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




                  REAUTHORIZATION OF THE EXPORT-IMPORT

                       BANK OF THE UNITED STATES

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

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                       DOMESTIC AND INTERNATIONAL
                 MONETARY POLICY, TRADE, AND TECHNOLOGY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 5, 2006

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 109-83







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

                 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


















                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    April 5, 2006................................................     1
Appendix:
    April 5, 2006................................................    33

                               WITNESSES
                        Wednesday, April 5, 2006

Harmon, James, Chairman, World Resources Institute...............    25
Lambright, Hon. James H., Chairman and President (acting), 
  Export-Import Bank of the United States........................     9
Morrison, James, President, Small Business Exporters Association 
  of the United States...........................................    23
Rice, Edmund B., President, Coalition for Employment Through 
  Exports........................................................    21

                                APPENDIX

Prepared statements:
    Oxley, Hon. Michael G........................................    34
    Velazquez, Hon. Nydia........................................    35
    Harmon, James................................................    40
    Lambright, Hon. James H......................................    44
    Morrison, James..............................................    55
    Rice, Edmund B...............................................    67

              Additional Material Submitted for the Record

Pryce, Hon. Deborah:
    Statement of Brett N. Silvers................................    78



















 
                  REAUTHORIZATION OF THE EXPORT-IMPORT

                       BANK OF THE UNITED STATES

                              ----------                              


                        Wednesday, April 5, 2006

             U.S. House of Representatives,
                       Subcommittee on Domestic and
                     International Monetary Policy,
                             Trade, and Technology,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 2:05 p.m., in 
the Rayburn House Office Building, Hon. Deborah Pryce 
[chairwoman of the subcommittee] presiding.
    Present: Representatives Pryce, Kelly, Manzullo, Biggert, 
Neugebauer, Maloney, Velazquez, Watt, and Sherman.
    Ex officio: Representative Oxley.
    Chairwoman Pryce. Good afternoon. This hearing will come to 
order. I am pleased to welcome you all here today, to this 
legislative hearing on H.R. 5068, which reauthorizes the 
Export-Import Bank.
    I would like to thank our witnesses for being here with us 
today, and also my colleagues, who have been very supportive of 
this legislation--Mrs. Maloney and Mrs. Biggert, thank you very 
much.
    We have drafted a good bill that brings to the Bank greater 
transparency, increased oversight, and improvements in 
outreach, especially to small businesses.
    I would like to thank Chairman Manzullo for his leadership 
on this issue, specifically. His assistance was vital in 
drafting language to formally establish a small business 
division within the Bank, which will make it easier for small 
business exporters to access the medium-term credit programs.
    In the new charter, we have required numerous reforms and 
structural changes to the Bank. These will take time to 
implement. And as such, we have extended the charter date to 
2011.
    To address any oversight concerns that the Bank may fall 
into--an all-too-familiar trap of being required to make 
changes by Congress and then not acting on those requirements--
we have included reports to Congress on implementation 
progress.
    Going further, we have also required that in those reports 
we have the board sign off before it comes to Congress and 
include any dissenting views. Additionally, we ask for the name 
of the person responsible for that section of reform within the 
Bank, so that Congress is aware of whom to address its focus.
    One of the most frequent criticisms of the Bank that my 
subcommittee has heard is that there is no staff designated 
exclusively for small business. When a small business calls to 
begin an application, they may get someone who has just 
finished a large contract and doesn't understand what small 
business exporters need. This can lead to frustration and 
failed service to the exporter.
    To address this concern, this legislation establishes a 
small business division that will provide outreach and advocacy 
of small businesses and advise them on Bank programs. 
Additionally, this division would specifically give advice to 
women and minority-owned small businesses that, as statistics 
show, are increasingly becoming the most successful of all 
small businesses in America.
    According to the U.S. Census, in 1992, there were 6.2 
million women-owned small businesses. In 1997, there were 5.4 
million, and today, there are over 10 million. All women and 
minority-owned businesses contribute over $4 trillion to the 
U.S. economy.
    So, to cut through any administrative red tape, we have 
instituted a direct line for the senior vice president of the 
small business division to report directly to the president of 
the Bank.
    And to further guarantee that the Bank must have small 
business staff who work solely on, and truly understand, the 
needs of small business exporters, we have required staff 
budgetary resources and staff be dedicated to the small 
business division. The division shall include staff dedicated 
exclusively to outreach, training, and advice concerning 
various programs.
    Though the Bank is not an aid agency, it can do much to 
support developing nations through the Sub-Saharan Africa 
Advisory Committee. We have added this division into the Bank's 
charter, and extended the charter until 2011. This section 
would see that a master guarantee agreement would be in place 
with appropriate banks in Africa, and require a report on the 
working relationship with the African Development Bank, and the 
Africa Ex-Im Bank.
    This provision would also encourage the Bank to work for 
closer cooperation with U.S. agencies in Africa, especially 
foreign service, which would encourage African buyers towards 
transactions supported by the Bank.
    As many of my colleagues can recall, we have heard, over 
the last few years, of instances where the board refused to 
take up a vote on an application. Non-actions like these by the 
board only result in hurting our economy. When the board 
refuses to act, our American exporters lose. As such, we have 
required the board to vote in all cases when an economic impact 
study has taken place.
    We've placed in the charter that the Bank will notify 
applicants of application status within 45 days after receipt, 
and send notices for additional information, if needed.
    Now, some of my colleagues here today believe that even 45 
days is too long, and I hope to hear more on this from the 
witnesses.
    It has been almost 5 years now, since my predecessor 
required Ex-Im to put in place an interactive Internet site 
where applicants can go to check the status of their loan 
request, and to track its progress, and Ex-Im still does not 
have this Web site functioning. We require in this new charter 
that the Bank have this online site up and properly functioning 
by September 1st of this year.
    This section of the legislation will also require: reports 
by the Bank related to technology to assist small businesses; 
analysis of money appropriated for this area; and a report by 
the inspector general which examines the total amount expended 
on technology, and what efforts are being made in assisting 
small business concerns.
    In working on this legislation, my subcommittee has heard 
from exporters that the Bank may not be as competitive as other 
banks, such as Canada and Japan. To gather further information 
on this, we have asked the Bank to provide a report to Congress 
that focuses on the competitiveness initiatives, as compared to 
the size of program accounts at the Bank, and other ECA's, and 
how the Bank's rates, terms, and other conditions compare with 
those offered by other governments, directly or indirectly.
    I believe this legislation is a solid foundation by which 
the Bank can become more competitive, transparent, and rise to 
address the needs of our American exporters.
    We welcome our witnesses here today, and I look forward to 
hearing their testimony. I would now like to recognize my 
friend and colleague, Mrs. Maloney, for her opening statement.
    Mrs. Maloney. Thank you, and I thank the Chair for holding 
this hearing, and all of our witnesses for being here today. I 
particularly would like to welcome Mr. James Harmon, who 
happens to be a constituent of mine. He is now the chairman of 
the World Resources Institute, and a former chair of the Ex-Im 
Bank.
    The future of the Export-Import Bank is of great concern to 
all of us on this subcommittee, and, I would say, to all 
Members of Congress. We are faced today with the need to pass 
the reauthorizing legislation for our Nation's export credit 
agency at a time when the demands of the global marketplace 
seem increasingly pressing and increasingly difficult, and the 
agenda of Ex-Im appears more critical to our economy than ever 
before.
    As the independent U.S. governmental agency that assists in 
financing the exports of U.S. goods and services to markets 
around the world, through export credit insurance, loan 
guarantees, and direct loans, the Ex-Im Bank has long played a 
vital role in the economy of many of the districts we 
represent, including the one that I represent.
    But in a year when the single best-selling non-fiction 
book, ``The World is Flat,'' argues that the most important 
event of the new millennium is not 9/11, but the explosive 
growth of the global market, the Bank's mission of creating and 
maintaining U.S. jobs through financing exports takes on a new 
urgency and importance. And I would say, as our gap in trade 
grows, the importance of this Bank grows.
    Whether we like it or not, the coming together of events 
that have brought India, China, and many other countries into 
the global supply chain for service and manufacturing has 
created an explosion of wealth in the middle classes of the 
world's two biggest nations, giving them a huge new stake in 
globalization.
    As former Chairman Greenspan was fond of telling the 
subcommittee, ``All of a sudden a huge number of highly 
educated people from formerly non-competitive countries have 
entered the global workforce.'' We cannot afford to be 
uncompetitive in the rapidly changing global market, or 
complacent about our status. Our current account deficit is 
increasing, and each year sets new records.
    Indeed, the new alarming news is that in the last quarter 
of 2005, we lost ground on the two factors that have 
traditionally been in our favor: the balance on income shifted 
to a deficit from a surplus; and the surplus on services 
decreased.
    As leadership on both sides of this subcommittee recognize, 
we must empower and support Ex-Im now, more than ever. I am 
very happy to report that the Ex-Im reauthorization bill 
introduced last week is truly a bipartisan piece of 
legislation, as evidenced by the fact that the original co-
sponsors include not only the majority and minority leadership 
of this committee and subcommittee, but also of the small 
business committee. And we are pleased to be joined by Mrs. 
Velazquez, who is here with us today.
    We have worked together in this bill to fairly address the 
concerns of many viewpoints, and I look forward to the comments 
from the witnesses.
    I would like to commend, particularly, the staff of the 
committee--Jackie Moran, Paul Kangas, Eleni Constantine, and 
Scott Morris--for their long hours and hard work, and a 
bipartisan effort to listen to many points of view, and to 
produce a bill that we all agree on.
    The bill responds to some concerns that we have had for a 
long time, and that we heard repeatedly as we began to work on 
this bill. First, the bill reaffirms Congress's intent that the 
Bank support small business to a greater extent than at 
present, consistent with sound lending policies. To this end, 
the bill creates a small business division within the Bank, run 
by a senior VP who reports directly to the chairman.
    The staff of this new division are dedicated exclusively to 
small business transactions, reflecting the fact that these 
deals and these clients need and require unique skills. Within 
this division, the bill creates an office charged with 
expanding outreach to women and minority-owned businesses, also 
underrepresented in the Bank's effort in a very important new 
addition.
    Based on numerous comments, I might add, particularly from 
my own constituency that are interested in exporting, we 
should--we worked on making it more transparent. And many of my 
constituents say they were very frustrated by the lack of 
transparency and unfriendliness in the bank process; it was not 
user friendly. Several said that their applications, and I'm 
using their words, ``simply disappeared.''
    And at my initiative, the bill contains several 
transparency reforms that respond to this concern, and I expect 
that these relatively low-cost changes will provide significant 
benefits to Ex-Im's clients. They include notification 
requirements so that applicants know what is happening to their 
application and a requirement for board action on applications 
that have been subject to economic impact analysis, among 
