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



 
  SUGGESTIONS FOR IMPROVEMENTS IN SBA PROGRAMS: VETERANS AND DISASTER 
                              LOANS SALES
=======================================================================

                                HEARING

                               before the

    SUBCOMMITTEE ON WORKFORCE, EMPOWERMENT, AND GOVERNMENT PROGRAMS

                                 of the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                      WASHINGTON, DC, MAY 21, 2002

                               __________

                           Serial No. 107-59

                               __________

         Printed for the use of the Committee on Small Business








                       U. S. GOVERNMENT PRINTING OFFICE
81-797                          WASHINGTON : 2002
___________________________________________________________________________
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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
                                 ------                                

    Subcommittee on Workforce, Empowerment, and Government Programs

                  JIM DeMINT, South Carolina, Chairman
FRANK A. LoBIONDO, New Jersey        JUANITA MILLENDER-McDONALD, 
MICHAEL FERGUSON, New Jersey             California
FELIX J. GRUCCI, Jr., New York       DANNY K. DAVIS, Illinois
DARRELL E. ISSA, California          STEPHANIE TUBBS JONES, Ohio
EDWARD L. SCHROCK, Virginia          CHARLES A. GONZALEZ, Texas
SHELLEY MOORE CAPITO, West Virginia  MIKE ROSS, Arkansas
                                     DONNA M. CHRISTENSEN, Virgin 
                                         Islands
                  Nelson Crowther, Professional Staff













                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on May 21, 2002.....................................     1

                               WITNESSES

Elmore, William, Associate Administrator, Veterans Business 
  Development, U.S. Small Business Administration................     5
Soares, Frank, Chairman, Board of Directors, National Veterans 
  Business Development Corporation...............................     6
Henry, Major General Charles, President & CEO, National Veterans 
  Business Development Corporation...............................     8
Gatewood, Wayne, President & CEO, Quality Support, Inc...........    10
Lopez, John, President, Association of Service Disabled Veterans.    11
Eiland, Tony, National Office of Veterans Employment, Veterans of 
  Foreign Wars of the United States..............................    12
Weidman, Rick, Director, Government Relations, Vietnam Veterans 
  of America.....................................................    14
Bew, Ronald, Associate Deputy Administrator For Capital Access, 
  U.S. Small Business Administration.............................    31

                                APPENDIX

Opening statements:
    DeMint, Hon. Jim.............................................    35
    Millender-McDonald, Hon. Juanita.............................    37
Prepared statements:
    Elmore, William..............................................    42
    Soares, Frank................................................    49
    Henry, Major General Charles.................................    55
    Gatewood, Wayne..............................................    65
    Lopez, John..................................................    69
    Eiland, Tony.................................................    72
    Weidman, Rick................................................    78
    Bew, Ronald..................................................    85










  SUGGESTIONS FOR IMPROVEMENTS IN SBA PROGRAMS: VETERANS AND DISASTER 
                              LOANS SALES

                              ----------                              


                         TUESDAY, MAY 21, 2002

              House of Representatives,    
    Subcommittee on Workforce, Empowerment,
                           and Government Programs,
                               Committee on Small Business,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 2:05 p.m., in 
Room 2360, Rayburn House Office Building, Hon. Jim DeMint 
[chairman of the Subcommittee] presiding.
    Chairman DeMint. Good afternoon, everyone. Let's get our 
hearing started again.
    Thank you, all of our witnesses, for being here.
    We will probably have a few more members come from the last 
vote. We wanted to get started, get your comments on the 
record.
    I do appreciate everyone being a part of this hearing for 
the Subcommittee on Work Force, Empowerment and Government 
Programs. Very special welcome to some of you who have come 
from very great distances. I appreciate that.
    The Small Business Administration is required by statute to 
provide special consideration to veterans in the administration 
of its programs. There have been various complaints in the past 
that SBA and other agencies were not addressing the needs of 
veterans, especially when it comes to starting, financing and 
growing small business. This hearing will provide a forum to 
evaluate the performance of SBA and the National Veterans 
Business Development Corporation.
    The Corporation was created by Public Law 106-50 and is an 
example of how this Committee can work in a bipartisan effort 
to help veterans and small businesses in this country. I am 
happy to say that special emphasis is given in the law to 
providing entrepreneurial and procurement assistance to small 
businesses owned and controlled by service disabled veterans.
    Also, this hearing will provide an opportunity to entertain 
comments concerning H.R. 3263, a bill introduced by Congressman 
Pascrell, a member of this Committee.
    A second panel will provide information concerning the sale 
of disaster loans commercially.
    Basic to the hearing is remembering our veterans and the 
sacrifices that they made for this Nation throughout our past. 
Memorial Day is a day of remembrance. I can assure you that we 
in Congress will not forget you.
    I look forward to a lively and informative discussion of 
the issues presented. Again, welcome to this hearing; and now I 
recognize the ranking member for her opening statement.
    Ms. Millender-McDonald. Thank you, Mr. Chairman.
    I, too, would like to apologize to the gentlemen who sit 
before us today who waited patiently for us to do the people's 
business on the floor. We thank you so much for your being 
here; and we thank you, Mr. Chairman, for convening this very 
needed hearing.
    Today, this Subcommittee meets in its oversight capacity to 
review two important programs and their effect on our Nation's 
entrepreneurs. Memorial Day is a time when we as a Nation take 
a break from our routine to remember, honor and thank those who 
have made the ultimate sacrifice for the freedom we enjoy. 
Therefore, it is fitting that we review the programs that work 
on behalf of our veterans who have taken the next step toward 
the American dream of starting a small business.
    Today more than 5.5 million veterans are small business 
owners. These men and women are facing new challenges. Their 
new battlefield is the American economy. To assist these 
veterans our Committee passed the Veterans Entrepreneurship and 
Small Business Development Act of 1999. This Act created the 
National Veterans Business Development Corporation to improve 
veterans' access to financial and technical assistance. This 
program is also meant to give special assistance to service 
disabled veterans. While it holds great promise in aiding a 
whole new class of entrepreneurs, its full potential has yet to 
be realized.
    The other program that we will review today is the Disaster 
Loan Program. While SBA has many successful programs, the 
Disaster Loan Program is the pinnacle. The last thing going 
through anyone's mind in the wake of a disaster should be, how 
I will ever rebuild? This program makes rebuilding a reality. 
Through the Disaster Loan Program, small businesses, homeowners 
and nonprofits can receive low-cost loans, enabling them to 
rebuild and restart their lives.
    Rebuilding from the tragic events of September 11th would 
have been impossible without the assistance of the Disaster 
Loan Program. SBA had people on the ground in New York and 
Virginia helping small businesses to start over as the fires 
still burned, allowing America to begin the healing process.
    On October 22nd, the administration took the extraordinary 
step to open the EIDIL program nationwide, ensuring recovery of 
those small businesses in the travel, air and tourism industry 
affected by the events. We should commend the administration 
and, more importantly, the SBA employees for their tireless 
work.
    In today's hearing we will look at what happens to those 
small businesses once they receive an SBA disaster loan. 
Assessing the small business recovery process to ensure their 
continued success is as important as the distribution of the 
loan in the first place. There needs to be flexibility in these 
companies meeting the conditions of the loan.
    By way of background, problems began in the late 1990s when 
SBA started selling loans to private agencies. Once the loan 
moved from SBA to the private sector, the level of small 
business assistance decreased dramatically, removing all 
flexibility. Often, these private-sector institutions engaged 
in an overly aggressive practice of the collection of those 
loans, sometimes to the point of harassment.
    While it is clear that these companies should repay their 
loans in a timely fashion, it is questionable if receiving the 
money on time for the lender is worth the bankruptcy and 
harassment those businesses experienced. It was this concern 
that led the Democrats on this Committee to introduce H.R. 
3011, the Small Business Emergency Relief Act, that, in 
addition to providing greater flexibility in the Disaster Loan 
Program, would also prohibit the sales of these loans.
    This issue was raised during our markup of H.R. 1499, the 
American Small Business Emergency Relief and Recovery Act of 
2001, when an amendment prohibiting the resale of those loans 
were offered. Today's hearing will explore this policy and look 
for ways to ensure small businesses will not face a second 
round of devastation after a disaster at the hands of 
creditors.
    Mr. Chairman, I again want to thank you for holding today's 
hearing and allowing us to investigate these very critical and 
timely issues facing our Nation's small business. I would like 
to thank the witnesses for testifying today and look forward to 
hearing their testimony. Thank you.
    Chairman DeMint. I thank the gentlelady and call on Mr. 
Pascrell, who would like to make some comments about his bill.
    Mr. Pascrell. Thank you, Mr. Chairman.
    I would like to just thank you and Ranking Member 
Millender-McDonald for holding this important hearing; and, Mr. 
Chairman, you have assembled quite a blue ribbon panel. I don't 
recall us ever having, in the larger Committee or any of the 
Subcommittees, without exception, an as outstanding panel. I 
commend you for that.
    We are going to focus on two different issues, Mr. 
Chairman, if I may, members of the Small Business Committee 
find practically relevant. That is, veterans assistance and 
disaster loan asset sales.
    Veterans issues have been a priority for a long time. As a 
former veteran myself, I know veterans have sacrificed a great 
deal to safeguard America's freedoms in our future. Just think 
about all of the men and women who are currently deployed in 
Afghanistan as we sit here today.
    I consider my own service in the Army as a life-building 
experience which has given me the necessary perspective when 
considering issues important to those who have and continue to 
serve this great Nation.
    I introduced H.R. 3263, the Veterans Small Business Relief 
Act. My legislation is pretty simple, Mr. Chairman. It would 
provide that servicemen and women who have left the military 
within 5 years would be exempt from paying any guarantee fee 
for using the 7(a) loan program, probably our most significant 
program in the Small Business Administration.
    We all know that the 7(a) loan program is one of the SBA's 
primary lending programs. It provides loans to small businesses 
that are unable to secure financing on reasonable terms through 
normal lending channels.
    However, to offset the cost of the program, SBA charges 
lenders a guarantee and a servicing fee for each loan approved. 
These fees are passed to the borrower. Currently, when a loan 
amount is $150,000 or less, the fee is 2 percent of the 
guaranteed portion. For loans between 150 and $700,000, a 3 
percent guarantee fee is charged; and for loans greater than 
700,000, a 3.5 percent guarantee fee is charged.
    While 7(a) loans are often critical to business start-ups, 
charging a fee effectively levies a tax on businesses at a time 
when they can ill afford to pay. The salaries of those in our 
Armed Forces are often less than sufficient to obtain a loan 
through normal lending channels. For example, some sergeants in 
the Air Force are making around $1,500 a month.
    Let's face it. No one signs up with Uncle Sam to become 
rich. We are indebted to those who serve, and I think my 
legislation is a small gesture that we on this Committee can 
support.
    We should permanently change the 7(a) loan program to 
ensure that recent veterans do not have to pay fees. We should 
make sure that veterans who return to civilian life, want to 
start a business, do not have to pay fees now or potentially 
increased fees in the future.
    Let's be real. The fee waiver for veterans will not bust 
the bank.
    The Congressional Budget Office has stated that the impact 
of this legislation would be, quote, unquote, absolutely 
minimal. That is different.
    In my State of New Jersey, there will be an estimated 4,000 
people returning home from active duty this year. I just think 
that we should help them any way we can. I am always up for 
suggestions not just for my legislation but for anything we 
will discuss here today; and I thank you again, Mr. Chairman, 
sincerely for bringing us together on these critical issues for 
our vets. Thank you.
    Chairman DeMint. Thank you, Mr. Pascrell.
    Now, I would like to introduce our panel, if there are not 
any additional opening remarks. I don't believe there are.
    Starting to my left, Mr. William Elmore, Associate 
Administrator, Veterans Business Development, U.S. Small 
Business Administration; Mr. Frank Soares, Chairman, Board of 
Directors, National Veterans Business Development Corporation; 
Major General Charles Henry, U.S. Army, Retired, President and 
CEO of the National Veterans Business Development Corporation; 
Mr. John Lopez, President, Association of Service Disabled 
Veterans; Mr. Tony Eiland, National Office of Veterans 
Employment, Veterans of Foreign Wars of the United States; and 
Mr. Rick Weidman, Director of Government Relations, Vietnam 
Veterans of America.
    And I think I missed Mr. Wayne Gatewood, President and CEO 
of Quality Support Incorporated.
    Now I would like to ask unanimous consent that all 
testimony will be made part of the record, and each witness 
will have 5 minutes to explain your testimony to us as well as 
to----
    We will keep those lights going on green when you are in 
good shape. When you see the yellow, you know you have only got 
a few seconds left. When it is red, we are going to start 
encouraging you to stop.
    Okay. Mr. Elmore, we will begin with you.

