[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]



 
          WHAT HAS EX IM BANK DONE FOR SMALL BUSINESS LATELY?

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

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                     WASHINGTON, DC, APRIL 6, 2005

                               __________

                            Serial No. 109-8

                               __________

         Printed for the use of the Committee on Small Business


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                      COMMITTEE ON SMALL BUSINESS

                 DONALD A. MANZULLO, Illinois, Chairman

ROSCOE BARTLETT, Maryland, Vice      NYDIA VELAZQUEZ, New York
Chairman                             JUANITA MILLENDER-McDONALD,
SUE KELLY, New York                    California
STEVE CHABOT, Ohio                   TOM UDALL, New Mexico
SAM GRAVES, Missouri                 DANIEL LIPINSKI, Illinois
TODD AKIN, Missouri                  ENI FALEOMAVAEGA, American Samoa
BILL SHUSTER, Pennsylvania           DONNA CHRISTENSEN, Virgin Islands
MARILYN MUSGRAVE, Colorado           DANNY DAVIS, Illinois
JEB BRADLEY, New Hampshire           ED CASE, Hawaii
STEVE KING, Iowa                     MADELEINE BORDALLO, Guam
THADDEUS McCOTTER, Michigan          MICHAEL MICHAUD, Maine
RIC KELLER, Florida                  LINDA SANCHEZ, California
TED POE, Texas                       JOHN BARROW, Georgia
MICHAEL SODREL, Indiana              MELISSA BEAN, Illinois
JEFF FORTENBERRY, Nebraska           GWEN MOORE, Wisconsin
MICHAEL FITZPATRICK, Pennsylvania
LYNN WESTMORELAND, Georgia
LOUIE GOHMERT, Texas

                  J. Matthew Szymanski, Chief of Staff

          Phil Eskeland, Deputy Chief of Staff/Policy Director

                  Michael Day, Minority Staff Director

                                  (ii)


                            C O N T E N T S

                              ----------                              

                               Witnesses

                                                                   Page
Merrill, Hon. Philip, President and CEO, Export Import Bank of 
  the United States..............................................     4
Hadfield, Ms. Victoria, President, Semiconductor Equipment and 
  Materials International (SEMI) North America...................     5
Vaden, Mr. Michael, President and CEO, Rutland Plastic 
  Technologies, Inc..............................................     8

                                Appendix

Opening statements:
    Manzullo, Hon. Donald A......................................    49
    Velazquez, Hon. Nydia........................................    54
    Otter, Hon. C.L. ``Butch''...................................    56
    Simpson, Hon. Michael and Hon. C.L. ``Butch'' Otter..........    58
Prepared statements:
    Merrill, Hon. Philip, President and CEO, Export Import Bank 
      of the United States.......................................    60
    Hadfield, Ms. Victoria, President, Semiconductor Equipment 
      and Materials International (SEMI) North America...........    65
    Vaden, Mr. Michael, President and CEO, Rutland Plastic 
      Technologies, Inc..........................................    73
Attachments
    April 1, 2005 letter to Chairman Philip Merrill from 
      Semiconductor Manufacturing International Corporation......    77
    Attachment A--Chronology of SMIC Transaction.................    82
    Attachment B--Appendices.....................................    86
    Appendix A: March 21, 2005 Letter from EX-IM Chairman Philip 
      Merrill to Congressman Donald A. Manzullo (R--IL)..........    87
    Appendix B: Congressional letters written on SMIC and 
      equipment suppliers behest [Items A--Q]....................    88

                                 (iii)


         "WHAT HAS EX IM BANK DONE FOR SMALL BUSINESS LATELY?"

                              ----------                              


                        WEDNESDAY, APRIL 6, 2005

                  House of Representatives,
                               Committee on Small Business,
                                                   Washington, D.C.
    The Committee met, pursuant to call, at 3:25 p.m., in Room 
311, Cannon House Office Building, Hon. Donald A. Manzullo 
[chair of the Committee] Presiding.
    Present: Representatives Manzullo, Kelly, Velazquez, 
Faleomavaega, Christensen, and Grijalva.
    Chairman Manzullo. The hearing will come to order. There's 
the bell. We are going to take a recess because the bells just 
went off for two votes. Probably be about 25 minutes or so, 
sorry about that.
    [recess.]
    Chairman Manzullo. Good afternoon and thank you for 
appearing before the committee. As you know, the Export-Import 
Bank, or EX-IM, plays a crucial role in supporting American 
exports and American jobs. I was proud to support EX-IM during 
previous authorization debates. EX-IM is the primary, and in 
many instances, sole source of assistance to small businesses 
that must overcome the challenges of globalization in order to 
survive. Small businesses often find themselves trying to open 
new export markets in the face of unfair competition and 
foreign government subsidies. Foreign governments pursue 
aggressive programs and subsidize home grown companies and they 
play to win.
    This is why EX-IM serves such a critical need. EX-IM's 
programs for credit insurance, working capital and loan 
guarantees to U.S. exporters play an essential role in 
maintaining America's competitive edge.
    Against that background this committee has taken note of 
some disturbing trends regarding EX-IM and its core clients, 
American small businesses. In 2002, as part of EX-IM's 
reauthorization, Congress imposed on EX-IM a small business 
set-aside of 20 percent. But EX-IM failed to meet this mandate, 
achieving 19.7 percent in 2003 and just 16.7 percent in 2004. 
These numbers are frankly quite suspect. Moreover, the trend is 
clearly in the wrong direction. We know of some worthy efforts 
to improve and streamline EX-IM's processes and to make it more 
friendly to small businesses. But these efforts remain 
frustrated by bureaucratic inertia, corporate culture issues 
within the Bank and adversarial relationships between EX-IM and 
its customers and partners.
    For over 2 years, the Bank's financial service partners 
have been trying to work with EX-IM on developing a more 
streamlined application process for small business exporters. 
It is called Fast Track, and it is used particularly for 
working capital between $10 million and $25 million. This Fast 
Track application has strong support among lenders and 
businesses. But EX-IM hasn't done its job. Two years to come up 
with the program and they have failed. That is inexcusable, and 
it also hurts small businesses.
    Other small business initiatives have also fallen by the 
wayside. For example, there is a dealer/distributor financing 
program which could be a boon to small U.S. manufacturers by 
helping them set up distribution networks in foreign countries, 
a vital requirement in getting a foothold into the foreign 
market. To date there have been no implementing guidelines for 
the program. EX-IM small business customers continue to wait, 
and that is why we have oversight hearings.
    In the meantime, while small businesses idle, international 
competition races forward. During the 2002 reauthorization, EX-
IM emphasized that the ``mandate of the Export-Import Bank is 
to sustain jobs here in the U.S. by helping to finance U.S. 
exports that would not take place without us.'' EX-IM also 
said, ``our motto is jobs through exports, and our mantra, of 
course, is jobs, jobs, jobs.''
    We know that China poses a historic challenge to the U.S. 
in terms of trade. Recent statistics show that the U.S. is 
running the largest trade deficit on earth with China. Last 
year U.S. imports from China were $196.7 billion, an increase 
of 29 percent, and exceeded our exports to China by five times. 
Wait till next year when GM, working with China, is 
manufacturing a car in China. They will be exporting that to 
the United States. Their goal is one million cars. Solving this 
trade deficit is of overriding significance.
    Today we are going to hear from two witnesses who will 
describe their difficulties with EX-IM in the China trade 
context. The first witness is Mike Vaden, CEO of a small North 
Carolina firm, Rutland Plastic Technologies, Inc., a company 
from Congresswoman Sue Myrick's district, and when she gets 
back she will be introducing you, Mike. The second witness is 
Victoria Hadfield of the trade association, SEMI, which 
represents many semiconductor equipment manufacturers.
    As with many export oriented industries, American 
semiconductor equipment makers are leading the world in terms 
of innovation, exports and additional export potential. Without 
EX-IM financing, many global customers turn to non-U.S. 
suppliers subsidized by their own governments. For example, the 
Japanese court foreign buyers openly with attractive loan 
subsidies and the Chinese subsidize in a wide variety of ways, 
directly and indirectly. Then add to this the many other cost 
advantages of producing in China. It is certain American 
equipment makers cannot begin to compete without the leveling 
provided by EX-IM.
    One particular situation of concern to this committee, an 
application to support hundreds of millions of dollars in sales 
of American semiconductor equipment to a company in China, has 
been indefinitely tabled by the EX-IM board. More than 50 
members of the Senate and House, including the Speaker and 
three Governors, have written to EX-IM with concerns over how 
EX-IM has handled this application, but most particularly EX-
IM's refusal to give it a vote. Both law and equity entitle the 
applicant to a vote on its application. Why EX-IM refuses to 
vote is baffling. It is inexcusable, particularly when so many 
American jobs are at stake.
    EX-IM is a critical tool in maintaining American innovation 
and export readiness. We think it is imperative that changes be 
made and quickly. We urge EX-IM to consider the following key 
reforms: Timely roll out of such programs as Fast Track and 
dealer financing; two, an effective small business advocacy 
modeled after the one at the Overseas Private Investment 
Corporation; three, new initiatives to get more banks to offer 
export financing; four, create and manage an organization-wide 
small business plan; five, define problem solving and EX-IM 
processes and procedures that are pragmatic, timely, and 
squarely address challenges faced by American exporters and 
those who wish to purchase from American companies; and last, 
establish board procedures that take applications to a vote and 
which provide applicants with a transparent and open process.
    [Chairman Manzullo's statement may be found in the 
appendix.]
    I now recognize the ranking Democratic member from New 
York, Representative Velazquez, for her opening statement.
    Ms. Velazquez. Thank you, Mr. Chairman, and I am going to 
use my time to set the record straight. I miss the time when 
this committee worked in a bipartisan way at a time when we 
really believed that our responsibility was to protect small 
businesses in this country and to enact legislation and craft 
legislation that really brought relief to small businesses, 
that provided economic tools for small businesses to succeed in 
this country. When Chairman Talent, today a Senator from 
Missouri, was the chairman of this committee, we passed 24 
bills. Twenty of them became law. In the last Congress only two 
bills, two extensions for SBA were passed from this committee.
    So let me just say that, Mr. Chairman, what happened here 
today is a travesty. What was done to Mr. Barrow, Ms. Moore and 
Ms. Sanchez was unconscionable, and I will not stand idly for 
that type of disrespect to the minority's right for an open 
debate. And yes, indeed, Chairman Talent and I had deep and big 
differences, but we were able to discuss those differences and 
respectfully disagree. So if you think that you can run this 
committee in a partisan way, unilaterally so, fine with me. Go 
ahead and do it. And then we don't have--it doesn't make any 
sense for me to stay here and for the members of the Democratic 
side to stay here and participate in this hearing.
    [Ranking Member Velazquez's statement may be found in the 
appendix.]
    Chairman Manzullo. Next time we offer to meet with your 
staff maybe they can take us up on it. Thank you for your 
comments.
    Mr. Merrill, we are gratified to have you here and look 
forward to your testimony. You can start. They are having a 
problem. Go ahead.
    Mr. Merrill. I just want to stay out of that argument.
    Chairman Manzullo. Oh, no, we have got enough issues going 
on.
    Mr. Merrill. Okay. Just tell me when you want me to start.
    Chairman Manzullo. You can start right now. That is a 
general clock, you know.

STATEMENT OF THE HON. PHILIP MERRILL, EXPORT-IMPORT BANK OF THE 
                         UNITED STATES

    Mr. Merrill. Okay. Thank you, Mr. Chairman.
    Mr. Chairman, and Members of the Committee, the Export-
Import Bank of the United States is committed, very committed 
to assisting small business exporters. That is the role the 
Bank assumed years ago and one I supported throughout my tenure 
as chairman. I commend this Committee for its key role in 
supporting small businesses. I thank you, Mr. Chairman, for 
offering valuable advice and support to Ex-Im Bank and its 
mission of sustaining U.S. jobs by supporting exports that 
would not otherwise go forward.
    I am happy to report that the direct support of the Export-
Import Bank for small businesses has increased in each of the 
last two fiscal years. Specifically, it stood at $1.78 billion 
in fiscal year 2002, $2.08 billion in fiscal year 2003 and 
reached $2.26 billion last year, fiscal year 2004. That is a 27 
percent increase in the period that I have been in this Bank, 
roughly two and a half years.
    This increased funding has also been matched by an increase 
in the actual number of small business deals. We closed 2,154 
small business transactions in fiscal year 2002, 2,258 in 
fiscal year 2003 and finally, 2,572 in fiscal year 2004. That 
is a 19 percent increase over 2 years. I am proud of the 
steadily increasing support the Bank has provided to small 
businesses during my tenure over the last 2 years plus.
    Also, during that period, over 80 percent of the Bank's 
transactions have directly benefited small businesses. Ex-Im 
Bank makes the most of its limited staff by using partners to 
reach small business exporters, partners such as financial 
institutions, brokers, our City-State Partners and the export 
assistance centers of the Department of Commerce. Other 
partners include trade associations, such as the Small Business 
Exporters Association, industry associations, some of whom are 
here today--I saw Peggy Hoolihan behind me-- chambers of 
commerce, world trade centers and other business groups.
    One additional partnership recently expanded is with the 
Small Business Administration. Through a co-guarantee program 
established in fiscal year 2004 with SBA's export working 
capital program, SBA can with the assistance of Ex-Im Bank 
seamlessly serve eligible small exporters whose needs exceed 
the SBA's lending ceiling. By seamless, I mean it is one 
application. We lay over on top of them if the loan is larger.
    Even our larger transactions benefit small businesses 
because small businesses are frequently suppliers for larger 
exporters. This is what we term ``indirect'' support for small 
business. Our charter provides that we make available 20 
percent of our overall authorization for the ``direct'' benefit 
of small business.
    As I have said, the numbers of transactions and dollars 
authorized for small business exporters have steadily increased 
during my tenure at Ex-Im Bank. But as a share of overall 
financing, the small business percentage has been variable. In 
fiscal year 2002, the rate was 17.6 percent compared to 19.8 
percent in fiscal year 2003 and 16.9 percent in fiscal year 
2004. I want to assure the committee that we take the 20 
percent very seriously. Our analysis shows that we were on 
track to exceed 20 percent for small business, but for two 
large transactions approved by the board very late in the 
fiscal year. We have several programs, large transactions, 
percentage drop. We have several programs in development or 
newly established to increase the number of small business 
exports and get us toward the 20 percent.
    While Ex-Im Bank is primarily demand driven and in the 
final analysis only has the ability to do those transactions 
that are brought to us, we continue striving to make ourselves 
more accessible to the small business community. There are 
240,000 exporters in the United States, many of whom are small 
businesses.
    A program in development called ``Ex-Im On Line'' is 
designed to provide on-line application submission and 
electronic automatic processing and servicing for our short and 
medium term insurance and guarantee products. In addition, we 
will leverage our relationships with credit unions, City-State 
Partners and other agencies similar to what we have done with 
the new arrangement with the SBA. Again, this will allow us to 
reach out beyond our small employee base and work with others 
to increase the benefits provided by our small business 
programs.
    In regard to our budget, the Administration is requesting 
$186.5 million in program budget, which when you add it to 
carry over funds and cancellations from previous years would 
give us $400.5 million to use as a loss reserve to support a 
projected $13.8 billion in authorizations for fiscal year 2006. 
That is more than sufficient to support our projected demand 
for small business authorizations.
    For fiscal year 2006, the Administration is requesting 
$73.2 million for our administrative budget. Just $600,000 more 
than this year's appropriation. It is out of this budget that 
we fund the technological improvements and outreach programs 
that I discussed above. Mr. Chairman, we need every dollar of 
that budget appropriated if we are to continue making progress 
towards the small business objectives we all share.
    Mr. Chairman, I thank you for your support of small 
business and the Ex-Im Bank. I am ready to answer any questions 
you or your colleagues may have, Mr. Chairman. Thank you.
    [The Honorable Merrill's statement may be found in the 
appendix.]
    Chairman Manzullo. Thank you. Okay. I am going to go to 
Victoria Hadfield. Even if you came from North Carolina I would 
be going to you anyway [Laughter-reference to North Carolina's 
win over Illinois in NCAA final]. I am waiting for Mrs. Myrick 
to come back. Ms. Hadfield is President of SEMI North America 
and assumed that position in June of 2002. Lots of 
qualifications. Great background. We look forward to your 
testimony.

