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




 
                    OVERSIGHT FOR THE EXPORT-IMPORT
                       BANK OF THE UNITED STATES

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

                             JOINT HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                       DOMESTIC AND INTERNATIONAL
                 MONETARY POLICY, TRADE AND TECHNOLOGY

                                AND THE

                            SUBCOMMITTEE ON
                      OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                           NOVEMBER 10, 2005

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 109-62


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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    MICHAEL G. OXLEY, Ohio, Chairman

JAMES A. LEACH, Iowa                 BARNEY FRANK, Massachusetts
RICHARD H. BAKER, Louisiana          PAUL E. KANJORSKI, Pennsylvania
DEBORAH PRYCE, Ohio                  MAXINE WATERS, California
SPENCER BACHUS, Alabama              CAROLYN B. MALONEY, New York
MICHAEL N. CASTLE, Delaware          LUIS V. GUTIERREZ, Illinois
PETER T. KING, New York              NYDIA M. VELAZQUEZ, New York
EDWARD R. ROYCE, California          MELVIN L. WATT, North Carolina
FRANK D. LUCAS, Oklahoma             GARY L. ACKERMAN, New York
ROBERT W. NEY, Ohio                  DARLENE HOOLEY, Oregon
SUE W. KELLY, New York, Vice Chair   JULIA CARSON, Indiana
RON PAUL, Texas                      BRAD SHERMAN, California
PAUL E. GILLMOR, Ohio                GREGORY W. MEEKS, New York
JIM RYUN, Kansas                     BARBARA LEE, California
STEVEN C. LaTOURETTE, Ohio           DENNIS MOORE, Kansas
DONALD A. MANZULLO, Illinois         MICHAEL E. CAPUANO, Massachusetts
WALTER B. JONES, Jr., North          HAROLD E. FORD, Jr., Tennessee
    Carolina                         RUBEN HINOJOSA, Texas
JUDY BIGGERT, Illinois               JOSEPH CROWLEY, New York
CHRISTOPHER SHAYS, Connecticut       WM. LACY CLAY, Missouri
VITO FOSSELLA, New York              STEVE ISRAEL, New York
GARY G. MILLER, California           CAROLYN McCARTHY, New York
PATRICK J. TIBERI, Ohio              JOE BACA, California
MARK R. KENNEDY, Minnesota           JIM MATHESON, Utah
TOM FEENEY, Florida                  STEPHEN F. LYNCH, Massachusetts
JEB HENSARLING, Texas                BRAD MILLER, North Carolina
SCOTT GARRETT, New Jersey            DAVID SCOTT, Georgia
GINNY BROWN-WAITE, Florida           ARTUR DAVIS, Alabama
J. GRESHAM BARRETT, South Carolina   AL GREEN, Texas
KATHERINE HARRIS, Florida            EMANUEL CLEAVER, Missouri
RICK RENZI, Arizona                  MELISSA L. BEAN, Illinois
JIM GERLACH, Pennsylvania            DEBBIE WASSERMAN SCHULTZ, Florida
STEVAN PEARCE, New Mexico            GWEN MOORE, Wisconsin,
RANDY NEUGEBAUER, Texas               
TOM PRICE, Georgia                   BERNARD SANDERS, Vermont
MICHAEL G. FITZPATRICK, 
    Pennsylvania
GEOFF DAVIS, Kentucky
PATRICK T. McHENRY, North Carolina

                 Robert U. Foster, III, Staff Director
 Subcommittee on Domestic and International Monetary Policy, Trade and 
                               Technology

                       DEBORAH PRYCE, Ohio, Chair

JUDY BIGGERT, Illinois, Vice Chair   CAROLYN B. MALONEY, New York
JAMES A. LEACH, Iowa                 BERNARD SANDERS, Vermont
MICHAEL N. CASTLE, Delaware          MELVIN L. WATT, North Carolina
FRANK D. LUCAS, Oklahoma             MAXINE WATERS, California
RON PAUL, Texas                      BARBARA LEE, California
STEVEN C. LaTOURETTE, Ohio           PAUL E. KANJORSKI, Pennsylvania
DONALD A. MANZULLO, Illinois         BRAD SHERMAN, California
MARK R. KENNEDY, Minnesota           LUIS V. GUTIERREZ, Illinois
KATHERINE HARRIS, Florida            MELISSA L. BEAN, Illinois
JIM GERLACH, Pennsylvania            DEBBIE WASSERMAN SCHULTZ, Florida
RANDY NEUGEBAUER, Texas              GWEN MOORE, Wisconsin
TOM PRICE, Georgia                   JOSEPH CROWLEY, New York
PATRICK T. McHENRY, North Carolina   BARNEY FRANK, Massachusetts
MICHAEL G. OXLEY, Ohio
                     SUE W. KELLY, New York, Chair

RON PAUL, Texas, Vice Chairman       LUIS V. GUTIERREZ, Illinois
EDWARD R. ROYCE, California          DENNIS MOORE, Kansas
STEVEN C. LaTOURETTE, Ohio           CAROLYN B. MALONEY, New York
MARK R. KENNEDY, Minnesota           STEPHEN F. LYNCH, Massachusetts
SCOTT GARRETT, New Jersey            ARTUR DAVIS, Alabama
J. GRESHAM BARRETT, South Carolina   EMANUEL CLEAVER, Missouri
TOM PRICE, Georgia                   DAVID SCOTT, Georgia
MICHAEL G. FITZPATRICK,              DEBBIE WASSERMAN SCHULTZ, Florida
    Pennsylvania                     GWEN MOORE, Wisconsin
GEOFF DAVIS, Kentucky                BARNEY FRANK, Massachusetts
PATRICK T. McHENRY, North Carolina
MICHAEL G. OXLEY, Ohio


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    November 10, 2005............................................     1
Appendix:
    November 10, 2005............................................    41

                               WITNESSES
                      Thursday, November 10, 2005

Hayman, Harry G., Senior Vice President, PNC Bank N.A., on behalf 
  of Bankers Association for Finance and Trade...................    30
Lambright, Hon. James H. Chairman and Acting President, Export-
  Import Bank of the United States...............................     7
Sabroske, John D., Director, Export Credit and Trade Finance, 
  John Deere Credit..............................................    31
Watters, Joseph, Director of International Sales, Hoffman 
  International, on behalf of Small Business Exporters 
  Association....................................................    27

                                APPENDIX

Prepared statements:
    Oxley, Hon. Michael G........................................    42
    Biggert, Hon. Judy...........................................    47
    Crowley, Hon. Joseph.........................................    48
    Kelly, Hon. Sue W............................................    49
    Lee, Hon. Barbara............................................    51
    Maloney, Hon. Carolyn B......................................    52
    Manzullo, Hon. Donald A......................................    53
    Pryce, Hon. Deborah..........................................    74
    Hayman, Harry G..............................................    76
    Lambright, Hon. James H......................................    82
    Sabroske, John D.............................................    89
    Watters, Joseph..............................................    93

              Additional Material Submitted for the Record

Lambright, Hon. James H.:
    Written responses to questions from Hon. Barbara Lee.........   100
    Written responses to questions from Hon. Patrick T. McHenry..   106
    Written responses to questions from Hon. Edward R. Royce.....   107
    Written responses to questions from Hon. Brad Sherman........   110