     STATEMENT OF THE HONORABLE WILLIAM ELMORE, ASSOCIATE 
   ADMINISTRATOR, VETERANS BUSINESS DEVELOPMENT, U.S. SMALL 
                    BUSINESS ADMINISTRATION

    Mr. Elmore. Thank you.
    Chairman DeMint, Ranking Member Millender-McDonald and 
members of the Subcommittee, I am William Elmore, Associate 
Administrator for Veterans Business Development at the U.S. 
Small Business Administration. On behalf of Administrator 
Barreto, I thank you for this opportunity to discuss SBA's 
accomplishments and commitment to better serving our Nation's 
veterans by helping them to start, run and grow their own small 
businesses.
    We are not only committed to increasing veterans 
participation in our programs but also to ensuring that we 
achieve better results. It is fitting that we meet today, just 
6 days before our Nation celebrates Memorial Day, to discuss 
SBA's support for our veterans.
    It was in 1866 that Henry Wells, a small business owner in 
Waterloo, New York, suggested that all the shops in town close 
for one day to honor the soldiers who were buried in the 
Waterloo Cemetery. One hundred years later, Congress and 
President Lyndon Johnson declared Waterloo, New York, the 
birthplace of Memorial Day.
    I can assure you that we are committed to improving 
veterans' access to all of our financial, technical and 
management assistance programs. SBA seeks to reach out and 
serve all of America's 25 million small businesses, including 
those owned by veterans. Though veterans are eligible and do 
use all of SBA's variety of finance, technical assistance and 
contracting programs, the administration wants to ensure active 
veteran participation in all of SBA's programs.
    In an effort to better serve our customers, including 
veterans, we have been reviewing theeffectiveness and, where 
needed, modifying all of our programs in an effort to make sure they 
keep pace with market trends, remain relevant and meet our customer's 
needs.
    There are many aspects to this much-needed effort, 
including restructuring and modernizing the agency's delivery 
system to best serve clients in the 21st century. I started 
these efforts by personally visiting with each program manager 
in the agency to discuss ways in which their particular 
programs could increase veteran participation and better serve 
the veterans who do use their programs.
    We have provided training to and enhanced the 
responsibilities of the Veterans Business Development Officers 
stationed at each SBA district office. These are the people on 
our front line who personally meet with veterans seeking 
business assistance and provide referrals to our resource 
partners.
    Additionally, SBA designated a full-time veterans 
coordinator in our Office of Government contracting and 
enhanced that office's web page to better assist veterans with 
procurement.
    We have also taken aggressive steps to partner with other 
Federal agencies and the National Veterans Business Development 
Corporation to increase resources available to veteran 
entrepreneurs. This past year we asked the Corporation and the 
Departments of Veterans Affairs and Labor to participate in our 
National Conference for Veterans Business Development Officers; 
and, in turn, DOL has asked us to make a presentation on SBA's 
veterans programs at their National Conference.
    We have also entered into discussions with both DVA and DOL 
to explore efforts to coordinate small business assistance for 
service disabled veterans participating in DVA vocational 
rehabilitation and to enhance outreach and training for DOL 
field staff regarding entrepreneurship opportunities for 
veterans. Additionally, we have worked with the Corporation on 
all of their efforts thus far and will continue to do so.
    In fiscal year 2002, SBA renewed our cooperative agreements 
with our Veterans Business Outreach Program Centers. We are 
pleased that the number of veterans served by this program 
doubled in fiscal year 2001.
    Also, in fiscal year 2001, SBA conducted special veterans 
and service disabled veteran outreach events through seven SBA 
district offices. In fiscal year 2002, SBA is increasing this 
number to a minimum of 17 district offices.
    SBA's Office of Government Contracting included veterans' 
procurement information in approximately 400 procurement 
conferences in fiscal year 2001. Every agency, including SBA, 
has been given a statutory 3 percent service disabled veteran 
Federal procurement goal for 2002. To help meet this goal, 
training was provided to all SBA government contracting staff. 
Additionally, government contracting area directors have been 
tasked to develop ongoing programs to emphasize, publicize and 
promote the 3 percent procurement goal for service disabled 
veterans.
    Before I conclude today, I would like to report some 
important information to you on the Advisory Committee on 
Veterans Business Affairs. After reviewing the backgrounds of 
over 50 highly qualified candidates, there are now seven 
candidates awaiting final clearance to serve on the Advisory 
Committee on Veterans Business Affairs.
    This concludes my testimony. Once again, thank you for this 
opportunity to discuss SBA's business development program for 
veterans. I am pleased to answer any questions you may have.
    Chairman DeMint. Thank you, Mr. Elmore.
    [Mr. Elmore's statement may be found in appendix.]
    Chairman DeMint. Mr. Soares.

   STATEMENT OF FRANK SOARES, CHAIRMAN, BOARD OF DIRECTORS, 
       NATIONAL VETERANS BUSINESS DEVELOPMENT CORPORATION

    Mr. Soares. Mr. Chairman, distinguished members of the 
Subcommittee, it is a pleasure to speak before you this 
afternoon about our progress in servicing the service disabled 
veterans through The Veterans Corporation. I was privileged to 
receive one of the initial presidential appointments to our 
Board of Directors in October of 2000. For almost a year I have 
served as its chairman.
    Although Public Law 106-50 was passed in August of 1999, I 
think it was more accurate to date the Corporation's progress 
from the date it received its initial funding in 2001. Once a 
temporary staff was hired, we began an extensive search for the 
strong leadership necessary to meet and exceed the law's 
mandates to expand and improve access to technical assistance 
regarding the entrepreneurship for the Nation's veterans and to 
assist veterans, including service disabled veterans, with the 
formation and expansion of small business concerns by working 
with existing organizations.
    With that as our mission statement, we conducted a 
nationwide search identifying six high-quality, top government 
and military leaders that had the experience, skills and 
abilities to make The Veterans Corporation successful.
    We carefully considered each candidate and selected Major 
General Chuck Henry. He is absolutely the right choice to 
ensure the Corporation's success. His distinguished service to 
our Nation combined with his shrewd business sense and strong 
leadership will give our veterans a real champion they so 
richly deserve. His efforts during the short period he has 
served as the Corporation's CEO and president have been 
remarkable for the significant progress he has made in creating 
a viable business operation devoted to accomplishing the 
mission that you have given us.
    To achieve our mission, the Board of Directors and I have 
created both a vision and goals for the Corporation. Our vision 
is that The Veterans Corporation will be the premier 
organization in the world assisting American veterans, 
including service disabled veterans, in creating and expanding 
their entrepreneurial endeavors in veteran-owned small business 
enterprises by providing access to knowledge, tools and 
resources necessary for success.
    We have numerous goals which I won't recite here but I did 
include in my written testimony.
    One of my goals is to establish and oversee the 
Professional Service Advisory Board, PCAB, which is provided 
for in Public Law 106-50. The Board is intended to create 
uniform guidelines and standards for the professional 
certification of the members of the Armed Forces. This will aid 
in their efficient and orderly transition to civilian 
occupations and professions and remove potential barriers in 
the areas of licensure and certification.
    This is an extremely difficult area that involves a complex 
web of certification standards and barriers that are nationwide 
at the Federal, State and local levels. At each level there is 
a multitude of organizations and interest groups involved in 
testing, licensing and certifying a vast array of civilian 
positions from welders to medical technicians.
    Seventy percent of the Army's enlisted military 
occupational specialties have civilian job equivalents that are 
subject to licensure or certification. I am sure the other 
services have similar statistics. So you can quickly see the 
challenges the Board faces in researching, identifying and,most 
importantly, creating and attempting to implement nationwide standards 
that allow our service members to transition their skills smoothly into 
a level obtained by their civilian counterparts.
    We will attempt to fund this effort through fund-raising 
but question whether this approach will work. The President of 
the United States appointed our Board of Directors. They were 
selected on the basis of their personal achievements and for 
the knowledge and expertise they provide our organization and 
our partners. All of our board members are also veterans.
    General Henry will detail the bold initiatives he has taken 
with the creation of several strategic business units to 
generate both services for the veterans and revenue for the 
Corporation. Those business units are just the beginning of 
many more complex business arrangement to support our veterans.
    I strongly suggest that future nominations to the Board be 
individuals who have a solid background in veteran service 
organizations and/or considerable strong business experience 
that can help guide the Corporation during this dynamic and 
difficult period of growth to fiscal independence.
    I thank you for the opportunity to speak before you today, 
and I personally wish to thank the Subcommittee members and 
their staffs who were instrumental in the creation of the 
successful passage of this legislation into law to help 
veterans establish and expand small businesses. It is good for 
the Nation and well-deserved assistance for our veterans.
    Thank you. I am prepared to answer any questions.
    Chairman DeMint. Thank you, Mr. Soares.
    [Mr. Soares's statement may be found in appendix.]
    Chairman DeMint. Major General Henry.

