    [House Hearing, 113 Congress]
    [From the U.S. Government Publishing Office]

                        EXAMINING REAUTHORIZATION OF THE

                         EXPORT-IMPORT BANK: CORPORATE

                        NECESSITY OR CORPORATE WELFARE?

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

                                    HEARING

                                   BEFORE THE

                        COMMITTEE ON FINANCIAL SERVICES

                         U.S. HOUSE OF REPRESENTATIVES

                        ONE HUNDRED THIRTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                 JUNE 25, 2014

                                   __________

           Printed for the use of the Committee on Financial Services

                               Serial No. 113-87

                                         ______

                          U.S. GOVERNMENT PUBLISHING OFFICE

    91-151 PDF                     WASHINGTON : 2015
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                     HOUSE COMMITTEE ON FINANCIAL SERVICES

                        JEB HENSARLING, Texas, Chairman

    GARY G. MILLER, California, Vice     MAXINE WATERS, California, Ranking
        Chairman                             Member
    SPENCER BACHUS, Alabama, Chairman    CAROLYN B. MALONEY, New York
        Emeritus                         NYDIA M. VELAAZQUEZ, New York
    PETER T. KING, New York              BRAD SHERMAN, California
    EDWARD R. ROYCE, California          GREGORY W. MEEKS, New York
    FRANK D. LUCAS, Oklahoma             MICHAEL E. CAPUANO, Massachusetts
    SHELLEY MOORE CAPITO, West Virginia  RUBEEN HINOJOSA, Texas
    SCOTT GARRETT, New Jersey            WM. LACY CLAY, Missouri
    RANDY NEUGEBAUER, Texas              CAROLYN McCARTHY, New York
    PATRICK T. McHENRY, North Carolina   STEPHEN F. LYNCH, Massachusetts
    JOHN CAMPBELL, California            DAVID SCOTT, Georgia
    MICHELE BACHMANN, Minnesota          AL GREEN, Texas
    KEVIN McCARTHY, California           EMANUEL CLEAVER, Missouri
    STEVAN PEARCE, New Mexico            GWEN MOORE, Wisconsin
    BILL POSEY, Florida                  KEITH ELLISON, Minnesota
    MICHAEL G. FITZPATRICK,              ED PERLMUTTER, Colorado
        Pennsylvania                     JAMES A. HIMES, Connecticut
    LYNN A. WESTMORELAND, Georgia        GARY C. PETERS, Michigan
    BLAINE LUETKEMEYER, Missouri         JOHN C. CARNEY, Jr., Delaware
    BILL HUIZENGA, Michigan              TERRI A. SEWELL, Alabama
    SEAN P. DUFFY, Wisconsin             BILL FOSTER, Illinois
    ROBERT HURT, Virginia                DANIEL T. KILDEE, Michigan
    STEVE STIVERS, Ohio                  PATRICK MURPHY, Florida
    STEPHEN LEE FINCHER, Tennessee       JOHN K. DELANEY, Maryland
    MARLIN A. STUTZMAN, Indiana          KYRSTEN SINEMA, Arizona
    MICK MULVANEY, South Carolina        JOYCE BEATTY, Ohio
    RANDY HULTGREN, Illinois             DENNY HECK, Washington
    DENNIS A. ROSS, Florida              STEVEN HORSFORD, Nevada
    ROBERT PITTENGER, North Carolina
    ANN WAGNER, Missouri
    ANDY BARR, Kentucky
    TOM COTTON, Arkansas
    KEITH J. ROTHFUS, Pennsylvania
    LUKE MESSER, Indiana

                         Shannon McGahn, Staff Director
                        James H. Clinger, Chief Counsel

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on:
        June 25, 2014................................................     1
    Appendix:
        June 25, 2014................................................   115

                                   WITNESSES
                            Wednesday, June 25, 2014

    Anderson, Richard H., Chief Executive Officer, Delta Air Lines...    10
    de Rugy, Veronique, Senior Research Fellow, Mercatus Center,
      George Mason University........................................    12
    Elmendorf, Douglas W., Director, Congressional Budget Office
      (CBO)..........................................................    72
    Gratacos, Hon. Osvaldo Luis, Inspector General, Export-Import
      Bank of the United States......................................    69
    Hochberg, Hon. Fred P., President and Chairman, Export-Import
      Bank of the United States......................................    68
    Moak, Lee, President, Air Line Pilots Association, International.    13
    Scire, Mathew J., Director, Financial Markets and Community
      Investment, U.S. Government Accountability Office..............    71
    Wilburn, Steven P., Founder, Chief Executive Officer, and
      President, FirmGreen, Inc......................................    15

                                    APPENDIX

    Prepared statements:
        Anderson, Richard H..........................................   116
        de Rugy, Veronique...........................................   131
        Elmendorf, Douglas W.........................................   146
        Gratacos, Hon. Osvaldo Luis..................................   159
        Hochberg, Hon. Fred P........................................   167
        Moak, Lee....................................................   174
        Scire, Mathew J..............................................   182
        Wilburn, Steven P............................................   194

                  Additional Material Submitted for the Record

    Hensarling, Hon. Jeb:
        Written statement of Air Liquide Advanced Technologies US LLC   201
        Written statement of the American Conservative Union.........   202
        Written statement of Cliffs Natural Resources, Inc...........   203
        30 Groups to Congress: Let the Export-Import Bank Expire.....   207
        Written statement of the National Taxpayers Union............   210
        Article from The Wall Street Journal entitled, ``End
          Corporate Welfare? Start With the Ex-Im Bank,'' dated June
          15, 2014...................................................   211
    Campbell, Hon. John:
        Discussion Draft to reauthorize the Export-Import Bank of the
          United States for 3 years, and for other purposes..........   213
    Green, Hon. Al:
        Written statement of Export Import Strategies................   233
        Written statement of the Greater Houston Partnership.........   234
        Written statement of the Hallmark Sales Corporation..........   235
        Editorial from the Houston Chronicle entitled, ``No time for
          games: Export-Import Bank loans support American jobs,
          including Houston-area jobs,'' dated June 25, 2014.........   236
        Written statement of Manufacturers of Valves and Strainers...   238
        Written statement of Grafitec................................   239
        Written statement of South Coast Products....................   240
    Maloney, Hon. Carolyn:
        Written statement of the National Association of
          Manufacturers..............................................   241
        Written statement of the National Conference of State
          Legislatures...............................................   243
        Written statement of 865 organizations urging support of
          reauthorization of the Export-Import Bank..................   245
        Written statement of various organizations which support
          swift reauthorization of the Export-Import Bank............   255
        Written statement of the U.S. Chamber of Commerce............   257
    McCarthy, Hon. Carolyn:
        Written statement of the International Association of
          Machinists and Aerospace Workers...........................   264
        Written statement of the International Federation of
          Professional & Technical Engineers.........................   267
        Written statement of the American Federation of Labor and
          Congress of Industrial Organizations (AFL-CIO).............   268
        Written statement of the Maritime Trades Department..........   269
    Pittenger, Hon. Robert:
        Written statement of The Babcock & Wilcox Company............   270
    Stivers, Hon. Steve:
        Written statement of the Nuclear Energy Institute............   272
        Written statement of PPG Industries..........................   276
    Waters, Hon. Maxine:
        Written statement of Air Tractor, Inc........................   277
        Written statement of Fritz-Pak Corporation...................   278
        Written statement of Greenergy Solutions Inc.................   280
    Elmendorf, Douglas W.:
        Written responses to questions for the record submitted by
          Representative Royce.......................................   281
    Hochberg, Hon. Fred P.:
        Written responses to questions for the record submitted by
          Chairman Hensarling........................................   284

                        EXAMINING REAUTHORIZATION OF THE

                         EXPORT-IMPORT BANK: CORPORATE

                        NECESSITY OR CORPORATE WELFARE?

                                  ----------

                            Wednesday, June 25, 2014

                 U.S. House of Representatives,
                       Committee on Financial Services,
                                                       Washington, D.C.
        The committee met, pursuant to notice, at 10:06 a.m., in
    room 2128, Rayburn House Office Building, Hon. Jeb Hensarling
    [chairman of the committee] presiding.
        Members present: Representatives Hensarling, Bachus, King,
    Royce, Capito, Garrett, Neugebauer, McHenry, Campbell,
    Bachmann, Pearce, Posey, Fitzpatrick, Westmoreland,
    Luetkemeyer, Huizenga, Duffy, Hurt, Stivers, Fincher, Stutzman,
    Mulvaney, Hultgren, Ross, Barr, Cotton, Rothfus, Messer;
    Waters, Maloney, Sherman, Meeks, Capuano, Hinojosa, Clay,
    McCarthy of New York, Lynch, Scott, Green, Cleaver, Moore,
    Ellison, Himes, Peters, Sewell, Foster, Kildee, Murphy,
    Delaney, Sinema, Beatty, Heck, and Horsford.
        Chairman Hensarling. The committee will come to order.
        Without objection, the Chair is authorized to declare a
    recess of the committee at any time.
        This hearing is entitled, ``Examining the Reauthorization
    of the Export-Import Bank: Corporate Necessity or Corporate
    Welfare?''
        I now recognize myself for 6 minutes to give an opening
    statement.
        Today, we will examine the Obama Administration's request
    to reauthorize the Export-Import Bank (Ex-Im or the Bank).
        First, we should examine where the money comes from to
    finance Ex-Im. Whose money is it? Obviously, it is taxpayers'
    money--the cashier at the corner grocery store, the cop on the
    beat, your children's teachers, the small business owner
    struggling to keep the doors open in a tough economy.
        And where does the money go? It goes to foreign countries
    and foreign companies in the way of direct loans and credit
    guarantees. The taxpayer money goes overseas to China and
    Russia, nations that openly challenge our economic and security
    interests. Taxpayer money goes to oil-rich countries like Saudi
    Arabia and the United Arab Emirates. The taxpayer money even
    goes to countries with a demonstrated history of atrocious
    human rights abuses like the Congo and the Sudan.
        So, who benefits? Overwhelmingly and indisputably, it is
    some of the largest, richest, most politically connected
    corporations in the world, like Boeing, General Electric,
    Bechtel, and Caterpillar. In fact, in 2013 over half of Ex-Im's
    financing went to a handful of Fortune 500 companies. And big
    Wall Street Banks apparently benefit, as well. As reported in
    the press recently, one former JPMorgan and Citigroup banker
    said of Ex-Im's credit guarantees, ``It is free money.''
        So if you are a politically connected bank or company that
    benefits from Ex-Im, no doubt you would like it to continue.
    After all, it is a sweetheart deal for you. Taxpayers shoulder
    the risk; you get the reward. But if you work at a small
    business or another American company competing in the global
    marketplace, it is unfair. Ex-Im effectively taxes you, while
    subsidizing your foreign competitors.
        We hear a lot from powerful voices on K Street and Wall
    Street about the Bank, but we also should listen carefully to
    some voices from Main Street, like Hal Richards of Terrell,
    Texas, in my district. Quote: ``As a small business owner who
    exports, I think it is outrageous that my own government puts
    my business and other small businesses at a competitive
    disadvantage through the Export-Import Bank. How is that
    fair?''
        Now, Ex-Im tells us sending taxpayer money to foreign
    interests supports jobs for Americans. But the government's
    chief auditor reported that programs like Ex-Im ``largely shift
    production among sectors within the economy, rather than raise
    the overall level of employment in the economy.''
        Delta Air Lines, whose CEO will testify shortly, points out
    that Ex-Im's loans to foreign airlines have killed as many as
    7,500 domestic airline jobs because the Bank will subsidize
    Delta's foreign competitors.
        Caterpillar was a recent beneficiary of Ex-Im's taxpayer
    financing that went to an iron ore mining project controlled by
    Australia's richest citizen. An American iron ore company
    called Cliffs Natural Resources said it will no longer be able
    to effectively compete with its Australian competitors due to
    the subsidy, and they are now having to cut employees' hours.
        Another American competitor feeling the sting of Ex-Im is
    Valero Energy in my native Texas. Ex-Im is lending $641 million
    to a Turkish company to build a new petroleum refinery.
    Valero's CEO stated that Ex-Im's actions ``jeopardize U.S.
    refining jobs and undermine the strength of the U.S. refining
    infrastructure.''
        Professor Donald Boudreau of George Mason University summed
    it up neatly when he stated, ``At best, the Ex-Im Bank creates
    jobs in export industries by destroying jobs in non-export
    industries.''
        Now, the Bank tells us it is essential to U.S. exports, but
    over 98 percent of all U.S. exports occur without risking
    taxpayer dollars--again, over 98 percent. And most of the
    others who take advantage of Ex-Im could certainly do it
    without taxpayer support. Even Boeing, the Bank's biggest
    beneficiary, has admitted it doesn't really need Ex-Im and
    could ``arrange alternative financing'' without it.
        The Bank has also told us it doesn't cost taxpayers a dime.
    The Congressional Budget Office respectfully disagrees and
    tells us if the Bank were to use fair-value accounting, the
    accepted accounting method for almost every bank and private
    company in America, Ex-Im's ledger would actually show a net
    loss to taxpayers in the neighborhood of $200 million a year.
    That is the difference between Washington accounting and Main
    Street accounting.
        Perhaps what is most disturbing about the Ex-Im Bank is its
    ideological and crony-based lending practices. It has a green
    energy quota. It permits no assistance for coal projects. It
    has a mandate to specifically support exports going to Sub-
    Saharan Africa.
        Last year, more than 60 percent of Ex-Im's financing
    benefited just 10 mega-corporations that clearly have a strong
    political and lobbying presence in this town. Recently, a
    Spanish multinational corporation received a $33-million Ex-Im
    loan while former Energy Secretary Bill Richardson
    simultaneously sat on its advisory board and Ex-Im's as well.
        Ex-Im guaranteed $10 million in loans to benefit the
    politically favored Solyndra, which clearly did not favor
    taxpayers.
        And just yesterday, we woke up to the report in The Wall
    Street Journal that, ``The U.S. Export-Import Bank has
    suspended or removed four officials in recent months amid
    investigations into allegations of gifts and kickbacks as well
    as attempts to steer Federal contracts to favored companies.''
    Ex-Im may not just be guilty of cronyism; it may be guilty of
    corruption, as well.
        Now, I will admit that Republicans may disagree on whether
    Ex-Im should be reformed or allowed to expire, and I certainly
    hope that this hearing will help illuminate that decision. But
    we are united in believing that we cannot reauthorize the
    status quo. And we are also united in believing that the
    smarter and fairer way to promote American exports is by
    fundamental tax reform; strong trade agreements, a regulatory
    freeze, with the exception of health and safety; and greater
    American independence, with projects like the Keystone
    pipeline.
        I now recognize the ranking member for 5\1/2\ minutes.
        Ms. Waters. Thank you, Mr. Chairman.
        I would like to thank you for finally holding this hearing
    on the reauthorization of the Export-Import Bank, even though
    it comes less than 3 months before its charter expires. It has
    been over a year since this committee even discussed the Bank
    at a subcommittee hearing to assess its progress on reforms.
        But let's be serious. This hearing is not going to be a
    forthright discussion on the merits of the Bank. Mr. Chairman,
    we know your position on the Bank. We know you have made ending
    the Bank your top priority, regardless if it is at the expense
    of thousands of American companies trying to compete against
    businesses in China, Russia, Korea, and countries across
    Europe, all of which have their own version of the Ex-Im Bank.
        I am dismayed to see that the Republican leader-elect,
    Kevin McCarthy, has also changed his view on the Export-Import
    Bank. I am saddened that he has followed the lead of the
    extremists in an effort to shows his Tea Party credentials.
        At one time, programs like the Ex-Im Bank were so
    apolitical that they did not even require a vote. Now, policies
    that create thousands of jobs and increase American
    competitiveness are under constant attack.
        I am becoming more and more concerned that the Republican
    Party's willingness to work together on issues like flood
    insurance, TRIA, and the Export-Import Bank has fallen victim
    to fringe elements who put their agenda over the well-being of
    our country's workers, manufacturers, business owners, and the
    broader economy.
        As the extremists celebrate, I have to admit, I mourn it as
    a loss for our country. Our new reality is government shutdowns
    and debt-ceiling crises. It is constant uncertainty. It is not
    knowing whether the government is going to help pick up the
    pieces after a major flood or a terrorist attack. It is about
    telling businesses, large and small, you are on your own to go
    up against competitors who are backed by global superpowers.
        And now they have set their sights on ``exiting'' the
    Export-Import Bank, an entity that creates or sustains hundreds
    of thousands of jobs, and over the past 5 years has supported
    $233 billion in U.S. exports.
        I would like to take a minute and thank Representatives
    Denny Heck and William Lacy Clay, who have just yesterday
    introduced a clean Ex-Im reauthorization bill with 200 original
    Democratic cosponsors.
        Mr. Chairman, I am not an expert at whipping votes, but if
    you add these cosponsors to the 41 Republicans who recently
    signed a letter in support of Ex-Im's renewal, I believe you
    have a majority of the House in support of extending the Bank's
    charter for the long term.
        Opponents of the Bank like to use the term ``crony
    capitalism.'' Over the past few weeks, we have been working
    hard to learn more about the so-called crony capitalists that
    have been supported by the Bank. Their stories have been
    astounding. Mr. Chairman, did you know there are 12 exporters
    in your district that I guess are crony capitalists and 11 of
    them are small businesses?
        Over the course of this hearing, Democratic members of this
    committee will share with you the truth about these hardworking
    Americans, not cronies, who are assisted by the Bank.
        They are companies like SpaceX, an ambitious and
    revolutionary firm based in Hawthorne, California, in my
    district, that designs, manufactures, and launches rockets and
    spacecraft. It is the first private company to build, launch,
    and dock spacecraft at the International Space Station. And it
    is a company that has been strongly supported by the majority
    leader-elect, Kevin McCarthy, who went so far as to call its
    founder, Elon Musk, the Wright Brothers of the next generation.
        In just a few short years, the Ex-Im Bank has authorized
    close to $900 million in support of exports from SpaceX,
    creating thousands of quality high-tech jobs across California
    and in the United States. I wonder when Mr. McCarthy decided
    that he no longer could support his friend, Elon Musk, or
    support the Bank that keeps SpaceX innovating and competing,
    despite the fact that he has identified himself as a big
    supporter of SpaceX.
        I, too, believe in SpaceX because I know the pain in my
    district that has been felt over the years after losing our
    manufacturing base. Supporting companies like SpaceX is
    critical because they are bringing manufacturing jobs back and
    they ensure the United States will remain a world leader in the
    manufacturing economy of the future.
        So I thank you, Mr. Chairman. I look forward to this
    hearing, and I yield back the balance of my time.
        Chairman Hensarling. The Chair now recognizes the
    gentlelady from West Virginia, Mrs. Capito, chairwoman of our
    Financial Institutions Subcommittee, for 2 minutes.
        Mrs. Capito. Thank you, Mr. Chairman. And thank you for
    holding today's hearing.
        For the last 2 years, the Export-Import Bank has joined the
    Obama Administration's assault on our Nation's coal industry.
    In December of 2013, the Bank imposed guidance that would
    prevent the financing of coal-fired power plants in all but the
    world's poorest countries. This guidance, combined with the
    EPA's proposed regulations to ban domestic coal-fired power
    plants, will irrevocably hinder the development of new clean
    coal technologies. This is another example of this
    Administration's intent to pick winners and losers in our
    economy, and I can no longer support the authorization of the
    Ex-Im Bank.
        I have expressed my concerns to the Bank to no avail. In a
    letter to, and in a meeting with, Chairman Hochberg, I
    discussed my opposition to this guidance. I have been
    absolutely clear that it is inappropriate to use the Bank's
    financing mechanisms to drive an idealogical agenda rather than
    promote U.S. exports.
        The Administration's policies come at a time when we should
    be ensuring the United States is leading the world in
    developing new coal plant technologies. We won't see carbon
    capture and sequestration developed by U.S. companies if we
    choke off the market for coal technology.
        The Ex-Im Bank's guidance is bad for our Nation's economy,
    bad for the development of future technologies, and bad for the
    environment. For these reasons, I do not support the extension
    of this charter.
        I yield back.
        Chairman Hensarling. The gentlelady yields back.
        The Chair now recognizes the gentleman from California, Mr.
    Sherman, for 2 minutes.
        Mr. Sherman. Mr. Chairman, a point of order. We had those
    clocks going for the national debt. They are going too slowly.
    You are proposing to eliminate the Ex-Im Bank, which will add
    billions of dollars to our national debt. And you have been
    unwilling, unless you change your mind, to join with me in tax
    increase measures that would replace that revenue.
        Now, whenever somebody wants to increase the national debt,
    they always say, ``Change the accounting system,'' and that Ex-
    Im Bank would be costing us money if we used fairytale-value
    accounting. I don't think we should. The fact is we should use
    GAAP, not GOP, accounting--G-A-A-P, not G-O-P, accounting.
        What is the underlying theory of fair-value accounting? It
    is that we look not at the profits and losses of the Ex-Im
    Bank, properly accounting for the risk they take, but we look
    at what their costs would be if they weren't the Ex-Im Bank but
    at a higher cost of funds. That is like saying Pizza Hut is
    over-reporting its income because they report accurately the
    cost they pay to the Bank for the money they borrow, not the
    higher amount they would pay if they were Jack's Pizzeria
    instead. The fact that Pizza Hut has a lower cost of funds
    doesn't mean they should report higher interest costs and
    report a loss. But that is what you do under fairytale-value
    accounting.
        I am also on the Foreign Affairs Committee. I sit there
    while Republicans say that Democrats might support unilateral
    disarmament, that we would give up our arms and then go into
    the arms-limitation talks asking others to follow our lead.
    That is what we are doing here.
        Germany has an export credit authority that is 3 times as
    large, they have total exports 3 times as large per capita, and
    they run a trade surplus. And we would go into negotiations
    with Germany giving up the Ex-Im Bank. Why don't we give up our
    missile--
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from New Jersey, Mr.
    Garrett, the chairman of our Capital Markets Subcommittee, for
    2 minutes.
        Mr. Garrett. First of all, thank you, Mr. Chairman, for
    holding this hearing.
        Thank you also, Mr. Chairman, for all of your efforts on
    fostering not only in this area but also, in general, economic
    growth and job creation in this country, including
    manufacturing. As the ranking member has bemoaned the fact that
    she has lost it in her district, I would just note that the
    chairman is encouraging economic growth and manufacturing but
    not on the backs of the American taxpayer.
        Thank you also, Mr. Chairman, for holding this hearing in a
    very timely manner, as well.
        And thank you to the panelists.
        You know, panelists, I was struck by an article on the
    front page of The Wall Street Journal. It was entitled,
    ``Officials at Ex-Im Bank Face Probes.'' What I found
    especially interesting and concerning in this article,
    notwithstanding the fact that four Bank employees have been
    suspended or removed for allegations of kickbacks, was a
    statement of the agency spokesman that, ``The Export-Import
    Bank takes seriously its commitment to taxpayers and its
    mission to support U.S. jobs.''
        Really? To begin with, I would question the Bank's
    seriousness to taxpayers, given in this committee we only
    learned of the allegations of potential criminal misconduct by
    reading the front page of The Wall Street Journal. I guess this
    so-called serious commitment to taxpayers did not reach the
    level of the requisite seriousness that would result in
    Congress being notified of various serious allegations like
    this.
        While we need to be certain that we have the facts, and
    ensure that this committee does not jump to proverbial
    conclusions, I do find it curious that these examples of
    employee misconduct were withheld against the backdrop of this
    debate over the Bank's future as well as the well-funded
    lobbying campaign to ensure the Bank's continued existence.
        If true, these allegations would go to the heart of the
    concern about this Bank, its lending, and of the special
    interests of multibillion-dollar corporations. I only need to
    look at the lobbying disclosures of some of our largest
    businesses to know that when you mix corporations and taxpayer
    guarantees, you get something that looks a lot like crony
    capitalism.
        And, with that, I yield back.
        Chairman Hensarling. The Chair now recognizes the
    gentlelady from New York, Mrs. McCarthy, for 1\1/2\ minutes.
        Mrs. McCarthy of New York. Thank you, Mr. Chairman. And I
    appreciate this hearing.
        I am a little confused on what I am hearing. This is about
    jobs. And I can talk about my district. I work in my district.
    I try to bring, certainly, businesses into my district. And I
    know in the last several years I have been able to help my
    small businesses--$86 million just into my district alone, and
    a lot more jobs added over the last 7 years. That is what our
    job is, to make sure that we can bring jobs home.
        And as the ranking member mentioned, Mr. Hensarling--who,
    unfortunately, didn't bring a lot of money into his district,
    but maybe he didn't work the district, I don't know. And Mr.
    McCarthy, who always supported the Ex-Im Bank, did have over
    $69 million that came into his district.
        This is about jobs. My colleagues on the other side keep
    saying, we are going to do jobs, we are going to do jobs. Where
    are they?
        People seem to have a very short memory. When we went
    through the great crisis, nobody went after the Banks, nobody
    went after the insurance companies. And when we look at the Ex-
    Im Bank and we hear my colleagues talking about how they found
    four employees, can I remind everybody, yes, they found four
    employees. They did an investigation, and they let them go.
    That is the way the system works. Anybody who understands any
    business, there are always going to be people who are going to
    try to rig the system.
        If we brought this bill up onto the House Floor, we would
    get it passed. So stop with this. Let's do jobs and let's--
        Chairman Hensarling. The time of the gentlelady has
    expired.
        The Chair now recognizes the gentleman from Illinois, Mr.
    Hultgren, for 1 minute.
        Mr. Hultgren. Thank you, Mr. Chairman.
        I want to take a hard look at the current structure of the
    Export-Import Bank. Protecting taxpayer dollars by keeping
    government out of tasks that the private sector can perform
    itself is central to a nation based on free enterprise.
        An estimated 760 jobs in the 14th District alone rely on
    the Bank to ensure their exports reach their customers. Miner
    Elastomer in Geneva, Illinois, who exports truck and shovel
    parts, has asked me to support the Bank. The Crystal Lake
    Matthews Company, a manufacturer of agriculture equipment, has
    jobs dependent on the Bank. We can't overlook the 29 smaller
    production suppliers who fulfill Boeing orders in my district.
        Since 2007, the Bank has supported almost $6 billion in
    Illinois exports from 301 exporters, including 204 small
    businesses. An outright elimination leaves U.S. jobs in peril.
        We must ask the hard questions: Do we know the job impact
    of eliminating the Bank without a proper glide path in place?
    Have we addressed the worldwide subsidies offered by our
    competitors through trade agreements? Can we put a reform plan
    on the table to ensure a more limited scope for the Bank?
        I am committed to working together to put a viable
    alternative forward.
        I yield back.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentlelady from Arizona, Ms.
    Sinema, for 1 minute.
        Ms. Sinema. I strongly support the operation of the Export-
    Import Bank, because helping Arizona businesses expand their
    manufacturing capacity and exporting ability creates jobs and
    grows our economy. The Export-Import Bank fills gaps in private
    financing, stepping up where the private sector can't or won't.
        Last year, Ex-Im Bank Chairman Fred Hochberg visited my
    district to help small and growing businesses increase their
    global exports right in our own backyard. From Fiscal Years
    2007 to 2014, the agency supported $176 million in exports from
    companies in my district.
        One of those companies, MarTech, Inc., was reluctant to
    sell their semiconductor equipment to customers in Asia. They
    were concerned that once the equipment left their building,
    there was no guarantee they would get paid. The Ex-Im Bank
    offered MarTech a solution. The Bank issued an insurance policy
    so MarTech could make sales and have a guarantee they would get
    paid. Thanks to the Bank, they now export to companies in Asia,
    Europe, and the Americas.
        Allowing the Bank's current charter to expire would
    threaten the competitiveness of these and many other Arizona
    businesses. And that is why I am a cosponsor of legislation to
    extend the Bank's authorization and I will continue to work to
    reauthorize this important investment in American jobs.
        Chairman Hensarling. The Chair now recognizes the gentleman
    from Georgia, Mr. Westmoreland, for 1 minute.
        Mr. Westmoreland. Thank you, Mr. Chairman.
        The problem with the Export-Import Bank is the entire
    mission and structure. Simply, the Export-Import Bank is
    designed to advantage one U.S. industry at the expense of
    another. Even if Congress directed the Bank to make changes, as
    it did in 2012, we have seen that this massive bureaucracy will
    not yield to even modest reforms.
        People talk about the cost of jobs that would be lost if it
    is not reauthorized. How about the new jobs and the more
    capital for growth created by finally being competitive with
    foreign competitors?
        The Bank has shown it is not able to conduct mandated
    economic impact analysis, and the Bank regularly employs fuzzy
    math and accounting. Congress mandated the Export-Import Bank
    be more transparent, and, quite simply, they have failed to
    follow this mandate.
        I am happy to join the chairman and the new majority leader
    in this effort.
        And I yield back the balance of my time.
        Chairman Hensarling. The Chair now recognizes the gentleman
    from Missouri, Mr. Clay, the ranking member of our Monetary
    Policy Subcommittee, for 1 minute.
        Mr. Clay. Mr. Chairman, the mission of the Ex-Im Bank is to
    support American jobs by facilitating the export of U.S. goods
    and services. The Ex-Im Bank does not compete with private
    sector lenders but provides export financing that fills gaps in
    trade financing. The Bank assumes credit and country risks that
    the private sector is unable or unwilling to accept. The Ex-Im
    Bank helps to level the playing field for U.S. exporters by
    matching the financing that other governments provide to their
    exporters.
        Refusing to reauthorize the Ex-Im Bank would reduce the
    number of ECAs from 60 to 59, hurting only U.S. exporters and
    workers that they employ. And in my home State of Missouri, the
    Ex-Im Bank supported $1 billion in exports and $339 million in
    exports from the district that I represent. Mr. Chairman, those
    are American jobs--
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from Washington, Mr.
    Heck, for 1 minute.
        Mr. Heck. Thank you, Mr. Chairman.
        Just because somebody says something that is untrue over
    and over and over again doesn't make it one whit less untrue.
    Let's start this hearing with the truth.
        Here is the truth: The Ex-Im creates jobs, 205,000 last
    year. Here is the truth: The Ex-Im supports small businesses.
    Ninety percent of its transactions go to small businesses.
        And an appalling lack of understanding of how the private
    sector works. Even large corporations are dependent on small
    businesses. The greatest plane manufacturer in the word is
    dependent upon 15,000 suppliers, 6,600 of which are small
    businesses which would be put at risk by your position.
        Here is the truth: There are no tax dollars involved in
    subsidizing the Ex-Im. In fact, the Ex-Im transferred over a
    billion dollars to the Treasury. Where is the proof that the
    Treasury ever transferred any money to the Ex-Im?
        And, finally, here is the truth: If we abandon the Ex-Im,
    we will engage in unilateral disarmament--unilateral
    disarmament. Every other developed nation in the world has an
    export credit authority. Don't render the United States the
    only one without one.
        Chairman Hensarling. The time of the gentleman has expired.
        We will now turn to our first panel of witnesses. And to
    introduce our first witness, I will yield to the gentleman from
    Georgia, Mr. Westmoreland.
        Mr. Westmoreland. Thank you, Mr. Chairman.
        It is my pleasure to introduce Richard Anderson, the chief
    executive officer of Delta Air Lines. Richard has been the CEO
    of Delta since 2007 and has more than 25 years in the aviation
    industry.
        As you probably know, Delta Air Lines is one, if not the
    largest employer in my district and across Georgia. Delta has
    been placed at a competitive disadvantage by the actions of the
    Export-Import Bank, and the time has come to level the playing
    field.
        Richard, welcome to you and the members of the Delta family
    team who are with you, and I look forward to your testimony.
        Chairman Hensarling. Our next panelist, Dr. Veronique de
    Rugy, is a senior research fellow at the Mercatus Center at
    George Mason University, where her primary research interests
    include the U.S. economy, the Federal budget, and various
    financial issues.
        Captain Lee Moak is the president of the Air Line Pilots
    Association, which represents almost 50,000 professional
    airline pilots in the United States and Canada. Before becoming
    an airline pilot, Captain Moak served as a Marine Corps fighter
    pilot.
        Last, but not least, Steven Wilburn is the chief executive
    officer of FirmGreen, a Newport Beach-based energy company that
    participates in virtually all aspects of the global green
    energy business.
        Before we proceed, Mr. Wilburn, we have one clerical matter
    to clean up with you. We received two different copies of your
    testimony, one at 6:00 last night. In that testimony, in that
    version, when describing why your commercial Bank officer could
    not provide financing to a Brazilian company, you said,
    ``Simply out of the question, given the new TARP regulations
    and the then-new Dodd-Frank legislation.'' A couple of hours
    later, from the Democratic staff we received a new copy of your
    testimony that struck that language and included the reason:
    ``reluctance of Banks to support small business exports.''
        To ensure that we have the correct copy of your written
    testimony for the record, which did you intend, the one we
    received from you at 6:00 or the one that we received from the
    Democratic staff at 8:00?
        Mr. Wilburn. Mr. Chairman, I apologize--
        Chairman Hensarling. I'm sorry, could you hit the button
    there? Just for the record, we need to know which testimony it
    is your intention to include?
        Mr. Wilburn. My intention is to provide an accurate written
    statement. I was flying from California on an airplane WiFi,
    trying to respond to your staff. And I was working realtime--
        Chairman Hensarling. Well, is it--
        Mr. Wilburn. --editing. The last version--
        Ms. Waters. Mr. Chairman?
        Chairman Hensarling. The last version is the one you intend
    to use?
        Mr. Wilburn. --is my official written statement.
        Chairman Hensarling. Okay. Thank you. Thank you, sir. That
    is what we needed to know.
        Without objection, each of your written statements will be
    made a part of the record.
        Not unlike a traffic light, if you are new to this, there
    is a green light, a yellow light, and a red light system. The
    yellow light will tell you there is 1 minute remaining. The red
    light means that it is time to wrap up so we can move on to the
    next witness.
        Mr. Anderson, you are now recognized for your testimony.

      STATEMENT OF RICHARD H. ANDERSON, CHIEF EXECUTIVE OFFICER,
                            DELTA AIR LINES

        Mr. Anderson. Thank you very much for having me here today.
        As a private citizen, it is a privilege to be in the halls
    of Congress and have the opportunity, regardless of what the
    issue is, to participate in the process. And, second, it is a
    real privilege to be here on behalf of the 80,000 people that I
    serve at Delta Air Lines and the 165 million passengers that
    the Delta family serves around the world with over 6,000
    flights a day.
        I would note that we are one of the largest operators of
    Boeing airplanes and GE engines in the world. We currently have
    100 Boeing airplanes on order with GE engines, and we are
    paying cash for them. And there are not many airlines in the
    world that buy 100 Boeing airplanes and pay cash for them. So
    let's make sure we put our discussions here in context.
        I was pleased to hear that we are talking about jobs,
    because I have about 100 Delta employees here with me who have
    my back today; they are the pilots and the flight attendants
    who provide the best airline service in the world.
        I am here to talk about their jobs, because the Ex-Im Bank
    takes their jobs. And if that is really what we are serious
    about, we should be serious about reforming the Bank. You tried
    to reform the Bank in a bipartisan way the last time, and your
    reforms were ignored. And it is our jobs that are at risk.
        I have a slide up here. The Ex-Im Bank finances the
    wealthiest, most profitable airlines in the world with huge
    amounts of our Treasury dollars. And you can see on this slide,
    we have an example of an Ex-Im Bank financing that was just
    done and a market-based financing that was just done. And those
    financing numbers show you that a very wealthy airline that
    goes in the private market on a regular basis to finance
    airplanes gets, over the life of the airplane, about a $20-
    million advantage.
        And these airlines are also owned by governments and deeply
    subsidized by their own government, in addition to being deeply
    subsidized by our government.
        Our focus here today is on a narrow issue. I am pleased to
    hear the job growth. My business depends upon job growth. We
    have no objection to anything that anybody does in the halls of
    Congress on either side of the aisle that grows jobs in this
    country. My business, our business, the Delta family serves
    people at work at all the great companies in the United States.
        But we shouldn't have a government policy that sacrifices
    the jobs of hardworking people at the Delta family in order to
    subsidize the wealthiest, most creditworthy airlines in the
    world.
        I was elected the chairman of the International Air
    Transport Association by the CEOs of all the airlines of the
    world. In the course of doing that, I have had many
    conversations with the CEOs of the most profitable airlines in
    the world. And they tell me, look, I don't really need the Ex-
    Im Bank financing, but it is so cheap, I might as well take it.
    This is effectively a free airplane every eighth airplane.
        All I want is a level playing field. The story of Delta Air
    Lines is a great American story. We are now the most
    successful, profitable airline in the world. But we have to
    compete against deeply subsidized government airlines that are,
    in turn, deeply subsidized by our government.
        And the prime example is Air India, a government-owned,
    government-subsidized airline that drove us out of the
    marketplace with a billion dollars of Ex-Im Bank financing.
    That cost about 1,000 jobs.
        So when we talk about creating jobs, why can't we navigate
    a policy? And our objection is a narrow objection. It is wide-
    body financing for creditworthy, state-owned and state-
    subsidized airlines. We have no objection to narrow bodies; we
    have no objection to small business. Our focus is on the policy
    junction of where U.S. jobs are destroyed by the Bank. So if we
    are serious about creating jobs, this Bank needs to be
    reformed.
        I yield my time.
        [The prepared statement of Mr. Anderson can be found on
    page 118 of the appendix.]
        Chairman Hensarling. Dr. de Rugy, you are now recognized
    for your testimony.

