madam chairman, currently the state department designates eight countries of particular concern, the worst freedom abusers. these are burma, china, iran, saudi arabia, sudan and uzbekistan. we currently are recommending eight additional countries. some have been recommendations for several years, but as you know, those recommendations haven't always been taken. the countries we're recommending but haven't been designated as countries of concern are nigeria, iraq, pakistan, kyrg

kyrgyzstan and iran. we mention pakistan at the top of our offending nations that hasn't yet been named a country of concern. if there is one at the top of the list that should be so designated, that is pakistan because of the horrific abuses that take place there, including abuses of the community. the other recommendations by the state department were in 2011, i believe. we strongly advocate annual designations. if annual designations aren't made, the designations become, in the words of my colleague, the vice president of our commission, katrina lantos, the daughter of tom lantos, the human rights congressman, she says these decorations become the wallpaper and nobody really notices them anymore. we really need the decorations and we're pressing our leadership, we want them to make

these designations on an annual basis. now, as far as why our -- >> i'm just going to stop you for a second because i ask too many questions, but i want to give a chance for ms. bahari to respond. >> thank you. as you mentioned, the rights discussed in the charter apply to only religious minorities officially recognized by the ir irani constitution which includes bahais. as to mr. mahani's practices, as a bahai we are strictly nonviolent and obedient to the government we live in. we participate in no partisan politics. we have noticed in the last year since mr. rohani's presidency, we have had mr. rohani killed and a family stabbed in their home in february of 2014, and there has been no progress in the investigation of their case. just as of yesterday, there was

a report from the bahai international news that in january, this was the catalog anti-bahai articles that were on web sites and so forth. in january there was 55, in february there was 72, in march there was 93, april 285, and in may, there were 366 anti-bahai. >> thank you very much. mr. automahi? >> thank you. mr. romani was the result of releasing the blood fonts. rohani doesn't have the power to change the human rights in iran

or even if he would change anything in iran. he is not reformist, as we know. he's very close to suhamani, and i think we show the regime to show him as a reformist. >> thank you very much. thank you. pleased to yield to the ranking member, mr. deutsch, for his questions. >> thanks, ms. chairman, and thanks to the witnesses for being here. it's almost overwhelming that the breadth of abuses in iran is almost too difficult for us to get our arms around. i'd like to try to approach it a different way. doctor, i know you focus on religious freedom, and i appreciate what you do. let me start with the other witnesses, though. we're viewing all this as a human rights issue.

but i'd like you to speak to the americans, the american people, to help us understand, help them understand what it means in each specific area. ms. bahari, what would you say to the religious community in our country to help them understand, help them feel what -- the type of persecution that the bahai undergo in iran? >> well, it's simple. it's been nothing except wanting to practice our basic rights, to be able to be married as bahais, to be able to go to school, to be able to continue education, and all for the sake of really just being bahai and refusing to recant your faith. simple. >> to the lgbt community in america who are engaged to their

leaders, help them understand the relevance of what's happening to the community in iran. >> i just want to emphasize that the issue is not specific to lgbt community. it is a broader issue and goes back to -- >> i understand that. and i appreciate it, and my point is, it's so broad -- >> right. >> -- that for those of us who spend a lot of time thinking about human rights issues and how to uphold human rights issues around the world, that's how we approach it. i'm trying to personalize this for people who may not think much about iran, perhaps don't think much about foreign policy, but absolutely understand and focus on their own community. >> it's as easy as this. as a person, your individuality, your privacy is constantly being violated and scrutinized by the

government. the government decides how much rights you have based on who you are, what sexual orientation or gender identity you have, even what gender you have. as congressman smith pointed out, there is a difference between the rights of men and women in iran. everything has been categorized. and depending on which category you belong to, your rights are different. so for the lbgt community, they don't exist. the official narrative is they don't exist, therefore, they have no rights. so the government continues to violate the rights of lgbt people on the basis that this is a form of perversion. this is not a human behavior that can be recognized. and i just want to point out something else. just last week, the parliament of iran issued a form of classified report that shows almost 20% of students in iran have homosexual tendency.

so we are talking about a sizeable portion of population whose rights are being violated on a daily basis. >> i appreciate it. mr. alizadeh, for students in america who are engaged in politics, for civic leaders, for community leaders, people who just want to express themselves, can you talk about the type of persecution they would experience in iran? >> i want to introduce my friend. she is a student -- actually, she was in the protests in 2009. after rohani's election, she got arrested by intelligence ministry just because she was

active in the presidential campaign, and she was sentenced to seven years in jail. and since last july, she is in jail, and she should be in jail for another three years. one of my friends has been in jail since 2009. he has been in jail since 2009, and many of my friends are in jail at the moment, and they should be in jail just because they were in peaceful political activities. >> i appreciate it. mr. etemadi, just to finish, i know we talk -- as i said before, a lot of us talk about human rights. but to look at those rights that

are being violated, ms. baheri, for americans to understand, america with freedom of religion to understand the type of persecution that the bahai -- and dr. george, as you pointed out, other religious groups face in iran. and mr. alizadeh, to think that for americans to stop a moment and think about what it would be like to be persecuted, to be subject to death, frankly, because of your sexual orientation, and mr. etamadi, for you to help us understand for students, for people who just are engaged and take views that are in opposition to the government, the threats, the possibility of going to jail, the persecution that they face, that's, i think, how we need to

think about it here. these are tremendous violations of universal human rights. and finally, to journalists who face the same thing in iran. to journalists am thin this cou i would suggest the same thing. think about what it would be like for you in iran and let all of us be guided by those notions of how our own lives could be turned upside down because of what we believe, who we are, the way we voice our opinions. i'm so grateful for your being here today to help shed light on that for us. it's very moving testimony that i hope moovves all of us not ju on the committee, but as a nation. thank you, mr. chairman, i yield back. >> mr. alizadeh, thank you for underscoring human rights on the table when discussions of nuclear weaponry are at hand. how do you trust a totalitarian

regime on enrichment issues, on whether or not they have a bomb or plan on making bombs. it's plural, not singular. when they mistreat, torture and murder their own people as well as three americans who are being held unjustly. abadini testified at our hearing we had here in december and before that at a frank wolf hearing, and at the wolf hearing, shockingly, the administration told nokmei that there was, quote, nothing we could do to help her. astounding. thankfully, secretary curry, when he heard that, did reverse course for the state department, but frankly, it still is not part of the negotiating, and maybe somewhere on the periphery, but far off the periphery, it would seem to me. yesterday i chaired a hearing on human rights in north korea. we heard from ambassador at

large from south korea, the republican korea, ambassador lee, who talked about a grand mobilization on behalf of the north koreans who are being decimated by the newest kim jong-una and talked about the gulogs and talked about how bad the mistreatment really is. to sudan, co-chair and creator of a human rights effort, talked about the abject failure of human rights and how human rights had grossly detear rater because they were not even on the table and people were not subjected to relief they might have gotten. the same issue being replayed with iran. we've done it on trade issues with china, we're doing it on trade issues with vietnam and many others, but the north korea and iranian absolutely are

appropriate parallels and very, very discouraging that it is not there front and center. again, how do you trust a regime that butchers its own people? i would say to ms. baheri, in 1983, i joined president reagan at the white house when they had a mobilization and president reagan spoke out boldly how alarmed and dismayed we were at the persecution of bahai in iran. and he talked about the 150 men and women who had been hanged or shot since khamenei had come in. one of those was your dad, obviously, and my greatest sympathy, all of us, on behalf of the committees, for your enormous loss. not surprisingly, just like the chinese, they made your family pay for the bullets that murdered your father. again, underscoring why human rights have to be front and center and not on the peripheral negotiations, if they are that. so thank you for being here and bearing witness. dr. george, on the cpc issue

which you spoke so eloquently to when you were here testifying for my subcommittee just a few weeks ago, i think members have to realize since 2011, not a single cpc designation -- that is also a frank wolf legislation, the freedom act, called for annual designations, and frankly, like you said, wallpaper. if we don't have those designations and a robust enforcement -- there are some 18 prescribed sanctions that were meant to be utilized when a country showed indifference, or worse, doubled down and made things worse. you talked about how things got worse under rohani. not even a designation in 2011. i make a call again to obama. designate cpc countries. do it now, and as you indicated, there are many more that ought to be added to the current list which are just languishing and there's nothing being done.

