Im determine that market financing is not 
actually available? What is the process?

A.11. Ex-Im Bank first explores the existence of foreign 
official financing competition. If such competition exists, we 
seek the details on the ECA financing offer to determine if 
there is a private market option and if so, determine if these 
terms match the foreign ECA terms. However, if it does not, Ex-
Im Bank identifies the gap in commercial availability and 
attempts to shape its support to the gap.

Q.12. Do you believe that Ex-Im should be the lender of last 
resort or do you want to maintain a certain level of Ex-Im 
business?

A.12. Ex-Im Bank is the lender of last resort. We finance 
transactions that the commercial banks are unwilling or unable 
to finance because of lack of capital, reluctance to lend, 
exposure limits, etc. Our mission is to support U.S. jobs 
through exports. The level of Ex-Im Bank activity is determined 
by the size of gaps (e.g., competition to be met, insufficient 
amount and terms from the private market) to be filled in any 
given year.
    In the small business sector, we target the transactions 
that the banks and other insurers don't find economically 
feasible to do. This does not necessarily mean taking 
additional credit risk. Because the incidence of exporting is 
so low in the small business sector, Ex-Im Bank could grow 
substantially without altering credit standards.

Q.13. The Bank's new Economic Impact Procedures (EIPs) are now 
in effect and the Board is currently reviewing an Air China 
transaction for more than $100 million worth of 777s to Air 
China. In the notice for this transaction it is stated that 
these aircraft may result in competition with U.S. airlines. 
What impact, if any, do you think the new EIPs will have on 
whether this transaction will be approved? Will the bank agree 
not to finance aircraft to China that compete with U.S. 
airlines' business just as you prohibit such financing that 
compete with Boeing's business in the U.S. (and France, 
Germany, and the U.K.)?

A.13. The Air China transaction you reference was subject to 
Ex-Im Bank's new EIPs, and it was determined that although the 
transaction is more than $200 million and the supported 
aircraft will operate two routes that will compete with U.S. 
carriers, the net addition of aircraft seat capacity does not 
meet the scale associated with having a potentially substantial 
impact. As such, the transaction was cleared for credit 
analysis without further economic impact review in the form of 
a detailed economic impact analysis. Given this determination, 
it is anticipated that the new EIPs will not have any impact on 
whether this transaction will be approved. However, because 
approval of this transaction is determined by the individual 
decision of each member of the Board of Directors it is 
impossible to forecast with certainty whether each Board member 
will choose to support or not support this particular 
transaction.

Q.14. The last Ex-Im reauthorization required the Department of 
the Treasury to begin negotiations with the European Export 
Credit Agencies supporting Airbus to ``substantially reduce or 
eliminate'' export credit financing for wide body aircraft. The 
first report on this--which Congress received in November--was 
far from a report on negotiations and more of a history of 
Export Credit financing. How will you push these required 
negotiations moving forward and what kind of substantive 
reports can we expect to see on the negotiations from the 
Administration moving forward?

A.14. In Ex-Im Bank's 2012 Reauthorization, Congress mandated 
that Treasury initiate and report on the negotiations described 
in the question, therefore, Ex-Im Bank is not in a position to 
comment on the content of future Treasury reports. Separately, 
Ex-Im Bank will continue to play an important role in 
supporting Treasury and Administration efforts in the 
International Working Group on Export Credits, which represents 
an important effort to bring China and other emerging economies 
into a multilateral rules-based framework for official export 
credits. Ex-Im Bank agrees with Treasury and the Administration 
that getting all of the major providers of official export 
credits to negotiate and ultimately abide by a common set of 
international guidelines is the first step in the process of 
reducing, with the ultimate goal of eliminating, trade 
distorting export financing programs, and will help ensure that 
official export credit support complements market financing, 
rather than crowding it out.

Q.15. The report on negotiations with the Europeans included 
one interesting comment. According to Treasury, ``It is 
important that demand for official export credit support arise 
only from a lack of market financing and not the mere presence 
of competing official export credit offers.'' How does this 
statement of policy mesh with the fact that 38 of 43 (88 
percent) Ex-Im FY2012 aircraft financings were completed ``To 
meet competition from a foreign officially sponsored export-
credit agency.''

A.15. For Ex-Im Bank to consider the authorization of an export 
credit transaction, the deal must meet one or both of two 
tests:

  1.  demand for official export credit support can arise from 
        absence of available private market financing; and/or

  2.  the existence of foreign ECA competition.

    If the underlying product or pricing is not similar, the 
presence of foreign ECAs is not necessarily a strong stand-
alone justification for Ex-Im Bank financing. However, a 
foreign ECA that is supporting an exported good that has the 
same technical specifications as the U.S. export and is 
comparably priced is a clear and strong case for Ex-Im Bank 
support even when there is potential market financing 
available. Hence, the head-to-head competition on near 
identical products, in this case aircraft, justifies Ex-Im 
Bank's support based on meeting competition from a foreign 
officially sponsored export credit agency alone.

Q.16. Chairman Hochberg, since July of 2010 the Ex-Im Board has 
failed to deny a single financing application which it 
reviewed. In fact, in your entire tenure, the Board has only 
denied 16 applications (versus 52 during the term of your 
immediate predecessor and 174 during the term of Chairman 
Merrill). How do you explain such a record? Has the world 
become absent of risk since your confirmation?

