[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]



 
  90 DAYS AFTER SEPTEMBER 11TH: HOW ARE SMALL BUSINESSES BEING HELPED?
=======================================================================


                                HEARING

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION
                               __________

                    WASHINGTON, DC, DECEMBER 6, 2001
                               __________

                           Serial No. 107-39
                               __________

         Printed for the use of the Committee on Small Business






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                      COMMITTEE ON SMALL BUSINESS

                  DONALD MANZULLO, Illinois, Chairman
LARRY COMBEST, Texas                 NYDIA M. VELAZQUEZ, New York
JOEL HEFLEY, Colorado                JUANITA MILLENDER-McDONALD, 
ROSCOE G. BARTLETT, Maryland             California
FRANK A. LoBIONDO, New Jersey        DANNY K. DAVIS, Illinois
SUE W. KELLY, New York               BILL PASCRELL, Jr., New Jersey
STEVE CHABOT, Ohio                   DONNA M. CHRISTENSEN, Virgin 
PATRICK J. TOOMEY, Pennsylvania          Islands
JIM DeMINT, South Carolina           ROBERT A. BRADY, Pennsylvania
JOHN R. THUNE, South Dakota          TOM UDALL, New Mexico
MICHAEL PENCE, Indiana               STEPHANIE TUBBS JONES, Ohio
MIKE FERGUSON, New Jersey            CHARLES A. GONZALEZ, Texas
DARRELL E. ISSA, California          DAVID D. PHELPS, Illinois
SAM GRAVES, Missouri                 GRACE F. NAPOLITANO, California
EDWARD L. SCHROCK, Virginia          BRIAN BAIRD, Washington
FELIX J. GRUCCI, Jr., New York       MARK UDALL, Colorado
TODD W. AKIN, Missouri               JAMES R. LANGEVIN, Rhode Island
SHELLEY MOORE CAPITO, West Virginia  MIKE ROSS, Arkansas
BILL SHUSTER, Pennsylvania           BRAD CARSON, Oklahoma
                                     ANIBAL ACEVEDO-VILA, Puerto Rico
                      Doug Thomas, Staff Director
                  Phil Eskeland, Deputy Staff Director
                  Michael Day, Minority Staff Director








                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on December 6, 2001.................................     1

                               Witnesses

Nadler, Jerry, Representative, U.S. House of Representatives.....     3
Moran, Jim, Representative, U.S. House of Representatives........     6
Barreto, Hector, Administrator, Small Business Administration....     8
Sweeney, Joan, Managing Partner and Chief Operating Officer, 
  Allied Capital.................................................    10
Yan, Alice, Acupuncture Therapeutic Care.........................    12
Lee, Don, Chinese Consolidated Benevolent Association............    13
Calder, John, Steamer's Landing Restaurant.......................    15
Kramer, Michael, Audio Systems Technology Sound and Video........    17
King, James, State Director, New York State SBDC.................    19

                                Appendix

Opening statements:
    Manzullo, Hon. Donald........................................    32
    Velazquez, Hon. Nydia........................................    34
    Ross, Hon. Mike..............................................    36
Prepared statements:
    Nadler, Jerry................................................    37
    Moran, Jim...................................................    43
    Barreto, Hector..............................................    45
    Sweeney, Joan................................................    63
    Yan, Alice...................................................    71
    Lee, Don.....................................................    76
    Calder, John.................................................    80
    Kramer, Michael..............................................    84
    King, James..................................................    86





  90 DAYS AFTER SEPTEMBER 11TH: HOW ARE SMALL BUSINESSES BEING HELPED?

                              ----------                              


                       THURSDAY, DECEMBER 6, 2001

                          House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 2:00 p.m., in room 
2360, Rayburn House Office Building, Hon. Donald A. Manzullo 
[Chair of the Committee] presiding.
    Chairman Manzullo. I would like to call the hearing for the 
Small Business Committee together. Good afternoon and a special 
welcome to those who have come some distance to participate and 
attend this hearing.
    In the aftermath of the terrorist attacks on September 11, 
this Committee held a hearing on October 10 regarding SBA's 
efforts to respond to the property damage and economic injury 
caused by these tragic attacks. We are here again to make sure 
the needs of small businesses are met.
    Many individuals lost friends and relatives, their homes 
and businesses in New York City as a result of the attacks on 
the World Trade Center, and many others have suffered enormous 
economic loss who are now located in the declared disaster 
area. Here in the Washington area the attack on the Pentagon 
and the subsequent closure of Reagan National Airport caused 
economic losses to a number of small businesses.
    It has now been 3 months since these attacks. The Committee 
needs to determine whether Federal programs presently in place 
are meeting the needs of small businesses. Are the Federal 
programs providing the assistance to small businesses that 
Congress intended or are there large numbers of businesses that 
are without help?
    Since September 11, the SBA has issued regulations 
expanding the scope of the disaster loan program beyond the 
geographical areas that were the targets of the terrorist 
attacks. Though the SBA has reported making over $195 million 
in disaster loans, many small businesses have complained that 
their applications were denied, that disbursements of the loan 
funds have not taken place or are delayed or the disaster loan 
program is not applicable to their particular situation. Plus, 
there is a credit crises facing small businesses, as confirmed 
by the Federal Reserve report of last month. What is the SBA 
doing to make more credit available through its regular loan 
programs to small businesses?
    Assistance is needed now. Delay will only hamper the 
recovery of the businesses impacted by the events of September 
11. And we will not let the terrorists win under--any 
circumstances.
    It is important that the members of this Committee hear how 
responsive the Federal Government has been to small businesses. 
We need to know what works, what doesn't work and the things 
that we can do to try to harmonize this massive effort, the 
worst local, domestic disaster this Nation has ever suffered.
    I think it was the FBI Director that got sworn in 5 days 
before September 11. Administrator Barreto had a couple of 
months before then. To work through a crisis like this is just 
enormous.
    Again, we thank you for participating in the hearing, and I 
yield to the Ranking Member, Ms. Velazquez, for her opening 
statement.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Three months after the second Tuesday in September, we are 
still learning the true scope of the effects of terrorism on 
our Nation. Rescue crews are still sorting through rubble, 
workers worry about their jobs, and small businesses face 
challenges in a slowing economy. The New York City Partnership 
estimates that small businesses will lose $101 million in 
capital losses and may shift 55,000 jobs in the next year.
    No place has been more impacted than Chinatown and the 
lower East Side in my district, where small businesses are the 
cornerstone of our community. Firms there are seeing 30 to 70 
percent drops in revenue. More than half of all government 
workers in Chinatown have lost their jobs. Most factories are 
operating at less than half their capacity. This disaster is 
larger than anything we have ever seen before. The Northridge 
earthquake and Hurricane Andrew were our largest before this 
year. September 11 dwarfs them many times over.
    I would like to commend the Small Business Administration 
for its rapid and effective response. Within days of the 
attacks, SBA was on the ground in New York with workers to 
assess damage and to begin to administer disaster recovery 
services. SBA has directly assisted 26,356 individuals and 
businesses with loan applications and other inquiries in New 
York City. It has processed 6,131 disaster loan applications 
and approved 1,166 disaster loans totaling $156,596,000. 
Closing documents have been completed in 1,800 loans, and 965 
disbursements have been issued for $33,492,000. This is a 
strong response and shows our commitment to recovery.
    I particularly want to thank the Small Business 
Administrator, Hector Barreto, for being here and to commend 
him for his strong leadership during these difficult months. He 
has returned again and again to New York, taking a personal 
interest in the recovery efforts.
    At my request, SBA had responded to the unique challenges 
Chinatown faces by opening a disaster recovery workshop. Mr. 
Barreto has joined me on two visits to address community 
concerns and to award the first disaster recovery checks to 
struggling small businesses. I appreciate your commitment and 
compassion.
    Today's hearing is an appropriate moment to look back and 
learn from our experience. No one can fault the effort of 
anyone who responded to this crisis, but clearly we can always 
strive to do more and better.
    What the SBA needs are new tools for the disaster program 
to cope with this catastrophe and those that may follow. The 
American's Small Business Emergency Relief and Recovery Act 
includes some of these new tools, including disaster recovery 
grants, low- and no-cost loans and debt forgiveness if 
bankruptcy threatens a company.
    Mr. Chairman, it is outrageous that the House leadership 
has not brought this innovative and necessary package to the 
floor for a final vote. We need to enact this legislation soon 
and with the grant provisions intact. Without grants, we will 
have a bill that does nothing for small business. I cannot 
stress this enough.
    The leadership has expressed concern that our bill costs 
too much, but I think that the true cost will be if we do not 
enact this bill. Small businesses will fail, workers will lose 
their jobs, and neighborhoods and families will suffer. By 
comparison, our bill is a bargain. Nothing in the stimulus 
package is reserved for small businesses. If we can do 
something for the airlines and the insurance industry, we can 
take our bill to the floor and pass it into law.
    In closing, I would like to thank Mr. Barreto again for his 
hard work and cooperation. Many thanks as well to the 
representatives of small businesses for taking the time to be 
here and sharing your experience and knowledge.
    Lastly, I am happy welcome my colleagues, Congressman 
Nadler and Congressman Moran, here to provide their 
perspective. I am sure that, working together, we can get the 
job done.
    Thank you, Mr. Chairman.
    Chairman Manzullo. Thank you.
    What we are going to do is take the Members first and then 
Mr. Barreto, because we may have a vote in about an hour or so. 
And we will lead off with Congressman Nadler.
    I am going to put the 5-minute clock on for whatever it is 
worth, Jerry. And we all have the same problem, being Members 
of Congress. But the purpose of the clock is to try to keep 
your testimony to 5 minutes. When the green is on, you are 
fine. When the yellow comes on, you have 1 minute. When the red 
comes on, we get a little agitated but not too agitated.
    Look forward to your testimony, Congressman Nadler.

