[Senate Hearing 111-1173]
[From the U.S. Government Publishing Office]



                                                       S. Hrg. 111-1173

 
            OVERSIGHT OF THE SBA DISASTER ASSISTANCE PROGRAM

=======================================================================

                                HEARING

                               BEFORE THE

            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
                          UNITED STATES SENATE

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 19, 2010

                               __________

    Printed for the Committee on Small Business and Entrepreneurship


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            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP

                     ONE HUNDRED ELEVENTH CONGRESS

                              ----------                              
                   MARY L. LANDRIEU, Louisiana, Chair
                OLYMPIA J. SNOWE, Maine, Ranking Member
JOHN F. KERRY, Massachusetts         CHRISTOPHER S. BOND, Missouri
CARL LEVIN, Michigan                 DAVID VITTER, Louisiana
TOM HARKIN, Iowa                     JOHN THUNE, South Dakota
JOSEPH I. LIEBERMAN, Connecticut     MICHAEL B. ENZI, Wyoming
MARIA CANTWELL, Washington           JOHNNY ISAKSON, Georgia
EVAN BAYH, Indiana                   ROGER F. WICKER, Mississippi
MARK L. PRYOR, Arkansas              JAMES E. RISCH, Idaho
BENJAMIN L. CARDIN, Maryland
JEANNE SHAHEEN, New Hampshire
KAY R. HAGAN, North Carolina
  Donald R. Cravins, Jr., Democratic Staff Director and Chief Counsel
              Wallace K. Hsueh, Republican Staff Director


                            C O N T E N T S

                              ----------                              

                           Opening Statements

                                                                   Page

Landrieu, Hon. Mary L., Chair, and a U.S. Senator from Louisiana.     1
Snowe, Hon. Olympia, a U.S. Senator from Maine...................     2
Vitter, Hon. David, a U.S. Senator from Louisiana................     4

                               Witnesses

Rivera, James, Associate Administrator, Office of Disaster 
  Assistance, U.S. Small Business Administration.................     5
Shear, William, Director, Office of Financial Markets and 
  Community Investments, U.S. Government Accountability Office...    12
Bergeron, Jaimie, Owner, Fleur-de-Lis Car Care Center............    29

          Alphabetical Listing and Appendix Material Submitted

Bergeron, Jaimie
    Testimony....................................................    29
    Prepared statement...........................................    31
Landrieu, Hon. Mary L.
    Opening statement............................................     1
Rivera, James
    Testimony....................................................     5
    Prepared statement...........................................     7
    Responses to post-hearing questions from Chair Landrieu......    46
Shear, William
    Testimony....................................................    12
    Prepared statement...........................................    14
Snowe, Hon. Olympia
    Opening statement............................................     2
Vitter, Hon. David
    Opening statement............................................     4


            OVERSIGHT OF THE SBA DISASTER ASSISTANCE PROGRAM

                              ----------                              


                        WEDNESDAY, MAY 19, 2010

                      United States Senate,
                        Committee on Small Business
                                      and Entrepreneurship,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 11:11 a.m., in 
Room 428A, Russell Senate Office Building, Hon. Mary L. 
Landrieu, Chair of the Committee, presiding.
    Present: Senators Landrieu, Hagan, Snowe, and Vitter.

 OPENING STATEMENT OF HON. MARY L. LANDRIEU, CHAIR, AND A U.S. 
                     SENATOR FROM LOUISIANA

    Chair Landrieu. Good morning. I would like to call this 
Oversight Committee of the Small Business Committee together 
for the purposes of our ongoing work in the oversight of the 
Disaster Assistance Program.
    I am very pleased to have this panel before us today to 
provide some updates and insights into that effort. We have 
with us SBA Associate Administrator James Rivera, we have 
William Shear from the GAO, and, most especially, we have Ms. 
Jaimie Bergeron from New Orleans, owner of Fleur-de-Lis Car 
Care Center.
    I welcome you, especially Ms. Bergeron, this morning. The 
Bergerons are an example of one of the pioneer businesses that 
I have spoken of so often since this disaster, and I think her 
testimony is going to be extremely meaningful to the Committee 
and our work today.
    We are focused today on the advancements that we have made 
in our response to disasters. I believe one of the most 
important responsibilities of this Committee is to ensure that 
the SBA is fully staffed, better prepared and ready to provide 
quick assistance to businesses following disasters. We, 
obviously, have one continuing to unfold in the Gulf of Mexico, 
putting some of the same businesses that were at risk after the 
Katrina/Rita devastation and the breaking of our Federal levee 
system. Some of those same businesses are being tested now. We 
have had unprecedented floods in Tennessee and in Rhode Island. 
So I hope that our new efforts are going to pay off.
    Unfortunately, in the past, there have been some terrible 
stops and starts. After the 2005 storms, it took 90 days to 
process a home loan, 70 days to process a business loan, even 
longer for disbursements for disaster funding. SBA used to 
required disaster victims to supply mountains of tax records 
when the SBA and the Federal government should obviously have 
been able to get some of these tax records themselves. That 
process has been changed.
    As we sit here today, we are less than two weeks away from 
the 2010 Atlantic hurricane season. I also mentioned what we 
have already seen in Rhode Island and Tennessee.
    So I want to say in conclusion that I am proud to have 
helped to lead the efforts of some reforms that have been put 
into place to date. We are looking forward, Mr. Shear and Mr. 
Rivera, to your testimony. But I am also going to continue to 
press for additional relief and support for our small 
businesses when they are faced with not just the economic 
pressures of the current underlying weak economy in our 
Country, but in addition to that, they are faced with these 
immediate situations before them. Please try to provide some 
testimony this morning in that regard.
    So I am going to turn it over to Ranking Member Snowe.

