[Senate Hearing 113-378]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 113-378


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

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



                                HEARING

                               before the

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

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                                   ON

CONTINUING OVERSIGHT OF THE RECENT ACTIVITIES OF THE EXPORT-IMPORT BANK 
        AND THE CRITICAL NEED TO REAUTHORIZE THE BANK'S CHARTER

                               __________

                            JANUARY 28, 2014

                               __________

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


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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                  TIM JOHNSON, South Dakota, Chairman

JACK REED, Rhode Island              MIKE CRAPO, Idaho
CHARLES E. SCHUMER, New York         RICHARD C. SHELBY, Alabama
ROBERT MENENDEZ, New Jersey          BOB CORKER, Tennessee
SHERROD BROWN, Ohio                  DAVID VITTER, Louisiana
JON TESTER, Montana                  MIKE JOHANNS, Nebraska
MARK R. WARNER, Virginia             PATRICK J. TOOMEY, Pennsylvania
JEFF MERKLEY, Oregon                 MARK KIRK, Illinois
KAY HAGAN, North Carolina            JERRY MORAN, Kansas
JOE MANCHIN III, West Virginia       TOM COBURN, Oklahoma
ELIZABETH WARREN, Massachusetts      DEAN HELLER, Nevada
HEIDI HEITKAMP, North Dakota

                       Charles Yi, Staff Director

                Gregg Richard, Republican Staff Director

                  Laura Swanson, Deputy Staff Director

                         Patrick Grant, Counsel

                  Greg Dean, Republican Chief Counsel

          John O'Hara, Republican Senior Investigative Counsel

                       Dawn Ratliff, Chief Clerk

                       Taylor Reed, Hearing Clerk

                      Shelvin Simmons, IT Director

                          Jim Crowell, Editor

                                  (ii)


                            C O N T E N T S

                              ----------                              

                       TUESDAY, JANUARY 28, 2014

                                                                   Page

Opening statement of Chairman Johnson............................     1

Opening statements, comments, or prepared statements of:
    Senator Crapo................................................     2
    Senator Shelby
        Prepared statement.......................................    23

                               WITNESSES

Fred P. Hochberg, President and Chairman, Export-Import Bank of 
  the United States..............................................     3
    Prepared statement...........................................    23
    Responses to written questions of:
        Senator Crapo............................................    27
        Senator Tester...........................................    30
        Senator Shelby...........................................    31
        Senator Vitter...........................................    33
        Senator Toomey...........................................    44
        Senator Coburn...........................................    51

              Additional Material Supplied for the Record

Statement submitted by Linda Dempsey, Vice President, 
  International Economic Affairs, National Association of 
  Manufacturers..................................................    56

                                 (iii)

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

                              ----------                              


                       TUESDAY, JANUARY 28, 2014

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

           OPENING STATEMENT OF CHAIRMAN TIM JOHNSON

    Chairman Johnson. I call this hearing to order.
    Today the Committee again welcomes the Chairman and 
President of the Export-Import Bank of the U.S., Fred Hochberg. 
This hearing will continue our ongoing oversight of the Bank's 
activities.
    In addition, the Bank's current authorization expires on 
September 30, 2014, and it is my goal to work with Ranking 
Member Crapo and other Members of the Committee to reauthorize 
the Bank. Today we will hear from the Chairman his ideas for 
the reauthorization.
    The Export-Import Bank is the official export credit agency 
of the U.S., and it assists in financing the export of U.S. 
goods and services to international markets. Last year, the 
Bank supported $37.4 billion in exports and 205,000 U.S. jobs 
and sent $1 billion to the Treasury Department.
    The Bank is one of the few Federal agencies that actually 
makes money for the U.S. Government, and since 2008 it has been 
self-funding. This is a testament to the Bank's leadership 
under Chairman Hochberg, as well as the good work of the 
dedicated staff and Board of the Bank.
    All of the Bank's transactions are backed by the full faith 
and credit of the U.S. Therefore, it is important for this 
Committee to make sure that the Bank is working as efficiently 
and as effectively as possible to protect the taxpayers.
    Equally important is the Bank's objective to use exports to 
help create and maintain jobs here at home. This mission, 
spelled out in the Bank's charter, is at the very core of what 
Congress intended for the Bank. I believe that while the Bank 
is doing a good job, it can--and must--do more in this area.
    Last Congress, the Bank was reauthorized with broad 
bipartisan support. As we begin work on reauthorization this 
year, it is important that the Committee hear from the Bank on 
how it has implemented the reforms in the last reauthorization, 
what challenges it faces moving forward, and what Congress can 
do to help support the Bank's efforts to increase U.S. exports 
and jobs.
    I now turn to Ranking Member Crapo.

                STATEMENT OF SENATOR MIKE CRAPO

    Senator Crapo. Thank you, Mr. Chairman, and, again, 
welcome, Mr. Hochberg. We appreciate your work.
    Today we will review the activities of the Export-Import 
Bank of the United States as the Banking Committee prepares to 
consider this years reauthorization of the Bank's charter. U.S. 
exporters are able to compete very effectively in international 
markets on the basis of price and quality. However, when 
aggressive foreign governments provide subsidies as a matter of 
policy or general practice to their exporters, U.S. exporters 
are placed at a competitive disadvantage purely because of such 
financing arrangements.
    Relative to the size of their economies, certain European 
governments use export credit agencies to provide three times 
as much official credit as the Bank does. China and India 
provide four times as much. Countries like China 
institutionalize protectionist policies at the direct expense 
of other nations, trying to keep up with China's ability to 
draw on vast foreign reserves to crowd out its trade 
competitors in foreign markets.
    One of the roles of the Bank is to level the playing field 
for U.S. exporters by countering the public financing made 
available by foreign governments. The last reauthorization 
called upon the Treasury Secretary to engage in international 
negotiations to ultimately eliminate official export credit 
activity globally. I am interested in hearing what steps the 
Bank can take to assist the Secretary and what steps the Bank 
can initiate independently with its international counterparts 
to jointly reduce international subsidies.
    In the 2006 reauthorization, I worked on a number of 
provisions to make sure the small business community has an 
advocate to help address its needs and concerns. However, the 
Bank historically has had trouble meeting its 20-percent small 
business mandate in terms of authorizations as opposed to sheer 
number of transactions. Small- and medium-business transactions 
account for more than 85 percent of the Bank's transactions, 
but still fall short in the amount of money lent.
    My question for Chairman Hochberg is: What additional 
changes are necessary to improve the Bank's programs for small- 
and medium-sized businesses to achieve their needs?
    It is precisely these companies that operate at the heart 
of the U.S. economy, and export to new markets is essential for 
their growth and job creation.
    With the most recent increase in the authorization level, 
the Bank will be pressed to work harder than ever to meet its 
congressional mandate. Medium-sized businesses, which tap the 
Bank's medium-term direct lending program that supports 
transactions in the 5- to 7-year and $50 to $75 million range, 
actually seem to be getting squeezed between the small business 
mandate and the Bank's larger portfolio. This occurrence is 
causing the medium-term program to dramatically shrink to the 
point where no direct loans are being made whatsoever last 
year.
    As we look at ways to improve efficiency and reduce costs 
through all Government programs, Chairman Hochberg should be 
commended for holding the Bank's default rate to a level under 
that of commercial banks, while each year depositing hundreds 
of millions of dollars into the U.S. Treasury's general fund 
for the benefit of the American taxpayer. And I look forward to 
working with the Chairman and all the Members of the Committee 
to develop a bipartisan plan for the Bank's upcoming 
reauthorization that will make a real commitment to small and 
medium businesses while continuing to ensure that any risk to 
the American taxpayer is minimized.
    Thank you, Mr. Chairman.
    Chairman Johnson. Thank you, Senator Crapo.
    Are there any other Members who would like to give brief 
opening statements?
    Senator Shelby. Mr. Chairman, I would like my statement to 
be made part of the record.
    Chairman Johnson. Without objection.
    I would like to remind my colleagues that the record will 
be open for the next 7 days for additional statements and other 
materials.
    Today's witness, Fred Hochberg, is the 23rd President of 
the Export-Import Bank. Mr. Hochberg, you may begin your 
testimony.

