[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]


                   EXAMINING THE EXPORT-IMPORT BANK'S.
                    REAUTHORIZATION REQUEST AND THE
                 GOVERNMENT'S ROLE IN EXPORT FINANCING

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

                                 HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              JUNE 3, 2015

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 114-29
                           
                           
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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
FRANK GUINTA, New Hampshire
SCOTT TIPTON, Colorado
ROGER WILLIAMS, Texas
BRUCE POLIQUIN, Maine
MIA LOVE, Utah
FRENCH HILL, Arkansas
TOM EMMER, Minnesota

                     Shannon McGahn, Staff Director
                    James H. Clinger, Chief Counsel
                            
                            
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    June 3, 2015.................................................     1
Appendix:
    June 3, 2015.................................................   109

                               WITNESSES
                        Wednesday, June 3, 2015

Boyle, Michael P., President and CEO, Boyle Energy Services & 
  Technology, Inc................................................    65
Cox, Rachael, Vice President, Business Development, Conway 
  Machine, Inc...................................................    63
Hirst, Richard B., Executive Vice President and Chief Legal 
  Officer, Delta Air Lines.......................................    70
Hochberg, Hon. Fred P., President and Chairman, Export-Import 
  Bank of the United States......................................     5
Ikenson, Daniel J., Director, Herbert A. Stiefel Center for Trade 
  Policy Studies, Cato Institute.................................    61
McCarthy, Michael T., Deputy Inspector General, Export-Import 
  Bank of the United States......................................     7
Murphy, John, Senior Vice President, International Policy, U.S. 
  Chamber of Commerce............................................    68
Smith, Clifford, Executive Vice President, Business Development, 
  Cliffs Natural Resources Inc...................................    66

                                APPENDIX

Prepared statements:
    Beatty, Hon. Joyce...........................................   110
    Sinema, Hon. Kyrsten.........................................   113
    Boyle, Michael P.............................................   114
    Cox, Rachael.................................................   118
    Hirst, Richard B.............................................   121
    Hochberg, Hon. Fred P........................................   144
    Ikenson, Daniel J............................................   170
    McCarthy, Michael T..........................................   180
    Murphy, John.................................................   189
    Smith, Clifford..............................................   196

              Additional Material Submitted for the Record

Hensarling, Hon. Jeb:
    Letter from Delta Air Lines to Ex-Im Bank, dated April 23, 
      2014.......................................................   199
    Written statement of the National Association of 
      Manufacturers..............................................   203
Fincher, Hon. Stephen:
    Letter to Members of Congress from 1,053 organizations urging 
      support for long-term reauthorization of the Export-Import 
      Bank.......................................................   211
Foster, Hon. Bill:
    Chart entitled, ``U.S. Manufacturing Jobs Since 1961''.......   224
Sherman, Hon. Brad:
    ``Treasury Report to the Committee on Banking, Housing, and 
      Urban Affairs of the Senate and the Committee on Financial 
      Services of the House of Representatives on Export Credit 
      Negotiations,'' dated November 2012........................   225
    ``Treasury Report to the Committee on Banking, Housing, and 
      Urban Affairs of the Senate and the Committee on Financial 
      Services of the House of Representatives on Export Credit 
      Negotiations,'' dated December 2013........................   230
    ``Treasury Report to the Committee on Banking, Housing, and 
      Urban Affairs of the Senate and the Committee on Financial 
      Services of the House of Representatives on Export Credit 
      Negotiations,'' dated December 2014........................   236
Wagner, Hon. Ann:
    Letter to Members of Congress from 1,053 organizations urging 
      support for long-term reauthorization of the Export-Import 
      Bank.......................................................   241
Waters, Hon. Maxine:
    Letter to Members of Congress from 1,053 organizations urging 
      support for long-term reauthorization of the Export-Import 
      Bank.......................................................   241
    Written statement of the Bankers Association for Finance and 
      Trade (BAFT) and the Financial Services Roundtable (FSR)...   254
    ``GOL Issues $41 Million Ex-Im Bank-Guaranteed Bond for 
      Services Exported by Delta TechOps, MRO Division of Delta 
      Air Lines,'' dated March 25, 2014..........................   263
Hochberg, Hon. Fred P.:
    Written responses to questions for the record submitted by 
      Representatives Murphy and Westmoreland....................   266

 
                   EXAMINING THE EXPORT-IMPORT BANK'S
                    REAUTHORIZATION REQUEST AND THE
                 GOVERNMENT'S ROLE IN EXPORT FINANCING

                              ----------                              


                        Wednesday, June 3, 2015

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:05 a.m., in 
room 2128, Rayburn House Office Building, Hon. Jeb Hensarling 
[chairman of the committee] presiding.
    Members present: Representatives Hensarling, King, Royce, 
Lucas, Garrett, Neugebauer, McHenry, Pearce, Posey, 
Fitzpatrick, Westmoreland, Luetkemeyer, Huizenga, Duffy, Hurt, 
Stivers, Fincher, Stutzman, Mulvaney, Hultgren, Ross, 
Pittenger, Wagner, Barr, Rothfus, Messer, Schweikert, Guinta, 
Tipton, Williams, Poliquin, Love, Hill, Emmer; Waters, Maloney, 
Velazquez, Sherman, Meeks, Capuano, Hinojosa, Clay, Lynch, 
Green, Cleaver, Moore, Ellison, Himes, Carney, Sewell, Foster, 
Kildee, Murphy, Delaney, Sinema, Beatty, Heck, and Vargas.
    Chairman Hensarling. The Financial Services Committee will 
come to order.
    Without objection, the Chair is authorized to declare a 
recess of the committee at any time.
    Today's hearing is entitled, ``Examining the Export-Import 
Bank's Reauthorization Request and the Government's Role in 
Export Financing.'' This is our third hearing on Ex-Im this 
Congress, and our fifth in the last 24 months. So, for better 
or for worse, rarely has such a small agency received so much 
attention by our committee.
    I now recognize myself for 3 minutes to give an opening 
statement. I begin my comments by admitting that Republicans on 
my side of the aisle are split on the issue of Ex-Im 
reauthorization. I certainly respect the arguments of those who 
support H.R. 597, and I look forward to continuing our debate. 
I do understand that one person's corporate welfare and 
politically driven capital allocation is another person's vital 
export support program and level playing field.
    However, understanding my Democrat colleagues' arguments is 
proving to be more challenging. They claim that Ex-Im is 
essential to supporting jobs, but I would ask most of my 
Democratic friends, where was your concern for jobs when you 
voted for ObamaCare, which according to the Congressional 
Budget Office is going to lead to 2.5 million fewer jobs in our 
economy? Where was your concern for jobs when your party voted 
against the Keystone Pipeline and the 42,000 jobs the State 
Department says are connected to it? Where was your concern for 
45,000 jobs when most of your caucus voted against legislation 
to advance construction of LNG export products?
    Democrats claim Ex-Im is essential to U.S. trade, but 
almost 99 percent of all U.S. exports are financed without Ex-
Im. If my Democrat friends are so concerned about trade, why 
are so many of them opposing trade promotion authority (TPA)? 
No less a Democrat than President Obama himself says that TPA 
will create more jobs and expand economic opportunities for 
middle-income Americans.
    The National Association of Manufacturers reports that over 
half of the structural cost disadvantage suffered by American 
exporters comes from our corporate tax system. Yet few, if any, 
Democrats support a fairer, flatter tax system, much less 
reducing our corporate tax rate, the highest in the 
industrialized world. Now, how many times have we heard 
Democrats vilify Wall Street banks, yet the big banks profit 
off Ex-Im like few others. The latest data I have seen shows 
JPMorgan Chase received $5.1 billion in assistance; Citigroup, 
$1.5 billion; Wells Fargo, $.5 billion; and HSBC, almost $1 
billion. They all profit from Ex-Im, and as far as I can see, 
they all vigorously support its reauthorization. After all, 
they have hard-working taxpayers to bail out any Wall Street 
losses.
    As one Citigroup managing director recently said, ``There 
is nothing that a commercial bank loves more than guaranteed 
financing.'' Another Wall Street banker was quoted in the press 
saying that Ex-Im guarantees are ``free money'' for the big 
banks. By reauthorizing Ex-Im, my Democratic colleagues are 
simply throwing Wall Street a big wet kiss.
    Just 6 weeks ago, the ranking member asked the question, 
``Why is it that the richest of the folks in the businesses in 
this country who have so many paid lobbyists are able to direct 
the public policy in ways the average citizen cannot do?''
    Boeing, which receives fully one-third of Ex-Im support, 
spent $35 million in lobbying expenses in the last Congress to 
help keep Ex-Im afloat. Their top 5 executives made $48.6 
million in 2013 alone. The public reports from other top 
beneficiaries like GE, Caterpillar, and Exxon Mobil all look 
pretty similar. So I would say to my friend the ranking member, 
perhaps their paid lobbying is so successful and their 
executives are getting so rich because you are doing everything 
you can to help them.
    To support more robust economic growth and economic 
justice, not to mention economic equal opportunity for all, it 
is time to wind down Ex-Im. I now recognize the ranking member 
for 3 minutes.
    Ms. Waters. Thank you, Mr. Chairman.
    It is the eleventh hour for the Export-Import Bank, only 14 
legislative days remain until this engine of economic growth 
shuts down.
    For 2 years, Democrats on this committee and many 
Republicans have asked the chairman to listen to reason with 
respect to the Export-Import Bank's reauthorization. We have 
pushed for action in this committee because for the thousands 
of American jobs and businesses across every one of our States 
and districts that count on Ex-Im support, the stakes are high. 
With 190 Democrats on record in support of a multiyear 
extension of the Bank's charter, and 59 Republicans on a 
separate reauthorization measure, including 5 on this very 
committee, the facts are unequivocal: A majority of the Members 
of the Financial Services Committee and of the House of 
Representatives support keeping the Export-Import Bank up and 
running for the long term.
    In light of the staunch opposition from this chairman, I 
would like to take a minute to thank Representative Stephen 
Fincher for having the courage to stand up for what he believes 
is right by offering legislation that commits to a long-term 
reauthorization of the Bank. Unfortunately, despite the fact 
that the Bank faces closure in just 14 legislative days, these 
two bills to reauthorize its charter are gathering dust in the 
chairman's office.
    Mr. Chairman, while you continue playing games with the 
Export-Import Bank, today we will do our best to remind you of 
the real people who will be impacted by shutting it down. Later 
in this hearing, you will hear from Michael Boyle, chief 
executive officer of Boyle Energy Services and Technology. Mr. 
Boyle is a Republican, and his energy firm is located in 
Manchester, New Hampshire, right from the district of 
Representative Guinta. He is going to tell this committee about 
how the Export-Import Bank took his business of 8 employees and 
helped it expand to 60 presently. For some reason, that engine 
of economic growth which allowed Mr. Boyle to grow and expand 
his business is the latest ideological target of this 
committee.
    Mr. Chairman, we are not legislating in a vacuum. Closing 
the Export-Import Bank will have real consequences for 
businesses trying to survive in an increasingly competitive 
marketplace. I am disappointed that this game continues, and I 
yield back my time.
    Chairman Hensarling. The gentlelady yields back.
    The Chair now recognizes the gentleman from Michigan, Mr. 
Huizenga, the chairman of our Monetary Policy and Trade 
Subcommittee, for 2 minutes.
    Mr. Huizenga. Thank you, Mr. Chairman. I appreciate you 
holding this hearing to further examine the Export-Import 
Bank's reauthorization request. As I have stated before, I am 
dismayed that some of the best American companies believe that 
they need special programs and carve-outs like Ex-Im to remain 
competitive on the global stage as opposed to dealing with what 
I believe are the true hurdles, tax reform as well as 
regulatory reform.
    If we allow a select few companies to determine the outcome 
of the Ex-Im Bank, what happens when we do try to work out 
reform of our Tax Code? What happens when we actually try to 
close loopholes? How can we address social entitlement programs 
if Congress is unwilling to address corporate entitlement 
programs as well?
    In 2012, although I voted ``no,'' Congress reauthorized Ex-
Im while mandating several modest reform provisions that shared 
broad bipartisan support. These reforms were viewed as vital. I 
voted ``no'' because I was concerned that the bill was actually 
nothing more than window dressing. Although these reforms were 
intended to better protect taxpayers and make the Export-Import 
Bank more accountable, the Bank and Treasury continued to 
ignore congressional intent and instead operated with too 
little accountability with regard to the interests of hard-
working American taxpayers. It looks like, unfortunately, I was 
right in 2012. American taxpayers have been unwittingly 
propping up foreign state-owned programs in Saudi Arabia, 
Russia, Colombia, Ethiopia, South Africa, et cetera, while 
others have done nothing but work against the best interests of 
American taxpayers.
    Additionally, the Export-Import Bank has an unsavory track 
record involving corruption, bribery, and fraud. The acting 
inspector general of the Export-Import Bank testified in our 
joint hearings with the Oversight and Government Reform 
Committee that 47 people have been convicted of defrauding the 
Bank in the past 5 years, and that there are at least 31 open 
investigations with a potential for even more indictments. The 
more that is unearthed about the Export-Import Bank, the more 
concerned I become. While the goals and objectives of the Bank 
may be admirable, the current state of the Bank is abhorrent at 
best. Why should Congress spend taxpayer dollars on an 
organization that has reestablished a track record of 
corruption? Why should American tax dollars be used to finance 
foreign government-owned or operated companies that compete 
against American workers? Why should the hard-working taxpayers 
take on unnecessary risk when private companies refuse to do 
so? Unfortunately for the folks at Ex-Im, I have come to the 
conclusion that the Export-Import Bank is beyond broken, and 
that it is time for the Bank's charter to expire.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentlelady from Wisconsin, Ms. 
Moore, ranking member of our Monetary Policy and Trade 
Subcommittee, for 1 minute.
    Ms. Moore. Thank you so much, Mr. Chairman.
    This is an important hearing, as the Export-Import Bank's 
charter expires at the end of this month. After several of 
these hearings, what do we know? In 2012, a number of 
substantive reforms were made by Congress, and the Bank has 
implemented an overwhelming number of them. We know that 
private finance supports the Bank, cannot fill the void, and 
that the Bank is not crowding out private capital. And it is a 
straw man fallacious argument about it being corporate welfare 
designed to undermine the social safety net for people.
    We know that the Bank operates with a low default rate with 
meaningful and vigorous oversight by the inspector general 
(IG). We know the Bank supports good jobs and small businesses 
in the United States of America. The counterpoint we will hear 
today from some libertarian academics is the claim that the 
Bank somehow creates hidden costs for some companies. But I 
think the best evidence against this case they are trying to 
make is that several firms mentioned in the research as being 
hurt by the Bank, such as Nucor and AK, still support the Bank. 
I yield back.
    Chairman Hensarling. The time of the gentlelady has 
expired.
    The Chair now recognizes the gentleman from Washington, Mr. 
Heck, for 1 minute.
    Mr. Heck. Thank you, Mr. Chairman.
    We should be skeptical of government lending programs 
because private markets are generally better at allocating 
credit and it is easy, maybe even reasonable, to become cynical 
about our political process.
    If a company comes to me and says they are hurt by Ex-Im, I 
worry for their employees, but we owe this topic more than a 
gut-level skepticism and easy cynicism. Our job as Members of 
Congress is to get information on how the world actually works 
and base our policy on that.
    Stephen Fincher has set the example. He came to Congress as 
a skeptic of Ex-Im, asked questions, voted ``no'' initially, 
replaced that skepticism with facts, and came to see the 
critical need for the Bank. Today is an opportunity for all of 
us to do that.
    Afraid that the Ex-Im is undercutting private banks? Ask 
Mr. Murphy whether the banks see it that way.
    Cynical that Ex-Im only helps big companies like Boeing? Go 
to Ex-Im and see who gets support in your district.
    Skeptical that there is really a need for government to be 
making these loans? Ask Mr. Boyle about the alternatives for 
small business. Frankly, there are none.
    Thank you, Mr. Chairman.
    Chairman Hensarling. The time of the gentleman has expired. 
We will now turn to our witnesses.
    For our first panel, we welcome the testimony of the 
Honorable Fred Hochberg, the president and chairman of the 
Export-Import Bank; and Mr. Michael McCarthy, the deputy 
inspector general of the Export-Import Bank. Each of you will 
be recognized for 5 minutes to give an oral summary of your 
testimony.
    And without objection, each of your written statements will 
be made a part of the record.
    Chairman Hochberg, you are now recognized for your 
testimony.

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

    Mr. Hochberg. Thank you.
    Chairman Hensarling, Ranking Member Waters, and 
distinguished members of the committee, thank you for inviting 
me today to testify before you about how Ex-Im equips small 
businesses, U.S. businesses, to compete in the global economy 
and add jobs here at home. Ex-Im complements and works with the 
private sector. We provide private sector backstop financing so 
American entrepreneurs can seize global opportunities, create 
jobs, and not get left behind by their foreign rivals. And we 
have been successful, supporting 164,000 jobs last year alone. 
Ex-Im does not pick winners and losers, rather it serves any 
eligible American business seeking competitive financing to 
export. We are, by definition, demand-driven.
    Of course, our customers pay fees and interest for this 
service, and as a result, Ex-Im is completely self-sustaining. 
Last year alone, Ex-Im generated $675 million for the taxpayers 
for deficit reduction. If Ex-Im Bank is not reauthorized, we 
will no longer generate $.5 billion for the taxpayer. On top of 
this, we have truly focused on risk management, demonstrated by 
our low default rate of 0.167 percent as of March 2015. And as 
you know, in 2012 Ex-Im was reauthorized by overwhelming 
bipartisan support. And today, 250 House Members have 
cosponsored legislation aimed at giving Ex-Im a long-term 
reauthorization.
    I take seriously my duty to implement the will of Congress. 
That is why I have provided each of you with all of the 
documentation outlining Ex-Im's implementation of every single 
requirement from the 2012 reauthorization, and why I will work 
diligently to implement any future requirements that Congress 
chooses to impose. In addition, Ex-Im continuously acts to 
proactively implement risk-management improvements to further 
ensure that we remain faithful stewards of taxpayer dollars. To 
name just two, we increased our staffing in asset monitoring by 
33 percent, and we went beyond all Federal requirements and 
required mandatory ethics training of every single employee.
    Of course, any organization can experience a bad apple, and 
let me underscore, Ex-Im has zero tolerance for fraud, waste, 
and abuse, and works closely with the IG to take thorough and 
immediate action when any hint of misconduct is detected.
    In the last 6 years, there has been exactly one indictment 
involving an Ex-Im employee, a situation that was uncovered 
thanks to a tip from a fellow employee. This infraction goes 
back to 2006 during the Bush Administration, before Ex-Im had 
an inspector general.
    Unfortunately, there are always those outside of the agency 
who will try and defraud the government. Ex-Im has 31 such 
cases. The Social Security Administration had over 16,000 in 
the last 2 years, and DOD had more than 6,000 last year alone. 
The point is, there will always be outsiders who attempt to 
defraud the government. But, frankly, thanks to our focus on 
fraud detection and risk management, Ex-Im has a track record 
of successfully protecting the public trust.
    Meanwhile, global competition has ramped up, and since our 
last reauthorization, it will continue to. American businesses 
and workers aren't simply competing against their Chinese, 
Russian, and French counterparts. Often, they are competing 
against countries. However, Congress has made it clear; they 
have asked the Treasury Secretary to ratchet down export 
credits. And while it is the Secretary's responsibility, as I 
said, I take the will of Congress seriously.
    As a result, I recently met with many of my foreign 
counterparts to discuss exactly that topic. And here is what I 
heard: To the contrary, our counterparts intend to accelerate 
financial backing for exports. Their role is clear: When 
commercial banks constrict financing, export credit agencies 
fill the gap so their domestic exporters don't lose sales or 
jobs.
    Ex-Im Bank is like a firetruck in that sense. You don't 
sell off the firetruck just because there is a fire currently 
burning.
    In closing, as this committee is aware, businesses need 
certainty to make long-term plans to grow, hire, and innovate. 
There are now about 80 other export credit agencies around the 
world fighting for jobs. And unlike Ex-Im Bank, one of China's 
export credit agencies recently noted that they doubled their 
activity in 2014 and expect to double it again in the next year 
or two. We look forward to working with you to continue 
empowering your constituents to export more and to hire more 
American workers.
    Thank you, and I look forward to your questions.
    [The prepared statement of Mr. Hochberg can be found on 
page 144 of the appendix.]
    Chairman Hensarling. Thank you, Chairman Hochberg.
    Mr. McCarthy, you are now recognized for your testimony.