        STATEMENT OF VERONIQUE DE RUGY, SENIOR RESEARCH FELLOW,
                MERCATUS CENTER, GEORGE MASON UNIVERSITY

        Ms. de Rugy. Thank you, Chairman Hensarling, Ranking Member
    Waters, and members of the committee. It is a pleasure to be
    here today.
        We don't agree on much in Washington, but I think we can
    all agree that the Federal Government shouldn't be sending our
    limited resources to the wealthiest and most politically
    connected corporations. And, yet, that is what the Ex-Im Bank
    does.
        Some say that there are good reasons for doing this. They
    say that the Ex-Im Bank promotes exports, supports jobs,
    returns money to Treasury, and helps taxpayers. None of these
    arguments withstand scrutiny, as my written testimony has
    shown, and I will briefly address in my statement today.
        However, my main focus will be on groups who are affected
    by Ex-Im activity that have gone ignored. These people don't
    have connections in Washington. They don't have access to press
    offices and lobbyists, but they matter, too. It is difficult
    but extremely important that we consider the unseen costs of
    political privilege, whatever form it takes, whether it is
    market distortions, job losses, potential destroyed, or higher
    prices.
        So, let's start. First, the Bank claims it is essential to
    promote U.S. exports. Economists disagree. We have long known
    that export-subsidy schemes, like Ex-Im, do not meaningfully
    improve national exports, and, in fact, the data prove this
    point. Ex-Im backs less than 2 percent of U.S. exports.
        Ex-Im likes to tout subsidized firm successes, but they do
    not consider the unseen costs imposed on everyone else involved
    with the other 98 percent of unsubsidized exports. In these
    cases, it is firms' own government, not foreign government,
    that puts them at a competitive disadvantage.
        For instance, Ex-Im harms these firms' export opportunities
    by making it harder for unsubsidized buyers to secure their own
    financing. That is because Ex-Im gives lenders an incentive to
    shift resources away from unsubsidized projects toward
    subsidized projects regardless of the merits of the business.
        These capital market distortions have ripple effects.
    Subsidized projects attract more private capital, while other
    worthy projects are being overlooked. The subsidized get
    richer, and the unsubsidized get poorer or, worse, get out of
    business. Unfortunately, we will never see the businesses that
    could have been. Perhaps they would have been better, more
    profitable, and more responsible than the well-connected
    subsidized businesses.
        Second, the Bank claims to have supported 205,000 jobs in
    2013. This number, however, should be taken with a grain of
    salt since GAO has criticized the Bank's job calculation
    methodology for failing to consider how many jobs would have
    been created without Ex-Im, among other flaws.
        But even if we accept the Bank's questionable jobs claim,
    that means that it only supported 1.8 percent of all export-
    related jobs in 2013. The Bank doesn't promote jobs as much as
    it promotes jobs for favored companies at the expense of
    everyone else.
        The other 98.2 percent of unsubsidized export jobs are
    placed at a competitive disadvantage by Ex-Im. Unsubsidized
    employers may not expand hiring, they may not increase wages,
    and they may even have to fire employees because they face
    competition from subsidized projects.
        Third, the Bank claims that it benefits taxpayers. A recent
    CBO report debunks claims of future Ex-Im profitability. Ex-Im
    is projected to yield losses for taxpayers over the next
    decade.
        But taxpayers are unseen victims in other ways. The Ex-Im
    Bank transfers risk away from lenders and toward every single
    U.S. taxpayer that you represent. This creates what economists
    call ``moral hazard.'' Since well-connected lenders like
    CitiBank and JPMorgan bear almost no risk when a company
    defaults, they have less incentive to apply transaction
    oversight. They collect high fees on billion-dollar loans in
    good times, but normal taxpaying Americans must pick up the tab
    in bad times.
        Everyone in this room knows who will benefit if the Bank is
    reauthorized, because the beneficiaries are few enough in
    number that they can effectively organize and are wealthy
    enough to apply significant political pressure. But what about
    the forgotten firms, workers, taxpayers, and consumers whose
    voices are so easily drowned out by the corporate beneficiaries
    of government privilege? They should not matter less than
    Boeing, GE, and Caterpillar. This is your opportunity.
        Thank you.
        [The prepared statement of Dr. de Rugy can be found on page
    133 of the appendix.]
        Chairman Hensarling. Captain Moak, you are now recognized
    for your testimony.

    STATEMENT OF LEE MOAK, PRESIDENT, AIR LINE PILOTS ASSOCIATION,
                             INTERNATIONAL

        Captain Moak. Mr. Chairman, Ranking Member Waters, and
    members of the committee, I am Captain Lee Moak. I am the
    president of the Air Line Pilots Association (ALPA), and it is
    an honor to represent our more than 51,000 pilots.
        As a labor leader, I believe that airline employees should
    work with their companies to better our industry. ALPA's goal
    is to make the pie bigger, rather than focusing on getting a
    bigger share. Ensuring our company's ability to compete is
    essential in safeguarding U.S. jobs and our national economy.
        I don't believe in subsidies. If we are going to grow our
    economy, it must be based on fair competition. Fair competition
    is good. And on a level playing field, I am here to tell you,
    U.S. airlines can compete with anyone in the world.
        However, we compete in a global economic environment. And
    it is one thing to compete with foreign airlines that are
    subsidized by their government and I know I can't do anything
    about them, but it is an entirely different matter to compete
    with foreign airlines that are subsidized by our government. We
    need to do something about that.
        This is where the Export-Import Bank comes in. I don't take
    issue with the historic mission of the Bank, but the Bank has
    lost its way. Today, the Bank is being used to provide
    subsidies to foreign companies--companies that don't need the
    financing but use the advantage to undercut U.S. companies.
        Recently, the House of Representatives voted unanimously to
    require the U.S. DOT to simply follow the law when it considers
    foreign air carrier applications. Why does this matter? Because
    Norwegian Air Shuttle is attempting to subvert U.S. law and
    international policy to establish a flag-of-convenience
    operation. Norwegian has also applied for Ex-Im Bank financing
    that it does not need and that will hand it an unfair economic
    advantage which threatens U.S. airlines, U.S. jobs, the U.S.
    economy, and, I am going to tell you, U.S. national interests.
    We thank this committee for recognizing that unfair business
    practices such as NAI should be rejected.
        International flying is crucial for U.S. airlines. Tens of
    thousands of flight crews at the three largest U.S. carriers
    fly international operations, so our jobs are directly at risk
    from this competitive and inappropriate imbalance.
        Since the United States first implemented its open-skies
    policy, the U.S. share of international wide-body fleet has
    dropped from 45 percent to 17 percent, and the share is now
    forecast to be at 5 percent by 2025. And if that doesn't
    concern you, well, it should concern you.
        The threat affects airports such as Los Angeles
    International, where in 2013 American, Delta, and United flew
    only about 16 percent of the total international passengers.
    International jobs at mainline carriers are in jeopardy, but so
    are jobs at the small regional airports that are U.S.
    destinations for many of these international passengers.
        In 2013, the Ex-Im Bank approved $7.9 billion in financing
    for U.S.-made aircraft that will be operated by our foreign
    competitors. Ex-Im financing is not available to U.S. airlines,
    and, through this financing, the Bank is effectively providing
    a subsidy to foreign airlines that operate on routes that are,
    have been, and could be served by U.S. airlines.
        As a result, U.S. airlines have been forced to withdraw
    from or not enter key international routes. One example
    mentioned earlier is Air India. Using its Ex-Im Bank-subsidized
    airplanes, the state-owned airline flooded the U.S.-India
    market. And, in 2008, this excess capacity forced Delta Air
    Lines out of the New York-Mumbai route, displacing U.S. workers
    due to unfair competition. And that was U.S. jobs that we lost
    directly as a result of actions by the Ex-Im Bank.
        In 2012, the reauthorization, Congress rightly directed the
    Treasury Department to negotiate with the European Union to end
    wide-body aircraft financing. ALPA encourages this committee to
    seek a full accounting of that effort.
        And I am going to say, because I could go on and on, thank
    you, and I am looking forward to all your questions, every one
    of them. Thanks a lot.
        [The prepared statement of Captain Moak can be found on
    page 176 of the appendix.]
        Chairman Hensarling. Mr. Wilburn, you are now recognized
    for your testimony.

       STATEMENT OF STEVEN P. WILBURN, FOUNDER, CHIEF EXECUTIVE
                OFFICER, AND PRESIDENT, FIRMGREEN, INC.

