[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


 
                       FULL COMMITTEE HEARING ON 
                     OVERSIGHT OF THE U.S. EXPORT-IMPORT 
                         BANK'S IMPLEMENTATION 
                     OF ITS SMALL BUSINESS MANDATE 

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

                      COMMITTEE ON SMALL BUSINESS
                 UNITED STATES HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                            JANUARY 17, 2008

                               __________

                          Serial Number 110-66

                               __________

         Printed for the use of the Committee on Small Business


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house

                     U.S. GOVERNMENT PRINTING OFFICE

39-788 PDF                 WASHINGTON DC:  2008
---------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing
Office  Internet: bookstore.gpo.gov Phone: toll free (866)512-1800
DC area (202)512-1800  Fax: (202) 512-2250 Mail Stop SSOP, 
Washington, DC 20402-0001

























                   HOUSE COMMITTEE ON SMALL BUSINESS

                NYDIA M. VELAZQUEZ, New York, Chairwoman


HEATH SHULER, North Carolina         STEVE CHABOT, Ohio, Ranking Member
CHARLIE GONZALEZ, Texas              ROSCOE BARTLETT, Maryland
RICK LARSEN, Washington              SAM GRAVES, Missouri
RAUL GRIJALVA, Arizona               TODD AKIN, Missouri
MICHAEL MICHAUD, Maine               BILL SHUSTER, Pennsylvania
MELISSA BEAN, Illinois               MARILYN MUSGRAVE, Colorado
HENRY CUELLAR, Texas                 STEVE KING, Iowa
DAN LIPINSKI, Illinois               JEFF FORTENBERRY, Nebraska
GWEN MOORE, Wisconsin                LYNN WESTMORELAND, Georgia
JASON ALTMIRE, Pennsylvania          LOUIE GOHMERT, Texas
BRUCE BRALEY, Iowa                   DEAN HELLER, Nevada
YVETTE CLARKE, New York              DAVID DAVIS, Tennessee
BRAD ELLSWORTH, Indiana              MARY FALLIN, Oklahoma
HANK JOHNSON, Georgia                VERN BUCHANAN, Florida
JOE SESTAK, Pennsylvania             JIM JORDAN, Ohio
BRIAN HIGGINS, New York
MAZIE HIRONO, Hawaii

                  Michael Day, Majority Staff Director

                 Adam Minehardt, Deputy Staff Director

                      Tim Slattery, Chief Counsel

               Kevin Fitzpatrick, Minority Staff Director

                                 ______

                         STANDING SUBCOMMITTEES

                    Subcommittee on Finance and Tax

                   MELISSA BEAN, Illinois, Chairwoman


RAUL GRIJALVA, Arizona               DEAN HELLER, Nevada, Ranking
MICHAEL MICHAUD, Maine               BILL SHUSTER, Pennsylvania
BRAD ELLSWORTH, Indiana              STEVE KING, Iowa
HANK JOHNSON, Georgia                VERN BUCHANAN, Florida
JOE SESTAK, Pennsylvania             JIM JORDAN, Ohio

                                 ______

               Subcommittee on Contracting and Technology

                      BRUCE BRALEY, IOWA, Chairman


HENRY CUELLAR, Texas                 DAVID DAVIS, Tennessee, Ranking
GWEN MOORE, Wisconsin                ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York              SAM GRAVES, Missouri
JOE SESTAK, Pennsylvania             TODD AKIN, Missouri
                                     MARY FALLIN, Oklahoma

        .........................................................

                                  (ii)

  


           Subcommittee on Regulations, Health Care and Trade

                   CHARLES GONZALEZ, Texas, Chairman


RICK LARSEN, Washington              LYNN WESTMORELAND, Georgia, 
DAN LIPINSKI, Illinois               Ranking
MELISSA BEAN, Illinois               BILL SHUSTER, Pennsylvania
GWEN MOORE, Wisconsin                STEVE KING, Iowa
JASON ALTMIRE, Pennsylvania          MARILYN MUSGRAVE, Colorado
JOE SESTAK, Pennsylvania             MARY FALLIN, Oklahoma
                                     VERN BUCHANAN, Florida
                                     JIM JORDAN, Ohio

                                 ______

            Subcommittee on Urban and Rural Entrepreneurship

                 HEATH SHULER, North Carolina, Chairman


RICK LARSEN, Washington              JEFF FORTENBERRY, Nebraska, 
MICHAEL MICHAUD, Maine               Ranking
GWEN MOORE, Wisconsin                ROSCOE BARTLETT, Maryland
YVETTE CLARKE, New York              MARILYN MUSGRAVE, Colorado
BRAD ELLSWORTH, Indiana              DEAN HELLER, Nevada
HANK JOHNSON, Georgia                DAVID DAVIS, Tennessee

                                 ______

              Subcommittee on Investigations and Oversight

                 JASON ALTMIRE, PENNSYLVANIA, Chairman


CHARLIE GONZALEZ, Texas               , Ranking
RAUL GRIJALVA, Arizona               LYNN WESTMORELAND, Georgia

                                 (iii)

  


























                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page

Velazquez, Hon. Nydia M..........................................     1
Chabot, Hon. Steve...............................................     2

                               WITNESSES


PANEL I:
Lambright, Honorable James H., Chairman and President, Export-
  Import Bank of the United States...............................     4

PANEL II:
Alford, Harry, National Black Chamber of Commerce................    18
Warfield, Paul, First National Bank of Omaha, on behalf of the 
  Independent Community Bankers Association......................    20
Yager, Dr. Loren, Government Accountability Office...............    22
Thiry, Steven, AMT - The Association for Manufacturing Technology    24

                                APPENDIX


Prepared Statements:
Velazquez, Hon. Nydia M..........................................    35
Chabot, Hon. Steve...............................................    37
Altmire, Hon. Jason..............................................    38
Lambright, Honorable James H., Chairman and President, Export-
  Import Bank of the United States...............................    39
Alford, Harry, National Black Chamber of Commerce................    43
Warfield, Paul, First National Bank of Omaha, on behalf of the 
  Independent Community Bankers Association......................    47
Yager, Dr. Loren, Government Accountability Office...............    54
Thiry, Steven, AMT - The Association for Manufacturing Technology    71

                                  (v)

  


                  FULL COMMITTEE HEARING ON OVERSIGHT 
                    OF THE U.S. EXPORT-IMPORT BANK'S 
                  IMPLEMENTATION OF ITS SMALL BUSINESS 
                                MANDATE

                              ----------                              


                       Thursday, January 17, 2008

                     U.S. House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:00 a.m., in Room 
2360 Rayburn House Office Building, Hon. Nydia Velazquez 
[chairman of the Committee] presiding.
    Present: Representatives Velazquez, Clarke, Sestak, 
Higgins, Chabot and Davis.

           OPENING STATEMENT OF CHAIRWOMAN VELAZQUEZ

    Chairwoman Velazquez. I call this hearing to order. Today, 
the Committee will review the Export-Import Bank's efforts to 
assist small businesses. Congress established the Bank seven 
decades ago to promote national competitiveness in an 
increasingly globalized economy. It was envisioned that this 
Agency will serve as a critical resource for domestic firms of 
all sizes, as they began to look abroad for new opportunities. 
But, unfortunately, this has not fully materialized.
    Currently, it is small U.S. firms that dominate foreign 
market sales, and operate at a trade surplus in numerous 
industries. Due to the ingenuity of this sector, small 
exporters are growing two times faster than their corporate 
counterparts. However, many still face hurdles when it comes to 
fully accessing the international marketplace.
    In order to provide assistance for these small firms, 
Congress has revised the Bank's charter multiple times. In 
2006, with the input of this Committee's members, legislation 
was enacted that refocuses the Agency's structure to better 
promote small exporters. Since adoption, it has been working 
and meeting its obligation under the legislation. However, 
there is still a long way to go before it is fully implemented. 
Overall, if I were to assign a grade, it will be an incomplete.
    While the Bank will point out that they have met their 
small business goal, the facts tell a different story. The 
number of small business loans is on the decline. In 2005, 
right before the legislation was enacted, there were 2,600 
awards, but today there are only 2,300, a drop of more than 10 
percent.
    These figures indicate that affordable trade financing is 
on the decline. The reality is that a smaller number of 
businesses are getting larger loans. What we need to see is 
more loans and more dollars. Until we see increases in both, it 
will be questionable if small businesses are the priority they 
are supposed to be.
    If it had fully implemented the 2006 legislation, perhaps 
these numbers would have been better. The Bank has failed to 
establish several key initiatives, including changes aimed at 
increasing bank lending, and reducing regulatory burden for 
both of which little progress has been made.
    The 2006 law also provides the authority to put U.S. firms 
on equal footing against heavily subsidized foreign firms. But, 
again, this is a tool that has failed to be used, and, again, 
small firms are left waiting.
    The effect of these delays is significant. By not 
implementing these programs, the Bank's actions are tantamount 
to cutting off assistance to small firms that are trying to 
access foreign markets. It is also deterring greater private 
sector involvement with export financing programs, which is a 
critical step to their expansion. Without the system mandated 
in the re-authorization legislation, many firms will be left at 
a disadvantage against their foreign competitors.
    As a result of the Bank's failure to establish key 
provisions of the 2006 re-authorization legislation, the 
Committee wants quick and decisive action on implementing these 
reforms. Going forward, we will continue to conduct regular 
oversight of its progress.
    Small exporters must be the priority at the Bank that 
Congress had envisioned. The 2006 legislation should be 
administered in a way that fulfills the mandated specific 
requirements, as well as its underlying purpose, which is to 
expand trade opportunities across the small business sector.
    As small firms increasingly look to international markets, 
and the nation's trade deficit remains unbalanced, Congress, 
Ex-Im Bank, and small business leaders must collaborate to 
promote U.S. interest in a global economy.
    I look forward to hearing ideas from the Bank, as well as 
industry representatives, on ways to improve its outreach and 
services to small exporters.
    Thank you all for your attendance today, and I now 
recognize the Ranking Member, Mr. Chabot, for his opening 
statement.

