[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
OVERSIGHT OF EFFORTS TO
REFORM THE EXPORT-IMPORT BANK
OF THE UNITED STATES
=======================================================================
JOINT HEARING
BEFORE THE
SUBCOMMITTEE ON MONETARY
POLICY AND TRADE
OF THE
COMMITTEE ON FINANCIAL SERVICES
AND THE
SUBCOMMITTEE ON HEALTH CARE, BENEFITS
AND ADMINISTRATIVE RULES
OF THE
COMMITTEE ON OVERSIGHT
AND GOVERNMENT REFORM
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
APRIL 15, 2015
__________
Printed for the use of the Committee on Financial Services and the
Committee on Oversight and Government Reform
Serial No. 114-12
Financial Services Committee
Serial No. 114-9
Oversight and Government Reform Committee
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
U.S. GOVERNMENT PUBLISHING OFFICE
95-056 PDF WASHINGTON : 2015
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HOUSE COMMITTEE ON FINANCIAL SERVICES
JEB HENSARLING, Texas, Chairman
PATRICK T. McHENRY, North Carolina, MAXINE WATERS, California, Ranking
Vice Chairman Member
PETER T. KING, New York CAROLYN B. MALONEY, New York
EDWARD R. ROYCE, California NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma BRAD SHERMAN, California
SCOTT GARRETT, New Jersey GREGORY W. MEEKS, New York
RANDY NEUGEBAUER, Texas MICHAEL E. CAPUANO, Massachusetts
STEVAN PEARCE, New Mexico RUBEN HINOJOSA, Texas
BILL POSEY, Florida WM. LACY CLAY, Missouri
MICHAEL G. FITZPATRICK, STEPHEN F. LYNCH, Massachusetts
Pennsylvania DAVID SCOTT, Georgia
LYNN A. WESTMORELAND, Georgia AL GREEN, Texas
BLAINE LUETKEMEYER, Missouri EMANUEL CLEAVER, Missouri
BILL HUIZENGA, Michigan GWEN MOORE, Wisconsin
SEAN P. DUFFY, Wisconsin KEITH ELLISON, Minnesota
ROBERT HURT, Virginia ED PERLMUTTER, Colorado
STEVE STIVERS, Ohio JAMES A. HIMES, Connecticut
STEPHEN LEE FINCHER, Tennessee JOHN C. CARNEY, Jr., Delaware
MARLIN A. STUTZMAN, Indiana TERRI A. SEWELL, Alabama
MICK MULVANEY, South Carolina BILL FOSTER, Illinois
RANDY HULTGREN, Illinois DANIEL T. KILDEE, Michigan
DENNIS A. ROSS, Florida PATRICK MURPHY, Florida
ROBERT PITTENGER, North Carolina JOHN K. DELANEY, Maryland
ANN WAGNER, Missouri KYRSTEN SINEMA, Arizona
ANDY BARR, Kentucky JOYCE BEATTY, Ohio
KEITH J. ROTHFUS, Pennsylvania DENNY HECK, Washington
LUKE MESSER, Indiana JUAN VARGAS, California
DAVID SCHWEIKERT, Arizona
ROBERT DOLD, Illinois
FRANK GUINTA, New Hampshire
SCOTT TIPTON, Colorado
ROGER WILLIAMS, Texas
BRUCE POLIQUIN, Maine
MIA LOVE, Utah
FRENCH HILL, Arkansas
Shannon McGahn, Staff Director
James H. Clinger, Chief Counsel
Subcommittee on Monetary Policy and Trade
BILL HUIZENGA, Michigan, Chairman
MICK MULVANEY, South Carolina, Vice GWEN MOORE, Wisconsin, Ranking
Chairman Member
FRANK D. LUCAS, Oklahoma BILL FOSTER, Illinois
STEVAN PEARCE, New Mexico ED PERLMUTTER, Colorado
LYNN A. WESTMORELAND, Georgia JAMES A. HIMES, Connecticut
MARLIN A. STUTZMAN, Indiana JOHN C. CARNEY, Jr., Delaware
ROBERT PITTENGER, North Carolina TERRI A. SEWELL, Alabama
LUKE MESSER, Indiana PATRICK MURPHY, Florida
DAVID SCHWEIKERT, Arizona DANIEL T. KILDEE, Michigan
FRANK GUINTA, New Hampshire DENNY HECK, Washington
MIA LOVE, Utah
COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
JASON CHAFFETZ, Utah, Chairman
JOHN L. MICA, Florida ELIJAH E. CUMMINGS, Maryland,
MICHAEL R. TURNER, Ohio Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee CAROLYN B. MALONEY, New York
JIM JORDAN, Ohio ELEANOR HOLMES NORTON, District of
TIM WALBERG, Michigan Columbia
JUSTIN AMASH, Michigan WM. LACY CLAY, Missouri
PAUL A. GOSAR, Arizona STEPHEN F. LYNCH, Massachusetts
SCOTT DesJARLAIS, Tennessee JIM COOPER, Tennessee
TREY GOWDY, South Carolina GERALD E. CONNOLLY, Virginia
BLAKE FARENTHOLD, Texas MATT CARTWRIGHT, Pennsylvania
CYNTHIA M. LUMMIS, Wyoming TAMMY DUCKWORTH, Illinois
THOMAS MASSIE, Kentucky ROBIN L. KELLY, Illinois
MARK MEADOWS, North Carolina BRENDA L. LAWRENCE, Michigan
RON DeSANTIS, Florida TED LIEU, California
MICK, MULVANEY, South Carolina BONNIE WATSON COLEMAN, New Jersey
KEN BUCK, Colorado STACEY E. PLASKETT, Virgin Islands
MARK WALKER, North Carolina MARK DeSAULNIER, California
ROD BLUM, Massachusetts BRENDAN F. BOYLE, Pennsylvania
JODY B. HICE, Georgia PETER WELCH, Vermont
STEVE RUSSELL, Oklahoma MICHELLE LUJAN GRISHAM, New Mexico
EARL L. ``BUDDY'' CARTER, Georgia
GLENN GROTHMAN, Wisconsin
WILL HURD, Texas
GARY J. PALMER, Alabama
Sean McLaughlin, Staff Director
Rachel Weaver, Deputy Staff Director
Andrew Dockham, General Counsel
Laura Rush, Chief Clerk
David Rapallo, Minority Staff Director
Subcommittee on Health Care, Benefits & Administrative Rules
JIM JORDAN, Jr., Ohio, Chairman
TIM WALBERG, Michigan, MATT CARTWRIGHT, Pennsylvania,
SCOTT DesJARLAIS, Tennessee Ranking Member
TREY GOWDY, South Carolina ELEANOR HOLMES NORTON, District of
CYNTHIA M. LUMMIS, Wyoming Columbia
MARK MEADOWS, North Carolina BONNIE WATSON COLEMAN, New Jersey
RON DeSANTIS, Florida MARK DeSAULNIER, California
MICK MULVANEY, South Carolina Vice BRENDAN F. BOYLE, Pennsylvania
Chair JIM COOPER, Tennessee
MARK WALKER, North Carolina MICHELLE LUJAN GRISHAM, New Mexico
JODY B, HICE, Georgia
EARL L. ``BUDDY'' CARTER, Georgia
C O N T E N T S
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Page
Hearing held on:
April 15, 2015............................................... 1
Appendix:
April 15, 2015............................................... 67
WITNESSES
Wednesday, April 15, 2015
Gianopoulos, Kimberly, Director, International Affairs and Trade,
U.S. Government Accountability Office.......................... 13
Hochberg, Hon. Fred P., President and Chairman, Export-Import
Bank of the United States...................................... 8
McCarthy, Michael T., Acting Inspector General, Export-Import
Bank of the United States, accompanied by Mark S. Thorum,
Assistant Inspector General for Inspections and Evaluations,
Export-Import Bank of the United States........................ 11
Sheets, Hon. Nathan, Under Secretary for International Affairs,
U.S. Department of the Treasury................................ 10
APPENDIX
Prepared statements:
Cartwright, Hon. Matt........................................ 68
Gianopoulos, Kimberly........................................ 70
Hochberg, Hon. Fred P........................................ 89
McCarthy, Michael T., and Thorum, Mark S..................... 130
Sheets, Hon. Nathan.......................................... 141
Additional Material Submitted for the Record
Heck, Hon. Denny:
Written statement of a group of State Governors who support
reauthorization of the Ex-Im Bank.......................... 145
Huizenga, Hon. Bill:
Article from The Wall Street Journal entitled, ``Justice
Department Charges Former Export-Import Bank Official With
Bribery,'' dated April 14, 2015............................ 149
Article from The Wall Street Journal entitled, ``Officials at
Ex-Im Bank Face Investigations,'' dated June 23, 2014...... 152
Moore, Hon. Gwen:
Slides pertaining to Ex-Im Bank.............................. 155
Article from the Free Republic entitled, ``Cruz under fire
from Texas businesses (Export-Import Bank),'' dated
February 27, 2015.......................................... 158
Written statement of the National Association of
Manufacturers.............................................. 160
OVERSIGHT OF EFFORTS TO
REFORM THE EXPORT-IMPORT BANK
OF THE UNITED STATES
----------
Wednesday, April 15, 2015
U.S. House of Representatives,
Subcommittee on Monetary
Policy and Trade,
Committee on Financial Services,
joint with the
Subcommittee on Health Care,
Benefits and Administrative Rules,
Committee on Oversight and
Government Reform
Washington, D.C.
The subcommittees met, pursuant to notice, at 10:01 a.m.,
in room 2154, Rayburn House Office Building, Hon. Jim Jordan
[chairman of the Health Care, Benefits and Administrative Rules
Subcommittee] presiding.
Members present from the Monetary Policy and Trade
Subcommittee: Representatives Huizenga, Mulvaney, Lucas,
Pearce, Stutzman, Pittenger, Messer, Schweikert, Guinta, Love;
Moore, Foster, Carney, Sewell, Murphy, Kildee, and Heck.
Members present from the Health Care, Benefits and
Administrative Rules Subcommittee: Representatives Jordan,
Walberg, DesJarlais, Gowdy, Meadows, DeSantis, Mulvaney,
Walker, Hice, Carter; Cartwright, and Watson Coleman.
Ex officio present: Representatives Hensarling, Chaffetz,
Waters, and Cummings.
Also present: Representatives Posey, Duffy, Blum, Clay, and
Green.
Chairman Jordan. The subcommittees will come to order. We
have interest from several of the members of the respective
full committees who would like to participate. So I ask
unanimous consent that those colleagues be allowed to fully
participate in today's hearing. Without objection, it is so
ordered.
I want to welcome our witnesses today. We will get to your
introductions in just a minute. But we want to start--and you
know how this works. Most of you have done this before. We will
start with opening statements.
So I recognize the gentleman from Michigan, the chairman of
the Monetary Policy and Trade Subcommittee, Mr. Huizenga.
Chairman Huizenga. Thanks, Chairman Jordan. I appreciate
your willingness to hold this joint hearing on this important
issue to discuss the Export-Import Bank.
This hearing will examine the role of the Ex-Im Bank, the
2012 authorization of the Bank by Congress, and Ex-Im's
progress on implementing the reforms and recommendations made
by the GAO and the Ex-Im Bank's Office of Inspector General.
Many of this, we all know. We are familiar with the
history. The Bank was established by Executive Order in 1934,
and became an independent agency in 1945 with the mission to
support domestic job creation in the United States. The Export-
Import Bank is intended to facilitate the export of U.S. goods
and services to international markets by providing working
capital guarantees, export credit insurance, loan guarantees,
and direct loans.
Since its creation, Ex-Im's taxpayer subsidy has grown
exponentially to a whopping $140 billion cap. As the national
debt continues to climb over $18 trillion, many fear that these
taxpayer-backed loan guarantees put taxpayer dollars at
significant risk and raise concern that the Ex-Im is looming
towards yet another bailout that the American people simply
cannot afford.
It has been claimed that while the Export-Import Bank is a
self-sustaining agency that receives a net appropriation of
zero from Congress, because these Bank loans are backed by the
full faith and credit of the U.S. Government, I believe, as do
many others, that the U.S. taxpayers are at risk if the Bank's
projects fail.
It is important to note that the Bank has already received
a congressional bailout. The Export-Import Bank operated at a
loss every year from 1982 to 1985. And by 1991, the Bank's
accumulated deficit hit $7.5 billion.
In fact, I was an intern here on the Hill in the spring of
1991. And it was a raging debate, what was happening and what
to do about it. And many will recall that it was the closing
days of the George H.W. Bush Administration. Democrats were
firmly in control of both the House and the Senate and were
trying to figure out what to do.
The solution was that from 1992 to 1996, Ex-Im received
$9.92 billion in direct appropriations from Congress and the
American taxpayers. In 2012, Congress reauthorized Ex-Im while
also mandating several modest reform provisions that shared
broad bipartisan support. These reform provisions required that
the Ex-Im Bank submit a business plan to Congress, as well as
respond to a review of Ex-Im's risk management practices
conducted by GAO.
Additionally, the reauthorization directed the Treasury
Secretary to initiate--I think that is a key word--and pursue
multilateral negotiations to reduce, with the ultimate goal of
eliminating, all trade-distorting export subsidies, including
those for aircraft, which has been a central theme in this
discussion.
The reauthorization further required that the Ex-Im Bank
categorize each loan and long-term guarantee, classifying them
as necessary to either: one, assume risk that the private
sector would not undertake, in other words, be that lender of
last resort; two, overcome limits in private finance; or three,
meet competition from foreign export credit agencies.
Although these reforms were intended to better protect
taxpayers and make the Export-Import Bank more accountable, the
Bank, and I believe Treasury, continue to ignore congressional
intent and instead operate with too little accountability and
too little regard for the interests of hardworking American
taxpayers.
The most recent authorization of the Ex-Im Bank's charter
occurred in September of 2014 and expires this June 30th. As
Congress continues its robust oversight of the Export-Import
Bank, it is important to note that the Ex-Im Bank cannot engage
in new business without congressional authorization; however,
if the authorization does lapse, Ex-Im would be obligated to
honor all of its existing loans and guarantees. In other words,
nothing would change. But it would be prohibited from entering
into new business.
Today, I look forward to hearing from our chairman of the
Export-Import Bank; the Treasury Under Secretary for
International Affairs; both the acting and assistant inspectors
general; and the GAO in regards to the Bank's progress or,
frankly, lack thereof on implementing these clearly-defined
reforms that had come out at the last authorization.
So thank you, Mr. Chairman. With that, I yield back.
Chairman Jordan. I thank the chairman for his statement.
We now recognize the gentlelady from Wisconsin, Ms. Moore,
ranking member on the Monetary Policy and Trade Subcommittee.
Ms. Moore. Thank you so much, Mr. Chairman. And what a
privilege it is to be here with our guests today.
Before I get into the substance of my comments, I feel
really compelled to address some of the mischaracterizations of
the Bank. And I am very disturbed that this debate been
hijacked by strawmen arguments.
I struggled to understand how this debate had become so
dispatched from the reality of how the Bank operates, that is
until I read the story in the Hill about Senator Cruz's lack of
support of the Bank, despite strong support of the Bank from
small businessmen in Texas, and his characterization of this
being ``low-hanging fruit.'' Low-hanging fruit, of course,
being proxy language for the Bank being low-hanging fruit in
pursuit of a larger goal of really dismantling any kind of
governmental assistance. Really, that is the sort of Tea Party
argument that government should not help anybody. And really,
the larger goal of dismantling Social Security, Medicare, and
the entire social safety net. Okay, tangent is over.
So in response to the realities of global competition and
business, and in recognition that the Bank is a U.S. job
creation engine, reauthorization in the past has been
bipartisan. And we have very little legislative time before the
current authorization expires on June 30th. We have a majority
in the House, not a majority of Democrats, a majority in the
House supportive of reauthorization. We have legislative
language with cosponsors demonstrating that.
And I hope that this hearing will reset the debate and be
grounded in fact. The Bank is not a government-funded utility
that offers below-market financing terms. It is not.
I will yield the rest of my time to the gentlelady from
California, the ranking member of the full Financial Services
Committee, Ms. Waters.
Ms. Waters. Thank you very much, Ms. Moore. And thank you,
Mr. Chairman.
I am sure the irony of today's hearing to discuss the
implementation of the 2012 reauthorization of the Ex-Im Bank is
not lost on anyone. Today, not one, but two committees are
holding this hearing on the progress of a 3-year-old law, just
as we are only 32 legislative days away from the expiration of
the Bank's charter.
Despite this imminent threat to our economic recovery and
to American workers, the Financial Services Committee has yet
to hold a single legislative hearing to reauthorize the Bank.
Over the course of its 80-year history, the Bank's charter has
been renewed 16 times, supporting hundreds of thousands of jobs
and leveling the playing field for American businesses large
and small so they can compete for business in the global
marketplace.
Earlier this year, my colleagues Gwen Moore, Denny Heck,
minority whip Steny Hoyer, and I introduced legislation to
reform and reauthorize the Bank. The proposal has the support
of 190 House Democrats. Another proposal introduced this year
to reauthorize the Bank has garnered the support of 61 House
GOP Members.
With the majority of House lawmakers officially on record
in support of the Bank, it is clear that this Congress could
pass an extension of the Bank's charter today. This begs the
question, what exactly are we doing here? Unfortunately, the
answer is evident. We are wasting time while the anti-
government, anti-American-worker wing of the Republican party
works desperately to let the clock run out on the Ex-Im Bank,
on U.S. businesses, and on the many American taxpayers whose
jobs and families count on its support.
Over the past few years, the Bank has become more
transparent, more efficient, and more accountable to the
American public, while at the same time the Republican party by
every one of these measures has become increasingly less so.
And what is so surprising is that my colleagues on the
opposite side of the aisle talk about support of business.
Yesterday, we were engaged on the Floor where they came up with
measures supposedly in support of businesses. They didn't want
banks to go out of business because they feel that they should
be able to charge as high interest rates as they want on
manufactured housing, and on and on and on. Business, business,
business, support for business.
But what are we doing now? We are literally saying to those
businesses that are supported by Ex-Im and all of the suppliers
that go along with that, that this government does not care
about them and their ability to do business, they don't care
about job creation, and they don't care that China and other
countries are cleaning our clock as they support their export
interests.
So I yield back the balance of my time. And I guess I will
continue to waste my time and stay here to see what some are
talking about. Because I just don't get it. I don't understand
it. I yield back.
Chairman Jordan. I thank the gentlelady.
I now recognize the chairman of the full Oversight and
Government Reform Committee, the gentleman from Utah, Mr.
Chaffetz.
Chairman Chaffetz. Thank you. I appreciate both bodies
here. I think this is a very worthwhile exercise to hear out
the issues. Because this is a group, an institution, the
Export-Import Bank, that has been fraught with problems and
fraud and lack of oversight.
The fundamental question is, should Americans continue to
subsidize the risk that is incurred by this Bank? It has failed
consistently to meet its congressionally-imposed mandates. The
Bank continues to attracts controversy. Just last night, I was
reading articles about the Justice Department charging a former
Ex-Im Bank official with bribery. That literally happened
yesterday. On 19 different occasions, it cites in the article.
And the inspector general stated that there are numerous open
fraud investigations. It begs a lot of questions in support for
this hearing. I am glad we are doing this jointly with the
Financial Services Committee.
With that, I yield back.
Chairman Jordan. I now recognize the gentleman from
Pennsylvania, the ranking member of the Health Care, Benefits
and Administrative Rules Subcommittee, Mr. Cartwright.
Mr. Cartwright. Thank you, Mr. Chairman. And welcome to all
of our witnesses. I do look forward to your testimony today.
Today's hearing is intended to examine the Ex-Im Bank's
effort to implement congressionally-mandated reforms, as well
as the implementation of recommendations provided by GAO and
the Bank's inspector general.
The Ex-Im Bank's transactions support billions of dollars
in exports and hundreds of thousands of American jobs by
supporting U.S. companies that export to foreign markets. The
Bank has been a stellar steward of taxpayer funds, maintaining
a portfolio with a default rate of just 0.175 percent. And the
Bank generates a surplus to the U.S. Treasury that results in
deficit reduction.
Since 2012, the Bank has implemented all of the
requirements in the 2012 reauthorization. It has addressed 15
of the 16 GAO recommendations. It has concurred with 140 of 142
IG recommendations. The Bank continues to work with GAO on the
one remaining recommendation and the IG on the two unresolved
recommendations.
The Ex-Im Bank plays a role in leveling the playing field
for American businesses competing in the global marketplace.
There are 60 other countries with foreign-export credit
agencies that seek to ensure their home country businesses are
winning at export sales. The Ex-Im Bank makes financing
available to U.S. businesses to compete with these foreign
manufacturers on the merits of their goods and services and not
government-backed cut-rate financing.
In Fiscal Year 2014, 89 percent of Bank transactions
benefited small business exporters of U.S.-made goods and
services. These are deals that could not and would not be done
by the private sector alone, and are the perfect example of the
kinds of public-private partnerships we need to continue to do
in order to grow our economy. In my own district in
northwestern Pennsylvania, the Bank supports over $63 million
in exports, benefiting 8 companies and over 400 jobs.
