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Small Business Administration Head Resigns

Associated Press
Published | Updated

WASHINGTON – The head of the Small Business Administration, criticized for his agency's handling of loans to aid recovery after the 9/11 attacks and last year's hurricanes, announced Tuesday that he was stepping down.

Hector Barreto, picked by President Bush to head the SBA in 2001, said he was leaving the administration to head The Latino Coalition, a prominent Hispanic advocacy group based in Washington.

His departure comes at a time when new White House chief of staff Joshua Bolten is shaking up the administration in the face of record low approval ratings for the president and calls from Republicans in Congress for a staff overhaul.

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A spokesman for Barreto said he had not been forced to resign by the White House.

"He was not asked to leave," said SBA spokesman Raul Cisneros. "He has been invited to join this prominent Latino organization and he has decided to do so."

The Associated Press reported last year that a substantial amount of nearly $5 billion in SBA terrorism recovery loans awarded after the 2001 terror attacks had gone to companies that had not wanted the loans or known that they would be receiving government money earmarked for Sept. 11 victims.

In December, Rep. Nydia Velazquez, D-N.Y., the top Democrat on the House Small Business Committee, called for Barreto's resignation contending that he "has simply run SBA straight into the ground."

Sen. John Kerry, D-Mass., ranking Democrat on a Senate committee overseeing the SBA, said Tuesday that Bush should replace Barreto with someone who would restore the SBA's ability to help small businesses.

"Since George Bush took office, the SBA's budget has been slashed by more than 40 percent, critical lending and counseling programs have been on the chopping block and we have witnessed the most abysmal response to the needs of Gulf Coast victims devastated by hurricanes Katrina, Rita and Wilma. It's time for a change," Kerry said in a statement.

Kerry and Velazquez had both complained of enormous loan backlogs and high rates of declined loans for hurricane victims.

However, the SBA statement announcing Barreto's departure said the agency had responded in an unprecedented manner following last year's hurricanes, providing more than $8.4 billion in low-interest disaster loans to businesses and homeowners in the disaster areas, more than double the next-largest disaster response in the SBA's history.

In his resignation letter to Bush, Barreto said that it had been an honor "to help execute your vision to bring unprecedented opportunities to all entrepreneurs in every community as they seek to realize their dreams."

Barreto, the second-longest serving administrator in the SBA's history 53-year history, said that he had agreed to remain at SBA during the transition period. There was no immediate announcement from the White House about who would be nominated to replace Barreto. The post is subject to Senate confirmation.

The administration announced last week that White House political mastermind Karl Rove was surrendering a key policy role and press secretary Scott McClellan was resigning in an escalation of an administration shake-up that has been driven by Republican anxieties about how they will fare in the November congressional elections.