screeria -- nigeria. -

where a live anthrax virus was accidentally sent to over 50 research labs. the export-import bank is a federally backed institution that guarantees loans for purchases of u.s. export. the program is set to expire at the end of the month. export-import bank president fred hochberg testified on

renewing their authorization. this is an hour and 40 minutes. >> the hearing will come to order. on tuesday the banking committee heard a range of perspectives from a panel of ex and industry representatives who testified on the future of the export-import bank. today the committee will receive the testimony of fred p.hochberg, president and chairman of the bank as we consider any next steps in the light of xm's expiring authorization. as i said earlier it this week after years of calls to reform the bank right here i'm not convinced in a long-term reauthorizing is merited. many criticisms of xm involve failures in risk management which are particularly disturbing considering the 40%

increase in kpchl m's exposure employment which i opposed in 2012. at a hearing last year the inspector general testified on concerns related and i'm quoting, to several challenges facing the export-import bank in managing the risk inherent in the core business activities. in recent years both the inspector general and the government accountability office, gao, have identified hundreds of recommendations related to xm's financial and operational weaknesses. i understand that mr. hochberg will address several of these in his testimony before us today. i think it goes without saying that taxpayers is should not be asked to back stock xm's $110 billion portfolio if the bank cannot adequately manage its risk of loss. much has been said about how xm

historically returns money to the taxpayer each year and i'm sure we'll hear that today. this does not take into account losses that could occur based on a variety of factors, including economic uncertainty and xm's disproportionate exposure to several industries geographic areas and large single foreign customers. any discussion of the bank's future i believe must include a serious examination of whether or not xm can substantially improve its accounting for these and other risks. i'm concerned that the reforms that are necessary may simply not be achievable. nevertheless i look forward today to hear mr. hochberg's remarks as the committee takes another hard look at the export-import bank. senator brown. >> thank you, mr. chairman or holding today's hearings and thank you care man hochberg for joining us again today. i especially want to thank you chairman hochberg for the outreach you've done to small businesses in my state, to the global access for small business

forums that you held in cincinnati and mentor, ohio and northeast ohio and youngstown and the round tables in both toledo and columbus. i know you've done the same kinds of outreach virtually almost everywhere in the country. congress does our country no favors when it lunches from oneself-inflicted crisis to another. at the end of the year we saw an ideological fight over an event actual expiration of the terrorism risk insurance program. last sunday portions of the national security agency's authority expired. when we've dealt with the highway trust fund it's been in the short -- it's been in the form of short-term patches one after another. i believe 30 extensions something like that. now we're 27 face away from the export-import bank's authority expiring expiring. one member of the republican leadership is committed to a floor vote in june, another said it should happen on the highway bill extension at the end of

july which most notably is after had this expires. this is not a way to do business for this committee, for this senate, for this congress. xm should be bipartisan and always has been since first authorized at the end of world war ii. according to the wall street journal prior to 2012 the senate had only once required a roll call vote only once in 70 years, a roll call vote to reauthorize x. am. the bank was reauthorized for example, by unanimous consent for the senate in 2006 under president bush and republican majorities if in the house and senate. the 2006, five-year reauthorization was followed by a five-month reauthorization in 2011, a two-year reauthorization in 2012 a nine-month reauthorization at the end of last year. this history, this this recent history, the long-term history has been done right, this recent history of limping from one short-term authorization to another is bad for small

business owners who want certainty to plan their investment and hiring, but can't make long-term decisions because of congressional inaction. it's bad for the export-import bank to attract business that will expand u.s. exports and retain the necessary number of talented employees to oversee an expanding portfolio. it's bad for our economy because it makes the bank riskier, not safer, it makes it riskier it hurts our competitiveness. of course, xm is not perfect no person or institution in a country had large can be, but the work is so important and in today's global economy we need to support businesses when they sell their products around the globe. many on this committee have argued for fast track authority and will support the trans-pacific partnership which arguably, very arguably may or may not mean an increase, a net increase in jobs, but there's no question the xm bank means jobs it's not easy for small businesses to export but making sure they are aware of and have

access to tools like xm can help them grow. we know that competitors around the world have their own version of export-import bank. there are about 60 export credit agencies worldwide. we shouldn't put our manufacturers and our exporters at a disadvantage to china, india, to european countries. it means more manufacturing, more exports more jobs particularly higher paying hurg jobs, it's why the work of xm is so important and why reauthorizing it by june 30 is essential. i look forward to working with colleagues, especially appreciated the comments on tuesday from smarts kirk and heitkamp and donnelly and others who are committed to ensuring that this authority doesn't lapse for the first time in seven decades. mr. chairman. >> mr. chairman, your written testimony we've reviewed it, it will be made part of the record in its entirety. if you would sum up your testimony we're going to -- after that we will -- if the senate is on schedule we will have a vote and break but we

will wait and see. you're recognized. >> thank you. chairman ranking member, distinguished members of the committee, thank you for inviting me to testify about how xm ee kwips u.s. businesses to complete -- compete in the global economy and add jobs here at home. xm compliments and works with the private sector. we provide backstop financing so american entrepreneurs can seize global opportunities to create jobs and not get left behind by their foreign rivals. and we've been successful supporting 164,000 jobs last year alone. xm does not pick winners and losers, rather it serves any eligible american business seeking competitive financing. we are by definition demand driven. of course our customers pay fees and interest for this service and as a result x am m is