 
                    OVERSIGHT FOR THE EXPORT-IMPORT
                       BANK OF THE UNITED STATES

                              ----------                              


                      Thursday, November 10, 2005

             U.S. House of Representatives,
                       Subcommittee on Domestic and
           International Monetary Policy, Trade and
          Technology, and Subcommittee on Oversight
                                and Investigations,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittees met, pursuant to notice, at 10:00 a.m., 
in Room 2128 Rayburn House Office Building, Hon. Deborah Pryce 
[chairwoman of the subcommittee on Domestic and International 
Monetary Policy, Trade and Technology] presiding.
    Present: Representatives Pryce, Oxley, Leach, Castle, 
Royce, Lucas, Kelly, Paul, LaTourette, Manzullo, Biggert, 
Kennedy, Garrett, Barrett, Harris, Gerlach, Neugebauer, Price, 
Fitzpatrick, Davis, McHenry, Frank, Kanjorski, Waters, Maloney, 
Gutierrez, Watt, Sherman, Lee, Moore of Kansas, Crowley, Lynch, 
Scott, Davis, Cleaver, Bean, Wasserman Schultz, and Moore of 
Wisconsin.
    Chairwoman Pryce. Good morning. I am very pleased to 
welcome you all here today to this joint hearing on Export-
Import Bank. And I would like to thank Chairwoman Sue Kelly for 
her abiding interest in this issue and the support in her 
subcommittee in joining with us.
    The Bank's current charter is set to expire next year, and 
we anticipate this hearing will touch upon a wide range of 
issues that will need to be addressed in the new charter.
    My subcommittee has been hearing from many current and 
former clients of the Bank on issues they feel should be 
included in any reforms to the Bank next session. These issues 
include the need for greater transparency, increased oversight, 
and improvements in outreach.
    The Bank has a varied history of success in bolstering the 
U.S. export business as a lender of last resort coupled with 
the constant drumbeat of the need for improved management 
within the Bank. On April 6th of this year, Chairman Manzullo 
held a hearing on the need for stronger corporate governance 
and further advocacy for small business exporters. I commend 
Chairman Manzullo for his work over the last year to get Ex-Im 
to achieve its goal of 20 percent activity devoted to small 
business and also to Congresswoman Barbara Lee, who has worked 
with the Bank to elevate the activity devoted to minority-owned 
small businesses.
    An issue of interest to me and of importance to many small 
businesses in my own district in Ohio is the simplification of 
the application for small business and the ability to use 
technology, like filing an application online to ease the 
burden of cost and work time a small business must devote. In 
the last reauthorization in 2002, according to language in 
their charter, the Bank was instructed to implement technology 
improvements that are designed to improve small business 
outreach, including allowing customers to use the Internet to 
apply for the Bank's small business programs.
    In the testimony of then Chairman Merrell received by this 
subcommittee in 2003, the Bank stated, ``We are focusing on 
three key priorities: putting customers first, improving cycle 
time, and expanding support for knowledge-based and service 
exports. In Fiscal year 2003, Ex-Im Bank revised and updated 
its website to provide all customers with improved access to 
information, applications, and forms. As a result, all of Ex-Im 
Bank's applications and forms are available through the 
website. Letter of Interest applications can now be processed 
electronically and claims filing can now be handled online.'' 
However, the business community has provided this subcommittee 
a cutting review about the Bank's inability to make these 
products and services available through the Internet. We have 
heard from businesses wishing to file online that they are 
unable to and must manually fill out the paperwork and fax it 
into the Bank. A further concern is the reduction in operating 
costs from $2.6 billion in Fiscal Year 2000 to $530 million in 
Fiscal Year 2004 that had been expended for small businesses, 
especially given that the Bank is required to provide greater 
Internet access for these small businesses.
    The Bank provides a greatly needed service to the 
businesses in our community that would like to export but 
cannot get a guaranteed loan from a commercial loan 
institution. It is my intent to work to improve upon the Bank's 
efforts in outreach to our community businesses and to work 
with my colleagues to make any reforms necessary in the 2006 
charter.
    We welcome our witnesses here today, and look forward to 
hearing their testimony. I would like now to recognize and turn 
over the gavel to Chairwoman of the Oversight and 
Investigations Subcommittee and my co-Chair at this hearing, 
Sue Kelly.
    [The prepared statement of Hon. Deborah Pryce can be found 
on page 74 in the appendix.]
    Chairwoman Kelly. [presiding] Thank you, Madam Chairman. 
The Export-Import Bank of the United States was designed to 
allow American businesses to export goods on an open playing 
field. Congress created it during the Depression to force open 
markets for factories that would otherwise close and to keep 
jobs in the United States that would otherwise be lost. From 
then until now, Ex-Im's original role is important, but it has 
a new responsibility to make sure America's small businesses, 
which are the center of the American economy, have the same 
access to world markets through the Ex-Im Bank. Last time Ex-Im 
testified before me was with Chairman Manzullo and the Small 
Business Committee. When Ex-Im testified previously before the 
Small Business Committee, we were extremely disappointed to 
learn that the percentage of small business loans made by the 
Bank still had not reached the required statutory limit of 20 
percent. That hearing was in April of this year. Not only did 
Ex-Im Bank not meet the requirement, but the number of small 
business loans had fallen 2.5 percent between 2003 and 2004, 
and this happened at the same time Ex-Im's total business 
soared. Ex-Im promised to do better, and we told Ex-Im that we 
expected better and that we would be watching.
    I want to thank Chairman Pryce for giving me the 
opportunity to hold this hearing with her subcommittee. This 
helps follow-up on my and Chairman Manzullo's concerns 
regarding the Ex-Im Bank from the Small Business Committee 
hearing. Unfortunately, the results for 2005 are in and Ex-Im 
is still not in compliance with the law. I am confident that 
Ex-Im can do better. We have a serious problem in that Ex-Im 
has not complied with the law. The loan program at Ex-Im to 
help America's small businesses is lacking. I am aware of 
suggestions for Congress to consider the larger loans provided 
to big businesses that eventually benefit small businesses. It 
is being suggested that Congress take this into consideration 
when determining whether Ex-Im has met the 20 percent 
threshold. I am also aware that Ex-Im knows full well that to 
process a larger loan takes just as much time and paperwork as 
a smaller loan, but the small businesses need those smaller 
loans. I was in Congress when Congress passed this law, and I 
am well aware of the intent behind the 20 percent threshold. 
Frankly, allowing such consideration for the big business loans 
is not within the original intent of this law.
    This is not my only concern. I am also interested in 
learning about Ex-Im's current initiatives regarding web-based 
platforms and relationship managers, especially for small 
businesses. I represent an area in New York's Hudson Valley 
where we rely so heavily on the continued success of our small 
businesses for job creation and the continued growth of the 
local economy. We need to be doing everything possible to help 
America's small businesses, and that should be our intent in 
this Ex-Im oversight hearing today.
    I look forward to hearing the testimony today and the Ex-Im 
Bank addressing my concerns with some follow-up questions.
    I now turn to my colleague from New York, Mrs. Maloney.
    The prepared statement of Hon. Sue W. Kelly can be found on 
page 49 in the appendix.]
    Mrs. Maloney. I thank the gentlelady from the great State 
of New York for her leadership on this issue and so many others 
and also Chairwoman Pryce and Chairman Manzullo for joining us. 
And I thank them for convening this as we prepare for the 
reauthorization of the Ex-Im Bank in 2006. And I am especially 
pleased to welcome Mr. Lambright, who has done a very fine job 
in his new position.
    The Bank has done a really good job in helping some of my 
constituents and New York residents and really people across 
this country with loans and loan guaranteed disbursements, 
insurance shipments, and working capital approvals to the tune 
of over $3 billion in export value in my district alone in the 
past year.
    And I fully support its mission, and, indeed, we do have to 
support American exports. We have the largest trade deficit in 
the history of our country. It is important that those American 
goods that can be exported that may not be exported without the 
support of the Ex-Im Bank are indeed shipped out. It does help 
American jobs, the American economy, and it is part of a global 
economy and very important.
    I hope that the Bank can expand its activity so as to allow 
U.S. companies to go more aggressively into new markets and 
increase its activity, particularly in the small business arena 
where it has not lived up to its congressional mandate that 20 
percent of its loans go to small businesses. I would like to 
hear, as my other colleagues would, from the witnesses what Ex-
Im has done to address the small business issue. Small 
businesses are the major employer in our country. It is a major 
center of new ideas and new business products, and it is a very 
important part of our economy, and they should really literally 
be supported more. It is better for the overall economy of 
America. And I am very distressed that the efforts that you 
have put in so far have not paid off from the viewpoint of the 
small businesses.
    I am also concerned that the present corporate governance 
structure does not incorporate some of the checks and balances 
that are common to private sector corporations and represent 
best practices in this area. For example, I would like to hear 
from the witnesses on whether they think that applying certain 
parts of Sarbanes-Oxley to the Bank would be an effective tool 
to increase transparency and improve corporate governance.
    I look forward to hearing from the witnesses today, and 
thank you for being here.
    [The prepared statement of Hon. Carolyn B. Maloney can be 
found on page 52 in the appendix.]
    Chairwoman Kelly. Thank you, Mrs. Maloney. We turn to Mrs. 
Biggert.
    Mrs. Biggert. Thank you, Madam Chairman, and thank you, 
Madam Pryce, for holding this joint hearing today.
    Four years ago, this subcommittee was scheduled to mark up 
the previous U.S. Export-Import Bank reauthorization at 9:30 
a.m. on Tuesday, September 11th. And I remember sitting in my 
office preparing to go to mark up when we saw the terrible 
images on the television and evacuated the building. Needless 
to say, that meeting was abruptly postponed but we rescheduled 
and held a mark up the next week. In doing so, we proved that 
in the wake of the terrorist attacks that we would not isolate 
ourselves from the world but instead take bold steps to promote 
international trade, increase U.S. exports, and strengthen our 
economy. Our committee united and produced legislation to 
strengthen the functions of the bank, directing the bank to 
increase its assistance to small businesses, and help U.S. 
businesses to maintain a competitive edge in trade and commerce 
around the world.
    The Ex-Im Bank has been through a lot of changes since that 
time in leadership and through reorganization. So today I am 
hopeful that the dust has settled, the online system can be up 
and running, and that the staff can get back full time to the 
business that they know best, and that is facilitating U.S. 
exports. Let's face it; in our increasingly competitive global 
environment, we as policy-makers have to ensure that we provide 
every advantage and remove every disadvantage for our companies 
to compete successfully abroad. That means all of our 
Government policies must work together from tax to foreign 
assistance, trade, regulatory, and export financing. Make no 
mistake; Ex-Im is one of the best tools we have to ensure that 
our business are allowed to beat the competition abroad.
    In short, we are here today to make sure that we win this 
sale. We don't want to lose the sale because another country 
offered better financing. We don't want to lose the sale 
because another country was more aggressive in encouraging 
small businesses to compete abroad. And we don't want to lose 
the sale because our businesses can't even access an export 
financing application online.
    So I want to thank the witnesses for sharing their 
expertise with us today, and I look forward to ensuring that 
this next authorization puts in place everything you need from 
us to win the sale abroad.
    And I yield back.
    [The prepared statement of Hon. Judy Biggert can be found 
on page 47 in the appendix.]
    Chairwoman Kelly. Thank you very much. Mr. Manzullo.
    Mr. Manzullo. Thank you very much for having this hearing. 
I am very upset with Ex-Im Bank. We held a hearing before the 
Small Business Committee on April 6, 2005, and tried to explain 
one of the problems, that unfortunately the Bank has taken on 
the mantra of just being the bank of Boeing and Caterpillar 
again. Now I have huge presence of those organizations in my 
congressional district, and Ex-Im is working very well for 
them, marvelously well for them, but it is to the exclusion of 
the little guys. And you just can't take care of the big guys 
and ignore the little guys, and the little guys are continuing 
to get beat up; they have been ignored. For example, with the 
master of guarantee agreement and the Bureau of Financing 
initiative, the report coming from the Banker's Association for 
Finance and Trade says the new Export-Import Working Capital 
Guarantee Program, the agreement will make it more difficult 
for smaller banks to support their export or customers, and 
that means that the little guy again gets quashed.
    But it is one incompetency after the other, and the 
incompetency of Ex-Im could lead to the demise of the entire 
organization. Is Mr. Discenza, is here today, the attorney? He 
is not here? He is not here. But let me tell you what he did in 
response to the inquiry we had in our April 6 meeting. Here is 
a man who took out a policy from Ex-Im for about $75,000, 
exported to China, got turned down on a claim for Ex-Im and Ex-
Im said you have to go to China courts in order to resolve your 
lawsuits before we can help you. And I asked specifically for 
Ex-Im to get involved. They took two months to answer a letter. 
People flew out, flew from Mrs. Myrick's district in South 
Carolina--North Carolina to Washington to get more help from 
Ex-Im, and you guys blew it again. It is one bumbling mistake 
after the other, Mrs. Kelly. And I want to tell you I am 
really, really upset and will go into great detail, and I would 
ask if it is possible that they could have Mr. Discenza come 
here to explore this gross thing that happened to his small 
company in South Carolina--North Carolina, if that is okay with 
you?
    Chairwoman Kelly. So moved. Without objection, so moved.
    Mr. Manzullo. Great, so can you have him come here?
    Mr. Lambright. Congressman, I would be happy to cooperate 
with you on that matter. Mr. Discenza is not an attorney; he is 
our CFO. And I am prepared to discuss that matter with you 
today.
    Chairwoman Kelly. Will that satisfy your need, Mr. 
Manzullo?
    Mr. Manzullo. Well, it is your hearing; I will just have to 
have another hearing on it. It won't because then you are going 
to have hearsay. I don't even know if you were at that meeting 
with this constituent and Mrs. Myrick.
    Chairwoman Kelly. Mr. Manzullo, we can always have another 
hearing in the Oversight and Investigations--
    Mr. Manzullo. That would be fine.
    Chairwoman Kelly.--if you would like us to do that.
    Mr. Manzullo. That would be fine.
    Chairwoman Kelly. Or we could do a joint hearing if you 
like.
    Mr. Manzullo. You could do that but you can tell I am quite 
upset over what has happened to the little guys here, and I 
hope they take them into consideration. Thank you.
    [The prepared statement of Hon. Donald A. Manzullo can be 
found on page 53 in the appendix.]
    Chairwoman Kelly. Thank you. Mr. Crowley.
    Mr. Crowley. Thank you, Madam Chair. I just want to start 
by thanking you for holding this hearing today and for the 
committee doing its work and for this testimony given today.
    The Ex-Im Bank supports U.S. exports and American jobs as 
the Nation's official export credit agency. It is charged with 
financing and promoting exports of U.S. goods and services and, 
in doing so, Ex-Im also assumes commercial and political risks. 
It also levels the playing field for U.S. businesses seeking to 
enter challenging markets by providing financing for U.S. 
exports that is not available in the private market. However, 
it does not compete against private lenders.
    The Ex-Im Bank was created in 1934 and established under 
its present law in 1945 to aid in financing and facilitate U.S. 
exports. Exports are seen as vital for sustaining U.S. economic 
growth. The U.S. economy is increasingly internationalized and 
exports a larger share of the Gross National Product than in 
the 1930's. Globally trading and financial systems are more 
interdependent, and international competition is more intense.
    Ex-Im Bank's financing annually sustains an estimated 
200,000 jobs directly among exporters and suppliers and another 
one million jobs indirectly among sub-suppliers. But Ex-Im is 
not only helping the U.S. stay competitive, it is helping New 
York City and my district as well. Overall, Ex-Im has provided 
loans and guarantees to three suppliers in my district, 
totaling over $2.8 million and dozens of small businesses 
throughout the State of New York. Companies such as Namco 
Machinery in Maspeth Queens and Water Meat Distributing Company 
in the Bronx have benefitted from working with Ex-Im Bank. With 
Ex-Im's help, these and other companies in New York have 
exported their products around the world.
    I look forward to hearing as well as perusing the testimony 
of our witnesses today as we work towards reauthorization of 
this important institution.
    And with that, I yield back the balance of my time.
    [The prepared statement of Hon. Joseph Crowley can be found 
on page 48 in the appendix.]
    Chairwoman Kelly. Thank you, Mr. Crowley. Mr. Davis.
    Mr.Davis. Thank you, Madam Chairman. I don't have an 
opening statement.
    Chairwoman Kelly. We turn then to Mr. Lambright. Mr. 
Lambright is the acting director of the Ex-Im Bank, and we are 
pleased to have you here this morning. And we are hoping to get 
some answers to some of the questions that have been raised 
here already. Thank you. Please proceed.

  STATEMENT OF THE HONORABLE JAMES H. LAMBRIGHT, CHAIRMAN AND 
   ACTING PRESIDENT, EXPORT-IMPORT BANK OF THE UNITED STATES

