The Export-Import Bank’s acting inspector general testified to Congress on Thursday that the bank could lose $150 million off a deal it financed with an Australian company that went bankrupt in April.
Bank officials approved a $280 million loan in 2012 to NewSat so it could purchase a satellite from U.S.-based company Lockheed Martin. NewSat filed for bankruptcy in April.
Ex-Im Acting Inspector General Mike McCarthy testified before a House subcommittee hearing that bank officials launched an internal inspection into the bank’s financing of NewSat.
{mosads}”How much are the taxpayers on the hook for?” Rep. Jim Jordan (R-Ohio), who chaired the hearing, asked McCarthy.
“I believe at this point it’s around $150 million, but there’s potential for recovery in that matter,” McCarthy said.
The bank’s supporters note that Ex-Im has a 0.167 percent default rate as of March 2015. And when a project does default, bank officials can pull from its $5 billion loan loss reserve fund.
“How did all fly under the bank’s radar?” Jordan asked. “How in the world did the bank miss this?”
“We’re conducting an inspection of this transaction,” McCarthy said.
The attack comes as conservatives are looking to end the bank’s charter, which expires June 30. The business community, moderate Republicans and Democrats are pushing for a reauthorization, arguing the bank helps finance projects that spur economic growth and support jobs.
After the hearing, Jordan told The Hill it was just “one more example of why this thing needs to go away.”
At a Senate hearing earlier this month, Export-Import Bank President Fred Hochberg defended the bank’s financing NewSat, arguing it helped sustain 250 jobs at Lockheed Martin and 650 jobs indirectly through Lockheed’s supply chain.
“From time to time, a deal will experience difficulties. That’s what capitalism is about. Everything doesn’t go perfectly according to plan, sometimes deals do better than expected, sometimes worse, sometimes exactly,” Hochberg said.
He called the NewSat issue “a project that’s in labor.”
“It’s in difficulty right now. We’re working through it,” Hochberg testified. “I still think we’re going to find a better solution. Yes — the news sounds rather grim, but I didn’t write that story.”