  STATEMENT OF MICHAEL T. MCCARTHY, DEPUTY INSPECTOR GENERAL, 
            EXPORT-IMPORT BANK OF THE UNITED STATES

    Mr. McCarthy. Thank you, Chairman Hensarling, Ranking 
Member Waters, and members of the committee. I am pleased to be 
here to present the work of the Export-Import Bank Office of 
Inspector General (OIG). The committee has my 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. The committee has 
asked me to discuss investigations into fraud at the Bank, 
recent court activity, and recommendations to improve risk 
management and prevent misconduct. Let me briefly cover a few 
highlights.
    Since 2009, OIG investigations into fraud schemes that 
target Ex-Im Bank have yielded 84 criminal indictments and 
informations, 50 convictions, and $255 million in judgments and 
repayments. The most common fraud schemes we have encountered 
involve outside parties obtaining loans or guarantees through 
false representations and submission of false documents. We 
work closely with the Bank's Asset Management Division, which 
makes referrals of transactions or claims with indicators of 
fraud. We currently have 30 open investigations, and nearly all 
of them address outside persons committing fraud against the 
Bank and have no indications of Ex-Im employee involvement. 
However, one of those fraud cases involves former Ex-Im loan 
officer Johnny Gutierrez, who recently pleaded guilt to one 
count of bribery of a public official. Mr. Gutierrez admitted 
accepting more than $78,000 in bribes in return for 
recommending the approval of unqualified loan applications, 
among other misconduct. This case remains an active fraud 
investigation against other parties.
    We have closed other employee integrity cases in the past 
year that led to findings of misconduct and personnel being 
separated from employment at the Bank but not criminal charges. 
As I have previously testified, our open investigations are at 
various stages, and working with the Department of Justice, 
some cases may result in prosecutions for bank fraud and money 
laundering. At this time, I would not expect charges against 
any other Ex-Im Bank employees from our current caseload.
    As to our recommendations, we have 48 open and unresolved 
recommendations: 24 from the current fiscal year; and 24 from 
prior fiscal years. My written testimony summarizes our most 
recent audit and inspection work. Our independent audit of the 
Bank's financial statements found that they were fairly 
presented in all material respects and had no material 
weaknesses. Our audits also found substantial compliance with 
the cybersecurity requirements of the Federal Information 
Security Management Act (FISMA) and found that internal 
controls for the short-term multibuyer insurance program 
provided reasonable assurance of compliance. Our inspection of 
transactions in Ghana found that one project was appropriately 
structured and was performing, while we identified engineers 
issues with another transaction and made recommendations for 
improvement going forward.
    Finally, a recent annual audit found noncompliance with the 
Improper Payments Act, and we recommended changes to the risk-
assessment process, which the Bank is implementing.
    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 the Bank 
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 outside 
exposures 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 
noncredit 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 previously found that internal policies 
providing clear guidance to staff had 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.
    Mr. Chairman, this concludes my statement. I am happy to 
answer questions.
    [The prepared statement of Mr. McCarthy can be found on 
page 180 of the appendix.]
    Chairman Hensarling. Thank you.
    The Chair now recognizes himself for 5 minutes of 
questions.
    Chairman Hochberg, last month the Richmond Federal Reserve 
updated a report called the ``Bailout Barometer.'' Is there any 
chance that this might have come across your desk?
    Mr. Hochberg. No, it did not.
    Chairman Hensarling. In this report, the Richmond Fed 
states that roughly 60 percent of all financial transactions in 
our economy are now either explicitly or implicitly backed by 
the Federal Government, up about a third since the financial 
crisis. In your testimony, you have a chart showing that 
taxpayer exposure has roughly doubled from $58 billion to $112 
billion over this same time period, is that correct?
    Mr. Hochberg. Yes, that sounds right.
    Chairman Hensarling. In the ``Bailout Barometer'' report, 
the Richmond Fed says, ``This protection could make financial 
crises and bailouts more likely.''
    I would commend it to your reading at some time.
    Chairman Hochberg, in our last hearing we spoke about Ex-Im 
financing different foreign state-owned enterprises. In fact, 
do you have a statistic of the financial assistance, how much 
of it goes to state-owned enterprises?
    Mr. Hochberg. I couldn't give you a precise number. I think 
the difference, Mr. Chairman, is that we have a capitalist 
society. We have far more private sector enterprises--
    Chairman Hensarling. But you admit that it includes a 
number of state-owned enterprises like Pemex in Mexico, which I 
believe is one of the largest recipients; Air India in India; 
and ICBC Leasing in China. We had a rather robust discussion 
about Ex-Im's support of China. I think there is currently, at 
the end of the last fiscal year, $4.5 billion in exposure to 
China. And I think the vast majority of that, according to your 
records, is to state-owned enterprises. Several Members, 
including myself, essentially asked you the question, ``How are 
we supposed to compete with China by subsidizing China?'' And 
your reply was, ``It is a complicated world out there.''
    Let me try to ask simple questions, then. In your opinion, 
do state-owned Ex-Im-supported foreign airlines like Air China 
compete with American carriers and their employees?
    Mr. Hochberg. We deploy an economic impact review any time 
we do a loan to any--
    Chairman Hensarling. I understand that. I am just asking 
your opinion. Do you believe they compete or not?
    Mr. Hochberg. Everybody is competing for airline 
passengers, yes.
    Chairman Hensarling. So you believe that China Air is 
competing with American carriers. How about the Ex-Im-supported 
foreign refineries like STAR Refinery in Turkey. Do they 
compete with American refineries?
    Mr. Hochberg. Yes. It is a global world, sir.
    Chairman Hensarling. Okay. In your written testimony, you 
state more than once, and you also say in your oral testimony 
that Ex-Im doesn't pick winners and losers. I don't know what 
is on your schedule for this afternoon. I would commend that 
you stick around for the second panel. Maybe you would change 
your mind because when you finance a state-owned airline, you 
are making Boeing a winner, and Delta a loser. You can hear 
Delta's testimony later on today. When you finance a Turkish 
refinery, you make Fluor a winner, and you make Valero a loser. 
When you finance an Australian mining project, you make 
Caterpillar a winner, and you make Cliffs Natural Resources a 
loser. You can hear their testimony later on today. And 
according to the Congressional Budget Office, if you were 
forced to use fair value accounting like the rest of America, 
you would be making the taxpayer a loser as well. So if you 
have the time, I would commend the second panel to your 
attention.
    You also brought up in your testimony, and you have it here 
as well, a report as an appendix to your testimony entitled, 
``Every Reform Completed,'' but when you look at the reforms, 
so-called reforms of the 2012 reauthorization, what I see in 
your report are the words ``plan,'' ``study,'' ``monitor,'' 
``report,'' ``notice,'' ``comment,'' ``categorize,'' 
``examine,'' and ``review.'' I know this was something that was 
authorized by Congress, but Chairman Hochberg, I think there 
are only two real reforms for most people in the 2012 
reauthorization. One is Section 11, which mandated that 
Treasury initiate negotiations to substantially reduce, with 
the ultimate goal of eliminating, subsidized export financing. 
You stated that this is completed annually by the U.S. 
Department of the Treasury. Not only is it not completed, there 
is scant evidence it has ever been started.
    Section 12 requires the Bank to develop and make publicly 
available methodological guidelines to be used for conducting 
economic analysis. I think, according to The Wall Street 
Journal, in conducting this analysis, you allegedly allowed 
your largest customer, Boeing, the ultimate beneficiary, to 
write the rules--as The Wall Street Journal said itself, ``an 
extraordinary level of cooperation.'' Also, according to The 
Wall Street Journal, ``The collaboration appears to have 
worked. In the nearly 2 years since the rule went into effect, 
no Boeing sales have been nixed as a result.
    My point is, Chairman Hochberg, you might report, you might 
plan, you might study, but I am not sure you actually manage to 
enforce the only reforms that counted in the reauthorization. I 
see I am over my time.
    I now yield to the ranking member for 5 minutes.
    Ms. Waters. Mr. Hochberg, I thank you for coming over one 
more time to explain to my chairman and the members on the 
opposite side of the aisle what harm they are doing to the 
American economy and how they are disrespectful of and not 
recognizing the trade deficit that we have and how the work 
that the Bank is doing with 2 percent of our exports and 
dealing with our competitiveness issue.
    I thank you for all of that. But what I would like you to 
do is to take China and two or three other countries that give 
such support to the export industry and talk about how they 
hope we will not reauthorize this Bank and what this means for 
their economy and what it means for our economy.
    Mr. Hochberg. Thank you, Ranking Member Waters. China alone 
is not a part of any OECD, any part of global framework. So one 
of the difficulties we have is that they don't follow the 
rules. They are not transparent. They don't follow any 
guidelines. And they have said point blank that they will do 
whatever it takes to further their exports and further their 
trade increase.
    China has up to four different export credit agencies that 
actually finance their exports, all government-sponsored, all 
government-backed, with not a lot of transparency and not a lot 
of accountability.
    One of them alone, Sinosure, which does insurance long term 
and short term, did about $670 billion in the last 2 years. It 
took Ex-Im Bank 80 years to get to $590 billion, and they have 
done that in 2 years. They have also indicated they doubled, 
and they plan to double again in the next 1 to 2 years. And 
Korea is also exceedingly aggressive, as are Japan and a number 
of others, particularly in Asia.
    Ms. Waters. Also, I would like for you to give us some idea 
of what has been happening in this space where we have been 
debating whether or not we are going to do reauthorization, and 
how some have lost faith in our ability to help with our own 
exports, and how we are losing out already to other countries.
    Mr. Hochberg. Mike Boyle, who is going to be on the second 
panel, can speak directly to that. Additionally, a number of 
the banks that we work with to get working capital loans, 
overwhelmingly for small businesses, have simply pulled back 
while they are waiting to see what happens. They don't want to 
go out there and issue a working capital guarantee and then 
find the rug pulled out from under them in 14 legislative days 
from now. So we are finding a reduction in working capital 
applications.
    And on insurance, which is the bulk of what our small 
businesses use, there has also been a reluctance and a wait-
and-see to make sure that we are really going to be there to 
execute those policies.
    Ms. Waters. On this business about the private sector, who 
is stopping the private sector from investing or supporting 
exports? Who is stopping them? What barriers do they have for 
not exercising their right to finance and support any business 
that they want to support? What is this business about we are 
somehow interfering with the private sector's ability to 
finance and support exports?
    Mr. Hochberg. Oh, you are absolutely right. The private 
sector does a spectacular job, a better job in our country than 
any other country. And it is the private sector that brings us 
in when they hit a barrier or a roadblock that they can't 
surmount. So if the private sector tries to do it on their own, 
and they can't, is when they call us in for a guarantee to make 
sure a loan gets done.
    Ms. Waters. When you referred to ``call us in'' or when you 
have businesses who come to you and say, ``I can't get private 
sector funding, can you take a look at my business and see what 
you can do to help me,'' et cetera, et cetera, who is it you 
are helping, aside from those that my chairman would have you 
believe all of the support is going to one company? Are you 
supporting small businesses, and why do they come to you?
    Mr. Hochberg. Ranking Member Waters, I was a small-business 
owner of a family business for 20 years. Small businesses 
always have difficulty getting access to credit. Ninety percent 
of our clients are actually small businesses, direct small 
businesses, and 39 percent of the exports we finance are 
shipped directly from a small company. Then, there are many, 
many small businesses in the supply chain of some of the larger 
companies we work with that are carried along in the process. 
But they come to us, their banks come to us saying, this is a 
risk we cannot take on. Maybe it is a country. Maybe it is the 
size of the transaction. Maybe it is the product category.
    Ms. Waters. And so, does Mr. Hensarling have any of these 
small businesses in Texas?
    Mr. Hochberg. We have a lot in Texas. We actually have a 
couple right in his district as well.
    Ms. Waters. Okay, so it is not that some in his district 
are not benefiting from it. All over the United States, we have 
these small businesses that are benefiting from Ex-Im, not just 
in California or some of the other States of these 
Representatives. Is that right?
    Mr. Hochberg. That is correct.
    Ms. Waters. Thank you. I yield back the balance of my time.
    Chairman Hensarling. The time of the gentlelady has 
expired. The Chair now recognizes the gentleman from Michigan, 
Mr. Huizenga, chairman of our Monetary Policy and Trade 
Subcommittee, for 5 minutes.
    Mr. Huizenga. Thank you, Mr. Chairman, and I am astounded 
that once again, the shifting sands of political expediency is 
rearing its ugly head here today. I wasn't necessarily going to 
go in this direction, but I feel it needs to be addressed. 
There was a call towards our trade deficits. I am curious as to 
then why many of my colleagues who are in support of the 
Export-Import Bank oppose tax reform, oppose regulatory reform, 
and even oppose something called the Trans-Pacific Partnership 
(TPP); and TTIP, an agreement with the Europeans; and the 
vehicle to get there, TPA.
    I am curious what kind of reaction they have when we are 
able to read quotes such as this: ``I am not a Democrat who 
believes that we can or should defend every government program 
just because it is there. The Export-Import Bank has become 
little more than a fund for corporate welfare, but if we hope 
to meet the challenges of our time, we must make difficult 
choices,'' said President, then-candidate, Barack Obama.
    You probably would be hard-pressed to guess who actually 
said this quote as well: ``Most Americans do not understand 
that we put $1 billion into this Export-Import Bank; many would 
see this as simply corporate welfare.''
    Now, this was in 2002, so closely on the heels of when they 
actually did have to put money into the Export-Import Bank. By 
the way, it is interesting to note that the corruption and the 
fraud cases that are talked about here in the last 6 years 
conveniently leave out the fact that we had one of our Democrat 
colleagues, William Jefferson, go down and spend, I believe it 
is 13 to 15 years, in Federal prison for bribery surrounding 
his actions in this Bank.
    Another quote: ``Unfortunately, the Bank has a history of 
providing assistance to companies that have been exporting 
American jobs and hiring cheap foreign labor.''
    And then, this is just a good kicker: ``I urge my 
colleagues to oppose Senate Bill 1372, the Export-Import Bank 
Reauthorization Act of 2002.'' That was none other than our 
ranking member, Ms. Waters from California.
    So it seems to me the only thing that has really shifted 
and changed is that there is a different person in the White 
House at this point. I would argue that seeing what happened in 
2009, and now most recently with the Gutierrez case, things 
have gotten worse, not better, in the Bank itself.
    It does lead me to then go to something that I want to 
touch on, which is, I think, more evidence that we are beyond 
broken here with the Export-Import Bank. In 2012, there were 
some requirements for some of these checks and balances to be 
put in, something that I am sure is very familiar. The due 
diligence standards and the know-your-customer requirements 
were finalized on May 20, 2014, after the NewSat deal was 
approved. And for those of you who haven't been following this, 
NewSat was--I believe it was an Australian company. Is that 
correct, Mr. Hochberg?
    Mr. Hochberg. Yes, it is.
    Mr. Huizenga. An Australian company that at this point 
appears to be handing you a $100 million loss. And there was a 
report given to Ex-Im by an outside consultant, Brendan Rudd, 
who found that NewSat's management showed ``a complete lack of 
control on reigning in costs. They included a $1.5 million 
raise for the CEO; $400,000 in undisclosed payments to a yacht 
business owned by the CEO's son; $10,000 dinners; and various 
irregularities in trading and tax reporting.''
    And Mr. Rudd in his report concluded, ``I have never seen 
nor heard of more appalling corporate behavior than at 
NewSat.''
    So, Mr. Hochberg, if the Bank had successfully implemented 
the 2012 bill and the ``reforms'' that have been put in place, 
then we wouldn't even be confronting NewSat, is that correct?
    Mr. Hochberg. I think we did a thorough due diligence and 
underwriting of that transaction. It was voted on by the board 
unanimously in 2012, and there was a revote in 2013 where there 
was a change in the transaction.
    Mr. Huizenga. So you are saying that this was a good loan?
    Mr. Hochberg. Congressman, we are in the business of making 
loans and supporting exports, about 250 direct exports from 
Lockheed Martin and 650 indirect. Every loan we make is not 
going to perform perfectly and flawlessly, and this is one that 
is, frankly, right now troubled. We are working through a 
solution. We are nowhere near a solution at this point.
    Mr. Huizenga. It seems to me that either you knew about it 
and had some suspicions and went ahead with it, which would 
obviously be a bad decision, or you didn't have the systems in 
place to actually root it out. Either one of those is a bad 
scenario from my perspective, and again, I come to the 
conclusion that it is beyond broken. And we simply are not 
going to be able to save the Export-Import Bank from itself.
    With that, Mr. Chairman, my time has run out.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentlelady from New York, Mrs. 
Maloney, ranking member of our Capital Markets Subcommittee.
    Mrs. Maloney. Thank you, Mr. Chairman.
    And welcome, Mr. Hochberg. I feel that if there is a 
challenge such as my Republican colleague put forward, then 
correct it.
    But with 15 more working days for the House before the Ex-
Im charter expires, I think it is important to look at an index 
of numbers which shows the good that it has done for the 
American economy: 60, that is the approximate number of export 
credit agencies operated by our competitors in an increasingly 
competitive global market, and they are just waiting for a 
chance to grab new businesses away from American exporters if 
our Bank folds; 3,340, that is the number of small businesses 
directly supported by the services of the Bank; 164,000, that 
is the number of American jobs that will be lost without 
congressional action; $1.3 million, that is the number of 
private sector jobs the Bank has supported since 2009, at no 
cost to the American taxpayer; and finally, zero, that is the 
good that will accrue if we allow our Export-Import Bank to 
die. And if you look at recent numbers in the last year alone, 
they supported $27.4 billion of exports, U.S. exports, at no 
cost to the taxpayer, absolutely no cost to the taxpayer.
    I ask unanimous consent to place in the record the export 
data analysis, and in this, China provided 17 times more 
support for their exports than the United States with 
approximately half the GDP.
    Chairman Hensarling. Without objection, it is so ordered.
    Mrs. Maloney. And Canada alone provided more than 3 times 
more support for their exports than the United States, and the 
United States had a GDP over 9 times larger than Canada. There 
are 60 different countries that are providing support for their 
exports. So I strongly believe that we should not unilaterally 
disarm if there is a challenge. If there is a problem, correct 
it. That is the American way. And go forward in supporting good 
jobs and our exports. What I find so troubling is that in this 
committee, we have hearing after hearing on access to capital, 
how difficult it is for startups and small businesses to find 
access to capital. Well, this is our access to capital. This is 
a way to help small businesses and large businesses export and 
create more American jobs.
    So I would like to ask you, Mr. Hochberg, have you seen the 
private sector trade lenders stepping up during this period 
where you said there is uncertainty, and people are looking for 
the financing--they don't know if they can get it--but are 
these private sector lenders coming in and providing the 
support? Or have these businesses simply been moving their 
production abroad to take advantage of other countries' export 
agencies?
    Mr. Hochberg. Thank you, Congresswoman Maloney. What we 
have seen in the last 2 years, frankly, is the private sector, 
generally speaking, has stepped up a lot more. There is a lot 
more liquidity. There is a lot more bank lending, and there has 
been less of a requirement for our work, which is a good thing. 
It shows that the private sector is working better. However, in 
the small business space, they always have a difficulty. We 
have not really seen the private sector stepping up that 
strongly in small business. And to your last point, I think 
that there are--you will see a number of companies, but most of 
the larger companies that actually have the ability to move 
production may well move production offshore.
    You also may see that companies that were looking to locate 
here in the United States because we have a great workforce, 
rule of law, cheap energy, or inexpensive energy, one of the 
things they also come here for is so they can export from here, 
and we are an important part of that factor.
    Mrs. Maloney. Great. Have you seen with our competitors, 
are they increasing their support for their export credit 
agencies or decreasing their support?
    Mr. Hochberg. By and large, they are overwhelmingly 
increasing, and more and more, they are also getting into 
short-term lending, which actually benefits their small 
businesses. So I think we are going to see more competitive 
pressure on small business exporters as a result of more and 
more entities getting into the game.
    Mrs. Maloney. Thank you.
    My time has expired.
    Chairman Hensarling. The time of the gentlelady has 
expired.
    The Chair now recognizes the gentleman from New Jersey, Mr. 
Garrett, chairman of our Capital Markets Subcommittee.
    Mr. Garrett. I thank the chairman for holding this very 
important hearing and when I was listening, Mr. Chairman, to 
your questions, I was reminded of the essay, ``What Is Seen and 
What Is Not Seen'' by Frederic Bastiat, who wrote that essay to 
analyze our economies. Some things you can see, and some things 
you can't.
    With Ex-Im, as the chairman was going down the list, you 
often report on what you can see. I understand you use a ratio 
or an analysis to come up with your figure of how many jobs are 
either saved or created by looking at the billions of dollars 
of sales that multinational corporations make and then 
multiplying that by some job ratio to come up with, this is 
what all of the good is that you are doing. Is that not an 
appropriate analysis of how you come up with your job creation, 
in short?
    Mr. Hochberg. The jobs that we support are based on the 
actual authorizations we have made to support U.S. exports, 
large companies and small.
    Mr. Garrett. Right, and so you do that by a job ratio by 
the sales?
    Mr. Hochberg. Right. The Bureau of Labor Statistics. Not 
ours, we use the Department of Labor.
    Mr. Garrett. Do you do a similar study of what the chairman 
was running down as far as the jobs that are lost or not 
created?
    Mr. Hochberg. We do it in a form which we update. We do an 
economic impact study. We do it on every transaction to make 
sure that any benefits to our economy outweigh any possible 
harm.
    Mr. Garrett. Right, and so what it comes down to is that 
you really don't go through a list of all of the winners and 
losers that the chairman was listing. Basically, you sit there 
and make that decision unilaterally; we are going to help these 
people, and we are going to hurt those people. We are going to 
help these sovereign countries. We are going to hurt American 
workers. We are going to help foreign institutions. We are 
going to hurt local businesses. You basically make that 
decision.
    And so, listening to the chairman's question as you ran 
down the list of U.S. companies, small and large, that are hurt 
in this manner, I think, how do you actually do that? How do 
you think about--or do you think about that man, that worker 
here in the United States who has just lost his job because of 
your decision; the woman who now no longer can make her 
mortgage payment because her U.S. job has been outsourced to 
another country because of your actions; the child who no 
longer is able to go to college because they have lost their 
American job because of your action; about the harm that you 
are doing to American families on a daily basis because you are 
sitting there picking winners and losers? It is a trauma to 
people when they lose their jobs. It is a trauma to people when 
they are looking at having worked a lifetime with a small 
company and seeing that job is now going to be exported 
overseas because of your decisions at the Ex-Im Bank. And I 
wonder just how does anybody sit there on a daily basis and 
make those decisions, support multi-international companies, 
support foreign countries, and do that knowing that you are 
hurting the litany of companies that the chairman just listed 
here?
    And it is not the companies; it is the people that you are 
hurting. How do you make those decisions on a daily basis 
knowing that you are hurting families, hurting people, hurting 
children with those decisions? I just find that unimaginable. 
And you do it at the same time that you are saying you have an 
entity that is self-sustaining.
    Really? You are self-sustaining? If that is true, then I 
guess you don't need to be here at all. We can separate the 
Export-Import Bank as a self-sustaining--your words, not mine--
entity without any U.S. Government backstop, without any U.S. 
Government support and allow them, allow it, allow you to be in 
that position without the Government backstop. So was your word 
a flippant word when you were saying ``self-sustaining,'' or is 
there more to it than that?
    Mr. Hochberg. Ex-Im is self-sustaining because of the fact 
that we collect fees for our work that fully pay for all of our 
costs, including loan loss reserves, and the excess--
    Mr. Garrett. Of course, that is not actually true over the 
history of Ex-Im Bank because Ex-Im Bank has been bailed out in 
the past. So it is not truly self-sustaining in that sense, and 
also in the sense that when you say, you take on the loans that 
banks won't. You take on the bank loans when banks won't step 
up to the plate and do it. And I have to think, why is it that 
the banks aren't making those loans? Is it because they are 
looking at it and saying, ``As a president and CEO or CFO of a 
bank, I have a fiduciary duty to my stockholders, my investors, 
and the mom-and-pops who invest in my banks not to do something 
that is too risky, so I am not going to make this loan to a 
risky venture?''
    But you are all too willing to do so, aren't you? You are 
willing to do so not with your personal money, not with any of 
the people who are sitting in front of us right now with your 
money. You are willing to do it with my money and everybody 
else's money, that person that maybe that you just put out of a 
job, his money.
    So when you are saying that banks aren't willing to do it, 
you are willing to do it and put the American taxpayer, the 
worker, that very same worker that you put out of business, you 
are using his dollars and putting them at risk.
    I yield back.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentlelady from New York, Ms. 
Velazquez.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Mr. Hochberg, small businesses are central to U.S. 
international trade, comprising the overwhelming majority of 
all exporting firms. Small or medium-sized companies with fewer 
than 500 employees comprise 97 percent of all export firms and 
were responsible for 33 percent of goods exported by value. So 
I would like to discuss with you the bank lending levels for 
small businesses.
    Since 2002, Ex-Im's reauthorization, the Bank must provide 
at least 20 percent of total assistance directly to small 
businesses. Since 2007, the percentage has steadily declined 
and fell below the 20-percent mandates each year between 2010 
and 2013. It recently grew to 25 percent in 2014 as a result of 
a sharp decrease in the Bank's large business lending activity. 
So it is not, I believe, that because the Bank did more to 
increase lending to small businesses, but because of the sharp 
decrease in lending to large businesses.
    My question to you is, given the fact that--and we are all 
using the argument here about the important role that the Bank 
plays in lending for small businesses--we assisted 3,200 out of 
25,000 small businesses in this country. I would like to see, 
first, that there is a commitment to increase the 25 percent, 
and what type of outreach will you do to make sure that we go 
beyond the 3,000 when we know that 97 percent of all exporters 
are small businesses, but yet they get less than 25 percent on 
small business lending?
    Mr. Hochberg. Congresswoman, I thank you.
    Ms. Velazquez. You know that I have been very critical of 
the Bank regarding lending to small businesses for ages now.
    Mr. Hochberg. We are, right now, above 20 percent. Our 
lending to small businesses directly is north of $5 billion. It 
was in the 3s when I joined the Bank. We have also, although we 
don't count it, a lot of indirect small business exporters. We 
now have an 800 number that is answered 8 to 8, Monday to 
Friday.
    Ms. Velazquez. But we are not here to discuss the indirect 
lending.
    Mr. Hochberg. You asked about outreach.
    Ms. Velazquez. We are talking about direct lending to small 
businesses.
    Mr. Hochberg. You asked about outreach. I said, we have 
telephone operators, 8 to 8, Monday to Friday. If you are on 
our website and you can't figure something out, we have online 
assistance there. We now have representation in about 12 
different cities. We work very closely with the Small Business 
Administration (SBA) and the Commerce Department. And on top of 
that, many members of this committee have invited me to their 
districts and we have done half-day workshops. I just did one 
with Congressman Reed in upstate western New York last week.
    Ms. Velazquez. Okay, given the fact that the Bank plays 
such an important role in providing financing, that the private 
market, private financial institutions do not make, would you 
support an amendment to increase the mandate to 25 percent?
    Mr. Hochberg. I think the 20 percent is a good level to 
have. I don't want to, as was discussed at this meeting, pick 
winners and losers. I don't want to not do a certain 
transaction to simply meet a target, making sure that we hit a 
certain target that has been established by Congress.
    Ms. Velazquez. Since the reauthorization in 2002, the 
mandate has been 20 percent, and you never reached that 
mandate.
    Mr. Hochberg. We did that the last 2 years. We exceeded it 
last year. We are exceeding it this year.
    Ms. Velazquez. Until last year. I just want to see that 
there is a strong commitment, given the fact that 97 percent of 
all exporters are small businesses, that should be reflected 
into the kind of financing that the Bank is providing to small 
businesses.
    Mr. Hochberg. Mr. Boyle will be on the second panel as a 
small-business owner. You might be able to ask him what his 
experience has been.
    Ms. Velazquez. I understand, sir. I just want to make sure 
that the lending to small businesses is reflected in terms of 
the 25,000 small businesses that we have, only 3,200 were 
served.
    And I yield back, Mr. Chairman.
    Chairman Hensarling. The gentlelady yields back.
    The Chair now recognizes the gentleman from Wisconsin, Mr. 
Duffy, chairman of our Oversight and Investigations 
Subcommittee.
    Mr. Duffy. Thank you, Mr. Chairman, and thank you for 
holding today's hearing. For my good friend, the ranking 
member, I have to give a couple of her quotes from earlier 
today. I think she said the Ex-Im Bank was an engine of 
economic growth. And she also said that letting the Ex-Im Bank 
expire would be harmful to the American economy.
    And, as Mr. Huizenga pointed out, that hasn't always been 
the case with my friends across the aisle or the Democrat Party 
because when Barack Obama was running for office, he called the 
Ex-Im Bank corporate welfare. And my good friend, the ranking 
member, she too called the Ex-Im Bank corporate welfare. She 
also told us that it would ship American jobs overseas because 
of cheap foreign labor.
    In the dissenting opinion from the ranking members and one 
Bernie Sanders from the House report from 2002, they said there 
are many examples of the Export-Import Bank subsidizing 
corporations that lay off American workers and move their 
production facilities overseas. But today, they are telling us 
that it is the engine of economic growth. So the question is, 
what has changed? What is different today than what they were 
saying in 2012?
    Mr. Hochberg, have you ever stayed at the White House?
    Mr. Hochberg. In the 1990s.
    Mr. Duffy. With Mr. Clinton?
    Mr. Hochberg. Yes, sir.
    Mr. Duffy. In the Lincoln bedroom?
    Mr. Hochberg. No, it was actually a different bedroom.
    Mr. Duffy. And you were an Obama bundler, correct? You were 
an Obama bundler?
    Mr. Hochberg. I raised money for Mr. Obama.
    Mr. Duffy. Okay. Is it fair to say we could probably deduce 
from those answers what your political affiliation is?
    Boeing, the largest beneficiary of Ex-Im financing, their 
top lobbyist since 2008 is a former aide to Bill Clinton. In 
2009, Secretary Clinton--President Clinton's wife, if you don't 
know--made a shameless pitch in Russia that Russian airlines 
should buy Boeing airplanes, and while I would like all 
airlines to buy great American jets, she was making a pitch as 
Secretary of State. And then, in 2010, a short while later, 
actually, Boeing got a contract for $3.7 billion. And after 
that, it is amazing, Boeing made a $900 million contribution to 
the Clinton Foundation--$900,000, I'm sorry. Thank you, Bill.
    Boeing Director William Daley was named President Obama's 
chief of staff in 2011. In June of 2011, Boeing Director John 
Bryson was named Obama's Commerce Secretary. Boeing's top 
lobbyist in 2014 hosted a fundraiser for Ready for Hillary, the 
PAC that is supporting her campaign for President.
    And so I think what has changed is, when you have Democrats 
who think they can get support from corporate welfare, they 
will support it. If, through corporate welfare, they can get 
campaign contributions, they will support it. And then, it is 
about the American workers, the American economy.
    But if they are not getting contributions and they don't 
have their bundlers in the CEO/president position, all of a 
sudden it is bad for the American worker, and it is bad for the 
American economy.
    Mr. Hochberg, did you say that you, the Ex-Im Bank, 
supports any eligible American business that seeks exports? Was 
that your quote?
    Mr. Hochberg. That can't find financing in the private 
sector.
    Mr. Duffy. Right. And you don't pick winners and losers?
    Mr. Hochberg. That is correct.
    Mr. Duffy. I was reading an article from Reuters from a 
couple of years ago that says, ``The U.S. Export-Import Bank 
Board of Directors voted on Thursday not to proceed with the 
financing of U.S. exports to help build a coal-fired powerplant 
in Vietnam, following a plea from U.S. environmental groups to 
stop the project.'' So isn't it fair to say that you support 
American jobs as long as it meets your ideological standards, 
but you don't support all American jobs, because you would 
admit that the American jobs that would have come from building 
a coal-fired powerplant are still American jobs?
    Mr. Hochberg. Congressman, in 1992 Congress put into our 
charter that we must take into account the environmental impact 
as well as the reasonable assurance of repayment. That has been 
on our charter for 23 years. The Bank was sued under President 
Bush for not following that mandate that is in our charter, and 
we lost.
    Mr. Duffy. So it is fair to say you support some American 
jobs, but not all American jobs, correct?
    Mr. Hochberg. We support jobs that fall within the mandates 
set forth by Congress in our charter.
    Mr. Duffy. So if you are making mining equipment in 
Wisconsin, or you work for a company that is trying to build 
powerplants overseas, those jobs are the ones that won't fall 
into the financing of the Ex-Im Bank. Other clean energy jobs 
will, but not, in your view, dirty jobs?
    Mr. Hochberg. Actually, we support a lot of mining 
equipment from Wisconsin. We support coal exports.
    Mr. Duffy. After much pressure from the Wisconsin 
delegation, I might add.
    Mr. Hochberg. No, we supported fully and freely mining 
equipment, coal exports as well.
    Mr. Duffy. We will talk about that later.
    I yield back.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Texas, Mr. 
Hinojosa.
    Mr. Hinojosa. Thank you, Chairman Hensarling and Ranking 
Member Waters, for holding this hearing today.
    And thank you to our panelists for your testimony.
    I would like to take a moment to state my unwavering 
support for the Export-Import Bank, and I call on our honorable 
chairman to let the majority of the House work its will and 
allow a vote on the reauthorization of the Bank.
    The Export-Import Bank is a vital free market, economic 
engine for our manufactures, producers, and exporters, as has 
been pointed out before me. This March alone, the Bank financed 
over $1 million in exports in my south Texas congressional 
district. Additionally, the Bank has supported thousands of 
jobs in my district over the past 5 years. These are good jobs 
in a very high-need area that would not have been possible 
without the Bank.
    Chairman Hochberg, many claim the Bank is not needed and 
that it only supplements would-be private capital. Part of the 
Bank's mandate is that the Bank is not to compete with private 
capital. Can you tell us how the Bank ensures that its loans go 
to support U.S. exports that would not otherwise be able to 
secure other financing?
    Mr. Hochberg. Certainly, Congressman. Thank you. On every 
application, the applicant must state why they are seeking Ex-
Im financing. And they have to state whether it is because they 
can't secure financing in the private sector, or they have to 
meet foreign competition. So that is part of the application, 
just like their financial statements on everything else. They 
certify that, and in most cases, we also can verify it 
independently.
    Mr. Hinojosa. Considering that the Bank is a lender of last 
resort that began when private financing alone is not 
available, do you believe the Bank distorts the U.S. market 
negatively?
    Mr. Hochberg. I believe we support--we supplement the 
private sector because the private sector is the one that 
brings us in. If you go to a bank and you are looking for 
export finance, if the bank can't make the loan happen, they 
will come. They will say, well, with an Ex-Im guarantee, we 
can. I was in Detroit, and a small engineering business wanted 
to export to the Mideast, and their bank was at the same 
roundtable. The banker said that the Bank of America, without 
an Ex-Im guarantee, told their client that they would not take 
on that risk. So, in that case, it was the bank that brought us 
in and said if we can get some guarantee, we can make that. And 
that small engineering firm is now providing services to the 
airport authority in Doha.
    Mr. Hinojosa. Thank you for that explanation.
    Chairman Hochberg, as you well know, the Bank supports 
about 2 percent of U.S. exports. Last year, 2014, that amounted 
to $27.5 billion worth, and 164,000 jobs. I find it funny that 
the Bank's detractors love to point to that 2-percent figure as 
evidence that the Bank's role is minuscule and unnecessary but 
then, without a hint of irony, turn around and argue that the 
Bank has huge negative market-distorting effects. What do you 
think?
    Mr. Hochberg. I very much value the 164,000 jobs. Those are 
family-sustaining jobs. Those are jobs in every State of this 
country. And those are jobs--exporter after exporter has said 
that without our support, those jobs just go away. Don Nelson 
has a company out in Bakersfield, California, and he said, ``We 
would probably have to lay off 50 or 60 people without Ex-Im 
Bank support.''
    Dave Ickert in the State of Texas, in Olney, Texas, has 
said, ``We would have to lay off as many as 68 employees if the 
Ex-Im Bank is not reauthorized.'' So there is a very direct 
impact on jobs whether or not we are reauthorized.
    Mr. Hinojosa. I thank you.
    Mr. Chairman, I yield back.
    Chairman Hensarling. The gentleman yields back.
    The Chair now recognizes the gentleman from South Carolina, 
Mr. Mulvaney, for 5 minutes.
    Mr. Mulvaney. I thank the chairman.
    Mr. Hochberg, I promised you before the hearing that I 
wouldn't badger you today. I am actually going to ask you some 
questions. I am looking forward to the change of pace.
    I do want to come back and talk about the NewSat 
bankruptcy, however, very briefly for folks who aren't familiar 
with it. I think you all made a direct loan, a rare direct loan 
of roughly $100 million or a little bit more than that to aid 
an Australian startup that was going to buy a satellite made by 
an American company. So you lent the money to the Australian 
company so they could buy an American satellite. The Australian 
company has since gone bankrupt. And it looks like you might be 
on the hook for $100 million.
    That is not my specific question. My questions deal with 
some of the comments made by the bankruptcy court, that 
apparently the bankruptcy court gave you the opportunity to 
protect your investments or your loan by finishing the project. 
You chose not to do so. And then, more troubling, and let's 
start with this, apparently you had no security interest in the 
collateral. How is that possible?
    Mr. Hochberg. We had security in the company itself, but 
the company is in bankruptcy.
    Mr. Mulvaney. No, the satellite.
    Mr. Hochberg. But the satellite is right now being 
manufactured by Lockheed Martin.
    Mr. Mulvaney. And who owns the satellite?
    Mr. Hochberg. At the current time, Lockheed Martin has 
possession.
    Mr. Mulvaney. Free and clear of any security interest of 
the Export-Import Bank of the United States of America, right?
    Mr. Hochberg. Which is typical because they are making the 
products. They actually have possession of it.
    Mr. Mulvaney. You lent $100 million to Australian startup 
and kept no security interest, no collateral at all?
    Mr. Hochberg. We would have had collateral at the 
completion of the satellite, not while it is being built.
    Mr. Mulvaney. And you had the ability to fund to the 
completion of the satellite, and you chose not to do so?
    Mr. Hochberg. We chose not to complete the satellite until 
we knew there was going to be an actual buyer who was going to 
take it.
    Mr. Mulvaney. And, ultimately, that has not happened.
    Mr. Hochberg. Right now, that is in negotiations.
    Mr. Mulvaney. I am reading from an article in Space News, 
from just 2 days ago: ``The Export-Import Bank, for reasons 
that were not clearly explained, the U.S. Justice Department 
lawyer representing the Bank referred vaguely to `policy/
business decisions,' refused to put up any funds to preserve 
its sunk cost in the project. The bankruptcy court judge in the 
May 21st hearing expressed surprise that the Ex-Im Bank with so 
much at stake, was unable to present a credible go-forward 
scenario by the May 18th deadline.''
    It then goes on to say the status of the satellite--you are 
out $100 million, and I think it is Lockheed Martin has a 
satellite free and clear that they can sell. You lost $100 
million. And you have given a several hundred million dollar 
windfall to Lockheed Martin at the expense of the taxpayer. How 
do you defend that type of lending?
    Mr. Hochberg. First of all, sir, this transaction is still 
in negotiations. We are still negotiating for an ultimate buyer 
of the satellite.
    Mr. Mulvaney. Did the bankruptcy court give you a May 18th 
deadline?
    Mr. Hochberg. We had a May 18th deadline.
    Mr. Mulvaney. How did that go?
    Mr. Hochberg. And we could not find a secure buyer. We 
could not identify a clear buyer by May 18th. We asked for a 
few extra days, and Lockheed Martin refused.
    Mr. Mulvaney. So it is a correct statement in the article 
where it says that $193 million was mainly Ex-Im money lent to 
NewSat in addition to equity NewSat had raised on its own. It 
is now in the form of a nearly completed spacecraft that 
Lockheed Martin owns and is free to sell without having to pay 
anything to Ex-Im.
    That is an accurate statement, isn't it?
    Mr. Hochberg. No. We are fully backed by NewSat. So NewSat 
still has control over that satellite.
    Mr. Mulvaney. NewSat is bankrupt.
    Mr. Hochberg. NewSat may be bankrupt, but we are secured by 
NewSat. And frankly Congressman, when we had an opportunity to 
simply ``throw good money after bad'' without a clear exit 
plan, we chose not to do that.
    Mr. Mulvaney. I will come back. I guess, Mr. McCarthy, I 
will ask you this: Was one of your recommended reforms at the 
Bank that they actually start looking at their lending 
practices with an eye towards getting security interest and 
collateral? I don't know of any bank that would lend money like 
that with no collateral at all.
    Mr. McCarthy. In the 2012 reauthorization, one of the 
requirements is that the Bank not be a subordinate lender. And 
so, it would be first in line. As far as the due diligence 
process--
    Mr. Mulvaney. Let me cut you off right there. Hold on a 
second. That was part of the 2012 reauthorization. Earlier 
today, Mr. Hochberg, you said that this loan was reviewed 
twice. It was originally reviewed by your Board and approved, I 
can't remember when, but it was reviewed and approved, 
reapproved by the Board in 2013, after the 2012 
reauthorization. Did you--
    Mr. Hochberg. We were not subordinate in any of those 
cases, sir.
    Mr. Mulvaney. Okay. Mr. McCarthy, help me here, so they are 
not subordinate, but why don't they have collateral? I guess 
the point is, the reason you would not have to be subordinate 
is that would put them in a second position where the 
collateral, if any, would be impaired, correct?
    Mr. McCarthy. That is correct.
    Mr. Mulvaney. And essentially, what you have is a position 
where your collateral is impaired because you don't have any to 
begin with. So I guess, Mr. Hochberg, again, I promised I 
wouldn't badger you. I have 14 seconds. I am sure that is what 
people think that I am doing. Do you think you followed good 
process when you made the NewSat loan?
    Mr. Hochberg. At the time, yes.
    Mr. Mulvaney. How about now?
    Mr. Hochberg. And I believe now we are working towards a 
solution. This is not over yet, sir.
    Mr. Mulvaney. If you make a new loan today, will you get 
collateral in whatever it is you are financing?
    Mr. Hochberg. We have the collateral in NewSat. We have the 
collateral in the actual entity.
    Mr. Mulvaney. Thank you, Mr. Chairman.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Massachusetts, 
Mr. Capuano.
    Mr. Capuano. Thank you, Mr. Chairman. Mr. Chairman, I don't 
have any questions for the witnesses because the truth is, I 
don't know how I am going to vote on Ex-Im. I am leaning 
towards voting for it, mostly because of competitive reasons. 
As I have said many times, every other country we compete with 
has one; therefore, we should have one. That doesn't mean 
everything you have done is wonderful. It doesn't mean I have 
agree with every loan. It doesn't mean there shouldn't be 
reform. I came over because as I was watching this, I probably 
shouldn't have done that. I probably should have had something 
else on, but as I am watching this hearing, I have to be 
honest. The people who are arguing against this most 
vociferously, not all of them, but many of them are losing the 
argument because they turned it into a personal attack on a 
political basis. This is an important, substantive issue, one 
that I am open to discussing, and one that I am certainly open 
to amending. And yet, all I hear is, well, 100 years ago 
somebody did this, and somebody said that, and somebody voted 
this way and somebody changed their mind.
    God forbid an elected official ever changes their mind on 
an important and complicated issue like the Ex-Im Bank. God 
forbid any of you ever change your mind--and by the way, if you 
really want to win the issue, you really need to change some 
minds, because you lost the Republican Conference in 2012 when 
we voted for it: 147 Republicans voted to reauthorize the Ex-
Im; only 93 voted against it. If you want to change our minds, 
you really have to do a little bit better than attacking the 
President and attacking the people who did change their minds. 
You really have to stick to the subject matter.
    And I respect people who disagree with me. But I have to 
tell you, I completely lose respect, I lose interest, on the 
fact, oh, you changed your mind. I really am--I have the whole 
list of names of the Republican side who voted for it in 2012, 
many of whom are here right this very minute.
    Now, you may change your mind. If you do, God bless you. 
But if you ever change your mind on anything else and you keep 
this nonsense up, I guarantee you, I will be keeping score. And 
we will all get down in the gutter. We will all get down in the 
street and call each other names and accomplish nothing. This 
is an important, difficult issue that reasonable people can 
disagree on.
    And, honestly, that is, I appreciate some of the things, 
even some of the things I don't agree with. Okay. But I came to 
ask my colleagues to stop the nonsense. If you really don't 
like the Ex-Im Bank because you really think it is corporate 
welfare and bad for America, fine. Argue to win the hearts and 
minds of the American people and your colleagues, whom you lost 
in 2012. You want some people to change their minds. How are 
you going to get people to change their minds when you 
constantly say anyone who changes their mind is somehow 
inherently wrong and evil? Then you are going to lose again 
based on your own Republican Conference. Almost all of the 
people who voted on this in 2012 are still here.
    So that is what I came to say. I was actually thinking 
about reading out names, but I don't want to denigrate down to 
that nonsense. I will, and I think you all know I can if I want 
to. But on this issue, I really would rather hear substantive 
facts, and important questions. I think the last series of 
questions was pretty good. They raised some serious issues. I 
have to be honest, just because there have been some problems 
in the past, I am not interested in shutting something down 
because if that is the case, we have to shut down the DOD. They 
have had people steal money. We should shut down the entire 
Defense Department because somebody stole money; the entire 
Agriculture Department because someone once took a loan that 
they shouldn't have gotten. I am not saying you shouldn't raise 
the issue, but that doesn't go to the basis of whether we need 
to open or close the Bank. That might open up some discussion 
about reforms. And I am more than interested in hearing it. I 
have actually told--who was it?--Delta, that is so opposed to 
this, I have also told them, ``Look, you raise some good 
issues. Let's talk about how we deal with the issues you 
raise.''
    But I don't get that. All I get is personal attacks, 
political attacks, which I am pretty good at, but on this one, 
if you really think you are going to win elections, you are 
going to change people's minds, you are going to win the issue, 
you are going to have to explain to me how the very people you 
need to change their minds, you are calling them names.
    With that, Mr. Chairman, I apologize for not asking any 
questions of the witnesses, but I look forward to going back to 
my office, turning the TV back on, and learning something, I 
hope. And if not, I will just change the channel like the rest 
of America.
    With that, I yield back.
    Chairman Hensarling. The gentleman yields back.
    The Chair now recognizes the gentleman from Oklahoma, Mr. 
Lucas, for 5 minutes.
    Mr. Lucas. Thank you, Mr. Chairman, I appreciate the 
opportunity to question our good friends.
    And I don't know that I have a particular series of 
questions I wanted to ask. I just would like to observe that in 
my time on this committee, now 20-plus years, I have observed 
lots of discourse and lots of discussion. We have always been a 
very philosophical group. We have argued the joys of Karl Marx 
and Adam Smith, and we have ground on each other day in and day 
out on a variety of things.
    But the issue that we have now had hearings on into almost 
ad nauseam is not just a philosophical issue. It is a real 
economic issue. It is a real bread-and-butter issue back home 
amongst the good folks.
    Everyone knows that my perspective is that in a competitive 
world economically, you have to be able to go punch for punch, 
blow for blow. You have to do what is necessary to give our 
fellow citizens a chance to prosper economically, to have good 
jobs, to grow our economy. I view the Export-Import Bank as one 
of those tools in the battle with 60 other countries around the 
world.
    I sincerely believe that, whether it is 14 days, or 14 
weeks, or 14 months, this institution will be reauthorized. It 
may take a number--if it is allowed to officially expire--of 
occasions where U.S. companies lose business, substantial 
business, around the world to help us focus. I prefer not to 
have that happen, but that is what it may take.
    I would ask all of my colleagues, the course we are on here 
leads us in the direction of either allegedly ending the Bank 
completely or, I fear, reauthorizing it in the exact form it 
was or is this moment. That is missing out on an opportunity to 
build on the reforms of the previous reauthorization. That is 
missing out on an opportunity to address legitimate problems 