                OPENING STATEMENT OF MR. CHABOT

    Mr. Chabot. Thank you. I'd like to thank the Chairwoman for 
holding this hearing today to evaluate the U.S. Export-Import 
Bank's ability to serve the needs of the American small 
business community.
    I'd also like to thank our witnesses for being here today, 
and I appreciate their willingness to engage in this important 
discussion.
    Over the past two decades, obstacles to trade have been 
crumbling at a staggering pace. In the last 20 years, for 
example, the United States has entered into 14 separate free 
trade agreements with negotiations currently underway for 
several more.
    The benefits of disintegrating trade barriers for the 
average American, and American businesses, abound, including 
increased employment opportunities, increased wages, and 
increased profits for businesses that export their goods, and 
import material used to make their goods. This spike in trading 
opportunities also encourages businesses to produce a better 
product, and sell that product at a lower price to both 
Americans, and to consumers in other countries.
    The process of becoming a successful exporter can be 
extremely daunting for a small business, whether it's 
determining if you need a license to export your product, or 
making sure you have the proper insurance, the maze of tasks to 
be completed can prove to be a minefield. Financing your new 
exports can be a very considerable challenge, and sometimes the 
ultimate challenge.
    Established in 1934, the Export-Import Bank provides 
financing, insurance, and exporting advice to U.S. businesses 
that export. Although some, including myself, have had concerns 
in the past regarding the types of businesses the Export-Import 
Bank has financed, our focus today is on America's small 
businesses that export, and making sure they benefit from the 
Bank that we're talking about here today, and make sure that 
all the services provided are done in a very good manner.
    The 2006 Export-Import Bank Re-Authorization Act require 
the Export-Import Bank to take several steps to maximize 
opportunities with small businesses. The Re-Authorization put 
in place a structure, the Small Business Division, that bears 
the sole responsibility of insuring that small businesses have 
equal access to Ex-Im Bank products.In order to accomplish 
this, the Small Business Division should provide outreach and 
manage feedback from small businesses.
    Additionally, they should maintain a liaison for the Small 
Business Administration, advise small business concerns on 
financing products offered by the Bank, and provide insight of 
the technology department to strengthen the small business 
outreach.
    With these thoughts in mind, today we hope to ascertain 
just how productive these new standards put in place by the Re-
Authorization of 2006 have been for small businesses. Adherence 
would most certainly help to put U.S. small businesses on a 
more level playing field with other small companies around the 
world.
    Once again, I thank the witnesses for joining us today and 
look forward to your testimony. I might note that I'm also a 
member of the Foreign Affairs Committee, and we have a 
classified briefing on the recent assassination of President 
Bhutto, which I am hoping to attend, and it's my understanding 
that Congressman Davis will be substituting for me during that 
period of time, at least for some of the hearing, but I hope to 
be back. And so I'll be here for some, and away for some. So, 
again, thank you for holding this hearing.
    Chairwoman Velazquez. Thank you, Mr. Chabot.
    Now it is my pleasure to welcome Mr. James H. Lambright. 
He's the President and Chairman of the Board of the Export-
Import Bank of the United States, the U.S. government's 
official export credit agency. Prior to his work with Ex-Im 
Bank, he served as an investment banker, an attorney 
specializing in real estate, and venture capital.
    Sir, welcome, and you have approximately five minutes to 
make your presentation.