For most of its 80 years, the Ex-Im Bank has received
support from both Republicans and Democrats. In fact, Congress
has consistently reauthorized this Bank 16 times without fail.
The Bank's reauthorization is supported by a diverse coalition,
including the U.S. Chamber of Commerce, the National Waste and
Recycling Association, and Air Products and Chemicals, Inc.,
which has two large plants in my district.
But this year, a group I referred to in the past as the
``shutdown crowd'' has decided to the hold the Bank's
reauthorization hostage. Look, playing such a dangerous game is
bad for American businesses, American exports, and, most
importantly, American jobs. Honest congressional oversight is
an extremely effective tool for achieving government reforms.
Today's hearing provides an opportunity effectively to examine
the Bank's efforts to strengthen its policies and procedures,
while holding the Bank accountable for implementation of
reforms and assuring the American public that this Bank
continues to contribute to our economy.
And with that, Mr. Chairman, I am going to yield 1 minute
to our colleague, Mr. Heck, of the Financial Services
Committee.
Mr. Heck. Thank you, sir. And thank you, Mr. Chairman.
That sound you hear in the background is the ticking of the
clock. There are, count them, exactly 32 legislative days until
the Ex-Im Bank expires. And yet, it has been 1,394 days since
the committee last held a markup on reauthorization. You don't
have to be a math savant to figure out that is 3 years and 10
months for what was a 2-year reauthorization.
I welcome Chairman Huizenga's albeit belated attention to
the most urgent legislative deadline before the Financial
Services Committee. Bar none, no exception. There are two long-
term reauthorization bills in the House. They have 250 sponsors
between the 2 of them. There is a full majority in this
committee who wants to pass it out. There is a full majority of
the House who wants to pass it out. It is way past time to
schedule a legislative markup on reauthorization of the Export-
Import Bank, period.
Mr. Cartwright. Thank you, Mr. Heck.
Mr. Chairman, I hope today's hearing will highlight the
good work of the Ex-Im Bank, resolve any outstanding questions
concerning the 2012 reforms, and provide additional support for
the Bank's continuing reauthorization.
Thank you, Mr. Chairman. And I yield back.
Chairman Jordan. I thank the gentleman. And I actually hope
for a different outcome.
Today's hearing is exactly what the Oversight Committee is
supposed to focus on, and frankly, what Congress is supposed to
focus on: eliminating waste, fraud, and abuse, things that have
been going on at the Ex-Im Bank for a long, long time.
The Export-Import Bank is little more than a fund for
corporate welfare. Those aren't my words. Those are the words
of Senator Barack Obama in 2006. He was right. The Bank was and
is corrupt beyond repair. And everyone knows it. But 9 years
later, the Bank still exists. Why? The answer to that question
represents the worst of politics.
Every time the Bank is up for reauthorization, deep pockets
of special interest and their friends on K Street descend on
Washington with ``Chicken Little'' fables about how small
businesses across America will suffer if the Bank's charter is
allowed to expire.
The reality is that 99.9 percent of small businesses across
America get no assistance from the Ex-Im Bank. The Bank's
beneficiaries are some of the largest companies in America. And
I don't fault large companies. They are great. We are glad they
are here. We are glad they do the great things they do in our
economy. But they don't need middle-class taxpayers' help to
succeed.
And, of course, one company has received most of the
assistance from the Bank, and that is Boeing. Many have called
Ex-Im the ``Bank of Boeing,'' and for good reason. In the last
fiscal year, 40 percent of all authorized funds from the Bank
went to one company: Boeing. That is \1/2\ times more support
than was received by all of the small businesses combined.
And the degree to which small business are actually small
is not entirely clear. In November 2014, a Reuters analysis
revealed that the Bank listed companies owned by billionaires
Warren Buffett and Mexico's Carlos Slim as small businesses.
Besides big corporations who don't need the support, the
other main beneficiaries are Ex-Im Bank employees themselves.
Recently, Michael Whalen was hired by the Bank as the vice
president of structured finance. He comes from Solar Reserve,
which had a junk bond rating, but still received $737 million
taxpayer dollars from the Obama Administration program that
supported Solyndra, and has been a candidate for Ex-Im
financing.
There is Tom Kiernan. He joined the Bank's advisory
committee earlier this year. And he is also chief executive of
the American Wind Energy Association, represents many companies
that have received Ex-Im support.
The revolving door between Boeing and the government is
especially troubling. Corey Golden is the senior director of
Boeing. Before that, he was a loan officer at the Export-Import
Bank, overseeing relationships with foreign airlines. So now
think about this: He worked for Ex-Im, which gives 40 percent
of its financing to Boeing, and now he works for Boeing. Such a
deal.
There is also Bill Daley, who resigned from Boeing's board
of directors in January 2011 to become White House Chief of
Staff. And former Secretary of Commerce, John Bryson, who left
Boeing's board to join the Obama cabinet.
In 2006, then-Senator Obama called the Bank out for being a
fund for corporate welfare. In 2012 the President spoke at a
Boeing plant and joked that he deserved a gold watch because,
``I am selling your stuff all the time.''
Corporate connectedness, corporate cronyism. And there is
also just flat-out corruption at the Ex-Im Bank. Just
yesterday, a former employee of the Bank was indicted for
bribery. Last summer, this committee held a hearing related to
numerous investigations into fraud at the Bank. Two officials
were accused of accepting gifts and kickbacks from companies
seeking export financing. One of these employees, an official
with significant responsibility over decisions to award
taxpayer-backed export assistance, is accused of accepting cash
payments from an applicant company. That is a nice way of
saying ``bribes.''
Two more officials were accused of improperly awarding
contracts to favorite companies. All four employees referred to
the Ex-Im Bank's Office of Inspector General, and the
investigation is currently being handled jointly by the IG and
the Department of Justice.
Given these issues, many have asked, is the Bank fixable?
In 2012, Congress engaged in the noble task of attempting to
reform the dysfunction at the Bank. Mr. Hochberg, our guests,
and others this morning are likely to say that the Bank has
implemented the reforms. I respectfully disagree. And I think
the GAO has some concerns about what they haven't done, as
well. The heart of the matter, however, is that the Bank's very
existence is anathema to free enterprise and American values.
Members of Congress will face many difficult decisions and
tough votes in the months and years ahead. But reauthorization
of the Ex-Im Bank is not one of them. This is an easy call.
This Bank is corrupt and it should be eliminated. It should be
allowed to wind down in the natural course of events and not be
reauthorized.
And with that, I yield back.
We will now recognize our witnesses. And thank you all
again for being here.
We will start with Mr. Hochberg. Mr. Fred Hochberg is the
chairman and president of the U.S. Export-Import Bank. The
Honorable Nathan Sheets is the Under Secretary for
International Affairs at the U.S. Department of the Treasury.
Mr. Mike McCarthy is the acting inspector general at the U.S.
Export-Import Bank. We have Mr. Mark Thorum, assistant
inspector general for inspections and evaluations at the Ex-Im
Bank. And Ms. Kimberly Gianopoulos is the Director of
International Affairs and Trade at the U.S. Government
Accountability Office.
Again, welcome to all of you. We swear folks in here in
this committee. So if you will please stand, and raise your
right hand.
[Witnesses sworn.]
Let the record reflect that all witnesses answered in the
affirmative. Thank you. You may be seated.
Mr. Hochberg, we will start with you. You have all done
this before. You get 5 minutes. You have the lighting system
there, the clock in front of you. Try to keep it as close as
you can because we have five witnesses, and I think four of you
are actually going to be making opening statements.
Mr. Hochberg, you are recognized for your 5 minutes.
TESTIMONY OF THE HONORABLE FRED P. HOCHBERG, PRESIDENT AND
CHAIRMAN, EXPORT-IMPORT BANK OF THE UNITED STATES
Mr. Hochberg. Thank you. Chairmen, Ranking Members, and
distinguished members of the subcommittees, thank you for
inviting me to testify about the progress that Ex-Im has made
over the past several years.
In May of 2012, Ex-Im was reauthorized with overwhelming
bipartisan support: 330 Members in the House; and 78 in the
Senate. Since then, the Bank has continued to support U.S.
private sector job growth, including 164,000 jobs in the last
year alone.
We also generated revenue for the taxpayers, including $675
million we sent to Treasury for deficit reduction.
Over the past 3 years, we have implemented each and every
requirement called for in our 2012 reauthorization. In 2012,
Congress required Ex-Im to do the following.
Submit a business plan and a textile report. Both were
submitted in the fall of 2012. I have all of those reports
right here.
Monitor and report default rates. We have issued 12
quarterly reports.
Provide Federal Register notices for transactions exceeding
$100 million. We have posted 88.
Publish economic impact procedures and methodology. We
updated and implemented new standards in April of 2013.
Examine the Bank's support for small business and issue a
report. We submitted a report in November of 2012. And small
businesses directly accounted for nearly 90 percent of all
transactions and about 39 percent of the exports we financed by
dollar value in 2014.
Include a textile representative on our advisory committee,
a position now held by the president of Morrison Textiles of
Fort Lawn, South Carolina.
Develop formal due diligence and know-your-customer
standards for lender partners. Both were completed in May of
2014.
Add a non-subordination requirement to our policy handbook.
This was published in January of 2013.
Categorize the purpose of loans and guarantees. This is now
included in the annual report.
Review and report on our content policy. That was completed
in May of 2013.
Update and expand Iran sanction certifications. That was
completed in September of 2012.
Update our IT systems. We have updated our computer
hardware and software, and have hired a new chief information
officer.
Provide a report on the implementation of GAO
recommendations. That was completed in November of 2012.
Congress required Treasury to negotiate an end to export
credit financing. They have issued three annual reports to
Congress on their progress.
And finally, GAO and the IG were asked to do several
studies, which they too completed.
In my written testimony, I have further detailed how we
have implemented all of these requirements.
Having run a small business, I know how important it is to
continually identify and become stronger and sleeker as an
institution. The oversight provided by Congress, the IG, and
the GAO has helped us to do just that.
Since the 2012 reauthorization, GAO has submitted a total
of 16 recommendations, and we agreed with all of them.
Another part in our efforts to improve has been the IG. And
I value the IG's role. I meet with him once a month. And our
chief risk officer meets with him far more frequently. Since
2012, the IG has issued 142 recommendations. Ex-Im fully
concurrs with 140, and we are working together on the last two.
Additionally, Ex-Im has proactively implemented risk
management improvements to further ensure we remain faithful
stewards of taxpayer dollars. I am just going to name two: we
increased staffing in our asset management division by 33
percent; and we implemented mandatory ethics training for all
employees that goes well beyond Federal requirements.
Let me take a moment to thank our employees, the inspector
general, and the Department of Justice for the work they have
done to expose and address an incident of improper activity at
the Bank, which was made public yesterday. Let me repeat, we
have zero tolerance for waste, fraud, and abuse at Ex-Im.
Our focus on risk management is demonstrated by our low
default rate of 0.174 percent as of December 2014. While our
transactions rarely default, when they do, claims are made by
fees and interest paid by Bank customers, not taxpayers.
So in closing, let me add there are 59 other export credit
agencies around the world aggressively fighting for jobs in
their countries. While we consider past and future reforms, I
trust the committee will keep in mind this global competition.
And we appreciate the committee's interest. I look forward
to working with you to continue empowering your constituents to
export more and hire more American workers. Thank you. And I
look forward to answering your questions.
[The prepared statement of Mr. Hochberg can be found on
page 89 of the appendix.]
Chairman Jordan. Thank you.
Mr. Sheets?
TESTIMONY OF THE HONORABLE NATHAN SHEETS, UNDER SECRETARY FOR
INTERNATIONAL AFFAIRS, U.S. DEPARTMENT OF THE TREASURY
Mr. Sheets. Chairman Jordan, Chairman Huizenga, Ranking
Member Moore, Ranking Member Cartwright, and distinguished
members of the subcommittees, thank you for the opportunity to
testify today on efforts of the Treasury and the Administration
to discipline the use of government export financing.
Treasury has been and continues to be guided by three core
principles in this effort. First, there should be a level
playing field for U.S. exporters, allowing them to compete
based on the quality and price of their goods and services,
rather than on the generosity of any government-supported
financing.
Second, China and other large emerging market economies,
which now account for a major share of all official export
financing, should participate in and abide by an international
rules-based framework.
And third, the terms and conditions of official export
credits should be as market-oriented as possible to limit trade
distortions and help ensure that this support complements,
rather than crowds out, market financing.
As we pursue these efforts, we recognize that curtailing
U.S. export financing unilaterally could undermine our
exporters' ability to compete, potentially causing them to lose
business to foreign competitors whose governments continue to
provide that support, as well as potentially resulting in the
loss of American jobs.
Moreover, unilateral action by the United States without
similar moves by foreign governments could weaken our ability
to negotiate more robust disciplines with counterparts abroad.
Fundamental changes have occurred in the global export
finance landscape over the past decade. Chief among them has
been a dramatic increase in official export financing provided
by China and other large emerging market economies that do not
participate in the OECD's arrangement on officially-supported
export credits. Unless these countries operate within the
international export framework, U.S. exporters could face an
uneven playing field.
Bringing all major providers of official export financing,
including China and the large emerging market economies, into
an international rules-based framework is an essential step.
Consistent with this, we are making meaningful progress
multilaterally through the International Working Group on
Export Credits and bilaterally with China in our strategic and
economic dialogue.
Most recently, during President Obama's November 2014
visit, China committed to take all steps necessary to advance
the IWG initiative and to support comprehensive guideline
coverage.
With respect to the aircraft sector, the United States has
worked for years to make the international guidelines on
official export financing more market-oriented. These efforts
have led most recently to the 2011 aircraft sector
understanding, which substantially improved on the previous
understandings in a number of ways, the most important being
adoption of a system for pricing borrower risk that adjusts
quarterly in response to evolving market conditions.
We believe that the market-oriented nature of the 2011 ASU
has contributed to a meaningful decline in demand for official
export financing for aircraft. Even as the overall number of
aircraft deliveries has increased since the 2011 ASU went fully
into effect in 2013, we have seen both: one, a sharply falling
proportion of large aircraft deliveries financed with official
support globally; and two, a significant decline in Ex-Im Bank
financing for U.S. exports of large aircraft. Even so, we will
continue to explore opportunities to make additional progress.
Now, let me conclude. Since 2012, we have worked to
discipline the use of government export financing support in a
way that minimizes trade distortions, helps ensure that
government export financing complements market financing, and
contributes to a level playing field for U.S. stakeholders.
In sum, progress, although sometimes incremental, is indeed
being made. And achieving further gains is a top priority for
Treasury and the Administration in the period ahead.
And I am happy to take your questions.
[The prepared statement of Under Secretary Sheets can be
found on page 141 of the appendix.]
Chairman Jordan. Thank you.
Mr. McCarthy?
TESTIMONY OF MICHAEL T. MCCARTHY, ACTING INSPECTOR GENERAL,
EXPORT-IMPORT BANK OF THE UNITED STATES, ACCOMPANIED BY MARK S.
THORUM, ASSISTANT INSPECTOR GENERAL FOR INSPECTIONS AND
EVALUATIONS, EXPORT-IMPORT BANK OF THE UNITED STATES
Mr. McCarthy. Thank you, Mr. Chairman.
I am pleased to be here to present the work of the Ex-Im
Bank Office of Inspector General. I am joined by my colleague,
Mark Thorum, who is the assistant IG for inspections and
evaluations.
You have our written testimony, which highlights the work
that our professional auditors, inspectors, and special agents
have done to promote efficiency and detect and deter fraud at
Ex-Im Bank. Let me briefly cover a few highlights.
Every year, we review our work and identify the top
management challenges facing the Bank. Last fall, the OIG
reported that the top challenge was managing risk,
specifically, managing the Bank's core business activities to
reduce the risk of loss to the Treasury and, by extension, the
taxpayer.
To manage that risk, we have recommended that the Bank
should design an agency-wide risk management framework so that
in addition to rating the risk of any individual transaction,
the Bank is also evaluating and mitigating the risks generated
by the overall composition of the portfolio and any outsized
exposures that the Bank has in certain regions, industry
sectors, or single companies.
To accomplish this, we have recommended a chief risk
officer, which the Bank has established. The Bank has also
conducted stress testing and monitoring of exposure levels. We
hope the Bank will build on these steps by developing and
implementing key risk policies, covering both credit and non-
credit risks.
We have also recommended improvements to due diligence and
know-your-customer policies. And the Bank has deployed
improvements in those areas.
Finally, we have previously found that internal policies
providing clear guidance to staff have not been prevalent at
Ex-Im Bank. So we recommended that the Bank rely more on clear
policies, controls, and documentation, and less on
institutional knowledge. Many of our recommendations have been
for specific internal control policies, which the Bank is
working on implementing.
Other critical challenges facing Ex-Im Bank are human
capital management and information technology management.
Without the ability to recruit and retain employees with the
knowledge to execute complex financial transactions, and
without an IT system that produces the data necessary to
provide timely service, effectively manage and track programs,
and conduct portfolio risk analysis, the Bank will be held back
from accomplishing its mission of financing U.S. exports and
domestic jobs.
The 2012 reauthorization legislation included several
provisions to increase reporting and transparency for Ex-Im
programs. We have summarized our relevant work on those
provisions in the written testimony. And we are happy to answer
questions on those topics.
I know the committees are interested in issues of fraud and
corruption as they affect Ex-Im Bank. Our investigative unit
gets results in this area. Since 2009, OIG investigations have
yielded 80 criminal indictments and informations, 47
convictions, $288 million in judgments, and 600 referrals of
investigative intelligence back to the Bank for enhanced due
diligence.
The most common fraud schemes that we have encountered
involve outside parties obtaining loans or guarantees through
false representations and submission of false documents.
Generally, our caseload has been external, not internal. But
last summer, the committee was interested in reports that Ex-Im
Bank employees had been removed or suspended based on OIG
investigations. At that time, we could not provide additional
information, but have since reported back to the committees on
two closed administrative cases.
And earlier this week, the Justice Department filed a
bribery charge against a former Ex-Im loan officer. This is
part of an ongoing investigation and a pending court preceding.
So I hope you will understand that I am unable to provide
details beyond the public court documents on that particular
case. We expect that more information will be available in the
near future. And we will share that with Congress as soon as it
is legal and appropriate to do to.
Mr. Chairman, this concludes my statement. And we are happy
to answer questions.
[The joint prepared statement of Mr. McCarthy and Mr.
Thorum can be found on page 130 of the appendix.]
Chairman Jordan. Thank you.
Do I understand, Mr. Thorum, that you are not going to make
an opening statement?
Mr. Thorum. That is correct.
Chairman Jordan. Okay. Thank you for being here.
Ms. Gianopoulos, you are recognized for 5 minutes.
TESTIMONY OF KIMBERLY GIANOPOULOS, DIRECTOR, INTERNATIONAL
AFFAIRS AND TRADE, U.S. GOVERNMENT ACCOUNTABILITY OFFICE
Ms. Gianopoulos. Thank you, Mr. Chairman.
Chairmen Jordan and Huizenga, Ranking Members Cartwright
and Moore, and members of the subcommittees, thank you for the
opportunity to be here today to discuss our recent work on the
Export-Import Bank.
Since the Bank's 2012 reauthorization, GAO has issued
several reports on the Bank's operations. In my statement
today, I will cover the following three areas: first, portfolio
risk management; second, underwriting and fraud prevention
processes; and third, exposure forecasting and reporting on
estimates of the Bank's impact on U.S. jobs.
First, I would like to talk about our work related to the
Bank's portfolio risk management. In our reports dated March
2013 and May 2013, we identified a number of weaknesses related
to loss estimation, vintage analysis, stress testing, sub-
portfolio reporting, workload benchmarks, and resources for
congressional mandates.
For example, we found that the short-term forecast the Bank
used to account for global economic changes could lead to
underestimation of credit subsidy costs and loss reserves and
allowances. We recommended that the Bank assess whether it was
using the best available data for adjusting its loss estimates.
As a result, in November 2013 it incorporated a longer-term
forecast of global economic change into its loss estimation
model.
Overall, with regard to portfolio risk management, all six
recommendations we made have been closed as implemented.
Additionally, while we did not make any recommendations in our
July 2014 report on wide-body jets, we reported information
about the Bank's aircraft finance portfolio, as well as the
financing by other credit agencies of these aircraft.
As of March 31, 2014, the Bank's financial exposure in
wide-body jets was $32 billion, representing about 28 percent
of its overall financial exposure.
The second area I would like to discuss is the Bank's
underwriting and fraud prevention processes. In September 2014,
we found that the Bank implemented many key aspects of its
underwriting process. However, we identified some weaknesses in
this process, as well as related documentation issues. For
example, the Bank did not have procedures to ensure that
applicants did not have delinquent Federal debt.
We also noted weaknesses in the Bank's documentation of
overall procedures related to fraud. Based on the Bank's
responses, we are taking steps to close four of the six
recommendations as implemented, and we are reviewing the Bank's
response to the final two recommendations.
In our August 2014 annual report on the Bank's monitoring
of exports with a dual civilian and military use, we found that
the Bank had financed three dual-use transactions in Fiscal
Year 2012. However, we noted that the Bank did not have
complete and timely information about whether the items were
actually being used in accordance with the terms of the
agreements and Bank policy. Therefore, we recommended that the
Bank establish steps for staff to take when borrowers did not
submit required documentation within required timeframes, and
to ensure that these efforts are well-documented.