              STATEMENT OF THE HON. JERROLD NADLER

    Mr. Nadler. Thank you, Don.
    Mr. Chairman, I would like to thank the distinguished 
Chairman, you, Mr. Manzullo, and the Ranking Member, Ms. 
Velazquez, my distinguished colleague from New York, for 
responding to requests to hold this hearing and for the 
opportunity to participate today. I also would like to extend 
my gratitude to Don Lee, John Calder and Michael Kramer, who 
are small business owners from my business district who are 
here to testify about the challenges they face in New York's 
post-September 11 economy.
    Mr. Chairman, the events of September 11 rocked the Nation 
and left my district in shambles. The tragedy of that day 
reshaped our priorities, altered our perception of safety and 
changed the way we approach everyday tasks like opening the 
mail. Even so, the President has urged us not to be defeated 
and to return to business as usual. Mr. Chairman, there are 
14,000 small businesses in lower Manhattan that wish it was 
only that easy.
    When the first plane hit the World Trade Center, it set off 
a devastating chain reaction that put the livelihood of many 
small business owners in jeopardy. The collapse of the towers, 
the damage to nearby subway tunnels, the fallen power and phone 
lines, the restricted access to the area and the haunting 
stench of still-burning wreckage have all led to a loss of 
client base, serious property damage and to a tremendous loss 
in profits. With so many obstacles to overcome, it is a wonder 
that any small businesses have managed to survive.
    But maybe ``survive'' is not the correct word. Some of 
their doors may have reopened, but are they really surviving? 
Small businesses in lower Manhattan will lose an estimated $5 
billion in sales in the last quarter of 2001 alone. Many have 
seen their sales decline by up to 80 percent because of 
disruption and damage to the area. A thousand businesses have 
been destroyed or severely damaged and are losing thousands of 
dollars each day that they are unable to reopen. Another 10,000 
businesses in lower Manhattan are at risk of failure as a 
direct result of the attack. Despite many of them being on the 
verge of shutting down, most of these businesses have been 
unable to access financial help from the Small Business 
Administration.
    Mark Panahbarhagh, who owns the Milano Restaurant in my 
district, has managed to reopen, but he lost 45 days in 
business in the aftermath of the attacks, and his daily sales 
are now down 70 percent. Many of his loyal customers have 
relocated uptown or to New Jersey, and many more, he believes, 
are driven away because of the air quality in the neighborhood. 
In the midst of all this, Mr. Panahbarhagh received an eviction 
notice from his landlord because he cannot afford to make full 
rent payments, given everything that is going on.
    He applied for an SBA loan but was turned down because he 
has no collateral. And how could he? Like thousands of others, 
his business has been devastated by the terrorist attacks. In 
lieu of business assets, the SBA requested that applicants put 
up their homes as collateral. This, Mr. Chairman, is not a 
viable option. These businesses are on the line, and the owners 
should not have to risk losing their homes, which are often 
their only remaining assets, as well.
    Until Lower Manhattan is rebuilt, and certainly until the 
fires are put out and the air returns to normal, Mr. 
Panabarhagh's business will suffer. That is why we must find 
some form of assistance through grants and guaranteed loans to 
help him and the thousands of others through this transition. 
The SBA must understand that these are extraordinary 
circumstances, and special measures must be taken. The fact 
that, of the thousands of businesses in lower Manhattan 
applying for loans since September 11, only 359 have been 
approved south of Housten Street is stark testimony to how 
badly the system is failing our small businesses. The SBA must 
change its attitude and its regulations quickly, and the SBA 
must be given additional authority by Congress. I ask that this 
Committee explore how to grant that additional authority.
    Since September 11, several laws have been enacted to help 
various sectors of our society deal with the extraordinary 
circumstances we are facing. Law enforcement has been given 
broader authority, airlines have been given financial aid and 
guarantees, and FEMA was given additional resources. In light 
of this, it strikes me as curious that the representative of 
the SBA stated at the October 10 hearing of this Committee that 
the Small Business Administration needed no new tools to assist 
the small business community in recovering from its biggest 
blow in history.
    I think the paucity of loans approved, especially south of 
Housten Street, and the inability of many of these small 
businesses to get loans and the fact that most of these small 
businesses desperately need grants, not loans, shows that the 
SBA indeed needs new tools and new authority. I hope that 
during the course of this hearing the SBA, if it doesn't 
already, will come to understand why it desperately needs 
additional resources and authority if thousands of small 
businesses in my district are not to be hung out to dry.
    I hope that today's discussions will lead to concrete 
strategies to revitalize New York's small business community. 
This Committee has already taken a step toward that end by 
reporting H.R. 3230, the American Small Business Emergency 
Relief and Recovery Act. This legislation would jump-start many 
businesses by expanding the number of businesses eligible for 
assistance, raising SBA loan amounts and forgiving the interest 
on these loans for 2 years.
    I believe that equally or more fundamental is H.R. 3272, 
the World Trade Center Claims Act, which I introduced last 
month along with Senator Clinton. This bill would provide small 
businesses with direct relief for property damage, business 
interruption loss, debris removal and clean-up costs, and it 
would do so in the form of direct grants for up to half a 
million dollars each. Although administered by FEMA, it would 
require the cooperation of the Small Business Administration. 
These types of immediate grant assistance are what the small 
business community desperately needs, as the gentlemen and 
women from my district will attest today.
    As I sit here next to my fellow New Yorkers, I am reminded 
of the countless statements I have heard from small business 
owners of their willingness, indeed their eagerness, to put 
everything on the line by reopening their businesses if they 
can somehow obtain some financial help. They are willing to 
risk so much because they know what we know: New York's economy 
cannot be rebuilt without the help of our small businesses. 
These people were fortunate enough to escape safely, physically 
safely from the terrorist attacks, but their livelihoods, their 
dreams are at risk of dying in the aftermath.
    I again thank you for holding this hearing and for inviting 
me and my constituents to participate. I look forward to the 
testimony today and to working with this Committee to address 
the needs of small businesses across the country as we recover 
from the terrorist attacks of September 11.
    I thank you, Mr. Chairman.
    Chairman Manzullo. Thank you.
    [Mr. Nadler's statement may be found in appendix.]
    Chairman Manzullo. The next witness will be Congressman Jim 
Moran.

              STATEMENT OF THE HON. JAMES P. MORAN

    Mr. Moran. Well, that is efficient, Mr. Chairman.
    Good afternoon to you and Chairman Manzullo and 
Congresswoman Velazquez and all the members of the Committee. 
Thanks for the opportunity to address this Committee on a very 
important piece of legislation.
    We know that, particularly in the aftermath of September 
11, small businesses around the country are struggling mightily 
to make ends meet. Many of them are going bankrupt, and many of 
them are laying off long-time employees, and we need to do 
something about it. It is the lifeblood of our economy.
    In fact, since September, we see that the unemployment rate 
has increased by 10 percent. That means about 700,000 Americans 
have lost their jobs, most of them in small business; and that 
is why Congressman Nadler and Chairman Manzullo and the members 
of this Committee have been working very hard to get this 
legislation enacted.
    John Kerry and Senator Bond on the Senate side have been 
able to get 60 co-sponsors for this. And it is good legislation 
because it is targeted to our Nation's small business owners, 
and it gives them the loans and the management counseling that 
can help them with paying off their existing debt, financing 
their businesses so that they can maintain and, hopefully, soon 
create more jobs. It addresses the shrinking availability of 
credit and venture capital to small businesses through 
traditional lenders and investors, because it has become 
virtually nonexistent since the attacks, and includes 
provisions to aid Federal contractors who are facing increased 
costs when trying to access Federal facilities to work on 
existing contracts.
    It is a good bill. It is a bipartisan bill. It was drafted 
with the help of SBA's lending and counseling partners, small 
business organizations and trade associations.
    I understand that the administration has some concerns with 
the bill. I trust that they are only marginal and, hopefully, 
the things have been worked out.
    I understand there was a letter sent on Friday, November 
30, which seems kind of at the last minute, but I know that 
there is an agreement that we need to take action to address 
what is happening throughout our economy, particularly with 
regard to small businesses. I guess where we part ways is that, 
in the letter from SBA, it says that permitting refinancing of 
existing debt, deferring principal payments and waiving 
interest for 2 years for those businesses who qualify because 
of September 11 is not a good idea. I think it is a great idea. 
So I am sure we can get some clarification of that.
    We have got letters from any number of industry 
associations in support of this bill. I am sure that actually, 
in the short run, because we don't have a lot of time, that 
this bill is going to be enacted and go to the aid of small 
businesses, because, as you know, you can't have employees 
without employers, and small businesses are our principal 
source of employment.
    So thank you very much, Mr. Chairman.
    [Mr. Moran's statement may be found in appendix.]
    Chairman Manzullo. Jim, before you finish, could you tell 
us about what you were able to do at National Airport? Because 
that goes into grants for small businesses, $25 million there.
    Mr. Moran. I appreciate that, Mr. Chairman. National 
Airport, as you know, suffered particularly because of the 
decision to continue its closure. We have several hundred 
retail establishments within the airport as well as thousands 
of people in the hospitality and the restaurant, the hotel 
industry, cab drivers, et cetera.
    At one point, the only part of National Airport that was 
opened was the terminal A because it was an unemployment line. 
We have about 17,000 people who are directly unemployed, and I 
think the figure is close to 50,000 who are directly or 
indirectly unemployed as a result of the continued closure of 
National Airport, which was a Federal Government decision.
    They have trouble getting loans for one thing, because we 
have got to show that their business is viable. Inside the 
gates, for security reasons, they are not allowing friends and 
family to accompany passengers. There is not a critical mass of 
potential customers. But these are businesses that we have 
tried to keep in place because, once we get back to some sense 
of normalcy, we need their business back at the airport.
    Again, it is a Federal determination that National should 
only operate at less than half capacity up till now; and, as a 
result, we have kept these businesses hanging.
    Our homeless shelters are over capacity. People can't 
afford their rent. Our hospitals are swamped because they have 
no health coverage. We don't know what to do, and we are a 
relatively affluent community. I know that there are a lot of 
parts of New York City that are really suffering as well.
    It is not just limited to people directly affected. All of 
the security measures, all of the anxiety on the part of the 
American people has exacerbated this unemployment situation, 
and where it hurts first are the small businesses. They don't 
have the place to go for capital. They can't get the lending. 
They don't have a line of credit. All they have is their 
willingness to go to work every day and the work ethic of their 
few employees.
    That is why this is necessary. Give them a reprieve. This 
can go as long as 2 years. It can keep them in business. They 
will pay it back. They need it, and they need it now.
    Chairman Manzullo. What I wanted you to talk was about the 
$25 million. You didn't answer the question about the $25 
million, I don't want you to leave until you tell us what you 
did to get OMB to set aside money for grants at National. I 
will let you go, obviously. Because there are small business 
people getting grants at National Airport, and some have gotten 
disaster loans.
    Mr. Moran. Actually, in some cases, the Small Business 
Administration moved almost overnight, within about 3 days, and 
got loans; and, in fact, there are some businesses that applied 
over the Internet and got the form on line, filled it out, got 
money. But others are having a lot of problem.
    One of the things that we have done is to provide money to 
the Airport Authority to relieve the rental costs so that 
businesses can survive without having to pay their rent and the 
Airport Authority can continue to pay off their bonds. But that 
is about to be exhausted. And we understand--we were hoping 
that they would open up National to about 70 percent. They 
haven't. We needed it before the Christmas season. Since they 
didn't, these businesses hung on for the Christmas holiday 
season. Now they have no place to turn. That was their biggest 
single source of retail business, and they are not going to get 
it. That is why now this is their only hope, this bill.
    Chairman Manzullo. Thank you.
    Mr. Moran. That come closer?
    Chairman Manzullo. Yes. You got it now.
    Our next witness is the new SBA Administrator. What a time 
for a new office. But, Mr. Barreto, I know that you are up to 
it. You have been working very hard on this, and we look 
forward to your testimony. The reason that we have one panel is 
that I know you are open to new types of suggestions on what to 
do. You have limited jurisdiction here. There are other 
agencies that are involved, and we can work together on this 
tragedy. We look forward to your testimony.