  STATEMENT OF VICTORIA HADFIELD, SEMICONDUCTOR EQUIPMENT AND 
          MATERIALS INTERNATIONAL (SEMI) NORTH AMERICA

    Ms. Hadfield. Okay. Thank you. Thank you for the invitation 
to be here today. SEMI, Semiconductor Equipment and Materials 
International, is an industry association that represents 
nearly a thousand American companies specializing in the 
manufacture of capital equipment and materials for the 
production of semiconductors.
    While the SME [semiconductor equipment] industry is quite 
diverse, the majority of U.S. companies are small, privately 
held firms with annual sales of less than 25 million. Many of 
these are part of a wide network of suppliers to larger 
publicly held semiconductor capital equipment and materials 
firms who serve the global semiconductor industry.
    The U.S. can be proud of its world class competitive 
semiconductor equipment and materials infrastructure. This also 
serves as a base for providing enabling technology to new and 
emerging industries such as those in nanotechnology and MEMS.
    Our industry has been one of the most innovative in the 
U.S., fueling many of the manufacturing technology advances 
that have helped to improve semiconductor capability and 
performance. The average SEMI member spends upwards of 15 
percent of annual revenues on research and development. The 
ability to fund these investments has always been dependent on 
export revenues, which now account for over 70 percent of sales 
for most U.S. leading semiconductor equipment companies in our 
industry. Thus, access to overseas markets and the ability to 
compete in these markets with leading edge technology is vital 
to the long-term health of the U.S. semiconductor capital 
equipment and materials infrastructure.
    The Asia Pacific region now comprises 70 percent of the 
world's market for semiconductor capital equipment and 
materials, and it is the fastest growing market for our 
members. If you look at my written testimony there are charts 
showing the shift of semiconductor manufacturing to the Asia 
Pacific region. Of these Asian markets China is becoming one of 
the most important players. The size of the China market for 
new equipment for 2004 was $2.68 billion, an increase of over 
130 percent from the previous year.
    U.S. SME producers face strong competition from Europe and 
Japan and markets around the world. In China last year U.S. 
producers sold 51 percent of the new wave for fab equipment and 
34 percent of test and assembly equipment purchased by China. 
Early access to the China market is very important. Gaining the 
tool of record designation with a customer in a new market 
cannot be underestimated since this means companies will be a 
part of future manufacturing facilities.
    As stated already, U.S. companies have been fairly 
successful so far in the China market, but we are still 
competing fiercely for market position. The U.S. Ex-Im Bank 
historically has provided beneficial export assistance to the 
U.S. SME industry. Transaction support in the last several 
years include loan guarantees and loans for exports to 
semiconductor manufacturing facilities in Malaysia, Russia and 
Singapore. Ex-Im's assistance is needed now more than ever. The 
cost of a single semiconductor fabrication facility is on the 
order of $2 to $3 billion. Approximately 80 percent of this 
cost is for equipment. Export financing is increasingly 
important and necessary to help private banks make investments 
in large purchases of capital equipment.
    Just 5 months ago, Ex-Im approved a loan guarantee for over 
$650 million for Chartered, a semiconductor foundry located in 
Singapore. This guarantee supported exports from at least 12 
U.S. suppliers and the Ex-Im Bank determined in this case that 
the transaction would create and sustain high quality jobs in 
the United States.
    This Chartered deal is quite similar actually to a deal 
currently pending before Ex-Im for a $770 million loan 
guaranteed to SMIC, the leading semiconductor foundry in China. 
For the time being, the SMIC deal has been put on hold due to 
an objection from one U.S. Company claiming potential 
competition. It is my understanding that this objection has 
already been addressed and the deal has been scaled back to 
insure that the equipment supported by the loan guarantee will 
not be used for products that directly compete with this 
company.
    We urge the Ex-Im Bank to put this deal back on the agenda. 
While making these decisions is not easy, we believe this case 
is clearly one where the Ex-Im loan guarantee would have a 
strong positive impact on the U.S. economy. Beneficiaries 
include the U.S. suppliers of capital equipment and materials, 
many of whom are fairly small companies, as well as the many 
U.S. semiconductor companies who are in partnership with SMIC 
and rely on them as a source of production. All of these 
companies represent high value-added exports for the U.S. and 
manufacturing jobs.
    In reviewing this and future applications from the SME 
industry, the long-term ramifications for the industry should 
be taken into account. The Ex-Im Bank will see more of these 
deals in the future, we are sure. In this instance, without Ex-
Im support SMIC could be forced to go to non-U.S. suppliers 
whose governments are able to provide a loan guarantee. In 
fact, we have been told that there already have been 
conversations with other governments and that they are very 
interested in this deal and would be willing to supply 
financing. If this deal does not go to U.S. suppliers, it could 
have a chilling impact and result in long-term changes to the 
semiconductor supplier base in China since other companies look 
to SMIC for leadership in making SME purchases.
    The U.S. Semiconductor equipment and material industry is a 
technology intensive, high value-added, net exporting American 
success story. Other nations recognize the importance of the 
SME manufacturing infrastructure as a valuable base for a range 
of enabling technologies in the semiconductor industry and 
other industries in the future such as MEMS and nano. They are 
willing to support their industry through a range of tools, 
including export financing. Continued Ex-Im Bank support for 
U.S. SME exports to leading markets is critical to the economic 
health and technological leadership of the U.S. SME industry, 
and we hope it can be retained. Thank you.
    [Ms. Hadfield's statement may be found in the appendix.]
    Chairman Manzullo. Thank you. Michael Vaden is the 
President and CEO at Rutland Plastics Technologies in 
Pineville, North Carolina. He joined Rutland in 1973, and we 
look forward to your testimony.

 STATEMENT OF MICHAEL VADEN, RUTLAND PLASTIC TECHNOLOGIES, INC.

