Tags: Hochberg | Exim | Senate | exports

Senate Banking to Reauthorize Eximbank

By    |   Tuesday, 04 February 2014 07:01 AM

The Senate Banking Committee, chaired by Tim Johnson, D-S.D., held a hearing Jan. 28 titled "Oversight and Reauthorization of the Export-Import Bank of the United States."

Unlike last year's oversight hearing by the House Financial Services Committee, the only witness was Fred Hochberg, chairman and president of Eximbank. There was no inspector general and no Government Accountability Office (GAO) auditor to utter discouraging words about the rate the Eximbank had been growing and the risk it was taking. Perhaps some of their cautious advice has sunk in, because Hochberg touted the fact that lending had dropped off from $36 billion to $27 billion per year, which he called a "good trend," because it represents some pickup in lending by banks.

In the opening remarks, Johnson proclaimed his intention to move forward with the reauthorization because the bank has made money for the government, which lends its full faith and credit, in order to promote exports that create jobs, all this while protecting taxpayers from loss.

The ranking Republican, Michael Crapo of Idaho, argued that while U.S. exporters can compete globally on price and quality, they are up against financial agencies that are three or four times as generous and aggressive as Eximbank is in financing exports and pursuing protectionist policies.

Crapo noted that the current authorization called for reducing subsidies by international agreement. He raised issues that became themes of the hearings, as to why, despite the fact that 85 percent of Exim's transactions are with small business, they account from somewhat less than the mandated 20 percent of volume, and why medium-sized exporters are getting squeezed out of borrowing almost entirely. Crapo commended Hochberg for holding the default rate below that of commercial banks, and he expressed his support for the reauthorization.

Hochberg devoted his statement to three points: 1) that the bank has had a successful year and helped to create jobs, citing the lowest trade gap since 2009 and $195 billion in exports in November, the highest monthly total ever; 2) that small business drives the economy and the bank has done 3,800 transactions during the past year, 90 percent of them with small business; and 3) that the bank has improved its administration in response to recommendations by the inspector general and GAO, such as by employing a chief risk officer and improving underwriting and risk management.

During the Q&A, Hochberg demonstrated total mastery of the committee. Can the Bank help to promote exports in rural states with significant American Indian populations such as the Dakotas, represented by Johnson and Sen. Heidi Heitkamp, D-N.D.? Sure enough, it can.

Two intriguing questions raised by senators were whether the bank might undermine U.S. competitiveness by financing exports of aircraft bought by foreign airlines, thus helping reduce operating costs for foreign airlines. Hochberg jauntily acknowledged that the bank has been sued four times by Delta and expects to prevail in all the cases.

Another issue is whether Exim should do more to help exporters of clean coal technology.

In each case, Hochberg responded that part of the bank's job is to make appropriate tradeoffs, and it is prepared to defend these decisions.

(Archived video can be found here.)

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The Senate Banking Committee, chaired by Tim Johnson, D-S.D., held a hearing Jan. 28 titled "Oversight and Reauthorization of the Export-Import Bank of the United States."
Tuesday, 04 February 2014 07:01 AM
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