OPENING STATEMENT OF HON. OLYMPIA J. SNOWE, A U.S. SENATOR FROM 
                             MAINE

    Senator Snowe. Thank you very much, Chair Landrieu, for 
holding this oversight hearing on SBA's Disaster Assistance 
Program, which is certainly timely given what is occurring in 
the Gulf.
    As Ranking Member of the Committee, I join the Chair in 
welcoming our panelists here today, the SBA Associate 
Administrator for Disaster Assistance, James Rivera; Government 
Accountability Office Director Bill Shear; and Ms. Jaimie 
Bergeron, from Fleur-de-Lis Car Care Center in New Orleans, 
Louisiana.
    We thank you for taking time away from your business, Ms. 
Bergeron, to fly here to Washington. I know that you have had 
your share of experiences with the SBA's disaster programs, and 
we thank you for your willingness to provide your accounts in 
terms of your experiences. I know you have also had to deal 
with numerous disasters, between Hurricanes Katrina, Rita and 
Wilma in 2005, the Hurricanes Gustav and Ike in 2008, and now 
the Deepwater Horizon oil spill which is fast becoming the 
worst off-shore environmental disaster in the history of this 
Nation.
    I know in future hearings we hope to hear from the CEO of 
BP, Mr. McKay, who was present at the Commerce Committee, on 
which I serve, yesterday. But certainly we need to know how the 
company is going to be compensating small businesses for their 
losses and what the level of liability BP is committed to as 
this bill continues, and the economic impact, not to mention 
the environmental impact, continues to grow.
    I assure that as former Chair, now Ranking Member, of this 
Committee, I have witnessed the good, bad and the ugly when it 
comes to the SBA's response to natural disasters. In the days 
and months and even a year after Hurricanes Katrina and Rita 
devastated the Gulf Coast back in 2005, I saw the worst side of 
the Federal Government--slow, inefficient and incompetent.
    At the time I was Chair of this Committee and through our 
tireless efforts, including trips to the Gulf, as my colleagues 
will recall and the Chair will, convening aggressive oversight 
hearings and forging numerous pieces of legislation, we were 
ultimately successful in including into the 2008 Farm Bill key 
provisions to address many of the fundamental flaws in the 
SBA's Disaster Assistance Program, which was important to both 
of my colleagues who of course represent the State of 
Louisiana, and Senator Vitter as well. This legislation was 
critical, learning from all of that experience how essential 
these reforms were, such as ensuring that the SBA maintain 
adequate loan processing staff and reserve employees who can be 
called upon to respond to these disasters in a timely fashion.
    I am very pleased that our aggressive oversight and reforms 
resulted in a streamlined, improved Agency that is much better 
prepared today to help victims of natural disasters recover and 
rebuild. But unfortunately, the job certainly is not complete, 
and according to the testimony, I am sure we are going to hear 
from Mr. Shear today regarding this.
    According to the GAO, the SBA has only fully met 15 of the 
26 requirements of the 2008 Farm Bill and has missed deadlines 
on 5 of the major components of this law. With the SBA 
currently responding to disasters in Tennessee, where very few 
people have flood insurance, in addition to Rhode Island, 
Mississippi, California, Kentucky, Massachusetts, New Jersey, 
West Virginia and American Samoa, the Agency must show more 
urgency in fully implementing all of the reform requirements.
    The GAO has been generally positive about the SBA's initial 
response after the 2008 Midwest floods and Hurricane Ike, the 2 
largest disasters since the 2005 Gulf hurricanes.
    And I hope that we hear today that the SBA is fully 
equipped to mount an effective and rapid response to the next 
catastrophic disaster, not to mention the one that is currently 
underway, and how that is going to work with BP, and making 
sure we extend assistance to small businesses in an effective 
and efficient way.
    I also look forward to hearing from Mr. Rivera and the SBA 
about the Agency's response to these recent and ongoing 
disasters, and specifically:
    How many SBA disaster reserves have been activated 
nationwide?
    Has the SBA improved the application process and simplified 
the burdensome paperwork requirements?
    Why has the SBA not implemented the private Disaster Loan 
Program which was created in the 2008 Farm Bill?
    What are the capabilities of the Disaster Credit Management 
System and is it ready for another disaster the size of 
Katrina?
    At the current pace of disaster declarations, how much of 
the disaster loan fund does the SBA expect to spend by the end 
of this fiscal year?
    In addition to these issues, I also hope, Mr. Rivera, that 
you address the SBA's response to reports issued by the 
Agency's Inspector General last fall, indicating that the SBA 
is failing to protect taxpayers' dollars by not ensuring 
compliance with insurance requirements on collateral used to 
secure loans and for not correctly applying insurance offsets 
to loan balances. As the Federal Government takes increasing 
responsibility from the States when it comes to disaster 
recovery and response, as has been the trend in recent years, 
we must ensure that taxpayer dollars are protected and used 
efficiently.
    Today's hearing represents an opportunity to look ahead, 
and ensure the SBA is prepared for the hurricane season and is 
able to mount a more comprehensive and aggressive response to 
future disasters. It is paramount that we do not relent in our 
oversight of these programs.
    Thank you, Madam Chair.
    Chair Landrieu. Thank you.
    Senator Vitter.