        Mr. Wilburn. Thank you, Chairman Hensarling, Ranking Member
    Waters, and the honorable members of this committee, for
    allowing me the great honor to be here.
        Mr. Chairman, I do apologize. I am a disabled veteran, and
    I have post-traumatic stress disorder. I am not using that as
    an excuse, but I don't have a staff to write my reports or
    anything, or my written statement. So when I got that email
    from one of your staff members that said they had to have my
    statement right away, I was editing it in realtime on an
    airplane coming from California with WiFi.
        So I don't want to take up more of my time than that, but I
    just thought--hopefully, that clears the record. No one
    influences my statement. No one ever will influence my
    statement. I guarantee you that, sir.
        With that said--
        [applause.]
        Mr. Wilburn. And that is--I wasn't looking for that, but
    thank you.
        My name is Steve Wilburn, and I am the CEO of FirmGreen. I
    am married to Margaret Wilburn, the proud father of five
    children, nine grandchildren, and one great granddaughter. I
    won't bother with their names right now because it would take
    up too much of my time, but I love them.
        I work hard for them. I built this business for my family
    first and my employees second. My employees are treated like
    family. We are a small company. I want to put a face on small
    business today, if I can, okay? It is an awesome burden,
    because there are thousands of small businesses out there. I
    don't have the authority to speak for all of them; I can only
    give you my story.
        And Semper Fi to you, sir, and thank you for your service.
        I started pursuing the FirmGreen dream 10 years ago. I am a
    firm believer in the Lord, my God. And serving as a Marine in
    Vietnam, I fought for equal rights for all, for free trade,
    limited government. But I do not share, nor do I understand,
    the rabid antigovernment animus that seems to be motivating the
    current attacks on the Export-Import Bank. Government, in my
    view, is simply people working collectively to accomplish
    things for the greater good that can't be done by individuals
    alone. In combat, I could not have survived without my fellow
    Marines. We cooperated. That is the way I thought we acted in
    America.
        I firmly believe that the Ex-Im Bank delivers enormous
    value to Main Street America. It provides small businesses like
    mine with the opportunity to grow in a prospering commerce
    without borders. We are not limited to domestic markets; we
    dare to reach out to the world's markets.
        For example, in my award-winning biogas project in Brazil,
    my client asked me how we intended to present our ECA-financed
    proposal for the project. I was embarrassed. I had to ask him
    what ``ECA'' meant. They laughed and said, that meant the
    export credit agency, your Ex-Im Bank. That is how I was
    introduced to the concept of Ex-Im Bank support. I was that
    naive.
        I was competing with Air Liquide and Linde Corporations,
    billion-dollar companies, much more prepared for that type of
    discussion and finance plan than me. But my clients and I went
    to the Export-Import Bank of the United States, my clients went
    through a very rigorous underwriting, and, thankfully, they
    were approved for that financing that I could not obtain
    through my private Bank. At that time, it was Wells Fargo, and
    they just basically told me that it didn't meet their
    underwriting criteria.
        I am going to deviate from my prepared remarks a bit more
    and just say that, due to the air of uncertainty swirling
    around the reauthorization, in large part, I think, by harmful
    words uttered by the Bank's opponents in an orchestrated,
    unprecedented, nonstop public smear campaign, I feel I lost a
    valuable contract in the Philippines.
        Words do have consequences, especially when they are
    uttered by people in power and position. I am a small man. I
    cannot combat the machines that are out there saying what they
    are saying. I am not a crony capitalist. I don't receive any
    welfare, corporate welfare, whatever you want to call it. We
    work hard.
        As a result of losing the memorandum of understanding--
    because the Korean Bank came in with my Korean competitor who
    had lost to me, and they basically came up and said, ``The Bank
    is not going to be reauthorized, he is not going to get to
    deal''--now my employees, including Ms. Dena Elbayoumy, my
    general counsel, are on furlough. We are scrambling.
        Please, words have consequences. Be careful.
        I will yield back the balance of my time.
        [The prepared statement of Mr. Wilburn can be found on page
    196 of the appendix.]
        Chairman Hensarling. Thank you--
        Ms. Waters. Mr. Chairman, if the gentleman needs extra
    time, I would request the same time that was allotted to Ms. de
    Rugy when she went over her 5 minutes.
        Do you need extra time, Mr. Wilburn?
        Mr. Wilburn. Not at this time. Hopefully I will have some
    adequate time in my answers. Thank you so much.
        Ms. Waters. Thank you very much.
        Chairman Hensarling. The Chair yields himself 5 minutes for
    questions.
        First, Mr. Wilburn, thank you very much for your service to
    your country, as I thank Captain Moak, as well.
        I used to be, prior to coming to Congress, an officer in a
    green energy company, myself. I don't know that much about your
    particular company, but it is a subject in which I am highly
    interested.
        But, Mr. Wilburn, I am still a little curious. I understand
    that you were on a flight, I guess, when you were sending your
    testimony. But I guess my first question is, was it simply a
    clerical mistake, or did you change your mind on whether or not
    TARP regulations in Dodd-Frank played a role in failing to
    finance the Brazilian company that sought your product? So is
    it a clerical error, or did you change your mind about
    including that in the testimony?
        Mr. Wilburn. No, it is not a clerical error. I didn't have
    exactly all the facts in hand.
        Chairman Hensarling. Okay.
        Mr. Wilburn. You will see, the rest of my written
    statement, I think it speaks to some of those issues
    surrounding that--
        Chairman Hensarling. Okay.
        Mr. Wilburn, you heard the testimony of others on this
    panel. You were very passionate with your testimony, but,
    frankly, so was Captain Moak, and Mr. Anderson, as well.
        I have spoken to people, particularly those, for example,
    at Cliffs Natural Resources, who said that they are having to
    cut hours for working people, single parents.
        And so I guess my question is one of fairness. Perhaps Ex-
    Im is--I have no doubt Ex-Im helps your business, but do you
    acknowledge that it can hurt other businesses?
        Mr. Wilburn. I can't speak to hurting other businesses
    directly unless I had a more specific example, Mr. Chairman,
    but I can say this, that it is not my intent to harm anyone.
    But if I don't compete through the Export-Import Bank, I know
    who is going to be harmed. Because my competitors in foreign
    countries, financed by their Banks, will get those deals.
        And I believe the same would happen to the aircraft
    industry. If Boeing doesn't sell those aircraft, I think--
        Chairman Hensarling. Let me, then, ask you this question.
    ``Fairness'' is a very subjective term, I understand that. But
    we seem to have a Federal policy that says, if you create a
    product and you want to sell it to foreigners, if you want to
    sell it to the Chinese, the Federal Government will step in and
    subsidize you, but if you want to sell your product to
    hardworking Americans, then, no, no subsidies for you.
        And so, I am thinking about small businesses in my own
    district. At Annexus Personnel and Business Services in
    Mesquite, the owner said: ``My mother and stepfather opened up
    the business without any government subsidies. They used their
    own retirement, 401(k), other resources to pay for rent. We had
    to go to auctions to buy office furniture. Small businesses
    like ours can't rely on the government.''
        So, again, I guess, by definition, you received the
    subsidy, you believe it is necessary to your business model. I
    accept that. But how is that fair to the other millions and
    millions of small businesses who sell to Americans but don't
    get their products subsidized by the Federal Government?
        Mr. Wilburn. Sir, I would love to compete on a fair basis
    in America with my green technology to take biogas into
    methane. I don't get a subsidy. I take exception to your
    remark. My point is that 15 percent--
        Chairman Hensarling. Does Ex-Im not subsidize the financing
    for your product?
        Mr. Wilburn. I don't believe that I am subsidized.
        Chairman Hensarling. Okay.
        Mr. Wilburn. I don't believe that at all--
        Chairman Hensarling. Okay.
        Mr. Wilburn. --sir. Let me speak to that point, if I may,
    Mr. Chairman, with all due respect. And I do respect you from
    the bottom of my heart.
        My point is that--you asked a question. I can't sell my
    technology here because there are barriers to entry to the
    market, and the barrier to entry to the market is that the oil
    and gas industry is subsidized with a 15-percent oil and gas
    depletion allowance. I don't get that, as a biogas producer. I
    can't put my biogas into the pipelines in California that is a
    pipeline equivalent because--
        Chairman Hensarling. Mr. Wilburn, we would be happy to work
    with you and try to make you--
        Mr. Wilburn. Well--
        Chairman Hensarling. --so much more competitive in--
        Mr. Wilburn. --I am trying to be responsive, Mr. Chairman.
        Chairman Hensarling. --that area. I have limited time.
        Dr. de Rugy, the proponents of keeping Ex-Im as the status
    quo have painted an apocalyptic vision should the Bank fail to
    be reauthorized. Is that an accurate vision, in your opinion?
    And if not, why not?
        Ms. de Rugy. I don't think it is an accurate version, Mr.
    Chairman. For one thing, as I said in my testimony, less than 2
    percent of U.S. exports are backed by Ex-Im, and that doesn't
    consider the possibility that these exports would happen
    independently of the existence, absent the Bank.
        More importantly, we have to think about some of what the
    other witnesses have said. So, for instance, a large part of
    the activity of the Bank is to subsidize big companies, Boeing,
    in particular.
        In the loan guarantee, 66 percent of the activity of loan
    guarantees through Ex-Im benefits Boeing. Boeing is selling
    planes to companies that could get access to credit, as we have
    heard, without the loan guaranteed.
        More importantly, Boeing has a really important and wealthy
    financing arm and it could do a lot of things itself, and it
    does.
        Chairman Hensarling. My time has expired.
        The Chair now recognizes the ranking member.
        Ms. Waters. Thank you very much, Mr. Chairman.
        I would like to explain to those who are wondering why
    there are three individuals presenting who all seem to be
    opposed to the reauthorization--let me explain the rules. These
    three individuals were invited by the opposite side of the
    aisle and we only get one witness, and that is Mr. Wilburn, who
    is here.
        So I don't want you to think that somehow these witnesses
    were objectively chosen and that there are more people against
    reauthorization than for reauthorization. We just only get one
    witness to come here today.
        Having said that, I would like to enter this letter into
    the record. This is a letter that our witness told us about
    where he lost a multi-million-dollar contract because of
    uncertainty regarding the future of Ex-Im.
        Chairman Hensarling. Without objection, it is so ordered.
        Ms. Waters. The letter reads, ``Dear Mr. Wilburn, In view
    of the uncertainty of the reauthorization of the Ex-Im Bank and
    project finance structure you propose have become problematic,
    we have made the decision in May this year not to proceed with
    your project offering. Our previous partner developer has
    provided us assurance of the certainty of obtaining
    satisfactory finance from the Export-Import Bank of Korea for
    our carbon biomass waste-to-energy project. With previous
    discussions with you, we had the impression that your company,
    FirmGreen, can provide the best technology for our project, but
    without terms similar to that being offered by the Ex-Im Bank
    of Korea, it would be impossible for our company to conclude a
    transaction.''
        Thank you for entering that.
        I have other letters that I would like to read and share
    with you.
        This is from your district, Mr. Chairman, from Mr. Gabriel
    Ojeda, who is the president of the Fritz-Pak Corporation. I
    will read an excerpt:
        ``During the past 5 years, we have grown our international
    sales from 15 percent to over 35 percent of our business. We
    now have major trading partners in over 30 different countries
    including Brazil, Russia, India, and Taiwan. Most recently, we
    exhibited our products at the BAUMA International Trade Fair in
    Munich, Germany. In addition, our products were used in the
    construction of the Sochi Winter Olympics in Russia.
        ``So what is Fritz-Pak Corporation today? We are an
    American manufacturer of the best concrete admixtures in the
    world, and we sell them as far north as Yellowknife, Canada,
    and as far south as Wellington, New Zealand. We may be small,
    but we think big. In an age where everything seems to be made
    someplace else, we are thriving here in the United States. And
    it is in no small part due to the services provided by Ex-Im
    Bank.''
        Mr. Neugebauer, we also have a letter from your district,
    from Air Tractor, Inc., and I will read an excerpt:
        ``As a small business that employs 265 people, 25 percent
    of those employees are supported by the Ex-Im Bank. We use Ex-
    Im Bank to create jobs in rural America. Ex-Im Bank levels the
    playing field so that small businesses can grow.
        ``Ex-Im Bank is a self-sustaining operation that has a
    solid history of making money for U.S. taxpayers. It has
    created millions of new jobs in the United States.
    Reauthorization of the Ex-Im Bank is a simple issue. Ex-Im
    creates and sustains jobs, strengthens the brand of American-
    made goods, and reduces our national deficit. If Ex-Im Bank
    ceases to exist, the deficit will increase, and we will lose
    jobs in Olney, Texas.''
        Mr. Chairman and Members, you are going to hear a lot from
    small business here today because we have received any number
    of letters from all over America, many of them from small
    businesses talking about the importance of the Ex-Im Bank.
        Jobs, jobs, jobs. As was said earlier, we all talk about
    jobs. We have been through a recession. We almost went into a
    Depression. We still have high unemployment in many of our
    areas, and we are all saying to our constituents that we are
    going to do everything that we can to provide jobs.
        But when we look at how we lost our manufacturing base in
    this country and how Ex-Im is helping us to re-create and
    develop and sustain manufacturing, which creates jobs, we say
    that is what we want. But here we are talking about not
    reauthorizing Ex-Im, which is responsible for these jobs and
    job creation.
        And so I submit to you these letters. I would ask my
    colleagues here on this side of the aisle--if you have letters
    or information from your businesses in your district, now is
    the time to share them.
        And, with that, Mr. Chairman, I won't use up all of the
    time that you allotted me because you used extra time. I just
    think the message is clear. Jobs, jobs, jobs.
        I yield back the balance of my time.
        Chairman Hensarling. The Chair now recognizes the gentleman
    from California, Mr. Campbell, chairman of our Monetary Policy
    Subcommittee.
        Mr. Campbell. Thank you, Mr. Chairman.
        You know, I sat in this very room however many years ago it
    was--I guess 3 or 4 or whatever--when the Ex-Im Bank was
    reauthorized for its current reauthorization, and there were
    about 6 people sitting out there.
        The vast majority of the American people never heard of the
    Ex-Im Bank. This American had never heard of the Ex-Im Bank
    before being elected to Congress.
        I doubt that the Ex-Im Bank's footprint on the American
    economy has grown or contracted since that time. But, yet, this
    room is full, and I understand there is an anteroom that is
    also full.
        And it seems that the debate over this Bank has become a
    proxy for a bunch of other things. But amongst the things that
    it has become a proxy for, in my view, is how we operate around
    here and how we operate in this place.
        And it seems there are only two options that are being
    discussed. One is the complete elimination of the Ex-Im Bank,
    and the other is the complete reauthorization of it as it is.
        But you know what? I think there is a third option. I think
    there is another way to do this that doesn't involve complete
    elimination and doesn't involve assuming that the Bank has
    nothing wrong with it and that it is absolutely perfect the way
    it is.
        Some months ago I formed--as the subcommittee chairman of
    the relevant subcommittee, I formed a working group to work on
    reforms for the Ex-Im Bank.
        Regrettably, none of my friends on the other side of the
    aisle--that is my fault, not theirs--were in that working
    group. But amongst the Republicans on our side of the aisle, we
    had a broad spectrum of Republicans.
        It included people who were and probably are still opposed
    to the Ex-Im Bank and its reauthorization and others who came
    in favoring it, and we did develop a work product, which until
    now, I have not released to anyone.
        But, Mr. Chairman, I have a discussion draft. This is the
    work product of that working group, which I would request be
    entered into the record.
        Chairman Hensarling. Without objection, it is so ordered.
        Mr. Campbell. And for those of you out there, this will be
    up on my Web site very soon, and I will be issuing a press
    release on the same as well.
        Now, this is a discussion draft. It is in bill form. It has
    about 20 different reforms to the Ex-Im Bank. Certainly I
    don't, and I don't believe the members of the working group,
    think that this is the final answer or the only way or
    whatever.
        But it is an idea and I believe an idea that we need to
    have not only about this subject, but perhaps about other
    subjects as well, where we need to--rather than we are going to
    do this over here or this over here, that perhaps there is
    something where we can agree that there are some problems we
    need to fix.
        But maybe we can fix them and maybe this thing can do what
    it was originally intended to do, what we all would like it to
    do, which is support American jobs and American export and
    enable us to compete against all those other export-import
    banks around the world and do so in a more objective, a more--
    just a better manner than it is right now.
        And in my last little bit of time, Mr. Anderson, I heard
    you say that you felt the Bank should be reformed. I didn't
    hear you say that it should be eliminated. Is that correct?
        Mr. Anderson. That is correct. And our position, by the
    way, the last time around when we were here, the reason there
    were only 6 people in the room, we have been working on this
    for 5 years because it has hurt us. And we got reforms and they
    were ignored.
        So that is why our position the second time around is, if
    it is not reformed, it needs to be abolished. Because we got
    all the reforms, and they were totally ignored. I can read you
    the language, but it is very--the language was strong, and the
    Bank has totally ignored it.
        Mr. Campbell. Okay. Mr. Anderson--and I don't know whether
    the reforms--this working group, we didn't have you, we didn't
    have Boeing, we didn't have anybody in the room. It was just us
    working on what we felt was right.
        Mr. Anderson. That was probably good.
        Mr. Campbell. And so--and what we felt was right. And we
    did something which we believe begins to address your issue. It
    doesn't necessarily eliminate your issue, but we believe it
    begins to address it. But that is what we tried to do.
        Mr. Wilburn, just picking someone on the other side of the
    issue, do you have--you obviously are supportive of the Bank.
        Do you have any objection to looking at things we can do to
    reduce the taxpayer risk, but perhaps continue its mission?
        Mr. Wilburn. Helping businesses compete, whether they are
    small or large on the global stage, I am all for that. I am a
    free market guy.
        Basically, I agree with 95 percent of what has been said
    here today. So, I applaud the Delta chairman and the other
    Members for stating that they don't want to abolish the Bank.
        Mr. Campbell. Thank you. I yield back.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentlelady from New York, Mrs.
    Maloney, ranking member of our Capital Markets Subcommittee.
        Mrs. Maloney. I thank the chairman and all the panelists
    and the ranking member.
        I believe we live in a very inconvenient truth right now,
    especially in global capitalism, and as much as we like to
    think that American businesses may not need any help, but what
    they are competing against is that total support, in some
    cases, subsidy, in some cases, is even owned by the foreign
    government.
        And if we were not, we would be unilaterally disarming in
    the international stage, putting American jobs and exporters at
    risk.
        Oftentimes what we hear in Congress is, ``We are not
    exporting enough. Why isn't America exporting enough?''
        Our number one exporter is Boeing. Boeing exports a lot of
    planes, but they are competing against Airbus that is
    subsidized, financed, and even owned by a government.
        And a lot of the areas where we are exporting and
    competing, the subsidies from their governments are far deeper
    and stronger than ours.
        I fail to understand why we would in any way want to
    disrupt an agency that is helping export American goods, create
    American jobs, and is not costing taxpayers any money. I think
    this is something that we should expand.
        I was at one export meeting where, literally, a company in
    New York was exporting clothing to China. I thought that was a
    great thing. Why in the world would I want to stop an agency
    that is helping them to do that?
        Therefore, I ask unanimous consent to place in the record a
    document that has been signed by 865 organizations and
    businesses in America supporting the Ex-Im Bank, including the
    Chamber of Commerce and, also, the National Association of
    Manufacturers.
        Chairman Hensarling. Without objection, it is so ordered.
        Mrs. Maloney. I have to think that 865 organizations and
    businesses can't be wrong, I tell you.
        And I just wanted to ask Mr. Wilburn: The opponents of the
    Bank claim that trade finance should be left to the private
    sector. What has been your experience with finding commercial
    lenders willing to extend credit to foreign buyers who want to
    purchase your company's services?
        Mr. Wilburn. Recently, I just obtained some private finance
    for my three works in progress in Brazil. The problem is that I
    had to pledge my house, my intellectual property, my inventory,
    everything I own.
        I am a risk-taker. I am willing to do that. But I can only
    do that once, because once I pledge that collateral for those
    three, I can't take care of the next six, seven that we are
    working on.
        And if there are those sources out there and the committee
    members know them, the chairman or anybody--or anybody hearing
    these words today--if you know these sources of private
    finance, please get in contact with me and the other small
    business people. I know they desperately would like to have
    that as a solution.
        Thank you.
        Mrs. Maloney. I have all these stacks of letters from
    businesses in support of the Ex-Im Bank. I would also like to
    ask unanimous consent to put it in the record and, also, one
    from labor. Labor is supporting it on the basis that this
    creates jobs in America.
        I ask unanimous consent to place this in the record.
        Chairman Hensarling. Without objection, it is so ordered.
        Mrs. Maloney. And in response to Mr. Anderson, I am a big
    fan of Delta. I fly it about once a week. I love the airline.
        Mr. Anderson. Thank you.
        Mrs. Maloney. And I was pleased to vote for the support for
    the bailout by the Federal Government after September 11th.
        I think we voted to transfer the pilots' pension
    obligations to the Federal Pension Benefit Corporation. So, we
    have provided that help. And that is a subsidy, I would say,
    and we needed to do that. And I supported it. I voted for it.
        And I think, also, that to this day, we have passed bills
    that restrict and prohibit foreign air carriers from competing
    with Delta by flying routes within the United States, that we
    are trying, in our own way, to help the private sector compete
    and win in a world economy and provide the wonderful service
    that you do.
        But I, for one, am going to be writing Boeing and asking
    them to write in their own words whether they think the Ex-Im
    Bank has been helpful in allowing them to compete and win and
    who are their competitors and compare how much they are
    subsidized, if they are, to their foreign competitors in Asia
    and in Europe and, also, to GE and to every small company that
    is getting any help from the Ex-Im Bank.
        And all of our Members should do the same. And let's create
    our own--
        Chairman Hensarling. The time of the gentlelady has
    expired.
        Mrs. Maloney. --report on what we are hearing from American
    workers and businesses.
        Chairman Hensarling. The Chair now recognizes the gentleman
    from Alabama, the chairman emeritus of the committee, Mr.
    Bachus, for 5 minutes.
        Mr. Bachus. I thank the chairman.
        And I would say to all Members, Mr. Anderson, what he is
    saying is identical to what he and the Air Line Pilots
    Association and the union representatives were saying when we
    reauthorized this bill in May of 2012.
        And I met with Chairman Hochberg in March. In fact, several
    Members on both sides expressed the same concern that Mr.
    Anderson had. And I was told at that time that they would sit
    down with Delta, and I was also told that Boeing would take a
    look at it.
        We then put in the language of the reauthorization,
    directing the Treasury Secretary to initiate and pursue
    multilateral negotiations for reducing and eliminating
    government export subsidies for aircraft.
        We specifically told them that we were concerned about
    wide-body aircraft, two companies that had government-owned
    subsidies, rich companies, as Mr. Anderson said, and everybody
    expressed a great sensitivity to this. And we documented losses
    by American air carriers on overseas routes.
        And that is what we are talking about. We are not talking
    about routes within the United States. That has nothing to do
    with this. Our American Airlines used to lead the world in
    these overseas routes.
        From the time that we reauthorize this, which, really, I
    say it is strong language, but it turned out it wasn't that
    strong because it didn't forbid these sales. And I could tell
    you that they are going to--as long as we don't just forbid
    them, they are going to have them.
        Because when Mr. Hochberg met with my office--and I am
    going to later--when he testifies, I am going to show you my
    letter to him and his response, which was a nonresponse. We
    have always gotten those.
        Members also expressed to me some great concern on the
    Australian loan, but there were Members on both sides. I wrote
    Chairman Hochberg about that on behalf of several Members on
    August the 2nd. We then inquired about the status of our
    letter, and we were told they were going to respond.
        On December the 20th, I woke up to read in The Wall Street
    Journal that the loan had been approved after my August letter.
    No response.
        Finally, on February the 19th, 2 months after the loan was
    approved and announced, and the iron ore industry, the miners;
    there were all sorts of union groups that were expressing
    concern--he wrote me back and he said, ``We approved it.''
        In my letter, I asked him to get with us and we wanted--
    there was no detailed analysis of the financing request or how
    it would affect U.S. jobs, and I asked him to share that
    information with me.
        And I know Mr. Hochberg is here. I look forward to maybe
    some explanation. But no one from Ex-Im gave us any of this
    information.
        They didn't even give it to us--he just said, if I have
    questions, I should call him. This is for a loan that had
    already been made.
        I had what I considered a commitment from Ex-Im Bank and so
    did Mr. Anderson on a directed prohibition that was costing
    probably 10,000 U.S. jobs. These jobs have been being
    eliminated since 1978, when they started doing this.
        There are estimates that this one mine produces more iron
    ore than our entire U.S. production, and it shut down iron ore
    production in this country as a result, a lot of it.
        But we got a lot of promises and then we reauthorized and
    then--and even the Treasury Department, when I asked them--and
    I will say, if I could have 30 seconds, I asked them, ``What
    are you going to do about these negotiations?'', they basically
    told us, ``What are you going to do? Are you negotiating?''
    ``Well, we formed a talking group.'' And they basically just
    blew us off, the staff.
        Thank you, Mr. Chairman.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from California, Mr.
    Sherman.
        Mr. Sherman. The ranking member notes that only Mr. Wilburn
    here is outnumbered three to one, but I will point out his
    arguments are 3 times as good; and, therefore, I think it is
    fair.
        It has been noted that Ex-Im Bank is financing the sale of
    airplanes to airlines that could get credit from somewhere
    else. That is entirely true.
        Every one of those airlines could get credit from the
    export credit agencies of Germany and France. There is only one
    catch. They would have to buy an Airbus.
        So the question here is not whether the buyer could make
    the purchase. The question here is whether the buyer will
    purchase the U.S.-made product.
        And we are told that only 2 percent of American exports are
    at stake here. America is running the largest trade deficit in
    the history of the world. We can't afford to give up 2 percent
    of our exports. We can't afford to give up half a percent of
    our exports.
        We are told that there has been a scandal involving some
    officers of Ex-Im Bank. There has also been a scandal involving
    officers of the United States Navy dealing with the repair of
    our ships in the Pacific. Yet, no one is proposing that we
    deauthorize the United States Navy.
        I look forward to working, hopefully, with the chairman,
    and perhaps the gentleman from California, to improve Ex-Im
    because I don't think our position is that everything is
    perfect and none of these criticisms deserve any attention.
        One of those reforms would be to have language and even
    more clear language to say that they can't make a loan or
    guarantee a loan without looking at the total effect on U.S.
    jobs.
        One particular area is airplanes. We are supposed to have
    an Ex-Im Bank to finance exports. If you're talking about a
    power plant being built in India, the turbine is an export. If
    the power plant is in Indiana, it is not an export. It doesn't
    matter whether the company that owns the plant is in Germany or
    the United States or India.
        Planes are different. They fly. And whether a plane has
    been exported or not doesn't or shouldn't depend upon the
    headquarter's building of the buyer. It should depend upon
    where the airplane will be used.
        There are two approaches we could take.
        One is to allow U.S. airlines to consider an export and,
    therefore, get Ex-Im financing on a plane that they are going
    to use in international routes in competition with foreign
    airlines that are also eligible for Ex-Im financing, should
    they buy American planes.
        The second approach is to deny Ex-Im financing to those
    foreign airlines when they are buying a plane that is going to
    be used to fly to and from the United States.
        But these are things to explore. I think to throw out 2
    percent of our total exports because of one issue affecting
    flights to Asia and the Middle East would be a mistake.
        Now, Mr. Anderson, you have financial statements that you
    send to shareholders and maybe you really have a choice. You
    could use GAAP accounting--generally accepted accounting
    principles--or some have suggested that we use fairytale-value
    accounting.
        When you produce a P&L statement, one of the biggest items
    on it is your interest expense. Do you report the interest
    expense you have based on the deals that you have made with
    your Banks and bondholders or do you instead report the
    interest expense you would have had if you lived in a fair
    world?
        When I read your income statement, do I see as interest
    expense what you are actually going to pay your lenders or some
    notion of fairness as to what you would be paying if only the
    world were fair? It is an easy question.
        Mr. Anderson. No, it is not.
        Generally accepted accounting principles have various
    methods for how you account for different--
        Mr. Sherman. Do any of them involve you reporting as your
    interest expense what the interest expense would be in a fair
    world?
        Mr. Anderson. Yes. In some instances, in the case of a
    merger where you have to go back to fresh-start accounting--
        Mr. Sherman. Okay. In some limited--
        Mr. Anderson. No. It is not limited. We have a--
        Mr. Sherman. You just had a merger.
        Mr. Anderson. We have a lot of interest expense on our
    balance sheet that is not the actual interest we pay because
    the generally accepted accounting principles require you to
    market-to-market.
        Mr. Sherman. That may be. But you don't do it and say, in a
    fair world, interest rates would be the same for you as they
    are for the Emirates.
        You don't say Pizza Hut should report the same interest
    cost as the local pizzeria or the Pellicola Pizzeria reports
    the same interest cost as Pizza Hut.
        You report--you just had a merger. I know you are an expert
    on merger accounting--or at least you have had a big experience
    with it.
        In the ordinary case and without a merger--I don't think
    Ex-Im Bank is going to do a merger with its German competitor--
    you report interest expense based on the deal you negotiated,
    not based on an imaginary fair world.
        Mr. Anderson. Look, I am not trying to obfuscate.
        In some instances, you do. In some instances, you have to
    come to a fair accounting standard. I wish it were that simple.
        Mr. Sherman. None of those reflect a really fair world.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentlelady from West Virginia,
    Mrs. Capito, chairwoman of our Financial Institutions
    Subcommittee.
        Mrs. Capito. Thank you, Mr. Chairman.
        Mr. Anderson, how many employees does Delta Air Lines have
    in the United States?
        Mr. Anderson. We have about 78,000 employees in the United
    States and probably a quarter of a million retirees.
        Mrs. Capito. Is that up or down or pretty steady?
        Mr. Anderson. Actually, we are hiring quite a bit right
    now. We are hiring about 600 pilots a year and over 1,000
    flight attendants a year. So we are growing our employment
    without any government aid, by the way.
        Mrs. Capito. And you made a mention in your comments that
    with the Ex-Im Bank's behavior in financing wide-bodies around
    the world, you kind of quantified it as to maybe 1,000 jobs it
    might have cost you.
        Could you expand on that a little bit?
        Mr. Anderson. Well, that was a specific instance of Air
    India.
        And when I hear the notion of this arms battle, what the
    Ex-Im is doing is putting our employees in the crossfire
    because it is U.S. airline jobs that are lost when heavily
    subsidized foreign-owned airlines are able to then also get a
    subsidy from our Treasury.
        And it has reduced the growth of our company. This is the
    first year we will actually have any real growth in the last 5
    years. And we see it in the marketplace by the entry of
    carriers with Ex-Im Bank finance below-market financing.
        Mrs. Capito. So the argument to either relook and reshape,
    like Mr. Campbell is saying, or deauthorize, as I was--it is
    small business jobs, but it is businesses that have 75,000
    employees at the same time.
        Mr. Anderson. Exactly. And the point is I don't understand
    why we don't have the same view about jobs that are hurt by the
    Bank as we do about small business jobs. These are all really
    important jobs.
        And the small business part of what Ex-Im does is actually
    really small and is pretty new to the Bank because, after the
    last reauthorization fight, the Bank went into a really
    aggressive marketing mode to small business so that it would
    have constituents in every congressional district.
        Mrs. Capito. Right.
        Mr. Anderson. Let's set that aside.
        The real issue is 90 percent of this goes to the top 10
    biggest companies in the United States that are well-funded and
    well-capitalized. And that is what we are focused on.
        Mrs. Capito. Thank you.
        Mr. Wilburn, I don't know if you remember, but in my
    opening comments I commented about the Administration--the Ex-
    Im Bank's policy of not funding coal-fired power facilities,
    including coal technologies, except in developing countries.
        You are a green energy company developer, and I love green
    energy jobs. We love our coal jobs. They are just as important
    to us as a green energy job is to you.
        Do you think, in thinking about this, that it is proper for
    an entity such as the Ex-Im Bank, because it has a certain
    environmental belief, to disenfranchise one American job over,
    say, one of the jobs in your company as a green energy company?
    Don't you think those jobs should be treated equally if we are
    going to be looking at financing exporting across the globe?
        Mr. Wilburn. Let me respond that, basically, I am very
    supportive of technologies that are good for the environment,
    and I think the coal industry--particularly my family has a
    background in that and were affected by it.
        I think the point here is, though, that the Bank is looking
    at an environmental policy. Okay? And I am not an expert on it.
    I serve on the advisory committee of the Ex-Im Bank on the
    environmental and renewable energy committee.
        And what I have tried to advise them of is to be cautious
    when we are taking a look at the environmental impact, make
    sure they have the data, make sure that they have the studies
    and the reports; don't just make arbitrary decisions.
        And I think, for the most part, they have been listening to
    me, but I understand your argument. And all I can say is that I
    want an environmentally sound policy by Ex-Im Bank that creates
    and protects American jobs.
        Mrs. Capito. Thank you.
        I looked at your list of your vendors and you are in and
    around in the State of Virginia. You just need to slip over the
    border there and bring a few over to West Virginia. Importing
    those jobs into West Virginia will be--
        Mr. Wilburn. Give me the names and the addresses. I will be
    happy to talk to them.
        Mrs. Capito. All right. Thank you so much.
        Chairman Hensarling. The gentlelady yields back.
        The Chair now recognizes the gentleman from New York, Mr.
    Meeks, ranking member of our Financial Institutions
    Subcommittee, for 5 minutes.
        Mr. Meeks. Thank you, Mr. Chairman.
        And I thank the ranking member.
        First, I want to just say thank you to Mr. Anderson. Delta
    Air Lines is one of the largest employers in our district, and
    we really appreciate what you have been doing at JFK airport,
    the expansion there and the folks that you have been adding.
    So, we want to thank you for that.
        And, as a result, I have made sure that I was reading your
    testimony very, very carefully because we do want to create
    jobs and I think that is tremendously important.
        But in looking at it, I just wanted to double-check,
    because I would just like to ask first outright, and I will
    start--I think I know where Mr. Wilburn is in reference to the
    reauthorization of Ex-Im.
        But I just was wondering, to, first, Captain Moak, do you
    think that we should do away with Ex-Im or should Ex-Im be
    reauthorized? I just want to know ``yes'' or ``no'' before we
    get into--what do you think about Ex-Im?
        Captain Moak. First, I want to thank the Congressman. I fly
    out of Kennedy. You have done an incredible job up there.
        I have been there since 1994, flying a Boeing airplane 767.
    Great airplane. I want to thank you and what you have done for
    my members. We have thousands of our members up there.
        The Ex-Im Bank needs to be reformed because we have lost
    jobs at John F. Kennedy Airport because of actions by the Ex-Im
    Bank. It needs to be reformed, period.
        Mr. Meeks. So do you think that it would be okay if Ex-Im
    was not reauthorizing all of the jobs that are created by Ex-
    Im?
        I know we have to figure this out, but Ex-Im was not there.
    Because one of the things that concerns me--I am one of the
    largest supporters of trade. And the reason why I support trade
    is because I want to export our goods to other places.
        And then, when I hear an example--for example--and trying
    to level the playing field. There is an example that I know
    took place in 2011, for example.
        Brazil had the largest landline telephone company and the
    Republic chose to purchase the network equipment with China's
    technology because of access to China Development Bank's $30
    billion credit line, which came with a 2-year grace period on
    payments and an interest rate of 2 percentage points below the
    market rate.
        Now, that is just one example that I could give on how
    China has used its Banks to win new exports. This is our
    competition. And there are hundreds of other examples which I
    could give from all over the world.
        So my concern is and--to all of you--so wouldn't you agree
    that several industries and export jobs throughout, which would
    devastate America?
        I wish I could just say I am focused only on JFK, but I
    have to think bigger than JFK in this one.
        I have to think about how I am a Member of the United
    States Congress who represents--I represent my district, but,
    also, my first--when I took--swore in is the overall benefit.
        And sometimes you have to figure out on a balance that--
    wouldn't we be really jeopardizing export jobs without Ex-Im
    Bank?
        Captain Moak. Sir, just to follow, we are here because we
    need your help to level the playing field. Right now, we are
    not able to compete, and we are losing jobs out of Kennedy. So
    we need leadership to reform the Bank. The Bank hasn't followed
    the will of the Congress.
        Mr. Meeks. But what I am getting at is this--and, as I
    said--and Mr. Anderson, I will go to you, also.
        See, because what I have to weigh here is the overwhelming
    balance of companies that come to me because I am a pro-trader
    that say this is absolutely important to them.
        And if I would show you the number of companies that have
    come to me and the jobs that they represent--because it
    absolutely would be devastating to them compared to one company
    that I like who have done something like, I have to say good,
    but compared to one company, then I have a decision to make, as
    a Member of Congress, especially me because I have to defend my
    own record of wanting to export things all over the world and
    making it easier so we can compete.
        And when I look at, for example--I know that there are
    other ECAs, almost upwards of 60 export credit agencies (ECAs)
    that exist in all of the other foreign countries, many of whom
    who do not even comply with international export credit
    standards established by OECD, and that such countries as China
    and Brazil and India offer below-market and concessionary
    financing alternatives.
        So I would think that--wouldn't you agree that is what we
    need to look at so we can level those playing fields and, if we
    don't level those, then we are putting at risk hundreds of
    thousands of American jobs because we cannot export to these
    other countries because there is no level playing field here?
        I see I am out of time.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from New Jersey, Mr.
    Garrett, chairman of our Capital Markets Subcommittee.
        Mr. Garrett. And I thank the chairman.
        There are a number of different areas that we can talk
    about here, and I think the gentlelady to the right of me may
    go into this in more detail.
        But just as a beginning, I will just do the highlight, and
    that is the fact that although there is a statement from the
    other side of the aisle saying that Ex-Im has never lost money,
    I think we have some documents to show that has not been the
    case over its somewhat sordid history of mismanagement, severe
    losses, and a past history of having to have been bailed out
    and recapitalized by the American taxpayer in the past.
        But I will let the gentlelady address that, if she chooses,
    later on.
        Secondly, to a technical point, Mr. Anderson, with regard
    to accounting and all those sort of things, GAAP accounting,
    under FASB rules--I think it is 157 because we have been in
    this on other hearings before. Fair value accounting. Right?
    That is part and parcel of your process, isn't it?
        Mr. Anderson. Absolutely. I think most companies in America
    would love to have the government's accounting system.
        Mr. Garrett. Yes, exactly.
        The next point is on reform. And maybe I will throw it back
    to Mr. Anderson or anybody else.
        So, the idea is maybe we can just reform this. But as some
    of you indicated before, we have been down this road before. We
    reformed it before, passed legislation just a few years ago. We
    instructed Treasury to do something, and we instructed Ex-Im to
    do something.
        We instructed Treasury to try to enter into new
    negotiations and we tried agreements and we tried to have Ex-Im
    do cost-benefit analysis.
        Neither of those things were completed. Correct? You are
    nodding your--
        Mr. Anderson. You were totally ignored.
        Mr. Garrett. Okay. So the question I have is: Before I
    think about re-re-re-re-reforming something, if we do that--and
    you don't have to answer this--I am wondering why I will not
    anticipate being here 2 or 3 years from now after this re-
    reform has not been--or has been ignored again.
        Mr. Anderson. That is why we thought this problem was fixed
    last time and then we worked over the course of the last 2
    years to try to get the reforms that both sides of the aisle
    agreed to enacted.
        Mr. Garrett. Right.
        Mr. Anderson. Lael Brainard told me they were not going to
    negotiate with the Europeans over Ex-Im Bank subsidies right
    across the table in the Treasury Department.
        Mr. Garrett. And, in the meantime, while we wait for the
    re-reform to be implemented and find out that it is not
    implemented, how many jobs will we lose in the interim?
        Mr. Anderson. We are going to lose thousands. And that is
    why our position now has changed. Last time we tried to--we
    thought we had it fixed.
        Now our position is, if there is not a hard stop on wide-
    body financing for state-owned, creditworthy airlines, the Bank
    should be ended.
        Mr. Garrett. And I appreciate it.
        Our small business guy at the end, Mr. Wilburn, for what
    you are doing, I appreciate your service as well, and I
    appreciate your entrepreneurial spirit.
        I just have one bone to pick with you. I know you say you
    are a free market type of guy. And I think you said, ``I
    pledged my collateral. I can only pledge that once.'' And I get
    that, but I guess that is the way the free markets work.
        If I have an idea or a product or a business and I have
    capital, I can only pledge it once. And I guess the industry in
    front of us, they can only pledge it once. That is the rule
    whether you are a big guy or a little guy. You can only pledge
    it once.
        And even though--I have had lots of great business ideas
    but nobody wanted to invest in them. That doesn't mean they
    weren't great business ideas.
        But just because you have a great business idea and a great
    business model doesn't mean that you can look to somebody else
    to finance it. You can try to seek somebody else to finance it.
        And that is what you're trying to do, and it is great that
    you are on TV today, maybe. So maybe it will help you out
    there. But--
        Mr. Wilburn. That is not the reason I am here, with all due
    respect.
        Mr. Garrett. My point is we should not be asking the
    American public to step in and be the one to ultimately finance
    once any business, big or small, pledges their collateral once.
    Independent investors should be the ones who are responsible
    for doing that. We should not ask the taxpayer to step in.
        And I will close, then, with Dr. de Rugy. Can you quantify
    any of what we are talking about here--Mr. Anderson has tried
    to--as far as, without a cost-benefit analysis being done like
    Ex-Im should have done, what we are really looking at when we
    continue down this road or path of picking winners and losers
    in this current system that we have as far as job losses. Do
    you want to talk about that?
        Ms. de Rugy. It is very--it is very hard to know exactly
    how many jobs are lost. One of the things that we know is who
    the beneficiaries are. We also know that the Ex-Im Bank picks
    winners and losers and that is very different from the free
    market.
        And, also, we have 200 years of economic literature which
    explains that free market is the way to go and protectionism
    isn't because it hurts consumers by raising prices. And with
    the Ex-Im Bank, it is not free market. It is protectionism.
        Chairman Hensarling. The time of the gentleman has expired.
        Ms. Waters. Mr. Chairman, I would request unanimous consent
    for Mr. Wilburn to have an opportunity to respond to the
    teaching that he just received from Mr. Garrett on oil and gas
    subsidies that he mentioned in response to Mr. Garrett's claim
    that the government should not be subsidizing anything or
    anybody.
        Chairman Hensarling. I am sure there are many Members on
    your side of the aisle who would be happy to yield more time to
    Mr. Wilburn.
        The Chair now recognizes the gentleman from Massachusetts,
    the ranking member of our Housing and Insurance Subcommittee,
    Mr. Capuano, for 5 minutes.
        Mr. Capuano. Thank you, Mr. Chairman.
        And I thank the panel for being here.
        Mr. Wilburn, I just want to thank you for your commonsense
    approach. It amazes me that people can disagree on substance,
    but you deserve more respect than you have received here today,
    and I regret that approach, as one member.
        Mr. Anderson and Captain Moak, I think you raise
    interesting and very good points. I have actually worked with
    the ALPA in the past on a similar issue just in Massachusetts
    using taxpayer dollars to help encourage wealthy foreign
    airlines. I am more than happy to look at this. And Mr.
    Campbell and others have suggested that.
        However, I am not willing to shut down the Bank because,
    very simply, Ms. de Rugy, I have to tell you, I don't live in
    the ivory tower. In the ivory tower, what you say makes sense.
        And if every country in the world would legitimately shut
    down their ex-im bank or their comparable one to it, I would
    consider it because I don't disagree. This should be
    unnecessary.
        But I don't live in that world. I live in the real world of
    fair competition. And when France has 4,600 people working for
    their ex-im bank and we have 400, if we want to compete, we
    need to do this.
        Ms. de Rugy. But we have 200--
        Mr. Capuano. So, for me, that is part of the problem.
        With that, I would like to yield the remainder of my time
    to Mr. Heck, who knows a lot more about the Ex-Im Bank than I
    do.
        Mr. Heck. Thank you, Congressman.
        First, I want to thank especially Mr. Wilburn and Captain
    Moak for their service. It is deeply appreciated.
        Mr. Wilburn, I am interested, as a small businessperson out
    there trying to build something for his family and his
    employees kind of one day at a time, one contract at a time,
    whether or not you would be surprised that the company to your
    right, which has claimed such material damage and is
    represented by its own spokespeople, is now the most profitable
    airline in the United States, and arguably the world, and
    indeed made $2.7 billion in profits last year, for which I am
    grateful. I think that is a good thing. I am really glad.
        I am not asking the question of you, Mr. Anderson.
        Would it surprise you that the company has paid no Federal
    income taxes for the last 6 years and is projected not to for
    the next 3 years?
        Mr. Anderson. Are you talking--
        Mr. Heck. Mr. Chairman, it is my time, not Mr. Anderson's.
        Would it surprise you, Mr. Wilburn?
        Mr. Wilburn. I don't know if I'm surprised. I can't
    characterize it as surprise. It is new information to me I was
    not aware of.
        Mr. Heck. Mr. Wilburn, I am wondering if you would consider
    what the gentleman to your right has repeatedly said.
        Again, I want to interject here my gratitude for living in
    a Nation that builds the greatest airplanes in the world, which
    are flown by the most competent pilots.
        I did 150,000 miles last year and I didn't lose one wink of
    sleep about my personal safety. And I thank you all for that,
    quite genuinely.
        But, Mr. Wilburn, the gentleman to your right said
    repeatedly in his opening testimony--I want to make sure I get
    it exactly right--``I don't believe in subsidies.''
        Mr. Wilburn, would you consider it a subsidy that the
    Federal Government, through its Pension Benefit Guaranty
    Corporation, took over the pension liabilities of Delta and, at
    the point at which Captain Moak collects his, will, in fact, be
    provided by the taxpayers of the United States? Would you
    consider that a subsidy?
        Mr. Wilburn. Again, with all due respect, I don't think I
    am really qualified to answer that, but I understand your
    point.
        Subsidies exist in a variety of different ways, and I am
    faced with that unlevel playing field every day. And I would
    have to have some more information on that, but you have piqued
    my interest.
        Mr. Heck. So, lastly, then, I am wondering whether or not
    you would consider it at least inconsistent that the company
    has argued that the existence of the Export-Import Bank to loan
    money to their competitors--will you consider it inconsistent
    that they have that view when, in fact, that same company
    borrowed from the Canadian export credit authority to buy what
    I deem short-hop airplanes?
        Mr. Wilburn. Again, I am not familiar with those facts, and
    I am learning a lot of things today in realtime and, as a small
    business guy, I am more focused on my issues.
        But I can tell you this. There are a number of issues
    raised here today, including the ones you mentioned, that lead
    us to a broader discussion.
        And the broader discussion is: What role does the Ex-Im
    Bank really play? These gentleman have opined and they have
    given their opinion.
        I can tell you just from my perspective, without the
    Export-Import Bank of the United States, people are going to
    buy in the Philippines, not my goods, but they are going to buy
    Korean goods, and they are going to buy that because it is
    financed by the Korean Export-Import Bank.
        So I think we need to get to their reasonable position and
    do some reforms, but get and save the Export-Import Bank of the
    United States.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from Texas, Mr.
    Neugebauer, chairman of our Housing and Insurance Subcommittee.
        Mr. Neugebauer. Thank you, Mr. Chairman.
        Mr. Anderson, I detected that you might want to respond to
    some of the questions that were raised awhile ago. Would you
    like to--
        Mr. Anderson. I would start by saying Boeing got a refund,
    didn't pay any taxes. But Delta accrues its taxes at the full
    Federal tax rate. We don't have any offshore subsidiaries.
        The reason why we are not a cash taxpayer is because we
    went through a very painful Bankruptcy and restructured our
    company without any subsidies from the government.
        We paid our premiums into the insurance--into the Pension
    Benefit Guaranty Corporation and, unfortunately for our pilots,
    we had to terminate their pension plan. And so Captain Lee
    Moak, I would correct the record, doesn't have a pension
    because his pension was terminated.
        We were able, with the help of this committee, to pass the
    Pension Protection Act in 2006 and save the pensions by getting
    an amendment to the law so that Delta can pay out over a
    billion dollars of pensions to our retirees today, and we are
    overfunding those pensions.
        So you hit a raw nerve when you look back at these people
    who went through a really tough restructuring--and we are a
    full taxpayer in this country--and these people bore the brunt
    of a tough Bankruptcy and a lot of them lost their pensions.
        Mr. Neugebauer. I thank you.
        And, I want to expand on something that has been brought
    up, but I don't think people realize the scope of that, and
    that is I was shocked to learn that 14 of the largest 20 state-
    owned or state-supported airlines receive Ex-Im funding.
        And so, just to put that in perspective, these countries--
    many of whom have fairly substantial sovereign wealth funds,
    are able to get financing backed by the U.S. taxpayers to
    compete with U.S. companies.
        Mr. Anderson, you mentioned, I think, a couple--India,
    Emirates, China. There is a long list of airlines that American
    taxpayers are subsidizing to compete with your airline, and
    that puts you at a disadvantage.
        Mr. Anderson. That is exactly right. The prime examples
    would be Singapore Airlines, which is owned by Temasek, the
    largest sovereign wealth fund in the world. Our government
    finances the airplanes.
        The largest oil-owning company in the world is Abu Dhabi.
    It has the largest oil reserves in the world and it owns and
    operates a government airline, and we, our Treasury, finances
    their airplanes well below market to fly into our markets.
        Mr. Neugebauer. Now, one of the things that you mentioned
    in your testimony, too, is that--you said that you did not
    support reauthorization of Ex-Im Bank because you kind of felt
    like you got double-crossed on the last reauthorization, but
    you would support possibly a reauthorization that had some
    reforms.
        Do you want to elaborate a little bit on that?
        Mr. Anderson. Absolutely. Our position has been consistent.
    It was consistent at the last reauthorization. Language was put
    in the bill to fix these issues that hurt American jobs, and it
    was ignored.
        So we have taken a harder-line position this time, along
    with all the employees I have here and the 3,000 employees we
    have in Seattle, Washington, to require that there be real
    reform this time.
        We aren't talking about small businesses. I respect small
    businesses. I want him to be successful. We want all small
    businesses to be successful. And this isn't about small
    business.
        This is about 90 percent--95 percent of the money that this
    Bank uses are for the top 10 corporations. So, let's not
    confuse the small business issue.
        This is about putting safeguards in place so that you, as
    Members of Congress, are not picking and choosing which
    companies win and which companies lose.
        I think these jobs are just as important as the
    manufacturing jobs. If they aren't, I would invite any
    Congressman here to just tell my employees that their jobs are
    not as important.
        Mr. Neugebauer. I thank you.
        I had a question for Mr. Wilburn.
        Mr. Wilburn, has your firm ever received any Federal
    grants, loans, guarantees?
        Mr. Wilburn. No, sir.
        Mr. Neugebauer. Okay. Thank you.
        And Dr. de Rugy, you have done some analysis on Ex-Im and
    their financing and their structure. I will have to--I see my
    time has expired, so I will submit it to you in writing.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from Missouri, Mr.
    Clay, ranking member of our Monetary Policy Subcommittee.
        Mr. Clay. Thank you, Mr. Chairman.
        Dr. de Rugy, do you believe that there is an appropriate
    role for government to make sure financing is available for
    U.S. businesses in cases where the private sector is unable or
    unwilling to provide financing to legitimate business ventures?
        For example, what about commercial exports for nuclear
    power projects? I understand that these deals are often
    untenable for commercial Banks. Is it appropriate for the
    government to help finance such deals?
        Ms. de Rugy. I don't think the government should be in the
    capital market business because the way government allocates
    monies is based on politics and not on sound economics.
        And, more importantly, you have to understand that when the
    capital market does not allocate funds to someone because they
    are cash-poor, it is a feature of the capital market, not a
    bug, and it is unfair for Congress to demand that taxpayers be
    the one footing the bill because some people want to borrow
    money and are not able to find lenders to actually lend them
    that money because they don't think it is a worthy or a safe
    enough bet.
        Mr. Clay. Well, Doctor, isn't it true that Congress picks
    winners and losers every year as far as through our Tax Code?
        Ms. de Rugy. I agree. And I am against that, too.
        Mr. Clay. Oh. You are against that, too?
        Ms. de Rugy. I am against the government picking winners
    and losers. I think the general rule should apply.
        Mr. Clay. And you have lobbied your Members of Congress on
    that, I assume?
        Ms. de Rugy. I don't lobby. I write research papers.
        Mr. Clay. Well, at least you talk to them.
        Ms. de Rugy. Yes. I specialize mostly on the budget. But
    when I have talked about tax reforms, I have talked about
    leveling the playing field.
        I don't believe in giving tax credit to some companies and
    not others, or to taxpayers based on the fact that they are
    buying a house rather than renting. I believe in the general
    rule. I believe in a flat tax, for instance, rather than the
    system that we have today.
        Yes, I am against the government picking winners and losers
    across-the-board, whether it is through taxes, through
    government funding, or through loan guarantees.
        Mr. Clay. Thank you.
        Mr. Anderson, a review of U.S. airline purchases by U.S.
    carriers between 2012 and 2014 reveals that all of the recent
    capital market deals have been on more affordable terms and
    would have been available if the carriers had used the export
    credit that is made available to foreign purchasers of U.S.
    aircraft.
        Given this, how do you defend the claim that the United
    States is providing below-market rates to our foreign
    competitors?
        Mr. Anderson. This is a competitive business and, depending
    upon what your interest rates are--your interest rates are
    determined by your capital structure.
        And when the government gets involved and takes that market
    component out, we are no longer competing on who is the best at
    managing capital. You have distorted the market.
        Just because we have lower interest rates, that just means
    we pay our debts better, and we should have lower interest
    rates. And if a competitor gets lower rates for an artificial
    reason, they are getting a subsidy.
        Mr. Clay. You don't think it--
        Mr. Anderson. They should be in the marketplace--
        Mr. Clay. Okay.
        Mr. Anderson. They should be in the marketplace raising
    capital the way we raise capital and having to pay a market-
    based interest rate and compete on that basis.
        Mr. Clay. You don't think France or England--
        Mr. Anderson. Pardon?
        Mr. Clay. You don't think France or England uses their
    ability to level the playing field for their airline-makers
    like Airbus?
        Mr. Anderson. No. Because there is something called the
    gentleman's agreement between Airbus and Boeing. It is an oral
    understanding that creates something called the ``home market
    rule.'' So the United States, Britain, Germany, France, and
    Spain do not use and are not allowed to use export credit.
        Mr. Clay. Okay. Thank you.
        I am going to yield the remainder of my time to my
    colleague from Missouri, Mr. Cleaver.
        Mr. Cleaver. Thank you.
        Mr. Anderson, some of your points I actually think are
    good. I hate that everything becomes partisan here. Let me ask
    you one question. You were talking about the employees behind
    you and what you would say to them. What would you say to the
    16 exporters in Kansas City, Missouri, my congressional
    district, which supports--because Ex-Im Bank supports about $84
    million in exports each year. What do I say to them when I say
    that the Ex-Im Bank is closed?
        Mr. Anderson. I think we should put both our employees and
    your employees and say we are going to preserve and grow both
    of their jobs, and that is the reform that needs to take place.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from Georgia, Mr.
    Westmoreland.
        Mr. Westmoreland. Mr. Anderson, thank you, again, for being
    here and for bringing the crowd with you.
        So I guess to put it in just really simple terms, if a
    European government-subsidized or any government-subsidized
    airline buys a plane from Boeing, and you buy a plane from
    Boeing, you compete with them on some of the same routes. Is
    that not true?
        Mr. Anderson. We compete on virtually--in a global network,
    you complete on virtually all of the routes internationally in
    some form or fashion over the hub system.
        Mr. Westmoreland. And it is so if you were buying 60 planes
    from Boeing. Is that not correct?
        Mr. Anderson. Right now, we have about 100 airplanes on
    order from Boeing.
        Mr. Westmoreland. A hundred airplanes. If you had some of
    the same--even though you said you were paying cash, if you had
    some of the financing options that some of your competitors
    had, you may even buy more planes from Boeing and give Boeing
    more work to do. Is that true?
        Mr. Anderson. The market needs to dictate how many
    airplanes we own. I am not in favor of opening up export
    financing for U.S. carriers because I don't think that is a
    free market.
        Mr. Westmoreland. Thank you.
        Ms. de Rugy, could you please tell me why it is misleading
    for the Export-Import Bank to claim that 90 percent of its
    loans actually go to small businesses?
        Ms. de Rugy. That number is only correct if you look at
    the--it is actually not 90 percent. It is a little less than
    that, but when you look at the number of transactions, when you
    look at the money, what you see is that roughly 19 percent of
    the money goes to small businesses, and that is less than even
    the Bank's charter asks. What it means is that--and by the way,
    they have a very expensive definition of small business. When
    you talk about small business, people think about mom-and-pop
    stores or 10/50 companies. The definition of Ex-Im for
    ``small'' can go to a company of at least 1,700 employees.
    These are big businesses in my book.
        But what it means is that really over 80 percent of the
    money goes to very big companies. And we know that they go to
    leading manufacturers, the number one U.S. exporter, Boeing is
    obviously leading the pack.
        Mr. Westmoreland. Thank you.
        Mr. Moak?
        Captain Moak. Congressman, I just wanted to add one other
    thing that might have gotten missed a little earlier. If you
    want to have apples to apples, airlines manufacture seats. That
    is essentially what we do, and we are actually getting impacted
    twice, not only by what the U.S. Ex-Im Bank does by financing
    airlines below market rates, but what happens since we don't
    have the ability to access that along with a few other
    countries that manufacture airplanes, countries like the Middle
    Eastern companies, not only are they using Ex-Im Bank financing
    and putting them on routes and costing us jobs, they are also
    using European credit agency Airbus airplanes overlaying our
    routes at a number like $3 million per year, per airplane, so
    you start out at the beginning of the year $3 million behind.
    It is hard to catch up. We have to pull out of markets, and we
    lose jobs, so we are getting hit not just by Ex-Im Bank
    practices but also by ECA practices, and that is why we came
    before this group to ask them to negotiate taking that down
    because the Middle Eastern countries are taking advantage of
    it.
        Mr. Westmoreland. So, Mr. Moak, would it be true that when
    the other side of the aisle says that labor is for the
    reauthorization of the Ex-Im Bank, that would not be entirely
    true?
        Captain Moak. Labor is for reform, fair practices,
    competing in the world. We have the best workers in the world.
    We need to be given the opportunity to compete because when we
    have a fair opportunity to compete, we win, and we are coming
    to this place because government policy matters. We need your
    help or we wouldn't be here.
        Mr. Westmoreland. And, Mr. Anderson, just one last thing.
    You had made an attempt at the last reauthorization to do the
    right thing. You are back here today because it didn't work,
    and they did not do the things that were promised. Is that not
    true?
        Mr. Anderson. Correct.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentlelady from New York, Mrs.
    McCarthy, for 5 minutes.
        Mrs. McCarthy of New York. Thank you, Mr. Chairman, and I
    appreciate the opportunity.
        Number one, I think it should be noted that we are not
    against any of the unions. We are not against any of our
    American airlines. We certainly support them, and I think I
    would like to ask Mr. Anderson one quick question, are there
    any other American airlines that are experiencing the same
    problems as you?
        Mr. Anderson. Yes.
        Mrs. McCarthy of New York. Captain?
        Captain Moak. I represent 51,000 pilots, 31 different
    properties, all the major U.S. airlines, and the answer to that
    is absolutely yes, we are getting hit by this. We need reform.
        Mrs. McCarthy of New York. Let me go back to Mr. Anderson.
    We did negotiate 2 years ago, which we thought was a fair
    agreement. So here we are at this point. What do you think
    would be a fair agreement? Where would you want to change the
    language? Is it only enforcing Ex-Im Bank? Is it something
    different?
        Mr. Anderson. It needs to be mandatory. The language that
    was prefatory last time needs to be made mandatory. And it is
    specific in our business. We have tried to be narrow because
    there is plenty of merit to what happens with small business.
    There is no question. And we have tried to be targeted to try
    to just go at the very issues that hurt our employment. And the
    issue that hurts is our government further subsidizing deeply
    subsidized foreign airlines?
        Mrs. McCarthy of New York. Let me say something. Number
    one, I doubt very much whether you would ever get language that
    was mandatory. It is just not going to happen. People here,
    myself included, don't like to use the word ``mandatory.'' So
    if we don't get the language in as mandatory and you are
    basically saying that we should abolish the Bank, then, to be
    very honest with you, your union, all the other unions, are
    going to have a problem. A lot of my constituents will have a
    problem, so we have to come up with some sort of solution to
    that.
        But with that being said, too, I know that you are probably
    the most profitable airline. That is great. We want to see
    that, and I know you had your ups and downs, especially when
    you had to go through the Bankruptcy. But wasn't going through
    the Bankruptcy more because of what was going on in the world
    that day--that year, as far as oil prices and everything else
    like that and you had to reconstruct?
        Mr. Anderson. The terrible tragedy of 9/11, and I sat in
    one of these rooms in September 15, 2001, representing the
    industry, so we lived through that. And it dealt a devastating
    blow to our industry. Our capacity fell off 25 percent. It has
    taken 10 years to get back. So I would have to say that between
    very high oil prices--and we could have another discussion on
    the depletion allowance--and the 9/11 tragedy, and then the
    aftermath of that really wreaked havoc on our industry.
        Mrs. McCarthy of New York. I am only trying to bring out
    that unfortunately whether small businesses or large
    corporations, we really want to support them because that is
    jobs, but sometimes we, even in the government, can't do
    everything.
        I want to also say that as someone who has been always
    supporting my unions, I would like to insert in the record, Mr.
    Chairman, statements from four other labor unions.
        Chairman Hensarling. Without objection, it is so ordered.
        Mrs. McCarthy of New York. Thank you.
        So I think one of the things that fascinates me about this,
    as it did 2 years ago, is trying to find that common ground,
    which is really difficult around here. It seems all or nothing
    the last several years. And so I hope we can come to an
    understanding because I do believe in the Ex-Im Bank. I do
    believe that it helps an awful lot of our people in this
    country. I do believe it brings good jobs and keeps good jobs
    here in this country. But with that being said, I want to turn
    over the rest of my time to my colleague. You wanted extra
    time?
        Mr. Heck. Are you pointing at me?
        Mrs. McCarthy of New York. Yes, I am.
        Mr. Heck. Thank you very much.
        Mr. Chairman, I would seek unanimous consent to enter into
    the record verified excerpts of the speech given by former Vice
    President Richard Cheney.
        Chairman Hensarling. Without objection, it is so ordered.
        Mr. Heck. And with your permission, I would like to just
    quote him briefly. There are those who say that the Bank is
    just some form of so-called corporate welfare. They obviously
    don't know that for every dollar appropriated in the last 5
    years, Ex-Im has returned approximately $20 worth of export.
    That is the kind of successful government program that even a
    fiscal conservative such as me can embrace.
        Thank you, Mr. Chairman.
        Chairman Hensarling. The time of the gentlelady has
    expired.
        The Chair now recognizes the gentleman from New York, Mr.
    King.
        Mr. King. Thank you, Mr. Chairman.
        Thank you for holding today's hearing. It is a vital issue,
    and I want to thank all the witnesses. I want to thank Mr.
    Anderson. Certainly, Delta is a good employer in my district.
    In fact, I just got my flight confirmed for tomorrow on Delta,
    so I want to thank you for that.
        Dr. de Rugy, besides your testimony today, I want to thank
    you for the work you have done on Homeland Security, and I have
    sometimes plagiarized some of your words without giving you
    credit, so let me do that now. Okay?
        Also, Captain Moak, I have had a very good relationship
    with the airline pilots.
        And, Mr. Wilburn, you do, I believe, represent an American
    success story.
        So, with all of that, I think I am trying to find a way we
    can all be on the same page. I was impressed by what Mr.
    Campbell said about trying to find reforms.
        Mr. Anderson, you believe that reform is necessary. I
    believe we have to find a way to reauthorize the Export-Import
    Bank. I know we hear of crony capitalism, and that may happen
    in some cases, but certainly the businesses in my district are
    small businesses. We have a musical string instrument
    manufacturer, a woodworking tool manufacturer, and a seafood
    distributor. I believe there are 10 companies in my district. I
    know Mrs. McCarthy mentioned a number in her district, which is
    next to mine. And in downstate New York, our districts are one
    on top of the other, so probably within adjacent four or five
    districts, there already hundreds of employees in each of our
    districts who work in businesses in adjacent districts. So, it
    is important.
        I have also voted for every free trade agreement that has
    come before Congress in the 22 years I have been here. I
    believe in free trade. I also don't like the idea of
    unnecessary government intervention. But I also know that
    countries such as Germany, France, China, Brazil, India, and
    Korea provide up to 7 times the support that Export-Import
    does. And to me, that is not a level playing field. What we
    have to do, I believe, is find a way to level the playing
    field. And with our Export-Import Bank, I believe we are
    definitely giving advantage to our foreign competitors. I think
    of former CBO Director Douglas Holtz-Eakin, who is, if I can
    use the partisan term, a Republican economist. And he said,
    ``The reality is you would like to live in a world and I would
    love to live in a world that does not have a need for an
    Export-Import Bank, one where international transactions were
    done on a level playing field. That is just not the reality.
    Many other countries, notably China, have an export credit
    agency. They are all out there trying to gain market shares.
    The West simply has to not disarm.''
        Jim Nussle, who was a former Republican Congressman--I
    served with him on this committee--and ended up being the
    Director of OMB said, ``Export-Import is self-funding and has
    generated income for the Treasury since 1992.''
        I bring these arguments out not just to make the appeal to
    authority, which they taught us in law school is one of the
    easiest things you can do; find somebody who agrees with you
    who supposedly is on the other side and if it sounds good. I
    just feel what Mr. Campbell said is important. I don't see how
    we can just end our involvement with Export-Import now. I don't
    know if we should end it, but obviously, reforms are necessary.
    We have seen the stories of corruption that are there, and
    obviously, that has to be changed. But on the other hand, I
    think the blow to our economy by suddenly ending Export-Import,
    putting small businesses and also larger businesses at risk is,
    especially at this time, when we still have not fully recovered
    from the crash of 2008, at a time when there is the increased
    burdens of Obamacare, of EPA, of regulations, of burdens, that
    it is just not appropriate, and it is not the responsible thing
    to do to end the authorization of Export-Import.
        At the same time, I believe reforms are necessary. If a way
    can be found before the expiration date to bring that about, I
    would strongly support that, work with that. I think the
    chairman has raised some important issues, but I think we go
    too far if we just say that we are going to end it.
        And as we saw today, there is always some government
    involvement in the company. Bankruptcy is the government
    involvement. I support that fully, but that is the government
    getting involved in the economy to help businesses get back
    together. So we use that. Protections given to labor unions
    that are in our economy. We have veterans. We have senior
    citizens. Everyone has some government involvement. My goal is
    to keep that to a minimum, but I think we would be going too
    far if we do not reauthorize Export-Import, but we should do
    it, I believe, with reforms.
        I certainly look forward to looking at the work and paper
    of the gentleman from California, Mr. Campbell, and I thank him
    for his efforts.
        And, Mr. Anderson, if nothing else, you have certainly
    forced Congress to pay more attention to you now maybe than was
    done 2 years ago.
        With that, I yield back the balance of my time.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from Massachusetts,
    Mr. Lynch.
        Mr. Lynch. Thank you, Mr. Chairman.
        I want to thank the witnesses for their willingness to come
    before the committee and help us with our work. I have been
    involved on the Oversight Committee and this committee in
    dealing with some of our trade agreements and just trying to
