WASHINGTON - The Ranking Democrat on the House Small Business Committee, Congresswoman Nydia M. Velázquez (D-N.Y.), today called for the immediate resignation of Hector Barreto, head of the Small Business Administration (SBA), amid scathing reports of the agency's failure to provide adequate assistance to Gulf Coast entrepreneurs recovering from the recent hurricanes. Three months after Hurricanes Katrina, Rita and Wilma, SBA declined 80 percent of all disaster loans, with a backlog of over 200,000 pending applications. This comes at a time when the agency is struggling under the weight of congressional inquiries, various GAO investigations, and even critical reports from its own Inspector General (IG) for its performance over the past year. Velázquez pointed out that this caps yet another year SBA has failed to deliver America's small business owners with the access to capital, contracting opportunities, and business development they need to be successful.

"For three months now, we have heard the harrowing tales from Gulf Coast business owners, with Mr. Barreto promising assistance in days, not months - but at this point, it is clear the agency has failed to deliver that promise," Congresswoman Velázquez said. "We continue to see low loan approval rates for SBA disaster loans, immense backlogs and high decline rates, coupled with massive business losses in the Gulf Coast region. Rather than take responsibility for these missteps, the administrator remains out of touch with reality claiming 'everything is fine.' Well, clearly, everything is not fine. We need new leadership at SBA with the vision to put this agency back on track and return to its mission of assisting entrepreneurs."

Nearly one month after Hurricane Katrina touched down, not even one loan had been approved for local homeowners and business owners. Now over three months later, out of the 312,000 applicants, only 5 percent have actually received any financial assistance - meaning that Gulf residents and business owners will continue to wait for any form of aid. When compared to the 2004 hurricane season, SBA was able to approve over twice as many loans with nearly a fourth of the staff they currently have. Much of the problem stems from the fact that despite criticism and concern, the agency poorly chose to implement a new loan processing system during the height of hurricane season, failing to give employees ample time to become fully trained and comfortable with the system.

Under intense pressure to speed up the loan approval process, SBA announced the Go Loan program on November 8 - over two months after the hurricanes hit - to allow private banks to underwrite small business loans. However, as of last week, only ten Go Loans had been approved. Instead of taking the steps necessary to fix the loan processing system meant to help businesses affected by disasters, the agency chose to introduce a loan program with high fees and soaring interest rates reaching 13.5 percent - which have deterred most business owners from even utilizing the program. The troubles with the disaster loan processing system, coupled with a misguided, inefficient alternative in the Go Loan program, are only inhibiting the recovery process for thousands of small businesses waiting for financial assistance.

The agency's recent mishandling of the hurricane disaster loans is just the latest in a series of blunders occurring under Hector Barreto's leadership, with the delayed response times only adding to its woes. SBA, an agency with a budget that has been shrinking each year, has been claiming to succeed at doing "more with less" despite the size of their budget. However, just last year, SBA's flagship 7(a) program - responsible for 30 percent of all long term lending - was temporarily shut down after the agency failed to notify Congress that the program needed additional funding to operate. On top of this, the Small Business Investment Companies (SBIC) Participating Securities program - SBA's only venture capital program - is no longer operating due to Mr. Barreto's ill-informed policy recommendations. The agency has been unable to provide any solutions for reopening the program.

SBA's failure to provide entrepreneurs with adequate access to federal procurement opportunities is further evidence of the agency's downfalls. Last year, SBA triumphantly announced the achievement of record small business contracting goals - only to admit three months later that the numbers were incorrect and had to be revised downward due to misrepresentation of contract awards. Inaccurate data is not the sole contracting issue plaguing SBA. For the entity charged as the primary watchdog to ensure small companies are treated fairly in the federal marketplace, the agency allowed other agencies to count contracts provided to large firms as part of their small business achievements for years now. Despite congressional oversight and numerous IG reports, Mr. Barreto has failed to correct these problems, costing small firms $1.4 billion in lost contracting opportunities in FY 2004 alone. On top of this, SBA's own IG issued numerous troubling reports stating the agency has failed to review bundled contracts, properly code contracts, and comply with the requirements outlined in the President's 2002 Small Business Agenda.

There has also been a significant lack of commitment to minority and women-owned firms, despite claims of support for this sector upon Mr. Barreto's takeover of the agency. SBA's 8(a) program, the key business development initiative designed to help minority business owners access the federal marketplace, has been on a downward spiral. In one year alone, 8(a) participants lost a record $2.4 billion in contracting opportunities in FY 2004. This is coupled with the fact that for the past five years, Hector Barreto has refused to implement the women's procurement program, signed into law in 2000 - inaction that has cost women entrepreneurs over $33 billion in contracting opportunities. This has led to the filing of an unprecedented lawsuit by women business owners against Hector Barreto to force him to implement the program.

This mismanagement and disregard for SBA's hardworking employees has resulted in an all-time low for agency satisfaction. In a 2005 ranking of employee morale at 30 federal agencies issued in mid-September by the non-profit Partnership for Public Service, SBA came in last - a drop of 17.4 percent, the largest decrease of any federal agency from the previous year. In a 2004 American Customer Satisfaction Index (ACSI) for the federal government conducted, by the University of Michigan, that took into account courtesy, professionalism, timeliness of service, accessibility, and confidence - SBA scored a mere 67 on a 100-point scale for consumer satisfaction.

Velázquez noted the preponderance of evidence that points to nothing less than an immediate need for new leadership at SBA. "For an agency tasked with the sole purpose of providing assistance to our nation's entrepreneurs, it is inconceivable to think that Mr. Barreto - a former small business owner himself - has simply run SBA straight into the ground," Congresswoman Velázquez said. "I truly fear for small business owners, whether it is those in the Gulf who are hanging on by a thread, or any of this nation's 23 million small firms that are being impacted on a daily basis by SBA's missteps. These inactions have resulted in little, if any assistance actually reaching our entrepreneurs. The bottom line here is that America's small businesses deserve better than the leadership Mr. Barreto has to offer this agency - not just in the Gulf Coast, but across the country."

Congresswoman Velázquez will discuss this issue tomorrow at the 11:30 press conference in the House Radio/TV Gallery for the release of the House Small Business Committee Democrats' End of Year report. Press credentials are required.