[Senate Hearing 112-141]
[From the U.S. Government Publishing Office]






                                                        S. Hrg. 112-141


 OVERSIGHT AND REAUTHORIZATION OF THE EXPORT	IMPORT BANK OF THE UNITED 
                                 STATES

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

                                HEARING

                               before the

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

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                                   ON

 EXAMINING THE OVERSIGHT AND REAUTHORIZATION OF THE EXPORT-IMPORT BANK 
                          OF THE UNITED STATES

                               __________

                              MAY 17, 2011

                               __________

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

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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                  TIM JOHNSON, South Dakota, Chairman

JACK REED, Rhode Island              RICHARD C. SHELBY, Alabama
CHARLES E. SCHUMER, New York         MIKE CRAPO, Idaho
ROBERT MENENDEZ, New Jersey          BOB CORKER, Tennessee
DANIEL K. AKAKA, Hawaii              JIM DeMINT, South Carolina
SHERROD BROWN, Ohio                  DAVID VITTER, Louisiana
JON TESTER, Montana                  MIKE JOHANNS, Nebraska
HERB KOHL, Wisconsin                 PATRICK J. TOOMEY, Pennsylvania
MARK R. WARNER, Virginia             MARK KIRK, Illinois
JEFF MERKLEY, Oregon                 JERRY MORAN, Kansas
MICHAEL F. BENNET, Colorado          ROGER F. WICKER, Mississippi
KAY HAGAN, North Carolina

                     Dwight Fettig, Staff Director

              William D. Duhnke, Republican Staff Director

                       Charles Yi, Chief Counsel

                           Pat Grant, Counsel

                     Laura Swanson, Policy Director

                 Levon Bagramian, Legislative Assistant

          Gregg Richard, Republican Professional Staff Member

          John O'Hara, Republican Senior Investigative Counsel

                       Dawn Ratliff, Chief Clerk

                     William Fields, Hearing Clerk

                      Shelvin Simmons, IT Director

                          Jim Crowell, Editor

                                  (ii)


















                            C O N T E N T S

                              ----------                              

                         TUESDAY, MAY 17, 2011

                                                                   Page

Opening statement of Chairman Johnson............................     1
    Prepared statement...........................................    15

Opening statements, comments, or prepared statements of:
    Senator Crapo................................................     2

                                WITNESS

Fred P. Hochberg, President and Chairman, Export-Import Bank of 
  the United States..............................................     3
    Prepared statement...........................................    15
    Responses to written questions of:
        Senator Menendez.........................................    21
        Senator Bennet...........................................    26
        Senator Wicker...........................................    30

                                 (iii)

 
 OVERSIGHT AND REAUTHORIZATION OF THE EXPORT-IMPORT BANK OF THE UNITED 
                                 STATES

                              ----------                              


                         TUESDAY, MAY 17, 2011

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 10:03 a.m., in room SD-538, Dirksen 
Senate Office Building, Hon. Tim Johnson, Chairman of the 
Committee, presiding.

           OPENING STATEMENT OF CHAIRMAN TIM JOHNSON

    Chairman Johnson. Good morning. I will call this hearing to 
order.
    Today, the Committee welcomes the Chairman and President of 
the Export-Import Bank of the U.S., Fred Hochberg. This hearing 
will allow us to continue our ongoing oversight of the Bank's 
recent activities. In addition, we will hear from the Chairman 
about the Bank's ideas for reauthorization.
    The Bank's current authorization expires on September 30, 
2011, and it is my goal to work with Ranking Member Shelby, 
Senator Crapo, and other Members of the Committee to 
reauthorize the Bank.
    I want to thank all Members of this Committee for their 
support of Wanda Felton and Sean Mulvaney last week. It is 
imperative that the Senate confirm these nominees as quickly as 
possible.
    The Export-Import Bank is the official export credit agency 
of the U.S., and it assists in financing the export of U.S. 
goods and services to international markets. Following the 
financial crisis, the Bank experienced a dramatic increase in 
its activities as many companies struggled to find financing in 
the private market. In fiscal year 2010, the Bank saw a 70-
percent increase in authorizations from 2008. In fact, last 
year the Bank committed almost $25 billion in support of U.S. 
exports--a record.
    The Bank is one of the few Federal agencies that actually 
makes money for the U.S. and, since 2008, has been self-
funding. This is a testament to the Bank's leadership under 
Chairman Hochberg, as well as the good work of the dedicated 
staff and Board of the Bank.
    All of the Bank's transactions are backed by the full faith 
and credit of the United States. Therefore, it is important for 
this Committee to make sure that the Bank is working as 
efficiently and effectively as possible to protect the 
taxpayers.
    Equally important is the Bank's goal to use exports to help 
create and maintain jobs here at home. This mission, embodied 
in the Bank's charter, is at the very core of what Congress 
intended the Bank to do. I believe that while the Bank is doing 
a good job, it can--and must--do more.
    Over the next several years, the Bank will face some 
challenges. After weathering the financial crisis, the Bank may 
see a shift in the types of deals it is asked to finance as the 
economy recovers. In addition, the President has called for the 
doubling of our exports by 2015 in an effort to create as many 
as 2 million American jobs. As the Nation's official export 
credit agency, the Bank will play a critical role if we are to 
meet that goal.
    I am eager to hear from Chairman Hochberg about the Bank's 
recent activities and his ideas for reauthorization.
    I now turn to Senator Crapo for any opening remarks he may 
have. Senator Crapo.

                STATEMENT OF SENATOR MIKE CRAPO

    Senator Crapo. Thank you very much, Mr. Chairman, and 
welcome, Mr. Hochberg. We appreciate you being here today.
    As you have noted, Mr. Chairman, the President declared in 
his State of the Union address that he hopes to double the 
American exports in 5 years, and he has identified the Export-
Import Bank of the United States as one of the leading 
Government agencies to help accomplish that goal.
    Financing is a key element in global trade competition, and 
extending the Bank's programs is a vital and integral component 
in supporting the export of American-made goods and American-
provided services for both small and large companies.
    In 2006, I had the privilege of working with my colleagues 
on the Banking Committee and then-Export-Import Bank Chairman 
Jim Lambright to reauthorize and reform the Export-Import Bank 
in a process that reflected broad bipartisan agreement.
    The last reauthorization changed the Economic Impact 
Procedures to ensure that the Bank's support for transactions 
not only helps U.S. exporters but does not negatively impact 
domestic companies. Since the Bank was not meeting its 20-
percent small business mandate, the legislation made structural 
changes to make sure that the small business community has 
advocates to advance its needs and to address its concerns. And 
while it is appropriate to review the content requirements, 
tied aid requirements, and funding limits, we should be mindful 
that the Bank's authorization expires in just a few months.
    We need to quickly assess the results of these changes from 
2006 and determine if there are any other reforms to the Bank's 
operations that are needed to maintain or improve its 
competitiveness with export financing while not negatively 
impacting domestic business.
    There are literally billions of potential global consumers, 
both established and emerging, in the markets for goods and 
services made in America. Getting these American goods and 
services into consumers' hands worldwide is the key to our 
export challenge.
    And one of the challenges the Bank and our exporters face 
is that other nations also use very aggressive export policies, 
which often limit the attractiveness of our export market to 
foreign buyers if we do not deal with them. Hopefully today's 
testimony will shed some light on these issues and contribute 
to our speedy reauthorization process.
    Thank you, Mr. Chairman.
    Chairman Johnson. Are there any Members who wish to make 
opening statements?
    [No response.]
    Chairman Johnson. If not, today's witness, Fred Hochberg, 
is the 23rd President of the Export-Import Bank, the U.S. 
Government's official export credit agency. In this capacity, 
he also serves as Chairman of the Board.
    Mr. Hochberg, thank you for being here today. You may 
proceed with your testimony.