                  STATEMENT OF HECTOR BARRETO

    Mr. Barreto. Thank you, Chairman Manzullo, Ranking Member 
Velazquez and distinguished members of the Small Business 
Committee. Thank you for inviting me to appear before you today 
to provide an update on SBA's disaster assistance following the 
events of September 11.
    In the interest of time, I will summarize the SBA's efforts 
but ask that my complete written testimony be included in the 
record.
    Chairman Manzullo. All the written testimony of the 
witnesses and Members of Congress will be made part of the 
record without objection.
    Mr. Barreto. Thank you.
    The administration's primary concern has been to address 
the immediate needs of those most affected by the tragedy at 
Ground Zero and the Pentagon. The President, with the support 
of the American people and the world community, has committed 
to fight a war against terrorism, and we are fighting that war 
on many levels. The President has vowed to bring the evildoers 
to justice, while restoring confidence and prosperity to the 
American public.
    The administration knows that a key factor in economic 
prosperity is a strong small business community. We can all be 
proud of our administration's response to the victims of the 
disaster at Ground Zero, and that includes SBA's role.
    SBA staff arrived in New York on the afternoon of September 
11 and have been assisting disaster victims at nine locations. 
We have deployed 94 people in the New York City area and an 
additional 205 people at the Niagara Falls district office. We 
also have several of our disaster loan experts from offices 
around the country temporarily assigned to New York to provide 
additional support to the area.
    We have worked on getting disaster relief information to 
those who need it. To that end, we have contacted all of the 
elected officials in the New York City area to provide them 
with information about SBA's programs by phone, by e-mail and 
regular mail. Our staff has been canvassing the neighborhoods 
to talk to the small business owners suffering from this 
tragedy in order to inform them of SBA assistance. We have also 
provided Chinese- and Spanish-speaking translators to assist in 
that effort.
    SBA has directly assisted 26,898 individuals and businesses 
with loan applications. We have approved 2,029 disaster loans 
in the declared disaster areas totaling $163,282,500. The 
average loan size is $80,308.
    The hard work of the administration and the agency have not 
gone unnoticed. We have a disaster team that I am honored to 
work with. As we have grown to expect, they have gone above and 
beyond in their efforts to provide relief to small businesses 
in the fastest and most effective means possible.
    We received many compliments on the speed and effectiveness 
of our response. Governor Pataki and Mayor Giulani have both 
commented on the excellent work of the SBA, as well as our 
legislative leaders like Ranking Member Nydia Velazquez.
    I think I was most touched when one of our loan recipients 
in New York said that we were the most humane agency in the 
government. Now that is quite a compliment and also quite a 
charge to live up to. We intend to live up to that charge.
    We soon realized, though, that the administration and our 
legislative partners needed to come together as never before to 
further assist small business. To that end, the administration 
has worked with the New York delegation to include $1.8 billion 
as part of the defense appropriations bill for small business 
grants to be provided through HUD's Community Development Block 
Grant Program. The administration also included language within 
the defense appropriations bill that would, one, increase the 
size standards for businesses located at Ground Zero so that 
more businesses would qualify as small businesses and therefore 
be eligible to receive loans.
    We also included financial institutions and nonprofit 
entities as eligible small businesses, and we also asked to 
increase the loan size limit from $1.5 to $10 million. This 
language was struck from the bill during floor consideration. 
However, it has been retained on the Senate side, and we are 
hopeful that we will be able to provide this much-needed relief 
as quickly as possible.
    In addition to the compliments we have received on the 
handling of the disaster in New York, we have also heard 
requests. The requests were that we expand the economic injury 
recovery beyond Ground Zero. We have heard these requests from 
our legislative partners like Senators Kerry and Bond and 
Congresswoman Velazquez and by hearings held by Chairman 
Manzullo. We have also heard from governors from across the 
Nation requesting that we assist small businesses in their 
States. We have also heard from small business industry 
representatives and small business owners themselves.
    I want you to know that the SBA has heard the message, and 
the administration has heard the message. The SBA programs have 
evolved over the years to meet these needs. The SBA's Disaster 
Assistance Loan Program is the primary Federal program for 
funding recovery for private sector disaster victims. This 
program offers a low interest loan not to exceed 4 percent, as 
compared to nondisaster loans which are at a 5 or 6 or greater 
rate. The term can be for as long as 30 years, providing 
greater flexibility to small business owners.
    Economic injury recovery loans address precisely the type 
of injury Congress considered when it developed this product. 
As a consequence, we have rolled out the expansion of EIDL on a 
national basis. Through the rollout of the expanded EIDL 
recovery, we have expanded recovery to small businesses located 
outside of Ground Zero through our existing disaster loan 
program. We provided loans to businesses that have been 
directly injured by the September 11 events and the Federal 
actions taken as a result of those events.
    We have accomplished this expansion through a change to our 
regulations. By making a regulatory change instead of 
legislative change, we provided the swiftest and most cost-
effective and efficient response to small business. We provided 
this response starting October 21 of this year. Currently, we 
have made approximately 323 loans in the amount of $26 million 
through the expanded EIDL.
    The President has asked the American people to get back to 
business. We know that small business is an integral part of 
that mission. I look forward to working with the Committee as 
we continue to assist small businesses who have been impacted 
by the events of September 11.
    Thank you very much.
    Chairman Manzullo. Thank you very much.
    [Mr. Barreto's statement may be found in appendix.]
    Chairman Manzullo. Our next witness will be Joan Sweeney. 
Joan is the Chief Operating Officer of Allied Capital 
Corporation.

                   STATEMENT OF JOAN SWEENEY

    Ms. Sweeney. Thank you, Mr. Chairman.
    Mr. Chairman and members of the Committee, my name is Joan 
Sweeney, and I am the Chief Operating Officer of Washington, 
D.C., based Allied Capital Corporation. Allied Capital is a 
publicly traded company on the New York Stock Exchange. Today, 
we are the largest business development company in the United 
States, with a diversified portfolio exceeding $2 billion. Our 
business is focused on providing long-term capital to support 
the expansion of growing businesses nationwide.
    Allied Capital has been investing in small and middle 
market businesses for over 40 years. While substantially all of 
our lending today does not rely on any Federal program, we do 
own and operate the oldest SBIC license issued by the SBA. 
Allied Capital also owns New York-based Business Loan Express. 
Business Loan Express is a nonbank small business lender with 
31 offices located throughout the country and is an SBA-
designated preferred lender in 66 markets throughout the 
country.
    In sum, Allied Capital's business is the investment in 
America's small and middle market businesses.
    As a direct participant in the capital markets for small 
business, we clearly see the challenges faced by companies 
seeking access to growth capital. Certainly those businesses 
directly and indirectly impacted by the events of September 11 
are facing critical access capital problems. As those companies 
and impacted communities rebuild and move forward, they need 
access to capital.
    I applaud you, Mr. Chairman, and the entire Committee for 
introducing and reporting out H.R. 3230, a bill to provide 
relief for those companies through SBA emergency loans. 
However, that bill and your efforts go further than that. You 
have recognized that there are impediments for all small and 
middle market businesses to access capital in today's 
recessionary economic environment.
    Today, there is a severe credit shortage for these types of 
businesses. Banks simply do not provide commercial financing to 
start-up small businesses, or to businesses without sufficient 
collateral, or to recent immigrants, or for loans that are 
deemed too small. Commercial lending becomes all that much more 
difficult as banks and bank regulators become more risk-adverse 
in an economic downturn. These small businesses only have two 
options: high interest credit card debt or SBA 7(a) loans.
    Yet in today's low interest environment it is somewhat hard 
to determine who might be overcharging more, given the risk 
involved, the credit card company charging 18 percent or the 
SBA charging as much as 3\1/2\ points up front. Can you imagine 
taking out a home loan today and paying 3\1/2\ points for 
origination fees? But that is not all. Under the SBA program, 
that is not the only fee. Every year the SBA lender must pay to 
the SBA another 50 basis points in fees on the outstanding 
balance. In 7 years, this means the SBA is charging on some 
loans almost 7 percentage points in addition to annual loan 
interest. How many of you would like to take out a home loan 
and pay 7 points for it?
    These fees are directly or indirectly paid by the borrower; 
and, in many instances, these fees are paid by no one because 
the fee prices alone are out of the reach of the potential 
borrower who could otherwise start or grow a successful 
business.
    What is worse, the SBA charges have created a billion 
dollar windfall for the Federal Government over the last 10 
years. The SBA fees are nothing more than a ``capital access'' 
tax on small business. The bill your Committee reported out 
addresses this issue by temporarily suspending these so-called 
fees. If you want to increase access to capital for small and 
growing businesses during an economic recession, this is what 
you need to do.
    Mr. Chairman, I also want to take this opportunity to 
correct what I believe is a fundamental misunderstanding of the 
program. I have heard too frequently from those who should know 
better that fees charged by the 7(a) program should only be 
modified to help the smallest borrowers, those borrowing 
$150,000 or less. Why? Because they assert that it is these 
borrowers who are minorities, women, recent immigrants are 
somehow who need the help most. That assertion is wrong as a 
matter of fact and as a matter of sound public policy.
    First, the fact is you cannot open a dry cleaning store in 
Manhattan for $150,000. You can't buy a gas station in suburban 
Washington, D.C. for $150,000. It is our experience that 
borrowers who take out SBA loans of $250,000 or $300,000 are 
just as likely to be a recent immigrant or a woman or Asian or 
African American. The credit crisis for small business happens 
to be rather color blind. Yet a disproportionate number of 
small business borrowers at every loan size happen to be 
represented by women, minorities and immigrants. They pledge 
their homes, their bank accounts and anything else they own for 
a chance to better for themselves and their families. They work 
hard, and they benefit our economy. And the programs low 
default rates show that the vast majority of these businesses 
succeed.
    Chairman Manzullo. How are you doing on time?
    Ms. Sweeney. I am done.
    [Ms. Sweeney's statement may be found in appendix.]
    Chairman Manzullo. Our next witness is Alice Yan, and we 
look forward to your testimony.
    Thank you, Congressman Moran, for joining us.