We are in the midst of this year's review of the Bank's
dual-use monitoring. And we will assess the Bank's progress in
our upcoming report.
Finally, in two reports issued during May 2013, we found
weaknesses in both the Bank's exposure forecasting and its
reporting of jobs supported. With regard to exposure
forecasting, we noted that the Bank had not reassessed its
forecasting assumptions to reflect changing conditions, nor had
it conducted sensitivity analyses to assess and report the
range of potential outcomes.
In response, the Bank put in place new methodologies and
created statistical models to validate its forecasts. So we
consider these recommendations closed.
We noted that the Bank had not reported the limitations in
its calculations of the jobs supported by its financing. We
recommended that the Bank improve reporting on the assumptions
and limitations in the methodology and data used. The Bank's
2013 and 2014 annual reports included greater detail on these
issues. And therefore, we consider this recommendation closed.
This concludes my opening remarks. Thank you again for the
opportunity to testify. And I am happy to answer any questions
the committees may have.
[The prepared statement of Ms. Gianopoulos can be found on
page 70 of the appendix.]
Chairman Jordan. Thank you.
The gentleman from Michigan is recognized for 5 minutes for
questions.
Chairman Huizenga. Thanks, Mr. Chairman.
And actually, Ms. Gianopoulos, I want to make sure I heard
you correctly. So, based on a 2014 report, you said that their
portfolio is weighted to a 28 percent exposure to wide-body
aircraft, is that correct?
Ms. Gianopoulos. That is correct.
Chairman Huizenga. Okay. Do you believe that this Bank
could pass a Federal Reserve stress test?
Ms. Gianopoulos. I understand that the Bank is engaged in
stress testing of its portfolio now. I don't know what the
current status is or if it could pass those types of judgments.
We haven't done work in that area.
Chairman Huizenga. It seems to me that portfolio risk--
which has been identified multiple times--a lack of economic
forecasting; if you talk to any other bank, they have multiple
models that are going forward, oftentimes getting castigated
that they haven't added another or used a particular one--
ability to repay examinations. Have any of those things been
done, to your knowledge?
Ms. Gianopoulos. My understanding is that the Bank has
focused on its estimates for its potential losses. And I know
there are some updates to the Bank's processes with regard to
both our recommendations and the IG's recommendations over the
past few years since the reauthorization.
Chairman Huizenga. How about reserve funds?
Ms. Gianopoulos. I am not aware of updates to the processes
for reserve funds.
Chairman Huizenga. I guess with a taxpayer guarantee, maybe
they don't have to worry about reserve funds, which would be
nice for some of the other banks. I am sure that they would be
interested in that.
But Mr. Sheets, a quick question for you, as well. I think
you aptly laid out in 2011 that there was an ``understanding''
for more orderly categorization or dealing with how these wide-
body aircraft deals were moving forward. It strikes me that if
this is a decline, I would hate to see what an acceleration of
those would be, if 28 percent of the portfolio is already
weighted to wide-body aircraft.
But you didn't mention the 2012 directive in the
reauthorization, which specifically mentioned a discussion with
the European Union about this particular situation. Why not?
Why has that not been pursued?
Mr. Sheets. Thank you. The discussion has, in fact, been
carried on with our European counterparts about wide-body
aircraft.
Chairman Huizenga. But you didn't talk about that at all;
is that just an oversight or--
Mr. Sheets. I do believe it has, but not with the same
emphasis.
At the end of last year, our lead negotiator spoke to
counterparts from Germany, France, and the United Kingdom,
which are the countries that are our major competitors, about
the scope--
Chairman Huizenga. Just so I understand, at the end of
2014, Treasury finally initiated that discussion?
Mr. Sheets. I came to Treasury in 2014. But my
understanding is that this has been an ongoing dialogue that we
have had. And the major challenge we have, at least so far, is
that these foreign counterparts are not enthusiastic about
moving in this direction. But we are vigorously--
Chairman Huizenga. The interesting thing is I have a fair
number of contacts in Europe in the legislative branches. They
are interested in pursuing that, as well. Europe is as, if not
even more, broken than the United States. And I think that is
absolutely imperative.
Mr. Hochberg, in my remaining minute, minute-and-a-half
here--actually, before we do that--
The OIG--Mr. Thorum, it seems this might be falling into
your category. You did a audit in 2012 of reauthorization,
looking back at 2010 through 2012 prior to the requirement of
the 2012 authorization. And according to your report, on page
seven, ``We found that the loan files did not include
sufficient documentation to substantiate the applicant's
assertions for their need for Ex-Im Bank financing. At the
time, Ex-Im Bank loan officers stated that the need for Ex-Im
Bank financing was done through verbal and email
communications, and detailed documentation was not required.''
I believe Mr. McCarthy had laid out that there had been
some improvements. However, you also say at the top of that
paragraph--this is the first full paragraph on page seven--the
OIG has not audited Ex-Im Bank's categorization in reporting of
the purpose of loans and long-term loan guarantees required by
the authorization. Why in the world not?
Mr. McCarthy. So we had the--
Chairman Huizenga. My question is actually directed to Mr.
Thorum, unless it is somehow more appropriate--
Mr. McCarthy. It is actually--it is not his report. It is
one of our audit reports. And he is responsible for inspection
reports.
So we did the direct loan audit. And that was based--it was
after the 2012 reauthorization, but it was looking back at the
2010 to 2012 timeframe. So what we had in that report is we
have had recommendations in order to put more--
Chairman Huizenga. So why have you not followed through on
that, as you were directed to in 2012?
Mr. McCarthy. In the 2012 reauthorization, we are
continuing to review all of these internal control issues. We
haven't looked at that--
Chairman Huizenga. That was nearly--it was 2\1/2\ years
ago. It would seem to me that if red flags went up from
auditing what had happened in 2010 through 2012, and you are
directed to do audits of the categorization, which it appears
are well off the mark, why are you not having that done now?
Mr. McCarthy. I don't read that provision as a requirement.
I know OIG audited that particular area. I believe it is a
requirement for the Bank reporting. And we are reviewing the
Bank reporting in that area and adding it to our risk-based
audit planing.
Chairman Huizenga. Mr. Chairman, my time has expired.
Chairman Jordan. I thank the gentleman.
The gentleman from Pennsylvania is recognized.
Mr. Cartwright. Thank you, Mr. Chairman.
Chairman Hochberg, again, thank you for being here today. I
would like to ask you a few questions about the Ex-Im Bank and
how it benefits Americans. The Export-Import Bank finances
exports of U.S. products. Am I correct in that?
Mr. Hochberg. Yes, sir.
Mr. Cartwright. And Ex-Im Bank financing helps U.S.
companies compete in the global marketplace, does it not?
Mr. Hochberg. Correct. Exactly.
Mr. Cartwright. Bank financing supports billions of dollars
in exports by U.S. businesses and hundreds of thousands of
American jobs. Am I correct in that?
Mr. Hochberg. Correct; 164,000 last year.
Mr. Cartwright. This is a Bank that operates at no cost to
the U.S. taxpayer. And in Fiscal Year 2014, it actually
generated a surplus to the tune of $674.7 million for U.S.
taxpayers. Am I correct on that?
Mr. Hochberg. That is correct, as well.
Mr. Cartwright. Now, the Bank's default rate, I think you
said in your testimony, was 0.174 percent. Did you say that?
Mr. Hochberg. That is correct.
Mr. Cartwright. You probably heard my opening statement.
And I said the Bank's default rate was 0.175 percent. So I find
that I have actually defamed you to the tune of one one-
thousandth of a percent. And to that very extent, I apologize,
Mr. Hochberg. Is it 0.174 percent?
Mr. Hochberg. That was the default rate as of December
2014. And we report that to Congress every 90 days.
Mr. Cartwright. My own view is this: It is hard to
understand how reauthorizing this hugely successful part of our
American Government, something that benefits Americans to the
extent you have described and the U.S. economy the way it does,
could possibly be a controversial issue. But here we are. Some
people choose to ignore these facts and risk creating a
disadvantage for U.S. businesses, U.S. manufacturing companies,
and U.S. services seeking to compete in the global marketplace.
But the efforts of the Bank to reform and to comply with
the GAO--by the way, the GAO is highly respected here in the
Oversight and Government Reform Committee.
Chairman Hochberg, the Ex-Im Bank has implemented how many
of the requirements in the 2012 reauthorization? I think there
were 18 requirements. How many were done?
Mr. Hochberg. I enumerated each and every one of them. We
have complied with every one of the requirements of the 2012
reauthorization.
Mr. Cartwright. And the GAO has issued 5 reports since 2012
with 16 recommendations, 15 of which have been addressed, and
the Bank is working to address that one remaining
recommendation. Am I correct on that?
Mr. Hochberg. That is correct.
Mr. Cartwright. The Ex-Im Bank inspector general has made
142 recommendations. And of 142, how many has the Ex-Im Bank
concurred with?
Mr. Hochberg. We have concurred with 140 of the 142. The
last two are in discussion, ongoing conversations.
Mr. Cartwright. And I think Mr. McCarthy mentioned that, as
well, in his testimony.
Let me ask you this: Has the Bank been cooperative in
working with GAO and also the IG on addressing concerns in
unresolved recommendations? And can you explain what they are?
Mr. Hochberg. We have been working closely with the IG--the
inspector general. As I mentioned, I meet with the inspector
general once a month at a formal meeting. And our chief risk
officer meets with him more frequently.
We have concurred with 140 recommendations. There are two
outstanding ones we are still in discussion on to find the
right common ground so it is workable and also meets the needs
of exporters and creating jobs.
And with the Government Accountability Office, we concurred
with all, and the last one we are still in discussion on. And
that one was only issued last August. So it is a rather recent
report from GAO.
Mr. Cartwright. Thank you, Chairman Hochberg. It is not
clear what concerns exist with this Bank's efforts to reform.
But I do hope Members today have learned of this Bank's high
performance in implementing reforms and have some assurance
that the Bank will continue to address oversight concerns that
strengthen the Bank's procedures and minimize the risk of fraud
or taxpayer losses.
And with that, Mr. Chairman, I yield back.
Chairman Jordan. I thank the gentleman.
I recognize the gentleman from Oklahoma.
Mr. Lucas. Thank you, Mr. Chairman.
Chairman Hochberg, Under Secretary Sheets, let's talk for a
moment again about this set of requirements in the 2012
reauthorization bill. And specifically, let's focus on the ones
that have not been implemented yet. Could you expand on what
you have not done yet to fully implement the 2012
reauthorization bill?
Mr. Hochberg. Are you addressing me?
Mr. Lucas. Both of you, actually, since the requirements
are placed on both the Bank and on Treasury.
Mr. Hochberg. We have--I tried to outline each of the
requirements that were set forth in 2012. And I gave a date on
each one that we have either complied, sent a report, or
changed our policies and procedures. And I have copies of these
reports here: default reports; competitor's reports; reports on
content; economic impact; Federal Register; and so forth.
Mr. Lucas. So from your perspective, when will all of the
requirements be implemented, since you say you are working
diligently to implement them all?
Mr. Hochberg. We have implemented the requirements of
Congress. The work with the Government Accountability Office
and the inspector general will always be ongoing.
As I mentioned, one of the most--we got one report from GAO
as recently as August. The IG, we have a large IG staff, so we
are constantly getting recommendations, frankly, to make us a
better bank. To make us operate better.
Mr. Lucas. So chairman, you have implemented your
requirements.
Secretary, what about the requirements for Treasury in the
2012 reauthorization?
Mr. Sheets. As I articulated in my statement, we are
working across a number of dimensions to implement the mandate,
which we take extremely seriously. We are, as I described,
working with the International Working Group to bring in the
emerging market economies. We are working with Ex-Im to
vigorously implement the ASU, which is reduce the quantity of
export credits significantly. So we feel that we are on a
convergent path consistent with the mandate.
Mr. Lucas. So, Secretary, part of that is, I think, what
most of the Members would refer to as a Section 11 requirement.
How much enthusiasm do you truly have from your colleagues
around the world about doing something in reference to their,
what, 24 or so of these institutions?
Mr. Sheets. At this stage, the negotiations in the
International Working Group--which I really see as being a key
part of what we are doing here, trying to bring in the emerging
market economies, which are increasingly important providers of
export credits--are tough, ongoing negotiations. For many of
these countries, they have not been in negotiations regarding
export credits before. And as a result of this, these
negotiations are slow. But we are making progress.
Mr. Lucas. So our competitors around the world at this
point are willing to talk about it, but nobody is taking any
concrete action in stepping away from these programs?
Mr. Sheets. To be clear, the advanced economies that are
members of the OECD are bound by the OECD understanding and are
operating with similar rules.
But the objective of the IWG is for the emerging markets,
to bring them in. And we are negotiating with them through the
IWG. But this is also a subject of a vigorous bilateral
negotiation. As I mentioned in the S&ED, when President Obama
was recently in China. So we are making progress.
Mr. Lucas. But Mr. Secretary, aren't some of the largest
economic players in this non-OECD members? Say the Chinese,
perhaps?
Mr. Sheets. Exactly--
Mr. Lucas. --with the sheer amount of resources they can
throw in the fight the way they play the competitive game?
Mr. Sheets. Yes. Yes, sir. That is why we are engaged in
this new process, the IWG, which is intended to expand the
periphery of countries that are bound by these export credit
understandings.
Mr. Lucas. Thank you, Mr. Secretary.
I would just note to my colleagues in what little remaining
time I have, that perhaps I have a perspective slightly
different than a number of my friends on both sides of the
room.
But if the biggest economic players refuse to step back
from this kind of a system, I have a real hesitation about
giving the field away. I have a real hesitation about that. And
I would say that at some point this year, this issue will be
addressed legislatively. I would encourage my colleagues:
Reform is the key. We have to make reforms.
But this is an institution we will be voting on before this
year is out. Let's take advantage of this opportunity. A
discussion about ending something that none of our competitors
are willing to do doesn't seem like the rational economic
choice.
I yield back the balance of my time, Mr. Chairman.
Chairman Jordan. I thank the gentleman.
The gentlelady from Wisconsin is recognized.
Ms. Moore. Thank you so much, Mr. Chairman.
And I, once again, want to thank all of the witnesses for
appearing. It seems to me, based on all the testimony I have
heard, that the Ex-Im Bank has really worked very diligently
and effectively at adhering to the 2012 mandates.
I do have a question, though, for you, Mr. McCarthy. I
would hope that you would return to Wisconsin at some point to
engage in your birthplace's stuff. That is not why we are here
today. But I would hope that you would do that.
I have been very impressed. I was impressed with your
testimony with regard to the extent that the IG has looked into
the operations of the Ex-Im Bank, even to the point that they
have--that there has now been an indictment of an Ex-Im
employee. I sure wish that you guys had gotten to the HSBC of
their money laundering, drug dealers, the London will, and
stopped the 2008 prices. But at least we got this one Ex-Im
employee.
We have heard a lot of testimony that the Ex-Im Bank has
shown favoritism for projects based on political connections
and electoral politics. So I was wondering if you discovered
any of that in your investigations. Crony capitalism?
Mr. McCarthy. Generally, our investigations have been of
outside parties perpetrating fraud and money laundering schemes
against the Bank. We haven't reviewed specific allegations that
we have received in specific cases where there was some type of
undue political influence or things of that nature.
Ms. Moore. You have not found that?
Mr. McCarthy. We have not found that. Now, we do emphasize
that the Bank needs to make sure that it has in place the
appropriate internal controls to make sure that things like
that can't happen. If you have the proper policies in place, if
you have separations of duties among employees, if you have
procedures in place, it lessens the risk for that type of undue
influence, and also fraud cases.
Ms. Moore. All right sir, thank you so much.
Mr. Sheets from Treasury, again, I want to thank you for
your due diligence. You are currently negotiating with other
countries to limit or end export credit. Were we not to
reauthorize the Bank on the 30th of June, as some Members of
our body would like, do you think that countries like Korea or
China will voluntarily end their credit support programs? The
other, what is it, 59 countries? If we were just to disappear
from this space?
Mr. Sheets. I think that would be very unlikely. And
indeed, if we were to unilaterally curtail, I think that there
is a risk, as I have indicated, that in negotiations going
forward we will have less leverage because we won't have
anything to give in those negotiations.
So I think it is important from a level playing field
standpoint that we remain engaged on this. But also, if our
ultimate goal is to further discipline export credits, a
unilateral curtailment would very likely move in the opposite--
Ms. Moore. Would it be catastrophic? Those are my words.
Mr. Sheets. --from a global standpoint.
Ms. Moore. Would it be catastrophic to our economy?
Mr. Sheets. I think it would be very negative and adverse.
How we define catastrophic--
Ms. Moore. All right. That is my definition. I am from
Milwaukee. And we are the manufacturers of the world. We have
Boeing, and all of these companies with which people have
issues. Boeing doesn't make any screws and bolts and nuts and--
they come from Milwaukee, small businesses.
We have heard that 99 percent of the small businesses don't
use Ex-Im Bank. But isn't it true that 89 percent of the loans
you guys make are to small businesses, Mr. Hochberg?
Mr. Hochberg. Yes, they are.
Ms. Moore. Okay. What do you mean, Mr. Hochberg, when you
say that the operations at the Bank are ``demand-driven?'' And
how do you supplement private finance? Can you walk us through
that?
Mr. Hochberg. Certainly. Demand-driven is that companies
come to us. For example, you and I visited Maxim Industries in
Wisconsin, a company that makes construction equipment. They
come to us when they are trying to sell overseas and can't get
financing locally or their competitors overseas have
government-backed loans, so they want to make sure they are on
a level playing field.
So when I say ``demand,'' they come to us, they seek us out
only when they need us. And we can fill in the gap that the
private--
Ms. Moore. Maxim has 30 employees. And they have worked on
projects like the Panama Canal, with 30 employees in Milwaukee.
Thank you. And I yield back.
Chairman Jordan. Before recognizing the gentleman from
South Carolina, I just want clarification on an answer. The
gentlelady talked about undue political influence.
Mr. McCarthy, did you say you have not found that, or you
have not looked into that?
Mr. McCarthy. I am saying that we haven't received specific
allegations that we have substantiated on that. We are always
happy to look--
Chairman Jordan. So you have not looked into it? You don't
know?
Mr. McCarthy. From time to time, we have looked into
various allegations.
Chairman Jordan. Which is it? You have looked into it, or
you haven't looked it into?
Mr. McCarthy. We have looked into it from time to time, but
we have not substantiated it.
Chairman Jordan. Okay. Thank you.
The gentleman from South Carolina is recognized.
Mr. Mulvaney. Mr. Hochberg, for the benefit of my
colleagues who have not had the pleasure before of sitting in
on our discussions, I thought I would review and summarize some
of the previous testimony you and I have gone over when you
have been here, as quickly as I can.
Mr. Cartwright mentioned the low default rate at the
Export-Import Bank. The Bank still has $36 million worth of
pre-Castro Cuban debt on the books, don't you, as a performing
loan? The answer to that is yes, you still have it. And my
guess is we probably didn't address it when we changed--
normalized relations. But it is still on the books as a good
loan.
You talk about the 164,000 jobs that the Bank supposedly
supports. It is always an interesting use of language. It
doesn't create; it supports. You still don't have any clue as
to how many of those are actually in the United States, do you?
Mr. Hochberg. All of those jobs are in the United States,
sir.
Mr. Mulvaney. The GAO has said on several occasions that
the method by which you count jobs does not adequately account
for the jobs of the foreign components of American exports.
Mr. Hochberg. We actually only look at the U.S. content.
And as a result of that, adjust our jobs numbers, which we
receive--we use data from the Bureau of Labor--
Mr. Mulvaney. You have no idea how many of those jobs would
cease to exist if the Bank is not reauthorized, do you?
Mr. Hochberg. No. I would differ with you on that.
Companies come to us, like Maxim Industries I just mentioned,
when they can't--
Mr. Mulvaney. How many would cease to exist?
Mr. Hochberg. Every application makes a statement in the
application--
Mr. Mulvaney. How many of the 164,000 jobs that you say you
support would cease to exist if the Bank is not reauthorized?
You don't know the answer--
Mr. Hochberg. I would say all of them. Because the
application requires you to state that you have come to us as
the lender of last resort.
Mr. Mulvaney. I will accept ``all of them'' as an answer.
But I will disagree with it.
You don't know how many jobs you destroyed, do you? You
were here previously and heard testimony from Delta Airlines
that you destroyed 7,500 jobs at Delta. You don't count that in
your 164,000, do you?
Mr. Hochberg. We actually look at--we do an economic impact
study, sir, that is required by law.
Mr. Mulvaney. You have done one of those on an airplane
sale in the last 20 years. How can you say you--
Mr. Hochberg. We review every single transaction for
economic impact. And when warranted, we do an in-depth study.
Mr. Mulvaney. Once in the last 20 years.