 STATEMENT OF FRED P. HOCHBERG, PRESIDENT AND CHAIRMAN, EXPORT-
                IMPORT BANK OF THE UNITED STATES

    Mr. Hochberg. Thank you, Chairman Johnson and Senator Crapo 
and distinguished Members of the Committee. Thank you for the 
opportunity to testify today about the Export-Import Bank and 
our reauthorization.
    The Export-Import Bank of the United States helps U.S. 
companies and workers compete in the global marketplace. In 
2010, at Ex-Im Bank's annual conference, President Obama kicked 
off the National Export Initiative with the goal of energizing 
our export base and creating jobs through a doubling of exports 
by 2015.
    The Export-Import Bank is our Nation's official credit 
agency, export credit agency. Our mission is to enable American 
companies, large and small, to compete for sales that help 
maintain and create U.S. jobs.
    In 2008, as the financial crisis unfolded, Ex-Im Bank 
stepped in to assist businesses when the private sector was 
unable or unwilling to provide financing. This ensured that 
American businesses and their employees were able to compete 
for sales that helped their companies and their workers weather 
the tough economic times.
    The Bank fulfilled its mission with reasonable assurance of 
repayment by providing export financing through its loan, 
guarantee, and insurance programs. This is something that Ex-Im 
Bank has been doing since it was established in 1934. Ex-Im 
Bank helps U.S. companies compete with foreign competitors that 
receive support from their export credit agencies. In short, we 
help level the playing field so that U.S. businesses can 
compete based on quality and price of their products and 
services and not be undercut by overly aggressive use of export 
financing. We provide our exporters and the workers with a 
competitive edge.
    In fiscal year 2010, Ex-Im Bank authorized a record $24.5 
billion worth of financing which supported more than $34 
billion worth of U.S. exports and 227,000 U.S. jobs at more 
than 3,300 companies. We proudly added more than 500 businesses 
over our fiscal year 2009 levels.
    We are now halfway through fiscal year 2011, and I am 
confident we will have another record-breaking year. We are 
already ahead of where we were mid-year 2010. And I would like 
to note that we do this work at no cost to the American 
taxpayer.
    Since October of 2007, Ex-Im Bank has operated as a self-
sustaining Federal agency. Given the importance of lowering our 
Nation's deficit, I am pleased to report that over the past 5 
years our agency has generated $3.4 billion for the U.S. 
Treasury.
    Ex-Im Bank helps businesses, large and small, sharpen their 
competitive edge in every part of the country.
    Mr. Chairman, in your State we have supported nearly $18.5 
million in exports since 2007. I have results for Senator 
Shelby. Let me continue. In fact, for all Members of this 
Committee, total exports supported more than $19 billion, of 
which more than 40 percent was for small business, and that is 
since 2007.
    Let me briefly touch on three issues that we are 
particularly proud of at Ex-Im Bank: our support of small 
businesses, our support of renewable energy projects, and our 
support of Sub-Saharan Africa projects.
    First, the Bank dedicates substantial resources to 
assisting small businesses, and it is paying dividends. More 
than 85 percent of all transactions at the Bank assist small 
companies. Our total for small business transactions have 
increased from $3.2 billion in fiscal year 2008 to $5.1 billion 
in 2010, which was a record for the Bank. We have been able to 
meet our 20-percent small business mandate even as our total 
authorizations grew 70 percent in the past 2 years. In fact, in 
43 of 50 States, we are well above the 20-percent small 
business mandate.
    In order to reach more small businesses, we are partnering 
with the U.S. Chamber of Commerce, the National Association of 
Manufacturers, and several financial institutions to leverage 
their networks.
    In January of 2011, Ex-Im Bank launched a new initiative 
called Global Access for Small Business because for small 
businesses to compete they need access to capital and 
liquidity. It includes new financing products for small 
exporters and concrete goals to double small business 
financings to $9 billion by 2015, as well as add 5,000 more of 
these companies to our portfolio.
    Ex-Im Bank along with these partners has already organized 
nine Global Access Forums across the country. As I mentioned to 
Senator Hagan just before, we will be doing one in North 
Carolina in early June. We plan to hold 20 in the course of 
this year.
    Second, I want to share with you the strong results we are 
achieving in financing renewable exports. In fiscal year 2008, 
the Bank authorized $30.4 billion in renewable energy exports. 
That grew more than tenfold by 2010 when we authorized $332 
million in renewable energy exports. We are optimistic that for 
fiscal year 2011 we will have doubled last year's numbers, 
which would set another record for renewable energy exports in 
2011.
    Third, we are breaking records with our work in Sub-Saharan 
Africa. For fiscal year 2009, the Bank supported $412 million 
across 20 countries. In fiscal year 2010, that grew to $812 
million, a new record, and it represents 5 percent of all U.S. 
exports for the region, more as a percentage than any other 
region of the world. In fiscal year 2011, Ex-Im Bank expects to 
top $1 billion in Sub-Saharan African authorizations.
    Last, let me take a moment to discuss our reauthorization 
legislation that was sent to you yesterday. Our legislation 
extends Ex-Im Bank's authorization through September 30, 2015. 
We clean up outdated language that references programs we no 
longer need and countries like Yugoslavia which no longer 
exist.
    The final highlight of our language is that we gradually 
increase our existing exposure cap from $100 billion to $140 
billion over 4 years. This will enable the Bank to continue to 
support U.S. exports and meet the President's goal of doubling 
them by 2015.
    I am proud of the excellent work that the 400 strong Ex-Im 
Bank staff is doing to create jobs, and, again, this is at no 
cost to the taxpayer.
    I look forward to working with you on our reauthorization. 
This will allow the Bank to continue to help grow exports and 
jobs while at the same time making American businesses more 
competitive in the global markets.
    I thank you for this opportunity to testify. I look forward 
to your questions.
    Chairman Johnson. Thank you for your testimony.
    As we begin questioning the witness, I will ask the clerk 
to put 5 minutes on the clock for each Member's questions.
    In large part due to the economic crisis, the Export-Import 
Bank has seen a 70-percent increase in its authorized 
transactions over the last 2 years. As the economy continues to 
recover, how do you think the Bank will be affected?
    Mr. Hochberg. Senator, thank you for that question. I am 
very proud of the fact that we have stepped in to the financial 
crisis and increased our authorizations over 70 percent.
    That said, although the financial crisis and the banking 
crisis is subsiding, we still see a need for extensive export 
assistance partly to address foreign competition. Our companies 
are facing brutal competition, and it is important that we 
continue to create jobs here in the United States through 
exports.
    Second, more and more exports are going to emerging 
economies which have less access to the capital markets, less 
access to banking, and, therefore, there is still a great need 
for our services.
    Chairman Johnson. The President has announced a National 
Export Initiative to double exports by 2015, which could create 
2 million new jobs. How can the Bank best advance the goals of 
this initiative?
    Mr. Hochberg. Chairman Johnson, the best way that we can 
address those is by making sure that when American companies 
are competing for orders, competing for sales overseas, that 
financing is never an impediment to making that sale. So we are 
helping companies, large and small, make sure that they have 
the financial resources--small companies primarily through 
access to liquidity and insurance on receivables, large 
companies making sure they have a competitive financing offer 
so that they can meet the foreign competition.
    Chairman Johnson. At the close of fiscal year 2010, the 
Bank had $75 billion in total obligations outstanding. The Bank 
is prohibited from exceeding $100 billion in outstanding 
obligations. If Congress were to raise this cap, what impact 
would that have?
    Mr. Hochberg. Senator, we are increasing our authorizations 
each year. So far this year we have authorized $13.4 billion, 
and I expect this year we will in all likelihood top last 
year's record of $24.5 billion. So each time we add to those 
authorizations, we need to add to our portfolio. Roughly 
speaking, we added $20 billion; about $10 billion stays on the 
portfolio because they are longer-term deals, and the balance 
will be paid off for the short term. So we need an increase in 
the exposure cap to continue to support American companies as 
they compete overseas and compete for jobs here at home.
    Chairman Johnson. The Bank is required to ensure that at 
least 20 percent of its annual authorizations goes toward small 
business. Under your leadership the Bank has met this goal this 
year. Can you talk about how the Bank works to meet and 
possibly exceed this mandate?
    Mr. Hochberg. Senator, I think that one of the reasons that 
President Obama asked me to take this position was my work at 
the Small Business Administration under President Clinton as 
the Deputy and the fact that I ran a company that was once 
small for 20 years, a family business called Lillian Vernon.
    The key to our growth in this economy is small business, 
and it is central to our work and central to my work at Ex-Im 
Bank. We have launched a number of these Global Access Forums 
around the country. I know that you and are working to find a 
date in South Dakota, for example. Most of this is about 
information. We do need resources to meet small business 
owners. They frequently do not understand how we can be a 
resource and help them grow their businesses. So resources are 
critical, and that is a separate matter in terms of 
appropriation.
    We have also added new products, Express Insurance and a 
number of fast products to improve turnaround time to make sure 
that small companies get answers and get answers quickly.
    But it is a real challenge to meet the 20-percent threshold 
each and every year based on the resources that we have.
    Chairman Johnson. The Bank limits foreign content in many 
of the transactions it approves. Can you explain how the Bank 
calculates domestic content for the products and services it 
supports?
    Mr. Hochberg. We work with our exporters. We have an 
engineering department that will certify, working with their 
self-certification and reviewing that, to ensure that in the 
case of full support 85 percent of the content is U.S. made and 
domestic.
    To the extent that content is less than 85-percent U.S. 
content, we simply adjust the amount of credit facilities or 
insurance to be commensurate with the amount of U.S. content in 
those transactions.
    Chairman Johnson. Senator Crapo.
    Senator Crapo. Thank you very much, Mr. Chairman.
    Chairman Hochberg, the last reauthorization changed the 
Economic Impact Procedures to ensure that support for 
transactions not only helps U.S. exporters but does not 
negatively impact domestic companies. Has the Sensitive Sectors 
List succeed in making the process more predictable about 
financing that is unlikely to be provided while still allowing 
the transactions to proceed?
    Mr. Hochberg. Senator, we have the Sensitive Sectors List 
that we look to and that is a guide to exporters to understand 
that there is particular heightened scrutiny on those 
particular transactions. It is a process that we review each 
time, and sometimes it requires outside of that area more in-
depth analysis depending on the nature of the industry or the 
nature of the product. But the Sensitive Sectors List has not 
changed since the last reauthorization.
    Senator Crapo. So do you feel that there is an adequate 
focus on the part of the Bank's operators and those who 
implement its processes to making sure that we focus on the 
possible negative impacts on domestic companies?
    Mr. Hochberg. Without question. We take that very 
seriously.
    Senator Crapo. All right. Thank you.
    Also, in the last reauthorization we made structural 
changes to make sure that the small business community has an 
advocate to advance its needs and required the Ex-Im Bank to 
authorize banks to process medium-term transactions on behalf 
of Ex-Im Bank to facilitate the approval of such transactions. 
Do you think these initiatives have been successful? And are we 
meeting our small business targets effectively?
    Mr. Hochberg. We are meeting our small business targets. I 
will tell you that, despite enormous effort, it is a large 
challenge. Small business owners need much more one-on-one 
contact and one-on-one work on those transactions. They do pay 
dividends and they do bear fruit, but it is labor intensive at 
this time.
    We have brought in a new Senior Vice President of Small 
Business, someone I actually worked with at the Small Business 
Administration. I personally put--a majority of my time is 
spent on working with the small business community.
    Senator Crapo. All right. Thank you for that.
    My last question is, as you know very well, gaining an edge 
in financing is critical in terms of export competition, and 
last year, the Bank invoked an almost never used provision in 
the charter to level the playing field, so to speak, in a 
transaction involving American and Chinese locomotives.
    What changes to U.S. export credit financing generally do 
you see necessary to help us level the playing field?
    Mr. Hochberg. This was a sea change for the U.S. 
Government. We had evidence that the Chinese were offering 
financing assistance to a Chinese manufacturer that did not 
comply with OECD guidelines that the other 31 industrialized 
countries follow. China now is the largest exporter in the 
world and the second largest economy, and yet they do not 
follow the same rules and protocols that the other 
industrialized countries do.
    As a result, having that evidence, we worked with the White 
House and the Treasury Department, and we were able to come up 
with a competitive financing arrangement. We informed the OECD 
that we were going to do so and have offered that to the 
exporters to make sure that when the Pakistan Rail Authority 
makes a decision, it can be based on the products, the 
attributes, service, and price and not on financing terms. We 
are still waiting for that transaction to be resolved.
    Senator Crapo. Do you think we need to change anything in 
the law in order to facilitate your ability to achieve these 
kinds of efforts to level the playing field?
    Mr. Hochberg. I think the most important thing we need to 
do is make sure that the exporting community realizes that and 
does not give up on competing against China because they feel 
they are such a formidable competitor. So I think we have the 
tools, and I am looking to make sure that other exporters in 
other sectors realize that we will back them fully to make sure 
that we protect U.S. jobs and are competitive and go toe to the 
toe with the Chinese or any competitor that is trying to make 
sales in the global marketplace.
    Senator Crapo. Well, thank you, and I appreciate your 
attention to these issues.
    Thank you, Mr. Chairman.
    Chairman Johnson. Senator Reed.
    Senator Reed. Thanks very much, Chairman Johnson, and, 
Chairman Hochberg, thank you for your leadership not only at 
the Ex-Im Bank but, as you indicated before, at the SBA. You 
bring great experience and great energy to this effort.
    One of the impressions I have is there are a lot of 
particularly small businesses throughout the country that could 
be in the export sector but are not for many reasons. What are 
you doing proactively along with your other colleagues in the 
Administration, the Department of Commerce, et cetera, to get 
potential export companies, small business companies, in the 
game?
    Mr. Hochberg. Senator, actually we are going to be in your 
State in early June with Congressman David Cicilline. Perhaps 
you can join us as well. We are going to be doing one of our 
Global Access Forums, along with Karen Mills, because we 
frequently do these with the SBA or the Commerce Department.
    One of the most effective tools we have are these Global 
Access Forums where we bring in small companies and explain to 
other small business owners how they have successfully 
exported, created jobs, and actually created sales and profits 
through that.
    The best way we can do that, candidly, is with Members of 
this Committee who can help bring the business community to the 
table, and we will do that education.
    Part of this, again, this is not an appropriation hearing, 
but this is about resources. These are labor intensive and time 
intensive, and we are at the same level as the CR, which has 
not increased our appropriation in any way, to take an account 
for additional volume or outreach to small businesses.
    We have a greater Web presence. We are doing webinars on a 
monthly basis. And, importantly, we are also changing our 
products. I have been challenging the agency to streamline our 
operations to get exporters quicker answers. We launched a 
product called Express Insurance where we are giving an answer 
to an exporter, a quote on insurance within 5 days, and 
frequently better than that.
    So those are some of the tools, but a lot of it is also 
communications.
    Senator Reed. Let me ask a question, because you raised 
this in the context particularly of very constrained budgets, 
you have got to be able to show that you are adding value to 
the process. And in terms of what Ex-Im Bank is doing, some 
critics have suggested it merely sort of does not increase 
overall economic activity, it just reallocates it to the export 
sector.
    Do you have measurements and metrics that show, you know, 
jobs are growing in this country, particularly in the small 
business community, that otherwise would not?
    Mr. Hochberg. Well, what we do, Senator, is we work with 
the Department of Commerce and have made an estimate that about 
7,400 jobs are created for every $1 billion worth of exports 
that we support, and that is looking at the entire supply 
chain. You cannot just look at the company that actually 
ultimately ships the goods. You have to look at all the 
equipment and material that work to get it to that point. So we 
use that number of 7,400 jobs per $1 billion of exports, and by 
that calculation, last year we either created or sustained 
227,000 jobs through the financings that we did.
    I would just add one more thing. American companies are 
continually facing a very, very tough competitive environment. 
The Senator referred to the transaction on Pakistan where we 
are competing against the Chinese. We compete against the 
Koreans, the Germans, the Japanese, the French, the Italians, 
and many, many other countries. And sometimes if it were not 
for the financing we offer, comparable financing, those sales 
would be lost and those products would be made by workers in 
those countries versus workers in America.
    Senator Reed. I think your goals are not only laudable but 
actually essential to the success of the country going forward. 
As we all know, the President has pledged to do everything they 
can to double exports. As you look at that challenge, what do 
you have to do more, what do we have to do more to try to reach 
that goal of double exports?
    Mr. Hochberg. Well, we are actually on a good track. 
Exports are up 17 percent in 2010. January was a record month 
of exports for the United States, and then that record was 
broken again in March. So we are actually on a good trajectory 
in terms of increasing exports.
    It takes greater dedication to manufacturing, a greater 
dedication to services, which actually we run a trade surplus 
in, and ag products as well. Secretary Vilsack is working very 
hard on making sure we increase our agriculture exports as 
well.
    I think that it requires the resources at Ex-Im Bank and 
the Commerce Department because we are clearly outgunned when 
it comes to foreign competition. My competitor export credit 
agencies have offices throughout the world. The Chinese have 
offices, the Japanese have offices, the Canadians have offices. 
You know, I would give you one example. Our offices are in the 
United States, and our appropriation is somewhat limited right 
now.
    Senator Reed. Thank you very much, Mr. Hochberg.
    Thank you, Mr. Chairman.
    Chairman Johnson. Senator Moran.
    Senator Moran. Thank you, Chairman Johnson.
    Mr. Chairman, thank you. My first opportunity to extend 
an--an opportunity to say hello to you and get acquainted, and 
I appreciate that very much.
    I want to just follow up on your last response to what you 
were saying to Senator Reed. Tell me about the competitors. If 
we are doing OK, and you say we are on the right trajectory, 
what do we see our competitors doing, particularly as it 
relates to access to credit, assisting their exports? You 
talked about offices around the world. Tell me more about what 
they have that we do not have.
    Mr. Hochberg. I would say primarily what some countries--
and I will name China, for example. There is a lot of support 
before a company exports, either free facilities, a tax 
holiday, 1-percent or no-percent interest loans. There are a 
number of those kind of programs that actually assist their 
manufacturing base and then make them very formidable 
competitors on price as well. So that is something that some 
foreign competitors are doing. China is particularly noteworthy 
in that particular area.
    Senator Moran. Before we ever get to the export market, 
they are subsidizing the production of manufactured goods, for 
example. We see that in agriculture in which part of what we do 
is support the production of agricultural commodities, but part 
of what we do is try to encourage their sale abroad. And so we 
may not be competing well in the support for the industry. Tell 
me about the access to credit. How are we different than other 
countries? And what disadvantages do we have?
    Mr. Hochberg. Well, actually, we have a number of 
advantages. One of the things we do is we can make a direct 
loan when a guaranteed loan does not work. Most of our foreign 
competition, the traditional OECD, you known, the European 
countries, cannot do direct lending. So that actually gives us 
an advantage.
    We have employed a number of new financing products--that 
is something called a take-out option--that if there a material 
adverse condition, we will take a loan away from a bank if they 
would like to send it back to us so that they can no longer 
service it.
    So there are a number of programs like that that we have 
put in place, and I would say with pride we have taken the 
small business mandate far more seriously than our competition 
has.
    Senator Moran. Thank you, Mr. Chairman.
    Chairman Johnson. Senator Warner.
    Senator Warner. Thank you, Mr. Chairman. And let me welcome 
my friend, Chairman Hochberg, whom I have had the opportunity 
to know and work with back to the days when he was in the 
private sector. Congratulations on your success at Ex-Im Bank.
    I want to follow up on both Senator Moran's comments and 
Senator Crapo's comments in terms of competition with the other 
export credit agencies.
    I guess the first point I want to make is that clearly 
China is not playing by the same rules that all the other 
participating OECD countries are playing by. Is there any 
coordinated effort, since China does these enormous subsidies 
and has a very, very low cost of capital, where, you know, the 
rest of the world is playing by one set of rules, is going to 
have some kind of united action vis-a-vis these kind of 
outside-the-fair-boundaries rules that China is playing with?
    Mr. Hochberg. I have been with Secretary Geithner and 
Secretary Clinton, who have advocated China to more comply with 
the rules and protocols that other export agencies do. Last 
week, there was the China Strategic and Economic Dialogue, and 
that was one of the central themes that was discussed with the 
Chinese.
    I was at a G-11 meeting, which was the G-7 plus the BRICs, 
so the Chinese were with us last week, and I had a meeting in 
Europe and discussed at length having them move closer toward 
OECD protocols so that they would be providing financing on the 
same terms that the United States and other exporters do.
    Senator Warner. Are other OECD countries putting that same 
kind of pressure on as well? Is there any kind of coordinate 
action?
    Mr. Hochberg. It is coordinated. I would say that we have 
to take the lead. As the United States, people look to us to 
take a leadership role. I think we did that in our financing of 
the rail for Pakistan. Offering that was a clear statement that 
until you comply, we will not sit idly and let orders go away 
because you have better financing than we do.
    Senator Warner. We would look toward, as we look at the 
reauthorization, how we make sure we have got those tools.
    Now, in terms of some of the other export credit agencies, 
obviously, you mentioned, they are more aggressive. We have got 
a deal in our State, the iridium deal, which I am sure you are 
familiar with, where France came in and topped us out and, you 
know, I just was curious. How can we make sure some of these 
areas, satellite technology, something that we have an 
advantage on, that we can stay competitive?
    Mr. Hochberg. I would say there is one other area I should 
mention that also Ambassador Kirk is taking the lead on, as 
well as Secretaries Clinton and Geithner, and that is on a 
level playing field, to make sure that when American 
companies--I am convinced that American companies will compete 
and win their fair share of orders when there is a level 
playing field and the bidding is truly open to all competitors, 
not simply State-owned enterprises or local companies.
    That is something that we are continually working toward, 
and it is a challenge for American companies when they are 
bidding, be it in--not just in China but in Asia and Latin 
America, to make sure that American companies can bid on the 
same terms as local companies.
    Senator Warner. But if my information is correct, Ex-Im did 
not even make an offer on the iridium circumstance.
    Mr. Hochberg. On the iridium transaction, they ultimately 
did not even make an application to us in the end, and from the 
preliminary data, we felt that the risk profile in that 
transaction was looking outside of the level that we were 
comfortable financing. And as a result, we never actually did 
receive an application.
    Senator Warner. Mr. Chairman, one of the things I hope that 
we will have a chance to look at as we work through this 
reauthorization--and I look forward to working with you since 
this falls in our Subcommittee, and I would like the Chairman's 
comments on any proposed changes to the content rules. 
Obviously, content rule in terms of what type of activity you 
can help finance. We have had a lot of changes in the 50 years 
since, I believe, the content rules originally were laid out in 
terms of global supply chain, a lot more move toward technology 
products and services where--and, again, I commend your efforts 
on the small businesses, but particularly a lot of small 
businesses are in that technology and supply chain, service in 
the supply chain as well.
    Do you have any comments for the Committee in terms of 
proposals that you would want to see changes in the content 
rules?
    Mr. Hochberg. The content rules now require that as long as 
the content is 85 percent, we will fully support the export. If 
the U.S. content is 50 or 60 percent, we will provide 50 or 60 
percent of the financing. So we adjust our financial support 
based on the U.S. content.
    With close to--well, actually, we are back at 9-percent 
unemployment, I find it very--it is hard to justify dropping 
the content as a way of increasing employment. We use content 
as a proxy for American workers and American labor. So I think 
the content rules, as we currently enforce them, are the best 
way we can help increase employment.
    Senator Warner. Even as we look on the service side and 
kind of----
    Mr. Hochberg. On the service side, we can support services. 
About 10 percent, Senator, of our exports last year were on the 
service side. We are working with Black & Veatch, a company in 
Kansas, that is 100-percent service export. So the service side 
we can support, be it engineering, architectural, legal, 
insurance.
    Technology companies are the ones that present somewhat of 
a challenge, and that is really--we need the product to be 
shipped from the United States to be a true export, and we need 
verification that it was create by U.S. workers. In that case 
we can support it.
    Senator Warner. Well, I would just like to look at kind 
of--since on technology so much of where it is shipped from may 
be one indication, but there are so many different parts along 
the way. I look forward to working with you on that.
    Thank you, Mr. Chairman.
    Chairman Johnson. Senator Merkley.
    Senator Merkley. Thank you very much, Mr. Chair.
    Thank you for your testimony. I wanted to start by asking 
about the economic impact studies on productive machinery. I 
believe you do a couple a year or you pick out topics. How do 
you decide what to choose to explore in those studies?
    Mr. Hochberg. For economic impact?
    Senator Merkley. Yes.
    Mr. Hochberg. It is on a transaction-by-transaction basis. 
When we get a transaction that would be of capital equipment 
that, therefore, might impact or hurt American competitive 
businesses and American companies, we will at that point do an 
economic impact study to ascertain whether this would be 
harmful or not to the U.S. economy. So it is really on each 
transaction.
    Senator Merkley. So, for example, in the Pacific Northwest, 
we have lost a lot of paper manufacturers to low-cost paper 
coming from China, and I know that China has shipped in major 
production machinery from around the world, I believe including 
U.S. machines. I do not know if they were subsidized at all by 
the Export-Import Bank, but is that the type of issue you would 
explore? And have you explored that specific issue?
    Mr. Hochberg. I have not explored that specific issue, but 
what we would--the way we would approach situations like that, 
if there was an export of paper-making equipment that we were 
being asked to finance, we would look at that export of paper-
making equipment and see whether that would hurt American 
competitiveness by producing paper and giving capacity and 
capability to a foreign company in a foreign country. So it is 
more on the export of the capital equipment that we would be 
making that assessment.
    Senator Merkley. Do those studies come in advance or are 
they backward-looking?
    Mr. Hochberg. Well, they are both backward-looking and, as 
best we can, making a forecast of what would this additional 
capacity on the part of a foreign company and could that 
compete in a material way with the marketplace for American 
goods and services.
    Senator Merkley. When you are guaranteeing loans to foreign 
companies to buy American products and those companies do not 
pay up in a certain amount of time--I do not know if it is 60 
days or 90 days--how do you go about essentially holding those 
companies accountable?
    Mr. Hochberg. Senator, I think that is one of the key 
reasons why American companies work with us, and they work with 
us in challenging environments. We have at our disposal--
frankly, the United States Embassy is very helpful. We do a 
thorough review of the creditworthiness before we get there. So 
our write-off rates average about 1.5 percent, which, if you 
look at it on a commercial basis, is actually very strong and a 
low write-off basis. And we are dealing with far more 
challenging credits than the average bank.
    Senator Merkley. Certainly any private lender would be 
envious of that write-off rate. Are there private lenders that 
find that there is enough business in the export world that you 
are not attending to that you have the complement of private 
financiers in this sector?
    Mr. Hochberg. Oh, without question. I mean, the United 
States Export-Import Bank finances or is engaged with about 1.5 
percent of U.S. exports--frankly, a low-intensity level, lower 
than most other developed countries. So we really as the United 
States far more on the private sector to support trade finance 
than almost any other country.
    Senator Merkley. I really think of the Bank as serving in 
that role where the private market does not attend because of 
the fact that it is too risky, the buyer is too uncertain, et 
cetera. And yet with a write-off rate of only 1.5 percent, that 
is quite remarkable. Are there a lot of loans that you simply 
turn down guarantees for or turn down direct loans for because 
they are too high of a risk?
    Mr. Hochberg. Well, first let me say one thing. Companies 
and countries do not like to default on the U.S. Government. It 
is not a good idea. We are a very good ally and a good friend 
and not someone you want to make an enemy of. So that helps in 
our ability to collect.
    Frequently a transaction will--people will work with the 
Bank, and if we feel that it is not creditworthy enough, we may 
not even see the application maybe early enough.
    That said, the instruction I have given to our Bank is that 
I want to find a way to get to yes, and if that means perhaps a 
slightly higher fee or instead of guaranteeing 85 percent we 
might only guarantee 80 or 75 percent, or ask the exporter to 
take on some other risk, we want to find a way that we can help 
a U.S. exporter so that they can make that sale. And we will 
either look at the pricing or the coverage ratio as a way of 
getting to yes in one way or another.
    Senator Merkley. Thank you.
    Chairman Johnson. Thank you, Chairman Hochberg, for your 
testimony today.
    We will leave the record open for 7 days so that Members 
can submit additional questions. Chairman Hochberg, please 
submit your answers to us as soon as possible.
    This hearing is adjourned.
    [Whereupon, at 10:46 a.m., the hearing was adjourned.]
    [Prepared statements and responses to written questions 
supplied for the record follow:]
               PREPARED STATEMENT OF CHAIRMAN TIM JOHNSON
    Today, the Committee welcomes the Chairman and President of the 
Export-Import Bank of the United States, Fred Hochberg. This hearing 
will allow us to continue our ongoing oversight of the Bank's recent 
activities. In addition, we will hear from the Chairman about the 
Bank's ideas for reauthorization.
    The Bank's current authorization expires on September 30, 2011, and 
it is my goal to work with Ranking Member Shelby and other Members of 
the Committee to reauthorize the Bank.
    I want to thank all Members of this Committee for their support of 
Wanda Felton and Sean Mulvaney last week. It is imperative that the 
Senate confirm these nominees as quickly as possible.
    The Export-Import Bank is the official export credit agency of the 
United States and it assists in financing the export of U.S. goods and 
services to international markets. Following the financial crisis, the 
Bank experienced a dramatic increase in its activities as many 
companies struggled to find financing in the private market. In Fiscal 
Year 2010, the Bank saw a 70-percent increase in authorizations from 
2008. In fact, last year the Bank committed almost $25 billion in 
support of U.S. exports--a record.
    The Bank is one of the few Federal agencies that actually makes 
money for the U.S. and, since 2008, has been self-funding. This is a 
testament to the Bank's leadership under Chairman Hochberg, as well as 
the good work of the dedicated staff and Board of the Bank.
    All of the Bank's transactions are backed by the full faith and 
credit of the United States. Therefore, it is important for this 
Committee to make sure that the Bank is working as efficiently and 
effectively as possible to protect the taxpayers.
    Equally important is the Bank's goal to use exports to help create 
and maintain jobs here at home. This mission, embodied in the Bank's 
Charter, is at the very core of what Congress intended the Bank to do. 
I believe that while the Bank is doing a good job, it can--and must--do 
more.
    Over the next several years, the Bank will face some challenges. 
After weathering the financial crisis, the Bank may see a shift in the 
types of deals it is asked to finance as the economy recovers. In 
addition, the President has called for the doubling of our exports by 
2015 in an effort to create as many as 2 million American jobs. As the 
Nation's official export credit agency, the Bank will play a critical 
role if we are to meet that goal.
    I am eager to hear from Chairman Hochberg about the Bank's recent 
activities and his ideas for reauthorization.
                                 ______
                                 