  OPENING STATEMENT OF HON. DAVID VITTER, A U.S. SENATOR FROM 
                           LOUISIANA

    Senator Vitter. Thank you, Madam Chair, for calling this 
hearing. It is very important, and I welcome all of our 
witnesses, particularly Jaimie Bergeron from Lakeview in New 
Orleans. I am very interested to hear all your testimony.
    I also want to thank Administrator Mills. I talked with her 
in the last few weeks about an aggressive SBA response to the 
current crisis in the Gulf, and we have gotten significant 
action that I have suggested, and Senator Landrieu and others 
have suggested, including the deferral of loan payments of 
Katrina and Rita loans by people who are now underwater because 
of this current crisis and also new loan opportunities that 
many others need.
    In addition to that, I would ask that we make part of this 
discussion the not just authority, but mandate that the 
President set up a quick loan program for fishermen and others 
in the fisheries industry, under the OPA bill. Again, that is 
not just an authority or a possibility. That is a mandate that 
he do that. I think that would give additional quick relief to 
folks hard hit in that industry as they deal with the BP claims 
process, and I would ask when that is going to happen because 
again, that is not simply a possibility open to the President. 
It is a mandate under OPA.
    And I look forward to all of your testimony. Thank you.
    Chair Landrieu. Thank you.
    Let me begin just briefly introducing the panel. Our first 
witness, James Rivera is Associate Administrator, as has been 
said. He started his career in 1989 as a disaster loan 
specialist in one of the regions. So he comes with a great deal 
of experience this morning.
    Mr. Shear joins us today from GAO. Mr. Shear is Director of 
the Office of Financial Markets and Community Investment. He is 
overseeing numerous reports addressing the SBA, Federal Housing 
Administration as well as the Rural Housing Service.
    And last, but certainly not least, at my specific request, 
Ms. Jaimie Bergeron is here. And I want to say, besides her 
experience as an insurance adjuster and her own professional 
experience as a small business owner, her personal story as the 
Katrina saga unfolded was extremely moving to me, having 
visited her place of business on any number of occasions, and 
her husband, Ray Bergeron. And what they went through, I mean 
Senator Snowe, to try to just reestablish their business is 
truly an amazing and moving business.
    So I am thrilled that you are here, Ms. Bergeron, to really 
put a face and the fabric and the texture behind what we talk 
about today.
    So let us begin with, Mr. Rivera, with your testimony.

 STATEMENT OF JAMES RIVERA, ASSOCIATE ADMINISTRATOR, OFFICE OF 
    DISASTER ASSISTANCE, U.S. SMALL BUSINESS ADMINISTRATION

    Mr. Rivera. Good morning, Chair Landrieu, Ranking Member 
Snowe and members of the Committee. Thank you for inviting me 
to discuss the SBA efforts with disaster assistance and 
recovery.
    The SBA is responsible for providing affordable, timely and 
accessible financial assistance following a disaster to 
businesses, homeowners and renters. This is available in the 
form of low interest loans. Since the SBA was created in 1953, 
we have provided 1.9 million disaster loans for more than $48.5 
billion.
    Today, we have about 1,300 employees with a reserve force 
of over 2,000. These staff members help provide disaster loans 
of up to $200,000 to help homeowners rebuild. We also make 
loans to nonprofits and businesses of all sizes for up to $2 
million, to assist with any uninsured or otherwise 
uncompensated physical loss sustained during a disaster.
    More importantly, we offer Economic Injury Disaster Loans 
to small businesses, small agricultural cooperatives and 
nonprofit organizations who cannot find credit in the 
conventional markets. If a business is unable to meet its 
obligation and pay its ordinary and necessary operating 
expenses due to a disaster, these working capital loans help 
provide a low interest rate of 4 percent for up to 30 years. 
The maximum loan amount is $2 million combined for both 
physical and economic injury disaster loans.
    In 2009, SBA successfully responded to 25 presidential 
individual assistance declarations, 40 agency declarations, 15 
economic injury declarations and 148 Secretary of Ag 
declarations. In total, we approved over 21,000 disaster loans 
for over $1.1 billion.
    This year, as a result of the Deepwater Horizon BP oil 
spill, small business owners in the Gulf Region who work in 
fishing, seafood retail, boatyards, shipping companies, 
processing plants and other coastal small businesses may face 
financial losses from having to shut down or interruptions in 
their operations due to the oil spill. While small businesses 
harmed by the BP Horizon oil spill disaster should seek 
compensation from responsible parties, SBA has a role in 
helping small businesses affected by the disaster, particularly 
if there is any delay in receiving payments for claims. SBA is 
ready to assist these businesses by making Economic Injury 
Disaster Loans for them in the States of Louisiana, 
Mississippi, Alabama and Florida. This provides vital bridge 
financing.
    Currently, SBA has 25 loan outreach centers in the impacted 
areas to meet the small business owners and answer questions 
about SBA loans. Small business owners can visit one of these 
centers or can apply online through our electronic loan 
application, which was introduced in August of 2008 and now 
accounts for one-third of all applications submitted.
    We are also supported by the Small Business Development 
Centers who provided staff to assist fishermen and other small 
businesses impacted by the Deepwater Horizon BP oil spill in 
filing potential claims.
    In addition, we are allowing existing SBA disaster 
borrowers to request a deferment, and we are strongly 
encouraging our private lending partners to consider deferment 
relief for borrowers with SBA traditional non-disaster loans.
    I should also note that SBA is currently responding to 38 
other disaster declarations, including flooding in Tennessee 
where we currently have 17 disaster locations responding to the 
event.
    Furthermore, I want to emphasize that we have made dramatic 
improvements to our disaster operations since 2005 and Katrina. 
For example, we are currently meeting our processing goal by 
turning around applications within 7 days for disaster home 
loans and within 14 days for disaster businesses. To put this 
into perspective, the average processing time during the 2005 
Gulf Coast hurricanes was 74 days for disaster home loans and 
66 days for businesses.
    We have also increased the number of work stations for our 
disaster employees from 360 to 1,750, and we have brought an 
online surge capacity of 350 additional work stations in 
Sacramento.
    We have also improved the Disaster Credit Management System 
which now gives us the technology to serve up to 10,000 
concurrent internal users, up from 1,500.
    Finally, we have invested in more front-end training, 
marketing and outreach to improve our preparedness for and our 
response to disasters. We have even brought together focus 
groups of Americans who have been directly affected by 
disasters to help us learn what works and what does not.
    I appreciate the opportunity to share with the Committee 
the role SBA plays in recovery. We believe that we are prepared 
to effectively and efficiently respond to the needs of the 
disaster victims, and I look forward to your questions. Thank 
you.
    [The prepared statement of Mr. Rivera follows:]

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    Chair Landrieu. Thank you very much.
    Mr. Shear.

