Speeches

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WRITTEN TESTIMONY OF
FRED P. HOCHBERG - PRESIDENT AND CHAIRMAN
EXPORT-IMPORT BANK OF THE UNITED STATES
BEFORE THE SENATE COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
"OVERSIGHT AND REAUTHORIZATION OF THE EXPORT-IMPORT BANK OF THE UNITED STATES"
JANUARY 28, 2014
Chairman Johnson, Ranking Member Crapo and distinguished members of the Banking Committee, thank you for inviting me to testify before you as the Committee considers the progress of the Export-Import Bank of the United States ("Ex-Im Bank" or "the Bank") has made in supporting U.S. jobs through exports since our last reauthorization.
Summary
Today, American exports are at an all-time high. The United States exported a record $194.9 billion in November, 2013. Never before has the U.S. exported more goods and services in a single month. Our trade gap is the lowest it has been since 2009, when U.S. exports totaled $1.9 trillion. In 2012, U.S. exports totaled a record $2.2 trillion. The "Made in America" brand has never been stronger.
I am proud of the job our 400+ employees do each and every day. Ex-Im Bank has supported nearly 1.2 million private sector U.S. jobs since 2009, including 205,000 jobs in FY 2013 alone. The Bank operates at no cost to the taxpayers, and in FY 2013, the Bank generated more than $1 billion for the U.S. taxpayers above and beyond the cost of all operations and loan loss reserves. This $1 billion goes toward deficit reduction. We do this while maintaining a default rate1 of 0.267.
Ex-Im Bank has at its core ensuring that small businesses - the foundation of our economy - are at the forefront of U.S. exports. We cannot grow our economy - or our exports for that matter - without fully supporting the small businesses of America. In 2013, the Bank financed a record 3,413 small businesses - nearly 90 percent of Ex-Im's transactions. In addition, Ex-Im financed more small businesses in the last five years than the prior eight years combined. The Bank also

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financed more minority and woman-owned businesses in the last five years than the prior sixteen years combined.
As the global economy continues to strengthen, exports are being financed not only by commercial banks but also by capital markets. This is an encouraging trend. In 2013, the total dollar amount of transactions financed by Ex-Im was significantly lower than in 2012, yet exports as a whole from the U.S. were up during that timeframe.
Purpose of Ex-Im Bank
Ex-Im Bank is the official export credit agency of the United States. The mission of the Bank is to enable U.S. companies - large and small - to turn export opportunities into sales that help maintain and create U.S. jobs which contribute to a stronger national economy. The Bank achieves its mission, when needed, by providing export financing through its loan, guarantee, and insurance programs in cases where the private sector is unable or unwilling to do so.
For example, we provide trade credit insurance to Miss Jenny's Pickles in North Carolina so they don't need to worry about foreign buyers not paying. We provide a working capital guarantee to Auburn Leather in Kentucky so they can build the inventory necessary to meet large foreign purchase orders. And, we provide direct loans to foreign buyers of GE locomotives so the sales and jobs will benefit workers in Pennsylvania rather than a foreign competitor.
Ex-Im Bank also provides support if necessary to level the playing field when financing is provided by foreign governments to their companies who compete against U.S. exporters. We assume commercial, country, and liquidity risks that are reasonable and responsible, but currently beyond the still-recovering appetite of private lenders. Ex-Im Bank does not compete with private sector lenders, but rather provides financing for transactions that would otherwise not take place because commercial lenders are either unable or unwilling to accept the political or commercial risk inherent in the deal.
Ex-Im Bank offers a variety of products to help U.S. businesses export around the world. Our working capital financing supports small business exporters to obtain loans which facilitate the exports of goods or services made by commercial lenders and backed by our guarantee. These loans provide small businesses the liquidity and confidence to accept new international contracts, grow export sales, and compete more effectively in the international marketplace. Export credit insurance allows U.S. businesses to increase their export sales by limiting their international risk, offering credit to international buyers, and enabling American businesses to access working capital funds.
Comprehensive Risk Management and Revenue for the Taxpayers
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Ex-Im Bank continues its prudent oversight and due diligence standards to protect taxpayers through its comprehensive risk management framework. It begins with effective project underwriting, including detailed documentation and financial structuring to ensure the Bank's rights are protected. It continues long after a transaction is approved and disbursed with pro-active monitoring efforts to ensure timely payment.
During all of FY 2013, the Ex-Im Bank paid, from the fees we collect, new gross claims of just $48.8 million on a total portfolio greater than $110 billion. The Bank recovered more money - $62.6 million - than it had in new claims for the fiscal year. The Bank is also appropriately reserved to cover expected loan losses. The Bank's reserve methodology has been reviewed, by GAO, our internal auditors, KPMG, and our external auditors Deloitte & Touche. As a result of provisions included in the Bank's charter during last year's re-authorization, Ex-Im Bank submits a quarterly default rate report to Congress. As of December 31, 2013, the Bank's default rate was 0.267 percent. At the same time, over the past five years Ex-Im Bank has generated more than $2 billion for U.S. taxpayers, above and beyond all administrative operating costs, claims and loan loss reserves we set aside. We operate at no cost to the taxpayers.
Moreover, we are committed to providing "Government at the Speed of Business," which means top-notch service and a relentless focus on our customers and a drive to innovate. In FY 2013, 89 percent of all transactions were completed within 30 days and 98 percent within 100 days. The time required to process long-term transactions dropped to an average of 88 days in FY 2013, down from an average of 163 days in FY 2009.
In 2013, the Bank named Mr. Charles J. Hall as our new Executive Vice President and Chief Risk Officer. Prudent risk-management is one of our foremost priorities. As chief risk officer, Mr. Hall reports directly to me and is responsible for ensuring that the Bank continues to be properly protected as it fulfills its mission of supporting jobs through exports.
Comprehensive risk management and continuous improvement is what we strive towards, and our default rate reflects that. The Bank has made many improvements over the past few years including:
Modernizing credit monitoring;
Creating a Special Assets unit to address emerging credit issues;
Expanding our pro-active monitoring efforts;
Improving our underwriting; and
Enhancing credit loss modeling with qualitative factors
We also have plans to implement additional risk management improvements identified over the past two years from our internal analysis of best practices, outside expert advice, audit recommendations, and from our Inspector General.
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Meeting Requirements of Reauthorization
Ex-Im Bank has met all of the reporting requirements set forth in our reauthorization bill. We produced several reports to this committee including:
Our Business Plan;
Our Small Business Report;
Our Content Review;
Our Report on Financing of Textiles; and
Our Quarterly Default Rate Reports
We have added a textile industry representative to our Advisory Committee from Frontier Spinning in Greensboro, NC, which I visited earlier this month. We have fully implemented all Iran sanctions provisions, as required under the most recent reauthorization. In c