    rebalance our Export-Import imbalance with a number of
    countries. I spent a little time in China recently, as well as
    South Korea, India, France, and Germany. I travelled to South
    Korea for a few days in connection with the South Korean trade
    agreement, and I couldn't help but notice that--this is just
    anecdotal, but I was there for several days. And the only U.S.
    cars--now South Korea is a booming economy, very modern, big
    highways, and the only U.S. cars I saw there on the days that I
    was there was the one I was riding in and the one that had my
    security detail from the Embassy, so no U.S. cars. In Japan,
    same thing. You need a detective to find an American car in
    Japan.
        So those companies obviously have closed markets in order
    to boost their domestic car production. I walk outside this
    door here, and I can't spit without hitting a Japanese or a
    Korean car, so they are doing massive investments and highly
    protective structures to protect their domestic markets so that
    they can export goods. And as Mr. King pointed out just
    recently, they are pumping in about 7 times what we are doing
    in terms of credit assistance through their versions of their
    ex-im banks.
        In addition, in my State of Massachusetts, the French
    government just came in and took over one of our rail systems,
    a commuter rail system. They backed one of their companies,
    Alstom. France's idea is they want to become the world's rail
    company. They want to manufacture the rails. They want to go
    out into other countries and dominate those markets, kind of
    like what Boeing is trying to do in the aircraft industry on
    behalf of American machinists and American workers.
        Spain is gobbling up a lot of the construction firms. It
    has become a globalized strategy, and they are there to push
    their workers, and I understand the theoretical arguments I am
    hearing today about it would be nice--we want a level playing
    field. The playing field is going to become much less level if
    we exit the battlefield, which is what you are suggesting that
    we do right now.
        I wish that our exit from the Ex-Im Bank--let's make no
    mistake. We are not talking about reforming the Export-Import
    Bank here. It is going away. So it is going to increase the
    imbalance here, but it will tip it drastically in favor of
    foreign competition. We are opening up our markets. We are
    walking off the battlefield. We will no longer try to protect
    our workers in this iteration the way we have been doing, and
    it hasn't been smooth. It hasn't been fair to smaller
    businesses. I will agree with that. We are protecting a whole
    boatload of workers right here. The reality I am dealing with
    is if you succeed, if the Ex-Im Bank goes away--and it looks
    like that will happen, because no other nation is going to
    disarm--we are going to be at a huge disadvantage. And foreign
    manufacturers will be handed a huge advantage, and I think it
    will be a very, very good day for Airbus. I think you will see
    their stock go right up. It will be a great day for them.
        But at the end of the day, when the Ex-Im Bank goes away,
    government will still be picking winners and losers. It just
    won't be the U.S. Government. And the governments that are
    picking the winners and losers will be the foreign governments,
    and those winners, you have to be kidding me if you don't
    believe those foreign governments are going to pick their own
    companies, their own workers--you see what China's doing, you
    see what South Korea and India, all these other countries. It
    is a nice theoretical argument you have here, but when this
    goes away, it will be a bad day for America, a bad day for the
    American worker.
        Chairman Hensarling. The time of the gentleman has expired.
        Dr. de Rugy, I think I have been informed that you have
    asked to be excused from the panel at this time because you
    have a prior commitment. Is this correct?
        Ms. de Rugy. Yes, I have a plane to catch.
        Chairman Hensarling. In that case, Members--I won't ask
    which plane, and I won't even ask which airline--will have 5
    legislative days to submit questions to Dr. de Rugy. We would
    ask that you respond as quickly as possible.
        Ms. de Rugy. Can I add just one thing?
        Chairman Hensarling. Not substantively. Process-wise, yes.
    Substantively, no. In which case, we will excuse you at this
    time.
        The Chair now recognizes the gentlelady from Minnesota,
    Mrs. Bachmann, for 5 minutes.
        Mrs. Bachmann. Thank you, Mr. Chairman.
        And if Ms. de Rugy would like to make her comment right
    now, I would be more than happy to let her make her comment. If
    you would like to make your comment, Ms. de Rugy, that you
    wanted to make, make your comment right now during the course
    of my time.
        Ms. de Rugy. Thank you. Based on the discussion, I think it
    is important to remember that the Bank itself only justifies 30
    percent of its activity based on the need to countervail
    foreign subsidies, so the idea that everything that the Bank
    does is to compete with foreign government is not accurate,
    based on the Bank's data itself.
        And finally, I will say that we are talking a lot about
    jobs. We are talking a lot about businesses, but we are
    forgetting consumers. Protectionism, which is what the Ex-IM
    Bank is doing, hurts consumers in the form of higher prices,
    and economists care about producers and consumers, too. We have
    many years of economic studies which show that basically
    protectionism tends to the benefit--even for the beneficiary of
    the protectionism does not outweigh the cost to all the unseen
    victims.
        Mrs. Bachmann. Thank you so much.
        That goes to my point. A lot of what I have heard here
    today is that we need to continue to provide subsidies and stay
    on the subsidy train because the rest of the world is on the
    subsidy train. And to continue that logic means that nations of
    the world have to continue one-upmanship on subsidy, so it is
    subsidy versus subsidy, and it is a complete rejection of the
    free market.
        I don't think that is the direction we want to go. The free
    market has built up the most magnificent economies of this
    world. I remain a defender of the free economy. One of our
    former Presidents said that nothing is more representative of
    eternal life than a government program. And I think we heard
    the defenders here today of this program, despite the
    mismanagement, despite the fraud, despite the failures, we have
    an executive summary in front of me that says, as a matter of
    fact, that Export-Import Bank operated at a loss every year
    from 1982 to 1995. And when reform was passed, the FCRA, that
    meant the losses were backfilled by the taxpayer, and Ex-Im
    Bank received $9.92 billion in direct appropriations from the
    government between 1992 and 1996.
        When we talk about free economies, the United States used
    to be considered under the category of a free economy. We are
    not the freest economy in the world. We are not the fifth
    freest economy in the world. We are not even the 10th freest
    economy in the world. We have actually fallen out of the status
    called free economy. We have now dropped out of the top 10. We
    are considered a mostly free economy. And while the fault isn't
    at the foot of the Ex-Im Bank, it is death by a thousand cuts.
    This is just one example.
        I think that Congress needs to look at itself in the mirror
    and to see what we have done to contribute to a less free
    economy. I think there are four areas. One is we have the
    highest--look at the tax code in the United States. We have the
    highest corporate tax rate in the world, bar none, 35 percent.
    Then you add on to that the Obama new tax rate, the 3.8
    percent, various state--corporate tax rates, and you see how
    uncompetitive the United States is. We need massive tax reform.
        Then you look at the next factor, regulatory burden. The
    Dodd-Frank Act was brought up today. Obamacare was brought up
    today. The new EPA rules are new regulations. We have heaped
    upon American businesses the uncompetitive factor of a tax rate
    you might say through increased regulatory burden. That is
    number two.
        Number three is the United States Government, which has
    exceeded growth beyond the taxpayers' ability to pay for
    government services. We are growing the cost of government.
        And number four, the lack of sound money. We have seen
    through what the Federal Reserve has been doing, the increased
    inefficiency with sound money.
        Those four reasons alone aren't your fault. Those are the
    fault of the United States Congress and this Government. We are
    the ones who need to look in the mirror at how we have made
    this a less free economy.
        Regarding the Ex-Im Bank and the 4 firings that just
    occurred, that also doesn't include the 74 cases since April of
    2009, when Bank officials were forced to act on the basis of
    integrity investigations by the Office of Inspector General.
    There are dozens of other fraud cases involving the Ex-Im
    beneficiaries that have now been referred to the Department of
    Justice for prosecution. I see that my time is gone, but I ask
    unanimous consent to enter into the record several recent
    stories about the fraud that is going on at this Bank.
        Chairman Hensarling. Without objection, it is so ordered.
        Mrs. Bachmann. I want to stand on record that I oppose the
    continuation of this Bank because reform hasn't worked. We have
    been ignored.
        Chairman Hensarling. The time of the gentlelady has
    expired.
        The Chair now recognizes the gentleman from Georgia, Mr.
    Scott.
        Mr. Scott. Thank you very much.
        Mr. Chairman, this has, indeed, been a very, very
    interesting hearing, a very important one. Let me say at the
    outset that Atlanta is the world's busiest airport. And I
    always like to tell people that whenever you land at the
    airport in Atlanta, you land in Congressman Scott's district.
    So I say welcome to that. Certainly welcome to you, Mr.
    Anderson. I have listened to this discussion with a very
    jaundiced ear, and I don't see where the success and the
    movement forward of the Ex-Im Bank is not mutually--is mutually
    exclusive to addressing the concerns of our airlines. I would
    like to see the committee, Mr. Chairman, give some very
    thoughtful--we have a very talented, we have a very skillful
    committee, and it seems to me that we ought to be able to
    address these concerns narrowly focused on what Mr. Anderson
    and what Captain Moak are saying without interfering with the
    forward progress and the very basic need the Ex-Im Bank has
    provided for small businesses that Mr. Wilburn has done. There
    may be some on this committee who want to do away with the Ex-
    Im Bank altogether. I am not one of those because it has been
    very beneficial. But I think we would be very derelict in our
    duty as a legislative body to ignore the very pointed concerns
    that have been raised by Mr. Anderson and Mr. Moak. I think we
    can have some folks from both sides go to work to try to put
    some language into this Ex-Im extension that will address those
    concerns.
        So, with that, Captain Moak and Mr. Anderson, let's narrow
    in specifically. I think what concerns you most is the
    competition with the wide-body or the Boeing 777. What can we
    do to put in some language that could address that? It could be
    a trigger mechanism. It could be an assessment, as Mrs.
    McCarthy said, mandating things that are rather difficult. What
    could we do to address those concerns and move this thing
    forward?
        Captain Moak. Thank you, Congressman Scott.
        First, I just want to thank you. I don't know if you
    remember, but you stood by my side in front of 1,000 Delta
    pilots in ``Keep Delta My Delta,'' and your speech is still
    viewed in that light when you stood up and said this is truly a
    David and Goliath, and when David was walking back and said, Is
    there a cause? There is a cause. He turned around and went
    back. The cause here is Ex-Im Bank reform. And I commit all our
    resources, everything, to work on that narrow part of the
    reform that we need so that we meet a fellow veteran's needs,
    small business needs, but we meet our needs so that we stop
    losing jobs. I would be happy to help. Our team will help.
    Anything we can do. Thank you again for that day. You know
    where we have come from there.
        Mr. Scott. Absolutely. And I certainly understand.
        Mr. Anderson, what would be the narrowest scope of language
    that we could add that would address your problem as we move
    the Ex-Im Bank forward?
        Mr. Anderson. The Bank would not finance below market wide-
    body airplanes for state-owned, state-subsidized airlines that
    are otherwise creditworthy. There won't be a need, and that
    would solve the competitive issue, because what we are dealing
    with is a much broader competitive issue. And I think both
    sides of the aisle have addressed this. We don't compete in my
    business against other companies. In our business, we compete
    against government. So my big competitors, our big competitors
    internationally are governments that happen to have a
    department that is an airline. They get huge, huge subsidies,
    and it really hurts us when our government gives them a subsidy
    on top of the huge subsidy they already collect.
        Mr. Scott. My time is running out.
        Mr. Chairman, I think it might be wise that we could make a
    point of order that as we move forward with this, that we could
    develop some language--I would be delighted to work with your
    side on that--that I think could accomplish that as we move
    this forward.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from New Mexico, Mr.
    Pearce.
        Mr. Pearce. Thank you. I appreciate each one of you making
    the appearance here today.
        Mr. Wilburn, you had mentioned barriers to entry in
    subsidies to oil and gas as being one of the problems that you
    have as a business unit. Could you tell me a little bit more
    about those obstacles?
        Mr. Wilburn. I'm sorry, Congressman. Could you repeat your
    question? I didn't quite catch it.
        Mr. Pearce. I was asking if you could go a little bit
    deeper into the obstacles that you face as a small business.
    You had mentioned the barriers to entry and the subsidies to
    oil and gas, and I think you specified the depletion allowance.
    How is it those keep you out of the domestic market or make it
    less available to you?
        Mr. Wilburn. They make it less available to me because I am
    basically competing with the price of natural gas. Trust me, I
    am an advocate of strong natural gas resources here. But I go
    to landfills and I go to pollution sources, and I take that
    organic material, and I make methane. That methane has a cost,
    but it also has some benefits to it. It doesn't go to a
    landfill. Oil and gas has a subsidy if you want to call it
    that, that allows an advantage over my product. I don't have
    access to that, so I have to go to markets where I have a
    chance to compete, and those markets are where there is not
    natural gas reserves, and they don't receive those subsidies.
    That is the barrier entry of which I was speaking.
        Mr. Pearce. The oil and gas company has to pay for that.
    They don't just get the oil and gas for free. They have to pay
    for it, and so, basically, all that is is a depreciation of
    what they have paid.
        Mr. Wilburn. --the same benefit.
        Mr. Pearce. When you go to a landfill, do you have to pay
    to get the right to harvest that gas?
        Mr. Wilburn. Absolutely.
        Mr. Pearce. And so you don't get a writeoff for creating
    that gas? You don't get a writeoff?
        Mr. Wilburn. No.
        Mr. Pearce. That is probably something that we should
    consider. But in contrast, it is not the major producers that
    would provide a barrier to entry that don't get the depletion
    allowance. It is just the independents, the small producers.
    That is about 12 percent of the market.
        Mr. Chairman, we have talked today about the catastrophic
    effects that we are going to have on the job market if we don't
    take action one way or another, and there have been all sorts
    of suggestions here. But I don't think what we do here is going
    to affect jobs nearly as much as other things. And the
    gentlelady from Minnesota had gotten this covered pretty well.
    The corporate tax rate the President has set is probably one of
    the biggest impediments to business in America, and I sent him
    a letter personally saying I will work with you on that, sir,
    across party lines, across any other lines, because I agree
    that one of the greatest impediments to manufacturing in this
    country is the corporate tax, but I have yet to hear from the
    President, and that has been 4 years ago. But the regulations
    are where we really are killing the job market. For instance,
    the timber industry: 85 percent of timber jobs are now gone
    from America; 123 mills in New Mexico closed because of a
    government regulation, one government regulation that said the
    spotted owl is going extinct because of logging, and the
    government came back this last year and said, oops, logging
    wasn't the problem, so not only do we have a government that
    intervenes, but we have a stupid government that intervenes;
    23,000 agriculture jobs in the San Joaquin Valley went begging
    because of a 2-inch Delta smelt, another regulation. Now we are
    importing 80 percent of our vegetables from areas that spray
    things that we could not spray before, and that has hurt the
    job market in America more than what we do on the Ex-Im Bank.
        We, in 2007, passed a bill through this Congress that
    outlawed incandescent light bulbs. That killed the incandescent
    light bulb industry. That last manufacturing facility closed
    down, and China is able to produce the small curly bulbs that
    require more labor because of actions like this; and that was
    not an Ex-Im problem. We have continually put the consumers at
    risk by driving the price of electricity up, and the President
    has said, yes, electricity is going to be necessarily higher
    because of our regulations. And we are a 70 percent retail
    economy, and yet I hear no one on this committee who is
    defending the job creation of the Ex-Im Bank addressing that.
    We are killing the consumer market by higher electricity. It is
    the government that is at fault. The government is not the
    solution.
        I yield back.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from Texas, Mr.
    Green, ranking member of our Oversight and Investigations
    Subcommittee.
        Mr. Green. Thank you, Mr. Chairman.
        I thank the witnesses for appearing, and I especially thank
    our two veterans who are part of this panel.
        And, Mr. Wilburn, I thank you because you indicated that
    you may be impacted by PTSD, and that says to me that you have
    had some experiences that are less than pleasant, and my
    prayers are with you.
        I am reminded of Chairman Barney Frank, who, on the topic
    of reality versus desires, would often say he wished that he
    could eat more and lose weight. I wish that I had options other
    than end it or extend it. I would dearly like to have options
    other than end it or extend it. But these are the options that
    we seem to be confronting, and I am a person who believes in
    compromise, and I am willing to work across lines to do
    something other than end or extend.
        But given that these are the options, let me just share
    some of the comments associated with the options that are
    before us. A Houston Chronicle editorial published on June 25,
    2014, that would be today: ``No time for games. Export-Import
    Bank loans support American jobs, including Houston area
    jobs.'' Apparently, Mr. Hochberg was interviewed by the
    Chronicle and gave his commentary. The Chronicle goes on to
    indicate large or small Export-Import Bank loans support
    American jobs, including jobs in the Houston area. Bank
    officials told the Chronicle that its financing has supported
    $11 billion in export sales from the area since 2009 with $3.5
    billion of that attributable to small businesses. The Bank also
    cost taxpayers nothing. It supports itself through the fees and
    interest it charges and regularly sends money to the U.S.
    Treasury to reduce the debt. This is from the Houston
    Chronicle.
        I concur with the ranking member with reference to there
    being persons of note who were not here to testify today. And
    if they were here to testify, I believe they would say, some of
    them, what the Greater Houston Partnership says. The Greater
    Houston Partnership indicates, and this is an excerpt: ``Small
    and medium-sized businesses in our region also benefit directly
    from Export-Import. Small businesses account for nearly 85
    percent of Ex-Im Bank's transactions. Further, these
    transaction figures do not include the tens of thousands of
    small and medium-sized businesses that support goods and
    services to large exporters using the Bank. We trust--this is
    addressed to me--you will carefully consider the impact Ex-Im
    Bank has on our region and our position as a global economic
    leader.''
        Now this letter, while sent from the Greater Houston
    Partnership, appears to be supported by the Bay Area Houston
    Economic Partnership, the Baytown Chamber of Commerce, the
    Brenham Washington County Chamber of Commerce, the Clear Lake
    Chamber of Commerce, the Greater Beaumont Chamber of Commerce,
    the Greater Houston Partnership, the Greater Tomball Area
    Chamber of Commerce, the Houston East End Chamber of Commerce,
    the Houston Northwest Chamber of Commerce, the Lake Houston
    Area Chamber of Commerce, the League City Chamber of Commerce,
    the Pearland Chamber of Commerce, the West Chambers County
    Chamber of Commerce, and the Wharton Chamber of Commerce.
        Finally, there are some small businesses in the Houston
    area which, if they were given the opportunity to testify,
    would indicate that they are supportive of the Ex-Im Bank as
    well. This would include the South Coast Products business. It
    would also include the Hallmark Sales Corporation in Houston--
    this is not the card company--and the Everest Valve Company in
    Houston and others.
        Thank you, Mr. Chairman. I will yield back.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from Missouri, Mr.
    Luetkemeyer.
        Mr. Luetkemeyer. Thank you, Mr. Chairman.
        And I thank the witnesses for being here today. I certainly
    appreciate your testimony.
        Mr. Anderson and Captain Moak, thank you for your comments
    and concerns. I appreciate the fact that you have brought some
    issues to light with regards to the aircraft manufacturing
    sales portion or financing portion of the Bank. I think those
    need to be addressed, but I congratulate Mr. Wilburn also on
    being here and thank you for your testimony from the standpoint
    that we have several different things to look at and discuss
    here today, and that is the small business portion of this as
    well.
        In 2013, aircraft manufacturing made up only 40 percent of
    Ex-Im's financing; 40 percent went to other manufacturing; and
    20 percent went to oil and gas, base telecommunication
    services, and mining. So it does have a lot of other financing
    interests that it takes care of and works with. I think the
    statement has been made many times this afternoon and this
    morning that about 3,400 of the 3,800 loans it made were to
    small businesses, and so I think that at the end of the day, it
    is something that we need to consider, how we can find a way to
    reform it, make it work for everybody.
        I get this crony capitalism comment, and it kind of sticks
    in my craw a little bit from the standpoint that crony
    capitalism is truly when you hand out favors for somebody as a
    favor for them having done something for you. And yet the
    Federal Government helps with SBA loans. Is that crony
    capitalism? It helps with VA loans, helps a veteran own a home.
    Is that crony capitalism? We have in our treaties and in our
    export and trade tariffs and all sorts of treaty protections
    with regards to everything from automobile manufacturing, to
    agricultural products, to intellectual property to be able to
    protect and incentivize businesses here in this country to be
    able compete internationally and protect their products so they
    can compete and provide jobs here.
        Dr. de Rugy a while ago made the comment that she would
    like to see it all go away. Well, that would be great. If we
    lived in a perfect world, that would be fine. But if that would
    happen and none of the rest of the world disarmed, as the
    comment has been made before a couple of times, what would
    happen? Let's stop and think about that for a second. What
    would happen if we did away with all our tariffs, all the
    intellectual property protections, and the rest of the world
    could really come in and rape and pillage our industries
    through the this country. We would have no ability to protect
    them. They could compete, subsidize, and take all of our jobs
    away. Yes, we would lower the price of products at the
    supermarket and the hardware stores and whatever, but our jobs
    would certainly be gone, wouldn't they? And we would suffer.
    Quality of life would go down, and some things would be a
    national security problem for us because we would lose the
    ability to be able to build things, provide services for things
    that are of national importance to ourselves. In my district
    alone, we had the last lead smelter in this country, and it
    went out of business because of the EPA in the beginning of
    January. You know what we do with the lead that is mined in my
    district? We send it to China. You know what we do when we want
    to build a bullet? We have to go to China and buy our lead
    back. That is what would happen if you continue down this path
    of forgetting about how to protect the ability of our
    industries to compete.
        Is it a perfect world? No, it is not. It is not what I
    would like to have either. But at the end of the day, I think
    that we have to find a way to come together to realize that
    there has to be a way to find a middle ground on this, to
    reform this thing. I am a banker. I can tell you there are a
    half dozen things I would love to see changed about this thing.
    I am working with Congressman Campbell on trying to do that
    because I believe that this can be done. I believe that there
    is enough good about this thing, this entity that we can use it
    for the good of our people, our country and our industries.
    Does it need to be reformed, absolutely. There are a few things
    in there that drive me up a wall.
        And I am glad, Mr. Anderson and Mr. Moak, that you brought
    those to light today.
        Mr. Wilburn, you also make a great point from the
    standpoint of the importance of how this Bank can help small
    businesses compete, can grow, can market a product that may not
    be able to even be marketed here in this country but can be in
    other countries around the world. And by enabling our markets,
    our entrepreneurs in this country to be able to build that
    product, can market it and bring revenue to our country instead
    of sending it out.
        Mr. Chairman, I yield back the balance of my time. I
    appreciate the opportunity today.
        Chairman Hensarling. The gentleman yields back.
        The Chair now recognizes the gentlelady from Wisconsin, Ms.
    Moore.
        I'm sorry, if the gentlelady would suspend, I will
    recognize the gentleman from Texas briefly for unanimous
    consent.
        Mr. Green. Thank you, Mr. Chairman. I ask unanimous consent
    that the letters and documents that I referenced be submitted
    for the record.
        Chairman Hensarling. Without objection, it is so ordered.
        Now, I recognize the gentlelady from Wisconsin.
        Ms. Moore. Thank you so much, Mr. Chairman, for having this
    hearing. I think it is extremely important to everyone.
        I do want to raise a bit of caution to Captain Moak and to
    Mr. Anderson here. I have heard you say continuously that you
    want the Bank to be reformed and not dismantled. I have clearly
    heard that, but I want you to be clear that this hearing is
    about whether or not we are going to reauthorize this Bank, and
    the authorization is going to expire in 90 days or so. And
    there are not many days left in this session.
        Our chairman has been very articulate in indicating that he
    does not believe in this kind of government activity. We had a
    very passionate witness, Dr. de Rugy. I am sorry that she had
    to leave before I had a chance to ask her some questions. Very,
    very passionate, given her economic view that this is bad.
        So I want you to be clear that you are sitting on the side
    of people who do not want this to be extended.
        I also want to associate myself with many of the excellent
    questions and comments that have been made by my colleagues on
    both sides of the aisle and just really want to remind people
    that we are not talking about just Boeing or the airline
    industry here. I represent an area that is home to six Fortune
    1,000 companies, manufacturers like Johnson Control, Rockwell,
    and Harley-Davidson. We are second in the country in
    manufacturing, and we are dominated by small to medium-sized
    metal fabricators that export all over the world and really
    need the Ex-Im Bank, so we are not just talking about one group
    of employees, and I am very, very sympathetic and empathetic to
    them, but there are hundreds of thousands of other employees
    who rely on these activities.
        And, indeed, Delta got a $45.5 million subsidy from the
    Export-Import Bank for their engine maintenance services, 400
    jobs that rely on the Export-Import Bank in order to do
    maintenance, I believe for Brazil. I see you shaking your head
    over there. Maybe I will give you a chance to answer.
        I have a chart up here because there are a couple of things
    that I really want to point out. We have heard a lot of
    testimony about how the Export-Import Bank creates competition,
    and that green line below shows the last nine brand new
    airplanes that were built by Boeing. That is the interest rate
    and the price that they paid as compared to the commercial Bank
    financing rate in the red, and the blue line there is the OECD
    agreement, the gentleman's agreement that we have heard so much
    about, with regard to what export credit agencies can provide.
    So Delta is buying planes at that green level. We are not
    squeezing out the private sector.
        One other thing that I continue to hear over and over again
    was about the Cliff Mine in Michigan and how the Export-Import
    Bank was creating an uncompetitive situation. And I am
    disturbed because Caterpillar is headquartered in the Midwest,
    and they have a huge operation in Mr. Ryan's district right
    across the street from my district. Many of my constituents
    work at Caterpillar. And the iron ore that was coming out of
    the mine in Australia and the one coming out in Michigan were
    two different iron ores, two different applications. Apples and
    oranges are both fruit, but they are not the same. That was not
    the truth.
        I don't have much time, so I will yield the rest of my time
    to Mr. Heck.
        Mr. Heck. I would just like to make the point that the
    threat to the American manufacturing base is existential. It is
    very real. As we sit here, the Chinese, at considerable state
    investment, are developing an airplane to complete with both
    Airbus and Boeing--the C919, I believe. They have an export
    credit authority that is larger than ours, that is a larger
    percentage of their GDP than ours, and be assured that when
    they successfully complete development of their airplane, they
    will compete with us on the open market. More to say later.
        Chairman Hensarling. The time of the gentlelady has
    expired.
        The Chair now recognizes the gentleman from Tennessee, Mr.
    Fincher.
        Mr. Fincher. Thank you, Mr. Chairman.
        I am going to give Mr. Anderson briefly a chance to
    respond. I also have the question that you guys did receive
    financing from a Canadian import-export.
        Mr. Anderson. I am glad you asked the question about GOL
    Airways. First of all, Delta is a huge manufacturing company.
    We have 7,000 manufacturing jobs, and we are one of the largest
    engine overhaul companies in the United States. We run the
    largest shop in the United States. And GOL is a terrible
    example for the Ex-Im Bank, and I think it was something they
    contrived to try to say it created jobs at Delta, as we are an
    opponent of the Bank. In 2010, we won a worldwide competition
    to overhaul engines at GOL Airways in Brazil. It had nothing to
    do--the Ex-Im Bank wasn't involved, and we won it against
    Lufthansa and against GE to overhaul their engines in Atlanta.
    Two years later, the Bank went down to Brazil and gave them a
    loan for .622 percent--and I know about this because we own
    part of that airline--and then issued a press release saying it
    created 40 jobs at Delta. That is just false.
        Mr. Fincher. Okay. Mr. Anderson, let me start by saying, as
    someone who lives 60 miles north of Memphis, I love Delta Air
    Lines. And the pilots and the airline, the flight attendants,
    you do a great job, so please don't hold anything I say against
    me today as we fly in the future. I was born at night but not
    last night.
        I didn't support reauthorization last time of Ex-Im Bank
    because I felt that reforms that needed to be made were not
    made. But today, listening to the testimony from all three of
    you--and the doctor is gone--reforming Ex-Im Bank with reforms,
    I think you all would support reauthorization. Correct?
        Mr. Anderson. With reforms.
        Mr. Fincher. With reforms. As we have been talking, and I
    have a whole package of reforms here that we have been working
    on for the last 6 weeks, 2 months. A thousand jobs in the
    Eighth Congressional District of Tennessee, my district, are
    supported by the investment of Ex-Im Bank. This is not about--I
    have heard some people today talk about 10 big companies or
    whatever. This is not about leadership and our party. I think,
    as Republicans, we are all trying to get to the same place of
    having a government that is more accountable and more
    transparent and more responsible with taxpayer dollars. This is
    about, for me, the jobs in my district.
        And it is going to be hard for me to go back home, Mr.
    Anderson and Captain Moak and Mr. Wilburn, and have my
    constituents ask, ``Congressman, have you balanced the
    budget?'' And I am going to say, ``Well, we are working on
    it.'' And they are going to ask, ``Congressman, did you get rid
    of Fannie Mae and Freddie Mac?'' And I am going to say, ``Well,
    we are working on it with the PATH Act.'' ``Well, Congressman,
    the only thing that you have done is you have gotten rid of an
    investment that was creating a thousand jobs in our district,
    and now I am on unemployment. I don't have a job.''
        I have a paper right here: ``U.S. economy shrank at steep
    at 2.9 percent rate in quarter one.'' The Commerce Department
    says the first quarter contraction was even more severe than
    the 1 percent annual decline it estimated a month ago. Another
    major factor was a bigger trade deficit than initially
    estimated.
        Again, if we don't reform Ex-Im Bank, then we will have
    some real problems. And as a lot has been said today about the
    way that Ex-Im Bank is being operated, Mr. Hochberg, if they
    won't respond to the changes that we are trying to make, maybe
    Ex-Im Bank needs to be--maybe we will need to clean house
    there. But please, let's not overreact. Let's try to fix this
    investment. Let's make it better. Let's get back to the
    original mission of Ex-Im Bank, and don't hurt jobs in our
    districts.
        I am going to have a hard time, I am just going to tell
    you, going back home to my district and telling my people, my
    folks, that the only thing I have done is kill jobs for my
    district. Let's try to work this out. I think we can.
        Again, I have a whole list of reforms here I will be glad
    to talk to anybody about. I appreciate Mr. Campbell and the
    work he has done.
        And I appreciate all of you gentleman, and we are going to
    reform this hopefully and make it better.
        And with that, I yield back, Mr. Chairman.
        Chairman Hensarling. The gentleman yields back.
        The Chair now recognizes the gentleman from Maryland, Mr.
    Delaney.
        Mr. Delaney. Thank you, Mr. Chairman.
        I want to thank all the witnesses for joining us here
    today.
        Mr. Wilburn and Captain Moak, thank you.
        And, Mr. Anderson, I want to thank you, in particular, for
    joining us and for bringing so many of your colleagues. Delta
    is an important and iconic company. I think you all should be
    congratulated for the great work you have done positioning this
    airline as such a successful business. And the fact that all
    your colleagues joined you here today is a reflection of the
    good culture of the airline and your good leadership. So I just
    want to make it clear that I think what you are doing is
    terrific.
        Mr. Anderson. Thank you.
        Mr. Delaney. My question is actually more of a factual
    question. And perhaps, unlike some of my colleagues, I don't
    actually know the answer to my question before I ask it.
        But I was struck by this page when you put it up, and I was
    very concerned by it because, as I think many of my colleagues
    know, I care deeply about free markets and believe that market
    pricing should dictate all of, kind of, government financing.
    And when I saw this, I was very concerned about that, because
    it said that the government is making a loan at 3.4 percent and
    the same loan in the market would be made at 6.1 percent, and
    that is obviously a very big subsidy.
        But, as someone who is used to reading footnotes, I did
    read the footnote, and it said that the private-market example
    is something called Doric Nimrod Air Finance Alpha. I looked
    that up. And that is a special-purpose entity based in Ireland
    that owns 58 airplanes and leases those 58 airplanes to about a
    dozen carriers, including the Emirates. And it leases those
    airplanes on an operating lease basis, not a capital lease
    basis, which means the risk of ownerships and the benefit of
    ownerships are not fully transferred to the lessee.
        And so, when I saw this, recalling my days in the credit
    business, I said, well, this strikes me as a worse credit,
    because I would much rather lend directly to Emirates and have
    their full faith and credit saying that they are going to pay
    back every penny of the loan on a fixed amortization, which is
    what Ex-Im finances, versus the loan to a special-purpose
    entity that has, structurally and contractually, certain
    limited recourse.
        Now, I may be wrong about this, because, again, I am just
    reading the footnotes and I just did some searching on my
    little Google device here. But my question is, first, is that
    accurate?
        And, second, do you think, as the CEO of Delta, if you were
    to borrow directly from a Bank and put the--and I recognize you
    didn't have to borrow to buy your planes, which is great. But
    if you were to put the full faith and credit of Delta Air Lines
    on the line, as well as a lien on the aircraft you purchased,
    wouldn't you expect to borrow at a lower rate than if you were
    to set up an unrelated company that purchases the airlines and
    signs a lease to you with certain limited recourse and then you
    were to get a loan for that special-purpose entity?
        So I am really just trying to figure out what the apples-
    to-apples pricing comparison is.
        Mr. Anderson. What we were to do here is make it apples-to-
    apples. Okay? And if you go down through the footnotes,
    obviously, the coupon--these were both public market
    financings.
        Mr. Delaney. Right.
        Mr. Anderson. The one on the left had an Ex-Im Bank
    guarantee attached. Right? And you can see the collateral. The
    coupon is beyond question--
        Mr. Delaney. Yes, that is obvious.
        Mr. Anderson. The coupon was obvious. The loan-to-value
    ratio--with the Ex-Im, you get a higher loan-to-value ratio
    because you don't need as much equity. And what you have
    approximated here is that this is the Emirates credit, and--
        Mr. Delaney. But isn't it true that it is actually not the
    Emirates credit?
        Mr. Anderson. No. But it is the Emirates credit, based on
    what Moody's said. I can give you--
        Mr. Delaney. I read the Moody's credit report on my device
    here, and it talked about how the lessor had risk of the value
    of the asset at the end of the term and that it wasn't fully
    recoursed to the Emirates.
        Mr. Anderson. Pardon?
        Mr. Delaney. That it wasn't really recoursed to Emirates?
        Mr. Anderson. No, this is an apples-to-apples, because they
    were both issued at the same time and both of them were public
    financings.
        Mr. Delaney. Right, but--
        Mr. Anderson. And one of them decided they were going to
    lease, so I think the market-based financing was a lease-based
    financing on the A380s.
        Mr. Delaney. Right. But at the end of the lease term, the
    lessor takes back that airplane if the lessee doesn't--like, if
    you leased a plane, at the end of 10 years, if you didn't want
    the plane, you would give it back. And if--
        Mr. Anderson. Correct.
        Mr. Delaney. --someone had a loan on that plane, that loan
    won't be your obligation.
        Mr. Anderson. But airlines lease--we tend to want to own,
    right, because you get the residual value. But part of what the
    market is reflecting here is that they are going to return--
    they want the option to be able to return the airplane in 5.7
    years, because that is the average life of the lease.
        Mr. Delaney. So, just a quick question. Do you think you
    should pay less for the direct Delta credit in the market
    secured by assets than you do for a lease?
        Mr. Anderson. Well, yes. You will--I think you are better
    off--well, it depends on the airplane. And that is probably
    what they are doing here. They probably want to own the 777s,
    but they probably only want to lease A380s.
        Chairman Hensarling. Time--
        Mr. Anderson. And this is what a lease looks like for
    Emirates at their credit.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from South Carolina,
    Mr. Mulvaney.
        Mr. Mulvaney. Thank you, Mr. Chairman.
        When we started today, I believe it was somebody on the
    other side--in fact, I know it was somebody on the other side,
    I believe it was Mr. Heck; I wish he was still here--who
    challenged us not to believe false statements regardless of the
    number of times they are repeated. And I think that is always
    good advice.
        I would think it is similarly good advice to not believe
    statements that you can't prove. And one of the things that I
    think he said--and I don't want to put words in his mouth, but
    I couldn't find the transcript--was that the Export-Import Bank
    had created 255,000 jobs last year. If I have that number
    wrong, I apologize. If I got the exact verbiage wrong, I
    apologize. But that was the general extent of things. Nobody
    can prove that number.
        And I want to explore that a little bit. I want to explore
    the weaknesses in these job numbers. Mr. Fincher talked about
    1,000 jobs in his district. Nobody can prove that number.
        Mr. Anderson, you have mentioned in your testimony that the
    Export-Import financing in the aviation sector has cost you all
    7,500 jobs. Ex-Im says that its Boeing-related activities
    created 51,000 jobs. Who am I supposed to believe between those
    two?
        Mr. Anderson. Me.
        Mr. Mulvaney. Why?
        Mr. Anderson. In the instance of Delta, in the example that
    we used with Air India, that actually happened. We went through
    a reduction in force. Fortunately, we were able to get enough
    employees to take voluntary early retirement. But when we
    pulled all that flying out of India--we had a very successful
    business flying to Mumbai. And we bought, by the way, two 777s
    and financed them ourselves to be able to do that service. And
    so, I know those jobs are there.
        I think you make a correct intellectual point on both sides
    of the debate, honestly, in that it is very difficult to put a
    precise number, for you or for any of us here.
        And so I guess what I rely back on is, I see what goes on
    in the marketplace. We have one going on right now in JFK to
    Milan, Italy, with Emirates Airlines, which has financed
    airplanes from the Ex-Im Bank. And they have dumped 65--they
    have increased the capacity in Milan to JFK 65 percent. That is
    going to have an impact on jobs in the United States over time.
    And they are deeply subsidized, which probably really gets to
    the deeper point of trade subsidies.
        But, look, you make the right intellectual point. These are
    estimates; they are estimates by everyone. And they are a best
    judgment. I will tell you, the Air India numbers are right,
    because I was involved in pulling it down and having to do the
    reductions in force.
        Mr. Mulvaney. And if you do scratch a little bit deeper at
    the Export-Import Bank numbers, what you will see is they are
    using formulas that use information from 2002.
        If Ms. de Rugy was here, I would talk to her about the
    foreign components. Boeing advertises that 30 percent of the
    787 is made overseas. And it is unclear how many of those
    255,000 jobs, Mr. Heck, are actually jobs overseas. In fact,
    when the GAO asked the Export-Import Bank about that in its May
    report, it said that Ex-Im officials told us they had not
    assessed the extent to which this limitation affects the
    overall jobs estimate.
        ``Supported'' versus ``created'' is another little twist of
    the language. ``Supported'' and ``created'' are not the same
    thing. Just because a job is supported, doesn't mean it is
    going away if the Export-Import Bank financing goes away at the
    same time.
        I think it is important to recognize one thing as we deal
    with these things and we start using these numbers when we talk
    about jobs: The only reason the Export-Import Bank counts jobs
    is because of us. That is it. That is the only reason they
    count jobs, is so they can come in here and try and justify
    their existence.
        I am not making this up myself. I am looking at the GAO
    report, and it says, ``Export-Import officials told us they use
    the results of its jobs calculations for reporting purposes
    only. According to the Ex-Im officials, Ex-Im calculates the
    number of jobs supported for the transactions reviewed by the
    board of directors at the request of one of its board members.
    Ex-Im board members stated that the purpose of reporting these
    numbers is to give Congress a sense of the employment effects
    of Ex-Im activities. They do not use them for decision-
    making.''
        The only reason they are giving you the 255,000 number is
    because they want--excuse me--255,000 jobs is because they want
    to continue to exist. And at some point we have to decide which
    numbers are real and which numbers are fake.
        And I would suggest to friends of mine on both sides of the
    aisle that, as between a government agency and bureaucracy that
    is trying to make an argument for getting more money and
    continuing to exist and a private sector company that is simply
    saying, please leave us alone so that we can compete, it is the
    latter that is the more reliable number. And the 255,000 is not
    a real number. But the 7,500 jobs that Delta lost are real, and
    that is what we should be focusing on.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair recognizes the gentleman from Washington, Mr.
    Heck.
        Mr. Heck. Thank you, Mr. Chairman.
        And to clarify the record, it is 205,000 jobs for 2013. I
    believe it was 255,000 in 2012, as reported by the industry,
    actually, to the Export-Import Bank.
        Mr. Anderson, I want to ask you a question to which I
    suspect I know the answer. Would you favor continuation of the
    Small Business Administration?
        Mr. Anderson. I don't know anything about the Small
    Business Administration. I am a large business. I could
    certainly go learn about it, but I--
        Mr. Heck. Please don't.
        Mr. Anderson. --don't know. I just don't know. I have never
    done any studies. I have never had anything to do with the
    Small Business--I don't even really know what it does.
        Mr. Heck. I asked because I thought I knew the answer,
    which I did, and I thought you would have said ``yes.'' And I
    was--
        Mr. Anderson. I can say ``yes'' if you want me to.
        Mr. Heck. It is nice to know what kind of thought you give
    to your testimony here today, sir.
        Mr. Anderson. Well, no, I am just totally--if you think
    that it is--
        Mr. Heck. No, I--
        Mr. Anderson. --a worthwhile program, I am happy to--
        Mr. Heck. Time out. Time out.
        Mr. Anderson. --support it.
        Mr. Heck. I--
        Mr. Anderson. I didn't come here to testify about the Small
    Business Administration.
        Mr. Heck. Admittedly.
        And I wanted to make the analogous point that the SBA, in
    some ways, functions as the Export-Import credit does. The SBA
    enjoys an enormous amount of public support and is kind of a
    given. And I wanted to give color to your earlier remarks that
    it was a reformed Ex-Im going forward you were seeking, not
    elimination of it. That was my only motivation.
        I do want to make the point that those of you who are
    aggressively seeking reforms, which may or may not enable the
    continued existence of Ex-Im in any kind of meaningful way, are
    playing with fire. You are playing with fire.
        I want to go back to how I ended up, in my brief time that
    the gentlelady from Wisconsin gave--we could wake up in 20
    years and still have a duopoly in terms of airplane production
    in this world, but unfortunately it would be Airbus and the
    state of China and their C919. I don't think America would be
    better off for that. I think America would be worse off.
        It is the broader point I seek to make, however, which is
    the importance of aerospace production, which is one of the
    important beneficiaries of the Export-Import Bank, and the
    domestic industrial base of this great Nation. We don't want to
    lose it.
        We have lost really key components of our industrial base
    over the last several decades, and most of us have lived to
    regret it. But the difference is this is not one we can
    reconstitute very easily. And, in fact, it is not unrelated to
    this Nation's security. The hundreds of thousands of people who
    put together those great airplanes and, frankly, those national
    security products are a part of keeping this Nation safe.
        And, again, I think we are playing with fire if we think
    that we can do away with the Export-Import Bank and not have
    that critical part of our industrial base decline. I think we
    are playing with fire if we think we can be as aggressive about
    certain kinds of reforms that would have that effect and not
    acknowledge it.
        I was delighted to hear my friend, Mr. Campbell, indicate
    that he had come up with a bill. I respect him a great deal.
    This institution is going to miss him. Frankly, I am going to
    miss him. This committee is going to miss him. And I thought it
    was an act of considerable integrity that he accepted
    responsibility for the development of that which he presented
    today, having been just done on that side.
        He knows that I talked to him on the Floor months ago and
    asked that our side be a party to those conversations. But we
    are where we are. And Mr. Campbell has taken the constructive
    step to put a bill on the Floor, which--or a bill on the table,
    which none of us have had the opportunity to read, so we know
    not what its impacts will be.
        But here would be my point about that, and granting him
    credit for that work, which I know was hard: The exact number
    is 97. Ninety-eight days from now, the doors of the Export-
    Import Bank will shutter, and America will be worse off for it.
        And the alternative is that we have a hearing on an actual
    bill that Mr. Campbell has developed and begin the give-and-
    take about what the path forward might be. Because, in fact, we
    only have 97 days.
        And I don't want to wake up in 20 or 30 years, should I
    have the great blessing to still be around, and look back and
    rue that we were the ones that allowed another enormous
    degradation of our Nation's domestic industrial base, as we
    have in so many other sectors. This Nation cannot afford it.
    Our quality of life cannot afford it, our standard of life
    cannot afford it, and the health of our economy cannot afford
    it.
        Thank you, Mr. Chairman.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from Kentucky, Mr.
    Barr.
        Mr. Barr. Thank you, Mr. Chairman.
        Thanks to the witnesses for your patience and for your
    persistent testimony here today.
        First, for Mr. Wilburn, I appreciate that you are a small
    business owner and you are an entrepreneur. You mentioned that
    you were ``a free-market guy.''
        Are there other means that you could identify making your
    company more competitive in the global marketplace besides
    reauthorization of the Ex-Im Bank? For example, lowering the
    highest corporate tax rate in the developed world? Ending the
    war on domestic energy production to make sure that we have an
    affordable and reliable supply of industrial energy costs?
    Repealing Obamacare, for example? Promoting free trade?
    Lessening the regulatory burden on U.S. companies, which is
    estimated to cost the American economy $1.8 trillion annually?
        Do you see some of these policies, which produce
    impairments to our competitiveness, as equally or even more
    important than reauthorization of the Ex-Im Bank to your bottom
    line?
        Mr. Wilburn. Speaking to my bottom line, I think all these
    things that you mentioned need to be considered in the argument
    that they are going to have in the next couple of days here
    really.
        And it is important, I think, to give you a number, if I
    may just diverge from the question for a moment. There were 165
    jobs that we created. We audited those. We will be happy to
    share that with the committee. But--with our project in Brazil.
        But, to your point, without the Export-Import Bank existing
    in a form that would allow me to compete with the ECAs of the
    world, for my products to get there, I can't imagine my company
    surviving.
        But I also think, as a free-market person, that a lot of
    the reforms that you are talking about and a lot of the
    policies you are talking about need to be debated, need to be
    debated civilly. We don't need to use words like ``crony
    capitalist'' and insult some of my people and small business
    people with that. We need to get into the productive words like
    you just mentioned, have a discourse.
        Mr. Barr. Just to conclude, you would agree, then, that
    there are many, many ways to make the United States and our
    businesses here, including yours, much more competitive
    independent of the Ex-Im Bank issue?
        Mr. Wilburn. Absolutely.
        Mr. Barr. Okay.
        Let me just ask the other witnesses to comment on that, as
    well, just very, very briefly.
        Captain Moak. The one thing I would focus on is, it is one
    thing competing in a free marketplace, and it is another when
    our government subsidizes our competitor.
        That is what we are here about. We are not here about all
    these other things that people are bringing in. We have
    somebody, our own government, government policy subsidizing
    someone, putting a piece of equipment on top of us. We are
    losing jobs. That is what we are about.
        Mr. Barr. Thank you, Captain Moak.
        And, Mr. Anderson, when you answer the question, I would
    also put something else out there for you to comment on. In
    response to my colleague Mr. Capuano's argument earlier in the
    hearing today--and I will summarize his argument: Since
    everybody else is doing it, we should, too. And we have heard
    that in some form or fashion from a number of my colleagues
    here today.
        Is that the right attitude? That because everybody else is
    doing it, we should do it? And how would you respond to that?
        Mr. Anderson. In our specific instance, it is not everybody
    else; it is three countries. It is England, France, and
    Germany, our three closest allies and trading partners. So, in
    terms of aircraft finance, this is--and everything else we do
    with those three countries, this is something that is
    immediately solvable with respect to financing.
        On the broader question, I think the really broader
    question is, I don't think we are very good at negotiating
    trade agreements in our country. And while we all support, I
    think on both sides of the aisle, the free trade, what ends up
    happening is we all--in our industry, we don't have free-trade
    agreements. We have unfair-trade agreements.
        And I think the biggest thing we could do as a country is
    make sure our trade agreements are, in reality, free-trade
    agreements and that U.S. companies are not put at a
    disadvantage.
        Mr. Barr. Mr. Anderson, in my remaining time, I will note
    that I appreciated your comments about lost pensions at your
    company. In my congressional district and just outside of my
    congressional district, my constituents in the coal industry
    have not only lost their pensions, they have lost their jobs.
    And what the Export-Import Bank looks to do is to harmonize
    their policies with the Administration's job-killing policies
    that have put those people out of work.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from Michigan, Mr.
    Huizenga.
        Mr. Huizenga. Thank you, Mr. Chairman. I appreciate that.
        Mr. Anderson, I know you were being quizzed about the Small
    Business Administration. I won't ask you about the EPA, I won't
    ask you about NLRB, I won't ask you about a lot of other things
    that have been going on in the Administration. But it does
    strike me, after doing a little basic Internet research here,
    that we might be talking about the ``big business
    administration'' here, with Ex-Im.
        General Electric has $656.6 billion in assets on their
    balance sheet, which includes a financing arm, GE Capital, with
    $517 billion in total assets. That makes them the eighth-
    largest Bank holding company in the United States. The Boeing
    Company, with $92.7 billion in assets on their balance sheet,
    with their finance arm with $3.9 billion in total assets.
    Caterpillar--I am familiar with heavy equipment. I own a small
    sand and gravel operation, and have owned Caterpillar products
    in the past. Their assets are $89.9 billion on their balance
    sheet.
        I guess maybe my question is, companies--and you are very
    familiar with how you finance large companies. And as you are
    going through--and you said earlier you paid cash, or will be
    paying cash--I am not sure exactly how that works, if it is up
    front or afterwards--but you are purchasing 100 airplanes. How
    does financing of these large companies work?
        Mr. Anderson. Typically, financing in the large companies
    work through public markets in the United States. So those big
    firms will go to the public bond markets. The Bank markets have
    really dried up after Dodd-Frank and the economic reforms. So
    there is still some Bank financing, but, by and large, it is
    both public market equity financing, public market secured
    financings, and public market financings.
        I will note that GECAS and the Bank compete all the time.
    So we own a stake in a company called Aeromexico, and
    Aeromexico bought some Boeing airplanes. And after it was over
    with, General Electric was competing against the Ex-Im Bank to
    finance the fleet. So GE kind of has a foot in both camps. They
    are the largest aircraft--
        Mr. Huizenga. Hey, if you can have your cake and eat it,
    too, that is a pretty good spot to be in.
        Mr. Anderson. They are the largest aircraft financier in
    the world, with GECAS, and at the same time they make engines
    and they are a participant in Ex-Im Bank financing. But then
    they compete all the time against the Ex-Im Bank financing arm
    to see if they can get the airline business around the world.
        Mr. Huizenga. I guess my question is, couldn't these
    companies find traditional financing?
        And, you had put up the Emirates Air situation. I think it
    is a $100-billion sovereign wealth fund that they have. And the
    number that we have heard is 98.4 percent of all exports don't
    use Ex-Im financing; they are done the traditional way. That
    means about 1.6 percent that do, of which about a third
    probably could not get that kind of traditional financing.
        I know, Mr. Wilburn, you might fall into that. But if I
    were you, frankly, sir, I would be a little concerned that you
    have major companies like that literally sopping up any
    opportunity that you have and other small business owners might
    have to access some of these programs. And yet you get trotted
    around as the showpiece of why we need to keep this, when, in
    fact, it is clearly going to these massive, massive companies.
        I don't know if you care to comment.
        Mr. Wilburn. With all due respect, nobody trots me around--
        Mr. Huizenga. Okay.
        Mr. Wilburn. --except me.
        Mr. Huizenga. I'm sorry. I did not mean specifically you,
    but--
        Mr. Wilburn. No, I understand that, sir, and I--
        Mr. Huizenga. --I have a number of companies that come in.
        Mr. Wilburn. I understand.
        Mr. Huizenga. I can tell you this. They don't come in with
    the big companies. They come in trying--
        Mr. Wilburn. I will give you my--
        Mr. Huizenga. --to play the small.
        Mr. Wilburn. I will give you my balance sheet. I am a
    private company. To put it in perspective, it is $5 million
    right now. Okay? So you are right, I am competing with
    billionaires. Okay?
        But there is a lot in common with these billionaires that I
    am hearing today that encourages me. Because if I can get these
    types of executives to give this kind of focus to small
    business and say that they are willing to work and negotiate to
    keep to the Export-Import Bank alive, I am all for that. I want
    to sit down with these gentlemen again.
        Mr. Huizenga. That is great. In my last 10 seconds, I guess
    I would express to you I am not concerned that is the focus of
    the Ex-Im.
        And, Mr. Anderson, I will gently remind you that, actually,
    Canada is our largest--as Chair of the Inter-Parliamentary
    Group with Canada, I have to point that out they are our
    largest trading partner.
        Chairman Hensarling. Time--
        Mr. Huizenga. Thank you.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from Ohio, Mr.
    Stivers.
        Mr. Stivers. Thank you, Mr. Chairman.
        Before I begin my remarks, I would ask unanimous consent to
    submit a letter from PPG, which is a company that has 200
    employees in my district. I would like to submit their letter
    for the record.
        Chairman Hensarling. Without objection, it is so ordered.
        Mr. Stivers. Thank you.
        Thank you for being here. I would like to thank all the
    witnesses for being here. I guess Ms. de Rugy could not stay. I
    am sorry to hear that.
        I actually care what the panel thinks. I am not going to
    make a 5-minute statement. I am going to ask you some questions
    because I came to learn from you. And I appreciate the chairman
    putting this panel together.
        So you have all spoken earlier. Could you please raise your
    hand if you could support Ex-Im Bank reauthorization with
    meaningful mandatory reforms? With meaningful mandatory
    reforms, could you support reauthorization?
        Mr. Anderson. Provided it addresses the issues that I have
    laid out--
        Mr. Stivers. Sure.
        Mr. Anderson. --and we stop--
        Mr. Stivers. You have passionately laid those out.
        Mr. Anderson. Yes.
        Mr. Stivers. Let's assume it addresses your issues with
    mandatory reforms.
        Could we see that again? Could you raise your hand?
        Captain Moak. Could I just say--
        Mr. Stivers. Mr. Wilburn, are you for reauthorization
    with--
        Captain Moak. Could I say, reforms, accountability, and
    compliance?
        Mr. Stivers. Sure. Okay. Reforms, accountability, and
    compliance.
        Could you please raise your hand if you are for
    reauthorization of the Ex-Im Bank with reforms, accountability,
    and compliance is mandatory, that sticks, and that addresses
    the issues you--
        Mr. Anderson. That stop wide-body financing--
        Mr. Stivers. So did everybody raise their hand? Okay.
        Chairman Hensarling. I am not sure your microphone is on,
    Mr. Wilburn.
        Mr. Stivers. Okay. He wants to know what the mandatory
    reforms are.
        But you could support it--
        Mr. Wilburn. The concept? Yes. There needs to be--
        Mr. Stivers. --with reforms?
        So I just want to show everybody who happens to be watching
    that the panel unanimously--I'm sorry Ms. de Rugy could not
    stay. The irony is that she is from France--
        Mr. Anderson. She would probably vote ``no.''
        Mr. Stivers. She might vote ``no,'' but she didn't stay, so
    the panel is unanimous in supporting reauthorization with
    meaningful mandatory reforms.
        Many of my colleagues, I think, do very well in the
    theoretical world, but I live in the real world. And 41
    countries have export finance agencies. And, I think Mr.
    Sherman from California talked about unilaterally disarming. I
    think that is a bad idea. But I think there is a way forward
    here.
        Mr. Anderson, you passionately argued for some meaningful
    reforms. And you talked about the handshake agreement between
    Boeing and Airbus of France, and they now agree to exclude some
    things and not cover certain things.
        If the United States completely walked away and did not
    reauthorize the Ex-Im Bank, do you believe Airbus would hold
    firm to the handshake agreement? It is kind of like--the
    handshake agreement is like mutually assured destruction,
    right? So they each have something, and they agree not to use
    it. If Boeing didn't have it, do you think Airbus would stick
    with the handshake agreement?
        Mr. Anderson. The commercial leader, John Leahy, at Airbus
    has said yes, that if the United States--and you hear this from
    both sides. I have heard it from Boeing, and I have heard it
    from Airbus: ``If the other side stops using Ex-Im Bank
    financing, we will stop using it.'' And I have that from the
    chief commercial officer of Airbus, and I have had it from
    Boeing executives.
        Mr. Stivers. I hope that is right.
        And I will tell you that I believe that--and I am sending a
    letter to the U.S. Trade Representative and trying to get some
    of my colleagues to support it, to ask that we immediately
    enter into negotiations with the OEDC and with all the
    countries around the world, the 41 countries that have export
    finance agencies to end them simultaneously.
        But I think if we end ours with the hope of goodwill that
    they might do the same thing, that might be a little
    shortsighted. I am sure that Ms. de Rugy and the academic world
    thinks that is a great idea, but I am not sure it works in the
    real world.
        Yes?
        Captain Moak. I just have one point of clarification--
        Mr. Stivers. Yes, Captain?
        Captain Moak. --Congressman. Thank you.
        This unilateral-disarmament talking point that people use
    all the time that I hear, the buzz word, the reality is, this
    government policy here, we are arming our competitors.
        Mr. Stivers. No, I--
        Captain Moak. Right now, our competitors are--
        Mr. Stivers. I recognize the need for reform.
        Captain Moak. We need that to come out.
        Mr. Stivers. I recognize the need for reform. But if we
    completely walk away from the entire thing--90 percent of these
    transactions are small business, like our other witness, Mr.
    Wilburn.
        And I have one last question. Did anybody read the
    Financial Times today?
        Mr. Anderson. No. I was getting ready to do this.
        Mr. Stivers. Okay. I am sure you were.
        So Mr. Luetkemeyer from Missouri mentioned earlier that 40
    percent of our finance transactions globally were covered by
    the OEDC rules. This year, it is down to 34 percent.
        The real risk is the rise of transactions that are not
    covered by the OEDC rules. That is why it is so important for
    us to engage in negotiations to fix this simultaneously across
    the world.
        Thank you.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from Wisconsin, Mr.
    Duffy.
        Mr. Duffy. Thank you, Mr. Chairman.
        Listen, on our side of the aisle, we oftentimes like to
    talk about free markets and free enterprise, how we are big
    advocates of that. But oftentimes we advocate that in theory,
    and sometimes in practice we are not so great at it.
        I think this has been a fascinating debate and conversation
    about Ex-Im reauthorization and, kind of, how we fall into the
    debate. None of us wants to see us lose American jobs. No one
    wants to see Ex-Im go away and Boeing see some substantial job
    losses. And we don't like to see the American taxpayer arm our
    competitors, which causes Delta to lose 7,500 jobs or more.
        I was sensitive to Mr. Fincher's comments about all of us
    who talk about balanced budgets and cutting spending, and one
    of the big first things we do is we cut Ex-Im Bank, and he has
    to go home and explain why he has lost a thousand jobs as the
    one big cost-cutting measure that he has done in Congress. That
    is a tough one.
        I think it brings us back to the budget debates we had at
    the start of this year, where we talked about cutting spending
    all over the place, but the first place we go is to cut the
    cost-of-living benefit increases to our retired veterans. Our
    veterans would all be onboard to cut spending, but if they are
    to say, listen, we are the first place you are going to go? You
    are going to cut us first? There are a lot of places you can
    cut. We will do our part, like we always have, but don't come
    to us first.
        Just a comment on our debate that we always have in the
    House.
        I appreciate Mr. Stivers' comments about the panel's
    commitment to--or, reserved commitment to reauthorization of
    Ex-Im.
        Mr. Anderson, what kind of reform do you think is
    necessary?
        And I know that, Mr. Moak, you talked about reform
    compliance and accountability.
        But what is needed on the reform front? Not just window-
    dressing, what is the real reform that is necessary to make Ex-
    Im work and get you to buy in?
        Mr. Anderson. Stop arming my competitors and taking my jobs
    away.
        Mr. Duffy. Throw me some specifics. You are advising the
    committee.
        Mr. Anderson. The specifics were the ones that were ignored
    the last time we did this and the Bank thumbed its nose at this
    committee.
        Mr. Duffy. Okay.
        Mr. Anderson. And it was very specific. We have to stop
    providing U.S. Government subsidies to foreign-flag,
    government-owned airlines that are usually subsidized on their
    own and have enormous creditworthy balance sheets.
        Mr. Duffy. No, no, I--you have made that point for 3 hours.
        Mr. Anderson. Let me be very blunt about this.
        Mr. Duffy. Sure.
        Mr. Anderson. Let's be very clear what happens with this
    financing. It improves the profit margins of the top 10
    companies in the United States that use it all the time. Okay?
    That is really what it does.
        Mr. Duffy. Mr. Wilburn?
        Mr. Wilburn. I have one reform that I would like to
    suggest--
        Mr. Duffy. Sure.
        Mr. Wilburn. --to the committee and to the Ex-Im Bank. Put
    more focus on small business job growth. It is as simple as
    that. Set not some kind of specious goals but some real goals.
    That is what I would like to see. I would like to really see it
    become the Bank of small business.
        Mr. Duffy. Just, I want to go to the gentlemen's agreement
    because I find that fascinating, that those countries who are
    providing the financing--oh, I'm sorry.
        Mr. Moak?
        Captain Moak. I just want to make that point. It is getting
    missed here because we are here, but over in Europe, British
    Airways, Lufthansa, and Air France want this to come down also
    because they can't access it. Okay? Airbus shouldn't be allowed
    to access ECA subsidies. They are getting--
        Mr. Duffy. Right.
        Captain Moak. --killed the same way Delta Air Lines is.
        Mr. Duffy. Well, in a sense--
        Captain Moak. So we need that reform there also. That is
    what is missed here.
        Mr. Duffy. And on the gentlemen's agreement, I find it
    interesting that the countries that provide the subsidy, if you
    want to call it a subsidy, are the very countries who are hurt.
    Where if you said, listen, we are going to allow the United
    States, Delta Air Lines, to say, well, listen, we are--all
    things being equal, I would say that Boeing makes a better
    plane, but if Boeing and Airbus were equal--
        Mr. Anderson. Not always.
        Mr. Duffy. --you could say--we will debate that later--you
    could say, listen, I am not buying any Boeing airplanes,
    because I am going to go buy Airbus, and I am going to get
    subsidized just like the rest of the world gets subsidized.
        But you don't have that option, right?
        Mr. Anderson. Well, no, you don't get--we don't get
    subsidized.
        Mr. Duffy. I know you don't, because you can't get--because
    of the gentlemen's agreement?
        Mr. Anderson. There is the gentlemen's agreement between--
    it is between Airbus and Boeing. It is the gentlemen's
    understanding--
        Ms. Duffy. Okay.
        Mr. Anderson. --that Ex-Im Bank financing won't be used in
    the United States, England, France, Germany, or Spain, because
    those are home-market countries where Airbus and Boeing
    airplanes--it will be an interesting question when Airbus
    starts making them in Alabama.
        Mr. Duffy. Fair enough.
        I yield back.
        Chairman Hensarling. The gentleman yields back.
        The Chair now recognizes the gentleman from Indiana, Mr.
    Stutzman.
        Mr. Stutzman. Thank you, Mr. Chairman.
        And thank you, gentlemen, for being here today. I have
    enjoyed the testimony and your comments so far.
        Obviously, this is something that is a big concern to a lot
    of us and especially those of us who want to see the private
    sector handle as much capacity as possible, especially when you
    are hearing a lot of discussion about Banks having plenty of
    capital, that people are looking to help.
        One of the folks that I spoke with in Indiana used to be a
    customer of Ex-Im Bank, and because of just the volatility
    around it and also his particular interest in finding another
    solution, he was able to.
        And so I guess maybe my first question would be directed to
    you, Mr. Wilburn, because I am a small business owner, as well.
    I understand the difficulties, the pressures that are on small
    businesses trying to make things work and trying to find new
    markets.
        Can you tell us a little bit, what else did you look at to
    see if there was another replacement besides Ex-Im, whether it
    was financing through a bank and some sort of insurance in
    executing transactions, anything like that you would have
    looked at before Ex-Im?
        Mr. Wilburn. I looked at all of those options with,
    primarily, my Bank, Wells Fargo, which was gracious enough to
    give me that working capital loan we talked about, where I had
    to leverage everything to support those export activities. But
    I am always, always constantly searching for those types of, I
    will call them, private solutions with Banks. And they are
    responsive, they will listen to me, but they don't respond with
    the funding.
        And, again, it is not my credit that is really called into
    question. When I am exporting my product to those exporting
    countries, I am relying on their credit and their
    creditworthiness. And it is difficult for my Banks to get that
    collateral and seize it, if you know what I mean--
        Mr. Stutzman. How long have you been in business?
        Mr. Wilburn. Ten years.
        Mr. Stutzman. Ten years. So did you see any difference
    before the Banking collapse? Was there better access to credit?
    When did you start using Ex-Im?
        Mr. Wilburn. I had a partner--my partner was one of the
    major investment Banks that was the last--I am underneath a
    nondisparagement agreement, so I have to be cautious. But, yes,
    they went Bankrupt. I didn't. My company was strong. It cost me
    $11 million to unwind that and 3 years to unwind that
    relationship.
        Mr. Stutzman. And that was before you started using Ex-Im?
        Mr. Wilburn. Yes, absolutely.
        Mr. Stutzman. So do you think--
        Mr. Wilburn. I was funded with a $25-million revolving
    credit line by that particular agency.
        Mr. Stutzman. So do you think the pressure today on Banks,
    whether through just the regulatory environment, Dodd-Frank, do
    you think that is putting more pressure on Banks and their
    ability to lend to small businesses and helping them in
    situations like yours?
        Mr. Wilburn. I tried to understand it and I have tried to
    address it in my remarks, and I was a little clumsy at it doing
    my research, but all I can say is that I think there are some
    barriers to entry for small business guys like me. And we have
    to take a look at the rules and the risk profiles to make it a
    more level playing field for us to have access to those capital
    markets.
        Mr. Stutzman. Mr. Anderson or even Captain Moak, would you
    have any information regarding that and just your experience
    around Ex-Im? And I know you are focused more on the bigger
    side, but smaller business, are there other opportunities and
    other solutions for smaller businesses to work outside?
        And would you make any comments about just the difficulty
    with credit today and the regulatory environment in which we
    live?
        Mr. Anderson. I can talk generally, that the credit
    environment is a much, much tighter credit environment. And
    with the mark-to-market rules, a lot of the Bank lending that
    we used to rely on, particularly in Europe, to finance
    airplanes is gone.
        So the number of sources for large structured finance,
    particularly given the Basel II requirements and the mark-to-
    market requirements, have really tightened up credit quite a
    bit in our industry. And a number of sources we used to have,
    where you could get a mortgage on an airplane, you can still
    get it, it just takes what Fannie Mae requires for a home, a
    bigger downpayment, a better credit rating--
        Mr. Stutzman. Yes.
        Mr. Anderson. --a better FICO score.
        Mr. Stutzman. And those are all the hard things with which
    small businesses have to deal.
        Captain Moak, you wanted to make a comment?
        Captain Moak. Yes. The only thing I would add is, we are
    going back to 2008 with the collapse. Okay? The U.S. Congress
    over a few days in 2008 was able to deal with that and come out
    with legislation. I am confident this body can address reform
    in less than 90 days on this issue.
        Mr. Stutzman. And, Mr. Chairman, if I could just make the
    comment, I think that we are focusing on something here that is
    a symptom with the regulatory environment that we live in, and
    we are trying to reauthorize a Bank that isn't part of the
    solution. We should be focusing on the--
        Chairman Hensarling. Time--
        Mr. Stutzman. --regulatory environment that we have.
        Thank you. I yield back.
        Chairman Hensarling. The time of the gentleman has expired.
        There are no other Members in the queue. So, Mr. Anderson,
    Captain Moak, Mr. Wilburn, we thank you for your testimony.
        We will excuse the first panel at this time.
        We would invite the members of our second panel to please
    make their way to the witness table.
        The committee will come to order.
        We will now turn to our second panel of witnesses, many of
    whom are familiar faces to this committee, so my introductions
    will be brief.
        If staff can be instructed to shut the hearing room doors.
        First, the Honorable Fred Hochberg currently serves as
    Chairman of the Export-Import Bank, a position he has held
    since 2009. The Honorable Osvaldo Gratacos currently serves as
    the Inspector General of the Ex-Im Bank. He has served in this
    capacity since 2010. Matthew Scire is the Director of Financial
    Markets and Community Investment at the GAO. Finally, Dr. Doug
    Elmendorf is the Director of the nonpartisan Congressional
    Budget Office.
        We welcome you each to the committee today.
        Without objection, your written statements will be made a
    part of the record.
        I believe all of you, hopefully, have testified before the
    committee before. You know the lighting system, so I will not
    go into that.
        Chairman Hochberg, at this time you are recognized for your
    testimony.

