News From the
Committee on Small Business
Nydia M. Velázquez, Ranking Democratic Member

For Immediate Release
April 25, 2006

CONTACT: Kate Davis, Allyson Ivins, (202) 225-4038

Velázquez Calls SBA Head's Announcement to Resign
the "Right Thing to Do"
Resignation announcement provides opportunity to introduce independent voice at SBA

WASHINGTON - As the Small Business Administration's (SBA) administrator, Hector Barreto, announced his resignation today following a five year reign at the agency, Congresswoman Nydia M. Velázquez, Ranking Democrat on the House Small Business Committee, wished Mr. Barreto well and stated that, "unfortunately, he was simply not up to the challenges of running this agency."

"I think the administrator has truly made the right decision not only for the agency, but for this nation's small businesses," Congresswoman Velázquez said. "Entrepreneurs have not been receiving the commitment and dedication they deserve over the past five years, and it was certainly showing in the rising cost of capital, declining contracting opportunities and poor disaster responses. New leadership that is truly dedicated to small business is just what this agency needs today."

Congresswoman Velázquez had called for the resignation of Hector Barreto in December following the agency's poor response to Hurricane Katrina, compounded by the downfall of SBA programs over the past five years due to his mismanagement. The most recent troubles at the agency were highlighted during the disaster response for Hurricanes Katrina, Rita and Wilma. Nearly nine months following the disaster, the agency had declined nearly 70 percent of the disaster loans, and had experienced massive delays and backlogs in their processing - leaving millions of disaster victims without the assistance they need to rebuild and recover their livelihood.

Hector Barreto is leaving the agency at a time when its budget has been cut in half during his tenure - down from a $1.1 billion request in 2001 to a mere $593 million request last year, which has resulted in less efficient and effective programs for small businesses. Millions of entrepreneurs rely on SBA lending programs to access affordable capital; however, the cost of capital has experienced double digit increases over the past few years. The agency's largest lending program -7(a) - actually shutdown two years ago, and had to reopen with severe caps in place. In addition, the federal government's largest venture capital program - the Small Business Investment Company (SBIC) participating securities program - shut down under Mr. Barreto's watch over a year ago, and to date has still not been reopened.

As the sole agency charged with assisting this nation's small businesses, SBA is responsible for oversight of small businesses in the federal marketplace. However, the agency's contracting system has been under investigation in the past. Reports found that the agency's small business contracting goal has actually been inflated with large business awards, which was listed as the number one management issue by SBA's own Inspector General. Reports have also found that the agency has a lack of oversight over contracting practices within the agency. These shortfalls have resulted in employee morale reaching an all time low this past year, and SBA also scored low on customer service ratings.

"It is my hope that Mr. Bolten will take this opportunity to recognize the problems that had existed in the agency and recommends new leadership that will correct those issues," Congresswoman Velazquez said. "What we need now is a new voice that will speak their mind when the President is wrong, defend the needs of this nation's entrepreneurs, and fight for the best interests of small businesses - just as a number of past administrators have done. With the right leadership, this agency could return to the days of the 1990s when it was a driving economic force - and truly provided assistance to this nation's small businesses."

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