Speeches

WRITTEN TESTIMONY OF
FRED P. HOCHBERG - PRESIDENT AND CHAIRMAN
EXPORT-IMPORT BANK OF THE UNITED STATES
BEFORE THE HOUSE FINANCIAL SERVICES COMMITTEE, SUBCOMMITTEE ON MONETARY POLICY AND TRADE AND THE HOUSE COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM, SUBCOMMITTEE ON HEALTH CARE, BENEFITS, AND ADMINISTRATIVE RULES

"Examining the Export-Import Bank's Mandates"

April 30, 2015

Chairman Huizenga, Chairman Jordan, Ranking Member Moore, Ranking Member Cartwright, and distinguished members of the Subcommittees, thank you for inviting me to testify before you today.

ABOUT EXIM BANK

The Export-Import Bank (Ex-Im Bank or the Bank) empowers businesses to create more American private sector jobs, while serving as a responsible steward of taxpayer dollars. In FY 2014, Ex-Im Bank supported 164,000 U.S. jobs through financing approximately $27.5 billion worth of exports. Ex-Im Bank is demand driven. Since 1934, the Bank's role has both expanded and contracted as a natural response to the needs and demands of the free market-as it was designed to do. Sixteen times, bipartisan majorities in Congress have reauthorized the Bank. In the course of reviewing and reauthorizing the Bank, Congress has also established several mandates requiring the Bank to support small business, environmentally beneficial exports, and exports to eligible markets in sub-Saharan Africa.

The Export-Import Bank Reauthorization Act of 2012 (P.L. 112-122), which was passed by Congress with overwhelming bipartisan support in both chambers - 330 Republicans and Democrats in the House and 78 in the Senate - continued these mandates and required some additional attention to small business and the textile industry. The Bank has complied with these mandates that Congress has placed upon us. The Bank is a self-sustaining agency that charges its customers interest and fees to fund the transactions. As a result, over the past two decades Ex-Im has sent just under $7 billion to the U.S. Treasury.

Ex-Im Bank fulfills its mission to support U.S. jobs in two ways. First, Ex-Im Bank fills the gaps when the private sector is unable or unwilling to provide financing for U.S. exports-a particularly important role for American small businesses, which often find it difficult to obtain export financing from their local bank even in the best economic times. U.S. businesses also have difficulty securing financing when selling to the developing markets, which accounted for 68 percent of Ex-Im Bank's authorizations in 2014. Second, Ex-Im Bank seeks to ensure a level playing field for U.S. exports in the hyper-competitive global marketplace by making available financing that encourages buyers to make decisions based on free market factors such as price and quality, rather than on foreign competitors' state-sponsored or cut-rate financing.

The goal of leveling the playing field is also supported by the Bank's Tied Aid Program, established by President Reagan in 1986. In establishing the program, President Reagan expressed support, saying it will "give the United States needed leverage for use in negotiations to eliminate predatory financing practices whereby countries mix official export financing with concessional foreign aid in an effort to undercut bids on major overseas projects." It is important to note that when we finance exports, it is most commonly in the form of insurance or loan guarantees, and that nearly 98 percent of the time Ex-Im Bank transactions involve commercial financial institutions. The Ex-Im Bank guarantee gives commercial banks comfort to offer their loans to foreign markets, leveraging the private sector to finance a transaction. Commercial banks' willingness to lend to foreign buyers of U.S. exports can form a critical part of the decision to buy from a U.S. business instead of a foreign competitor.

In the course of fulfilling its mission, the Bank properly focuses on achieving the mandates set forth by the U.S. Congress while simultaneously meeting its other Congressional mandate of reasonable assurance of repayment. Today's hearing focuses on three of those Congressional mandates - environmentally beneficial exports, sub-Saharan Africa, and small business.

FINANCING ENVIRONMENTALLY BENEFICIAL EXPORTS

Ex-Im Bank is committed to promoting U.S. exports and jobs that encourage the use of environmentally beneficial products and services. Since the 1980s, Congress has required the Bank to promote the export of environmentally beneficial exports through its Charter and later years through appropriations acts. Congress has also enacted a number of other provisions related to Ex-Im Bank's consideration of environmental factors.

In 1989, Congress directed that Ex-Im Bank should seek to provide at least 5 percent of its energy sector financing for renewable energy projects and undertake to promote renewable energy. Following that action, in 1992 a mandate was added to Section 11(b) of the Bank's Charter by Congress to require the Bank to "encourage the use of its programs to support the exports of goods and services that have beneficial effects on the environment or mitigate potential adverse environmental effects. Similarly, Section 10(b)(5) of the Bank's Charter specifies that its Tied Aid Program "may only be used to defend potential sales by United States companies to a project that is environmentally sound."

In recognition of this mandate, Ex-Im Bank established its Environmental Exports Program in 1994 to expand support for U.S. exports of environmentally beneficial goods and services through offering enhanced financing terms. In 2002, Congress added Section 2(b)(1)(k) to the Charter, which directs the Bank to promote exports related to renewable energy sources. Complementing its efforts under the Environmental Export Program, the Bank created a Renewable Energy Business Development Initiative in 2009. Congress also mandates that the Bank have representation of the environmental community on its Advisory Committee.

In addition to the general mandates in the Charter, since 2008, through appropriations bills Congress has given Ex-Im Bank the following goal: "That not less than 10 percent of the aggregate loan, guarantee, and insurance authority available to the Bank under this Act should be used for renewable energy technologies or energy efficiency technologies." On top of the Congressional mandates, the Bank also complies with international agreements and principles in the environmental area such as those of the Equator Principles and the Organization for Economic Cooperation and Development.

With respect to greenhouse gas emissions, Congress' Appropriations Committees also directed the Bank to post on its website any proposed use in fiscal year 2015 of "the aggregate loan, guarantee, and insurance authorities available to the Bank that would result in greenhouse gas emissions from the extraction or production of fossil fuels or the use of fossil fuels in electricity generation that exceeds the average of total emissions in the previous five fiscal years resulting from the use of such authorities, and the amount of the increase." Additionally, the appropriations legislation continued to suspend enforcement of the Bank's Supplemental Guidelines for High Carbon Intensity Projects through September 30, 2015. Ex-Im Bank continues to follow the requirements placed by Congress.

Ex-Im Bank, of course, operates in the context of the overall financial strength and production capacity of firms in the U.S. renewable energy industry. According to data from the U.S. International Trade Commission, the total exports of renewable energy technology (solar, wind, hydro, geothermal, and biomass) in 2014 were approximately $1.4 billion, of which the two leading sectors were $1.04 billion in wind turbines, towers, and blades, and $204 million in solar exports. Even if Ex-Im Bank had financed 100 percent of U.S. renewable exports, it would not have been able to meet the 10 percent mandate set forth by Congress.