New figures show one agency had a banner year. The Export-Import Bank, which lends money to American companies that do business abroad, had a record number of transactions in fiscal 2012.
Fred Hochberg, the Export-Import Bank president told The Federal Drive with Tom Temin and Emily Kopp there were two good reason for the bank’s success.
“One, we’re on an export upswing,” he said. “Exports topped $2.1 trillion last year. Never have we done more exports than we did in 2011. And two, the other thing that’s not as good is the financial markets are still kind of weak. So, one of the reasons we’ve had to step in is to make sure we keep those exports going and the jobs being created. We need to step in sometimes and help finance those exports.”
The bank is not subsidized; rather, it collects a fee for the work it does, which covers all of the agency’s administrative costs and loan-lost reserves. “On top of that, in fiscal 2012, we sent the Treasury $1.1 billion,” Hochberg said. “Subsidy usually means you get something from the government. We actually contribute to the government.”
While the Export-Import Bank is able to offer low-interest loans like other banks, its loans are backed by the “full faith and credit of the U.S. government,” Hockberg said.
“We did almost $36 billion worth of approved loans and most of those loans go to foreign buyers so that they can buy U.S. goods,” he said. “Very few of them actually go to U.S. companies. Most of them go to their customers.”
Bright future ahead for U.S. exports
Looking down the road to the next four or five years, Hochberg expects to see the large upswing in exports to continue.
“We make a difference in two areas, long-term loans and small business,” he said. “Those two areas I believe are going to still have trouble getting lending from banks for quite some time to come.
According to the 2012 Annual Report, the bank has not only been posting good numbers, its employees are more productive as well.
Part of the workforce’s success is its collaborative nature. “People have found a lot of shortcuts,” Hochberg said. “We’ve eliminated things like Credit Committee, so the career staff of the bank can approve loans up to $10 million. There’s a process for that, but the point is, we’ve delegated more authority to our employees and we’ve tried to therefore cut cycle time.”
Using this process, the bank has been able to process 98 percent of all loans within 100 days and 90 percent within 30 days.
Helping business succeed overseas
The bank’s role is to help companies that are having a difficult time finding financing due the nature of the products they produce — satellite, nuclear power plants or large commercial aircraft — or the countries they are selling products to.
“U.S. companies are sometimes selling to countries that are hard to finance into,” Hochberg said. “Kazakhstan, South Africa, Colombia, these are more difficult markets for banks to be comfortable in. So, we try to fill the gap on products that are hard to finance and countries that are hard to finance.”
The Export-Import Bank conducts extensive credit reviews of its customers and reports its default rates to Congress every 90 days. “Our defaults right now are running about one-third of 1 percent,” he said.
Currently, the bank operates in 178 countries and is waiting for the State Department and President Obama to make a decision about whether it can begin doing business in Burma.
“There’s certainly a keen interest in Burma,” Hochberg said, but added the “real action” for U.S. exports is in emerging markets like India, Turkey, China, South Africa and Mozambique.
“I think a lot of those countries are going to be still growing strong,” he said. “Some of the fastest growing countries in the world today are actually in South Africa and Sub-Saharan Africa.”
What makes Hochberg optimistic about the emerging markets is the growing middle class in those countries, something key he said U.S. businesses should be building their exports on.
“Why I’m so optimistic and bullish is the continuing emergence of the middle class globally,” he said. “We’re looking at more than a billion additional people entering the middle class by the end of this decade.”
All of the bank’s good news and optimism comes in the wake of a bumpy authorization process that wrapped up last May, when President Obama signed the bank’s three- year re-authorization.
“At the end of the day, that was a bipartisan agreement but a hard-fought agreement,” Hochberg said. “Partly, we’re having a little bit of a debate in this country of what is the role of the government? Does government have a role in helping create jobs and helping businesses succeed. That was partly what that debate was about last spring.”
Tom Temin is the host of The Federal Drive, 6 a.m.-10 a.m. on 1500 AM in the Washington, D.C. region and online everywhere.
Tom also writes a weekly commentary. Subscribe to Federal Drive's daily audio interviews on iTunes or PodcastOne