others.
    Some of my constituents said that an economic impact 
analysis may have been called by some of their competitors, and 
that it was a way of just killing a project before the Bank.
    And I just want to add on what my colleague, the 
chairwoman, mentioned. My daughter is now going through the 
process of applying to colleges. She can go through any college 
application, find out what papers are missing, what needs to be 
done, and where it stands in the process. Why can't we do this, 
as was required 5 years ago?
    The bill also has a new activity to increase activity in 
Sub-Sahara Africa, and it has many other additions that I think 
are important, particularly in the competition area. In 
particular, the bill gives the Bank authority to use the Tied 
Aid Fund, a fund established several years ago by Congress to 
combat unfair export practices by other countries.
    It has many new additions. I just ask to revise and extend 
my remarks, and add the rest of it to the official record. We 
look forward to your testimony, and I look forward to a swift 
passage of this important legislation.
    Chairwoman Pryce. Without objection, your full statement 
will certainly be put in the record.
    We are very pleased to welcome our chairman. Chairman 
Oxley, you are recognized.
    The Chairman. Thank you, Chairwoman Pryce. And I am going 
to submit my statement for the record, and only say welcome to 
Mr. Lambright, and to say that this is the second go-around on 
the Export-Import Bank reauthorization since I have been 
chairman. And I am reasonably optimistic, given the tenor of 
the opening statements, and the bipartisan support we have for 
this legislation, of going forward.
    I recall some fits and starts when we went through this 
process in 2002. Well, we finally got it done, got to a 
conference committee, and worked out our differences. And I 
think some of the recommendations, particularly in the small 
business area, make a lot of sense, and certainly, I think, 
will add some support here on the Hill for the reauthorization 
this time around.
    So I want to thank Chairwoman Pryce for her support on 
this, and Carolyn Maloney, and others, who have really put 
together, I think, a bill that we can be proud of, and that 
gets us to our goal of increasing exports by American 
producers.
    And with all of the rhetoric we hear about trade and 
outsourcing, and the like, this is something very positive that 
this Congress can do to send a strong signal that we are 
reauthorizing the Export-Import Bank, and we understand the 
goals that they have, that the witnesses will be talking about. 
And at the end of the day, we will have a solid package that we 
can pass over to the Senate, and hope to have the President's 
signature by the end of this calendar year.
    So, with that, Madam Chairwoman, I yield back the balance 
of my time, and ask unanimous consent that my full statement be 
a part of the record.
    Chairwoman Pryce. Without objection. Thank you very much, 
Mr. Chairman.
    I now recognize Mr. Sherman.
    Mr. Sherman. Thank you. I think that the trade deficit of 
the United States, which is the largest any country has ever 
had in history, by far, is the greatest threat to world 
economic order, and to American prosperity. And so, I welcome 
the efforts of the Export-Import Bank--which I hope would 
someday change its name to Export Bank--to try to deal with 
that problem, although your efforts are, at most, a few drops 
in the bucket.
    A second concern I have is the Export Bank's dealing with 
small business. I have dealt with the chairman on that 
directly, and I think that we can deal effectively with 
particular small businesses in my area.
    And then, finally, I have been concerned--and I realize 
this is more a foreign policy issue, and this is not the 
Foreign Policy Committee of the Congress, but you have an 
effect on foreign policy--about the financing that the Export 
Bank has done with regard to projects in the Caucuses. You have 
financed a pipeline that can only be called ``The War 
Pipeline''. It is a pipeline to go from Ajarbaijan, around 
Armenia, into Georgia, and then into Turkey.
    The effect of this pipeline will be disastrous. The route 
of this pipeline is the exact opposite of what it would be if 
it was a ``peace pipeline.'' If it was a peace pipeline, it 
would take the shortest distance, and it would link Ajarbaijan 
and Armenia. By going around Armenia, you have given some voice 
to the extremists in Ajarbaijan, who say, ``Look, once we pump 
out the oil and the Armenians can't stop us, we will somehow 
get enough money to reverse our defeats on the battlefield, and 
we will start a new war.''
    Now, that's not only a problem for our policy in the 
Caucuses, but it's also a problem for the Export Bank, because 
we established firmly during World War II that oil pipelines 
are legitimate strategic targets of war. And so, when we get to 
the questions, I will ask the chairman whether you have 
reserved in full for what may very well happen, the total 
destruction of that pipeline in a war that may very well occur 
precisely because the pipeline was built with U.S. funds.
    My current concern now is that you may match the war 
pipeline with a war railroad designed, again, not to go from 
Ajarbaijan through Armenia and to Turkey, but rather, to go 
around.
    And, I will point out again, that during World War II, we 
clearly established that railroads are legitimate strategic 
targets in war. And I would hate to see you or one of your 
successors try to reverse what has been established U.S. policy 
and somehow say, ``Oh, we lost money. It's Armenia's fault. 
They shouldn't hit pipelines, they shouldn't hit railroads.'' 
Well, we have in every war that we have had in the last 60 
years, and I suggest that we make sure that this railroad be a 
peace railroad and not a war railroad. And I yield back.
    Chairwoman Pryce. The gentlewoman from Illinois, who has 
worked very hard on this issue, Mrs. Biggert.
    Mrs. Biggert. Thank you very much, and thank you, 
Chairwoman Pryce, for holding this legislative hearing today. I 
am going to try and just take a few minutes and submit my 
testimony, or my statement, for the record.
    But I would like to express my thanks for Mr. Lambright and 
his team for coming out to my district in Illinois for a 
roundtable recently. In an effort to ensure that we had the 
best bill possible, we met with Chicago area manufacturers, 
large and small, and financial services industry 
representatives, to discuss what the Bank is doing well, and 
how it could improve. I think we had a very productive 
discussion, and I would like to thank the Ex-Im Bank team for 
listening to my constituents and taking into consideration some 
of their suggestions for the Bank.
    And I would also like to encourage my colleagues to hold 
similar sessions, for they're a great way to hear directly from 
those who are on the front lines. And thanks to the advice of 
those who participated in the roundtable, there were just a 
couple of suggestions that I would just like to touch on 
briefly.
    First, we should encourage the Bank and other financial 
institutions to increase their outreach efforts with 
businesses, and spread the word about export financing 
opportunities.
    Second, several of my constituents expressed concern that 
the approval criteria for the Bank financing is too strict.
    Third, the Bank should explore opportunities to streamline 
applications.
    Fourth, the Bank should work with other Federal agencies in 
the private sector to develop greater expertise in the 
financing of exports to developing countries. And then, on a 
related note, I would hope that the Bank could expand expertise 
in specific sectors, and facilitate increasing exports in those 
sectors. I would particularly like to see this in the energy 
sector that I think we talked about, giving increased--
increasing the global demand for clean, efficient, and cheap 
energy.
    And lastly, I hope that the Bank will find ways to more 
accurately assess the economic impact that its larger 
transactions have on smaller businesses. So it was a great 
meeting, and such an important issue, that in our increasingly 
competitive global environment, we must ensure that we can 
provide every advantage, and remove every disadvantage, for 
U.S. businesses to win this sale.
    So, I look forward to working with the Bank. I look forward 
to working with the chairman and my colleagues on both sides of 
the aisle to reauthorize the Bank, and to ensure that it has 
targeted directives, adequate financing and staff, and the 
capabilities to facilitate increased U.S. exports, and most 
importantly, U.S. jobs. With that, I yield back.
    Chairwoman Pryce. Thank you. Mrs. Kelly?
    Mrs. Kelly. Thank you, Madam Chairwoman. I would like to 
ask Mr. Lambright, you expressed support for a 5-year 
reauthorization--
    Chairwoman Pryce. We are in the period of opening 
statements.
    Mrs. Kelly. Oh, I am sorry. I don't have an opening 
statement. I thought you were in questions.
    Chairwoman Pryce. All right. That's all right. Mr. 
Manzullo, do you have an opening statement?
    Mr. Manzullo. I just want to thank you for the hearing. I 
look forward to Mr. Lambright's testimony. He has brought a lot 
of fresh air and a new culture to Ex-Im, and I look forward to 
his being accepted by the honorables over on the other side. 
And he has already worked with us very closely in implementing 
some very strategic small business issues. So I thank you for 
having the hearing.
    Chairwoman Pryce. And I thank Mrs. Kelly and Mr. Manzullo 
for your input and assistance in this bill. Thank you very much 
for your interest.
    And now, without objection, the Chair would recognize Ms. 
Velazquez for an opening statement.
    Ms. Velazquez. Thank you, Chairwoman Pryce, and Ranking 
Member Maloney, and I would like to really thank you for the 
work that you have done on this reauthorization. And as the 
ranking Democrat on the Small Business Committee, of course 
this is an important issue for me, and we have worked with the 
committee staff to have input into this language, 
reauthorization language.
    As you know, small exporters are key components of a 
successful export strategy. They are the Nation's leading 
exports, dominating many export sectors, and growing 2 times 
faster than large exports. However, these firms face obstacles 
trading internationally. They, therefore, require assistance 
from the Export-Import Bank to obtain adequate and timely 
financing, as well as business development and outreach 
resources.
    In the Export-Import Bank's Reauthorization Act of 2002, 
Congress required small and medium-sized exporters to receive 
at least 20 percent of the Bank's authorizations. However, the 
Bank has not fulfilled its mandate since this was enacted. The 
unfulfilled mandate demonstrates inadequate institutional focus 
on, and commitment to, small exporters to promote a sustainable 
export sector. The Export-Import Bank must take steps to 
support the growth of the country's lead exporters, small 
businesses.
    To support small exporters, the Bank's financing procedures 
and resources must be geared, in part, to the particular needs 
of these businesses. The reauthorization proceeding provides a 
new opportunity to ensure that the Bank's small business 
financing is commensurate with overall need.
    To implement changes, the reauthorization legislation 
proposes to establish reforms to the Bank's institutional 
structure, and decisionmaking procedures. The Bank structure 
will better serve small businesses through the creation of a 
small business division. The division will represent small 
exporters and advocate for their interests within the Bank, and 
to private lending institutions.
    However, if it is to be relied upon as the representative 
of small business needs, the division must have real resources, 
real responsibilities, and real decisionmaking authority. A 
weak small business division will not be able to enforce its 
mandates.
    A newly established small business division staff should 
possess both knowledge of these exporters' particular needs, 
and be authorized to review and approve small business 
financing applications. Knowledge and advocacy are meaningless 
if they do not impact the bottom line, which is to provide 
these firms with financing assistance.
    I am also concerned with the Bank's level of assistance to 
minority and women-owned export businesses. These firms are 
growing at double the rate of all firms in the country, and 
possess immense potential to become top exporters. Yet, the 
Bank currently provides them with just over 2 percent of the 
total financing. To support the growth, these businesses 
require additional resources for business development and a 
higher mandatory setaside from the Bank's total authorizations.
    Chairwoman, I just want to say, look, in 2002, I was a 
member of this subcommittee. I was sitting here when we were 
dealing with the reauthorization language. And here we are 
again, pointing and raising the same concerns that small 
business exporters were facing back then. So, I hope you do a 
better job, and I hope that we can accomplish that with this 
legislation. Thank you.
    Chairwoman Pryce. The gentlelady's time has expired.
    Well, as we begin, I would like to thank chairman and 
acting president of the Bank, Jim Lambright, for being here 
today with us. Mr. Lambright has made--has been in this role 
since July of 2005, and has been doing a very good job working 
with the Members of Congress in addressing their concerns in 
many areas, and also making the Bank more competitive and 
responsive.
    We welcome you here today. We will recognize you for a 5-
minute summary of your testimony, without objection. Your 
entire written statement will be part of the record, and then 
we will get to the meat of other concerns as we ask questions. 
Go right ahead, Mr. Lambright.

