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REAUTHORIZATION OF THE EXPORT-IMPORT BANK
WEDNESDAY, MAY 2, 2001
U.S. House of Representatives,
Subcommittee on International Monetary Policy and Trade,
Committee on Financial Services,
Washington, DC.
The subcommittee met, pursuant to call, at 2:10 p.m., in room 2128, Rayburn House Office Building, Hon. Doug Bereuter, [chairman of the subcommittee], presiding.
Present: Chairman Bereuter; Representatives Oxley, Ose, Green, Shays, Miller, Capito, Ferguson, Sanders, Waters, Frank, Watt, Sherman, C. Maloney of New York, Schakowsky, and Bentsen.
Mr. OXLEY. [Presiding.] The hearing will please come to order. Obviously, I am not Mr. Bereuter. Mr. Bereuter has been delayed in another committee, and the Vice Chairman is also delayed on the floor. So I am either in the right place at the wrong time or the wrong place at the right time. Whatever it may be, we didn't want to keep our distinguished panel waiting. To that end, the Chair would recognize himself for a brief opening statement.
I want to thank Mr. Bereuter for holding this hearing on the reauthorization of the Export-Import Bank. The Administration is expected to send up legislation renewing the Bank's charter beyond its current expiration date of September 30, 2001, soon. I support the reauthorization of Ex-Im Bank, and I look forward to working with the Administration, subcommittee Chairman Bereuter and others, and speedy committee consideration of reauthorization legislation.
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My support for the Ex-Im Bank stems from the fact that it has been an important tool for increasing trade and providing U.S. exporters access to markets that they would otherwise not be able to reach. With the backing of the full faith and credit of the United States, Ex-Im Bank has initiated thousands of transactions in foreign markets that commercial banks deem too risky to enter. The result is that U.S. businesses export more goods and develop new and stronger trading relationships abroad.
In my home State of Ohio, Ex-Im Bank has authorized transactions to over 420 businesses valued at more than $1.1 billion since 1994. In my district alone, in the Fourth Congressional District, Ex-Im Bank has worked with 10 different small businesses, enabling them to reach markets they would not normally be able to reach. Over $62 million in exports have been financed through Ex-Im Bank in my district over the past 6 years.
In a perfect marketplace, there would be no need for export credit agencies; however, the realities of today's international trading system demand that Ex-Im Bank operate aggressively to support the sale of U.S. products abroad. Every major actor in international trade utilizes an export credit agency similar to the Ex-Im Bank to support its trade initiatives. Without Ex-Im Bank, U.S. companies would be forced to compete against foreign firms who are receiving assistance from their export credit agencies.
In discussing exports, most people focus on large corporate transactions and tend to overlook the importance of small businesses in the international trade equation. In 1997, Congress mandated that Ex-Im Bank expand its outreach to small businesses and work to facilitate more transactions among these exporters. In fiscal year 2000, Ex-Im Bank approved 2,176 small business transactions, an increase of over 13 percent from the previous fiscal year. Further, financing and support of small businesses increased by nearly 10 percent in fiscal year 2000 to $2.3 billion.
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This improvement in small business export activities is an encouraging sign that Ex-Im Bank has been successful in helping small businesses access overseas markets. I commend them on this progress and hope that they continue to bring more small businesses into the international trade arena.
As we begin the review of Ex-Im Bank, I look forward to hearing how we can improve the Bank in order to ensure that it has the resources to compete in the modern international trade environment.
Mr. Chairman, I would like to thank you for your leadership in reviewing this important program. I yield back the balance of my time, and I also yield the chair to the distinguished Chairman of the subcommittee, Mr. Bereuter.
Chairman BEREUTER. [Presiding.] Well, thank you, Mr. Chairman. I couldn't have had a better person to fill in to start the subcommittee hearing.
I apologize for being late. We are holding a markup in International Relations, and there was an amendment which zeroed out the Asia Foundation I wanted to oppose.
But I am pleased today that we are beginning open session hearing to receive testimony on the reauthorization of the Export-Import Bank, Ex-Im Bank. The Ex-Im Bank was last reauthorized in 1997 for a 4-year term that will expire on September 30 of this year. As the subcommittee with jurisdiction over the Ex-Im Bank, this hearing is the first step in an important reauthorization process. So today we are hearing from representatives of the Export-Import Bank.
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I would remind my colleagues here on the subcommittee that on May 8 representatives of the private sector, including NGOs, will testify regarding the Export-Import Bank. We will have critics and we will have supporters at that time. I also want to mention to my colleagues that you probably have noticed, as I have, the recent decisions coming out of the annual meeting of the IMF and the World Bank here in the Nation's capital, and they have important implications for our responsibilities on the international financial institutions, those two in particular. A number of things they are proposing on Africa, for example, are a major departure from the existing practice, and I know Members of the subcommittee will welcome a hearing soon on that subject, and it is my intention to proceed with that.
Now, back to the Export-Import Bank. Because of Chairman Oxley's comments, I will abbreviate some of my remarks and provide all of them for the record. But I think it is important to reiterate what the Chairman has mentioned with respect to two mandates that were a part of the 1997 authorization act.
The first one from Congress was to expand the participation of small and rural businesses. We will be particularly interested in hearing from the Export-Import Bank witnesses before us today how well they have done, what problems they have run into in that respect. My understanding is that for fiscal year 2000, the Ex-Im Bank invested approximately 18 percent of its lending activity in small business. Now, that may not sound like a great deal, but it is an increase, and I believe the number of transactions involving small businesses was actually 86 percent, so a very large percentage of your activities, your transactions were focused in that area.
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Second, as a mandate, we asked for an expansion of the Export-Import Bank's financial commitments to Sub-Saharan Africa. In that 1997 language, we established an advisory committee to make recommendations to the Board of Directors on how the Export-Import Bank can facilitate greater support for trade with Africa. As a response to this mandate, the Export-Import Bank created an internal African task force to coordinate its activities in Africa. Since that 1997 mandate, my understanding is that the Export-Import Bank has increased their activities and the number of exports involving the Export-Import Bank has increased dramatically. But we started from a low base. In 1998, the Export-Import Bank invested $16 million of exports to Sub-Saharan Africa, in 1999 that increased to $589 million, and in 2000 it is expected to have reached $914 million. Did I say $589 thousand? I should have said $589 million. In particular, I am interested in seeing how the Ex-Im Bank can continue to increase its investment in Africa, and I am sure Members have that same interest in light of our mandate.
Third, any hearing on the Export-Import Bank this year must consider the fact that the Administration has proposed a 25 percent reduction in Ex-Im Bank funding for fiscal year 2002. It is important to note, I believe, that the Export-Import Bank's budget includes the following two components: program budget and administrative budget. The program budget includes the cost of loans, guarantees and insurance programs, administrative budget of course is self-explanatory, but my understanding is that many people think we have really shorted the kind of upgrading necessary for administrative capacity.
So we have some statistics on that, and we will look for some interesting information in those areas from our witnesses.
I do have significant concerns about the Administration's proposed cuts in the Export-Import Bank. I look forward to testimony today to explain the effects that those proposed cuts would have on the activities of the Bank.
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Lastly, I would also like to emphasize the subsidies offered by foreign governments which have export financing agencies, the developed countries which are major export competitors. We have statistics which I will enter for the record, but the United States in most ways you could calculate fares pretty badly in comparison with our competitors.
So we will now, after we hear from the Ranking Member of the Minority if he wishes, we will now introduce Mr. Hess, the Chief Financial Officer of the Bank. Mr. Hess has been with the Export-Import Bank since 1966. He has been the Chief Financial Officer since 1992. He comes highly recommended as a person who has great institutional knowledge of the Export-Import Bank.
Next, Mr. William W. Redway, the Export-Import Group Vice President of Small and New Business, will testify. Mr. Redway, a graduate of the University of Pennsylvania, is in charge of the Small Business Group outreach activities. Prior to that current position, he has been the Vice President of the Bank's Insurance Division and also served as New York Regional Manager of the Export-Import Bank.
Mr. SHERMAN. Mr. Speaker, I am interested in these introductions, but I just want to make sure I am given a chance to make an opening statement.
Chairman BEREUTER. Indeed, you will be.
Subsequently, Mr. Bert C. Ubamadu will testify. He is an attorney with the Bank, where he works on project, structured, and trade finance transactions throughout Africa. He is a member of the Bank's Africa Task Force. Prior to his position, he worked with Marriott International, where he served as their representative to the Corporate Council on Africa.
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There are three other people from the Ex-Im Bank at the table to supplement and to assist: Ms. Elaine Stangland, Deputy General Counsel; Mr. Jeffrey Miller, Group Vice President for Structured and Trade Finance; and Mr. James Cruse, Group Vice President of Policy. As you make your contributions, I would appreciate it if you would identify yourself for the hearing record beyond this introduction.
So we welcome the distinguished panel. Now I would like to see if there are other Members who would have a brief opening statement. I turn to Mr. Sherman from California first.
Mr. SHERMAN. Thank you, Mr. Chairman.
The first two opening statements lauded the Export-Import Bank, but we would be unmindful of the thoughts and concerns of many if we didn't hear some of the criticisms.
The Bank is attacked very loudly as a quintessential embodiment in the eyes of its critics of corporate welfare. The critics point out that while a large number of transactions involve small business, that small business as reasonably defined receives a tiny portion of the dollars disbursed. The President of the United States has sought to cut this bank by 25 percent, and this is a President who is the most pro-business President, I think, in our lifetimes.
Mr. Chairman, I have not been able to find a single business in my district, and I have worked very hard, in conjunction with bank staff, to try to find any business in my district who thought that the Bank was a significant benefit to them, and we couldn't find one.
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But that aside, I am not here just to support the narrow economic interests of my own district. This is a bank that is important and is viewed as important to the national economy, because it promotes American exports. I hope to work with this subcommittee to fine-tune some aspects of what the Bank does. But before we get there, we have to deal with what I think is the biggest economic issue facing not my district, but the entire country, and that is the energy crisis in the western States.
The charter of the Bank in its own rules says that it should do nothing to harm the United States economy. Yet, one concern arises, and that is that the number one beneficiary of the Bank's export subsidies through export financing go to the industry that makes electric turbines. It flabbergasts everyone in California to hear that in our hour of extreme need, American-built turbines are the subject of subsidies paid for by California tax dollars.