we don't even have an ambassador at large. i chaired the hearings and marked up the bill for the international freedom act in this room back in 1988. this is not what we envisioned, a non-enforcement of that very important human rights piece of legislation. so dr. george, i would like to ask you, you pointed out in your testimony that official policies promoting anti-semitism have risen sharply and jews have been targeted in israel. could you elaborate on that? you pointed out the issue of sanctions. i wrote the sanctions act. we worked very closely with the europeans on who we sanctioned in the regime in minsk. the numbers of people on both sides of the sanction, they're almost the same people, if not identical. you pointed out the european union has 90 people sanctioned to our one. you're encouraged there is at least one, the mayor of tehran, but where are the others?

we have the law in place to do it. 90-1. if it was a world cup score, it would be a blowout. we need to add to and update that list. you also finally -- i do have a lot of others but i'll just go to your answers. dr. george? >> yes, thank you, congressman smith. i'll take a moment to address the particular issues that you wanted me to talk about. we have noticed, our staff has noticed that since rohani assumed the presidency, there has been a toning down of the anti-jewish rhetoric that we had seen from government officials during the ahmadinejad period. what we haven't seen is any corresponding diminution of the pressure against the jewish community as there's still 20,000 jews remaining in iran, a fraction of what was once a flourishing and large community there. so, yeah, there's been a toning down of the rhetoric but no real

action to make things any better or any different for the jewish community, like all the religious minority communities in iran, they are third class citizens or worse and always subject to harassment of all sorts. so we don't have any good news to report beyond the rhetorical side for the jewish community in iran. were you asking me particularly about the jewish community in iran? >> also about the sanctions regime and its -- >> yes, we need those annual designations, we really do. we urge the administration to do that. we urge every administration, it doesn't matter if it's a republican or democrat, to make those designations and then to use those sanctions that are available under the act, which was passed by congress, signed into law in the 1990s by president clinton. they are there to be used.

they are effective tools when they are used. we saw this about a decade ago when the tools were used very effectively against vietnam when it was a very gross abuser of religious freedom. we saw some real benefits for persecuted religious people in christians alike in vietnam. we then removed them from the cpc list to encourage the good behavior we had seen to reward the progress that had been made, and unfortunately they slipped right back into their old patterns of behavior and became an abuser again. so we find ourselves in 2014 recommending that vietnam, for example, again be shifted over to cpc status. that's another designation we would like to have made. we need to make those did he say i go n -- designations. they need to be made known. >> and the violators, we have it

now. >> exactly right. the tools are there in the legislation to put travel restrictions on people, officials who are responsible for the brutality and for the abuses. to freeze assets. those tools are available as well. you know, make the people who are responsible for these human rights abuses -- whether they're actually committing the abuses or whether they are tolerating them and letting them occur with impunity, make them pay a cost, make them suffer a cost. the tools are right there in the administration. let's use it. >> again, just before i yield back, angel nosius is one of the most effective human rights persons i know. we have delinked human rights on the talks of nuclear issues. this would be iran. my hope is it's never too late to relook at that, and i would encourage the administration, especially with the deadline coming up with the three

americans, but also on behalf of those iranians who are suffering daily in tig ndignities and tor be bold about it, have lists. something reagan did so excellently throughout the entire time he was president, he showed the secretary of state wherever they went, especially the soviet union, before they met with soviet officials, they proffered a list and said, we want progress on that because it's linked to everything else we do. >> could i ask a question on that? >> sure. >> does my colleague agree -- we just passed the sanctions legislation -- does my colleague agree there is a clear link between sanctions and the elevation of the issues. he said, well, as durnl described. >> oh, there is definitely a

sanction. i think our targeted sanctions are the best and i think our witnesses have pointed that out. we don't want to hurt the iranian people. >> thank you very much. >> thank you. and i recognize, i guess -- mr. conley? >> i thank the chair and i welcome our panel. dr. george, i assume, though, you're on the u.s. commission of international religious freedom, but listening to your testimony and your answer to questions, i'm assuming you agree that we can't cherry pick which groups we advocate for, which groups we say deserve special protection. it's a whole panoplea of human rights and human rights violations we need to be concerned about. would that be an accurate statement on my part?

>> i'm here today -- >> i know, that's why i read your title. >> -- to talk about the religious freedom, so i'm constrained by the religious mandama -- legislative mandate that we have, so i can talk about religious freedom. rjts freedom abuses are linked to other basis, so in those circumstances, our commission feels as though it's within our mandate to call attention to those abuses because they bear on religious freedom abuses. there's nine of us. we represent a range of viewpoints on a wide range of issues where united based on the commitment of religious liberty, but the chairman speaking out of turn, offering his own personal opinions, which may not be shared by the other commissioners, we are, in our capacity as commissioners, and i in my capacity as chairman stay

within the lines. >> let's stay within your rubrick. would it be advisable if the kon congressman and the administration said, we're going to focus on roman catholics or iran. therefore, we're not going to be talking about any other religious because we're pretty close to that one. >> our mandate is based on the civil rights of all people, so we don't distinguish. >> that's my point. we don't cherry pick. although your mandate has to do with religious freedom, you might take the point by extension that we don't want to be cherry-picking rights and human rights, either, just as we don't within your purview. >> i'm sure that's true, and there are many philosophical and political debates about contours of rights, if so-and-so is a

right or is not a right. those are the disputes you have in the congress and that we have among the american people. >> to what extent do you deal with -- how do you deal with sort of the cultural barriers? so, for example, i mean, america was founded by some pretty passionate founders who wanted to make sure that there were careful boundaries. in fact, jefferson referred to them, i believe, as firewalls between the state and religion, and some of them actually professionally cut their teeth on exactly that. madison spent his early professional career in my home state of virginia fighting against the established church of virginia. he wanted religious liberty for other nonestablished groups. so to what extent -- to what extent is it a cultural issue?

iran doesn't have that tradition. iran has an overwhelmingly eun taer denomination. and one could understand -- not justify, but one could understand, therefore, there is going to be tension when people are sort of outside the norm religiously. h how. you're crossing a boundary that we can't accept and that's persecution rather than cultural identity that we have to work with. >> you're right, iran is different than the united states, and we do have a separation of church and state. that's not a phrase that exists in our constitution, but it describes the basic theory of the relationship of the institutions of religion and the institutions of government under

our constitutional system, and especially, of course, under the first amendment. they don't have that state's church separation. but our constitution does not mean no liberty of life. george washington realized that it was essential to political freedom, any order that inspires to be a set of free institutions. john adams said our constitution is for moral and religious people and will serve well no other. so we can understand the relationship between religion and state in other societies. religion is an important part of the picture in the united states and we don't see it as something special. we don't saifl. so we don't have the afc champl.

culturally we value the role of religion in public life. >> stipulated. >> so the big difference, of course, is do we respect the right of everyone irrespective of faith, including those who have no faith, those who are atheists, unbelievers, to follow their consciences precisely in matters of faith? we believe in that very strongly. we did from the beginning. we have a prohibition of religious tests. anybody of any faith can run por office in the united states. we have committed ourselves, as happens with religious freedom. >> we're actually saying eye.

