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Congresswoman Calling for SBA Chief's Resignation

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Dec. 15, 2005--The ranking member of the House Small Business Committee is calling for the resignation of Small Business Administration chief Hector Barreto, citing the agency's mishandling of federal hurricane disaster loans, among other issues.

Rep. Nydia Velazquez (D-N.Y.) said in the three months since Hurricane Katrina slammed into the Gulf Coast, Barreto and the SBA have failed to provide adequate assistance to local entrepreneurs, leaving them "hanging on by a thread," she said in statement Wednesday -- one day before issuing a scathing year-end report detailing more than 40 pieces of small business legislation currently stalled in Congress.

"The last thing we want is another do-nothing Congress for small business," she said.

So far, fewer than 5% of 312,000 emergency loan applications filed by business owners in the Gulf Coast have received financial assistance, about half the amount approved over the 2004 hurricane season, Velazquez said.

As of last week, she said, only 10 loans had been approved under the agency's new Go Loan program -- launched last month to speed up the process following complaints from business owners, along with members of Congress and the Senate, of costly delays.

According to SBA figures released Thursday, the agency has received 317,000 applications, of which a third have been processed. To date, the agency says, it has approved $1.4 billion in loans for over 21,000 homeowners, renters, and small businesses, with loan approvals since the beginning of December averaging $33 million per day.

"Since the beginning, we've been working with state and local governments as well as the private sector and the non-profit community to help the Gulf Coast rebuild," Barreto said in a statement Thursday.

Before Katrina struck, there were an estimated 900,000 small businesses in the Gulf Coast region. The 77 counties worst hit by the storm -- followed by Hurricane Rita just weeks later -- are home to some 145,000 businesses employing 2.4 million residents, according to government figures. Losses are now estimated at more than $140 billion, of which only $40 billion was insured.

The slow approval rate, coupled with application backlogs and a high decline rate, have already caused massive business losses in the Gulf Coast region, Velazquez said.

"For three months now, we have heard the harrowing tales from Gulf Coast business owners, with Mr. Barreto promising assistance in days, not months," Velazquez said. "It is clear the agency has failed to deliver that promise."

She blamed ongoing delays on a misguided decision to implement a new loan-processing system at the height of the storm season.

In October, Barreto defended the agency's efforts during a congressional hearing, saying SBA loan officers were hampered by faulty communications systems, while many of the region's most devastated communities were simply inaccessible.

At a press conference Thursday, Rep. Don Manzullo (R-Ill.), who chairs the House Small Business Committee, echoed Barreto's testimony, calling the three storms a "triple whammy [that] caused unprecedented challenges for government officials." He said the SBA was stuck in a no-win situation.

"It is understandable that those affected by the disaster want to get their loans as soon as possible," Manzullo said. "At the same time, taxpayers demand accountability and a reasonable expectation that the loans will be paid back." That requires SBA loan officers to be extra diligent, he said.

Manzullo cited the high number of 9/11 loan recipients who have since defaulted on their loans -- twice as many as any previous disaster, he said. "And still, the SBA was criticized for not responding fast enough," he added.

Yet beyond hurricane relief woes, Velazquez also accused Barreto of running the agency "straight into the ground," pointing to funding shortfalls with its flagship 7(a) loan program, the shuttering of its only venture capital program, and its failure to meet small-business contracting targets.

In an annual year-end report released Thursday, Democrats on the House Small Business Committee said Congress had "failed to make the programs most essential for small firms a priority, instead focusing on a plethora of other matters."

Velazquez said the agency's missteps under Barreto cost small firms some $1.4 billion in contracting opportunities last year alone.

"The bottom line here is that America's small businesses deserve better," she said.

Last updated: Dec 15, 2005




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