    Mr. Vaden. Thank you for the opportunity, Mr. Chairman. 
Rutland is a company that is based in North Carolina, probably 
typical of, fairly typical I should say, of the small 
manufacturers in the United States, particularly those that we 
find are heavily associated with textiles activities. We have 
got about 113 employees.
    We have one facility that we manufacture in and we serve a 
niche marketplace with a product called plastisols, and those 
plastisols are used to supply products that go into automotive 
applications such as air filters and oil filters and fuel 
filters. It goes into a lot of textile and fabric coating 
applications.
    And then we have a very large segment of our business 
associated with what we call screen print ink business, and 
that really goes into garment embellishments for T-shirts, 
athletic apparel, ladies garments and things of that sort. What 
we have found is that our business has shifted dramatically as 
has the textile industry, as you know probably what everybody 
in Washington is talking about these days. But what we are 
finding is that export business is a way for us to survive and 
even thrive in a situation where many companies are not able to 
grow in that environment, particularly smaller manufacturers.
    What we have been able to do in the last 5 or 6 years is 
actually grow our export sales from a little under 3 percent of 
our business to currently over 25 percent of our business. The 
way we have been able to do this is by going overseas and 
exporting product. We recognized this back in the late '90s.
    We have gotten tremendous assistance and support from the 
Department of Commerce and aligned organizations, such as some 
of those that have been mentioned in the previous comments. And 
when we did that, we said that we needed to find a way to 
insure that our size company would not be at risk for the 
products that we were selling overseas.
    The Department of Commerce actually suggested that we 
consider the Ex-Im services because they had a mission to help 
companies such as ours. We have been using this now for over 5 
years, probably over closer to 6 years, and we have found it to 
be a very successful approach in what we are trying to do in 
the marketplace. We have insured over $27 million worth of 
transactions over that time period and we have gone to about 45 
different countries selling product. We have worked closely 
with the Ex-Im folks. We would comply with their policies and 
procedures and feel that it has been a good partnership. And we 
have paid, not insignificant for our company, a sum of about 
$160,000 in premiums over those years also to provide ourselves 
this coverage.
    We have had a problem, in that when we did last year submit 
a claim for lack of payment from a company that we were selling 
product to over in China. We were--we basically encountered 
some difficulty in how you work through the organization. We--I 
don't want to dwell too heavily on just what the particulars of 
that were, but we feel like that we need better support as a 
small company and being able to work effectively through Ex-Im 
to continue our success. We have to grow globally. That is--
    Chairman Manzullo. Mr. Vaden, you can be specific if you 
want.
    Mr. Vaden. Well, the specifics were that we sold goods to a 
Chinese buyer. The Chinese buyer took our goods, did not pay 
for our goods, is actually selling those goods into the 
marketplace over there, proclaiming their company to be the 
Rutland product line over in China. We would think that there 
have actually been some intellectual property theft that has 
occurred also in this activity. And so what we are encountering 
is increased--of course we are no longer in business with this 
company so we have actually seen our business drop off in 
China, which is the largest growth market and opportunity that 
we have in the world these days. And we have to be there. We 
have to be positioned there.
    The problem that we have is we have to know that we are not 
at risk. It is very difficult for us to find trustworthy 
partners to do business with over there. And what we have 
encountered and found is that if we have good support such as 
the Ex-Im insurance, we can then continue to grow our business 
not only in China, which is the biggest market opportunity for 
our growth, but also in Asia and in the other parts of the 
world.
    So we are frustrated with the situation that arose when we 
did apply for a claim to be reimbursed. And basically the 
response that we got was, I felt like, a technicality in 
regards to what we--how we saw the situation versus how the 
folks at Ex-Im saw the situation. But more frustratingly was 
the circumstance that we were advised to go back and get a 
judgment against this company in China, in the courts in China, 
which we do not have the resources to do, do not have the time 
to do. And frankly, it is just not worth chasing. The amount of 
monies that we have lost--
    Chairman Manzullo. Who advised you? I want to--this is an 
oversight hearing. The purpose of oversight is to hold agencies 
accountable for things that they may be doing wrong, also to 
give praise when they are doing things that are right. Was it 
Ex-Im that told you you had to go to China to get the judgment?
    Mr. Vaden. Well, my understanding was that since we did not 
have a judgment against this person in China, that that would 
toss out the consideration for any payment of claim. And that 
was my understanding from our financial group and our CFO's 
discussions with some of the folks in the Ex-Im organization.
    Chairman Manzullo. Proceed.
    Mr. Vaden. Okay. Basically, when we get beyond that point, 
my company is a privately financed and private equity held 
business. One of the things that we have to do in that business 
is to continue to grow our business, not just sustain business 
levels that we are at. For us to be able to do that, we have to 
grow in the export market. Our borrowing base of activity and 
the financing that we have in our business right now is 
predicated and tied to collateral and accounts receivable. And 
as we grow our business internationally Ex-Im becomes all the 
more vital to what we are doing.
    And I do want to say again that Ex-Im has helped us grow 
this business dramatically over those years. Our new investors 
and owners have a great deal of comfort knowing that we have 
worked with and through Ex-Im, and so they have agreed to make 
that part of our borrowing base. If we were under circumstances 
where there is doubt and question as to whether we will be able 
to rely on Ex-Im should we run into situations, and I suspect 
we are going to run into a few out there, where we going to 
find bad actors who will not pay for product as we sell that 
product overseas, then we are going to have a hard time running 
our business. If I can't grow my business in the export 
activity, we are going to have a hard time running our business 
and our business surviving.
    So basically I guess what I would like to see, and really 
the reason that I had contacted your committee, knowing that 
there were going to be some discussions and hearing this week, 
is to implore and encourage and ask that not only in a very 
personal situation with our company, I wanted to be able to 
find a way to work better through Ex-Im to cut through some of 
the red tape and find out how we can get support for what we 
need personally. But we need to know that that support is out 
there as we try to grow our business in the future, and I think 
that is indicative not just of my company but of a lot of small 
manufacturing companies in the U.S.
    So what we are looking for is ways that we can know that we 
have to go to a marketplace and have some backup support 
through the Ex-Im organization. Ex-Im is the best choice I 
think to assist us, but we cannot operate and be told that we 
need to go back and litigate in foreign courts and chase things 
on those activities with our size organization. And I think 
with respect to the export markets in general that we are 
working in and the Chinese market in particular, you know, we 
are faced with a very drastic choice. If we cannot get Ex-Im to 
do what we think we have been paying for insurancewise, we may 
be told by our investors, you have to forego growing in those 
markets. If we forego growing in those markets as business 
continues to migrate offshore, then our business will not grow. 
It will shrink and our business will not survive.
    [Mr. Vaden's testimony may be found in the appendix.]
    Chairman Manzullo. I appreciate your testimony. I will 
start the round of questions here. Mrs. Myrick could not make 
it back to introduce you. She probably would have said all 
kinds of nice things about you, I am sure, but also about North 
Carolina. So these things happen.
    I am concerned, I have got a letter here to Mr. Eric Lang. 
Is that your attorney?
    Mr. Vaden. That is our attorney, yes.
    Chairman Manzullo. And I am just--I am absolutely 
astonished at this letter that came from Export-Import Bank. It 
is short and I am going to read it. It says this letter is in 
response to your letter dated March 10 to Richard Bragg, from 
the Ex-Im Bank Assets Management Division. ``You have argued 
that the word "dispute" in article V, letter F of the policy is 
ambiguous because it is unclear if it applies only to disputes 
with respect to the insured transaction or also to disputes 
existing out of the insured transaction. Further, you have 
argued in that case that the dispute does not involve the 
insured transaction since the debtor is not contending the 
price, quantity--or quantity of the products has already 
accepted these products and is selling them on the market.'' 
That is the pirate, is that correct?
    Mr. Vaden. Yes.
    Chairman Manzullo. ``You have argued that the 
interpretation should prevail because when interpreting an 
insurance policy the ambiguity should be construed in favor of 
the insured. While we agree that ambiguities are construed in 
favor of the insured, we do not agree with your analysis. The 
word "dispute" in article V, letter F refers to any dispute 
with respect to the validity or legal enforceability of the 
debt. In this case, the buyer is disputing its obligation to 
pay the insured because it claims to have certain set-off 
rights against Rutland. The fact that such set-off rights stem 
from a previous transaction between the parties is irrelevant. 
Furthermore, whether the buyer is correctly or incorrectly 
invoking a set-off right to extinguish its obligation to pay 
the insured debt should either be determined by the parties 
pursuant to a settlement satisfactory to the Ex-Im Bank or by 
the competent authorities.''
    ``Article V, letter F clearly provides that Ex-Im Bank will 
only entertain a disputed claim when such dispute has been 
settled by the parties''--you would have to work with the 
pirate with a patch over his eye who steals your stuff and 
sells it on the open market, does reverse technology and 
refuses to pay you.
    ``Or in a manner satisfactory to Ex-Im Bank, or when the 
final determination of the validity and legal enforceability of 
the debt has been made by the courts of the buyer's country or 
another form acceptable to Ex-Im Bank.''
    I mean, I am just--I am absolutely astonished that Andrea 
Gunderman, counsel, would sign her name to this letter.
    The last paragraph is finding the exclusion from coverage 
of losses resulting from disputes between the buyer and the 
insured constitutes a standard market practice.
    Let me read that again. ``The exclusion from coverage of 
losses resulting from disputes between the buyer and the 
insured constitutes a standard market practice.''
    Okay. That is not covered. Ex-Im doesn't cover disputes. 
They only pay when there is an agreement. So why have 
insurance? Why have Ex-Im insurance? Congress is asking why 
have Ex-Im at this point. Indeed, the insurer has the right to 
first pay the claim to reassign the debt documents in order to 
collect the debt. That is called the right of subrogation. If 
the debt is not valid or is not legally enforceable, the 
insurer will be prevented from collecting. And I read this, and 
if I was in your position, I would go absolutely ballistic, and 
wonder what did you get from Ex-Im, and what did you hope to 
get from them when you signed the contract?
    Mr. Vaden. Well, what we got from Ex-Im and what we hoped 
to get from Ex-Im was some mitigation of credit risk which 
would then enable our lenders and owners in our business to 
enable us to go and grow our business overseas and take on debt 
in the export market. Without that we can't survive. We will 
die. I am, of course, from North Carolina. It is fairly simple 
in the concept. The concept that I thought we were entering 
into was that we had the best of both worlds. We had not only 
an insurer, so that if we did have risk on some of those 
collectibles, it would not damage the business that we are 
running, which is a small business. But also I felt like that 
we had the Federal Government behind us, and that carries a lot 
of weight. That is a marketing tool that has actually been 
positively received in the marketplace when we talk to these 
people we are working with and we utilize when we run against a 
tough situation. We can't do that because Ex-Im Bank will not 
agree and let us do it.
    Chairman Manzullo. So you were told here by somebody at Ex-
Im Bank, do you recall who it was, Mr. Vaden? Was it this 
Andrea Gunderman?
    Mr. Vaden. Well, that conversation occurred with our 
attorney. I think John Conat might have been the person that 
had some conversation with our financial folks because I 
believe John was the one that notified us initially that they 
were going to deny the claim.
    Chairman Manzullo. And so you were told that you had to go 
to China and file an IT lawsuit?
    Mr. Vaden. That was the basic message that we received at 
Rutland.
    Chairman Manzullo. And how much did you lose in this 
transaction?
    Mr. Vaden. Well, the transaction was for $86,000, 
approximately, which occurred in late summer, I believe it was, 
of 2003. I think the way our policy is written, we would be out 
about $66,000 if we do not collect the claim because there was 
a 20 percent deductible, I guess you would call it. And of 
course what we are out is not just that situation, but we had 
to discontinue doing business with this gentleman. We have had 
to go find other folks in the marketplace. This gentleman, the 
pirate, is out there now selling our product under our 
tradenames.
    Chairman Manzullo. And can't you prove that in--I mean did 
Ex-Im ever offer to sit down and talk to you about this at 
length?
    Mr. Vaden. We provided documents and we provided 
information accordingly, but basically I think what we got 
distracted on was that this gentleman claimed that he had a 
dispute with Rutland as a company.
    Chairman Manzullo. Well, there's always a dispute. That is 
why you have insurance because there is a dispute.
    Mr. Vaden. Well, with these kind of people, there is 
absolutely a dispute because he is not a trustworthy, honest 
individual, number one. And number two, the other issue that we 
encountered was that we sold goods. He received goods. He had 
no dispute about the goods, and the goods are being used in the 
marketplace against us.
    Chairman Manzullo. Mr. Merrill, are you aware of this 
particular transaction?
    Mr. Merrill. No. This is the first I heard about it. I 
mean, I heard of it a few minutes ago.
    Chairman Manzullo. Could you turn on your mike, please? You 
don't know the details of it?
    Mr. Merrill. No, you have the advantage over me by being a 
lawyer. I am very sympathetic. I thank the gentleman for his 
kind words. I am very sympathetic because I personally as a 
businessman looked at insurance policies like that. But the 
answer to your question is no.
    Chairman Manzullo. Could you help us on some general 
principles here as to when you have a dispute, why the Ex-Im 
Bank would say go to China and get a judgment from a Chinese 
court? I mean, doesn't that seem pretty difficult, especially 
for a small businessman to do that?
    Mr. Merrill. Small business or large business, I would 
think that--let me say it is not language that I would choose 
to use. However, I don't know what answer I can give you in 
principle. You asked for an answer, and the question is, some 
principles--first, there is a difference between insurance, 
which is conditional. I don't know the conditions of this 
particular insurance policy and just--we can find out but I 
don't know. A guarantee, which in a general sense is 
unconditional, and let me call it a project finance which is 
subject to the individual--let me say the cash flow for the 
individual product. So the answer here is, I just don't know 
enough about his insurance policy, or guarantee policy, or 
whatever it is policy to answer intelligently. I am answering 
your question about the principles.
    Chairman Manzullo. That is fair.
    Mr. Merrill. I think I ought to add that I was in China for 
10 days in January. You only have to pick up a paper anywhere 
in the world really to see that piracy and I am going to call 
it--I think you used the term "reverse engineering." I don't 
know whether you did or not.
    Chairman Manzullo. Pirate. Black patch over one eye.
    Mr. Merrill. Say it again.
    Chairman Manzullo. That is a pirate.
    Mr. Merrill. Pirating. Thank you.
    Chairman Manzullo. They look like this [placing one hand 
over one eye].
    Mr. Merrill. Pirating is an extent that would understate 
the issue in China. And so I think that there are a lot of 
companies that have similar problems. And by the way, companies 
in Japan and Korea have also similar problems.
    Chairman Manzullo. Okay. On this issue--Mrs. Kelly, why 
don't you go ahead? Go ahead.
    Mrs. Kelly. Mr. Chairman, have you finished your line of 
questioning?
    Chairman Manzullo. You go ahead.
    Mrs. Kelly. Mr. Merrill, I noticed in the chairman's 
statement, he noted that there is a lower number of small 
business, that your role within the small business community 
has a lower number. I would like to ask why that is true.
    Mr. Merrill. Lower number, you mean lower percentage?
    Mrs. Kelly. Yes. Lower percentage.
    Mr. Merrill. Yes, ma'am.
    Mrs. Kelly. Why is that?
    Mr. Merrill. It is very simple. It really is simple. I mean 
not many answers in life are simple.
    Mrs. Kelly. That is okay. I don't have a whole lot of time 
so if you can just give me an answer quickly, I would 
appreciate it.
    Mr. Merrill. Okay. A billion and a half dollars worth of 
deals for all practical matter, one billion dollar deal, 
airline deal, one-half billion dollar deal, an export of Lucent 
technologies, export of knowledge based industry, came in 
toward the end of the fiscal year. We were at 20.234, 21 
percent round terms. In comes a billion and a half dollars and 
obviously the percentage drops at the last minute. It is 
literally impossible to divide two billion--I am just using 
round terms--by an average small business loan of $242,000 and 
get enough loans of that to match $2 billion in a period of 
weeks. So the last--these two deals came in. These were real 
jobs, which were American jobs. The transactions were approved 
at the very end of the fiscal year and bingo, the percentage 
went down slightly. That is what happened.
    Mrs. Kelly. Had there been more involvement with the small 
business community prior to that, that might not have been 
quite such a strong drop, don't you think?
    Mr. Merrill. Frankly, I think it was a very modest drop, 
because the drop of a percent or a percent and a half against 
$2 billion is really not much. I mean, total authorization in 
[FY 2004] was 13 billion and total authorizations for next year 
that we are seeking is a little over $13.8 billion. To 
correctly anticipate when billion dollar deals are going to 
drop is an estimate. I mean we can't do it on the basis of 
where it is in the fiscal year. You can estimate where the 
small businesses are because there are a lot of them. But you 
can't estimate the big ones.