  STATEMENT OF MAJOR GENERAL CHARLES R. HENRY, U.S.A. (RET.), 
   PRESIDENT AND CEO, NATIONAL VETERANS BUSINESS DEVELOPMENT 
                          CORPORATION

    General Henry. Mr. Chairman, distinguished members of the 
Subcommittee, I want to thank you for the invitation to come 
and testify today.
    I want to also thank you for your outstanding legislation, 
Public Law 106-50. That is what brings us together. It honors 
our veterans by assisting them. It is a noble effort. It is 
deeply appreciated.
    Let me tell you a little bit, of what we have accomplished 
over the past 200 days at The Veterans Corporation. More 
detailed information is in my written testimony which is 
submitted, but I will try to summarize it, with your 
permission, Mr. Chairman.
    The law gives us five goals. One is to increase business 
opportunities for veterans and service disabled veterans. The 
second one is to raise matching funds, develop information 
centers, privatize the Corporation, get it so that it is 
successful on its own, and create the certification board for 
standards.
    Mr. Soares has spoken to you about the certification 
standards, but what I would like to do is to tell you that The 
Veterans Corporation has established itself as an umbrella for 
business development operations. Below the line we have created 
strategic business units, and we have created four of those. 
The first one is a venture capital fund called the Veterans 
Venture Capital Fund, and through the help of Mr. Elmore it is 
working its way through the SBA. We envision this to be a $120 
million venture capital fund of which The Veterans Corporation 
will have a 10 percent carried interest, 10 percent stake, if 
you will, and that will provide us the opportunity to make 
investments to veteran-owned businesses.
    The second one is an electronic marketplace for veterans 
and service disabled veterans' businesses who wish to buy and 
sell. This marketplace is operated with our strategic business 
partner eScout of Kansas City. It is up and running. It is in 
its very infancy at this point, but we have 26,000, not all 
veteran businesses, on it. Our goal is to have over 1,000 
veteran businesses posted on the electronic marketplace by the 
end of this fiscal year. This allows veterans to go from 
regional to national in scope, overnight.
    The electronic marketplace is dynamic. It is growing very 
fast. $5 billion a month is being consumed within the Internet 
marketplace as we speak.
    The third is access to capital. To provide access to 
capital, we have established relationships with banks, and we 
have two of those established to provide micro loans to 
veterans. Our goal is to have, within the next 18 months, the 
entire country covered with banks that will make loans to 
veterans, speed up the process, if you will.
    The last one is providing training for business owners with 
the Kaufman Foundation out of Kansas City, a very respected 
entrepreneurial organization. They have provided us with Entre-
World, which is a respected web site to tell business owners 
how to deal with businesses, how to create their business 
plans, how to do the intricacies of building and running their 
own businesses.
    Additionally, the Kaufman Foundation has given The Veterans 
Corporation Fast Trac, which is a program of training. The 
statistics say that, for those who have taken it, 70 percent 
are still in business 5 years later.
    Wrapped around those two combinations we feel that we can 
provide a delivery of services that will be second to none for 
veterans in building their corporations.
    Matching funds. With the help of the Kaufman Foundation and 
with the help of pro bono work from legal services and some 
others, we report today that we have met our $2 million in 
matching funds for this fiscal year; and we project that that 
will be ongoing in the out years.
    Our efforts to privatize are making good progress. I have 
in the past 2 weeks received commitments for $550,000 in cash 
from two sources to date. Our direct mailing was launched last 
week. Our business will ramp to meet the revenue goals.
    We are now telling the story, and that story is good. We 
were featured in an article in the Chicago Tribune's Small 
Business Section. We have been reported in the American Banker. 
CBS Marketwatch, Dallas News, NBC, and Kipplinger. AOL Time 
Warner has offered us public service spots. We will shoot those 
next week. Saturday, I will be on a veteran radio talk show to 
be broadcasted in Hawaii, talking about veterans in businesses; 
and on Sunday I will be speaking with Secretary Principi at 
Rolling Thunder.
    Sir, my time is up. It is a real pleasure to come. I think 
that we are on a marathon, not a sprint. We are building the 
company around two principles: Build a solid, self-sufficient 
company on business principles and provide for the delivery of 
quality services to the veteran community.
    Subject to your questions, sir, I stand by.
    Chairman DeMint. Thank you, General Henry.
    [General Henry's statement may be found in appendix.]
    Chairman DeMint. Mr. Gatewood.

STATEMENT OF WAYNE M. GATEWOOD, JR., PRESIDENT AND CEO, QUALITY 
                         SUPPORT, INC.

    Mr. Gatewood. Good afternoon, Mr. Chairman and 
distinguished Subcommittee members.
    First of all, I am proud to be here. I am a retired Marine 
Master Sergeant who served 21 years in the Marine Corps, 
retired 15 years ago, and I receive a 20 percent disability 
from the Veterans Administration. This is what America is all 
about. I am just so proud to be here before you. Thank you so 
much.
    For the past 12 years I have owned and operated Quality 
Support, Inc., starting the business in my home with $600. 
Today Quality Support employs nearly 100 people. It was largely 
because of the SBA 8(a) program that Quality Support developed 
as a successful firm, and I thank the SBA for the opportunity 
to have been a member of the 8(a) Business Development Program. 
It is a wonderful program.
    I was very pleased to see the signing of Public Law 106-50. 
Unfortunately, I personally do not believe much progress has 
been made since the signing of this law.
    The National Veterans Business Development Corporation has 
yet to compile a concise database of veteran- and disabled-
veteran-owned business. If the Corporation does not know who we 
are, where we are and what we do, there is little chance of 
veteran-owned firms receiving mandated assistance and guidance.
    I have seen little, if any, evidence of interaction between 
the Corporation and the average veteran-owned firm such as my 
own. Since the signing of Public Law 106-50, my firm has yet to 
be invited to any type of corporation gathering, nor have I 
received mailings that outline progress made by the corporation 
and/or discuss current services and/or opportunities available 
to my firm.
    The law requires an Advisory Committee on Veterans Business 
Affairs be established not later than 90 days after the date of 
the enactment of the Act. The duties of this Committee are very 
important, and this Committee is absolutely essential to the 
success of Public Law 106-50. However, it has been 2 and a half 
years since the signing of the Act, and the Advisory Committee 
has yet to be established.
    The law states government-wide goals for participation by 
small business concerns owned and controlled by service 
disabled veterans shall be established at not less than 3 
percent of the total value of all prime contract and 
subcontract awards for each fiscal year. Again, I have seen 
little, if any, progress in this area and do not believe any 
government agency is making the 3 percent subcontracting goal.
    I have some recommendations:
    Immediately establish the Advisory Committee on Veterans 
Business Affairs as required by law.
    Ensure the inclusion of all veteran-owned and service 
disabled veteran-owned firms in a comprehensive and current 
database to facilitate actions consistent with the spirit and 
intent of the law.
    The Corporation should identify prime contractors who are 
seeking to do business with veteran-owned firms, and a listing 
of these prime contractors should be made available to all 
veteran-owned business.
    Also, bring veteran-owned firms together with prime 
contractors and government procurement officials so these 
groups can discuss potential contracting opportunities.
    Make an assessment of the policies and procedures now in 
place at Federal Government agencies and ensure there is an 
active promotion of the 3 percent subcontracting procurement 
goal.
    Subsequent to contract award, assess and monitor the 
subcontracting progress or lack thereof made by Federal 
Government agencies and their prime contractors. Those prime 
contractors that fail to make their goals should be precluded 
from participating in further Federal Government procurements 
until such time as they have rectified their deficiencies.
    The SBA Corporation Advisory Committee and the Department 
of Veterans Affairs need to work closely with one another to 
ensure they are all working for the same goals under agreed-
upon procedures and that turf battles do not take place at the 
expense of the American military veterans.
    Also, illegitimate, unofficial, for-profit organizations 
that promote so-called veterans rights need to be identified 
and our veterans made aware of and warned of their existence.
    Finally, and most importantly to me, sir, the Federal 
Acquisition Regulations, FAR, and similar regulations need to 
be revised to authorize set-aside procurement opportunities for 
veteran and service disabled veteran-owned firms.
    Federal law currently precludes contracting officers from 
offering veterans and disabled veteran-owned firms the same 
set-aside advantages offered socioeconomic groups, hub zone 
businesses and, to some degree, women-owned businesses. Unless 
procurement regulations are modified to include a degree of 
set-aside authority for veteran and service disabled veteran-
owned firms, it will be extremely difficult if not impossible 
for government contracting officials to reach specified goals.
    In closing, I would like to say that Public Law 106-50 can 
only be effective when it is taken seriously by all concerned. 
Laws without clear accountability do very little to motivate 
people into action and to achieving desired results. Results 
need to be continually assessed and measured, and people in 
positions of authority and applicable Federal Government 
agencies need to be held accountable.
    Thank you, sir.
    Chairman DeMint. Thank you, Mr. Gatewood.
    [Mr. Gatewood's statement may be found in appendix.]
    Chairman DeMint. Mr. Lopez.

  STATEMENT OF JOHN LOPEZ, PRESIDENT, ASSOCIATION OF SERVICE 
                       DISABLED VETERANS

    Mr. Lopez. Good afternoon, members and Chairman DeMint.
    Without objection, I shall summarize my testimony and 
submit written testimony for the record.
    I have focused my testimony on the provisions for Federal 
procurement participation by businesses owned and controlled by 
service disabled veterans.
    Although the United States Congress in its Public Law 106-
50 findings and legislative language stated clearly that the 
intent of the Congress was to ``increase the participation of 
service disabled veterans businesses to a goal of not less than 
3 percent of the total value of all prime contracts and 
subcontract awards for each fiscal year,'' this has not 
happened. In fact, there is little credible evidence that the 
intent of the U.S. Congress was even considered. It is now 
nearly 3 years since the enactment of Public Law 106-50, and 
available data show little progress towards the goal. There is 
only the traditional bureaucratic mumbling regarding coming 
efforts and other priorities.
    America's veterans are dying at the rate of 1,200 per day, 
and the mounting frustration with broken promises and 
bureaucratic manipulation is becoming a major disgrace and 
embarrassment of our Nation's government, because 
rehabilitation assistance delayed and manipulated is 
rehabilitation assistance denied.
    The United States Congress must take action to provide to 
service disabled veterans businesses those mandatory 
requirements afforded to other special groups. The denial of 
equal assistance to those who sacrificed and enabled prosperity 
for all our citizens is an unmitigated disgrace and an 
unadulterated abuse.
    I would be pleased to answer any of your questions.
    Chairman DeMint. Thank you, Mr. Lopez.
    [Mr. Lopez's statement may be found in appendix.]
    Chairman DeMint. Mr. Eiland.