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

    Mr. Lambright. Good morning. Thank you, Chairwoman 
Velazquez, Ranking Member Chabot, and Members of the Committee. 
It's my pleasure to be here with you today.
    Each passing day, the U.S. grows more economically 
interdependent with other nations across the globe, both as 
partners and competitors. For decades, the industries, both 
large and small, that drive the American economy have provided 
an example to the world, and many competitors have proved to be 
fast learners.
    As a result, the divide that once existed between the 
United States economy and that of the rest of the world has 
narrowed, not because our economy has taken a step back, but 
rather because other nations' economies have advanced. This is 
a reminder that America's preeminence in the global economy is 
the product of achievement, not birthright.
    Our station can only be maintained through the hard work 
and entrepreneurial spirit of American businesses and workers. 
Our GDP growth has increasingly been driven by exports, and 
exports have increasingly been driven by small exporters. 
Ninety-seven percent of all U.S. exporters are small firms, and 
they sell over a quarter of the value of U.S. manufactured 
exports.
    These small exporters create opportunity. Workers in such 
firms can expect, on average, 15 percent higher wages. Women 
and minorities are particularly strong drivers of job growth 
right now. Women own more than a quarter of all American 
businesses today, and that number is growing. And Hispanic 
Americans are opening their own businesses at a rate three 
times the national average.
    It's a great time for these firms to export. Ninety-five 
percent of the world's population lives outside of the United 
States. The buying power of these customers continues to grow. 
Yet, only a tiny percentage of America's small businesses 
export, and of the nearly quarter million that do, the majority 
sell into only one market. That's because exporting poses a 
variety of challenges; from the time and money required to deal 
with documentation, travel, and shipping, to increased risks 
from unfamiliar languages, relationships, and business 
practices.
    This is why in 2006, I directed our network of seven 
regional business development offices to dedicate their 
outreach and marketing efforts exclusively to small businesses. 
And these offices are working closely with the local export 
assistance centers to reach as many small businesses as 
possible.
    The Export-Import Bank can help small businesses reach new 
markets and shoulder new risks through a variety of financial 
products. We offer loans, insurance, and guarantees as a lender 
of last resort to insure U.S. companies are able to finance 
export sales that otherwise would not go forward.
    In essence, the Bank exists to bolster the U.S. economy and 
employment through trade finance. So my priority since assuming 
my current position has been to make sure we at Ex-Im Bank are 
doing everything we can to be as effective and efficient as 
possible in serving small businesses within the bounds of the 
niche we fill in the financial world.
    We've listened to the small business community, and to 
Congress, and we've made changes accordingly. And our changes 
have addressed every stage of the small business experience 
inside Ex-Im Bank. In addition to more organizational focus on 
outreach, we've made technological improvements to allow 
customers to use the internet to apply for our small business 
programs. Today, every short-term insurance and medium-term 
application can be filed and tracked through Ex-Im online.
    We've also identified small business specialists in each of 
our operating units to provide our customers with professional 
staff knowledgeable about, and sensitive to, the particular 
characteristics of small businesses.
    Processing transactions involves nearly every division of 
the Bank. That's why we established an Ex-Im Bank Small 
Business Committee, chaired by the Senior Vice President for 
Small Business, and comprising senior members of each division 
to coordinate, evaluate, and make recommendations for a 
successful small business strategy involving all of the Bank's 
functions.
    We've also retooled our claims process, so that insurance 
claim denials can be appealed to a senior level committee that 
includes the Senior Vice President for Small Business.
    I appreciate the Congressional guidance that shaped these 
reforms. And I want to extend an ongoing invitation to all the 
Members of this Committee to continue to work with me, the 
Bank's Board, and the Bank's staff on our service to America's 
small businesses, because I agree with Chairwoman Velazquez, 
that more can always be done on this critical front.
    So far, the results have been good. Our small business 
continues to grow. In fiscal year 2007, we authorized $3.4 
billion in direct support of small business transactions, up 
from $3.2 billion the year before. For the past two fiscal 
years, we've exceeded the target set for us by Congress that 
the value of our small business authorizations be at least 20 
percent of our overall authorizations, with the 2007 ratio 
coming in at 26.7 percent. In terms of numbers of transactions, 
over 85 percent of our total were directly for small 
businesses.
    I should note, we're equally proud of the indirect support 
our financings provide small businesses, that act as suppliers 
to larger exporters.
    While important, the data only tell part of the story, that 
we supported nearly 2,400 transactions with small business 
exporters this past year. I'll limit myself to just one 
illustration of the Bank's impact on a customer.
    The Robbins Company of Solon, Ohio, used a $25 million Ex-
Im Bank working capital guarantee to fulfill $130 million 
contract for the export of two large tunnel-boring machines to 
India. The machines will dig a 27 mile long tunnel to supply 
potable water to drought-stricken farmland in 516 villages in 
Andhra Pradesh. The tunnel will be built 300 feet below the 
Nagarjuna Sagar Tiger Reserve to avoid disturbing the tigers' 
habitat.
    This export provides a significant environmental benefit, 
but what makes Ex-Im Bank's ability to support the sale so 
gratifying is that to satisfy the contract, this company with 
fewer than 200 employees has added 50 new employees to its 
payroll.
    While I can't guarantee increases in our small business 
numbers every year, I can promise you that we'll continue our 
work to improve the quality of the small business experience at 
Ex-Im Bank, and I can assure you this is a commitment shared by 
staff and Board members alike.
    I'm pleased that this effort will benefit from the 
leadership of Diane Farrell, our newest Board member, whose 
enthusiasm and insight make her a terrific fit for this 
portfolio.
    When given a level playing field, America's small firms 
have proven to be resourceful, creative, and a reliable engine 
for the economy.
    I look forward to working with the Members of this 
Committee to insure that small businesses continue to enjoy the 
financial support they require as they make foreign sales and 
provide jobs for hardworking Americans.
    Thank you, again, for the opportunity to appear today. I 
look forward to your questions.
    [The prepared statement of Mr. Lambright may be found in 
the Appendix on page 39.]
    Chairwoman Velazquez. Thank you, Mr. Lambright.
    And I would like to ask my first question regarding the 
Bank's 2006 Re-Authorization that required the establishment of 
a preferred lending program for medium-term transactions. This 
was designed to increase small business access to products with 
longer repayment terms for higher volume transactions. Although 
the Bank has taken steps to implement the program, one year 
later it's still not in operation.
    I would like to know the following. First, when will the 
final regulations for the program be implemented? Two, when 
will the Bank alter its standard operating procedures to 
implement the program? And, third, what will borrowers and 
lenders be able to utilize, when they will be able to utilize 
the program?
    Mr. Lambright. This is an important new program for Ex-Im 
Bank that was approved by our Board in October, and work had 
begun on it shortly after the new charter was passed by 
Congress. And the time that it has taken is to make sure that 
when we offer this new program, that we get it right, and that 
it's something that the market will appreciate and use. So 
there has been significant vetting with potential users, 
including small business exporters. But this is a program that 
creates new relationships with lending partners that gives them 
true delegated authority to approve transactions without going 
through the Ex-Im Bank processes. And what that will give small 
businesses is quicker processing, but creates a new 
relationship between Ex-Im Bank and lenders where they share 
some of the risk, and we will cover about 90 percent of the 
commercial risk for your typical transaction, if it's a small 
business exporter, slightly more of the risk will be borne by 
Ex-Im Bank.
    And to answer your question on timing, we have put out the 
final set of documents for review by the pool of lending 
partners, so we're awaiting their comments and feedback, and 
hope that at our annual conference in April, we can roll this 
out so that all of the exporters and lenders that attend that 
conference can learn exactly what the product offers, and begin 
to use it.
    Chairwoman Velazquez. When is your expectation as to the 
time line for borrowers and lenders to be able to utilize the 
program?
    Mr. Lambright. In April, when we would roll this out, and 
have final documents.
    Chairwoman Velazquez. One interesting dichotomy following 
the enactment of the Re-Authorization, is that while the Bank 
has met the small business financing goal, the number of small 
business awards has decreased by 10 percent since 2005.
    Do you think this drop is reflective of the intent of the 
Re-Authorization legislation?
    Mr. Lambright. No. I agree with your observation that 
that's a trend in the direction that we shouldn't be happy 
with. I think we should aspire to do more for small businesses, 
both in terms of dollar amounts, and in terms of numbers of 
transactions, and so your observation is correct.
    Chairwoman Velazquez. How do you intend to accomplish that?
    Mr. Lambright. Well, all of the changes that the charter 
directed us to make, that we have made, focus more 
organizational effort on outreach to small businesses, because 
awareness is really the biggest hurdle that we have in reaching 
the community of small businesses, getting them to understand 
the financing that we do offer, and so we have all of our 
branch office staff focused exclusively on reaching more small 
businesses.
    This year, for example, we had about 370 small businesses 
that were first-time users of the Bank as a result of that 
outreach. You're correct that the average size of the 
transaction went up, and so I agree with you that we would like 
to do more in terms of numbers and outreach and education, and 
making the whole process of using Ex-Im Bank easier, is the way 
to accomplish that.
    Chairwoman Velazquez. Mr. Lambright, I am concerned about 
the General Accounting Office report that stated that in 2006, 
``That the Bank is inflating its small business financing 
numbers, which include loans and other products.'' And the 
General Accounting Office asserts that the Bank is including 
awards that did not go to small firms.
    My question, do your small business numbers include any 
awards that went to firms that were not small?
    Mr. Lambright. In the dollars reported, the answer is no, 
and the GAO has confirmed our methodology, and made 
accomodations for internal control improvements that we have 
executed.
    The one remaining area of disagreement between their 
recommendations and our practices gets to reporting the numbers 
of transactions, not the dollars. And there is a set of 
transactions that we make available to banks to use for their 
customers. And those support more small business transactions 
than the numbers of policies, and so we report the number of 
policies.
    GAO makes the correct observation that some of those at the 
end of the year may not, in fact, have been used for small 
businesses. But in our assessment of the data, we believe we're 
actually under-reporting the number of transactions for small 
business, but they make a correct factual statement.
    Chairwoman Velazquez. So would it be more accurate to leave 
those numbers out until you can determine who they went to?
    Mr. Lambright. Ideally, yes, it would be. But we have a 
volume of transactions underneath some of those policies where 
we may not know until after our reporting period whether that 
policy has been used, and so because the trend has been more 
transactions supported than the number of policies, we believe 
we're being conservative by reporting the number of policies.
    Chairwoman Velazquez. Well, I've been in this predicament 
before in dealing with the Small Business Administration 
reporting of contracts awarded to women, minorities, and small 
businesses. And years after years, they were saying we are 
achieving their goals, and what we found through not only a 
report that we did in this Committee, but the General 
Accounting Office, and their own Inspector General was that 
they were miscoding, and that awards that they claim went to 
small businesses, in fact, $12 billion in one year to small 
businesses, went to large firms. So I don't want this to happen 
here, because as you know, the intent of the Re-Authorization 
was clear. And we need to increase not only the volume of 
loans, and the amount of money that is going to small 
businesses.
    So let's talk about what are you doing in terms to 
outreach, or how can you increase the number of loans going to 
small businesses?
    I want to ask you, you have dedicated staff located in 
regional offices, but they lack the authority to make loans, so 
why hasn't the Bank sent small business underwriters out into 
the field, or provided the regional offices with the authority 
and training to make those loans?
    Mr. Lambright. Well, the staff in the regional offices do 
have the training to work with small businesses on all of the 
products that they might use, and to walk them through the 
process.
    Small businesses use all of our products, and so each of 
those products units is located here in Washington to maximize 
efficiency of processing. And because we now have the online 
application system, the underwriters being here in Washington 
really don't slow down the processing of those transactions, 
and so the most value that those branch office staff can 
provide is in finding new small businesses that would be 
eligible for our support, and educating them, and working with 
them, and then advocating within Ex-Im Bank for increased 
support to those businesses.
    Chairwoman Velazquez. Well, let's talk about the Office of 
Minority and Women Exporters, which was designed to expand your 
outreach. Can you talk to us as to what type of outreach you're 
doing to reach out to minority and women? That's a way where 
you can expand the number of small businesses, trying to access 
financing through the Bank.
    Mr. Lambright. You're exactly right, Chairwoman Velazquez. 
In fact, as a result of the chartering process, and the 
discussions that we've had with you and other members, we 
created an Office of Minority and Women-Owned Exports, and 
dedicated four full-time staff to that office. And, also, all 
of our branch officers who work on outreach support their 
effort in identifying women and minority-owned businesses.
    Collectively, that staff attended and participated in over 
80 events and conferences focused directly on either minority-
owned businesses or women-owned businesses, and that effort has 
led to a significant increase in the amount of business that we 
see in that sector.
    Chairwoman Velazquez. This is what I hear. Well, let me 
just say this. The Bank currently provides just 2 percent of 
its financing to minority exporters. And this is clearly 
insufficient given that nearly one in five of these 
entrepreneurs export goods and services to markets around the 
globe. So why is the Bank's lending to minorities so low?
    My understanding is that you signed an MOU with the 
National Suppliers Council, and now it is MIA, missing in 
action. They haven't heard back from you guys from the Export-
Import Bank. So you have an opportunity to tell me what's going 
on here.
    Mr. Lambright. Thank you. I think if you look at the 
numbers of our support to minority and women-owned businesses, 
it's a trend that is improving with the increase in 
organizational focus that we've given it.
    Last year, we supported $524.6 million in exports to women 
and minority-owned businesses, a little over $400 million of 
that was small businesses owned by minorities and women. But if 
you look at our universe of small business support, about 12 
percent of our small business support was to small businesses 
owned by minorities and women. And if you look at the products 
where the exporter is itself directly the borrower, and that's 
our working capital line of products, women and minority-owned 
businesses received over 20 percent of that financing, and so 
we would like to continue this trend of increased support, 
because it is a growing and important sector.
    Chairwoman Velazquez. Mr. Lambright, numbers don't like. 
Just 2 percent of financing is going to minorities. You've got 
to do better. It will be good for you, it will be good for our 
economy. And with that, I recognize Mr. Chabot.
    Mr. Chabot. Thank you, Chairwoman.
    Mr. Lambright, as I had mentioned in my opening statement, 
there are some who have reservations, including myself, just 
philosophically about the Export-Import Bank; not that we don't 
think you do a good job, or that you have good people, you do. 
But who just believe that when you're giving out loans, and 
people--businesses get those loans, basically claiming that 
there's excessive political or commercial risk, and, therefore, 
they have difficulty getting them in the private sector. And 
those of us, like myself, just believe philosophically that 
risk should be reflected in the amount of the loan, and it just 
ought to be done through the private sector, philosophically. 
And that's traditionally where I have been on that issue. But 
the fact is, we have not prevailed in that effort, those of us 
that basically believe the government is doing things that were 
never intended to be done by our Founding Fathers, and we sort 
of lost that battle over the years. So you do exist, and so my 
concern here as the Ranking Member of the Small Business 
Committee, is that if you're going to give loans to the 
business community, that the small businesses in this country 
ought to get their fair share. And that's what the purpose of 
this hearing is. So in that spirit, I just have a few 
questions.
    Since the creation of your enhanced web site, have you 
noticed any increased interest by small businesses via the 
internet? Could you discuss that briefly?
    Mr. Lambright. Of course. I will note that our Small 
Business program, like our overall program, is not intended to 
compete with commercial lenders, so we're not trying to compete 
with the private sector. And all of our programs are created 
with an eye on supporting U.S. employment, and keeping U.S. 
companies from having to compete with foreign competition 
supported by its government.
    And we do price our products according to the risk that we 
perceive. And, in fact, have been consistently returning money 
to the Treasury in excess of our appropriation, so we believe 
that we have been operating in a responsible manner.
    With respect to our technology upgrades, we have increased 
the dollars supported for small business year over year, but I 
think the real benefit of it is not in the numbers that have 
increased, but really in the ease of working with Ex-Im Bank. 
So, for us moving from paper submissions and paper files to an 
electronic system has made it easier for small businesses to 
submit their information, and not just submit an application, 
but track it so that they know where their application is in 
the pipeline as it goes through the system. And so, really, I 
look at the benefit primarily being one of customer service, 
not simply a business development tool, even though we have 
been able to boost the numbers with the new system.
    Mr. Chabot. Thank you.
    What type of feedback is received by Ex-Im Bank from small 
businesses concerning the Bank products, and how does the Bank 
go about obtaining feedback from small businesses?
    Mr. Lambright. We receive a lot of anecdotal feedback just 
through the course of working with exporters. They may make 
comments to loan officers, or even write a note to me, or pick 
up the phone, so we hear a lot anecdotally, but we have tried 
in the spirit of these organizational changes to be more formal 
about it. And so, our Small Business Division and the Small 
Business Committee have conducted focus groups, and have sent 
out questionnaires to be more disciplined in our soliciting of 
feedback. And that feedback is very useful to us.
    I would say that the feedback could be categorized broadly 
into two buckets, one is customer service, just pushing us to 
be faster and more responsive, which we are always trying to 
do, and the new computer system will be helpful on that front. 
And the second broad category is in our product limitations. 
And this is where we have less freedom to respond, because our 
products come with limitations that a lot of commercial lending 
products or foreign competition, their export credit agencies 
may not have all the same restrictions that we have from a 
policy point of view. So our charter creates certain policy 
restrictions on us in terms of U.S. content, or shipping 
requirements, and environmental and economic impact standards 
that prevent us from supporting every potential small business 
exporter that may be seeking our help. So we take all of that 
feedback from both of those broad categories, and within the 
narrow niche that we fill, try to be as effective as we can in 
serving that community.
    Mr. Chabot. Thank you. If a small business would apply for 
a capital loan, what's the average time for the application 
process, and to receive the loan? I know that's going to vary 
on a case-by-case basis, but just what kind of parameters do 
you work with that?
    Mr. Lambright. As you noted, it varies on a case-by-case 
basis. It also varies by product type, so working capital, 
which is the pre-export financing, most of that is done through 
delegated authority, so that the lenders are processing those 