completely self-sustaining. last year alone xm generated $675 million for deficit reduction reduction. if xm is not reauthorized xm would only be able to generate half a billion dollars in ref muse for the tack pairs. in may of 2012 xm was reauthorized with overwhelming bipartisan support. a know our exporters and their workers are pleased to see movement in the senate with two bills introduced this congress. i take very seriously my duty to implement the will of congress, that's why i provided each of you with all the documentation outlining xm's implementation of every single requirement from the 2012 reauthorization. and why i will work diligently to implement any future requirements congress chooses to enact. on top of that mr. chairman we are keenly focused on risk

management demonstrated by our low default rate of 0.167% as of march 2015. in addition, xm continues to proactively implement risk management improvements to further ensure we remain faithful stewards of the taxpayer. let me just name two. we increased staffing in our asset monitoring division by 33% and we went beyond all federal requirements to implement mandatory ethics training for all employees. having run a small business i know how important it is to continually identify ways to become stronger and sleeker. and we can always do better. and we continually strive to be better and improve the way we operate and serve small businesses. two particular examples tachb port aviation in columbus ohio and zchl ante print printing in mobile alabama. in xm we help exporters to pursue export sales, create jobs

and compete more effectively in global market. global competition has ratcheted up dramatically since our last reauthorization and it will continue to do so. american businesses and workers aren't simply competing against their chinese russian or french counterparts, often they're competing against countries. congress has made it clear. they have asked the treasury secretary to ratchet down export credits. and while that is the secretary's responsibility as i said i take the will of congress very seriously. as a result i recently met with many of my counterparts to discuss exactly that topic. here is what i heard. to the contrary, our counterparts intend to accelerate the financial backing for exporters. their role is clear. when commercial banks constrict financing export credit agencies fill the gap. so that their domestic exporters don't lose sales or workers.

xm bank is like a firetruck in that sense, you don't sell off the firetruck because because there isn't a fire currently burning. in closing, as this committee is aware, businesses need certainty to make long-term plans to grow hire and a innovate. there are now about 80 other export credit agencies around the world, aggressively fighting for jobs, unlike xm bank. one of china's export credit agencies recently noted that they doubled their financing in 2014 and they plan to tunnel it again in the next year or two. we look forward to working with you, mr. chairman, and the committee to continuing empowering your con is stit wents to export more and hire more american workers. >> since we haven't called a vote yet we will move on to questions. in 2012 export-import bank's inspector general reported that xm's narrow definition of default may result in an jund statement of the bank's hi or

cal defaults. among other things the inspector general noted that xm's definition on default does not include technical defaults which reflect a failure to comply with specific conditions in the loan agreement. do you think, mr. chairman that it's a problem that xm is not properly estimated historical defaults and what are you doing about it? are you changing it? how can you assess future performance at the bank if you do not have a good ens is of historical defaults? >> well mr. chairman, we issue this default report to congress every 90 days, one one of the reforms in congress. the defaults in here are actually cash outlaid claims paid by the export-import bank. they currently are running less than 1/5 of 1%. in addition in this report we indicate delinquent payments which is an indicator of what might possibly default in the future because they are late. in terms of a technical default

sometime that is something such as a filing of a financial statement could be can running a week or two late or could be -- could be some kind of compliance issue like that. so we are on top of that we monitor that but thea not in the definition that congress has given us. we have -- congress, by the way has updated the definition of our default four times since 2012. >> would a technical default also include maybe a violation of loan covenants? >> it would depend -- technical default could be as i said -- >> it could be substantive could it not in nature? >> it could be substantive but it would not have any material effect on the ability to repay, if it does we have a watch list that we produce every single month of credits that are requiring extra scrutiny or troubled credits. >> mr. chairman, according to the xm bank's annual report the ocp, a more can government owned mining company with a questionable history of human rights violations received over

$92 million in xm loan guarantees. several news sources have reported that ocp donated millions to the clinton foundation and just recently hosted a clinton foundation fundraiser at a five-star luxury hotel in morocco. my question is this: how do you ensure to the people american people that none of the money guaranteed by the american taxpayer has not been used to fund the clinton foundation or other unrelated activities once the money is there? >> well, for one, the money has not been disbursed yet. at the moment the money -- we've approved this loan we have not finished documentation and dispersed it so no money has been used for that purpose. secondly, all money that is borrowed for a specific transaction relates to the purchase of u.s. goods and services and the other attendant services around that. they have to show invoices of where -- of what the money is

used for and that's when the disbursement is made. >> does it bother you at all that if ocp is donating millions to the clinton foundation and just recently hosted a fundraiser and we're making them a loan it does that raise a red flag with you or that doesn't bother you? >> senator, we look at every transaction, we look in terms of -- look at reputation risk integrity of the transaction. this is a large mining operation in morocco. >> state owned? >> state owned -- let's understand one thing about state owned. in the rest of the world much of the infrastructure in country after country in state owned power plants transportation, rail utilities, water services, mining is frequently state owned. so that is -- that's the way the business -- whether we like it is regrettably done around the world. this is a good project,th buying almost $100 million of u.s.

goods, creating a lot of jobs here in america and we obviously make sure that it's credit worthy environmentally sound and has no reputation nl risk. >> mr. chairman, in the area of subsidies and free markets, we have that debate and i think it's a healthy debate. in your written testimony you state and i will wrote, it is incumbent upon america to strive to level the playing field in the global export area. restoring free market factors to their rightful place at center stage of competition. what does that mean to you? >> it means -- it means very clearly the rest of the world has a lot more government engagement with their industries and their companies. as you just mentioned, mr. chairman, we want to make sure that by our financing we level the playing field. so if we use ocp as an example, we want to make sure that the financing package that backs up u.s. exporters is the same financing package that backs up

our competitorser in china or germany or much of europe so that the buyer picks from a free market the best product best service is best quality not because someone has their finger on the scale and has provided off market financing to give it their country an advantage. >> we heard testimony a couple of days ago that a little less than 2% of american exports rely on or do business with export-import bank, but 98% don't but they're still exporting. is that figure about right? >> that's right and that's a good thing. >> okay. >> the private sector is a really good job. >> senator brown. >> thank you, mr. chairman. mr. hochberg, your charter says that xm financing should quote, supplement and encourage, no the compete with private capital, unquote. a lot of wide bodied jets for example, are sold without kpflt m help. why can't everything be financed solely by the private sector?