that have been brought up. It is missing out on an opportunity, 
I think, ultimately, to give the participants in our economy 
more effective tools to compete around the world.
    Right now, this moment, the Agriculture Committee, another 
committee I serve on, is having a hearing about foreign 
subsidies and how it affects food sales around the world and 
production and all of those kinds of things. You might be 
surprised to know that it is a pretty tough place out there 
competing economically. It is really kind of vicious. Do 
whatever you have to do, my friends, from your philosophical 
perspectives, but don't--don't--in a competitive world say that 
we are going to establish a principle so perfect, so 
idealistic, so philosophically straightforward that everyone 
else will flock to it. That is not the way it works, just not 
the way it works.
    You don't negotiate from a position of surrender. You 
negotiate from a position of strength. Again, I have enjoyed 
these philosophical hearings. It is reminiscent of many 
different periods in the last 20 years on this committee. But 
in 14 days, 14 weeks, or 14 months, we will reauthorize Export-
Import, and we will, I fear, reauthorize exactly what we have. 
That would be a horrible opportunity missed.
    With that, Mr. Chairman, I am going to do something out of 
character in Congress. I am going to yield back some time.
    Chairman Hensarling. The gentleman yields back.
    The Chair now recognizes the gentleman from Texas, Mr. 
Green, ranking member of our Oversight and Investigations 
Subcommittee.
    Mr. Green. Thank you, Mr. Chairman.
    I thank the ranking member as well.
    Mr. Chairman, it has been my experience that there is a 
process that can extricate us from differences. We have policy 
that we differ on, and the process is the thing that can give 
us an opportunity to resolve these differences in policy 
positions. I recall very vividly the process that allowed us to 
make a policy decision with reference to life and death in the 
Schiavo case. I recall coming back after having just landed in 
Houston, Texas, and on short notice, to take a vote. It was 
very late at night when we ultimately took that vote. But the 
process allowed us to resolve a question involving life and 
death.
    The process is the means by which we resolve questions of 
war and peace. We can have our differences about where we 
should station our military, what the military should be doing, 
but ultimately, when these differences are to be resolved, we 
have a process that allows us to do so. We vote. And we have 
voted in this Congress, not this particular Congress, but in 
the Congress of the United States of America on questions of 
war and peace, the budget. We have our differences about 
whether or not we should cut or expand certain programs, 
whether sequestration is a proper process, and when we 
confronted the question of sequestration, we allowed the 
process itself to dictate a resolution to a policy question. 
That process was to vote.
    I am calling on all of our leadership to allow the process 
to work, not just on the committee level. But let's take this 
to the Floor of the Congress of the United States of America. 
And let's do what we were sent here to do, debate the great 
issues of our time. And let us, after having a robust debate, 
have a process function as intended. Let us vote. I may not 
like the results. But I will respect the process. I believe the 
American people are expecting us to take a vote as to whether 
or not the Ex-Im Bank will continue or whether it will become a 
part of the ash heap of history.
    Personally, I will vote to extend the Ex-Im Bank. It has 
done meaningful things. It has made a difference in the lives 
of the people that I represent. I and Mr. Hochberg had an 
opportunity to visit with a business in Houston, Texas, and 
there is an interesting thing about these businesses. Many of 
the small businesses that benefit don't benefit directly. They 
benefit indirectly from larger businesses that they associate 
themselves with. Many of them are off the radar in the sense 
that we can identify them immediately as beneficiaries. But 
because of their connectivity and their association with larger 
businesses, there is an emolument that inures to the benefit of 
the people that I represent.
    I want the process that has worked with this country, that 
has time-honored positive benefits, to continue. I call on all 
of our leadership to, please, give the process a chance. The 
policy can be resolved if the process is allowed to function. 
And I will yield back the balance of my time.
    Chairman Hensarling. I thank the gentleman.
    Now the gentleman from Georgia, Mr. Westmoreland, is 
recognized for 5 minutes.
    Mr. Westmoreland. Thank you, Mr. Chairman.
    Mr. Hochberg, in November of 2012 the board approved the 
economic impact analysis guidelines that were required in 
Section 12 of the 2012 Ex-Im Bank reauthorization. Would it 
surprise you if the analysis was engineered to favor one 
company or another?
    Mr. Hochberg. Congressman, we actually revised our entire 
economic impact procedures. Congress asked us to review that in 
2012, and we made some adjustments throughout the entire 
process of economic impact.
    Mr. Westmoreland. You made adjustments. Did you make those 
adjustments in consultation with any of your customers?
    Mr. Hochberg. Without question. We, of course, consulted 
many of our customers because we wanted to have a policy that 
works for our customers, that works for our exporters. So we, 
of course, did that.
    Mr. Westmoreland. I am just a slow, country boy from 
Georgia, but reading some of the emails, some of the 
correspondence between your staff and Boeing's staff, something 
just doesn't smell right to me. I don't know if you have ever 
heard the word ``collusion,'' but have you read those emails?
    Mr. Hochberg. I have read the reports in the paper, sir.
    Mr. Westmoreland. Have you read the emails?
    Mr. Hochberg. I have seen some of them, yes.
    Mr. Westmoreland. And do they seem funny to you?
    Mr. Hochberg. Out of context, they look rather funny, but 
they are out of context. What we are trying to do, sir, is, if 
we were writing regulations, guidelines for farm equipment, we 
would talk to the five companies that make farm equipment.
    Mr. Westmoreland. Okay.
    Mr. Hochberg. So in this case, we only have one aircraft 
manufacturer.
    Mr. Westmoreland. Okay. I want to read one or part of one 
from Mr. Moran, and he was advising the Boeing capital that 
subjecting and applying transactions through detailed analysis 
under economic impact procedures has had the effect of killing 
most of those aircraft deals.
    Mr. McCarthy, have you read these emails?
    Mr. McCarthy. We are familiar with those emails. We are 
familiar with them.
    Mr. Westmoreland. You are. And you didn't find anything 
funny with them?
    Mr. McCarthy. Right now, we are working on a report on the 
economic impact guidelines. We had a report in 2010 that made 
certain recommendations. We are doing a follow-up report that 
is looking at not only implementation of our 2010 
recommendations, but also implementation of the requirements in 
the 2012 reauthorization. And we are including this matter that 
you are raising as part of that--
    Mr. Westmoreland. Okay. Well, 2012. It has taken you a 
while to get to that. But there is another email where Mr. Cruz 
told the board, ``Given the historical distribution in nature 
of aircraft cases, it is anticipated only 10 to 15 percent of 
the cases would go through the new procedure.'' This comes 
after a series of emails that he had had. And besides that, and 
the fact that Mr. Moran didn't want the complete transparency, 
I just wonder if it was brought to the board's attention of 
these specific requests for analysis that would influence their 
acceptance of these new procedures?
    Mr. Hochberg. We have had--just to go back, we have had 
economic impact procedures back to 1968. And we have adjusted 
them periodically over time. We actually voluntarily added 
aircraft seats as part of that category on our own because of 
concerns from the public, so these are things we have done 
voluntarily. And we are constantly updating them. We updated 
them in 2012. We voted on them. And we actually conduct a 
review of every transaction, and if we find there are enough 
findings, then we do an in-depth review. But every transaction 
is reviewed for its economic impact procedure.
    Ours is at the threshold of 1 percent. If it adds 1 percent 
or more to foreign production capacity of a good of comparable 
U.S. production, it would trigger a more detailed analysis.
    Mr. Westmoreland. I know it all depends on what--if you use 
the twin aisle, the single aisle, the number of seats. All of 
that is discussed in the emails between the Boeing staff and 
your staff, as far as what numbers to use.
    And as Mr. Green, my friend from Texas stated, the process 
needs to work. When you are trying to get this information, do 
you think it is proper that your staff would be conversing with 
Boeing staff in to how to make these numbers look right to 
justify your ability to make them the loans?
    Mr. Hochberg. It is a public process. We had a low number 
of public meetings. We actually invited committee staff to join 
us. We post every transaction in the Federal Register. This is 
standard procedure and process at the Bank for economic impact.
    Mr. Westmoreland. I don't think that is a standard 
procedure process, but my time has expired. I thank the 
gentleman.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Missouri, Mr. 
Cleaver, ranking member of our Housing and Insurance 
Subcommittee.
    Mr. Cleaver. Thank you, Mr. Chairman.
    Thank you, Mr. Hochberg, for visiting some of the 
subcontractors who are involved with Ex-Im Bank in the Fifth 
District of Missouri.
    Mr. McCarthy, I would like to ask you a couple of 
questions. Do you have any information that would lead you to 
believe that Ex-Im Bank is competing with private sector banks 
or lending institutions?
    Mr. McCarthy. We haven't done that particular analysis. We 
did do a report on the direct loan program a few years back 
looking at how the Bank tracked that information and made 
recommendations that needed to do a better job of requesting 
documentation from applicants as to why they were unable to 
obtain private sector financing, and they have implemented 
changes there.
    Mr. Cleaver. But the Bank is self-funding and self-
sufficient?
    Mr. McCarthy. Yes. Our audited financial statements have 
found that they are fairly presented.
    Mr. Cleaver. I am not sure, but prior to Ronald Reagan 
being sworn in as President, there was very little controversy 
as it relates to the Ex-Im Bank. Since that time, there have 
been times when Democrats and Republicans have challenged the 
existence of the Ex-Im Bank. I am not sure why or so forth.
    But about a year ago, I think, I attended a meeting on the 
second floor, I believe, and the amazing thing at that meeting 
was that as I sat there with other Members of Congress, all of 
the business leaders sitting in front of us, asking that we 
support the Ex-Im Bank were people who had given money to my 
opponents and to the opponents of most of us sitting up 
listening to these folks.
    It was one of the amazing moments in Congress. I talk about 
this when I am out speaking. Business leaders from all over are 
asking me to support something that they felt strongly about, 
even though they had given money to my opponents. It is just 
amazing. And so I have come to the conclusion that, I guess, 
both sides switch and swap and do silly stuff, and sometimes it 
is at the detriment of the agency.
    Mr. Hochberg, a couple of things. I think there are 60 or 
70 other nations with similar banks. Are most of them in the 
industrialized world?
    Mr. Hochberg. Most of them are, and actually we did a 
survey this year, and the number is now above 80, 80 different 
export credit agencies that are doing long-, short-, and 
medium-term financing.
    Mr. Cleaver. And so if we discontinue the Ex-Im Bank, we 
are actually withdrawing from what most of the western world is 
doing, trying to support the exploitation of goods to foreign 
countries?
    Mr. Hochberg. Exactly. It would be unilaterally disarming. 
We would have no seat at the table if we want to ratchet down 
export credits. We would have no say in the matter because we 
wouldn't be a participant.
    Mr. Cleaver. The way the Export-Import Bank debate is 
going, do you think that it is having any impact right now, for 
example--because of the uncertainty--are you able to do any 
long-term planning, long-term considerations of the requests?
    Mr. Hochberg. We have authority until June 30th. Larger 
transactions over $100 million come to Congress for a 35-day 
review. That period has passed. So we have a number of 
transactions that are up here during that 35-day review period. 
We hope to consider those before the end of June. But any large 
transactions are considered from now on. If we are not 
reauthorized, we are not getting a final approval by the Bank.
    Mr. Cleaver. Okay. Thank you.
    Mr. McCarthy, a one-word answer might be okay since my time 
is running out, have you found that there is waste and fraud 
and abuse in the Ex-Im Bank?
    Mr. McCarthy. We are the inspector general; we always find 
waste, fraud, and abuse. We have had some cases, as I reported, 
we have had some serious cases of employee misconduct.
    Mr. Cleaver. Yes, I am familiar with those.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from North Carolina, 
Mr. Pittenger, for 5 minutes.
    Mr. Pittenger. Thank you, Mr. Chairman.
    Mr. Hochberg, there was a review which found that many 
businesses had been categorized improperly that were big 
corporations, foreign conglomerates who were categorized as 
small businesses, those owned by Warren Buffett and others. One 
business had 53,000 employees. How do you account for that 
categorization?
    Mr. Hochberg. Congressman, we obviously take data accuracy 
very seriously. It is one of the key principles we have applied 
this year. The Reuters report went back over 6, 7, 8 years. It 
found a 3 percent error rate. We strive for a 0 percent error 
rate. I will tell you one other thing, as a business owner, 
this is the dynamics. You may be a small business one year and 
then sold to a large business the next.
    Mr. Pittenger. 53,000 is quite a number.
    Let me ask you this: Is it accurate that 40 percent of the 
Export-Import's authorizations in 2014 went to one company, 
Boeing?
    Mr. Hochberg. I think it is a little less than that, but it 
is around a third.
    Mr. Pittenger. That is a very significant amount.
    Mr. Hochberg. It didn't go to Boeing. It went to customers 
of Boeing. Boeing does not get one penny from the Export-Import 
Bank. Boeing does not derive a single dime from the Export-
Import Bank.
    Mr. Pittenger. According to your own data, 60 percent of 
the Ex-Im Bank's financing has benefited just 10 large 
corporations in 2013, is that correct?
    Mr. Hochberg. And about 39 percent of the total value of 
exports financed went to small businesses directly.
    Mr. Pittenger. But to just the 10 companies, 10 companies, 
60 percent. How big is your loan portfolio?
    Mr. Hochberg. Our portfolio is about $112 billion.
    Mr. Pittenger. At the end of 2014, less than 45 percent of 
Ex-Im import's exposure is concentrated to just air 
transportation, correct?
    Mr. Hochberg. Air transportation and aircraft is our 
largest single export in the country.
    Mr. Pittenger. Exactly, and you had 45 percent. And I say 
that in light of just folks in small business. There is a lady 
who runs a machine business in South Carolina, Rachael Cox. It 
has 30 employees. They have a machine business. Here is her 
comment. She said, ``When I researched the Ex-Im Bank and 
especially the sign-up process, it became clear that it is 
designed for large businesses. The amount of information that 
was required was overwhelming at best and invasive at least. 
After some consideration, I decided against it.''
    Now, by the direction or design or how the Ex-Im Bank 
executes its plans, it appears very strongly that your efforts 
are sizably favoring very large businesses. Ten businesses, 60 
percent of your financing. Here is a small business who says it 
is too cumbersome for me. It is too overwhelming. So we 
multiply that times many times.
    How do you justify that in a way of performing an 
institution that is really supposed to be favoring small 
business, and yet here is someone who can't get access?
    Mr. Hochberg. I would actually like to meet that customer 
and speak with her. But I will tell you directly, we are trying 
to balance ease of doing business with risk management. This 
committee has made it very clear that it wants to see our 
default reports every 90 days, so we are trying to balance 
risk--
    Mr. Pittenger. She couldn't even get to your reports to get 
access.
    Mr. Hochberg. We are trying to balance the information so 
we can do good underwriting, but at the same time don't make it 
too cumbersome for customers. And we are constantly working to 
find the better balance. I would be happy to talk to your 
constituent to find out what was it, because I would like to 
learn more about our customers.
    Mr. Pittenger. Just one other thing, the CBO accounting 
reflected that the methods that she used, if you use fair value 
accounting, that you would have--significantly higher subsidy 
rates would be revealed. You have stated, of course, that you 
are profitable. How do you justify not using fair value 
accounting, and do you believe that you should?
    Mr. Hochberg. The law of the land is the Federal Credit 
Reform Act of 1990. So we follow the law of the land and we 
used that accounting method. I was in business for 20-plus 
years. You have one set of books and you follow the law of the 
land.
    Mr. Pittenger. The CBO says if you use fair value 
accounting, you would cost taxpayers $2 billion. Do you 
believe, on your own account, that you should be using fair 
value accounting?
    Mr. Hochberg. I follow the law of the land, and I also 
dispute that number from CBO.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentlelady from Wisconsin, Ms. 
Moore, ranking member of our Monetary Policy and Trade 
Subcommittee.
    Ms. Moore. Mr. Chairman, I would like to raise a point of 
personal privilege, and not be charged time for it.
    Chairman Hensarling. Do you have a point of order?
    Ms. Moore. Point of personal privilege, yes, sir.
    Chairman Hensarling. You can make a parliamentary inquiry. 
I am uncertain as to what the point of personal privilege is.
    Ms. Moore. My point, I would like to make a point of 
personal privilege.
    Chairman Hensarling. We will certainly hold the clock and 
allow the gentlelady to make her point.
    Ms. Moore. Thank you, Mr. Chairman.
    I would just like to thank this committee on both sides of 
the aisle for really supporting me during a very painful couple 
of weeks, due to the death of my sister. I have gotten flowers 
and cards and calls. And you just don't know how important that 
has been to me, and I am just overwhelmed with gratitude, and I 
wanted to thank you, Mr. Chairman, and you, Madam Ranking 
Member, for caring about me as a person and not just as a 
committee member.
    Chairman Hensarling. I know I speak for the entire 
committee on both sides of the aisle to let you know what a 
valued friend and colleague you are and how our hearts were 
heavy with your loss.
    Ms. Moore. Thank you so much.
    Chairman Hensarling. And now the clock can start anew, and 
we will yield the gentlelady her 5 minutes.
    Ms. Moore. Thank you so much. I want to thank the panel for 
appearing again here. And I can tell you that I am sort of 
unhappy that Mr. Huizenga, my very good friend from the 
midwest, is not here, because I really want to clear something 
up. I think the not-so-surreptitiously-veiled strategy to pluck 
the low-hanging fruit of the Ex-Im Bank from the vine as a 
raison d'etre to get into Social Security, Medicare, Medicaid, 
SNAP, the so-called entitlement programs.
    Mr. Huizenga said it very straightforwardly. We heard it 
time and again that, how can you pluck into these social 
programs if you can't even bring down the Ex-Im Bank? So I 
think it is a straw man argument. I guess my for first 
question--and I had intended to engage in a colloquy with him 
and if the chairman or someone else would like to do that, I 
will yield time--is for Mr. Hochberg. How is the structure of 
the Ex-Im Bank similar to Social Security, Medicare, Medicaid, 
and SNAP, such that it is persistently called corporate 
welfare? How is it similar or dissimilar from the gas and oil 
business who, through our tax expenditures every year, get 
about $4.8 billion from the government? Can you share with us 
the structure of the Ex-Im Bank as compared to SNAP?
    Mr. Hochberg. I am a little confused as well by some of 
these comparisons. Customers, clients, exporters pay a fee for 
their service. It is a fee-for-service. They pay a fee. The fee 
fully covers all of our operating costs, all of our loan lost 
reserves, and then generates a surplus that goes to the 
taxpayers for deficit reduction. So we are not transferring 
money from one group of taxpayers to another. We are actually 
transferring money from customers to the taxpayers, from 
outside entities to the taxpayers, and many times, those are 
foreign buyers. So I don't understand the comparison.
    Ms. Moore. I don't either. I thought maybe you would 
understand it better than I do.
    Let me ask you, one of the things that seems to get under 
the call of some of our members of our committee is the mandate 
that you all have to do clean energy stuff, and that you are 
picking winners and losers. I am reflecting on the $4.8 billion 
that is transferred to the oil and gas industry through tax 
expenditures. And I want to compare that $4.8 billion a year to 
whatever subsidy that the government perceives that you get 
from them, even using their accounting system. How does $4.8 
billion a year compare to what the government does for the Ex-
Im Bank?
    Mr. Hochberg. We transfer money to the government from the 
Ex-Im Bank. We don't receive money from the government. So 
there is no subsidy that goes to Ex-Im. And by World Trade 
Organization, WTO, we need to be self-sustaining, meaning the 
fees we collect have to, at a minimum, cover all of our costs, 
and in this case, they cover more than our costs.
    Ms. Moore. We usually have a debt clock running, and I am 
wondering to what extent would our trade deficit increase were 
we not to reauthorize the Bank, in your opinion?
    Mr. Hochberg. I can only tell you that in the last 20 
years, we have transferred just under $7 billion for deficit 
reduction to reduce the debt. Just under $7 billion over that 
20-year period. $675 million as recently as October.
    Ms. Moore. Okay. So this notion that you pick winners and 
losers, I am wondering, Mr. McCarthy, have you seen anything in 
your examination of the Ex-Im Bank which suggests that they 
pick winners and losers?
    Mr. McCarthy. We haven't received any allegations along the 
lines of the process being skewed in favor in particular 
transactions. The Bank has controls and processes in place. 
They have to do due diligence. The applicants have to meet 
certain credit standards. We haven't seen any evidence of cases 
where they seem to be favoring one particular party or another 
and not following their own guidelines on that. The structure 
of the guidelines are set by Congress and set by bank policy.
    Ms. Moore. Thank you. My time has expired.
    Chairman Hensarling. The time of the gentlelady has 
expired.
    The Chair now recognizes the gentleman from Kentucky, Mr. 
Barr.
    Mr. Barr. Thank you, Mr. Chairman.
    Mr. Hochberg, you and I have talked extensively about the 
Ex-Im Bank's announcement following President Obama's climate 
action plan in June of 2013, and the Bank's guidelines for 
high-carbon projects in December. I know you have answered this 
question before, but in light of that policy adopted by the 
Bank's board of directors, do you believe that the Export-
Import Bank chooses winners and losers in U.S. industries?
    Mr. Hochberg. No, we don't, but we have a standard that 
Congress has put in our charter since 1992 that we must take 
the environment into account.
    Mr. Barr. So you have the charter, which is a policy of 
picking winners and losers, a policy that favors renewables 
over fossil energy projects, and then you have this additional 
codification of the policy of picking winners and losers, which 
was the December 13th guidelines.
    Mr. Hochberg. What you referred to, much of this is 
actually in our charter.
    Mr. Barr. Right. So the charter is inherently part of the 
policy of the Bank, which interjects political judgments about 
what energy projects are worthy of financing versus others. 
What is wrong with that analysis?
    Mr. Hochberg. It is Congress' judgment that makes the 
decision on what guides our behavior. So these have all been 
passed by Congress.
    Mr. Barr. Right. So, okay, fine, you can blame it on 
Congress.
    Mr. Hochberg. We are not blaming them.
    Mr. Barr. But you, sir, in response to President Obama's 
climate action plan, and in announcing your board's 
discriminatory policy against coal-fired power said, ``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 international consensus such 
that other nations follow our lead in restricting financing of 
new coal-fired power plants.''
    How is that not a policy of picking winners, renewables or 
nuclear or non-coal fossil energy over coal, a loser? How is 
that not picking winners and losers?
    Mr. Hochberg. Sir, we finance a lot of coal exports. We 
finance coal-mining equipment. But we have a restriction about 
financing coal-fired powered plants except in very poor 
countries.
    Mr. Barr. Right. You are not letting the marketplace 
dictate this. So what has the marketplace said? Here is what 
the marketplace is saying right now. The marketplace is saying 
that the demand for coal-fired power, particularly in lesser-
developed countries, is skyrocketing. The International Energy 
Agency (IEA) concludes that 1,000 gigawatts of coal capacity 
will be built by 2040 at a cost of $2.5 trillion, irrespective 
of American policy.
    Here is what the IEA says, ``In the world energy outlook, 
the use of coal for power generation will continue to increase 
until at least 2035 to 2040 and will remain an integral part of 
the energy mix long after that.'' Here is the sad conclusion 
that I draw: The United States has the best, most 
environmentally-friendly, energy technology on the planet with 
respect to coal-fired power.
    Your Bank's decision to not finance coal-fired power 
projects overseas with American clean coal technology is 
resulting in China financing these projects and using inferior 
electric generation technology. The Bank's policy, ironically, 
is contributing to a worse environmental result. Is there any 
response to that in China's export credit agencies doing the 
job that you won't do?
    Mr. Hochberg. First of all, we will finance coal-fired 
power plants in poorer countries. In those developing 
countries, we will certainly do so. We haven't had an 
opportunity--
    Mr. Barr. Okay. You are citing an exception with poor 
countries. So my question is this: Since you announced the 
guidelines, has your board agreed to finance a coal-fired power 
plant in a lesser-developed country?
    Mr. Hochberg. We have not received an application.
    Mr. Barr. Have you invoked that inception? Because China is 
not. China is financing coal-fired power. India is financing 
coal-fired power projects. Do you think they have better 
technology in generating coal power than we do?
    Mr. Hochberg. The U.S. Government is in negotiations with 
China and others to restrict it globally.
    Mr. Barr. Okay, so in 2030, and if you trust China, that is 
a great assumption, but doesn't allowing an exception for 
lesser-developed countries actually imply in the policy itself 
that coal-fired power plants have benefits as cheap and 
reliable sources of energy for poor countries?
    Chairman Hensarling. Short answer from the witness, please.
    Mr. Hochberg. There is a benefit for poor countries, 
exactly. That is why the exception is there.
    Mr. Barr. Okay. My time has expired, but I think we have 
proven the point that the Bank will always pick winners and 
losers--
    Chairman Hensarling. The time of the gentleman has expired. 
The Chair now recognizes the gentleman from Illinois, Mr. 
Foster.
    Mr. Foster. Thank you, Mr. Chairman, for holding this 
hearing.
    I have a graphic that I would like displayed, and without 
objection, entered into the record. It is simply a plot of the 
number of manufacturing jobs in the United States over the last 
several Administrations. It is interesting to look at the trend 
here that you see, for example, in the Kennedy Administration, 
we had the strongest period of job growth in our country's 
history, in the Kennedy and Johnson Administrations.
    Then in the Nixon and Ford Administrations, the number of 
manufacturing jobs dropped. It went up the during the Carter 
years, down during the Reagan years, down further during the 
first Bush Administration, roughly level during the Clinton 
Administration, and then we suffered a catastrophic drop due to 
the policies of the second Bush Administration. We now are 
continuing to grow manufacturing jobs again, largely by 
returning to the policies that had historically supported 
strong growth of U.S. manufacturing.
    I am best known as being, I guess, the last Ph.D. scientist 
in Congress, but I am also a manufacturer. The company that my 
younger brother and I started with 500 bucks from my parents 
now manufacturers the majority of theater lighting equipment in 
the United States. We do hardware, software, sheet metal 
painting, customer support, and we have kept all those jobs in 
the midwest, which is something I am extremely proud of.
    And so as much as anything, it is this collapse that got me 
to lead my career in science and in business, to go into one to 
try and make a difference here. Because you can see, it makes a 
difference what the policies are. Both parties talk as though 
their policies are pro-job, pro-growth, pro-manufacturing, but 
you can see there is a real difference in the actual result. 
And the statistics on the number of Administrations, the number 
of times we have gone back and forth between what we support. 
And, as a scientist, I think the conclusions here are pretty 
clear. I leave it up to the audience or the students here to 
deduce what the color coding on the arrows means.
    And so actually, with that out of the way, it is 
interesting to talk about what was responsible for this 
tremendous drop, that we lost over a third of our manufacturing 
jobs in the last decade. The three biggest causes of that, in 
my mind, are, first and foremost, currency manipulation. We led 
China and the World Trade Organization without any agreement 
that they not manipulate their currency. And the U.S. 
manufacturers, as a result, have a significant artificial cost 
disadvantage for most of a decade or longer than a decade now.
    We also had a wave of subsidized or guaranteed credit for 
exporters in other countries that frankly we did not match. 
That is the subject of this hearing, whether guaranteed export 
credit is actually an important countervailing thing that we 
have to do. In a perfect world, we would not need the Export-
Import Bank, but I think it provides in the presence of 
subsidized credit from around the world, for their exports, I 
think it is essential. My attitude is very much that we should 
put down our weapon when they put down theirs and not before.
    The third factor, of course, is the enormous tax breaks for 
those already wealthy that happened during the Bush 
Administration, where those already wealthy, instead of 
reinvesting their productive assets back into the United States 
simply turned the money over to their money managers, who more 
and more invested that money offshore. Very different than what 
happened during the Kennedy Administration, for example, when 
we had very different tax rates.
    But since we are concentrating on the second item there, 
the credit, the guaranteed credit for exports. I have a couple 
of questions for Chairman Hochberg. First, you received some 
criticism early in this hearing about your dealings with 
foreign state-owned enterprises. Do you run a profit or a loss 
in your dealings with foreign state-owned enterprises?
    Mr. Hochberg. We run an overall profit at the agency, and 
we turn it over to the taxpayers every October.
    Mr. Foster. Okay. And does that include your dealings with 
foreign-owned enterprises?
    Mr. Hochberg. Yes, it certainly does.
    Mr. Foster. So the taxpayer is better off because of your 
dealings with foreign state-owned enterprises.
    And the second thing is, I am increasingly concerned with 
these eleventh hour reauthorizations that you are suffering 
through. It seems to me that creates exactly the kind of 
uncertainty that ruins deals, and drives equipment purchasers 
to foreign competitors. What kind of impact along those lines 
might you have seen already because of the brinksmanship going 
on here?
    Mr. Hochberg. We have already seen--there was testimony 
last year from Steve Wilburn who lost a deal to the Philippines 
that was taken over by South Korea, and we have also seen banks 
and insurance brokers pull back and deny credit to small 
businesses.
    Mr. Foster. Okay. Thank you. It looks like I am out of 
time, and I yield back.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Pennsylvania, 
Mr. Rothfus.
    Mr. Rothfus. Thank you, Mr. Chairman.
    Chairman Hochberg, Michael Grunwald, in a Politico Magazine 
article from earlier this year, the article titled, ``The Real 
Bank of America'' described the more than $3 trillion in loans 
that the Federal Government--that is the hardworking American 
taxpayers--are on the hook for in case of defaults. And that $3 
trillion does not count the more than $15 trillion in other 
guarantees for which the Federal Government is on the hook.
    At a time when our national debt exceeds $18 trillion, and 
in the wake of the massive bailouts at Fannie Mae and Freddie 
Mac, it is imperative that any efforts, I believe, to 
reauthorize Ex-Im must take steps to ensure that taxpayers are 
fully protected from the possibility of potential losses. And 
here, Mr. McCarthy identified one of Ex-Im's biggest challenges 
is risk management.
    One way that we could potentially create additional 
protections for American taxpayers is by requiring full 
collateralization, or sovereign guarantees for all direct loans 
or loan guarantees issued by the Bank. As noted in the Bank's 
Fiscal Year 2016 congressional budget justification, only 77 
percent of the Bank's portfolio is currently backed by a form 
of asset or collateral security.
    The percentage increases to 80 percent when including 
sovereign guarantees. A reasonable person might think this 
should be 100 percent collateralization. Would you be 
supportive of making that sort of requirement for Ex-Im loans 
or loan guarantees?
    Mr. Hochberg. I would not.
    Mr. Rothfus. Another way that we can protect the American 
taxpayer from potential Ex-Im losses is by requiring additional 
guarantees from U.S. exporters who directly benefit from the 
banks providing of loans or loan guarantees to the foreign 
purchasers of their products.
    Specifically, we could require that as a prerequisite for 
any loan or loan guarantee, the U.S. exporter must both 
guarantee full repayment for any money extended to a foreign 
purchaser and take the necessary steps to ensure that this 
guarantee is senior to other obligations.
    This would create an additional barrier and source of 
repayment before any losses would be placed on the backs of the 
taxpayer. Would you support this reform?
    Mr. Hochberg. No, I would not.
    Mr. Rothfus. It is interesting to read--I am just learning 
about the NewSat bankruptcy. And in this article in Space News, 
it says that $193 million was mainly Ex-Im money lent to NewSat 
in addition to equity NewSat had raised on its own. It is now 
in the form of a nearly complete spacecraft that Lockheed 
Martin owns and is free to sell without having to repay 
anything to Ex-Im.
    Now, if Lockheed sells the satellite, you have no agreement 
right now with Lockheed that they would have to go back and pay 
Ex-Im for that loss; is that right?
    Mr. Hochberg. We are still working on a solution to this 
transaction. It is simply in an early stage, sir, and so we are 
trying to find an actual buyer together.
    Mr. Rothfus. But you have no legal document that you can go 
back to if Lockheed goes and sells? Because it owns the 
satellite, and it is certainly free to go and sell it, correct?
    Mr. Hochberg. Lockheed has possession of it, but we are 
working with Lockheed and other creditors to find a solution so 
that we do not suffer a loss in this particular case.
    Mr. Rothfus. The 2012 reauthorization directed Treasury to 
pursue negotiations to substantially reduce, with the ultimate 
goal of eliminating, subsidized export financing programs and 
other forms of export subsidies. There has been essentially no 
progress on this front at all, as most recently confirmed by 
Treasury's Under Secretary for International Affairs, Nathan 
Sheets, in testimony before the committee on April 15, 2015. 
Whom do you blame for that failure?
    Mr. Hochberg. First, this is the Secretary of the 
Treasury's responsibility. He has issued three reports about 
their efforts to reign in export finance globally. I understand 
this is the Treasury Secretary's responsibility, but it is to 
reign it in. We have to get outside parties like China, Brazil, 
India, and Russia that aren't even a party to it before we 
ratchet down everybody else. Let's make sure we get everybody 
following the rules then we can ratchet everybody down.
    Mr. Rothfus. Have you done anything personally to make sure 
that this requirement is fulfilled?
    Mr. Hochberg. As I mentioned in my own testimony, although 
this is the Treasury Secretary's responsibility, I have gone 
out of the way to speak to all of my colleagues and ask them 
how we would do this.
    Mr. Rothfus. Ex-Im is currently open to support foreign 
purchases for U.S. exports. In almost 200 countries around the 
world, the Bank is prohibited from extending credit and 
insurance to certain countries, for example, those that are in 
armed conflict with the United States. But it can still provide 
services in many countries that have horrific records on issues 
pertaining to human trafficking and the protection of 
internationally-recognized human rights, including the freedom 
of religion.
    Would you support simple commonsense reforms that would 
further limit the Bank's country limitation schedule to 
prohibit countries that are refusing to take the necessary 
steps to prevent human trafficking within their borders and 
those who are engaged in or tolerate particularly severe 
violations of religious freedom?
    Mr. Hochberg. We actually subject all transactions to 
review by the State Department and follow their guidance in 
terms of whether it is an allowable country or not. So that 
policy decision is made by the State Department, not by us.
    Mr. Rothfus. So you would take no position on any of the 
reforms that we propose.
    I thank the chairman, and I yield back.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from California, Mr. 
Sherman.
    Mr. Sherman. Mr. Chairman, in a second I will yield to you 
for the answer to a question.
    But I think there are some things we all agree on. This is 
a very important issue. We have debated it at length. 
Reasonable and good-spirited people can reach different 
conclusions, and democracy ought to determine what our policy 
should be.
    So, Mr. Chairman, will you be doing everything possible so 
that this committee or the House is voting on whether to 
reauthorize the Ex-Im Bank in the next couple of weeks?
    Chairman Hensarling. Is the gentleman yielding to the 
chairman?
    Mr. Sherman. Yes.
    Chairman Hensarling. The Chair will not make a decision 
until after this hearing. I will listen to all colleagues. I am 
not aware of any bill that is supported by a majority of the 
House, much less a majority of this committee. If I am made 
aware of such, I assure you, it will influence my thinking.
    I thank the gentleman for yielding.
    Mr. Sherman. We may have a chance to look at bills 
supported by a majority, or perhaps a 60 percent majority of 
the United States Senate. And there are many, many bills that 
come to this committee that we mark up that are not cosponsored 
by a majority of the House or a majority of the members of this 
committee.
    I think if this committee has a markup, we will devise a 
bill that has majority support, perhaps taking into 
consideration the comments of the gentleman from Pennsylvania, 
that we have restrictions on not allowing Ex-Im Bank to operate 
in those countries which have horrific records on human 
trafficking.
    Also, the gentleman from Pennsylvania focuses on the need 
to try to get other countries to ratchet down their export 
promotion authorities. That is a responsibility of the 
Department of the Treasury. Without objection, I would like to 
put in the record the last three annual reports of the 
Department of the Treasury.
    Chairman Hensarling. Without objection, it is so ordered.
    Mr. Sherman. And I will point out that I don't think they 
are doing as much as they should. But the next Administration 
hopefully will, and the next Administration will have nothing--
like going to a gunfight without even a knife--in its arsenal 
if we don't have an export promotion authority. If you go into 
arms talks working for disarmament and you have already 
unilaterally disarmed, there is no reason for anybody to listen 
to you.
    Accounting. My favorite subject. Mr. Hochberg, with 
generally accepted accounting principles (GAAP), you have a 
profit of $750 million, is that correct?
    Mr. Hochberg. Last year was $675 million, to be precise.
    Mr. Sherman. Okay. And up on the board, whenever a 
Republican is speaking we have the debt clock, so that debt 
would be $675 million higher if we had abolished your Bank a 
year ago?
    Mr. Hochberg. Yes. And furthermore, CBO has actually scored 
the Ex-Im budget initially at $1 billion. Deficit reduction has 
cut that about in half to, again, uncertainty of the 
reauthorization.
    Mr. Sherman. And that is with reserves for the risk that 
you are taking of default. Just like any insurance company, any 
lender can calculate its profit only after determining what is 
an actuarially sound reserve for bad debts; is that correct?
    Mr. Hochberg. That is correct.
    Mr. Sherman. Now, I have heard that there is this thing 
called fair value accounting--I think it is better called 
fantasy value accounting--which would say that you should 
determine your profit or loss not based on whether you have a 
profit or loss, but whether you would have a profit or loss in 
some artificially constructed fair world.
    And as you have heard me say before, in a fair world, 
Jack's Pizzeria would have the same cost of funds as Pizza Hut. 
Now, if you really know Jack, you would not lend him money. But 
in a fair world, he might have the same cost of funds and then 
he would have a profitable--or Pizza Hut would have a higher 
cost of funds. But if Pizza Hut had to pay when it borrowed 
money, the risk premium that is appropriate for Jack, they 
would be out of business.
    So in the real world, generally accepted accounting 
principles are the same principles used by all the other 
lenders in the country, is that correct, and do you show a 
profit?
    Mr. Hochberg. The U.S. Government uses the Federal Credit 
Reform Act (FCRA). And by that, we put aside reserves, as you 
have mentioned, Congressman, about $5 million worth of 
reserves, and the rest goes to the taxpayers. Any change in 
accounting would actually just increase reserves and then they 
would be released to the taxpayer.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Arizona, Mr. 
Schweikert.
    Mr. Schweikert. Thank you, Mr. Chairman.
    Mr. McCarthy, I would love for your help in just trying to 
make sure I have my head around some of the mechanics I see 
here. I am looking at a report, an audit from September 2012, 
if you are willing to track with me to page 6. But I am going 
to do this--I think it is the second paragraph--a little bit 
backwards.
    Apparently, in 2011 it was determined that because of the 
way the law is structured, the Ex-Im Bank did not need to 
report impairment of assets. So I guess, 2011, they just 
stopped the impairment. And it is really important for this 
conversation. There is a difference between impaired assets and 
write-offs. Can we at least agree to that? Because last time, 
we had some fussing back and forth where we were sort of mixing 
the two, I think quite disingenuously.
    Mr. McCarthy, have there been any attempts since 2011 to 
start to say, here is actually what the impairments are on this 
book?
    Mr. McCarthy. The Bank has some separate reports that it 
prepares. One of the reports that it prepares is the default 
rate report, and that is--
    Mr. Schweikert. I am not asking the default. Impairment.
    Mr. McCarthy. There is a different report that is prepared 
about impaired assets and a watch list.
    Mr. Schweikert. Okay. So it does exist. But in the last 
discussion, the Honorable Mr. Hochberg looked at me as if I 
were deaf, that no such thing existed. I am not overstating it. 
You can go back and see the video.
    So right now, if, as Mr. Mulvaney was talking about with 
NewSat, would I see that on the impairment report, and was it a 
half million dollars? Would I see that as now the impairment 
set-aside on that report?
    Mr. McCarthy. I don't know the timing of it, but I would 
expect that would be something that would appear on that 
report, given the recent developments.
    Mr. Schweikert. So in some of the opening discussion here 
and opening testimony, I am hearing these repeated statements 
about how low our default rate is. According to that report, if 
you know off the top of your head, what is the actual default? 
And remember, default is defined as, ``I am late on a payment. 
I am out of compliance in my reps and warrants.''
    I am trying to--like for like, my ceteris paribus of here 
is the rest of the world that ensures, or does guarantees and 
this institution, so we have at least an honest discussion 
going on here.
    Mr. McCarthy. Right. So as you recognize, default can mean 
different things. It can mean a payment default; it can mean 
impairment.
    Mr. Schweikert. Impairment. Impairment. Default is--they 
are different things.
    Mr. McCarthy. Let me try to explain. I understand what you 
are getting at, and let me try to explain it from our point of 
view as the IG. The Bank reports their--what they report as the 
default rate was called the default rate by the 2012 
reauthorization, and Congress provided the formula to how the 
Bank calculates that. They have reported that. They have been 
transparent about that formula.
    That formula, as you say, is more of a net loss rate than a 
default rate. Looking at a default rate as more broadly used, 
as you say, of things that are potentially impaired but haven't 
yet generated a loss but could potentially do so in a future 
would have a different calculation.
    Mr. Schweikert. But any other institution out there, when 
someone's out of compliance in arrests and warrants, there is 
often a scaling of, we need to set aside for this. We heard a 
little while ago there is--what was it, $5 billion that is 
ultimately set aside for losses. Does that scale in accordance 
with the percentage of the book that is an impairment, like 
every other institution would be required to? And if so, how 
come a couple of weeks ago when we had this very discussion, I 
couldn't get near an answer of such a thing as actually scored 
and kept.
    Mr. McCarthy. On the impairment list, and I can go in and 
try to look and answer your question more specifically, some of 
the impairments are more qualitative in nature than 
quantitative. So in some ways, it is difficult to calculate an 
actual--
    Mr. Schweikert. No, it is not. No, the industry has been 
doing this for about a couple of centuries. And there are 
industry standards in how you do this. So what you are telling 
me is our institution here doesn't at least just do what is 
common practice in the rest of the banking and investment 
world?
    Mr. McCarthy. The institution has an impaired asset list 
and a watch list.
    Mr. Schweikert. Okay. Impaired asset and then the reserve 
calculation for it.
    Mr. McCarthy. The reserve calculation is based on the loss 
experience historically under FCRA.
    Mr. Schweikert. Mr. Chairman, one more time, I yield back. 
One day, I might get an answer.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from New York, Mr. 
Meeks.
    Mr. Meeks. Thank you, Mr. Chairman.
    I keep hearing this thing about winners and losers, winners 
and losers. It seems to me that what we are talking about is 
making the American workers the winners here. Clearly, from my 
experience, I understand--and I don't understand why, 
especially my friends and colleagues who are supporters of 
trade, this seems like a no-brainer. Americans are selling more 
goods and services abroad than ever before, and every $1 
million in U.S. exports supports an average of more than 5,000 
jobs here at home.
    American exports supported more than 11.3 million U.S. jobs 
in 2013. Ninety-five percent of the world's customers live 
outside of the United States, and we need to continue to help 
American businesses to export more, so we should all be talking 
about how we can export more overseas. I just give you the 
benefit of my experience from my small, little State of New 
York, something like--in Maine.
    Ex-Im has committed over $11 billion in total export value. 
That includes $7 billion in insured shipments, guarantees of 
disbursed loans, and an additional $4 billion in approved 
authorizations. There are 350 New York-based exporters that 
benefited from Ex-Im Bank trade facilities last year, of which, 
and this is very significant to me, 201 were small businesses. 
And 26, I know Chairman Hochberg, and Vice Chair Felton have 
been working very hard are minority businesses. They were 
minority-owned businesses, giving them the opportunity to 
export.
    And these businesses operate in various sectors that are 
creating jobs here in America. We have exports in food 
manufacturing, machinery manufacturing, transportation 
services, computer and electronics, insurance, banking, 
finance, and the list goes on and on and on. And so we need to 
be exporting more, not less, and that is what the Ex-Im Bank 
does.
    So let me just ask Chairman Hochberg, first, I believe, 
isn't it true that Ex-Im operates more like, in this case, a 
lender of last resort, in one second correcting the market 
failures when private trade finances are unable or unwilling to 
invest in U.S. exports at competitive rates? So when that 
happens, the bank of last resort, Ex-Im, if you no are longer 
there to help these companies move, what happens to them?
    Mr. Hochberg. Thank you, Congressman. I have often said 
that we are plan B. Plan A is the private sector. Plan C would 
be China. They would be more than happy to fill in the gap that 
is the vacuum that we would create if we are not there.
    I was talking yesterday with an exporter in Chattanooga, 
Tennessee. A company that we are working with is going to 
finance an export to China. He has hired up for this thing. And 
he said that if it wasn't for Ex-Im, he probably would not have 
hired those 20 people, and he would lay off another 20 people, 
so 40 to 50 people's jobs are at stake on this single order to 
China.
    Mr. Meeks. And so, it just seems, that is why I am just 
baffled that some of my colleagues don't believe we need Ex-Im 
Bank, and they say that the private sector can do it all. But 
when we look at between 2008 and 2009, the private sector trade 
financing fell by 40 percent. And as of today, isn't it true, 
Mr. Hochberg, that many of these private banks are still not 
willing to extend export financing without additional 
guarantees from Ex-Im Bank?
    And can you also talk about the gaps our financial crisis--
you know, we had one in 2008--left in trade financing, and how 
the Ex-Im Bank filled that void then and continues to fill that 
void now.
    Mr. Hochberg. Our authorizations hit an all-time high in 
2012. We financed over $36 billion of financing, financing over 
$50 billion worth of goods. We are operating at about half of 
that level now, which is a good sign that the financial markets 
are recovering. The banks are more liquid. They are not liquid 
in every market. They certainly make it tougher for small 
businesses.
    But the good news is that when there was a crisis, we 
stepped in. We were like the fire truck, my analogy. And now 
that the fires of the recession are more behind us, we have 
been less active, which is a good sign that the capital 
markets, banking markets are recovering.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Texas, Mr. 
Williams.
    Mr. Williams. Thank you, Mr. Chairman.
    Throughout this process, I have heard from many of the 
stakeholders involved. I have heard from the Bank, from 
businesses, and my constituents, who are the taxpayers. And 
some of the biggest complaints I hear are what about taxpayer 
liability, and does the Bank pick winners and losers? And as we 
have heard today, Ex-Im Bank financed $27.5 billion in exports 
in 2014. Now, I personally believe that the Bank needs reform. 
We don't seem to talk about reforms. We just defend positions. 
But I have yet to see a set of reforms that fixes the two chief 
complaints I mentioned before.
    Mr. Chairman, you know my background is in retail. I have 
been a small business owner for 44 years, a family business 
founded in 1939. I am Main Street America. I am a car dealer. 
And in my industry, when a car needs to be financed, I often 
will guarantee the note for the person to whom I am selling the 
car. In other words, I let the bank know that if for some 
reason the buyer defaults on his loan, I, as the seller, will 
be responsible for the balance of the loan. In my business, we 
call that recourse paper.
    Now, I am a deal maker. So I want to help you make a deal 
today. Chairman Hochberg, why couldn't we do something similar 
with the Bank? Why couldn't we say that any money being loaned 
out by the Bank be subject to similar requirements and 
guarantees? In other words, the seller guarantees the note to 
Ex-Im, which gets the taxpayers out of their liability. The 
taxpayers are gone then, and that reduces that question. Why 
can't we do that?
    Mr. Hochberg. Congressman, we work in a very competitive 
world, and that is simply not a competitive practice. There are 
80-plus export credit agencies. Without Ex-Im's financing, we 
put U.S. companies at a severe disadvantage to their global 
competitors. And besides which, our default rate which we 
report to Congress every 90 days is less than one fifth of 1 
percent, it doesn't indicate there is a problem here that needs 
to be fixed.
    Mr. Williams. Okay. I hear what you are saying. The 
taxpayers, though, the taxpayers are guaranteeing this. We need 
to get the taxpayers out of this. And I understand competition 
as good as anybody, okay. So I know you have mentioned there 
are points and fees that you charge. But that doesn't come 
anywhere near covering the entire liability of the loan, 
correct?
    Mr. Hochberg. We have about $5 billion in reserves to back 
up any possible default--
    Mr. Williams. But it doesn't cover all the loans.
    Mr. Hochberg. You never have reserves to cover 100 percent.
    Mr. Williams. Yes, you would if you go resource paper.