    Mr. Lambright. Of course, thank you. Chairwoman Kelly, may 
I submit my written testimony for the record?
    Chairwoman Kelly. Yes, without objection, your written 
testimony will be submitted for the record.
    [The prepared statement of Hon. James H. Lambright can be 
found on page 82 in the appendix.]
    Chairwoman Kelly. And you understand, you have testified 
here before; you have 5 minutes to testify. When the lights, 
which don't seem to be on right now, when the green light 
changes to yellow, you have one minute. And when the red light 
comes on, we would like you to sum up. Thank you, Mr. 
Lambright. We are here to listen to what you have to say.
    Mr. Lambright. Thank you, Chairwoman Kelly, Congresswoman 
Maloney, and members of the subcommittees. I am pleased to be 
here to bring you up to date on the activities of the Export-
Import Bank. For those members who are new to Ex-Im Bank, this 
is a good introduction as we head into 2006, the year of our 
reauthorization.
    I am proud to report that during Fiscal Year 2005, we 
achieved significant results in meeting our goals of becoming 
more customer friendly, market driven, and results oriented, 
all in support of financing exports that would not otherwise go 
forward and, therefore, in support of the U.S. jobs base.
    Of particular note, first, our volume of business is up. 
Ex-Im Bank authorized roughly $14 billion in financing but 
supported nearly $18 billion in U.S. exports. This level of 
authorized financing reflects a 50 percent increase since 2001.
    Second, our multiplier effect is increasing. For every 
taxpayer dollar used in Fiscal Year 2005, Ex-Im Bank supported 
$57 in U.S. exports. That compares to $50 last year and $35 the 
year before. Management and staff have been doing more with 
less.
    Third, our small business exports are growing. Our direct 
support of small business exporters increased 18 percent over 
the last year. Since 2001, we have increased our direct support 
to small businesses by $1 billion, going from $1.7 to $2.7 
billion. At least 13 percent of those small business 
transactions have been with women- and minority-owned 
businesses.
    We have also boosted the number of small business 
transactions, which consistently account for over 80 percent of 
our transactions. And I think that bears repeating that when we 
talk about the component of Ex-Im Bank business that goes 
directly to small businesses, 83 percent of the number of 
transactions we did this year went directly to small business 
exporters.
    But you do note that our charter provision requires us to 
make 20 percent of our funding available for small business 
transactions. And as indicated by the chart on the last page of 
my written testimony covering 2001 to 2005, small business 
demand has not reached 20 percent. For Fiscal Year 2005, the 
level was 19.1 percent, up from 16.7 percent the year before.
    Fourth, the amount of exports we support to sub-Saharan 
Africa is up. Over the past 7 years, the Bank has supported 
over $3 billion in exports to sub-Saharan Africa. In Fiscal 
Year 2005, we support over $460 million in exports to the 
region, up 36 percent over last year.
    It is important to note that this performance was achieved 
without adding any employees and without competing with private 
banks while responsibly managing taxpayer resources. These 
results demonstrate the strong commitment of Ex-Im Bank 
management and staff to efficiently and effectively support 
U.S. exporters and the jobs associated with their overseas 
sales.
    In Fiscal Year 2005, we authorized over 3,000 transactions. 
Over 2,500 of those went directly to small businesses. That 
means there are a lot of workers in American firms benefitting 
from the service we provide. But like any service provider, we 
know we can serve our customers even better. For the future, we 
will continue to focus our efforts on increasing small business 
exports under the leadership of our new vice president for 
small business and the staff of 40 Ex-Im Bank employees 
dedicated exclusively to small business outreach.
    Furthermore, when fully in place, our business automation 
project will increase the transparency of our approval process 
for our small business customers by allowing online application 
and tracking. We are also going to continue our efforts to 
increase our activities in sub-Saharan Africa and our outreach 
to exporters of environmentally beneficial goods and services.
    Through these efforts and the reauthorization process, I am 
confident that Ex-Im Bank will remain in good shape to pursue 
its mandate of supporting U.S. jobs by financing exports that 
wouldn't go forward without us.
    Thank you very much, and I would be happy to take any 
questions.
    Chairwoman Kelly. Thank you very much, Mr. Lambright. Mr. 
Lambright, you spoke about the automation. When will that web-
based platform for small businesses be up and running? Do you 
have a projected time?
    Mr. Lambright. Well, I try to be conservative in the 
promises I make, but my best estimate is the first half of 
2006.
    Chairwoman Kelly. The first half, some time between January 
and June of next year?
    Mr. Lambright. Yes, Chairwoman, we are trying to roll this 
out in phases. Since the last reauthorization, at which point 
we had nothing online, we heard this committee loud and clear 
that we needed to be moving our business services online. And 
since then, we have captured some of the low hanging fruit of 
being able to issue letters of interest, offer subscriptions 
and forms online, but the application processing, which is 
really what I understand your interest to be, was always known 
to be a multi-year process. And so we have developed that 
automated platform. It is in the testing stage now. In fact, I 
have taken it for a test myself acting as a potential 
applicant. So we are getting very close to being able to roll 
out the first products online.
    Chairwoman Kelly. Are small businesses going to have the 
same access as large businesses to the relationship managers 
that don't work with direct competitors or large companies at 
the same time they are working on the small business loans? 
Will there be dedicated people there?
    Mr. Lambright. I think I know what you are asking.
    Chairwoman Kelly. I just want a no or yes answer.
    Mr. Lambright. We have a pool of relationship managers who 
specialize in the small businesses.
    Chairwoman Kelly. I want a no or a yes answer. Will they be 
dedicated in a way that they are not working with direct 
competitors or with the large companies; are they going to be 
working as a dedicated manager with the small businesses? All I 
need is a yes or a no.
    Mr. Lambright. I think what you are asking would be 
impractical, and I am going to have to say no.
    Chairwoman Kelly. Well, you do it for large companies.
    Mr. Lambright. Right, we do and we do it for customers that 
are frequent customers of the Bank. So when we have a pattern 
of business, we can work directly with a company. But of the 
200,000 or so small businesses that export, we can't assign 
each of them a dedicated relationship manager. But we do offer 
a pool of people whose job is largely focused on small 
business.
    Chairwoman Kelly. But if they are also working with large 
businesses, then they are largely focused maybe, but they are 
still working with small businesses. Look, here is the problem. 
If you have someone who is a manager and they are working not 
only with your business but with your competitors, that is a 
problem in my book. We need somebody who is going to work 
directly in a way that doesn't put them in that position. Also, 
I think that we need more people focused on small businesses, 
and I think that is important.
    I want to ask you about the dealer distributor program 
because the last time you were in front of us I asked you 
about--I mentioned the lack of loans in the dealer distributor 
program and a later witness here today is going to testify that 
they were denied a loan in this program. I want to know if Ex-
Im has increased the number of dealer distributor loans?
    Mr. Lambright. We have not, Chairwoman Kelly.
    Chairwoman Kelly. I have also found out that Ex-Im plans to 
move about 40 people, which is 10 percent of your workforce, to 
doing small business outreach and education. Is this in 
addition to small business relationship managers?
    Mr. Lambright. Yes, it is. This staff is working with the 
new vice president of small business, and these folks are 
focused exclusively on outreach to small business: finding, 
educating, developing business from small businesses that 
export or might be interested in exporting. When you talk about 
the relationship managers, those are the folks that actually 
handle the applications and get the financing for the 
applicant, and so those are the people in our business units, 
many of whom spend most of their day just on small businesses.
    Chairwoman Kelly. Well, if that is the case, you ought to 
be able to hit 20 percent. I note that you have come up.
    Mr. Lambright. We are very hopeful. We are working hard.
    Chairwoman Kelly. Okay, we want you to work hard on that. I 
understand also that it is the claim of the Ex-Im that the 
large loans support the small businesses, and that is really 
not very well supported by the empirical data, at least the 
empirical data we have. In fact, Ex-Im doesn't even look for 
information from the large businesses as to whether there are 
small business components in the actual product being exported. 
Now I heard you say that those large loans support small 
businesses. We don't have any data to support that, and it 
doesn't look to me like Ex-Im is really requiring that of the 
large business loans. So have you done anything about that, and 
do you have better data than we have?
    Mr. Lambright. Well, I don't bring with me data today that 
says ``X'' thousands of sub-suppliers have been benefitted by 
our larger deals, but we do make estimates through talking with 
the exporters on the small businesses that are benefitted. But 
you are correct to note that this is fairly anecdotal, and it 
is a lot of estimation. But I can tell you from talking to some 
of the larger exporters that they point to the tens of 
thousands of small businesses that are on their supplier rolls, 
but for any particular export, your observation is correct.
    Chairwoman Kelly. My background is science, sir, and 
anecdotal evidence is lovely, but I like to see figures and 
numbers.
    Mr. Lambright. Fair enough.
    Chairwoman Kelly. And if you can start collecting those, it 
might help all the way around our understanding of the 
transparency of what you are doing.
    Mr. Lambright. Right.
    Chairwoman Kelly. So thank you very much. I am out of time. 
Mrs. Maloney.
    Mrs. Maloney. I thank you for being here and I applaud the 
line of questioning from the chairwoman on helping small 
businesses. I think it is important. One of the criticisms that 
doesn't apply to my district but that you hear from other 
Members of Congress is that some of the businesses that get 
these loans are among the Fortune 500, some of the most 
successful businesses in our country. And they argue why in the 
world are we subsidizing or back-stopping these businesses? And 
so I am asking you a question that I hear as a supporter of the 
Ex-Im Bank.
    Mr. Lambright. It is a fair question, Congresswoman. We 
think about these questions a lot but when we look at our 
mission of supporting U.S. jobs, a lot of those jobs are in the 
larger companies and a lot of jobs go into some of the larger 
exports of the capital equipment. One tractor involves a lot of 
people on assembly lines putting that together. And so we take 
great pride in helping some of the larger companies in the U.S. 
get those sales that they might not otherwise get, but we also 
focus on helping as many small businesses as we possibly can.
    Mrs. Maloney. Well, how do you get your criteria? When you 
have a large business that is exporting tractors, shall we 
say,--
    Mr. Lambright. Right.
    Mrs. Maloney.--and being very successful and then all of a 
sudden they get a loan to export more tractors. What is the 
differential that shows you that they need support for one set 
of tractors but not the other set of tractors?
    Mr. Lambright. Well, we work carefully with applicants to 
make sure that the standard that we call additionality is met, 
which is exactly what you are asking. Do they really need us? 
We go where firms would go on their own if there weren't either 
government-sponsored financing from a competitor or an 
exaggerated perception of risk in their commercial markets. And 
so we step in in those two instances to help that export go 
forward.
    Mrs. Maloney. Okay, and also we heard some concern that the 
businesses complain that the governance structure of the Bank 
is not transparent and accountable. For example, it has been 
proposed that Ex-Im adopt the auditing standards of Sarbanes-
Oxley, the fact that they have an independent director and that 
form of transparent governance. And what is your response to 
that?
    Mr. Lambright. Well, I don't know what particular concerns 
you have been hearing, but with regard to Sarbanes-Oxley, while 
technically we are not governed by that legislation, we take it 
very seriously. We conducted our own audit with an outside firm 
to see how close we were to compliance with Sarbanes-Oxley. We 
have adopted a number of best practices. We did a rigorous 
review of our internal controls. And you mentioned our board of 
directors. We have a five member, bipartisan board. The non-
managing directors constitute an audit committee that works 
directly with both an outside and inside audit function.
    Mrs. Maloney. And there have been some concerns, 
particularly from Congressman Sanders from Vermont, that some 
of the biggest outsourcing businesses, where they out source 
jobs to other countries, are receiving the Ex-Im loans. And so 
then you see an outsourcing of jobs that they are purposely 
outsourcing and then they are getting loans to have jobs in the 
U.S. And how do you justify that challenge?
    Mr. Lambright. They are not getting loans from us for the 
jobs that they have moved overseas. We care only about the jobs 
that remain here in the U.S. And so when we help those exports 
go forward that otherwise would not go forward, we are helping 
keep more of those jobs from being outsourced by keeping the 
production here in the U.S.
    Mrs. Maloney. Where do you see job growth in the U.S.? As 
you are doing export financing, where do you see job growth and 
expansion in the U.S.? I know we have lost manufacturing, three 
million manufacturing jobs, but where do you see the potential 
job growth?
    Mr. Lambright. Well, I see a lot of job growth in small 
business. As a sector, it really is the engine of job growth in 
this country. And we would like to support that and help fuel 
that growth. In particular sectors, I think we are seeing 
global demand for some of our more sophisticated manufacturing, 
environmental, and medical equipment experts. Also, we are 
seeing a lot of large infrastructure projects as emerging 
markets realized that they need first-class infrastructure to 
grow themselves. We are seeing demand for power, roads, and 
other infrastructure projects where American companies can 
help.
    Mrs. Maloney. My time is almost up, but would you spend a 
little bit of time on your financing structure? You do not cost 
the taxpayers any money; you basically are a revolving door, 
assisting businesses, making profits, plowing it back in. Is 
there any cost to the taxpayer for administrative costs, or are 
you totally self-sufficient?
    Mr. Lambright. Well, we do not have the authority to keep 
revenues in the sense of retained earnings and that revolving 
notion that you mentioned. So every year we do come before 
Congress to request both an administrative and a program budget 
to fund our operations. And what we do is like a bank; when we 
support a loan, we work with OMB and other agencies to assess 
the risk of that loan. And we take from our program budget that 
amount that reflects the potential loss and over time, if we 
realize, as has been the recent history, that our portfolio is 
performing better than the original risk calculations, we 
return that extra money to the U.S. Treasury.
    Chairwoman Kelly. Thank you very much, Ms. Maloney. Mrs. 
Biggert?
    Mrs. Biggert. Thank you, Madam Chairman. Mr. Lambright, on 
page 2 of your testimony you stated that the Bank often becomes 
involved in deals that are not attractive to commercial lenders 
because they are in higher risk markets and this is the reason 
for the Bank's existence. But in the next paragraph you state 
that the Bank has a claims rate comparable to many commercial 
banks. If you are in the higher risk markets, how can you claim 
that the rates are comparable to the banks?
    Mr. Lambright. I came from private banking to Ex-Im Bank, 
and that confused me for a while as well, Congresswoman. Ex-Im 
Bank by its very nature does take risks that the commercial 
market won't bear. But we structure our deals to find 
reasonable assurance of repayment, as our charter dictates. We 
try to walk that balance, but I think the answer to your 
question is even though we are taking greater risks in the 
commercial market, we are the United States Government, and 
borrowers often find that they would like to pay us back and 
not default to us.
    Mrs. Biggert. Well, do you think the reasonable assurance 
of repayment is the correct standard? Do you find that that is 
too restrictive? How many loans do you turn down?
    Mr. Lambright. Well, it is hard to give you a precise 
figure on how many we turn down because some are withdrawn 
throughout the process when applicants realize they won't meet 
our standards. We have translated that reasonable assurance of 
repayment standard into credit standards that we posted on our 
website, and we work with our customers to make sure they know 
what countries we are willing to take which risks in. And we do 
get fairly aggressive, even though the whole portfolio, as you 
know, has a low claims rate. In certain markets or in certain 
sectors where we have been aggressive and with seasoning we 
have seen those deals turn bad; we have had to re-calibrate and 
take a closer look at the transactions that are coming before 
us. Just very recently, a few years ago we were spending a lot 
of time developing business in markets like Ghana and the 
Philippines, and with seasoning we noticed that there was a 
troubling default rate, and so we have had to ask harder 
questions. We have had to make sure that our banking partners 
have good "Know-Your-Customer" standards; knowing who we are 
dealing with is becoming ever more important. So I do think 
that a reasonable assurance of repayment is the right standard. 
But, Congresswoman, we try to walk that balance between our 
eagerness to help the exporter and our eagerness to protect the 
taxpayer from excessive risk. And if we feel, if we sense from 
our customers or from you that we have strayed too far off that 
balance, we want to listen to your guidance. And if we need to 
adjust course, we can do so.
    Mrs. Biggert. Okay, thank you. And then I have a question 
about transactions. Of the authorized $15 billion worth of 
transactions if Fiscal Year 2004, $4.5 billion went to Boeing. 
How many transactions does this $4.5 billion represent?
    Mr. Lambright. You correctly note that Boeing deals this 
year represented about a third of our portfolio. I am not sure 
how many transactions that was, maybe two dozen or so. We have 
a large portfolio of aircraft in 50 countries around the world, 
and that portfolio is performing quite well.
    Mrs. Biggert. I guess what I am getting at is how do you 
define transactions? Is this like a line of credit that like 
somebody uses it and there are many transactions that are 
counted in one, or is it every transaction?
    Mr. Lambright. It would be specific sales of aircraft, but 
oftentimes a foreign airline would buy more than one aircraft 
at a time, so we would count transactions by the number of 
contracts. So if there were a contract to buy four aircraft, 
that would be one transaction.
    Mrs. Biggert. So in the small businesses, I think you said 
there were like 2,167, something like that, transactions last 
year. Does that mean that there were just that number of 
contracts?
    Mr. Lambright. Right, we are counting by the number of loan 
approvals or insurance product approvals that we signed, and 83 
percent of those went directly to small business. And the 
reason that this 20 percent of funding isn't met by those 80 
percent of transactions is, as you correctly note, one Boeing 
transaction involves a lot of money.
    Mrs. Biggert. Okay. So do we need a small business mandate 
in the next reauthorization? And, if so, what should the 
percentage of transactions be?
    Mr. Lambright. Well, we at Ex-Im Bank are working very hard 
to find more ways to do small business exports, and so we 