A.16. Over the last several years, private sector banks have 
contracted their lending significantly, shifting stronger 
credits to Ex-Im Bank. The result is both increased demand for 
our services as well as stronger credit applications.
    In addition, we have improved our underwriting and due 
diligence, to quickly identify and resolve challenges that 
transactions face. In some cases, the identified challenges 
cannot be overcome, which results in the withdrawal of the 
application. This helps to minimize the amount of resources 
that the applicant puts into the transaction and increases 
efficiency of the Bank staff. Lastly, applicants do not want to 
waste time on applications that have a high likelihood of 
rejection at the Board and they do not want the embarrassment 
of having a transaction voted down by the Bank.

Q.17. It appears as though the Bank's Board of Directors has 
not denied a transaction since the middle of 2010. In no period 
since 1998 has the Bank had such a low denial rate. Is this 
part of a conscious effort on your part to ensure that fewer 
transactions are denied? If so, what have you done to further 
that effort? Have you examined the potential consequences of 
that effort, such as an increased incidence of unnecessary Bank 
involvement or increased risk to U.S. taxpayers?

A.17. There is no conscious effort on Ex-Im Bank's part to deny 
fewer transactions. As noted in response to your previous 
question, over the last several years, we have improved our 
underwriting and due diligence, resulting in identifying 
challenges that any transaction may experience. As we develop 
the structure and conditions that are likely to be required for 
a transaction, frequently a potential borrower will withdraw 
the credit request. This early identification of our 
requirements has resulted in a reduced number of declinations 
by the Board. It should also be noted that over the past 4 
years, we have experienced financial crises, and a major 
withdrawal by the private sector banks (particularly those in 
Europe), conditions that make the work of the Ex-Im Bank even 
more necessary.
    For every transaction the Bank sets aside adequate reserves 
which come out of the fees we charge to foreign purchasers of 
U.S. goods and services. Our due diligence reviews look at 
every transaction and risk associated with it. We are 
continually reviewing and improving our risk analysis for 
transactions.

Q.18. I'm not talking about the Bank's historic default rate, 
I'm asking whether the Bank has actually evaluated whether its 
growth under your tenure could have detrimental effects going 
forward.

A.18. Yes we have. During my tenure we have modified our 
reserve methodology to increase reserves at the Bank. We also 
continuously monitor our transactions and we have a stronger 
rated portfolio today than we did 4 years ago. Our risk 
management practices and policies have been audited and 
reviewed recently by Deloitte & Touche, KPMG, our internal 
Audit Committee, the GAO, and our Inspector General.
    Ex-Im Bank has comprehensive risk management practices, 
policies, and procedures which was validated in the recent GAO 
Risk Management Report. This system results in decreasing the 
likelihood of default and in cases of default it maximizes 
recoveries. This framework minimizes detrimental effects of a 
growing portfolio going forward. The Bank has a current default 
rate (March 31, 2013) of 0.307 percent and recovery efforts of 
approximately 50 percent on all claims paid.
    Ex-Im Bank is very proud of our efforts in these areas, 
efforts that in fiscal year 2012 resulted in the payment of $37 
million in gross claims on a portfolio of $106 billion while 
collecting $1 billion in fee income.

Q.19. Your Bank recently admitted that ownership is not a 
factor when providing assistance to companies doing business 
with foreign companies/countries. In this case it was a Chinese 
owned company with some manufacturing sites in the United 
States. Why wouldn't you give preference to American companies, 
since these foreign companies directly compete with them, and 
you have said Ex-Im Bank helps ``American companies''?

A.19. Our mission is to support U.S. jobs through exports. As 
long as the goods or services are of U.S. content (and they 
meet our other financing requirements), we can finance the 
export. Ex-Im Bank accepts applications from all applicants 
that are buyers of U.S. exports. Therefore, what matters is the 
demand for the U.S. export and not the ownership of the buyer. 
While the U.S. export may be manufactured in the U.S. by a 
foreign-owned company, the demand for this U.S.-manufactured 
export supports jobs in the United States and the exported 
product is being sold to an overseas buyer.
    For example, the German company Siemens exported its U.S.-
manufactured equipment to a power project in Saudi Arabia. In 
that deal, the award of the project by the Saudi Electricity 
Company was subject to the lowest bidder in an intensely 
competitive process. Japanese, German, Korean, and other 
bidders had the support of their export credit agencies, some 
of them offering terms outside of the OECD Arrangement.
    Only because Ex-Im Bank was able to respond quickly with 
competitive terms allowed in the OECD was Siemens' U.S. 
manufactured equipment (ACWA Power) able to win the bid. As a 
direct result of our support on this deal, Siemens expanded its 
U.S. operations, making a permanent and long-term commitment at 
its Charlotte, North Carolina, facility to U.S.-manufactured 
goods and U.S. employment. In a similar transaction also in 
Saudi Arabia, Ex-Im Bank's quick and competitive response to 
Japanese, German, Korean, and other bidders, meant that GE's 
equipment was selected for the project. So, we provided 
financing for the foreign buyer for both GE and Siemens 
equipment because we do not discriminate amongst U.S. 
manufacturers and want to support U.S. jobs. It is important to 
note that when U.S. companies manufacture offshore, they do not 
receive Ex-Im Bank financing. We only finance U.S. exports 
directly tied to U.S. jobs.