    Okay, now, my next question is this: You said the default 
rate for Ex-Im Bank is actually very small, something less than 
1 percent, correct?
    Mr. Hochberg. It is running less than one fifth of 1 
percent.
    Mr. Williams. Okay. That is another reason to go recourse 
paper.
    So in my head, if the businesses are benefiting from Ex-Im 
Bank, have skin in the game, like a lot of us do in the private 
sector, have skin in the game on the loan, and the default rate 
is so low, which you talked about, basically zero, all the more 
reason for them to guarantee the note. And, in fact, as you 
know, if they guarantee the note, you can give them a better 
rate and make them more competitive across the world, which you 
just talked about.
    So the point I am trying to make, Mr. Chairman, is if the 
average taxpayer sees the Bank as doing exactly what I said 
before, and just as with other Federal agencies who have been 
bailed out, the taxpayer wants to know what happens if all the 
loans go bad. I know the possibility of that might be small, 
which is good, but, again, we have said that for agencies like 
Fannie and Freddie, and guess what, they are bailed out and the 
taxpayer pays the money.
    I don't know if something like this could actually save the 
Bank during this conversation, but by removing the taxpayer 
from the equation, again, removing the taxpayer from the 
equation, I think it would go a long way to solving a lot of 
the problems. So, again, why can't you do this? Think about it. 
It is a solution that nobody seems to be talking about. It 
fixes. It fixes the questions that I have, and it fixes the 
questions that Americans have on the way they have to support 
this.
    So I would also say in closing, I have heard my colleagues 
talk about why the private sector has left. How about Dodd-
Frank? Maybe start thinking about that.
    Mr. Chairman, I yield back.
    Chairman Hensarling. The gentleman yields back.
    The Chair now recognizes the gentleman from Massachusetts, 
Mr. Lynch.
    Mr. Lynch. Thank you, Mr. Chairman. And thanks to the 
ranking member.
    Thank you, gentlemen, for your willingness to come here to 
help the committee with its work. I tend to look at things from 
the worker perspective. I was a welder and an ironworker down 
at the Quincy Shipyard in the Boston area, down in Quincy, 
Massachusetts, for a while, until that shipyard closed down 
because of the foreign competition. Some foreign ex-im banks 
supported shipbuilding in their countries and put us out of 
business.
    And I worked at the General Motors plant in Framingham, 
Massachusetts, and they closed that plant down and a couple of 
others and moved them over to Mexico. So I tend to see the 
effects of what other countries are doing.
    I just had an opportunity to travel to South Korea, and 
also to Japan. And I make it a point of, during my travels, and 
I was in both those countries for several days, to try to look 
for American products to see how we are doing in Korea and 
South Korea and in Japan.
    We were in South Korea for several days. It is a major 
industrialized country, big highways, millions of cars. I was 
there for 3 days, and was stuck in plenty of traffic. I saw two 
U.S. cars out of hundreds of thousands of cars in South Korea. 
The only two cars I saw were the one I was driving in from the 
U.S. Embassy, and the one behind me that had the U.S. Embassy 
security team for my detail. That was it. I was in Japan, the 
same thing. It looked like nobody's business trying to find a 
U.S. car. Nothing. So it just bothers me to no end that the 
Korean ex-im banks and the Japanese ex-im banks are picking 
winners and losers. And they are picking Korean winners, South 
Korean winners, and Japanese winners. And we are criticizing 
our Ex-Im Bank because you are picking American winners.
    And I have a real problem with what is going to happen here 
once America gets off the field, once we surrender, once we 
surrender and say: Okay, China, you can push Chinese 
manufacturing, and we are going to tie our hands behind our 
back.
    And what will this do? What will this do to creating U.S. 
jobs? I have to say that I hope and understand that your job is 
to create American jobs. And there has been some criticism here 
today of the way you are going about it, but I do think it is 
in the best interest of the American worker to be in the game, 
to be trying to push American companies. And I have said 
before, your support for Boeing doesn't support necessarily 
Massachusetts jobs in my district. But it is okay if you are 
putting Americans to work in Washington State, God bless you 
for doing that, and any other American company that you help. I 
don't think we can be parochial at that level. And can you just 
tell me what your ideas are about what is going to happen if we 
walk off the playing field and leave it to these foreign 
export-import banks to drive the creation of manufacturing jobs 
and other jobs around the world?
    Mr. Hochberg?
    Mr. Hochberg. Thank you for that. We take very seriously 
our jobs mandate. We are about U.S. jobs and not really about 
U.S. companies. When a U.S. company or a company makes goods in 
America, we support it. As I have said before, 164,000 jobs 
last year alone. And even when you make the comment about 
Boeing, I suspect there are many, many Boeing suppliers in the 
State of Massachusetts. So every time a Boeing plane is 
delivered to a foreign customer, many small businesses benefit.
    I was just in Erie, Pennsylvania, a town that without the 
exports from GE locomotive would be a very quiet town with not 
very many good jobs. And I met with a number of small 
businesses that actually supply machine parts, tools, and die 
parts that actually go into the locomotives.
    One company I met with, ISM, with 175 employees, a full 15 
percent of their work is tied to GE exports. So they are very 
much tied to the state of those larger companies making those 
exports. But I think what we are putting in jeopardy is 164,000 
jobs. That is a lot of jobs. That is a lot of families in their 
homes. That is a lot of families who are relying on these 
export jobs and the financing we do to make sure that export 
happens. And, again, 90 percent of those companies are small 
businesses, some in the chairman's district itself.
    Mr. Lynch. All right, thank you.
    I yield back.
    Mr. Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Maine, Mr. 
Poliquin.
    Mr. Poliquin. Thank you, Mr. Chairman.
    Gentlemen, thank you very much for being here. I appreciate 
it.
    Mr. Hochberg, since 2009 you have run this independent Ex-
Im Bank. It is an entity that was created by the Federal 
Government here in the 1930s. You have about 440, 450 
employees. And you folks provide low-interest-rate loans to 
foreign entities that turn around and buy U.S. products from 
U.S. companies, of course. Now, if these foreign companies 
cannot repay their loans and the taxpayers are on the hook, in 
fact, the reason why you are able to provide foreign companies 
with cheaper credit than nongovernment banks is because of the 
taxpayers' backstop.
    So where I want to go down this path, sir, if I may, is I 
have heard today from you and from other folks here in this 
hearing room that there is no cost to the taxpayer.
    There is no free lunch, Mr. Hochberg, everybody knows that. 
Of course, there is a cost to the taxpayer. For example, if you 
have a worker at a company and across the street is a 
competitor that has the same, roughly the same product, and 
that company is financed in part by you folks, so that product 
is purchased but not the product from the company that the 
other gentleman works for, then you have picked that winner, 
and he loses. There is a cost to that individual.
    Second of all, is that the only reason why, again, that a 
nongovernment bank isn't able to provide credit to some of 
these foreign companies is because you folks step in, and you 
are backstopped by the U.S. taxpayer who is at risk if 
something goes wrong. And so those U.S. banks who might be able 
to extend those loans aren't able to do so. So there is a cost 
to those banks, sir, in the nongovernment sector and also the 
people they employ.
    Now, there is one other cost I would like to talk about 
today that hasn't been discussed, and that is reputational risk 
for the U.S. Government. Now, I understand that you are 
appointed by the President and you also serve as the chairman 
of the board of your own directors. And you have stated here 
today in testimony that you raise money for the President. I 
don't see any way, sir, that Congress is able to hold you 
accountable. We don't appropriate any money to you.
    Now, what does it say to investors around the world who run 
companies who are thinking about investing in our economy, 
whether in Maine's Second District or throughout the country, 
that we have an Export-Import Bank where, if my notes are 
right--and I know, Mr. McCarthy, you are the inspector general 
for Ex-Im, so correct me if I am wrong--over the last 5 years, 
you have had 48 people associated with the Bank who have been 
convicted of fraud. You have 37 ongoing investigations for 
fraud and corruption right now. There has been about 66 years 
of prison time that has been dished out to these folks over the 
last 5 years and about $224 million of fines. Now, there was a 
Bank employee not long ago who accepted $78,000 in cash as a 
bribe to help folks out, foreign companies out to receive your 
credit, your cheap credit, and I guess he is going to be 
sentenced in July. There is a former Member of Congress who is 
in jail in Louisiana right now, and they found $90,000 of cash 
in his freezer that was associated with lending practices at 
the Bank.
    So I am asking myself, Mr. Hochberg--I represent 650,000 of 
the hardest working, most honest people that you could ever 
find in this country in Maine's Second District. And now you 
come before us. And the only way we have accountability, we can 
hold you accountable, is to determine whether or not we 
reauthorize your charter. I would like to find out how I can go 
back to the people that I represent with this trail of 
mismanagement, ongoing mismanagement and vote to reauthorize 
your Bank.
    Now, I would like to turn it over to your inspector general 
who is internally working at your Bank. Sir, you are also 
appointed by the President, is that correct?
    Mr. McCarthy. The position is appointed by the President. I 
am currently--
    Mr. Poliquin. Do you have subpoena authority?
    Mr. McCarthy. Yes, we do.
    Mr. Poliquin. You do. Do you have the ability to make 
criminal referrals?
    Mr. McCarthy. We do.
    Mr. Poliquin. Good. And do you have the ability to 
investigate employees who are no longer at the Bank but have 
left the Bank?
    Mr. McCarthy. We do.
    Mr. Poliquin. Do you have enough independence from the 
gentleman sitting right beside that you work with under the 
same roof that you think you can do your work effectively?
    Mr. McCarthy. Yes, we do. Under the Inspector General Act, 
we have organizational independence. We also have our own 
separate appropriation and manage our own budget.
    Mr. Poliquin. Good. Mr. McCarthy, you keep doing your work 
and keep digging. If you need help, you call our office.
    Thank you, Mr. Chairman.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Washington, Mr. 
Heck.
    Mr. Heck. Thank you, Mr. Chairman.
    I am reminded of a presentation I was a party to while in 
college. One of the faculty members of my school did some of 
the seminal field research on the correlation between the 
presence of DDT and eggshell damage among peregrine falcons. In 
his presentation to us, he had a scatter graph on the 
correlations between the presence and mortality rates among 
peregrine falcon eggs. And almost all of the dots were 
concentrated on, they died. And there was one or two way up 
there where they didn't. And when he made that presentation to 
the manufacturer of DDT, their response was, what about those 
two? I feel a little bit like I am living through that again 
almost 50 years later.
    There is a lot of semantics going on here as it relates, 
for example, to default rates. But the fact is that the Export-
Import Bank has a default rate and a loss ratio that is the 
envy of commercial banks. That is the fact.
    Mr. McCarthy, you are an incredibly patient human being. 
Thank you so much for being here. I want to make sure I 
understood you correctly. Is it accurate and fair for me to 
infer from your remarks, both in your opening statement and in 
answers to questions, that your opinion is that the Export-
Import Bank has made a good-faith and reasonable effort to 
embrace and implement the recommendations you have made?
    Mr. McCarthy. We have made our recommendations. The Bank 
has to implement them. We have closed a number of those 
recommendations, and we continue to make progress on them.
    Mr. Heck. Thank you.
    Mr. Hochberg, I want to get at the issue of harm. At its 
essence, some of this has to do with those who advocate that 
there will be no harm done if the Export-Import Bank's charter 
expires. I happen to share the concerns and worries of Speaker 
Boehner, who said he believes there will be lots of job loss if 
that happens.
    I am beginning to believe that the opponents are beginning 
to worry about that as well insofar as their wish casting, my 
new favorite word, that the private sector will step in. Let's 
break it down. First, for small businesses, I think often 
overlooked is the fact that a preponderance of the transactions 
aren't direct loans, but loan guarantees, revolving lines of 
credit, and what I call accounts receivable insurance. I think 
of Pexco in my district, which manufactures traffic cones, with 
little tiny quantities sold to Belgium; or Manhasset music 
stands, one of the largest music stands in America in Yakima, 
Washington.
    Is there any evidence to suggest that there is anyplace 
within the commercial sector where a bank would step in and 
guarantee such small amounts of exports even though those 
exports, for example, in Manhasset's case, would constitute 
over 30 percent of its business? Is there any evidence to that 
effect, Mr. Hochberg?
    Mr. Hochberg. Congressman, the reason we are brought in, 
and a bank brings us in, as I said, generally, or brokers is 
because they can't do it on their own, or they refuse to 
because it goes beyond their credit standards, beyond their 
risk profile.
    Mr. Heck. So let's scale up and deal with the large 
business part. Obviously, the name of the manufacturer of the 
finest airplane on the face of the planet has been invoked many 
times here. I just want to remind everybody that they assemble 
planes. They don't manufacture them. Their supply chain is 
15,000 businesses, 6,000 to 8,000 of which are small 
businesses. They make the parts. I have always thought that the 
way the Boeing Company would deal with this is that they would 
provision for it if the Ex-Im goes away on their balance sheet. 
Now, I come from the private sector, and I think anybody who 
does understands what that means. That means there will be a 
lot less money available to invest in attracting and retaining 
a quality workforce, research and development, remembering that 
the manufacturing of commercial airplanes is an exceedingly 
competitive business now between Boeing and Airbus, but soon to 
be China, and that they would therefore be harmed by it. But 
here is my question, Mr. Hochberg. That is how I thought this 
would play out. And that it would cause the loss of jobs. But I 
have recently read that I think the chairman and the CEO of the 
company had indicated that if we unilaterally disarm, the 
company would be compelled to consider moving certain parts of 
their manufacturing production offshore.
    Do you find that to be a plausible response to our shutting 
of your bank? And if so, what would the damage be to the 
manufacturing sector in America?
    Mr. Hochberg. Without question, that is a very real 
possibility, and certainly with the company you mentioned, but 
there are many others, such as GE, that have facilities all 
over the world, and can very easily begin to offshore their 
work permanently.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from North Carolina, 
Mr. McHenry, vice chairman of the committee.
    Mr. McHenry. Thanks so much, Mr. Chairman, and thank you 
all for being here. It has been a long day. But Mr. Hochberg, I 
think what Members, policymakers, want to know here with 
reauthorization coming at the end of the month, it is some sort 
of basic admission that there are some challenges in running an 
organization, right? There have been discussions of 
indictments. The IG is sitting next to you. There are ongoing 
investigations there. So, what would you say?
    Mr. Hochberg. I should probably let the IG answer himself, 
but we have had one indictment.
    Mr. McHenry. No, I am asking you.
    Mr. Hochberg. We have had one indictment, sir. One 
indictment. And the person pled guilty and that came to light 
because another employee saw something that didn't look proper. 
In the other investigation, the inspector general said at this 
point in the investigation, none of them involve employees, but 
you can ask him directly.
    Mr. McHenry. Okay. So are there any management challenges?
    Mr. Hochberg. Sir, I have run a company for 20 years. Every 
organization has management challenges.
    Mr. McHenry. So this is no different?
    Mr. Hochberg. Every organization is different. But of 
course, there are management challenges. We are trying to move 
forward. We are trying to be responsive to Congress, responsive 
to exporters, work with the private sector, not compete with 
the private sector, make sure we are competitive globally and 
get more small businesses to export. There are a number of 
those challenges.
    Mr. McHenry. A government survey of your employees at Ex-
Im--government employees, not your employees, you had the 
organization, but they don't work for you, they work for the 
American taxpayer. Only 42 percent of Export-Import Bank 
employees agree with the statement, ``My organization's leaders 
maintain high standards of honesty and integrity.'' Is that 
sufficient?
    Mr. Hochberg. Pardon me? Forty-two percent said that, and 
about 30 percent had no opinion.
    Mr. McHenry. So that is fantastic, is what you are telling 
me?
    Mr. Hochberg. No--
    Mr. McHenry. As a policymaker, am I supposed to look at 
this and say, ``Keep going man, you are doing fantastic?''
    Mr. Hochberg. Without question, sir, I take this very 
seriously. We all take this seriously at the Bank and we put a 
much higher priority on improving the workplace environment 
than we have at Ex-Im Bank. Of course, I am disappointed in 
those results.
    Mr. McHenry. Okay, some sort of admission is sort of 
helpful. I am not trying to inject humility to a grown man 
here, but I am simply saying that should not be in any way 
acceptable. And there should be a firm desire to improve the 
standards you have within the organization that you head.
    Mr. Hochberg. One of the--
    Mr. McHenry. I am giving you an opportunity to say that, is 
what I am telling you.
    Mr. Hochberg. Yes. One of the key objectives we have 
established.
    Mr. McHenry. Just because you say, ``We have only had one 
indictment,'' how is that a sales pitch for reauthorization of 
the organization that you head up that you explain in great 
detail the importance of what you do, and your defense is one 
indictment? We have only had one indictment. Would the American 
people look at Congress and say, ``Gosh, they have only had one 
indictment. Wow, that is good. We are happy?'' Walk me through 
this.
    Mr. Hochberg. I would be happy to, sir. Some have asserted 
on this committee that the organization is full of corruption. 
What I tried to indicate is that there is one indictment, one 
employee. The other investigations involved outside entities, 
companies and individuals trying to defraud the government. 
That is what I was referring to.
    In terms of improving the workplace environment, last fall 
we established four objectives for the Bank, and amongst the 
top four was making this a first-tier place to work, improving 
management development, improving opportunities, and making 
this a better place to work. So, we are working hard at that.
    Mr. McHenry. Sir, in the same survey, you have half of your 
employees agree, or half of the employees at the organization 
you had, agree that if they disclosed suspected violations of 
any law, rule, or regulation, they will not fear--actually, 
only half say that they would not fear reprisal for that.
    Mr. Hochberg. If you look at the data, sir, only 20 percent 
actually disagreed with that statement. Not--20 percent of the 
employees said they actually did not feel--
    Mr. McHenry. That is like bragging, ``I am firmly middle 
management.'' Or, ``I am a solid C student.'' Like this sort 
of--you should be making a better effort on this to acknowledge 
that, yes, there are failures. That would be a helpful thing, I 
would think. I am not trying to change your sales pitch, but I 
am just telling you that it is just not working. We are not 
buying it when you say that the management practices are 
sufficient and good, and just because you have raised this as a 
higher priority, that is sufficient, and we should be happy as 
policymakers when we look at your charter. All right, something 
has to change.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentlelady from Ohio, Mrs. 
Beatty.
    Mrs. Beatty. Thank you, Mr. Chairman.
    Thank you, Ranking Member Waters, and thank you to our 
witnesses today.
    First, let me say to you, Mr. Hochberg, welcome back to our 
committee. And I certainly want to take this opportunity to 
thank you for coming to my district. And not just coming to 
give a speech or be there for an hour, but to stay there and 
walk through the district, and hear concerns from a panel of 
some 50 people. It was also my pleasure to have you visit with 
a small company, Davenport Aviation, which utilizes Ex-Im 
resources to finance exports of its aircraft products 
internationally.
    Today has been interesting, and disappointing. It has been 
about a whole lot of issues for me, from where you slept, what 
room you slept in, how much money you took, to this whole 
concept of winners and losers. I believe this Congress should 
work to lift up America, and we should work day and night to 
support small businesses, to help our veterans, to invest in 
innovation, but clearly, some of my colleagues on the other 
side of the aisle want to pick winners and let the rest of 
America suffer as losers. If we are going to have that 
discussion, since all morning we have been hearing about 
winners and losers, and Democrats are being accused of flipping 
our opposition on the Ex-Im Bank, I am going to follow Mr. 
Capuano's example and not read off the list of people who have 
switched their votes on both sides.
    But I would like to draw this committee's attention to some 
of the losers under the current Republican Leadership. Last 
Congress, if the Majority had its way, the Supplemental 
Nutrition Assistance Program (SNAP), the Food Stamp program, 
would have suffered over $20.5 billion in cuts. These cuts 
would have cost millions of our most at-risk Americans, 
seniors, children, and veterans to go hungry. And later today, 
the House will vote on another appropriations bill, subject to 
the drastic spending caps created under the sequester, the 
Commerce-Justice-Science Appropriation bill, where funding for 
the Legal Services Corporation is cut by $75 million, reducing 
it to just $300 million, and thousands of people who qualify 
for legal representation from LSC will be turned away. Well, 
that is just another example of losers.
    So I get confused when sometimes we are accused of 
supporting the big folks, well, in this case, we supported a 
lot of folks. And we made the losers the small people.
    So I went to my district, and I started asking the small 
companies what they thought. And here is a statement: ``The Ex-
Im is 100 percent necessary for my company,'' the president of 
Davenport Aviation said. ``My company without Ex-Im Bank would 
not be able to exist.''
    One of my central Ohio Republican colleagues said that he 
had heard from employers in central Ohio and how they directly 
benefitted from the Ex-Im Bank and the consequences of not 
reauthorizing it. So my point is this, you have been 
criticized; you have been asked a lot of questions about the 
small businesses. Critics of the Ex-Im claim that the Bank 
promotes production in one sector of the economy to the 
detriment of the other. And we have heard all of those critics 
and that the Ex-Im picks winners and losers.
    So can you dispel this notion of Ex-Im picking winners and 
losers, and speak to how the Bank actually extends loans and 
guarantees to all applicants that meet its strict lending 
requirements?
    Mr. Hochberg. Thank you, Congresswoman.
    It was very good to be out in your district with you. As I 
said in my testimony, I will be brief, because we do not pick 
winners and losers. Companies come to us when they can't secure 
the financing they need to make their exports sales and support 
jobs. And there was a comment in Maine, if there are two 
companies, if one doesn't need our support and the other one 
does, one can find it in the private sector, we are delighted 
with that, but we want to make sure it is a level playing field 
and that financing is not the thing that gets in the way, we 
don't want that to stop creating jobs in America versus jobs 
overseas.
    Mrs. Beatty. Thank you, and I yield back.
    Chairman Hensarling. The gentlelady yields back.
    The Chair now recognizes the gentleman from Missouri, Mr. 
Luetkemeyer, chairman of our Housing and Insurance 
Subcommittee.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    It is interesting--I had a meeting the other day with the 
CEO of a large company that buys a lot of large items like 
airplanes, train cars, heavy equipment, and I asked him the 
question, if Ex-Im went away, what would you do? And his first 
response was, the first thing I would do is I would quit buying 
Boeing planes and go buy Airbuses, and all of the jobs would go 
away. Boeing isn't a manufacturing company. They are a design 
and assembly company. They have 1,800 small manufacturers, 
small businesses that produce their parts. So those 1,800 small 
manufacturers which are relying on this Bank to be able to 
exist, to be able to make a profit, to hire people. I think 
your numbers, Mr. Hochberg, indicated a minute ago 160,000-plus 
was created recently, the last year or so.
    It is interesting, also--I sit on the Small Business 
Committee as well. I am vice chairman of the committee, and we 
have had a couple of hearings. And in those hearings we have, 
obviously, small-business people all the time talk about their 
concerns, whether it is taxes, regulation, whatever, and the 
discussion eventually gets around to Ex-Im Bank. If it doesn't, 
I get there with it. And I ask them, what is your opinion of 
it? And every single one, not one time in the committee 
hearings that we have had has there been one person who said, 
we don't need it. Every single one says, we need it. It is 
important. We have to compete.
    So I guess my first question to you, sir, would be, do you 
have any idea of all of the other suppliers that are affected 
by--I think the number of small businesses that you loan to 
directly is like 3,400, but I am interested if you have Boeing 
with 1,800, how many other small businesses do you have 
calculated that are affected by your Bank?
    Mr. Hochberg. It is hard to get a precise number of the 
small businesses in the supply chain, but as you mentioned, I 
visited a company called LMI that is a Boeing supplier in 
Missouri. There is a company called Tomco that supplies GE with 
fire suppression equipment that is used in their power plants 
that they export overseas. So, over and over again, the company 
that Congresswoman Beatty referred to sells replacement parts 
for Boeing aircraft overseas to airlines in sub-Saharan Africa. 
And so, there are many small businesses, both direct and 
indirect. The indirect are like in a campaign who provides the 
catering and the yard signs and the printing; those are 
indirect beneficiaries. In the same way, we have Boeing has 
15,000 suppliers and I want to say that about 6,000 small 
businesses.
    Mr. Luetkemeyer. What is the percentage of small businesses 
that access your Bank as it is now versus the big guys? In 
other words--
    Mr. Hochberg. Well, 90 percent of our customers, direct 
customers, direct beneficiaries are small businesses. In 2014, 
we financed about $27 billion, of which about 39 percent or 
about $10 billion of Ex-Im's supported export value of the 
goods and services financed were from those small companies, 
and that doesn't count all of the indirects, as you referenced.
    Mr. Luetkemeyer. I also have a lady in my district who 
builds log homes out of oak logs. I come from central Missouri. 
Oak logs are very plentiful, and that is what she does. She 
also takes those oak logs, packages them up into a kit, and 
sells them to China, and your bank helps finance that. I thank 
you for that. If you go away, she goes away.
    And I think that those jobs are going to go away with it. 
One of the arguments that seems to be out there is that these 
jobs would all find someplace else to go. I think my first 
example was, no, they are not. They are going to go to France 
to buy Airbuses. They will not be created at all because that 
lady will be no longer to be able to finance the kits that she 
sells to China.
    And it is interesting that my side is interested in dynamic 
scoring. So if you have a job and you do something that--an 
exponential economic increase off of that is something, I would 
think, that we would be very interested in, and would really 
score--this bill would really score well from the standpoint of 
the job creation that is out there.
    So I think it is a point that needs to be made, and I think 
that I understand that sometimes there is--I know our vice 
chairman was making some reference to some of the internal 
problems that you have in the Bank, and we can't deny that. But 
I think that if we are going to throw the baby out with the 
bath water, you never go out, and you don't throw away the 
whole police department if there is problems in the police 
department. You clean it up. You make it better. And I think 
that is the responsibility of Congress. For us to disregard 
that responsibility and just say no, we don't need the Bank, is 
disregarding our responsibility.
    It is also interesting to me that I have heard the words, 
``level playing field for our companies,'' ``creating jobs,'' 
``must be able to compete with China,'' ``if we don't, they are 
going to fill the void,'' which sounds like some of the 
rhetoric that I use when I am trying to defend Ex-Im Bank. Yet, 
that is the same rhetoric that my colleagues use to support the 
TPA, in going with the trade agreement or the Trans-Pacific--
trade agreement. And yet they are going to vote against versus 
for, and I really fail to see the situation here.
    But I see I am over my time, and I appreciate the 
opportunity to voice a few concerns, and I yield back to the 
chairman.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Colorado, Mr. 
Tipton.
    Mr. Tipton. Thank you, Mr. Chairman. Mr. Hochberg and Mr. 
McCarthy, thank you for taking the time to be here.
    Mr. Hochberg, I think I would like to follow up a little 
bit along the lines of Mr. Williams' questioning in regards to 
the need for Ex-Im Bank given that we have the private sector. 
Can you name for me a bank in the country with, if we have a 
default rate of 0.167 percent, a bank that would not take a 
loan?
    Mr. Hochberg. The reasons we have a low default rate of 
0.167 percent are twofold. One is our underwriting, but most 
importantly, it is backed by the full faith of the U.S. 
Government. People don't default on the U.S. Government. That 
is a very strong incentive for people to pay and to make sure 
we have a good credit rating.
    Mr. Tipton. So no private sector banks can sell this?
    Mr. Hochberg. Private sector banks are those who bring us 
to the transaction. That is the only reason we are there. We 
don't muscle them out. They actually bring us in because of the 
example I gave earlier of a company in Detroit where the fact 
is, their bank would not provide financing unless Ex-Im 
guaranteed the loan.
    Mr. Tipton. And that is because regulatorily they can't 
make the loan, is that correct?
    Mr. Hochberg. Either it is outside of their strike zone, it 
is outside of their risk profile--
    Mr. Tipton. But the risk profile is going to be driven by 
the regulations that come out of the Federal Government.
    Mr. Hochberg. Part of it is also coming through Basel III, 
sir, where banks have severe penalties for lending more than 
5--
    Mr. Tipton. So we are getting the FSB, the FSOC that is 
going to be involved. The bottom line is we are getting back to 
regulations which are coming out of FSB or FSOC that are coming 
in telling banks what those profiles can actually be. So there 
is--we are squeezing out the private sector, leaving you as the 
sole source of capital.
    Mr. Hochberg. Sir, we did, as I mentioned, last year about 
$20 billion worth of loans. The private sector did a 
spectacular job. We only came into those few situations--
    Mr. Tipton. I understand that, sir, but I guess the point I 
am trying to be able to get at is that we have to be able to 
have the government backstop on this. Can it be filled by the 
private sector, and what I am asking you is, is this really 
regulatory in nature coming out of policies, be it the FSB, the 
FSOC, out of Dodd-Frank, and the implications that are coming 
in that are going to be inhibiting the private sector from 
being able to participate in this?
    Mr. Hochberg. You would have to ask a commercial banker 
that question. I can only tell you that we are brought in when 
the banks said we cannot--
    Mr. Tipton. Ironically, I have asked banks that, and it may 
not be in Ex-Im's particular portfolio, loans that they would 
like to be able to make, but because of regulations, they 
cannot make, and this is an opportunity, actually, for the 
private sector to be able to step in and to be able to service 
that need, and maybe to be able to create actually more jobs.
    Do you think this is actually maybe--your very existence is 
an indictment of--and we all know there need to be some 
regulations, but overregulation that is literally coming out of 
expansive government policy that is being now collaborative 
with our European counterparts?
    Mr. Hochberg. Ex-Im Bank today--and I look at our foreign 
counterparts--we exist when there are crises in the financial 
markets globally. That is why we did so much in loans 2 years 
ago because of the severe contraction of credit globally in the 
aftermath of the worst recession since the 1930s Depression.
    Mr. Tipton. Exactly, and we could have probably a great, 
great argument on who helped precipitate that crisis in terms 
of government policy that was being put forward. But if we look 
at really the regulations and if we are talking about being 
able to be competitive, right now we are seeing businesses in 
this country paying $2 trillion in regulatory costs. We see the 
lowest labor participation rate. We have a broken Tax Code. I 
just visited with a company that has a 32-percent effective tax 
rate. What if we were to shift that policy to be able to make 
the United States a place where people want to be able to come 
and do business, to where it is easier to be able to get a 
loan, where we put risk not on the Federal Government, not 
ultimately on the American taxpayer, but back into the private 
sector, where it actually should belong? Would you dispute that 
is a bad idea?
    Mr. Hochberg. We have the best private sector in the world. 
We have the best private banking system in the world, and it is 
the most expansive. It is just not 100 percent. We try and fill 
in a gap when there are certain gaps based on economic 
conditions or certain countries or industries at a certain 
time. The nuclear industry is a good example of that since it 
is very hard to get private sector financing no matter what you 
do with the regulations, so we fill in that market.
    Mr. Tipton. Again, I think we could probably have a 
discussion over whether or not the private sector wouldn't do 
it as long as there is going to be the government backstop, 
there is no incentive for the private sector to be able to step 
in. The risks can actually be taken through that private 
sector.
    And Mr. Chairman, my time should be up. I yield back.
    Chairman Hensarling. The time of the gentleman is yielded 
back. For what purpose does the ranking member seek 
recognition?
    Mrs. Waters. I ask unanimous consent to enter documents 
into the record from: the Bankers Association for Finance and 
Trade, and the Financial Services Roundtable; and 1,053 
organizations from across the country that are urging support 
for long-term reauthorization.
    Chairman Hensarling. Without objection, it is so ordered.
    The Chair now recognizes the gentleman from Minnesota, Mr. 
Emmer.
    Mr. Emmer. Thank you, Chairman Hensarling and Ranking 
Member Waters, and thank you, Mr. Hochberg, and Mr. McCarthy 
for being here. I am relatively new to this committee, and I am 
working to get up to speed quickly. Again, I appreciate your 
being here today and answering these questions. It has been 
very informative for me.
    Now, Mr. Hochberg, in your opening statement, you reminded 
us that Ex-Im was created to support American jobs. And I 
believe the mission statement, for example, provides 
specifically that it is to contribute to maintaining or 
increasing employment of U.S. workers by subsidizing the export 
of U.S. goods and services to foreign markets. Further, it is 
my understanding that the Ex-Im Bank is primarily a bank that 
is--it works for a few large multinational corporations. In 
fact, according to some of the information that I have recently 
been going through, I think it was 2013, 75 percent of the 
loans guarantees and insurance issued through Ex-Im were to 10 
large companies.
    That number remained pretty much the same last year in 
2014. I hear all the time that it is important for small 
businesses to have the Ex-Im Bank. And I actually have some 
constituents who have used the Ex-Im Bank. The mandate is 20 
percent. I am interested to know, if you can do it briefly, how 
do you define a small business?
    Mr. Hochberg. Small businesses are actually defined by the 
Small Business Administration. We don't make our own 
definition. We use the SBA's definition.
    Mr. Emmer. What is your understanding of the definition?
    Mr. Hochberg. It basically depends on the industry. If you 
are a manufacturer, it is less than 500 employees, but it 
actually varies industry wide. A small car dealer--
    Mr. Emmer. If you are a manufacturer, it is less than 500.
    Mr. Hochberg. Yes, but it varies, as I say, industry to 
industry.
    Mr. Emmer. All right, I believe I am correct, and please 
correct me if I am wrong, the Ex-Im Bank provides less than 2 
percent of the loan guarantees and insurance, in other words 
the financing, for American exports?
    Mr. Hochberg. About 2 percent of U.S. exports, that is 
correct.
    Mr. Emmer. And, again, 75 percent of that goes to large 
businesses, correct?
    Mr. Hochberg. As I said earlier, Ex-Im financed $27 billion 
last year, and 39 percent of the total value of the exports we 
financed was shipped directly from small companies.
    Mr. Emmer. Actually, Mercatus just put out the one for 
2014, and it had 76 percent going to the top 10 largest 
companies.
    I am going to move on from that because my time is limited. 
You have focused on how other countries are aggressively 
supporting their commercial sectors as a means to enhance their 
sphere of influence, and you used China as the example and the 
ranking member this morning talked about China. In fact, I 
think you said at one point, in the near future, they will 
double the financing for their exports. And yet, according to 
some information that I have, your Bank last year guaranteed, I 
think it was $18 million, for a deal the Chinese ex-im bank was 
doing. Why is the Ex-Im Bank in this country helping to 
guarantee this wonderfully successful and aggressive Chinese 
ex-im bank?
    Mr. Hochberg. We do a number of transactions with China. A 
lot of them are--for the company I mentioned earlier, Tuftco in 
Chattanooga, Tennessee, the debt is guaranteed by the China Ex-
Im bank. So--
    Mr. Emmer. I understand--
    Mr. Hochberg. --with the buyer in China, we actually have a 
government guarantee.
    Mr. Emmer. Mr. Hochberg, let me put it this way, if they 
are so successful and they are so aggressive, it doesn't seem 
to make sense that you are guaranteeing their deals. They 
should be able to do it on their own. I will also ask you this: 
Apparently last year before they ran in sanctions, your Bank 
was actively working with a Russian bank that is doing business 
with Russian arms dealers and you didn't stop that until the 
sanctions were put in place. All I would suggest is that in my 
initial review of this, it looks like we are not staying in 
accordance with our mission.
    And Mr. Chairman, I would yield my last 30 seconds to the 
Chair.
    Chairman Hensarling. I thank the gentleman.
    Chairman Hochberg, you have heard several members speak of 
this NewSat scandal today. We are under the impression that 
you, the Ex-Im, have in your possession the report by the 
consultant Brendan Rudd, I believe is his name. Our staff has 
asked your staff for a copy of this. It is my understanding 
that your staff has refused. Will you provide the Rudd report 
on NewSat to the committee?
    Mr. Hochberg. Mr. Chairman, there is not a report. It is an 
email we received from Mr. Rudd which outlines a number of 
allegations that we are working with the legal authorities on 
to run them down, to find out what is true and what is not true 
so we don't have a lot of--
    Chairman Hensarling. Okay, sir, will you provide a copy of 
this to the committee?
    Mr. Hochberg. Right now, it is still business confidential. 
We would like to keep this so we can actually move forward. I 
am trying to find a way we can get to a good answer and a good 
outcome for the American taxpayers and for Ex-Im Bank.
    Chairman Hensarling. Okay, the committee has requested 
this. We will put in an official request. I hope we don't have 
to subpoena it. We would hope that you would voluntarily supply 
this.
    The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Tennessee, Mr. 
Fincher.
    Mr. Fincher. Thank you, Mr. Chairman.
    And thank you, Chairman Hochberg and Mr. McCarthy, for 
being here today.
    A lot has been said today, many comments on both sides of 
the aisle, pro and con. I was just thinking, as I was looking 
over some notes, about one of our greatest Presidents, 
President Reagan, and how he was able to guide the country in 
the direction of prosperity and growth, was able to make things 
work, and I was thinking about a lot of the policies that he 
championed, and I wonder, in today's political world, on the 
Republican side of the aisle, how many of my colleagues would 
politically go after President Reagan because he wasn't, in 
their mind, conservative enough, which is really ridiculous 
because he was able to do a lot for this country with his 
leadership?
    Also today, as I have been listening to a lot of the 
comments, I guess I have to get on my staff, I thought we had 
introduced a bill with 60 cosponsors earlier in the year, H.R. 
597, to reauthorize and reform the Ex-Im Bank. So many of the 
issues that have been brought up today we are addressing in our 
reform package. I was just looking over some of the things 
making the Office of Ethics statutory.
    To my good friend Mr. Williams from Texas, we allowed the 
Bank to build its own earnings now. So if there is ever a place 
and time that there is a failure, we allow the Bank to build 
its own capital so the taxpayer will not be on the hook. We are 
actually strengthening and making this--what is frustrating as 
a good conservative Republican is we are sent to Washington to 
make the government more accountable, more transparent, and 
more responsible, and to work for our constituents.
    Last night, I had a lot of thoughts go through my head, and 
I asked my wife, ``Am I sure I am doing what is right?''
    And she said, ``You know in your heart you are doing what 
is right.''
    And I said: ``Well, it is very difficult on me having a 
disagreement with the chairman.''
    And she said, ``Well, honey--and she has been wrong before, 
but I think she was right this time--you don't work for the 
Chairman. You don't work for the President. You don't work for 
the Speaker. You work for your district. You work for the hard-
working Americans all over this country, and you are sent to 
Washington to do the best you can with what you have.''
    Now, look, the easiest thing for us to do here politically 
is to blow this thing up and go back home to our districts, and 
blame everybody else for it. And you know who is going to be 
left holding the bag? The workers who lose their jobs because 
these companies are buying products from people in other places 
around the world.
    Now, we have a challenge here. Are we going to step up and 
try to do the right thing? Roger Williams brought up a great 
point when it came to reforming this part of the nonrecourse 
loan. Do you know how we do that? We do that by bringing 
something before this committee in regular order. Chairman 
Hensarling has been a champion of regular order. Allow us to 
have our day, allow us to have our say, and if the opponents of 
this win out, then we lose and the Bank won't be reauthorized. 
But we have all of these reforms. We have been working on a 
conservative approach to fixing the problems with this Bank, 
but yet we somehow can't seem to come together and at least 
have an open and honest debate.
    The hearings are good. I know they serve their purpose. But 
this is getting a little old doing the same thing over, and 
over, and over, when we could have a markup. We could have 
regular order. The people could offer amendments, amendments if 
they wanted to end the Bank, amendments to have nonrecourse, 
whatever amendment they wanted to offer. And we could all vote. 
We could all have our say. We could all show people where we 
stand on these issues. Or we can continue to play the game--it 
expires in, what, 14 days? We have an obligation to do what is 
right for the American people. And I have an obligation to work 
for my district: 160,000 jobs nationwide; 8,300 jobs in the 
State of Tennessee; 116 exporting companies in the State of 
Tennessee. The American people deserve better and we need to 
give it to them.
    And I yield back.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from New Hampshire, 
Mr. Guinta.
    Mr. Guinta. Thank you, Mr. Chairman.
    And thank you, Chairman Hochberg, for being here today to 
talk about this issue. I have listened to a lot of the 
testimony and a lot of the questions, and I think this is a 
very serious and complex issue before this committee, and 
before Congress.
    I served back in the 112th Congress when this was 
reauthorized. And I have met with you, and I have listened to 
your testimony. I have read your testimony, and I have tried to 
look at this in a way that gives me as much information as I 
can possibly have as I try to make a decision. I have met with 
companies back home who favor and support reauthorization. I 
have talked to constituents who oppose reauthorization for 
different reasons.
    There are two areas that I think I would like to focus on, 
on which I need some clarification. You stated in your 
testimony this morning, I think in your written testimony, a 
very basic statement: ``To be clear, every action and study 
required in the Bank's 2012 bipartisan reauthorization has been 
completed and implemented or is being compiled with on an 
ongoing basis.'' And you have the attachment to identify that.
    What I would like you to walk me through as I looked 
through all of these recommendations, I see a number of them 
that are fully implemented, but I see quite a number that say, 
``concur, working to implement.''
    Mr. Hochberg. Concur what?
    Mr. Guinta. ``Concur, working to implement.'' And a number 
of them going back to 2010, 2012, 2013, so I wonder if you 
could clarify for me why would it be taking so long to 
implement some of these recommendations? And I can be specific 
on some of them, but if you just want to answer generally or 
broadly then I can get more specific.
    Mr. Hochberg. Well, for example, for me--the inspector 
general's are ongoing studies, ongoing audits, ongoing 
proposals for improvement. They are currently standing at 145. 
We have closed out 97 of them. Two-thirds of them are closed 
out. Since we last had a hearing here 6 weeks ago, we have 
closed out another 9 or 10 of them in that period. So we are 
continually working through that. We reviewed it, and have 
agreed with the inspector general on 143 out of 145 
recommendations. So once we agree, then the next work is to do 
a work plan together to actually implement it. That is what we 
are working on.
    Mr. Guinta. What about in the area of portfolio risk and 
loss reserve allocation policy? Under recommendation 5, it 
says: ``Create a position of chief risk officer to oversee the 
design implementation of an agencywide risk management.''
    And it says, ``concur, working to implement.'' Is that 
accurate?
    Mr. Hochberg. I added a chief risk officer, C.J. Hall. He 
joined the Bank in the fall of 2013.
    Mr. Guinta. So are there reports from him?
    Mr. Hochberg. C.J. Hall, he chairs the Enterprise Risk 
Committee, and then--there are two people under him, two long-
serving employees who are actually the two sort of deputies on 
that committee who meet on a regular basis, review the 
portfolio; review credit policy; when appropriate, make 
recommendations to me and the Board if it requires board 
approval; but work closely on providing an enterprise-wide 
review of all risk whatsoever. That was one--that was an 
earlier recommendation before the 2012 reauthorization that we 
implemented voluntarily.
    Mr. Guinta. So are there reports which C.J. Hall creates 
that Congress should be looking at or can look at?
    Mr. Hochberg. One of these they approve is the default 
report, which comes to Congress every 90 days.
    Mr. Guinta. How about other reports?
    Mr. Hochberg. There are other reports. Some of them they 
send to the audit committee of the Bank. Some come to me. Some 
will go to the inspector general. I prefer that the inspector 
general answer the rest of that question.
    Mr. Guinta. What about--there is another one from September 
28, 2012, Export-Import Bank Short-Term Insurance Program. It 
is recommendation 6: ``Development and implement a monitoring 
processor for periodically reviewing a sample of 
authorizations.'' It says, ``concur, working to implement.'' Is 
that not completed?
    Mr. Hochberg. I would be probably better served by having 
Mike McCarthy respond directly.
    Mr. McCarthy. Which one are you referring to?
    Mr. Guinta. Recommendation 6, from September 28, 2012, 
under Export-Import Bank Short-Term Insurance Program. It is 
recommendations 6 and 7; both say, ``concurring, working to 
implement.'' I guess my question is, if that is accurate, if 
you are working to implement, why would it take from September 
2012 to today to not complete?
    Mr. McCarthy. I think our view overall is that we have been 
working with the Bank to implement these recommendations. We 
have drawn a distinction, and I did in my testimony today, 
between current recommendations they have been issued in this 
fiscal year and older ones. The older ones we would like to see 
more progress on.
    Mr. Guinta. Okay, thank you.
    Chairman Hensarling. The time of the gentleman has expired.
    There are no other Members in the queue, so we will excuse 
our first panel.
    Mr. McCarthy, Chairman Hochberg, thank you very much for 
your testimony.
    The Chair wishes to alert all Members that there are 
currently votes taking place on the Floor. Thus, we will not at 
this time convene the second panel, but we will excuse the 
first panel.
    We expect to be on the Floor for quite some time. We 
anticipate convening the second panel in approximately an hour 
and a half. Until then, the committee stands in recess.
    [recess]
    Chairman Hensarling. The committee will come to order. 
Before we recessed for Floor votes, we heard testimony from our 
first panel of witnesses. We have now impaneled our second 
panel, and we will introduce them.
    Starting on my left, Mr. Daniel Ikenson is the director of 
the Cato Institute's Herbert A. Stiefel Center for Trade Policy 
Studies.
    I now wish to yield to the gentleman from Arkansas, Mr. 
Hill, to introduce our next witness.
     Mr. Hill. Mr. Chairman, thank you so much.
    It is a pleasure for me to introduce Rachael Cox, who is 
vice president of business development for Conway Machine, 
Inc., a small, successful, family-owned manufacturer located in 
Conway, Arkansas, which is in the Second Congressional 
District. Like many small businesses, Conway Machine faced 
tough economic times during our Great Recession. But they 
adapted and innovated, largely by increasing exports around the 
world. And in 2013, Conway Machine received the Governor's 
Award for Excellence in Global Trade for small businesses.
    I appreciate Mrs. Cox taking time away from her family to 
be with us today. Her husband is deployed overseas, and we 
appreciate their family's service to our country. And I look 
forward to her testimony.
    Thank you, Mr. Chairman.
    Chairman Hensarling. Thank you.
    I now recognize the gentleman from New Hampshire, Mr. 
Guinta, to introduce our next witness.
    Mr. Guinta. Thank you, Mr. Chairman.
    It is an honor today to introduce my fellow Granite Stater, 
Mike Boyle. Mike is the CEO and president of Boyle Energy 
Services and Technology, Inc., which is located in New 
Hampshire's largest City and my hometown, Manchester. After 
serving in the Navy, Mike utilized the skills gained in his 
training to start his very successful company, Boyle Energy, 
back in 1990. He has served our country and he served our great 
State, and I very much appreciate him being here. I look 
forward to hearing his testimony, and I believe he'll be a 
great witness.
    Chairman Hensarling. Our next witness, Mr. Clifford Smith, 
is the executive vice president of business development at 
Cliffs Natural Resources. He graduated from the South Dakota 
School of Mines and Technology with a degree in mining 
engineering, and previously held mine management positions with 
other concerns.
    Mr. John Murphy is the senior vice president for 
international policy at the U.S. Chamber of Commerce. He 
graduated Phi Beta Kappa from the University of Colorado at 
Boulder, with a Master's degree from the School of Foreign 
Service at Georgetown. He previously served as the Chamber's 
vice president for western hemisphere affairs.
    Richard Ben Hirst is the executive vice president and chief 
legal officer of Delta Air Lines. He graduated from Harvard 
College, Harvard Law School. He previously served in general 
counsel positions for Northwest Airlines, the Minnesota Twins, 
Burger King, KB Home, and Continental Airlines.
    I know we have several witnesses who have never testified 
before Congress. It is not quite as difficult as it looks, but 
there is a little button system and a light system. When it is 
your turn, if you can please make certain that your microphone 
is on. Green means go, yellow means really go because you are 
about to run out of time, and red means stop. Hopefully, that 
will be abundantly clear to all.
    And at this time, Mr. Ikenson, you are now recognized for 5 
minutes to give a summary of your testimony.