                     STATEMENT OF ALICE YAN

    Ms. Yan. Thank you, Chairman Manzullo and Ranking Member 
Velazquez, for having this hearing.
    My name is Alice Yan. I own and operate Acupuncture 
Therapeutic Care at 188 Lafayette Street in New York City. I am 
a New York State-certified acupuncturist. I have owned my 
company for 2 years, and I am the only employee. I worked as an 
acupuncturist in Houston, Texas, before moving to New York to 
start my own business.
    Since September 11, my business has had a difficult time. 
Before September, I would have three or four customers a day. 
But now, I see three or four per week.
    Some of my clients come all the way from Queens and Long 
Island. But now it is very difficult for them to visit my 
business. Security keeps people from driving alone into 
Manhattan. Traffic and air quality are very bad. And, after 
September 11, people are holding money in their pocket.
    Like many others in New York, I was worried about how my 
business would survive. That is why I am very grateful that 
Asian Americans for Equality told me about the Small Business 
Association disaster loan program. I did not know it existed 
before then.
    I applied for an economic injury loan from the SBA. The 
process was very complicated and took over a month to complete. 
I asked for $50,000, but SBA only approved me for $9,300. They 
asked me to put up my collateral for almost half of that. I 
took only $5,000 from SBA.
    After all that time spent I really feel a great 
inconvenience and my feelings very hurt. In the last week 
before I received the SBA loan, Asian Americans for Equality 
approved a much larger disaster loan for me.
    The loans help me pay my rent and expenses while I worked 
to attract new customers. I really appreciate the SBA loan, and 
I am working very hard to pay it off soon.
    But I hope the Committee can learn from my experience. 
Dealing with the SBA at the Community Center in Chinatown was 
difficult, sometimes more difficult than with commercial 
lenders. SBA took too long. In the first month after September 
11, I had almost no customers. I needed help immediately, and I 
worried I would lose my business.
    I hope you can find a way to speed up the loan approval 
process. There is a lot of paperwork to apply for a loan, and 
it is very complicated. In fact, some of the paperwork needed a 
CPA, which cost me additional money before I even qualify for a 
loan.
    After I filed my application, SBA would call often to 
clarify problems. For example, they didn't understand that I 
don't own my home, I lease it. They asked the same question 
over and over again with different people. Constant 
interruption makes it difficult for me to work.
    I hope that, in the future, the SBA can work more quickly 
and more easily with small businesses like mine. There should 
be less paperwork, and it should be easier to understand.
    SBA needs to know how difficult it is for business like me, 
where I am the only employee, to find the time to deal with 
this complicated process. Every loan application should go more 
quickly, without the help of an outside group like Asian 
Americans for Equality.
    I am very grateful for the help SBA provided, because it 
helped me keep my business open. I am here because I hope the 
other businesses can learn and benefit from my experience.
    I would like to thank the Committee for holding this 
hearing and for giving me the opportunity to talk about my 
experience with the SBA.
    Thank you very much.
    Chairman Manzullo. Thank you.
    [Ms. Yan's statement may be found in appendix.]
    Chairman Manzullo. Our next witness is Don Lee of the 
Chinese Consolidated Benevolent Association.
    Mr. Lee, we look forward to your testimony.

                    STATEMENT OF DON B. LEE

    Mr. Lee. Good afternoon, ladies and gentlemen. Thank you 
for inviting me to participate in today's hearing.
    My name is Don Lee. I am here in my capacity as the 
Disaster Assistance Coordinator of the Chinese Consolidated 
Benevolent Association, CCBA, located at 62 Mott street in 
downtown Manhattan.
    In response to the September 11 terrorist attack, the CCBA 
has provided without cost or charge office space, equipment, 
supplies, food, water and other services to those affected by 
this tragic event. The CCBA's conference rooms and auditorium 
have been converted into satellite offices for various relief 
agencies, charitable organizations and government agencies, 
including FEMA, the Red Cross, Department of Labor and the SBA, 
and also organized more than 150 volunteer interpreters. 
Services include multi-lingual information sessions and direct 
services including the intake, preparation of disaster loans 
and grants on site for both residents and businesses. In its 
last report, FEMA reported more than 16,000 visitors have been 
served at the center since it went into operation on September 
20.
    While the community is extremely thankful and impressed 
with the professionalism and dedication of the SBA and FEMA 
staff, the business community found effectiveness and 
efficiency of the overall relief program to be woefully 
inadequate. In many instances, the process frustrated those 
seeking assistance, and many more were disappointed by the 
outcome. They felt that their expectations were unreasonably 
raised and their efforts and energy wasted.
    People, process and technology are the components by which 
problems are solved. Without being overly simplistic or 
critical, our observation is that the SBA and other relief 
agencies simply did not have enough people who could 
effectively communicate to the victims. The process is long and 
tedious, particularly since pen and paper is the primary intake 
and feedback of technology.
    As we hope and pray that our Nation will never have to deal 
with another tragedy, I feel compelled to share with you 
several of our observations, concerns and recommendations for 
providing relief to small businesses in immigrant communities 
in an urban environment. The following are areas of concern, 
with recommendations:
    Risk factors. There are two primary risk factors that 
discourage victims of this tragedy from either applying for or 
accepting loans from the SBA.
    The first is the personal risk. An owner of a toy store in 
the community turned down a $50,000 loan from the SBA, funds 
that he needed to carry him through the holiday season, because 
the SBA required him to risk his only tangible asset by 
mortgaging his home. He felt that the psychological burden of 
placing his family shelter at risk outweighed the burden of 
trying to restart his business.
    The other risk is the success and recovery capability of 
the overall local economy. As one restaurant supplier said, 
helping me to reopen is not enough if my customers cannot get 
help. All the SBA has done is to get me into more debt.
    Recommendation: The SBA should provide stimulus programs 
that will assist each sector, an uplifting of the entire 
community, without forcing unreasonable economic, legal and 
psychological risks on the victims. Only then can we fashion a 
solution that is meaningful.
    Operational efficiencies in other areas. There were 
insufficient or no trained bilingual staff interpreters until 
much later. The problem is the red tape. These procedures, 
forms and instructions are confusing even for those fluent in 
English. The problem is magnified for applicants who have 
limited English capability. Forms, applications are also not 
available in other languages. While small business may not have 
the necessary expertise to complete each application, they do 
possess the know-how to show up with the necessary documents.
    Perhaps the SBA can create a prequalification package 
written in different languages outlining the requirements as 
well as an approval process. The forms are unnecessarily 
complicated and tedious, as mentioned earlier.
    And here is another point. Many immigrant businesses are 
created by many family members or friends pooling their life 
savings together. By requiring each and every partner to 
provide their own historical financial information, the SBA 
multiplies the burdens and adds complication to an already 
tedious inefficient process. Again, the information should be 
readily available from government entities.
    Timing. Small businesses, especially in immigrant 
communities, runs extremely low on profit margins. This week's 
intake pays for next week's supplies. It is critical for loans 
and grants to be made available quickly.
    One example is a tour operator who built their entire 
business by pulling together their entire life savings to lease 
several tour buses, and the vehicles were repossessed because 
they did not have the cash to make the payments. These are the 
same situations with many limo drivers and taxi drivers in the 
area. With their entire life savings wiped out, it is unlikely 
these hard-working Americans will have the capital needed to 
restart their business anytime soon.
    All of us in our community support the President's call to 
be stronger than ever in the face of this attack. We do have 
the courage to deal with the challenge of rebuilding our 
economy. To offset the impact we do need help from agencies 
like FEMA and SBA. Inefficient operation hampers the recovery 
efforts, drains resources and demoralizes our community.
    This disaster has been extraordinary and unprecedented. I 
believe the relief must be extraordinary and unprecedented.
    Thank you.
    [Mr. Lee's statement may be found in appendix.]
    Chairman Manzullo. Our next witness is John Calder, who is 
the owner of Steamer's Landing Restaurant.
    Ms. Millender-McDonald. Mr. Chairman, may I just ask that 
other witnesses summarize so we can have----
    Chairman Manzullo. We only have three left, and they will 
be pretty quick.
    If you want to take less than 5 minutes, that would help 
out.