The GAO report said that one of the shortcomings they found
at the Bank a few years ago was that when a third-party lender
gets involved on an Export-Import Bank-guaranteed loan, they
don't do adequate credit checks. They stop doing the credit
checks. If Boeing is going to sell an airline to Ethiopia, the
Bank doesn't look at the credit of Ethiopia, because they
simply rely on the government guarantee. You were supposed to
fix that a couple of years ago. That is one of the things you
haven't fixed yet, have you?
Mr. Hochberg. We do a full underwriting--using the example
of Ethiopian Airways--which, by the way, supports thousands and
thousands of U.S. jobs, including many small businesses in the
Boeing supply chain. But when we--
Mr. Mulvaney. A checklist--
Mr. Hochberg. --we do a full and complete financial review
and underwriting of every--we do not rely on any outside
source. We do it ourselves.
Mr. Mulvaney. The checklist that the IG or the GAO has
required or requested you to do is one of the things that
remains unfinished at the Bank, isn't?
Mr. Hochberg. I mentioned to you we--
Mr. Mulvaney. The answer to that question is also ``yes.''
The IG report in June of last year said that you can't
account--this is a new one for me--for $500 million worth of
costs on a PNG liquified natural gas project?
Mr. Hochberg. If you would like me to answer the question,
I would be happy to answer the question--
Chairman Jordan. Can you account for the--
Mr. Hochberg. What we do--as an example, we make an export,
we finance an export. Some of those exports require local cost.
In this case, Exxon Mobile was the exporter. The project
certified that there was $500 million local cost, which was
authorized and approved. And so there is full certification
from the project sponsor that the money was indeed incurred and
spent for this project.
Mr. Mulvaney. So the IG is just wrong on that one?
Mr. Hochberg. The IG doesn't like some of the documentation
we have--
Mr. Mulvaney. And speaking of documentation--this is the
last one on my list, Mr. Hochberg, and then I am finished with
you. And I know you are excited about that.
Mr. Hochberg. I always like talking to you.
Mr. Mulvaney. I know. And we always enjoy this, but one of
the places you fall short on documentation--I found this one to
be interesting. One of the places they cited you was that you
don't do a very good job of documenting why companies ask for
Export-Import Bank participation. Why is that?
Mr. Hochberg. Companies come to us--like I gave an example
of Maxim Industries, or I gave a number of examples here--
Mr. Mulvaney. But the IG says you don't document that. Why
don't you document that?
Mr. Hochberg. No. Companies have to certify on their
application that they need us and why do they need us. Because
they can't get that loan.
Mr. Mulvaney. So Mr. McCarthy, why did you cite them for
that particular shortcoming?
Mr. McCarthy. In the previous direct loan program audit
that we did in 2012, we did find that there was not
documentation in the files supporting the reason for the
company needing Ex-Im financing. And so we made
recommendations, and the Bank has modified its procedures.
Mr. Mulvaney. Mr. Sheets, you are the lucky one here.
Because I was hoping to handle Mr. Hochberg in 2 minutes and
give my other 3 minutes to you, sir, and go over some of the
discussions with our competitors overseas on wide-body aircraft
financing. But I am out of time.
So I thank the chairman. And I yield back.
Chairman Jordan. I thank the gentleman.
The gentlelady from New Jersey is recognized.
Mrs. Watson Coleman. Thank you very much, Mr. Chairman.
I would like to read something to you, Mr. Hochberg. And I
would like you to tell me whether or not this is a true
statement.
``Although the reliance on Ex-Im Bank has diminished
slightly over the last year amid a growing economy and
improvements in the availability of private sector financing,
the Bank still plays a vital role for thousands of U.S.
businesses and their workers. In Fiscal Year 2014 alone, the
Bank authorized $20.5 million of financing in support of $27.5
billion worth of U.S. exporters and more than 164,000 U.S.
jobs. Of the Bank's 3,700 authorizations in 2014, more than
3,300--nearly 90 percent--directly served small U.S.
businesses.
``Furthermore, roughly one in five authorizations completed
last year directly served women- or minority-owned businesses.
As noted above, the Bank operates on a self-sustaining basis to
cover the cost of its operations. Ex-Im Bank charges users a
fee which, over the past few decades, has generated a surplus--
a surplus--resulting in payments of $6.9 billion to the U.S.
Treasury. Last year alone, the Bank generated a surplus of
$674.7 million for U.S. taxpayers. This directly results in
U.S. deficit reduction.''
In other words, the failure to reauthorize the Bank would
actually cost the government money. Yes or no?
Mr. Hochberg. That would be yes.
Mrs. Watson Coleman. To the Treasury Department, to the IG,
and to the GAO. While I recognize that there were many findings
that the Bank had deficiencies in operations and accountability
and those kinds of things, it seemed to me from your testimony
that you have been working with the Bank in a very cooperative
manner and that it is, in fact, addressing, redressing, and
moving forward with those recommendations primarily that have
been found and made. Yes or no?
Mr. McCarthy. In terms of the IG recommendations, we have
broken out the more recent recommendations, versus the ones
that have been outstanding for 6 months or longer, so prior to
October 2014. And the number on the older recommendations that
we have--and there is maybe a discrepancy of one or two between
what Mr. Hochberg is reporting on just on--because it changes
by the day.
At that point, we were reporting that there were still 29
open and 2 unresolved recommendations, as opposed to 78 that
have been closed out of the older ones.
Mrs. Watson Coleman. Okay.
Mr. McCarthy. The newer ones, there are more that are still
open, because some of those reports have just been issued
within the last several weeks.
Mrs. Watson Coleman. Okay. Thank you.
Ms. Gianopoulos. And with regard to the GAO
recommendations--
Mrs. Watson Coleman. Right.
Ms. Gianopoulos. --13 of those 16 recommendations have been
closed as implemented officially. For two of the
recommendations, we have gotten responses from the Bank. And we
are on the road to closing those imminently. And then the final
recommendation is from our report of last August, and we are
working with the Bank on addressing that.
Mrs. Watson Coleman. I have sat in on a lot of hearings
where we have had the inspector general and the GAO speak to
issues regarding departments. And this actually is the first
time where I have seen so much, what seems to be supportive
language, that the entity that is under discussion is moving in
the right direction.
This is to Mr. Sheets from the Department of the Treasury.
If the Bank isn't authorized, how will it disadvantage U.S.
businesses' ability to compete in the global market? And what
are some of the potential consequences of a unilateral action
to end U.S. export financing?
Mr. Sheets. My strong sense is that unilateral curtailment
of export credits would play very adversely for the U.S.
economy, for U.S. jobs, for U.S. workers. Because essentially
what we would be doing is competing in a world where other
countries are providing these credits. And even if our goods
and services were of comparable quality or even better, it may
be economically advantageous for buyers in our export markets
to buy foreign products. So I think it would be very adverse
for the U.S. economy and--
Mrs. Watson Coleman. Thank you. I would just like to note
that from my very small but important district of the 12th
District in New Jersey, there is a total export value of $765
million. That sounds like a lot of money to me and--in my
district. And I think that we can look at things--you know that
old adage, half full or half empty? I believe that if we look
at this in a very realistic way, we will see that there is a
half-full opportunity here to support the economic growth in
the State of New Jersey and jobs, and that we all should be
held to the same standards, whether we are asking questions or
answering questions or making statements: that we tell the
truth, the whole truth, and nothing but the truth.
Thank you very much. Thank you, Mr. Chairman.
Chairman Jordan. I thank the gentlelady.
Mr. McCarthy, who is Johnny Gutierrez?
Mr. McCarthy. Johnny Gutierrez is a former Ex-Im Bank loan
officer.
Chairman Jordan. And Mr. Gutierrez was under investigation
by the inspector general's Office and the Department of
Justice?
Mr. McCarthy. I can report what has been filed in the
public court documents, which you referenced. On Monday, the
Justice Department filed a one-count information alleging that
Mr. Gutierrez accepted bribes--
Chairman Jordan. And the Justice Department indicted Mr.
Gutierrez this week?
Mr. McCarthy. They filed an information, which is the
equivalent of an indictment.
Chairman Jordan. According to the court filing, Mr.
Gutierrez on ``19 separate occasions personally and corruptly
sought and accepted things of personal value, i.e. money, from
another person, and entity, in return for being influenced in
the performance of his official acts.'' And this occurred
between 2006 and 2013. Is that accurate?
Mr. McCarthy. That is what the information alleges.
Chairman Jordan. So this started in 2006. And he was
indicted when?
Mr. McCarthy. On Monday.
Chairman Jordan. On Monday, in 2015?
Mr. McCarthy. That is correct.
Chairman Jordan. And is there any coincidence to the fact
that he was indicted 2 days before this hearing, or did that
just happen?
Mr. McCarthy. Mr. Chairman, that did just happen. That is a
coincidence. This was in process prior to the hearing--
Chairman Jordan. Starts stealing and taking bribes in 2006.
Gets indicted 2 days before a big hearing?
Mr. McCarthy. The process was in place--
Chairman Jordan. Nine years later?
Mr. McCarthy. --announced--being announced. DOJ makes these
decisions. They will tell you that they are charging--
Chairman Jordan. Okay. That is fine.
Mr. Hochberg, back in 2006, when Mr. Gutierrez was first
starting to take bribes as an employee at your Bank, President
Obama, who was then Senator Obama, said the Export-Import Bank
is little more than a fund for corporate welfare. Was he wrong?
Mr. Hochberg. Yes. That was--people say things in
campaigns, and they say different things when they are in
office. So I am not going to comment what was motivating then-
Senator Barack Obama--
Chairman Jordan. That is the understatement of the year
there for this Administration. Thank you.
Mr. Hochberg, who is Diane Farrell?
Mr. Hochberg. Diane Farrell was a former director of the
Bank who was nominated by the President and confirmed by the
U.S. Senate.
Chairman Jordan. Director of the Bank means she was on your
board?
Mr. Hochberg. Correct. She was--we have a--
Chairman Jordan. How long was she on your board?
Mr. Hochberg. Her time precedes mine. So I can't tell you
precisely--
Chairman Jordan. How long have you been there?
Mr. Hochberg. I have been there--this May will be 6 years.
Chairman Jordan. My understanding is that she was on the
board for 8 years between 2007 and 2015. That doesn't seem like
it precedes you.
Mr. Hochberg. No. She was not--no. Her term was up, I
believe, in 2011.
Chairman Jordan. When you have been there 6 years? If I do
the math, that means you--there was some overlap?
Mr. Hochberg. Of course, yes. I thought you were asking--
I'm sorry. I misunderstood the question.
Chairman Jordan. No. You said she was there before you
were.
Mr. Hochberg. She was there before I was.
Chairman Jordan. Yes.
Mr. Hochberg. I arrived in 2009, she arrived sometime--
Chairman Jordan. You served together, is what I am getting
at.
Mr. Hochberg. Oh, yes. Of course.
Chairman Jordan. Your answer seemed to say that you didn't.
Mr. Hochberg. Oh, no. I'm sorry. I misunderstood you.
Chairman Jordan. Where is she currently employed?
Mr. Hochberg. She is--my recollection is that she is at the
U.S. Indian American Chamber.
Chairman Jordan. Do you know if she is on the board of
Azure Power?
Mr. Hochberg. I have no recollection.
Chairman Jordan. My understanding is that she is. And do
you know, does Azure Power benefit from any financing from the
Export-Import Bank?
Mr. Hochberg. Azure Power is a solar development company in
India that has been a purchaser of U.S. goods. And we have
financed some of their projects.
Chairman Jordan. You have financed some of their projects?
So a lady who was on your board is now working for a company
for which you financed projects?
Mr. Hochberg. It was long after she left the Export-Import
Bank.
Chairman Jordan. She just recently left the Export-Import
Bank, correct?
Mr. Hochberg. She left the Export-Import Bank, as I
mentioned, sometime in 2011.
Chairman Jordan. Okay. And so did Ms. Farrell work on any
loans that are now benefiting the employer she is with, and
that association?
Mr. Hochberg. I--I have--I would not be able to--
Chairman Jordan. Could you get us that answer? That is
important.
Mr. Hochberg. I would--we can get you that answer. I don't
know off the top of my head what transactions she voted on
during her time as a board member.
Chairman Jordan. Okay. And do you know where Ms. Farrell's
husband is employed? Do you happen to know?
Mr. Hochberg. No, I don't know.
Chairman Jordan. He is employed at Boeing. Does that cause
any concern?
Mr. Hochberg. Actually, now that you--when Ms. Farrell was
on the board and her husband was at Boeing, she was recused
from all transactions--
Chairman Jordan. That is nice. And we would expect that. I
am just making the point that she was working for the Export-
Import Bank giving loans and financing to the company she now
works for. And also, while she was on the board at the Export-
Import Bank, her husband worked for Boeing, which gets 40
percent of the financing from the Export-Import Bank. Now, how
do you think the normal taxpayer looks at that arrangement?
Mr. Hochberg. I will have to leave that to you, sir. But--
Chairman Jordan. I can tell you, they talk to me about
things. But this is the part of government that just drives
them crazy. This kind of coziness, this kind of closeness, this
kind of connectedness drives them crazy.
You have--she is on the board. Her husband is working at
Boeing. And you say oh, she recuses herself from those
decisions. But 40 percent of all the financing goes to one
company that her husband works for. And oh, by the way, she
goes to work for a company that got $15 million of export-
import financing after the board approved the $15 million in
financing to Azure Power. You don't find that a little strange?
Mr. Hochberg. First of all, Congressman, none of the
financing we do goes to Boeing. It goes to overseas customers
who buy U.S. products. We don't lend money to the Boeing
corporation.
Chairman Jordan. Okay. All right. So I was mistaken. All
those people who come talk to me from Boeing, lobbyists who
represent Boeing, they don't really care that much about the
Export-Import Bank, then? You say it is not important?
Mr. Hochberg. We are talking about customers, overseas
customers who have a choice, Congressman, between buying a
Boeing airplane and an Airbus airplane. If we are looking--
Chairman Jordan. So all the lobbying Boeing is doing is
just out of the goodness of their heart to help those overseas
customers, right?
Mr. Hochberg. We are talking about jobs in America, jobs in
Toulouse, France, or Hamburg, Germany.
Chairman Jordan. All right. My time has expired.
I now recognize the gentlelady from California.
Ms. Waters. Thank you very much. I really don't have a lot
of questions. I have worked very closely with the U.S. Chamber
of Commerce, the Business Round Table, the National Foreign
Trade Council, the National Association of Manufacturers. I
have met with some of the businesses that are beneficiaries of
the Ex-Im Bank. I have met with Mr. Hochberg. I have met with
my local chambers. I have tremendous support from the
California Chamber of Commerce.
And I know the Export-Import Bank pretty well. I have spent
a lot of time learning about what they do and how they do it.
And I am convinced of the high performance, the excellent
default rate, the support for both large and small businesses
and their suppliers. And I have a real appreciation for the job
creation that they are doing. So I don't have any questions.
There have been representations over and over again from
both sides of the aisle from various times about this Bank and
the importance of this Bank. But I think I should use this time
to get a little mean and to talk about the way that this Bank
has been unfairly attacked.
First of all, yes, this article, ``Justice Department
Charges Former Export-Import Bank Official with Bribery.'' We
don't support the people committing crimes or doing bad things.
But do we want to shut down the Export-Import Bank because we
have a person or a few persons who have acted improperly? I
don't think so.
Because if we did that, I would have to say this:
Republicans have said that individual acts of fraud or
corruption at Ex-Im Bank proves that there is systemic fraud
and corruption throughout the Bank and for this reason, among
others, the Bank should be closed.
Let me give you some examples of fraud, corruption, and
abuse of the public trust at an institution very close and dear
to most people here today. I am talking about the Congress of
the United States of America. From 1981-1989, under the Reagan
Administration, 10 Members were convicted of bribery and
conspiracy, and one Member was convicted of perjury.
From 1989-1993, under Bush, one Member was convicted of
accepting illegal gifts, and one Member was convicted of
bribery. Under Clinton, one Member was convicted of bribery,
one Member was convicted of tax evasion and extortion, and two
Members were convicted of embezzlement. Under George Bush W.
Bush--2001-2009, two Members were convicted of bribery, one
Member was convicted of money laundering, and one Member was
convicted of financial corruption. Under the Obama
Administration, two Members were convicted of wire fraud,
extorting or money laundering, and one Member was convicted of
tax evasion.
Does anyone believe that these individual instances of
corruption by bad actors point to systemic corruption
throughout the Congress? And I also wonder if any Republican
Members support shutting the House down. I don't think so.
Let us take a look at what has not been done. We bailed out
the biggest banks in this country. I have 15 pages of fines
that have been leveled on the banks, many of whom we bailed
out, from everything from market manipulation to money
laundering to lending consumer practices, mortgage-backed
securities fraud, on and on and on and on. We have not had one
hearing. Not one hearing on any of this.
But yet, we come here today and we have Mr. Mulvaney
talking about how you didn't properly do credit checks. Mr.
Mulvaney, have you ever heard of no-documentation loans, no
credit checks that were done by the biggest banks in America
who brought us down in a subprime--
Mr. Mulvaney. Would the gentlelady yield?
Ms. Waters. No, I won't yield.
Mr. Mulvaney. Well, you mentioned my name, so I thought I
would ask--
Ms. Waters. And so let me just say that this business of
talking about this very important institution to be closed down
for all of these phony reasons really is something that I
cannot take seriously and the American public cannot take
seriously.
And I think it was you who also said something about how
our citizens, perhaps, should be very, very disappointed with
us. Oh, no. Here is what you said: How does the average
taxpayer look at us? You are right. How do they look at us? How
do they look at us, who would attack a bank that not only is
helping us to deal with building up and expanding our ability
to support exports and businesses and create jobs, and then
have Members sit here who have not said one word about what has
happened in America with banks which are accused of and have
been fined for all of these crimes?
And you ask, how should our citizens think about us? I
would think they think we have no credibility and this must be
political. This must be about someone who is attempting to
create something that they can accuse Democrats of and make it
look as if they are taking care of the taxpayers in some
extraordinary way. And it doesn't wash.
I yield back the balance of any time.
Chairman Jordan. I would just remind the gentlelady that
many of us didn't vote to bail out the Banks. The Constitution
requires a House of Representatives. It doesn't require an
Export-Import Bank. And the most well-known case of a
Congressperson getting in trouble was the cash in the freezer
of Mr. Jefferson, which was related to the Export-Import Bank.
Ms. Waters. It doesn't measure up to the acts that have
been committed--
Chairman Jordan. With that, I recognize the chairman of the
full Oversight and Government Reform Committee, Mr. Chaffetz.
Chairman Chaffetz. I thank the chairman.
Mr. Hochberg, how many employees are there at the Bank?
Mr. Hochberg. About 450.
Chairman Chaffetz. And how many of those would be loan
officers?
Mr. Hochberg. I would have to say in the range of maybe 75.
Chairman Chaffetz. Will you provide this committee a
listing of--when you say 450, an organizational chart, as well
as how many you have in each of those slots?
Mr. Hochberg. I would be happy to do so.
Chairman Chaffetz. Thank you. I would appreciate it.
You are aware of the Washington Examiner story that alleges
that the Bank may have tipped off Boeing about a Freedom of
Information Act request that was put forward by Delta Airlines.
Delta Airlines had made a FOIA request, but they did not
publicize it. And yet, it was revealed that Boeing knew to ask
for pretty much the exact same information 2 months before that
information became public. How could that be?
Mr. Hochberg. I am not sure I can answer that question. I
don't have an answer to that--
Chairman Chaffetz. Are you familiar with the article on
March 19th?
Mr. Hochberg. I am vaguely aware of the article. Yes, I am.
Chairman Chaffetz. So there is an article saying who at the
Export-Import Bank warned Boeing about a Delta FOIA, and you
are just vaguely familiar with that?
Mr. Hochberg. What I can say, sir, is that no employee
reveals the source--
Chairman Chaffetz. How do you know that?
Mr. Hochberg. We have an--we run an ethical organization,
and that is what--
Chairman Chaffetz. You do have more than 31 open
investigations into fraud and abuse in your organization. You
did have somebody who was just indicted yesterday. So what is
the case to say that you run an ethical organization?
Mr. Hochberg. The 31, sir, are outside companies that have
tried to defraud the Export-Import Bank.
Chairman Chaffetz. Mr. McCarthy, do you have any open
investigations?
Mr. McCarthy. We have about 31 open investigations right
now. Most of them are for external fraud. Some of them are
proactive intelligence-based investigations, and some of them
are internal to the Bank.
Chairman Chaffetz. Some of them are internal. So I would
take exception to the idea that you run the most ethical
organization. As Mr. Mulvaney cited, we have had problems with
this Bank in the past, and we did just have an indictment
yesterday, in this week.
How much did you charge Delta Airlines for their FOIA
request?
Mr. Hochberg. I don't know the precise fees we charge. But
I can say this, Congressman--
Chairman Chaffetz. Have you fulfilled that FOIA request?
Mr. Hochberg. Yes, we have fulfilled that one. And let me
just--if I could add--
Chairman Chaffetz. There was more than one. How much have
you charged Delta Airlines to gather information that
rightfully they should be able to see?
Mr. Hochberg. I will have to get back to you. I don't know
the--
Chairman Chaffetz. Would it be $90,000?