we understand you can have a different system than ours. . for the bahais, for the christian community, for the muslim communities we're not trying to force them into a jeffersonian constitution. but we do say live up to the requirements you have signed on to in religious documents by respecting the religious freedom of the minorities. >> i think that's an important statement and distinction. if i can just ask one more question, different topic. thank you, mr. chairman. mr. alizedah, you said -- am i pronouncing that correctly? you said, i want to highlight

lgbt persecution. i want to come back to dr. george who said you can't cherry pick which denomination you're going to protect, it's the whole thing. i'm a little concerned that sometimes some of my colleagues want to highlight certain it seems that if everybody is consistent and we're going to hold someone to a norm, every group is required to human protecti protection, brothers and sisters. could you talk a little bit about that? because i'm really worried if some of the advocates here in the congress never talk about that, we send a signal unintentionally to the regime that is not a single one. what's your sense of that? >> i just want to thank you very much for highlighting the cultural problems. the root of the ifsh u in iran

is cultural issues, and i think that needs to be acknowledged and highlighted. we were talking about a region who has seen numbers of changes and revolutions, and one after another, we see the situation is getting worse in terms of, egypt and syria. all those countries we see the regime changes not resulting. i just want to acknowledge that. as such, we have to invest into society. we just can't hope for a regime change or the change to the president's approach to fix those issues. it's going back to a question. i want to mention that we don't think about lgbt people. it's about your body, up to individuals who they want to

love and about equal rights between men and women. this is a broader issue. we're not here to talk about the specific target of our society. if i am very aware that when we talk about iran, if you are walking down the street with your boyfriend as a woman, you can be arrested. any form of sexual encounter outside hett ro sexual marriage is a crime. i want to emphasize that we really pop, regardless of their sexual orientation and gender identity. this is about the write-up of individuals to decide what they want to do with their body, despite the interference of the government. the government doesn't have the right to tell people what they want to do in the privacy of

thirl offices. a and a lot of issues are connected to gerald wright, such as the right to freedom of speech or a very specific self-category. we talk about the general race that everybody in the society is welcome to. >> thank you. thank you, mr. chairman, for your graciousness. the chair now recognizes itself for a period of five minutes. this is all very important, and i just want to say i was very alarmed this weekend when i was hearing rumblings, not just from the administration but from my party, which the way to deal with iraq is to work with iran. i think that's died down a little bit, and i think right ful the so. we do not. they are more a member of the united states, and i think that

the imposition of a sunni state is contrary, and i have serve our national interests. i would just say given that, i'm concerned about the administration's decision to continue to send money to this uni unity. they may have a venear of technical leadership, but that money will go to hamas one way or another given that money is fundable. that lines us with iran because they send us money to be warking alongside that and that's important. i think you talked about our

establishments very liberally, but i wonder in terms of viewing iran, and you said, look, they have their own system. maybe they haven't established church or whatnot, but it's more than that. these tie toll la's it's very much a religion. it's that so territory i had yolg, and even the states -- we had established katsz in connecticut that were churches, still. but they weren't active in that way, so this idea of sherea being so broad seems to be more than just about what religion you may be in. there are people that are russians that do not pro scribe to the idealogy that comes with that. >> yes, that's absolutely right. you can have an established religion. in the united states we prefer

not to have that. we disestablished our churches in the states. i think the last one has died out in the sl 30s t. -- 1930s. they expect the rights of others. i wasn't a member of the established church but i was entirely free to practice my own religion. so we wouldn't want to say to the british, well, you have an obligation under human rights to disestablish the ankly can church. >> and it did not permeate society to the did he tellryment of our capital people as to who can still be on the throme. you. >> you put your finger on the real problem. it's that in this age of

totalitarian rule, all dimensions of life are under control of the theacratic rulers. no one who is a member of the faith, even those who have descending feelings about politics within the cfas are persecuted could you tell. i mentioned one of the ayatollahs showed a picture of -- i'll do it again here -- ayatollah berigardi who himself is a shia but nevertheless the persecuted because he speaks out on behalf of i see real. so in iran if you convert away from islam, that's a crime, correct. you could potentially be put to death for that, and i've been following this, i think, during the easter season, the

government raided christian churches. that would be something that would be par to the coarse there. you can be convicted of a crime if you and iran still imposes severe punishment such as stonings and mutilation under their law, correct. where did they come from under these punishments? how were they developed? >> it comes from shia. >> it was interesting, because i read the ayatollah was speaking about freedom, and he says, iran, we have freedom unlike any other country in the world. then he pointed to europe, and he said, they talk about freedom of speech, but go ask them about the holocaust. thafr not free to diagnose the holocaust. we don't in his.

it's obvious if you study the history that we don't have freedom of speech. and we talk past folks in the middle east when we say why wouldn't they want freedom? some people, such as these ayatollahs, for them freedom is freedom to live under sherea, correct? so when we say freedom, they view the freedom differently than we do. but i think what you guys have testified about is very important. i'm 100% behind the people in iran who were struggling for freedom. i think the tragedy of this islamic revolution is that it's really served to snuff out a lot of the vitality that you had seen historically throughout persian society. and i know that there are a lot of people in iran who are suffering under the yoke of this dictatorship who would be

like-minded with folks, not just in the united states but throughout the west. so i commend you guys for speaking out, and i commend the chairman for holding this committee, and with that, my time is expired and i will recognize the gentleman from rhode island for a period of five minutes. >> thank you, mr. chairman. thank you again to our witnesses for this very compelling testimony, and i hope that it will cause this committee and this congress to focus more energy on the issue of international human rights. i'd like to begin with you, mr. azi azibetah, did i pronounce that correctly? you didn't even know i was talking about you, it was so badly pronounced. i want to ask you first, i know that the journalist who responded to former president ahmadinejad who made the claim there were no gay or lesbian people in iran was imprisoned. i wonder is the status of that unusual today?

is he still in prison? >> yes. there were a couple cases that happened since then, so there was a journalist who used to work with the iranian news agency, and he had a personal blog. and basically on his blog, he started to talk about issues, including, you know, about the existence of homosexuality, and that was later listed as one of the charges against him in the revolutionary court and he ended up in jail. as late as last month, there was another case. the newspaper published an article. this is basically a reformist newspaper that is running on a daily basis in tehran. it's an editorial about homosexuality. and the next day it was shot down by the court because they were promoting basic homosexuality in the country. so any conversation about this issue is considered to be propaganda against islam, and so it's banned, basically. >> and the laws, the

discriminating laws that criticize homosexuality in iran, they were renewed as recently as 2013, right before rohani became president. what is the likelihood we will see any progress or any movement on this issue if, as you say, the supreme leader is the one who sets policy, and, you know, is there any reason for us to be hopef hopeful? and what can we do as a country to get human rights regardless of sexual orientation in iran or anyplace in the world? do we have the ability to impact what is truly a horrific, discriminatory, unsafe environment for people who are gay and lesbian? >> congressman, i really think the issue here is not the government. the government is hopeless. they are not really going to change. what i'm really hoping to

happen, both for lgbt people and also for religious minorities and about political activists, is to promote tolerance within the society. and the united states can play a quick card. i just mentioned one example. we started a program about two years ago to basically talk to journalists about the language that they use to talk about lgbt issues. that this is not a sexual issue, it's a human rights issue. in two years you can see society's approach has changed. even though the outside media are banned inside iran, but people are hungry for information, because nobody believes the government propaganda, and this is a good thing. we had all the resources at our disposal. we had the biggest, basically, broadcast corporation on the planet a few miles from here. so we can really do a lot with our resources in order to communicate with the iranian people to teach them the values

of tolerance in civil society existence, and i think that's the long-term investment we theed to sneed to see in iran and other countries. i would hope the new generation would not buy that stereotype and kind of narrow mindedness the government is adopting on a daily basis. >> hopefully our continuing to raise this issue in hearings like this and other settings will help to advance that as well. ms. baheri, thank you for being here today. i'm from a state that prides himself on having been founded by williams on religious freedom. so the idea that people would be not only designed the ability to practice their own. federal prosecution is a

an anathema, and i'm sorry you had this experience and there are those. what can we do as a country? what can we do as a congress that would have some positive impact on the ability of religious minorities in places like iran to exercise their religious freedoms and to be able to do so without facing harassment, discrimination and imprisonment. i ask any of the panelists who have something to contribute. what can we do? we hear this testimony that i think most americans would find horrifying and disturbing and recognize that there has to be some action we can take, some steps we should take to respond to this to have some impact.