     STATEMENT OF TONY EILAND, NATIONAL OFFICE OF VETERANS 
   EMPLOYMENT, VETERANS OF FOREIGN WARS OF THE UNITED STATES

    Mr. Eiland. Thank you, Mr. Chairman, ranking member and 
members of the Subcommittee. Thank you, Mr. Chairman, for 
inviting the Veterans of Foreign Wars here today to testify 
before the Subcommittee to comment on H.R. 3263, the Veterans 
Small Business Relief Act of 2001, and to express our 
evaluation of the Small Business Administration's programs and 
services for veterans as well as The Veterans Corporation.
    Mr. Chairman, concerning our views on H.R. 3263, the 
Veterans Small Business Relief Act of 2001, we support its 
timely enactment. We see it as a welcome measure to ensure that 
disabled veterans small business owners have an additional 
opportunity towards success in today's challenging economy.
    Mr. Chairman, when assessing and analyzing the role the SBA 
has played with assisting future as well as present veteran 
entrepreneurs, we must look at the SBA with a proper 
perspective and understand exactly what it is we as veterans 
want from them. Then we must define how we expect to hold them 
accountable for what they can control and measure those things 
that can be measured and reasonably obtained.
    We see the SBA is making headway in this process through a 
cooperative effort with both the Department of Veterans 
Affairs' Center for Veterans Enterprise and with The Veterans 
Corporation.
    The VFW has enjoyed a productive relationship with the 
Assistant Administrator for Veterans Affairs, William Elmore, 
and his staff within the SBA's Office of Business Development. 
Two staffers primarily have stood out, Mr. Ajoy Sinha and Mrs. 
Audrey Moore. They have both been very helpful providing direct 
personal assistance to veterans from our organization on a one-
to-one basis by offering a strong hands-on approach.
    We have had members directly contact our office commenting 
on the superior service and assistance they were provided in 
either developing particular details for their business plans 
or simply looking for specific information to answer unique 
questions.
    Another item that deserves to be mentioned is the U.S. 
Business Advisor Website that has been sponsored by the SBA. It 
has been an effective tool in providing general business 
assistance that promotes small business within our membership 
and have received free assistance in expanding their business 
and removing obstacles that could lead to potential disasters.
    While the SBA has performed an adequate job with the 
funding they have been provided with, there is still more that 
can and must be done. Unfortunately, their ability is severely 
limited because of minimum funding levels that have been placed 
upon them by the Administrator. This does have a direct impact 
on the scope and quality of the veterans' programs and services 
that can be of use for outreach, be it either through mailings, 
promotional campaigns or seminars.
    Another critique is the involvement of the SBA with the 
veterans groups themselves. For example, our relationship with 
the Office of Veterans Business Development has improved. The 
VFW remembers the promise was made about wanting to expand the 
relationship with the Veterans Service Organizations. 
Unfortunately, we have only seen limited examples outside of 
the Office of Veterans Business Development. We have yet to 
meet with the Administrator, let alone speak with him directly 
to voice our desires and concerns.
    In addition, we are also disappointed in how long it has 
taken the Administrator to complete the SBA Advisory Committee 
and seeming overall lack of overall commitment towards our 
concerns for disabled veterans as a whole. The VFW is very 
disappointed that this issue has not been treated with the 
sense of urgency that it deserves. While we understand that we 
are not the only programs that the SBA oversees, we still 
desire to be treated with a balanced, even-handed approach.
    At this critical point in time, veterans' programs are 
essentially here to serve as a good-faith gesture between the 
government and the people whom they serve to be guaranteed the 
opportunity to maximize any small Business Development Program. 
The VFW does not view the programs of the SBA as simple 
entitlements to be given out but as investment in the long-term 
economic growth and stability of the U.S. Economy.
    We want to be completely frank. The VFW does not want a 
give-away program mentality or anything for that matter that 
would dilute the credibility of the veteran or disabled veteran 
business owner. Whether black, white, Hispanic or Asian, male 
or female, service disabled or economically impoverished, 
veterans have earned, through their dedicated service 
commitment to their country, the right to be offered an 
opportunity to compete on an equal playing field with every 
other group that has been provided a service by the SBA for 
long-term solutions for establishing business ventures.
    Mr. Chairman, we believe that the SBA can only be 
successful in its mission of assisting veterans if it has the 
following components: the full support of the Congress through 
maintaining strict implementation of existing laws and 
provisions that will enable the SBA to be effective and 
adequate funding of the Office of Veteran Business Development.
    There also has to be a clear understanding of where the 
veteran community belongs within SBA. Be it through a realistic 
goal-setting measurement that is obtainable, taking into 
account the service disabled veterans' individual situations or 
creating a Small Disadvantaged Business, an SDB, status for a 
disabled veteran-owned business that will allow them to compete 
on equal ground within the SBA as a disadvantaged business 
enterprises is a must.
    Mr. Chairman, the opinion of the VFW is that The Veterans 
Corporation, in its present form, has only been in effect for 
approximately 200 days, not enough time to make a credible 
assessment of their progress. Yet the VFW does see the 
potential for The Veterans Corporation and are committed to 
assisting and working with them to achieve a source of answers 
for our veterans' small business questions and also putting 
them in a position to find sources of financial revenue.
    We understand that anything worth having is worth setting 
up correctly from the beginning. Mr. Chairman, we need to 
maintain a focus that everything we are doing here today is for 
the one purpose and one purpose only, to assist veterans, 
especially disabled veterans, establishsuccessful, independent 
small businesses and become as self-sufficient as possible to add to 
the continuing economic growth of our country.
    Mr. Chairman, this concludes my statement. I would be 
pleased to answer any questions you or the members of the 
Subcommittee might have at this time.
    Chairman DeMint. Thank you, Mr. Eiland.
    [Mr. Eiland's statement may be found in appendix.]
    Chairman DeMint. Mr. Weidman.