    Mrs. Kelly. Yeah. We need--we are interested in small 
businesses. The second thing I would like to ask you is why 
fast track isn't in place yet. We have had a long time to get 
it done. Why isn't it there yet?
    Mr. Merrill. Yes, ma'am. I am very frustrated by it. Again 
I think the answer is I hope relatively simple. We have gone 
out three times now to the banking community with, let me call 
it a proposal inside the banking community. The asset-base 
lenders and the commercial lenders were arguing with each other 
about what the terms for fast track lending should be. So they 
sent back, we got a lot of complaints. Went back for a second 
round. Similar lot of complaints. There also were complaints 
not only inside the same banks, but among the banks to have 
each one tailored--there are 14,000 banks in the United 
States--to have them tailored to bank-by-bank credit or other 
similar standards. We went back for a third round which is now 
being considered, and we hope we have it right. However, the 
fast track is a program that goes between 10 million and 25 
million. Any deal that would be fast tracked can also go 
through the board as one did just a few weeks ago for $14 
million. The idea is to make it easier to do medium-term 
businesses, mainly 10 to 25 million. But no deal has been 
turned away because we haven't got the fast track in place.
    Mrs. Kelly. I understand that.
    Mr. Merrill. So we hope to get it place in early next year.
    Mrs. Kelly. It may not have even been approached because 
fast track wasn't in place. Businesses need speed. Sometimes 
timeliness makes all the difference in the world.
    The other things I wanted to ask you about was, and I am 
making this quick because I am running out of time here. You 
have no guidelines yet for the dealer/distributor financing 
program. Why is that?
    Mr. Merrill. I heard about that just a few minutes ago 
while we had the waiting period here, I called back to find 
out. I mean I just heard about that. I never heard of 
guidelines. We don't have any guidelines. We don't need any 
guidelines. The program is open. We have promoted it in all of 
our pieces of paper, in all of our communications with bankers. 
We have 1,500 people coming, or between a thousand hotel rooms 
reserved for our annual Bank conference, Trade Finance Export 
Credit, at Omni Shoreham next week. It has been promoted in all 
of the literature that goes there. We will promote it again 
there. We are open for that. I don't know anything about 
implementing guidelines. I don't know where that comes from. At 
least that is what I was told when I called back to the people 
in the Bank just an hour ago. We are open.
    Mrs. Kelly. How many people have taken advantage of that?
    Mr. Merrill. I don't know.
    Mrs. Kelly. Is there anyone, do you have staff here that 
could answer these questions?
    Mr. Merrill. Well, answer which question, ma'am?
    Mrs. Kelly. Well, you don't know the answer to the question 
I just asked. Is it possible that there is someone here in the 
audience that you brought with you?
    Mr. Merrill. What is the question you asked?
    Mrs. Kelly. My question is whether or not anyone had taken 
advantage of the dealer/distributor financing program.
    Mr. Merrill. I genuinely do not know the answer to that 
question.
    Mrs. Kelly. But do you have staff here that might know the 
answer to the question, since you don't?
    Mr. Merrill. There is staff here but I don't know which one 
would know the answer.
    Mrs. Kelly. Is there anyone here who does? Can we ask them? 
Sir, you have your hand up.
    Chairman Manzullo. Will you come up to the table?
    Mrs. Kelly. Will you come up and identify yourself please 
and tells us--
    Mr. Miller. My name is Jeffrey Miller with the Ex-Im Bank. 
As the Chairman said, the program is operational. We are in the 
marketing rolling out stages. No one has taken advantage as of 
yet. And our annual conference will be one of the platforms 
where we will try to capture a lot of attention.
    Mrs. Kelly. Thank you very much, Mr. Miller. I am glad you 
clarified that. I am concerned that the Ex-Im Bank fulfill for 
the small businesses the function that Mr. Vaden and the other 
people who have come to this committee asking for our help with 
regard to Ex-Im Bank and small business. I am very concerned 
that that be addressed. The job we have right now is to help 
American businesses do business and be in the world economic 
market. I am concerned that Mr. Vaden's company has lost 
intellectual property and is apparently not getting the quality 
support that he feels he needs. Issues like that need to be 
addressed with regard to our small businesses.
    I am also concerned because we know that other countries in 
the world are subsidizing aggressively loans that give our 
industries and our businesses a disadvantage. What your 
function is, Mr. Merrill, is to make sure that our people at 
least get an even, level playing field.
    I am very hopeful that the next time you come to talk to us 
there will be a larger percentage of small businesses involved 
with you. I will hope that fast track will be in place and 
people are using it, and I would hope that more than one person 
will have taken advantage of this dealer/distributor financing 
program because these are the programs that our industries, the 
people that I represent, the people that the chairman 
represents and everybody else on this committee, our small 
businesses need help. We are in a global economy that needs our 
help right now. Our businesses need our help to be players in 
that field.
    So I would hope that you would be coming back to us and 
giving us some real solid information. I thank you for what you 
have done, sir, but I know very well that it is easy to loan 
large amounts because the same amount of paperwork is required 
for a big amount as a small amount. But it is our small 
businesses that generate seven out of 10 jobs in this country. 
We need those new jobs. We need that, the small businesses to 
be able to have the financing and to be internationally playing 
in the world economy.
    So I thank you for appearing here today. I hope when you 
come back you will have strong answers to those questions.
    Mr. Merrill. Me too. I am on your side.
    Chairman Manzullo. Ms. Kelly, in your questioning of Mr. 
Miller, I believe he said he was rolling out this program in 
stages.
    Mrs. Kelly. The dealer/distributor program?
    Chairman Manzullo. What does that mean?
    Mrs. Kelly. He said that the conference--correct me if I am 
wrong, the conference--
    Chairman Manzullo. People come to Washington D.C.
    Mr. Merrill. He meant in terms of promotion. We have 
promoted it in paper and letters and export credit. Big place 
to promote it. Excuse me, I don't mean to interrupt the 
Chairman.
    Chairman Manzullo. I mean, here is what we are hearing. The 
guys that want to export, they check with Ex-Im about the 
program. And you know what Ex-Im is saying? ``We have no 
guidelines.'' Those people aren't testifying here. You know 
why? They are afraid of retaliation by Ex-Im. There is a 
problem here. There is a big problem, because you have had this 
program around for some time and not one person has taken 
advantage of it.
    Mr. Merrill. Mr. Chairman, we have no guidelines. All you 
have to do is ask.
    Chairman Manzullo. We do and we are told there are no 
guidelines. I don't think you guys know what you are doing.
    Mr. Merrill. I understand floor planning and that is what 
it is.
    Chairman Manzullo. Why hasn't one person in the United 
States been able to take advantage of the program?
    Mr. Merrill. I don't know.
    Chairman Manzullo. Does somebody have the answer? Mr. 
Miller?
    Mrs. Kelly. Mr. Chairman, perhaps we could ask for you to 
submit to the committee a written program of the written 
guidelines that you have, whatever you have, that is the 
methodology for the small businesses that can use the bank.
    Mr. Merrill. I would be happy to submit such a report. I 
agree with the Chairman and with you.
    Chairman Manzullo. I want the document in 7 days. The 
document you will give us will be the document that goes to 
people who want to avail themselves of that loan. And if you 
get it wrong, that is your problem. You understand that?
    Mr. Merrill. Mr. Chairman, in fairness, can I ask you to 
let us include the documentation that we do--
    Chairman Manzullo. No. I want you to include--I am sorry, 
finish.
    Mr. Merrill. We have a conference where this is a main line 
issue to announce. Can we--if you give us a deadline, the 
conference is the 14th and 15th. If you give us until the 17--
    Chairman Manzullo. I want it in 7 days because I want to 
see what you are rolling out. Our people back home get on an 
airplane and they are all excited and they are going to 
Washington for a big Ex-Im conference. Got a great opportunity 
to sell things. And then they go there and there is this big 
show that costs them thousands of dollars. And if this program 
is already operational, why don't you have one person involved 
in it? Not one person has taken advantage of it.
    Mr. Miller, do you have an answer to that? Do you know why 
you don't have an answer to that? When these people ask, they 
are told there are no guidelines. I think there is a corporate 
governance problem here. There is a big problem, a huge 
problem, because you guys don't even know there is a problem.
    Mr. Merrill. Mr. Chairman, if I had known this issue was 
going to come up today, I guarantee you that we would have--
    Chairman Manzullo. Can I document to you the number of 
times that we have talked to you about this? I don't know how 
many times--I mean we had a hearing on it. It was last year at 
the financial services. And I sit on the Financial Services 
Committee, the committee of jurisdiction.
    Mr. Merrill. You were very helpful.
    Chairman Manzullo. And so does Mrs. Kelly. I want it done 
in 7 days. I don't care if you work 24/7. It is the only way 
things get done around here is that I have to force the issue. 
Will you have it in my office in the next final 7 days, the 
final document? And I will review it with the people, the 
people who are afraid to sit here because of retaliation by Ex-
Im, and then I will get back to you. Do you understand that?
    Mr. Merrill. Yes, Mr. Chairman. And--
    Chairman Manzullo. Mr. Vaden, is your attorney here?
    Mr. Vaden. No, he is not.
    Chairman Manzullo. Is Andrea Gundleman here from Ex-Im? 
Anybody here from your legal department? Mr. Saba, is he here, 
general counsel? Mr. Saba, I would like to meet with you and 
Mr. Vaden and I want to find out why--and you, Mr. Merrill, why 
this man is being asked to go to a Chinese court. Can you meet 
with us after the hearing?
    Mr. Merrill. Of course.
    Chairman Manzullo. Mr. Bradley, do you have any questions?
    Mr. Bradley. Yes.
    Mr. Merrill. Just let me say for the record, I am extremely 
sympathetic to the gentleman to my right [referring to Mr. 
Vaden].
    Chairman Manzullo. Our goal is we are going to get this 
resolved tonight. See that door over there? That door will be 
locked until we come to a conclusion. This man got screwed. You 
told him and your people at Ex-Im that they had to go to China 
to litigate an IT claim and you just sat there and said there 
is no intellectual property protection in China.
    Mr. Merrill. I didn't say that.
    Chairman Manzullo. Yes, you did. It is a joke in China.
    Mr. Merrill. That may be, but I said it was a problem that 
has been reported in all the newspapers.
    Chairman Manzullo. It is not just a problem. It is an 
epidemic over there. They are pirates and you know that. And is 
she still with you, Andrea Gundleman? Mr. Saba, is she still 
with you? Is she working today? Could you call her and have her 
be here in an hour, please.
    Mr. Saba. We don't need her here.
    Chairman Manzullo. It may not be necessary?
    Mr. Saba. That is correct.
    Chairman Manzullo. You are chief counsel. I take your word 
for it. Mr. Bradley?
    Mr. Bradley. Thank you, Mr. Chairman, I apologize for 
having to leave the hearing. Mr. Merrill, I have a couple of 
questions. And if they have already been asked, just say so. 
And if not, have at it. Over the past year or so, the board of 
directors has approved several new financing programs which 
have been aimed at small businesses, lease financing, dealer 
financing, but the bank's staff seemed to have dropped the ball 
from what we have heard in implementing what the board has 
approved. When will these board approved initiatives actually 
be implemented, because they would help in increasing small 
business financing?
    Mr. Merrill. I am listening to two representatives of 
Congress saying they received complaints, which I have not 
received. I take what the Chairman and you, sir, say seriously. 
We will have to look into it. I wish I had been aware of this 
even a day or two ago.
    Mr. Bradley. Let me continue then. The bank seems to take 
the view that the annual 20 percent minimum for small 
businesses as a percent of the total financing issue is a 
guideline. But the legislation which passed in 2002 makes it 
clear that it is a requirement, not just a general guideline. 
Is that your view of what the 20 percent means or do you 
interpret that to mean it is a guideline?
    Mr. Merrill. I don't have an interpretation either way. I 
will give you an example in the instant case. The question is 
whether it is a guideline. I think that it is basically 
whatever you say it is, whatever is written--whatever is 
written down, I accept as being valid. In the instant case, 
there were three choices. You could reject the--I am going to 
say $2 billion in round terms of last-minute deals; two, three 
large ones, two particular. You could manage the numbers by 
kicking them over into the next fiscal year. In the world of 
Enron, Fannie Mae and AIG, I am not prepared to do that, and I 
wouldn't be prepared to do it before any of those.
    Or you could take the business and help create American 
jobs and something had to give. We voted--we decided to create 
the American jobs. It did drive the percentage down. We intend 
to honor that percentage to do everything we can to honor the 
percentage to ensure that the 20 percent guideline, goal, 
mandate, objective, target, whatever word you wish to use, is 
met and we hope we can exceed it. We are on track to do it this 
year. We are doing everything we can to make that happen.
    I was once a small business man. The President wants to 
help. There is no objection to this. The President of the 
United States is wound up on helping small business. We are 
wound up on helping small business. And I agree with whoever 
made the point about the job creation of small business. 
Virtually all of the businesses being created in the United 
States is through small businesses like his [referring to Mr. 
Vaden] and mine in my nongovernment role.
    Mr. Bradley. Mr. Chairman, one last question and thank you 
for that answer. Congress has made it pretty clear over the 
years that small business has to be a priority for your bank. 
Several years ago, though, the bank's small business division 
apparently was downgraded. Have you considered reinstating the 
small business division to make it more high profile and 
something that reports directly to the board of directors?
    Mr. Merrill. In a certain sense, everything is reported to 
me directly. We can't stop people from talking to the board or 
any member of the board. The small business thread--the focus, 
culture, ethic, objective of small business is threaded into 
the culture of the Bank. It is kind of like saying, do you 
still love me. We love small business. No matter how many times 
we say it, we still love them just as much. You can't love 
somebody more than you already love them. The culture is small 
business-oriented.
    Let me say that the Bank's principal lines of business are 
small, medium and long-term; large, medium and small in size 
and the Bank is oriented also towards guarantees, insurance and 
project finance. All of those have within them a culture of 
small business. All of them are involved in emphasizing the 
maximum number of small businesses that we can serve. And there 
isn't anybody at the Bank who is outside the culture of small 
business. I don't know who the janitorial contract is with, but 
I suspect it is small business. But in any professional sense, 
all of those operating divisions are conscious of trying to 
emphasize or focused on the maximum number of small businesses.
    Mr. Bradley. Thank you.
    Chairman Manzullo. Let me follow up. I guess it goes to the 
question that we have been asking you that it is obvious that 
people who work for you have not conveyed these complaints to 
you, which is problematic, I think. I would want to know.
    Mr. Merrill. Mr. Chairman, you can swear me 10 times over. 
The two complaints--
    Chairman Manzullo. I believe you entirely. I guess my 
concern is why these never reached your desk.
    Mr. Merrill. We are going to find out.
    Chairman Manzullo. Did you know there is a directive at Ex-
Im that no staff of Ex-Im may communicate with any board member 
without the consent of the general counsel's office? Were you 
aware of that?
    Mr. Merrill. No, I was not. However--the short answer is I 
was not. The Bank, like the rest of the country, is e-mail 
crazy. I got 8,000 e-mails one weekend. Everybody copies 
everybody else. This is just not the thing which one can 
operate on. They are all doing e-mail back and forth and 
everybody gets copied. That is about the best I can answer to 
that one. And I have made it clear that my office is open to 
anybody who wants to talk to me. I take all phone calls and 
return all phone calls within human possibility unless I am in 
China, and that includes people that work for us, particularly 
people who work for us.
    Chairman Manzullo. We get this information because as 
Members of Congress, we are close to the people. And this has 
come in from staff at Ex-Im themselves. This is pretty serious.
    Mr. Merrill. I haven't gotten an answer to that.
    Chairman Manzullo. Would you be willing to put out a 
directive to your employees that anybody at any time could talk 
to any of the board members?
    Mr. Merrill. I don't know if it is a directive or not a 
directive.
    Chairman Manzullo. That would be a simple yes or no.
    Mr. Merrill. It is not a simple yes or no, because if 
anybody at any time can talk to any director on any subject 
that has not gone through in some way and contacted their 
supervisor, I would not be able to function. If somebody has a 
complaint after they have talked to their supervisor, I would 
be happy to talk to them. If they have something they think I 
need to know, I would be happy to receive it in an open line. 
But I don't think--
    Chairman Manzullo. We are not talking about HR [human 
resources] matters. This is some pretty serious stuff where 
people at the Ex-Im bank feel an obligation at times to talk 
directly, particularly, to the other board members.
    Mr. Merrill. Board members can talk to each other. They 
can't, three people together. Not a good idea for two.
    Chairman Manzullo. That is regular staff talking to board 
members. Not board member to board member. Max Cleland is a 
board member, is that correct?
    Mr. Merrill. Yes, he is.
    Chairman Manzullo. And he came on for what purpose?
    Mr. Merrill. The President appointed him.
    Chairman Manzullo. And was he assigned a particular task 
to--in fact, he has been designated by you as the small 
business person on the board, is that correct?
    Mr. Merrill. That is correct. The charter requires that a 
board member--one board member take a special interest in 
environmental affairs. Another one take an interest in small 
business affairs. Senator Cleland asked for that portfolio. 
Senator Sarbanes and two of the other Senators called and asked 
that he be given that area to represent. And the answer is yes.
    Chairman Manzullo. Have you met and talked with him about 
what he is doing there? Does he have staff to work on that?