Mr. Hochberg. I don't know the charge. I can get--
Chairman Chaffetz. Is that a wrong number? Is it more than
$90,000?
Mr. Hochberg. I don't know the number, sir. I don't want to
mislead--
Chairman Chaffetz. When will you give us the number?
Mr. Hochberg. I can check and I will get back to you on
that. I can--
Chairman Chaffetz. When will you get back to us?
Mr. Hochberg. I will have to ask my council how readily do
we have that information.
I can get that to you tomorrow.
Chairman Chaffetz. Fair enough. Thank you.
Mr. Hochberg. And I can add--
Chairman Chaffetz. Of the FOIA requests that were issued by
Delta, how much of that have you fulfilled? Have you given them
100 percent? Because part of the concern is that you have
charged them and taken their $90,000-plus dollars, but you
haven't fulfilled the FOIA request.
Mr. Hochberg. Congressman, I don't want to mislead you, I
don't want to mislead the committee. I don't have the precise
facts on that particular FOIA request.
I can add, however, that when we--the law requires that
when we have a FOIA request, we need to inform the company
whose information we are revealing. So that is why Boeing was
aware of that FOIA request, because it was their information
that was being submitted to Delta.
Chairman Chaffetz. You are going to provide this committee
the details of that specific instance?
Mr. Hochberg. You asked about this--
Chairman Chaffetz. There are a couple of different FOI's.
But I want to see the information about how Boeing knew in
advance, when it wasn't public, that they knew 2 months in
advance to submit their own FOI's for the same material?
Mr. Hochberg. When I tried to explain this--it is my
understanding of the law--I am not a lawyer--that we must
inform the company about whose information we are providing in
a FOIA request.
Chairman Chaffetz. And part of the question was, did you
fulfill that FOIA request? Because I want additional details. I
have 30 seconds.
Mr. Hochberg. We have fulfilled that FOIA request--
Chairman Chaffetz. It is my understanding that there was
more than one FOIA request.
The Wall Street Journal reported that in the drafting of
regulations related to this, they would have an ``extraordinary
level of coordination.'' How do you quantify the level of
coordination with Boeing in relationship to the drafting of the
regulations?
Mr. Hochberg. Congressman, we work with every company who--
when we are doing regulation requirements that concern a
particular company. So in the case of Boeing, we happen to have
one aircraft company, so we talk to the one aircraft company.
When we are doing banking regulations, is how we--
Chairman Chaffetz. When was the last time you spoke with
Boeing?
Mr. Hochberg. The last time I spoke with Boeing?
Chairman Chaffetz. Yes.
Mr. Hochberg. They are in the room today.
Chairman Chaffetz. So did you speak with them today?
Mr. Hochberg. I said hello--I said good morning.
Chairman Chaffetz. When was the last time you had a
substantive conversation with them?
Mr. Hochberg. I was in Panama with President Obama and we
signed--U.S. Boeing signed an agreement with Copa Airlines.
Chairman Chaffetz. And what was the value of that?
Mr. Hochberg. A list value of about $6.6 billion.
Chairman Chaffetz. I have gone past my time. Thank you, Mr.
Chairman. I yield back.
Chairman Jordan. I thank the gentleman.
I now recognize Mr. Heck, the gentleman from Washington.
Mr. Heck. Thank you, Mr. Chairman.
Mr. Hochberg, could you quickly restate for the record what
your default rate is?
Mr. Hochberg. Yes. Our default rate is 0.174 percent. And
it is something we send to Congress every 90 days make sure
that Congress is apprised of the state of our portfolio.
Mr. Heck. To the best of your ability, could you compare
that default rate to the rest of the commercial lending sector
that operates in the same space?
Mr. Hochberg. It is hard to get a precise benchmark. But it
is, from my understanding, 2 to 3 times lower than general
commercial loans.
Mr. Heck. To the best of your recollection, could you state
for the record what your collection rate is on bad debt?
Mr. Hochberg. It is partly reflected in our default rate,
again, of 0.174 percent. And when something has gone in
arrears, we have generally been collecting about 50 cents on
the dollar.
Mr. Heck. And can you compare that to the rest of the
commercial lending?
Mr. Hochberg. I don't have a precise benchmark for that.
But my understanding is it is very much on the high side.
Mr. Heck. Do you recall off the top of your head the last
year--are you aware of the last year in which there was an
actual transfer of taxpayer money to the Export-Import Bank in
the form of a subsidy?
Mr. Hochberg. There has been none. We have transferred to
Treasury $6.9 billion in the last 2 decades. And most recently,
in October of this past year, $675 million.
Mr. Heck. I was asking for the reverse transfer. When is
the last time you received a subsidy? And are you aware that
there have been any subsidies since the enactment of the 1990
Credit Reform Act?
Mr. Hochberg. There have been none.
Mr. Heck. Mr. Hochberg, you know that I have expended no
small amount of time on this effort. I am just one of many. As
has my friend Congressman Fincher from Tennessee and others. We
have met with you multiple times. We have met with the majority
whip's office, the chair's office, the chair--the ranking
member of the subcommittees--and I meant the ranking member,
not the chair--in an effort to develop legislation.
Have you or any members of your office met with Chairman
Huizenga of the subcommittee to develop or respond to or react
to proposed changes and/or reforms for reauthorization
purposes?
Mr. Hochberg. No, I have not.
Mr. Heck. Mr. Hochberg, a difficult question, a permutation
on some of the line of questioning of Ranking Member Waters.
Sir, do you believe that Congressman Aaron Schock's
resignation in shame from this institution is a reflection on
the entire House Republican conference?
Mr. Hochberg. No, I have--no, I would say not.
Mr. Heck. I don't either.
Mr. Hochberg, are you aware that China is developing a
wide-body aircraft for sale into the commercial market in
competition with both Boeing and Airbus?
Mr. Hochberg. I have met, actually, with Comac, which is
the Chinese aircraft manufacturer. They already have 400 orders
for a narrow body. And there have been reports they are working
with the Russian aerospace industry to develop a wide-body,
also to compete with Boeing and Airbus.
Mr. Heck. There have been reports to that effect. Do you
believe it to be the case?
Mr. Hochberg. Oh, I have no reason not to believe it. As I
said, I personally met with the CEO of the Chinese aircraft
company. So I would have a firsthand impression of their
activities.
Mr. Heck. So lastly, Mr. Hochberg, would you give us a
little bit of information about how much larger the export
credit authority is in China? As a matter of fact, I think they
have multiple entities. But educate us. How many export credit
authorities do they have? And aggregating them, how do they
compare in size to the Export-Import Bank?
Mr. Hochberg. For one, China, as we know, is not the most
transparent country in terms of its banking and financial
dealings. They have four entities that provide export support.
First, SINOSURE, which essentially provides credit insurance.
That alone has been about $670 billion in the last 2 years.
They also have the China Ex-Im Bank. Informally, in
speaking with their chairman, they operate between $90 billion
and $100 billion a year. There is the China Development Bank,
and then there is the Chinese Agriculture Bank. So there are
four entities that do that.
Mr. Heck. I lied. I have two more quick questions.
First of all, yes or no if you can, are we already losing
business as a consequence of the cloud hanging over
reauthorization of the Export-Import Bank?
Mr. Hochberg. Without question.
Mr. Heck. Mr. Chairman, at this time I would like to
request unanimous consent to place in the record a letter from
multiple governors from both political parties throughout this
country, in support of reauthorization of the Export-Import
Bank.
Chairman Jordan. Without objection, it is so ordered.
Mr. Heck. Thank you, sir.
Chairman Jordan. I thank the gentleman.
I now recognize the chairman of the full Financial Services
Committee, the gentleman from Texas, Mr. Hensarling.
Chairman Hensarling. I thank the gentleman.
I must start off by saying that I have been somewhat amused
by my friends on the other side of the aisle who decry the lack
of hearings on Ex-Im and then simultaneously say they are a
waste of time.
But just for the record, Mr. Chairman, is this a hearing?
Chairman Jordan. It most certainly is.
Chairman Hensarling. Okay. We are in the midst of a
hearing.
Mr. Hochberg, according to Ex-Im records, of the 50 largest
loans or guarantees provided by Ex-Im--I believe this was on
your watch--through the end of Fiscal Year 2014, roughly half
have gone to state-owned companies or joint ventures that
include state-owned companies, including Saudi Arabia, Russia,
China, Pakistan, India, Colombia, Mexico, Ethiopia, South
Africa, and Poland. Do you agree with that analysis?
Mr. Hochberg. I haven't seen the data you are looking at.
But those names sound familiar.
Chairman Hensarling. Okay. Again, these are state-owned
companies or joint ventures that include state-owned companies.
There has been discussion of losing jobs to China. On your
watch in 2011, the Ex-Im Bank records show that a $75.8 million
loan was approved to a Chinese company, ICBC Financial Leasing.
Its parent company is the state-owned Industrial Commercial
Bank of China, the largest bank in the world, with reported
assets of $3 trillion. Are your records correct? Did that
transaction take place?
Mr. Hochberg. Congressman, my recollection is we approved
that authorization, but there was never a disbursement. They
changed their mind on that transaction.
Chairman Hensarling. Okay. Let's talk about Russia. It is
my understanding--again, from perusing Ex-Im records--that on
your watch, taxpayer-backed financing to Russia has increased
roughly tenfold from roughly $60 million to $600 million. Is
that accurate?
Mr. Hochberg. I am not looking at the precise data. But we
no longer do any business in Russia.
Chairman Hensarling. I know you don't. Because I sent you a
letter after Russia had invaded the Ukraine. And if memory
serves me correctly, that was February 27th of 2014. And it
took you until July 29th, many months later, before you and the
Ex-Im Bank suspended all deals with Russia.
Is July 29th, according to press reports, the date that you
suspended all deals with Russia? And is it not true that Russia
invaded the Ukraine on February 27th?
Mr. Hochberg. I would have to get back to you on the
precise date we stopped. We put a hold on--
Chairman Hensarling. I will let you know, Mr. Hochberg,
that there are numerous press reports that show that it took
you months, months, in order to do that.
In February of this year, there were press reports that
indicated that a $2 million direct Export-Import Bank loan to
Ghana that was designed to bring electricity to 1,200 rural
communities was instead diverted to buy luxury automobiles,
including Lexus SUVs, by various foreign government
bureaucrats. Are you familiar with this press report? And if
so, is it accurate?
Mr. Hochberg. I am familiar with a company that has done a
lot of electrical work in Ghana, Weldy Lamont. In fact, they
have done such a good job that they have expanded their
contract there. I am not familiar with--
Chairman Hensarling. So you are not familiar with this?
Mr. Hochberg. No, I am not, sir.
Chairman Hensarling. Okay. In September of 2013, the Ex-Im
Bank approved a $33.6 million loan for a Spanish green energy
company, Abengoa International at the time. Former New Mexico
Governor Bill Richardson sat on the advisory board for both Ex-
Im and this particular company. Are the records correct that
Ex-Im approved this loan?
Mr. Hochberg. That is--again, I can confirm that. That
sounds familiar to me, sir.
Chairman Hensarling. Okay. Mr. Hochberg, approximately how
many days a month do you travel away from the Export-Import
Bank?
Mr. Hochberg. I am probably on the road, if I had to guess,
about 7 or 8 days a month.
Chairman Hensarling. Eight days a month. And do you know
over the last year how many appearances that you have made in
congressional districts with Members of Congress?
Mr. Hochberg. I have traveled around the country meeting
with small business exporters. I mentioned when I was with Gwen
Moore and the Maxim company, I was most recently--
Chairman Hensarling. Are you meeting with them? Or are you
lobbying for your reauthorization?
Mr. Hochberg. No. I am meeting with companies and finding
better ways that we can support them to support more American
jobs. And meeting--since 90 percent of our customers are small
businesses--
Chairman Hensarling. Mr. Hochberg, while you are going
around meeting with various individuals and posing for photos,
we get articles like this, ``Justice Department Charges Former
Export-Import Bank Official with Bribery.'' And as I understand
it, this individual engaged in these activities on your watch,
sir. And so perhaps maybe a little bit more time managing the
store, and a little less time posing for photo ops and lobbying
for your reauthorization may lead to fewer indictments.
I thank the chairman. I yield back the balance of the time
I no longer have.
Chairman Jordan. Thank you, Chairman Hensarling.
I now recognize the gentleman from Texas, Mr. Green.
Mr. Green. Thank you, Mr. Chairman. I thank the ranking
member, as well.
And would like to explain that when I say, ``Export-Import
Bank,'' I am really talking about 1,630 exporters in the State
of Texas. I am really talking about Texas being one of the top
exporters in the country. It is more than a building that is
located someplace with people in it. We are talking about, in
my 9th Congressional District, 94 exporters. We are talking
about 46 small businesses. We are talking about 14 minority-
owned businesses. And we are talking about 5 women-owned
businesses.
So it is more than brick and mortar. More than people who
happened to have engaged in some conduct that I don't approve
of. Quite frankly, a lot of businesses engage in conduct that I
don't approve of. Those who police us engage in conduct that I
don't approve of. But I never advocated eliminating one police
department.
Someone mentioned corporate welfare. This is a wonderful
device, this iPad. It gives you access to the world
immediately. The Huffington Post has reported in 2014 with
reference to corporate welfare that direct Federal subsidies to
corporations--and now they mention the Cato institute. The Cato
Institute estimates that Federal subsidies to corporations cost
taxpayers $100 billion every year.
Let's really look into corporate welfare. Let's do
something about corporate welfare. If this is the genesis,
let's go move on to revelations. I have some revelations.
Federal tax breaks to corporations. The Tax Code gives
corporations special tax breaks that have reduced what is
supposed to be a 35 percent tax rate to an actual tax rate of
13 percent, saving these corporations an additional $200
billion annually.
Let's talk about Federal tax breaks to the wealthy. Federal
tax breaks for wealthy hedge fund managers, special tax breaks
for hedge fund managers, allow them to pay only 15 percent. A
15 percent tax rate, while people that they earned the money
for usually pay a 35 percent tax rate.
You want to talk about corporate welfare? What about
subsidies for the fast food industry? Research by the
University of Illinois and UC Berkeley documents that taxpayers
pay about $243 billion each year in direct subsidies to the
fast food industry because they pay wages that are so low that
taxpayers must put up $243 billion to pay for public benefits
the workers receive. My God. This is not a crime. But I think
an argument can be made that it is sinful.
So now we want to eliminate the Ex-Im Bank because of
corporate welfare and criminality. My dear friends, if we
didn't have the Ex-Im Bank, we would be trying to find a way to
create it, so that we could compete in the global marketplace.
I agree with Mr. Lucas. And I thank you for your
commentary, sir. I hope this doesn't hope you back hope, my
agreeing with you. I want you to know I think that reform may
be necessary, but that we should not throw out this baby with
the bath water.
Mr. Chairman, I thank you for allowing an interloper to
have a moment. God bless you. And God bless the United States
of America. I yield back.
Chairman Huizenga [presiding]. The gentleman yields back.
With that, the Chair recognizes Mr. Walberg of Michigan for
5 minutes.
Mr. Walberg. Thank you, Mr. Chairman.
Last year, Delta CEO Richard Anderson testified before the
Financial Services Committee, Mr. Sheets, that your predecessor
informed him that Treasury was not going to negotiate with
Europeans over Ex-Im subsidies. Could you elaborate on that for
us?
Mr. Sheets. Thank you. As you indicated, the meeting that
you are referring to occurred before I was at the Treasury.
What I can say is that we take the mandate that we have
been given very seriously. And we have, in fact, negotiated
with our European counterparts on aircraft. And we are pressing
them and ready to go as quickly as they are prepared to go and
broadly engaging on export credit financing with an eye toward
further disciplining it.
Mr. Walberg. How many meetings with other countries have
you attended to discuss lowering export credit assistance?
Mr. Sheets. The meetings of the OECD and IWG negotiations
are done by members of my team. But what I can tell you is that
in international discussions with the Indians, with the
Chinese, with the Brazilians, in a number of meetings, more
than I can count, we have discussed issues related to export
credit and efforts to further widen the scope.
When we engage, particularly with our Chinese counterparts,
this is one of the very, very first issues, perhaps after the
exchange rate.
Mr. Walberg. But let me go at it from another direction.
How many countries receiving export subsidies has the
Department of the Treasury not engaged in its negotiations?
Mr. Sheets. I don't have a number for you. What I can say
is that we get all the OECD members through that understanding.
And my recollection is that we have 18 countries involved in
the IWG. Now, some of those are also in the OECD. But I think
that expands the number of countries by another half dozen or
so.
Mr. Walberg. If we could get a list of those that you have
not engaged with, I would appreciate that.
In your testimony, you note that you will work on possible
ways to limit official financial support for wide-body
aircraft, particularly for airlines with access to alternative
sources of financing.
Applying this principle more broadly, can you identify
which aircraft makers, regardless of make of aircraft, would be
unable to obtain financing without Ex-Im Bank involvement?
Mr. Sheets. I don't have the analytics with me today to be
able to answer that question. But we would be happy to take a
look and respond to you on that.
Mr. Walberg. There is not a set answer that you could give
of particular aircraft companies--
Mr. Sheets. I don't know the list.
Mr. Walberg. Okay. Mr. Hochberg, reports have shown that
the Bank mischaracterized--and that is a strong word--large
businesses owned by billionaires and multinational
conglomerates as small businesses, and that these errors have
contributed to as much as $3 billion in authorizations that
should have gone to small businesses, the small businesses that
we talked about that supply for the larger corporations,
including Boeing. How does the Bank justify these errors?
Mr. Hochberg. Congressman, we take data accuracy as a
central core mission of the Bank. In fact, last fall we
identified four key strategies for the Bank. And data quality
is one of them.
In fact, just today we applied to OMB and got emergency
approval. We have updated our application form to make sure
that we collect more accurate data from the actual exporter
themselves. We relied on some outside databases, and now we
have a little bit more of a belt and suspenders--
Mr. Walberg. So the $3 billion of authorizations that
should have gone to small businesses are a thing of the past
now?
Mr. Hochberg. Well, no. It is not a question of should. It
is a question of--when the Reuters story came out, 97 percent
of the transactions were accurate. And we looked at the other
200 to see how they were categorized.
One of the difficulties, Congressman, is there are times
you have a small business that grows large and therefore is no
longer small, or a small business is sold. So this is a very
dynamic database that changes, and we continually update it.
Mr. Walberg. Mr. Chairman, my time has expired.
Can you give me any latitude for one more question?
Chairman Huizenga. Had you not called my attention to it,
it would have made it much easier.
Mr. Walberg. Everybody else has. But I am trying to live by
the rules.
Mr. Hochberg, one final question: Acknowledging these
reporting errors, the Bank responded and it hired a new
information officer, as you have said, and said it would
conduct an overhaul of databases and review of paper documents.
What is the status of these activities and results, and is it
your testimony today that no large firms are classified as
small in Ex-Im's current small business portfolio?
Mr. Hochberg. We report our small business to Congress. We
report our small business results. We make the utmost effort to
make those completely accurate. But as I tried to say earlier,
sometimes--it is a very dynamic database. Companies get larger
and are no longer small. They may be sold. They may be sold off
from a large company. So we have to look at it from a moment in
time.
And what I have said is today we enacted an improvement in
our data system so we can get more accurate data. And it is one
of the four things we have focused on this year.
Mr. Walberg. Thank you. And thank you very much--
Chairman Huizenga. Now your time has expired, Mr. Walberg.
And I appreciate you being maybe the only person in Washington
who would rather ask for permission than forgiveness before
they went ahead with something, but--
Mr. Walberg. Remember, I am a minister.
Chairman Huizenga. With that, the Chair recognizes Mr.
Carney of Delaware for 5 minutes.
Mr. Carney. Thank you, Mr. Chairman.
I would like to thank all the panelists for coming in today
and for addressing the questions that we have asked. And I
would like to go back to the closing comments that the
gentleman from Oklahoma made, Mr. Lucas, about the fact that
the reauthorization of Ex-Im is going to come before us
sometime in the near future.
I suspect progress going forward is going to depend in some
measure on efforts to reform operations and the like. And I
thought he kind of hit the nail on the head, and I would like
to associate myself with him as someone willing to look at
those things to find a path forward.
And with that, I would like to give the rest of my time to
the gentleman from the State of Washington, Mr. Heck.
Mr. Heck. I thank the gentleman.
I would like to register for the record umbrage I have
taken at a couple of attacks here today, the first of which is
the imputing of the motives and integrity and character of Mr.
Hochberg. We can have our philosophical differences, our policy
disagreements. But frankly, I think those suggestions do not at
all match Mr. Hochberg's career of intermittent outstanding
public service. And I apologize on behalf of this institution.
I think it is beneath our dignity.
I also take umbrage at the suggestion that there is some
kind of--something untoward in the fact that the Export-Import
Bank loans money to the foreign purchasers of American-made
airplanes. When people ask me back home, and they often do, why
is it that there is quite a bit of activity in the aerospace
industry? My shorthand response--and Mr. Hochberg, I am going
to ask you for yours--is who exactly is it in the commercial
lending industry that you think would be willing to lend $200
million to $300 million for Somalia to buy an airplane, as to
why the Export-Import Bank is needed.