   STATEMENT OF WILLIAM SHEAR, DIRECTOR, OFFICE OF FINANCIAL 
      MARKETS AND COMMUNITY INVESTMENTS, U.S. GOVERNMENT 
                     ACCOUNTABILITY OFFICE

    Mr. Shear. Thank you, Chair Landrieu, Ranking Member Snowe 
and members of the Committee. It is a pleasure to be here today 
to discuss our work at the Small Business Administration.
    To complete my statement, we reviewed and updated our 
report, ``Small Business Administration: Additional Steps 
Should Be Taken to Address Reforms to the Disaster Loan Program 
and Improve the Application Process for Future Disasters.'' We 
issued this report in July of 2009.
    After the 2005 Gulf Coast hurricanes, many deficiencies 
were exposed in the Agency's Disaster Loan Program and 
demonstrated the need for reform. Since then, SBA has taken 
several steps to reform its Disaster Loan Program, which 
includes creating an online loan application and increasing the 
capacity of its Disaster Credit Management System.
    In June, 2008, Congress enacted the Small Business Disaster 
Response and Loan Improvements Act, which placed new 
requirements on SBA to ensure that the Agency is prepared for 
future catastrophic disasters.
    In my statement today, I will summarize first the extent to 
which SBA has addressed the requirements of the Act and, 
second, how SBA's response following the major disasters of 
2008 aligned with key components of its June, 2007 Disaster 
Recovery Plan.
    First, with respect to addressing the requirements of the 
Act, the SBA has met 15 of 26 requirements of the Act and 
partially addressed 6. The remaining 5 provisions do not 
require action. You can see the figure on Page 5 of my 
statement which shows, I say, a lot of small print about 
summarizing SBA's progress.
    Since July, 2009, when we issued our report, SBA has taken 
a number of actions. For example, the Agency issued an updated 
DRP in November, 2009. In addition, SBA issued regulations on 
coordinating with FEMA on timely submission of disaster 
assistance applications.
    With respect to provisions that have been partially 
addressed, SBA has taken steps to address the Act's 
requirements for region specific marketing and outreach. For 
example, SBA has begun a dialogue with the SBDC State Directors 
in the Gulf Coast about disseminating disaster planning 
information in the five most hurricane-prone States before the 
hurricane season begins. However, these steps have not been 
discussed in public documents or venues, such as in the DRP or 
on the SBA web site, which would make the information more 
transparent and easily accessible to the public and Congress.
    In our July, 2009, we recommended that SBA develop 
procedures for regional entities that would enable SBA to meet 
all region specific requirements of the Act. SBA officials told 
GAO the Agency has not yet completely addressed some provisions 
that require new regulations because to do so the Agency must 
make extensive changes to current programs or implement new 
programs. For two requirements that will involve private 
lenders, SBA plans to implement pilots before finalizing 
regulations. One pilot for the Intermediate Disaster Assistance 
Program is expected to be in place by September of this year.
    In our July, 2009 report, we recommended that SBA develop 
an implementation plan and report to Congress on the Agency's 
progress in addressing all requirements within the Act. Such a 
plan could improve transparency, thereby making it clear how 
well prepared SBA is to manage catastrophic disasters.
    Now I will briefly address our second objective, addressing 
how SBA's response to major disasters in 2008 aligned with key 
components of its June, 2007 Disaster Recovery Plan.
    SBA's initial response after the 2008 Midwest floods and 
Hurricane Ike aligned with certain components of its initial 
DRP, such as using technology and outreach efforts to ensure 
timely assistance. The individuals GAO interviewed and results 
from SBA's 2008 Disaster Loan Program Customer Satisfaction 
Survey provide some positive feedback about SBA's performance 
following recent disasters.
    However, interviewees and survey results indicated areas 
for improvement. In particular, both indicated that application 
paperwork was burdensome and that the application process 
needed improvements. SBA officials told GAO that they have been 
taking steps to improve the application process, but did not 
provide documentation of such efforts. As a result, it did not 
appear to have any formal process for identifying problems in 
the application process and making needed improvements.
    It is a pleasure to testify before this Committee. I would 
be pleased to answer any questions.
    [The prepared statement of Mr. Shear follows:]

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    Chair Landrieu. Thank you very much.
    Ms. Bergeron.

  STATEMENT OF JAIMIE BERGERON, OWNER, FLEUR-DE-LIS CAR CARE 
                             CENTER

    Ms. Bergeron. Thank you for inviting me to speak here, 
Senator Landrieu and Senator Snowe and other members of the 
Committee.
    My husband, Ray Bergeron, and I have operated Fleur-de-Lis 
Car Care Center in the Lakeview neighborhood of New Orleans 
since 1988, and I would like to speak on behalf of Senator Bill 
2986.
    We are a family business that, prior to Hurricane Katrina, 
employed 9 people. On August 29th, my husband and I enjoyed a 
measure of financial security. We owned an unencumbered home 
and a successful business.
    By August 29th, we were homeless, jobless and in debt. In a 
few hours, the flooding caused by the levee failures wiped out 
over 20 years of work and savings.
    In early 2005, we were negotiating for the sale of the 
business, and my husband, who turned 70 years old a few weeks 
after the flood, was looking forward to retirement. Today, 
there are no purchase offers. We are working 12-hour days, and 
the SBA holds a $250,000 mortgage on our home which we will be 
force to sell if the business fails.
    Prior to the flood, we served an average of 250 customers a 
day. Our business was one of the few in the city to offer full-
service gasoline. We were the largest tire dealer in the 
neighborhood, and we offered a full range of mechanical 
services.
    As soon as the flood waters receded, we began to clean up 
and plan to reopen. Many businesses held off, waiting to see if 
residents would return before they made that commitment. We 
believed it was up to businesses to provide essential services, 
so residents could come back. And they have, but not in the 
numbers required for us to keep our doors open.
    Today, our business is about half of what it was, averaging 
less than 100 customers a day. We have cut hours and eliminated 
many of the services we used to provide because we cannot cover 
the necessary payroll. We had hoped to be fully staffed by now, 
but since the recession we have been forced to lay off three 
employees. We have only two left, and our SBA funds have run 
out. We cannot afford to borrow more.
    We applied for an SBA disaster loan in September, 2005. 
After approving our loan, SBA sent us to closing in December, 
2005, without providing us with the necessary mortgage 
documents. When we asked for a new closing date, we were told 
that that would delay the process, and we were encouraged to 
sign the loan agreement. We did so with the understanding the 
funds would be disbursed as soon as the mortgage documents were 
returned to SBA; that did not happen.
    SBA advanced us $10,000 in January, 2006. We received no 
additional funds until April of that year, and then only after 
we agreed to take less money than we had been approved for and 
to pay 2 different title companies $305 each for title searches 
on the same piece of property.
    SBA based our payments on the amount approved rather than 
the amount borrowed, but later agreed to reduce our payments by 
$200 per month. However, we were forced to begin paying the 
loan back on the anniversary of the closing date, December, 
2006. As a result, we barely had eight months to restart the 
business before we were required to begin making payments on 
the loan.
    Although individual SBA employees I dealt with worked hard 
for us, there seemed to be no sense of urgency and no system in 
place to process disaster loans efficiently.
    Recently, the streets surrounding our business were closed 
for repairs. New roads mean better access, and we hope more 
customers. In the meantime, two of the three points of entry 
are blocked. We are told that repairs will not be complete 
until December, 2010 at the earliest.
    In February, we received a six-month deferment from SBA to 
help us deal with this major business interruption. We are 
grateful for the assistance, although we know that interest 
continues to accrue and there will be a large balloon payment 
due at the end of the term of the loan. That is a bridge we 
will have to cross when we come to it.
    A few months, Senator Landrieu and SBA Administrator Karen 
Mills visited our business, and I had an opportunity to tell 
them how much the small businesses affected by Hurricane 
Katrina need loan relief to stay in business and create more 
jobs. Even in our current situation, we need one more employee. 
As things improve, we hope to add more jobs, but as of now the 
debt service does not leave us with enough funds to hire even 
that one employee and be confident we can make our payroll. The 
bill before this Committee could help us do that.
    Small businesses in our area are dealing with the twin 
burdens of a prolonged recovery and the effects of the worst 
recession in decades, and now South Louisiana has been hit with 
another disaster off our coast. Nearly five years later, our 
business and others like it are still in need of the relief 
this bill will provide, and I ask you to support it.
    [The prepared statement of Ms. Bergeron follows:]