I won't take the time, unless someone asks me to, to disprove a couple of the, I think, rather silly attacks made against California. The argument that you can't site a plant in California or couldn't a few years ago, that is demonstrably false, and I will answer that if somebody is concerned, or somehow that California has mishandled the deregulation in some way that others saw as a problem, that we ignored anyone's warnings, there were no such warnings, and that somehow the crisis that has hit California is somehow just retribution for California's own governmental decisions.
Now, I know the Bank has distributed documents showing how its activities affect each of our districts. I believe the Chairman of the full committee used the figure $61 million. Let me assure everyone here that you can take whatever figure the Bank gives you for its impact on your district and multiply not by 100, not by 1,000, multiply that figure by 10,000, and that is the economic relationship that your district has with California.
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Chairman BEREUTER. Will the gentleman try to conclude his comments?
Mr. SHERMAN. I will conclude within 1 minute.
So these turbine manufacturers are the number one beneficiaries of these export subsidies. And during this period of crisis, a period that I think will not only hurt the economy of California, it will drag down the economy of the entire country and it is beyond economics, there will be deaths in California, both this summer and next summer as a result of this.
Before we go forward and reauthorize this bank to do business as usual, we must make sure that the turbine companies are not just doing business as usual, but in this extraordinary crisis they are willing to take extraordinary actions, because they receive and have received for decades extraordinary subsidies to deal with this crisis by providing California with the turbines that it needs.
Chairman BEREUTER. The time of the gentleman has expired.
Are there other Members who wish to make an opening statement?
The gentlewoman from New York.
Mrs. MALONEY. Thank you, Mr. Chairman. I join my colleagues in the effort to reauthorize the Export-Import Bank. I have a very long and thoughtful statement, and I will put it in the record because I would like to hear what everybody has got to say.
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Chairman BEREUTER. I thank the gentlewoman, and I am sure it is, and it will be in the record.
Now, I understand that you will share your testimony with approximately 15 minutes and then proceed to questions, so you may proceed as you wish. Your entire written statements, if you have them, will be made a part of the record, and I know that you provided some information already.
STATEMENT OF JAMES HESS, CHIEF FINANCIAL OFFICER, EXPORT-IMPORT BANK
Mr. HESS. Thank you, Mr. Chairman.
Chairman Bereuter, Members of the subcommittee, my name is Jim Hess. I am the Chief Financial Officer of the Bank. I am happy to testify today on behalf of the Bank's rechartering. Thank you for entering our full testimony into the record.
Chairman BEREUTER. Would you pull that mike just a little bit closer, sir?
Mr. HESS. Accompanying me are five of my colleagues who are prepared to answer your questions in their particular areas of expertise, and two of them to offer testimony.
Mr. Speaker, Export-Import Bank is a sunset agency. Its charter expires on September 30, 2001. The Administration is requesting a renewal of the charter until September 30, 2005, including a 4-year extension for our Sub-Saharan Africa Advisory Committee.
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The mandate of the Export-Import Bank is to sustain jobs here in the United States by helping to finance U.S. exports that would not take place without us. We only step in where we are needed; that is, where the markets are too risky for the private sector to assume the risk, or to meet the government-sponsored export finance provided by our competitors. Also, we are required by our charter to find a reasonable assurance of repayment for every transaction we approve. Since our last rechartering in 1997, those exports have totaled just——
Chairman BEREUTER. Mr. Hess, I am going to ask you to just put the mike a little lower. We are having a hard time picking it up for some reason. Thank you.
Mr. HESS. Those exports have totaled just over $60 billion.
We financed those exports by guaranteeing loans from commercial banks to foreign buyers, lending directly to foreign buyers, offering a variety of insurance policies which assure repayment, and guaranteeing working capital loans to small U.S. exporters.
I want to emphasize that these are not giveaways to corporate America. We get repaid. Our losses over the last 20 years are only about 2 percent of disbursements. This compares very favorably with commercial banks.
I would like to now turn to my colleague, Bill Redway, on my left, who will briefly describe our small business programs.
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STATEMENT OF WILLIAM REDWAY, GROUP VICE PRESIDENT OF SMALL AND NEW BUSINESS, EXPORT-IMPORT BANK
Mr. REDWAY. Thank you, Jim.
Chairman Bereuter and Members of the subcommittee, over 80 percent of our transactions directly benefit small businesses. These transactions consumed about 18 percent of our authorization expenditures, and this does not take into consideration the tens of thousands of small businesses that benefit indirectly from exports from large corporations. Small businesses account for most of the job growth in our country. We currently directly assist some 2,000 small businesses each year.
I would like to take this opportunity to review some of the major small business initiatives the Export-Import Bank has undertaken since we were last rechartered.
First, we have reorganized internally to centralize all of our small business efforts. In 1997, the Small and New Business Group was established to provide specific services for the small business community. This group includes the Insurance, Working Capital, and Business Development Divisions, along with the regional offices located in New York, Chicago, Miami, Houston, and Long Beach, California. In 1998, overseas selling was transferred to the Structured and Trade Finance Group. This move, which consolidated all domestic selling, allowed us to attack the small business market aggressively. Since then, the Small and New Business Group has endeavored to aggressively meet the exporting needs of the small business community.
Chairman BEREUTER. Mr. Redway, I am sorry. I need you to move that mike a little closer.
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Mr. REDWAY. To be specific, we have opened new regional offices in San Francisco, Orange County, California, and Washington, DC., and given all regional officers substantial new business goals. We have constructed a database of small exporters, which now numbers over 200,000 and have begun a direct mail campaign that has resulted in over 2,000 qualified small business leads for our regional offices. During this fiscal year, we have scheduled 60 nationwide exporter seminars, where we take Ex-Im Bank's story to the marketplace. We have also established an Emerging Market Subgroup to promote Ex-Im Bank products and services to small business in the minority, women-owned, and rural communities.
It is through our short-term insurance program that the majority of our small business transactions are enacted. Ex-Im Bank has adopted a detailed strategic approach in supporting and increasing its support for small business exporters and associated lenders. Central to this strategy are three key components: offering useful, high-quality products that are reasonably priced and will attract a greater number of small business exporters; providing prompt customer service by investing in technology to support a growing volume of small transactions; and, finally, through technology, being in a position to monitor and adapt risk-taking to the marketplace on a real-time basis. Insurance small business authorizations increased from $1.2 billion in 1999 to $1.5 billion in 2000, a 25 percent increase.
Another way of assisting small business is through our Working Capital Guarantee Program, which guarantees commercial bank loans to exporters so that they can tool up to meet export contracts. The program has grown from $387 million in fiscal year 1998 to $588 million in fiscal year 2000, an increase of about 52 percent, of which 88 percent are small business transactions.
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In addition to the hard work of our staff, this increase has been made possible by some program changes. The program has added additional delegated authority lenders and has increased the amount of delegated authority afforded to lenders many times in the last 5 years. Program documentation also has been simplified for ease of operation. New partners have been added to broaden the potential marketplace for this product. Asset-based lenders and community bank initiatives have resulted in additional usage of the program.
Finally, Ex-Im Bank has joined the Commercial Finance Association and dedicated a business development officer to increase our exposure to small business lenders.
Mr. Chairman, all of these efforts would be for naught without superior customer service in all of our programs. I am pleased to inform you that a study done by the University of Michigan, entitled the American Customer Satisfaction Index, shows that Ex-Im Bank's customer service rating is a 70, which is termed excellent and compares favorably to other U.S. Government agencies and U.S. commercial banks. This study covers all of Ex-im Bank's programs, large, medium, and small; and we are proud of these results.
Jim.
Mr. HESS. Thank you, Bill. Of course, we also deal with medium and large businesses. About 80 percent of our program budget supports exports by larger companies. But, a job in these companies is no less important than any other job. Also, exports from large corporations contain inputs from businesses, large and small, all over the United States.
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I would like now to introduce Bert Ubamadu, who is with our General Counsel's office, to briefly explain our program in Sub-Saharan Africa.
STATEMENT OF BERT UBAMADU, OFFICE OF THE GENERAL COUNSEL, EXPORT-IMPORT BANK; ACCOMPANIED BY JEFFREY MILLER, GROUP VICE PRESIDENT, STRUCTURED AND TRADE FINANCE
Mr. UBAMADU. Thank you, Jim.
Mr. Chairman and Members of the subcommittee, the most notable growth in Ex-Im Bank's regional programs has been in Sub-Saharan Africa, a market where previously both Export-Import Bank and U.S. exporters were largely inactive. As a result of Export-Import Bank's commitment to meet its 1997 congressional mandate to increase our programs to Sub-Saharan Africa, the Bank has seen nearly a 15-fold increase in supported exports to the region. Also to meet this mandate, the board of directors established both an internal Africa Task Force to direct the activities of the Bank pertaining to Africa, and also named the Sub-Saharan Africa Advisory Committee, as the Chairman pointed out earlier, to bring practitioners from the field, to offer advice to Export-Import Bank in its efforts.
The importance and commitment of the Bank to this market is also underscored by several bank delegations in fiscal year 2000, which included missions to Nigeria, Ghana, South Africa, Mozambique, Cameroon and Senegal.
As a result of these efforts, Export-Import Bank's support to Sub-Saharan Africa has grown substantially. Again, as the Chairman pointed out earlier, in 1998, the Bank authorized approximately $56 million to support U.S. exports to this region. In 1999, the Bank's authorizations increased to $589 million. I am happy to let you know that in 2000, the Bank's authorizations again increased to $914 million.
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In terms of volume, Export-Import Bank authorized 103 transactions in 1999 and 125 in 2000. This is a 25 percent increase. In 1998, the Bank was open for business in 21 countries and has been open in 32 countries now for the past 2 years. We will work hard with U.S. exporters and African buyers to continue this progress in the future.
Thank you.
Mr. HESS. Thank you, Bert.