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

    Mr. Lambright. Thank you so much. Chairwoman Pryce, 
Congresswoman Maloney, and members of the subcommittee, I am 
pleased to be here today to testify on the 2006 reauthorization 
for the Export-Import Bank of the United States.
    Since my testimony before this subcommittee on November 
10th of last year, I have had the pleasure of meeting with a 
number of the distinguished members of the subcommittee, and I 
look forward to continuing this dialogue.
    The mandate of the Bank, as expressed in our charter, is to 
create and sustain U.S. jobs by supporting exports that 
otherwise would not go forward, either because of government-
supported competition, or because the private sector is 
unwilling or unable to assume the risk. We do this through 
loans, guarantees, and insurance.
    That mandate remains the core of why the Bank exists, and 
why it should be reauthorized. We are requesting the extension 
of the charter for 5 years, to September 2011. We are also 
requesting that our existing authority to approve dual-use 
transactions, as well as the life of the Sub-Saharan Advisory 
Committee be extended to the same date.
    And except for these changes, we at Ex-Im Bank believe the 
current charter language provides the institution with 
sufficient powers and flexibility to meet the challenges of the 
next 5 years.
    Our charter provides guidance as to how to meet our 
mandate. We then must set our course by those beacons, one 
representing the aggressive support we provide U.S. workers and 
exporters, and the other representing responsible stewardship 
of taxpayer dollars.
    Since our 2002 reauthorization, we have authorized roughly 
$48 billion in financing support of an estimated $63 billion in 
U.S. exports. Some of those have been big ticket items, such as 
aircraft or power generation equipment. But over 80 percent of 
those transactions have been made available to directly support 
small business exports.
    For fiscal year 2005, every taxpayer dollar invested in the 
Bank's program and administrative budgets yielded financing in 
support of over $50 in U.S. exports.
    Since I was appointed acting president about 8 months ago, 
no topic has received more attention at Ex-Im Bank than small 
business. There have been numerous meetings between Ex-Im staff 
and the staff of the House Committee on Small Business since my 
last testimony before this subcommittee.
    We have also worked closely with small business 
representatives. And as a result of this collaborative process, 
we have made a number of creative and innovative changes to our 
business operations. These include: improving the claims 
process; establishing a new division for small business 
outreach; assigning small business specialists in each 
division; and expanding our online capabilities.
    We are forward-leaning in reaching out to the small 
business community, and we will continue to adapt our policies 
and practices to be as flexible and responsive as possible to 
meet the needs of small businesses.
    And we have already laid a strong foundation for growing 
the small business program. In the last fiscal year, Ex-Im Bank 
authorized 47 percent more in dollar volume than in fiscal year 
2002, at the time of our last rechartering, and 21 percent 
more, in terms of transactions.
    We also remain mindful of the policy considerations that 
exist in our mandate, and we try to achieve the objectives set 
by Congress. And to this end, it's worth highlighting, first, 
that the Sub-Saharan Africa Advisory Committee has proved to be 
a valuable source of knowledge for the Bank, as we attempt to 
increase our exports to this important part of the world that 
offers great potential for our exporters.
    Second, since the establishment of the Bank's Environmental 
Export Program in 1994, our environmental transactions have 
grown significantly, with a total portfolio in excess of $2 
billion. This has allowed U.S. environmental companies to 
compete in promising emerging markets.
    And, third, we at Ex-Im Bank are striving to help the 
American export community be more competitive by working to 
increase our transactions involving women and minority-owned 
businesses. In the last fiscal year, Ex-Im Bank staff 
participated in 70 events aimed at this targeted audience.
    And in looking to the future, industrialized countries 
which are not OECD members, are emerging as significant 
exporters of capital goods. And we have to decide what Ex-Im 
Bank's response should be to these growing challenges.
    I have every confidence that Ex-Im Bank will continue to 
serve American workers, and preserve American jobs for years to 
come. I look forward to working with you in this 
reauthorization process, and I would be happy to take your 
questions. Thank you.
    [The prepared statement of Mr. Lambright can be found on 
page 44 of the appendix.]
    Chairwoman Pryce. Thank you very much. We all appreciate 
your time-sensitive testimony.
    And I would like to talk a little bit about the proposals 
for limiting time limits on processing the applications. Do you 
believe this would approve or hinder the process, in 
determining whether or not to approve a loan?
    And I would also like your honest assessment of the 45-day 
period, and whether that, from your perspective, and from the 
applicants', is too long, too short, or just right. Would you 
give us your thoughts on that, please?
    Mr. Lambright. Yes. I don't want to take a day longer than 
is necessary to satisfy our customers' needs. Customer service 
is an important part of what we do. And we are assessing ways 
to meet our customers' needs in a more time-sensitive manner.
    One thing that we're doing is introducing the Ex-Im Online 
program, which some members have mentioned in their opening 
statements, as a way we can provide faster response and more 
transparency for our customers, particularly our small business 
customers.
    And to your particular point about the 45 days, it strikes 
me as reasonable that any customer should be contacted by Bank 
staff in that timeframe to acknowledge receipt of an 
application, and to start the discussion about what further 
information may be needed to proceed.
    Chairwoman Pryce. Start the discussion? That means you 
don't think you could complete the evaluation within 45 days?
    Mr. Lambright. As I read the bill, it was 45 days to reach 
out to customers to ask questions or to express concerns about 
an incomplete application. And that struck me as something that 
would be reasonable to expect staff to do.
    Chairwoman Pryce. And how long does the typical application 
process take?
    Mr. Lambright. It would be a different answer for different 
programs. If you look at our primary small business program, 
the typical case is evaluated and approved within 20 business 
days. And so, the 45 days would, of course, be well within that 
timeframe.
    When you start to look at our more complicated transactions 
in the medium term, the typical turnaround time is 40 to 45 
business days. And when you go into the longer-term credits for 
asset-backed financing, or structured projects, those are 
measured in months, or perhaps even years. But when I hear 
complaints about our cycle time--and I'm sure that the 
complaints that you hear about Ex-Im Bank's responsiveness--
they generally relate to the medium term or the shorter-term 
products.
    Chairwoman Pryce. And so, would it be valuable for us to 
require a time limit? Would it be valuable, in terms of your 
internal processes, and would it be valuable for the applicants 
themselves?
    Mr. Lambright. I agree with the premise that customers 
having some clarity as to when they can reasonably expect 
feedback from the Bank is appropriate. Whether that requires 
legislation or whether it's something that we should be 
evaluating currently, I would leave to the committee. But it 
seems like a reasonable direction to be going.
    Chairwoman Pryce. And the online review process that this 
will require you to put into place by the first of September, 
is there anything that you know of that would limit your 
ability to do that?
    Mr. Lambright. Well, our plan is to reveal or activate the 
online program on June 1st. And that would be for our primary 
small business programs. And the medium-term program would 
follow, and I would need to investigate whether that could 
reasonably be expected to be online by September.
    It may be that the medium-term program is more likely to be 
ready for activation at the end of the calendar year than at 
the end of the fiscal year. But we would be onstream with the 
major component of the online program by June.
    Chairwoman Pryce. And is there any reason that you can give 
us for this not having been put in place over the last 5 years?
    Mr. Lambright. Well, the major reason is that the Bank 
underwent a major reorganization in 2002. At the time of that 
reorganization, the decision was made to table the online 
effort so that when we did take up programming the online 
functions, they would be more cleanly tied to the new business 
flows that would be developed in this reorganization. And so, 
some significant time was lost in meeting this goal.
    Chairwoman Pryce. I agree. All right. Thank you very much. 
Mrs. Maloney?
    Mrs. Maloney. Okay. On making the Bank's operations more 
user-friendly, will people be able to apply online? We have the 
online applications. I think probably the barrier is bigger for 
women and minority businesses, so being able to apply online 
would be very helpful. Are you moving--
    Mr. Lambright. That is the part of our online functions 
that we anticipate rolling out on June the 1st.
    Mrs. Maloney. So you expect that?
    Mr. Lambright. Yes.
    Mrs. Maloney. Okay, great. Well, listen. I tell you, 
basically, I'm just concerned about our account deficit. It's 
just getting bigger and bigger. We have the largest trade 
deficit in history, the largest of any country in the world, 
and we need to do something about it. And I certainly support 
any efforts that you have.
    I do want to raise one of the criticisms that you hear of 
the Bank, and listen to your response. And one of the 
criticisms is that by supporting large corporations doing 
business abroad, the Bank is effectively moving American jobs 
overseas, as many of these corporations move their offices 
offshore.
    And what response do you have to this? This is an issue 
that is constantly, or usually, raised by Congressman Sanders, 
that we are giving the support to corporations that are moving 
entire divisions, and therefore, American jobs, overseas. And 
part of your mandate from your creation in 1934 was not only 
exports, but the creation and saving of American jobs.
    Mr. Lambright. That's exactly right, Congresswoman. When we 
make our program and policy decisions, we do so with U.S. jobs 
in mind, as opposed to the corporate structure involved in 
those jobs.
    So, yes, U.S. companies--some U.S. companies--are moving 
jobs overseas. But when U.S. Ex-Im Bank participates in a 
transaction, our financing is only connected with the goods and 
services produced by U.S. workers. And so, we feel like the 
function we serve is in helping keep more of those jobs here in 
the United States.
    Mrs. Maloney. And does the economic impact analysis 
required by law capture this problem of a major corporation 
maybe moving tens of thousands of jobs overseas, but then 
wanting to have a little help over here, with another export? 
Is it--
    Mr. Lambright. Well, when we evaluate an application, we 
are looking at the U.S. production and the jobs associated with 
those overseas sales. Our economic impact procedures really 
address something slightly different, which is weighing the 
benefit of the immediate export against the longer-range 
implications of increased commodity production overseas that 
may cause some threat to U.S. producers.
    Mrs. Maloney. Could you give us some comments--I'm sure 
you've put a lot of thought into it--on the fact that in this 
global economy, we are losing so many jobs. I literally had a 
case where they were trying to outsource the flight attendant 
jobs--it was before bankruptcy court, and they lost--but they 
were trying to literally fly people in from other countries to 
fly all around the United States.
    And it used to be you would think it's just going to be a 
certain type of job. It seems to be growing into practically 
every job. If you're not chained to your seat, there are 
attempts to outsource those jobs. And do you think we need to 
look at different policies at home to try to combat this?
    I mean, this is a phenomenon that is huge, the number of 
jobs that are being outsourced, and really, the trade gap. Even 
though we work hard at the Ex-Im Bank, and we work in all these 
other places to do things, the trade gap seems to be just 
growing bigger and bigger and bigger. And what is your overall 
thoughts on how we should confront this as a Nation? It's a 
growing challenge, to say the least.
    Mr. Lambright. I share your views, that we are all 
grappling with some pretty big questions right now, on this 
front.