transactions, and our approval comes concurrent with the 
lender's approval, so there's really no added time by Ex-Im.
    On short-term insurance, we try to turn those around and 
typically do within 10 days. Where that turn-around time 
becomes more of an issue, and where we would hear more negative 
comments in that feedback that we solicit, is when you start to 
move into longer terms, say five or seven-year financings, 
where we need to spend more time underwriting the credit risk 
of a foreign borrower, and we start to have more entities 
involved in a transaction, so we need to be more careful. Those 
transactions can take 60 days, and so given the pace of 
commercial life, if we need to ask a lot of questions to get 
comfortable with the transaction, that can create some negative 
feedback. So for the shorter terms, it's usually a week or two, 
and for the longer terms, it could be around 60 days.
    Mr. Chabot. Okay. Thank you very much.
    I yield back the balance of my time.
    Chairwoman Velazquez. Mr. Sestak.
    Mr. Sestak. Thank you.
    I was going to ask that same question. You said 60 days for 
the larger ones?
    Mr. Lambright. Right.
    Mr. Sestak. And what was it for the small ones?
    Mr. Lambright. Ten days or less.
    Mr. Sestak. Ten days.
    The question I had was, you had, to the Chairwoman's 
question about moving underwriters out to the regional offices, 
we're going to hear from community lenders. And the value I 
found of the community lenders is they're there, they 
understand the community. They are quite responsive.
    You responded to her question by saying for efficiency 
purposes, if I heard you correctly, we like to do it down in 
Washington. But how about for effectiveness purposes? I mean, 
the statistics show they were not quite as effective this year 
as last year, so are we giving up effectiveness for efficiency? 
And, if so, should you be asking for additional resources in 
order to make this happen?
    I mean, my perspective, just from my background, is 
decentralization. You actually garner a lot of effectives and 
efficiencies if the right management is done. Why don't we look 
at the effectiveness of this?
    Mr. Lambright. I think it's a very good question, and one 
that we have spent time on. And, really, the resources aspect 
that you highlight is a large constraint on moving large 
numbers of people around the country.
    We have staff in seven regional offices to identify, and 
work with, and cultivate new business, but small businesses 
that we then bring in as applicants could use one of any number 
of our products. Each product has a dedicated staff that 
specializes in processing that product, so the difficulty would 
be in sending one or two people out to a branch office. They 
have expertise in one product, but not another. And so, by 
having them housed in Washington, it actually does serve both 
efficiency and effectiveness.
    I think with unlimited resources--
    Mr. Sestak. But aren't you, to some degree, able to do some 
of that under the Export Assistance Centers? I mean, because 
they do financing packages right there on-site. I mean, haven't 
they had to deal with this problem?
    And in your answer, then my question is, you're making, 
understandably, an argument here that it going to be less 
deficient, so I assume you've studied this. Do you have a study 
on it? I mean, because those are nice general statements, but 
what's the study that actually shows the statistics between 
your assertion?
    Mr. Lambright. We don't have a formal study to give you, 
Congressman.
    Mr. Sestak. But we do show that we're less effective this 
year than last year to the Chairwoman's point. So why don't we 
do a study to see if we can't be more effective, because I 
understand those good general words. We use them all the time 
in the military, but what's the real facts on this? Because I 
do think we have to think about the value I see community 
lenders do, because they're there. And I don't think they're 
ineffective. I think they're pretty darned efficient, so could 
we take that to the next step?
    Chairwoman Velazquez. Yes. Mr. Sestak, would you yield for 
just a second?
    Mr. Lambright, if I understand correctly, you're saying 
that you're compromising your outreach because you lack the 
resources, in terms of having underwriters in those regional 
offices. Correct?
    Mr. Lambright. I'm saying that there are resource 
considerations. I think there are also organizational 
considerations.
    Chairwoman Velazquez. But I don't understand, because my 
understanding is that last year you proposed to terminate Ex-Im 
Bank subsidy, and that--so why do you do that?
    Mr. Lambright. Well, by terminating the subsidy, and moving 
to self-sustaining financing, that wouldn't necessarily 
increase the amount of resources we have available, because our 
appropriators would still set a cap on the funds available to 
us for admin and program uses. Even if we have excess revenue 
coming in--we consistently have more revenue than we spend - 
but the accounting of it has been that all of that revenue goes 
to the Treasury Department. So we still have limited funds 
available to us, as set by our appropriators.
    Mr. Sestak. My only issue here is, there has to be a 
tipping point for efficiency and effectiveness. And you can --I 
understand your assertions, and I'm not saying they're wrong. I 
think they might be, but I think this should be studied before 
we assert it.
    Mr. Lambright. Congressman, I appreciate your remarks about 
the value of community banks, which is a view I share. We have 
relationships with about 100 community banks throughout the 
country.
    Mr. Sestak. I think it's larger than that.
    Mr. Lambright. We have slightly over four hundred banks 
that we have relationships with. In the past year, we signed up 
17 new ones. Developing those relationships is part of the 
goals that we give our outreach staff, because those banks in 
the local communities can serve as gatekeepers for us, and 
multipliers of our outreach efforts. So we work with them to 
cultivate new business. And, in fact, in many cases, we then 
delegate authority to some of these banks to approve 
transactions for us.
    Mr. Sestak. Madam Chair, may I make--I know I'm over time.
    I just want to thank you, also. And I wish I could remember 
his name, your Expert Assistant Center in the Philadelphia 
region was tremendous. They helped us on our second Economic 
Development Summit. I saw the value of this outreach out there, 
but I'm in a district that's lost 762 small businesses net in 
the last six years, and so that's why I'm interested in this 
effectiveness and decentralization. But thank you for the 
assistance they gave us. Tony Caballos. Thank you.
    Chairwoman Velazquez. Time has expired.
    Mr. Davis.
    Mr. Davis. Thank you, Madam Chairwoman. And, Mr. Lambright, 
thank you for being here with us today. Appreciate you taking 
part in this hearing.
    In the 2002 Re-Authorization of the legislation, there was 
a mandate that 20 percent of the financing goals, can you tell 
me where we're at right now on that 20 percent?
    Mr. Lambright. Yes. The reference in the charter is to 
making available at a minimum 20 percent of our authorizations 
to small--of our total authorizations to small business, and in 
fiscal year 2007, that ratio was 26.7 percent of our total 
authorizations going directly to small businesses.
    Mr. Davis. Thank you.
    Currently, there are over 200,000 small exporters in the 
United States. The Bank has, therefore, provided just 1 percent 
of the firms with resources to competitively compete abroad. 
Can you tell me why that just 1 percent, why you think it's so 
low?
    Mr. Lambright. Well, first of all, I think it should be 
bigger, and I want to do everything we can to make that as big 
as possible. But the reasons for the low percentage reflect the 
nature of our business. There are constraints on what we can 
and cannot do.
    We are not intended to compete with the private sector, so 
much of that trade finance is being provided by commercial 
lenders and insurers, which is terrific. That's the way the 
market should work.
    Second, we have certain policy constraints on what we can 
provide for small business exporters. There are requirements as 
to the U.S. content of shipments. There are shipping 
requirements, environmental and economic impact considerations, 
and so not every small business export is eligible for our 
consideration.
    And then I would say the last consideration is really 
awareness. We have our work cut out for us in educating those 
several hundred thousand small exporters about the financing 
that is available to them in the U.S. government, because when 
I go meet with small businesses around the country, I find that 
most of our time is spent explaining who we are, and what we 
do. And so, we need to get out there and meet as many of them 
as possible.
    Mr. Davis. You mentioned the private sector. What are some 
of the advantages for a small business firm to actually go 
through the private industry, rather than go through the Export 
Bank?
    Mr. Lambright. Well, if they have a credit worthy 
transaction to a borrower or to a market that the commercial 
lenders are comfortable with, the advantage of working with a 
commercial lender then is that they would get cheaper products. 
We are not designed to compete with the private sector, and so 
we are there to take riskier positions, and serve really as a 
lender of last resort. So when we are providing assistance to 
exporters, it's because the commercial market isn't available 
to them, and yet they want to proceed with a sale, and so we 
are underwriting the political and commercial risk of those 
transactions.
    Mr. Davis. One of the requirements that you have is to 
lower the fees that you charge. Can you talk to me about some 
of the things you're doing to move in that direction?
    Mr. Lambright. We have--we try to price our products both 
to reflect the risk we're taking, and to avoid competing with 
private sources of capital. And in the universe of our small 
business products, we have certain policies where there are 
benefits provided if the exporter is a small business. So 
there's a multi-buyer insurance product that offers small 
businesses a fixed rate regardless of the risk of the export 
market.
    We talked a little bit about our new medium-term delegated 
authority program, where we will retain a bit more risk where 
the exporter is a small business. So we're constantly looking 
across our offerings of products to find areas where we can 
enhance the experience for small businesses.
    Mr. Davis. Okay. One last question, if you look at 
statistics, larger firms typically will compete in about five 
countries around the world, small firms, if they compete at 
all, will be about one. Can you tell me why you think that's 
the case?
    Mr. Lambright. Well, your observation is correct. The last 
statistic I saw was that about three-fifths of small businesses 
that export, export to only one market, and typically that 
would be Mexico or Canada. So one reason is that it's easier to 
export to a neighbor than to start exploring far away lands. 
And there are challenges to exploring those foreign markets, in 
terms of the time and money required to deal with complicated 
documentation, and the risks of undertaking new relationships 
with foreign business practices, so it is a challenge to start 
to sell overseas. And financing can also be difficult, when 
there aren't as many lenders financing for overseas sales as 
there are for domestic activity. And small businesses, 
unfortunately, often are involved in transactions that may be 
too small to be attractive to those commercial lenders, so we 
at Ex-Im Bank take pride in the fact that nothing is too small 
for us to consider, that we will work on very small 
transactions so that small business exporters have financing 
available to reach those overseas markets.
    Mr. Davis. Thank you, and I yield back.
    Chairwoman Velazquez. Thank you.
    Ms. Clarke.
    Ms. Clarke. Thank you very much, Madam Chair.
    Honorable Mr. Lambright, it's good to have you here, 
because I think that this hearing is very, very important, 
given where we are with regard to our economy right now.
    I am a native New Yorker, Brooklynite of Jamaican descent, 
and so this whole issue of how we do import/export utilizing 
your institution as a tool is very important to me. My district 
has entrusted me to insure that small exporters are united with 
their Caribbean partners, Latin American partners, and the 
global marketplace, and capitalize on the great trading 
opportunities that we have available.
    It's been my observation, particularly coming from New York 
City, that many immigrants who are now second, third, fourth 
generation, come with an entrepreneurial spirit, so the 
disconnect between our ability to help them finance businesses 
with real nature connections to other parts of the globe is 
something that I find very interesting; that we can't help them 
make that connection.
    I think that your institution is poised right where we need 
it. And I think that it takes some ingenuity, and it takes some 
real aggressiveness to make the marriage, to make a win-win.
    You spoke in your testimony today about the global 
competition that exists for the American small business. Your 
description about the growth and aggressiveness of the 
international interest outside of the United States, having 
reached a point where they're approaching the level that we 
have maintained. I find that interesting, because shouldn't we 
be concerned about that?
    Your observation is very similar to ones that I've had. 
When you look at what is happening with nations like China, 
India, and the EU, and their ability to be strident in their 
globalization, moving their businesses forward, not only 
throughout the globe, but right here in the United States 
should be of real interest to your organization.
    It seems to me that it should be key to raising the bar for 
U.S. preeminence and competition in the global economy. Do you 
have a strategy in place to be more aggressive in outreach in 
getting American business into the game?
    And let me also say this. As we sit here today, you are 
sitting on the goods. Our Congress is poised to initiate an 
economic stimulus plan. Small businesses are our employers. 
What can you see your institution doing to help in an economy 
that has become sluggish, many believe is about at the advent 
of a recession? What role should your institution be playing in 
partnering with Congress around this whole economic stimulus? 
Are we missing something? Is there a disconnect? And if we 
admit that today, what is the plan? What is the strategy for 
making that connection? That's what we should be talking about 
here today.
    Mr. Lambright. You've covered a lot of ground, 
Congresswoman, and I agree with much of what you've said.
    We notice a trend that you notice, which is oftentimes in 
difficult export markets, the first people in from America are 
people that came from those markets, and they understand those 
markets the best, and so they're very good partners for us to 
support in that effort. And we are always looking for ways to 
reach those groups through the right trade associations, or the 
right events to help introduce them to Ex-Im Bank, and find 
ways to work with them.
    And I think doing more of that reaches your second main 
point on U.S. competitiveness. There are a lot of things to 
talk about in terms of U.S. competitiveness, but in the context 
of this hearing, I think it's important to emphasize the 
growing role of exports in the U.S. economy. And exports are 
approaching 12 percent of our economy. They were just five 
years ago well below 10 percent, and so the growth of exports 
is exceeding the growth of our economy. And it really has 
become a driver of the economy. And so focusing our efforts on 
helping companies compete overseas, and providing a level 
playing field against foreign competition is what we can be 
working on together to help U.S. competitiveness.
    Ms. Clarke. Mr. Lambright, I hear you saying that. What I 
don't hear coming from you is the sense of urgency. And we're 
really in a time where that level of urgency is one that we 
really need to express through all the work that we do.
    And my time is up, but I want to suggest to you that 
expanding your operations, and fortifying them, particularly in 
the seven banks that you have, is a very, very critical tool at 
this point. If there is a need for additional resource to make 
that happen, you need to make that plain, because like I said, 
you're sitting on the goods. And we need to get them into the 
hands of capable people to make this thing happen, and happen 
in real time.
    So I want to thank you for testifying here. Thank you, 
Madam Chair.
    Chairwoman Velazquez. Thank you, Ms. Clarke.
    Mr. Lambright, I guess that our frustration is that given 
the state of our economy, and the fact that our trade deficit 
is so huge, how can the Bank, Ex-Im Bank, meet the legislative 
goals that were set in the 2006 Re-Authorization?
    My question is, should the Bank develop new programs and 
customize its policies so that it is on par with what is going 
on in today's economy, and today's challenges? What are you 
doing, what is the plan, what is the strategy? Are you making 
such offerings available?
    Mr. Lambright. With our new Small Business Committee, we 
are undertaking that exercise of reviewing all of our products, 
and all of our divisions.
    Chairwoman Velazquez. Can you mention to us, or discuss 
some of the new services and products?
    Mr. Lambright. Well, there are revisions to, say, the 
commission schedule on insurance products that create 
incentives for brokers to put more energy into policies 
benefiting small business exporters. I mean, there are very 
detailed adjustments that have been made to, as you say, 
customize our products to benefit small businesses, and so at 
the very granular level, we are constantly refining our 
offerings to benefit small businesses. But then at a very broad 
strategic level, we also have to think about what are we doing 
competitively to serve all of our exporters, as well as 
possible, because there's a lot going on with China's economic 
rise, and changes going on with European integration that 
really create competitive challenges for a government export 
credit agency like ours. And the rechartering process really 
gives us the opportunity to work with Congress on making those 
adjustments. So as we implement the new charter and look 
forward to the next reauthorization process, now is the time to 
have that dialogue about what's going on in the world, and what 
do we need to be doing. But I agree with you that there are 
challenges, both big and small.
    Chairwoman Velazquez. In that revision, you should keep in 
mind the fact that 97 percent of all exporters are small firms. 
And to give you an example, other countries are just in a 
proactive way looking for new products to be able to compete. 
Canada's Export Credit Agency launched a new program last year 
helping small businesses compete for larger export contracts. 
The year before, an initiative was implemented to help small 
exporters meet new custom security guidelines. Is Ex-Im Bank 
undertaking similar efforts?
    Mr. Lambright. We are evaluating all of our products and 
programs, and looking at the efforts of export credit agencies 
like that in Canada to see what we can do. But I should note 
that there are also different government philosophies in these 
countries. We purposefully do not compete with the private 
sector, so our offerings are inherently limited; whereas, 
Canada's export credit agency isn't bound by the same policy 
constraints as our's. And, in a resource sense, they have about 
five times our staff to support an economy one-tenth our size, 
so what they are able to do for small businesses, I would 
expect would greatly exceed what we have done.
    Chairwoman Velazquez. Well, what I'm saying is, what can 
you establish, and how can you come up with new products within 
the mandate?
    Mr. Lambright. That's exactly our challenge of how to do as 
much as we can within the limitations that we have, both in a 
resource, and a policy sense. And I have to tell you that I 
come to work every day asking myself that question, and 
thinking about how to help U.S. employment stay strong by 
helping all of our exporters win overseas sales. And all of our 
staff and our Board members ask themselves the same question, 
and so with all of these institutional reforms that we've 
undertaken, they're just a year old. We're trying to 
institutionalize those and really challenge everybody involved 
in their new roles to ask themselves how we can be doing as 
much as possible for small business. And it's a challenge that 
will continue, because no matter what we do, we will always be 
able to aspire to do more, and I hope that we will.
    Chairwoman Velazquez. Okay. Mr. Davis.
    Well, not only as the Chair of this Committee, we will 
continue to monitor the implementation of the 2006 Re-
Authorization, but as a Member of Financial Services that has 
jurisdiction over Export-Import Bank, I will tell you that I 
was planning to introduce an amendment to the 2006 Re-
Authorization to limit the re-authorization for only three 
years, to make sure that you will implement the intent of the 
law.
    I'm not planning to leave Congress pretty soon, so I guess 
I'll be here for the next re-authorization, and I hope that we 
will not have to make changes because of the lack of progress, 
as intended by the re-authorization that we just passed in 
2006.
    My challenge to you is, we can do better within the 
mandate, and we expect for you to do better when it comes to 
financing, not only in terms of the numbers of loans, and the 
volumes of loans, but the amount of money that is provided to 
small businesses. And, particularly, don't forget the new face 
of small businesses; more women, Blacks and Latinos.
    Thank you very much for your participation today.
    Mr. Lambright. Thank you, Chairwoman.
    Chairwoman Velazquez. The gentleman is excused.
    I will ask for the second panel to please come forward and 
take your seats.
    Mr. Lambright, I will ask if there is going to be any staff 
that will remain in this hearing.
    Mr. Lambright. I believe we will have a representative.
    Chairwoman Velazquez. Very good. Thank you.
    I welcome the second panel, and our first witness is Mr. 
Harry Alford. Mr. Alford is the President, CEO, and co-founder 
of the National Black Chamber of Commerce, which has 100,000 
members. He is also on the Board of Directors for the U.S. 
Chamber of Commerce and serves on the National Advisory Council 
for the Small Business Administration.
    Welcome, Mr. Alford, and you will have five minutes to make 
your presentation.