Regarding our budget, the Administration has requested $633 million for our program budget for fiscal year 2002. This is the budget that serves as our loan loss reserve and is the money we use to actually do our transactions. The requested budget is approximately a 25 percent reduction from the current fiscal year level of $863 million. This means that we will have to manage very carefully in fiscal year 2002. The request for our administrative budget is $65 million, up from $62 million for this fiscal year. We will use this increase to further improve our technical infrastructure, including computers, and to reduce our processing time, especially on small business transactions.
Mr. Chairman, Export-Import Bank is a good deal for America and a bargain for taxpayers. For every dollar invested in our program budget, we support $15 to $20 of exports that would not go forward without us. This translates into good, high-paying jobs.
At this point, my colleagues and I will be happy to answer any questions you or the Members of the subcommittee may have.
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Chairman BEREUTER. Mr. Hess, thank you very much. We will turn directly to questions. I was going to yield to Chairman Oxley if he had been here, but we will go in the usual fashion in order of seniority of those Members here at the beginning of the hearing and then we will proceed to people as they appeared in order of appearance, moving from one side of the aisle to the other.
So therefore, first, I recognize Mr. Green under the 5-minute rule.
Mr. GREEN. I have no questions at this time, Mr. Chairman. Thank you.
Chairman BEREUTER. Mr. Sherman is not here, Mr. Bentsen is not here. Mrs. Maloney. Well, let's see. We then need to move to Mr. Shays. All right. He yields to you, Mrs. Maloney.
Mrs. MALONEY. Well, I yield to Mr. Shays, my good friend.
OK. The Bush Administration has put forth a budget that will reduce your institution's funding by 25 percent. What impact will this have on the amount of projects that the Bank can support in the coming year, as well as the U.S.'s ability to compete in industries that the Bank supports?
Mr. HESS. Congresswoman, the budget of $633 million that is requested by the Administration for the Bank is estimated to support about $11.5 billion of U.S. exports. This figure and all of our figures are estimates of demand. We do not program funds, as you probably know, but we respond to requests from U.S. exporters for their export sales. We have estimated that the figure of $633 million will be doable, but tight, for fiscal year 2002. If our demand estimates are under what the actual call on our resources happens to be in that year, the Bank will have to look at policy options that could be taken to stretch our resources while still keeping U.S. exporters competitive in their financing offers for their export sales efforts. We will not know if we have to do that until we see if demand actually materializes in 2002. It does promise to be tight. We are keeping a close eye on it, but we have every intention of keeping U.S. exporters competitive in our export efforts, as well as living within the $633 million that the Administration has requested.
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Mrs. MALONEY. I would like to go to questions that I raised with the Bank in 1999 about the Export-Import Bank's transaction for the benefit of Halliburton and ABBM Tyumen to develop Russian oil fields, controlled by Tyumen, a Russian oil company. At the time a number of constituents came to my office and there were editorials in The Washington Post and really front-page articles in several papers objecting to Tyumen's business practices, telling the American public that the company had gained control over a particular oil field by manipulating Russian policies and through other acts of crony capitalism. Eventually, the Administration temporarily halted the transaction using the so-called Chafee Amendment.
From the beginning, the Export-Import Bank defended Tyumen's business practices and, frankly, I am not concerned about debating the merits of the Tyumen business transaction. What I am concerned about is the general issue of whether the Export-Import Bank has the ability to take into consideration past fraudulent acts committed by companies it works with around the world when making a decision about a transaction.
I asked CRS to review this question in February of 2000. CRS responded that, and I quote: ''Congress has placed a number of specific requirements on the Export-Import Bank for it to consider in authorizing extensions of credit or guarantees to firms seeking such assistance. These requirements, however, do not specifically reference the disallowance of credit or credit guarantees based on acts of fraud or corruption on the part of the beneficiary unless such fraud occurred on the application for credit.''
My question is, would it be beneficial for Congress to specifically give the Bank authority to disallow a transaction based on fraud or corruption on the part of the beneficiary?
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ELAINE STANGLAND, DEPUTY GENERAL COUNSEL, EXPORT-IMPORT BANK
Ms. STANGLAND. This is Elaine Stangland. If I can try to respond to you, Congresswoman, I think it is important to know that the Bank does take into consideration——
Chairman BEREUTER. Will you pull that mike a little closer, please?
Ms. STANGLAND. I am sorry. The Bank does take into consideration issues of corruption, character, and good governance. We do that within the framework of finding creditworthiness in our transactions and on two levels. One is an indirect way in the ICRAS process, which helps us determine the fee levels and our risk rating for various countries. The ICRAS process is an interagency process that does take into account business climate, judicial system, and political climate in each country. But, probably more importantly, we are required to find a reasonable assurance of repayment on each transaction we support, and as every banker knows, character, past actions, and past performance does enter into the determination of whether a credit meets the reasonable assurance of repayment standard.
Earlier this year, we submitted a report to the Senate Committee on Appropriations that outlined the considerations of the Bank, and its procedures for dealing with issues of this nature within the context of creditworthiness. We do due diligence, we consult with our embassies abroad, we consult with other sister agencies, and we believe these characteristics play an important role in determining the creditworthiness of any transaction.
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Mrs. MALONEY. But you mentioned that creditworthiness was your goal if they will repay the loan. I mean, a lot of crooks have good credit, a lot of crooks are going to repay a loan.
My question is, given the Tyumen Oil, there was no question that they had a shady past. Some of the major periodicals in our country wrote about it, and it is well-known, and several American companies were suing them, as you know.
But my question is not just creditworthiness, are you going to pay it back, but shouldn't we look at what the business practices are? I mean when people take this example of Russia seeing us giving loans to Tyumen and they feel that they have manipulated the bankruptcy laws and manipulated politicians and manipulated this, that and the other, it doesn't instill confidence in the American form of government. I was just thinking that if a company has a history of fraud, corruption, fraudulent bankruptcy proceedings such as Tyumen had, shouldn't we possibly consider not giving them a loan, even though they are going to pay us back, just based on their method of operating?
Chairman BEREUTER. The time of the gentlewoman has expired, but if you wish to respond, you certainly may.
Ms. STANGLAND. I just want to remind the Congresswoman that we were aware of the various allegations that were made against Tyumen.
Mrs. MALONEY. I know I had several conversations with your offices.
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Ms. STANGLAND. We investigated this by absolutely all means available to us and did extensive due diligence. However, we did not find any credible evidence of misconduct.
There are provisions in our charter which allow the President, and he has delegated that authority to the Secretary of State, to consider non-commercial and non-financial factors in determining credit. This happened in Tyumen. A final decision on the case was postponed until the Chafee Amendment was removed. So there is a mechanism that Congress has put into our charter that allows for the consideration of factors other than commercial and financial when determining whether Ex-Im Bank can support a transaction.
Actually, right now the company that brought most of these allegations and Tyumen are strategic partners.
Mrs. MALONEY. OK. Thank you.
Chairman BEREUTER. The gentlewoman may pursue that again later if she wishes.
The gentleman from Connecticut, Mr. Shays, is recognized under the 5-minute rule.
Mr. SHAYS. Thank you, Mr. Chairman.
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Mr. Hess, Export-Import Bank is basically supposed to be the lender of last resort, correct?
Mr. HESS. That is correct, sir.
Mr. SHAYS. And what I am trying to determine is how you determine that you are, in fact, the lender of last resort. I happen to think if in the end we wouldn't have these sales without the Export-Import Bank, then thank God we have the Export-Import Bank. But how do you know we would or would not have these sales without your involvement?
Mr. HESS. Well, we look at this very carefully. In certain transactions, the U.S. exporter is facing competition from a foreign exporter who is supported by below interest rate financing from their export credit agency. In those cases, we are directly meeting the foreign competition and clearly we are needed to do that.
There are other instances where the U.S. exporter is selling into a situation that the commercial sector is unwilling or unable to go, simply because it is too risky or because they have found it——
Mr. SHAYS. Let me just ask you, do they attempt to get financing in the marketplace before they come to you?
Mr. HESS. They try to get financing in the marketplace before they come to us; and we look at the transaction when it is presented to us to make sure that we are necessary before we authorize the transaction, yes, sir.
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Mr. SHAYS. Some of these companies are quite large and some are actually in my district and I am grateful they have the business. But when you look at a company like General Electric, what tells you that they do not have the ability to get financing, the project itself? Certainly their financial capability is quite sound. So what do you do, you isolate each project, and it is not important—it has no impact that it is a large company like GE? Walk me through something like a GE loan.
Mr. HESS. We look at all of the cases that come in, whether they are from large companies or small companies, and we look to see if we are needed. We have those two situations, which I just explained, where we find that we are necessary to make the transaction go forward. We try to get as much private sector participation in the transaction as we can. You have to remember that we do not do the entire 100 percent of the financing. We require a 15 percent cash payment, which is frequently financed, and it is done at the risk of another party, either the exporter or a commercial lender.
So we are only financing 85 percent of the transactions, and it is very frequently a strain on resources from the private sector or the U.S. exporter to put together the other 15 percent.
Mr. SHAYS. When we appropriated the $927 million in this year's budget and $62 million of it was administrative expense, does the balance of the $62 million ultimately come back to us? In other words, if that is a loan extended, they pay the cost of money? I mean I am not quite sure that money doesn't disappear. The money that we appropriated ultimately just makes your fund larger?
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Mr. HESS. That is correct. The money that is appropriated beyond our administrative expenses is, in effect, a loan loss reserve. We, as a technical matter, put the money into what is called a financing account at the U.S. Treasury where it is available to pay losses, if necessary, for those credits.
Mr. SHAYS. And then how much of this $927 million minus the $62 million, how much of it ends up just disappearing in terms of loans that are not paid and so on? What is our ratio of our loan to loss?
Mr. HESS. Over time, the ratio of our losses to disbursements is about 2 percent. Credit reform itself has only been in place since 1992, and our medium and long-term programs generally have repayment terms that are 5 years to 10 years. So, we have not yet closed out any of the year cohorts for the medium- and long-term business under credit reform. Therefore, I can't give you a definitive answer for any of those years.
However, credit reform provides for that type of analysis to be done, and the information will be available.
Mr. SHAYS. The basic cost to the Government is just the fact that we are subsidizing very low-interest loans?
Mr. HESS. We are basically charging a risk premium for the risk that is in the credit, and we are charging an interest rate that is approximately 1 percent or so above the U.S. Treasury rate.