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    Chair Landrieu. Thank you, Ms. Bergeron. Let me just begin 
with you because it is important I think to put, as I said, a 
face and texture on what this Committee deals with, so that the 
administrators here understand that Ms. Bergeron is speaking 
for at least 12,000 small businesses on the Gulf Coast that 
have loans similar to her loans and similar situations. And we 
are trying to desperately to provide some relief to these 
current 12,000 disaster loan holders, in addition, 
understanding the new pressures that have come to bear on this 
particular region because of the unfolding disaster.
    Ms. Bergeron, when you and your husband, Ray, decided to go 
back into Lakeview, would you just take 30 seconds or a minute 
to describe what Lakeview and your neighborhood looked like, 
how it felt and who was there?
    Ms. Bergeron. There was no one there.
    Chair Landrieu. This was six months after?
    Ms. Bergeron. Yes.
    Chair Landrieu. Could you describe what it looked like?
    Ms. Bergeron. When we first came back, we started cleaning 
up in October of 2005, and there was no one there, literally. 
There were no birds. There were no--it was unbelievable. It was 
very, very unbelievable. It was us, the National Guard, the 
NOPD and the Associated Press, and there was not much else.
    We just felt like the neighborhood would come back. We just 
really believed people--if you are not familiar with New 
Orleans or the Lakeview neighborhood, people have very, very 
deep roots. A disaster like that happening some place else 
might have turned it into a ghost town. But in New Orleans, and 
particularly in Lakeview, people have lived there, generation 
after generation, and they come back. And they have, but right 
at first, no.
    And we were the only business on the block for a very long 
time. We stayed in business initially with the funds that we 
got, obviously, from SBA and also because of the cleanup, the 
contractors, with the trucks. We began selling diesel, 
something we had not done before because there was no demand 
for it, but we switched that around because we could see what 
was coming.
    Chair Landrieu. Can you tell me what some of the neighbors 
said when they drove up to your gas station in those first few 
months or even the first year, what they shared with you?
    Ms. Bergeron. Oh, it was amazing. We have pictures on the 
wall of our first customer that came back, pictures of the 
first full-serve customer and the first self-serve customer. 
People were just like, we are so glad you came back. We are so 
glad that you are here.
    It did give a lot of people confidence. We had people tell 
us that, where they said if you are coming back, I am coming 
back. And that was something that we heard often.
    Chair Landrieu. Let me ask you this. There was almost one 
million people displaced by the storm, and many of them were in 
Baton Rouge which is 90 miles away from the city, and some of 
them were in Houston, and some of them were in other parts of 
the Country. Was there any other gas station that you knew of 
in that first couple or six months to a year that was open 
within 20 miles of your station?
    Ms. Bergeron. Not too many. No, not very many. I know there 
were none in Lakeview for quite some time. We were pretty much 
it. There may have been a few in Jefferson Parish adjacent, 
where they had some flooding, but it was not of the severity 
that we had in our neighborhood.
    But we did. We had people coming from all over the city, 
people we had never seen before, people coming from further 
east, from Gentilly and from New Orleans East and places like 
that, where they had nobody that had yet reopened.
    Chair Landrieu. I would just end this line of questioning. 
I have one more question to each, and then I am going to turn 
it over to my colleagues.
    This is true of many neighborhoods in the Gulf Coast, but 
basically the routine would be people would drive in for hours, 
fill up their gas tank at this one gas station that was open, 
stand outside under an oak tree and have mass on Sunday, to see 
their neighbors, and then the next week would start all again. 
Without churches conducting services and these pioneer 
businesses opened, I do not know how this city and this region 
would have come back.
    And that is the purpose of this hearing is to see what we 
can do to help them expedite their openings, relieve their 
burden and give them the support because they are actually 
leading the recovery. Not the Federal Government, not the State 
government, it is the small businesses that start to breathe 
immediate life back into the community that has been so 
devastated.
    So, Mr. Rivera, what would you like add just to this 
testimony briefly? I have some other follow-up questions I can 
submit in the record. But what have you done or what are 
reviewing that can help Ms. Bergeron?
    And are you all supporting the loan relief that I have 
requested, along with Senator Cochran and others, for this 
current group of holders of this debt?
    Mr. Rivera. Regarding the loan relief, we have the 
servicing office that has worked pretty effectively with the 
Bergerons. They provided a six-month deferment. My 
understanding of the discussion was if there is a need at the 
end of the six-month period--we clearly understand her 
situation--we can take a look at doing another six-month 
deferment and just working with. We work with all our disaster 
borrowers. I mean there is no doubt about it.
    One of the things that I would like to just comment on, we 
were well aware of the fact of the numerous contacts that the 
borrowers had to make once they received a loan from us, and we 
have actually reengineered that entire legal department, the 
account department. We actually have a case manager now, one 
person that is a point of contact for all the SBA borrowers. So 
anytime that your loan is approved, you only deal with that one 
case manager from the time you get your initial disbursement, 
from the loan closing documents to your initial disbursement 
until it is fully closed. That seems to have been a much more 
effective process instead of having to deal with different 
individuals through that process. We hope that that is a 
successful improvement.
    Chair Landrieu. All right, Mr. Shear, just one for you. In 
your testimony, you indicated that 26 of the requirements that 
this Committee has put in the reform legislation which was, as 
Senator Snowe said, inserted in the 2008 Farm bill. In your 
testimony, you said the SBA has met 15, partially addressed 6.
    Could you talk about the top three that have not been yet 