But Mr. Hochberg, why is it that there is such significant
activity at Ex-Im on behalf of America's aerospace industry?
Let me say that again: America's aerospace industry.
Mr. Hochberg. Thank you, Congressman. We in the United
States are in a head-to-head competition with the Airbus on
large aircraft. We try--we are continually competing with them
to make those sales. We also make guarantees. We don't make
direct loans. So we are always engaged in the Bank as a
guaranteed loan.
And the chairman asked me about Boeing. When I was with
Copa Airlines, as an example, they placed an order that will be
delivered over anywhere between a 9- to 12-year period. And
part and parcel of that order, giving the order to the United
States and supporting 12,000 jobs here, versus 12,000 jobs in
Toulouse and Hamburg, was the fact that we would be a backstop.
They don't need us for the entire order, but they do need us
from time to time.
And they predict over a 12-year period there will be
financial stress. And in order to make that order and to give
the confidence that they can make delivery, they needed us as a
backstop. We may--we could wind up doing zero. But they have to
know that we are there as a reserve, should the financial
conditions warrant that we need to step in.
And let me just add right here. We talk about Boeing. There
is a lot of discussion of big companies. I visited one of
Boeing's suppliers in Missouri, LMI. The company started out as
Leonard's Metal Industries. It is now called LMI. There is a
company in--Eaton Aerospace in Jackson, Mississippi.
Boeing is a conglomeration. Just like the Ford Motor
Company is an assembly plant, the Boeing Company is an assembly
plant. It is assembling components for more than 15,000
businesses, about 6,000 of which are small businesses. So we
are not talking about a large company. We are talking about a
very deep supply chain that would be impacted if there is any
untoward action here.
Mr. Heck. Much has been made over the last few years about
the importance of America's future, of revitalizing its
manufacturing base. I realize this is calling for a subjective
evaluation. But how important to America's manufacturing base
do you think the thousands and thousands and thousands of
engineers working across all platforms of technology are to
America's manufacturing base and our future?
Mr. Hochberg. If we want to compete--if the United States
wants to compete in capital goods, if we want to compete with
the likes of China, Japan, Korea, Germany, and others on
capital goods, we need to have a backstop to provide the kind
of long-term 12-year money that is required. And that goes
above and beyond, as you mentioned, all the engineers, all the
designers, all the patents and everything else that is
developed that creates those products we can sell on the global
marketplace.
Mr. Carney. I yield back.
Chairman Huizenga. The gentleman from Delaware yields back.
With that, the Chair recognizes Mr. Gowdy of South Carolina
for 5 minutes.
Mr. Gowdy. Thank you, Mr. Chairman. I actually supported,
Mr. Chairman, the 2012 reauthorization. And there will be
another day, in my judgment, to debate the merits and demerits
of the Bank and the reauthorization. And there will be
reasonable minds on both sides of that. And there will be
colleagues that I respect on both sides of that.
Mr. Chairman, what is not open for debate is whether or not
the Bank and the Department of the Treasury have a
responsibility to cooperate with oversight. This committee has
a responsibility to provide oversight. And you have a
corresponding obligation to assist with that.
So Mr. Sheets, can you tell me with a specificity the name
of the person negotiating the end of the need for Ex-Im Banks?
Mr. Sheets. I would say consistent with the mandate that
there are a number of people--
Mr. Gowdy. Okay. Then, give me all of the names.
Mr. Sheets. I would say consistent with the mandate, the
responsibility rests with the Secretary, with me--
Mr. Gowdy. Okay. Are you going to make yourself available
for a transcribed interview with the Financial Services
Committee so they can ask you about the status of those
negotiations to end the need for the Bank?
Mr. Sheets. In my remarks today, I outlined in some detail
the things that we are doing. And we are vigorously engaged--
Mr. Gowdy. Actually, Mr. Sheets, that was not my question.
My question is, are you are willing to make yourself available
for a transcribed interview so my colleagues on the Financial
Services Committee can ask you with specificity what steps you
are taking, as the 2012 reauthorization required, to end the
need for such banks?
Mr. Sheets. We, as a regular and routine matter, make
ourselves available to Congress.
Mr. Gowdy. And you have updated Chairman Hensarling on all
the progress that has been made, with specificity?
Mr. Sheets. We, consistent with the mandate--
Mr. Gowdy. You don't have to say ``consistent with the
mandate.'' You and I both know what we are talking about.
Mr. Sheets. Consistent with the mandate, we are required to
submit an annual report. And--
Mr. Gowdy. That is not my question, Mr. Sheets. My question
is very particular. Are you willing to submit to a transcribed
interview with the Financial Services Committee so they can ask
you about all the progress you have been making about ending
the need for Ex-Im Banks? You can start with a yes or a no, and
then you can explain it.
Mr. Sheets. And as I said, as a routine matter--
Mr. Gowdy. No, you haven't said.
Mr. Sheets. --we are--
Mr. Gowdy. That is my point, Mr. Sheets, that you haven't
said--and it took forever for you to respond to a request from
Chairman Hensarling. I am going to tell you this, Mr. Sheets,
right now the single best argument against reauthorization is
you.
Chairman Hochberg, you referred to transcribed interviews
as ``inherently adversarial.'' Tell me why you said that.
Mr. Hochberg. We have made ourselves available,
Congressman, for briefings repeatedly on the Hill and--
Mr. Gowdy. Mr. Chairman, I have limited time, and I am
going to need you to go straight to the answer.
You described transcribed interviews as inherently
adversarial. Why did you say that? What is inherently
adversarial about taking testimony under oath, which I hasten
to add, is exactly what we are doing today.
Mr. Hochberg. And I think this is an excellent forum for
that, sir.
Mr. Gowdy. Do you think Congress should be able to provide
a little input into what they think an excellent forum is? Or
are you the sole arbiter of that?
Mr. Hochberg. No. Without question, sir. I am saying we
have made ourselves available for briefings, and we make
ourselves available for hearings--
Mr. Gowdy. Will you make yourself and your employees under
the purview of the Oversight Committee available for a
transcribed interview, just like everyone else has to submit to
when they are requested by Congress?
Mr. Hochberg. We would prefer to have a briefing to
understand what the transcribed interview would be about before
we would commit to that. We would like to know what the subject
is, sir.
Mr. Gowdy. I am just going to tell you this. For those of
us who live in States that benefit from the Bank, and for those
of us who have supported the reauthorization and would like to
support future reauthorizations, I would encourage you to
revisit your answer to that question. When the chairman of the
Financial Services Committee asks to take transcribed
interviews--which is nothing more than an interview under oath
behind closed doors--I fail to see how that is appreciably
different from what you and I are doing right now. You are
under oath right now.
Mr. Hochberg. Correct, sir.
Mr. Gowdy. It is being transcribed. That is what the lady
beside you is doing. So what is the difference?
Mr. Hochberg. It is in public, sir--
Mr. Gowdy. So you prefer for these employees to be brought
out in public?
Mr. Hochberg. I would prefer it to be in a hearing setting
where we have full disclosure, both sides of the aisle can
hear, and both sides of the aisle can ask questions.
Mr. Gowdy. Have you ever been to a transcribed interview?
Because both sides are represented there too, Mr. Chairman.
Mr. Hochberg. No, I have not.
Mr. Gowdy. Okay. Then, when you are subject to a
transcribed interview, which may be soon, you will see that
both sides get to participate in that.
Now, I want to ask you one follow-up question because I am
out of time. You--
Ms. Moore. Mr. Chairman, I object--
Chairman Huizenga. It is at the Chair's discretion.
However, as it has been pointed out, the Chair will now make
sure that everyone adheres to the 5-minute rule, which includes
both sides, apparently.
So with that, sorry, Mr. Gowdy, your time has expired.
Mr. Gowdy. Thank you, Mr. Chairman.
Chairman Huizenga. And with that, Mr. Clay of Missouri will
have his 5 minutes. Exactly 5 minutes.
Mr. Clay. Thank you, Mr. Chairman. And I will try to
observe the 5 minutes.
I want to take a moment to thank Chairman Hochberg for his
leadership and the Ex-Im Bank's role in supporting so many
small businesses that are seeking to compete successfully in
the global market.
Ex-Im directly supports 17 small and medium-sized
businesses in the first congressional district of Missouri by
providing millions of dollars in credit support to businesses
that sustain many of the families and communities in my
district.
Despite the vital role that the Bank plays in supporting
small businesses, the Bank's reauthorization has been held
hostage to partisan extremism. I want to reiterate my support
for H.R. 1031, the Promoting U.S. Jobs Through Exports Act of
2015, a comprehensive proposal that expands the Bank's support
for small businesses, enhances its transparency, and reduces
the Bank's risk to taxpayers.
With nearly 250 Members of this body lending their support
to a renewal of the Bank, I remain hopeful that partisan
extremism will eventually yield to the overwhelming support for
the Bank's reauthorization.
And just one question for Mr. Hochberg, if Congress fails
to reauthorize the Ex-Im Bank, which business sectors would
begin to feel the pain first?
Mr. Hochberg. I believe first and foremost would be our
small businesses in our country; 90 percent of our customers
are small businesses, and they frequently--in all cases--when
they come to us, don't have another option. A number of banks
have already said they have begun to curtail their extension of
credit to small businesses due to the potential of not being
reauthorized in July.
Another company--I would say there are also a lot of
companies in the supply chain. In the State of Missouri itself,
I visited a company called LMI in Saint Charles. They are a
supplier to Gulf Stream, Cessna, and many, many companies. They
would feel an immediate impact because sales would begin to
shift towards airplanes made in Canada, Brazil, Europe, Russia,
China, and places like that.
Mr. Clay. So Congress' inaction is having a negative impact
on our economy and will do serious damage if we continue down
this path?
Mr. Hochberg. We have already gotten some reports from
different sectors about that.
Mr. Clay. Thank you for your response.
And Mr. Chairman, at this time I would like to yield the
remainder of my time to the ranking member of the full
Financial Services Committee, Ms. Waters.
Chairman Huizenga. Without objection, it is so ordered.
Ms. Waters. Thank you very much.
First, let me just commend our witnesses here today on the
way that you have conducted yourself, despite the attacks that
have been thrown at you. You have done a wonderful job.
And let me also say, Mr. Hochberg, Mr. Sheets, you have the
right to decline transcribed interviews. We are not happy with
the way that they handle transcribed interviews. They refuse to
give us memorandums of understanding. So having said that, let
me go to something that I think we need to expand on.
Mr. Hochberg, how much have China's export credit agencies
financed in the past 2 years versus the U.S. Export-Import
Bank?
Mr. Hochberg. In the last 2 years, SINOSURE alone has done
close to $670 billion. The China Ex-Im Bank is not as
transparent. It is between about $80 million and $90 million.
On top of that, you have two other Chinese banks that do that
same kind of work. In that same period last year and the year
before, we would have done $47 billion.
Ms. Waters. I'm sorry. Would you give us those numbers
again?
Mr. Hochberg. Sure. China--SINOSURE, which is their short-
term credit insurance, the kind of things we do for our small
businesses, has done $670 billion in the last 2 years alone.
There is also the China Ex-Im Bank that does generally speaking
in the $80 million to $90 million range a year. That is
directly from the chairman of that bank. Plus there are two
other--there is the China Development Bank and the China
Agriculture Bank.
Ms. Waters. Thank you. And thank you for talking about the
nature and mission of other countries' export credit agencies
that allows them to support their industries' exports far
beyond--
Chairman Huizenga. With that, the gentleman's time has
expired, per the gentlelady's request.
And with that, the Chair recognizes the gentleman from
Arizona, Mr. Schweikert, for 5 minutes.
Mr. Schweikert. Thank you, Mr. Chairman. Now we all get to
do the lightning round because we all have to talk a lot
faster.
Mr. McCarthy, you might be the arbiter of a little bit of
fairness here. Total U.S. exports last year: $1 trillion, $640
billion. Yet, somewhere in here I was hearing that the book of
business from Ex-Im actually went down a little bit last year.
Mr. McCarthy. That is correct. There was a decline in the
book of business. The outstanding exposure went from $113
billion to $112 billion.
Mr. Schweikert. Okay. So if you do the simple math, Ex-Im
represents less than 1 percent of U.S. exports, at least from a
total book of business. Simple math.
Mr. McCarthy. I am not an economist, but--
Mr. Schweikert. But that is correct? That is called--
Mr. McCarthy. That sounds correct.
Mr. Schweikert. That is called--
Mr. McCarthy. The math sounds correct.
Mr. Schweikert. As a CPA, I am sure you do that in the back
of your head.
How did Ex-Im Bank's book of business go down, yet our
exports went up? Where in heaven are these organizations
finding surety enhancement credit? What is happening out there
in the marketplace that is also providing some of this type of
liquidity? What are your--
Mr. McCarthy. Let me give you a very high-level answer,
because this isn't my area of expertise. But my understanding
is that the Ex-Im Bank loan portfolio increased after the
financial crisis because liquidity was less available in the
private market--
Mr. Schweikert. My focus is the 14-year--
Mr. McCarthy. --and now there is just more--
Mr. Schweikert. --just because I have a nice block year
where I can run the numbers.
Mr. McCarthy. Okay. I would defer to Chairman Hochberg on
those, the larger Bank operational issues.
Mr. Schweikert. Okay. Mr. Thorum, you had a grin on your
face during that. Walk me through what you understand as to
where these other organizations are getting import/export
credit?
Mr. Thorum. I don't recall having a grin. Sorry.
Mr. Schweikert. Oh, okay. I'm sorry.
Mr. Thorum. I am listening intently.
Mr. Schweikert. Okay. We will go to Mr. Hochberg. Share
with me what is happening out there in the alternative or
private marketplace on the loan enhancement side that it was
able to grow last year in 2014?
Mr. Hochberg. The private sector has done a spectacular job
in the last 2 years, and it has far less need for us today than
there was 2 years ago. As you commented, Congressman, our
portfolio has and our loan volume has gone down. And that is a
good thing. We really--we step in when the private sector isn't
available or cannot do so.
Mr. Schweikert. So if I came to you right now and said one
of my ultimate goals here is--because I believe the pricing of
risk is best in the crowd in the marketplace--how do I continue
to grow that private guarantee? Because so far, the
conversation around here has been a bit absurd. If you are 1
percent of the exports and part of your book of business went
away, and there were no alternatives, the world comes to an
end. The math doesn't add up.
So what would you do to continue to grow the real world,
instead of the taxpayer-insured world?
Mr. Hochberg. Actually, I think we do that every day. What
we are trying to do is encourage more banks to do so. What
happens is frequently banks and insurance companies will work
with us and then over time, either they say, we can do this on
our own now; we are going to take the training wheels off and
we can now do this. That is our goal, to get--
Mr. Schweikert. But do you believe that would expand more
the syndication of risk silos and those mechanics if you
weren't the easy default?
Mr. Hochberg. It is sort of an--I only will tell you what
our customers tell us. I was recently in Alabama, a company
called--that makes printing.
Mr. Schweikert. I am less after anecdotes. I am more just
after the sort of the--
Mr. Hochberg. They come to me and say, I need to come to
you because I don't have an alternative. That is why people
come.
Mr. Schweikert. Okay. And my basic economics would say they
don't have an alternative because if you are in the market, why
should the private sector compete with you?
Also, in digging through some of the mechanics, do you
believe you define default and failure to meet reps and
warrants--don't look through your tabs--the same as Chase Bank
or any other SIFI out there because you have a wonderful
default rate, impairment rate. Do you define impairment the
same as the rest of the major money-centered banking industry?
Mr. Hochberg. We define faults as charge-offs as where we--
Mr. Schweikert. Okay. It is full charge-offs. So it is not
even a violation. But if I am Chase, I have to define an
impairment, even when there is a failure in my reps and
warrants.
Mr. Hochberg. We define--we put in our--we--
Mr. Schweikert. But what you are telling me right now is
that is not ceteris paribus, I think was the old word we had in
college, of you are not doing equal-to-equal--
Chairman Huizenga. The gentleman's time has expired.
Mr. Schweikert. --definition of what impairment--
Thank you, Mr. Chairman. I yield back.
Chairman Huizenga. With that, the Chair recognizes the
gentlelady from Wisconsin for a unanimous consent request.
Ms. Moore. Thank you, so much, Mr. Chairman.
I ask unanimous consent to place two documents in the
record: first, as I referenced, ``Cruz Under Fire,'' from the
Texas businessmen; and second, a statement of support for the
Ex-Im Bank from the National Association of Manufacturers.
Chairman Huizenga. Without objection, it is so ordered.
With that, seeing no other witnesses at this time on the
Democrat side of the aisle, we will continue on the Republican
side of the aisle with Mr. Meadows, of North Carolina, who is
recognized for 5 minutes.
Mr. Meadows. Thank you, Mr. Chairman. And I thank each of
you for being here. I really don't have any other questions
that would help further this debate.
But I will say, Chairman Hochberg, it is troubling when you
answer the way that you do when you have somebody like myself
who is trying to make a decision on reauthorization. And the
lack of transparency, the lack of willingness to come before
the Oversight Committee is troubling to me, and quite frankly,
more troubling to the American people on Main Street who don't
understand why you would not submit to transcribed interviews
under oath and why you would want to do it in a public forum.
And so I would just ask you to reconsider your position, as
Mr. Gowdy had covered earlier.
And with that, I have no questions, Mr. Chairman, so I
yield back. Actually, I yield to Mr. Gowdy for follow up.
Mr. Gowdy. And I thank my friend from North Carolina.
So Mr. Chairman, you have heard from an undecided Member of
Congress who is less than overwhelmed with your answers with
respect to oversight, and you have heard from a Member of
Congress who very much wants to support reauthorization. I
think you said you are not an attorney. I once was.
Ms. Waters did give you some legal advice, that you have
the right to decline a transcribed interview. I would also
remind you that Members of Congress have a right to factor that
in as they determine whether or not to reauthorize this Bank.
And before I yield to my friend from South Carolina, I want
to ask you about something else. In a letter that you wrote to
Chairman Hensarling, you said that you have made redactions to
protect the candid exchanges of views by the Bank's board
members. And I am curious what legal privilege entitles you to
make that redaction?
Mr. Hochberg. We submitted our board minutes, board
transcribes, to the committee. We try and leave out
deliberative matters and business confidential information so--
Mr. Gowdy. I get that. But you also said you were going to
protect candid exchanges of views by the Bank's board members.
If you were providing oversight, wouldn't you want candid
exchanges as opposed to, say, stale boilerplate discussions? If
your responsibility was to provide oversight, wouldn't you want
candid exchanges?
Mr. Hochberg. We have a candid exchange at our board
meetings. But at the end of the day, what is most critical is
how board members vote, whether they vote for or against the--
Mr. Gowdy. And I will tell you that the results in life
matter, but the process may matter even more. And I would
encourage you to revisit that position with Chairman
Hensarling, as well.
And with that, I yield to my friend from South Carolina.
Mr. Mulvaney. I thank the gentleman.
Mr. Sheets, very briefly--
Ms. Moore. Parliamentary inquiry. Whose time is it, sir?
Mr. Gowdy. I will reclaim my time--
Chairman Huizenga. It is the gentleman from North
Carolina's time.
Mr. Gowdy. I will reclaim my time.
I yield to the gentleman from South Carolina, Mr. Mulvaney.
Chairman Huizenga. Without objection, it is so ordered.
Mr. Mulvaney. Thank you. One of the reasons that we focus
so closely on these supposed discussions with the folks
overseas about getting out of the aircraft financing business
is the data that has been provided to us by Ms. Gianopoulos.
I read your reports. I have your reports. I have read your
testimony, which is pretty much a cut and paste of your last
report. And yet, we have data, real data, that says--if we can
get it up on the screen--that the Bank's exposure to the
aircraft market has gone up, not down. It is the dark blue at
the bottom. It is not going down. You are measuring it in such
a way where I think you can fill out a piece of paper that says
you are doing what you are supposed to do. But the real data
indicates that the exact opposite is happening. That is what is
causing us the difficulty, sir.
Other things cause us difficulties about this. Secretary
Lew was in front of the Financial Services Committee just a
couple of weeks ago, and I had a chance to ask him the same
question, a very similar question to what Mr. Gowdy asked you.
I asked him, ``Can you tell us who is in charge of these
negotiations?'' And he said he was going to have to get back to
me on that.
You identified him just a little while ago, in response to
Mr. Gowdy's questions, as somebody who was involved. Do you
think he would be able to recall if he was involved in those
discussions?
Mr. Sheets. Thank you. The mandate, as I understand it--
Mr. Mulvaney. I am not asking about the mandate. You said
that he was involved. Has Secretary Lew been directly involved
in the discussions that are mandated by the statute?
Mr. Sheets. Yes.
Mr. Mulvaney. Okay. We have asked him to provide us with
information. I am told by staff that you are the one
responsible for pulling those together. Are you, sir?
Mr. Sheets. I have not seen a request--
Mr. Mulvaney. You have not talked to Mr. Lew about this
since March 17th, when he appeared before the Financial
Services Committee?
Mr. Sheets. I have not seen a request. But as soon as we
see it, we will--
Mr. Mulvaney. And I am sorry to cut you off, but I have 8
seconds.