i start with you, ms. baheri. >> as a country, we can definitely make sure that iran is unnoticed that it's being watched. so anything the state department has done and will continue, hopefully, to do would definitely be appreciated and helpful. on all accounts of human rights in bahai. there is a question of human rights and i believe 130 congressmen have passed it so far, and if anyone has not, i would encourage them to do so, and that's a sign that iran is being watched and it would definitely be more than helpful. >> back to george. >> one concrete thing to do, congressman, is at the moment

the latin dburg amendment has t be adopted every year. why not adopt it for a period of seven years. it's a tremendous tool. it enables the people who are persecuted to have refugee status. it enables them to transit through other countries to get to the united states when they are being persecuted. it would be not only substantively very valuable in terms of assisting people who are under severe persecution or threat of persecution. symbolically, i think it would also be sending an important message. a very concrete thing congress can do. >> thank you. >> congressman, i just want to reiterate, in my opinion, people like rohani and ahmadinejad come and go. the problem is the darkness that this regime has been promoting for three decades, and we have to counter it with knowledge and education, and i think the congress can play a very acute role by funding resources and allow basically the societies to talk to each other, and people

inside iran have access to information. the government of iran denies their access to freedom of formation, but i think by allowing them to learn about themselves, their rights, their existence, and i think we can inspire them to create a better society for themselves. >> what you can do is persia. if persia votes on the gay issue, it will vote on human rights issue. maybe you remember the movement as president obama was with us in the development. i think many people ignore that. and iranian people has the positive view about united

states. if you want to change this view, ignore the human rights. >> i thank the chairman for the indulgence. >> thank you very much, mr. sissolini. thank you to the witnesses for sharing their personal stories with us, their bravery and the suffering that they have endured. ms. baheri losing family members, and mr. amadi being in jail, and thank you, mr. alizateh, for bringing such awareness to us. and dr. george for holding up the photographs of real victims of the persecution that is going on daily in iran. thank you for the brave work of your commission. we look forward to adopting their recommendations very soon. and to our audience, thanks for being here today with us. and with that, the subcommittee is adjourned. >> thank you, madam chairman.

>> thank you. this afternoon on c-span,af mexico's efforts to boost oil and gas production. mexico's ambassador to the u.s. and a panel of energy executives will talk about the recent decision to allow private sector access to the state controlled energy market. watch this program live. and today, the effect of nsa's surveillance on the overall security of the internet. members of congress and cybersecurity experts will talk about how the national security agency's activities may be compromising privacy and security. that's live from the new american foun dawgs at 4:00 p.m. eastern here on cspan 3.

the current reauthorization of the export import bank expires in september. next, we'll hear from business, government and finance officials, including the import export president on the role of the bank and requirements for reauthorization. the house financial services committee hosts this two-hour hearing. committee will come to order. we will now turn to our second

panel, so my introductions will be brief. if staff can be instructed to shut the doors. first, the honorable fred hawkenberg serves as chairman, a position he has held since 2009. the honorable oswaldo serves as inspector general of the xm bank. he has served in this capacity since 2010. matthew shera is the director of financial markets and community investment at the gao. finally, dr. doug elmendorf is the director of the nonpartisan congressional partisan office. without objection, your written statements have been made part of the record after your oral

remarks. i believe all of you have testified before the committee before. you know the lighting systems. chairman, you are recognized for your testimony. >> thank you. >> could you pull the microphone a little closer to you? >> is that better? all right. chairman, ranking member and committee member, thank you for inviting me to testify before you as the committee considers a reauthorization and progress xm bank has made in supporting u.s. jobs through exports. since our last reauthorization just two short years ago, xms supported nearly half a million american jobs while generating nearly $2 billion from the taxpayers. we are committed to continuous

improvement. when i testified before this committee last june, i committed to hire the chief risk officer before year end and we completed that on time. under his leadership, the enterprise risk committee assesses risk issues, reports and provides me as well as our other directors with a monthly update. including we post in the federal register all transactions of $100 million or more. we posted our economic impact procedures on our website. we implemented and enhanced iran sanction provisionses, we've add ed a textile industry member. we've implemented portfolio stress testing. frankly, the list goes on and on. the longer list is included in my written testimony. at the height of the financial crisis in 2008, our default rate

was 1.1%. and today in our most recent report of march of this year which we issued to congress as part of those reforms every 90 days, it is 0.211% or less than a quarter of a percentage point. customers who use the bank pay a service fe which covers all of our reserves and operating costs. we make no grants. money is not given away. it is lent and we pay and xm bank does not engage in corporate welfare. since i last appeared before you, we have accomplished much to support small businesses. in 2013, the bank financed a record 3,413 small businesses. nearly 90% of xm's transactions. that amounted to about $6 billion. of which 5.2 billion was direct. the bank supports tens of

thousands of additional small businesses, whose goods are incorporated sbo larger exports. we have critical to small businesses exporting directly and indirectly across the world. these businesses are operating in an extremely competitive environment. this morning, we are releasing xm's bank competitive report. in 1999, just 15 years ago, nearly 100% of export credit financing globally was done between an agreed upon framework and it was transparent. as this report shows, it was down to one-third and it continues to drop. in other words, b two-thirds of all official government support for exports is opaque and unregulated. countries like china and russia frequently engage in market distorting financing that threatens u.s. workers and their jobs. this is deeply concerning to me and should be to every american worker. u.s. businesses are not

competing against chinese companies on a level playing field. they are competing against china inc. in 1999, official chinese financing was almost nonexistent. today, it is well over $100 billion morphing what xm bank does. south korea now finances $100 billion, nearly four times the $27 billion we financed last year. other ecas such as south korea are using the uncertainty surrounding the reauthorization to steal contracts. you heard that clearly from panel one from steve will burn about how this is harming his business. in closing, i want to thank inspector general for his years of service as he heads to new endeavors. he has helped us without question run a better bank. we've worked cooperatively with gao since the last

reauthorization. lastly, i want to commend the outstanding work of our 400 plus employees. we live in an extremely competitive world and playing field is not level. i wish everyone played by the rules, but as our report starts out, they could not. the stakes could not be higher. we should not seed american jobs to china, russia and other countries. that's why i ask for your support with a lending cap of $500 million. i look forward to answering your questions and working with you on the reauthorization. >> welcome your testimony now. >> good afternoon, mr. chairman, ranking member waters and distinguished members of the committee. and chairman for his kind words. thank you for the opportunity to testify before you. about the oig and xm plan.