  STATEMENT OF RICK WEIDMAN, DIRECTOR, GOVERNMENT RELATIONS, 
                  VIETNAM VETERANS OF AMERICA

    Mr. Weidman. Thank you very much, Mr. Chairman. I would 
like to echo the sentiments of my colleagues in tremendous 
thanks to this Committee. This is where Public Law 106-50 
began, with this Committee; and we thank you for your oversight 
hearings, two of which were held last year and, of course, this 
hearing today.
    I would point out also that the impetus for the original 
legislation came from Mr. Roscoe Bartlett's Committee, a joint 
hearing he had with the House Veterans Committee, which was a 
bipartisan hearing. That got the ball rolling. So we owe you a 
great debt, sir.
    Now we have to make it a reality. The struggle over 
regulations went on for over a year before we got some 
regulations that were substantially correct, published in early 
January of 2002 after several false starts. It was the kind of 
woeful ignorance that really cannot be explained, only by 
incompetence, although I keep in my office the old saying that 
``never attribute to malice in Washington that which can be 
explained by sloth and by incompetence.'' .
    But finally we do have regs that are fairly accurate, but 
we don't have an impetus from the executive branch overall, 
from the President, from OMB, and from the Cabinet level in 
order to make sure that the 3 percent procurement goal happens.
    Secondly, in regard to a number of comments that were 
already offered today, the Small Business Development 
Corporation or the National Veterans Business Development 
Corporation, also known as The Veteran Corporation, was created 
to fill in some blanks and not to do everything that SBA with 
its almost billion dollar budget is doing.
    Public Law 106-50, we would refer every single employee of 
the Small Business Administration back to the black letter law; 
and I would refer all of the distinguished members who have 
made it here today and your staff back to the black letter law, 
which says that veterans, particularly disabled veterans, 
service-connected disabled veterans shall be given priority and 
given a high status within every single program operated by the 
Small Business Administration.
    In fact, almost no programs at the SBA have revamped as a 
result of this law which took effect immediately and was 
enacted on August 17th of 1999. In fact, it changes everything 
right throughout the agency, or it is supposed to. That is 
clear that that is the congressional intent, not just from the 
letter--black letter law but also from the Committee report 
from the House that went forward with it.
    So we would ask the Committee to look carefully at that and 
to urge the new Administrator, Mr. Barreto, to issue an 
administrator's order and regulations, where necessary, in 
order to bring the pattern, practice and policy of SBA into 
accordance with what is in fact black letter law under Public 
Law 106-50.
    I would also just commend many of the fine activities that 
have happened at SBA. Many of the activities are, in fact, well 
done; and the only problem we have from the veterans' 
community, the 24 million veterans in this country and those 
who are disabled and their families, is that our folks are left 
out if they identify as a vet. And I think that that is just 
the key to look at throughout this thing.
    We have gotten very good cooperation, I might add, and 
tremendous leadership out of the new small business advocate. 
Mr. Sullivan has met with us and is setting up a series of 
seminars and roundtables with the Task Force on Veterans 
Entrepreneurship over the next year and a half. We are 
proceeding on that and will keep the Committee posted, sir.
    There are a number of things that we would ask you for.
    Firstly is we have not received a single official report 
since August of 1999 which was mandated in the law.
    Secondly, the study that was the mandated in the fall of 
1997, SBA has been keeping in camera ever since that time. It 
was formerly delivered to the agency in the fall of 1998, and 
we would ask that the Committee demand that it be turned over 
to the Congress. It was a major study of veterans, a $400,000 
study which has still not been supplied to the Hill nor made 
public.
    Last, but by no means least, in that regard there is a 
study that is under way now that we urge be brought forth and 
the last two annual reports of SBA.
    I have attached as an attachment to my statement, Mr. 
Chairman, a list that is the beginning of legislative goals. A 
task force which consists of all of the major veterans 
organizations participating in one way or another in the Task 
Force on Veterans Entrepreneurship will be coming together on 
June 11th.
    We ask the leave of the distinguished members of the body, 
the Chair and the ranking Democrat in order to work with staff 
to put together legislation that would fine tune the intent of 
this Committee that was expressed in Public Law 106-50 over 3 
years ago.
    There is no better time to take that step.
    I would add that I mentioned this before an oversight 
hearing, chaired by Mr. Bartlett jointly with Mr. Quinn and 
strong participation with Lane Evans, 4 years ago this week, 
and that is what started the ball rolling on this. There is no 
better time than this week to determine, as we reflect on those 
who did not come home from every war our Nation has ever 
fought, and those young men and women who will not return from 
Afghanistan, from East Africa, from Iraq or wherever they are 
defending all of us, the American people, against those who 
would do us great harm and destroy us as human beings and our 
way of life--there is no better time to take the steps in order 
to fine tune what we have learned over the last 3 years since 
enactment of 106-50 and move forward.
    Mr. Chairman, I thank you for the opportunity and for the 
privilege of presenting the views of Vietnam Veterans of 
America here today and sharing at least some of the general 
views of the task force and our distinguished and fine 
colleagues there.
    Thank you, sir.
    [Mr. Weidman's statement may be found in appendix.]
    Chairman DeMint. Thank you, Mr. Weidman. I will start with 
a few questions, and I know our committee members have some 
too.
    Mr. Elmore, I will begin with you. Just a quick question. 
Is there any reason that this veterans report that was just 
referenced cannot be delivered to this committee in the next 
week?
    Mr. Elmore. In fact, the report itself was delivered. I am 
not sure of the date. I believe it was last summer or last 
fall; I would have to check with staff. What Rick has 
referenced was a study by the SBA Commission that was a part of 
that report, but it wasn't the report itself.
    Chairman DeMint. Right. But the report does exist----
    Mr. Elmore. Yes. The report was forwarded to Congress last 
year.
    Chairman DeMint. Well, we would like the complete report, 
and if it has been delivered before, I would appreciate it if 
you would deliver it again so I can get a look at it myself.
    Mr. Elmore. We absolutely will, sir. Thank you.
    Chairman DeMint. Just a few questions.
    I know you have heard a lot expressed in appreciation of 
the SBA's role for veterans, but one of the major reasons for 
this hearing is to figure out how to improve what we are doing, 
particularly how to comply with 106-50; and you have heard a 
number of concerns expressed. The concerns that have been 
expressed that bother me the most are just the lack of 
adherence to law, the lack of the reports that were required, 
the advisory committee not being appointed, the 3 percent 
procurement mandate. These things that have been brought up 
obviously are of concern because our hope is, if we pass a law, 
that it will be implemented as we had asked.
    Do you have any comments before the members ask questions 
about what is going on?
    Mr. Elmore. I can try to address those three, sir.
    The advisory committee, I will start there. We were asked 
by Congress in--I believe this was either before or just after 
I came to the agency--in 2000, to hold off on the naming of the 
advisory committee until the nine members of the board of 
directors of the corporation had been named.
    The ninth member of the corporation was named last October 
by President Bush. Up until that point, we had gathered 
approximately 50 candidates and background information on those 
candidates; and those are the candidates that are now being 
evaluated, but we did not as an agency begin to move on that 
until after the ninth member was named.
    Now, on the reports, we did submit the 1997 report, and 
that was a report that after I came to the agency we caught up, 
we put together and we sent to Congress. The 1999 and 2000 
reports were not completed before I got there. We have 
completed those in my office and they are going through final 
clearance in the agency now. So as soon as they are cleared, 
they will be provided up here. My staff is presently working on 
the fiscal year 2001 report.
    Now, on the 3 percent goal--and I will give you my take on 
the history of this--when I came to the agency in the summer of 
2000, that goal was not being acted on by the FAR Council. As I 
dug into that, within literally the first 30 days on the job, I 
went to others in the agency, including the Administrator, and 
urged that we implement what I perceived to be a 
misinterpretation of the intent of Congress by the FAR Council 
to go ahead and establish the 3 percent goal at the prime 
contracting level and a 3 percent goal at the subcontracting 
level. But there was an interpretation by the council that 
included service-disabled veterans and veterans at the 
subcontracting level. That was not what Congress intended, I 
did not believe.
    So I worked with Congressional Affairs at the same time 
that we implemented that bad rule--and I will tell you why I 
did that and why I urged that--and the Administrator agreed was 
that if we waited until we got technical amendments from 
Congress to change that interpretation so that FAR couldn't, in 
my view, misinterpret, we would have put procurement for 
disabled veterans another year later.
    So I moved--implemented the bad rule, sought the technical 
amendment. We secured the technical amendment. We then amended 
the rule, and that's why it took until January, 2002, to 
finally get what I think is an appropriate and an accurate 
rule.
    Now, I can't speak to all the reasons why all those 
implementations and interpretations of what Congress intended 
happened. I can tell you what it is we did, though; and I moved 
as aggressively as I could, and the agency has assisted me and 
supported me in trying to do that.
    Now, I will readily admit the level of success of Federal 
procurement for service-disabled veterans--and I would point 
out, for veterans as well--in fiscal year 2001 was not good. It 
was nowhere near the 3 percent goal for service-disabled 
veterans. There is no goal for veterans, but there is a best 
efforts clause; I was disappointed in that.
    All I can say, for a variety of reasons, is that I think 
from data collection problems to perhaps lack of information 
out in the field with the thousands and thousands of 
procurement officials, et cetera, et cetera, we obviously 
didn't achieve the 3 percent goal the first year. We are going 
to do everything we can to try to get that done.
    Chairman DeMint. We would like that as well, and we would 
like to know from you if the obstacles are internal or 
external, if there are things we can do from our side of the 
desk here to help open the door to make these things happen; 
because I think everyone who is at the table has agreed today 
that we have a good law, a good law that would work if it gets 
implemented; and we need to make sure we know why it is not.
    I have got more questions, but I will allow some of the 
other members.
    Mr. Pascrell, do you have questions?
    Mr. Pascrell. Thank you, Mr. Chairman.
    The whole issue, as you know, Mr. Elmore, of procurement is 
one that bugs this committee for many, many years. We seem to 
be going backwards and not forward. We don't seem to be getting 
any action, and the chairman, the committee as a whole threw 
its arms up in the air at data that we have been presented.
    And I don't think this is any mystery; I don't think it is 
any secret that we are spinning our wheels and we want to see a 
breakthrough. I would hate to see the next set of questions 
about it go unanswered, or no improvement because we do not 
have improvement. You know that as well as I do.
    In terms of 3263, do you believe that waiving the 7(a) fee 
requirements for recent veterans would cost the SBA a 
substantial sum of money?
    Mr. Elmore. It is a difficult question to answer because we 
don't know how to determine how many veterans would have been 
discharged in the last 5 years that are 7(a) loan recipients. 
That question certainly has not been asked thus far from the--
--
    Mr. Pascrell. We do know how many would be eligible that 
are leaving the service, and we have a good idea----
    Mr. Elmore. We know how many are discharged approximately 
each year, yes, sir. The concern from the agency's perspective 
is that under the Federal credit rules if we decrease fees for 
one group then we would have to increase fees for other groups 
of borrowers. So while I am certainly a veterans' advocate and 
will be until the day I am done, for us to turn and increase 
costs for other groups of Americans so that veterans get a 
special benefit--we have concerns about taking that approach.
    Mr. Pascrell. Why? Do you think it is unconstitutional?
    Mr. Elmore. No. I think just to extend the cost that 
veterans would save, if you will, to other Americans is not 
perhaps the appropriate way to approach it.
    Mr. Pascrell. I don't think you are going to get any 
complaints from whoever those other groups are and I would 
suspect, because I use the numbers we know of in New Jersey, 
what is going to happen over the next year.
    I think that, from what I see--and I am asking you to 
correct me if I am wrong--the SBA could afford a fee waiver for 
all veterans within the scope and within the reasonableness of 
the problems we are having with the budget at this particular 
time, because everything has become apriority and that is why 
nothing is a priority. And as far as I am concerned, and I would hope 
in your position as far as you are concerned, veterans are a priority, 
correct?
    Mr. Elmore. Veterans are certainly a priority. I can tell 
you as we go through and evaluate all of the agency's programs, 
one of the programs we are looking at is all of our lending 
initiatives and, in that context, if there are ways that fees 
can be reduced and restructured. And I think, as you are aware, 
sir, the agency is trying to move toward smaller loans in a 
number of arenas, and I think that would be important to 
veterans.
    Now, that doesn't impact the fees necessarily, but I can 
tell you that, historically, about 60 percent of the loans that 
veterans receive guarantees on from the agency are below 
$150,000. So that is obviously where the majority of the 
veterans market is in that smaller arena.
    I am not sure what else I can tell you, sir.
    Mr. Pascrell. Well, it seemed to me, first of all, we have 
to support 7(a) loan program. Right, Mr. Chairman? I think that 
would be the first step. We can't afford to have any finagling 
with that number, any reduction of that number.
    Americans have spoken out on--we pound our chests about 
veterans, and if we are not willing to step up to the plate, it 
becomes--and you heard these gentlemen say--``empty words.'' I 
am sure you don't want to be in front of the march that 
provides simply empty words, Mr. Elmore.
    You have got a big job on your hands.
    Mr. Elmore. Yes, sir.
    Mr. Pascrell. And we want to be of assistance here. We 
don't want to make things more difficult for you. I think it is 
important that we do what we have to do, and if you think we 
have to do this, you have got the support, I think, of the 
folks at this side of the table.
    One more quick question, Mr. Chairman, to Mr. Gatewood.
    Mr. Gatewood. Yes, sir.
    Mr. Pascrell. Your statement was very short and concise. 
You are obviously not a Member of Congress. But you said a lot 
in a very short period of time.
    Mr. Gatewood. Thank you, sir.
    Mr. Pascrell. When you retired from the military, what were 
the main hardships you faced while adjusting to civilian life?
    Mr. Gatewood. Other than the psychological challenges after 
21 years in the Marine Corps, it was--to start my company, was 
getting money. I could get no loans from no bank. There was no 