STATEMENT OF MR. HARRY ALFORD, PRESIDENT & CEO, NATIONAL BLACK 
             CHAMBER OF COMMERCE, WASHINGTON, D.C.

    Mr. Alford. Thank you, Madam Chair, Ranking Member Chabot--
Davis I guess right now. Thank you for allowing the National 
Black Chamber of Commerce to provide some input.
    You have my written testimony. I am just going to have some 
comments in addition to that, and will be glad to entertain any 
questions.
    I must say, when I saw the invitation to come and talk 
about Ex-Im Bank and that they had a small business and a small 
disadvantaged business, minority business outreach program, I 
was quite surprised and very curious, and somehow I want to 
chuckle, but at the same time something inside me says you 
should be enraged, because if they do have a minority business 
program, and the National Black Chamber of Commerce, which is 
the largest black business association in the world, with 150 
chapters in 41 states, interfacing in those communities where 
they have regional offices, having annual conventions and 
conferences and workshops about international trade, having 
trade missions around the world multiple times every year, has 
yet to see an official manager from Ex-Im Bank any place.
    I have done a search in preparation of my testimony through 
our membership, trying to find that one black business that 
does business with Ex-Im Bank. There are rumors. There may be 
one in Chicago, I understand. But we are still trying to 
identify them.
    I would like Ex-Im Bank to provide a list of the top 10 
African-American-owned businesses utilizing their services. I 
want to see 10, and I wonder if we can get one. And if they 
cannot come up with that list, Congresswoman Clarke, I would 
recommend to the Congressional Black Caucus that they need a 
civil rights audit, and perhaps we should expunge them from the 
federal budget, if they are taking tax money and discriminating 
with it.
    Discrimination is a hard term. But when we are in your 
face, and we send you invitations to come, to have 
international trade meetings, no charge, be our guest, just 
tell us what you do, and you don't come, you don't show, you 
are not around, something is terribly wrong.
    Now, when we have these trade missions, and when we 
interact with Spain, with France, with Africa, with the 
Dominican Republic last November, with Brazil, when we have 
these--and these countries tell us, ``You joint venture with 
our businesses, and we have got all of these programs for you. 
We have all of these financial programs to help you interact in 
business.''
    And then, the word gets around that African-American 
businesses, there are a million African-American businesses. 
African-Americans account for $970 billion in expendable 
income. And when Ghana tells us that that 972--excuse me, Kenya 
tells us that that $972 billion, if they just got 1 percent of 
that, it would triple their GDP. We become very attractive. And 
they know that we are vulnerable, should I say approachable, 
because we don't have programs here in our country like they 
have in their country.
    The Canary Islands, which has programs from Spain and the 
EU, and it was aggressively trying to do business in Africa, 
wants to match with us where we have in-roads into Africa, 
naturally, and can provide opportunities, and they have got the 
programs and everyone can make money.
    That is to the detriment of this country, and I think that 
it does a disservice in total, that America is at risk in this 
globalization where other countries can utilize the talents and 
the skills of African-Americans, of Hispanics, and of Asian-
Americans to further along their business, because the United 
States Government is on deaf ears to being inclusive.
    I think that is a national disgrace, and I for one, as an 
American, as a veteran of this country, can't stand to sit here 
and see an entity of the United States Government that thinks 
it is a country club and can utilize an entrepreneur from China 
has a better chance of working with Ex-Im Bank than an African-
American business.
    I understand in my research through Wikipedia Ex-Im Bank 
financed two Mexican drug cartels. I guess that is the Minority 
Business Program--two Mexicans, who happen to be in the drug 
business, from Mexico. They have it easier in working with Ex-
Im Bank than a Hispanic-American trying to get into the export-
import business in South America. Something is terribly wrong.
    So I challenge the Committee to really get firm with Ex-Im 
Bank, and after that you can go to the Trade Development 
Agency, and after that you can go to OPEC, because they are 
pretty much the same. We don't have the luxury, or should I say 
the opportunity, to utilize incentive programs that Congress 
has written for us.
    Thank you, ma'am.
    [The prepared statement of Mr. Alford may be found in the 
Appendix on page 43.]
    Chairwoman Velazquez. Thank you, Mr. Alford.
    Our next witness is Mr. Paul Warfield. Mr. Warfield is the 
Vice President and Director of Global Banking at First National 
Bank of Omaha. He serves on the U.S. Department of Commerce, 
Nebraska District Export Council, and the Nebraska Department 
of Agricultural Directors' Advisory Panel on International 
Trade. He is also a member of, and is representing today, the 
Independent Community Bankers Association.
    Welcome, Mr. Warfield.

  STATEMENT OF MR. PAUL WARFIELD, DIRECTOR OF GLOBAL BANKING, 
    FIRST NATIONAL BANK OMAHA, OMAHA, NE; ON BEHALF OF THE 
           INDEPENDENT COMMUNITY BANKERS ASSOCIATION