>> before i continue, i would like to thank the opportunity, my family and members of the bank for their hard work. last year, testified before this committee about the need for xm bank to enhance its risk management framework. back then, we stated xm bank would manage the risk with practices and multilateral banks. specifically, we recommend xm bank to establish a chief officer or create a risk management office within requirements. a qualified and experienced staff to that office. different market industries and scenarios and on levels. some of them describe the statement. however, we think the

improvements still exist. for example, the bank established a cro and restructured report origination fractions for risk management functions, however, the cro was established with additional management responsibilities supervising administrative functions of the bank. stress testing for its portfolio and its analysis. the first stress testing process relating to congress and the report, data september 2013. the bank has also established risk provided on its activities to the oig. finally, xm bank commends the risk of factors and the process to account for the impact of such factors.

the application of such factors in the process in the fall of 2012 and resulted in a vision of its loss. lastly, let me address some recent press reporting on integrity investigations. i cannot confirm or deny particular investigations on specific matters, but i can say that we have a number of active investigations involving also external participant or xm bank. in the semiannual report to congress and have had a fully cooperative working relationship for the the bank management. bank management employees have referred issues to us for review. and the bank has the employment actions based on permission we have referred to them. some of these matters are near conclusion and i expect to share information on them in the coming months, while others are at early stages and may or may not be substantiated. we work closely with the justice department and i hope you understand that i am not in the

position to comment further on this matter. if the chairman recommended the members of this committee. thank you once again for the opportunity to testify before you today. i would be pleased to respond to any questions you might have. >> you are now recognized for your testimony. >> thank you for the opportunity to be here today to discuss the actions xm has taken in response to recommend dayses we made last year. our reports were completed in response to the export reauthorization act in 2012. we reported that xm's business volume has grown in recent years and that this growth posed challenges to xm. outstanding commitments were about 114 billion, nearly double the level in 2008 when xm began to experience rapid growth. among the challenges beside it is understanding the risk of

loss. this is particularly challenging for xm because of the need to anticipate losses far into the future and because of weaknesses in its data. to improve its lost modeling, the bank added certain factors. these include minimum loss rates, global economic risk and portfolio concentration risk, whether by region, industry or -- these should help xm better capture risk that may be different than historical experience might suggest. but we found that its technique for assessing global risk could be improved by considering longer term default forecasts. we therefore recommended xm reconsider whether it was using the best data for longer term transactions to account for global economic risk. in response, november, xm replaced its one-year forecast with a five-year forecast. we found xm had not maintained

historical data on defaults which might lead to the loss potential portfolio. xm had not maintained records with that of a life transaction at a similar age. we therefore recommended that xm retain point in time historical data on credit performance, xm has since began retaining such data. ultimately, lost estimates can never be certain. for this reason is useful to conduct stress tests to better understand and form the potential outcomes of alternate scenarios. xm plant conducts such stress tests and be recommended it report to the congress and content the results. xm has since begun such information in its quarterly default rate reports. another challenge is understanding what to expect in terms of future activity. in this regard, we found the message used by xm to forecast its total exposure in 2013 and

2014 had certain weaknesses. specifically, xm has not assessed to reflect changing conditions to assess and report the range of potential outcomes. we therefore recommended that xm do so in response to its budget justificati justification, xm has incorporated experience into the forecast and range and exposure estimates. another challenge is the sufficient fi of its reports. we noted that the rapid growth in the business volume coupled with more modest growth in staff levels created a potential operati operational risk for xm and xm recognizes this risk. but it had not formally determined the level of business it can manage whether agency wide or specific functional areas with a given level of resources. likewise, we were put at the xm's business plan had not

assessed the add quausy to support small business and renewable energy. we recommend that xm develop benchma benchmarks to monitor work levels and provide congress with more information on the resources associated ed with meeting the mandates. in response, xm hireded a contractor to work with benchmarks and modeling tool. this effort is ongoing. going forward, it will be important for xm to sustain a commitment to improving its understanding of factors that drive demand for its programs, the performance of its products with potential operational risks it may face. this concludes my opening remarks. thank you again for a chance to speak today. i would be glad to take any questions. >> you're now recognized for your testimony. >> thank you, mr. chairman. i'm pleased to be here to discuss cbo's estimates of the budgetary cost of the export

import bank's credit programs. cbo has not analyzed the operations of the bank or economic impact of its program. analysis has been limited to the direct effects of the bank on the federal budget. as you may know, cbo uses two different approaches. one reflects the procedures currently used in the budget under the federal credit reform agent of 1990. the other, fair value, reflects the market value of the government's assistance. for 2015 to 2024, we found the six largest programs -- be cost about $2 billion under fair value accounting. both estimates are -- the programs as reported in the federal credit supplement to the

2015 budget. thus, both estimates reflect the amount of fees and default rates expected to prevail under the current structure of the programs. the difference between the two lies in the market risk, which is one component of financial risk. much to have risk of financial investments can be avoided by diversifying a portfolio. market risk is a component that remains. most provide well when the economy is strong. people value income from investments more when the economy the weak and incomes are low and so assign a high er cos to losses that occur during economic downturns. the higher costs of losses in bad times is captured in the cost of market risk. the government is exposed to market risk through its credit program because when the economy

is weak, borrowers default more frequently and recoveries are smaller. that market risk is effectively passed along the taxpayers and beneficiaries of government programs because they bear the consequences. moreover, that risk is costly because they tend to value resources more highly when the economy is weak. turnd approach, treasury borrowing rates are used to discountry expected cash flows. that approach essentially treats future cash flows as having the same value as treasury securities that promise the same average payments with no risk. that means that the market risk is treated implicitly as having no cost to the federal government. that is an important consequence. the cost of federal credit programs recorded in the budget

are generally lower than the cost to private institutions. also, the budgetary costs, the federal programs, are generally lower than those of grants for similar purposes that involve equivalent economic costs. in addition, purchases of loans and loan guarantees at market prices appear to make money for the government and conversely sales at market prices appear to result in losses. to incorporate the cost of market risk, the fair value approach entails using discount rates on future flows that private financial institutions would use. that approach effect ily uses market prices to measure the cost to the public on loan guarantees when the economy is weak and incomes are low. in cbo's view therefore, fair value estimates provide a more comprehensive view. some have expressed concern about potential drawbacks of using the fair value approach in

federal budgeting. they argue for example, that estimates include costs that will not be paid directly by the federal government if actual cash flows turn out to match expected and if including those costs makes compare sops more difficult. these analysts note that estimates are more volatile and complex to produce. and they worry that communicating the basis for fair value estimates for policymakers is more difficult than doing so for estimates. proponents argue that decisions about spending the public's money should take into account how the public assesses financial risks as expressed through market price is. that by taking those prices into account, fair value estimates are unbiased estimates of the expected costs of loan guarantees. and other concerns being mitigated to establish practices. thank you. i'm happy to take your questions.

>> chair now yields himself five minutes for questions. my background is not in accounting. i have a degree in economics and a degree, jd, but i do know the difference between single entry accounting and double entry accounting. so, i just heard your latest jobs claims that seems to increase every time that i see you. i trust you did hear the testimony of the earlier panel. is that correct? okay, in the claims that you make, is that a net number or a gross number because we're having testimony of job loss caused by your bank, so is the number that you -- a gross or net number? >> it is a gross number. it's a number we use -- >> that answered the question. i appreciate that. also, i assume since we have a witness from gao here, you are

familiar with their may 2013 report that criticized the bank for concealing methodlogical weaknesses, including the fact you do not distinguish -- effects, industry that made apart from the average and again, criticized the banks for not considering the unseen counterfactual, how many jobs would have existed without -- are your familiar regarding your jobs claim? >> yes, we pointed out a number of weaknesses with the methodology and recommended xm -- >> thank you.

dr. elmendorf, i've seen a report that there are roughly 10,000 federal agencies programs, figure out how many there are. but how many are subject to ficra? how many program ors agencies? >> i don't know what the count is, mr. chairman. as you know, there are several trillion dollars of outstanding federal loans and loan guarantees. >> specific programs. >> the exceptions to ficra among credit programs that i'm aware of are the t.a.r.p. program because congress wrote into the law that we should do estimates of that program on adjusting for market risk and fannie mae and freddie mac because there is nothing specified in law. >> this is probably outside your area of expertise and i think we had system testimony earlier

today. certainly, i've seen evidence. doesn't almost every other private bank or company subject to gap use fair value accounting? >> private financial institutions generally use fair value accounting, yes. >> we had a gentlemen here on the earlier panel, one of the recipients of an xm credit guarantee. roughly supporting 3500 small businesses, is that correct? earlier witness takes some exception. your definition. we'll accept the definition for the moment. i've got information from the sba by their definition and i don't know the definition at differenc differences, but there are roughly 30 million small businesses across america, so if i'm doing the math right, you are in some way, shape or form