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Mr. SHAYS. You are only having a 2 percent loss? The risk isn't as great as I made an assumption. I mean that is a pretty low loss.
Mr. HESS. That is a very low and a very good loss record. This is a different methodology than the credit reform process uses to assess losses. That methodology will change over time as the few losses under credit reform actually become measured, so there is a difference in methodology there which is a slight dislink between the two losses.
Mr. SHAYS. Thank you.
Thank you, Mr. Chairman.
Chairman BEREUTER. I appreciate you bringing that out. We have a committee amendment in the nature of a substitute pending. We will hear from one more Member at this point and then resume when we return.
The gentleman from North Carolina, Mr. Watt, is recognized.
Mr. WATT. Thank you, Mr. Chairman. I will try to be expeditious. I have a couple of questions, though.
Representatives of the Bank visited me recently and in the course of that conversation advised me that you all basically have never lost any money for the U.S. Government, that you make money for the U.S. Government.
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Mr. HESS. Well, Congressman, as I said earlier, we have lost about 2 percent of our total disbursements. Our financial statements of the last 2 years——
Mr. WATT. The question I am trying to get to is does that include the annual appropriation? Does your premium and the returns you get on interest cover your operating cost?
Mr. HESS. It does not totally cover the estimate, the current estimate of what may be the losses under our credits. We charge the minimum fee that is allowed under the OECD agreement so that we can keep our exporters fully competitive with the foreign packages that are offered by ECAs. But, the fees in higher risk markets are not sufficient to cover what the Office of Management and Budget considers to be the risk in those markets. So in order to cover the risk, we need the appropriation.
However, those are estimates, and over time we may find that those estimates are on the high side in terms of losses. If so, then that money will go back to the U.S. Treasury.
Mr. WATT. I guess the question I am asking is, up to this point in the history of operation of the Bank, have you covered both the risks and losses that result from that risk and your operating cost, or have you not?
Mr. HESS. Over the history of the Bank up until now, Congressman, we have not fully covered those losses.
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Mr. WATT. How much of a shortfall per year approximately would there be historically, I mean?
Mr. HESS. Well, for example, recently, by definition, the shortfall that we are talking about for fiscal year 2002 would be $633 million for an appropriation for the credit risk; and it would be $65 million for administrative expenses. So it would be about $698 million.
Mr. WATT. Well——
Mr. HESS. Like I said, those are estimates.
Mr. WATT. Maybe I am asking the wrong question. You are looking prospectively at risk, I am looking retrospectively at losses. You are not saying that the $600 some million is needed to cover past losses; you are saying that it is needed to cover OMB's estimate of what future risk of losses; is that what you are saying?
Mr. HESS. That is exactly what I am saying.
Mr. WATT. OK. The question I am asking is not that question. I am asking a retrospective question. How have you covered the actual losses in the past by the premiums that you have charged or user fees that you have charged?
Mr. HESS. We have not fully covered actual losses from the Bank's inception in 1934.
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Mr. WATT. OK. I asked that question. Now, the question is, how much of a shortfall has there been historically?
Mr. HESS. Well, I can provide the figure for the record, but because we have been recapitalized since credit reform began, the figure is in the neighborhood of about $8 billion.
Mr. WATT. $8 billion ever since 1994?
Mr. HESS. No, no, since 1934.
Mr. WATT. 1934, I am sorry, OK.
Mr. HESS. But this again is a very small percentage of the total activity of the Bank. We have supported over $400 billion of exports in that period of time and our losses have been minimal, less than 2 percent of our disbursements.
Mr. WATT. You all gave me a list of 28 businesses in my Congressional District who have benefited from the Export-Import Bank, six of which were banks. Can you give me an example of what you do for a bank?
Mr. REDWAY. Yes.
Mr. WATT. They are not exporting anything, I take it. They are not exporting money.
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Mr. REDWAY. Congressman, no, they are not. Speaking from a small business standpoint, the banks will take out policies themselves for some of your constituents in your area and do the project or do the transaction in their name rather than the exporter's name. They also may take an assignment of a policy so that they would advance against an insurance policy that we issued for one of your constituents and help them that way, or you could do a working capital guarantee where they would be advancing funds against our working capital guarantee to provide funds to produce the export order.
Mr. WATT. Mr. Chairman, I think I am out of time, but I would just say that I did write to all of the 28 companies in my Congressional District and asked them to tell me what experience they have had with the Bank, and that letter went out on April 4, and I have since gotten three responses which I would like to submit for the record. I ask unanimous consent to submit these for the record.
Chairman BEREUTER. Without objection, that will certainly be a part of the record.
We need to proceed now.
Ms. Waters, I don't know if you can come back or not, but you can take 2 minutes now if you choose.
Ms. WATERS. Let's go vote.
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Chairman BEREUTER. We will go vote. The hearing will stand in recess. We have one vote. We will be gone for 15 minutes. If a second vote comes shortly thereafter, it will be a little bit longer.
The hearing is in recess.
[Recess.]
Chairman BEREUTER. The hearing will come to order. I regret we had such a long intervention in our hearing. We had three votes awkwardly spaced to complete the votes on the floor. It is part of democracy. Thanks for your patience to the witnesses and to all the people interested in the hearing today.
I will begin the questions until we have other Members return.
Mr. Hess, I wonder if I might ask you the questions. Of course you redirect it as you wish or supplement. One of the concerns that I have heard expressed by the Export-Import Bank's funding and its operations relates to the simple technology gap within the agency, which means that you are, I am told, not able to respond as quickly to potential American businesses, particularly small businesses who do not have the capabilities. We are talking about information technology, computers, and so on. This is the word I have received from a variety of sources, and I wonder if you would comment on the state of affairs when it comes to processing information and being able to respond.
Mr. HESS. Mr. Chairman, this is a problem that we have been working on quite diligently. We have recently put in a couple of processes that use the internet and computers to reach out to the exporting community and the banking community. We also have our claims filing system now working through the internet. We have a system whereby banks can send to us requests for cover on disbursements through the internet.
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So we are beginning to move in that direction. It is true that we need to do a lot more. The increase that we are requesting in our fiscal year 2002 budget will be earmarked virtually entirely for improvements in our automated information systems and in outreach efforts to use the internet, to use computers, to streamline our insurance program and our small business programs to make them more user-friendly and more quickly responsive to the community. This is a valid concern of the exporting community as well as ours, and we are actively trying to address it.
Chairman BEREUTER. Thank you. To the extent that you had a problem or still may have a problem on being responsive because of obsolescence, does that have a greater negative impact upon the small businesses?
Mr. REDWAY. Mr. Chairman, I would say that the small business programs would benefit the most from an increase in technology. If we could basically automate some of our credit decisionmaking, which can be done, and is being done in the private sector, it would speed up turnaround time and would free staff for the more difficult cases. So yes, we could very much stand for an increase in our technological capabilities.
Chairman BEREUTER. Could you provide us with a description of the problem and what you hope to do to solve that problem during the upcoming fiscal year based upon the resources that you have proposed for the agency in the Administration's budget?
Mr. HESS. Mr. Chairman, we would be happy to do that for the record, yes, sir.
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Chairman BEREUTER. And then would you go further and suggest, if you had more resources, how you would devote the first additional resources beyond that?
Mr. HESS. We will do that, sir.
Chairman BEREUTER. Thank you.
Now, one of the interesting things to this committee, I am sure, and particularly this subcommittee is, to compare the resources that the Export-Import Bank has as compared to agencies of competitor export countries, the developed countries like Japan, the Netherlands, Canada, Germany, France, and so on, which seem to have substantially more resources in a direct sense than does the Export-Import Bank of the United States.
Is the OECD a source of objective information about the comparative resources the agencies have, or is there another source that you would suggest to us?
Mr. HESS. I will let Mr. Cruse address that.
JAMES CRUSE, GROUP VICE PRESIDENT, POLICY, EXPORT-IMPORT BANK
Mr. CRUSE. Yes, Mr. Chairman. The OECD is a very good source of information on activity of export credit agencies. But, it is not an expert on all export promotion activity that the Commerce Department types or others do.
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There have been a variety of studies that have dealt with that information, which we will be glad to provide to you.
Chairman BEREUTER. Who would be the source of some of those studies, looking at the resources that are available? For example, in the various categories, the two to three major categories of the Export-Import Bank, what your competitors are able to put forth in the way of resources? Where do we go for objective information?
Mr. CRUSE. On export credit activity, we could generate an extensive detail of activity there. For activities from the Commerce Department, the Track Promotion Coordinating Committee—TPCC—put together a study on this a couple of years ago in one of the reports that they had done. So we could get that too. But, if it is just export credit activity, we have ample and detailed information on that.
Did you want any information on administrative budgets?
Chairman BEREUTER. That would be helpful too.
Mr. CRUSE. We could take care of that.
Chairman BEREUTER. Because we hear that in some ways we are not able to respond because of the physical and the information technology resource that you have at your disposal.
Mr. CRUSE. OK. We will get you both, activity and administrative resources.
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Chairman BEREUTER. Thank you. I will ask one more question to open it up and then let Ms. Waters have her 5 minutes and we will go back for a second round for other Members as the case demands.
I am going to move to Africa where we have had this mandate in place with respect to the 1997 authorization legislation. Are there any additional statutory changes needed to facilitate the Export-Import Bank's supported trade with U.S. supported trade with Sub-Saharan Africa, and has there been any internal or external examination of our effectiveness in providing additional resources to U.S. exporters whose markets are in Africa or who hope to exploit markets in Africa?
Mr. UBAMADU. Mr. Chairman, with regard to the first part of your question, any additional legislation needed, and I would have to say that based on the experience that we have had, the answer would be no at this point. Congress has already provided for the Sub-Saharan Africa Advisory Committee, as you well know, which is a group of private sector advisors that are experts in Africa, who meet with the Bank three times a year to give us advice on how to increase our programs to this region. Beyond these meetings, Ex-Im Bank is always talking to them on ways to increase our support to the region. So our answer would be no additional legislation is needed at this time.