    Mr. Warfield. Thank you. Madam Chairwoman, Ranking Member, 
and members of the Committee, my name is Paul Warfield. I am 
Director of Global Banking for First National Bank Omaha.
    I am pleased to appear this morning to testify on behalf of 
the Independent Community Bankers of America on the Export-
Import Bank's trade finance programs. The ICBA represents 
nearly 5,000 community-based financial institutions nationwide.
    Trade financing is a fast-growing area of opportunity for 
our nation's community banks and the small businesses they 
serve. I strongly support the valuable programs provided 
through the U.S. Export-Import Bank. Community banks like First 
National Bank have increased their involvement with the Ex-Im 
Bank programs to the benefit of our small business exporters 
and local economies.
    The Ex-Im Bank's programs represent a success story of how 
the Federal Government, working with private sector lenders, 
can assist small businesses to support greater U.S. trade, 
small business job creation, and economic growth. The ICBA 
supports the Ex-Im Bank and wants to ensure Ex-Im Bank programs 
reach their full potential.
    Specifically, the Ex-Im Bank programs and activities should 
be structured and managed so they work well for lenders and 
borrowers of all sizes. This Committee helped to mandate that 
20 percent of Ex-Im's transactions support small businesses, 
and I believe that is working.
    We are all aware of the recent decline in the value of the 
U.S. dollar and the rapid growth in global economies. Combined, 
these developments have created an environment ripe for greater 
U.S. exports worldwide. This offers U.S. lenders, and 
particularly small businesses, the ability to better reach new 
markets, to expand their sales, and create jobs using Ex-Im's 
programs.
    While there has been a small increase in the number of 
lenders and small businesses participating in the Ex-Im 
programs in recent years, ICBA believes many more can and 
should be involved. In addition to the valuable support 
provided for large- and mid-sized businesses, the Ex-Im Bank 
should continue to enhance its ongoing small business-focused 
efforts, trade promotion, and engage even more community banks 
in its trade finance activities and programs.
    ICBA recommends enhancing the Ex-Im Bank's program budget 
funding for small business outreach. A portion of any Ex-Im 
Bank earnings should be allowed to be retained to further 
advance small business outreach. Today, Ex-Im returns funds 
back to the U.S. Treasury that could be retained for outreach.
    ICBA suggests additional Ex-Im Bank budget resources be 
applied to better staff and support community lenders' and 
small businesses' outreach nationwide, including enhancing 
community bank programs. Additionally, Ex-Im Bank should ensure 
solid community bank representation on the Ex-Im Bank Advisory 
Committees. This would help to engage more community lenders 
and their small business customers in the mix.
    The Ex-Im Bank currently has about 200 lenders 
participating at some level in the Bank's trade finance 
programs. In 2007, Ex-Im Bank added 26 new lenders to the 
roles, with about half representing community lenders. With a 
total of 8,560 FDIC-insured banks nationwide, there is ample 
opportunity to reach even more community lenders with the 
products and services offered through the Ex-Im Bank.
    Since its initial contact with Ex-Im, First National Bank 
Omaha has grown its trade services and trade finance business. 
In just seven years, the global banking group at First National 
has grown from six employees to 14. Using the Ex-Im programs, 
First National has been able to meet the needs of more small 
business customers across the Midwest.
    I would like to mention just a couple of examples. By using 
the Ex-Im Bank letter of credit policy, First National Bank has 
been able to successfully offer letter of credit confirmations 
for small businesses. Using this tool, First National can 
assign proceeds to small business suppliers, extend payment 
terms to foreign buyers, and utilize working capital financing.
    These activities have helped our local exports. Products 
often exported by our local small businesses include center 
pivot irrigation systems, scientific equipment, water 
purification systems, construction equipment, and various 
professional services.
    First National undertook a challenging transaction with a 
Nigerian buyer. They were seeking Ex-Im Bank medium-term 
financing for the purchase of used equipment from a small 
business supplier. The assistance Ex-Im Bank offered as 
exceptional. The transaction was successful, and we are now 
awaiting approval for a second shipment to the same buyer.
    In conclusion, I want to make it very clear that the Ex-Im 
bank programs are unique and extremely valuable in helping 
community banks and U.S. businesses compete in the 
international trade arena. I know that under Ex-Im Bank 
Chairman Jim Lambright's tenure there have been noticeable 
improvements in Ex-Im's relationship with both the lending and 
small business community.
    First National Bank Omaha looks forward to working even 
more closely with the Small Business Committee and the Ex-Im 
Bank to ensure a more robust Ex-Im Bank in the future. The ICBA 
is optimistic that community banks, working more closely with 
Ex-Im, will continue to meet and exceed the challenge of 
serving even more small businesses.
    Thank you.
    [The prepared statement of Mr. Warfield may be found in the 
Appendix on page 47.]
    Chairwoman Velazquez. Thank you, Mr. Warfield.
    Our next witness is Dr. Loren Yager. He is the Director, 
International Affairs and Trade Team, of the U.S. Government 
Accountability Office. He has managed a body of work on export 
promotion issues generally, and on several issues related to 
the Export-Import Bank.
    Welcome, sir.

 STATEMENT OF MR. LOREN YAGER, Ph.D., DIRECTOR, INTERNATIONAL 
     AFFAIRS AND TRADE, GOVERNMENT ACCOUNTABILITY OFFICE, 
                        WASHINGTON, D.C.

    Mr. Yager. Good morning, Madam Chairwoman, Ranking Member, 
and other members of the Committee. Thank you for the 
opportunity to appear again before the Small Business 
Committee, this time to talk about the Export-Import Bank.
    We have been involved in a number of studies of the Export-
Import Bank in recent years, and we have just begun our 
engagement on a requirement of particular interest to this 
Committee regarding the performance standards related to the 
Bank's small business program, including finances for 
businesses owned by women, socially and economically 
disadvantaged individuals.
    We look forward to reporting back to the Committee when we 
complete our work under this congressional mandate. Hopefully, 
this will contribute to the continuing oversight that you 
mentioned, Madam Chairwoman, in your opening statement.
    We would also be happy to brief the Committee on some of 
our other trade-related studies, including recent studies of 
the U.S. free trade agreements, the effectiveness of U.S. 
Customs in protecting intellectual property at the U.S. 
borders, and other subjects that you and other members raised 
at your last trade hearing in November of 2007.
    My statement today is based primarily on research we 
performed for the Congress in 2006 on the Bank's efforts to 
assist small business. In particular, I will cover two main 
issues. First, I will report on the trends in Ex-Im's small 
business financing since the fiscal year 2000. Second, I will 
briefly summarize the weaknesses GAO identified in our 2006 
report on the tracking and reporting of small business 
financing, and I will briefly describe the steps the Bank has 
taken to address those weaknesses.
    In terms of the first issue, as Chairman Lambright has 
mentioned in his testimony, the share of Ex-Im financing 
directly benefiting small business has increased over recent 
years, surpassing a required 20 percent in both 2006 and 2007. 
The percentage reflects an increase in the value of Ex-Im 
financing for small businesses, while financing for larger 
businesses was noticeably lower in 2006 and 2007 compared to 
2005.
    In terms of the second topic of the statement, when we 
performed our 2006 work on the methods used by Ex-Im for 
tracking small business financing, we found a number of 
weaknesses and made several recommendations to the Bank. I am 
pleased to report that Ex-Im has made changes that should 
provide this Committee and other interested members of Congress 
greater confidence in Ex-Im's reporting on its small business 
financing. Madam Chairwoman, you also have noted the importance 
of this reliability in your opening statement.
    Let me give a few illustrations of the problems that we 
found, and the kinds of changes made by the Bank. For example, 
we found that Ex-Im sometimes had conflicting information in 
their internal databases about the same company, so that the 
same company might appear as both a small company and a large 
company at the same time. In other cases, we found weaknesses 
in the Bank's data systems that affected the reliability of the 
value of its small business financing.
    We believe the Bank has made a number of changes to address 
the weaknesses we identified. For example, Ex-Im replaced its 
previous data system with Ex-Im Online, as Chairman Lambright 
also mentioned. This is an interactive web site that allows 
exporters, brokers, and financial institutions to transact with 
Ex-Im electronically. This eliminates the need to transfer 
information from paper files to the Bank's electronic files for 
the bulk of Ex-Im's applications.
    GAO also recommended that Ex-Im contract for an audit of 
the congressionally-mandated report on the level of direct 
support for small business. Ex-Im was also responsive in this 
area, and the auditor found that the process that they have 
operates in accordance with the policy and approved methodology 
for these program types.
    Ex-Im disagreed with one recommendation that we made 
regarding the number of its authorized transactions that 
directly benefit small businesses. Ex-Im has frequently 
reported that about 85 percent of its authorized transactions 
directly benefit small business. For example, this includes 
crediting all bank-held insurance policies as directly 
benefiting small businesses.
    While many of the transactions under each of these policies 
may benefit small businesses, not all of the transactions under 
these policies do so. And we continue to believe that Ex-Im 
should consider ways to more accurately determine and report on 
these transactions.
    In summary, I believe that there are a number of positive 
developments to report regarding the Bank's activities towards 
small business, including its success in meeting the 20 percent 
target and the improvements in its record keeping system.
    We appreciate the opportunity to contribute to the 
oversight of Ex-Im's activities, and want to note that the Bank 
has indicated its willingness to work with us on our ongoing 
assignment related to the performance standards for financing 
by businesses owned by women and from persons of economically 
and socially disadvantaged groups.
    Madam Chairwoman, Ranking Member, this concludes my 
remarks. I would be happy to answer any questions that you 
have.
    [The prepared statement of Mr. Yager may be found in the 
Appendix on page 54.]
    Chairwoman Velazquez. Thank you very much, Mr. Yager.
    Our next witness is Mr. Steven Thiry. Mr. Thiry is Vice 
President of Business Development at the Association for 
Manufacturing Technology. During his tenure, he has assisted in 
the development of export-oriented programs designed to 
increase AMT members' share of export markets for manufacturing 
technology.
    Welcome.