    At Ex-Im Bank, we are looking at how we can keep up with 
the pace of change in the economy, and the structure of U.S. 
exports. As services become a bigger part of exports, for 
example, we at Ex-Im have to ask ourselves how can we keep up 
with that, and help support those exporters with financing for 
their exports, without losing sight of our historical focus on 
manufactured goods?
    And so, those are the sorts of things that we are looking 
at. It's also becoming a harder question to answer what is an 
American good, as components come from all over the world, and 
assembly may take place here or elsewhere. We need to figure 
out the right approach for the new kind of products that are 
getting exported.
    Mrs. Maloney. Okay. Thank you very much. My time is up.
    Chairwoman Pryce. Mrs. Biggert.
    Mrs. Biggert. Thank you. Mr. Chairman, how does the Bank's 
approval of large business transactions also help small 
businesses?
    Mr. Lambright. Well, many of the larger exports that we 
support are big capital goods, like a piece of agricultural 
equipment, or construction equipment, or a commercial aircraft. 
And any piece of large equipment is going to have many 
components to it. And a lot of those components are supplied by 
America's small businesses.
    Mrs. Biggert. Well, how does the Bank--do you track the 
benefits that those large business deals--
    Mr. Lambright. It can be very difficult, because a large 
exporter may not be able to invoice for us all of the exact 
suppliers for any particular good that we help finance.
    But we have exporters who have offered us information on 
their supplier data, and we look at that and can try to look at 
how much indirect benefit we are providing to America's small 
businesses.
    In fact, the last time such a study was done of our top 
dozen exporters, which was a few years ago, indicated over 
35,000 SME's contributing to their larger exports.
    Mrs. Biggert. But you don't include that when you're 
determining how much--the percentage of small business versus 
the large--
    Mr. Lambright. No, we do not.
    Mrs. Biggert. Okay. Then we have, in the bill that's been 
talked about, something called Tied Aid. And that's--can that 
be used to level the playing field, with respect to the 
government subsidies on foreign exports?
    Mr. Lambright. Tied Aid is a U.S. Government tool to combat 
trade distorting aid from other governments. And this is 
something with a long history at the OECD in Europe, and is 
something that Ex-Im Bank and other U.S. Government agencies 
have been monitoring for a long time now.
    Mrs. Biggert. But you don't really use Tied Aid very often.
    Mr. Lambright. It's not a tool that we use frequently, no.
    Mrs. Biggert. Are the Bank's main competitors, other export 
credit agencies in Asia and Europe, using the Tied Aid?
    Mr. Lambright. Many of them do. If you look back, though, 
over 15 years, the global level of Tied Aid has come down 
dramatically through international negotiations and through our 
use of Tied Aid.
    So now we are dealing with a far lower level of Tied Aid, 
but it does continue to exist. And some exporters would like to 
access Tied Aid funds to help level the playing field.
    Mrs. Biggert. Thank you. I yield back.
    Chairwoman Pryce. Mr. Manzullo.
    Mr. Manzullo. I have a comment. We have, in our district, 
the northern part of the State of Illinois, probably close to 
2,000 factories. And Boeing Aircraft has close to a $200 
million presence, even though there is no Boeing plant there. 
Caterpillar, about $100 million. John Deere, close to $100 
million.
    And these are all--without the exception of Hamilton Sun--
very small machine shops, and hundreds and hundreds of machine 
shops that do specialty machine work.
    My understanding is that if an item is worth, say, $100 
that you're going to export, that at least $50 of that has to 
represent U.S. content. Is that correct?
    Mr. Lambright. That's correct for our short-term programs, 
yes.
    Mr. Manzullo. Okay. The other question I have is, first of 
all, I want to thank you and your staff for working with my 
staff on the small business issues.
    One of the questions I have is on the 5-year 
reauthorization. I might have problems with that. I think if 
you go a couple of years, it gives everybody an opportunity to 
review periodically, from time to time. What is your--I know 
you're in favor, but there may be some room for compromise in 
between.
    Mr. Lambright. My reaction to that is to welcome 
Congressional guidance throughout the life of the 
reauthorization. So, however long we would be reauthorized, I 
would expect an open line of communication to continue between 
the Bank and the committee.
    I guess I would have two reactions to a shorter 
reauthorization. One would simply be that there are many 
changes contemplated in this bill, and I would appreciate the 
time to implement them and administer them before we took a 
measure of their success or failure.
    And secondly, I would think that exporters, our customers, 
would benefit from a longer-term certainty of Congressional 
support of the Bank's availability.
    Mr. Manzullo. I appreciate that. The second question is on 
the turnaround in the application process. You have been the 
acting president now for how long?
    Mr. Lambright. A little over 8 months.
    Mr. Manzullo. Okay. Could you tell us, anecdotally, what 
you have seen under your direct watch, in terms of the 
turnaround process?
    Mr. Lambright. Well, this--the cycle time turnaround is 
something that we have been trying to improve for some time 
now. I think that our--one thing that we have taken some staff 
off the front line and devoted them to is the online project, 
so that when we can get that fully implemented and up and 
running, that cycle time for the short-term program should come 
down, to reflect the ease of administration with the online 
program.
    But right now, we have a number of people focused on that. 
And so I don't have--
    Mr. Manzullo. You don't have any figures on it at this 
point?
    Mr. Lambright. Right, I don't have something to show you--
    Mr. Manzullo. Okay. I understand. The third thing is 
compliments to your webmaster. That is a very interesting Web 
site.
    And when you were in the office last time, or a couple of 
times, when you talked about doing some corny caricatures and 
walking people through, what's the progress of that, Jim?
    Mr. Lambright. Well, we have come up with a flowchart that 
explains our insurance product and the claims process, so that 
it's very simple for exporters who may be new to Ex-Im Bank, to 
understand what steps are required and what is expected of 
them.
    And actually, as of today, we have a special small business 
portal on the Web site that presents an even simpler format to 
introduce small businesses to the Bank's services.
    Mr. Manzullo. Great. Thank you very much.
    Chairwoman Pryce. Mr. Watt? Welcome, and you're recognized.
    Mr. Watt. Thank you, Madam Chairwoman. I am sorry, first of 
all, that I missed your testimony, but I did have an 
opportunity, several weeks ago, to meet with representatives of 
the Ex-Im Bank through a task force of the Congressional Black 
Caucus, and I want to thank you for that opportunity.
    I thought it might be helpful, just if you haven't already 
done so, to give you the opportunity to put on the record the 
fact that the name of this Bank doesn't necessarily reflect 
the--what the Bank actually does. So I will throw you a nice 
little softball here.
    What, if any, import assistance are you providing, as 
opposed to export assistance?
    Mr. Lambright. One hundred percent of our activity is 
devoted to export support, Congressman. You correctly note that 
the name is something of a misnomer. And every time we visit 
the question of changing the name, we discover through 
conversations what a valuable brand name it is globally, in 
markets around the world.
    And so, it is a name that we have lived with for 72 years 
now.
    Mr. Watt. Thank you. I just--I thought it was important to, 
if you have not already put that in the record--because, to the 
extent that there is controversy about the Ex-Im Bank, my 
experience has been that most of it relates to the perception 
that the Ex-Im Bank is supporting the import of product from 
other countries, as opposed to supporting our own businesses in 
exporting things to other countries, which I think all of us 
agree is a wonderful, wonderful thing.
    We are planning to take more aggressive steps to be engaged 
with the Ex-Im Bank to increase support for minority businesses 
who may be exporting abroad, and facilitating those efforts. 
And I wanted to put that in the record, that undertaking has 
been--is in process through our small business--small minority 
business task force of the Congressional Black Caucus.
    And I thank you for being here. And if there are any other 
softballs you want me to throw you, I will do that. But, 
otherwise, I will just yield back the balance of my time.
    Chairwoman Pryce. Thank you. Mr. Neugebauer.
    Mr. Neugebauer. Thank you, Madam Chairwoman. I appreciate 
Mr. Lambright coming back. I see you're still acting. So I 
guess we need to talk to your friends in the Senate; we would 
like to make that a more permanent position.
    You know, I have a number of companies in my district that 
use the Bank, and particularly the small businesses. And you 
know, I think it is so important that we, who are moving in a 
global economy that is--that train has left the station--it's 
important that we help those small businesses be able to learn 
how, and be able to facilitate that.
    I got kind of a quick glimpse of how that can happen. A few 
years ago I was in Italy in a small, remote community where the 
FedEx guy, and the UPS guy, have to drive their truck up the 
hill part of the way, and then push a cart up into the village.
    But here is this little company that's been making 
pottery--it's a family--for probably 200 or 300 years, and they 
are literally selling their commodity around the world. And so, 
you know, the technology is in place, the transportation is in 
place for a lot of small businesses to do that.
    I think it's intimidating to a lot of our small business 
people, you know, ``How do I get started in that?'' So one of 
the things I want to commend you is the fact that I think you 
are making an effort to reach out to small businesses.
    And you know, the last time you were here, we talked a 
little bit about getting that participation rate up to the 20 
percent, and you have said that I think you were going to 
actually have people designated not only to be processing that, 
but to do some outreach. Can you kind of roll out kind of your 
strategy in that area a little bit?
    Mr. Lambright. Of course. Since I was here in November, I 
have spent a great deal of time meeting with representatives of 
the small business community, including members of the Small 
Business Committee of the House, and a number of interests 
emerged from those--from that dialogue.
    One was having advocacy at a senior level, having direct 
access to the chairman and the rest of the board, representing 
the interests of small business. Another interest was having 
some kind of formal structure to indicate the Bank's 
institutional commitment to small business. And a third 
interest was having staff interact with small exporters who 
were expert in small business, who were sensitive to the 
special needs of small businesses.
    And I appreciate that some may envision different ways of 
addressing those interests, but I have made a number of changes 
since our last testimony, that I feel most effectively and 
efficiently meets those interests. And the first is that we now 
do have a senior vice president for small business, focused on 
outreach and advocacy. He is a direct report of the chairman of 
the Bank, and has unfiltered access to the board of directors.
    We have also instituted a small business committee that was 
formalized by the board of directors. And this will be a 
committee designed to monitor our progress on the small 
business initiatives and develop new initiatives to better 
serve small businesses. And we have also designated small 
business specialists in each of the business units, so that 
small businesses are dealing with familiar faces when they deal 
with the Bank.
    Mr. Neugebauer. One of the things that--I don't know if you 
have done this before, but I think it would be helpful if you 
had the personnel to be able to do that, but I would certainly 
like to, you know, invite some of your people, or one of your 
folks, to my district to put together, you know, kind of a 
seminar on what the Bank can do, and what are some of the 
programs that you have available.
    Because I think one of the jobs that we have, as Members of 
Congress, is that--is to help get the word out on some of those 
programs. And again, I think some of them find that they think, 
``You know, that's the Export-Import Bank, that's for the big 
boys.''
    And so, I would be anxious for maybe some of your folks to 
contact mine, and see what the possibilities of that would be.