Q.20. How many employees now work at the Ex-Im Bank?

A.20. As of May 14, 2013, there are 396 employees at Ex-Im 
Bank.

Q.21. What foreign companies or Governments have paid for Ex-Im 
Bank travel in past year?

A.21. Please see Table 1 below.

Table 1

Q.22. Why does the Ex-Im Bank have different rules/regulations 
than other Government agencies when it comes to allowing staff 
to accept paid travel by companies with business pending before 
the bank?

A.22. The Bank can accept sponsor-paid travel under two 
different legislative authorities. This travel is consistent 
with industry practice and the primary purpose of this travel 
is to conduct due diligence and monitor these complex 
transactions. As chairman of the Bank, I have never taken 
sponsor-paid travel.
    In the Bank's Charter legislation, Congress has granted to 
the Bank the power to accept reimbursement for travel expenses 
(12 U.S.C. 635(a)). This is consistent with the practice of 
international financial institutions and other export credit 
agencies in processing credit applications. All official travel 
by Ex-Im Bank employees and directors are subject to approval 
in accordance with U.S. Federal regulations.
    The Bank is also authorized to accept sponsor-paid travel 
pursuant to 31 U.S.C. 1353, an executive branch-wide authority 
that permits an agency to accept a payment of ``travel, 
subsistence, and related expenses'' from a non-Federal source 
for an employee's official, travel away from the employee's 
official station, to attend a ``meeting or similar function.'' 
The implementing regulation is published by the General 
Services Administration at 41 CFR Chapter 304.

Q.23. Why doesn't the Ex-Im Bank make this information readily 
available to the public, considering the media has already 
exposed this practice?

A.23. Agencies are required to submit to the U.S. Office of 
Government Ethics (OGE) semiannual reports of payments received 
from non-Federal sources under 31 U.S.C. 1353. Those travel 
reports are available on the OGE Web site.
                                ------                                

       RESPONSES TO WRITTEN QUESTIONS OF SENATOR JOHANNS
                     FROM FRED P. HOCHBERG

Q.1. Chairman Hochberg, Section 9 of the Export-Import Bank 
Reauthorization Act of 2012 requires specific public notices 
prior to a meeting of the Bank's Board to consider transactions 
exceeding $100 million. However, the Bank's revised Economic 
Impact Procedures (required by Section 12 of the same Act) set 
a $200 million threshold for review of aircraft transactions. 
Given Congress' express sentiment that $100 million was an 
appropriate reporting requirement, why did you feel it 
appropriate to double that amount when determining the level 
required to trigger a review? Can you explain the rationale for 
the higher threshold?

A.1. The Bank's Charter has long required that Ex-Im Bank 
report to Congress on any transactions greater than $100 
million that Ex-Im Bank intends to consider. The referenced 
section of the Bank's recent Reauthorization Act extended a 
similar notification to the Federal Register as well.
    Sec. 9 is titled ``Notice and Comment for Bank Transactions 
Exceeding $100,000,000''. Section 12 is titled ``Publication of 
Guidelines for Economic Impact Analyses and Documentation of 
Such Analyses''. To be clear, the $100 million notification 
requirement found in Section 9 is not connected to the economic 
impact provisions of the Charter found in Section 12. Section 9 
is simply a public notification for transactions of $100 
million or more (regardless of economic impact) whereas Section 
12 required the Bank to ``develop and make publicly available 
methodological guidelines to be used by the Bank in conducting 
economic impact analyses . . . .''
    Virtually all transactions for the sale of wide-body 
aircraft exceed $100 million because a single wide-body 
aircraft costs at least that much. Nothing in the Bank 
Reauthorization Act suggests that Congress intended the Bank to 
conduct a detailed economic impact analysis on every single 
transaction involving wide-body aircraft. Therefore, the Bank 
follows precisely the notification requirements on transactions 
exceeding $100 million, and establishes the screens for 
aircraft transactions based on the likelihood of substantial 
injury. It is also worth noting that the $200 million threshold 
is over a 12-month period. Therefore, an airline cannot 
circumvent an economic impact analysis by splitting up an 
order.
    The Bank's Charter requires the Bank to conduct a detailed 
economic impact analysis when the adverse implications are 
likely to result in substantial injury to the U.S. producers. 
Congress defined substantial injury as new foreign production 
that is equal to 1 percent or more of the U.S. production of 
the same or similar good. In addition, Ex-Im Bank pursues 
operational efficiency by, among other things, setting minimum 
transaction size limits as proxy guides of when ``substantial'' 
injury is not likely to occur. For goods, this level is $10 
million. Years of evaluation of economic impact have strongly 
indicated that transactions that involve the export of capital 
goods where the financed amount requested is less than or equal 
to $10 million, do not have the potential to achieve 
substantial adverse impact.
    As referenced in the 2013 Economic Impact Procedures and 
Methodological Guidelines, it generally requires two aircraft 
to provide daily, long-range flights on any specific route. 
Commercial jet aircraft cost no less than $35-$50 million for a 
narrow body aircraft and $100-$125 million for a wide body 
aircraft. Hence, the $200 million level screen assumes that it 
would take at least four narrow-body or two wide-body aircraft 
to create enough alternatives on at least one or two 
significant routes to potentially have a noticeable impact on 
the U.S. airline industry. Thus, $200 million threshold for 
review of aircraft transactions is an appropriate one.
                                ------                                

        RESPONSES TO WRITTEN QUESTIONS OF SENATOR TOOMEY
                     FROM FRED P. HOCHBERG

Q.1. Under what circumstances, other than bad credit, should 
the Bank deny an application for financing? Can you give me a 
specific example of a situation where the Bank would deny an 
application?