implemented, why they have not in your mind and what we need to 
do, either additional deadlines to be submitted or additional 
legislation that needs to be passed, or is it a rule, 
expediting the rule process?
    Mr. Shear. The 3 I would put at the top as the most 
challenging for SBA, among the 26 provisions, are the ones 
dealing with lending through private lenders, and those are the 
3 that stand out. We understand that by September there will be 
a pilot with one of the programs which is probably the simplest 
of the three to roll out, and we strongly encourage pilots when 
going into a new activity like this.
    As far as legislative proposals, I think the best thing 
that can happen now is to make sure that SBA moves forward 
judiciously, at least on the two where they plan to have 
pilots, and to assess the results of those pilots, so that 
there are some lessons learned, so that these programs can be 
tailored and delivered on a timely basis. So I think it is an 
oversight issue.
    Chair Landrieu. Thank you.
    Senator Snowe.
    Senator Snowe. Thank you, Chair Landrieu.
    Ms. Bergeron, I am so sorry for all that you have endured 
and experienced. I mean I can see across the board the pain and 
the hardship that you have had to confront, you and your 
husband, in such a horrendous ordeal and for so long. We truly 
appreciate the fact that you are here today to share your 
experiences.
    Hopefully, there is some way that we can help to make this 
better. I know there are some things beyond your control and 
our control when we have these types of disasters, but 
hopefully we can get you through, you and your husband through, 
in this terrible ordeal.
    One of the issues I wanted to ask you about, have you 
requested a deferment from the SBA with respect to your 
payments, they are allowed to do up to 12 months?
    Ms. Bergeron. We received a six-month deferment because of 
the business interruption issue when they--our business is 
located on a corner. Because with the stimulus package and part 
of it is the Submerged Roads Program, they worked on both roads 
at the same time. So we had a period of time there where there 
was no access at all. You could not get in and out. Now three 
of the four, I am sorry, two of the three access points are 
closed, but one is open now.
    We did request a six-month deferment. We requested and 
received a six-month deferment back in February. We have to 
resume payments in August with a balloon note at the end. 
However, Mr. Rivera was mentioned re-looking, looking at it 
again.
    I do not have it with me, but as I recall from reading the 
letter I received from SBA, it said this is one time only. You 
can have a six-month deferment, but please understand that we 
will not do this again. So the idea that it will be looked at 
again is something I have not heard before, and I appreciate 
that. That would be wonderful, but it is not something that I 
was aware was even a possibility based on what they sent me.
    Senator Snowe. I am going to ask a question in a moment to 
why it was not 12 in her circumstance. I mean it seems to me 
that every hurdle, I mean every impediment, had been thrown 
your way, certainly over a protracted period of time.
    I know the State of Louisiana, I know that through Chair 
Landrieu and Senator Vitter that it has borne the brunt of 
unprecedented disasters in such a short period of time. So we 
have to do everything we can to extend assistance to you.
    So, Mr. Rivera, why would it not be 12 months in her case, 
and why is it a 1-time only situation?
    Mr. Rivera. The initial request, it is my understanding, 
pre-dated obviously the oil spill, and the time her request was 
six months. Had she requested 12 months, I am sure we would 
have taken a look at a 12-month deferment because of the 
dynamics of the road closures and stuff. But we will definitely 
take a look as a result of the recent BP oil spill. We will 
take a look if she wants a further deferment after the six 
months expires.
    Senator Snowe. Yes, we ought to decide, certainly for our 
purposes too, what we need to do to change the law in that 
regard, to make sure that that is an option under extenuating 
circumstances and the contingencies that arise from these kinds 
of events. That is hard to determine. When you make a 6-month 
request, how do you know it is going to be 6 months or up to 
12? You should have the options depending on the circumstances.
    Mr. Rivera. Okay. We understand.
    Senator Snowe. Does that require a statutory change?
    Mr. Rivera. No, ma'am.
    Senator Snowe. It does not, okay. But it is certainly 
something that we would want to incorporate into law at some 
point, to make sure that that flexibility is available.
    See, something positive happened when you came to 
Washington.
    [Laughter.]
    Senator Snowe. See how quickly that happened?
    Ms. Bergeron. I see how quickly that happened.
    Senator Snowe. You just have to endure a hearing. In any 
event, we get things done.
    [Laughter.]
    Senator Snowe. See what you did, Chair Landrieu, 
instantaneously?
    So your interaction with SBA, has it been generally 
positive or negative, any difficulties?
    Ms. Bergeron. My interaction with the individuals at SBA 
was positive. They really, the people that I spoke with all 
seemed like they wanted to help, with the exception of the 
people who were initially at the Disaster Assistance Office. 
But beyond that, the people that I spoke with in the legal 
department, whatever, they were all very, very helpful.
    They tried, but it was a constantly changing requirement. 
They would say: Yes, this is all we need; yes, this is it. And 
two weeks later I would get the phone call: Well, we need this 
now; we need that now.
    We reached a point where we were getting ready to open. It 
was several months past when we had closed.
    Senator Snowe. So what year would this be?
    Ms. Bergeron. 2006.
    Senator Snowe. 2006, okay.
    Ms. Bergeron. 2006. We were trying to get open. So finally, 
we had to reduce the amount of money we had been approved for 
in order to get the loan because they came back and said we 
want you to buy a title policy, which would have cost several 
thousand dollars, and they had already made me pay twice for a 
title search.
    We just said we have got equipment coming. We have no way 
to pay for it. How much can we borrow that you do not need a 
title policy? They told us, and that is what we did.
    Senator Snowe. I see. So has that all improved, Mr. Rivera 
and Mr. Shear, that process that she just described?
    Mr. Rivera. We have completely reengineered the legal 