    Mr. Lambright. I will make sure we follow up with that. 
It's also helpful for Ex-Im Bank to get out and hear the 
concerns of U.S. business people, and so it's a two-way street, 
and we would love the chance to do that.
    Mr. Neugebauer. Yes, I think we could actually have a panel 
and have some of your folks on it, and then have some of your 
customers that are in my district also talk about their 
experiences with the Bank, as well as give an opportunity to 
give an orientation to those folks that might be thinking about 
it.
    I yield back the balance of my time. Thank you for your 
comments.
    Chairwoman Pryce. Thank you. Mrs. Kelly?
    Mrs. Kelly. Thank you, Madam Chairwoman. I would like to 
ask you, Mr. Lambright, I want to go back to the question I 
started to ask during the beginning of this hearing.
    You are supportive of a 5-year reauthorization period in 
your testimony. But we are starting something brand new with 
you in the small business area. We in Congress can--yes, we can 
get reports and so forth, but officially, it would be a good 
thing, I believe, that we have a chance to have some kind of 
control over the report.
    In the past, there have been instances where the Ex-Im Bank 
has had very good intentions to start various things that, in 
fact, never have occurred. One of the problems is that 
Administrations change. You are here, we are hoping that you 
will step in and do--you have been doing a good job--we hope 
you will step in and get that assurance from the Senate, that 
you will be the chairman.
    But this Administration has two-and-a-half more years to 
go. There will then be 3 years, or two-and-a-half more years, 
of a new Administration, and possibly new people. And if we 
have a 5-year--5 years going without a look-back, I am afraid--
have very serious concerns that there is no guarantee that any 
of this small business work that we have all been working on 
and wanting to have happen will continue, if we have a new 
Administration.
    And so, what I am asking is if you are at all open to 
having a 2-year look-back, just to come and report on how 
you're doing. That gives us a chance to give you more 
flexibility quickly, give you whatever you need to get this 
implemented and in place, so it can't get changed with a new 
Administration.
    Mr. Lambright. I am certainly open to working with the 
Congress, however Congress deems necessary. If a 2-year 
reauthorization is the way Congress would like to go, we will 
cooperate with that. But I would reiterate my concerns about 
making sure we give this program enough time so that our 
measurement of its success is measuring something that has had 
enough time to grow to fruition.
    And also, I would want to make sure that exporters wouldn't 
have any reason to be concerned about Congress's support of the 
Bank.
    Mrs. Kelly. I--you can clearly hear on this committee that 
everybody here seems to be very supportive of what you're 
doing. And my concern is not that we are given a final measure 
of success of what you're doing, but how you're doing on 
implementing it.
    There are instances--I well remember when a business in my 
district came in and begged me to talk to Ex-Im Bank, because 
there was a certain time that they had to get a bid in. They 
lost that bid. They lost that bid to a foreign country in a--a 
foreign company in a foreign country, because the Ex-Im Bank 
couldn't get the processing done fast enough.
    They lost the bid, in part, because they didn't get what 
they needed back from the Bank that they had to go to to get 
the loan. That time period when a bank is doing a short, or a 
small or medium-sized loan up to the $500 million--and other 
people are shaking their heads; you know what I'm talking 
about--these are problems that need to be addressed, and I am 
hopeful they are going to be addressed in this new small 
business piece that you're putting in.
    However, that was in--in 1999, we were assured that the Ex-
Im Bank was going to process these things in 30 days. That 
didn't happen. Why? Because there was an election. I am very 
concerned that this not happen again. Our small businesses in 
the United States need that competitive edge, and they need it 
now. And it's important that we move this along.
    That's why I feel so strongly that you be able to come back 
here and tell us, ``Yes, this is working. We are able to make 
this move,'' and we get some kind of process in place, and not 
wait 5 years to find out whether it's working or not. By then, 
we've got a lot of small businesses out there that are going to 
be not in business.
    And I mean, I--if you want to--I'm not answering--asking 
you a direct question, so I will. What do you think about that?
    Mr. Lambright. I appreciate your concerns, and I understand 
the concerns about timing of Administrations. To that end, it 
may be--I have not been here during the change of 
Administration to understand how difficult it might be to focus 
the Bank on a rechartering and a change of Administration at 
the same time. I can imagine that may cause some difficulties.
    But I do appreciate your concerns about continually 
monitoring and refining our small business efforts, and I would 
be willing to continue the dialogue throughout the life of the 
authorization, assuming I am given the opportunity to be 
staying at the Bank.
    Mrs. Kelly. Thank you.
    Chairwoman Pryce. Ms. Velazquez.
    Ms. Velazquez. Yes. Mr. Lambright, I just would like to 
continue the point raised by Mrs. Kelly. I don't think that the 
problem is, or the issue here is, about changing 
Administrations. It is the institutional commitment from Ex-Im 
Bank to follow the law.
    And here we are, 5 years later, still discussing the fact 
that you have not been able to fulfill the statutory goal of 20 
percent financing for small businesses.
    So, let me ask you my first question. We have seen the 
total financing grow of Ex-Im Bank by 18 percent since 1995. At 
the same time, the total amount of small business financing has 
increased by just over 9 percent. Can you explain why the 
Bank's financing growth trend isn't carrying over to small 
businesses?
    Mr. Lambright. Congresswoman, I am not aware of the data 
you are citing. When I came to the Bank in 2001, right before 
the last reauthorization exercise was getting going, at that 
time the amount of small business the Bank was--was $1.6 
billion. In fiscal year 2005 it was $2.6 billion, directly to 
small businesses. That's a $1 billion increase, an increase of 
47 percent.
    The overall volume of the Bank's business is roughly 35 
percent in that time. So the pace of growth for our small 
business exceeds the pace of growth for our overall volume of 
business.
    Ms. Velazquez. But you are not telling me that it is 
evidence that you have a problem by the Bank's inability to 
meet its 20 percent small financing mandate.
    Mr. Lambright. Congresswoman, I fully agree with you that 
the Bank is not doing enough for small business, that there is 
certainly more that the Bank can and should be doing.
    Ms. Velazquez. Does the Bank have a limit on financing 
small exporter transactions?
    Mr. Lambright. A limit?
    Ms. Velazquez. Yes.
    Mr. Lambright. There is no limit to what we can do for 
small businesses.
    Ms. Velazquez. Okay. What steps are you taking to develop 
and implement specific lending assistance targeted to small 
exporters?
    Mr. Lambright. Very recently, we have established an office 
of small business for outreach and advocacy, headed by a senior 
vice president, and this division has a large staff focused 
exclusively on outreach to small businesses, including minority 
and women-owned small businesses.
    And they are working with outside entities, pursuing a 
strategy that we call multiplier effects, where we are looking 
to work with other government agencies, partners at the local 
level, brokers, lenders, and trade groups, so that we can 
magnify our voice when we're trying to communicate with small 
businesses, because in my time at the Bank, and my travels and 
my conversations with small businesses, what I have discovered 
is that the key to bringing in more business is simply one of 
awareness, and that a lot of small businesses just simply don't 
know that this Federal Government resource exists.
    And so, we're putting a lot of energy into making sure that 
more small businesses are aware of the financial support that 
Ex-Im Bank can provide.
    Ms. Velazquez. Okay, so let's talk about the personnel at 
the Bank. For personnel in the Bank processing and approving 
loans, do they take into account the unique circumstances of 
small businesses, or do they process these applications with 
the same criteria used for large businesses?
    Mr. Lambright. Well, one of the components of the changes 
that have been made recently has been to identify small 
business specialists in each of the business units, so as they 
process transactions, the people who are handling the small 
business applications are people who have an expertise and a 
sensitivity to the particular characteristics of small 
businesses.
    Ms. Velazquez. And regarding the 10 percent aside for 
minority and women-owned export businesses, according to 
current bank reports, it already provides 12 percent of the 20 
percent small business financing set aside to these firms. Do 
you see this provision in the legislation as a step backwards 
for these firms? And would you agree to increase it to 15 
percent?
    Mr. Lambright. Well, I am reluctant to embrace any 
particular target, because the Ex-Im Bank is demand-driven, and 
it's always troubling when the Bank is held to a particular 
quantified target when we don't control the characteristics of 
the economy, or the market at any given time.
    But you correctly note that we have already done, in fiscal 
year 2005, 12 percent of our small business activity went to 
minority and women-owned businesses. And I would note, 
Congresswoman, that that is probably underreported, because we 
cannot mandate that our customers disclose their status. And so 
that 12 percent only reflects those who are willing to report 
their status.
    And so, I think the number is probably really larger, and I 
would like to see it get even larger and larger, as we focus 
more on that outreach side.
    Ms. Velazquez. Thank you.
    Chairwoman Pryce. Well, thank you very much, Mr. Chairman. 
Your testimony has been invaluable, and working with you is a 
pleasure. We appreciate your cooperation, and we will be back 
with you again.
    Mr. Lambright. Thank you very much.
    Chairwoman Pryce. At this time, as Chairman Lambright 
exits, we can seat our next panel.
    We expect a series of votes at about 3:45 or 4:00, and so 
we will try to get through this testimony and as many questions 
as we get in. Hopefully, we will wrap this up before our vote.
    So, before I introduce our second panel, I would like to 
ask unanimous consent to include in the record a written 
statement by Brett Silvers. Mr. Silvers is the president and 
CEO of World Business Capital. Mr. Silvers has worked 
extensively with the Bank, and we believe his written statement 
adds much to this discussion. Without objection, I will add his 
statement to the record.
    And for our second panel, we are pleased to welcome here 
today Mr. Ed Rice, president of the Coalition for Employment 
Through Exports. The company specializes in issues of export 
financing and export promotion, and is comprised of 35 major 
U.S. exporters.
    And Jim Morrison, president of the Small Business Exporters 
Association. The Small Business Exporters Association is the 
largest non-profit organization of small and medium-sized 
exporting companies in the United States. Mr. Morrison is a 
member of the President's advisory committee on trade policy 
and negotiation.
    And finally, Mr. James Harmon, whom I will allow Mrs. 
Maloney to introduce, since he happens to be a constituent of 
hers.
    Mrs. Maloney. I am delighted to welcome James Harmon from 
the great City of New York. And Mr. Harmon was the president 
and CEO of the Ex-Im Bank from 1997 to 2001, and is now the 
head of Harmon and Company, a financial advisory firm.
    Both in his capacity at Ex-Im and in his present capacity 
with the World Resources Institute, he has made substantial 
contributions to a number of the concepts reflected in this 
bill. He is also a former chairperson and CEO of the investment 
banking firm of Wertheim Schroder.
    He has been deeply involved in education, serving on the 
boards of Barnard and Brown, and currently Columbia, and is 
acutely aware of the problems that our young people face in the 
economy by the global marketplace, and the need for a strong 
role for Ex-Im in promoting U.S. companies and making them 
competitive. Thank you for your many years of service. We are 
delighted to have you here today, Mr. Harmon. Thank you.
    Chairwoman Pryce. And now we will begin testimony. We will 
first hear from Mr. Rice, then Mr. Morrison, and, finally, Mr. 
Harmon. Mr. Rice, you may proceed, thank you. And your full 
remarks can be included in the record, if you would like to 
summarize.
    Mr. Rice. Yes.
    Chairwoman Pryce. Thank you.