>> i wish it was such, but it isn't. i guess there are a couple of reasons, senator. one, we face in the commercial jet area intense competition with airbus, backed by the governments of germany, france and britain. each of them have an export credit agency that backs all airbus purchases. so if we want a level playing field, we want to make sure there is a level playing field between american-produced aircraft made through 15,000 suppliers of the boeing company and airbus backed by three governments we need to provide a comparable financing package when warped. additionally from time to time we have just come through the worst financial crisis since the depression when liquidity tightened up and constricted and we had to really step in and fill at that gap to keep trade growing and jobs being supported in this country. since there's more liquidity since that recession there's more and more in our rearview

mirror our lending has dropped. we're doing about half of what we did two years ago because banks have come back into the fore and there's less need for us today than there was even two years ago. >> some opponents of xm, and we've heard them come out with increasing volume express concerns about management risk oversight at the bank, be the bank's portfolio has grown in the last five or six years since 2009 but the number of employees has not grown by much. your inspector general in april no eted uncertainty about xm bank's long-term reauthorization is hindering recruitment. we know there is a whole host of reasons that the fits and starts and short term reauthorization that congress seems to inflict on a whole lot of government programs including certainly yours, have had -- have had negative impact on investment on long-term decisions, on

predictability. talk to me if you would about how this repeated short terl reauthorizations and possible he can operations affect your ability to recruit. >> well, i think it has certainly made it a challenge to recruit. there's also a bit of a brain drain as people get concerned. our employees are no different than the 164,000 jobs we support around the country. they're worried about their mortgage, about making twig payments this fall and the start and stop about what they do. we have about 450 workers at xm bank. i care about them they do a spectacular job. why we have a default rate of 0.167% percent is because we've got good underwriting and good asset management. i fear this debate can jeopardize our ability to retain those people and bring in new people as it goes on and on. >> so these -- talk further, if you would, you touched on your testimony the repeated short

term reauthorizations the continued let's that xm won't exist after june 30th. how does it affect your small business customers? i've had -- you mentioned davenport in columbus, ohio you mentioned a company in alabama. i met with probably a dozen businesses businesses, mostly companies i had not heard of as many companies as i visit around ohio there are obviously hundreds and hundreds that i don't know yet that people that came in this that really depend -- that gave up their time and costing their companies money to come here and push visit senators and house members to push for reauthorization. what effect do you see this has on small business customers? >> we've seen it firsthand with one of the tools that small businesses use is a working capital program, we work with their bank provide a 90% guarantee to induce the bank to make a working capital loan to support exports.

more than a few banks have pulled back in light of the uncertainty they don't want to get into a situation where they have made a commitment and then if approximate our authorization should expire they're not able to execute that. so we've seen some constriction in working capital lines forcing -- if you are a small exporter with very small percentage you might be able to fit that in your regular working capital loans. if exporting is 20 or 30% it probably is too large to fit within your domestic working capital line. we've seen that. a lot of what we do for small businesses is provide credit insurance. when they sell overseas we insure their receivable. they go to a commercial broker for that. commercial brokers are loath to write a policy that may only have 20 days left. >> thank you, mr. chairman. senator corker. >> thank you, mr. chairman. thank you for your service. we had a hearing, i guess a couple days ago and it became

pretty evident that we're involved in a race to the bottom with these export credit agencies that in essence the national manufacturers association had had a witness in here and i guess it really highlighted more than ever that that's really what we're about is we are competing with other countries, as you mentioned, many of the companies that are in these countries are state owned enterprises the export credit agencies in other countries he are putting you putting our nation in a place where we're in a race to the bottom to try to quote level the playing field and i assume you agree with that. is that correct? >> yes. i mean, that's what -- the oecd, organization for economic cooperation development which has something called the arrangement where most industrial lysed countries are a party to but china russia, inn i can't, brazil are not. we all have a standard, we all have a minimum fee we have to charge so there is not a race to the bottom. the challenge is can you please

trees that are not a am member can do whatever they want, they can be opaque about it and they cause some of the most severe challenges to u.s. competitiveness. >> well, i will say in their testimony they made it pretty clear that it was all about market conditions and it was about meeting the -- especially in the case of -- i use the case of boeing because their name came up i have nothing against boeing, as i mentioned i like flying in their airplanes, but she did lay out the fact that it is that, it's a race to the bottom. we're competing with other countries. and i guess i would ask this question: how do you when you're making these loans to a manufacturer like this and you know that they are -- you're doing this to make it so that a company in another country is able to buy some type of equipment, just name whatever type at a lower rate and yet those companies are competing

with other u.s. companies that don't have the benefit of that export credit agency yours. how do you reconcile that? in other words, in some cases you're actually making american companies disadvantaged because foreign companies are able to purchase goods that are made here in the country at better financing arrangements than they can here dom clee. >> we do the best we can to level the playing field. i was in south africa about a year ago actually this week and i met with trans net which is the rail authority in south africa. they had a large tender for locomotives. in the end they divided it half to the chinese half to the u.s. i asked the head of trans sent what kind of financing terms are the chinese offering you so i boo know as a businessman what the competition is. they said, well what would i like, 10 years, 15 years 20 years, a grace period? what do i want to make the deal? we don't do that.