                    STATEMENT OF JOHN CALDER

    Mr. Calder. Mr. Chairman, Ranking Member Velazquez, members 
of the Committee, thank you for inviting me to testify today 
before you regarding my experiences regarding September 11. I 
will go right into----
    Chairman Manzullo. Mr. Calder, you can take the 5 minutes; 
and same with you, Mr. Kramer and Mr. King.
    Mr. Calder. I am the major shareholder and co-manager of 
Steamer's Landing Restaurant located on the esplanade between 
Liberty and Albany Streets in Battery Park City. We are located 
just two blocks west of the World Trade Center site. My 
restaurant, my partner and 35 employees were directly impacted 
by the physical and economic damages wrought by the attack.
    By 9 a.m. on September 11, Steamer's was full of people who 
sought shelter and hope of escape. Before the buildings came 
down, police and fire officials broke my windows. As the towers 
fell, Steamer's became a giant vacuum cleaner as the 125-mile-
an-hour wind created by the suction from the floor from the 
World Trade Center and around our building, which is a 35-story 
building above, just filled with dirt, unspeakable debris. 
Every nook and cranny was filled.
    For the first several days I had tried in vain to get to 
Steamer's. Finally, 10 days later, I was able to remove some 
valuable papers and dispose of rotten food. Two weeks after 
that, we started taking inventory and talked about reopening in 
the spring.
    Half of our chairs, our outside furniture was missing and 
scattered around the neighborhood. Debris was everywhere. And 
not knowing the content of what had been--that content of what 
had been, it was difficult to deal with--talking about the 
debris in the neighborhood--replacing $25,000 in ruined food 
and beverage and HVAC system as well as several refrigerators 
and electronic equipment, plus the furniture, repainting, and 
refinishing must now be accomplished. A new ceiling must be 
hung, because the building suffered a leak that came down from 
the 17th floor into the restaurant. There was also a fractured 
sewerage tank in my cellar and a flood in the basement when the 
electrical went out.
    At first I was crazed that no government agency was 
offering to clean the debris of the World Trade Center from 
inside my restaurant. Now I want to create something new and 
fresh, and I am optimistic that we will succeed sooner than 
later.
    Financially, I thought the insurance would help, because I 
had bought business interruption insurance after the first 
World Trade Center bombing. We also have replacement value in 
the policy. Yet the adjuster who is assigned to Steamer's talks 
of dusting the place off and reopening as soon as possible.
    In almost 3 months, I have received just $40,000 from my 
insurance. Our monthly overhead is about $30,000. We had 
$40,000 in the bank account on September 10, which is now 
depleted.
    Our destroyed inventory was worth approximately $100,000 in 
resale value.
    Personally, this experience has meant tremendous financial 
hardship as well as being an emotional disaster. We have been 
able to take advantage of two grants totaling $10,500. 
Hopefully there will be more grants available for working 
capital and improvements. I remain optimistic about the 
insurance.
    In mid-September I applied for an SBA loan just in case 
other sources failed. I spent time with my accountants and 
submitted the proper forms. The SBA inspector who inspected the 
Steamer site said he could not get into the restaurant--this 
was early before we were able--allowed to get into the area, 
which is about 4 weeks after the bombing--but said not to 
worry, he had a good feel for what had happened and had to 
leave for Buffalo the next day. It was impossible for him to 
know the extent of the physical damage, especially in the 
cellar, the ceiling, the HVAC, the loss of property.
    On October 11th, I was told that I would be awarded 
$150,000 loan, but was told the government would have to take 
my home as collateral. Since my wife and I jointly own our 
home, and she is not involved in my business, pledging our home 
was out of the question. They could not recommend an 
alternative accommodation.
    As of September 10th, I had--I had a $110,000 line of 
unsecured credit with my bank and a good balance sheet. I could 
not understand the refusal, since this was purely business-
related. Steamer's Landing, my only business, sits in a 
beautifully maintained park in Battery Park City. It is located 
right on the Hudson River. For 12 years we had maintained a 
relaxing atmosphere while----
    Chairman Manzullo. How are you on time, Mr. Calder? The red 
light is on.
    Mr. Calder. My emotions are----
    Chairman Manzullo. I can understand that.
    Mr. Calder. I am awfully sorry.
    Chairman Manzullo. You don't have to apologize for 
anything. You have suffered a great loss.
    Mr. Calder. I am almost through.
    For 12 years we have maintained a relaxing atmosphere while 
offering good, dependable food to those who occupy the 175 
seats and 2 outdoor terraces. A bar and 80 seats fill the 
interior space. The Statue of Liberty, the intense colorful 
sunsets and the shimmering river finish the decor. The Twin 
Towers rose forever up behind us and were in the view as well.
    I opened my first restaurant in New York City in 1968----
    Chairman Manzullo. Mr. Calder, I am going to have to cut 
you off. We are going to have a vote in about 15 minutes. I 
want to have two more witnesses----
    Mr. Calder. Can I just finish one more paragraph?
    I believe the combination of new grants, loans and tax and 
wage credits must be created as well as new criteria by which 
loans are approved and other preloan requirements. I also 
believe that we have to work together on this until we see the 
light. We all need a long-term commitment from each other. If 
nothing is changed from this legislation, it is just another 
exercise, and God help us. Thank you.
    Chairman Manzullo. Thank you very much.
    [Mr. Calder's statement may be found in appendix.]
    Chairman Manzullo. Our next witness is Michael Kramer of 
Audio Systems Technology Sound and Video. If you could abide by 
the 5-minute rule, I would appreciate that. There is no penalty 
for going over.

                  STATEMENT OF MICHAEL KRAMER

    Mr. Kramer. Thank you.
    According to J.P. Morgan Chase, before the World Trade 
Center attacks, there were nearly 7,800 businesses with annual 
revenues of $10 million or less at Ground Zero and about 34,800 
of them south of 14th Street in Lower Manhattan. As an owner of 
an audio video retail store, I am proud to be asked to come to 
Congress to champion a new legislation, and I thank the 
Chairman for H.R. 3230 and our Congress Member Nadler for H.R. 
3272.
    I am a lifelong New Yorker, leaving only briefly to attend 
college in Beloit, Wisconsin, and graduate school at the 
University of Kentucky.
    After watching the first plane hit the first tower while 
crossing the street to my office, the shock of witnessing 
firsthand an act of war is something I will never forget.
    Chairman Manzullo. Mr. Kramer, could you bring the mike 
back just a little bit there?
    Mr. Kramer. Yes.
    Although we suffered no physical injuries, this economic 
and psychological trauma has haunted us ever since. Our 
location was in the frozen zone for the rest of the month of 
December. No customers were allowed to walk below the 
demarcation line of Canal Street on foot, and up until as 
recently as 2 weeks ago, any motorists trying to visit us had 
to pass through a checkpoint that included a New York cop, a 
New York State Trooper and an army guy.
    In the months of September, October and November, our 
customers have had to run a gauntlet in order to patronize our 
store. There is an acrid smell of smoke from the fire that will 
continue to burn into spring of 2002. Whenever a large piece of 
debris is lifted, the rush of fresh air fuels the burning of 
who knows what kinds of chemicals, exposing us to health risks 
like PCBs and asbestos.
    With only 7 days of receipts for September, we still had to 
be timely with our October rent of $14,000 for our fancy 
Tribeca corner store location. FEMA worked with Chase Bank to 
extend our line of credit by $10,000 to satisfy our landlord.
    As soon as we could take stock of our situation, we 
contacted FEMA for help. Their response was to refer us to the 
Small Business Administration, and the SBA had only one 
instrument available to help us in the form of an economic 
injury disaster loan, which is defined as assistance that is 
available only to applicants with no credit elsewhere 
available. Our firm was turned down based upon an 
unsatisfactory credit history and inadequate working capital, 
resulting in a lack of repayment ability. In short, without 
putting up our homes as collateral, we did not qualify for the 
only form of Federal assistance available, a low-cost loan.
    We need and we needed grants, not loans. Why go further 
into debt to finance a business without customers for a 
significant period of time? Why should we be asked to choose 
between staying open and paying off debt? Why make commitments 
to staying in the downtown section of Manhattan if the SBA has 
likewise turned down 70 percent of our commercial neighbors?
    Small business people are by definition initial risk-
takers, entrepreneurs who pioneer ideas. We need the 
opportunity to have access to a grant program to help provide 
monies without payback or assuming any more debt so that we can 
make immediate repairs to pay our rents, to meet our payrolls 
and keep our staffs employed until conditions improve. Starting 
all over again because of a terrorist attack was never a 
scenario that we considered.
    This was an act of war. It wasn't a natural disaster. 
Assuming that the SBA was not around in 1816 when the White 
House was burned down by the British, it is quite clear they 
had no program in place to deal with a completely different set 
of issues. Who was looking out for the tens of thousands of 
small business people in Lower Manhattan who have had their 
day-to-day life and long-term prospects turned upside down?
    The airlines and the insurance companies seized the moment 
and got bailed out by the Federal Government. The SBA 
Administrator, who I met at the Pier 94 intake center, didn't 
have what I needed, because it was not in his range of 
experience as a weather-related event. Collectively, we all 
speak now of our lives post-911 and the trauma that we have all 
suffered. It had nothing to do with the weather.
    We are the last people you would normally see asking for 
public largesse. Small business people are fiercely resilient. 
We have a strong independent streak, but these are 
extraordinary times in the downtown district. We need direct 
Federal grants to pay our overhead costs and to regroup and 
allow us to hang on.
    Our customers are hesitant to come back until the fires are 
out in downtown--in Lower Manhattan. The only people coming 
downtown now are the tourists, who have been asked by our mayor 
to stay away, to stop taking pictures of a mass grave and crime 
scene and give us time to heal.
    Yes, it is presumptuous on our part to ask Congress to 
allocate direct Federal grants, but we are New Yorkers, and 
they will provide the financial and technical resources that 
are needed to keep our small businesses afloat and help 
subsidize the retention of thousands of low- and middle-class 
jobs, because it is just pure common sense.
    This disaster has made us all New Yorkers. We are very 
proud to share our heritage with our Nation and with the world, 
and when I read in the testimony about how providing disaster 
assistance by the Small Business Administrator in the forms of 
loans rather than grants creates an incentive for property 
owners to be underinsured against risk or to expect a Federal 
bailout, I would say, he just doesn't get it.
    Thank you.
    [Mr. Kramer's statement may be found in appendix.]
    Chairman Manzullo. Okay. Thank you very much, Mr. Kramer.
    Our next witness is James King. Mr. King, is the New York 
State director of the Small Business Development Center. Mr. 
King.