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

    Mr. Hochberg. Thank you. Thank you, Chairman Johnson, 
Ranking Member Crapo, and other Committee Members. You have my 
written testimony which goes into detail about the Bank's 
results, processes, and reforms over the last few years, so I 
would like to take a few moments this morning to highlight just 
three key issues: our recent results; our efforts to support 
small business, which has already been mentioned; and changes 
we have implemented since our last reauthorization.
    As I sit before you today, the trade gap is at the lowest 
level it has been since 2009. Unemployment is down to 6.7 
percent, a level not seen since October 2008. And the ``Made in 
America'' brand has never been stronger.
    American exports are at an all-time high--$195 billion 
recorded in November alone, the largest 1-month total in the 
history of the United States.
    At the same time, our authorizations were down last year--
$27 billion, off from $36 billion the year before.
    Let me just repeat that. Exports are up, and Eximbank 
authorizations are down. That actually is a very good trend.
    A significant contributor to the drop in authorizations was 
that aircraft financing was down $3.5 billion. At the same 
time, total aircraft deliveries were up. The aerospace industry 
is less reliant on Eximbank largely because other forms of 
financing became more available in the last few years. But our 
real report card is jobs, and that is private sector jobs. 
Through our financing we have supported 1.2 million private 
sector jobs over the past 5 years, including 205,000 this last 
fiscal year.
    We are about 400 employees, a little bit more than 400, at 
Eximbank, a number of whom are with me today, but we punt well 
above our weight. For example, we have won 25 awards in the 
last 5 years, including an Innovation in Government Award from 
Harvard's Kennedy School of Government, as well as the Best 
Global Export Credit Agency from Trade Finance magazine, to 
name just two. And for the first time ever, Eximbank generated 
more than $1 billion for the U.S. taxpayers above and beyond 
the cost of all operations and loan loss reserves. Where I come 
from, we would have called that a profit.
    Let me talk about small business. I was a small businessman 
for 20 years, so I know that small businesses are the engines 
that drive our economy and create so many jobs back home. I am 
proud to report that of the 3,800 transactions we approved last 
year, nearly 90 percent of them were for small businesses, also 
an all-time record for the Bank.
    We have done more than 60 Global Access Forums, from Boise 
to Billings, from Charlotte to Shreveport. These and other 
forums in your communities spread the word of how Ex-Im can 
help reduce the risk for small businesses.
    We have also recently partnered with FedEx in a new program 
to make sure that their small- and medium-size companies who 
are clients of FedEx understand how we can help them improve 
and expand their global footprint and at the same time build 
sales and jobs.
    Third, let me now turn to the reforms and improvements we 
have made since our last reauthorization. We have improved our 
underwriting and credit monitoring. We hired a new Chief Risk 
Officer who reports directly to me. We are now posting all 
transactions, over $100 million, Federal Register prior to 
Board action. We have updated our economic impact procedures, 
and we have reviewed our domestic content requirements.
    We have enhanced reserves with qualitative factors. We now 
submit quarterly default rate reports to Congress. In our last 
report, which was filed just this past Friday, the default rate 
came in at 0.00267--in other words, just over one-quarter of 1 
percent.
    Comprehensive risk management and continuous improvement is 
what guides our work, and our default rate reflects that.
    In closing, let me leave you with one thing that does keep 
me up at night. We live in an extremely competitive world. On a 
daily basis, American businesses and their workers need to 
scrap and fight to win overseas sales. There are some 60 other 
export credit agencies around the globe, some regulated and 
some not, who are supporting their nation's exporters. They 
would like nothing more than to steal sales and jobs from 
companies in your States.
    For example, as mentioned earlier, South Korea's ECA 
finances roughly $100 billion in exports, three to four times 
the amount that we do in a nation that is less than one-tenth 
our size. That is why we need your help to reauthorize the Bank 
on time so that businesses can tap into the 95 percent of the 
world's customers that live outside of our borders and support 
U.S. jobs.
    Thank you, and I look forward to your questions.
    Chairman Johnson. Thank you for your testimony.
    As we begin questions, I will ask the clerk to put 5 
minutes on the clock for each Member.
    Mr. Hochberg, while the number of transactions conducted by 
the Bank increased from 2012 to 2013, the value of 
authorizations declined. Do you see this trend continuing?
    Mr. Hochberg. Well, thank you, Chairman Johnson, for this 
hearing and that question. The number of transactions declined; 
partly we are tapping into more small businesses and helping 
more small companies with smaller amounts, which is an 
important goal of the Bank. It is difficult to gauge how well 
the capital markets and banks will support U.S. exports. We saw 
some greater support this year, as I cited, in aircraft. So we 
are really monitoring this on a regular basis.
    Our first quarter results are actually slightly off from 
last year, although exports are still very strong. So I think 
we are seeing some banks stepping up more than they have the 
last few years.
    Chairman Johnson. As we have discussed before, I believe 
more needs to be done to support workers and businesses in 
rural areas. Can you explain how the Bank is working to address 
the needs of U.S. exporters located in rural areas?
    Mr. Hochberg. Without question. I mentioned I did an export 
event with Senator Crapo in Boise this past summer. I have done 
some with Senator Tester in Billings. I was just in North 
Carolina in the Textile Belt just a week or two ago. We work 
with city-State partners in those States to make sure we can 
support both the export of commodities and raw materials, as 
well as farm equipment that is often made in those areas. I 
will be in North Dakota, in Fargo, later this year.
    Chairman Johnson. If Congress fails to reauthorize the Bank 
this year, what would be the effect for American exporters and 
workers?
    Mr. Hochberg. Well, if we are not reauthorized, we put in 
jeopardy the 205,000 jobs that our financing supported this 
last year. When we finance an export, it is because that 
financing is not available through the private sector. So it is 
really putting all those 205,000 jobs and all those families 
that rely on those jobs at risk.
    Chairman Johnson. What is the Bank doing to help support 
exporters in Native American communities?
    Mr. Hochberg. Again, I think that we are working in rural 
communities, we are working on the commodities, we are working 
with minority- and women-owned businesses. We are looking at 
that entire area. I would say, Senator, one out of every five 
loans made in the small business space was to either minority 
communities, women communities, or communities that have not as 
fully participated in the global economy.
    Chairman Johnson. The Bank's financing must support jobs 
here in America. What specific steps is the Bank taking to meet 
the mandate to contribute to the employment of U.S. workers?
    Mr. Hochberg. Well, our content policy very much says that 
the financing we do supports work done in America. We require 
85 percent content for full financing. If there is 60 percent 
content, we will supply 60 percent financing. So we match our 
financing to the amount of work and jobs that are supported in 
this country.
    Chairman Johnson. As countries throughout the world expend 
their export credit efforts, how has the Bank responded? In 
particular, what is the Bank doing to counter export financing 
that is unregulated by the OECD?
    Mr. Hochberg. This is a very tricky area. It is one of the 
things I mentioned that does keep me up. And, you know, we 
often cite China, but, frankly, Russia is a very large threat 
right now, particularly in the nuclear space. We have two U.S. 
companies, Westinghouse and GE, competing. And many other 
countries, allies of ours--Japan, Korea--use what they call 
sort of ``soft loans'' and ``development loans.'' Partly we are 
doing this through diplomatic channels. We are bringing the 
attention to the OECD when we see them. We are working with the 
State Department and Treasury to curtail them. But at the same 
time, when we see an example--we did in Pakistan a few years 
ago--we, working with the White House and the Treasury 
Department, came up with offsetting financing to make sure we 
could negate any impact from sort of offline or one-off 
financing that some of these countries have been deploying.
    Chairman Johnson. The Bank plays a critical role in 
providing access to emerging markets for American exporters. In 
what regions and industries can the Bank be most effective in 
supporting American exporters?
    Mr. Hochberg. I would say--and I think we will have some 
questions on this. You know, it is a little bit like a barbell. 
We do a lot in the small business space, and we do a lot with 
very large companies. Small business always has difficulty 
getting access to credit, and on some large capital projects, 
whether it is locomotives or satellites that are simply 
difficult to finance, are going to countries that have 
perceived greater credit risk is where the bulk of our business 
rests.
    Chairman Johnson. Last, you have noted the Bank's 
commitment to ``Government at the Speed of Business.'' What 
steps are you taking to ensure that timely processing of 
financing requests does not lead to increases in bad loans or 
fraud?
    Mr. Hochberg. Well, we pride ourselves on what we call 
``Government at the Speed of Business.'' We are not taking any 
shortcuts whatsoever on due diligence or how we underwrite a 
transaction. But you know and I know when a transaction comes 
in and it is reviewed by underwriters and say it takes 8 weeks, 
they are not working on this 8 weeks, 40 hours a week. There is 
a lot of time we are waiting for information. It is sitting 
waiting for an economic impact study or an accounting report or 
compliance reports. What we are doing is squeezing that air out 
of the system, making sure we get on the phone, call, making 
sure our underwriters and our legal teams are working closely 
together so we are not having transactions waiting around for 
information. But we are not taking any shortcuts in due 
diligence, any shortcuts in underwriting to making sure that we 
are underwriting and financing things that will have a 
reasonable assurance of repayment.
    Chairman Johnson. Senator Crapo.
    Senator Crapo. Thank you, Mr. Chairman.
    First, Mr. Hochberg, I want to thank you for your 
leadership at the Eximbank. I want to go first in my questions 
back to the first question the Chairman had and just explore it 
a little further. You talked with him about the fact that the 
number of Bank transactions has increased from 2012 to 2013 
while the overall value of authorizations has actually 
decreased, and I appreciate your answer to his question about 
that. One question I have is: What effect does this dynamic 
have on small business transactions?
    Mr. Hochberg. Well, small business is something that, one, 
I feel very close to, one, having run a small business and, 
frankly, served at the SBA under President Clinton.
    We are continually finding new ways to reach small 
businesses. We have modified our Web site. We opened additional 
offices when we received an appropriation a few years ago. We 
are innovating new products. I mentioned the award we received 
from Harvard's Kennedy School about a product called ``Express 
Insurance.'' We can turn around and give an answer within 5 
working days of a request for insurance to insure overseas 
receivables. So we are continually finding how do we chip away, 
how do we find better ways.
    The other thing, frankly, Senator, when we were out in 
Boise meeting with exporters in your State and in many of the 
Members of this Committee, we had, I think, about--we had 
standing room only, I recall that. I think we had between 100 
and 120 people there who were looking for information how they 
can export and secure the business and increase sales and 
thereby increase jobs at home.
    Senator Crapo. Well, thank you, and we do appreciate your 
outreach on that.
    I want to turn to what appears to be a contraction of the 
medium-term program. In 2013, the medium-term program totaled 
only about $234 million, and when you compare that to a $27 
billion portfolio, it is about 1 percent. And last year, the 
Bank provided no medium-term loans, as I understand it.
    It further appears that the Bank has allowed its medium-
term program to contract while overall demand for Bank support 
has increased.
    Why has the Bank allowed the medium-term program to shrink 
when the overall demand for authorizations is consistently 
growing?
    Mr. Hochberg. Well, let us recall that what we do at 
Eximbank is fill in gaps, gaps that the private sector is not 
doing. So the private sector always gives small businesses a 
hard time. That will never change. It is getting better, but it 
will never change. And for long-term loans in remote parts of 
the world that require 12-year financing or longer, the private 
sector also has difficulty there.
    The medium-term market is one that banks actually fill 
well. I do not want to compete with the banks at all. It is not 
in our charter. We supplement the banks. We are not trying to 
replace them in any way whatsoever. So where the banks step in, 
we are happy to step back. We only want to step forward when we 
are really needed.
    Senator Crapo. Do you have the same credit standards for 
the medium-term program as you do for other loan programs?
    Mr. Hochberg. We do have the same standards. I have to tell 
you, though, when I arrived at Eximbank in 2009, the default 
rate in the medium-term program was as high as 44 percent. We 
now have a default rate that we have brought down to 7 percent. 
You recall that Congress has a mandate that we have to keep 
overall defaults 2 percent or less. So we monitor our defaults 
and say, ``What do we need to do?'' We are not in the grant 
business. We are in the loan business. We need to get paid 
back. And, frankly, a 44-percent default rate--I was in 
business for 20 years--was just unacceptable. We got it down to 
7 percent, and, frankly, we need to still work that to a level 
that is acceptable by lending standards.
    Senator Crapo. Well, thank you. And the Bank has 
cofinancing agreements in place with 11 countries. These 
programs enable the Bank to meet foreign competition by working 
cooperatively with foreign export credit agencies largely to 
the benefit of the Bank's largest exporters. The small- and 
medium-sized enterprise exporting community has long sought 
such a program.
    Does the Bank have a comparable program in supporting 
similar transactions among small and medium enterprises?
    Mr. Hochberg. Without question. I will give you one 
example: Dave Ickert from Olney, Texas, that sells crop dusters 
and firefighting planes, mostly to farmers; most of their 
customers are in Latin America. We cofinance with Canada. The 
engines for those planes come in from Canada supported by EDC, 
our counterpart in Canada, and we support the manufacturing of 
the actual airplane itself.
    That is just one example that is a medium-term loan. 
Another aircraft company called Thrush sells a competing 
product in China. Also those engines come from the Czech 
Republic, and so we together jointly finance that so that those 
smaller and medium--it is a medium-size transaction that takes 
advantage of that.
    Senator Crapo. Thank you. And, last, on this round, with 
regard to Eximbank's climate change guidelines, last December 
the Bank issued new environmental guidelines to reduce 
greenhouse gas emissions, and almost immediately it became more 
difficult for developing countries to find public financing for 
coal-fired plants. Is the Bank's guidance consistent with the 
Bank's chartered mandate to provide competitive financing on 
behalf of U.S. exporters to find U.S. jobs? I guess the 
question really is: What is the intention of the Bank with this 
new guidance? And how does that support the Bank's objectives?
    Mr. Hochberg. Well, I am glad you asked that question, 
Senator. You know, our charter, which goes back to 1945, 
although the Bank will celebrate 80 years this year--is 
celebrating 80 years this year--has laid out an environmental 
requirement in our charter back to 1992. So we have always had 
to balance supporting U.S. jobs and looking at the 
environmental impact of those jobs for over 20, 22 years now. 
And we are constantly working with industry and environmental 
groups and finding that balance between the two. Sometimes I 
think we make everybody angry at us, both the exporter and the 
environmental community. Both of them would like us to tilt in 
one direction or another. We are trying to find that line in 
between that balances jobs and the environment and keeps that 
in some kind of balance.
    Senator Crapo. Thank you.
    Chairman Johnson. Senator Reed.
    Senator Reed. Well, thank you very much, Mr. Chairman, and 
thank you, Director, for your great work over many years.
    You mentioned nationally the unemployment rate is 6.7 
percent, but in many States it is much higher. In my State it 
is 9.1. In Nevada it is 8.8. In Kentucky and Mississippi eight-
point--it is not a regional phenomenon.
    Are there any special efforts that your agency is taking to 
reach out to these areas that need a little more help?
    Mr. Hochberg. I think without question. I mean, as I 
mentioned, I was with Senator Crapo this summer. I was in North 
Carolina just 2 weeks ago in the textile area, which has been 
an area that has really been buffeted by a lot of foreign 
competition.
    One of the tools we have is we do these forums, these 
workshops. I bring in the SBA, we bring in the Commerce 
Department to make sure that small businesses understand what 
are the tools available, tools, frankly, they are paying for as 
taxpayers, that could help them increase their global 
footprint.
    We started that program 3 years ago. Actually at the 
Chamber of Commerce, Tom Donohue, Jay Timmons of NAM, and a few 
other Federal agencies all together launched it, and as I 
mentioned, we have done over 60 of those. We have revamped our 
Web site. We are continuing looking at outreach, and I would be 
happy if, for those Members that we have not been to your 
State, we would like to do that in the new few months.
    Senator Reed. Well, I would encourage you to do that, but 
also it is--you know, the areas of the country that really do 
need an infusion of jobs, and exports generate jobs, I think we 
would put high on your priority list, and I hope you can do 
that.
    One other area here--and we chatted about this previously--
is the fact that, for particularly small businesses, they might 
be able to have financing or be aware of your programs, but 
they are not aware of the markets overseas, and that is a 
Commerce Department activity. Can you talk about how you are 
going to try to pull together the identification of overseas 
markets and the potential? Because without that, the financing 
is sort of moot.
    Mr. Hochberg. You are absolutely right. I mean, frequently 
financing is not what is holding them back. Frequently they 
need to say, well, where could I sell this product overseas? 
And we work closely with Secretary Pritzker and the Commerce 
Department. They have something called ``U.S. Export Assistance 
Centers,'' with the bad acronym of USEAC for Export Assistance 
Centers. There are about 108 of them around the country. They 
have more Export Assistance Centers in this country than they 
have posts overseas. And they help exporters to find those 
foreign markets and identify where they could sell their 
products, and we frequently--our regional offices are 
collocated. So someone can go one stop and see all of that in 
one location. That is really key.
    We have done a number of outreach efforts at community 
colleges that also have a large footprint with small 
businesses. But I think that is why when we do an export event 
in-State, we make sure that SBA and the Commerce Department are 
with us, because people need to look at the full range of those 
services, not just at the financing option, as you mentioned.
    Senator Reed. And you have made it very clear that your 
mission is really to fill a gap between the commercial 
financing operations--and, in fact, you note that exports are 
up and your activity is down, and that is a good sign because 
it means that commercial enterprises are, you know, doing the 
bulk of the lending, as it should be. But there is another area 
where a gap can develop, and that is in areas where there is 
political risk and other issues.
    Do you consciously sort of, you know, provide support to 
companies that may be exporting areas where individual 
commercial enterprises will not engage, not because of the 
dollars and cents but because of other risks?
    Mr. Hochberg. I think that is a large portion of our 
portfolio. I mean, we really--for example, we are not terribly 
active in Europe. You know, there is not a lot of commercial 
risk, political risk, and there is a lot more commercial 
financing there. We are more active in places--for example, in 
sub-Saharan Africa, about 1 percent of U.S. exports go to sub-
Saharan Africa, and it accounts for about 5 percent of our 
portfolio, which takes into account both commercial and 
political risk that is perceived in that area. And sometimes 
there can be--the perception can be far greater than the 
reality, and that is where we step in. We are only looking to 
really step in where we need it. Our feelings are not hurt when 
a customer goes away and goes to a commercial bank. We actually 
encourage it.
    Senator Reed. And let me underscore what you have already 
said, that in addition to getting credit out, you are bringing 
your default rate down dramatically. So these are good credits, 
and you have done a good analysis, and you are providing good 
value, not just to the exporter but to the taxpayer.
    Mr. Hochberg. Correct.
    Senator Reed. Thank you.
    Mr. Hochberg. Thank you.
    Chairman Johnson. Senator Shelby.
    Senator Shelby. Thank you. Thank you, Mr. Hochberg.
    As you well know, we have a current account deficit; in 
other words, we are running a huge deficit, exports versus 
imports, and have for years and years. On the other hand, 
Germany and China are quite the opposite, for the most part.
    What role and what positive things can you tell us that the 
Export-Import Bank is doing besides helping in the aircraft 
area? We know the role you play there, which is big. We do not 
know all of it, but we export a lot of planes. But as we begin 
to make more here--for example, Airbus is building a huge 
facility to compete with Boeing--you know of this; they compete 
all over the world--in my home State of Alabama, Mobile, 
Alabama, right now. So will this--would the Export-Import Bank 
be available to Airbus to export the same as Boeing? Or what 
are the rules going to be?
    Mr. Hochberg. Well, thank you, Senator Shelby. In terms of 
the current account deficit, we want to support exports to make 
sure that when they are competing--and it is not just aircraft. 
It is farm equipment, it is services. We do a lot in power, oil 
and gas, in many of those areas.
    Senator Shelby. Can you break it down roughly, unless you 
have the figures? What percentage of the exports that you aid 
on this with the Export-Import Bank are aircraft, aircraft-
related? What are power plants or power-related? What are 
agriculture? In other words, manufacturing and everything. Can 
you just give us a thumbnail----
    Mr. Hochberg. Manufacturing was actually at an all-time 
high. I am doing this from my recollection. It is north of $11 
billion of the $27 billion we financed last year. A small 
business----
    Senator Shelby. OK. Now, does that include aircraft?
    Mr. Hochberg. No. And then----
    Senator Shelby. OK. And aircraft----
    Mr. Hochberg. Last year, aircraft was just over $8 billion. 
It was about 30 percent of what we did. So we actually did more 
in manufacturing than we did in aircraft. We did a total in 
small business, direct and indirect, just north of $6 billion. 
I think we should be doing more in power, frankly, because the 
world is powering up.
    One of the areas that has done a lot of growth in the last 
few years is services. We do a lot in the service sector, 
engineering services, things of that nature, architectural, 
even legal services, insurance. Those are some of the things 
that we have been increasing in. So those are all large areas.
    The other thing, when you mentioned Airbus--let me give you 
an example. I mentioned power. Siemens opened a turbine factory 
in Charlotte, North Carolina. We treat Siemens no different 
than we would treat General Electric. They make the goods here. 
They employ Americans. We are indifferent to who owns the 
company. We are most focused on supporting jobs, and if those 
jobs are in the United States, we will support that company.
    Senator Shelby. So that would include Airbus if they export 
planes.
    Mr. Hochberg. Yes. To the extent, though, they have to make 
the planes here, not just assemble them but they really have to 
make them here.
    Senator Shelby. And what does that mean? You make them here 
because say, for example, Boeing imports so many of their parts 
from all over the world and just assembles them.
    Mr. Hochberg. Well, for example, on the 787, approximately 
60 to 65 percent, depending on the engine, is made in the U.S. 
and----
    Senator Shelby. Do you have a rule on this?
    Mr. Hochberg. Yes, we have a content rule. We look at the 
content. We get a certification. We audit that. And, for 
example, as you mentioned, on the 787, NEXI, the Japanese 
credit agency, cofinances with us so we can finance it. So we 
will cofinance with a foreign country's export credit agency 
to--they can finance their portion, we will finance our portion 
so we can put a package together.
    Senator Shelby. What is the impediment to get up to at 
least 20 percent dealing with small business?
    Mr. Hochberg. Well, we are at 19 and change this year. We 
are actually at 27 percent for the first quarter of this year. 
We had a very strong showing in small business. And partly we 
need to continue to get the word out to small business. I think 
as Senator Reed mentioned, sometimes it is not the financing. 
It is access to markets; it is understanding those markets that 
makes a difference.
    Senator Shelby. But that is an untapped source we have, I 
believe, in America.
    Mr. Hochberg. I think we still have a large untapped 
source. As I said, I am pleased that we hit 27 percent in the 
first quarter. If I look at it State by State, Senator, I think 
all but five or six States, we were well north of 20 percent in 
our support.
    Senator Shelby. Last--my time is up--what did you get out--
what did you take out of the GAO report which we had requested 
dealing with the Export-Import Bank, your assumptions are 
different and so forth?
    Mr. Hochberg. Well----
    Senator Shelby. As far as ultimate risk to the taxpayer, 
what did you take out of that?
    Mr. Hochberg. Well, a number of things. There have been a 
number of--GAO blesses us with many studies and investigations. 
They are not bashful about coming by. We put in a Chief Risk 
Officer, is one of the things we have done. We have tightened 
up our underwriting. We make sure there is a feedback loop for 
what is called ``asset management underwriting,'' so as we see 
how a credit is performing, we make sure we provide that 
information to underwriters so they can take it into account on 
future transactions.
    So a number of those things have been very helpful. Both 
the IG and the GAO have given us a number of very good 
recommendations, and, frankly, that is why I believe we have a 
good default rate.
    Senator Shelby. Do you plan to carry out those 
recommendations?
    Mr. Hochberg. We have agreed with each one that the GAO has 
put forward. We did not object to them.
    Senator Shelby. Thank you.
    Thank you, Mr. Chairman.
    Chairman Johnson. Senator Warren.
    Senator Warren. Thank you, Mr. Chairman, and thank you, Mr. 
Hochberg, for your leadership in this area.
    I would like to follow up on where Senator Shelby started, 
and talking about the goal of the Eximbank is to promote U.S. 
exports, and, of course, increasing exports is ultimately 
supposed to create more jobs at home. But in some cases, those 
two things maybe in tension with each other.
    For example, a loan to a foreign company to buy a U.S. 
product may increase U.S. exports, but it may also give that 
foreign company a leg up over its American competitors, thus 
costing us jobs here at home for the American company.
    So how do you balance those two things in making a loan 
decision?
    Mr. Hochberg. Gingerly. Our job and our charter calls for 
us to create those balances and to do that analysis. One of the 
tools we use to do that is called ``economic impact.'' What 
that really means is we look at what is the impact of making 
this export and could there be any harm caused by making this 
export and balance those two against each other.
    In fact--I had a feeling I would get this question--we have 
got--on our Web site there is an 18-page guide to how we 
conduct economic impact procedures. So any exporter can know 
exactly how we are going to make that assessment, what analysis 
we will use before we make it.
    Our goal is purely about increasing U.S. jobs. We have zero 
interest, we have no dog in this race in terms of harming the 
U.S. economy when it comes to jobs. So we have got to do that 
balancing act, and it is tricky. We have to make a number of 
assumptions. But we have put that out to the exporters. We have 
taken the comments. We have created the procedures, and we have 
put them on our Web site.
    Senator Warren. All right. Good. So you are telling me, 
though, that you carefully consider the impact if you make the 
loan, how it may help a foreign company compete against 
domestic companies that do not have access to that same kind of 
financing.
    Mr. Hochberg. Right.
    Senator Warren. OK. Good.
    We talked some about small business lending, and I was very 
pleased to see that in 2013 you committed a greater percentage 
of your money to small business lending. I think that is 
terrific. But as everyone has been talking about, the bad news 
is we are still barely at 20 percent of the assets going into 
small business lending.
    Obviously marginal increases in small business lending are 
a step in the right direction, but I am concerned that 
marketing and outreach are not enough to expand small business 
lending.
    So can you describe some ways in which the Bank could make 
some really meaningful increases in small business lending to 
push that number well beyond 20 percent?
    Mr. Hochberg. Well, I think that--I will give you an 
example. What our competitors to the north in Canada do, they 
spend north of $3 million a year on advertising. They advertise 
in in-flight magazines throughout Canada to make sure that 
business owners--who, generally, if they are exporting, they 
are on planes--know about them. I think our largest single 
impediment is people do not know the support that we can offer 
them.
    One of the things, we did a pilot this year called ``U.S. 
Global Business Solutions.'' Frankly, it was a little 
disappointing. I am hoping that we can pick that up, which is 
where Commerce, the SBA, and Eximbank are going to be working 
more jointly so that if you show up at an SBA office or a 
Commerce office or an Eximbank office, you do not have to worry 
about where to do. We will solve the problem and give you the 
right tool to do that.
    I will tell you I bring this up with my counterparts and 
competitors around the world. They are all having a difficult 
time with this. It is difficult to reach them. But let us 
remember, we did reach more small businesses last year than any 
other year in our history. We have well exceeded 20 percent in 
our first quarter of this year. I cannot predict the second, 
third, and fourth quarters. And sometimes the good news is some 
small businesses are graduating and they are no longer counted 
as small. So that is the greatest success we have, is when they 
migrate up, or they are now financially secure, they can 
actually go to a commercial bank.
    So the 20 percent is a barometer, but it is not a perfect 
index.
    Senator Warren. Well, fair enough that it is a barometer 
but not a perfect index, but it is also a modest goal. And I 
think a large part of what we would like to see in supporting 
this is to go beyond the 20 percent, and so I look to support 
every creative approach you are using. I recognize some of them 
may not work, but that we are out there trying to do it. And 
also the notion of reaching beyond just trying to market, what 
else we can do, what other kinds of programs we can put in 
place that help small businesses get into the export business.
    I had one other area I wanted to ask about very briefly, 
and that is, the Eximbank's charter makes it clear that the 
Bank is supposed to supplement private capital, and you 
mentioned this in your testimony. In other words, you should 
provide public funds only when private funds are not available.
    I am interested to know how you make sure that you are 
complying with that mandate. Is there a process in place to 
ensure that for every deal the Bank does, there was no private 
sector capital available?
    Mr. Hochberg. It is one of the questions that an applicant 
has to complete and answer when making a loan application. 
Second, our process is very rigorous. I promise you, if there 
was another source of capital, most exporters would choose that 
source of capital. The requirements we have on economic impact 
we just talked about; content, if it is a large product, having 
to be shipped on U.S. merchant marine ships; the Iran sanctions 
we have put in; our default rate--there are many hurdles. So, 
one, we do not make the process that simple. We are trying to 
make it more simple and more streamlined, but there are still a 
number of things, because we are a Government agency. But on 
top of that, the customer has to state affirmatively they could 
not get that loan.
    I will give you just one example----
    Senator Warren. And let us be brief.
    Mr. Hochberg. I will be very fast. We exported locomotives 
to South Africa. Of all the banks surveyed, one bank agreed to 
make the loan only with our guarantee. So it is one thing if we 
had ten banks, and you would say, well, maybe to get five of 
them without a guarantee, we only got one--one applicant would 
even consider it, and that is only with our guarantee.
    Senator Warren. Well, I just want to say thank you very 
much. Thank you for the direction that you are pushing us in 
trade and for the successes you have had, and I hope we have 
many more that we can celebrate in 2014.
    Thank you, Mr. Chairman.
    Chairman Johnson. Senator Corker.
    Senator Corker. Thank you, Mr. Chairman. And, Mr. Chairman, 
thank you for being here today as we talk about something that 
I know is very important to you.
    We have had some conversations about this in the past, I 
know in prior authorizations, but it would appear that as we 
look at ECAs around the world, especially those outside of the 
OECD, that there is, generally speaking, a race to the bottom 
relative to lending. And I am just wondering what your 
perspective is relative to keeping that from happening--Number 
one, is it happening? And what can we do to ensure that we do 
not participate, if you will, in this race to the bottom?
    Mr. Hochberg. Thank you, Senator Corker. Well, I would say 
that the primary focus we have is to get more countries in the 
OECD. The Organization for Economic Cooperation and Development 
sets a floor that member countries can charge to do their 
financing, and it sets a floor in terms of the fee, and it sets 
a maximum amount of years that a loan can be.
    The problem we have today is the BRICs--Brazil, Russia, 
India, and China, to name just four--large powerhouse countries 
doing a lot of exports, are outside of the OECD. There are no 
rules that apply. They can do any deal they want, one-off 
deals, 20-year loans, 25-year loans, grace periods--nothing 
that we are allowed to do.
    So our first goal is getting them in the fold. President 
Obama took a leadership role with President Xi. There is a plan 
to get China to agree to some kind of export framework and 
regime by the end of this fiscal year. But I am equally 
concerned about countries like India and Russia and not just 
China, frankly.
    Senator Corker. Let me ask you this question: Do you 
agree--and it sounds like you may agree, but there are a lot of 
people right now that are concerned that, in essence, what 
China is doing in Africa is the same thing that happened here 
with subprime loans. I mean, in essence, you know, they are 
loaning monies to countries on a basis that down the road they 
are going to be saddled with huge debts that they are not going 
to be able to repay. Is that phenomenon actually occurring from 
your standpoint?
    Mr. Hochberg. It is hard to tell precisely, but China is 
certainly pouring a lot of money into sub-Saharan Africa with 
some good results and some not-so-good results. There have been 
a number of countries that have been looking more toward U.S. 
exporters and more toward Eximbank because they feel it is a 
more level playing field. When we export to sub-Saharan Africa, 
Africans go to work--building a power plant, building roads. 
Frequently when China does exports, they also export the 
workers so the African nations get very little benefit from 
that, and on top of which frequently the workers are left 
behind, so there is even less of an impact or opportunity for 
those African nations to succeed.
    Senator Corker. Well, look, I appreciate you being here 
today. I felt like in the last authorization that things sort 
of started gelling, if you will, toward the end, and maybe not 
as well thought out as might have been. I do hope that, you 
know, as we move ahead, we will figure out a way to ensure that 
there is access to credit in an appropriate level, but at the 
same time we do not ourselves pursue policies just to keep up, 
if you will, that are very damaging both to our country but 
also to the world. I look forward to talking to you about that 
further as we move ahead, and I appreciate your service to our 
country.
    Mr. Hochberg. Thank you so much.
    Chairman Johnson. Senator Heitkamp.
    Senator Heitkamp. Thank you, Mr. Chairman.
    I want to follow up on a couple points both raised by the 
Chairman and by the Ranking Member. First is small business, 
and obviously you are getting a recurring theme here that we 
all would love to see you do more outreach, more attention, and 
certainly not just small business but rural small business. I 
know it might be hard to imagine, but those places in North 
Dakota we do not consider rural.
    We also would obviously love you to reach out to many of 
our Native American tribes who are looking at economic 
development and I think have industries within their boundaries 
that could be well served by expertise that your Bank brings. 
And so not to be too flip about it, but many of them do not fly 
on airplanes, so advertising in an in-flight magazine may not 
work. But almost every small city in North Dakota has an 
economic development agency, and there is an excellent 
opportunity to reach out to people who know what is happening 
on the ground, who know what may be the potential work with 
Commerce to make that happen.
    And so I would really encourage you to continue that kind 
of effort, and I thank you for your willingness to come to 
North Dakota. We are trying to set that up. I think there is a 
great deal of opportunity, and as we know, when we look at 
employment, we all give lip service to small business, right? 
Small business is where employment is going to grow maybe the 
next big business, but yet a lot of the focus is on locomotives 
and airplanes, and maybe you might find a jewel in the rough 
here, that gem in the rough that could, in fact, be the next 
Microsoft or Apple. And so that is just my pitch there.
    But I want to talk a little bit about your energy policy 
and about the decisions that you have made regarding coal-fire 
generation. You know, the lack of energy and electricity and 
poverty kind of go hand in hand, and I was reminded of that 
when I was in Afghanistan, and USAID was bragging because they 
were bringing a 250-kilowatt--megawatt line, and right now that 
probably would not power the bakit [phonetic]--you know.
    So this is a great disparity in this world, and the access 
to affordable energy is a key component to building the middle 
class. And I think that the way you have structured your 
restrictions really takes out of the mix an opportunity for 
affordable electricity, and I think there is a lot of--without 
going too far into the weeds on carbon capture, there are a lot 
of opportunities beyond carbon capture for higher efficiency, 
for, you know, looking at environmental standards, but not 
clamping down so hard that we are not exporting important 
technologies that can, in fact, provide an opportunity for 
affordable electricity, but also improve air quality in many of 
these locations.
    And so I just want to ask you how amenable is the Bank to 
taking a look at reversing some of the policies that they have 
made on coal-fired electricity and taking a second look, 
looking at some of the arguments that I have made today.
    Mr. Hochberg. Well, thank you for your support and the 
support of small businesses, just to underscore that. I would 
say, you know, again, almost 90 percent of the transactions we 
do are small companies, and, you know, I would love it to be 91 
or 92 percent, but we are pushing the limits there.
    Senator Heitkamp. Well, your definition of ``small'' and 
maybe my definition of ``small'' are two different things.
    Mr. Hochberg. We actually use the SBA's definition.
    Senator Heitkamp. There is a long debate about what is 
small business in America today.
    Mr. Hochberg. Yes. But my only point is we do not have our 
own separate private definition. We go with the Government's 
definition of that.
    In terms of the energy issue, I would say that our charter 
makes it clear that we have to find a balance, and it is a 
difficult balance. It is a balance between jobs and the 
environment, and you also mentioned affordable power around the 
world. And this requirement has been in our charter since 1992, 
so we are looking to make that balance.
    Senator Heitkamp. But the restriction coal-based fire power 
has not been an interpretation since 1992, correct?
    Mr. Hochberg. Well, we have had--well, actually the Bank 
was sued in the early part of this century because we were not 
taking into account the environment sufficiently in making loan 
decisions. So as part of the agreement there, we came up with a 
more explicit and transparent environmental policy, though in 
the omnibus bill that was just passed, in some ways put a stay 
or reversed some of the environmental policies we put into 
place in December. Net-net, in 82 countries we would be able to 
finance coal-fired power plants without going through some of 
the requirements and checks that that policy would have put 
into place. So of 180 countries around the world, 82 of them--
these are the poorest; they are called ``IDA'' and ``IDA-
blend'' countries--we simply have to apply our standard 
environmental procedures, which those procedures had been in 
place and modified over the last 20 years. They are the kinds 
of things that the World Bank, the IFC, and others have put 
into place. They are sort of the global international norms. So 
in that case, for those countries, between now and the end of 
the year there is no difference.
    Senator Heitkamp. Thank you, Mr. Chairman.
    Chairman Johnson. Senator Vitter.
    Senator Vitter. Thank you, Mr. Chairman.
    Thank you very much, Mr. Hochberg. Like many others, I 
continue to be concerned about Eximbank deals that finance 
projects essentially in direct competition with U.S. 
businesses, and, of course, I am mainly talking about the 
airlines.
    It seems very clear that Eximbank financing in many cases 
has given foreign carriers a significant competitive advantage 
against domestic carriers, and this has been, in fact, verified 
in various court decisions and opinions as well. So moving 
forward, how do you all plan on dealing with that concern and 
specifically the mandate to Eximbank that it is not supposed to 
harm U.S. businesses in any of its deals?
    Mr. Hochberg. Thank you, Senator Vitter. You are referring 
to a number of lawsuits that have been filed by Delta Airlines 
against the Bank.
    Senator Vitter. Right.
    Mr. Hochberg. They so far have filed four lawsuits. We won 
the first case, and the others are in various stages.
    Senator Vitter. Just to make clear, I am not really talking 
about lawsuits. I am talking about the policy concern of 
providing a competitive advantage to foreign carriers versus 
U.S. carriers, and it seems to me that is beyond dispute that 
that is a direct result of these deals.
    Mr. Hochberg. Well, let us remember two things, I think, 
that we look at at Eximbank: one, whether we finance and 
whether an airline decides to buy a Boeing airplane or an 
Airbus airplane, they are going to fly those plans, and they 
are going to probably fly a lot of them into the United States 
and around the world. So, frankly, we do not have a monopoly. 
It is not like we can--if we decide not to finance and not to 
sell them an airplane, that a foreign carrier is not going to 
do so. So after----
    Senator Vitter. I am not talking about whether they fly the 
routes. I am talking about, for instance, the price they fly 
the routes, because if you substantially reduce the cost of a 
plane, that can change their whole competitive position.
    Mr. Hochberg. Currently, when we provide financing, only 
when it is needed and largely to rebut financing that is 
provided by Airbus, two things, two factors are considered: 
one, the price we charge is greater than the public markets, 
greater than the private sector, and we verify that. We look 
at--if American Airlines or United is financing a plan, we look 
at, for that credit risk, what would we charge, and over and 
over again we charge more than the private sector. That is 
number one.
    Number two----
    Senator Vitter. So why does anyone come to you?
    Mr. Hochberg. Well, a foreign airline will come to us 
because they cannot find other financing, or partly because 
Airbus is offering financing, and if we want to have a level 
playing field to make sure the jobs stay in the United States 
and not go to Toulouse and Hamburg, we need to provide a level 
playing field financing to make sure that the airline chooses 
the best airplane, not simply the one that offers financing, 
which happens with the Airbus planes coming out of Europe.
    Senator Vitter. So you disagree with the basic premise that 
your financing in these deals gives foreign carriers a 
significant advantage that they would not otherwise have?
    Mr. Hochberg. I do disagree with that. And, furthermore, 
Senator, I would also say we do--it has been asked earlier. We 
do an economic impact study. We look at what is the economic 
impact, as we do for every export, and including airline, will 
we be adding seats to foreign carriers that would compete with 
U.S. carriers? And we do that evaluation and that review on 
every single transaction.
    Senator Vitter. OK. Mr. Hochberg, I also want to ask about 
some of your relatively new environmental policy. You have made 
several new policy pronouncements, I believe as a direct result 
of the President's Climate Action Plan.
    First of all, what is the statutory basis for all of this 
new policy at Eximbank regarding carbon and environmental 
concerns? Because I do not see it.
    Mr. Hochberg. Well, the environmental requirement that the 
Board must take into account--a reasonable assurance of 
repayment, U.S. content for jobs, and the environment are all 
part of our charter. That is in our charter. As I mentioned 
earlier, it has been in our charter since 1992.
    Senator Vitter. And what is the exact language of that of 
the environmental----
    Mr. Hochberg. The language, I have not memorized the 
language. In making a decision to make a loan, we have to look 
at the environmental impact and balance that against jobs and 
competitive pressures as well as reasonable assurance of 
repayment. That is part of the deliberative process that every 
Board decision requires.
    Senator Vitter. And is there any specific grounding--is 
there any specific statutory basis for all of these recent new 
requirements and considerations directly related to coal, 
carbon capture, et cetera?
    Mr. Hochberg. Well, we have to take--it is obviously an 
evolving policy, as it would be with any Federal agency, or, 
frankly, when I was in the business world, any corporation. We 
continually evolve over time. Since that was put in place in 
1992, we have obviously modified----
    Senator Vitter. I translate that as a no in terms of 
statutory basis, but go ahead. Is there anything specific----
    Mr. Hochberg. No, we have a statutory basis--the basis is 
we have to be clear to exporters what do we mean by 
environmental policy. So we put on our Web site what are the 
environmental concerns that we will look at in making a 
determination whether we can provide financing or not.
    Senator Vitter. As I understand it, you will not block 
coal-related projects for particularly poor countries. Is that 
correct?
    Mr. Hochberg. For the 82 poorest countries in the world, we 
will not block that at all. We will look at--make sure that it 
is environmental sound and financially sound. But let me also 
just add there are no restrictions on the export of coal, which 
we have been involved in. There is no restriction on the export 
of coal-mining equipment--drag lines, locomotives, shovels, and 
so forth. We are still continuing to do that kind of export.
    Senator Vitter. But so coal-related projects would be 
environmentally sound for those countries but not for richer 
countries?
    Mr. Hochberg. For the very poorest countries--and I think 
Senator Heitkamp mentioned it--which have problems finding 
basic power, things we take for granted, 7 days a week, 24-hour 
power--for the very poorest countries, we have a lower 
standard, or a more relaxed standard, I should say, than for 
the richer countries. If Canada is looking to build a power 
plant, there are different standards that would apply in Canada 
than would apply in sub-Saharan Africa.
    Senator Vitter. And how do you determine where to draw that 
line between who gets to benefit from cheaper power and who 
does not?
    Mr. Hochberg. Well, the omnibus bill said that when it 
comes to what are called, through the World Bank, the IDA and 
IDA-blend countries, about 82 countries, we are looking at 
purely our standard environmental policies and procedures, some 
of which, as I say, go back to 1992.
    Senator Vitter. OK. Thank you.
    That is all, Mr. Chairman.
    Chairman Johnson. Senator Manchin.
    Senator Manchin. Thank you very much. Mr. Hochberg, thank 
you, and I have enjoyed meeting with you a couple times in my 
office and learning more about what you can do and what you do 
do to really help a small State such as mine I think really 
opening up. So I look forward to the visit that we talked 
about.
    Mr. Hochberg. Good.
    Senator Manchin. What I would like to talk about--I know my 
good friend from North Dakota here, Senator Heitkamp, has 
talked to you about coal, and that has been a big concern of 
all of ours. I know you are saying that you will help a 
smaller, underdeveloped countries, or 82 of them, so if 
somebody in West Virginia and North Dakota has technology that 
can help them use their resources in a much cleaner fashion, we 
can go in that direction, but in a larger country we are not 
able to. And I would just say that if the environment is our 
concern--there are 8 billion tons of coal being burned--we 
should take the best technology we can anywhere in the world 
and try to help use it better. So I would hope that maybe--and 
I know this Administration is not--has been a little bit 
difficult, if you will, on those issues, and I would like to 
continue to explore that with you if we can.
    I do want to ask you about LNG. This has reversed our 
fortunes with the fracking and all the gas coming online in 
America today. And now we have more people applying for export 
LNG when we were thinking we had to import LNG. I have been 
very blessed in the State of West Virginia to have both 
Marcellus and Utica, and we have a tremendous influx of this.
    How are you all looking at that now, working with exporting 
of LNG?
    Mr. Hochberg. Well, up to now, we have been involved mostly 
in the export of technology and engineering. We have financed--
we are in the process of financing two large LNG facilities in 
Australia, both being developed and built by Bechtel.
    Senator Manchin. Is that for them to receive it or for 
them----
    Mr. Hochberg. For them to tap it and export it.
    Senator Manchin. For them to export it?
    Mr. Hochberg. Yes. Right now we have not had any 
applications about exporting LNG from the United States. But we 
are certainly open to that. Just as I mentioned earlier, 
Senator, we financed the export of coal from the United States.
    Senator Manchin. I appreciate that very much because that 
has helped us, because if it was not for the export market 
right now, our little State would be severely damaged 
economically, and there is a demand for the product. What we 
are wanting to say is that I would hope the Administration 
would look differently about it if we have the technology with 
the scrubbers, low NOx boilers, super-critical, and all the 
different technology that we have, why shouldn't we be able to 
help use coal cleaner around the world? Because they are going 
to use it.
    Mr. Hochberg. Well, when it comes to scrubbers or improving 
the efficiency and the cleanliness of coal, we can finance 
that.
    Senator Manchin. So you are saying in existing plants you 
can finance----
    Mr. Hochberg. Existing plants we can----
    Senator Manchin. But building a new plant, if it is not in 
one of the 82 underdeveloped, you cannot.
    Mr. Hochberg. Then it needs to--when it becomes 
commercially sound, it needs to use carbon capture 
sequestration in those richer countries, because those richer 
countries have other options. They have options in terms of 
renewable energy, hydro, nuclear, natural gas, a number of 
things that the very poorest countries do not have those same 
options.
    Senator Manchin. Give me one example as a small business--I 
have a machine shop in West Virginia, and I have an expertise 
of something I make that can be used anywhere in the world, but 
I do not know how to get in those markets. I am scared of the 
financing of those, whether I get my money or not and how to 
finance through these international banks. That is where you 
all step in, I understand, and you can take us through that. 
And if I came to you as a little small West Virginia company, I 
could come to you and say I need help financing, I want to sell 
my product, they want to buy it, I want to make sure I get 
paid, how do you handle it?
    Mr. Hochberg. Well, I will give you an example. I am sorry 
it is in the State of New Hampshire, but----
    Senator Manchin. That is OK.
    Mr. Hochberg. That is also a small State. There is a great 
company there called Boyle Energy. Michael Boyle runs it. I met 
him. I was so impressed. I put him on our Advisory Committee.
    Senator Manchin. OK.
    Mr. Hochberg. So his company does the startup of power 
plants. It is about a $10 million company. So when they do that 
startup in Saudi Arabia or the rest of the world, his worry is: 
``How do I get paid?''
    What we do is we will insure that receivable, so he does 
the work, if for some reason his customer does not pay, we gave 
him insurance. We pay and then we collect on his behalf.
    Senator Manchin. You subrogate and go back on----
    Mr. Hochberg. And then we go----
    Senator Manchin. But I have to get----
    Mr. Hochberg. You have to buy insurance.
    Senator Manchin. Do I have to buy----
    Mr. Hochberg. Just like you buy buyer insurance, you have 
got to be----
    Senator Manchin. But I have got to start with you when I 
start that process, right? And my contract for this overseas 
work----
    Mr. Hochberg. Yes, you----
    Senator Manchin. I should get involved with you for the----
    Mr. Hochberg. You cannot ask--just like you cannot ask for 
fire insurance after the fire happens, you got to come to us 
and get insurance on the receivable before you actually----
    Senator Manchin. So I have to buy that insurance, and that 
has to be part of my cost and return on my----
    Mr. Hochberg. Frankly, if I was to give any small business 
owner who is watching this hearing----
    Senator Manchin. Yes?
    Mr. Hochberg. If they are watching this hearing, the best 
bargain they can do is get credit insurance from the Eximbank.
    Senator Manchin. That is all----
    Mr. Hochberg. It is very cheap, and it provides them the 
peace of mind. I often tell people, ``I am in the sleep 
business. If you have credit insurance, you will sleep well at 
night.''
    Senator Manchin. Well, I look forward very much to having 
you and your staff, capable staff, coming down and working with 
us, because we are going to do a lot of business with you.
    Mr. Hochberg. Good. I look forward to it.
    Senator Manchin. Thank you.
    Chairman Johnson. Thank you, Chairman Hochberg, for your 
testimony today.
    This hearing is adjourned.
    [Whereupon, at 11:10 a.m., the hearing was adjourned.]
    [Prepared statements, responses to written questions, and 
additional material supplied for the record follow:]
            PREPARED STATEMENT OF SENATOR RICHARD C. SHELBY
    Thank you, Mr. Chairman. Today, we examine the activities of the 
Export-Import Bank as this Committee considers reauthorizing the Bank's 
charter.
    One of the greatest problems facing our economic well-being in this 
country is our current accounts imbalance. Countries such as China and 
Germany have robust export surpluses; however, our current accounts 
situation is the opposite. I believe we must continue to look for ways 
to shore up the export deficit.
    Further, I believe that the Ex-Im Bank must do more to help small 
businesses succeed. As small businesses are the backbone of our 
economy, we must do all we can to help them thrive. Congress has 
mandated that the Ex-Im Bank reach a 20 percent threshold for small 
business authorizations, yet the bank has failed to reach that level 
over the past 3 years. I look forward to hearing from Chairman Hochberg 
on how we can not only reach this baseline, but make small business 
more of a centerpiece to the Bank's mission.
    Finally, there is growing concern over the level of transparency 
with the Ex-Im Bank's transactions. I believe we must ensure that the 
Bank has not and will not become just a government engine for corporate 
welfare and that the investments made by the Bank are to companies that 
truly cannot access financing through the private sector.
    I look forward to hearing from Chairman Hochberg on these and other 
concerns, as we consider reauthorizing the Bank's charter. Thank you, 
Mr. Chairman.
                                 ______
                                 