we offered the most we could offer is 14 years. however, by offering 14 years maybe we didn't equal precisely the chinese offer, but we got close enough that we at least were able to get half that order and not lose the entire order to the chinese. >> i might just add one last thing is not surprisingly about a month or so before the tender was determined china made a $5 billion loan to the rail authority for upgrading tracks, signaling and so forth. what happens that's a coincidence, perhaps not. >> i think you can see why this would be -- we understand the business you're in and i was going to allude to you after 2012 needing to try to get other countries to lower this amount of activity. you alluded to that in your opening comment. but you can tell -- i mean, this is an unseemly business to those of us sitting here where basically we've created had this entity to create financing to complete with other countries

that are based -- basically racing to the bottom. the other, i guess part of your quote, agenda is to make sure that smaller enterprises have access to credit and yet we've looked at your application form and there's really no -- nothing there that requires them to make sure that -- or requires you to make sure that you are the lender of last resort. i mean, you can check other on the application form and sign it. i had an amendment a couple years ago to make sure that xm was actually the lender of last resort. i know you didn't support that. i know steven fincher over in the house is leading an effort to reform xm. do you support those types of things, for us to know that you, in fact, are the lender of last resort and just don't allow borrowers just to easily check another box? >> well there are actually four questions they have to answer with seven subparts. >> but would you be supportive of that being much stronger so

we know in fact you are the lender of last resort? >> it should be stronger but let's be clear, you're signing this application you're committing perjury fines an imprisonment if you falsify. >> not if you check other. so will you support much stronger legislation to absolutely ensure that you are the lender of last resort in those cases? >> well, senator i guess i believe that -- i believe in the certifications and we verify those when warranted. >> i think the answer is no. let me just -- i think we're going to be pressing for that and i'd love to talk to your office about it. i will just close with this, i was in eastern europe -- i was in eastern europe recently dealing with a number of different issues and i have to tell you was peril offended to realize that the xm bank basically had taken on some of the administration's policies without congress being involved

in any way. as i understood xm was no longer financing coal exports. that somehow or another you without a congressional mandate had decided that if a company wanted to export to eastern europe, which is a great market for our coal suppliers, you had decided, the xm bank had had decided because the administration had had laid out this policy that you would no longer do that. i find that to be offensive, not that i'm a lover of coal or not a lover of coal, but that you would be able to do that and i wonder if you could respond to why kpflt m would take on administration policies when congress has not legislated that >> well congress actually put in our charter 23 years ago that we must take the environment into account before making any loan agreement and during the bush administration the bank was sued and in a settlement way before i got to the bank had to do a consent decree about how we

actually had a more rigorous environmental policy so that goes back to 2006 '7 and '8 before i got to the bank. over the 23 years we have had to adjust our environmental policy to meet the needs of science and industry over and over again. so this is not a recent -- something that was just inserted recently. >> but if we were to change that you would be perfectly fine with that? >> let me say this i mean -- well we have an environmental standard, that's up to congress to determine it and we try and comply with other -- the world bank, other -- other export credit agencies around the world. but i want to be clear, we actually do support the administration's climate action plan to restrict coal fired power plants except to the poorest countries which total 80 can you please trees which have no restrictions in the wealthier countries we do support that provision. >> mr. chairman, thank you. i didn't know we were carrying out environmental policy through

xm bank. >> i didn't, either. we found out something today didn't we? thank you, senator. senator menendez. >> thank you, mr. chairman. before i move on to my questions i'd like to enter into the record a list of 244 new jersey companies over 70% which are small businesses that have received xm financing since 2007. okay. i fully support a timely reauthorization of the bank and i hear regularly from our con stit wednesday of the irreplaceable role that the bank plays in making new jersey exports competitive on the international market. many of these companies have come to washington to explain how kpchl m has supported their efforts around the world, others have written to me in support of xm's reauthorization and i'm speaking for them here today. now, i'd like to share with my

colleagues a story about a situation in ukraine something that provides a great example of how the export-import bank can play a critical role in furthering u.s. national security and economic interest. ukraine gets fully half of its electricity from nuclear power. historically they have been dependent on russia to manage the used fuel from its plants. after the orange revolution ukraine moved to break that tie by establishing its own spent fuel storage facility. i know about this issue because a new jersey firm hol tech international won the contract to construct that facility. because of russia's military aggression the government in ukraine did not have the resources to go forward with that new jersey form. that's where the xm bank comes

in, to help manage the risk of investing in this strategically important done re, something that the senate has clearly ex poused on by virtue of that it has had in the ukraine freedom support act that i wrote with senator corker xm can make this possible. it will bring income into new jersey where hol tech is expanding its presence it would support ukraine's ability to develop it's on expertise and infrastructure and remove a lever of russian influence in ukraine, ukraine would also keep over $1.5 billion in fees that would otherwise be sent to russia. unfortunately since the contract was awarded the security situation in ukraine has not permitted the pro correct to go forward. now, we heard some argument on tuesday that american firms should essentially sink or swim on their own in international market, that we don't need additional options to pursue our diplomatic and security goals

even as other nations including our most significant trading partners and rivals continue to pour more resources into promoting their exports. in a world where all countries wished us well, in a world with no other nations provided support for the international operations of their industries that would be an appealing idea, but that is not the world that we live in. so here is a median sized business ngs no, not some major cooperation that is on the front line of both nuclear technology an ongoing national security challenge that would be an important beneficiary of the kind of work that xm does. president hochberg how do you see the role that xm bank plays in bolstering u.s. national security and foreign policies of the services that it provides u.s. companies? >> well, thank you, senator menendez and thank you for your support and the many companies you work with in new jersey.