providing credit services to roughly one in ten thousand. and i'm still trying to figure out, i'm struggling with this. and that is, i have a number of small businesses in my district, including cat co catalytic heating company. they export. they don't use your services and i quoted this gentlemen earlier, i think it's outrangs that my own government puts my business and other small businesses at a competitive through the export import bank. i see my time is starting to run out but i say that because i think it's important that we hear from the small businesses that have to pay for what your bank does and whose balance sheet you put at risk. those voice, i believe, are underrepresented in this hearing

room today. i will pause that all 3500 businesses that receive your credit services would want them extended. i would pause at that and i know you have traveled all around the nation. i think somewhat reminiscent of fannie and freddie, i have no doubt you have come close to finding a customer in every congressional district in every district today, but i think it's important that these other voices be heard. isn't it roughly 18% of your expo shoour is small businesses? >> actually, this year, we're in the 23, 24% range. we've had great use of small business and banks have come back to some of our larger experts. >> i would just say for the record, that 90% is fairly misleading. i see that i am out of time. chair now recognizes the gentle

lady from new york. >> thank you, mr. chairman, and welcome to all of the panelists. some people on this panel today have suggested we could let the export import banks charter expire and that the economy would be fine. and that there would be no impact on the u.s. exporters are small businesses. can you walk us through what the impact would be? >> thank you for giving me the opportunity to talk about our small business. one, we do 90% of our clients are small businesses and it's defined by the nsba. you heard on panel one, a harm to businesses and employment,

even just the threat of xm not being here. we had some folks in the audience, company that i think the chairman has sometimes cited, jenny's pickles, a woman from north carolina, who is exporting her pickles and food products to china, britain and is looking to expand to germany and the mideast. we provide credit insurance the way businesses and credit snrns she cannot obtain in the private sector, so, there are many small businesses -- >> how do you know these businesses cannot obtain the private market? >> first of all, they have to state they needed us and were not able to obtain privately. many times, they will not make loans for smaller businesses. the good news, the private sector has come back and the private insurers are doipg a better job than they were during the crisis, but the word is out

that you probably should not get insurance from the xm bank because we may not be here after september 30th, so, brokers are telling the clients, i've got to get you more expensive insurance. >> you raised a point that people are concerned you'll not be there and providing insurance. the statute gives xm the authority to facilitate orderly liquidation if its charter expires and a recent memo noted that xm would have considerable discretion in how to manage this liquidation. >> if the bank has not reauthorized on september 30th, we would not make any new loans sh support any new businesses. small businesses in particular

would probably be hit first and we would simply hold, i don't see a reason. i hope congress would not want to liquidate the portfolio, which implies selling it off at a discount, but let the loans mature to term. we have a well fer performancing portfol portfolio. liquidation is often used for a failinging bank. the om reason we would be -- not to reauthorize us, not because of a failure of a bank. >> there's a lot of debate about exporting planes. basically exporting boeing. if the u.s. decided to stop providing any support or assistance for the export of u.s. made planes, unilaterally, who would, what would happen? who would stand to benefit? >> well, i think that the makers of airbus would be quite excited by this. because frankly, it would not

change the amount of planes coming into the u.s. carrying passengers. it would change whether they're made in the united states by boeing versus being made in hamburg and other places. frankly, the threat of china is coming up. they are building a plane to compete with 737s. which is the single aisle, general commercial plane used and that's coming on in the next few years. >> well, we are often criticized for not exporting enough. have now done any work on how much of the american export is the cause of the xm bank? >> the rough cut number is around 2%, but that includes everything that's exported. many things are not financed. i can give you some specifics. may be 2% globally.

but if we look in places in africa, for example, in cameroon, it's more than 55% of the exports. senegal is almost 50%. india is 30% in the last 12 months. so, there is a large percentage above the 2% ch. recognizes the gentle lady from california. >> first of all, i apologize for that. enough over the years i know not to butcher that. but i hear your issues and agree 100% with the issues relative to the banks accounting for risk. chief risk officer having other responsibilities and a number of other factors. i would mention that the discussion draft which i

released today, contains attempts, at least, to deal with all of those issues. i think, i agree and believe that the bank is not properly "ing for risk and if there is a risk authorization, that is something we need to do. i'd like to ask you a few questions and some things. you've actually requested an increase in the authorization of the bank even though the authorizations you're doing, private sector's back in the game and the authorizations are down from what they were in the bank a few years. why would you want an increase in authorization? >> because and thank you for your comments and interest in this. we took a look in the reauthorization. we looked at compounding. i took a modest increase, exports are up close to 45% since 2009. so, exports are up. banks continue to tell us --

they have less on after appetite for long-term loans, so far toring in those factors, export markets, more going to the developing nations, i tried to put a prudent estimate. >> even though that's not your experience right now. l. >> two years ago, we right now, there seems to be a slight reduction in need, but i'm not looking at only six months of making assessment. i was a business man for 20 years. >> okay, got you. let me ask you now, in the previous panel, the ceo of delta and others complained about things that were in the previous reauthorization that they're saying you're ignoring, which is the mandate adverse effects of transactions on others. what is your response? >> i completely disagree with

mr. anderson. congress asked us to -- those state we should look at the benefits in the u.s. economy and any potential harm. we reviewed it. on top of that, we published new regulation, put them out for comment and adjusted our impact procedures and put it to vote of the board, so, we complied fully and on top of that, every transaction the bank reviews gets reviewed for economic impact. we want to make sure the benefits outweigh any harm. >> i want to get on to this other question. yesterday, there was news that came out about a potentially some accusations of things going on in the bank. now, we know that any organization certainly any element of government that deals with the public that there can be corruption and fraud. guess what? that is occurred within congress. i know that's a huge shock to

everyone listening, but that has occurred here as well, but the question i have for you is this. is that there is i think a question and it is a good one, about you are handing out loans guarantees and other things to the private sector and that if people have the ability to make that not just for kick backs, but to their friends, to political allies, to whether it may be, that's a bad thing. that there is not enough if you will within the xm bank to stop that from happening. how do you judge who gets support and who doesn't? >> you mean what companies get support? we look if there's a need. whether the private sector does it by itself. frequently, we don't need to engage. that's why close to 97% of

exports don't need our assistance. got few questions i'm trying to -- >> basically and we're running out of time, but the accusation is that some people got support from xm in exchange for kickbacks. that means somebody else probably didn't or those weren't mare tor yous or there was a competition going on. i'm trying to determine what procedures you have in place and you're not going to have time this answer this, so maybe you can later. what procedures you have in place that stop that from happening because that can't happen. >> the chair recognizes mr. meeks. >> thank you, mr. chairman. you know, the latest trade data that shows that the united states trade gap has increased to 47.the billion in april of 2014. highest value on record.

purchases of automobiles all hit record highs, so, in the midst of record trade deficits, we are here today debating and i can't believe this, whether or not we need to recognize the xm bank. the chinese, brazilians, all must be lookinging at us and shaking their heads in complete disbelief that we're debating this issue. that we could purposely kill american industries and hundreds of thousands of american jobs. it's unbelievable to me and i know when we start talking about other reforms, there's always the question of uncertainty kept coming out. people want to know what the rules are and whether or not certainty was important. but here we are now in this atmosphere of uncertainty. chairman hockberg, what effect is uncertainty creating for u.s.