appreciate the encouragement from this committee to do more. In 
terms of what language or what number might be the best mark to 
set for us, I am not in a position to talk about what the 
Administration position on any charter changes would be.
    Mrs. Biggert. Okay, thank you. Thank you, Madam Chairman, 
and I yield back.
    Chairwoman Kelly. Thank you very much, Ms. Biggert. Mr. 
Crowley.
    Mr. Crowley. Thank you, Chairwoman Kelly. Thank you for 
being here again, as I mentioned earlier. I appreciate the work 
of Ex-Im, as I stated in my opening testimony, my opening 
statement as to the importance that it has lent to a number of 
my constituents. I do have though a constituent who we thought 
would benefit from Ex-Im, and if you could help maybe give us 
guidance as to how we could help proceed, whether now or 
generally speaking or specifically targeting this particular 
case. I won't mention the name of the company but there is a 
metal works company in my district. They are in the business of 
wrought iron and brass and all kinds of metals, making doors 
and frames and things of that nature for some very high-level 
people. They entered into a contract with the prince of Abu 
Dhabi in the UAE to create brass doors valued at over $2 
million. For whatever reason, the prince did not want to pay 
the price at some point, once the doors had been completed. And 
imagining all the money that was laid out to do that. In 
essence, their refusal to pay caused my constituent to enter 
into bankruptcy and, in effect, default on the Ex-Im loan that 
was also issued to help in that process. There was a Federal 
judgment earlier this year in favor of my constituent against 
the UAE prince. What can, what is, or what can Ex-Im do to 
help, see that judgment carried through? In other words, is 
there anything the Ex-Im could help us do in terms of making 
sure that my constituent is made whole and, in effect, being 
able to pay back the taxpayers that they are owed for the 
monies that were lent to help that business transaction take 
place? I am sure this is probably not the only case of its kind 
in the history of Ex-Im. The reason why it is sensitive is that 
you may very well be aware of the fact that the U.S. is 
negotiating a free trade agreement with UAE. And if this is how 
they deal in private matters, I am concerned about any free 
trade agreement that we may be entering into with a country 
that would treat our citizens in this way. Maybe if you can 
comment on that.
    Mr. Lambright. Sure. Congressman, I am not familiar with 
the company that you referenced or the particular transaction 
and so--
    Mr. Crowley. I will be able to get that to you. For right 
now, I think I have said enough to make my point. I hope there 
is someone here for the UAE. If not, some friends that maybe 
can get that back to them.
    Mr. Lambright. We will let them know your concerns, and we 
will follow up with your office.
    Mr. Crowley. My second question deals with an overall, 
again a broader picture. In terms of deals that are entered 
into with American companies overseas that deal with 
politically sensitive issues and, specifically, funding of a 
pipeline through Azerbaijan that completely cuts out Armenia in 
the creation of that pipeline. I oppose funding of the Baku-
Ceylan Pipeline because it does exclude Armenia. How do you go 
about deciding which projects to fund when they are politically 
sensitive in this particular case?
    Mr. Lambright. Well, regardless of the politics, we are 
demand driven. And so the market needs to bring us commercially 
viable transactions. When you are talking about a large 
project, like what we refer to as the BTC Pipeline, the market, 
the participants would seek our financing and come to us. We 
would look very carefully at the politically sensitive issues 
that you raise. We would also look very carefully at any 
environmental concerns. And we would also look very carefully 
at the creditworthiness of the project, since for a project 
like that, we need the project up and running producing 
revenues for us to make sure that we are getting repaid. But in 
terms of what route a pipeline might take, that is really for 
the participants to decide. And then once the project is 
brought to us, if it meets those criteria I mentioned, we would 
decide whether to finance it or not.
    Mr. Crowley. How are those decisions actually made?
    Mr. Lambright. Which decisions?
    Mr. Crowley. In terms of the political significance, the 
environmental significance.
    Mr. Lambright. On a project of that size we would have a 
lengthy due diligence process that would go months and months 
of working with all the participants, with interested parties. 
Oftentimes in a project of that scope and scale, we would hear 
from NGO's who might have environmental concerns. And so we 
would work with the project participants and most likely 
outside contractors to do environmental impact assessments that 
we would share with the public. We would also work with other 
government agencies on the political issues of whether it was 
appropriate for us to be involved in a transaction or not.
    Chairwoman Kelly. Thanks very much, Mr. Crowley. Mr. 
Manzullo.
    Mr. Manzullo. Thank you. I would ask permission to insert 
my full opening statement into the record.
    Chairwoman Kelly. Without objection, so ordered.
    Mr. Manzullo. Thank you. Does the head of the small 
business office report to you directly?
    Mr. Lambright. He is the number two guy in our largest 
business unit, but I have a lot of day to day contact with him.
    Mr. Manzullo. That doesn't answer the question.
    Mr. Lambright. On the org chart, he does not report 
directly to me, no.
    Mr. Manzullo. All right, so you have no supervision over 
him?
    Mr. Lambright. I have plenty of day to day contact with 
him, and I am very involved in what he is doing.
    Mr. Manzullo. But he doesn't report to you.
    Mr. Lambright. He reports to the head of our business unit; 
that is correct.
    Mr. Manzullo. He reports to what?
    Mr. Lambright. The head of what is called our Export 
Finance Unit, which is our major business unit.
    Mr. Manzullo. Do they report to you?
    Mr. Lambright. Yes.
    Mr. Manzullo. Do you have the ability to intervene in 
individual transactions, a transaction that takes place with 
the head of the small business?
    Mr. Lambright. Well, I suppose I have the ability to 
express my interest in transactions moving forward.
    Mr. Manzullo. Can you reverse them?
    Mr. Lambright. Can I reverse?
    Mr. Manzullo. Right, if the head of the small business 
group makes a decision, can you say, ``I don't like that; I 
want that reversed''?
    Mr. Lambright. Well, it depends on the nature of the 
transaction. The board of directors approves transactions but 
has delegated certain authorities to other committees or 
individuals in the Bank to approve transactions. Once a deal is 
signed under the terms of those delegated authorities, I don't 
think I have any power any more than anyone else to turn it 
around. Our commitments carry the full faith and credit of the 
U.S. Government.
    Mr. Manzullo. That is a pathetic answer. I am trying to 
find out who is in charge of the agency. Does he work for you 
or not?
    Mr. Lambright. Yes, he does.
    Mr. Manzullo. All right, if he makes a mistake, do you have 
the ability to reverse the mistake?
    Mr. Lambright. Sure, but if he has the authority to commit 
the Bank, then I am honor bound by the contract signed.
    Mr. Manzullo. Well, have you ever been asked to intervene 
in a situation involving a small business?
    Mr. Lambright. I have taken a personal interest in several 
matters related to small business.
    Mr. Manzullo. Will you answer the question, please?
    Mr. Lambright. Yes, the answer is yes.
    Mr. Manzullo. With regard to Rutland, were you personally 
involved in that transaction?
    Mr. Lambright. I was personally aware of it; I was not an 
adjudicating official.
    Mr. Manzullo. What does that mean?
    Mr. Lambright. It means I took an interest in making sure 
that that customer was treated fairly and kept informed of our 
process, but I was not opening the file and reviewing the terms 
of their claim.
    Mr. Manzullo. So you are not familiar with this file 
personally?
    Mr. Lambright. I am familiar enough to know that our staff 
gave it four levels of review.
    Mr. Manzullo. Madam Chair, would you instruct the witness 
to answer the questions.
    Chairwoman Kelly. The witness will answer.
    Mr. Lambright. I would be happy to. Could you repeat the 
question, please?
    Mr. Manzullo. The question is did you have the ability to 
intervene in this case and to right a wrong?
    Mr. Lambright. I did not intervene.
    Mr. Manzullo. Did you have the ability to do so?
    Mr. Lambright. Sure.
    Mr. Manzullo. Did we request that you do so?
    Mr. Lambright. You requested of my predecessor to take a 
hard look at the case, and he directed our staff to do so.
    Mr. Manzullo. Did you yourself personally take an interest?
    Mr. Lambright. I took an interest in making sure that our 
staff--
    Mr. Manzullo. Did you look at the file yourself?
    Mr. Lambright. No, sir.
    Mr. Manzullo. Did you realize the file was important enough 
that I requested Mr. Merrill to personally look at it; are you 
aware of that?
    Mr. Lambright. I did and I know that he did take a personal 
involvement in it. I did not subsequently review the action 
taken previously.
    Mr. Manzullo. Were you in charge of the organization on 
August 22nd of this year?
    Mr. Lambright. Yes, I was.
    Mr. Manzullo. Well, the letter comes August 22nd denying 
any relief to this small business. I am just trying to find out 
who is in charge here.
    Mr. Lambright. Congressman, that action was confirming 
action taken earlier. This has received many levels of review 
in the organization.
    Mr. Manzullo. Did it receive your level of review?
    Mr. Lambright. Enough that I directed staff to take another 
look at it and treat the customer fairly--
    Mr. Manzullo. Did you personally look at the file, yes or 
no?
    Mr. Lambright. No.
    Mr. Manzullo. You didn't do your job. Do you know what type 
of insurance Rutland had?
    Mr. Lambright. Yes, they had an export credit insurance 
policy.
    Mr. Manzullo. What does that do?
    Mr. Lambright. It protects against credit reasons for non-
payment.
    Mr. Manzullo. You know they didn't get paid by this Chinese 
firm?
    Mr. Lambright. I am aware of that.
    Mr. Manzullo. Would you tell the committee today where you 
told them to go adjudicate their claim against you?
    Mr. Lambright. I don't know what we instructed them to go 
do.
    Mr. Manzullo. You told them to go to China.
    Chairwoman Kelly. Mr. Manzullo.
    Mr. Manzullo. I will calm down, thank you.
    Chairwoman Kelly. I am sorry; you are out of time.
    Mr. Manzullo. Thank you.
    Chairwoman Kelly. We go to Mr. Neugebauer.
    Mr. Neugebauer. Thank you, Madam Chairwoman. A couple of 
questions that I would like to pursue with you. One is the Bank 
and the Small Business Administration last year finalized a 
memorandum of understanding designed to facilitate small 
business access to the Bank's various facilities. How has this 
program performed? How many transactions have you concluded 
pursuant to this agreement? And do you think similar 
arrangements would be desirable or possible for say the 
Department of Commerce or other foreign commercial services?
    Mr. Lambright. Well, Congressman, let me work backwards 
from the end of your answer. In terms of creating a facility 
for financing with the foreign commercial service of the 
Commerce Department, that really isn't possible because they 
are not making financings. But we do work closely with them. We 
train foreign commercial service officers who are going to key 
markets for us. We work very closely with the Commerce 
Department on outreach to customers. As for the Small Business 
Administration, we do have a facility for small business 
customers of the SBA who have reached a cap of what the SBA can 
finance in terms of export lending. We will cover the overflow 
amount of financing so that that customer doesn't have to go to 
two different Government agencies. It would be a seamless 
application process. And in the time that we have had that 
facility up and running, we have done about a dozen 
transactions.
    Mr. Neugebauer. One of the things that I was glad to hear 
you say, recognize when the discussion was going on about small 
versus large businesses, just to remind everybody that small 
businesses are the number one job creator in America. Today the 
Wall Street Journal stated that we set a new record today, and 
it wasn't necessarily the kind of record that we want to set, a 
$66.11 billion trade deficit. When you talk about all of these 
outreach efforts that you are doing on small businesses, and 
while you have made some efforts and in some years you have had 
more success than others in reaching the 20 percent goal, what 
are some of the impediments that you see to getting to the 20 
percentile as far as programs?
    Mr. Lambright. Well, the one major hurdle that stands 
between us and helping more small businesses is awareness on 
the part of small business exporters. There are roughly 250,000 
small businesses that export, many more who could export if 
they had access to capital. And when we travel around the 
country and speak to different groups, I always find that the 
number one issue that I talk about is explaining who we are and 
what we are doing there and what kind of services we offer. And 
so when we call on small businesses that may potentially be our 
customers, we are doing it to let them know that we exist and 
that we want to help them export.
    Mr. Neugebauer. When you are looking at the criteria for 
large companies versus small companies in your lending criteria 
and your credit analysis, do you make a differentiation and 
should you?
    Mr. Lambright. Well, we have in our charter the standard 
that is called reasonable assurance of repayment. It's the 
standard that we need to satisfy for every financing that we 
participate in. And so whether the exporter is large or small, 
we still need to find that likelihood of getting repaid. Now we 
work closely with small businesses, and some of our policies 
offer them greater coverage and greater protection. But the 
terms that we look for in order to find that reasonable 
assurance of repayment really look at the borrower, the end 
user of the product to find out if we are going to get repaid.
    Mr. Neugebauer. When you say greater coverage for small 
business, are you requiring them to have a greater cash flow 
coverage than you would say a large company?
    Mr. Lambright. No. What I mean is if there is an export 
contract for $100, our typical policy for short-term credit 
insurance would cover $90 of that. Basically, they would have 
to put the down payment up. For a small business exporter, we 
would move up and cover 95 percent of that. And also we would 
offer them a policy that had no deductible so that they knew 
what their costs were going in.
    Mr. Neugebauer. How many board members is the Bank supposed 
to have?
    Mr. Lambright. There are five.
    Mr. Neugebauer. And how many do you currently have?
    Mr. Lambright. Three.
    Mr. Neugebauer. Yes, what is the progress on that?
    Mr. Lambright. Well, these are Senate confirmed, 
presidentially-appointed positions, and so filling those spots 
is outside of my control. But we are eagerly awaiting 
nominations and confirmations to have a full complement of the 
board.
    Mr. Neugebauer. Have the nominations been made and we are 
waiting on the Senate or we are still waiting on the 
nominations?
    Mr. Lambright. We are still waiting on nominations.
    Mr. Neugebauer. Yes, and how about for the permanent 
position as far as the director?
    Mr. Lambright. That is a nomination we are waiting for as 
well.
    Mr. Neugebauer. Okay.
    Chairwoman Kelly. Mr. Neugebauer, you are out of time.
    Mr. Neugebauer. That is the story of my life. Thank you.
    Chairwoman Kelly. Sorry. We have a second panel so I am 
trying to keep everybody and--be fair and keep everybody on 
time. Mr. Cleaver.
    Mr.Cleaver. Thank you, Madam Chair. The Bank received a 
significant increase in the administrative costs from $55 
million to $78 million in 2000. Small business loans actually 
went down last year. Is that correct?
    Mr. Lambright. No, Congressman, the number of small 
business transactions, both in number of transactions and 
dollar terms, went up over last year.
    Mr.Cleaver. The difference in administrative cost, what 
kind--
    Mr. Lambright. To get to a $55 million administrative 
budget, you have to go all the way back to 2000 where there was 
a jump in the administrative resources given to the Bank. In 
the last three years our administrative budget has been fairly 
flat. We are at $73.2 million for Fiscal Year 2006 
administrative budget.
    Mr.Cleaver. What does that $73 million buy?
    Mr. Lambright. Largely, it buys compensation and benefits 
for our 400 employees. It also pays rent. It pays for 
technology. It also pays for other miscellaneous things like 
travel.
    Mr.Cleaver. The increase was to improve the technology.
    Mr. Lambright. My understanding of the spike back in 2000 
was that it was in anticipation of our growing technology 
needs; that is correct.
    Mr.Cleaver. Do you have an idea of what the new 
technology--
    Mr. Lambright. Oh, certainly, we are developing a business 
automation platform. Back in 2000, we offered no services 
online. Today, already we offer subscriptions, claim filing, 
letters of interest, and forms online. But the bulk of that 
money was going into a contract for an online application 
service that has been developed. We are in the testing phases 
of it now, and we will roll it out in the first part of next 
year.
    Mr.Cleaver. I have no further questions.
    Chairwoman Kelly. Thank you, Mr. Cleaver. Mr. Price or Mr. 
McHenry, I didn't see which one came in first. Mr. McHenry.
    Mr. McHenry. Thank you, thank you. Actually, to follow up 
on Mr. Cleaver's questions, it is very much in the same line 
and same vein that I was asking. It turns out your budget 
actually is increased by close to $20 million. I think Fiscal 
Year 2000 was $55 million and this year it is what, $73 
million?
    Mr. Lambright. Right.
    Mr. McHenry. So that is a pretty significant increase. What 
has that gone to, that basically $18 million, what has that 
gone to?
    Mr. Lambright. Well, it is increased over five years. The 
initial spike was really between 2000 and 2001 to make funds 
available for increasing technology where we basically have 
been moving from having no technology to some technology. And 
so this has been a multi-year process for us. But if you look 
at the $73.2 million administrative budget, 66 percent of that 
just goes straight into compensation and benefits; maybe a 
little bit over 10 percent goes into the technology aspect. And 
we really are left with a discretionary pool of funds that is 
less than 10 percent of the overall budget.
    Mr. McHenry. Well, it is a 30 percent jump in your budget, 
and you are just sort of saying it is going to additional 
needs. Can you be more specific? You talked about technology, 
but what are you doing?
    Mr. Lambright. The technology project and the way we are 
deploying those discretionary funds is really looking towards 
serving our customers better, towards reaching out to--
    Mr. McHenry. I know you are. It is like saying I am a 
Member of Congress; I am here to serve. Well, what do you do 
with your day? It is a very different question.
    Mr. Lambright. Right.
    Mr. McHenry. That is sort of a broad answer. It is a nice 
thing to say, but what do you do, that is what I am asking, 
with that money?
    Mr. Lambright. As I was saying, 66 percent of it goes to 
compensation and benefits. We pay rent; we pay for technology.
    Mr. McHenry. So your budget increased 30 percent. Did your 
salaries increase 30 percent?
    Mr. Lambright. No, they have been increased--
    Mr. McHenry. By that line of thinking, the salaries would 
go up 30 percent. I am asking you what are you doing with the 
technology money?
    Mr. Lambright. It has gone into a multi-year technology 
program that we are unveiling in phases, the largest chunk of 
that which will be early next year. It is an online application 
system so that our customers, particularly our small business 
customers, can both apply online and then once their 
application is submitted, track the status of their 
applications. This system has many goals. One is to help our 
small businesses apply and then know where their deals are in 
the underwriting process to increase transparency. But also it 
will help us with data quality and provide us a more flexible 
platform going forward.
    Mr. McHenry. Okay. It seems like you have this interest in 
giving the most generic and basic answers. I don't know what 