our number one right is u.s. jobs, that's what we're here to do we're here to support u.s. jobs through the financing of exports. that said, obviously economic security and national second is writ go hand in hand. the number of defense contractors who are now moving into commercial fields, osh kosh is a good example, darling is another example, there are a number of them financing theirs, but most importantly it's about u.s. jobs but clearly if you have energy security and you mentioned nuclear -- uk clear is one of the areas that we've been active in, it's one of the areas commercial banks are reluctant to engage in and certainly reluctant to engage in without our assistance an guarantees. so i think there is a very close relationship between those national security interests, economic security and jobs. >> let me ask you one or question. china has been particularly aggressive in export fpsing. as of 2013 it extended over

$45.5 billion in export credits, three times the amount extended by xm. so you touch on this in your written and oral testimony. could you elaborate on the tends you're seeing by major economic competitors. >> china is right now the largest exporter am in the world, we were number one a dozen years ago, i actually believe we could be the number one exporter again because of the technology and invasion. that said china has four different state-owned banks that do export credit. we have one. just one of those called cynas had hore has done about $267 billion in loans and guarantees. it took us 80 years to get to $590 billion. and they have indicated they have no interest in stopping whatsoever. that said the secretary of the treasury we have been working on negotiating that they join an international framework so we have transparency and we try and

tamp that down, but that is an ongoing negotiation and it's taking time. >> mr. chairman, i just had think that we should not engage in unilateral disarmament and that is exactly what we will do if we let xm expire and we are facing global competitors and many countries china bra glil and others that are helping their companies create the opportunity to penetrate markets which means jobs here at home. thank you. >> senator toomey. >> thank you, mr. chairman. you know, i think -- i think we should hopefully reach an understanding of what is and what isn't going on here. one of the arguments that supporters of the xm bank made is that this is somehow a free policy choice this is a free lunch. the xm bank creates jobs, no jobs are destroyed no cost to

the taxpayer. in economics there is no such thing as a free lunch, there's a cost to everything that is provided. the chairman states in his testimony that over the last couple of decades the xm bank has sent nearly $7 billion to the u.s. treasury. i'm sure that's true. but if you go back a little further behind that then we had a pert when the xm bank was costing the taxpayer direct money in the form of bailouts in the '80s, $3 billion bailout in the mid '90s about $10 billion in taxpayer bailouts and that was at a time when the xm bank was a fraction of the size that it is today. the chairman also it he was that xm bank is restoring free market factors to their rightful place. i don't understand how we could come to such a conclusion. it's clear to me that the xm bank interferes with the free market. you may decide that the interference is worthwhile and is desireable but let not pretend that it's not an interference in the free market.

that's my point. chairman refers to the xm bank finances as filling in the gaps. well, if there is a gap then that tells youing is. here's another way to look at this. if the xm bank is creating jobs, if this is -- if this is to be believed, then it seems to me it must necessarily be the case that the x mflt is providing financing that would not otherwise occur or its providing it on terms that it would not be obtained in the market, right? that's the only possible way in which you can say that it's creating jobs. but if that's the case, if the xm bank is financing at rates and terms that the market is either unable or unwilling to offer, then that's not the free market. in fact, thea the definition of a subs is dee. it's the sub dee that the

taxpayers are being forced to pay not in the form at the moment of writing a check but in the form of not being adequately compensated for the risk that taxpayers are being required to take. so i don't think there is even a question that taxpayers are being forced to take this risk, the question is for whom? if it's to large politically connected corporations then that strikes me as crony capitalism. if it's less that happen credit worthy foreign corporations then we're putting taxpayers at risk to benefit them. none of these outcomes in my view make sense is. let me ask one specific question of the chairman. when we talk about the jobs that are created, do you net out the lost jobs in the industries where the competitive disadvantage that the xm confers occurs? so we know for instance, airline companies that have to compete with foreign airlines that get the subsidy of cheaper

aircraft miners that have to compete with overseas mining operations they get the subsidy of mining equipment refineries in the united states that have to compete with foreign refineries that benefit in a similar fashion. it seems to me the last job out to count. do you include that in your analysis? >> senator, thank you and thank you for coming today. first of all, there are a couple of things you mentioned. we never -- xm has not received a single bailout. from 1934 to 1992 we sent a billion dollars to the taxpayers. after federal credit reform act of 1990 from '92 to 2014 we've sent $6.9 billion. that's cash that leaves the checking account of the export-import bank and goes to the treasury. it is the sadest day for a cfo each year as that money leaves our bank account. let me be clear about that. we don't pick winners and losers, companies come to us if

they need our financing to compete with overseas competition and sometimes the markets are not fully free and open in the overseas international market. that's where we compete, that's where we step in when there's a gap in the marketplace. we also do something put in congress since 1968 called and mic income review. it said if we're going to support the export of capital equipment, use the example of mining equipment, we have to make sure that the benefit to the u.s. economy from that will make sure there's a net benefit to our economy. so is we do that each and every one of those -- we in fact look at every single transaction to ensure -- >> so if it you're looking at the net you're acknowledging that there are some who win and some who lose and then you add it up and see on balance is it a net positive. is that the way -- >> we make sure that there's a net benefit and the board the board that senate confirmed takes that into account. >> how does that not include