                    STATEMENT OF JAMES KING

    Mr. King. Mr. Chairman, Ms. Velazquez, members of the 
committee, thank you for the opportunity. I have to admit I was 
one of those organizations that had one of those weather-
related disaster plans, and it went out the window on the 11th.
    The SBDC is a unique partnership between SBA host 
institutions, the State, and the private sector, and we relied 
upon every element of that partnership to come into play for 
our response to the September 11th disaster. I would like to 
recognize the Administrator, Hector Barreto, for his leadership 
in providing us with some of the resources we needed during 
this time. It seemed like every time I was in New York City, he 
was there, his presence and support was very much appreciated 
in a very critical time.
    On the 11th, I was traveling with the deputy associate 
administrator for SBDC, and that was New York's good luck. 
Johnnie Albertson provided us with some supplemental funding 
the day after the event that allowed us to start on a disaster 
recovery effort. She also organized all 57 States to provide 
New York with some specialized funding that was made available 
from California to cover our disaster efforts for most of this 
year, but I think we are looking at a long-term effort with the 
small business community to recover from this disaster measured 
in years not months.
    The SBDC recovery plan said all 23 centers across New York 
State were committed to providing experienced staff to provide 
services within the disaster area. I am pleased to let you know 
that all 23 centers have responded, and we have been able to 
move over 40 additional staff members into the New York City 
market to provide direct assistance to impacted small 
businesses.
    The SBA's disaster loan program, I think, was confronted 
with the largest-scale disaster it had ever seen. Luckily, the 
State cooperated very closely with SBA in setting up those 
initial hotlines in the first few days to capture businesses 
needing help, and coordinated with FEMA. A lot of coordination 
efforts were accomplished.
    On September 25th, SBA broke the tradition and approved the 
SBDC to provide SBA disaster loan applications and assistance 
in completing those applications. That was critically 
important, because during those first few weeks after the 
event, travel was restricted, and a lot of small business 
owners could come into SBDC offices across the New York City 
area and obtain assistance with the application without having 
to travel back into the disaster area.
    I also would like to commend Aubrey Rogers, who is the 
district director for New York City. Aubrey was in the impact 
area. He operated from a cell phone and on the run. He 
coordinated volunteers, assisted our offices with coordinating 
door-to-door efforts to involve more small businesses in the 
recovery effort.
    New York State came to the forefront. Again, the State's 
economic development agency started discussing small business 
needs, and they became a very nimble entity that we were 
coordinating with, bringing support programs to bear in usually 
unheard of times of less than 48 hours.
    Our third partner in this was the private sector community, 
and I would just like to point out a couple corporations to 
you. First of all, we did launch our own microloan fund for 
small businesses that would slip through the cracks with some 
of the other efforts. American Express, Deutsche Bank and the 
Principal Financial Group became our founding sponsors. We have 
raised over a million dollars and are issuing microloans to 
small businesses across the impact area. Right now we are 
restricting it to 14th Street and below.
    Destruction to communications was really awful for small 
business. Compaq Computer donated 60 computers that we put in 
offices across the region to allow firms to have direct access 
to the Internet and any other communication needs they had.
    Companies like Intuit stepped up, providing new copies of 
Quicken, Quick Books. I think every small business is familiar 
with that. We distributed over 500 free copies of those.
    The financial institutions stepped up to the plate, and the 
best example I can cite was--within the first week, a small 
towing company that couldn't meet their payroll at the end of 
the week because they would have been removing cars and damaged 
vehicles around the clock from ground zero. Their loan of 
$50,000 was approved in 3 hours, after some faxes with one of 
the New York City banks.
    Given these efforts, has it been enough? Has SBA and the 
other agencies responded? Are the Federal programs there to 
respond? Speaking as the SBDC director, I have to say no. There 
are many more things that we need to do. The U.S. Chamber ran a 
report that said that after the attacks, revenues plunged for 
57 percent of businesses an average of 34 percent, but small 
business remains optimistic.
    I think that we have key obstacles in the way, some of the 
size standards, the restriction on financial services, and they 
need to be addressed today. I applaud the committee for 3230 
and hope that everything that is possible can be done to push 
that legislation forward. Thank you.
    Chairman Manzullo. I am glad that you like our bill. Maybe 
we can convince your boss to sign on to it.
    [Mr. King's statement may be found in appendix.]
    Chairman Manzullo. Mr. Mitchell, would you like to sit next 
to Mr. Barreto to help him with some of these questions that 
may come along?
    Mr. Mitchell. Sure.
    Chairman Manzullo. Herb Mitchell is the director of the 
disaster program. Please feel free if when a question comes to 
join in an answer, because I know these are extremely difficult 
and technical questions. And, Mr. Barreto, I know will look 
upon you for your wisdom and advice in this area.
    Ms. Velazquez.
    Ms. Velazquez. Thank you, Mr. Chairman. And I want to thank 
all of you for being here today. I think this has been very 
helpful to us, and it is great that we have all the witnesses 
and at the same time Mr. Barreto is here so that we could have 
an exchange of--a dialogue among the witnesses and the 
administration.
    Mr. Barreto, I have a lot of questions, so please try to be 
as short as you can and address them. We have seen--we have 
heard anecdotal evidence that the loan decline rate from New 
York is leaning above what the rate has been historically. Why 
is that?
    Mr. Barreto. I want to make sure I understand the question.
    Ms. Velazquez. Disaster----
    Mr. Barreto. Disaster decline rate in New York?
    Ms. Velazquez. Yes.
    Mr. Barreto. Right now the percentage of loans that we are 
approving is approximately 46 percent. Nationally what we have 
seen in other disasters is approximately 50 percent, but one of 
the things that is very different is the makeup of the loan 
applications. Oftentimes when we are responding to a disaster, 
an earthquake, a fire, a tornado, 80 percent of the 
applications are coming in from homeowners, and only 20 percent 
from small businesses. In this instance, it has been exactly 
the reverse of that. Eighty percent of the applications that we 
are receiving right now are from small businesses. Only 20 
percent are from homeowners.
    Even when you take out the loans that would not qualify 
because they are too large or there is credit problems or a 
judgment from the IRS or something like that, the percentage 
raises significantly higher than that, especially when you look 
at the economic injury disaster loans that we are doing across 
the Nation. I think the percentage jumps up to over 60 percent 
when you pull out some of the loans that wouldn't have 
qualified anyway. But when we are doing our calculation of 
that, we calculate everybody that actually applied for one of 
those loans.
    Ms. Velazquez. Yeah. Mr.--we heard Mr. Lee and Mr. Calder 
and Kramer and Alice Yan, you all talked about the disaster 
loan program and how complex and the red tape, but even if we 
have the perfect world that we have bilingual forms that is 
just one page and all that, it seems to me that what you are 
telling us is that the disaster loan by itself is not enough, 
and that in some cases is not the answer.
    Mr. Calder, the Democrats on this committee, we were 
successful in including a business grant program into H.R. 
3230, the American Small Business Emergency Relief and Recovery 
Act. Could you talk more about how a grant program will be 
helpful to you?
    Mr. Calder. I think the concept of the grant as opposed to 
the loan, again, we have to look at why we are in this 
situation, and I think more business people are looking at why 
we are in this situation. We are not there because we want to 
expand our businesses. We are there because we want to keep 
them alive. In an area where, you know, obviously you as 
bankers are not terribly confident that business is going to 
return right away or quick enough to be able to--for businesses 
to stand on their own. I am not a banker. I am a renter. I make 
steaks. I do all sorts of other things. I like to create food 
and serve my customers.
    Ms. Velazquez. And I hear that they are great.
    Mr. Calder. Thank you. But I--you know, I think in looking 
at this whole thing, it is going to take a long-term 
commitment, and with maybe a combination of grants, which are 
important to us, because, again, we weren't there, and we had 
no choice about the situation. We--some of us can't afford to 
pay loans. We already have loans that we are paying, and high 
interest rates on that can't be absorbed by the low interest 
rates of the SBA. One good way if you could do that, but our 
banks still want to keep their loans and keep their rates.
    Ms. Velazquez. Thank you, Mr. Calder. I will encourage you 
that you reach out to Senator Clinton and Senator Schumer and 
ask them to support the grant program that is included into 
this legislation.
    Mr. Kramer?
    Mr. Kramer. I would just add that what we are looking to do 
is cover our out-of-pocket expenses. You know, in the month of 
September we didn't anticipate having to pay our staff with no 
revenue coming in, to have to pay the rent with no revenue 
coming in. That is the purpose of grants.
    Ms. Velazquez. Thank you.
    Mr. Barreto, on October 22nd, you expanded the disaster 
loan program to businesses outside the declared disaster area 
that could show significant economic injury that are related to 
the terrorist attack of September 11th. Today only about 13 
businesses have applied. Why is it that the Economic Injury 
Disaster Loan Program nationwide has so few applicants?
    Mr. Barreto. Well, one of the things that we have tried to 
do is a lot of outreach. We have been communicating with a lot 
of the Chambers of Commerce, business organizations, and of 
course, we work through our network of over 70 district offices 
in the country.
    One of the things that we have communicated is that these 
loans are for businesses that were impacted directly by what 
happened on September the 11th. For example, businesses that 
would have been located in airports, or if you had a business, 
for example, that taught flight training school, or planes that 
have the signs behind them at the stadiums that we all go to, 
or somebody in the tourism industry. There are very specific 
criteria. But we are continuing our efforts to get the word 
out. There has been interest.
    Obviously this regulation change was enacted after we began 
our other disaster response efforts, and so some people are 
just getting the word on that now. And we have also tried to 
make sure that we have provided it in different languages as 
well so we could make sure all communities are receiving this 
information.
    Ms. Velazquez. It seems the response has been light, and 
you know that we are talking about a deep recession. Would you 
consider to extend the deadline of October 22nd?
    Mr. Barreto. We will always look at extending the deadline, 
especially if we see that there is a lot more interest and 
there is still a lot of people that haven't been informed. In 
fact, we have already extended the deadline once. We want to do 
whatever we can to be responsive to all those small businesses. 
We also want to make sure that we educate them about the other 
things that we have available to them.
    I totally agree that access to capital, especially in this 
time, is very important to a lot of small businesses. There are 