                 PREPARED STATEMENT OF FRED P. HOCHBERG
    President and Chairman, Export-Import Bank of the United States
                            January 28, 2014
    Chairman Johnson, Ranking Member Crapo, and distinguished Members 
of the Banking Committee, thank you for inviting me to testify before 
you as the Committee considers the progress of the Export-Import Bank 
of the United States (``Ex-Im Bank'' or ``the Bank'') has made in 
supporting U.S. jobs through exports since our last reauthorization.
Summary
    Today, American exports are at an all-time high. The United States 
exported a record $194.9 billion in November, 2013. Never before has 
the U.S. exported more goods and services in a single month. Our trade 
gap is the lowest it has been since 2009, when U.S. exports totaled 
$1.9 trillion. In 2012, U.S. exports totaled a record $2.2 trillion. 
The ``Made in America'' brand has never been stronger.
    I am proud of the job our 400+ employees do each and every day. Ex-
Im Bank has supported nearly 1.2 million private sector U.S. jobs since 
2009, including 205,000 jobs in FY2013 alone. The Bank operates at no 
cost to the taxpayers, and in FY2013, the Bank generated more than $1 
billion for the U.S. taxpayers above and beyond the cost of all 
operations and loan loss reserves. This $1 billion goes toward deficit 
reduction. We do this while maintaining a default rate \1\ of 0.267.
---------------------------------------------------------------------------
     \1\ This default rate is different than the default rates 
published in the annual Budget Appendix due to differing definitions. 
The reported rate in the Budget Appendix reflects projected defaults 
over the life of the loan while the default rate report as required in 
Section 8B of the Bank's charter reflects actual defaults at a 
particular point in time.
---------------------------------------------------------------------------
    Ex-Im Bank has at its core ensuring that small businesses--the 
foundation of our economy--are at the forefront of U.S. exports. We 
cannot grow our economy--or our exports for that matter--without fully 
supporting the small businesses of America. In 2013, the Bank financed 
a record 3,413 small businesses--nearly 90 percent of Ex-Im's 
transactions. In addition, Ex-Im financed more small businesses in the 
last 5 years than the prior 8 years combined. The Bank also financed 
more minority and woman-owned businesses in the last 5 years than the 
prior 16 years combined.
    As the global economy continues to strengthen, exports are being 
financed not only by commercial banks but also by capital markets. This 
is an encouraging trend. In 2013, the total dollar amount of 
transactions financed by Ex-Im was significantly lower than in 2012, 
yet exports as a whole from the U.S. were up during that timeframe.
Purpose of Ex-Im Bank
    Ex-Im Bank is the official export credit agency of the United 
States. The mission of the Bank is to enable U.S. companies--large and 
small--to turn export opportunities into sales that help maintain and 
create U.S. jobs which contribute to a stronger national economy. The 
Bank achieves its mission, when needed, by providing export financing 
through its loan, guarantee, and insurance programs in cases where the 
private sector is unable or unwilling to do so. For example, we provide 
trade credit insurance to Miss Jenny's Pickles in North Carolina so 
they don't need to worry about foreign buyers not paying. We provide a 
working capital guarantee to Auburn Leather in Kentucky so they can 
build the inventory necessary to meet large foreign purchase orders. 
And, we provide direct loans to foreign buyers of GE locomotives so the 
sales and jobs will benefit workers in Pennsylvania rather than a 
foreign competitor.
    Ex-Im Bank also provides support if necessary to level the playing 
field when financing is provided by foreign governments to their 
companies who compete against U.S. exporters. We assume commercial, 
country, and liquidity risks that are reasonable and responsible, but 
currently beyond the still-recovering appetite of private lenders. Ex-
Im Bank does not compete with private sector lenders, but rather 
provides financing for transactions that would otherwise not take place 
because commercial lenders are either unable or unwilling to accept the 
political or commercial risk inherent in the deal.
    Ex-Im Bank offers a variety of products to help U.S. businesses 
export around the world. Our working capital financing supports small 
business exporters to obtain loans which facilitate the exports of 
goods or services made by commercial lenders and backed by our 
guarantee. These loans provide small businesses the liquidity and 
confidence to accept new international contracts, grow export sales, 
and compete more effectively in the international marketplace. Export 
credit insurance allows U.S. businesses to increase their export sales 
by limiting their international risk, offering credit to international 
buyers, and enabling American businesses to access working capital 
funds.
Comprehensive Risk Management and Revenue for the Taxpayers
    Ex-Im Bank continues its prudent oversight and due diligence 
standards to protect taxpayers through its comprehensive risk 
management framework. It begins with effective project underwriting, 
including detailed documentation and financial structuring to ensure 
the Bank's rights are protected. It continues long after a transaction 
is approved and disbursed with proactive monitoring efforts to ensure 
timely payment.
    During all of FY2013, the Ex-Im Bank paid, from the fees we 
collect, new gross claims of just $48.8 million on a total portfolio 
greater than $110 billion. The Bank recovered more money--$62.6 
million--than it had in new claims for the fiscal year. The Bank is 
also appropriately reserved to cover expected loan losses. The Bank's 
reserve methodology has been reviewed, by GAO, our internal auditors, 
KPMG, and our external auditors Deloitte & Touche. As a result of 
provisions included in the Bank's charter during last year's 
reauthorization, Ex-Im Bank submits a quarterly default rate report to 
Congress. As of December 31, 2013, the Bank's default rate was 0.267 
percent. At the same time, over the past 5 years Ex-Im Bank has 
generated more than $2 billion for U.S. taxpayers, above and beyond all 
administrative operating costs, claims and loan loss reserves we set 
aside. We operate at no cost to the taxpayers.
    Moreover, we are committed to providing ``Government at the Speed 
of Business'', which means top-notch service and a relentless focus on 
our customers and a drive to innovate. In FY2013, 89 percent of all 
transactions were completed within 30 days and 98 percent within 100 
days. The time required to process long-term transactions dropped to an 
average of 88 days in FY2013, down from an average of 163 days in 
FY2009.
    In 2013, the Bank named Mr. Charles J. Hall as our new Executive 
Vice President and Chief Risk Officer. Prudent risk-management is one 
of our foremost priorities. As chief risk officer, Mr. Hall reports 
directly to me and is responsible for ensuring that the Bank continues 
to be properly protected as it fulfills its mission of supporting jobs 
through exports.
    Comprehensive risk management and continuous improvement is what we 
strive towards, and our default rate reflects that. The Bank has made 
many improvements over the past few years including:

    Modernizing credit monitoring;

    Creating a Special Assets unit to address emerging credit 
        issues;

    Expanding our proactive monitoring efforts;

    Improving our underwriting; and

    Enhancing credit loss modeling with qualitative factors

    We also have plans to implement additional risk management 
improvements identified over the past two years from our internal 
analysis of best practices, outside expert advice, audit 
recommendations, and from our Inspector General.
Meeting Requirements of Reauthorization
    Ex-Im Bank has met all of the reporting requirements set forth in 
our reauthorization bill. We produced several reports to this Committee 
including:

    Our Business Plan;

    Our Small Business Report;

    Our Content Review;

    Our Report on Financing of Textiles; and

    Our Quarterly Default Rate Reports

    We have added a textile industry representative to our Advisory 
Committee from Frontier Spinning in Greensboro, NC, which I visited 
earlier this month. We have fully implemented all Iran sanctions 
provisions, as required under the most recent reauthorization. In 
certain instances we have gone beyond the requirements of our 
reauthorization. For example, Congress required us to simply post our 
economic impact policies. The Bank went beyond the requirement by 
reevaluating our economic impact procedure process and making changes 
to that process, which included the review of airline services.
    As part of the reauthorization we are working in a transparent and 
cooperative way with GAO. I personally met with the Comptroller General 
to express my strong desire to work collaboratively and make the Bank 
more efficient and effective. I received very positive feedback from 
the Comptroller General about the cooperation between the GAO and Ex-
Im.
    Four reviews were required under our last reauthorization. To date, 
three reviews have been completed: risk management; business plan; and 
jobs supported calculation. In each of these reviews, the Bank agreed 
with the GAO's recommendations and we have implemented or are in the 
process of implementing each of them. We continue to work closely with 
the GAO as they seek to complete the final audit, due diligence 
process, which is due in May 2014.
Congressional Mandates
    Small businesses are critical to our economy and comprise a 
significant number of net new jobs. Congress has mandated we make 
available 20 percent of our financing to meet their needs. In FY2013 we 
financed a total of $6 billion in small business exports, of which $5.2 
billion was for the direct support of American small-business 
exporters. Total small business exports include those directly exported 
by small business to a foreign buyer, plus small business inputs into 
the supply chain of larger U.S. companies' products which are 
ultimately exported. At Ex-Im Bank, small business accounted for a 
record-high 3,413 authorizations--nearly 90 percent of the total number 
of Ex-Im transactions.
    To put this in perspective, we have financed more small business in 
the past 5 years than in the previous 8 years combined.
    Another area that we are particularly proud of is our financing to 
woman- and minority-owned businesses. In FY2013, authorizations for 
woman-owned and minority-owned small businesses reached a historic high 
of 761 transactions, totaling $815.5 million. One in five of total 
authorizations supported woman-owned and minority-owned businesses. In 
fact, over the past 5 years we have financed more woman and minority 
owned businesses than the Bank did in the previous 16 years combined.
    To address the needs of our small business customers, Ex-Im Bank 
has implemented a number of new financial products. Our most popular 
product, Express Insurance, received an innovation in government award 
from Harvard's Kennedy School and has helped more than 800 small 
businesses get a prompt response to their application.
    The key to expanding exports is marketing and communicating to 
small businesses. Three years ago, Ex-Im in partnership with Tom 
Donohue at the U.S. Chamber of Commerce, Jay Timmons at the National 
Association of Manufacturers (NAM) and commercial banks, launched 
Global Access for Small Business. To date, we have held over 60 Global 
Access forums across America. From Billings to Boise and from 
Shreveport to Charlotte, more than 5,000 businesses have learned how to 
access foreign markets and use Ex-Im Bank to give them a competitive 
edge when exporting. For example, in November 2013, Ex-Im and FedEx 
announced an innovative new alliance that will help U.S. small- and 
medium-sized businesses (SMEs) reach the 95 percent of the world's 
customers who live overseas. As part of this agreement, FedEx 
international customer representatives will make their clients aware of 
the Bank's abilities to protect against the risk of nonpayment and to 
extend credit to buyers, eliminating the need for expensive letters of 
credit or cash-in-advance payments. Customers who are interested in 
this service will then be connected to Ex-Im Bank's managers for trade 
finance counseling. This alliance with FedEx will help businesses 
increase sales, create jobs, and succeed in international markets.
    At Ex-Im Bank we have worked to ensure significant progress in 
supporting our other congressional mandates to finance more renewable 
energy exports and exports to sub-Saharan Africa. Our support for 
renewable energy has increased nearly than tenfold from $30.4 million 
in FY2008 to $257 million in FY2013.
    I am proud of our work in sub-Saharan Africa which is home to seven 
of the ten fastest growing economies in the world. In the past 4 years, 
Ex-Im Bank has authorized more than $4 billion in financing for U.S. 
exports to sub-Saharan Africa, including $604 million in authorizations 
in FY2013.
    The Bank approved a record 188 authorizations to sub-Saharan Africa 
in FY2013. This financing supported U.S. exports to 35 of 49 sub-
Saharan African countries, including Cameroon, Ethiopia, Ghana, Kenya, 
Mozambique, Nigeria, South Africa, and Tanzania. Ex-Im Bank is a key 
player in the Power Africa initiative, involving other U.S. Government 
agencies including the U.S. Agency for International Development 
(USAID), U.S. Trade and Development Agency (USTDA), the Overseas 
Private Investment Corporation (OPIC) and the Departments of State and 
Energy. Ex-Im Bank pledged support of up to $5 billion over the next 5 
years in support of the President's goal of doubling sub-Saharan 
Africa's access to electricity.
    As a destination market, sub-Saharan Africa receives about one 
percent of U.S. exports, but the region receives a higher percentage of 
Ex-Im's financing. As of FY2013, almost 5 percent of Ex-Im's total 
exposure consisted of exposure to sub-Saharan Africa.
Conclusion
    I want to thank this Committee for their work on our 
reauthorization in 2012 and stress the importance of a timely 
reauthorization in 2014. There are some 60 Export Credit Agencies 
(ECAs) around the globe. Make no mistake, these foreign governments 
want the 205,000 American jobs Ex-Im financing helped support last year 
for themselves. As I travel the world on behalf of American companies, 
I know that my counterparts in China, Brazil, Russia, and South Korea, 
are right behind me. These nations, and many others, are serious 
competitors in the global marketplace. For example, the South Korean 
government, with an economy less than one tenth of our size finances 
more than 3 times the exports for South Korean companies than the 
United States finances for U.S. companies. There is a strong drive to 
increase exports from many countries around the globe. We need to send 
the same signal to competitor nations that we stand behind American 
workers and ensure they are operating on a level playing field. In 
order for U.S. businesses to be able to compete based on the price and 
quality of their exports, Ex-Im needs to be there to level the playing 
field when it comes to meeting foreign ECA competition. The thousands 
of businesses that benefit from Ex-Im Bank financing--almost 90 percent 
of which are small businesses--appreciate the fact that Congress was 
able to reach an agreement to reauthorize the Bank in 2012 and they 
need to know that we will be around in the years ahead to help them 
meet foreign competition and grow their exports and create more jobs 
here at home.
    I thank you for this opportunity to provide you with an update on 
the excellent work Ex-Im Bank is doing to support U.S. jobs. I want to 
commend the outstanding, professional work of our 400+ employees who 
are committed to supporting American jobs and increasing U.S. exports. 
I look forward to working with you to reauthorize the Bank and continue 
to grow U.S. exports.
        RESPONSES TO WRITTEN QUESTIONS OF SENATOR CRAPO
                     FROM FRED P. HOCHBERG