winners and losers? you have of' kind of acknowledged that there are winners and we count them and there are losers which we create, but as long as the net we think is po testify in our analysis then it's okay. >> well the net winners are the united states economy and u.s. jobs. the choice, sir is they're going to build that mine and we're either going to have u.s. mining equipment or chinese or japanese or korean. so we wanted the u.s. economy to win and make sure those jobs are here not elsewhere. >> i've run out of time, mr. chairman. i appreciate the indulgence. let me point out the gao has come to the con crucial that this does not create net new jobs, it shifts job creation and in that process in my view it certainly is picking winners and losers. >> thank you. senator warren. >> thank you mr. chairman. i just want to follow up on this question on jobs. we talk a lot about the xm and about jobs and i believe that the xp bank helps create american jobs and pur economic growth, but i also think that the bank's operations can be

improved in certain areas so i want to follow up on some questions i asked you the last time that you were before this committee. as i noted at the hearing last year the core of the bank's work is to promote trade by providing financing for foreign companies to be able to buy u.s. goods. obviously that helps the u.s. economy and we want to sell those goods as you have been testifying to this morning. but in some cases the foreign company purchasing those goods also has u.s. competitors so helping that foreign company can mean that the foreign buyer gets a benefit not available to their u.s. competitors. so i want to start where i left off last time. before agreeing to finance a deal i just want to make sure i hear this right, does the bank determine whether the number of u.s. jobs that could be lost by helping a foreign competitor is counted into the calculation? >> what we look at, senator warren we look at, one, we review every transaction. corporation has made it clear that if the production that would be generated by some

capital equipment export exceeded 1% of u.s. production that would trigger a more in-depth review. so if a diminimus amount might go on the market less than 1% that's a threshold established by congress over 30 years ago, that actually would say that the impact would be de minimis would not be adverse. >> just so i'm understanding what you're saying here, you're saying you don't do the calculation on how many jobs might be destroyed because a foreign company got a financing benefit that was not available to the u.s. competitors, unless it hits a -- this much higher threshold. so in all the rest of those cases, even though cumulatively they may be a lot, you're not doing that calculation? >> well, what congress has established for us in 1986 or 1984, 30 years ago, is that we -- the threshold is 1%.

>> i'm sorry. i think what congress established is you must do the calculation if you hit that high threshold. the question i'm asking is whether you do the calculation -- is it only in those cases and you are adding up the number of jobs lost and the number of jobs gained? >> well, for example let me be very clear let's use an airline example. we have an airline that provides low cost service in south africa. there is no impact on the u.s. economy by that low cost carrier in south africa buying u.s. equipment to fly around south africa. we don't fly there, we don't fly within south afk. >> so -- >> in those cases no there is no potential impact on the u.s. economy. >> so if you -- >> we look at every traib. >> so if the foreign buyer has no u.s. competitors then you say you don't do the calculation, another way to say it is you've done the calculation and it's sfwloe.

>> we review every single transaction. >> and if there is a domestic competitor, u.s. competitor for the foreign company that's about to get the financing do you always then do the calculation of how many jobs might be lost by the u.s. competitor? i'm just asking how this works. >> at that level we do it at the dollar level. >> what does it mean at the dollar level? >> we'll look at the benefit to the u.s. economy of selling that product, how much revenue -- >> i'm asking a jobs measure question. >> we don't do it on a per job basis. we do it on -- at that level we do it on the economic impact, what was the economic benefit to the united states versus potential any economic adverse impact to the united states. >> so is there ever a case in which the bank has decided not to finance a deal because of its potential impact on u.s. competitors? >> yeah. >> and potentially on jobs? >> yeah. >> and is that publicly available? >> what happens is you know, you are at the university. you know, people don't --

universities issue rejection letters, people don't like them from banks. >> actually i understood banks did issue rejection letters. >> they don't like it to -- when we sit down with a customer and look at that situation we will have that conversation about do you know what, this is an economic impact here, we're going to do a more in-depth study and this may not pass muster. in those cases sometimes they withdrew. i know one particular case the entity in latin america withdrew, let me just finish for a minute -- and what happened, they still built the petrochemical built, built it all with foreign equipment and we still are competing with that petrochemical plant. >> i'm taking from what you're saying is none of this is publicly available. >> sure it is. if it gets as far as doing the study and there's a vote, but frequently a client pulls out before that time. >> i'm sorry so you're saying there is publicly available data on how many times you have rejected a deal because it would

cost american competitors jobs? >> our economic impact data is on the board -- is available after the fact to -- the fact to -- that was on the reform we put in in. >> i want to see what the economic impact study would be on this transaction. >> i think i got it. you're talking dollars here. i believe the bank helps create jobs. it does it while making money for the taxpayer. i believe the bank ought to be doing all it can to promote job growth overall. not helping at the expense of others. that's why i think that the bank needs a rigorous process for assessing how it's work affects u.s. competitors. and i think the bank should make

those redaction ss available. the bank has taken important steps while under your leadership, and you moved it in that direction, and i hope we can continue to work on this, to continue to move in this area. >> we're the only export credit agency of the 85 around the world that does this. we're the only one that actually goes to the effort to say, is there going to be a net benefit to the u.s. economy? we're the only single one. everyone else says they're going to build it anyway we could lose once or lose twice. >> i appreciate we may be more transparent than some other countries. the question we have to address is whether we are transparent enough. and those calculations are obvious enough when we're trying to evaluate jobs. >> sorry for going over this. >> i think it's important that we find out what it does to our

jobs here, and that is not been answered yet. a lot of people are concerned about it, i think some of our airlines, as you know, delta has raised that question, for example, others said, they're not getting the financing that their competitors overseas stayed home are getting. which is a subsidy which they argued and probably rightfully so it caused american jobs. >> actually i would -- i've heard delta make this claim. they've never substantiated. richard anderson just last august indicated they're adding 1800 new flight attendants this year alone. they are the most profitable airline in the country perhaps the world at this time. >> we have a vote on the floor, we're going to try to make it, we're going to come back and -- because we have -- we might have some more senators here. >> when we get back, maybe 15 minutes or so.