other things that SBA does, too, entrepreneurial development, 
technical assistance, especially when businesses are struggling 
right now and looking for some solutions to business, and that 
can be very valuable, obtaining contracts from the public and 
private sector and many other services. So we are using this 
opportunity of outreach to also communicate the other tools 
that are available to small businesses.
    Ms. Velazquez. Mr. Chairman, I just have one more question.
    Chairman Manzullo. Sure.
    Ms. Velazquez. We have here the Congresslady from the 
Virgin Islands, and we have all the people from Florida who 
have been concerned about the resale of these disaster loans, 
and we hear anecdotal testimony concerning cases of aggressive 
loan collection practices. Would you consider protecting this 
loan from resale?
    Mr. Barreto. Well, we have been very flexible in looking at 
our whole loan sale program. In fact, we delayed a sale that we 
were going to have because we just felt that it was the wrong 
time. We also have looked at ways that we can remove loans that 
are directly impacted. For example, if somebody has a disaster 
loan already that was impacted by September 11th, we have 
looked at that. We are looking at all of our processes.
    One of the things we thought that we have to do a better 
job of is communicating to people when a loan may be subject to 
one of these loan sales so that if they have difficult 
circumstances, they can appeal those circumstances, and we can 
do something about it before that loan is sold. So obviously we 
are very sensitive to areas like the Virgin Islands, Puerto 
Rico, Florida. All of those areas have been impacted directly 
by what has occurred on September 11th, especially the tourism 
industry, and that is actually where we are seeing some of the 
most interest for these economic disaster loans in these 
tourist areas. We are doing everything we can to make sure that 
they are aware of what their options are.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Chairman Manzullo. Thank you. One of the problems, first of 
all, nobody can prepare for a disaster where two jet aircraft 
go into a building, and no one is expecting anybody to have had 
a stand-by plan for that. But here are the problems, and Mr. 
Barreto, these are--they are not your problems. You are a piece 
of the recovery program.
    First of all, Congress decided to give away several billion 
dollars to the airline industry. I have a list here from the 
U.S. Department of Transportation, a list of air carrier 
payments as of October 5th, which is a late date, and in here 
we have, for example, two helicopter companies. Grand Canyon 
Helicopter got $340,000. ERA Aviation got $204,000. Now, a 
company in New Jersey that is in Mr. Ferguson's district, we 
have got to fight like hell to get the loan, and I called this 
meeting in order to push SBA to the edge in order to get the 
loan. They were not given the loan because of sizing standards, 
which Mr. King referred to. And as I look at the sizing 
standards, I scratch my head and say, there is a big problem. I 
refer to the regulations.
    Here is the situation with the helicopter people. Ms. 
Velazquez owns a helicopter service, and so do I. She has 10 
employees, and so do I. She has three helicopters, and so do I. 
She is in the regular commuter service for helicopters. I am in 
the tourism service. She gets an economic disaster loan at 4 
percent. Somebody in Colorado gets a grant, and I get nothing. 
That is not acceptable. And I had to call this hearing to get 
the SBA to move.
    We have got one opinion after the other. You can appeal. 
You can do this and you can do that. I mean, if I had been in 
that helicopter business, I would have raised hell, and that is 
what they did. They went to Mr. Ferguson, they came to the 
Chairman, and what concerns me is the fact that I don't think 
the SBA understands the totality of the situation.
    For example, why should the SBA be fighting the House Small 
Business Committee, the Senate Small Business Committee, most 
of the Members of the House, most of the Members of the Senate 
to ease up the restrictions on allowing 7(a) loans to be made? 
I mean, I get this letter dated November 30th to Chairman 
Kerry, and it says, given the administrative changes SBA has 
already made in the Economic Injury Disaster Loan Program, we 
don't believe statutory changes made by S. 1499 are necessary.
    I don't know who wrote this letter, but I think whoever 
wrote the letter didn't read the bill. I mean, economic injury, 
that is a small portion of it. I am just at the point now 
where, you know, finally the helicopter service is going to get 
its 4 percent loan, and that happened maybe 3 hours ago when 
suddenly the SBA decided to act.
    Now, what I would like to do is this. There is a big 
problem with size standards. There is no one that can justify 
the scenario that I laid out as to who gets the loans, because 
somebody is picking winners and losers, and what I like to do 
is to have just a working group, and I am going to commit--see 
if you would commit yourself to it, Mr. Barreto. Ms. Velazquez 
and I would head it up, with some of the small business groups 
to be able to say, look, you have got to move faster, because 
that helicopter company would have gone bankrupt had they not 
contacted their Congressman, had I not gotten personally 
involved in it.
    If you look at the economic injury disaster loans, these 
are not a substitute for the bill that we have been proposing. 
It is just a portion of it. In fact, the--of the total amount 
of applications made on it, there were 13,597 applications 
issued. Applications received were 1,544. That is because of 
onerous size restrictions. I went through that thing on the 
Internet last night, and you can--if you are under 5 here, if 
you are under 15--I mean, all the way from 1,500 employees to 
under $5 million in sales. This doesn't make sense, and the SBA 
has the authority through the Director to be able to waive 
these restrictions on here.
    But, again, of those economic injury disaster loans, 13,597 
were applications issued, 1,544 applications received, 323 
approved, 443 declined.
    What I am going to do is this: If I have to save small 
businesses in this country one by one, I am going to do it, and 
I want to be able to sit down with somebody from the SBA next 
week and go through every single one of those applications, all 
453, and I want somebody there from the SBA who has the 
authority to make a waiver on each of those. Would you be 
willing to commit yourself to do that?
    Mr. Barreto. I am always committed to working with you, and 
I would be happy to be involved in any committee that you or 
Ranking Member Velazquez would like me to. We want to do 
everything that we can to look at every situation. If there is 
a situation that deserves a second, a third, a fourth look, we 
are happy to do it. We are constrained as well by our policies 
and procedures, but whenever we can provide the flexibility 
necessary to right a situation that needs to be righted, we 
would love to do that. So, yes, we would love to work with you 
on that.
    Ms. Velazquez. Would the gentleman yield?
    Chairman Manzullo. Yes.
    Ms. Velazquez. We understand all the restrictions under the 
law, and, in fact, we cannot blame you, because you are 
administering a program that was created by an act of Congress, 
and you have to comply with the restrictions and limitations. 
But would you support H.R. 3230 that will give you the power to 
make decisions and to waive restrictions on limitations?
    Mr. Barreto. I am happy to work with both you, Ranking 
Member Velazquez, and Chairman Manzullo. I think it is very 
important that we all have a very strong participation in this 
process.
    Chairman Manzullo. Mr. Barreto, you need to answer the 
question. You say you are bound by your rules and regulations. 
We want to change them, and that it is not a matter of working 
with us. We need this done. We can't wait any longer on it. I 
appreciate working with you. I want to get something done. I 
practiced law for a long time, and there is nothing more 
complicated than the legal process. This thing about the 
helicopters, they would have gone under had I not personally 
gotten involved. If I have to get involved with 453 cases, I 
will do it one business by one.
    I want a meeting next week. I want somebody with authority 
sitting next to Ms. Velazquez and me who right there can make 
the determination that the loan will be done, will be given. 
Could you grant us that assurance?
    Mr. Barreto. Absolutely.
    Chairman Manzullo. Good. Doesn't get much better than that.
    Yes, Mrs. Tubbs.
    Mrs. Tubbs Jones. Thank you, Mr. Chairman, Ranking Member 
Velazquez.
    Mr. Barreto, after we recover from September 11th, I want 
to keep reminding you that we met on September 11th in the 
Capitol.
    I am going to go directly to the issue that I raise. I have 
a statement that I wish to admit for the record, Mr. Chairman, 
and attached to that statement is a letter that has been signed 
by 11 of my colleagues and myself to speak to you on the 
issue--I am going to have my staffer pass it to your staffer--
an issue that fortunately was approved in 3230 that would allow 
credit unions across the country to administer 7(a) loans.
    And the reason we proposed it and it was approved by this 
committee, there are so many applications for small business 
loans, and in many areas where there are not large banking 
institutions, it is very difficult for many of the small 
businesses to access a banking institution who wants to 
administer a small or microloan.
    So in that letter signed by a number of my colleagues, 
there is a proposal to you. 3230 only expands the opportunity 
or the ability for the SBA to allow member credit unions to 
expand or to administer the small business loans for 1 year, 
consistent with--or in keeping with September 11th. But the 
letter proposes that your procedural rules be amended to allow 
member credit unions to administer SBA loans permanently. And I 
know there has been some concern within the--not the 
administration, but within the SBA as to whether or not you are 
authorized to do that. And in the letter, as well as in the 
legislation, we cite an attorney general's opinion that, in 
fact, says that you may, within the authority as an 
administrator, allow that to occur.
    I would like to go on and on and on with my inquiries, Mr. 
Barreto, but I decided that because we are short in time, that 
I will not go on. This is one of the most important things for 
me to be able to do on behalf of many of the small businesses 
across this country who really don't have access. You go to 
many communities--and I am on banking, and I love the banking 
institution world, but they have closed down the ATM machines, 
and people that are running businesses in small communities 
just don't have access. So it would be great to have the credit 
unions do that.
    I offer that to you, Mr. Barreto, and any response you 
would care to give, or your assistant, I would accept.
    Mr. Barreto. Well, thank you very much, Congresswoman, and 
I really appreciate your comments. It is ironic that I ran into 
somebody that led one of the largest credit union associations 
yesterday, and we have agreed to get together and to continue 
exploring ways that we can work together. Anything that gives 
us the ability or the authority to be able to change our 
policies with regards to credit unions, we will absolutely 
follow that.
    But I think there are a lot of opportunities, and I agree 
with you. Sometimes credit unions may be the only opportunity 
that somebody has to get these very valuable financial 
services. So we would pledge to continue working with you and 
to meet with the leadership of the credit unions association 
and find some solutions to this.
    Mrs. Tubbs Jones. And it is included in the legislation as 
well, so we are hoping that you will be able to support our 
legislation. And I thank you for the opportunity to inquire, 
and I yield the balance of my time, Mr. Chairman.
    Chairman Manzullo. Thank you.
    Mr. Bartlett.
    Mr. Bartlett. Thank you very much. Several years ago in the 
farming community in which I live, after several years of low 
rainfall, there was a pretty intense drought which brought our 
farmers to their knees, and it was declared a disaster area, 