your prepping was for this hearing, but it is sort of 
bothersome when I ask a specific question, you give me a 
general answer. We are here to provide loans. Give me a break. 
We are asking specifics because this is a reauthorization, and 
we want to know if your existence is necessary.
    Mr. Lambright. I understand.
    Mr. McHenry. And when you are giving me general answers, it 
is frustrating. So I don't know if I should even go on with any 
questions because you just give general answers. It is not 
helpful to me on whether or not you deserve to exist. So let me 
try again. Okay? Ninety-five billion dollars worth of loans, 
that is what you have over this authorization. You have given 
out what, $50 billion so far?
    Mr. Lambright. Well, we have an authorized limit of how 
much exposure we can have of $95 billion. We have a current 
exposure of $62 billion.
    Mr. McHenry. Sixty-two. How does that break down small 
business to large business, large companies to small companies?
    Mr. Lambright. Well, about 80 percent, in ball park 
numbers, about 80 percent of the transactions is for small 
business, but less than 20 percent of that money.
    Mr. McHenry. Eighty percent of the transactions, 20 percent 
of the money?
    Mr. Lambright. The numbers of deals would be 80 percent go 
directly to small businesses. Twenty percent of the 
transactions go directly to large businesses. But it is 
basically the inverse of that when you talk about money because 
the larger deals involve more funds.
    Mr. McHenry. Okay, that is actually a good specific answer 
and a very nice way for me to end. Thank you.
    Mr. Lambright. Thank you.
    Mr. McHenry. And I have got two other questions, Madam 
Chair, if I could submit for the record and if they would be so 
good to provide answers.
    Mr. Lambright. We would be happy to.
    Mr. McHenry. Sort of in the specific range of things, that 
would be wonderful.
    Mr. Lambright. Fair enough.
    Mr. McHenry. Thank you.
    Chairwoman Kelly. Thank you very much. Mr. Scott, are you 
ready with questions?
    Mr. Scott. Yes, I would. Thank you very much, Madam Chair 
Lady. Let me just ask you, sir, the Advisory Committee on sub-
Saharan Africa makes recommendations to the Bank. How are these 
recommendations received by the Bank? Is there a formal process 
for these recommendations to be incorporated into Bank policy?
    Mr. Lambright. Our sub-Saharan Africa Advisory Committee 
meets several times a year. It has roughly a dozen folks from 
outside the Bank who have experience in these markets to help 
us understand the risks and opportunities in sub-Saharan 
Africa. And it is a valuable source of advice to us. At the end 
of their term, an annual term, they do provide a list of 
recommendations to us. This is digested by senior management. I 
have a meeting next week with the chairman of the sub-Saharan 
Africa Advisory Committee to go over his recommendations from 
the current year. Depending on the nature and the length of the 
list, many of these recommendations do get adopted, and some do 
not.
    Mr. Scott. Another question, I am going to ask you a couple 
of questions about small businesses. I have a number of small 
businesses, as most of us do, but I have an inordinate amount 
in my suburban Atlanta district. There have been complaints 
from the small business community that the relationship manager 
program is not working well for them. Are you aware of that?
    Mr. Lambright. I am aware of those complaints.
    Mr. Scott. Do the relationship managers specialize in small 
business transactions? And is the Bank's decision-making 
process sufficiently transparent?
    Mr. Lambright. Well, on the transparency question, it is 
something that we are working hard to improve. We have done 
over 3,000 transactions last year, so we are getting a lot 
done. Those are more deals than the year before and the year 
before that. So with every year we are doing more with the 
resources we have. But I am aware that there are some 
frustrated customers with regard to transparency, and this is 
an area that we take very seriously. So we have taken steps to 
put our policies and standards up on our website so people know 
what is expected by us. We are also developing an online 
application and processing system so that our small business 
customers know where their application stands in the approval 
process.
    Mr. Scott. Let me ask you this? Why does the Bank not have 
an allocation in its administrative budget for small business 
activities?
    Mr. Lambright. Well, because a lot of our programs--a 
number of our programs are largely used by small businesses, 
but they are also used by medium or larger companies. And so we 
need to staff those operating units to handle all the 
applications that come in, even if that particular product is 
used 80 percent of the time by small businesses.
    Mr. Scott. In your position, would you not advocate for 
some resources being added to your budget, administrative 
budget, to be of greater assistance to small businesses, 
especially in view of the light of the complaints from small 
businesses?
    Mr. Lambright. Well, Congressman, I was pleased to hear 
that the conferees have adopted an appropriations package for 
2006 for us that gives us our full administrative request, so I 
think we do have the resources going forward, at least in the 
next fiscal year, to meet our outreach goals. But I do agree 
with you about dedicating resources to small business. We 
recently have repositioned 40 of our employees to work under a 
new vice president of small business solely on the question of 
outreach to small businesses to help them increase awareness of 
our products and develop applications that we can support.
    Mr. Scott. If I might shift for a moment to small lenders. 
Does the Bank need to expand its relationship with small 
lenders? I have a number of small lenders in my district. Do 
the large national and international banks have sufficient 
understanding of small business lending issues?
    Mr. Lambright. On small lenders, we are trying to work with 
more of them. We have signed an agreement with the National 
Credit Union Administration to try to work with community 
lenders. We are trying to spend more resources training the 
staff of small banks. The problem is there are not that many 
banks right now that are active in overseas trade finance and 
so we are trying to work with those that are interested to make 
sure they understand that we are available.
    Mr. Scott. Do you find from your information that these 
smaller lenders are better at financing larger operations than 
small business activities?
    Mr. Lambright. Could you repeat the question?
    Mr. Scott. Do you find that these lenders are better at 
financing larger operations than they are with smaller business 
activities?
    Mr. Lambright. Well, I think your larger companies are 
going to have lender relationships that might make it easier 
for them to get finance for their exports. So that is why we 
are devoting so much of our energy to working with the small 
businesses and the lenders that work with those small 
businesses. A lot of the small business that we get comes in 
through brokers who know the Bank's criteria but also have 
relationships with a lot of small businesses. So that is 
something we are working hard on.
    Chairwoman Kelly. Thank you very much, Mr. Scott. Since Mr. 
Scott brought up the issue of countries that are cooperating 
with us, does the Bank receive data from Treasury on which 
countries are cooperating with money laundering and terror 
financing?
    Mr. Lambright. We do; we take that issue very seriously. We 
have been working with our banking partners to set guidelines 
for what we call "Know-Your-Customer" standards. We check 
participants in all of our transactions against lists kept by 
other Government agencies to make sure that we know who we are 
dealing with and that we are sensitive to the issues you have 
raised.
    Chairwoman Kelly. Okay, thank you. Mr. Price.
    Mr. Price. Thank you, Madam Chair. I want to thank you for 
this hearing, and I want to thank you, Mr. Lambright, for 
coming and being with us today. I want to follow up very 
quickly on Congressman Neugebauer's question about the 
vacancies on the board; five positions on the board, three 
members now, two vacancies. How long have those two spots been 
vacant?
    Mr. Lambright. Well, a technical correction to the 
Congressman is actually three vacancies because I am serving in 
only an acting capacity. So there are three nominations 
forthcoming that would require Senate confirmation, and all 
three of those expired on the same day on July 20 of this year.
    Mr. Price. Of this year?
    Mr. Lambright. Yes, a few months ago.
    Mr. Price. Thank you. I want to switch gears to the issue 
of China, which, as Congressman Crowley brought up, some 
politically sensitive areas. China is increasingly becoming a 
controversial issue I suspect for Ex-Im, and I am interested in 
your thoughts on what the role of the Bank is and should be 
playing in the trading of goods with China?
    Mr. Lambright. China is a market that gets a lot of 
attention. There is a large trade deficit with China and so 
when we do support exports, we are helping reduce that trade 
deficit. But there hasn't been a lot of activity in recent 
years between Ex-Im Bank and China because China has developed 
a highly liquid banking system that has been providing 
liquidity to borrowers in China for the last few years, and we 
haven't been needed as much. So we find where we have been 
needed in China has really been the much larger transactions.
    Mr. Price. Does the Bank support the export of nuclear 
power plant technology to China?
    Mr. Lambright. We have in the past and there is--
    Mr. Price. Tell me how that decision was--how you arrived 
at that decision.
    Mr. Lambright. Well, the existing financings in this sector 
in China were back in the 90s. We have a preliminary commitment 
for a future transaction. And so the process that we are going 
through on that transaction is to work very closely with other 
Government agencies to make sure that all export controls and 
licenses and concerns about nuclear power in China have been 
addressed before we would finance the project. We would also 
look at credit issues of who we are dealing with and 
environmental issues before we would finance the loan, but we 
do not yet--the Chinese have not yet selected whether they will 
be choosing American exports or French or Russian exports on 
this particular project.
    Mr. Price. Do you believe there is a role or is it 
appropriate for Congress to have a role in that decision-making 
process for sensitive issues like that?
    Mr. Lambright. Well, both chambers did take it up during 
our appropriations process and so we were watching very closely 
and listening to the statements made by Members, and we will 
work closely with interested Members if and when we take that 
case up.
    Mr. Price. But you can take action without Congress 
opining?
    Mr. Lambright. Well, a transaction of that size after a 
board action, we would give the Congress a notification period 
where we would then see what kind of response we got back 
before it became final.
    Mr. Price. Thanks. I want to shift to the Patriot Act and 
the relevant portions of that to the Bank and how you comply 
and the difficulties, if any, that are present.
    Mr. Lambright. Sure. Many provisions do not apply to the 
Bank since we are not a deposit holding bank. But some 
provisions do apply, those relating to information retention or 
sharing information with other Government agencies in certain 
circumstances. And my understanding right now is that none of 
our practices are out of compliance with the Patriot Act and so 
we are looking very closely at those provisions that do apply 
to us.
    Mr. Price. And what provisions are those that do apply to 
the Bank?
    Mr. Lambright. The provisions requiring certain information 
to be retained, to know your participants and transactions, we 
take that very seriously. There are also requirements that 
would apply to us in certain circumstances requiring the 
sharing of information with other Government agencies. I don't 
think we have been called upon to share that information, but 
we would comply if relevant.
    Mr. Price. Let me just ask one final question, if I may, 
about this concept of additionality that you talked about and 
how you determine whether or not you add something to the mix 
as it relates to assisting for exports, especially in the area 
of large corporations. It is unclear to me; we talk about small 
business and trying to help small business, but it is unclear 
to me what the Bank brings to the table for corporations that 
have significant resources and probably could do anything they 
wanted to do with or without the Bank?
    Mr. Lambright. Well, our focus when we make financings for 
larger transactions is really to the overseas buyer of American 
goods. And so while the U.S. firms benefit from being able to 
make that marginal export, we are really looking at the 
availability of financing to that borrower. And we step in 
when--in the larger cases oftentimes to match government-
supported foreign competition. So if a foreign government is 
offering attractive financing terms, we step in to make sure 
that that borrower is making a choice of product based on 
price, quality, and service, not on Government financing terms.
    Mr. Price. I see my time is up, Madam Chair. Thank you.
    Chairwoman Kelly. Thank you. Ms. Waters.
    Ms. Waters. Thank you very much, Madam Chairwoman. I am 
sorry I am late for the meeting. As you know, we have so much 
going on all at the same time. But I am delighted to be here 
and this is a subject matter that I am very much interested in, 
and I would like to ask Chairman Lambright the Ex-Im Bank's 
2002 reauthorization legislation directed the Bank to expand 
its activity sub-Saharan Africa. However, in spite of this 
directive, both the number and dollar value of Ex-Im Bank 
transactions in sub-Saharan Africa have gone down since 2002. 
Now in 2003, the Commission on Capital Flows to Africa, which 
was chaired by former Ex-Im Bank Chairman James Harman, made 
several recommendations for increasing capital flows to Africa 
by the Bank and other export credit agencies. Some of those 
recommendations included allowing 20 year repayment terms for 
African countries, raising the credit ceiling for local costs 
for African projects from 15 to 20 percent of export value, 
offering guarantees and loans in local currency and creating a 
pilot program to initiate aid for Africa. In addition to that, 
I would like you to respond to--I want to know if you support 
those recommendations. If so, have you taken any steps to 
implement them or have you done anything else, perhaps that I 
didn't mention, to increase the Bank's activity in Africa? And 
I am worried about the HIPC Initiative, even though it has been 
argued that the terms of the Heavily Indebted Poor Countries, 
the HIPC Initiative, which provides debt relief to the world's 
poorest countries, are constrained Ex-Im Bank activities in 
sub-Saharan Africa. I don't think so, and I don't see why it 
should be. I would like to know your opinion on that. I know 
that there is a one year moratorium on new lending to countries 
that have received debt relief but that should not interfere 
with the ability to expand activity there. So that is a lot, 
generally though the discussion about Africa, what are we 
doing?
    Mr. Lambright. I would be happy to discuss Africa 
generally, though I may not hit all of the issues you raise, 
Congresswoman. But we take our efforts to increase activity in 
sub-Saharan Africa very seriously. In the past 7 years, we have 
supported over $3 billion in U.S. exports to the region. In 
2005, we supported over $460 million in U.S. exports, which was 
up over 36 percent from the year before. In 2001, when I first 
came to the Bank, the amount of exports to sub-Saharan Africa 
was $85 million. Although I think you are correct in noting in 
2002 there was a big spike, and what I have noticed in our sub-
Saharan Africa numbers is that it is not a smooth line on a 
chart. It bounces up and down depending on whether we 
participate in some large transactions. But what our goal 
really is is to increase what I would call our bread and butter 
transactions, the small and medium-size transactions that we 
can do every day to the region. And so we spend a great deal of 
time trying to work with U.S. companies exploring the region 
and also traveling there to educate borrowers.
    You mentioned the report involving our former chairman, Mr. 
Harman. That report does have a lot of ideas in it. I think 
some of them have a lot of merit. I think some of them probably 
go beyond what the Bank can do without working with other 
agencies or with this body in our re-chartering or at the OECD. 
There are only certain terms that we are allowed to provide 
based on our participation in the OECD. But we are working to 
do as much as we can in Africa. We are open in 39 different 
countries in sub-Saharan Africa. We did deals in about 20 of 
them, maybe 18 of them this year. And we are working to do as 
much as we can.
    You mentioned the HIPC concerns and the moratorium on new 
lending. Both of those are limits on lending activity to 
governments or qualifying countries, and a lot of those do 
happen to be in sub-Saharan Africa. But it is important to note 
that most of our business, interestingly, in sub-Saharan Africa 
is to private sector borrowers. And neither the HIPC rules nor 
the moratorium would prohibit us from doing lending to the 
private sector, just to the government. And so we are able to 
continue doing a lot of business even in the countries affected 
by the things you mentioned.
    Ms. Waters. Thank you very much. And I would like to, not 
now because we certainly don't have time, I would like to 
further with you about what you are doing to educate American 
businesses about these opportunities. So I am going to call 
your office and try to set up some time for us to get together 
and talk.
    Mr. Lambright. I look forward to it.
    Ms. Waters. Thank you very much.
    Chairwoman Kelly. Thank you very much, Ms. Waters. The 
Chair notes that some members may have additional questions for 
this panel, which they may wish to submit in writing. So 
without objection, the hearing record will remain open for 30 
days for members to submit written questions to these witness 
and to place their responses in the record. With that, this 
panel--I want to excuse this panel, but first I would like to 
ask if Mr. Lambright, you or members of your staff would be 
willing to stay in this room to hear the testimony of the 
people on the second panel. I think that would be very 
important for all of us in this room.
    Mr. Lambright. I agree, and I think we have arranged for a 
number of our staff, senior staff in particular, to be here and 
listen.
    Chairwoman Kelly. Good. Thank you very much. We appreciate 
your being with us this morning, and we thank you. This panel 
is excused.
    Mr. Lambright. Thank you.
    Chairwoman Kelly. All right, I am happy now to introduce 
our second panel of witnesses. The first is Mr. Joseph Watters, 
representing the Small Business Exporters Association of the 
United States. Mr. Watters is currently the managing director 
of international sales for Hoffman International, Inc. in New 
Jersey. Mr. Watters was also the president of Hoffman 
International for 24 years until 2002. He is a former chairman 
of the Small Business Exporters Association, former board 
member of the National Small Business Association, and former 
member of the sub-Sahara Advisory Committee for the U.S. Export 
Bank.
    Next, we have Mr. Hayman, who is appearing today and 
testifying on behalf of the Banker's Association for Finance 
and Trade. Mr. Hayman is a senior vice president at the PNC 
Bank in Philadelphia where he manages international banking and 
global treasury management, which includes trade services, 
trade finance, international correspondent banking, and 
international cash management.
    And now I know that my colleague, Judy Biggert, would like 
to introduce our final witness. Mrs. Biggert.
    Mrs. Biggert. Thank you, Madam Chairman. I am happy to 
welcome Mr. John Sabroske, who is the director of Global Trade 
Finance for John Deere Credit. John Deere is headquartered in 
Molene, Illinois. Prior to joining John Deere Credit, Mr. 
Sabroske managed the trade banking group responsible for both 
export finance, as well as import finance and the associated 
operational areas.
    He currently serves on the International Committee of the 
Equipping Leasing Association. Mr. Sabroske has had more than 
20 years experience in trade finance. He received his MBA from 
the University of Chicago, as well as BA with distinction from 
Purdue University. Welcome.
    I yield back.
    Chairwoman Kelly. Thank you so much. We will begin with you 
Mr. Watters.