on the next washington journal, a look at the legislation legislation. >> the committee will come back

to order. i've watched the discussions and listened toed testimony on tuesday with regard to what the bank does, and the fact that literally there are all of our competitive nations that we work with have an entity similar to the bank, that their businesses can rely on. >> it seems strange to me -- i tried to search and figure out what it is that's causing the uproar, and i want to try to get to what i think might be part of it, i want to ask you some questions here and i mean this

to try to get you to explain it. thank you, sir. i'd like to establish the question. give you the opportunity to respond as president of the bank. i understand that the bank is part of the federal government, and that as a result there are rules and regulations that they have to abide by. but i'm concerned when i see you as the head of the bank have been making rather significant political statements that i think may have caused part of the problem. it only bolsters the problem that the bank is picking winners and losers. here's the example that i'm speaking of. in 2013, you said, and i quote, the bank engages in an important balancing act in supporting our exporters, we have to weigh the potential impacts on the environment associated with our financing. without guidelines or limits, ever increasing numbers of new coal plants will continue to

emit more carbon pollution into the air we breathe. america cannot do is this alone. i strongly support the administration's efforts such that other nations follow our lead in restricting financing of new coal fired plants. would you call carbon pollution powers a lot of the homes in my home state of south dakota and used for a lot of power on farms in our part of the country as well. i'm concerned that by using what literally is a loaded carbon pollution, and making personal statements about which types of exports that you may oppose, the xm bank becomes more about advancing policy goals and less about creating american jobs. do you think that making this statement was a mistake? and gives the opponents of the xm bank the ammunition to say

that xm does pick winners and loser s losers? >> well, thank you for giving me a chance to talk about this, and we have a chance to meet in your office, i mentioned earlier, we've had an environmental policy that congress has inserted in our charter since 1992. over two decades, we have been required to look at reasonable payments and the environmental impact. that's not my doing that's been in our charter for over two decades. i mentioned earlier, and in the first part of -- on the bush administration in 2004 '05, '06, the bank got sued. and the bank agreed to a consent decree how to impact, how the bank could do a better job to adhere to the role of congress which is to take the environment into account. the bank's been doing this, and

it's been involving policy over the last two decades it's not something i inserted into a personal agenda. >> can you show me any place where the congress of the united states has identified carbon pollution as being part of your role in terms of managing the environment? >> well, the environment was put in as i said, i'm happy to share with you the lawsuit that the bank lost. and the court found that before i got there, the bank was not taking into account the environment sufficiently. part of that agreement was some restrictions, some regulation on the amount of carbon. so that was -- that precedes me at the bank. >> i understand that you have an obligation in which you can and are required or expected to promote renewable energy. but i can't find where you are in a position to determine. i'm just going to ask the question. if the organization walks in and they say, we have an opportunity

to create, to build a new power plant, is it your role to say is this a coal fired plant and if it is, it's not something we can do? >> we don't look at a coal fired -- we look at the environmental impact, and we look at the amount of high carbon intensity. we in fact, we export coal, we export coal mining equipment, the only thing we've had to do and again as part of a consent decree is to look at to what degree the environment's impacted by our expert. that was put in my congress, and again, the xm bank lost a lawsuit about that. i'm happy to share with you the section of the law, i'm happy to share with you the consent decree. >> i think what happens in this particular case is it gives those individuals concern about whether or not you're picking winners and losers. you shouldn't be picking winners and losers i think it gives them the opportunity to point to the fact that in this particular

case, when it comes to your statements on maher plants that are coal fired that you do have a desire or an interest in promoting those which are not coal fired. i bring it up, because i think it's got to be clarified, that either you are picking winners and losers and giving people who do not want to see this bank continue forward, you're giving them the ammo that they want to show that you are picking winners and losers and that's not the way it was set up in their opinion nor in their opinion. if we're misunderstanding the focus that you think the bank has gotten. >> i guess all can i say is that we're doing to the best of our ability to follow the will of congress 234in terms of taking the environment into account. >> you believe it's the will of congress that we not promote as

you call it carbon pollution through the creation of coal fired plants or the use of the bank to finance coal fired plants in other parts of the world? >> well, we are open for coal fired power plants in the '82 poorest countries in the world. the only -- what our current law states is that -- >> you would do it in '80 or '82? >> ida defined by the world -- those we do not have restrictions at all. in wealthier countries. countries that have options on renewable gas, nuclear the current policy, and in our appropriation bill says that we don't do nicole fired power plants in those countries where they have a lot of options. 80 countries in the world approximately today. >> is that directed by congress

or is that a policy which has been created within the bank itself? >> no, that's current appropriation language. >> thank you, sir. appreciate your comments. thank you, mr. -- >> thank you, mr. chairman. i just want to kind of run through this. basically you're subject to the requirements of nefa. you have to do an eis or some kind of environmental assessment on the decisions that you make. there wasn't any decisions being made regarding carbon you're sued as a result, you signed a consent decree that says yes carbon will be part of that consideration, right? >> my predecessor -- >> the bank is under a consent order by the court to take that into consideration. it's similar to what happened to epa, when epa said carbon's not a pollutant the united states supreme court said it could be and you need to take a look at massachusetts case. and so i just want to make clear this is not a policy that came

into existence when the president became the president it's not something that you initiated at the bank although you're administering it. it's creating controversy here. as a result the kirk heitkamp bill puts in there you can't discriminate against any legitimate business. that's something that was vetted strongly during the negotiations on the bill with whole companies as well. or i wouldn't sign on this bill. we've addressed a lot of the concerns that the senators have expressed regarding picking winners and losers, regarding environmental impact on carbon. and so it doesn't mean -- i guess when you look at the nondiscrimination language not something that was appreciated but obviously if that passes, it will be administered appropriately by the xm bank is that correct? >> yeah, we're -- obviously we'll totally and completely follow the will of congress.