A.1. Our Charter instructs us to review applications for 
financing for a list of reasons, including creditworthiness, 
adverse economic impact on the U.S. economy, consistency with 
U.S. law (most notably our prohibition against financing 
defense articles and prohibition against financing sanctioned 
countries) and environmental concerns. Under language added to 
its Charter in 1993, the Bank was directed to establish 
environmental procedures that permitted the Board of Directors 
to withhold financing from a project for environmental reasons 
or to approve financing after considering the potential 
environmental effects of a project.
    In 2010, the Board of Directors initially voted to withhold 
financing for U.S. exports destined for the SASAN coal-fired 
power project in India, based on the project's high-carbon 
intensity and its projected levels of carbon dioxide 
production. Shortly after this action, the owner of the project 
informed the Bank that it was prepared to commit to building 
solar power projects totaling 250 MW in capacity. With this new 
information stating the buyer's commitment to invest in 
renewable energy, the Board of Directors reviewed for a second 
time the transaction's impact on greenhouse gas production and 
it subsequently voted to finance the project. I am pleased to 
report that Ex-Im Bank has already supported U.S. exporters 
involved in several solar projects for this buyer, totaling 
approximately 150 MW. Furthermore, it has financed more than 
250 MW in solar energy projects throughout India since 2010, 
and we continue to address applications for renewable energy in 
that market.
    Over the years there have been few explicit denials on 
economic impact grounds, but several major cases never made it 
through the application process. Perhaps the most noteworthy 
was a D-RAM project in Singapore (SMIC) where the proposed 
facility would have competed with U.S. production in Idaho and 
other locations. Members of the Senate Banking Committee and 
others raised concern about the facility. After the Bank's 
consideration of these concerns the application was withdrawn 
and D-RAM was added to Ex-Im Bank's Sensitive Sectors List.

Q.2. Do you read the economic-impact provisions in the Bank's 
statutory charter as requiring the Bank to conduct economic 
impact analyses?

A.2. We adhere to all statutory requirements in our charter. 
Indeed I read the economic impact provisions in the Bank's 
statutory charter as requiring the Export-Import Bank to 
consider the economic impact of all applications; but to 
conduct a detailed economic impact analysis on only those 
transactions where there is a likelihood of substantial adverse 
economic impact. If there were not a system of reasonable 
filters in place, all transactions at the Bank would require 
detailed economic analysis.
    In FY2012, 88 percent of all transactions were for small 
business. If a detailed economic analysis were required on 
every transaction, foreign buyers would simply purchase their 
goods and services from a foreign source where their ECA 
financing does not require such analysis. The result would be a 
significant loss of U.S. jobs in States like Pennsylvania where 
since 2007 Ex-Im Bank has authorized $35 billion in 
transactions to 224 exporters, 140 of which are small 
businesses. In Pennsylvania we finance everything from GE 
locomotives to Gamesa wind turbines to SB Global Foods, Inc. in 
Landsdale, PA, which has grown their gourmet pretzel business 
from exporting to only one country prior to using Ex-Im up to 
60 countries now.
    Accordingly, all applications are subject to filters 
designed to: (i) identify those cases associated with specific 
legislative prohibitions (e.g., cases in which trade measures 
are applicable), and (ii) determine what applications have the 
potential to cause substantial injury to the U.S. industry 
(when the new foreign production equals or exceeds 1 percent of 
comparable U.S. production).

Q.3. How does the Bank determine whether or not foreign Export 
Credit Agency (ECA) competition exists? Does the Bank attempt 
to negotiate a stand-down from European ECAs so that market-
based competition can be used by both sides for individual 
transactions?

A.3. Ex-Im Bank explores the existence of foreign official 
financing competition and relies on lenders and exporters to 
inform the Bank as to whether foreign ECA competition exists in 
any given transaction. Any applicant to Ex-Im Bank must state 
whether there is foreign ECA competition. Several times over 
the course of the last two OECD Aircraft Sector Understanding 
negotiations, U.S. negotiators explored the European 
willingness to consider market-based options on individual (or 
types of) cases. Each and every time, the initiative was 
rejected.

Q.4. In addition, in Ex-Im's 2012 Reauthorization, Congress 
mandated that the Treasury Department initiate and pursue 
negotiations to substantially reduce, with the goal of 
eliminating, aircraft export credit financing by all ECAs, 
including specifically for wide-body aircraft.
    It appears as though the Bank's Board of Directors has not 
denied a transaction since the middle of 2010. In no period 
since 1998 has the Bank had such a low denial rate. Is this 
part of a conscious effort on your part to ensure that fewer 
transactions are denied? If so, what have you done to further 
that effort? Have you examined the potential consequences of 
that effort, such as an increased incidence of unnecessary Bank 
involvement or increased risk to U.S. taxpayers? I am not 
talking about the Bank's historic default rate. I am asking 
whether the Bank has actually evaluated whether its growth 
under your tenure could have detrimental effects going forward.