 STATEMENT OF JOSEPH WATTERS, DIRECTOR OF INTERNATIONAL SALES, 
 HOFFMAN INTERNATIONAL, ON BEHALF OF SMALL BUSINESS EXPORTERS 
                          ASSOCIATION

    Mr. Watters. Thank you. Chairwoman Kelly, members of the 
committee, thank you and thanks for the opportunity to be here 
at this meeting to testify this morning. You have already done 
the introduction, so I will skip that but I will reiterate that 
I am here before you today representing my company, Hoffman 
International, as well as the SBEA, Small Business Exporters 
Association of America.
    As a matter of background, Hoffman International is a 
distribution company employing some 70 employees. And we are 
representing major manufacturers of construction, earth moving 
and lifting equipment for the sale, rental, lease, and service 
of that equipment throughout New Jersey, New York City, Long 
Island, and eastern Pennsylvania.
    In addition to that activity, we have for the past 35 years 
operated an international group within our company. That group 
focuses exclusively on the global market place for the same 
sale of parts and new and used equipment. We target emerging 
markets around the globe. Our primary markets include Central 
and South America, Russia, and NIS countries, Egypt, together 
with a number of parts of Africa. Our export business is a 
vital part of our total overall business.
    SBA, for whom I served as chairman for 3 years, from 1999 
to 2002, represents its own group of several hundred active 
exporters, as well as over 22,000 members of the National Small 
Business Association, many of whom are involved in exporting.
    Our association has had a long and constructive 
relationship with Ex-Im Bank. Many of our members are frequent 
users of the Bank's products. And, I might add, assuring the 
continued vitality and smooth functioning of the Bank is the 
single strongest bond that connects the members of our 
association.
    Congress originally designed Ex-Im to be the lender of last 
resort for American exporters. Yet for us, as small and middle-
size enterprises, SMEs, the Bank is frequently the lender of 
only resort. Banks over the world fear foreign risk, and that 
is why every major industrial nation has an export credit 
agency comparable to Ex-Im Bank. Relatively few banks in the 
U.S. get past that fear of foreign risk to the point of 
understanding international trade finance. And of those few 
commercial banks that do, even fewer of them will assist SMEs 
with transactions of under $1 million. Without the guarantees 
and insurance that Ex-Im provides, virtually no commercial bank 
would underwrite small export transactions. So let me direct: 
Small businesses that export need the Ex-Im Bank.
    Today, financing plays an increasingly important role in 
export sales. This is particularly true for small companies 
like mine and those of other SBEA members whose foreign buyers 
need financing to afford to buy what we in America sell. And it 
is almost mandatory for buyers in developing countries. They 
have enormous need for everything our country sells, from the 
bulldozers that we sell for building their roads to medical and 
hygiene products for clinics and schools to typical consumer 
goods. They need to pay for these purchases over time, but more 
often than not their own banking systems cannot support either 
short or longer term financing. Small USA companies can play an 
important role in these markets, but we need more than a 
quality product and a salesman's smile. We need to provide the 
means for our customers to pay for these goods and services. In 
a word, we need financing. And for capital goods, like those we 
sell, we need 3 to 5-year medium term financing that meets a 
client's cash flow capabilities. If small business is indeed 
the engine of the U.S. economy, then our companies that export 
critically need an aggressive and effective Ex-Im Bank to keep 
that engine humming. Virtually every large company in the U.S. 
exports. Less than 10 percent of the small ones do. If we are 
serious about addressing the $50 billion a month trade deficit, 
we have to get more of our small companies out on the 
international playing field. That means we have to back them up 
with a dependable export finance program and make the process 
user friendly. So we at SBA keep a close watch on Ex-Im. We 
often make suggestions to the Ex-Im leadership for improvements 
in the Bank's operations.
    In that spirit, I would like to share with the subcommittee 
some recommendations that we have made to the Bank officials 
over the past year or two. Our recommendations fall into three 
categories. First, transparency. The Bank needs to better 
connect with its clients through greater openness about its 
guidelines and requirements and the status of processing of 
particular transactions. Customers should know, as they once 
did, which underwriters are assigned to a case. Then there 
should be a more open and honest dialogue between the 
underwriters and its customers. The Bank should quickly assess 
a potential transaction and just as quickly offer suggestions 
if they are needed.
    Chairwoman Kelly. Mr. Watters, I am sorry, but I am holding 
the committee to the 5 minute rule, and I am also hopeful that 
you can sum up from where you are. Your testimony is important 
to us and you know without objection your written testimony is 
a part of this record.
    Mr. Watters. One more minute I think I will be finished, 
Madam Chairman.
    Chairwoman Kelly. Go right ahead, sir.
    Mr. Watters. The second involves efficiency. Efficiency 
means rapid processing. The Bank seems to do quite well with 
short-term programs, but virtually all of our members find the 
transaction period entirely too long, much too long. Time is a 
critical commodity. If we don't move rapidly, we lose 
customers. A small company simply can't afford to nursemaid a 
transaction.
    We believe expanded partnering programs with commercial 
banks would also improve the Bank's efficiency. Ex-Im currently 
has a working capital guarantee program, which is enormously 
helpful to smaller companies. My company has one of those. How 
we would ever arrange our pre- and post-export financing 
without that program, I don't know. The program is largely 
handled by commercial banks using Ex-Im's delegated authority. 
We would like to see this type of delegated authority expanded 
to include medium-term products. SBA is doing this; OPIC has 
done this and had great success with it.
    Third, and our final topic is focus. Congress has mandated 
that 20 percent of Ex-Im's business must involve small business 
exporter transactions. This is a significant challenge for the 
Bank, but meeting or even exceeding it only adds more fuel and 
fire to the small business engine. What do we mean? We mean the 
establishment of a dedicated small business division at the 
Bank comparable to the highly successful at OPIC, one that 
answers directly to the Ex-Im board. It means having 
underwriters that work on nothing else but SME deals, and it 
means developing incentive programs for the employees.
    Chairwoman Kelly. Sir, I will give you a few seconds to sum 
up but then I really must ask you to please--
    Mr. Watters. I understand; I am sorry for going over time. 
I want to finish this one point. And it means developing 
incentive programs to better motivate Ex-Im employees to 
originate SME transactions, move them expeditiously through the 
Bank, and then reward those people who perform and do a good 
job.
    Chairwoman Kelly. Thank you very much.
    Mr. Watters. Thank you very much.
    [The prepared statement of Joseph Watters can be found on 
page 93 in the appendix.]
    Chairwoman Kelly. Mr. Hayman.