     STATEMENT OF EDMUND B. RICE, PRESIDENT, COALITION FOR 
                   EMPLOYMENT THROUGH EXPORTS

    Mr. Rice. Thank you, Madam Chairwoman, Representative 
Maloney, and members of the subcommittee. First, let me commend 
the sponsors of H.R. 5068. This is a thoughtful and careful 
proposal. It is an excellent basis, from our viewpoint, for the 
legislative process moving forward. And we commend your staff 
in supporting your leadership on this. It is a very good 
proposal. Doubtless, refinements and amendments will be 
considered and made as the process goes forward, and we 
certainly want to contribute to that, as you consider this 
legislation.
    Let me make three points very briefly. First, the need for 
Ex-Im Bank for our exporters is increasing, as the data from 
Chairman Lambright indicated. Financing is an increasing point 
of competitiveness, internationally. Ex-Im Bank fosters 
commercial export loans through its guaranteeing and insurance 
business, and that's virtually all that Ex-Im is doing now, is 
guarantees and insurance of private financing.
    It has the authority to make direct loans, but last year, 
of their 3,100 transactions, none were direct loans. And the 
year before, there were only five. So, Ex-Im really is 
supporting the private sector.
    As you look at other government activity, export credit 
agencies around the world are expanding and becoming more 
aggressive. In 2004, which is the most recent year for data, 
the total ECA activity was approaching $800 billion a year, 
globally. And that's getting close to about 10 percent of world 
trade flows. So export credit agencies are playing a growing 
role.
    There are new entrants that are coming onstream, including 
in China, and there are new services from the existing export 
credit agencies, as well.
    The second point is that H.R. 5068 will strengthen Ex-Im 
Bank's programs. You have included provisions, as you have 
discussed, in small business to encourage co-financing, to 
reauthorize the so-called dual use program, to sharpen the 
board's role in the economic impact cases, and to expand 
transparency and outreach to exporters. And, in my view, the 
most important provisions are increasing the reporting, and 
therefore, your oversight of the Bank.
    The third point is that Ex-Im Bank is both fiscally and 
financially sound. And in the era of steadily worsening deficit 
situations--this is an extremely important point, I think, for 
the Congress to take into account--Ex-Im Bank generates 
revenues. This is a fee-based operation. It charges fees and 
interest. These are risk-based, and they are market-level. 
There is no subsidy of interest rates at all in Ex-Im Bank's 
programs, and that's according to the annual OMB report to 
Congress on all lending programs.
    Last year, Ex-Im Bank generated a net income, positive 
income to the United States Government, of $2.6 billion, up 
roughly $500 million from the year before. Further, Ex-Im Bank 
maintains reserves against its exposure. It currently has--or 
at least at the beginning of the fiscal year, it had--
approximately 7.6 billion in reserves against its $63 billion 
in exposure. This committee, more than all others, will 
understand that that's a very healthy reserve rate for a bank.
    I raise these points because it's often not clear to the 
Congress that Ex-Im Bank is really operating as a net positive 
benefit to the government, and it certainly is no drain on the 
budget or on the taxpayer.
    Madam Chairwoman, let me conclude there, so we can move on 
to your questions.
    [The prepared statement of Mr. Rice can be found on page 67 
of the appendix.]
    Chairwoman Pryce. Thank you very much.
    Mr. Morrison?

      JAMES MORRISON, PRESIDENT, SMALL BUSINESS EXPORTERS 
                ASSOCIATION OF THE UNITED STATES

    Mr. Morrison. Representatives Pryce and Maloney, and 
members of the subcommittee, good afternoon. I thank you for 
inviting me to appear here today.
    I am Jim Morrison, the president of the Small Business 
Exporters Association of the United States. We are, as you 
noted, the oldest and largest association dedicated exclusively 
to small and mid-sized exporting companies. We also serve as 
the international trade council of the National Small Business 
Association, and we represent their 22,000 exporters on all 
international trade issues.
    SBEA and NSBA strongly support the reauthorization of 
Export-Import Bank. In our written testimony, we explain why in 
greater detail. But suffice it to say without Ex-Im, smaller 
exporters in this country would have virtually no way of 
offering terms to most of their foreign buyers.
    The larger the export sale that a small business is 
attempting, the more indispensable that Ex-Im is. So we want to 
thank the subcommittee, its staffers, as well as many people 
from the full Financial Services Committee, for helping craft 
H.R. 5068. It's an excellent bill. You have listened carefully 
to the Bank and to the private sector, and you have done a 
remarkable job of addressing the challenges that the Bank faces 
going forward.
    My colleagues on the panel have, and will, speak to other 
aspects of the bill. But I want to mention some items relating 
to small business.
    First, the bill wisely leaves intact the key mandate from 
the last reauthorization, that Ex-Im provide at least 20 
percent of the dollar value of its financing directly to small 
businesses. The Bank has met this threshold in the past, and it 
can do so again. What it needs now are product and process 
upgrades, as well as additional outreach.
    Second, the bill gives the Bank a well-deserved pat on the 
back for its innovative small business committee concept. This 
committee would tap into small business expertise all across 
the Bank to suggest improvements in helping smaller companies.
    Third, the bill gets the Bank to delegate more authority 
for medium-term financing to banks and brokers, as Ex-Im has 
done for other products. Medium-term financing is what propels 
some of our country's most valuable capital equipment exports 
by both small companies and large, and the financing process 
needs to be as efficient as possible.
    We would also encourage the subcommittee to consider 
additional medium-term measures, suggested to you in the letter 
you just entered into the record by Mr. Brett Silvers, an SBEA 
member whose financial institutions have extraordinary records 
of supporting small business exporters.
    All in all, H.R. 5068 makes some very positive changes for 
small business. We would suggest some further refinement in one 
area of the bill, however. The bill creates a small and medium-
sized enterprise division at the Bank, answering directly to 
the Bank president, which is a step that SBEA has strongly 
backed, and we thank you for doing that.
    But we have always believed that the SME division must have 
authority commensurate with its responsibility. The 
subcommittee clearly intends for the SME division and the 
person heading it to be responsible for improved SME 
performance at the Bank.
    Yet the division and the person heading it, under this 
legislation as it stands now, would not have the authority to 
do underwriting. It would not have the authority to set credit 
standards, it would not have the authority to change any 
products or processes, to approve transactions, or to require 
anyone in the transaction cycle to do anything.
    The SME division would be focused on giving advice to other 
elements of the Bank, on training, on outreach to the public, 
and on business development. These are useful and fine 
activities for this division, and certainly input is necessary 
to get output.
    But what matters now is how companies are treated once they 
get in the door. What matters is how the transactions are 
handled, and the Bank's output. If we have to choose between 
having business outreach people in the SME division and having 
underwriters in it, as some have suggested, then Congress ought 
to take the underwriters. The business outreach people can be 
assigned elsewhere.
    It is a core small business team, with underwriters, that 
has spelled success for OPEC, for Canada's export credit 
agency, and for private sector lenders like GE Capital. We, 
frankly, do not see how the SME division can succeed in its 
responsibilities without the authority to handle products, 
processes, and transactions, and without creating a stable and 
meaningful institutional environment for Bank employees that 
want to focus on SME's.
    We suggest that the subcommittee clarify this by calling 
the SME division the ``SME Finance Division,'' and by assuring 
that it has the authority to manage the responsibilities that 
Congress is giving it.
    SBEA, like you, as the oversight committee, is pinning many 
hopes on this division, and on the individual who leads it. 
You, as the oversight committee, will want to be able to bring 
this person up here, and to get answers about what is working 
and what is not working in the way the Bank handles its SME 
transactions. Answers and action.
    But right now, the way the bill is written, the only honest 
answer such a person could give you is, ``I don't know, and I 
can't do it, because I'm not in charge of it.'' You need better 
accountability than this, and so do smaller exporters.
    We again thank the subcommittee for its excellent work thus 
far, and we urge that Ex-Im be speedily reauthorized.
    [The prepared statement of Mr. Morrison can be found on 
page 55 of the appendix.]
    Chairwoman Pryce. You were right on the money. 5 minutes, 
exactly. Thank you.
    All right, Mr. Harmon?