    Mr. Merrill. He gets the same staff that everybody else in 
the Bank gets, except that he--because of his handicap--gets a 
little extra staff.
    Chairman Manzullo. I understand that. Let me go back to 
the--with regard to meeting the numbers where you came in at 
16.7 percent on the small business goals. Is that 16.7 percent 
of the total amount of money that is loaned that goes to small 
business--that is authorized that goes to small businesses?
    Mr. Merrill. Yes, but it is 80 percent, Mr. Chairman, of 
the transactions.
    Chairman Manzullo. Explain that to me.
    Mr. Merrill. The difference is the--small business, by 
definition, is a small business. So 80 percent of the 
transactions go to small business. But not 80 percent of the 
volume, because--
    Chairman Manzullo. The goal--
    Mr. Merrill. How many $240,000 loans can you do to match 
one Boeing jetliner?
    Chairman Manzullo. Let me--Ms. Hadfield, you have mentioned 
in your testimony where you brought up the fact that Ex-Im had 
entered into an agreement with Chartered. Explain that again.
    Ms. Hadfield. Recently, Ex-Im approved a loan of $650 
million for the export of semiconductor equipment to Chartered 
Semiconductor in Singapore.
    Mr. Merrill. To who?
    Ms. Hadfield. Recently, there was an approval by Ex-Im of a 
loan of $650 million to Chartered in Singapore in November of 
2004.
    Chairman Manzullo. Then you went on to--there is another 
pending deal now that has caused some concern.
    Ms. Hadfield. There is a deal that is pending that has been 
set aside indefinitely by the Ex-Im bank for an export of up to 
$770 million to SMIC, a semiconductor foundry in China. And we 
are very concerned that that deal should be attended to and 
should go forward. We believe it has strong economic benefits 
for the U.S. economy and very similar to the Chartered deal.
    Chairman Manzullo. Are you familiar with the SMIC, with the 
application?
    Mr. Merrill. Yes.
    Chairman Manzullo. Let me tell you where I am coming from 
and the reason I have a concern in this. First of all, I don't 
have any employees from SMIC in my congressional district. I 
lost 29 percent of my manufacturing base. Rockford, Illinois 
used to be the machine tool center of the world, grease, 
machine oil. And today, we are down to the fact that if we go 
into what is left of our industry, with the exception of Haas 
from California, there aren't that many machine tools made in 
this country.
    I get called all the time to go and look at machines. I 
mean, I get excited phone calls: ``I have a new Gleason 500 
shaper. Would you like to see it?'' I saw my first creep feed 
grinder and got really excited about that. But these things are 
not made in the United States. And the guys struggle on a 
continuous basis in the district that I represent. We have lost 
14,000 manufacturing jobs.
    The fastener industry was in the process of recovering. 
They are getting killed again. There are still tariffs on 
stainless steel and hot rolled steel. And manufacturing is a 
base in this country that has been destroyed. The Pentagon 
leads the charge on it. They say they live by the application 
of the Buy America Act. If you read it [Pentagon's 
understanding], you could fulfill the Buy America Act in the 
Defense Department and not have one ounce of American products 
in it.
    We are withering on the vine. And the only thing that is 
left is the dry machine tools. Applied Materials put in 
millions of dollars worth of machine tools when IBM made the 
very wise decision to make the 300-millimeter wafer in East 
Fishkills, New York. And I have looked at this thing. In terms 
of the machine tool industry, this country is desperate. I know 
manufacturing probably better than 95 percent of the people in 
this place. I live it. My dad was a master machinist. 80 
percent of my time in Washington is spent on manufacturing. 
This committee has held 60 hearings on manufacturing, 
manufacturing techniques. Anything that involves manufacturing, 
this committee has been involved in.
    I have to speak next week in Nashville, St. Louis and 
Tucson within a matter of 5 days in trying to maintain our 
manufacturing base in this country. And that is my interest. 
And what I see going on now when, according to what you said 
is--why don't I do this. Why don't you tell us the status of 
SMIC's application at Ex-Im to sell $770 million worth of 
machine tools, or rather to purchase those?
    Mr. Merrill. Is that the question, Mr. Chairman?
    Chairman Manzullo. Yes.
    Mr. Merrill. Let me say first, we are well aware of 
manufacturing, too. We are aware of the evolution of 
manufacturing taking place in the world and in our country. And 
I do not want to pretend special expertise in solving that, let 
me call it, continental revolution to you. So I am very 
sympathetic. And I understand. You come from a great district, 
U.S. Grant's hometown, and a manufacturing base of America. And 
so I am entirely empathetic.
    Chairman Manzullo. Well, Grant would drink away his 
problems and I am not predisposed to do that. I know he won a 
war.
    Mr. Merrill. My problem is I don't drink and smoke, but if 
you give me an ice cream cone, that is where my weakness is. 
The status at the moment is that this was left with the 
applicant. Now I personally, in December, met with all--met 
with the applicant, whose own request to us was to say they 
would come back with an industry-wide consensus, and we said we 
were available for that and we are available for that. They 
have not come back to us. So that is the status at the moment. 
By the way, I would add, I have met with all three companies 
personally, in 2 cases, the chairmen; in all cases, the senior 
executive staff. And in the case of the applicant, twice, once 
here and once in China. I found them to be wonderful people 
unanimously. I would invest in one of them personally. But if 
you ask me where it stands, it stands where they left the ball 
in their court.
    Chairman Manzullo. You have gotten letters from me and the 
Speaker of the House, and a letter that was just sent April 1. 
There is no industry agreement. So what are you going to do in 
that case?
    Mr. Merrill. Mr. Chairman, we have heard--I am kind of 
astonished about this. When I talked to these people, I thought 
in December, I thought this was normal business. Anybody who 
wants to come in and talk, comes in and talks.
    Chairman Manzullo. I don't think it is normal to get a 
letter from the Speaker of the House asking to bring this to a 
vote.
    Mr. Merrill. Mr. Chairman, I have letters and 
correspondence and phone calls from Members in both House and 
Senate of both sides on all sides of this issue, but 
principally on both sides on this issue. It puts us between a 
rock and a hard place.
    Chairman Manzullo. That is why you are paid. My only 
interest in this is procedural. So my question to you is, it is 
obvious there is no industry agreement. When is your board 
going to meet to vote up or down on this application? I want a 
date.
    Mr. Merrill. I don't think--
    Chairman Manzullo. Mr. Merrill, I want a date.
    Mr. Merrill. I don't think I am going to give you one, Mr. 
Chairman.
    Chairman Manzullo. Then maybe you ought to step aside so 
the board can get the job done. You have two companies that are 
fighting. You are paid to make a decision and so are the 
members of the board. And the applicant says ``we can't reach 
an agreement with the industry.'' You don't bookshelf an 
application based upon the fact that they can't reach an 
agreement.
    Mr. Merrill. That was not our suggestion, but their 
suggestion.
    Chairman Manzullo. But you bookshelved it. And you have 
been advised many times since they tried to do an industry-wide 
agreement that they just can't agree. They just absolutely 
cannot agree. What are you going to do if they can't agree on 
it?
    Mr. Merrill. Mr. Chairman, I am going to do what any person 
between a rock and hard place is going to do, which is to be 
extremely conservative.
    Chairman Manzullo. And that means doing nothing.
    Mr. Merrill. No. That means sticking as close to our--
    Chairman Manzullo. Don't you think you have an obligation 
to bring it to the board for a vote or are you going to sit on 
it? If you are going to sit on it, then you have helped people 
who are opposed to the application.
    Mr. Merrill. Mr. Chairman, there are serious problems. We 
have thick briefs on both sides.
    Chairman Manzullo. I understand that. But you are supposed 
to be reading these things in order to come to a conclusion, 
and so are the other directors.
    Mr. Merrill. Senior members of the Bank ask of me before 
they consider a case that we deliver a proposition to the 
board, that is a case statement to the board the Friday before 
the case--
    Chairman Manzullo. So when are you going to do that?
    Mr. Merrill. Not likely to, because there are serious 
questions here of economic impact, additionality.
    Chairman Manzullo. Let us go back to economic impact. Do 
you have a written report from your staff? Have you seen the 
written report on economic impact?
    Mr. Merrill. I have seen volumes of reports.
    Chairman Manzullo. And based--and you are supposed to take 
those into consideration and make a decision, isn't that 
correct?
    Mr. Merrill. Those and the reports that came as a result of 
the public notice process.
    Chairman Manzullo. The fact that there are a lot of 
problems doesn't mean that you can't just schedule a vote on 
this thing.
    Mr. Merrill. The fact that there are a lot of problems 
means in order for us, the senior management, to take a case to 
the board--to take a case to the board that said there were 
economic impact issues here of substantial import, that there 
were additionality issues of substantial import.
    Chairman Manzullo. What are you reading from?
    Mr. Merrill. I am reading from my own notes to myself.
    Chairman Manzullo. I understand that. You have to make an 
economic analysis under the Toomey amendment, am I correct?
    Mr. Merrill. You have me there.
    Chairman Manzullo. The Toomey amendment was the amendment 
that mandated you do an economic analysis. That is what was 
added. And I guess my issue here is when are you going to make 
up your mind on this thing?
    Mr. Merrill. We made up our minds on this thing.
    Chairman Manzullo. What did you make up your mind on?
    Mr. Merrill. We made up our minds that there was economic 
impact. These are my notes to myself when you were speaking. 
Just key words. These are the remarks I made when I started the 
conference. I am not reading from testimony. Economic impact is 
an issue.
    Chairman Manzullo. Let me finish right there. We can do 
this seriatim. The fact that it is an issue, does that mean 
that you are going to deny the application?
    Mr. Merrill. What it means is, Mr. Chairman, is there are 
several issues that are involved that are complex.
    Chairman Manzullo. I understand that. I am trying--
    Mr. Merrill. Not only economic impact.
    Chairman Manzullo. I want to start with that one because I 
haven't received a satisfactory answer on it.
    Mr. Merrill. There is a serious economic impact issue, 
which involves market definition, what is the market involved 
and whether--
    Chairman Manzullo. If this is the case then, why didn't you 
just call your board of directors and vote on it? Apparently 
you have made up your mind that there is going to be an adverse 
economic impact.
    Mr. Merrill. Under the bank's normal and permanent--long 
before I got there and long after I will ever be there, the 
cases presented to the board are presented by the management of 
the Bank and there are 50 to 100-page documents which give you 
the general drift of the loan and everything that is associated 
with it or the guarantee or the insurance if it is over $10 
million.
    Chairman Manzullo. Have you seen the economic analysis 
provided by your staff? Have you had a chance to read it?
    Mr. Merrill. I have not personally looked at that economic 
analysis except in a glancing way. But I have also seen the 
economic analysis presented as a result of the public notice 
period and several other economic analyses. And to be honest 
with you, the several economic analyses are together in my mind 
and I am not quite capable of separating what was said in one 
economic analysis as opposed to what was said in another 
economic analysis. But the general answer to your question is, 
yes, I have seen these economic analyses.
    Chairman Manzullo. At what point will you come to a 
conclusion as to whether or not there is an adverse impact upon 
a company? I think that is a fair question.
    Mr. Merrill. It is a fair question.
    Chairman Manzullo. If they don't get the loan from you they 
are going to Japan. They are going to get the same stuff from 
Japan, the same machine tools.
    Mr. Merrill. Mr. Chairman, the applicant in question, a 
very, very, very likeable person with whom I met with twice--
    Chairman Manzullo. You are not answering my question. I 
want to know at what point--I know he is a likeable person. 
When are you going to make up your mind as to the issue of 
economic impact?
    Mr. Merrill. There are three other issues as well and they 
interact.
    Chairman Manzullo. Go ahead.
    Mr. Merrill. I am trying to be responsive the very best I 
can. I want to be responsive.
    Chairman Manzullo. Proceed.
    Mr. Merrill. There is an issue of additionality.
    Chairman Manzullo. What does that mean?
    Mr. Merrill. We are not supposed to give--to make credit 
available on a basis that competes with any other financial 
institution. In other words, if anybody else takes the deal, we 
are the lender of last resort.
    Chairman Manzullo. I imagine if they went to you and didn't 
go to anybody else and were turned down, that is pretty simple. 
Isn't that a simple determination of additionality? Isn't that 
a simple determination?
    Mr. Merrill. It could be a very simple determination.
    Chairman Manzullo. They could just give you a letter that 
said that they can't get financing anywhere else. What do you 
require from the applicant?
    Mr. Merrill. When I met with him in China and here--now 
this is not somebody else, this is me, you know. It is not 
somebody six levels down in the Bank that I am not familiar 
with, me--this is not good English--me and my associates and 
several people from other government agencies and the--inside 
the embassy in China and here, were told by the applicant that 
they were going to get financing from Chinese banks. It would 
cost 80 basis points more; that they wanted to use us because 
we were 80 basis points less. After that meeting, 
representatives of at least two other U.S. government agencies 
rather surprised me, said to me, boy, you really have a 
question of additionality here.
    Chairman Manzullo. When did that conversation take place?
    Mr. Merrill. That conversation took place in the last week 
of January in China. And so the additionality factor got raised 
not only by me, but by other agencies who sit either ex-officio 
on our board or who attend our meetings.
    Chairman Manzullo. Go ahead with your list.
    Mr. Merrill. We will come back to economic impact. There is 
an oversupply issue. The industry consensus now is that there 
is an oversupply.
    Chairman Manzullo. What does that mean?
    Mr. Merrill. Chips--
    Chairman Manzullo. Oversupply of someone making machine 
tools?
    Mr. Merrill. No. It means there is a market.
    Chairman Manzullo. Why would that be a consideration, 
because machine tools are going to be brought from Japan if not 
the United States. They still will be manufacturing.
    Mr. Merrill. We are mandated to analyze the economic 
impact, it goes back to that, of anything that impacts.
    Chairman Manzullo. Well, in that case, you probably can't 
approve any loan.
    Mr. Merrill. Might be. But in the instant case, this lady--
give me your first name [referring to Ms. Victoria Hadfield]--
that Vicky referenced earlier, the Chartered company, there 
were no objections by public--through the public notice 
process. No objections from other experts, so to speak. No 
objections put to us as a result of our required procedures. 
Here we have objections put to us. We have to look at those 
objections. I take very seriously, very seriously, all comments 
by any Member or Members of the House and Senate. We also have 
experts on both sides.
    There are people who are presenting papers to us on both 
sides. For the record, just so I convey this, one of those 
experts who gave us an eight-inch stack of paper was an old 
friend of mine and I think of yours, Jim Miller, who used to be 
director of OMB in the Reagan administration when I was in the 
Defense Department. There is not a better mind in the world 
than Jim Miller's. In the interest of full disclosure, I 
supported him when he ran for public office and I supported his 
wife when she ran for public office. But I didn't talk to him 
personally about this case. His view is opposite to those of 
the proponents in respect to the impact on the marketplace of 
the 1 percent and the impact of, let me call it, the estimated 
amount, lack of oversupply, if you will, that would be extant 
18 months from now. The argument on one side--Mr. Chairman, I 
think you need to know this.
    Chairman Manzullo. There is a hearing going on, because a 
lot of people don't know anything. We are just asking.
    Mr. Merrill. I don't want to overstate my welcome. I want 
to be responsive. If the impact on the market is more than 1 
percent, there is a question of definition of what is the 
market as in an antitrust case. Is the market the Washington 
area? Is the market Maryland? Virginia? Is the market the east 
coast? It is open to question.
    Chairman Manzullo. What is the fourth point?
    Mr. Merrill. The second part is an estimate of a product 
that is now in oversupply, but the estimate of the applicant is 
that it will not be in oversupply 18 months from now. If I took 
all--when this bureau becomes operative--if I took all the 
philosophers in the world and rounded them up end to end around 
the world, half of them could make a reasonable case on one 
side and half of them could make a reasonable case on the other 
side. It is an ambiguous circumstance. You could make a 
reasonable case for either side.
    Chairman Manzullo. That is why you have lawyers. They are 
paid to make reasonable cases. But there are also people like 
you and the directors that are paid to make decisions based 
upon the information they are given.
    Mr. Merrill. And what I was asked to do and the applicant 
said to me and this is not to somebody else, again back to me, 
that they wanted this case brought to the board within the next 
week. This is in January, toward the end of January. I haven't 
gotten the exact date, but when I was in China, but within the 
next week; that they had to make a decision; that they were 
going to get Chinese financing; that they were going to get 
Chinese bank financing. In the context of the fact that the 
Chinese have $600 billion cash on hand. And this is a Chinese 
company. That was not an unreasonable thing for them to say.
    So we considered all of these factors that I just 
mentioned, definition of market, oversupply, additionality, 
economic impact. And as soon as we decided these were just too 
complex and too difficult to overcome, we went immediately back 
to the borrower, the applicant, I should say, and said no, we 
are not going to take it to the board in the next week. There 
are too many issues here. The applicant said, thank you and 
then offered up this suggestion that they would come back to us 
with an industry--
    Chairman Manzullo. You are aware of the fact that there is 
no industry agreement. You knew that before you came in this 
room.
    Mr. Merrill. I am not sure I know that.
    Chairman Manzullo. When you look at the letters from 
different Members of Congress that are fighting like crazy, do 
this, do that. Isn't it obvious to you that there is not an 
agreement?
    Mr. Merrill. Mr. Chairman, my bias is totally towards the 
exporter. You know that.