STATEMENT OF HARRY G. HAYMAN , SENIOR VICE PRESIDENT, PNC BANK 
OF N.A., ON BEHALF OF BANKERS ASSOCIATION FOR FINANCE AND TRADE

    Mr. Hayman. Thank you. I would like to thank the two 
subcommittees for holding this timely and important hearing on 
oversight of the U.S. Export-Import Bank. As mentioned, my name 
is Harry Hayman. I am in charge of international for PNC Bank, 
which is one of the largest supporters of small and medium-size 
business through financing with the Ex-Im Bank.
    I am speaking today as vice president of the Bankers 
Association for Finance and Trade, which is 150 banks and 
service providers, so virtually all of the banks that support 
medium-sized businesses on their exports. I have also served 
for the last 2 years as a member of Ex-Im Bank's advisory 
board, and we appreciate the opportunity to make some comments.
    Expansion of exports is a critical element for the U.S. 
economy and the U.S. Export-Import Bank plays an important role 
in supporting these exports. As we are all aware, the U.S. 
current account deficit now exceeds 6 percent of GDP. This is 
clearly not sustainable from either an economic or geopolitical 
standpoint and requires, among other actions, significant 
growth in U.S. exports.
    The Ex-Im Bank has made a number of positive and successful 
new initiatives in the past 2 years. Examples include the 
continued expansion of the City-State Partners Program and the 
initiation of the Environmental Exports Program. The staff of 
Ex-Im Bank should be congratulated for their work and progress 
in promoting effective and efficient programs for end users of 
the Bank's services.
    I am particularly pleased with Acting Chairman and 
President Jim Lambright's recognition that the next major 
effort needed is to improve Ex-Im Bank's transaction 
application approval process. This can be cumbersome for 
parties involved and, therefore, detrimental to U.S. exports. 
The focus should be on both consistent and transparent credit 
standards, improvements in the use of technology, and in my 
written remarks there are a number of comments I make on that 
subject.
    We look forward to working with Mr. Lambright and the Bank 
to streamline and improve this process. We do not believe there 
are any changes required to Ex-Im's charter at this time.
    An additional area that continues to require improvement is 
the way governmental entities cooperate in facilitating 
international business. Ex-Im is working on that. Mr. Lambright 
is working on that, but there is much to be done in that area 
to make the U.S. successful in exports.
    I was asked to comment on Ex-Im's Working Capital Guarantee 
Program, which the Congressman referred to earlier. This has 
been resolved. There is a new agreement in place between the 
banks and our exporting customers and Ex-Im Bank. It is 
satisfactory. I believe that we would stand by our statement 
that it will make things more difficult for some of the smaller 
banks. We have a program in place on the Bankers Association 
for Finance and Trade working with Ex-Im to work closely with 
the smaller banks, such as in the Congressman's district, to 
allow them to work closely with small business.
    Thank you.
    [The prepared statement of Harry G. Hayman can be found on 
page 76 in the appendix.]
    Chairwoman Kelly. Thank you very much, Mr. Hayman. Mr. 
Sabroske?