  STATEMENT OF MR. STEVEN A. THIRY, VICE PRESIDENT, AMT, THE 
      ASSOCIATION FOR MANUFACTURING TECHNOLOGY, MCLEAN, VA

    Mr. Thiry. Thank you. Madam Chairman, Ranking Member, 
members of the Committee, thank you for holding the hearing 
today and giving me the opportunity to be here. Before I speak, 
and pursuant to House Rule XI, I am obliged to report that AMT, 
the Association for Manufacturing Technology, received $225,100 
from the Commerce Department's Market Development Cooperator 
Program for a technical center in China, $207,254 of which was 
disbursed in 2005, $17,846 disbursed in 2006.
    AMT is an association whose membership represents 400 
manufacturing technology providers located throughout the 
United States, almost the entire universe of machine tool 
builders who manufacture in our country. Most of these 
companies are small. An estimated 78 percent of them have less 
than 50 employees. Most are multi-generation, family-owned 
business. But their contribution is huge.
    They are the ones that build the machines that make things 
work. In fact, everything in this room, and everything in this 
city, with the exception of the people, was either built by one 
of their machines or a machine that their machines built. They 
are an essential part of the manufacturing base and over the 
past few decades, these companies have faced increasing 
competition from abroad, and seen a decline in the U.S. 
manufacturing base. As a result, they have turned heavily to 
the export market to keep their companies alive and growing, 
which in turn has safeguarded jobs here in the United States.
    Increasingly, the ability to compete in the global markets 
is determined by factors beyond the products offered and the 
manufacturers' ability to support those products at the end 
user. Foreign competitors from countries such as Taiwan, Italy, 
and Brazil can often package their products and services with 
government-subsidized financing that substantially improves 
their competitive position.
    This support becomes even a greater differentiator when the 
purchasing company in those countries is a small business. As 
such, small businesses in foreign markets must often pay 
substantially greater credit insurance and interest rates, and 
undergo a difficult and uncertain application process in order 
to acquire American products.
    It is our belief that the Ex-Im Bank has made some progress 
in its efforts to support small businesses, and we cited a 
number of those in our written testimony. But, first, all small 
businesses are not created equal, and this is something we feel 
that is very important for everyone to understand.
    The U.S. Government defines a small business as having less 
than 500 employees. It is very important to remember that the 
organizational structure, as well as the specialization of 
skills in businesses ranging in size from 10 to 500 employees, 
is dramatically different. A business with 300 to 500 employees 
is likely to have a far more experienced and sophisticated 
financial organization than one with 20 to 50 employees.
    In fact, the chief financial officer of a 20- to 50-
employee company is quite likely also to be the chief operating 
officer and the owner. Wearing multiple hats greatly limits the 
time he or she can dedicate to learning the ins and outs of 
getting an Ex-Im application through the approval process.
    Second, speed is of the essence. With a shrinking product 
life cycle, today's business environment is one where first to 
market, first to produce, and first to deliver carries a 
greater competitive advantage than ever. An application 
approval process that exceeds the time allotted by the buyer 
for selecting a product and releasing an order effectively 
eliminates the Ex-Im Bank financing and, by default, the 
American exporter from competing even where American products 
might be preferred.
    Simplifying and accelerating the application and approval 
process needs to be a priority to improve future support. 
Providing delegated authority for medium-term loans to lending 
institutions with the resources and experience in these 
targeted markets is a program that offers tremendous potential 
for improvement. And I want to emphasize that this is strongly 
supported by AMT. We urge rapid authorization of that program.
    And, finally, it is our strongest recommendation that the 
current U.S. content requirements be reviewed. American 
manufacturers compete in a world market. Increasingly, 
customers in export markets want to reduce the number of 
vendors and orders they transact in order to reduce their 
operating costs. This often forces American exporters to bundle 
U.S.-produced products with products manufactured outside of 
the United States.
    When financing support is offered only in proportion to the 
American content, it puts the American exporter at a 
substantial disadvantage to foreign competition, who can and 
will finance the entire project. Although intended to ensure 
financing support is only given to American-produced products, 
the ultimate effect of this proportional support is a reduction 
in the sale of U.S.-exported product.
    Every member of AMT manufactures products in the United 
States. Each one is fiercely competitive and determined to 
ensure that American manufacturing technology remains 
preeminent. They continue to invest their time and money in 
their family businesses to grow their share of the world 
marketplace. They need your help to level the field that they 
must compete on.
    Madam Chairman, Ranking Member, and members, thank you, 
again, for giving me this opportunity.
    [The prepared statement of Mr. Thiry may be found in the 
Appendix on page 71.]
    Chairwoman Velazquez. Thank you, Mr. Thiry.
    I would like to address my first question to Mr. Warfield. 
Currently, less than 100 commercial banks finance international 
transactions, and less than half of those lend to small 
exporters. Surveys have shown that most lenders involved in 
trading financing are large money-centered banks, plus a few 
regional and small institutions.
    My question to you is: what structural changes to the 
Bank's financing programs would you recommend to increase the 
participation of smaller banks in these transactions?
    Mr. Warfield. I can offer a couple of comments. Early in 
the process, the credit culture of the Bank has to be willing 
to look at transactions that take the receivable outside of the 
U.S., and understand in that supply chain where the goods are 
moving, how they are producing, what they are producing, for 
what country, and be a better partner with that small business 
to understand how they can help them financially work through 
that transaction. And that really comes with the lenders and 
the Bank, the senior lender and the Bank to say, yes, we want 
to offer this type of service.
    Following up to that, it then really becomes somebody's 
task. And I think we heard it mentioned earlier, stuff gets put 
on the side, it becomes more difficult, and they work on 
different transactions. Or the answer might just be, wow, good 
luck getting paid, you know, things like that. And that's 
inappropriate. There needs to be a better initiative, working 
with the community banks, to better understand how they can 
mitigate those risks in working with those small businesses, 
and actually provide a better service to the small businesses.
    In your opening comments, when you referred to Ex-Im Bank's 
ability to work with the small business mandate, maybe being 
incomplete, I would offer this in addition to that comment in 
saying that while maybe parts are incomplete, they are in 
process. But, more importantly, they are incomplete in the 
sense that we need to tie the bankers that work with the small 
businesses into the picture more efficiently and more 
effectively.
    And that two years ago, three years ago, at First National, 
we weren't near as aggressive at looking to find small 
businesses that were looking to do more trade finance 
transactions. We were more on the transactional side of 
international trade, working with letters of credits and 
collections and some of the other tools. And we broadened our 
base, because I was able to add staff that could work 
specifically with that.
    It is just a matter of taking that time to make the 
commitment, move through the education process, and find the 
right partners, whether they are through the Export Assistance 
Center. We work primarily with Barry Bent and Michael Howard in 
the Chicago office, as well as the staff here in Washington. 
And once you develop those partnerships, you get the trust, 
things really fall into place. It just takes time.
    Chairwoman Velazquez. A follow-up question regarding the 
2006 reauthorization that required the Bank to establish a 
preferred lending program for its medium-term transactions. And 
the fact is that the Bank has not been able to implement this 
program as of yet. So do you think that the Bank is deterring 
smaller lenders from participating in Ex-Im Bank's programs?
    Mr. Warfield. No, I do not believe that. And I would give 
our bank as an example, and the preferred lending in doing 
delegated authority on the medium-term transactions. I wouldn't 
be ready to do that tomorrow. If Jim Lambright said, ``Today we 
are going live with the program,'' we rely on Ex-Im Bank to be 
our partner and help us underwrite those transactions. And I 
don't have in my staff, in my size institution, that ability to 
do that. I am not a Wells Fargo or a J.P. Mortgage Chase, or 
one of those institutions.
    So I am still going to probably want to work with Ex-Im 
closely to make sure the transaction is getting underwritten. 
The last thing I want is that the foreign buyer can't pay and 
then we have a loss or a default in the transaction. And so I 
don't want that to happen. I want to use their expertise. I 
don't have country officers, and I don't have offices in 
foreign countries, so I need them as a partner.
    So for me that has really not been a priority. What has 
worked well on the delegated authority, very much so with us, 
and we have become an active participant, is on the working 
capital side, providing the pre-exporting financing, which is 
very valuable to the small businesses.
    Chairwoman Velazquez. Dr. Yager, in the study that you 
conducted in 2006 of Ex-Im Bank, discrepancies were found in 
small business lending reporting practices. Do you believe that 
the current accounting method for small business transactions 
is still overestimated?
    Mr. Yager. Chairwoman Velazquez, we believe that the Bank 
has made some very important improvements, and I believe that 
the Congress can have much greater confidence now in the 
reporting that the provide to you in their mandated report.
    We did have one area of continued discussion and 
disagreement with Ex-Im Bank. You mentioned it in your 
questions, that we think that the Bank should continue to look 
for better ways to try to report on these umbrella policies 
that they provide to different banks. Instead of counting 100 
percent of those as oriented towards small business, we believe 
the Bank should consider different ways to report that 
information in order to be completely reliable and up front 
about what they are doing.
    But we certainly looked at what they have done and we 
believe they made some important changes which remedied many of 
the problems, all but one of the problems in fact, that we 
identified in our 2006 report.
    Chairwoman Velazquez. Okay. Mr. Thiry, in your testimony, 
you state that the Bank has failed to fulfill its small 
business financing mandate in the past due to budget cuts. Do 
you think that the recent restructuring of the institution and 
its policy will expand small business lending?
    Mr. Thiry. I am a little confused on your question.
    Chairwoman Velazquez. Well, it wasn't you, it was your 
association in--
    Mr. Thiry. Yes.
    Chairwoman Velazquez. --an article that came out.
    Mr. Thiry. Okay.
    Chairwoman Velazquez. So--
    Mr. Thiry. Yes. I think if we back up and look at what Ex-
Im Bank does and what they are trying to do, we feel very 
strongly that there needs to be a recognition of the difference 
in the size of small businesses, and that the people you have 
that support those businesses need to understand how they 
operate.
    Under the current structure and with the resources they 
have, and how they currently allocate those resources, we don't 
believe adequate attention goes to the small small businesses. 
That is an area that, if resources are not allocated 
differently, then certainly we feel additional resources need 
to be brought on.
    Chairwoman Velazquez. Let me ask you about the fact that 
manufacturers are located throughout the United States, 
including in regions that are isolated from major urban areas. 
And so their lending options are quite limited. I asked Mr. 
Lambright why is it that the Bank does not locate underwriters 
in many areas? Do you think that there is a benefit to placing 
Ex-Im Bank underwriters in such local communities?
    Mr. Thiry. I do. And the biggest reason for that, frankly, 
is people that are local are focused on getting things done 
locally, and understand local issues. And I do believe that the 
right people when placed closer to the customer base gets 
things done more quickly.
    Chairwoman Velazquez. Yes. Mr. Alford, I heard you and your 
frustration regarding the establishment under the 2006 
reauthorization of an office for minority and women exporters, 
and as of yet you haven't heard from Ex-Im Bank. The staff is 
here, and my guess is that you will be able to discuss with 
them how can they better enhance its outreach and educational 
services to minority businesses interested in exporting? But if 
you have to make a recommendation, what would that be?
    Mr. Alford. I think--years ago, and you participated in 
this, we had a problem with the SBA and its outreach. And you 
wanted the National Black Chamber of Commerce to report to you 
quarterly on what is going on with the SBA and what changes 
have been made. I would commit that to this Committee, that--
and I see a representative of the Supplier Development Council 
here, who they supposedly had an MOU with, but as we all know 
MOUs aren't enforceable in a court of law, and it makes a good 
press conference, but the follow-up has to be there.
    But I would suggest that we would let them know where there 
are conferences, where there are workshops, where there are 
opportunities for outreach, and they should attend, and we 
would not charge or make sure that no one would have to charge 
them to attend.
    Chairwoman Velazquez. They will attend. They will attend.
    Mr. Alford. Just to come and to outreach, and then we could 
report back to you on their efforts.
    Chairwoman Velazquez. Thank you.
    Mr. Alford. And if they don't, we will be glad to and 
certain to let you know that they aren't.
    Chairwoman Velazquez. Thank you.
    Mr. Davis.
    Mr. Davis. Thank you, Madam Chairman.
    Mr. Alford, many small businesses have difficulty in 
security export finance assistance through commercial banks. 
What are the greatest obstacles to small businesses in securing 
this type of financing?
    Mr. Alford. I think having some assets that they can hold 
as collateral. I think history. The easiest way, the most 
successful way, for many of our businesses to get financing is 
to partner with a big brother, more or less. Someone--let us 
take pineapples in Ghana. KDI out of Chicago, what they did, 
they went to the biggest pineapple importer in the United 
States and got them into a protege program going with them, 
where they could pick up the phone and get some lines, and let 
them know who are the friendly people in town. And from that 
they have been able to import enough pineapples to be in five 
supermarkets in the United States, and they are going from 
there.
    Those creative ways--banks are traditional and there are 
banking laws that you have to deal with. So it is up to the 