    Chairman Manzullo. I don't know. I am asking you to do your 
job. I know you have a lot of heavy lifting to do in this case.
    Mr. Merrill. I am going to step out of line and say my old 
friend Senator Gramm called me this morning about this case and 
he said--I said to him the same thing I said to you I am 
between a rock and hard place, to use the same analogy. And he 
is no longer in the Senate, but he is an old friend. And he 
said you know when you are in difficulty and you are between a 
rock and a hard place, what you have to do is do what is right 
and live with the consequences. In my view, what is right here 
and the view of all of the senior staff of this Bank is that 
the obstacles here are the same obstacles that we gave back to 
the applicant the first week--either the last week--
    Chairman Manzullo. The parties can't resolve it. Do you 
agree that it is your job and the job of the other--is it five 
directors?
    Mr. Merrill. It is my job to take the case to the board if 
we believe the case does not violate the mandate of Congress.
    Chairman Manzullo. So you believe that it does?
    Mr. Merrill. Yes.
    Chairman Manzullo. Why don't you deny them the loan? Send 
them a letter. We want those directors to vote on it, because I 
believe they may disagree with you, and that is a matter of 
corporate governance. They are also appointed by the President 
of the United States. They have an obligation also. I mean you 
are telling me that you can sit there and you can pigeonhole 
one application that nobody else--can anybody else on that 
board individually or somebody else force a vote up or down?
    Mr. Merrill. The normal procedures of this Bank are that a 
board gets a paper, which gives the plusses, minuses, risk 
factors, and all of the liabilities. Any paper that we would 
give to the board now would have to say that we believe that 
there is a significant, substantial additionality issue. There 
is a significant--
    Chairman Manzullo. Have you asked--
    Mr. Merrill. That this loan be voted on.
    Chairman Manzullo. Why don't you do that?
    Mr. Merrill. We have done it.
    Chairman Manzullo. Why don't you get everybody from the 
board. Because you know, they have minds of their own and they 
may disagree with you and they may say, just a second, Mr. 
Chairman. We have also examined the same materials that you 
have and we believe you are wrong. But what you are doing now 
is you won't even let it come up for a vote. And that is wrong. 
That is not what Congress envisioned. I am not talking about 
the staff. I am talking about the presidential appointees, that 
they also have an obligation and they have a right to vote on 
these applications. You are not--let me finish.
    Mr. Merrill. I am sorry.
    Chairman Manzullo. What you are telling me is that you have 
sole discretion, that nobody else can bring a matter before the 
board except you. And that if you decide that just based upon 
the fact that there are problems, just the fact that there are 
problems, even though if you read the documents, you may come 
to a conclusion that maybe one side is right and the other side 
is wrong, that you can completely withhold the vote. That is 
why the Speaker is engaged in this thing. He has also lost 29 
percent of his manufacturing base. I mean, we are getting 
killed around the country and you are sitting there and you are 
sitting on an application and that is why I got involved 
procedurally. Let the members of the board exercise their right 
to pass upon this application. Can't you do that?
    Mr. Merrill. Let me know when you are finished.
    Chairman Manzullo. Can't you do that?
    Mr. Merrill. Is that the question, sir?
    Chairman Manzullo. Yes.
    Mr. Merrill. Mr. Chairman, what I believe I am doing is 
faithfully executing the duties.
    Chairman Manzullo. You are doing nothing. You have deep-
sixed this thing just because there are problems. You won't 
even give me a time table within which you think you can 
resolve these problems.
    Mr. Merrill. Mr. Chairman, I have sworn an oath to 
faithfully execute the office.
    Chairman Manzullo. No one is sitting here denying your 
patriotism, all right. I am trying to get you to act. If you 
can't move on this application, then why don't you at least 
recuse yourself from this case. You haven't lost the 
manufacturing jobs. You don't go back home and face people with 
9 percent unemployment in Rockford, Illinois. You don't see the 
closed factories.
    And you don't see what is happening to the industry in this 
country. If this applicant buys the stuff from the Japanese, do 
you know what that is going to do for the reputation for buying 
machine tools that make chips in this country? Do you know what 
the Japanese are saying? ``Don't buy from the Americans. That 
Ex-Im Bank. Don't worry about them. You have visa problems 
coming in. You can't rely upon those people. They won't make a 
decision. Why buy from the Americans.'' And you are part of it, 
because I can't get any answers out of you.
    Mr. Merrill. Mr. Chairman, we let the applicant know--
    Chairman Manzullo. He is right here. He is ready to move.
    Mr. Merrill. I had trouble, ma'am understanding some of 
your language. I did not realize you were--
    Chairman Manzullo. No. He is back there in the first row 
[referring to SMIC official]. The applicant is sitting there. 
He came here. I am trying to get you to make a decision.
    Mr. Merrill. We made a decision.
    Chairman Manzullo. And what is the decision?
    Mr. Merrill. Mr. Chairman, as we informed the applicant as 
soon as we had decided in late January that there were 
sufficient problems here that we were not going forward to the 
board with it--
    Chairman Manzullo. No. No. No. Who has the final decision, 
you or the board? You can surely answer that question.
    Mr. Merrill. There is a question of analyzing the 
economic--
    Chairman Manzullo. No. I am asking you a question. If the 
board takes a vote to approve this loan and you vote no and the 
rest of them or any proportion votes yes, is the loan approved 
or the application approved?
    Mr. Merrill. That is a hypothetical question.
    Chairman Manzullo. That is not a hypothetical question. 
This one is a hypothetical--when you get up in the morning, do 
you tie your shoes?
    Ms. Hadfield. Mr. Chairman, may I ask a question? I am 
curious as to how, if this loan is turned down, and SMIC is 
forced to turn to a foreign source for financing, Japan or 
Europe or some combination thereof, and change their overall 
strategy which has been to mainly use U.S. equipment--how that 
is going to benefit the U.S. Industry and also the U.S. 
Semiconductor industry because ultimately, it will go forward. 
They will get the financing.
    Mr. Merrill. Just speak a little bit slower.
    Ms. Hadfield. I am curious as to how it ultimately benefits 
the U.S. economy for the Ex-Im bank to deny this deal, when 
ultimately, they will get financing and they will buy equipment 
that will not be from U.S. companies. They will still be a 
competitor. They will not compete in any area that is directly 
competing with the company that is opposing this deal, but they 
will remain a strong competitor and they will get financing and 
they will buy equipment. Right now, they are buying U.S. 
Equipment, but they need the financing to continue doing that. 
And they have come to the Ex-Im bank to get that financing. And 
I don't understand that economic impact issue.
    Secondly, I don't understand the issue of oversupply, 
because that is constantly changing in the industry. The 
industry prognosis on that is constantly wrong. You can go to 
any number of experts on this and get a different story. So you 
are always going to have that issue with these loans. The 
complexity of this industry is going to be longstanding, and it 
has been a problem predicting when oversupply is going to kick 
in and when there is a problem with capacity.
    What you are saying to me right now as I hear it on behalf 
of SEMI, is that we are going to face future continued--``this 
is too complex for us to deal with, so we don't want to give 
you any financing because it might be a problem in the future 
or it might have a negative economic impact to one company even 
though you have letters from governors from the State of 
California, Texas, Massachusetts, about jobs that are impacted 
in those companies and in those States.''
    It is a very important issue for us because export 
financing is going to be a key tool in the future in these 
deals. If we want to retain a semiconductor, capital equipment 
and a materials base, we need access to this as a tool. And 
that helps fund the R&D necessary to be a world class industry.
    Mr. Merrill. I am not sure if I am answering your question 
or the Chairman's question. I would like the Chairman to hear 
what I said. The answer to that question or comment is that 
first of all, I agree with every word you said personally or 
close to every word. I didn't hear quite every syllable. But 
the Congress has mandated an economic impact analysis of 
anything that affects more than 1 percent of the relative 
market. We had weigh in on us somebody who has 15,000 jobs and 
who claims that there will be a severe economic impact on those 
jobs. So we are caught between the desire of ourselves to 
support an exporter and the requirement of Congress to protect 
those jobs that would be affected by let me call it an adverse 
economic impact.
    Chairman Manzullo. And the other thing that you have is an 
analysis from SMIC?
    Mr. Merrill. Yes.
    Chairman Manzullo. Can both be right? Both economic 
analyses can be correct? I mean, you have to make a decision as 
to whose economic analysis is correct.
    Mr. Merrill. And the decision we have made is that the 
impact--
    Chairman Manzullo. The decision that you have made, because 
you have not allowed the board of directors to vote on this. So 
you made the decision to sit on it.
    Mr. Merrill. If you ask does the buck stop here, the buck 
stops here.
    Chairman Manzullo. It stops at a point of responsibility 
and personal acceptance of the fact that you are frustrating 
Congress's intent. Why do you think we have Ex-Im governors or 
directors? If you make the decision, these people must be 
wasting their time, because you are the one who is saying, I 
have to bring it before the board.
    Mr. Merrill. Mr. Chairman, I want to be sure you are 
finished. I don't want to interrupt.
    Chairman Manzullo. Show me your by-laws, Mr. Miller. Show 
me your by-laws or your rules that say only you can present 
this.
    Mr. Merrill. Mr. Chairman, I am the Chairman and Chief 
Executive Officer of this Bank. The manager reports to me by 
law. The directors are not the management of the Bank. They are 
directors, as in a company. When we make a judgment on whether 
or not as we are required to do here whether we assess the 
economic impact on a company as mandated by Congress 
outweighs--
    Chairman Manzullo. That is fine. Have you told that to the 
directors?
    Mr. Merrill. I have told that to the applicant.
    Chairman Manzullo. Have you told it to the directors? Do 
you think they appreciate people hounding them all the time 
because you won't make a decision?
    Mr. Merrill. The directors ask of me a complete package 
without serious liabilities that we are violating the expressed 
will of Congress as expressed through our Charter. I would not 
have put the economic statement in our Charter.
    Chairman Manzullo. I am not talking about that. I mean, 
isn't the vice-chair, hasn't that typically been the CEO of Ex-
Im?
    Mr. Merrill. Sometimes yes, sometimes no.
    Chairman Manzullo. You are not making a decision. You are 
making a decision to shelve this thing, is that correct?
    Mr. Merrill. We are making a decision--the senior 
management of this Bank has looked at what the economic impact 
analysis--
    Chairman Manzullo. That means that you believe the analysis 
of the people that are objecting to the loan, is that correct?
    Mr. Merrill. That is essentially correct, according to law.
    Chairman Manzullo. Now that is the most I have gotten out 
of you in an hour.
    Mr. Merrill. I have made it clear.
    Chairman Manzullo. No. You have not made it clear. I have 
asked you several different times. Now what you are saying is 
this. I want to make sure this is correct. You are adopting the 
economic analysis of the people objecting to this loan?
    Mr. Merrill. I did not say that.
    Chairman Manzullo. Then what did you say? You are agreeing 
with it?
    Mr. Merrill. There are several economic analyses.
    Chairman Manzullo. Whose do you believe?
    Mr. Merrill. Our own. Our own says that the economic--
    Chairman Manzullo. That is not what your staff has been 
telling us. They came to us.
    Mr. Merrill. Mr. Chairman, I am not a lawyer.
    Chairman Manzullo. I mean the staff is so frustrated, they 
end up calling Congress. We can't say who these people are.
    Mr. Merrill. Mr. Chairman, there are several hundred 
employees in the Bank. Many of them are conflicted and divided.
    Chairman Manzullo. You have to make a decision. Is the 
application still pending?
    Mr. Merrill. Still pending? I don't know what that means.
    Chairman Manzullo. You don't know what the word "pending" 
means?
    Mr. Merrill. I don't know what pending means in the context 
right now, no, I don't. I could give you an answer as to where 
we stand with it, but I don't know what "pending" means.
    Chairman Manzullo. Has the application been withdrawn?
    Mr. Merrill. I don't know the answer.
    Chairman Manzullo. The answer is no. It hasn't been 
withdrawn. You should have known that before you came here.
    Mr. Merrill. Mr. Chairman, we informed them that we were 
not going forward with this loan as far back as the first week 
in February or maybe the last week--
    Chairman Manzullo. But you said you needed further data, 
additionality. So it is still pending.
    Mr. Merrill. They wanted an answer in a week.
    Chairman Manzullo. My question is, is this application 
still pending?
    Mr. Merrill. We gave them an answer.
    Chairman Manzullo. Would you answer my question. Is it 
still pending?
    Mr. Merrill. I don't know the answer to that question. I 
can't answer something I don't know.
    Chairman Manzullo. You don't know. And you are the chairman 
of the Ex-Im Bank and on one of the most controversial loans, 
you don't even know if the application is still pending.
    Mr. Merrill. Pending is a technical term.
    Chairman Manzullo. What about the word ``is''?
    Mr. Merrill. Mr. Chairman, I am trying to be as responsive.
    Chairman Manzullo. Just a second. Everybody here who is 
with the Ex-Im bank, would you please stand. Please stand. 
Everybody with the Ex-Im bank. We have about 10 people. Now 
start over here. Is the application still pending, do you know?
    Voice. I don't know.
    Chairman Manzullo. Do you know, Mr. Miller?
    Mr. Miller. Yes, it is.
    Chairman Manzullo. Could you have a seat up here next to 
your boss and help him out.
    Mr. Merrill. Could I offer one more sentence?
    Chairman Manzullo. No. I would like to talk to Mr. Miller.
    Chairman Manzullo. Could you enlighten us.
    Mr. Miller. The application has not been withdrawn.
    Chairman Manzullo. It means it is still there?
    Mr. Miller. Yes.
    Chairman Manzullo. Have you been seeking further 
information on it, Mr. Miller, further data? To your knowledge, 
has further data, new data been coming in on a daily basis?
    Mr. Miller. I understand that there still has been some 
data being passed.
    Chairman Manzullo. Stay there, please, if you could. Mr. 
Merrill, the application is still pending, you have heard. Do 
you believe you have an obligation to dispose of a pending 
application?
    Mr. Merrill. I believe that I do and I believe I got back 
to the applicant or we got back to the applicant as soon as we 
had decided--
    Chairman Manzullo. That is not the answer. The applicant 
has not withdrawn that.
    Mr. Merrill. But we have disposed of it in terms of the 
practical sense of it by saying to the applicant that we are 
not going forward with this and we did this back in February 
and that is where it was left. We were very clear with them. 
That is what we said. They asked for a decision in a week and 
did not get a decision that they liked, but they got a 
decision.
    Chairman Manzullo. It is obvious with all this interest by 
Members of Congress. You have three.
    Mr. Merrill. Three sides?
    Chairman Manzullo. No. No. No. You have people from Idaho 
and people from other States and people like me who are 
interested in keeping manufacturing here. I think there are 
probably two sides to this issue.
    Mr. Merrill. Reduced to two sides.
    Chairman Manzullo. Did you confer with any of the directors 
in this case?
    Mr. Merrill. We have talked a little bit about it.
    Chairman Manzullo. Just in the last couple of days.
    Mr. Merrill. We are unable to talk about any case with 
three people together. It is illegal under the Sunshine Act. We 
do not confer in advance of cases. And as a practical matter, I 
find--I don't know whether it is a legal question, but I find 
and our directors find I believe that we each take our own 
briefings so that we are not impinging on the Sunshine Act or 
putting Democrats versus Republicans if somebody is left out. 
So essentially, each director does their own work.
    Chairman Manzullo. Now is it asking, would it violate the 
Charter or the intent of Congress--I had a little bit to do 
with the Charter, would you agree? You guys were in bad shape 
several years ago and I had to jump in. Remember that?
    Mr. Merrill. You are a big supporter of the Bank.
    Chairman Manzullo. Maybe I have some credibility and let us 
talk about congressional intent. Don't you think I have 
something in this?
    Mr. Merrill. You have a sense of credibility. And other 
Congressmen and Senators also have credibility.
    Chairman Manzullo. My question is does your Charter say, or 
your by-laws, that only you can bring a matter before the board 
for a vote? Yes or no?
    Mr. Merrill. I can't answer yes or no, because I don't know 
what the by-laws say. I just don't know.
    Mr. Miller. I don't know the answer to that.
    Chairman Manzullo. General counsel, do you want to have a 
seat up here and answer that question? This thing is coming up 
for reauthorization.
    Mr. Merrill. I can tell you what I think is right.
    Chairman Manzullo. What you are doing is wrong.
    Mr. Merrill. That may be. Half the time in life, my purpose 
in life is to be right 51 percent of the time.
    Chairman Manzullo. Mr. Saba, can you answer my question?
    Mr. Saba. The Charter provides that the President of the 
Bank is the chief executive officer. Also as Chairman, he 
presides over the board meetings. In that context, he sets the 
agenda just as I believe you probably set your agenda here for 
this committee or other committees. It does not specifically 
make the statement you say, but he has those powers 
historically and that is how it has been. Before my time and 
continuing further, he sets the agenda.
    Chairman Manzullo. Don't you think it is interesting--and 
how many directors are there? There are five?
    Mr. Saba. Including the chairman, there are five.
    Chairman Manzullo. All five are presidential appointments, 
correct?
    Mr. Saba. That is correct.
    Chairman Manzullo. Does one of the five simply say that is 
it?
    Mr. Saba. Not just one of the five. The chairman of the 
board who presides over the board.
    Chairman Manzullo. I understand that. I don't have-- people 
that work for me aren't elected by my constituents nor are they 
appointed by the President, but they are there for a purpose. 
And one of their [Ex-Im Directors] purposes is to pass upon the 
applications, and they are being denied the opportunity to do 
that in this case.
    Mr. Saba. I think what the chairman was saying was that at 
the time that the applicant requested action, this case was not 
ready for action. And at that time, it would have been--in his 
view, I believe, he was talking about fulfilling the duties of 