                 PREPARED STATEMENT OF FRED P. HOCHBERG
    President and Chairman, Export-Import Bank of the United States
                              May 17, 2011
    The Export-Import Bank of the United States (``Ex-Im Bank'' or 
``Bank'') is the official export credit agency of the United States. 
The mission of Ex-Im Bank is to enable U.S. companies--large and 
small--to turn export opportunities into real sales that help maintain 
and create U.S. jobs which contribute to a stronger national economy. 
The Bank achieves this mission by providing export financing through 
its loan, guarantee, and insurance programs in cases where the private 
sector is unable or unwilling to provide financing. Ex-Im Bank also 
provides support when export financing is necessary to level the 
playing field due to financing provided by foreign governments to their 
exporters that are in competition for export sales with U.S. exporters.
    All Ex-Im Bank products carry the full faith and credit of the U.S. 
Government and are only provided if the Bank is convinced that there is 
reasonable assurance of repayment. As a result of our diligent review 
and management of credit, the Bank has a loan loss rate of roughly 1.5 
percent--well below most commercial banks. Since FY2008, Ex-Im Bank has 
operated in self-sustaining financial status at no cost to the 
taxpayer, while achieving its mission.
    Over the past 2 years, Ex-Im Bank addressed the market contractions 
caused by the financial crisis by stepping in where private banks and 
other lending institutions were unwilling or unable to meet the trade 
finance needs. In recent years, the Bank has supported a level of 
authorizations that is far higher than historical averages.
    In FY2008, Ex-Im authorized $14.4 billion to support transactions 
that resulted in roughly $19.6 billion in U.S. exports. Just 2 years 
later, in FY2010, Ex-Im authorized a record $24.5 billion in export 
financing which supported roughly $34.3 billion worth of U.S. exports 
and 227,000 U.S. jobs at more than 3,300 U.S. companies.
    I am proud to say that we have accomplished all of this work at no 
cost to the U.S. taxpayer. Ex-Im Bank more than covers our 
administrative and program expenses through the fees that we charge to 
borrowers of the U.S. exports Ex-Im Bank helps to support. In the past 
5 years, we have sent $3.4 billion to the U.S. Treasury.
    Ex-Im Bank offers three financial programs to keep the U.S. 
competitive in the world markets: direct loans, guarantees, and 
insurance. There are various products within these programs, such as 
Working Capital Guarantees and Export Credit Insurance, which primarily 
benefit small businesses.
    Direct loans provide financing directly to foreign buyers of U.S. 
goods and service and cover up to 85 percent of the U.S. contract value 
or 100 percent of the U.S. content, whichever is less.
    Loan guarantees cover the repayment risks on the foreign buyer's 
debt obligations incurred to purchase U.S. exports. Ex-Im Bank 
guarantees to a lender that, in the event of a payment default by the 
borrower, it will pay to the lender the outstanding principal and 
interest on the loan. We provide support up to 85 percent of the U.S. 
contract value or 100 percent of the U.S. content, whichever is less.
    Working Capital Guarantees provide repayment guarantees to lenders 
on secured, short-term working capital loans made to qualified 
exporters. The working capital guarantee may be approved for a single 
loan or a revolving line of credit. Ex-Im Bank's working capital 
guarantee protects the lender from default by the exporter for 90 
percent of the loan.
    Export credit insurance helps U.S. exporters sell their goods 
overseas by protecting them against the risk of foreign buyer or other 
foreign debtor default for political or commercial reasons, allowing 
them to extend credit to their international customers. Insurance 
policies may apply to shipments to one buyer or many buyers, insure 
comprehensive (commercial and political) credit risks or only political 
risks, and support short-term or medium-term sales.
    By utilizing these various products, Ex-Im Bank levels the playing 
field for U.S. exporters and workers so U.S. jobs are not lost to 
foreign competitors.
    To ensure that the needs of small businesses are met, Congress 
mandates that 20 percent of our authorizations directly benefit small 
businesses. I am happy to report that we are meeting this mandate. Our 
totals for small business transactions have increased from $3.2 billion 
in FY2008, to $5.1 billion in FY2010, which reflects a 58-percent 
increase over the 2-year period. We have been able to maintain the 20-
percent small business mandate over the last 2 years, in a time that 
has seen our total business grow from $14.4 billion in FY2008 to $24.5 
billion in FY2010, a 70-percent increase.
    We recently submitted our 2011 Small Business Report to Congress on 
March 31st which details our small business activity for fiscal year 
2010 and the plans that we have already initiated for 2011 to continue 
growing our small business portfolio.
    While we have met our 20-percent Congressional mandate and we 
continue to implement new programs and strategies to grow that 
percentage, it is increasingly difficult to do given our limited 
administrative budget and our inability to deliver the highest level of 
quality customer service as a result of our aging Information 
Technology (IT) infrastructure. The Bank utilizes its various products 
to respond to the needs of the market and as such, we provide financing 
based on what business is coming in at any given time. We continue to 
aggressively pursue small business transactions, but ultimately our 
percentage of the total portfolio is a function of the sectors that 
need Ex-Im financing at any given time. Small business transactions 
account for more than 85 percent of our total transactions at the Ex-Im 
Bank but are just over 20 percent of the authorization dollars. Meeting 
our 20-percent small business mandate is something that is highly labor 
intensive and requires significant resources. To maintain and grow our 
small business percentage, we will need an increase in our 
administrative budget.
    In order to further expand the small business activity, Ex-Im has 
initiated the following initiatives:

    Global Access for Small Business Initiative. Earlier this 
        year, I was joined by Tom Donohue from the Chamber of Commerce 
        and Jay Timmons from the National Association of Manufacturers 
        in announcing Ex-Im Bank's Global Access for Small Business 
        Initiative. Ex-Im Bank is sponsoring a series of 20 forums 
        across the country to assist small business exporters in 
        understanding how the Bank's programs and programs at the Small 
        Business Administration (SBA) and Department of Commerce can 
        help them begin exporting or increase their international 
        sales. In addition to presentations by successful small 
        business exporters, the Global Access forums include panels of 
        Ex-Im, SBA, and Department of Commerce staff based in local 
        United States Export Assistance Centers (USEACs) as well as 
        one-one-one counseling by Ex-Im Bank Export Finance Managers 
        and other Federal agency representatives. These half-day events 
        are free for attendees and held in collaboration with elected 
        officials, representatives from Federal and local government 
        agencies, lenders, and insurance brokers involved with 
        supporting exporters. We also provide small business owners as 
        panelists who highlight their success in using Ex-Im Bank 
        products to start or grow their exporting and we provide one-
        on-one counseling for businessmen and women at the event.

    Expanded Bank and Broker Training. Ex-Im Bank has expanded 
        its lender and broker training options to include monthly 
        trainings around the country. Webinars have also been added to 
        the training curriculum to help exporters, lenders and 
        insurance brokers learn how to use Ex-Im products and services.

    Supply Chain Finance Guarantee. The Supply Chain Finance 
        Guarantee provides competitively priced working capital 
        financings to businesses that supply products or services to 
        larger U.S. exporters. These businesses are considered indirect 
        exporters. The product works through approved lenders with an 
        existing supply chain finance program.

        It enables the lender to purchase accounts receivable from 
        small business suppliers whose goods will be part of an export. 
        The suppliers are paid for their goods in approximately 5 days 
        which improves their cash flow and liquidity. Ex-Im Bank 
        provides the lenders with a 90-percent guarantee of repayment 
        by the manufacturers. In turn, the Bank requires that at least 
        50 percent of the credit be to small-business suppliers.

    Reinsurance. Reinsurance assists private-sector insurers 
        that provide short-term export-credit insurance covering 
        foreign receivables to predominantly U.S. small business 
        exporters. This new product will increase the capacity of 
        insurance companies to offer insurance to small business 
        exporters that have had difficulty obtaining short-term export 
        credit since the financial crisis. The Bank's reinsurance 
        product will mitigate risks for private insurers and enable 
        them to expand their underwriting capacity for short-term small 
        business credits. It will also help Ex-Im Bank achieve 
        economies of scale in originating, underwriting, and servicing 
        these credits--accomplishing substantially more for small 
        businesses with fewer resources by expanding the reach of 
        private-sector insurers.