A.4. Over the last several years, private sector banks have 
contracted their lending significantly, shifting stronger 
credits to Ex-Im Bank. The result is both increased demand for 
our services as well as stronger credit applications.
    In addition, we have improved our underwriting and due 
diligence, to quickly identify and resolve challenges that 
transactions face. In some cases, the identified challenges 
cannot be overcome, which results in the withdrawal of the 
application. This helps to minimize the amount of resources 
that the applicant puts into the transaction and increases 
efficiency of the Bank staff. Lastly, applicants do not want to 
waste time on applications that have a high likelihood of 
rejection at the Board and they do not want the embarrassment 
of having a transaction voted down by the Bank.
                                ------                                

        RESPONSES TO WRITTEN QUESTIONS OF SENATOR COBURN
                     FROM FRED P. HOCHBERG

Q.1. Under what circumstances, other than bad credit, should 
the Bank deny an application for financing? Can you give me an 
example of a situation where the Bank would deny an 
application?

A.1. Our Charter instructs us to review applications for 
financing for a list of reasons, including creditworthiness, 
adverse economic impact on the U.S. economy, consistency with 
U.S. law (most notably our prohibition against financing 
defense articles and prohibition against financing sanctioned 
countries) and environmental concerns. Under language added to 
its Charter in 1993, the Bank was directed to establish 
environmental procedures that that permitted the Board of 
Directors to withhold financing from a project for 
environmental reasons or to approve financing after considering 
the potential environmental effects of a project.
    In 2010, the Board of Directors initially voted to withhold 
financing for U.S. exports destined for the SASAN coal-fired 
power project in India, based on the project's high carbon 
intensity and its projected levels of carbon dioxide 
production. Shortly after this action, the owner of the project 
informed the Bank that it was prepared to commit to building 
solar power projects totaling 250 MW in capacity. With this new 
information stating the buyer's commitment to invest in 
renewable energy, the Board of Directors reviewed for a second 
time the transaction's impact on greenhouse gas production and 
it subsequently voted to finance the project. I am pleased to 
report that Ex-Im Bank has already supported U.S. exporters 
involved in several solar projects for this buyer, totaling 
approximately 150 MW. Furthermore, it has financed more than 
250 MW in solar energy projects throughout India since 2010, 
and we continue to address applications for renewable energy in 
that market.
    Over the years there have been few explicit denials on 
economic impact grounds, but several major cases never made it 
through the application process. Perhaps the most noteworthy 
was a D-RAM project in Singapore (SMIC) where the proposed 
facility would have competed with U.S. production in Idaho and 
other locations. Members of the Senate Banking Committee and 
others raised concern about the facility. After the Bank's 
consideration of these concerns the application was withdrawn 
and D-RAM was added to Ex-Im Bank's Sensitive Sectors List.

Q.2. Do you read the economic impact provisions in the Bank's 
statutory charter as requiring the Bank to conduct economic 
impact analyses, or are you free to ignore those provisions?

A.2. We adhere to all statutory requirements in our charter. 
Indeed I read the economic impact provisions in the Bank's 
statutory charter as requiring the Export-Import Bank to 
consider the economic impact of all applications; but to 
conduct a detailed economic impact analysis on only those 
transactions where there is a likelihood of substantial adverse 
economic impact. If there were not a system of reasonable 
filters in place, all transactions at the Bank would require 
detailed economic analysis.
    In FY2012, 88 percent of all transactions were for small 
business. If a detailed economic analysis were required on 
every transaction, foreign buyers would simply purchase their 
goods and services from a foreign source where their ECA 
financing does not require such analysis. The result would be a 
significant loss of U.S. jobs. Those jobs include ones in 
Muskogee, OK where we have financed Advantage Controls, LLC, 
Omni Valve Company, LLC, and Array Holdings Inc.
    Accordingly, all applications are subject to filters 
designed to: (i) identify those cases associated with specific 
legislative prohibitions (e.g., cases in which trade measures 
are applicable), and (ii) determine what applications have the 
potential to cause substantial injury to the U.S. industry 
(when the new foreign production equals or exceeds 1 percent of 
comparable U.S. production).

Q.3. How does the Bank reach a judgment on whether or not 
foreign ECA competition exists? Does the Bank attempt to 
negotiate a stand-down with other ECAs so that market-based 
competition can occur for individual transactions?

A.3. Ex-Im Bank explores the existence of foreign official 
financing competition and relies on lenders and exporters to 
inform the Bank as to whether foreign ECA competition exists in 
any given transaction. Any applicant to Ex-Im Bank must state 
whether there is foreign ECA competition. Several times over 
the course of the last two OECD Aircraft Sector Understanding 
negotiations, U.S. negotiators explored the European 
willingness to consider market-based options on individual (or 
types of) cases. Each and every time, the initiative was 
rejected.