 STATEMENT OF DANIEL J. IKENSON, DIRECTOR, HERBERT A. STIEFEL 
        CENTER FOR TRADE POLICY STUDIES, CATO INSTITUTE

    Mr. Ikenson. Thank you, Chairman Hensarling, Ranking Member 
Waters, and members of the committee. I am Dan Ikenson, 
director of the Herbert A. Stiefel Center for Trade Policy 
Studies at the Cato Institute. Thank you for the invitation to 
share my views with you today, which are my own and should not 
be construed as representing any official positions of the Cato 
Institute.
    Americans tend to view the global economy as an us-versus-
them proposition, where exports are team U.S.A.'s points, 
imports are the foreign team's points, the trade account is the 
scoreboard, and the deficit on that scoreboard means the home 
team is losing at trade. Given the exalted status of exports in 
the public's mind, Ex-Im's self-portrayal as indispensable to 
U.S. export success insulates it from the level of scrutiny it 
deserves.
    Trade is not a competition between us and them. It is not a 
national sport played between countries. The goal of trade 
policy is not to secure a national trade surplus. Why should 
U.S. taxpayers underwrite and U.S. policymakers promote the 
interests of exporters anyway, when the benefits of those 
exports accrue primarily to the shareholders of the companies 
enjoying the subsidies?
    There is no national ownership of private export revenues. 
Policymakers should stop conflating the interests of exporters 
with the national interest. Instead, they should aim to make 
the United States a more attractive place for companies, both 
domestic and foreign, to invest, hire, and engage in production 
and commerce.
    For example, most of the value of U.S. imports in 2014 
consisted of intermediate goods, capital equipment, and raw 
materials, which are the purchases of U.S. businesses. Yet many 
of those imports, products like sugar, steel, magnesium, and 
polyvinyl chloride are subject to Customs duties which raise 
the cost of production for the U.S.-based companies that need 
them, making those firms less competitive at home and abroad.
    Now, that is fairly easy to grasp. But just as U.S. steel 
tariffs raise costs for U.S. manufacturers of appliances and 
auto parts, subsidies to exports steel have the same adverse 
effect on steel-using industries: diverted supply leading to 
higher domestic input cost and lower input prices for 
competitors abroad. What is seen and celebrated is the tariff 
or export subsidy that benefits the steel industry. What goes 
unseen but is every bit as real are the costs imposed on the 
downstream industries.
    Ex-Im financing helps two sets of companies: U.S. firms 
whose exports are subsidized through direct loans or loan 
guarantees; and the foreign firms who purchase those subsidized 
exports. But those same transactions impose costs on two 
different sets of U.S. companies: competing U.S. firms in the 
same industry who do not get Ex-Im backing; and U.S. firms in 
downstream industries whose foreign competition is now 
benefiting from reduced capital costs courtesy of the U.S. 
Government.
    Nearly 55 percent of U.S. manufacturing output is purchased 
by other U.S. manufacturers as inputs to their own production. 
So subsidizing its diversion abroad amounts to a policy that 
does pick winners and losers. Ex-Im financing enables the lucky 
U.S. exporter to offer more favorable sales firms to the 
foreign customer to win the sale, and it reduces the cost of 
capital for that foreign customer. Those two parties are the 
beneficiaries.
    But hurt by that same transaction are U.S. competitors of 
the U.S. exporter, in other words, U.S. firms in the same 
industry as the subsidized exporter and U.S. competitors of the 
foreign customer who are put at a relative cost disadvantage. 
If Ex-Im provides a $50 million loan to a foreign farm 
equipment manufacturer to purchase steel from U.S. Steel, the 
transaction may benefit U.S. Steel, but it hurts competitors 
like Nucor, Steel Dynamics, AK Steel, and the other steel firms 
in the United States that compete for the same customers at 
home and abroad.
    These are what I call the intra-industry costs. The $50 
million subsidy of U.S. Steel is a $50 million cost to the 
other steel firms. And while Ex-Im would call that a $50 
million benefit to the U.S. economy, it is really a $50 million 
benefit to U.S. Steel, not the broader economy. What is given 
to U.S. Steel is taken from Nucor and other firms.
    But there is more, the downstream industry cost of those 
imposed by the transaction on the U.S. companies that compete 
with the foreign customer. When that foreign farm machinery 
producer purchases steel on credit at subsidized interest 
rates, it obtains an advantage over its competitors, including 
its U.S. competitors. Some percentage of that $50 million loan 
to the foreign farm equipment producer is a cost borne by U.S. 
farm equipment producers such as John Deere, Caterpillar, New 
Holland, et cetera, who compete in the United States and abroad 
with foreign producers whose costs are lower courtesy of the 
U.S. taxpayer.
    Ex-Im measures its success by the exports it underwrites. 
Last year, it supported $27.4 billion of U.S. exports, but the 
analysis doesn't simply end there. Those are, at best, the 
gross benefits. Costs need to be taken into account, 
considering only the downstream costs and not the intra-
industry costs or the opportunity costs. A recent Cato 
Institute paper found that Ex-Im policies amount to an annual 
tax on the U.S. manufacturing sector of approximately $2.8 
billion, and the victims include companies across the 
manufacturing spectrum and across the United States.
    The average firm in four of every five manufacturing 
industries is made worse off by the Export-Import Bank. Market 
interventions like these, no matter how well-intentioned, have 
secondary effects that must be considered when rendering 
judgment about the efficacy of policy; in other words, costs 
and not just the shiny benefits, must be taken into account. 
And when they are, the case is clear, Congress should allow Ex-
Im to expire at the end of the month and refrain from 
subsequent reauthorization.
    Thank you.
    [The prepared statement of Mr. Ikenson can be found on page 
170 of the appendix.]
    Chairman Hensarling. Thank you.
    Mrs. Cox, you are now recognized for 5 minutes for your 
testimony.

STATEMENT OF RACHAEL COX, VICE PRESIDENT, BUSINESS DEVELOPMENT, 
                      CONWAY MACHINE, INC.

    Ms. Cox. Thank you, Chairman Hensarling. My name is Rachael 
Cox. I am the vice president of business development for Conway 
Machine. We are a woman-owned, small business specializing in 
precision machining, Swiss style and standard CNC turning and 
milling, as well as the manufacturer of replacement parts for 
the printing and packaging industries.
    I am an Air Force wife. My husband is presently deployed. 
I, therefore, rely heavily on my network of family and friends 
in the caretaking of my two young daughters. My parents 
purchased the business when I was about 8 years old, so I have 
a lifetime of experience in the industry. And in 2010, as the 
economy was crashing and it looked like it was going to take us 
down with it, my parents requested that I join the business, 
and like any good daughter, I obliged them.
    When I came on board, we regrouped, refocused, and decided 
if the U.S. economy could not provide the sales that we needed, 
we would find the sales in new markets overseas. And it didn't 
take long to start seeing results. As we began our recovery, we 
were overwhelmed with work. And any small business owner can 
tell you that on any given day, you are wearing about five 
different hats, of which all you are the expert. So as we 
reintroduced Conway Machine to the international stage, we 
began to hire new employees as well.
    Now, my first full year with the family business saw a 
total export of over $300,000 in 2011, and that was 13 percent 
of overall sales. And at that time, the shop was running a day 
shift with about 15 employees. The next year in 2012, it grew 
slightly, $441,000 in exports, about 16 percent of overall 
sales.
    But in 2013, after we did a trade show in Germany, we saw a 
nearly 50 percent increase to $809,000 in exports, about 25 
percent of our overall sales. That same year, as Congressman 
Hill mentioned, we did receive the Governor's Award for 
Excellence in Exporting. We maintained these new customers the 
following year with $875,000 in exports, in 2014, again 25 
percent of overall sales. And it looks like this year we are 
going to maintain that growth.
    We have doubled our workforce, and we now employ an average 
of 30 full-time workers. We run a day and a night shift and are 
in the process of adding a weekend shift as well. Last year, 
Conway Machine made a large investment of $1 million in new 
equipment, and by the end of this summer, we will be moved into 
our new expansion of over 5,000 square feet of production 
facility. All of these have served to increase our capacity, 
technological expertise, and overall quality of product and 
price.
    Our 50 percent increase in exports was accomplished without 
the assistance of the Ex-Im Bank. That is not to say Conway 
Machine is adverse to government resources for small 
businesses. We have good relationships with the folks at the 
Arkansas World Trade Center, and I am currently taking classes 
with the Small Business Administration.
    However, Conaway Machine is not dependent on the government 
for its success. When I researched the Ex-Im Bank, and 
especially the sign-up process, it became clear that it was 
designed more for large businesses. The amount of information 
required was pretty overwhelming at best and invasive at worst. 
And after some consideration, I did decide against it.
    As an Air Force wife, I consider myself a bit of a patriot. 
It is important to remember that our servicemen sign up because 
they wish to protect and defend the Constitution. They 
understand and cherish the fact--and I will quote from the 
Declaration of Independence--`` that All men are created equal, 
endowed by their Creator with certain unalienable Rights, that 
among these are Life, Liberty and the pursuit of Happiness.--
That to secure these rights, Governments are instituted among 
Men...''
    As you consider the renewal of the Ex-Im Bank, I would ask 
you to consider our founding documents and the principles from 
which they were derived. What is the purpose of government? And 
in fulfilling that purpose, what is the role of government? It 
seems that if government aims to aid small businesses and their 
exports and thereby grow the domestic economy, it would be much 
more beneficial to create more free trade agreements with other 
countries and decrease the red tape barriers to trade.
    While the Ex-Im Bank may work for some companies in other 
industries, it has not been a resource for Conaway Machine. As 
previously stated, we have grown our exports by 50 percent and 
doubled our workforce without the use of the Ex-Im Bank. Given 
the complaints that we have seen today, it may be time to 
consider whether a good intention by the government has gone 
awry yet again.
    Thank you, Mr. Chairman.
    [The prepared statement of Mrs. Cox can be found on page 
118 of the appendix.]
    Chairman Hensarling. Thank you.
    Mr. Boyle, you are now recognized for 5 minutes for your 
testimony.

STATEMENT OF MICHAEL P. BOYLE, PRESIDENT AND CEO, BOYLE ENERGY 
                  SERVICES & TECHNOLOGY, INC.

    Mr. Boyle. Thank you, Chairman Hensarling and Ranking 
Member Waters.
    I am Mike Boyle of Boyle Energy Services & Technology. I 
have a unique business. I don't manufacture a product or 
machine parts. I am a service provider, a unique person in the 
Ex-Im world. My company helps transition the world's largest 
energy facilities from construction to operation, a very unique 
niche of services that we started 25 years ago, I guess, now, 
in 1990.
    I went on, 10 years of that time, as a sort of ``me too'' 
organization working mostly domestically here in the United 
States. And then, we invented a new technology that we patented 
here in the United States and decided that our best markets for 
penetration during the downturn would be overseas, and we were 
right. Our opportunities were great because the technology that 
we provided as an American engineering corporation were greater 
than were available overseas.
    During that time, I was very concerned as a small business 
that the cash flow for the company be supported, more so for my 
vendors and employees than for the benefit of the company as a 
whole. But, in fact, that was our greatest fear, our ability to 
collect the receivables that we were able to produce overseas.
    Having done so, we had a couple of successes, but the 
projects grew in large scale. Much, much bigger than a simple 
terms of payment would be available to some of these companies. 
We were competing with companies such as Abener Abengoa that 
had terms of 180 days of payment, which was unconscionable for 
a small business. It is impossible for us to work with that 
environment.
    So what we did is we secured a working capital line of 
credit through our bank after we had applied to Bank of America 
and were rejected, because our receivables were not able to be 
secured overseas, so they were discounted to zero, and 
therefore not creditworthy. It wasn't whether or not the 
process that we were doing was risky; we had been performing 
more than 200 of these projects in the United States at that 
time.
    Having secured that, we went on to become one of the 
leading technologists in the industry. We are considered the 
foremost technological leader in the world at what we do. We 
patented our program here in the United States. We are seeing 4 
times growth in revenue since that time, and 6 times the amount 
of employees are now at Boyle Energy Services.
    We actually have just made an offer and it was accepted to 
buy a 70,000-square foot building, which would now bring us up 
to nearly 100,000 square feet in New Hampshire. We are the only 
company, outside of Houston in the Texas marketplace, that has 
ever done this globally in the commissioning energy industry 
from New Hampshire. And this is all from a service I learned 
while I was in the Navy. I bill myself as the world's most 
successful U.S. Navy-enlisted boiler technician. So until 
somebody challenges me on it, I am going to hang that hat on my 
award wall.
    We have had great success with the Ex-Im Bank. We are the 
success story. We have used it appropriately, and as such, we 
have repatriated 100 percent of our profits. We pay a nominal 
tax rate of 26 percent on those profits, all returned to the 
Treasury. We were advised recently on the structure of our 
corporation, because we have gone global. We have offices in 
Brazil, Mexico City, and Bahrain. We have a laydown yard in 
Saudi Arabia.
    I have been working in 22 countries, and I think we are in 
11 countries tonight, all with American employees. We have 
equipment purchased from the United States and shipped 
overseas, $75 million since we started exporting. All of that 
is at work in support of our working capital line of credit 
through the Ex-Im Bank. When I have asked my banks if I could 
get additional credit without Ex-Im, they answered, ``no.'' 
Plain and simple.
    I don't know of any other instruments or facilities that 
can support. We have sought that out across the United States 
and have been unsuccessful. We want to go forth, we want to 
continue with our growth. I am hiring at a rate that--I am 
putting seats in my office faster than I can hire people right 
now. We have enjoyed success, and we have projects going 
forward, and we continue to believe that we will be successful 
with the Export-Import Bank supporting us.
    I am in favor of the Export-Import Bank, and I would ask 
that the House of Representatives call for its reauthorization. 
Thank you.
    [The prepared statement of Mr. Boyle can be found on page 
114 of the appendix.]
    Chairman Hensarling. Thank you, Mr. Boyle.
    Mr. Smith, you are now recognized for 5 minutes for your 
testimony.

STATEMENT OF CLIFFORD SMITH, EXECUTIVE VICE PRESIDENT, BUSINESS 
           DEVELOPMENT, CLIFFS NATURAL RESOURCES INC.

