Congress will investigate the "flagrant abuse" of a federal loan program designed to help businesses recover from the Sept. 11 attacks (search) and make sure such problem don't occur with Hurricane Katrina (search) relief, a key Senate Republican announced Friday.

Sen. Olympia Snowe, R-Maine, chairwoman of the Senate Small Business and Entrepreneurship Committee (search), announced the investigation in response to an Associated Press story Thursday that showed the federal program was so loosely managed that it gave low-interest loans to companies that didn't need terrorism relief or even know they were getting it.

"The apparent widespread abuse of loans provided through the Supplemental Terrorist Activity Relief Act is nothing short of an outrage," Snowe said.

The committee chairwoman said she would demand answers from both the banks that gave the loans and the Small Business Administration, which supervised the program.

"Congress must seek and find answers when confronted with a situation that represents a possible betrayal of the public trust especially at a time when the people of the Gulf Region need every resource available to recover," Snowe said. "...I intend to exert my oversight power to determine how such flagrant abuse could happen and to ensure that Small Business Administration loans truly go to those who need them."

Sen. John Kerry of Massachusetts, the committee's top Democrat, joined in the call for an investigation.

"This was a deliberate attempt to cover up White House budget gimmicks that left the SBA's largest loan program underfunded and on the brink of shutting down," Kerry said. "The administration asked SBA employees to bend the rules and steer regular loans through the program aimed at helping businesses impacted by 9/11."

The AP reported Thursday that businesses as diverse as Dunkin' Donuts shops and motorcycle dealers far from New York and Washington got loans drawn without their knowledge by their banks from the Sept. 11 program.

AP quoted several business owners as saying they hadn't been hurt by the attacks and were embarrassed to learn their loans came from the program. And banking officials and SBA documents show the SBA encouraged lenders to give out the low-interest, government guaranteed loans using the loosest interpretation of the rules.