Head of US's official export credit agency sees business triple
By Zachary S. Fagenson
The part-time Miamian now sitting atop the US Export-Import Bank says though the bank did $21 billion in trade financing last year, no deal is too small to consider.
"In the first four months of this year we did $10.9 billion" of financing, Exim bank Chairman and President Fred Hochberg said in a telephone interview, "three times what we did last year during the same period.
"And small business was up in the first four months, doubling last year's," he added.
The bank is the US's official export credit agency, charged with helping to finance US exports to foreign markets.
It provides direct loans for export-related activities or guarantees loans that banks would not otherwise provide and finances foreign buyers' purchases of US exports.
Its transactions range from as little as $11,000 to the $1 billion deal the bank just completed with Air India.
Mr. Hochberg, who owns a Miami Beach home and is a former board member of the Wolfsonian Museum, was appointed to the post by President Obama, sworn in in mid-May, and is to serve until Jan. 20, 2013. He previously served as deputy director, then acting director of the Small Business Administration under President Clinton and was most recently dean of Milano, The New School for Management and Urban Policy in New York City.
Though 2009 was a year of unprecedented economic and financial upheaval, Mr. Hochberg finds himself at the helm of what, on paper, appears to be the one of the federal government's best assets.
The agency did $20 billion in financing in 2009, up 50% from 2008, and Mr. Hochberg said it's on pace to guarantee or provide even more loans during 2010.
And as the bank's assistance to exporters grows and President Obama's 2010 budget calls for a 25% increase in the bank's budget, it could pay special attention to small exporters and Latin American markets.
Of the bank's loans, 85% are to small businesses, according to bank spokesperson Phil Cogan, which equates to $4.3 billion of transactions.
But the bank is looking to grow that figure.
"We actually launched last year something called Exports Live, where we went out into eight different cities in the fall to promote exporting among small- and medium-sized businesses," Mr. Hochberg said. "We're taking the resources of the Export-Import Bank, the Small Business Administration and the Department of Commerce and going community by community so small businesses can see firsthand what tools are available."
And while the agency offers multiple finance tools to help exporters grow, financing isn't the only thing that can help grow the sector.
"Another thing we recommend to companies is to make sure they have an Internet presence," Mr. Hochberg said. "We see increasingly an interest and a desire for people [around the world] to buy American goods and services."
But the agency has also had to get creative to give lenders the flexibility needed during uncertain times and also incentives to countries looking to buy US products.
One is a put-back option on guarantees that allows a cash-strapped lender to put its export loan back to the agency to help manage low-liquidity levels.
The other, used in large purchases such as aircraft, helps foreign buyers cut the cost of buying US goods.
"They are actually taking a loan they use to buy [an] aircraft and taking a bond and selling it on the markets," Mr. Hochberg said. The move can "help trim 75 to 100 basis points off the interest rates."
Meanwhile, the huge increase in export financing and guarantees the agency took on last year isn't a fluke due to the financial meltdown and subsequent credit freeze.
"When the crisis hit and demand went down… banks were hoarding their liquidity to face the potential effects of a drawn-out recession and it was a real gap that really affected the [export] market," said John Rodriguez, president of the Florida International Bankers Association and a senior vice president in Wells Fargo's global correspondent banking division. "One way banks can lend with risk mitigation that allows [for] returns and capital allocations to be balanced is the Exim bank program.
"In the meantime, you're seeing that bank regulation is keeping banks at bay to make sure they have prudent lending practices."
And Mr. Hochberg said the bank's role in guaranteeing loans that might otherwise not be made will only grow in coming years.
"One I think that we see in general is banks are deleveraging at a rapid rate," Mr. Hochberg said. "I believe that the reliance on export credit agencies to help trade finance is going to continue for several years.
"Non-depository lenders are going to have a tough time in the years to come," he added.
But the bank could also play a key role in opening new markets to American exports — markets that lenders, even during stable economic circumstances, would think twice about before offering export credit.
The US is "trading more and more to emerging markets, and the need for agencies like Exim is going to increase," Mr. Hochberg said.
While he said Mexico, Colombia and Brazil are the "three key markets" the agency is looking at, natural ties between Miami and Latin America may have also caught its attention.
"The whole Latin American diaspora living in America frequently [does] a lot of exporting back to their home country," he said. "Miami is particularly rich in that."