    Mr. Smith. Thank you, Chairman Hensarling, Ranking Member 
Waters, and members of the committee for allowing me to testify 
today. My name is Clifford Smith, and I am the executive vice 
president of business development for Cliffs Natural Resources. 
We have five major mines in the States of Minnesota and 
Michigan, and we are the largest producer of iron ore pellets 
for the steel-making industry in the United States.
    I am here to speak about the Ex-Im Bank and its $694 
million direct loan to the Roy Hill project in Western 
Australia that we believe exposes serious flaws in the Bank's 
governance and has contributed to the decimation of the global 
iron ore trade.
    In May of 2013, following the release of the economic 
impact notice for the Roy Hill project, Cliffs conducted an 
independent economic study on the proposed transaction which 
found that the transaction would cause a loss of almost $600 
million worth of U.S. exports and the loss of $1.2 billion of 
U.S. domestic sales due to price degradation of our products 
supplying iron ore.
    The total impact to Cliffs over the term of the loan was 
estimated to exceed $1.8 billion. These pricing estimates were 
based on an assumption that global oversupply would lead 
seaborne prices to degrade from an average of $135 a ton in 
2013 to $96 a ton in 2018. And, in fact, the global oversupply 
of iron ore has become much worse than our own economic 
analysis predicted.
    Today, the global seaborne iron ore price is in the low 
$60-a-ton range, and has dipped as low as $45 in the month of 
April of this year. The oversupply situation has been caused by 
new projects and the conscious decision of major iron ore 
producers like Rio Tinto and BHP Billiton to add unneeded iron 
ore capacity, even as the Chinese economy continues to slow 
down and demands less iron ore.
    Over the past 9 months, we have been reshaping Cliffs to be 
a peer U.S.-centric company and to remove us from the iron ore 
trade with China. While we still have an international iron ore 
mining operation in Australia that participates in the seaborne 
iron ore trade, we have initiated court-supervised proceedings 
for our Canadian operations to complete our exit from Canada in 
an orderly fashion.
    This was a difficult but necessary step after considering 
and exploring other alternatives for these assets. In addition, 
let me point out that there is a direct correlation between low 
seaborne iron ore pricing and U.S. steel imports. Low-cost iron 
ore is facilitating Chinese steel producers to flood the United 
States with cheap steel. The U.S. steel market is experiencing 
all-time record levels of imports. A staggering 34 percent of 
finished goods hit the United States in the first quarter of 
this year.
    To put this in perspective, when the Roy Hill transaction 
was approved, the U.S. iron ore industry was producing at or 
near capacity and at full employment. Today, there are over 
1,200 workers in the domestic iron ore business who are 
currently on layoff or have been notified of an impending 
layoff, including 350 employees at Cliffs Empire Mine in the 
State of Michigan.
    The Roy Hill project proposes to add even more iron ore to 
the market, and then the U.S. industry and aggregate will 
compound this oversupply situation when the project begins 
later this year in 2015. The Ex-Im Bank's charter precludes the 
extension of financing for a material that will be in a state 
of global oversupply, and prohibits the Bank from funding the 
project that will harm one set of U.S. producers, iron ore 
miners, over others, equipment manufacturers.
    How then could the Bank justify the Roy Hill loan? The 
Bank's own economic analysis found an adverse economic impact 
to the U.S. producers of only $25 million, compared to our 
study of $1.8 billion in harm. To reach that outcome, there 
were widely unsupported claims that the 55 million metric tons 
of production for the Roy Hill project would not affect the 
global supply demand dynamics.
    In short, the Ex-Im Bank second-guessed Cliffs' economic 
impact and largely refused to acknowledge our outlook on our 
own industry. Going forward, we look forward to working with 
the committee to share our thoughts on the necessary amendments 
to the Bank's charter to ensure that the Bank can never again 
fund a fatally-flawed project such as Roy Hill.
    Thank you.
    [The prepared statement of Mr. Smith can be found on page 
196 of the appendix.]
    Chairman Hensarling. Thank you, Mr. Smith.
    Mr. Murphy, you are now recognized for 5 minutes for your 
testimony.

STATEMENT OF JOHN MURPHY, SENIOR VICE PRESIDENT, INTERNATIONAL 
                POLICY, U.S. CHAMBER OF COMMERCE

    Mr. Murphy. Chairman Hensarling, Ranking Member Waters, and 
members of the committee, thank you very much for the 
opportunity to be here today. I am pleased to testify on the 
importance of reauthorizing the Ex-Im Bank. I represent the 
U.S. Chamber of Commerce, the world's largest business 
federation representing the interests of more than 3 million 
businesses of every size, sector, and State.
    At this point in the hearing, you have heard most of the 
fundamentals. From the perspective of our business members of 
all sizes, the idea that Congress would even consider making 
the United States the one major trading nation in the world 
without an official export credit agency has left many baffled.
    This morning, the Chamber and the National Association of 
Manufacturers sent a letter to Congress signed by more than 
1,000 companies of every size, sector, and State, calling for 
the Bank to be reauthorized swiftly. Consider how refusing to 
reauthorize the Bank would put specific sectors and industries 
at a competitive disadvantage in global markets.
    First, shutting down Ex-Im would mean many small businesses 
couldn't even export because commercial banks often refuse to 
accept foreign receivables as collateral for a loan without an 
Ex-Im guarantee. For these small firms, Ex-Im is often 
indispensable. In fact, buyers overseas nowadays expect vendors 
to offer financing in many cases. Without Ex-Im's accounts 
receivable insurance and lines of credit, many U.S. small 
businesses would be unable to extend terms to foreign buyers 
and would have to ask for cash in advance.
    In such a case, the business will most likely go to a firm 
from another country that is able to offer financing. For these 
small businesses, Ex-Im isn't just nice to have; it is 
indispensable. Nor is there any assurance that eliminating Ex-
Im would cause commercial banks to step into the breach. In 
addition to these direct small business beneficiaries, tens of 
thousands of smaller businesses that don't even always 
recognize it are also benefiting as they supply goods and 
services to large exporters that benefit from Ex-Im support.
    Second, it is par for the course for expensive capital 
goods such as Canadian planes, Chinese trains, and Russian 
nuclear reactors to be sold worldwide with unashamed backing 
from these firms' national export credit agencies. In past 
years, we have seen major tenders for locomotives and a number 
of emerging markets hang in the balance.
    These tenders, worth hundreds of millions of dollars, 
require that the supplier finance a significant portion of the 
transaction. Chinese competition, in these cases, has been 
fierce, and they come well-prepared with generous financing 
from one of China's several export credit agencies. Again, in 
these circumstances, the calculus is clear: No Ex-Im, no sale.
    Third, with regard to foreign infrastructure opportunities, 
closing Ex-Im would shut American exporters out of these huge 
and growing business opportunities overseas, because export 
credit agencies support is often required for a company to even 
bid on overseas infrastructure projects.
    Fourth, nuclear power is another sector where the fate of 
Ex-Im will have a major impact. According to the Nuclear Energy 
Institute, 5 nuclear power plants are under construction in the 
United States, but 61 are under construction overseas. So for 
the U.S. nuclear industry, which directly employees more than 
100,000 American workers in high-skill, high-wage jobs, it is 
export or die.
    But here is the rub: Export credit agency support is always 
a bidding requirement for international nuclear power plant 
vendors. Without Ex-Im, U.S. nuclear power companies won't even 
be able to bid for business overseas. Make no mistake, 
executives in a number of these industries will face the hard 
question of whether to shift production to locations abroad 
where export credit agency support is available.
    Ex-Im's critics would like to have it both ways. On the one 
hand, the Bank is a colossus with the power to distort free 
markets; but on the other hand, it is such a small agency that 
its abolition would do no harm to U.S. companies or their 
workers. It can't be both. In fact, Ex-Im is modestly and 
appropriately scaled, acting mostly in the circumstances I have 
described where it is necessary to U.S. competitiveness.
    In closing, Ex-Im does not skew the playing field; it 
levels it for U.S. exporters facing head-to-head competition 
with foreign firms backed by their own export credit agencies. 
It doesn't pick winners and losers, but refusing to reauthorize 
Ex-Im is picking foreign companies as winners and U.S. 
exporters as losers in many head-to-head competitions.
    Ex-Im's opponents have attempted to tie it to unsavory 
customers overseas. We believe this is just a diversion from 
the true beneficiaries of Ex-Im, the tens of thousands of 
American workers who hope and expect to see Congress vote on a 
reauthorization bill here in the short term. Thank you.
    [The prepared statement of Mr. Murphy can be found on page 
189 of the appendix.]
    Chairman Hensarling. Thank you, Mr. Murphy.
    And Mr. Hirst, you get to bat cleanup. You are now 
recognized for 5 minutes for your testimony.

