Letter to Stephen Fincher, U.S. Representative and Mark Kirk, U.S. Senator - Reform Ex-Im Bank

Letter

Dear Representative Fincher and Senator Kirk:

Maine's 2nd Congressional District is home to some of the most honest, hardest-working families in America. I'm honored and humbled to represent them in the U.S. House of Representatives.

The General Electric Company (GE) employs approximately 450 fellow Mainers at its Bangor gas and steam turbine manufacturing plant. I visited the impressive facility this summer and met with a number of the highly skilled workers. They produce the highest quality turbines used to generate electric power around the globe. These hard-working friends and neighbors are proud of what they create and appreciative of their good-paying jobs.

Recently, GE announced it might add 80 future jobs at a plant in France if the U.S. Export-Import Bank (ExIm) is not reauthorized by the U.S. House and Senate. I'm disappointed that a huge American corporation would use such politically charged language while considering to grow jobs overseas.

As we know, ExIm provides low-interest rate loans and guarantees to foreign companies to help them buy products manufactured by U.S. businesses. The ExIm Bank extends around two-thirds of its authorizations to only 10 large American corporations, including GE. ExIm is able to offer these low-interest loans and guarantees because U.S. taxpayers are on the hook for possible bailouts if the foreign borrowers do not repay their loans.

On behalf of Maine's honest and hard-working families, I thank you for initiating legislation to reform the Export-Import Bank. To that end, I respectfully ask that you include the additional reforms below in your bills. I'm very concerned about the long record of fraud and corruption, lack of management accountability, and taxpayer risk at the Bank. It would be most effective if the following reforms were included in your legislation before being submitted to the House and Senate Floors for ExIm reauthorization votes.

1. Replace Bank senior management including Chairman and President Fred Hochberg.

During the past five years, Mr. Hochberg and his team have repeatedly ignored the demands of the House Financial Services Committee, which has Congressional oversight of ExIm, to clean up its long history of fraud, corruption, and insider dealings. During Director Hochberg's tenure, there have been 49 legal convictions for fraud, bribery, and corruption by Bank employees and others associated with its lending practices. The courts have dealt out 75 years of jail time and $224 million of fines and penalties. Today, there are 31 ongoing investigations of fraud and corruption. Hard-working American taxpayers, who backstop the Bank's low interest rate loans to foreign companies, should not be subjected to this continuous and inexcusable violation of unethical government behavior. A new management team committed to cleaning up the mess will help restore public trust in the Export-Import Bank.

2. Change majority of Bank directors to non-partisan business professionals with extensive financial experience.

The President of the United States appoints five of the seven board members. Each member must be confirmed by vote of the Senate. A more forthright and robust dialogue regarding Bank policies is needed to root out long-standing fraud, corruption, and insider dealings, and to ensure that such unacceptable behavior does not find its way back into the Bank. That can be advanced by a board of directors comprised of professionals with diverse financial and business skills and experience, not beholden to the Executive Branch. This will improve transparency and hold management accountability for ethical behavior.

3. Congress should force the Bank to reveal true cost of operations to taxpayers.

The Export-Import Bank should use fair-value accounting so Congress has a more accurate understanding of its real cost. Comparing market interest rates to the Bank's taxpayer backed low-interest rate loans would help measure the actual cost and risk to American taxpayers. Using this widely accepted methodology, in 2014, the non-partisan Congressional Budget Office calculated ExIm's budgetary impact shifted from reducing the deficit by approximately $14 billion to increasing it by $2 billion over 10 years. The taxpayers who risk bailing out the Bank's loans to foreign companies if they are not repaid deserve to know the true cost and risk they are assuming.

4. Reduce taxpayer risk by requiring internal build-up of Bank reserves.

U.S. taxpayers are on the hook to bail out foreign companies who are awarded guarantees and low interest rate loans from the Export-Import Bank if they cannot repay the borrowing. The risk is real for the $107 billion of outstanding loans in the Bank's portfolio as seen by the $3 billion bailout in 1987. As such, I respectfully recommend an even stronger provision in Section 201 of the Fincher bill to further increase ExIm's loss reserves in order to protect hard-working American taxpayers against the possibility of loan default by foreign borrowers.

In addition to the above recommended reforms, I fully support Section 110 of the Fincher bill that moves ExIm to the lender of last resort if foreign companies are unable to secure their own financing to buy products manufactured by U.S. corporations. This thoughtful provision will lessen the crowding out of private financing by ExIm, and thereby encourage competition with ExIm by U.S. commercial banks--boosting American job creation. ExIm as the last lending option for foreign companies will also reduce the risk of bailouts by American taxpayers.

Thank you, Representative Fincher and Senator Kirk, for consideration of the above reforms for inclusion in your proposed legislation to fix the serious problems at the U.S. Export-Import Bank. The reforms place the needs of American taxpayers before those of foreign borrowers. They will help restore the public trust in this federal government entity. And, the reforms will strengthen the job creation activities of the Bank, including for the skilled and hard-working employees at the General Electric plant in Bangor, Maine.

Together, the U.S. House and Senate can help lay the foundation for a growing American economy and good-paying jobs while rooting out fraud, corruption, and insider dealings in Washington. With this ongoing commitment to work together for change, I will be in a position to support the reauthorization of a more effective and accountable Export-Import Bank.

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