Finance

Export-Import Bank's Hochberg says institution critical to keeping U.S. companies competitive on energy

How does the Export-Import Bank of the United States help U.S. companies stay competitive in international energy markets? During today's OnPoint, Fred Hochberg, chairman and president of the Ex-Im Bank, makes the case for long-term congressional reauthorization of the institution. Hochberg also discusses a recent trip to India where renewable energy opportunities were explored.

Transcript

Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. With me today is Fred Hochberg, chairman and president of the Export-Import Bank of the United States. Chairman Hochberg, thank you for joining me.

Fred Hochberg: Thanks for having me.

Monica Trauzzi: Let's start with a bit of background on the role of the Export-Import Bank on energy-related matters. How does the bank keep U.S. companies competitive in the international market?

Fred Hochberg: Well, the Ex-Im Bank's been around for 80 years, started by FDR, acknowledging from Day 1 that selling overseas has more risk and more challenges. I often think of myself as Plan B. Plan A is go to the private sector, but if the private sector isn't available, either due to the financial crisis we just came through or capacity constraints in certain countries are more challenging, we step in and we can finance a project. We either do it through guarantee or insurance or even a direct loan.

Monica Trauzzi: So how much financial risk is there to taxpayers?

Fred Hochberg: Well, we actually report our defaults to Congress every 90 days. We're currently running less than one-fifth of 1 percent. We do this every 90 days. We just finished our fiscal year. We now have 26 years in a row of a clean financial audit from outside auditors like Deloitte Touche or Pricewaterhouse, recognized public accountants, unqualified opinions. So, I feel confident about that. I've added a chief risk officer in the last year. We have an enterprise risk committee. So, we take that very seriously. We're operating on the full faith and credit of the U.S. taxpayer, and all of us at the bank take that very seriously.

Monica Trauzzi: There are questions in Congress over whether the bank is necessary and whether to reauthorize it. With Republicans about to take control over both chambers of Congress in January, the thinking is that the future of the bank could be at risk. What do you think the prospects are heading into June, when you'll be seeking reauthorization?

Fred Hochberg: Well, we've been reauthorized 16 times. President Reagan, just to use an example -- we got a six-year reauthorization under President Reagan, so we have enjoyed bipartisan majorities in the House and the Senate as recently as 2012 we had 78 to 20 votes in the Senate, 330 to 93 in the House, so we had large bipartisan majority. So, there are no Republican exports or Democratic exports. We make sure that U.S. companies compete globally and make sure they are on a level playing field with foreign competition.

Monica Trauzzi: But why do you think that recently there has been an issue, particularly among Republicans, relating to the bank?

Fred Hochberg: Well, I think there's some questions about what's the role of government. I think there's a question about the role of government, and do we need government to play a role? And I think those are legitimate questions. We always should be looking at does government need to be doing something. In this case, I was in business for 20 years. I ran a small business for 20 years, so I understand the private sector. I've been in the private sector, but if we want to compete and we want jobs here in the United States, we need to make sure we have a backstop. We don't do every transaction. We're not intended to do every transaction, but we don't want to lose a sale to a foreign competitor backed by their government because we're not standing behind our exporters.

Monica Trauzzi: The last reauthorization was for nine months. How is sort of that lack of a long-term reauthorization impacting U.S. companies?

Fred Hochberg: In a very damaging way, actually. We have one company in particular I've been talking to, had an order. They were the prime prospect to do an energy project actually in the Philippines, and the Philippines decided that, due to the uncertainty, they were going to go with the South Korean alternative. So, I think that that was a very clear black and white. We're working with that company to try to win that order back. I was in business a long time. Winning an order back's a lot harder than winning it the first time, so some banks have told me they've sort of pulled back because they don't want to get caught halfway into a transaction then find out we're not around. So, I think it's causing a lot of difficulty. And, lastly, I just returned from India two days ago, and I have to begin every conversation with this question as opposed to talking about how we further U.S. exports, support more jobs at home. I'm having to say, "Can we rely on you? Are you going to be there for us?"

Monica Trauzzi: Let's talk about that trip to India. You focused on renewable energy opportunities there. What actions did you take, and what is the potential for U.S. companies with interest in India?

Fred Hochberg: I've been to India eight or nine times. It's our second-largest market after Mexico. It's a very strong market for us, enormous interest in solar energy, particular in solar, wind, but solar much more so. We signed an MOU with the renewable energy authority there for $1 billion to signal that we're ready to support more renewable energy. I was quite surprised. They have probably, in my opinion, the most advanced and developed renewable energy plan of any country I've seen. They had planned on 20,000 gigawatts by 2022, and they now increased it to 100,000, so they realize that they need to get power for everybody. Prime Minister Modi and President Obama talked about this when the prime minister was here in September, a clear indication that we need to be working together on this, and they are going full speed ahead, particularly in the renewable space.

Monica Trauzzi: And so, beyond India, what other energy opportunities are you looking at across the globe?

Fred Hochberg: Well, there's a lot. I mean, there's a lot of gas that's being developed in Africa. There is some geothermal in Indonesia, though that's been slower, to be candid with you. In Brazil they're looking much more in sort of the pre-salt. We've been talking to them about some oil rigs. We've also financed some ships that go to -- that service the offshore rigs. So I think there're a number of opportunities in places like that. Well, we did two major LNG projects in Australia, so I think there are a lot of opportunities in the energy field. It's one of the core competencies, I would say, of Ex-Im Bank.

Monica Trauzzi: How much of a focus is there on funding fossil fuel projects abroad, and how does that balance with the Obama administration's Climate Action Plan?

Fred Hochberg: We respond to customers' needs. When customers come to us, they come to us either an exporter or come to us -- or the purchaser overseas, because they can't get conventional financing. So, it's not like we have a forecast for fossil fuels or renewable. Congress has given us a mandate to do more in the renewable space, so we actually do more business development there, but otherwise we really respond to the marketplace. When the market needs us in certain industries or certain countries, we step in as a backstop to make sure that U.S. companies compete, because we want those jobs here. Last year we just reported our results. A hundred and sixty-four thousand jobs, according to the Bureau of Labor Statistics, was supported by our financing. So, that's almost a full month's worth of jobs that we're creating each and every month. That's a big number, and we want to make sure we keep doing that.

Monica Trauzzi: All right, very interesting. We'll end it there. Thank you for coming on the show.

Fred Hochberg: Thank you. Thanks, Monica.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

[End of Audio]

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