traditional bank or institution that was ready to give us money 
at all.
    I started with $600 and received loans from my dad, and I 
think I took on about 17 credit cards at 20 percent interest; 
that was it.
    The other issue which was very difficult was to get work, 
and although the Veterans Administration is not here today, I 
would like to say that in the 12 years I have been in business 
I have had very little, if any, help from the United States 
Veterans Administration. I have been in business for 12 years, 
and I have never seen an opportunity available to firms such as 
myself in the procurement area.
    I have spoken to people at the Veterans' Administration, 
asked them to look very closely at the policies and procedures 
they have in place. Unless the people in these agencies reach 
out and touch the grunt--I call us ``the grunts''--in the 
field, us small business people, unless you reach out and 
actually touch us and tell us what you are all about, we cannot 
avail ourselves of your services.
    It is very important that there is dialogue between us 
folks out here in the field and the corporation and the SBA.
    Mr. Pascrell. Thank you Mr. Gatewood.
    Thank you, Mr. Chairman.
    Chairman DeMint. Thank you, Mr. Pascrell.
    Mr. Bartlett.
    Mr. Bartlett. Thank you very much, and I am very pleased to 
be here. As you know, I also serve on the Armed Services 
Committee, chair the panel on Morale, Welfare and Recreation 
and have been a big supporter of veterans for all of my life. 
My father was one in World War I.
    Mr. Chairman, we are now discharging our constitutional 
responsibility in oversight. We are here today some 3 years 
after enactment of law; it is unfortunate today that what we 
are hearing is that the results of this law have not been as 
anticipated, because it has really not been implemented as it 
should have been implemented.
    I thought we had in place a Chair, a position in the Office 
of Advocacy that was focused specifically on veterans' issues. 
That person or persons ought to have been telling SBA and 
whomever else is involved in compliance with the law, you 
really need to be doing this, or there is going to be a day of 
reckoning when you sit before a congressional committee; And 
they are going to be asking you, why haven't you complied with 
the law?
    I thought also that we had kind of isolated the Office of 
Advocacy from the Small Business Administration so it wouldn't 
be a case of the guard in the cabbage patch; that the Office of 
Advocacy would really be free to be advocates for small 
business people relative to the Small Business Administration, 
as well as to the other government agencies where it has a 
prime responsibility.
    Were any of you in contact with the veterans' Chair in the 
Office of Advocacy, and if so, what response did you get from 
them?
    Mr. Weidman, you mentioned the Office of Advocacy in your 
testimony.
    Mr. Weidman. I did, sir. There is not a specific person 
within the Office of Advocacy. We work most closely with Joe 
Sabota and with the new chief economist; and as I mentioned 
before, last week, we met for over an hour with Tom Sullivan, 
who is the small business advocate today, who was appointed by 
President Bush. He has committed to doing a round table 
regularly with the veterans' organizations, trying to find out 
what do we need and at least substantive--sponsoring four 
substantive events, as well as holding an event to get us 
together with NSBU, with NFIB, et cetera, the mainstream 
business organizations, to find out where we can plug together 
common ground.
    The problem has to do with the other entities within the 
SBA, the role you described, sir, as I understand the law 
anyway, is the role that the Office of the Associate 
Administrator for Veterans' Business Development plays. And 
they are supposed to have that far-ranging kind of authority, 
which is why this committee saw fit to have that person for 
Veterans' Business Development report directly to the 
Administrator.
    I have no direct knowledge of this, one way or another, but 
it would appear from the outside, those who have had a chance 
to meet the Administrator--who seems to be a very bright, 
intelligent guy--during Small Business Week last week--was that 
last week; it seems like about 2 years ago, given the pace of 
the Congress this spring--that he is not familiar and not 
involved in day-to-day running of the veterans' program.
    Perhaps it might be different if, in fact, that were the 
case. It would certainly be different if it was brought to the 
Administrator's attention, all of the things that are 
requirements--not cute ideas, requirements, legal 
requirements--of the Congress as recommended to the full body 
by this committee in regard to changing each and every program 
offered by the Small BusinessAdministration.
    So it seems to us it is not the Office of Advocacy, sir; we 
are getting good cooperation from there and from at least the 
association, ASBDC, and it looks like we are finally going to 
get some cooperation from SCOR. We would like to see more done 
by the Office of the Associate Administrator for Veterans' 
Business Development.
    It is useful to remember that thanks to the efforts of this 
committee and your distinguished colleagues on the 
Appropriations Committee, as I recall, $986 million went to 
this agency this year; and Mr. Elmore has a budget of 750,000.
    In terms of the range and impact on the rest of the agency, 
that falls with the Administrator and the Chief of Staff to 
make it happen throughout that agency, and for the 
Administrator to take it to the White House to make it happen 
in the other agencies, when it comes to procurement, as Mr. 
Pascrell so eloquently described.
    And I might add one last thing. There has been discussion 
among the veterans' group at the recent task force meeting 
about how can we work with this committee and the 
Appropriations Committee to get the attention of the heads of 
those other agencies, whether it be the Secretary of Defense or 
whether it be, you name it, from XYZ Federal entity, and 
perhaps working together with a petition or a letter that would 
be signed by every Member on a bipartisan basis from this 
committee and the Appropriations Committee to the SECDEF, that 
the particular problem that we are having is with the Secretary 
of Transportation--which is shocking to some of us, because we 
thought Mr. Mineta was a veterans' advocate when he was in the 
Congress. But the Department of Transportation, including 
hiring air marshals, has been awful; and they are terrible on 
road transportation contracts and subcontracts, and are 
basically telling veterans, that law doesn't apply to you here.
    Chairman DeMint. Excuse me. We need to cut----
    Mr. Weidman. I beg your pardon, Mr. Chairman. That was just 
the tip of the iceberg, and there is a lot of frustration out 
here because all the good you all set in place is not becoming 
a reality, and yet----
    Chairman DeMint. We have got you. Thank you.
    Mr. Weidman [continuing]. Yet they get bonuses down at the 
agency.
    Chairman DeMint. I am sure we will get back to you.
    Ms. Christian-Christensen.
    Mrs. Christensen. Thank you, Mr. Chairman.
    Most of us are up here feeling your frustration and your 
pain, and we appreciate the fact that the corporation has just 
been in effect for a short period of time. But you have a lot 
of catching up to do, a lot of catching up to do.
    Let me ask the corporation my first question. You, like SBA 
and other Federal agencies, have initiated some programs that 
involve outreach and information sharing through the Internet.
    Do you have any idea how many veterans have access to the 
Internet? In my district, I would imagine they are very few.
    General Henry. That is true.
    Mrs. Christensen. And how would you address that?
    General Henry. That is a good issue, and the question is 
the database that we have been asking for, if I may talk about 
the database, we have been through the agencies, DOD, to pick 
up the databases.
    But the question is, we have no real database in order to 
answer the question how many veterans are there? We believe 
there are 24 million veterans out there, but when I start 
looking through the Federal Government to say, where is the 
database of all veterans, where can I find it? It doesn't 
exist, ma'am.
    So what we have done is, we have gone to the VSOs, we have 
gone to the various people here. We have asked Mr. Elmore, we 
have asked VA. We are tapping into fragmented databases, and we 
are building one database as we go.
    The answer to your question will be determined, though, by 
some type of focus groups that we give those questions to.
    Now, we do know that what is happening--is this not 
working?
    Mrs. Christensen. I can hear you, but for the recorder----
    General Henry. It does appear that if we go to the focus 
groups and pick this up, we will be able to determine a little 
bit more with specificity on this line.
    What we do know is that the Internet service, though, is 
growing very rapidly and that we have tied our future to what 
we are doing by setting up the electronic marketplace, going 
out and asking veterans to register. The question is, do we 
charge veterans for it? And the answer is, no, we are not going 
to do that.
    What we want people to do is to come to our Web site, sign 
on to our Web site, become identified. We are tied into SBA, we 
are tied into VA. We will then be able to drive that 
information back to.
    Mrs. Christensen. But my concern is that if the veterans 
don't have access--and maybe to some of the vet centers as a 
beginning because we can pretty much assume that a lot of 
veterans don't have access.
    But before my time runs out, Mr. Lopez, in your statement 
you said the procurement policies of our government are like a 
Tower of Babel, unintelligible to most businesses.
    Do you have any specific suggestions as to how to quiet the 
noise?
    Mr. Lopez. I believe that the Federal Procurement Council 
and all the constituent agencies or parts of that should 
provide concise information in total. All of them should speak 
and say to the public at large, the business public at large, 
this is what we mean, this is what we intend. What you have now 
is this fragmented mess where you can go from one agency to 
another and get a different answer----
    Mrs. Christensen. You need a one-stop--like Labor is doing, 
a one-stop center with all the information----
    Mr. Lopez. That would be a fine suggestion, but the problem 
is, you would have to get them to do it.
    If I may depart for a second, Mr. Chairman, I would like to 
apologize for this, somewhat, whining that we do to you folks. 
We are talking to the choir. You folks have been great for us.
    Mrs. Christensen. But it gets on the record, and it is 
important.
    Mr. Lopez. You have always been good to us and always 
agreed with us, and you have always understood us. It is the 
bureaucracy which stands there like a big stone wall and says, 
we don't care what Congress says, we are going to do what we 
want to do.
    Mrs. Christensen. We understand, and Congressman Pascrell 
and I were saying that in three scorecards we haven't gotten 
them to respond.
    I guess this is to Mr. Gatewood. In your testimony, you 
stated that they didn't have a database. Is the ProNet system, 
did you consider that one of the questions----
    Mr. Gatewood. I have been on ProNet for some time, and I 
consider it a very viable system. I think what the corporation 
needs to do first of all is utilize ProNet to identify those 
veterans and disabled-owned veteran firms that are already in 
business; and for the most part, Iknow that many are.
    I have been on ProNet since its start.
    Mrs. Christensen. It is a good start?
    Mr. Gatewood. Yes, ma'am. And those businesses that are 
about their business will find a way to get on ProNet and make 
themselves known.
    But you had a very good point about Internet. I visited the 
corporation Web site, and it is put together well in terms of 
design, but a lot of it is just information, information 
dissemination, much of which most of us already know. I would 
like to see names, telephone numbers, progress made.
    And if I might depart from your question just briefly, back 
to the advisory committee, if you read Public Law 106-50, 
ma'am, and I am sure you are aware of it, this advisory 
committee is absolutely necessary to the operation of the 
corporation and Public Law 106-50. Without this advisory 
committee, you have no Public Law 106-50 and you don't have an 
advisory committee.
    Mrs. Christensen. Thank you. Two questions and one thanks.
    Chairman DeMint. Mrs. Capito.
    Mrs. Capito. Thank you, Mr. Chairman.
    And thank you for your testimony. I would like to go to Mr. 
Gatewood.
    In your response to the first question, asking how you got 
started, your financing, you talked about your credit cards and 
all these kinds of things. I notice that the corporation is 
going to be developing a venture capital fund. What suggestions 
would you give to them to be most effective at the frontline 
loan?
    And I will give General Henry a chance to respond to this 
as well.
    You mentioned in here that you will be using that venture 
fund for mezzanine-level businesses. Well, I remember a 
mezzanine is kind of between one and two, isn't it? Yes. So 
what is going to be on the ground floor, Mr. Gatewood, if you 
had some suggestions; and General Henry, if you want to 
respond.
    Mr. Gatewood. First of all, I think, in all honesty, the 
SBA has their job cut out for them. When I started my business 
I started as a minority firm, an SBA Section 8(a). And it took 
me a long time to get certified as an SBA firm, and one of the 
reasons I couldn't get certified was, I didn't have any capital 
or revenue from which to start a company. Well, hello, that is 
why I am coming to the SBA.
    But secondly, I think the most important thing to the 
veteran that is getting out is to be educated as to how you 
move in and about the community, particularly retirees, people 
that have been in some time, how you move in and about the 
Federal Government procurement arena. It is a very interesting 
community, and given that knowledge, then they can set about 
getting contracts through the Federal Government.
    To that end, I would like to see a set-aside program set up 
for veterans, a program that allows us to get--disabled 
veterans--3 percent of the subcontracting dollars of all the 
primes. We are talking billions of dollars that these prime 
contractors get. And I will tell you now when that law was put 
into effect, I sent out over a hundred letters to prime 
contractors and over 40 letters to Federal Government agencies 
announcing to them that the law had been signed and our company 
was available to do business with them.
    I have received two responses in 2 years.
    Mrs. Capito. Thank you.
    General Henry.
    General Henry. May I respond, Congresswoman, to his last 
point?
    Mrs. Capito. Yes.
    General Henry. In my other life, I was the senior 
procurement guy for DOD, and what you heard here today on this 
3 percent is absolutely true. You folks passed the 1984 
Competition in Contracting Act that precludes anyone from 
giving the sole source unless you had a justification and 
approval; and there are seven exceptions.
    If you really want to mandate 3 percent goals to service-
disabled veterans, then you make it a set-aside because nothing 
else is going to work. The contracting officers out there will 
not be able to reach out and say, I have got this goal, it is a 
target; what I want to do is be a good guy, and I am going to 
do it because as soon as you do, you are going to have 
everybody else that was on that procurement list coming in and 
filing a protest, and now you have got it all messed up into 
the courts.
    The only way it will work is as a set it aside. Otherwise, 
we are wasting our time on the issue of trying to meet a goal, 
and I think it is unanimous on this panel that it is something 
that is laudable and should be achieved.
    Ms. Millender-McDonald. Will the gentlewoman yield?
    Mrs. Capito. Yes.
    Ms. Millender-McDonald. Thank you so much. The Co-Vice 
Chair of the Women's Caucus, thank you.
    When you talk about set-asides, a red flag goes up as to 
the constitutionality of that, and yet I can certainly 
sympathize, empathize with what you are saying.
    How do we get around this, given that there is no 
constitutional protection for individuals except based on race 
and gender? So how do we accomplish this and yet be within this 
constitutionally?