With regard to the second part of your question, we are constantly traveling to the region. For example, I just returned in December with a four-member team where we did a bank sector study in Nigeria to see what the needs of the borrowers are in that community, and we are then able to disperse information out to U.S. exporters when we meet with them. But, I don't believe we have done a comprehensive study to see what our effectiveness is, but I think you can certainly see by the numbers—where we started with $58 million in 1998 and we are now up to $914 million—that our efforts are working. We certainly hope to see an increase next year.
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Chairman BEREUTER. Is there anything you could say, in short, about the number of U.S. firms coming to you who are asking for your assistance on Africa-related trade as compared to U.S. companies who have interests they want to exploit in other continents? Are we meeting a higher percentage or lower percentage of those businesses wanting to have your assistance for Africa trade?
JEFFREY MILLER, GROUP VICE PRESIDENT, STRUCTURED AND TRADE FINANCE, EXPORT-IMPORT BANK
Mr. MILLER. Mr. Chairman, Jeffrey Miller. We don't have statistics that compare the level of interest by continent. But the interest in Sub-Saharan Africa has certainly increased due to the efforts of the Sub-Saharan Africa Advisory Committee.
Chairman BEREUTER. The gentlewoman from California is recognized.
Ms. WATERS. Thank you very much.
Mr. Chairman, you started down the road that I would like to go down in relationship to Sub-Saharan Africa. I was a little bit distracted here. I heard the response relative to whether or not we needed additional legislation or they needed additional authority of any kind. But what I don't have a sense of is the level of involvement we have in Sub-Saharan Africa.
Could you describe to me since the mandate, generally; basically what have we done?
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Mr. UBAMADU. Congresswoman, are you speaking in general or for a specific area? I can certainly tell you in general what we are doing with regard to Africa is both on the continent and as well as here in the U.S. We work very closely with U.S. exporters and U.S. banks to inform them about the various programs that we have for Africa. With regard to the banks, we are trying to encourage more U.S. banks to get involved in working with Export-Import Bank where we can provide guarantees for loans that they make to this region.
Ms. WATERS. Could you describe to me in a dollar amount how much you have been able to do? How many loans have you made, or loan guarantees?
Mr. UBAMADU. Last year we did 125 transaction loans in Africa compared to 123 the year before.
Ms. WATERS. All of Africa or Sub-Saharan Africa?
Mr. UBAMADU. In Sub-Saharan Africa.
Ms. WATERS. Did you say 125 loans?
Mr. UBAMADU. I can certainly give you the breakdown. There are a number of different programs that we have. We have what we call working capital guarantee, where we provide a guarantee to a bank, a U.S. bank, that has provided a loan to a U.S. company that would export the product. Just to let you know, of that 125, 11 transactions were done under the working capital guarantee program. Under loans and guarantees, we had 32 transactions, and for insurance, we had 82 transactions. This is all in calendar year 2000.
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Ms. WATERS. Do you consider that you have done a good job? Are you happy with what you have been able to do?
Mr. UBAMADU. Congresswoman, if I may, I came to this bank about 2 years ago specifically for the goal of trying to do work in Africa, and I can certainly tell you that I have worked in a number of other institutions that do similar things that have also attempted to do work in Africa. But the answer to that is absolutely yes. I think more absolutely has to be done, but Export-Import Bank has a specific mandate and part of that is we have to show reasonable assurance of repayment for a lot of the transactions that we do. However, we are working as hard as we can within that mandate to increase U.S. exports to Africa. We are certainly making strong progress, but there is always more that can be done, and we are trying to do that.
Ms. WATERS. Where are we most successful? What country do we make the most loans to?
Mr. UBAMADU. Ghana probably is our most successful.
Ms. WATERS. Non-African countries. I want to just get some comparisons so I can try and understand this amount as compared to what? Where do we do the most loans?
Mr. MILLER. Congresswoman, Mexico is our largest market.
Ms. WATERS. And could you give me a dollar amount, total amount of authorization?
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Mr. MILLER. Our authorization amounts in Mexico were $1.4 billion in fiscal year 2000.
Ms. WATERS. And the amount for Sub-Saharan Africa, all of Africa, I guess, is how much?
Mr. UBAMADU. $914 million.
Ms. WATERS. What are your plans to increase it?
Mr. UBAMADU. Congresswoman, we have undertaken a number of initiatives to increase our activity. First, we have staff that is constantly traveling to Africa, and we have what we call regional training seminars in various regions of the continent. For example, we have one scheduled this month in South Africa, which will basically capture all of the SADC, Southern African countries, where we are trying to work with them to explain our programs. At the same time, we also encourage U.S. exporters to attend these training seminars.
We also take along with us U.S. financial institutions as a way of letting them see the market, meet the potential buyers and see the business that is in these countries. We are doing this all over the continent. Last year, I was able to participate in two of these training seminars. I mentioned earlier that we think this is one of the key aspects of working in this region because there are a lot of U.S. banks that are looking into this region. We are also trying to encourage African banks to get involved in our programs. This is one of the reasons why we were in Nigeria back in December, where we spent 2 weeks, and had an opportunity to meet with 16 banks to talk to them about the local economy, and to take a look at their financial position. So we are going to continue these endeavors.
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In the U.S., we are also trying to encourage meetings with U.S. exporters, and U.S. banks to again encourage them to look into this region.
Ms. WATERS. Mr. Chairman, I know my time is up, but I would like to set up a meeting with the Bank to talk about a combination of Sub-Saharan Africa and small businesses in our country and how we can get more of them involved. Thank you.
Chairman BEREUTER. Would you like to respond to the Congresswoman's request?
Mr. REDWAY. Yes. We would be delighted to have such a meeting.
Chairman BEREUTER. Thank you. I think it should be productive for all of us.
The gentleman from New Jersey, Mr. Ferguson, is recognized for 5 minutes.
Mr. FERGUSON. Thank you, Mr. Chairman.
I thank you, Mr. Hess, and the panel for your patience with our sometimes unpredictable schedule here. I certainly appreciate your testimony and your willingness to stay and to answer some questions, and I appreciate the chance, Mr. Chairman, to follow up on a couple of things.
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I represent the Seventh District in New Jersey and particularly with our high-tech industry in New Jersey, I have a particular interest in the health and the activities of the Ex-Im Bank, and I am concerned, as the Chairman had mentioned before, about the current budget funding request. I want to get into a little bit about some of your activity, and just a couple of points I would like to address.
There has been a lot of comment about the need for reform with Export-Import Bank in order to make it a more effective agency for U.S. exporters as they strive to compete with foreign competitors. What are some of the changes that you, Mr. Hess, believe need to be made in order to make your process more efficient and more in line with the global economy?
Specifically, do you believe that this market window approach, which is used by European and some of the other export credit agencies, do you believe that to be effective? I wanted to get some of your reaction or thought on that.
Mr. HESS. Congressman, thank you. Let me first comment on the administrative efficiency. We have asked for an increase in our administrative budget to $65 million for 2002. Virtually all of that has been earmarked for more computerization efforts to streamline and make the Bank's operations more efficient. It will also increase our ability to interface with the U.S. exporting community, particularly small businesses. So we are actively trying to improve in the area because we feel other ECAs have an edge on us, and we are not as up-to-the-minute as we should be.
So in this area, we definitely are trying to improve and we believe we will do so.
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As far as programmatic changes are concerned, we are also constantly looking at those.
On the market windows issue, I think Mr. Cruse can comment on that. He has done a significant amount of work on that issue within the OECD context.
Mr. CRUSE. Yes, thank you. On market windows and other areas, it is important to say that the world is changing. We are very competitive with our current programs, but given the world of banking and export credit, most of the export credit agencies are trying to find new ways to do things. One of them is to be very efficient, which Mr. Hess just mentioned.
Another one is to provide for specially dedicated institutions which are called market windows. In the U.S., the closest approximation might be to Fannie Mae. Just imagine to the extent that you can, an institution dedicated with a Federal charter to exports and doing anything it can to encourage current and future exports out of the country without any regulation and with almost unlimited access to funds. That type of an institution has not yet made a major appearance on the export scene, but two of them are operating. We believe that some time in the future that type of institution would pose a major challenge to us.
Mr. FERGUSON. What about specifically with high-tech folks? Lucent, for instance, is a company in my district, major company in my district. Is there anything specifically that Ex-Im Bank is doing to work with high-tech companies, particularly regarding our new economy in a global economy?
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Mr. MILLER. Congressman, in the high-tech area in the last 2 years, we have increased our exposure fivefold, particularly in sectors such as electronics, telecommunications, information biotechnology, and life sciences; and we currently have a tremendous interest in more transactions in these areas. We are also expanding our marketing efforts in those areas.
Mr. FERGUSON. Just finally, I know my time has almost expired, Mr. Shays was talking before about how Ex-Im Bank is a lender of last resort and we talked about that a little bit. Does this mean if Ex-Im Bank isn't adequately funded or if it were to disappear somehow that U.S. exports and their related jobs would be completely lost, or would competing export credit agencies end up financing that competition overseas, would they fill the void? I mean we are talking about a 25 percent reduction in your appropriation. Can you talk just briefly about how that would affect your activity?
Mr. HESS. Well, we do have a significant reduction in the appropriation request for fiscal year 2002. We estimate demand in the future, we don't program our funds, so we do not have precise knowledge today of either the amount of demand or the risk profile of that demand that will be coming into the Bank.
To the extent that either the risk profile or the total amount of demand exceeds the amount that it appears that we can do with the $633 million, we will have to look at program changes with a strong eye on competitiveness. However, if changes are necessary, we will try to continue to keep the U.S. exporter competitive, but at the same time stretch our resources. We have every intention of making the $633 million last through fiscal year 2002 and providing a strong support for U.S. exporter sales.
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Mr. FERGUSON. I know my time has expired. I do have more questions, but I will be in touch with you directly on those. Again, thank you for your patience and I appreciate your willingness to stay and answer these questions.
Thank you, Mr. Chairman.
Chairman BEREUTER. Thank you, Mr. Ferguson. I was going to call on the Ranking Minority Member, Mr. Sanders, for his comments and questions.
Mr. SANDERS. Thank you, Mr. Bereuter. I apologize for not being here for this important hearing, but I was on the floor of the House offering a motion to recommit.
I want to focus on one or two very simple issues and I hope you can educate me on them.