    Express Insurance. In response to the requests of exporters 
        and Ex-Im Bank broker-partners, Ex-Im is adding a new program 
        to its flagship Trade Credit Insurance product--Express 
        Insurance. Express Insurance specifically targets small 
        businesses. Ex-Im Bank has designed an express insurance 
        product that streamlines the application process for the Bank's 
        short-term export credit insurance. The target turnaround time 
        for a quote is 5 days, down from the current average of 15. 
        Cutting the processing time by \2/3\ and cutting the length of 
        the actual application from 4 pages down to 2 pages and using 
        credit scoring in the processing of new applications and 
        renewals reduces the time frame and the complexity of insurance 
        that small businesses need to protect their export receivables 
        from foreign buyer and country risk.

    Authorizations--Small business authorizations in FY2010 increased 
15.9 percent to just over $5 billion as compared with new small 
business authorizations for FY2009 of roughly $4.4 billion and FY2008 
of roughly $3.2 billion. In FY2010, small-business authorizations 
represented 20.7 percent of total authorizations. During FY2010, the 
number of transactions that were made available for the direct benefit 
of small-business exporters increased by 21.7 percent to 3,091 
transactions compared to 2,540 in 2009.
    As referred to earlier, Ex-Im Bank offers two products that 
primarily benefit small businesses: Working Capital Guarantees and 
Export Credit Insurance. In fiscal year 2010, Ex-Im Bank authorized 
roughly $1.5 billion in Working Capital Guarantees to small businesses 
compared to $1.2 billion in 2009. In fiscal year 2010, Ex-Im Bank 
authorized more than $2.6 billion in Export Credit Insurance to small 
businesses.
    Increased Lender and Broker Participation--Ex-Im Bank leverages its 
resources on behalf of small businesses by working with private-sector 
lenders, insurance brokers and other financial and trade institutions. 
In fiscal year 2010, 18 new lenders received Delegated Authority to 
provide working capital guarantees. Delegated Authority provides 
lenders a preapproved credit line which allows them to approve loans 
and receive Ex-Im Bank's guarantee without having to submit individual 
applications for approval. An additional 14 brokers serving small 
businesses trade insurance needs were added to the roster. At the 
fiscal year's end, Ex-Im Bank had a total of 100 delegated authority 
lenders and 194 registered brokers helping deliver the Bank's small-
business products. While these numbers are significant, we continue to 
seek additional brokers and lenders to partner with Ex-Im Bank.
    Export Initiative With State and Local Constituencies--One 
effective approach to developing strong partnerships is our initiatives 
with our City/State Partners. More than 60 Ex-Im City/State Partners in 
40 States work with Ex-Im Bank and report their activity annually. 
Their mission is the promotion, creation and expansion of businesses in 
a given region by making available financing assistance and 
entrepreneurial services. Examples of eligible partners include: State, 
County, City Governments--either directly or indirectly funded; local 
nonprofit economic development entities funded through universities and 
colleges; and Small Business Development Centers.
    Many of the small business owners are veterans, women, and 
minorities. Ex-Im Bank wants to do more to reach these key groups which 
historically are less likely to approach the Bank for financing. In an 
effort to increase our interaction with these groups, Ex-Im Bank has 
worked with the Department of Commerce and other sources to increase 
our outreach. I would also ask Members of this Committee and your 
colleagues to provide suggestions of organizations, constituencies, and 
events that you think we should be participating in so we can grow 
participation among veterans, women, and minorities.
    Ex-Im Bank recently created a new position of Director of Veterans' 
Relations to better reach out to all veterans groups and to connect 
export finance opportunities with their knowledge of foreign cultures, 
people, and businesses. Ex-Im Bank hosted the Vet-Force meeting for 
Veteran Owned Business (VOB's), Veteran Community Organizations (VCO's) 
and various Government agencies to introduce veterans to export 
financing. In coordination with SBA's Georgia District Office Ex-Im's 
Director of Veterans' Relations was the keynote speaker at the first 
ever Veteran's Export Symposium.
    In fiscal year 2010, Ex-Im Bank authorized $481 million to support 
exports by U.S. small businesses known to be minority-owned and woman-
owned (this information can be volunteered on applications, but we 
cannot require it). In fiscal 2009, Ex-Im Bank authorized $492.7 
million to support exports by U.S. small businesses known to be 
minority-owned and woman-owned. Although support for minority and 
woman-owned small business declined slightly, the total support 
increased by $65.2 million when taking into account medium and large 
exporters in this group.

 
------------------------------------------------------------------------
                (Millions)                    2008      2009      2010
------------------------------------------------------------------------
Minority and Woman Owned
Medium/Large Business.....................      $80     $70.3    $147.2
Small Business............................     $386    $492.7    $481.0
------------------------------------------------------------------------
    Total.................................     $466    $563.0    $628.2
------------------------------------------------------------------------

    Significant emphasis is placed on events attended by small business 
exporters, as well as minority, rural, and woman-owned entrepreneurs. 
During 2010, staff from within the Small Business Group at the Bank 
attended 85 outreach events reaching approximately 5,500 Minority and 
Woman-Owned Business exporters and intermediaries. Ex-Im Bank made 
presentations at 75 percent of the events attended in 2010.
    Significant steps are being taken to boost this segment of the Ex-
Im Bank business. First and foremost, during 2010, Ex-Im Bank hired as 
our new Senior Vice President of the Small Business Group a former 
banker with 20 years in community development and minority lending and 
investment experience. In addition, we hired a Vice President of 
Marketing and Sales, a Community Reinvestment Act professional from a 
major bank. In addition to their managerial responsibilities, these two 
officers will further expand Minority and Woman-Owned Business Outreach 
activities. We have also reallocated resources to achieve our 20-
percent small business mandate.
    In order to expand the reach and service to small businesses, Ex-Im 
is doing the following:

    Global Access Events. Developing at least 4 Global Access 
        media and training events specifically for Minority and Woman-
        Owned Businesses.

    Community Development Financial Institutions. The Small 
        Business Group attends the conferences for the National 
        Federation of Community Development Credit Unions, Opportunity 
        Finance Network, National Community Reinvestment Coalition, and 
        events sponsored by Federal regulators concerning Community 
        Reinvestment Act initiatives. The chief objective is to expand 
        the number of local and community development banks and other 
        intermediaries using the Ex-Im Bank trade credit and working 
        capital products and services.

    Direct Calling on Minority and Woman-Owned Exporters. In 
        order to expedite the communication with the exporter, Ex-Im 
        has established a ``smart data-base'' program. The program, 
        which includes exporter names from the Trade Promotion 
        Coordinating Committee (TPCC), is designed to support direct 
        outreach to minority and woman-owned exporters through 
        systematic cold calling by experienced Ex-Im Bank export 
        finance officers. While targeting the use of Ex-Im Bank's trade 
        credit insurance, the officers are also trained and encouraged 
        to refer exporters to the appropriate Department of Commerce 
        and SBA functions as reflected by the exporter's needs.

    The global marketplace is brutally competitive for businesses small 
and large. At Ex-Im we have seen a decrease in sovereign loans and an 
increase from the private sector in emerging markets. And commercial 
lenders routinely limit the amount of exposure a company can have in 
particular regions and consequently those businesses are coming to Ex-
Im Bank for financing.
    Businesses in the United States are second to none when it comes to 
manufacturing. The U.S. is the number one manufacturer in the world. We 
make more goods than China, Germany, and Japan.
    However, when it comes to selling overseas, we fall to number three 
behind China and Germany, which is unacceptable. There is nothing 
third-rate about American products and American business and there 
should be nothing stopping us from selling more of the products and 
services we make into the global marketplace.
    By ensuring that more American companies--big and small--go after 
our share of this global business, Ex-Im Bank is helping build the type 
of export powerhouse that is at the heart of President Obama's plan to 
win the future and double exports by 2015. At Ex-Im, our goal is to 
provide the financing to make this a reality.
    We have targeted nine emerging markets in Brazil, Colombia, India, 
Indonesia, Mexico, Nigeria, South Africa, Turkey, and Vietnam. Let me 
provide examples of the work Ex-Im Bank is doing to support exports to 
a couple of these countries.
    India plans to spend $1 trillion on infrastructure between 2012 and 
2017, which is double what they spent in the previous 5 years.
    As part of these investments, India needs to build one million 
square miles of new paved roads and roughly 4,600 miles of new metros 
and subways. That rail system and those roads mean billions of dollars 
worth of capital goods and services--from trains to rails to 
engineering services to paving equipment.
    In addition to infrastructure demands, India also has growing power 
needs. Today, nearly 400 million people in India have never seen a 
light bulb. India is powering up and they are working to do it 
responsibly. India recently announced its National Solar Mission, a 
far-reaching plan to add 20,000 megawatts of solar power by 2020. That 
is enough to power nearly 10 million homes with renewable energy.
    At Ex-Im, we are working with U.S. solar companies to make sure 
they have the competitive financing they need to be part of these 
projects. One of these companies is Infinia, which is based in 
Washington State. Ex-Im recently authorized a $30 million direct loan 
to finance a solar project in Rajasthan, India. The project is using 
Infinia's PowerDish technology. This was Infinia's first major sale for 
foreign delivery and their largest sale to date.
    Brazil is another market that we are targeting due to its 
forecasted growth in the coming years. With the World Cup in 2014 and 
the Olympics just 2 years later, boosting power production and building 
out infrastructure are two of the country's critical priorities. Brazil 
will invest more than $200 billion on everything from roads and public 
transportation, to airports and sports stadiums.
    Ex-Im will support American companies--and American workers--
exporting to these projects. That's why just a few weeks ago, President 
Obama announced a $1 billion credit facility in Ex-Im financing for the 
State of Rio de Janeiro. Its purpose is to finance the purchase of more 
American-made goods and services. All around the world we are seeing 
similar opportunities for American companies.
    In many cases, Ex-Im Bank's financing levels the playing field when 
it comes to international competition. Let me give you an example. 
General Electric (GE) was recently bidding on a $500 million rail 
project to supply 150 diesel-electric locomotives to Pakistan. These 
locomotives are critical to building the infrastructure of Pakistan's 
economy, so products and commodities can get to market.
    GE was told by Pakistani officials that they preferred GE 
locomotives and they were willing to pay a premium for their high-
quality and dependability. However, there was only one sticking point 
and it was financing. The Chinese government offered financing that did 
not conform to international standards and practices. The intended was 
to provide Chinese manufacturers an advantage that GE could not make up 
in quality, price or service. This put the entire sale and more than 
700 jobs in Erie, Pennsylvania, at risk.
    To remedy this, the Administration put together a matching 
financing package. And for the first time, we went to the OECD, the 
organization that governs global export financing, to inform them of 
our decision to match China. While the final deal is not yet completed, 
this significant policy change signals to foreign competitors that Ex-
Im will compete on financing, allowing American companies to compete 
solely on the quality and value of its products--and the service it 
provides.
    Let me share with you exciting results we have accomplished in 
financing renewable energy. The Ex-Im Bank has made significant strides 
when it comes to increasing financing of renewable energy products. In 
FY2008 the Bank authorized $30.4 million in renewable energy exports. 
That grew to $101 million in FY2009. We tripled our previous year's 
totals by authorizing $332 million for renewable energy exports in 
FY2010. To put this number in perspective, according to data gathered 
by the Department of Commerce, the U.S. exported a total of $2.1 
billion in renewable energy products in 2009. Ex-Im Bank is playing a 
major role in supporting U.S. renewable energy exports. In FY2011 we 
are projecting to more than double our authorizations from FY2010.
    We are also breaking records with our work in Sub-Saharan Africa. 
For FY2009, Ex-Im Bank supported 109 transactions totaling $412 million 
across 20 Sub-Sahara African countries. In FY2010 those totals grew to 
132 transactions totaling $812 million in 20 Sub-Saharan African 
countries, which represents nearly 5 percent of all U.S. exports for 
the region. In FY2011, Ex-Im Bank expects to top $1 billion in Sub-
Saharan African authorizations.
    We are supporting U.S. exports and transactions across various 
economic sectors including: power, aviation, transportation, 
construction, agriculture, and mining.
    Ex-Im Bank is providing a key service to businesses large and small 
in the United States. In order for us to continue helping to grow and 
sustain jobs through exports, the Bank needs to be reauthorized.
    Our legislation provides for a gradual increase in our exposure 
limit over 4 years from the existing $100 billion to $140 billion in 
FY2015, removes outdated references from our Charter--such as removing 
references to the former Yugoslavia which disbanded in the 1990s, and 
provides for a 4 year reauthorization which allows the Ex-Im Bank to 
continue operations through September 30, 2015.
    The President's FY2012 Budget continues the Bank's self-sustaining 
status, which was achieved for the first time in FY2008. I want to 
emphasize this point: self-sustaining status allows for funding of the 
Bank's operations, including program budget and administrative 
expenses, entirely from fees collected from the Bank's borrowers. As a 
result, the Bank does not rely on taxpayer resources to fund 
operations, which is critical in a tight budgetary environment. 
Congress will continue its oversight of Ex-Im Bank's budget, setting 
annual limits on its use of funds for program subsidy and 
administrative expense obligations.
    Ex-Im Bank and our employees are making a significant contribution 
to the U.S. economy. Our employees at the Bank have helped increase 
business by 70 percent since 2008 while implementing new technologies 
and programs like Express Insurance and Supply Chain Finance which are 
detailed in my written testimony. At the same time, we have received 
only a 7.6-percent increase in our administrative expense appropriation 
since 2008 and have only increased staffing by 13 FTEs or full time 
equivalent staff. Simply put, we have become leaner and more 
productive. This is something that every business strives to achieve. 
While Ex-Im's staffing and budget have remained relatively flat, we 
have generated billions in funds for the U.S. Treasury. But, in order 
to meet our goal of doubling exports by 2015, we must be able to 
increase our administrative budget.
    I ran a business for 20 years and I know that we need to continue 
to invest in capital and human resources in order to grow business. The 
President has proposed an increase in our budget for Fiscal Year 2012. 
This increase includes $124.6 million for our administrative budget 
which would allow Ex-Im Bank to increase staffing for outreach to small 
businesses. Additionally, it will provide resources to improve our IT 
systems to help expedite applications and provide better customer 
service. While I realize this is our authorizing committee and not our 
appropriating committee, I would encourage you all strongly to consider 
the President's request for increased funding levels for the Bank. Let 
me be clear--this increase in our administrative budget is simply 
allowing Ex-Im Bank to use more of the money it generates for 
administrative expenses, which in turn will help sustain and create 
more jobs and generate more funds for the taxpayers of our country. The 
President's Budget still estimates--even with the increase in 
administrative budget--that the Export-Import Bank will generate excess 
funds in the amount of $212.9 million in FY2012.
    Thank you very much and we look forward to working with you on the 
reauthorization process.
                                 ______
                                 