    General Henry. I believe this body could pass legislation 
that would require the Federal acquisition regulation to set 
aside 3 percent of Federal procurements for the support of 
service-disabled veterans.
    Ms. Millender-McDonald. Will you be the first in line to 
help us advocate for that?
    General Henry. Yes, ma'am, I will.
    Ms. Millender-McDonald. Thank you.
    Mr. Lopez. Congresswoman, may I, with your permission?
    Mrs. Capito. Yes.
    Mr. Lopez. Supreme Court Justice Rehnquist has already 
stated that veterans and especially service-disabled veterans, 
who are essentially workmen's compensation cases of this 
government, are entitled to special consideration in all legal 
applications; and this was made in reference to a challenge 
relating to Public Law 209 and--I am sorry, with the 
constitutional change 209 in California, which you are familiar 
with. That is why they exempted service-disabled veterans from 
209 because the Supreme Court had already spoken.
    We consider these people to be unique and our direct----
    Ms. Millender-McDonald. Indeed----
    Mr. Lopez [continuing]. Direct responsibility--not 
theoretical, not philosophical, but direct. We did this to them 
and we have to fix it.
    Ms. Millender-McDonald. Mr. Chairman, you and I have 
legislation to introduce. Thank you.
    Chairman DeMint. We do.
    Mrs. Capito, do you have any more questions?
    General Henry. Can I go back and address----
    Mrs. Capito. Venture capital, yes.
    General Henry. The venture capital at the mezzanine area, 
you are absolutely right. It is those start-ups who have run 
out of capital, but who still have a good product which the 
venture capital world would see as moving forward. And either 
we are dealing specifically with a veteran who is at that 
mezzanine area or we have imparted into that the requirements 
that they subcontract to veteran businesses.
    It has a larger element on it, but I think more to your 
issue what we are looking for, as in the case of Mr. Gatewood, 
is for those small businesses who come out, who need to get the 
micro loans, that would allow him to get into business--$600.
    We have set up an operation with Southern Financial Bank. 
This came on the heels of September 11. The mayor of the city 
went to them and said, we need a process that will speed up the 
loan process. Now, to those that were otherwise creditworthy, 
when we came along with Southern Financial, we said, if we can 
do that for September the 11th victims, we can do that for 
veterans. We took that and we put together the plan with 
Southern Financial. We hit the news wires on it with Bloomberg.
    Our phones have been ringing off the hook. We have got 
about eight proposals that we are evaluating at the present 
time. That is why I am saying our goal is to blanket the 
country so that any person similarly situated with Mr. Gatewood 
in the future will be able to walk in, under our sponsorship, 
to the bank and say, I need a loan, and get that loan timely 
processed and granted.
    Mrs. Capito. Thank you.
    I would like to make one closing statement, and I will use 
Mr. Gatewood's term about who gets to see the grunts. We see 
the grunts as Members of Congress. I have folks coming into my 
office all the time trying to find seed money for small 
businesses, veterans, disabled veterans and anybody. And it is 
difficult for us to know how to direct if we, even as Members 
of Congress, are not sure what is really out there. So you can 
imagine the next layer down, the difficulties.
    So I think it is important that while you are blanketing 
the veterans, you blanket us as well with all of the 
information, your venture capital initiative and the rest of 
the things, so that we know how best to direct our 
constituents. Thank you.
    General Henry. We will be happy to. May I make one other 
comment on it?
    I think your legislation, the reception--that is, being out 
in the public--is well received; and for veterans, maybe it is 
because of the time right now, we have an opportunity that if 
we can leverage the combined effects of what this body can give 
to us with what we have been able to do and the members on this 
panel, I think that we can create some very nice things for the 
veterans of this country.
    Chairman DeMint. Thank you very much.
    Mrs. Tubbs Jones.
    Mrs. Jones. Thank you, Mr. Chairman.
    Associate Administrator Elmore, how many of the groups that 
are seated at the table this morning have you or your designee 
met with?
    Mr. Elmore. I think all of them, numerous times. Not only 
have I known and worked with the gentlemen to my left, all of 
them--some for better than 20 years--there have been ongoing 
meetings.
    I participate in most of the Task Force meetings, for 
example. When it comes to the Corporation, SBA put together and 
hosted their first board meeting at SBA headquarters in 
September, 2000, and I have been involved, I believe, in every 
board meeting representing the Administrator since then, and 
virtually all of the strategic planning and many of the 
initiatives that, in fact, they are working on and moving 
forward on.
    Mrs. Jones. So what is the holdup?
    Mr. Elmore. What is the holdup?
    Mrs. Jones. Usually it is that you are not communicating 
with the people that you ought to be dealing with. Here you 
just told me that you spent 20 years working with these 
organizations.
    What is the holdup?
    Mr. Elmore. I don't know that there is a holdup per se. 
There are certainly some parts of the law that have not been 
completely enacted yet. The Advisory Committee is one of those, 
and we talked about that earlier.
    I can tell you that in fiscal year 2001 the number of 
veterans that received services from the SBA exceeded 100,000. 
Now, in my review of SBA data, all the way back to 1990, we 
never exceeded 100,000 veterans receiving services from the 
agency in at least the last 11 years.
    I am proud of the fact that we went over 100,000. It 
reflects the good work of my office, my friends in the veterans 
community, the Corporation and lots of dedicated SBA employees 
who have done their best to ensure that veterans----
    Mrs. Jones. Is it that you don't have enough staff?
    Mr. Elmore. My new office was created in January of last 
year, and we had a 75 percent increase in staff since that 
office was created. So we have moved on virtually every 
initiative----
    Mrs. Jones. Mr. Elmore, don't take it so personally. I am 
talking about SBA as an agency. These gentlemen have sat here--
and I was late, but I sat here for 45 minutes and listened to a 
dilemma that these veterans claim they are having; and I have 
sat here and listened to you say what a great job SBA is doing. 
But the links aren't quite making it; they are not linking 
together.
    There is a problem here, and versus a slap at one another 
on the back saying how great we have done, what else can we do? 
What is the next step? What is the problem?
    Mr. Elmore. I don't know that I can tell you exactly what 
the problem is. I think my responsibility at the agency is to 
increase outreach and encourage veterans to participate.
    Mrs. Jones. And how you are going to do that?
    Mr. Elmore. I have already been doing that through a number 
of initiatives, as detailed in my testimony, including this 
outreach poster.
    Mr. Gatewood----
    Mrs. Jones. Let me suggest this, seeing how you have such a 
wonderful relationship with these fine gentlemen at the table, 
and you have met with them on more than one occasion, and we 
have sat here for 2 hours listening to dilemmas that are 
presented: that you call together a meeting very soon with 
these gentlemen.
    And maybe you would get a hold of their mailing list and 
their meeting dates. And you send a person from SBA out to 
their places, as well as send a communication to the members of 
their organization to get something going. That is what I 
suggest.
    Mr. Elmore. I will do that, ma'am.
    Mrs. Jones. I appreciate it very, very much.
    Have you got a suggestion, Mr. Lopez, Mr. Gatewood, Mr. 
Eiland, Mr. Weidman, of what else we could do? It is nothing 
personal, but I am about getting it done.
    Am I out of time already? No. Okay.
    Mr. Lopez. Congresswoman Jones, you are so perceptive. The 
record should state very clearly, what SBA has done for 
veterans, the task force and this body made them do. None of it 
was offered; none of it was their initiative. We had to 
pressure, and you had to pressure with us to get everything 
that we have accomplished to date, which is woefully little.
    And you are very, very accurate and very perceptive; that 
is precisely the problem. They can talk about services to 
veterans, but what is a service? A man comes in one door, you 
give them a piece of paper and shove them out the other door, 
that is recorded as a service; and then they play number games, 
but our particular position in this society does not change. 
That is the evaluation, not how many noses you count.
    Mrs. Jones. Mr. Weidman.
    Mr. Weidman. Yes.
    Bill doesn't have the power, and he is proactive, but the 
Associate Deputy for Management, the Associate Deputy for 
Capital Formation, on and on, don't work for him. And so what 
is the Administrator doing, what is the Chief of Staff doing?
    It is not that we are against the current administrator. 
Most of them have met him only at a cocktail party during Small 
Business Week, because we have never been brought in to talk 
turkey. And we are certainly willing to do that. General Henry 
has brought us in. He meets with us regularly, and we offer him 
suggestions and offer him help.
    We will do the same with Mr. Elmore, but the problem is, 
you have this little $750,000 operation over here on the side 
and you have got a billion-dollar agency where nobody who can 
make anything else happen in that agency is willing to meet 
with us or willing to meet with this committee and follow 
through on implementing the law.
    So the problem with the rest of the agency, with that 
proactive stuff, reminds me, Ms. Jones, when my dad was in 
Korea and we lived with my grandparents and we didn't have very 
much money. We used to have those old gas stoves with the 
painted ceramic thing that looked like a flame----
    Mrs. Jones. I understand.
    Mr. Weidman. But if you didn't run any gas over it, there 
was no heat. So all I am saying is that SBA, despite the fact 
that 25 of those folks got bonuses to the tune of $400,000 a 
year last year, those SES folks--you guys turn off the gas, and 
there ain't no fire down there.
    Mrs. Jones. Mr. Elmore, I want to come back to you and this 
is not a personal attack; this is just encouragement.
    I would appreciate--and maybe the better move is to ask my 
staffer to send a letter to Mr. Baretta detailing some of the 
things that we have talked about today to encourage that the 
agency and other departments make it a priority.
    I always make the discussion, when they talk about minority 
and women's events, that it is a second thought versus when all 
the big planning is done, versus being at the table when 
everything else is being done; and then all of a sudden, by the 
way, we have got to get those veterans, by the way, we have got 
to get those women, by the way, we have got to get those other 
minorities.
    Can that be part and parcel of the overall discussion, and 
accomplishments of the agency; and that other SBA procurement 
officers, or in other departments, that would be a goal they 
would have to reach in order to get the bonuses that are being 
considered by Mr. Weidman.
    I guess I am out of time, Mr. Chairman.
    Gentlemen, thank you for your testimony. We just did a 
small business conference with the Federal Reserve on Monday, 
but my next one, I am going to do veterans. So maybe I will 
have to call upon you.
    General Henry. I would like to----
    Mrs. Jones. You would like to come?
    General Henry. I would.
    Mrs. Jones. Oh, get that note, Patrice. Very good.
    Mr. Lopez. We will all come.
    Mrs. Jones. You will all come? Cleveland, Ohio. I promise, 
it will be warm by the time you get there.
    Chairman DeMint. Thank you. Thank you Ms. Tubbs-Jones.
    Ms. Millender-McDonald.
    Ms. Millender-McDonald. Thank you, Mr. Chairman, and again 
thank you for convening such an impressive panel today.
    I have read part of your testimony, having to run out to 
put a bill on the floor and come back. I think what you said 
and what I am going to say is clear.
    H.R. 3011, I think, the Small Business Emergency Relief Act 
that was introduced by Congressman Pascrell, and H.R. 1499, the 
American Small Business Emergency Relief and Recovery Act of 
2001 that was introduced by Congresswoman Donna Christian-
Christensen were pieces of legislation that we thought would 
move things. They have not, and so if we cannot identify the 
problem, then we need an inspector general to come in and look 
at this department and see just what is impeding the forward 
motion; and I am going to, as the ranking member, make that 
happen. I think it is time for us to do the due diligence for 
our veterans that is sorely needed.
    And, Mr. Chairman, with that, thank you very much. I think 
you and I have a lot of work cut us out for us.
    Chairman DeMint. We do.
    This is great information, and I think we have some very 
specific ideas to follow up on. I am going to dismiss this 
panel, and if the members who are still here can stay for one 
statement from an additional witness, that will be wonderful. 
We are running out of time, but I think we can still----
    Ms. Millender-McDonald. I am here for the long haul.
    Chairman DeMint. Thank you and thank all of our witnesses 
for coming forward.
    Mr. Bew, we need to move ahead so we won't lose your 
statement, and there are very specific questions I think we 
have; and I apologize for the lack of members, but we have been 
pulled away. Believe me, you will be on the record and we will 
be responding to your comments.
    But this is Mr. Ronald Bew, Associate Deputy Director for 
Capital Access for the U.S. Small Business Administration. And 
before we allow your testimony, I would like to allow Ms. 
Christian-Christensen to make an opening statement.
    Mrs. Christensen. Thank you, Mr. Chairman. I am going to be 
very brief, but this is an issue that is of critical importance 
to my district, and it has been brought to our attention, to 
other districts as well.
    When the disaster loans began, when the program began in 
1998, my constituents came running to me. They were very 
concerned about their loans being sold. At that time, we were 
assured by SBA that the terms of the loan would not change; and 
with some hesitation, I think my constituents decided to accept 
and trust in that.
    And in August of 2000 the loans were bought by Beal Bank of 
Texas, and this happened a little over a year after my 
community rejected an agreement that the governor made with the 
owner of Beal Bank to build a rocket company. So you can 
imagine the alarm in our community when we found out that over 
3,000 loans were bought by Beal, with whom we had just had a 
bitter battle, and of those, 605 were business loans, about 
2,500 were home loans. But 605 business loans in a small 
community like the U.S. Virgin islands is a lot, and we 
attempted to have SBA buy backthe loans.
    They looked into it and investigated how the bid was made 
and found that it was done fairly and equitably, and they 
didn't feel they had any recourse to do that. We have tried to 
have them put on hold. That has, to date, not happened, but we 
continue to get complaints from companies because the 
flexibility that we could have with the SBA does not pertain.
    One issue is the subordination of the loans and the fact 
that Beal Bank just does not subordinate the loan. It has 
created problems with companies wishing to expand and that has 
happened in several instances.
    So I know we are really strapped for time, but I want to 
stress the importance of this issue and I especially, in light 
of the fact of the new disaster loan program following 
September 11, where businesses across the country are now able 
to access these loans, but they are accessing them with the 
understanding that SBA is making these loans, that they are 
coming under certain terms, that there is some flexibility--not 
in terms of paying back the loans, but in terms of working out 
issues with SBA when their circumstances change, in reaching 
equitable agreements that do not occur when you are working 
with a for-profit bank.
    So with that, Mr. Chairman, I will yield.
    Chairman DeMint. Thank you very much.
    Mr. Bew, we will turn to you for a 5-minute testimony

