In The News

Ex-Im Bank President Aims to Ease Panel's Concerns on Loan Risk, Standards
By Rebecca Helm | June 13, 2013 09:08PM ET

(BNA) -- Export-Import Bank President Fred Hochberg was pressed by House lawmakers June 13 about the risk of the outstanding loans the bank holds and on the bank's business plan, which was the focus of a recent Government Accountability Office report.

“The goal here is really making sure that accountability, efficiency, effectiveness of government, and responsibility is held by all those in charge of these various programs,” Rep. Bill Huizenga (R-Mich.), vice chairman of the House Financial Services Subcommittee on Monetary Policy and Trade, said in his opening statement.

The May 30 GAO report found that the forecast of risk exposure calculated by the Ex-Im Bank “has weaknesses” and an alternative calculation used by GAO indicated the bank's risk forecast could be higher than the limit set by Congress for 2014. These findings have generated concern among some lawmakers (106 DER A-30, 6/3/13).

Subcommittee Members Split on Merits of Bank

The subcommittee members were split on the merits of the Ex-Im bank. Rep. Jeb Hensarling (R-Texas), chairman of the Financial Services Committee, questioned the bank's place in our free-market system. “While I don't often find myself in agreement with statements coming out of the Obama administration,” said Hensarling in his opening statement, “I have the occasion to agree on the market-distorting power of the Export-Import Bank.”

“Some of those ‘winners' [chosen as loan recipients by the Ex-Im Bank] include the likes of Enron and Solyndra, hardly worthwhile investments on behalf of the American taxpayer,” said Hensarling, referring to two companies that eventually entered bankruptcy. “Put another way, the Ex-Im Bank ostensibly makes loans backed by taxpayers that the private sector is unwilling to make. And if private creditors are unwilling to engage in these transactions, it begs the question: Why should the American taxpayer?”

Rep. Mick Mulvaney (R-S.C.) expressed concerns about the bank's alleged lax record-keeping and loan standards as highlighted in the GAO report. “It strikes me, that we could go back four or five years and find these exact same statements [in the GAO's report] about Fannie Mae and Freddie Mac, right before we ended up paying for their huge bailout,” Mulvaney said.

“For me, coming from Colorado, we're in the middle of the country, we love the exports, because that gives our small businesses business and puts Coloradans to work, I see this Export-Import Bank assisting either through direct loans or by guaranteeing loans to certain businesses in my district,” said Rep. Ed Perlmutter (D-Colo.). However, looking through the Fannie Mae and Freddie Mac debacles and rebuilding, Perlmutter asked, “Is the Ex-Im Bank too good to be true?”

Other subcommittee members questioned the $5 billion the bank has loaned to Pemex, a Mexican oil company, if the goal of the institution was to support American jobs and businesses. Hochberg explained that the bank also existed to fund loans to foreign companies to facilitate the purchase of U.S. exports. The Pemex loan, said Hochberg, was one such transaction.

But Rep. Stevan Pearce (R-N.M.) noted his concern that, “the bank has more outstanding loans to just one company than it has cash in reserve [$1.4 billion, according to Hochberg].”

According to Hochberg, most of the committee's concerns were unfounded or exaggerated. “At the end of each fiscal year, we do a mark to mark, we look at each and every transaction, and determine whether the credit has improved or degraded, and make adjustments accordingly,” Hochberg said in response to a question about the bank's oversight of loans and loan recipients.

“Our support for small business is at a record high,” said Hochberg in response to another question. He cited the rise from financing $3.2 billion in direct small business exports in fiscal year 2008 to $6.1 billion in fiscal year 2012.

The bank found support from some committee members, specifically its effectiveness in promoting industry and trade. “In my home state of Missouri, the Export-Import Bank is financing exports ranging from soybeans to aluminum, to crushing and pulverizing equipment from St. Louis,” according to Rep. William Lacy Clay (D-Mo.). “The Ex-Im Bank benefits the nation by generating more than a billion dollars for the taxpayers while supporting hundreds of thousands of jobs.”

The bank was reauthorized by Congress in 2012 under a mandate to contribute to maintaining or increasing employment in the United States. According to its mission, the bank “facilitates the export of U.S. goods and services to international markets by providing working capital guarantees, export credit insurance, loan guarantees, and direct loans.”

President Obama March 21 reappointed Hochberg to serve as the bank's president. Hochberg's nomination for a second term as president of the Ex-Im Bank was passed out of the Senate Banking, Housing and Urban Affairs Committee June 6 and now faces a vote in the full Senate (110 DER A-16, 6/7/13).