aspect of it. I mean as I mentioned earlier, one of the 
challenges we had is a disaster borrower would contact a bank 
of 20 attorneys, and the possibility of dealing with a 
different response when you deal with those individuals goes up 
exponentially.
    So what we have done is again we have a case manager. Once 
your loan is approved, you go to one individual from the loan 
closing documents to the initial disbursement. If you have any 
questions, you call the processing center and the disbursement 
center, and you will deal with that one individual.
    We have seen it much more. It has made it a much more 
effective process since we have gone at this new approach. We 
heard a lot of those stories, and obviously I mean we empathize 
with the situation, and that is why we went to this 
reengineering effort.
    Senator Snowe. Mr. Shear, do you have anything to say in 
that regard?
    Mr. Shear. Yes, not to the legal requirement itself. While 
we acknowledge that the Agency has become more responsive to 
the needs of victims of disasters over time, we are still 
looking for a more structured approach to react to problems 
that are reported, from work that we have done and have 
reported, information coming to SBA, information coming to SBA 
from its customer satisfaction survey. A more structured or 
formal process is needed to try to improve difficulties in just 
the day-to-day dealings with victims of disaster.
    Senator Snowe. Mr. Rivera, I just want to ask one question 
in your coordination with BP on assistance to small businesses, 
and I know Senator Vitter raised the fisheries issue as well. 
In order to get funding for fisheries, you have to go through a 
disaster declaration, though I gather in this instance 
assistance could be given through the Oil Spill Trust Fund. 
What are you doing, the SBA specifically, to coordinate with BP 
to make sure they are receiving assistance and also through the 
Economic Disaster Loan Program?
    Mr. Rivera. Yes, ma'am. We have, Administrator Mills has, 
the authority under the SBA Act to do a governor's 
certification, to declare a governor's certification. Five 
small businesses have to sustain substantial economic injury in 
that case.
    In the State of Louisiana, we received the first request 
from the governor there, and we started with 6 primary 
parishes, and then we expanded it to 12 primary parishes. Then 
we received subsequent requests. And we received the requests 
on a Monday or Tuesday as a result of the fisheries closure on 
Sunday, and then we turned around and were able to declare the 
disaster area on Wednesday. So we had a 24-hour turnaround.
    We had the same situation for Mississippi, Alabama and 
Florida as a result of the BP oil spill.
    The way we are responding to this event, if there is a 
business that has had a direct impact as a result of this 
disaster, they can go ahead and file an Economic Injury 
Disaster Loan application with us. As another condition in our 
loan agreement, we will say in the event that there is a like 
kind claim that they file with BP, that we will use those that. 
We will use those proceeds to pay down the loan.
    But there is no requirement that they go to BP first. I 
mean we are being very proactive, and we are leaning forward as 
much as we can.
    We have received about 100 applications so far in the State 
of Louisiana, and we started processing those loans, and then 
we have some approvals already.
    Senator Snowe. We are going to make sure that BP repays all 
that assistance, correct?
    Mr. Rivera. Absolutely, but they have other types of 
assistance for physical damage that we may not loan out in this 
specific case to. But correct, they will.
    Senator Snowe. Thank you.
    Chair Landrieu. Well, I wanted to follow up with that 
because I think this is very, very important for the businesses 
that are being stressed with this current situation in the Gulf 
Coast. Specifically, does the SBA have authority to use the 
assignment of a BP claim as collateral?
    And let me just finish the question. And if not, what are 
you requiring for collateral for these loans to be made, and 
what are your limits?
    Mr. Rivera. Right. The Economic Injury Disaster Program 
will not change in its substance. What we will do is we will 
make a loan as we always do. We will take best available 
collateral in this case.
    We are not going to take an assignment of insurance for the 
BP claim. What we are going to do is we are going to put 
another condition in the loan document. It is an easier, 
simpler process. There is not filing that has to occur. So, 
once they get the claim, they will just use that claim to pay 
down the loan.
    Chair Landrieu. Okay. But let me be clear. You are 
requiring collateral. You are requiring collateral for the 
loan.
    Mr. Rivera. Yes, ma'am.
    Chair Landrieu. And give us some specifics about options. 
People could put up what? Their house?
    Mr. Rivera. We take best available collateral.
    Chair Landrieu. Which means what in English?
    Mr. Rivera. If you have a chattel, we can take a chattel 
mortgage on your boat. It does not matter if it is a first or 
second lien position. We can take a second or third lien 
position on somebody's home. We will take whatever collateral 
is available.
    Chair Landrieu. And suppose no collateral is available?
    Mr. Rivera. Then we just do not secure the loan. I mean 
that is what we do.
    Chair Landrieu. You do not make the loan or you do not 
secure the loan?
    Mr. Rivera. No, we do not secure the loan. What we will do 
is we will just----
    Chair Landrieu. You will make an unsecured loan.
    Mr. Rivera. Well, we will put a lien on--we will just put a 
blanket lien on available assets, but there is no real 
security. We will just do a public filing.
    Chair Landrieu. The idea would be to create, Senator, some 
kind of avenue for this loan to be paid in full according to 
the law, which is BP's obligation to these individuals. In 
other words, if we cannot get funding advanced directly from 
BP, if we do this correctly, there is a way that these loans 
can be made, but no principal and interest paid, hopefully for 
a while until BP can make this whole.
    Now I want to ask you, Mr. Shear, do we have to change any 
laws to allow that to happen in your opinion, or can it be done 
administratively?
    Mr. Shear. We have not examined that situation. We would be 
glad to talk to Committee staff about it and see what we could 
do to try to answer your question and to look into it, but we 
have not addressed that question.
    Chair Landrieu. Okay, because I do think that this is sort 