STATEMENT OF RONALD E. BEW, ASSOCIATE DEPUTY ADMINISTRATOR FOR 
       CAPITAL ACCESS, U.S. SMALL BUSINESS ADMINISTRATION

    Mr. Bew. Thank you, Mr. Chairman, ranking member, and 
members of the subcommittee for inviting me here today.
    SBA's Asset Sales Program was initiated in fiscal year 
1998. It is designed to sell loans by SBA to private sector 
investors, and is part of an effort to more efficiently manage 
the government's credit portfolios. Since the first of five 
sales in August of 1999, SBA has sold over 111,000 loans for 
over $2.5 billion. SBA plans to continue to conduct the program 
with two to three asset sales per year.
    Through the program, SBA has maximized sales proceeds of 
selling loans to the private sector at a value that exceeds the 
agency's expected hold value. The program helps future 
borrowers by freeing up scarce resources to be used for loan 
subsidy and frontline delivery of services. The purpose is to 
allow SBA to focus on inherently governmental functions, i.e., 
making the loans rather than servicing loans.
    By selling these loans and freeing servicing staff to 
perform other functions, such as loan origination, lender 
monitoring and risk management, the program has provided SBA 
much-needed flexibility in an ever-tightening budget 
environment. In addition, the sale of assets has allowed the 
agency to continue providing essential loan servicing while 
maintaining capacity for future major disasters. This is in 
spite of staff loss through attrition in the servicing centers 
and field offices.
    Bidders in these sales have included Wall Street investment 
banks, large national banks, regional banks, loan servicing 
companies and small investment companies. SBA has provided 
these bidders abundant, accurate and easily accessible loan 
information by remote access over the Internet at a nominal 
cost in order to expand the potential bidding community and 
maximize gross proceeds.
    Doing so particularly assists small bidders who frequently 
do not have the resources to invest the time and expense in 
traveling to a central location to view the due diligence 
materials. SBA includes small businesses in its assets sales 
program management by using the services of small minority-
owned and women-owned businesses to perform some of the work.
    SBA will also continue to apply the lessons it learns from 
each individual sale, and it requires its contractors during 
each sale to note and record all policy and process 
improvements.
    Another benefit of the program is that SBA has been able to 
reduce its outstanding loan portfolio. For a variety of 
reasons, many borrowers pay off their loans or enter into 
compromise agreements when SBA informs them that their loans 
have been selected for sale.
    While undertaking the program, SBA has been able to protect 
borrowers both before and after sales. Disaster loans are held 
for at least 2 years and thereafter SBA gives special 
consideration before selling loans when another disaster occurs 
in the same area. Additionally, terms and conditions remain the 
same unless the borrower chooses to change them.
    SBA has recently changed its borrower notification process 
to ensure that all borrowers with a loan scheduled for an asset 
sale are fully aware of the pending actions and their options. 
The written notice of the sale is sent to the borrower 
approximately 4 months before each scheduled sale and includes 
a series of frequently asked questions based on previous issues 
raised by borrowers, including questions regarding the types of 
servicing actions the sale process might affect.
    SBA also frequently updates the field offices and servicing 
centers regarding the status of each sale so that these offices 
can work with any borrower who has a situation that requires 
special handling.
    SBA has managed the program while successfully limiting 
customer complaints. Of the approximately 111,000 loans sold 
since the first asset sale, SBA has received less than 300 
complaints. However, when SBA does receive a complaint, SBA 
acts upon its commitment to follow up on each complaint by 
contacting the loan purchaser and asking the purchaser to 
attempt to resolve the borrower's concerns.
    Thank you for the opportunity to appear here. I will be 
happy to answer your questions.
    [Mr. Bew's statement may be found in appendix.]
    Chairman DeMint. Thank you, Mr. Bew.
    Ms. Christensen, would you like to ask a question?
    Mrs. Christensen. Thank you.
    That notice time doesn't really help a community that has a 
very low income level. They are not able to buy out. You can 
give them a year's advanced notice, and they will not be able 
to buy the loans before you can sell them; and I guess that is 
when they come to complain to us.
    When the loans are sold, do you give the purchaser any 
notice or guidelines if the loans are different or should not 
be viewed as a conventional loan, or is that how you look----
    Mr. Bew. In 2001, we started putting notice in the loan 
agreement to make borrowers aware that their loans are subject 
to sale.
    Mrs. Christensen. For example, does Beal Bank get any kind 
of a notice or guidelines that this loan is different from 
their conventional loans and should be in keeping with the 
original terms that SBA provided at the time the loan was taken 
out?
    Mr. Bew. Yes. Beal Bank is a 7(a) lender and knows the 
program very well. And we go through a bidders' qualification 
process.
    Mrs. Christensen. And we are talking about the disaster 
loans--I mean when a person loses their business and has no 
place else to turn but to SBA, and is continuing to make 
payments, sometimes struggling, because our economy is not 
good; and then it is being sold,they can't buy out the loan and 
the terms of the loan now change.
    Mr. Bew. Beal, as any other purchaser, would have to adhere 
to the note. It cannot change unless the borrower requests a 
change, such as subordination, et cetera. They have to adhere 
to the terms of the note.
    Mrs. Christensen. Do I have time for more questions?
    Chairman DeMint. Go ahead.
    Mrs. Christensen. You had said that through the asset sales 
you are able to deploy staff that would otherwise be used for 
portfolio management. Would the bulk of loan execution for the 
7(a) and 504 loan regulation be lending, monitoring and risk 
management, which are already done by the private sector? What 
other areas do you deploy those people to?
    Mr. Bew. What has happened as the loans were sold and the 
loan volume and the servicing centers declined, attrition took 
hold, so it was able to equal--to have an equal balance of 
people and servicing.
    What we have done since, I might add, is that there was an 
emphasis--and someone else, earlier, mentioned that--on small 
loans. What we are doing now is proposing increasing the SBA 
express loan, to increase that from 150 to 250, and open it up 
to many banks. Particular emphasis is on that program for the 
50,000-and-under loan, to touch more small businesses in the 
smaller loans.
    Mrs. Christensen. I am--Mr. Chairman, I would like to 
submit some questions in writing and, if I could, ask one more 
question.
    The mission of the Disaster Loan Program is to assist the 
borrower to return to predisaster conditions. Doesn't this 
conflict with the profit-driven mission of a financial 
institution, making it impossible to really service the loans?
    Mr. Bew. We do give a 2-year waiting period before we sell 
a disaster loan. That recognizes that most changes occur in the 
first 2-year period after a loan is made. It allows these 
businesses to get back up on their feet.
    Mrs. Christensen. Unless you get hit with a hurricane the 
next year.
    Mr. Bew. If it does, we can pull those loans out of that 
sale if there is a disaster in that same area.
    Mrs. Christensen. Within what period of time?
    Mr. Bew. Two years.
    Mrs. Christensen. Not as long as the loan is in effect?
    Mr. Bew. No. Because many disaster loans have maturities of 
25 to 30 years.
    Mrs. Christensen. I would just like, through the Chair, to 
submit further questions in writing.
    Chairman DeMint. And I would like to suggest, if you can, 
if Mr. Bew is agreeable, to perhaps meet with the Congresswoman 
in her office to come up with specific suggestions that the 
committee can follow up on, whether it be legislation or 
regulatory, if that is possible. Because I know that is her 
particular interest.
    Mr. Bew. I read some of your earlier correspondence. I hear 
you. I understand exactly where you are coming from. I would be 
happy to meet with you.
    Chairman DeMint. We would very much like to hear from that.
    Ms. Millender-McDonald.
    Ms. Millender-McDonald. Mr. Bew, what I would like to ask 
is, what are the specific procedures or criteria for the 
repurchase of loans, especially disaster loans you have put in 
place, if at all--any?
    Mr. Bew. For the repurchase?
    Ms. Millender-McDonald. For the repurchase of loans, 
especially disaster loans.
    Mr. Bew. Let's see. I am not sure that I can answer that.
    Ms. Millender-McDonald. I will tell you what. I will submit 
that question to you and perhaps you can research that, along 
with those questions that Ms. Christensen----
    Mr. Bew. If you are talking about SBA repurchasing sold 
loans, we could repurchase them during the first 6 months after 
the sale--we could only do this, however, if there is something 
faulty in the documentation, something we warranted and it is 
not true. That is basically it, because once we have sold that 
loan, it belongs to private sector investors.
    Ms. Millender-McDonald. I do understand that.
    Thank you, Mr. Chairman.
    Chairman DeMint. Thank you. And thank you, Mr. Bew. I 
appreciate your comments and look forward to some additional 
recommendations.
    This meeting is adjourned.
    [Whereupon, at 4:25 p.m., the subcommittee was adjourned.]





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