The last time this committee asked for information from
Treasury about this, it took 9 months to get the response. When
did we get it? Yesterday. Do you understand maybe, sir, why we
have this type of adversarial relationship?
Ms. Moore. Mr. Chairman?
Chairman Huizenga. The gentleman from North Carolina's time
has expired.
Does the gentlelady from Wisconsin have an inquiry?
Mr. Sheets. We do.
Ms. Moore. No. I just would question--the ranking member
did--
Chairman Huizenga. We will--
Mr. Mulvaney. --the ranking member went a minute-and-a-half
over.
Chairman Huizenga. The ranking member was not cut off. It
was--it was not the gentleman--
Mr. Mulvaney. Point of parliamentary inquiry?
Chairman Huizenga. The gentleman from Missouri was the one
whose time had expired.
Yes, gentleman from South Carolina? He withdraws. Okay.
Again, still seeing no Members on the Democrat side who are
eligible to be recognized in this first round, we will move on
to the gentleman from Georgia, Mr. Hice, for his 5 minutes.
Mr. Hice. Thank you, Mr. Chairman.
Mr. Hochberg, what information does the Bank publicly post
about either the Bank's transactions, suppliers, buyers or
other type information?
Mr. Hochberg. I am not exactly sure I understand the nature
of the question.
Mr. Hice. Well, data.gov, for instance. You post this type
of information for the public regarding transactions and buyers
and all that type of thing.
Mr. Hochberg. Right. We post data on data.gov for all
transactions.
Mr. Hice. Okay. Why did the Bank remove so much of the
dataset from the Federal Government's public site in the fall
of 2014?
Mr. Hochberg. We moved some of that data because we had
some complaints from customers, that they felt business
confidential information, names of their customers, pricing,
and so forth was included. So in an effort not to in any way
hurt any U.S. exporters, we took the data down, reviewed it,
and then put it back up within a few weeks.
Mr. Hice. When you put it back up, it came right after a
watchdog group, eximuncensored.com, posted some information.
And when you reposted, there was a lot of information that was
missing. Why was that missing?
Mr. Hochberg. We removed information at the request of
actual exporters because the last thing we want to do is
jeopardize their business. So we took out information that they
felt was business confidential, like who their customers are,
what their pricing is, but left the rest of the information in.
Mr. Hice. Without that information being posted, quite
frankly, how do we know whether or not applicants are being
treated fairly?
Mr. Hochberg. First of all, if applicants aren't being
treated fairly, they complain. So we would get complaints if
they are not--we took the data down in response to complaints
that they felt their business was being jeopardized. And we
took a look at it and we said we don't really need to post the
names and addresses of their exact customers.
Our customers--we all keep our customer list somewhat
confidential. When I was in business, we didn't share customer
lists with competitors. It is the same in this particular case.
And that is why data was removed and then promptly put back up.
Mr. Hice. Why did the Bank decide to remove information
regarding things like primary supplier of the Ex-Im
authorizations? Why was it necessary to remove that type of
information?
Mr. Hochberg. Again, we responded in response to customers,
exporters, small businesses that were concerned about trade
secrets and confidential information being revealed. So in
order to balance transparency and also protect businessess, we
tried to strike that balance.
Mr. Hice. Can you provide this committee with the request
for these companies' further information for us?
Mr. Hochberg. As long as I understand precisely what you
are asking for, we can provide it.
Mr. Hice. Yes. As to the information that was removed,
precisely what was removed?
Mr. Hochberg. What fields? I would be happy to do that. I
review that personally myself to say, why did you remove these
fields, do we need to? And we put many of them back up.
Mr. Hice. All right. Over half of the 27,000-plus
authorizations that were in the new dataset had ``NA'' listed
as their primary lender. I find that a bit odd. How do you
explain not having any information regarding the primary lender
for over half of the authorizations?
Mr. Hochberg. I would have to take a look at that data
and--
Mr. Hice. You have no idea why NA was placed on 27,000-plus
in place of a primary lender?
Mr. Hochberg. I can make conjecture. I don't want to do
that, sir. I would rather get you the exact facts.
Mr. Hice. If the Bank has this information, why is it no
longer available to the public?
Mr. Hochberg. I would have to look at the data, sir. And I
would be happy to get it to you. I just--I am not fully--
Mr. Hice. So you don't have a reason why it would not be
available? You may not know why it was left out but--
Mr. Hochberg. If we have the data, we would make it
available.
Mr. Hice. All right. The new dataset also lists NA as a
primary exporter for nearly 1,200 transactions. Do you have any
idea why that would be the case?
Mr. Hochberg. I would have to look--I will give you a full
report. I don't have it at my fingertips, what is the
percentage--
Mr. Hice. Doesn't it seem like this would be something that
would be at your fingertips?
Mr. Hochberg. Sir, I try and keep as much as I can at my
fingertips and in my head, but we all have our limits.
Mr. Hice. Why does the Bank have ``various'' and
``insurance'' listed as the country, the primary source of
repayment, and so forth, for 60 percent of these 27,000-plus
authorizations?
It is totally in the wrong place, the wrong things. It is
up here. We can get this information for you so you can look at
it. I know it is small. But you have various insurance listed
as the country, the primary source of repayment, and so forth.
Mr. Hochberg. We offer what are called ``multi-buyer
insurance policies.'' We have small businesses that sell to
dozens of companies. So frequently, that--we do not always list
every single customer they are selling to. Because it is a
blanket policy that covers many credits.
Chairman Huizenga. Sorry. The gentleman's time has expired.
Mr. Hice. Thank you, sir.
Chairman Huizenga. And again, seeing no Members on the
Democrat side who are eligible for this first round, we go to
Mr. Stutzman of Indiana for his 5 minutes.
Mr. Stutzman. Thank you, Mr. Chairman. And I appreciate the
panel for being here this morning.
I want to ask a question here. I will just first of all say
this to you all. I have been trying to keep an open mind about
this. And I understand the role that folks try to argue for the
reauthorization of Ex-Im. I did vote against the last
reauthorization. And I am inclined to do so again at this
point, considering the role that the Ex-Im Bank has played and
also the lack of transparency in the issues that we discussed
today.
Mr. Hochberg, could you answer the question that the
gentleman from Arizona was talking about earlier? What is the
number of U.S. exports in 2014?
Mr. Hochberg. Excuse me. The number of exporters that we
worked with?
Mr. Stutzman. Dollar amount in exports for 2014 from the
United States.
Mr. Hochberg. About $2.35 trillion.
Mr. Stutzman. About $2.35 trillion?
Mr. Hochberg. Correct.
Mr. Stutzman. And the business that you do in that is about
$112 billion?
Mr. Hochberg. No. We did--actually, we financed $27.5
billion worth of exports last year.
Mr. Stutzman. $27.5 billion?
Mr. Hochberg. Correct.
Mr. Stutzman. Out of $2.35 trillion?
Mr. Hochberg. That is correct.
Mr. Stutzman. Okay. So it was said earlier by the gentleman
from Pennsylvania that Ex-Im Bank is hugely successful. Would
you agree with that?
Mr. Hochberg. We act as a backstop. I would say we are
successful.
Mr. Stutzman. Okay. So out of $2.35 trillion, $27.5
billion, hugely successful. The question I am asking myself is,
why can't the private sector handle that small amount? It is
not that much in the grand scheme of things.
I want to go to--according to your competitiveness report,
both France and Germany provided more new medium- and long-term
export credit than the United States did in 2007; 5 years
later, we were providing more export credit than both countries
combined. China provides more than what we do. And in addition,
based on Treasury's own reports, it does not look like
congressionally-mandated negotiations to end export credit
subsidies are being taken seriously by the Department.
I worry that what might happen to Indiana's exporters as
these trends continue, especially with China's new role, it
could disrespect trade rules.
Let me ask you this. Suppose the world supply of exports
multiplies 3 or 4 times over the the next few years. Should Ex-
Im grow at that same rate?
Mr. Hochberg. Congressman, mostly what I have learned in my
6 years on the job is that we really stand to fill in the gap.
So when we have a small business--or in your own State,
Cummings Engine, they don't use us most of the time. But they
need us in a few select circumstances.
Mr. Stutzman. Should we just continue to grow at a certain
pace?
Mr. Hochberg. We only respond as filling in a gap. If a
company like Cummings or a small business that I visited, I
mentioned earlier, is a company called Zante needs us, we step
in. When they don't need us, we step away.
Mr. Stutzman. So again, $27.5 billion out of $2.35 trillion
can't be handled by the private sector, is what you are saying.
I want to ask you another question. I think most of us
would agree that in a perfect world, we wouldn't have export
credit agencies. Would you agree with that?
Mr. Hochberg. We just don't live in that perfect world.
Mr. Stutzman. Okay. So considering today's developing
economies, we have countries all around the world that are
growing. Have any of them approached you--or I would ask Mr.
Sheets at the Treasury--have any of them approached you about
how to develop an export-import model in those developing
countries?
Mr. Hochberg. From time to time, we have countries come
visit us and spend maybe a few days or a week with our staff to
learn what they can do to support their exports in their
countries.
Mr. Stutzman. Mr. Sheets?
Mr. Sheets. I haven't been involved in any of those
conversations, and I don't know of any regarding me or my
staff.
Mr. Stutzman. But would anybody on staff--if somebody came
to you all, would you help them develop a model so they
understand how an export-import model would work?
Mr. Sheets. Absolutely. Thinking through best practices and
how to frame an export-import bank would be something that we
could carry on a conversation with international counterparts
on quite productively.
Mr. Stutzman. But wouldn't that then directly contradict
the congressional mandate to eliminate global export subsidies?
Mr. Sheets. My focus is on the U.S. side of that equation.
But--
Mr. Stutzman. But if we are talking to any foreign entities
and they are wondering, how does an export-import model work,
wouldn't that violate the mandate?
Chairman Huizenga. The gentleman's time has expired. But I
will allow the answer, if that is all right.
Mr. Sheets. My answer to your question is it wouldn't, in
that the issue is gaps in market financing. And these countries
that don't have ex-im banks don't have well-developed financial
sectors.
Mr. Stutzman. Okay. Thank you, Mr. Chairman. It just seems
like we are contradicting ourselves on trying to eliminate the
competition.
Chairman Huizenga. And with that, we have reached the end
of our first round. We would like to entertain a brief second
round if that is okay with the panel, as well.
Chairman Jordan, the chairman of the Health Care, Benefits
and Administrative Rules Subcommittee, had been kind enough to
recognize me to speak first in that first round. And it is my
failure not to recognize him.
Chairman Jordan. I thank the gentleman.
Mr. McCarthy, you said you have 31 investigations, open
investigations related to fraud. Can you tell me--or more
importantly, can you assure this committee and the Congress
that none of those 31 are going to turn out like Mr. Gutierrez?
Mr. McCarthy. So the answer that I gave to this question
last summer is that we have--including the Mr. Gutierrez
investigation, we have some allegations of serious misconduct
and ineffective management.
Outside of that small number of investigations, we have not
developed evidence that there is widespread employee
involvement.
Chairman Jordan. You said earlier that most of these fraud
investigations involve a company seeking financing doing
something fraudulent to get the financing. So it comes from
outside?
Mr. McCarthy. That is correct.
Chairman Jordan. But that is exactly how Mr. Gutierrez's
situation played out, as well. Wasn't Impex the company,
basically a shell company trying to get financing? Mr.
Gutierrez complied with that and worked with that. And so that
fraud case that resulted in the indictment of Mr. Gutierrez
earlier this week started with a company doing exactly what you
allege most of these 31 open fraud investigations are about?
Mr. McCarthy. Without getting into the details--
Chairman Jordan. I am asking, is that accurate?
Mr. McCarthy. Without getting into the details of that
specific case, I can--
Chairman Jordan. I will give you the details. A 69-page
complaint filed in the U.S. District Court, southern district
of Florida, laid out how Impex Associates was little more than
an artifice to defraud the Bank. So it started off with an
outside organization entity trying to defraud the Bank. But
there was someone on the inside actually taking bribes and
committing fraud, and now he has been indicted.
Mr. McCarthy. And in those cases where we see those types
of outside frauds, we are taking a hard look at whether there
is employee complicity or participation in the scheme.
Chairman Jordan. Which takes me back to my question, you
have 31 of those open right now?
Mr. McCarthy. Right.
Chairman Jordan. We want to know, before this Congress is
asked to reauthorize something with all the problems that have
been cited here in today's hearing, can you assure us that none
of those other cases are like Mr. Gutierrez?
Mr. McCarthy. What I can assure you is that at this time,
those other cases that we are investigating do not have
evidence that we have developed of Ex-Im Bank employee internal
complicity or participation.
Chairman Jordan. Have you referred any of those other
cases, any of the 31, to the Justice Department?
Mr. McCarthy. We work routinely with the Justice Department
on most of our cases.
Chairman Jordan. Do you know if the Justice Department is
going to have--are we going to have an indictment tomorrow? Are
we going to have an indictment before the next Ex-Im hearing
that Chairman Hensarling has or Chairman Chaffetz has in this--
when is the next indictment coming?
Mr. McCarthy. There is a possibility that there will be
future indictments in this particular case. There is a
possibility there will be--
Chairman Jordan. Whoa, whoa, whoa. Wait a minute. That is a
big statement. You think there is a possibility of future
indictments in the Gutierrez case, or in some of the other 31
cases?
Mr. McCarthy. Both.
Chairman Jordan. Both? That is important information for
this committee and this Congress to understand. You made it
sound earlier like oh, no, no, these are people who filed some
wrong paperwork or something coming on the outside. But now you
are saying there is a possibility of future indictments
relative to the Gutierrez case and the other 31 open fraud
investigations; is that right?
Mr. McCarthy. What I am saying is that there is a
possibiliy of future indictments in the Gutierrez case. And in
the other 31 cases, there is a possibility of indictments in
those cases, as well. In those other cases--
Chairman Jordan. Whoa, whoa, whoa. What other cases? Now
you are going beyond 31. What other cases?
Mr. McCarthy. Within those 31 cases. I would not at this
time--
Chairman Jordan. But now--
Mr. McCarthy. --expect indictments of other Ex-Im
employees.
Chairman Jordan. So now you are getting to the point I
want. How do you define those 31 cases? When you testified here
last summer, The Wall Street Journal had just reported about
Mr. Gutierrez and three other people. You and Mr. Hochberg
wouldn't tell me who the three other people were; you wouldn't
even confirm Mr. Gutierrez in that hearing.
Were those four individuals--is that one case of fraud, or
are those four separate cases of fraud? How do you define it?
Mr. McCarthy. Those are three separate cases.
Chairman Jordan. Three cases.
Mr. McCarthy. But one of them involves Mr. Gutierrez and
another former Ex-Im employee. The other two cases involve one
employee each. Those are separate cases. And those cases have
been closed out and I have reported--
Chairman Jordan. How many individuals are involved in the
31? It can be a lot more than 31 based on what you just told
me. Is that accurate?
Mr. McCarthy. In many of our cases and indictments, we have
indictments of multiple individuals in these schemes.
Chairman Jordan. Okay. Mr. Chairman, I think that is huge.
There is a possibility we have future indictments coming. And
we have a decision to make here in a couple of months. That is
huge news and something I think this committee needed to know.
And I am glad that Mr. McCarthy was able to give us that
information.
I yield back.
Chairman Huizenga. The gentleman yields back.
With that, the Chair recognizes Ms. Moore of Wisconsin for
5 minutes.
Ms. Moore. Thank you so very much, Mr. Chairman. And thank
you, panel, for your patience with this second round.
There has been a lot of discussion about the 1992 bailout
of the Ex-Im Bank. And I guess maybe Ms. Gianopoulos is the
person that I need to ask about the restructuring of the Ex-Im
Bank since 1992 to the fee-for-service model. And are they in a
position for us to have to bail them out again?
Ms. Gianopoulos. It is difficult to say if we are going to
have to bail out the Bank again. Of course, some of our
recommendations over the past few years since the 2012
reauthorization have focused on the way that the Bank looks at
its portfolio risk management. And the Bank has been responsive
to almost all of the recommendations we have made since that
time to look at how they are calculating that loss.
Ms. Moore. Thank you so very much. There has been a lot of
discussion about the stress test that the Bank has undergone.
Mr. Hochberg, I want you to tell us how you have performed
under these stress tests.
Mr. Hochberg. Congresswoman, I think the most perfect
stress test we have had is the recession that we have just gone
through. And if I take a look at--I'm sorry. It was in my
written testimony. But our defaults, as reported to Congress,
in 2006 were a high of 1.6 percent. We have gone through the
worst recession, the most stressful time in not only our
economy, but the global economy. And as you can see in our
written testimony, our defaults have declined each and every
year since.
So that, in my opinion, is still the most perfect stress
test. On top of that, we do stress tests in our CFO's
department on a routine basis to look at different stresses in
our portfolio. But let's not forget that the recession created
a very perfect example of that.
Ms. Moore. I appreciate hearing that, particularly since
under Title I of Dodd-Frank, the globally-systemic risky banks
that we bailed out during 2008 have not yet submitted their
living wills, as mandated under Title I of 2010. So I would say
that there is a lot more risk from Wall Street and from the
banking community than there is with the Ex-Im Bank.
Let me ask this question: There has been a lot of
discussion of Delta. And so, there have been lawsuits. I think
Delta has really gone to court to suggest that the Ex-Im Bank
has put them in a very noncompetitive situation. I guess I
would like for the committee to hear what the results of those
lawsuits have been. Mr. Hochberg?
Mr. Hochberg. Thank you, Congresswoman Moore. Delta has
sued the Bank on four occasions. The courts have ruled in favor
of the Export-Import Bank in all four occasions and have not
found anything in their particular case.
The cases basically say that when we finance a foreign
carrier, could that potentially have damage to a U.S. company.
We review, as I have mentioned, every single transaction. Not
just in the aircraft, but the entire Bank. Any transaction over
$10 million, we look at for any potential harm.
The last thing we want do at the Export-Import Bank is harm
the U.S. economy and hurt the U.S. economy. So we look at--it
is called economic impact. We look at the positive benefits and
make an estimation with outside consultants about any potential
harm and we balance those two against each other.
So Delta has claimed that. We review every aircraft
transaction and found no evidence of it.
Ms. Moore. I guess, in my last minute, I will turn to Mr.
Sheets. Because we have heard an awful lot of talk about this
indictment of Mr. Gutierrez and potential indictments coming
down from Ex-Im Bank.
I just am so concerned about the lack of indictments for
what happened in 2008. And I am wondering if what we see in the
Ex-Im Bank indictments has nearly the globally-systemic impact
that we saw in 2008, where we have seen very few indictments
come down.
Mr. Sheets. The impact of the bank failures during 2008 and
2009 globally was of astronomical proportions. Not only here in
the United States, but the global implications of that were
literally beyond what I can calculate in terms of lost economic
output and jobs and human and psychic pain. I don't think that
these indictments are of a similar magnitude.
Chairman Huizenga. The gentlelady's time has expired.
Ms. Moore. Thank you, Mr. Chairman, for your indulgence.
Chairman Huizenga. Not a problem at all, my friend.
So with that, I am not seeing--I'm sorry. At this point,
the Chair would like to recognize Mr. Pittenger of North
Carolina for 5 minutes.
Mr. Pittenger. Thank you, Mr. Chairman.
Mr. Hochberg, in just a brief elevator speech, would you
kindly define for me your mission?
Mr. Hochberg. Our mission is to support U.S. jobs and
provide financing through the form of guarantees, insurance,
and loans, when the private sector is unwilling or unable to do
so--
Mr. Pittenger. You see your goal, your objective, a wide
range of business interests to try to support their objectives?
Mr. Hochberg. It is to support U.S. job growth.
Mr. Pittenger. And your loan portfolios, how much?
Mr. Hochberg. Approximately $112 billion.
Mr. Pittenger. $112 billion. What was that portfolio in
2013?
Mr. Hochberg. I have that right here, in fact. In 2013, it
was slightly higher. It was just under $114 billion.
Mr. Pittenger. $114 million?
Mr. Hochberg. Billion.
Mr. Pittenger. Billion.
Mr. Hochberg, you stated a few minutes ago that 90 percent
of your loans are made to small businesses, correct?
Mr. Hochberg. That is correct.
Mr. Pittenger. I am reading here that in 2013, according to
the Ex-Im Bank's own data, more than 60 percent of the Ex-Im
Bank's financing benefited just 10 large corporations.
Mr. Hochberg. I think what we have to remember,
Congressman, is those 10 corporations that you refer to all
have very deep supply chains. I was just in Georgia, a company
called Tomco, a small business that makes CO2--
Mr. Pittenger. But the people who borrow the money, they
are--
Mr. Hochberg. They are a supplier to GE. The way--the
reason--
Mr. Pittenger. I reclaim my time. The people who borrowed
the money were those large corporations, though, is that
correct?
Mr. Hochberg. And therefore pay the small businesses--
Mr. Pittenger. But the loans--let's be clear on the words
that were said. You said 90 percent of your loans were made to
small business.
Mr. Hochberg. No, 90 percent of the loans support small
business exports. We don't make--
Mr. Pittenger. --exports. Okay.
Mr. Hochberg. And even those 10 large companies you are
referring to, we are talking about their overseas customers,
not the company themselves.