of the most important issue right before this Committee right 
now--the fishermen and other businesses. It could be hotels, 
tourism, restaurants, seafood processors. I mean there are a 
number of businesses that are more directly, more immediately 
affected than others in this region. And depending on how long 
this situation goes on and how grave the environmental impacts 
have been, which have not yet been determined, this could be a 
very serious situation for businesses along the Gulf Coast, 
from Texas all the way to parts of Florida.
    We want to make sure that the laws are adhered to, and one 
of the laws overriding this is that BP is responsible under the 
Oil Pollution Act to pay for economic injury to individuals, to 
businesses, to governments, both local, State and Federal. They 
are even picking up the tab, I understand, for the National 
Guard that is on the coast right now. So what we want to make 
sure is that we eliminate any possibility that businesses in 
the Gulf Coast would go belly-up either waiting for the SBA to 
process or BP.
    And I will turn this over to you. I know you have to go.
    Senator Snowe. I just want to raise a question that you 
raised, to address that, the question of collateral. There has 
to be some way for BP to assume the responsibilities for that 
because if the business is going to SBA and does not have the 
necessary collateral to back up that loan, I mean this is the 
difficulty that they are going to, the individual owner is 
going to, have to assume for a crisis that they did not create. 
And BP is responsible for it. So it seems to me that we have to 
get some clarity on those issues because the person should or 
the business owner should be made whole.
    And if they have to go to SBA to get the loan because they 
are not getting that immediate reimbursement from BP, and they 
have to put up collateral, and they may not have adequate 
collateral, then clearly there has got to be some 
responsibility on the part of BP to make that, correct that 
situation, to mitigate that, because why should they be in the 
position--the small business owner to be in a position of not 
being able to access a loan immediately, to rectify the 
situation.
    Chair Landrieu. Well, one of the things we are going to do, 
and our time has run out today, but I do plan to have a hearing 
on this, more directly on this subject, probably next week. The 
date has not yet been set, but we are pulling the panel 
together because it is very, very important.
    And just for the record, I wanted to state, Senator Snowe, 
that there are currently 11,745 disaster loans, business loans 
outstanding relative to Gustav, Ike, Katrina and Rita, from 
Louisiana, Mississippi and Texas. The bulk of course being in 
Louisiana, over 7,000 loans currently outstanding, not for this 
current disaster but for past.
    I am also going to submit for the record that these are not 
insignificant sums for some of these fishing communities. 
Calcasieu, on the western part of our State, has 263 loans 
outstanding for a total of $21 million.
    In Orleans, one of the parishes, not right on the coast but 
sort of the hub of the southeast region, there are 3,000 
business owners that currently have loans outstanding, these 
same kinds of businesses--restaurants, seafood processors, 
small mom and pop hotels, maybe seeing some cancellation, 
marine operators, boat captains, $26 million outstanding.
    In Saint Bernard Parish, which you have seen all over the 
news, Saint Bernard and Plaquemines, there are 682 current 
loans for $78 million, outstanding.
    My fishermen and my constituents are telling me: ``We are 
loaned up to the hilt on the Gulf Coast. We have got everything 
we ever owned, mortgaged, from the last disasters, and now we 
are facing a potentially significant slowdown in business.'' 
Some people are actually completely out of business because 
they are fishing and their fishing waters have been closed.
    So I appreciate, in conclusion, the progress that we have 
made over the last couple of years, but the Ranking Member and 
I are going to be very focused in the next weeks to make sure 
that we are expediting, streamlining every process and 
proposing any new legislation necessary to make sure we do not 
have hundreds, dozens, hundreds of thousands of businesses 
collapse, waiting for help to come either from us or from BP.
    Does anybody want to give a 30-second answer or response?
    Mr. Rivera, just 30 seconds of anything you would like to 
add to the record before we close?
    Mr. Rivera. From the perspective of looking at the disaster 
operation of the Agency a couple years ago, compared to today, 
we have really done a lot of process improvements. We continue 
to strive hard. Customer service is very key from that 
perspective. And we will continue to keep you and your staff 
informed as we go through all these developments.
    Chair Landrieu. Mr. Shear.
    Mr. Shear. As you know, at the request of you and Senator 
Snowe, we are looking at basically the 5-year anniversary of 
the 2005 hurricanes, and we are writing that report. We are 
nearing completion on that.
    But on these issues, and obviously the oil spill is a huge 
issue, we really would welcome any interaction with you and 
Committee staff, if you wanted to us to kind of like act to 
that body of work.
    Chair Landrieu. Well, I most certainly do, and if you could 
that would be extremely helpful.
    Ms. Bergeron.
    Ms. Bergeron. I think I would just say with respect to the 
SBA disaster loans in particular, since that is kind of about 
what I know about this, it is just to think about it in terms 
of the individuals. In our particular case, we could be 
homeless if this business fails. It is not just oh, well, my 
business failed; I guess I have to go get a job.
    I told Administrator Mills, you probably remember. In 2005, 
I owned my house. You own it now.
    It is a very, very difficult thing when you are speaking 
about collateral for these fishermen, taking their boats and 
mortgaging their boats. Some of them already have tons of loans 
and mortgages and whatever. They cannot pay it. They just 
cannot pay it.
    It just seems like there must be a more creative way to 
come up with collateral for a disaster loan. For a regular SBA 
loan, of course, it is different. But for collateral, it just 
seems like there has got to be a better way.
    Chair Landrieu. Thank you. We are going to look for one, 
Ms. Bergeron.
    Thank you very much. Meeting adjourned.
    [Whereupon, at 12:06 p.m., the Committee was adjourned.]

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