The United States today has the largest trade deficit in its history, over $400 billion. We have a trade deficit with China which is over $80 billion. I think economists will tell us that these trade deficits are costing us hundreds of thousands of decent paying jobs. So in other words, our trade policy, from my perspective, is failing, and I think it is hard not to acknowledge that.
Now, the question that I have is I find it ironic, and please tell me about this, how it is that some of the largest recipients of Ex-Im Bank subsidies, companies like AT&T, Bechtel, Boeing, General Electric, and McDonnell Douglas, which is now a part of Boeing, these are the major recipients of Ex-Im Bank subsidies, and these are the very same companies that have laid off huge numbers of American workers. In fact, just those companies that I mentioned have reduced their overall employment by 38 percent.
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So if you have companies like General Electric and if you have the President of General Electric, he would say, ''Hey, that is how we are making so much money. We are running to China, we are running to Mexico, we are throwing American workers out on the street. That is why we are a very profitable company. And we are delighted, just ever so delighted that Ex-Im Bank is supporting us. So thank you. We thank the American taxpayers, especially those we are throwing out of work as we go to China and Mexico for your support. We really do appreciate it.''
So on behalf of a few hundred thousand American workers, some of them in my own State, who were laid off by these companies who Ex-Im Bank supports, why isn't there a link being made? When these companies are coming to you for their welfare payments, why don't you say, ''Well, gee whiz, you have been laying off American workers, sorry.''? Why don't you say to some of these smaller companies, who have been growing companies, creating new jobs, say, ''Thank you, we are going to support you, we like what you are doing.''?
So bottom line is, why do you give huge taxpayer subsidies to corporations who are laying off huge numbers of American workers?
Mr. MILLER. Congressman, we provide financing for the foreign entities to purchase the goods of those companies you mentioned, and some of those large corporations also do not have the resources to stand up against government-subsidized foreign competition or the reluctance of commercial banks——
Mr. SANDERS. Excuse me. AT&T, General Electric do not have the resources? Did I hear you say that correctly?
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Mr. MILLER. Yes, sir.
Mr. SANDERS. You said that?
Mr. MILLER. Yes, sir.
Mr. SANDERS. You want that on the record. AT&T does not have the resources. General Electric does not have the resources.
Mr. MILLER. Foreign borrowers do not need the financing to buy the products.
Mr. SANDERS. OK. I see. I just wasn't clear. AT&T does not have the resources. Sorry. All right. I find it frankly hard to believe that these large corporations who make large sums of money do not have the resources.
Now, you raised the issue of competing against other companies which provide the resources, right?
Mr. MILLER. Yes.
Mr. SANDERS. Now, do you also ever raise the question that in many of these countries, especially European countries, our competitors, France, Germany, that, A, the wages in many of those countries are substantially higher; that all of those countries guarantee national health care, they guarantee free college education to their children, they have universal and publicly subsidized child care? Is that part of the equation?
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Mr. MILLER. It is not part of our——
Mr. SANDERS. Not part of the equation, I see. It is only because they don't provide, B, subsidies.
Mr. Chairman, as I have indicated, I have a real problem with the philosophy of the Bank. If somebody wants something from me and they want a subsidy from the American people, it seems to me that the representatives of the American people have a right to say, fine, but what are you going to do for the working people of this country? Do you want some help? No problem. Tell us about the jobs you are going to create. But it is not good enough just to talk about this one project when they go next door—if General Electric were here, they would tell you that is their philosophy now; it is to lay off American workers to go to China and hire people at 20 cents an hour. Is that true? Do you agree with me? Is that largely what they would tell us?
Mr. MILLER. I don't know that, sir.
Mr. SANDERS. Would you disagree with me?
Mr. MILLER. I don't know what he would say.
Mr. SANDERS. Does anyone want to disagree with me, that if we had—what is the name of—who is head of GE? What is his name? Jack Welch. I think he writes books on this. Does anyone want to disagree with me that Jack Welch is not very proud of the fact that he has laid off American workers and hired people abroad at low minimum wages. I don't think anyone can disagree with that.
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Why do you reward companies like that with American taxpayer subsidies? I would like somebody to respond.
Mr. MILLER. Mr. Chairman, we look at individual transactions, foreign borrowers to buy U.S. products. We don't discriminate against large or small corporations. We look at creditworthiness of the transactions.
Mr. SANDERS. Not a good enough answer. It is an answer that says, yes, we are going to look at this particular transaction but oh, by the way, we forgot the fact that you laid off 10,000 workers last week; not of concern to the Ex-Im Bank.
I think we need to rethink the whole process. I think we should provide help to those companies that are committed to the well-being of American workers. Many of these corporations are not. They should not receive our subsidies.
Chairman BEREUTER. I really need to recognize the gentlewoman from Illinois, but perhaps she will yield to you and I will not take it out of her time.
I recognize the gentlewoman from Illinois, and she can yield. It will come out of her time. Would you like to yield to the gentlewoman from California briefly?
Ms. SCHAKOWSKY. I would be happy to.
Ms. WATERS. Mr. Chairman, I am a little bit concerned. At this panel today we don't have the person that is in charge of this agency, the Acting Director, so I don't know who is running the show. It bothers me because I suspect that there has not been a concentrated, well-defined effort to take care of the mandate in Sub-Saharan Africa and I don't have anybody to charge with that.
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Chairman BEREUTER. Well, if the gentlewoman from Illinois would yield, just to respond briefly, I am concerned of course that we don't have the Chairman here today too, but we have a Chairman that is on the way out, and frankly I will say at least discouraged from testifying by the current Administration, and we have no new Chairman in his place at this moment. But I think that we need to hear from the Chairman as soon as there is, in fact, a Chairman appointed and confirmed by the Bush—for the Bush Administration.
Now, if the Clerk will start the clock over, I recognize the gentlewoman from Illinois.
Ms. SCHAKOWSKY. Thank you, Mr. Chairman.
I apologize to the witnesses for not being here for your testimony. I have been looking through the testimony. I wanted to just echo to some extent what my colleague Mr. Sanders has said.
When you look at the charter of the Export-Import Bank and it says that contributing to the promotion and maintenance of high levels of employment and real income, a commitment to reinvestment and job creation, and so forth, that I would also say that it would be important in making these decisions with very precious resources of taxpayer dollars that we do scrutinize more carefully the overall mission. I understand the mission of looking project-to-project, but I think taxpayers rightfully may question, especially those, as Mr. Sanders mentioned, who may be out of an a job from one of the very companies that is receiving support for their work overseas. It seems a little bit like we are using taxpayer dollars and pouring salt into a very painful wound.
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Let me ask you this. I know that there is one issue, and that is, as I understand the environment, on which project-by-project the Export-Import Bank may decide to deny a loan, and that that happened, let's see, the Three Gorges Dam project in China for environmental concerns. But I am concerned about other loans that have been made which, I guess, were not allowed to look at project by project, but I think have some unfortunate results.
For example, the Export-Import Bank provided $298 million to the—I am going to say it wrong, probably, Dabhol Power Project in India, despite documentation by Human Rights Watch of serious abuses, including beatings and harassment of protestors by state security forces. With the Chairman's concurrence, I would like to submit the Human Rights Watch report on the power project into the record.
Chairman BEREUTER. Without objection, that will be the order.
Ms. SCHAKOWSKY. And then recently, the Bank announced a $5 billion program to help Africans buy AIDS drugs, but it does nothing to check the pricing policies of the pharmaceutical companies, which is the biggest roadblock to slowing the pandemic, or at least addressing parts of the pandemic which are ravaging the continent.
It would just seem to me that again, when we are making these kinds of loans that it would be useful to have a broader scope when we examine individual projects and would welcome anyone's response to those concerns.
Ms. STANGLAND. Elaine Stangland from the Office of General Counsel, Congresswoman. I would like to address the first part of your comments with respect to human rights. Our charter does specifically speak to human rights. It speaks to it in the context of what is known as the ''Chafee Amendment.''
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The Export-Import Bank's staff is some 400 people with expertise in banking, economics and law.
The Chafee Amendment is a reflection of Congress' determination that the expertise and the resources for determining human rights abuses and how they should impact the Export-Import Bank's financings best lies with the Secretary of State. So our charter does speak to it specifically.
There is other legislation, including an appropriations bill, and the so-called Leahy Amendment, which provides that we cannot do financing to security forces of any country without going through a process with the State Department relating to abuses of human rights.
Ms. SCHAKOWSKY. Although those deal with countries and not projects, right?
Ms. STANGLAND. That is correct. Leahy deals with security forces of governments.
The Chafee Amendment tries to balance the benefit from the export with human rights concerns and our national policy and foreign policy with respect to those issues. The Chafee Amendment is not limited to government deals at all; it applies to private sector deals as well. But, it is in the realm of expertise of the State Department; and Congress has set forth this procedure to take those types of issues into account.
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Ms. SCHAKOWSKY. Exactly how does that interaction with State happen?
Ms. STANGLAND. The State Department gets copies of all of our board agendas and they have a representative attending each of our board meetings.
With respect to the Chafee Amendment, the way that works is the Secretary of State, having gotten the powers delegated from the President, will send us a letter specifically referring to that section and telling us that we are allowed to consider non-commercial and non-financial factors in our determination.
But, we do have an ongoing working relationship with the State Department.
With respect to the Leahy Amendment, we have instituted a procedure where we will notify the State Department any time we have any request for a financing to security forces and we wait for their clearance.
Ms. SCHAKOWSKY. My understanding is that credit has been denied because of human rights reasons only twice, right? Argentina and Cameroon, if I am not mistaken. So this is a fairly—well, a very rare occurrence.
Ms. STANGLAND. Your facts are correct, according to my records. On human rights, it has been twice.
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Ms. SCHAKOWSKY. Under human rights, would violence against women and issues related to abuse based on gender be included?
Ms. STANGLAND. Well, the Chafee Amendment does list some specific concerns. They include international terrorism, nuclear proliferation, environmental protection, and human rights. We have always taken the position, and it is well accepted throughout the U.S. Government that the list of examples is not exclusive. If the State Department were to find that it is in the national interest and would importantly advance our national policy, they can do a Chafee Amendment for other foreign policy considerations.