the consent decree we referred to, that's a regulation put in by the court we made everybody unhappy. we made the environmental community unhappy we made the exporters unhappy. maybe that makes a good policy, when everybody's unhappy, everybody's not happy with that outcome. >> i want to get to another issue raised here. you don't do enough for small business. the bank really represents two major multinational corporations, and that's -- you know the piggybank for these two large corporations. i would tell you that i've had a fair amount of experience with the xm bank, first working with the xm bank and the bank of north saturdayde coat de an iconic institution they've had this long recollectionship that's been fruitful for north dakota exporters. i want to have you address what you've done to reach out to the small businesses like you've

reached out in north dakota. whether you think in fact in the heitkamp bill whether we can achieve a 25% target in the next period as established by that bill? >> let me say this, and thank you for your support of the bank, and thank you for proposing one of the bills under consideration i know our exporters and workers are keenly focused on that. i ran a small business. we have in this fiscal year, we put in an 800 number. operators are available 8:00 to 8:00, if you go on our website, we do have an online chat. >> i only have so much time, do you think you can achieve a 25% target in this period of time that we've given you in this reauthorization. >> i think that's a very steep target. the reason i say that we are demand driven. people come to us when they need

us. right now, banks are doing a better job. in some ways they have more options. when there's a financial crisis, they come to us. that's the challenge. i will work on any target. we're doing better than 20%, which is our current target. but it's difficult to know because we're demand driven, what the demand is. that's the only challenge i say, with any particular target in this regard. >> finally obviously there's a lot of concern. and i think the chairman expressed some legitimate concern about reforms. and we're very interested in ongoing activities that the bank has to address concerns that have been expressed by this committee and by gao and by the inspector general. where do you think you are in adapting and adjusting and responding to the concerns that have been expressed about governance of the bank? >> well, let me say i mentioned earlier, you know these are the reforms that were put in in

2012, they kplids with each and every one of them. there are a number of reforms that have been proposed in the heitkamp bill and the three other bills circulating. we will move forward on any of the reforms that are enacted and do our best to enact them quickly and officially. all i'm worried about is not creating a burden for small business that makes it harder to be nimble. >> finally, when you look at the bank, and you look at the hard deadline that we have at the end of the month how disruptive will it be if we allow the charter to lapse and then try to reinstate that? how much additional cost will the bank experience even if we were able to reinstate it? >> i think the uncertainty has caused a lot of concern. the uncertainty has caused workers to be restrictive to small businesses. and my fear is that there's been

a lot of uncertainty. i spent a lot of time convincing foreign buyers we're going to be there, and they can rely on us rely on the united states. i think that even a temporary lapse will have a very negative effect because it makes us less reliable. it makes u.s. companies less reliable and puts our workers in jeopardy. >> thank you mr. chairman i want to brief you on a project near and dear to me. that is the c-919. the chinese competitor built the boeing 737 with subsidies from china. we've seen 400 of these booked. all those orders should have come to the united states. i can say to my colleagues, i'm for xm to keep winners and losers. those winners should be americans. make sure those 400 orders come to the united states.

think of the -- if you know aviation as i do all the spare parts for the boeing 737 are going to be american originated. in the case of the d-919 they will be largely chinese for the billion s billions coming to this airplane, i want to thank heidi for her work on the national defense authorization bill. make sure we win the competition against the c-919. >> thank you, mr. chairman. you may have already addressed this and if you have please let me know. but i wanted to have you explore a little bit the subsidies that

chij in a gives to their export, including what we've been hearing about, the $10 billion in export credit to africa, bringing their total to $30 billion in expert credits to africa, which is roughly equivalent to xm's global valium for the year. >> china is a particularly vulnerable competitor. total u.s. exports about 23, 24 billion, that's all exports, as you decided china's going to vote $30 billion alone. we see them everywhere, in power plants, infrastructure, mining, perhaps aircraft. they are a very, very formidable competitor. fastest growing region in the world right now. >> essentially, we have a very

unlevel playing field if they're providing finance support for their industries and we're not doing the same? >> we exist to fry to level that playing field and do the best we can, but we have a little bit tied behind our back, in terms of, we abide by a number of global guidelines and rules, and china is untethered by that. >> we've been having a debate here over the fast track and the trans pacific partnership and other potential agreements there's a real debate over whether it will create jobs in america or eliminate jobs. in this case can't we say that this is a 100% clear that this financing creates jobs here in the united states of america? >> i would say our calculations -- >> can you remind us again how many jobs there are at stake

here? >> we supported 165,000 jobs last year alone about 1.2, 1.3 billion in the six years i've been at the bank. >> thank you mr. chairman, good morning. thank you for being here this morning, such an important topic, i want to share with you two stories from two of our more important employers in south carolina and get your response to the comments that they've made to me. the first one is sage automotive interiors. because of the downturn of the economy, they decided to spin them off or get rid of them. >> unfortunately, senior management decided to get the capital together buy that company and now they are employing more than