Mr. Pittenger. I think we had a word change there. And that
is fine.
Mr. Hochberg, do you believe that you have an agenda in
your role? Do you have a policy preference? Do you believe that
your goal is to support all businesses and create jobs, or do
you have a selective interest in what you do?
Mr. Hochberg. We are looking to support U.S. job growth
that need us. We have a few mandates from Congress that we
obviously guide our efforts, as well.
Mr. Pittenger. Yes. And one of your mandates, of course, is
to support exports of green energy technology, is that right?
Mr. Hochberg. That is one of the three mandates we have.
Mr. Pittenger. That is right. And on the other hand, you
have adopted policies that permit almost no assistance to coal
projects, is that correct?
Mr. Hochberg. No, I would not say that is correct, sir.
Mr. Pittenger. Let me quote you. Upon announcement of these
guidelines, you were quoted as saying, ``Without guidelines or
limits, ever-increasing numbers of new coal plants worldwide
will just continue to emit more carbon pollution into the air
we breathe. I strongly support the Administration's efforts to
build an international consensus such that other nations follow
our lead in restricting financing of new coal-fired power
plants.''
That sounds like you have a pretty clear interest in
perpetuating your own agenda.
Mr. Hochberg. Congress has put in our charter since 1992 a
requirement that we look at the environmental impacts of any
export we supply. We have to look at the creditworthy and the
environmental impact. That goes back 23 years.
Mr. Pittenger. Okay. But this contrasts with what you just
said a minute ago, that you didn't have your own objectives.
But let me ask you as well, we looked at the
creditworthiness. In September of last year, the GAO reviewed
the Bank's underwriting procedures and found that the Bank
wasn't requiring simple things like using credit reports--we
talked a little bit about this, but I really want to delve into
it a little bit more--verifying that applicants did not have
any delinquent Federal debt, or even to merely inquire that all
documentation analysis be in the loan file before approval.
According to the GAO report--and if you would like, you can
give us an example which refutes this--your own manual did not
include instructions for loan officers to use credit reports
and for the inclusion of all required documents and analysis in
the loan file prior to approval.
``While Ex-Im's review process called for transaction
participants' information to be checked against various
databases, it did not include the recommended database that
identified delinquent debt of the transactions of
participants.'' Would you like to comment on that?
Mr. Hochberg. Congressman, I would say two things. We are
continually trying to improve our methods and do a better job
of underwriting. I was in business for 20 years, and that is
what every businessperson does. And we are trying to improve in
this case, as well.
One of the things we are looking at that we are having some
discussions on is how we look at other--I believe you are
referring to other outstanding debts that a company may have
before they can apply for a loan or guarantee from us.
Mr. Pittenger. I yield back my time.
Chairman Huizenga. The gentleman's time has expired.
With that, the Chair recognizes the ranking member of the
full Financial Services Committee, Representative Waters of
California.
Ms. Waters. Thank you very much.
Under Secretary Nathan Sheets, I am looking at an ad that
was placed in Politico. And this ad basically raises the
question, why all the applause? And they have the pictures of
Xi Jinping, the president of the People's Republic Of China;
Vladimir Putin, the president of the Russian Federation; and
Francois Hollande, the president of France.
And then it answers the question: They are applauding those
in Washington seeking to dismantle the U.S. Ex-Im Bank. And
then it asks, why? Because shutting down the U.S. Ex-Im Bank is
good for business and creates thousands of jobs in China, in
Russia, and in France. And then the ad goes on to say, ``Don't
let American jobs go overseas. Keep the playing field level for
American businesses. Reauthorize the Ex-Im Bank.''
Now, until recently, most large official providers of
export credits were a party to the OECD arrangement which, as
you know, sets limits on the rates and terms that government-
backed export credit agencies can provide to their exporters.
However, according to Ex-Im Bank's latest competitiveness
report, as of 2013, two-thirds of all official export credit
support went beyond OECD guidelines. Much of this unregulated
financing is offered by China, Brazil, India, and Russia on far
more generous terms than can be offered by Ex-Im Bank and other
members of the multilateral OECD arrangement.
Given this trend, it seems to me that this is exactly the
wrong time to be pushing to scale back or shut down the Bank
altogether. With many countries doubling down on their efforts
to spur growth by expanding exports with the support of export
credit financing, what would it take for these countries to
entertain U.S. efforts to push for a global reduction in export
credit support?
Moreover, how much leverage does the United States actually
have in pushing for a multilateral reduction in export credit
financing, when the world is well aware that efforts are
already under way in Congress to unilaterally shut down the Ex-
Im Bank?
We have been talking a lot about this today. And this ad,
even though it is about one of the proponents for
reauthorization, really does describe what we have been talking
about. How do these countries get away with ignoring the
arrangement? And how big are their efforts to do that?
Mr. Sheets. Thank you. As you point out, the moves towards
unilateral curtailment of export credits would put us in a much
weaker position in our negotiations vis-a-vis these important
emerging market economies that you describe.
I think the incentive that they have--and it is what is
driving this international working group and our efforts to
extend the protocols and the international agreements to
include the major emerging market economies--is a recognition
that they benefit from global integration. And that the only
way they can integrate sustainably into the global environment
is by playing by the rules of the game.
And this International Working Group is a vigorous effort
by the Treasury and others to bring them inside the periphery.
It is also, as I have said, a key objective in our multilateral
engagement and our bilateral engagement, to better articulate
these best practices and expand the periphery of export
guidelines to the extent that we can.
Ms. Waters. Thank you very much. And let me just say this,
I have not been one to go around waving the flag all the time.
But I feel like we have been pushed around. I feel like the
greatest country in the world is being not only pushed around,
but taken advantage of.
And while we sit here talking about closing down our
Export-Import Bank, we have people laughing at us and clapping
and applauding, hoping that we do it. And I don't like it. I
yield back the balance of my time.
Chairman Huizenga. The gentlelady yields back.
With that, the Chair recognizes the Chair of the full
Oversight and Government Reform Committee, Mr. Chaffetz, of
Utah.
Chairman Chaffetz. Thank you.
Mr. Hochberg, you indicated that you were in Panama with
the President of the United States. This is a $6-plus billion
transaction. What is Ex-Im's participation in that?
Mr. Hochberg. Thank you for giving me that opportunity. The
order is at $6.6 billion at list prices. That is not what the
airline will pay. We may do zero financing. I don't know what
we will do. It is really--that order is going to be over a 9-
to 12-year period. And we provide--we are there purely as a
backstop. Should the financial climate be such that they need
our--
Chairman Chaffetz. You did participate--sorry, my time is
short--in 2010 in the transaction--this is with Copa Airlines?
Mr. Hochberg. Yes.
Chairman Chaffetz. Yes. And in 2011, that was a value of
roughly $177 million?
Mr. Hochberg. I'm sorry. I am not sure I understand--you
are saying we did a Copa transaction for $177--
Chairman Chaffetz. In the past, how many Copa transactions
have you done?
Mr. Hochberg. I don't have that number off the top of my
head. I am happy to get it to you.
Chairman Chaffetz. It is in excess of $500 million. Would
that sound right?
Mr. Hochberg. That sounds like it is in the ballpark.
Chairman Chaffetz. Why would that be? Why do you have to
help--
Mr. Hochberg. Why? We are looking at U.S. jobs and we are--
Chairman Chaffetz. --okay, no, no. Before you filibuster
the rest of this, what proof do you require to know that they
can't get private sector financing? Why can't Copa get private
sector financing?
Mr. Hochberg. Copa does get a lot of private sector
financing. They just can't finance 100 percent of their fleet
privately.
Chairman Chaffetz. But how do you know that? Where do you
get this information?
Mr. Hochberg. We get that information both in talking to
the actual company, Copa, and we talk to banks and we get a
sense of what--
Chairman Chaffetz. Let me read what Copa says, a Copa
description of you, the Ex-Im Bank, ``The Export-Import Bank
provides guarantees to companies that purchase goods from U.S.
companies for export, enabling them to obtain financing at
substantially lower interest rates as compared to those that
they could obtain without a guarantee.'' That is true, isn't
it?
Mr. Hochberg. Actually, sir--
Chairman Chaffetz. It is true.
Mr. Hochberg. Let me answer the question. Do you want me to
answer the question--
Chairman Chaffetz. Yes. It is a yes-or-no question--is it
true or false?
Mr. Hochberg. We have doubled the price that airlines pay
for financing in the last 5 years.
Chairman Chaffetz. Is it true that you provide
substantially lower interest rates as compared to those they
could obtain without a guarantee? That is true, isn't it?
Mr. Hochberg. We don't lend them money, no. We provide a
guarantee. It is up to the bank to decide what the--
Chairman Chaffetz. And the American taxpayers are
responsible for that. They are on the hook for that.
Mr. Hochberg. They pay a fee. And they have--we have a loan
loss reserve that backs up--
Chairman Chaffetz. But what Copa states in their documents
is accurate, isn't it?
Mr. Hochberg. We don't make a loan to Copa. We provide a
guarantee to the bank.
Chairman Chaffetz. But you provide it at a substantially
lower rate than they could get with private financing.
Mr. Hochberg. But we don't--the rate is determined by the
bank, sir. It is not determined by the Ex-Im Bank. We don't
determine the rate.
Chairman Chaffetz. Is it a lower rate or not?
Mr. Hochberg. The bank essentially is buying insurance on
the loan.
Chairman Chaffetz. I am just asking if it is a lower rate
or not. It is lower than the private sector.
Mr. Hochberg. The private sector is making the loan with
our guarantee. We are not making the loan.
Chairman Chaffetz. But consequently, they get a lower rate.
Mr. Hochberg. The interest rate is determined by the bank
that is making the loan, not by us.
Chairman Chaffetz. Not for the guarantee.
Listen, what proof do you get from Copa, what
documentation--this is just one example--that they can't get
100 percent private sector financing?
Mr. Hochberg. We look at, do they need us, and we also look
at foreign competition. Our other goal is to level the playing
field. They have a choice of buying Boeing and Airbus. And part
of our charter says we need to level the playing field to make
sure that U.S. jobs are not put in jeopardy. This transaction
will support--
Chairman Chaffetz. The question is, what documentation do
you get? How do you--
Mr. Hochberg. It is in their application. They have to
assert and make a representation, just like they have to make
other representations in their application.
Chairman Chaffetz. Will you provide that to this committee?
Mr. Hochberg. That representation?
Chairman Chaffetz. The Copa.
Mr. Hochberg. We can provide that information.
Chairman Chaffetz. You will provide the Copa documentation
to this committee by when?
Mr. Hochberg. Within a week. I--
Chairman Chaffetz. Fair enough. In a week, you will provide
to this committee all the paperwork on Copa, correct?
Mr. Hochberg. We can provide that to you.
Chairman Chaffetz. Thank you. I appreciate it.
I yield back.
Chairman Huizenga. The gentleman yields back.
Seeing no eligible Members on the Democrat side at this
time, we will recognize Mr. Carter of Georgia for 5 minutes.
Mr. Carter. Thank you, Mr. Chairman. And thank all of you
for being here today. This is an issue that is very important
to me and of great interest to me and to my district.
Mr. Hochberg, can you, in your own words, describe to me
what the mission of the Ex-Im Bank is?
Mr. Hochberg. Let me try.
Mr. Carter. Please.
Mr. Hochberg. Our goal--our mission--
Mr. Carter. Quickly, if you don't mind.
Mr. Hochberg. Our mission is to support U.S. jobs and when
financing is not available in the private sector, or to level
the playing field with foreign competition.
Mr. Carter. Okay. Now, the line of questioning that you
just finished, you were talking about interest rates. And that
is of interest to me. You don't make the loans, you just
guarantee the loans?
Mr. Hochberg. Correct. We do make some loans, but not in
this particular case.
Mr. Carter. Let's talk about the wide-body jets. Because
that seems to be a point of contention. It seems to be what a
lot of people are concerned about. Do you make those loans?
Mr. Hochberg. We provide guarantees. We don't make those
directly.
Mr. Carter. Okay. It is my understanding that the Ex-Im
Bank has brought back over a billion dollars, almost a billion
dollars to the budget. Is that true?
Mr. Hochberg. We are actually--CBO has scored us for $1
billion for 2016. That was the original score that CBO--
Mr. Carter. Where does that money come from? If you are not
making loans, where are you making money?
Mr. Hochberg. No. That comes from fees and loans--well,
fees we collect. And we do--on a small number of direct loans,
we also make some interest.
Mr. Carter. Okay. Hang in with me here. Let me try to
explain to you where I am coming from.
Mr. Hochberg. Sure. Please.
Mr. Carter. There are a lot of things that I don't like in
this world. And I know that is hard to believe, but there are.
And I don't like cronyism. I don't bureaucracy. But more than
anything, I don't like debt. And I don't like the fact that our
country has $18 trillion in debt. I just despise it. I think it
is, as has been said, a threat to our national security.
And I am trying to look for ways to satisfy that debt and
to get rid of that debt. I don't want to do away with something
that is generating a billion dollars. But if you are not making
the loans--and what I am hearing from some of the critics is
that well, they make a loan to--they guarantee a loan to a
foreign country in order for that country to buy 12 wide-body
jets. And the loan is so good, the interest rate is so good, it
is almost as if they pay for 11 and get the 12th one free.
I don't like to hear that. That is not right. And I don't
think that is the mission of the Ex-Im Bank. I don't think that
is what you ought to be doing. Not only that, but we could have
made money. We could have made that money and put it toward our
national debt. Is that true?
Mr. Hochberg. Sir, we actually make money and help pay the
deficit. We sent $675 million for deficit reduction--
Mr. Carter. But the point is, if that is true, you could
have made more. I appreciate that. But we need a lot more. We
have $18 trillion in debt. That is a lot of money. That is a
lot of debt we have to satisfy. And we need more.
Is it true what I am hearing? I am asking you, is it true
that these companies, when they buy 12 jets, they get such a
good interest rate that they almost get a 13th one free?
Mr. Hochberg. No. I have never heard anything remotely
close to that assertion before. Never.
Mr. Carter. But you admitted just a little while ago that
they do get a better interest rate?
Mr. Hochberg. They pay more than any U.S. carrier ever pays
for interest. We actually--we verify, whenever we do a
transaction, that U.S. carriers borrow at far better rates than
any foreign carrier that we support.
Mr. Carter. But it just occurs to me--I am a small
businessman, and when I go to the bank to borrow money, I don't
get the same interest rate as a big company does. And I
understand that. I get that. I am a bigger risk. It appears to
me that is part of your mission, to fill that void there and to
help American companies to be able to get that backing and that
financing.
There is a price to that. And I just want to know, are you
maximizing that price?
Mr. Hochberg. Our job is to maximize jobs, not to maximize
price.
Mr. Carter. Okay. Well--
Mr. Hochberg. And let me just add, when it comes to wide-
body planes, sir, carriers--you refer to the Mideast. They can
buy an Airbus wide-body or a Boeing wide-body. We get the jobs
in America, we get the jobs in Europe. That is our choice.
Mr. Carter. I understand that. But, again, I think you are
missing a great opportunity here. And we need it. We need it
badly. And I need you to focus more on how we can generate more
income for this country. I don't want to raise taxes. Nobody
wants to raise taxes.
But if you ask me, because you are using the full faith and
backing of the U.S. Government, should we be making money off
of foreign countries and foreign companies? Yes. What is wrong
with that? We have $18 trillion in debt. We need to be making
it somewhere. Remember, I am a businessman. I am looking for
revenue.
Mr. Hochberg. We supported $27.5 billion worth of exports
last year alone.
Mr. Carter. That is fine. But again, you can do better.
Mr. Hochberg. That is money--that is--
Mr. Carter. But can we do better? That is my point.
Mr. Hochberg. We step back when the private sector can do
it. The only time we are stepping in is when the private sector
can't, or to level the playing field.
Mr. Carter. And there ought to be a price for that. That is
my point. You have it right there. That is my point. There
ought to be a price for that, for the full backing of the
United States Government.
Mr. Hochberg. That is where the $675 million is from.
Chairman Huizenga. The gentleman's time has expired.
Mr. Carter. Thank you, Mr. Chairman. That was the fastest 5
minutes I have ever seen.
Chairman Huizenga. It is amazing how quickly it goes. That
is very true. I believe that my ranking member has a unanimous
consent request.
Ms. Moore. Thank you so much, Mr. Chairman.
I would like to enter into the record an assessment that
demonstrates that government export credit pricing, Ex-Im Bank
pricing, is on par with commercial markets, and demonstrates
that the foreigners are paying more for credit than U.S.
borrowers.
Chairman Huizenga. Without objection, it is so ordered.
And with that, actually, I have my own unanimous consent
request. I would like to enter into the record a Wall Street
Journal article entitled, ``Officials at Ex-Im Bank Face
Investigations,'' which was dated June 23, 2014.
And without objection, it is so ordered.
The good news is, we are almost done. The bad news for some
of you is, you are almost done. I do have a brief moment here,
as well, to take my 5 minutes. I don't plan to take all 5
minutes.
But I do feel that this needs to be said. I appreciate, Mr.
McCarthy, you coming forward with that information regarding
some of the other potential situations that you see with some
of the Bank employees. I think it is unfortunate it took 2\1/2\
hours for us to get to that point. But that is important
information, nonetheless, to have.
Mr. Hochberg, I do want to ask you about the best places to
work in the Federal Government rankings report that has come
out. For those who aren't familiar with it, it is rankings that
include the views of over 92,000 Federal employees; 389 Federal
organizations are ranked according to overall employee
satisfaction and commitment, as well as 10 additional workplace
issues such as tragic management, teamwork, leadership, and
life/work balance.
The Partnership for Public Service uses the data from the
Office of Personnel Management (OPM) Federal employee viewpoint
survey, as well as surveys administered by 11 additional
agencies to put this into place.
In a resent survey conducted by the Partnership for Public
Service on the best to worst places to work in government,
unfortunately Ex-Im literally ranked dead last: 28 of 28 for
``effective leadership,'' in the most recent survey. This also
caught my eye, ``In the category of support of diversity, there
has been a decline of 20-points since 2009, since this
Administration has come into place.''
That 20-point decline has allowed Ex-Im to slide to 27th
out of 28 Federal best places to work. This is something else I
think is maybe relevant to what Mr. McCarthy is dealing with.
When asked if ``my organization's leaders maintain high
standards of honesty and integrity,'' only 42 percent said yes.
And asked whether they could ``disclose a suspected violation
of any law, rule, or regulation without fear of reprisal''--
this is whistle blowing--only 50 percent of the employees
responded yes, they would feel comfortable and felt that they
could disclose a violation of any law.
I don't know, Mr. McCarthy, if you are experiencing any of
that fear when you are going in and dealing with employees.
That would obviously be more than unfortunate if that is the
case. I don't know if you care to elaborate?
But Mr. Hochberg, my question to you is, why do you think
that is? And what are you doing about that?
Mr. Hochberg. We take that very seriously, Mr. Chairman. We
have had a number of stresses on the agency, and frankly, the
political environment has not helped. We were under
construction for the past 2 years. But I don't want to just
make those excuses.
I told you earlier in the hearing that we have made data
and improving our data quality one of our top four priorities
of the year. And the other one is improving the workplace
environment. I take that very seriously. I meet constantly with
employees. I meet with them informally, have coffee with
employees randomly selected every month. We have a number of
programs to make Ex-Im a more first-tier place to work.
But let's not mistake the fact that we have had the kind
of--the political environment, the threat of a shutdown has
certainly--for the last 3 years, our employees have been under
extreme stress on this.
Chairman Huizenga. But just a moment. This is not about
overall. This is a ranking. So everybody has experienced that--
Mr. Hochberg. None of them has experienced a shutdown--
Chairman Huizenga. --including my own employees who got
furloughed. And stresses of building, just ask the people in
Cannon, ask the people anywhere around. That is happening all
the time.
I guess my question to you, maybe to refine that is, would
you be willing to share with your committee and the oversight
committee here, subcommittees, specifically what your plan is?
Because I find it very disturbing that in the past 5 years, 6
years, this agency has slid 20 points in its ranking in support
of diversity.
If that is something that is important, we saw this--not--
this is not your bailiwick. But we saw some similar things with
the CFPB and other places, where there is a feeling that there
is a hostile work environment. And if you have 50 percent of
your employees who believe that they could come under some sort
of reprisal for being a whistleblower, that does not bode well.
That has nothing to do with workplace stress and whether
government is getting shut down--
This is extremely serious. I would anticipate you sharing
that with us. And I would assume my colleagues on the other
side of the aisle would be very, very concerned about that, as
well, and would like to have that.
With that, I would like to thank our witnesses, especially
those who maybe weren't as actively engaged in the
conversation. You may be thankful for that, as well. But we do
appreciate and value your time for appearing with us today.
The Chair notes that some Members may have additional
questions for this panel, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 5 legislative days for Members to submit written questions
to these witnesses and to place their responses in the record.
Also, without objection, Members will have 5 legislative days
to submit extraneous materials to the Chair for inclusion in
the record.
And if there is no further business, without objection, our
joint subcommittees stand adjourned.
[Whereupon, at 1:15 p.m., the hearing was adjourned.]
A P P E N D I X
April 15, 2015
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