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Slow Business Administration

The SBA's response to Katrina is approaching FEMA's in feebleness

The Washington Post

There are many competitors for the title. But after viewing the video (available at ) of a hearing held Nov. 8 by the Senate Committee on Small Business and Entrepreneurship, we'd like to nominate Hector V. Barreto, chief of the Small Business Administration, as the next Michael Brown. The committee chairwoman, Sen. Olympia J. Snowe, R-Maine, began the session by pointing out that the Small Business Administration had, at that time, processed only 10 percent of 28,540 applications for disaster loans from small businesses in the Gulf Coast area and had approved only — percent of them. Barreto responded with a long and self-pitying description of how difficult things remain in the Gulf, how emergencies are not really his responsibility and how much his agency's performance had improved lately.

Unfortunately, improvement isn't the first word that comes to mind when the SBA's loan records are examined a month after that hearing. As of Tuesday, the SBA had received 37,214 applications for disaster business loans. Of those, 2,127 have been approved. Meanwhile, Barreto and his agency are still resisting the committee's proposal to give the SBA funding to make short-term bridge loans similar to those set up to help businesses affected by the Sept. 11, 2001, attacks (loans that the affected states were making before they ran out of funding), arguing that the same needs are met through other SBA programs. This may well represent the first time a government agency has resisted a congressional attempt to give it more money. It may also help explain why economic recovery in Louisiana is going so slowly.

The agency has set up an expedited loan program that it calls GO Loans. But it didn't get going on this program until two months after Hurricane Katrina (and just before the aforementioned Senate hearing), and now not enough lenders in the region are qualified to make these loans. More to the point, the loans are being offered at relatively high interest rates, which doesn't necessarily make them any more attractive than what commercial banks offer anyway. Perhaps that's why the agency has so far approved only 10 of them.

A spokesman says the agency is planning to send a team to the Gulf Coast to find out what the problem is. But the biggest problem seems to be in Washington, where Barreto has shown no sense of urgency. Only under congressional pressure, and only a full two months after the storm, did the agency agree to simplify some of its heavy bureaucracy for victims of Katrina or to start recruiting more loan officers from the private sector. Asked by Senate committee staff members why they weren't willing to try different ways of doing things, SBA officials replied that they didn't want to switch horses in midstream.

The SBA's failure even to understand why it needs to think differently while thousands of businesses are going bankrupt bodes ill. It's possible to imagine many other scenarios ' a terrorist attack, a West Coast earthquake ' that might once again require fast, targeted government help to ensure rapid economic recovery. Small-business loans ' as opposed to massive government aid ' are a smart way to help because they create employment and growth, leading to reduced overall government costs. But without a rethinking of this agency's mission, the loans won't be there when they're needed.