Q.4. In addition, in Ex-Im's 2012 Reauthorization, Congress 
mandated that the Treasury Department initiate and pursue 
negotiations to substantially reduce, with the goal of 
eliminating, aircraft export credit financing by all ECAs, 
including specifically for wide-body aircraft.
    Do you believe that the Bank should be a lender of last 
resort or do you want to maintain a certain level of Ex-Im 
business?

A.4. Ex-Im Bank is the lender of last resort. We finance 
transactions that commercial banks are unwilling or unable to 
finance because of lack of capital, reluctance to lend, 
exposure limits, etc. Our mission is to support U.S. jobs 
through exports. The level of Ex-Im Bank activity is determined 
by the size of gaps (e.g., competition to be met, insufficient 
amount and terms from the private market) to be filled in any 
given year.
    In the small business sector we target the transactions 
that the banks and other insurers don't find economically 
feasible to do. This does not necessarily mean taking 
additional credit risk. Because the incidence of exporting is 
so low in the small business sector, Ex-Im Bank could grow 
substantially without altering credit standards.

Q.5. Since July of 2010 the Ex-Im Board has failed to deny a 
single financing application which it reviewed. In fact, in 
your entire tenure, the Board has denied only 16 applications 
(versus 52 during the term of your immediate predecessor and 
174 during the term of Chairman Merrill). How do you explain 
this?

A.5. Over the last several years, we have improved our 
underwriting and due diligence, resulting in identifying 
challenges that any transaction may experience. As we develop 
the structure and conditions that are likely to be required for 
a transaction, frequently a potential borrower will withdraw 
the credit request. This early identification of our 
requirements has resulted in a reduced number of declinations 
by the Board. It should also be noted that over the past 4 
years, we have experienced financial crises, and a major 
withdrawal by the private sector banks (particularly those in 
Europe), conditions that make the work of the Ex-Im Bank even 
more necessary.

Q.6. The Bank's new Economic Impact Procedures (EIPs) are now 
in effect and the Board is currently reviewing an application 
to finance the sale of more than $100 million in Boeing 777s 
and 737s to Air China. In the notice for this transaction, the 
Bank states, ``To the extent that Ex-Im Bank is reasonably 
aware, the item(s) being exported may be used to produce 
exports or provide services in competition with the exportation 
of goods or provision of services by a United States 
industry.'' What impact, if any, do you think the new EIPs will 
have on whether this transaction will be approved? Will the 
Bank perform a detailed economic impact analysis before 
approving this transaction? If not, why?

A.6. The Air China transaction you reference was subject to Ex-
Im Bank's new EIPs, and it was determined that although the 
transaction is over $200 million and the supported aircraft 
will operate two routes that will compete with U.S. carriers, 
the net addition of aircraft seat capacity does not meet the 
scale associated with having a potentially substantial impact. 
As such, the transaction was cleared for credit analysis 
without further economic impact review in the form of a 
detailed economic impact analysis. Given this determination, it 
is anticipated that the new EIPs will not have any impact on 
whether this transaction will be approved. However, because 
approval of this transaction is determined by the individual 
decision of each member of the Board of Directors it is 
impossible to forecast with certainty whether each Board member 
will choose to support or not support this particular 
transaction.

Q.7. In last year's reauthorization, Congress mandated a notice 
and comment period and required the Bank to provide, upon 
request by a commenter, a ``nonconfidential summary of the 
facts found and conclusions reached in any detailed analysis or 
similar study'' for all transactions exceeding $100 million. 
Yet, the Bank's new Economic Impact Procedures and 
Methodologies set the threshold for detailed economic impact 
analysis of aircraft transactions at $200 million. Do you think 
this $200 million threshold meets the spirit of the law? Does 
it not make the $100 million threshold Congress set for 
disclosure of detailed economic impact analyses somewhat 
meaningless?

A.7. The Bank's Charter has long required that Ex-Im Bank 
report to Congress on any transactions greater than $100 
million that Ex-Im Bank intends to consider. The referenced 
section of the Bank recent Reauthorization Act extended a 
similar notification to the Federal Register as well.
    Sec. 9 is titled ``Notice and Comment for Bank Transactions 
Exceeding $100,000,000''. Section 12 is titled ``Publication of 
Guidelines for Economic Impact Analyses and Documentation of 
Such Analyses.'' To be clear, the $100 million notification 
requirement found in Section 9 requires the provision of a 
nonconfidential summary in any long-term case of more than $100 
million if a detailed economic impact analysis is conducted 
whereas Section 12 required the Bank to ``develop and make 
publicly available methodological guidelines to be used by the 
Bank in conducting economic impact analyses . . . .''
    Virtually all transactions for the sale of wide-body 
aircraft exceed $100 million because a single wide-body 
aircraft costs at least that much. Nothing in the Bank 
Reauthorization Act suggests that Congress intended the Bank to 
conduct a detailed economic impact analysis on every single 
transaction involving wide-body aircraft. Therefore, the Bank 
follows precisely the notification requirements on transactions 
exceeding $100 million, and establishes the screens for 
aircraft transactions based on the likelihood of substantial 
injury. It is also worth noting that the $200 million threshold 
is over a 12-month period. Therefore, an airline cannot 
circumvent an economic impact analysis by splitting up their 
order.
    The Bank's Charter requires the Bank to conduct a detailed 
economic impact analysis only when the adverse implications are 
likely to result in substantial injury to the U.S. producers. 
Congress defined substantial injury as new foreign production 
that is equal to 1 percent or more of the U.S. production of 
the same or similar good. In addition, Ex-Im Bank pursues 
operational efficiency by, among other things, setting minimum 
transaction size limits as proxy guides of when ``substantial'' 
injury is not likely to occur. For goods, this level is $10 
million.
    As referenced in the 2013 Economic Impact Procedures and 
Methodological Guidelines, it generally requires two aircraft 
to provide daily, long-range flights on any specific route. 
Commercial jet aircraft cost no less than $35-$50 million for a 
narrow body aircraft and $100-$125 million for a wide-body 
aircraft. Hence, the $200 million level screen assumes that it 
would take at least four narrow-body or two wide-body aircraft 
to create enough alternatives on at least one or two 
significant routes to potentially have a noticeable impact on 
the U.S. airline industry. Thus, $200 million threshold for 
review of aircraft transactions is an appropriate one.