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

        Mr. Hochberg. Thank you.
        Chairman Hensarling, Ranking Member Waters, and committee
    members, thank you for inviting me to testify before you as the
    committee considers our reauthorization and progress that Ex-Im
    Bank has made in supporting U.S. jobs through exports.
        Since our last reauthorization just 2 short years ago, Ex-
    Im has supported nearly half-a-million American jobs while
    generating nearly $2 billion for the taxpayers. Ex-Im Bank has
    met all of the reporting requirements set forth in our
    reauthorization bill and has implemented several other reforms.
    At Ex-Im Bank, we are committed to continuous improvement and
    effective risk management.
        When I testified before this committee last June, I
    committed to hiring a chief risk officer before years end, and
    we completed that on time. Under his leadership, the Enterprise
    Risk Committee assesses comprehensive risk issues, reports
    semiannually to the Bank's audit committee, and provides me as
    well as our other directors with a monthly update.
        We have implemented a number of other reforms making Ex-Im
    more transparent and accountable, including: we post in the
    Federal Register all transactions of $100 million or more; we
    reviewed, revised, and posted our economic impact procedures on
    our Web site; we have implemented enhanced Iran sanctions
    provisions; we have added a textile industry member to our
    advisory committee; and we have implemented portfolio stress-
    testing and reported that to Congress. Frankly, the list goes
    on and on. The longer list is included in my written testimony.
        At the height of the financial crisis in 2008, our default
    rate was 1.1 percent. And today, in our most recent report of
    March of this year, which we issue to Congress as part of those
    reforms every 90 days, it is 0.211 percent, or less than a
    quarter of a percentage point.
        Customers who use the Bank pay a service fee, which covers
    all of our reserves and operating costs. We make no grants.
    Money is not given away; it is loaned and repaid. And Ex-Im
    Bank does not engage in corporate welfare.
        Since I last appeared before you, we have accomplished much
    in our efforts to support small businesses. In 2013, the Bank
    financed a record 3,413 small businesses, nearly 90 percent of
    Ex-Im's transactions. That amounted to about $6 billion for
    small business financing, of which $5.2 billion was direct.
        The Bank supports tens of thousands of additional small
    businesses, whose goods are incorporated into larger exports.
    We are critical to small businesses exporting directly and
    indirectly across the world. These businesses are operating in
    an extremely competitive environment.
        This morning, we are releasing Ex-Im Bank's Competitive
    Report. In 1999, just 15 years ago, nearly 100 percent of
    export credit financing globally was done within an agreed-upon
    framework and it was transparent. As this report shows, it is
    down to one-third, and it continues to drop. In other words,
    two-thirds of all official government support for exports today
    is opaque and unregulated.
        Countries like China and Russia frequently engage in
    market-distorting financing that threatens U.S. workers and
    their jobs. This is deeply concerning to me and should be to
    every American worker. U.S. businesses are not competing
    against Chinese companies on a level playing field; they are
    competing against ``China, Inc.''
        In 1999, official Chinese financing was almost nonexistent.
    Today, it is well over $100 billion, dwarfing what Ex-Im Bank
    does. South Korea, an economy less than one-tenth our size, now
    finances $100 billion, nearly 4 times the $27 billion that we
    refinanced last year.
        Other ECAs, such as South Korea, are using the uncertainty
    surrounding Ex-Im's reauthorization to steal contracts. You
    heard that clearly on panel 1 from Steve Wilburn, about how
    this is harming his business.
        In closing, I want to thank Inspector General Osvaldo
    Gratacos for his years of service at Ex-Im as he heads to new
    endeavors. He has helped us, without question, to run a better
    Bank. We have worked cooperatively with GAO and accepted all of
    their recommendations since the last reauthorization.
        Lastly, I also want to commend the outstanding professional
    work of our 400-plus employees.
        We live in an extremely competitive world, and the playing
    field is not level. I wish everyone played by the rules, but,
    as our competitiveness report starkly points out, they do not.
    The stakes could not be higher. We should not cede American
    jobs to China, Russia, or other countries. That is why I ask
    for your support in reauthorizing Ex-Im Bank for 5 years with a
    lending cap of $160 billion.
        Thank you for your support, and I look forward to answering
    your questions and working with you on reauthorization.
        [The prepared statement of Mr. Hochberg can be found on
    page 169 of the appendix.]
        Chairman Hensarling. Mr. Gratacos, we welcome your
    testimony now.

      STATEMENT OF THE HONORABLE OSVALDO LUIS GRATACOS, INSPECTOR
            GENERAL, EXPORT-IMPORT BANK OF THE UNITED STATES

        Mr. Gratacos. Good afternoon, Mr. Chairman, Ranking Member
    Waters, and the distinguished members of this committee.
        And I thank Chairman Hochberg for his kind words.
        Thank you for the invitation and opportunity to testify
    before you about the Office of Inspector General (OIG) and Ex-
    Im Bank oversight as it relates to its lending reauthorization.
        Before I continue, I would like to thank the Almighty for
    the opportunity, and my family, and the members of the Ex-Im
    Bank OIG staff for their hard work.
        Last year, I testified before this committee about the need
    for Ex-Im Bank to enhance its risk management framework. Back
    then, we stated that Ex-Im Bank should proactively manage the
    risk of its growing portfolio in line with common practices of
    commercial and multilateral development Banks.
        Specifically, we recommended that Ex-Im Bank should
    establish a chief risk officer or create a risk management
    office with independent reporting requirements to the Chairman;
    assign qualified and experienced staff to that office; conduct
    periodic stress-testing on its entire portfolio reflecting
    different market industry and microeconomic scenarios; and
    actively monitor industry, geographic, and obligor exposure
    levels.
        As of today, Ex-Im Bank has taken steps towards improving
    its risk management framework, some of them described by
    Chairman Hochberg in his statement. However, we think the
    opportunity for improvement still exists.
        For example, Ex-Im Bank established and hired a CRO and
    restructured reporting lines to separate origination functions
    from risk management functions. However, the CRO was
    established with additional management responsibility,
    supervising the legal and administrative functions of the Bank,
    which could dilute the focus of the position on credit risk
    issues.
        In addition, Ex-Im Bank has initiated some stress testing
    for its portfolio utilizing a top-down analysis of the
    portfolio as well as a bottom-up approach on some obligors. The
    results of the first stress-testing process were conveyed to
    Congress in the default report dated September 2013. The Bank
    has also established an Enterprise Risk Committee and recently
    provided documentation on its activities to the OIG.
        Finally, Ex-Im Bank commenced the use of several
    qualitative factors in its re-estimate process to account for
    the impact of such factors in the portfolio. The application of
    such factors in the re-estimate process commenced in the fall
    of 2012 and resulted in an upward revision of its loss
    reserves.
        Lastly, let me address some recent press reporting on
    employee integrity investigations. I cannot confirm or deny
    particular investigations or comment on specific personnel
    matters. What I can say is that we have a number of active
    investigations involving also an external participant or Ex-Im
    Bank, and they are being reported in the semiannual report to
    Congress and we have had a fully cooperative working
    relationship with Bank management on these matters.
        Bank management employees have referred issues to us for
    review, and the Bank has taken employment actions based on
    information we have referred to them. Some of these matters are
    nearing conclusion, and I expect to be able to share some
    information on them in the coming months, while others are in
    early stages and may or may not be substantiated. We work
    closely with the Justice Department on these issues, and I hope
    you understand that I am not in a position to comment further
    at this time on these matters.
        Mr. Chairman, Ranking Member Waters, and members of this
    committee, thank you once again for the opportunity to testify
    before you today. I would be pleased to respond to any
    questions you may have. Thank you.
        [The prepared statement of Mr. Gratacos can be found on
    page 161 of the appendix.]
        Chairman Hensarling. Mr. Scire, you are now recognized for
    your testimony.

