Hearing of the Domestic and International Monetary Policy, Trade and Technology Subcommittee of the House Committee on Financia Services Subjec

May 6, 2004 Thursday

HEADLINE: HEARING OF THE DOMESTIC AND INTERNATIONAL MONETARY POLICY, TRADE, AND TECHNOLOGY SUBCOMMITTEE OF THE HOUSE COMMITTEE ON FINANCIAL SERVICES SUBJECT: OVERSIGHT OF THE EXPORT-IMPORT BANK OF THE UNITED STATES

CHAIRED BY: REPRESENTATIVE PETER T. KING (R-NY) WITNESS: PHILIP MERRILL, PRESIDENT AND CHAIRMAN, THE EXPORT-IMPORT BANK OF THE UNITED STATES

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REP. NYDIA M. VELAZQUEZ (D-NY): I ask unanimous consent to include my --

REP. KING: Without objection.

REP. VELAZQUEZ: -- opening statement in the record. Thank you.

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REP. VELAZQUEZ: Thank you, Mr. Chairman.

In your exchange or answering the question to Carolyn Maloney, you said that you are in the business-Ex-Im Bank is in the business of supporting jobs?

MR. MERRILL: Yes, ma'am.

REP. VELAZQUEZ: And we all know that small businesses produce 75 percent of all new jobs, small businesses account for 50 percent of all sales in this country, small businesses employ nearly 53 percent of the American workforce. In the last recession small business fast growth companies created nearly 3.8 million jobs, compared to 3.3 million jobs created by big companies. So if you are in the business of creating jobs, how could you come here and say that you're so proud about the 19.7 financing achieved by Ex-Im Bank and then to say that the 20 percent is neither the ceiling nor the floor? But if we are a facing a jobless recovery in this country, don't you think that then you should focus or reassess what your institution is doing in providing more financing for small companies?

MR. MERRILL: Madam Congresswoman, the committee's dictate or mandate or instruction was measure the-to target 20 percent --

REP. VELAZQUEZ: At least 20 percent.

MR. MERRILL: At least 20 percent, not including, not counting the subcontractors.

REP. VELAZQUEZ: Subcontractors-look, sir --

MR. MERRILL: Look, subcontractors are small businesses.

REP. VELAZQUEZ: Now, there's --

MR. MERRILL: Eighty-three percent of the --

REP. VELAZQUEZ: The 20 percent is regarding prime contractors, not subcontractors. You know that?

MR. MERRILL: Well, but by definition --

REP. VELAZQUEZ: Your definition?

MR. MERRILL: Well, anybody's definition, it's not likely that a small business is going to be a prime contractor. It's not going to build a power plant and --

REP. VELAZQUEZ: But 20 percent-what I'm saying to you, sir, is that 20 percent-the law, the reauthorization of 2002, says 20 percent-at least 20 percent. It's just common sense that what we need in this country is to create jobs, that you should amend what you're doing and reassess and make sure that we have more financing for small businesses.

MR. MERRILL: We are doing every-I don't know how I can change to improve the culture of this --

REP. VELAZQUEZ: Okay, my --

MR. MERRILL: -- (cross talk) -- beyond its focus on small --

REP. VELAZQUEZ: My other question --

MR. MERRILL: -- business because we are totally focused on increasing small business. We agree with you. Well, almost totally focused --

REP. VELAZQUEZ: Are you prepared, based on the reality of the economy, to reassess then 20 percent, instead of being the ceiling, to be the-instead of being the floor?

MR. MERRILL: The problem is that we're the lender of last resort. They have to come to us.

REP. VELAZQUEZ: Okay, sir. In light of the fact that the face of small businesses in America is changing, that we have more-that women is the fastest growing sector in terms of small businesses in our economy, there is more women, more Latinos, more blacks, do you have any data as to how much money from the 19.7 percent of financing has gone to minority contractors?

MR. MERRILL: Yes, ma'am, I do. I'd actually like to-I'd like to read it to you. We have the measurement for the whole bank. We do not have a measurement on the 19.7.

REP. VELAZQUEZ: Okay. Will you be prepared to send up to this subcommittee --

MR. MERRILL: Yes, ma'am.

REP. VELAZQUEZ: -- data?

MR. MERRILL: But I'd also like to answer the question so you get at least some --

REP. VELAZQUEZ: Well, you said that you don't have the data?

MR. MERRILL: Not on the basis of the 20 percent, but on the basis of the whole bank.

REP. VELAZQUEZ: No, I'm referring to the 20 percent. Would you --

MR. MERRILL: In that case, I'll have to --

REP. VELAZQUEZ: -- please submit to this committee in writing?

MR. MERRILL: I will have to get back to you with that. But I would like to say that among the larger corporations, that is the Fortune 500 crowd if you will, the G.E.s of the world, G.E. has 11 percent minority contracting, Caterpillar-minority subcontracts, 30 percent --

REP. VELAZQUEZ: That's not my question.

MR. MERRILL: Thirty percent for Caterpillar. The bank's awards to small business are 57 percent, and the awards to African American businesses are 18 percent.

REP. VELAZQUEZ: Mr. Chairman --

MR. MERRILL: But that's out of the total of the bank, not out of the 20 percent. I'll have to get back to you on the 20 percent.

REP. VELAZQUEZ: Thank you. And if I may, Mr. Chairman, this is a very important question because of the arrangement between SBA and Ex-Im Bank. You know that the administration FY '05 budget drastically cuts the 7(a) guarantee loan program out of which the small exporters obtain funding, such as export working capital. Now that less funding is going to be available for small exporters through the SBA export working capital, is the Ex-Im Bank going to start handling smaller loan requests?

MR. MERRILL: Yes, ma'am, we will handle them. Last year we financed $67,000 worth of used clothing to Ghana. We will finance any small business at any level from any state.

REP. VELAZQUEZ: Thank you, Mr. Chairman.

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