Q.8. Last year's reauthorization legislation included a 
requirement that the Treasury Department begin negotiations 
with all relevant countries ``to substantially reduce, with the 
ultimate goal of eliminating, aircraft export credit financing 
. . . .'' In its annual report to Congress on those 
negotiations, Treasury stated, ``It is important that demand 
for official export credit support arise only from a lack of 
market financing and not the mere presence of competing 
official export credit offers.'' Yet, in FY2012, Ex-Im issued 
43 loans and long-term guarantee authorizations for the export 
of wide-body aircraft; in 38 of those instances (88 percent), 
Ex-Im indicated the ``primary purpose identified for seeking 
the Bank's support'' was ``to meet competition from a foreign 
officially sponsored export-credit agency.'' How do you 
reconcile this fact with the Administration's stated policy?

A.8. For Ex-Im Bank to consider the authorization of an export 
credit transaction, the deal must meet one or both of two 
tests: (1) demand for official export credit support can arise 
from absence of available private market financing and/or (2) 
the existence of foreign ECA competition.
    If the underlying product or pricing is not similar, the 
presence of foreign ECAs is not necessarily a strong stand-
alone justification for Ex-Im Bank financing. However, a 
foreign ECA that is supporting an exported good that has the 
same technical specifications as the U.S. export and is 
comparably priced is a clear and strong case for Ex-Im Bank 
support even when there is potential market financing 
available. Hence, the head-to-head competition on near 
identical products, in this case aircraft, justifies Ex-Im 
Bank's support based on meeting competition from a foreign 
officially sponsored export credit agency alone.

Q.9. Ex-Im's Charter states, ``It is also the policy of the 
United States that the Bank in the exercise of its functions 
should supplement and encourage, and not compete with, private 
capital . . . .'' What steps does the Bank take to ensure that 
it is supplementing, and not competing with, private capital?

A.9. Ex-Im Bank does not compete with private capital. Last 
year (2012), the U.S. had total exports of $2.2 trillion, of 
which Ex-Im supported approximately $35 billion. The balance 
was financed in the private sector or by the exporter itself. 
As part of the application for financing, an applicant is 
required to explain why Ex-Im Bank is required. Ex-Im Bank also 
encourages exporters to seek financing outside of Ex-Im Bank. 
The financing Ex-Im Bank supports is primarily funded through 
loans by private sector banks with Ex-Im Bank's support taking 
the form of a guarantee or insurance. From time to time, direct 
loans are granted but in these cases, the amount, tenor, and/or 
complexity deters the private sector from participating. 
However, they are always welcome.
    Besides discussions with lenders and buyers during 
individual cases, Ex-Im Bank has several broader exercises to 
solicit input. The broadest is the survey of bankers and 
exporters in the Annual Competitiveness Report to Congress, 
where banks regularly comment on where Ex-Im is supplementing 
and competing. Also, each year I convene a Banker's Roundtable 
before the Ex-Im Bank Annual Conference. The high-level bankers 
are not reluctant to make their views known.

Q.10. Why should airlines with access to market financing be 
able to use the Bank to finance their purchases if, as the 
Bank's charter states, the Bank's role is to supplement, not 
compete with, market financing?

A.10. You are correct that a primary goal of the Export-Import 
Bank is to supplement, not compete with, market financing. 
However, there are a host of reasons why an airline who has 
access to market financing would need to use Ex-Im Bank 
financing from time to time. First, as we have seen in recent 
years as a result of the financial crisis, in time of market 
distress commercial market financing ceases to be available and 
as a result Ex-Im Bank needs to step in and fill the financing 
gap. In this sense, the business of the Export-Import Bank 
tends to be countercyclical in nature. Second, the nature of 
aircraft acquisition is for airlines to purchase a large order 
of multiple aircraft at a time. Given the volume of aircraft 
finance needed to finance an order, it is oftentimes the case 
that the commercial markets will only be able to finance a 
portion of the order and as a result Ex-Im Bank financing is 
needed to finance the aircraft in the order that the market is 
unwilling to do. Third, just as is prudent business practice in 
any industry, airlines seek a diversified mix of financing 
sources to finance their acquisitions, in this case their fleet 
of aircraft needed to perform business operations. Export 
credit in the form of Ex-Im Bank supported financing is one 
element in this financing mix necessary to achieve portfolio 
diversification and not leave an airline overly dependent on 
one form of financing.