entrepreneur to try to find ways of doing this.
    Mr. Davis. You mentioned that collateral and your 
background, your history, how could the Ex-Im Bank address some 
of these challenges?
    Mr. Alford. All Ex-Im Bank has to do is just expose 
themselves, and we understand what Ex-Im Bank is. So if we can 
certainly get billions of dollars of business loans from Wells 
Fargo Bank, which we do, I can't understand why we can't get 
loans from Ex-Im Bank.
    Mr. Davis. Sounds like the--from what I hear in your 
testimony, if they will show up at your conferences, that is a 
good first step.
    Mr. Alford. That is a great step.
    Mr. Davis. Okay. Continue, one more question with you. What 
steps do you believe the Bank needs to take to be of greater 
assistance to minority and disadvantaged businesses 
specifically?
    Mr. Alford. Yes. Again, the communication. And you take two 
traditional banks--Bank of America and Wells Fargo--who I 
believe have a great track record in doing business with small 
and minority-owned businesses. And that is through basically 
their interaction out there in the field, letting people know 
what their products are. They aren't bending lending laws and 
requirements, but they are there to provide access. And when 
that need occurs, it occurs.
    So I have got a lady in Brooklyn, in fact--Wandi Sheneke 
from Kenya--who has a tea business. And she got her financing 
through her family. She had a big family reunion and shook down 
her aunts and uncles and all. But today her tea is in Whole 
Foods, based off that creative way of financing. It would have 
been nice if she could have gone a traditional route.
    Mr. Davis. Mr. Warfield, I will direct my last question to 
you. You mentioned in your testimony that you believe more 
lenders could be working with Ex-Im Bank by participating in 
their programs. What do you believe is keeping more lenders 
from doing just that?
    Mr. Warfield. Just the knowledge of knowing how to help 
their customers and ask the right questions. Oftentimes when we 
make calls on some of our correspondent banks, other community 
banks, we ask the question, ``Do you have companies that import 
and export?'' And they kind of--they draw back, because they 
don't typically ask that question. They don't know what their 
customers are typically doing maybe outside of the U.S. They 
know what they doing on their business loan or real estate loan 
and things like that.
    It is asking the right questions and identifying when those 
lenders are present, you know, what can we do for you? And when 
they say, you know, ``I have got an order to Malaysia, and the 
buyer wants two years to repay,'' a bell needs to go off and 
say, ``Yes, I remember Ex-Im Bank can help with that. And, if 
needed, I can get hold of the Export Assistance Center.'' It is 
knowing that process and really getting in front of them, so 
they have those connections when they hear the right--ask the 
right questions and then hear the answers.
    Mr. Davis. Thank you, and I yield back.
    Chairwoman Velazquez. Ms. Clarke.
    Ms. Clarke. Thank you, Madam Chair.
    And, Mr. Alford, I certainly hear you, and I can relate to 
your pain. It would seem to me if there is a real commitment to 
working with minority and disadvantaged small businesses, there 
would be someone in that office dedicated to the outreach, to 
the preeminent organizations around this nation. And, 
certainly, it wouldn't take much, if one couldn't find them, to 
reach out to this Committee and this Chairperson to say, ``Who 
have you been working with? Who has been attending your 
hearings?''
    What I am concerned about is the lack of urgency and the 
lack of openness to really creating as many corridors for 
success in our nation. And one could say by extension that it 
is benign neglect, or take it even further and say there is 
some discriminatory type of practice taking place. So I will 
certainly be taking this up with the CBC.
    And if you have any further recommendations, I would love 
for you to make sure that I am in touch with that, so that we 
can move forward and make sure that we bridge this gap, and 
that it is sustainable, because oftentimes people will reach 
out, they will come to a conference, you will see them one 
year, one session, and after that you never see them again.
    We want sustainable relationships established, because 
business is taking place each and every day in this nation.
    Mr. Alford. Yes, ma'am.
    Ms. Clarke. And we need to capture that.
    Mr. Alford. I think--
    Ms. Clarke. Mr. Alford, would you like to comment?
    Mr. Alford. There has been reticence at best, and it is not 
because they didn't know, because they have been invited, and 
they have been--and many businesses have gone to their doors 
trying to find help and being discouraged. they will go back, 
and they will keep going back. But we will find a way, but it 
is a shame that, you know, that is not a resource that we can 
use. And last time I checked, it was being funded with 
taxpayers' money.
    Ms. Clarke. Very well. We will make sure that we make that 
connection, and that we hold folks accountable.
    Let me turn to Mr. Warfield at this time. In a transitional 
economy, there has to be robust collaboration. I think that is 
some of what I got from your testimony. For us to reach the 
tipping point in closing the gap of the U.S. trade deficit, I 
think that each of your organizations really have to play a 
role, bridging this disconnect.
    In theory, what do you believe would occur if the Import-
Export Bank's program is enhanced for small business outreach? 
And, secondly, would you recommend that community banks be 
represented on the Import-Export Bank's Advisory Committee? And 
how would this help increase small business exports?
    Mr. Warfield. Thank you. I guess I would start by saying 
that the outreach--it needs to be a strong partnership, and it 
needs to be partners that are committed to working through the 
community bank process to work with small businesses across the 
country. And, yes, I myself would be willing to participate in 
any way I can. I have been active in a lot of banking 
organizations in my career, and I enjoy that a lot. It is 
something that adds a lot of value back to our banking 
industry.
    I am a third generation banker, and my family still holds 
and owns a couple of banks in Nebraska. So I participate at the 
very small community banking level as well.
    From an outreach standpoint, in reaching the right folks 
and being more robust about it, I think it is kind of--the 
saying, ``You hit on all cylinders,'' or ``You really get the 
power,'' it is really kind of connecting through the process, 
through Ex-Im Bank's annual conference is an excellent way to 
get more people involved in what Ex-Im does. There is firsthand 
experiences there. There is people that have been exporting for 
a long time. There is new to export folks to network.
    Ex-Im makes themselves very available for people to attend 
those types of events on the more local level through the 
Export Assistance Centers. I get--oftentimes get offers to say, 
``Hey, if you are having a seminar or workshop in the area, we 
would be glad to send someone to speak,'' and been open about 
that. It gets down to a matter of us committing the time on the 
banker's side to make sure all of those things happen, and that 
is where I need to do a better job at working with Ex-Im, to 
get them in front of more people in the Midwest.
    From a standpoint of working through the process, helping 
customers and small businesses, oftentimes they are new to 
export. So it is not just getting to the financing part, it is, 
how do we ship it? How do we pack it? How do we insure it? You 
know, what happens here? Do I need to get credit information?
    And then, on top of that, you put know your customer, know 
your transaction, and the BSA/AML regulations. And that is 
usually about if they are still hanging in there with you, you 
have got somebody that is willing to make that commitment to 
export, if they have--you have lost them along the way, you 
have--it just takes time and it takes more of an education.
    So we could be much more robust on the educational process. 
I think we could be a lot more robust in terms of banks like 
myself that have had successes with Ex-Im Bank talking to other 
banks through our correspondent network, and saying, ``Hey, we 
are there as a partner as well. We can share our experiences 
with you and participate in the transaction.''
    Ms. Clarke. Thank you very much, Madam Chair. I yield back.
    Chairwoman Velazquez. Thank you. Mr. Chabot?
    Mr. Chabot. Thank you, Madam Chair.
    Mr. Alford, could you tell us about a success story or two 
about a member of the National Black Chamber of Commerce in 
your experiences with the Bank?
    Mr. Alford. With Ex-Im bank?
    Mr. Chabot. Yes.
    Mr. Alford. There are none, sir.
    Mr. Chabot. None?
    Mr. Alford. None.
    Mr. Chabot. Okay.
    Mr. Alford. Nada.
    Mr. Chabot. Thank you.
    All right. Mr. Warfield, in doing business with the Bank, 
what type of problems have small businesses encountered during 
the loan process?
    Mr. Warfield. Problems can often arise with the U.S. 
content regulation. And that is probably the first question we 
ask anymore is: is your--is the content U.S.--is there any 
foreign content to what you are exporting? It is difficult, at 
best, to go to Main Street America and find a manufacturer that 
hasn't imported some component part to be competitive in their 
pricing, so they can sell overseas.
    And I really--that becomes a question, ``Well, the SBA can 
help them, because they don't have the same requirement,'' or 
you get into some of the private insurance and private 
providers. Once you get past that question, then it says, okay, 
then we can fit and look into some of these. And would say 50 
percent of the time, easily, there is a U.S. content, and we 
look for some other solutions, or we go back to working with 
some of the more traditional trade tools.
    That is probably--in the small business arena, that is more 
and more prevalent. And I guess what we--our mantra really is 
that trade is a two-way street, and these folks are being 
innovative. They want to keep employing their people in the 
small towns and small communities, and they need to be 
competitive on price, and they have imported some of the 
component parts. So that is an issue that I think--ongoing I 
think we need to keep looking at.
    And if there could be some leeway for small businesses in 
the content, that would be great. And aside from that, I think 
to the extent that--just assistance with the paperwork. It is 
just paperwork that you have got to do, and it is a matter of, 
yes, nobody really likes to do all that, but it is finding the 
right partner to help you. And at the same time, when you go 
through it a couple of times, it gets much easier. It is just a 
matter of doing it.
    The enhancements they have made to the online system is 
wonderful. That helps a great deal speeding up the process. 
From the standpoint of customers oftentimes wanting something 
tomorrow, well, in international trade it oftentimes doesn't 
happen tomorrow. It takes time. And when you are dealing with 
foreign banks and maybe need to get information back from them, 
as well as some other credit information and things like that, 
it is just a matter of building that expectation appropriately, 
so they know what time frames are appropriate.
    Mr. Lambright mentioned 60 days for the medium term, 10 
days for some of the other programs. Those are pretty accurate. 
Some are more complex; they might take more time. But I don't 
think there was any deal-breakers, because we can't process 
something instantly.
    Mr. Chabot. Thank you.
    Dr. Yager, you mentioned in your written testimony that the 
Ex-Im Bank's reported increase in small business transactions 
was due partly to a drop in the overall level of financing 
provided in other--to other customers by the Bank. Could you 
discuss that a little further?
    Mr. Yager. Yes, Ranking Member Chabot. We wanted to make 
sure that we looked at both components of that particular 
ratio. Obviously, you count the number of transactions or the 
value of transactions provided to small business on the top, 
and then the denominator is the entire work of the Bank. And we 
did notice that between 2005 and 2006, and continuing on into 
2007, the denominator, which is all of the business of the 
bank, dropped off.
    So one of the reasons why the ratio went from 19 percent 
all the way up to 25 and 26 percent had to do with both of 
those numbers changing--the increase, a fairly steady increase, 
in the value of business going to small business, and somewhat 
of a sharper drop in the value of business going to larger 
businesses. So both of those things had some contribution to 
the fact that now Ex-Im can report that 26 percent of its 
financing value is being directed towards small business.
    Mr. Chabot. Thank you very much.
    And, finally, Mr. Thiry, what type of other barriers to 
trade are small businesses experiencing now that the Ex-Im Bank 
may be able to help alleviate?
    Mr. Thiry. In our particular industry, we do struggle with 
some export control issues that I think a lot of effort is 
going in to improve. The real key one, though, and I do have to 
emphasize, is the content issue. And to really understand why 
this is such a barrier, put yourself in this position. I will 
use an example of a Mexican business that wants to buy 
manufacturing product. And let us say in the project he has it 
would involve 60 percent U.S. content, if it was coming from a 
bundled group of products here. So 40 percent would be foreign. 
To try and finance that out of here, if you can only finance 60 
percent of it, and I am the buyer there, where do I come up 
with this other money?
    But if we are competing with Germany, Italy, or other 
countries, they might put 80 percent their content, there might 
be 20 percent American content, they will finance it. So we 
lose the opportunity for that business. None of our members 
really want to see foreign content financed, but, as you know, 
the real issue is: how do you serve that customer? And as much 
as we would like to see 100 percent American content on 
everything, that simply is not the real world anymore. By 
keeping that old constraint, we are forcing ourselves out of 
the world market.
    Mr. Chabot. Thank you very much, Mr. Thiry.
    I yield back.
    Chairwoman Velazquez. Thank you.
    I have a last question, Mr. Thiry. Out of the 205,000 
exporting firms of manufactured products, 200,000 are small 
businesses. You indicated that time is critical to maintain the 
competitiveness of small businesses. Have your members 
experienced an improvement in the processing time for large 
overseas transactions?
    Mr. Thiry. Where they are dealing with a bank that has 
delegated authority on things such as working capital 
financing, that has helped dramatically. But in terms of 
attempting to work through the standard loan process, quite 
frankly, we have not seen significant differences.
    Chairwoman Velazquez. Okay. Well, you don't have any more 
questions. With that, I just want to take this opportunity to 
thank all of you for being here today. And we will continue to 
monitor the progress in implementing the 2006 reauthorization, 
especially at a time when our economy is struggling, and our 
trade deficit is big. We have to make sure that the financing 
is there to help those who are really providing the jobs in our 
American economy, and those are the small business sector.
    So with that, I ask unanimous consent that members will 
have five days to submit a statement and supporting materials 
for the record. Without objection, so ordered.
    This hearing is now adjourned. Thank you.
    [Whereupon, at 11:56 a.m., the Committee was adjourned.]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    
                                 