     STATEMENT OF MATHEW J. SCIRE, DIRECTOR, FINANCIAL MARKETS AND
      COMMUNITY INVESTMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

        Mr. Scire. Mr. Chairman, Ranking Member Waters, and members
    of the committee, thank you for the opportunity to be here
    today to discuss the actions Ex-Im has taken in response to
    recommendations we made last year.
        Our reports were completed in response to the Export-Import
    Reauthorization Act of 2012. We reported that Ex-Im's business
    volume had grown dramatically in recent years and that this
    rapid growth posed challenges to Ex-Im. Outstanding financial
    commitments were about $114 billion in 2013, nearly double the
    level of 2008 when Ex-Im began to experience rapid growth.
        Among the challenges we cited is understanding the risk of
    loss. This is particularly challenging for Ex-Im because of the
    need to anticipate losses far into the future and because of
    weaknesses in its data. To improve its loss modeling, the Bank
    added certain qualitative factors. These include minimum loss
    rates, global economic risk, and portfolio concentration risks,
    whether by region, industry, or obligor.
        These should help Ex-Im better capture risks that may be
    different than historical experience might suggest, but we
    found that its technique for assessing global economic risk
    could be improved by considering longer-term default forecasts.
    We, therefore, recommended that Ex-Im consider whether it is
    using the best available data for adjusting loss estimates for
    longer-term transactions to account for global economic risk.
    In response, in November Ex-Im replaced its 1-year forecast
    with a 5-year forecast.
        We also found that Ex-Im had not maintained historical data
    on defaults that might be used in evaluating the performance
    and loss potential of the current portfolio. That is, Ex-Im had
    not maintained records that would permit comparing the
    performance of a transaction with that of a like transaction at
    a similar age. We, therefore, recommended that Ex-Im retain
    point-in-time historical data on credit performance. Ex-Im has
    since begun retaining such data.
        Ultimately, loss estimates can never be certain. For this
    reason, it is useful to conduct stress tests to better
    understand and inform the Congress of the potential outcomes of
    alternate scenarios. Ex-Im planned to conduct such stress
    tests, and we recommended that it report to the Congress their
    content and results. Ex-Im has since begun to include such
    information it its quarterly default rate reports.
        Another challenge facing the Bank is understanding what to
    expect in terms of future activity. In this regard, we found
    the methods used by Ex-Im to forecast its total exposure for
    2013 and 2014 had certain weaknesses. Specifically, Ex-Im had
    not reassessed its assumptions to reflect changing conditions
    or conducted a sensitivity analysis to assess and report the
    range of potential outcomes. We, therefore, recommended that
    Ex-Im do so. In response, in its 2015 budget justification Ex-
    Im has incorporated historical experience into the forecast and
    prepared a range of authorization and exposure estimates.
        Another challenge facing Ex-Im is the sufficiency of its
    resources. We noted that the rapid growth in business volume
    coupled with the more modest growth in staff levels created
    potential operational risks for Ex-Im. And Ex-Im recognizes
    this risk, but it had not formally determined the level of
    business it can prudently manage, either agency-wide or within
    specific functional areas, with a given level of resources.
    Likewise, we reported that Ex-Im's business plan had not
    sufficiently assessed the adequacy of resources for meeting
    certain congressional mandates to support small business and
    renewable energy.
        We recommended that Ex-Im develop benchmarks to monitor and
    manage workload levels and provide Congress with more
    information on resources associated with meeting the mandates.
    In response, Ex-Im hired a contractor to develop workload
    benchmarks and a workload modeling tool. This effort is
    ongoing.
        Going forward, it will be important for Ex-Im to sustain a
    commitment to improving its understanding of factors that drive
    demand for its programs, the performance of its products, and
    the potential operational risks it may face.
        This concludes my opening remarks. Thank you again for the
    chance to speak today. I would be glad to take any questions
    you may have.
        [The prepared statement of Mr. Scire can be found on page
    184 of the appendix.]
        Chairman Hensarling. Dr. Elmendorf, you are now recognized
    for your testimony.

      STATEMENT OF DOUGLAS W. ELMENDORF, DIRECTOR, CONGRESSIONAL
                          BUDGET OFFICE (CBO)