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

Q.1. My understanding is that it is in Ex-Im Bank's charter to 
create U.S. jobs and according to the Ex-Im Bank Web site in 
2009 for every $1 billion in exports the Bank created 7,400 
jobs and for every $1 billion in export financing you created 
9,265 jobs. But based on discussions my staff has had with Ex-
Im Bank, it seems that the Kusile coal project in Africa will 
create 1,049 jobs over 5 years (or just over 200 jobs per year) 
for an $800 million loan. This is a ratio of $1 billion in 
export financing creating 1,311 jobs (or 250 jobs per year). Do 
you think this ratio of jobs to a loan is good enough? Should 
we have a target or even a flexible requirement that a certain 
number of jobs are created per dollar of loan?

A.1. All jobs are important as far as Ex-Im Bank is concerned 
no matter how few. The Bank is there to support U.S. exports 
that, in turn, sustain and support U.S. jobs. Moreover, not 
only were there benefits to Ex-Im Bank being involved in the 
transaction in terms of exports and jobs but also because the 
project itself was improved along environmental grounds.

Q.2. I have also heard complaints that loan applicants and Ex-
Im Bank loan officers do not under the laws governing U.S. 
shipping requirements. What are you doing to ensure that Ex-Im 
Bank employees and Ex-Im applicants know they are required to 
use U.S. flagged ships with U.S. merchant marines unless 
certain circumstances arise?

A.2. Ex-Im Bank staff are made aware of the shipping 
requirements as part of their ongoing training. In addition, 
the Bank's policies are also posted on our internal and 
external Web sites for easy reference. (See: http://
www.exim.gov/products/policies/shipping.cfm). The U.S. shipping 
requirement is also contained in the internal and external fact 
sheets of those programs in which the shipping requirement 
applies. (See: http://www.exim.gov/products/loanguar.cfm, and 
http://www.exim.gov/products/directloan.cfm). Finally, our 
Policy Group is readily available for further information, 
explanations, or interpretation to staff and external 
participants.

Q.3. Are you aware that some proposed project sponsors 
effectively pay their shipping managers a bonus if they lower 
transportation costs by outsourcing to foreign shipping 
companies? Can you guarantee that the Bank is not funding 
projects sponsored by companies that do business this way?

A.3. Ex-Im Bank ensures that transactions receiving Ex-Im Bank 
loans or guarantees fully comply with U.S. shipping 
requirements under Public Resolution 17. If a transaction is 
not in compliance, Ex-Im Bank will not fund or guarantee 
financing for the shipments.
    Ex-Im Bank's shipping regulations are subject to Public 
Resolution 17 of the 73rd Congress (PR-17). The following 
transactions are subject to the provisions of PR-17, and Ex-Im 
Bank supported goods must be shipped exclusively on U.S. 
vessels or pursuant to a waiver granted by the Maritime 
Administration of the Department of Transportation (MARAD):

  1.  Direct loans regardless of term or amount; and

  2.  Guarantees in excess of $20,000,000 (excluding Ex-Im Bank 
        Exposure Fee) or the repayment period of greater than 
        seven (7) years or the term permitted under Ex-Im 
        Bank's Environmental Exports Program, Transportation 
        Security Export Program, or Medical Equipment 
        Initiative.

    Requests for waivers of PR-17 can be obtained for a variety 
of reasons (e.g., if a U.S. vessel is unavailable or 
unsuitable, etc.); however, obtaining a waiver may be difficult 
as MARAD explicitly tries to keep waiver issuances to a 
minimum. If a waiver is obtained, goods shipped on vessel of 
non-U.S. registry are eligible for financing by Ex-Im Bank.

Q.4. I understand from a letter you sent to Transportation 
Secretary LaHood that you have met with several companies who 
have claimed hardship when it comes to U.S. shipping 
requirements. Could you provide the Committee a list of the 
companies and the projects where you have found hardship in 
complying with U.S. shipping requirements?

A.4. The estimated impact on Ex-Im Bank is in excess of $4 
billion. On overall U.S. exports, the estimated impact is less 
but substantial--$1.5 to $3 billion. These figures are 
imprecise in that Ex-Im Bank does not hear about all of the 
cases that don't come in to us due to MARAD requirements.

The Impact of U.S. Shipping Requirements on the Export-Import Bank of 
        the United States (Ex-Im Bank)

Prepared by the Ex-Im Bank Structured Finance Division, July 2011

    Ex-Im Bank is the only export credit agency (ECA) that 
requires buyers to use domestic (e.g., U.S.-flagged) shipping 
as a condition of financing eligibility, placing (a) Ex-Im Bank 
at a comparative disadvantage to other ECAs and, (b) all else 
being equal, U.S. exporters at a competitive disadvantage 
relative to foreign competitors.
    Exporters and foreign buyers have informed Ex-Im Bank's 
Structured Finance Division that the requirement to use U.S.-
flagged vessels has:

  1.  Complicated, delayed, and increased the cost of U.S. 
        goods and services supported by Ex-Im Bank;

  2.  Reduced the amount of Ex-Im Bank support provided to U.S. 
        exporters; and

  3.  Led to lower U.S. exports.

    The following examples on a number of important deals, as 
reported to the Structured Finance Division, demonstrate these 
points. Please note that names of companies involved and other 
identifying facts have been withheld due to confidentiality 
concerns.

1. Complications, Delays, and Increased Transactions Costs

    On several deals, U.S. exporters and foreign borrowers have 
had to perform extra work to secure U.S. vessels or seek 
waivers to qualify for Ex-Im Bank financing or hire experts at 
their own expense to comply with U.S. shipping requirements. 
Some of these experiences have led foreign buyers to inform Ex-
Im Bank of their intention to forgo working with Ex-Im Bank. 
Examples include:

    A Middle Eastern company, which had difficulty 
        complying with shipping rules before obtaining finance 
        on a infrastructure deal, ultimately requiring the 
        retention of a shipping expert to support future 
        transactions with Ex-Im Bank.

    A project in Latin America, in order to meet 
        shipping requirements and qualify for Ex-Im Bank 
        financing, had to aggregate shipments. The borrower 
        also had to transship through other countries in Latin 
        America, and then ship on a MARAD-specified foreign 
        vessel. The process led to cost increases, project 
        delays, and was blamed for damages to the equipment.

    Several borrowers in Brazil consider compliance 
        with U.S. shipping requirements to be difficult and 
        costly. Even though MARAD ultimately granted one of the 
        companies a waiver, at the time the company stated that 
        they would forgo using Ex-Im Bank again until the 
        shipping requirements are eliminated or substantially 
        changed.

    Ex-Im Bank's financing for a project in the Middle 
        East was delayed by approximately 1 year due to the 
        company's initial unwillingness to pay the cost of a 
        compensatory waiver required for U.S. goods shipped on 
        non-U.S. vessels--ultimately the buyer paid the costs 
        associated with the compensatory waiver.

2. Reduction in Ex-Im Bank Support for Exports

    On certain transactions, foreign borrowers have also 
reduced the amount of Ex-Im Bank financing on certain 
transactions, reportedly due to U.S. shipping requirements. 
While these reductions might not 'directly and immediately lead 
to less U.S. exports, reduced support levels impair Ex-Im 
Bank's ability to fulfill its mission to level the playing 
field for U.S. exporters compared to foreign competitors.
    Reduced support on one deal can also lower the chance that 
a borrower will elect to award a U.S. exporter a future sale. 
Based on the information received by Ex-Im Bank from exporters 
and foreign buyers, Structured Finance Division estimates 
broadly the amount of its financing lost due to U.S. shipping 
requirements to be about $4 billion between 2004 and 2010 or 
about $600-$700 million per year.
    Examples where borrowers and exporters have informed Ex-Im 
Bank that their inability or unwillingness to comply with 
shipping requirements has caused parties to reduce Ex-Im Bank 
financing include:

    As a result of having to pay the costs associated 
        with a compensatory waiver on a transaction cited 
        above, the foreign company recently chose not to pursue 
        Ex-Im Bank finance for a transaction for $900 million.

    A total of $50 million in gas production equipment 
        exports were excluded from Ex-Im Bank financing 
        approved in 2004 because of inability to comply with 
        U.S. shipping requirements.

    A Latin American company canceled a long-term 
        transaction due to U.S. shipping requirements. The 
        company later sought and received a large Preliminary 
        Commitment from Ex-Im, but allowed the facility to 
        expire, in part, because of concerns about higher 
        shipping costs for U.S. vessels.