exports, if any? >> thank you. there's an add in today's politico that says xm bank meet the needs of china, russia and france. they are delighting in the hearing, in the u.s. debate. on panel one, there was a discussion of steve willburn and the direct impact on his business. i heard that during the shutdown and potential shutdowns. we enumerate that in this come pettiveness report. again, two-thirds, about $200 billion globally is unregulated, opaque, one off and causes harm to american companies. when i'm in africa, chinese government offers 100% financing, up to 40-year terms. so, there is a direct impact on our debate here and trying to sell u.s. products and more importantly, support jobs here in america. small business jobs as well as large companies. so, we have seen a direct

impact. i hear it from companies. i hear it from their customers overseas. one customer in maryland during the shutdown said he lost a customer to germany because he could not take the risk we would not be around. >> you mention this and i was listening to my colleagues on the other side of the aisle, also, and i know at the time we had the last reauthorization, there were certain reforms that were in there. and listening to them, you would think maybe xm has not implemented any reforms. is that true? >> we have complied with every single reform and recommendation that the committee made. we have complied or are in the process of complying with every single recommendation that gao has made. we have agreed with each and every one of their recommendatio recommendations. >>ened i want to go because you mentioned africa twice and you know i just had a event in new york on energizing africa, i want to thank xm for being

there. you talk about china, et cetera, but in your testimony, talked about cameroon. can you tell us what opportunities are there for american made goods and services on the continent of africa? >> africa is the home to six or seven of the fastest growing economies in the world. i just returned two weeks ago. there are great needs in power, transportation, water. i was in angola, who agreed to buy a billion dollars of locomotives and power units, so there are enormous opportunities, but we face intense competition from china, which will provide financing for any and all exports going to africa. quickly, i went to meet with trans net, as a result, split their order between the united states and china. and the ceo told me point-blank china offered 10, 15, 20 years. what terms do you need and what

rate do you need to pay and we'll make it work. >> now, let me ask this in my little time that i have left. how does the size of xm bank, its particular mission and the terms it is able to offer compare with other foreign export credit agencies? >> well, china as i mentioned, is more than four times our size. that's just their xm bank. they have two or three others that support their exports. the canadian bank, an economy somewhat smaller than the u.s. korea does about four times more than we do. we probably have the smallest footprint in the world. >> thank you. i see my time has just expired. >> indeed, it has. the chair now recognizes the gentlemen from alabama, mr. bacchus. >> you and i met in my office march 27th when we were

considering reauthorization of 2012. at the beating, we expressed concerns about transparency, accountability and the mandate to review the economic effects of its financing to take into account any and i'm reading this stat torrey line, of any loan or guarantee on the competitive position of the u.s. industry. we had follow some follow up conversations may 9th and delta's concerns. we voted that bill out on may 15th and i've really, i never had an explanation of that the

sale of wide body jets to the emirates did not hurt u.s. airlines and their competitive position and several times this has come up. even i think as early as 2003. have you ever done an analysis and shared it with the congress of that particular issue that the president of the airlines was talking about earlier? >> we again, congress asked us to review our economic impact. we not only reviewed it, we decided to revise it and publicize it and it's on our website. we also do an analysis of -- >> is that specifically about the effect on -- >> we look at aircraft and we look at every aircraft transaction. >> i'm talking about specifically, could you supply that specific analysis that you

did, what that concern was directed, it was very refined. it was to address the need to subsidize loans to the emirates or rich countries of wide body jets of carriers that directly compete with american carriers on an international route. is there an analysis of that and going back and looking at that? >> we did an analysis. we hired an outside firm to make it unbiased. of is there an oversupply in the aircraft field of wide bodies. >> that's not what my question was. my question was the impact on our flag carriers. were there too many wide body

jets in the world. you're telling me something i know. i'm asking you something i'm -- you know, i know you've had procedures. i know you've had economic studies. i'm asking you specifically have you responded to our request and mr. anderson concerns that we discussed on two different occasions. >> the answer to that question is yes, sir. >> would you supply us with those documents? when you did the lopes to and i'd like copies of the loans specifically analysis of whether any sale to those countries, the effect on the flag carriers. if you could just give me that. >> we'll provide -- >> i want to tell you something else i'm very concerneded about. august 2nd, i wrote a letter to

y'all. we obviously faxed it over to you because scott responded the same day. and promised us that before the thing, before the loan was made, they'd refer it to the policy division as well as engineering division. because there are two different studies and they'd share the concern with the board prior to a vote. and they would share in the analysis. >> that was never given to us. what i'm saying, you didn't supply to us before the vote your response to me was two months after the vote. which is not our committee then couldn't respond.

you didn't even advise us when the vote was going to be. >> can i answer a that question? >> yes. >> briefly. >> briefly. we set the board considered it, it comes to congress, congress has 35 days to comment before a final vote is taken by the board. any transaction over $100 million comes to congress for any member to comment. >> who does it come to? >> it is sent to i would, i don't know precisely how it's transmitted, but every transaction is transmitted to congress for a 35-day review. >> time is gentleman has expired. the chair now recognized the gentle lady from new york, miss mccarthy. >> thank you, mr. chairman. >> i notice we only get fyfe minutes and that you've always been writing something down.

understand you were in the back listening, stop talking and any questions that you want to answer or things that opportunity to do that now. >> let me try and answer one or two questions you have. we look to make sure that any benefit, any export benefit to the u.s. economy outweighs any harm. that's referred to as economic impact, so, we're financing the export of an airplane, going to make sure that the -- the dollar amount to the u.s. economy could outweigh any potential harm. we look at every transaction. not just aircraft, to make sure we're come plying with that. because the last thing we want to do is hurt the u.s. economy. we're here to support jobs. not take paway jobs. so, that would be number one. two, the committee staff receives every transaction over 35 days and the staff, i

presume, forwards it to members of the committee who would like to review it. we receive many comments sometimes, no comments. the committee and congress has a full 35 days to send comments back to us before any transactions finally voted on. there was a question about working with the inspector general. i've had a great working relationship with the inspector general. together, we have made a better bank. our employees are alert to if they see something suspicious loan or something that doesn't look right, they work directly with the inspector general. they don't go through me. whether it's in the general counsel's office, anybody who sees something suspicious, they care about their reputation as well. so, i'm pleased with the reputation, the work we do with the ig. the article that was in yesterday's "wall street

journal" in my opinion is a good article because it says to our staff and any exporter, if you're doing anything funny business, we are on to you and we will work with you and a lot of this has changed since we have an inspector general, which is 2007. a number of of the things discussed predate the inspector general. >> with that, one of the things that i wish you would go over one more time is basically i know that you're not looking to hurt delta, to hurt the pilots and the flight attendants that you want them to succeed. could you go over one more time with their arguments that you heard today on why the situation is where it is and do you see any way to work with them to come to any sort of agreement so

we don't go through this every two years. >> we complied with congress' request. there are over a dozen and we come plied with each one of them. you know, delta airlines made an assertion that our financing of planes caused them, they did not ground aircraft, they have added employees since and they even stated at the time, it was not because of competition. they said we have moved this size and scope of delta's operation are best suited for the capacity of the triple 7 lr, so, for business reasons, they moved the flight to atlanta. it was not because of competitive issues or the xm bank. that was a concept they came up with three years later. that was not in their press release. they said nothing about the fact it was a global recession in 2008.

they said nothing about high jet fuel prices. the h1n1 virus, a number of other things they also talked about impacting their business, but somehow, this one route they decided was only because of xm bank and that doesn't comply with any of their public messages. >> one of the things i did even before you came to become the chairman was reach out to the export import bank, coming to my community, bring my small businesses in to get educated and you did come out when you came on and in my district, by word of mouth, more and more businesses have been joining and certainly, we've seen the growth of the am of money that's come into my district and it's not

mine. t the people working. it's jobs and that's the important thing. thank you very much for your time. >> thank you. >> gentle lady yields back. just so happens to be my turn. you said you had complied with all the requests that congress had made at the last reauthorization. you referred to mr. anderson and all these things has been com y complied with although there were people at that table that says they were not complied with. why do you think there's a difference there? >> certainly. we complied with every requirement, every reform that congress put in. we did as i mentioned, economic field. >> how many of those did you do in the aircraft field? >> we do one a year. we do a survey -- well, we do a

survey to determine is there a glut in the aircraft field, which is the criteria that's been deployed by the bank for 20, 30 years in looking at economic impact. if there is an oversupply, then any additional capacity would have an impact. if there's an undersupply -- >> okay. so how many of those -- how many of those impact analyses have you done on aircraft in the last five years? >> well, >> well, two things. we review every transaction.pth we do an in-depth study. >> every transaction. >> over $10 million, we review for economic impact. >> and how many would that be? >> well, close to -- 3500.th we look at all of them.source we don't deploy the resources, do an inon depth study on every single one.ha for example,ve a congressman, sometime, you haven airplane replacing an oldth plane. to sometimes, it's a plane that's r never flying to america.ould h

a number of those would have no. impact, so, we don't waste government resources chasing things that have no potential impact. >> okay. but you've only, you've only done one analysis in the last five years on an aircraft? >> the new procedures went in in april of 2013. 15 months. we review all. we did an in-depth analysis on one transaction because one said triggered and said this warrants further review and study.arra because the planes are new capacity potentially flying to c americanit cities and as a resu, it triggered a more in-depth ii study. again, if it's relacement aircra aircraft or not flying to the is united states, weta would not sd spend the time and money and resources to do an impact, a a detailed study on something sot that's not goinghi to potential impact.

