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Press Release Published: Apr 15, 2015

Joint Hearing Wrap-Up – Oversight of Efforts to Reform Export-Import Bank of the United States

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HOUSE FINANCIAL SERVICES AND OVERSIGHT JOINT SUBCOMMITTEE HEARING

Financial Services Subcommittee on Monetary Policy, Chairman Bill Huizenga (R-MI)

                Oversight Subcommittee on Health Care, Benefits, and Administrative Rules, Chairman Jim Jordan (R-OH)

 

Oversight of Efforts to Reform Export-Import Bank of the United States

Witnesses: Fred P. Hochberg, Chairman & President, Export-Import Bank

Nathan Sheets, Undersecretary for International Affairs, U.S. Department of Treasury

Michael T. McCarthy, Acting Inspector General, Export-Import Bank

Mark S. Thorum, Assistant Inspector General for Inspections and Evaluations, Export-Import Bank

Kimberly M. Gianopoulos, Director, International Affairs and Trade Team, Government Accountability Office (GAO) 

CLICK HERE FOR HEARING MATERIALS

 

What We Learned:

  • The Export-Import Bank resists much-needed reforms recommended by its Inspector General (IG) and the Government Accountability Office (GAO).
  • On the heels of news that former Ex-Im loan officer Johnny Gutierrez was indicted for bribery, IG says future indictments are possible.
  • The Obama Administration has failed to meaningfully comply with the requirements passed by Congress and signed into law as part of the reauthorization of Ex-Im in 2012.
  • The Top 5 Beneficiaries of Ex-Im are reaping even more in benefits.
  • In 2007, corporations comprising the Top 5 beneficiaries received 52 percent of the Bank’s total benefits. In 2013, the percentage grew to 57 percent.

Key Takeaways:

  • Accounting Methods: The Congressional Budget Office (CBO) has concluded that accounting methods used by Ex-Im understate the costs of the programs it offers.  If Ex-Im followed more accurate accounting standards — fair-value accounting — significantly higher subsidy rates would be revealed and Ex-Im’s ledger would actually show a cost to taxpayers of $2 billion over 10 years.
    • Additionally, Ex-Im has not taken sufficient steps to fully incorporate fair-value analysis into its internal risk management practices – as a White House-commissioned report recommended – for similar Department of Energy credit programs.
  • Governance Structure:
    • Ex-Im’s own IG found that the Bank’s governance structure is “not commensurate with the size, scope, and strategic ambitions of the institution.”
    • GAO found Ex-Im’s governance structure to be deficient.
  • Risk Management and Lack of Transparency: The GAO and IG have offered recommendations to improve the Ex-Im Bank’s risk management – recommendations that Ex-Im has resisted.
    • Ex-Im has refused to implement concentration sub-limits on its portfolio – a step that would improve the Bank’s ability to manage its risk to taxpayers – despite the fact that they are in use by a large majority of private sector financial institutions, as well as other federal agencies and foreign export credit agencies.
    • Ex-Im has failed to strengthen the role of the Ex-Im Bank’s Board of Directors in agency-wide risk management.
    • In one recent transaction, Ex-Im’s IG was unable to validate the origin of $576.9 million in local costs financed by the Bank.  This means that Ex-Im could not account for how more than two percent of its total authorizations for that year were spent.
  • Failure to Comply with the Law: In passing the 2012 reauthorization of Ex-Im, Congress required the Treasury Secretary to “initiate and pursue negotiations…to substantially reduce, with the ultimate goal of eliminating, subsidized export financing programs and other forms of export subsidies.”  Reauthorization specifically mandated that Treasury negotiate to end airport export credit financing. Treasury is required to report to Congress annually on the status of these negotiations until it can certify that all countries that support subsidized export financing programs have agreed to end the support.
    • To date, Treasury has provided three reports to the House Financial Services Committee, each of which underscores their failure to meaningfully comply with the law. These reports contain unsubstantiated claims of compliance but no factual explanation of what concrete steps were taken pursuant to the law to reduce export subsidies.

VIDEO HIGHLIGHTS

Mr. Jordan

Mr. Huizenga

Mr. Chaffetz

Mr. Gowdy