Q.11. Can competition with private capital by foreign ECAs ever 
justify Ex-Im financing of a given transaction, even if the 
Bank's own financing could also compete with private capital?

A.11. Yes. In such a case, Ex-Im Bank would use its best 
judgment to determine whether the loss of a transaction due to 
competition from private capital covered by a foreign ECA is of 
significant size and scope for Ex-Im Bank to use its own funds 
even though private capital in the U.S. market may be 
displaced. The Bank would weigh the costs and benefits of an 
exporter losing a transaction (e.g., potential loss of U.S. 
jobs) versus the loss of a private capital supported 
transaction (e.g., potential loss of profits).

Q.12. Why did Ex-Im not issue financing for three transactions 
it approved from 2009 to 2012 for the export of solar panels by 
SolarWorld?

A.12. Three cases for SolarWorld that were approved from 2009-
2012 were authorized but later canceled without funding by Ex-
Im Bank. All of these cases involved limited recourse project 
finance, a type of finance requiring substantial documentation. 
The time to close and fund a project finance transaction is 
more than twice that of a typical corporate or bank finance 
transaction. In the time between Board approval and financial 
close there can be changes in market conditions, the borrower's 
circumstances, and new funding opportunities may arise that 
affect the benefits and viability of Ex-Im Bank finance. Even 
though Ex-Im Bank endeavors never to impose burdensome, 
unnecessary, or unexpected conditions, borrowers sometimes have 
more difficulty meeting closing conditions than they expect. As 
a result, project finance transactions can be withdrawn and 
canceled, as was the case with the three transactions in 
question.
    In 2009, the Board approved five small projects for Gochang 
Solar in South Korea for approximately $61 million. However, 
after Board authorization and following a reversal in the Won/
Dollar exchange rate that increased the cost of Ex-Im Bank 
financing, the South Korean borrower informed us that, as a 
condition to the financing, it wished to change important terms 
of the Board approval. It furthermore refused to comply with 
customary and important conditions for closing and funding. 
When agreement became impossible, staff canceled this 
commitment. As this was a post-completion financing, the 
borrower did purchase SolarWorld equipment without Ex-Im Bank 
support.
    In 2011, the Board authorized a transaction in India for 
the Tatith Solar Project in the amount of approximately $19 
million. The commitment was contingent upon the borrower's 
successful execution of construction, supply, engineering, and 
other documents. The borrower was unable to comply with the 
stated requirements and Ex-Im Bank staff was forced to cancel 
the commitment. To the best of Ex-Im Bank's knowledge, the 
Tatith borrowers were unable to obtain other financing and did 
not purchase SolarWorld equipment.
    In 2012, Ex-Im Bank approved the Stardale Project in Canada 
for a loan guarantee for $81 million. The borrower, however, 
refused to agree to customary financing terms. The borrower 
informed Ex-Im Bank that it wished to withdraw the financing 
request and asked Ex-Im Bank to withdraw the commitment which 
Ex-Im Bank staff did. A potential motivating factor in the 
borrower's decision making was that Ex-Im Bank's co-lender was 
willing to lend more money to the transaction, enough to cover 
Ex-Im Bank's share, and without the same conditions. At the 
time of the Ex-Im Bank Board approval, this additional 
financing was not on offer. Ex-Im Bank staff understands that 
the Borrower did use this finance to fund SolarWorld related 
costs and complete the project.

Q.13. What foreign companies or Governments have paid for Ex-Im 
travel in the past year?

A.13. Please see Table 1 above.

Q.14. Why does the Bank have different rules than other 
Government agencies when it comes to allowing staff to accept 
paid travel by companies with business pending before the Bank?

A.14. The Bank can accept sponsor-paid travel under two 
different legislative authorities.
    In the Bank's Charter legislation, Congress has granted to 
the Bank the power to accept reimbursement for travel expenses 
(12 U.S.C. 635(a)). This is consistent with the practice of 
international financial institutions and other export credit 
agencies in processing credit applications and prevents the 
Bank's due diligence activities from burdening U.S. taxpayers. 
All official travel by Ex-Im Bank employees and directors are 
subject to approval in accordance with U.S. Federal 
regulations.
    Additionally, the Bank is authorized to accept sponsor paid 
travel pursuant to 31 U.S.C. 1353, an executive branch-wide 
authority that permits an agency to accept a payment of 
``travel, subsistence, and related expenses'' from a non-
Federal source for an employee's official, travel away from the 
employee's official station, to attend a ``meeting or similar 
function.'' The implementing regulation is published by the 
General Services Administration at 41 CFR Chapter 304. Agencies 
are required to submit to the U.S. Office of Government Ethics 
(OGE) semiannual reports of payments received from non-Federal 
sources under 31 U.S.C. 1353. Those travel reports are 
available on the OGE Web site.

Q.15. Please provide a full list of Ex-Im employees, including 
individual salaries and most recent bonuses.

A.15. [Ed.--The response is confidential and has been provided 
to the Member asking the question.]

              Additional Material Supplied for the Record

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