if there's a potential of an impact, we'll do an in-depth pa study. >> but, to impact, i mean, if you're buying a plane from boeing, it should still have impact on the economy, right? >> again, the analysis that has been used in every industry, nos just for aircraft, we say what are the benefits to the u.s. c economy, how much revenue is coming to the united states, what is the potential lost to the u.s. economy and we balance them against each other. >> okay. >> so, we're always looking at that. what's the balance. >>is thank you. is the bank being sued right now on the any of your economic impacts? >> delta airline is suing us. >> they are? >> yes. >> and is that because of the case that youca jusset mentionen >> well, again, they don't, they don't -- we have put together economic impact procedures that are consistent with the way we r do it for every industry. we're not going to pick and nd o choose and do a special one for

aircraft. we look at how we look at look economic impact as congress hass asked us to look at economic impact. just add one more thing, we're y the only export credit agency in the entire world that does this. no other export credit agency, r no other country, requires this. we're happy to do so, but i think the committee should know this is unique to the united states. >> you have really since 2011, you stopped disclosing a yearly total of the number aircraft exports. why would that be?would th >> i'm unaware that we made a f change in our disclosure since 2011. >> you disclose now? all of them right now?ll full disclosure of everything? >> everything over $100 million2 is in the federal register for a full 25 days before final board vote.5 that >> above that amount.

if it's less than that, that's just chump change?of >> first of all, you can't buy a wide body plane. item of concerns, none of them cost less than $100 million.$100 so, under the aircraft would be two and a fraction of a 737. that's what congress asked us to save over $100 million. i can just add this does have an impact on our competitiveness again. >> i'm going to lead by example and cut myself off. gentle lady from california. >> yes. thank you very much. i would like to go back to a discussion about how you guarantee and how you finance and how you supply support for insurance. the opposite side of the aisle

have created these words to describe what you do that are absolutely not true. they talk about corporate welfare. in saying that, they're trying to lead the public to believe that you are giving away something to the corporate sector in foreign countries. they also talk about crony capitalism as if you are somehow giving to persons who have some kind of connection with you or with xm, something that they don't deserve. so i think we need to clear this up. we need to talk about the difference between loan guarantees and the kind of financing that you do and grants. you made it clear these are not grants, but i think we need to

say it in words everybody understands and nobody can deny. for those saying it, none of them can prove that there is any welfare here. they'll keep saying it until you deny it. please talk about how you do it. >> thank you for your support. we provide loans. loans need to be repaid. we do not provide any grants whatsoever. we have a tough group of people who make sure loans are paid back and paid back on time. that's why we have a default rate 0.21%. at the height of the financial crisis, at the height of the financial crisis, the worst crisis since the depression, it was 1.1% and it keeps declining. in terms of risk management and in terms of corporate welfare,

welfare implies we are taking from someone and giving it to somebody else. we don't do that. people come us to for support. we have to be self-sustaining. that is where there is no subsidy from the government. the fees we collect cover long lost reserves, cover operating expenses and for the last several years we transfer back to the taxpayer for deficit reduction. last year over $1 billion. >> do you charge interest on loans? >> most of the loans are guaranteed. if it is a direct loan and sometimes we do that, we borrow the money from treasury. because law we add a full percentage point. if treasury lends 2% we must charge at least 3%. on top of that we add fees like points on a mortgage. if i look at -- if we are providing welfare, if you talk

to any of our customers, they feel they pay a lot of money for our services. none of them feel like it's welfare. they are paying handsomely for quote/unquote the privilege of borrowing. >> is it because of these fees you charge and interests on loan that you are able to earn money? and what do you do with the money that you earn? >> a prudent portion goes to loan unreserves. a portion to the agency to run. the balance we transfer to the treasury. >> say that one more time. the balance of this money goes to the treasury. >> the treasury. >> of the united states of america, is that right? >> correct. $1.57 million last october. the previous october it was $803 million. >> so are you telling us that

you actually earn money for the government that goes into the treasury? >> correct. we are taking in more money than it requires to run the bank. >> so in earning money, there is no way that anybody can credibly say that you are providing welfare for corporate interest, is that right? that is an untrue statement. >> it is a misstatement as crony capitalism is a misstatement, as well. >> thank you very much. i hope as we go through these discussions you will say that over and over again. we have got to rob the opposite side of their ability to undermine the kre work that you are do iing, the tremendous way you are allowing the united states to at least get at the balance of payment and get us into the export business. if it wasn't for your 2% or so that you are doing, we would be out of it all together. i thank you and yield back the

balance of my time. >> the chair recognizes the gentleman from oklahoma, mr. lucas, chair of the house. >> are you having fun today? >> i have a chance to tell the story of ex banks and how we help support jobs in this country. >> that's a good response. clearly, you are having a lot of rounds pitched at you politically from a variety of directions here today. >> discuss the nature how the rest of the world handles this situation, and if we were indeed to step away from the institution, would any of the other countries that we are aware of around the world drop their similar type of programs? i address this to anyone on the panel who care to touch it. is anyone talking about getting out of this business that does

this on the planet that you interact with? any of you? >> if you're asking me. >> any of you. >> i would say i meet with my colleagues and the g-7 and the brics, it's the exact opposite. they are looking for ways to amp up. they are adding staff. unlike the ex-im bank, most have offices around the world. china has 10 or 12 offices globally. we are just here in the united states. they are going in. opposite direction. none are looking to become less robust or hand cam ex-im banks. >> to my friends from cbo and gao, if this is tugs goes away, i know you addressed this, but one more time please, the impact on the federal budget? >> congressman, under the credible federal reform act rules, it has a negative subsidy cost and that is the way it is

recorded in the budget and the way we include it in our budget projections. >> if i understand the two sets of comments, we are not the only people engaging in this activity. we are the only people discussing not continuing to engage in this activity. and the effect of engaging or not engaging in the activity has no real impact on the federal budget. fair observation? >> you really don't yet know. you won't know what the costs of these programs are until more time has elapsed. i would point out 11 of the cohorts ex-im has done according to the estimates based upon

reestimation, we won't know the full costs of these credits until they have had time to mature. >> under the rules that we follow, we said a number of times including just recent report that we think a more comprehensive way to show it has a more positive cost. that is not the way it is recorded in the budget now. >> thank you for that clarification. >> so it's clear, negative subsidy means we make extra money, we don't use and it goes to the taxpayers to deficit reduction. that's what a negative subsidy means.

since federal credit in '92, it's $6.6 billion have gone from the bank to the treasury. if i could add one last thing, i know our time is limited. from the financial crisis in 2008 we have a real-life stress test. we complied with everything go asked for. we have seen the most stressful economic system and stresses on the economic and banking system the world has seen since the depression. our defaults are 0.211%, less than quarter of a percent. we've gone through the worst six years the world has ever seen. >> absolutely, chairman. the question always is, is the glass half full or half empty, what will be the impact on having a glass, not having a glass? that is a policy decision we have to decide here, but it is a fascinating subject of discussion. the intensity i've