After a disaster like Katrina, a community finds itself confronting problems that may threaten its very survival. Even when the storm or tornado or earthquake has passed, the economic devastation can cripple a community, uprooting lives, forcing many people to move away even though their homes survived. Small businesses are especially vulnerable, and their survival is a crucial factor in determining whether people will be able to pick up the pieces of their lives and whether their community will truly recover.
Senator Kerry is a passionate advocate for small businesses, which are -- as he never ceases to point out -- the lifeblood of the nation's economy, providing half of the jobs in this country and more than half of the newly-created jobs. Quite simply, whatever threatens the health of small businesses threatens communities and threatens our national economy. As chair of the Senate Committee on Small Business and Entrepreneurship, Senator Kerry has worked tirelessly to improve and streamline the processes by which aid reaches small businesses after a disaster, and convened hearings such as this one to evaluate the mechanisms in place, to investigate problems such as the failures after Katrina, and to determine the improvements that still need to be made.
For anyone who has been concerned about what the federal government did or didn't do after Katrina, FEMA isn't the only agency that people count on to help them after a disaster; the Small Business Administration's role is vital to the economic survival of a community, and hearings like this one go to the heart of concerns about whether the government is prepared to do its part for the people who are counting on it to be there. Senator Kerry emphasizes however that this is not intended as a "gotcha" hearing, but as an opportunity to learn from mistakes and to look at what is done right as well as what has gone wrong -- contrasting the slow and inadequate response after Katrina with the rapid response to the recent disastrous fire in Uxbridge, MA, for example.
Here we present Senator Kerry's opening remarks, which you can also read in the transcript below.
Part One
We’re here today to take a close look at the SBA’s Disaster Assistance Program. Obviously, this program serves as the Federal government’s primary source of long term financial assistance to small businesses that have been hit by a disaster of one kind or another.
We became all too familiar a couple years ago with the problems of the lack of adequate planning, the lack of adequate staffing, and other kinds of problems that accompanied the massive failure of delivery of services across the board in the wake of Katrina. And that taught us something. I think a lot of people, however, are unaware of how frequently the SBA does respond to various disasters around the country, some small, some large. And in fact, the SBA’s Disaster Assistance program plays an integral role in rebuilding homes and towns, businesses in communities all across the country.
My hometown – not hometown personally, but in my home state - Uxbridge – recently, just over this weekend experienced a serious mill fire, and some 135 homes and businesses were destroyed, a lot of damage done, some 300 jobs plus lost, and this mill had become a major magnet, if you will, for business in this community that’s been hurt over the last years by businesses going abroad and the transition of our economy anyway. So SBA stepped in, and I want to thank Administrator Preston for a fast response of the Agency. Agency personnel were on the spot Sunday afternoon for a fire that occurred on Saturday, they did their evaluation, and by Monday we had a designation and were able to move. And that’s terrific. That’s an important message to send to people, that’s the way it ought to work.
Not every disaster can receive or does receive the same kind of response, and certainly there are some where we haven’t seen that. Next month marks the two-year anniversary of the most devastating natural disaster that we know of in the history of this country. The impact of Hurricane Katrina was nothing less than catastrophic on the state of Louisiana and on surrounding communities and Mississippi also. Thousands were killed, hundreds of thousands were displaced, and many of them are still struggling to recover from the impact of that.
At every step during the response and recovery process, the federal government was shown to be behind the process, unprepared and unable to respond. And I want to emphasize this is not Administrator Preston’s watch. He came in to try to clean up some of this, and I think he’s done an admirable job of trying to tackle a lot of that.
But at no agency was the lack of preparedness more evident, or incompetent, frankly, than what happened within the SBA. Insufficient staffing, slow response, lack of coordination, lack of leadership, lack of vision and inadequate processing system led to the agency’s absolute failure to respond to the needs of Gulf Coast applicants.
Nearly eight months after the storms hit—Mr. Preston’s predecessor resigned, leaving an enormous mess to clean up, frankly. On that day, more than 31,000 loan applications remained unprocessed and just 10 percent of the money that was approved for disaster victims had actually been disbursed.
By all accounts, Administrator Preston made it his top priority to get this program on track. In the fall of 2006, he set a goal of reaching each and every one of the roughly 90,000 loan applicants that had been approved for a loan but had not received their money. This aggressive goal did have an immediate impact, and to date the agency has disbursed nearly $6 billion to the victims who waited so many months to rebuild their homes and their lives.