  STATEMENT OF JOHN D. SABROSKE, DIRECTOR, EXPORT CREDIT AND 
                TRADE FINANCE, JOHN DEERE CREDIT

    Mr. Sabroske. Thank you, Madam Chairman.
    Chairwoman Kelly. Mr. Sabroske, be sure you--
    Mr. Sabroske. Yes.
    Chairwoman Kelly.--yes, please. Thank you.
    Mr. Sabroske. Thank you, Madam Chairman and members of the 
subcommittee. I appreciate the opportunity to appear before you 
today to present our views on reauthorization of the Ex-Im Bank 
charter. John Deere has manufacturing operations in the U.S., 
as well as in 15 other countries. And our products are sold to 
consumers in more than 160 countries, virtually across the 
globe. Our financial services group, John Deere Credit, 
provides credit and other financial services to support John 
Deere equipment sales to customers both here in the U.S. and in 
global markets. I believe this gives us a unique perspective, 
both as an exporter and a lender, from which to comment with 
regard to the operations and value of the Ex-Im Bank.
    The Ex-Im Bank support for John Deere exports has grown 
from about $7.5 million in 2003 to $43.5 million in 2004 and to 
$64 million in 2005. So far for our Fiscal Year 2006, Ex-Im 
support for John Deere equipment sales as total $11.5 million.
    Over the past 3 years, the Ex-Im loan guarantees of $127 
million have supported about $143 million in export sales of 
John Deere equipment. Virtually all of these export sales were 
in the commercially and politically challenging former Soviet 
States of Russia, Kazakhstan, and Ukraine. Ex-Im's loan 
guarantees supported exports of John Deere combine harvesters, 
manufactured in east Molene, Illinois, tractors produced in 
Waterloo, Iowa, and cedars made in Valley City, North Dakota. 
Without Ex-Im's support, it is fair to say that much, if not 
all, of this business would have gone to non-U.S. based 
competitors.
    There is today a strong and growing demand in many parts of 
the world for more efficient productive technology and 
machinery made in the West. And there is strong and growing 
competition for this business from agricultural equipment 
manufacturers in Belgium, Canada, Finland, France, Germany, 
Italy, and other countries. Each of these manufacturers is 
aggressively backed by its own export credit agency. And 
because the demand for Western equipment is so strong, it is 
often the terms of credit and its timely approval that 
determine which manufacturer gets the sale.
    The financial risks of doing business in emerging markets 
means that without Government support of credit enhancement, 
the cost of credit to the customer would be prohibitive. So it 
is vitally important for us to have an aggressive and innovated 
Ex-Im Bank that enables us to compete against non-U.S. 
manufacturers. We view Ex-Im as a strategic partner in helping 
John Deere compete for this business.
    Regarding the Ex-Im Bank reauthorization, not only is ours 
an extremely competitive business but in emerging markets, 
especially those businesses in the constant state of change. 
Our customers operate in seasonal, relatively high risk 
commercial environments. They are increasingly demanding of 
suppliers to provide quality farm inputs at low cost and in an 
efficient and timely manner. As these markets continue to 
evolve, so too do our overseas competitors with the active 
support of their own export credit agencies. This means that 
Ex-Im products, policies, and procedures must continue to 
evolve to keep U.S. exporters ahead of customer demands and 
foreign competitors.
    In our experience, the Bank's procedures for documentation 
review and approval of applications have historically taken far 
longer than other ECAs. This creates obvious competitive 
pressures in our seasonal business. We have a saying that if we 
are 2 weeks late in delivering equipment, we are in reality 12 
months early. We have a unique business in that Mother Nature 
really sort of drives these deadlines. You may have only a 2-
week planting window and if you deliver a cedar a week after 
that or even at the end of that period of time, they are going 
to leave that equipment unused for another year. So we have 
extreme time pressures. Your reauthorization efforts should 
encourage more streamlined procedures for transaction approval.
    To stay competitive, we believe that the Bank must also be 
willing to assume greater risks through its lending practices. 
As stated before, emerging markets for U.S. exports are 
evolving and competitor ECAs have become more aggressive. We 
recognize that these markets are inherently more risky. If they 
weren't, the Bank's loan guarantees and other products wouldn't 
be necessary. And we fully recognize the necessity of the 
Bank's reasonable assurance of repayment obligation. However, 
the inflexible application of this standard in the face of 
changing market conditions for additional risk taking as both 
reasonable and prudent could work against U.S. exporters. We 
believe that Congress through the reauthorization process 
should work with the Bank to consider more aggressive standards 
for underwriting risks and extending the credit enhancements 
needed to develop these evolving markets for U.S. exports.
    Nor should policies that govern the Bank's lending 
practices become an undue barrier to U.S. exports. In working 
with Ex-Im, our objective is to reach a level playing field on 
financing so that we compete and win on product performance and 
quality. More flexibility in Ex-Im rules ranging from loan 
tenure to MARAD requirements can have a positive impact on 
achieving the Bank's overriding mission.
    In short, we encourage Congress and the Bank to continue to 
work together to develop a more agile and flexible institution 
that helps U.S. exporters compete better in the face of 
changing market conditions and customer expectations.
    John Deere appreciates the opportunity to share its views 
with the subcommittee, and we would be pleased to work with you 
to help build on the contributions the Ex-Im Bank makes to 
promote U.S. exports and U.S. jobs.
    Thanks very much.
    [The prepared statement of John D. Sabroske can be found on 
page 89 in the appendix.]
    Chairwoman Kelly. Thank you, Mr. Sabroske. I am going to 
start the questioning with Mr. Watters. You testified regarding 
the importance of having a new vice president of small business 
report directly to the board of directors. If it is required 
that one-fifth of the loans that Ex-Im Bank does go to small 
businesses, do you think that we should also require at least 
one-fifth of the Ex-Im Bank board of directors represent small 
business exporters?
    Mr. Watters. Well, at the moment, I believe one of the 
directors of the Ex-Im Bank has the responsibility of small 
business loans. I am not able to identify that director now, 
but I think there is a designation for one of the five 
directors to be responsible for small loan activities.
    Chairwoman Kelly. Well, since we heard earlier that there 
are only three out of the five there, is it possible that you 
or someone, perhaps you have staff who are here, who might be 
able to help us with this answer, does there exist currently a 
small business person whose charge it is to handle--a person on 
the board of directors whose charge it is to handle the small 
business loans? Anybody here?
    Mr. Watters. I believe surely the answer to that is yes, 
there is one.
    Chairwoman Kelly. Currently of the three?
    Mr. Watters. No, there is a chair that is filled by one of 
the directors who has that responsibility. I cannot answer 
whether or not it is filled at this moment.
    Chairwoman Kelly. All right, well, that is good to know. 
Perhaps we can get some information from the Ex-Im Bank on 
that.
    Mr. Sabroske, many of the Ex-Im exporters sell agriculture 
equipment and implements. You talked about the seasonal nature.
    Mr. Sabroske. Right.
    Chairwoman Kelly. I want to know how important it is to you 
all to have a loan officer or a relationship manager or someone 
like that that understands the seasonal nature of exporting 
agricultural equipment. And if that is important, should we 
make sure that someone has that chair on the board of 
directors?
    Mr. Sabroske. For us it is absolutely vital that we have 
what I would consider a relationship manager for our business. 
We spend a lot of time with Ex-Im Bank, communicating with Ex-
Im Bank, both in person and on the phone. I travel here 
frequently. People on my staff travel here from overseas to 
meet with Ex-Im Bank senior management. We are I would say in 
daily phone contact, touching various parts of the 
organization. The seasonality issue is very real, and we have I 
think done a good job, I hope we have done a good job, in 
explaining the implications of that. Once you back up the time, 
you have to have the equipment in the field to where we have to 
make a production decision, and when we need to know whether we 
are getting the support or not from Ex-Im Bank for a particular 
transaction, we can lay that all out in a very clear timeline. 
So for us it is critical.
    Chairwoman Kelly. And would you feel that--my question was 
actually also what about our designating, making sure that at 
least one chair is occupied by somebody who has that seasonal 
sensitivity and knowledge?
    Mr. Sabroske. I think it would be extremely helpful. That 
would go a long way towards I believe streamlining the approval 
process within the Bank for situations like this.
    Chairwoman Kelly. I want to go to a question that I asked 
earlier about the relationship managers working with 
competitors. Is that an important issue to you, to have someone 
who is working directly with you and not with competitors?
    Mr. Sabroske. Oh, I would not be comfortable with having a 
relationship manager that was working, assigned to us and also 
to one of our domestic competitors. That would be a tremendous 
potential conflict there, yes.
    Chairwoman Kelly. Thank you. Mr. Hayman, do you have 
anything you would want to add?
    Mr. Hayman. No. On that subject, no.
    Chairwoman Kelly. All right. Thank you; we turn now to Mrs. 
Biggert.
    Mrs. Biggert. Thank you. Mr. Hayman, how would you suggest 
that Ex-Im Bank improve their inter-agency cooperation between 
the Department of Commerce and State and the Overseas Private 
Investment Corporation, the Trade and Development Agency, and 
the Small Business Administration?
    Mr. Hayman. I think that one of the things that we notice 
as a bank with many middle-sized customers is that there are a 
number of people and agencies, both private sector and 
Government sector, trying to promote U.S. exports. We would 
say--including banks, so we would say it hasn't worked as well 
as it should, and we all bear responsibility for that. But if 
all of those resources could be leveraged, then it would 
certainly be a much more effective program. So, for example, an 
inter-agency group that we know that the Commerce Department is 
out calling on this sector and they have a goal to create this 
many export transactions. And over here it is U.S. Chamber of 
Commerce through their own financial resources have a group 
doing the same thing and have it more organized.
    Mrs. Biggert. So you are suggesting that there should be an 
inter-agency council?
    Mr. Hayman. Right, yes.
    Mrs. Biggert. That would make more cooperation. Why not 
include the Foreign Commercial Service?
    Mr. Hayman. Absolutely. They can be very helpful in a 
number of ways.
    Mrs. Biggert. Okay, thank you. Mr. Watters, what kind of 
communication goes on between your small business and the Bank 
throughout the application process?
    Mr. Watters. Representative Biggert, our company works 
generally through banks similar to Mr. Hayman's in which our 
applications are completed and submitted by our banking 
relationship directly to Ex-Im. And our communication, 
therefore, with Ex-Im is generally through our bank.
    Mrs. Biggert. So you would know with that process whether 
sometimes you might withdraw it because it is not going to be 
accepted or know how to make other points in the application? 
Is there communication through the bank for that?
    Mr. Watters. Yes, we are generally communicating with our 
bank to determine the status of a particular application that 
is moving through the Ex-Im Bank. There is some frustration in 
that, to find out, and that is why I commented in my remarks 
that some more openness in terms of being able to determine 
exactly where a particular application stands is very, very 
important because you have a customer on the other end who is 
vitally interested to know, okay, how am I doing; how is my 
loan coming; is it moving along or not? So it is important for 
us to know that, so we continue to communicate with our 
customers throughout the world.
    Mrs. Biggert. Thank you. Then, Mr. Sabroske, what would you 
say have been some of the most helpful tools in having such a 
large increase from $7.5 million to $64 million in 3 years in 
loans that you obtained? How did you do that; I guess, what are 
the tools?
    Mr. Sabroske. Yes, I would say we work very closely with 
Ex-Im Bank with our relationship manager first off, but 
actually the origin of that business generation came from 
somebody in my group that is stationed over in Europe that has 
the responsibility for that market and has been working 
tirelessly to develop and structure transactions. But we have 
involved our relationship manager in Ex-Im Bank in every step 
of the way in expanding that business. The specific products, 
the credit guarantee facilities for our purposes are probably 
the most efficient way to handle this increased business from 
an administrative standpoint. It is much less burdensome in one 
up transactions. That is getting fairly technical here. But we 
have been working hard with Ex-Im Bank to expand that business. 
We just sort of re-dedicated ourselves to that market within 
the past 3 years and with obvious success. And we couldn't have 
done it; we absolutely could not have done it without Ex-Im 
Bank's support.
    Mrs. Biggert. Would you say that you were able to create or 
save any jobs in the United States because of the sales 
generated from the transactions supported by Ex-Im Bank?
    Mr. Sabroske. I have some information on that in terms of 
exports. Waterloo Works, for example, says about one in every 
four tractors that comes off their line, that is 25 percent, is 
exported. Now not all of those are going to the CIS region and 
not all are supported by Ex-Im Bank. But of the numbers I gave 
you, in terms of business that we have booked in the past 2 to 
3 years, those are all transactions that would not have 
happened without sales and financing. I can't tell you how many 
jobs that affected directly; I don't have that information, but 
that is a significant amount of business.
    Mrs. Biggert. Right, thank you very much. I yield back.
    Chairwoman Kelly. Thank you. Ms. Waters.
    Ms. Waters. Thank you very much, Madam Chairwoman. I would 
like to talk about small business. Ex-Im is required to 
allocate 20 percent of its annual lending to small businesses, 
measured in dollar terms. The reauthorization also called on 
the Bank to increase its transactions with women- and minority-
owned businesses and with very small businesses, those with 
fewer than 100 employees. However, the legislation I am told 
did not establish a binding threshold for transactions in these 
areas. The Bank has failed to meet its 20 percent requirement 
for small businesses in each of the 3 years since the 
reauthorization. What, if anything, are you who are part of the 
advisory committee?
    Mr. Hayman. I was a part of the advisory committee until a 
couple of weeks ago, so the last 2 years I was part of the 
advisory board of the bank, yes.
    Ms. Waters. Anybody here on the advisory committee still?
    Mr. Watters. No, ma'am, I was on the Advisory Committee on 
Africa, but I terminated that about a year ago.
    Ms. Waters. What about you, sir?
    Mr. Sabroske. No, I am not. A colleague of mine was 
previously on the advisory committee.
    Ms. Waters. I see. Well, what do you know about--well, what 
are your recommendations having served for what can be done to 
increase small business participation? It appears that the Bank 
works well when it is working with the large banks and large 
businesses but that not many small banks are involved. Is that 
true? And could this increase, the participation of small 
businesses? Anybody?
    Mr. Watters. Well, I would respond, first of all, the Small 
Business Exporters Association, as well as my company, we are 
delighted to see the action that President Lambright has taken 
by establishing the small business unit. We would like to maybe 
move it up a level, frankly, so it is more institutionalized 
and have it report directly to the board of directors. I think 
that would bring a greater focus on developing that 20 percent 
or even higher, frankly. I think that would work well, and I 
think what he has done has certainly put an emphasis on further 
developing small business transactions. While we like to see it 
move up a level, we are delighted with what he has taken. And 
we are very interested to see what the results will be as we 
move forward. That is certainly I think a major step on the 
part of Ex-Im to cure this or to help them achieve their 
mandated 20 percent.
    Ms. Waters. Anyone else? On the 20 percent, how can we get 
there?
    Mr. Hayman. Well, I think--I totally agree with that; I 
think Ex-Im is making its effort. We certainly would support 
more interagency cooperation as we were talking about and 
leverage all the resources that could be leveraged to promote 
exports, which would then flow to Ex-Im Bank and allow them to 
achieve their objective. I think clearly Chairman Lambright, 
John McAdams, Ken Tinsley, the new management group at Ex-Im 
Bank, will work very hard to make the process of underwriting 
credits, getting them approved more quickly improved because 
that is important to small business. We need those transactions 
to move through more quickly. So that combination of things 
certainly has the potential to pass the 20 percent mark.
    Ms. Waters. What about how do you get women businesses 
involved?
    Mr. Hayman. I think there has been some good progress made, 
as Chairman Lambright mentioned. I think there is a whole 
network, mostly Department of Commerce; SBA has a strong 
program. There is a lot being done. But as I was saying 
earlier, if you had a more interagency and private sector group 
where you could say these three groups are going to give huge 
focus on minority or women owned businesses and here are the 
targets that they are going to have, then it makes it all--
    Ms. Waters. Were there any women on the advisory committee 
when you served?
    Mr. Hayman. Quite a few.
    Ms. Waters. Were there any minorities when you served?
    Mr. Hayman. Yes, Lieutenant Governor Steele.
    Ms. Waters. Beg your pardon?
    Mr. Hayman. Yes, Lieutenant Governor Steele, for example.
    Ms. Waters. How big is the advisory committee?
    Mr. Hayman. I am sorry?
    Ms. Waters. How big is that committee?
    Mr. Hayman. I think there were nine, and I think five would 
have been minority or female.
    Mr. Watters. About the same representative orders, I was on 
the subcommittee for the Africa Advisory Committee on which 
there were a number of female members and from minority groups, 
absolutely.
    Ms. Waters. Thank you very much.
    Chairwoman Kelly. Thank you.
    Ms. Waters. I yield back.
    Chairwoman Kelly. Mr. Manzullo.
    Mr. Manzullo. Thank you. Nothing runs like a Deere; I have 
got two of them.
    Mr. Sabroske. Thank you.
    Mr. Manzullo. And our congressional district has over $100 
million presence of John Deere in it and really appreciate the 
quality green that comes out of mowing. As I am going through 
the testimony here, a little bit of institutional history, I 
believe until the 2002 reorganization of Ex-Im, there was I 
believe a person who was a senior vice president that reported 
directly to the president and that person was in charge of 
small businesses. And I took over the chairmanship of the Small 
Business Committee 4 years ago and prior to that I chaired a 
subcommittee. And we have had I think half a dozen hearings on 
Ex-Im. And ever since that reorganization, Ex-Im has just 
fallen through the floor. Any comments on that, Mr. Watters, 
Mr. Hayman?
    Mr. Watters. Representative Manzullo, when you say ``fallen 
through the floor,'' are you suggesting that Ex-Im is failing 
in its efforts to achieve the 20 percent?
    Mr. Manzullo. I am talking in terms of transparency, 
accountability, response. You know I am frustrated today.
    Mr. Watters. Well, I can sympathize with you, sir, and I 
will tell you that as a small business we also get frustrated 
on the time it takes to process a deal through the Ex-Im Bank. 
That is why we are so I think pleased with some of the 
decisions that Mr. Lambright and his staff have made, not only 
to form this special committee for small business, this group 
but also to streamline the processing. That is the most 
difficult challenge for small business to tolerate with respect 
to processing an Ex-Im transaction. We just can't afford to 
nursemaid these transactions.
    Mr. Manzullo. I understand. The problem is that is all we 
have heard is promises and it gets worse. And I tried to hold 
the Ex-Im Bank accountable at a hearing that we held last April 
and charged the president, and obviously Mr. Lambright was 
aware of the situation, to personally look at the documents. 
They just took it and shoved it right in the face of a 
committee chairman. Apparently no one is in charge over there. 
The nature of the answers that we got from Mr. Lambright, he 
didn't personally look at the file. So I am going to have to 
hold a hearing the week of December 5th again. That will be 
about my sixth or seventh hearing on Ex-Im Bank because they 
just don't seem to get it with regard to small businesses. And 
this time I am going to put them under oath because I am just 
tired of this organization continuing with the promises.
    Chairwoman Kelly. If the gentleman will yield?
    Mr. Manzullo. Of course.
    Chairwoman Kelly. Mr. Manzullo, do you want to make that a 
joint hearing?
    Mr. Manzullo. Absolutely, absolutely. We are going to do 
that. One of the things that I had noticed, oh, by the way, I 
am looking for a used Gator, okay, a four by six. One of the 
things I noticed on the testimony, Mr. Hayman, on page--was 
your recommendations, on page 3, where it says the five 
recommendations that you make there.
    Mr. Hayman. Yes.
    Mr. Manzullo. And the first one is enhanced training of Ex-
Im staff. You have the same problems we do.
    Mr. Hayman. I think we all have the same problem with 
banks, but this is certainly, if you look at the process of Ex-
Im, and I think that all of the gentlemen are aware of the 
subject, clearly creating a more experienced, knowledgeable 
group of underwriters would help address the issues that have 
been mentioned.
    Mr. Manzullo. Do you deal with OPIC also?
    Mr. Hayman. Yes.
    Mr. Manzullo. Have you had different experience with OPIC 
in terms of facilitating those loans?
    Mr. Hayman. I think it is pretty comparable. There are some 
easy ones that OPIC will move more quickly. The more difficult 
ones--the volume at OPIC isn't the same as Ex-Im. Ex-Im has a 
lot of transactions going through where OPIC is more crafting a 
transaction.
    Mr. Manzullo. I don't know if anybody here could be able to 
answer this question with regard to the dealer finance 
initiative. Any of you familiar with that?
    Mr. Sabroske. Yes, we have had some limited experience with 
that. Both applications were turned down which we thought were 
actually reasonable bets from a credit standpoint. So I think 
it has a tremendous amount of potential.
    Mr. Manzullo. It is another failure by Ex-Im. If they can 
turn down John Deere, just think what they are doing to the 
small businesspeople.
    Mr. Sabroske. The two instances were in Central America. 
These were not particularly large dealers, but they were well 
established, had a long term history, we felt. We don't own the 
dealers. These are independent dealers, but they are exclusive 
dealers and we have had an extensive history with these 
entities, and we felt that they were fair bets.
    Mr. Manzullo. Mr. Hayman, did you have a comment on that?
    Mr. Hayman. The dealer finance program was wildly 
successfully or very successful in the 1970s and 1980s, so this 
is bringing that program back. We have not taken our first 
transaction in yet, but we are about to. So we will see what 
the experience is on that. But it is a good program, and we 
really think it would promote what we are trying to accomplish 
here.
    Mr. Manzullo. Okay, appreciate that very much.
    Chairwoman Kelly. Mr. Manzullo, thank you very much.
    Mr. Manzullo. Thank you, Ms. Kelly.
    Chairwoman Kelly. The Chair notes that some members may 
have additional questions for the panel, which they may wish to 
submit in writing. So without objection, the hearing record 
will remain open for 30 days for members to submit written 
questions to these witnesses and to place their responses in 
the record.
     I want to thank my colleagues, Chairman Pryce, and Vice 
Chairman Biggert, and Chairman Manzullo and all of the others 
of my colleagues who have been here today. This has been an 
important informational hearing for all of us. And I especially 
want to thank all you gentlemen on the panel for sharing time 
with us this morning. With that, this hearing is adjourned.
    [Whereupon, at 12:10 p.m., the joint subcommittees were 
adjourned.]


                            A P P E N D I X



                           November 10, 2005


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