    Thank you for your questions. Over the past 5 years Ex-Im 
Bank has supported an estimated 1.2 million U.S. jobs through 
exports. I am pleased to report that in Idaho from 2009 to 
2013, Ex-Im Bank financed total authorizations of $66,288,220, 
of which $50,345,720 were small business authorizations. The 
total number of companies financed was 107 companies, of which 
92 were small businesses.
    The top three categories supported in Idaho were: 
manufacturing and sales of noncapital equipment; manufacturing 
and sales of capital equipment; and agriculture, forestry, 
fishing, and hunting.
    The top four exporters in Idaho supported by Ex-Im Bank 
were: Micron; George F. Brocke & Sons, Incorporated; Hess 
Pumice Products, Inc.; and Buck Knives, Inc.
    The estimated number of jobs supported in Idaho over the 
last 5 years by Ex-Im Bank was 500 jobs.

Q.1. On the Apparent Contraction of the Medium Term Program--In 
FY2013, the Medium Term Program totaled only some $234 million 
of a $27 billion portfolio, which is about 1 percent, and the 
Bank provided no direct loans at all last year. It further 
appears that the Bank has allowed its Medium Term Program to 
contract while overall demand for Bank support increased.
    Why has the Bank allowed the Medium Term Program to shrink 
when overall demand for authorizations has consistently 
increased?

A.1. The medium-term program consists of loan guarantees and 
insurance policies up to a value of $10 million plus exposure 
fee, if financed, that are typically between 2 and 7 year 
terms. Ex-Im Bank is fully supportive of the medium-term 
programs which support U.S. exports and U.S. jobs. In the past, 
the Bank has sustained significant losses under the medium-term 
program, such that the fees charged no longer cover our loan 
loss reserve requirements. When I took over as Chairman & 
President of Ex-Im Bank, medium-term defaults were above 40 
percent. We have brought those down to roughly 7\1/2\ percent, 
which, is still too high.
    Improved due diligence steps during the underwriting phase 
combined with robust monitoring of the medium-term portfolio 
postauthorization has resulted in a significantly lower loss 
ratio.

Q.2. What does this mean for medium-sized market exporters?

A.2. Nothing has changed for small- to mid-sized exporters. Ex-
Im Bank continues to accept medium-term applications through 
our electronic application platform. Our staff is available to 
assist and advise exporters and lenders on complex loan 
structuring. The good news is that commercial banks have also 
increased their activity in medium-term transactions.

Q.3. Does the Bank extend the identical credit standards for 
the Medium Term Program, as for its other programs?

A.3. The Bank has credit standards that are specific to the 
medium-term loan guarantee and insurance borrower. They can be 
found on our Web site at: http://www.exim.gov/tools/upload/ebd-
m-39-1.pdf.

Q.4. On Cofinancing for Small and Medium Business--The Bank has 
cofinancing agreements in place with 11 countries. These 
programs enable the bank to meet foreign competition by working 
cooperatively with foreign export credit agencies largely to 
the benefit of the Bank's largest exporters. The small- and 
medium-sized enterprise exporting community has long sought 
such a program.
    Does the Bank have a comparable program supporting similar 
transactions among Small and Medium Enterprises?

A.4. Cofinancing for small- and medium-sized businesses has 
been available since 2001. Several small and a few large 
exporters actively use cofinancing. One small Texas company 
concludes approximately 40 export sales under our cofinancing 
program each year. Another small business located in Georgia 
recently concluded approximately 40 export sales under our 
cofinancing program. The most active export credit agencies 
that are used to cofinance medium-term programs include: EDC 
(Canada); EGAP (Czech Republic); Hermes (Germany) and Atradius 
(Netherlands.)

Q.5. If not, why not?

A.5. N/A

Q.6. On Ex-Im's Climate Change Guidelines--In December, the 
Bank issued new environmental guidelines to reduce greenhouse 
gas emissions. Almost immediately it became more difficult for 
developing countries to find public financing for coal-fired 
power plants.
    What authority did the Bank rely on to issue the 
guidelines?

A.6. Since 1992, Section 11 of the Bank's Charter requires the 
Bank to establish environmental procedures for projects like 
coal-fired power plants that meet certain criteria, to take 
into account the potential beneficial and adverse environmental 
effects of U.S. exports for which support is requested. Such 
procedures shall apply to any transaction involving a project:

  A.  for which long-term support of $10,000,000 or more is 
        requested from the Bank;

  B.  for which the Bank's support would be critical to its 
        implementation; and

  C.  which may have significant environmental effects upon the 
        global commons or any country not participating in the 
        project, or may produce an emission, an effluent, or a 
        principal product that is prohibited or strictly 
        regulated pursuant to Federal environmental law. (12 
        U.S.C.A. 635i-5)

Q.7. How is the Bank's guidance consistent with the Bank's 
chartered mandate to provide competitive financing on behalf of 
U.S. exporters to maximize U.S. export jobs?

A.7. Section 11 of the Bank's Charter states that the Bank's 
environmental procedures ``shall permit the Bank's Board of 
Directors, in its judgment, to withhold or approve financing 
from a project for environmental reasons or to approve 
financing after considering the potential environmental effects 
of a project. Environmental effect is one of many factors, 
including economic impact and reasonable assurance of 
repayment, that the Charter directs the Bank to consider in its 
decisions concerning these kinds of projects.

Q.8. Was it the intention of the Bank's guidance to reduce the 
number of new coal projects globally?

A.8. The intention of the Bank's Supplemental Guidelines was to 
set environmental requirements and standards applicable to 
high-carbon intensity projects, including coalfired power 
plants, seeking financing support from Ex-Im. These guidelines 
may result in a reduction of Ex-Im Bank exposure to high 
carbon-intensity methods of power generation.

Q.9. How does the guidance support U.S. companies?

A.9. The Charter requires the Bank to ``aid in the financing 
and to facilitate exports . . . and in doing so, contribute to 
the employment of United States workers.'' The Charter also 
requires the Bank to ``establish procedures to take into 
account the potential beneficial and adverse environmental 
effects'' of certain categories of financed projects. The 
Bank's environmental guidelines ultimately support U.S. 
companies by establishing transparent environmental emission 
(and effluent) limits for plants which, when adopted by those 
companies and foreign buyers, enables Ex-Im Bank to provide the 
financial support required to achieve the U.S. company's 
exporting endeavors. To the extent that U.S. companies 
manufacture CCS technology or manufacture new coal-fired power 
plants that are the best appropriate technology where there is 
no other economically feasible alternative to high CO2 plans 
(in the case of the poorest countries), they will benefit 
through export sales. Also, engineering service companies will 
benefit from contracts that meet our new guidelines.

Q.10. On Aircraft Finance--At the 2013 Dubai Airshow, several 
state subsidized airlines announced orders totaling $162.6 
billion.
    What involvement has the Bank in providing loans or any 
other loan services with regard to any of these aircraft orders 
from the 2013 Dubai Airshow?

A.10. The 2013 Dubai Airshow was a great win for American jobs 
and American workers. Orders will support thousands of U.S. 
jobs over the course of fulfilling these orders. Ex-Im Bank has 
not been formally approached to provide loans or any other loan 
services with regard to the aircraft orders that were announced 
at the 2013 Dubai AirShow.

Q.11. Does the Bank need to provide funding for aircraft that 
an airline has already committed to purchase?

A.11. Ex-Im Bank provides financing to support the export of 
U.S. manufactured goods where there is a need for such 
financing, whether due to a shortfall in the availability of 
commercial financing or to level the playing field with 
financing support provided by other export credit agencies. The 
2013 Dubai Airshow was a great win for American jobs and 
American workers. Orders will support thousands of jobs over 
the course of fulfilling these orders. Ex-Im Bank has not been 
formally approached to provide loans or any other loan services 
with regard to the aircraft orders that were announced at the 
2013 Dubai Airshow.

Q.12. Does the Bank act as a true ``lender of last resort'' in 
such transactions?

A.12. The Bank acts either as a lender of last resort or in the 
function of leveling the playing field due to competitor ECA 
financing availability.

Q.13. Why would export credit agencies, the Bank included, need 
to finance acquisitions for State-owned enterprises in 
circumstances where sovereign wealth funds exist?

A.13. In the rest of the world, State-owned enterprises are 
involved in railroads, power generation, airlines, 
telecommunications, and many other projects. U.S. companies are 
competing with other foreign countries to sell them goods. Ex-
Im financing is used to ensure a level playing field for U.S. 
businesses--large and small--with foreign competitors.

Q.14. On the Bank's Domestic Content Policy--The Bank has 
identified as worthy for additional analysis, three areas 
concerning its domestic content policy: namely, the 
codification of a policy for Services, the expansion of 
cofinancing arrangements, and a simplification of the content 
policy.
    What is significant about these particular areas and what 
is the progress of that analysis?

A.14. The three areas identified by the Bank for further 
exploration all provide opportunities for Ex-Im to streamline 
policies and establish programs that will add clarity to Ex-
Im's content policy and will make engaging with Ex-Im easier 
for U.S. exporters. Staff is in the process of preparing 
proposals and plans to bring to Bank management such proposals 
in the first half of 2014.
    The Board has not yet voted on changes to our content 
policy. However, in the first half of FY2014, the Board of 
Directors is expected to have an opportunity to consider 
proposals intended to provide reasonable assurance that Ex-Im 
Bank's content requirements are met, address operational risks, 
and propose solutions to the challenges in collecting and 
verifying content data.
                                ------                                


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

    Thank you for your questions. Over the past 5 years Ex-Im 
Bank has supported an estimated 1.2 million U.S. jobs through 
exports. I am pleased to report that in Montana from 2009 to 
2013, Ex-Im Bank financed total authorizations of $14,092,989, 
100 percent of which were small business authorizations. The 
total number of companies financed was 47 small businesses and 
we would like to do more.
    The top three categories supported in Montana were: 
manufacturing and sales of capital equipment; manufacturing and 
sales of noncapital equipment; and agriculture, forestry, 
fishing, and hunting.
    The top three exporters in Montana supported by Ex-Im Bank 
were: Agmor Inc.; Rm International, Inc.; and Schoggi, Inc.

Q.1. The recent authorization of the Export Import Bank 
included a clear directive for the Bank to engage the European 
Union export credit agencies in negotiations to cease offering 
loans for the purchase of wide-body aircraft. Please tell me 
the status of these negotiations and provide us with any 
letters or proposals exchanged with the EU ECA.

A.1. The 2012 Ex-Im Reauthorization did not require Ex-Im Bank 
to negotiate a reduction or end of financing of wide-body 
aircraft with Export Credit Agencies in Europe. The 2012 Ex-Im 
Reauthorization provides that Treasury initiate and report on 
the negotiations described in the question. Treasury has 
submitted two such reports on these negotiations to Congress, 
the most recent in December 2013.

Q.2. At the 2013 Dubai Airshow, several State-subsidized 
airlines announced orders totaling $162.6 billion. Has the Bank 
been approached to provide loans or any other loan services 
with regard to any of these aircraft orders from the 2013 Dubai 
Airshow? If so, how many?

A.2. The 2013 Dubai Airshow was a great win for American jobs 
and American workers. Orders will support thousands of U.S. 
jobs over the course of fulfilling these orders. Ex-Im Bank has 
not been formally approached to provide loans or any other loan 
services with regard to the aircraft orders that were announced 
at the 2013 Dubai Airshow.
                                ------                                


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

    Thank you for your questions. Over the past 5 years Ex-Im 
Bank has supported an estimated 1.2 million U.S. jobs through 
exports. I am pleased to report that in Alabama from 2009 to 
2013, Ex-Im Bank financed total authorizations of $224,441,912, 
of which $190,623,091--or 85 percent--was small business 
authorizations. That's more than four times the national 
average of small business authorizations by the Bank. The total 
number of companies financed was 163 with 136 being small 
businesses.
    The top three categories supported were: manufacturing and 
sales of noncapital equipment; manufacturing and sales of 
capital equipment; and transportation and warehousing.
    The top three exporters in Alabama supported by Ex-Im Bank 
were: Biohorizons Implant Systems; American Tank & Vessel Inc.; 
and Imaging Business Machines.
    The estimated number of jobs supported in Alabama by Ex-Im 
Bank over the last 5 years was 2,500 jobs.

Q.1. Ex-Im Bank has recently finalized its Supplemental 
Environmental Guidelines for High Carbon Intensity Projects. 
Ex-Im purports these guidelines will have a positive 
environmental impact, however some have said these guidelines 
clearly place domestic industry at a competitive disadvantage. 
For many parts of the world, coal-generated electricity is 
vital, because it remains one of the best means to lift people 
out of poverty. Unquestionably, the lack of affordable energy 
jeopardizes the future of developing nations and helps to 
condemn billions worldwide to continued energy poverty. The 
International Energy Agency (IEA) estimates that over 1.3 
billion people--nearly 20 percent of the world's population--
live with no access to electricity, to say nothing of the 1.7 
billion who have very limited access. This is not just about 
powering a light bulb and stoves, but about powering commerce, 
education, and health care that will improve lives.
    How will emerging nations in Africa, South Asia, and Latin 
America afford and implement alternative energy under Ex-Im's 
guidelines?

A.1. Since 1992, Ex-Im Bank is required by its charter to 
consider the impact to the environment of projects it finances. 
In approving the Supplemental High Carbon Intensity Guidelines, 
the intent of the Bank was to continue to adhere to our Charter 
and consider the environment in all Board decisions and set 
requirements and standards that would result in a reduction of 
greenhouse gasses (CO2) from new coal plants those otherwise 
produce very large amounts of CO2. It was also to encourage 
other ECAs to adopt similar requirements so as to promote broad 
multilateral standards while leveling the playing field for 
U.S. exporters. The CO2 emissions from coal-fired power plants 
represent a large portion of the world's anthropogenic CO2 
production. The Guidelines introduced a standard or limit for 
CO2 emissions produced by power plants in countries such as 
China that would require mitigation measures including 
deployment of carbon capture and sequestration (CCS) to lower 
the plant's CO2 emissions to levels consistent with that of 
gas-fueled plants. However, for the world's poorest countries, 
such as most sub-Saharan African nations, the Guidelines for 
new coal plants do not require CCS. For those poorest 
countries, we require only that the buyer meet the criteria of 
best appropriate technology where there is no other 
economically feasible alternative. The Bank's Supplemental High 
Carbon Guidelines allow for the financing by Ex-Im Bank of U.S. 
exports for new affordable coal plants in the world's poorest 
countries, if the buyer meets requirements such as the 
submission of an analysis demonstrating that the proposed coal 
plant is the best appropriate technology where there is no 
other economically feasible alternative. These Supplemental 
Carbon Guidelines have no impact on U.S. exports for gas or oil 
fired power plants worldwide. This policy impacts more 
developed economies that are able to afford cleaner or 
alternative technologies.
    In many emerging markets the cost of alternative or 
renewable energy is approaching and sometimes at par with 
fossil fuel sources since much of the populations without 
electricity live in rural areas where the cost to connect to 
the grid would be prohibitively expensive. To make renewable 
energy affordable, Ex-Im Bank has adopted a policy to offer 
financing for renewable forms of energy at the maximum 
allowable repayment terms allowed by the Organization for 
Economic Cooperation and Development (OECD) group of export 
credit agencies (ECAs), which is up to 18 years, compared to 
the 12 year maximum that the OECD allows for ECA support of 
conventional fossil fueled plants. In addition Ex-Im Bank, 
consistent with OECD policy, can also offer local cost 
financing of up to 30 percent of the U.S. export contract, and 
offer capitalization of interest during construction of the 
project.

