Erskine B. Bowles, the new head of the Small Business Administration, says his agency needs a strong dose of social responsibility.

Instead of providing loan guarantees for lenders on a first-come, first-served basis, Mr. Bowles wants to funnel loans to underserved individuals and communities. Minority and women-owned businesses, as well as firms in inner cities and poor rural areas, should come first, he says.

"These are the markets that are clearly starved for capital, and what we want to do is refocus a significant portion of the SBA's efforts in the future to this area," said Mr. Bowles, who was nominated for the post by the President in March and confirmed by the Senate in May.

The Clinton Agenda

Mr. Bowles' concerns mirror those of other members of the Clinton administration, who want banks to play a stronger role in community development. They have also stressed the importance of getting credit to small businesses, which puts the SBA at the heart of the Clinton banking agenda.

Sitting at a conference table in his pristine office, Mr. Bowles lays out his plans for the agency.

"The SBA's lending programs have historically been on a first-come, first-served basis," he says. "I think when you're operating with limited capital resources, that's a foolish way to allocate them."

Poor Record on Minorities

Last year, only 2% of the SBA's total loan dollars supported black-owned businesses; 3% went to hispanics. Some bankers note the irony that while they are under pressure to improve minority lending, government agencies are failing to keep up.

"The government should review the operations of the SBA to bring it more in line with the intent of the Community Reinvestment Act," said Richard Rosenberg, chairman of Bank-America Corp., in a recent speech.

Mr. Bowles responds, "Judge me not on what we've done in the past, but on what we do in the future."

The 47-year-old friend of the President will not lay out in detail just how the agency will target the underserved. But he says a first move will be relocating much of the top-heavy Washington staff to district offices.

"I subscribe to the management philosophy that you put your assets where your customers are," he said. "That way we can more proactively look for these new opportunities and bring new people to the commercial banking system."

Until named, Mr. Bowles served as chairman and CEO of Bowles Hollowell Conner & Co., a Charlotte, N.C., investment banking firm. With degrees from the University of North Carolina and Columbia University, he has also served on the board of First Union National Bank.

Mr. Bowles has already spoken to more than 400 bankers at "town hall" meetings around the country. He intends to heed their calls for a "more user-friendly, more useful" agency.

"Clearly we can reduce our forms and requirements down close to zero and rely on the banks' forms," he says.

The agency is already testing a program with NationsBank and others in the Southwest, to gauge the impact of dramatically cutting paperwork, or even allowing banks to file forms electronically.

The new administrator has survived his first budget battle, but not to the industry's liking. To support $8 billion in guarantees next year with 19% fewer funds, it will cut guarantees and add a secondary market fee.

"I'm able to do the arithmetic, the program will not be as profitable to the banking community," he says. "But I maintain that this is still a very profitable program for the banking community."

And Mr. Bowles insists that he has nothing else up his sleeve that would reduce the profitability of SBA lending.

"Now my job is to manage this place in an efficient, effective manner that will give the taxpayers the most bang for their buck," he says.

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