    A total of $25 million of Ex-Im Bank financing for 
        a U.S.-made equipment was canceled because U.S. flag 
        carrier shipping costs were two times that of foreign 
        carriers and parties chose not to pay the additional 
        costs.

    A company reduced its financing request from $1 
        billion as a result of U.S. flag carrier shipping 
        costs. Ultimately, the transaction entailed Ex-Im Bank 
        support for less than $400 million, a reduction of over 
        $600 million compared to the initial estimate.

    An Asian company chose to ship U.S. goods on a 
        foreign flag vessel rather than on U.S. vessels that 
        were two times more expensive and thus had to cancel a 
        significant portion of its Ex-Im Bank commitment. \1\
---------------------------------------------------------------------------
     \1\ Note that U.S. carriers believe that the terms of foreign 
competition were unclear, but this does not change the fact that Ex-Im 
Bank finance of $18 million was canceled.

    An Asian company reduced its financing on a 2011 
        transaction by about $25 million to avoid paying 
        transportation rates that were two times as expensive 
        as foreign options. The company did agree to pay 
        shipping costs two times those of foreign carriers to 
        maintain the possibility of Ex-Im Bank finance for 
---------------------------------------------------------------------------
        other equipment equal to about $50 million of finance.

    A Latin American company sought Ex-Im Bank 
        financing to support a U.S. contract worth about $150 
        million, but canceled the Ex-Im Bank finance because of 
        concerns that about \1/3\ of this $150 million in 
        equipment was not shipped on U.S. flag vessels or 
        pursuant to a MARAD waiver, was unable to obtain a 
        waiver, and thus was not eligible for Ex-Im financing.

    An application for finance of $61 million for an 
        electricity company was withdrawn because the company 
        had shipped goods on non-U.S. vessels and was unable to 
        obtain a compensatory or other waiver from MARAD.

    Ex-Im Bank was not able to support a transaction 
        for a sale of $50 million from a U.S. manufacturer to a 
        borrower in Latin America because of a lack of 
        shipments on U.S. vessels and failure to obtain a MARAD 
        waiver.

    A project finance advisor in Latin America informed 
        Ex-Im Bank that, because of U.S. shipping requirements, 
        the project sponsor would not pursue Ex-Im Bank 
        financing for the project even though the project could 
        include about $240 million in Ex-Im Bank eligible U.S. 
        goods and services.

    Ex-Im Bank approved its first-ever merchant power 
        project finance transaction for borrower in Asia. 
        However, the loan for canceled due to U.S. shipping 
        requirements. Ex-Im Bank was informed that U.S. 
        shipping costs were more than four times greater than 
        those of foreign carriers and one-sixth of the total 
        amount of Ex-Im Bank finance. The borrower and exporter 
        chose a foreign carrier, were unable to obtain a 
        waiver, and ultimately canceled the transaction. 
        Executives from the company raised this again in a 
        recent meeting with the Chairman of Ex-Im Bank.

3. Reduction in U.S. Exports

    In comparison to the impact on Ex-Im Bank financings, 
making estimates about the effect of U.S. shipping rules on 
U.S. exports is more difficult. In nearly all cases, if 
borrowers make decisions not to ``buy U.S.'' as a result of 
U.S. shipping requirement--Ex-Im Bank does not learn about this 
decision until after the transaction has been finalized. In 
most cases the U.S. exporter does not know that U.S. shipping 
requirement negatively affected their sales opportunity, only 
that it lost a sale.
    In a few cases foreign borrowers have informed Ex-Im Bank 
that U.S. shipping requirements and associated costs have 
resulted in decisions to shift sourcing choices from the U.S. 
In other cases, EPC contractors have informed Ex-Im Bank of 
decisions to shift production to foreign suppliers as a result 
of U.S. shipping requirements.
    Additionally, we have seen the emergence of bidding 
requirements and other rules that expressly forbid the concept 
of cargo preference. Based on reports, Ex-Im Bank believes that 
over the last 5-10 years U.S. shipping requirements have 
resulted in a reduction of $1.5 to $3 billion in U.S. exports. 
In a competitive, global economy where financial decisions for 
hundreds of millions of dollars are made on basis points and 
the ability to meet project deadlines is critical, there is a 
plausible basis to conclude that the negative impact of U.S. 
shipping could be potentially even greater. While hard 
quantitative data on ``lost sales'' is limited, the evidence 
points to of a financial loss to U.S. exporters.
    The following examples illustrate where parties have 
informed Ex-Im Bank that U.S. shipping rules have curtailed 
U.S. exports.

    Wind Power Project. In 2010, a U.S. exporter lost a 
        sale to a significant wind power project in Asia to 
        Chinese competitors in part due to U.S. shipping 
        requirements.

    Wind Power Project. Earlier this year, on a wind 
        power project in Sub-Saharan Africa, a U.S. wind 
        turbine manufacturer decided to shift production to 
        serve this project from its U.S. facilities to 
        facilities in Germany, because U.S. vessel shipping 
        cost was significantly greater than foreign carrier 
        costs.

    Uruguay Project. U.S. manufacturers and Ex-Im were 
        excluded from the opportunity to participate in a 
        follow up bid on a follow-up transaction to a Uruguay 
        project because tender documents specifically required 
        ``no shipping restrictions.''

    Supply Shifting. ``Supply shifting'' has emerged on 
        a number of transactions, including a Latin American 
        mining project and a Middle Eastern power project where 
        Ex-Im Bank financing was rejected. Based on information 
        from exporters, Ex-Im Bank estimates this supply 
        shifting to be several hundred million dollars.

    Latin American Oil and Gas. A Latin American oil 
        and gas company decided to source an $80 million 
        contract with a U.S. oil and gas company mainly from 
        its facilities in Europe rather than sourcing at least 
        half from the U.S. as had been originally envisioned. 
        The stated reason was that U.S. shipping costs were too 
        great, so it approached a European ECA for financing 
        for about $70 million and Ex-Im Bank for only about $10 
        million.

    Integrated Water & Power Project. A U.S. power 
        generation equipment company appears to have lost a 
        sale for $400-$500 million for an Integrated Water & 
        Power Project located in the Middle East. The Middle 
        Eastern power company making the purchasing decision 
        informed Ex-Im Bank that it preferred the U.S. 
        equipment but before making the decision wanted to know 
        if it could obtain a waiver from U.S. shipping 
        requirements. In the absence of an application for Ex-
        Im Bank finance, Ex-Im Bank believes that this sale was 
        lost.

    Indian Company. As a result of its experience 
        paying more for U.S. vessels, an Indian company has 
        informed Ex-Im Bank that it would be shifting sales 
        from the U.S. to other countries.
                                ------                                


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

Q.1. In Colorado, we're fortunate to be home to many innovative 
companies that research, invent, and manufacture clean energy 
technologies. What role does the Export-Import Bank play in 
promoting the export of these technologies? How does the Bank 
support the growth of our domestic renewable energy sector?

A.1. Ex-Im Bank plays a critical role in supporting clean 
energy exporters in Colorado, and throughout the United States. 
Financing is often the most critical element in winning an 
export sales order. Ex-Im Bank can support clean energy 
exporters in a number of ways ranging from using Ex-Im Bank's 
Short-Term Insurance Program to offer open account financing 
for international customers for both goods and services up to 
360 days--this is much less complicated and lower cost method 
than having the foreign buyer pay by letter of credit--to our 
medium- and long-term direct loan and loan guarantee program 
that can support repayment terms of up to 18 years for 
renewable energy systems transactions over $350,000. Ex-Im Bank 
financing is usually the most cost-effective source of 
financing for international customers to purchase U.S.-made 
products and services.
    Earlier this year, Ex-Im Bank approved an 18-year loan 
guarantee under its Renewable Energy Express program for a 
solar power project in Canada, which made possible an $800,000 
sale of solar inverters by Advanced Energy Inc. of Fort 
Collins, CO. The fact that Ex-Im Bank can support loans and 
loan guarantees with repayment terms of up to 18 years has 
enabled U.S. exporters to compete in markets where host 
governments have created incentives for renewable energy, such 
as Italy, Canada, and India.
    Ex-Im Bank's working capital guarantee can also be an 
invaluable resource for U.S. exporters seeking to finance the 
manufacture of goods for export sales. This program enables 
commercial lenders to make working capital loans to U.S. 
exporters for various export-related activities by 
substantially reducing the risks associated with these loans. 
The exporter may use the program to purchase raw materials and 
finished goods for export, to pay for materials, labor, and 
overhead to produce goods for export, and to cover stand-by 
letters of credit, and bid and performance bonds.
    In September 2010, Ex-Im Bank approved a $10 million 
working capital guarantee to support export sales for Abound 
Solar, Inc. of Loveland, CO. Abound Solar is also benefiting 
from several pending Ex-Im Bank loans to buyers in India that 
will expand to India for Abound.
    Since 1992, Ex-Im Bank has had a special Congressional 
mandate in its Charter to increase its support for 
environmental exports. In recognition of this mandate, Ex-Im 
Bank established its Environmental Exports Program in 1994, to 
expand support for U.S. exports of environmentally beneficial 
goods and services, and, at the behest of a Congressional 
request in 2006, Ex-Im Bank created the Office of Renewable 
Energy and Environmental Exports (Office) in 2008. The Office 
serves as the primary point of contact for environmental 
exporters, as well as international customers. The Office is 
charged with promoting the Bank's Environmental Exports Program 
that includes renewable energy.
    A major focus of the Office, as the means to achieve the 
goal of increased support for renewable energy and other 
environmental exports, is increased outreach to the 
environmental industry. The Office seeks to accomplish this 
through a robust calling plan to visit renewable energy 
exports, representation at trade shows, e-mailings, and 
overseas trade missions. The Office makes a major effort to 
establish and maintain relationships with U.S. environmental 
exporters. By increasing the knowledge among environmental 
exporters of how to include Ex-Im Bank financing as part of 
their package of technology and services, Ex-Im Bank stands to 
gain significant numbers of repeat customers who will serve to 
create a pipeline of Ex-Im Bank deals. We are already seeing 
the fruits of our labor with a number of deals inhouse, as well 
as a strong project pipeline. In addition to outreach to 
customers, the Office works with the exporters to generate 
applications to Ex-Im Bank. In Colorado, Ex-Im Bank has visited 
the offices of Abound Solar (one of our staff attending the 
ribbon-cutting ceremony of the new factory), Ascent Solar, 
Advanced Energy Inc., CH2MHill, Community Power Corp., 
Coolerado, ReflecTechSolar, SkyFuel, Inc., and Solix Biofuels.
    In addition to the business development staff, the Bank 
created a ``renewable energy finance team'' of three loan 
officers within the Office to develop expertise at underwriting 
renewable energy transactions. This team currently handles all 
renewable energy transactions under $10 million, and often 
larger transactions as well, with transactions over $10 million 
handled by the Structured and Project Finance Division.
    Over the past few years, Ex-Im Bank has experienced a 
significant growth in financing renewable energy exports. We're 
on track to more than double our authorizations for financing 
renewable energy in FY2011 to over $700 million vs. 
authorizations in FY2010 of $330 million, compared to our 
FY2009 authorizations of $100.4 million, and FY2008 
authorizations of $30.4 million.
    This surge in activity has been driven by the growth of the 
industry combined with our increased efforts at promoting Ex-Im 
Bank to the industry, particularly new companies in the 
industry such as Clipper and Suniva. Also, the ongoing turmoil 
in financial markets in which commercial banks are constrained 
in funding loans with 18-year tenors has driven a greater 
interest in Ex-Im Bank financing for renewable energy projects 
in the EU and Canada where the longer-term Ex-Im Bank financing 
is helping U.S. solar suppliers compete with cheaper Chinese-
made solar panels.