  STATEMENT OF RICHARD B. HIRST, EXECUTIVE VICE PRESIDENT AND 
              CHIEF LEGAL OFFICER, DELTA AIR LINES

    Mr. Hirst. Thank you very much, Mr. Chairman, and members 
of the committee. On behalf of the more than 80,000 employees 
of Delta Air Lines, I very much appreciate the opportunity to 
testify on the need for substantial reform of the Export-Import 
Bank of the United States. My testimony today is an update for 
you of what has happened since Delta last appeared before this 
committee one year ago. And we believe the events of the past 
year continue to highlight the need for reform of the Bank.
    I would like to make three main points in my testimony 
today: first, despite the reforms of the 2012 reauthorization 
bill, the Bank continues with business as usual, financing more 
than $6.8 billion in aircraft transactions in 2014, without any 
real analysis as to whether Ex-Im's actions cause harm to 
airlines or their employees; second, the courts have recently 
ruled that there is no judicial review of the Bank's actions 
because of gaps and ambiguities in the Bank's statutory 
charter; and third, if there is to be any meaningful progress 
to ensure that all U.S. employees are treated fairly, Congress 
must take a leadership role to ensure that the Bank only acts 
as a lender of last resort.
    Since its inception in 1934, the Export-Import Bank has 
been charged with promoting U.S. jobs, while ensuring that its 
efforts do not harm other U.S. businesses. When it comes to the 
airline industry, however, the Bank's loan guarantees to 
foreign competitors provide a significant unfair advantage in 
the form of low-cost financing, which hurts Delta's competitive 
position.
    Moreover, the biggest users of Ex-Im financing are some of 
the most profitable foreign airlines in the world, which 
regularly access the private markets for capital, and do not 
need export financing from Ex-Im. Almost half of the Bank's 
financial capacity is used to finance these airlines, which 
means that a substantial portion of the Bank's financial 
capacity is used to harm Delta.
    In 2012, we worked with many of you to include two reform 
provisions in Ex-Im's reauthorization. The first reform 
provision requested that Ex-Im make publicly available the 
procedures and methodology for its economic impact analysis. As 
we have learned in the past year from the Bank's own emails and 
documents obtained through a Freedom of Information Act (FOIA) 
request, this effort was never undertaken by the Bank in good 
faith; rather, it was engineered to produce a specific result 
that would not upset the status quo.
    The second reform provision requested that Treasury 
undertake negotiations to reduce, and eventually eliminate, 
export credits, a directive included in the Bank's charter. We 
thought that this reform held the greatest promise to ensure 
that a level playing field exists for everyone. Regrettably, 
there has been no good faith effort to negotiate.
    Recently, as I said, the courts have ruled against Delta 
and others in lawsuits challenging Ex-Im's lack of economic 
impact analysis in specific transactions. What the committee 
may not appreciate is the magnitude of the court's ruling: 
first, because of gaps and ambiguities in the Bank's enabling 
statute, the court ruled that Ex-Im has near total discretion 
about how and whether to consider economic impact, effectively 
eliminating any ability for an injured party to obtain judicial 
review; second, the court took the view that Congress and only 
Congress can impose any meaningful restrictions on Ex-Im's 
discretion, and to date, Congress has not done so.
    It is now clear that Congress must act if any real reform 
is to occur. We continue to believe that the best solution is a 
mutually-negotiated reduction in international exports 
subsidies, a negotiation that really needs to take place only 
with the three countries that provide export credit subsidies 
for Airbus's wide-body aircraft: France; the U.K.; and Germany.
    For there to be any urgency behind these negotiations, we 
continue to believe that Congress must take the lead and 
require Ex-Im to adhere to its statutory mandate as a lender of 
last resort. If private market financing is available to a 
foreign airline, Ex-Im should not be permitted to undercut the 
private sector.
    Throughout this debate, Delta's sole aim has been to 
advocate on behalf of our 80,000 employees, at least one of 
whom resides in the State of every member of this committee. 
Their request is a simple one, that their government consider 
their jobs to be as important as the jobs of every other 
American.
    Chairman Hensarling, Ranking Member Waters, thank you again 
for the invitation to appear before the committee. I look 
forward to answering any questions that you may have.
    [The prepared statement of Mr. Hirst can be found on page 
121 of the appendix.]
    Chairman Hensarling. Thank you, Mr. Hirst.
    I want to thank all of the panelists. Without objection, 
your full written statements will be made a part of the record. 
The Chair now recognizes himself for 5 minutes for questioning.
    Mr. Murphy, in your testimony, you are a very articulate, 
effective advocate for Ex-Im. Indeed, this is some old ground 
that is getting plowed here. But having said that, you used a 
phrase that Chairman Hochberg used in his testimony, and that 
was, ``Ex-Im does not pick winners and losers.'' Now that you 
have heard the testimony of Cliffs Natural Resources, now that 
you have heard the testimony of Delta Air Lines, do you still 
stand by that line?
    Mr. Murphy. I do.
    Chairman Hensarling. Okay.
    Mr. Murphy. In many cases around the world, we have seen 
instances where it is very clear that a purchase is going to be 
made. And the question is whether or not the U.S. company that 
is making an export can get the business or not, and often, it 
is the presence or the absence of export credit finance that 
will determine that.
    Chairman Hensarling. Let me ask this question, then. So in 
the vaunted 2012 reforms, I believe it was Section 12 that had 
to do with the economic impact statement. And Mr. Hirst, I 
think, alluded to it in his testimony. Do you believe that Ex-
Im has executed that reform effectively in the 2012 
reauthorization bill, that they effectively take the 
detrimental impact on other U.S. companies into account before 
engaging in the process of credit allocation?
    Mr. Murphy. I do.
    Chairman Hensarling. Okay.
    Mr. Murphy. And I would cite the court case that was 
mentioned earlier as a source of that. The court--
    Chairman Hensarling. Mr. Murphy, I will take ``yes'' for an 
answer. So that is your answer. Maybe I will get a ``yes'' 
answer to this, as well.
    I think it was a Mr. Brilliant--what a wonderful name--
Myron Brilliant, executive VP head of International Affairs at 
the U.S. Chamber who said that, ``TPA is the Chamber's top 
priority before Congress.''
    Tom Donahue, President and CEO, U.S. Chamber, March 9, 
2015, ``Renewal of TPA is priority number one.''
    Is renewal of TPA the number one priority of the Chamber?
    Mr. Murphy. As a very broad business organization, it is 
difficult to prioritize, but we have spared no effort on TPA.
    Chairman Hensarling. Apparently, Mr. Donahue and Mr. 
Brilliant--
    Mr. Murphy. And I am not going to differ from my bosses on 
that, Mr. Chairman.
    Chairman Hensarling. You are a wise man, Mr. Murphy. You 
are a wise man.
    I respect the right of all Americans to petition their 
government for the redress of grievances. Last I looked, the 
Chamber had a pretty healthy lobby budget. But just out of 
curiosity, are you expending greater resources on lobbying for 
the reauthorization of Ex-Im or are you spending more on the 
renewal of TPA?
    Mr. Murphy. Mr. Chairman, we believe it is a false choice. 
What TPA can do--
    Chairman Hensarling. It may be a false choice, but can you 
answer the question?
    Mr. Murphy. We have a nationwide effort going on to back 
TPA.
    Chairman Hensarling. I am just asking which are you 
spending more on. And if you don't know the answer, I will 
accept, ``I don't know the answer.'' But if you do know the 
answer, I would appreciate the answer.
    Mr. Murphy. I believe we have more resources dedicated to 
TPA right now.
    Chairman Hensarling. Okay. Thank you.
    Mr. Murphy. But it does no good to open a foreign market 
if, in fact, we don't have the tools that will allow American 
exporters to be competitive--
    Chairman Hensarling. The last I looked, particularly at my 
friends on this side of the aisle, you might want to look at 
investing a few more resources in that particular effort.
    You referenced also, I guess, a letter with the National 
Association of Manufacturers (NAM). According to NAM, over 50 
percent of our competitive disadvantage with our trading 
competitors is as a result of our tax structure, and 
specifically the corporate tax advantage. Does the Chamber 
agree with NAM's analysis?
    Mr. Murphy. I am not familiar with the details of it, but 
certainly, the world beating high corporate tax rate is a major 
factor--
    Chairman Hensarling. Okay. So they seem to cite the number 
one problem being our tax structure, and not necessarily the 
presence or absence of an export credit agency. I just wanted 
to note that for the record.
    Mrs. Cox, I want to thank you for coming here today, and 
thank you for your family's service to our country. I take note 
that as a small business person, you don't use Ex-Im. 
Apparently, you don't begrudge those who do. But I have heard 
from other small businesses, one in Pullman, Washington, who 
said, ``If the Ex-Im Bank were to disappear, I believe buyers 
and sellers would find attractive commercial options 
unencumbered by politics and special interests.''
    I heard another one from Cook, Illinois, in the airline 
logistics business say, ``Over the long run, Ex-Im subsidies 
from foreign carriers creates a tilted playing field that makes 
fewer U.S. airline jobs and translates into economic pain for 
our employees.'' Is that a fair assessment of your small 
business and other small businesses of which you are familiar?
    Ms. Cox. I really can't speak for other small businesses. I 
will say that the industry for which we are exporting is rather 
niche, and so it is a small network and we are able to know 
that those companies that we are working with we are able to--
we get credit references from them just like we do any other 
kind of domestic customer and try to establish a good business 
relationship with them before extending terms of credit.
    So I can only speak for my small business and the industry 
that we are serving. I hope that is helpful.
    Chairman Hensarling. Thank you. I am way over my time. The 
Chair now recognizes the ranking member for 5 minutes.
    Ms. Waters. Thank you very much, Mr. Chairman and members.
    We have been in a discussion and somewhat of a debate for a 
long time about the reauthorization of Export-Import, and we 
have said about everything that could be said about it. My 
colleagues on the opposite side of the aisle have mentioned 
over and over again that back in 2002, I voted against the 
Bank. And they did not mention that in 2006, I think it passed 
on a voice vote and nobody objected on either side of the 
aisle. So there is a mixed history about Ex-Im on this 
committee.
    But I think it is important for me to say that we have gone 
through some very difficult times; 2008 was not a good year. 
And we ended up having to bail out some of the biggest banks in 
this country because of a failed oversight by regulators, et 
cetera. We witnessed a decline in employment, and there was a 
lot of unemployment, and people suffered quite a bit.
    I am joining with the Chamber of Commerce in ways that I 
have never done before, because I am focused on jobs and job 
creation. There is a lot of talk now--you are going to hear it 
even on both sides of the aisle--about income inequality and 
discussion about wealth building, et cetera, et cetera.
    I make no apology for the fact that SpaceX is in my 
district. I make no apology for the fact that I have a great 
number of suppliers to Boeing in my district. They create jobs, 
and I am very proud and I am very pleased about that. And I 
think that Ex-Im is doing what was designed for them to do. 
That is their mission, to create jobs.
    I have been involved in working on Ex-Im for reform. I have 
been involved in supporting small businesses to make sure that 
we have as many small businesses as possible supported by Ex-
Im. I have also worked on other reforms in Ex-Im. And for those 
on the opposite side of the aisle, we have been interested in 
reform, we join them in looking at ways by which it could be 
stronger and better.
    What is very interesting about this discussion is that we 
have members on the opposite side of the aisle who point to 
that one indictment and they try to paint Ex-Im with a broad 
brush of corruption and mismanagement. What you don't hear is 
anybody on the opposite side of the aisle painting the big 
banks in America with the same kind of brush no matter how many 
crimes they commit, no matter how much fraud they are 
responsible for.
    We are watching as we look recently at the manipulation of 
LIBOR, which determines the interest rates. We have watched as 
the attorneys general in this country had to penalize some of 
the big banks for the servicing mismanagement that they were 
involved in, on and on and on.
    So I think it is important for me to say this, as quickly 
as I can with the minute that is left: I support Ex-Im. I 
support the job creation. I support the fact that they have put 
money into our Treasury. I support the fact that we are more 
competitive with Ex-Im, and the fact that we consider ourselves 
the number one country in the world, and we are having our 
clocks cleaned by China and some of the other nations, and I 
don't think we want to do that.
    We have always had a deficit for too long in export, and we 
should be proud of the fact that we have an agency that is 
dedicated to the proposition that we can do better. So there 
are problems; if there are, they should be worked out. But to 
talk about killing this Bank, not reauthorizing this Bank, is 
radical. That is a radical decision. And it does not make good 
sense for our country, which prides itself on innovation and 
creation and business expansion and job development. So I am 
hopeful that for all of those who may be unhappy, find a way to 
work with Mr. Hochberg and the Bank to work out these problems.
    I am thankful that you are here, Mr. Boyle, because you are 
the poster child for what this Bank is all about. And so I 
would just implore not only those who are here criticizing the 
Bank, to say it is all right to have criticism, but to talk 
about the killing the Bank is a radical response to whatever 
your concerns are.
    And for my friends on the opposite side of the aisle who 
have painted this as chronic--what do you call it?--corporate 
welfare, et cetera, I think that is an extreme way to deal with 
this.
    And for you, Mr. Duffy, I must point out to you that you 
kind of crossed the line when you implied that there was some 
kind of connection between campaign contributions and support 
for Ex-Im. I went and took a look at your record and everybody 
else's record, and if you want to get into that debate, I am 
ready for that one, okay.
    I yield back the balance of my time.
    Chairman Hensarling. The gentlelady's time has expired.
    The Chair now recognizes the gentleman from Michigan, Mr. 
Huizenga, the chairman of our Monetary Policy and Trade 
Subcommittee.
    Mr. Huizenga. Thank you, Mr. Chairman. I'm glad to see this 
has continued to be a high-brow debate here.
    Unfortunately, especially for Mrs. Cox and Mr. Boyle and 
Mr. Smith, I think you are seeing some of the reasons why 
people in America believe that their government is 
dysfunctional. That is a sad commentary.
    And especially for the three of you, I want to thank you 
for taking your time out of your family businesses. I know from 
Michigan, Mr. Smith from Cliffs, I am very familiar that when I 
served in the State legislature, I was able to go up and see a 
number of your facilities in the upper peninsula. And as well 
as, Mr. Hirst, from the private sector.
    I do have a quick question for Mr. Murphy. Mr. Murphy, what 
would have more impact on the U.S. economy in our standing 
internationally, tax reform or Ex-Im?
    Mr. Murphy. Again, tax reform is a big issue that it is 
difficult to assess--
    Mr. Huizenga. Okay. How about regulatory reform versus 
Export-Import Bank?
    Mr. Murphy. When I work for such a broad business 
organization with many issues before the Congress, you see 
clear the linkages and the importance of moving forward on a 
variety of fronts, including reauthorization of Ex-Im Bank.
    Mr. Huizenga. Okay. I take that as a regulatory reform.
    How about TPA and TPP and TTIP?
    Mr. Murphy. Opening up foreign markets for American exports 
is vital. Making sure that American exporters have the tools to 
be able to serve those foreign markets is also important.
    Mr. Huizenga. Okay. So are you comfortable with direct 
loans to companies such as NewSat? Foreign companies. Direct 
loans. We are not talking loan guarantees. We are talking 
direct loans.
    Mr. Murphy. In the course of today's hearing, there has 
been a lot of discussion about different overseas customers for 
American exporters. At a time when we need economic growth and 
job creation here at home, we see the primary beneficiaries of 
Ex-Im as the workers in American companies who are able to sell 
their goods--
    Mr. Huizenga. Are you comfortable putting those same 
workers' hard-earned taxpayer dollars at risk in a foreign 
company with a direct loan, yes or no?
    Mr. Murphy. In the case of Ex-Im where the many controls 
are in place and where the active default rate is below a 
quarter of 1 percent, we are comfortable with the system that 
does that, and also welcome reforms that have been proposed in 
a number of bills now before the Congress.
    Mr. Huizenga. Okay. Which would not get rid of direct 
loans, by the way, I might add. All right.
    So Mr. Smith, could you just, again, maybe give us a quick 
picture on what you think is going to be happening and how this 
deal that put you at an economic disadvantage has really, I 
think, two things have happened: one, you have obviously seen 
the world market change; but two, you have seen your 
competitive playing field change, correct?
    Mr. Smith. That is correct. The one-off equipment sales 
really contributed to a decade of additional global supply. 
Picking winners and losers and selling equipment, now this 
installed capacity that will come online later this year. We 
have struggled to secure further overseas sales in exports, and 
we actually ceased exporting pellets from Michigan and 
Minnesota in the third quarter of last year as global 
oversupply continued to build.
    We have lost our ability to export any iron ore pellets to 
any steel makers in Europe or anywhere else. So we have lost 
that export capacity, and now we are seeing the compounding 
effect as cheaply made steel from South Korea and China enters 
the country and puts pressure on our customer base. Because 
iron is only used for one thing: making steel. There is nothing 
else that we can do, no substitute that we can seek out for our 
markets.
    Mr. Huizenga. Okay. Mr. Hirst, really quickly, I know that 
there may be some other options for purchases and leases out 
there that are in the private sector or in the nongovernmental 
sector, is that the case as people would be looking for 
aircraft for their particular airline? Are there lease 
programs?
    Mr. Hirst. There are many options, and there are leasing 
companies that currently make aircraft available to virtually 
any buyer.
    Mr. Huizenga. Virtually any buyer, even someone who might 
have some dubious credit?
    Mr. Hirst. Even some that may have difficulty obtaining 
credit to purchase aircraft outright.
    Mr. Huizenga. But it would be easier to use the loan 
guarantee?
    Mr. Hirst. It is much easier to use loan guarantees when 
the effect is that you are--
    Mr. Huizenga. Mr. Chairman, I am just reminded of a few 
other conversations being had in this committee and others, and 
it goes like this: The Feds currently do X. And X either, ``has 
always been done'' or we have seen, as we have seen with FHA 
and some other agencies, new responsibilities have been 
expanded massively. And now that argument is that there is no 
proof that the nongovernmental sector can handle it, and 
suddenly we are stuck. And it is time that we actually move 
beyond stuck. This is beyond broken. Thank you.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Texas, Mr. 
Green, ranking member of our Oversight and Investigations 
Subcommittee.
    Mr. Green. Thank you, Mr. Chairman.
    Mr. Chairman, I love my country. I love what it stands for. 
I love the great and noble ideals expressed in the Gettysburg 
Address, ``Government of the people, by the people, for the 
people.'' I love the words in the pledge of allegiance: 
``liberty and justice for all.''
    But as much as I love these, there is something that I 
love, I believe, even more, and it is the respect that we have 
for the vote. In this country, every 2 years, Representatives 
are elected; every 4 years, a President is elected; every 6 
years, Senators are elected. We in this country allow power to 
change hands from one President to another the passage of the 
keys to the nuclear arsenal, every 4 years because of a vote 
that we respect.
    So Mr. Ikenson, my dear friend, you and I have a lot in 
common. As you can see, we both have beards. But my suspicion 
is we have something else in common. I believe you have respect 
for the vote. And I just believe that you, while you may not 
agree with the results as I might not agree with the results. 
There are many elections that I don't agree with, but I respect 
the results even when I differ.
    Would you respect the will expressed by the Congress of the 
United States of America, the will of the American people 
expressed by and through their elected representatives? Would 
you respect a vote, Mr. Ikenson? A simple yes or no would 
suffice. The chairman and I have that in common. We have a 
proclivity to ask for yes-or-no answers, kind sir.
    Mr. Ikenson. Yes.
    Mr. Green. You would. Thank you, sir.
    By the way, others, please take note of the paradigm that 
has been established here. Excellent job. In court, we would 
probably call this voir dire. It is a French term and it 
means--or voir dire, depending on where you are from, it means 
to speak the truth. So this is sort of the truth-telling 
portion of this hearing.
    Let me just go down the line and I will ask Mrs. Cox, and I 
will go to each of you. Would you respect the will of the 
people expressed by and through their duly-elected 
Representatives, ma'am?
    Ms. Cox. That is a trick question there.
    Mr. Green. Not really.
    Ms. Cox. I am just considering the percentage of people who 
actually vote anymore. It has kind of gotten to where, is it 
really representative of the citizenry? I don't know that you 
can really say that anymore.
    Mr. Green. I can say this: I bemoan the fact that they 
don't vote, but I respect the vote.
    Ms. Cox. I do, too.
    Mr. Green. I respect the vote. When we cease to respect the 
vote--
    Ms. Cox. Right.
    Mr. Green. --we are going to lose a lot of what we call 
respect for law and order in the country. So Mrs. Cox, I will 
pass on you, I see you are not prepared. I'm sorry.
    Ms. Cox. It is not a lack of preparation. I would love to 
debate political theory with you.
    Mr. Green. I will just pass on you and go to Mr. Boyle.
    Would you respect a vote, sir?
    Mr. Boyle. Yes, sir.
    Mr. Green. All right. Mr. Smith, do you respect a vote?
    Mr. Smith. Yes.
    Mr. Green. Mr. Murphy, do you respect a vote?
    Mr. Murphy. Yes, sir.
    Mr. Green. Sir?
    Mr. Hirst. Of course.
    Mr. Green. All right. And the truth be told, that is what 
we are looking for, a vote. And while Mr. Murphy and I agree on 
many things, I am sure there are things that we differ on, Mr. 
Murphy. But you and I respect the vote. This is all about 
whether or not we will have an opportunity to go to the well of 
the Congress, have a robust debate, and then take a vote.
    TTP, there would be a vote if it is brought before the 
Congress.
    Ms. Waters, if I may say so, my ranking member whom I 
admire greatly, a vote resolved all of the issues. I respect 
the vote. She respects the vote. We need to vote and then let 
the votes fall wherever they may. And whether one side wins or 
loses, I promise you, I will respect the vote even when I 
differ with the results.
    I yield back, Mr. Chairman.
    Chairman Hensarling. The time of the gentlemen has expired.
    The Chair now recognizes the gentleman from Wisconsin, Mr. 
Duffy, the chairman of our Oversight and Investigations 
Subcommittee.
    Mr. Duffy. Thank you, Mr. Chairman.
    Listen, it has been a fascinating, not just day of 
testimony, but also a fascinating couple of months of hearing 
the debate go on of Ex-Im Bank, and it is pretty obvious that 
we have pretty high passions on both sides. I think a lot of 
folks can argue, as we have heard, that Ex-Im Bank helps create 
and save American jobs; I think a lot of other people say, 
well, it also costs American jobs. I think that has been the 
root divide of folks in this debate.
    Mr. Hirst, does Delta analyze the consequence of Ex-Im Bank 
to cost American jobs in Delta Air Lines?
    Mr. Hirst. It is very hard to have a precise analysis of 
the total effect of what Ex-Im does, but Ex-Im's support of 
Boeing means that it supports our competitors. And we include 
in our testimony an analysis of the financing that Emirates 
Airlines did a couple of years ago which showed that Ex-Im's 
support for Emirates provides them with a subsidy of about $20 
million in aircraft, and that kind of subsidy, that level of 
impact has an impact on Delta's ability to compete with 
Emirates. And in the case of Emirates, we are dealing with an 
airline that is already subsidized by its own government. It is 
an instrument of state policy. It is owned by the government. 
And so the impact is significant and severe, given the 
magnitude of the Bank's financing activities in the aircraft 
sector.
    Mr. Duffy. Mr. Murphy, I appreciate the position of the 
Chamber. I have had my local Chambers, my State Chambers, my 
neighboring Chambers, the national Chamber, all of your 
members, a lot of them have come through to chat with me over 
the 5\1/2\ years I have been in Congress, and they usually talk 
to me about taxes; say, listen, we can't compete 
internationally, because we have the highest tax rate in the 
industrialized world. We in Congress here vote inversions where 
American companies are buying foreign counterparts and moving 
their headquarters overseas because we pay too much in American 
taxes. They talk about rules and regulations.
    I have to tell you, over the 4\1/2\ years that I have been 
here, one of the main things I hear from the Chamber or your 
members is not, oh, my gosh, the world is going to fall apart 
if we don't have Ex-Im Bank.
    I am troubled with your testimony when you say Ex-Im 
doesn't pick winners and losers. Mr. Hirst, right next to you 
with Delta, would say, listen, yes, it helps Boeing and saves 
Boeing jobs, but how do you say that Delta sees a subsidy to 
a--its competitors and doesn't hurt Delta and the American 
employees with Delta, and the bank therefore isn't picking 
winners and losers?
    Mr. Murphy. There are, at present, two vendors of wide-body 
aircraft in the world today, and soon there will be more out of 
China. Every time a foreign airline goes to buy aircraft, 
export credit agency support is there from Airbus. In those 
situations, if a foreign airline wants to purchase planes, the 
absence of Ex-Im support can be determinative.
    Mr. Duffy. So what you are telling this committee is, we 
value the Boeing jobs more than the Delta jobs, because Delta 
is telling you that they are losing jobs because of Ex-Im, and 
you are telling me, I know that, but--
    Mr. Murphy. I am telling you that if the foreign airline 
buys an Airbus plane, it doesn't--
    Chairman Hensarling. The time belongs to the gentleman from 
Wisconsin.
    Mr. Duffy. You are telling me that you care about the 
Boeing jobs, and so do I. I am sensitive to the Boeing jobs as 
well. I want Boeing to thrive and sell all over the world, but 
we can't turn a blind ear to what Delta experiences as a 
competitive loss. Even Mr. Boyle is saying--listen, I have been 
to the mines in northern Minnesota. They can't compete, and we 
are going to say that, listen, I am going to come in and have--
with an honest face, which you usually have, and say there are 
not winners and losers being picked with Ex-Im Bank. That is--
listen, I am all about the debate, but to tell me that Ex-Im, 
through its subsidies, through its financing, isn't picking 
winners and losers, I have a hard time buying that.
    And with Mr. Hochberg, I pointed out, even on the 
environmental front, you have to point out--you have to 
recognize that loans in the carbon space aren't being made. And 
so we will say the green jobs in America, we love those jobs, 
but if it is a carbon job, not so much. Again, you would agree 
in green versus carbon, Ex-Im does pick winners and losers? 
Yes?
    Mr. Murphy. It is plain that in the aircraft space--
    Mr. Duffy. Yes or no?
    Mr. Murphy. --since 2011--
    Mr. Duffy. I am asking about green. I am not talking about 
that. Green versus carbon, winners or losers?
    Mr. Murphy. You know--
    Mr. Duffy. Mr. Murphy, come on. It's easy.
    Mr. Murphy. We support a nondiscriminatory approach to what 
Ex-Im supports--
    Mr. Duffy. I will take, Mr. Murphy--
    Mr. Murphy. --and doesn't.
    Mr. Duffy. I will take your nonanswer as a ``yes'' to that 
question.
    I yield back.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentlelady from Wisconsin, Ms. 
Moore, ranking member of our Monetary Policy and Trade 
Subcommittee.
    Ms. Moore. Thank you so much, Mr. Chairman, and Ranking 
Member Waters. And I thank the panel for your patience and the 
time you are spending here with us this afternoon.
    I am particularly impressed with you, Mrs. Cox. Being a 
woman-owned business and being in the heavy equipment area, I 
think you are a fantastic role model for women, and I applaud 
you and thank you for being here this afternoon.
    I want to ask a little bit about Conway Machine and what 
you do. First of all, I am happy to see that you are a 
participant in the SBA Step Program, which, by the way, is a 
government-funded program, but in addition to that, I was 
wondering if you were--if you supplied parts and services to 
Galley Support Innovations?
    Ms. Cox. Hi, Ms. Moore. Thank you for your kind words.
    We do supply parts to Galley Support Innovations.
    Ms. Moore. And Galley Support Innovations is a supplier to 
Boeing and Gulfstream and other aircraft manufacturers. So you 
are part of this supply chain that we have been talking about, 
and so even though you may not--and I can understand it if you 
say the paperwork is too onerous. So even though you don't 
directly benefit, you benefit as part of this supply chain that 
I believe the Chamber has talked about constantly. I know in my 
own district, for example, I visited a company called Maxin, 
which has 30 employees, but they are part of this huge supply 
chain, and they pay well, because they are. So I want to thank 
you for that.
    Let me ask Mr. Ikenson from the Cato Institute, I went on 
your website, and I just want to make sure that I have your 
objection to the Ex-Im Bank put into some sort of context. You 
guys believe climate change is a hoax, and are against central 
banking, the Fed, against public education, want voucher 
schools, and you are against the Ex-Im Bank, right? I just want 
to sort of get a profile of the Cato Institute.
    Mr. Ikenson. We all have our own opinions, Congresswoman.
    Ms. Moore. That is true.
    Mr. Ikenson. So--
    Ms. Moore. I just want to make sure that backdrop was 
there.
    Mr. Ikenson. There was some mischaracterization there, 
but--
    Ms. Moore. Okay.
    Mr. Ikenson. --go on.
    Ms. Moore. You will allow it.
    But you do agree with--do you think we should have the TPP?
    Mr. Ikenson. Well, I want to see it. I support trade 
liberalization. And I think in order for us to see TPP, we need 
to pass TPA first--
    Ms. Moore. Okay.
    Mr. Ikenson. --and then we can evaluate TPP.
    Ms. Moore. All right. You quoted Milton Friedman, and we 
all disagree. He was very brilliant, we know that. You quoted 
him, and he said, according to your testimony, that the real 
benefits of trade are transmitted through imports and not 
through exports.
    Now, 95 percent of the consumers on the entire planet are 
somewhere other than the United States of America, but we ought 
to measure it by imports. So if we get a lot of these foreign--
Asian, China, like Vietnam, cheaper products imported into the 
United States, that is how we ought to measure our progress, 
versus exporting our goods. Was that your testimony? I am 
reading it here.
    Mr. Ikenson. Yes. I have made the point that exports are 
the things that we produce but don't get to consume.
    Ms. Moore. And we have jobs here in the United States when 
we export.
    Mr. Ikenson. Right. And--
    Ms. Moore. Versus importing and supporting some other 
economy.
    Mr. Ikenson. Right. So the purpose of exchange, like, when 
you go to the grocery store, you want to part with as few 
dollars as possible for your purchases. That is the same thing 
we want to do. We want to give up--
    Ms. Moore. But I deliberately don't go to a certain big box 
store typically, unless I just have to, because I want to 
support American jobs.
    It is my time, so I need the next 25 seconds to ask Mr. 
Smith a question about Roy Hill. You have your mining project, 
and it is--would you agree that it is a regional business, that 
iron ore is a regional kind of business?
    Mr. Smith. It is a global business. The price of iron ore 
is controlled by delivered to China, and indexes are worked 
back from that delivered to northern China price based on 
freight rates. So it is a global business now.
    Ms. Moore. Okay. I see my time has expired. May I have 
leeway to ask this question, Mr. Chairman?
    Chairman Hensarling. I'm sorry. I didn't hear that.
    Ms. Moore. I just wanted to ask him a question, and I 
didn't have time. I am wondering if I am going to get the 
indulgence of the Chair.
    Chairman Hensarling. It depends on how quickly the member 
can ask her question.
    Ms. Moore. Okay. You supply iron ore to Canada, right?
    Mr. Smith. No longer. We do not.
    Ms. Moore. Okay. Because the Roy Hill project was 
designated for Asian markets, and so I am wondering what your 
objection was to places like Caterpillar, which is a big 
presence in my State, sending equipment, creating 3,400 jobs.
    Mr. Smith. And also creating a--contributing to the 
oversupply glut that has seen the price of our commodity drop 
50 percent inside of one year, and also locking us out of other 
markets in Korea, in Japan, as Roy Hill has secured those long-
term supply agreements.
    I was being polite about our Canadian operations. They are 
in bankruptcy. At this time last year, we were exporting to 
China and to Korea, and I had some 1,600 employees, and they 
were Canadian employees. We are down to 100 today. So, it is a 
seaborne business.
    Chairman Hensarling. The time of the gentlelady has long 
expired.
    The Chair now recognizes the gentleman from Georgia, Mr. 
Westmoreland.
    Mr. Westmoreland. Thank you, Mr. Chairman.
    Mr. Hirst, I just want to ask you a simple question at 
first. Does Delta belong to the U.S. Chamber of Commerce?
    Mr. Hirst. I don't think we do here.
    Mr. Westmoreland. Oh, okay. Mr. Hirst, earlier today I 
asked Mr. Hochberg about some emails between Ex-Im Bank staff 
and Boeing regarding these rules on the economic impact. Did 
you hear me ask those questions?
    Mr. Hirst. Yes, sir, I did.
    Mr. Westmoreland. You did? How would you characterize his 
answer that he gave me back as far as his analysis was 
concerned?
    Mr. Hirst. I would characterize it as incomplete. The truth 
is that the Bank is required by its charter to give full 
consideration to the effects of its actions on employment in 
the United States, including industries that would be affected, 
like Delta is, by the financing of our competitors, but rather 
than considering those effects on a case-by-case basis, the 
Bank has designed economic impact procedures that include a 
number of screens that a transaction has to pass through before 
the Bank will even consider what the effects are on the 
employees of other companies.
    And what these emails showed was that when the Bank 
designed these procedures following the 2012 Reauthorization 
Act, it designed them with a view in mind, the clear and 
intended view in mind to avoid having to consider individual 
transactions. And so in the last year, in 2014, of 20 large 
transactions which the Bank considered, averaging over $350 
million in aircraft financing each, the Bank only considered 
the effects of one of those transactions out of 20, because 
these screens, which set up blocks to that consideration, and 
that one transaction with Aeroflot, the Russian airline, was a 
fundamentally insignificant transaction to the U.S. airlines.
    Mr. Westmoreland. Just from me reading, not as a lawyer but 
as a builder, did it seem like they were what we would call 
cooking the books on this analysis, to you?
    Mr. Hirst. They were clearly crafting the procedures so 
that the analysis that is called for by the statute would very 
rarely be done. And, in fact, one of the documents--this is one 
of the documents that was produced by the Bank in its response 
to our FOIA request, and it is a chart prepared by Boeing 
showing all the steps that a transaction must go through before 
the Bank even begins to analyze its economic effect. So you can 
see there is one hurdle after another, and the effect is that 
very few transactions will get through that test, and that is 
intentional.
    Mr. Westmoreland. Yes, sir. If this committee were to craft 
a reauthorization bill, what would be some of the language in 
there that Delta or you would recommend for the ability to come 
up with a good comprehensive impact analysis?
    Mr. Hirst. Sir, we think the most important thing that the 
committee can do and that the Congress can do is to require 
that the Bank actually be a lender of last resort, as Mr. 
Hochberg repeatedly characterized. He repeatedly said that the 
Bank is here to provide back-up financing.
    We think that if the Congress were to adopt a reform, the 
most important reform would be actually to implement that 
requirement, so that a foreign airline seeking Ex-Im's support 
would first have to show that it could not obtain financing in 
the private market.
    Of the 20 largest recipients of Ex-Im financing over the 
last 10 years, virtually every one has access to the private 
financial market. And that financial market is robust, it is 
there, it is available, but it is more expensive, and from 
Delta's standpoint, that is the most single important reform.
    Mr. Westmoreland. Would your definition of a bank of last 
resort be that they had gone through all their other options as 
far as financing goes?
    Mr. Hirst. Yes. If they certified that they were unable to 
obtain private financing, then I believe an airline should then 
be available--or accessible--have access to the Bank, but if, 
in fact, an airline has access to private financing, it should 
not have access to Ex-Im.
    Mr. Westmoreland. You would think that Emirates Air and 
Qatar and those people would have access to cash, wouldn't you?
    Mr. Hirst. Ex-Im has provided about $4 billion of support 
over the last 15 years to Emirates, and Emirates regularly 
accesses the private markets, they are highly profitable, they 
are state-supported.
    Mr. Westmoreland. Or a cash deal. Or cash.
    Chairman Hensarling. The gentleman's time has expired. I 
assume the gentleman yields back the remainder of his 
nonexistent time.
    So with that, the Chair recognizes Mr. Delaney for 5 
minutes.
    Mr. Delaney. Great. Thank you, Mr. Chairman.
    Mr. Hirst, it is nice to see you again. Thanks for coming 
in and testifying. I think it is important for companies to 
give their perspective, particularly a great company like 
Delta. We appreciate what you do.
    Mr. Hirst. Thank you, sir.
    Mr. Delaney. But I did want to dwell again on the topic I 
talked about last year, which was understanding better this 
chart that you lay out between the financing that Emirates is 
able to obtain from Ex-Im versus the financing they are able to 
obtain in the market, because I do think it is important that 
when we are thinking about Ex-Im, that it does provide 
financing that is consistent with market terms, which is what 
they have represented that they do, which I believe they do.
    In fact, I have even suggested that they look at 
potentially selling off part of their portfolio from time to 
time so that people could get a sense as to how well it is 
priced according to the market, but I also do think it is 
important that things get presented on an apples-to-apples 
basis. And my recollection when I looked at this more carefully 
last year was that when you are comparing the Ex-Im terms of 
the financing where you show an interest rate of 3.41 percent 
to the market terms, that it is not really an apples-to-apples 
comparison, because when Emirates borrows from Ex-Im Bank, they 
are borrowing on a recourse basis. Is that correct?
    Mr. Hirst. I am not sure that I know the answer to your 
question, sir.
    Mr. Delaney. Well, I think they do. I think when Ex-Im 
lends to Emirates, they get a lien on the planes and then 
Emirates also promises to pay the loan back. So the Ex-Im Bank 
is the lender. It would be like if Ex-Im was lending to Delta. 
On a recourse basis, they would get a lien on your planes.
    Mr. Hirst. Correct.
    Mr. Delaney. Right. And then the corporation would also 
guarantee the loan in the event the planes were worth more than 
the debt. And it seems to me you are comparing it to examples 
where Emirates is borrowing effectively on a nonrecourse basis, 
where the market terms are set up as a special purpose entity, 
where the borrower is actually this entity, this Irish special 
purpose corporation, I can't really read the name in my 
footnotes, but it is a special purpose corporation, it owns the 
planes, it leases the planes from Emirates, so it gets the 
Emirates cash flow during the terms of the lease, but at the 
end of the lease, the residual value of the planes cover 
whatever debt is outstanding, if any, so therefore it is 
nonrecourse.
    So my question to you is if Delta Air Lines was borrowing 
money from one bank, on what I will call a nonrecourse basis, 
in other words, just pledging the planes as collateral, and 
from another bank on a recourse basis, where you not only 
pledge the planes as collateral, but you also provide a 
corporate guarantee that in the event the collateral is worth 
less than the debt, that Delta would make up the difference, 
wouldn't you expect to pay a lower rate in the second category 
and potentially a substantially lower rate?
    Mr. Hirst. I think the loan rate results from the 
guarantee.
    Mr. Delaney. Right. And that is my sense. So when you point 
out that Ex-Im lends to Emirates on a lower rate, it is because 
they not only have the planes as collateral, but they also have 
the Emirates' guarantee.
    Mr. Hirst. They have the guarantee of the U.S. Government.
    Mr. Delaney. No. But the premise of your point here is that 
Emirates can actually borrow from the Ex-Im Bank at terms 
cheaper than the market.
    My point to you is the market terms you are comparing it to 
are not the same terms the Ex-Im Bank is getting. The Ex-Im 
Bank is getting a lien on the planes and a guarantee of 
Emirates Airline, which is a subsidiary of the Dubai Investment 
Corporation, which it a subsidiary of the Dubai Sovereign 
Wealth Fund.
    Mr. Hirst. Correct.
    Mr. Delaney. So basically when Ex-Im is lending in your 
first column here, they not only get the planes as collateral, 
but they get a guarantee from the Sovereign Wealth Fund of 
Dubai, whereas your market terms, they just have the planes as 
collateral. So as a lender, I would expect to get paid a much 
higher rate if I was just lending on the planes than if I was 
lending on the planes plus a guarantee of the Sovereign Wealth 
Fund.
    Mr. Hirst. Mr. Delaney, my memory is that is not accurate 
and that the--and it has been about a year--
    Mr. Delaney. Right.
    Mr. Hirst. --since I have actually read these documents, 
but my memory is that the credit of Emirates, taking into 
account--
    Mr. Delaney. Yes.
    Mr. Hirst. --this provenance was, in fact, a factor.
    Mr. Delaney. Yes, during the terms of the lease. So I just 
think that--look, I want to go back to my initial premise. I 
don't think the Ex-Im Bank should be subsidizing loans relative 
to the market, certainly material terms, and I think there are 
good ways for us to figure out if that is happening. We could 
have Ex-Im sell off part of its loan, see where the market is, 
but I do think this premise that this $20 million-per-plane 
subsidy that really you build a lot of your arguments on is, in 
fact, flawed, because I think the two credits that you lay out 
here were very different. It would be like a lender lending to 
a government office building and getting the building as 
collateral, but not a guarantee by the U.S. Government, versus 
if a lender lent on a government office building, got the 
building as collateral and then also had a guarantee of the 
U.S. Government. I would expect that second lender to get a 
much better deal, which is what is effectively happening here.
    Mr. Hirst. We do disagree, and I would be happy to talk to 
you further about it.
    Mr. Delaney. Thank you.
    Chairman Hensarling. The time of the gentlemen has expired.
    The Chair now recognizes the gentleman from Ohio, Mr. 
Stivers.
    Mr. Stivers. Thank you, Mr. Chairman. I appreciate the 
chairman holding this hearing. And I think there is a group of 
witnesses with diverse views that all bring important 
perspectives to this debate. And I, for one, believe that Mr. 
Hirst and others have some points about some reforms that are 
very importantly needed, but I do think that we need to, with 
substantial reforms, reauthorize the Bank.
    My first question is for Mr. Murphy. Mr. Murphy, you said 
during your testimony that 78 different countries have export 
credit finance agencies, or 79 countries?
    Mr. Murphy. Yes.
    Mr. Stivers. Do we compete against those companies in the 
marketplace every day?
    Mr. Murphy. Yes. There are 79 export credit agencies around 
the world, and there is evidence that a large majority of them 
are greatly expanding the trade finance that they are making 
available. By contrast, if the United States is left as the 
only major trading nation that doesn't have an export credit 
agency like this, there will be circumstances like the ones I 
have described where American companies are uniquely 
disqualified from even participating in business opportunities.
    Mr. Stivers. Even outside the uniquely disqualified, in the 
marketplace, if we are competing against countries that have 
export credit finance agencies and we do not, and let's say we 
take the assumption on the small end that it is 1 percent of 
our exports, what would happen to that 1 percent of our 
exports?
    Mr. Murphy. It is actually 2 percent, but $27 billion is--
it is not nothing. That is more than the United States exports 
to Italy, India or Australia.
    Mr. Stivers. What would happen to those exports without an 
export credit financing agency?
    Mr. Murphy. It may be that in some cases that there can be 
an accommodation and they will find commercial support, but in 
many cases they won't. And so--and in many of these head-to-
head competitions where the foreign competition, say, heavy 
equipment manufacturers from Japan or Korea that have export 
credit support--
    Mr. Stivers. So who would likely win those deals?
    Mr. Murphy. In many of those, where the customer is in a 
position to demand that support be available, the American 
company would lose.
    Mr. Stivers. And where would those jobs be?
    Mr. Murphy. They would be elsewhere.
    Mr. Stivers. Thank you.
    Mr. Hirst, I have some real sympathy and empathy for the 
concern you bring up. And I think the first point you brought 
about how we really do need to--and it is clear from what Mr. 
Ikenson said and others that export credit finance agencies 
create an aberration in the marketplace. They are an aberration 
in 79 countries, though, and if we unilaterally disarm, that 
might not be the smartest strategy, but I would hope that we 
would put some teeth in requiring the U.S. trade representative 
to negotiate with France, the U.K., and Germany with regard to 
wide-body planes that we disarm together. And while we are 
doing that--and you only mentioned those three countries. In 
the next 5 years through this reauthorization, we need to be 
acutely aware that Brazil and China are working on wide-body 
planes, and we need to add them to the list that we negotiate 
with, even though in the marketplace today, we don't face them. 
In the next 5 years, that could easily happen.
    Mr. Hirst. Probably not in the next 5 years, sir.
    Mr. Stivers. Okay. But they are working on it--
    Mr. Hirst. Right.
    Mr. Stivers. --and we need to--we definitely need to start 
negotiations there too, because, frankly, China's not going to 
be easy to negotiate with on that and Brazil might not either, 
but I think that is the most important thing we can do. And you 
already talked about the lender of last resort reform, which I 
think is a good real reform.
    What about if we did a reform on the adverse impact to 
American businesses that made it clear that injured parties 
could bring a judicial review? Would that be a good or a bad 
reform?
    Mr. Hirst. No. It would be a very good reform, and I think 
tied to that would be the--placing obligation on the Bank to 
analyze individual transactions and not use screens to do it. 
There is no reason why they can't craft regulations that would 
require borrowers to file applications far enough in advance to 
allow individual transactions to be analyzed.
    Mr. Stivers. And my next question is for Mr. Ikenson. You 
talked a lot about the aberration in the marketplace that 
export credit finance agencies create. And assuming for a 
second that the Bank was to be reauthorized, what if there was 
a program that guaranteed some type of reinsurance that showed 
the true market-based pricing for different transactions as a 
percentage--a required percentage of their business? Would that 
be a step in the right direction, from your perspective, or 
would that just be a waste of time?
    Mr. Ikenson. I think it would be a step in the right 
direction. However, there are many problems with the Ex-Im 
Bank, and if they weren't all addressed at the same time, then 
we would be in a position of possibly reauthorizing a slightly 
improved aberrational system. We can get rid of this thing. It 
is--actually, John, you mentioned 2 percent. It is actually 1.2 
percent. So 98.8--
    Mr. Stivers. Like I said, there are differences of opinion, 
so I even went with the lower number of 1 percent.
    I do have one question for Mrs. Cox. I appreciate that. So, 
Ms. Cox, you used the Small Business Administration, you don't 
choose to use Ex-Im Bank. Do you think we should also do away 
with the Small Business Administration, because it also picks 
winners and losers and is an aberration in the marketplace and 
guarantees credit?
    Ms. Cox. I would rather not--I think you will see with any 
kind of government welfare type of program that there can be a 
lot of overlap in services offered, and you do see that with 
the SBA and the Ex-Im Bank. However, the program that I am 
using is called the Emerging Leaders Program. It is a 
beneficial resource for small business owners, and I would 
recommend it.
    The way that I see it personally, and I do believe in small 
government, but I see it as getting some of my tax dollars 
back. I give up 30 percent of my check, and if I am able to get 
something back from the government, I am going to take a little 
bit of it, so--
    Mr. Stivers. I yield back the balance of my time.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from California, Mr. 
Sherman.
    Mr. Sherman. Ah. Mr. Chairman, thank you, and I will be 
yielding to you in a second, because I have a question.
    We talked earlier about bringing a bill to this committee 
or to the Floor, but particularly to this committee for markup, 
and you asked me whether any bill had 218 supporters. That is a 
rule that we use for bills that involve minting a commemorative 
coin, but with that one exception, I don't think any--90 
percent of the bills that come before the committee don't have 
218 cosponsors when they start. In fact, the whole purpose of 
our effort here is to offer amendments and to improve the bill 
to the point where we hope it has majority support in the 
committee. So, we can have democracy where we all in this room 
work together to try to create a bill that is worthy of our 
support, or we can have a situation where we don't get a chance 
to do that.
    Are you planning to bring any version of an Ex-Im 
reauthorization bill before the committee in the next couple of 
weeks?
    Chairman Hensarling. Will the gentleman yield?
    Mr. Sherman. I will definitely yield.
    Chairman Hensarling. I think I have already answered the 
gentleman's question, but I was just curious, when your party 
was in the Majority, where was your voice for bringing a 
balanced budget amendment to the Floor?
    Mr. Sherman. I think I cosponsored the balanced budget 
amendment, and certainly would have supported committee 
consideration, but sometimes my voice is so soft, it cannot be 
heard. My shyness is something I am trying to overcome.
    But, Mr. Chairman, do you know, will we have a chance to 
work in this room to create a bill worthy of the support of a 
majority of the House? I yield to the chairman.
    Chairman Hensarling. The chairman has already answered your 
question.
    Mr. Sherman. Ah. I can't be as tough on the chairman as I 
am on witnesses when the answer may not be a complete answer to 
a question. I will turn instead to Mr. Murphy and probably give 
him less deference than I do our chairman.
    Mr. Murphy, we have a couple of businesses here that feel 
that, on balance, Ex-Im hurts business. You represent an 
organization that pretty much sweeps across American business. 
Is this a close call for the Chamber? Is this, like, oh, 60 
percent of our members think it helps their business--60 
percent of those affected members are on one side and 40 
percent are on another, and, gee, it may split our 
organization, or is this one of those issues where you can 
safely say that for the vast majority of your concerned 
members, this is a helpful organization?
    Mr. Murphy. I would say there is extremely broad support in 
our membership, and I am not aware of any members that are in 
opposition. In fact, if you look at press clips, you will find 
just a small number of--
    Mr. Sherman. The gentleman sitting next to you isn't a 
member?
    Mr. Murphy. Neither of the gentlemen immediately next to me 
are members of the Chamber.
    Mr. Sherman. But you do have how many members in total?
    Mr. Murphy. We have 300,000 direct members, and through our 
State and local Chambers, 3 million.
    Mr. Sherman. That is--and within your organization, it is 
overwhelming that, on balance, Ex-Im Bank helps American 
business?
    Mr. Murphy. I have to tell you, I have never gotten a call 
from a member in the past months, when it has been quite public 
that the Chamber was advocating for a reauthorization of Ex-Im 
Bank--never gotten a call from a member protesting.
    Mr. Sherman. Now, one issue that arises is the competition 
in airlines. One approach is to say if Air India is going to 
fly from Dulles to Delhi and they get good financing on their 
plane, that might put United Airlines or even Delta at a 
disadvantage. Another approach is to say that if a plane is 
acquired by a U.S. carrier for use in an Ex-Im-eligible route, 
that we should regard that as an export, because a plane flying 
from Dulles to Delhi is the same as a plane flying from Delhi 
to Dulles; that is to say, United States Airlines flight going 
in one direction is the same as the Air India flight going in 
the other direction.
    Does the Chamber have a position on whether Ex-Im Bank 
would be allowed to provide financing when a U.S.-based airline 
is operating from Dulles to Delhi in the same way as one flying 