        Mr. Elmendorf. Thank you, Mr. Chairman, Ranking Member
    Waters, and members of the committee. I am pleased to be here
    to discuss CBO's estimates of the budgetary costs of the
    Export-Import Bank's credit programs.
        I want to emphasize that CBO has not analyzed the
    operations of the Bank or the economic impact of its programs.
    Our analysis has been limited to the direct effects of the Bank
    on the Federal budget.
        As you may know, CBO uses two different approaches to
    estimate the budgetary costs of Federal credit programs. One
    approach reflects the procedures currently used in the budget
    under the Federal Credit Reform Act of 1990, or FCRA. The other
    approach, known as fair value, reflects the market value of the
    government's credit assistance.
        For Fiscal Years 2015 to 2024, CBO found that Ex-Im Bank's
    six largest credit programs would generate budgetary savings of
    about $14 billion under FCRA accounting but cost about $2
    billion under fair-value accounting.
        Both estimates are based on Ex-Im Bank's projections of
    cash flows for those credit programs, as reported in the
    Federal credit supplement to the Administration's 2015 budget.
    Thus, both estimates reflect the amount of lending, fees, and
    default rates that are expected to prevail under the current
    structure of the programs and the President's budget request.
        The difference between the two estimates lies in the
    treatment of the cost of market risk, which is one component of
    financial risk.
        Much of the risk of financial investments can be avoided by
    diversifying a portfolio. Market risk is the component that
    remains even after a portfolio has been diversified as much as
    possible. It arises because most investments perform relatively
    poorly when the economy is weak and relatively well when the
    economy is strong.
        People value income from investments more when the economy
    is weak and incomes are relatively low, and so assign a higher
    cost to losses that occur during economic downturns. The higher
    cost of losses in bad times as well as lower costs in good
    times is captured in the cost of market risk. The government is
    exposed to market risk through its credit programs because when
    the economy is weak, borrowers default on their debts more
    frequently, and recoveries from defaulting borrowers are
    smaller. That market risk is effectively passed along to
    taxpayers and beneficiaries of government programs because they
    bear the consequences of the government's financial losses.
    Moreover, that risk is costly to those taxpayers and
    beneficiaries because they tend to value resources more highly
    when the economy is weak.
        Under the FCRA approach to accounting for Federal credit
    programs, Treasury borrowing rates are used to discount
    expected future cash flows, that is to translate future cash
    flows into current dollars. That approach essentially treats
    future cash flows subject to market risk as having the same
    value as Treasury securities that promise the same average
    payments with no risk. This means that the market risk of
    Federal credit assistance is treated implicitly as having no
    cost to the Federal Government.
        That has important consequences. For example, the cost of
    Federal credit programs reported in the budget is generally
    lower than the cost to private financial institutions for
    providing credit on the same terms. Also, the budgetary costs,
    the Federal credit programs are generally lower than those of
    grants for similar purposes that involve equivalent economic
    costs.
        In addition, purchases of loans and loan guarantees at
    market prices appear to make money for the government and
    conversely sales at market prices appear to result in losses.
    To incorporate the cost of market risk, the fair-value approach
    generally entails using the discount rates on expected future
    cash flows that private financial institutions would use. That
    approach effectively uses market prices to measure the cost to
    the public of the lower returns on Federal loans and loan
    guarantees when the economy is weak and incomes are relatively
    low. In CBO's view, therefore, fair-value estimates provide a
    more comprehensive measure of the cost of Federal programs.
        Some analysts have expressed concern about potential
    drawbacks of using the fair-value approach in Federal
    budgeting. They argue, for example, that fair-value estimates
    include costs that will not be paid directly by the Federal
    Government if actual cash flows turn out to match expected cash
    flows and that including those costs makes comparisons with
    some non-credit programs more difficult. These analysts note
    that fair-value estimates are somewhat more volatile than FCRA
    estimates and more complex to produce, and they worry that
    communicating the basis for fair-value estimates to
    policymakers and the public is more difficult than doing so for
    FCRA estimates.
        Proponents of the fair-value approach respond to those
    concerns by arguing that decisions about spending the public's
    money should take into account how the public assesses
    financial risks as expressed through market prices; that by
    taking those prices into account, fair-value estimates are
    unbiased estimates of the expected costs of loans and loan
    guarantees when they are offered and that other concerns can be
    mitigated through established accounting practices. Thank you.
    I am happy to take your questions.
        [The prepared statement of Dr. Elmendorf can be found on
    page 148 of the appendix.]
        Chairman Hensarling. The Chair now yields himself 5 minutes
    for questions.
        Mr. Hochberg, my background is not in accounting. I have a
    degree in economics and a degree, a J.D., but I do know the
    difference between single-entry accounting and double-entry
    accounting. So, I just heard your latest jobs claim that seems
    to increase every time that I see you. I trust you did hear the
    testimony of the earlier panel. Is that correct?
        Mr. Hochberg. Yes, I did.
        Chairman Hensarling. Okay. In the claims that you make, is
    that a net number, or is that a gross number, because we are
    having testimony of job loss caused by your Bank, so is the
    number that you posit a gross number or a net number?
        Mr. Hochberg. It is a gross number. It is the number we
    use--
        Chairman Hensarling. That answered the question, Mr.
    Hochberg. I appreciate that. Also, I assume since we have a
    witness from GAO here, you are familiar with their May 2013
    report that criticized the Bank for concealing methodological
    weaknesses in the jobs claim, including the fact that you do
    not distinguish between full-time, part-time and seasonal
    employment. You do not control for selection effects between
    supported firms and industries that may depart from the
    average. And, again, as I just posited, GAO criticized the Bank
    for not considering the unseen counterfactual of how many jobs
    would have existed without any intervention at all. Are you
    familiar with GAO's work regarding your jobs claim?
        Mr. Scire. Yes, and we pointed out a number of weaknesses
    with the methodology and recommended that Ex-Im do more to
    disclose the weaknesses with the methodology, and since, they
    have done so.
        Chairman Hensarling. Thank you.
        Dr. Elmendorf, FCRA applies--well, I have seen a report
    that there are roughly 10,000 Federal agencies, programs.
    Frankly, I have been here for a number of years, and I still
    can't figure out how many there are. But how many are subject
    to FCRA? How many programs or agencies?
        Mr. Elmendorf. I don't know what the count is, Mr.
    Chairman.
        As you know, there are several trillion dollars of
    outstanding Federal loans and loan guarantees that are recorded
    in the budget on a FCRA basis. The exceptions to FCRA among
    credit programs that I am aware of are the TARP program,
    because Congress wrote into the law that we should do estimates
    of that program, adjusting for market risk, and for Fannie Mae
    and Freddie Mac, because that is something that is specified in
    law, and we do those on a fair-value basis.
        Chairman Hensarling. This is probably outside your area of
    expertise, and I think we had some testimony earlier today.
    Certainly, I have seen evidence. Doesn't almost every other
    private Bank or private company that is subject to GAAP use
    fair-value accounting?
        Mr. Elmendorf. Private financial institutions generally use
    fair-value accounting, yes, Mr. Chairman.
        Chairman Hensarling. Mr. Hochberg, we had a gentleman here
    on the earlier panel, as you well know, one of the recipients
    of an Ex-Im credit guarantee. I think your latest figure is
    that you are supporting roughly 3,000 or 3,500 small
    businesses. Is that correct?
        Mr. Hochberg. Correct.
        Chairman Hensarling. The earlier witness takes exception to
    your definition. We will accept the definition for the moment.
    I have information from the SBA; by their definition, and I
    don't know the definitional differences, there are roughly 30
    million small businesses across America. So if I am doing the
    math right, you are in some way, shape or form providing credit
    services to roughly 1 in 10,000.
        And I am still trying to figure out--I am struggling with
    this, Mr. Hochberg, and that is I have a number of small
    businesses in my district, including CATCO Catalytic Heater
    Company in Terrell, Texas. They export. They don't use your
    services. And I quoted this gentleman earlier who said, ``As a
    small business owner who exports, I think it is outrageous that
    my own government puts my business and other small businesses
    at a competitive disadvantage through the Export-Import Bank.''
        I see my time is starting to run out, but I say that, Mr.
    Hochberg, because I think it is important that we hear from the
    small businesses that actually have to pay for what your Bank
    does and whose balance sheets you put at risk. Those voices, I
    believe, are underrepresented in this hearing room today. I
    will posit that all 3,000 or 3,500 small businesses that
    receive your credit services would want them extended. I would
    posit that, and I know that you have traveled all around the
    Nation. I think somewhat reminiscent of Fannie and Freddie, I
    have no doubt that you have come close to finding a customer in
    every congressional district in America today. But I do think
    it is important that these other voices be heard. I noticed you
    said that roughly 90 percent of your transactions, but isn't it
    roughly 18 percent of your exposure is small businesses? Is
    that correct, Mr. Hochberg?
        Mr. Hochberg. Actually, this year we are in the 23, 24
    percent range. We have had greater use of small business and
    little Banks have come back and so some of our larger--
        Chairman Hensarling. I will just say for the record that
    the 90 percent is fairly misleading. I see that I am out of
    time. The Chair now recognizes the gentlelady from New York,
    Mrs. Maloney, the ranking member of our Capital Markets
    Subcommittee.
        Mrs. Maloney. Thank you, Mr. Chairman, and welcome to all
    of the panelists.
        Mr. Hochberg, some people on this panel today have
    suggested that we could let the Export-Import Bank's charter
    expire and that the economy would be fine, that the private
    sector would just step in and take over, and there would be no
    impact on the U.S. exporters or small businesses. Can you walk
    us through what the impact would be?
        Mr. Hochberg. Thank you. Thank you for giving me an
    opportunity to talk about our small businesses. One, we
    actually do, 90 percent of our clients are small businesses;
    and that is small business as defined by the SBA. We don't make
    our own definition. You heard on panel one, Steve Wilburn of
    FirmGreen made a clear articulation of the loss and harm to his
    business and employment from even just the threat of Ex-Im not
    being here. We had some folks in the audience from a company
    that I think the chairman has sometimes cited, Jenny's Pickles,
    a woman from North Carolina who is exporting her food products
    to China, Britain, and is looking to expand to Germany and the
    Mideast. We provide credit insurance the way that other
    businesses get fire insurance or theft insurance and credit
    insurance she cannot obtain in the private sector. So though
    there are many small businesses that can't get--
        Mrs. Maloney. How do you know these businesses cannot
    obtain the financing in the private market?
        Mr. Hochberg. First of all, they have to state that they
    needed us, and they were not able to obtain this privately.
    Second of all, we survey the private sector all the time, and
    many times, they will not make loans or insurance for smaller
    businesses. The good news is I will tell you the private sector
    has come back, and the private insurers are doing a better job
    than they did during the crisis, but I will also tell you that
    the word is out that you probably should not get insurance from
    the Ex-Im Bank because we may not be here after September 30th.
        So brokers are telling their clients, I think we have to
    either get you more expensive insurance or I can't insure you
    because I don't know if you want to take the risk of having a
    policy that will have a 90-day term.
        Mrs. Maloney. You raised a point that there are people
    really concerned whether or not you will be there, and they are
    not providing the insurance. The statute gives Ex-Im the
    authority to facilitate an orderly liquidation if its charter
    expires, and a recent memo from the Congressional Research
    Service noted that Ex-Im would have considerable discretion in
    deciding how to manage this liquidation.
        Mr. Hochberg. If the Bank is not reauthorized on September
    30th, we would not make any new loans. We would not support any
    new businesses. I would add that small businesses in particular
    would probably be hit first, and we would simply hold--I don't
    see a reason, and I hope Congress would not want to liquidate
    the portfolio which implies selling it off, often at a
    discount, but let the loans mature to term. We have a well-
    performing portfolio. Liquidation is often used for a failed
    Bank. The only reason we would be not operating is because of a
    political decision not to reauthorize us, not because of a
    failure at the Bank.
        Mrs. Maloney. There is a lot of debate this morning about
    exporting planes, basically exporting Boeing. If the United
    States decided to stop providing any support or assistance for
    the export of U.S.-made planes unilaterally, what would happen?
    Who would stand to benefit?
        Mr. Hochberg. I think that the makers of Airbus would be
    quite excited by this. They would be cheering because, frankly,
    it will not change the amount of airplanes coming into the
    United States carrying passengers. It will simply change
    whether it is made in the United States by Boeing and their
    15,000 suppliers--6,600 are small businesses--versus being made
    in Toulouse, Hamburg, and other places, so I think that we have
    a very real competitive threat. And frankly, the threat of
    China is coming up. They are building a plane to compete with
    737s, which is the single-aisle general commercial plane used,
    and that is coming on stream in the next few years.
        Mrs. Maloney. We are often criticized for not exporting
    enough, that we have an export deficit. Have you done any work
    on how much of the American export is because of the Ex-Im
    Bank?
        Mr. Hochberg. The very rough cut number is around 2
    percent, but that includes everything that is exported. Many
    things are not products, are not financed. I can give you some
    specifics. It may be 2 percent globally, but if we look in
    places in Sub-Saharan Africa, for example; in Cameroon, it is
    more than 55 percent of the exports. Senegal is almost 50
    percent. India, it was 30 percent in the last 12 months, so
    there is a large percentage above the 2 percent, depending on
    what country you are looking at.
        Chairman Hensarling. The time of the gentlelady has
    expired.
        The Chair now recognizes the gentleman from California, Mr.
    Campbell, chairman of our Monetary Policy Subcommittee.
        Mr. Campbell. Thank, Mr. Chairman.
        And, Dr. Elmendorf, Mr. Scire, and Mr. Gratacos--I probably
    butchered two out of those three names. First of all, I
    apologize for that.
        Dr. Elmendorf, I have said your name enough over the years
    that I know how not to butcher it.
        I hear all of your issues and agree 100 percent with the
    issues relative to the Bank's accounting for risk, a chief risk
    officer having other responsibilities, and a number of those
    other factors, so I would mention that the discussion draft
    which I released earlier today contains attempts at least to
    deal with all of those issues. I think I agree and believe that
    the Bank is not properly accounting for risk and that if there
    is a reauthorization, that is something we need to do.
        During the remainder of my time, Mr. Hochberg, I would like
    to ask you a few questions about some things. You have actually
    requested an increase in the authorization of the Bank, even
    though the authorizations you are doing as you just stated, the
    private sector is back in the game, and the authorizations are
    down from what they were in the Bank a few years. Why would you
    want an increase in authorization then?
        Mr. Hochberg. Congressman, thank you for your comments and
    interest in this. We took a look at--again, we are asking for a
    5-year reauthorization. We looked at--we are compounding the
    increase 3 percent per annum from the $140 billion today. I
    took a modest increase. Exports are up close to 45 percent
    since 2009. So exports are up. Banks continue to tell us, due
    to Basel III, Dodd-Frank, and other regulations, that they have
    less of an appetite for small business, less of an appetite for
    long-term loans, so factoring in those factors, export markets,
    more going to developing nations, I tried to put together a
    prudent estimate of what we would need.
        Mr. Campbell. Even though that is not your experience right
    now?
        Mr. Hochberg. We had a--2 years ago, we were in great need.
    Right now, there seems to be a slight reduction in need. I am
    not looking at only 6 months of making an assessment. I am
    trying to take a broader view. I was a businessman for 20
    years. You don't look at 6 months at a time.
        Mr. Campbell. Okay. Got it. Let me ask you now, in the
    previous panel the CEO of Delta and others complained about
    things that were in the previous reauthorization that they are
    saying you are ignoring, which is the mandate to weigh adverse
    effects of transactions on others. What is your response to
    that?
        Mr. Hochberg. I completely disagree with Mr. Anderson.
    Congress asked us to simply review our economic impact
    procedures. Those procedures state we should look at the
    benefits of the U.S. economy and any potential harm. We
    reviewed it. On top of that, instead of just reviewing it, we
    actually published new regulations, put them out for comment,
    went to the entire industry for comment and adjusted our impact
    procedures and put it to a vote of the board. So we complied
    fully, and on top of that, every transaction the Bank reviews
    gets reviewed for economic impact. We want to make sure the
    benefits outweigh any harm.
        Mr. Campbell. Okay. My time is limited so I want to get on
    to this other question. Obviously, yesterday there was some
    news that came out about potentially some accusations of things
    going on in the Bank. Now, we know that in any organization,
    certainly in any element of government that deals with the
    public, there can be corruption and there can be fraud. Guess
    what, that has occurred within Congress. I know that is a huge
    shock to everyone listening, but that has occurred here as
    well.
        But the question I have for you is this: There is, I think,
    a question, and it is a good one, about you are handing out
    loans, guarantees, and other things to the private sector and
    that if people have the ability to make that not just for
    kickbacks but to their friends to political allies to whatever
    it may be, that is a bad thing. So it would seem to me that
    there are not enough controls, if you will, within the Ex-Im
    Bank to stop that sort of thing from happening. How do you
    judge, how do you make the decision of who gets support and who
    doesn't?
        Mr. Hochberg. You mean, what companies get support?
        Mr. Campbell. Yes.
        Mr. Hochberg. Well, one is what the need is. We look at the
    need, whether there is a need for Ex-Im Bank to be a player in
    that or whether the private sector does it by itself.
    Frequently, we don't need to engage at all. That is why close
    to 98 percent of exports don't need our assistance. You have a
    few questions, and I am trying to--
        Mr. Campbell. Basically, and we are running out of time,
    but the accusation is that some people got support from Ex-Im
    in exchange for kickbacks. That means somebody else probably
    didn't, or those weren't meritorious, or there was a
    competition or something going on. I am trying to determine
    what procedures you have in place and you are not going to have
    time to answer this, so maybe you can later, but what
    procedures you have in place to stop that sort of thing from
    happening because that can't happen.
        Mr. Hochberg. I agree.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair recognizes the gentleman from New York, Mr.
    Meeks, the ranking member of our Financial Institutions
    Subcommittee.
        Mr. Meeks. Thank you, Mr. Chairman.
        The latest trade data shows that the United States trade
    gap has increased to $47.2 billion in April 2014, as imports
    recorded the highest value on record. Purchase of automobiles,
    capital goods, food, and consumer goods all hit record highs.
    So, in the midst of record trade deficits, we are here today
    debating--and I can't believe this--whether or not we need to
    reauthorize the Ex-Im Bank. The Chinese and the Europeans and
    the Brazilians and the Japanese all must be looking at us and
    shaking their heads in complete disbelief that we are actually
    debating this issue, that we could actually voluntarily
    purposely kill American industries and hundreds of thousands of
    American jobs. Its unbelievable to me.
        And I know when start talking about other reforms, there is
    always the question of uncertainty that keeps coming up, that
    people want to know what the rules are in play and whether or
    not--certainty was important. Well, here we are now in this
    atmosphere of uncertainty.
        Chairman Hochberg, what effect is uncertainty creating for
    U.S. exports, if any?
        Mr. Hochberg. Thank you, Congressman.
        First of all, there is an ad in today's Politico that says,
    ``Meet the Ex-Im Banks of China, Russia and France.'' They are
    delighting in this hearing. They are delighting in the U.S.
    debate. On panel one, there was a discussion of Steve Wilburn
    and the direct impact on his business. I heard that during the
    shutdown. I heard that during the potential shutdowns. We
    enumerate all of that in this competitiveness report. Again,
    two-thirds in the range of about $200 billion of export
    financed globally is unregulated, opaque, one-off, and causes
    harm to American companies.
        When I am in Africa, the Chinese government offers 100
    percent financing for anything you will buy, and they will give
    you 10, 15, 20, up to 40-year terms. So there is a direct
    impact on our debate here and trying to sell U.S. products, and
    more importantly, support jobs here in America, small business
    jobs as well as at large companies. So we have seen a direct
    impact. I hear it from companies. I hear it from their
    customers overseas.
        One customer in Maryland during the shutdown said he lost a
    customer to Germany because he could not take the risk we would
    not be around.
        Mr. Meeks. I was listening to some of my colleagues on the
    other side of the aisle also, and I know at the time that we
    had the last reauthorization, there were certain reforms that
    were in there. And listening to them I would think maybe Ex-Im
    has not implemented any reforms. Is that true? Has Ex-Im
    implemented any reforms?
        Mr. Hochberg. We have complied with every single reform and
    recommendation that the committee made. We have complied or are
    in the process of complying of with every single recommendation
    that GAO has made. We have agreed with each and every one of
    their recommendations.
        Mr. Meeks. I want to go--because you mentioned Africa
    twice, and you know I just had an event in New York on
    energizing Africa, and I want to thank Ex-IM for being there.
    And you talk about China, et cetera, being there, but you also
    just in your testimony talked about Cameroon. Can you tell us
    what opportunities are there for American-made goods and
    services on the continent of Africa?
        Mr. Hochberg. Africa is the home to, depending on your
    estimate, six or seven of the fastest growing economies in the
    world. I just returned 2 weeks ago. There are great needs in
    power, transportation, water. I was with the President of
    Angola, who agreed to buy a billion dollars worth of
    locomotives and power units, so there are enormous
    opportunities, but we face very intense competition from China,
    which will provide financing for any and all exports going to
    Africa.
        Quickly, I went to meet with Transnet that, as a result,
    split their order between the United States and China, and the
    CEO told me point blank China offered 10, 15, 20 years; what
    terms do you need and what rate do you need to pay, and we will
    make it work.
        Mr. Meeks. Let me ask this in my little time that I have
    left: How does the size of Ex-Im Bank, its particular mission,
    and the terms it is able to offer compare with other foreign
    export credit agencies?
        Mr. Hochberg. China, as I mentioned, is more than 4 times
    our size, and that is just their Ex-Im Bank. They have two or
    three other policy Banks that support their exports. The
    Canadian Bank is about 3 times larger than the United States,
    and an economy somewhat smaller than the U.S., Korea, also does
    about 3 to 4 times more than we do. We probably have the
    smallest footprint of any export credit agency to the size of
    our economy in the world.
        Mr. Meeks. Thank you, and I see my time has just expired.
        Chairman Hensarling. Indeed, it has.
        The Chair now recognizes the gentleman from Alabama, the
    chairman emeritus of the committee, Mr. Bachus.
        Mr. Bachus. Thank you.
        Chairman Hochberg, you and I met in my office on March
    27th, when we were considering the reauthorization of 2012. At
    that meeting, we expressed some concerns to you about
    transparency, accountability, and also the mandate requiring
    the Bank to review the economic effects of its financing to
    take into account, and I am reading statutory language, any
    serious adverse effect of any loan or guarantee on the
    competitive position of United States industry. And then we had
    some follow-up conversations as late as May 9th about Delta's
    concerns. We voted that bill out on May 15th, and I have never
    had an explanation that the sale of wide-body jets to the
    Emirates did not hurt U.S. airlines and their competitive
    position. Several times this has come up, even I think as early
    as 2003. Have you ever done an analysis and shared it with the
    Congress of that particular issue that the president of the
    airlines was talking about earlier?
        Mr. Hochberg. Again, Congress asked us to review our
    economic impact. We not only reviewed it; we decided to revise
    it and to publicize it, and it is on our Web site. We also do
    an analysis of--
        Mr. Bachus. Is that specifically about the effect on--
        Mr. Hochberg. We look at every aircraft, and we look at
    every aircraft transaction.
        Mr. Bachus. I am talking about specifically. Could you
    supply that specific analysis that you did? That concern was
    directed. It was very refined. It was to address the need to
    subsidize loans to the Emirates or rich countries of wide-body
    jets, of carriers that directly compete with American carriers
    on international routes. Is there an analysis of that and going
    back and looking at all of that?
        Mr. Hochberg. We did an analysis. We hired an outside firm
    to make it unbiased of, is there an oversupply in the aircraft
    field globally of wide-bodies?
        Mr. Bachus. No. My question was not, were there too many
    wide-bodies. My question is the impact on our flag carriers. We
    didn't ask for a study of, were there too many wide-body jets
    in the world.
        Mr. Hochberg. The Bank has had economic impact procedures
    for 20, 30-plus years.
        Mr. Bachus. You are telling me something I know. I am
    asking you something; I know you have had procedures. I know
    you have had economic studies. I am asking you specifically,
    have you responded to our request and Mr. Anderson's concerns
    that we discussed on two different occasions?
        Mr. Hochberg. Then the answer to that question is yes, sir.
        Mr. Bachus. Okay. Would you supply us with those documents?
        Mr. Hochberg. We would be happy to you supply you.
        Mr. Bachus. I would like copies of the loan-specific
    analysis on any sale to those countries, the effect on the flag
    carriers, the United States flag carriers, if you could just
    give me that.
        Mr. Hochberg. We will provide that.
        Mr. Bachus. I would like to tell you something else that I
    am very concerned about. You heard what I said earlier. On
    August 2nd, I wrote a letter to you all. We, obviously, faxed
    it over to you because Scott responded the same day and
    promised us, according to his letter, that before the loan was
    made, they would refer it to the policy division as well as the
    engineering division because there were two different studies,
    and they would share the concern with the board prior to a
    vote, and they would share with us any analysis. That was never
    given to us but what I am saying is, you didn't do that or
    supply it to us before the vote. Your response to me was 2
    months after the vote, which is not--our committee then
    couldn't respond, couldn't analyze, couldn't have any input.
    You didn't even advise us when the vote was going to be.
        Mr. Hochberg. Can I answer the question?
        Mr. Bachus. Yes.
        Chairman Hensarling. Briefly.
        Mr. Hochberg. Briefly. The board considered it. It comes to
    Congress. Congress has 35 days to comment before a final vote
    is taken by the board. Any transaction over $100 million comes
    to Congress for any Member to comment, and we got a number of
    comments on that transaction.
        Mr. Bachus. Who does it come to?
        Mr. Hochberg. I don't know precisely how it is transmitted,
    but every transaction is transmitted to Congress for a 35-day
    review.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentlelady from New York, Mrs.
    McCarthy.
        Mrs. McCarthy of New York. Thank you, Mr. Chairman.
        Chairman Hochberg, we only get 5 minutes, and I noticed
    that you have always been writing something down. Obviously,
    whether it was somebody on this panel, or I understand that you
    were in the back listening to the first panel, so I am going to
    stop talking. And any questions that you want to answer or
    things that you have heard that you want to give a rebuttal to,
    I am giving you that opportunity to do that now.
        Mr. Hochberg. Thank you very much.
        Let me try and answer one or two questions we have. We look
    to make sure that any benefit, any export, the benefit to the
    U.S. economy outweighs any harm. That is referred to as
    economic impact. So if we are financing the export of an
    airplane, we are going to make sure the dollar amount to the
    U.S. economy could outweigh any potential harm. We look at
    every transaction, not just aircraft, to make sure that we are
    complying with that because the last thing we want to do, the
    400 people at Ex-Im Bank, is hurt the U.S. economy. We are here
    to support jobs, not take away jobs. That would be number one.
        Two, the committee staff receives every transaction over 35
    days, and the committee staff, I presume, forwards it to
    members of the committee who would like to review it. Sometimes
    we receive many comments, and sometimes no comments, but the
    committee has and Congress has a full 35 days to send comments
    back to us before any transaction is finally voted on.
        There was a question about working with the inspector
    general. I have had a great working relationship with our
    inspector general. I think together we have made a better Bank.
    Our employees are alert to if they see something suspicious or
    a suspicious claim or a suspicious loan or something that
    doesn't look right, they work directly with the inspector
    general. They don't go through me. They work, whether it is in
    the General Counsel's Office, the CFOs Office, anybody who sees
    something suspicious, and I am very proud of the fact that our
    employees are very concerned--they care about their reputation
    as well. So, I am pleased with the reputation and the work we
    do with the IG. The article that was in yesterday's Wall Street
    Journal, in my opinion, is actually a good article because it
    says to our staff and it also says to any exporter, if you are
    doing any funny business, we are on to you, and we will work
    with it. A lot of this has changed since we have an inspector
    general, which is 2007. A number of the things discussed
    predate the inspector general. We did not have a inspector
    general in those early days.
        Mrs. McCarthy of New York. One of the things I wish you
    would go over one more time, is basically I know you are not
    looking to hurt Delta. I know you are not looking to hurt the
    pilots and the flight attendants, that you want them to
    succeed. Could you go over one more time with their arguments
    that you heard today on why the situation is where it is, and
    do you see any way to work with them to try to come to some
    sort of an agreement so we don't go through this every 2 years?
        Mr. Hochberg. We fully complied with Congress' request on
    transparency and reforms. There were over a dozen, and we
    complied with each and every one of them. We have complied with
    everything or at least so far agreed with everything in the GAO
    report. Delta Airlines made an assertion that our financing of
    planes to Air India caused them to lay off people. If you look
    at the facts, they did not ground any aircraft. They have added
    employees since, and they even stated at the time it was not
    because of competition. They said we have moved this, the size
    and scope of Delta's operation at the Atlanta hub are best
    suited for the capacity of the 777-200LR in terms of cargo and
    passenger. So, for business reasons they moved the flight to
    Atlanta. It was not because of competitive issues or the Ex-Im
    Bank.
        That was a concept they came up with 3 years later. There
    was nothing in their press release. They said nothing about the
    fact that there was a global recession in 2008. They said
    nothing about high jet fuel prices, the H1N1 virus, reduced
    demand, and a number of other things that they also talk about
    impacting their business.
        But somehow this one route, this one route they decided was
    only because of Ex-Im Bank, and that doesn't comply with any of
    their public messages.
        Mrs. McCarthy of New York. Thank you.
        And the other thing, too, obviously, when I came on this
    committee and I had to learn a lot of new things, one of the
    things I did even before you became the chairman was reach out
    to the Export-Import Bank to come into my community, bring my
    small businesses in to get educated, and you did come out when
    you came on. And I am happy to say that in my district by word
    of mouth, more and more businesses have been joining, and
    certainly we have seen the growth of the amount of money that
    has come into my district. And it is not mine. It is the people
    working. It is jobs, and that is the important thing. Thank you
    very much for your time.
        Mr. Westmoreland [presiding]. The gentlelady yields back.
        It just so happens to be my turn, Mr. Hochberg.
        Mr. Hochberg. Perfect timing.
        Mr. Westmoreland. You said you had complied with all the
    requests that Congress had made at the last reauthorization and
    you referred to Mr. Anderson in that all these things had been
    complied with, although there are people who were at that table
    evidently when these things were being looked at who say they
    were not complied with. Why do you think there is a difference
    there?
        Mr. Anderson. Certainly. We complied with every
    requirement, every reform that Congress put in. We did, as I
    mentioned, an economic impact analysis, particularly in the
    aircraft field.
        Mr. Westmoreland. How many of those did you do in the
    aircraft field?
        Mr. Hochberg. We do one a year. We do a survey to determine
    if there is a glut in the aircraft field, which is the criteria
    that has been deployed by the Bank for 20, 30 years in looking
    at economic impact. If there is an oversupply, then any
    additional capacity will have an impact. If there is an
    undersupply--
        Mr. Westmoreland. So how many of those impact analyses have
    you done on aircraft in the last 5 years?
        Mr. Hochberg. Well, two things. We review every
    transaction. We do an in-depth study.
        Mr. Westmoreland. Every transaction?
        Mr. Hochberg. Every transaction over $10 million we review
    for economic impact.
        Mr. Westmoreland. How many would that be?
        Mr. Hochberg. Close to 3,500. We look at all of them. We
    don't deploy the resources to do an in-depth study on every
    single one. For example, Congressman, sometimes you have an
    airplane that is replacing an old plane. Sometimes it is an
    airplane that is never flying to America, so a number of those
    would have no impact. So we don't waste government resources
    chasing things that have no potential impact.
        Mr. Westmoreland. Okay. But you have only done one analysis
    in the last 5 years on aircraft?
        Mr. Hochberg. The new procedures went in, in April of 2013,
    so first of all, they have been extant now for 15 months. We
    review them all. We did an in-depth analysis on one transaction
    because one transaction triggered and said, this warrants
    further review and study because the planes are new capacity,
    potentially flying to American cities, and as a result, it
    triggered a more in-depth study. Again, if it is replacement
    aircraft or not flying to the United States, we would not spend
    the time and money and resources to do a detailed study of
    something that is not going to potentially have an impact. If
    there is a potential of an impact, we will do an in-depth
    study.
        Mr. Westmoreland. Okay. If you are buying a plane from
    Boeing, it will still have impact on the economy, right?
        Mr. Hochberg. Again, the analysis that has been used in
    every industry, not just for aircraft, is we say, what are the
    benefits to the U.S. economy? How much revenue is coming to the
    United States? What is the potential loss to the U.S. economy?
    And we balance them against each other. So we are always
    looking at that. What is the balance?
        Mr. Westmoreland. Thank you.
        Is the Bank being sued right now on any of your economic
    impacts?
        Mr. Hochberg. Delta Airlines is suing us.
        Mr. Westmoreland. They are?
        Mr. Hochberg. Yes.
        Mr. Westmoreland. Is that because of the case you just
    mentioned?
        Mr. Hochberg. Again, they don't--we have put together
    economic impact procedures that are consistent with the way we
    do it for every industry. We are not going to pick and choose
    and do a special one for aircraft. We look at how we look at
    economic impact, as Congress has asked us to look at economic
    impact.
        I should just add one more thing. We are the only export
    credit agency in the entire world that does this. No other
    export credit agency, no other country requires this. We are
    happy to do so, but I think the committee should know this is
    something unique to the United States.
        Mr. Westmoreland. You have really, since 2011, stopped
    disclosing the yearly total of the number of aircraft exports.
    Why would that be?
        Mr. Hochberg. I am unaware that we have made a change in
    our disclosure since 2011.
        Mr. Westmoreland. You disclose all of them right now? Is it
    full disclosure of everything you do?
        Mr. Hochberg. Everything over $100 million is in the
    Federal Register for a full 25 days before a final board vote.
        Mr. Westmoreland. Above that amount?
        Mr. Hochberg. Above $100 million.
        Mr. Westmoreland. If it is less than that, it is just chump
    change?
        Mr. Hochberg. No. Less than that would be--first of all,
    you can't buy a wide-body plane, the item of concern to Mr.
    Anderson and Delta, none of them cost less than $100 million.
    So, under $100 million, and the aircraft would be two and a
    fraction of a 737, so that is what Congress asked us to say
    over $100 million, we would like in the Federal Register. I can
    just add, this does have an impact on our competitiveness.
        Mr. Westmoreland. I am going to lead by example and cut
    myself off.
        The gentlelady from California is now recognized.
        Ms. Waters. I would like to go back to a discussion about
    how you guarantee and how you finance and how you supply
    support for insurance. The opposite side of the aisle has
    created these words to describe what you do that are absolutely
    not true. They talk about corporate welfare. In saying that,
    they are trying to lead the public to believe that you are
    giving away something to the corporate sector in foreign
    countries. They also talk about crony capitalism, as if you are
    somehow giving to persons who have some kind of connection with
    you or with Ex-Im, something that they don't deserve, and so I
    think we need to clear this up. We need to talk about the
    difference between loan guarantees and the kind of financing
    that you do and grants. You have made it very clear that these
    are not grants, but I think we need to say it in words that
    everybody understands and nobody can deny. And, of course, for
    those who are saying it, none of them can prove that there is
    any welfare here, but they will keep saying it, unless we keep
    denying their description of Ex-Im. So would you please, in
    your own words, Mr. Hochberg, talk about how you do this?
        Mr. Hochberg. Thank you, Ranking Member Waters, and thank
    you for your support. We provide loans. Loans need to be
    repaid. We do not provide any grants whatsoever, and we have a
    very tough group of people who enforce the loan covenants and
    make sure that loans are paid back and paid back on time. That
    is how we can have a default rate of 0.21 percent, less than a
    quarter of a percent.
        At the height of the financial crisis, the worst crisis
    since the Depression, it was 1.1 percent, and it keeps
    declining. So in terms of risk management and in terms of
    corporate welfare, welfare implies we are taking from someone
    and giving it to somebody else. We don't do that. People come
    to us if they need our support. Also, according to the World
    Trade Organization, we have to be self-sustaining. If we are
    self-sustaining, that is where there is no subsidy from the
    government because the fees we collect cover the loan loss
    reserves, cover our operating expenses, and for the last
    several years, we transfer back to the taxpayer for deficit
    reduction, last year over a billion dollars.
        Ms. Waters. Mr. Hochberg, do you charge interest on loans?
        Mr. Hochberg. Most of the loans are guaranteed, therefore
    the Bank charges if it is a direct loan, and sometimes we do
    that, we borrow the money from Treasury. By law, we had a full
    percentage point. So if Treasury lends us the money for 2
    percent, we must charge at least 3 percent. On top of that we
    add fees, like points on a mortgage. If we are providing
    ``welfare,'' if you talk to any of our customers, they feel
    like they pay a lot of money for our services. None of them
    feel like it is welfare. They are paying ``handsomely'' for the
    privilege of borrowing.
        Ms. Waters. So is it because of the fees that you charge
    and interest if it is a loan that you are able to earn money,
    and what do you do with the money that you earn?
        Mr. Hochberg. The money we receive, a prudent portion goes
    to loan loss reserves to make sure that every loan is paid off.
    Congress each year appropriates a certain portion of that back
    to the agency to run. The balance we transfer to the Treasury.
        Ms. Waters. Let me say that one more time. The balance of
    this money goes to the Treasury of the United States of
    America.
        Mr. Hochberg. Correct. One billion 57 million dollars last
    October. The previous October, it was $803 million.
        Ms. Waters. So are you telling us that you actually earn
    money for the government that goes into the Treasury?
        Mr. Hochberg. Correct. We earn money because we are taking
    in more money than it requires to run the Bank.
        Ms. Waters. So, in earning money there is no way that
    anybody can credibly say that you are providing welfare for
    corporate interests. Is that right?
        Mr. Hochberg. That is correct.
        Ms. Waters. It is just an absolute misstatement.
        Mr. Hochberg. It is a misstatement, as crony capitalism is
    a misstatement as well.
        Ms. Waters. Thank you very much. And I hope that as we go
    through these discussions, you will say that over and over
    again. We have to rob the opposite side of their ability to
    undermine the tremendous work that you are doing, the
    tremendous way that you are allowing the United States to at
    least get at the balance of payment and get us into the export
    business. If it wasn't for your 2 percent or so that you are
    doing, we would be out of it altogether.
        I thank you.
        And I yield back the balance of my time.
        Chairman Hensarling. The time of the gentlelady has
    expired.
        The Chair now recognizes the gentleman from Oklahoma, Mr.
    Lucas, the chairman of the House Agriculture Committee.
        Mr. Lucas. Mr. Hochberg, are you having fun today?
        Mr. Hochberg. I have a chance to tell the story of Ex-Im
    Bank, so more people will understand what we do and how we help
    support jobs in this country, so I enjoy doing that.
        Mr. Lucas. That is a good response. And clearly, you are
    having a lot of rounds pitched at you politically from a
    variety of directions here today.
        If I could, to the whole panel, discuss for a moment with
    me the nature of how the rest of the world handles this
    situation. And if we were, indeed, to step away from the
    institution, would any of the other countries that we are aware
    of around the world drop their similar type of programs? I
    address this to anyone on the panel who would care to touch it.
    Is anyone talking about getting out of this business that does
    this on the planet that you interact with?
        Mr. Hochberg. Are you asking me?
        Mr. Lucas. Any of you.
        Mr. Hochberg. I would say when I meet with my colleagues in
    the G7 and the BRICs, it is the exact opposite. They are
    looking for a way to ramp up. They are adding staff, and
    frankly, unlike the Ex-Im Bank, most of them have offices
    around the world. I think China Ex-Im has something like 10 or
    12 offices globally. We are located here in the United States.
    So, they are going in the opposite direction. None of them are
    looking to become less robust or handicap their Ex-Im Banks.
    They are looking to enhance them.
        Mr. Lucas. To my friends from CBO and GAO, if this
    institution goes away, I know you have addressed this but one
    more time, please, the impact on the Federal budget?
        Mr. Elmendorf. So, Congressman, under the Federal Credit
    Reform Act, the rules that Congress has legislated and we
    follow, the Export-Import Bank has a negative subsidy cost, and
    that is the way it is recorded in the budget and the way we
    include it in our budget projections.
        Mr. Lucas. Okay. So if I understand the two sets of
    comments, we have a situation where we are not the only people
    engaged in this kind of activity. It would appear we are the
    only people discussing not continuing to engage in this
    activity, and the effect of engaging or not engaging in the
    activity has no real impact on the Federal budget? Fair
    observation?
        Mr. Scire. I think the way the Federal budget is accounted
    for right now, you really don't yet know. You really won't know
    what the costs of these programs are until more time has
    elapsed and the very recent books of business have had time to
    mature. I would point out that 11 of the cohorts that Ex-Im has
    done actually require subsidy according to Ex-Im and OMB's
    estimates based upon re-estimation. So we really won't know the
    full cost of these credits until they have had time to mature.
        Mr. Elmendorf. Congressman, I want to agree with that.
        What I was careful to say in my comments was that under the
    rules that Congress has legislated and that we of course
    follow, the Ex-Im Bank is a negative subsidy. We also have said
    a number of times, including just in a recent report, that we
    think a more comprehensive way to measure the cost of Federal
    credit programs would show Ex-Im Bank as having a positive
    subsidy cost. That is not the way it is recorded in the budget
    now.
        Mr. Lucas. Thank you for that clarification.
        Mr. Hochberg. Just so it is clear, a negative subsidy means
    we transfer, we make extra money we don't use, and it goes to
    the taxpayers to deficit reduction. That is what a negative
    subsidy means. So we have transferred this year over a billion
    dollars; last year, $800 million; and since Federal credit
    reform in 1992, $6.6 billion has gone from the Bank to the
    Treasury. If I could add one last thing, I know our time is
    limited. The financial crisis from 2008, we have a real-life
    stress test. I understand what GAO says. We have complied with
    everything GAO has asked for, but on top of that, we have seen
    the most stressful economic system and stresses on economic and
    Banking system the world has ever seen since the Depression,
    and our defaults are, again, 0.211 percent, less than a quarter
    of a percent. So I understand the future is uncertain, but we
    have just gotten through the worst 6 years the world has ever
    seen.
        Mr. Lucas. Absolutely, Chairman.
        The question is always is in most issues, is the glass half
    full or half empty? What will be the impact of having a glass
    or not having a glass? That is a policy decision that we have
    to decide here, but it is a fascinating subject of discussion.
    The intensity that I have observed in this committee, both
    perspectives, is great, but whatever we do will impact
    business. It will impact individuals. It will impact our
    competitive nature around the whole planet.
        And with that, I yield back to the chairman.
        Chairman Hensarling. The Chair now recognizes the gentleman
    from Missouri, Mr. Cleaver.
        Mr. Cleaver. Thank you, Mr. Chairman.
        To the inspector general, there have been some problems,
    obviously, with the Ex-Im Bank, but has there been something so
    egregious, so monstrous, that Congress should give the Ex-Im
    Bank a certificate of discontinuation?
        Mr. Gratacos. Obviously, the decision of whether Ex-Im Bank
    is still around is for Congress to decide. All we have done
    since we started the office is to look at some of the issues
    that were apparent to Bank operation, either from the law
    enforcement side--we have been very active on that side--or
    from the operational side. We had a hearing last year talking
    about risk management. We have done work on dealing with
    customers, on the complaints we receive from customers. We look
    at economic impact. We looked at all those aspects of the Bank
    that we thought needed to be addressed, and since then, the
    Bank is working with us in addressing those. Some
    recommendations are still outstanding, but there is still some
    progress and even the conversation is something that 2 or 3
    years ago, wasn't even on the table. So, from our perspective,
    we focus on the operations of the Bank.
        Mr. Cleaver. Thank you. To the GAO, if we didn't fund the
    Air Force, would it have an impact on the budget?
        Mr. Scire. Of course.
        Mr. Cleaver. That simple?
        Mr. Scire. You asked if we didn't fund the Air Force?
        Mr. Cleaver. Yes.
        Mr. Scire. Of course, yes.
        Mr. Cleaver. What if we didn't fund toilet tissue for the
    Capitol?
        Mr. Scire. That would have an impact on the budget.
        Mr. Cleaver. Okay. Thank you. So anything we don't fund
    would have an impact on the budget. Is that correct?
        Mr. Scire. I am not sure it is material for this
    discussion, but yes.
        Mr. Cleaver. You are absolutely right. You are absolutely
    right. Now, let me go further.
        Mr. Hochberg, do you know how many times the Ex-Im Bank has
    been reauthorized?
        Mr. Hochberg. Ex-Im Bank has been reauthorized more than 16
    times in its 80-year history.
        Mr. Cleaver. Sixteen times.
        Mr. Hochberg. Correct.
        Mr. Cleaver. Would it be a surprise to you--it probably
    wouldn't--that most of them were unanimous votes or
    overwhelmingly unanimous when they went to the House Floor and
    to the Senate and that a significant number--I can't remember
    the exact number--was actually, they were actually voice-voted
    out of the House, and then I think they called it consent in
    the Senate, in the lower House--what do they call it in the
    lower House?
        Mr. Hochberg. I think unanimous consent in the Senate.
    Unanimous consent.
        Mr. Cleaver. Unanimous consent. You would be surprised at
    the number of unanimous consent. So I guess the point I am
    making, perhaps poorly, is that, what is different now? And
    what I am saying is, are there some problems? I think that
    there are some things we can do. I think there are some tweaks
    that could be made. There should be some reform. I think the
    Delta Airlines representative brought us some things that
    should be considered. But my concern is that the Ex-Im Bank has
    been well-received by everybody over the years, and now, all of
    a sudden, we have this partisanism over the Bank, and I am just
    wondering what is it about this moment in our history that we
    don't think we can look at a problem and something that's not
    that big a problem and then make changes so that our businesses
    can compete for business abroad? I am frustrated over the fact
    that it would seem to me that there are issues that need to be
    addressed that can be fixed. Has there been anything that has
    been discussed here today that can't be dealt with if we sat
    down and worked?
        Mr. Hochberg. Congressman, I am a businessman. I came to
    this after 20 years in the private sector. We are constantly,
    and our team is looking for better ways to operate the Bank,
    address reforms and issues brought up by Congress so we can do
    a better job in managing risk and also serving exporters. And
    lastly, I would just add that it was President Reagan who
    signed a 6-year extension of the Ex-Im Bank, so a full 6-year
    reauthorization.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from North Carolina,
    Mr. McHenry, chairman of our Oversight and Investigations
    Subcommittee.
        Mr. McHenry. I wanted to ask you about The Wall Street
    Journal story from June 23rd about the employees being under
    investigation for accepting kickbacks and improperly steering
    contracts to favored firms. Is there an internal investigation
    conducted by the Ex-Im Bank on these matters separate from the
    investigation by the Office of Inspector General?
        Mr. Hochberg. Let me just begin by saying, frankly, I am
    outraged by the number--
        Mr. McHenry. I appreciate that. You have answered this
    question before about how you are outraged, but is there an
    investigation by the Ex-Im Bank separate from the Office of
    Inspector General?
        Mr. Hochberg. Most of those investigations are transferred
    over to the inspector general when they reach a certain point,
    so they are under the jurisdiction of the inspector general at
    this point.
        Mr. McHenry. At this point. No further investigation from
    your staff?
        Mr. Hochberg. They are turned over--at this level of
    seriousness, they are turned over to the inspector general.
        Mr. McHenry. And so the status of an investigation would be
    closed there but opened at the OIG?
        Mr. Hochberg. Well, it is not closed. It is an open issue.
    But it is--
        Mr. McHenry. But if you referred it to them because of the
    seriousness, then you are done with the investigation, correct?
        Mr. Hochberg. We are waiting to hear what the Inspector
    General says. That may recommend other actions we take, either
    with the employee or in a procedural manner.
        Mr. McHenry. I understand. Okay. So as a result of this,
    have you consulted with the General Counsel's Office about
    these reported incidents of fraud, waste, and abuse?
        Mr. Hochberg. Let me just make one statement. All of these
    infractions, all of these individuals you are referring to were
    all referred to the Inspector General by our employees. Our
    employees said, ``There is something suspicious here. I need
    the Inspector General to look at that.'' So these were all
    internally generated and sent to the Inspector General by our
    own employees, who said, ``I don't like what I see here. This
    doesn't look right.''
        Mr. McHenry. Yes, I am asking about you.
        Mr. Hochberg. Then I am not sure I understand the question.
        Mr. McHenry. Okay. Fantastic.
        So have you consulted the Ethics Office about these
    matters?
        Mr. Hochberg. Matters have been handled by our General
    Counsel and the Inspector General, as is proper, so that they
    are helped--
        Mr. McHenry. And the General Counsel referred that over to
    the Office of Inspector General?
        Mr. Hochberg. On some of them, they may have been turned
    over by another employee. They don't have to go through a
    particular channel. Any employee can refer a matter to the
    Inspector General.
        Mr. McHenry. Okay. Let me ask you a separate question. Is
    there an Office of Ethics at the Ex-Im Bank?
        Mr. Hochberg. An Office of Ethics? Yes, in the General
    Counsel's Office, there is an Office of Ethics and Compliance.
    I know of two--I think there are two to four attorneys in the
    administrative law area that--
        Mr. McHenry. And they report to? Who do they--
        Mr. Hochberg. They report to the General Counsel.
        Mr. McHenry. Yes. Okay. Other ethics offices actually
    report directly to the head of the operation, in other parts of
    government. Would you support that?
        Mr. Hochberg. We have a Chief Risk Officer that this
    committee asked, that the Inspector General recommended, and I
    committed to. The Chief Risk Officer has reporting to him--it
    is more broader than just credit risk. It looks at all of it.
        Mr. McHenry. I understand. I just asked you a simple
    question. So, I will just move on.
        Mr. Hochberg. The Chief Risk Officer reports to me. And he
    is in charge of--
        Mr. McHenry. Yes, I understand. I asked about the Ethics
    Office, not about the risk office. So--
        Mr. Hochberg. Ethics is part of that.
        Mr. McHenry. I understand, but I am talking about a direct
    report.
        I will move on because I understand you don't want to
    answer those questions I have been asking. So I am going to ask
    another question. Are you aware of any criminal investigation
    about the actions that were brought to light in The Wall Street
    Journal report?
        Mr. Hochberg. These matters, I think, are better answered
    by the Inspector General since they are an ongoing
    investigation. I don't want to invade people's privacy--
        Mr. McHenry. Are you aware of a criminal investigation
    about these matters?
        Mr. Hochberg. I am aware that the Inspector General is
    conducting an investigation.
        Mr. McHenry. Are you aware of if there is a criminal
    investigation about this matter?
        Mr. Hochberg. I am aware of the investigation. I still feel
    the question would be better answered, so I don't invade
    anyone's privacy, by the Inspector General, who is at the
    table. I just don't--
        Mr. McHenry. I understand.
        Mr. Hochberg. I don't want to make a misstatement.
        Mr. McHenry. I understand. In terms of meetings with the
    Office of the Inspector General, that is much easier to do. And
    so, I am just trying to ask you a few questions. Mr. Chairman,
    I am just trying to get to the bottom of this.
        If I can ask you a question about the Florida construction
    company at the center of The Wall Street Journal story, have
    you had any contact or dealings with them personally?
        Mr. Hochberg. Oh, no.
        Mr. McHenry. Okay.
        Mr. Hochberg. Absolutely not.
        Mr. McHenry. All right. Thank you.
        And, Mr. Chairman, I yield back. Confounded, I yield back.
        Chairman Hensarling. The gentleman yields back.
        The Chair now recognizes the gentleman from Florida, Mr.
    Murphy, for 5 minutes.
        Mr. Murphy. Thank you, Mr. Chairman.
        And thank you all for appearing before us today.
        Chairman Hochberg, thank you. It is good to see you. Thank
    you for your steadfast promotion of American jobs and American
    manufacturing in our country.
        As a small business owner myself, I understand that one of
    the most important things those small business folks need is
    access to capital and financing. Last year alone, Export-Import
    Bank financing supported over 200,000 jobs, 90 percent of which
    supported small businesses.
        If the United States unilaterally disarms the export
    financing world and allows Ex-Im to lapse, what kind of
    economic impact could it have on American manufacturing, on our
    job creators, on our exporters selling goods that are stamped
    proudly, ``Made in America'' all around the world--and so many
    of which have relied on this Export-Import Bank?
        Mr. Hochberg. On the first panel, we had Steve Wilburn, who
    gave specific testimony how just the threat of Ex-Im Bank not
    being here in September has already impacted the awarding of a
    $57-million contract to his company that would support a lot of
    jobs. The smaller transaction of $48 million supported 165
    jobs. This would obviously be more; it is even a larger
    transaction.
        We heard small businesses at the time of the shutdown, just
    even the threat of a shutdown, were losing sales because of
    potential we would not be there.
        Small businesses rely on us very deeply. It is 90 percent
    of our customers, 90 percent of the clients. And, frequently,
    they do not have another option. They frequently have very few
    options. I ran a small business. It is hard to get credit in
    general, and it is even harder for a small business.
        Lastly, many of the small businesses are part of the supply
    chain. So I know we focus on small businesses, direct
    exporters, but they are part of the Boeing supply chain, they
    are part of SpaceX, where Congresswoman Waters is, in her
    district. There is a large supply chain. A manufacturer like
    Boeing or GE, people like to talk about, but they don't make
    100 percent of what they do. Their supply chain is full of
    small businesses that would also be impacted immediately.
        Mr. Murphy. Thank you.
        As a fiscal conservative myself, I view all government
    spending with a skeptical eye. But one of the things I say
    frequently is that it isn't this body's role to create jobs;
    rather, it is our role to create an environment that is
    conducive to job growth. And you develop that environment
    through stability and certainty. Not by shutting down the
    government, or threatening to go over fiscal cliffs and
    sequesters and not by putting things like the Ex-Im Bank at
    risk.
        Can you talk about some of that uncertainty, and if 200,000
    jobs were supported last year, what that could potentially mean
    for these jobs in the future?
        Mr. Hochberg. It is obviously hard to be precise. I am
    thinking positively, that we are going to reauthorize the Bank
    and do it on time. But let's be very clear--205,000 jobs in the
    past year, well over a million jobs over the last 5 years, just
    under 1.2 million, were supported by our exports. That is
    because we filled the gap the private sector could not fill or
    didn't to meet the competition. So those are all at risk.
        When someone gets a loan from us, they have to state why
    they need the loan from us, or the guarantee or insurance, why
    can't they get it in the private sector. I would rather the
    private sector do everything. We are there when the private
    sector can't or won't.
        Mr. Murphy. To that point, I feel like I am in an alternate
    universe here. It just doesn't make any sense.
        Can you talk about how on the international scene, this has
    affected what some of our competitors globally are doing, what
    some other countries are doing? And could you address whether
    you think our global competitors' export Banks are going to
    step in to help American manufacturers.
        Mr. Hochberg. As I said, there is an ad in today's Politico
    that talks about the ex-im Banks of China, Russia, and France.
    And there are 57--there are 60 countries that all have an