Q.2. As you know, the Export-Import Bank has a congressional 
mandate to use 10 percent of its financing to support renewable 
energy and energy efficient end use technologies. Yet according 
to a July 2010 Government Accountability Office (GAO) report, 
it continually falls well short of this mandate. Given the 
importance of the renewable energy and energy efficiency sector 
to the U.S. and Colorado economy, what steps is the Export-
Import Bank taking to improve in this area? Does the Bank have 
a timetable to comply fully with the mandate? As the Bank 
implements the President's National Export Initiative, what 
plans does it have to ensure that it complies with its 
renewable energy and energy efficient end use technologies 
mandate?

A.2. Ex-Im Bank is uniquely positioned to help achieve 
President Obama's vision for the U.S. to be a leader in the 
export of renewable energy technology. Ex-Im Bank has developed 
close working relationships with most of the major renewable 
exporters, industry trade associations, and a number of key 
foreign buyers and international project sponsors. Already in 
FY2011 the Office of Renewable Energy has brought in $540 
million in pending applications for renewable energy projects.
    Ex-Im Bank has put in place a Business Development Strategy 
to proactively increase its support for renewable energy 
exports. As the market for renewable energy and clean 
technology continues to be dynamic, Ex-Im Bank's Business 
Development Strategy also will be dynamic with adjustments and 
updates made as needed. The highlights of the Bank's Strategy 
are:

  1.  Create a robust calling program to visit companies at 
        their offices, as well as visit companies and meet with 
        their customers at the major industry trade shows. 
        Importantly, maintain and strengthen relationships with 
        the top 20 firms in the industry that generate an 
        estimated 90 percent of U.S. renewable energy exports. 
        Expand the calling program to include venture capital 
        firms with significant clean tech portfolios.

  2.  Continue to build the Ex-Im Bank ``brand'' in the 
        industry by issuing press releases of success stories, 
        running ads that highlight our programs in targeted 
        industry publications, speaking and having a presence 
        at major conferences, and selectively engaging in key 
        international markets, and in participating in 
        international trade missions.

  3.  Creation of the Renewable Energy Finance Team within the 
        Bank, comprised of three Loan Officers, solely 
        dedicated to the expedited processing of renewable 
        energy transactions under $10 million.

  4.  Creation of a Renewable Energy Express Program Finance 
        Team to process transactions under $10 million in 60 
        days or less.

Q.3. Independent accountability mechanisms that evaluate and 
report on agency compliance with environmental and social 
policies, and that provide problem-solving services are 
increasingly the norm at public finance institutions, and exist 
at the U.S. Overseas Private Investment Corporation (OPIC), 
several export credit agencies, the World Bank Group, and 
elsewhere. Do you support the establishment of a similar 
independent accountability mechanism at Ex-Im Bank?

A.3. We believe that independent accountability mechanisms are 
quite appropriate for many international financial 
institutions, and can be valuable in ensuring that the projects 
financed by those institutions are in compliance with their 
environmental and social policies. This is especially true in 
the case of financial institutions that have developmental 
mandates, such as the multilateral development banks and OPIC, 
which have provided significant investments in less developed 
countries, many of which have weak governance structures.
    In the case of Ex-Im Bank, however, our mandate is trade 
related--to support U.S. jobs through the financing of exports. 
Ex-Im Bank has historically been a leader among export credit 
agencies with respect to environmental and social stewardship, 
and we have an especially strong legacy with respect to 
transparency in the administration of our environmental and 
social policies as they relate to our financial support of 
foreign projects. The divisions within the Bank that administer 
these policies, most notably our Engineering and Environment 
Division, have always taken very seriously any concerns 
expressed by the stakeholders of projects we finance, or 
problems brought to our attention by environmental groups. 
Moreover, I have an open door policy when it comes to any Ex-Im 
Bank stakeholder wishing to express an opinion on our policies 
or issues associated with projects we finance.
    Finally, any action to establish a formal social and 
environmental accountability mechanism within Ex-Im Bank would 
require additional staff and administrative resources, which 
would have the effect of diverting resources away from 
activities related to the core objectives of the Bank, the 
support of U.S. exporters, especially small business exporters 
and exporters of renewable energy and environmentally 
beneficial goods and services. We only provide financing for 
foreign projects that are in compliance with our environmental 
and social guidelines, and we scrupulously monitor those 
projects to ensure that they remain in compliance. I do not 
believe that the establishment of a formal accountability 
grievance mechanism within Ex-Im Bank would represent a 
productive or constructive action, nor do I believe that it 
would necessarily contribute to the environmental performance 
of the foreign projects that we support.
                                ------                                


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

Q.1. With the ability to offer such attractive rates, often for 
transactions that would have happened anyway, do you feel that 
private lenders are being put at a competitive disadvantage?

A.1. Ex-Im Bank does not compete with the private sector. In 
fact, Sec. 2(b)(1)(B) of the Bank's charter states: ``It is 
also the policy of the United States that the Bank in the 
exercise of its functions should supplement and encourage, and 
not compete with private capital . . . .'' Thus, Ex-Im believes 
we do not put private lenders at a competitive disadvantage. 
Ex-Im is very mindful of its role and makes a concerted effort 
to not compete with, but instead supplement the private sector. 
Ex-Im has a basic litmus test which is known as additionality. 
Ex-Im support is contingent upon a clear need for our 
participation in a transaction or project with the basic reason 
being to address certain market imperfections such as 
heightened perceptions of risk and/or foreign ECA competitive 
financing. If a private lender is willing and able to assume 
the foreign credit risks on their own, then they need not come 
to Ex-Im and won't because of the cost and profit factors, if 
nothing else. And if a private lender can offer financing terms 
(interest rates, repayment terms) on comparable footing as the 
foreign competitors are offering and meet their own internal 
objectives, then they will and should do it independently of 
Ex-Im.
    However, if the private lender cannot accept the risks or 
offer the financing terms to support the U.S. export, 
especially on the same or similar terms as its foreign 
competitor, then Ex-Im stands ready to supplement their support 
and facilitate the sale. Simply put, Ex-Im Bank's financial 
involvement is countercyclical in nature and has an inverse 
relationship with the market: when the private sector has a 
robust capability and willingness to extend foreign credit on 
their own, the need and demand for Ex-Im declines and vice 
versa. Hence, Ex-Im finances deals that, but for Ex-Im, would 
not otherwise go forward. In other words, Ex-Im Bank fills a 
very important niche and gap in private capital financing.
    The recent global financial and liquidity crisis has 
illustrated the role of ECAs generally and for Ex-Im in 
particular. Since 2008, the global private lending community 
shut down for all intents and purposes. Ex-Im Bank was asked to 
step in by the lending and exporting community to ensure that 
critical trade flows continued ranging from short-term trade 
finance, up through medium- and long-term export finance. 
During this period, it is safe to say that Ex-Im was not a 
competitor to private lenders whatsoever, but rather has 
bridged the gap for the private lending community until they 
have been able and willing to reengage. In fact, Ex-Im created 
a ``safety net'' program to encourage private lenders to stay 
involved but, in the event market conditions deteriorated and 
they stood to incur financial losses, Ex-Im Bank would ``take-
out'' their loan, thereby at least minimizing losses for 
private lenders, if not avoiding them altogether.
    During less volatile, more interest-rate stable periods, 
Ex-Im believes that the all-in-cost of Ex-Im Bank support 
(including the risk premium and other fees) when compared to 
what a private lender's cost would be, any cost advantage with 
interest rates that Ex-Im might have is offset by the cost of 
Ex-Im participation. Therefore, unless Ex-Im Bank is truly 
needed in a transaction, borrowers would prefer to finance 
their deals on their own with private sector support.
    It is also important to note that when Ex-Im Bank does 
provide a direct loan, the interest rates we charge are in full 
compliance with the OECD Arrangement and the WTO commitments 
and these rates do reflect marketing pricing.

Q.2. I understand that the Export-Import Bank is more active 
than ever before in its efforts to promote U.S. exports. Would 
you tell me what portion of the Ex-Im Bank's loans and 
guarantees currently outstanding directly benefit businesses 
and workers in the State of Mississippi?

A.2. Ex-Im Bank has $54 million in exposure outstanding that 
directly benefits businesses and workers in the State of 
Mississippi.

Q.3. The board of directors of the Export-Import Bank recently 
granted preliminary approval for an $805.6 million direct loan 
to South Africa's state-owned electric power utility, Eskom, 
Ltd. How does this align with the Charter's mandate to promote 
renewable energy?

A.3. The recent Ex-Im Bank $805.6 authorization to finance the 
export of engineering services and other goods and services for 
Eskom's, Kusile, coal-fired power plant is not inconsistent 
with Ex-Im Bank's directive to supporting renewable energy. In 
FY2010, Ex-Im Bank adopted a carbon policy under which it 
implemented measures to expand its support for renewable energy 
projects, and subsequently the Board of Directors approved a 
revision to the Bank's Environmental Guidelines that placed 
added requirements on high carbon intensity projects (such as 
the Kusile power plant) that address the project's level of 
greenhouse gas emissions. (These revised Guidelines for high 
carbon intensity projects are set forth in Annex ``G'' of the 
Bank's Environmental Procedures and Guidelines.)
    Concurrently, Ex-Im Bank maintains a robust and growing 
program for the support of renewable energy. Since 2008, it has 
increased its authorizations for renewable energy from $30 
million in 2008, to over $100 million in 2009, to $332 million 
in 2010, and we're on track and expect our support of renewable 
energy transactions in FY2011 to total over $800 million. To 
encourage exports of renewable energy, Ex-Im Bank provides 
incentives for renewable energy transactions consisting of up 
to 18-year repayment terms and capitalization of interest 
during project construction (loan draw-down) that is not 
available to fossil fuel power projects.
    South Africa's Eskom project met the requirements of our 
revised guidelines for high carbon intensity projects. It is 
consistent with South Africa's long term strategy for lowering 
its carbon production, which by 2025 is projected to decline. 
The Kusile plant uses boilers incorporating super-critical 
technology for high efficiency, and it is ``carbon capture and 
sequestration ready'' reflecting an investment by Eskom to 
mitigate the project's greenhouse gas production when the 
technology becomes technically viable. The plant is also the 
first in South Africa to incorporate into its design equipment 
to reduce the level of sulfur pollution through the use of S02 
scrubbers.
    Ex-Im Bank's mission is to support U.S. exports, and the 
jobs that create those exports for all foreign projects that 
meet its environmentally guidelines, and which are considered 
to be environmentally responsible. High carbon intensity 
projects such as the Kusile project are urgently needed by 
foreign buyers to meet their country's electric power demands, 
and they represent a bridge between high carbon intensity 
plants and future projects that will draw from renewable and 
low carbon technologies. Moreover, the participation in these 
projects by U.S. suppliers lead to U.S. employment. Ex-Im Bank 
offers initiatives for the financing of renewable energy 
projects consisting of repayment terms of 18 years, and 
capitalization of interest during the construction of the 
renewable energy projects, incentives that are not given to 
conventional fossil fuel plants.

Q.4. Do you believe that the Administration would support the 
construction of an identical coal-burning power plant in the 
United States?

A.4. This question relating to the domestic policies for coal-
burning power plants would be best posed to the U.S. DOE and 
the EPA. While we understand that the Administration is 
discouraging the construction of plants that produce high 
levels of greenhouse gases in favor of renewable, nuclear, and 
low carbon alternatives, we believe that Ex-Im Bank's carbon 
policy responsibly addresses the legitimate realties posed by 
the increasing demands for electric power in South Africa and 
other developing countries as they embark on paths to 
transition from carbon producing plants to alternative energy 
sources.