 STATEMENT OF JAMES HARMON, CHAIRMAN, WORLD RESOURCES INSTITUTE

    Mr. Harmon. Thank you, Madam Chairwoman. And thank you, 
Congresswoman Maloney, for the nice comments that you made 
about me. It's always good to come to Washington, because the 
introductions are always better than they are in New York.
    I am going to zip through what I have written, because you 
all have seen it, and so that I can cover the time period. You 
should know that most of the first page is devoted to the good 
work that Congress has done.
    And I didn't appreciate it when I was chairman at Ex-Im 
Bank, which clearly, I was honored to be, but I often saw 
Congress not being as productive as it could have been. I now 
look back on it and I think that without the small business 
exports target, we would not have done what we did do, even 
though it's not as much as you would wish.
    Clearly, without the environmental procedures, we would not 
have been in the game where we should have been. Thank goodness 
we did that. And clearly, without AGOA, we would never have 
done what we did in Africa. I might add that, in 1945, 
establishing the Ex-Im Bank as a sunset agency of the United 
States Government was a very wise decision.
    I look back on the excellence of the staff at the Ex-Im 
Bank, and the wisdom of Congress as critical to the success of 
the Agency. Having said that, I would like to think that you 
would apply that experience and wisdom to continue to improve 
Ex-Im Bank.
    So, I'm going to jump ahead to what I see as some of the 
critical areas, very briefly. First, economic impact needs a 
more precise definition and a designated referee. For example, 
the issues like oversupply. I struggled a lot with this at the 
Bank. I think they probably still struggle with these issues.
    Secondly, Tied Aid needs clarification, purpose, and 
control in today's world. If not, give the money back to the 
Treasury. It takes too much time and too much grief for 
everybody--Ex-Im Bank, from my experience, not to deal more 
clearly with this issue of Tied Aid. I have said this already 
to the Treasury.
    Third, you are already extending the Sub-Saharan African 
Advisory Committee, and the work there, which I think is so 
essential right now for, well, small business needs, enhanced 
resources, and a greater focus by the Bank's leadership. I am 
going to make one other comment on that in a moment.
    Fourth, the environment. I have three comments on the 
environment that I would like to make. I would create a 15 
percent target for renewable energy products and services. I 
would apply the target against long and medium-term energy 
transactions, excluding hydro. That would make the Bank reach 
to do more, and the Bank can do more in all the things you 
want. When the Congress sets targets, people at the Bank 
respond, and do what they can to reach those targets.
    A second area that I would create is a renewable energy 
advisory committee, which I know you've done before. I would 
either recreate it or create it to meet at least semi-annually, 
each year for 5 years, with five members, at least two of which 
should come from the relevant NGO world. Each year the 
committee must issue a report to Congress on progress in and 
constraints to increasing renewable energy activity in the Ex-
Im Bank.
    Third, I think the report language is critical. Congress 
should send a clear signal to the Ex-Im Bank and the Executive 
Branch to keep pushing for highest environmental standards and 
the OECD common approach process this year. The U.S. Government 
should continue its long-standing bipartisan effort to raise 
the bar on environmental standards for exports, while creating 
a level playing field in the ECA community.
    Now, since I have left the public sector, I have worked 
closely with a lot of U.S. companies expanding into the 
developing world, and I have been channeling institutional 
money into investing in the emerging markets. These are 
critical markets for the future. That is, the entire developing 
world.
    I support what the committee wants to do regarding small 
business, although I am somewhat concerned about the lack of 
funds available from Ex-Im Bank to execute this program. I 
always believed then, and I believe now, that delegated 
authority, concurrent with some risk sharing, was the key to 
dramatically increasing marketing to small business exporters.
    The concept of a public/private form of joint venture could 
achieve what all of us want for small business exporters. We 
don't have a marketing capacity. No one in the United States 
Government markets well. Ex-Im is the closest thing to being in 
the private sector within the government, but it doesn't have a 
marketing arm. It's not expected to. But the banks could play 
such a role, if we wanted them to.
    Then, Tied Aid and economic impact, in my mind, are 
yesterday's issues. Today, business and labor face a much 
different kind of challenge. China's export credit agency is 
bigger than the U.S. Ex-Im Bank. In my opinion, it's the 
largest in the world. Moreover, it is growing faster than all 
the other export credit agencies in the G7. And no one is 
focusing on it.
    Within the--without OECD restrictions, without 
environmental standards, China is playing on a different field. 
The world may be flat, but because of China's industrial 
policy, it is tilted in its favor. If you add India, Brazil, 
and other large developing countries, I am concerned that the 
United States and, in fact, the G7--are no longer competitive.
    This is today's and tomorrow's challenge. And this 
committee, or this subcommittee, should be studying the impact 
of this development. In fact, I would suggest that Congress 
commission a study on this matter.
    The current Ex-Im Bank reauthorization is focused a bit too 
much on old business, some of which must be done, but Congress 
has a responsibility to look ahead and think long-term. If the 
level playing field continues to be tilted, what will happen to 
our industries and to our jobs? I believe these questions can 
have positive answers with real leadership today.
    I believe we can restore U.S. export competitiveness, and I 
believe, with the appropriate guidance and support of this 
body, the Ex-Im Bank can play a defining role in achieving this 
goal.
    I appreciate the opportunity to appear before you. I tried 
to zip through so I could get it done. It's good to see 
everybody, and I will take whatever questions you have.
    [The prepared statement of Mr. Harmon can be found on page 
40 of the appendix.]
    Chairwoman Pryce. Well, thank you very much, Mr. Harmon. 
Let me start.
    You say this legislation deals a bit too much with 
yesterday's issues, and you put Tied Aid in that category. And 
you say the world is flat. Well, what--let's get into that a 
little bit more. How do you see this legislation, Ex-Im making 
the world a little less tilted toward China, if we don't make 
use of the Tied Aid, and how would you propose we proceed 
there?
    Mr. Harmon. The first comment is it's a little embarrassing 
for all of us who worked at Ex-Im for the 4 years, and for, in 
my opinion, a lot of people in Congress, that we haven't done a 
Tied Aid case at the Ex-Im Bank--I think it's 5 years, or 
something like that.
    Chairwoman Pryce. And why not?
    Mr. Harmon. And it's because, you know, in coming back I 
have nothing to lose from being candid with you all. And that's 
not always done, maybe.
    But Treasury has a different attitude than Ex-Im Bank. 
Treasury, in all good intentions, has a different position on 
Tied Aid than most other parts of the United States Government. 
Treasury frustrated every effort that I tried to do to move 
forward on Tied Aid cases in the last year or two while I was 
at the Ex-Im Bank, and I am certain--without evidence--that 
they have not done much more since then.
    So, unless Treasury changes its attitude, or unless you get 
an official referee in this matter, nothing will get done on 
Tied Aid cases.
    Secondly, what is happening now in the world is that the 
customers of Ex-Im Bank have become, or are becoming, the 
competitors. So while China was a principal large source--or 
you might say customer--for our products, now China has an 
export credit agency. In fact, China itself is what I call the 
mother of all export credit agencies, because they are 
financing so much of our purchases of their goods and services.
    Therefore, most people haven't focused on their export 
credit agency. Their export credit agency is growing at a 
terrific rate. It doesn't have to live within the standards 
that we have, so it's very tough to compete with them.
    To use Tied Aid funds to match China would eat up our Tied 
Aid funds in a month. It's not an answer. We don't have enough 
resources, in my opinion. I think--I'm guessing--at the Tied 
Aid capital fund, maybe 250 million, or something like that. 
That would not be adequate to do what we need to do in meeting 
the challenge of China. Not to mention other developing world 
countries.
    So, that's a big problem for the future. I'm not, by the 
way, being critical of this bill. I think you make a lot of 
steps in the right direction. Unfortunately, as I listen to the 
questions and answers, I thought to myself the deja vu of this 
is--I could have played this script out for the years that I 
was there, and I was there from 1997 to 2001. What--
    Chairwoman Pryce. Well, we don't want to have a deja vu. We 
want to progress into the global economy. And do you have 
solutions that we should be considering when it comes to China?
    Mr. Harmon. I think that's the hardest question to answer. 
We have to get the facts. I mean, either this subcommittee or 
Congress should get the facts together. No one I have asked has 
exact information on the export credit agency of China. I 
believe I have some information, only by anecdotal basis. I 
know it's very large. I think you should be able to find this 
out.
    But knowing that Treasury does not know the answer because 
I have asked there--and I think one of the things you could do 
is commission some kind of study. I don't know if the study is 
done by--who would do that study, but there are a lot of people 
who are qualified to look into this, come back to you, and give 
you a report.
    If it's as big and growing as fast and is doing what I 
think they're doing, then this subcommittee has to take some 
kind of appropriate action. And I don't think people know 
enough about it. So, the first thing I would do is gather the 
information.
    Chairwoman Pryce. All right. Well, thank you. We will keep 
that on the front burner and see where we go with it. In the 
short time I have left, Mr. Rice, did you have any 
recommendations for the committee on--or Ex-Im itself--on 
products and services that would be more attractive and useful 
to your customers?
    Mr. Rice. Yes, I do. And I have gone into some of that in 
my statement, but let me try to highlight. And some of this is 
reflected in your bill. As a matter of fact, a good deal of it, 
which is why we support that.
    In the small business area, I think Mr. Harmon and Mr. 
Morrison have both indicated that delegating the authority to 
private banks under some sort of contract arrangement, I think, 
is the only way to go. It's important to straighten out the 
structure within Ex-Im Bank. But that, in and of itself, is not 
going to take Ex-Im to the next level on small business. The 
private banks are where the lending expertise and underwriting 
expertise are. And that could be expanded greatly.
    Co-financing is going to become a very important product 
and service for Ex-Im, and that's where you have one or more 
export credit agencies combining when you have a multi-national 
bid consortium. This isn't becoming extremely important on the 
largest worldwide bids.
    Europe is way ahead of us on this. As my testimony 
indicates, there are four European governments that have taken 
the lead in basically coordinating many of the EU export credit 
agencies together, so they can better finance their companies 
against ours. We are way behind on this. It's not really Ex-Im 
Bank's fault, if you will. It's much more that U.S. Government 
policies have made it hard to work out these agreements. That's 
the second.
    The third is more of a culture issue at Ex-Im. The U.S. 
Government is going to have to, I think, completely relook at 
its willingness to take risk in international markets. This is 
the single biggest difference that our members say between Ex-