    export Bank. They all would gleefully take sales from the
    United States and support more jobs in their communities. They
    are delighted to do that. They are looking forward to doing
    that.
        As I mentioned, China does more than 4 times the amount of
    financing for its exports than we do. We have a far more
    modest, much more careful, much more proscribed--
        Mr. Murphy. So, if anything, some could argue we should be
    expanding the Export-Import Bank.
        Mr. Hochberg. Yes, I would agree with that.
        Mr. Murphy. If you really care about jobs and American
    manufacturing--
        Mr. Hochberg. If you really care about jobs and you want to
    make sure we beat the competition. And, frankly, one way to get
    to the competition is to meet them toe to toe, head to head,
    over and over again and indicate we are not going to back down
    unless they play by the rules.
        Mr. Murphy. It would be one thing if not a single other
    country in the world had the equivalent of the Export-Import
    Bank. But they do, and, in fact, they are bigger. We don't live
    in that universe, so we might as well live in this reality,
    compete, and give our employees the best opportunity they can
    have.
        Thank you, Mr. Chairman.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from California, Mr.
    Royce, chairman of the House Foreign Affairs Committee.
        Mr. Royce. Thank you, Mr. Chairman, very much.
        Mr. Hochberg, a stated goal of Ex-Im Bank is to provide
    export credit assistance to serve customers who are unable to
    obtain financing through the commercial markets.
        What policies and procedures does the Bank have in place to
    ensure that it is limiting its assistance to these customers
    and not crowding out opportunities for private capital markets?
    And does Ex-Im make any kind of formal analysis of what kind of
    private capital would enter markets in its absence?
        Mr. Hochberg. Each application must state unequivocally why
    they are looking for our support and why they can't find it in
    the private sector. That is a requirement in reviewing a loan
    application, whether it is lack of financing, meeting the
    competition. Sometimes Banks have limits on what they will do
    in certain industries or certain countries. That is where we
    step in.
        Sub-Saharan Africa is a good example of that. We did a lot
    of loans in the Philippines. I have a list here. In Cameroon, I
    think I mentioned earlier, over half the exports that went to
    Cameroon, for example, we financed. Why? It is very hard to get
    any Bank to step forward.
        In places like Western Europe, we do very little business,
    because the banks are able to do that. In Japan, we hardly do
    any business, because there is a well-defined banking system.
        Mr. Royce. Let me ask Mr. Scire; let me ask the GAO.
        Is Ex-Im doing enough to ensure that companies are going
    out into the private market and not finding capital before
    coming to the Bank?
        Mr. Scire. So I think that gets into, sort of, the
    underwriting and what they are doing in terms of looking at
    eligibility and the analysis that is done there. And we have
    work under way right now that is looking at that, but that work
    is not yet complete.
        I would point out that we had made some recommendations
    back in 2007. And this is just to clarify a point. Although Ex-
    Im has been very cooperative and has agreed with our
    recommendations, not all have yet been implemented. And so
    there are some recommendations we made in 2007, which look at
    some of this economic impact, that it is still working on.
        Mr. Royce. Okay.
        Let me ask, also, in terms of the numbers and what numbers
    are right, both sides of this debate are claiming numbers that
    support their case, based on different accounting
    methodologies. So the Bank claims estimates that it made $1.6
    billion in revenues for taxpayers since 2008. Yet, as you know,
    and as has been cited here today, the CBO reported on May 22nd
    that if Ex-Im used the fair-value accounting method, it would
    be budgeted as a $200-million cost to the taxpayers each year.
        Dr. Elmendorf, can you explain the large gap in numbers
    between these assessments? And, in your response, can you touch
    on what kind of risk assumptions you use, in terms of losses,
    when you apply this fair-value methodology? Do you look at
    historical experience and commercial Bank experience? And do
    you factor in loss reserves and capital? Maybe a quick
    explanation of how you do this?
        Mr. Elmendorf. Yes, Congressman.
        When the government makes a loan or makes a loan guarantee,
    either through Ex-Im Bank or some other credit program, the
    ultimate budgetary effects of that are not known. Many loans,
    most loans are repaid. Some loans are not repaid or are repaid
    in part. Sometimes, some money is recovered. The ultimate
    budgetary effects aren't known until after the fact.
        So, last year Ex-Im turned over some amount of money to the
    Federal Treasury. That is certainly true.
        When we give the Congress cost estimates, we are trying to
    give you a sense of what will happen going forward under a
    certain program from a certain program from a certain bit of
    financial assistance, and those estimates are operating in a
    world of great uncertainty. What the fair-value methodology
    does is to capture in the estimate not only the expected level
    of default and recoveries but the variation around that
    expectation, and to recognize how possible outcomes are--
        Mr. Royce. Let me put it another way. What I would be
    interested in is the risk-analysis framework that is employed
    in accounting by the private sector creditors.
        Mr. Elmendorf. Right.
        Mr. Royce. If you did that--
        Mr. Elmendorf. So private sector creditors take account of
    this market risk and put a price on it because the risk is
    costly to--
        Mr. Royce. In your opinion, if you did that, would it be a
    $200-million cost to the taxpayers or would it be a--
        Mr. Elmendorf. Yes, Congressman. When we applied that
    methodology to the Ex-Im Bank's projections of the size of the
    credit programs they will run, of the default rates and
    recovery rates and so on, taking the same set of underlying
    cash flows that appeared in the credit supplement to the
    President's budget and that we use in our standard FCRA
    accounting, when we use those same underlying cash flows but
    apply this cost for market risk, then the Ex-Im Bank's programs
    are costly, by our estimate, to the tune of $200 million a
    year, as you said.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from Georgia, Mr.
    Scott.
        Mr. Scott. Thank you, Mr. Chairman.
        In this morning's hearing, the airlines, with the chairman
    of Delta Air Lines and the Pilots Association, made some very,
    very salient points.
        Now, I think this: We have to the move the Ex-Im Bank
    forward. It helps small businesses. It creates jobs. But I
    believe we can do this as well as address those concerns.
        So, Mr. Hochberg, I know that you know exactly what they
    are, but from what the testimony said this morning, the
    chairman of Delta Air Lines, Mr. Anderson, and the head of the
    Pilots Association, Mr. Moak, both made these points: that
    unless there is a level playing field in the exercise of one
    particular aspect of what you do, which is the financing of
    these wide-body aircraft, that puts our airline industry in the
    United States at a competitive disadvantage with foreign
    airlines who are able to get these wide-body aircraft flying
    these international routes that are very, very profitable.
        So you can see the concerns that Delta Air Lines has and
    the pilots and the airline industry have. Because, quite
    honestly, unless we do something to address this--and if the
    Ex-Im Bank is being used in an unfair way to subsidize, for
    example, the airlines in India, the other airlines that have
    been brought up, where they get subsidized by their government,
    then they turn around and they get subsidized by you, they are
    able to get those planes cheaper, then they can reduce their
    ticket prices, and that makes it very uncompetitive.
        So what I want to do is, and as I mentioned to the
    chairman, find a way that perhaps we can come up with some
    language as we move forward with this, within the 90 days that
    we have, that can address that concern. It doesn't seem that
    this is mutually exclusive.
        Can you help us with that and give me a little guidance on
    how we will be able to move this forward, while at the same
    time addressing the concerns of Delta Air Lines?
        Mr. Hochberg. I will do my best.
        One, let me just--I have to say, we don't subsidize. People
    pay us a fee, and, as a result, they are essentially paying for
    our guarantee so they can borrow money through a bank. And we
    are totally self-funding and self-sustaining. So there is not a
    subsidy going from us to anybody else. I just need to state
    that.
        Two, in 2011, without Congress asking us, we raised the
    fees multilaterally across the world, made it more expensive to
    borrow money from us to buy aircraft, in particular. Today,
    foreign carriers all pay more than a comparable U.S. carrier
    would pay for the same airplane. So, they are already paying a
    premium. What Delta Air Lines is unhappy about is--they are
    paying a premium; they think they should pay an even bigger
    premium. They are paying more; they would like them to pay a
    lot more.
        So, one, we just need to understand the facts. We all can
    have different opinions, but there are the facts--
        Mr. Scott. But Delta Air Lines does not take any money from
    the Ex-Im Bank, but these foreign countries do.
        Mr. Hochberg. We look at a--that is correct. Because the
    need is--the United States has the best financial markets, the
    most liquid, creative financial markets. So U.S. carriers can
    borrow at far lower rates than any foreign carrier buying the
    same airplane.
        Mr. Scott. Well, here is what--
        Mr. Hochberg. So there isn't an advantage going to the
    foreign carriers is what I am trying to say.
        Mr. Scott. Yes, but here is--granted.
        It is sort of like we are at a stalemate here, and what we
    have to do is try to lean in to one another and to try to find
    out where we can give here. Because there is absolutely no way
    that we can move forward with the progression of the Ex-Im Bank
    if you have this salient cry from an unlevel playing field for
    one of our most significant, important industries worldwide.
        Isn't there something we can do, even if it is a trigger,
    even if it is an amount, even if it means curtailing certain
    routes that the competition can't take?
        Mr. Hochberg. For 3 years, we have been asking Delta
    precisely what they would like, and they have not given us a
    precise recommendation.
        Mr. Scott. Hopefully, we will get that recommendation, and
    an amendment that can address this, too, as we move forward.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair recognizes the gentleman from Tennessee, Mr.
    Fincher.
        Mr. Fincher. Thank you, Mr. Chairman.
        Mr. Hochberg and the rest of the witnesses, I appreciate
    you being here.
        A lot has been talked about today with Delta Air Lines, and
    I was looking over something where Delta had used the credit
    export agencies of Brazil and Canada to purchase hundreds of
    aircraft made in those countries.
        Is that true, Mr. Hochberg?
        Mr. Hochberg. Yes, to the best of my knowledge.
        Mr. Fincher. So why would they be--and to their credit,
    they are for reforms, but extending the reauthorization of the
    Bank. But what would be to the advantage of Delta to borrow the
    money from those countries and not use ours? The products?
        Mr. Hochberg. Yes. The United States is not really in the
    business of making what are called regional jets, those small,
    somewhat uncomfortable, narrow jets that hold 50 to 75 people
    that a lot of us fly on. So, we don't make those. They are
    really manufactured today largely in Brazil and Canada. Japan
    is coming up on stream, Russia and China--
        Mr. Fincher. But it is the principle of the thing. If you
    are against it, you would be against it, all of it.
        Mr. Hochberg. Correct.
        Mr. Fincher. But they--
        Mr. Hochberg. They avail themselves of, it is estimated,
    between $3 billion and $4 billion worth of export credits from
    Brazil and Canada.
        Mr. Fincher. Again, I used this, this morning. The U.S.
    economy shrank at a steep 2.9 percent rate in quarter one. The
    Commerce Department says the first-quarter contraction was even
    more severe than the 1-percent annual decline it estimated a
    month ago. Another major factor was a bigger trade deficit than
    initially estimated.
        I did not support reauthorization last time because we did
    not make the reforms I think were necessary. I have a book of
    reforms now that we have been working on.
        Something that we tend to do in Congress--and now we are in
    primary election season. So things are happening. We saw
    elections last night, and elections will be next week. And
    elections have consequences when we forget who we work for. If
    I forget my district back at home in Tennessee, then when I go
    back there, the elections will have consequences.
        My district, the number of jobs supported--and I know the
    gentleman from South Carolina had problems with numbers a few
    minutes ago--but 1,000-plus jobs in my district, 5,000-plus in
    my State. Now, that is who I work for, the Eighth Congressional
    District of Tennessee.
        This is not about big business or small business. Look, we
    want the country to grow and flourish. We want to hopefully
    have the environment and the private sector where they don't
    need the government and don't need Washington. But, at the same
    time, I am looking at the debt clock. It is unbelievable. But
    this is a program, under the current guidelines, that is not
    costing; it is actually returning money back. We need to reform
    it.
        I heard former Chairman Bachus, a few minutes ago, talk
    about sending a letter to you guys and not getting a response
    in a timely manner. I think that is unacceptable. I think we
    have do a better job of being accountable to your customers.
        But to just, because it doesn't look right or I don't get
    everything I want--my wife and my little girl were going to be
    here today, but she is out doing something else. And I was
    thinking, I have been married 23 years, which is a long time. I
    don't get everything I want at home. I am sure not going to get
    everything I want up here. It is just not going to happen. But
    my job--
        Mr. Hochberg. I hope you do better at home.
        Mr. Fincher. Yes, I will have to do better at home.
        My job is not--I am a farmer. And I came to Washington 3\1/
    2\ years ago, and I promised my constituents, the folks in my
    district--because I received farm subsidies before I was
    elected. And I promised them that we needed a better way. We
    needed to reform the farm bill. This is just an example. We
    reformed the farm bill, more reforms than there had been in I
    don't know how many years. We did away with the farm subsidy
    program. We took many steps in the right direction.
        Was it perfect? No. I have voted over 2,400 times since I
    have been here, and none of the bills have been perfect. But
    did I vote ``no'' and say, it is not everything I want so I am
    just not going to do anything? No. That would be irresponsible
    on my part.
        My part is to do the best I can for my district and support
    an investment that creates 1,000 jobs in my district. And that
    is what this is about. With reforms. Without reforms, I can't
    support it. But, hopefully, we can reform it and move it
    forward.
        So, with that, I yield back, Mr. Chairman. Thank you.
        Chairman Hensarling. The gentleman yields back.
        The Chair now recognizes the gentleman from California, Mr.
    Sherman.
        Mr. Sherman. Mr. Hochberg, I hope that as you administer
    Ex-Im in the future--and I do think you have a future--you will
    focus especially on small businesses and focus on new products.
    Because the future--we have been trying to maintain a wage rate
    way beyond the average wage rate in the world, and the only way
    we are going to do that is by making things here that they
    don't make elsewhere.
        Now, a lot of this debate is between those who think we
    should focus on Ayn Rand's books on libertarianism and the
    purity of that versus the practicality. The practicality is
    Germany has more than 3 times the exports per person as we do
    in the United States. Germany has an export credit authority,
    or agency, that is roughly 3 times the size of ours compared to
    the size of our economy. Obviously, Germany is a somewhat
    smaller country. And while we have a declining manufacturing
    sector and a huge trade deficit, they have outstanding
    manufacturing jobs and a huge trade surplus. So the
    practicality side leads toward us also having an export credit
    agency.
        So the question is on purity. I want to point out to this
    committee that the Ex-Im Bank has a little sister. It is called
    OPIC. It is also a U.S.-sponsored export credit authority. It
    comes under the jurisdiction of the Foreign Affairs Committee.
    We reauthorized them on the Floor of the House of
    Representatives under a bill written by my good friend,
    Chairman Royce of the Foreign Affairs Committee. Yes, that good
    friend. One hundred and six Republicans voted for that bill.
        So if you are torn and you think, well, the Ex-Im Bank is
    good practicality but I have to preserve my ideological purity,
    if you are one of those 106 Republicans who voted for the
    Electrify Africa Act, which had the OPIC reauthorization in it,
    you have already lost your ideological purity. So, come with us
    and be practical.
        As to ideological purity, as to the gentleman from
    Tennessee, I think, who has just left, pointed out, Delta Air
    Lines has no ideological purity, nor do I expect them to have
    it. They are practical. They bought Canadian aircraft and they
    got financing from the Canadian agency that is analogous to Ex-
    Im Bank.
        One thing that is practical about Ex-Im Bank is that you
    are scheduled to make, what, $14 billion over the next 10
    years? Do I have that right, Mr. Hochberg?
        Mr. Hochberg. That is the CBO estimate, yes.
        Mr. Sherman. That is the CBO estimate. Okay. Do you have a
    different estimate?
        Mr. Hochberg. I don't make estimates to 10 years. We simply
    made a projection, a budget proposal for 2015, and they took
    those numbers and projected them out 10 years.
        Mr. Sherman. Okay. And so, we have to live under the
    benevolent tyranny of CBO, and if they say we lose $14 billion,
    then we have to adjust those debt clocks and announce to the
    country that we are increasing the national debt by $14
    billion, or we have to wait for the chairman of this committee
    to join me in a pro-revenue bill. And that would take a long,
    long wait.
        But it is argued that fair-value accounting, which is not
    the law--every time somebody wants to increase the national
    debt by a proposal, they say, ``Well, just change the
    accounting, and then I am not increasing the national debt.'' I
    have heard this all the time. Dynamic scoring. Now, it is fair-
    value accounting.
        And I want to make sure I understand this. Fair-value
    accounting would mean for Pizza Hut that we don't see whether
    they made money or lost money; we see whether they would have
    lost money if they had to pay as much to borrow money as the
    local pizzeria, which would be a very strange thing. The
    investors in Pizza Hut would be very surprised to find out that
    their company had lost money.
        Do I have that right, Mr. Hochberg?
        Mr. Elmendorf. Congressman, that is not the way I would
    describe Pizza Hut's use of fair-value accounting.
        Mr. Sherman. Pizza Hut is prohibited from using fair-market
    accounting, thank God, because--
        Chairman Hensarling. The time of the gentleman has expired.
        Mr. Sherman. --it would be a phony way to report to
    shareholders.
        Chairman Hensarling. The Chair now recognizes the gentleman
    from South Carolina, Mr. Mulvaney.
        Mr. Mulvaney. Thank you, Mr. Chairman.
        We have heard a lot of talk today in the last 5\1/2\ hours
    about reforms and making a better Bank. So, let's look at that
    a little bit.
        Mr. Hochberg, you were here a year ago, and, at that time,
    I asked you about the Inspector General's report that said you
    had had some problems, that you were not routinely reporting
    the performance of your sub-portfolios relating to the small
    business, Sub-Saharan Africa, and renewable energy mandates. I
    found out from the IG's Office today that you still haven't
    fixed that one.
        I also said a year ago that it looked like you had trouble,
    according to the IG's Office, with a lack of due diligence and
    asset monitoring efforts conducted by lenders, specifically the
    ones who have a history of defaulted transactions. Even though
    there is an expectation that such efforts are taken, Ex-Im Bank
    does not require participating lenders to conduct due diligence
    or asset monitoring of their investigations. I found out from
    the IG's Office this morning that you haven't done that one
    either.
        There is a list of 78 different things that the various
    reports since 2010 have asked you to do, 78 things either the
    IG or the GAO has asked the Export-Import Bank to do. The IG
    has been able to verify that you have done and fixed 33 of
    those 78. As to 36 of them, either the IG can't verify that you
    have fixed them, they say that you are working on it, or they
    say that they know for a fact you haven't started on them yet.
    There are 9 of the 78 that they say your responses are
    unresponsive and they don't even count you as trying to fix
    things.
        You are required by law--12 U.S.C. 635(b)(1)(B): ``In
    authorizing any loan or guarantee, the board of directors shall
    take into account any serious adverse effect of such loan or
    guarantee on the competitive position of United States
    industry, the availability of materials which are in short
    supply, and employment in the United States.''
        We heard this morning that you have done that one time--one
    time in 2001, when it comes to helping Boeing sell aircraft
    overseas. That was with, I think, Aeroflot in 2001. And staff
    tells me now that you have conducted a grand total of 24 of
    those reports, as required by law, over the last 17,000 export-
    import transactions.
        In 2012, we asked for some reforms. In 2012, this body
    asked the Export-Import Bank for some reforms, one of which
    was, ``The Secretary of the Treasury shall initiate and pursue
    negotiations with other major exporting countries, including
    members of the Organization for Economic Cooperation and
    Development and non-OECD members, to substantially reduce, with
    the ultimate goal of eliminating subsidized export financing
    programs and other forms of export subsidies. That was, I
    think, almost 2 years ago. You all have managed to set a
    meeting.
        The Administration recently sent over its proposed reforms,
    I guess. They call it a reauthorization. I don't know if we
    would call it a reform. It essentially says that you want more
    money; you want to change the way you count losses; you want to
    eliminate the need for producing stuff in the Federal Register
    regarding notice, lowering the accountability and transparency.
        And--and I wish the gentleman who was here from the
    previous panel, small businesses--you want to be able to count
    towards your small business quota small businesses that sell to
    big businesses. So forget about the pickles, forget about the
    guy's green energy. Unless you are selling to one of the big
    guys, you don't get to count under the President's proposed
    reforms, which I guess you participated in, because it is under
    your signature.
        I look at all of that against a political environment where
    this Administration has regularly shown that they don't really
    care about following the law very much. They certainly haven't
    followed it on health care. They are not following it on
    immigration. They don't seem to be following it on how they are
    supposed to keep the emails over at the IRS.
        So it makes me wonder, for everybody here who says, listen,
    that is great, let's pass some reforms, that would be
    wonderful. Before you run to the reform bandwagon, I encourage
    you to ask some questions to make sure that before we do that,
    let's first see if the Bank can actually reform itself under
    the existing laws that we have already passed. Let's see if
    maybe the Bank can make the suggested reforms that the IG and
    the GAO have suggested. And let's maybe make sure that this
    Administration might actually be interested in enforcing a
    reform bill if we pass it. Until then, I suggest to you that
    the time is way, way too early for talking about reforms of
    this Bank.
        With that, I yield back the balance of my time.
        Chairman Hensarling. The gentleman yields back.
        The Chair now recognizes the gentleman from Illinois, Mr.
    Hultgren.
        Mr. Hultgren. Thank you, Mr. Chairman.
        And thank you all for being here.
        First, Mr. Chairman, I would ask for unanimous consent that
    my full statement be inserted into the record.
        Chairman Hensarling. Without objection, it is so ordered.
        Mr. Hultgren. Thank you.
        I really would like to thank the panelists. It has been a
    long day, I know, but this is an important discussion. And I
    know, as many of my colleagues, we just want to get
    information, we want to know the truth, we want to do the right
    thing.
        As I mentioned in my opening remarks, I think Congress
    should take a hard look at the current structure of the Export-
    Import Bank. But, also, I hear from my own district's
    businesses that tell me that they rely on the Bank to ensure
    that their exports reach their customers. So before Congress
    abolishes the Export-Import Bank without a reasonable exit
    strategy, I think we really, first, need to explore viable
    reforms for the Bank.
        This leads me to my first question, and I will address it
    to Chairman Hochberg.
        The Bank's role in providing export credit assistance is to
    serve markets and customers that are unable to obtain financing
    through commercial markets. What policies and procedures does
    the Bank have in place to ensure that it is limiting its
    assistance to these customers and not crowding out
    opportunities for private capital markets?
        Mr. Hochberg. Congressman, thank you for giving me a chance
    to talk a little bit about that.
        First of all, 98 percent of the transactions at Ex-Im Bank,
    we work with a private sector bank to either make the loan,
    guarantee the loan, or arrange the loan. So we are doing that
    with 98 percent of the transactions.
        Furthermore, every application needs to state unequivocally
    why they are coming to us and why they can't do this in the
    private sector. That is a requirement for us to be making a
    loan. It is called--the term that is used is ``additionality,''
    what additional value are we providing.
        And that is one reason, quite frankly, our loan portfolio
    hasn't grown as much in the last 2 years; there has been less
    need for us of late. I don't know if that will continue, but,
    of late, there has been a little bit less need. And that is a
    good sign. That is a good sign that Banks are making more loans
    and they are also dealing more with small businesses.
        Mr. Hultgren. I would address my next question to the
    Inspector General, if I may.
        Your office regularly engages with private sector
    stakeholders to obtain input on the Bank's operations. I
    wonder, in your opinion, is the Bank effectively limiting
    itself to markets and customers not being served by private
    lenders? What steps could the Bank take to better mitigate the
    risk that it is crowding out private capital markets, and that
    the Export-Import Bank is the lender of last resort, not the
    lender of choice?
        Mr. Gratacos. Thanks for the question.
        The Bank has a requirement in the charter to only offer
    financing for three situations. One of them is another ECA
    competition, a lack of financing in the market, or
    additionality.
        So the requirement that Chairman Hochberg is talking about
    is a requirement that any transaction that goes through the
    system has to have a declaration, to some extent almost like a
    certification, saying, the reason why we come is because of
    ``X.''
        Now, whether or not that is verified is another story. We
    did a report on the direct loan program, and we highlighted
    that sometimes in the loan documents, we couldn't find
    documentation backing up that statement.
        That is the extent of what we are looking to do. We haven't
    really gotten into whether or not marketing strategies of the
    Bank across the country meet the charter requirement. We
    haven't gotten that far. But as focused on the direct loan
    program, we did address some of those questions.
        Mr. Hultgren. Chairman Hochberg, back to you.
        Mr. Hochberg. Yes, I would just add, it is required in the
    loan application. So the applicant needs to certify that their
    financial records are accurate as presented, that everything
    they state is accurate as presented.
        So I would--we do an audit periodically, but I have to take
    an assumption, if an applicant is signing an application for a
    loan guarantee from the Federal Government, that they are not--
    that a corporate officer is not committing fraud in doing so.
    So they have to state unequivocally why they are coming to us.
        Mr. Hultgren. Let me move on. I only have a little bit more
    time.
        The current risk management function of the Bank is
    fragmented and neither addresses the totality of enterprise
    risk nor how risks may be interrelated.
        Given the Bank's recent risk trends, including the
    increased authority to extend credit from $100 billion to $140
    billion, what additional procedures are you putting in place to
    ensure a central risk management structure?
        Mr. Hochberg. We, at the recommendation of the IG, and I
    stated, a year ago we added the position of a Chief Risk
    Officer. I work closely with the Inspector General that the
    Chief Risk Officer and the underwriting are two entirely
    separate reporting structures, both reporting to me.
        And the Chief Risk Officer looks not only at credit risk
    but employee risk, reputational risk, legal, IT, hacking--the
    entire risk portfolio. There has an Enterprise Risk Committee,
    and there are two senior career people who report up to the--
        Mr. Hultgren. My time has expired. I yield back. Thank you,
    Mr. Chairman.
        Chairman Hensarling. The time of the gentleman has expired.
        There are votes currently on the Floor. The committee will
    recess until approximately 4:45 p.m.
        The committee stands in recess.
        [recess].
        Chairman Hensarling. The committee will come to order.
        My apologies to the witnesses. Votes do happen. I hope you
    understand.
        The Chair now recognizes the gentleman from Wisconsin, Mr.
    Duffy.
        Mr. Duffy. Thank you, Mr. Chairman.
        And I appreciate the witnesses waiting as we voted.
        I was looking at a recent article that quoted a study which
    basically said that 42 percent of Ex-Im Bank employees agreed
    with the statement, ``My organization's leaders maintain high
    standards of honesty and integrity.'' Only 42 percent of Bank
    employees agreed with that.
        And I know, as, I think, what Mr. McHenry brought up
    earlier, just yesterday in The Wall Street Journal, we had an
    article about the four Ex-Im Bank employees who are under
    investigation.
        This obviously breeds some concern and actually makes sense
    as to why only 42 percent think the organization's leaders have
    honesty and integrity as values.
        Mr. Hochberg, I want to just follow up on a question that
    Mr. McHenry asked.
        Have any of those four had referrals for criminal
    investigations?
        Mr. Hochberg. I am going to need to defer again to the
    Inspector General because these are all in his hands at this
    point.
        Mr. Duffy. I know, but I am asking you.
        Mr. Hochberg. I can't comment on it. I referred these to
    the Inspector General.
        Mr. Duffy. You don't--do you not know?
        Mr. Hochberg. They are under his jurisdiction.
        Mr. Duffy. Do you know?
        Mr. Hochberg. I am not--
        Mr. Duffy. I am asking: Do you know if they have been
    referred?
        Mr. Hochberg. If they--do I--
        Mr. Duffy. Do you know if they have been referred for
    prosecution?
        Mr. Hochberg. For prosecution, I--to my knowledge, they are
    in the investigation stage.
        Mr. Duffy. Okay. Were the four employees referenced in that
    article placed on leave?
        Mr. Hochberg. I can't comment. Two of our--
        Mr. Duffy. You can comment on whether or not they were
    placed on leave. We all know they are under investigation.
        Mr. Hochberg. Two of them have already left the Bank.
        Mr. Duffy. Okay. And so the two that didn't leave, are they
    still drawing a paycheck?
        Mr. Hochberg. There is an investigation going--I am not
    allowed--I am told by counsel and by the IG that I am not
    allowed to comment on this.
        Mr. Duffy. On whether or not they are drawing a paycheck?
        Mr. Hochberg. I am told I am not allowed to comment on
    that.
        Mr. Duffy. Okay.
        Mr. Hochberg. I am not trying to evade you. I am just told
    by counsel I can't comment on that.
        Mr. Duffy. Listen, if you haven't picked up on it, there is
    a little bit of concern about whether we should reauthorize the
    Ex-Im Bank.
        I know some have presented it as an institution that should
    have a little halo on top that sparkles and it provides great
    job opportunity throughout the country and it is a pristinely
    run organization, you know, sunshine, roses, tulips, it is a
    beautiful thing.
        Some of our concerns and some of the concerns that you
    might have heard from Delta earlier today are concerns that I
    imagine don't surprise you.
        We have asked that you do an economic impact analysis on
    your activities, and we have heard testimony that you have
    17,000 authorizations. You have only done an economic impact
    analysis on 24 of them.
        Do you wonder why we sit back in surprise and ask, ``Why do
    we want to reauthorize an institution that can't even follow
    our directions from Congress?''
        Mr. Hochberg. Congressman, we do an economic impact review
    of every transaction. Not every transaction warrants a full,
    in-depth, full-blown, several-month economic--
        Mr. Duffy. Out of 17,000--do you agree with that number?
    Out of 17,000 authorizations, you only did 24?
        Mr. Hochberg. I don't know where the 17,000 comes from, so
    I can't comment on that.
        Mr. Duffy. Do you agree you have only done 24?
        Mr. Hochberg. I don't have the precise number at my
    fingertips of how many we have done. I can say the following.
    If you would like to know the process, from a process point of
    view, Congressman, we do an economic impact analysis when--when
    on the surface it says there is more to investigate here.
        Mr. Duffy. It is my understanding that the chairman has
    been given a large amount of discretion on whether this Bank is
    reauthorized or not.
        And I think it would behoove you if you just fully leveled
    with us, are fully straightforward with us, you don't dance on
    questions, you don't hedge, but honesty and being forthright
    might get you to get a few of us to buy into significant
    reforms and reauthorize.
        But when you come in and you dance on us and hedge, that
    makes me say, ``Listen, I am just going to get more of the
    same.'' Because if I vote for reform, I don't trust that you
    are going to do it. I don't.
        I hear a lot of folks tell me that this has no economic
    consequence to the taxpayer. It helps job growth. It doesn't
    have an impact on the taxpayer.
        Do you agree with that, the Ex-Im Bank?
        Mr. Hochberg. No.
        Mr. Duffy. Thank you.
        Because you know that from 1982 to 1988, on average, we
    bailed out Ex-Im about $330 million a year and then, from 1992
    to 1996, it cost the taxpayer almost $10 billion.
        So this is not cost-free to the taxpayer, necessarily.
    Correct?
        Mr. Hochberg. If I can respond to that?
        Mr. Duffy. Sure.
        Mr. Hochberg. A transfer was made because Federal credit
    reform in 9 billion--
        Mr. Duffy. Oh. So you are going to give me excuses?
    Listen--
        Mr. Hochberg. No. 1996. And then we returned--
        Mr. Duffy. My time is almost up.
        Mr. Hochberg. --9.6. So, actually, we--
        Mr. Duffy. You are not convincing me--
        Mr. Hochberg. --returned more money than we received.
        Mr. Duffy. --that I should vote for reforms and
    reauthorization. You have not convinced me here today. I would
    like you to convince me, but that takes honesty--
        Mr. Hochberg. You have not given me--
        Mr. Duffy. --and forthrightness--
        Mr. Hochberg. --a chance to answer the question.
        Mr. Duffy. --with this committee.
        And I yield back.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair recognizes the gentleman from Washington, Mr.
    Heck.
        Mr. Heck. Thank you, Mr. Chairman.
        Before I begin and use my time, I ask unanimous consent to
    submit for the record three statements of support from external
    organizations, most notably including a statement of the U.S.
    Chamber of Commerce, along with a statement by the U.S. Chamber
    of Commerce in support of H.R. 4950, the bill I introduced last
    night, with 201 signatures and sponsors.
        Chairman Hensarling. Without objection, it is so ordered.
        Mr. Heck. Thank you.
        Mr. Hochberg, how many audits have you had of the Bank
    since reauthorization?
        Mr. Hochberg. My recollection is that GAO has done nine;
    they can probably confirm that.
        Mr. Heck. They were all completed?
        Mr. Hochberg. To my knowledge, seven have been fully
    completed and two are in process.
        Mr. Heck. Mr. Chairman, at this time I would ask unanimous
    consent to submit for the record a list of all of the
    requirements and reforms as included in the Reauthorization Act
    and their status as well.
        Chairman Hensarling. Without objection, it is so ordered.
        Mr. Heck. Thank you, sir.
        Mr. Hochberg, there is a lot of conversation here today
    around what reform should be pursued with respect to the
    funding or financing of wide-body aircraft.
        At no point during the many hours we were here today, did I
    actually hear a specific proposal from Delta Air Lines,
    although I thought what I was interpreting was, ``Let's just
    prohibit them.''
        If we were to do that, what, in your opinion, would happen
    in the marketplace, especially with respect to other ECAs?
        Mr. Hochberg. My concern would be, unless it is
    multilateral and done with the Airbus countries as well, we
    would be unilaterally disarming and putting the sale of Boeing
    aircraft and the thousands upon thousands of jobs that are
    generated from that manufacturer at risk.
        It is as though the Honda dealer offers full financing and
    the Toyota dealer says cash only. It will be a tilt towards
    that vendor that provides financing.
        So if we were to prohibit--if Congress were to prohibit
    wide-body financing, it would open up that market to Airbus and
    the competition would still exist for U.S. carriers because the
    only difference would be foreign carriers would be flying more
    Airbus planes versus a mixed fleet.
        Mr. Heck. In the last 2 minutes that I have, I am going to
    ask you to stop, breathe, and then paint a picture.
        There have been lots of kind of surface projections made
    about what happens if we wake up on October 1st and your doors
    are shuttered.
        I would like you, as a long-time former businessperson, the
    former acting administrator of the Small Business
    Administration, and as the president of the Export-Import Bank,
    to look forward, not just October 1st and 2nd.
        What is the long-term consequence to America's
    manufacturing base? What happens to our economy? What happens
    to our position in the world? Paint the picture for us, please,
    Mr. Hochberg.
        Mr. Hochberg. I will paint the picture and I would actually
    include something that is frequently overlooked, Congressman,
    and that is foreign companies that are looking to invest in
    this country to make products for the U.S. market.
        But all of them have said to me, ``When we move here, it is
    also to export from the United States.'' And on--several of
    them have said, ``We would not be opening new manufacturing
    facilities in the United States if there was no possibility of
    Ex-Im support for our exports. That would be too risky, to
    actually attract U.S. manufacturing here.''
        First Solar, a company that does solar panels, manufactures
    in the United States and in Malaysia. He said that without the
    Ex-Im Bank, labor costing pretty much the same, the United
    States actually has higher taxes, but without Ex-Im Bank, he
    would probably shift more manufacturing to Malaysia.
        So I think that we will see some irrevocable changes if
    that happens. The threat of it is enough to make manufacturers
    think twice.
        If this is going to be an--on again, off again continually,
    it is hard as a businessman--I was a businessman--to make 5-
    and 10-year investments when there is so much uncertainty.
        Mr. Heck. In the very brief amount of time that I have
    left, I am fascinated to know how you have accomplished such a
    low default rate and such a low loss rate. Can you express that
    in 25 seconds? How do you get that?
        Mr. Hochberg. First of all, 80 percent of the transactions
    we have on our books are either collateralized, we actually
    have security in the actual asset, or are guaranteed by a
    sovereign nation. So we have a very high degree of
    collateralization and security.
        We do a good job of underwriting, and we do an excellent
    job at what I would call asset management, actually following
    up on credits and making sure people are current and stay
    current.
        Mr. Heck. Thank you.
        I yield back the balance of my time.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from New Jersey, Mr.
    Garrett, chairman of our Capital Markets Subcommittee.
        Mr. Garrett. I would defer if you have another Member
    first.
        Chairman Hensarling. In that case, the Chair will recognize
    the gentleman from Kentucky, Mr. Barr.
        Mr. Barr. Thank you, Mr. Chairman.
        Chairman Hochberg, I appreciate you coming to my office and
    talking to me about a month ago, and I think you know what my
    principal concerns are with reauthorization of Ex-Im Bank.
        There has been a lot of talk today about jobs. And I would
    like to talk a lot about jobs and, in particular, the job
    situation in Kentucky and the Obama Administration's climate
    policies, carbon policies, and the impact that those policies
    have had on jobs, particularly in eastern Kentucky.
        And, as you may recall, on December the 3rd, I sent you a
    letter expressing my concerns about the supplemental guidelines
    for high carbon intensity projects.
        These are guidelines that your Bank adopted which
    explicitly provide that your Bank will not provide support for
    exports for high carbon intensity plants.
        And your Bank defines a high carbon intensity plant as any
    plant that uses coal as a source of fuel for the generation of
    power or the production of heat.
        My Home State of Kentucky is the third largest coal-
    producing State in the country. We have lost over 7,000 coal
    jobs in eastern Kentucky over the last 2 years as a direct
    result of the regulatory assault of this Administration.
        We are talking about jobs. You want to talk about jobs. My
    dismay is that, on December 19th, in response to that letter,
    you said that the revisions and the adoption of these
    guidelines was for the purpose of harmonizing Ex-Im Bank with
    the Administration's climate change policies.
        My question to you is: Why on earth, if you are about
    creating jobs--why are you aligning yourself with a job-killing
    agenda?
        Mr. Hochberg. Congressman, we had time to meet in your
    office. And since 1992, Ex-Im Bank has had to take into account
    the creditworthiness of an export as well as the environmental
    impact.
        That was put in by Congress 22 years ago. We have had an
    environmental criteria for all exports since 1992. This is not
    a newfangled policy.
        Mr. Barr. I would just submit that, if this is really about
    jobs, then Ex-Im would not have issued or adopted these
    guidelines.
        You say in your letter, that you have reviewed this
    extensively with the Administration. And I want to know who in
    the Administration did you work with in adopting these
    guidelines? And I finally want to know whether or not Ex-Im, in
    order to be reauthorized, would consider abandoning this Bank's
    participation in the war on coal?
        Mr. Hochberg. We are active in the export of coal-mining
    equipment. We are active in the export of coal. One of our
    largest exporters in the State of Pennsylvania is a company
    called Xcoal. These regulations only apply to a coal-fired
    power plant.
        Mr. Barr. Well, I understand that.
        Let me reclaim my time really quickly.
        I would just submit, also, if the Administration is
    concerned about the environmental impacts, then what you are
    doing by discriminating against coal-fired power projects is
    you are excluding U.S. technology from the opportunity that
    these projects will be funded, but they will be funded by
    China.
        And so, if you are interested in supporting
    environmentally-sensitive policies, then support U.S.
    technology to build coal-fired power plants and deliver
    hundreds of millions of people from energy poverty across the
    globe.
        In my remaining time, I want to share a story from a
    constituent. When we talked in my office, you gave me the
    example of a small business in my district that benefitted from
    Ex-Im financing. And you said, ``Reach out to them,
    LectroDryer.'' We did.
        John McPhearson--I know this man--a small businessman, and
    he did access financing from Ex-Im. But this is what he told my
    staff on the phone yesterday, ``We reached the point where
    someone was working full-time to make sure the reporting
    documents were filled out so that we could continue to receive
    our line of credit. You simply can't take a company of only 70
    employees and dedicate one employee entirely to filling out
    this kind of paperwork. If the Export-Import Bank went away, it
    wouldn't make any difference to me.''
        This was the company that you told me benefitted from the
    Bank.
        ``We have seen no difference in sales since we stopped
    working with Ex-Im Bank. The reason we stopped working with Ex-
    Im was the cost and the complexity.''
        Do you have a response to that?
        Mr. Hochberg. Congressman, we are asked by this committee
    continually to do a better job of risk management, a better job
    of oversight.
        So I am trying to find a balance between supporting jobs
    and doing the proper job of oversight. I hope to get it right.
    If we get tilted one direction, we need to adjust that.
        Mr. Barr. Thank you.
        I yield back.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from New Jersey, Mr.
    Garrett, chairman of our Capital Markets Subcommittee.
        Mr. Garrett. Thank you, Mr. Chairman, again. And, once
    again, Mr. Chairman, thank you for your interest in promoting
    job creation in this country and holding a very timely hearing.
        This committee is very familiar with government lending
    programs and very familiar with government lending programs
    that have gone belly up, including Fannie and Freddie, the
    National Flood Insurance, and FHA in the sense that--you know
    their numbers.
        As such, I have come to believe that over time, when
    proponents of government lending programs tout that they
    actually make money for the Federal Government, I tend to
    remember the old adage that there is no such thing as a free
    lunch.
        So we have to look at it a little bit deeper than the
    talking points that we hear sometimes on the panel.
        According to the CBO--Congressional Budget Office--over the
    next 10 years, Ex-Im's 6 largest programs will generate $14
    billion in the government's standard accounting framework.
        However, when CBO applies the private sector's accounting
    method--and, if you were here before, that issue was discussed
    with Mr. Anderson in some detail. And I appreciate Mr. Anderson
    actually having a comprehensive understanding of that as
    opposed to some of the members of this committee.
        However, when the CBO applies the private sector's
    standards of this program to it, CBO projects the Bank is
    projected to lose about $2 billion. So between $14 billion and
    $2 billion--and I can do the math in my head right here even
    though it is late in the day--is a $16-billion swing, and that
    suggests there is a lot of downside uncertainty when it comes
    to Ex-Im.
        I will start with you, Mr. Hochberg.
        Do you believe that the current government accounting
    standards truly and honestly and fully account for the risk to
    the taxpayers of the Bank's lending programs?
        Mr. Hochberg. I do, Congressman. I can--the difference
    between--to my understanding, of fair value and the analysis
    CBO did in that swing assumes one large giant assumption that I
    believe is not true.
        Mr. Garrett. Okay. So that is--
        Mr. Hochberg. And that is we would not adjust our fees,
    would not--we could adjust our fees to compensate. If there was
    a different accounting system that was adopted by the U.S.
    Government, we could adjust our fees accordingly to make sure
    that we were at a break-even or cost no subsidy.
        Mr. Garrett. I don't know that is the only difference and--
    on their appraisal of it.
        Dr. Elmendorf, can you elaborate on this, since you have
    been there.
        Mr. Elmendorf. Also, Congressman, the estimates that we
    have done, the numbers of which you describe correctly, take
    the structure of the programs as they currently are.
        So they take the fees as they currently stand. They take
    Ex-Im Bank's projections of default rates and recovery rates
    and so on.
        If the programs were to change, then we would end up
    possibly with different estimates of their cost. We have just
    done an estimate based on the way the programs stand today and
    the numbers in the President's budget request for 2014.
        Mr. Garrett. So when they talk about the fees changing,
    those fees are changing on what? On current loans or on future
    loans, Dr. Elmendorf?
        Mr. Elmendorf. So from our point of view, we have taken the
    fees that are currently in place.
        If Ex-Im Bank were to charge different fees, then we would
    have to see how that affected not just the direct payments for
    the fees, but, also, how it would affect the composition of the
    borrowing that would occur from Ex-Im Bank.
        So we have to look at the whole changed structure of those
    programs.
        Mr. Garrett. Seeing that we have legislation to this point,
    would you commit to evaluating your loan portfolio on a fair
    value basis?
        Mr. Hochberg. We follow the Federal Credit Reform Act. If
    CBO wants to do a study on that, we would work with them on
    doing a--
        Mr. Garrett. I am not asking for a study. I am just asking
    that you do your books as other agencies do, as the CBO does
    their analysis, on a fair value basis.
        Mr. Hochberg. Right now I am required--because Congress
    has--the law of the land is the Federal Credit Reform Act that
    was passed in 1990. So that is how we keep our books in
    accordance.
        I was in business. You don't pick and choose your
    accounting system. That is the accounting system of the U.S.
    Government. It is the accounting system that we comply with
    when we do our annual audit and work with the IG on that. It is
    our--
        Mr. Garrett. That is a ``no.''
        Mr. Hochberg. We don't pick and choose.
        Mr. Garrett. Mr. Chairman, I think you wanted additional
    time?
        Chairman Hensarling. Yes.
        Mr. Garrett. If not--
        Chairman Hensarling. I will take the 30 seconds here.
        Mr. Hochberg, you have used some rather apocalyptic
    language regarding what would happen if Ex-Im was not
    reauthorized.
        Again, just for the record--I believe you said it already--
    but isn't it true that 98.4 percent of U.S. exports are
    financed without your Bank? Is that correct?
        Mr. Hochberg. That is correct.
        Chairman Hensarling. Is it also correct that only 5 percent
    of all transactions of Ex-Im are to meet countervailing
    subsidies?
        Mr. Hochberg. I'm not sure I understand the question, sir.
        Chairman Hensarling. It is from your records: 5 percent of
    the transactions of the Bank--you classify these--are made in
    order to meet other subsidies.
        It is in your competitiveness report. Do I need to cite the
    page?
        Mr. Hochberg. I can't remember or recall if it is 5
    percent. But one of the criteria is meeting foreign competition
    from other export credit agencies. In 2013, it was 38 percent.
    I am just looking at my records here, in 2013.
        Chairman Hensarling. That is dollar volume. Correct?
        Mr. Hochberg. That was transactions by purpose. It was on a
    transaction basis.
        Chairman Hensarling. That is on a transaction basis, 38
    percent. Okay.
        The time of the gentleman has expired.
        The Chair now recognizes the gentleman from Michigan, Mr.
    Huizenga, vice chairman of our Monetary Policy Subcommittee.
        Mr. Huizenga. Mr. Chairman, actually, I will yield some of
    my time to you if you want to continue that line of
    questioning. As I believe that is a line that needs to be
    explored, I will yield some time back to you.
        Chairman Hensarling. I thank the gentleman for yielding.
        So, Mr. Hochberg, we have heard a lot, and I think you
    yourself have used the phrase, ``unilateral disarmament.''
        And so, again, if we have over 98 percent of all U.S.
    exports not being financed--again my reading of your report,
    and I will try to get the page number, was that it was 5
    percent of transactions, roughly a third of dollar volume, are
    there to so-called level the playing field. All in all, it is a
    fairly small percentage of all U.S. exports.
        You also said that the Bank extends credit based on need
    and where they cannot find it in the private sector--I don't
    want to put words in your mouth. I don't have the transcript in
    front of me. I think you said that.
        So GE, Boeing, based on their balance sheets, can they not
    find credit in the private sector? Is that your opinion?
        Mr. Hochberg. It is not GE or Boeing. It is their customer.
    So in the Boeing case, to use that example, I just was in
    Africa. It is--Kenya Airways or Ethiopian Airways, which are
    good customers, but don't necessarily--
        Chairman Hensarling. So the size of their balance sheets
    wouldn't allow them to extend credit to their customer. Is that
    what you are saying?
        Mr. Hochberg. They are a manufacturing company. They are
    not a Bank. And their job is to manufacture and put money into
    R&D.
        Chairman Hensarling. He doesn't have GE Capital? Boeing
    doesn't have a finance arm? Are they not financing
    transactions?
        Mr. Hochberg. Not to the extent that--of the global
    requirements. And, again--
        Chairman Hensarling. What is a global requirement?
        Mr. Hochberg. Well, to meet all their export needs. They do
    it--frankly, sometimes--
        Chairman Hensarling. What is an expert need?
        Mr. Hochberg. I'm sorry?
        Chairman Hensarling. What is an export need?
        Mr. Hochberg. What I am trying to say, Mr. Chairman, is
    that sometimes Boeing will do it when they say, ``You know
    what? This credit is too poor. We are not even going to present
    that to Ex-Im Bank.'' So we do that.
        And the other thing we have to remember is we have Airbus,
    as an example, because we are talking about Boeing, that fully
    funds their export credit agencies, particularly in Britain,
    Germany, and France, don't have the criteria we have in terms
    of--
        Chairman Hensarling. GE Capital has half a trillion dollars
    in total assets. Boeing apparently has $92 billion in assets.
    And yet, they have a need that apparently you have to fill.
        So you are telling me again some of the largest companies
    in America can't finance their customers' desire for their
    products. Correct?
        Mr. Hochberg. They cannot provide--they are not in the
    position to provide 12-year financing or 10- or 14-year
    financing.
        Chairman Hensarling. I wonder what they are doing with that
    half-a-trillion-dollar balance sheet?
        Mr. Hochberg, a couple of different times you have talked
    about government shutdown, and rightfully said, ``I believe
    this is something that is harmful to the economy, I assume
    something to be avoided.''
        Did you talk about the government shutdown earlier today?
        Mr. Hochberg. I talked about it in terms of what the impact
    was on exports and small businesses that we work with.
        Chairman Hensarling. And my takeaway from your answer was
    detrimental. Is that correct?
        Mr. Hochberg. That is correct.
        Chairman Hensarling. Okay. So if Congress decided to send
    the President a clean continuing resolution and he refused to
    sign that because it did not reauthorize the Ex-Im Bank, and
    the Administration threatened a government shutdown, would you
    counsel the Administration publicly not to do that?
        Mr. Hochberg. I am not in a position to make
    recommendations on that, sir. My job is to manage the Bank and
    to determine--
        Chairman Hensarling. You just said in your earlier
    testimony that shutdown is something that you thought was
    pretty negative to the economy.
        So the Ex-Im Bank would be something that would be
    extraneous potentially attached to a clean reauthorization to
    keep the government open.
        You have had a lot of opinions on a lot of other matters.
    You have no opinion on this matter?
        Mr. Hochberg. What I referred to, sir, was that the threat
    of a shutdown--the threat of not reauthorizing the Bank or I am
    simply reporting what I heard when I spoke to exporters and
    their customers--
        Chairman Hensarling. So do you have no opinion on the
    matter, or do you refuse to share your opinion?
        Mr. Hochberg. I haven't given it any thought, sir.
        Chairman Hensarling. Fascinating.
        Mr. Huizenga. I will reclaim my 3 seconds, Mr. Chairman.
        The exact quote, as I wrote it down earlier, is that, ``We
    are there when the private sector can't or won't.'' And the
    question mark I wrote for myself after that was, ``Really? It
    doesn't always seem to be that is the case.''
        So, with that, I yield back. Thank you.
        Chairman Hensarling. The time of the gentleman has expired.
        The Chair now recognizes the gentleman from Indiana, Mr.
    Messer.
        Mr. Messer. Thank you, Mr. Chairman.
        I yield my time back to you, the Chair, to continue your
    inquiry.
        Chairman Hensarling. I thank the gentleman for yielding.
        Again, Chairman Hochberg, I would have you take a look at
    Figure B-1 of the Ex-Im Bank transactions by purpose from your
    2012 competitiveness report, page 149, where you list the
    financing due to the fact that, ``No private sector financing
    was available,'' and that which says ``meet competition.''
        As I do the math by number of transactions, it is about 5
    percent. So--
        Mr. Hochberg. Would you repeat the page number?
        Chairman Hensarling. --I would have you take a look at that
    particular report.
        Mr. Hochberg. I have 2013 here. I did not bring 2012
    because we issued this and set this up last night.
        Chairman Hensarling. Well, thank you. But we just got 2013
    yesterday. So this is the latest data that we have. Again,
    whatever the proper number is, it appears to be a somewhat
    smaller number.
        Let's talk again about the so-called level playing field.
    Listening to some of those who are on the other side of the
    debate, you would think the only way one could be competitive
    is to take taxpayer money and subsidize Fortune 50 companies.
        Dr. Elmendorf, regrettably, we are going to drag you back
    into all of this.
        But I believe the latest--CBO's February budget and
    economic outlook said that the Affordable Care Act, also known
    as Obamacare, would reduce the number of full-time employees
    over the 10-year budget window by 2\1/2\ million.
        I assume CBO still stands by that report?
        Mr. Elmendorf. I think that was our projection for near the
    end of the budget window, Mr. Chairman. And, yes, we stand by
    those estimates.
        Chairman Hensarling. Okay. Perhaps one way we could make
    our manufacturers and our exporters more competitive would be
    to repeal Obamacare.
        Now, here is something else that makes people competitive:
    wages. Some of our competitors have a higher wage scale. Some
    of them have a lower wage scale.
        The President has called for increasing the Federal minimum
    wage. According to a February CBO report, that could reduce
    employment by half a million, but it could be as high as 1
    million. That, again, is according to a February CBO report.
        Dr. Elmendorf, does CBO stand by that report?
        Mr. Elmendorf. Yes, Mr. Chairman.
        Chairman Hensarling. Okay. I think, if I remember right,
    just about every Democrat on this committee cosponsored the
    reduction in jobs of a half a million. Perhaps they might want
    to rethink that to help make our manufacturers a bit more
    competitive.
        We have the top five proposed rules that are coming down
    the pike, most of which is coming from EPA: Tier 3 emission
    standards, with a $35-billion impact on the economy, efficiency
    standards for motors, 11.7.
        We have the highest corporate tax rate of any
    industrialized nation in the world, yet my friends on the other
    side of the aisle, the only way they can think to somehow make
    us more competitive is to take taxpayer money in subsidized
    large companies.
        In the time that is remaining, Mr. Hochberg, here is
    another question that is somewhat disturbing to me: It appears
    that you are taking taxpayer money and loaning it or
    guaranteeing the credit to some nation-states that, according
    to Human Rights Watch, are some of the worst violators of human
    rights.
        The Democratic Republic of Congo, where the Human Rights
    Watch has said, ``Government authorities have sought to silence
    dissent with threats, violence, and arbitrary arrest against
    human rights activists.''
        Freedom From Torture, another human rights group, calls it
    the rape capital of the world.
        And, yet, on behalf of the American taxpayer, apparently,
    you have extended one of the state-owned enterprises a line of
    credit.
        You have also extended lines of credit to Russia, now that
    Ukraine's peninsula, the Crimea, has been absorbed.
        Sierra Leone, Human Rights Watch, ``The government of
    Sierra Leone and the mining company that is the country's
    largest employer have undermined villagers' access to food, and
    prevented workers from challenging abusive practices.''
        United Arab Emirates continue to crack down on freedom of
    expression and association.
        Okay. What private companies do with their money is one
    thing. What you do with taxpayer money is something else.
        Why are you taking taxpayer money and consistently loaning
    it to nation-states that are some of the worst human rights
    abusers on the planet?
        Mr. Hochberg. Mr. Chairman, the example you cited in the
    Congo is from the 1980s. It is over 30 years ago. We--
        Chairman Hensarling. My data says 2012.
        Mr. Hochberg. For every transaction, the State Department
    gives a clearance of human rights conditions, and we don't make
    a transaction if the State Department has an objection on a
    human rights basis. So that is current practice.
        I can't talk about what happened in the 1980s. I can talk
    about currently. The State Department gives us a clearance on
    every transaction from a human rights point of view that the
    board considers.
        Chairman Hensarling. Mr. Hochberg, I might say it is time
    to start showing a little bit of independent judgment in this
    matter, just one man's opinion.
        The gentleman from Indiana's time has expired.
        There are no other Members in the queue. So I would like to
    thank our witnesses for their testimony today.
        The Chair notes that some Members may have additional
    questions for this panel, which they may wish to submit in
    writing. Without objection, the hearing record will remain open
    for 5 legislative days for Members to submit written questions
    to these witnesses and to place their responses in the record.
    Also, without objection, Members will have 5 legislative days
    to submit extraneous materials to the Chair for inclusion in
    the record.
        The hearing is adjourned.

        [Whereupon, at 5:25 p.m., the hearing was adjourned.]

                                A P P E N D I X

                                 June 25, 2014

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