WASHINGTON – Today, Senator John Kerry (D-Mass.) chaired a hearing to examine the Disaster Loan program run by the Small Business Administration (SBA) one month before the two-year anniversary of Hurricane Katrina. The Committee on Small Business and Entrepreneurship heard from former SBA loan officer Gale Martin and SBA Inspector General Eric Thorson about charges that staff improperly cancelled already approved loans, forced loan withdrawals, or disbursed loans without the homeowner’s or business owner’s consent. Kerry and Senator Mary Landrieu (D-La.) pressed for full Senate passage of their bill to overhaul the program.

“I’m gravely concerned both by the allegations made by Ms. Martin and her colleagues and by Mr. Thorson’s findings,” said Kerry. “We need to ensure that no victim falls through the cracks, that no one who was relying on the government for a loan to rebuild a business or a home was left wondering why the government let them down. That includes victims of Hurricanes Katrina, Rita and Wilma still to this day, victims of fire and floods in my own state of Massachusetts, and victims of future disasters. I believe that Administrator Preston has made big strides to right the sinking ship of the SBA’s disaster program, but we can always do better, and we must take action to put the tools in place that will prevent another Katrina-like response to a disaster.”

Martin testified that SBA staff were pressured to cancel, decline and withdraw loan applications in September 2006 or face losing their jobs. According to investigation findings by the Inspector General, nearly 8,000 loans were cancelled after the applicants weren’t reached in a 24-hour period. If these borrowers were later reached, they were forced to resubmit all required paperwork in an insufficient amount of time if they wanted their loan reinstated. This resulted in numerous borrowers missing out on essential aid.

“The SBA did not have a handle on the catastrophic nature of Hurricanes Katrina and Rita. The testimony today corroborates what has already been abundantly clear from the struggles of my constituents -- that the agency was more concerned about impressing the press and Congress with the number of loans closed than about working with disaster victims to help them get back on their feet,” said Senator Landrieu. “Administrator Preston has committed to reform, and I will continue working with him and the committee to make sure the agency’s response to the next disaster is quick, efficient and responsive to disaster victims’ needs. As part of this necessary reform, Senator Kerry and I are working to pass our critical disaster loan bill that is being held up by the objections of just one Senator. Our bill will greatly improve the experience of both business owners and homeowners following a disaster, be it natural or manmade, and we must move it forward.”

The Small Business Disaster Response and Loan Improvements Act (S.163), sponsored by Kerry, Landrieu, and Senators Olympia Snowe (R-Maine), David Vitter (R-La.), Bill Nelson (D-Fla.), and Johnny Isakson (R-Ga.) also has the backing of the Bush Administration. Specifically, the bill will create an expedited disaster assistance loan program, strengthen agency coordination, and increase loans from $1.5 to $2 million. The legislation also creates a new, elevated level of disaster declaration that triggers nationwide economic injury disaster loans for adversely affected small businesses. The Committee passed the bipartisan bill in March and is awaiting full Senate action.