Im Bank and other export credit agencies. It's the willingness 
to take risk, the aggressiveness of providing financing, and at 
this point, there is no benefit for any Ex-Im loan officer to 
say yes to a case. It's all downside risk for that person 
working there; it didn't used to be that way.
    One specific suggestion would be to have the management and 
loan officers rated each year on the amount of business that 
they write, just like a commercial institution would.
    Let me stop there.
    Chairwoman Pryce. Yes. Well, I'm sorry, my time is way 
expired, and--but we will talk more. Thank you very much. Mrs. 
Maloney?
    Mrs. Maloney. Well, I want to thank all the panelists for 
their testimony, and their really good ideas. And I certainly 
would like to work in a bipartisan way on the idea you just put 
out there, Mr. Rice, on rating their productivity.
    And I think the point that you made earlier, that we had a 
net income of $2.6 billion that we made, literally, off of the 
Ex-Im Bank, and with a deficit and a debt of over $8 trillion, 
to have an agency that's literally making money and helping 
with American exports, should definitely be supported.
    Mr. Harmon, I really liked your idea of having a percentage 
target for renewable energy products. That is a bipartisan goal 
of our country for renewable energy. I think that is an 
excellent idea. Again, I am in the minority, but I would love 
to join with a majority person to work on that amendment.
    And your idea, also, of just getting a hand on what's 
happening with China with their export credit agency, I 
certainly would support a commission to study this. But I think 
it would be more productive if the current head of Ex-Im Bank 
was a member of that study, as well as former presidents, that 
have a real feel for what's going on.
    When you read the world is flat, it's a tremendous wake-up 
call to the competitive world environment that we're all in. 
And I think those three ideas, I think, are tremendously 
important. I agree that it's difficult, but we have to make it 
work.
    We have to be more competitive. We have to export more, and 
we have to really get a handle on what's happening with our 
competitors in the world economy. We don't want to lose our--
where we are. We don't want to fall backwards. We certainly 
want to go forward, and we want to be competitive in this new 
world economy.
    I want to ask Mr. Harmon a question that I always asked 
Chairman Greenspan. What do we do about the outsourcing of our 
jobs in the world global economy where we seem to be losing 
with the account deficit, with the trade deficit? And his 
answer is always, ``Education.'' And I notice you have a big 
commitment to education, serving on three educational boards.
    And to me, I think it is structurally more in our--
structure of the world economy that we're moving into, not just 
education. I represent some of the brightest people, very 
highly educated, and they're out of work, or their jobs have 
gone out of business. And we continually ask Chairman 
Greenspan, ``What do we do about the global economy to stay 
competitive,'' and his answer is always, ``We need to invest 
more in education.''
    To me, that's not--we're investing in education. We have 
educated people who can't find jobs. And I just would wonder 
what your response to that is, how we as a Nation confront the 
global challenges, not just for the Export-Import Bank, but in 
a broader sense.
    Mr. Harmon. Thank you. This is a subject which, actually, 
Chairman Greenspan and I used to toss around a lot during those 
years. It's not an easy thing to have a simple, silver bullet 
answer.
    I do believe that we have to all recognize, first, that the 
rest of the world has caught up to us. The United States, with 
4-1/2 percent of the world's population, and 26 percent of the 
global wealth, that will not continue. It cannot continue. So, 
we are in a period of time where we are not going to represent 
that share of the wealth of the world. It couldn't continue.
    Now, it is accelerated somewhat, because of the deficit 
that we have had. So, what does it mean? First, I think we have 
to follow what China and the other developing countries are 
doing on supporting their own exports, which I have said 
already. We have to know more of what they are doing. Because 
if they're doing as much as I think, then we have to be 
competitive. And if we're not competitive, we're going to lose 
even more than what we're losing.
    I do--you cannot minimize--I mean, you can't say enough 
about education. Of course he's right about that. That's a 
long-term answer. But the other countries are doing just the 
same. I travel the world now all the time, representing 
investment in those countries, and frankly, you see how far 
they are coming. This is a particularly serious problem.
    I think that the deficit is related to it. In other words, 
if we continue to have the size of the deficit we have now, we 
are going to eventually have a serious decline in the dollar. 
That's going to be--that's going to put us into even a more 
difficult position.
    So, we have some serious fiscal problems which we don't 
want to get into in this committee right now. So there are some 
macro issues that are going to impact this that do concern me.
    The one that directly impacts Ex-Im Bank, Ex-Im Bank is a 
valuable tool. The other trade finance agencies are, too. 
Sadly, in the last 5 years, this Administration hasn't done 
everything it could to utilize these tools, as you have heard 
already from us today. They could do a lot more on small 
business, they could do a lot more, in my judgement, about the 
issues that we have discussed.
    I would look seriously, if I were the--in the government, 
to a way to relate the work of the three trade finance 
agencies, so that they're more effective, so that they 
communicate to each other, so that they can create a more 
competitive position for us. But we could increase our exports 
there--
    Mrs. Maloney. Okay. Can you itemize the three trade 
financing agencies that you would like to see working together 
better?
    Mr. Harmon. I always--the people behind me are likely to 
smile a little bit, because they knew that was a favorite 
subject. I would have put OPIC and Ex-Im and TDA in the same 
building, so that we talk to each other.
    I was tired of going to countries, and going out one door 
and seeing the president of OPIC coming in that door, because 
we didn't know they were going there. It was unnecessary. There 
could have been better communication. Maybe there is now. I 
suspect there isn't.
    But, clearly, if you had at least some coordinating 
effort--someone at the White House could do this--to coordinate 
the trade finance agencies to be more effective.
    Secondly, they should really look closely into how they--
what more they should do in the three trade finance agencies. 
And all you have to do is look at what other countries are 
doing. Other countries have made more restructuring efforts, 
have made more progress--when I left the Ex-Im Bank, we were 
the seventh largest export credit agency.
    As a measurement of our support for exports, as a 
percentage of our gross domestic product, if I remember 
correctly, we were way down the list. So we were nowhere near 
competitive in making our effort. This is a significant 
question we have to think about, but at least we can be more 
effective if we coordinated more, and if there was more 
overwatch.
    One other thing I did want to say. It doesn't matter too 
much, 5 years or 4 years on reauthorization. What mattered to 
this committee always concerned me. In other words, every time 
you asked--you called for a hearing, and I had to testify, I 
ran around and talked to everybody at the Bank, and we tried to 
figure what were we doing wrong, what did we have to do more. 
The power of this committee is very significant. It's not just 
reauthorization. It's that we thought a lot about what we had 
to do more, so in reporting to you, we could say we achieved 
that. So, monitoring the Ex-Im Bank is going to be critical.
    Lastly, when I arrived at the Ex-Im Bank in 1997, I was the 
fifth chairman in 5 years. This chairman who comes in is the 
fourth chairman in 5 years. The other countries have one 
chairman. They run it as a business. Ex-Im is the closest thing 
to the business sector.
    There is not much you could do about that, in my opinion, 
but it's a huge handicap that we operate to, because you 
arrive, and even if you spent a lifetime in the financial 
world, as I have, it took me a year just to understand what Ex-
Im was doing, and to be able to make a significant impact.
    Fortunately, this chairman has been at the Bank for some 
years, so he has a bit of a head start. So, the turnover in 
leadership--I mean, you don't want me to go on, because you 
have--
    Chairwoman Pryce. We have to stop there. Our time is 
expired, except for Mrs. Biggert.
    Mrs. Biggert. Thank you. Mr. Morrison, some people think 
that the Bank would have to disapprove large business 
transactions in order to meet their mandated 20 percent of all 
transactions to go to small businesses.
    What would you suggest that the Bank do to meet both the 20 
percent mandate, and at the same time, not hurt other business 
clients at the Bank?
    Mr. Morrison. Well, the simplest thing is for the Bank to 
manage for a goal of 21 percent or 22 percent. That would give 
the Bank a cushion against any unforeseen large transactions 
occurring toward the end of the fiscal year. If you aim for 20 
percent and give yourself no margin of error, then you are, of 
course, vulnerable to those kinds of difficulties.
    But having said that, I think that it's not the goal of my 
association, or I think Congress, to stop any export sale. We 
are all here because we believe in trade and we believe in 
exports. I think, in those situations where Ex-Im is going 
along toward a 20 percent goal, and fails to meet it, it's an 
oversight responsibility of this committee, and it's a 
reporting responsibility of Ex-Im to explain why it happened in 
very specific terms, and to talk about remedial efforts that 
will be undertaken to meet the goal going forward.
    And I also think that the committee might wish to ask for 
quarterly reports, rather than annual, in that situation to 
monitor more carefully Ex-Im's movement back toward the 20 
percent goal.
    Mrs. Biggert. Okay. Then what are some examples of exporter 
performance standards that the Bank should implement to meet 
the special circumstances of small business concerns?
    Mr. Morrison. The standards that would be helpful to rate 
the Bank on are things like customer acquisition, customer 
retention, customer satisfaction, and the rise in the dollar 
value of exports by small companies.
    Each of those is an indication the Bank is doing its job, I 
would think.
    Mrs. Biggert. Are there other U.S. institutions that the 
Bank works with to streamline the processing of applications 
for bank assistance for small business concerns?
    Mr. Morrison. Well, as you may know, most of the short-term 
activities of the Bank are done in a delegated way, through 
banks and brokers, and they, of course, have a competitive 
reason to try to move the transactions through more rapidly, or 
otherwise the customers will go somewhere else.
    The problem with medium term all being done by the Bank 
itself is that those competitive pressures don't exist. That is 
one of the problems. But there are probably lots of other 
opportunities for the Bank to reach out.
    I know it does some transactions in tandem with the Small 
Business Administration, certain kinds of transactions that are 
above SBA's limit. But in general, I think the simplest way to 
speed up the transactions is to work with the brokers and the 
banks.
    Mrs. Biggert. Okay. Thank you very much. I yield back.
    Chairwoman Pryce. All right, I want to ask unanimous 
consent for Mr. Manzullo's statement to be made a part of the 
record. Without objection.
    I thank our panel very much. You have provided terrific 
insights, and we value them. And thank you very much.
    I also want to thank the staff who worked so hard to put 
all this together so far, and thank you for your continued 
efforts.
    All right, without anything further, we are adjourned.
    [Whereupon, at 3:53 p.m., the subcommittee was adjourned.]


                            A P P E N D I X



                             April 5, 2006


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