I can't be more specific in my response than that. I am sorry.
Ms. SCHAKOWSKY. Thank you very much.
Thank you, Mr. Chairman.
Chairman BEREUTER. Thank you for pursuing those questions.
The gentleman from Texas, Mr. Bentsen, is recognized.
Mr. BENTSEN. Thank you, Mr. Chairman.
Let me apologize if you have already gone through these questions. I am sorry for the disjointed nature of this hearing today, but obviously the floor schedule got in the way.
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The Administration has proposed a 25 percent reduction in your budget for fiscal year 2002 and presumably that would carry on through the outyears. I am curious, how would the Bank absorb a reduction in that amount, and second of all, I believe this is correct that they have argued in the past that—or they have argued in their budget that in fact the Bank has not necessarily utilized all of its capital resources. I am not sure that is correct. But I would like you to comment on both of those issues.
Mr. HESS. On the budget reduction, Congressman, we do, as you say, have a 25 percent reduction in the proposed $633 million for an appropriation for program budget for fiscal year 2002. The estimates that the Bank makes on the resources necessary for a future fiscal year are just that, estimates. We don't program funds; we respond to requests that come in. If it turns out that the $633 million would be insufficient to handle the demand that comes in under our current programs and policies, we would look to program changes that could be made while maintaining U.S. exporter competitiveness in their financing packages that would stretch the $633 million to meet the demand that would, in fact, come in.
We do not necessarily believe that the $633 million would be a figure that would carry out into future years. We look at each year separately. Our budget request to OMB goes over each year with a new analysis of the projected demand for that current budget year. So we anticipate OMB will respond to our request and our analysis not based on just moving forward from a $633 million level, but from the analysis that we present on the demand we have projected.
Mr. BENTSEN. Let me ask you this, and I am not asking you for a policy decision here. I know that is not in your bailiwick. But last year, for the current fiscal year, your appropriated amount is $963, the prior year it was $865, or this year it is $630, approximately. Was the Bank fully subscribed in its lending or guarantees for fiscal year 2000 to the $865 figure and is the Bank on track this year to utilizing the $963 figure? If so, obviously, if by the whims of Congress and the Administration you end up with $663 million or whatever the dollar amount that is in the President's budget is exactly, assuming that the trends continue, then how would you make up that shortfall? Would you have to raise fees or just underwrite less guarantees? What would you do?
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Mr. HESS. Well, the Bank's estimates sometimes are right on the mark and sometimes they are over or under. This past year we did carry over $38.5 million from last year into this year, a program budget that we did not use. The year before that, we had to budget our resources very carefully toward the end of the year because we had sufficient transactions presented to us that used up virtually our entire budget. The year before that, we had a carryover. So it goes both ways.
This year, as we look at demand coming up over the next 5 months, we believe there is sufficient demand to use up the entire appropriation that we have this year. So there will be little or no carryover from this year into next year's program budget. Therefore, we will have to rely on the $633 million plus any cancellations of prior year commitments to carry us through next year.
Mr. BENTSEN. So assuming trends continue the way they are this year and have been where you have been utilizing between 95 and 100 percent of your appropriated amount, then you would just reduce the number of guarantees that you would make, or would you raise your fees? What would you do?
Mr. HESS. Well, there are several things that the Bank could do. One of them, as you just mentioned, is raising fees. A second is lowering the amount of the transaction that we would finance. Right now we finance 85 percent of the transaction. By lowering the overall amount of the transaction financed, we would save budget authority. A third way would be to simply look with a more stringent eye at additionality and make judgments that some transactions simply do not need us.
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Now, all of these kinds of actions tend to increase the cost to the U.S. exporter. So we would have to make any changes very carefully in order to ensure that the U.S. exporter's financing packages still remained competitive with those offered by other ECAs.
This would be a very delicate balancing act. But, we hope that we would be successful in doing it.
Mr. BENTSEN. Mr. Chairman, with your indulgence, if I could just ask the counsel, because I don't know the answer to this, I was involved with the 1997 reauthorization. To adjust the guarantee level or the fee level, does the Bank have that authority under the current authorization, or is that statutory authority?
Ms. STANGLAND. The 85 percent is not statutory. It is, however, a reflection of the OECD arrangement.
Mr. HESS. But that is a minimum. We could lower it from 85 percent; however, we just couldn't go above it to 90 percent.
Mr. BENTSEN. Thank you.
Thank you, Mr. Chairman.
Chairman BEREUTER. Thank you. The time of the gentleman has expired. I know the hour is late. I do have a number of questions I would like to ask on a second round and perhaps other Members do as well.
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So first of all I would like to go to the question of the War Chest, over $300 million available that has not been used now for over 3 years. What is the direction to the Export-Import Bank and from whence did that direction come not to use the War Chest?
Ms. STANGLAND. Mr. Chairman, Elaine Stangland. Under the legislation that established the Tied Aid War Chest, the administration of the War Chest is lodged with Export-Import Bank. However, our ability to use the War Chest must be done in consultation and in accordance with the recommendations of the Secretary of the Treasury.
The legislative history of that provision we believe makes it fairly clear that it is the Secretary of Treasury that has the final word in how and when the Tied Aid War Chest is used.
Chairman BEREUTER. I would like to see the justification for that conclusion, if you could provide that to me in writing.
Ms. STANGLAND. I would be happy to, sir.
Chairman BEREUTER. What is the value of having the War Chest if we rarely use it? Is there any value at all?
Mr. MILLER. Mr. Chairman, obviously we are a demand-driven organization and the transactions are not coming in, but to the extent that we see them, and we try to do it, it is helpful to many of our exporters.
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Chairman BEREUTER. Do you have any flexibility in using the War Chest funds for other purposes at the Export-Import Bank? Do you have any statutory authority to use it for other purposes?
Mr. HESS. Yes, Mr. Chairman, the War Chest can be used for other purposes, for normal day-to-day business, but we can only do that after we have consulted with the appropriate congressional committees.
Chairman BEREUTER. And that is the authorizing committees or the authorizing and appropriation?
Mr. HESS. We would normally consult with both, Mr. Chairman.
Chairman BEREUTER. Thank you. Export-Import Bank has been accused of facilitating transactions that have a net result of goods being dumped on U.S. markets to the detriment of U.S. industries. I know one of our colleagues from Ohio has a concern about steel. What procedures are in place, if any, to prevent Export-Import Bank in effect to have a dumping effect, a negative dumping effect on our country?
Mr. CRUSE. Mr. Chairman, Jim Cruse here. There are procedures mandated by Congress that evaluate what is called the economic impact of any Export-Import Bank transaction on the U.S. economy. We have developed a process, rules, and principles for that procedure. We would be glad to provide them to you if you wish.
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In the context of the very specific requests about dumping, we have added a feature to those procedures that says that if there is a completed antidumping or countervailing duty determination against a specific country and a specific buyer that has exported to the United States, we will not provide any support for capital equipment to produce the specific goods under penalty to that buyer.
Chairman BEREUTER. But it takes that official determination?
Mr. CRUSE. Yes, to absolutely prohibit it. The larger review could come to a same conclusion, but that could take a lot of time.
Chairman BEREUTER. All right. What statutory provision or procedure was utilized to block Export-Import Bank's involvement in Three Gorges Dam. Was that the Chafee Amendment?
Mr. CRUSE. No. No, Mr. Chairman. That is the provision in Ex-Im Bank's charter that allow the Bank to deny a transaction based on environmental considerations.
Chairman BEREUTER. So that is not the Chafee Amendment?
Mr. CRUSE. That is not the Chafee Amendment.
Chairman BEREUTER. That is another provision that you must take into account?
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Mr. CRUSE. It is. And moreover, the Congress specifically gave us the authority to deny a transaction, which, by the way, we did not deny the Three Gorges. We asked the buyer a lot of environmental questions which were never answered by the time the transaction went to the board for a decision.
Chairman BEREUTER. Yes. I remember that. Mr. Manzullo remembers it very well.
That provision traces only back to the 1997 authorizing act, is that correct?
Mr. CRUSE. The environmental provision came in 1992.
Chairman BEREUTER. 1992. And how long has the Chafee Aendment been in effect?
Mr. CRUSE. Since 1978, I believe.
Ms. STANGLAND. That is correct.
Chairman BEREUTER. I still have just enough to sneak in one more here, I think. Can you give us examples of how Export-Import Bank reaches out to local and regional banks to assist in financing transactions, and what is your experience, success, or what do you need, in addition, if anything, in the way of encouragement or statutory authority?
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Mr. REDWAY. Mr. Chairman, we reach out in a number of ways. In fiscal year 2001, we are doing 60 seminars across the country, of which about 25 of those are lender seminars. Those are seminars where we go into local communities and talk about Export-Import Bank. We are doing these seminars all of the time. We also run a training program in Washington, which we have cut back since we have taken so many on the road. But we are doing about six in Washington where we have invited lenders.
In addition, on a very regular basis, we talk to the people at BAFT, the main trade association for the commercial banking industry. I think we reach out to banks just about every which way we can do it. They are our best customers.
Chairman BEREUTER. Thank you.
Ms. Waters.
Ms. WATERS. I had raised with the Chairman the fact that I was concerned about the head of the Bank, new or old, not being here, because I want to ask more questions about Sub-Saharan Africa. I was looking at—tell me how the Bank is organized so that—do you all have organizations specifically to take care of the Sub-Saharan mandate? How is it staffed? Who is in charge of it? How does it work?
Mr. UBAMADU. Congresswoman Waters, as you know, in 1997 there was congressional legislation to establish the Sub-Saharan Africa Advisory Committee. This group meets with the Bank to advise us on doing more transactions in the region. We also have an internal task force called the Africa Task Force that is composed of individuals from different divisions in the Bank. Just to let you know, this is the only internal task force that is dedicated to a specific region. This group meets once every Monday to look at issues that are related to Africa, and to look at transactions that are in the Bank and try to find ways to move them forward.
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Ms. WATERS. Who is in charge of that?
Mr. UBAMADU. The counselor to the Chairman and to the Board, Gloria Cabe.
Ms. WATERS. Counselor to the Chairman of the Board.
Mr. UBAMADU. Yes. And we can give you specific information on the record.