his office--it would have been--he would not have been 
fulfilling his duties to have brought the case with these 
serious issues out there.
    Chairman Manzullo. My question to you, do you think that 
these issues should be resolved? I mean you have an issue of, 
what is that word called--additionality. Can that issue be 
resolved?
    Mr. Saba. I don't think it is a simple yes-no issue. It has 
always been a gray area.
    Chairman Manzullo. I mean how do you go about making 
conclusions and decisions?
    Mr. Saba. It is very hard. You have an applicant in this 
case who most recently sent a letter saying that they are 
looking for Ex-Im Bank financing, in large part, because they 
don't want to be overly dependent on Chinese banks. That is in 
their most recent letter. Should the U.S. Ex-Im Bank--
    Chairman Manzullo. They are buying American stuff.
    Mr. Saba. Should the U.S. Ex-Im Bank be financing a Chinese 
company when they have alternative Chinese bank financing 
available?
    Chairman Manzullo. Based upon that--all I want you to do is 
to rule and make a decision so nobody has to bother you 
anymore. If you feel that based upon that, they do not fulfill 
the Ex-Im requirements, then the application should be turned 
down, isn't that correct, if that is your decision?
    Mr. Saba. We effectively are acting in response to their 
request for action by a certain date. And we told them that 
that could not happen. They have now continued to move the goal 
post and they have increased their efforts. Additional data has 
been provided, but most of the stuff we have just seen frankly, 
has been, you know, efforts and lobbying.
    Chairman Manzullo. Just because you guys haven't made up 
your mind. That is because they were led to believe that you 
guys had deep-sixed this thing and we are trying to get you to 
make a ruling on it.
    Mr. Merrill. They wanted a decision and we gave them a 
decision.
    Chairman Manzullo. The Speaker of the House has requested 
that you meet and come to vote. Is that asking too much?
    Mr. Merrill. I am going to execute the office. That is my 
best ability.
    Chairman Manzullo. You aren't doing it. The best of your 
ability is insufficient because you have hung them out.
    Mr. Merrill. It means honoring the mandate of Congress that 
we do not support anything.
    Chairman Manzullo. Send them a letter and say look it, your 
application is denied. Can you do that? Can you send them a 
letter and say your application is denied?
    Mr. Merrill. Sure I can.
    Chairman Manzullo. Can you send them a letter?
    Mr. Merrill. I suppose we could send them a letter. Be 
happy to do it.
    Chairman Manzullo. Go ahead and do it. And I would be 
interested in knowing what the other five members, four members 
of your board would be--would have to say about the fact that 
you unilaterally turned it down and you didn't even bring it to 
them for a vote and they may have a different conclusion. 
Perhaps you have usurped their authority because they were 
appointed by the President to at least vote upon something. I 
don't think that is being a good CEO, not in this particular 
case. It is not like--
    Mr. Merrill. You have Congressmen on both sides of this 
issue and Senators on both sides of this issue.
    Chairman Manzullo. I just want you to make a decision.
    Mr. Merrill. We made a decision.
    Chairman Manzullo. Then tell them.
    Mr. Merrill. We told them in the first week in January.
    Chairman Manzullo. I challenge you to put it in writing. 
Phil, I am going to tell you right now, if you don't act on 
this thing, I am going to ask for your resignation.
    Mr. Merrill. We will do it.
    Chairman Manzullo. I want this thing disposed of. You can't 
keep people hanging out. Let them go buy from the Japanese. 
Make sure you carbon copy the other members of the board.
    Mr. Merrill. In the interest of civility, Mr. Chairman, we 
told them that directly and specifically the last week in 
January.
    Chairman Manzullo. Mr. Saba says the application is still 
pending. They are here because they think they have some hope 
of still getting the Ex-Im loan.
    Mr. Saba. Mr. Chairman, in effect we told them, as Mr. 
Merrill said, that this application was not going to move 
forward.
    Chairman Manzullo. That is not in the letter you sent me.
    Mr. Saba. From their own business perspective, it would be 
better than getting this denial letter. If they think they are 
better off with a denial letter, the Chairman has indicated he 
will provide that.
    Chairman Manzullo. Let me read this letter [from Mr. 
Merrill] dated March 21, 2005. ``Thank you for your letter of 
March 17. Appreciate your interest in the SMIC application and 
the concern that SMIC receive a timely response. The 
application relates to large complex transactions that 
implicates a number of requirements under our Charter, 
including, among other things, an economic impact test and 
additionality. While our interest at Ex-Im is always to help 
U.S. exporters large and small, we must adhere to these 
extraordinary mandates.''
    Chairman Manzullo. ``The borrower, SMIC, indicated that a 
decision from Ex-Im in early February will proceed with 
securing alternative financing. We concluded that the deal as 
structured was unlikely to satisfy our charter requirements and 
obtain board approval. Consequently, we timely notified both 
SMIC and one of the primary exporters the application would not 
be put on the board agenda. SMIC and the exporter both stated 
an intention to pursue an industrywide solution to address any 
outstanding concerns related to our charter requirements. We 
remain open to considering such a new proposal if it is 
presented to Ex-Im.''
    Mr. Merrill. It has not been presented and I sent--
    Chairman Manzullo. That is why I asked the question whether 
or not it is still pending. I mean they want to know what is 
expected of them.
    Mr. Merrill. You know, Mr. Chairman, I am not a lawyer and 
the definition of--
    Chairman Manzullo. Don't hide behind that. You are a CEO, 
all right? And I have seen your background. It is impressive.
    Mr. Merrill. Thank you, Mr. Chairman.
    Chairman Merrill. Well, don't tell me you don't know what 
this letter means.
    Mr. Merrill. I know exactly what it means. Mr. Chairman, 
that letter came, when I was en route, on a Friday on a 22-hour 
trip, and had to change planes in Chicago to Japan. I got there 
over the weekend. The letter was faxed to me. I cleared it and 
it got back to you on Monday. I have served in several 
administrations, and I have watched Congressmen, in fact I have 
watched White Houses and Presidents send letters to several 
departments in which I have served and get answers 3 months 
later. We turned this around over a weekend. I thought we were 
being very responsive and I stand by every word of that letter.
    Chairman Manzullo. I understand. It says we remain open to 
considering such a new proposal if it is presented to Ex-Im. I 
guess that answers the question of whether or not it is 
pending.
    Mr. Merrill. That is right. That is what they said about 
their intention.
    Chairman Manzullo. Yeah.
    Mr. Merrill. That is what they said when we told them we 
weren't going to go forward with it.
    Chairman Manzullo. Let me ask you a question. What if I 
hosted a meeting to come up with a solution to this? Would you 
be open to that?
    Mr. Merrill. If you can get the industrywide consensus that 
they--
    Chairman Manzullo. No. What if I hosted a meeting. I would 
have you there.
    Mr. Merrill. Mr. Chairman, I don't make any sense there 
without reliability of staff. I trust my staff.
    Chairman Manzullo. Well, you know, I think your staff isn't 
telling you some stuff. There is some stuff that came out of 
this hearing. No, I understand that. So you don't want to be--
you don't think this is important enough to sit down with me, a 
Member of Congress, and try to come up with a solution?
    Mr. Merrill. Well, I don't know what a solution means. If a 
solution means--
    Chairman Manzullo. You don't know what a solution means?
    Mr. Merrill. If a solution means, Mr. Chairman, I am going 
to be--whether I am actually under oath or not, I feel that I 
am under oath and so I have to tell you what is the truth. It 
is the functional equivalent of being under oath. I wasn't 
sworn but you can swear me in. The truth is that we said to the 
applicant that the problems of economic impact--
    Chairman Manzullo. No, I understand. Can this thing--I 
mean, you know--
    Mr. Merrill. You have got a law. You have got the Congress 
mandating in our charter that we cannot impact an exporter, 
somebody who has 15,000 jobs at stake and they have a whole set 
of papers which--
    Chairman Manzullo. I am going to change the Ex-Im charter 
when it comes up for reauthorization to remove the power that 
you think you have to be the sole determinant as to whether or 
not this thing comes before the board. You will be out by then. 
You retire what, in June or July?
    Mr. Merrill. Mr. Chairman, that hasn't been determined.
    Chairman Manzullo. Well, maybe I can be part of that.
    Mr. Merrill. Perhaps. But if you are not part of it on this 
side there will be somebody else on the other side.
    Chairman Manzullo. No, it isn't. I am just asking you to 
make a decision.
    Mr. Merrill. I made a decision. The decision was not one 
the applicant liked.
    Chairman Manzullo. Then what do you need from SMIC here 
where it says we remain open to considering such a new 
proposal? What do you want from them?
    Mr. Merrill. I want something from SMIC that says that 
there is not an economic impact on somebody with 15,000 
employees who is invoking the law against us.
    Chairman Manzullo. All right. So anybody who comes in there 
and says this has an economic impact on us, then you are going 
to accept their theory of it?
    Mr. Merrill. Not automatically, but we would certainly 
consider it.
    Chairman Manzullo. Well, I think you have.
    Mr. Merrill. We have in this case, yes.
    Chairman Manzullo. I think you have, and I think you have 
also done a disservice to the United States Congress by not 
allowing the other members of the Board of Directors duly 
appointed by the President to get involved in the decision 
making process. You are not a king of this organization.
    Mr. Merrill. Mr. Chairman, I think that I, and my general 
counsel--
    Chairman Manzullo. I am just telling you right now.
    Mr. Merrill. I am doing the best job I can.
    Chairman Manzullo. Well, I don't think it is enough, Phil. 
I really don't. You have been evasive. You have been dodging 
questions here. You didn't know what the word "pending" was. 
Maybe you have a problem with your staff. Maybe you have 
somebody else running the organization that is not telling you 
what is going on. But this man sitting here in the crossfire of 
this period of time, I think you can see what happened to you, 
right, Michael? Do you see what happened to you when they said 
to go file a lawsuit in China?
    Go ahead.
    Mr. Merrill. Mr. Chairman, I am old enough to have served 
in enough administrations, I have run enough businesses to know 
that when I don't know something I am infinitely better off to 
say I don't know it. And the technical context of the world 
"pending" is not something that I understood any more than this 
gentleman over here understood. I do not know that. What I know 
is that I conveyed--we conveyed clearly and substantially to 
the applicant that we were not going to go forward with this 
deal because of the economic impact and additionality issues. 
We are not supposed to make loans to somebody because they are 
80 basis points less than another institution.
    Chairman Manzullo. Well, that is fine. It says that we 
remain open to considering such a new proposal if it is 
presented to Ex-Im. That is your letter. Did you see this 
letter?
    Mr. Merrill. Yes, I saw it. I cleared it and it is my 
signature.
    Chairman Manzullo. It says we remain open to considering 
such a new proposal.
    Mr. Merrill. Such a new proposal refers to an industrywide 
consensus.
    Chairman Manzullo. That is correct. So what that means is 
this. If one person out there objects and there is no 
consensus, just like that you turn it down.
    Mr. Merrill. What it means is there is a public hearing 
process, Mr. Chairman.
    Chairman Manzullo. I understand that.
    Mr. Merrill. There is a public hearing process. People have 
the right to respond to their public hearing process.
    Chairman Manzullo. I am going to be preparing amendments 
that I am going to give to Mrs. Kelly to make it as effective 
as possible that if two of the five people on the Board of 
Directors, and Phil, if you could work on that legislation, 
call for a vote on a pending application that they can do that 
and the application--would you be in favor of that? That would 
get you off the hook.
    Mr. Merrill. No, I would not.
    Chairman Manzullo. Why is that?
    Mr. Merrill. Because I think that I am a private 
businessman, Mr. Chairman.
    Chairman Manzullo. Not when you work for the government. 
Different rules apply here.
    Mr. Merrill. Yes, sir. Representation of the rules but also 
practical rules. This Bank is--again, in a spirit of comity and 
friendliness, this Bank is rather a government agency operated 
as a bank or a bank operated as a government agency or a 
combination of both. I believe that with the sums of money at 
stake here that somebody, whether it is me or somebody else, 
has to be the chairman and chief executive officer. If you want 
to make a co-chairman or a co-chief executive officer or 
multiple chief executive officers, I cannot stop the Congress 
from doing that. You asked me whether you thought it was wise. 
I do not think it is wise. I would not be in favor of it.
    Chairman Manzullo. That means you want to make all the 
decisions yourself. This is a matter of public record.
    Mr. Merrill. I am required by the mandate of Congress--
    Chairman Manzullo. Well, this would be a new mandate. Could 
you live with that?
    Mr. Merrill. Congress can make another mandate.
    Chairman Manzullo. Could you live with that? By the way, 
there is no mandate that says at the suggestion of one or two 
members that you can't go ahead and call a vote.
    Mr. Merrill. There is a mandate that says we must take 
account of economic impact.
    Chairman Manzullo. No. I understand that. Do you think that 
they are ignoring it?
    Mr. Merrill. Who is they?
    Chairman Manzullo. The directors.
    Mr. Merrill. I think the directors, in the two and a half 
years I have been there, the directors have made it clear to me 
with unmistakable force that they want from me or from the 
staff and me, when a case is presented to the board, they want 
all the liabilities presented. They do not want open questions 
in it. They expect us to make a recommendation that says this 
is in accordance with all legal charter congressional mandates. 
And in the instant case I cannot make that certification.
    Chairman Manzullo. That is called a rubber stamp.
    Mr. Merrill. In the instant case I cannot make that 
certification.
    Chairman Manzullo. Well, then fine. Then why don't you tell 
them that?
    Mr. Merrill. I did.
    Chairman Manzullo. Tell your board that and then let them 
vote on it. Has it ever occurred to you that they may disagree 
with you?
    Mr. Merrill. As I said--
    Chairman Manzullo. These are presidential appointees who 
are appointed to approve loans and disapprove transactions.
    Mr. Merrill. As I said to you before, Mr. Chairman, I will 
have to repeat it again, that the board has made it 
unmistakably clear to me that they want you to present complete 
cases.
    Chairman Manzullo. Is that in writing?
    Mr. Merrill. It is a good faith understanding. I commit--we 
don't always make it. I commit in good faith to give them a 
complete case by the Friday before the Thursday of board 
meeting, which is what the applicant understood, and they 
commit in good faith to vote on it. If I don't give them the 
case by then they say they have not had enough time to consider 
it. They do not--some of them do not like to consider cases 
that are not complete. Some of them do not--some of them want 
to ask questions in advance. Each director plays his own role.
    Chairman Manzullo. You have had occasions, have you not--
    Mr. Merrill. Pardon?
    Chairman Manzullo. You have had occasions, have you not, 
when you brought a matter before the board and the board looks 
at it and they say, you know, we need some further study on 
this and send it back for further study? You have done that?
    Mr. Merrill. I don't think so.
    Chairman Manzullo. Yes, you have. I have called you.
    Mr. Merrill. Not on actual cases where an applicant has 
requested a decision. There have been some policy issues where 
that has--
    Chairman Manzullo. No. Where you bring a matter up and then 
perhaps in the meeting with the directors something comes up 
and you say, you know, let's ice this thing for 30 or 60 days. 
That has happened?
    Mr. Merrill. That has happened with regard to certain kinds 
of policies, like whether you are open in a country or not or 
whether you change the rating of a country or risk rating or so 
forth.
    Chairman Manzullo. It has also happened with regard to 
certain applicants where it is come up before the board.
    Mr. Merrill. I can only tell you what I think is the truth. 
I will stand corrected if I am wrong. But in the nearly two and 
a half years that I have been there I believe that there has 
been no case, meaning a money case, that is a $10 million or 
more case that I can recall where the board has said send this 
back for further study. There are several cases where the 
board, or several instances where the board objected when they 
saw the case before the board meeting, before the board 
meeting, and said that there were issues in this case which 
were unresolved and they didn't want to vote on it until the 
issues were resolved by the management.
    Chairman Manzullo. Has the board ever disagreed with your 
recommendation?
    Mr. Merrill. Yes.
    Chairman Manzullo. Have you ever gone before the board and 
you took the advice of the board?
    Mr. Merrill. We had a vote. That is why they are there, to 
vote.
    Chairman Manzullo. Has it ever fallen upon you to present 
this before the board and let them vote on it?
    Mr. Merrill. The answer I come back to you again is the 
board--
    Chairman Manzullo. Yes or no. I mean, get this monkey off 
your back. Present it to them. Let them vote on it.
    Mr. Merrill. Mr. Chairman, I don't know how many times I 
can go back to the same point.
    Chairman Manzullo. Well, you don't have to because you are 
not making the point. The point is this. You go before them 
with the recommendation that it pass and then you will follow 
their will. Is that correct?
    Mr. Merrill. No. Sometimes I have gone before them and they 
have voted the other way.
    Chairman Manzullo. No. Have you ever gone before them with 
a recommendation that the application not be granted?
    Mr. Merrill. That the application not be granted?
    Chairman Manzullo. Right.
    Mr. Merrill. For reasons of illegality or violation of the 
charter, no.
    Chairman Manzullo. That still doesn't answer my question. 
Have you ever gone before your board with an application and 
say look, this thing is here, we need to dispose of it, I 
personally think it has a lot of problems but I will leave it 
up to you because I know you have an opinion on it?
    Mr. Merrill. Well, we do that every week.
    Chairman Manzullo. Well, then why didn't you do it with 
this one?
    Mr. Merrill. Because what the board asks of me and which I 
am obligated to provide is a complete case statement.
    Chairman Manzullo. Yeah. You are saying that the violation 
is illegal--the application is a violation of the charter or it 
is illegal.
    Mr. Merrill. We have a mandate from Congress that--
    Chairman Manzullo. But you are the one that makes the 
decision. Do you understand what I am trying to get at? Do you 
understand that I don't have--I don't think that one person 