Q.2. To alleviate poverty, countries look to economical and 
reliable sources of electricity such as coal. Coal remains the 
backbone of global electricity generation and is the fuel 
enabling rapid advancement of developing countries, helping to 
raise living standards and lift hundreds of millions of people 
out of poverty. Ex-Im's High Carbon Intensity Guidelines could 
deny developing countries these opportunities and the 
associated quality of life and environmental improvements 
correlated with higher standards of living.
    Wouldn't a better policy be to promote coal as a low cost 
and reliable source of electricity that will power growth and 
sustainable development and the associated environmental 
improvements for generations to come?

A.2. The Bank does not direct the development of other 
countries' energy policies. The Bank takes an ``all of the 
above'' approach to energy financing. This includes supporting 
projects that rely on solar, wind, biomass, geothermal, 
nuclear, and natural gas. Under the Bank's Supplemental 
Guidelines for High Carbon Intensity Projects, in the world's 
poorest countries where there is no other economically feasible 
alternative, coal-fired power plants are expected to use the 
best appropriate technology.
                                ------                                


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

    Thank you for your questions. Over the past 5 years Ex-Im 
Bank has supported an estimated 1.2 million U.S. jobs through 
exports. I am pleased to report that in Louisiana from 2009 to 
2013, Ex-Im Bank financed total authorizations of $587,748,942, 
of which $325,879,062 were small business authorizations. The 
total number of companies financed was 276 companies, of which 
211 were small businesses.
    The top three categories supported in Louisiana were: 
manufacturing and sales of noncapital equipment; manufacturing 
and sales of capital equipment; and mining.
    The top three exporters in Louisiana supported by Ex-Im 
Bank were: Pride Offshore Inc.; Atlantis International, Inc.; 
and Reliable Industries, Inc. of New Orleans.
    The estimated number of jobs supported in Louisiana over 
the last 5 years by Ex-Im Bank was 5,100 jobs.

Q.1. Mr. Hochberg, in 2012, Congress passed the Export-Import 
Bank Reauthorization Act of 2012. The act required the U.S. 
Government Accountability Office (GAO) to report on the process 
and methodology used by Export Import Bank (Ex-Im Bank) to 
calculate the effects of export financing on U.S. employment. 
In a 2013 report, GAO found that the Ex-Im Bank's methodology 
to calculate the number of U.S. jobs associated with the 
exports, while following a process, does not report serious 
``limitations in its process or fully detail the assumptions 
related to its data or methodology.'' The GAO report concludes 
that, ``because of a lack of reporting on the assumptions and 
limitations of its methodology and data, Congressional and 
public stakeholders may not fully understand what the jobs 
number that Ex-Im Bank reports represents and the extent to 
which Ex-Im Bank's financing may have affected U.S. 
employment.''
    Does Ex-Im Bank maintain a detailed list of U.S. exporters 
involved or who benefit from individual transactions?

A.1. Ex-Im Bank's mission is to support U.S. jobs through 
exports. The Bank developed a methodology that utilizes 
publicly available Commerce Department and Bureau of Labor 
Statistics data, and is also used by other agencies to 
calculate jobs numbers. We were pleased that the GAO verified 
the Bank's jobs calculation methodology and recognized the 
advantages of the Bank's current jobs calculation methodology. 
The GAO report also recognized that the Bank's current jobs 
calculation methodology is commonly used. The report did not 
recommend any changes to the underlying methodology, but it did 
recommend that we include detailed information on the 
assumptions and limitations associated with jobs calculation 
methodology. These were included in the Bank's ``supporting 
U.S. jobs'' section of our FY2013 Annual Report which was 
released on December 16, 2013.
    The Export-Import Bank does maintain information on U.S. 
exporters involved or that benefit from individual 
transactions. The Bank's annual report also lists all Long Term 
guarantees and direct loans. The Bank's Web site also lists all 
transactions which includes information on the primary 
exporter. This information is compliant with the Federal 
Funding and Transparency Act (FFATA) and can be found on the 
Bank's Open Government Web page.

Q.2. Mr. Hochberg, Office of Inspector General and GAO reports 
as recent as December 2013 have found that while the Ex-Im Bank 
Business Plan reported that the Ex-Im Bank's exposure limits 
were appropriate, the forecasting process used to reach these 
conclusions have key weaknesses that do not appropriately 
reflect changing conditions.
    What steps is the Ex-Im Bank taking to routinely analyze 
and report financial performance for mandated transactions? Has 
Ex-Im Bank increased its ability to evaluate such performance 
at the sub-portfolio level and inform Congress of related 
risks?

A.2. Ex-Im Bank is committed to continuous improvement and 
using the GAO recommendations has improved its forecasting 
process. In January 2014 in response to GAO concerns, the Bank 
submitted a report on the Bank's Authorization and Forecasts to 
the Senate Committee on Banking, Housing, and Urban Affairs and 
the House Financial Services Committee.
    Ex-Im Bank is routinely analyzing and reporting financial 
performance for authorized transactions. The Bank has enhanced 
its ability to evaluate such performance at the sub-portfolio 
level. Ex-Im Bank began reporting this information in our 
quarterly default report. The first quarterly report that 
incorporated this information was the September 30, 2013, 
Quarterly Default Report. The recent December 31, 2013, 
Quarterly Default Report also included this information. This 
report is submitted to the Senate Committee on Banking, 
Housing, and Urban Affairs and the House Financial Services 
Committee. The Bank will continue including this information in 
future Quarterly Default Reports.

Q.3. Mr. Hochberg, in response to exporter concerns, the Ex-Im 
Bank revised its medium- and long-term content policy in 
January 2001. Specifically, the Bank allowed eligible content 
to be calculated based on the aggregate content of all items 
within a supply contract instead of using an item-by-item 
approach. However, according to the Inspector General, 
voluntary reporting resulted in limited information for 
decision makers, and did not establish other appropriate 
internal controls; because of this, the Bank has not received 
any statistically valid data to date. Additionally, language 
included in the Export-Import Bank Reauthorization Act of 2012, 
required the Ex-Im Bank to address this issue. Since that time 
it appears that the Ex-Im Bank has failed to achieve one of the 
key desired outcomes of the 2001 changes to its content policy, 
and has been unable to comply with its Board of Directors' 
requirements regarding the analysis and reporting of detailed 
content trend information.
    In 2013 we were told that ``The Board of Directors intends 
to vote on these possible policy changes by the end of calendar 
year 2013,'' has the Board done so?

A.3. Section 15 of the reauthorization required the Bank to 
``conduct a review of its domestic content policy for medium 
and long-term transactions.'' The Bank conducted that review as 
prescribed by Congress and submitted the report to the Senate 
Committee on Banking, Housing, and Urban Affairs and the House 
Financial Services Committee on time.
    The review yielded a number of policy recommendations that 
the Board is scheduled to consider in the first half of 2014.

Q.4. Mr. Hochberg, due to the above referenced issue (long-term 
content policies) present day decision makers do not have 
access to what could have been a robust historical record of 
over 10 years of content-related data to inform current and 
future decisions about the content policy and help assess 
potential impacts on achieving Ex-Im Bank's jobs mandate.
    What potential losses or negative decisions could the Bank 
have avoided had it had access to this historical data?

A.4. It is not possible to speculate as to what potential 
losses or negative decisions the Bank could have avoided if the 
historical data had been submitted.

Q.5. Ex-Im Bank has indicated that it is considering additional 
changes to its content policy. Has Ex-Im Bank enacted all 
content policy review requirements of the Export-Import Bank 
Reauthorization Act of 2012? If not, please delineate which 
have and have not been met.

A.5. Ex-Im Bank has ``enacted all content policy review 
requirements of the Export-Import Bank Reauthorization Act of 
2012.'' However, in the course of conducting the 
Congressionally mandated review, the process revealed 
opportunities for Ex-Im Bank to streamline policies and 
programs. Staff plans to bring several proposals for 
consideration to the Board in the first half of 2014.
    The three areas identified by the Bank for further 
exploration all provide opportunities for Ex-Im to streamline 
policies in order to add clarity to Ex-Im's content policy and 
will make engaging with Ex-Im easier for U.S. exporters. Staff 
is in the process of preparing proposals and plans to bring to 
Bank management such proposals in the first half of 2014.

Q.6. Why has it taken 13 years since 2001, and almost 2 years 
since the 2012 reauthorization for the Board to consider and 
implement changes needed?

A.6. The issues predated my tenure as Chairman and President of 
Ex-Im Bank. When the issue was brought to management's 
attention, it was addressed. In the absence of concrete data 
from exporters and at a time of record breaking authorizations, 
there was no evidence that changing the current content policy 
would result in increased exports and more U.S. jobs. The 
Congressionally mandated content review was concluded on time 
at the end of May 2013. Since the conclusion of the review, 
Bank staff have been analyzing and preparing proposals for 
streamlining the content policy and plan to bring proposals to 
senior management and ultimately the Board for consideration in 
the first half of 2014.

Q.7. What has the Bank done to ensure that it adheres to the 
2012 Ex-Im Reauthorization passed provisions instructing it to 
negotiate a reduction or end of subsidies for wide-body 
aircraft with the Export Credit Agency in Europe?

A.7. The 2012 Ex-Im Reauthorization did not require Ex-Im Bank 
to negotiate a reduction or end of financing of wide-body 
aircraft with Export Credit Agencies in Europe. The 2012 Ex-Im 
Reauthorization provides that Treasury initiate and report on 
the negotiations described in the question. Treasury has 
submitted two such reports on these negotiations to Congress, 
the most recent in December 2013.

Q.8. I am increasingly concerned that current procedures set up 
to facilitate and benefit the United States are working at ends 
that will result in the ultimate harming of U.S. businesses. 
One glaring example is the recent U.S. Customs and Border 
Protection, or CBP preclearance customs post at Abu Dhabi 
airport, which opened on Friday. This post which was funded by 
Appropriations Committee in 2012 despite widespread bipartisan 
opposition, solely benefits foreign competitors. Why are the 
Ex-Im Bank and the DHS pouring money into businesses that do 
not appear to need it and which directly compete against U.S. 
businesses? Is there a mandate from the Executive Branch to do 
so?

A.8. Ex-Im Bank has absolutely no role in appropriating funds 
for the U.S. Customs and Border Protection preclearance post at 
Abu Dhabi Airport.

Q.9. U.S. Competition Questions--In the U.S. District court, 
Delta Air Lines et al v. Export Import Bank of the United 
States; 878 F. Supp. 2d at 57, the memorandum opinion of the 
U.S. District Judge states, that in previous cases related to 
2011 Commitments to Air India, (it) ``decisively establishes 
what seems a matter of common sense: the loan guarantees 
provided by the Ex-Im Bank to foreign airlines, in the 
aggregate, have injured ATA's (U.S. based airliners) members.'' 
\1\ . . . and ``competitive injury'' ``will nevertheless face 
increased direct competition .. . '' Adding further that it 
``has also shown that additional direct competition on 
international routes is substantially certain.'' The Court also 
``finds that ATA has made a factual showing sufficient to 
establish that it faces imminent competitive injury.'' There is 
more than a ``vague probability'' that the subsidized planes 
will compete on routes served by ATA's members and an even more 
significant probability that said competition ``will cause 
[those members] to lose business or drop its prices.''
---------------------------------------------------------------------------
     \1\ Ibid, p.58.
---------------------------------------------------------------------------
    In short, the court appears to find that in previous cases, 
an entity upon whom the U.S. Government has conferred a 
significant benefit was in direct competition of a U.S. 
business which prior Bank guarantees have caused them 
significant, concrete injuries and that the 2011 Commitments 
are substantially certain to cause them further injury. What 
actions and steps is the Bank conducting to ensure that similar 
processes do not continue to occur?

A.9. Ex-Im Bank's policy on economic impact is to provide an 
analysis of whether or not Ex-Im support of a transaction will 
generate more benefits than a potential harm to the U.S. 
economy. The quotations above from the opinion of the U.S. 
District Court in Delta Air Lines et al. v. Export-Import Bank 
of the United States, 878 F.Supp.2d at 57, were stated in the 
context of the Court's decision that the plaintiffs in the case 
had standing to bring suit. In the context of a standing 
analysis, the Court must determine, among other things, if the 
plaintiffs have met the minimal Constitutional requirement of 
demonstrating that they have suffered an injury-in-fact and 
that the injury has occurred or is substantially certain to 
occur. The finding that a plaintiff has made such a showing 
says nothing about the merits of the plaintiffs claim. It also 
says nothing about the entirely different assessment that the 
Bank's Charter requires it to make, which is whether a proposed 
transaction is likely to cause substantial injury to U.S. 
industry. The Bank's economic impact procedures are designed to 
make that assessment. Moreover, the Court in that opinion went 
on to conclude that Ex-Im Bank's economic impact procedures 
were not arbitrary and capricious as alleged by the plaintiffs. 
Additionally, in April 2013, the Bank put into effect new 
economic impact procedures and methodological guidelines, 
including new procedures for aircraft transactions. The 
procedures include an economic impact review for every 
transaction and detailed reviews where warranted. In addition, 
Ex-Im has supported the Treasury Department in negotiating more 
market oriented terms and conditions for governmental financing 
support for aircraft exports. The most recent round of these 
negotiations concluded in 2011.

Q.10. Mr. Hochberg, when the Export-Import bank is completing 
an Economic Impact Analysis for financing to a foreign entity, 
does the bank, in order to avoid counting foreign jobs, take 
foreign content into account as part of any benefit to the 
United States economy? If so, how does the bank do this?

A.10. The Bank's Economic Impact Procedures have never 
included, and still do not include, the number of jobs 
supported by a transaction as a factor in the Economic Impact 
Procedures or in any detailed economic impact analysis. Ex-Im 
Bank's mission is to support U.S. jobs through exports. The 
Bank developed a methodology that utilizes publicly available 
Commerce Department and Bureau of Labor Statistics data, and is 
also used by other agencies to calculate jobs numbers. We were 
pleased that the GAO verified the Bank's jobs calculation 
methodology and recognized the advantages of the Bank's current 
jobs calculation methodology. The GAO report also recognized 
that the Bank's current jobs calculation methodology is 
commonly used and cost effective. The report did not recommend 
any changes to the underlying methodology, but did recommend 
that we include detailed information on the assumptions and 
limitations associated with jobs calculation methodology. These 
were included in the Bank's ``supporting U.S. jobs'' section of 
our FY2013 Annual Report which was released on December 16, 
2013.

Q.11. Mr. Hochberg, Does the Ex-Im Bank take into account the 
impact on domestic companies access export credit support 
against the Home Market Rule?

A.11. The Home Market Rule is a longstanding informal 
understanding between certain European countries--supporting 
sales of Airbus aircraft--and the United States--supporting 
sales of Boeing aircraft--that neither side will finance 
aircraft into the United States or the European ``Airbus 
countries'' (the United Kingdom, France, Spain, and Germany). 
Under the Home Market Rule, U.S. airlines do not have access to 
European export credit support for the purchase of Airbus 
aircraft, just as they do not have access to support for the 
purchase of Boeing aircraft. Likewise, airlines in European 
``Airbus countries'' do not have access to Ex-Im Bank export 
credit support for the purchase of Boeing aircraft. However, 
U.S. airlines do benefit from the United States having the 
largest, most liquid and sophisticated capital markets in the 
world.

Q.12. Mr. Hochberg, you have previously stated that the bank 
does an Economic Impact Analysis on every single transaction 
the Ex-Im Bank enters into. Is this information available for 
Congress to review? If so, can you please provide to myself and 
other Members of the Banking Committee a list and copies of all 
of the Economic Impact Analysis reports that the bank performed 
as part of large aircraft transactions during your tenure as 
Chairman?

A.12. In my testimony, I indicated that the Bank considers the 
economic impact implications of every application. However, the 
Bank performs detailed economic impact analyses only on those 
applications that meet the standards articulated in the Bank's 
Economic Impact Procedures. In April 2013, new Economic Impact 
Procedures and Methodological Guidelines went into effect. 
These new procedures put in place a revised system for 
assessing whether aircraft transactions are likely to cause an 
adverse economic impact on U.S. industry. For transactions that 
include passenger aircraft for commercial use, staff submits to 
the Ex-Im Bank Board of Directors one of two types of analyses: 
(1) a no-substantial injury analysis, or (2) a detailed 
economic impact analysis. For passenger transactions that do 
not meet the threshold for substantial injury to U.S. industry 
according to the Bank's Economic Impact Procedures, Ex-Im Bank 
staff prepares a no-substantial injury memorandum explaining 
the details of the transaction and why the transaction fails to 
pass the substantial injury threshold. For passenger aircraft 
transactions that do meet the threshold for substantial injury 
to U.S. industry, Bank staff prepares a detailed economic 
impact analysis, which identifies any financing advantage that 
the Bank may provide to the foreign buyer compared to financing 
available to a similarly situated U.S. airline. If staff finds 
that Ex-Im Bank has provided a financing advantage, staff 
calculates an estimate of harm to the U.S. passenger airline 
industry that could result from the financing advantage, which 
is weighed against the positive effects of the export. The Ex-
Im Bank Board of Directors considers this analysis when 
deciding whether to finance a transaction. A list of all 
analyses done since April 1, 2013, is below.


    In light of the fact that Ex-Im Bank is involved in several 
different lawsuits regarding its aircraft transactions, and due 
to the business confidential and sensitive nature of the 
information about transactions that is contained in economic 
impact analyses, it is not appropriate to provide physical 
copies of these analyses outside of the Bank. We would, 
however, make arrangements for you or a staff person to do an 
in camera review of the documents if necessary.
    Prior to April 1, 2013, aircraft transactions were 
subjected to a categorical ``exportable goods'' screen. Each 
transaction was checked to make sure that it should be 
subjected to the ``exportable goods'' screen, but there is no 
separate transaction report for each such transaction.