and the Department of Agriculture and Small Business 
Administration came in with loan assistance programs.
    I remember one of our farmers who made the plea, I am 
already drowning in 9 feet of water. How can you help me by 
making it 12 feet deep? What he meant was he already had more 
debt than he could carry.
    Bankers are eager to loan money to our farmers, because 
they have real estate that is worth far, far more than any debt 
that they owe. What they needed as a bridge to get them through 
this disaster period was a grant, and there were very few grant 
dollars available. Clearly, the World Trade disaster is kind of 
the equivalent of a drought. It didn't happen yesterday. 
Hopefully it is not going to happen tomorrow. Now, we have 
routine droughts, but this was several years of low rainfall 
and then a rather acute drought following that, which was 
really quite unusual.
    I am not convinced that we have the right mixture of grants 
and of low-interest loans. Clearly to some of these businesses, 
the low-interest loan is just going to submerge them, and they 
are going to drown. What they need to get them through this 
period is a grant.
    Do you need something from us, or can your policies direct 
additional monies to grants, because many of these people, 
giving them another loan is not going to be helpful at all to 
them. They are just going to go bankrupt sooner rather than 
later doing that. They need a grant to get them over this.
    Mr. Barreto. Thank you for the question, Congressman, and I 
agree with you that just loans themselves will not solve every 
situation, and there are many different small businesses with 
different types of needs.
    We are working very closely with all of our district 
directors. We have a lot of district directors that respond to 
rural areas to reach out to those areas, and in the cases where 
an economic injury disaster loan to one of those rural small 
businesses would make sense, we try to afford them every 
opportunity to do that. Sometimes they will access it 
themselves from the Internet.
    As you probably know, the SBA is not authorized to do 
grants. That has not been something that we have typically 
done, and I know that there are a lot of different ideas and 
legislation out there. What we are trying to do now before any 
changes are made to our existing programs is to educate people 
where those grant programs are.
    In New York where we work very closely with the 
Congresswoman, we have had the opportunity to identify some 
grant programs that have been very helpful to the small 
businesses out there. So wherever we can, we try to refer out 
to some of the grant programs that are available. We do not 
have the ability at this present time to provide grants.
    Mr. Bartlett. Do the other agencies you work with have 
sufficient grant money that working together you can meet these 
needs? I am gathering that that is not true, that there is just 
not sufficient grant money out there.
    Mr. Barreto. Well, there are some grant programs in 
different agencies. As you probably are aware, HUD was recently 
granted a grant program that they are going to make available 
through community block grants. But there are some other 
agencies that have grant programs. I am not familiar with all 
of them, but to the best of our ability, we try to refer and 
work together with our counterparts in the other agencies to 
provide whatever relief is available to those small businesses.
    Mr. Bartlett. I know for our farmers, low-interest loans 
were not the solution. The banks were happy to lend them money, 
and the interest rate wasn't much different. And several of the 
witnesses here today indicate the costs of some of the SBA 
loans which makes them as costly as loans in the private 
sector.
    And I suspect that many of the small businesses in New York 
are very much in the same position that our farmers were, that 
additional loans are not what they need to get them through 
this. They need grants, and somehow through all of the agencies 
that are involved here, we need to make enough grant money 
available to get them--after all, a small business is worth 
saving. When we come out of a recession, it is going to be true 
of this one as it was the last one, most of the new jobs are 
going to be created by small business. This is an investment. 
It is not just spending by our taxpayers. This is an investment 
that will pay off.
    Thank you, Mr. Chairman.
    Chairman Manzullo. We are going to go vote for one vote, 
then we are going to come back.
    Okay. Who is next? Who was here first? You have no 
questions? Oh, Ms. McDonald.
    Ms. Millender-McDonald. Thank you, Mr. Chairman, and thanks 
to all of you who are here today. We have heard from many of 
you. Thanks to my friend, Congressman Nadler, who suggested 
that I talk with a lot of you, and I have done that. I would 
like to also welcome personally our native son to his post 
here. And quickly, I would like to say a couple of things.
    One is I am concerned about your outreach, because as I 
look at the--your statement, Mr. Barreto, you have sent out 
26,000 applications. You have received 6,000. You have sent 
out--that is under the New York disaster. Then the expanded 
EIDL, when you sent out 13,000, you received 1. Virginia Tech, 
523; you have received 118.
    Something is wrong with some outreach here. It seems to me 
that you need to do something to help get the word out that you 
have whatever you have for these small business people. When 
you see that Lower Manhattan has lost 100,000 jobs, then it 
says to us we are not trying to pick up this economy, because 
we know that the small businesses are the engines that drive 
the economy, and if you are going to lose these types of jobs, 
you are not going to ever have an economy that is going to 
return back. So we need to look at what will make that happen.
    I agree with Mr. Bartlett that we need grants instead of 
loans. These small business folks need grants, not loans, and 
if you are indeed not--it is not unusual for--it is unusual for 
you to give grants. These are unusual circumstances. So we need 
to see what we can do under the cloak of SBA to get those 
grants to these small business folks. They don't want to put up 
their homes. This is all they have left, for heaven's sake, so 
why should they have to do this? Why should they have to pay 
fees for balances, as I heard the young woman say, on existing 
balances of loans? These are impediments to trying to help 
these small business people, and I tell you, as Ranking Member 
here, I want to see what we can do to work things out for those 
folks, many of whom are women who are leading the charge on 
increasing businesses.
    I want to ask you also, the $1.8 billion through the HUD 
community block grant, is this additional funding, because 
cities--as a former mayor of the city, I do know that CBDG 
grants are needed very much in city governments, and we need to 
know whether that is additional money and not pulling from the 
cities.
    And lastly, let us see what I have here. I think I have 
said it all so quickly. But when we talk about time elements 
over a month for this young woman, Ms. Yan, to get a loan, 
which was fewer--fewer than what she wanted, I am concerned 
about your high-tech. Don't we have some kind of high-tech, 
that you can do something more expedient than have a month that 
you wait for someone to even be told that they are not getting 
the amount of the loan that they have--or they requested?
    These are things that we must look at, my friend, and we 
have got to do this. We have got to kick up this economy, and 
it must be through SBA. So these are unusual times. We must do 
unusual things.
    Thank you, Mr. Chairman.
    Mr. Barreto. Thank you very much, Congresswoman. And I 
appreciate the question, and I want to make sure I respond 
quickly and comprehensively.
    With regards to the applications that we have sent out, we 
have also noticed that the response rate coming back has not 
been high. We have reached out to them, sometimes called them 
one, two, three times. We have done a lot of training also with 
all of our partners, SBDC's and SCORE to make sure that they 
are also available in this outreach. We have taken 
unprecedented moves to do outreach, and anything that we can do 
above that to get some of those folks to apply for the loan, we 
would love to do that.
    Ms. Millender-McDonald. Churches, synagogues, mosques----
    Mr. Barreto. Absolutely. Sometimes we have found out that 
they have gotten help, maybe from another program, a grant 
program. They have found other types of financing. But I agree 
with that.
    With regards to the HUD grants, those are new monies, it is 
my understanding. I am not familiar with all of the specifics 
around it, but we would be happy to follow up.
    The response time right now on the approval loans is 
averaging 10 days. That is an all-time quick-time period for 
us. I mean, it went from 40 days, and some periods it was 
averaging 25 in previous. It is down to 10 days from the time 
that we receive an application, and if we can get it down lower 
than that, we will.
    Ms. Millender-McDonald. I would like to see it gotten down 
lower than that.
    Chairman Manzullo. Mr. Nadler, did you have a quick 
question or comment?
    Mr. Nadler. I have a quick comment. I was going to ask 
questions, but I would rather comment on the questions by Ms. 
Millender-McDonald and the answer. Two things.
    One of the--probably the main reason the response rate is 
very low is because the product of the SBA is not suitable for 
many of the small businesses. They are reaching out. Maybe they 
are not doing as good a job as they should. Maybe they are. But 
someone gets the information, and he sees he can get a loan at 
3 percent, 4 percent if he puts up his house as collateral. He 
says, that is nice, but I am not going to do that. It can't 
help me, I need a $400,000 grant because my business was shut 
for 6 weeks until the police let people come to my business, 
and now it is only down 80 percent. I am starting to build it 
up. It is only down--but it is 20 percent--I have got to look 
at this presumably until they put out the fires, and how am I 
going to survive for another 6 months. I need a grant, not a 
loan.
    So if your product of what you are offering to help people 
isn't suitable for them, and what we are saying is it is by and 
large, because this is such an extraordinarily and different 
kind of situation, the SBA product, to a very large extent, is 
simply not helpful, number one.
    Number two, the CDBG, the community development block 
grants that you asked about, $1.8 billion was added to the 
original $700 million's total of $2\1/2\ billion. That, first 
of all, goes to the Governor. It is statewide. It can be used 
for a lot of things besides small business grants. We at this 
point don't know, one, how fast it will come through; two, how 
much of it will go to southern Manhattan as opposed to the rest 
of the State; three, how much of it will be used for small 
business grants as opposed to the million other things, as you 
have said.
    As a mayor--as former mayor, you know what other things can 
be done. And that is why in the Small Business Claims Act that 
Senator Clinton and I introduced, we make available half-a-
million-dollar grants to small businesses who have suffered 
business interruption losses or physical damage directly and as 
much as is needed, directly drawing down for FEMA with the 
cooperation of the SBA----
    Chairman Manzullo. I am going to have to interrupt. There 
is a motion to recommit that is on the floor. We are going to 
have to end this. I want to thank all of the witnesses for your 
generosity. Mr. Barreto----
    Mr. Barreto. Thank you, Mr. Chairman.
    Chairman Manzullo [continuing]. You came under a lot of 
fire today. You did extremely well. We know where your heart 
is.
    Ms. Velazquez. Excuse me. Are we coming back?
    Chairman Manzullo. Right. The helicopters are taken care 
of. Are you going to be around town next week?
    Mr. Barreto. Actually, Chairman, I am out of town next 
week, back the week after, but we will make accommodations and 
have somebody meet with you that has decision-making authority.
    Chairman Manzullo. Appreciate that. Thank you so much.
    Mr. Barreto. Thank you very much.
    [Whereupon, at 3:51 p.m., the committee was adjourned.]
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