should sit in that organization and make the decisions.
    Mr. Merrill. In every company, Mr. Chairman--
    Chairman Manzullo. No. This is not a bank. You can go work 
for a bank if you want. You have done that before.
    Mr. Merrill. It is a bank.
    Chairman Manzullo. You are accountable to Congress and you 
are accountable to the people. So other people have to weigh in 
on these decisions.
    Mr. Merrill. Congress has mandated that we consider--
    Chairman Manzullo. I understand that. I have not disagreed 
with you on that. I have never disagreed with you on that.
    Mr. Merrill. Mr. Chairman.
    Chairman Manzullo. But you are not acting--
    Mr. Merrill. You are extremely articulate.
    Chairman Manzullo. I am not extremely articulate. Phil, I 
am going to recommend the President not reappoint you, okay? 
And maybe he ought to clean house too with the staff.
    Mr. Merrill. Mr. Chairman, I am doing the best job that I 
can do.
    Chairman Manzullo. Well, you know, you have got this Member 
here who has been a big--I have carried your flag for years, 
Phil. You know that.
    Mr. Merrill. I know that.
    Chairman Manzullo. When people were stomping on Ex-Im Bank, 
who was out there trying to save the Ex-Im Bank?
    Mr. Merrill. Mr. Chairman, I am very aware of your support 
of the Ex-Im Bank and I am very grateful for it, as I said in 
my statement, as I say again.
    Chairman Manzullo. Well, you are not willing to sit down 
with the principals and me to try to come up to try to resolve 
this thing.
    Mr. Merrill. It is not up to me to resolve a private--
    Chairman Manzullo. Yes, it is.
    Mr. Merrill. No, it is not.
    Chairman Manzullo. It is up to you to resolve it.
    Mr. Merrill. It is up to the applicant to resolve it.
    Chairman Manzullo. Oh, the applicant. You can't sit there 
with the parties and say look, you guys, we only have $770 
million at stake, let's try to figure out and get this thing 
done? Bring the principals together? Is that legal to do that, 
Mr. Saba? Is that legal? Could he do that, as long as you don't 
have or have the other board members there, whatever your rules 
are. Could he do that?
    Mr. Saba. You know, we are not doing anything to violate 
the antitrust law. From a board and a bank perspective, that 
would not be the case.
    Chairman Manzullo. Of course it is not. There is no problem 
there. You are trying to resolve this thing.
    Mr. Saba. It depends what the resolution is. Clearly, if 
they are carving up the market, no, then we couldn't do that.
    Chairman Manzullo. Well--
    Mr. Saba. It was the applicant and the main exporter that 
said that they were going to go back and provide this industry 
solution. They have not come back to us on that front since 
they have said that.
    Chairman Manzullo. I think the fact that--have the 
applicants given you more data since you had that conversation 
with them?
    Mr. Saba. At this hearing was the first that I have heard 
that there have been--I know there have probably been ongoing 
discussions with the loan officers. I have not seen submissions 
of additional data. This is the first that I have heard of, you 
know, any additional data potentially being provided. The first 
we have heard from the applicant was basically the letter that 
was presented after this hearing was set up.
    Ms. Hadfield. Mr. Chairman, may I just interject that 
initially when an economic impact analysis was done by the Bank 
we heard, through the grapevine, through the economic staff at 
the Bank, that it was positive and that until the objections 
were raised by one single company this loan was going to go 
through, this loan guarantee. I want to understand--and then 
once those objections were raised the loan was scaled back to 
address these objections and there is no competitive impact 
now, with respect to the equipment that will be shipped to 
China, which will be used for two fabs that are not involved in 
any D-RAM-related products, and I don't understand how the 
economic impact analysis could be negative.
    Chairman Manzullo. Well, SMIC, they made concessions, isn't 
that correct?
    Ms. Hadfield. That is correct. So it has been scaled back 
significantly--
    Chairman Manzullo. Since the first of the year.
    Ms. Hadfield. Already to address any potential--
    Chairman Manzullo. We all seem to know about it here but 
this--
    Ms. Hadfield. So it is not like the applicant hasn't done 
anything to address this issue, and I am kind of surprised that 
now I am hearing that the economic impact is definitely going 
to be negative. I don't quite understand that.
    Mr. Saba. If I could address--we are going to set the 
record straight. The process to scale this back in order to 
save this transaction by just doing the two fabs where there 
wasn't going to be D-RAM production was one that I made, and it 
was discussed with the senior management in an attempt to see 
if we could move this forward. We have tried to put out 
solutions to this and there have been, and there are still 
significant issues, questions raised about economic impact. 
They deal with issues, as the chairman has said before, 
relating to oversupply even in logic, competition in logic, the 
enforceability of covenants, the ability to convert these fabs 
from logic to D-RAM production. They all remained open at the 
time that we were asked to provide a decision. I don't know why 
there is some sense here, that getting a ``no'' makes this 
company better off. Usually you ask about our experience with 
coming with denials to the board. Applicants don't want us to 
do that. They may say they want a quick response, but they 
then--if that response is going to be negative, they work with 
the Bank to seek resolution. And that is what we did here, 
until they determined that they said they had no more time.
    Chairman Manzullo. Well, SMIC is still offering to make 
concessions. I mean, I need to get this kicked up to the 
highest level. I mean--
    Mr. Merrill. It got kicked up to the highest level. You are 
not the only one who wanted it to get kicked up to the highest 
level.
    Chairman Manzullo. No, I mean to your level.
    Mr. Merrill. It did get kicked up to my level.
    Chairman Manzullo. No, they are still making concessions. 
Are you aware of the concessions they have been making over the 
past couple of months?
    Mr. Merrill. I am not aware of anything from them.
    Chairman Manzullo. I guess that is the point.
    Mr. Merrill. Until the letter was received a couple of days 
ago, when this hearing--I mean in the last 2 days before this 
hearing.
    Chairman Manzullo. Mr. Saba, you came up with a proffered 
solution, is that correct?
    Mr. Saba. I don't know if it is a unique solution, but I 
was the one that pushed that through with staff and discussions 
and then staff discussions with SMIC as a potential way to 
transact--
    Chairman Manzullo. When did that discussion come up?
    Mr. Saba. I believe that was in probably early January.
    Chairman Manzullo. Okay. First of all, I commend you for 
trying to come up with a solution on this because that shows a 
lot of good faith.
    Mr. Saba. And we discussed that solution with the Chairman 
before it was put forward. It was done with his blessing.
    Mr. Merrill. We thought that would be helpful. We have 
tried. We have tried again and again.
    Chairman Manzullo. Well, where is--what is the status now? 
I mean is the objector just saying that is it, he is not 
interested?
    Mr. Saba. I don't know the status because it was both the 
applicant and the main exporter that asked to go back and they 
felt fairly confident that they could achieve this industrywide 
solution. Obviously, as you have indicated, they have not been 
able to do that, and that is why we have seen this stepped up 
effort to pressure the Bank into doing this transaction.
    Chairman Manzullo. I am pressuring you to make a decision.
    Mr. Merrill. We made a decision.
    Chairman Manzullo. I don't have a dog to hunt in this 
thing. The other people do.
    Mr. Merrill. Mr. Chairman, you keep wanting a direct answer 
and I keep trying to give it to you. We have made a decision. 
We are not taking this case forward to the board. Now, that 
decision was not the decision they wanted to hear.
    Chairman Manzullo. Don't use the word "we," use the word 
"I."
    Mr. Merrill. I said "we."
    Chairman Manzullo. No, ``you'' made the decision.
    Mr. Merrill. Mr. Chairman, I believe the decision was made 
by senior management collectively. Was it cleared by me? And do 
I approve of it? Am I the place where the buck stops? Yes.
    Chairman Manzullo. It has got to start there first.
    Mr. Merrill. The buck comes up. It does not go down. The 
applicant didn't like the decision that they got.
    Chairman Manzullo. They didn't get a decision.
    Mr. Merrill. They got a decision. They have one right now. 
If you have two co-chief executive officers or three co-chief 
executive officers I can't--maybe the decision would be 
different.
    Chairman Manzullo. No. You made the decision yourself.
    Mr. Merrill. Yes.
    Chairman Manzullo. And?
    Mr. Merrill. I approved the decision, and I take 
responsibility for it.
    Chairman Manzullo. And you let your staff come to you with 
suggestions and you followed those. But you never presented 
this before the entire board, to give any of these marvelous 
public servants also appointed by the President, to get their 
view.
    Mr. Merrill. It has been my experience, as I have said 
before, that the board wants me to present those cases--
    Chairman Manzullo. You have said that over and over again. 
You have said that over and over again. And I just don't think 
this is going to get anywhere, except I do know this. There is 
going to be some very substantial changes if I have anything to 
do with it with the governance of Ex-Im. You must be more 
accountable to the applicants than you are now. And you aren't.
    I have no further questions. You know, in 7 days, you know 
what I want, Mr. Miller?
    Mr. Miller. Yes.
    Chairman Manzullo. I want you to prepare--it doesn't have 
to be in final form, but close to final form and get it to Mr. 
Eskeland. This is on the dealer finance. It would be an 
application form, if there is a separate application form, plus 
the guidelines of how people fit into it and how to implement 
it. This is something perhaps you were going to prepare for 
your--when is your expo coming up?
    Mr. Miller. Next Thursday Mr. Chairman.
    Chairman Manzullo. Next Thursday.
    Mr. Miller. Yeah.
    Chairman Manzullo. So you need it before then. Thursday 
is--yeah, you are going to roll it out.
    Mr. Merrill. We have already rolled it out.
    Chairman Manzullo. No, you haven't. You can't roll it out 
unless somebody takes advantage of it, and not one person has 
signed up for it. But I want you to meet with Mr. Eskeland and 
bring that in. I presume that is what you would be giving to 
the people at your show, is that correct?
    Mr. Miller. Yes, Mr. Chairman.
    Chairman Manzullo. Mr. Miller, do you expect this to be a 
lengthy set of guidelines? Is it a couple of pages or can you 
give us a thumbnail sketch? It is not regulations. I mean we 
are not in the area there.
    Mr. Miller. Mr. Chairman, as in all our products when we 
try to roll them out we try to make it as simplified a process 
as possible. We will try to do it in as minimum amount of 
effort to make it clear and understandable especially for small 
businesses.
    Chairman Manzullo. Okay. And then they would be using 
standardized forms that are already in existence?
    Mr. Miller. Yes.
    Chairman Manzullo. Okay. These would be the guidelines and 
how they fit into that.
    Mr. Miller. Mr. Chairman, there is a new insurance policy 
that was geared to incorporate the changes that we made for 
this particular program.
    Chairman Manzullo. Okay. And then I want a date on fast 
track. I am not going to wait 2 years. I have had all kinds of 
promises. It is up to you to come up with a product. When is 
that going to be done?
    Mr. Merrill. It is a question of what the reactions of the 
banks are to this third round. The third round, we have--they 
are our customers. There are 14,000 banks in the United States. 
About 175 of them do trade finance. We try--some expertise in 
trade finance.
    Chairman Manzullo. Go ahead.
    Mr. Merrill. Mr. Miller and other members of our staff have 
made three rounds with these banks and they all had problems. 
We have had to come back through the--just to meet our 
customer's requests. But no deal has been stopped.
    Chairman Manzullo. I just don't--
    Mr. Merrill. So we will get it done as soon as I can get 
the banks, as soon as we can get the banks to agree to a 
statement that is common to all of them, which was the purpose 
of having the fast track.
    Chairman Manzullo. We had--
    Mr. Merrill. It is not fast track if you have 175 banks 
each with a different set of criteria.
    Chairman Manzullo. I have got some interesting--
    Mr. Merrill. It is a little bit like herding cats. We think 
we have got it done. I thought we had it done 6 months ago. I 
am equally frustrated.
    Chairman Manzullo. What can I do to get this thing done? 
What can I do to help you?
    Mr. Merrill. Say it again, sir.
    Chairman Manzullo. What can I do to help you to get this 
fast track done? What if I convene a meeting of the principals?
    Mr. Merrill. I am just as frustrated as you are, Mr. 
Chairman.
    Chairman Manzullo. No, you aren't. The people that get 
turned down by you come to me and the CEO doesn't wait 2 years 
to get a project done.
    Mr. Merrill. Mr. Chairman, when our senior executives went 
around to talk to these banks they complained to us about the 
differences between asset-based lending and commercial lending, 
different standards. They didn't like the form. It didn't fit 
each individual bank's standards. We have done this three 
times. It is herding cats. I think we have got it done right 
this time, but I don't know. I have to rely on both counsel and 
our staff who is in contact with these banks. We want a form 
that makes it easier for them. If each bank has a separate 
standard, then it is not fast track anymore. You can call it 
fast track but it wouldn't be fast track.
    Chairman Manzullo. I understand that. You know, this is a 
mandate of Congress. This is something that we want done and we 
can't accept the fact that 2 years have come and passed. I 
mean, you know, this is the testimony, your testimony, May 6 of 
2004, before the Subcommittee on Domestic International 
Monetary Policy, on which I sit. This is a transcript, May 6 of 
2004, your testimony before the Subcommittee on Domestic and 
International Monetary Policy on the Financial Services 
Committee, and I sit on that Subcommittee. ``And the 
commitments, we are focusing on three key priorities, putting 
customers first, improving cycle time, and expanding support 
for knowledge-based and services exports. And putting customers 
first, we are implementing the three guiding principles 
President Bush has set for the government; namely, that this 
should be citizen-centered, results-oriented, and market-
driven.''
    ``For Ex-Im Bank putting customers first means ensuring 
that every customer receives quick answers and clear responses. 
We have assigned relationship managers to assist customers who 
do a high volume of business through Ex-Im Bank in order to 
ensure consistent processing.''
    ``And as I discussed below we have made our website easier 
to use, with improved access to information, application and 
contracts. By improving cycle time, Ex-Im bank is particularly 
focused on reducing our transaction process cycle time in order 
to keep--in order to help our customers offer timely financing 
to their buyers. As any exporter knows, timeliness can mean 
everything when you are competing for international sales. To 
improve cycle time Ex-Im Bank has simplified applications for 
financing products that most benefit small business exporters. 
We are also modernizing other systems and procedures.'' And 
so--that is a year ago.
    And so I have offered, as I have offered here with Mr. 
Vaden, in fact I just settled a monstrous case in my office, 
not using my legal hat, involving probably over a million 
dollars where the agencies were going at it with a small 
business person. And we just sat down and got the thing 
resolved. And so I am offering to sit down with you and a 
representative from the objecting group and the applicant to 
try to resolve this thing amicably. And you are not--are you 
willing to participate in something like that?
    Mr. Merrill. Not without counsel, Mr. Chairman.
    Chairman Manzullo. What is that?
    Mr. Merrill. I want counsel with me.
    Chairman Manzullo. That is okay. Would you be willing to 
participate in a meeting like that?
    Mr. Merrill. I want to be clear--
    Chairman Manzullo. I mean, can you give me a yes or no?
    Mr. Merrill. I just don't know what the answer is. Peter, 
what is the answer?
    Mr. Saba. I am sorry. Are we talking about this meeting on 
the SMIC transaction?
    Chairman Manzullo. Yeah, very informal. We would have one 
representative from SMIC and one from the objectors and then 
Peter and then Phil, you.
    Mr. Merrill. Mr. Chairman, why can you not meet with the 
two alone? You have a lot more power.
    Chairman Manzullo. Because you made the decision. No, you 
have a lot more power than I do. You make the decision. I mean 
are you willing to do that?
    Mr. Merrill. Mr. Chairman, something doesn't add up to me. 
There is something there--I am punchy at the moment but 
something there does not add up. I have representations from 
the--a stack of documents inch inches thick that says we feel 
there is an economic impact on this deal and a set of 
documents, a set of--
    Chairman Manzullo. No, you don't understand. Maybe that is 
the problem, Mr. Merrill. I don't think you understand. I have 
offered to sit down with you and Peter and one person from the 
objecting group and one from SMIC to see if there can be a 
resolution, that these questions can be answered to the 
satisfaction of Ex-Im Bank.
    Mr. Merrill. Mr. Chairman, in that--
    Chairman Manzullo. Because I think that is picking up where 
Peter left off when he made that suggestion.
    Mr. Merrill. In that context the answer is 100 percent yes. 
We would never refuse to meet with a Member of Congress.
    Chairman Manzullo. All right. Do you have the calendar? Do 
you have my calendar there? Do you know your availability next 
week, Phil? Are you going to be in town, do you have any idea? 
Are you going to be out of the country? Peter, do you know?
    Mr. Merrill. Well, we have the conference Thursday and 
Friday.
    Chairman Manzullo. Okay.
    Mr. Merrill. That would be the 7th and 8th.
    Chairman Manzullo. Well, listen.
    Mr. Merrill. It would be infinitely better for me the 
following week when I know I am clear. We can probably make 
time. I am not sure. I have to check my schedule.
    Chairman Manzullo. Okay. I take your word.
    Mr. Merrill. But I am quite willing to do this.
    Chairman Manzullo. Okay, that is fine. I have no further--
Peter, are you point on this, on setting up the meeting?
    Mr. Saba. I have exchanged cards with your staff.
    Chairman Manzullo. Okay.
    Mr. Merrill. We will try and set up a schedule.
    Chairman Manzullo. Okay. Well, listen. This meeting has 
been very long. Then, Peter, we are going to meet with Mr. 
Vaden as soon as we conclude the hearing. And the hearing is--
first of all, thank you for your patience. Phil, I am glad to 
see that you are up and at it after that open heart surgery.
    Mr. Merrill. Thank you.
    Chairman Manzullo. You gave us a scare.
    Mr. Merrill. You don't have to--I thank you for the 
comment, but I am perfectly capable of responding to a strong 
and committed Congressman who is fighting for something he 
believes in. I have no problem with this.
    Chairman Manzullo. Appreciate this. This meeting is 
adjourned.
    [Whereupon, at 6:45 p.m., the committee was adjourned.]

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