Q.13. Mr. Hochberg, regardless of a foreign airlines' credit 
rating, from the mid-1980s until 2013, the bank charged foreign 
airlines a fee of, at most, 1 percent over the triple A rating. 
Could United States airlines borrow as cheaply during this 
period, and how does this financing compare to private markets?

A.13. The Aircraft Sector Understanding (ASU) sets the minimum 
terms and conditions that export credit agencies (ECA) may 
provide when financing large aircraft transactions, and Ex-Im 
Bank is fully compliant with these guidelines. During the 
period from the mid-1980s through today, the United States and 
others have steadily raised the all-in cost (which includes 
risk fees, other fees and interest) of ECA support for large 
aircraft transactions in the ASU.
    More recently, U.S. airlines have been able to borrow as 
cheaply, if not more cheaply, than their foreign competitors 
who utilize official export credit financing, given the unique 
financing tools and mechanisms available to them in the U.S. 
financial markets. In the 1980s and 1990s, as a result of 
specific U.S. laws and favorable U.S. tax-code provisions, U.S. 
airlines could avail themselves of tax-favored leases as well 
as capital market financing known as equipment trust 
certificates. In the early 2000s, the equipment trust 
certificate product was modified and the Enhanced Equipment 
Trust Certificate (EETC) was born; the EETC remains an 
attractive financing option today.
    These financing tools provided significant cost advantages 
to U.S. airlines and were not available to foreign airlines 
until 2013 when the first international EETCs were issued by a 
select few foreign airlines. Also during the 1990s and early 
2000s, several U.S. airlines declared bankruptcy as airlines 
consolidated and changed their business models; this affected 
the rates they paid for aircraft financing.

Q.14. Mr. Hochberg, the Export-Import bank Web site publishes 
annual reports detailing its Loans and Long-Term Guarantees. 
However, at the time of your testimony the 2013 report was not 
yet available. When will the 2013 report be posted online? 
Also, please provide Members of the Banking Committee this 
report as soon as possible.

A.14. In accordance with a directive from the Office of 
Management and Budget to Federal agencies, Ex-Im Bank posted 
its FY2013 financial report (PDFs of audited documents) to the 
Bank's Web site on December 16, 2013, shortly after the Bank's 
signoff with its auditors 4 days earlier. In addition, Ex-Im 
Bank posted the report's year-in-review narrative texts on 
December 20, 2013. These nonaudited texts supplement the 
financial report and fulfill Congressional reporting 
requirements. The full annual report (in individual sections) 
has been available online since December 20, 2013.
    Ex-Im Bank anticipates that printed copies of the FY2013 
annual report will be available in the first week of March and 
will be distributed to your office.

Q.15. Energy Questions--Mr. Hochberg, over the last 10 years 
what has been the historical return on investment for fossil 
fuels projects, and how does that compare to recent investments 
in renewables? Please provide that information, in detail by 
year, to the Committee.

A.15. No investments are made by Ex-Im Bank. Ex-Im Bank does 
not invest, but rather, provides loans and guarantees. Over the 
past 10 years, Ex-Im Bank has earned $884 million in fees and 
interest on fossil fuel transactions, versus losses incurred 
during that time of $117 million.

Q.16. Mr. Hochberg, as the National Association of 
Manufacturers has pointed out, the revisions to Ex-Im Bank's 
Environmental Procedures & Guidelines, as approved by the Ex-Im 
Bank Board of Directors in December, would substantially deter 
Ex-Im support for new coal-fired power plants abroad. Can you 
tell me what the exact benefit of that decision will be? For 
example, over the next 10, 50, and 100 years what will be the 
exact change in global temperatures and other weather-related 
events? Has the Ex-Im Bank determined that by making this 
decision the climate will stop changing, and no longer do so as 
it has for millions of years?

A.16. Since 1992, Ex-Im Bank is required by its charter to 
consider the impact to the environment of projects it finances. 
In approving the Supplemental High Carbon Intensity Guidelines, 
the intent of the Bank was to continue to adhere to our Charter 
and consider the environment in connection with Board decisions 
related to projects that have an impact on the environment and 
set requirements and standards that would result in a reduction 
of greenhouse gasses (CO2) from new coal plants those otherwise 
produce very large amounts of CO2. It was also to encourage 
other ECAs to adopt similar requirements so as to promote broad 
multilateral standards while leveling the playing field for 
U.S. exporters. The CO2 emissions from coal-fired power plants 
represent a large portion of the world's anthropogenic CO2 
production. The Guidelines introduced a standard or limit for 
CO2 emissions produced by Ex-Im-supported power plants in 
countries such as China that would require mitigation measures 
including deployment of carbon capture and sequestration (CCS) 
to lower the plant's CO2 emissions to levels consistent with 
that of gas-fueled plants. However, for the world's poorest 
countries, such as most sub-Saharan African nations, the 
Guidelines for new coal plants do not require CCS. For those 
poorest countries, we require only that the buyer meet the 
criteria of best appropriate technology where there is no other 
economically feasible alternative.
    Ex-Im Bank still finances coal exports, coal mining 
projects, and improvements to existing coal-fired power plants. 
Since 2009 we have completed approximately $2 billion in coal 
related projects.

Q.17. Mr. Hochberg, prior to passage of the omnibus 
appropriations bill earlier this month, the Ex-Im Bank was 
planning on requiring carbon capture and sequestration (CCS) 
for new coal-fired power plants. How was the Ex-Im Bank 
planning on determining whether the geology in a region would 
facilitate CCS or otherwise that the technology existed in a 
form that wouldn't explode the price of electricity generation 
for those facilities?

A.17. In the context of any particular project, the Bank's 
engineers and technical consultants will address the technical 
feasibility of CCS in their analysis provided to the Bank's 
Board of Directors for their consideration prior to voting on 
the transaction.

Q.18. Mr. Hochberg, according to the International Energy 
Agency (IEA), global demand for electricity will nearly double 
in 2035 over 2010 levels, as will electricity generated from 
coal. From now on, the Ex-Im Bank will insist that development 
agencies give ``full consideration'' to low-carbon or no-carbon 
options before moving ahead with a new coal plant. Is Ex-Im 
using their leverage associated with public finance to move 
developing countries away from coal-fired power plants thereby 
denying these countries the opportunities correlated with 
higher standards of living?

A.18. The Bank does not direct the development of other 
countries' energy policies. Through its Supplemental Carbon 
Guidelines, the Bank is using its policies to encourage the 
poorest countries to employ coal plants using the best 
appropriate technology where there is no other economically 
feasible alternative to high CO2 producing plants. In richer 
countries Ex-Im's Supplemental Carbon Guidelines provide that 
coal-fired plants must be deployed with techniques such as CCS 
to mitigate the level of CO2 emissions produced from new coal 
plants.

Q.19. Mr. Hochberg, the fiscal year 2014 consolidated 
appropriations bill recently signed into law by President Obama 
includes language prohibiting Ex-Im and the Overseas Private 
Investment Corporation from enforcing policies that block 
support for coal-power generation projects, which will increase 
exports of U.S. goods and services. How do you intend to comply 
with the intent of Congress?

A.19. The appropriations bill does not include language 
``prohibiting Ex-Im . . . from enforcing policies that block 
support for coal-power generation projects.'' The 
appropriations language leaves in place the Bank's policy 
requiring CCS mitigation for wealthier countries, but it 
suspends the bank's criteria for financing in IDA-eligible 
countries. Ex-Im Bank will fully comply with the Appropriations 
language.
    Ex-Im Bank is fully complying with the language of the 
Appropriations Bill and with the intent of the Congress with 
respect to the application of its Supplemental High Carbon 
Intensity Guidelines. The Bank has suspended the application of 
these Supplemental Guidelines for transactions related to 
export financing requests in all ``IDA-eligible'' (IDA-only and 
IDA-blend) countries. The Bank has posted this suspension on 
its Web site.
                                ------                                


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

    Thank you for your questions. Over the past 5 years Ex-Im 
Bank has supported an estimated 1.2 million U.S. jobs through 
exports. I am pleased to report that in Pennsylvania from 2009 
to 2013, Ex-Im Bank financed total authorizations of 
$6,246,856,291, of which $986,366,231 were small business 
authorizations. The total number of companies financed was 575 
companies, of which 431 were small businesses.
    The top three categories supported in Pennsylvania were: 
manufacturing and sales of capital equipment; mining; and 
utilities.
    The top three exporters in Pennsylvania supported by Ex-Im 
Bank were: General Electric International, Inc.; Aquatech 
International Corporation; and Xcoal Energy & Resources.
    The estimated number of jobs supported in Pennsylvania over 
the last 5 years by Ex-Im Bank was 46,000 jobs.

Q.1. You stated that Ex-Im does an economic impact study ``for 
every export and including airlines.'' Can you please provide a 
list of the economic impact studies that Ex-Im performed as 
part of large aircraft transactions during your tenure as 
Chairman and also provide copies of those studies to the 
Committee?

A.1. In my testimony, I indicated that the Bank considers the 
economic impact implications of every application. However, the 
Bank performs detailed economic impact analyses only on those 
applications that meet the standards articulated in the Bank's 
Charter and Economic Impact Procedures.
    The following table summarizes the number of transactions 
for which the Bank has conducted detailed economic impact 
analyses since May 2009. This table further subdivides the 
information depending on whether the foreign buyer used the 
U.S. export to establish or expand production of a good or 
offer passenger aircraft services.




Q.2. When completing an Economic Impact Analysis for the 
financing of an aircraft to a foreign carrier, does Ex-Im take 
foreign content into account to avoid counting foreign jobs as 
part of any U.S. economic benefit? If so, how?

A.2. When completing an Economic Impact Analysis, Ex-Im Bank 
looks at dollar benefits versus potential dollar harm to the 
U.S. economy.

Q.3. In your testimony you stated that Ex-Im charges foreign 
airlines rates that are higher than those that foreign airlines 
can find in the private market.
    How did you come to the determination that Ex-Im charges 
higher interest rates than private lenders?

A.3. Note: Chairman Hochberg would like to ensure that his 
testimony was not misunderstood. First, Airbus and Boeing 
compete for almost every single sale. Therefore, Ex-Im Bank 
must ensure that the financing available to a foreign airline 
to purchase a U.S.-manufactured airplane is as favorable as the 
financing provided by the European ``Airbus'' ECAs. Otherwise, 
Airbus will just get the sale. In addition, For every large 
aircraft transaction, Ex-Im Bank first performs an analysis to 
determine whether the transaction will create significant 
direct competition for a U.S. airline. If that analysis is 
affirmative, then Ex-Im Bank compares the cost of financing Ex-
Im Bank provides to foreign airlines to the cost of financing 
available to comparably rated U.S. airlines from commercial 
sources. With rare and short-lived historical exceptions, U.S. 
airlines consistently have access to more favorable financing 
terms than the financing terms that Ex-Im Bank makes available 
to foreign airlines. Responses to the questions below address 
how Ex-Im performs this analysis.
    Please note the clarification stated above. The Aircraft 
Sector Understanding (ASU) sets the minimum terms and 
conditions that export credit agencies (ECA) may provide when 
financing large aircraft transactions, and Ex-Im Bank is fully 
compliant with these guidelines. Over the past several years, 
the United States and others have steadily raised the all-in 
cost (which includes risk fees, other fees and interest) of ECA 
support for large aircraft transactions found in the ASU. In 
addition to the strict cost component, it is also important to 
note that private aircraft lending over the historical period 
provided additional flexibilities in terms of advance rate and 
loan term, for example, that was significantly more 
advantageous than what Ex-Im could offer under the terms and 
conditions of the ASU.
    With the most recent revision of the ASU in 2011, ECA 
financing is now less competitive than U.S. bond market 
financing obtained through instruments such as the enhanced 
equipment trust certificate (EETC). An EETC is a structure 
whereby investors can provide financing directly through the 
capital markets, as opposed to loan financing provided by 
banks. The EETCs provide significant cost advantages to U.S. 
airlines. The EETC is premised on Section 1110 of the U.S. 
Bankruptcy Code, which only applies to U.S. airlines. Section 
1110 permits a secured creditor of an airline in bankruptcy to 
obtain possession of the creditor's collateral (i.e., the 
aircraft) 60 days after the bankruptcy petition date, 
notwithstanding the automatic stay provision that applies to 
creditors of other types of debtors. This certainty of access 
to collateral--and thus to payment--significantly decreases the 
risk to creditors of U.S. airlines and allows these creditors 
to provide more favorable financing terms than creditors of 
foreign airlines (which lack equivalent protections).

Q.4. In making the determination that Ex-Im charges foreign 
carriers higher rates than those that can be found in the 
private markets, did you consider other benefits of Ex-Im 
financing, including favorable loan durations and loan-to-value 
ratios?

A.4. In determining whether Ex-Im Bank provides a pricing 
advantage, Ex-Im Bank compares the price of financing it 
provides to foreign airlines to pricing available to comparable 
U.S. airlines in the U.S. capital markets. This comparison 
considers loan duration and loan-to-value ratios in analyzing 
the price of Ex-Im financing in comparison to the price of 
private markets financing. While we look at and adjust for 
these factors in case-by-case comparisons, historical data 
generally demonstrate that both loan duration and loan-to-value 
ratios are more favorable in the EETC market, the proxy Ex-Im 
uses for private market financing. With regards to loan 
duration, the mean average weighted life (AWL) for EETCs during 
the historical period from 2001 through 2013 was 7.98 years, 
significantly longer than the typical AWL on a standard Ex-Im 
aircraft transaction of 6.25 years. Similarly, with regards to 
loan-to-value (LTV) ratios, while Ex-Im can offer only a 
maximum financed amount of 85 percent of the net purchase price 
of the aircraft, EETC LTVs are based on appraised values (not 
actual purchase price), and as a result oftentimes airlines are 
able to achieve more beneficial LTVs with the EETC debt 
instruments than can be achieved through Ex-Im financing.

Q.5. If Ex-Im financing is in fact more expensive than the 
financing available in the private market, why would a 
creditworthy foreign carrier ever choose Ex-Im financing?

A.5. There are several reasons why an airline which has access 
to market financing would need to use Ex-Im Bank financing from 
time to time. First, as we have seen in recent years, in times 
of market distress, commercial market financing may be 
temporarily unavailable, and as a result, Ex-Im Bank may need 
to step in and fill the financing gap. In this sense, the 
business of the Export-Import Bank tends to be countercyclical 
in nature. Second, the nature of aircraft acquisition is for 
airlines to order a large number of aircraft at one time. Given 
the volume of aircraft finance needed to finance an order, it 
is often the case that the commercial markets will only be able 
to finance a portion of the order, and as a result, Ex-Im Bank 
financing is needed to complement commercial financing and to 
finance the aircraft that the market is unable or unwilling to 
do.

Q.6. On its Web site, Ex-Im publishes an annual report 
detailing its Loans and Long-Term Guarantees. However, as of 
January 31, 2014, the 2013 report was not available on your Web 
site. When do you expect this report to be posted on your Web 
site? Please also provide the Committee with this report as 
soon as possible.

A.6. In accordance with a directive from the Office of 
Management and Budget to Federal agencies, Ex-Im Bank posted 
its FY2013 financial report (PDFs of audited documents) to the 
Bank's Web site on December 16, 2013, shortly after the Bank's 
signoff with its auditors on December 12, 2013, In addition, 
Ex-Im Bank posted the report's year-in-review narrative texts 
on December 20, 2013. These nonaudited texts supplement the 
financial report and fulfill congressional reporting 
requirements. The full annual report (in individual sections) 
has been available on line since December 20, 2013.
    Ex-Im Bank anticipates that printed copies of the FY2013 
annual report will be available in the first week of March and 
will be distributed to your office.

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

    Thank you for your questions. Over the past 5 years Ex-Im 
Bank has supported an estimated 1.2 million U.S. jobs through 
exports. I am pleased to report that in Oklahoma from 2009 to 
2013, Ex-Im Bank financed total authorizations of $621,702,468, 
of which $486,879,357--78 percent, or four times the national 
average for the Bank--were small business authorizations. The 
total number of companies financed was 213 companies, of which 
166 were small businesses.
    The top three categories supported in Oklahoma were: 
manufacturing and sales of noncapital equipment; services; and 
manufacturing and sales of capital equipment.
    The top three exporters in Oklahoma supported by Ex-Im Bank 
were: Zeeco Inc.; Royal Mfg Co.; and Devco International.
    The estimated number of jobs supported in Oklahoma over the 
last 5 years by Ex-Im Bank was 5,200 jobs.

Q.1. In FY2013, Ex-Im Bank approved commitments worth $27.3 
billion. Of this amount, only 19.1 percent supported exports by 
small businesses--below the congressionally mandated target of 
20 percent. Is the Bank's failure to meet the 20 percent target 
due to low demand from small businesses or other reasons? What 
steps will the Bank take to ensure a larger share of its 
commitments benefit small businesses?