the other direction?
    Mr. Murphy. I think our position is that this is a problem 
that has been addressed pretty successfully. There was a 2011 
agreement reached at the OECD which considerably raised the 
fees imposed for the purchase of aircraft. It is an aircraft 
sector understanding. The cost of using Ex-Im to purchase 
aircraft has gone up considerably and is very comparable to 
commercial rates now. By contrast, U.S. domestic airlines can 
access capital markets here for approximately one-third the 
cost of what export credit agency support is. So in that sense, 
there has been real progress in this area.
    Mr. Sherman. Thank you.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from North Carolina, 
Mr. Pittenger.
    Mr. Pittenger. Thank you, Mr. Chairman.
    And thanks to each of you for enduring this process. It is 
important for each of us to hear from you and to better 
understand your perspective.
    And I appreciate my friend, Mr. Green, as well, addressing 
the issue of our vote. Our vote is very important to each of 
us. We all represent about 750,000 people and we want to make 
the right decisions that are fair and equitable for our 
constituents, so we are deliberate, we are thoughtful, and we 
are concerned, as we probe these issues to see what is really 
fair.
    As I have reviewed these materials and studied the 
information from the Ex-Im Bank, I have read the following, 
that from--according to their own data, more than 60 percent of 
Ex-Im Bank's financing benefits just 10 large corporations. At 
the end of 2014, no less than 45 percent of Ex-Im's exposure 
was concentrated just in the air transportation system.
    Mr. Murphy, how do you respond to that? How do you consider 
the weighted role that Ex-Im has in supporting large 
corporations that really don't benefit the same folks that I am 
trying to represent every day?
    Mr. Murphy. The most important market for small business 
isn't Canada or Europe or China, it is big business, and that 
is why you see some of the largest exporters in the country 
have so many suppliers, like Boeing has nearly 15,000 
suppliers, GE has more than 35,000. So those are how small and 
medium-sized companies get into the export business--
    Mr. Pittenger. Well, Mr. Murphy--
    Mr. Murphy. --is as providers to the larger companies.
    Mr. Pittenger. --you heard the testimony of Mrs. Cox, and 
there are others like it, how cumbersome and how difficult and 
challenging it is for a small business time-wise, information-
wise, and cost-wise, to even begin to process this out. And I 
think what concerns many of us is the weighted interest that 
Ex-Im Bank has from individuals who have strong financial and 
political interest. You probably heard the testimony earlier 
today, and with recognizing the strong political role and 
financial role this has played into this entire process.
    And that is really a concern to many of us, that it seems 
as though the big guys with huge resources are putting enormous 
weight and pressure in this process. They come and they make a 
lot of noise. And I appreciate and respect the role of every 
business, I am here to represent large and small, but the 
reality is that even by the data given by the Ex-Im Bank, 10 of 
the large corporations get 60 percent of the benefit.
    Mr. Ikenson, do you have any response, do you have any 
thoughts or reflections on some of the concerns you have heard 
today?
    Mr. Ikenson. Yes. I think that the problem you raise is a 
big problem. The Bank shouldn't be there to begin with. The 
fact is that, I think, it is closer to 70, 75 percent go to the 
top 10 users, but more indicting than that is the fact that 
98.8 percent of U.S. exports don't go through the Ex-Im Bank. 
So this notion of unilateral disarmament or leveling the 
playing field by requiring this export credit agency implies 
that Americans are selling--or that this small percentage of 
Americans are selling perfect substitutes for other--to other 
products in 70 other countries with ECAs.
    Our products are distinguishable, and yet the financing 
terms are not the final say. There are lots of determinants 
that go into buying decisions. And there are humongous costs 
that are not taken into account. I heard the testimony of Mr. 
Hochberg this morning saying that they do an analysis of the 
costs of the policies, but I have never been privy to that, I 
have never seen the details of that. I did an analysis which 
suggests that there are profound costs across the economic, the 
manufacturing sector.
    Many of these companies are silent to respond to a question 
that was brought up earlier to Mr. Murphy about why they don't 
raise the issue. Many don't recognize it. The cost of an input 
that is subsidized for export might only be 1 or 2 or 3 percent 
of its total cost of production. For Delta, it is--airplanes 
are huge, it is a huge part of their costs, so they were able 
to recognize it. For Cliffs Mines, mining equipment is huge, so 
they were able to recognize the impact, but many of the 
companies across the manufacturing spectrum don't realize they 
are being pickpocketed.
    Mr. Pittenger. Thank you, Mr. Chairman. I yield back my 
time.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Washington, Mr. 
Heck.
    Mr. Heck. Thank you, Mr. Chairman. I first want to express 
my appreciation to Mr. Hirst for alluding to the litigation 
that has been brought on this, but before I do that, I want to 
mention in passing that I do not want to be accused of that 
which my friend, Mr. Duffy from Wisconsin inartfully described 
as turning a blind ear to the claims that Delta is suffering as 
a consequence of Export-Import Bank activity. I have a hard 
time squaring it with the performance of the last year, when 
they had record revenues, when their passenger load was at an 
all-time high, when they are aggressively expanding in markets, 
especially my own up at Seattle, and the chairman of the board 
and the CEO have press conferences touting their historic 
performance. I can't square those two things. In fact, I would 
say if this is suffering, sign me up.
    The assertion has been made by the company that Ex-Im 
financing gets foreign airlines to buy new airplanes which are 
used to compete against U.S. carriers. It is pretty simple and 
straightforward. This point has been litigated. And for the 
record, I would like to clarify. This is what the judge said 
when Delta lost the case. The record contradicts Delta's 
presumption that the availability of Ex-Im Bank financing sways 
foreign airlines to purchase new aircraft they would otherwise 
would not acquire, thereby causing an increase in competition 
with U.S. airlines that otherwise would not exist; rather, the 
availability of bank financing, or the lack thereof, is more 
likely to affect only the secondary decision of whether to 
purchase aircraft from Boeing or Airbus when a specific need 
for new planes arises. Thus, Delta's underlying assumption that 
U.S. airlines necessarily face less competition if the Bank 
does not provide financing to foreign airlines falls apart.
    I might add that Delta has litigated not once, but 4 times, 
and lost every single case.
    Mr. Murphy, it seems to me that we have been down this road 
before. I see an antecedent and an analog. I would be 
interested in your reaction. Thirty-four years ago, we had the 
same kind of policy debate in this chamber, and it was over the 
Federal Government's subsidy of shipbuilding. In that instance, 
however, there was a bit of a difference. It wasn't an indirect 
subsidy, as some allege, in the instance of the Export-Import 
Bank, in fact, it was a direct Treasury subsidy. Some people in 
this chamber advocated that we needed to continue that subsidy 
in order to continue to compete in the global market of 
shipbuilding. Congress decided instead that the United States, 
as some would argue in this instance, should lead by example 
and get rid of the shipbuilding subsidy.
    Mr. Murphy, how did that work out?
    Mr. Murphy. Congressman, I appreciate that you pointed out 
that it is a somewhat imperfect analogy since, after all, in 
the case of Ex-Im, it is a curious kind of subsidy program that 
returns money to the Federal Treasury. In the case of 
shipbuilding, it was actual taxpayers' dollars at work. But 
when the U.S. oceangoing shipbuilding industry was--when its 
subsidies were taken away in the 1980s, it could not compete, 
because other countries around the world continued with those 
subsidies, and today the United States has basically very 
little, or none, in the way of oceangoing shipbuilding.
    It shows the challenge of the world that we live in, where 
we would like to see free markets and free enterprise prevail 
in every case, but getting rid of Ex-Im just ourselves and not 
doing anything about those 79 export credit agencies around the 
world could have a very damaging effect for a lot of export 
industries.
    Mr. Heck. Finally, Mrs. Cox, thank you for being here. I 
think you have done the hardest thing in the world to do, which 
is stand up a successful small business. I also want to thank 
your family and your husband, in particular, for their service. 
Bluntly, painfully put, I doubt there are too many people in 
this room who better understand the sacrifice or potential 
sacrifice that such service can cause than my family, and I 
genuinely thank you for that.
    I do, however, want to note and hope you appreciate that 
you are a part of benefiting from the Export-Import Bank 
insofar as you are one of the members of the supply chain for 
the Boeing Aircraft Company, which makes the best airplanes on 
the face of the planet, in no small part due to your parts, and 
I thank you for that as well.
    With that, I yield back the balance of my time.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentlelady from Missouri, Mrs. 
Wagner.
    Mrs. Wagner. Thank you, Mr. Chairman. I would like to start 
off this hearing by asking that this letter, Mr. Chairman, the 
letter that Mr. Murphy referenced earlier in his opening 
statement, it was sent out and it is dated today by over 1,000 
local organizations, Chamber groups, local and the U.S., and 
businesses, I should say, of all sizes from all across the 
country urging reauthorization of the Export-Import Bank be 
submitted for the record, Mr. Chairman.
    Chairman Hensarling. Without objection, it is so ordered.
    Ms. Wagner. Thank you all for joining us today to talk 
about renewing the Export-Import Bank. This is an incredibly 
important debate and deals with our global competitiveness and 
our country's economic output. However, for reauthorization, 
for any kind of reauthorization, Congress must take the 
opportunity to consider the merits of the program and whether 
any reforms or changes are warranted. So, let's look at the Ex-
Im Bank.
    According to its charter, the Bank works on maintaining or 
increasing employment of United States workers. I can vouch 
that in St. Louis and the State of Missouri, the Bank is 
fulfilling that goal in a very large way. Since 2007, the Ex-Im 
Bank has supported 125 companies and 9,400 jobs in Missouri, 
helping finance $1.5 billion in goods and services for exports. 
9,400 jobs. Think about all of the house payments and car 
payments and monthly grocery bills and college tuition payments 
that those jobs actually support.
    These are real jobs and these are real families, and they 
are depending on this and they are depending on us. In fact, 
just last month the Bank supported 3 small businesses in my 
district by financing over $2 million in exports. This is a 
packaging company, a children's products company, and a 
plastics company.
    Now the question is whether those same companies would 
still be able to find assistance in the private market in July 
should the authorization for the Bank lapse? In addition, would 
such financing be able to adequately compete against foreign 
export credit agencies?
    Let me be clear, as certainly Mr. Murphy has and as my 
colleague, Mr. Stivers, has, that every developed country in 
the world has their own form of ex-im bank and they are 
constantly working against us in the United States of America 
to win business.
    Mr. Murphy, many people make the argument that if export 
financing is, in fact, a good deal, that the private sector is 
perfectly capable of taking on the risk of that loan. Is the 
private sector, at this time, able to step in and fill the void 
that the Bank's expiration would leave behind?
    Mr. Murphy. The reality is that the private sector does 
provide the vast majority of trade finance in this country, and 
that is a virtue, not a weakness of the Ex-Im Bank, but what we 
could not do is take care of those particular circumstances 
where Ex-Im or ECA support is required in order to participate 
in foreign markets in bids on infrastructure projects, in 
nuclear energy and in the head-to-head competition. Those are 
areas where we would see American companies really competing 
with one arm tied behind their back.
    Ms. Wagner. In my limited time that I have left, I want to 
talk about reforms of the Bank. I believe many of my colleagues 
on this committee, including the chairman, have some valid 
concerns and criticisms. Everybody is interested in reforms. So 
I personally have worked in the past year and a half on at 
least two different working groups, the Campbell group and the 
Fincher group here in Congress, to put together reform packages 
that ensure the Bank is not crowding out private market.
    Mr. Murphy, as you listened to the debate today, what 
recommendations would you and the Chamber propose to address 
criticisms of the Bank, and are there any reforms that you 
think the Bank absolutely must implement?
    Mr. Murphy. In my limited time, I have to say that we 
respect the work that has gone into the Fincher bill and also 
Ranking Member Waters' bill. There are quite a few good reforms 
on the table there.
    What we need most of all, though, is for Congress to take 
up these bills and debate them expeditiously, because we have 
just days left until American exporters will be at a unique 
competitive disadvantage.
    Ms. Wagner. Thank you, Mr. Murphy. And I thank all of our 
panelists.
    I thank you, as well, Mr. Chairman, and I yield back the 
rest of my time.
    Chairman Hensarling. The gentlelady's time has expired.
    The Chair now recognizes the gentleman from Kentucky, Mr. 
Barr.
    Mr. Barr. Thank you, Mr. Chairman.
    Thanks to all of our witnesses in this second panel. We 
really appreciate your testimony and your help in fleshing out 
some of these issues.
    Let me start with Mrs. Cox, because I read your written 
testimony, and like others, I share in extending our 
appreciation for your family's service to our country. And I 
wanted to share with you an example of Ex-Im financing that I 
would like for you to comment on as a member of a military 
family.
    This is from The Wall Street Journal: ``Ex-Im has given 
hundreds of millions of dollars in taxpayer-backed guarantees 
to the state-owned Russian bank, VEB. Ex-Im only recently 
suspended new deals after the Bank was targeted by American 
sanctions in the past year. VEB has a long and sordid history. 
Known until 2007 as the Bank for foreign economic affairs of 
the USSR, VEB maintains an operating agreement with a Russian 
arms exporter to promote exports of Russian military products 
and boost their competitive edge in the world market. This 
Russian arms exporter also handles more than 80 percent of 
Russian's weapon exports. In this capacity, it has become a 
cheap weapons supplier to Bashar al-Assad's regime in Syria and 
has provided advance missile systems to Iran, according to a 
reporting last year. VEB has said that its practices fully 
comply with the European Union and the United Nations 
sanctions. Americans probably assume that Washington wouldn't 
use taxpayer money to help a company that supports these 
regimes, yet the Bank's records indicate that VEB, this Russian 
bank, received a $497 million loan guarantee in 2012 and a 
further $703 million loan guarantee in 2014. American taxpayers 
still haven't received Thank You cards from President Assad and 
the mullahs in Tehran.''
    As the wife of a U.S. Air Force airman, can you please 
comment on that report from The Wall Street Journal?
    Ms. Cox. Thank you for bringing that up. I think anybody 
who looks into the support that we have given to Syria will 
find that it is very likely that we have supplied arms to 
Syrian rebels that may have gone to ISIS, and that is very 
disturbing to me.
    I would say that today during this hearing, we have found 
that Ex-Im Bank may be in need of some reforms. Usually when 
you have a government entity, things can get sticky.
    Mr. Barr. Mr. Ikenson, I was very interested in your 
testimony about the World Trade Organization litigation as a 
potential. Much discussion over this reauthorization has gone 
into the necessity of an export credit agency where 
participation with one is required in order to compete as a 
threshold matter for American companies in these nuclear power 
plant construction projects and other examples.
    Can you elaborate on the alternative to Ex-Im in terms of 
pursuing litigation in the WTO so that we do achieve a level 
playing field without Ex-Im?
    Mr. Ikenson. Yes. First of all, I think characterizing the 
existence of our Ex-Im Bank as leveling the playing field 
misses an important point, which is that it is unleveling the 
playing field for downstream industries, and I have been trying 
to point that out.
    Ex-Im has been around since 1934. It invented this stuff. 
The People's Republic of China didn't come around until 1949, 
so it is not like we have to do this because others are doing 
it. And what happened to our standing in the world?
    Mr. Barr. Let me follow up with a quick question. My time 
is short. The argument that the Bank's lending activities yield 
an annual return to the Treasury is another argument that we 
hear for proponents of reauthorization, but that argument, to 
me, suggests that there would be a considerable appetite in the 
private sector to enter the space exited or vacated by Ex-Im. 
If this is truly a profitable enterprise, it seems to me that a 
bank or a group of banks pooling and diversifying risk would 
enter that space.
    Mr. Ikenson. I think that is absolutely right. We need to 
see if that happens.
    Mr. Barr. Mr. Murphy, I know you have a contrary opinion to 
that, and I will give you an opportunity to respond to that.
    Mr. Murphy. Well, just to say that hope is not a strategy. 
There are dozens and dozens of companies that we have 
interviewed, we have their stories on our website, where they 
have found that their commercial banks are unwilling to accept 
their foreign receivables as collateral and they have had no 
alternative to Ex-Im.
    Mr. Barr. I understand that, and you have made a big point 
of the nuclear power projects as an example. Members of the 
Chamber include coal-fired power and coal companies, a big part 
of the U.S. Chamber's portfolio membership. They don't get the 
same treatment that the nuclear power industry does. Does that 
concern you?
    Mr. Murphy. In the past few years through an appropriations 
writer, there has been a nondiscriminatory approach.
    Mr. Barr. Oh, I know. And I voted for it and fought for 
those. And, Mr. Murphy, I fought for those and I believe in 
that. The problem is they still haven't provided any financing 
for coal-fired powered projects.
    Mr. Murphy. Good to include in reform.
    Mr. Barr. Thank you.
    Chairman Hensarling. The time of the gentleman has expired.
    I now recognize the gentleman from Pennsylvania, Mr. 
Rothfus.
    Mr. Rothfus. Thank you, Mr. Chairman.
    I thank the panel for being with us all day. It has been a 
long day for a very important discussion.
    I think a fair number of us who are in Congress today are 
here because of what we saw happening in the late 2000s with 
the financial crisis, with the bailouts. I remember as a 
private sector citizen back in the early 2000s, some people 
started to raise the alarm about Fannie and Freddie, and 
attempts at that time to reform Fannie and Freddie, and then we 
get to the financial crisis, and all of a sudden there is a 
$150 billion bailout after individuals involved with Fannie and 
Freddie themselves have made millions of dollars.
    I mentioned this in the panel earlier. I cited the work 
that Michael Grunwald had done in Politico Magazine in an 
article earlier this year. It was titled, ``The Real Bank of 
America.'' It described the more than $3 trillion in loans that 
the Federal Government, and therefore, the American taxpayer, 
the hardworking American taxpayer is on the hook for.
    We usually have the debt clock running, $18 trillion in 
debt, and obviously, this is a significant concern for many of 
us. And so we look at our programs and we think, is there any 
way to shield taxpayers from a potential loss. And Fannie and 
Freddie were going along great until they weren't. Mr. Ikenson, 
I just want to float with you the idea that I spoke with 
Chairman Hochberg about this morning. And one way that we could 
potentially create additional protections for American 
taxpayers is by requiring full collateralization or sovereign 
guarantees for all direct loans or loan guarantees issued by 
the Bank. We know that the Bank has said that they are 77 
percent collateralized right now. What about 100 percent 
collateralization? Would that not be a good idea?
    Mr. Ikenson. Why not just allow Ex-Im to expire, and just 
turn it over to the private sector? Why are we--
    Mr. Rothfus. Well, look at what happens in the private 
sector when a loan happens. And a private-sector bank is going 
to be looking for collateralization. And frankly, it has not 
been more than 100 percent. When you have a piece of property 
that you are going to buy and it is going to cost a million 
bucks and you go down and put--it is commercial property and 
they are going to put $200,000, the bank will make a loan for 
$800,000 but it is going to take a security interest in the 
entire property, even if it is worth more than $800,000, in 
case there is a default, and then they have to go and liquidate 
and try to recover.
    And here we have a situation where I am concerned that 
there is going to be an exposure for the taxpayers as we are 
seeing with NewSat today. And I am wondering if there might be 
a better way to have constructed that transaction so that the 
American taxpayers aren't out $100 million right now?
    Mr. Ikenson. Yes, I think that is problematic, and I point 
to the fact that 98.8 percent of U.S. exports don't require the 
Bank, so somehow they are able to manage without it. I think 
the necessity of this Bank has been overstated. Just because 
other governments have it, doesn't mean we can't differentiate 
our offerings on other terms. We can go to the WTO, the 
question was asked earlier. I didn't get a chance to respond to 
that.
    Mr. Rothfus. What about the entity that is doing the 
export? Should there be consideration as to whether or not that 
entity which is earning a profit from the transaction may think 
of guaranteeing the indebtedness of the purchaser?
    Mr. Ikenson. Sure, I think that is one way of doing it.
    Mr. Rothfus. Just a quick question for Mr. Murphy, we have 
had some discussion today about the NewSat transaction. Can you 
think of a way that transaction could have been structured so 
that the American taxpayers aren't looking at a $100 million 
loss?
    Mr. Murphy. I am not sufficiently familiar with the case, 
but if you look at the record of Ex-Im, under the accounting 
rules that were established by Congress and required by law, it 
has a $4 billion loan loss reserve and a very low default rate 
which has been mentioned many times here. Yes, there will be 
cases like this that go south, but the record is not one that 
is bad.
    Mr. Rothfus. Shouldn't there have been some 
collateralization? To me, it is just common business sense that 
a lender is going to be seeking a security in something to make 
sure that they are going to mitigate any kind of loss.
    Mr. Murphy. As I said, I am not familiar with this 
particular case.
    Mr. Rothfus. I thank the chairman, and I yield back.
    Chairman Hensarling. The gentleman yields back. Mrs. Cox, I 
have been informed that you have a plane to catch. I don't know 
if it is a Delta plane or not. Regardless, we will excuse you 
from the panel at this time. Thank you for your testimony. We 
hope you found it to be a worthwhile experience. The Chair now 
recognizes the gentleman from South Carolina, Mr. Mulvaney.
    Mr. Mulvaney. I thank the chairman. Mr. Murphy, I had a 
chance to look very briefly at your written testimony. You 
mentioned a South Carolina company that I am not familiar with. 
But last week I did have a chance to go visit another South 
Carolina company that uses the Ex-Im Bank facility, Sage 
Automotive in Marietta, South Carolina. They make textiles for 
automobile seats. And they take advantage of a small line of 
credit that is offered by the Export-Import Bank, and they 
asked me to try and figure out ways to preserve that function 
so that it is still available to them in the future. Their 
argument is, they are not part of the problem. It is very 
small. There is no corruption. It is not the type of thing that 
really warps markets. And I told them I would give that some 
thought.
    So I am hoping that you can do that here with me today as 
we try and figure out a way to find a compromise. The U.S. 
Chamber of Commerce would not support a reform that would limit 
the Export-Import Bank to only doing small business 
transactions, would it?
    Mr. Murphy. No, for the reasons that I mentioned earlier, 
it is important for others.
    Mr. Mulvaney. It is important for others. So you wouldn't 
support ones that would preserve the 90 percent of transactions 
because you need a private transaction. So would you support a 
reform that would have the Export-Import Bank do the 90 percent 
of small business transactions, plus participate where we are 
leveling the playing field, where other export credit 
facilities are involved in negotiations, and we are simply 
meeting the competition? Would the U.S. Chamber of Commerce 
support a reform that had the Export-Import Bank do just those 
two primary functions?
    Mr. Murphy. I think we would have to look at what are the 
other particular circumstances where it is uniquely necessary, 
so for instance, when it is a bidding requirement, and other 
instances that I have mentioned.
    Mr. Mulvaney. And my guess is, I could go through the whole 
list of adding a little bit here and adding a little bit here. 
But the bottom line is that the U.S. Chamber of Commerce 
supports a full and clean reauthorization of the Export-Import 
Bank without reform, doesn't it?
    Mr. Murphy. We express support for the Fincher bill, and 
think that there are a number of good reforms in there that are 
definitely worth considering.
    Mr. Mulvaney. But you told all of my local Chambers that 
you support full and clean reauthorization, right?
    Mr. Murphy. Our goal at present is to find a path forward. 
We know that this is a fierce debate and there are going to 
have to be compromises made all around.
    Mr. Mulvaney. Let me switch gears with you a little bit 
because you mentioned something, and we have sort of gotten, 
not sidetracked, but a lot of folks were focusing on the 
language of winners and losers. I don't want to use that 
language. I want to use your language from your opening 
testimony where you said you worried about putting American 
firms at a competitive disadvantage in the global marketplace. 
It was more or less your words.
    Do you believe that the Export-Import Bank puts Delta Air 
Lines at a competitive disadvantage in the global market when 
it facilitated the purchase of Boeing 777 airplanes by Air 
India?
    Mr. Murphy. I believe that there are many cases like that 
where the foreign airline has a very clear choice between 
buying Airbus and Boeing. In those cases, if Ex-Im were not 
available, I believe that there will be instances when that can 
determine that the sale goes abroad.
    Mr. Mulvaney. Thank you, Mr. Murphy. The airplane in 
question was the Boeing 777, and it was going to used by Delta 
to fly nonstop from the Continental United States to India. In 
fact, they were using it for that purpose. Air India sought it 
for the same purpose. At that time in the mid-2000s, the Boeing 
777 was the only airplane in the world capable of making that 
trip.
    So I would suggest to you, sir, that it was not a 
circumstance where we were competing with Airbus. We were 
simply trying to sell the Boeing airplane. So I ask you again, 
did that transaction put Delta Air Lines at a competitive 
disadvantage?
    Mr. Murphy. I believe that these--there are many 
substitutes in the different classes--
    Mr. Mulvaney. And I am simply telling you, Mr. Murphy, and 
you can go look it up if you want to, there were no substitutes 
in this instance. Only the 777 extended range, long-range plane 
could make the trip. So do you want to change your answer or 
are you going to stick by what you told me?
    Mr. Murphy. I think we can agree to disagree.
    Mr. Mulvaney. No, we can't. So what airplane could Airbus 
offer that would make the trip.
    Mr. Murphy. Airbus has a variety of different aircraft that 
it sells aggressively around the world.
    Mr. Mulvaney. They absolutely do. So tell me the one they 
had in 2004 that could make a trip nonstop from India to the 
United States. And I can assure you, Mr. Murphy, I know this 
one, I got you on this. There was no Airbus airplane that could 
make it, okay. I don't think there was until about 2012. So I 
ask you one last time, would you at least admit that in that 
one transaction, the Export-Import Bank put an American 
business at a competitive disadvantage?
    Mr. Murphy. I don't know further details about it enough to 
answer you.
    Mr. Mulvaney. Thank you, Mr. Murphy. I appreciate your 
time. Thank you, Mr. Chairman.
    Chairman Hensarling. The Chair now recognizes the gentleman 
from Arizona, Mr. Schweikert.
    Mr. Schweikert. Thank you, Mr. Chairman. It keeps getting 
more and more interesting. I want to run through a couple of 
the mechanics here because some of the sort of hyperbolic 
conversations that seem to have gone on in the last month, I 
want to sort of distill this down to what is really in debate 
moving here. Mr. Murphy, are you comfortable with the 
discussion that over 98 percent of U.S. exports either find 
loan enhancement surety credit through other avenues other than 
the Export-Import Bank?
    Mr. Murphy. Yes, that is--
    Mr. Schweikert. All right. Mr. Ikenson, tell me if I have 
my basic understanding of credit tree set up properly.
    I am going to sell widgets around the world, often before 
it is able to get in that container and start heading overseas, 
I need to--my loan facility, I may need an enhancement on it to 
make the bank happy or to be able to make the bank's regulators 
happy as it may ultimately be. I may need a surety device, 
surety bonding, which is technically not a type of bond. It is 
a type of laddering, or an actual credit facility from my 
buyers. Am I missing any particular categories?
    Mr. Ikenson. Not that I am aware of.
    Mr. Schweikert. Isn't it true that every single day around 
this world, and maybe in the hundreds of billions of dollars 
every week, that secured--or excuse me, that syndication of 
risk is done?
    Mr. Ikenson. Yes.
    Mr. Schweikert. And functionally, it is just like all of us 
here who have had a home mortgage. We may have had Fannie, 
Freddie, FHA or other types of mortgage insurance. 
Functionally, that is what those loan enhancements are doing, 
is guaranteeing part of that debt instrument.
    Mr. Ikenson. Yes.
    Mr. Schweikert. So right now we are basically engaged in 
this conversation for less than 2 percent of our exports, 
basically saying that there is something that is already 
working for over 98 percent of our trade, whether it be the 
credit, whether it be the surety, whether it be the 
enhancements.
    Mr. Ikenson. Right.
    Mr. Schweikert. So could you and I tomorrow design a way 
where the full faith and credit, which is what many of us 
object to, of my 318 million brothers and sisters in this 
country that their credit is on the line on this less than 2 
percent of the transactions, could you and I design a mechanism 
where you could still call it the Export-Import Bank? You could 
still have some of the same employees. The fact of the matter 
is the majority of their book is actually creating loan 
enhancement vehicles to make the money center bank or whoever 
the lender is putting up the money, could you see something 
like Export-Import Bank being rechartered so we remove the 
taxpayers and it basically becomes a risk syndicator out in the 
marketplace?
    Mr. Ikenson. I haven't given that a whole lot of thought. 
But perhaps that is the way to go, and--but it can have a 
private charter and just be a regular bank.
    Mr. Schweikert. Yes, well functionally, it is not 
technically--what is it, only about 20 percent of its book is 
actually true lending credit.
    Mr. Ikenson. Right.
    Mr. Schweikert. So in many ways, it is actually more of a 
lending enhancement vehicle than it really is as a bank, which 
there are hundreds of companies that do that. On occasion in 
these discussions you will hear one of our witnesses refer to 
it as the insurance brokerage industry. It is not homeowner's 
insurance. It is actually lending enhancement insurance. In 
many ways, we are engaging in an absurd debate here. The vast 
majority of the world's trade goes without my taxpayers, 
without your taxpayers, for my brothers and sisters who are 
members here being on the hook.
    Mr. Ikenson. I agree.
    Mr. Schweikert. If that is what ultimately people like me 
mostly object to, I can see a path where it may not give the 
Chamber ultimately what they want, which is the easiest path, 
but it is already out there. It exists every day. If you all 
were economics majors, or finance majors, you used to sit 
through a class of how Lloyd's of London was organized and what 
it basically was doing which was enhancing or guaranteeing 
ships and their cargo. It is time to start to realize the 
solution is already out there in the private marketplace. We 
actually just need to find a way to have what is already 
working in this instance. And with that I yield back, Mr. 
Chairman.
    Chairman Hensarling. The gentleman yields back. The Chair 
now recognizes the gentleman from Maine, Mr. Poliquin.
    Mr. Poliquin. Thank you, Mr. Chairman. I appreciate it. 
Thank you all for being here today, and helping us through this 
very important discussion. I have been listening to this 
discussion since, I don't know, about 10 this morning, and 
there are about 4 things that I am guessing that all of us here 
in this room, including you folks at the table, agree on. 
Number one is that Ex-Im does pick winners and losers. I don't 
see how we can debate that. You just listen to everything that 
we listened to today and a couple of examples right here with 
the nice gentleman from Delta.
    Second of all, there is a cost. There is absolutely a cost. 
There is a cost to the taxpayers, because the risk that they 
are on if something goes wrong. There is a cost to the workers 
who work at a company that don't have--have not been supported 
by Ex-Im. And I think the third thing, fourth thing that we all 
can probably agree on, is that there has been gross 
mismanagement at the Bank, gross mismanagement. When you talk 
about the fraud, the corruption, and you talk about how a 
Member of Congress is in jail down in Louisiana because he had 
$90,000 in his freezer as a result of a bribe related to the 
Bank. So there has been corruption. There has been gross 
mismanagement.
    Nobody knows what the result is going to be of this 
discussion. I know that in my experience with the private 
sector where I came from, and as a business owner currently, I 
would never do business with a bank like this. Now, I am not 
criticizing those who have chosen to do that. But there is 
reputational risk, and if you are dealing with the folks who 
have this sort of behavior, who knows what they are going to be 
doing.
    So my question really is to you, Mr. Murphy, and help me 
out with this: Is this normal behavior for export credit 
agencies around the world? Your members deal with the folks in 
every different space in our economy and throughout the world. 
Is this sort of behavior common among other ECAs around the 
world?
    Mr. Murphy. Your question is a bit like asking me if I 
stopped beating my wife yet. On behalf of the Chamber's members 
who do business around the world, I would just have to say that 
it is a tough global environment where every day they are going 
head to head with competitors from around the world. U.S. 
merchandise exports are just 8 percent of the world's total. 
Everything we make has competition and substitutes around the 
world. And they face--and they enjoy support from their ECAs.
    Mr. Poliquin. Okay, where I am going with this, if I may, 
sir, and all of you, if the Bank is not reauthorized that is 
one avenue. If the Bank is reauthorized, it seems like to me, 
from what I have heard today, there will be a lot of very badly 
needed reforms. I would hope that would be the case if it goes 
down that path. And I am hopeful that those of you who have 
experience in dealing with the Bank, and with the think tank 
over here with Cato and the folks who have other experience in 
this room, is that we won't be shy about reforms that deal with 
the Bank's structure, management structure, because that, of 
course, is what ultimately leads to unacceptable behavior.
    For example, earlier this morning, we learned that Mr. 
Hochberg effectively reports to nobody. He is appointed by the 
President. He has been a fund-raiser for the President. He 
chairs his own board. So the only way that management at Ex-Im 
is accountable, is if we don't reauthorize the Bank. So if we 
go down this path and Ex-Im is reauthorized, and I am not 
saying it will be, but if it is, I would hope that all the 
stakeholders in this room and outside of this room can bring it 
upon themselves to make sure that we have reforms in place that 
deal with the management structure that leads to their business 
practices such that we don't have to come to this point again 
where it is, you are on or you are not. It is all or nothing.
    And so I would hope that all of us can keep that in mind as 
we move forward. But I do appreciate all of the folks being 
here today. This has been a tough discussion. But I will tell 
you, I represent about 650,000 people in northern Maine. They 
play by the rules. They are as honest a group as you could ever 
find. And they see this, and they hear this behavior, and their 
hair just stands up on end. So I don't know where this is going 
to go. But if it goes down the path of reform, let's fix this 
thing. Thank you, Mr. Chairman. I yield back.
    Mr. Schweikert [presiding]. Thank you, and we are excited 
to watch your hair stand on end.
    Mr. Emmer?
    Mr. Emmer. Thank you, Mr. Chairman, and I thank the 
witnesses for being here today. I have limited time, Mr. Hirst, 
but I want to thank you, even though you have moved to the 
beautiful State of Georgia, we still have very good feelings 
about Delta, and especially Northwest Airlines in Minnesota. 
You talked a little bit about not being able to quantify 
specifically the jobs. My understanding is that Delta employs 
some 80,000 people. I had the number in Minnesota. I don't have 
it right in front of me now. Maybe you know it offhand. I am 
interested to know what this means to my State, and other 
airlines. You are just talking about Delta, but is Delta the 
only one that this impacts or have you talked to other 
airlines?
    Mr. Hirst. No, sir, it impacts the U.S. airlines that 
operate in international markets because where the Ex-Im Bank 
and the European export credit agencies provide subsidies to 
foreign airlines, U.S. airlines cannot receive comparable 
subsidies, and we don't want them. We are all affected by that. 
I say that in any situation where a foreign airline displaces a 
U.S. airline, or a foreign airline serves the market that a 
U.S. airline therefore can't enter, subsidize, the effect on 
jobs is about 1,000 on net. About 1,000. That is the number 
that can have an impact in Minneapolis which is a Delta hub--
    Mr. Emmer. Thank you. And Mr. Smith, obviously, mining is a 
big deal in Minnesota, and we have had some challenges. I am 
glad you are still there. I hope you are still there next year 
and the year after. I am concerned. How is this going to affect 
Minnesota mining, and specifically the jobs?
    Mr. Smith. With the 1,800 jobs we have in Minnesota, some 
of those are at risk due to the high levels of steel that are 
being imported into the United States. And just to correct 
something that I said earlier to Ms. Moore about our exports, 
we still export to Canada at a limited tonnage right across to 
Sault Ste. Marie, but going through Canada out to other markets 
into Europe, and into the Far East, we don't export anymore. So 
we have cut back our production tonnage at Northshore already 
this year, one our mines in Minnesota. And we have done that 
through attrition, but our customers are struggling with high 
levels of imports.
    Mr. Emmer. How many jobs has that cost us in Minnesota so 
far?
    Mr. Smith. It is right at probably 200.
    Mr. Emmer. Mr. Murphy, quickly, and then I am going to run 
out of time. I do have a question for Mr. Boyle if I can get 
there. But you are talking about how we would be the only 
country without an Export-Import Bank. And contrary to what you 
may be suspecting, I want to know why it is important to 
maintain it. One of the things that caught me when you were 
talking was we need this to offset what other countries are 
doing. And yet, I assume you are aware that only a third of the 
Ex-Im's portfolio, or Ex-Im's work actually goes to a 
countervail, or to a deal with competitive Export-Import Banks 
from foreign countries. You are aware of that?
    Mr. Murphy. Yes, but some of the remainder goes to the 
circumstances I have mentioned where it is a bid requirement, 
and so on. And I think Doug Holtz-Eakin, former head of the 
CBO, said it well when he said, ``I would like to live in a 
world where the Export-Import Bank is not necessary, but this 
is not that world.''
    Mr. Emmer. Okay, and Mr. Boyle, quickly, you talked about 
initially, when you are in this niche market where you take 
power plants from construction to operation, and that you went 
out initially looking for a line of credit, operating capital, 
and your commercial bankers wouldn't do it. They wouldn't take 
a security interest in your foreign accounts receivables, I 
think is what you had said.
    Mr. Boyle. Yes.
    Mr. Emmer. And my question is, did they ask for a security 
interest in your domestic accounts receivable, in domestic hard 
assets?
    Mr. Boyle. They have 100 percent of my personal and 
corporate assets.
    Mr. Emmer. And last question, just because I am going to 
run out, is, what is the collateral of the security interest 
that Ex-Im Bank asked you for?
    Mr. Boyle. Ex-Im Bank didn't ask me for it. Bank of America 
did.
    Mr. Emmer. No, but you got the credit line with Ex-Im.
    Mr. Boyle. No. Bank of America asked Ex-Im Bank for the 
backing of my credit. I asked Bank of America. I had never 
asked Ex-Im Bank for any credit.
    Mr. Emmer. What is the collateral that Ex-Im has?
    Mr. Boyle. The same as Bank of America, because Bank of 
America would be paid first, which is 100 percent of my 
personal and business assets.
    Mr. Emmer. Thank you. That is what I want to know. I 
appreciate it.
    Mr. Schweikert. The gentleman from Tennessee, Mr. Fincher.
    Mr. Fincher. Thank you, Mr. Chairman. Just a few comments. 
A few minutes ago, my colleague, Mr. Poliquin, was talking 
about Ex-Im Bank picking winners and losers, and Mr. Hochberg 
said this morning that he didn't feel that it did. But any time 
that American workers are picked over other countries, we are 
winning. So when we are making products and selling in all of 
the world, that is a positive step in the right direction. Mr. 
Hirst just listening, and I love Delta Air Lines too, just so 
you know, it is a great, great airline company. At Delta Air 
Lines, have you ever purchased Airbus airplanes using foreign 
Ex-Im financing?
    Mr. Hirst. No, sir.
    Mr. Fincher. Are you in favor of reauthorization of the Ex-
Im Bank with reforms?
    Mr. Hirst. Yes.
    Mr. Fincher. Okay. Mr. Murphy, explain to us what happens, 
for example, credit insurance, if we don't reauthorize Ex-Im 
Bank, the private sector insuring some of these deals, if it 
goes away, what happens? Who steps up?
    Mr. Murphy. I think many small businesses have already had 
the experience that commercial banks are unwilling to provide 
that without an Ex-Im backstop. So I think a lot of those small 
businesses would no longer be able to export.
    Mr. Fincher. It is a shame when we have the conversation, I 
have been watching the debt clock, 18-plus trillion dollars 
here of all of the things that we could be focusing on trying 
to fix the debt problem, but we are spending a lot of time and 
a lot of energy here focusing on something that no doubt, I 
will be the first to admit, we need to reform. We have the bill 
to reform it. But it is actually something that returns money 
to the Treasury every year. We are changing the accounting 
standards to GAAP accounting standards, so if someone has a 
problem with that. But also, I am troubled by some of my 
colleagues continuing to go down this path of, well, it is the 
bank of 10 big companies. The top 10 get all of the loans, 
blah, blah, blah. Well, it is no fault of Boeing, or 
Caterpillar, or John Deere, or other companies that build 
products that are very expensive.
    Boeing puts together airplanes that are built all over the 
country, and it just happens to cost a lot of money to sell 
these airplanes and to build these airplanes. So we are going 
to be now, a country of capitalism, in that you can be 
successful, but not too successful. We can be the country, and 
this is frustrating for me as a Republican, we can be the 
country and the land of opportunity and growth, but don't grow 
too much. Because if you do, then you are the enemy.
    We somehow have to get our heads around that this goes back 
to the American worker, and being competitive around the world. 
And there are 60 other countries. I get it. In a perfect world, 
it wouldn't be needed. But the world is not perfect, and we 
have to stay competitive. And if we don't reauthorize this, 
jobs are going to be lost, and so we are, again, we have been 
beating this horse all day, and it seems like forever. We have 
to get this done. We owe it to the American workers. Let's 
don't punish job creators all over the country for something 
that is no fault of theirs. And let's continue to be 
competitive. And with that, Mr. Chairman, I yield back.
    Chairman Hensarling. The gentleman yields back. The Chair 
now recognizes the gentlelady from Utah, Mrs. Love.
    Mrs. Love. Thank you so much, Mr. Chairman. Thank you all 
for being here today. I just wanted to point out a couple of 
things. I will just get right into it.
    Mr. Hochberg said in his statement today that Ex-Im Bank 
does not pick winners and losers; rather, it serves any 
eligible American business seeking competitive finance to 
export goods and services. That sentence alone suggests that 
you pick winners and losers when you are deciding who is 
eligible and who isn't eligible to receive that.
    Mr. Hirst, have you ever been eligible for Ex-Im financing?
    Mr. Hirst. No.
    Mrs. Love. Okay. We will just leave it at that. I am having 
a hard time believing this argument that this bank doesn't pick 
winners and losers. I just have a quick slide I wanted to show, 
just some pictures here. Those are employees of Delta who 
actually just finished building a park for students. The others 
volunteered to build homes, on their free time, by the way, 
their own vacation time. Other volunteers who are Delta 
employees, you can go through the pictures and you can get my 
gist there.
    We have been advocating for jobs. That is all I keep 
hearing about. Jobs here, jobs there. I want to know if their 
jobs are expendable? I want to know what about their jobs and 
the people that they serve and their families that they serve? 
One of the things that I love about my colleague on the other 
side of the aisle, Al Green, who talks about--he talked about 
justice for all. He talked about liberty and justice for all. 
He is incredibly passionate and I know that he loves this 
country. But where is the justice for some of these people who 
may have their jobs at risk?
    This is not about a vote. This is not about you and me. It 
is not even about the votes that we make here today. What makes 
this country exceptional is not the decision we are going to 
make whether we--whether we vote to reauthorize Ex-Im Bank. It 
is about allowing people the freedom to make decisions on their 
own, to be able to compete in a world and in a country where 
government is not picking winners and losers for them.
    I think that we would be doing a much better job in this 
body if we were spending our time here arguing--instead of 
arguing about how we are going to improve the Bank's exercise 
in picking winners and losers, that we could actually be 
spending our time talking about real justice in terms of how we 
reduce regulatory burdens, tax burdens on companies that 
prevent them from creating jobs. Why not fight for every single 
job by fighting for every single company by reducing the 
corporate tax rate that we have, by reducing burdens that we 
put on every single company? Why not save as many jobs as 
possible? This is what this body should be doing, not making 
decisions for other people and saying, hey, by the way, we are 
going to choose you, and not choose you. But we are going to 
say we are going to give as many people as many options as 
possible so that they have the best chance in providing for 
themselves and going back and helping their communities.
    That is what I came here to do. What are we doing? If we 
are in the business of providing every--of making sure that 
every company is able to sell their products here and across 
the--across this--the great seas, then we are grossly 
underperforming.
    Again, I want to thank you all for testifying here, for 
being here. But I want to be able to live in a world where my 
children can be able to compete equally and make choices and 
reap the benefits of those choices that they make. Thank you. I 
yield the remainder of my time.
    Chairman Hensarling. The gentlelady yields back. The Chair 
now recognizes the gentleman from Arkansas, Mr. Hill.
    Mr. Hill. Thank you, Mr. Chairman. Panel, thank you for 
your indulgence and your tenacity. I appreciate you staying 
through this process.
    Mr. Hirst, you commented on, be a lender of last resort as 
a reform idea. And I am curious how you would see that manifest 
itself? What would that mean to you? What does that mean?
    Mr. Hirst. Any applicant for bank financing, any foreign 
airline that would apply for bank financing would have to 
certify that it was unable, it had made an effort and was 
unable to obtain financing in the commercial markets for the 
aircraft that it wants support for.
    Mr. Hill. Thank you, and Mr. Murphy, you talked a lot about 
international tenders for projects and products that companies 
bid on on a global basis. And you said that frequently 
financing was a component of that tender, and I don't think you 
meant to say ECA-type financing as a component of the tender. 
Perhaps you did. So I want you to clarify that for me. Because 
why wouldn't it just simply be that we are going to sell large-
scale product X to a country or company and country Y, and that 
financing be provided, but are you implying that those tenders 
require only the ECA of the selling country?
    Mr. Murphy. That is exactly what I am saying. And it is a 
common practice in infrastructure projects around the world 
which are big business and huge opportunities for American 
exporters. That is one of the particular instances where it is 
required.
    Mr. Hill. Thanks for the clarification. Would you describe 
that as a non-tariff barrier to American trade then?
    Mr. Murphy. Absolutely.
    Mr. Hill. And in Trade Promotion Authority and when we 
think about TTIP, and TPP, should we be very cognizant of non-
trade barriers like that when we look at those agreements, non-
tariff barriers?
    Mr. Murphy. I think that the emphasis that a number of 
members of the committee have put on trying to find a path 
forward for international negotiations is something that we can 
all support. But I think one of the messages here today that we 
hear from around the world is that there is very little 
appetite from foreign governments to engage in that. They are 
all expanding in almost every instance their ECAs.
    Mr. Hill. Particularly the European--we have heard a lot 
about Europe, particularly today that didn't affect our friends 
in the construction business, which is global, but in the 
aviation business, it seems to be Europe is a prime part of the 
discussion. And they are the primary countries that are seeking 
an Atlantic TTIP treaty with the United States, right, so don't 
we have some clout or credibility there in putting this on the 
table as a non-tariff barrier to be eliminated?
    Mr. Murphy. It is certainly worth trying, but as has been 
pointed out, China has four of these banks. They are providing 
volumes of export finance that are 10 and 20 times between the 
four different policy banks that China has, 10 and 20 times 
what our little old Ex-Im Bank is providing, so it is an uphill 
struggle.
    Mr. Hill. Okay, thank you for that.
    Mr. Boyle, I have never had an opportunity to question a 
boiler technician of your standing. So it is a treat. Thank you 
for coming, and thanks for your passionate story you told. 
Following up on Mr. Emmer, I had some of the same questions 
which was, when I meet people, some people apply for Ex-Im 
because their credit is insufficient to do a transaction. 
Others, it is the buyer. There is some buyer-seller problem in 
a foreign country, or the lack of credit standing.
    So I take it in your discussion with Mr. Emmer, it was 
expanding or qualifying your credit on behalf of your primary 
bank. Do you think that was the nature of your receivables, and 
your inventory, and your balance sheet, or--
    Mr. Boyle. Yes and no, because my receivables are foreign-
based and unsecure. They are with foreign corporations, Korean 
construction companies, GE, foreign companies overseas, GE's 
companies overseas, and large construction companies around the 
world.
    Mr. Hill. I was a former commercial banker in my previous 
life, and we made loans to people who had foreign receivables, 
and we tended to take bank letters of credit from those 
countries, particularly if they were developed countries, or 
countries with a solid banking system. I wondered if you would 
explore that aspect of it and just get you to comment on that 
as well?
    Mr. Boyle. We haven't been able to make that become a 
reality. It is not available in the current marketplace that we 
can find. This discussion has been ongoing for some period of 
time, and we in small business across the United States that 
are currently working with the Ex-Im Bank, seek an answer to 
that question. And I think, hope as a strategy is what we are 
having a problem with at the moment, in that regard, is the 
answer isn't out there, and you want us to hope that it 
materializes overnight. If it materialized beforehand, we might 
have a discussion.
    But there isn't anything that we know of. We don't have the 
resources to scan the globe looking for this. I have spent a 
great deal of time doing this, so you are putting the cart 
before the horse.
    Mr. Hill. Thank you, Mr. Boyle. My time has expired and, 
again, I thank the panel. And thank you, Mr. Chairman.
    Chairman Hensarling. The time of the gentleman has expired. 
I understand the ranking member wishes to be recognized for a 
unanimous consent request.
    Ms. Waters. Thank you, Mr. Chairman. I seek recognition to 
insert into the record a document entitled, ``GOL Issues $41 
million Ex-Im Bank-Guaranteed Bond for Services Exported by 
Delta TechOps, MRO Division of Delta Air Lines.''
    Chairman Hensarling. Without objection, it is so ordered.
    There are no other Members in the queue on either side of 
the aisle, so this is good news for our panel. I wish to thank 
all of our witnesses for their testimony today.
    The Chair notes that some Members may have additional 
questions for today's panels, 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.
    This hearing is adjourned.
    [Whereupon, at 5:30 p.m., the hearing was adjourned.]

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