Today, during the course of this and it’s inevitable, what I want to emphasize – this is not a ‘gotcha’ hearing. And I want to emphasize that. This is an educational, accountability hearing. It’s what government ought to do, it’s what the committee ought to do, and it’s what all of us ought to be involved in. And notwithstanding the success generated by Administrator Preston’s efforts, there were some serious concerns, in some quarters, with some of the methods that were used to carry out that effort.
Earlier this year, I received two letters from former SBA loan officers, which I sent to the agency’s Inspector General Eric Thorson to consider as part of what was already an ongoing investigation into the agency’s Gulf Coast response. And I think we should emphasize, it is good that we’re having that kind of evaluation, so we understand what did go wrong, and don’t repeat those mistakes. We’d be criticized if we didn’t - every single one of us.
Today, we’ll hear from Mr. Thorson and several of the allegations made in these letters and we’ll hear from Gale Martin, a former SBA loan officer, who wrote one of the letters alleging misconduct on the part of superiors.
As Chairman of the Committee, obviously I’m concerned by those allegations and by the findings, but I admire the qualities in the SBA Administrator for his willingness to be accountable, and to establish accountability and to submit to that accountability. I think it’s admirable and I think it’s important, and I’m confident we’re going to see that exhibited here today. The goal of this hearing and the goal of each Senator on the Committee and for each witness—is to ensure that no victim falls through the cracks, that no one who was relying on the government for a loan to rebuild a business or a home was left wondering why the government let them down, and that we know what happened so that these kinds of things don’t happen again.
As we have done since the day Katrina struck us, Senator Snowe, Senator Landrieu, and Senator Vitter particularly on the committee, and I have worked and we will continue to work to make sure that the SBA leaves no stone unturned in providing relief to small business owners and homeowners who are still struggling to make ends meet, and I know I don’t need to, but I will encourage Administrator Preston to continue to work with the Inspector General in the months ahead to address the concerns raised in those reports.
More importantly, I believe an effort needs to be made to ensure that no loan applicant who was approved for a disaster loan was left with an undesired or an un-requested cancellation. If there are victims of this storm that were approved for assistance but were later turned away against their wishes, then I think we have a responsibility to go back and try to find out whether things can be made right within obviously, the rules and normal standards by which those decisions are made. I am confident that Administrator Preston will make a serious effort to do that.
Just as we have to continue to look at what can be done for the people of the Gulf Coast, we have to put in place the tools that prevent another Katrina-like response. The SBA recently briefed congressional staff on its Disaster Recovery Plan, which establishes a framework for how the agency will respond to future events. And we look forward to hearing from the Administrator regarding the specifics of the plan.
We’re also going to hear from William Shear of GAO, who has made several recommendations through two published reports regarding what steps the SBA needs to take to address these, the shortcomings that we’ll discuss.
Finally, we are meeting today four months after this Committee voted unanimously to report a bill that addresses many of the holes in SBA’s capacity to execute effective disaster response. I emphasize capacity. Capacity depends often on the law itself, on staff and other things.
This bill creates an expedited disaster response program to get money in the hands of victims quickly. It authorizes private banks to make disaster loans, so that local banks can get involved immediately with a response effort, I might add, in a place where they know the people, know the players, know the facts, and have a stake. It also creates a new level of declaration for the Administrator—a declaration of Catastrophic National Disaster—to allow for businesses outside of the geographic reach of a disaster to access low interest loans if they are adversely impacted. And I want to emphasize, because some have expressed some concern about sort of a new disaster [unintelligible]. It can only be done with the Department of Homeland Security and Presidential and other appropriate signoffs. So, it’s not as if it’s some great new permissive discretion, and only in the face of, obviously, a legitimate disaster.
Despite broad bipartisan support in the Senate and a letter of support from the Administrator, this bill remains stalled. We need to pass this bill now so that these funds are available, if and when the SBA needs to respond to another large scale, Katrina-sized disaster.
So, we’re here today because we got to get this right. We’re almost two months into another hurricane season that is projected to be a busy one—the National Oceanic and Atmospheric Administration projects 13 to 17 named storms, with as many as 10 becoming hurricanes. I think it’s irresponsible of Congress to continue to count on luck to carry us through having seen what we’ve lived through in the last years. So, I hope we’re going to be able to break that logjam and I call on my colleagues to help us do that.