A.1. In FY2013, Ex-Im Bank supported nearly $6 billion in small 
business, of which $5.2 billion was direct exports. While the 
direct exports accounted for 19.1 percent, when you take into 
account the total small business authorizations by the Bank, we 
are over 20 percent. Our charter requires us to report on 
direct small business exports, which is why you see the 19.1 
percent figure in our reports. Indirect small business exports 
are vitally important to small business.
    Approximately 90 percent of the 3,800 Ex-Im transactions in 
FY2013 supported small business. This was an all-time record 
for the Bank. On the demand side, risks associated with the 
United States' largest trading partner (the EU) decreased in 
FY2013. Macroeconomic instability in Europe caused U.S. 
businesses to purchase additional trade credit insurance for 
their exports to the EU. As European markets have stabilized, 
demand for export insurance has decreased. On the supply side, 
Ex-Im moved ``down market'' in FY2013 to service more U.S. 
small businesses. In FY2013, the number of small business 
transactions increased from 3,313 in FY2012 to 3,413 in FY2013. 
While the average transaction size decreased from $1.85M to 
$1.53M over the same period. In addition, thanks to an 
improving economy, the private sector insurers are actively 
targeting Ex-Im's larger small business customers via 
information requested under FOIA. We are continually 
encouraging the private sector to step up, thereby reducing the 
demand for Ex-Im Bank support.
    The key to expanding exports is marketing and communicating 
to small businesses. We will continue to leverage outreach 
programs such as our Global Access Forum events. In addition, 
we have partnered with FedEx in an innovative new alliance that 
will help reach and inform their small- and medium-size 
exporters about how Ex-Im Bank can help increase FedEx's export 
sales and create jobs.

Q.2. Is Ex-Im Bank a lender of last resort, or does the Bank 
want to maintain a certain level of business?

A.2. Pursuant to the Bank's Congressional mandate, Ex-Im Bank 
financing is reserved for transactions for which either: (1) 
commercial sources of financing are unavailable due to 
limitations in capacity and/or risk appetite; or (2) 
competition exists from foreign suppliers and their export 
credit agencies and, therefore, Ex-Im Bank support is needed to 
level the financing playing field. Hence, Ex-Im Bank focuses on 
those U.S. export transactions that would not likely go forward 
absent Ex-Im Bank support. Ex-Im Bank complements, rather than 
competes with, commercial sources of financing. As such, the 
``lender of last resort'' label is fitting with respect to 
those transactions for which commercial sources of financing 
are unavailable due to limitations in capacity and/or risk.

Q.3. Does Ex-Im Bank issue any staff performance bonuses based 
on the level of business the Bank does?

A.3. No. Ex-Im Bank issues performance awards based on an 
employee's achievement of individual performance goals, 
including a balanced scorecard of such measures as employee 
effectiveness, customer service, collaboration, productivity, 
cycle time, and quality.

Q.4. If Ex-Im Bank's mission is to fill gaps in market 
financing, why does the Bank continue to extend financing to 
companies which have no problem accessing credit in the private 
market?

A.4. Ex-Im Bank extends financing to companies for one of two 
reasons. The first reason is to fill financing gaps unmet by 
private sources of financing due to capacity and risk-taking 
limitations. The second reason is to level the financing 
playing field when U.S. exporters are competing against foreign 
suppliers that have financing support from their national 
export credit agencies. Thus, the Bank can and does provide 
financing to foreign companies that might be able to access 
private sources of financing with the goal of supporting and 
increasing U.S. Jobs. The Bank provides this financing only for 
the purpose of neutralizing financing available from a foreign 
export credit agency for a specified purchase.

Q.5. How much of Ex-Im Bank's current exposure is comprised of 
large aircraft financing? Why does large aircraft financing 
represent such a large portion of the Bank's total exposure, 
despite being a much smaller share of total U.S. exports? What 
would be a financially prudent portfolio cap for large 
commercial aircraft that is also fair to the broader spectrum 
of U.S. industry?

A.5. Ex-Im Bank's exposure, as of December 31, 2013, is 
approximately $87 billion (or 77 percent) of the Bank's $113 
billion exposure supported capital goods. Of that amount, $49 
billion supported large aircraft. Large aircraft represent a 
significant portion of Ex-Im Bank total exposure because of 
several factors: (i) aircraft are very expensive; (ii) Boeing's 
order book has increasingly consisted of orders from airlines 
located in emerging markets such as Africa, Latin America, 
Asia, and the Middle East, which are more likely to require Ex-
Im Bank financing for at least some of their aircraft 
purchases; and (iii) during the credit crisis and the great 
recession, other sources of financing for commercial aircraft 
were not available, or not available in sufficient quantities 
to meet the financing needs of the aircraft manufacturers 
customers.
    Boeing is the United States' largest manufacturing 
exporter. Although exports of commercial aircraft may appear to 
be a small share of total U.S. exports, that is only because 
the U.S. economy is so large. The commercial aircraft industry 
is one of the industries in which the United States continues 
to run a trade surplus and is one of the largest export 
industries within the U.S. economy. Ex-Im Bank support for this 
important U.S. industry is due to the fact that we are called 
upon to finance large capital goods that face a shortage of 
financing options as well as where U.S. exporters face foreign 
competition that is supported by their countries' export credit 
agencies. The purchase of commercial aircraft requires large 
amounts of long term financing, which commercial banks have 
demonstrated a reluctance to finance. Any unilateral ``cap'' on 
Ex-Im Bank support for sales of U.S. manufactured commercial 
aircraft would have only one result: the foreign airlines in 
question would purchase more European-manufactured aircraft, to 
the great detriment of U.S. industry. The market for large 
aircraft is a duopoly, and the sale of Airbus aircraft is 
heavily supported by ECAs in Airbus's home countries. 
Therefore, the need for Ex-Im to level the playing field is 
most intense in this market.

Q.6. Under Ex-Im Bank's new Economic Impact Procedures (EIPs), 
the Bank estimates only 10 to 15 percent of aircraft 
transactions will receive a detailed economic impact analysis. 
Why were the EIPs designed in such a way that so few 
transactions receive a detailed analysis? How does this 10-15 
percent figure compare to nonaircraft transactions of similar 
dollar value (e.g., above $200 million)?

A.6. Not all aircraft that Ex-Im finances are adding capacity 
to the commercial airline market. Many are replacing seats on 
aircraft that are being retired and others are used for cargo 
shipping. The new EIPs were designed in response to language in 
the Bank's charter that directs the Bank to: (1) ``take into 
account any serious adverse effect . . . on the competitive 
position of United States industry'' (see Section 2(b)(1)(B) of 
the charter); and (2) determine if its transactions could cause 
``substantial injury'' to U.S. industry (see section 2(e)(1)(B) 
of the charter). Section 2(4) of the Charter defines 
substantial injury as: `` . . . the amount of the capacity for 
production established, or the amount of the increase in such 
capacity expanded, by such credit or guarantee equals or 
exceeds 1 percent of United States production.'' The terms 
``serious adverse effect'' and ``substantial injury'' suggest 
that, for economic impact purposes, the Bank should focus on 
transactions where the potential for adverse effects are 
greatest (i.e., relatively large transactions with significant 
increases in foreign production capacity).
    Of the 15 proposed transactions involving large aircraft 
subject to approval between April 2013, when the new EIPs went 
into effect, and the end of FY2013, none triggered detailed 
economic impact analyses. However, one detailed economic impact 
analysis was performed on a passenger aircraft transaction that 
was authorized on January 23, 2014. Therefore, between the 
implementation of the Economic Impact Procedures for aircraft 
on April 1, 2013, and the time of this writing, one out of 18, 
or 5.5 percent, of analyses for authorized commercial passenger 
aircraft transactions has resulted in a detailed economic 
impact analysis.
    For nonaircraft cases, of the 11 cases valued over $200 
million supported by Ex-Im financing in FY2013, six cases (or 
about 55 percent) triggered a detailed economic impact 
analysis. However, the more appropriate comparison of aircraft 
and nonaircraft economic impact activity would be to include 
nonaircraft transactions valued over $10 million (the 
nonaircraft threshold) to air transactions valued over $200 
million (the air threshold). This comparison shows that of the 
FY2013 authorizations, 8 (or 13 percent) of nonaircraft 
transactions were subject to a detailed economic impact 
analysis. The data shows that the percent of transactions which 
required a detailed economic impact analysis for aircraft and 
nonaircraft transactions are relatively comparable.

Q.7. According to Ex-Im Bank's new aircraft EIPs, the Bank will 
only perform a detail economic impact analysis if it determines 
that the total number of airline seats related to a given 
transaction exceeds I percent of the total seats in the U.S. 
fleet, even though this number includes U.S. flights that don't 
compete with the foreign airline. Is this a fair threshold for 
performing a detailed analysis?

A.7. The 1 percent test in the EIPs for passenger aircraft was 
drafted to align with the Bank's Charter. Sec. 2(e)(4) of the 
Charter states: ``For purposes of paragraph (1)(B), the 
extension of any credit or guarantee by the Bank will cause 
substantial injury if the amount of the capacity for production 
established, or the amount of the increase in such capacity 
expanded, by such credit or guarantee equals or exceeds 1 
percent of United States production.''
    Not all aircraft that Ex-Im finances are adding capacity to 
the commercial airline market. Many are replacing seats on 
aircraft that are being retired and others are used for cargo 
shipping. According to the Bank's EIPs for passenger aircraft 
transactions, one of the tests used to determine the potential 
for substantial injury to U.S. industry is the 1 percent test. 
Bank staff separates all wide-body and narrow-body seats in a 
transaction, and divides each by the number of seats in the 
U.S. fleet of either wide-body or narrow-body aircraft, 
respectively. This ensures that the number of seats in a 
transaction involving Bank-supported wide-body aircraft, which 
are typically used on long-haul international routes, is 
compared to the number of seats in U.S. wide-body aircraft, 
which are also largely operated on long-haul international 
routes. Accordingly, the 1 percent threshold is fair and 
consistent with the Bank's Charter.

Q.8. When performing a detailed economic impact analysis for an 
aircraft transaction, does Ex-Im Bank include the foreign-
sourced content of the aircraft in its calculations of the 
export value of the transaction? lf so, why?

A.8. The Bank's Economic Impact Procedures have never included, 
and still do not, include, the number of jobs supported by a 
transaction as a factor in the Economic Impact Procedures or in 
any detailed economic impact analysis. Naturally, jobs are at 
the heart of the Ex-Im Bank mission, and Ex-Im uses a 
methodology consistent with that used by the Trade Promotion 
Coordinating Committee to calculate the number of jobs 
associated with its financing for reporting purposes. This 
methodology uses employment data from the Bureau of Labor 
Statistics (BLS), which includes an average foreign content 
adjustment by industry. Accordingly, the Bank's methodology 
accounts for foreign content when calculating the number of 
jobs associated with its financing. With limited staff and 
resources, the Bank has developed a practical, easy to use tool 
that provides an effective approximation of Ex-Im Bank 
supported jobs; it utilizes publicly available Commerce 
Department and Bureau of Labor Statistics data, and is also 
used by other agencies to calculate jobs numbers. We were 
pleased that the GAO surveyed the Bank's jobs calculation 
methodology and recognized the advantages of the Bank's current 
jobs calculation methodology. The GAO report also recognized 
that the Bank's current jobs calculation methodology is 
commonly used and cost effective. However, that factor is not 
then applied in the economic impact analysis.
    When Ex-Im Bank conducts a detailed economic impact 
analysis for a passenger aircraft transaction, the Bank counts 
the net contract price, including foreign content, as the 
benefit to the U.S. economy, and counts estimated revenue lost 
to the U.S. economy. If the first part of a detailed economic 
impact analysis for a passenger aircraft transaction finds 
there is a basis to estimate harm to U.S. industry, Bank staff 
estimates the overall revenue loss to U.S. carriers as the cost 
to the U.S. economy, regardless of the quantity of foreign 
content in the service provided by U.S. carriers. Ex-Im Bank 
employs this practice because calculating the precise foreign 
content in any business operation that could be harmed by an 
Ex-Im transaction would require business sensitive information 
from the injured business, or would otherwise rely solely on 
speculation. Instead, Ex-Im Bank takes the more workable 
approach of assuming that the foreign content of the Ex-Im 
Bank-supported export is roughly comparable to the foreign 
content of a U.S. business potentially injured by the 
transaction. Accordingly, the Bank takes foreign content into 
account when calculating the number of jobs associated with its 
financing.
              Additional Material Supplied for the Record
  STATEMENT SUBMITTED BY LINDA DEMPSEY, VICE PRESIDENT, INTERNATIONAL 
        ECONOMIC AFFAIRS, NATIONAL ASSOCIATION OF MANUFACTURERS
    Chairman Johnson, Ranking Member Crapo, and Members of the 
Committee, thank you for the opportunity to submit this statement for 
the record. I am grateful for the chance to highlight the importance of 
supporting the U.S. Export-Import Bank to help manufacturers compete in 
the global marketplace.
    The National Association of Manufacturers (NAM) is the largest 
manufacturing association in the United States, representing small and 
large manufacturers in every industrial sector and in all 50 States. 
Manufacturing employs nearly 12 million men and women, contributes more 
than $1.8 trillion to the U.S. economy annually, has the largest 
economic impact of any major sector and accounts for two-thirds of 
private-sector research and development. The ability of U.S. companies 
to export has always been a critical issue for the NAM, and exports are 
increasingly important to the U.S. economy and to the success of 
domestic manufacturing. Manufactured goods exports increased by 47 
percent between 2009 and 2012, reaching a record $1.35 trillion for 
2012.
    The NAM strongly supports Ex-Im Bank's mission to support U.S. jobs 
through exports and views the Bank as one of the most important tools 
the U.S. Government has to help grow U.S. exports and jobs, which is 
now more important than ever to U.S. companies. Ex-Im is the only tool 
American manufacturers have to counter the approximately $1 trillion in 
export financing that other governments provide their exporters. 
Without Ex-Im Bank support, customers may turn to foreign competitors 
that have support from aggressive foreign export credit agencies to the 
detriment of U.S. industry and jobs. America's manufacturers cannot 
afford to be defenseless in today's global marketplace.
    NAM member companies across the country, from large firms to small 
businesses, have turned to Ex-Im Bank to take advantage of new 
international trade opportunities and grow their workforce. Polyguard 
Products develops and produces materials in Ennis, Texas, for corrosion 
protection and water proofing of structures and infrastructure. Founded 
in 1952, Polyguard started to delve into exporting in 2005. Today, the 
company is trading with more than 30 countries a year and has 
experienced a 325 percent increase in total sales. Ex-Im Bank was able 
to mitigate one element of uncertainty in international trade, helping 
Polyguard cover the credit risk of exporting. Like Polyguard, many 
small businesses have sought the assistance of Ex-Im Bank and reaped 
the benefits of expanded market access.
    A record 295,000 U.S. small- and medium-sized enterprises exported 
goods in 2011, accounting for 98 percent of all identified exporters 
and helping demonstrate the export potential of small businesses. With 
those new export opportunities, manufacturers in the United States 
create American jobs. According to the latest figure from the U.S. 
Department of Commerce, every $1 billion increase in exports creates or 
supports an estimated 4,000 manufacturing jobs. Exports have a real 
impact, and that impact is strengthened through the work of Ex-Im Bank.
    The Export-Import Bank is essential to boosting exports of U.S. 
products. In FY2013, Ex-Im was involved with 3,842 transactions that 
supported more than $37 billion in exports--leveraging about $27 
billion in authorizations. Nearly 90 percent of those transactions 
directly supported small-businesses, with a total of $5.2 billion in 
support for small business exporters. The Ex-Im Bank is a self-
sustaining agency that generates money for the U.S. Government, thereby 
reducing our national deficit. Last year alone, Ex-Im sent more than $1 
billion to the U.S. Treasury. Ex-Im is a net gain for the Federal 
Government and for the taxpayer. Furthermore, the Bank has maintained 
its incredibly low default rate of through the recession and through 
several years of record growth. At last measure, the Bank's default 
rate was less 0.5 percent.
    Despite this tremendous record of success, manufacturers are 
concerned that Ex-Im Bank's efforts to implement guidelines that 
categorically deny support to certain exporters contradict the Bank's 
principal mandate to support U.S. jobs through exports. The revisions 
to Ex-Im Bank's Environmental Procedures & Guidelines, as approved by 
the Ex-Im Bank Board of Directors in December 2013, would substantially 
deter Ex-Im support for most new coal-fired power plants abroad--
hindering the supply of U.S. goods and services to countries that need 
reliable electricity, without any real economic or environmental 
benefits for those countries. On behalf of manufacturers in the United 
States, I would urge Chairman Hochberg to heed the clear signal sent 
recently by Congress to reevaluate those guidelines.
    The Ex-Im Bank's charter expires on September 30, 2014, and 
Congress must act quickly this year to extend its authorization. 
Reliable access to export financing is a vital part of being globally 
competitive, and the Ex-Im Bank has taken on even greater significance 
in today's turbulent financial environment. Exporters often face 
difficulty in obtaining credit and working capital, and overseas 
customers are financially stretched. Those customers will continue to 
place a high priority on favorable financial terms. Failure to 
reauthorize Ex-Im Bank would threaten the many American jobs that 
depend directly or indirectly on its crucial export financing.
    Additionally, the Ex-Im Bank is the only tool American 
manufacturers have to counter the huge sums of export financing--many 
hundreds of billions of dollars--that other governments provide their 
exporters. Manufacturers in the United States face stiff competition 
from companies backed by the 59 other export credit agencies around the 
world, and Ex-Im Bank helps level the playing field so that 
manufacturers can compete on the merits of their products. If American 
manufacturers lose access to the Ex-Im Bank, our ability to compete 
globally will be severely curtailed. Companies large and small will be 
disadvantaged, and their customers may turn to foreign competitors that 
have support from aggressive foreign export credit agencies. America's 
manufacturers cannot afford to be defenseless in today's global 
marketplace.
    I urge you to move swiftly on legislation that will provide a 
stable, long-term reauthorization for Ex-Im Bank. Thank you, Chairman 
Johnson and Ranking Member Crapo, for holding this hearing and for 
allowing me the opportunity to submit a statement for the record.