WASHINGTON - It has been a challenging few months for Hector V. Barreto, but the administrator of the Small Business Administration insists that the heat is not getting to him.
Since Hurricane Katrina leveled much of the Gulf Coast in late August, the agency has been under attack from business owners, lenders, and lawmakers, who say it has been too slow in responding to the disaster. It has also been faulted for its response to 9/11; a series of Associated Press stories last September said an SBA-managed program set up in response to the attacks lent to many companies that had not been hurt.
Rumors have begun circulating that Mr. Barreto, 44, is angling for a new job - ambassador to Mexico, president of the U.S. Hispanic Chamber of Commerce - and his fiercest critics are calling for his resignation.
But Mr. Barreto, who has already held his job longer than all but two of his predecessors, dismisses the speculation that he is job hunting, as well as much of the criticism that has been leveled at him.
In an interview last week, he said he is as enthusiastic about his job now as he was when he took office in July 2001. He said his critics fail to recognize the boundaries within which its disaster-relief efforts must operate, and they ignore the fact that the SBA's lending activity has nearly doubled, to $19 billion, since 2001, despite deep cuts in the agency's staffing and operating budget.
"When I started here, SBA was at a crossroads," Mr. Barreto said. "Some said this agency's best days were behind it. [Now] we're doing two times the number of loans - nearly two times the dollar volume. We've directed billions more in federal contracts to small businesses. … This is a completely different agency than it was four years ago."
Among those who disagree is Rep. Nydia M. Velazquez of New York, the ranking Democrat on the House Small Business Committee.
Rep. Velazquez said that Mr. Barreto has committed a series of blunders, culminating in the mismanagement of the Gulf Coast relief effort. Last month she called for him to step down.
"The bottom line here is that Hector Barreto is simply not getting the job done," Rep. Velazquez said in an e-mail Thursday. "I am sure the administrator has been trying his best - but the fact of the matter is that he is clearly not up to the task."
Mr. Barreto has been a lightning rod for controversy since President Bush appointed him. His signature achievement, changing the way the SBA pays for its loan losses, was bitterly opposed by congressional Democrats, bank trade groups, and business owners. Many continue to attack, even though the SBA has guaranteed record loan volume in each of the last two years.
The SBA used to pay the 7(a) program's credit costs with an appropriation from Congress. But the money frequently came late, a situation that resulted in frequent program slowdowns and occasional shutdowns. In fiscal 2005 the SBA gave up the appropriation (which usually totaled around $100 million) and boosted user fees charged to lenders and borrowers to make up for the lost revenue.
The result, according to many lenders, has been a more effective and stable operation. The 7(a) program accounts for about three-fourths of the SBA's lending activity.
"Now our lenders are rushing to get new loan officers trained," Anthony Wilkinson, the president and chief executive officer of the National Association of Government Guaranteed Lenders, said Tuesday. "What they have told me is that the cost of program disruptions and uncertainty was much higher than a modest fee increase."
The change was fiercely resisted by some banking trade groups and by congressional Democrats, who argued that the increased fees would make the program too costly for many entrepreneurs.
They fought unsuccessfully to revive the subsidy in the 2005 and 2006 budgets, but they acknowledge now that the change has become permanent.
And though he worries that the critics' concerns about the program's cost may yet prove true, Mr. Wilkinson said the zero-subsidy plan has worked so far, and that he expects another record year in fiscal 2006.
"If that plays out, we'll have had a three-year period of making all the loans we could," he said. "These are good times."
Mr. Barreto, though, says that the public has no interest in hearing about the growth of the SBA's regular lending programs right now. The agency is focused on the rebuilding effort under way in Louisiana and Mississippi, "as it should be."
(The SBA is generally not a direct lender; it guarantees loans made by banks and other lenders. However, it does make direct loans to homeowners and businesses affected by disasters.)
He would like people to focus on the fact that his agency is now approving about $50 million of disaster-relief loans a day, and that it is expected to surpass $3 billion over all by the end of the month.
"We've got people working seven days a week, 24 hours a day," he said.
Rep. Velazquez and other critics, though, charge that the SBA takes far too long to process and underwrite loans and is rejecting far too many borrowers. She said it has declined far more than half the disaster-loan applications it has received.
"The agency has declined an unprecedented amount of loans for one of the worst natural disasters to ever hit this nation," she said in her e-mail. "With thousands of small-business and home owners in desperate need of immediate assistance, there is simply no excuse for SBA's massive delays and backlogs that have prevented hurricane victims from receiving timely and adequate assistance - and it is certainly nothing the administration should be proud of."
And though Peter K. Gwaltney, the CEO of the Louisiana Bankers Association, is not nearly as scathing in his criticism, he said Tuesday that many bankers in his state remain disappointed in the SBA, despite the pickup in disaster loan approvals.
"I am pleased to hear that it is doing more than it was before, but we are still very frustrated with the slowness of the response," he said. "At the start, the demand was so great, and the response was so long. … One of the lessons we learned is that we are going to have to help ourselves. We cannot rely on the federal government to pull us out."
However, Mr. Barreto said such criticisms do not take into account regulations that require his agency obtain property appraisals before making disaster-relief loans and mandate that borrowers demonstrate a capacity to repay the government, something some have had trouble proving in Katrina's wake.
"We have to balance our response to the victims with our mandate to make bona fide loans with some prospects of being paid back," Mr. Barreto said.
Many borrowers were actually seeking rejections, since applying for an SBA disaster-relief loan is a precondition for receiving a grant from the Federal Emergency Management Agency, he said.
"People have different perceptions of what … [we] can do or should do," Mr. Barreto said. "They want us to provide short-term cash infusions or bridge loans or grants, but that is not our mission. Our mission is to provide long-term reconstruction and rehabilitation loans, and the conditions on the ground for doing that have been challenging at best and impossible at worst."
Mr. Barreto also disputed some critics' claims that the SBA's response to Katrina has lacked creativity and flexibility. He can tick off a series of innovations the agency has introduced in the wake of last year's hurricanes: It has relaxed its documentation requirements, used global imaging technology to do property appraisals, and eased its credit-score and collateral standards.
It has also created a program that lets lenders make disaster-relief loans that are 85% guaranteed by the SBA. Through Jan. 10, however, the SBA had guaranteed just 73 of the so-called Gulf Opportunity loans, for $6.5 million.
Mr. Wilkinson said the disappointing response was at least partly caused by the controversy that sprang up over the Supplemental Terrorist Activity Relief program, or Star, which was implemented after the Sept. 11 attacks. The scrutiny by the AP and other publications has made lenders wary of disaster-relief lending in general, he said.
"Lenders won't touch" the Gulf Opportunity program, "because they are scared of what people will say four years from now," Mr. Wilkinson said.
The SBA has strongly defended its handling of the Star program. Mr. Barreto said that it was intended as a stimulus program to aid the entire economy, not as disaster relief - an interpretation the agency made public when it was making the loans.
Over all, the agency guaranteed 8,202 Star loans for $3.7 billion.
"The economy got hit hard," Mr. Barreto said. "People do not remember, but that was the objective of the terrorists."
He admitted to some frustration over the way Star has been portrayed in the news media and by some politicians, and he said the criticism does not reflect the true picture of the agency's work.
"We measure our success by what our customers tell us," he said. "What they say is that they are happy with the opportunities we are providing. … I came here as a small-business owner to help small businesses. My sense of enjoyment and fulfillment comes from working with small businesses. I'm very pleased about my service and proud of it."