Ms. WATERS. So this counselor has as her responsibility this issue only?
Mr. MILLER. Congresswoman, she chairs the African Task Force. In addition to the task force and the advisory committee within the International Business Relations area, we have a Sub-Saharan Africa team that is committed just to that region, and within different geographic groups in the Bank that process and analyze the transactions, there is a Sub-Saharan Africa region.
Ms. WATERS. How is it staffed? For the Sub-Saharan Africa region, describe the staff to me.
Mr. MILLER. Within the international business relations—are you referring, Congresswoman, to the number of staffers?
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Ms. WATERS. Yes.
Mr. MILLER. In the international business relations area, we have three; within the trade finance——
Ms. WATERS. But that is broken up into regions?
Mr. MILLER. It is within the region of Sub-Saharan Africa, yes, ma'am.
Ms. WATERS. Oh, I see. So go back and describe to me again how the Bank is organized to specifically deal with the Sub-Saharan mandate. Who is in charge of it? I understand your committees. I just noticed that when I looked at Mr.—what is your name? Mr. Ubamadu, there is his name, but no title; he didn't have one. It says you are with the Office of the General Counsel. Are you a Deputy General Counsel?
Mr. UBAMADU. No. I am just a Counsel in the office. But, I am a member of the Africa Task Force.
Ms. WATERS. Do you work for the General Counsel's Office, or do you do something else with Sub-Saharan Africa?
Mr. UBAMADU. I do work for the General Counsel's Office, but we also have three representatives from the General Counsel's Office that are members of the Africa Task Force and I am a member of the Africa Task Force. As I mentioned before, as part of the task force, we work very closely with our Regional Director for Africa on various issues that are related to where there is market or trying to structure transactions in the region.
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Ms. WATERS. So I take it that with this mandate, there has never been a structure where you have had something like a Vice President or other officer with the specific responsibility for Sub-Saharan Africa, with the staff that is advised by a task force and an advisory committee. What you have done is you have kind of taken someone from the General Counsel's Office to do some coordinating work of the task force or the advisory group; is that what you do?
Mr. MILLER. Congresswoman, each of the divisions within the Bank, the General Counsel's Office, the Small and New Business Group, the Structured and Trade Finance Group, which includes International Business Relations, are part of the Africa Task Force and coordinate with the Sub-Saharan Africa Advisory Committee to focus on activities for developing business and doing transactions in the region.
Ms. WATERS. Who is in charge of it?
Mr. MILLER. The task force is headed, as Mr. Ubamadu said before, by Gloria Cabe. The Sub-Saharan African Advisory Committee has a private sector chair, and the Small and New Business Group obviously is Mr. Redway and the Structured and Trade Finance Group is myself. So we all contribute to this effort.
Ms. WATERS. Is that the same way that you work with Mexico, for example?
Mr. MILLER. We don't have a specific task force for Mexico.
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Ms. WATERS. How do you work with Mexico? Give me the structure.
Mr. MILLER. We have regional people within Latin America also, yes.
Ms. WATERS. Give me the structure of your Mexico operation.
Mr. MILLER. Within International Business Relations we have a Latin America team, and in the Structured and Trade Finance Group we have people focused on Latin America.
Ms. WATERS. What is different about what I am hearing about Sub-Saharan Africa and Mexico, for example, and the way that it is staffed?
Mr. UBAMADU. Congresswoman, if I may take that——
Ms. WATERS. I can't hear you.
Mr. UBAMADU. Sub-Saharan Africa is the only region at Export-Import Bank that has a task force which is specifically tasked to work in this area. It is also the only region that has a specific advisory committee that provides advice and counsel to the board on how to improve its business to the region. So unlike let's say Mexico or other regions where you have business development officers that are responsible for it, for Sub-Saharan Africa we have both business development officers plus individuals on the task force that work very closely with the business development officers, and the board, and the advisory committee to meet the 1997 legislative mandate.
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Ms. WATERS. So is the business development officer considered the key person with responsibility for making things happen?
Mr. MILLER. Congresswoman, to develop the business, and the credit officer that would get the transaction would make the transaction happen and bring it to the authorizing decisionmaking body.
Ms. WATERS. They would bring it to the board?
Mr. MILLER. Correct. But it all feeds into the task force so that the whole region is looked at as a whole and there is initiative to direct the activities in the region.
Ms. WATERS. I have lots more questions, but we can't do it today. But I want to talk about again the staffing and I want to talk about how the decisions actually get made.
Chairman BEREUTER. Thank you. I think it would help this Member, the Chairman, perhaps Ms. Waters, if we had an organizational chart which is specified exactly as you can about the Africa effort.
Mr. MILLER. Mr. Chairman, we will provide it for the record.
Chairman BEREUTER. At this point we are looking for some sort of an overall organization chart for Ex-Im Bank, and either we do not have one with us, or we have not received one.
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Mr. MILLER. We will provide it for the record.
Chairman BEREUTER. The gentlelady from Illinois, Ms. Schakowsky, is recognized again for 5 minutes.
Ms. SCHAKOWSKY. Thank you, Mr. Chairman.
I wanted to go back to some parts of the questions that were not answered before. I wanted to talk about the $290 million that went to the Dabhol project in India, which is a subsidiary of the Enron Development Corporation in India, and wondered were there any considerations, was that even part of the debate, the human rights abuses that took place around that project which were brought to my attention by Human Rights Watch and are very carefully documented. And I wondered if that was even a consideration.
Ms. STANGLAND. Congresswoman, I did not personally participate in that transaction but, I would be very happy to check with our staff and get you a response.
Ms. SCHAKOWSKY. It is the single largest foreign investment in India, so what we do there has an enormous implication.
Ms. STANGLAND. I don't mean any ignorance to be taken as——
Ms. SCHAKOWSKY. And I didn't mean that as a criticism.
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Ms. STANGLAND. We will get you that answer.
Chairman BEREUTER. And will you share that with the subcommittee?
Ms. STANGLAND. Yes.
Ms. SCHAKOWSKY. Five million dollars to help with AIDS is very important. I guess I just wanted to make a suggestion. There are many Members of Congress, including Representative Waters and Representative Lee and myself and others, who are very concerned about this issue, and when a huge investment like that is made, is there ever any process that would involve consultation with Members who have weighed in heavily on issues like this to look at that kind of loan, that kind of commitment to such a project?
Mr. UBAMADU. Congresswoman, the initiative that was announced last year was to provide $1 billion per year in support to exports that would be HIV/AIDS-related. What this program does is allow us to export such items as medical supplies, AIDS testing kits, hospital supplies, equipment and services, which we traditionally finance right now on longer terms. So, what we basically announced was that for some pharmaceuticals and other products that traditionally we finance on a 180-day to 1-year term, we are now willing to provide up to a 5-year term.
With regard to consultation with the Congress, Congress has given us legislation to carry on the program; and there really is nothing new within this program that requires additional legislation. But, we can certainly discuss these issues with the Members if they would like, and with the subcommittee Members if they would like.
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The key aspect of this program is that Ex-Im Bank was trying to help in this severe humanitarian crisis. This is not really within Ex-Im Bank's mandate in some sense. We are not a grant agency. We provide loans where we are required to show reasonable assurance of repayment, and many of these countries are heavily indebted. However, we did not want to stand to the side of such a catastrophic issue and do nothing. In the instance where perhaps grants are not available but infrastructure products are not needed, Ex-im Bank is willing to help finance this.
Clearly what we are looking at with this program is more in the private sector, but there are some countries where we are open in the public sector and we would be willing to look at this.
Ms. SCHAKOWSKY. I would say there is a lot of expertise on this committee and in this Congress and interest in this particular issue.
I wanted to just end quickly with this. While you defer to the State Department on human rights, you are not environmentalists either, and yet on environmental policy you do make decisions project by project within the Bank. Why is that not also true of any other subject, including human rights?
Mr. CRUSE. The environment is one of the two areas besides commercial creditworthiness where the Bank is granted independent authority to deny a case, and the other is economic impact. Only in those two areas can we go beyond the issue of commercial and financial creditworthiness. Everything else is prohibited by Chafee and requires going through the Chafee process.
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Ms. STANGLAND. I would just add that we do have an engineering department that has expertise in the environment. It is a much more contained area than some of the other areas that you have talked about; and we have an engineer who focuses solely on environmental matters.
Ms. SCHAKOWSKY. Thank you.
Chairman BEREUTER. Thank you very much.
I would like to conclude the hearing, which is the first of at least several we are going to be holding on the Export-Import Bank, with a question and to encourage you, Mr. Hess, to invite members of the Export-Import Bank to be here in the audience on May 8, when we hear from supporters and critics of the Export-Import Bank programs.
But my question to you now, a concluding question, is, as objectively as you can, as candidly as you can, without pushing you into policy, what in your judgment are the implications for U.S. Exporters of a proposed 25 percent cut in the budget for the Export-Import Bank?
Mr. HESS. I think that if the estimates of demand, which are fairly conservative, in the budget are, in fact, exceeded by the calls on our authority, that it will be very tricky to fashion program changes that continue to have the Export-Import Bank offer competitive financing packages while still remaining within the $633 million. Candidly that will be a real challenge, but one that we will try to meet.
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Chairman BEREUTER. Thank you very much. This will be a subject of considerable discussion within the subcommittee and on May 8 for the next hearing of the Export-Import Bank.
Again, I want to mention to Members of this subcommittee and the staff who are here watching for other Members that I expect we are going to be revising to some extent our proposed hearing schedule to take into consideration some of the changes that have been approved by the World Bank in the IMF meeting, specifically as it relates to AIDS, HIV. And, Ms. Stangland, I am anxious to see the information that you will provide me on which you base the interpretation that we mention with respect to the U.S. Treasury.
Ms. STANGLAND. Yes, sir.
Chairman BEREUTER. Thanks to all of you for taking time today to help us begin our examination of the Export-Import Bank reauthorization legislation. I very much appreciate it. Thank you.
Mr. HESS. Thank you, Mr. Chairman. We appreciate the subcommittee's attention.
Chairman BEREUTER. The hearing is adjourned.
[Whereupon, at 5 p.m., the hearing was adjourned.]
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